Fellow "Muppets",
Michael Hudson says a lot in this interview with Ben Norton, with full transcript. A quick overview. Thanks Christine.
Today's banking crisis stems from the "fixes" of 2008-2009, when the correction in asset-prices, like mortgages and mortgage-backed securities, was prevented. The Fed bought all of the trash at face value and held it, then lowered interest rates and kept buying trash, in order to inflate asset prices up to the price they paid for the trash. This was the opposite of what Obama had promised, writing-down mortgages and mortgage payments.
The progression of this reached the point where inflation finally hit the level of consumer prices. It was no longer contained in financial assets, so the stock "solution" was to squeeze the economy to force unemployment up nd wages down, which has been the "solution" so long that many people find some other way to live than work for sub-living wages.
Now, with interest rates rising, which was inevitable, bond values are falling, and the stock bubble is threatened, as there is a shortage of cheap borrowed money to borroow to bid up asset prices. There are more details about Silicon Valley Bank and Silvergate, and the types of customers they each served.
Structurally, there is no way out of a financial crisis at this point, because of the actions of 2008-2009, which prevented financial speculators from realizing losses, blew the bubbles bigger, and have locked in the inevitable reset.
Ellen Brown has this about The Looming Quadrillion Dollar Derivatives Tsunami.
SVB was the 16th largest bank in the country and its bankruptcy was the second largest in U.S. history, following Washington Mutual in 2008. Despite its size, SVB was not a “systemically important financial institution” (SIFI) as defined in the Dodd-Frank Act, which requires insolvent SIFIs to “bail in” the money of their creditors to recapitalize themselves.
Technically, the cutoff for SIFIs is $250 billion in assets. However, the reason they are called “systemically important” is not their asset size but the fact that their failure could bring down the whole financial system. That designation comes chiefly from their exposure to derivatives, the global casino that is so highly interconnected that it is a “house of cards.” Pull out one card and the whole house collapses. SVB held $27.7 billion in derivatives..
..As of the third quarter of 2022, according to the “Quarterly Report on Bank Trading and Derivatives Activities” of the Office of the Comptroller of the Currency (the federal bank regulator), a total of 1,211 insured U.S. national and state commercial banks and savings associations held derivatives, but 88.6% of these were concentrated in only four large banks: J.P. Morgan Chase ($54.3 trillion), Goldman Sachs ($51 trillion), Citibank ($46 trillion), Bank of America ($21.6 trillion), followed by Wells Fargo ($12.2 trillion). A full list is here. Unlike in 2008-09, when the big derivative concerns were mortgage-backed securities and credit default swaps, today the largest and riskiest category is interest rate products.
The original purpose of derivatives was to help farmers and other producers manage the risks of dramatic changes in the markets for raw materials. But in recent times they have exploded into powerful vehicles for leveraged speculation (borrowing to gamble). In their basic form, derivatives are just bets – a giant casino in which players hedge against a variety of changes in market conditions (interest rates, exchange rates, defaults, etc.). They are sold as insurance against risk, which is passed off to the counterparty to the bet. But the risk is still there, and if the counterparty can’t pay, both parties lose. In “systemically important” situations, the government winds up footing the bill.
Like at a race track, players can bet although they have no interest in the underlying asset (the horse). This has allowed derivative bets to grow to many times global GDP and has added another element of risk: if you don’t own the barn on which you are betting, the temptation is there to burn down the barn to get the insurance. The financial entities taking these bets typically hedge by betting both ways, and they are highly interconnected. If counterparties don’t get paid, they can’t pay their own counterparties, and the whole system can go down very quickly, a systemic risk called “the domino effect.” That is why insolvent SIFIs had to be bailed out in the Global Financial Crisis (GFC) of 2007-09, first with $700 billion of taxpayer money and then by the Federal Reserve with “quantitative easing.” Derivatives were at the heart of that crisis. Lehman Brothers was one of the derivative entities with bets across the system. So was insurance company AIG...
..Derivatives are largely a creation of the “shadow banking” system, a group of financial intermediaries that facilitates the creation of credit globally but whose members are not subject to regulatory oversight. The shadow banking system also includes unregulated activities by regulated institutions.....According to a December 2022 report by the BIS, $80 trillion in foreign exchange derivatives that are off-balance-sheet (documented only in the footnotes of bank reports) are about to reset (roll over at higher interest rates). Financial commentator George Gammon discusses the threat this poses in a podcast he calls, “BIS Warns of 2023 Black Swan – A Derivatives Time Bomb.”
