Tuesday, April 30, 2013

House Finance Chair Goes on Ski Vacation with Wall Street

from propublica.org

Rep. Jeb Hensarling, R-Texas, speaks during a news conference on Capitol Hill. (Alex Wong/Getty Images)
In January, Rep. Jeb Hensarling, R-Texas, ascended to the powerful chairmanship of the House Financial Services Committee. Six weeks later, campaign finance filings and interviews show, Hensarling was joined by representatives of the banking industry for a ski vacation fundraiser at a posh Park City, Utah, resort.
The congressman’s political action committee held the fundraiser at the St. Regis Deer Valley, the “Ritz-Carlton of ski resortsknown for its “white-glove service” and for its restaurant by superstar chef Jean-Georges Vongerichten.
There’s no evidence the fundraiser broke any campaign finance rules. But a ski getaway with Hensarling, whose committee oversees both Wall Street and its regulators, is an invaluable opportunity for industry lobbyists.
Among those attending the weekend getaway was an official from the American Securitization Forum, a Wall Street industry group, a spokesman confirmed. It gave $2,500 in February to Hensarling’s political action committee, the Jobs, Economy, and Budget (JEB) Fund.
Len Wolfson, a lobbyist for the Mortgage Bankers Association, which gave the JEB Fund $5,000 that month, posted a picture on Instagram from the weekend of the fundraiser of the funicular at the St. Regis. (It was labeled, “Putting the #fun in #funicular. #stregis #deervalley #utah.”) Wolfson did not respond to requests for comment. (UPDATE 1 p.m.Wolfson has now set his account to private.) 
This photo was posted to Instagram by Mortgage Bankers Association lobbyist Len Wolfson on Feb. 24.
This photo was posted to Instagram by Mortgage Bankers Association lobbyist Len Wolfson on Feb. 24.
Visa, which gave the JEB Fund $5,000, also sent an official. A Visa spokesman told ProPublica that in attendance were not justfinance companies, but also big retailers and others.
Hensarling, a protégé of former Texas senator and famed deregulator Phil Gramm, has a mixed record regarding Wall Street. While he has been critical of “too big to fail” banks and voted against the 2008 bailout, Hensarling recently said he opposed downsizing big banks, according to Bloomberg. That stance matters now more than ever as a bipartisan duo in the Senate, David Vitter, R-La., and Sherrod Brown, D-Ohio, introduced a bill last week seeking to constrain the too-big-to-fail institutions. While the bill is considered a longshot, it has provoked intense opposition from the industry.  
Meanwhile, Hensarling recently barred the head of the new Consumer Financial Protection Bureau from appearing before the House Financial Services Committee, citing a legal cloud over recess appointments made by President Obama.
Whatever his stance on the industry, Hensarling has been more than happy to court Wall Street’s money.
Donors working in various financial industries are Hensarling’s biggest supporters, giving him over $1 million dollars in the last election cycle, according to the Center for Responsive Politics. The congressman’s office did not respond to requests for comment.
Others donating to Hensarling’s JEB Fund around the time of the Utah ski weekend: Capital One; Credit Suisse; PricewaterhouseCoopers; MasterCard; UBS; US Bank; theNational Association of Federal Credit Unions; Koch Industries, which is involved in sundry financial trading; the National Pawnbrokers Association; and payday lendersCash America International and CheckSmart Financial. All either declined to comment or did not respond to requests.  
A spokeswoman for one large bank that donated $5,000, Alabama-based Regions Financial, told ProPublica the company doesn’t discuss events employees attend for “a number of reasons, including security.”
Also donating $5,000 to Hensarling’s political committee around the time of the ski weekend was Steve Clark, a lobbyist for JP Morgan and the industry group the Financial Services Roundtable. (In 2011, a memo written by Clark and his partners for the American Bankers Association proposed an $850,000 public-relations strategy to undermine Occupy Wall Street. It leaked to MSNBC; the plan had apparently never been executed.)
Clark didn’t respond to requests for comment.
The ski weekend was a large, apparently family-friendly affair. A Utah entertainment booker told ProPublica she had hired two caricature artists for a Feb. 23 event at the St. Regis for a group of 100, including 20 children. Hensarling’s JEB Fund, paid the bill. The fund also reported spending about $1,000 on “gifts and mementos” at Deer Valley as well as charges at the upscale restaurant Talisker on Main.
Campaigns and political action committees of a few other GOP congressmen also show charges totaling more than $50,000 at the St. Regis around that time: House Rules Committee Chairman Pete Sessions of Texas; House Ways and Means Committee Chairman Dave Camp of Michigan; and National Republican Congressional Committee Chairman Greg Walden of Oregon. None responded to requests for comment.
This is at least the second consecutive year that Hensarling has attended a fundraiser at Deer Valley. During the same February congressional recess last year, the National Republican Congressional Committee hosted a “Park City Ski Weekend” for Hensarling along with Sessions and Walden. Hensarling’s JEB Fund also reported about $60,000 paid to the St. Regis Deer Valley in the last election cycle. (The NRCC said it did not sponsor this year’s event.)
The Texan congressman has long had a taste for mixing skiing and politics. On the same February weekend in 2009, for example, Hensarling’s political action committeeinvited donors “to the second annual ‘JEB Fund Takes Jackson’” ski weekend for a minimum contribution of $2,500. The setting was the Snake River Lodge and Spa in Jackson, Wyoming, which boasted “wintertime activities fun for the entire family” including dog sledding tours and sleigh rides, according to the invitation. 
Reporting contributed by Al Shaw.

