The
vast profits made from drug production and trafficking are
overwhelmingly reaped in rich "consuming" countries - principally across
Europe and in the US - rather than war-torn "producing" nations such as
Colombia and Mexico, new research has revealed.
"The
Story of who makes the money from Colombian cocaine is a metaphor for
the disproportionate burden placed in every way on 'producing' nations
like Colombia as a result of the prohibition of drugs," said one of the
authors of the study, Alejandro Gaviria, launching its English edition last week. .............
With
Britain having overtaken the US and Spain as the world's biggest
consumer of cocaine per capita, the Wachovia investigation showed much
of the drug money is also laundered through the City of London, where
the principal Wachovia whistleblower, Martin Woods, was based in the
bank's anti-laundering office. He was wrongfully dismissed after
sounding the alarm.
The
most far-reaching and detailed analysis to date of the drug economy in
any country – in this case, Colombia – shows that 2.6% of the total
street value of cocaine produced remains within the country, while a
staggering 97.4% of profits are reaped by criminal syndicates, and
laundered by banks, in first-world consuming countries.
The mechanisms of laundering drug money were highlighted in theObserver last year after
a rare settlement in Miami between US federal authorities and the
Wachovia bank, which admitted to transferring $110m of drug money into
the US, but failing to properly monitor a staggering $376bn brought into
the bank through small exchange houses in Mexico over four years.
(Wachovia has since been taken over by Wells Fargo, which has
co-operated with the investigation.)
But
no one went to jail, and the bank is now in the clear. "Overall,
there's great reluctance to go after the big money," said Mejía. "They
don't target those parts of the chain where there's a large value added.
In Europe and America the money is dispersed – once it reaches the
consuming country it goes into the system, in every city and state.
They'd rather go after the petty economy, the small people and coca
crops in Colombia, even though the economy is tiny."
Collapse At Hand
Ever since the beginning of the financial crisis and quantitative easing, the question has been before us: How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits? Not long ago the Fed announced that it was going to continue this policy for another 2 or 3 years. Indeed, the Fed is locked into the policy. Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury’s credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued.
In
other words, financial deregulation leading to Wall Street’s gambles,
the US government’s decision to bail out the banks and to keep them
afloat, and the Federal Reserve’s zero interest rate policy have put the
economic future of the US and its currency in an untenable and
dangerous position. It will not be possible to continue to flood the
bond markets with $1.5 trillion in new issues each year when the
interest rate on the bonds is less than the rate of inflation. Everyone
who purchases a Treasury bond is purchasing a depreciating asset.
Moreover, the capital risk of investing in Treasuries is very high. The
low interest rate means that the price paid for the bond is very high. A
rise in interest rates, which must come sooner or later, will collapse
the price of the bonds and inflict capital losses on bond holders, both
domestic and foreign.
A
number of factors are contributing to the stability of the dollar and
the bond market. A very important factor is the situation in Europe.
...........
Will it be the end of the EU and the euro?
The
Treasury bond market is also helped by the fear individual investors
have of the equity market, which has been turned into a gambling casino
by high-frequency trading.
High-frequency
trades now account for 70-80% of all equity trades. The result is major
heartburn for traditional investors, who are leaving the equity market.
They end up in Treasuries, because they are unsure of the solvency of
banks who pay next to nothing for deposits, whereas 10-year Treasuries
will pay about 2% nominal, which means, using the official Consumer
Price Index ............
Treasury
can have the Federal Reserve print the money to pay off its bonds.
Therefore, bond investment at least returns the nominal amount of the
investment, even if its real value is much lower. (For a description of
High-frequency trading
Unlike
Japan, whose national debt is the largest of all, Americans do not own
their own public debt. Much of US debt is owned abroad, especially by
China, Japan, and OPEC, the oil exporting countries. This places the US
economy in foreign hands. If China, for example, were to find itself
unduly provoked by Washington, China could dump up to $2 trillion in US
dollar-dominated assets on world markets ............
Jeff Nielson explains another way that banks can sell bullion shorts when they own no bullion.
Nielson
says that JP Morgan is the custodian for the largest long silver fund
while being the largest short-seller of silver. Whenever the silver fund
adds to its bullion holdings, JP Morgan shorts an equal amount. The
short selling offsets the rise in price that would result from the
increase in demand for physical silver. Nielson also reports that
bullion prices can be suppressed by raising margin requirements on those
who purchase bullion with leverage. The conclusion is that bullion
markets can be manipulated just as can the Treasury bond market and
interest rates
Fed chairman Bernanke has spoken of an “exit strategy" .......
prevent the inflation by taking the money back out of the banking system
Sell Treasury
bonds this would cause interest rates to increase, this would threaten
the derivative structure & cause bond losses, so Private &
Public Debt would increase & introduce additional problems.
This could spell the end for The $ as The Reserve Currency. The American Banks own $230,000,000,000,000 in derivative bets, JPMorgan
Chase has had to admit that its recently announced derivative loss of
$2 billion is more than that. How much more remains to be seen.
According to the Comptroller of the Currency http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/dq411.pdf the
five largest banks hold 95.7% of all derivatives. The five banks
holding $226 trillion in derivative bets are highly leveraged gamblers.
For example, JPMorgan Chase has total assets of $1.8 trillion but holds
$70 trillion in derivative bets, a ratio of $39 in derivative bets for
every dollar of assets. Such a bank doesn’t have to lose very many bets
before it is busted.
Assets,
of course, are not risk-based capital. According to the Comptroller of
the Currency report, as of December 31, 2011, JPMorgan Chase held $70.2
trillion in derivatives and only $136 billion in risk-based capital. In
other words, the bank’s derivative bets are 516 times larger than the
capital that covers the bets.
Goldman
Sachs takes the cake. That bank’s $44 trillion in derivative bets is
covered by only $19 billion in risk-based capital, resulting in bets
2,295 times larger than the capital that covers them.
Everyone
wants a solution, The US government should simply cancel the $230
trillion in derivative bets, declaring them null and void. As no real
assets are involved, merely gambling on notional values, the only major
effect of closing out or netting all the swaps (mostly over-the-counter
contracts between counter-parties) would be to take $230 trillion of
leveraged risk out of the financial system. The financial gangsters who
want to continue enjoying betting gains while the public underwrites
their losses would scream ..............
Any
government that can murder its own citizens or throw them into
dungeons without due process can abolish all the contracts it wants in
the name of national security. And most certainly, unlike the war on
terror, purging the financial system of the gambling derivatives would
vastly improve national security.
Lloyd's of London preparing for euro collapse
The chief executive of the multi-billion pound Lloyd's of London has publicly admitted that the world's leading insurance market is prepared for a collapse in the single currency and has reduced its exposure "as much as possible" to the crisis-ridden continent.
Richard Ward said the London market had put in place a contingency plan
to switch euro underwriting to multi-currency settlement if Greece
abandoned the euro.
In an interview with The Sunday Telegraph he also revealed that Lloyd's could have to take writedowns on its £58.9bn investment portfolio if the eurozone collapses.
Europe accounts for 18pc of Lloyd's £23.5bn of gross written premiums,
mostly in France, Germany, Spain and Italy. The market also has a
fledgling operation in Poland.
Lloyd's move comes as a major Franco-German provider of credit insurance
for eurozone trade, Euler Hermes, said it was considering reducing
cover for trade with Greece because of the risk the country might leave
the eurozone.
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REGARDS ........... WASP
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