Jack Rasmus

An Excerpt of Jack Rasmus’s recent publication on the destabilizing effects of shadow banks on China’s economy, published this past week in teleSUR media, follows below. (For the full article, go to Rasmus’s website at:
http://www.kyklosproductions.com/articles.html)

“What China, Argentina, Greece, Venezuela, and Ukraine all share in common is an ongoing struggle with global shadow bankers, who continue to destabilize their financial systems and drive their real economies, at different rates, toward recession and worse.

Since 2010 shadow banks have speculated intensely in Greek government bonds, driving up bond interest rates, forcing the government in turn to impose ever more draconian forms of austerity in order to pay their loan debt to the IMF, the EU, and shadow bankers like global Hedge Funds. Shadow banks have played a major role in forcing more severe austerity on the Greek people, and the hardship that has produced in lost jobs, falling wages, reduced pensions, cutbacks in essential social services, and privatization of public goods. Wages and working class standards of living are reduced, in order to ensure ever-rising interest payments to shadow banks and their investors.

In Argentina, U.S. shadow bankers were behind much of that economy’s prior debt crisis and defaults early in the last decade. Today, the same shadow bankers are at the center of a fight to extract even more payments from Argentina than previously agreed upon years ago in a resolution of that prior debt crisis. As U.S. central bank policy and collapsing world oil prices together force a decline in Argentina’s currency that threatens to push its economy into recession, U.S. shadow bankers continue to maneuver to cut off further global credit access to Argentina as a way to force it to pay them more than before for prior loans—a strategy that may accelerate Argentina’s slide into recession. Argentina’s economy thus reels under a triple assault by global finance capital – led by the U.S. central bank, exacerbated by global oil finance and oil futures securities traders, and simultaneously squeezed by U.S. hedge funds leading a charge to reduce Argentina’s credit availability still further.

In Venezuela, much of that economy’s current troubles are also traceable to shadow bankers, working in consort with global commercial bankers and the USA government. Shadow bankers are serving as a key conduit for funneling capital out of the Venezuelan economy. That has resulted in collapsing Venezuela currency, and in turn accelerating import driven inflation, and declining credit availability for the economy in general. Even more so than Argentina, Venezuela is being hammered by global oil commodity futures traders, as well as the rapid rise in the USA dollar. Whereas hedge funds and other shadow bankers are working behind the scenes to deny global credit to Argentina as a tactic to force it to pay U.S. funds even more, in Venezuela the vulture fund tactic is to exacerbate currency decline and capital flight from Venezuela’s economy.

The Ukraine is yet another classical case of shadow bankers preying upon an economy in distress. In the wake of the Ukraine’s descent into economic depression in 2014, the IMF and western commercial bank and government (European Commission) policies have put heads of western shadow banks in direct and daily management control of Ukraine’s economy. This past December, the CEO of the USA private equity firm, Horizon Capital, Natalia Jaresko, was appointed by Ukraine’s Poroshenko government as its official Finance Minister, while a western European, Aivaras Abramavicius, with close ties to Swedish and German shadow banks, was appointed as Economics Minister for the Ukraine. Shadow banks in the case of Ukraine will now be able to dismantle and destabilize the Ukraine economy ‘from the inside’, instead of dictating its policies from the outside as has been traditionally the case of other economies.

Relatively smaller economies like Ukraine, Greece, and even Argentina-Venezuela are more vulnerable to the financial intrigues and maneuvers of global shadow bankers—the overwhelming majority of which originated and are still based in the USA and the UK. Shadow banks are definitely a phenomenon of Anglo-American global finance that re-emerged on a global scale several decades ago, expanded in the 1980s, became truly global in the 1990s, played a central precipitating role in the global financial crash of 2007-09, and have come to represent in the 21st century one of the defining characteristics of global capitalism today.

A Brief Overview of ‘Shadow Banking’

Shadow banks are that exploding growth segment of global finance capital that share the following characteristics: they are largely unregulated, they invest primarily in financial asset securities of various kinds (i.e. stocks, government and corporate junk bonds, foreign exchange, derivatives, etc.) instead of real asset investment (plant, equipment, software, etc.), they target high risk-high return opportunities based on asset price appreciation and volatility to realize financial capital gains, their investments are highly leveraged and debt driven, their investment targets are highly liquid financial markets worldwide that enable a quick entry, price appreciation, and subsequent just as quick short term profit extraction.

Their client base is predominantly composed of the global finance capital elite – i.e. the roughly 200,000 worldwide ultra and very high net worth individuals with net annual additional income from investment flows of $20 million or more—for whom they invest individually as well as for themselves as shadow bank institutions.

Shadow bank ‘forms’ include private equity firms, hedge funds, asset and wealth management companies, mutual funds, money market funds, investment banks, insurance companies, boutique banks, trust companies, real estate investment trusts – to note just a short list – as well as dozens of other forms and newly emerging initiatives like peer to peer lending networks, online investment funds, and the like.

Shadow banks have been estimated to have investable assets (i.e. relatively short term and liquid) of about $75 trillion globally as of year end 2014, a total that does not include revenue from ‘portfolio’ shadow-shadow banking. That is projected to exceed $100 trillion well before 2020.

Shadow banks and their finance capital elite clients make money when financial asset prices are volatile, i.e. when such prices rapidly rise or fall or both. It is thus in their direct interest to cause asset price volatility and instability—whether in provoking a rapid rise in government bonds rates(Greece), in contributing to the collapse in currencies (Venezuela, Argentina), or in IMF-enforced ‘firesales’ of companies (Ukraine). Their strategy is to exacerbate, or even create, financial price inflation in the targeted market and financial instruments, be they stocks, junk bonds, real estate, foreign exchange, derivatives, etc. That same financial price instability, however, is what causes havoc with the real economies of countries—like those in southern Europe in recent years, in Asia in the late 1990s, Japan in early 1990s, and which led to the global financial crash of 2008-09 itself.

In the Shadows of China…..

(go to http://www.kyklosproductions.com/articles.html for the remainder of this article)

Jack Rasmus is the author of the forthcoming book, ‘Transitions to Global Depression’, Clarity Press, 2015; and Epic Recession: Prelude to Global Depression and Obama’s Economy, both by Pluto Press, 2010 and 2012. His blog is jackrasmus.com and website http://www.kyklosproductions.com.