February 18, 2016 at 1:33 am #47369
I was sure someone would have brought up the latest from the new Minneapolis Fed guy Neel Kashkari. That, taken with others in the financial note indicating they believe we’re definitely headed back in to ‘another’ recession. A friend in the financial world in London is quite happy this week he has finally managed to rearrange most of his investments over the last few months – because his gut after 40 years in that arena urged him on.
http://www.reuters.com/article/us-usa-fed-kashkari-idUSKCN0VQ2R8 – just showing the a-refs.
Sorry couldn’t get the link function to workFebruary 18, 2016 at 2:19 am #47370
Like with most of the big problems in the world, the folks in charge don’t really want to solve the problem. Just re-instituting Glass Steagall would curb a major part of the reckless banking that has become endemic. This is sort of like the unspoken elephant in the room. Jailing a few folks from the executive suites would do it too. There are many laws on the books. They just aren’t enforced because TPTB don’t really want to reign in the source of major campaign donations.
Similar situations exist with out of control health care and education costs. There are simple solutions available, but they would rock the boat of powerful interests.
As an aside last night I spoke with the guy I know who sits on the Board of one of the Fed branches (not NY). He said at their last meeting it was discussed that there are things that bear monitoring but that the fundamentals are all strong ……economy growing, unemployment dropping etc etc. I didn’t bother challenging him as it wouldn’t do any good. Waste of my time and his. Afterwards it occurred to me that maybe folks like him refuse to see the world for what it is because they are totally dependent upon that rainbows and unicorns world to keep going in perpetuity. He has no useful skills outside of banking and law and would quickly become a casualty if the lights go out.February 18, 2016 at 2:51 am #47373
I was sure someone would have brought up the latest from the new Minneapolis Fed guy Neel Kashkari.
I posted this story yesterday evening (just from a different source – Seattle Times) over in an existing thread on the economy (Another Economic Indicator):
But so far there’s only one reply to it over there, so any further discussion could just as well continue here instead.February 18, 2016 at 5:15 am #47377
I think Kashkari is a slick guy with some brains. I was sorry to hear he went the Goldman/now Fed route.
You know what still astonishes me? And, I purposefully, when the opportunity presents itself, bring the subject up to people I meet? (I deal with the general public a great deal) Most are shocked when I inform them that the bank, their local branch, 1) does not have the cash on hand equal to all the deposits made by local patrons and 2) yes, they ‘deposit’ money in the bank, but they really are no different than a stockholder of that bank – except of course for the FDIC limits/insurance – for what that is worth. Many Americans simply do not even understand the basics of general banking in this country …much less high finance…3) if I give a short recap of what happened in Cyprus – ‘oh that could never happen here’. Really? Why not? Might want to think about that is all I can end the discussion with.
The ‘big banks’, are no better than the governments and big firms they are in bed with. They are so big, so intertwined, so complicated in structure that one hand does not know what the other hand is doing. That’s well-understood – but I can’t figure out why the boards and CEO’s can’t see they have created a house of cards that a poof of breath, so to speak, by one trader, or one VP of some division can’t send it all down the toilet. They have proof this can happen. It just hasn’t had it happened big enough for them? Or, are they really so sure it doesn’t matter the government will bail them out. Really? Or is it that and a combination of egos like with Dimos and Blankfein? It makes no sense to me that they would create such elephants. They have created super tankers that take miles to stop, miles to turn…big lumbering things unable to shift direction or course quickly or easily. It is such a poor business model – just that fact – it still amazes me.February 18, 2016 at 11:12 pm #47385
tweva, most people never stop to think about how the world around them functions nor how it came to be the way it is. They live in the moment and assume that moment will continue uninterrupted. The masses won’t know what hit them when SHTF comes. Every governmental or organizational disaster preparedness plan I have ever seen assumes they can procure the supplies and other support they need when the event occurs. Events are always assumed to be small scale enough for that to occur and events are always of sufficiently short duration for that to occur. When I walked through the little cemetery dating from the latter 1700’s in my hamlet I saw the graves of many young women in their teens and 20’s and many babies and toddlers. I knew why that was so. Most would only see the interesting old tombstones if they bothered to look at all. The realities of a world without modern medicine would not occur to them.
Those folks who think the bank has cash enough for all will line up just like the folks did back during the Depression, completely unaware that banks hold even less cash now than they did back then. And they’ll be just as shocked when they can’t get in the door. I keep a certain amount of cash tucked away just in case. I’d venture a guess that a major part of the population could not fill their gas tank or buy a week’s groceries if suddenly they could only do so with cash. Most of us here are old enough to remember the oil embargo of 1973 with the ensuing gas lines and all. How quickly that can occur has always been in the back of my mind and it is the rare day that I go below half a tank.
