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True Size of the Shadow Banking System Revealed (Spoiler: Humongous)
KentuckyFC writes "The banking system is closely regulated and monitored by central banks and other government agencies. But it has become common practice for banks to get around this by doing business in ways that don't show up on conventional balance sheets. This so-called shadow banking system is thought to be huge, but nobody knows exactly how big. Now three econophysicists have discovered that the size distribution of the world's largest financial firms significantly differs from the size distribution of smaller ones or indeed non-financial firms. And they hypothesize that the difference is the result of the hidden transactions that make up the shadow banking system. By this new measure, the shadow banking system has grown dramatically since the financial crisis and was worth over $100 trillion in 2012, significantly more than had been thought and more even than the GDP of the entire planet. Nothing to worry about, then."
AHAHAHAHA Stop it! Yer killing me!
100 terabucks seems like a lot but when you compare it to the 200 terabucks under-the-table business-to-employee market, it kind of takes a back seat.
I did my masters in non-Newtonian budget surpluses.
Those shining brand new banknotes need to accumulate somewhere, preferable to those that would be impacted the most in absolute value by the ensuing inflation.
You wouldn't expect "the 1%" to take the hit, that's what the "middle class" is for. The trickle economy is still operating, except that now it's no longer the "value" that trickles, it is the "value depreciation".
Questions raise, answers kill. Raise questions to stay alive.
No surprise here. What FED was doing for the last couple decades?
Printing the money and printing and printing and printing and printing and printing and printing and printing and printing and printing and printing and printing
All these cries about savings and cuts are pathetic.
There is enormous amount of money in circulation, so much that economic bubbles just put little dent in it.
All contributions should be tax deductible.
“He’s not deformed, he’s just drunk!”
See subject line.
If I can be modded down for being a troll, can I be modded up for being an orc, or a balrog?
"Shadow", that sounds really scary. I don't like scary things like shadows and terrorists.
Let's give the government a lot of power to regulate cash flow so they can protect us.
If video games influenced behavior the Pac Man generation would be eating pills and running away from their problems.
The largest banks don't fit their oversimplified power law predictions, so the most reasonable explanation is that the evil geniuses have created a shadow market greater than the GDP of the entire planet!!
I bet they're the same villains who skewed the results of my lab assignments, too.
As long as we get our .01% annual fee on that $100T, you have nothing to worry about.
Sincerely,
Your shadow banking overlords.
I immediately thought of Sid Maier's Alpha Centauri and it's wonderful tech tree and prescient ideas [1]
Note: while in SMAC, computing resources are used to solve big problems, mainly we're using them to run HFT schemes aiding the super-wealthy get even more wealthy.
[1] http://alphacentauri2.info/wiki/Sentient_Econometrics
Make sure everyone's vote counts: Verified Voting
The under-the-table business-to-employee market is nothing compared to the $8.3 Quadrillion in unfunded pension liabilities. We'll need 221 Earths to pay that off.
Maw! Fire up the karma burner!
and more even than the GDP of the entire planet.
The size of the shadow banking system may be worrisome (I guess), but banks hold assets, whereas GDP measures income. It would be extremely surprising if the GDP of the world were more than its income.
Incidentally, if you are upset about the 'shadow banking system' or the name 'shadow' scares you, money market funds are part of the shadow banking system. So are ETFs. So it is very possible that you are part of the SBS, since normal people invest in these kinds of things.
In general the SBS only matters because tax payers are committed to bailing banks out if they lose too much money there. If we followed Paul Volcker's advise and made a rule that, "any bank that is too large to fail is too large to exist. Any bank that receives money from the federal government will be broken up in pieces and sold," then it would solve a large portion of these problems. Make a rule that you can clawback salaries and bonuses from execs who made very very bad decisions, and that will solve another large portion of the problem.
As it is now, all the incentives are aligned to ensure another financial crisis, whether we have a shadow market or not. Focus on fixing the incentives, focus on smaller details. But we won't focus on changing the incentives as long as the administration continues to keep stooges from the financial industry in his cabinet.
"First they came for the slanderers and i said nothing."
... and do they have any expertise in economics? Or is it kind of like an econobiologist or econocabdriver -- someone interested in economics but doesn't know any more than I do about it.
Lord Humongous: Transact, my vermin, transact!
Any financial transaction in or out of a country that is not reported is subject to a 110% tax.
And they hypothesize
In other words they are making this shit up for some unknown reason.
