Archive for the Finance Category

Bernanke’s Former Advisor: “People Would Be Stunned to Know the Extent to Which the Fed is Privately Owned”

Posted in Conspiracy, Finance, Warnings on April 13, 2016 by betweentwopines

 

With every passing day, the Fed is slowly but surely losing the game.

Only it is not just former (and in some cases current) Fed presidents admitting central banks are increasingly powerless to boost the global economy, even if they still have sway over capital markets. What is far more insidious to the Fed’s waning credibility is when former economists affiliated with the Fed start repeating mantras that until recently were only a prominent feature in the so-called fringe media.

This is precisely what happened today when former central bank staffer and Dartmouth College economics professor Andrew Levin, special adviser to then Fed Chairman Ben Bernanke between 2010 to 2012, joined with an activist group to argue for overhauls at the central bank that they say would distance it from Wall Street and make its activities more transparent and accountable to the public.

Levin is pressing for the overhaul with Fed Up coalition activists. Many of the proposed changes target the 12 regional Federal Reserve Banks, which are quasi-private and technically owned by commercial banks in their respective districts.

All of that is not surprising. What he said to justify his new found cause, however, is.

“A lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned, Mr. Levin said. The Fed “should be a fully public institution just like every other central bank” in the developed world, he said in a conference call announcing the plan. He described his proposals as “sensible, pragmatic and nonpartisan.”

Why is that stunning? Because it has long been a bone of contention if only among the fringe media, that at its core the Fed is merely a private institution, beholden only to its de facto owners: not the people of the U.S. but to a small cabal of banks. Worse, the actual org chart of who owns what is not disclosed, even as the vast majority of the U.S. population remains deluded that the Fed is a publicly owned institution.

As the WSJ goes on to note, the former central bank staffer said he sees his ideas as designed to maintain the virtues the central bank already brings to the table. They aren’t targeted at changing how policy is conducted today. “What’s important here is that reform to the Federal Reserve can last for 100 years, not just the near term,” he said.

And this is coming from a former Fed employee and Ben Bernanke’s personal advisor! That in itself is a most striking development, because now that the insiders are finally speaking up, it will be a race among both current and prior Fed workers to reveal as much dirty laundry as possible ahead of what is increasingly being perceived by many as the Fed’s demise.

To be sure, Levin’s personal campaign for Fed transformation will not be easy, and as the WSJ writes, what is being sought by Mr. Levin and the activists is significant and would require congressional action. Ady Barkan, who leads the Fed Up campaign, said the Fed’s current structure “is an embarrassment to America” and Fed leaders haven’t been “willing or able” to make changes.

Specifically, Levin wants the 12 regional Fed banks to be brought fully into the government. He also wants the process of selecting new bank presidents—they are key regulators and contributors in setting interest-rate policy—opened up more fully to public input, as well as term limits for Fed officials.

This would represent a revolution to the internal staffing of the Fed, which will no longer be at the mercy of its now-defunct shareholders, America’s commercial banks; it would also mean that Goldman Sachs would lose all its leverage as the world’s biggest central bank incubator, a revolving door relationship which has allowed the Manhattan firm to dominate the world of finance for the decades.

Levin’s proposal was made in conjunction with the Center for Popular Democracy’s Fed Up coalition, a group that has been pressuring the central bank for more accountability for some time. The left-leaning group has been critical of the structure of the regional banks, and has been pressing the Fed to hold off on raising rates in a bid to make sure the recovery is enjoyed not just by the wealthy, in their view.

The proposal was revealed on a conference call that also included a representative from Bernie Sanders’s presidential campaign, although all campaigns were invited to participate.

The WSJ adds that according to Levin, who knows the Fed’s operating structure intimately, says the members of the regional Fed bank boards of directors, the majority of whom are selected by the private banks with the approval of the Washington-based governors, should be chosen differently. The professor says director slots now reserved for financial professionals regulated by the Fed should be eliminated, and that directors who oversee and advise the regional banks should be selected in a public process involving the Washington governors and local elected officials. These directors also should better represent the diversity of the U.S.

Levin also wants formal public input into the selection of new bank presidents, with candidates’ names known publicly and a process that allows for public comment in a way that doesn’t now exist. The professor also wants all Fed officials to serve for single seven-year terms, which would give them the needed distance from the political process while eliminating situations where some policy makers stay at the bank for decades. Alan Greenspan, for example, was Fed chairman from 1987 to 2006.

As the WSJ conveniently adds, the selection of regional bank presidents has become a hot-button issue. Currently, the leaders of the New York, Philadelphia, Dallas and Minneapolis Fed banks are helmed by men who formerly worked for or had close connections to investment bank Goldman Sachs.

Levin called for watchdog agency the Government Accountability Office to annually review and report on Fed operations, including the regional Fed banks. He also wants the regional Fed banks to be covered under the Freedom of Information Act. A regular annual review hopefully would insulate the effort from perceptions of political interference, Mr. Levin said.

* * *

While ending the Fed may still seem like a pipe dream, at least until the market’s next major crash at which point the population may  finally turn on the culprit behind America’s serial boom-bust culture, the U.S. central bank, Levin’s proposal would get to the heart of the most insidious conflict of interest in the US: the fact that the Federal Reserve works not for the people of America, but for its owners – the banks.

Which is also why, sadly, this proposal will be dead on arrival, as its passage would represent the biggest loss for Wall Street in the past 103 years, far more significant than anything Dodd-Frank could hope to accomplish.

 

Source :  http://www.zerohedge.com/news/2016-04-11/bernankes-former-advisor-people-would-be-stunned-know-extent-which-fed-privately-own

Tax haven data leak reverberates around globe

Posted in Conspiracy, Finance, Law, Politics on April 4, 2016 by betweentwopines

38 media outlets probing one of biggest ever leaks of financial data

Last Updated: April 3, 2013

A massive leak of financial data to media outlets around the globe has spurred a series of investigations into offshore banking and tax havens. Documents detailing secret accounts were leaked to the Washington, D.C.-based International Consortium of Investigative Journalists.
The non-profit group granted 38 media organizations access to the database. Corporate moguls, property tycoons, lawyers and politicians are under scrutiny in the international investigation. Go to SOURCE  for map and select the red marker to open a window to read more about the investigations in each country.

CitiGroup: The End of Pax Americana, With No Replacement in Sight.

Posted in ATS Thread, Finance, Warnings on January 19, 2016 by betweentwopines

 

Post by SkepticOverlord at ATS

Just a few days ago, CitiGroup released a new report that reads like an alarm klaxton sounding the end of the current geopolitical world order, with nothing but chaos to follow. Indeed, the “banksters” are admitting that everything we thought we knew about how the world operates is either wrong, or coming to a jarring end. The report is centered around the idea that “Pax Americana” has either already ended, or is in its final death throes.

“Pax Americana” is the term often used to define the (previously) current geopolitical order. That the general peace and stability of the Post-WWII world is due to America’s dominant economic and political power, backed up by its ridiculously large military. In its analysis, Citi is certain that the Pax Americana era is over, but the main problem for the future is what they’re calling the “Great Power Sclerosis.” In other words, there’s nothing to replace Pax Americana, other than chaos, disorder, and a great many panicking investment bankers.

The full PDF of the report, “Global Political Risk: The New Convergence Between Geopolitical and Vox Populi Risks, and Why It Matters” is available here, and I encourage all to take the time to read its 70+ pages. Because, there are times when the pragmatic warnings, predictions, and fears of those advising investors are very important to we, the skeptical. This is most certainly one of those times.

Some key excerpts follow…

The report begins with:

2016 has begun, as 2015 ended, amid a significant worsening of the global political climate and along with that, considerable volatility in financial markets. Investors and businesses are increasingly aware of the need to understand the drivers and the implications of a greater level of event risk exacerbated by shifting social patterns.

Well, tell us something we didn’t know.

In the section titled, “Is This the Dawning of a New Era,” with regard to the death of Pax Americana:

What’s more, we see little sign of this trend of political risk cutting across advanced and emerging economies reversing. We think it’s unlikely that the moderate global growth that Citi’s economists forecast as their central scenario will dampen these risks. If anything, the data we have analyzed for this report, combined with our combined expertise in comparative political science and international relations and security and defense analysis, underscores how, by many measures, these risks are on the rise and indeed could endanger even the already modest prospects for global growth

In other words, translated from investor-speak; put on the air mask and assume crash-landing position.

And invocation of the dreaded, “Black Swan”

In our view, political and business leaders will need to be more attuned to the new shape of global political risk, a paradigm shift that means that previous policies will fail to keep pace and uncertainty will remain high, with the potential to interact in unexpected ways. Among the key implications of this more fragile and interconnected risk outlook is that so-called Black Swan events — in this case, geopolitical events producing instability spanning several orders of magnitude — may be both more likely and more difficult for leaders and global financial institutions to resolve.

The Black Swan theory was developed by Nassim Nicholas Taleb, as the disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology. The 9/11 attacks are a prime example of a Black Swan.

The report closes with this bit of doom-porn:

Over the long-term, failure to devise policies to address middle class anxiety and declining living standards increases the likelihood that Vox Populi risk — including mass protests and government collapses — could move from being episodically disruptive to systemic, undermining globalization in the process. And we are deeply concerned that the political capital necessary to stem the refugee crisis and terrorist threat, perhaps best-characterized as the collision between previous foreign policy failures and current governance capacity, exceeds that available to government leaders, who have relied upon central banks to manage the lion’s share of global crises over the past several years. 2016 could be a very political year for markets.

Overall, the report is an excellent analysis of the condition our condition is in, which isn’t good by any measure. It’s very enlightening read, and worth your time.

Ron Paul Warns: “Watch The Petrodollar”

Posted in Energy, Finance, Politics, Warnings on January 19, 2016 by betweentwopines

 

The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better. – Ron Paul

Ron Paul is calling for the end of the petrodollar system. This system is one of the main reasons the U.S. dollar is the world’s premier reserve currency.

Essentially, Paul is saying that understanding the petrodollar system and the forces affecting it is the best way to predict when the U.S. dollar will collapse.

Paul and I discussed this extensively at one of the Casey Research Summits. He told me he stands by his assessment.

Nick Giambruno and Ron Paul

This is critically important. When the dollar loses its coveted status as the world’s reserve currency, the window of opportunity for Americans to protect their wealth from the U.S. government will definitively shut.

At that point, the U.S. government will implement the same destructive measures other desperate governments have used throughout history: overt capital controls, wealth confiscation, people controls, price and wage controls, pension nationalizations, etc.

The dollar’s demise will wipe out the wealth of a lot of people. But it will also trigger political and social consequences likely to be far more damaging than the financial fallout.

The two key takeaways are:

  1. The U.S. dollar’s status as the premier reserve currency is tied to the petrodollar system.
  1. The sustainability of the petrodollar system relies on volatile geopolitics in the Middle East (where I lived and worked for several years).

From Bretton Woods to the Petrodollar

The Bretton Woods international monetary system, which the Allied powers created in 1944, turned the dollar into the world’s premier reserve currency.

After WWII, the U.S. had by far the largest gold reserves in the world (around 706 million ounces). These large reserves – in addition to winning the war – allowed the U.S. to reconstruct the global monetary system around the dollar.

The Bretton Woods system tied virtually every country’s currency to the U.S. dollar through a fixed exchange rate. It also tied the U.S. dollar to gold at a fixed exchange rate.

Countries around the world stored dollars for international trade or to exchange with the U.S. government at the official rate for gold ($35 an ounce at the time).

By the late 1960s, excessive spending on welfare and warfare, combined with the Federal Reserve monetizing the deficits, drastically increased the number of dollars in circulation relative to the gold backing them.

Naturally, this made other countries exchange more dollars for gold at an increasing rate. This drained the U.S. gold supply. It dropped from 706 million ounces at the end of WWII to around 286 million ounces in 1971 (a figure supposedly held constant to this day).

To stop the drain, President Nixon ended the dollar’s convertibility for gold in 1971. This ended the Bretton Woods system.

In other words, the U.S. government defaulted on its promise to back the dollar with gold. This eliminated the main motivation for other countries to hold large U.S. dollar reserves and use the U.S. dollar for international trade.

With the dollar no longer convertible into gold, demand for dollars by foreign nations was sure to fall, and with it, the dollar’s purchasing power.

OPEC, a group of oil-producing countries, passed numerous resolutions after the end of Bretton Woods, stating its need to maintain the real value of its earnings. It even discussed accepting gold for oil. Ultimately, OPEC significantly increased the nominal dollar price of oil.

For the dollar to maintain its status as the world’s reserve currency, the U.S. would have to concoct a new arrangement that gave foreign countries a compelling reason to hold and use dollars.

The Petrodollar System

From 1972 to 1974, the U.S. government made a series of agreements with Saudi Arabia. These agreements created the petrodollar system.

The U.S. government chose Saudi Arabia because of its vast petroleum reserves, its dominant position in OPEC, and the (correct) perception that the Saudi royal family was corruptible.

In essence, the petrodollar system was an agreement that the U.S. would guarantee the survival of the House of Saud. In exchange, Saudi Arabia would:

  1. Use its dominant position in OPEC to ensure that all oil transactions would happen in U.S. dollars.
  1. Invest a large amount of its dollars from oil revenue in U.S. Treasury securities and use the interest payments from those securities to pay U.S. companies to modernize the infrastructure of Saudi Arabia.
  1. Guarantee the price of oil within limits acceptable to the U.S. and prevent another oil embargo by other OPEC members.

Oil is the world’s most traded and most strategic commodity. Needing to use dollars for oil transactions is a very compelling reason for foreign countries to keep large U.S. dollar reserves.

For example, if Italy wants to buy oil from Kuwait, it has to purchase U.S. dollars on the foreign exchange market to pay for the oil first. This creates an artificial market for U.S. dollars that would not otherwise exist.

The demand is artificial because the U.S. dollar is just a middleman in a transaction that has nothing to do with a U.S. product or service. Ultimately, it translates into increased purchasing power and a deeper, more liquid market for the U.S. dollar and U.S. Treasuries.

Additionally, the U.S. has the unique privilege of not having to use foreign currency to buy imports, including oil. Instead, it gets to use its own currency, which it can print.

It’s hard to overstate how much the petrodollar system benefits the U.S. dollar. It’s allowed the U.S. government and many Americans to live beyond their means for decades.

What to Watch For

The geopolitical sands of the Middle East are rapidly shifting.

Saudi Arabia’s strategic regional position is weakening. Iran, which is notably not part of the petrodollar system, is on the rise. U.S. military interventions are failing. And the emerging BRICS countries are creating potential alternatives to U.S.-dominated economic/security arrangements. This all affects the sustainability of the petrodollar system.

I’m watching the deteriorating relationship between the U.S. and Saudi Arabia with a particularly close eye.

The Saudis are furious because they don’t think the U.S. is holding up its end of the petrodollar deal by more aggressively attacking their regional rivals.

This suggests that they might not uphold their part of the deal much longer, namely selling their oil exclusively in U.S. dollars.

The Saudis have even suggested a “major shift” is under way in their relationship with the U.S. To date, though, they haven’t matched their words with action, so it may just be a temper tantrum or a bluff.

The Saudis need an outside protector. So far, they haven’t found any suitable replacements for the U.S. In any case, they’re using truly unprecedented language.

This situation may reach a turning point when U.S. officials start expounding on the need to transform the monarchy in Saudi Arabia into a “democracy.” But don’t count on that happening as long as Saudi oil sells exclusively for U.S. dollars.

Regardless, the chances that the Kingdom might implode on its own are growing.

For the first time in decades, observers are calling into question the viability of the Saudi currency, the riyal. The Saudi central bank currently pegs the riyal at a rate of 3.75 riyals per U.S. dollar.

The Saudi government spends a ton of money on welfare to keep its citizens sedated. Lower oil prices plus the cost of their mischief in the region are cutting deep into government revenue. So there’s less money to spend on welfare.

There’s a serious crunch in the Saudi budget. They’ve only been able to stay afloat by draining their foreign exchange reserves. That threatens their currency peg.

Recently, Saudi officials have begun telling the media that the currency peg is fine and there’s nothing to worry about. That’s another clue that there’s trouble. Official government denial is almost always a sign of the opposite. It’s like the old saying: “Believe nothing until it has been officially denied.”

If there were a convenient way to short the Saudi riyal, I would do it in a heartbeat.

Timing the Collapse

Long before Nixon ended the Bretton Woods system in 1971, it was clear that a paradigm shift in the global monetary system was inevitable.

Today, another paradigm shift seems inevitable. As Ron Paul explained, there’s one sure way to know when that shift is imminent:

We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros.

It’s very possible that, one day soon, Americans will wake up to a new reality, just as they did in 1971 when Nixon severed the dollar’s final link to gold.

The petrodollar system has allowed the U.S. government and many U.S. citizens to live way beyond their means for decades. It also gives the U.S. unchecked geopolitical leverage. The U.S. can exclude virtually any country from the U.S. dollar-based financial system…and, by extension, from the vast majority of international trade.

The U.S. takes this unique position for granted. But it will disappear once the dollar loses its premier status.

This will likely be the tipping point…

Afterward, the U.S. government will be desperate enough to implement capital controls, people controls, nationalization of retirement savings, and other forms of wealth confiscation.

I urge you to prepare for the economic and sociopolitical fallout while you still can. Expect bigger government, less freedom, shrinking prosperity…and possibly worse.

