GLOBAL MONEY: The Alchemists have taken over the laboratory

Those whom the Gods would destroy, they first make mad.

Michael Saunders, the Chief UK economist at Citibank, was quoted by the Daily Telegraph this morning as saying that “the Government could use the accumulated profits from quantitative easing (QE) to finance a special temporary tax cut for a year or two”. When it comes to post Glass-Steagall bollocks, this one is a lulu that attended college in how to be an A1 extract of 100% pure and unadulterated testicles.

Listen up: here is the world according to Mr Saunders: according to official figures, the  profit by February 2013 from QE to the Bank is £20.7bn – more than enough to knock 2.5p off income tax for a year. But hark – hark and wait – the  real potential profit is even larger, as the QE programme has been extended by £50bn to £375bn since the official figures were compiled. Saunders thinks the ‘profits’ could therefore reach £30bn by 2013…which would fund – drumroll, deep intake of breath – a two-year tax giveaway!

Oh dear. Oh dear oh dear oh dearie me. Just when you thought it might be safe to venture back into banking accountancy, along comes Michael Saunders.

The by now rather dotty old lady in Threadneedle Street is sitting on QE profits because it bought gilts. Gilts pay interest from the Government, which in this context – all other things being equal – is, be ye in no doubt, the old lady herself. Saunders of the Citi is proposing that a £30bn sum made by the Bank of England by buying stuff off itself can be called profit – or even ‘tax giveaway’.

In fact, the profit is virtual printing – upstream inflation, if you like. Here in Lilliput the United Kingdom of Camerlot, Rubber Bands and Alex Salmond, the man pretending to be Chancellor (George Osborne) has just completed two years of austerity to save £13bn in Government spending, while the Government as represented by the BoE Governor (Mervyn King) has just spent £325bn underpinning the clay foundations of our banks stimulating the economy. Given that the economy is, as a result, stimulated after the manner of my wife watching a football match, the Government just went £312bn deeper into debt.

No it didn’t. Yes it did. OH NO IT F**CKING DIDN’T: pay attention. The Government will make £30bn profit, and that means a tax giveaway that – who knows? – might see the Coalition re-elected in May 2015.

Iggle burgle ungle engel dribble I think it’s time for my medication now Nurse.

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Let us now head south, and leave on a jet-plane  bound for Sunny Spain – que viva Espana! This morning, The Slog posted about a unique new EU invention, The Bank Customer Haircut. You see, what happens is that a Spanish Caja lends more than it can cover, and so forecloses on the unsuspecting homeowner before mis-selling preference share savings products in the Caja to those self-same suspicion-free customers. But even that degree of perfidy doesn’t work, so the bank goes bust, and the EU Gauleiters decree that the already twice-shafted customer shall lose all the savings that were innocently ploughed into the prefs, complete with Government-backed advertising.

While all this surreal criminality is in full swing, ECB Lady Bountiful Mario Draggifeeti refuses a Spanish central bank request that the EU Central Bank should buy its bonds. But nihil desperandum, because if the Spanish central bank sells its bonds to the already insolvent Caja banks (see Para above) then of course the ECB can lend inordinate sums of taxpayer money to the insolvent Cajas who will never repay it, so they in turn can buy the bonds of the equally insolvent Spanish central bank.

Yesterday, The Slog suggested that the construction of this vast spaghetti junction of Fiscal Rules by-pass routes in Spain might be the reason why the ECB’s new Frankfurt HQ building project has been put on hold. But I wasn’t being serious: how on earth could anyone take this kind of three-card trick seriously?

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And finally, another big white bird takes us North West to New York, where Benjamin Lawsky has had the audacity to call time on US Federal Regulator/Bankster incest, how very dare he?

Compared to Peter Sands, the head of Standard Chartered Bank, Tim Geithner’s leveraging equipment is a little under-sized. There’s no double-entendre intended there, but whereas in Poland earlier this year, Federal Tim could only envisage €350bn of EFSF money transmuting into two trillion, overnight Sands turned a $15m “maximum” misdemeanour into the all-time megascam of $250bn in rogue dealings with Iran.

Most of the MSM missed this dramatically engorged discrepancy, but at an ri (reality imagination) ratio of 17,000:1, the SCB boss must surely claim the world record. The unknown question today is, “The world record what?”