Monday, April 29, 2013

Banksters' deadly game of Sheldon's three-person chess

from eurekastreet.com.au


There is a disease plaguing the global financial system that can be characterised as a willingness of governments to give up the responsibility to set the rules of money, and hand it over to private traders and the banks that facilitate the trading. In effect the umpire, government, has handed over the rules of the game to the players. 
It is reminiscent of the three-person-chess that the eccentric character Sheldon invents in the television show The Big Bang Theory, which, according to the Big Bang Theory Wiki, 'utilises a non-standard, three-sided board with transitional quadrilateral-to-triangular tessellation to solve the balanced centre combat-area problem, additional (or fairy) pieces, and different rules for capture, move order, and game objective'.
Such gobbledegook sounds suspiciously similar to the application of mathematical models to financial securities in derivatives markets: high tech nonsense that can be brought undone at any time by the vagaries of crowd behaviour. The results have been sputtering economic growth, virtually no cost of money in most of the developed world and continual financial crises, mainly in the peripheral countries of the Euro zone.
The 'three-person chess' that financiers were allowed to create is called the derivatives market: transactions derived from more familiar activities such as bond markets, stock markets, currencies and bank debt.
Derivatives are a legitimate form of insurance if they are on the margin, but they have taken over. The global economy — the buying and selling of goods and services — is about $60 trillion. According to the McKinsey Institute global financial assets (shares, bonds, bank debt) are about $250 trillion. The Bank for International Settlements estimates the stock of derivatives is about $700 trillion.
Derivatives markets are driving what is happening in the 'real' economy and 'real' financial markets (the Greek and Italian financial crises, for instance, have a lot to do with the use of derivatives by those governments to cover their real debts). And that is proving extremely hard for economists and regulators to analyse. In effect, they are accustomed to analysing chess moves, not Sheldon's three-person meta-chess.
The International Monetary Fund recently conducted a conference to consider the future of macro economics as a discipline, which is looking distinctly frayed at the edges. IMF economist Olivier Blanchard expressed the widespread confusion:
Five years into the crisis, the contours of the macroeconomic policy of the future are only slowly coming into focus. From macroeconomic to financial stability, policy makers have realised that they have to watch many targets. They have also realised that they have potentially many more instruments at their disposal, from macro prudential tools to unconventional monetary policy.
But how to map instruments to targets remains very much a work in progress.
If regulators and financial analysts are confused, the big banks are not. They know where their interests lie — in protecting the derivatives markets from either scrutiny or change.
Dr Robert Johnson, executive director of the Institute for New Economic Thinking, recently commented that the problems started with the Thatcher era — when financial 'deregulation' was instituted mainly using economist Milton Friedman's 'snake oil' philosophy, the illusion that markets are stable and self correcting.
The attorney general of the US, Eric Holder has said he cannot prosecute crimes in the largest banks because it might undermine confidence. Clear evidence that the umpires cannot umpire because the game has been handed over to the players.
Johnson describes the US as a 'money politics system'. The derivatives system, he estimates, is 97 per cent dominated by six banks, which make about $35 billion a year. If derivatives were properly structured, put on exchanges, made more transparent and properly capitalised, it is estimated that the banks would lose about a fifth of their profit, about $7 billion a year.
'You get a financial bill through Congress about every five years. So the excess profit is about $35 billion,' said Johnson. 'As it turns out the banking lobbies spend about $600 million, which overwhelms American politics. It is the dominant force in American politics given the importance of money and how our society works. For $600 million these guys can protect $35 billion of profit. Fabulous risk return for them. Terrible for society.'
Francesco Musolino, in a paper 'Game Theory for Speculative Derivatives: a Possible Stabilising Regulatory Model', describes how self contained the financial world has become:
The current financial system is based on virtual money, which does not confluence into the real economy, remaining stuck in the finance. Possible solutions? Before arriving to a point of no return (which is actually not so far), it becomes appropriate, and perhaps vital, to establish the 'rules of the game', in order to redistribute the social wealth in a way at least close to the concept of equity.
Establishing better financial rules is what is needed, but the banks will resist it, and with such financial power they are likely to succeed, making another crisis likely.
Bitter battles between the banks and governments are not new; they have occurred for about two centuries in the United States. Franklin D. Roosevelt, for instance, in the 1930s used the word 'banksters' to decry 'the ruthless manipulation of professional gamblers and the corporate system' that allowed 'a few powerful interests to make industrial cannon fodder of the lives of half the population'.
But financial globalisation means that what used to be mainly an American problem is now a danger for the whole world. 

