Very big news on the banking front, the Federal Reserve is now apparently allowing Chinese banks to take stakes in U.S. banks. North of our border, Canada is contemplating becoming one of the many, recent “renminbi hubs“. Why would this be happening? Why would it be happening now?
First, why is China setting up shop all over the world? This is an easy one, for business, for trade, for relations. China knows exactly where the U.S. and the dollar stand, they also know fairly well where and how the U.S. and her dollar will fall. China is merely preparing the groundwork to trade with Western entities in either local currency or the yuan. In the case of Canada, China sees a very large energy source along with the mining of many necessary resources they will need in the future.
The thing is, China doing a deal with Canada like this hits very close to home. Actually, Canada doing a deal like this is almost a slap in the face of the U.S. Don’t get me wrong, Canada doing a deal with China is good for Canada for all of the right reasons but this is certainly an action of distancing themselves from the U.S. Should the monetary hub deal be consummated, trade will be facilitated in a win/win fashion for both Canada and China. I believe this can be viewed as another straw on the U.S. camel’s back and a preparation by Canada for what is about to come. You must look beneath the surface here, not only will their trade volumes increase, they will actually get paid in a currency issued by an industrial powerhouse where there is no question as to whether or not there is any gold in the vault. If this deal goes to fruition, it will be clear proof that Canada is attempting to break the leash and no longer being a U.S. lap dog.
As for China’s banks now being allowed to purchase stakes in U.S. banks, this is VERY interesting from both sides of the coin. Why would China want to do this and why would the U.S. allow it? The other and even bigger question is “why now?” Why not five or 10 years ago? Why not in a “few years?” I have my opinions on this which is all they are, opinions and not fact but this is a topic that needs to be thought about because it is very curious indeed!
Why would China want to do this if she thinks the U.S. is a bankrupt entity which she surely must? Could this only be a “toe hold” or an avenue to picking up the pieces later and profiting while doing so? Yes, probably. Is this a way to be able to look inside our banks to see how bad it really is? Again, probably. Remember, with any “percentage” stake comes the ability to be represented on the board of directors. Is this a way to put a “spy” on the inside, in plain sight and legally? I think yes. Also remember, the way to “control” the masses throughout time has been to control the currency and the banks. Owning large swaths of the U.S. banking industry in the future can only lead to knowledge, eventual profits and at least some control on our home turf.
On the other hand, why would the Federal Reserve allow China into our banking system? Off the top of my head, maybe because the banks need the capital? Or worse, maybe China has told the Federal Reserve to “do it or else?” The “or else” part could be anything at this point. If China still owns all of the Treasury debt claimed by the Fed as custodian, maybe they are threatening to dump? Maybe they are threatening to upset the gold, silver or any multitude of commodity markets? …which of course would knock the legs out from under the dollar itself. If you recall, it was about 10 years ago when China wanted to buy out Unocal and were rebuffed for “national security” reasons, why would the Fed agree to this…now?
As I mentioned, one of the reasons may be because “we” collectively need the capital. I say “collectively” because even though we are told our economy is growing, it is not growing in real terms, only nominal terms because of inflation. The economy is not generating enough income (savings) for future growth. We are and have been eating our seed corn rather than saving. The Fed has “printed” money to sustain and “prolong” the economy but this is not real capital. It is liquidity only rather than real hard capital (unencumbered) for future use, let me explain just a little. You see, when the Fed injects dollars into the system it boosts the amount of dollars outstanding …but, eventually those dollars must be paid off. It is like borrowing money from your credit card to start a business that only breaks even …the day will eventually come when the credit card must be paid off but the asset (your business) never really grew and really wasn’t worth enough to pay off the debt.
This is the American situation and why I believe we are at this point in time allowing China into our banks, we need some real outside capital to shore up our balance sheets. Of course we are forgetting one other possibility as long as we are talking about balance sheets. Maybe the Fed’s own balance sheet which is levered at nearly 80-1 needs some help? Maybe they realize their “assets” are not worth nearly what they originally paid and their “true” leverage ratio is who knows, 200-1? You see, the Fed took all of the crappy assets on to their books from the banks so the market participants would never see “trade prices” of .40 cents on the dollar or .20 cents on the dollar or even worse. Maybe the Fed threw Bernanke’s 1, 2, 3 punch (QE’s) and we didn’t get the hoped for reflation? Maybe this is only the Fed screaming “help?”
