Category: movie reviews

Summary of 97% Owned Financial Documentary

97% Owned

Seigniorage – a form of fund raising for the government by selling currency to commercial banks.

It created bank notes for 4 pence, and sells the note to bank for 10 pounds, the profit goes straight to treasury and reduces tax burden.

In 10 years the Bank of England raised 18 billion pounds

In 1948 notes and coins were 17% of total money supply

Now notes and coins make up less than 3%. The rest of the money is digital and imaginary…97% owned.

Most money is now digital so it is not the central bank that creates the money it is the commercial/private banks that create the vast majority and decide how and to whom it is loaned to.

Banks create money, they don’t lend it. When you get a loan, the bank just pretends you have deposited the money. It has to invent the liability.

If everyone starts saving, the amount of money in the economy shrinks. We have a recession.

Whoever creates the electronic money gets the proceeds. It is much more profitable than creating cash in the form of notes and coins as with digital money there is zero expense.

Commercial banks have created 1.2 trillion pounds in same time it took the central bank to create 18 billion pounds with hard currency.

Banks create new money by extending credit, buying an existing asset or by making payments on their account.

When a bank buys a company’s bond it adds the bond to it’s assets and increases the company’s deposits by the corresponding amount. In other words, the bank just types in the figure it just bought the bond for on the company’s account and it has acquired the asset. So it has created new money to the value of the bond out of thin air.

People think their personal or household economy works the same way as the national economy.

That is incorrect.

The money is distributed based on the priorities of the banking sector.

If you let bankers control money supply, they will keep creating it. Why would you stop you are creating it from thin air? And it is their prerogative to acquire more loans.

Until there is so much debt that it can’t be paid back.

Money in the current system is debt. So the only way we can have money is if we have borrowed it all from the banks.

We think money is created from hard work, from working in a job. But in reality you would never have got that job without a loan / credit in the first instance.

Then people get over-indebted and cannot repay their debt.

Banks go insolvent and stop lending which causes a recession. People lose jobs and become more indebted to the banks.

If we didn’t bail out the banks it would be a total and complete killer of economic growth or the whole economy, but now there is more debt from bailout.

The only way to stop this is for banks to stop creating money. Private profit seeking banks creating 200 million pounds a year and pumping that into the economy. These private profit seeking banks are putting money into housing bubbles making houses more expensive, making their loans bigger and making more money out of thin air.

Central bank reserves is an electronic version of cash (not the imaginary numbers or bank money the general public use), it is how banks pay each other.

A High street bank will create a bond which is effectively government debt and give it to the central bank and then the central bank will type some numbers into the account for that bank at the bank of england.

So the central bank is creating these reserves out of nothing.

Before the credit crisis if a bank was short of central bank reserves, it could loan reserves from other banks with interest.

When transactions take place they use special money central bank reserves, so you buy a house from another bank they tell central bank to change values of reserves.

If they don’t have enough central bank money, then they can’t make payments and the whole system seized up. So bank must ensure this doesn’t happen.

Banks were allowed to set their own reserve targets each month.

Quantitative easing, is the process of giving commercial banks the reserve currency for free.

So central reserve money is considered real money, but fact is banks can have as much of this as they want now. It is also FIAT money, backed by nothing.

History of money

After world war 2, the UK and USA came together to manage world economies with the IMF and the world bank. At that time there was still a gold standard – Dollars was pegged to gold. And all currencies pegged to the dollar so long as americans played the roll as oversight. Preventing countries not being able to pay their bills / currency collapses. Then Americans started inflating the value of their own currency (To pay for vietnam war).

The French got worried and sent a gun boat to ask for their gold back

FIAT currency – medium of exchange where issuer does not promise to redeem in a commodity and holds its value based on confidence alone.

We believe it is worth something.

Growth and Inflation

A growing economy required growing debt.

Politicians (and many finance and economic professionals) do not realise this.

Money supply can be used to drive growth but it can also be used to inflate asset prices and for market speculation.

Inflation is the general rise in prices of goods and services. It means that each unit of currency is worth less as time passes.

When money supply grows there is more money for investments and growth but there is also more money for market speculation and buying of goods.

Inflation is caused by too much money chasing too few goods and services. When money supply is growing at a faster rate than goods and services.

Recorded / Measured is flawed

CPI is a measure of the increase in price of  basket of goods and services over time. It is deemed to provide a consistently lower figure for inflation. This is because house prices, mortgage repayments and council tax are excluded from the calculation.

