Unravelling the control of, by and for banks

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Lead Editorial

7 August 2024
Vol. 26 No. 32

Recession fears sparked a dramatic selloff on US markets at the end of last week, setting off a contagion which quickly spread worldwide. Concerns were ignited by slumping US manufacturing activity and payroll figures, combined with warnings that the USA would soon be embroiled in a broader Middle East war. On Monday morning the yen soared in value due to Japan’s recent rate hikes (blindly ruled out by many) and by day’s end the Nikkei stock market index had seen the biggest crash—12.4 per cent—since 1987, and the worst drop, in point terms, in its history.

Market crashes in 1914, 1929, 1987 and 2008 were all the result of reality stopping a speculative mania in its
tracks—when the hopes of a never-ending investment boom are smashed by the incessant build-up of economic reality, ruptured usually by some insignificant, final economic straw. 

All of the cited triggers are simply straws: economic data, disappointing earnings reports on tech stocks, the busting of the mythology surrounding Artificial Intelligence, and more. 

Many fear a recession, say media reports, but “recession” doesn’t begin to cut it. 

Anglo-American financial hegemony is coming to an end and the writing has long been on the wall. Recall the following events of the last five years: 

• In September 2019, just one month after central bankersand banks teamed up to demand drastic action to save the economy (“monetary regime change”), the US Fed engineered a more elaborate bailout than in 2008 (to deal with the “repo crisis”).
• This operation was repeated on a grander scale in March 2020 with unprecedented Fed-Treasury collusion.
• Skipping over other financial dramas, from Gamestop to Archegos, in early 2023 the USA saw its second, third and fourth largest bank failures in history, within just three weeks.
• In the midst of that saga, to stop a collapse of the global financial system, Swiss, British and US central banks and regulators contrived a massive intervention to prevent a collapse of financial giant Credit Suisse—itself plagued by US crashes including Archegos Capital Management in March 2021 and the declining value of US Treasury bonds (with rising interest rates).
• As a result of all this, the US Treasury market—the “bedrock” of global markets—was taken over by a “handful” of risky hedge funds, as even AFR warned in December 2023.

The Bank for International Settlements in December 2019 warned that domination of the repo market (the interbank
lending circulatory system for US banking) by hedge funds, could result in disruption that “could quickly ripple through the financial system”. The 2024 IMF Global Financial Stability Report said the volatile US Treasury market could threaten the entire global system. A January 2024 American Enterprise Institute report admitted the Fed is “operating at a loss, deeply technically insolvent, and with asset shortfalls”. In May 2024 the US Treasury announced a program to buy back its own bonds.

An unnamed senior executive at one of the world’s largest hedge funds told the 26 September 2023 London Financial Times: “If hedge funds stopped buying Treasuries, I don’t know who would buy them.” As AAS reported last week, some nations have significantly decreased their holdings of US Treasuries and it appears there is a concerted campaign, led by the UK, to prop them up. 

In April this year another regional US bank collapsed, with others on the ropes. As the Citizens Party asked in its 9
May Citizens Report (titled “Are you ready for 2008 on steroids?”), “Where are the blaring financial warning headlines?” 

The breakthroughs we and our collaborators are making—including the demands of parliamentary committees to
break up useless corporate regulator ASIC (Citizens Insight, 6 Aug.) and establish an expert panel to consider a government postal bank—are a reflection of the shifting economic reality, as are the stunning revelations about the banks’ control over Assistant Treasurer Stephen Jones (p. 4).

In this week's issue: 
•    Australia Post mercenaries vs. licensees: Whose side are you on, Albanese?
•    Compromised Jones absolves banks of scams responsibility
•    ANZ bond scandal highlights need for re-regulation and a public bank
•    The Petroleum and Minerals Authority: the battle for control over Australia’s ‘great mineral wealth’
•    Messianic fanatics drive Israel to ‘Armageddon’
•    Building a new leadership coalition
•    Australian scientist on cusp of defeating world’s no. 1 killer with first permanent artificial heart
 

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