It’s probably not going to happen tomorrow. But it’s clear where the trend is headed.

Once the petrodollar system kicks the bucket and the dollar loses its status as the world’s premier reserve currency, you will have few, if any, options to protect yourself.

This is why it’s essential to act before that happens.

The sad truth is, most people have no idea how bad things could get, let alone how to prepare…

Yet there are straightforward steps you can start taking today to protect your savings and yourself from the financial and sociopolitical effects of the collapse of the petrodollar.

This recently released video will show you where to begin. Click here to watch it now.

Source : http://www.zerohedge.com/news/2016-01-13/ron-paul-warns-watch-petrodollar

A Real Picture Of The Economy

Posted in ATS Thread, Finance, Warnings on October 15, 2015 by betweentwopines

Post by WCmutant at ATS

Stagnant. That’s the word that best describes our economy over the last 6-7 years from the 2008/2009 recession.

In this post I want to discuss the important aspects of an economy:
1. Wages
2. Job growth/unemployment
3. Retail sales

Too many people point to the stock market as an indicator of economic health. Some of you reading this may still do that, while many others have wised up and realize it’s nothing more than gambling – mainly for the rich. This is why I focus on Wages, Jobs, and Sales. These three factors give you a better picture of the millions of Americans that haven’t invested much (if any at all) in the stock market.

Wages
According to the most recent September 2015 Census Bureau report 2014 wages have been stagnant and are in fact down from 2007 (pre-recession).
Census LinkPage 13 provides a graph and highlights

You find that for 2014 average wages are not statistically significant from 2013 wages, and 2011 and 2012 saw declines in average wages. So, average wages (for everyone) have declined and now flattened out but are still not where they were prior to the recession – 6.5% lower 2014 vs. 2007.

If you are Asian, good news – your average wages are higher than any other race. If you are white, also good news, you make the 2nd highest average wage. If you are black you make the lowest average wage and hispanics follow right behind. More importantly the average wage for non-whites (asian, hispanic, black) had no statistically significant change from 2013 to 2014. However, the bad news for this same period whites saw a 1.7% decrease in average wages.

Jobs/Unemployment
As an economist, this is one of my most hated statistics reported. Unemployment numbers are only based on people (age 16+) actively looking for jobs (last 4 weeks). People that give up on looking for jobs aren’t included in this statistic.

It’s important to understand that the BLS (Bureau of Labor statistics) attempts to track people in the “Not in Labor Force” (NILF) and they also have “Marginally Attached Workers” (MAW) and “Discouraged Workers” (DW). Both the MAW and DW groups (age 16+) are NOT included in the unemployment figures because they have not actively looked for work in the last 4 weeks.

To get a better understanding of what has really been happening (because a picture is worth a thousand words) I’m including two recent graphs from the BLS website.

Graph for Unemployment numbers (notice the downward trend):

Graph for Not in Labor Force numbers (notice the upward trend):

For reference: BLS Link to Graph 1 and BLS Link to Graph 2

As you can see the unemployment rate is indeed dropping. But of much more concern are the growing number of people that are NILF because they have given up. This paints a much more bleak picture of our economic conditions than the simple unemployment rate provides.

Retail Sales
In February 2014 the National Retail Federation (NRF) provided a forecast that retail sales were expected to grow by 4.1% over the next year (LINK). However, by July 2015 they had to adjust their forecast downward to 3.5% (LINK).

Graph showing the flattening of retail sales over the last 3-4 years:

Reference for this graph is at the NRF website, LINK.

Final Thoughts:
Now, I’m not intending to present an alarmist picture. However:
1. Lower average wages from pre-recession (2007)
2. flattening retail sales
3. Increases in the Not In Labor Force numbers

Add to that the stock market is moving into a much more volatile time period and there are continued restructuring (layoffs) in many industries around the world to save those companies money (Hewlett Packard, Catepillar, ConAgra, Walmart, Target, Air France, etc.) and we might be missing some signaling of things to come over the next 1-3 years.

Wal-mart stock price plummets and the billionaire heirs lose in the neighborhood of $9-11 billion in one day, Bloomberg. I can tell you this, any restructuring they do is going to preserve their own greedy pockets not those of the average worker.

My quick stock market forecast:
I’m expecting to see dips in the markets Mid-November into Mid-December (approx. Nov. 17 through Dec. 20). And again market dips in the Spring of 2016 Mid-April to Mid-May. The downward trend will continue as we move more toward a new paradigm, yeah I said paradigm because that’s the best way to describe it at this point.

What do we do?
It’s time to begin imagining and possibly implementing a better system. Complaining and pointing out the faults of the broken system that we have only goes so far, we must begin.

RKRC!

Why Are So Many People Freaking Out About A Stock Market Crash In The Fall Of 2015?

Posted in Finance, Warnings on August 25, 2015 by betweentwopines

By Tyler Durden

Is the stock market going to crash by the end of 2015?  Of course stock market crashes are already happening in 23 different nations around the planet [10], but most Americans don’t really care about those markets.  The truth is that what matters to people in this country is the health of their own stock portfolios and retirement accounts.  There are a lot of people out there that are very afraid of what could happen if the money that they have worked so hard to save gets wiped out in a sudden financial collapse.  And right now there is an unprecedented amount of buzz about the potential for a giant stock market crash by the end of this calendar year.  In fact, I don’t think that I have ever seen more experts come out with bold predictions that a stock market crash will happen within a very specific period of time.

The following is a sampling of some of the experts that have made very bold proclamations about the rest of this year over the past few weeks.  Many of these individuals are putting their credibility on the line by proclaiming that a stock market crash is just around the corner…

-Tom McClellan says that we are heading for an “ugly decline” and that there will be “nothing good for bulls for the rest of the year” [11]

Tom McClellan loves doing what financial advisers tell you not to do. He tries to time the financial markets — to the exact day, if his charts align just right.

At the moment, they are telling him to be bullish on the stock market for all of his trading time frames, including those that trade every few days, weeks and months. But bulls should be ready to flee, as soon as this week.

That’s because McClellan said his timing models suggest “THE” top in stocks will be hit some time between Aug. 20 and Aug. 26. He expects “nothing good for the bulls for the rest of the year,” he said in a phone interview with MarketWatch.

McClellan doesn’t have a strong view on how far stocks could fall, just that it will probably be an “ugly decline” lasting into early 2016.

-Harry Dent recently stated that we are just “weeks away” from a “global financial collapse [12]“.

-Gerald Celente says that “the global economy has collapsed [13]” and he is “predicting that we are going to see a global stock market crash before the end of the year [14]“.

-Larry Edelson insists that he is “100% confident” [15] that a global financial crisis will be triggered “within the next few months”…

On October 7, 2015, the first economic supercycle since 1929 will trigger a global financial crisis of epic proportions. It will bring Europe, Japan and the United States to their knees, sending nearly one billion human beings on a roller-coaster ride through hell for the next five years. A ride like no generation has ever seen. I am 100% confident it will hit within the next few months.”

-Jeff Berwick, the editor of the Dollar Vigilante, says that there is “enough going on in September to have me incredibly curious and concerned about what’s going to happen [16]“.

-Egon von Greyerz recently explained that he fears “that this coming September – October all hell will break loose in the world economy and markets [17]“.

-Even the mainstream media is issuing ominous warnings now.  Just a few days ago, one of the most important newspapers in the entire world published a major story about the coming crisis under this headline: “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control [18]“.

-The Bank for International Settlements and the IMF have jumped on the prediction bandwagon as well.  The following comes from a recent piece by Brandon Smith [19]

The BIS [20] warns [21] that the world is currently defenseless against the next market crisis. I would point out that the BIS has a record of predicting economic crashes, including back in 2007 [21] just before the derivatives and credit crisis began. This ability to foresee fiscal disasters is far more likely due to the fact that the BIS is the dominant force in global central banking and is the cause of crisis, rather than merely a predictor of crisis. That is to say, it is easy to predict disasters you yourself are about to initiate.

It is no mistake that the warnings from the BIS and the IMF tend to come too little too late, or that they are beginning to compose cautionary press releases today that sound much like what alternative analysts were saying a few years ago. The goal of these globalist organizations is not to help people prepare, only to set themselves up as Johnny-come-lately prognosticators so that after a collapse they can claim they warned us all, which can then be used as a rationalization for why they are the best people to administrate the economies of the planet as a whole.

So why are so many prominent voices now warning that a global financial crisis is imminent?

The answer is actually very simple.

A global financial crisis is imminent.

Back on June 25th, I issued a red alert for the last six months of 2015 [22] before any of these other guys issued their warnings.

When I first issued my alert, things were still seemingly very calm in the financial world, and a lot of people out there thought that I was nuts.