RPI retail price index is deemed a better representation of inflation.

The biggest expenditures one makes should be taken into account, like house or car / school fees.

The increase in mortgage/loan on a house does not increase the economic output of a naction. It just increases money supply and hence does not enhance GDP, causing inflation. Banks creating money leads to more speculative credit and higher valuations on safe assets.

You can give a loan to a small business, is more risky as there is less collateral. Giving a Loan to a house, on the other hand, there is collateral. Not productive investments.

Bubbles

High inflation on a specific good or service.

The Tulip mania. The money system is not abstract it has alot to do with nations, power, trade and how they interact.

The ideal attributes for bubble creation: Luxury and Necessity.

Inflation can be avoided if money supply or creation does not exceed the economic output

Argument for government to guide where money should be invested (war economy)

People are getting poorer all the time, money is distributed from the poor to rich.

Every pound of money, has a pound of debt.

Debts from the poor to the rich are set in stone and are now sacred.

The reason the poor are in debt is because the prices have gone out of control and when the system breaks the poors are the ones owing.

Bank Run

You can withdraw all your cash from bank, but this does not reduce digital money supply.

You can stop the monopoly by moving your money into local community banks, not these massive private banks.

International bank run – withdraw from one currency to another, reserve currency shifts from reserve currency to international bank. But not part of their local central bank.

Currency Wars

It will get a trade imbalance.

Spending more than they are earning = trade deficit. Ability to repay debts is questioned. You can devalue your currency so exports increase. Domestic industry demand has grown.

Central bank can sell reserve currency in the market to devalue currency (this reserve is created from nothing, typed into a computer).

Belief is the thing holding up a currency.

Third world debt is used as a form of colonialism, having power of the economy controlling what they do.

IMF tells 3rd world countries that they can pay back their debt by increasing exports so they are earning more dollars so you can pay off your debt. Which is all a lie.

In reality countries cut their government spending and hence they stop growing. So they paid their debts but their own economy was not being developed. So the country becomes poorer and then big corporations come to exploit its natural resources.

These rules imposed by IMF actually destroys local industry and makes more dependent on foreign loans.

Also tell countries to lower tax in multinational corporations.

Also means profits made in country go out and do not help locals.

To manage risk on this unbacked currency you needed derivatives, futures and new markets. Hedging = insuring against your risk.

Derivatives based not on real products were essentially gambling, which changed in the 1960.

Efficient market hypothesis, The theory is that a market regulates itself better than if a government interferes.

The 2008 credit crisis caused that belief to end. Anyone who still believes the market is self regulating is a pencil neck.

Credit default swaps – insurance against companies from going bust – inflated from 1 trillion to 60 trillion in 5 years. But it turns out they don’t provide stability and the maths inside them is completely borked.

Cash is backed up by government debt and government debt is backed up by the ability of government to get money from the public through tax.

System is designed to make a few people very rich at the expense of taxpayers and citizens.

It Lowers standard of living of majority.

Currency Reform

So what can we do…

One hypothesis it to back a currency by renewable energy, which will increase investment in that space.

Banks should have to ask you what they do with your money. They shouldn’t be able to gamble with it.

A safe account and an investment account so banks don’t need to be bailed out by government.

Person to person banking.

We should not ask the banks for advice on how to improve the money system, they are the last people to ask.

You wouldn’t ask a bad house builder advice on how to build a house.

Great Financial Movies and Documentaries Reviewed

Spolier Alert: Mild spoilers ahead

Leading up to the release of the Big Short, a movie based on the book. Many of these movies are based on books in fact and Hollywood has a fascination with these sorts of Movies. It is a sad reality that in the world of exchange rates massive leverage and bing banking decisions of Bankers and Brokers affect everyone around the world. Nonetheless the movies can be entertaining so I’ve watched and reviewed some from the perspective of knowing a little bit of what is going on.

Financial Movies

Margin Call (5/10) [Rotten Tomato: Audience Score 74%]

A very Hollywood style film with little to no reality. The film takes place over a single day. The day leading to the global financial meltdown. It feels trivial to show just this time when the repercussions, you would think, would be more entertaining to the viewer.

