Today, our financial system is so broken that casinos have much more integrity in their business dealings than do our banks.
Casinos Actually Have More Cash on Hand
The largest casinos in Vegas and Macau have much more cash on hand on a daily basis than most branches of the largest banks in the world. Whereas banks typically only have a minute percentage of their clients’ cash on hand and are really a digital business, casinos are a cash business. This is precisely why large casinos in Vegas or Macau possess security systems unrivaled by any commercial bank in the world. Nearly every single person that wins at a casino on any given day can take their chips to the cashier’s window and cash out their winnings. However, if a bank’s entire client list came to a bank on any given day and demanded their deposits to be returned, the bank would likely run out of cash after returning 5% or less of their clients’ money.
Most of the cash that people believe is sitting in a bank ready for withdrawal at their disposal at anytime are just digital bytes that exist on a bank computer somewhere in the world. Most of the money in this world does not exist in cash form and exists merely in a digital form, including the billions of “money” that is “wired” into bank accounts every day from real estate transactions. Most people have never even heard of CHIPS (the Clearinghouse Interbank Payments System) though CHIPS should be commonly known to every man and woman given its role in our fraudulent monetary system. CHIPS clears more than $1 trillion a day, executing more than a quarter of a million interbank wires and payments. Do you really think that this is real cash that moves around the monetary system daily?
This is why Alan Greenspan said more than forty years ago that the monetary system was a system that created “more claims outstanding than real assets.” The only difference between now and forty years ago is the fact that today there are FAR more claims outstanding than real assets. The claims we all have in our bank accounts are represented mostly by digital bytes and very little cash. As far as claims to real cash inside the vaults of banks, multiple clients of every bank have the same claim to the every dollar, yen, euro or pound sterling in that bank’s cash vault. When we state that Central Banks print money out of thin air, even this statement is somewhat misleading. The majority of time, Central Banks use the fraudulent system they have set up to merely transfer digital bytes that represent money into the global monetary system. The fact that there are “more claims outstanding than real assets”, as has been the case for at least a century now, is the reason why every bank in the world would be bankrupt within hours if all of their clients demanded that their money be returned on the same day.
However, let’s compare how a bank operates to how a casino operates. If you win $150,000 at craps in Las Vegas and another gambler wins $80,000 at black jack and you both show up at the cashier’s window simultaneously, the cashier will not place $100,000 on the counter and say, “that’s all I have, so the two of you, settle this score on your own.” But if two separate clients arrived at their local bank branch on the same day unannounced and respectively asked for $1500,000 and $80,000 of their own money that they originally deposited, I guarantee you that many banks would have a serious problem producing that money on the spot (not because most bank branches wouldn’t have $230,000 in cash on hand, but because they may have more cash obligations and claims already to meet that day that a $230,000 draw down, if allowed, might seriously jeopardize). If banks actually used a sound monetary system and had gold and silver backing their money, then perhaps their security system would be as elaborate as a casino’s because they would actually have something real to protect. Instead, money as it exists today in our fraudulent system is not only digital, but it is a digital bunch of IOUs! Given the aforementioned hypothetical scenario, the bank teller would likely tell the person to return in a couple of days to gather his cash. In other words, “I owe you so come back when we can produce your cash because we don’t have it right now.”
Casinos are More Transparent in their Client Business Dealings
Casinos are also far more transparent than banks in the manner in which they operate. Since casinos are essentially a cash business and banks are not, if you look at a casino’s financial statements, the picture of cash flow through their business is simple and upfront. One knows how much cash is flowing in and out of the business every day and it is easy to tell if the casino is profitable or hemorrhaging. However, look at a bank’s financial statements today and you better have a forensic accountant by your side if you want to know the truth.
Take a look at the financial statements of any large global banking institution today and you would have no idea what is fiction and what is fantasy without doing a lot of digging. Entire commercial real estate portfolios, among other derivative products such as CDOs and MBSs, are held on bank’s balance sheets at fantasy valuations because they are not marked to market. Many large banking institutions would be bankrupt by the end of the month if they had to liquidate their commercial real estate portfolios. They are only financially “healthy” because many assets on their balance sheets are not valued honestly. Of course, I’m not discounting the fact that gangsters founded Las Vegas, but for the unaware, so was our modern day banking system.
If we look at the history of bankers like Hank Paulson and the Fannie Mae and Freddie Mac debacle, we have a blueprint for how dishonest bankers and their regulators operate.
On July 22, 2008, I released a special bulletin to my Platinum subscribers in which I discussed the likely fate of Fannie Mae and Freddie Mac at that time. In this bulletin, I stated:
“My belief is that in order to bailout Freddie Mac and Fannie Mae (which at this point is almost guaranteed to happen as both institutions are bankrupt as of today), sticking the American public with their losses will not be enough to bail them out. I believe that the U.S. Federal Reserve is going to have to print more money out of “thin air” just to bail these two institutions out. In doing so, they will erode the value of all fiat currency all over the world, whether the Euro, the Swiss Franc, the Japanese Yen, the Brazilian Real or any other currency. The bailout of Freddie Mac and Fannie Mae is almost certain to devalue all currency in the world (paper currency).”
