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Hot Money Profits From Sovereign Nations and then Leaves
The root cause, then, of the credit crisis was the Thatcher libertarian reform of the banking system. There was no Glass-Steagall in the UK. The banks took advantage and the momentum spread toxic loans throughout the world.
I am sure that this City of London cabal wants no focus upon it, through Occupy Wall Street type protests, since the Parliament has no power over the City, and it is a disreputable tax haven, a commodity exchange, a high frequency stock exchange, and everything financial rolled into one that answers only to the Queen of England.
The failure to institute capital controls against hot money was the libertarian answer of self regulation. It has been an abysmal failure for the middle classes of developed nations and for many emerging markets nations.
For your benefit, please understand that when people are talking about neo-liberal deregulation they are talking about the new classic liberalism, or, libertarianism. This liberalism is base on the belief, proven false by observation, that the free market self regulates and thus stops the misallocation of capital. But clearly, the misallocation of capital is the bubble blowing flow of hot money. Our deregulated financial system is corrupt to the core.
For Further Study:
The Evils of Hot Money Flooding the Economy
The Big Bang of economic deregulation, which occurred in the City of London in 1986, brought major investment banks from the US and Europe into the British economy, The old UK brokerage houses were snapped up and put out to pasture..
The City of London, otherwise known as the square mile, which is the financial center of the UK, became the seat of hot money, as international investing became the goal. Market manipulation was the result, and this type of predatory investing distorted economic and real estate markets in many emerging nations, with the culmination in massive distortions in the developed nations including in the US housing market.
Hot money results when investments mostly fueled by hedge funds and investment banks flood a sovereign nation and causes commodities to explode in price. This hot money generally goes to emerging markets, but in the world wide housing bubble, especially in the US, hot money came in to fuel the private mortgage backed securities (MBS) explosion.When the money pulled out and investors had their fill, sometimes suffering losses, the hot money which had been made available through shadow banks lending very easy money, left the scene.
Hot money is a threat to every investment you make, including your house and because of the carry trade, in any emerging market investment. Hot money is a threat to the middle class and to the accumulation of wealth. There is no stopping the hot money system, other than to watch out what kind of loans you take out.
Glass-Steagall did not exist in the City of London when Margaret Thatcher deregulated the financial system. So the merger of investment banks with commercial banks with insurance was easy to pull off. Those investment banks bought our politicians of both parties in 1999 and Glass-Steagall was repealed, allowing for all manner of speculation to create mayhem in the United States financial system. The repeal of Glass-Steagall was an open invitation by our congress, and both political parties, (the senate vote was 90-8) for massive inflows of hot money into the United States.
Some say it was a pact between the international financial cartel and the neocons for the extension of American power into the middle east; a way to pay for oil invasions. Of course the repeal and the hot money severely weakened the middle class in the United States.
As long as hedge funds and investment banks can spread hot money, speculation exists. Anyone who tells you that speculation does not exist in the oil market is lying or is misinformed. As long as the banks have the power to speculate, with deregulation failing to cause the markets to self correct, we will always pay a premium above price determined by supply and demand. It is like a massive tax upon the populace, and threatens the very existence of the middle class in the United States. Ask Russia and Asia about their credit crises in the 1990's. Hot money not looking for sound investments but just a profit off bubbles caused massive financial distress in those areas of the world.
Both parties are bought out, but the Democrats are seeking to slow down the speculation train with Dodd-Frank and the Volcker Rule. This is not as good as Glass-Steagall would be but it may prove to be better than nothing. The argument our banks make is that we will be left behind in the financial sector as a nation if we don't overturn these laws. But clearly being left behind in a world of corruption and speculation is not bad for main street!
Did You All Notice How the UK Stayed Out of the Eurozone?
The Brits stayed out of the Eurozone compact entered into on 12/9/2011.
I don't think that the Tobin tax was the main reason for this British boycott but it was part of the reason. The main reason is that the City of London, the financial district that spawned hot money and a bubble mentality starting in 1986, leading to our repeal of Glass-Steagall, has to be bailed out of bad bets. The Euro would not have allowed these bailouts to the degree that the Bank of England would accommodate.
The City of London answers to the Queen of England, not the Parliament. The nickname of the place is the square mile. The concepts of feverish trading, leading to electronic trading was established there. So, a transaction tax could put a damper on the financial manipulation of markets that originated from this City of London and was so wonderfully adopted by Wall Street. The square mile is still the seat of speculation in the world. And the serfs, meaning the rest of us, pay a price for this speculation.
The speculators would not be interested in paying a price to the riff raff for the privilege of pumping your oil, stocks and foodstuffs to artificially high levels. Hence the refusal of the square mile casino to submit to the Eurozone.
If the banks were not so predatory, people would not be calling for a Tobin Tax. So, while it is true that banks can move transactions to other places, those transactions are costing the real economies of the world as the speculation is rampant. We had less driving in the US for months and oil is up. We had the most expensive Thanksgiving dinners in 20 years and demand is down.That all comes about because no government can control the banks.