Well, here we are just a couple of months later and all hell is breaking loose.  23 global stock markets are crashing [10], the price of oil has been imploding, a new currency war has erupted [23], industrial commodities are plunging just like they did prior to the market crash of 2008 [24], a full-blown financial crisis has gripped South America with fear [25], and junk bonds are sending some very ominous signals [26].

In the U.S., things are beginning to slowly unravel.  The Dow is now down over 1200 points from the peak of the market.  At this point, it isn’t going to take much to push us into a bear market.

So enjoy what is left of August.

September is right around the corner, and if the experts that I mentioned above are correct, then it is likely to be one wild month.

There will be another stock market crash before 2015’s end

Posted in ATS Thread, Finance, Warnings on August 23, 2015 by betweentwopines

Post by WeActOnImpulse at ATS on Aug 23, 2015
Most of you probably already know a good chunk of this, but for those of you who don’t, here’s the breakdown.

The last two days have gone down in history as larger than any single day stock market crash in history. Thousands of news articles are going up everywhere, anybody important has already pulled everything out of the NYSE, and other investors are still pulling, and pulling from other stocks too. Walmart’s stock alone has dropped nearly 5 percent which blew my mind when I saw. I used to work for that company.

But upon seeing a random comment on the Internet where this dude pretty much laid out everything that’s happening in the bigger picture (which I will paste at the bottom of this post) I decided to look into things a little more deeply. I found that there will be another stock market crash. The motives and implications are a little fuzzy, but here’s what I do know. Keep in mind that the conspiracy is almost certainly much larger than the information i’m posting here and also I will be posting google search terms instead of links because I don’t want to post a bunch of links only to realize i’m breaking a rule and have my post removed.

Gerald Celente, one of the most respected trends forecasters and a person who has predicted many stock market crashes in the past predicts a stock market crash by the end of 2015. Google search terms: GERALD CELENTE IS PREDICTING THAT A STOCK MARKET CRASH WILL HAPPEN BY THE END OF 2015

Donald Trump knew about the crash back in June, which leads me to believe that he’s a part of it in a conspiracy to get him elected. Not to mention Donald Trump’s prediction sounds greatly exaggerated compared to Gerald Celente’s prediction. So I think he exaggerated his claims and is continuing to do so to get the masses in a state of fear and then make himself look like the hero who can save us all from another depression. It probably runs deeper than that but I can’t find any solid evidence of an even larger conspiracy and I know a lot of people here really want some evidence before they’ll believe anything. Google search terms: Billionaire Donald Trump Tells Americans to Prepare For ‘Financial Ruin’

Furthermore some simple Googling will bring up articles of people knowing about China’s stock market crash for years. Not to mention Greece’s recent crash. And now America. This can’t be a coincidence. People have known about these things for way too long, have had time to prepare for it or avert it entirely, but it all happened anyway and is continuing to happen. Who’s next, Australia? Is this bigger than Donald trump? Who knows, we’ll just have to keep our eyes open.

And last but not least, here’s the original post from Google+ on The Free Thought Project page. Please excuse the bad grammar, it was obviously written in a hurry.
For once pretty much everyone here is in agreement and we all have our own particular areas of concern. Overall though we agree. Now is what will happen some Monday soon. There will be a horrible stock market crash. A big crash just like last time but worse, much worse. There will be bad repercussions all through the world and here in te USA. It will make Bernie Sanders look like a deer caught in the headlights and Donald Trump look good to a worried “We need a business genius NOW” population.DON”T BE FOOLED!!! It is a set up by the FED to 1). Ensure the outcome of the next election and @). To get te USA involved in a Huge war, perhaps a world war, to bail out our economy and give the finger to China who holds a lot of the debt. The FED is a private Bank owned by Pro Israeli world class financiers who want to enslave us to debt (to them) and who own all the business devoted to war and a war economy. They want to make sure we are fully engaged, not this petty war on terror [censored for ATS], a real shooting deadly outcome war. Don’t be fooled, Fight the FED Fight the Republicans and Fight to keep your rights under the Bill of Rights and the Constitution, they are being undermined with the excuse of National Security.It is a lie. Stop this , do not participate , become active and engage in massive civil disobedience if what I say comes true. If it turns out I am a whacked out crazy prognosticator of wild eyed Henny Penny false alarms, then I am an idiot and you were right to sit back and go on as if nothing is messed up. Still – – – Remember Monday there will be a stock market crash, a really big one. Perhaps it will happen on a Friday but more likely on a Monday, Mark my words, it is planned and you are not in on the benefit plan from it.

We’ve Reached The End Of The Line—–Now The Game Changes

Posted in Finance, Warnings on August 16, 2015 by betweentwopines

by Raúl Ilargi Meijer
Eventful days in the middle of summer. Just as the Greek Pandora’s box appears to be closing for the holidays (but we know what happens once it’s open), and Europe’s ultra-slim remnants of democracy erode into the sunset, China moves in with a one-off but then super-cubed renminbi devaluation. And 100,000 divergent opinions get published, by experts, pundits and just about everyone else under the illusion they still know what is going on.

We’ve been watching from the sidelines for a few days, letting the first storm subside. But here’s what we think is happening. It helps to understand, and repeat, a few things:

• There have been no functioning financial markets in the richer parts of the world for 7 years (at the very least). Various stimulus measures, in particular QE, have made sure of that.

A market cannot be said to function if and when central banks buy up stocks and bonds with impunity. One main reason is that this makes price discovery impossible, and without price discovery there is, per definition, no market. There may be something that looks like it, but that’s not the same. If you want to go full-frontal philosophical, you may even ponder whether a country like the US still has a functioning economy, for that matter.

• There are therefore no investors anymore either (they would need functioning markets). There are people who insist on calling themselves investors, but that’s not the same either. Definitions matter, lest we confuse them.

Today’s so-called ‘investors’ put to shame both the definition and the profession; I’ve called them grifters before, and we could go with gamblers, but that’s not really it: they’re sucking central bank’s udders. WHatever we would settle on, investors they’re not.

• The stimulus measures, QE, were never designed to induce economic recovery. They were meant to transfer private losses to public purses. In that, they have been wildly successful.

• China is the end of the line. It was the only economy left that until recently could boast actual growth on a scale that mattered to the global economy. Growth stopped when China, too, introduced stimulus measures. To the tune of some $25 trillion or more, no less.

The perhaps most pivotal importance of China is that it was the world’s latest financial hope. The yuan devaluation shatters that hope once and for all. The global economy looks a lot more bleak for it, even if many people already didn’t believe official growth numbers anymore.

Because we’ve reached the end of the line, the game changes. Of course there will be additional attempts at stimulus, but China’s central bank has de facto conceded that its measures have failed. The yuan devaluations, three days in a row now, mean the central People’s Bank of China has, openly though reluctantly, acknowledged its QE has failed, and quite dramatically at that. They just hope you won’t notice, and try to bring it on with a positive spin.

Central banks are not “beginning” to lose control, they lost control a long time ago. The age of central bank omnipotence has “left and gone away” like Joltin’ Joe. Omnipotence has been replaced by impotence.

This admission will reverberate across the globe. China is simply that big. It may take a while longer for other central bankers to admit to their own failures (though ‘failures’, in view of the wealth transfer, is a relative term here), but it won’t really matter much. One is enough.

What will happen from here on in will be decided by how, where and in what amounts deleveraging will take place. This will of necessity be a chaotic process.

Debt deleveraging leads to, or can even be seen as equal to, debt deflation. This is a process that has already started in various places and parts of economies (real estate), but was kept at bay by QE programs. It will now accelerate to wash over our societies like a biblical plague.

The Automatic Earth started warning about this upcoming deflation wave many years ago. I am wondering if I should rerun some of the articles we posted over the past 8 years or so. I might just do that soon.

It is fine for people to say that since it hasn’t happened yet, we were wrong about this, but for us it was never, and is not now, about timing. If you think like an investor -or at least you think you do- timing may seem to be the most important thing in the world. But that’s just another narrow point of view.

When deflation takes its inevitable place center stage, it will wipe away so much wealth, be it real or virtual or plain zombie, that the timing issue will be irrelevant even retroactively. Whether the total sum of global QE measures is $22 trillion or $42 trillion, its deflation-driven demise will wipe out individuals, companies and nations alike at such a pace, people will wonder why they ever bothered with trying to get the timing right.

This may be hard to understand in today’s world where so many eyes are still focused on central banks and asset- and equity markets, on commodities and precious metals, on housing markets. In that regard, again, it is important to note that there have been no functioning markets for many years. Those eyes are focused on something that merely poses as a market.

For us this was clear years ago. It was never about the timing, it was always about the inevitability. Back in the day there were still lots of voices clamoring for – near-term or imminent – hyperinflation. Not so much now. We always left open the hyperinflation option, but far into the future, only after deflation was done wreaking its havoc. A havoc that will be so devastating you’ll feel silly for ever even thinking about hyperinflation.

