”The credit default swap was, in effect, a credit laundering service for the residents of Lower Middle Class America. For Wall Street it was a machine that turned lead into gold.”— Michael Lewis, The Big Short
“Much of the current banking chicanery couldn’t take place without fiat currency in circulation in lieu of real money,” writes reader Bill M, echoing a point from our Demise of the Dollar playbook.
“Having currency with intrinsic value in circulation– or having the legal right to convert paper dollars into whatever notion of value is backing the monetary system– this forces discipline on the banking system, so that the value of the money remains about the same until the backing is removed.”
Bill’s email hit our inbox at an opportune time. We spent this past weekend going down the rabbit hole of the Treasury Department’s “banking systemic risk monitor.”
Sounds like a boatload of fun, eh? Party at the Wiggin household!
The Treasury’s Office of Financial Research (OFR) publishes, among a myriad of other data, the largest banks required to carry additional capital to counter outsized risks on their books.
The OFR’s “contagion index” calculates a bank’s “connectivity” with other banks, their net worth and “outside leverage” in order to determine how bad things would get if said bank were to get whacked by, say, rapidly rising interest rates.
Note: The contagion index is limited to US banks, so doesn’t include a whopper like Credit Suisse getting bought out for pennies on the dollar by UBS.
Discover, the credit card company, sets the benchmark, with a contagion risk number of 0.
JPMorgan’s contagion index number is a freakishly large 426. The top 5 banks on the OFR’s ragin’ contagion radar:
- JP Morgan Chase: 426
- Citigroup: 288
- Bank of New York Mellon: 207
- State Street: 198
- Bank of America: 135
Regulators require each of these banks to keep 3.5% of their capital on hand for any crisis situation.
Two notable banks stick out to me, however, aside from the big five.
Charles Schwab, whom we noted last week has been downgraded and is losing depositors at a panic rate, only has a contagion index number of 1. Silicon Valley Bank, which quickly became the poster child for the Banking Crisis of 2023, has a contagion index number of 22.
Makes you wonder what’s going on behind closed doors at the big bank houses, eh?
“The super-rich owners of corporate America,” our correspondent Bill M, continues his wax philosophic, “…They want fiat currency to be printed in excessive amounts to increase business activity in general and government squandering in particular. Their fiat profit distributions are then invested in hard assets like precious metals, real estate, collectables and what not.” Mr. M continues:
Remember the big banks are part of corporate America and are owned by the same super-rich families, also known as “the establishment.”
The big banks are selling gold and silver contracts short to depress their prices so that the major owners of corporate America and the central banks (same owners) may accumulate precious metal at prices well below what they should currently be.
“The wealth management industry does not exist to make you wealthy,” Porter Stansberry noted in this week’s Wiggin Session, “it exists to make them wealthy.”
“Even 25 years ago,” Porter says, reminiscing on how we got started in our chosen metier, “I saw that the people who were the clients of major investment banks like Morgan Stanley or Merrill Lynch were oftentimes very poorly served.” Porter:
I’m not trying to disparage everybody. There were certainly very many good people at that firm [Merill Lynch], like there were very many good people at Morgan Stanley. I’ve known many of them over the years.
But there was always an inherent conflict. Those banks made their money primarily by serving the people who were selling securities. And the customers, our subscribers, my friends who were successful in business or in medicine who would entrust these people with their savings, they truly didn’t understand that.
Porter provides a good look behind the scenes at what motivates those of us in the financial newsletter business. “Our customers did not understand that the companies that they were with — the people they saw advertising at the golf tournaments, the brands they saw on top of tall buildings — they thought the purpose of those firms was to serve investors. And of course, as you know, it’s not.”
The purpose of those firms is to serve corporations who are listing securities. Wall Street as “a state of mind” meant to me that we have an obligation to our readers. We don’t have a legal fiduciary duty, but I’ve always believed that we had a moral and ethical fiduciary duty to do what we could to even the playing field for those people. Those folks are going to spend $100 or $1,000, or sometimes more, $5,000 with us. And they’re doing so because they trust us more than they trust those firms. And we have to do a good enough job to be worthy of that trust and to help them succeed.
If you haven’t already, The Wiggin Session with Porter is worth a listen. You can do so on the www.wigginsessions.com website, right here. We also provide the transcript, if you’d prefer to read.
So it goes,
The Wiggin Sessions
P.S. Reader Bill M also attached a letter he wrote to then President Donald Trump in 2017 reminding the president of his responsibility to the U.S. Constitution. Congress is given the right to “coin” money and regulate its value, he writes. That’s a right they have effectively ceded to the Federal Reserve, a private institution.
“As we know from monetary history,” Bill writes to Trump, “monetary collapse is a natural consequence of unbacked fiat currency, and starvation is a natural consequence of monetary collapse. You talk about fake news and many of your supporters talk about fake campaign promises but no one is discussing our fake money. Next to sex, money makes the world go around and our dollar is intrinsically worthless.”
Bill didn’t say if Mr. Trump ever wrote back.
Addison Wiggin is an American writer, publisher, and filmmaker. He was the founder of Agora Financial and publisher for 18 years. An acclaimed New York Times best-selling author, his books include: Financial Reckoning Day, Empire of Debt, The Demise of the Dollar, and The Little Book of the Shrinking Dollar. Addison is also the writer and executive producer of the documentary I.O.U.S.A., an exposé on the national debt, shortlisted for an Academy Award in 2008. He lives in Baltimore, Maryland with his family. Addison started his latest project, The Wiggin Sessions, powered by Consilience Financial, in March 2020. He films from a homegrown studio in his basement.