A major high street bank has paved the way for the introduction of negative interest rates for the first time in Britain by warning customers it may have to charge them to accept deposits.
The warning by NatWest was made in a letter changing the terms and conditions for the bank’s 850,000 business customers, which range from self-employed traders, charities and clubs to big corporations.
It could mean that an account holder with £1,000 in a NatWest account could see that shrink to £999 or less the following year as the bank charges a negative rate of interest.
In its letter to customers, NatWest said: “Global interest rates remain at very low levels and in some markets are currently negative. Dependent on future market conditions, this could result in us charging interest on credit balances.”
Warren E. Buffett quietly walked through the lobby of JPMorgan Chase’s headquarters on Park Avenue in Manhattan last summer and was ushered up to the 49th floor by a security guard, trying to avoid drawing too much attention. Laurence D. Fink, chairman of BlackRock, the world’s largest money manager — with more than $4 trillion — soon was also escorted upstairs. Abby Johnson, the chief executive of Fidelity (which invests more than $2 trillion), and Frederick William McNabb III, chief of Vanguard ($3 trillion), were also shepherded to the elevator.
In all, the parade included about a dozen chief executives of investment firms — T. Rowe Price, State Street — plus the head of a public pension fund and an activist investor. All had arrived for a meeting that they were told they would absolutely have to keep secret.
When they reached the 49th floor, they were met by JPMorgan Chase’s chief executive, Jamie Dimon.
The agenda — shaped over many conversations Mr. Dimon had had with his friend, Mr. Buffett — was to discuss the sorry state of publicly traded companies: too little trust and connection between shareholders and management, too many rules imposed by so-called governance experts and too many idiosyncratic accounting guidelines. As a result, much of the smart money in the United States is going — and staying — private, creating more companies that have less public accountability and transparency.
With economic growth trending downward globally, many of the world’s largest economies are not converting what growth they have left into an increase in well-being for their citizens, according to a report by the Boston Consulting Group.
The SEDA, or Sustainable Economic Development Assessment ranks more than 160 countries across 10 areas including economic stability, health, governance and environment. It uses two measures, the first a current score taking into the most recent data and a rolling score that assesses how countries can convert economic growth into well-being over an eight year period from 2006 to 2014.
Ethiopia is at the top of list of countries that managed to convert growth to well-being since 2006 with Norway at the top of the list for the most recent data, according to Boston Consulting. The stark contrast between these two countries sets the trend for the two lists in some respects. Norway is ranked sixth globally in terms of gross domestic product per capita and Ethiopia is ranked 169th out of 187, according to the most recent IMF outlook.
The last-minute decision to include in the Republican platform a call to restore the firewall between commercial and investment banking comes as a surprise, because Donald Trump himself has never publicly addressed or endorsed such a reform in his year-long presidential run.
Trump did once say at a debate in New Hampshire, “nobody knows banking better than I do,” but a review of the transcripts of all 12 Republican debates shows that he never endorsed restoring Glass-Steagall, legislation first passed in 1933. Websites devoted to detailing Trump’s positions find no record of him having any opinion on the Depression-era law. The issues pages of Trump’s presidential website steer clear of anything related to banks or finance.
In fact, Trump campaign manager Paul Manafort, who first leaked word that the platform would endorse the reintroduction of Glass-Steagall, ran a campaign consulting firm in the 1980s that helped elect to Congress Phil Gramm, co-author of Glass-Steagall’s repeal. (Gramm supported Ted Cruz in the GOP primaries.)
The measure is haphazardly attached to the end of a paragraph decrying regulatory overreach by the Environmental Protection Agency, National Labor Relations Board, Federal Communications Commission, and more. Tacking on a call to restore a law that prevents private corporations from particular lines of business suggests that there wasn’t much thought put into it before Monday.