You would think that after the financial crisis of 2008 that folks would be thinking this through more, but it doesn’t seem they are.February 19, 2016 at 12:38 am #47387
tweva, It is all pointing to a down turn. The question is how big will it be and will it happen before the election. I think it will first happen with the Dow Jones then will go to the banks closing there doors like Greece. This will happen just do not know when since they are printing so much paper to hold it all together. Cash will be king at the beginning but food and ammo will be gold.February 19, 2016 at 2:04 am #47388
MB, you hit the nail on the head when you said,
Those folks who think the bank has cash enough for all will line up just like the folks did back during the Depression, completely unaware that banks hold even less cash now than they did back then. And they’ll be just as shocked when they can’t get in the door.
I got halfway through an MBA years ago before becoming disgusted with what I was being taught – and just plain quit. I realized I wanted no part of that world – just enough to understand it since I have to live with it. But thinking I needed a career change a few years later, I took the financial end of it and went to work for a large financial planning firm that had probably the best training in the industry at the time (some in the military, particularly those that have lived overseas, used to call that un-named company American Excuse – but that’s another story….). Anyway, after realizing that I was still dealing with a company that subscribed to the worst of the values I learned to detest in the MBA program, I decided to leave that large company, and went to work for a much smaller one that serviced bank customers from inside the branches. I was assigned to a savings and loan. My first day on the job was “Black Monday” (19 October 1987). Needless to say, I did not sell anything – for THREE MONTHS. But two very big things I did learn from that were by observation that very few people “saw” even though it was happening right in front of them while standing in the teller window lines. First, there were the old folks waiting to see the customer service reps so they could get in their safe deposit boxes. That was a long line. But that was AFTER they had already been to the teller window and withdrawn huge amounts of cash – and then took it to their safe deposit boxes (surprisingly enough). I guess they didn’t remember that banks can and do shut down, and they could easily have found themselves unable to even get inside the bank to take the money out of their boxes. A good friend of mine was assistant manager of one of the branches at the time. He confidentially took me inside the safe deposit box vault and, without pointing me to any specific boxes of course, directed my attention to the largest boxes on the bottom (probably one foot square in front). He said I’d flip if I knew how many of those boxes were filled with nothing but bills, front to back, top to bottom.
The other lesson learned was what was happening multiple times every day for a while (remember, this was a true crisis time for S&L’s). Brinks trucks were arriving frequently, bringing truck loads of cash to the bank – giving the “comforting” appearance to all the customers that nothing was wrong, that the bank was FULL of money! Not to worry! Individual customers might happen to see a truck outside, and see guards bringing in money, but everybody’s seen that from time to time. What they didn’t realize was that those few minutes while they were there as a customer, were happening many more times that same day, and the day before, and the day following.
I also remember the gas lines all too well. And I recall a local gas station on 9/12/2001 was selling gas for the generally inflated price that everyone else was selling it for, to an around-the-block line of custoemers — except for those with 1964 and earlier dimes (90% silver). Then a dime could buy a gallon of gas.
Most people alive today don’t have such recollections, or even knowledge OF those circumstances. Therefore, there will be shock beyond belief for so many of them. And because of living in LaLa Land, they’re woefully unprepared. Too big to fail? Hmmmm…. Where are all the S&Ls these days? How about Lehman Brothers or Bear Stearns? And the FDIC or SIPC are going to be able to cover all the losses? If this forum had the capability of animated GIFs, I’d love to end that last question with the little happy face rolling around kicking its feet, laughing hysterically.February 19, 2016 at 2:12 am #47389
Cash will be king at the beginning but food and ammo will be gold.
I posted this a few moments ago, and it apparently didn’t make it up, so I hope it doesn’t turn out to be a duplicate. I’d love to see Selco’s thoughts on that statement. Personally, I’d expect that disclosure that someone has enough food or ammo to trade away, would be an open invitation for theft (or likely worse). I suspect that most people who are smart enough to store away food and ammo, aren’t doing to primarily as barter options, but for primary use if/as needed. I’m not sure one could have enough of either. Personally, I would not advertise that I had “extra” by offering to trade it away – not of those two things.February 21, 2016 at 11:39 pm #47441
Too big to fail? Hmmmm…. Where are all the S&Ls these days? How about Lehman Brothers or Bear Stearns? And the FDIC or SIPC are going to be able to cover all the losses?
