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True Size of the Shadow Banking System Revealed (Spoiler: Humongous)

Soulskill posted about a year ago | from the sith-lords-need-checking-accounts-too dept.

The Almighty Buck 387

KentuckyFC writes "The banking system is closely regulated and monitored by central banks and other government agencies. But it has become common practice for banks to get around this by doing business in ways that don't show up on conventional balance sheets. This so-called shadow banking system is thought to be huge, but nobody knows exactly how big. Now three econophysicists have discovered that the size distribution of the world's largest financial firms significantly differs from the size distribution of smaller ones or indeed non-financial firms. And they hypothesize that the difference is the result of the hidden transactions that make up the shadow banking system. By this new measure, the shadow banking system has grown dramatically since the financial crisis and was worth over $100 trillion in 2012, significantly more than had been thought and more even than the GDP of the entire planet. Nothing to worry about, then."

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BWAHAHAHAHAHAHA (5, Funny)

NoNonAlphaCharsHere (2201864) | about a year ago | (#44875763)

"The banking system is closely regulated and monitored by central banks and other government agencies."

AHAHAHAHA Stop it! Yer killing me!

Re:BWAHAHAHAHAHAHA (5, Insightful)

Anonymous Coward | about a year ago | (#44875793)

In the United States, the central banks are regulating the Government.

They love the government as long as it sets rules that let them win.

Re:BWAHAHAHAHAHAHA (0)

Anonymous Coward | about a year ago | (#44875857)

https://en.wikipedia.org/wiki/Regulatory_capture
More regulation at this point will only increase the corruption until there is a way to get the big money from controlling regulation and politics.

Re:BWAHAHAHAHAHAHA (-1, Troll)

Goaway (82658) | about a year ago | (#44876205)

When somebody begins their argument with a link to Wikipedia, I always figure they are just parroting something something they read on the internet that they think makes them sound clever.

Re:BWAHAHAHAHAHAHA (3, Insightful)

nedlohs (1335013) | about a year ago | (#44876357)

Whereas I make that judgment based on what they say. But whatever floats your boat.

Re:BWAHAHAHAHAHAHA (5, Insightful)

Anonymous Coward | about a year ago | (#44876511)

When somebody begins their argument with a link to Wikipedia

That's funny, when I see someone dismiss something because wikipedia was the citation I always figure they're just rejecting things on the basis that Wikipedia got mentioned because they think that makes them sound clever.

Re:BWAHAHAHAHAHAHA (1)

Anonymous Coward | about a year ago | (#44876529)

If you are living life believing that Regulatory Capture isn't a reality of our government then you must be in bliss because you're sure as hell ignorant.

Re:BWAHAHAHAHAHAHA (0)

Anonymous Coward | about a year ago | (#44875907)

The article defines "the banking system" as the part that's closely regulated etc, and "the shadow banking system" as the part that isn't.

Shocker: "the shadow banking system" is many times larger!

In other shocking, unexpected news, crazy people can easily buy guns in the US. Also, the sky is blue.

Re:BWAHAHAHAHAHAHA (0)

kwbauer (1677400) | about a year ago | (#44876355)

and yet another shocker... crazy people and criminals can buy guns in every country in the world.

Re:BWAHAHAHAHAHAHA (-1, Offtopic)

xevioso (598654) | about a year ago | (#44876365)

Virtually anyone can easily buy guns here. it's insane.

Re:BWAHAHAHAHAHAHA (0)

Anonymous Coward | about a year ago | (#44876417)

Virtually anyone can easily buy guns here. it's insane.

Why is that insane? Are you saying they should get them for free or something?

Re:BWAHAHAHAHAHAHA (5, Insightful)

pla (258480) | about a year ago | (#44876087)

AHAHAHAHA Stop it! Yer killing me!

Sorry? I completely fail to see any humor in the fact that the banks of the world explicitly and openly collude to fuck us as hard as they can - And with the outright support of government, at that.

Re:BWAHAHAHAHAHAHA (2)

MickyTheIdiot (1032226) | about a year ago | (#44876109)

You're right there is no humor in it.

