Tag: banks

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The Crypto Lottery Ponzi Scheme

When Bitcoin first appeared, I welcomed it.  Why?  Because at the time it appeared, I had just been involved in organizing an event in Montreal (2000) that attracted attendees from all over the world. Each of them had to pay a small fee to attend, which they had to send to the organizing committee to be deposited in a bank and then used to pay for the facilities and the talent at the event.

I thought– this should be easy, in today’s world, with the internet and all that.

I was wrong.

Many of the attendees actually mailed cash, in envelopes, to pay for their tickets.  Really?  Why?!  Why couldn’t they just go to their banks and direct them to send the money electronically, from their accounts to the organizing committee’s?  What was so hard about that?

Well they could.  But the bank-pimps demanded a lot of money to do something that naive me thought could not possibly cost very much to do.  The cost of sending money directly from their banks in Europe to my bank, BMO, in Canada was ridiculously, absurdly prohibitive.

WTF!

So the idea of Bitcoin, a currency that could bypass the banks and be used to purchase items through the internet without incurring outlandish surcharges sounded like a very good one.  I envisioned a world in which people buy and sell and get paid with this digital currency with no deposit fees or monthly bank fees or transaction fees or other such bullshit.  You do some work for a company, it deposits bitcoin in your bitcoin account (managed from your computer or smartphone) and you go buy your groceries or some shoes or a car and transfer bitcoin to the vendor and nobody pays the pimp.

It never happened.

A brief diversion: I set up an account with Coinbase to purchase about $3,000 worth of bitcoin many years ago– I forget when exactly but it was before 2010.  Bitcoin at the time was worth about $30 each. Yes, $30 for ONE Bitcoin.  I figured I could afford to lose $3,000 if it all went bad and I wanted to understand Bitcoin and the blockchain.  For unknown reasons, I was never able to connect my Coinbase account to my bank account and complete the transaction.  I didn’t feel strongly about it at the time so I gave up.

If I had succeeded, and kept the bitcoin, I would have, today, probably about 100 Bitcoin now worth about $7 million.

More likely, I would have sold part of it much earlier, but I had planned to keep about half for the long term.

Anyway, that’s what happened.  I mean that in a broad sense: that’s what happened.  Bitcoin became something other than a replacement for currency.  Nobody today buys anything with Bitcoin (for all practical purposes).  What they do is buy Bitcoin to see if it goes up, if they can make some money.

You can make money buying Bitcoin if you buy it low and sell high.  That’s it.  It has no other practical value, and even as an investment, it doesn’t have any real value, except for hackers who plant trojans on your computer and lock up your data unless you pay them, and kidnappers, and other criminals.

If Bitcoin is merely an entity of speculation, it is gambling.  It is a Ponzi scheme that only works as long as there is a continuous supply of suckers to perpetuate the demand.  The sustained viability of Bitcoin as a financial entity fundamentally depends on deception.  A sufficient number of customers must believe that it will continue to increase in value.

Inevitably, a number of investors will decide that it has peaked and will want to cash out before it crashes.  And  it will crash.  It has already crashed several times.  It is likely to crash more often as more and more ill-informed investors jump onto the bandwagon.

In the late 1920’s, an investor (some claim it was Joseph P. Kennedy) was getting his shoes shined and the shoeshine boy started chatting with him about the stocks he had invested in and offering him tips.  The shoeshine boy!  That was when, according to the anecdote, Kennedy decided to get out, because he realized that the market was being driven by foolish investors who were essentially gambling– not investing.

It’s not clear if the story is true but the point is well-taken.

When I say “suckers” I don’t mean that in a specific sense.  Some of the people buying vast amounts of Bitcoin are indeed very, very smart.  They understand what is happening, the same way a croupier at a casino understands what is happening.  Some people will become exceedingly rich from cryptocurrencies (there are now lots of them, including, ridiculously– absurdly– $Trump!!)