David James headshotDavid James has been a business journalist for 25 years and is the author of Managing for the Twenty First Century and The Business Devil's Dictionary. He has a PhD in English Literature from Monash University. 

Tuesday, April 23, 2013

The Banksters Are Cashing In On The Mortgage Meltdown

from talkradionews.com

They are putting our economy at risk again and they're making huge profits off of the homes they foreclosed on.
thom-hartmannThe banksters are cashing in off their own disaster.  The big banks are buying up distressed real estate by the boat load, and renting or selling it back to the public for huge profits.  And, in addition to making it even more difficult for economically-strapped Americans to become home owners, the banksters are increasing the likelihood of another Wall Street-fueled bubble that could crash our economy.
According to the Washington Post, institutional investors account for as much as 70 percent of sales in some markets, and their purchases are increasing home prices in those areas.  Some investors are bidding on as many as 200 homes in a single day, crowding out individual buyers, re-inflating prices, and taking on a huge volume of inventory that can’t be liquidized quickly if and when big banks get intofinancial trouble.
Dean Baker, of the Center for Economic and Policy Research, expressed his concern about the risk the banksters are taking on.  He said, “This is frightening to me.  At some point the music stops.  The investors, if they get hurt, that is their problem…but invariably a lot of other people will get caught up in that.”
Because of the risky trading practices and sub-prime mortgage scandals of the big banks, the taxpayers were forced to spend 700 billion dollars bailing out the banksters.  Now, they are putting our economy at risk again, and they’re making huge profits off of the homes they foreclosed on.  And, taxpayers could be left holding the bag, when the big banks get into trouble again.
This practice must be stopped.  Let’s break up the big banks, and stop the banksters from cashing in on the very disaster they created.