There is a lot of DARK humor in the fact that a large percentage of our population would disagree with your statement, though.

Re:BWAHAHAHAHAHAHA (2)

freeze128 (544774) | about a year ago | (#44876521)

No, it's funny, just not the part that you think.

"Econophysicists" - That's the REAL punchline.

Re:BWAHAHAHAHAHAHA (3, Insightful)

NoNonAlphaCharsHere (2201864) | about a year ago | (#44876191)

Are you kidding? It is riotously funny that *anyone* could, with a straight face, begin a sentence with "The banking system is closely regulated and monitored...".

Re:BWAHAHAHAHAHAHA (1)

gstoddart (321705) | about a year ago | (#44876329)

Sorry? I completely fail to see any humor in the fact that the banks of the world explicitly and openly collude to fuck us as hard as they can - And with the outright support of government, at that.

No, but what's hilarious is the continued claim they're well regulated and that the system is working.

Econophysicist (-1, Troll)

smitty_one_each (243267) | about a year ago | (#44876165)

Did you hear the one about the Econophysicist, the Historochemist, and the Artamatician?
They showed up to un-f**c the UNFCCC [wikipedia.org] , the the global warming weenies were all: "Hey, we thought WE were the ridiculous ones."

Re:BWAHAHAHAHAHAHA (0)

FooAtWFU (699187) | about a year ago | (#44876255)

JP Morgan Chase lost about $7.2 billion dollars trading bonds (with its own private money, mind you, not depositors' money or anything). Then the feds decided this was bad and that they should fine them an extra $800 million. Even the Brits are dubious, [economist.com] suspecting that it's really because Chase has been publicly complaining about the feds and wondering when exactly it became a crime to lose money...

So if you want a laugh, sure, you can choose the popular-screed opinion du jour where banks are the bad guys. But I'd say, why limit your targets like that? We can be cynical about banks and regulators!! :P

Re:BWAHAHAHAHAHAHA (5, Informative)

Anonymous Coward | about a year ago | (#44876473)

Then the feds decided this was bad and that they should fine them an extra $800 million.

WTF? Your own article says they were fined for hiding the loses. There are even criminal charges. It's legal to lose money, but it isn't legal to lie about it to regulators.

Re:BWAHAHAHAHAHAHA (0)

Anonymous Coward | about a year ago | (#44876471)

Central banks closely monitor and regulate governments. Not the other way around. The bankers in Obama's cabinet aren't advisers, they are board members.

Re:BWAHAHAHAHAHAHA (1)

interkin3tic (1469267) | about a year ago | (#44876531)

Regulate: control or maintain the rate or speed of (a machine or process) so that it operates properly.

I'd say that fits. "Operates properly" here meaning something very specific to a very small number of people. It clearly works for them.

Shadow economies (0)

Moblaster (521614) | about a year ago | (#44875777)

100 terabucks seems like a lot but when you compare it to the 200 terabucks under-the-table business-to-employee market, it kind of takes a back seat.

Re:Shadow economies (1)

i kan reed (749298) | about a year ago | (#44875847)

You really think that every single American is making ~800k under the table per year?

Re:Shadow economies (3, Insightful)

Intrepid imaginaut (1970940) | about a year ago | (#44875923)

There are surprisingly people in other parts of the world than American (IKR!!), but even if you take the global working population that still comes to around $40,000 for every worker per year. So, still calling bullshit.

Re:Shadow economies (1)

i kan reed (749298) | about a year ago | (#44875979)

My presumption of Americas was driven by the pricing in USD, not from nowhere.

Re:Shadow economies (3, Funny)

MickyTheIdiot (1032226) | about a year ago | (#44875981)

There is a guy in a corner office somewhere that is apparently making my $40k share of the underground banking economy.

I would guess to say he's also making the $40k share of many most of the people in my 5 square miles as well.

Re:Shadow economies (0)

Anonymous Coward | about a year ago | (#44876539)

There is a guy in a corner office somewhere that is apparently making my $40k share of the underground banking economy.

I would guess to say he's also making the $40k share of many most of the people in my 5 square miles as well.