Another time bomb in the news is Credit Suisse, a giant Swiss derivatives bank that was hit with an $88 billion run on its deposits by large institutional investors late in 2022. The bank was bailed out by the Swiss National Bank...
..Interest rate derivatives are particularly vulnerable in today’s high interest rate environment. From March 2022 to February 2023, the prime rate (the rate banks charge their best customers) shot up from 3.5% to 7.75%, a radical jump. Market analyst Stephanie Pomboy calls it an “interest rate shock.” It won’t really hit the market until variable-rate contracts reset, but $1 trillion in U.S. corporate contracts are due to reset this year, another trillion next year, and another trillion the year after that.
A few bank bankruptcies are manageable, but an interest rate shock to the massive derivatives market could take down the whole economy.....Lev Menand, author of The Fed Unbound, is an Associate Professor at Columbia Law School who has worked at the New York Fed and the U.S. Treasury. Addressing the problem of the out-of-control unregulated shadow banking system, he stated in a July 2022 interview with The Hill, “I think that one of the great possible reforms is the public banking movement and the replication of successful public bank enterprises that we have now in some places, or that we’ve had in the past.”
Certainly, for our local government deposits, public banks are an important solution. State and local governments typically have far more than $250,000 deposited in SIFI banks, but local legislators consider them protected because they are “collateralized.” In California, for example, banks taking state deposits must back them with collateral equal to 110% of the deposits themselves. The problem is that derivative and repo claimants with “supra-priority” can wipe out the entirety of a bankrupt bank’s collateral before other “secured” depositors have access to it...
..The current financial system is fragile, volatile and vulnerable to systemic shocks. It is due for a reset, but we need to ensure that the system is changed in a way that works for the people whose labor and credit support it...
Such public-minded corporate citizens! They are pitching in $30 billion to show their support for "the little guys "that "are critical to the health and functioning of our financial system". [it's not because they fear "the domino effect". Don't be so cynical.]
Action by the largest U.S. banks reflects their confidence in the country’s banking system and helps ensure First Republic has the liquidity to continue serving its customers.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo announced today they are each making a $5 billion uninsured deposit into First Republic Bank.
Goldman Sachs and Morgan Stanley are each making an uninsured deposit of $2.5 billion. (Well, that is the Big-5 derivative banks there.)
BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank are each making an uninsured deposit of $1 billion, for a total deposit from the eleven banks of $30 billion.
This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities.https://www.zerohedge.com/markets/first-republic-bank-shares-crash-exploring-strategic-options
Consciousness of Sheep says the current global financial reset will be worse than the 1970s for developed countries, and will be further worsened by the not-yet-unveiled BRICS currency, rumored to be based on gold and commodities.
According to Pilkington, were this BRICS currency to emerge – and western leaders’ actions make it likely sooner rather than later – we can expect roughly a 33 percent devaluation of the western currencies… something which would result in what can only be described as hyper-stagflation, with prices of imports – including essentials like food and fuel – rising beyond the reach of all but the wealthiest westerners, even as that mountain of unrepayable debt comes tumbling down so rapidly that it will render most of what we still consider repayable bad as well.
Sergey Glazyev is a Russian economist with the kind of clear nderstanding of currency flows that Michael Hudson has and John Maynard Keynes had. He has long been frustrated that the Russian central bank comports itself in the same manner as western central banks. if his advice had been taken, Russia would not have had $300 billion of national assets frozen. He is the cheif economist working out the BRICS currency. Pepe Escobar interviewed him recently.
What Glazyev repeatedly emphasized is that as long as there’s no reform of the Russian Central Bank, any serious discussion about a new Global South-adopted currency faces insurmountable odds. The Chinese, heavily interlinked with the global financial system, may start having new ideas now that Xi Jinping, on the record, and unprecedentedly, has defined the US-provoked Hybrid War against China for what it is, and has named names: it’s an American operation.
What seems to be crystal clear is that the path toward a new financial system designed essentially by Russia-China, and adopted by vast swathes of the Global South, will remain long, rocky, and extremely challenging. The discussions inside the EAEU and with the Chinese may extrapolate to the SCO and even towards BRICS+. But all will depend on political will and political capital jointly deployed by the Russia-China strategic partnership.
