Friday, December 18, 2009

United States Of Big Banks

I was depositing a check at my bank, Wells Fargo, and the teller wanted to up-sell me to a de-luxe account of some sort, some kind of special, VIP, for our very favorite customers sort of thing. No doubt. The delux came with no BillPay fees, which is very nice and free money orders, etc. Our conversation went like this:
Peter: the delux carries an automatic monthly transfer to a savings account, right?

Teller: that's right, we set that up right here in the branch.

Peter: $100 a month, or something?

Teller: just $75

Peter: so what's the interest rate for the savings account?

Teller: you get an introductory rate of 3.25% on the first $500 and [blah blah, more figures]

Peter: fascinating. A reverse teaser rate.

Teller: Yes, [what a great deal this, etc]

Peter: and what's the regular interest rate after the one year?

Teller: well it varies you know.

Peter: what is the rate today?

Teller: zero point one-five percent

Peter: [pause.. astonishment..] ZERO POINT ONE-FIVE PERCENT??
[voice goes up a few decibels] that's.. fifteen cents a year.. on a HUNDRED DOLLARS??

Teller: [almost inaudible] that's right

Peter: wow. WOW.
[can't believe it.. does the math again in his head] zero point one-five percent.
[looks at the teller to see if she thinks this is strange. Teller is looking at her feet.. maybe wondering if she's going to have to hit the security button]

Peter: you have Ben Bernanke to thank for that.. [realizes that this is not the place for a debate on macro economics, and quits]

Teller: can I help you with anything else?

Peter: [cheerful again] no not today, thanks!

I just wish I'd thought to point out to her that when Wells Fargo lends me money, they charge around twenty percent interest (i.e. cash advance rate) and did she think that was fair? But why bother?

Tuesday, December 15, 2009

Quantitative what?

Quantitative easing is simply the central bank printing money out of nothing. Really just adding it to the accounts of the Federal Reserve. The chart below is hotlinked directly from the St. Louis Fed website. Note that it is still spiking straight up.

And what does it mean? It means inflation. Lots of it. Very likely out-of-control inflation.

Sunday, December 13, 2009

Rude FUs from the FDIC and Office of Thrift Supervision

This pisses me off so much: The Fight For WaMu Documents. It is an email from Sheila Bair, chair of the FDIC, to Jason Cave, also at the FDIC, with the subject line WAMU. It is so sensitive that it cannot be seen by the press. Just what is the FDIC hiding? And the OTS, they were far more direct: they simply told the Puget Sound Business Journal that their FOIA request was "denied in full".

All during the boom years of the 90s and 2000s, did the OTS or FDIC ever stand up to anyone, for either law or principal? I doubt it. But now they are smug and arrogant enough to send shit like this to the Puget Sound Business Journal. Beyond the insolence of our government agencies there is a very serious charge being made here: that government regulators gave WaMu to J.P. Morgan Chase ("Just the assets please, we don't want the liabilities."). They did this to keep JPM solvent. "Kyle Krol", in comments, alleges that JPM committed felonies in the process (click the link and go down). Who knows if there is any truth here, or if this is just a vindictive lawsuit? If our government is permitted to do this sort of concealment we will never know.

When us mere citizens write a check or swipe a debit card the transaction is a matter of record. And if we are indicted for some crime, or if the government just chooses to audit us (even at random), all our financial transactions may be seen. But the financial dealings of major too big to fail banks – they are far too sensitive for public scrutiny. Suppose the bank is charged with wrongdoing? No one will be permitted to see anything. If the government sides with the bank, and even conspired in the crime, what hope would the plaintiff ever have?

Pretty Boy Floyd and Jesse James were thought to be good at robbing banks in their day. They had no idea what could be done if you got the federal government to back you up.

Sunday, December 06, 2009

so you own some gold stocks?

maybe gold stocks will become the next boom. who knows? is gold mining the path to wealth via speculation? I don't know. I just want to make a point about political risk here.

the world is moving, inexorably, to a gold standard. but not exactly willingly, happily, or easily. the disruption this process will entail is hard to predict, or even imagine. the world will more likely be thrown violently onto a gold standard, complete with mercantilist trade principals – enforced with arms. the reason we are moving inexorably to a gold standard is that we are losing our dollar: the key currency that stitches globalized trade together. we are losing it, it is disintegrating, rotting and crumbling. and when it is gone, then fiat currency itself will be gone.

it is not like we will gain a wonderful stable monetary base – mostly we'll just gain poverty. think of what we will be losing: we'll lose our freedom to travel internationally, freedom to buy imported goods, freedom to buy on credit (these things will be virtually banned). if we american are lucky we'll retain our constitution, but not much else. we will slowly re-build our manufacturing base, and try to make the things we need, instead of buying them on credit and fake money.

but think of Mexico (as just one of numerous examples). how will Mexico deal with the loss of their oil revenue? (in case you have not heard: due to depletion Mexico will soon no longer be exporting oil, and they will also have to end domestic subsidies on fuel.) Either the Mexican government will retain control by authoritarian decrees, or the government will all but collapse under assault from drug cartels and their warlords. These are the two possible outcomes from the unrest that will result in Mexico City when the government is broke, and no international aid is available to save them.

to get back to the gold mines.. Mexico has significant mineral wealth and a developed mining industry. a mining industry that goes back many centuries. they are going to keep mining. but who will control that wealth? maybe the Mexican government, through nationalization. maybe a regional warlord will take control of certain mines. it won't be through any fair process, not democratic, not environmentally sound, and not without violence, and not traded freely on a stock exchange. and if anyone thinks the profits from gold mining will leave Mexico and find their way to the brokerage accounts of americans, they're nuts.

what about Australian gold stocks (to use one more typical example)? Australia won't slide into authoritarianism, not fractional violence. but I still don't think the profits, nor the specie, will find its way to America. it will go to China. the Chinese will be putting up the capital, once the United States Federal Reserve Notes disintegrate like so many leaves on the ground in November. the Chinese will own most of what portion of the global mining industry is not nationalized and guarded. gold bars will be shipped to Shanghai vaults, not London, New York or Toronto.