Federal Reserve Says Banks Need to Brace For Economic Impact

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The Federal Reserve Bank (FRB) warned financial institutions to reserve on-hand cash, government bonds and all highly rated assets to survive a severe economic “downturn”.

The FRB outlined essential “liquidity” requirements to ensure that cash can be assessed in an instant.

Those financial institutions with more than $250 billion in assets on the books are now required to hold those cash reserves to fund banking operations for 30 days during severe market “stress”.

Smaller banks with an estimated $50 million in worth are expected to have that much in in-house accounting to survive for 21 days.

Banks are being subject to international standards as disseminated by the Bank for International Standards (BIS).

Ben Bernanke, chair of the FRB said: “Liquidity is essential to a bank’s viability and central to the smooth functioning of the financial system. [The new regime] would foster a more resilient and safer financial system in conjunction with other reforms.”

Last January the BIS and the Basel Committee on Banking Supervisors (BCBS) has applied the underlying pressure on US banks to liquidate to appease global markets. The American taxpayer is picking up the tab for this turn of events. BIS is giving these banks until 2019 to comply with their new rules. Capital to prop up the banks will be needed while they liquidate assets such as bonds, mortgages, loans and stock shares.

Consequences of the liquidation have been evidenced in governmental austerity and movement toward sovereign debt by the technocrats. Any asset assessed by Basel can and is being used as collateral of the banksters in an anything goes temperament while the squandering of wealth continues.

BIS has used the scheme of forcing capital from the banks to control the measures taken globally. International banking constraints mandated in these new rules are putting more control into the hands of “shadow banks” where supervision is unheard of.

Michel Barnier, commissioner of BIS, stated that the Basel Committee has “revised liquidity coverage ratio and the gradual approach for its phasing-in by clearly defined dates. This is significant progress which addresses issues already raised by the European Commission. We now need to make full use of the observation period, and learn from the reports that the European Banking Authority will prepare on the results of the observation period, before formally implementing in 2015 the liquidity coverage ratio under EU law in line with the Basel standards.”

Liquidity is seen by the technocrats as a necessity for “the stability of banks as well as for their role in supporting wider economic recovery.”

At a time when the introduction of a global currency to replace all fiat across the globe is at hand, it makes perfect sense that the technocrats are positioning themselves to control the central banks as offshoot branches of their operation. At the head of this monster, the BIS sets the tone and directs the banksters with limitations and orders.

The European Central Bank (ECB) is setting the stage of a complete financial collapse of fiat currencies across the globe. Joining in the scheme are other technocratic institutions such as the Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan and the Swiss National Bank.

Under the guise of preventing a system failure during the global financial crisis, there will be “an extension of the existing temporary US dollar liquidity swap arrangements until February, 1 2014.” This action allows the central bankers to liquidate currencies under their jurisdiction “should market conditions so warrant.” Under this plan, euros backed by nothing can continue to pour into the system throughout the Eurozone “in addition to the existing liquidity-providing operations” in the US. This liquidation will take place “until further notice.”

The UN has proposed a complete overhaul in the report entitled, “Adapting the International Monetary System to Face 21st Century Challenges”.

They call for a “more intense debate on and reforms to the international monetary system imply that the current system is unable to respond appropriately and adequately to challenges that have appeared, or become more acute, in recent years. This paper focuses on four such challenges: ensuring an orderly exit from global imbalances, facilitating more complementary adjustments between surplus and deficit countries without recessionary impacts, better supporting international trade by reducing currency volatility and better providing development and climate finance. After describing them, it proposes reforms to enable the international monetary system to better respond to these challenges.”

They recommend movement toward a global currency that will replace all current currencies. Revaluation will be accessed and the worth of money would redistribute with oversight of the IMF, WTO and ultimately the UN.

source: occupycorporatism

MAJOR NEWS: CHASE Bank Limits Cash Withdrawals…

Chase Bank has moved to limit cash withdrawals while banning business customers from sending international wire transfers from November 17 onwards, prompting speculation that the bank is preparing for a looming financial crisis in the United States.