I further stated in that same bulletin:
“Fannie Mae and Freddie Mac hold $1.7 trillion of assets that are backed by a mere $70 billion of capital. Furthermore, they guarantee another $3.1 trillion of mortgages, so in essence they have $70 billion that back almost $5 trillion. That is not a misprint. These two companies have $70 billion of assets backing $5 trillion [of assets and guarantees].”
Based upon my assessment of Fannie Mae and Freddie Mac’s true health, not the disingenuous rubbish told to us by the likes of Hank Paulson and others, I told my subscribers that the likely final bailout cost of Fannie Mae and Freddie Mac would be “more than $2 trillion” in the form of tax theft from taxpayers and theft through currency devaluation. Furthermore, I stated that my price target for Fannie Mae, then trading at $19, was $4 (an estimate that, by the way, turned out to be far too generous).
In contrast, this how the financial gangsters assessed the situation. Former Goldman Sachs CEO and then US Treasury Secretary Hank Paulson stated in July 2008:
“Their regulator [Fannie Mae’s and Freddie Mac’s] has made clear that they are adequately capitalized.”
The Congressional Budget Office (CBO) followed up with their own lies in September 2008, publicly declaring that the final cost estimate of the Fannie Mae and Freddie Mac bailout to taxpayers would be $25 billion. Remember, after looking at the numbers myself without the benefit of the CBO’s rose-tainted glasses, I estimated that the final bailout cost to taxpayers would eventually exceed $2 trillion.
This past Christmas, under the cover of a holiday, the Obama administration quietly removed the collective $400 billion cap of bailout money to Fannie Mae and Freddie Mac and raised their bailout plan to an “unlimited” amount. Welcome $2 trillion+ bailout! So in a matter of a little more than 1 year and four months, the taxpayer bailout for Fannie Mae and Freddie Mac grew from no more than $25 billion to $400 billion to an “unlimited” amount. At the same time, it was reported that, as a reward for their fine job, the CEOs of Fannie Mae and Freddie Mac could each earn up to $6 million in compensation annually in 2009 and 2010.
The history of lies that has surrounded the bailout of Fannie Mae and Freddie Mac is very similar to the web of lies that banking CEOs are weaving today in regard to the disclosure of the financial health of their institutions. Many of the world’s largest banks are in the same proverbial creek without a paddle and are flat out lying to the public about the dire circumstances of their financial health just as Hank Paulson and the CBO lied to us about the financial health of Fannie Mae and Freddie Mac in 2008 and their successors continued to lie to us in 2009.
When it comes to transparency about their financial health, the world’s largest banks cannot hold a candle to the world’s largest casinos. In fact, the life-support health status of many of the world’s top banks is the very reason that 24 of the world’s top central bankers have congregated in Sydney, Australia to hold very secretive talks. In fact, though Ben Bernanke is almost certainly attending this meeting, this meeting has been so secret, thus far, that journalists have not even been able to confirm Mr. Bernanke’s presence.
Consider that on March 24, 2008, an article on MarketWatch originating out of San Francisco advocated in its headlines “With Stocks Down, It’s a Prime time to Increase Retirement-Plan Contributions”. The article quoted Christine Benz, the director of personal finance at Morningstar Inc, as stating:
“It’s a practice that almost all the great investors have used. They’ve taken advantage of short-term market panics. It’s a sensible strategy for smaller investors to emulate.”
Sri Reddy, head of retirement strategies at ING, stated:
“If you can afford to contribute more, I would tell you to increase it in any market. Participate as much as the plan will allow.”
In stark contrast, I wrote an article on my blog almost exactly one-month later, as markets were rising, titled, “Will Markets Crash Now or Later?” Eighteen business days after I wrote this article, the US market started crashing and didn’t let up until the S&P 500 had shed about 50% of its valuation. Yesterday, economist Joseph Stiglitz stated that in regard to the sovereign debt of the UK and the US, “Yes, I do think they deserve to keep their triple A rating” because “all we do is print money to pay it back.” If this is the case, then interest payments of the sovereign debt of the US and the UK will become worthless and the real question should be, “Why would anyone want worthless interest payments?” In fact, why even maintain a rating system, if the rating system is meaningless and only used to deceive people? Over the years, I’ve written extensively about the fraud of the financial industry in the following articles:
The Coming Blowback of Banking Fraud
The Massive Disconnect – Why Stock Markets are All About Confidence and Gullibility Today
Can Rising Stock Markets Serve as Confirmation of a Crashing Economy?
