Category Archives: Financial Crisis

Number of global billionaires has doubled since the financial crisis

Jamie Merril reports for The Independent:

‘The number of billionaires has doubled since the start of the financial crisis, according to a major new report from anti-poverty campaigners.

According to Oxfam, the world’s rich are getting richer, leaving hundreds of millions of people facing a life “trapped in poverty” as global “inequality spirals out of control”.

The report found that the number of billionaires in the world has more than doubled to 1,646 since the financial crisis of 2009, and Oxfam says is evidence that the benefits of a return to economic growth are “not being shared with the vast majority”.’

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The Gold Riggers: Distorting Perceptions of Economic Reality

Paul Craig Roberts and Dave Kranzler write for CounterPunch:

‘The Federal Reserve and its bullion bank agents (JP Morgan, Scotia, and HSBC) have been using naked short-selling to drive down the price of gold since September 2011.  The latest containment effort began in mid-July of this year, after gold had moved higher in price from the beginning of June and was threatening to take out key technical levels, which would have triggered a flood of buying from hedge funds.

The Fed and its agents rig the gold price in the New York Comex futures (paper gold) market. The bullion banks have the ability to print an unlimited supply of gold contracts which are sold in large volumes at times when Comex activity is light.

Generally, on the other side of the trade the buyers of contracts are large hedge funds and other speculators, who use the contracts to speculate on the direction of the gold price. The hedge funds and speculators have no interest in acquiring physical gold and settle their bets in cash, which makes it possible for the bullion banks to sell claims to gold that they cannot back with physical metal. Contracts sold without underlying gold to back them are called “uncovered contracts” or “naked shorts.” It is illegal to engage in naked shorting in the stock and bond markets, but it is permitted in the gold futures market.’

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Markets Nervous Ahead of Swiss Gold Vote

Chiara Albanese and Ese Erheriene report for The Wall Street Journal:

Central bank gold reserves chart‘Gold and currencies markets are starting to show their first nerves ahead of a referendum in Switzerland that could potentially force the country’s central bank to buy thousands of metric tons of gold and never sell it, complicating its so far credible policies to hold down the franc.

A ‘yes’ result in the so-called “Save Our Swiss Gold” vote Nov. 30 wouldn’t be the end of the matter, with the controversial measure facing several hurdles before it could ever be passed into law.

Still, a ruling in favor of the motion would force the Swiss National Bank to hold some 20% of its about $547 billion assets in the precious metal, returning to the weighting it last held in gold in 2008. This harks back to a time when Switzerland held a dominant role in global gold markets.’

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Public trust in U.S. has dwindled with rise in income inequality

Science Daily reports:

‘Trust in others and confidence in societal institutions are at their lowest point in over three decades, analyses of national survey data reveal. The findings are forthcoming in Psychological Science, a journal of the Association for Psychological Science.

“Compared to Americans in the 1970s-2000s, Americans in the last few years are less likely to say they can trust others, and are less likely to believe that institutions such as government, the press, religious organizations, schools, and large corporations are ‘doing a good job,'” explains psychological scientist and lead researcher Jean M. Twenge of San Diego State University.’

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Piketty’s prophecy comes true: The planet’s middle class is rapidly going extinct

Lynn Stuart Parramore writes for AlterNet:

Piketty's prophecy comes true: The planet's middle class is rapidly going extinct ‘According to a new report, the richest one percent have got their mitts on almost half the world’s assets. Think that’s the end of the story? Think again. This is only the beginning.

The “Global Annual Wealth Report,” freshly released by investment giant Credit Suisse, analyzes the shocking trend of growing wealth inequality around the world. What the researchers find is that global wealth has increased every year since 2008, and that personal wealth seems to be rising at the fastest rate ever recorded, much of it driven by strong equity markets. But the benefits of this growth have largely been channeled to those who are already affluent. While the restaurant workers in America struggled to achieve wages of $10 an hour for their labor, those invested in equities saw their wealth soar without lifting a finger. So it goes around the world.’