Max Keiser talks to Nomi Prins, former banker and author of All the Presidents’ Bankers, about a solution to the revolving door between Wall Street and Washington D.C. They also discuss Hillary Clinton’s highly paid speeches to Goldman Sachs matter and whether or not Wall Street expects anything in return for its contributions to her campaign. (Keiser Report)
Sharmini Peries speaks to former financial regulator Bill Black who says the Republicans could embarrass Barack Obama, Hillary Clinton, and Loretta Lynch by demanding further investigation into the failure to prosecute HSBC for its world-historical money laundering operation. (The Real News)
Eric Holder has long insisted that he tried really hard when he was attorney general to make criminal cases against big banks in the wake of the 2007 financial crisis. His excuse, which he made again just last month, was that Justice Department prosecutors didn’t have enough evidence to bring charges.
Many critics have long suspected that was bullshit, and that Holder, for a combination of political, self-serving, and craven reasons, held his department back.
A new, thoroughly-documented report from the House Financial Services Committee supports that theory. It recounts how career prosecutors in 2012 wanted to criminally charge the global bank HSBC for facilitating money laundering for Mexican drug lords and terrorist groups. But Holder said no.
Donald Trump: The Raw and Naked Face of a System That Showers Speculators with Obscene Riches and Political Power
Paul Jay says the enablers of this surge in far right populism are the leaders of both major parties and the corporate media. (The Real News)
From Brexit to Donald Trump, if there’s anything that current events tell us, it’s that the man on the street is angry and wants change.
A new report from the McKinsey Global Institute, with the chilling title “Poorer than their Parents: Flat or Falling Incomes in Advanced Economies,” shows just why this is the case. According to the paper, the trend in stagnating or declining incomes for middle class workers is not just confined to the United States, but is a global phenomenon hurting workers across the wealthy world.
The report found that as much as 70% of the households in 25 advanced economies saw their earnings drop in the past decade. The study tracked income brackets, not individual households, from 2005 to 2014. That compares to just 2% of households that saw declining incomes in the previous 12 years.
The two greatest periods of wealth inequality in the United States (the 1920s and today) have one critical element in common – there was no Glass-Steagall Act. The absence of the Glass-Steagall Act allows Wall Street banks to use the savings of small depositors across the United States to fuel risky speculation on Wall Street and create the super rich. After the Wall Street crash of 1929 and the onset of the Great Depression, the Glass-Steagall Act became law and put an end to this institutionalized wealth transfer system from the legislation’s enactment in 1933 until its repeal in 1999 under the Presidency of Bill Clinton.
Today’s banking system is a perfect reflection of U.S. society. Just six banks (one-tenth of one percent of the 6,000 insured-depository banks in the U.S.) control the bulk of total assets while, as Senator Bernie Sanders regularly reminds his audiences, in American society “the top one-tenth of one percent owns almost as much wealth as the bottom 90 percent.”
Until the public wakes up to the reality that banking concentration is producing the wealth concentration and restores the Glass-Steagall Act, poverty, despair and the unraveling of social order will continue apace while another epic financial crash hovers just over the horizon.
US officials refused to prosecute HSBC for money laundering in 2012 because of concerns within the Department of Justice that it would cause a “global financial disaster”, a report says.
A US Congressional report revealed UK officials, including Chancellor George Osborne, added to pressure by warning the US it could lead to market turmoil.
The report alleges the UK “hampered” the probe and “influenced” the outcome.
HSBC was accused of letting drug cartels use US banks to launder funds.
The bank, which has its headquarters in London, paid a $1.92bn (£1.48bn) settlement but did not face criminal charges. No top officials at HSBC faced any charges.
“The current outlook for UK financial stability is challenging,” the Bank of England warned on Tuesday.
The central bank’s Financial Policy Committee has released its biannual financial stability reportlooking at the financial health of Britain and assessing any changes to the outlook since the most recent report.
The TLDR is: Things look bad, and it is mostly because of the European Union referendum.
The report says Britain’s referendum on its EU membership remains “the most significant near-term domestic risks to financial stability.”
The Bank of England says that many of the potential risks it had identified in the run-up to the referendum had “begun to crystallise.”
Back in May 2013, we wrote an article titled “Europe’s EUR 500 Billion Ticking NPL Time Bomb” in which we laid out very simply what the biggest danger facing European banks was: non-performing, or bad, loans.