Wow. Where there is smoke there is usually a fire slowly beginning to ignite.
I suspect that both Canada and the USA know that we do truly live within a world
economic system now and the problems of debt dictate the need for a rewrite of the foundation of the financial system.
We can only truly move forward with an effort to repair what is broken if we implement a reset of the currencies and a return to sound money principles.
Yes the Swiss could lead the way if the powers to be resove to accept what must be.
PS. There is always risk when the truth is hidden.
What caused this action at this time? Hmmmm
Move forward cautiously and remember that seldom are things as the first appear.
this is the question, why now?
A very pertinent article with a most pertinent question Bill. I’ll take a stab. Something big is about to take place very soon in a move Away from the our present Dollar centric world monetary system and move the world toward a monetary system with much greater Yuan weighting. I believe there is soon to be the first of several GlobalCurrencyResets about to take place. The GCR will be sudden (as in overnight) and for king Dollar holders – severe. We shall see, but I believe that our next door neighbor Canada becoming the latest (perhaps last) of the world’s new “renminbi hubs” – is very telling. Again, great article Bill.
Thank you Richard,…G-20 in Australia is going to happen,.
There is an old saying. Everyone does what they do For a reason.
I think this Canadian decision is Huge.
U.S. banks allowing China to participate in their businesses is equally a sign of change being near.
Everyone is setting the stage for a financial reset I suspect.
Thank you to everyone at miles franklin for helping us sift through all of this mostly hidden from view developments.
you’re welcome Mike, we try hard!
The question you ask (“why now”) is a good one that I suspect very few know the answer to. But I can sure sense a lot of desperation in the markets rights now (especially in the PM markets where prices are being so aggressively suppressed). I honestly can’t believe that more people can’t sense the serious trouble in the financial markets when it is so palpable.
$15 silver? There is none.
Thank you for reporting. Do you think independent states (Texas)? will also join in a crusade against the dollar for win/win business deals and just plain “common sense”? I’m not thinking yuan but I am thinking silver and gold local currencies. Are these legal to establish? So can a town or municipality/state legally use something other than the dollar to conduct commerce IF federal taxes/liabilities for business trade are still paid to the IRS in dollars? What about non-profits like churches or religious groups… Can they collectively use an agreed medium of exchange (aka money) other than the dollar to conduct trade amongst other members?
not sure of all the legalities but what you describe is “barter”.
Allowing them to take any stake will be a mistake.
it’s not the first and won’t be the last.
holy f*** who writes amazingly well thought out articles like this one ?
Well drum roll plz …….Bill Holter does
Does this mean that the Yuan hub in Canada will make it easier to convert PMs into Yuan when it becomes the reserve currency presumably at a fair price like 10k Yuan per oz of silver
thank you for such enthusiasm Jackson! And yes, this will aid in the convertibility of yuan.
Why now? My guess… QE just ended (they need someone to buy the bonds) and this is what China negotiated in return.
maybe but I tend to think not.
Bill,
Your link to “The Telegraph” article titled “Federal Reserve allows Chinese-controlled banks to take stakes in US banks” was published by Reuters on May 8, 2012. The article is more than two years old! You’ll find the date just under the photo and to the left. There, you’ll also find a link to “25 comments.” If you click on the link you’ll see that the comments were written two years ago.
Since the title of your commentary is “Why would we do this … now?” I hope you will write a retraction in your next commentary. Credibility is important.
BTW, I worked as a print and broadcast journalist, corporate communications manager and writer, author, and lecturer. In all, I worked as a writer and editor for 30 years. I’ve enjoyed reading your commentaries during the past couple of years because you’re an excellent analyst, but terrible at sentence structure and punctuation. I know you’ve admitted that weakness. Your articles would shine and be much easier to read if you had a good editor. Let me know if you’d like my help.
