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"What creativity can there be, when only money can buy you your next opportunity?"
Unknown free-lance film maker in Netherlands, 2014
MSM: "The £100bn Parasite Banker Work Through The Night To Make A Killing On The Referendum" [06/23/16] "Shameless bankers were last night gambling billions of pounds on the EU referendum. Hedge funds had commissioned private exit polls to steal a march on the official declaration. Armed with the advance information – and a £100billion war chest – their traders went on an all-night 'feeding frenzy'. They are thought to have placed huge bets on currencies and other markets, hoping to clean up by the time stock exchanges opened today. MPs said the public – 40million of whom voted – would be disgusted by the casino-style wagers on the nation's future. [...]"
Commentary: "Soros, Rothschild Warn Of Brexit Doom; Osborne Threatens With “Suspending” Market" Ø Hedge [06/22/16] "Just yesterday, we recounted the story of “Black Wednesday” when on September 16, 1992, the UK was forced out of the EU’s exchange-rate mechanism, or ERM, when the BOE tapped out and allowed the British pound to float freely, leading to 15% losses in the sterling. As we noted, this was George Soros’ infamous trade which “broke the Bank of England” and made the Hungarian richer by over $1.5 bilion. 24 years later Soros is back, and this time he is warning against the kind of devaluation that made him a billionaire and which he believes will be unleashed by Brexit, when in a Guardian Op-Ed he wrote that U.K. voters are “grossly underestimating” the true costs of a vote to leave the EU, saying that there would be an “immediate and dramatic impact on financial markets, investment, prices and jobs.” He predicts that the pound would decline “precipitously”, seeing a gargantuan drop of at least 15% and possibly >20% to below $1.15. Considering it has now become trendy for analysts to come up with ever “doomier” forecasts of just how low cable would plunge in case of Brexit, we are surprised Soros stopped there. Here Soros makes the distinction how the collapse in cable would be different from the one that made him richer by saying that this devaluation wouldn’t be “healthy” like the one in 1992 because BOE wouldn’t cut rates, U.K. has large current account deficit and devaluation unlikely to improve manufacturing exports this time. Just don’t tell that to the BOJ, which would gladly leave the EU – twice if it had to – if it meant a 20% devaluation. [...] As opinion polls on the referendum result fluctuate, I want to offer a clear set of facts, based on my six decades of experience in financial markets, to help voters understand the very real consequences of a vote to leave the EU. Of course, Soros’ set of facts may be clouded by his far greater equity stake in equity interests around Europe, and the globe, which would be drastially impacted by not only a Brexit, but by a European Union which is suddenly on the rocks. From that point on, Soros’ entire analysis is on the “worst case” scenario centered around a collapsing pound, something which most ironically every other central bank around the globe is so desperate to achieve: " … sterling is almost certain to fall steeply and quickly if there is a vote to leave– even more so after yesterday’s rebound as markets reacted to the shift in opinion polls towards remain. I would expect this devaluation to be bigger and more disruptive than the 15% devaluation that occurred in September 1992, when I was fortunate enough to make a substantial profit for my hedge fund investors, at the expense of the Bank of England and the British government." At least he is honest. [...] It is notable that Soros’ warning comes just days after that of Jacob Rothschild himself who said in another Op-Ed, this time for The Times, that leaving the EU could lead to a “damaging and disorderly situation” in the UK as he urged Britons to vote ‘remain’. Just like Soros, Lord Rothschild, suddenly exhibiting a rare strain of humanitarian concern, said readers should not “risk the wellbeing of our country”and European countries are “better off together”. He said that “at present we enjoy being a permanent member of the UN security council and we are essential to the G8 and Commonwealth. But diplomacy, defence, the environment and our values of being a liberal democracy will all be at risk” adding that “I can see no good reason why we should accept our playing a diminished role on the world stage,” especially if his own personal fortune would be jeopardized. [...] Osborne also played down claims he could be forced to leave the Treasury after the referendum amid anger form Tory backbenchers over the way he has campaigned, saying: “It’s really not about my job”. Oh but is George, just like it is in Soros and Rothschild’s own self interest for the people to vote “Remain.” To suggest otherwise is naive, but it may also be irrelevant. With just three days until the vote, the scaremongering tactic, not to mention the murder of an innocent woman, may have already done its job judging by the reveral in public opinion. In any case, one can only hope that unlike the case of the failed Greek referendum where the people voted one way only to get the opposite, no matter how the Brits vote, it will truly represent the democratic will of the majority and that particular outcome is what they get." Note: It's all conceptual head games. Everyone should do the opposite of what these people ask for.
MSM: "US Banks Top Cluster Bomb Investment 'Hall Of Shame': Report" [06/21/16] "Despite the international ban on cluster bombs, more than 150 financial institutions have invested $28 billion in companies that produce them, according to a new report released Thursday. Bank of America, JP Morgan Chase, and Wells Fargo are among the 158 banks, pension funds, and other firms listed in the "Hall of Shame" compiled by the Netherlands-based organization PAX, a member of the Cluster Munition Coalition (CMC). [...] The report, titled Worldwide Investments in Cluster Munitions: A Shared Responsibility (pdf), finds that the leading investors come from 14 countries including the U.S., the UK, and Canada. Of the top 10 overall investors, the U.S. is home to eight. Japan and China round out the last two. [...] Both the UK and Canada— along with France, Germany, and Switzerland, whose institutions are also named on the list—have signed the 2008 Oslo treaty known as the Convention on Cluster Munitions banning the use of the indiscriminate bombs under international law. The U.S., which hosts by far the most companies on the list with 74, is not a signatory. [...] Cluster bombs, which can be launched from the air or ground, operate by ejecting smaller sub-munitions or "bomblets" that can saturate an area of several football fields, according to CMC. They can remain volatile long after a conflict ends. "Financial institutions must stop turning a blind eye to the lethal consequences of their investments," said CMC ambassador Branislav Kapetanović, who survived a cluster bomb in Serbia 16 years ago. "Cluster munitions are being used in Yemen and Syria, causing significant civilian casualties including among children and women. All banks and financial institutions must prohibit investment in companies that produce these indiscriminate weapons." [...] One type of cluster bomb, produced by the U.S.-based company Textron, has been used by the Saudi Arabia-led coalition in Yemen since March 2015, the report states, citing research by Amnesty International and Human Rights Watch. [...] Some of the countries listed in the report have adopted legislation (pdf) that bans certain forms of investment in cluster bombs, including Belgium, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, New Zealand, Samoa, Spain, and Switzerland. Others have "made an interpretive statement that investments in cluster munitions are or can be seen as prohibited by the Convention on Cluster Munitions." [...] But more needs to be done, PAX said, noting that its recommendations "all come down to one simple message: disinvest from producers of cluster munitions now!" [...] For financial firms, that means ending any connection to cluster bomb manufacturers on every level—commercial banking, investment banking, and asset management, the report states. It continues: "Financial institutions should develop policies that exclude all financial links with companies involved in cluster munitions production. Because all investment facilitates this production, no exceptions should be made for third-party financial services, for funds that follow an index, or for civilian project financing for a company also involved in cluster munitions." [...] Co-author Suzanne Oosterwijk said, "It is an outrage that so many financial institutions have no qualms about investing in companies that make banned cluster munitions," though she noted that some companies have made proactive steps to end those links. "We commend these financial institutions for halting their investments and encourage others to follow suit," she said. [...]" Related: "$28 Bln Invested In Cluster Weapon Producers In 4 Years" " [...]"| "Worried About “Stigmatizing” Cluster Bombs, House Approves More Sales to Saudi Arabia" "The House on Thursday narrowly defeated a measure that would have banned the transfer of cluster bombs to Saudi Arabia, but the closeness of the vote was an indication of growing congressional opposition to the conduct of the U.S.-backed, Saudi-led bombing coalition in Yemen. The vote was mostly along party lines, with 200 Republicans – and only 16 Democrats – heeding the Obama administration’s urging to vote against the measure. The vote was 204-216. [...] Cluster munitions are large shell casings that scatter hundreds or thousands of miniature explosives over large areas – often the size of several football fields. Some of the bomblets fail to explode on impact, leaving mine-like explosives that kill civilians and destroy farmland decades after a conflict ends. Cluster bombs are banned by an international treaty signed by 119 countries, not including the United States. The United States opposed the treaty, and instead of signing it, adopted a policy that cluster bombs should never be used in concentrated, civilian areas.[...]"
Commentary: "Socialism's 1%: "The Rich People Are Thieves ... Socialist Dream Is Falling Apart" Ø Hedge [06/20/16] "A defining characteristic of socialism in all its forms in all places and at all times is a relatively small political elite (and its “private sector” cronies) that lives lavishly by plundering its population, destroying its economy, imposing a regime of equality of poverty and misery; and turning almost everyone into a dependent on the state for survival. Joseph Stalin was the wealthiest man in the world during his time, not the Rockefellers, Morgans, or anyone else, as the de facto “owner” of the entire Soviet Union. African and Latin American socialist political thugs in the “post- colonial era” have long been notorious for becoming millionaires or billionaires, with Swiss bank accounts galore, while their people starved and begged them for subsistence. Socialism’s one percenters make today’s Wall Street plutocrats seem impoverished by comparison. [...] The latest glaring example of the disgusting and immoral corruption of socialism’s one percenters is Venezuela, a country that has “long been the darling of the [socialist] Left,” according to a June 16 article in the Daily Mail. The article, authored by Jake Wallis Simons, has the headline: “Super-rich socialists quaff champagne in Venezuelan country clubs while middle-class mothers scavenge for food in the gutter . . . even the dogs are starving.” [...] Venezuelan socialism, known as “Chavismo,” after the wealthy socialist one percenter Hugo Chavez, has indeed destroyed the country’s economy. Thanks to government-imposed price controls that hold prices below costs, supermarkets are empty, everything is in short supply or simply unavailable, and middle-class people are literally “rummaging in stinking piles of rubbish for cabbage leaves . . . and fetid meat,” according to the Daily Mail article, which includes dozens of pictures of these pathetic scenes. Among the most disturbing pictures are those of starving dogs and other animals in this socialist “paradise.” [...] Nationalization, price controls, and suffocating government regulations have so destroyed the remnants of capitalism that hospitals can’t afford toilet paper, let alone medicine; people wait in queues for ten our twelve hours a day, just like in the old Soviet Union, in hopes of buying something – anything – that might come up for sale in hopes of trading it for things they actually need; there is raging hyperinflation as the government tries to print money like mad to continue paying for its socialist fantasies; and crime is the worst of anywhere on earth. One middle-class woman is quoted in the article as saying “Chavez’s legacy is people like me looking for food in the garbage.” “Those rich people are thieves,” says the woman quoted by the Daily Mail. “They are government cronies and they stole the country’s money . . . . We had a socialist revolution and these are the results.” “I feel cheated. Our socialist dream is falling apart,” said another pathetically-duped victim of Bernie Sanders/ Hugo Chavez- style socialism. Meanwhile, according to a recent poll, 46 percent of American “millennials” say they could vote for a socialist for president, who they believe would end political cronyism, “get money out of politics,” and redistribute the wealth of the politically-connected one percenters to them. This, of course, is complete nonsense and an expression of extreme ignorance. As F.A. Hayek explained in his classic, The Road to Serfdom, the reality is that under socialism, “the only power worth having is political power.” It is capitalism, private property, and markets that provide the most potential for economic opportunity, economic advance based on merit, hard work, savings, entrepreneurship, and individual initiative. Who says the government schools are not teaching the kids much these days?[...]"
Commentary: "You Are Living Through The Dumbest Monetary Experimental Endgame In History" Ø Hedge [06/19/16] "We have seen several explanations for the financial crisis and its lingering effects depressing our global economy in its aftermath. Some are plain stupid, such as greed for some reason suddenly overwhelmed people working within finance, as if people in finance were not greedy before 2007. Others try to explain it through “liberalisation” which is almost just as nonsensical as government regulators never liberalised anything, but rather allowed fraud, in polite company called fractional reserve banking, to grow unrestrained. Some point to excess savings in exporting countries as the culprit behind our misery. Excess saving forces less frugal countries reluctantly to run deficits, or so the argument goes. [...] While some theories are pure folly, others are partial right, but none seem to grasp the fundamental factor that pulled and keep pulling the world into such unsustainable constellations witnessed in global finance, trade and capital allocation. Whenever we try to explain the reasons behind the crisis, such as the build-up in non-productive and counterproductive debt (see here, here and here for more details) people ask us why did this happened now, and not earlier? It is a fair question that we have thought about and believe have one simple answer. Bottom line, the world economy is running on a system with no natural correcting mechanisms. [...] As we are never tired of pointing out, the Soviet Union only had one recession, the one in 1989. The system was stable, until it was not. A system that does not correct internal imbalances grows just like a parasitic cancer, eventually killing its host. If unsustainable capital allocations are allowed to continue unchecked, the pool of real savings will at some point be depleted. At that point recession hits because the structure of production is too capital intensive relative to the level of real saving available. A quick look at US saving and investment rates since the 1950s confirms what we all know to be true; saving and investments are not keeping up with GDP growth. That the trend broke after Nixon took the dollar of gold in 1971 is not a coincidence. Real funding for economic activity were slowly substituted from proper saving towards “forced” saving through fiat money expansion. [...] The inevitable result from such a policy has been the massive increase in debt and drop in the US balance versus the rest of the world. No matter what political leaning the country had, debt kept on rising and its mirror image, the current account balance, kept on falling. The US mortgaged their future to foreigners willing to fund this consumption spree. No one seemed to care that the US did not build up a productive capital base that could service all this debt in the future. The US, issuer of the world reserve currency, was good as gold. At least that was what the world assumed, and surprisingly enough still do.[...] So what does this have to do with a world in economic crisis? [...]"
MSM: "Almost $50 Billion Dollars In Retail Property Loans Will Be Due In The Next 18 Months" [06/18/16] "Things are not looking good for America’s shopping malls. General Growth Properties Inc, the second largest mall owner in the U.S., has missed a $144 million dollar loan payment. [...] This delinquency marks the beginning of the end for America’s favorite shopping destinations. According to Bloomberg almost $50 billion dollars in retail property loans will be due in the next 18 months spelling doom for Americas dying shopping malls, strip malls and struggling retailers. [...] Suburban Detroit's' Lakeside Mall, with mid-range stores such as Sears, Bath & Body Works and Kay Jewelers, is one of the hundreds of retail centers across the U.S. being buffeted by the rise of e-commerce. After a $144 million loan on the property came due this month, owner General Growth Properties Inc. didn't make the payment. [...] The default by the second-biggest U.S. mall owner may be a harbinger of trouble nationwide as a wave of debt from the last decade's borrowing binge comes due for shopping centers. About $47.5 billion of loans backed by retail properties are set to mature over the next 18 months, data from Bank of America Merrill Lynch show. That's coinciding with a tighter market for commercial-mortgage backed securities, where many such properties are financed. [...] For some mall owners, negotiating loan extensions or refinancing may be difficult. Lenders are tightening their purse strings as unease surrounding the future of shopping centers grows, with bleak earnings forecasts fromÂ retailers including Macy's Inc. and Nordstrom Inc., and bankruptcy filings by chains such as Aeropostale Inc. and Sports Authority Inc. Older malls in small cities and towns are being hit hardest, squeezed by competition from both the Internet and newer, glitzier malls that draw wealthy shoppers. "For many years, people thought the retail business in the U.S. was a bit overbuilt," said Tad Philipp, an analyst at Moody's Investors Service. "The advent of online shopping is kind of accelerating the separation of winners and losers." Landlords that can't refinance debt may either walk away from the property or negotiate for an extension of the due date. It can be hard to save a failing mall, leading to high losses for lenders on soured loans, Philipp said. [...]"
MSM: "US Fed: No Interest Rate Hike, For Now" [06/16/16] "Although it stated that it expects the job market to rebound in 2016 and that US economic performance has strengthened in recent years, the Federal Open Market Committee (FOMC) indicated following its two-day meeting in Washington that it will not hike interest rates at this time.Instead, it voiced confidence that interest rates will likely gradually rise but maintained an accommodative stance. [...]"
Satire: "Last Week Tonight with John Oliver: Retirement Plans (HBO)" [06/15/16] [21:29] "Saving for retirement means navigating a potential minefield of high fees and bad advice. Billy Eichner and Kristin Chenoweth share some tips. [...]"
MSM: "Soros Buying Gold On BREXIT, EU “Collapse” Risk" [06/15/16] "George Soros is again buying gold and selling and going short stocks due to BREXIT and EU “collapse” risk, after a six year hiatus from the gold market. [...] The multi-billionaire hedge fund manager, the man who “broke the Bank of England” and one of the richest and most powerful men in the world has now publicly warned that inflation is likely soon and is voicing concerns about BREXIT, the disintegration of the EU, a Chinese financial crash, global contagion and a new World War. Soros Fund Management, which manages around $30 billion for the Soros family, is now aggressively selling and going short stocks and diversifying into gold and shares in gold mining companies, due to his now even “gloomier” view of the global financial system and the global economic outlook. Soros has become more involved in trading at his family office, due to his many concerns and the risk that “large market shifts may be at hand”, according to a person familiar with the matter as reported by Bloomberg. Soros recently warned that the EU is “on the verge of collapse” because of its handling of the Greek economic crisis and refugee crisis and said the prospect of a BREXIT from EU Superstate posed a fresh threat to the EU.[...] Governments, economists, financial advisers, brokers and of course bankers did not see the first crisis coming in 2008 and they are not seeing it now. Some are simply not informed or aware of the risks and others choose to ignore them and spin the illusion that all is well and there is nothing to be worried about. The cosy consensus and groupthink of economic recovery continues and there is a remarkable lack of a plurality of opinion and lack of debate regarding the risks posed to savers and investors today. The real risks of another global financial crisis as warned in recent days by Martin Wolf and Japanese Prime Minister Abe are largely being ignored again – as was the case before the first crisis. A few market observers are warning about and again they are largely being ignored. The inability to look at the reality of the global financial and economic challenges confronting us today will see investors suffer financial losses again. In the coming crisis, depositors and savers are also exposed due to the new bail-in regimes.[...]"
MSM: "US Asset Managers Target Australia's $1.5 Trillion Pension Funds" Ø Hedge [06/12/16] "Hedge funds attracted a net $44 billion in assets globally last year, the smallest amount since 2012. As these increasingly desperate funds try to change that in 2016, one enormous target has been identified in Australia. Australia has approximately USD$1.5 trillion in retirement savings, one of the largest and fastest growing pools of pension money in the world according to the WSJ. Several US asset managers are already actively working to get a foot in the door, even though management fees charged in Australia are among the world's lowest according to local lobby group Financial Services Council. "Everyone wants to get their hands on that pie. People think there's a lot of money to be made (stolen) in Australia" said Jesse Huang, director for strategic relations Boston based hedge fund PanAgora Asset Management [...] Ah yes, hedge funds who introduce complex trading strategies to mom and pop investors and massive pension funds - what could possibly go wrong there?"
MSM: "76 Million Americans Are Struggling Financially Or Just Getting By" [06/12/16] "The Federal Reserve Bank’s latest survey on Americans’ economic well-being, which looked at 2015. 31% of American adults, or 76 million people, said they are struggling to get by or just barely making it. [...] Seven years after the end of the Great Recession, millions of Americans have yet to find firm financial footing. That’s one reason why the economy remains a top concern in the 2016 presidential election. Some 46% of adults say they can’t cover an unexpected $400 expense or would have borrow or sell something to do so. While lower income Americans said they’d have the toughest time handling this emergency charge, some 38% of middle class Americans reported they’d have trouble too. Even 19% of those raking in over $100,000 a year said they couldn’t pay the bill promptly. About one-third of Americans also say that their income varies month-to-month, mainly because they have an irregular work schedule. Some 45% say their expenses shift each month. Some 42% of those with these volatile income streams or expenses say they struggled to pay the bills at least once in the past year. Many Americans want to work more or are already holding down multiple jobs. Some 35% of those who are not self-employed said they’d prefer to work more hours (at their current wage). This was particularly true of lower-income respondents, non-Hispanic blacks, younger folks, Hispanics and and those with less education.[...]"
Commentary: "How Wall Street Profits From ‘Public Education’ While Students Drown In Debt" [06/11/16] [9:43] " In this episode of ‘Behind The Headline,’ host Mnar Muhawesh meets Steve Mims, the writer and director of ‘Starving The Beast,’ a documentary about the privatization of college education. He explains that learning is now treated like a profitable commodity rather than a public good. [...] An education crisis largely orchestrated by neoconservatives in both the Republican and Democratic Parties, has left some of the country’s oldest and most prestigious public universities struggling under deep cuts and severe budget shortfalls. Although these cuts are driven mostly by conservative think tanks, the changing face of education isn’t just about austerity. It’s no coincidence that some of the deepest cuts have come against social sciences, the humanities, and the arts — all subjects that are traditionally the target of some of the GOP’s harshest critics. And despite these staggering cuts, football coaches continue to earn massive salaries. [...] Simultaneously, thanks to rising tuition costs and a poor job market, students are struggling under record-breaking levels of debt. It’s an economic bubble that some predict could burst with devastating effects similar to the 2008 subprime mortgage crisis. Our old friends at Wall Street are ready to step into the gaps created by the neocons’ cuts, offering a new form of education that treats learning as a commodity and students as consumers. Neocons in Congress have argued for allowing more for-profit universities to receive accreditation, while the “Investing In Student Success Act” would see students become indentured servants of big corporations in return for their education. [...]" Related: "Using Students As a Commodity, And the Propaganda Train Pushing for US Intervention in Syria" [28:02] "Mnar Muhawesh, editor-in-chief of MintPress News and host of “Behind The Headline,” starts this episode with Steve Mims, director of “Starving the Beast,” who reveals how a Republican-led attack on public education in the United States has left schools struggling to meet their budgets and students drowning in debt. He explains why learning is now being treated as a profitable commodity rather than a public good, and how the shift to treating students as consumers has negative implications for both their education and for the country’s future. [...] (10:35) And with 250 new boots about to hit the ground in Syria, investigative journalist Vanessa Beeley pulls back the curtain on U.S., NATO and Gulf ally forces already driving the conflict in Syria. She goes further, explaining the Western mainstream media’s complicity in the crisis by “following the imperialist roadmap” and “very rarely deviating from a narrative that serves the U.S. and NATO propaganda and objectives in Syria.”[...]" | "Documentary Reveals How Wall Street ‘Disrupted’ Public Education" "Is education a right and a public good, or is it a commodity from which corporations can profit? “Starving The Beast,” a documentary which premiered March 13 at the SXSW Film festival, reveals the struggle between these two paradigms for higher education taking place across the country at publicly funded universities. From the University of Texas at Austin to the University of Illinois at Urbana-Champaign, decades of budget cuts have resulted in skyrocketing tuition alongside a simultaneous decline in the quality of education. Now Wall Street is moving into the gaps created by a largely Republican-created budget crisis, from the increasing reliance on private student loans as public funding falls to schemes to allow the accreditation of more for-profit universities, a move championed by Sen. Marco Rubio during his 2016 electoral campaign. [...]" |
MSM: "Mervyn King's Alarmist Warning: "All China's Assets In The US Might Be Annulled" Ø Hedge [06/10/16] "What is it about former central bankers who first destroy the fiat system with their monetarist policies, only to go into retirement, and preach the virtues of the one compound they spend their entire professional careers trying to destroy: gold. To be sure, when it comes to polar reversals of opinion, nobody comes even remotely close to Alan Greenspan: the former Fed chairman who is not only instrumental in launching the "Great Moderation", which unleashed the current unprecedented global debt wave which will lead to unprecedented disaster sooner or later, has in recent years become one of gold's biggest advocates as demonstrated most recently in "Greenspan's Stunning Admission: "Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It." Now it's the turn of his former colleague at the Bank of England, Mervyn King, who in an interview with the WGC's Gold Investor monthly, pours cold water over Bernanke's "explanation" that gold is merely a tradition, and says the following: "I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold,” he adds." The then innocently pointed out that when it comes to defense against hyperinflation, gold remains the, well, gold standard: [...] But the most interesting observation from Mervyn King's interview comes courtesy of an observation by The Money Trap's Robert Pringle, who writes the following about "Mervyn King's alarmist warning": According to the World Gold Council, Mervyn King, former governor of the Bank of England, believes that in certain circumstances China’s assets in the US could be “annulled”. Mervyn King’s alarmist warning is made in an interview, entitled “Present perilous, future imperfect” that appears in the June issue of Gold Investor, a WGC publication. After pointing out that “China and other countries do not want to be in a situation where all their iternational assets are in effect dependent on the US”, he is quoted as suggesting that all China’s US assets could be at risk: "Over the last decade or so, the claims by some emerging market countries on the US have grown. Who knows what the future holds, but China and other countries do not want to be in a situation where all their international assets are in effect dependent on the US. Of course the US would not want to renege on its debts, but if some awful conflagration occurred, then all China’s assets in the US might be annulled. So there are plenty of big concerns that make it extremely reasonable to have assets in your portfolio that are not dependent on the goodwill of other countries." The choice of the word “annulled” suggests some kind of deliberate action. Under what scenario could this be even contemplated? [...]"
Commentary: "Saudi Arabia To Tax Millions Of Foreign Residents To Raise Cash" Ø Hedge [06/09/16] "The troubles that Saudi Arabia has been facing due to the plunge in oil prices have been discussed many times, most recently when Saudi authorities ordered banks to stop allowing speculators to bet against the Riyal. Liquidity worries have also surfaced, as late last month Saudi Arabia indicated that it was considering paying contractors with government issued bonds - read: IOUs. [...] As Bloomberg reports, in a proposal released this week for the country's National Transformation Plan, the kingdom is seeking to tax millions of foreign residents. The tax is only "an initiative that will be discussed" Finance Minister Ibrahim al-Assaf said. However as Bloomberg notes, the fact that the tax was included in the proposal means that Deputy Crown Prince Mohammed bin Salman is considering the idea. Prince Mohammed has already taken steps to reduce spending, recently cutting fuel and utility subsidies and has proposed reducing the public sector wage bill. The kingdom is also joining other members of the six-nation Gulf Cooperation Council in imposing value-added taxation starting from 2018.[...]"
Commentary: "Blockchain Entrepreneur To Central Bankers: Get Into The Digital Thing For Control" [06/08/16] "The direction digital currencies are headed in is real bad. The head of a startup, Adam Ludwin CEO of San Francisco-based Chain, was recently in Washington D.C to introduce the digital blockchain to central bankers. He met with central bankers from 90 countries including Federal Reserve Chair Yellen, as well as officials from the International Monetary Fund, World Bank and Bank for International Settlements. And get this, the meeting was held at the Washington D.C. headquarters of the Federal Reserve, the notorious Eccles Building where monetary policy meetings are held. Luwin's pitch to the central bankers was about pure control, that is, the central bankers can get even more control over their monetary systems and a countries economy by going digital. [...]"
MSM: "Major Australian Bank Taken To Court Over Interest Rate Rigging" [06/08/16] "The corporate regulator has launched legal action against National Australia Bank for allegedly manipulating the bank bill swap rate (BBSW) 50 times. NAB said it would fight the case. Labor leader Bill Shorten jumped on the move, saying it provided further evidence of the need for a royal commission into the banks. “How many more people need to suffer and get ripped off before [Prime Minister Malcolm] Turnbull stops covering up for the banks?” Mr Shorten said. “Rather than hold the big banks accountable, Mr Turnbull is gifting them a $7.4 billion tax handout. It is an insult to everyone who’s been ripped off. Mr Turnbull has a choice here – and he’s putting the big banks first. He’s governing for the banks, not the Australian people.” The Australian Securities and Investments Commission’s case is based on unconscionable conduct and market manipulation. ASIC alleges NAB “traded in a manner that was unconscionable and intended to create an artificial price” for bank bills on 50 occasions between June 8, 2010 and December 24, 2012. [...]"
