If you're wondering why the big banks have "captured" the political environment in every nation of the world, you need only look at the Goldman results through a somewhat-different lens.
See, it wasn't just Goldman - it was also Bank of America, Citibank and JP Morgan who scored "perfect quarters."
Now if Goldman's record was predicated on the outcome of a game of chance set of odds and had an 8.67 x 10-19 probability of occurring, for four of these institutions to do so would be that to the 4th power, or something approaching 5.65 x 10-73.
As pointed out in the forum by Tsberts, there are fewer than this many particles (atoms, etc) in the known universe.
Now it is certainly true that trading activities are not a pure game of chance, and that most of the trading profits are generated from "market making" (that is, earning a spread.)
But that makes the performance even more outrageous, because these "market making" activities are claimed to be something that provides net benefit to market participants and thus the economy as a whole.
That claim looks awfully hard to sustain when the book-maker never loses - not even once on a daily aggregate basis.
Indeed, this puts into stark relief the nature of "banking" these days in the Wall Street context, which is increasingly nothing more than an activity intended and executed to skim off profits for the banksters at the expense of literally everyone else in the economy.
They seem to be doing a good job of it too, if these results are any indication.
Here's the problem with this, assuming you're not a bank executive: The money these people skim off comes from all other economic activity. That is, every dollar they make through these "activities" is a dollar you lose as a productive member of society.
It cannot be otherwise. The spread has to come from someone, and the "someone" it comes from ultimately is you!
You pay it at the pump, you pay it in your mortgage, you pay for it at the grocery store, and you pay for it at Home Depot. In each and every product and service you purchase there is an implicit "Bankster Tax."
Now some of this "bankster tax" is unavoidable. That is, there indeed is a need for a banking system, despite the claims of some. We have a penchant in modern society for being able to easily buy things we want, and do to that we need both one or more mediums of exchange but also a clearing mechanism. Banks provide this.
But what's lost on most people in the current debate is that many of the other things that banks do are actually quite destructive. Have you noticed that you can only get a CD that pays 1% right now? Is the cost of living rising at 1% or less? No, it is not, which means that you are funding the bankster tax if you have your money in the bank. They're stripping you!
Worse is the game being played between the banks and Treasury. This is a symbiotic mess and it sucks. The banks borrow at or near zero from The Fed and then buy Treasuries with the money. Since Treasuries have a "Zero" risk weighting, they can then pledge those for Repo money in the overnight market (again, at essentially zero) and now they have cash to do it again! This creates effective infinite leverage and yet this is permitted because these "securities" are sovereign and thus "safe."
This has allowed the Treasury to continue to "borrow" and spend, but the "borrowing" is, to a large degree, false money. That is, it is nothing other than leverage - it is not actual money being lent.
This, if it does not stop, is how you get a Ponzi-style collapse!
If you want to know why Greece was bailed out, this is the reason. Had they not been the banks in Europe who had taken this Greek Debt which was represented as "safe" but in fact was not would have gotten nailed, as their inherent leverage in the transaction would have chewed them to bits. Indeed, they had mark-to-market losses in the billions when the interest rates on that debt ramped - all not recognized, of course, since sovereign debt has "zero risk."
The error in this process is that sovereign debt does not have zero risk. Indeed, allowing banks to trade anything creates this sort of hazard, since there is no such thing as a free lunch - claims otherwise are in fact lies. Yet the claims continue.
Mark Hanson of Hanson Advisors has an interesting report out this morning that underlies much of the trouble, which of course is focused in the housing market. We have been told repeatedly by administration officials and others that the "worst of the crisis" in mortgages and similar instruments is behind us, and that credit quality is "improving."
This is a lie.
I have stressed repeatedly that you cannot fix someone who is overlevered by offering them more credit, no matter the terms. You can only solve their problem by reducing their credit load. But for most Americans their primary mortgage (which is all that HAMP really addresses, despite the protests of some 'pundits') isn't the half of it. You also have HELOC debt, and far more importantly all other forms of credit, including credit cards, auto loans and similar.
The Ponziconomy folks are well-aware that without restarting credit creation the attempts to "pump" our claimed "economic recovery" will fail. More importantly, since we have managed to crank expectations in business so high over the last year, resulting in an 80% ramp in the stock markets, if they fail we won't "muddle along" and work the excesses out - that capability has now disappeared. What we face is an all-on collapse that will likely destroy 20% or more of the S&P 500 and 50% or more of all small businesses.
The numbers say they're failing:
That's everything but mortgages. Non-revolving debt has leveled off - but it never went materially below a zero creation rate in the first place. But revolving debt has not, which belies the claim that "credit quality is stable and improving."
It most-emphatically is not when one looks at the outstanding credit as represented here:
We nearly doubled non-revolving credit out from 2000-2008 and added about 50% to revolving. Now non-revolving, despite all the "stimulus" programs and "Free money" deals for cars, has stalled and refuses to resume it's ascent, while revolving continues to contract. On a total basis you have this:
Looks folks, we went from $1.5 trillion outstanding to over $2.5 trillion in ten years. Now it's contracting and while non-revolving has stabilized, it is not growing materially, and revolving debt continues to contract. To resume the upward trajectory we had in 2000-2007, we must ramp consumer credit from $2.5 trillion to roughly $4 trillion over the next ten years, and we must also take the $53 trillion in total outstanding debt and ramp it to somewhere around $80 trillion.
But to do that you must have the income to service that debt.
We do not, and we cannot without radical changes in how we approach trade and employment in this nation.
All we have done thus far is play "extend and pretend" writ large throughout the economy, with a special emphasis in the housing market in all it's forms. The banks are cheating on asset valuations when it comes to MBS and whole loans of all sorts but so are consumers! A consumer who has a total debt-service-to-income ratio post modification in the 60s or above is one blown transmission in their car, a leaking water heater or an unexpected medical bill away from bankruptcy.
To get out of this hole we must either truly restructure those debts (which at best means writing down expected interest payment streams in the future, and at worst recognizing the bankruptcy that has already taken place) or we must significantly increase income - not by 5 or 10% but by serious amounts, 20% or more.
The latter is impossible due to global wage arbitrage unless we either force China to revalue their currency or whack them (and other low-cost exporters such as Vietnam and similar) with huge tariffs on everything they export to the United States.
Enjoy the illusion that it has all been fixed. Everywhere I look, no matter the sector, I see the same game being played.
Last week showed us a crack in the dam. The coming weeks may prove that the number of cracks exceed the number of available fingers.