I've never really thought of it as a corner office since there are windows on only one wall. I guess you're right though. It is an office in the corner of a building. Cheers and thanks for $40k sharing!

Re:Shadow economies (1)

GameboyRMH (1153867) | about a year ago | (#44876257)

Maybe some large outliers are skewing the average...

Re:Shadow economies (1)

Ultracrepidarian (576183) | about a year ago | (#44875943)

How do I get in on this?

Re:Shadow economies (1)

durrr (1316311) | about a year ago | (#44876047)

Surgically remove your conscience, you'll get a letter of invitation a week later.

You don't have to be any particular race or gender (2, Insightful)

Anonymous Coward | about a year ago | (#44876189)

How do I get in on this?

Buy a couple dozen senators, just like anybody else. You can get a discount price if you're a Christian Armageddonist, or willing to go along with them.

We have two intermingled crises - governmental corruption on a global scale, administered and centered in the USA, and of course the failure of the hereditary ruling class to build anything resembling a sustainable economy.

Re:Shadow economies (1)

CanHasDIY (1672858) | about a year ago | (#44875947)

You really think that every single American is making ~800k under the table per year?

Either that or he's implying that those jobs that only illegals are 'willing' to do actually pay 8-9 figures a year.

Re:Shadow economies (0)

Anonymous Coward | about a year ago | (#44876159)

Either that or he's implying that those jobs that only illegals are 'willing' to do actually pay 8-9 figures a year.

The hit-man market is dominated by illegals, and they earn a lot too.

Re:Shadow economies (1, Insightful)

bhagwad (1426855) | about a year ago | (#44875919)

And is anyone actually being harmed by this "shadow banking"? If so, I'd be interested in a concrete example.

Re:Shadow economies (4, Insightful)

RealGene (1025017) | about a year ago | (#44876015)

An investor in a bank, or a purchaser of A-rated securities offered by that bank, may not be aware that there are unregulated, undocumented liabilities held by that bank, which, were they to go sour (see "Credit Default Swap"), could cause the bank to collapse.
If you knew that your bank was involved in large, unregulated transactions worth more than the bank's holdings, would you continue to do business with them?

Re:Shadow economies (4, Interesting)

TsuruchiBrian (2731979) | about a year ago | (#44876153)

An investor in a bank, or a purchaser of A-rated securities offered by that bank, may not be aware that there are unregulated, undocumented liabilities held by that bank, which, were they to go sour (see "Credit Default Swap"), could cause the bank to collapse.

I thought everyone knew these ratings were bullshit.

If you knew that your bank was involved in large, unregulated transactions worth more than the bank's holdings, would you continue to do business with them?

Well, this presumes that I am doing business with them in the first place, but I would say that this information wouldn't change my mind, because I just assumed nearly everything the banks did was not actually regulated anyway. Yes there are bank regulators, but they don't really understand how anything works, nor do the banks for that matter. This might be pretty scary for the banks if they weren't able to get taxpayers to pay their losses. It also might cause regulators to start shutting all these banks down if their bosses weren't completely in the pockets of the banks.

Hell even I have my money in a bank. I basically dumped almost all my money into a house because I don't trust banks, but the money I have left over is in a bank. The Federal reserve has made it so that the only thing dumber than putting your money in a bank is not putting your money in a bank. They basically force everyone to become irresponsible investors or they confiscate your money through inflation. It's really quite an ingenious system, but it sucks for people who want to play it safe. Then again life sucks for people who want to play it safe.

Re:Shadow economies (1)

bhagwad (1426855) | about a year ago | (#44876175)

But to my understanding, "shadow banking" means completely off the books. Meaning it's a "trust" system. "White" cash couldn't be used to satisfy any liabilities acquired from shadow banking, so the bank's cash reserves are safe. Or maybe my understanding of "shadow banking" is wrong?

It's almost as if there are two separate banks and the two can never meet. Or like I said, maybe I haven't grasped the real meaning of shadow banking.

Re:Shadow economies (1)

PPH (736903) | about a year ago | (#44876265)

Right. Banks have minimum capital requirements. If something is 'off the books', then it can't be a part of the assets used to satisfy these regulations.

