Tuesday, September 16, 2008

Not long to wait now pt 374

...and whilst on the subject of the impending Global Financial Apocalypse we Loons have been foretelling for some time, now's a good time to, yet again, dust off that famous Jefferson quote...

"If the American people ever allow the banking system to control their money, first by inflation, then by deflation; their children will one day wake up homeless on the continent their fathers conquered."

It is a much repeated though, I suspect, not completely understood quote

I think people understand the inflation part of the con because they have experienced it in their daily lives. Deflation, for the moment anyway, is a much more theoretical concept


Strange things are going on in the world of money right now - retail inflation is going through the roof, yet the prices of shares and commodities are going through the floor

And because I'm such a nice person I'm writing this post to explain to anyone who bumps into it exactly what is happening, and that is...

Virtually no-one in the global finance industry knows
what the fuck is going on

Quite simple really

The recent spikes in the price of oil and food weren't the result of the Chinese eating steaks and driving SUVs, Peak Oil or biofuel production


Total bollocks

All of it

The price volatility is the result of people not knowing whether to hold onto cash or not

  • If you expect that the shadowy fuckers who control money supply are going to print money like there's no tomorrow and dilute the value of the £, $ or Euro in your pocket, you would be daft to hold onto the stuff. You'd buy something more tangible with it whilst there were still idiots out there daft enough to take it
  • If, on the other hand, you expect the amount of cash in the system to start evaporating, every time a bank goes down the toilet for instance, then you'll hold onto cash and turn everything you can into cash in anticipation of its scarcity and buying power increasing

The trick is, of course, knowing for sure if the amount of money in circulation is going to increase or decrease

And the shadowy fuckers who do know aren't telling

So, there are a lot of very silly, very well paid people moving into and out of cash, commodities, equities and derivatives like headless, very well paid chickens

And, because virtually none of them know what the fuck is going on, they all pile in behind anyone who looks even faintly like he does - which makes for some very large, and not necessarily rational, price swings

It will all end in tears


As it happens, I've had a few emails today from chums and acquaintances in the wonderful world of finance, sharing all sorts of little snippets and rumours of various large institutions bracing themselves for a major poo storm in the next couple of days

And whenever the real poo storm does finally kick off, be it this week, next month or next year, there's one thing you can be sure of. Those of us with money deposited in any bank that fails will have to take their chances. Those of us who owe money to any bank that fails can sleep easy knowing that their debt will be 100% safe whatever happens



Anonymous said...

There's a lot of talk on the HPC forums about the £35,000 deposit on savers if a bank goes under. Well if one of the major banks does go under, you can kiss goodbye to that I'm afraid - it's an empty promise. A more likely scenario in that event is the government actually seizing peoples savings, not repaying them.

Argentina 2001 anybody?

Stef said...

People who believe in Ickeian Lizard Overlords have a firmer grip on reality than anyone who believes that the Financial Services Compensation Scheme is adequately funded

per Martin Lewis

The FSCS doesn’t keep a pot of cash sitting ready and waiting. Instead, it has the power to operate a 'compulsory levy' on banks, insurers and others signed up to the scheme, as and when it needs the money. The advantage of this is it can pull cash from more than just the affected sector (i.e. if an insurer went down, while other insurers must contribute first, above a set level banks would be asked too) so funds should be available.

In theory, this means should the worst happen and a bank goes out of business, the FSCS has the legal power to call in funds from major financial institutions to cover the compensation needed to repay the first £35,000 lost by every saver

However, here it gets a little complicated. The FSCS has a cap on how much cash it can levy per year from financial institutions; from 1 April 2008 the overall capacity was set at just over £4 billion. Yet in the FSA’s review document (page 77), it admits that £4 billion wouldn’t even cover the twenty-fifth biggest UK deposit taker!

That means there’s not enough money in it for all the main high street names. This is a tad worrying to say the least, although of course the Government’s main focus is to avoid ever getting into a situation where the FSCS would need to pay out.