We further said, that “Europe’s non-performing loan problem is such an issue that there is increasing bluster that the ECB may take this garbage on to its balance sheet since policymakers realize that bad debts and non-performing loans (NPLs) reduce the capacity of banks to lend, hindering the monetary policy transmission mechanism. Bad debts consume capital and make banks more risk averse, especially with respect to lending to higher risk borrowers such as SMEs. With Italy (NPLs 13.4%) now following the same dismal trajectory of Spain’s bad debts, the situation is rapidly escalating (at an average of around 2.5% increase per year).
The conclusion was likewise simple:
“The bottom line is that at its core, it is all simply a bad-debt problem, and the more the bad debt, the greater the ultimate liability impairments become, including deposits. As we answered at the time – the real question in Europe is: how much impairment capacity is there in the various European nations before deposits have to be haircut? With Periphery non-performing loans totaling EUR 720bn across the whole of the Euro area in 2012 and EUR 500bn of which were with Peripheral banks.”
Now, three years later, the bomb appears to be on the verge of going off (or may have already quietly exploded), and nowhere is it more clear than in an exhaustive article written by the WSJ in which it focuses on Italy’s insolvent banking system, and blames – what else – the hundreds of billions in NPLs on bank books as the culprit behind Europe’s latest upcoming crisis.
Sharmini Peries speaks to Dimitri Lascaris who says so-called leftist or socialist governments throughout the EU are engaging in self-immolation by embracing austerity, and then become wildly unpopular with the electorate. (The Real News)
The UK has voted to leave the European Union; well, technically. In practice, the 17.5 million people voting for Brexit will have voted for many different things—not all of which are relevant to the EU. After the ascendance of post-truth politics, spurious claims about additional NHS investment and even reducing immigration are already starting to unravel.
The biggest falsehood of all was that the UK could simply choose what kind of economic relationship it would continue to have with the remaining EU, because it was in many EU members’ interests to keep trading with the UK. This argument was exposed as a dangerous illusion within hours of the result being announce
For the sake of keeping the remaining 27 member states together, the UK must, and will, be punished for daring to depart. The German chancellor, Angela Merkel, has been cool-headed enough to advise caution in this regard. Ultimately she must, and will, act to protect Germany’s interest in maintaining what is left of the union over the interests of a handful of German industries in selling to UK consumers.
So what, essentially, is going on? I think we need to look at the political and discursive climate in the UK within which this brand of politics came to thrive during the campaign.
In Britain, people complacently assume that corruption is something that goes on everywhere else and it is a matter of slipping a few quid to greedy officials. In fact corruption is a very British phenomenon, which has increased, is increasing and must be diminished.
Other countries complain of “regulatory capture” when the mafia takes over the cops. In the UK, it’s the norm. Regulation of chaps by chaps has never worked, and certainly doesn’t in an era of multinationals and huge financial institutions. Neoliberalism has given elites an insatiable lust for wealth by almost any means, which produces a drive to loot companies and pick people’s pockets for the self enrichment of few.
Britain has become a Taxhaven-on-Thames, with the City of London welcoming funny money from drug dealers, oligarchs, fiddlers and all those fleeing tighter regulation elsewhere. Britannia no longer rules the waves but it will waive the rules, provide money laundering and expensive London properties and a soft touch regulatory system. Those able to bend the rules for private gain are considered to be entrepreneurs.
Over three years ago we wrote “At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World” in which we introduced a bank few until then had imagined was the riskiest in the world.
As we explained then “the bank with the single largest derivative exposure is not located in the US at all, but in the heart of Europe, and its name, as some may have guessed by now, is Deutsche Bank. The amount in question? €55,605,039,000,000. Which, converted into USD at the current EURUSD exchange rate amounts to $72,842,601,090,000…. Or roughly $2 trillion more than JPMorgan’s.”
