Round Up the Usual Suspects: Wall Street is Making Money Hand Over Fist From Inflation
And it's a crime against humanity
In one of the greatest movies of all time, Casablanca, Claude Rains, as the character Captain Renault, has one of the most famous lines in cinematic history.
Right after Humphrey Bogart’s character Rick Blaine kills Major Strasser, Captain Renault refuses to implicate Blaine, and instead tells his underlings to “round up the usual suspects.”
In this case, the usual suspects that Captain Renault refers to are “the usual” suspects because they are habitual criminals who are responsible for the average crimes that take place in Casablanca.
In our modern times, the usual suspects are not the habitual criminals responsible for crimes in Casablanca. Instead, they are the habitual criminals responsible for crimes against humanity.
I’m talking about the Wall Street banks. These are the biggest banks in the world, and include JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, HSBC, Wells Fargo, Barclays, Deutsche Bank, UBS, Credit Suisse, and a number of others.
In an earlier essay I wrote, The Incestuous Nature of Wall Street, I talked about the world of Wall Street banks, and how their cloistered and rarefied world is a universe far apart from the one inhabited by common folk like you and me.
While the bankers and their compatriots—the hedge fund and private equity tycoons—count their billions and trillions, the rest of us hope to have enough money in the bank to pay our monthly bills, with a little left over.
The Wall Street banks are international conglomerates, situated in many countries around the globe. They have an infinite supply of money, thanks to both the Federal Reserve’s doling out money to them by way of the pressing of a few keys on their computers, thus creating money, and also the banks ability to create money on their own.
Through the magic of fractional reserve, Wall Street banks can create money at a magnitude of ten times the amount they have in their reserves. So if they have, through deposits and the reserves bestowed on them by the Federal Reserve, say $2.87 trillion—which is the amount of assets the largest bank in the U.S., JPMorgan Chase has—they can create another $28.70 trillion.
Not a bad day’s work, y’know?
And they can pretty much do with it as they please.
For instance, a few years back, Adam Neumann, the former charismatic and grifter CEO of WeWork, walked into JPMorgan Chase to set up a new account, after Neumann had lined up a $4 billion line of credit from the Japanese bank Softbank.
The $4 billion line of credit that Neumann received was for WeWork, but Neumann wanted his own line of credit so he could have his own spending money. When he introduced himself to one of the bankers at JPMorgan Chase and told the banker of his line of credit from Softbank, the banker immediately arranged a meeting for Neumann with Jamie Dimon, the CEO of JPMorgan Chase.
In their meeting, Neumann, who had never met Dimon before, asked Dimon for a $50 million line of credit.
Now granted, WeWork, Neumann’s company, was built on a pile of bullshit. Neumann inflated how much money the company was taking in and deflated their expenses. The reality was that WeWork was deep in the red.
But Jamie Dimon could care less about reality. He looked Neumann straight in the eye and told him he was turning down his request for a $50 million line of credit and instead was granting him a $500 million line of credit.
That’s what sitting on a pile of cash that extends from Earth to the far reaches of the galaxy can do for you, if you happen to be Jamie Dimon—you can play emperor and dole out endless amounts of it.
History shows that Dimon’s investment in WeWork and Adam Neumann was a losing proposition, as once news became public about the reality of WeWork’s financial status, WeWork tanked and JPMorgan Chase’s investment went sour.
Neumann was pushed out of the company, but happily walked away with a billion dollar payout, so his con proved fruitful for him.
That’s how it goes when you realize it’s all funny money, and you figure out how to manipulate the system in your favor.
As for Dimon, after losing that investment, he shrugged his shoulders, said that’s life, and went on to the next investment.
That’s how it goes when you have $28.70 trillion at your disposal.
And it’s not just JPMorgan Chase that has enough money to function as their own empire—they just happen to have the most.
The second largest U.S. bank, Bank of America, has $2.16 trillion in assets, which allows them to conjure up $21.60 trillion dollars.
If you have trouble wrapping your head around these surreal amounts, let’s take the pauper of the bunch, the tenth largest U.S. bank, Bank of New York. This lowly bank only has $349.43 billion in assets, which means they can only conjure up $3.49 trillion in assets.
That must suck to have so little money.
If you feel sorry for the Bank of New York, when you get a chance, stop by a branch of the bank and put a dollar in their donation box, to help them play with the big boys.
I’m sure they’ll be forever in your debt.
But besides giving money to shady characters like Adam Neumann, how do these banks make money on their money?
They can do it the old-fashioned way—lend money out.
But that’s so old school. And why would they want to lend it out to people who may not repay it? You know who I’m talking about: the peons of the world who come to them for mortgage loans or car loans or student loans, or have credit cards with the bank.
There’s a better way for the banks to make money, and it’s the way that keeps the money out of the grubby hands of common people.
