Archive for the ‘That was Then’ Category

Banks and Other Financial Institutions

I laughed Banks and Other Financial Institutions ~ Brenda J MacMillan ~ Full Quadrantand cried with joy and despair at this writing . . .it is fantastic !! . . . . . enjoy . . . and its okay to weep.  How do you spell Economic Predator with Walls of False Integrity ?

Brenda MacMillan

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written by:  Paul Tustain, a principal in a precious metals service-linked institution, has produced what is probably the best capsule describing how our global collateralized debt structure works.  See if you can follow the route your money travels and try to go through the maze and complete the intellectual puzzle.

“ Banks, (stockbrokers), mortgage guarantors and all the major financial institutions on which we depend are now tied up in a web of undelivered assets.  A is the registered owner of a bond payable by B, the principal on which has been credit-swapped out to C.  The terms are controlled by a deed drafted by an investment bank D, which in itself receives the interest, which has been aggregated with 30 others and sold notionally to E.  E is foreign, and flattens the FX (foreign exchange) risk with a bank F, who sells and rolls a future on his long currency book, which is bought by another bank for an assured profit by running the position against a higher yield bond bought from a junk-status borrowing customer, which has been insured against the risk of default with G, a major insurer, who happens also to be A.”

These are the styles of relationship which dominate the world in which ordinary peoples’ savings are bound up, and they are profitable in the short term. (for the banks)  This is why financial rather than commercial companies increasingly dominate the list of the top companies in America and Europe.  They find it easier to make profits by providing credit and assuming eventual repayment, rather than by actually demanding settlement; a habit which could put off no end of potential customers.

All our common (liquid assets) are bound up in these webs.  No one knows when and where these webs will break, and, with the greatest possible respect, we don’t think you do either.  But it is so certain that they will break, and at an unexpected place and time, that we believe every forward thinking person with a respectable private reserve would do well to opt out with at least part of their assets.

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