Monday, April 22, 2013

Wealth and the $1,500 toilet

from hpr1.com

By Ed Raymond
Staff Writer
Definition of Capitalism: Earning $107,703 While Sitting on a $1,500 Toilet
The Japanese have developed and are selling $1,500 toilets to high end hotels (no pun intended) and to the rich, famous, and infamous for their homes around the world. It does everything you don’t want to know about while serving you in many perfect ways. The rich will never have doubts about their cleanliness again after leaving these magnificent automatic scrubbing, washing, and drying thrones. They don’t have to even use a single exteriormuscle. Absolutely priceless.
In writing about world income inequality, I thought I would try to find something that would mark the extreme difference between the rich and poor besidesmoney. The $1,500 toilet is a perfect “differentiator.”
I got the amount of “toilet” money from an article by William Finnegan titled “The Miner’s Daughter.” The richest woman in the world is Gina Rinehart, an Australian who owns Hancock Prospecting, a company that has interests in mining and related businesses in several countries. Her estimated wealth is $30 billion, give or take a few billion. The Walton women of WalMart fame don’t even come close at only $26 billion each. The Walton family owns 14 percent of the U.S. total wealth and as much as the bottom 41 percent own. In that the Australian economy is one-tenth the size of the American economy, her wealth in relation to that would be about $200 billion, or the combined wealth of the four richest Americans–or seven Michael Bloombergs.
Rinehart, a widow with four children, has acquired a reputation as a greedy, brutal, psychopathic capitalist whose father caused hundreds of asbestos-related deaths among thousands of his aboriginal workforce. Her father never assumed any personal or medical responsibility for injuries and deaths. He even suggested at one time that aborigines should be lured to welfare offices so their water could be “doped” to make them all infertile, thus wiping out the entire race.
Internet Headline: “You Vs. Gina Rinehart”
This was the headline on the Australian website howrichareyou.com.au. The site has a game people can play. You can enter your annual salary and compare it with Gina’s. A player entering $60,000 will learn that Gina earns that every 1.7 minutes. Then the site pounces: “Guess who made $107,703 sitting on the toilet today?” Aussies do not like her. Her father did not help her national reputation. He once described her as a “slothful, vindictive and devious baby elephant ...because you are grossly overweight. I’m glad your mother can’t see you now.”  There goes family values. I guess money really isn’t everything.
Americans lost $16 trillion in household equity in the ever-cyclical Wall Street bubble, but we still are one of the richest countries. Our problem is the money needed to maintain a dominant middle class is now in the wrong hands.  It’s in the hands of a few hundred billionaire psychopaths who have no interest in the common good. A psychopath is an aggressive antisocial person lacking empathy for fellow human beings. The welfare of fellow human beings is not on their bucket list.
David and Charles Koch, brothers who inherited third base from daddy, made the equivalent of $3 million an hour from their oil and pipeline business based on a 40-hour work week in 2012. That’s an increase of six billion a year for each Koch. In order to keep the billions rolling in they poured millions into fake grass-root campaigns opposing 98 percent of the scientific community who believe humans add to the problems of global warming. If they take an hour for lunch they pocket another $3 million while the waiter serving them is paid $2.13 and must depend on the largesse of customer tips for survival.
Mitt Romney and His Worthless 47 Percent
Since vulture capitalists like Romney and Wall Street banksters and hedge fund operators took the economy down lover’s lane and raped it, the middle class has been decimated. In 1983 the poorest 47 percent of America averaged $15,000 of wealth per family.  When the vultures and banksters really went to work in the Dubya years they cleaned these families out in a short time, so now the average wealth is zero per family.
To put personal fortunes into perspective, just one of the ten richest Americans with his 2012 income could pay the annual single room occupancy cost of $558 per month to house the 633,000 homeless sleeping on the streets of American cities. The ten richest also made more in 2012 than the entire housing budget of the U.S! Out of 141 countries surveyed, the U.S. has the fourth-highest degree of wealth inequality in the world, behind Russia, Ukraine, and Lebanon.
Minority families once had some equity in their homes, but because of the Wall Street housing fraud the median wealth for Hispanic and black families has fallen 66 percent and 53 percent, respectively. Now the average single black or Hispanic woman has about $100 in net worth. For every dollar of assets owned by a black or Hispanic woman, each member of the Forbes 400 has over $40 million.
This is the Real American “Exceptionalism”
We still hear the Know-Nothings in the Republican Party pontificate about how exceptional we are. Evidently these are guys and gals who look in the mirror and sing that famous line: “I’m perfect in every way.” The Global Competitiveness Report of 2012-2013 by the World Economic Forum, the latest annual ranking of 144 countries in a comprehensive examination of a wide range of factors, reveals the dark side of the “richest country in the world” with “the finest health care on earth.” American “exceptionalism” is hard to find in this report. We rank #1 in only one category: Gross Domestic Product. That is, we are on top only as a share of the world GDP. We are #136 in Government Debt as a percentage of GDP (not good!), #80 in Soundness of Banks, #37 in Strength of Auditing and Reporting
