The Crash is the Solution E-Book

Matthias Weik

• Herausgeber: Bastei Entertainment
• Kategorie: Ratgeber
• Sprache: Englisch
• Veröffentlichungsjahr: 2016

Seitenzahl: 490

Beschreibung

Germany’s most successful business book of 2014 in English now


It's no longer a question of whether the crash will happen, but when. All of the measures taken toward saving banks, national economies, and the euro boil down to the maximization of damages and state bankruptcy for Germany, for which case the expropriation of private citizens has long been in preparation. Government bonds, pension funds, life insurance policies and bank accounts - these are the things that will lose the most in a crash that should come sooner rather than later. Only then will the political and business sectors be open to making radical changes. When the crash comes, we'll need fast solutions!

In their e-book, economics experts and authors of three bestsellers Matthias Weik and Marc Friedrich thoroughly and clearly describe what has caused and who benefits from the crisis. But their predictions are not completely pessimistic when it comes to securing your wealth. The two financial strategists explain in simple terms how you can redistribute your money into tangible assets before the crash in order to keep your savings safe.
The book immediately made it onto Spiegel magazine’s bestseller list and has caused quite a stir. In this book, the authors correctly predicted the outcome of EU elections, the ECB’s interest rate cuts and negative interest rates for banks, and the lowering of the interest rate guaranteed by life insurers - just to name a few examples.


About the authors:

Matthias Weik studied international business in Australia where he completed his degree. He has dealt with the global economy and financial markets for over a decade. Matthias Weik earned his MBA as part of a work-study program while working for a German corporation. On professional and academic stays in South America, Asia and Australia, Matthias Weik gained deep insight into the world of international finance and economics. His two books co-authored with Marc Friedrich Der grösste Raubzug der Geschichte (English working title: "The Greatest Heist of All Time”) and Der Crash ist die Lösung (English: "The Crash Is the Solution”) are both Spiegel magazine bestsellers and No 1. Manager Magazine bestsellers as well as the most successful economics books in Germany in 2013 and 2014. In 2016 they published their third bestseller "Kapitalfehler" (English: "Capital error”).

Marc Friedrich studied international business administration and has focused intensely on the economy and financial markets. During a job assignment in Argentina, he witnessed a sovereign default first hand in 2001 and its devastating consequences. Marc Friedrich gained valuable work experience in the UK, Switzerland and the US. Together with Matthias Weik, Marc Friedrich holds seminars and lectures for companies, associations, foundations, at conferences, trade shows and at universities and colleges. The duo has been active in this field for several years now. Marc Friedrich and Matthias Weik are welcome economic experts and have made numerous appearances in recent years in print media and on radio and television programs.

.

Leseprobe

Contents

Cover

About the book

About the authors

Titel

Impressum

Disclaimer

Quote

1. The Crash That Was Inevitable

The euro, destroyer of wealth

Zero interest rates and speculation bubbles

The senseless race against the clock

2. It’s a Sick World, or: Why the People Who Caused the Crisis Are Winning It

The “too big to fail” getaway plan – Why banks keep getting bigger and bigger

A little catalogue of financial crime stories

How the banks rip off Germany

The Libor scandal

The financial sector still hasn’t learned anything

Savings banks and credit unions: the better banks?

Why arbitrators often leave you coming away empty-handed

Useless informational pamphlets

Postbank: the customer foots the bill

How banks palm off undesirable stocks onto clients

For the return of the honorable salesman

3. Germany: Master of Exports in Record Debt

Not all that glitters is gold

Trapped by exponential growth

Rich Germany, poor Germany

Germany’s foundation is crumbling

Who actually has the money to save the euro?

Do us citizens benefit from the euro?

Banks, not schools: where our tax money ends up

Made in Germany – subsidized by workers and savers

4. The EU – A Fake Democracy

Violations of the law and non-stop lies

How democratic is the EU?

No one bears another’s burden?

Europe: who pays more – and who gets more?

In the bureaucracy of milk and honey

Wasting tax money

The camps of the lobbyist army

Europe can be saved – restructure the EU, get rid of the euro!

5. The Driving Forces of Crises: USA, China, Japan

USA – a superpower facing bankruptcy

China – the turbo-capitalist communists

Japan – kamikaze economic policy, crash guaranteed

6. Dispossession, Mandatory Levies, and Inflation

The era of profitability is over!

We are all going to lose our some of our wealth – or we’ll have to give it to someone else.

How the state squanders our money

The central banks’ dilemma

Inflation

7. How Can I Protect My Assets?

The most popular capital investments

Guide to protecting your assets

Discontinued models: endowment policies and retirement plans

Building loan agreements

The root of the consultant mess

Accounts versus cash

Protecting your investments with material assets

Property and real estate

Stocks

Dangerous material assets

Gold and silver

Are diamonds investors’ best friends?

Renewable energies – wind, hydro, solar

Forests, fields, and meadows

Direct shares and natural produce – P2P

Crowdfunding

Whiskey – the liquid gold of Scotland

Virtual money – Bitcoin and other cryptocurrencies

Collections

8. The Crash is the Solution – the Big Bang Theory

The main factors and drivers behind the crisis

The first steps toward a sustainable economic and financial system

Basic alternatives to our financial system

The crisis is our chance, or: why the crisis calls for some radical rethinking

Acknowledgements

Notes

About the book

It’s no longer a question of whether the crash will happen, but when. All of the measures taken toward saving banks, national economies, and the euro boil down to the maximization of damages and state bankruptcy for Germany, for which case the expropriation of private citizens has long been in preparation. Government bonds, pension funds, life insurance policies, bank accounts – these are the things that will lose the most in a crash that should come sooner rather than later. Only then will the political and business sectors be open to making radical changes. When the crash comes, we’ll need fast solutions!

In their e-book, economics experts Matthias Weik and Marc Friedrich thoroughly and clearly describe what has caused and who benefits from the crisis. But their predictions are not completely pessimistic when it comes to securing your wealth. The two financial strategists explain in simple terms how you can redistribute your money into tangible assets before the crash in order to keep your savings safe.

