The Next Revolution in our Credit-Driven Economy E-Book

Paul Schulte

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 420

Veröffentlichungsjahr: 2015

Beschreibung

Go inside the research to see the global consequences of unethical banking The Next Revolution in our Credit-Driven Economy: The Advent of Financial Technology integrates market theory and practice to help investors identify growth opportunities, and to help regulators create a sustainable economic environment. Author Paul Schulte, former economic analyst with the National Security Council, draws upon his own decade-spanning research to demonstrate how unethical banking practices provide the brute force that drives political and economic crises worldwide. By unbundling how credit markets work, this authoritative guide provides deep insight into crisis avoidance and detection, successful investment climates, and the groundwork that must be in place for policy makers to build a sound basis for economic growth. Clear, succinct case studies provide examples of policy and its effects on economic stability, giving you a stronger understanding of the network of forces that determine how loan/deposit ratios behave around the world. Countries that lend more than they save consistently get into trouble, with catastrophic consequences for the rich and middle class as well as the politicians. This book shows how credit excesses bring about price collapse in stocks, currencies, and real estate, and provides direction for change in the context of global economics. * Dive deep into the mechanisms underlying the credit markets * Learn how unregulated borrowing leads to socioeconomic crises * Examine real-world policy options through global case studies * Discover how credit rises are best detected and avoided An economic climate in which even the smallest hiccup can have long-lasting consequences should be the ideal impetus for a close scrutiny of global banking practices and economic policy. The Next Revolution in our Credit-Driven Economy takes you behind the scenes for a new perspective, and a more informed look at where the world needs to begin changing. The second half of the book will take a look at the revolution driving financial technology. Companies in Silicon Valley and giants like Alibaba are challenging the landscape for banking. This has profound implications for policy makers, banks and for a new class of entrepreneurs who are developing software which is taking away market share from bank and challenging decades-old financial empires. The book will explore the reasons why many global banks remain flat-footed. It will go into detail about the new companies and software that are moving in the Far East and with innovations in securities, bonds, foreign exchange, retail lending and SME lending. Lastly the book will look at the strategy behind Alibaba and how it will challenge many companies from a powerful base inside China.

Leseprobe

Table of Contents

Title Page

Copyright

Dedication

Acknowledgments

About the Author

About the Website

Introduction: A Few Numbers Can Crack the Code

Part One: How Bank Credit Drives Economics (Not the Other Way Around) and Why

Chapter 1: A Few Simple Concepts That Anyone Can Understand

The Error of Our Ways

The Mechanics of Economics

Economic Blinders

The Corporate Example

Painful Reality

How Political Chaos Is Created from Runaway Greed

Tangible Leverage Is the Other Vitally Important Factor

When

Debt

Becomes a Dirty and Dangerous Word

European Bank Woes

Following the Numbers

Chapter 2: Differences between Liquidity and Solvency Are Thin

Current Account versus LDR

Bad Credit Karma

The “Good” Banks

A Wellspring of Debt

Lessons in Asia

Chapter 3: Anatomy of a Credit Crisis and Examples in the Real World

Capital Cycles

The Winners after a Crisis

The Absurdity of Wholesale Lending: This Is a B-A-D Business

Part Two: I Am From the Government, and I Am Here to Help Your Broken Banking System

Chapter 4: Socialization of Debt after Mismanagement by Bankers (or, Why Keynesian Economics Doesn't Work)

Thailand

The United States: In Many Ways, a Carbon Copy of Thailand

Spain and Ireland: The Most Extreme Examples of Irresponsible Lending in Modern History

The United Kingdom

Indonesia

Conclusion

Chapter 5: Why Capitalist Bankers Create Soviet Banking Models When the Going Gets Rough

Basel I: The Japanese Financial M&A Boom and Bust

Basel II: The Rise of the AAA-Rated CDO Boom and Bust

Basel III: The Rise of the Government Debt Boom and Bust?

Chapter 6: Central Banks Are Carrying the Greatest Load and Will Dominate Outcomes

Why Have Central Banks Become So Involved in the Solution of the Global Financial Crisis?

Chapter 7: How Bankers and Policy Rescuers Affect Stocks, Foreign Exchange, and Property

LDRs and Determining Currency Values

The Best Indicator for Value for Financials

What about ROE as a Measure in Itself?

As with All Living Corporations, Return on Capital Is Everything

Part Three: Interlude

Chapter 8: Why Government and Institutions Get Suckered into Debt Binges

Why Are We Comfortable Crawling into Bubbles and Staying There Despite Dangers?

Human Folly: Believing in Something Is Better than Believing in Nothing, and Injustice Is Better than Disorder

11 Rules To Avoid Getting Pulled into a Bubble

Conclusion: Cassandras must replace delusions with a new vision

Part Four: The Revolution in Financial Architecture

Chapter 9: Why Is This Revolution Happening Now and Why So Fast?

Do Banks Have the DNA To Change?