Deflation will obliterate our economies as we know them. Imagine an economy for instance where next to no-one sells cars, or houses, or college educations, simply because next to no-one can afford any of it.

Where everything that today is bought on credit will no longer be bought, because the credit will be gone. Where homes are not worth more than the cardboard they’re made of, and still don’t sell.

Where ships won’t sail because letters of credit won’t be issued, where stores won’t open in the morning because they can’t afford their inventory even if it arrives in a nearby port.

As for today’s reality, the Chinese leadership has been eclipsed by its own ignorance about economic systems, the limits of their control over them, and the overall hubris they live in on a daily basis. These people were educated in the 1960s and 70s China of Mao and Deng Xiaoping. In the same air of omnipotence that today betrays all central bankers. Why try to understand the world if you’re the one who shapes it?!

It was obvious this moment would arrive in Beijing as soon as the one millionth empty apartment was counted. There are some 60 million ’empties’ now, a number equal to half the total US housing contingent.

Beijing then heavily promoted the stock market for its citizens, as a way to hide the real estate slump. All the while, it kept the dollar peg going. And now all this is gone. And all that’s left is devaluation. As Bill Pesek put it: “China Adds a Chainsaw to Its Juggling Act”.

Ostensibly to improve the country’s trade position, for lack of a better word. Whether that will work is a huge question. For one thing, the potential increase in capital flight may turn out to be a bigger problem than the devaluation is a solution.

Moreover, one of the main reasons to devalue one’s currency is the idea that then people will start buying your stuff again. But in today’s deflationary predicament, one of the main failures of mainstream economics pops up its ugly head: the refusal to see that many people have little or nothing left to spend.

This as opposed to economists’ theories that people must be sitting on huge savings whenever they don’t spend “what they should”. Ignoring the importance of personal debt levels plays a major part in this. Any which way you define it, the result is a drag on the velocity of money in either a particular economy, or, as we are increasingly witnessing, a major spending slowdown in the entire global economy.

Seen in that light, what good could a 1.9% devaluation (or even a, what is it, super-cubed 5% one, now?!) possibly do when China producer prices fell for the 40th straight month, exports were down 8.3% in July, and cars sell at 30% discounts? Those numbers indicate a fast and furious reduction in spending.

Which in turn lowers the velocity of money in an economy. If money doesn’t move, an economy can’t keep going. If money velocity slows down considerably, so does the entire economy, its GDP, job creation, everything.

This of course is the moment to, once again, point out that we at the Automatic Earth define deflation differently from most. Inflation/deflation is not rising/falling prices, but money and credit supply relative to available good and services, and that, multiplied by the velocity of money.

When this whole debate took off, even before Lehman, there were only a few people I can remember who emphasized the role of deflation the way we did: Steve Keen, Mike Mish Shedlock and Bob Prechter.

And Mish doesn’t even seem think the velocity of money is a big factor, if only because it is hard to quantify. We do though. Steve is a good friend, he’s the very future of economics, and a much smarter man than I am, but still, last time I looked, stumbling over the inflation equals rising prices issue (note to self: bring that up next time we meet). Prechter gets it, but believes in abiotic oil, as Nicole just pointed out from across the other room.

So yeah, we’re sticking out our necks on this one, but after 8+ years of thinking about it, we’re more sure than ever that we must insist. Rising prices are not the same as inflation, and falling prices are but a lagging effect of deflation.

Spending stops when people are maxed out and dead broke. And then prices drop, because no-one can afford anything anymore.

We’ve had a great deal of inflation in the past decade or two, like in US housing. We still have some, for instance in global stock markets and Canada and Australia housing. But these things are nothing but small pockets, where spending persists for a while longer.

Problem is, those pockets pale in comparison to diving -consumer- spending in the US, China, Europe, Japan. Spending that wouldn’t even exist anymore if not for QE, ZIRP and cheap credit.

The yuan devaluation tells us the era of cheap credit is now over. The first major central bank in the world has conceded defeat and acknowledged the limits to its alleged omnipotence.

It always only took one. And then nothing would stand in the way of the biblical plague. It was never a question. Only the timing was. And the timing was always irrelevant.

Source :  http://davidstockmanscontracorner.com/weve-reached-the-end-of-the-line-now-the-game-changes/?utm_source=ReviveOldPost&utm_medium=social&utm_campaign=ReviveOldPost

10 warning signs of global financial meltdown

Posted in Finance on July 9, 2015 by betweentwopines

Stock markets and investors around the world have enjoyed record gains but the clouds are gathering

ROW OF FOUR ROAD TRAFFIC LIGHTS SHOWING RED

Traffic lights showing red Photo: Alamy

It is always best to fix the roof when the sun is shining, and with stock markets at or near record highs around the world then there is no better time than now to make sure investments and financial security are in good order.

Based on the following 10 charts there is every reason to think that the record run of gains for investors might be running out of steam, and that means taking some profits and raising cash would be a good idea.

Of course there is always the unknowable chance that European Central banks press the button on mass monetary easing, or for that matter central banks in the US, UK or China. But that is a dangerous investment strategy to rely on given the outlook below.

1 – China slowdown

The Chinese economy is slowing and this increases risks for investors around the world. China contributes more than a quarter of world economic growth and is the largest buyer of commodities in the world to fuel its massive construction boom.

The signs coming out of China are not good, industrial production dropped 0.4pc in August from a month earlier. Chinese power output – that is a good proxy for industrial growth – posted its first annual decline down in over four years in August raising concerns that the economy is losing momentum. Power output fell 2.2pc on last year, however, part of that fall is due to a high reading last summer as many cities suffered a record heat wave.

The cracks in the Chinese economy are growing wider as its property market falls. In August Chinese home prices fell in almost every city surveyed by the National Bureau of statistics (NBS), the biggest monthly decline since records began and the fourth straight decline in a row. The NBS data showed new home prices fell in 68 of the 70 major cites it monitors in August, up from 64 cities in July.

http://cloud.highcharts.com/embed/ovucib

For the past five years the credit glut in China has been driving world economic growth, but now it looks like the Chinese dragon is running out of puff. It also looks as though Premier Li Keqiang is determined to try and bring the debt mountain under control.

2 – Iron ore price slump

Iron ore is an essential raw material needed to feed China’s steel mills and as such is a good gauge of the construction boom.

The numbers coming out of China’s steel industry are shockingly bad. Shanghai steel futures have fallen to a record low and the sector’s profit margin has also apparently halved to just 0.3pc. A survey of China steel mills that incorporated 2,235 firms or 88pc of Chinese listed companies showed that much of the industry was reliant on subsidies from the state to remain porofitable.

As a result of the dire situation in the Chinese steel industry the price of iron ore has collapsed this year. The benchmark iron ore price has fallen to a five-year low of $83 per tonne, down 40pc this year having opened at around $140 per tonne in January. Fears are now increasing that the iron ore price could slump further undermining the profits of some of Britain’s biggest listed companies.

“Iron ore prices could definitely touch $70 per tonne in a structurally oversupplied market,” said Richard Knights, mining analyst at Liberum Capital.

It isn’t all down to a China slowdown as two of the largest mining groups in the world BHP Billiton and Rio Tinto are expanding iron ore mine output at record levels. However, China does buy two-thirds of all the iron ore produced globally.

http://cloud.highcharts.com/embed/eluqok

3 – Oil price slump

The oil price is the purest barometer of world growth as it is the fuel that drives nearly all industry and production around the globe. China is also the world’s number one importer of oil.

Brent Crude, the global benchmark for oil, has been falling in price sharply during the past three months and hit a two-year low of $97.5 per barrel, below the important psychological barrier of $100.

http://cloud.highcharts.com/embed/okyhap

4 – Global Commodities

The prices for nearly all comodities are now falling in a sign of weakening demand across the globe. The Bloomberg Global Commodity index which tracks the prices of 22 commodity prices around the world has fallen to a five-year low.

http://cloud.highcharts.com/embed/otiqih

5 – Smallcap selloff

Shares in small UK-listed companies are more sensitive to the underlying economy and quickly show investors sentiment. When shares start falling despite companies reporting strong increases in profits and revenues then it is time to worry.

Share price falls on good results hints that there are a lack of buyers who believe the recovery will continue and too many sellers trying to take profits after the results.

http://cloud.highcharts.com/embed/izovub

6 – Bursting of the tech market bubble

The collapse of share prices in the technology sector has been brutal this year. Companies that were once stock market darlings such as Quindell, ASOS, Ocado and Monitise have all seen their share prices collapse as results miss expectations, profit warnings are issued or the business model comes under question.

Again what this shows to the wider stock market is that investors are reducing riskier positions and selling shares where earnings and profits are not as secure. Two years ago people were prepared to invest in a story, they now demand some returns.