Unregistered securities should be worth zero for any 'mark to market' rules.

Re:Shadow economies (2)

i kan reed (749298) | about a year ago | (#44876287)

Your understanding of shadow banking is wrong. That is precisely the reason a bank called "Wachovia" doesn't exist anymore.

Re:Shadow economies (1)

GameboyRMH (1153867) | about a year ago | (#44876289)

Oh so it just puts the global economic system on the ragged edge of violent implosion. No big deal.

Re:Shadow economies (4, Insightful)

NoNonAlphaCharsHere (2201864) | about a year ago | (#44876125)

Other than the tens of millions who are upside-down on their house loans, or who have already lost them; other than the entire middle class, who have had stagnant wages for the last 40 years, no, no-one at all. Everything is lollipops and unicorns when the 0.1% are allowed to "trickle down"* on the rest of us.

* [urbandictionary.com]

Re:Shadow economies (0)

Anonymous Coward | about a year ago | (#44876267)

when the 0.1% are allowed to "trickle down"* on the rest of us.

At your own expense of course. Golden showers aint free, you fucking freeloader!

-Mitt Romney

Re:Shadow economies (2)

afidel (530433) | about a year ago | (#44876549)

Credit default swaps were a major cause of the domino like collapse of financial institutions in 2008 that required a government intervention of unprecedented size and scope. CDS's are a large part of the shadow banking system, they are black boxes to regulators who have no ability to regulate the market or ability to model the effects of problems in the market.

Making shit up (1)

Tailhook (98486) | about a year ago | (#44875941)

The under-the-table business-to-employee market is nothing compared to the $8.3 Quadrillion in unfunded pension liabilities. We'll need 221 Earths to pay that off.

Re:Shadow economies (1)

alexander_686 (957440) | about a year ago | (#44876495)

I am still reading the underlying article but it looks like the figures are referring to nominal value – not real value. Nominal value will normally way overstate how large the shadow banking system is.

Example – I enter into a future to swap 2m US Dollars for 1m British Pounds in 90 days. (not the right exchange but I am trying to keep things simple.) The nominal value is either 2 or 4m depending on how you counting. In reality you are agreeing to swap to things of equal value so the economic value is zero.

Econophysicists. WTF? (5, Funny)

Russ1642 (1087959) | about a year ago | (#44875781)

I did my masters in non-Newtonian budget surpluses.

Re:Econophysicists. WTF? (5, Funny)

king neckbeard (1801738) | about a year ago | (#44875825)

Econophysicists are just aspiring botanopsychologists who couldn't cut it.

Re:Econophysicists. WTF? (1, Offtopic)

MickyTheIdiot (1032226) | about a year ago | (#44875953)

This is not to be confused with Ecto-physicists. That's what the famous documentary "Ghostbusters" was about.

Re:Econophysicists. WTF? (0)

Anonymous Coward | about a year ago | (#44876381)

Econophysicists are a fraud (not completely), their theory explains, rather inadequately, the slow moving large pools of moneis. It takes a combination of Quantum EconoMechanics and Stringized EconoScientonomics to explain fast moving lips that read nothing but speak and write at 1M Tera buks speed all voidesque in relation to physical biology and econochemical aspects of coinage. The same is also required to coin new terms and theories.

Re:Econophysicists. WTF? (1)

Anonymous Coward | about a year ago | (#44875867)

Pfft! Non-Newtonian? Try relativistic economics [wikia.com] .

Re:Econophysicists. WTF? (1)

Russ1642 (1087959) | about a year ago | (#44875887)

We all know that Bistronomics is at the forefront of the science.

Re:Econophysicists. WTF? (1)

Anonymous Coward | about a year ago | (#44876045)

Pffft yourself. In Washington, they practice the string theory of economics.

Re:Econophysicists. WTF? (1)

Tailhook (98486) | about a year ago | (#44876129)

Shoe stores? Please....

Terrestrial economics is so provincial. We need more exoeconomists to get a grip on alien finance.

Re:Econophysicists. WTF? (0)

Anonymous Coward | about a year ago | (#44875909)

I did my masters in non-Newtonian budget surpluses.

So did I!!!
 
