We all know of the disastrous condition of our global banking system and the havoc it has caused over the last 4 years since the recession started to bite. Talks of a double dip recession are comical as we need to leave the first one before we think about entering another!
The austerity measures imposed were felt worldwide with increased taxation measures, cut backs, rampant inflation and reduced borrowing. It is a complex and truly mammoth topic so I shall focus on one small island, which is representative of each and every country affected by this calamity.
Yes, of course, I am referring to my own fair shores, the United Kingdom.
UK taxpayers have been battered by increased taxes over the last few years and the bank bailout, purported to cost the UK taxpayers an extra £50 billion (that’s £50,000,000,000) was one of the largest nails in the coffin.
No small amount and a bitter pill to swallow but of course it gave us the benefit of having a greater control over the banks by taking a shareholding. Therefore like any shareholder we will benefit from payouts as these companies profit, ultimately reducing our tax bills. Right?
Royal Bank of Scotland was the main target in this debacle and under the new regime the taxpayer effectively controls 60%, with the merger of Lloyds, TSB and HBOS the taxpayer controls 40%. Barclays was the final bank, but declined government aid to raise its own capital.
Now I’m going slightly off topic to the USA but it will become self evident why I am shortly. More specifically I’m going to the Federal Reserve and their recent lending, which was reported in the Government Accountability Office Report published in July 2011.
All of you must know of the report to the Congressional Addressees? Being the world’s most important report ever published and affecting the entire GLOBAL economy as the single biggest report ever issued on the world’s reserve currency.
You’ve seen it? Read it? At least heard of it? Surely ever major news agency covered this as one of the most dangerous financial reports to have hit the economy in recent years. Ok, Ok, enough with the sarcasm, no neither did I. I hunted it down after finding out it existed and retain a copy of it for posterity. What damming evidence could this report contain that the press would suppress such an important document? The report covers lending from the Federal Reserve to major worldwide financial and banking institutions between December 2007 and July 2010. It’s a weighty tome of 266 pages but buried right in the centre on page 133 is where it gets interesting.
I will write a full report in due time and even publish the document online for others to peruse at their leisure, but for now I will return to the UK shoreline and our ‘taxpayer controlled’ banks.
In these 32 months (Dec ’07 to Jul ’10) we have partially ‘owned’ RBS it has borrowed from the Federal Reserve a total of $541,000,000,000. That is not a typo, that is 541 billion dollars (approx £345 billion), nearly 7 times our bailout package. If £50 billion buys you 60% then surely the Federal Reserve now owns 414%?
Similarly the Bank of Scotland is listed as having borrowed $181,000,000,000 and Barclays a staggering $868,000,000,000. These 3 banks alone have borrowed more than $1.59 trillion (approx £986 billion).
The report shows that in 32 months the Federal Reserve lent over $16 trillion. Just over $500 billion EVERY month. I dread to think what the last years unreported figures are.
I have yet to see a report from the banks showing these figures, how much they have paid back and how on earth they intend to pay the rest, but rest assured in today’s economy recession it will eventually fall squarely on the shoulders of those who allowed them to get away with it. (By the way if you’re reading this, I’m talking about YOU the taxpayer)
With crisis after crisis devaluing the currency, it will only take one straw to break the camel’s back. Surely this tome would raise it to the ground, yet press suppression and apathy keep it from having its ultimate effect.
As banks (including some of those previously mentioned) suddenly start to increase Gold reserves you must wonder to what end?
(1) If quantitative easing (money printing) is truly a limitless supply of free money and can go on indefinitely, what possible use could they have for such a shiny asset?
(2) Alternatively if this exponential process of money printing has an impassable ceiling defined by consumer confidence, then how far off can it be before we collide with it?
The UK debt is officially £950 billion, yet just the 3 banks listed above appear to have borrowed MORE than that figure in just 32 months.
Whatever currency you work in, USD, GBP or Euro, prepare for one of the two scenarios above to happen. I know which one I’m betting on and I’m already preparing for the inevitable outcome.