Sharp selloff in technology stocks

The shares of Quindell, ASOS, Ocado and Monitise have all fallen sharply from March 2014

7 – US Money printing is driving the market higher

Since late 2008 the US has been printing an incredible amount of money with the monetary base soaring, and that wall of money has found a new home in the stock market driving the FTSE 100 higher. The US is now reducing its latest bond buying programme. The Federal Reserve’s policymaking committee said it will reduce its bond-buying program by $10bn to $15bn a month and may end the purchases in October if economic conditions allow, as expected. The Fed was buying $85bn worth of bonds at the start of 2014.

US Money Printing v FTSE 100

8 – US Markets are overvalued

The S&P 500 closed at another record high of 2,011.36 and that means the Shiller PE for the S&P 500 is currently at 26.6, well above the long run average of 16.5, and indicated the S&P 500 is more than 60pc overvalued. The ratio, devised by Yale professor Robert Shiller, averages out US corporate earnings through a 10yr period to reach an earnings ratio that smoothes out the wild swings of the business cycle and is viewed as a better indicator of long term value.

http://cloud.highcharts.com/embed/ybunik

9 – Shares don’t go up forever

The FTSE 100 bull run has been underway for more than five years now, or more than 66 months exactly, making it the fourth longest bull run on record. The longest on record was the increase in stock prices from 1990 to 2000, ending in the dotcom bubble. That lasted for 117 months. Then there was the run from 1921 to 1929, which lasted 97 months, before the famous stock market crash on record. The rally after the second world war ran for 70 months from 1949 until 1956.

FTSE 100 Bull Run

10 – Interest rate shock

The Federal Reserve in the US and the Bank of England in the UK are both set to increase interest rates from next year. The world economy has become addicted to cheap debt and could struggle to survive when interest rates start to rise. At the very least a higher cost of debt will eat into profitability and reduce growth through debt fuelled acquisition.

History of UK interest rates

Meet The Secretive Group That Runs The World

Posted in Conspiracy, Finance on April 14, 2015 by betweentwopines

” The world’s most exclusive club has eighteen members. They gather every other month on a Sunday evening at 7 p.m. in conference room E in a circular tower block whose tinted windows overlook the central Basel railway station. Their discussion lasts for one hour, perhaps an hour and a half. Some of those present bring a colleague with them, but the aides rarely speak during this most confidential of conclaves. The meeting closes, the aides leave, and those remaining retire for dinner in the dining room on the eighteenth floor, rightly confident that the food and the wine will be superb. The meal, which continues until 11 p.m. or midnight, is where the real work is done. The protocol and hospitality, honed for more than eight decades, are faultless. Anything said at the dining table, it is understood, is not to be repeated elsewhere.”

This is their story.

First unofficial meeting of the BIS Board of Directors in Basel, April 1930

* * *

The following is an excerpt from TOWER OF BASEL: The Shadowy History of the Secret Bank that Runs the World by Adam LeBor.  Reprinted with permission from PublicAffairs.

The world’s most exclusive club has eighteen members. They gather every other month on a Sunday evening at 7 p.m. in conference room E in a circular tower block whose tinted windows overlook the central Basel railway station. Their discussion lasts for one hour, perhaps an hour and a half. Some of those present bring a colleague with them, but the aides rarely speak during this most confidential of conclaves. The meeting closes, the aides leave, and those remaining retire for dinner in the dining room on the eighteenth floor, rightly confident that the food and the wine will be superb. The meal, which continues until 11 p.m. or midnight, is where the real work is done. The protocol and hospitality, honed for more than eight decades, are faultless. Anything said at the dining table, it is understood, is not to be repeated elsewhere.

Few, if any, of those enjoying their haute cuisine and grand cru wines— some of the best Switzerland can offer—would be recognized by passers-by, but they include a good number of the most powerful people in the world. These men—they are almost all men—are central bankers. They have come to Basel to attend the Economic Consultative Committee (ECC) of the Bank for International Settlements (BIS), which is the bank for central banks. Its current members [ZH: as of 2013] include Ben Bernanke, the chairman of the US Federal Reserve; Sir Mervyn King, the governor of the Bank of England; Mario Draghi, of the European Central Bank; Zhou Xiaochuan of the Bank of China; and the central bank governors of Germany, France, Italy, Sweden, Canada, India, and Brazil. Jaime Caruana, a former governor of the Bank of Spain, the BIS’s general manager, joins them.

In early 2013, when this book went to press, King, who is due to step down as governor of the Bank of England in June 2013, chaired the ECC. The ECC, which used to be known as the G-10 governors’ meeting, is the most influential of the BIS’s numerous gatherings, open only to a small, select group of central bankers from advanced economies. The ECC makes recommendations on the membership and organization of the three BIS committees that deal with the global financial system, payments systems, and international markets. The committee also prepares proposals for the Global Economy Meeting and guides its agenda.

That meeting starts at 9:30 a.m. on Monday morning, in room B and lasts for three hours. There King presides over the central bank governors of the thirty countries judged the most important to the global economy. In addition to those who were present at the Sunday evening dinner, Monday’s meeting will include representatives from, for example, Indonesia, Poland, South Africa, Spain, and Turkey. Governors from fifteen smaller countries, such as Hungary, Israel, and New Zealand are allowed to sit in as observers, but do not usually speak. Governors from the third tier of member banks, such as Macedonia and Slovakia, are not allowed to attend. Instead they must forage for scraps of information at coffee and meal breaks.

The governors of all sixty BIS member banks then enjoy a buffet lunch in the eighteenth-floor dining room. Designed by Herzog & de Meuron, the Swiss architectural firm which built the “Bird’s Nest” Stadium for the Beijing Olympics, the dining room has white walls, a black ceiling and spectacular views over three countries: Switzerland, France, and Germany. At 2 p.m. the central bankers and their aides return to room B for the governors’ meeting to discuss matters of interest, until the gathering ends at 5.

King takes a very different approach than his predecessor, Jean-Claude Trichet, the former president of the European Central Bank, in chairing the Global Economy Meeting. Trichet, according to one former central banker, was notably Gallic in his style: a stickler for protocol who called the central bankers to speak in order of importance, starting with the governors of the Federal Reserve, the Bank of England, and the Bundesbank, and then progressing down the hierarchy. King, in contrast, adopts a more thematic and egalitarian approach: throwing open the meetings for discussion and inviting contributions from all present.

The governors’ conclaves have played a crucial role in determining the world’s response to the global financial crisis. “The BIS has been a very important meeting point for central bankers during the crisis, and the rationale for its existence has expanded,” said King. “We have had to face challenges that we have never seen before. We had to work out what was going on, what instruments do we use when interest rates are close to zero, how do we communicate policy. We discuss this at home with our staff, but it is very valuable for the governors themselves to get together and talk among themselves.”

Those discussions, say central bankers, must be confidential. “When you are at the top in the number one post, it can be pretty lonely at times. It is helpful to be able to meet other number ones and say, ‘This is my problem, how do you deal with it?’” King continued. “Being able to talk informally and openly about our experiences has been immensely valuable. We are not speaking in a public forum. We can say what we really think and believe, and we can ask questions and benefit from others.”

The BIS management works hard to ensure that the atmosphere is friendly and clubbable throughout the weekend, and it seems they succeed. The bank arranges a fleet of limousines to pick up the governors at Zürich airport and bring them to Basel. Separate breakfasts, lunches, and dinners are organized for the governors of national banks who oversee different types and sizes of national economies, so no one feels excluded. “The central bankers were more at home and relaxed with their fellow central bankers than with their own governments,” recalled Paul Volcker, the former chairman of the US Federal Reserve, who at- tended the Basel weekends. The superb quality of the food and wine made for an easy camaraderie, said Peter Akos Bod, a former governor of the National Bank of Hungary. “The main topics of discussion were the quality of the wine and the stupidity of finance ministers. If you had no knowledge of wine you could not join in the conversation.”

And the conversation is usually stimulating and enjoyable, say central bankers. The contrast between the Federal Open Markets Committee at  the US Federal Reserve, and the Sunday evening G-10 governors’ dinners was notable, recalled Laurence Meyer, who served as a member of the Board of Governors of the Federal Reserve from 1996 until 2002. The chairman of the Federal Reserve did not always represent the bank at the Basel meetings, so Meyer occasionally attended. The BIS discussions were always lively, focused and thought provoking. “At FMOC meetings, while I was at the Fed, almost all the Committee members read statements which had been prepared in advance. They very rarely referred to statements by other Committee members and there was almost never an exchange between two members or an ongoing discussion about the outlook or policy options. At BIS dinners people actually talk to each other and the discussions are always stimulating and interactive focused on the serious issues facing the global economy.”

