You and I live in a totally different world than the ultra-rich and the international banking elite do. Many of them live in a world where they simply do not pay income taxes. Today, it is estimated that a third of all the wealth in the world is held in offshore banks. So why is so much of the wealth of the globe located in places such as Monaco, the Cayman Islands, Bermuda, the Bahamas, and the Isle of Man? It isn’t because those are fun places to visit. It is to avoid taxes. The super wealthy and the international banking elite think that it is really funny that our paychecks are constantly being drained by federal taxes, state taxes and Social Security taxes while they literally pay nothing at all. These incredibly rich elitists make a ton of money doing business in wealthy western nations and then they transfer virtually all of their profits offshore where they don’t have to contribute any of it in taxes. It works out really great for them, but it sucks for the rest of us.
It is estimated that approximately $1.4 trillion is held in offshore banks in the Cayman Islands alone. According to an article in Forbes magazine, there is a total of approximately 15 trillion to 20 trillion dollars in offshore bank accounts, brokerage accounts and hedge fund portfolios.
A recent article in the Guardian stated that a third of all the wealth on the entire globe is held in offshore banks and that the vast majority of international banking transactions take place in these tax havens….
On a conservative estimate, a third of the world’s wealth is held offshore, with 80% of international banking transactions taking place there. More than half the capital in the world’s stock exchanges is "parked" offshore at some point.
All of the biggest banks in the world are involved in playing this game. All of them have big branches in these various tax havens. All of them work very hard to ensure that the tax burdens on their ultra-rich clients are as light as possible.
Nobody knows for sure how much money big governments around the globe are missing out on from all this tax avoidance, but everyone agrees the number…
Lately, anywhere we look, there seems to be a pattern emerging: those economic thinkers who actually construct and run their own macro models (not the glorified powerpoint presenter variety) and actually do independent analysis and tracing of the money flow, instead of relying on Wall Street forecasts that have as much credibility as a Moody’s home price hockey stick from 2006, almost inevitably end up having a very dire outlook on the economy. One such person is and has pretty much always been Shadowstats‘ John Williams, whose "shadow" economic recreation puts the BLS data fudging dilettantes to shame. That said any reader of Zero Hedge who has been with us for more than a few weeks, knows all too well our eagerness to ridicule the increasingly more incoherent lies coming out of the US department of truth, so no surprise there. Yet another aspect over which there is much agreement is that no matter how one slices the data, the outcome for the US currency is a very grim one. Which is why Williams over the past several years has become a major fan of the shiny metal. Below we recreate portions of his latest observations on the upcoming currency collapse, courtesy of King World News.
John Williams today was dispatching information regarding gold, silver, M3, nearby massive selling of dollars and inflation. Here is a portion from his commentary, “Despite November 9th’s historic high gold price of $1,421.00 per troy ounce (London afternoon fix) and the multi-decade high silver price of $30.50 per troy ounce (London fix) on December 7th, gold and silver prices have yet to approach their historic high levels, adjusted for inflation.”
Real Money Supply M3: The signal of the still unfolding double-dip recession, based on annual contraction in the real (inflation-adjusted) broad money supply (M3), continues and is graphed (above). Based on today’s CPI-U report and the latest estimate on the November SGS-Ongoing M3 Estimate, that annual contraction in November 2010 was 4.0%, narrower than October’s 4.5% contraction, and May’s post-World War II record annual decline of 7.9%.
Incidentally, if there is one thing we disagree with John on is that the broadest aggregate (M3 for Williams, Shadow Banking for Zero Hedge) is declining. That said, an expansion in the most critical broad money signal is merely the missing piece of the puzzle that we…
Credit conditions are improving for speculators and bubblemakers, but they continue to worsen for households, consumers and small businesses. An article in the Wall Street Journal confirms that the Fed’s efforts to revive the so-called shadow banking system is showing signs of progress. Financial intermediaries have been taking advantage of low rates and easy terms to fund corporate bonds, stocks and mortgage-backed securities. Thus, the reflating of high-risk financial assets has resumed, thanks to the Fed’s crisis-engendering monetary policy and extraordinary rescue operations.