The meme coin, known as $Trump, was launched by the president on Jan. 17 and quickly surged, reaching a peak of over $14.5 billion in overall market value by Jan. 19, the day before his inauguration. It has since slumped by two-thirds.  From Here.

If there was a more obvious sign that the Trump administration is going to be absolutely rife with corruption, I haven’t heard it.  The fact that Trump is endorsing and even selling crypto currencies is a tell.  This administration is out to facilitate looting on a scale we haven’t seen since Coolridge.

 

 

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Paul Martin and Jean Chretien

From 1998 to 2003, the Canadian government received proposals from Canadian banks to merge, with each other, and with entities in the insurance industry, in order to compete with the big American financial institutions that were madly rushing into hedge funds and derivatives.

The liberal government of Jean Chretien and Paul Martin thought the idea was unwise and refused the request. They also initiated a review of banking policy that ended up favoring consumer protections over the new profit centers for the bank.

They also looked at the Canada Pension Plan. Like the U.S. Social Security system, economic and social factors had conspired to raise questions about it’s long term viability. What did the Americans do? After bickering and arguing for 20 years: nothing. What did Paul Martin do? Analyzed it, consulted with the provinces, and then fixed it. Done.

Canadian banks did not require a single dollar of government bail-outs during the world-wide financial crisis of 2008-2009. Not one dollar. Canada emerged from the global economic crisis with one of the healthiest economies in the G-8.

In 2002, Stephen Harper criticized the Liberal government for standing in the way of progress by blocking “innovations” in the banking sector. Now he struts around crowing about his management of the financial crisis.

Born on third base; thinks he hit a triple. Mr. Chretien and Mr. Martin left you a surplus, Mr. Harper. Where is it now?

The details of the Liberal approach to bank mergers.

More on the pressure resisted by Martin.

Calgary Herald thanks Jean Chretien.

And nice tribute from Newsweek.

From a Liberal website:

In 2002, Stephen Harper lambasted the then-Liberal government for “the failure to adapt bank regulation to the needs and challenges of a financial sector that is less and less national, and more and more global.”

Yes, it’s from a partisan source.

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The Republican’s Strategy

Okay. Does anyone need to have it explained to them again what the Republican strategy is?

When Bush took office ten years ago amid “controversy” over whether his tax plan would create a deficit (with the liberals foolishly believing that the Republicans were sincere about wanting a balanced budget), I argued that it was actually clearly the intent of the Republicans to create as big a deficit as possible because it serves their policy wishes.

  • firstly, it gloriously appears to justify cutting expenditures on programs that benefit the average American
  • secondly, it seems to prove that governments can’t be trusted to spend wisely (even though it’s usually the Republican government that can’t balance the budget)
  • thirdly, it creates the kind of noise Republicans need to try to generate mass hysteria about some kind of “crisis” that requires draconian measures to deal with.

They did it with Reagan (who raised the deficit from 45 billion to 450 billion) and they did it with Bush (who took a surplus and turned it into a deficit in only one year) and they will do it again next year with Palin or Gingrich or whomever.

Don’t believe me? How many Republicans made it a campaign issue when Bush ran up the deficit within less than a year of taking office after Clinton left a surplus?

But the whole strategy is rarely as naked as it is in Wisconsin where Governor Walker took a budget that was virtually balanced, handed out huge tax cuts to corporations, proclaimed a crisis when the cuts put the budget in deficit, and then, after refusing the offers of the public sector unions to rescind some of their own wages and benefits, attacked their right to collective bargaining.

It’s absolutely naked: there is a war, in the U.S., of the rich upon the poor. And you watch and you wonder, in amazement, that the poor, believing some insane illusion about justice and prosperity, refuse to fight back. Why the hell should the public sector employees have rescinded their own wages and benefits so that Wisconsin corporations could get a larger tax break?

Why is no one asking stockholders and profitable corporations to make some sacrifices because times are tough and the nation has to pull together and we are at war and so on?

