July 13th, 2014 By Michael Snyder
Most people have never heard of Jaime Caruana even though he is the head of an immensely powerful organization. He has been serving as the General Manager of the Bank for International Settlements since 2009, and he will continue in that role until 2017. The Bank for International Settlements is a rather boring name, and very few people realize that it is at the very core of our centrally-planned global financial system. So when Jaime Caruana speaks, people should listen. And the fact that he recently warned that the global financial system is currently “more fragile” in many ways than it was just prior to the collapse of Lehman Brothers should set off all sorts of alarm bells. Speaking of the financial markets, Caruana ominously declared that “it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally” and he noted that “markets can stay irrational longer than you can stay solvent”. In other words, he is saying what I have been saying for so long. The behavior of the financial markets has become completely divorced from economic reality, and at some point there is going to be a massive correction.
So why would the head of ‘the central bank of the world’ choose this moment to issue such a chilling warning?
Does he know something that the rest of us do not?
According to a recent article in the Telegraph by Ambrose Evans-Pritchard, Caruana is extremely concerned about rising debt levels and the current level of euphoria in the financial markets…
The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned.
Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield.
“Markets seem to be considering only a very narrow spectrum of potential outcomes. They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give,” he told The Telegraph.
Mr Caruana said the international system is in many ways more fragile than it was in the build-up to the Lehman crisis. Debt ratios in the developed economies have risen by 20 percentage points to 275pc of GDP since then.
And you know what?
Caruana is certainly correct to be warning us about these things.
As I have written about previously, the total amount of government debt in the world has grown by about 40 percent since the last recession, and the “too big to fail banks” have collectively gotten 37 percent larger since that time.
The U.S. national debt has grown from about 10 trillion dollars to more than 17.5 trillion dollars, and even the Bank for International Settlements admits that the global derivatives bubble has grown to at least 710 trillion dollars.
The massive financial imbalances that we were facing during the last crisis have not been fixed. Instead, they have gotten much, much worse.
But should we trust the Bank for International Settlements?
Of course not.
This is a very secretive organization that very few people know about but that possesses absolutely enormous power. The following is a brief overview of the Bank for International Settlements from one of my previous articles entitled “Who Controls The Money? An Unelected, Unaccountable Central Bank Of The World Secretly Does“…
An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe. It is called the Bank for International Settlements, and it is the central bank of central banks. It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City. It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws. Even Wikipedia admits that “it is not accountable to any single national government.” The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system. Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does. Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”. During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on. The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.
The role that the Bank for International Settlements is playing today was envisioned by the global elite long ago. In another previous article, I quoted from a book that Georgetown University history professor Carroll Quigley wrote in 1975 entitled “Tragedy & Hope” in which he discussed how the BIS was to one day become “the apex” of the global financial system…
[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.
And it is interesting to note that Professor Quigley was not against the system that the elite were setting up. He was just an academic that was trying to accurately convey what he had learned about how the global system works.
Sadly, the system that Quigley wrote about all the way back in 1975 has fully blossomed today.
Every two months, the central bankers of the world travel to Switzerland for “Global Economy Meetings” in Basel. Most people have never heard of them, but these Global Economy Meetings were actually discussed in the Wall Street Journal…
Every two months, more than a dozen bankers meet here on Sunday evenings to talk and dine on the 18th floor of a cylindrical building looking out on the Rhine.
The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world’s biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world’s economic output.
So how do you feel about the fact that the central bankers of the world regularly gather to plot their next moves for the global economy?
Should an unelected group of central bankers that has no accountability to any national government really have so much power?
by Rob Wile
But it’s only the latest such argument in a debate that’s rated almost since the nation was first settled.
The San Francisco Federal Reserve and Doug Mudd, the curator of The American Numismatic Association’s Money Museum, have helped guide us through the history of the $20 bill, from the colonial era to the present.
We were able to find $20 notes from every era of the country’s banking history, from the colonial era to the present Federal Reserve system. We also included Confederate bills and notes issued by obscure local banks. We discuss what prompted the new bill to be issued — and whose portrait is on the cover.
