He
was a boy when the great earthquake struck San Francisco at 5:12a.m.
on Wednesday, April 18, 1906, one of the worst natural disasters in U.S.history.
The man and his family survived the earthquake and subsequent fire,
managing to get out of the destroyed city by boat. His father paid the boatman,
who would not accept money, in gold, secreted away for emergencies.
Gold, the sweat of the god as the Incas called it, is hard money. It is the only
money when chaos ensues.
Satyajit
Das. Extreme Money.
We
open today with a game plan of how to rob a modern central bank. How a criminal
enterprise hacked into the Bangladesh central bank, went on to fool the New
York Fed, and got 81 million transferred into the Philippine banking system in
false names, there to disappear into the Philippines gambling casinos, never to
be seen again. Not to worry though, it’s only electronic fiat money that was
stolen, and there’s plenty more where that comes from at the push of a Fedster
computer button. Didn’t the Fed electronically “fix” a 300 million “problem” at
major New York bank back in the 1990s.
Now
if we’d stayed on a metallic money system back in 1971, simply devaluing the
dollar against gold, none of this insanity would have happened, nor would we
have polluted the planet, left the millions for the billions, and the billions
for the trillions, and shortly leave the trillions for the quadrillions, in all
likelihood. But Nixon moved the world onto the Great Nixonian error of fiat
money in August 1971, communist money, all to ensure his re-election in 1972.
A
good summer’s read as we await news from the G-20 Finance Monsters meeting in
China, where the G-20 Muppets seem determined to keep doing the same things
that haven’t worked since the Bear Stearns and Lehman crashed in 2008.
The SWIFT hack
How the New York Fed fumbled over the Bangladesh Bank cyber-heist
When hackers tried to steal nearly $1 billion from
Bangladesh’s central bank, the Federal Reserve Bank of New York failed to spot
warning signs and nearly let all the money go. Here’s the inside story of what
happened.
DHAKA/NEW
YORK – Jupiter. That single word, by a stroke of luck, helped stop the Federal
Reserve Bank of New York from paying nearly $1 billion to the cyber-criminals
behind a notorious bank heist earlier this year, according to sources familiar
with the incident.
When
hackers broke into the computers of Bangladesh’s central bank in February and
sent fake payment orders, the Fed was tricked into paying out $101 million. But
the losses could have been much higher had the name Jupiter not formed part of
the address of a Philippines bank where the hackers sought to send hundreds of
millions of dollars more. By chance, Jupiter was also the name of an oil tanker
and a shipping company under United States’ sanctions against Iran. That
sanctions listing triggered concerns at the New York Fed and spurred it to
scrutinise the fake payment orders more closely, a Reuters examination of the
incident has found.
It was a
“total fluke” that the New York Fed did not pay out the $951 million requested
by the hackers, said a person familiar with the Fed’s handling of the matter.
There is no suggestion the oil tanker or shipping company was involved in the
heist.
The
Reuters examination has also found that the payment orders sent by the hackers
were exceptional in several ways. They were incorrectly formatted at first;
they were mainly to individuals; and they were very different from the usual
run of payment requests from Bangladesh Bank. Yet it was the word Jupiter that
set the loudest alarm bells ringing at the New York Fed. Even then it appeared
to react slowly.
By the
time the fraud was discovered, the New York branch of the U.S. central bank had
approved five of the payments. It took $101 million from Bangladesh Bank and
paid it to accounts in Sri Lanka and the Philippines – including $81 million to
four accounts in the names of individuals. Most of that $81 million remains
lost.
It was
among the most audacious cyber-heists ever to emerge – shining a light on
worrying weaknesses in the global financial system and into a little-known
corner of the U.S. Federal Reserve: its Central Bank and International Account
Services unit (CBIAS), which one former employee described as a “bank within a
bank.”
Interviews
with investigators, lawyers and current and former central bank officials in
several countries, as well as a Reuters review of payment messages, emails and
other documents, show disarray and bungling at all the financial institutions
involved. But the most striking is the inertia and clumsiness at the New York
Fed, the most powerful of the U.S. central bank’s 12 regional units and a
mainstay of global finance.
The heist
revealed that the New York Fed lacked a system for spotting potential fraud in
real time – even though such systems are used elsewhere – instead relying at
times on checking payments after they were made, usually for problems such as
violating U.S. sanctions.
Months of
bitter finger-pointing over who is to blame for the fiasco have damaged the
sensitive diplomacy of correspondent banking, where big Western institutions
are entrusted with safeguarding the treasures of smaller economies. Bangladesh
Bank is now preparing a legal case to seek compensation for what it says were
failures by the Fed, according to a source close to the Asian bank. It also
claims that errors by SWIFT, a messaging system used to make international bank
transfers, made the bank vulnerable to hackers.
More, so much more.
In early G-20 news, Dodgy Dave Cameron
and Project Fear got it all wrong, we can handle Brexit say the 20 finance
ministers meeting in China.
G-20 Says It’s Prepared to Deal With Brexit’s Economic Fallout
July 22,
2016 — 1:16 PM BST
The Group
of 20 nations is planning to say that it’s capable of dealing with the economic
fallout of Britain’s vote to leave the European Union, according to a draft
statement.
