Tuesday, October 23, 2012

               Do we need the banks in their traditional form anymore?

Ben Bernanke has told “close friends” he may not stand for re-election even if President Obama wins, the New York Times reports.

Bernanke’s term as Federal Reserve chairman ends Jan. 2014. This may be the perfect time to switch to true Cloud Banking.

Some Landmarks to ponder in the era of negative real interest rates:

 On January 2 2011 the 13 week Treasury Yield (3 months)was was 0.12%.

 On July 2 2011 (the announced end of QE 2) this yield was still 0.01%.

 On January 2nd 2012 the 13 week Treasury Yield (3 months)was 0.001%. 

 By September 17th 2012 - the date that QE3 was announced the yield had gone up to 0.09%.

 Today October 23 2012 it stands at 0.10%  - that is an increase in yield of 99 basis points (nearly a full 1%!).

During all this time inflation as reported by "official" Government sources was far in excess of this 1% yield. So the stated goal of preventing deflation is achieved - inflation is definitely with us.

Also: money supply in the USA and Worldwide has exploded exponentially.

         deficits have continued to exceed a trillion dollars in the USA
            unemployment remains stubbornly above 8% in the population of       
              people still seeking work in the USA.
                real estate is barely budging off the bottom and the number of 
                   "underwater" mortgages has barely stopped declining.

The Fed balance Sheet has also exploded, tripling in size.

The fed achieved its goal of preventing deflation. What has this all done for the US economy and the rest of the world economies?

    the US dollar is worth significantly less than two QE's ago.

    The stock markets are up significantly as is the price of precious metals measured in US dollars. 

Is this the purpose of QE? 

Doesn't look good for QE3 that started a month ago, does it? we are very far from suffering from deflation.

And the US big banks are wildly profitable again....

     Why are you surprised? The shareholders of the Fed are exclusively banks.
The Fed was set up in 1913 to ensure the survival of the banking system. 

The Fed is wildly successful in that primary mission. That is the true purpose of all this QE.

A Government granted monopoly to print money, and manipulate interest rates primarily benefit the Fed's owners. Not the citizens of this country.

It creates money out of thin air and lends it to its member banks (and anyone else deemed qualified to play in this sandpit) and allows these banks to use the bulk of this funding to buy Government issued debt  that pays a significantly higher interest rate back to the banks and voila!!

The banks make a "riskless" positive return! They get healthier and the population languishes in stubborn unemployment, and inflation in a stagnant economy.

Do we need the banks in their traditional form anymore? 

In this electronic age where the chance of getting a loan depends on a mystifying creditworthiness determining algorithm.....

Why not simply apply to a credit rating agency and skip the banks altogether?

Why not have Google or Microsoft or Heaven Forbid, Facebook just set up a server farm and have everyones' earnings deposited into an electronic cloud account? Or dare I say it - have the IRS do this.

Then the individual could choose to lend his excess balance to whomever he/she pleases using the magic creditworthiness algorithm. All funds transfers once approved are made electronically between the accounts in the cloud.

The IRS gets to track everything and remove its share from the repayments as they are made (getting rid of the need for a whole layer of Taxpayer paid pencil pushers).

Ads are sold to cover the cost of the server farms and of course add to the taxable revenues to be collected.

Think of the benefits! 

We will know second by second how much revenue the Government has to squander er spend on "investments". 

Putting the Government on the same system will allow us to watch, second by second, how much the Government actually spends in real time. And to whom the money was transferred.

Instant budget deficit/surplus calculation to be displayed on the famous Debt Clock.

Instant accountability for the expenditures! 

No more crooked politicians, or devious lobbyists or foreign money inflows influencing elections!! No more corruption or tax evasion. Complete transparency for every aspect of your life.

Privacy? Who cares.. you lost that years ago.

I can but dream.

  This is a 28min video from Grant Williams of Vulpes Investment management (Singapore hedge fund managers). Grant is the author of the much acclaimed Things that make you go Hmmmmmmm!. The presentation details two bubbles, one about to burst and the other about to inflate enormously.
There is much money to be lost in the bursting by the unwary and conversely a great deal to be made by hitching a ride up with the other.

LINK to YouTube here: