Posted Jun 30, 2013 by Martin Armstrong
It is starting to become critical regarding what bank to trust. The Bank War of Andrew Jackson just may be reemerging at last with the target being this time the “club” led by the New York Investment Bankers. The dangerous bankers in NYC and elsewhere are those who are proprietary traders. The NY Investments Bankers are the ones who are actively manipulating government to stay out of jail when their manipulations blow up. Then there are the custodian banks that are conservative such as Brown Brothers and Bank of New York. If you have deposits at the high flyers, I would recommend moving to the more conservative custodial banks.
We are preparing a special report on this subject of banks and interest rates. This may be one of the most important reports ever to be written in the field of finance. Why? Because what is at issue are standard old theories that will be responsible for the increase in confusion and total chaos 2015.75-2020.05.
There is a storm brewing on the horizon that this time the Fed is warning the bankers about and is at the core of why Bernanke wants to get out of town fast. Amazingly, it is the Fed now telling the banks they better prepare for the bizarre. The Fed has effectively carved out of the banks what will be bailed out and what will not for their next fiasco. They are restoring Glass-Steagall indirectly. They have dissected the banking business into the core traditional business and the investment banking trading with other people’s money shit ushered in by Goldman Sachs thanks to Rubin.
The traditional core in banking is regarded as loans and deposits. That is the extent of any future bailout. Proprietary trading will not be bailout again. The Fed has stated this point-blank to all bankers. The banks have been informed there will not be another $700 billion blank check petitioned for by Goldman Sachs’ Hank Paulson. There is no doubt that the two worst Treasury Secretaries in history were both from Goldman Sachs – Rubin and Paulson. The first eliminated Glass-Steagall and the second grabbed $700 billion while forcing Bear Sterns and Lehman to collapse in hopes of culling the herd to increase market-share for Goldman Sachs.
There are a lot of rumblings in Washington about Corzine and why he was not indicted or prosecuted for anything. The international heat is building about the “UNTOUCHABLES” and if there is going to be sacrificial lamb, it could be Corzine who is criminally prosecuted for the sins of Wall Street. This is the rumor mill behind the scenes for it appears he was even personally trading. Corzine’s bet on Europe failed because of the collapse in liquidity – no bid. But this is sufficiently separate from the Mortgage CDO crisis there will not be spill-over into Wall Street. Thus, criminally prosecuting Corzine will signal that the politicians are acting at last in their own self-interest meaning they are wising up and starting to separate themselves from Goldman and the club.
The pressure on government is building on a global scale. It is clear that there will be no new bailouts for the bankers and the carve out redefining the “core” nature of traditional banking is interesting is effectively restoring Glass-Steagall. The NY Investment Bankers have blown up the world too many times with their crazy trading that the tide has turned against them. They have been scolded in public, but always embraced behind the curtain. That may be starting to change. This is critical, for it is essential if we are to save the day at all – the “club” has to go. Banking should be compelled back to the conservative custodian model. That was historically the purpose of a bank.
This new realization in Washington that will not be discussed in mainline newspapers yet, has been matched by a change in trend within the Federal Reserve. Instead of asking the bankers what they should do next, the role is starting to switch. The nonsense coming from the Investment Bankers has been nothing but advice based to further their profits. This is why I say that the “club” has been successfully destroying Western Civilization.
We are actually at the dawn of a rising new age in central banking a return to the old days of Biddle and the Bank of the United States. Jackson destroyed the central bank and ushered in the crazy period of Wildcat Banking where countless banks issued money and this led to the complete meltdown of the banking system during the Panic of 1837. Jackson did not taking into consideration that eliminating the central bank only led to a free-for-all among bankers at the state level. States then issued bonds trying to bailout the banks and they went bust defaulting permanently on their debt. Banking bailouts are not new. Politicians have been in bed with the bankers and spawned offspring in the form of numerous panics and bond defaults.
This time, the Fed is giving advice to the bankers that their primitive models are likely to fail once more. Namely, the Fed strikingly realizes that the financial system is in trouble. It has shortened the maturity on the national debt with no exit plan. Buying in 30 year bonds has introduced the risk of tremendous volatility. The Fed is starting to listen to outside sources other than bankers.
The greatest risk on the horizon is an exponential rise in rates and this will make the Treasuries FAIL to be the object within a FLIGHT TO QUALITY. Illustrated here is the failure of bonds to offer the traditional FLIGHT TO QUALITY. This is what we see after 2015 and the Fed has been telling banks that they had better re-calibrate their models, which are inadequate to cope with a serious economic decline that we face on the other side of 2015.75.
We are preparing a very important special report on interest rates around the globe. This report will provide the road-map for what lies ahead. This is serious. This is not speculation or personal opinion. This is the trend at work.Stay away from the Investment Bankers/Proprietary Trading Bankers and move any assets to the Custodian Bankers.