Economics

Economics
Max and Stacy give you all the financial news you need as the Global Insurrection Against Banker Occupation gathers pace. Occupy Wall Street, Crash JP Morgan, Buy Silver and DEFINITELY visit MaxKeiser.com!
Updated: 9 hours 43 min ago

Expropriation and Impoverishment: “Capitalist” Greece and “Socialist” Venezuela

7-Feb-2017

Yesterday I noted that not all assets will make it through the inevitable financial re-set. ( Which Assets Are Most Likely to Survive the Inevitable “System Re-Set”?)

Those that are easy to expropriate will be expropriated, and those assets vulnerable to soaring taxes, inflation and currency devaluation will also be hollowed out.

There are two real-time examples of these dynamics we can profitably study: “capitalist” Greece and “socialist” Venezuela. Both nations have impoverished their citizenry to preserve an oligarchy and its cronies.

I hope it won’t be too great a shock that crony-capitalism and crony-socialism function in much the same fashion and generate the same result: the wealth of the nation is funneled (or expropriated) into the ruling Elites, impoverishing the non-elites.

The mechanisms differ in appearance but they produce the same results: expropriation and impoverishment. In Greece, two Ruling Elites stripmined the nation: the big European banks and the domestic oligarchs and their functionaries in the state.

Having flooded Greece with “cheap” credit denominated in euros, the EU’s big banks demanded “austerity” so the Greek government could continue servicing its massive debt. The Greek oligarchs dodged “austerity” in the usual way: by buying political influence.

Very little of the so-called “bail-outs” actually reached the Greek citizenry, and much of what did enter the Greek economy flowed into the hands of the oligarchy.

This is what I call the Neocolonial-Financialization Model (May 24, 2012), which substitutes the economic power of financialization (debt, leverage and speculation) for the raw power of political conquest and control.

The main strategy of financialization is: extend cheap credit to nations with limited access to capital. Nations with limited access to capital will swallow the bait of cheap credit whole, and willingly agree to penalties, high interest rates, etc.

Then, when the credit expansion reaches levels that cannot be supported, the lenders demand collateral and/or favorable trade and financial concessions.

The global financial powers developed the Neocolonial Model, which turns these same techniques on one’s home region. Thus Greece and other capital-poor European nations were recognized as the periphery that could be exploited by the core, and the euro was the ideal tool to financialize the economies of nations which could never have generated credit/housing bubbles without the wide-open spigots of cheap credit flooding their economies.

In Neocolonialism, the forces of financialization are used to indenture the populace to the financial core: the peripheral “colonials” borrow money to buy the finished goods manufactured in the core economies, enriching the regional Elites with A) the profits made selling goods to the debtors B) interest on credit extended to the peripheral colonies to buy the core economies’ goods and “live large”, and C) the transactional skim of financializing peripheral assets such as real estate and State debt.

In essence, the core banks of the EU colonized the peripheral nations via the financializing euro, which enabled a massive expansion of debt and consumption in the periphery. The banks and exporters of the core (Germany) extracted enormous profits from this expansion of debt and consumption.

Now that the financialization scheme of the euro has run its course, the periphery’s neocolonial standing is starkly revealed: the assets and income of the periphery are flowing to the core as interest on the private and sovereign debts that are owed to the core’s central bank and its money-center banks.

Neocolonialism benefits both the core’s financial Aristocracy and the domestic oligarchies/ kleptocracies. This is ably demonstrated in the recent essay Misrule of the Few: How the Oligarchs Ruined Greece.

I’ve covered these dynamics for many years:

Greece Is a Kleptocracy (June 28, 2011)

Is Greece a Template for U.S. State & Local Government Debt Crises? (July 11, 2015)

The only way the banks and domestic oligarchy can retain their grip is by stripping non-Elites of their income and wealth. As I discussed in When Assets (Such as Real Estate) Become Liabilities (December 27, 2016), raising property taxes and transaction fees is one way of accomplishing this: as taxes rise to fund “austerity” payments to the EU’s banking Elite, the costs of owning property soar.

Meanwhile, incomes stagnate as taxes increase and the economy is crushed by the euro’s asymmetry (good for Germany, bad for Greece) and the debt-serfdom of paying interest on the staggering debt.