Commentary: "It Takes A Village To Maintain A Dangerous Financial System" Ø Hedge [06/07/16] "Last month, Anat R.Admati, the George G.C. Parker Professor of Finance and Economics at Stanford University’s Graduate School of Business, published a very important working paper titled, It Takes a Village to Maintain a Dangerous Financial System. PDF At 26 pages, it’s a bit longer than what you might leisurely read in the course of your daily activities, but I strongly suggest you take the time. Of course, if you don’t have the time, I’ve provided some key excerpts for you below. Despite deconstructing an intentionally complicated subject, the paper was both an enjoyable read and easily understandable. Additionally, the range of issues she successfully covered in such an short piece was nothing short of heroic. I knew it would be good after reading the abstract… Abstract: I discuss the motivations and actions (or inaction) of individuals in the financial system, governments, central banks, academia and the media that collectively contribute to the persistence of a dangerous and distorted financial system and inadequate, poorly designed regulations. Reassurances that regulators are doing their best to protect the public are false. The underlying problem is a powerful mix of distorted incentives, ignorance, confusion, and lack of accountability. Willful blindness seems to play a role in flawed claims by the system’s enablers that obscure reality and muddle the policy debate.[...]"
Trends: "Developed World Bond Yields Plunge To Record Lows" [06/07/16] "With the plunge in rate-hike odds and fears over Brexit, it appears the safety of global developed market bonds is sought after as Bloomberg's Developed World Bond yield slumps to just 62bps - a record low. Yields are moving opposite to what economist expected (and have been expecting since the fall of 2011 when Ben Bernanke broke the capital markets). Record low global bond yields ... [...]"
MSM: "Pure Coincidence? Massive McKinsey-Managed Hedge Fund Has Made Money In 24 Out Of 25 Years" Ø Hedge [06/07/16] "McKinsey, known as one of the world's most influential consulting firms, has another business line that hasn't been talked about much until recently - a little known investment arm called McKinsey Investment Office (MIO). MIO has total assets of $9.5 billion, in which roughly $5 billion are partner investments (past and present), and the rest is invested on the behalf of the McKinsey group pension plan FT reports. What the FT also found was MIO uses sophisticated proprietary trading strategies and external hedge fund and private equity managers, and has even seeded some of the funds with its own capital. Most interestingly, the flagship offering of the fund called Compass Special Situations, has made money for 24 of the past 25 years, only suffering a loss during the 2008 financial crisis. In 2014, the fund returned 14% compared to the average 3% average for hedge funds during that year. [...] So to summarize, an influential consulting firm that advises some of the world's largest companies on strategic questions such as M&A and restructuring has an internal investment arm with $9.5 billion in assets that hasn't lost money more than once in 25 years. Now that's Steve Cohen type performance right there. "Given the size of the internal investment fund, it raises the question of whether there's a conflict of interest here between McKinsey's investment strategy and its clients' needs" said Fiona Czerniawska, director of Source Global Research. Do you think? Let's take a look.[...]"
Commentary: "The Case For A Super Glass-Steagall" Ø Hedge [06/06/16] "Donald Trump can instantly get to the left of Hillary with respect to Wall Street and the one percenters by embracing Super Glass-Steagall. The latter would cap U.S. banks at $180 billion in assets (<1% of GDP) if they wished to have access to the Fed’s discount window and have their deposits backed by FDIC insurance. Such Federally privileged institutions would also be prohibited from engaging in trading, underwriting, investment banking, private equity, hedge funds, derivatives and other activities outside of deposit taking and lending. Instead, these latter inherently risky economic functions would be performed on the free market by at-risk banks and financial services companies. The latter could never get too big to fail or to manage because the market would stop them first or they would be disciplined by the fail-safe institution of bankruptcy. No taxpayer would ever be put in harms’ way of trades like those of the London Whale. By embracing this kind of Super Glass-Steagall Trump would consolidate his base in the flyover zones and reel in some of the Bernie Sanders throng, too. The latter will never forgive Clinton for her Goldman Sachs speech whoring. And that’s to say nothing of her full-throated support for the 2008 bank bailouts and the Fed’s subsequent giant gifts of QE and ZIRP to the Wall Street gamblers. Besides, breaking up the big banks and putting Wall Street back on a free market based level playing field is the right thing to do. Today’s multi-trillion banks are simply not free enterprise institutions entitled to be let alone. Instead, they are wards of the state dependent upon its subsidies, safety nets, regulatory protections and legal privileges. Consequently, they have gotten far larger, more risky and dangerous to society than could ever happen in an honest, disciplined market. [...]"
Concepts and Practices: "In Landslide Vote, Swiss Reject Proposal To Hand Out Free Money To Everyone" [06/06/16] "This weekend the Swiss population was called upon to make a historic decision, when Switzerland became the first country worldwide to put the idea of free money for everyone, technically known as Unconditional Basic Income (of CHF2,500 per month for every adult man and woman, and CHF625 for every child, for doing absolutely nothing) to a vote. As reported previously, the outcome of this referendum would set a strong precedent and establish a landmark in the evolution of the debate of handing out free money in a centrally-planned world. And as predicted, based on early vote projections it has been a landslide decision against the "free lunch." [...] Critics of the measure say that disconnecting the link between work done and money earned would be bad for society. But Che Wagner from the campaign group Basic Income Switzerland, says it wouldn't be money for nothing. "In Switzerland over 50% of total work that is done is unpaid. It's care work, it's at home, it's in different communities, so that work would be more valued with a basic income." Luzi Stamm, who's a member of parliament for the right-wing Swiss People's Party, opposes the idea. "Theoretically, if Switzerland were an island, the answer is yes. But with open borders, it's a total impossibility, especially for Switzerland, with a high living standard," he says. "If you would offer every individual a Swiss amount of money, you would have billions of people who would try to move into Switzerland.[...] Switzerland may be the first but it won't be the last. The idea is also under consideration elsewhere. In Finland, the government is considering a trial to give basic income to about 8,000 people from low-income groups. And in the Dutch city of Utrecht is also developing a pilot project which will begin in January 2017.[...]"
MSM: "Why The Fed Is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses" [06/05/16] "A funny thing happened as every central bank around the world rushed to stimulate their economy by devaluing their currency in a global FX war that is now 7 years old and getting more violent by the day: with bond yields plunging, and over $10 trillion in global debt now having a negative yield, every fixed income investor starved for yield was pushed into the long end of the bond curve where whatever yield is left in the world of "safe" bonds is to be found. As long as interest rates never go up, this strategy is relatively safe. However, a major risk emerges when central banks start tightening. To be sure, banks have been eager to front-run any concerns about the Fed's rate hike by cheering higher rates as precisely what they need to be more profitable, and the market has so far believed and rewarded bank stocks the higher rate hike odds rose. Just this Thursday, speaking at an investor conference James Dimon said that if short-term and long-term rates were to move up by 1 percentage point simultaneously, 70% of the benefit would come from the move in short-term rates. The reason for this is that even if long-term rates remain under pressure, and the curve flattens further, an increase in short-term rates provides an immediate boost to bank profits. That is because many loans are automatically priced against short-term benchmarks like LIBOR and Prime. [...] What Dimon did not discuss is the P&L impact from the higher yields and dropping bond prices in the long end of the yield curve. And it is here, in the unprecedented duration exposure that central banks have forced everyone into, that the true risk resides.[...]How big is the risk? According to an analysis by Goldman's Charles Himmelberg, if rates rise by the Jamie Dimon-referenced 1 percentage point, the market value loss would be between $1 and $2.4 trillion! Putting this loss in context, even the smaller $1trn loss would be over 50% larger than the market value lost in the 1994 bond market selloff in inflation-adjusted terms, and larger than the cumulative credit losses experienced to date in the non-agency residential mortgage backed securities market. And this is only only as a result of a 1% interest rate increase: assuming full normalization of rates to their historical level of 3.5%, and the level of mark-to-market losses climbs to a staggering $3 trillion.[...]The culprit? The Fed, the same Fed which does not to grasp that by "renormalizing" into the biggest bond bubble in history is assuring massive losses for the financial sector.[...]The problem is simple: having inflated a gargantuan bond bubble, letting the air out would by definition lead to dramatic consequences not just for bonds but for all other asset classes. [...]"
Commentary: "Uber And Goldman Leasing Cars To Broke People" [06/04/16] "Deal led by Goldman Sachs, Xchange received a $1 billion credit facility to fund new car leases. Uber will grow its U.S. subprime auto leasing business and give many of the world’s biggest financial institutions exposure to the company’s auto leases. [...]" Note: The Saudis (below) have just bought into Uber for 3.5 Billion ...
MSM: "Cash-Strapped Saudi Arabia Looking To Issue $15 Billion In Bonds" [06/03/16] "Last week the bond market was stunned by the unprecedented demand for sovereign paper issued by the middle-eastern nation of Qatar, which announced it would issue $9 billion in Eurobonds (in three maturities), more than double what had been originally expected by the market, and well below the total demand for Qatar sovereign paper: according to Reuters, the issue was massively oversubscribed, with over $23 billion in soft orders. [...] While Saudi Arabia is still sitting on nearly $600 billion in foreign-exchange reserves, the country has burned through $140 billion in reserves since the end of 2014. And the IMF warned the Saudis could eventually run out of cash. This is not Saudi Arabia’s first recent approach to capital markets: in April the kingdom raised a $10 billion loan from a group of banks, its first loan in 25 years. Last year, the Saudis tapped the local bond market for the first time in eight years, raising at least $4 billion. But this would be the first time Saudi Arabia has issued international bonds. And it will be a whopper. CNN also quotes John Sfakianakis, a former official in Saudi Arabia’s Ministry of Finance who said the sale would likely take place over the next several months. “There is a need to cover the fiscal gap,” said Sfakianakis, who is currently director of economic research at the Gulf Research Center in Riyadh, Saudi Arabia. “It’s better for this money to come from other sources than reserve assets because as they get depleted that places a bigger risk over the medium to long-term.”[...]" Related: "Saudi Arabia Has Just Invested 3.5 Billion In Uber, Making It The Largest Single Investment In A Private Company On Earth" "Uber Technologies Inc. said it received its biggest investment to date, raising $3.5 billion from the Public Investment Fund of Saudi Arabia.The investment valued Uber at $62.5 billion, the same amount as its previous valuation, the company said Wednesday in a statement. Yasir Al Rumayyan, the managing director of Saudi Arabia’s sovereign wealth fund, will take a board seat. The investment brings Uber’s total balance sheet, including cash and convertible debt, to more than $11 billion, the company said. [...]" More from Bloomberg.com
MSM: "Mission Impossible: Untold Story of US-Saudi 41-Year-Old Secret Agreement" [06/02/16] "For 41 years the amount of Saudi Arabia's holdings in US Treasuries remained shrouded in secrecy. What was behind the mysterious deal? [...] "The basic framework was strikingly simple. The US would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America's spending," the journalists continues.[...]" Related: Corbett Report: "Why is the MSM (Finally) Reporting on the Petrodollar? " [17:09] "Bloomberg is trumpeting "The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt Secret," but anyone who is scratching their heads at this non-revelation might well wonder 'Why Bloomberg?' and 'Why now?' Join James in today's Thought For The Day as he examines the latest volleys in the ongoing covert war between the Saudis and the US and the bigger picture of the battle for the global monetary system. [...]"
Commentary: "SWIFT Finally Pushes Two-Factor Authorization In Banks" [06/01/16] "The international financial network SWIFT has said it will "expand" its use of two-factor authentication when banks shift funds. The belated decision comes following a turbulent few weeks in which a series of multi-million dollar thefts carried out through the SWIFT system came to light. Bangladesh's central bank lost $81m, Ecuadoran bank Banco del Austro SA lost $12m, and the same attacks were also used against a bank in the Philippines and the Vietnamese bank Tien Phong. SWIFT's initial response to the hacks was to stress that its network had not been compromised and the thefts were the result of other banks' systems being hacked. But that slant on things elicited a fierce response, with experts pointing out that SWIFT's security measures were severely lacking and used a model of threat awareness that was a decade out of date. Stung by criticism, a few weeks later SWIFT's CEO promised to review the organization's security measures and earlier this week outlined a five-point plan in a speech at a financial conference. [...] On Friday, that plan was fleshed out a little. It will now "require" more information from customers and share that information with its other customers, plus inform everyone on its system of any incidents, and issue "best practices" for "cyber defense." Critically, it will "expand" its support of two-factor authentication as well as include "additional tools" such as monitoring software. Although we note that it has still not said it will insist on the basic security measure for transfers. SWIFT will provide "audit frameworks" and create audit standards and certification, plus compare banks' compliance level with "baselines." And it will "support increased payment patterns control" as well as "explore tools to allow customers to quickly recall fraudulent payment messages" and make it easier to put a stop on payments. All of those improvements will help beef up the security of a system that moves billions of dollars around the globe on a daily basis. The fact that it took four incidents of theft and widespread public criticism to force SWIFT to enter the modern world does not put the organization in a good light, however. [...]"
MSM: "Stockman: U.S. Has Been Living Beyond Its Means For 30 Years" [06/01/16] [4:45] "Fmr Reagan budget director David Stockman explains.
MSM: "Iceland Has Offered Foreign Bondholders A "Choice": Sell Now, Or Have Cash Impounded Indefinitely" Ø Hedge [06/01/16] "Iceland has had a difficult past few months politically, as its Prime Minister Sigmundur David Gunlaugsson became the first casualty of the Panama Papers. Economically however, the story is more upbeat, as the country has rebounded since the financial crisis. The Icelandic Krona has stabilized against the Euro, the rate of change in inflation has slowed, and the country has recorded year-over-year growth in GDP each year since 2011. However, in a shocking turn of events, a law passed on May 22 by Iceland's parliament is offering the foreign holders of about $2.3 billion worth of krona-denominated bonds a choice of either selling out in June at a below-market exchange rate, or have the money they receive upon maturity be impounded indefinitely in low interest bank accounts. In other words, Iceland is trying to kick out foreign investors. However, in a shocking turn of events, a law passed on May 22 by Iceland's parliament is offering the foreign holders of about $2.3 billion worth of krona-denominated bonds a choice of either selling out in June at a below-market exchange rate, or have the money they receive upon maturity be impounded indefinitely in low interest bank accounts. In other words, Iceland is trying to kick out foreign investors. [...] Iceland has had formal capital controls since it barred conversions of krona to foreign currencies during the 2008 crisis, boxing in foreign bondholders at that time as well. While the controls are still in place, the country has made the first step in easing some of the controls, as it recently negotiated a deal with creditors that paved the way for payments to be made to those holding distressed bank debt left over from the crisis. Investors deciding to stay invested with Iceland are playing a dangerous game of chicken with the government on whether or not capital controls will be lifted in any reasonable amount of time. It has taken nearly seven years for creditors to get money out of the country after the financial crisis, and although the krona has stabilized since its plunge and the economy is back on firmer footing, nobody can know for certain just how long investor cash will be tied up in Iceland's low yielding bank accounts before controls are finally lifted. [...]"
MSM: " Illinois Gov Vetoes Plan To Reduce Chicago’s Pension Contributions" [05/31/16] "Chicago’s pension contributions to its four dreadfully underfunded pension plans were supposed to double this year to $1.1 billion, up from $478 billion in 2015. But state legislators passed a bill (which had been bottled up for nearly a year) to cut that back to under $900 million. On Friday Illinois Governor Bruce Rauner (shown) vetoed the bill, expressing in no uncertain terms that he was tired of politicians kicking the can down the road: By deferring responsible funding decisions until 2021 and then extending the timeline for reaching responsible funding levels from 2040 to 2055, Chicago is borrowing against its taxpayers to the tune of $18.6 billion. This practice has got to stop. If we continue, we’ve learned nothing from our past mistakes. Those past “mistakes” have got Chicago Mayor Rahm Emanuel in a pickle. He dares not challenge the unions to cut benefits for teachers and city workers. The state enacted the largest property tax increase in history in 2011, mulcting another $31 billion from taxpayers, nearly all of which went to shore up those pension plans. The pension liabilities, even if funded under the original plan, would still result in the plans running out of money within 10 years. Pension assumptions have just been reduced (slightly), which neatly added $11.5 billion to the city’s $20 billion plan shortfalls. And with stock and bond prices at historic highs, there is little chance that investment returns over the next decade will overcome funding shortfalls through market gains. Already those plans are eating into principal every year just to make payments to current beneficiaries. [...] And then there’s House Speaker Michael Madigan. Mayor Emanuel didn’t mention Madigan’s name in his blunt response to Rauner’s veto. Instead, he made it clear that, in order to meet the pension shortfall, Rauner is forcing Emanuel to impose another property tax increase on Chicagoans: With a stroke of his [veto] pen, Bruce Rauner just told every Chicago taxpayer to take a hike. Bruce Rauner ran for office promising to shake up Springfield [Illinois’ capital city], but all he’s doing is shaking down Chicago residents, forcing an unnecessary $300 million property tax increase on them and using them as pawns in his failed political agenda. Would that it would be that simple. On May 19 the city’s net pension liability of just one of its four plans, its Municipal Employees’ Annuity and Benefit Fund, jumped by $11.5 billion as the plan’s actuaries were forced to reduce some of its investment assumptions.[...]"
Commentary: "Here's Why All Pension Funds Are Doomed" [05/30/16] "There are limits on what the Fed can do when this bubble bursts, as it inevitably will, as surely as night follows day. It's no secret that virtually every pension fund is dead man walking, doomed by central banks' imposition of low yields on safe investments, i.e. Zero Interest Rate Policy (ZIRP). Given that both The Economist and The Wall Street Journal have covered the impossibility of pension funds achieving their expected returns, this reality cannot be a surprise to anyone in a leadership role. [...] Here's problem #1 in a nutshell: the average public pension fund still expects to earn an average annual return of 7.69%, year after year, decade after decade (arbitrary and delusional) This is roughly triple the nominal (not adjusted for inflation) yield on a 30-year Treasury bond (about 2.65%). The only way any fund manager can earn 7.7% or more in a low-yield environment is to make extremely high risk bets that consistently pay off. This is like playing one hand after another in a casino and never losing. Sorry, but high risk gambling doesn't work that way: the higher the risk, the bigger the gains; but equally important, the bigger the losses when the hot hand turns cold. [...] Here's problem #2 in a nutshell: in the good old days before the economy (and pension funds) became dependent on debt-fueled asset bubbles for their survival, pension fund managers expected an average annual return of 3.8%--less than half the current expected returns. In the good old days, the needed returns could be generated by investing in safe income-producing assets-- high-quality corporate bonds, Treasury bonds, etc. The risk of losing any of the fund's capital was extremely low. Now that the expected returns have more than doubled while the yield on safe investments has plummeted, fund managers must take risks (i.e. chase yield) that can easily wipe out major chunks of the fund's capital if the bubble du jour bursts. [...]" Related: "Keiser Report: Pensions Going Bankrupt" [25:47] "In this episode of the Keiser Report, we discuss retirement: the ugliest word in the English language, which, nevertheless, many Americans will no longer have to encounter. In the second half, Max interviews Constantin Gurdgiev, Professor of Finance at Middlebury Institute of International Studies, about the debt situation in Europe and the Irish water fiasco."
MSM: "China Sends Yellen Another Warning, Fixes Yuan At Lowest In Over Five years" Ø Hedge [05/30/16] "We got an early hint of what the PBOC would do tonight on Friday and Saturday, when as we reported, an unprecedented volume burst of bitcoin buying out of China, sent the digital currency soaring to the highest level since 2014. To be sure, we had expected sailing would not be smooth for the FX market, when on Friday afternoon, after Yellen's' unexpectedly hawkish comments at Harvard, which sent the USD surging, we predicted a stormy sea for the Monday Yuan fix [...]"
Concepts and Practices: "EU Passes Tax ID Numbers For Everyone" [05/30/16] "The EU is laying the groundwork for everyone in Europe to be given a new tax ID number in preparation for moving to electronic money. They are using a National Insurance number pretense to disguise the real objective. This scheme was passed by the Economic and Monetary Affairs Committee last week. This is another step in the federalization of Europe and even the British will have to comply. Naturally, nobody will report this in Britain because it obviously calls for a European Taxpayer Identification Number to keep track of every EU citizen, which include the British. The actual the European Commission text reads: “Proper identification of taxpayers is essential to effective exchange of information between tax administrations. The creation of European Taxpayer Identification Number (EU TIN) would provide the best means for this identification. It would allow any third party to quickly, easily and correctly identify and record TINs in cross-border relations and serve as a basis for effective automatic exchange of information between member states tax administrations.” [...] This covert maneuver calls for the EU to take over member states’ corporate taxation powers with a common corporation tax base for Europe as a whole. The British corporations are suddenly going to taste the bitter bite of Europeans socialism and watch their taxes sky-rocket. That should help increase unemployment in Britain at a far faster pace than expected. This new legislation is banning sovereign member states from increasing their competitiveness by cutting corporation tax below 15%. Brussels is eliminating independence within Europe on taxes and this enables Brussels to be handed the ability to track every EU taxpayer, laying the foundations for a new European tax and to prevent competitive taxation to lure in companies from other members to help reduce local unemployment."
MSM: "US Default Risk Hits 8-Month Highs" Ø Hedge [05/29/16] "While still relatively low, USA sovereign CDS spreads have risen to 8-month highs, surging off early March lows. The reasons are likely numerous though we suggest the 4 surges in the last 3 months appear to line up with notable 'events'... While correlation does not imply causation, it does waggle its eyebrows suggestively and gesture furtively while mouthing "look over here." Could it be that Trump's honest comments on the creditworthiness of the USA are beginning to resonate with market participants as the probability of his winning in November rises? [...]"
MSM: "The Plans on Putin's Desk - 3 Ways Out of the Economic Crisis" [05/28/16] "Plan 1: Limit the income of the population. The Ministry of Economic Development believes that the growth of salaries and the country's galloping consumption are driving the Russian economy into a dead end. That is why it is suggesting two ways of getting out of the crisis: limiting salaries and transforming the revenues into investments. According to this plan, investments in the upcoming years should grow by 7-8 percent annually if consumption stagnation remains as it is now, says the ministry. It is impossible to force all employers to limit the growth of salaries, but it is possible to influence the budget structures that are dependent on the government. [...] Plan 2: Print money. An alternative plan was presented by the so-called Stolypinsky Club, named in honor of Minister Peter Stolypin from the beginning of the 20th century, (a club of conservative economists). One of the members of its presidium is Putin's advisor Sergei Glaziev, a leftist economist who is in favor of independence for the Russian-speaking Donbass region in eastern Ukraine. The Stolypinsky Club suggests that Russia launch a "quantitative easing" policy, for example, print special obligations for 1.5 trillion rubles ($22.5 billion). In order for this not to affect inflation, the club proposes the country return to the currency corridor and end the floating exchange rate, which was introduced at the end of 2014. Such a plan was implemented in the USSR during the large crisis at the end of the 1980s, which led, among other things, to the collapse of the state. This method is actively employed in the West.[...] Plan 3: Reform the justice system. It is impossible to obtain economic growth without guaranteeing the right to property. That is why the necessary condition for overcoming the crisis must be the reformation of the law enforcement agencies and the justice system, according to former finance minister and author of the third plan Alexei Kudrin. Despite the fact that Kudrin resigned in 2011 and currently heads the Committee of Civil Initiatives, which in reality opposes the present government, he remains one of the most influential economists in the country. In his view, for the country to get over the crisis the justice and law enforcement systems must be more objective and the share of the economy that belongs to the government must be reduced in favor of small business. But to speed up growth rates to 4 percent in 2019 an additional 4.5 million people must enter the workforce and 40 trillion rubles ($599 billion) of investment must be injected into the principal capital. Such a policy produced successful results in the Southeast Asian countries, notes Emil Martirosyan, professor at the Russian Presidential Academy of National Economy and Public Administration’s Institute of Business and Business Administration.[...]"
Commentary: "Bill Would Prohibit Federal Reserve Bailouts for States, Cities" [05/28/16] "Amid the fiscal meltdown in Puerto Rico, a coalition of Republican lawmakers introduced a bill in Congress that would prohibit any federal or Federal Reserve “funny-money” funding to bail out state, county, local, or territorial governments across the United States. If the legislation is approved, the prohibition would apply to bailouts by both the Obama administration’s Treasury and the “independent” Federal Reserve System, which in recent years has conjured trillions of dollars into existence out of thin air to bail out mega-banks and other cronies in America and worldwide. Some analysts, though, are skeptical of the motives. [...] The anti-bailout measure comes amid Puerto Rico’s ongoing financial woes, problems so serious that the island, a territory of the United States, is said to be in a “death spiral” after defaulting on its debts. At the same time, America is also facing a widely anticipated wave of looming state, county, and municipal bankruptcies in the face of outlandish pension obligations and wild debtsrun up by Big Labor-controlled politicians. Some city governments, including Detroit (shown) and Stockton, have already declared bankruptcy in recent years. More will follow in the months and years ahead. The legislation, entitled No Bailouts for State, Territory, and Local Governments Act (HR 5276), is only four pages long. The purpose, according to the summary, is simple: “To prohibit the provision of Federal funds to State, territory, and local governments for payment of obligations, to prohibit the Board of Governors of the Federal Reserve System from financially assisting State and local governments, and for other purposes.” [...] Opponents of bailing out fiscally irresponsible state and local politicians and bureaucrats celebrated the legislation. Some analysts, though, suspect the bill is really aimed at saving all of the potential Federal Reserve bailouts for the federal government itself, which currently has more debt and unfunded liabilities than any entity has ever accumulated in all of human history. Among other liabilities, Washington, D.C., has a national debt close to $20 trillion, owing much of it to the Fed and Communist China. That figure does not include unfunded liabilities, which experts estimate at between $100 trillion and $200 trillion. More than a few states are also in trouble. Among state governments, the Big Government-dominated states of Illinois, California, New Jersey, and New York are said to be in the most dire financial straits — and that is despite imposing some of the highest tax burdens in the nation. Conservative states such as Alaska, Wyoming, the Dakotas, and Florida are in the best shape, and also have among the lowest tax rates. Numerous Democrat-controlled cities are also facing impossible-to-pay pension obligations and debt loads. Several have already gone under, stiffing bond holders.[...]"
MSM: "Fed Has Limited Number of Tools to Address Possible US Economic Downturn" [05/28/16] "The US Federal Reserve is constrained in the number of ways it can address economic challenges in the United States, Federal Reserve Chair Janet Yellen said on Friday. Yellen also underscored that greater scope for fiscal policy might be needed in the future to address the US economic weakness. The Federal Reserve Chair explained that current tools to stimulate the US economy include purchases of longer-term assets and provision of forward guidance, which serve to assure the public about intended monetary policies. Yellen noted that the Federal Reserve considered negative interest rates as a tool, employed by other economies, but only briefly. "We were concerned at the time that there could be a number of negative repercussions… to lowering to zero or negative territory," she added.[...]"
Curiosities: "Anonymous Alleged To Have Hit NY Stock Exchange, World Bank, The Fed, & Vatican" [05/27/16] "Amidst a global media blackout of Anonymous’ ongoing worldwide attacks on the “corrupt banking cartels,” the hacking collective has now taken down some of the most prestigious institutions in global governance. OpIcarus has recently taken offline the World Bank, the New York Stock Exchange, five U.S. Federal Reserve Banks and the Vatican. After announcing a global call to arms against the “corrupt global banking cartel,” the hacker collective, known as Anonymous, in conjunction with Ghost Squad Hackers, have taken more than 30 central banks offline,[...]"