Was your advisor SSSssslex the serpent-lord too?

Sentient Econometrics (SMAC/X) (1)

rsborg (111459) | about a year ago | (#44875921)

I immediately thought of Sid Maier's Alpha Centauri and it's wonderful tech tree and prescient ideas [1]
Note: while in SMAC, computing resources are used to solve big problems, mainly we're using them to run HFT schemes aiding the super-wealthy get even more wealthy.

[1] http://alphacentauri2.info/wiki/Sentient_Econometrics [alphacentauri2.info]

Re:Sentient Econometrics (SMAC/X) (2)

dywolf (2673597) | about a year ago | (#44876053)

You thought of that, but not of Psychohistory?

Hari Seldon would be very disappointed in /. today.

Re:Sentient Econometrics (SMAC/X) (1)

rsborg (111459) | about a year ago | (#44876325)

You thought of that, but not of Psychohistory?

Hari Seldon would be very disappointed in /. today.

Toché, but assuming my recollection isn't too foggy, I didn't feel that Asimov's stories really focus on the economist aspect of psychohistory. He tended to focus on historical events, and not from people attempting to profit directly from it (counterexample: Mule).

In our modern society Mr. Seldon would be made to understand that profit is the only meaningful objective (either by force or subversion).

Re:Econophysicists. WTF? (3, Funny)

xvzf (3111567) | about a year ago | (#44876025)

Dark matter, ya know.

"Quantitative easing" my ass (4, Interesting)

c0lo (1497653) | about a year ago | (#44875823)

Those shining brand new banknotes need to accumulate somewhere, preferable to those that would be impacted the most in absolute value by the ensuing inflation.
You wouldn't expect "the 1%" to take the hit, that's what the "middle class" is for. The trickle economy is still operating, except that now it's no longer the "value" that trickles, it is the "value depreciation".

Re:"Quantitative easing" my ass (0)

Anonymous Coward | about a year ago | (#44875925)

But I thought we have a free market system in a free country.

Re:"Quantitative easing" my ass (0)

MickyTheIdiot (1032226) | about a year ago | (#44875999)

you thought wrong, sunshine.

Re:"Quantitative easing" my ass (3, Funny)

meta-monkey (321000) | about a year ago | (#44876067)

To so much as imply otherwise means you must be a communist.

Re:"Quantitative easing" my ass (0)

Anonymous Coward | about a year ago | (#44876187)

The economy is man-made, and will always be subject to suppressing those seen as 'at the bottom', only so long as 'those at the bottom' agree that they're at the bottom.

Nature's hand will steady itself, regardless what man does. If you live in tune with Nature, then you will not see yourself as 'at the bottom'.

Because of FED (2)

HansKloss (665474) | about a year ago | (#44875829)

No surprise here. What FED was doing for the last couple decades?
Printing the money and printing and printing and printing and printing and printing and printing and printing and printing and printing and printing and printing

All these cries about savings and cuts are pathetic.
There is enormous amount of money in circulation, so much that economic bubbles just put little dent in it.

Re:Because of FED (4, Interesting)

digsbo (1292334) | about a year ago | (#44875865)

Exactly. As Rothbard stated, the purpose of the Fed is twofold: to enrich the large banking cartel, and to facilitate government deficits. In essence enriching the bankers is the payoff granted to the banking sector for financing government programs which purchase votes across the electoral spectrum.

Re:Because of FED (1)

Anonymous Coward | about a year ago | (#44876065)

You do realize the Federal Reserve Bank doesn't print the money? The Treasury does. Possible a minor quibble, but this is /. and pedantry is expected and encouraged.

Re:Because of FED (0)

Anonymous Coward | about a year ago | (#44876239)

Yes. We do. It is a handy shorthand expression for what the Fed does. Most of what the Fed generates by "printing" isn't even printed by the Bureau of Engraving and Printing, it's electronic.

Re:Because of FED (4, Insightful)

dkleinsc (563838) | about a year ago | (#44876101)

The Fed can and has printed a ton of money. There's no question about that.

