Rogue Trading Is Not the Problem
By Anthony Wile - September 17, 2011

UBS trader Kweku Adoboli supposedly lost £1.3bn and is now under arrest. People wonder how one individual can inflict such large losses on bank-run trading firms over and over again; the real question is why doesn't it happen more often?

In this article, I will try to provide a frame of reference and a more specific analysis of Adoboli's actions and how they could happen. Frame of reference first.

The underlying problem, of course, returns us to central banks and the farcical distortions that stem from the assumption of a money monopoly. Everything else stems from this. Without central banking monopoly money printing, the world's bank bubble would not exist. The literally hundreds of money center banks around the world – all busily distributing central bank printed paper money – would vanish. Poof.

A digression: According to the UK Daily Mail that has run a surprisingly informative series of articles on the Adoboli situation, there was speculation that he "may have been caught after the Swiss Central Bank unexpectedly devalued the franc last week, producing mammoth losses on one of his currency trades."

This is another issue. Large money center banks like UBS are the flotsam and jetsam riding on top of the central banking money wave. But add to money printing itself the ability of banks – central banks using governmental authority – to manipulate currencies as they like, and one soon creates a noxious brew.

UBS is nominally a Swiss private bank but actually it is an entirely Anglosphere institution. Its profit centers and business methodology are virtually indistinguishable with that of large banks on Wall Street, or those who call London's "City" home.

The billions that UBS is able to make are derived from the peculiar position of large banks at the intersection of central bank money flows and public distribution. As soon as one institution – a central bank – controls money printing, abuses will occur. The corruption is built in and locked in.

What is clever about the current system is that the corruption is positioned as salvation. Large money center banks are "necessary" to distribute central banking funds. But imagine if YOU were handed a franchise to distribute money. Imagine the graft such a privilege entails.

Of course, if things sour, as they do, inevitably, your friends at the central bank will print more money to ensure that your positions and larger businesses are not destabilized. In fact, one could speculate that such banks as UBS encourage "rogue trading" because essentially there is no penalty for the larger institution. Rogue trading never seems to emerge when banks MAKE money, only when banks lose it.

And when banks are losing money, the sky is suddenly seen to be falling. A famine may affect millions, but heaven help us if a big bank gives an indication of distress. Immediately, the world's entire economy is threatened with "contagion." Such banks cannot be allowed to go bust. Wow. A good job if you can get it.

The system is controlled from top-to-bottom. It begins with the privilege of money printing, which is supervised and controlled by only a few impossibly wealthy, elite banking families. Around these families cluster controlled corporations, religious personages, media moguls and military and political leaders – the enablers. They are drawn to this power structure like bees to honey.

We can see that money doesn't exist anymore – or not at the top, "elite" level. Central banks can print money at will, as they have divorced it from an underlying commodity, and this enables the top banking families to pursue their insane agenda of one world government.

They have all the money they need, as they can print it, and they have used the money to pervert civil society from the top down. In order to instigate world government, these families use dominant social themes – fear-based promotions – to induce the middle class to give up power and wealth to global institutions that supposedly have solutions to these non-existent problems.

Global warming, peak oil, over-population, pollution, political tensions, wars, fake crimes, general resource depletion, food and water scarcity – anything that seems to affect basic survival is seized upon by the Tavistock Institute and other elite think tanks and configured for maximum fear. The promotions are rolled out one after the other in endless waves.

In order to ensure that people don't notice that an entirely new sociopolitical paradigm has replaced the society of yesterday, the elites have to retain the outward show of civil society. The elements of yesterday's world are thus kept in place as the families recreate a simulacrum of civil society to take the place of the one that has been hollowed out.

The fundaments of society have been retained, though they are stripped of significance. Paper money used to be the receipts for gold and silver; they have been retained. Rulers of all sorts used to exercise real power; they have been retained. Countries used to battle one another over power and wealth; wars have been retained. Banks used to store gold and silver; they have been retained.