Corporate share of federal taxes in the 1950’s: 30%

Corporate share of federal taxes in 2009: 6.6%

What the hell’s going on here: 30% of General Electric’s massive income comes from…. lending.

GE is a bank.

And here we are again– how rich America goes after the wealth of working America. They found out there was no way around paying people to work, so they evolved ways of reabsorbing that wealth through interest rates, hidden fees, tricked out mortgages, and shifting the tax burden.

The war on Iraq mattered because of the oil. It’s an achievement to not only persuade Americans to fight an entire war to sustain your investments, but also to pay a disproportionate cost of it by borrowing the money, running the federal budget into a deficit, and cutting taxes on the rich.

Now think about that– what sector of the economy gives you the warm fuzzies about productivity and employment and enduring prosperity: manufacturing.

What GE used to be known for.

What sector of the economy makes you think about scumbags, liars, and cheats: that’s right– banking.

GE is a bank.

 

I’ll bet you think I’m kidding when I tell you that the American tax system is so twisted that it actually transfers wealth from the working classes to the rich– here’s more detail on that. General Electric, one of the most profitable corporations in American history, pays no taxes at all. In fact, the U.S. government appears to “owe” GE about $4 billion.

This is the result of various strategies. When Republicans talk about reducing the tax burden for Americans, they deliberately identify the beneficiary as “Americans” when, in fact, I doubt they have proposed a single policy in the past 30 years that benefits average working Americans. It’s code, and the corporations and the rich know understand it. As when they propose to cut the budget, partly, by laying off tax collectors. The message is, we’ll make it less likely that you’ll get caught cheating on your taxes.

GE smartly hired people from the IRS to work for them, and to lobby the government on their behalf.

America– I’m sorry if you feel bad because I think you have the dumbest voters on the planet, but think about the fact that the people you elected are asking you to make serious sacrifices for the good of the nation, because times are tough, while simultaneously reducing the tax burden on those most able to pay is mind-blowing.

You are suckers.

Is GE embarrassed at all by this? Why, in America, should they be?

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To Serve Mankind

“My view is that Washington and the regulators are there to serve the banks.”

Did you miss this revelation? From the new chairman of the House Financial Services Committee– the Congressional body that regulates the banking industry– Spencer Bachus.

Bachus received about $1 million in campaign contributions from the banking industry.

“Now is the time to get the farmers out of the way,” said Bachus, “so the foxes can create chickens and grow the farm.”

There is a Twilight Zone episode in which aliens land on earth promising solutions to all mankind’s problems, energy, food, pollution. They also encourage humans to come visit their planet. They have with them a guide book in their own language which some stubborn scientists have obtained and try to decipher.  One of them succeeds.  It translates as “To Serve Mankind”.

Hundreds of humans are happily boarding the alien spaceship, breathing a sign of relief.

But just as the protagonist has decided to get on the spaceship and visit the alien world, a friend of his, one of the scientists, rushes to the spaceport. She screams at him, “don’t get on the space ship!”.

They have succeeded in translating the rest of the book.

It’s a cookbook.

Spencer Bachus has arrived, with his cookbook, to serve Americans.

If you thought there might be relief in sight from the Democrats, you should know that Barney Frank himself, the outgoing Democratic chairman, accepted about $1 million in campaign contributions from the banking industry.

I’ll bet the Tea Party people are really upset about that.

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Banks and Lawyers and Pimps and Pushers

I am the chairperson of a committee organizing a public, non-profit event in Montreal in May, 2000. People are registering for this event from all over the world. One of the problems we have encountered is how to transfer money from one country to another, swiftly, efficiently, and painlessly.

You would think that with the world gone hog-wild with the internet and digital wireless communications and fiber-optic cables and mergers and the new world economy, that this would be a simple thing to do. Franz, in Germany, wants to send me $75 Canadian to pay for his registration. He logs onto the internet, right, and transfers the money from his account to our Event account. Done, right? Simple. Easy.