But because the banks aren't lending that money out to consumers, the overall money supply hasn't gone up, and inflation rates have been historically low, not high. If you believe, like almost all economists, that inflation and employment are inversely related, then you want to be doing exactly what the Fed is doing, because that will create jobs that people desperately need, and will have no negative effects on savings (because inflation has been almost 0% for years). This is the Fed doing exactly what they should do in a deep recession.

And if you want to see what not to do in a financial crisis, look at the central bank that steadfastly refused to print money like crazy during the recession: the European Central Bank. The result is Spain with a 26.9% unemployment rate, compared to the 7.4% just reported in the US.

Re:Because of FED (2, Insightful)

Anonymous Coward | about a year ago | (#44876163)

Every single dollar in circulation was borrowed at interest. Governments don't issue their own money. It's all borrowed from. . . who? We don't really know, but we suspect.

So it doesn't matter how much you print, you're still in automatically in debt. There's *never* enough money in circulation to pay back both the principal and the interest debt.

And interest ain't static. It increases debt with time, so you gotta borrow more (and print faster) as the whole charade steam rolls to the next crash and wave of mass foreclosures.

It's a system designed to move real property and physical wealth into the hands of those lending the money to governments and people. The economy is a con.

It's really that simple once you cut through all the bullshit terminology and confusion.

One of the main reasons the West took out Iraq and Libya, and are hot on the tail of Syria and Iran is that those companies weren't (and the latter two aren't) playing ball with the secret banking cartels. They actually issue their own state controlled money rather than letting the middle men rape the economy. And charging interest is considered a sin.

Re:Because of FED (2)

DudeTheMath (522264) | about a year ago | (#44876545)

Keep in mind the real interest rate. Currently, the U.S. 10-year T-bill yields 2.8%, while inflation is 1.5%; that means the current real interest rate is a paltry 1.3%. Agreed, feeding money out to the banks via the Fed just feeds the banks. If, instead, the government actually used that same money to pay people to do stuff, a lot of stuff could get done, people could be put to useful work (repairing infrastructure, teaching kids, researching non-petroleum energy), increasing GDP, increasing tax receipts, and making it even easier to pay back those T-bills in the future.

However, that means the government (mainly Congress) needs to take its thumb out of its collective ass, learn some math, and commit to spending some money until we've got something more like full employment, with the economy running at or near potential. Right now, even with all the money the Fed pushes, very little private investment is happening (except in that casino we call the stock exchange and the shadow banking system); with returns this low, there's no crowding out. Resources are underutilized by private corporations (although, via the Tea Party in the House, the Chamber of Commerce screams, "Hey, I was gonna use that!" about any attempt to spend government money).

I'm only afraid that we've lost the best opportunity: It wasn't more than a year ago that the real interest rate was negative, expected to cost less to pay back than the money was worth at the moment (my wife bought a new car at an effective negative interest rate in May 2012), not even taking into account the increase in GDP and tax receipts.

The economy is faith based (3)

fustakrakich (1673220) | about a year ago | (#44875839)

All contributions should be tax deductible.

Re:The economy is faith based (1)

MickyTheIdiot (1032226) | about a year ago | (#44876367)

I think saying fiat based currency is faith-based economy in literally true. It relies on everyone agreeing that its worth something.

Good (1)

BitterOak (537666) | about a year ago | (#44875863)

See subject line.

Shadow banking system (3, Funny)

Iamthecheese (1264298) | about a year ago | (#44875885)

"Shadow", that sounds really scary. I don't like scary things like shadows and terrorists.

Let's give the government a lot of power to regulate cash flow so they can protect us.

Re:Shadow banking system (5, Insightful)

amiga3D (567632) | about a year ago | (#44875933)

Nothing scarier than having your entire life savings become worthless.

Re:Shadow banking system (3, Informative)

houghi (78078) | about a year ago | (#44876209)

Nothing scarier? How about a twilight marathon?

Re:Shadow banking system (3, Insightful)

HeckRuler (1369601) | about a year ago | (#44876227)

Said by someone with life savings.

Re:Shadow banking system (1)

Intrepid imaginaut (1970940) | about a year ago | (#44875973)

The government enables these kinds of transactions. What, you thought your elected representatives were in it for the sake of their voters and their countries? This is it folks, the real picture. It's all about the money.