They trade in abstract derivatives—that’s where the big money is.
And that’s where inflation is helping them make even more money. Globs of money, to be exact.
The derivatives they trade in are mostly containers of money, and they trade at a dollar volume of $4 to $5 trillion a day in indexes on central trading platforms all over the world. They are based on interest rates and exchange rates of currency around the world.
When interest rates are higher, as they are all around the world right now because of inflation, they take their money, which they’ve either been given at very low interest from the Federal Reserve, or created themselves at no cost through fractional reserve, and they buy foreign currencies on the exchange markets.
They may hold the money—whether dollars, euros, Swiss francs, pounds, pesos, yen, renminbi, ruble, rupee, shekel, dinar, riyal, or any other currency—for a very short time, be it minutes, hours, days, or weeks, and make just a very small profit on the currency exchange; but when you’re talking about trading trillions of dollars a day, those very small profits add up.
The next thing you know, we’re talking big profits. Like mucho big.
These people are shrewd, and know what they’re doing. They employ quants—quantitative analysts who work for the banks, people with Ph.Ds in math and physics—who design algorithms that rig the system by figuring out where to move the money and for how long.
This game they play of moving money and taking advantage of inflation and the high interest rates it has caused allows the banks to make even more humongous profits than what they already amass.
And not one drop of that trickles down to the rest of us.
The bankers who run the show at these banks live in a rarefied stratosphere, a parallel universe to the one you and I live in.
It’s a world of abundance, where anything they want is at their beck and call.
If they want to buy a rare car, such as a 1962 Ferrari 250 GTO, worth $52 million, or a 1957 Ferrari 250 Testa Rossa, worth $39.8 million, or a 1956 Aston Martin DBR1, worth $22.5 million—or if they want to buy them all—they can just write a check, without batting an eyelash.
Or if they want to buy da Vinci’s painting Salvator Mundi, worth $497 million, or Cezanne’s painting, The Card Players, worth $300 million, or Warhol’s painting, Shot Sage Blue Marilyn, worth $195 million—or if they want to buy them all—they can just write a check, without batting an eyelash.
And the same goes for yachts, mansions, real estate, stocks, or anything else their hearts desire.
Occasionally the banks screw up with their reckless trading and take the world down with them. That’s what happened in 1929 when the stock market crashed, causing the Great Depression, and what happened in 2008, when the bank’s gambling was so overboard that the entire world economy teetered.
This systemic collapse happens because these banks are too big to fail. If one fails, it can lead to a domino effect that takes down other banks, and with it, the entire world economy.
It’s happening again right now, with Credit Suisse threatening to fail, thanks to its gambling in the derivatives market and widespread losses it has experienced in that market.
The reason the banks can gamble and make trillions, or in the case of the 2008 bank crash and what’s going on right now with Credit Suisse, lose trillions, is that there is very little regulation of these banks.
They can do what they want, and at most, get off with a slap on the wrist. Or even better, get off with a mega-billion or mega-trillion dollar bailout.
You may say, ok, these banks and bankers suck, but it has no bearing on my life, right?
Well, you’re wrong on that account. As I said, they are committing crimes against humanity. And these crimes are not just because they continually invest in and prop up the fossil fuel companies, which is the main reason we have the problem of climate change, along with the bigger problem of extreme weather that is taking place all over the world now.
The even bigger crime against humanity that these usual suspects are committing is predicated on the fact that they live in a stratosphere of their own making, a world inhabited by the .01%, which is the world of those who make big money on money.
This stratification has caused obscene levels of wealth inequality, a consequence of which is that the great majority of people are struggling financially—80% of people currently live paycheck to paycheck. Living so precariously is not a healthy way to live.
Their crime against humanity is this: With the obscene levels of wealth inequality, we are witnessing the dissipation of the middle class, as more people struggle to make ends meet.
The ramification of this, as we’re seeing— especially in the U.S.—is that the fabric of the social contract, and with it, a vibrant democracy, is dissolving, leading to the logical endpoint of democracy collapsing into an authoritarian state.
This is what happens historically when a democracy collapses: an autocratic leader comes into power, usually by being voted in, and replaces the democratically elected leadership.
When the great majority of people are struggling and suffering, they are easy prey for demagogues who promise to make their country great again.
This is why fascism is defined as a dictatorship of the corporations, because the autocratic leaders do the bidding of the moneyed elite—and the moneyed elite, by sponsoring the autocratic leaders, have as their sole aim the desire to continue amassing hideous amounts of wealth.
That’s why it’s time, as Captain Renault said in Casablanca, to round up the usual suspects.
And the usual suspects are the Wall Street banks, who under the guise of inflation, are not only robbing us blind, but also, in their greedful and naked lust for more and more money and power, are committing crimes against humanity.