Government is a “Reverse ATM”

Stick $100 in; get $96.50 to spend. Isn’t that just grand? June 18, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Government is a “Reverse ATM” SEAN RING Dear Reader, Going cashless was always a scam. Now, the mask has finally slipped. Remember all the claims about how going cashless was the best thing since sliced bread? If you went cashless, you’d have less chance of catching a disease (a compelling reason during the Government Mandated Private Sector Shutdown of 2020-2021); the Treasury would save money by not printing paper notes and minting coins; you’d have lower risk of fraud and theft; and the consumer data generated from the cashless transactions would help businesses serve you better. Of course, The Powers That Be didn’t want you to know all the dangers surrounding The Cashless Society™. And there were more than a few. For instance, while the consumer data generated would help serve you better, the government having a backdoor through those private systems would deter even the most open, pious citizen. (I’m especially cross about this, as I’m one of those weird ones who like it when my thoughts appear as advertisements on my phone. If it were anyone but Zuckerberg, I probably wouldn’t mind.) And, of course, they never talked about hacking. Hacking is a menace neither the private sector nor governments can solve. Because if those bureaucrats were as good as the hackers, they’d be hackers. If you - or someone you know - got caught in the Ashley Madison hack, you know what I mean. However, the big bugaboo is that the people who are the most hurt are the poor. Let’s not go as far as New York Governor Kathy Hochul, who said, “Right now, we have young black kids growing up in the Bronx who don't even know what the word 'computer' is. They don't know these things.” That’s as absurd as it sounds. However, there is much truth in that most poor people don’t have Apple Wallets. Or even an Android wallet. Or even a cell phone. Governments literally “de-bank” the poor when they go cashless. Incidentally, one of Bitcoin’s claims is its inclusivity. How they get the poor to understand Blockchain and Bitcoin is beyond me, but there you go. But maybe they don’t need to. There won't be any questions if there’s no inflation in the Bitcoin supply. Credit: [The Wall Street Journal]( If you want further proof of how important cash is to the poor, take this inadvertently honest paragraph from a Wall Street Journal article titled, “[Paper Money Diehards Refuse to Fold]( Actual cash changes hands in only around 15% of transactions in the U.K., pushed out by the speed and convenience of using a card or phone. In parts of London, cash has become something akin to a prison currency like ramen noodles or cigarettes, circulated among panhandlers or those on the margins of society. But let’s not get bogged down in the theory. There is plenty of empirical evidence that going completely cashless sucks. To wit, Iowa Michael and Paradigm Grand Poobah Matt Insley sent me the same Zero Hedge article titled, “[It's Just Not Right": Major Venues Now Punishing People For Using Cash Vs. Plastic]( When two of the most intelligent people I know send me the same article, my antennae go up. [URGENT: Unclaimed Giveaway Offer]( We have an item of considerable value on hold for you in our warehouse. Valued at nearly $300, this [special item]( is an opportunity you wanted to miss. [Click here to see how to claim yours now.]( [Click Here To Learn More]( The New Yankee Stadium I haven’t been there yet. I’m in no rush, as Citi Field is supposed to be much better. But the Yanks are up to their old tricks again. This time, instead of watering down already watered-down Bud, they charge customers for the pleasure of paying cash. From another article in [The Journal]( When Noa Khamallah recently tried to pay cash for popcorn and soda at Yankee Stadium, his almighty dollars struck out. The stadium’s concession stands no longer take cash. An employee directed him to a kiosk that could convert his greenbacks into plastic. Khamallah, 41 years old, fed $200 into the reverse ATM, which subtracted a $3.50 fee and spat out a debit card with a balance of $196.50. Paying for anything in New York is expensive already, said Khamallah, who lives in the city. “If you add on top of that extra fees for being able to pay for food, that’s not right,” he said. Paying with cash used to be a way to get a discount. These days it can often cost an extra $1 to $6—the sort of transaction fees once limited to swiping a credit card or using an out-of-network ATM. I certainly sympathize. You Wanna Pay Rome? One of my favorite sayings is, “A German will always pay his income tax out of civic duty. An Italian never will, for the same reason.” Italians know anything they send to Rome may as well be burned in their fireplaces. It’s part of the reason why I love this country so much. The owner of a construction company working on my