Numerous business customers with Chase BusinessSelect Checking and Chase BusinessClassic accounts have received letters over the past week informing them that cash activity (both deposits and withdrawals) will be limited to a $ 50,000 total per statement cycle from November 17 onwards.

The letter reads;

Dear Business Customer,

Starting November 17, 2013:

– You will no longer be able to send international wire transfers. You will still be able to send domestic wires and receive both domestic and international wires. We’ll cancel any international wire transfers, including reccurring ones, you scheduled to be sent after this date.

– Your cash activity limit for these accounts(s) will be $ 50,000 per statement cycle, per account. Cash activity is the combined total of cash deposits made at branches, night drops and ATMs and cash withdrawals made at branches (including purchases of money orders) and ATMs.

These changes will help us more effectively manage the risks involved with these types of transactions.

Another letter (PDF) received by Peak to Peak Charter School, a college in Colorado, states that the option to send both international and domestic wire transfers has been withdrawn from Chase business savings account holders.

Shortly after we posted this story, other Chase business customers confirmed they had also received similar or identical letters.

“I’m a Chase customer with both of the type accounts mentioned and got the letter posted,” wrote one.

“I have been a loyal customer of Chase for 11 years and I received the letter for my business and when I called about this I was told basically piss off and find another bank!” added another.

Chase is obviously very keen to make it hard for their customers to have any kind of control over their savings and is trying to prevent them from sending dollars abroad, prompting concerns that Cyprus-style account gouging could occur in America.

The move to limit deposits and withdrawals while banning international wire transfers altogether is a bizarre policy and will cripple many small and medium-sized businesses with Chase accounts. Buying stock from abroad in any kind of quantity will now become impossible for many companies, while paying employees will also be a headache.

Why has Chase announced such a ludicrous and restrictive policy change and is it related to the potential for a US debt default?

Speculation is rife that the bank is preparing for some kind of economic crisis by “locking down” its customers’ money. Although most still expect a deal to be struck to prevent a US debt default, its impact would “shake financial markets to a degree not seen since the Great Depression,” according to experts.

Others fear the move to restrict international wire transfers is part of a plan to protect against a near-future collapse of the US dollar.

Whatever the truth behind the policy change, Chase really needs to publicly explain its reasoning in order to quell the speculation.

The bank’s reputation was already under scrutiny after an incident earlier this year where Chase Bank customers across the country attempted to withdraw cash from ATMs only to see that their account balance had been reduced to zero. The problem, which Chase attributed to a technical glitch, lasted for hours before it was fixed, prompting panic from some customers.

Earlier this month it was also reported that two of the biggest banks in America were stuffing their ATMs with 20-30 per cent more cash than usual in order to head off a potential bank run if the US defaults on its debt.

The image below shows another example of a Chase business customer receiving the same letter.

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What China Really Thinks of the Shutdown

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In the midst of a domestic crisis, it is easy to forget that the rest of the world is watching. Now that the U.S. federal government has shut down for the first time since the mid 1990s, the talk of the town is the political problems of the world’s largest economy and sole superpower. In China, most media reports about the shutdown have been merely informative, but every now and then they offer a rare insight into what the Chinese have learned about America’s shortcomings.

“As far as the Chinese populace is concerned, the government shutdown is like the Arabian Nights,” writes Wang Xuejing of Hong Kong Daily News. Evidently, for the citizens of a totalitarian state, the prospect of a government shutdown seems otherworldly. The newspaper Qilu Wanbao complains, “To us, far on the other side of the ocean, the information appears contradictory. Some say Americans are furious […] Some say [everyday] life remains unchanged. Have or haven’t Americans been affected by the federal shutdown?”

