New opportunities for fiddlers

As people become more cautious about their investments in virtual banking products the great boni of the bankers for cashing in money from the street seem to be over. However, there is always money on the table for tricky bankers. The banking lobby and the experts in consulting have convinced the government to spend the money of the people for them. Now there are gresat opportunities to grab a good portion of the 700 Billion $ bailout pot without serious work. Again Great Times for fiddlers.Things get even worse for the working class because they have no chance to control where the money is spent. In the last banking crash you could decide by yourself wether you participate or not. My standard question “Please explain in three sentences why you could care better for my money than me”" was very helpfull when dealing with financial advisers. But now government is decisiding where my money will go. I am just an “anonymous workaholic” providing tax money which is joyfully spent by the people which got us in the current trouble.

Roots of the Evil – The Great Crash 1873

Bankers and politicians declare in millions of interviews and press statements that the current banking crisis is something totally new and nobody could predict it. This is certainly not true (much like the other stuff your banker is telling you) . The great crash in 1873 in Germany was just one of many starting points of the great depression hitting Europe in 1929.

• The first common problem between 1873 and the current crisis was deregulation. Starting with a law in1870 which allowed creating banks and  public companies without any strings attached. As a result 107 banks and 928 public companies were founded between 1871 and 1873.  Everybody could found a bank and collect money from the public.
• The second problem was short term. massive supply of money (3 times the GNP of Germany) mainly coming from France, after France lost the war 1871.  However, the money was flowing only for a very short time.
• The third common problem was the explosion of the real estate market. Profits of 600% per year were possible. Most of the long term real estate investments was financed with short financing contracts.  Today you still can see a lot of big buildings from the “Gründerzeit”.  Brick and Mortar lasted but the money of the investors was gone.
• The fourth problem was the huge amount of “fake” and overvalued shares. Even in 1870 the Germans bought American railway shares which soon became worthless. One company was even selling shares successfully for a “moon to earth” railway system.
• The fifth problem was a major change in technology. With the exploitation of steam engines to the production and transportation of wheat from USA and barley from Russia. The German farmers were no longer competitive – export of grain declined dramatically (much like export of cars or import of goods from China today).
• The sixth problem was that more and more people could not make their living anymore in the countryside. Thus people moved to the cities and lived in slums.
• Much like today everybody was playing the financial poker game. The game ended when the Rothschild Bank collapsed in May 1873 (the Lehman Brothers of 1873).

I guess that’s enough material to think about!

Recommended reading: Die Wurzeln des Bösen [The Roots of Evil] by Massimo Ferrari Zumbini

Where do the bankers spend the government money?

US government was more than eager to provide 700 B$ for the criminal failure of the banking industry. In contrast the US senate is not willing to support the automotive industry with a couple of billion dollars. The reason is pretty simple – everybody who looks at a car of GM, Ford and Chrysler can easily see that their cars are not competitive. The banking products secured by the huge government loans and guarantees are not competitive either. However, because most people including politicians know much less about banking than cars, they willingly follow the banking managers. The “new” money given by government to the banks will first be used to get rid of banking employees with amazingly high salaries. The average salary at a typical German investsment bank was about 700 k$ including clerks and secretaries. US bankers commanded much higher salaries. Now most of these people are laid off with a nice handout of two to three times their yearly salary. Now it turns out that the profits they showed in the past were virtual but the bonusses they cashed in were very real. For sure ese golden handshakes are paid by the taxpayer. The poor workers at GM, Ford and Chrysler will probably not see golden handshakes when they are laid off.

Interesting to note, what bankers are doing right now with their money. They do not longer buy “banking products” or expensive and overprized real estate but try to convert their private robbed money to real assets. They now shop around and buy small and midsize companies with real assets. It comes handy that the bankers have cut the money supplies of smaller companies and got them into financial trouble . The bankers know very well which companies have a solid undervalued business.. Now you can buy good real economy companies for much less money than a year ago. Financing these deals is rather easy because they pay almost no interest on money they need to finance the deals. It would be a surprise of all the tricky guys in the banking industry would be converted within weeks after the financial saints. They are still out there and cash in your money thru government which is much easer than getting it directly from you!  Probably only Saint Anthony can help: “Saint Anthony, Saint Anthony, please come around. Something is lost and cannot be found.”