Click Here: History of the $20 Dollar Bill
- This Video Of Harry Reid Demanding A Federal Reserve Audit Will Blow Your Mind (businessinsider.com)
- How to End the Fed, and How Not To (txwclp.org)
- First Audit Results in Federal Reserve’s Near 100 Year History Posted Today; Startling! (2012thebigpicture.wordpress.com)
- Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts (sott.net)
Having finished his “damage control” PR campaign (for now) Ben Bernanke decided to discuss… Europe, urging the Big Banks to help prop up the system over there.
Exclusive: Bernanke breaks bread with top bankers
After completing a series of public lectures in Washington, D.C. last week, Federal Reserve Chairman Ben Bernanke quietly slipped into New York City for a private luncheon on Friday with Wall Street executives.
Fortune has learned that attendees included Jamie Dimon (J.P. Morgan), Bob Diamond (Barclays), Brady Dougan (Credit Suisse), Larry Fink (Blackrock), Gerald Hassell (Bank of New York Mellon), Glenn Hutchins (Silver Lake), Colm Kelleher (Morgan Stanley), Brian Moynihan (Bank of America), Steve Schwarzman (Blackstone Group) and David Vinar (Goldman Sachs).
Sources say Bernanke spoke at length about monetary policy, in an apparent effort to persuade attendees that they needed to take a more active role in helping to deal with the European debt crisis. He spent virtually no time discussing regulation, although that mantle got taken up by both Dimon (domestic regulation) and Schwarzman (global regulation).
The lunch was held at the New York Fed, and hosted by NY Fed president William Dudley. Before leaving New York, Bernanke separately addressed NY Fed staffers.
This is an interesting progression from the last time Fed officials went to New York:
Fed met with major financial firms to discuss Volcker Rule impact
Documents released by the Federal Reserve on Monday show that its officials met with some of Wall Street’s major financial firms earlier this month to discuss Volcker Rule implications.
The Fed met with representatives from Goldman Sachs, JPMorgan Chase and Morgan Stanley on Nov. 8, according to Bloomberg.com. Bank lawyers H. Rodgin Cohen and Michael Wiseman from Sullivan & Cromwell were also present during the meeting.
According to the documents, the meeting entailed a discussion on “possible unintended consequences of the rule.”
Notice that during discussions of regulations, it was “Fed officials” who attended these meetings, NOT Bernanke himself (at least he’s not mentioned anywhere). So why is Bernanke, the head of the Fed wanting to meet with bankers to discuss Europe instead of Regulation?
You guessed it: Bernanke realizes Europe is totally and completely bust… and that the coming fall-out will be disastrous for the global banking system.
After all, the ECB spent over $1 trillion trying to prop up the system over there. And already the effects of LTRO 2 (which was worth $712 billion) have been wiped out. If you don’t think this sent a chill up Bernanke’s spine, you’re not thinking clearly.
Consider the following facts which I guarantee you Bernanke is well aware of:
- 1) According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans… the real leverage levels are likely much, much higher.) These are a Lehman Brothers leverage levels.
- 2) The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).
- 3) The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).
- 4) Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)
So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank (the ECB) that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.
I guarantee you Bernanke knows about all of the above. He also knows the ECB’s used up all of its ammunition fighting the Crisis over there. And lastly, he knows that the Fed cannot move to help Europe without risking his job. After all, even the Dollar swap move the Fed made in November 2011 saw severe public outrage and that didn’t even include actual money printing or more QE!
Moreover, Bernanke knows that the IMF can’t step up to help Europe. The IMF is, after all, a US-backed entity. How many times has it requested more money to help Europe? Maybe a dozen? And the answer from the US has always been the same: “No.”
Finally, the G20 countries have made it clear they don’t want to spend more money on Europe either. They keep dangling a bailout carrot in front of the EU claiming they’ll cough up more dough if the EU can get its monetary house in order… knowing full well that they actually cannot provide more funds (otherwise they’d have already done it).