MSM: "World’s 16 Biggest Banks Ordered To Face Libor Lawsuits In Ruling Court Warns Could Ruin Them" [05/26/16] "Sixteen of the world’s largest banks including JPMorgan Chase & Co. and Citigroup Inc. must face antitrust lawsuits accusing them of hurting investors who bought securities tied to Libor by rigging an interest-rate benchmark, a ruling that an appeals court warned could devastate them. The appellate judges reversed a lower-court ruling on one issue — whether the investors had adequately claimed in their complaints to have been harmed — while sending the cases back for the judge to consider another issue: whether the plaintiffs are the proper parties to sue, in part because their claims, if successful, provide for triple damages that could overwhelm the banks. “Requiring the banks to pay treble damages to every plaintiff who ended up on the wrong side of an independent Libor denominated derivative swap would, if appellants’ allegations were proved at trial, not only bankrupt 16 of the world’s most important financial institutions, but also vastly extend the potential scope of antitrust liability in myriad markets where derivative instruments have proliferated,” the U.S. Court of Appeals in New York said in the ruling. Bank of America Corp., HSBC Holdings Plc, Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, Royal Bank of Canada and Royal Bank of Scotland Group Plc are also among the banks sued in Manhattan. Libor Fines: About a dozen firms have paid almost US$9 billion in fines to resolve government investigations around the world into rigging of the key benchmark. Libor is used to set interest rates for trillions of dollars financial instruments. The ruling by a three-judge panel opens the possibility the banks may have to pay billions more.[...]" Related: "So, You Thought Bank of America Would be Punished for Role in 2008 Crisis? Think Again"
MSM: "Head Of The IMF Christine Lagarde In Court Charged With Embezzlement And Fraud" [05/25/16] "The head of the International Monetary Fund arrived in the dock of a Paris courtroom today as she braced herself to be formally charged with embezzlement and fraud. [...] Christine Lagarde’s humiliation is not only a massive personal blow which could lead to her resignation, but one which will plunge the world’s banking system into further ignominy. The clearly nervous 57-year-old said nothing to reporters as she entered the Court of Justice of the Republic, a special tribunal set up to judge the conduct of France’s government ministers, shortly after 8.30am. Lagarde faces a maximum sentence of 10 years in jail if found guilty of the very serious charges. It was when she was President Nicolas Sarkozy’s finance minister that she is said to have authorised a 270 million pounds payout to one of his prominent supporters, so abusing her government position. The money went to Bernard Tapie, a convicted football match fixer and tax dodger who supported Lagarde and Sarkozy’s UMP party. It came after Dominque Strauss-Kahn, another senior French politician, was sacked as IMF chief following allegations that he attempted to rape a chambermaid in a New York hotel. Ms Lagarde began campaigning to succeed Mr Strauss-Kahn soon after his arrest for the alleged crime. But now it is Ms Lagarde, a lawyer and retired synchronised swimming star, who is facing a long court process of her own, as well as a possible jail sentence. The scandal will not only pile further shame on France’s political class, but worry politicians and bankers desperately trying to resolve the global financial crisis." Note: Pluto in Capricorn asserting itself ... and reckless path planning.
Commentary: "Lewis Black On Wall Street Bankers" [05/25/16] [12:04] "Comedian Lewis Black talks about the banks and their bail out. [...]"
MSM: "Greek Parliament Pushes Through More Austerity Measures To Unlock Bailout Cash" [05/25/16] "In the midst of huge public protests, Athens has approved more budget cuts, tax increases and a new privatization fund to manage almost all state property in order to get further rescue loans from European creditors. The government hopes to incorporate an extra €1.8 billion in revenue and get the next tranche of much-needed bailout funds to pay IMF loans, bonds held by the ECB coming due in July, and decreasing state debt. Greece's European creditors are expected to disburse €11 billion ($12.3 billion) following an assessment of the country's third bailout program. Under the terms of the bailout deal agreed last year, the international lenders will provide as much as €86 billion in aid. “Greeks have already paid a lot, but this is probably the first time the possibility of these sacrifices being the last is so evident,” said Prime Minister Alexis Tsipras to Parliament before the vote. The PM expects the country’s economy to grow three percent next year. The reforms involve new taxes on alcohol, tobacco, fuel, internet usage, cars, hotel stays, as well as an increase in the basic value-added tax rate from 23 to 24 percent. [...]" Note: I remember the movie and expression 'they shoot horses, don't they?' .... as if the Greek population hasn't been through enough ...
MSM: "American Companies Are 'Masking' A $6.6 Trillion Mountain Of Debt" [05/24/16] "Too much debt, however, can be a bit of a problem to say the least ... Well, American companies may just have a mountain's worth of problems, according to a new report from Andrew Chang and David Tesher of S&P Global Ratings. At the same time, the imbalance between cash and debt outstanding we reported on last year has gotten even worse: Debt outstanding increased 50x that of cash in 2015," wrote Chang and Tesher. "Total debt rose by roughly $850 billion to $6.6 trillion last year, dwarfing the 1% cash growth ($17 billion)." To be fair, Chang and Tesher do mention that the $1.84 trillion in cash that the over 2,000 companies they analyzed are holding is the largest amount ever. The issue is, a big pile of cash doesn't help mask the much, much larger mountain of debt. In S&P's case, one of the key factors used to determine a company's credit rating is the ability to pay down debt. So as the cash-to-debt ratio gets even more out of whack, debt problems could be around the corner. "Given the record levels of speculative-grade debt issuance in recent years, we believe corporate default rates could increase over the next few years, especially given diminished growth prospects in China, weak commodity and energy prices globally, and the sizable universe of lower-quality non-financial corporate debt outstanding," said the report.[...] How did this happen? It's all about investor appetite. As we've hit on before, the so-called reach for yield among investors has increased the appetite for higher yielding bonds. These companies have clearly obliged, opting to issue debt in order to fund operations or return cash to shareholders. "This jump in debt reflects the scant resistance borrowers faced from yield-starved investors as companies pursued acquisitions and returned cash to shareholders," said the report. Some have said that this has led to a massive bubble in the bond market, or it could just be a cycle. Regardless of its future ramifications, it is by any measure quite a lot of debt. Now to be fair, cash isn't the only way to pay off debt. If necessary, companies can liquidate assets or refinance in order to pay creditors beck. Doing so, however, usually means that the company is in big trouble and is much less preferable.[...]" Related: "Business Debt Delinquencies Are Now Higher Than When Lehman Brothers Collapsed In 2008"
MSM: "Finance: The Endgame" Ø Hedge [05/23/16] "There is a growing fear in financial and monetary circles that there is something deeply wrong with the global economy. Publicly, officials and practitioners alike have become confused by policy failures, and privately, occasionally even downright pessimistic, at a loss to see a statist solution. It is hardly exaggerating to say there is a growing feeling of impending doom. The reason this has happened is that today’s macro-economists are a failure on the one subject about which they profess to be experts: economics. Their policy recommendations have become the opposite from what logic and sound economic theory shows is the true path to economic progress. Progress is not even on their list of objectives, which fortunately for us all happens despite their interventions. The adaptability of humans in their actions has allowed progress to continue, despite all attempts to discredit markets, the clearing centres for the division of labour. Ill-founded beliefs in the magic of unsound money have been shattered on the altar of experience. Macro-economists are discovering that the failure of monetary and fiscal planning are becoming a policy cul-de-sac that has generated a legacy of unsustainable debt. Those of us aware of a gathering financial crisis are discovering that governments have tamed only the statistics and not what they represent. There is evidence that central bank intervention began to irrevocably distort markets from 1981, when Paul Volker raised interest rates to halt the slide in the dollar’s purchasing power. It was at that point the free market relationship between the price level and the cost of borrowing changed, evidenced by the failure of Gibson’s paradox. That was the point when central banks wrested control of prices from the market. This is explained more fully below. [...] Markets versus governments: [...] The analytical mistake: [...] The Consequences: [...]"
Commentary: "Meltdown - The Men Who Crashed The Financial World" [05/22/16] [43:20] "Meltdown is a four-part investigation into a world of greed and recklessness that brought down the financial world. The show begins with the 2008 crash that pushed 30 million people into unemployment, brought countries to the edge of insolvency and turned the clock back to 1929. But how did it all go so wrong? Lack of government regulation; easy lending in the US housing market meant anyone could qualify for a home loan with no government regulations in place. Also, London was competing with New York as the banking capital of the world. Gordon Brown, the British finance minister at the time, introduced "light touch regulation" - giving bankers a free hand in the marketplace. Meltdown moves on to examine the epidemic of fear that caused the world's banks to stop lending and how the people began their fight back. Finally, it asks how the world can prepare for the next crisis even as it recognises that this one is far from over. The first of a four-part investigation into a world of greed and recklessness that led to financial collapse. In the first episode of Meltdown, we hear about four men who brought down the global economy: a billionaire mortgage-seller who fooled millions; a high-rolling banker with a fatal weakness; a ferocious Wall Street predator; and the power behind the throne. The crash of September 2008 brought the largest bankruptcies in world history, pushing more than 30 million people into unemployment and bringing many countries to the edge of insolvency. Wall Street turned back the clock to 1929. But how did it all go so wrong? Lack of government regulation; easy lending in the US housing market meant anyone could qualify for a home loan with no government regulations in place. Also, London was competing with New York as the banking capital of the world. Gordon Brown, the British finance minister at the time, introduced 'light touch regulation' - giving bankers a free hand in the marketplace. All this, and with key players making the wrong financial decisions, saw the world's biggest financial collapse.[...]" Related: "Part 2" [15:09]| "Part 3" [12:26] | "Part 4" [44:59]
MSM: "Five Banks Sued In U.S. For Rigging $9 Trillion Agency Bond Market" [05/21/16] "Five major banks and four traders were sued on Wednesday in a private U.S. lawsuit claiming they conspired to rig prices worldwide in a more than $9 trillion market for bonds issued by government-linked organizations and agencies. Bank of America Corp (BAC.N), Credit Agricole SA (CAGR.PA), Credit Suisse Group AG (CSGN.S), Deutsche Bank AG (DBKGn.DE) and Nomura Holdings Inc (8604.T) were accused of secretly agreeing to widen the "bid-ask" spreads they quoted customers of supranational, sub-sovereign and agency (SSA) bonds. The lawsuit filed in Manhattan federal court by the Boston Retirement System said the collusion dates to at least 2005, was conducted through chatrooms and instant messaging, and caused investors to overpay for bonds they bought or accept low prices for bonds they sold. [...] The lawsuit filed in Manhattan federal court by the Boston Retirement System said the collusion dates to at least 2005, was conducted through chatrooms and instant messaging, and caused investors to overpay for bonds they bought or accept low prices for bonds they sold. "Only through collusion could a dealer quote a wider spread than market conditions otherwise dictate without losing market share and profits," the complaint said. "Defendants reaped millions of dollar(s) in profits at the expense of plaintiff and members of the class as result of their misconduct." The proposed class-action lawsuit seeks triple damages, and follows probes by U.S. and European Union antitrust regulators into possible SSA bond price rigging.[...] Those probes are also examining the London-based defendant traders Hiren Gudka of Bank of America, Bhardeep Singh Heer of Nomura, Amandeep Singh Manku of Credit Agricole and Shailen Pau of Credit Suisse, Thomson Reuters' IFR service reported in January. Bank of America, Credit Suisse, Deutsche Bank and Nomura declined to comment on behalf of themselves and the traders who have worked for them. Credit Agricole did not immediately respond to a request for comment.[...] The lawsuit is one of many in the Manhattan federal court seeking to hold banks liable for alleged price-fixing in bond, commodity, currency, derivatives, interest rate and other financial markets. One such lawsuit, concerning competition in the credit default swaps market, led last September to a $1.86 billion settlement with a dozen banks.[...]"
Commentary: "Texas Bullion Depository: Gold Backed Bank To Be Completed Next Year" [05/20/16] "Last year Texas Governor Gregg Abbott signed HB 483, allowing the creation of the Texas Gold Depository. “With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state,” he said last June. This gold bank would allow Texas to recover the gold that it has stored in New York vaults, and give Texan citizens and institutions a chance to store their gold in the facility, and open checking and savings accounts that would be valued in gold rather than dollars. This even opens the possibility of making gold transactions electronically for the very first time. Now several companies are offering competing plans to build the depository, including Brinks, Anthem Vaults, and Texas Precious Metals. TPM wants to create a sprawling 46,000 square foot facility with 12 inch concrete walls. Brinks would utilize a series of preexisting vaults that they own and operate in Texas, while Anthem vaults would build “multiple vaulting locations throughout Texas to enable all Texans access to their bullion within a reasonable distance from their homes.” They wold also set up coin shops that could accept deposits on behalf of the vault. According to Representative Giovanni Capriglione, the original sponsor of HB 483, “I am optimistic that the depository will be up and running at the end of this year or the beginning of next year.” What isn’t being said by the original proponents of this idea, is that it would give Texans a solid alternative to the Federal Reserve banking system and the US dollar. And should the dollar ever lose its global reserve status, Texas will be in a financial position that is far more resilient than the rest of the country. [...]"
MSM: "11 Signs That The U.S. Economy Is Rapidly Deteriorating Even As The Stock Market Soars" [05/19/16] "We have seen this story before, and it never ends well. From mid-March until early May 2008, a vigorous stock market rally convinced many investors that the market turmoil of late 2007 and early 2008 was over and that happy days were ahead for the U.S. economy. But of course we all know what happened. It turned out that the market downturns of late 2007 and early 2008 were just “foreshocks” of a much greater crash in late 2008. The market surge in the spring of 2008 was just a mirage, and it masked rapidly declining economic fundamentals. Well, the exact same thing is happening right now. The Dow rose another 222 points on Tuesday, but meanwhile virtually every number that we are getting is just screaming that the overall U.S. economy is steadily falling apart. So don’t be fooled by a rising stock market. Just like in the spring of 2008, all of the signs are pointing to an avalanche of bad economic news in the months ahead. The following are 11 signs that the U.S. economy is rapidly deteriorating… [...] Of course the U.S. economy is actually doing significantly better at the moment than almost everywhere else on the planet. Many areas of South America have already plunged into an economic depression, major banks all over Europe are in the process of completely melting down, Japanese GDP has gone negative again despite all of their emergency measures, and Chinese stocks are down more than 40 percent since the peak of the market. This is a global economic slowdown, and just like in 2008 it is only a matter of time before the financial markets catch up with reality.[...]" Related: "Working 60 Hours A Week At 3 Part-Time Jobs And Still Living Paycheck To Paycheck" "What can you do when you are working 60 hours a week at three part-time jobs and it is still not enough? In America today, many people have taken on more than one job in a desperate attempt to make ends meet, but they still come up short at the end of the month. And those that are actually working are the fortunate ones, because in one out of every five families in the United States nobody has a job. There are more than 100 million working age Americans that are currently not employed (yes this is true), and as I pointed out yesterday, job cut announcements by major firms are currently running 24 percent ahead of last year’s pace. But unemployment is just part of the overall problem. There is this growing misconception out there that if you “have a job” that you must be doing okay. Unfortunately for the growing number of “working poor” in America, that is not true at all. [...]"
Commentary: "America's Age Of Impunity" [05/19/16] "The Panama Papers opened yet another window on the global system of financial corruption, showing how political leaders and businesses use shell companies in secrecy havens like the British Virgin Islands and many US states to evade taxes and hide corruption and other crimes. Yet the system of corruption depends on another factor beyond secrecy, one that is perhaps even more important: impunity. Impunity means that the rich and powerful escape from punishment even when their malfeasance is in full view. Impunity is epidemic in America. The rich and powerful get away with their heists in broad daylight. When a politician like Bernie Sanders calls out the corruption, the New York Times and Wall Street Journal double down with their mockery over such a foolish “dreamer.” The Journal recently opposed the corruption sentence of former Virginia governor Bob McDonnell for taking large gifts and bestowing official favors — because everybody does it. And one of its columnists praised Panama for facilitating the ability of wealthy individuals to hide their income from “predatory governments” trying to collect taxes. No kidding. Our major institutions, the ones that should know better, are often gross enablers of impunity. Consider my alma mater, Harvard University, and its recent nuptial with hedge-fund manager John Paulson. Paulson was the coconspirator with Goldman Sachs of one of the most notorious scams of the recent financial bubble. Paulson and Goldman constructed and marketed a portfolio of toxic assets to sell to unwitting investors so that Paulson could bet against the portfolio. Goldman and Paulson thereby turned the sucker investors’ quick $1 billion loss into an equivalent $1 billion gain for Paulson, with Goldman collecting on fees. The SEC fined Goldman but left Paulson untouched. As one disillusioned SEC investigator put it: The SEC is “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors.” Yet Harvard was delighted last year to take $400 million of Paulson’s ill-gotten gains, leave Paulson with the rest, name its engineering school after Paulson, and declare Paulson to be “the epitome of a visionary leader.” [...]"
MSM: "Revealed: Saudi Arabia Owns $117 Billion Of U.S. Debt" [05/18/16] "Saudi Arabia stockpiled $116.8 billion of U.S. Treasuries as of March, the Treasury Department announced on Monday, ending four decades of keeping the figure secret. That makes Saudi Arabia the 13th largest foreign holder of U.S. debt, though well behind the $1 trillion-plus owned by China and Japan each. The Saudi figure was first reported by Bloomberg News based on a Freedom of Information Act request. Unlike with most other major owners of U.S. debt, the Treasury Department kept Saudi Arabia's precise holdings secret since the 1970s. Saudi's holdings were lumped together with that of other oil exporting nations, including Venezuela and Iraq. But that policy ended on Monday as the Treasury Department disclosed precise holdings by specific countries that were previously grouped together. A Treasury official told CNNMoney the move was made following a review aimed at trying to provide more "comprehensive and transparent" data. The new Treasury report also revealed that the Cayman Islands, a country of less than 60,000 people, owned $265 billion of U.S. Treasuries as of March. That's the third-highest sum in the world and a reflection of the nation's status as a major tax haven. The Cayman Islands does not have a corporate tax, encouraging multinational companies to store vast sums of money there to avoid taxes. [...]" Related: "Bill Allowing 9/11 Victims To Sue Saudi Arabia Passes The Senate" "The US Senate adopted unanimously a proposed bill that would allow Americans to sue nation-states for terrorist attacks on US soil, despite opposition from the White House and allies such as Saudi Arabia. The Cornyn-Schumer bill seeks to create an exception in the doctrine of sovereign immunity established by a 1976 law, which has so far shielded Saudi Arabia from lawsuits over the September 11, 2001 terror attacks. Fifteen out of 19 hijackers involved were Saudi subjects. Citing sovereign immunity, a federal judge threw out a lawsuit by the 9/11 families against the kingdom in September 2015. Under the Cornyn-Schumer bill, however, Riyadh could be sued because the attacks on the World Trade Center and the Pentagon killed American citizens on US soil. Saudi Arabia has voiced opposition to the bill. During the visit to Washington in March, Saudi Foreign Minister Adel al-Jubeir said the country would sell up to $750 billion in US treasury securities and other assets before the lawsuits put them in jeopardy. The warning was delivered by last month during a visit to Washington, the New York Times reported. He said his country would sell up to $750 billion in US treasury securities and other assets before the bill puts them in jeopardy. [...]"
Commentary: "House Committee Announces Plan to Mark Up "Audit the Fed" Bill" [05/17/16] "The U.S. House of Representatives Oversight and Government Reform Committee announced that on May 17 they will begin markup of a bill aimed at forcing an audit of the Federal Reserve. Upon learning of the decision, former presidential candidate and sponsor of several “Audit the Fed” bills, Ron Paul, released the following announcement: “OGR’s announcement that they will markup Audit the Fed next week is a good step toward finally tearing down the Fed’s wall of secrecy,” Paul said. “The House of Representatives should vote on the bill this summer and send it back to the Senate for another vote before the election, and then hopefully on to President Obama’s desk so people can finally learn the truth about monetary policy,” he added. [...]" Related: "New Story Title and Link" " [...]"
MSM: "Longest 5 Seconds Of Lloyd Blankfein's Life: Frozen In Thought Crime" [05/17/16] [0:42] "This clip is from a Charlie Rose interview in 2012, near the time Goldman Sachs was facing Senate scrutiny for purposefully selling securities (CDOs) filled with worthless mortgage paper to clients around the globe. It's a Blankfein instant classic. [...]"
Commentary: "The SWIFT System: A Potential Weapon In The Hybrid War" [05/16/16] "The acronym SWIFT ( Society for Worldwide Interbank Financial Telecommunications) has once again popped up in the global media headlines. Experts usually describe SWIFT as an international, interbank network for transmitting information about payment transactions. [...] Globalization would be impossible without SWIFT: The society was founded in 1973. By that time the post-war monetary system established in 1944 in Bretton Woods had virtually collapsed. The dollar as well as other currencies had been divorced from gold, and the printing presses at the US Federal Reserve and other Western central banks were furiously at work. The volume of international payments had increased sharply. The traditional systems for sharing data about payment transactions (the teletype, telegraph, and telephone) could not cope with the increased traffic. It was necessary to draw upon the latest technology in order to centralize the isolated channels used to exchange information. Two hundred thirty-nine banks from 15 countries worked together to set up an organization devoted to solving this problem. SWIFT is a cooperative society, established under European law, with a head office in Brussels. Currently almost 11,000 institutions from over 200 countries, including 9,600 banks, are members of SWIFT. Every year 2.5 billion payment orders are transmitted through the SWIFT network, which processes billions of dollars each day. SWIFT’s advantages are its speed, low cost, and reliable data protection. As a result, the majority of the world’s international settlements and payments now go through the SWIFT system. Payments are also cleared through this network even when each of the parties is under the same jurisdiction. This includes dollar and euro payments that must be handled by the banking systems of the US and European Union. During the 21st century the SWIFT system began helping money circulate throughout the entire global economy. The economic and financial globalization that began in the 1970s would have been impossible without SWIFT.[...] Russia needs an alternative to SWIFT: There are about 800 banks in Russia today, approximately 600 of which are connected to the SWIFT system. Russia is home to the second-highest number of SWIFT member institutions (after the US), but it doesn’t even crack the top ten in terms of volume of transactions (last year Moscow was in 15th place). By the early 2000s at least 90% of Russia’s foreign payments were processed through SWIFT. The system was also utilized for many domestic transactions. When the West first introduced economic sanctions against Russia in 2014, British Prime Minister David Cameron demanded that Russia be disconnected from the SWIFT system. The only reason they have not made good on this threat is because the West is afraid of the potential consequences. After all, disconnecting Russia from SWIFT isn’t like disconnecting Iran – only 14 banks were cut off there, while 600 would need to be unplugged in the Russian Federation. But if the hybrid war against Russia becomes a full-blown conflict, it will not be possible to rule out the chance that Russian bank operations will be completely barred from SWIFT. Preparations for that war can’t wait until the last minute, and some measures are already in place. For example, by late 2014 Russian companies and organizations were already making payments and settling accounts with one another without resorting to SWIFT as an intermediary. A national system had been set up to handle domestic payments between Russian banks.[...]"
Commentary: "How Hedge Funds Invest Heavily In Washington D.C.'s Culture Of Corruption" [05/16/16] "Earlier this week, Ryan Grim and Paul Blumenthal published a blockbuster piece in the Huffington Post, titled: The Vultures’ Vultures: How A New Hedge-Fund Strategy Is Corrupting Washington. It details the secretive world of the dark money groups representing mercenary hedge funds in their insatiable quest for more and more money. In many ways, it’s merely a microcosm of America in 2016. A culture in which ethics has become so irrelevant, it isn’t even a nuisance; it simply never factors into the equation. The first few paragraphs set the stage perfectly: [...]"
MSM: "Angry Teamsters: One Of America's Largest Pension Funds Demands A Taxpayer Bailout" [05/15/16] "Over the past few months, we have covered the unfolding saga (here and here) of the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, all the way through Kenneth Feinberg's rejection of the proposal to cut benefits on behalf of the Treasury. When the proposal was rejected, we said that the final resolution will be in the form of an inevitable taxpayer-funded bailout [...] As it turns out, that is precisely what fund director Thomas Nyhan believes as well. Nyhan said the rejection means the CSPF likely won't be able to offer another proposed fix without getting funding from Congress, either directly or through the Pension Benefit Guaranty Corp. However with the PBGC also on its way to insolvency, and unable to shoulder the additional burden in world of zero and negative rates, that leaves us with... drum roll please... the US taxpayers, aka Congress, footing the bill. "There are only two solutions. Either the plan receives more money or has to have fewer benefits. I'm hopeful that come probably 2017, we can actually all get to work on something that can provide a solution. If there is no legislation at any time, we're going to end up going to insolvency." Nyhan said. The full-court press is now on, as now everyone involved is calling on congress to step in [...]"
MSM: "Bank Of England Warns Of "Sharp" Sterling Fall If UK Votes To Leave EU" [05/14/16] "The Bank of England stepped up its warnings about the economic risks if Britain votes to leave the European Union, saying on Thursday that sterling could fall sharply and unemployment would probably rise. The central bank also cut Britain's growth forecast for this year to 2.0 percent from 2.2 percent in February, reflecting how uncertainty about next month's referendum is already weighing on the economy. The Bank's rate setters - who voted unanimously to keep interest rates on hold - said households and companies were likely to hold off on spending and investment in the event of a vote for so-called Brexit on June 23. Governor Mark Carney said the BoE would try to offset the potential hit to the economy but there were limits to what monetary policy could do. British finance minister George Osborne, who has tried to focus voters on what a Brexit would mean for their incomes, said the BoE assessment was a "clear and unequivocal warning" that leaving the EU would be a "lose-lose situation for Britain."[...]"
MSM: "CNBC Busts Sid Blumenthal On Fraud At The Clinton Foundation" [05/13/16] [2:36] "Blumenthal is not an idiot despite the appearances. He had to realize he was heading into enemy territory this morning on Squawk Box. Joe Kernan loathes Hillary Clinton and he doesn't hide it. Finally, someone has the courage to ask him directly to his face about fraud at the Clinton Foundation. Blumenthal is completely taken aback by the question. He stutters and squirms. He's not really sure how to answer because no one has actually ever questioned him about it before. He's not used to this kind of treatment. The mainstream media is protective of Hillary and her henchmen in anticipation of the coronation of their queen. That's the treatment he's used to. So, how did he end up here, with these evil people who actually want to know the truth about Hillary. [...]" Related: "Crooked Hillary Took $100 Million From Middle East Regimes: “Massive Conflicts Of Interest”"
Commentary: "Fed Dropping Rates To Zero For Hillary Clinton" [05/13/16] [4:57] "Peter Schiff CNBC World 5/9/2016 [...]" Related: "Yellen: “I Won't Completely Rule Out Negative Interest Rates" "In response to a question submitted by US Rep. Brad Sherman (D-California) as to what the Fed plans to do in the event of another economic downturn, Yellen said that negative rates are not completely off the table."