An insider email I got this morning from a trusted (as in, reliable and real) source suggests poor old Peter just might be the Twit in Charge of a Global Bank gold medallist:

‘I don’t have much doubt about what happened; just how naughty it was may be quite another matter. Standard Chartered are a contender for the title of “world’s most boring bank”; they know one big thing – trade finance – and that is pretty much what they do. Don’t bother going to them for derivatives, advice on takeovers or even loan finance – trade finance is what they do. They are run by an amiable bunch of buffers who cut their teeth in Bombay, Nairobi, Djakarta and so on. They are good at political risk in the East, deeply averse to market risk, and almost wholly ignorant of North America, with all its myriad legal and similar pitfalls.’

I’m more than happy to take that at face value, as SCB have never figured much on my radar beyond a brand-name that makes me think of rubber plantations, restless natives, and ‘the demmed heat’. And to be fair to those who see only an easy target for the ambitious here, I haven’t seen Ben Lawsky taking a swipe at Goldman Sachs in recent memory.

But I must also record that the British media went out of their way over the last three days to depict Standard Chartered as a shining example of dynamic probity, innocent victims of perfidious American greed…and yet somehow also proof that nice guys can come first. As a verdict, I don’t really think that holds water.

Related: Why even Dollar Power doesn’t seem to be enough for Hillary

27 thoughts on “GLOBAL MONEY: The Alchemists have taken over the laboratory

  1. Erm…

    Standard and Chartered can do business with any sovereign country it likes. No, it can’t do business with “terrorist groups” or Mexican drug lords, but the UN cannot declare a country a “terrorist state” (my, if it did that it wouldn’t get any money coming in!)

    Therefore: it’s been fined a pitiful amount for trading with a country that the US declares to be a Terrorist State. A bit like the democratically elected Spanish Republic being embargoed for the pleasure of bankers who were falling over each other to finance the Third Reich.

    • I am not ashamed to admit this, but I subscribe to Sky TV. A programme this evening was described as follows:

      “6pm National Geographic Channel
      Hitler’s Millions: Nazi Secrets
      “Hitler portrayed himself as the everyman yet secretly lived a life of luxury funded by tax fraud and shady financial backers. How did he succeed in deceiving his people?”

      Sound familiar? Teflon-coated comments appreciated.

  2. I think this could well happen – as a last ditch attepmt to save the coalition. They will paint themselves as putting more money into the pockets of working people (with labour the party that steals from people who work to give to those who don’t)…it could work, and is in truth desirable over anything labour would do.

    The term “profits” generally referes to revenue – costs of a business operation. So the use here is rather comical.

    The sterling is looking ever more like the least desirable major currency for the following reasons:

    – the europhiles are having difficulty getting the idea of massively printing past those dogmatic germans
    -the $ and the euro are potentially (if absolutely all else fails and we are on the brink out outright chaos) backed by large gold reserves; the pound is not after the one eyed scottish socialst free maison sold most of it at its all time inflation adjusted low)
    – the $ is backed by the biggest military ever
    – the american economy looks in better shape than the european and especially british economy especially as assets such as housing are being marked to market value
    – other western countries – europe, japan, us, etc have demograpic problems, but they don’t have native societies destroyed deliberatly destroyed by social engineers; and all of those economies have less relience on the overleveraged financial sector

    Presently I have nearly no cash position which may seem unwise – yet I can only really earn interest on sterling. So I’ve been accumulating the miners (endeavour silver, energold drilling, fortuna silver, alexco, more bullion, and the cattle and hogs etf COW)…maybe I need more deflation protection, but I just refuse to hold sterling!)

    • @ Maxi P

      But if you had held it for the last 12 months, in spite of everything Merv has done to devalue it, today you could buy 25% more Euros than before, for instance.

      I’m not saying you are wrong, just mentioning one of the many anomalies which keep making nonsense of any logic.

  3. Seems like printing is the favoured solution. However there has been no real damage done yet. Unless you count the lack of spending power of savers versus borrowers. But not so bad as people are taking to the streets. Much.

    Once they lose their savings however…

    So expect continued printing and financial asset inflation. Maybe. I have a view that Germany may well bail out of this madness. If so the DM might prove a useful store of value.

    However this game plays to the 1%/99% split. Maybe a good investment is in rope and lamp post manufacturers?

    Though seriously I’m struggling to see the good ending in current policies. Monetising debt may be the least worst option but it is by no means a good one.

  4. Errrm, so let me get this right? If the Gov is entitled to claim any profits from QE from BoE to use for vote winning promises (to be broken later). Then am I to assume the Gov own the BoE?
    If so, then the £30Bn is only virtual profit from lending themseves £375Bn and then paying themseves interest on it!! If not, then the tax cut wheeze could only be funded by borrowing further £30Bn in 2013.
    It seems to me that we really have reached some sort of end game here, but first, all such economists and banksters must be arrested and sent down for life, and please start at Citybank, because if they’re still at large after the armageddon event, we’ll soon all be back in trouble yet again. But hurry!!!