Here’s an excerpt from the Wall Street Journal:
"A new quarterly survey of lending by the Federal Reserve found that hedge funds and private-equity funds are getting better terms from lenders and that big banks have loosened lending standards generally in recent months. The survey, called the Senior Credit Officer Opinion Survey, focuses on wholesale credit markets, which the Fed said functioned better over the past quarter." ("Survey shows credit flows more freely", Sudeep Reddy, Wall Street Journal)
In contrast, bank lending and consumer loans continue to shrink at a rate of nearly 5 per cent per year. According to economist John Makin, there was a "sharp drop in credit growth, to a negative 9.7 per cent annual rate over the three months ending in May." Bottom line; the real economy is being strangled while unregulated shadow banks are re-leveraging their portfolios and skimming profits. Here’s more from the WSJ:
"Two-thirds of dealers said hedge funds in particular pushed harder for better rates and looser nonprice terms, and they said some of the funds got better deals as a result….(while) The funding market for key consumer loans remained under stress, with a quarter of dealers reporting that liquidity and functioning in the market had deteriorated in recent months." ("Survey shows credit flows more freely", Sudeep Reddy, Wall Street Journal)
As the policymaking arm of the nation’s biggest banks, the Fed’s job is to enhance the profit-generating activities of its constituents. That’s why Fed chair Ben Bernanke has worked tirelessly to restore the crisis-prone shadow banking system. As inequality grows and the depression deepens for working people, securitization and derivatives offer a viable way to increase earnings and drive up shares for financial institutions. The banks continue to post record profits even while the underlying economy is…
People who know me well know that I am obsessed with GE Capital as being one of the key stories of the change in the American economy of the late 20th century, a story I hope to develop more 3 or 4 projects from now. GE Capital was founded in 1932 to finance dealer inventories and consumer purchases. People made things in a factory and bought things from a factory and GE Capital helped provide both a burgeoning middle class and the businesses that served it with sufficient lines of credit.
Starting in the 1960s it began to provide leasing and financial services to other large Fordist-Keynesian style businesses. And then starting in the 1980s during the financial deregulatory wave it expanded rapidly into one of the world’s premiere shadow banks: it was the single largest issuer of commercial paper in the United States before the crisis, with $620 billion in assets at the end of 2007.
Did you ever listen to the Giant Pool of Money epsiodes of This American Life? (You must have.) If you remember it, during the episode you meet rising subprime mortgage star Glen Pizzolorusso, who was an area sales manager at an outfit called WMC mortgage in upstate New York. He made over $1 million dollars a year handling the subprime market and spent like mad on cars, real estate, and impressing celebrities. Here’s his description, from the transcript:
Glen Pizzolorusso: What is that movie? Boiler Room? That’s what it’s like…We lived mortgage. That’s all we did. This deal, that deal. How we gonna get it funded? What’s the problem with this one? That’s all everyone’s talking about…
We rolled up to Marquee at midnight with a line, 500 people deep out front. Walk right up to the door: Give me my table. Sitting next to Tara Reid and a couple of her friends…We ordered 3, 4 bottles of Cristal at $1000 per bottle. You know so you order 3 or 4 bottles of those and they’re walking through the crowd and everyone’s like: Whoa, who’s the cool guys? We were the cool guys.
He then losses it all during the crash and has to move back home. (He has since joined the Tea Party.) Now WMC sounds like a fly-by-night operation in…
Volatility is back and stocks have started zigzagging wildly again. This time the catalyst is Greece, but tomorrow it could be something else. The problem is there’s too much leverage in the system, and that’s generating uncertainty about the true condition of the economy. For a long time, leverage wasn’t an issue, because there was enough liquidity to keep things bobbing along smoothly. But that changed when Lehman Bros. filed for bankruptcy and non-bank funding began to shut down. When the so-called "shadow banking" system crashed, liquidity dried up and the markets went into a nosedive. That’s why Fed Chair Ben Bernanke stepped in and provided short-term loans to under-capitalized financial institutions. Bernanke’s rescue operation revived the system, but it also transferred $1.7 trillion of illiquid assets and non-performing loans onto the Fed’s balance sheet. So the problem really hasn’t been fixed after all; the debts have just been moved from one balance sheet to another.
Last Thursday, troubles in Greece triggered a selloff on all the main indexes. At one point, shares on the Dow plunged 998 points before regaining 600 points by the end of the session. Some of losses were due to High-Frequency Trading (HFT), which is computer-driven program-trading that executes millions of buy and sell orders in the blink of an eye. HFT now accounts for more than 60 percent of all trading activity on the NYSE. Paul Kedrosky explains what happened in greater detail in his article, "The Run on the Shadow Liquidity System". Here’s an excerpt:
"As most will know, liquidity is, like so many things in financial life, something you can choke on as long as you don’t want any….Liquidity is a function of various things working fairly smoothly together, including other investors, market-makers, and, yes, technical algorithms scraping fractions of pennies as things change hands. Together, all these actors create that liquidity that everyone wants, and, for the most part, that everyone takes for granted…..
“Largely unnoticed, however, at least among non-professional investors, the provision of liquidity has changed immensely in recent years. It is more fickle, less predictable, and more prone to disappearing suddenly, like snow sublimating straight to vapor during a spring heat wave. Why? Because traditional providers of liquidity,
Nevertheless, President Obama clearly believes the line fed to him by Wall Street. He is no Teddy Roosevelt. The question you should be asking is, will the tentative reforms proposed by the Obama Administration have any kind of positive effect? The answer is probably in a very temporary fashion, but that is more a function of the impairment of the capital markets themselves. However, if you don’t deal with a cancer fully, it comes back and spreads – even if you conduct surgery to take out some of the tumour.
Reform of the current US financial sector is neither possible nor would it ever be sufficient. It’s a bit like Lincoln saying, "Well, this slavery thing has a few problems, but we can ‘reform’ it and make it better.” As any student of horror films knows, you cannot reform zombies. Zombie banks must be killed. In other words, the financial system must be downsized.
