Disaster Capitalism Is Creating Tremors in the Global Financial World
As I type, the government of Cyprus, the European Central bank and the IMF are in negotiations over how to ‘save’ the economy and banks of the tiny island. (live feed here). In order to secure the ten billion euro bailout they’d been promised earlier. But in a recent burst of calumny, the deal Cyprus was given was to plunder the savings accounts of real people to the tune of 6.9% (holding less than 100,000 euros) to 9.9% (accounts over 100,000 euros) as a one time tax to aid the banks via the government. The theft is the sort that John Perkins, Naomi Klein, and others have warned us was coming to us. Even Michael Hudson said in this recent interview that “even Karl Marx wasn’t cynical enough to have predicted where we are now with banking” (or something close).
One of the most insidious parts of IMF loans is that the contract with recipient nations agree to resets of the terms of the initial agreement if (and more likely: when) a nation doesn’t meet its repayment schedule; some ‘austerity measures’ can come with the deal up front. Pension fund ‘buy-ins’ (plunders), as in Ireland, decreased social safety nets, privatization of taxpayer funded commons, etc. Given that many of the citizens in the Middle East and global south became early victims of these loans, they got the message quickly that these loans weren’t altruistic for the 99%, just huge gifts to the banks, multinationals, and conscienceless profiteers. ‘Constructed’ disasters and natural disasters bring out the World Bank and IMF as well, but those are a whole ‘nother subject.
When Cyprus’s president Nicos Anastasiades recently announced the ‘haircuts’ for bank accounts to save the banking system and the government, the crowds understandably went wild. Who wouldn’t, given that the bank shareholders wouldn’t suffer one jot, but as we’ve learned only too well here, the Lemon Socialism that ‘free market capitalism’ has become means: the Banks take the risks, reap the profits, and when they find themselves too toxic or illiquid and need bailouts so they don’t topple, the little guy provides the dough. Nice way to make a living if you’re a sociopath. Cyprus’s legislature, in a burst of democracy, rejected the deal. But now comes the hardest parts: making a deal. Parliament hasn’t met yet as of this diary’s publication, indicating the arguments are still ongoing.
In the US, of course, it’s a bit different, since The Ben Bernank keeps printing money (giving zeo percent loans to banks to sit on in order to construct the next massive bubble/s), or buying up their bonds and toxic debt at fictitious valuations, keeping ‘Mr. Market’ (as Yves Smith calls Wall Street) massively inflated.
“Aha!,” the headlines read today; The Market tells us that it’s not concerned that contagion will spread here from Cyprus! A deal’s about to be reached! Nothing to shiver about here!”
But trust is gone now, as citizens sense that the whole financial charade is…a charade, and built on nothing but inertia by now. And the fear that robbing citizen savings accounts is spreading, and folks in Italy, Spain, New Zealand and other nations know their futures are about to be on the chopping blocks next.
Public banking specialist Ellen Brown says, ‘oh, yes: it can happen here,’ and explains why that is, what’s at stake, and what’s needed: public banks and political will.
Russia was apparently the last hope for Cyprus, but the finance minister found no buyers for banks during his recent trip to Mother Russia. I suppose it was thought feasible since Russian mafia are said to own about 30% of their bank deposits, but ‘no joy there’ means plans B, C, and D are being considered. The live feed reports some pretty wild swings, so who knows how it will turn out short-term for Cyprus, or the world of global finance. Separating the Better Banks from the Sickest Banks is on offer (to slow down the need for recapitalization or detoxification); as is changing the metrics of the deposit grabs, and several other possibilities. New rules for withdrawing money and cashing checks are being rafted as I type, as well.
On March 19, self-styled ‘Euro-skeptic’ British MP Nigel Farage offered this advice after hearing of the Cyprus bank deposit grab: “Get your money out while you still can.”
(video here) I’ll bet a few bankers would like to terminate him with extreme prejudice, lol. Talk about inciting a panic run on banks! But seriously, no one knows exactly which event might precipitate the Big Fall of the Rigged-Casino Financial Machine.
Again in the ‘could it, will it happen here’ category comes our beloved Fed Chair, who says … nothing of any value, nothing that refutes the possibility. Here’s Ben ‘adjusting his tools’ at the FOMC two days ago:
As the proprietor of Washingtonsblog.com says:
Bernanke should have said, “we will always make sure the FDIC has enough money”.
Second – and more important – Bernanke failed to answer the question altogether. The question was not about whether the government would save bank depositors from economic conditions caused by others. The question was whether the government itself would grab deposits.