The notion of a government shutdown is strange for the average Chinese person because its consequences in the People’s Republic would go far beyond closed federal agencies and parks. In mainland China, and increasingly Hong Kong, every school and every agency (national and local) answers to a party minder. Banking and internet traffic are also closely monitored by Beijing. Should the party overseers be absent one day, many organizations crucial to China’s social structure would suddenly find themselves without official guidance. The effects of such an abrupt and unfamiliar decentralization are impossible to predict.

Yet other commentators find the federal shutdown inspiring. Dr. Li Xiaohui, Assistant Professor of Law at Xiamen University writes, “The life of the average American has not been greatly affected by it and the economy has continued to grow. This reflects the clear limits between America’s government and the market. Our country should likewise move forward and decouple the government from the economy.” Similarly, the newspaper Nanfang Dushi Bao commended the strength of American society for being able to function without the government.Interestingly, while the American public sees the shutdown as a government failure, some Chinese are seeing it as a sign of efficiency. The common belief that the Chinese words for “opportunity” and “crisis” are the same, though wildly untrue, seems applicable in this case.

While common Chinese citizens muse over the implications of a shutdown, China’s leadership has been giving the impression of merrily promenading through Southeast Asia, stealing the international spotlight. Taking advantage of Obama’s absence at the recent APEC and East Asia summits, President Xi Jinping visited Malaysia and Indonesia with a friendly demeanor that his predecessor would have likely avoided, greeting the Indonesian parliament in the local language and visibly travelling with his celebrity wife Peng Liyuan. In Brunei, on the other hand, Premier Li Keqiang stuck to the usual rhetoric of making progress on a code of conduct for the South China Sea disputes and indirectly urged the U.S. not to get involved.

But aside from bewilderment and contentment over the shutdown, there is also concern in China about the possibility of a future U.S. default. At a recent news conference in Beijing, China’s Vice Finance Minster Zhu Guangyao said that the U.S. must protect its creditors, stating, “safeguarding the debt is of vital importance to the economy of the U.S. and the world […] This is the United States’ responsibility.” Dr. Li echoed the Minister’s message, “The shutdown of the American government is a warning to our compatriots that we should optimize the allocation of our foreign exchange reserves.”

As the largest holder of U.S. debt, China unsurprisingly appears more concerned about American solvency than about the unfamiliar mechanics of a representative democracy. Despite this, China as a whole also appears to be learning a great deal from the shutdown, not only about the American political system, but also about itself and its future. As the shutdown enters its third week, it remains to be seen if America will learn something as well.

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Catastrophic Default Looms As Global Economy On The Verge Of Collapse

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The foundation for the original financial architecture and economic systems of the modern era was laid over the last two to three centuries.  Much of the actual architecture and various systems were designed, engineered and constructed during a time that would be considered the Stone Age when compared to the Information Age of 2013.  Herein lies the crux of the matter.

Way back in the days there were relatively few stock and bond exchanges, as well as limited currency and commodity trading. Of course, real estate investments have always been around but certainly not in the form of Real Estate Investment Trusts, Real Estate Limited Partnerships, and Collateralized Debt Obligations that we see today.

Over the last century there has been exponential growth experienced in every single market across the globe.  Equity, bond, currency, commodity, real estate, derivative to name the primaries.  Each of their original trading platforms were built to accommodate a vastly different world.  You could say that the foundation specs were quite minimal, especially relative to the 21st century.

Was Superstorm Sandy really an OMEN?

By way of an analogy we all saw Superstorm Sandy blow through the Northeast in October of 2012.  As it wended its way though New York City, what was revealed was just how vulnerable the Big Apple really is.  Especially the business district in Lower Manhattan.  Even the subway lines from Wall Street down to the Battery were incapacitated for an unheard of amount of time.  Much of Wall Street all the way to the Battery was either without power or completely shut down for days after the storm.

What’s the point?

The city of New York was also built over a few centuries.  However, much of the infrastructure was built over the past one hundred years.  Each decade of expansion brought with it new layers of technology and building materials and design changes.