Dan
yes, my bad Dan. The date at top of article says Nov. 6 2014, I missed it further down. As for my “painful writing skills”, to be honest with you I don’t care. Do you understand what I am trying to say when I write? Do you understand my logic when I write? If so then “good on ya”. If it is too painful to read, then please don’t. I am not a writer, I’m a hockey player by trade and like to drink beer and ride horses, my grammar and writing will always suck no matter how hard I try. If you want heart failure, try reading some of my stuff from 2007 and 2008, that’ll put your literary panties in a wad!
Not sure what the deal is here but there is little doubt that the DEBT WALL is about to change the rules of the game.
We have had it pretty easy these last 40 plus years but the excesses of that time are about to cause great hardship for many.
Unfortunately,the middle class of today for the most part have no idea of the life style changes that await them.
I have always said that arrogance breeds failure.
Those that have chosen fast profits at the cost of others will now have to hide their wealth so they do not become targets.
I have even heard talk about some people living in affluent areas wanting to move to less conspicuous areas.
Knowledge is power and there seems little doubt that some have abused their power.
The balance of 2014 might very well bring us life changing developments.
very possibly.
‘nother good read Bill. My thought about why now,,, it’s just another thing. RBS HSBC Duetcha all have ties with US Banks.
These types of mergers and acquisitions don’t happen overnight – unless of course there’s an act of congress involved.
So this was part of Bernacke playbook that Yellen will be folowing.
The Chinese realize that the US consumer purchases a good percentage of their goods.
With all banks being just about insolvent, whose gonna buy their goods? Plus the Chinese really don’t want the Fed to further dilute their holdings by pumping bucks, they come to the rescue and delay the mathematical inevitable.
There are two distinct philosophies involved here. 1) Capitalism, when you got the money you can buy whatever you want. And 2) Communism – Don’t care how much money you have, you can only buy what we let you.
Do you think (unless amageddon) The Chinese will ever sell Chase Manhatten Plaza?
never, they own JP Morgan’s throne never ever to be sold in my opinion. Plus, an underground (and hidden) direct pathway to the NY Fed’s vault across the block. How fortuitous!
I’m thinking China see’s Canada not just for energy, but for H2O. H2O = You live or die and also FOOD.
Correct me if I am wrong, but think China has already attempted to set up shop in resource rich states like Idaho here in the US (probably at the invite of some US Senator). I believe the state and Governor took some pre-cautions against that… also the Bundy ranch situation in Nevada had Harry Reid making BLM land deals with China written all over it. Once again, instead of the state, locals took pre-cautions in that case. It makes sense that Canada would be highly sought after. What makes it more concerning is that as our ally, Canada would be the go to friendly neighbor who could help us in shortage situations. Now I wonder if they would even want to given the way China will likely treat them as a responsible and respected trade partner.
yes, China see’s Canada for many different resources.
I do want to clarify, I think Canada is smart to deal with China. It is just too bad that our leaders have gone so far that even our neighbor will not see us as their go to preferred trade partner.
it’s because the Chinese to “win/win” business deals, we do not.
Bill,
I called you an “excellent analyst,” offered my editing expertise, and correctly pointed out that the article you referenced and built your commentary around was more than two years old.
Instead of thanking me for complimenting your analytical skills and pointing out the error, you responded childishly, flippantly and unprofessionally. I thought only teenagers used the expression “my bad.” And “putting my literary panties in a wad” sounds like something from a dumbed-down Hollywood TV show or movie.
More importantly, you’re an employee of Miles Franklin and paid to write commentaries that encourage people to buy metals from them. When you tell readers something that isn’t true and respond to one of those readers in a flippant way when they professionally point out that error, it doesn’t reflect well on you or your employer.
You could have thanked me and showed concern about your mistake. I realize you didn’t intentionally mislead your readers. The problem is you don’t seem to care that you misled them. You built your lengthy commentary around something that occurred more than two years ago, but you told readers it just happened. I suggested you write a retraction in your next commentary, but you totally ignored my reasonable recommendation. Instead, you told me you “drink beer and ride horses.” Who cares?
I’ve been reading your commentaries since you joined Miles Franklin. I read your pieces simply to see if your views reflect mine, and they do. You are a logical thinker like me.