That’s why Xi’s visit to Moscow next week is so crucial. The leadership of both Moscow and Beijing, in sync, now seems to be fully aware of the two-front Hybrid War deployed by Washington.
This means their peer competitor strategic partnership – the ultimate anathema for the US-led Empire – can only prosper if they jointly deploy a complete set of measures: from instances of soft power to deepening trade and commerce in their own currencies, a basket of currencies, and a new reserve currency that is not hostage to the Bretton Woods system legitimizing western finance capitalism.https://thecradle.co/article-view/22457/interviews
Greek War News site says Russia has located the MQ9 Reaper drone at the bottom of the Black Sea with underwater drones and has positioned a specialized ship above it to recover it. The US has released a video clip of Russian Su 27 fighter(s) making 2 runs and dumping jet fuel, which caused propeller damage after the second run, though the drone camera footage shown did not show the drone to be grossly unstable at that point.
The Pentagon has claimed that a Russian fighter clipped the propeller with a wingtip, which Russia specifically denies.
It is likely that Russian pilots were trying to get the drone to turn around, to stop flying towards Crimea.
The $65 million Reaper drone happens to have fallen very close to Russia's South Stream pipeline.
The hidden security clauses of the Iran-Saudi deal Although the Beijing statement primarily addresses issues related to diplomatic rapprochement, Iranian-Saudi understandings appear to have been brokered mainly around security imperatives. Supporters of each side will likely claim their country fared better in the agreement, but a deeper look shows a healthy balance in the deal terms, with each party receiving assurances that the other will not tamper with its security.
While Iran has never declared a desire to undermine Saudi Arabia’s security, some of its regional allies have made no secret of their intentions in this regard. In addition, MbS has publicly declared his intention to take the fight inside Iran, which Saudi intelligence services have been doing in recent years, specifically by supporting and financing armed dissident and separatist organizations that Iran classifies as terrorist groups.
The security priorities of this agreement should have been easy to spot in Beijing last week. After all, the deal was struck between the National Security Councils of Saudi Arabia and Iran, and included the participation of intelligence services from both countries. Present in the Iranian delegation were officers from Iran’s Ministry of Intelligence and from the intelligence arms of the Islamic Revolutionary Guard Corps (IRGC).
On a slightly separate note related to regional security — but not part of the Beijing Agreement — sources involved in negotiations confirmed to The Cradle that, during talks, the Saudi delegation stressed Riyadh’s commitment to the 2002 Arab peace initiative; refusing normalization with Tel Aviv before the establishment of an independent Palestinian state, with Jerusalem as its capital. What is perhaps most remarkable, and illustrates the determination by the parties to strike a deal without the influence of spoilers, is that Iranian and Saudi intelligence delegations met in the Chinese capital for five days without Israeli intel being aware of the fact. It is perhaps yet another testament that China — unlike the US — understands how to get a deal done in these shifting times.
https://thecradle.co/article-view/22445/exclusive-the-hidden-security-clauses-of-the-iran-saudi-deal
Moscow rolls out the red carpet for Syrian President Basher al Assad
The statement also noted that Wednesday is the "anniversary of the conflict" which started 12 years ago in March 2011. Assad emerged victorious especially with Russia's help, given the the Russian military intervention at the invitation of the Syrian leader in 2015...
According to details of Assad's red carpet arrival in Moscow:
Assad was received by Putin’s special representative for the Middle East, Mikhail Bogdanov, at Moscow’s Vnukovo international airport.
Prior to a deadly Feb. 6 earthquake that killed 50,000 people in Turkey and Syria, Russia had been mediating talks between the two quake-hit countries.
Turkish representatives are expected to be present for events related to Assad's visit, with The Associated Press detailing that "The Syrian, Turkish and Russian deputy foreign ministers as well as a senior adviser to their Iranian counterpart are also set to hold talks Wednesday and Thursday in Moscow to discuss 'counterterrorism efforts' in Syria."
Given Assad and the Syrian Army have emerged victorious after over a decade of fighting, which also on multiple occasions saw the US bomb government-held cities and areas, including the capital, even Turkey appears to be warming to the idea of rapprochement. Both sides want US troops out of northeast Syria as well. President Erdogan has in particular bristled at Washington's training and support given to Syrian Kurdish groups aligned with the outlawed PKK.