Also financially speaking not too much to go on. The risk analysts at the firm had gone through the numbers and apparently they had over leveraged a particular derivative that was really worthless. Which meant that the company if it did not sell right now would lose more than it’s entire market capitalisation. No charts or figures were ever given, we only see blurry computer screens in the background.

Just an annoying film that ends abruptly about some corporate clown owners of a huge firm that have people that are are selfish and think more about their own career progression than the company / global financial position.

The movie is about the utter ass clowns that started the fire sale of the 2008 financial crisis, and they are portrayed in a neutral light. Also it is show that they had no choice, it was sink or swim.

Sometimes I think some of the scenes in this film were just thrown together.

Rogue Trader (7/10) [Rotten Tomato: Audience Score 52%]

Not an enjoyable film for me, but I would say it is an essential for any potential or current trader. This is the reality of trading, it is the real thing. Perfect film for understanding the negative aspects of leverage and the derivatives market. Moral of the story, don’t use leverage.

The film is a biographical film and probably the most realistic of all the films in this list.

Although not set around a financial crisis, the story revolves around the rogue trader Nick Leeson who single handedly bankrupted a ban in the united kingdom with terrible trading practices.

If you ever wanted to know how terrible trading can be, this is the film to watch. It is not enjoyable, it is frustrating and the recklessness of the main character will piss you off. No wonder the rotten tomato audience didn’t like it…it is old as well. Anyway the verdict is an essential watch for any trader.

The Big Short (6/10)

[Rotten Tomato: Audience Score 88%]

It’s a bit hollywood, appealing to the normal people. They tried too hard to make something that is boring sound interesting. It is a good movie for the novice to enjoy.

Financial Documentaries

Inside Job (9/10) [Rotten Tomato: Audience Score 91%]

Warning: This movie might annoy you or piss you off

An awesome documentary exposing the disgusting rotten financial events, institutions and governments that led to the financial crisis in 2008. Narrated by Matt Damon and with interviews with good guys and bad guys, as well as great explanations of what really went on when those Capitalist bastard decided to deceive and burn the rest of the world.

The main cause of all of this was the Greed of disgusting humans.

Another shocking thing that comes out is the amount of academic community member were paid to praise the terrible decisions and deregulation of banks. Rating agencies: Moody’s, Standard and Poor’s and Fitch also gave these CDO and CDS instruments triple AAA ratings because they make money when they do. Ratings agencies opinions mean nothing.

The financial institutions even got the government (tax-payers money) to bail them out…

It is sad that no one is looking out for the public, only themselves.

Don’t ever use leverage, don’t ever use money you don’t have.

A financial engineer gets paid 4 to 100 times more than a real engineer. A real engineer builds bridges. A financial engineer builds dreams and those dreams turn out to be nightmares that they don’t have to endure.

Here is the PDF mentioned that exposes before the fact called Who’s Holding the Bag

Princes of the Yen (8/10)

A profound look at how the central bank and finance ministry work together or not. It highlights the ways in which an economy is highly controlled by government intervention and it exposes what is seemingly profound truths that relate to many economy. It is based on the Japanese post-war economy and what led it to prosper and fall.

Unfortunately not too much info about the negative interest rates and how it became like that and what is means. It is also taken primarily from a single person’s viewpoint but this guy clearly knows his stuff and is a professor of economics, Richard Werner.

View the Summary of points in the Princes of the Yen

97% owned ( 8/10 )

An in-depth look into what is really going on in the British economy with regards to money creation. It can be likened to the commercial bank and central bank actions throughout the world after the dropping of the gold dollar standard.

See the Summary of 97% Owned Financial Documentary

Enron the smartest guys in the room

Money for nothing, inside the Federal reserve

End of the Road, how money became worthless (9/10)

Another classic movie movie showing the debasing of world currencies through the removal of the Dollar-Gold standard by Nixon on 15th August 1971. Ending the Bretton-woods system.

The movie suggests the economy is just a massive Ponzi scheme held up only by people’s belief that the US can pay back this money, the truth is it cannot.

Proven 100% failure rate, FIAT currencies always fail

All currencies have tethered their currencies to the US dollar ie. fresh air.

A very simple explanation, to a very difficult topic.

One thing that this movie disregards is the group that creates the majority of money…commercial banks, not central banks.

They were saying buy gold when the movie was released 2012, when it was $1700 a fine ounce.

Take home: Become more economically aware, empower yourself, don’t let the people running the Ponzi scheme guide your decisions.