All bankers are wankers – discuss.

[Cousin Jack]

Credit (lit. debt) is what makes this money-go-round work. It is the bottom line of the Ponzi pyramid scheme that capitalism has become. When you owe the bank money, they own a slice of YOU. Your debt is what allows banks to massively inflate their schemes (lit. leverage) by multiplying that "investment" in your labour by increasingly unsustainable amounts. I don't think it's been that long since we went down the fiat currency route but the moment we did, all sense of value went out the window.

AFAIK we abandoned the gold standard a LONG time ago, and there is zero hope of going back to it unless a real physical mountain of the stuff is discovered somewhere in England. We did however have stability for many years, with currency values pegged to each other. I used to have a stamp album with printed values eg £1=$2.7

[Screwdriver]

Credit (lit. debt) is what makes this money-go-round work. It is the bottom line of the Ponzi pyramid scheme that capitalism has become. When you owe the bank money, they own a slice of YOU. Your debt is what allows banks to massively inflate their schemes (lit. leverage) by multiplying that "investment" in your labour by increasingly unsustainable amounts. I don't think it's been that long since we went down the fiat currency route but the moment we did, all sense of value went out the window.

AFAIK we abandoned the gold standard a LONG time ago, and there is zero hope of going back to it unless a real physical mountain of the stuff is discovered somewhere in England. We did however have stability for many years, with currency values pegged to each other. I used to have a stamp album with printed values eg £1=$2.7

I was thinking more about when the USA went all-in: https://en.wikipedia.org/wiki/Nixon_shock

1971

[Mr. Dazzle]

This is kinda like quantum physics. No, not the uncertainty bit or the bit about stuff not really being there, but the bit about this requiring way more background understanding and maths than I have

I'd love to know if the move towards Fiat currency is a step in the evolution towards some sort of pure abstract economy where everything is fair and even, or if it's just a terrible idea. I don't doubt there are whole "philosophy of economics" papers on the subject I just wouldn't understand!

[Cousin Jack]

Fiat currencies were inevitable, the banknote promise "I promise to pay the bearer on demand ..........." was rarely invoked and would never work.

The US system was similar in theory, but actually impossible too. Other countries were worse, since many held their gold in the BoE or Fort Knox.

As for getting fairer, I think the only system that even purports to offer fairness is comunism. You are very welcome to try their version of "fair".

[Horse]

For every winner there is a loser. That fact seems o have escaped their attention

If only some politicians understood that and other basics too.

Aspirational Society. Great - aspire as much as you like - but if everyone aspires to have the same things, then prices will go up, so you still won't all get it.

Levelling Up. Ah, like a see-saw? One end goes up, but the other goes equally down.

[Cousin Jack]

For every winner there is a loser. That fact seems o have escaped their attention

If only some politicians understood that and other basics too.

Politicians? Understand?

Does not compute!

[Screwdriver]

Fiat currencies were inevitable, the banknote promise "I promise to pay the bearer on demand ..........." was rarely invoked and would never work.

The US system was similar in theory, but actually impossible too. Other countries were worse, since many held their gold in the BoE or Fort Knox.

As for getting fairer, I think the only system that even purports to offer fairness is comunism. You are very welcome to try their version of "fair".

Our currency is better than yours... because look how much Gold we have.

...because look how much oil we have.

..because look at our military power.

Inflation is baked into the capitalist system. More consumers chasing fewer commodities, or the same number of consumers chasing more of the same commodity. A commodity is usually gold or oil, natural mineral reserves or land which are finite resources.

Finite commodity means a zero sum game in these days of corporate globalisation. I win you lose. If a nations currency has to be backed up by military might, not merely in the pursuit of controlling classic commodities, then we are in deep shit since the obvious solution to any economic downturn is to flex your military muscles.

The upshot being of course you now experience the same rampant inflation in a situation where military action props up your fiat model currency. That sort of inflation doesn't just make stuff more expensive, it tends to ramp up warmongering.

[gremlin]

Does Fractional Reserve banking need a serious overhaul, or just massively tighter regulation? Recent events have shown that not all is well in the land of finance, indeed the smell of rotten fish is becoming quite overwhelming.