After Mideast (West Asian) leaders meeting this week, Putin and Xi will make some joint announcement next week in Moscow. China seeks to maintain good relations with both Russia and Ukraine. Xi will speak to Zelensky remotely after meeting with Putin. China can offer a lot of carrot to Ukraine, not just stick. Ukraine is pivotal to pan-Eurasian "New Silk Road" trade, which China is very much promoting.
German Minister of Health, Karl Lauterbach has hedged his official position in an interview. In 2021 he claimed in a Tweet that COVID-19 ‘vaccines’ had no side-effects. Remarkably, his current admission is, “That was an exaggeration that I once made in an ill-considered Tweet. It did not represent my true position.“! It is egregious that a federal Minister of Health is admitting this AFTER coercing most people to get the shots and claiming everyone gave fully informed consent. After a desperate attempt to backpedal, all while looking incredibly uncomfortable, Lauterbach was called out by the interviewer for repeatedly promoting his message that the shots were “more or less free of side-effects”.
The interviewer to Lauterbach:
“So, you’ve always given the impression that side-effects aren’t really a thing.“
With respect to severe COVID-19 ‘vaccine’-induced injuries, Lauterbach stated:
“I’ve always been aware of the numbers. They have remained relatively stable. …1:10,000: some may say that’s a lot, and some may say it’s not that much.“
This report is all that I can find about the February 22 crash of an airplane at Clinton Airport in Arkansas, with a crew of chemical analysis experts headed to Ohio.
Despite exaggerated local media reports of strong winds at noon on Wednesday, February 22, the weather conditions posed no threat to flying, which raises serious questions of why the company-owned plane crashed within a minute of clearing Runway 18 at the Bill and Hillary Clinton National Airport. The irregularities surrounding the air-crash included an official cover-up of the actual crash location inside a 3M industrial complex, suspension of phone reception at Little Rock 911 and blatant disinformation by the Gannett newspaper group on the ill-fated Beechcraft’s destination.
Thus far, a review of that midair blast along with the registered flight destination suggests that the CTEH team was targeted for elimination under the pervasive Biden cover-up of chemical warfare agents in the tanker cars destined for secret use in Ukraine, which instead derailed at East Palestine, Ohio. Crashing a short distance from takeoff, the Beech BE20, an upgraded Beechcraft 200 Super King Air, which has an excellent reputation for flight performance and air safety, was blown to shreds midair before its fiery nose-dive into a 3M factory warehouse on the north end of the complex, barely averting a highway pile-up on Route 440, the link road between I-40 and I-30...
..Just prior to noon on Wednesday, February 22, toxic site inspectors Micah Kendrick, Kyle Bennett, Gunter Beaty, and Glenmarkus Walker boarded the CTEH-owned twin-engine Beech BE20 (a 9-passenger business version of a Beechcraft 200 Super King Air) at the Bill and Hillary Clinton National Airport in Little Rock, Arkansas. Earlier predictions of light rainfall had not materialized and winds from the southwest were subsiding to below 40 mph. On takeoff from Runway 18, which is reserved for small aircraft, pilot Sean Sweeney planned to keep the plane climbing toward the south, into the wind, with the aim of circling leftward over the Arkansas River onto a northeasterly flight path toward Ohio with the added advantage of a tailwind. All systems were go, there was no cause for concern at takeoff.
After clearing the runway, at the start of ascent along a straight line and immediately after crossing the Highway 40 bypass (which connects I-40 with I-30), less than a mile from takeoff, the BE20 was suddenly blown to bits by a powerful explosion. The fragmenting plane nose-dived toward the rear of the 3M industrial complex, crashing through the roof of a large warehouse with truck-loading docks. A pillar of black smoke from burning aircraft fuel rose into the gray sky, and was caught on video by a nearby weather helicopter. The steep fast dive allowed no time for a bail-out by the passengers or pilot, who were likely killed in the powerful blast or within a few seconds after being crushed on impact. Phone calls to 911 went unanswered over the next hour.
Meanwhile, as an emergency crew closed off the 3M grounds and hosed the flames, another team from an as-yet identified agency set up a fake crash-site farther south in a junkyard, hauling pieces of wreckage to that decoy site for reporters to snapshoot.
Forests draw water towards themselves in atmospheric flows, and it drops on them.
This is described here, with link to scholarly paper. Thanks Ugo Bardi.
The Forest: a Holobiont that Creates Rain
Rain Man (pictured sealing the covered decking after sealing all the uncovered decking before the rain)
