Western Banking: Money for Nothing

VANCOUVER (Bullions Bull Canada) -- For those seeking economic truths in a world saturated with corporate propaganda, it can often be useful and revealing to follow the work of the Apologists.

In attempting to "explain" the transgressions of their masters it is nearly inevitable that details will slip out others would have rather remained secret.

A classic example would be when Jeffrey Christian of the CPM Group -- an ex- Goldman Sachs banker and noted banking apologist -- was testifying before the CFTC regarding the issue of manipulation in bullion markets.

In attempting to pooh-pooh the relentless manipulation taking place in these markets, Christian casually mentioned that "the gold market" was about 100 times larger than the actual amount of bullion being traded.

Let me reiterate this: The actual total of assorted "paper bullion" and "bullion derivative" products in this market has leveraged the amount of real bullion being traded by a factor of approximately 100:1. Two points follow from this slip of the tongue.

First, in attempting to cover up the serial manipulation of bullion markets, the Western financial crime syndicate would have preferred people didn't know that every ounce of gold and silver being traded was leveraged (in aggregate) by roughly 100:1. It's not the sort of thing that gives the chumps confidence in the bankers' paper-bullion "products."

Second, given that this admission came from one of the bankers' "friends" and is now several years old, that 100:1 ballpark estimate must now be regarded as a very conservative figure. However, Jeffrey Christian is not the only one of the bankers' friends to have been damning them with faint praise.

The legendary banking apologists of Bloomberg were recently attempting to stamp out any fears that an imminent downgrade of the U.S.'s triple-A credit rating would lead to a plunge in U.S. bond prices and soaring interest rates.

They did this by pointing out the credit ratings on government bonds made by the banking analysts at these ratings agencies are totally irrelevant. Said Bloomberg:
...Bond investors needn't worry that a rating cut will hurt returns. About half the time, government yields move in the opposite direction suggested by new ratings, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back to 1974.

Thus, according to Bloomberg, investors in government bonds could have gotten equally good "advice" on the direction of bond prices and interest rates for the past 40 years by flipping a coin -- meaning that the services provided by these bankers were/are worthless (as a tautology of logic).

Of course, here is where it gets interesting: Credit ratings (i.e., the creditworthiness of nations) should matter in determining bond prices and interest rates. There are only two possible explanations as to how/why the credit ratings of Western sovereign debt have been totally worthless for at least 40 years:
  1. The bankers working for the credit ratings agencies are utterly incompetent or corrupt.
  2. Western bond markets are so heavily manipulated they simply do not respond to economic fundamentals.

Readers can choose the explanation they find most plausible. Note that neither is mutually exclusive.

However, such revelations pale in comparison to the recent work of German propaganda outlet Der Spiegel. While Bloomberg's apologists were merely trying to explain/defend the absurdly corrupt U.S. bond market Der Spiegel was attempting to defend/justify investment banking as a whole.

Obviously even the propagandists know it is impossible to defend the psychopathic gamblers generally lumped under the category of "traders" who spend half their time making extremely risky/insanely leveraged bets and the other half of their time scamming clients with the banksters' notorious fraud scams.

Thus Der Spiegel acknowledges these people are nothing but psychopath-gamblers, and then presents us with a myopic, tip-of-the-iceberg look at their litany of crime. However, it then attempts to differentiate these bad bankers from the good bankers: the "M&A consultants and IPO specialists".

Out come the rose-colored glasses as Der Spiegel proclaims:
...All of this insane gambling and scamming clients has little to do with traditional investment banking, say so-called M&A consultants and IPO specialists. They arrange mergers and acquisitions, plan initial public offerings and embody a completely different kind of banker. They come complete with a broad job profile and multiple foreign languages, and they've often had years of training in management consulting firms. In fact, the people working in the trading rooms are about as foreign to them as car salesmen are to professors. emphasis mine

However, as frequently takes place with these serial-apologists, the writers were unable to maintain their Grand Illusion through to the end. A little later on, the truth comes out about these "professors":
...It only gradually emerged that the bankers, with their murky forecasts, were often wrong. In fact, studies now show that every other merger was a failure. Nevertheless, the volume of such transactions increased tenfold from 1990 and 2007, to almost $4 trillion worldwide. Investment bankers, it would seem, can be very convincing - especially when they're banking on high fees. emphasis mine

Again, what is presented here is completely unequivocal: Half of all the mergers put together by the Western banking cabal were/are failures. As with credit ratings, corporate clients could have obtained equally competent "merger advice" by flipping a coin -- meaning that as with credit ratings M&A banking is (in aggregate) a 100% worthless service.

What is unclear from Der Spiegel's more-realistic characterization of investment banking is whether, like the "traders", the M&A consultants were deliberately scamming their clients for their gigantic fees or whether they were merely recklessly fleecing their clients with their gigantic fees.

Presumably the same also applies to the "IPO specialists" (since Der Spiegel made a point of grouping them closely with the M&A consultants). However, we could always seek a second opinion on this topic from Facebook ( FB) shareholders.

The more general point made here by Der Spiegel -- and much, much more damning -- is clear. The services of the "good bankers," the M&A consultants (and IPO specialists?) are totally worthless in that equally competent "advice" can be obtained from a coin toss.

By implication, this means the "services" (for lack of a better word) provided by the bad bankers are, in aggregate, worth much less than zero -- meaning the massive overt harm committed by these serial criminals makes their work much worse than merely "worthless."

Even more generally, we have an entire industry -- investment banking -- that extracts exorbitant fees for its services (the largest in the history of human commerce); but where even the friends of this industry explicitly point out (via long-term data) that these services are absolutely worthless.

There is an identical parallel in nature. Creatures that relentlessly suck the blood from other creatures while providing nothing in return are known as parasites. Those are the "good" bankers.

For an appropriate analogy for the bad bankers (i.e., the traders) who relentlessly blood-suck their "clients" while simultaneously doing massive/catastrophic harm, there's the vampire.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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