MSM: "Devastating” Documentary Probing Clinton’s Cash To Premiere At Cannes Next Week" [05/13/16] "The film was written and produced by Breitbart News executive chairman Stephen K. Bann [...] “Clinton Clash,” premiering at the Cannes Film Festival on May 16, is a “devastating” documentary, according to MSNBC, alleging Bill and Hillary Clinton used the Clinton Foundation to “help billionaires make shady deals around the world with corrupt dictators, all while enriching themselves to the tune of millions.” The film, written and produced by Breitbart News executive chairman Stephen K. Bannon and directed by M.A. Taylor, is based on the New York Times bestselling book of the same name (subtitled “The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich”) by Peter Schweizer. [...] “The movie alleges that Bill Clinton cut a wide swathe through some of the most impoverished and corrupt areas of the world — the South Sudan, the Democratic Republic of Congo, Colombia, India and Haiti among others — riding in on private jets with billionaires who called themselves philanthropists but were actually bent on plundering the countries and lining their own pockets. “In return, billionaire pals like Frank Giustra and Gilbert Chagoury, or high-tech companies like Swedish telecom giant Ericsson or Indian nuclear energy officials — to name just a few mentioned in the film — hired Clinton to speak at often $750,000 a pop …”[...] Read the full report over at MSNBC. And watch the trailer [1:39]
MSM: "Chelsea Clinton's Husband Loses 90% Of Money In A Greek Hedge Fund" [05/12/16] "Oy! Hillary's son-in-law goes belly up. Let's see if this makes the nightly news. [...] Chelsea Clinton's husband is reportedly closing his Greek hedge fund. The news from Marc Mezvinsky comes after the fund is said to have lost 90 percent of its value. "It was a hedge fund portfolio pitched by Hillary Clinton's son-in-law, Marc Mezvinsky, as an opportunity to bet on a Greek economic revival," the New York Times reports. "Now, two years later, the Greece-focused fund is shutting down, after losing nearly 90 percent of its value, according to two investors with direct knowledge of the matter who spoke on the condition of anonymity. "Investors were told last month that the fund would close. The fund, Eaglevale Hellenic Opportunity, had raised $25 million from investors to buy Greek bank stocks and government debt. "Eaglevale Partners, a Manhattan hedge fund firm founded by Mr. Mezvinsky and two former Goldman Sachs colleagues, raised money for the Hellenic fund at a time when some on Wall Street had hopes for a revival in the Greek economy. For a time, Mr. Mezvinsky appeared at hedge fund conferences promoting the Greece investment thesis.[...]" Note: Pluto in Capricorn in action.
Commentary: "Four Clinton Foundation Trustees Charged or Convicted of Financial Crimes" [05/09/16] "This newest, startling revelation is just one more of many in Peter Schweizer’s bombshell book Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich, the book that has sent the Hillary Clinton campaign and the media scrambling. The book shows that there are many problems with the Clinton charity. In fact, the Clinton Foundation is so unlike a real charity that even charity watchdog group Charity Navigator refuses to rate the Clinton Foundation because of its “atypical business model.” One of those problems is the fact that the Clintons put big donors and close pals on the board for reasons that are hard to fathom. In fact, at least four of these “board members” have either been charged or convicted of serious financial irregularities, crimes including bribery and fraud. [...] The most well-known of these board members is Vinod Gupta. [...] “Vinod Gupta, the founder and chairman of the database firm InfoUSA, was a major Clinton financial supporter who served as a foundation trustee,” the book says. In 2008 he was charged with fraud by the Securities and Exchange Commission (SEC) for using company funds to support his luxurious lifestyle. He was alleged to have used more than $9.5 million in corporate funds to pay for personal jet travel, millions for his yacht, personal credit card expenses, and the cost of twenty cars. He settled with the SEC for $4 million. Gupta also paid Bill Clinton a $3 million “consulting fee,” an act of misuse of corporate funds that brought shareholders to file a suit against him. The company eventually settled with shareholders to the tune of $13 million, Clinton Cash reports.[...] Another such person involved with financial irregularities is foundation trustee Sant Chatwal, who has convictions for illegal campaign financing, obstruction of justice, and a list of other charges.[...] Then there is trustee Victor Dahdaleh, who “was charged by the Serious Fraud Office (SFO) in Great Britain with paying more than 35 million pounds in bribes to executives in Bahrain to win contracts of more than 2 billion pounds,” the book notes. [...] Clinton Cash goes on to report that Dahdaleh “has worked for the American aluminum company Alcoa as a ‘super-agent.’ (The billionaire had his bail revoked in the case because he contacted prosecution witnesses.) Dahdaleh was found not guilty after the SFO offered no evidence against Dahdaleh because a key witness, Bruce Hall, pleaded guilty to conspiracy to corrupt but refused to testify. Alcoa ended up pleading guilty in the US case arising out of the transaction and settled with the US Justice Department for $384 million. Dahdaleh was not charged in the United States individually.” [...] Finally, there is current Clinton Foundation board member and trustee Rolando Gonzalez Bunster, who “has been named in a fraud case in the Dominican Republic involving his company InterEnergy. The charges were filed by the Dominican government’s Anti-Corruption Alliance (ADOCCO). In 2013, Bunster was charged along with officials of a government agency concerning alleged ‘ballooned’ fees charged to the government. The company dismisses the charges as ‘baseless allegations.'” These are just a few of the troubling things that Clinton Cash reveals about the Clinton Foundation. [...]" Related: Website: Clinton Cash | Amazon link: Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich |
MSM: "Wall Street Analyst Who Warned On GE Ahead Of Crash Calls Clinton Foundation “Charity Fraud" [05/08/16] "The Clinton Foundation’s finances are so messy that the nation’s most influential charity watchdog put it on its “watch list” of problematic nonprofits last month. The Clinton family’s mega-charity took in more than $140 million in grants and pledges in 2013 but spent just $9 million on direct aid. The group spent the bulk of its windfall on administration, travel, and salaries and bonuses, with the fattest payouts going to family friends. “It seems like the Clinton Foundation operates as a slush fund for the Clintons,” said Bill Allison, a senior fellow at the Sunlight Foundation, a government watchdog group where progressive Democrat and Fordham Law professor Zephyr Teachout was once an organizing director. – From last year’s post: Senior Fellow at Sunlight Foundation Calls the Clinton Foundation “A Slush Fund” [...] Thanks to Charles Ortel, it’s time to prepare ourselves for some more Clinton Foundation revelations: [...] The Washington Free Beacon reports: "The Wall Street analyst who uncovered financial discrepancies at General Electric before its stock crashed in 2008 claims the Bill, Hillary, and Chelsea Clinton Foundation has a number of irregularities in its tax records and could be violating state laws. Charles Ortel, a longtime financial adviser, said he has spent the past 15 months digging into the Clinton Foundation’s public records, federal and state-level tax filings, and donor disclosures. That includes records from the foundation’s many offshoots—including the Clinton Health Access Initiative and the Clinton Global Initiative—as well as its foreign subsidiaries. This week, Ortel is starting to release his findings in the first of a series of up to 40 planned reports on his website. His allegation: “this is a charity fraud.” The Sunday Times of London described Ortel as “one of the finest analysts of financial statements on the planet” in a 2009 story detailing the troubles at AIG.[...] Ortel turned his attention to the Clinton Foundation in February 2015. To learn more about the charity, he decided to take it apart and see how it worked. “I decided, as I did with GE, let’s pick one that’s complicated,” said Ortel. “The Clinton Foundation is complicated, but it’s really very small compared to GE.” [...] When Ortel tried to match up the Clinton Foundation’s tax filings with the disclosure reports from its major donors, he said he started to find problems. “I decided it would be fun to cross-check what their donors thought they did when they donated to the Clinton Foundation, and that’s when I got really irritated,” he said. “There are massive discrepancies between what some of the major donors say they gave to the Clinton Foundation to do, and what the Clinton Foundation said what they got from the donors and what they did with it.” Last year, the Clinton Foundation was forced to issue corrected tax filings for several years to correct donation errors. But Ortel said many of the discrepancies remain. Ortel said his reports in the coming months would also provide evidence that the foundation is not complying with state laws on fundraising, financial disclosure, and audits. “I’m against charity fraud. I think people in both parties are against charity fraud, and this is a charity fraud,” he said. Ortel said he hoped the reports would encourage investigative journalists to follow up on his findings. A spokesperson for the Clinton Foundation did not comment on the claims.[...]"
Commentary: "Baltic Dry Index Plunges Most Since November As Commodity Bubble Bursts" [05/06/16] "Remember a week ago when TV entertainers crowed about the surge in The Baltic Dry Freight Index was a "clear signal" that 'China is back' baby and that escape velocity growth was just around the corner as global growth was destined to pick up... Well, just as we warned very explicitly, the ramp in the index merely reflected the frenzied speculation in industrial metals by the Chinese and as authorities have cracked down on that idiocy, so the Baltic Dry has plunged by the most since November... as real demand punches back. [...]" Related: "Rail Traffic Depression: 292 Union Pacific Engines Are Sitting In The Arizona Desert Doing Nothing"
MSM: "120 Nations Accuse US Top Court Of Violating Law Over Iran" [05/06/16] "The 120-nation Nonaligned Movement headed by Iran accused the U.S. Supreme Court on Thursday of violating international law by ruling that nearly $2 billion in frozen Iranian assets can be paid to victims of attacks linked to the country. A communiqué issued by the NAM's Coordinating Bureau follows an Iranian appeal to the United Nations last week to intervene with the U.S. government to prevent the loss of their funds. Iran's Foreign Minister Mohammad Javad Zarif called the ruling an "outrageous robbery, disguised under a court order." The NAM, comprising mainly developing countries, called the U.S. waiver of "the sovereign immunity of states and their institutions" a violation of U.S. international and treaty obligations. It called on the U.S. government "to respect the principle of state immunity" and warned that failing to do so will have "adverse implications, including uncertainty and chaos in international relations." It also warned that a failure would also undermine the international rule of law "and would constitute an international wrongful act, which entails international responsibility." The U.S. Supreme Court ruled on April 23 that the families of victims of a 1983 bombing in Lebanon and other attacks linked to Iran can collect nearly $2 billion in frozen funds from Iran as compensation. The court's ruling directly affects more than 1,300 relatives of victims, some who have been seeking compensation for more than 30 years. They include families of the 241 U.S. service members who died in the bombing of the Marine barracks in Beirut. Iran denies any links to the attacks. Iran's U.N. Ambassador Gholamali Khoshroo asked that Secretary-General Ban Ki-moon circulate the NAM statement to the U.N. General Assembly and Security Council. [...]"
MSM: "Trump Picks Former Goldman Partner And Soros Employee As Finance Chairman" [05/06/16] "In an oddly ironic twist, today Donald Trump announced that he has picked as chairman of his newly launched fundraising operation none other than a former employee of the bank he has repeatedly criticized in the past, and which he used as a foil to criticize Ted Cruz: Goldman Sachs. Trump announced that heading up his own personal fundraising operation as national finance chairman will be Steven Mnuchin, a long-time business associate, chairman and CEO of the hedge fund Dune Capital. More importantly, however, he spent 17 years at Goldman Sachs where he was most recently a Partner, having built a fortung of $46 million before launching his own hedge fund. While employed at Goldman, he purchased the remains of IndyMac Bank (now known as OneWest Bank), the Pasadena, California-based mortgage lender that collapsed in 2008. "Notoriously press-shy, the executive endured 2011 protests on the lawn of his Bel Air mansion by foreclosed homeowners angered at his lender's handling of soured mortgages." [...] As Zero Hedge readers are familiar, Trump often critized his main competitor Ted Cruz for his links to the bank because of loans used to finance Cruz’s Senate campaign, and because Heidi Cruz was a one-time employee of Goldman. "I know the guys at Goldman Sachs. They have total, total control over him. Just like they have total control over Hillary Clinton,” Trump said in one debate. He had no qualms, however, in hiring one of the most prominent Goldman alums to raise money for him. In addition to Goldman, Mnuchin also worked at Soros Fund Management, whose founder, George Soros, has funded many left-leaning causes. Where it gets even more bizarre is that Mnuchin has donated frequently to Democrats, including to Clinton and Barack Obama. As a hedge fund manager, Mnuchin is part of a group of businesspeople Trump has excoriated. In August, Trump said hedge fund managers were "getting away with murder" as he touted his proposal to end the so-called carried interest loophole, which gives private equity and hedge fund managers preferential tax treatment. [...]"
Commentary: "Either Reverse All The Perverse Incentives Or The System Will Implode" [05/04/16] "Every perverse incentive is the cash cow for a vested interest or cartel. I hope it's not a great shock to discover all the incentives in our status quo are perverse: those who rig the financial system while creating zero real value, jobs, goods or services reap all the big profits; those who take near-zero responsibility for their own health are subsidized by those who take responsibility for their own health; those who try to start enterprises and hire workers are saddled with endless regulations, junk fees and taxes while those who game the system to get welfare (household or corporate) skim the cream for doing nothing for their community or for the nation.[...] Systems in which all the incentives are perverse implode under their own weight. Those who struggle to pay the mounting costs of Imperial Over-Reach, crony- capitalism and all the skimmers and scammers eventually go bankrupt or quit in disgust, while the army of state dependents and cronies explodes higher.[...]It has taken decades for the incentives to become so perverse, so we no longer notice the perversity or the pathological consequences.[...]High-frequency traders and financiers with the ready ear of well-paid political lackeys, stooges, toadies and sycophants run never-lose skimming operations and pay lower tax rates than self-employed and small business owners.[...]Corporations have increased their share prices not by earning more money by producing more goods and services but by borrowing cheap money from the Federal Reserve and buying back outstanding shares.[...]Corporations pay less tax if they move production overseas and keep their profits in other countries.[...]If I wreck one vehicle after another due to reckless irresponsibility, what happens to my insurance premiums? They skyrocket, of course, reflecting the higher risks that result from my behavior and poor choices. Nobody thinks safe drivers should subsidize irresponsible drivers.[...]But if I wreck my health by recklessly pursuing risky behaviors, I pay the same as people who are careful "drivers" of their health. What sort of incentives does this system generate? Corporate profits have soared as financialization and rigging the system have paid much higher returns than risking capital in new goods and services. The incentives for home ownership have turned the bottom 90% into debt-serfs in servitude to banks while the top 5% own income-producing assets and businesses. Larded with the most perverse incentives possible, the U.S. healthcare system in the final stages of maximum costs, just before it implodes: [...] It's not hard to design positive incentives. For example: [...]"
MSM: "Exploding Insider Trading Based on Government Data" [05/04/16] "A new ECB white paper has found evidence that many major market-moving data releases in the US are leaked in advance of their official publication, allowing some investors to profit from trading stocks and Treasury securities when those data are released. Included among the data releases studied are two from the Federal Reserve Board, on industrial production and consumer credit. The researchers analyzed price movements in the S&P 500 futures market and the 10-year Treasury Note futures market in the thirty minutes prior to these data releases, assuming that strong price movements in the direction of the eventual post-release price were indicative of some sort of leak. The industrial production release was one of seven releases that was strongly suspected of being leaked. This isn’t good news for the Fed. [...] The Fed is already grappling with an ongoing probe into a 2012 leak of confidential interest rate information to a financial newsletter. The Fed also provides news organizations with sensitive data which is embargoed until the Fed publishes it, however those embargoes are occasionally breached. Then there are the accidental leaks from the Fed on FOMC matters and the case of the former New York Fed official who obtained confidential information from his former colleagues after he went to work at Goldman Sachs. There have been enough mistakes and leaks that the idea of sensitive information being systematically leaked to certain market participants isn’t far-fetched. Especially because such leaks rarely come to light and almost never result in anyone’s termination, the risks of being caught don’t outweigh the potential benefits of making friends on Wall Street or making a little extra money. At the very least, this study should result in hard questioning surrounding these data releases and the importance placed on them. In particular, the Federal Reserve’s role as a market mover should face scrutiny. Leaking information to profit special interests is all the more reason to end the existence of government agencies that have so much power to move markets. [...]"
MSM: "Freddie Mac Reports $354M Net Loss In First Quarter" [05/04/16] "Freddie Mac reported a $354 million net loss in the first quarter, significantly down from its $2.2 billion net income recorded in the fourth quarter of 2015. The news is a reminder of the government-sponsored enterprise’s net loss of $475 million for the third quarter of 2015, which marked its first loss in four years. Due to Freddie’s net worth of $1 billion, it required no draw from U.S. Treasury. To date, the company has returned $98.2 billion to taxpayers. [...] “The percentage of our purchases of loans to first-time homebuyers hit a 10-year high and we continue to finance record levels of rental housing. Also, the transfer of mortgage credit risk away from taxpayers, which we pioneered, proved its resiliency through the quarter’s significant financial market distress. While the resulting flight-to-quality decrease in interest rates reduced our GAAP results this quarter, an impact which is non-economic in nature, the fundamentals of our business are very solid and continue to improve,” CEO Donald Layton said." [...] Despite the positive aspects of the results, calls to recapitalize Freddie Mac and Fannie Mae will likely increase. Some analysts argue that Fannie and Freddie are moving more into a position to need additional intervention by the federal government; something brushed off by Freddie Mac repeatedly.[...]"
Concepts and Practices: "New Digital Cash System Just Unveiled At Secret Meeting For Bankers In New York" [05/03/16] "Last month, a “secret meeting” that involved more than 100 executives from some of the biggest financial institutions in the United States was held in New York City. During this “secret meeting“, a company known as “Chain” unveiled a technology that transforms U.S. dollars into “pure digital assets”. Reportedly, there were representatives from Nasdaq, Citigroup, Visa, Fidelity, Fiserv and Pfizer in the room, and Chain also claims to be partnering with Capital One, State Street, and First Data. This “revolutionary” technology is intended to completely change the way that we use money, and it would represent a major step toward a cashless society. But if this new digital cash system is going to be so good for society, why was it unveiled during a secret meeting for Wall Street bankers? Is there something more going on here than we are being told? None of us probably would have ever heard about this secret meeting if it was not for a report in Bloomberg. The following comes from their article entitled “Inside the Secret Meeting Where Wall Street Tested Digital Cash“… [...] On a recent Monday in April, more than 100 executives from some of the world’s largest financial institutions gathered for a private meeting at the Times Square office of Nasdaq Inc. They weren’t there to just talk about blockchain, the new technology some predict will transform finance, but to build and experiment with the software. By the end of the day, they had seen something revolutionary: U.S. dollars transformed into pure digital assets, able to be used to execute and settle a trade instantly. That’s the promise of a blockchain, where the cumbersome and error-prone system that takes days to move money across town or around the world is replaced with almost instant certainty.[...] This is actually how it was described by Bloomberg. And I think that there is a very good reason why this meeting was held in secret, because many in the general public would definitely be alarmed by this giant step toward a cashless society. Here is more on this new system from Bloomberg… While cash in a bank account moves electronically all the time today, there’s a distinction between that system and what it means to say money is digital. Electronic payments are really just messages that cash needs to move from one account to another, and this reconciliation is what adds time to the payments process. For customers, moving money between accounts can take days as banks wait for confirmations. Digital dollars, however, are pre-loaded into a system like a blockchain. From there, they can be swapped immediately for an asset. “Instead of a record or message being moved, it’s the actual asset,” Ludwin said. “The payment and the settlement become the same thing.”[...]" Related: "Australian Entrepreneur Craig Wright Reveals Himself As Bitcoin Creator "Satoshi Nakamoto" "In what may be the biggest "self-outing" in years, overnight Australian entrepreneur Craig Wright has publicly identified himself as Bitcoin creator Satoshi Nakamoto, revealing his identity to three media organizations - the BBC, the Economist and GQ. His admission ends years of speculation about who came up with the original ideas underlying the digital cash system. [...] There are detractors who say Wright isn't who he claims to be [...]"
MSM: "Puerto Rico Defaults On $422 Million" [05/03/16] "The island was unable to make a $422 million debt payment due Monday. It's another alarm bell of how bad the situation is getting on the island. Governor Alejandro Garcia Padilla calls it a "humanitarian crisis," which a step above an economic emergency. He claims he is prioritizing paying Puerto Rico's police and teachers over Wall Street. "I had to make a choice. I decided that essential services for the 3.5 million American citizens in Puerto Rico came first," the governor said in a speech Sunday. This is the third time the island has defaulted on bond payments. The island paid the interest due Monday, but not the principal amount, resulting in a default of about $370 million, Puerto Rico's largest yet. [...] Puerto Rico is deep in debt. It owes over $70 billion to creditors. For months, Garcia Padilla has warned that Puerto Rico doesn't have enough money to pay its creditors. Another huge payment is due July 1. The island's best hope is that Congress will act before then to provide some sort of relief, such as granting a temporary moratorium on payments until a plan can be worked out. "We're very far from the end," says Philip Fischer, the managing director of municipal bond research at Bank of America Merrill Lynch. "It's clear Congress doesn't know how to handle this." [...] The governor believes the solution is simple: Puerto Rico should be granted Chapter 9 bankruptcy rights -- or something similar -- to make it easier for the island to restructure some of its debts, akin to what Detroit did. But many creditors and Republican lawmakers argue that the island has had years of political and financial mismanagement and needs someone from the outside to come in and restore credibility. The island still has not completed its 2014 audit, for example. "Congress has a Constitutional and financial responsibility to bring order to the chaos that is unfolding in the U.S. territory," Republican House Speaker Paul Ryan said last month.[...]" Related: "Treasury Warns Congress - Bailout Puerto Rico Or Risk "Chaotic Unwinds... Cascading Defaults" "In a disappointingly similar tone to the warnings, threats, and promises sent to Congress in 2008 when demanding the banks get their bailout (or else), Treasury Secretary Jack Lew has released a letter he sent to Congress warning that if Puerto Rico's situation is not "fixed" in an "orderly" manner "quickly" then the nation will face "cascading defaults." [...]"
Commentary: "Panama, The Secret Garden Of The Colombian Oligarchy" [05/02/16] "As everywhere else in the world, the disclosure of the Mossack Fonseca documents has been on the front page of all major Colombian papers. However, the close historical links between Colombia and neighbouring Panama, as well as the deeply unequal social structure of the country, make the case of Colombia particularly interesting. Given the unusually close historical, economic and political links between the two countries, it is remarkable that almost nothing of substance has emerged from the Panama papers, from a Colombian perspective. [...] Panama hosts an estimated 50,000 Colombian shell companies. In the first days of the scandal, the media announced a small number of Colombian accounts among the data leak: 850. Publicly, however, the names of only 12 people were given – and then nothing more happened. Colombia has always been a deeply unequal country with weak state control in broad parts of its territory and a violent history of civil wars and guerrillas. Yet it has always been formally a democracy. Its 50-year-long and very complex internal armed conflict, born in the context of the Cold War, was triggered by land and social inequality, and was later fuelled by drug trafficking. According to a 2015 UN Development Programme report, the country ranks 12th worst in the world in terms of income distribution, and second in this regard (after South Africa) among countries with a significant population. [...] Fast forward to the present day, and Colombians now heavily use Panama as a tax haven. It is used by wealthy individuals; by foreign companies eager to escape tax and scrutiny; by Colombian companies eager to disguise their investments in Colombia as originating from abroad (TJN: a phenomenon known as round-tripping); by corrupt Colombian politicians, and by organised crime linked to drug money. Panama has been the locus of the major corruption scandals that shook Colombia in recent years. [...] Ortega estimated that Colombians had stashed around $100 billion in various tax havens, and cites TJN estimates of $14 billion kept in Panama just in bank deposits. Colombian individuals would keep around $20 billion in tax havens. To fully understand the magnitude of the fraud, the figures have to be compared with the wealth of the nation. The figures are mind-boggling. The national budget amounts to around $70 billion and Colombian GDP $266 billion. This means that Colombian money hidden in offshore havens is roughly 140% of the national budget and about 40% of the GDP.[...] "
Commentary: "The Cult Of Central Banking Is Dead In The Water" [05/01/16] "The Fed has been sitting on the funds rate like some monetary mother hen since December 2008. Once it punts again at the June meeting owing to Brexit worries it will have effectively pegged money market rates at the zero bound for 90 straight months. There has never been a time in financial history when anything close to this happened, including the 1930s. Nor was interest-free money for eight years running ever even imagined in the entire history of monetary thought. So where’s the fire? What monumental emergency justifies this resort to radical monetary intrusion and repression? Alas, there is none. And that’s as in nichts, nada, nope, nothing! There is a structural growth problem, of course. But it has absolutely nothing to do with monetary policy; and it can’t be fixed with cheap money and more debt, anyway. By contrast, there is no inflation deficiency—–even by the Fed’s preferred measure. Indeed, the very idea of a central bank pumping furiously to generate more inflation comes straight from the archives of crank economics.[...] The following two graphs dramatize the cargo cult essence of today’s Keynesian central banking regime. Since the year 2000 when monetary repression began in earnest, the balance sheet of the Fed has risen by 800%, while the amount of labor hours used in the US economy has increased by 2%. At a ratio of 400:1 you can’t even try to argue the counterfactual. That is, there is no amount of money printing that could have ameliorated the “no growth” economy symbolized by flat-lining labor hours.[...] Owing to the recency bias that dominates mainstream news and commentary, the massive expansion of the Fed’s balance sheet depicted above goes unnoted and un-remarked, as if it were always part of the financial landscape. In fact, however, it is something radically new under the sun; it’s the footprint of a monetary fraud breathtaking in its magnitude. [...] In essence, during the last 15 years the Fed has gifted the US economy with a $4 trillion free lunch. Uncle Sam bought $4 trillion worth of weapons, highways, government salaries and contractual services but did not pay for them by extracting an equal amount of financing from taxes or tapping the private savings pool, and thereby “crowding out” other investments. Instead, Uncle Sam “bridge financed” these expenditures on real goods and services by issuing US treasury bonds on a interim basis to clear his checking account. But these expenses were then permanently funded by fiat credits conjured from thin air by the Fed when it did the “takeout” financing. Central bank purchase of government bonds in this manner is otherwise and cosmetically known as “quantitative easing” (QE), but it’s fraud all the same. In essence, Uncle Sam has gotten $4 trillion of “something for nothing” during the last 16 years, while the Washington politicians and policy apparatchiks were happy to pretend that the “independent” Fed was doing god’s work of catalyzing, coaxing and stimulating more jobs and growth out of the US economy. No it wasn’t! What it was actually doing was not stimulating the main street economy, but falsifying and inflating the price of financial assets. [...] By contrast, the mainstream Keynesian delusion that the Fed has been stimulating GDP growth rather than speculator windfalls is rooted in the hoary concept of “aggregate demand” deficiency. That is, the proposition that the macroeconomy has a natural growth rate based on potential output at full employment, and that when actual growth falls short of that benchmark, it is the job of the state—–and in recent times, especially its central banking branch——to stimulate sufficient aggregate demand to close the gap. This is claimed to be the essence of the welfare enhancing function of the state. To wit, pushing a continuously lapsing and faltering private capitalism toward its inherent full employment potential, thereby generating jobs, income and wealth that would otherwise not happen.[...]" Related: See also below: "Why Real Structural Reform Is Now Impossible" [04/29/16]
MSM: "Deutsche Bank Unveils The Next Step: "QE Has Run Its Course, It's Time To Tax Wealth" [05/01/16] "Helicopter money may be on the horizon, but if Deutsche Bank has its way, there is at least one intermediate step. According to DB's Dominic Konstam, now that the benefits QE "have run their course", it is time for the next, and far more drastic step: "the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates."... This in turn would strongly suggest a significant re-think to short-rate policy. In this case, central banks should move more strongly toward penalizing savings, rather than just the institutions that “house” those savings – the banks. This would mean allowing significantly negative retail deposit rates or perhaps even wealth taxes. With this stick would also come a carrot – one example being that while deposit rates penalize savings (the whole point), banks might also pay borrowers to buy houses via negative mortgage rates. In short, the real central bank panic is about to be unleashed; who will suffer? Why everyone else. Should wealth taxes really be imminent, we foresee more "boating incidents" in the immediate future. [...]"