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Richest 1% of people own nearly half of global wealth, says Credit Suisse study

Jill Treanor reports for The Guardian:

1percent 300x201 The Global 1%: Exposing the Transnational Ruling Class‘The richest 1% of the world’s population are getting wealthier, owning more than 48% of global wealth, according to a report published on Tuesday which warned growing inequality could be a trigger for recession.

According to the Credit Suisse global wealth report (pdf), a person needs just $3,650 – including the value of equity in their home – to be among the wealthiest half of world citizens. However, more than $77,000 is required to be a member of the top 10% of global wealth holders, and $798,000 to belong to the top 1%.

“Taken together, the bottom half of the global population own less than 1% of total wealth. In sharp contrast, the richest decile hold 87% of the world’s wealth, and the top percentile alone account for 48.2% of global assets,” said the annual report, now in its fifth year.’

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Top 400 US Billionaires Own $2.29 Trillion, Equal To Brazil’s GDP: Interview with Robert Johnson

Editor’s Note: Robert Johnson is the Executive Director of the Institute for New Economic Thinking, a Senior Fellow and Director of the “Project on Global Finance” at the Roosevelt Institute. He was also a former currency trader on Wall Street who worked under George Soros.

Detroit Faces “Humanitarian Crisis” as City Shuts Off Water Access for Thousands of Residents

‘We are on the road in Detroit, broadcasting from the “Great Lakes State” of Michigan, which has one of the longest freshwater coastlines in the country. But its residents are increasingly concerned about their access to affordable water. A judge overseeing Detroit’s bankruptcy recently ruled the city can continue shutting off water to residents who have fallen behind on payments after a judge concluded there is no “enforceable right” to water. The city began cutting off water to thousands of households several months ago, prompting protests from residents and the United Nations. Today, some 350 to 400 customers reportedly continue to lose water service daily in Detroit, where poverty rate is approximately 40 percent, and people have seen their water bills increase by 119 percent within the last decade. Most of the residents are African-American. Two-thirds of those impacted by the water shutoffs involve families with children. We speak with Alice Jennings, the lead attorney for residents who have lost their water access. “What’s happening here is nothing short of a humanitarian crisis,” Jennings says. “In a military way, the truck would start at one end of the street, and by the time it reached the other end maybe 50 percent of the homes were shut off.”’ (Democracy Now!)

Fed’s “Doomsday Book” Has Day In Court

Damian Paletta reports for The Wall Street Journal:

‘Three separate versions of a secretive Federal Reserve Bank of New York manual known as the “Doomsday Book” were entered into court evidence under seal Tuesday as part of a classaction lawsuit by shareholders of American International Group Inc.

The “Doomsday Book” is essentially a private compilation of emergency measures that the Federal Reserve could take in the event of a financial crisis or other market-destabilizing event. The book has never been made public.

It’s existence of the book isn’t secret: Treasury Secretary Timothy Geithner references it in his recent financial-crisis book, “Stress Test,” calling it a catalog of “our actual firefighting equipment.”

But Fed officials have refused to release it, and Justice Department officials at a court hearing on Tuesday said the Federal Reserve Bank of New York wanted to keep the book under seal.’

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IMF warns period of ultra-low interest rates poses fresh financial crisis threat

Larry Elliott reports for The Guardian:

‘A prolonged period of ultra-low interest rates poses the threat of a fresh financial crisis by encouraging excessive risk taking on global markets, the International Monetary Fund has said.

The Washington-based IMF said that more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.

In its half-yearly global financial stability report, it said the risks to stability no longer came from the traditional banks but from the so-called shadow banking system – institutions such as hedge funds, money market funds and investment banks that do not take deposits from the public.’