About the authors

Matthias Weik has closely studied global economics and financial markets for over ten years. Through his experiences working and studying in South America, Asia, and Australia, he gained deep insights into the economic and business sectors in other countries. He received his MBA while also working for a German corporation. An unconventional thinker, he is now active as an independent fee-only financial advisor.

Marc Friedrich studied international business administration and has intensively studied economics and financial markets. While in Argentina, he witnessed the 2001 state bankruptcy and its shocking consequences. He has collected numerous and valuable work experience via stays in Great Britain, Switzerland, and the USA. Together with Matthias Weik, he holds seminars and specialized lectures at businesses, associations, universities, and schools.

Matthias Weik & Marc Friedrich

THECRASHIS THE SOLUTION

Why the Ultimate Collapse is Coming and How You Can Protect Your Wealth

BASTEI ENTERTAINMENT

Digital original edition

Bastei Entertainment is an imprint of Bastei Lübbe AG

Copyright © 2016 by Bastei Lübbe AG, Schanzenstraße 6-20, 51063 Cologne, Germany

The German original edition was published by Bastei Lübbe AG in 2014

Cover illustration: iStockphoto/Mikey Man

Cover design: Christina Hucke, www.christinahucke.de

E-book production: le-tex publishing services GmbH Leipzig, Germany

ISBN 978-3-7325-3082-3

www.bastei-entertainment.com

Disclaimer: Every individual bears personal responsibility for his or her private assets and investment management. It therefore follows that every individual investor is personally responsible for informing him or herself about specific financial products. The authors are not liable for any damages resulting from flawed conclusions drawn from the information presented in this book. Although the information in this book is based on in-depth research, errors may still be present. The authors reject liability claims of any kind.

Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion– when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.

Ayn Rand (1905 – 1982), Russian-American author

1. The Crash That Was Inevitable

If we ask people whether “the financial crisis” is over, then the answer is generally always the same. Nobody thinks so. It doesn’t matter whether we talk to clients, business partners, or friends about it. It doesn’t matter if they are involved in financial transactions at work or not. It doesn’t matter if they know much about economics or not. Everyone’s gut feeling says that since 2008, we have been experiencing momentous changes. The international economy and global financial system are coming apart at the seams. Without a fundamental paradigm shift, we will continue to race towards the cliff’s edge with no working brakes. Everyone has the inkling that the crash will be massive, but only a few people can make a more informed guess as to when we will finally hit the ground. In this book, we analyze who is actually steering us, why they are driving like total nut, and where the road is potentially headed. And: how we can all win back control over the car we call money.

Since 2008, crises have been our constant companion: the real estate crises in the USA, Spain, and Ireland, the Lehman Brothers crisis, the crisis in Cyprus, banking and finance scandals one after the other, out-of-control national debts, the Euro crisis, and at-risk candidates like Italy, Portugal, and even France. And Greece, over and over again: an economically and politically ailing nation altogether, with a desperate population that has been exhausted and demoralized by recessions, countless bailout packages, and calls for reform. In September 2015, when this book was written, Greece was rescued with its third bailout to the tune of 86 million euros and against all economic sense. Although this kind of bailout had already catastrophically failed twice, once again, the same useless medicine is being administered to the mortally ill patient. We can only shake our heads and think of this quote from Albert Einstein: “Insanity is doing the same thing over and over again and expecting different results.” Currently, we can’t predict exactly what will happen to Greece, what the Greeks are going to have to further endure, what ideas the creditors at the IMF, ECB, EFSF & Co. will come up with, and what all of this is going to cost Europe’s taxpayers in the end. The only thing that’s clear is this: the greatest protraction of bankruptcy in history will continue. And despite whatever odd shortcuts are taken, the Hellenic Republic will end up being drip-fed by Europe for decades. And there’s more: ultimately, not one of the financial crises in the last seven years has ever been solved –quite the contrary. It’s becoming clearer and clearer that all of these so-called bailout packages are the problem and not the solution. And that they are becoming less and less effective with more and more questionable effects.

This historically unique and apparently endless bailout orgy is already an unprecedented series of contract breaches, lies, and fraud. Do the owners and investors at failed banks actually have to bear the risks of their recklessness? Pfft! All one of the responsible parties has to do is shout “too big to fail,” and, right away, all of us taxpayers write them a check. No debt transfers between the euro states? For a while, this rule hasn’t been worth the paper it was written on. The European Central Bank as an independent monetary authority? It’s been mutated into a funding agency for government loans. In 2009 we watched one crisis conference convene after the other. 2015 doesn’t look any different, and nothing will change in the future, either. Each time, we were told that the banks, investment trusts or hedge funds had finally been cornered. That the banks would have to build up significantly more equity capital in order to offset the risks they take. That the super bonuses for finance managers were a thing of the past. And what has really happened? Basically nothing! Many banks now are doing even better than they were before the crisis. The less than modest goals for increasing capital quotas have been stretched out as far as into the year 2019. And yet, even those institutions with modest profits are already showering their top managers with fat premiums once again.

Since the outbreak of the financial crisis in 2008 and especially since the summer of 2012, politicians have, together with the finance industry and the central banks, merely attacked the symptoms of the disease. The true causes of the crisis have not really been tackled. In doing so, they have massively accelerated the maximum economic damage at the cost of the general public – and democracy. Meanwhile, things that were once considered unthinkable have been done anyway in order to buy more time and drag the unsolved, seemingly permanent crisis further out into the future. Businesses and banks are being nationalized and citizens, shareholders, and depositors dispossessed. On top of everything, current laws are constantly being broken by those at the highest levels in order to keep the failed system on artificial life support. But the patient, i.e. the financial system, is in reality already clinically dead.