Trends: "Arizona Taking Steps to Allow 'Freer' Money" [04/30/16] "Since monopolies remove the positive effects of competition, however, it makes sense to reexamine one of the most detrimental monopolies that ever existed. Most folks would probably agree that government-run monopolies like the United States Postal Service and the Department of Motor Vehicles do a lousy job of serving the public, so why should we give bureaucrats a monopoly over our money as well? It wasn’t always this way in America. And a few states are finally taking steps toward breaking the money monopoly that’s developed, thereby fostering viable alternatives to the U.S. dollar. [...]"
Commentary: "Why Real Structural Reform Is Now Impossible" [04/29/16] "The endless bleating of well-paid pundits in the corporate media about "reform" is just more circus. It's difficult for well-meaning pundits to abandon the fantasy that meaningful reform is possible. Indeed, a critical function of the punditry and corporate media is to foster the fantasy that the status quo could be reformed if only we all got together and blah blah blah. As I explain in my new book Why Our Status Quo Failed and Is Beyond Reform, real structural reform would trigger the collapse of the status quo. (As a reminder, the status quo benefits the few at the expense of the many.) But there's another dynamic that makes reform impossible. I've prepared a chart to explain this dynamic: [...] Central banks have transformed the market--in stocks, bonds, commodities and risk--into the signaling mechanism that tells us all is well. Even though the real-world finances of the bottom 95% continue deteriorating, a rising stock market and suppressed measures of risk signal that the economy is doing well. If you're not doing well, it's your personal problem; the status quo is fine and needs only minor tweaks.[...] Central banks thwart this existential danger to the status quo by rescuing the market every time it approaches the market clearing event level. (see chart) In a market clearing event, risky loans and bets are liquidated, credit dries up, risk soars and the price of assets falls to levels that once again make fundamental sense. Market clearing events are a necessary part of a healthy credit and asset-allocation system. If the market is never allowed to clear away the dead wood of mal-investments, high leverage, nose-bleed valuations, bad bets and risky loans that should never have been issued, all this dead wood eventually chokes off healthy expansion. The problem for central banks is a market clearing event pushes markets to levels that call the entire travesty of a mockery of a sham status quo into question. That is too dangerous to risk, so central banks quickly defend the fantasy that markets only drift higher, stopping any market clearing event in its tracks.[...] This leaves the economy increasingly vulnerable to the financial equivalent of an uncontrollable forest fire that burns away all the collected dead wood that has been protected by the central banks. At some difficult to predict point, a random financial flame ignites the accumulated dead wood and the markets are torched in a conflagration so intense not even massive central bank intervention can extinguish the flames. Structural reform is only possible when markets and sentiment crash far below the market clearing event level. Meaningful reform only becomes politically, economically and socially possible when the status quo has failed so obviously and so painfully that even its most entrenched defenders concedes that the choice has boiled down to either full-blown revolution or meaningful reforms that limit the power of the few at the top of the wealth/power pyramid ,the number of people in each wealth bracket [...] The pyramid by the assets and income held by each wealth/income bracket:[...] But the process of real reform is quickly hijacked by vested interests once the markets recover back to the market clearing event level. Once the crisis has passed, the well-oiled machine of lobbying, grift, graft and campaign contributions kicks into gear and waters down or co-opts the reforms into PR facades designed to fool the masses into believing the reforms will work as advertised (for example, all the "reforms" passed in the aftermath of the 2009 meltdown: thousands of obfuscating pages of Obamacare, bank regulations etc.) The only time meaningful reform is possible is in a crisis that reveals the true nature of the status quo, and central banks will create as many trillions of dollars, yen, yuan, euros etc. as are needed to erase that moment of clarity and truth. The endless bleating of well-paid pundits in the corporate media about "reform" is just more circus designed to distract us from the much colder truth: the status quo is beyond reform. The choice is either collapse or well, collapse: letting the status quo strip-mine the bottom 95% will eventually lead to collapse and so will structural reforms that deprive the few of their power to create near-infinite sums of money and credit for their cronies.[...]"
Commentary: "CIA-Backed Artificial Intelligence Firm To Spy On Wall Street Traders" [04/28/16] "Swiss multinational bank, Credit Suisse, will collaborate with data analysis firm, Palantir, to launch a trader surveillance program. According to Bloomberg’s Jeffrey Voegeli, the joint venture, called Signac, aims to catch rogue Wall Streeters engaged in illegal trading. It comes in the wake of a number of trading scandals in recent years that have cost banks billions of dollars. Palantir was co-founded by Peter Thiel and seed-funded by the CIA. The company was funded in part by In-Q-Tel Inc., the venture capital investment arm of the CIA that has a long, symbiotic history with startups, the NSA, the FBI, and DARPA. In fact, In-Q-Tel specifically funds tech start-ups “to advance ‘priority’ technologies of value” in the intelligence community. The group has ties to Donald Rumsfeld’s 'Total Information Awareness' initiative and is believed by some to have worked closely with Google in its earliest years. [...] Palantir itself has lived in the shadows since its 2004 inception, working primarily to create a proprietary data mining system used by law enforcement agencies, finance firms, and security companies to isolate criminality. For example, Palantir’s software was used to analyze the troves of millions of documents related to the Bernie Madoff scandal. Palantir has an extensive relationship with the U.S. government, and includes among its clients the CIA, DHS, NSA, FBI, the CDC, the Marine Corps, the Air Force, Special Operations Command, West Point, the Joint IED-defeat organization and Allies, the Recovery Accountability and Transparency Board, and the National Center for Missing and Exploited Children. [...] The new trader surveillance co-venture comes at a time when Credit Suisse finds itself in dire straits. After adhering to a so-called Pursuit of Revenue “At All Costs” policy, the company now finds itself facing $90 billion of distressed debt and rampant illiquidity. Now bank executives view the problem as stemming largely from rogue traders, and believe Signac will help them turn things around. Signac will use algorithmic artificial intelligence to monitor unauthorized trades. It is perhaps worth noting that Signac will monitor internal transactions that harm Credit Suisse – not any of the myriad transgressions made by the financial industry at large, such as the kinds of predatory lending we saw prior to the Great Recession. We may have to wait for a larger, more aggressive artificial intelligence presence for that kind of oversight.[...]"
Commentary: "Swift Hack Is A Story Of Globalization And Poverty" [04/27/16] "Swift, the financial messaging system used by 11,000 banks throughout the world, admitted this week that it’s vulnerable to hackers if they penetrate its member financial institutions. It shouldn’t be major news: Thieves go where the money is, and more than half of the 25.8 million messages a day the network carried in March were meant to transfer money. Yet Swift’s hacker problem is a great illustration of how globalized finance can get out of hand. [...] February’s Bangladesh Bank heist, which could easily provide the plot for a cyberpunk novel. On Monday, U.K.-based BAE Systems’ cybersecurity division provided the technical details of how the hack probably worked, having found malware that was likely used for the hack on an online malware repository. The perpetrators tried to transfer $951 million to the Philippines and Sri Lanka from the account Bangladesh’s central bank holds with the New York Federal Reserve. The Philippine bit worked without a hitch: $81 million went to accounts at the Rizal Commercial Banking Corp., set up in the names of two Chinese businessmen (who deny they had anything to do with it), then passed through several local casinos that are exempt from money-laundering regulations and left the Philippines in an unknown direction. The Sri Lanka bit was a failure. Bangladesh Bank recovered the $20 million transferred to that country and stopped further transactions after a typo in one of the messages led a routing bank to start asking questions. The hackers slipped up stupidly: They misspelled “foundation” as “fandation” in the name of a Sri Lankan non-governmental organization they were using for their transfer. [...] The hackers gained access to Bangladesh Bank’s local network, which wasn’t too hard since the bank was using secondhand $10 switches. They found that the Swift servers were on that network, not separated from it by any kind of firewall. They then ran a program designed to cheat Swift’s Alliance Access software, which interacts with the Oracle-built database in which transaction data is stored. The malware searched Swift messages to extract addresses and transfer references. As the hackers generated and sent money transfer messages based on that data (exactly how they did that is not clear to BAE Systems based on the available data), they also patched Alliance Access to allow these transactions, so they looked as if they had been properly checked by the system. That’s why, at the New York Fed’s end, the messages looked perfectly legit. The hackers also knew that all Swift messages are automatically sent to be printed, and they used a bit of malware to cheat the printers so they only spewed out evidence of properly approved transactions.[...] Networks such as Swift aren’t vulnerable because they underspend on security. Swift takes it seriously: The latest warning came with a mandatory security update. Yet a global system is only as safe as its most unsafe parts. In a way, the Bangladesh heist is part of the same problem as Europe’s refugee crisis: The West would like to be complacent about its relative wealth and security, but it can’t be, because in a world made smaller by technological advances, poverty and need are knocking more and more persistently at its doors.[...]"
MSM: "Trump And Hillary Refuse To Explain Why They Both Share The Same Address In Delaware" [04/27/16] "As it turns out, Hillary Clinton and Donald Trump share something pertinent in common, after all — a tax haven cozily nested inside the United States. This brick-and-mortar, nondescript two-story building in Wilmington, Delaware would be awfully crowded if its registered occupants — 285,000 companies — actually resided there. “Big corporations, small-time businesses, rogues, scoundrels, and worse — all have turned up at the Delaware address in hopes of minimizing taxes, skirting regulations, plying friendly courts or, when needed, covering their tracks,” the New York Times’ Leslie Wayne described in 2012. “It’s easy to set up shell companies here, no questions asked.” [...] [Cross-Posted]
MSM: "U.K. Leads A Global Banking Retreat" [04/26/16] "U.K. banks are giving new meaning to the term "Brexit": They've been pulling money out of the rest of the world at a pace not seen since the global financial crisis. The latest data from the Bank for International Settlements suggest that financial institutions have been beating a retreat just about everywhere. In 25 countries whose banks report to the BIS, total foreign claims (such as loans and securities) stood at $23.2 trillion in December 2015, down 5 percent from a year earlier and the lowest level since 2006. Exposures to both developing and developed nations declined. Even against that background, the global financial hub known as the U.K. stood out. The foreign claims of the country's banks declined 15 percent in 2015 -- the equivalent of more than half a trillion dollars. That's the largest decline, in both dollar and percentage terms, since the crisis year of 2009. The biggest portions of the decline came in claims on the U.S., China, France and Spain. [...]"
Satire: "Last Week Tonight with John Oliver: Puerto Rico (HBO)" [04/26/16] [21:21] "Puerto Rico is suffering a massive debt crisis. Lin-Manuel Miranda joins John Oliver to call for relief.
Commentary: "US Taxpayer Is Now A Major Counterparty To Wall Street Derivatives" [04/25/16] "According to a study released by the Federal Reserve Bank of New York in March of last year, U.S. taxpayers have already injected $187.5 billion into Fannie Mae and Freddie Mac, two companies that prior to the 2008 financial crash traded on the New York Stock Exchange, had shareholders and their own Board of Directors while also receiving an implicit taxpayer guarantee on their debt. The U.S. government put the pair into conservatorship on September 6, 2008. The public has been led to believe that the $187.5 billion bailout of the pair was the full extent of the taxpayers’ tab. But in an astonishing acknowledgement on February 25 of this year, the Government Accountability Office, the nonpartisan investigative arm of Congress, issued an audit report of the U.S. government’s finances, revealing that the government’s “remaining contractual commitment to the GSEs, if needed, is $258.1 billion.” This suggests that somehow, without the American public’s awareness, the U.S. government is on the hook to two failed companies for $445.6 billion dollars. And that may be just the tip of the iceberg of this story. The official narrative around the bailout of Fannie and Freddie is that they were loaded up with toxic subprime debt piled high by the Wall Street banks that sold them dodgy mortgages. While that is factually true, the other potentially more important part of this story is the counterparty exposure the Wall Street banks had to Fannie and Freddie’s derivatives if the firms had been allowed to fail. [...] The New York Fed’s staff report of March 2015 concedes the following: “Fannie Mae and Freddie Mac held large positions in interest rate derivatives for hedging. A disorderly failure of these firms would have caused serious disruptions for their derivative counterparties.” [...] Exactly how big was this derivatives exposure and which Wall Street banks were being protected by the government takeover of these public-private partnerships that had spiraled out of control into gambling casinos? According to Fannie and Freddie’s regulator of 2003, OFHEO, “The notional amount of the combined financial derivatives outstanding of Fannie Mae and Freddie Mac increased from $72 billion at the end of 1993, the first year for which comparable data were reported, to $1.6 trillion at year-end 2001.” A 2010 report from the Federal Reserve Bank of St. Louis updates that information as follows: [...]
Concepts and Practices: "Revenge of the Vikings — Iceland Will Create Its Own Money" [04/24/16] "Back in 1914, the Bradbury Pound was introduced by the UK government as an ’emergency measure’ to bolster a failing economy. It was a huge success. The banking elite were unhappy, however and panicked – before managing to wrestle control of the money supply afterwards. President John F. Kennedy also introduced a similar ‘Greenback’ in 1961, and again, the banking elite were very unhappy about being pushed out, and losing control of the issuance of money as debt. JFK did not survive past 1963. Then there was Muammar al-Gaddafi in Libya who, in 2009 announced a new gold-backed dinar, issued by Libya’s state-owned public central bank, and with further plans – negotiating with the other African nations for the creation of an all-African currency to compete with the Euro and the Dollar. Gaddafi did not survive past 2011. Who knew that the revolution would start with those radical Icelanders? One Frosti Sigurjonsson, a lawmaker from the ruling Progress Party, issued a report that suggests taking the power to create money away from commercial banks, and hand it to the central bank and, ultimately, Parliament. Can’t see commercial banks in the western world be too happy with this. They must be contemplating wiping the island nation off the map. If accepted in the Iceland parliament, the plan would change the game in a very radical way. [...] It would be successful too, because there is no bigger scourge on our economies than commercial banks creating money and then securitizing and selling off the loans they just created the money (credit) with. Everyone, with the possible exception of Paul Krugman, understands why this is a very sound idea. Agence France Presse reports: Iceland’s government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled “A better monetary system for Iceland”.[...]"
Commentary: "China, Russia And The Reemergence Of Gold-Backed Currencies" [04/23/16] "On 19 April 2016, China was rolling out its new gold-backed yuan. Russia’s ruble has been fully supported by gold for the last couple of years. Nobody in the western media talks about it. Why would they? – A western reader may start wondering why he is constantly stressed by a US dollar based fiat monetary systems that is manipulated at will by a small elite of financial oligarchs for their benefit and to the detriment of the common people. [...] In a recent Russia Insider article, Sergey Glaziev, one of Russia’s top economists and advisor to President Putin said about Russia’s currency, “The ruble Is the most gold-backed currency in the world”. He went on explaining that the amount of rubles circulating is covered by about twice the amount of gold in Russia’s Treasury. [...] In addition to a financial alliance, Russia and China also have developed in the past couple of years their own money transfer system, the China International Payment System, or the CIPS network which replaces the western transfer system, SWIFT, for Russian-Chinese internal trading. SWIFT, stands for the Society for Worldwide Interbank Financial Telecommunication, a network operating in 215 countries and territories and used by over 10,000 financial institutions. Up until recently almost every international monetary transaction had to use SWIFT, a private institution, based in Belgium. ‘Private’ like in the US Federal Reserve Bank (FED), Wall Street banks and the Bank for International Settlements (BIS); all are involved in international monetary transfers and heavily influenced by the Rothschild family. No wonder that the ‘independent’ SWIFT plays along with Washington’s sanctions, for example, cutting off Iran from the international transfer system. Similarly, Washington used its arm-twisting with SWIFT to help Paul Singer’s New York Vulture Fund to extort more than 4 billion dollars from Argentina, by withholding Argentina’s regular debt payments as was agreed with 93% of all creditors. Eventually Argentina found other ways of making its payments, not to fall into disrepute and insolvency. All of this changed for Argentina, when Mauricio Macri, the new neoliberal President put in place by Washington, appeared on the scene last December. He reopened the negotiations and is ready to pay a sizable junk of this illegal debt, despite a UN decision that a country that reaches a settlement agreement with the majority of the creditors is not to be pressured by non-conforming creditors. In the case of Argentina, the vulture lord bought the country’s default debt for a pittance and now that the nation’s economy had recovered he wants to make a fortune on the back of the population. This is how our western fraudulent monetary system functions.[...] China’s economy has surpassed that of the United States and this new eastern alliance is considered an existential threat to the fake western economy. CIPS, already used for trading and monetary exchange within China and Russia, is also applied by the remaining BRICS, Brazil, India and South Africa; and by the members of the Shanghai Cooperation Organization (SCO), plus India, Pakistan and Iran, as well as the Eurasian Economic Union (EEU – Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan). It is said that CIPS is ready to be launched worldwide as early as September 2016. It would be a formidable alternative to the western dollar based monetary Ponzi scheme.[...]"
Commentary: "These SEC Insider Emails Reveal Why No Bankers Have Gone To Jail" [04/22/16] "Back In April 2010, the world was stunned when in what would be the first major case dealing with the fallout from the endemic fraud prevalent during the last housing and credit bubble, the SEC charged Goldman Sachs and Paulson with securities fraud over the infamous Abacus CDO, which was subsequently featured in Michael Lewis' Big Short book and movie. There was also hope that for the first time, bankers - ostensibly from the company that does "God's work" - would go to prison. None of that happened, and instead just a few months later Goldman walked away with a $550 million slap on the wrist, while a young Goldman banker, French citizen Fabrice Tourre, who was in his late 20's when Goldman was quietly colluding with Paulson to package a "time bomb" CDO it knew would explode in just a few months, was the only Goldman banker prosecuted. In 2013, Fabrice Tourre, a low-ranking trader, was found liable for violating securities laws and ordered to pay more than $850,000. He also avoided prison time and is now a Ph.D. candidate at the University of Chicago. He was the only banker who was named in the entire Abacus fraud, something which we laughed at long and hard in 2010 because according to the SEC, this meant the 20-year old was the mastermind behind all of Goldman wrongdoing; nobody else at the firm was aware of what had been going on. But what was most appalling and what made it clear that the SEC is a captured organization, was not only that no other banker at Goldman was named, but that absolutely everyone avoided prison time setting a disastrous precedent which demonstrated that when it comes to criminal liability, Wall Street will henceforth have a permanent get out of jail free card. [...] Earlier today, ProPublica's Jesse Eisinger published a story that looks at the evolution of the SEC's collapse, and how from a regulatory agency meant to defend investors, it instead mutated into a captured, crony, revolving door (whose employees all too frequently end up working for the same companies they should be prosecuting) farce, whose only purpose is to protect criminal bankers from prison while handing out paltry fines which ultimately are paid by the company's shareholders while management walks away free. Eisinger tells the story of one SEC lawyer, perhaps the last SEC lawyer with a conscience, James Kidney, who joined the agency in 1986. "He was thirty-nine at the time, having first worked a stint as a journalist. The “steam was elevated” at the agency when he started there, he said. Young lawyers were expected to go after the big names, and they did: the junk-bond king Michael Milken, the insider trader Ivan Boesky, the investment banker Martin A. Siegel." [...]"
MSM: "Teamsters Union Pension Plan Moves To Cut Benefits" [04/21/16] "A dark storm is brewing in the world of private pensions, and all hell could break loose when it finally hits. As the Washington Post reports, the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, has filed an application to cut participant benefits, which would be effective July 1 2016, as it "projects" it will become officially insolvent by 2025. In 2015, the fund returned -0.81%, underperforming the 0.37% return of its benchmark. Over a quarter of a million people depend on their pension being handled by the CSPF; for most it is their only source of fixed income. [...] Pension funds applying to lower promised benefits is a new development, albeit not unexpected (we warned of this mounting issue numerous times in the past). For many years there existed federal protections which shielded pensions from being cut, but that all changed in December 2014, when folded neatly into a $1.1 trillion government spending bill, was a proposal to allow multi employer pension plans to cut pension benefits so long as they are projected to run out of money in the next 10 to 20 years. Between rising benefit payouts as participants become eligible, the global financial crisis, and the current interest rate environment, it was certainly just a matter of time before these steps were taken to allow pension plans to cut benefits to stave off insolvency. [...] The Central States Pension Fund is currently paying out $3.46 in pension benefits for every $1 it receives from employers, which has resulted in the fund paying out $2 billion more in benefits than it receives in employer contributions each year. As a result, Thomas Nyhan, executive director of the Central States Pension Fund said that the fund could become insolvent by 2025 if nothing is done. The fund currently pays out $2.8 billion a year in benefits according to Nyhan, and if the plan becomes insolvent it would overwhelm the Pension Benefit Guaranty Corporation (designed by the government to absorb insolvent plans and continue paying benefits), who at the end of fiscal 2015 only had $1.9 billion in total assets itself. Incidentally as we also pointed out last month, the PBGC projects that they will also be insolvent by 2025 - it appears there is something very foreboding about that particular year.[...] All hope is not lost, however. Democratic candidate Bernie Sanders has proposed a bill that would repeal the measure allowing cuts, and instead calls for the government to provide assistance to troubled pension funds. In other words, another bailout. Which brings us to the current juncture, where we remind everyone that the governments own safety net, the PBGC has itself become insolvent, and according to CNN, projects that more than 10% of the roughly 1,400 multiemployer plans, covering more than 1 million workers fits the current criteria to be able to apply for benefit cuts for participants. "This is going to be a national crisis for hundreds of thousands, and eventually millions, of retirees and their families. It's going to open the floodgates for other cuts." said Karen Friedman, executive president of the Pension Rights Center.[...]" Related: "Obama Extolled Bill Leading To Pension Cuts For Retirees"
MSM: "China Launches Yuan-Denominated Gold Benchmark" [04/20/16] "A yuan-denominated gold benchmark started operations in Shanghai on Tuesday, pushing China one big step closer to becoming a price determiner for the precious metal. What impact will the new benchmark have on China and gold traders? The gold market is an important part of the global financial market. And because of that, almost every country in the world wants to have the power to set prices or at least have a say in the matter. Eighty percent of the pricing power is now in the hands of London and New York. Experts say the launch of "Shanghai Gold" means China is making significant progress in gaining gold pricing power. The Chinese benchmark price will be derived from a 1 kilogram-contract to be traded by the 18 members of the Shanghai Gold Exchange. The SGE will act as the central counterparty. The benchmark price will be set twice a day, based on a few minutes of trading in each session. The milestone move will ensure that Chinese investors trade gold with the yuan instead of the US dollar. That boosts China's pricing power in the international market and also fends off exchange rate risks. Experts say that with the launch of the yuan-denominated gold benchmark, the Shanghai Gold Exchange can gain more power to compete with the London Metal Exchange and the New York Commodity Exchange. [...]"
Commentary: "War, Confiscation Or Redistribution" - An Anecdote On Systemic Reset" [04/19/16] "Excerpted from One River Asset Management's Eric Peters' comments... Anecdote: "People work in order to convert their time into a unit of account,” he said. “We call that money, and it’s an invention that allows us to store time.” Most people have stored little or none. So when they receive money, they quickly purchase necessities; food, shelter, health care. “People who are able to save money inevitably purchase real estate, stocks, bonds – all of which are alternative vehicles for storing time.” One share of Google stores 30 hours of work for the average American, or 30 minutes of copying-and- pasting formation documents for the average hedge fund attorney. “Bill Gates has stored enough time to fund a 1bln person army for 20 years.” As the gulf between people’s income has grown, the amount of stored time has accumulated in fewer hands. [...] Central banks face a different problem altogether. They need to get people who’ve saved time to exchange it for something other than clever inventions that store it. They’ve largely failed. So now, everything that stores time is extremely expensive and offers little or negative return, while the pace of economic activity slows. “The problem that we face now is that there is simply too much time that’s been saved. Another way of saying it is that there’s too much capital in the world, in too few hands.” To restart the system, capital needs to exchange hands or be destroyed, spurring people to rebuild their store of time, rather than just save it. “It is an elemental truth that at some point, through inflation, war, or confiscation and redistribution, this imbalance will correct, and the system will then restart.”[...]"
MSM: "Bankrupt Illinois Is Out Of Money, Legislators’ Paychecks Delayed" [04/19/16] "Illinois Comptroller Leslie Munger announced at a press conference in Chicago on Sunday that she was delaying paying the state’s legislators until there are sufficient funds available to cover the checks. She said that the practice of prioritizing those paychecks ahead of other agencies waiting for their money was over: Our social service network is being dismantled, mass layoffs are occurring and small businesses across Illinois are awaiting payments for services they’ve already provided. As our cash crunch grows in the coming months, it is only appropriate that the unfair prioritization of payments to elected leaders ends. We are all in this together. We will all wait in line. She also expressed hope that this would galvanize those legislators waiting for their paychecks into passing a budget. The state has been operating without one for more than 300 days. [...]"
MSM: "Billion Dollar Lawsuits Filed Following Deutsche Bank's Admission Of Gold, Silver Rigging" [04/17/16] "Barely a day had passed since the historic admission of gold and silver price rigging by Deutsche bank, which as we reported on Thursday was settled with not only "valuable monetary consideration", but Deutsche's "cooperation in pursuing claims" against other members of the cartel, i.e., exposing the manipulation of other cartel members, and the class action lawsuits have begun. Overnight, two class action lawsuits seeking $1 billion in damages on behalf of Canadian gold and silver investors were launched in the Ontario Superior Court of Justice. The first class action alleges that the defendants, including The Bank of Nova Scotia, conspired to manipulate prices in the silver market under the guise of the benchmark fixing process, known as the London Silver Fixing, for a fifteen-year period. [...] An identical class action lawsuit was also launched for gold manipulation.[...]"
Commentary: "On The Hubris Of The Completely Clueless" Ø Hedge [04/16/16] "In the latest semi-annual Keynesian incantation spewed out by the world’s best pseudo-scientists, we learn that growth has been too slow for too long and that in itself is the cause of slow growth. First, they promote debt-funded consumption because spending – money supply/credit and velocity – is equivalent to nominal GDP growth, and as long as you have nominal GDP growth you can always add more debt to the existing stock ad infinitum. That obviously came crashing down in 2008. At that important juncture, which proved to even the most ingrained and indoctrinated Krugmanite that something was seriously wrong with the economic model, a proper re-set would be the only route toward sustainable prosperity. Instead of taking the honest path, countercyclical policy measures, both fiscal and monetary, aimed at maintaining and even expanding debt on top of the bloated and highly unsustainable level that existed at the 2008 inflection point. As parasitical, id est consumptive, debt got thrown a lifeline by the global central bankers with the explicit condonation by the like of the IMF, it is no wonder growth has been weak or even absent in the aftermath of reaching debt saturation. Old structures have been cemented and new capital formation mal-invested. Specifically from the latest IMF report on the global economy, we learn that “…persistent slow growth has scarring effects that themselves reduce potential output and with it, consumption and investment…” circulus in probando! [...] In the New Testament of the scripture, originally written by Ragnar Frisch it is postulated that all economic processes can be mathematically deduced in a complex web of equations, commonly known as an econometric model. An economic model is nothing more than an extrapolation of historical data and does not tell us anything worth knowing, such as upcoming structural shifts and unsustainable economic processes.[...] Any honest person working with such models know their gross limitations and how awful their track-records are. Still, these are the tools guiding the world’s central planners when they micromanage economies, be it fiscal or monetary expansion. They are obviously completely clueless, but still act with an extravagant level of hubris simply because they believe the scripture and their models.[...]" Note: More conceptually hobbled sequentials.