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Cut benefits? Yes, let’s start with our £85bn corporate welfare handout

Aditya Chakrabortty writes for The Guardian:

daniel pudles for Aditya Chakrabortty‘[...] Politicians and pundits talk about welfare as if it’s solely cash given to people. Hardly ever discussed is corporate welfare: the grants and subsidies, the contracts and cut-price loans that government hands over to business. Yet some of our biggest companies and industries operate a business model that depends on them extracting money from the British taxpayer. The operators of our supposedly privatised train services are kept afloat by billions in public money. Or take the firm created by billionaire Jeff Bezos: last year it emerged that Amazon had paid less in corporation tax to the UK than it had received in government grants.

The bill for corporate welfare is huge – and largely hidden. We know a lot about the people who claim social welfare: we know how much each benefit costs the public, the government sets strict rules for eligibility – and we even have detailed estimates for how much cheating goes on. Between them, Whitehall, academia and NGOs have churned out enough surveys on social welfare claimants to fill a wing of the Bodleian library. But corporate welfare? The government has itself acknowledged: “There is no definitive source of data about spending on subsidies to businesses in the UK.” The numbers are scattered across government publications and there is not even any agreement on what counts as a corporate handout.’

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Chinese investors surged into EU at height of debt crisis

Jamil Anderlini reports for the Financial Times:

‘As investors fled Europe in the worst days of its sovereign debt crisis, China-based companies moved in the other direction and surged in, with cash flowing from China into some of the hardest-hit countries of the eurozone periphery.

In 2010, the total stock of Chinese direct investment in the EU was just over €6.1bn – less than what was held by India, Iceland or Nigeria. By the end of 2012, Chinese investment stock had quadrupled, to nearly €27bn, according to figures compiled by Deutsche Bank.

The buying spree, analysts say, was nothing short of a transformation of the model of Chinese outbound investment. It is expected to increase steadily over the next decade.’

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S&P Warns of Greece Default Within 15 Months

Tyler Durden writes for Zero Hedge:

‘Remember Greece: the country that in 2010 launched Europe’s sovereign solvency crisis and the ECB’s own helpless attempts at intervention, which later was “saved”, only to default shortly thereafter (but without triggering CDS as that would end the Eurozone’s amusing monetary experiment and collapse the Deutsche Bank $100 trillion house of derivative cards), which later was again “saved” when every single global central bank made sure Greek bonds became the only yield-generating securities in the world? Well, the country which at last count was doing ok, is about to not be ok. Because according to none other than S&P, at some point over the next 15 months, Greek debt is about to be in default when the country is no longer able to cover its financing needs. In other words, back to square one.

As Bloomberg reports, citing Real News, S&P analyst Marie-France Raynaud said Greece can’t cover its own financing needs.’

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Payday lenders should wipe out loans in wake of Wonga ruling, experts say

Lisa Bachelor reports for The Guardian:

Money Shop payday lendersThousands of people who have taken out payday loans from firms other than Wonga should also have their interest and charges wiped out, say consumer and legal experts.

This follows the announcement on Thursday that the payday lender was forced by the Financial Conduct Authority, the new City regulator to write off £220m of loans to 375,000 borrowers after the firm admitted those people should never have been given loans.

The company, which charges annualised interest rates of up to 5,853% a year and has been accused by MPs of “legal loan sharking”, said it would entirely wipe out loans to 330,000 people, and scrap interest and charges owed by a further 45,000 customers.’

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Hong Kong’s Fight Against Neoliberalism

Ming Chun Tang writes for CounterPunch:

‘[...] As stories on Occupy Central flood the front pages of the mainstream news media, both the BBC and CNN have published handy “explainers” that confuse more than they explain, making no real effort to dig into the economic roots of discontent. The “Beeb” went as far as to ask whether “Hong Kong’s future as a financial centre” was “threatened” – giving us some insight into where the global establishment’s priorities lie.

But regardless of what the BBC wants the world to believe, Occupy Central isn’t so much a fight for democracy as a fight for social justice. It’s true that Hong Kongers are angry over Beijing’s interference in domestic affairs, whether these be immigration from China, encroachments on the freedom of the press, or the nationalistic-propagandistic “moral and national education” program. These issues, while serious, pale in comparison to the increasingly difficult realities of everyday life in Hong Kong. As City University of Hong Kong professor Toby Carroll points out, one in five Hong Kongers live below the poverty line, while inequality has risen to levels among the highest in the world.’