The euro, destroyer of wealth

Unfortunately, much of what we predicted in early 2012 in our first book, Der größte Raubzug der Geschichte (English: The Greatest Heist of All Time), has already arrived with a momentum that surprised even us. Right now in certain countries, we are experiencing not only the biggest protraction of insolvency in the history of mankind, but also the largest political experiment with the central banks. Never before has there been as much money in the system as there is today. The balances of the reserve banks have taken on historical dimensions. And in reality, the euro has long since failed, because money that needs to be rescued is not really money at all! The economic numbers clearly show that the euro is ruining Europe and destroying our wealth! From a historical standpoint, the EU is a respectable Nobel Peace Prize winner, but in many European countries, the advent of the euro has brought record unemployment numbers along with it. Meanwhile, in nations such as Spain and Greece, half the population under the age of 25 cannot find work. Adult men and women and even families with children are forced to either move back in with parents and grandparents or leave their country. In those countries, a whole generation is being sacrificed for the sake of keeping a failed and politically motivated financial experiment alive. As diverse as their specific economic situations may be, Greece, Ireland, Portugal, Spain, the USA, and Japan are all effectively bankrupt. We’ll go even further and count Italy, France, Spain, Croatia, and the Netherlands among the candidates for going broke, too.

Before the European elections in May 2014, politicians from Helsinki to Rome, Lisbon and Warsaw held flowery and emotional speeches in which they lauded the European peace order and the undeniable advantages of transnational economic cooperation as blessings. But simultaneously, with their flagrant mistakes the same politicians create a volatile breeding ground for populists, nationalists, separatists, and extremists. The European elections and the elections in Greece, France, and Spain have more than confirmed our fears. Situations that resemble civil war, such as what was experienced in Athens in 2012, could threaten other states that are in crisis sooner or later.

It doesn’t matter whether bailout banks are saved with government bonds (tax money) or bailin banks are rescued by their owners, stakeholders, and depositors. No matter what you call it, in the end it all means only one thing: the taxpaying citizens are all liable and must therefore pay for the banks’ gambles and losses. This clearly shows how desperate the situation is. For us economists, these ongoing attempts to solve the financial crisis and their devastating consequences come across like an endless horror film.

Zero interest rates and speculation bubbles

That horror is intensified by the fact that for years, we have all been gradually expropriated by the central banks. In all important areas of commerce, the key interest rates are nearly at zero. The return on our savings, regardless of whether we drop them in a classic savings account or put them in government bonds or otherwise invest them, is almost without exception under the inflation rate. But if we temporarily overdraw our accounts then our banks demand excessive interest rates from us – even though the European Central Bank (ECB) has literally gifted them the money they are “working” with.

Meanwhile, vast sums of this cheap money bounce around the world waiting for investment opportunities. This is how stock prices and, to an extent, real estate prices have reached record highs again and again. Current or recently burst speculation bubbles are simply replaced by new and bigger speculation bubbles. Thus, we are back to the cynical 2008 statement of former Citigroup CEO Chuck Prince, whom we already cited in our first book: “As long as the music is playing, you've got to get up and dance.” Sad news flash: the music is louder now than it was in 2008. And the banking moguls in New York, London and Frankfurt have long since returned to their debaucherous dancing and are getting paid bigger bonuses than ever before. That the world is sinking in debt in the meantime, that more and more nations are on the edge of bankruptcy, that the gap between the rich and the poor is ever-widening, that the middle class is gradually being wiped out, and that the social tensions are rising – unfortunately, our dancing bankers at the finance party don’t give a hoot about any of it.

The finance industry has brought the world to brink of collapse more than once with its greed and its egotistical, irresponsible trading. Nevertheless, the huge, supposedly “too big to fail” banks have been and will be rescued again and again, an assumption which has been automated and burned into the minds of the people in charge. To be “too big to fail” is not an uncontrollable risk to the world’s financial managers. Instead, perversely enough, it’s practically seen as a sensible goal. Because if your bankruptcy can ruin whole national economies, then the responsible politicians will do anything to stop you from going broke. Therefore, since 2008 the banks have become bigger, more powerful, and above all, even more “too big to fail.” Their managers are gripping countries as if in a chokehold. As perfidious as it sounds, the people who caused the crises are the same ones who are winning them. It’s like being at the casino: the bank always wins!

Despite massive efforts, the slow economic growth in the USA and in Europe persists. Japan, the most heavily indebted industrial country in the world, is only slowly getting back on its feet after twenty years of economic stagnation. And booming countries such as Brazil, India, and Turkey are now running out of steam. Wherever there is still timid growth, that growth is bought out with an exorbitant flood of money – and is ultimately revealed to be built on quicksand after all. We are bearing witness to a totally neglectful and irresponsible game against time that no one will win in the end.

The crises are multiplying and with every new crisis they grow in strength and power. The waves that they make surge over and over again, rolling forward with nothing in the way to stop them. And it’s impossible to stop them. The only decision you can, to a certain extent, make for yourself is whether to surf or be carried away to sea.

The creators of all these crises in the financial sector are the only ones who, until now, have remained unscathed. The major banks and other billion-dollar financial intermediaries consistently present themselves as the only option for the global economy. There is no alternative. It’s like Godzilla in the sense that size does matter. The lords in the world of finance still believe that they are above the law. They caustically summon the taxpayer to the bank and stomp on every kind of law, norm, or moral value without ever being forced to take responsibility. Because as politicians are laboring over supposedly harsh new regulations for banks, scandals filled with extortion, manipulation, and criminal doings continue to be exposed.

With that, the societal acceptance afforded to the financial sector continues to be dismantled. Of course, many financial managers are painfully aware that that they are perceived as only marginally better than criminal drug cartels. And the cleverest ones among them also know very well that their system of unchecked speculative income cannot function for much longer. That is why this book is also an appeal to the responsible parties in the financial sector and politics: There is no such thing – especially when we are talking about our current financial system – as “the only option.” There are always alternatives! What we need is a total reform of our financial system – a new path towards a sustainable, human-oriented business philosophy. All of us must hold out our hands to the banks and insurance providers and pull them back into society. With palpable societal pressure, even if they cannot be led back to the path of virtue, they can at least be brought back to the way of economic sense.

The senseless race against the clock

There is neither a cure nor a solution within the current system. This is a fact. If a solution existed politicians would have already proudly and loudly presented it to us. Moreover, the responsible parties apparently lack the will and the courage to give up on the status quo and introduce a real and sustainable change for the better. Instead they continue, undaunted, to poke and probe at the symptoms and race against the clock at the expense of us private citizens.