Downsizing can begin with the following set of actions:
All bank assets and liabilities must be brought onto balance sheets, and made subject to reserve and capital requirements and—more importantly—to normal oversight by appropriate regulatory agencies. Any assets and liabilities that are left off balance sheet will be declared null and void, unenforceable by US courts.
All CDSs must be bought and sold on regulated exchanges; otherwise they will be declared unenforceable by US courts.
Unless specifically approved by Congress, securitization of financial products such as life insurance policies will be prohibited and thus unenforceable by US courts.
The FDIC will be directed to examine the books of the largest 25 insured banks to uncover all CDS contracts held. These will then be netted among these 25 banks, canceling CDS contracts held on one another. CDS contracts with foreign banks will be unwound. The FDIC will also examine derivative positions with a view to determine whether unwinding these would be in the public interest.
For readers who have the time and interest to follow up on the topic Zero Hedge commenced yesterday discussing money liquidity and the shadow banking system, the best place to start is with Friedrich Hayek’s seminal Prices and Production, published in the depression days of 1935. Curiously Hayek discerned the critical role of the shadow banking system long before the advent of securitization, derivatives and other products that today have caused the monetary supply problem to reach a screaming crescendo. A very salient sample is presented below:
"There can be no doubt that besides the regular types of the circulating medium, such as coin, notes and bank deposits, which are generally recognised to be money or currency, and the quantity of which is regulated by some central authority or can at least be imagined to be so regulated, there exist still other forms of media of exchange which occasionally or permanently do the service of money. Now while for certain practical purposes we are accustomed to distinguish these forms of media of exchange from money proper as being mere substitutes for money, it is clear that, other things equal, any increase or decrease of these money substitutes will have exactly the same effects as an increase or decrease of the quantity of money proper, and should therefore, for the purposes of theoretical analysis, be counted as money.
In particular, it is necessary to take account of certain forms of credit not connected with banks which help, as is commonly said, to economize money, or to do the work for which, if they did not exist, money in the narrower sense of the word would be required. The criterion by which we may distinguish these circulating credits from other forms of credit which do not act as substitutes for money is that they give to somebody the means of purchasing goods without at the same time diminishing the money-spending power of somebody else. This is most obviously the case when the creditor receives a bill of exchange which he may pass on in payment for other goods. It applies also to a number of other forms of commercial credit, as, for example, when book credit is simultaneously introduced in a number of successive stages
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Like all addicts, Central Planners are confident they can manage the monkey on their back. But this is a self-serving illusion.
Addiction is many things, but beneath its complexities it is a self-destructive expression of the desire to avoid or suppress pain. The pain might be physical or the stuff of the mind, memories or inner demons or tortured misgivings about one's choices, soul and life.
Though the self-destructive aspects of the addiction are painfully ...
I don’t really want to keep talk about Ukraine, but it’s too hard to avoid. Besides, it’s not the same story anymore that it was when the week began, since the economic war vs Putin and Russia is now escalating. For reasons that have nothing to do with the plane crash, though they may seem to, a fact that completely seems to escape 999 out of 1000 people.
We still don’t know who shot that plane (we’re not even sure anyone did), and the longer is takes to get evidence for who did it, the more likely it is that such evidence will be tainted and/or fabricated.
That’s undoubtedly why the western media simply bypass the need for evidence, which is worrisome on multiple fronts....
An affiliated company of Advanced Semiconductor Engineering (NYSE: ASX), Universal Scientific Industrial, has reportedly received SiP module orders from Apple (NASDAQ: AAPL) for the iWatch according to industry sources, as reported by DigiTimes. Each SiP module costs approximately $60, which is 20% of the iWatch's rumored $300 price tag.
Volume in Starbucks options is running approximately three times the average daily level for the stock as of 1:15 p.m. ET ahead of the company’s third-quarter earnings report after the close. Shares in the name are up roughly 1.0% just before midday to stand at $79.95. Traders of SBUX options today are more active in calls than puts, with the call/put ratio hovering near 2.0 as of the time of this writing. Much of the volume is in 25Jul’14 expiry options contracts, most notably in the $80 and $83 strike calls which have traded roughly 3,350 and 2,550 times respectively and in excess of existing open interest levels in both strikes. A portion of the volume in the $80 and $83 calls appears to be part of a spread trade.
Despite a highly eventful week in the news, not much has changed from a stock market perspective. No doubt, investors have grown immune to the daily reports of geopolitical turmoil, including Ukraine vs. Russia for control of the eastern regions, Japan’s dispute with China over territorial waters, Sunni vs. Shiite for control of Iraq, Christians being driven out by Islamists, and other religious conflicts in places like Nigeria and Central African Republic. But last Thursday’s news of the Malaysian airliner tragically getting shot down over Ukraine, coupled with Israel’s ground incursion into Gaza, had the makings of a potential Black Swan event, which in my view is the only thing that could derail the relentless bull march higher in stocks.
Nevertheless, when it became clear that the airline...
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We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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