house in Northern Italy said, “I can create an invoice for you, but then I have to charge you 10% VAT [value-added tax]. If you don’t want the money to go to Rome, you pay cash and get a 10% discount.” You can guess what I did. If there were “reverse ATMs” in Italy that charged you money to convert your cash, like in Yankee Stadium, there would be riots. The Real Problem Let’s just come out with it: Government is a “reverse ATM.” You put your hard-earned cash in and get no services worthy of the name. How are those folks in Maui doing? You spend a trillion dollars on that winged embarrassment known as the F-35, and you get a plane that can’t get off the ground in time for combat. And, of course, lunatics like Harvard economist Ken Rogoff want to implement negative interest rates. The only way to do that is by eliminating cash. Your money would be “streaming” like Netflix. Imagine watching your balance slowly decline like on a progress bar…without spending any! Talk about “use it or lose it…” Wrap Up I’m not against cashless transactions as a means of payment by choice, but I am against eliminating cash. Between hurting the poor, having our data stolen, and implementing dreadful negative interest rates, we’d be the boiling frog in the pot. We’d be cooked before we could jump out. All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… Elaborating on the CMBS Problem SEAN RING Paradigm Press Customer Satisfaction Guru Dustin Weisbecker sends me questions, comments, and feedback from the Rude’s outstanding subscribers. I appreciate all of them, even the critical ones. I owe many people some sort of response, but this one question from James T. inspired me to dedicate an entire edition of the Rude to answering it. Here’s his query: Sean, This was a great read and a most important read. I’ve taken time to watch and read The Big Short multiple times and think I have a pretty good understanding of what you are talking about here. However, you threw out some things that escaped me. So: - If I remember right, securitization was done to create a product to sell and make the investment banks and hedge funds a lot of money; to make an attractive investment to sell. I'm not sure that they were actually trying to spread the risk. - What is the CFPB supposed to do? - Where do we buy credit default swaps? - How big are commercial MBS problems compared to the home MBS in 2008? Can you quantify in any way what the banking system is in for? Great writing as usual. If my ponderings are remotely intelligible, the credit goes to Paradigm Press, and in particular you and Jim Rickards, for being great teachers and opening up minds! JR has mentioned the looming issue several times and this read really hit home. Thanks again. Your paisano, James T. Thank you, Paisano! I appreciate such a rich question. Let me get right to answering it. Securitization James, nothing is ever done unless it’ll make hedge funds and investment banks a lot of money. This invention was particularly lucrative. Imagine a bunch of bankers getting together and thinking up a plan to make more money from mortgages than they already make. But they were all at one bank. If you liked The Big Short movie, you may like Liar’s Poker, Michael Lewis’ first and best (in my opinion) book. That book was required reading on Wall Street when I first started out. If you didn’t know what “Equities in Dallas” referred to, or why Lewis’ friend Alexander called him up when Chernobyl happened and said, “Buy potatoes!” you weren’t in the club. Liar’s Poker described how the mortgage department at Solomon Brothers, then the fixed income bank on Wall Street, invented mortgage-backed securities through securitization. The book is hilarious. The invention of MBSs? Nothing short of genius. Securitization is merely bundling assets (such as mortgages) together to create a new security. When you bundle mortgages together, they become a mortgage-backed security. When you bundle credit card debt, auto loan debt, and other debt, you’ve got a collateralized debt obligation. Once you bundle them, you can slice them into tranches (which means “slice” in French). Some investors can then own tranches that only pay the principal back, while others could own ones that repay interest. The trick was knowing how to price them. Since Solomon Brothers invented MBSs, they were the only ones who knew how to price them. They ripped everyone’s face off, practically minting billions in profit. The big mistake was not paying the mortgage guys enough. One by one, they left to join other banks, sharing their secrets. Once that happened, making money wasn’t as easy. Still, it’s worth billions to Wall Street currently. [Are you worried about “Biden Bucks”?]