All of us know that it can be completely sensible to engage in a race against the clock, for instance in soccer. Sure, it rarely looks good, but you can hold onto the outcome this way. In the end, the referee will blow his whistle after 90 minutes. But in the game of the global financial crisis, for most people there hasn’t been anything to win in a long time. And there is no whistle. At some point the accounts need to be balanced. And then all of the crises since 2008 will seem like a little taste of the invoice that was eventually going to come. In comparison to the final collapse, the Lehman crisis, the Euro crisis, and even the Greek economy’s crash will look like a little kid’s birthday party.

The crash is coming. We are economists, not psychics. Therefore, we don’t know when it’s coming or how many more crises in which subsystems of our financial system will come before it. But it’s not just a doom and gloom prophecy to say that it is coming. The final collapse is a logical consequence based on indisputable economic ground rules. What we are experiencing now will be written about in history books. Never before has there been as much unbacked money in the system as there is now. The balances of the central banks have never been more bloated and the interest rates have never been so low. All of us know that you can’t keep blowing up a balloon indefinitely. At some point either air has to be let out or the balloon will pop. Our prediction – based on good reasons – is that it’s far too late now to let out the air.

Actually, we didn’t plan on writing a second book. But now we are practically obligated to do so, thanks to the unbelievable events and developments since 2012 as well as the failure of the political establishment and the financial sector to draw the necessary conclusions from the crisis. As staunch democrats and Europeans, we cannot bear the endless half-truths and lies spread by those who are responsible. We must continue to pour salt on the wounds, point to the flagrant abuses that are still rampant, and call those who take us for fools, who lie, deceive, dispossess and rip us off, by name. Every citizen needs to understand what is happening before our very eyes and how it will affect each of us personally and all of us as a group. And everyone should know how to protect him- or herself from the impending crash. The more people who are prepared both mentally and financially for the crash of the century, the better the chance that our society will be able to escape less scathed.

In The Greatest Heist of All Time, we already described how not only all unbacked paper money systems but also all monetary unions to date have, without exception, been failures. Money that is not based on real economics is always worthless, but many still like to believe it has value. These systems are actually characterized by the belief in unlimited and exponential growth. But we live in a closed system with finite resources. There is no perpetual growth. We need to finally shake free of this belief. Humans can subdue nature up to a certain point, perhaps. But we can’t circumvent mathematics. Unfortunately, right now we are trying to do exactly that – again. But our financial system, too, has a lifespan that is limited by mathematics – and its demise is overdue. As stated, we cannot see into the future and say with certainty what exactly is going to happen, let alone when it will happen. But it is possible for us to learn from the past and to some extent prepare ourselves for what is coming.

As economists, we understand a little bit about the thoroughly complex background behind the crisis. But as Swabians, we tend to avoid all the mumbo-jumbo. We say exactly what is on our minds and we prefer to speak and write in a comprehensible, honest, and clear way. Without jargon – we promise!

In our first book we described the greatest shift of assets in human history – assets that were in the lower and middle classes and are now found in the uppermost class. If nothing else, with this book we want to help you position yourself so that your and your family’s savings remain intact. You actually have the ability to protect your money from devaluation and dispossession. There is still time to prepare yourself for the crash. But that little window of time is getting smaller every day.

The crash is the solution! That’s a bold statement. But we show why this is ultimately both good and necessary – for the financial sector whose power must be broken, for our society that needs to be more just, and for each individual who should be profiting from a true social market economy based on everyone’s reasonable vested interests instead of paying for the irrational wealth enjoyed by the few.

After our first book, The Greatest Heist of All Time, this book too has evolved into what is to us an unbelievable bestseller. That we can now present the most successful business title of 2014 in a completely updated edition is largely thanks to all of our readers and those who have attended our readings and lectures. From them, we know that we are simply stating what many of our fellow citizens are also thinking. Their encouragement gives us the strength to keep going. From the beginning, our objective was to reach as many people as possible and to make them aware of what is happening before our eyes in a clear, honest, and understandable way. More than ever, we are being cheated, deceived, and stolen from by the financial sector and the government.

The world of finance continues to turn as if nothing ever happened. Hundreds of bubbles have burst, but the central and commercial banks around the world continue to stir the pot of soapy water from which they come that represents the fantastical moneymaking and speculation. None of the problems of our terrible financial system have been sustainably resolved. Absolutely nothing has been learned from the mistakes of the past. The banks are much more “too big to fail” than ever before, and the rewards for their top levels of management have not only already reached their previous highs, they have often surmounted them. We watch with disbelief and dismay the political and financial establishments’ increasing undemocratic decisions made to keep an undeniably failed system artificially alive. Even the word “negative interest rate” is no longer foreign to us. The only thing that has been consistently promoted since 2009 is the maximum economic damage at all of our expense.

For us, it is especially frightening that many of our statements and prognoses have already become our bitter reality. And with such a dynamic as to render us speechless. For these reasons we say louder than ever before: The crash is the solution! If there were really a solution, then the “decision makers” in Berlin, Brussels or Washington would have already presented it to us long ago. Furthermore, the core argument of our first book has been confirmed: That the wealthy are becoming wealthier and those who are hardworking poorer. We thus sincerely hope that we can reach even more people. That they raise their voices – and that, finally, the people will be rescued instead of the banks, the “market” and the euro. Don’t let yourself be deceived by the financial sector and the politicians. Our society needs a new, more democratic, and more just economic and financial system.

Stuttgart, September 2015

Matthias Weik & Marc Friedrich

2. It’s a Sick World, or: Why the People Who Caused the Crisis Are Winning It

“Man is not in charge today, money is in charge, money rules.”

Pope Francis, June 20131

That which we are in the habit of calling the “financial crisis” or even just “the crisis” was essentially triggered by two fatal economic and fiscal mistakes. They were then both substantially fueled by that ineradicable human weakness called greed.