As each new phase of construction was overlaid on top of the preceding one, the infrastructure became burdened by the outdated or obsolete technology from previous times.  Equipment and machinery that was old and worn out became easily stressed when forced to operate under extraordinary pressures such as weather events like Superstorm Sandy.  Likewise, inferior parts and substandard components served to further weaken the entire system, especially the older infrastructure and creaking architecture, just as we saw happen in the wake of Sandy.

Images from the Metropolitan Transit Authority of Sandy damage in the NYC area.

The following statement concerning technospheric breakdown accurately describes not only the predicament of NYC infrastructure, it’s also applicable to the current state of the global economic foundation and financial architecture.

“Equipment, machinery and technology which has not been proportionately upgraded to meet obvious requirements, ever-growing needs, newly emerging challenges and contingencies of the 21st century will begin to fail and breakdown at an ever-increasing rate.”
– “Technospheric Breakdown: Ongoing, Ubiquitous and Unstoppable

When the economic foundation cracks and the financial architecture teeters

Herein lies the greatest challenge of the 21st century regarding the consequences of globalization and current state of worldwide commerce.  The world is now one huge marketplace. However, the current global marketplace was assembled over decades (and centuries) by the piecing together of a multitude of little markets. A veritable hodgepodge of financial patchwork and economic mishmash have been somehow jumbled together to make it all stick together to function as a cohesive global economy.

How the markets (read global marketplace) continues to function, given all of the obvious flaws and inherent weaknesses  is anybody’s guess. Truly, only by the daily manipulations and monthly machinations of the Hidden Hand does it really continue to present some semblance of order and efficiency. Were it not for the artificially propping up of so many collapsing platforms, the whole House of Cards would have fallen many years ago. The following quote sums up the true state of affairs quite well.

“The global money matrix, worldwide financial architecture and planetary economic landscape most closely resemble the proverbial House of Cards in the form of a Pyramid-Ponzi scheme superstructure built on quicksand.”
– “The FOUR HORSEMEN Herald the Death Knell of ‘Free Market’ Capitalism

US Government Shutdown, Debt Ceiling, and Budget Debate

Clearly Obamacare has served as a worthy pretext to initiate the much more serious issues facing the US Government and American people. Whereas it has the potential to bankrupt the nation over the long term, so does the failure to reign in the burgeoning $17 trillion dollar debt and ballooning federal budget deficits.

In this regard, Oct. 17 functions merely as the latest in a long series of wakeup calls. Managing the largest economy on earth with virtually no budgetary consensus or attention to a catastrophic national debt level is a recipe for disaster. Overlaying the most costly and forced piece of legislation (aka Obamacare) during this time of economic turmoil and financial uncertainty has only further upped the ante.

Kicking-the-can

No, the proverbial CAN can no longer be kicked down the road. And to continue to do so will only make matters much worse. The various market bubbles, which are expanding against all odds at this very moment, will deflate sooner or later. If they pop in a disorderly fashion, it will not be a pretty picture.

There’s no question that the derivative market provides the glue, tape and staples which hold the entire House of Cards together. The myriad bets being placed and hedge positions being held are literally keeping this global Ponzi scheme from falling apart. Therefore, it’s imperative that serious regulatory controls be enacted for this ever-burgeoning derivative market.  Otherwise, the consequences will be too great to even consider putting “Humpty Dumpty back together again”.

It would be much better for every stakeholder playing this game, if the current opportunity (read government shutdown) for a reality check triggers a genuine attempt toward finding real solutions. Denial is no longer an option. The whole world will fall victim to whatever financial apocalypse and/or economic armageddon awaits in the absence of a durable resolution.

If October 17th comes and goes without the President and Congress appropriately addressing the actual systemic issues related to government spending, tax reform and the national debt, the USA risks even greater calamity when things do reach the final breaking point.