Yet it was something I wanted to deal with, so in May 08, as part of my ‘How Safe are your Savings’ programme I managed to get an interview with the Cabinet Minister responsible, Chief Secretary to the Treasury Yvette Cooper, MP. During the interview, as I pushed, I was told the government would ensure the £35,000 was paid out, yet I couldn’t get an answer on how… then just before the programme went out we got this statement

The Treasury gave us the following statement

"In the unlikely event a major bank became insolvent the Government would ensure that the FSCS has access to enough immediate funding to pay out depositors in a timely manner, through borrowing from the Government or Bank of England. The FSCS could then levy up to £4 billion per year from the financial services industry to cover the costs of compensation"

In plain English, this means that in the unlikely event of a bank collapsing and requiring more than £4 billion of compensation, the FSCS would be lent the money to compensate consumers up to £35,000 each, and it would have to pay back to loan in subsequent years, by continuing levies.

So this means, the £35,000 limit is still the prime safety limit to rely on in your planning.

Anonymous said...

I disagree that the food price increase is due to price speculation:


This makes economic sense, and you can tell the guys on the level because:

Mitchell said biofuels policies that encourage subsidized production need to be rethought because they are hurting poor countries.

Truer words...

Stef said...

The underlying value of food, or oil, or anything else is going to rise or fall depending on the supply/ demand thing

I'm not denying that

But the recent volatility in prices is a different matter

And, repeating a point I repeat a lot, the supply and demand of money is the key driver for the price of a commodity - however scarce or plentiful it is

Even if food or oil gets scarcer the $ or £ price of that food or oil will still fall if $ or £ are pulled out of the system fast enough and vice versa

And that's a subject that's rarely, if ever, discussed

How many people do you know who can answer the question

'Where does money come from and who controls how much of it is in circulation?'

Shahid said...

"'Where does money come from and who controls how much of it is in circulation?'"

A post for the uneducated like me please?

Anonymous said...

watch the Money As Debt or this short animation to get an idea of how the money markets work.


bottom line is that money is not "real" it is a control tool these days in a system that is out of control.In a fair world you make /produce or offer a service for something in return(money)way too many people making too much non existent cash and using it for their own selfish ends to the detriment of the rest.

These days cash is numbers on a computer screen.

A truly wealthy nation would be one with easy access to plentiful supplies of cheap energy with a well educated populace, hard working, who produced products other people wanted to buy.

Anonymous said...

The modern finance system is a bit like a candyfloss machine. You put a small amount of sugar in (that's the sum of our hardwork) it's spun around the system 100s of times and this vast piece of candyfloss is created(the global derivatives market is worth $1.14 quadrillion). The criminals in charge then skim off as huge profit from this before the whole edifice collapses into nothing, because that's essentially what it is. The black holes left in the global economy then have to be paid for by us.

Nice work if you can get it!

Stef said...

A post for the uneducated like me please?

1. Money is created by the elected and accountable governments

2. The amount of money in circulation is strictly controlled to ensure that it is just enough to ensure the smooth, undistorted exchange of goods and services within the economy

3. Money has inherent value and it makes perfect sense to work like a twat at a job you hate 40 hours a week in exchange for some of it.

4. The people who print money/ make up it up on computer screens respect ordinary people for their intelligence in accepting to live under such a system

Thank you, thank you, I'll be here all week

Stef said...

the candyfloss machine analogy is a good one

Stef said...

The 'Where does money come from?' question is a little bit special as it's one of those rare, apparently simple questions which is capable of subverting the entire world view of the person trying to answer it

Another one, of course, is 'How does Life start?'

Believers simply 'know' that there are rational, sensible answers to those questions out there which can be provided by top flight scienticians, even if they personally don't have the time to get up to speed with them

The fact that people don't know stuff like where money comes from or how Life starts but carry on as if they do is, to me, proof enough that you can get away with selling the most colossal bollocks, virtually indefinitely, provided you communicate properly

In such a world the notion of consensus can go fuck itself

Stef said...