The first mistake: an extensive deregulation of the national and international financial markets. This deregulation had already begun in the 1980s under the administrations of Ronald Reagan and Margaret Thatcher, who were both open followers of the radical teachings of Friedrich August von Hayek (1899–1992) as well as the so-called Chicago School and its mastermind Milton Friedman (1912–2006). In the 16 years of Helmut Kohl’s government the “Rhenish capitalism” tentatively followed this (wrong) path. Only in the wake of Democratic President Bill Clinton and the British Labour Prime Minister Tony Blair were the doors to deregulation also opened in Germany by the red-green coalition under Chancellor Gerhard Schröder. And with typical German thoroughness, mind you!

The second mistake began taking its course in the mid-1990s at the latest, when the American central bank under its president Alan Greenspan tried to stimulate the sluggish economy with lower and lower interest rates. Other central banks followed this course all too often, meaning that for two decades, the world has been flooded with cheap money without interruption – money for which there aren’t nearly enough reasonable investment opportunities outside of the financial sector and in the world of the production of goods and services. And money that therefore produces one speculation bubble after the other in intervals that get shorter and shorter.

We can’t even blame those who are living in the jungles of the financial sector, those stockbrokers, bankers or fund managers, those financial mathematicians, speculators and investment gurus full of tricks, for the fact that numerous flora of the greed genus bloom gloriously in the muggy climate of no rules and lavish amounts of money. And not in the least for the fact that their greed is coupled partly with speculative cockiness and even partly with criminal behavior and openly fraudulent intentions. Clients aren’t the only ones who were scammed with highly risky junk bonds, among other things. Even currency exchange rates and base rates were illegally manipulated.

Many still optimistically chalked the March 2000 burst of the dot-com bubble and the crash of NASDAQ, the Deutsche Börse’s Neuer Markt and others up to an industrial accident or as an unavoidable “correction of market excesses.” But the financial sector and the governments were standing before the shambles of this system by no later than fall 2008, when the American investment bank Lehman Brothers went bankrupt and the real estate bubble in the United States finally burst. Bad loans and incalculable risks dropped out of bank balances everywhere like dead flies. The “masters of the universe” soon didn’t even trust each other at all. Suddenly, the credit institutions would not only refuse to loan money to private citizens and businesses, but they also wouldn’t loan money to each other. The politicians and their grand gestures were just barely able to prevent a universal banking crisis. And since then, institutions that would otherwise have dissolved within days without our tax money are being kept alive with billions guaranteed by the state.

But what, apart from the grandiose avowals made at the endless crisis summits, has changed since then? Have the markets really been more strictly regulated? Have the torrents of cheap money been halted by the central banks? Was the insanity of the financial markets stopped? No. None of this has changed. The hubris of the financial jugglers is still unbroken despite all of the crises and scandals.

We’d like to make one thing clear now: We are not generally negatively disposed to banks. And we definitely don’t want to practice the same banker bashing that’s been fashionable for some time now. On the contrary: Banks are indispensable for a functional society. Unfortunately, a majority of them have departed from their true purpose – providing the economy with money and credit. The financial economy no longer serves people and society first, but instead mainly its own interests. Instead of making prosperity possible for all thanks to a functional and stable credit system, they chase unbelievable amounts of unproductive money around the globe every second of the day. For every dollar that is spent worldwide on goods or services, an estimated 70 dollars circulate that are purely financial investments. This system makes a few people rich in name only – and thereby ruins whole economies in crises that are hardly controllable anymore. The price is paid by all the people who lose their savings, their jobs or their homes overnight. Or the people who have their bread and butter taken away from them, sometimes literally. In a word: Our banking and financial system has gone in a direction that is completely wrong and damaging to our society overall.

With this book, we once again pour salt on the wound and reveal the severe negative developments in the financial sector that have occurred since 2008 and mainly in the last few years. While doing so, we trust neither the vague announcements of politicians nor the crocodile tears and regretful vows from the top ranks at the banks. We let the facts speak for themselves because we want to contribute to a change in the mindset of both the decision makers in the financial economy and us, the banks’ clients. We are all jointly responsible for ensuring that the system gets back on its feet again and that money serves the people, and that people are not slaves to money.

Because you decide if you even want to trust a bank with your income and your savings, and if you do, which bank. You decide who invests your money for you and where it is invested. Of course, every bank will profess that they are “the bank that’s on your side.” But you don’t trust your friends or colleagues just because they are wearing t-shirts that say “Trust me!”. You only trust people who have been open and honest with you. Who at least won’t try to pull a fast one on you. Can you say the same about your bank consultant in good conscience?

The “too big to fail” getaway plan – Why banks keep getting bigger and bigger

Since 2008, the year of the crisis, the banks have continued the inflationary expansion of their balances. Historically low interest rates have made this possible for them, as well as mergers and acquisitions that, compared to the years before the crisis, have often been real bargains. Through this almost totally unchecked expansion, the major banks around the world have become even more systematically important, or “too big to fail.” And with the help of the most powerful lobby in the world – the banking lobby – they have defended themselves extremely successfully against any and all truly far-reaching reforms.

For instance, an increase in liability capital for banks has been widely impeded and dragged out over time. The bosses sitting at the top of the banks never tire of whining about the terrible consequences increased capital ratios would mean for the banks and for society. The government and us private citizens have been given a mantra-like warning that considerably higher reserves will inevitably lead to a reduction in credit allocated to the real economy. And that this will, of course, stifle growth, destroy jobs and prosperity, and trigger a very, very bad crisis. These threats have worked. At the very least, the oft-quoted Third Basel Accord was a clear victory for the financial sector. As it often happens, the lobbyists were able to dictate numerous loopholes and special provisions that were to be built into the accord.

Basel III

According to the reform package by the Bank for International Settlements (BIS) in Basel, stricter capital and liquidity requirements have applied to financial institutions since January 1, 2014. The actual goal of “Basel III” was to make the world of banking more stable so that banks could manage crisis situations without state assistance in the future. Currently, most of the large institutions maintain a miserable equity capital ratio of between 1 and 5 percent. For instance, at the end of 2014 the Deutsche Bank had an equity ratio of a shameful 3.9 percent. This is less than what Lehman Brothers had before the crisis, when it went broke! The regulations for what can be considered equity capital were to a great extent internationally standardized, but softened at the same time. The minimum equity ratio was increased to only 7 percent. And the banks don’t have to reach this percentage until 2019 at the earliest.2

In the cartoon, the man on the left is reading “Basel III Bank Regulations” while the man on the right is saying “Basel? I prefer Las Vegas!”