This leaves the private banks as Bernanke’s last resort for a “backdoor” prop for Europe. If private meeting with the TBTFs that focuses on Europe doesn’t scream of desperation, I don’t know what does.
And do you think the big banks, which have all depleted their capital to make their earnings look better, actually have the money to help Europe? No chance.
Which means that Europe is going to collapse. Literally no one has the firepower or the political support to stop it.
Remember, we’re talking about banking system that’s a $46 trillion sewer of toxic PIIGS debt that is leveraged at more than 26 to 1 (Lehman was leveraged at 30 to 1 when it went under).
Again, NO ONE has the capital to prop the EU up much longer. And the collapse is coming.
If you’re not already taking steps to prepare for the coming collapse, you need to do so now.
- Bernanke Just Admitted the Fed Failed… Not That More QE Is Coming (zerohedge.com)
- Exclusive: Bernanke breaks bread with top bankers (finance.fortune.cnn.com)
- Revisited: Three Data Points That Prove Europe Cannot Be Saved (zerohedge.com)
- We Are Nearing the End Game For Central Bank Intervention (zerohedge.com)
I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc. The strong yen strikes again: Honda decides to build a high-performance hybrid Acura in Ohio – instead of its home nation of Japan. The firm’s continued shift in production to North American capacity signals a wider trend of Japan’s automakers to battle currency-related losses by moving operations.
Japan is on life support. The largest buyers of its debt are now sellers. Japan Post Holdings holds almost 3 trillion dollars of JGB’s and GPIF, the retirement fund, holds over $1 Trillion of JGB’s. Japan Post is the largest financial institution in the world and has 75% of assets in JGB’s and now wants to diversify. The retirement fund is liquidating $80+ billion per year to pay out benefits. I just read that the banks across Japan have 25% of assets in JGB’s. If rates were to move 1% (double), what would be the impact to the capital of the banks?
One argument is that Japan’s banks are going to step in lieu of the big dwindling pensions. I merely point out that the IMF is go to stress test the banks against a modest move higher in rates. That would discourage the banks from buying debt at current levels.
The insurance companies are big holders and the people are getting old and dying. The savings rate is at 2% and headed negative (also demographics). The trade surplus has turned to deficit. The budget for this year was to have more JGB issuance than government revenue (about 50% of spending to be borrowed), then the earthquake hit. There are projections that the end total may approach two thirds of total spending that will be borrowed for the current fiscal year. There are no new large buyers to replace the ones mentioned above, and to sell bonds outside of Japan would require much higher rates. The Japanese people have trusted their financial institutions to the government and the trust has been violated. The money is gone and the government is not fiscally responsible. This party is about to end. John Mauldin called Japan, “A bug looking for a windshield” and Kyle Bass, “A giant ponzi scheme that is running out of time”.
Japan is just one insolvent country; there are others. In tandem, the central banks of these nations hold $15 trillion plus in inflated securities, loans and sovereign securities, in one giant Ponzi pool holding increasingly insolvent debt and “liquidity” loans to banks. As defaults and more credit downgrades gather steam (UK, US, France, Germany and others), the markdowns of these $15 trillion will accelerate. It is important to remember that the capital for central banks is provided by the participating govts. For example, this is who backs the tiny $81 billion ECB capital used to lever 2.75 trillion in “assets.”
When central banks (CBs) expand their balance sheets, they buy securities and accept collateral of securities. As such they take risks, especially when defaults occur. And what is the quality of those securities?
These charts are actually dated. The CBs own these markets, use thin capital bases, and are going to be handed the losses on the fictitious capital they hold. Tattoo this on your forehead, CBs hold well over 15 trillion in securities and loans to banks of various and often dubious quality, an immense gamble. These are all ultimately the responsibility of the sponsoring country, and represents a monster contingent liability. That will be the end game.