I bought my PMs many years ago and am just waiting for the currency revaluations and other dramatic changes that are coming, so I don’t need to be convinced to buy PMs.
However, I often forward the Miles Franklin newsletter to other people and ask them to specifically read your commentaries because, as I wrote before, I think you’re an excellent analyst. Because of my professional background, my recommendations go a long way. I did scores of speaking engagements and radio interviews across the country and wrote an important, patriotic book that sold thousands of copies.
Unfortunately, because of your childish, flippant, unprofessional response to me, you’ve lost my readership. Thus, Miles Franklin has potentially lost future customers who would have received the newsletter from me. I will remain a Miles Franklin subscriber for a few days longer to see what you write and then cancel my subscription. I see what’s going on around the world and can analyze events and developments just as well as you. I don’t need to read your commentaries.
Dan
Dan, you have written in before (you wrote me a private e-mail) and offered your “editing” services to me. I thanked you but graciously declined. Admittedly I am not a proper writer, it is my content that counts rather than my delivery. That said, there are those out there who read me simply because of my delivery and “style”, meaning I connect dots and break down complex subjects so that the average reader can understand them. I thank you for forwarding my work and a shame you won’t read it anymore but I cannot please everyone. I missed the date on the article but have to wonder “why” it would have been reprinted just now by the Telegraph? I obviously missed this 2 years ago when it came out, still, why would we allow Chinese banks in when they were rebuffed previously? I write over 200 articles per year and try to be accurate in what I put forth and admitted the article was a reprint that “I missed”. You could have written to me privately as you did previously rather than publicly and in the comments section to my blog. Offering your “expertise” and help which you point out I so badly need in a public fashion is what elicited my “childish, flippant and unprofessional response”, my apologies. As I told you before, thank you for your offer of editing my work but bad structure, poor grammar and ridiculous punctuation does not negate my message which is why Miles Franklin asked me to write for them.
You finished with “I see what’s going on around the world and can analyze events and developments just as well as you. I don’t need to read your commentaries”. Really? You knew absolutely everything I have written about beforehand and I just “confirmed your thoughts” with my logic?
I think Bill’s writing is professional and well delivered. I myself am the king of typo’s but have found that these types of forums are fast paced and in a way like an ongoing conversation as if we were all in the same room together talking. So it is the content and the point made that are most important rather than grammar IMHO. If Bill had to spend the time to do everything so formal, it would take up so much of his time we wouldn’t hear nearly as much from him…. and thus not gain his indsight or open diaplogs from commentors like us. Keep up the good work Bill. You are offering a great service in educating folks and making us all think.
thank you Rich, I do my best work with a beer in one hand and no commas in the other! (I’m not even sure if “commas” comma’s? has an apostrophe or not?).
“Maybe the Fed threw Bernanke’s 1, 2, 3 punch (QE’s) and we didn’t get the hoped for reflation?”
This is the essence of this article, IMO. The Fed saw the previous bubbles as “normal” and “desirable” when they are neither. Causing an economy to develop bubbles is bad enough but then recreating those same bubbles once they are KNOWN to be bubbles is unconscionable. Yet the Fed does this routinely.
I continue to marvel at how this illicit and unconstitutional central bank got itself created and continues to remain in operation when it is an absolute failure. If the people in congress were not complete twits at understanding money, banking, finance, and economics, they would grasp the idea that the Fed is a useless organization that is self-serving and incompetent rather than serving competently any viable need of the American people.
Banking needs to be converted into a local utility, much like a PUD. Savings accounts, home, business, personal, and auto loans, checking accounts and check cashing, and safety deposit boxes are ALL of the services that citizens really need. Everything else needs to be stripped from the banking menu as do loans to government via buying UST paper of any kind. Banking and finance needs to be a much smaller portion of the US economy. Banks need to be smaller too, such that they can fail and no national harm done. Yes, I know… dream on. But then, virtually everything in this world was once a dream of someone’s. 🙂
Finance is too large a portion of U.S. “production”.
Not sure if you know this but Prime Minister Harper is actually in China at the moment:
http://www.cbc.ca/news/politics/pm-harper-arrives-in-china-hoping-to-increase-exports-1.2826024
The article also mentions the currency hub.