Just try to get your house or apartment financed by your local bank if you have an equity ratio of 7 percent. You could hear the bank consultant laughing all the way out on the street! Private citizens rightly need at least 20 percent in equity to get a loan; even businesses need at least 25 percent. What’s more, for both the private home and the factory there are material assets and real capital available. Without a doubt, the Deutsche Bank’s skyscrapers in Frankfurt are top real estate. Yet their worth wouldn’t cover a billionth of the institution’s risks. But what even “belongs” to a bank? Definitely not their clients’ money. And even their “real” equity capital is based on nothing more than abstract assets – meaning money. Thus, in the risk assessment, there is one standard for private citizens and businesses and another for banks. But banks are businesses too. And rather risky ones at that – as we have been forced to learn in the meantime. So why treat them differently than industrial or service enterprises? Unfortunately, the banks still enjoy a fool’s license that is yet to be matched.

The motto of the financial institutions is still: Privatize profits and socialize losses. With their laughable equity ratios and because of their monopoly the big banks can depend on being rescued by the central banks, the governments and the taxpayers. You can’t be infuriated enough by it!

Rescued for all the gold in the world

5.1 trillion euros! This is the gigantic financial framework that the European countries have built since 2008 in order to rescue the banks.3 With that kind of money you could easily fund the German national budget for more than ten years. You could buy up the complete DAX – all the stocks from Allianz to Volkswagen – five times. Or all the gold in the world! And you would still have an impressive little sum left over.4

Banking advice means losses – for the client

50 billion euros. This is the amount that investors in Germany lose annually due to bad advice from the banks and financial experts, as was shown by a report by the Bamberg financial economist Andreas Oehler.5 With this sum, you could have financed the entire national debt service for 2014 plus the total education budget. And with that, you’d also get the new Berlin airport thrown in for free!

It’s no wonder that according to a 2013 survey by the finance portal FinanceScout24 almost 86 percent of Germans intend to invest their money with as little external help as possible. Only 14 percent desire a personal consultation from a bank.6 This survey reflects the deep distrust consumers have toward the banks. What’s strange is that although the majority of respondents is of the opinion that the private banks have learned nothing from the mistakes that led to the financial crisis, and although 72 of the survey respondents said that the big banks would keep going just as they did before the crisis, the banks’ damaging behavior has had little impact on the investment habits of their clients.7 They complain but mostly remain loyal to their institution. Perhaps because they hardly have any alternatives? In the chapter about asset protection we will name a few.

According to an online survey that the market research institute Mafo performed exclusively for Handelsblatt Online in July 2012, almost every fourth German considers bankers to be on par with criminals.8 Unfortunately, we have to agree with them. All those things we were told by politicians after the crash of 2008 about how they wanted to bring banks and bankers back to the golden rules of business and finance – a mess of laws, reforms and measures with unbelievably complicated names like Basel III, ESM, Solvency II, banking supervision, EFSM, stress test and banking union was thrown around the room and spelled out by committees and the numerous crisis summits. Even some experts themselves couldn’t say what was actually decided, what was only discussed, and what were total platitudes in conference rhetoric.

Spineless banking supervision

After a closer look, many of the decisions taken were as ineffective as their announcement was loud, the same way compliance with the Basel III regulations was delayed until the cows come home. We can only pray that there will not be any more crises before 2018! Unfathomably, the banks were even allowed to build into their liquidity cushions the exact things that actually caused the crisis of 2008: bonds with bad ratings, stocks that go all the way down to risky secondary markets, and – if you can believe your ears – mortgage bonds! Thus, in regard to risk prevention, the regulations were not made stricter, but were rather loosened so as to become almost unrecognizable. And apparently we are supposed to understand and accept that!

Bank supervisors rightly criticize the fact that government bonds from countries that are officially treated by the stock markets as “junk” are suddenly being evaluated as risk-free.9 That’s basically as if you were to purchase a really old broken cell phone at the flea market, glue a small apple to it and claim it was the newest iPhone model. And then you demand 500 euros for your electronic garbage! In light of the precarious risks afforded to many banks, these sleights of hand amount to a scandal.

The USA is currently assessing whether Basel III should even be utilized at all. The CEO of the US bank JPMorgan Chase, James Dimon, complains almost weekly about the Basel accord and demonizes bank regulations as being “un-American.”10

Additionally, the so-called “stress tests” for banks have proven to be absolutely meaningless. The banks’ balances and their ability to be crisis-proof were supposed to be put to the acid test. And what happened? Irish banks, for example, were rated in 2010 as being completely healthy – only four months later, they had to be bailed out with billions in tax money. Moreover, there were calculation errors regarding the banks that failed in 2010. Instead of being 2.5 billion euros in the hole, the balances showed that the banks were almost 300 billion euros in what one could describe as a gigantic crater. In the following year, it only took three months for major mistakes to be revealed: In April 2011, the Belgian-French banking corporation Dexia was crowned as the winner of the stress tests and thus as the safest bank in Europe. In July, Belgium, France and Luxembourg jumped in with 90 billion euros. Dexia was not “rescued,” it was nationalized.11 And in the process, a tremendous 95 billion euros in bad money was outsourced to a bad bank.12 That’s basically as if you were to commit massive overdraft and then smile at your banking advisor and tell him to immediately put your account under the name of Aunt Edith, who will pay off her debts one happy day. Luxembourg alone took four billion euros to bail out Dexia – which corresponds to nine percent of its GDP.13 In 2013, the Deutsche Bundesbank, or the German federal bank, also warned that five years after the Lehman bankruptcy there was still no adequate solution for the liquidation of institutions that are too big to fail.14

Who’s got the biggest one?