I disagree that the food price increase is due to price speculation:

Some of us Loons are partial to a bit of economic commentator Max Keiser every now and then.

He's smart and frequently amusing

He is, however, rather too partial to the Peak Oil and AGW things which fucks up his objectivity

Sooooo, when oil touched $150/ barrel Keiser was poo-pooing the suggestion that the spike was due to speculation and claimed that The Market had a magically discovered the True price of scarce, evil oil

and then the price of oil fell by $50+ a barrel in the blink of an eye (and in spite of hurricanes and Russian interventions), leaving Keiser looking like a completely twat

In fairness to him, he did take his lumps, sort of

Shahid said...

I get fractional reserve, I just don't get the origin of money (or life)

Stef said...

we'll see what we can do or, even more labour-efficient, find...

Anonymous said...

see that HBOS is fucked well no big fuckin surprise there I guess.Loyds is gonna have it.

If you look at its chart it has been in steady decline for over a year.I sold back at 10 quid moons ago.

Stef said...

I never held any myself but some family members did off the back of the Halifax float

I urged my relatives to dump them 18 months ago and I remember being asked at the time 'Was I sure?'

I recall laughing for about 15 seconds longer than would have appeared natural, or sane

Anonymous said...

Beleaguered lender HBOS is in talks with UK rival Lloyds TSB about a merger which would value HBOS’ shares at around 300 pence each.

Anonymous said...

back of the Halifax float

yep that´s how I acquired my shares.I´d been in the Halifax for years and so got a fair number of shares.I sold them a few months later and had a great time with the cash!

Shahid said...

I bank with the Halifax. Should I care? (just a salary/serfdom conduit)

Stef said...

not really

If HBOS went down so heavily that it affected the day to day operation of current accounts then it would be pretty much game over for the day to day operation of all current accounts

For savings I've been pointing friends and family towards building societies, especially the Nationwide

(but nobody's paid me for that advice and I won't held liable if the NW goes legs up)

Stef said...

...now would be a very good time for anyone with any surplus cash to don a fake moustache and buy a few gold coins or something else that is portable and has tangible worth and utility

which might (erroneously) be interpreted to sound like I'm advocating the stockpiling of drugs and handguns

that sort of thing is best left to the experts in our security forces and government

Anonymous said...

There's some great bluster and hot air from the usual old leftie idiots on the Guardian about capitlism - http://www.guardian.co.uk/business/2008/sep/17/recession.labour

Still fighting the same old battles! This isn't about capitalism, it's about criminals and rigged markets. it's about a few oligarchs fixing all the rules so they can never lose. To blame capitalism is like blaming Honda because your shop was ram-raided with a Civic.

Stef said...

elsewhere I've seen other, more rightist commentators, talk about the 'Darwinist' struggle between well-run and poorly-run banks

absolutely f**king appalling

Suspect Paki said...

Savings? Never believed in those.

I want a house somewhere safe and a lifetime supply of insulin. And some big guns to defend it (and my family) from looters.

Stef said...

Florida for you it is then

paul said...

One of the better anti guns and gold bullshit pieces

Anonymous said...

May I nominate Nassim Nicholas Taleb to be accepted as a conspiraloon?

Here's a recent essay from him, "When Nassim Taleb talks about the limits of statistics, he becomes outraged. "My outrage," he says, "is aimed at the scientist-charlatan putting society at risk using statistical methods. This is similar to iatrogenics, the study of the doctor putting the patient at risk." As a researcher in probability, he has some credibility. In 2006, using FNMA and bank risk managers as his prime perpetrators, he wrote the following:

The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deemed these events "unlikely."
" Follow the link to sup from the pyrean spring.

Anonymous said...

Soros: Bank problems to worsen,,

soon they will be throwing themselves off of tall buildings

Anonymous said...