I did not know he was there now, I thought it was after not before the G-20, makes sense though.
Maybe this is the last link to the global currency reset. The FED bought up the world with all the FIAT printed, and allowed the rich to do the same and not many people noticed. Think about this, banks were bailed out for mortgages and bought up by the FED. Many of these same properties were forclosed on by some of the same banks(others were bought back by bailed out money), and resold for a profit. So in other words, the banks made money more than once on the same investment which was distressed.
How do I know this? Imagine this scenario. The loss on the values of houses in one old neighborhood came when the same bank carrying the mortgage forclosed on the house right across the street, then sold another house not too far for 1/3 the value of the loans of people who were paying full mortgages and never behind. When the bank was contacted about a mortgage restructure people were told they are not late on their loan, so there was nothing the bank could do.
This was a set up and the crooks are still at it. They are now doing the same thing with PM. They will smash the price to oblivion to get the asset in hand. This is their plan to buy the world with fake printed money.
Keep calm, stack on!
I’m not so sure there is much if any more downside, physical buying has been unleashed.
Bill,
I 2nd your answer to Dan.
Do I heard a 3rd?
thanks Farrell.
Chinese tourists with fistfulls of cash are buying up 1522g++ 96% bars in local gold shops. The Thai-Chinese owner of one shop says he will consider learning Mandarin if this continues.
He says that the new Shanghai Gold Exchange deals only in yuan, so it seems to me that if China has its eye on eventually super-imposing the phys price as a daily fix over NY/LON paper, the easy intl transfer of funds to-from SGE must be in place prior to any phys fixing.
The hubs in Canada, London plus the Chinese banking branches in LAX, NYC should do the trick. No need for yuan as a reserve currency, which might come later.
In the meantime, hold the “kill-switch” in reserve… (comex xag delivery)
they are buying up “everything”, not just gold all over the world.
As well, a Chinese reset offering to buy, say, 10k yuan of 1-oz gold could not take place without a payment transfer mechanism already in place… ex-US hubs, US branches…
it could but the mechanism would be very choppy.
Bill,
Isn’t this just a step in foreclosure?
Who owns JPM’s HQ bldg now?
Thanks for your work.
China owns the vault, I don’t know about the HQ’s.
I thought this is what I remembered….
http://money.cnn.com/2013/10/18/news/china-jpmorgan-real-estate/
very good Louis, I only remembered the vault…I guess the building went with it? Thanks.
So Jamie Dimon is just going through his fortress balance sheet one day, and he says, “This thing is so strong, I think we’ll sell the headquarters.”. and tthe board thought it was a great idea. Right. Sure thing.
The fact that “Now” possibly took place 2 years ago makes it even more significant than if it were today.
The fact were just learning this “now” shows the magnitude of events that are able to take place behind the curtain.
No need for fancy sentence structure and punctuation, the messages you convey are loud and clear!
thank you Brady.
Bill, please continue what you do. Btw, I don’t see any bad grammar… Greetings, daily loyal reader.
will do, thanks.
Our PM Harper is a closet American fully ensconced in the Texas of the north (Calgary). That the US admirers and transplants are flirting with the Chinese indicates that the Canada/US relationship is on the rocks.
yes, it appears so.
Bill, I appreciate this information. The original article being two years old only makes this head’s up more valuable, and does raise more questions due to the lack of coverage on this issue. Thank you for bringing this to your reader’s attention.
thanks Shannon, as I said, my mistake as I did not catch the date. I was unaware of China already being allowed to invest in U.S. banks. The timing though does make sense as we needed funding in 2012 …and still do today.
Ok I will take a stab at the “why?” question.
China takes a stake in the Fed and smaller US banks. We all know the Fed paid smaller banks 100 cents on the dollar for the rotten MBS. The banks were made whole while the Feb absorbed the risks on the MBS.
What if the Chinese position at the Fed is to mark-to-market all of those rotten MBS and get money back from the banks paid by the Fed? So the Fed demands back $0.80/$0.90 or some other number on the dollar from the banks that sold rotten MBS.