Technology Is Advancing while Banks Deal with the DA

Emergence of New and Big Players like BlackRock, Alibaba, and Blackstone

Telecom Companies Now See Revenue in Banking

Legal Issues: The Sheriff and the DA Are After Banks for at least 20 Economic Crimes

Have Banks Lost the Goodwill of the Regulator?

The Tax Man

Rules on Subsidiaries around the Globe

Leftover Derivatives from the Global Financial Crisis

Chapter 10: The Revolution in Alternative Investments

Private Equity: Much Dynamic Activity To Replace Businesses That Banks Exited

Hedge Funds Are Backing Technology and Have Abandoned Banks

Sovereign Wealth Funds

Chapter 11: The Revolution in Big Data and SME Lending in the Emerging World

What Happens When Sales and Research Can't Be Paid for Access or IPO Research?

After the Regulators, New Technology Is Leading to End Times for High-Touch Banking

Crowdfunding Is Threatening Traditional Lending

The Jewel in the Crown for Financial Technology: SME Lending

Big Data, Crowdfunding, and the SME: The Magic Formula

Examples: Bringing Together the Data To Create New Opportunities and Reliable Credit Ratings

Payment Systems

Chapter 12: Banking and Analytics—The PayPal Gang, Palantir versus Alibaba, and Hundsun

The PayPal Gang Summit: Big Data, Research, Credit Ratings, and Cybersecurity

Alibaba's Cloud Business: The Future of Banking

AliCloud and Hundsun: The Mother Lode of All Financial Data

Hundsun: A Vast Array of Information on Financial Services

Final Analysis: There is No Such Thing as Private Information for Anyone

Appendix

Bibliography

Index

End User License Agreement

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Guide

Cover

Table of Contents

Introduction: A Few Numbers Can Crack the Code

Part One: How Bank Credit Drives Economics (Not the Other Way Around) and Why

Chapter 1: A Few Simple Concepts That Anyone Can Understand

List of Illustrations

Chapter 1: A Few Simple Concepts That Anyone Can Understand

Figure 1.1 Global Credit System in 2010: United States Deleveraged and BRIC (Brazil, Russia, India, China) Releveraged

Figure 1.2 GIIPS LDR: Deleveraging Process of GIIPS More Severe Than Asia in 1997

Figure 1.3 Methods to Decrease Leverage: Sell Assets or Increase Equity—Both Are Painful

Figure 1.4 U.S. and U.K. Public Debt: Government Debt Levels Rose Precisely to Bail Out the Banks

Figure 1.5 Return on Equity and Tangible Leverage: The Rule of 1 and 20: Maximum LDR of 1 and Tangible Leverage of 20

Chapter 2: Differences between Liquidity and Solvency Are Thin

Figure 2.1 LDR and Current Account: The World Is Seeking Equilibrium at (0,1)

Figure 2.2 Mortgages and Deposits: Government GSEs Quietly Hijacked the System and Funded It with Overseas Money

Chapter 3: Anatomy of a Credit Crisis and Examples in the Real World

Figure 3.1 Western and Eastern LDRs: If LDRs Can Go as High as People Want, Systemic Instability Will Rule

Figure 3.2 Thailand Banks Market Cap/Deposit and LDR: The More Extreme the LDR, the Greater the Pain

Figure 3.3 Brazil Banks Market Cap/Deposits and LDR: In Definite Danger Territory

Figure 3.4 Indonesia Banks Market Cap/Deposits and LDR: Bumping up against a Ceiling

Figure 3.5 U.S. Banks Market Cap/Deposits and LDR: Turning a Corner for a Multiyear Credit Run?

Figure 3.6 U.K. Banks Market Cap/Deposits and LDR: More Pain Ahead with Asset Sales and Deleveraging

Chapter 4: Socialization of Debt after Mismanagement by Bankers (or, Why Keynesian Economics Doesn't Work)

Figure 4.1 Thailand Banks LDR and Government Debt/GDP: Debt Is Still Quite High—Leftover from Crisis

Figure 4.2 U.S. Banks' LDR and Government Debt/GDP—A Very High Price for the Crisis: 45% of GDP Addition to Debt

Figure 4.3 LDR and Government Debt/GDP (Average of Spain and Ireland): The Crisis Broke the Bank for Both Countries

Figure 4.4 U.K. Banks' LDR and Government Debt/GDP: RBS and Northern Rock Broke the Bank

Figure 4.5 Indonesia Banks' LDR and Government Debt/GDP: Spectacular Improvement Postcrisis

Chapter 6: Central Banks Are Carrying the Greatest Load and Will Dominate Outcomes

Figure 6.1 Central Bank Total Assets: They Had to Absorb Assets Being Thrown Overboard by Banks

Figure 6.2 Total Assets by Industry. Central Banks Are Still

the

Heavyweight. Could Private Equity Morph into Investment Banks?