Concepts and Practices: " Thomas Jefferson: His Most Prescient Statements" Ø Hedge [04/16/16] "On this day, 273 year ago, one of America's most visionary founding fathers - Thomas Jefferson - was born. To celebrate his birthday, we are sharing a small sample of some of his most prophetic quotes which are perhaps more relevant today than they have ever been [...]"
MSM: "US-Born Ukrainian Finance Minister May Buy Country's Largest Telecom Company" [04/15/16] "Ukraine’s finance minister may soon own one of Ukraine's largest IT businesses. A firm co-founded by US-born Natalie Jaresko, a former State Department employee, is reportedly looking to purchase a company that controls 85 percent of Ukraine's telecom market. The potential business transaction focuses on the company Information and Computer Technology (Incom), which began its liquidation procedure in February. To pay off debts, the company's major asset, Datagroup, may be sold. The likely buyer is Horizon Capital, co-founded by Ukrainian Finance Minister Natalie Jaresko, according to LIGA.net news outlet. Prior to her role in the Ukrainian government, Jaresko worked for the US State Department. In fact, Jaresko – who was born in the US state of Illinois – only received Ukrainian citizenship in December 2014, the same time as when she was appointed as finance minister. Her political career in Ukraine has moved at lightning speed, and she is currently thought to be in talks to become the country's next prime minister. Although she is favored by investors and those hoping to crack down on corruption, critics say the move would show that Kiev is in fact a puppet of Washington. [...]"
MSM: "Ukraine Gov't Accepted Toxic Monsanto for 17 Billion IMF Loan" [04/14/16] "Tucked away in the layers of paper that come with any loan agreement (especially those from the IMF) were arrangements that opened Ukraine to be raided by major corporations one of which is the nefarious Monsanto. Putin wisely kicked these peddlers of toxin out of Russia, yet traitors like Poroshenko and Yates open the doors to these bandits. Both these two Gestapo leaders came to power via a coup, which is illegal based on Ukraine’s constitution. Ukraine opens the gateway to other parts of Eastern Europe, but its land is one of the most prized in the world and allowing GMO food in will have a devastating effect on the ecosystem. In fact, Putin has openly stated that Monsanto’s Bee-killing products are enough reason for a nation to go to war. Ukraine is asking for even more trouble by embracing these corporate thieve. Oakland Institute a California-based organization recently released a report titled “Walking on the West Side” showing how the conniving World Bank and IMF pushed terms that would force Ukraine to open the Country to Genetically Modified Crops. [...] Viktor Yanukovych, despite being a crook and gangster rejected the loan offer from for the $17 billion IMF loan. The world sadly is only coming to terms with this disaster now. Wisely for a chance, he opted for the Russian aid package worth $15 billion with an added incentive of cheaper Russian Natural gas. His change of heart is what pushed the Neo-Cons in Washington to mobilize and turn Maidan into a scene of violence and Bloodshed.[...]" Related: "Poroshenko's Man For PM In Ukraine, Total IMF Takeover Postponed" "In a typical Ukrainian fashion the formation of its new government which seemed like a done deal Sunday has been delayed over fighting for key ministries. Nonetheless, its Prime Minister and general composition are already known. The post-Yatsenyuk government will be headed by one Volodymyr Groysman (38) who comes from the ranks of the Poroshenko Bloc. Yatsenyuk's People's Front Party, which is being battered in opinion polls but is with its 81 MPs still the second largest party in the parliament, will continue to support the new government and will be awarded important ministerial positions. This means that the Poroshenko-Yatsenyuk 'grand coalition' remains in place but that leadership passes from one part to the other. That is unlikely to have too many Ukrainians jumping for joy but it is better than the only realistic alternative, which was far worse. The other candidate to replace Yatsenyuk was the Illinois-born former State Department official Natalie Jaresko (who still hasn't renounced her US citizenship) who was serving as post-Maidan's finance minister. [...] What made the prospect of Jaresko government so horrifying was that she proposed and demanded to run a radical, 'non-political' government beholden only to herself, and the IMF and EU. [...]"
Commentary: "Panama Ain't Got Nothing on Real Western Tax Havens" [04/14/16] "A Russian oligarch explains that off-shores are the Alpha and Omega of modern capitalism [...]"
Commentary: "Panamanian Authorities Raid Law Firm Mossack Fonseca" [04/14/16] "Police have raided the headquarters of the Panamanian law firm whose leaked Panama Papers revealed how the world's wealthy and powerful used offshore companies to stash assets. Police officers and patrol cars began gathering around the company's building on Tuesday afternoon under the command of prosecutor Javier Caravallo, who specialises in organised crime and money laundering. Mossack Fonseca, which specialises in setting up offshore companies, did not respond to requests for comment. Earlier, founding partner Ramon Fonseca said the company had broken no laws, destroyed no documents, and all its operations were legal.[...]" Related: "SQL Injection Bug Found In Panama Papers Law Firm Mossack Fonseca" "A hacker by the name, 1×0123, has revealed he found a flaw in the Panamanian tax company, Mossack Fonseca, which was involved in the #PanamaPapers leak. The hacker who found the SQL bug on Saturday might be too late for the Panamanian firm, which is busy handling the aftermath of the offshore companies saga. He revealed he found the bug on the custom online payment system of Mossack Fonseca, which is called Orion House, and he put some of the configuration data inside a Paste.ee file. The self-styled, “underground researcher” said through his 1×0123 Twitter account handle, “They updated the new payment CMS, but forgot to lock the directory /onion/,” he said. [...] The 1×0123 timeline on Twitter shows that although he hacks companies servers illegally, he still manages to notify them if he finds any flaws in their systems providing details. Such type of hackers is called grey hat hackers. He has also been involved with Edward Snowden, whom he notified of a blind XSS (cross site scripting) on the Freedom of the Press Foundation website. This is a project the US whistleblower is working on personally and thanked 1×0123 via Twitter on Sunday.[...]"
MSM: "Swiss Banker Whistleblower: CIA Behind Panama Papers" [04/13/16] "Bradley Birkenfeld is the most significant financial whistleblower of all time, so you might think he’d be cheering on the disclosures in the new Panama Papers leaks. But today, Birkenfeld is raising questions about the source of the information that is shaking political regimes around the world. Birkenfeld, an American citizen, was a banker working at UBS in Switzerland when he approached the U.S. government with information on massive amounts of tax evasion by Americans with secret accounts in Switzerland. By the end of his whistleblowing career, Birkenfeld had served more than two years in a U.S. federal prison, been awarded $104 million by the IRS for his information and shattered the foundations of more than a century of Swiss banking secrecy. In an exclusive interview Tuesday from Munich, Birkenfeld said he doesn’t think the source of the 11 million documents stolen from a Panamanian law firm should automatically be considered a whistleblower like himself. Instead, he said, the hacking of the Panama City-based firm, called Mossack Fonseca, could have been done by a U.S. intelligence agency. “The CIA I’m sure is behind this, in my opinion,” Birkenfeld said. Birkenfeld pointed to the fact that the political uproar created by the disclosures have mainly impacted countries with tense relationships with the United States. “The very fact that we see all these names surface that are the direct quote-unquote enemies of the United States, Russia, China, Pakistan, Argentina and we don’t see one U.S. name. Why is that?” Birkenfeld said. “Quite frankly, my feeling is that this is certainly an intelligence agency operation.” Asked why the U.S. would leak information that has also been damaging to U.K. Prime Minister David Cameron, a major American ally, Birkenfeld said the British leader was likely collateral damage in a larger intelligence operation. “If you’ve got NSA and CIA spying on foreign governments they can certainly get into a law firm like this,” Birkenfeld said. “But they selectively bring the information to the public domain that doesn’t hurt the U.S. in any shape or form. That’s wrong. And there’s something seriously sinister here behind this.” [...]"
Commentary: "Public Registration of Asset Ownership" [04/13/16] "When the Panama Papers broke and the news cycle had an opportunity to scold the wealthy from using offshore accounts to stash some of their wealth, the globalist regulators had another excuse to demand that financial privacy needs to end. Lost in this frenzy is that private property is an inherent natural right of individuals. If money was ill-gained, by theft, criminal endeavors or manipulated transactions; the penal judicial system certainly has enough tools to hold crooks accountable. Yet, the monetary controllers want to know exactly where and how much cash you have under the mattress or in a foreign bank account. What exactly is behind the motivation to force disclosure on all financial transactions? Ostensibly, cracking down on tax evasion is the basic argument. Never is there an attempt to debate what methods of taxation are proper for funding whatever governmental services a society deems appropriate. No, the entire rationalization is that the state has absolute authority to impose taxation at whatever level and inclusion on any asset it deems necessary. Of course authorities must know the entire portfolio of possessions, properties and resources in order to make this assessment. [...] In a foreboding essay on The Daily Bell, Transparency International Plots to Strip Global Privacy With Public Registry of Ownership, sets out the risk to private property. “This outfit, the largest entity of its kind with over 100 chapters around the world, is determined to create an international registry that will list the “beneficial ownership” of all controlling legal entities. If you want to affix your name to a document asserting ownership of assets, be prepared to have that ownership revealed. The group was founded by a former top executive of the World Bank.”[...] "
Commentary: "Oxfam: Most of World Bank's Private Investments Linked to Tax Havens" [04/13/16] "As the Panama Papers continue to shed light on the widespread issue of tax evasion around the globe, Oxfam has revealed that the World Bank is also complicit in promoting tax havens with the majority of its private investments going to companies with offshore accounts, according to a new report released Monday. "Tax dodging by multinational corporations alone costs developing countries at least US$100 billion every year, and corporate investment in tax havens almost quadrupled between 2000 and 2014," Oxfam said in a recent report. "Furthermore, it is estimated that globally a total of US$7.6 trillion of individuals’ wealth sits offshore. If tax were paid on the income that this wealth generates, an extra US$190 billion would be available to governments every year." [...] Out of the 68 companies in Sub-Saharan Africa that the World Bank’s private lending arm the International Finance Corporation lent money to in 2015, 51 use tax havens, accounting for 84 percent of IFC annual investment in the region. “It doesn’t make sense for the World Bank Group to spend money encouraging companies to invest in ‘development’ while turning a blind eye to the fact that these companies could be cheating poor countries out of tax revenues that are needed to fight poverty and inequality,” said Oxfam tax policy advisor Susana Ruiz in a statement on Monday.[...] In just five years, IFC, which according to its website is “the largest development institution focused exclusively on the private sector in developing countries,” has more than doubled its investment in companies that use tax havens. In 2015, the amount was US$2.87 billion, up from US$1.20 billion in 2010, according to Oxfam. Oxfam has previously reported that corporations cheat Africa out of some US$11 billion in taxes every year, highlighting the need for stricter tax rules to help fight poverty in inequality in the poorest yet economically fast-growing region. “The World Bank Group should not risk funding companies that are dodging taxes in Sub-Saharan Africa and across the globe, Ruiz added. “It must put safeguards in place to ensure that its clients can prove they are paying their fair share of tax.” [...] Billions of dollars in tax dollars siphoned off from African countries each year could provide crucial and much-needed investments in key areas of infrastructure and public services, including health. [...]"
MSM: "IMF Recommended Indebted Governments Confiscate Citizens’ Assets" [04/13/16] "... The debt situation is so dire that in 2013, the International Monetary Fund (IMF) recommended to indebted governments not just higher taxes, but confiscation of citizens’ assets. More perversely still, the IMF’s recommendation of assets-seizure is intended merely to make the national debt “sustainable,” not to actually pay off the debt. The IMF recommends that drastic measures are called for, from increasing income and consumption taxes to the direct confiscation of assets in the form of a “capital levy” — a “one-off tax” of about 10%, not on the super rich, but on all households with “positive net worth,” i.e., everyone with retirement savings or home equity. [...]" Note: Nested criminal parasitism ... Related: "International Monetary Fund Discussed Forcing Greek Debt Default"
MSM: "Goldman Sachs To Pay $5 Billion For Misleading Mortgage Bond Investors" [04/12/16] "Goldman Sachs Group Inc (GS.N) has agreed to pay $5.06 billion to settle claims that it misled mortgage bond investors during the financial crisis, the U.S. Department of Justice said on Monday. The settlement, which Goldman disclosed in January, stems from Goldman’s conduct in its packaging, securitization, marketing and sale of residential mortgage-backed securities between 2007 and 2009, the Justice Department said. Investors suffered billions of dollars in losses from the securities bought during the period, the Justice Department said. [...]"
MSM: "Wells Fargo Admits Deception In $1.2 Billion U.S. Mortgage Accord" [04/12/16] "Wells Fargo & Co (WFC.N) admitted to deceiving the U.S. government into insuring thousands of risky mortgages, as it formally reached a record $1.2 billion settlement of a U.S. Department of Justice lawsuit. The settlement with Wells Fargo, the largest U.S. mortgage lender and third-largest U.S. bank by assets, was filed on Friday in Manhattan federal court. It also resolves claims against Kurt Lofrano, a former Wells Fargo vice president. According to the settlement, Wells Fargo “admits, acknowledges, and accepts responsibility” for having from 2001 to 2008 falsely certified that many of its home loans qualified for Federal Housing Administration insurance. The San Francisco-based lender also admitted to having from 2002 to 2010 failed to file timely reports on several thousand loans that had material defects or were badly underwritten, a process that Lofrano was responsible for supervising. [...]"
MSM: "Greece Sells Country’s Largest Port To China" [04/10/16] "China has described a deal to sell Greece’s biggest port to Chinese shipping group COSCO as a “win-win” for both countries. Under the deal between Greece’s privatization fund HRADF and China COSCO Shipping Corporation, the Chinese investors will pay 280.5 million euros($319.79 million) to HRADF for the initial acquisition of a 51 per cent stake, while it will pay another 88 million euros within five years for the remaining 16 per cent, provided it has implemented the agreed investments in the port. [...] According to the Greek prime minister, the agreement sends a strong message to the global economic community about the recovery of the Greek economy. Athens needs to repay 3.5 billion euros to the International Monetary Fund and the European Central Bank in July, as well as unpaid domestic bills.[...] Mission chiefs of Greece’s European Union and IMF lenders held talks in Brussels on Friday on the country’s key bailout review. “The Greeks are still short of meeting of the conditions of either organization,” a Reuters report quoted an EU official as saying on Friday. The IMF, which will decide whether to co-finance Greece’s third bailout after the review and in light of how much debt relief Greece receives, believes Athens will miss its 2018 surplus target, even if it implements measures worth 3 per cent of GDP.[...]"
MSM: "Germany Takes Aim At The European Central Bank, May Sue Draghi: Spiegel" [04/10/16] "... There was a time when the German chancellor and the head of the European Central Bank had nice things to say about each other. Mario Draghi spoke of a "good working relationship," while Angela Merkel noted "broad agreement." Draghi, said Merkel, is extremely supportive "when it comes to European competitiveness." These days, though, meetings between the two most powerful politicians in the euro zone are often no different than their face-to-face at the most recent summit in Brussels. She observed that his forced policy of cheap money is endangering the business model of Germany's Sparkassen savings banks and retirement insurance companies. He snarled back that the sectors would simply have to adapt, just as the American financial sector has.[...] This is nothing new: we have been hearing laments by Europe's biggest bank, Germany's Deutsche Bank, that the ECB has gone too far for over two months now (initially in "A Wounded Deutsche Bank Lashes Out At Central Bankers: Stop Easing, You Are Crushing Us"). But for Merkel to take her feud in the open, and seeking to once again freeze relations between Germany and the ECB at this fragile juncture for the future of Europe, when Draghi has once again failed to stimulate inflation, when he has crushed European banks, but at least has unleashed a massive debt issuance spree, is troubling. Spiegel has much more: The alienation between Germany and the ECB has reached a new level. Back in deutsche mark times, Europeans often joked that the Germans "may not believe in God, but they believe in the Bundesbank," as Germany's central bank is called. Today, though, when it comes to relations between the ECB and the German population, people are more likely to speak of "parallel universes."The reason for German anger: rates.[...]" Related: "Israel Conflates The Boycott, Divestment And Sanctions (BDS) Movement With 'Terrorism' And Is Threatening German Banks" "Netanyahu-appointee Gilad Erdan has threatened to coerce German banks to prohibit BDS activists from fundraising through their accounts, not through Israeli legislation, but the laws of other countries [...]"
Commentary: "Banks At Risk Of Bad-Debt Blowout As Aussie Steelmaker Collapses" [04/10/16] "Commonwealth Bank of Australia and its competitors are staring at a potential blowout in bad-debt expenses as they try to claw back a combined A$1 billion ($753 million) of loans to steel and iron ore supplier Arrium Ltd., underscoring the looming threat to lenders from the commodities bust. The banks may recoup less than 50 cents on the dollar they lent to the Sydney-based company, which handed control to an administrator Thursday after lenders rejected its $927 million recapitalization plan with Blackstone Group LP’s GSO Capital Partners. The turn in the commodities cycle is impacting companies from miners to oil explorersand causing trepidation for banks that have lent them billions of dollars across the world. Bad-debt provisions at Australia’s largest lenders are set to rise to their highest in eight years by 2018, as the chances of defaults in the mining, agricultural and dairy sectors increase, according to a survey by Bloomberg last month. “It’s a negative for the four big banks given they are unsecured creditors,” said Omkar Joshi, a Sydney-based investment analyst at Watermark Funds Management, which manages A$1 billion. “It is also negative because it looks like the banks wouldn’t even get the 50-55 cents on the dollar that was expected under the GSO proposal.” [...]"
MSM: "ECB’s Monetary Policy Is Now Creating a Rush Into Derivatives" [04/09/16] "One of the most catastrophic things central banks have done in the post financial crisis period is destroy financial markets. Investors are no longer investors, they’re merely helpless rats running around the lunatic central planning maze desperately attempting to survive by front running the latest round of central bank purchases. [...] So “investing” has morphed into simply front-running the decisions of unelected central planners. That’s all there is to it, and while that’s disturbing enough, there may be another unappreciated angle to this mess. When QE was rolled out by Bernanke, many of us assumed that printing money to buy bonds would be immediately devastating for the currency in question. The current state of affairs makes me question whether this assumption still works going forward. If investors are merely looking to front run central banks, you could make an argument that QE can strengthen a currency, at least in the short run, as global fund managers move into the QE producing nation’s currency in order to front run central bank purchases. So in the short-term, will further QE weaken a nation’s currency or strengthen it? It’s an important question to ask in this increasingly twisted world of global finance.[...]"
Commentary: "Triffin’s Paradox Revisited: Crunch-Time For The U.S. Dollar And The Global Economy" [04/08/16] "While all eyes on fixated on global stock markets as the measure of “prosperity” and “growth” (or is it hubris?), the larger force at work beneath the dovish cooing of central bankers is foreign exchange: the relative value of nations’ currencies, which are influenced (like everything else) by supply and demand, which is in turn influenced by interest rates, perceived risk, asset purchases and sales by central banks and capital flows seeking the lowest possible risk and the highest possible return. Which brings us to Triffin’s Paradox, a topic I’ve covered for many years: [...] (History of current situation) [...] The core of Triffin’s Paradox is that the issuer of a reserve currency must serve two entirely different sets of users: the domestic economy, and the international economy. This has created a no-win conundrum for the Fed: if it normalizes rates (as it should, after seven years of ZIRP and stimulus) in the domestic U.S. economy, that will strengthen the USD, further pressuring China’s yuan and emerging markets, which in turn will further pressure an already-tottering global economy. [...] There are no winners, regardless of what policy the Fed chooses to pursue. This is why we see such absurd waffling in the Fed: one statement suggests interest rates hikes are on the way, and the next dovish cooing suggests rate hikes are so far away that global markets can safely ignore the possibility." [...] As the Fed waffles in response to global markets, the USD has swung up and down in a trading range. Sorry, Fed: you can’t have it both ways. Eventually, the domestic economy will pay the price of essentially zero interest rates, or China and the global economy will pay the price of a strengthening USD. No nation ever achieved global hegemony by devaluing its currency. Hegemony requires a strong currency, for the ultimate arbitrage is trading fiat currency that has been created out of thin air for real commodities and goods. Generating currency out of thin air and trading it for tangible goods is the definition of hegemony. Is there is any greater magic power than that? In essence, the Fed must raise rates to strengthen the U.S. dollar (USD) to keep commodities such as oil cheap for American consumers. The most direct way to keep commodities cheap is to strengthen one’s currency, which makes commodities extracted in other nations cheaper by raising the purchasing power of the domestic economy on the global stage.[...]"
MSM: "Rothschild's Primer How To Launder Money In U.S. Real Estate And Avoid "Blacklists" Ø Hedge [04/08/16] "Anyone closely following the Panama Papers tax haven story, is by now familiar with the role that Rothschild plays in providing virtually identical services right inside the US by the Rothschild Trust, as explained in our recent article "Rothschild Humiliates Obama, Reveals That "America Is The Biggest Tax Haven In The World." They are also probably familiar with the name Andrew Penney profiled in January by Bloomberg as follows: " Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt. For financial advisers, the current state of play is simply a good business opportunity. In a draft of his San Francisco presentation, Rothschild’s Penney wrote that the U.S. "is effectively the biggest tax haven in the world." The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.” So for all those now former Mossack Fonseca, or their "Panamanian" peers who have not been rooted out yet, or for anyone else who wishes to open a domestic "trust", here is the primer straight from Rothschild Trust. Key highlights: [...]"
Commentary: "Russian Intelligence Historian: American Intelligence Is A Branch Of Wall Street" Alexander Kolpakidi [04/08/16] "... Economic espionage – it has always been conducted, from the beginning, even in tsarist times. Economic information was always in the shadow. In the Soviet era, we had the Chamber of Commerce, headed by Primakov, created by one of the closest associates of Beria – General Pitovranov. And financial intelligence is closely intertwined with economic, that's always been one of the most important tasks of the state. And everything to do with banks, related to finance is always in the shadow. So, naturally, intelligence in this area is doubly in the shadow. By the way, compared to Americans, as Snowden showed us well, we are like a blind, one-armed cripple on crutches fighting with a strong and healthy boxer. The struggle is unequal, the U.S. is really in control of the entire world, and not only just eavesdropping on terrorist conversations, but they control, primarily, all financial flows. Their intelligence from the very beginning was built as a branch of Wall Street. If you look at who created the CIA – they are the people from Wall street, so, naturally, owing to their habits they always left intelligence for large corporations. [...]
Commentary: "Panama Papers Reveal London As Centre Of 'Spider's Web'" [04/07/16] "Critics accuse British authorities of turning a blind eye to the inflow of suspect money and of being too close to the financial sector to clamp down on the use of its overseas territories as havens [...] As-well as shining a spotlight on the secret financial arrangements of the rich and powerful, the so-called Panama Papers have laid bare London's role as a vital organ of the world's tax-haven network. The files leaked from Panama law firm Mossack Fonseca exposed Britain's link to thousands of firms based in tax havens and how secret money is invested in British assets, particularly London property. Critics accuse British authorities of turning a blind eye to the inflow of suspect money and of being too close to the financial sector to clamp down on the use of its overseas territories as havens, with the British Virgin Islands alone hosting 110,000 of the Mossack Fonseca's clients. "London is the epicentre of so much of the sleaze that happens in the world," Nicholas Shaxson, author of the book "Treasure Islands", which examines the role of offshore banks and tax havens, told AFP. The political analyst said that Britain itself was relatively transparent and clean, but that companies used the country's territories abroad -- relics of the days of empire -- to "farm out the seedier stuff", often under the guise of shell companies with anonymous owners. "Tax evasion and stuff like that will be done in the external parts of the network. Usually there will be links to the City of London, UK law firms, UK accountancy firms and to UK banks," he said, calling London the centre of a "spider's web". "They're all agents of the City of London -- that is where the whole exercise is controlled from," Richard Murphy, professor at London's City University, said of the offshore havens." [...]"
MSM: "Corporate Tax Inversions Are the Least of It" [04/07/16] "One of the most insidious tax loopholes out there" just got a little smaller. But President Barack Obama, who announced the change on Tuesday with much fanfare, didn’t go nearly far enough: The tax code itself, not just its loopholes, is what needs fixing. [...] It's hard to overstate just how bad the U.S. corporate tax code is. Imagine it was designed by foreign saboteurs -- and prepare to be impressed by their ingenuity. It taxes profits at 35 percent, one of the highest rates in the world. This excessive rate applies to a base riddled with exemptions and exceptions. U.S. companies pay taxes on their non-U.S. earnings, but only when the money is brought home, thus creating an incentive to park profits abroad. In these and other ways, the system manages to combine maximum economic damage with relatively meager revenue collection.[...]"
MSM: "Treasury Department Announces New Rules Relating To Corporate Tax Inversions" [04/06/16] "... The Treasury Department announced new rules relating to tax inversions yesterday, and as tax analyst Robert Willens put it, "They’re pretty much taking all of the juice out of inversions." The biggest juicing involves earnings stripping: The Treasury Department also took aim at another feature of these so-called corporate inversion transactions: complicated internal loans that effectively move profits of United States-based businesses overseas. This tactic, known as earnings stripping, involves the American subsidiary borrowing from the parent company and using the interest payments on the loans to offset earnings — a cost that is not reflected on financial statements but lowers the tax bill. Monday’s rules classify this intra-company transaction as if it were stock-based instead of debt, eliminating the interest deduction for the American subsidiary. It is worth distinguishing two reasons for tax inversions. One reason is just that the U.S. has a relatively high corporate tax rate on worldwide income earned by U.S. corporations, which creates an incentive for international companies not to be located in the U.S. This will pretty much always be true as long as the U.S. taxes worldwide income this way (and as long as other countries don't); even if you ban "inversions," foreign companies will still have an advantage in acquiring U.S. ones for just this reason. The other reason to invert is because inverted companies can structure their U.S. income to avoid paying U.S. income taxes, by creating a lot of deductible expenses (interest, licensing payments) that are paid to subsidiaries abroad. That is more or less gamesmanship, and is more or less solvable by rules. The solutions are difficult, but Treasury seems to be pretty serious about finding them. [...]" Related: "Obama Explains 'Why The Land-Of-The-Free' Will (Now) Ban Tax Inversions" MSM "Several Democrats have announced bills to make it harder for U.S. corporations to invert. But prospects for passing such legislation in an election year appear low given wide differences between Democrats and Republicans on taxes. Obama's statement also comes amid an uproar over publication of thousands of names of rich and powerful people who conducted offshore financial dealings through a Panamanian law firm. Obama has yet to address those disclosures publicly. [...]"
Commentary: " Mossack Fonseca Founders Admit It's Over... To Rothschild's Delight" [04/06/16] "... Recall that according to a recent investigation by Bloomberg, "The World’s Favorite New Tax Haven Is the United States" ... After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota. “How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote Peter A. Cotorceanu, a lawyer at Anaford AG, a Zurich law firm, in a recent legal journal. “That ‘giant sucking sound’ you hear? It is the sound of money rushing to the USA.” That money is rushing for one simple reason: dirty foreign - and local - money is welcome in the U.S., no questions asked, to be shielded by the most impenetrable tax secrecy available anywhere on the planet. One may even say that nowadays, US-based tax havens are the new Switzerland, or Bahamas or, for that matter, Panama. Indeed, for most Americans, offshore tax haven are now meaningless with the passage of the FATCA law, which makes the parking of dirty US money abroad practically impossible. [...] And, to top it off, there is one specific firm which is spearheading the conversion of the U.S. into Panama: Rothschild. Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nev., a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt. For financial advisers, the current state of play is simply a good business opportunity. In a draft of his San Francisco presentation, Rothschild’s Penney wrote that the U.S. “is effectively the biggest tax haven in the world.” The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.” Yes, Mossack Fonseca may now be history, and its countless uberwealthy clients exposed, but none other than Rothschild is now delighted to be able to fill its rather large shoes. In fact, someone with a conspiratorial bent may decide that the dramatic takedown of the Panama "tax offshoring" industry was nothing more than a hit designed to crush the competition of US-based "tax haven" providers..[...] "
Flashback: "Panama Trade Deal Would Undercut Efforts To Get Rich Americans To Pay Taxes" 2011 [04/05/16] " During a Monday press conference addressing Standard & Poor’s downgrade of U.S. debt, President Barack Obama reaffirmed his commitment to raising taxes on the wealthy. But as he pushes to get the rich to pay more into federal coffers, Obama is also urging Congress to approve a trade agreement that would cement a key tax avoidance tactic deployed by some of the richest Americans. “What we need to do now is combine those spending cuts with two additional steps: tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare,” Obama said during the address, referring to steps the U.S. should take in addition the cuts agreed to to raise the federal debt ceiling. Just two days before, during his Saturday radio address, Obama urged Congress approve three trade deals, including one with Panama that would permit Americans to easily stash assets in the Central American country, a notorious tax haven for the wealthy and American corporations. [...]"