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12 Very Ominous Warnings About What A U.S. Debt Default Would Mean For The Global Economy

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A U.S. debt default that lasts for more than a couple of days could potentially cause a financial crash unlike anything that the world has ever seen before.  If the U.S. government purposely wanted to damage the global financial system, the best way that they could do that would be to default on U.S. debt obligations.  A U.S. debt default would cause stocks to crash, would cause bonds to crash, would cause interest rates to soar wildly out of control, would cause a massive credit crunch, and would cause a derivatives panic that would be absolutely unprecedented.  And that would just be for starters.  But don’t just take my word for it.  These are the things that top financial experts all over the planet are saying will happen if there is an extended U.S. debt default.

Because they are so close together, the “government shutdown” and the “debt ceiling deadline” are being confused by many Americans.

The “partial government shutdown” that we are experiencing right now is pretty much a non-event.  Yeah, some national parks are shut down and some federal workers will have their checks delayed, but it is not the end of the world.  In fact, only about 17 percent of the federal government is actually shut down at the moment.  This “shutdown” could continue for many more weeks and it would not affect the global economy too much.

On the other hand, if the debt ceiling deadline (approximately October 17th) passes without an agreement that would be extremely dangerous.

And if the U.S. government is eventually forced to start delaying interest payments on U.S. debt (which could potentially happen as soon as November), that would be absolutely catastrophic.

Once again, just don’t take my word for it.  The following are 12 very ominous warnings about what a U.S. debt default would mean for the global economy…

#1 Gerald Epstein, a professor of economics at the University of Massachusetts Amherst: “If the US does default, that will make the Lehman Brothers bankruptcy look like a cakewalk”

#2 Tim Bitsberger, a former Treasury official under President George W. Bush: “If we miss an interest payment, that would blow Lehman out of the water”

#3 Peter Tchir, founder of New York-based TF Market Advisors: “Once the system starts to break down related to settlement and payments, then liquidity disappears, as we saw after Lehman”

#4 Bill Isaac, chairman of Cincinnati-based Fifth Third Bancorp: “We can’t even imagine all the things that might happen, just like Henry Paulson couldn’t imagine all the bad things that might happen if he let Lehman go down”

#5 Jim Grant, founder of Grant’s Interest Rate Observer: “Financial markets are all confidence-based. If that confidence is shaken, you have disaster.”

#6 Richard Bove, VP of research at Rafferty Capital Markets: “If they seriously default on the debt, what we’re really talking about is a depression”

#7 Chinese vice finance minister Zhu Guangyao: “The U.S. is clearly aware of China’s concerns about the financial stalemate [in Washington] and China’s request for the US to ensure the safety of Chinese investments.”

#8 The U.S. Treasury Department: “A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse”

#9 Goldman Sachs: “We estimate that the fiscal pull-back would amount to 9pc of GDP. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed quickly”

#10 Simon Johnson, former chief economist for the IMF: “It would be insane to default, but it’s no longer a zero-percent probability”

#11 Warren Buffett about the potential of a debt default: “It should be like nuclear bombs, basically too horrible to use”

#12 Bloomberg: “Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.”

A U.S. debt default could be the trigger for the “nightmare scenario” that so many people have been writing about in recent years.  In fact, it could greatly accelerate the timetable for the inevitable economic collapse that is coming.  A recent Yahoo article described some of the things that we would likely see in the event of an extended U.S. debt default…

A default would upend money markets, destroy bond funds, slam the brakes on lending, cause interest rates to spiral, make our banks insolvent, and deal a blow to our foreign trading partners and creditors around the globe; all of which would throw the U.S. and the world into economic disarray.

And of course stocks would crash big time.  Deutsche Bank’s David Bianco believes that if the U.S. government starts missing interest payments on U.S. Treasury bonds, we could see the S&P 500 go down to 850 by the end of the year.

