News & Analysis
Perception Over Substance – Banking Fallacy?
Mark Carney to the bankers: the joke is on you now ... In the long run, "heads-I-win-tails-you-lose finance" catches up to you. That was the message Bank of Canada Governor Mark Carney delivered to an audience of finance majors at Western University's Richard Ivey School of Business today. In other words: "don't you kids try to play that game." It's in the banks' own interest to embrace stricter regulation aimed at restoring the public's confidence in the financial system, Carney said in prepared remarks. Lower levels of trust since the financial crisis are harming the economic recovery and the banks' own business, the governor noted – EconoWatch
Dominant Social Theme: Regulation will ease the problems of public perception when it comes to banking.
Free-Market Analysis: Mark Carney is set to be the next Governor of the Bank of England, so his words are worth listening to. In a message to university students at Western University (see above) Carney revealed the reason for the regulatory push that is going on in the EU and North America ... Trust.
Carney sees the issue as one of public trust and notes that major banks outside Canada are now trading well below their book value. This "indicates shareholder concerns about a combination of the quality of bank assets and the value of their franchises," he is quoted as saying.
Such sentiments are indications of a larger campaign by top central bankers to bolster the public profile of large banks, and this has led in the European Union, for instance, to a regulatory push to control bank bonuses. An article of ours on this issue just yesterday pointed out what observers are warning, that reducing bank bonuses will likely result in larger base salaries for bankers. The money will be had, one way or another. Here's more from the article excerpted above:
Credit rating downgrades of many big banks are another sign of that lack of trust, not just between financial institutions and the general public but among financial players as well. Even recent credit upgrades are due more to governments guarantees than debt-holders' confidence in the banks themselves, Carney said. (The governor didn't mention this, but Canada's big banks have seen ratings cuts too recently, albeit not as a consequence of the 2008 meltdown.)
The governor also noted that creeping distrust among national bank regulators might lead to a "balkanized" financial system, with governments trying to insulate their country's banks from the fallout of foreign crisis by restraining cross-border financial flows. Some euro zone countries, in particular, are known to be flirting with such options. These measures, though, tend to exacerbate rather than reduce risk, Carney noted.
Governments [are] concerned that they might have to use taxpayers' money to bail out foreign banks that have a large customer base in their own country (remember the case of Icelandic banks and the U.K. government?). As a result, they are increasingly relying on domestic banks and investors for financing: German banks are lending to the German government, and Italian banks to the Italian government.
Financial institutions in vulnerable countries, in other words, are loading their balance sheets with bonds investors see as increasingly risky. If these banks lose access to credit markets—and some of them are already struggling to borrow— the whole continent would likely experience a banking crisis.
The above paragraph reveals the reason for concern about banking and its public image. It is not so much that the banking establishment is concerned about the system's functionality as it is concerned about its public perception and how banks might interact with the political establishment as a result.
Apparently, what is going on is a crisis of globalism. The concern is that state financing is returning to a state paradigm. Rather than having multinational financings, the trend, as stated above, is to restrict borrowing to national facilities that are more predictable and controllable.
Monetary velocity is falling as well, and Carney is quoted as saying that money multipliers have fallen by 55 percent in the US and 40 in the European Union between 2006 and 2012. "The magnitude of the decline indicates the extent to which trust has been shaken," Carney said.
The article concludes with the admission that "new rules won't be enough without a broad-based culture shift in the banking industry." And, of course, this is just the point. The system itself is to blame for what is taking place – and in the case of the EU, we have top political men on record as saying that a crisis would be necessary to create a stronger political union.
In Europe the current crisis was at least welcomed by some Euroleaders, while in the US the financial crisis was due in large part to the reduced interest rates promulgated by the Federal Reserve that led to the housing bubble. Neither of these factors are going to be affected by regulating banks, bank bonuses or other banking behaviors.
The article itself concludes that "virtue cannot be inculcated via lecture either." But banking virtue is really not the issue here. The problem is systemic and Carney's analysis – which focuses on fixing public opinion rather than fixing what is wrong with the monetary system – may be providing us with the mindset that he will take to the Bank of England.
Conclusion: That likely does not bode well, either for the financial system as a whole or for solving the underlying problems with which Britain and the West's financial systems are currently struggling.
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Posted by 1776 on 03/07/13 04:05 PM
"I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country." Thomas Jefferson
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Posted by 1776 on 03/07/13 01:35 PM
A new kind of fascism has taken over America: the merger of corporations and government whereby corporate power dominates. With the emergence of ever-larger multinational corporations -- due to consolidation facilitated by the Federal Reserve's endless FIAT money -- the corporatocracy has been in a position to literally purchase the U.S. Congress.
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Posted by moneylender on 03/07/13 11:00 AM
It need not be that way, because we all enslaved from cradle grave, except a few, the rest of 99% are unable to act
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Posted by amanfromMars on 03/07/13 06:36 AM
"Hi amanfrommars
How can a child crying out for a morsel of food due to the moneylenders seeking their pound of flesh do.?" …. Posted by moneylender on 03/07/13 06:15 AM
Methinks, moneylender, that they themselves can do precious little, nor would they expected to be able to do anything, but even Gods and Devils themselves will not be able help or protect or save such moneylenders from the revenge of fathers and mothers and families whose children are so wronged for a pound of flesh which is not theirs to be given.
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Posted by moneylender on 03/07/13 06:15 AM
Hi amanfrommars
How can a child crying out for a morsel of food due to the moneylenders seeking their pound of flesh do.?