Households have no choice but to surrender property they can no longer afford– even when they own it free and clear. That is also what happened in the late stages of the Roman Empire: taxes soared to the point that farmers could no longer feed their families and pay taxes, so they abandoned their farms and became serfs on the protected Elites’ vast estates.

The “crony-socialist” model is to centrally manage the economy to benefit the oligarchy and its cronies–a fatal mismanagement of the nation’s productive resources that exploits and stripmines the non-Elites. Venezuela is imploding not because of hyper-inflation, but as a result of policies that led to hyper-inflation: policies that generate perverse incentives while protecting the Elites, disincentives to produce goods and services and incentives to depend on government subsidies.

Venezuela has been effectively de-industrialized by its crony-socialist oligarchy.Capital that should have been invested in the electrical grid and the oil industry has been diverted to the pockets of cronies and state apparatchiks. There’s no food in the markets because government-set prices don’t make it worthwhile to grow anything. Farmers take their produce to neighboring countries if they can, where they can actually get paid for producing food.

Outlaw markets and the free flow of fact-based information, and the only possible result is The Disaster of De-industrialization (June 15, 2016), which generates a self-reinforcing feedback of high inflation and declining production.

This dynamic eventually hollows out the nation’s currency, as the currency is effectively an asset based on the collateral of the nation’s output. As output stagnates or implodes while the money being issued expands, the only possible result is a severe devaluation of the currency, a.k.a. hyper-inflation.

This is how you end up with a currency that is officially 10 to the U.S. dollar (USD) but on the black market is 3,200 to the USD. The Trajectory of Venezuelan Hyperinflation Looks Frighteningly Familiar.

Venezuela Live Economic Data

Meet the Venezuelan rebel whose crime is publishing exchange rates: ( dolartoday)

You see the two stripmining mechanisms at work here: either expropriate the non-Elites’ income and property with soaring taxes, or mismanage the economy so severely that the resulting de-industrialization destroys the value of the currency, impoverishing the citizens who have no choice but to value their labor and assets in the near-worthless currency.

Neocolonial “capitalist paradise” or crony “socialist paradise”: the net result is the same: expropriation and impoverishment.

Books of related interest:

Sweetness and Power: The Place of Sugar in Modern History

The Shock Doctrine: The Rise of Disaster Capitalism

Confessions of an Economic Hit Man

My books on these topics:

Why Our Status Quo Failed and Is Beyond Reform

An Unconventional Guide to Investing in Troubled Times

Get a Job, Build a Real Career and Defy a Bewildering Economy

Resistance, Revolution, Liberation: A Model for Positive Change

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

 

London Analyst Warns: TRUMP Could TRIGGER A Great Depression

7-Feb-2017

In This Exclusive Interview, London Analyst Alasdair Macleod Issues A Dire Warning:
If Trump Fails to Learn THIS, He Will Lead America Into A Repeat of the Great Depression…

Click Here For Full Coverage With London Analyst Alasdair Macleod:

5 Must See Charts and Gold Mean “Impending Market Volatility”

7-Feb-2017
  • Gold prices rising & up 6.6% YTD
  • Signal “impending market volatility”
  • World has never been more uncertain (see chart)
  • Fear in Wall Street versus Fear in Washington
  • Price of ‘plunge protection’ rising even as VIX remains low
  • Smart money diversifying into gold
  • Important to watch rising gold and rising bond yields 
  • Gold may prove the “tell”

Bloomberg have done an excellent article replete with five must see charts including gold charts that suggest that we are on the verge of significant market volatility and turmoil.

From Bloomberg:

“A former TV star as U.S. president doesn’t seem to have injected markets with much of a ‘‘fear factor.’’ But digging beneath the surface of an eight-year bull run exposes subtle signs that hint at an uneasy optimism.

The Dow Jones Industrial Average has sailed past 20,000 and the S&P 500 is nearing its life-time high set in January, indicating that investors have so far shrugged off the uncertainty brought by the new administration.