MSM: "Similarity Between Snowden Leak And Panama Papers: Scandal Is What’s Been Legalized" Glenn Greenwald [04/05/16] "Yesterday, dozens of newspapers around the world reported on what they are calling the Panama Papers: a gargantuan leak of documents from a Panama-based law firm that specializes in creating offshore shell companies. The documents reveal billions of dollars being funneled to offshore tax havens by leading governmental and corporate officials in numerous countries (the U.S. was oddly missing from the initial reporting, though journalists vow that will change shortly).[...]"
MSM: "600 Israeli Companies, 850 Shareholders Listed In Panama Data Leak" [04/05/16] "Some 600 Israeli companies and 850 Israeli shareholders are listed in the 11.5 million documents leaked from a Panamanian law firm detailing offshore dealings. The trove was published Sunday after a year-long investigation into the material. According to the probe by the International Consortium of Investigative Journalists (ICIJ) with the German daily Sueddeutsche Zeitung and other media, including Haaretz, the leaked data from Mossack Fonseca, from 1975 to the end of last year, provides what the ICIJ described as a “never-before-seen view inside the offshore world.” The documents, from 214,000 entities, detail the offshore holdings of a dozen current and former world leaders, as well as businessmen, criminals, celebrities and sports stars. [...]"
Commentary: "Mossack Fonseca Has 441 U.S. Clients" [04/04/16] "An interactive map created by Brian Kilmartin lays out shotgun data (no names) about the number of companies, clients, beneficiaries and shareholders of Mossack Fonseca, there are at least 441 clients, 3,072 companies, 211 beneficiaries and 3,467 U.S.-based shareholders of the Panamanian law firm. [...]"|
Corbett Report: "Panama Papers: Are Strategic Leaks A New Form Of Geopolitical Warfare?" [04/04/16] [15:26] "The Panama Papers are out and the Panama Papers propaganda is out right along with it. So why does this new mega-leak seemingly only expose those in the State Department crosshairs or expendable others and not a single prominent American politician or businessman? And what does this have to do with the OECD’s plan for a global taxation grid? [...]"
MSM: "First Panama Papers Casualty? Former Iceland Premier Calls On Current PM To Resign" [04/04/16] "One of the more prominent names featured in the Panama Papers disclosure is that of Iceland's Prime Minister Sigmundur David Gunnlaugsson. The reason is that according to the leaked files, Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned a company called Wintris set up in 2007 on the Caribbean island of Tortola in the British Virgin Islands, to hold investments with his wealthy partner, later wife, Anna Sigurlaug Pálsdóttir. [...]" Related: See below
Commentary: "Mossack Fonseca: The Nazi, CIA And NV Connections ... Why It's Now Rothschild's Turn" [04/04/16] "For all the media excitement about the disclosed names in the "Panama Papers" leak , in this case represented by the extensive list of Mossack Fonseca clients, this is not a story about which super wealthy individuals did everything in their power, both legal and illegal, to avoid taxes, preserve their financial anonymity, and generally preserve their wealth. After all, that's what they do, and it should not come as a surprise that they will always do that, especially following last year's disclosure by the same ICIJ which revealed a list of 100,000 HSBC clients who had been dutifully avoiding the payment of taxes. What the story is about is the nebulous world of offshore tax evasion and tax havens, which based on data from the World Bank, IMF, UN, and central banks, hide between $21 and $32 trillion, where registered incorporation agents and law firms in small Caribbean countries (and not so small US states) make the laundering of money and the "disappearance" of the super wealthy, into untracable numbers hidden behind shell companies, possible. So, in order to learn some more about the real star of this story, the Panamanian lawfirm of Mossack Fonseca, we went to Fusion which has compiled a fascinating story of the company's history, founders, and key milestone events in its life. [...]" |
MSM: "Mossack Fonseca Warns Customers Of Unauthorised ‘Panamaleaks’ Data Breach" [04/04/16] "Panamanian law firm employed by energy minister to create offshore company informs customers of data breach that is set to be revealed in the news [...]"
MSM: "Presenting The Mossack Fonseca Interactive Web Of Secret Companies (And All Available Source Files)" [04/04/16] "Even though, as we said in our previous post, the starting role in today's record document leak should be that of Mossack Fonseca (and its heir apparent, Rothschild, operating out of Reno, NV) the general population is far more curious to learn which names will emerge as a result of this historic crackdown involving 11 million documents and 2,600 gigabytes of data. And while the full disclosure effort will take months, if not years, here courtesy of Fusion, is a data map of the intersection between clients, shareholders, companies and agents who have used Mossack Fonseca's services. From Fusion: "the map represents just over a third of all the data we have access to through the leak. We’ve chosen to show you 115,373 of the most connected entities so you can see how, in many case, individuals are actually related in some way. [...] Meanwhile, for those who enjoy primary data, the full universe of currently available source documents is available at this link. Based on a recent Wikileaks tweet, more may be becoming available soon."
MSM: "Leak" Exposes Criminal Financial Dealings Of Some Of World's Wealthiest People" MSM [04/04/16] "An investigation published on April 3, 2016 by the International Consortium of Investigative Journalists and its media partners reveals the hidden workings of a secretive industry that banks and lawyers use to hide the financial holdings and dealings of powerful clients, including prime ministers, parliamentarians, plutocrats and criminals, according to a trove of leaked documents. An unprecedented leak of more than 11 million documents, called the "Panama Project" , has revealed the hidden financial dealings of some of the world's wealthiest people, as well as 12 current and former world leaders and 128 more politicians and public officials around the world. [See several related stories in the "Panama Papers: Global Overview"] More than 200,000 companies, foundations and trusts are contained in the leak of information which came from a little-known but powerful law firm based in Panama called Mossack Fonseca, whose files include the offshore holdings of drug dealers, Mafia members, corrupt politicians and tax evaders – and wrongdoing galore. The law firm is one of the world's top creators of shell companies, which can be legally used to hide the ownership of assets. The data includes emails, contracts, bank records, property deeds, passport copies and other sensitive information dating from 1977 to as recently as December 2015. It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues. [...] Mossack Fonseca’s fingers are in Africa’s diamond trade, the international art market and other businesses that thrive on secrecy. The firm has serviced enough Middle East royalty to fill a palace. It’s helped two kings, Mohammed VI of Morocco and King Salman of Saudi Arabia, take to the sea on luxury yachts. [...] Today, Mossack Fonseca is considered one of the world’s five biggest wholesalers of offshore secrecy. It has more than more than 500 employees and collaborators in more than 40 offices around the world, including three in Switzerland and eight in China, and in 2013 had billings of more than $42 million. The leak also provides details of the hidden financial dealings of 128 more politicians and public officials around the world. The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars. These are among the findings of a yearlong investigation by the International Consortium of Investigative Journalists, German newspaper Süddeutsche Zeitung and more than 100 other news organizations. [...] The leaked files also show the firm regularly offered to backdate documents to help its clients gain advantage in their financial affairs.[...]" Related: Video: "The Panama Papers: An Introduction" [4:19] " The Panama Papers is a global investigation into the sprawling, secretive industry of offshore that the world’s rich and powerful use to hide assets and skirt rules by setting up front companies in far-flung jurisdictions. Based on a trove of more than 11 million leaked files, the investigation exposes a cast of characters who use offshore companies to facilitate bribery, arms deals, tax evasion, financial fraud and drug trafficking. Behind the email chains, invoices and documents that make up the Panama Papers are often unseen victims of wrongdoing enabled by this shadowy industry. This is their story."| "The 'Stairway To Tax Heaven' Game" "Discover a parallel universe of shell companies and wealth managers, and learn how they hide cash away. Also Sign up for a guided email tour of the Panama Papers investigation that will reveal its biggest findings, provide valuable background information and expose how the offshore finance industry impacts lives around the world."| "The Power Players" "Explore the offshore connections of world leaders, politicians and their relatives and associates." | "Key Figures" "Discover the big numbers behind the Panama Papers files, including nearly 40 years of data." Note: Pluto in Capricorn helps reveal things that have been hidden for a long time. | Resources: "The Center For Public Integrity" | "International Consortium of Investigative Journalists"
Exposé: "Big Banks Aided Firm At Center Of International Bribery Scandal" [04/04/16] "British financial giant HSBC and American bailout kingpin Citibank processed transactions, managed money and vouched for Unaoil, a once-obscure firm that is now at the center of a massive international corruption scandal. Police raided Unaoil’s Monaco offices and interviewed its executives on Thursday, a day after The Huffington Post and Fairfax Media first exposed the company’s practices. Law enforcement agencies in at least four nations are involved in a wide-ranging probe of the company and its partners. Halliburton, KBR and other corporate conglomerates relied on Unaoil to deliver them lucrative contracts with corrupt regimes in oil-rich nations. But without the help of banks like HSBC and Citibank, none of Unaoil’s operations would have been possible. Both Citibank and HSBC declined to comment on whether Unaoil or the Ahsani family, who own and operate the firm, remain their clients. [...]" Related: "Exposure of Major Corruption Scandal Spurs Call For More Global Government" "... But could there be another reason for the furious publicizing of this story? In some sense, it seems to be a screed supporting the necessity for worldwide policing. Global corporations, we are learning, have broken the law and an extraordinary international policing effort is surely necessary to deal with the criminal challenges. One leading entity in this new worldwide policing effort is the FBI. You would think HuffPo might question why the FBI is leading the charge given that it is supposed to be a domestic US agency. International corruption demands global solutions. The US – along with Britain, Australia and others members of the Anglosphere – is happy to provide the resources. Predictably, corporate privacy is attacked. Transparency is a key element: For this reason, anonymous shell corporations ought to be done away with. Monaco is prominently mentioned as providing a home for the company at the center of the corruption. Monaco’s status as a tax haven has often proven vexatious to international crime fighters. We also learn that the OECD, the lead organization in the fight against bribery and corruption, ought to be strengthened. (Great! another sprawling bureaucracy is going to be awarded with yet more power and law-enforcement clout.) And then there is this, from the article: Attorney General Loretta Lynch spoke at the annual meeting of the OECD anti-bribery convention … “[W]e have transitioned in less than two decades from a world in which bribery of foreign officials was considered a sound business strategy, to one in which bribery is treated like the destructive and corrosive crime that it is,” Lynch said. “That is a tremendous achievement in which we can all take pride — and it is a testament to what is possible through multinational cooperation.” [...]"
Exposé: "Wikileaks Reveals IMF Plan To "Cause A Credit Event In Greece And Destabilize Europe" [04/03/16] "One of the recurring concerns involving Europe's seemingly perpetual economic, financial and social crises, is that these have been largely predetermined, "scripted" and deliberate acts. This is something the former head of the Bank of England admitted one month ago when Mervyn King said that Europe's economic depression "is the result of "deliberate" policy choices made by EU elites. It is also what AIG Banque strategist Bernard Connolly said back in 2008 when laying out "What Europe Wants" To use global issues as excuses to extend its power: • environmental issues: increase control over member countries; advance idea of global governance • terrorism: use excuse for greater control over police and judicial issues; increase extent of surveillance • global financial crisis: kill two birds (free market; Anglo-Saxon economies) with one stone (Europe-wide regulator; attempts at global financial governance)• EMU: create a crisis to force introduction of “European economic government”* This morning we got another confirmation of how supernational organizations "plan" European crises in advance to further their goals, when Wikileaks published the transcript of a teleconference that took place on March 19, 2016 between the top two IMF officials in charge of managing the Greek debt crisis - Poul Thomsen, the head of the IMF's European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece. [...]"
MSM: "IMF Fears EU Membership Vote in UK to Paralyze Decision Making" [04/03/16] "EU leaders will have to work hard on two fronts this summer if they want to keep old traditions within the union. WikiLeaks released information that the IMF fears that a possible Greek default on its debt will coincide with Britain’s referendum on its EU membership and freeze the EU’s decision-making process. The top IMF experts believe that a possible Greek default on its third bailout would coincide with Britain's possible Brexit and it would be hard for the EU to deal with two major events at the same time. According to the leaked conversation, the IMF wants to tell Germany that it will leave the Troika, composed of the IMF, European Commission and the European Central Bank, if the IMF and the Commission cannot reach an agreement regarding the Greek bailout. The IMF chiefs want Greece to accept more austerity measures, such as raising taxes and cutting pensions. According to the leaked conversation, Greece needs to accept more of these draconian measures or the EU will face the threat of "an imminent financial catastrophe." However, the Brexit referendum in June "will paralyze European decision making at the critical moment," the IMF officials fear, according to WikiLeaks. [...]" Related: "IMF Lauds 'Decisive' New Russian Banking Rules" "The Russian authorities managed to keep the country’s banking system stable amid challenging economic conditions by introducing new regulatory measures, the International Monetary Fund said in a press release on Thursday upon concluding a mission to Moscow. [...] "Against the background of a challenging macroeconomic environment, the banking system has been kept stable by the authorities’ decisive policy response, which included liquidity provision, capital support and temporary regulatory forbearance," the press release stated. [...] The IMF noted that the Russian authorities have also achieved "considerable progress" in establishing an effective policy framework to mitigate the systemic risk of the financial system.[...]"
MSM: "Citigroup Warns 2 Million Jobs Will Be Lost In Banking" [04/01/16] "The financial crisis was bad for banking jobs. The rise of “fintech” could be worse. A new report by Citigroup Inc. forecasts retail banking automation could spur a 30% decline in banking jobs across the U.S. and Europe over the next decade. That would be the equivalent of eliminating nearly 2 million jobs. The report is a broad assessment of the potential impact of financial technology, or “fintech,” on the global banking industry. It says that banking is at a “tipping point” with technology but still only in the early innings of a transition, with just 1% of consumer banking revenues generated from digital channels last year. Big banks are under enormous pressure to return to pre-financial crisis profit levels, but have struggled to grow their lending and other revenues. Many banks have said that cost cutting and efficiency through technology is a path to profit expansion, resisting calls to break up instead. Citigroup itself was the subject of such a call last week. [...]" ]"
MSM: "Yellen Says What Markets Want to Hear" [03/30/16] "Markets had a predictable immediate reaction to comments by Federal Reserve Chair Janet Yellen on Tuesday that they interpreted as relatively dovish signals about the thinking of the world’s most important central bank. Within minutes of her remarks, risk assets rose, government bond yields fell, the dollar weakened and the VIX declined. Sustaining this trend will require two policy signals, one short-term and one longer-term -- assuming that the global economic environment remains relatively stable. She used her much-anticipated lunchtime speech to the Economic Club of New York to paint a cautious and measured picture of the U.S. economy, and of the delicate balance that Fed policy makers must maintain. And she refrained from venturing into the debate about negative interest rates, which has been fueled by the decision of her counterparts in Europe and Japan to push theirs below zero. Judging from the immediate reaction, the markets liked her overall message, which they interpreted as an indication of continued support from the Fed. Consequently, stocks and corporate bond prices rose within an overall rally for risk assets. Government bond yields fell as traders revised down their expectations of the path of future policy interest rates. The dollar depreciated as the VIX, commonly referred to as a measure of 'market fear', fell.[...] Finally, and perhaps most importantly for the well-being of both the U.S. and global economies, the biggest takeaway from Yellen’s important speech could go beyond the specific issues she covered. Her remarks and their context could be taken to suggest that, for reasons beyond its control, the Fed is increasingly held hostage by three forces that could threaten its own credibility and political autonomy: [...]"
Commentary: "Report: 74% Of Billionaire Wealth From 'Rent-Seeking" [03/29/16] " ... A new report by Dider Jacobs at the Center for Popular Economics offers a breathtaking estimate of how the rich have gotten richer in recent years. [...] What Jacobs reveals is that 74% of billionaire wealth in America that has propelled people into the top 1% and beyond was gained not through the creation economic benefit, but through 'rent-seeking'. 'Rent-seeking' is the use of a company, organization or individual's resources to obtain economic gain from others without reciprocating any benefits to society . Economic 'rents' are obtained when someone is able to extract wealth or excessive returns despite no additional contribution to productivity, or what could be called socially useless activity. Jacobs then identifies the industries in which rent-seeking is most significant: those heavily reliant on the state, like oil, gas and mining, gambling, or forestry, and industries that involve a lot of imperfect information and market failures, like finance, IT, and the music and fashion industry. And, of course, much billionaire wealth is inherited, making it hard to argue meritocracy plays much of a role at all. Taking all of this data into account, Jacobs concludes: " The bottom-line is that extreme wealth is not broad-based: it is disproportionately generated by a small portion of the economy. Economic theory predicts that activities that are prone to rent-seeking or market failures will concentrate wealth, and that is what we observe. This finding has important moral, economic, and policy implications. To the extent that it is driven by rents as opposed to productive activities, the extreme concentration of wealth we observe is not fair according to a meritocratic conception of social justice. Moreover, because rents do not compensate productive activities, redistributing them through taxes or regulation does not harm the economy, and could even boost economic growth. As wealth inequality has become so extreme, even modest redistribution could have significant positive impact for the poor and the middle class.[...]" Note: I seem to remember that the original idea behind granting corporate charters hinged on whether or not that company benefited society in some way ... now it doesn't matter, because to them, the society is expendable. [...]"
Date With Destiny: "Chairman Of Insolvent Chinese Steel Company Hangs Himself Day Before Bond Maturity" [03/27/16] "At 13:20 on the 24th, the Dalian City Public Security Bureau received a report, found that the chairman Dongbei Special Steel Group Co., Ltd., party secretary Yang Hua (male, 53 years old) Death by hanging at his residence. At present, the authorities are conducting investigations. [...]" Note: Yuan Hung Lo
Commentary: "Excerpt from "Tragedy and Hope" by Carroll Quigley" [03/26/16] "...The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole, this system was to be controlled in a feudalist fashion by the central banks of the world acting in concert by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations.... It must not be felt that these heads of the world's chief central banks were themselves substantive powers in world finance. They were not. Rather, they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up and were perfectly capable of throwing them down. The substantive financial powers of the world were in the hands of these investment bankers (also called 'international' or 'merchant' bankers) who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks, this dominance of investment bankers was based on their control over the flows of credit and investment funds in their own countries and throughout the world. They could dominate the financial and industrial systems of their own countries by their influence over the flow of current funds though bank loans, the discount rate, and the re-discounting of commercial debts; they could dominate governments by their own control over current government loans and the play of the international exchanges. Almost all of this power was exercised by the personal influence and prestige of men who had demonstrated their ability in the past to bring off successful financial coupes, to keep their word, to remain cool in a crisis, and to share their winning opportunities with their associates.”Excerpt From: Quigley, Carroll. “Tragedy and Hope.” [...] Related: "Tragedy & Hope (PDF)" 1367 pages.
MSM: "30Y Treasury Yield Tumbles, Signals Trouble Ahead For Banks" Ø Hedge [03/24/16] "[The Fed] cannot save the banks now, without creating a recession, with all the consequences that has for bad loans and falls in GNP. " [...]"
Commentary: "Forbes Yanks a Negative Article on JPMorgan While the Bank Pays for Content" [03/22/16] "Americans have painful recollections of how allowing ratings agencies to take Wall Street money and dole out bogus triple-A ratings on subprime mortgages tanked the U.S. housing market in the worst economic collapse since the Great Depression. They fully understand that the Supreme Court’s Citizens United decision that opened the floodgates to pay-to-play corporate financing of elections has grotesquely disfigured participatory democracy in America. Now they’re about to learn how America’s “free press” is able to be bought – literally. This past Friday, March 18, Laurence Kotlikoff, a Forbes contributor, Professor of Economics at Boston University and bestselling co-author of Get What’s Yours: The Secrets To Maxing Out Your Social Security, tweeted the headline of an article he had just posted at Forbes: “JPMorgan Chase – The True Story of America’s Most Corrupt Bank.” The Tweet linked to a two-page article by Kotlikoff at Forbes, which began with these two paragraphs: “Between Bernie Sanders and Elizabeth Warren, we’ve heard a lot about the corruption on Wall Street. But, if you want to understand exactly what happened and why, read JPMadoff: The Unholy Alliance Between America’s Biggest Bank and America’s Biggest Crook. “Written by trial lawyers, Helen Davis Chaitman and Lance Gotthoffer, this heavily-researched, meticulously documented book lays out for the world to see the absolute corruption of JPMorgan Chase – America’s biggest bank. And the authors explain how Obama has furthered Wall Street crime by refusing to enforce America’s criminal laws against America’s biggest criminals – not Madoff, but JPMorgan Chase.”[...] By Friday evening, all that one got at the link to Kotlikoff’s article was a Forbes’ error message saying the page couldn’t be found. By this morning, even a partial Google cache of the article is giving the reader just a second or so to see the headline, then disappearing into thin air. We emailed Mia Carbonell, Senior Vice President, Global Corporate Communications for Forbes, asking if anyone connected to JPMorgan Chase had requested that the article to be removed. Carbonell responded: “Forbes was not contacted by anyone at or on behalf of JPMorgan. An updated version of contributor Laurence Kotlikoff’s post will be available on Forbes.com this week.” If you haven’t been closely following the criminal charges against JPMorgan Chase, you might think that the Forbes’ lawyers had every right to yank the story out of fear of a libel lawsuit. Unfortunately, for both America and the banks’ shareholders, JPMorgan Chase has the odious distinction of being both America’s largest bank and the only standing U.S. mega bank to have three felony counts against it by the U.S. Justice Department. Two felony counts in 2014 were in connection with its role in the Bernie Madoff Ponzi scheme. Those felonies received a deferred prosecution agreement. [...] At the time of the Madoff-related charges, FBI Assistant Director-in-Charge George Venizelos said: “J.P. Morgan failed to carry out its legal obligations while Bernard Madoff built his massive house of cards. Today, J.P. Morgan finds itself criminally charged as a consequence. But it took until after the arrest of Madoff, one of the worst crooks this office has ever seen, for J.P. Morgan to alert authorities to what the world already knew.” Less than a year and a half later, JPMorgan Chase had another felony charge against it for its role in rigging foreign currency markets, along with other banks. No executive at JPMorgan has gone to jail for any of its crimes.[...]" Note: In the past four years alone, JPMorgan Chase has paid out $35,735,254,670 in fines and settlements for fraudulent and illegal practices. Related: "2% Shift In The $1.5 Quadrillion Global Derivatives Would Wipe Out $30 trillion Greater Than Combined Market Capitalisation Of All Banks"
Commentary: "British Banking System The Pumping Heart Of Terror Finance And Global Drug Trade" [03/20/16] "The National Crime Agency (NCA) is Britain’s national law enforcement and police agency. It was established in 2013 as a non-ministerial government department, replacing the Serious Organised Crime Agency and has assumed a number of responsibilities of other law enforcement agencies. It is the UK’s lead agency against organised crime; human, weapon and drug trafficking; cyber crime; and economic crime that goes across regional and international borders, but can be tasked to investigate any crime. Both the NCA and government are acutely aware of the scale of money laundering in Britain that they now admit is completely out-of-control. In a report by the Treasury and Home Office it clearly stated its concerns but attempts to gloss over its seriousness – “The same factors that make the UK an attractive place for legitimate financial activity – its political stability, advanced professional services sector and widely understood language and legal system – also make it an attractive place through which to launder the proceeds of crime.” [...] The true amount and scale of money laundering in the UK is not known. Banks are by far the biggest problem. They use complex corporate structures and offshore vehicles to conceal ownership and facilitate the movement of criminal assets designed to baffle the authorities and they do so with impunity. [...] Nick Maxwell, the head of advocacy and research at Transparency International (TI) said last October “It puts beyond any doubt that vast sums of money from the proceeds of corruption around the world are flowing into the UK, and our system for stopping it and preventing it isn’t fit for purpose.” TI have also stated that $2 trillion is the likely annual sum for money laundering worldwide as has the United Nations on Drugs and Crime (UNODC) and that the problem lies predominently with the banking industry – “money in the form of symbols on computer screens can move anywhere in the world with speed and ease.” Given the statement by the NCA it is fair to say that British banks could be the facilitator of one quarter of all money laundering in the world today with the City of London now classed as the global money-laundering centre for the drug trade, says a crime expert. He found that banks were welcoming dirty money because they need cash, liquidity during the financial crisis, that is ongoing. A first attempt at tackling the problem by the NCA was in its 2014 paper entitled “High End Money Laundering – Strategy and Action Plan” where it was made clear at the outset that “we do not have a clear view of the scale of high end money laundering and its impact on the UK economy.” This is an admission that the authorities have lost control.[...]"
MSM: "Buyback Blackout Period Starts Monday: Is This The Catalyst That Ends The S&P Rally?" Ø Hedge [03/20/16] "Last week, one day before the Fed unleashed a statement that stunned Wall Street by its dovishness and admission that the Fed had been far too optimistic on the state of the US (and global) economy, when it slashed its forecast on the number of rate hikes from 4 to 2, we said that "while everyone's attention is on the Fed, the biggest danger to the S&P500 has little to do with what Janet Yellen may say tomorrow, and everything to do with the marginal buyer of stocks being put into a state of forced hibernation", namely the start of the stock buyback blackout period during Q1 earnings session. As a reminder, even Bloomberg recently acknowledged the unprecedented role corporate stock repurchases play in the current market when it penned "There's Only One Buyer Keeping S&P 500's Bull Market Alive." Of course, our readers have known the identity of the "mystery, indescriminate buyer" for two years. Today, it is Deutsche Bank's turn to warn about the imminent end of buybacks for the next 6 weeks. From Parag Thatte's latest Asset Allocation and Flows report: Buyback blackout period starts Monday. An increasing number of S&P 500 companies will enter into their blackout period starting next week, about a month before the earnings season kicks into high gear in the third week in April [...] Next week this "accelerating" buyback activity ends, and the question will be whether the S&P at a high enough level to give institutional investors comfort that without the buyback bid, in fact the only bid for the past seven weeks, they should now buy on their own, or will the selling, which took place as the market has soared from its recent lows in its biggest quarterly comeback ever..."