So here we are three years later, when not only did Deutsche Bank just flunk the Fed’s stress test for the second year in a row, but moments ago in a far more damning analysis, none other than the IMF disclosed that Deutsche Bank poses the greatest systemic risk to the global financial system, explicitly stating that the German bank “appears to be the most important net contributor to systemic risks.”
Yes, the same bank whose stock price hit a record low just two days ago.
[…] The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.
“It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”
He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing.
That doesn’t bother Mundell. For him, the euro wasn’t about turning Europe into a powerful, unified economic unit. It was about Reagan and Thatcher.
For all the scaremongering and threats of an imminent financial apocalypse should Brexit win, including dire forecasts from the likes of George Soros, the Bank of England, David Cameron (who even invoked war), and even Jacob Rothschild, something “unexpected” happened yesterday: the UK was the best performing European market following the Brexit outcome.
This outcome was just as we expected three days ago for reasons that we penned in “Is Soros Wrong“, where we said “in a world in which central banks rush to devalue their currency at any means necessary just to gain a modest competitive advantage in global trade wars, a GBP collapse is precisely what the BOE should want, if it means kickstarting the UK economy.”
On Friday, the market started to price it in too, and in the process revealed that the biggest sovereign losers from Brexit will not be the UK but Europe.
Not only, though. Because as we noted yesterday in “Who Are The Biggest Losers From Brexit?”, there is an even bigger loser than the EU: Britain and Europe’s wealthiest people.
The decision by UK voters to leave the EU is such a glaring repudiation of the wisdom and relevance of elite political and media institutions that – for once – their failures have become a prominent part of the storyline. Media reaction to the Brexit vote falls into two general categories: (1) earnest, candid attempts to understand what motivated voters to make this choice, even if that means indicting one’s own establishment circles, and (2) petulant, self-serving, simple-minded attacks on disobedient pro-leave voters for being primitive, xenophobic bigots (and stupid to boot), all to evade any reckoning with their own responsibility. Virtually every reaction that falls into the former category emphasizes the profound failures of western establishment factions; these institutions have spawned pervasive misery and inequality, only to spew condescending scorn at their victims when they object.
The Los Angeles Times‘ Vincent Bevins, in an outstanding and concise analysis, wrote that “both Brexit and Trumpism are the very, very wrong answers to legitimate questions that urban elites have refused to ask for thirty years”; in particular, “since the 1980s the elites in rich countries have overplayed their hand, taking all the gains for themselves and just covering their ears when anyone else talks, and now they are watching in horror as voters revolt.” The British journalist Tom Ewing, in a comprehensive Brexit explanation, said the same dynamic driving the UK vote prevails in Europe and North America as well: “the arrogance of neoliberal elites in constructing a politics designed to sideline and work around democracy while leaving democracy formally intact.”
If, as a result of Brexit, the economy crashes it will not vindicate the economists, it will simply illustrate once more their failure
We, at Policy Research in Macroeconomics (PRIME) call for an urgent, independent, public inquiry into the economics profession, and its role in precipitating both the financial crisis of 2007-9, the subsequent very slow ‘recovery’; and in the British European referendum campaign.
As this morning illustrates, financial disarray is not unlikely under Brexit, but whether this turns into anything material depends in the first instance on economic policy. Labour’s John McDonnell was quickly out of the blocks to warn against George Osborne’s and Alastair Darling’s “punishment budget.” But, even if Osborne resigns, as he should, can we trust economists at the Treasury not to impose more disastrous policies?
Economists have once again proved themselves not only irrelevant, but a dangerous irrelevance.
For too long they have resisted call after call for reform. If they will not do it themselves then it is time for others to take control. The profession should be brought to account through a public inquiry into the this failure.
[…] Just how traumatic Brexit is will be depends on whether Parliament can rise to the challenge and fashion a credible trade policy – so far glaringly absent – to safeguard access to European markets and ensure the viability of the City, and it depends exactly how Brussels, Berlin, Paris, Rome, Madrid, and Warsaw react once the dust settles. Both sides are handling nitroglycerin.
