Global Financials & Random Musings. "Inside the Devil's Machine"

"Use your inside voice." That's a phrase from childhood well worth restoring to the crafts of diplomacy and conflict management. Overtly, it's a command directed at volume. More subtly, it could be a philosophy for turning inward to allow space between ideologically warring factions. It's not enough any longer to win a debate; the objective is complete oratorical destruction of the other side and all they may stand with & for. This is a compelling "moment" in our history, but it will be historians who alone connect the dots of insight over the march of time. Meanwhile, there may be something to just watching & listening. Many drive toward an outcome; for others it's the drive itself. The questions can be more interesting than the answers. The world spins on its axis & rotates around its sun. The rest of it is quite possibly more random than we care to believe & not all the dots connect all the time.

1. Through the wide-angle lens of financial institutions and financial markets one can achieve a drone-like vantage point of many generational developments. From economic fairness to environmental sustainability, banks & trading markets of all measure are drawn into the atom-smashing of key social, economic, and geopolitical forces. Competing agendas (some less transparent than others) find their way into the the use and mis-use of Finance & Financial markets for personal & commercial advantage. Outside parties attempt to exert discipline, but can governance & regulatory oversight drift toward over-reach, to interfere with rather than engage in building rational, durable, & just financial systems? Where money is power, there is no hope for reducing the mis-use of the global banking system to reach national, commercial & personal aims for bad actors. The fight for safety, soundness, & fairness is a war of attrition against a crafty insurgency capable of finding and exploiting narrow fissures of opportunity, while often evading & escaping accountability. Insurgencies are suppressed more often than they can be defeated, but the side effects with suppression can be debilitating. Or, like crypto-currencies, innovating.

2. "Capitalism must be modified to do a better job..." are the crowd-pleasing words in an entertaining piece written for a once-revered (now on-line) magazine, by a very respected (increasingly on-line) banker. Barely a week or so later, the New York Times published "Inside the 'Devils Machine." The story is an all-too familiar recounting of bankers & their schemes to extract billions of dollars from national treasuries in actions characterized as "the biggest tax theft in the history of Europe." Now, considering how much tax theft there must have been in Europe over the ages, that's saying something. So far, seems like no one has been brought to book.

The juxtaposition of modifying capitalism with the accounting schemes perfected inside closely-regulated banks is too rich to ignore. All is not lost, however, after $60 billion was spirited away from the public. Perpetrators sail their wealth around the golden waters of Dubai, but the so-called "reckoning has begun." "Several banks have been fined (Deutsche Bank, Unicredit), one has apologized (Macquarie), others have pledged cooperation..and two are insolvent." Sounds more like: "Sorry. Not sorry." The article at least soothes us with bankers owning up to the colossal plundering in their own special language. "Spokesmen [not women, we observe], for JPMorgan Chase, Morgan Stanley and Bank of America...said they had no comment." Message received. Question: when this happens, is it a control deficiency in these banks to argue it was a small group of bad actors rather than a business strategy encouraged up the ranks? Independent auditors may have that answer. We will look for any discussion in the banks' annual reports.

3. Amidst the latest and greatest fixation on all things technological, artificial & robotic, it's still People who deserve our attention. RIP KB (1/27/2020), his daughter, their friends, & the pilot.

4. Check back occasionally. We are wandering around watching, listening, thinking. Drawing to conclusions a lot less than most folks. Don't forget: it's the drive.

Kind regards,

from KCA/Princeton Advisors, LLC