Five years after the mother of all bank failures, the desire of the financial industry to finally put the crisis behind it is growing. At a conference in Frankfurt in September 2013, the banking bosses already were again making plans for how to keep the big wheel turning. Federico Ghizzoni, the CEO of the major Milan bank UniCredit, explicitly explained that the infamous “too big to fail” rule may not be taboo. The man is unshakeable in representing the view that the largest of the banks are more important than ever.15 With that, he ignores one of the main lessons of the crisis: that banks that are too big pose an immense danger to the economic system and to society because they can essentially take whole countries hostage. For the large institutions, bailouts and rescue packages are licenses for the management to engage in horrendous risks – risks that the bank itself could not bear.

A little catalogue of financial crime stories

Rather fail with honor than succeed by fraud.

Sophocles (496 – 405/6 BC), Greek playwright and statesman

For regular citizens, what has happened in the world of finance since 2012 is simply unimaginable. The business conduct of some financial corporations is beginning to resemble that of a criminal organization more and more – regardless of whether money is being laundered or whether the embargos imposed by UNO are being circumvented. As long as a business’s profit rates are comfortably in the double digits, someone is bending, getting around, or straight up breaking the law. Morals and virtues are being left behind at the doorstep every day anyway. We’re not talking about dubious gambling houses on various Caribbean islands. We’re talking about the leading major international banks. It’s best if you see it for yourself. The following is a little “best of” list of all the things that have been exposed in recent years. We fear that this unfortunately is only the tip of the iceberg.

In December 2012, an Italian court sentenced the Deutsche Bank to a fine of one million euros. Employees of the institution received suspended sentences of up to eight months. They had sold risky interest rate bets to the city of Milan, which according to the jurists amounted to serious fraud. Similar sentences were handed down to the Swiss

UBS

, the American bank

JPMorgan Chase

and the German-Irish

Depfa Bank

. All of these institutions had conned Milan’s city treasurers into so-called interest rate swaps. According to the bankers, with the help of the swaps the heavily debt-ridden city could reduce the interest burden with a 1.7 billion euro 30-year bond issued to it in 2005. But during the financial crisis the papers were discovered to be nearly worthless. Milan lost millions.

16

In a Manhattan court in early January 2013, the Swiss bank Wegelin, founded in 1741, pleaded guilty to helping dozens of American bank clients hide away more than 1.2 billion dollars from the US tax authorities. In March 2013, the oldest Swiss private bank dropped off the face of the earth.

17

“What if we just go ahead and convert the whole complex into a big prison?”

Also in January 2013, the

Deutsche Bank

settled its dispute with the US Federal Energy Regulatory Commission (FERC) – with a fine of 1.5 million dollars. The charge: manipulation of the California energy market. The bank vehemently rejected the accusations. It remains a secret as to why it still paid the monetary fine plus a 73,000-dollar deduction for “illegal profits.”

18

In the same month, the

Bank of America

transferred more than ten billion dollars to the government-sponsored home mortgage loan company Fannie Mae. With that, various disputes regarding questionable mortgage deals were settled.

19

Additionally, in January 2013

JPMorgan Chase, Citigroup,

and seven other US banks had to answer for wrongful foreclosures in an 8.5 billion dollar settlement.

20

The major British bank

Standard Chartered

was accused of money laundering for Iranian clients in 2013. For ten years, the bank had covered up transactions with Iran to the amount of 250 billion dollars and in doing so had raked in hundreds of millions of dollars in fees.

21

According to a report by the Department of Financial Services (DFS), more than 60,000 secret deals violated US sanctions, including transactions for the Iranian central bank and the banks

Saderat

and

Melli

. The serious accusations were simply settled with a checkbook. The institution agreed to pay New York financial regulators 340 million dollars. The DFS superintendent, Benjamin Lawsky, explained that the bank had “left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes.”

22

The Dutch

ING

coughed up 619 million dollars in order to settle accusations that it had moved billions of dollars for Cuban and Iranian clients through the US financial system.

23

The British

Barclays Bank

, too, was involved in the same mess. It agreed to pay 298 million dollars. The charge: making illegal transactions with banks in Cuba, Iran, Libya, Sudan and Burma to the amount of 500 million dollars.

24

In a money laundering scandal in the USA, the major British bank

HSBC

paid a record fine of almost two billion dollars. “We accept responsibility for our past mistakes,” was the sheepish statement of HSBC chief executive Stuart Gulliver. The US authorities accused the institution of helping clients with transfers of questionable funds from countries like Mexico, Iran or Syria.

25

After the US authorities accused the second largest Swiss bank,

Credit Suisse

, of concealing its booming business with Iranian banks and thereby violating the USA’s economic sanctions, the bank paid 536 million dollars. It was, however, emphasized here, too, that the payment did not represent an admission of guilt.

26

The British

Lloyds Bank

agreed to pay 350 million dollars. The charge: it had helped clients bypass US sanctions against Sudan, Iran and Libya.

27

The

Royal Bank of Scotland

paid 500 million dollars. It allegedly laundered money for Iranian, Libyan and Syrian clients through the Dutch bank

ABN Amro

.

28

In fall 2013,

JPMorgan Chase

, the largest bank in the USA, had to pay a fine of 920 million dollars to four different regulatory authorities. The US bank regulator OCC received 300 million dollars due to “unsafe and unsound practices,” the US exchange supervisory authority SEC demanded a fine of 200 million dollars for a “failure to maintain effective internal controls over financial reporting,” and the US central bank, the Fed, also received 200 million dollars. The British regulator FCA also paid a fine of over 137.6 million pounds. With JPMorgan Chase, it was very clear that laws had been broken. The bank had simply refrained from informing the authorities about risky options trades.       At the beginning of 2012, the London trader Bruno Iksil caused 6.2 billion dollars in trading losses. He was nicknamed “the Whale” thanks to his enormous bets. At first, the boss of JPMorgan, James Dimon, played down the problem: In April 2012 he spoke of a “storm in a teacup.” The CFO at the time, Doug Braunstein, claimed that the involved derivative trades were “fully transparent to the regulators, who get information on those positions on a regular and recurring basis.” But a US Senate committee still found that the OCC did not know anything about the trades involved.