All the governors present at the two-day gathering are assured of total confidentiality, discretion, and the highest levels of security. The meetings take place on several floors that are usually used only when the governors are in attendance. The governors are provided with a dedicated office and the necessary support and secretarial staff. The Swiss authorities have no juridisdiction over the BIS premises. Founded by an international treaty, and further protected by the 1987 Headquarters Agreement with the Swiss government, the BIS enjoys similar protections to those granted to the headquarters of the United Nations, the International Monetary Fund (IMF) and diplomatic embassies. The Swiss authorities need the permission of the BIS management to enter the bank’s buildings, which are described as “inviolable.”

The BIS has the right to communicate in code and to send and receive correspondence in bags covered by the same protection as embassies, meaning they cannot be opened. The BIS is exempt from Swiss taxes. Its employees do not have to pay income tax on their salaries, which are usually generous, designed to compete with the private sector. The general man- ager’s salary in 2011 was 763,930 Swiss francs, while head of departments were paid 587,640 per annum, plus generous allowances. The bank’s extraordinary legal privileges also extend to its staff and directors. Senior managers enjoy a special status, similar to that of diplomats, while carrying out their duties in Switzerland, which means their bags cannot be searched (unless there is evidence of a blatant criminal act), and their papers are inviolable. The central bank governors traveling to Basel for the bimonthly meetings enjoy the same status while in Switzerland. All bank officials are immune under Swiss law, for life, for all the acts carried out during the discharge of their duties. The bank is a popular place to work and not just because of the salaries. Around six hundred staff come from over fifty countries. The atmosphere is multi-national and cosmopolitan, albeit very Swiss, emphasizing the bank’s hierarchy. Like many of those working for the UN or the IMF, some of the staff of the BIS, especially senior management, are driven by a sense of mission, that they are working for a higher, even celestial purpose and so are immune from normal considerations of accountability and transparency.

The bank’s management has tried to plan for every eventuality so that the Swiss police need never be called. The BIS headquarters has high-tech sprinkler systems with multiple back-ups, in-house medical facilities, and its own bomb shelter in the event of a terrorist attack or armed conflagration. The BIS’s assets are not subject to civil claims under Swiss law and can never be seized.

The BIS strictly guards the bankers’ secrecy. The minutes, agenda, and actual attendance list of the Global Economy Meeting or the ECC are not released in any form. This is because no official minutes are taken, although the bankers sometimes scribble their own notes. Sometimes there will be a brief press conference or bland statement afterwards but never anything detailed. This tradition of privileged confidentiality reaches back to the bank’s foundation.

“The quietness of Basel and its absolutely nonpolitical character provide a perfect setting for those equally quiet and nonpolitical gatherings,” wrote one American official in 1935. “The regularity of the meetings and their al- most unbroken attendance by practically every member of the Board make them such they rarely attract any but the most meager notice in the press.”8 Forty years on, little had changed. Charles Coombs, a former foreign exchange chief of the New York Federal Reserve, attended governors’ meetings from 1960 to 1975. The bankers who were allowed inside the inner sanctum of the governors’ meetings trusted each other absolutely, he recalled in his memoirs. “However much money was involved, no agreements were ever signed nor memoranda of understanding ever initialized. The word of each official was sufficient, and there were never any disappointments.”

What, then, does this matter to the rest of us? Bankers have been gathering confidentially since money was first invented. Central bankers like to view themselves as the high priests of finance, as technocrats overseeing arcane monetary rituals and a financial liturgy understood only by a small, self-selecting elite.

But the governors who meet in Basel every other month are public servants. Their salaries, airplane tickets, hotel bills, and lucrative pensions when they retire are paid out of the public purse. The national reserves held by central banks are public money, the wealth of nations. The central bankers’ discussions at the BIS, the information that they share, the policies that are evaluated, the opinions that are exchanged, and the subsequent decisions that are taken, are profoundly political. Central bankers, whose independence is constitutionally protected, control monetary policy in the developed world. They manage the supply of money to national economies. They set interest rates, thus deciding the value of our savings and investments. They decide whether to focus on austerity or growth. Their decisions shape our lives.

The BIS’s tradition of secrecy reaches back through the decades. During the 1960s, for example, the bank hosted the London Gold Pool. Eight countries pledged to manipulate the gold market to keep the price at around thirty-five dollars per ounce, in line with the provisions of the Bretton Woods Accord that governed the post–World War II international financial system. Although the London Gold Pool no longer exists, its successor is the BIS Markets Committee, which meets every other month on the occasion of the governors’ meetings to discuss trends in the financial markets. Officials from twenty-one central banks attend. The committee releases occasional papers, but its agenda and discussions remain secret.

Nowadays the countries represented at the Global Economy Meetings together account for around four-fifths of global gross domestic product (GDP)— most of the produced wealth of the world—according to the BIS’s own statistics. Central bankers now “seem more powerful than politicians,” wrote The Economist newspaper, “holding the destiny of the global economy in their hands.” How did this happen? The BIS, the world’s most secretive global financial institution, can claim much of the credit. From its first day of existence, the BIS has dedicated itself to furthering the interests of central banks and building the new architecture of transnational finance. In doing so, it has spawned a new class of close-knit global technocrats whose members glide between highly-paid positions at the BIS, the IMF, and central and commercial banks.

The founder of the technocrats’ cabal was Per Jacobssen, the Swedish economist who served as the BIS’s economic adviser from 1931 to 1956. The bland title belied his power and reach. Enormously influential, well connected, and highly regarded by his peers, Jacobssen wrote the first BIS annual reports, which were—and remain—essential reading throughout the world’s treasuries. Jacobssen was an early supporter of European federalism. He argued relentlessly against inflation, excessive government spending, and state intervention in the economy. Jacobssen left the BIS in 1956 to take over the IMF. His legacy still shapes our world. The consequences of his mix of economic liberalism, price obsession, and dismantling of national sovereignty play out nightly in the European news bulletins on our television screens.

The BIS’s defenders deny that the organization is secretive. The bank’s archives are open and researchers may consult most documents that are more than thirty years old. The BIS archivists are indeed cordial, helpful, and professional. The bank’s website includes all its annual reports, which are downloadable, as well as numerous policy papers produced by the bank’s highly regarded research department. The BIS publishes detailed accounts of the securities and derivatives markets, and international banking statistics. But these are largely compilations and analyses of information already in the public domain. The details of the bank’s own core activities, including much of its banking operations for its customers, central banks, and international organizations, remain secret. The Global Economy Meetings and the other crucial financial gatherings that take place at Basel, such as the Markets Committee, remain closed to outsiders. Private individuals may not hold an account at BIS, unless they work for the bank. The bank’s opacity, lack of accountability, and ever-increasing influence raises profound questions— not just about monetary policy but transparency, accountability, and how power is exercised in our democracies.

* * *

WHEN I EXPLAINED to friends and acquaintances that I was writing a book about the Bank for International Settlements, the usual response was a puzzled look, followed by a question: “The bank for what?” My interlocutors were intelligent people, who follow current affairs. Many had some interest in and understanding of the global economy and financial crisis. Yet only a handful had heard of the BIS. This was strange, as the BIS is the most important bank in the world and predates both the IMF and the World Bank. For decades it has stood at the center of a global network of money, power, and covert global influence.

The BIS was founded in 1930. It was ostensibly set up as part of the Young Plan to administer German reparations payments for the First World War. The bank’s key architects were Montagu Norman, who was the governor of the Bank of England, and Hjalmar Schacht, the president of the Reichsbank who described the BIS as “my” bank. The BIS’s founding members were the central banks of Britain, France, Germany, Italy, Belgium, and a consortium of Japanese banks. Shares were also offered to the Federal Reserve, but the United States, suspicious of anything that might infringe on its national sovereignty, refused its allocation. Instead a consortium of commercial banks took up the shares: J. P. Morgan, the First National Bank of New York, and the First National Bank of Chicago.

The real purpose of the BIS was detailed in its statutes: to “promote the cooperation of central banks and to provide additional facilities for international financial operations.” It was the culmination of the central bankers’ decades-old dream, to have their own bank—powerful, independent, and free from interfering politicians and nosy reporters. Most felicitous of all, the BIS was self-financing and would be in perpetuity. Its clients were its own founders and shareholders— the central banks. During the 1930s, the BIS was the central meeting place for a cabal of central bankers, dominated by Norman and Schacht. This group helped rebuild Germany. The New York Times described Schacht, widely acknowledged as the genius behind the resurgent German economy, as “The Iron-Willed Pilot of Nazi Finance.” During the war, the BIS became a de-facto arm of the Reichsbank, accepting looted Nazi gold and carrying out foreign exchange deals for Nazi Germany.

