Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Banks Punished For Central Bank and Political Errors

Politics / Banksters Oct 17, 2012 - 03:39 AM GMT

By: John_Browne

Politics

Best Financial Markets Analysis ArticleIn recent decades politicians have increasingly followed the Keynesian prescription of economic growth through continued government borrowing and the creation of undreamt of amounts of fiat money by central banks. To facilitate this process, the larger commercial banks have acted as the central banks' de facto distribution system, and as a result have grown ever larger while accepting progressively greater risks.


In 2008, potential catastrophe loomed as the entire international financial system was challenged with collapse. But, as the 'darlings' of the central banks, the "too big to fail" banks were saved by taxpayer bailouts so that they could continue to play their role in the stimulus engine. But as a result of these distortions, the environment for those banks outside of the exclusive "too big to fail club" has been increasingly challenging. In the United States, the financial services industry is changing radically and many fear that the days of U.S. dominance will be coming to an end.

Public ire resulting from the 2008 financial crisis largely missed politicians and central bankers and landed squarely on "Wall Street." As a result, bankers have become easy political targets. Increased regulation of the banking sector has become the rallying cry for the political left.

In addition to direct assaults on the banks, the ill-designed 2010 Dodd-Frank financial overhaul law has raised considerably the cost of entry to small entrepreneurial financial companies. Already, it is forcing the business of smaller financial companies offshore to the benefit of other countries.

Daniel Tarullo, an influential executive at the Federal Reserve Board, has suggested curbing bank growth by demanding a limit on the non-deposit liabilities of banks. Too often, short-term debt comprises the majority of these liabilities and is a source of potential vulnerability in a credit crunch. Meanwhile, some politicians have urged higher capital requirements in order to curb increasing bank size. Even ex-bankers such as Sandy Weil who led the lobbying effort to abolish the Glass-Steagle Act are now calling for its effective restoration. As a result, many corporations are deciding to leave the banking sector.

Companies for whom banking services provide an added benefit to their non-bank clients are fearful of the threat of increased capital requirements and of new, as yet to be clarified, Federal Reserve banking regulations. As such, it is a classic example of how excessive and uncertain regulations are hurting American business and employment. A specific example is that of tax preparation firm H&R Block. Years ago the company launched a service that provides some banking services to its customers. Recently they re-evaluated that strategy and have engaged advisors Goldman Sachs to help them "evaluate strategic alternatives." In other words, they are looking to shed the unit.

Those large banks that remain, firmly entrenched and supported by government guarantees, see little reason to provide cost effective services for retail clients. Most people with bank accounts in the United States will likely agree that in recent years banking fees have gone up while the level of service has gone down. This has resulted in private enterprise proposing innovative solutions. Recent moves by retail giant Walmart provides one example.

The Federal Deposit Insurance Commission (FDIC) pointed out some weeks ago, some 51 million Americans are "under banked". Worse, about 17 million are "unbanked". This implies a massive potential need for banking services for individuals at the lower end of the socio-economic spectrum. Many such Americans do a great deal of their shopping at Walmart, which purveys a wide variety of merchandise at extremely low prices.

To provide a service to these potential customers, Walmart has announced an agreement with American Express to issue a prepaid debit card entitled 'Bluebird'. This will enable less well-off consumers to purchase products from Walmart without surrendering their paychecks to a bank, thereby exposing themselves to high banking fees, or to put their purchases on conventional credit cards, which are notorious for high fees. As the service involves no extension of credit, Bluebird should provide cost effective service to the poor while involving no financial risk to either Walmart of American Express.

While Walmart's efforts may be timely and successful, the move will not reverse the fading glory of the U.S financial services sector. In order to perpetuate its system of massive money distribution, the Fed has insured that American banking will become as competitive domestically and globally as American manufacturing, which is to say, not at all.

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, Michael Pento, and John Browne delivered to your inbox every Monday.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules