Swiss Central Bank Has Action Plan For Euro’s Collapse

Hi Tap, here are a couple of interesting Items for you, & an Information Video, I thought was quite good in explaining the situation, of The Euro Crisis ,Debt & other BANKING CRISES.

The vast profits made from drug production and trafficking are overwhelmingly reaped in rich “consuming” countries – principally across Europe and in the US – rather than war-torn “producing” nations such as Colombia and Mexico, new research has revealed.

“The Story of who makes the money from Colombian cocaine is a metaphor for the disproportionate burden placed in every way on ‘producing’ nations like Colombia as a result of the prohibition of drugs,” said one of the authors of the study, Alejandro Gaviria, launching its English edition last week. ………….

With Britain having overtaken the US and Spain as the world’s biggest consumer of cocaine per capita, the Wachovia investigation showed much of the drug money is also laundered through the City of London, where the principal Wachovia whistleblower, Martin Woods, was based in the bank’s anti-laundering office. He was wrongfully dismissed after sounding the alarm.

The most far-reaching and detailed analysis to date of the drug economy in any country – in this case, Colombia – shows that 2.6% of the total street value of cocaine produced remains within the country, while a staggering 97.4% of profits are reaped by criminal syndicates, and laundered by banks, in first-world consuming countries.

The mechanisms of laundering drug money were highlighted in theObserver last year after a rare settlement in Miami between US federal authorities and the Wachovia bank, which admitted to transferring $110m of drug money into the US, but failing to properly monitor a staggering $376bn brought into the bank through small exchange houses in Mexico over four years. (Wachovia has since been taken over by Wells Fargo, which has co-operated with the investigation.)

But no one went to jail, and the bank is now in the clear. “Overall, there’s great reluctance to go after the big money,” said Mejía. “They don’t target those parts of the chain where there’s a large value added. In Europe and America the money is dispersed – once it reaches the consuming country it goes into the system, in every city and state. They’d rather go after the petty economy, the small people and coca crops in Colombia, even though the economy is tiny.”


Collapse At Hand

Ever since the beginning of the financial crisis and quantitative easing, the question has been before us: How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits? Not long ago the Fed announced that it was going to continue this policy for another 2 or 3 years. Indeed, the Fed is locked into the policy. Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury’s credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued.


In other words, financial deregulation leading to Wall Street’s gambles, the US government’s decision to bail out the banks and to keep them afloat, and the Federal Reserve’s zero interest rate policy have put the economic future of the US and its currency in an untenable and dangerous position. It will not be possible to continue to flood the bond markets with $1.5 trillion in new issues each year when the interest rate on the bonds is less than the rate of inflation. Everyone who purchases a Treasury bond is purchasing a depreciating asset. Moreover, the capital risk of investing in Treasuries is very high. The low interest rate means that the price paid for the bond is very high. A rise in interest rates, which must come sooner or later, will collapse the price of the bonds and inflict capital losses on bond holders, both domestic and foreign.

A number of factors are contributing to the stability of the dollar and the bond market. A very important factor is the situation in Europe. ………..


Will it be the end of the EU and the euro?

The Treasury bond market is also helped by the fear individual investors have of the equity market, which has been turned into a gambling casino by high-frequency trading.

High-frequency trades now account for 70-80% of all equity trades. The result is major heartburn for traditional investors, who are leaving the equity market. They end up in Treasuries, because they are unsure of the solvency of banks who pay next to nothing for deposits, whereas 10-year Treasuries will pay about 2% nominal, which means, using the official Consumer Price Index …………

Treasury can have the Federal Reserve print the money to pay off its bonds. Therefore, bond investment at least returns the nominal amount of the investment, even if its real value is much lower. (For a description of High-frequency trading

Unlike Japan, whose national debt is the largest of all, Americans do not own their own public debt. Much of US debt is owned abroad, especially by China, Japan, and OPEC, the oil exporting countries. This places the US economy in foreign hands. If China, for example, were to find itself unduly provoked by Washington, China could dump up to $2 trillion in US dollar-dominated assets on world markets …………

Jeff Nielson explains another way that banks can sell bullion shorts when they own no bullion.

Nielson says that JP Morgan is the custodian for the largest long silver fund while being the largest short-seller of silver. Whenever the silver fund adds to its bullion holdings, JP Morgan shorts an equal amount. The short selling offsets the rise in price that would result from the increase in demand for physical silver. Nielson also reports that bullion prices can be suppressed by raising margin requirements on those who purchase bullion with leverage. The conclusion is that bullion markets can be manipulated just as can the Treasury bond market and interest rates

Fed chairman Bernanke has spoken of an “exit strategy”  …….
prevent the inflation by taking the money back out of the banking system
Sell Treasury bonds this would cause interest rates to increase, this would threaten the derivative structure & cause bond losses, so Private & Public Debt would increase & introduce additional problems.

This could spell the end for The $ as The Reserve Currency. The American Banks own $230,000,000,000,000 in derivative bets,  JPMorgan Chase has had to admit that its recently announced derivative loss of $2 billion is more than that. How much more remains to be seen. According to the Comptroller of the Currency http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/dq411.pdf the five largest banks hold 95.7% of all derivatives. The five banks holding $226 trillion in derivative bets are highly leveraged gamblers. For example, JPMorgan Chase has total assets of $1.8 trillion but holds $70 trillion in derivative bets, a ratio of $39 in derivative bets for every dollar of assets. Such a bank doesn’t have to lose very many bets before it is busted.

Assets, of course, are not risk-based capital. According to the Comptroller of the Currency report, as of December 31, 2011, JPMorgan Chase held $70.2 trillion in derivatives and only $136 billion in risk-based capital. In other words, the bank’s derivative bets are 516 times larger than the capital that covers the bets.

Goldman Sachs takes the cake. That bank’s $44 trillion in derivative bets is covered by only $19 billion in risk-based capital, resulting in bets 2,295 times larger than the capital that covers them. 

Everyone wants a solution, The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream …………..

Any  government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.


Lloyd’s of London preparing for euro collapse

The chief executive of the multi-billion pound Lloyd’s of London has publicly admitted that the world’s leading insurance market is prepared for a collapse in the single currency and has reduced its exposure “as much as possible” to the crisis-ridden continent.

Lloyd's of London preparing for euro collapse

Richard Ward said the London market had put in place a contingency plan to switch euro underwriting to multi-currency settlement if Greece abandoned the euro.
In an interview with The Sunday Telegraph he also revealed that Lloyd’s could have to take writedowns on its £58.9bn investment portfolio if the eurozone collapses.
Europe accounts for 18pc of Lloyd’s £23.5bn of gross written premiums, mostly in France, Germany, Spain and Italy. The market also has a fledgling operation in Poland.
Lloyd’s move comes as a major Franco-German provider of credit insurance for eurozone trade, Euler Hermes, said it was considering reducing cover for trade with Greece because of the risk the country might leave the eurozone.

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On Sunday, Swiss central bank chief Thomas Jordan admitted his country is drawing up an action plan in the event of the euro’s collapse



REGARDS  ………..  WASP

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.
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