Angry reproaches are flying in all directions, but let us not forget that the root cause of this unhappy divorce is the conduct of the EU elites themselves. It is they who have pushed Utopian ventures, and mismanaged the consequences disastrously. It is they who have laid siege to the historic nation states, and who fatally crossed the line of democratic legitimacy with the Lisbon Treaty. This was bound to come to a head, and now it has.
The wild moves in stocks, bonds, and currencies this were unavoidable, given the positioning of major players in the market, and given that the Treasury, the International Monetary Fund, and the Davos brotherhood have been deliberately – in some cases recklessly – stirring up a mood of generalized fear.
But let us separate the noise from what matters. This is not a ‘Lehman moment’. The sterling rout has not been as bad as some feared. You could almost say that we have had a miraculous reprieve, at least for now.
George Soros may be getting rich on an implosion in British markets — again.
The landmark vote in the U.K. to leave the European Union has rocked global markets, sending the British pound to its lowest level in more than 30 years. Futures for the Dow Jones Industrial Average plunged as much as 700 points at one point, and Europe’s benchmark stock index was facing its worst one-day plunge since 1987.
It is precisely the scenario of which Soros, writing in Britain’s Guardian newspaper last week, warned. The global financial carnage and Friday’s tumble could be adding to the wealthy investor’s bankroll, if reports are true.
Soros is famous for breaking the Bank of England — and lining his pockets — in 1992 with a bet against the British pound, which resulted in sterling’s ejection from the European exchange-rate mechanism.
Soros Fund Management, which manages some $30 billion for Soros and his family, has been scooping up gold assets and placing wagers that stocks will tumble,according to a Wall Street Journal report earlier this month.
The Big Guns Are Out: Soros and Rothschild Warn Of Brexit Doom, Osborne Threatens With “Suspending” Market
The big guns are officially out.
Just yesterday, we recounted the story of “Black Wednesday” when on September 16, 1992, the UK was forced out of the EU’s exchange-rate mechanism, or ERM, when the BOE tapped out and allowed the British pound to float freely, leading to 15% losses in the sterling. As we noted, this was George Soros’ infamous trade which “broke the Bank of England” and made the Hungarian richer by over $1.5 bilion.
24 years later Soros is back, and this time he is warning against the kind of devaluation that made him a billionaire and which he believes will be unleashed by Brexit, when in a Guardian Op-Ed he wrote that U.K. voters are “grossly underestimating” the true costs of a vote to leave the EU, saying that there would be an “immediate and dramatic impact on financial markets, investment, prices and jobs.”
He predicts that the pound would decline “precipitously”, seeing a gargantuan drop of at least 15% and possibly >20% to below $1.15. Considering it has now become trendy for analysts to come up with ever “doomier” forecasts of just how low cable would plunge in case of Brexit, we are surprised Soros stopped there.
Greek Leaks Expose IMF Chief Overruling Pro-Debt Relief IMF Negotiator: Interview with Dimitri Lascaris
Sharmini Peries speaks to securities lawyer Dimitri Lascaris who says recent leaks to the press show that IMF Chief Lagarde forced her negotiator to give up the previously stated position to insist that creditors offer debt relief to Greece. (The Real News)
Seventy-one percent of the Greek capital’s homeless population has ended up on the streets in the last five years and 21.7 percent in the last year alone, a study by the City of Athens’s Homeless Shelter (KYADA), funded by the Norwegian government and other European countries, has found.
According to the study, which was conducted as part of the “Fighting Poverty and Social Exclusion” program and whose findings were presented by Athens Mayor Giorgos Kaminis on Monday evening, 62 percent of the capital’s homeless are Greeks, the overwhelming majority (85.4 percent) are men and most (57 percent) are aged between 35-55.
Of the 451 respondents questioned by KYADA workers from March 2015 until the same month this year, 47 percent said they ended up on the street after losing their job and 29 percent said they do not want to move to a shelter or other organized facility.
A strong warning that austerity policies can do more harm than good has been delivered by economists from the International Monetary Fund, in a critique of the neoliberal doctrine that has dominated economics for the past three decades. In an article seized on by the shadow chancellor, John McDonnell, the IMF economists said rising inequality was bad for growth and that governments should use controls to cope with destabilising capital flows.