We know this would immeadiately trigger bankrupcy and/or depositor bail in. This event in itself would effectively give the Chinese total control of the US banking industry and Fed along with all funds within it.
Sound plausible?
not sure, I don’t really think the Chinese even think of dollars as money anymore which is why they are buying as much gold as possible and doing as many resource deals “paid for” in dollars.
In the end China has to spend their dollars in the only place on earth that has no choice about taking them.
The Fed is putting a good face on it, much like the Germans, who realized they don’t even want their gold back.
Bill makes a great point about the knowledge transfer that will now take place and in finance what is more valuable than knowledge? If the Chinese buying Chase Manhattan Plaza was a bad omen for the US, this is outright humiliating.
The Fed will take it and like it.
you mean “CAN”T” get their gold back… because it’s not there to get back.
Indeed I did mean CANT :).
What happened there was an obvious default and yet, you’d never know it by the press coverage. First, they get told they will get it over 8 years, then get paltry portion of the first years installment and even it’s not the gold Germany deposited in the first place.
The complete lack of interest among the financial press amazed me at the time.
I don’t blame the Germans for saying publicly that these events prove their gold is in good hands. What else can they do?
Would love to hear your opinions on Greenspans unpublished remarks before the Council on Foreign Relations sometime (todays zero hedge posted remarks I mean). To me, the events that prove gold is money are never so educational as the establishments reaction to those events (in this case Greenspans remarks apparently being removed from the public record).
My desire to see the Swiss gold referendum pass has more to do with seeing how everyone reacts than anything else. I fully expect a Swiss politician to announce that gold is a silly, trifling relic and then in the next breath warn that if anyone has to buy any gold, return any custodial gold or even count the gold they already have that all hell will break loose.
Have a nice evening.
yes you are correct Tom, already a default. Don’t hold your breath as the Swiss referendum will probably be “Diebolded”. It doesn’t matter who you vote for …it matters who counts the votes. Greeny’s comment though “turned off” are still on the record as I think he truly wishes, his conscience is eating away at his stomach lining, this was clear when I saw him speak in Nawlins. I hope I never get to be his age but if I do, I surely do not want the turbulence he has within!
where is Dan the punctuation nazi ?just want to say fuck you and goodbye go proofread your own writing you dick really the guy is gonna cancel his sub because of commas,comma’s commies whatever .and apparently bill is a logical thinker like he is lol Bill was the one who woke dan up to reality, poor bastard needs an editing job
PS hey dan do you like my riting styl
Thanks SD, pretty good except for a few spelling errors.
The level of perceived corruption in the markets today is simply a confirmation that the financial system as we know it is on the verge of collapse.
Fiat currency does not have value. The value of it is in the perceived value.
Gold and silver do have value and yes that value like the markets can be manipulated.
Time always tells the truth.
Over time Gold and Silver have always had value but fiat currencies have come and gone many times in the past. The present USA fiat currency has been re-invented a number of times in the past from the perspective of its valuation.
The difference now is it will likely soon loose the status of world exchange currency. When that happens it will be a whole new ball game.
I for one have more confidence in my PM holdings than I do in my fiat currency holdings.
In my opinion the elites of the world usually speak a different story than what they act on.
Elites always end up on the right side of the trade. That is why they can stay the elites.
Us little people must make a conscious decision to research history and act according to what history tells us.
Nothing is forever. Time to prepare for the new world order.
It is coming soon.
correct, it’s about the reserve currency status, I have an upcoming piece on this maybe Tuesday.
Bill, This latest from Koos Jansen shows that the central banks are well along in the planning for the big reset. It is right there for everyone to see. China will have a big role.
Beijing Forum: New Global Financial Order Is Essential
“The global economy and global finance is at the turning point in a way… New rules have been discussed not only inside the advanced economies, but with all emerging economies, including the most important emerging economies, namely, China.” Jean-Claude Trichet, former president of the European Central Bank, stated on a financial forum in Beijing at the end of October 2014.
https://www.bullionstar.com/blog/koos-jansen/beijing-financial-forum-new-global-financial-order-essential/
thanks Mark, G-20 is next week, I will write about it as a likely “timing” point for the world to reject the dollar.