  5. Tony B.Liar upon joining J P Morgue says…..

    “It is a great opportunity to be able to contribute to the work of JPMorgan Chase. They are a leading company at the cutting edge of the global economy, with a footprint in virtually every part of the world. I look forward to advising them on how they approach the huge political and economic changes that globalisation brings. I am excited at the prospect of joining Jamie Dimon, for whom I have a lot of respect, and the whole team, adding my own experience to their work and helping them to grow.”

      • At my place of work we have an abbreviation: CSF

        C = male chicken
        S = clucking with the c transposed with an s
        F = the usual word conjoined with wit

        We are still doomed, sadly, and JW is dead right: the question is, what are WE going to do about it?

  6. Pingback: John Ward – Global Money : The Alchemist Have Taken Over The Laboratory – 15 August 2012 | Lucas 2012 Infos

  7. William -Re 1 million -Right on-with the basel 3 agreement you would then be good to lend out 10million and earn interest on the 9 million you dont actually have.Even 20 or thirty million if you chose to ignore B3. Good game.

    • @mike.I ran a nice little LDT in the early 1980s,with £1m of equity,before anybody had heard of Basel,and it was indeed a ‘good game’.Now, you can put it in your SIPP!

  8. ODE TO THE EURO

    Geli baby,she’s lost the plot
    Sticky fingers have spent the lot
    Wolfie growls in his finance chair
    With the look of a man in despair
    Mario’s ordered more paper and ink
    Dodgy balance sheets will have to shrink
    A trillion here, twenty billion there
    Do you think the bankers really care ?
    Pensions, perks and Mercs for them
    Nothing will be left in your ATM
    You will pay and pay and pay
    Until austerities cold judgement day
    Decides dear citizen there is nothing left
    After completing this continent wide theft
    One size fits all, it does seem clear
    Turns out to be a bad idea
    The Euro irritates like chronic phlegm
    or a cerebral disease called the ERM
    A poor concept whose time is past
    This fecked up circus, surely can not last !

    • So then Angela
      We are screwed because hubris does not translate into German
      Shame that
      But, then again,
      Life has always been a bit of a b£&tard

      E J Thripp (aged 12)

      With apologies to any readers who did not read Private Eye prior to 1985 and apologies to Private Eye for borrowing an old idea…but with congratulations to all of JW’s supporters who remember Master Thripp.

  9. The value of a currency is backed by the vitality of the nation issuing it. The Vitality of the economy is apart from the credit-induced charade of unsustainable economic-activity-level, which is taught by the establishment to have been the measure for the “meaning” of a currency. The establishment also preaches there would have been no inherent value to anything, but rather the utterly relativistic on-the-spot by and sell prices, which represent the free market i.e. the unregulated cobwebs of private and corporate equity, which is to a large extent non-transparent via accustomed accounting practices, which in turn focus on taxing the working people.
    Detailed analysis here :
    http://essential-intelligence-network.blogspot.com/2012/07/valid-value-of-money-national-vitality.html

  10. What are we going to do about it
    well at this moment few are in the mood to start a revolution
    Many are to scared to stand up
    So it will have to be the straw i am afraid
    That straw can be anything and everything but it will happen
    Voting might change everything John you could stand on a Icelandic manifesto
    But their is one thing they fear more than anything,it would bust the banks it would bust the governments and it would stop all this mess in 40 days and 40 nights
    Answers to John please

  11. Looking at the Government’s “economics”, I am beginning to wonder if Mr Osborne is actually real, or something penned by Lewis Carroll…

  12. Saw this in todays telegraph and thought – at last we are taking a firm line with Bankers
    “Yaman Hamoud, 22, divided his time between university and working in a Gap store in Dubai, before becoming an executioner for the FSA “

  13. JW,

    The gov claimed to have reduced the annual deficit vs previous year I have wondered how much of this reduction came from the ‘profit’ made by the BOE and then handed to the gov (think the figures from memory were something like £139 B down to £127 B).

    Imo a large % of the reduction in the annual gov deficit is exclusively dependent on the the BOE being by far the largest buyer of gov debt and the perversely low coupon interest on gov debt.

    This debt is unlikely to be repaid anytime soon and much of it needs to be continuously rolled over, there will come a time when either the BOE is the sole purchaser of gov debt or we get rates similar to US’ 1981, 15.85% pa, rates

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