People didn’t think any European country would seize bank deposit assets. But the EU demanded that the government of Cyprus seize private bank deposits. The attempt of a government to seize private property is undermining confidence in Europe … and many people worry that that contagion will spread. That is what the question was about. [snip]
In the same way that the Department of Justice’s wishy-washy assurances that it probably wouldn’t assassinate Americans on U.S. soil hasn’t reassured anyone, Bernanke shouldn’t have given a half-hearted reply. He should have said:
‘The U.S. will never, ever seize any American’s bank deposits under any scenario whatsoever … without exception. We respect the rule of law as the basis for our economy, and we will never do anything which interferes with private property rights.’
Bernanke’s failure to reassure couldn’t have come at a worse time.
Maybe we should thank him for telling the truth.
In additional disgusting, disturbing and totally unsurprising news, (a hat-tip to PeasantParty), David Dayen has penned a column explaining why the Agriculture Department has become an easy way for lobbyists to influence the derivatives markets in their favor, and at the risk of magnifying the risks that are already major enough to bring down the system. Given that: derivatives (created first by Blythe Masters at JP Morgan initially), then spread all over the world in daring feats of ‘regulatory arbitrage’, and even within the lame-ass Dodd-Frank ‘financial reform’ bill have never been adequately ‘regulated’ even after all these years. Gary Gensler swore they were close as far back as last April…and now he claims again to be soooo close to finishing up. (If those goddam bank lobbyists’d just leave him alone for a day or two!)
David’s piece is titled “Is Jamie Dimon a Farmer?” which did beg for more satire wherein I’m his unrequited lover, but I decided against it; some of DD’s news ain’t really all that funny. Swooning over my heartthrob in overalls…was hard to pass up, though.
Along with explaining all the governmental creations that led to the formation of the Commodity Futures Trading Commission, and its initial healthy purposes, he describes why it’s the go-to place for working against regulating the derivatives markets at all now. He contrasts the recent Levin hearings into JippyMo’s London Whale trade losses (totaling $157 billion), and the corrupt practices and insane lack of regulatory oversight that led to them with a current batch of industry lobbyist bills that are being marked up this week.
But less than a week after the Levin report, the House Agriculture Committee will hold a markup session today on seven bills designed to gut derivatives regulations passed in the Dodd-Frank financial reform law. If the bills pass, practically every improper and illegal action that JPMorgan Chase took in the London Whale debacle would be either made legal or allowed to foster outside of regulatory oversight. It borders on unthinkable that lawmakers on both sides of the aisle would pick this moment to undermine derivatives rules, right when we get a case study in the dangers of bank misuse of derivatives. [snip]
In this case, a bipartisan collection of Wall Street-friendly congressmen pitched these bills to the Ag Committee as mere “technical corrections” that would prevent “unintended consequences.” In the House, the effort is led by Jim Himes, a former Goldman Sachs vice president who represents the Connecticut bedroom communities of Wall Street traders. Himes, who has aggressively defended the bills, was also just named the national finance chairman of the Democratic Congressional Campaign Committee, the campaign arm for House Democrats. So this effort to bestow gifts on Wall Street comes from the very congressman who has to raise money for his colleagues in the midterm elections, presumably from the same bankers he’s aiding. And of course, his role as finance chair makes him extremely important to his fellow members, who then trust him as he drops legislation to gut derivatives rules.
Ah, those Democrats: the lesser evil, killing you with sweeter smiles and wearing better suits. Read his description of the laws, and their upside down names … and weep … or laugh, cuz that’s about all that’s left besides massive amounts of people waking up and seeing what’s afoot: and doing something about it.
DD said he asked Bartlett Naylor of Public Citizen what the worst case scenario would be if these bills are passed. “The worst would be an inter-affiliate swap, hidden, moves trades from the U.S. to the U.K., escapes oversight, blows up, and the trades are located inside the bank, which now needs a bailout,” Bartlett replied.
And that, DD says, is what exactly happened in the London Whale Fail case.
Make yourselves heard one way or another; they can’t keep getting away with this stuff. And yes, for those of you who say, ‘It’s just capitalism.’ I’ll stick up an open thread on alternatives to capitalism, and you can teach us some of what you know about other systems. Meanwhile, stay strong, build community, and work outside the system all you can for now: Let your life be a friction to stop the machine!
‘These are the times that try men’s souls.’
~ Thomas Paine
(Yes, it’s from 2012, and 23 minutes long, but watch it when you can, even if you’ve seen it already.)