From Denny: Former British Prime Minister Gordon Brown brings into focus the world economic meltdown in his latest book "Beyond The Crash: Overcoming The First Crisis of Globalisation." This video clip is the extended interview and also an exclusive one with Jon Stewart on The Daily Show.
Former Prime Minister Gordon Brown Exclusive Interview
The revelations of inept government and banking officials is astounding here. Government leaders around the world assumed that bankers were professionals and actually knew and understood the banking system. According to PM Brown, apparently bankers from renowned global Big Banks admitted to not understanding the concept of how to calculate financial risk. That's like saying you don't understand the concept of burning yourself if you put your hand into the roaring fire. Unbelievable.
October 2008 beginning of world economic meltdown
Brown and Stewart discuss the atmosphere of the beginning of the world economic meltdown in October 2008. The crisis was so severe that within three to six days huge global banks would be out of money. Brown relates that one banker told him that "all he needed was some overnight financing to get through." The next day the bank collapsed. Brown said the head of that Big Bank was completely clueless as to what was going on.
What shocked Brown the most as he delved into the financial crisis at the time was how interconnected like a world web were all the banks. In fact, they were so entangled that when one bank failed it started a domino effect worldwide.
Why banks failed worldwide and continue to fail today
From what he experienced as a government leader, Brown learned a lot about the banking system and its terrible flaws, vulnerabilities and ruthless crookedness. As he sees it there are four major areas of problems with Big Banks:
* the banks were over leveraged with too many risks
* not enough working capital monies available because they were
* spent as bonuses rewarding the bankers instead of being invested back into the bank as working capital
* when the banks ran out of money all lending froze up
Government bailouts for greedy world bankers failed to bring about change
These idiot bankers were so greedy to reward themselves for the short term and too stupid to realize eventually the well would run dry and collapse their banks entirely. Of course, along come governments like America who gave huge bailouts to keep the banks in business. What did the bankers do? Nothing changed. They still continue to reward themselves with multi-million dollar bonuses - and allowing their working capital to dry up so we will end up bailing them out yet again.
What happened to create the economic crisis is that banks did not take in enough premiums on their risk investments to cover their risks. Say they took in a $50 million premium to cover a $5 billion risk yet did not set aside a full $5 billion to cover that risk. Instead, these stupid bankers got greedy, rewarded themselves with huge bonuses, leaving the banks unable to cover the huge losses that came their way. In short, they gave out as bonuses to themselves what was supposed to be the bank's working capital.
Brown pushes for world banking standards to inspire trust and investments
As idealistic Brown sees it the world must move to a global banking system where there are industry standards, integrity, trust, responsibility and fairness. While he is correct, good luck on that one with all the extreme greed on Wall Street.
Brown does admit that even if America finally reins in Big Banks with new legislation there will still be problems unless all the banks of the world in Europe, Asia and Latin America join the effort. Otherwise, if the crooks don't like the regulations in one country they will just move their operations to a country that will allow their greed to rein unchecked.
Brown also puts forth how important it is to have trust, integrity and transparency in the banking world. If there is not a way to verify what a bank has as investments and how leveraged they are for risk then it makes investors uneasy and disinclined to trust that bank's judgment. And, without that trust, the markets dry up. He also claims that by developing this global banking system it would develop such a trust that the markets would begin flowing again. He seems to think this act would help stimulate as many as 50 million jobs right here in America. He did not elaborate further on that idea.
So, basically, Brown believes the world economic crisis boils down to greedy bankers too stupid to use their own money to keep themselves flush in working capital to cover bad investments. Which brings us to the Nine Big Banks who are manipulating our world economy.
9 Big Banks manipulating world economy
The New York Times reported this past week about the secret meetings of world bankers who serve on a global council. What they do is meet every month to discuss and oversee trading in the derivatives market and the credit default market.
Anonymous secret bankers
What is annoying is that no one knows who "they" are. They remain anonymous. They come from famous names like JPMorgan Chase, Goldman Sachs and Morgan Stanley. Their locations are secretive as to when they meet and what exactly they do discuss. These men supposedly "safeguard" a multi-trillion dollar market - yeah, for themselves because they work hard to exclude other banks trying to get into the market.
Derivatives market
Get this as to just how crooked the derivatives market truly is: they don't allow public information to know their prices and the fees for the "insurance" product they offer as derivatives. Of course, Wall Street also claims we are all too stupid to understand the so-called complicated world of derivatives.
Here's the deal: it's nothing but a fancy word for unregulated betting and gambling. By not allowing their own customers who buy this product they are left wondering if they got a fair price and completely clueless as to the details of what the bank is charging them. This affects small businesses as well as large ones. This derivatives market also affects the average person because pension funds use this product to hedge their investments.
As it stands right now these banks are collecting billions of dollars in these undisclosed fees. All this could change if governments would get involved and regulate this industry severely. If there was more competition, rather than this monopoly by the nine Big Banks, prices would go down and there would be transparency.
To read more on the details of just how these Big Banks operate, controlling these derivatives market clearinghouses, go here for the New York Times article: A Secretive Banking Elite Rules Trading in Derivatives
The Daily Show: Exclusive - Gordon Brown Extended Interview - In this unedited, extended interview, Gordon Brown thinks America should be optimistic about its future in the global economy.
Check out Gordon Brown's new book: "Beyond The Crash: Overcoming The First Crisis of Globalisation."
Exclusive - Gordon Brown Extended Interview
In this unedited, extended interview, Gordon Brown thinks America should be optimistic about its future in the global economy.
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