Alternative Visions – Shadow Banking Concerns Growing – 06/21/14
(To Listen to the show click on either of the two urls indicated after the announcement)
RADIO SHOW ANNOUNCEMENT
“Dr. Jack Rasmus reviews the growing role and influence of shadow banks in the global financial system, amidst recent growing concern in official circles of the need for their regulation and control to avoid another even deeper financial crash in the future.
Rasmus addresses the recent editorial of Mark Carney, chair of the UK’s central bank, the Bank of England, last week on the need to quickly regulate the shadow banking system, and the daily feature stories in the global financial paper, The Financial Times, on shadow banks following Carney’s editorial. Dr. Rasmus argues that “money capital is like water flowing downhill” and cannot be regulated in the long run”. Jack documents the explosion in liquidity and investible financial assets in the global shadow banking system since the 1960s and since the crash of 2008 in particular, and explains the fundamental linkage between the new global financial elite—the global high net worth individual investors(HNWIs)—and the shadow banks as their now preferred investing institutions as they shift their wealth recently from traditional banks to the shadow sector. Referring to recent reports by the Boston Consulting Group and Capgemini, Jack shows how investible assets of HNWIs and the shadow banks have grown faster since 2008 than during the decade preceding the crash of 2008. While global total private wealth has risen by more than $40 trillion, from $111 trillion in 2008 to more than $152 trillion today, the top 200,000 HNWIs share has risen even faster and now exceeds $53 trillion. Jack explains how the growing concentration and acceleration of liquid, investible assets within the HNWIs and Shadow banks is building the preconditions for another, perhaps even greater, financial crash, as debt-leverage based investing and securitization grows again. Jack notes that Bank of England Carney’s recent editorial represents a growing awareness among central bankers that their influence over the shadow banking system may be eroding even further than pre-2008, laying the ground for even greater central banks’ difficulty in re-stabilizing the global capitalist system in the event of another crash.”
Listen to the show at either of the following:
http://prn.fm/alternative-visions-shadow-banking-concerns-growing-062114/
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
I went to the Boston Consulting web page to look up growth in financial assets since 2008. Globally they jumped by about 50%, from $102.3 trillion to $152.0 trillion. Here in the U.S. total private wealth since 2008 jumped by 40%, from $57 trillion to now over $81 trillion. (Flow of Funds report, page 2) That would also be by $185,000 per household, which means the median household with about $90,000 in net worth would have tripled, to $270,000, its net worth — if distribution had been healthy or even, but it is not. I am trying to predict the next ten years. With most of the surplus (profit) going straight into the financial markets, of whatever category, those assets will push up in value. There is not a large range of options, certainly investing in productive capacity is out, the aggregate purchasing demand is level and dropping. Various nation’s will play off in attracting the gamblers’ money, sometimes called investment. So advanced nation’s have to develop ways to manage the surplus, take it away from the very wealthy who have no incentive to productively invest the surplus. A wealth tax, a financial transaction tax, various means of raising wages and worker’s incomes.
I went looking for this quote from Ray Boshara who works for the Fed, “During the 25 years ending in 2007 [since 1982], Americans’ per capita disposable personal income more than tripled, while total assets owned per capita increased about five-fold. [financial and housing price assets] The value of assets owned increased faster than incomes primarily because stock and house prices increased rapidly. Meanwhile, the amount of debt of all kinds owed per person increased by a factor of six, while mortgage debt owed per capita grew eight-fold.6” — from Cascade, No. 84, Winter 2014. http://www.philadelphiafed.org/community-development/publications/cascade/84/01_asset-diversification-and-low-debt-are-keys-to-building-maintaining-wealth.cfm#footnotes
Then I looked at domestic financial system outstanding debt, and that increased by a factor of 16. I wonder why he did not include that in his report. I read Epic Recession and you spotted this trend in the book, an amazing growth of financial debt. I am at a loss as to how humans, nations, communities will respond to enormous gains in financial assets while their actual economies limp along.