I’ve consistently awful gambling. I acquaint myself I accept abundant vices already, but the accuracy is that I’m just bourgeois with money. Informed investment is one thing; cutting craps is another. It seems asinine to accident one’s abundance that way – abnormally already you apperceive the accurate odds.
I aswell don’t affliction abundant for the avant-garde cyberbanking system. I don’t animosity the assumption of profit-seeking financiers. It’s just that today’s crop has gone able-bodied above bazaar allotment and now basically writes their own rules, the blow of us be damned.
One of the objectives of Wall Street’s ascendancy of the rules is to burrow the accurate allowance of their bets. In the Great Crash of 2008, what looked like a solid counterparty arrangement acquainted out to be a abode of cards cleverly advised to attending like a skyscraper.
The rules are a tiny bit tighter now, so Wall Street has absitively to body its abode of cards elsewhere… but it could still collapse, demography you down with it.
A Rose By Any Added Name
Derivatives accept been about as continued as accounts itself. They are basically second-tier affairs that acquire their amount from the achievement of an basal asset, index, bill or absorption rate. Insurance is a anatomy of derivative, as are futures, options and swaps.
Starting in 1994, Wall Street began to about-face derivatives abroad from ambiguity – such as if a lender takes out a acclaim absence bandy adjoin a accommodation fabricated to addition affair – and against speculation.
For example, a avant-garde acquired can be “naked” – i.e., taken out by a affair who has no insurable absorption in a transaction at all. If you borrow money from someone, I can access into a acquired arrangement with anyone abroad to accept payments if you absence on your loan.
The analytical affection of the avant-garde acquired is that it allows break of buying of an asset and account from its bazaar value. The a lot of alarming forms of derivatives acquiesce humans to accumulation from bread-and-butter processes and contest in which they accept no role or absorption at all. In added words, gambling.
And it’s a big casino. According to the Bank for International Settlements, the absolute estimated amount of acquired affairs about the apple is an alarming $710 abundance ($710,000,000,000,000). Added estimates put the absolute at over a quadrillion dollars. The top 25 banks in the United States abandoned accept added than $236 abundance of acknowledgment to derivatives.
To accomplish affairs worse, the majority of derivatives are traded over the counter, area data about pricing, accident altitude and collateral, if any, are secret.
A Private Bank in the Caribbean
Most of us can anamnesis cine scenes in which James Bond struts up to a baccarat table in a Caribbean bank for a bold of chemin de fer.
Those sorts of retail-level casinos are baby change compared to the mega-casinos on some of the Caribbean islands. For example, Wells Fargo now has about $2 abundance account of derivatives stored in an asymmetric area accessory registered in the Cayman Islands – basically, just a P.O. box. Bank of America has about a billion, and added big Wall Street banks accept ample amounts as well.
The funny affair is that the official amount of derivatives captivated by U.S. institutions has collapsed badly back the accomplishing of the Dodd-Frank Act in 2013. Trillions of dollars of trades acutely vanished.
But there was no abracadabra trick. U.S. megabanks artlessly confused a big block of their derivatives off their own antithesis bedding and assimilate those of adopted subsidiaries. They able this acknowledgment to a artifice won by a above Enron lobbyist.
When Dodd-Frank was beneath debate, a Republican congressman, Rep. Spencer Bachus of Alabama, proposed that banks’ across operations be alfresco the new rules. To abstain that, Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler drafted accent that said the CFTC would alone arbitrate if U.S. banks’ across operations “have a absolute and cogent affiliation with activities in, or aftereffect on, business of the United States.”
So the banks and their advocate accompany mobilized the troops. If the CFTC wrote the Dodd-Frank accomplishing rules in 2013, the banks sweet-talked CFTC Commissioner Mark Wetjen, a longtime abettor to Democratic Senator Harry Reid. He acclimated his access to admit accent that says that U.S. banks do not “guarantee” the derivatives captivated by their adopted subsidiaries.
So adopted they went.
If You Believe This, I’ve Got a Bridge to Sell You
Thanks to the bipartisan efforts of Wall Street’s buddies in Washington, the trillions of dollars’ account of derivatives captivated by adopted subsidiaries clearly don’t accept any “connection with activities in, or aftereffect on” the U.S. cyberbanking system.
Riiiight. And the Pope ain’t Catholic.
Here’s the absolute deal. 1.) The U.S. cyberbanking arrangement is secretly leveraged to the hilt, and just as acceptable to collapse as it was in 2008 – apparently added so. 2.) Very few humans are acquainted of this because lobbyists accept succeeded in ambuscade it. 3.) If it goes down, some adopted jurisdictions are traveling to go down with it.
If you adopt investment to gambling, by all agency go offshore… but do it my way, not the Wall Street way.