There would be almost immediate panic among ordinary Americans as well.  In fact, it is being reported that some banks are already stuffing their ATM machines will extra cash just in case…

With just 10 days left to raise the debt ceiling and congressional Republicans threatening to force the government to default on its obligations, banks are taking some dramatic steps to prepare for the economic chaos that would result should the brinkmanship continue.

The Financial Times reports that one major U.S. bank has started stuffing its automatic teller machines with extra cash in preparation for a possible bank run from panicked depositors. The New York Times reports that another bank is weighing a plan to advance funds to customers who rely on Social Security and other government payments that could stop in the event of a default.

Let’s hope that cooler heads will prevail and that a U.S. debt default will be avoided.

Unfortunately, it appears that the Democrats are absolutely determined not to be moved from their current position a single inch.  They have decided to refuse to negotiate and demand that the Republicans give them every single thing that they want.

And who can really blame them for adopting that strategy?  After all, it has certainly worked in the past.  Whenever Democrats have stood united and have refused to give a single inch, the Republicans have always freaked out and caved in eventually.

Will this time be any different?

The funny thing is that once upon a time, Barack Obama was adamantly against any increase in the debt limit.  The following comes courtesy of Zero Hedge

Obama Debt Ceiling

But now Obama says that it is so unreasonable to be opposed to a debt limit increase that any negotiations are out of the question.

So which Obama is right?

If the Democrats will not negotiate, a debt default could still be avoided if the Republicans give in.

And that is what they always do, right?

Perhaps not this time.  Just check out what John Boehner had to say on Sunday

“I, working with my members, decided to do this in a unified way,” the speaker said — with demands to defund, delay or otherwise alter the Affordable Care Act.

Boehner had expected that the Obamacare fight would come during the next vote to raise the debt ceiling, “but, you know, working with my members, they decided, let’s do it now,” he said. “And the fact is, this fight was going to come, one way or another. We’re in the fight. We don’t want to shut the government down. We’ve passed bills to pay the troops. We passed bills to make sure the federal employees know that they’re going to be paid throughout this.”

“You’ve never seen a more dedicated group of people who are thoroughly concerned about the future of our country,” he said of House Republicans. “It is time for us to stand and fight.”

But will the Republicans really stand and fight?

In the past, betting on the intestinal fortitude of the Republican Party has been a loser every single time.

So we’ll see.  Boehner insists that this time is different.  Boehner insists that he is not going to fold like a 20 dollar suit this time.  In fact, when he was asked if the U.S. government was headed toward a debt default if Obama continued to refuse to negotiate, Boehner made the following statement

“That’s the path we’re on.”

The mainstream media has certainly been placing most of the blame at the feet of the Republicans, but at least the U.S. House of Representatives has been trying to get an agreement reached.  The House has voted 26 times since the Senate last voted.  Harry Reid has essentially shut the Senate down until the Republicans fold and give the Democrats exactly what they want.

The funny thing is that this could probably be solved very easily.  If the Democrats agreed to a one year delay to the individual mandate, the Republicans would probably jump at it.  And because of epic technical failures, hardly anyone has been able to get signed up for Obamacare anyway.  So a one year delay would give the Obama administration time to get their act together.

Unfortunately, the Democrats seem absolutely obsessed with the idea that they will not give the Republicans one single inch.  They seem to believe that this will be to their political benefit.

But this is a very dangerous game that they are playing.  The U.S. government must roll over 441 billion dollars of short-term debt between October 18th and November 15th.

If a debt ceiling increase is not in place by that time, it will send interest rates soaring.  Borrowing costs for state and local governments, corporations, and ordinary Americans will go through the roof and economic activity will be hit really hard.

And as detailed above, we could potentially be looking at a financial crash that would make 2008 look like a Sunday picnic.

So let us hope for a political solution soon.  That will at least kick the can down the road for a little bit longer.

If a debt default were to happen before the end of this year, that would bring a tremendous amount of future economic pain into the here and now, and the consequences would likely be far greater than any of us could possibly imagine.

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