Standards (witness Enron, Tyco, and Countrywide), and #78 in Wastefulness of Government Spending (check Pentagon’s F-35 budget of the fighter that can’t fight).
In health care we are #34 in Life Expectancy and #41 in Infant Mortality. In education we are #38 in Quality of Primary Education, #47 in Quality of Math and Science Education, and #28 in Quality of the Educational System. Our political system has more than a tinge of corruption. We are #34 in Diversion of Public Funds (due to corruption), #42 in Irregular Payments and Bribes, #54 in Public Trust in Politicians, #38 in Judicial Independence, and #59 in Cronyism Involving Government Officials. We are #103 in Total Tax Rates, #47 in Number of Procedures Required to Start a Business, and #33 in Internet-Broadband Use. Among the nations that stand high on the positive side are Finland, Switzerland, Singapore, New Zealand, Denmark, Sweden, Norway, Japan, Canada, and the Netherlands. We are buried in the middle of the second quartile of this significant report–and are gradually sinking to “Third World” status. The most important factor for the disappearing middle class in the U.S. is that we are a less upwardly mobile society than many comparable nations, with Great Britain, Canada, and almost all of Western Europe way ahead of us. This is a bad sign: Foxconn, China’s largest private employer, is considering opening plants in this country. I wonder if Foxconn will put nets around U.S. factories to catch suicidal workers jumping out of windows–as they do in China.
Is David Stockman a Reliable Authority?
One of Ronald Reagan’s most reliable budget chiefs, David Stockman,  dropped an economic bomb on his fellow Republicans a couple of weeks ago by declaring that “the United States is broke—fiscally, morally, intellectually—and the Fed (Federal Reserve) has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German-dominated euro zone is crumbling) that will soon overwhelm it. When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out the cash, it is.”  Ouch!
The Decade of Disaster While George W. Bush Was Learning to Paint
Stockman does not mince words about the Bush decade of disaster: “Over the last 13 years (from 2000) the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later ... this latest Wall Street bubble, inflated by an egregious flood of phoney money from the Federal Reserve rather than real economic gains, will explode, too.”
Economic facts substantiate what Stockman is predicting. During the Bush decade our economy grew at 1.7 percent a year, the lowest since the Civil War. Business investment has averaged a measly .8 percent a year, with the payroll job count limping along at .1 percent annually. Real median family income growth has dropped 8 percent in this decade, and the number of middle-class jobs has dropped 6 percent. The bottom 90 percent lost 25 percent of their net worth while food stamp and disability aid recipients have doubled to 59 million and one in five Americans.
Stockman, who “was taken to the woodshed” by the great budget balancer Ronald Reagan because he didn’t believe in “trickle-down” economics (It really became tinkled-on or pissed-on economics), which further defined the 30-year period when the middle-class didn’t make a dime. He said: “The destruction of fiscal rectitude under Ronald Reagan—one reason I resigned as his budget chief in 1985—was the greatest of his many dramatic acts. Reagan said deficits didn’t matter….and allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars.”
The Musings of an Old Commie – Karl Marx
Karl Marx is long dead, but the Republicans always keep looking for commies under beds, in beds, in the Democratic Party, in newspaper columns, and in government departments. I have always wondered why they fear and hate Marx so much. Could it be because Marx was right about unfettered capitalism? He trained as a philosopher in the 19th Century, concentrating in the areas of economics and politics. He believed that the extraction of surplus value from exploited labor eventually breaks down capitalism. At first capitalism raises everyone to new heights of wealth. But then wealth gets concentrated in a greedy few, causing conflict between the rich and working classes.
Widening inequality in the world is just what Marx predicted, with such inequality creating misery, ignorance, slavery, brutality, and mental degradation, whether in third world or “rich” industrialized European or North and South American nations. Class struggle is back in spades in the U.S. and around the world, with workers demanding their share of the global economic pie. The Third World War, the battle between capital and labor, has started, whether in China, Egypt, Russia, North Carolina, Pakistan, India, France, and Illinois. Pitchforks are being sharpened around the world.
John Steinbeck in his Great Depression novel “The Grapes of Wrath” used the Joad family to illustrate the problems of the middle-class and poor during periods of inequality. Bruce Springsteen in his song “The Ghost of Tom Joad” followed Steinbeck’s theme:
“Men walkin’ long the railroad tracks, goin’ someplace there’s no going back,
  Highway patrol choppers comin’ up over the bridge, hot soup on a campfire under bridge,
  Shelter line stretchin’ round the corner, welcome to the new world order,
  Families sleepin’ in their cars in the Southwest, no home no job no peace no rest,
  The highway is alive tonight but nobody’s kiddin’ nobody about where it goes,
  I’m sittin’ down here in the campfire light, searchin’ for the ghost of Tom Joad.”
Questions and comments: raymond@loretel.net