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Tokyo trader has £381bn share orders cancelled after a spectacular ‘fat finger’ error

Jonathan Prynn and Jamie Dunkley report for The Independent:

‘Share trades worth more than the size of Sweden’s economy had to be cancelled in Tokyo after what is believed to be the biggest “fat finger” error on record.

It is thought to be the most extreme example of a trader in financial markets inputting hopelessly wrong figures while working under intense pressure. The identity of the trader is not yet known.

Mistaken orders for shares in 42 major Japanese companies, including household names such as Toyota, Honda, Canon and Sony, totalling ¥67.78trn (£381bn) were overturned, according to data from the Japan Securities Dealers Association.’

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V For Vendetta With Some Real Truth

Former Federal Reserve Chairman Ben Bernanke turned down for mortgage refinancing

Elizabeth Campbell reports for Bloomberg:

Ben S. Bernanke said the mortgage market is still so tight that he’s having a hard time refinancing his own home loan.

The former Federal Reserve chairman, speaking at a conference in Chicago, told moderator Mark Zandi of Moody’s Analytics Inc. — “just between the two of us” — that “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

When the audience laughed, Bernanke said, “I’m not making that up.”

“I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” he said.’

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Neoliberalism has brought out the worst in us

Paul Verhaeghe writes for The Guardian:

City of London and Canary Wharf‘We tend to perceive our identities as stable and largely separate from outside forces. But over decades of research and therapeutic practice, I have become convinced that economic change is having a profound effect not only on our values but also on our personalities. Thirty years of neoliberalism, free-market forces and privatisation have taken their toll, as relentless pressure to achieve has become normative. If you’re reading this sceptically, I put this simple statement to you: meritocratic neoliberalism favours certain personality traits and penalises others.’

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France’s far-right sets sight on presidency

Spanish Independence Movements and the Recolonization of Southern Europe: Interview with Sister Teresa Forcades

Gold price seen near tipping point for mine cuts, closures

Nicole Mordant reports for Reuters:

‘The price of gold, down more than a third in three years, is approaching the tipping point where the mining industry would see a spike in the number of producers reducing output or even shutting down operations.

Several mines globally have already suspended output in the past 18 months, but not as many as industry watchers expected as producers focused on slashing costs and reworking mine plans to extract more profitable, higher-grade ounces.

But with bullion’s slide this week to a nine-month low of $1,208.36 an ounce, those defenses may not be enough.’

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Big Banks Manipulated $21 Trillion Dollar Market for Credit Default Swaps (and Every Other Market)

From Washington’s Blog:

Runaway derivatives – especially credit default swaps (CDS) – were one of the main causes of the 2008 financial crisis. Congress never fixed the problem, and actually made it worse.

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.

Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed (see below) … through gamed self-reporting.

Reuters noted last week:

A Manhattan federal judge said on Thursday that investors may pursue a lawsuit accusing 12 major banks of violating antitrust law by fixing prices and restraining competition in the roughly $21 trillion market for credit default swaps.

***

“The complaint provides a chronology of behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence,” [Judge] Cote said.

The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc , Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc, HSBC Holdings Plc , JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.

Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.

***

U.S. and European regulators have probed potential anticompetitive activity in CDS. In July 2013, the European Commission accused many of the defendants of colluding to block new CDS exchanges from entering the market.

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“The financial crisis hardly explains the alleged secret meetings and coordinated actions,” the judge wrote. “Nor does it explain why ISDA and Markit simultaneously reversed course.”

In other words, the big banks are continuing to fix prices for CDS in secret meetings … and have torpedoed the more open and transparent CDS exchanges that Congress mandated.

As shown below, Wall Street has manipulated virtually every other market as well – both in the financial sector and the real economy – and broken virtually every law on the books.’

