Banks, insurance giants are free again to abuse the real economy

US Secretary of the Treasury Steven Mnuchin, (third from left) standing near the American President Donald Trump.They all deliver the first report on recalibrating the US financial system. (White House photo, 12/7/2017).

Not many years after the financial meltdown of 2008-2010, the main culpable parties for that global catastrophe, the big banks and the gigantic insurance companies are now commandingly asking the world to forget that. They demand to be again left completely unchecked, free to repeat what they did then; inflate all and every market to bursting point. They are empowered by the trillions the central banks handed them for free at the peak of the crisis. Now they are about to make sure they are keeping the money for an indefinite period of time. Actually, the monetary authorities have reassured them about that. Of course, this will be at zero or even negative real interest rates. Let’s follow the latest developments.

At the end of last month, the European Central Bank clearly ‘guaranteed’ that. ECB President Mario Draghi said the Central Bank will keep its basic interest rate at their current zero level, “for an extended period of time, and well past the horizon of our net asset purchases”. He also guaranteed “the Eurosystem will reinvest the principal payments from maturing securities purchased under the Asset Purchase Program for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary”. In short, the European financial leviathans will keep ECB’s gift of €2.5 trillion in perpetuity.

They keep the trillions

On the other side of the Atlantic Ocean, US President Donald Trump, despite having been voted to support the ‘left behind’ Americans, is primarily worrying about how to make the New York bankers richer. The New York Stock Exchange, located in the perennially shaded from sun’s light Wall Street, has gained around 25% in the last twelve months that is after Trump’s 2016 electoral victory. He did what he could to support that. This is an increase in market capitalization of around $4.5tn. It’s an inconceivable mass of asset creation in just twelve months. No relation whatsoever though with the real world, but enough to destroy it.

Of course, this hideous sum of wealth belongs only partially to the New York banks, yet they thrive on all of it. How they do it? It’s very simple. They get money for free from the central bank, then spread it on all and every white and grey financial activity. A large part of it, inflated many times by leverage, returns to prime financial markets and sends them to the skies. Elon Musk’s Tesla electric car company is valued at NYSE at more than $50bn, without having ever produced one dollar in net profit.

It’s the same good old story. The banks and some others create their own money. If left uncontrolled, this ‘technique’ can go on and on, until the lenders go bankrupt. In the between, the bankers have become immensely rich. The thing is as old as the banking profession. Until the early 1990s the lenders were so closely controlled and checked by the authorities, up to the point they could barely grow in size. But the neoliberal politicians ‘liberated’ the financial sector from its bonds and now it has outgrown many times in value the real economy.

Insured by the taxpayers

As taxpayers on both sides of the Atlantic Ocean know very well, in 2008-2010 the bankrupt financial giants, banks and insurance companies alike were saved with their money. After that, the authorities, alarmed by the dimensions of the catastrophe, introduced some checks and controls, obliging the major banks and insurers to reduce their exposure to risks and increase coverage with more own capital.

Bit by bit though, the banks have found ways to overcome the controls by using various techniques. For the new schemes to hold though, the banks and the other financial firms must keep the money which was given to them at the peak of the last crisis. Now, they say they cannot do without those trillions the monetary authorities have lent them at zero interest rate. Bowing to those demands the central banks have ‘promised’ not to ask for that money back or raise the real or actual interest rates. On top of that, Trump has even reassured his fellow New York bankers, to further ‘liberalize’ them from the remaining checks and controls.

Insurers too

Along with the banks, the insurance companies are now demanding to be also ‘liberalized’ from their bonds. The US Treasury Department under Steven Mnuchin vies to do that. It’s not a surprise he would do everything he can to support his banker and insurer friends. He made his fortune with thousands of home foreclosures, after the hard working Americans were hit by the last meltdown.

However, insurers are so big as to have come under the international control of G20’s Financial Stability Board. G20 is the council of the 20 largest world economies. According to Reuters “The shift in the FSB’s approach to designating globally systemically important insurers, or GSIIs, follows pressure from the U.S. Treasury Department”.

It’s all financial…

In short, the US administration under the inglorious guidance of Donald Trump and instrumented by some financial killers like Mnuchin, is pressing the world to leave the insurance firms alone to do whatever they want, with other people’s money. Not to forget, back in 2008 the largest insurance company of the world, the American International Group (AIG) was saved from bankruptcy with taxpayers’ money.

This firm was one of the main culpable parties which brought the world to its knees. They insured whatsoever could or couldn’t be insured, without prudentially estimating the risks they were undertaking. The American taxpayers, after saving AIG with $185bn, ‘generously’ returned it to its previous owners, as if nothing had happened. This was of course a political decision by the Washington elites. Now, AIG wants to be liberalized from the prudential checks of the FSB and the Trump/Mnuchin duo is struggling for that. The scheme is too flagrant. There is probably a lot of cash changing hands under the table.