Read full story here…

Lost in the Political Wilderness

6-Feb-2017

First off, I want to thank everyone for bearing with me during my break. It’s rare that I step away from my incessant reading and writing for such a lengthy period. Emotionally and intellectually, I found it to be deeply invigorating as well as periodically frustrating. Frustrating, in the sense that I am unquestionably addicted to reading about current events, yet I came to understand that removing yourself from the 24/7 outrage news cycle gives you some much needed perspective. By removing myself from the conversation for a moment, I was able to more clearly recognize just how completely idiotic the conversation has become. Ultimately, whether or not I gained some genuine insight during my time away will be revealed by the quality of work I produce in the days, weeks and months ahead. So let’s get started.

Read the rest here.

Which Assets Are Most Likely to Survive the Inevitable “System Re-Set”?

6-Feb-2017

Longtime correspondent C.A. recently asked a question every American household should be asking: which assets are most likely to survive the “system re-set” that is now inevitable? It’s a question of great import because not all assets are equal in terms of survivability in crisis, when the rules change without advance notice.

If you doubt the inevitability of a system implosion/re-set, please read Is America In A Bubble (And Can It Ever Return To “Normal”)? This brief essay presents charts that reveal a sobering economic reality: America is now dependent on multiple asset bubbles never popping–something history suggests is not possible.

It isn’t just a financial re-set that’s inevitable–it’s a political and social re-set as well. For more on why this is so, please consult my short book Why Our Status Quo Failed and Is Beyond Reform.

The charts below describe the key dynamics driving a system re-set.

Earned income (wages) as a share of GDP has been falling for decades: this means labor is receiving a diminishing share of economic growth. Since costs and debt continue rising while incomes are declining or stagnating, this asymmetry eventually leads to insolvency.

The “fix” for insolvency has been higher debt and debt-based spending–in essence, borrowing from future income to fund more consumption today. But each unit of new debt is generating less economic activity/growth. This is called diminishing returns: eventually the costs of servicing the additional debt exceed the increasingly trivial gains.

What happens when the bubbles pop, despite massive central bank/state interventions? The entire socio-political/financial system goes through a “system re-set” in which all the fantasy-based valuations, political denials, false promises and fraudulent claims collapse in a heap.

In a crisis, the privileged Elites will change the rules in a desperate attempt to expropriate the income and wealth of the bottom 99.5% to preserve their own power.

The trick is to do so in ways that won’t spark an immediate political insurrection.

We can better understand their policy choices by asking: What’s easy to expropriate, what’s difficult to expropriate?

Those assets that are easy to expropriate will be expropriated first. Those that are difficult to expropriate are far less likely to be grabbed, due to the high costs of expropriation and the high risks of sparking a political insurrection.

History suggests the privileged Elites will pursue two basic strategies to expropriate the income and wealth of non-elites:

1. They will expropriate what is easy to expropriate: financial assets in centralized institutions the state controls: banks, brokerage accounts, insurance policies, etc.

2. They will use the time-honored “stealth expropriation” methods: inflation and taxes.

Any “money” held in a centrally controlled institution can be expropriated overnight. The rules will change without warning, so there will be no opportunity to escape the system.

Direct expropriation takes many forms. Your funds could be “bailed-in” (transferred to the bank). Large currency bills could be declared worthless. IRA and 401K accounts could be transferred into government bonds, to “protect the account owners from risky investments.” (Naturally, any expropriation will be presented as “for your own good.”)

Or a new currency could be issued that strips away 90% of the purchasing power of the old currency. It could be a New Dollar, an SDR global currency, or a state-issued cryptocurrency. The point is to strip away 90% of the wealth held in the old currency.

Indirect “stealth” expropriation has several forms: slow currency devaluation, also known as inflation, or higher taxes and junk fees (not called taxes, but you receive no additional value for the higher fees).

The end result of these policies is you may receive the $2,000 monthly pension you were promised, but after inflation, currency devaluation and taxes, your real purchasing power is $100 in today’s currency.

So what’s difficult to expropriate? I present some answers in my books An Unconventional Guide to Investing in Troubled Times and Get a Job, Build a Real Career and Defy a Bewildering Economy.

It’s impossible to expropriate one’s skills, experience and social capital. These are intangible forms of capital and so they cannot be confiscated like gold, currency, land, etc.

Land and homes are difficult to expropriate for two reasons: private property is the backbone of capitalism and democracy, and the state confiscating private property would very likely spark a political insurrection that would diminish or threaten the power and wealth of the privileged Elites.