In his Principia, 2nd ed (published 300 years ago in 1713) Isaac Newton made some pithy comments about this sort of baloney.
"I have not as yet been able to discover the reason for these properties of gravity from phenomena, and I do not feign hypotheses. For whatever is not deduced from the phenomena must be called a hypothesis; and hypotheses, whether metaphysical or physical, or based on occult qualities, or mechanical, have no place in experimental philosophy. In this philosophy particular propositions are inferred from the phenomena, and afterwards rendered general by induction."
So really there is nothing to see here. Just move along now.
At what point can we end the delusion that fiat currencies are worth anything at all?
Let's just go back to bartering. How many chickens do I need to give my Cox Cable for my internet access?
We don't have a state-run media we have a media-run state.
Buy a couple dozen senators, just like anybody else. You can get a discount price if you're a Christian Armageddonist, or willing to go along with them.
We have two intermingled crises - governmental corruption on a global scale, administered and centered in the USA, and of course the failure of the hereditary ruling class to build anything resembling a sustainable economy.
That article is weird. But then, so is the site. In the middle of the article, there are ads for other articles:
New Healing Mechanism Closes Wounds By Up to 50 Percent in 30 Seconds -- And Leaves No Scar
Universe May Contain "Tardis-like: Regions of Spacetime, say Cosmologists
Reliable source problem here.
Anyway, their claim is that, based on Zipf's law, there must be some "long tail" of unknown small financial institutions which have vast but uncounted assets. No way. There's halawa, Indian gold merchants, and Bitcoin, but together they don't add up to one of the big banks.
"It is in the nature of markets to move money from the many to the few."
The page is down, so hopefully someone can explain: how can the GDP of a system which is itself only a fraction of the planet, exceed the value of the planet?
If, as I suspect, this is calculated by totaling transactions alone - ie if I sell you an apple for $1, and then buy it back for $1, we've just added $2 to the total GDP of the system...well then my next question is why we even pay attention to such a worthless number in the first place?
-Styopa
These guys are rank amateurs. I received my Doctorate in EconomicPrognostication from the Ms. Cleo University and I predict that the impending implosion of fiat currencies will be cancelled out by an equal distribution of Fiat 500s. In the meantime, please pay $50 for my current research entitled "Tomorrow we'll all be broke, so buy more guns and ammo now!"
Harrison's Postulate - "For every action there is an equal and opposite criticism"
If I remember correctly, the 'Shadow Banker' was someone in Mass Effect.
In addition to this, I also want: 1) A continuous mapping and quantification of the Military Industrial Complex, complete with relations to people, and businesses up and down the chain. 2) Continuously updated Corporate to Lobbyist to Politician studies, with full exposure. I want to make smarter decisions about the people and companies that I choose to deal with and give money to on a day to day basis. And I can't do that without such clear analysis. These people are only in power because _we_ allow them to be.
What the hell is Shadow Banking? Is he talking about derivatives? Futures? What kind of financial instruments exist in this Shadow Banking arena? This seems like FUD to me. I can only hope the econophysicists know something about the instruments used and how this system works, because the article writer certainly didn't do his own due diligence.
When describing something with loaded words like "Shadow", I'd really hope there was a basis for using it beyond the "I don't know what's happening and thus it is evil and reprehensible".
Eat sleep die
was one that worked for cheap.
It apparently is. Of French, at least.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Now if it was only printed on paper it might actually have some value; but don't - there's not enough trees on the planet to do so
Agreed, we want:
About your assertion that "These people are only in power because _we_ allow them to be" ... your heart is in the right place, but my head says otherwise. I wouldn't say that the powerful are powerful because we *allowed* them to be -- that overstates how much power *we* really have to prevent the concentration of power.
The powerful either have power to begin with, or they take it. Either way, they won't give it up, and if you try to take it from them, they will fight you. Since they have power -- and I don't -- they will tend to win. Indeed, because I believe they will win, I don't even begin.
For everyone today who says "Bad Guys run the world, let us liberate ourselves from our corrupt overlords", I remind you: we said the same thing in the nineties, and the eighties, and the seventies, and the sixties. And the thirties. And the teens. And the eighteen-nineties. And so on -- the American Revolution, for example.
I'm not saying "Give Up" -- but let's not comfort ourselves with false optimism. If you declare revolutionary intent, do so in pragmatic terms, with specific achievable goals. No idealism: a successful revolution demands hard-headed realists.