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Are We On The Verge Of Another Financial Crisis?

Whistleblower’s tapes suggest the Fed was protecting Goldman Sachs from the inside

Dylan Matthews reports for Vox:

‘One of the most troubling aspects of the financial crisis was that government regulators let it happen in the first place. And the most compelling explanation is also the most disturbing: regulators were unduly influenced or even controlled (“captured” is the term of art) by the very banks and financial firms they were meant to rein in. This argument, popularized most notably by MIT economist Simon Johnson, has strong circumstantial evidence supporting it, but concrete proof from within regulatory agencies has, understandably, been hard to come by.

On Friday, This American Life and ProPublica announced they had found such proof. A joint report produced by ProPublica reporter Jake Bernstein (who previously won a Pulitzer for his investigative reporting on Wall Street for the two outlets) revealed the existence of 46 hours of audio recordings made inside the Federal Reserve Bank of New York, which, as the Fed’s interface with the financial sector, serves as one of country’s most powerful bank regulators. Taken by former Fed bank examiner Carmen Segarra, the recordings suggest a culture within the Fed that was at best overly cautious in confronting bank wrongdoing, and at worst in bed with the banks it was regulating.’

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Eric Holder’s legacy on Wall Street, Voting Rights, Civil Liberties and Press Freedom

Bill Black says Eric Holder’s legacy on “too big to fail” is “too big to jail”:

Mike Papantonio on Eric Holder’s relationship to the corporate world:

Part of a Democracy Now! round-table discussion on Eric Holder’s “complex legacy”:

Zeitgeist’s Peter Joseph on Wealth Illusion, Structural Violence & Hope for Survival

Abby Martin interviews the creator of the Zeitgeist Movement, Peter Joseph, covering everything from the upcoming Zeitgeist Festival in Los Angeles on October 4th to economic and societal solutions to global problems ranging from environmental destruction to mass inequality. (Breaking the Set)

Chris Hedges on Wilful Blindness, Climate Corporatism & the Underground Revolt

Abby Martin speaks with journalist and author, Chris Hedges, going over where the recent mass climate change demonstrations in New York fall short, as well as why he believes revolt is the only solution to restoring a functioning American democracy.’ (Breaking the Set)

IFS: Austerity will continue during next Tory, Labour or Lib Dem parliament

Larry Elliott reports for The Guardian:

‘George Osborne’s plans to balance the government’s books will require additional tax increases, spending cuts or welfare cuts worth more than £37bn in the first three years of the next parliament, according to Britain’s leading experts on the public finances.

In an assessment of the budget plans of the three biggest Westminster parties, the Institute for Fiscal Studies (IFS) found that austerity would continue under a Conservative, Labour or Liberal Democrat chancellor, but that Osborne had by far the toughest approach to fiscal policy.’

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How the People’s Climate March Became a Corporate PR Campaign

Arun Gupta writes for CounterPunch:

‘Environmental activist Anne Petermann and writer Quincy Saul describe how the People’s Climate March has no demands, no targets,and no enemy. Organizers admitted encouraging bankers to march was like saying Blackwater mercenaries should join an antiwar protest. There is no unity other than money. One veteran activist who was involved in Occupy Wall Street said it was made known there was plenty of money to hire her and others. There is no sense of history: decades of climate-justice activism are being erased by the incessant invocation of the “biggest climate change demonstration ever.” Investigative reporter Cory Morningstar has connected the dots between the organizing groups, 350.org and Avaaz, the global online activist outfit modeled on MoveOn, and institutions like the World Bank and Clinton Global Initiative. Morningstar claims the secret of Avaaz’s success is its “expertise in behavioral change.”

That is what I find most troubling. Having worked on Madison Avenue for nearly a decade, I can smell a P.R. and marketing campaign a mile away. That’s what the People’s Climate March looks to be. According to inside sources a push early on for a Seattle-style event—organizing thousands of people to nonviolently shut down the area around the United Nations—was thwarted by paid staff with the organizing groups.’

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