Secondly, it’s very costly for the state to maintain the productive output of real property it has confiscated. Guards must be posted, sabotage repaired, and the immense difficulties of coercing a rebellious populace to continue working what they once owned for the benefit of the state and its privileged Elites must be solved and paid for.

The state can expropriate farms, orchards and workshops for back taxes (or some similar extra-legal methodology), but how do you force people to work these properties productively?

As a general rule, whatever the super-wealthy own will be protected from expropriation. Private real property is the foundation of the Elites’ wealth, and while the land of debt-serfs may well be confiscated for back taxes (the wealthy will buy exemptions from rising taxes), those who own land and buildings free and clear constitute a political force to be reckoned with.

As I discuss in my book Resistance, Revolution, Liberation: A Model for Positive Change, there’s one other asset the state and its ruling Elites cannot expropriate: community.

The state will also have difficulty confiscating assets that are outside its reach.This explains the popularity of owning assets in other nations, and the debate over cryptocurrencies: will states be able to confiscate all cryptocurrencies at will, or is that technically unfeasible?

The main takeaway is this: your skills, knowledge and social capital will emerge unscathed on the other side of the re-set wormhole. Land and real property you own free and clear (no debt) is likely to remain in your possession, as long as you can pay soaring taxes/junk fees during the crisis phase. Your financial assets held in centrally controlled institutions will not make it through unscathed; they are simply too easy for central authorities to expropriate.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

London Gold Bullion Banks To “Open Vaults” In Transparency Push?

6-Feb-2017

London Gold Bullion Banks To “Open Vaults” In Transparency Push

London’s gold bullion market, which is centuries old, is said to be seeking transparency with plans to reveal how much gold bullion is held in vaults in and around London city according to gold bullion banks. These include gold bullion bars held and controlled by the Bank of England, as reported by Henry Sanderson in the Financial Times.

The move is being led by the London Bullion Market Association and it is said that it will provide data for the first time on how much gold is traded in the London gold bullion market in the Square Mile.

According to the FT:

Some of the world’s biggest banks are trying to shift trading of the precious metal on to an exchange. By providing greater transparency and data, the LBMA, whose members include HSBC and JPMorgan, hopes to head off the challenge and persuade regulators that banks trading bullion should not have to face more onerous funding requirements.

In London most gold is traded “over-the-counter,” or directly between buyers and sellers, so there is little data on how much changes hands. Estimates from the LBMA suggest that about $26 billion of gold is traded daily in the City but there are no official figures.

The LBMA plans to release the monthly vault data on a three-month lag, according to people involved in the process. It will show gold bars held by the Bank of England, the gold clearing banks, and those operated by the security companies such as Brink’s, which are also members of the LBMA, according to a person involved in setting up the programme.

The LBMA declined to comment.

London’s vaults hold billions of dollars of gold, one of the largest stashes. Vaults owned by HSBC are used to back the largest gold exchange traded fund, the SPDR Gold Shares.

Read Full Story Here…

[KR1028] Keiser Report: Financial Sector Tapeworms

4-Feb-2017

We discuss the financial sector tapeworms robbing the fiscal nutrients of a smooth running financial system and global economy. In the second half, Max interviews Sunny Ray of UnoCoin.com about bitcoin in India and what exactly is happening with the government’s crazy efforts to demonetize.

A Murderous Complacency

4-Feb-2017

Running PeakProsperity.com requires me to read and process a lot of data on a daily basis. As it’s hard to digest it all in real-time, I keep a running list of charts, tables and articles that catch my attention, to return to when I have the time to give them my full attention.

Lately, that list has been getting quite long. And it’s largely full of indicators that concern me, signals that the long era of “extend and pretend” in today’s markets may finally be at its terminus.

Like crows circling overhead, everyday brings with it new worrisome statistics that portend an ill change ahead. Indeed, these signs are increasing so quickly now that it’s hard not to feel like Tippi Hedren in Hitchcock’s classic The Birds.

So what are the data that make me think these crows will soon be feasting on the carcass of the great bull market that has powered stock, bonds, real estate and most other asset classes to record highs since 2009?

Click here to read the full article

Bitcoin Adoption gets a boost as the digital currency finds it place in IRA

4-Feb-2017

 

Bitcoin has proved out to be a very good portfolio asset owing to its high returns and acceptable volatility. After thorough study, a Sherman Oaks, CA based firm have come up with a unique and viable retirement investment strategy. This involves using Bitcoin in Investment Retirement Accounts.Its growing adoption has boosted its application in various streams and not so surprisingly people have accepted Bitcoin as a part of their IRA. Bitcoin IRA crossed $4 Million mark last week in sales and launched “Bitcoin Bull Watch”, a weekly report on Bitcoin market insights. On this occasion, Chris Kline, COO of Bitcoin IRA and Director of Operations at Fortress Gold Group featured in an interview on CrushTheStreet

Read More

Market Chaos: The REAL Fireworks Begin When Trump Turns Attention to China!

3-Feb-2017

Craig Hemke Joins the Show For A Powerful Analysis of the Trump Administration & Global Currency Markets, Discussing:

  • Death By China: When Trump Turns Attention to China…The REAL Fireworks Begin!
  • Declaring China A Currency Manipulator Will Put An After – Burner On Precious Metals!
  • Will China Pre-empt Trump & Announce A Shocking Yuan Devaluation? 
  • Gold: The REAL THING Continues To Move East & DISAPPEAR 
  • Deja Vu All Over Again – Why 2017 Is Shaping Up to Be A Great Year For Gold & Silver

Click Here For Full Coverage:

 

 

The Central Banks Face Unwelcome Realities: Their Policies Boosted Wealth Inequality and Failed to Generate “Growth”

3-Feb-2017

Take a quick glance at these charts of the Federal Reserve balance sheet and bank credit in the U.S. Notice what happened to bank credit after the Fed “tapered” and stopped expanding its balance sheet?

Bank credit exploded higher:

Now look at corporate profits:

Once the Fed ended its $3.7 trillion “experiment” of vastly expanding its money-creation and bond-buying in early 2014, what happened to bank credit? Bank credit had expanded by a bit over $1 trillion in the early years of the Fed’s quantitative easing, but it really took off after QE3 ended, soaring roughly $2 trillion.

This was the policy goal all along: the Fed would do the heavy lifting to keep credit and the financial markets from imploding, and eventually private-sector credit would expand enough to fuel a self-sustaining recovery.

While measures of employment and production have lofted higher, productivity, profits and wages for the bottom 95% have all stagnated. Is it coincidental than corporate profits began weakening once the Fed’s QE3 ended? Perhaps.

How about the stagnation of household median income during the Fed’s expansion and the rise of private bank credit from 2014 to the present? Was that also a coincidence?

If the economy was expanding smartly as the Fed was goosing credit higher, it certainly wasn’t trickling down to households.

What’s happening beneath the happy-happy surface is that the returns on expanding credit are diminishing rapidly. The Fed’s QE “free money for financiers” never did “trickle down” to the bottom 95%, and the enormous expansion of bank credit is no longer driving corporate profits higher.

There are other factors at work, of course; a global slowdown in trade, for example, a rise in energy costs and a stronger US dollar. All of these impact credit, profits and the share of GDP flowing to labor in wages, salaries and benefits.

Whatever the causes, the reality is that the positive results of credit expansion have reached the top of the S-curve and are now declining. Expanding credit, via central bank monetary policy or private-sector bank credit, is no longer boosting profits or wages.

As noted yesterday in The Central Banks Pull Back: Now It’s Up to Fiscal Policy to “Save the World”, even the cheerleaders of central bank gimmickry now admit QE enriched the rich and impoverished everone else.

So what happens as other central banks taper their expansion? It’s unlikely to be a positive for private-sector economies stagnating despite rapid expansion of bank credit.

And what happens if central banks unleash new torrents of cash? If the returns on new credit have plummeted, rapid expansion by central banks may well hasten the slide down the S-curve– the opposite of what conventional economists expect.

Rather than be seen to be further enriching the rich, central banks will start closing the “free money for financiers” spigots. If the returns on central bank “free money for financiers” are diminishing rapidly while public anger at rising wealth inequality is heating up, why put the central bank’s credibility and political independence on the line for a policy that has visibly failed to benefit Main Street?