Friday, April 19, 2013

History has shown us repeatedly that all fiat money systems eventually fail

from stockhouse.com  

O Gold! I still prefer thee unto paper, which makes bank credit like a bark of vapour.
Lord Byron, 1815.

It was 1:30 am on Thursday, March 28, on the West Coast of North America. Still jet-lagged a week following my return from Asia, I awoke after a mere three hours sleep to an epiphany.
The thought evidently coincided with the time that banksters in Cyprus braced for a run on reserves. Their intervening measures to prevent bank failures included severely discounting the value of large investors’ deposits and radically limiting cash withdrawals forpeones to 300 euros a day.
Here’s the idea that woke me up: If you keep your money with the Banksters, they are LOL.
I must question why any smart person with financial assets in any fiat currency held anywhere in the world would freely choose to keep the majority of that cash in any bank anywhere in the world.
At its very best, a bank is a 10:1 fractional reserve system; i.e., the bank backs 10% of its outstanding loans by the equivalent in paper money. In actuality, the majority of banks are leveraged much more than that. Fractional banking has existed for centuries. In the early 1600s, central governments in Europe began to manipulate money supply and credit in order to regulate banks, restrict bank runs, and prevent bank failures.
In early 1700s, England formed a joint public-private banking monopoly designed to alleviate its national debt. The South Seas Company was a conspiratorial scam involving government accountants, stock promoters, and politicians based on a purported but non-existent trade monopoly in South America. In 1720, the “Bubble Act” was designed to preserve the monopoly by outlawing competition, but it soon resulted in massive bank failures, financial panic, and economic collapse. Henceforth, the term “bubble” refers to any market that goes parabolic over a short period of time.
I know an ex-banker in Albuquerque whose hometown bank failed during the U.S. housing market collapse in 2008. He was ruined but at least his small clients’ investments were backed and honored by central government-issued bank insurance, made whole by the keyboard creation of fiat dollars. His creditors were less fortunate, writing off huge sums ofbad debt.
The current Cypriot bank crisis and the resulting closure of its stock market for two weeks illustrates that banking remains an inherently risky business, often fueled by speculative credit markets that are subject to collapse.
History has shown us repeatedly that all fiat money systems eventually fail and lead to government default and demise. Even the value of the United States dollar has been rolled back twice in the past 80 years.
In 1933, President Roosevelt devalued the dollar 70% by raising the fixed price of gold from $20.67 to $35.00. His executive order also reneged on the government’s promise to redeem paper currency in gold upon demand and made it illegal for citizens to own more than five ounces of bullion.
The Breton Woods Agreement of 1944 made the U.S. dollar the world’s reserve currency and it alone was decreed as redeemable in gold and only by other central governments. In 1971, the U.S. defaulted again when Nixon closed the gold-for-dollars option and floated its money on world exchanges. Since then, greenbacks have had no backing except the United States of America’s promise to pay.
Since the first baby boomers were born in 1946, American citizens have been taught, cajoled, and perhaps even brainwashed into thinking that the almighty dollar, the world’s reserve currency, is a stable fiat money beyond question and reproach. Acceptance of this idea requires a belief that the U.S. government is solvent and will remain so into the future.
But this very same government has gone bankrupt and defaulted on its financial obligations twice during my parents’ lifetimes. Why would you think they will not do it again in yours? Is it your faith, belief, or a combination of both?