The consequences for the bank managers: none

. Neither the directly responsible parties nor Dimon, who apparently had even lied to the Senate committee, faced any sanctions. Despite massive losses, the involved managers didn’t even have to face any internal consequences. That almost leads to the conclusion that, in the eyes of the management board, the profits that were achieved justify the risky behavior of the bankers involved. Because after the “Whale of London” affair, the available budget for this kind of speculation business rose to 500 billion dollars at JPMorgan Chase in 2013.

29

In May 2013, however, trouble with

JPMorgan

began brewing again. FERC investigators accused the bank of having manipulated the electricity prices in California and numerous Midwest states in the years 2010 and 2011.

30

Through unfair bidding strategies in the electricity market, they had bamboozled the local power grid operators. The accusations were especially directed toward Blythe Masters, a top manager at JPMorgan. Masters enjoys sad fame on Wall Street for being a co-inventor of the Credit Default Swaps (CDS). Those are the too-large and opaque package bundles of bonds that were partly responsible for causing the financial crisis. According to the

Süddeutsche Zeitung

, Masters allegedly knew about and signed off on the dubious energy business the bank was doing. Furthermore, she wrongly denied under oath that the problems had been known to her, according to a report by the regulatory authorities.       In this case, her employer Dimon tried the “good cop” tack for a change and approached the investigators. He excused himself for misleading the authorities and pledged to do everything possible to improve the situation. Reports from industry circles indicated that the bank had almost reached a settlement. According to media reports, it can be assumed that the authorities dropped their investigation for a price of 400 million dollars.

31

It was probably also because of this that in the fourth quarter of 2013 JPMorgan Chase set aside more than 1.5 billion US dollars for possible future claims in damages.

32

In July 2013, the

New York Times

uncovered that

Goldman Sachs

had manipulated the central aluminum price in the raw materials market. The bank had purchased the warehouse specialist Metro International in 2010. Around a quarter of the American aluminum supply goes through their warehouses, most of which is processed into aluminum cans. Before the integration into the corporation, the delivery time for clients was only six weeks. By 2013, it had stretched to 16 months. Each day, the bank cashed in storage fees, which were – of course – passed on to the end consumer.

The

New York Times

wrote about deliberately protracted storage periods – which cost the American consumers approximately five billion dollars.

33

In August 2013, the British Financial Conduct Authority (FCA) slammed 13 insitutions and credit card providers with compensation payments that totaled 1.3 billion pounds. From the regulators’ perspective, they had sold unnecessary extra credit card insurance plans to their clients. Among those punished were major banks which included the

Royal Bank of Scotland, HSBC

and

Barclays Bank

.

34

JPMorgan Chase

landed in the headlines again in November 2013. Apparently, America’s largest bank was aiming for first place when it comes to monetary penalties. In order to halt numerous lawsuits related to disputed mortgage dealings, the bank paid the highest sum that had ever been coughed up by an American company for an out-of-court settlement:

13 billion dollars!

According to Reuters, JPMorgan had agreed on this amount, which equaled the profits the bank made in the second half of 2013, with the US Department of Justice.

35

However, James Dimon’s bonuses were not threatened because of the affair. Despite the aforementioned penalty fine, in addition to his basic salary of 1.5 million dollars, Dimon received a bonus of 18.5 million dollars in the form of stock options.

36

Another guilty one is the

Deutsche Bank.

In December 2013, it paid 1.4 billion euros to the two US government-sponsored mortgage financing enterprises, Fannie Mae and Freddie Mac, who felt deceived by the Frankfurt bank’s mortgage dealings from 2005 to 2007. It goes without saying that this little sum may to no extent be perceived as an admission of guilt.

37

In February 2014, the

Bank of America

had to pay 8.5 billion euros in damages for a subsidiary’s bad loans.

38

In the same month, the US investment bank

Morgan Stanley

paid Fannie Mae and Freddie Mac a total of 1.25 billion dollars. In its papers for the sale, the bank had exaggerated the state of its own mortgage papers and thus built major risks into the whole of its fine print drivel.

39

The end consumer isn’t always the fool. The heroes of the banking industry also like to play each other. For example, in the fall of 2013

JPMorgan Chase

– yes, them again – compensated institutional investors with 4.5 billion dollars for losses from controversial mortgage dealings.

40

The Allianz subsidiary Pimco and the Bayerische Landesbank – yes, the ones with the bankrupt Hypo Alpe Adria that underwent emergency nationalization in Austria

41

- were to receive a portion of the money.

In late September 2014, the

Wall Street Journal

reported that federal authorities were investigating the

Commerzbank

for violating regulations aimed at combating money laundering. Shortly thereafter, it was revealed that the bank would pay 800 million euros in penalties.

According to a report from the

Times

, the largely state-owned British

Royal Bank of Scotland (RBS)

faced high penalty fines in 2015 for alleged misdemeanors during the financial crisis. The litigations in connection with the sale of so-called junk bonds in the USA could cost the bank more than five billion pounds.

The suspected manipulation of interest rates cost the

Deutsche Bank

hefty sums in 2015. A payment to the amount of 2.5 billion dollars was agreed upon with the authorities in the USA and Great Britain. That equals roughly 25,000 dollars per Deutsche Bank employee.

The dirty business of the private Swiss bank

HSBC

caused quite a storm in 2015. For years, corrupt politicians, weapons dealers and other criminals had been using their accounts for money laundering, concealment of assets and tax evasion. The bank actually knew about the dubious schemes in many cases. It did business with them anyway.

How the banks rip off Germany

Banking activities that are designed to harm the taxpayer are completely indefensible for a state bank and every other serious financial institution.

Peter Tschentscher (SPD), Senator of Finance of the Free and Hanseatic City of Hamburg

In November 2013, how German and foreign banks had managed to swindle the German tax authorities with dubious tax deals in the billions came to light. In their deception, the banks used a loophole in the laws that existed until 2012. With its help, it was – shockingly – possible to get capital gains taxes reimbursed twofold. In layman’s terms: Banks have let themselves be reimbursed for taxes that they had never paid in the first place! The responsible authorities estimate damages of over ten billion euros.42