We discuss these trends and much more about the economy in My podcast with X22: The Central Bankers Are Going To Shutoff The Spigot And The Economy Will Rollover.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

Why Geopolitical Sabre-Rattling will be Good for the Gold Price

3-Feb-2017
  • Gold hits 12-week high
  • USD Gold price up 4.85% in last month
  • Sabre-rattling from Trump administration set-to benefit gold
  • Iran upset and Middle East tensions could drive oil and gold prices up.
  • Financial Times foresees “not only currency wars but a fully fledged trade confrontation that could be disastrous for the world economy.”
  • Royal Mint producing 50 % more gold bullion coins and bars compared to 2016
  • Utah moves to hold public funds in gold
  • WGC report demand for gold hit four-year high in 2016
  • Investment demand climbed by 70% last year fuelled by geopolitical uncertainties 

The Trump administration continues to sabre-rattle at global powers and threatens to disrupt the status-quo of international relations. Comments in just 24-hours by Donald Trump and his team have included attacking an Ivy League university, a nuclear power and two of the United States’ key trading partners.

We continue to look on as the unconventional tweets and announcement appear, but in the meantime watch the gold price hit 12-week highs and inflows of roughly 1.2 million ounces surge into gold ETFs, as uncertainty continues to drive investors towards safe havens.

FOMC stand-by to watch the Donald

Many market observers may have found a funny sort of comfort in seeing the statement of the FOMC meeting, this week. A funny thing to say, but given each day appears to bring a new surprise there is something reassuring that meetings and announcements from the likes of the Federal Reserve, continue as scheduled.

Unsurprisingly, and despite Janet Yellen’s warnings of a ‘nasty surprise on inflation if it was too slow with rate hikes’, the Federal Reserve held back from a further rate rise this week. The committee painted a fairly positive outlook of the economy, it was perceived to be dovish. The statement helped to ultimately push gold prices higher as the dollar fell in disappointment to no rate hike. For some this was an example of ‘The Fed that cried Wolf.’

The Fed is still expected to hike rates up at points throughout the year, but uncertainty about when and how much remains. The FOMC are waiting for further disclosure President Trump’s economic policy.

Gold was the only commodity that climbed higher (+0.9%) following the Fed announcement.

Iran on notice: be on notice to buy gold

Earlier this week Iran tested a ballistic missile and attacked a Saudi navy vessel. The Trump did not disappoint in letting the world that they were unhappy, through both Twitter and Mike Flynn.

Mike Flynn, Trump’s national security advisor stated, ““Recent Iranian actions involving a provocative ballistic missile launch and an attack against a Saudi naval vessel conducted by Iran-supported Houthi militants underscore what should have been clear to the international community all along about Iran’s destabilizing behaviour across the entire Middle East”

Flynn concluded, “As of today, we are officially putting Iran on notice.” This was followed by a Tweet confirming this position, by Trump.

Read full story here…

RBS caught using Richard Branson’s Virgin One as cover for alleged ‘industrial scale’ fraud

3-Feb-2017

The Royal Bank of Scotland (RBS) is using Richard Branson’s Virgin One brand as an alleged ‘cover’ to pursue legal cases attempting to bankrupt RBS/NatWest customers. But, in a bizarre twist, these customers have never even held an account with the business tycoon’s brand.

One case, passed to The Canary, involves allegations against RBS of forgery, mortgage fraud and falsification of customer documents. And the revelations blow open the debate about the potential scale of alleged customer abuses at the majority publicly-owned bank and may pave the way for further legal claims.

An immaculate conception?

Launched in 1997, the Virgin One Account was a joint venture between Branson’s Virgin Direct and RBS. But when RBS took a majority shareholding in 2001, it changed to the NatWest One Account. Virgin Direct merged with Virgin Money in 2002, and then bought out the failed Northern Rock bank in 2011/12.

It is here where the story of former police detective Andrew Keats comes in.

Keats originally held a Northern Rock mortgage when the bank was an entity in its own right. But in November 2004, he transferred his business account and personal mortgage to a NatWest One/RBS account. The dispute between Keats and RBS is about a void mortgage, which he believes the bank originally granted him in error.