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Posted by amanfromMars on 03/07/13 01:08 AM
"What is the solution.DB.? You are the Pundits" …. Posted by moneylender on 03/06/13 07:36 PM
"The solution lies with the individual. Each must live as best he or she can ... "free in an unfree world."" ….. Reply from The Daily Bell
Hmmm?
That particular solution, DB, may best work most well whenever it be freely shared worlds-wide to enable those who be able and enabled over the Internet to create alternate virtual realities as a replacement for failed present programs/right dodgy and discrediting new world order projects.
Such a solution then becomes much more of an ongoing and evolving revolutionary application, for contiguous smarter input to continually output as advanced intelligence which provides better alternative realities for all future needs and seeds and feeds and leads.
More on the matter can be perused here today, in a hosting third party site …… Click to view link ….. or viewed, of course, any and every day at AIMetaDataBase Global Communications Head Quarters …… Click to view link
Methinks, moneylender, such an App would be a prime investment opportunity for money lenders of every ilk and more than just a heavenly safe place in which to rest capital …… allowing IT to regenerate markets and generate interest for smarter principal spends.
It be certainly and designedly different for a pleasant radical change and pleasant radically changed Live Operational Virtual Environments.
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Posted by moneylender on 03/06/13 07:36 PM
Banking is a criminal enterprise,running a Ponzi scheme, where money is created out of NOTHING as a compound interest bearing debt, thus ENSLAVING us all from cradle to grave.
Get your heads around the following quotes
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"The bank hath benefit of interest on all moneys which it creates out of nothing."
William Paterson, founder of the Bank of England in 1694, then a privately owned bank.
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"Let me issue and control a nation's money and I care not who writes the laws." Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.
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"If you want to remain the slaves of the bankers and pay for the costs of your own slavery, let them continue to create money and control the nation's credit."
- Sir Josiah Stamp (1880-1941)
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"If the American people ever allow private banks to control issue of their currency, first by inflation, then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson in the debate over The Re-charter of the Bank Bill (1809).
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"I believe that banking institutions are more dangerous to our liberties than standing armies." Thomas Jefferson, US President 1801-9.
The derivative obligations are to the tune of $1.5Quadrillion, the Global GDP is only $60Trillion.
Wake up all of you.Mark Carney like every other Central Bankers are incapable of a solution.
What is the solution.DB.? You are the Pundits
Reply from The Daily Bell
The solution lies with the individual. Each must live as best he or she can ... "free in an unfree world."
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Posted by steveg on 03/06/13 04:24 PM
I hate to promulgate gloom and doom.I believe the system is so corrupt and fraudulent that eventually it will all end badly. That old saying "when thieves fall out... " meets the criteria. See links:
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Posted by amanfromMars on 03/06/13 12:06 PM
David Cameron, joint Prime Minister and glorious leader of the Conservative Party in UKGBNI, has a serious problem in not being able to give a straight and direct answer to the questions posed to him on the floor of chamber in the House of Commons during today's Prime Minister's Questions pantomime, that supposed revered bastion of Parliamentary democracy, on the capping of bankers' bonuses at 100pc of salary, or a maximum 200pc after agreement with shareholders, from January 2014, as agreed by 26 of the 27 EU finance ministers.
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He appears to be thinking, for one has to read between the lines of the nonsense he spouts, because he's certainly terrified of saying anything meaningful which can be acted upon, that things are going to be business as usual in the future and how crazy delusional and dangerously naive is that. And how very strange that it appears all so natural to him and the Cabinet ... to think that all do not see that he leads in nothing and delivers even less worthwhile.
Remind me again who it was who said ... "Party Politics, a third rate soap opera for ugly actors and crazy fools with their hands in everyone else's pockets spending their money in order to trap them with a ponzi power which controls them in and with debt, which is oft disguised and called credit too to kickstart new collapsing debt cycles, for the great stupid game all over again "
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Posted by bionic mosquito on 03/06/13 11:03 AM
EW: As a result, they are increasingly relying on domestic banks and investors for financing: German banks are lending to the German government, and Italian banks to the Italian government.
BM: This was a predictable path to follow. This way, when bailouts are needed, each government can go to its taxpayers and say 'we aren't bailing out those other guys, we are stabilizing our own system from these external shocks.'
DB: It is not so much that the banking establishment is concerned about the system's functionality as it is concerned about its public perception…. Carney's analysis - which focuses on fixing public opinion rather than fixing what is wrong with the monetary system….
BM: This was the same message in Bernanke's recent testimony; he wants to change 'perceptions':
'Federal Reserve Chairman Ben S. Bernanke said he wants to end investor perceptions that the largest U.S. financial institutions will be given taxpayer bailouts to prevent a collapse.'
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Posted by Danny B on 03/06/13 10:05 AM
RIGHT, they need to FIX public opinion.
"The aggregate happiness of the society, which is best promoted by the practice of a virtuous policy, is, or ought to be, the end of all government . . . ."
George Washington
"Only a virtuous people are capable of freedom. As nations become more corrupt and vicious, they have more need of masters."
Benjamin Franklin
"Laws without morals are in vain."
Benjamin Franklin
"When virtue is banished, ambition invades the minds of those who are disposed to receive it, and avarice possesses the whole community."
Montesquieu
"History fails to record a single precedent in which nations subject
to moral decay have not passed into political and economic decline.
There has been either a spiritual awakening to overcome the moral lapse,
or a progressive deterioration leading to ultimate national disaster."
Douglas Macarthur