The IMF team praised some aspects of the liberalising agenda that was ushered in by Ronald Reagan and Margaret Thatcher in the 1980s, such as the expansion of trade and the increase in foreign direct investment. But it said other aspects of the programme had not delivered the expected improvements in economic performance. Looking specifically at removing barriers to flows of capital and plans to strengthen the public finances, the three IMF economists came up with conclusions that contradicted neoliberal theory.
“The benefits in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries,” they said. “The costs in terms of increased inequality are prominent. Such costs epitomise the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.
“Increased inequality in turn hurts the level and sustainability of growth. Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.”
According to the Census Bureau, the percentage of Americans living in poverty is higher today than it was in the late 1960s. Last year I argued in these pages that these “official” poverty statistics are extremely misleading. When the United States first explicitly defined an official poverty line in 1969, it was supposed to be adjusted every year to ensure that it represented a constant standard of living. However, two problems arose and were never fixed.
First, the Consumer Price Index, which was supposed to be used to adjust the poverty line for inflation, turned out to have flaws that made it rise faster than the cost of living. Second, the official measure uses pretax money income to measure families’ economic resources; but anti-poverty measures enacted since then, such as the expansion of food stamps and then the Earned Income Tax Credit (EITC), made low-income families’ total economic resources increase faster than their pretax money income. As a result of these problems, roughly half the families now counted as officially poor have a higher standard of living than families with incomes at the poverty line had in 1969.
In $2.00 a Day: Living on Almost Nothing in America, Kathryn Edin and Luke Shaefer argue that what they call “extreme” poverty roughly doubled between 1996 and 2012. If they are right—and I think they are—the reader might wonder how I can still claim that poor families’ living standards have risen. The answer is that inequality has risen even among the poor. Half of today’s officially poor families are doing better than those we counted as poor in the 1960s, but as I learned from reading $2.00 a Day (and have spent many hours verifying), the poorest of the poor are also worse off today than they were in 1969. $2.00 a Day is a vivid account of how such families live. It also makes a strong case for blaming their misery on deliberate political choices at both the federal and state levels.
Long before the words “Grexit” or “Brexit” entered the popular lexicon, the economic news out of Europe was difficult. Since the 2008–9 recession, Eurozone countries have been treading water, bobbing up and down in the wake of the economic storm: falling into recession in spring 2008, rising out in spring 2009; falling again in late 2011, rising again to growth of 1 to 1.5 percent in 2014 and 2015. Across the Eurozone, success is piecemeal and has varied by region and country. In 2015, Germany’s gross domestic product (GDP) grew by 1.5 percent, while Italy’s economy followed two negative years with 0.8 percent growth; resilient Poland, one of only two European Union (EU) member states able to avoid the Great Recession altogether, grew by 3.5 percent.
Whatever the metric or perspective, much of Europe has experienced a lost decade. With punishing austerity and high debt-to-GDP ratios in many countries, and slow growth across the board, how can Europe find its way again? Trade, consumer spending, and business investment — which have seen muted growth at best — are the traditional routes to economic recovery. But while Europe struggled, the global economy shifted to a more abstract foundation: innovation, especially digital innovation, from which trade and investment follow.
Innovation can be either incremental or transformative. Incremental innovation — the improvement of an existing process — is important to creating value, but by its nature it is often about building on existing creations; its returns are less explosive, but often are more stable. Transformative innovation, as its name suggests, can be game-changing, causing disruption of existing industries and processes, creating new industry leaders, and sometimes fundamentally changing the way people live. While Europe is rich in both human capital and technology and boasts many highly competitive international companies (Siemens, SAP, Philips, Bayer, and Ericsson, to name a few), the innovation stemming from these sources tends toward the incremental. Europe simply is not generating transformative innovation at a high level. With a few notable exceptions (e.g., Spotify, the music-streaming giant founded in Sweden), the nations of Europe are failing to generate and grow new cutting-edge technology companies.