Did bankers really not anticipate that bank rates could rise, and rise rapidly? FFS, do they not have a collective memory that can realize that within living memory bank rates were up in 2-digit territory, and that the recent very low rates were an aberration that was unlikely to last?

Do they not remember 2008, where massive problems because they failed to recognize commonality of risk? Last time around it was crap mortgage bundles, this time it is US Govt stock, and customers.

Do the Gnomes of Zurich have a clue? Equity is risk, bonds, even AT1 bonds, are less risky. Unless of course the aforesaid gnomes decide that keeping Saudi equity holders happy is much more important than any normal rules.

Is it all going to stop, or is this the start of a slow-motion financial crash?

Time to insist that near 100% reserves are necessary to get a banking licence? Yes that will cause considerable pain, but the end result might be a sustainable industry that is not prone to shooting itself (and us!) in the foot ever few years.

Or any other solutions? I am sorely tempted to swap my cash for a bag of gold, the real shiny stuff. Even bankers cannot screw that up (although Gordon Brown tried his best).

Not sure where to start on this, but I assume the catalyst for the post was the collapse of SVB and the subsequent shotgun marriage of CS to UBS, correct?

SVB first. IMHO, a massive failure of oversight by the US regulator and a a questionable, though understandable, response from the Fed. SVB was the tech-start up's friend. During Covid, many tech companies made shed loads of money which SVB invested in US Govt. bonds, which are safe as safe can be in terms of security, when rates were at historic lows. Worth remembered that these bonds are fixed rate. When rates started rising, SVB realised, when marking to market, that the yields were shit and a huge loss was being realised. Once word got out, the classic run on the bank started. Ironically, customers didn't need to queue outside the door on Monday morning, they simply logged on and shipped it out.

Two things stand out. After the world went to shit in 2008, America brought in the Dodd Frank Act. SVB was among the mid-size banks that successfully lobbied to raise the limit from $50b to $250b, i.e. the balance sheet would have to be $250b before it came under the very sharp eye of the Dodd Frank. In effect, the regulator was blind and shouldn't have been.

Secondly, the FDIC covers $250k, like our FSCS. In order to cover the greater losses of SVB it had to invoke a 'systemic risk' clause. SVB was not a systemic risk, IMO. How many zombie mid-size banks are in existence in America, still below the radar in terms of regulatory oversight, given the nod and wink of a bailout? Also worth noting that many of the customers who benefited from the bail out had lots of cash in current accounts. Had they been a bit smarter, they could have bought US T-Bills which are in their name and guaranteed by the govt.



On to CS. Fucking basket case. Swiss banking regulation is joke. It's been lurching from once disgrace to another: spying on former staff members, Grensill, fined $500m for dodgy dealings in Africa, et al. It posted huge losses at the beginning of the year and a the knock-on of SVB was the final nail in the coffin. So now instead of Switzerland having two banks that are too big to fail, they have one behemoth in the form of UBS.

[gremlin]

Strangely, for no particular reason, a few months ago I put some of my money into actual gold and put it into safe storage. I wanted an asset to diversify a bit but don’t believe in multiple property ownership. It was little more than a whim based on spider sense and I wondered if I’d regret it, I still might but I’m up a bit atm.

There's no point in owning a gold bar unless your post up a picture of it on your desk, gunny in hand and a semi-naked woman behind the chair, a la every rap artist in the 90's.

[Yambo]

SVB first. IMHO, a massive failure of oversight by the US regulator . . .

Weren't we all told that that sort of thing couldn't happen?

Or weren't we told with things like Boeing that they were increasingly likely? I can't remember.

It'll be OK though, the people (it's always people) that failed to regulate will probably get very good jobs in banking if they are ever held to account.

[gremlin]

SVB first. IMHO, a massive failure of oversight by the US regulator . . .

Weren't we all told that that sort of thing couldn't happen?

Or weren't we told with things like Boeing that they were increasingly likely? I can't remember.