GS, Lehman Brothers and Bear Stearns were too little to save, so they got eaten. Goldman, BofA, Wells Fargo, Citibank, etc. (the ones who were “too big to fail,” and therefore, got “saved,” were just as insolvent as Lehman and Bear, but were bigger, and therefore had the juice to be “saved.” Their salvation did not come from the FDIC, nor the SIPC, which are agencies (allegedly) tasked to protect us “depositors” if (when) the bank into which we’ve deposited our meager $$, can’t cough up what we’ve put in. And as long as the failures are small banks, with modest deposits, they’ve been able to do so.
But when a larger bank system reaches that point, the authorities don’t deplete the few paltry billions they have for minor emergencies, they “arrange” for the smaller system to be bought (absorbed) into some larger banking company (an action that the FDR administration would have prosecuted under the anti-trust laws.) When all of the biggies become insolvent simultaneously, the fedgov colludes with (i.e., obeys) the Federal Reserve, and though already insolvent itself (many times over) passes new laws allowing the Fed to “print” (synthesize) $$, and hand it over wholesale to the insolvent TBTF banks. The Fed, for its part, allows the insolvent US fedgov to “borrow” the additional dollarized electrons in our names, promising to wring it out of us, as the Fed might demand. We taxpayers, through the agency of our beloved fedgov, borrowed more than we can ever repay, in order that the $multibillion salaries (and bribes) could continue, unabated.
But there will be a reckoning. The next step will eliminate all that fol-de-rol pretense of borrowing, since the new banking laws (Dodd-Frank, and its descendants) have already transformed us (sheepizen-depositors) from customers of the banks, into their creditors. Whatever we deposit (savings, checking, etc.) are “unsecured loans” to the bank which, if the bank finds itself inconveniently unable to cover its loans (to the Fed, or other larger banks) may be used for the needed repayment. As depositors, we’re at the bottom of the list to be repaid. (No wonder Barney retired.)
Further, the next round of laws (if they haven’t already enacted them) will compel those of us who have them, to”contribute” to saving the TBTF, out of our 401-k’s, IRAs, Pensions, and other retirement plans, whenever they next need. And when the fedgov spends more than it takes in, the need is inevitable. Not to worry — Zero has already invented the MyRA. The fedgov takes whatever you have saved, and gives you whatever they decide you really need. Ask the Kulaks how that worked out.
February 22, 2016 at 12:18 am #47443
- This reply was modified 2 years, 7 months ago by L Tecolote.
L Tecolote, Great post. It is what is happening and what will happen. Well done.February 22, 2016 at 12:18 am #47444
Addendum: It struck me that the expression “Too Big To Fail,” needs an extended definition. TBTF doesn’t mean that they are so big that they can’t fail. It means, rather, that they are so big, so integral to the Federal Reserve System of over-riding the constitution, so controlling of so much of the economy, so influential with so many politicians, that those politicians will happily, joyously, even casually, sacrifice the lives and fortunes of any (and if necessary, in their estimation) all of us, to prevent those high-flying owners and officers of those banking companies, suffering any degradation in their styles of profligacy.
Who wields the purse, wields the man who wields the sword.
Cry, "Treason!"February 22, 2016 at 12:30 am #47447
L Tecolote, I think they will also try negative interest rate on everyone saves and checking accounts first which is being talked about lately.February 22, 2016 at 2:39 am #47452
It means, rather, that they are so big, so integral to the Federal Reserve System of over-riding the constitution, so controlling of so much of the economy, so influential with so many politicians, that those politicians will happily, joyously, even casually, sacrifice the lives and fortunes of any (and if necessary, in their estimation) all of us, to prevent those high-flying owners and officers of those banking companies, suffering any degradation in their styles of profligacy.
I think that’s really the sum of it all. Of course in Lehman Bro’s case, the feud between their CEO and Hank Paulson didn’t help the matter either. It will never be known for sure, but there’s widespread speculation (with good reason) that Lehman was punished, not just allowed to fail. Plus, Geitner & Company seriously missed or misunderstood some key data leading up to the Lehman’s demise. Still, the bottom line is, “they” control it, and the ultimate outcome will never be intentionally and primarily in our favor. If we end up winning (or at least avoid getting hammered), it will only be as a coincidental consequence of the true intended outcome.February 22, 2016 at 4:07 am #47453
This may seem so loosely tied at first as to be first class conspiracy whackoism. Just hang in there a bit, then if somebody still thinks so, go ahead and “have at it.”
