Proprietary Trading Is Ending – JP Morgan Withdraws from Commodities
The banks are coming under tremendous pressure in respect to proprietary trading. The days of the merger of Commodity Trading that took over Saloman Brothers in 1981 by Philips Brothers (PhiBro) are coming to an end 31.4 years after they began. JP Morgan has announced it is exiting the commodity business which came 3 days after a Senate banking committee heard that the metals warehouses owned by Wall Street and other commodities traders were distorting markets. This of course is not true. They have alleged gold is suppress by them systemically and that they have been driving up the cost of aluminum cans for beer and soda. There have been arguments that allowing them to trade in physical markets was a risk to the financial system.
The real risk is market manipulation by proprietary trading. They target markets and attack them and move on to the next. They are not capable nor are they interested in unprofitable systemic manipulation to suppress anything for some agenda. They are all about the immediate profit – nothing else.
Proprietary Trading is the huge risk regardless of what the market may be. Banks should not be proprietary traders. The Fed has been informing the banks that they will NOT bail them out again regarding proprietary trading. The $700 billion bill they created the last time shows there is no risk management. They routinely blame “rouge” traders whenever they get caught with even $8 billion losses. In all honesty, if the banks are never held accountable and cannot control their own risk of their own traders, they cannot tare society apart pushing the losses on the people while keeping the profits.
It is time to end proprietary trading for bankers period.
Cyprus Bail-In 47.5%
The Cyprus Bail-In seems to be coming in as 47.5%. Keep in mind that the loss is due to the banks holding debt from Greece that the EU promised would never happen. The entire European Banking System is at tremendous risk. Aside from the issue of proprietary trading that went sour as in New York, here we also have the problem that the banks held as AAA reserves the bonds of sovereign member states. So here we have the faulty design of the Euro undermining the banking system on a grand systemic level. This has even put Switzerland at risk for they have a ton of euros they have been buying trying to keep the Swiss franc pegged to a sinking ship. Switzerland is getting trapped by the chaos of the EU and their attempt to issue new Eurobonds after the German elections will also fail. They are now going to have to redeem ALL outstanding euro debt of all sovereign member states to save Europe.
The dollar is setting up to be the ONLY viable currency. We have the September debt ceiling battle ahead and Obama’s cry to increase taxes by $1.6 trillion. This is running the risk of massive deflation. The budget deficit is declining because the bailouts are done for now and the Fed is running around telling the bankers to re-calibrate their models and that they will NOT be bailing out proprietary trading next time around. Firms like Goldman Sachs will be forced to suffer their own losses for once. They will wine and cry behind the curtain that losses belong to the taxpayer and profits go to them. But this may fall on deaf ears this time around since it will coincide with the 2016 elections. We need to drive a stake in the heart of proprietary trading by banks once and for all. If they want to trade with other people’s money, convert to a hedge fund.
The deficits are moving lower and what will start to kick them higher will be the rise in interest rates. This is why the Fed is telling the bankers to wake up for there may not be the flight to quality that has been traditional up to this point.
Our models are still warning no HYPERINFLATION. Sorry! Find another bullshit sales pitch to fool the public. We are facing bail-ins in Europe on a grand scale, G20 hunt for every red penny, and Obama preaching more and more tax increases, with munis doing into default because they cannot pay the pensions and maintain current service levels. Everything around us is imploding and this is reflected in the massive decline in liquidity that is off by 50% from 2007 levels. This is how EVERY major economy has collapsed – complete implosion that destroys the economic foundation.
So while the politicians are in search of themselves out there, they have ignored the impact of their Marxist policies. They will not relent because to do so requires self-inspection and realization that the economic theories are dead wrong and are seriously overrated. Government in its all powerful Marxist mantle is the problem and it cannot see that the lights are fading. The Marxist haven is not all what it is cracked up to be. Economists and Politicians see themselves as the elite entitled by the divine hand of God to dictate how society should function. They never ask –What if we are wrong?
They have no contingency plan but to buy tanks and bullets while trying to cut off all supplies to private gun ownership to prevent a revolution. What will happen when people who have worked all their lives under the promise they could retire as the public workers in Detroit? Everyone who has believed this nonsense of perpetual utopia will come crashing down from their shooting stars. This is what Homeland Security is all about – protecting government from the delusional people as we see government workers rioting in Greece.
What I am saying here is not popular or fashionable because people do not want to think of themselves as fools. But thinking perpetual benefits would always be there for public workers is a wrong assumption that no matter how long it has gone unquestioned does not make it right. Too many people remain confused that a nation is its government. People have been crowning themselves with titles and honors, but it does not elevate them in reality. One day the emperor is seen bare-ass naked. Government and society are two distinct entities. The people are not government and government cannot claim the mantle of the people while exploiting them to sustain its own power. The blue skies of Marxism are fading to dark grey and the lights that appeared on the horizon have been extinguished. I try to explain this is how all empires, nations, and city states have historically always failed (notHYPERINFLATION) in my own last breath hoping to avoid the darkness if only we could stop and look before we crash and burn. In this quest, I will fail for who am I to change the fate of humankind.