This quote from the economist Martin A. Armstrong deserves comment:
“The real crisis emerges when the scheme of Investment Banking and proprietary trading then moves into the Commercial Banking realm. Blending the proprietary trading and Investment Banking with Commercial Banking opens the door for catastrophic meltdowns because the Commercial Banking is the cornerstone of the economy providing loans to business and they facilitate the velocity of money. When proprietary trading is merged with Commercial Banking, then the entire system is placed at risk. This was the importance of Glass-Steagall wisely separating each aspect. We cannot allow the Investment Banking culture to dominate the Commercial Banking field. This MUST be severed or the next crisis will be twice as bad as the last one.”
I’d have to say I agree, that the decision to repeal Glass-Steagall was the seed that produced the inevitable harvest almost 30 years later.
Banks were supposed to have Chinese Walls, though perhaps the phrase should have been “Japanese walls” – i.e. Paper-thin, to keep the brokers activities from the market-makers activities. And as Armstrong points out, inevitably leads to information flowing across these barriers.
It also begs the question how these large Banks can seriously justify packaging up sub-prime MBS (Mortgage Backed Securities) and sell them on as Prime assets knowing that in a credit crunch such was likely to happen back in 2007, that these assets would be seriously marked down.
The deaths of Bear Sterns and Lehman were therefore baked in the cake.
For full piece scroll about 3/4 down…
Bob Beckman posited that this was inevitable back when I read his book in the 80’s – “The Downwave”. Though to be honest, the main thrust of his argument was the Kondratieff (Kondratiev) curve of circa 54 years – which also happens to be about 2 generations of 25-30 years depending on female fertility/birth-rates.
Of course the mere fact that women in western countries are leaving it later and later to have their first-born means these cycles will be spread out – but you only have to look at the number of baby-bumps around the west, and toddlers/babies/under fives, to realise that this will all play out again, perhaps not quite as severe, in 25-30 years time. (circa 2030)
- Swiss Move to End Bank Proprietary Trading (financialsurvivalnetwork.com)
Got something to say about Precious Metals? (Or the events surrounding them?)
I was leafing through Bloomberg.com, having been directed there by a link I’d seen when I happened on this statement of the absolutely bleedin’ obvious (as we northerners are wont to say)
“Bernanke was suggesting in his own way that too much importance is given to gold, it’s too hyped,” said Nouriel Roubini, professor of economics and international business at New York University. “Gold is not a currency.”
Well, I never… Gold is NOT currency… NO… It’s MONEY… and apart from Silver – everything else is currency, i.e. just credit, debt, paper, a loan from the BoJ, BoE, or the FED – who for the uninititated are a bunch of Old Money Banker families predominately from Europe, though J.P Morgan’s family at least had the decency to make things along with the Rockefellers,
But as ol’ J.P. Morgan once so eloquently stated – “Gold is money – Everything else is just credit”
You can read the actual piece on Bloomberg – HERE:
Have a great weekend…
Aside Posted on Updated on
Welcome to Money Matters – because it really does, more than most people realise.
While one side of the world sleeps, The other side is busy, making money, building empires, and making things.
Those who want more than they currently have for their families and for their future, need help, guidance, and an opportunity to make more money. That’s where we come in. This blog will be a talking point, a focus for money making ideas. And when I find investment opportunities that sound like they could do with an airing, then I’ll air them. And I hope you will too.
(At this point I should point out… Any investment ideas posted here are just that – suggestions for further research – we are not investment advisers, but we get ideas sent to us, and we’ll do a little background research just to see if they are worthwhile doing further research on, and hopefully, you will share yours too)