The bank’s alliance with Berlin was known in Washington, DC, and London. But the need for the BIS to keep functioning, to keep the new channels of transnational finance open, was about the only thing all sides agreed on. Basel was the perfect location, as it is perched on the northern edge of Switzerland and sits al- most on the French and German borders. A few miles away, Nazi and Allied soldiers were fighting and dying. None of that mattered at the BIS. Board meetings were suspended, but relations between the BIS staff of the belligerent nations remained cordial, professional, and productive. Nationalities were irrelevant. The overriding loyalty was to international finance. The president, Thomas McKittrick, was an American. Roger Auboin, the general manager, was French. Paul Hechler, the assistant general manager, was a member of the Nazi party and signed his correspondence “Heil Hitler.” Rafaelle Pilotti, the secretary general, was Italian. Per Jacobssen, the bank’s influential economic adviser, was Swedish. His and Pilotti’s deputies were British.

After 1945, five BIS directors, including Hjalmar Schacht, were charged with war crimes. Germany lost the war but won the economic peace, in large part thanks to the BIS. The international stage, contacts, banking networks, and legitimacy the BIS provided, first to the Reichsbank and then to its successor banks, has helped ensure the continuity of immensely powerful financial and economic interests from the Nazi era to the present day.

* * *

FOR THE FIRST forty-seven years of its existence, from 1930 to 1977, the BIS was based in a former hotel, near the Basel central railway station. The bank’s entrance was tucked away by a chocolate shop, and only a small notice confirmed that the narrow doorway opened into the BIS. The bank’s managers believed that those who needed to know where the BIS was would find it, and the rest of the world certainly did not need to know. The inside of the building changed little over the decades, recalled Charles Coombs. The BIS provided the “the spartan accommodations of a former Victorian-style hotel whose single and double bedrooms had been transformed into offices simply by removing the beds and installing desks.”

The bank moved into its current headquarters, at 2, Centralbahnplatz, in 1977. It did not go far and now overlooks the Basel central station. Nowadays the BIS’s main mission, in its own words, is threefold: “to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in these areas, and to act as a bank for central banks.” The BIS also hosts much of the practical and technical infrastructure that the global network of central banks and their commercial counterparts need to function smoothly. It has two linked trading rooms: at the Basel headquarters and Hong Kong regional office. The BIS buys and sells gold and foreign exchange for its clients. It provides asset management and arranges short-term credit to central banks when needed.

The BIS is a unique institution: an international organization, an extremely profitable bank and a research institute founded, and protected, by international treaties. The BIS is accountable to its customers and shareholdersthe central banks—but also guides their operations. The main tasks of a central bank, the BIS argues, are to control the flow of credit and the volume of currency in circulation, which will ensure a stable business climate, and to keep exchange rates within manageable bands to ensure the value of a currency and so smooth international trade and capital movements. This is crucial, especially in a globalized economy, where markets react in microseconds and perceptions of economic stability and value are almost as important as reality itself.

The BIS also helps to supervise commercial banks, although it has no legal powers over them. The Basel Committee on Banking Supervision, based at the BIS, regulates commercial banks’ capital and liquidity requirements. It requires banks to have a minimum capital of eight percent of risk-weighted assets when lending, meaning that if a bank has risk-weighted assets of $100 million it must maintain at least $8 million capital. The committee has no powers of enforcement, but it does have enormous moral authority. “This regulation is so powerful that the eight percent principle has been set into national laws,” said Peter Akos Bod. “It’s like voltage. Voltage has been set at 220. You may decide on ninety-five volts, but it would not work.” In theory, sensible housekeeping and mutual cooperation, overseen by the BIS, will keep the global financial system functioning smoothly. In theory.

The reality is that we have moved beyond recession into a deep structural crisis, one fueled by the banks’ greed and rapacity, which threatens all of our financial security. Just as in the 1930s, parts of Europe face economic collapse. The Bundesbank and the European Central Bank, two of the most powerful members of the BIS, have driven the mania for austerity that has already forced one European country, Greece, to the edge, aided by the venality and corruption of the country’s ruling class. Others may soon follow. The old order is creaking, its political and financial institutions corroding from within. From Oslo to Athens, the far right is resurgent, fed in part by soaring poverty and unemployment. Anger and cynicism are corroding citizens’ faith in democracy and the rule of law. Once again, the value of property and assets is vaporizing before their owners’ eyes. The European currency is threatened with breakdown, while those with money seek safe haven in Swiss francs or gold. The young, the talented, and the mobile are again fleeing their home countries for new lives abroad. The powerful forces of international capital that brought the BIS into being, and which granted the bank its power and influence, are again triumphant.

The BIS sits at the apex of an international financial system that is falling apart at the seams, but its officials argue that it does not have the power to act as an international financial regulator. Yet the BIS cannot escape its responsibility for the Euro-zone crisis. From the first agreements in the late 1940s on multilateral payments to the establishment of the Europe Central Bank in 1998, the BIS has been at the heart of the European integration project, providing technical expertise and the financial mechanisms for currency harmonization. During the 1950s, it managed the European Payments Union, which internationalized the continent’s payment system. The BIS hosted the Governors’ Committee of European Economic Community central bankers, set up in 1964, which coordinated trans-European monetary policy. During the 1970s, the BIS ran the “Snake,” the mechanism by which European currencies were held in exchange rate bands. During the 1980s the BIS hosted the Delors Committee, whose report in 1988 laid out the path to European Monetary Union and the adoption of a single currency. The BIS midwifed the European Monetary Institute (EMI), the precursor of the European Central Bank. The EMI’s president was Alexandre Lamfalussy, one of the world’s most influential economists, known as the “Father of the euro.” Before joining the EMI in 1994, Lamfalussy had worked at the BIS for seventeen years, first as economic adviser, then as the bank’s general manager.

For a staid, secretive organization, the BIS has proved surprisingly nimble. It survived the first global depression, the end of reparations payments and the gold standard (two of its main reasons for existence), the rise of Nazism, the Second World War, the Bretton Woods Accord, the Cold War, the financial crises of the 1980s and 1990s, the birth of the IMF and World Bank, and the end of Communism. As Malcolm Knight, manager from 2003–2008, noted, “It is encouraging to see that—by remaining small, flexible, and free from political interference—the Bank has, throughout its history, succeeded remarkably well in adapting itself to evolving circumstances.”

The bank has made itself a central pillar of the global financial system. As well as the Global Economy Meetings, the BIS hosts four of the most important international committees dealing with global banking: the Basel Committee on Banking Supervision, the Committee on the Global Financial System, the Committee on Payment and Settlement Systems, and the Irving Fisher Committee, which deals with central banking statistics. The bank also hosts three independent organizations: two groups dealing with insurance and the Financial Stability Board (FSB). The FSB, which coordinates national financial authorities and regulatory policies, is already being spoken of as the fourth pillar of the global financial system, after the BIS, the IMF and the commercial banks.

The BIS is now the world’s thirtieth-largest holder of gold reserves, with 119 metric tons—more than Qatar, Brazil, or Canada. Membership of the BIS remains a privilege rather than a right. The board of directors is responsible for admitting central banks judged to “make a substantial contribution to international monetary cooperation and to the Bank’s activities.” China, India, Russia, and Saudi Arabia joined only in 1996. The bank has opened offices in Mexico City and Hong Kong but remains very Eurocentric. Estonia, Latvia, Lithuania, Macedonia, Slovenia, and Slovakia (total population 16.2 million) have been admitted, while Pakistan (population 169 million) has not. Nor has Kazakhstan, which is a powerhouse of Central Asia. In Africa only Algeria and South Africa are members—Nigeria, which has the continent’s second-largest economy, has not been admitted. (The BIS’s defenders say that it demands high governance standards from new members and when the national banks of countries such as Nigeria and Pakistan reach those standards, they will be considered for membership.)

Considering the BIS’s pivotal role in the transnational economy, its low profile is remarkable. Back in 1930 a New York Times reporter noted that the culture of secrecy at the BIS was so strong that he was not permitted to look inside the boardroom, even after the directors had left. Little has changed. Journalists are not allowed inside the headquarters while the Global Economy Meeting is underway. BIS officials speak rarely on the record, and reluctantly, to members of the press. The strategy seems to work. The Occupy Wall Street movement, the anti-globalizers, the social network protesters have ignored the BIS. Centralbahnplatz 2, Basel, is quiet and tranquil. There are no demonstrators gathered outside the BIS’s headquarters, no protestors camped out in the nearby park, no lively reception committees for the world’s central bankers.

As the world’s economy lurches from crisis to crisis, financial institutions are scrutinized as never before. Legions of reporters, bloggers, and investigative journalists scour the banks’ every move. Yet somehow, apart from brief mentions on the financial pages, the BIS has largely managed to avoid critical scrutiny. Until now.

Source :  http://www.zerohedge.com/news/2015-04-11/meet-secretive-group-runs-world