[GHung]

http://www.bbc.com/news/business-29982178

Interviewing Alistair Darling in 2011, three years after the financial crisis during which he was chancellor, his most striking answer to me was not about the fear that Britain's economic system was on the point of collapse.

It wasn't even his worry that ATMs up and down the country might simply stop functioning.

Those answers were of course chilling. But they were symptoms of a wider disease.

Mr Darling's most striking answer was the "absolute astonishment" he felt when he asked Britain's largest banks to account for the risks contained in their businesses - and they were unable to come up with a coherent answer.

This total lack of knowledge - coupled with the hubris of profit-taking built on lax credit - went to the heart of the financial crisis.

Regulators appeared similarly non-plussed.

Such was the global complexity and lack of governance in the international financial system, when it came to rescuing the banks from having to eat their own sick, the UK government - and many other governments around the world - initially had no idea how large the bill would be.

And neither did the banks.
Taxpayer as guarantor

The only funding avenues large enough to contain such unquantifiable risks were those provided by central banks and the taxpayer.

The alternative was financial meltdown.

The numbers turned out to be astronomical. A National Audit Office report in August this year suggested the value of the UK government's total support for the financial system alone exceeded £1.1tn at its height.

Many tens of billions of pounds worth of capital was directly injected into failing banks and building societies.

The rest of that dizzying £1.1tn was the total value of liability insurance - the government guaranteeing banks' security as lender of last resort.

Put simply, the taxpayer had become the guarantor of the global financial system and the banks that are the essential plumbing of that system.

[Paulo1]

What I read Ghung is that basically the derivitives scam has not changed, and that the risks are as great as ever due to shaky debts. Furthermore, there are now fewer banks than ever with even more concentrated power.

The much ballyhooed Dodd-Frank bill was watered down and has yet to be implemented to any extent.

The scams continue to mount with cursory oversight, (commodity manipulation inluding the gold index), and while not wanting to encourage Plant , Obama tacitly protected past and encouraged future malfeasance by not going after the banksters when he had the chance. In fact, he cozied up and supported them and continues to do so.

He is bought and paid for by the shadow oligarchs and has proven to be the gift that keeps on giving. Sub-prime auto loans and a resurge in shaky mortgages are my reference. Govt is owned by the banking cartel and the people are too scared or ignorant to insist on changes before it is too late. Just like Slim Pickens on the bomb ride, we will be forced to tag along the whole ride down.

I just hope it is slow ride.

Paulo

[hvacman]

The concept "Too big to fail", if the circumstances for "failure" appear again, will probably run head-on into a concept now lying just under the surface of all of us... "Too broke to bail out those greedy b#$%sards again". That collision will not be pretty.

[Keith_McClary]

New G20 Rules
Cyprus-style Bail-ins to Take Deposits and Pensions
by ELLEN BROWN

On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again. It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Board’s “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” which completely changes the rules of banking.

Russell Napier, writing in ZeroHedge, called it “the day money died.” In any case, it may have been the day deposits died as money. Unlike coins and paper bills, which cannot be written down or given a “haircut,” says Napier, deposits are now “just part of commercial banks’ capital structure.” That means they can be “bailed in” or confiscated to save the megabanks from derivative bets gone wrong.

[dolanbaker]

The concept "Too big to fail", if the circumstances for "failure" appear again, will probably run head-on into a concept now lying just under the surface of all of us... "Too broke to bail out those greedy b#$%sards again". That collision will not be pretty.

Don't worry, QEZ will come into play. An infinite amount of money will be made available at zero interest for an indefinite period. Buying enough time to replace the current monitory system with something else that works in a "zero growth" world.

[careinke]

The concept "Too big to fail", if the circumstances for "failure" appear again, will probably run head-on into a concept now lying just under the surface of all of us... "Too broke to bail out those greedy b#$%sards again". That collision will not be pretty.

Don't worry, QEZ will come into play. An infinite amount of money will be made available at zero interest for an indefinite period. Buying enough time to replace the current monitory system with something else that works in a "zero growth" world.

Bitcoin would work.

[dolanbaker]

As they're not a "debt" currency, then yes they could.

[onlooker]

http://www.nakedcapitalism.com/2015/06/ ... lites.html
Very interesting article about the bankruptcy of American elites. It goes into the current climate of "get rich quick" and how slowly but surely the institutions and people at the top with money and authority have taken advantage of the system with their money and influence. The system slowly fashioned to benefit those with money and power. What is striking is how corrupt this system is now and being manipulated by any who can for their own interest. Their is no longer any pretense of being a "good sport" or being part of a worthwhile longer term endeavor. Rather brute self-interest rules and hence we have these exploitative bubbles rising and falling so that people can make money off of this. One big gambling casino for the corporations, banks and the stock market and aided by the government. Too big to fail. To tell you the truth it is a sign of the decay and decadence of the times we live in.

[Pops]

New G20 Rules

Unlike coins and paper bills, which cannot be written down or given a “haircut,” says Napier, deposits are now “just part of commercial banks’ capital structure.”

Thanks for that Keith, but is this new? I thought a depositor was an "unsecured creditor" all along. When you "deposit" $100 in the bank, they become the owner of that Franklin and you the proud owner of their IOU.

This is what I've been getting at in the whole argument about hyperinflation. If the balloon goes up and all those interconnecting bets start collapsing, trillions of "dollars" in digital money will up and disappear. That is the exact opposite of hyperinflation.

In addition, and depending on what your institution is betting on at the time, that could impact not just the value of your IOUs — the money you imagine you "have in the bank" — but your access to it. I'm thinking that .gov is going to be hard pressed to go the bank bailout route again for fear of pitchforks (hence the "Bail-In" law in Keith's post that turn your IOU equity into bank balance sheet equity), so rather than inflate away to nothing, physical greenbacks could grow dramatically in value because all those competing 1s & 0s are wiped. Since lots of other "money" has up and disappeared, your dead presidents (and some woman) appreciate and the magic magnetic stripes you carry around, the ATMs, Auto-Bill-Pay, Direct-Deposit, etc just stop functioning.

Or not.