…And it’s theirs

The last centuries of the previous millennium taught us that the banking and insurance sharks are doing what it is natural to them; feeding on the flesh of the real economy. The structured societies though had set as their duty to block the sharks from killing people. The western countries were successful in achieving that until the early 1990s.

Then, the neo-liberalism introduced in the 1980s by Ronald Reagan and Margaret Thatcher prevailed and the financial conglomerates had it their way. Today, judging from what happens in the financial world one may conclude, organized structured in the economy is no more. Just open fields, where some gangs impose their will, as in the ‘good old wild West’.




















Featured Stings

Water supply a human right but Greeks to lose their functioning utilities

How many more financial crises in the West can the world stand?

Azerbaijan chooses Greek corridor for its natural gas flow to EU

Why Eurozone’s problems may end in a few months

Volkswagen scandal update: “We want clarity fast, but it is equally important to have the complete picture”, Commission’s spokesperson underscores from Brussels

European Confederation of Junior Enterprises hosts in Geneva the Junior Enterprise World Conference

A day in the life of a refugee: the role of nations and citizens of the world

The 27 EU leaders did nothing to help May unlock the Brexit talks

German elections: Is Merkel losing ground or Shultz is winning?

Copyright: European Union , 2017; Source: EC - Audiovisual Service; Photo: Frank Molter

EU hits deadlock on the future of glyphosate a month before deadline

Jade Spring Meeting 2017 – day 2: Coporate workshops, general assembly and magna moment

COP21 Breaking News: Conference of Youth Focuses on Hard Skills to Drive Greater Climate Action

The three US financial war fleets

Can the EU afford a trade war with China?

Why do medical students need to emigrate to become doctors in 2017?

Trump badly cornered at home by agribusiness and steel consumer lobbies: Trade

Draghi’s top new year resolution: Quantitative Easing

Eurozone: Inflation plunge to 0.4% in July may trigger cataclysmic developments

A rapid deterioration of the humanitarian situation in the war-torn Yemen

From Grexit to Brexit: UK industry now says the in/out referendum is good for your health

On Human Rights Day European Youth Forum calls for end to discrimination of young people

The European Youth Forum needs better signal for its “call” for Quality Internships

Counting unemployment in the EU: The real rate comes to anything between 16.1% and 20.6%

Opening Remarks by H.E. Ambassador Yang Yanyi, Head of the Chinese Mission to the EU at the Chinese Fashion Night

The EU Commission does nothing about the food retailing oligopoly

Eurozone: How safe are our deposits? Which banks will survive?

Eurozone banks to separate risky activities: Can they stay afloat?

The EU Parliament endorses tax on financial transactions

The US + Britain trivialize mainland Europe, NATO and the EU

Lithuania vs Parliament over 2014 EU budget

The US may be “open” to reviving TTIP, while the EU designs the future of trade with China

Schengen is losing ground fast revealing Europe’s clear inability to deal with migration crisis

German stock market is not affected by the Greek debt revolution while Athens is running out of time

EU will not deliver on promises without democratic accountability

China revisited by the former Ambassador of Hungary to China

The West castigates Turkey’s Erdogan for the ruthless political cleansing

Eurozone has practically entered a deflation trap

A Sting Exclusive, the European Commissioner for Energy Günther Oettinger writes for the Sting on “EU Industry: a major energizer”

Greece: The new government of Alexis Tsipras shows its colors

Managers’ pay under fire

Why Eurozone can afford spending for growth

EU Commission says falling labour remuneration leads to deflation and damages growth prospects

Mario Draghi didn’t do it but Kim Jong-un did

E-Government can be a remedy for the crisis

Education expenditure in the EU not hurt much by crisis

The EU Parliament slams Commission on economic governance

EU is now giving Google new monopolies to the detriment of European citizens and Internet companies

EU Commission: Banking and energy conglomerates don’t threaten competition!

How will Brexit affect higher education in the EU?

Eurozone’s bank resolution mechanism takes a blow

UK’s PM Theresa May asks for a two-year Brexit transition plan as negotiations round kicks off

Twenty days that may remold the future of Europe

France and Poland to block David Cameron’s plans on immigration

A new proposal breaks the stalemate over the Banking Union

Can the EU last long if it cuts Cyprus out?

UN Environment Assembly 2017: where the world convenes to #BeatPollution

The UK to split if May’s hard or no-deal Brexit is pursued

Finally an answer to the hottest question of European youth today: How to make sure Juncker’s Investment Plan works for youth

IMF – World Bank meetings: US – Germany clash instituted, anti-globalization prospects visualized

China Unlimited: the dragon’s long and winding road

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s