It'll be OK though, the people (it's always people) that failed to regulate will probably get very good jobs in banking if they are ever held to account.

It's unfortunate, but in the world of business, businesses will always fail. I don't recall anybody ever promising they wouldn't. With SVB, they should have been managing their interest rate risk. Not managing it better, but just bloody well managing it full stop. It fairly apparent that if you hold a bond portfolio that's paying 1% pa and rates start going north, your mark-to-market value of the assets will depreciate. There's no defending the indefencible.
America has a different bank landscape to the UK. There are many small to mid-size local banks. Whereas the PRA and the FCA will be fairly much on top of the players in the UK, over in the States the Fed is ultimately responsible for thousands of banks (Google says c. 4,200) and, with limited resources, would have to police all of them. I can attest to the fact that regulators don't get jobs in banks. Quite the opposite: the staff the regulators get is pitiful in some instances, not least because the pay isn't good.

[gremlin]

If I was a banking overlord I would make 2 rules.

A minimum of 50% of deposits have to be kept in cash reserves.
Trading can only happen with cash raised from specific high risk trading bonds, and that includes leveraged derivatives, ie only trading bond holders can lose their shirts, no matter how big the trading loss.

Banks can set up foreign companies to play on the world stage, but UK banks have to follow my rules or no UK banking licence.

In your world, what would happen if a number of large depositors withdrew their funds? Would I then have to start pulling loans and mortgages? Or would I offer better depositor rates in order to maintain my ratios? Only cash? Would that not cause liquidity issues in the market if there was sudden squeeze? Specific currency? Plenty of FX risk there. Not chance of govt bonds being held?

Why are you restricting trading to bonds? You mention leveraged derivatives, but where do you stand on managing interest rate risk with Interest Rate Derivatives or currency risk with Currency Derivatives? Do you think your world would be better managed?

UK Banks already have to be 'ring fenced', i.e. high-street banking is kept in a different legal entity. Think Barclays plc. vs. Barclays UK.

[Cousin Jack]

All I really want is the UK economy ring fenced from what appears to me to be stupid mistakes by greedy banks. Going back to very prudent lending seems like a very good first step. If you minimize risk you won't make losses, you may not make so much money but that seems a reasonable trade off.

[mangocrazy]

All I really want is the UK economy ring fenced from what appears to me to be stupid mistakes by greedy banks. Going back to very prudent lending seems like a very good first step. If you minimize risk you won't make losses, you may not make so much money but that seems a reasonable trade off.

I think that genie escaped from its bottle a long time ago, and I don't see any way of putting it back. The only time people yearn for the return of prudent lending is in one of the periodic credit-induced downturns. The rest of the time it's just "let 'er rip"...

[Yorick]

I love banks. They loaned us stupid amounts of money to buy property.
We retired on the appreciation

[gremlin]

Everybody hates banks, but everybody wants modern banking. When you make a bank transfer on your phone*, do you not wonder how much technology and infrastructure is needed to make it happen? And then let's talk about the intraday liquidity risk that offering that service creates for an institution.
Now tell me you want to go back to old fashioned banking with cheques, no cash over a weekend and waiting a month for a printed statement.

*which I'm sure would only have been designed and built using bank funding.

[Cousin Jack]

Everybody hates banks, but everybody wants modern banking. When you make a bank transfer on your phone*, do you not wonder how much technology and infrastructure is needed to make it happen? And then let's talk about the intraday liquidity risk that offering that service creates for an institution.
Now tell me you want to go back to old fashioned banking with cheques, no cash over a weekend and waiting a month for a printed statement.

*which I'm sure would only have been designed and built using bank funding.

I was actually ok with that old system. It worked, I used cash rather thsn s card, and I wrote cheques. It was slower, but I didnt need faster so that was ok. I always had enough cash for the weekend.

[JackyJoll]

Who else remembers endorsing your paycheque and passing it over the bar?

[Felix]

Who else remembers endorsing your paycheque and passing it over the bar?

Navid Harrid Mode.


Naw ya Jakey Bastard

[Mr. Dazzle]

Unlimited Jetskis though I assume.