I kindly remind you what Mark Twain had to say about that: Faith is believin’ what you know ain’t so.
Face the truth folks, your money is not real money unless it is held in physical gold.
Let’s look at current facts about the American banking system and how it takes care of your money:
  • The central bank (Federal Reserve) creates more dollars (inflation) and devalues the purchasing power of your money every minute of every day to the tune of several percentage points per year. The Fed has been doing this at an exponential rate since the financial crisis of 2008, more than tripling the dollars in circulation.
  • Your local bank is paying you a tiny fraction of a percent in interest for the privilege of holding your money in checking, savings, and money market accounts. At current average rates for a $100,000 account, the bank will pay you interest income of about $110 per year, subject to federal taxes up to 39.6%.
  • However, the bank doesn’t actually hold your money; it lends it out to debtors at much higher interest rates. That’s how a bank makes most of its money, or at least it used to. 
  • The bank also takes in money by charging you fees for its privilege of lending your money to debtors. The charges you incur for check printing, ATM withdrawals, overdraft protection, foreign transactions, wires, and exchange rate spreads have skyrocketed since 2008 and are likely to far exceed the aforementioned interest you earn.
  • Banks always have a percentage of loans in which the debtor defaults. These are actually liabilities but are euphemistically called “non-performing assets.” If this percentage exceeds cash reserves and liquidity becomes a question, many depositors will try to remove their money quickly before the bank fails. That creates a bank run and the bank will default on its obligation to you.
  • At that point the bank is taken over by a federal government agency and placed into receivership. Small depositors’ funds up to $250,000 per account are protected by the agency via a bank insurance program and are reimbursed simply by creating more fiat money.
  • Liabilities are absolved and the bankrupt bank’s remaining assets are sold at discounted prices. Partial returns of capital are distributed to its first-in-line creditors. Most of the creditors however, are left only with bad debts to write-off against their taxes.

Despite their many flaws and shortcomings, banks are a necessary evil within our modern-day system of business. As a law-abiding citizen, you are required by the government to use a bank to move any significant sum of fiat currency from one entity to another. Transfers of funds can include not only the old in-out (re: Alex from A Clockwork Orange, 1962) but also the over, under, sideways, and down (Yardbirds, 1966).
If you are still reading this rant, I assume that you accept the above as more or less correct. Or perhaps you just got a chuckle out of my reference to the early to mid-1960s when U.S. government debt was about $300 billion. Federal debt is now 56 times that figure, at well over $16.8 trillion and growing rapidly. Note this astronomical number does not include unfunded future liabilities such as pensions and health care for the old folks at home. Yikes!
The simple fact is that by keeping your money in a bank, you are losing wealth each and every day.
I have no faith and refuse to use the word believe (Mercenary Musing, December 28, 2009). Therefore, logic demands that I question the viability and longevity of our current monetary system and beg the following questions of you:
  • Should you not keep only enough fiat money within the world’s banking system to carry on your daily requirements for personal and business affairs and nothing more?
  • Should you not buy more gold with those constantly depreciating dollars that you remove from said banking system?
  • Should you not hold your excess, discretionary, and/or emergency fiat dollars in your personal possession at all times, the same as you do with your physical gold bullion? 

