October 21, 2013 By Joseph P. Farrell

Here's something to ponder:

The True Size of the Shadow Banking System

Now, I know that I've blogged about this before, but consider something from this article that is very telling:

"The value of the shadow banking system is simply the difference between the value of the largest financial firms and their projected size according to the power law. 

"By this measure, the shadow banking system is significantly bigger than previously thought....


"Of course, there is an 800lb gorilla in the room. That’s how these financial companies come to be so huge in the first place. The global economy is dominated by financial firms. On the Forbes Global 2000 list of the world’s largest companies, the first non-financial firm is General Electric, which ranks 44th." (Bold emphasis in the original, italicized emphasis added).

There are, I suggest, two ways of viewing this information. The first would be the "conventional way," and the second, while not ignoring the implications of the first, would be to view in the "high octane speculation" way.

Conventionally, the indicator is a measure of what the Anglosphere financial oiligarchs have called "sustainability," a buzz world for their world were real growth, manufacture, and progress is strictly under their control, and largely illusory. It's the buzz word for "progress on the balance sheets", but very little in the way of the productive increase of physical wealth, of things that are created. This Malthusian closed-system zero-sum game has been their goal since they first enunciated the idea of "carrying capacit,y" and financial transaction as a "some win, some lose" sort of transaction, in Venice. (See my Financial Vipers of Venice, and note carefully how the zero sum game is tied either to "metalism" or debt-based fiat money).

That the world's 43 largest financial institutions are nothing more than that, that they are involved in the production of precisely nothing tangible, other than, perhaps, derivatives and credit default swaps, and that the 44th company down is one associated with traditional manufacturing, says it all.  And it's a dangerously unbalanced pyramid.

But now comes the high octane part. With this upside down structure, one wonders why, then, all that vast amount of paper and electronic blips are not registering world wide as a kind of Zimbabwe-like hyperinflation. Some argue, "be patient, it will show up." But they've been saying that for years now. Such a huge system does, however, point to the possibility that perhaps at least some of that vast financial leverage is being used for genuine manufacture of things, only we just don't see it, both because of its advanced technological nature, and because the cost of producing it, if disclosed, might in itself cause such a backlash that the system might conceivably be challenged along "populist" lines, and come tumbling down.

Howsoever one chooses to analyze the phenomenon, one thing now is increasingly clear: that system exists; mathematicians and econophysics have found it, modeled it, and disclosed the fact.  Now, if they'd just catch up with the rest of us, and start connecting it to gold-backed "bearer bonds," Operation Golden Lily, and certain decisions taken by President Truman in the time of the establishment of the national security state.

See you on the flip side.