Banks have lost their grip

A blurb from
Allan Kohler

I like Allan Kohler he has a way of focussing on the basics of things which is where we should be focussing.
I will only post extracts and summarise as the article is half a broadsheet page long. Their is no link so if you want to read the entire article you have to have an account to access the online version of this article.


BANKS HAVE LOST THEIR GRIP
Alan Kohler
from the AUSTRALIAN Thursday , may 28 2015.

In the third episode of the Wolf Hall TV series, Thomas Cromwell tells Harry Percy, the cocky former suitor of Anne Boleyn, the facts of life: How can I explain this to you? The world is not run from where you think it is. Not from border fortresses, Even from Whitehall. The world is run on Antwerp, from Florence, From Lisbon, from wherever the merchant ships set sail off into the West. Not from Castle walls, but from counting houses, from the pens that scrape out your promissory notes.

"So believe me when I say that my Banker friends and I will rip your life apart"

Five hundred years later, it is not so clear any more who runs the world. It isn't bankers even though they are called "too big to JAIL", having paid $236 billion of other people's money in fines, much of it for crimes no less but NO JAIL TIME.

(Big blurb here about Jamie Dimon)

The power of the counting houses is being mown down, and the bankers tied like Gulliver by the regulatory Lilliputians. A side effect is that they are being regulated out of the market madding and trading, with the result that the bond markets are more volatile because banks can no longer arbitrage out price spikes, and more dangerous because real buyers must be found instead of placing stock in bank warehouses.

Maybe its central bankers who run the world. After all, they control the price of volume of money and the banks are their puppets.
In fact investors have given up watching the economic playing arena and have instead turned to watch the screen of central bank "Guidance" - a sort of proxy reality in which money is materialised from thin air and interest rates are dematerialised to zero, and central bankers play with the markets via semantics.

(blurb about misprising of biotech stocks etc)

Interest rates are another matter. Universal prices, they discount future cash flows, calibrate risk and define investment hurdle rates. Inter rates are the traffic signals of a market economy.

You would think that those who control the traffic lights control the traffic, except that the US Fed funs rate has been next to zero for six years now, ad while the stock market has tripled, economic growth is stuck at 2 per cent.

Fed chairwoman Janet Yellen confessed last week that things had not gone according to plan.
" There has been some softness in the economic data." she said. "The pace of improvement is highly uncertain."
"Things could go either way, she concluded. These are hardly the words of the ruler of the world.

(Blurb about CB's)

The reason for the impotence of central banks is the collapse of the money multiplier, The Fed's balance sheet has ballooned , and the US monetary base (bank reserves plus currency) has increased 378 per cent since 2008, but broadly defined money supply, M2 has risen just 53%. The money is printed, but it goes nowhere that matters. As Jim Grant puts it. "Central Banks may propose, but the market disposes. They have created a bull market but not inflation, wealth but not growth.
So the 500 year reign of the bankers has come to an end.

WHO HAS REPLACED THEM?

Not sovereigns and politicians. We were reminded of that last week when an inquiry into the alleged manipulation of Australia's most important price - Iron Ore - was cancelled at the behest of those to be inquired into.

Modern power resides in Multinational corporations especially those that posses data.

Trade agreements between nations are no longer about the movement of goods and services but the enforcement of the intellectual property and copyright of multinationals.

"THE INVESTOR STATE DISPUTE SETTLEMENT PROVISIONS THAT NOW EXIST IN 3000 SO CALLED TRADE DEALS ARE NOTHING OTHER THAN STATES YIELDING THEIR SOVEREIGNTY TO CORPORATIONS.

In part, their power comes from their mobility, combined with their roles as tax collectors and employers. Jobs and taxes are the currency of politics. But most of all it comes from the dossiers they are building on everybody.