Well, if you’re not already rolling on the floor laughing your head off, you’ve probably never tried to accomplish a simple transaction like that before.

Franz did indeed send us his $75 dollars. He got some kind of money order (it’s in German so I’m not sure what you call it) and sent it to me. I took it to my local Bank of Montreal. They accepted it and told me it would take three weeks to clear. They also warned me that there would be surcharges. Well, I knew the Canadian bank vampires would get their fangs into it right after the German bank vampires, and I knew it would be outrageous and excessive, but, hey, you can’t fight every battle, so I merely smiled and nodded and went on my way.

A few weeks later, I got a call from the bank. A nice woman named Cindy said, “You don’t want to cash this money order.” I said, “Why not?” She said, “Because it will cost you $15.” I said, “well, I know that’s pretty bad, and it’s a rip-off, but we really don’t have much choice. At least, we still get $60.00 out of the deal.” She said, “No– you won’t get any money out of the deal. It cost $90.00 in bank fees to process the check.”

!!

Now, if you’ve read through some of my earlier rants, you already know how I feel generally about the banks. But this is a new low. For Franz to get his $75 from Germany to Canada is going to cost $90.00. This is something he could also have done with an envelope and a $1 stamp, and some cash. At least then, I would only have been hit with the exchange rate.

Vampires. They’re all vampires out there. It’s getting depressing. VISA handles some of our registrations. They take a cut of 2 or 3%. The Bank of Montreal kindly provides us with a free “Community Account” but they still take their share of the exchanges from U.S. to Canadian dollars. The American banks and European banks each take their cut. Every time money moves in our economy, the vampires at the banks get their fangs out.

Why? The banks know that you can’t sit there and watch them and add up the total amount of time it takes for them to actually handle your check. But I do know that bank employees are not paid a lot of money (only the managers are, but they don’t handle checks) and that a trained employee doesn’t take more than a minute or so to stamp a check and put it into a pile to be sent on to the next clearing house. And with all this globalization going on, of course, we’re supposed to see all the advantages of increased efficiencies and productivity.

And, of course, we all know that the banks are making record profits these days.

Of course the “efficiency” stuff, the rationale for mergers and the new global economy, is pure nonsense. The increased efficiency is really only in the way they squeeze the customers for more and more money by applying vague and arbitrary surcharges to every conceivable transaction.

Efficiency? I’ve been to the bank three times to deposit checks. The first teller took about 45 minutes– I am not exaggerating– to process about 20 checks in U.S., Canadian, and European coinage. The second teller was indeed efficient: about five minutes to do the same amount of work. The third teller was in the middle: about 30 minutes. She was completely confused. She had to get help. She did not know how to deposit a check from Texas. Two of the three tellers had insufficient training.

Efficiency? I went at 2:00 in the afternoon and there were about ten people in line, and only one or two tellers working. It was slow and inefficient.

Efficiency? Remember when the banks promised that they wouldn’t start hitting us up for surcharges when they started driving us all out of the lobbies and into the vestibules to use the banking machines? Surprise, surprise– a few months ago, the Bank of Montreal sent me a notice that they were now going to charge me .50 for every transaction on the ATM. Everyone else on the face of the earth uses computers to increase productivity and efficiency. But the banks– it must be costing them a fortune to be so efficient– that’s why they keep hitting us up with service charges!

The banks have a cooperative monopoly in this country. No single bank has a monopoly, of course, but neither do they really compete with each other. All of them hit you with the same basic service charges and other aggravations.

The solution is simple: the government should now require every employer to give employees the option of receiving their pay in cash. This is not as silly as it sounds. Why don’t they offer to pay you in cash now? Because it would cost them more to do it. But it seems pretty likely to me that if you took all the service charges and bank fees paid by any group of 50 or more employees, you could easily do it more cheaply than the banks.

The banks have the most incredible office towers in every major city. I wish God would grind them all into the dust.