-kgj
According to this web site, there's $228 trillion in derivatives. I didn't believe that number at first, but then I checked the source of the data and it comes from the FDIC (Schedule RL-C). Oh, and that data was for the end of the 2011 calendar year. Anyone wanna take bets that the number was much higher for 2012 and will be even higher in 2013? Don't worry, though - I'm sure the banks aren't playing fast and loose and we have absolutely nothing to worry about.
Insurance files released last month. If the conspiracy is 100 trillion dollars large than perhaps russia benefit from it as well and granted snowden asylum on the condition that he didn't release information know about the shadow economy.
"I had thought – I had been told – that a ‘funny’ thing is a thing of a goodness. It isn’t. Not ever is it funny to the person it happens to. Like that sheriff without his pants. The goodness is in the laughing itself. I grok it is a bravery and a sharing against pain and sorrow and defeat.”
(not listing source because if site visitors can't recognize the source then there aren't enough geeks left for me to want to return again)
www.positivemoney.org
Most people don't realise the magnitude of the crime that has been committed by the individuals who run the banks, and create money out of thin air, lend it to us, and then expect us to pay it back with real labour and real property.
97% of the money in existence came into being when somebody borrowed money from a bank - it didn't exist before the borrower signed the loan agreement. Therefore 97% of the money in existence is a DEBT to a bank somewhere, which means the banks OWN 97% of everything.
These criminals need to be tried and then brutally executed for enslaving practically the entire population of the planet - along with all the traitorous politicians who not only allowed them to continue this fraud and slavery, but actually work FOR the banks, not the people.
Mod parent in the UPWARD DlRECTION.
Forget shadow banking.
Try this instead:
https://bitcoinera.net/?ref=kbroadfoot
Ken
Bitcoin pyramid: Join here: http://www.bitcoinpyramid.com/r/1427 it's FREE!
It sounds like money laundering to me. Perhaps the DOJ should investigate.
IT'S HAPPENING!
Reminds me of this article about the failings of extrapolation. Those graphs look like perfectly reasonable first-order Bode plots to me.
From the Zorro Project:- (I'm not posting a link, use google)
"Technical progress has enormously boosted productivity worldwide and is still increasing it at a rate of about 2% per year. Theoretically, we needed to work four days less every year for producing the same goods and earning the same income.
However it does not happen this way. Producers use productivity boosts for reducing costs - mostly wages and salaries. This is supposed to improve their profits, but it also has an adverse affect. Layoffs, unemployment, subsequent demand shortfall and economic crises eat a large part of the benefits from increased productivity.
The remaining excess profits are invested - however not in production of goods, but in financial assets. Hedge funds, investment banks, and trading firms circulate an immense money volume (up to seven trillion US$ per day) through the financial markets, this way creating a shadow economy that largely surpasses the market of real products and services. It consumes most rewards of technical progress, and gives back occasional market crashes and financial crises.
But it also offers the opportunity to redistribute some of the excess profit back from the rich to the poor. Providing many people with a small but regular trading income will take liquidity out of the financial markets and inject it back into the production cycle. This will boost demand worldwide and soften the world's economical problems."
READY.
PRINT ""+-0
AHAHAHAHA Stop it! Yer killing me!
Consider for a moment... why the constant slow inflation? It isn't to protect us from deflationary spirals. Combine it with low interest rates in the market, and bonds start to look pretty good.
What does the US government get out of a thriving bond market? It effectively lowers the interest rate on the national debt. You've been hoodwinked. (and you're not alone)
I won't join Slashcott. OTOH, If Beta goes live, I just won't be back until it's fixed. Sorry Dice.
What the rich are worried about is...
A STRONG GLOBAL GOVERNMENT THEY DO NOT CONTROL.
A strong global government is a net benefit to them. Among other things it means you will have *NOWHERE TO RUN*. (The UN already covers this to some degree, but a true global government will eliminate jurisdictional issues, which will generally be to the detriment of the common man, not the privileged.)
Rep. Alan Grayson asks the Federal Reserve Inspector General about the trillions of dollars lent or spent by the Federal Reserve and where it went, and the trillions of off balance sheet obligations. Inspector General Elizabeth Coleman responds that the IG does not know and is not tracking where this money is.
http://www.youtube.com/watch?v=nE3BmhhWFFQ
Very interesting.
"Those who consume the bulk of goods are those who make them. We must never forget this secret of our prosperity."
AMERICA; FREEDOM TO FASCISM by the late Aaron Russo, names names and who to go after, what they've been doing and for how long and what thier plans have been all along. Youtube it.