For Further Study:
Hot Money Controlled By Capital Controls: IMF On Target Here But We Still Cannot Trust This Bank!
Free Trade Pacts Are Just An Avenue for Hot Money
The American government is getting desperate in its efforts to sign trade agreements with foreign nations. But these trade agreements ban stopping the flow of hot money. Accepting this super imperialism is a dangerous game for the foreign countries to play. Yes they get benefits in trading with the United States, but they also are at the mercy of investment banks and hedge fund hot money flows and bubbles.
America is turning sinister in her foreign economic policy. QE makes these countries not want dollars. They don't want dollars because you can't use them to invest in companies in the United States as we mostly only sell companies to Europe. And they don't want dollars because they fear the hot money will create bubbles in their economies.
So, It would be better to wind down the too big to fail banks, in an orderly fashion than it would be to continue to flood the world with dollars and make our currency less valuable as a reserve currency. The gamble of our financial cabal is that people will flee to dollars in times of crisis. But certainly that is a huge risk, and the need for the dollar as reserve currency is more important to our standard of living than Bank of America or some other bank surviving with continual help from the Fed. I do not advocate the failure of all the financial system en masse, as that would create a massive depression, perhaps in the entire world.
Perhaps this is why the Eurozone is so afraid that the European Central bank, which is nothing more than a German central bank, will cause the Euro to fall in value if it becomes lender of last resort to the Eurozone banks who are also in a lot of trouble, perhaps more trouble than US banks are in.
The outcome is dangerous for any who want to get long term loans. We don't know how these tumultuous market forces and manipulations the world over will effect interest rates, the easy of obtaining loans, if you want to sell in the future, or regarding the world economies going forward. A stronger dollar makes US citizens wealthy. The attack on the currency in order to please the hot money people, who want low US interest rates in order to flood the world with their useless investment money, bubble money, is simply not worth it in the long run.
The investment in bubbles doesn't build factories, doesn't help the real citizens of these countries, but the misery is spread by those wanting to manipulate markets by pushing them up and leaving, just for their own easy gain. There are not very many folks who have this sort of money, but they are wrecking havoc on the world stage, and must be stopped.
And don't forget, people like Geoge Soros were once looked upon as heroes in the libertarian Thatcher motivated community (Paul Staines, writer of the Guido Fawkes blog, defended him, defended high frequency trading, shorting of currencies, etc.). Because of the confidence in "free" markets, in program trading, in financial manipulation, in self regulation these libertarians supported the impoverishment of many for the profit of a few. Even Newt Gingrich still believes that this economics of speculation and self interest works for the common good! Was this really the classical liberal position? I wonder what Adam Smith would say. This mayhem all came about through the Big Bang. It would all work out they said. Now the world is in crisis because of it.
Libertarians in the US cannot quite grasp that deregulation of the banking industry, starting in the UK in 1986, and advocated by the libertarians there, has resulted in the massive mess we now have in the financial world. Things only went downhill after the banking system was deregulated. Libertarians stay awake at night befuddled by that simple fact.
Libertarians in the US, not seeing the real desire of UK libertarians to set up a casino in the banking sector, are totally out of the loop. And they want banks to fail and they want less liquidity. Well, as it turns out, we need lenders of last resort. The only way to slow down speculation is not to ban central banks, but rather, to have transaction taxes, to have less leverage allowed, and to have less reason to need a last resort lender as loans are made more prudently.
Since banning central banks will not happen, we need to watchdog those banks who seek to take advantage of the backstop of central banking. We need to make sure their loans are made with sound underwriting. We need to make sure that speculation in futures is limited. All getting rid of the central banks will do is to stop lending the world over. Nationalizing the central banks becomes a much better idea, to make sure all the profit they make is returned to the treasury.
We need a tobin tax, but with the UK stepping out of the Euro agreement, we will never have that tax where it counts, in the square mile and on the Isle of Manhattan!
For Further Study
- Alan Greenspan Was a Libertarian to the Crony Capitalists
Libertarianism is crony capitalism
- "Super Imperialism: The Economic Strategy of American Empire"
Important discussion regarding America's Economic Empire.
- Amazon.com: Ponzi Housing Scheme 21st Century: How the Ponzi House Crisis Was Contrived eBook: Gary
Amazon.com: Ponzi Housing Scheme 21st Century: How the Ponzi House Crisis Was Contrived eBook: Gary Anderson, Sandy Mertens: Kindle Store
- HEARD ON THE STREET: Hot Money Could Make Banks Sweat - WSJ.com
U.S. banks are awash in deposits, but that growth is somewhat deceiving.
- Hedge Funds, No Thanks!--The hedge fund apocaplypse is here 6-20-11
There is no accurate measure of hedge fund performance because of the absence of reporting requirements and because the performance of the unsuccessful ones that are dissolved and disappear are not included in the statistics that are available. Hedge