Figure 6.3 Federal Reserve Liabilities: Big Change from Mostly Currency to Mostly Risky Assets

Figure 6.4 Bank Holdings of Government Debt: The Fed Had to Take Debt on Its Balance Sheet or Rates Would Have Spiked

Chapter 7: How Bankers and Policy Rescuers Affect Stocks, Foreign Exchange, and Property

Figure 7.1 Western and Eastern LDR Movements (1990–2014): Uncapped LDRs Create Massive Instability

Figure 7.2 Spanish and Australian House Prices: High Australian LDR in Funded Boom while Falling LDR in Spain Caused Falling Prices

Figure 7.3 Chinese and U.S. House Prices: Rising PRC Leverage Created Price Boom; Falling U.S. LDR Caused Fall

Figure 7.4 Schulte Bank Valuation Model: Uncontrolled LDRs Cause Constant Cycles of Instability

Figure 7.5 LDR versus Fair Value of Foreign Exchange: As LDR Rises, a Country's Asset Prices Rise as Leveraged Buyers Splurge

Figure 7.6 P/Es and ROE for Banks: P/Es Have Nothing to Do with Bank Valuations and Should Never Be Used

Figure 7.7 Return on Capital versus Price/Book for Global Banks: Return on Capital Works! The Banks at the Bottom Left Are the Broken European Banks

Figure 7.8 Return on Capital versus Price/Book: Global Emerging Market Banks Don't Have Bonds, so ROE = ROC

Chapter 9: Why Is This Revolution Happening Now and Why So Fast?

Figure 9.1 The Regulatory and Legal Nightmare from Hell for Global Banks

Chapter 10: The Revolution in Alternative Investments

Figure 10.1 Can Private Equity and Hedge Funds (Buy Side) Replace the Sell Side?

Figure 10.2 Global Investors Are Shunning Banks for Fascinating New Technology

Figure 10.3 HSBC, J.P. Morgan, Deutsche Bank, Barclays, BNP, and Citi Need to Shrink

Chapter 11: The Revolution in Big Data and SME Lending in the Emerging World

Figure 11.1 Billionaires Are Creating Their Own Financial Ecosystem

Chapter 12: Banking and Analytics—The PayPal Gang, Palantir versus Alibaba, and Hundsun

Figure 12.1 The Three Types of Cloud Service

Figure 12.2 Alibaba Knows Everything about 500–600 Million Chinese

Figure 12.3 Alibaba Sees under the Skirt of

All

Chinese Financial Institutions

Figure 12.4 Beware the AliCloud—It Will Grow Like a Weed

Figure 12.5 Hundsun Built the Backbone Connecting Banks with Consumers

Figure 12.6 Apple Was Alone 7 Years Ago and Now Connects All with Its 700 Million Users

Appendix

Figure A.1 There Is No Doubt about It: Bank Credit Matters

List of Tables

Chapter 2: Differences between Liquidity and Solvency Are Thin

Table 2.1 Tradeoff: Pain through Shareholder Dilution or Asset Sales

Chapter 6: Central Banks Are Carrying the Greatest Load and Will Dominate Outcomes

Table 6.1 Bernanke's 10 Commandments from

Essays on the Great Depression

Table 6.2 Central Banks and Their Weight as Percent of GDP

Table 6.3 Fed Balance Sheet: Voluntary Reserves Is “Unused” Money; Fed Owns 15% of Housing Market

Table 6.4 Central Banks Comparisons Globally: The Column at Extreme Right Shows Risk Profile (U.S. Best Balance Sheet)

Table 6.5 Combined Central Bank Balance Sheet Globally: Central Banks Own $6 Trillion in Government Debt; ECB Has $1 Trillion in Bank Debt

Chapter 10: The Revolution in Alternative Investments

Table 10.1 Sovereign Wealth Funds by Size and Returns

Chapter 11: The Revolution in Big Data and SME Lending in the Emerging World

Table 11.1 Astounding Speed of Technological Advance

Table 11.2 Excellent Tools for Research in Equities and Fixed Income

Table 11.3 A New Breed Finding New Credit Methods and Reducing Nonperforming Loans

Table 11.4 Crowdfunding Is True Diversification and Citizen Funding

Table 11.5 Payment Systems Are Bleeding into Social Networks

Table 11.6 Fascinating New Experiments in Payments with New Credit Checking

Chapter 12: Banking and Analytics—The PayPal Gang, Palantir versus Alibaba, and Hundsun

Table 12.1 Annual Revenues in US$ for the Cloud: This Is a Brand New Business

Table 12.2 Alibaba Information Powerhouse Is

the

Entire Consumer Spectrum

Advance Praise for The Next Revolution in Our Credit-Driven Economy: The Advent of Financial Technology: The Advent of Financial Technology

This book is a timely and comprehensive description of the rapidly changing financial world. It covers not only the changing role of financial institutions but is also one of the first to analyze the profound impact of technology and big data on financial institutions and transactions. There is no question that the tens of billions of dollars in fines levied on the banks will change their ways of doing business. But, when a world top bank announces that it is hoping major institutional depositors will withdraw at least a hundred billion dollars in deposits, something serious must have happened. The book covers, in everyday language, the lead-up to and the current status of this transformation. Best of all, the author draws on his extensive BRIC experience to differentiate an increasingly regional market despite much hyped “globalisation.” It is also a must read for the practitioner, as the author goes beyond descriptions to investment strategies.