Re:Shadow banking system (1)

gmuslera (3436) | about a year ago | (#44876013)

The government wont dare to touch their bosses. Any hint of this reaching the NSA will be promptly erased, even from the backups.

Re:Shadow banking system (1)

Iamthecheese (1264298) | about a year ago | (#44876185)

You didn't catch my point. Whatever the real causes of the shadow economy any government action will be directed at gaining further power and better controlling the plebeians.

You can bet any scare words in any news article are aimed toward that goal.

Re:Shadow banking system (0)

Anonymous Coward | about a year ago | (#44876491)

Let's give the government a lot of power to regulate cash flow so they can protect us.

Yes, let's. That is the purpose of government. To protect the people. Not just from foreign oppressors, but from domestic ones as well. But I will let you in on a little secret. The people with the big bucks do not consider themselves citizens of any nation, even those holding the same passport as you. They consider themselves transnational. The passport is a convenience. They have real estate holdings and political interests throughout the world. They *are* foreign oppressors. They don't give a shit about American citizens or German citizens or Chinese citizens because they are above it all.

In all truth, we all should be above nationalism. Nationalism is a weakness that the rich use against the masses. The thing the rich fear the most is a strong global government, because, for now, that is one government that would have absolute jurisdiction over their crimes and misdemeanors.

When in doubt, create a conspiracy theory (1)

Anonymous Coward | about a year ago | (#44875897)

The largest banks don't fit their oversimplified power law predictions, so the most reasonable explanation is that the evil geniuses have created a shadow market greater than the GDP of the entire planet!!

I bet they're the same villains who skewed the results of my lab assignments, too.

Re:When in doubt, create a conspiracy theory (1)

MickyTheIdiot (1032226) | about a year ago | (#44876439)

Bullshit. If *this* is a conspiracy theory then all economies are conspiracy theories.

This is individuals doing tons of individual transactions that they believe are in their best interests. There was no grand meeting where all these people got together and said "LET'S HAVE AN UNDERGROUND BANKING SYSTEM FOR THE LOLZ!"

What, me worry? (1)

Anonymous Coward | about a year ago | (#44875903)

As long as we get our .01% annual fee on that $100T, you have nothing to worry about.

Sincerely,

Your shadow banking overlords.

size (5, Insightful)

phantomfive (622387) | about a year ago | (#44875957)

and more even than the GDP of the entire planet.

The size of the shadow banking system may be worrisome (I guess), but banks hold assets, whereas GDP measures income. It would be extremely surprising if the GDP of the world were more than its income.

Incidentally, if you are upset about the 'shadow banking system' or the name 'shadow' scares you, money market funds are part of the shadow banking system. So are ETFs. So it is very possible that you are part of the SBS, since normal people invest in these kinds of things.

In general the SBS only matters because tax payers are committed to bailing banks out if they lose too much money there. If we followed Paul Volcker's advise and made a rule that, "any bank that is too large to fail is too large to exist. Any bank that receives money from the federal government will be broken up in pieces and sold," then it would solve a large portion of these problems. Make a rule that you can clawback salaries and bonuses from execs who made very very bad decisions, and that will solve another large portion of the problem.

As it is now, all the incentives are aligned to ensure another financial crisis, whether we have a shadow market or not. Focus on fixing the incentives, focus on smaller details. But we won't focus on changing the incentives as long as the administration continues to keep stooges from the financial industry in his cabinet.

Re:size (0)

Anonymous Coward | about a year ago | (#44876485)

..., but banks hold assets, ..

You mean like mortgages, which are backed only by insurance, excepted when claused in a natural disaster zone?

This whole system is a glass house of cards, and gamed against anyone who isn't a multi-millionaire. If you think you're different, the exception to it, you've never been burnt by it or tried to fight it.

What is an "econophysicist" (1)

guanxi (216397) | about a year ago | (#44876011)

... and do they have any expertise in economics? Or is it kind of like an econobiologist or econocabdriver -- someone interested in economics but doesn't know any more than I do about it.