From the essay above,

"The banking system (betting AGAINST rare events) just lost > 1 Trillion dollars (so far) on a single error, more than was ever earned in the history of banking. Yet bankers kept their previous bonuses and it looks like citizens have to foot the bills. And one Professor Ben Bernanke pronounced right before the blowup that we live in an era of stability and "great moderation" (he is now piloting a plane and we all are passengers on it). "

not Anonymous said...

as the plot unfolds it is becoming obvious why a lot of draconian new laws have been passed in the UK and US al quaeda ??nah pissed of punters who have lost their investments and hard earned savings.
dissent will not be tolerated.Banks have closed move on nothing to see here or you´ll end up in the slammer for being a member of the somewhere nowhere everywhere terrurist group alciaeda

Suspect Paki said...

I highly recommend Taleb's "Black Swan". Particularly the obvious pleasure he takes in describing his fantasy of dropping a rat down the collar of one of these stats-pimping, stiff-collared fucks.


Wolfie said...

I don’t think that's entirely true Stef, I think there are many in the City who know exactly what's going on but are powerless to do anything about it. Much of the damage was done before they even started working in finance and the remaining problems were forged in high-level meetings with powerful people who answer to no one. The shadow banking system in concert with policy makers.

I was watching Newsnight recently and it was particularly noticeable that only one of Paxton's guests was talking sense yet he was rude and dismissive of her on every occasion. The stream of rubbish emanating from most of the print and visual media is astonishing, not only in its ignorance but its curious harmony in its effort to deceive the public with the abstruse.

Anonymous said...

Halifax Bank of Scotland has confirmed that it is in advanced talks with Lloyds TSB about a possible merger as Lehman Brothers' collapse continues to shake up the financial world.

Lloyds TSB was nearly 2% up.

If the two business were to come together, they would create a British banking colossus.

more like a limping giant!

Stef said...

@mr wolfenstein

my bad, I wasn't clear enough

when I say

"Virtually no-one in the global finance industry knows
what the fuck is going on"

what I mean is that they don't know if the system is going to be carpet-bombed with lots of lovely inflationary money or not

a couple of months ago everyone clearly did and was piling into commodities

now the herd appears to have gone trundling off into completely the opposite direction

a woman described as a fierce critic of the international banking system was on more 4 news just now

her solution to the current and future crises was greater powers for central banks


Stef said...

as for Taleb, he clearly makes a lot of sense

but shouldn't people stop and ask themselves about how strange it is that someone is lauded so highly for stating what is, after all, the bleeding obvious

Anonymous said...

I blame these.Anyone explain this?

credit default swap (CDS) is a credit derivative contract between two counterparties, whereby the "buyer" or "fixed rate payer" pays periodic payments to the "seller" or "floating rate payer" in exchange for the right to a payoff if there is a default[1] or "credit event" in respect of a third party or "reference entity".

Credit default swaps are the most widely traded credit derivative product[2] and the Bank for International Settlements reported the notional amount on outstanding OTC credit default swaps to be $42.6 trillion[1] in June 2007, up from $28.9 trillion in December 2006 ($13.9 trillion in December 2005) and by the end of 2007 there were an estimated USD 45 trillion worth of Credit Default Swap contracts.[3]

Stef said...

CDSs are insurance contracts you can take out in case someone who owes you money doesn't pay up

Amusingly, you can also take out CDSs on someone else not paying someone else

Which basically means you can bet on someone going out of business

Some very silly institutions sold a lot of CDSs on the understanding that times were great and no-one was going to default on anyone else

Money for old rope really

Provided there aren't too many claims

Anonymous said...

Gold up 12% in a few hours. Dow down over 4%. Goldman Sachs and Morgan Stanley in deep trouble. Fed has run out of funds. The US's triple AAA credit rating under threat.

This really is it isn't it?

Stef said...

I wouldn't call it until the first tranche of ordinary savers gets wiped out - if and when that happens it'll be bankruntastic

Anonymous said...

