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The U.S. is Headed for Currency Collapse — Peter Schiff

from Greg Hunter:

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1 comment to The U.S. is Headed for Currency Collapse — Peter Schiff

  • rich

    Even Bernie Sanders May Underestimate Some Banks’ Size

    But banks are even bigger than Bernie Sanders may realize.

    When talking about “too big to fail,” bank lobbyists and journalists are largely silent about banks’ enormous amounts of off-balance sheet assets. The U.S. accounting standards, defined by the Generally Accepted Accounting Principles, let banks exclude a significant number of items such as certain derivatives from their books. Institutions can omit them where credit, market, operational, and liquidity risks are difficult to identify. The resulting opacity forces market participants to become forensic accountants, needing to use magnifying glasses to pour through hundreds of footnotes in the hopes of piecing together the true size of a bank and its risks.

    Under U.S. GAAP, derivatives are measured on a “net” basis, which arguably undercounts the total. But international accounting standards are more stringent and more inclusive. For example, a 2013 analysis by the Milken Institute’s James R. Barth and Apanard Angkinand Prabha found that when “derivatives are calculated under” International Financial Reporting Standards “JPMorgan’s assets double to about $4 trillion.” This moves JPMorgan from the seventh largest bank to the largest globally.

    Unfortunately, new rules from the Dodd-Frank Act still allow the use of some off-balance sheet accounting. U.S. accounting rules permit corporations and banks to exclude their full derivatives’ exposures from their financial statements. They only report “fair value” changes in those derivatives over time. This is akin to a borrower disclosing only the changes in his or her debt over time rather than actual debt levels.

    For anyone who is worried about Sen. Bernie Sanders being a socialist, it’s too late: socialism is already thriving on Wall Street. Banks cannot claim that they are true free market advocates when they benefit enormously from opacity, and when they accepted bailouts from taxpayers who never benefited from the industry’s off-balance sheet transactions.

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