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Pic credit: Banksy (See more Banksy pictures here, via Bruce Krasting)
- Living In A QE World (ritholtz.com)
- You: Azumi invites individuals to buy 0.18% quake bonds (japantimes.co.jp)
- IMF Urges ECB to Expand Its Balance Sheet to Tame Crisis (blogs.wsj.com)
- This Kind Of Logic Never Fails To Infuriate Us…. (businessinsider.com)
- Japan central bank downgrades growth forecast (sfgate.com)
- $A increasingly popular with central banks (news.theage.com.au)
By Mitra Amiri and Robin Pomeroy
TEHRAN | Wed Jan 25, 2012 8:29am ES
(Reuters) – Iran increased bank interest rates on Wednesday and indicated it would further restrict sales of foreign currency, hoping to halt a spiraling currency crisis after new Western sanctions accelerated a dash for dollars by Iranians worried about their economic future.
“The economy minister has announced that (Iranian President Mahmoud) Ahmadinejad has agreed with the approval of the Money and Credit Council to increase interest rates on bank deposits to up to 21 percent,” the official IRNA news agency reported.
The central bank also told Iranians they should only buy dollars if they are travelling and not hoard them to guard against economic uncertainty.
New U.S. and European sanctions targeting Iran’s vital oil exports and its central bank seriously exacerbated a slide in the Iranian currency that was already under way, creating what one senior politician described as economic instability not even witnessed during Iran’s 8-year war with Iraq in the 1980s.
The West hopes the economic pressure will force Iran to curb the nuclear work they fear is aimed at making bombs but which Tehran says is entirely peaceful.
The rial started weakening after a decision last April to cut interest paid on bank deposits to a range of a 12.5-15.5 percent, below inflation which is currently around 20 percent, prompting many Iranians to withdraw savings and buy gold and foreign currency and pushing up the price of both.
The dash for those safe havens accelerated sharply after the new sanctions were announced, resulting in the rial losing 50 percent of its value against the price of dollars available on the open market in just one month.
Monday’s decision marks a policy U-turn for Ahmadinejad, who faces a political test in March 2 parliamentary election. He previously vetoed efforts by Central Bank Governor Mahmoud Bahmani to increase rates.
Bahmani indicated the rate increase would be accompanied by further restrictions on the sale of foreign currency.
“We will provide foreign currency in any amount for people demanding it for various uses,” he said in an interview published on the website of state broadcaster IRIB.
“Travelers, university students and patients will be supplied at an appropriate rate,” he said. Importers of vital goods would also be able to buy as much foreign currency as they need.
“The government will not give foreign currency for storage,” he added, implying that Iranians will no longer be allowed to exchange their rials for hard currency unless they can prove an immediate need.
The rial’s slide is a huge risk to already rising inflation as Iran is heavily reliant on imported consumer and intermediate goods whose prices have surged as the rial has depreciated.
“Government officials and the president himself should definitely be held accountable to people and public opinion.”
Ahmadinejad’s representative in parliament – which is already highly critical of the president and may become more so after March 2 – said the new policy would burst what he called the bubble of gold and dollar prices.
“The effects of the new decision will be clear in the market very soon and the bubbles being created for foreign currency and gold will be removed,” the ISNA news agency quoted Mohammad Reza Mirtajedini as saying.
The deputy head of parliament’s economics committee criticized the government for reacting late to the crisis which he said had “no reasonable, logical basis.”
“Increasing the bank deposit interest rates is an appropriate tool for people’s investments but doing it in a hasty manner and the current inflamed situation of the market will not solve any problem,” Mostafa Motavarzadeh told the semi-official Fars news agency.
The price of 8.133-gram gold coins dropped on the news, local media reported, to 8,500,000 rials, reversing most of last week’s 45 percent increase when the price rose to 10,100,000.
The effect on the price of dollars was negligible however with ISNA saying the price had fallen on the news to 22,500 rials from 23,000 rials – still double the central bank’s official “reference rate” of 11,293 rials.
However, exchange agencies contacted by Reuters said they had no dollars to sell, reflecting either a shortage of notes or a reluctance to sell in such a volatile atmosphere.
- Iran bans foreign currency trading on the street (seattlepi.com)