BOOM as at 12th January 2020


The BOOM continues. Most stock markets around the globe continue to advance while bond prices consolidate their gains achieved during 2019. Yield curves are also consolidating into more normal stances.

BOOM Finance and Economics began publishing in 2015 when no-one thought a boom was coming (except BOOM). In early 2016, the signs were appearing that the the Global Financial Crisis was slowly resolving. BOOM began noting positive signs of recovery then but Gloom and Doom was everywhere with almost no other commentator brave enough to call the end of the financial pain. The crisis had caused grave financial sector damage around the globe since late 2008 with many major banks failing or teetering on the brink of failure.

In the early days, some famous investment banks collapsed in New York, notably Lehman Brothers and Bear Sterns. Many global banks and insurance companies failed or had to be desperately rescued, including such household names as Northern Rock, Countrywide Financial, AIG Insurance, Roskilde Bank, Bradford & Bingley, Landsbanki, Kaupthing Bank, Bank West, Royal Bank of Scotland, LLoyds Bank, UBS, HBOS, London Scottish Bank, Indymac, Anglo Irish Bank, Dresdner Bank.

In the United States, there was carnage — banking fraud and crime had certainly been widespread.

In 2008, 25 US banks failed.
In 2009, 140 banks failed.
In 2010, 157 banks failed.

In 2011, 92 banks failed.
In 2012,  51 banks failed.
In 2013, 24 banks failed.
In 2014, 18 banks failed.
In 2015, 8 banks failed.
In 2016, only 5 banks failed. The crisis was ending.
In 2017, 8 banks failed.
In 2018, no US banks failed.
And last year in 2019, just two failed.

Massive interventions were necessary from central banks and governments to rescue the financial sector, especially in the advanced economies, but by mid 2016 BOOM could sense that the tide was turning. And, since then, relative stability has returned to the globe’s financial markets. We should all be thankful.

Note that the banks on that list were all commercial (retail) banks. The list does not include the failures of major US investment banks such as Lehman Brothers, Bear Sterns and MF Global.

The numbers in that list seem outrageous but it is worth knowing that well over 1,000 Savings and Loan institutions failed in the USA from 1985 – 1995 during a previous banking crisis. Savings & Loans institutions in the US are small mutual banks, building societies and finance cooperatives that principally make loans for house purchases in a geographic region.

Banking is a dangerous business, especially when fraud, mis-management and outright criminal behavior are allowed to run wild by slack regulators. This behavior is still going on today because banks attract such behavior. Their “product” is money so it makes sense that the worst humans and the worst of human behavior should manifest in them.

BOOM strongly recommends that  you watch this recently published short video where bankers are put under intense scrutiny by the author Ian Fraser of ‘Shredded’ (a book about  the collapse of the giant UK bank, Royal Bank of Scotland) and the Police & Crime Commissioner for Thames Valley, Anthony Stansfeld. You will be shocked.


The advanced economies and emerging economies are still brittle with low GDP growth and low CPI inflation almost everywhere you look. In the US last Friday, the new job numbers were very disappointing. Nonfarm payrolls increased by only 145,000 in December and the numbers for November were downwardly revised to 256,000.

In the 1990’s, monthly job growth creation was double those numbers. It was common to see 350,000 – 400,000 new jobs being created each month. The Land of Trump can only dream of such numbers.

America has an unemployment rate of just 3.5% which is the lowest level since 1969 but many Americans choose not to work so the economy just can’t grow substantially. Trump is helping as much as possible with huge increases in Federal Government deficit spending but jobs are a much more effective way to boost an economy.

There has been no appreciable improvement in the Labor Force Participation Rate since 2013. That is 6 years of sideways movement in the statistic.  It is stuck in a tight range around 62 %, effectively going sideways. This means that 38 % of Americans cannot contribute significantly to the economic output (as measured in GDP terms) because they just don’t have a meaningful income earned from full time employment.  More than 40 Million need assistance to buy food under the Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program.

In 2000, the Labor Force Participation rate was 67.3 %, an all time high. The gap between 62 % and 67 % seems to be a bridge too far. So the US Economy is stuck in a rut as far as BOOM can see with Trump’s massive deficit spending in excess of 5 % of GDP holding it together.


The CEO of Boeing has reportedly been fired after the 737 Max debacle. Two plane crashes resulted in 346 people dying and the new aircraft being grounded indefinitely. He exited the company with over $ 80 Million in pay and benefits. Boeing put aside less than that for the families of the victims, just $ 50 Million.


Remember to watch that video interview. It is riveting as the crimes of the British financial sector are laid bare for all to see.


In economics, things work until they don’t. Until next week …………  Make your own conclusions, do your own research.  BOOM does not offer investment advice.


EMAIL: gerry [@]

Return to the BOOM Main Website –  BOOM Finance and Economics at



BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR (but they always need a Borrower to do so)


Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.

How is Most New Money Created ?

LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).

From the Bank of England Quarterly Bulletin Q1 2014    —
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —

“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”

The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.
“…… the vast bulk of broad money consists of bank deposits”
“Money can be created …….. when financial intermediaries make loans
“In the first instance, the process of money creation requires a willing borrower.”
“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”

Disclaimer:   All content is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the authors alone on the current and future status of the markets and various economies. It is subject to error and change without notice.The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.

Neither the information nor any opinion expressed constitutes a solicitation to buy or sell any securities nor investments. Do NOT ever purchase any security or investment without doing your own and sufficient research.  Neither BOOM Finance and nor any of its principals or contributors are under any obligation to update or keep current the information contained herein. The principals and related parties may at times have positions in the securities or investments referred to and may make purchases or sales of these securities and investments while this site is live. The analysis contained is based on both technical and fundamental research.

Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

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MOLS Denmark

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