( All you need to protect yourself and your money is this secret gold investment you see here. This new alternative gold currency is the perfect way for you to sidestep “Biden Bucks” while preserving your wealth at the same time. Just watch this [quick 2-minute video]( for all of the details… [Click Here To Learn More]( Consumer Financial Protection Bureau The Consumer Financial Protection Bureau (CFPB) is a federal regulatory agency that oversees financial products and services offered to consumers. The CFPB was established in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its primary mission is to protect consumers by enforcing federal consumer financial laws and ensuring that markets for consumer financial products are fair, transparent, and competitive. The CFPB regulates mortgage lenders, brokers, and servicers to ensure compliance with federal laws. This includes overseeing practices such as loan origination, underwriting, and servicing. The bureau has the authority to take enforcement actions against companies that violate consumer protection laws. This can include imposing fines, requiring restitution for affected consumers, and other corrective measures. The CFPB provides resources and information to help consumers make informed decisions about mortgages and other financial products. This includes tools for comparing loan offers, understanding mortgage terms, and avoiding predatory lending practices. The bureau operates a consumer complaint system where individuals can submit complaints about financial products or services, including mortgages. The CFPB then works with companies to address these complaints and resolve issues. The CFPB has the authority to create new rules and regulations to protect consumers. For mortgages, this has included rules on mortgage servicing, disclosure requirements, and protections against unfair lending practices. With all that said, I don’t remember the CFPB doing anything notable since its inception. Credit Default Swaps (CDSs) CDSs, or credit default swaps, can be considered “bond insurance.” The CDS spread - prices of CDSs are called “spreads” - is typically quoted in basis points (bps) and represents an annualized percentage of the notional amount. CDS spreads are the one number traders look at to assess default risk. But for fund managers and retail investors, credit ratings matter. Fund managers cannot put any bonds in their portfolios that don’t reflect the risk they can take. Where can you buy one? You can’t. Sorry, that’s only for the institutional players. (The ISDA agreement part of The Big Short is all about this.) CMBSs Versus MBSs In 2008, the size of the commercial mortgage-backed securities (CMBS) market was significantly smaller than that of the residential mortgage-backed securities (MBS) market. The residential MBS market, which includes securities backed by residential mortgages, was much larger. In 2008, its total value was estimated to be around $7 trillion. This market primarily includes securities issued by government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae, as well as private-label securities. The CMBS market, which includes securities backed by commercial real estate loans, was considerably smaller. In 2008, its total value was estimated to be around $700 billion to $800 billion. CMBSs are used to securitize loans on commercial properties such as office buildings, shopping centers, hotels, and multifamily housing units. CMBS Market in 2024 The market size for CMBS loans scheduled to mature in 2024 and 2025 is approximately $900 billion. New issuance for CMBS is forecasted to reach about $55 billion in 2024, rebounding from the significant drop in 2023 when the issuance was around $39.3 billion. However, the market continues to face headwinds with rising delinquency rates, particularly in the office sector, which has been significantly impacted by the shift to remote work and higher borrowing costs. Delinquency rates for office-related CMBS are expected to rise, potentially reaching as high as 8.1% in 2024. Residential MBS Market in 2024 The residential MBS market remains considerably larger than the CMBS market. As of mid-2024, the issuance of residential MBS has continued to grow, with a total issuance of approximately $560.4 billion by May 2024. As I mentioned above, the residential MBS market benefits from strong backing by government-sponsored enterprises like Fannie Mae and Freddie Mac, contributing to its larger size and stability compared to the commercial sector. That’s an enormous amount of money at risk for investors. However, the CMBS market is still much smaller than the residential market. The key here is that many regional banks are at risk from commercial mortgages, so the knock-on effects are very different from last time. Wrap Up Thanks, James, for the great question. I hope I answered it to your satisfaction. If you have any questions, comments, or issues, please feel free to write to feedback@rudeawakening.info. I read all the mail in the bag; I just don’t always have time to answer live. Have a great week ahead. All the best, Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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