Discovered after 8 year dispute v RBS -my 2004 remortgage was void! and now RBS trying to repossess after Years of misrepresentations to me!

— Andy Keats (@AndyKeats) January 27, 2017

In September 2015, Keats received correspondence from RBS regarding his dispute with the bank. But it was sent on Virgin One letterhead, which was by then more than a decade out of date. Even though he had never held an account with Virgin or any of its subsidiaries.

Now you’re lying…

The letters, to M&M Solicitors (acting for Keats) from RBS (see footnote bottom of page) using Virgin letterhead threatens Keats with repossession of his house if the mortgage balance wasn’t settled by 29 November 2015:

 

 

Virgin’s involvement baffled Keats. So, he took the issue up with Virgin, which told him RBS had sent the letter in error. And that it had received several other, similar queries from the media.

But RBS then sent a further letter using Virgin One headed paper to Keats in November 2016:

Is something funny?

Ian Fraser, an investigative journalist, questioned RBS Chief Executive Ross McEwan over the allegations during an LBC interview in November 2015 audio from which was passed to The Canary. McEwan initially laughs at Fraser’s allegations. But then the journalist explained in more detail:

the allegations basically are that RBS is on a kind of industrial scale falsifying the core files on… customers… and these falsifications of the files are allegedly enabling RBS to then win [in court] against these customers… How concerned are you Ross, about these very credible allegations of deliberate falsifications of customer files?

McEwan says:

You keep saying that they were allegations but that’s what they were, but no one has proved these things… you show me where it’s gone wrong and show me what difference it would of made to the actual case that was held and the outcome of that.

Keats is confident his upcoming court case will prove that the allegations against RBS are true. But McEwan, during the LBC interview, appeared to miss the point.

If RBS knowingly falsified customer documents and transcripts, and relied on those documents in court, that would be perjury; irrespective of any bearing it may or may not have had on the outcome of previous legal proceedings.

Whose money, again?

The public bought a 58% stake in RBS in 2008 to avoid its collapse. But because of the structure of the government’s share plan, the value of RBS the public owns has actually increased since 2010. “We” now own 72.9% of the bank.

Since the 2008 financial crash RBS has been the subject of numerous scandals. Most recently, the bank set aside £6.4bn in readiness for a fine from the US State Department. The fine relates to the sale of so-called ‘sub-prime’ mortgages before 2008. Analysts expect that the fine from the US government will push RBS into a loss for this financial year.

Virgin Money told The Canary:

This was brought to our attention back in October 2015 by more than one media outlet. We contacted RBS at the time and they confirmed to us that they had sent the letter in error.

So, why did RBS send Keats another Virgin-fronted letter in November 2016? Even if it was on different headed paper and had a different head office address?

The Canary contacted RBS for comment. But at the time of publication no response had been received.

The tip of the iceberg?

Keats told The Canary:

I’ve got hundreds of documents from NatWest One. And it’s not until 2015 when RBS was attempting to explain why it falsified documents in my customer records that it used Virgin One headed paper, to imply there’s a bug in Microsoft Word [to explain it]. And I can’t see any other reason why they would us Virgin One headed paper…. I think it’s just a diversion, really. They pretend it’s a mistake. It’s just unexplainable…. It doesn’t make sense to me how [Virgin] could allow their logo to be used in that way.

Keats’ says that the fraud uncovered at HBOS, which saw six people jailed on Thursday 2 February for a total of more than 45 years, is “just the tip of the iceberg”. And he says that RBS is implicated in the same way. Keats’ believes that the method of fraud, including falsification of documents and forgeries, allegedly committed by RBS appears to be the same modus operandi of systemic US mortgage fraud leading up to the 2008 financial crash.

Nothing but misery

The public’s ‘bailing out’ of numerous banks after the 2008 financial crash has caused nothing but misery for us. The Tories have used it as an excuse for their devastating austerity agenda. It has meant public debt has increased by over 50%. And it has also meant that “we” have probably lost money, as the latest sale of our shares in Lloyds prove as a case in point. But the fact that RBS is allegedly manipulating and mistreating its customers – the very same people who saved it from collapse – stinks. The government must set the public free of this institution. Because there’s nothing “Royal” about RBS.

This article is a joint investigation by Steve Topple and Joel Benjamin

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