Saturday, 23 July 2016

Weekend Update 23/07/2016 – A Comedy of Central Bankster Errors.

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.

In other news from China, did another black swan just fly in?

Heavy rain in China kills at least 24, millions evacuated

Sat Jul 23, 2016 1:39am EDT
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.

Laura Meckler & Peter Nicholas-Market Watch/Wall Street Journal: 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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