I became aware of something a couple or three days ago that immediately caught my attention – an article at Casey Research about Lawrence Summers’ Washington Post column titled, “It’s Time to Kill the $100 Bill.” One can put the article title in quotes, stick that in a search engine along with Summers last name, and all kinds of references will come up. Here’s just one short one:
I think back to my experience in an S&L during the S&L crisis in the aftermath of Black Monday (October 1987). Older people who’d lived through the depression were withdrawing cash in massive amounts. What was truly instructive was sitting there all day, watching Brinks truck after Brinks truck show up to keep supplying the S&L with paper money in order to avoid a panic. There wasn’t even remotely enough money in the S&L to pay out all the customer demands. But the paper flowed in, and the customers flowed back out feeling quite safe. They had “their” money. Multiplying all the paper money deliveries to all the S&Ls at that time in just this region was truly a remarkable feat as I’ve thought back on it, realizing that massive volume of paper “money” was flowing all over the nation. It was little reported, thus very few people really knew it was going on. I only witnessed multiple deliveries to a single branch of a single S&L, and just that was quite impressive.
Mr. Summers stated in his WaPo article that, “Illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds, as would be the case if the $20 bill was the high denomination note.” In other words, Mr. Summers and company are merely saving us from the nasty drug dealers and other unsavory characters. So he says.
But when one combines that with the actual trend around the globe to a cashless society altogether, one begins to wonder. Take for example this article from nearly 50 years ago:
Then consider this from a subscription publication that was allowed to be reprinted on the Casey Research web site for free (where I first saw the Larry Summers proposal):
Now consider the person that wants to innocently periodically withdraw “small” amounts of cash (well under the $10,000 trigger – which by the way is STILL no guarantee, since they also look at “patterns” that total $10,000). It may be that all they want to do is simply pay cash for purchases to the extent possible – possibly even negotiating cash discounts at some merchants. No problem? Having to take a few $thousand in all $20s results in a not-so-nice bulky package as you walk out of the bank. Of course that further discourages people from using cash – it’s too much of a pain to get your money from the bank and safely get it home. We can’t “spend” $1000 bills anywhere. (Can we even GET $1000 bills anymore? I don’t know – haven’t had occasion to bother even asking.) Plus, more and more places won’t take $100 bills, and if they’re subsequently banned by FedGov, it’s a moot point. What’s next? $20s?
Sweden, Denmark, and others are leading the way into a fully cashless society. The US is merely doing the “boiling frog” routine of more slowly increasing the temperature so as not to alarm the frog. But if one really looks, the signs are all around. From the Casey Research article, ” ‘High-denomination notes,’ said the report, ‘play little role in the functioning of the legitimate economy, yet a crucial role in the underground economy.’ ”
“Underground economy” includes drug trade, but it also includes ANY transactions the government can’t control and monitor. Do away with cash, and it’s all transparent to the government(s). In no particular order, they know what we buy, where we bought it (and therefore where we traveled), and when, simply by our everyday use of credit cards. Privacy is further eroded. And just what is it we’re going to “withdraw” when cash no longer exists? Will there even be a need for a “bank?” Loan applications, etc., could be done on line, along with all other moving of money (fully tracked by the federal clearinghouse, of course). And with no “hoarding” of cash possible (because paper money has been deemed worthless after a certain deadline for turning it in for “credit” to our accounts), we can have money electronically confiscated at will – not just from our MyRAs or other investment accounts, but our “regular” bank accounts.
Then, “too big to fail” almost goes away as a concept, because all “money” will simply be zeros and ones in high speed digital format, speeding all over the globe 24/7/365. We’re almost there today. But when investors (or simply citizen savers) can no longer line up to collect their funds in any physical format, what does “failure” mean then anyway?
We can still sock away $20s, even $100s, but in time there will be turn-in deadlines, after which those slips of expensive paper will be worthless in any economy – underground or otherwise. MAYBE gold and silver will still have value, but when those can’t be swapped out for government-recognized “money,” who’s going to even want gold and silver? Food, water, toilet paper, ammo, etc., will be the new gold. And lives will depend on it – one way or the other.
For final (very chilling) fun, check out the latest Hasbro version of “Monopoly.” This ought to send chills down the spine of anyone with kids or grand kids. Read the entire article for the full “flavor” of just what’s being “taught.” Our kids are being brainwashed into an entirely different way of thinking than we knew:
Who needs banks?
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