Re:What is an "econophysicist" (0)

Anonymous Coward | about a year ago | (#44876269)

a physicist from a buy-in-bulk diploma site on the interweb?

Re:What is an "econophysicist" (1)

damn_registrars (1103043) | about a year ago | (#44876513)

I read it as someone who took Econ101 as a freshman, and then decided instead to study actual science that does actual things for actual people. Unfortunately when they transfered from fantasy college to science they were labeled as coming from econoland and hence their degree was branded "econophysics".

From a post apocalyptic future... (1)

Sponge Bath (413667) | about a year ago | (#44876017)

Lord Humongous: Transact, my vermin, transact!

New law needed, report it or lose it (0)

Anonymous Coward | about a year ago | (#44876029)

Any financial transaction in or out of a country that is not reported is subject to a 110% tax.

The key phrase here is: (4, Interesting)

the eric conspiracy (20178) | about a year ago | (#44876071)

And they hypothesize

In other words they are making this shit up for some unknown reason.

In his Principia, 2nd ed (published 300 years ago in 1713) Isaac Newton made some pithy comments about this sort of baloney.

"I have not as yet been able to discover the reason for these properties of gravity from phenomena, and I do not feign hypotheses. For whatever is not deduced from the phenomena must be called a hypothesis; and hypotheses, whether metaphysical or physical, or based on occult qualities, or mechanical, have no place in experimental philosophy. In this philosophy particular propositions are inferred from the phenomena, and afterwards rendered general by induction."

So really there is nothing to see here. Just move along now.

Re:The key phrase here is: (0)

Anonymous Coward | about a year ago | (#44876247)

You wrote all that without reading the report, more fool on you.

I am not amused (4, Funny)

meta-monkey (321000) | about a year ago | (#44876111)

At what point can we end the delusion that fiat currencies are worth anything at all?

Let's just go back to bartering. How many chickens do I need to give my Cox Cable for my internet access?

No, the little people don't have all the money (3, Insightful)

Animats (122034) | about a year ago | (#44876213)

That article is weird. But then, so is the site. In the middle of the article, there are ads for other articles:

New Healing Mechanism Closes Wounds By Up to 50 Percent in 30 Seconds -- And Leaves No Scar

Universe May Contain "Tardis-like: Regions of Spacetime, say Cosmologists

Reliable source problem here.

Anyway, their claim is that, based on Zipf's law, there must be some "long tail" of unknown small financial institutions which have vast but uncounted assets. No way. There's halawa, Indian gold merchants, and Bitcoin, but together they don't add up to one of the big banks.

"It is in the nature of markets to move money from the many to the few."

Silly, stupid me (2)

argStyopa (232550) | about a year ago | (#44876221)

The page is down, so hopefully someone can explain: how can the GDP of a system which is itself only a fraction of the planet, exceed the value of the planet?

If, as I suspect, this is calculated by totaling transactions alone - ie if I sell you an apple for $1, and then buy it back for $1, we've just added $2 to the total GDP of the system...well then my next question is why we even pay attention to such a worthless number in the first place?

Pfft. EconoPhysicists (1)

Virtucon (127420) | about a year ago | (#44876223)

These guys are rank amateurs. I received my Doctorate in EconomicPrognostication from the Ms. Cleo University and I predict that the impending implosion of fiat currencies will be cancelled out by an equal distribution of Fiat 500s. In the meantime, please pay $50 for my current research entitled "Tomorrow we'll all be broke, so buy more guns and ammo now!"

Shadow Banker (0)

Anonymous Coward | about a year ago | (#44876353)

If I remember correctly, the 'Shadow Banker' was someone in Mass Effect.

More studies/sites/resources like this please. (2)

jfz (917930) | about a year ago | (#44876387)

In addition to this, I also want: 1) A continuous mapping and quantification of the Military Industrial Complex, complete with relations to people, and businesses up and down the chain. 2) Continuously updated Corporate to Lobbyist to Politician studies, with full exposure. I want to make smarter decisions about the people and companies that I choose to deal with and give money to on a day to day basis. And I can't do that without such clear analysis. These people are only in power because _we_ allow them to be.
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