I’m just sayin’: If all your money is stored by the Banksters, then I surmise that they are occasionally LOL while sipping Dom Perignon in their bullet-proof Lincoln limousines at your expense. After all, much of those multi-tens-of-millions-of-dollars in annual bonuses ought to be expensed to avoid onerous government taxes, no?
If you have your fiat currency in your physical possession, the Banksters can only devalue it and that’s exactly what they are doing now. But the bank and/or the government cannot confiscate your gold or your money that you physically hold without engaging you directly.
Unless of course, you are already dead. When that happens, the government confiscates a significant portion from rich people’s heirs in another scheme called the estate tax, levied for the privilege of dying. After all, life is a death sentence.
Because of periodic wars and central bank interventions, U.S. baby boomers and subsequent generations have never witnessed a long financial collapse. However, my long-gone grandparents lived thru en masse bank failures and an entire generation struggled to make ends meet during the decade-long Great Depression. Colored by that experience, many folks abandoned banks altogether and kept their paper money and illegal gold coins stuffed in mattresses or hidden in old coffee cans under the crawl space.
I remember that my Granny Alexander used to put her change in a piggy bank every day. Periodically she would roll the coins up and take them to the bank for exchange into paper money. Those paper dollars were then taken home and stashed away in her secret place, ready and waiting for a rainy day.
At her urging when 10 and 11 years old, my brother and I collected pennies of different years and mints in little blue books. I still have that collection of pennies, some of which are worth way more than a pretty penny now. Rest assured this book is not stored by a bank in a safety deposit box that I do not own, to which I am afforded access for only 35 hours in any 168-hour week, and in which the government upon a whim can order the bank to open and confiscate its contents.
My parents’ generation lived thru the 1930s and savvies bad financial times. These old folks are not only likely to own gold but also have a considerable stash of cash in the cookie jar, a home safe, or another hiding place with easy access at their leisure or in a monetary emergency. In my opinion, that’s not a bad idea.
We came pretty darn close to a monetary emergency when the banks crashed in 2008. A bank run in the U.S. likely would involve the invoking of martial law, the shut-down of ATM machines, lengthy bank holidays, long waits in queues upon re-opening, and severe limitations on personal withdrawal amounts.
That sounds a lot like the past month in Cyprus to me.
In the 42 years after remaining vestiges of the gold standard were dissolved, numerous countries have defaulted on their currencies and debts, leaving their suddenly poor ordinary citizens to suffer the consequences. Meanwhile, their Banksters merely re-organized and promulgated perpetual paper pyramid schemes again.
Rest assured it will happen in the good ol’ US of A once again; we just do not know when.
Please do your own due diligence and research before seriously considering my maniacal musings, radical raves, libertarian literalisms, or inane ideas.
Don’t let the Banksters’ have the last laugh on you. Buy more gold and mattresses.

Disclaimer: I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.com, LLC. 
Michael S. (Mickey) Fulp
The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified ProfessionalGeologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has 30 years experience as an exploration geologist searching for economic deposits of base and precious metals, industrial minerals, coal, uranium, oil and gas, and water in North and South America, Europe, and Asia.
Mickey has worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for the past 22 years, specializing in geological mapping and property evaluation. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient and is bilingual in English and Spanish. From 2003 to 2006, Mickey made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia.
Mickey is respected throughout the mining and exploration community for his ongoing work as an analyst for public and private companies, investment funds, newsletter and website writers, private investors, and brokers.

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