Of course, when it comes to banks and money, the charade is increasingly complex though the underlying reality is far simpler. Money is to be seen as something valuable even though it is not. Those who can print as much money as they want – and change the valuations of currencies as they choose – labor mightily to convince everyone else that their paper tickets are of the utmost value.

Every part of the system is comprehensively designed to impress upon people that their constantly depreciating assets have intrinsic value. There is no doubt that every part of the financial universe – from stocks to bonds to the value of money itself – is comprehensively manipulated.

But the charade continues, as it must. And Adoboli has now become another victim. He is a modern sacrifice to ensure once again that people are impressed with the idea that the electronic digits that the power elite has substituted for money are indeed valuable.

This is why one hears so little about the notional US$750 TRILLION that supposedly exists in the derivatives markets. The numbers keep going up, but they are so phenomenally huge that people cannot grasp them. They are an indirect, if not direct, result of the world's phony money system.

None of this – not the banks, not the trading, not the "financial products," not the casino mentality itself – would exist without the fundamental fraud of paper money divorced from an underlying asset. This cannot be admitted. Must not be admitted. Every scandal must be seen within the context of "regulation." The system itself is the problem, but the controlled mainstream media will reject that statement outright.

What is needed? More ineffective supervision; more laws; more useless punishment. The Daily Mail articles provide us with a good example of the tenacity of this meme. There is nothing that cannot be fixed by proper regulatory adjustments and punishment of the guilty. Eventually, these big banking institutions shall "learn" how to manage their affairs – if the government cracks down hard enough.

It's quite a job, however. Doesn't happen overnight. According to the UK Daily Mail, in fact, the new trading scandal provides graphic evidence that the world's leading investment banks "have learned nothing from Lehman Brothers's collapse three years ago." Sir John Vickers, the Daily Mail tells us, (whoever he is) recently proposed separating "casino" activities from the ordinary and more important business of taking deposits and making loans to consumers and businesses.

And new culprits have been identified, as well, with the proviso that the "government" must take action. While Adoboli may have been done in by Swiss currency manipulation, the Daily Mail also reports on speculation that many of his bad bets were placed in the area of exchange-traded funds. Here's some more from the article:

Originally, these funds allowed ordinary investors to buy 'bundles' of related stocks, from house builders to gold, with the fund controllers selecting which individual shares to buy. But a new, more opaque and more sinister form of ETF has evolved. With the so-called 'synthetic ETF', instead of buying real stocks in real companies, fund managers simply make bets on whether shares in a particular sector will rise or fall.

Such gambles can yield fabulous profits – or catastrophic losses. It is these 'synthetic' funds that are thought to have been central to the UBS scandal. And other banks are in serious danger of similar disaster. In the wake of the credit crunch investment in all forms of traded funds has ballooned by 40 per cent a year. By the end of 2010 some £760billion was invested in ETFs.

This boom caused the Bank of England to warn in June that 'potential financial stability issues arise from recent trends in exchange traded funds'. Unfortunately, the Bank's caution looks to have gone unheeded. As one senior regulator told me last night if you hold a 'synthetic' gold ETF 'who knows what is in it'.

The Daily Mail sheds light on how Adoboli might have managed his "unauthorized trading." In fact, he may have started back in 2008, hiding his losses and then trying to make the money back. By last month, he apparently had lost some $1.5 billion and "had sold positions that would cost a further $500million."

There were triumphs, apparently. He may have made up to US$20 million on a single trade, adding to his totals by a refusal to hedge. It carried on for three years. "He continued to take risks, gambling the money of UBS bank," one UBS official says severely.

The bottom line is this: today's world of "financialism" encourages excessive risk taking and extreme leverage. In fact, while the banks maintain an outward illusion of conservative practices, their internal policies are anything but. This is just another example of a trader being thrown under the bus in order to protect the bank's image. Adoboli will be victimized, yet he was no doubt doing exactly what he was enabled to do. The whole system is built on leverage. It is in fact a giant Ponzi scheme.

Ask yourself, dear reader, is it really the "money of the UBS bank" that Adoboli supposedly lost? Is it really money at all?