Why Following the Leaders Will Generate More Portfolio Losses
Casinos Offer a Win-Lose Matrix. Banks Only Offer a Lose-Lose Matrix
When it comes to customer education, casinos again win hands down against banks in their transparency. Google the phrase “odds of casino games” and this search will return 2,410,000 pages, many of which reveal the odds of every major casino game from black jack to craps to roulette. Casinos don’t hide the fact that the odds are with the house in every single game from their customers but banks routinely do. Of the major casino games, only the odds of winnings from slot machines remain obscure. Still, it is common knowledge that casinos earn their highest profit margins from slot machines of any game their clients play. For this reason, over the past decade, every casino has significantly expanded the percentage of floor space that they devote to slot machines. In fact, though far from an honorable policy, casinos are even transparent enough to let you know of their unspoken rule that limits your winnings. Again it is common knowledge that if you win too much and too often, casinos have back rooms and blackball lists to solve this “problem”.
However, when it comes to the games banks play, these games are executed in much more secrecy than the games casinos play. Banks take their clients’ deposits, invent shady derivative products solely for their enrichment, and then leverage their clients’ deposits 20, 30, or even 40 times or more in an attempt to earn massive profits for themselves. However, they never disclose these activities to their clients when their clients make massive deposits with them, and unlike in a casino, they never provide their clients with a chance of winning alongside with them. If the banking executives win in their gambles, they keep all their money. Lose, and they call in favors to their bribed politicians to ensure that they will get you, the taxpayer, to assume the entire burden of their losses. If you think this scenario has changed due to the financial crisis that reared its ugly head in 2008, you are wrong. The same shenanigans still take place today and many bankers continue to gamble with their clients’ deposits in an effort to pay themselves with no concern for the financial health of their clients’ monies. Of course, not all bankers act in this fashion, as many small community banks abstain from the same high-leverage, high-risk games of their larger banking brethren.
The mentality of financial executives to transform their financial institutions into giant hedge funds in search of the huge payoff is what caused AIG to fail. Today and for quite some time, Goldman Sachs, JP Morgan, Wells Fargo, Bank of America and Citigroup all operate as giant hedge funds as well. However, as a member of the ruling oligarchy of countries, they operate with a certain immunity not granted to casinos. The largest banks in the world operate today with the mentality of “if we gamble with your money and win, only we win. And if we gamble with your money and we lose, only you lose.” And this has been their modus operandi since as far back as the Great Depression. In a casino, if you gamble with your money and win, you, not the casino, keep the winnings. Furthermore, in a casino, you, and not some executive you’ve never met before, have the liberty to decide how you will gamble your money.
Casinos operate more like a republic than a bank because in a casino, every one has the freedom to make significant sums of money or to walk away and never risk serious financial losses. In other words, every opinion counts in a casino. If you take a trip with five friends to Macau and all five of your friends gamble, you can still opt to not to participate and not to risk any of your capital. This is not an option with all large commercial banks. From the minute you deposit your money in a large commercial bank, bank executives are going to gamble with your money in an attempt to earn huge profits and bonuses and you literally have no say in any of the gambles bank executives take with your money. Bankers have become the oligarchs and dictators of the world economy. In past decades, the financial industry served as a lead indicator of stock market behavior. If the financial sector rose, then this usually portended a rise in broad stock market indexes, and vice versa. Today, the financial sector IS the stock market. In early 2007, Citigroup, Fannie Mae and Freddie Mac comprised just 1% to 3% of the daily NYSE composite volume. In August of 2009, for weeks on end, Citigroup, Fannie Mae, Freddie Mac, and AIG (and sometimes Bank of America) comprised nearly 40% of the daily NYSE composite volume.
Give me a choice today to be ruled under the modus operandi of a casino or a bank, and I would chose the MO of a casino 1000 times out of 1000. I’m not saying that casino owners are saints when compared to owners of banks. Far from that. But I am saying that we live in scary financial times when we can trust a casino to be aboveboard and honest to a much greater degree than a bank. At least with a casino, I would have a chance of winning. And if I’m losing, at least I can make the decision to walk away. With a bank, I have neither of these two options. With a casino, if I win too consistently in a very grandiose manner, then at least they are upfront about banning me from ever entering their casino again or the beating I would receive if I didn’t stop winning. With large banks, even if you profit from their illicit activities because you own their bank shares, they will continue to let you in the front door and urge you to buy more even when they know that the shares are ready to crash. In the end, I will always have much more respect for an enemy that confronts me face to face while I’m awake than for one that waits until I’m asleep so he can stab me in the back. The former at least has a modicum of integrity while the latter will always remain a coward until the day he dies.
As John Maynard Keynes stated, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” All Keynesian solutions to economic crises always debauch the currency. Just look at the solutions being executed by the Bank of China, Bank of England, Bank of Japan, the European Central Bank and the US Federal Reserve today. This is why bankers and their shills always praise Keynesian economics to high heaven while secretly meeting, as they are this week in Sydney, to assuredly plan to debauch currencies even more. And this is why I will always trust black jack dealers more than bankers. That’s why it’s so ironic that most large commercial banks, as part of their “moral code”, do not allow private bankers to do business with casinos. It appears today, that the bankers got that one entirely wrong.
About the author: JS Kim is the Managing Director of maalamalama. In 2009, 2008, & 2007, JS used his knowledge of banking and market fraud to outperform the S&P 500 by 39.87%, 41.71%, and 27.99% in his Crisis Investment Opportunities newsletter.