I enjoyed the opening of Newsnight today:

Halifax man from the shit advert: "Woke up this morning feeling fine..."
Jeremy Paxman(sneering): "No you didn't"

Wolfie said...

They're just caught out by the timing. Most know what - they just don’t know when.

Plus they are desperate to make a buck so they won't be the one being escorted out of the building on the next rationalization. Desperate people do strange things.

Also they're traders.

My wife has a funny story about why the central banks have thrown petrol on the fire...

Tom said...

The fact that people don't know stuff like where money comes from or how Life starts but carry on as if they do is, to me, proof enough that you can get away with selling the most colossal bollocks, virtually indefinitely, provided you communicate properly

I once met a guy when I was contracted on behalf of a few different banks, he said he was a 'banking troubleshooter. Whenever the numbers don't add up they call me in and I sort it out.'

He was one of the good communicators

not Anonymous said...

UPDATED SEPT 17 4:05 PM CST: NYC Housing Authority spokesman Howard Marder has now officially confirmed that Barry Jennings indeed passed away approximately a month ago after several days in the hospital, matching confirmations from several other employees at the Housing Authority. Marder commented that Jennings was a great man, well liked by everyone at the Housing Authority, and that he would be missed. No other details were available.

Key Witness to WTC 7 Explosions Dead at 53

Emergency coordinator and 9/11 witness Barry Jennings has passed away with controversy about WTC7 still hot– as the BBC hit piece and NIST report have been released to counter Jennings’ exclusive testimony of explosions inside Building 7

Stef said...

Barry Jennings application to be listed in the Conspiraloon Alliance directory of SADS (Sudden Adult Death Syndrome) sufferers is currently awaiting moderation

Anonymous said...

regarding Barry Jennings.I can find no report of his death other than the Alex Jones site,,,maybe he has went underground and faked it after threats,,who knows.

Anonymous said...

just out of curiosity

Lloyd C Blankfein

CEO/Chairman of the Board/Director at
Goldman Sachs Group, Incorporated
New York, New York

Salary $600,000
Bonus $26,985,474


Stef said...


My wife has a funny story about why the central banks have thrown petrol on the fire...

you tease

Anonymous said...

WSJ: Worst Crisis Since the Depression
From the WSJ:

The financial crisis that began 13 months ago has entered a new, far more serious phase.

Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. New fault lines are emerging beyond the original problem -- troubled subprime mortgages -- in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. There's also a growing sense of wariness about the health of trading partners.

Fed and Treasury officials have identified the disease. It's called deleveraging, or the unwinding of debt. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can't pay back the loans, a problem that is exacerbated by the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.

That's exactly what the problem is -- way too much debt that no one ever had any intention of paying back. Enter all sorts of great loan documentation schemes like "stated income loans" and the like. "Just tell us what you really want to make in your wildest dreams and we'll base out loan to you on that." Well, now we know what it has gotten us.

Stef said...

of course, all that money that was borrowed and apparently disappeared has gone somewhere...

Anonymous said...

The money never existed in the first place of course, outside of anybodies imagination. But the footprint left by the debt is still there, and you still have to pay even though everything just vanished in a puff.

Stef said...

no, the money never existed but I think the debt footprint is matched by a transfer of ownership of useful assets to only God, and some Conspiraloons, know who

and now they've banned short selling of bank stocks

comedy gold!!

Anonymous said...

Ohh yes I have an idea who is benefiting. It's who always benefits since the introduction of modern banking...

So, do we think Bush et al will cancel the election?

not Anonymous said...

banned short selling!,,,fucking idiots,,any fuckin scapegoat will do eh!

Anonymous said...

I read somewhere, can't remember where, that the amount of shares on loan from HBOS was only 8%. In comparison HMV has 1/3rd of its shares on loan. The fact is, HBOS took a pounding because of its fundamentally flawed business model, like Northern Rock.