“Members
of the G-20 are well positioned to proactively address the potential economic
and financial consequences stemming from the U.K. referendum,” according to a
draft communique seen by Bloomberg News. The document was being discussed by
deputies on Friday ahead of a meeting of finance ministers and central bank
governors and will be revised over the next two days.
Delegates
from the world’s largest developed and emerging-market economies are
gathering this weekend in Chengdu, China, to address issues ranging from
recent terrorist attacks to the deteriorating global growth outlook. Economic
prospects were dimmed additionally by Britain’s vote to leave the EU.
The
Brexit vote “adds to the uncertainty in the global economy,” according to the
draft. “The global economic environment is challenging and downside risks
persist, highlighted by fluctuating commodity prices, low inflation in many
economies, geopolitical conflicts, terrorism and refugee flows.”
The group
is expected to reiterate pledges to consult closely on currency markets and to
refrain from protectionist measures.
“We
reaffirm our previous exchange-rate commitments including that we will refrain
from competitive devaluations and we will not target our exchange rates for
competitive purposes,” the draft said.
The G-20
also plans to stress the need for an “open and resilient financial system” in
light of recent turbulence in financial markets and to express its commitment
to finalize critical elements of the regulatory framework.
More
In other news from China, did another
black swan just fly in?
Heavy rain in China kills at least 24, millions evacuated
Heavy
rain in China has killed at least 24 people and forced 16 million from their
homes, state media reported on Saturday.
The
government of Henan province in central China told the Xinhua news agency that
15 people were killed and eight were missing after thunderstorms and strong
winds forced 7.2 million people from their homes and damaged 18,000 houses.
Nine
people have been killed and 11 are missing in neighboring Hebei province,
authorities in its Xingtai city said on social media late on Friday.
Nearly 9
million people have been evacuated in Hebei, they said.
Large
parts of China have been inundated with rain this summer, killing more than 200
people.
More than
1.5 million hectares of crops have been damaged, leading to direct economic
losses of more than 20 billion yuan ($3 billion), the government has said.
The
central bank on Friday issued a statement saying it would provide financial
support for flooded areas.
We close for the week with the view from America. One convention down, one convention to go.
Clinton Veers toward the Center with
Kaine V.P Pick, Caps off Busy Week in American Presidential Politics as Wall
Street Breathes “Sigh of Relief”
N. Jason Jencka
July 23, 2016 2:22 am ET
Throughout this past week, discussion
amongst American political punditry had revolved around the grand spectacle
that was the Republican convention and nomination of brash billionaire Donald
J. Trump. The Republican National convention has essentially been a veritable
parade of attacks on chronically embattled Democratic nominee and former
Secretary of State Hillary Clinton. While some speeches, like that of former
Speaker of the House of Representatives Newt Gingrich, were delivered with more
eloquence than others, the message was the anti-Clinton sentiment was eminently
palpable. On Friday, Clinton
managed to escape the dual roles of piñata and punch-line to deliver some news
of her own: The selection of centrist former Virginia Governor and present
Senator Tim Kaine as running mate on the Democratic ticket.
As a politician from a “purple” state that
voted for President Barrack Obama in 2008 and 2012 but hadn’t previously voted
for a Democrat presidential candidate since Lyndon Johnson in 1964, Kaine is
doubtlessly skilled at taking moderate positions as unlikely to offend as to
inspire. His selection serves as a sharp rebuke of the progressive forces
within the party that had catapulted fiery Vermont Senator and self proclaimed
“democratic socialist” Bernie Sanders to national prominence. While Sanders
hammered away at issues such as income inequality and reckless behavior from
banks, Kaine is on the record as one of 70 Senators to sign a letter to the
Consumer Financial Protection Bureau cautioning against excessive impacts from
the type of aggressive reform championed by Sanders. While the eventual outcome
of November’s election remains as unpredictable as Donald Trump’s Twitter
account, talk of “political revolution” amongst progressives has turned to
guarded optimism at the prospect of incremental progress.
Sources:
Joseph P. Williams: http://www.usnews.com/news/articles/2016-07-22/what-tim-kaine-brings-to-hillary-clintons-democratic-ticket
July 22, 2016
Aaron Blake: https://www.washingtonpost.com/news/the-fix/wp/2016/07/22/10-things-you-should-know-about-tim-kaine/
Laura Meckler & Peter Nicholas-Market Watch/Wall Street
Journal: http://www.marketwatch.com/story/hillary-clinton-chooses-tim-kaine-as-her-running-mate-2016-07-22
July, 22, 2016
N. Jason Jencka is presently studying
Finance and Economics at Sierra Nevada College, located near the shores of Lake
Tahoe on the border of California and Nevada.His interests include the
interplay between world markets and the global political sphere, with a focus
on developments of both sides of the Atlantic in North America and Europe.In
his leisure time he enjoys connecting with those people that have an
interesting story to tell and a genuine desire to make an impact in the world.
At each step of the transition from commodity to paper to credit, money became more unreal, and detached from the real goods and services that money can be exchanged for. Money transformed itself from a mechanism for trade into an object in its own right. Modern technology—digitalmoney—further stripped money of corporeality. Money exists as pure information, with no intrinsic value. It is nothing and everything.
Satyajit
Das. Extreme Money.
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