MSM: "As U.S. Ports Go, So Goes the U.S. Economy" [03/19/16] "You've heard it from Donald Trump. You've heard it from Bernie Sanders. Hillary Clinton chimed in. Some famous economists, too. It's the idea that trade liberalization has sapped U.S. economic strength, and that it's time to make it stop. Flourishing U.S. ports tell a different story. Business is booming, and the unprecedented quantity and quality of port commerce announces their role as a leading indicator of America's strengthening job market and her robust consumers. Los Angeles and Long Beach, the continent's two biggest gateways, reported the best February traffic in their histories going back more than a century. Total imports to the U.S. last month increased 27.4 percent from 2015, the most since 2010. Everything from furniture and electronics to apparel and machinery unloaded and distributed via Los Angeles surged 46.6 percent in February, the largest increase since February 2002. Long Beach traffic was up 44.7 percent in the same period, its biggest monthly gain since 2013. [...] The Los Angeles and Long Beach ports, which account for about 40 percent of all the goods entering the U.S., employ at least 60,000 people earning between $80,000 and $300,000 a year with retirement benefits that rival the most generous compensation in the history of organized American labor, according to Slangerup. Total employment for all the U.S. ports, including the men and women transporting goods by truck and rail to destinations throughout the country, is about 50 times that number. And that doesn't include all the jobs of people "getting goods to retailers, such as Wal-Mart and Target," Slangerup said. Here's more good news: The ports are doing more while polluting less. Long Beach's Middle Harbor will become the "world's first mega-terminal with zero emissions, the fourth-biggest port in North America and the world's first all-electric port," when it's fully operational next month, Slangerup said.[...]" Note: This story from Bloomberg only tells part of the picture. If the Baltic Dry Index of world shipping has tanked, it wouldn't seem to square with this enthusiastic report.
Commentary: "Why The Fed Is Paralyzed - Its Economic Model Is Junk" [03/18/16] "If there is any doubt as to the confusion inside the FOMC, one needs only to examine its models. The latest updated projections make a full mockery of both monetary policy and the theory that guides it. Ferbus and the rest don’t buy the labor market story, either, which is why the Fed can only be hesitant at best about “normalization.” Coming from the (neo or not) Keynesian persuasion, what is showing up should never happen. The theoretical notion of recovery is very straightforward in orthodox economics. In recession, the economy starts with high unemployment and therefore low inflation. Using the Phillips Curve as a short-term guide, orthodox models assume that as levels of unemployment begin to normalize, output (GDP) will rise. That will occur first without any uptick in inflation as the “slack” produced by the recession keeps price pressures to a minimum. [...] In Stage 1 everything is easy, so long as you can gain forward momentum in unemployment or output (which is what the QE’s were supposed to accomplish with regard to theoretical notions of hysteresis). Stage 2 gets slightly more complicated as the economy nears or reaches “full employment.” At that point, inflation should start to rise which will moderate output growth. If it progresses too far, that means the economy has reached “overheating” whereby inflation gets out of control and actively suppresses output, even reversing employment gains.[...]"
MSM: "Yesterday: Either Something Spooked The Fed Or There Is A "Central Bank Accord" [03/18/16] "Despite modest changes in the Fed’s economic projections, the Fed is forecasting growth above its estimate of potential growth. So how is it possible that a ‘data dependent’ Fed turned dovish? Reporters tried to address these questions during the press conference. Yellen was uncharacteristically opaque. She deflected questions. It had the appearance of a coach who had a specific game plan, but the familiar playbook was replaced on the day of the game. The market place is abuzz with two possibilities for such a shift. The first possibility is that something spooked the board. The market is only learning now from Bernanke’s book that QE2 and QE3 were initiated because of fears of the European crisis, not due to a shortfall in economic targets as claimed. Most people believe that the Fed deferred a hike in September due to “international developments”. The first possibility may have been the catalyst for the second. The second possibility being discussed is that some type of central bank accord was reached at the G20 meeting in Shanghai February 25-26. Maybe they noticed that diverging central bank policies were leading to extreme market volatility and accusations of currency wars. It is not difficult to envision an agreement where central banks agreed to provide more stimuli, if the Fed agreed to pause in order to not offset the effects of such moves. This would mean that the Fed would have to ignore economic data. Since markets have become more correlated, a pause would allow the dollar to weaken, and in turn, take pressure off of China to devalue the yuan. This would also help commodities to rise and emerging markets to soar. As global financial conditions begin to improve, the Fed would then have better cover under which to hike interest rates.[...]"
Commentary: "Bank of England Intentionally Strangles UK Economy To Discourage Brexit" [03/18/16] "... A recent Economist analysis of Britain’s leave-taking from the EU – Brexit – indicates a variety of negative consequences. This is generally the tenor of the mainstream media in Britain, one of alarmism tinged with negativity. The tone probably won’t change but a recent poll is certainly deepening tensions. Suddenly, Pro-Brexit forces seem to be winning. In what has been called “a huge boost” for Brexit forces, a recent Daily Telegraph poll has revealed that pro-Brexit forces have gained a seven-point lead. The poll shows the numbers at a deadlock, but when actual voters are considered, pro-Brexit forces win by 52 per cent to 45 per cent. The new poll has stoked concerns that a variety of pressures and “scaremongering” tactics aimed at pro-Brexit forces will be expanded. [...] Last year the Bank of England “accidentally” leaked a confidential internal study to The Guardian over Britain’s future in the EU and the impact of Brexit. When Bank of England Governor Mark Carney claimed in recent testimony that Brexit could severely harm the British economy, anti-EU legislators called his remarks “unacceptable” and asked for his resignation. But “Project Fear,” as anti-Brexit forces call it, remains ongoing.[...] It sounds fairly absurd to suggest the Bank of England and proponents of the EU within London’s square mile financial City would take aim at Britain’s economy in order to remove the threat of Brexit. And yet reading between the lines, the warnings seem clear enough. [...] We believe pro-Brexit forces may not win this one. Another has to do with what seems to be the REAL reason for the Brexit vote. In never made any sense to us that Cameron would call for such a vote. The answer may lie in the results of Cameron’s recently announced deal with the EU. Under the deal, Britain received certain concessions to stay in the EU. One was that Britain would not be part of an “ever closer union.” More importantly from our perspective, further EU regulations will not be imposed on the City. The City may exercise significant EU power behind the scenes, but this can’t be fully admitted for various reasons. And thus the need for a formal show of negotiations leading to the exemptions that Cameron has generated. And now that these have been negotiated, there is no further reason for London to pursue Brexit. The movement, once created, must now be halted. They’ve already fired one shot by linking the pound’s February decline to Johnson’s statements. And perhaps there are more to come. [...] Conclusion: One Brexit speculation involves shorting the pound. Another involves industrial equity plays as there are a variety of ways that the Bank of England can probably contract the money supply without being too obvious.[...]"
Concepts and Practices: "The Cashless Society - Keynesian "Stability" Vs Trumpian Turmoil" Ø Hedge [03/15/16] "In this article, Claudio Grass, Managing Director at Global Gold Switzerland, talks to economist and Mises Institute Senior Fellow Thomas DiLorenzo. This exclusive interview covers central bank monetary policies, Keynesian economics, the economic “recovery,“ political correctness, and much more. [...] CG: Now to the presidential election in the US. Who do you think will be the likely winner of this race? It is believed that if Trump wins the election that the US will move toward a more isolationist foreign and economic policy. What are your thoughts on Trump? TD: Right now my money is on Donald Trump being the next president. If that happens, there will be a less “isolationist” foreign policy, for Trump does not want to risk starting World War III, unlike all of the “neoconservatives” who run both of the main political parties. That is why he is so hated and despised by the Republican Party establishment. He would like to do more business with countries like Russia rather than start a nuclear war with the Russians. They, on the other hand, want to see endless military aggression in the Middle East and elsewhere. This is why they will do everything possible to defeat Trump, including putting all of their Big Money behind Hillary Clinton or whomever the Democrat Party nominee is. If I were Donald Trump I would also double or triple my personal security detail. As for economic policy, Trump could hardly be worse than Obama or his predecessor. He has said that he hates taxes and does everything in his power to minimize his own tax burden, which is certainly a good instinct. Since he’s a billionaire, he can’t be bought off on any policy, which is really the main reason why the GOP oligarchs hate him with a red-hot passion. But if he wins and becomes a politician, there is always the chance that he will succumb to a more interventionist economic policy so that the media will say nicer things about him. Vanity seems to be one of the man’s hallmarks.[...] "
Concepts and Practices: "Deutsche Bank: Negative Rates Confirm The Failure Of Globalization" [03/13/16] " Negative interest rates may or may not be a thing of the past (many thought that the ECB had learned its lesson, and then Vitor Constancio wrote a blog post showing that the ECB hasn't learned a damn thing), but the confusion about their significance remains. Here is Deutsche Bank's Dominic Konstam explaining how, among many other things including why Europe will need to "tax" cash before this final Keynesian experiment is finally over, negative rates are merely the logical failure of globalization.[...] Understanding how negative rates may or may not help economic growth is much more complex than most central bankers and investors probably appreciate. Ultimately the confusion resides around differences in view on the theory of money. In a classical world, money supply multiplied by a constant velocity of circulation equates to nominal growth. In a Keynesian world, velocity is not necessarily constant – specifically for Keynes, there is a money demand function (liquidity preference) and therefore a theory of interest that allows for a liquidity trap whereby increasing money supply does not lead to higher nominal growth as the increase in money is hoarded. The interest rate (or inverse of the price of bonds) becomes sticky because at low rates, for infinitesimal expectations of any further rise in bond prices and a further fall in interest rates, demand for money tends to infinity. In Gesell’s world money supply itself becomes inversely correlated with velocity of circulation due to money characteristics being superior to goods (or commodities). There are costs to storage that money does not have and so interest on money capital sets a bar to interest on real capital that produces goods. This is similar to Keynes’ concept of the marginal efficiency of capital schedule being separate from the interest rate. For Gesell the product of money and velocity is effective demand (nominal growth) but because of money capital’s superiority to real capital, if money supply expands it comes at the expense of velocity. The new money supply is hoarded because as interest rates fall, expected returns on capital also fall through oversupply – for economic agents goods remain unattractive to money. The demand for money thus rises as velocity slows. This is simply a deflation spiral, consumers delaying purchases of goods, hoarding money, expecting further falls in goods prices before they are willing to part with their money.[...] In a Keynesian world of deficient demand, the burden is on fiscal policy to restore demand. Monetary policy simply won’t work if there is a liquidity trap and demand for cash is infinite. Interest rates cannot be reduced any further to stimulate demand. (In Gesell’s terminology the product of velocity and money supply i.e. effective demand keeps falling). In Gesell’s world money itself needs to be taxed to prevent hoarding and to equalize the worth of money to goods. If cash is taxed (and he suggested at the annual tax rate might be 5.2 percent, according to Keynes) then velocity is stabilized, demand for money falls and goods demand recovers. The tendency to oversupply however in an economy unfettered by “privilege” effectively implies that interest rates in equilibrium may converge to zero. Taxing of money specifically is to deal with an ex ante effective demand deficiency.[...]"
Commentary: "Credit Card Debt In The United States Is Approaching A Trillion Dollars" [03/12/16] "For the first time ever, total credit card debt in the United States is approaching a trillion dollars. Instead of learning painful lessons from the last recession, Americans continue to make the same horrendous financial mistakes over and over again. In fact, U.S. consumers accumulated more new credit card debt during the 4th quarter of 2015 than they did during the years of 2009, 2010 and 2011 combined. That is absolute insanity, because other than payday loans, credit card debt is just about the worst kind of debt that consumers could possibly go into. Extremely high rates of interest, combined with severe penalties and fees, can choke the financial life out of almost any family in no time at all. These days, most Americans use credit cards for various purposes, and they can be very convenient. And if you pay them off every single month, they don’t become a problem. Unfortunately, a lot of people are not doing this. According to CNBC, total U.S. credit card debt rose by an astounding 71 billion dollars last year alone [...]"
Commentary: "Valuing Truth" Paul Craig Roberts [03/10/16] "Truth is the enemy of the state, and always has been. But today the Western populations live in a world of total lies. Try to think of anything that the government has told you the truth about. “Saddam Hussein’s weapons of mass destruction,” “Assad’s use of chemical weapons,” “Russian invasion of Ukraine” are not the only lies. Everything the government says is a lie. The unemployment rate. The GDP growth rate. The inflation rate. Payroll jobs. 9/11. Tonkin Gulf. Boston Marathon Bombing. Paris attacks. Of consider the taxation of Social Security benefits. Social Security existed for 49 years, from 1935 to 1984 without the benefits being taxed. Wall Street, David Stockman, Alan Greenspan, and the Republican establishment are responsible for breaking the promise to the American people and subjecting Social Security benefits to income taxation. When the Supply-Side economic policy led to the collapse of inflation far quicker than Stockman’s budget prediction had taken into account, federal budget deficits appeared that Stockman and Wall Street blamed on Reagan’s economic program. In those days the only economics the Republican establishment knew was fear of budget deficits. The fools actually thought that a budget deficit caused by the unanticipated collapse in inflation was going to cause inflation. To please Wall Street, Stockman and Greenspan went to work to turn Social Security into a cash cow for the government. Two things happened. Future increases in the payroll tax rate that had been legislated during the Carter administration were accelerated and brought into effect sooner than needed in order to collect a surplus of Social Security tax revenues with which to fund other government spending. The other “reform” was to subject Social Security benefits to income taxation. In 1984 50% of Social Security benefits were subject to income taxation for retirees with incomes above $25,000. In 1993 the Clinton regime made 85% of Social Security benefits subject to income taxation. Taxing Social Security benefits is a way of cutting the benefits, long a Republican goal. [...] I remember Democratic Senator Russell Long, the Chairman of the Senate Finance Committee, telling me that to tax benefits that working people had paid for over the course of their working life via the payroll tax was a tax on a tax and an unconscionable violation of the compact that the government had made with the American people. My office in the Treasury had prepared a different solution to the hyped “Social Security revenue shortfall.” We showed that the best solution was to adjust the formula that governed the growth of Social Security benefits, not to accelerate the payroll tax increases and subject benefits to taxation. But Wall Street and the banks wanted revenues to reduce the budget deficit, which they claimed would reduce interest rates, thus allowing the issuance of more loans with which to financialize the economy. Now Wall Street’s plan is to get rid of Social Security altogether by privatizing it and turning it into another financial scam.[...] We have to ask ourselves how it can be that the world’s worse criminals—people responsible for the death and displacement of millions of peoples—occupy high office while a tennis star is disciplined because her medical prescription, legal for a decade, suddenly runs afoul of a new prohibited drug regulation. What kind of a world does the West run? We all know the answer. Western governments, a collection of criminals, run the world for the One Percent.[...]"
Commentary: "The Financial System Is A Larger Threat Than Terrorism" [03/09/16] "In the 21st century Americans have been distracted by the hyper- expensive “war on terror.” Trillions of dollars have been added to the taxpayers’ burden and many billions of dollars in profits to the military/security complex in order to combat insignificant foreign “threats,” such as the Taliban, that remain undefeated after 15 years. All this time the financial system, working hand-in-hand with policy makers, has done more damage to Americans than terrorists could possibly inflict. The purpose of the Federal Reserve and US Treasury’s policy of zero interest rates is to support the prices of the over-leveraged and fraudulent financial instruments that unregulated financial systems always create. If inflation was properly measured, these zero rates would be negative rates, which means not only that retirees have no income from their retirement savings but also that saving is a losing proposition. Instead of earning interest on your savings, you pay interest that shrinks the real value of your saving. Central banks, neoliberal economists, and the presstitute financial media advocate negative interest rates in order to force people to spend instead of save. The notion is that the economy’s poor economic performance is not due to the failure of economic policy but to people hoarding their money. The Federal Reserve and its coterie of economists and presstitutes maintain the fiction of too much savings despite the publication of the Federal Reserve’s own report that 52% of Americans cannot raise $400 without selling personal possessions or borrowing the money. [...] Negative interest rates, which have been introduced in some countries such as Switzerland and threatened in other countries, have caused people to avoid the tax on bank deposits by withdrawing their savings from banks in large denomination bills. In Switzerland, for example, demand for the 1,000 franc bill (about $1,000) has increased sharply. These large denomination bills now account for 60% of the Swiss currency in circulation. The response of depositors to negative interest rates has resulted in neoliberal economists, such as Larry Summers, calling for the elimination of large denomination bank notes in order to make it difficult for people to keep their cash balances outside of banks. Other neoliberal economists, such as Kenneth Rogoff want to eliminate cash altogether and have only electronic money. Electronic money cannot be removed from bank deposits except by spending it. With electronic money as the only money, financial institutions can use negative interest rates in order to steal the savings of their depositors. People would attempt to resort to gold, silver, and forms of private money, but other methods of payment and saving would be banned, and government would conduct sting operations in order to suppress evasions of electronic money with stiff penalties. What this picture shows is that government, economists, and presstitutes are allied against citizens achieving any financial independence from personal saving. Policymakers have a crackpot economic policy and those with control over your life value their scheme more than they value your welfare.This is the fate of people in the so-called democracies. Any remaining control that they have over their lives is being taken away. Governments serve a few powerful interest groups whose agendas result in the destruction of the host economies.[...]"
Commentary: "The Futility Of Representative Government In An Age Of Robber Barons" [03/08/16] "...As I point out in my book Battlefield America: The War on the American People, all of the caucuses, primaries, nominating conventions, town hall meetings, rallies, meet and greets, delegates and super- delegates are sophisticated schemes aimed at advancing the illusion of participation culminating in the reassurance ritual of voting. [...]" Note: “That's the way the ruling class operates in any society. They keep the lower and the middle classes fighting with each other… Anything different—that's what they're gonna talk about—race, religion, ethnic and national background, jobs, income, education, social status, sexuality, anything they can do to keep us fighting with each other, so that they can keep going to the bank!” - Comedian George Carlin
Commentary: "Rothschild Bank Now Under Criminal Investigation After Baron David De Rothschild Indictment" [03/06/16] "Last year, Baron David de Rothschild was indicted by the French government after he was accused of fraud in a scheme that allegedly embezzled large sums of money from British pensioners. It has taken many years to bring this case against Rothschild and his company the Rothschild Financial Services Group, which trapped hundreds of pensioners in a bogus loan scheme between the years of 2005 and 2008. One by one the pensioners lost their money and pressed charges against the notorious banker, beginning a case that would take many years to get even an indictment. In June, Paris-based liaison judge Javier Gómez Bermudez ruled that Rothschild must face a trial for his crimes, and ordered local police to seek him out in his various mansions that are spread throughout the country. “It is a good step in the right direction. The courts are now in agreement with us that there is enough evidence to interrogate Baron Rothschild. The first thing they will have to do is find him. Once they have done that they can begin to question him. It is a real breakthrough moment for everyone involved,” lawyer Antonio Flores of Lawbird told the Olive Press after the ruling. “In short, independently of what happened to the investment, Rothschild advertised a loan aimed at reducing inheritance tax, which is a breach of tax law,” he added. While news of a single Rothschild being indicted is certainly noteworthy, a particularly important announcement was made this Friday. The French government announced that it has launched an investigation into the entire Swiss branch of the Rothschild’s banking empire. [...] According to Bloomberg, "The Swiss unit of Edmond de Rothschild said it’s the subject of a French probe regarding a former business relationship managed by a former employee. “Edmond de Rothschild (Suisse) SA is actively participating in the criminal investigation under way,” the Geneva-based bank said in an e-mailed statement on Friday. “The bank denies all the allegations that have been made against it.” Edmond de Rothschild, a private banking and asset management firm established in Paris in 1953, oversees about 150 billion euros ($164 billion) and is led today by Baron Benjamin de Rothschild and his wife Ariane. The Swiss unit traces its roots to the acquisition of Banque Privee in Geneva in 1965. The company has no further comment at this time, according to the statement. Officials in Geneva weren’t immediately available to respond to a telephone call from Bloomberg News on Friday.[...] The Rothschild empire has been instrumental in helping move the global elite’s wealth from traditional tax havens like the Bahamas, Switzerland and the British Virgin Islands to the U.S. Last month, the Free Thought Project reported on the above the law tax haven established inside the United States by the Rothschilds. After opening a trust company in Reno, Nev., Rothschild & Co. began ushering the massive fortunes of the world’s most wealthy individuals out of typical tax havens, and into the Rothschild run U.S. trusts, which are exempt from the international reporting requirements. The Rothschild banking dynasty is a family line that has been accused of pulling the political strings of many different governments through their control of various economic systems throughout the world. Historically, there is ample evidence to show that the family has used insider trading to bilk money from both private and public funds.[...]"
Concepts and Practices: "Bitcoin's ‘Nightmare Scenario’ Has Come To Pass" [03/05/16] "The network's capacity to process transactions has maxed out [...] Over the last year and a half a number of prominent voices in the Bitcoin community have been warning that the system needed to make fundamental changes to its core software code to avoid being overwhelmed by the continued growth of Bitcoin transactions. There was strong disagreement within the community, however, about how to solve this problem, or if the problem would ever materialize. This week the dire predictions came to pass, as the network reached its capacity, causing transactions around the world to be massively delayed, and in some cases to fail completely. The average time to confirm a transaction has ballooned from 10 minutes to 43 minutes. Users are left confused and shops that once accepted Bitcoin are dropping out. Bitcoin transactions are confirmed every time miners create a new block on the networks chain. Each block takes about ten minutes to mine, and can hold 1MB of information. At current volumes, there are more than 1MB worth of transactions asking to be confirmed in that time. To solve this bottleneck, many in the Bitcoin community have called for increasing the block size to 2MB.[...] This sounds simple, but has proven to be a highly contentious issue. A schism has developed between the team in charge of the original codebase for Bitcoin, known as Core, and a rival faction pushing its own version of that open source code with a block size increase added in, known as Classic.[...]"
MSM: "Malaise Spreads: Service Industries Cut Jobs For The First Time In Two Years" Ø Hedge [03/04/16] "For many months, the general consensus was that the "malaise" in US manufacturing (which is clearly in a recession) is isolated, and would not spread to the service sector. That is no longer the case. As a very gloomy Markit report noted earlier, "business activity stagnated in February as malaise spread from the manufacturing sector to services. The Markit PMIs are signaling a stagnation of the economy in February, suggesting growth has deteriorated further since late last year. Prices pressures are waning again in line with faltering demand. Average prices charged for goods and services are dropping once again, down for the first time in five months, as firms compete to win new business." And then it was the ISM's turn where despite a modest beat to expectations, overall growth in U.S. service industries slowed for a fourth straight month in February, prompting the first job cuts in two years as the Employment indicator dipped from 52.1 to 49.7, the first contraction in two years. This means that not only are manufacturing jobs suffering mass layoffs, but the service sector - ostensibly now that the second tech bubble has burst - is next. We wonder how long until the US Bureau of Labor Services discovers this.[...] With 188,000 for tomorrow's jobs data, this chart suggests things may be a little different to what the economists expect. And judging by the lagged effect of the collapse of the Restaurant Performance Index, that party is over. [...]"
MSM: "U.S. Government Is Broke, With A Negative Net Worth Of $18.2 Trillion" [03/04/16] "... In the case of the U.S. government, year after year the Government Accountability Office (GAO) gives the federal government a failing grade in its audit report of America’s financial statements. For 2015, the GAO chastised the federal government for its “unsustainable fiscal path” and for consistently failing to prepare “reliable and complete financial information– both for individual federal entities and for the federal government as a whole,” singling out in particular the Department of Defense, Department of Housing and Urban Development, and the Department of Agriculture. In fact, a report published last year found that the Department of Defense had somehow “misplaced” $8.5 trillion of taxpayer money over the last 20 years. In all, the GAO calculates that the federal government’s financial uncertainties total $27.9 trillion, which is $6.4 trillion more than the $21.5 trillion in liabilities reported for 2015. All of which suggests that the government’s true financial condition is even worse than reported, with an actual net worth of MINUS $24.6 trillion. [...]"
MSM: "Former Bank Of England Head: The European Depression Was A "Deliberate" Act" Ø Hedge [03/03/16] "Once again we find that it is only after they leave their official posts that central bankers finally tell the truth. Last night, it was Alan Greenspan who blasted the state of the economy, saying that "we’re in trouble basically because productivity is dead in the water" and when asked if he is optimistic going forward, Greenspan replied "no, I haven't been for quite a while." Then on Sunday, the former head of the BOE, Mervyn King, warned that another aspect of the global economy, namely the financial system whose structural problems remain untouched since the financial crisis have been untouched, is "certain to have another crisis." To be sure, warnings by former central bankers who are more responsible about the current global mess sound as nothing but revisionist bullshit. And yet, it was what King said today at the launch of his new book that left us surprised. As the Telegraph reports today, according to the former head of the Bank of England Europe's economic depression "is the result of "deliberate" policy choices made by EU elites. Mervyn King continued his scathing assault on Europe's economic and monetary union, having predicted the beleaguered currency zone will need to be dismantled to free its weakest members from unremitting austerity and record levels of unemployment. [...] King also said he could never have envisaged an economic collapse of the depths of the 1930s returning to Europe's shores in the modern age. But, he added, the fate of Greece since 2009 - which has suffered a contraction eclipsing the US depression in the inter-war years - was an "appalling" example of economic policy failure, he told an audience at the London School of Economics.[...]"
Commentary: "This Is The Real Reason For The War On Cash" Ø Hedge [03/01/16] "... The real reason the war on cash is gearing up now is political: Politicians and central bankers fear that holders of currency could undermine their brave new monetary world of negative interest rates. Japan and Europe are already deep into negative territory, and U.S. Federal Reserve Chair Janet Yellen said last week the U.S. should be prepared for the possibility. Translation: That’s where the Fed is going in the next recession. [...] Negative rates are a tax on deposits with banks, with the goal of prodding depositors to remove their cash and spend it to increase economic demand. But that goal will be undermined if citizens hoard cash. And hoarding cash is easier if you can take your deposits out in large-denomination bills you can stick in a safe. It’s harder to keep cash if you can only hold small bills. So, presto, ban cash. This theme has been pushed by the likes of Bank of England chief economist Andrew Haldane and Harvard’s Kenneth Rogoff, who wrote in the Financial Times that eliminating paper currency would be “by far the simplest” way to “get around” the zero interest-rate bound “that has handcuffed central banks since the financial crisis.” If the benighted peasants won’t spend on their own, well, make it that much harder for them to save money even in their own mattresses. All of which ignores the virtues of cash for law-abiding citizens. Cash allows legitimate transactions to be executed quickly, without either party paying fees to a bank or credit-card processor. Cash also lets millions of low-income people participate in the economy without maintaining a bank account, the costs of which are mounting as post-2008 regulations drop the ax on fee-free retail banking. While there’s always a risk of being mugged on the way to the store, digital transactions are subject to hacking and computer theft. Cash is also the currency of gray markets—amounting to 20% or more of gross domestic product in some European countries—that governments would love to tax. But the reason gray markets exist is because high taxes and regulatory costs drive otherwise honest businesses off the books. Politicians may want to think twice about cracking down on the cash economy in a way that might destroy businesses and add millions to the jobless rolls. The Italian economy might shut down without cash.[...]" Note: It's also the case that US corporations offshored their cash ... trillions overseas ... which they could have invested in the US infrastructure ... but they knew the country would be undermined, all along. Now, they do 'inversions' and transfer major aspects of the companies to overseas branches that have access to the off-shored funds, all of which escape US taxes. The population of the US was thrown under the bus of greed.
MSM: "Collapse Of The Paper Gold & Silver Market May Be Close At Hand" Ø Hedge [02/29/16] "... Number Of Owners Per Ounce Of Registered Gold Goes Exponential: Again, to have a properly functioning futures exchange, there has to be available supply of metal. However, if we look at the long-term trend of Registered Gold inventories at the Comex, something looks painfully wrong here: The chart shows the total amount of Registered Gold inventories on the top and the number of owners per ounce on the bottom. From 2001 to 2013, the number of owners per ounce of gold trend line was basically flat.. except for a few blips. But, something changed in 2013 when the price of gold was taken down from $1,600 to $1,150 in a short period of time. As the amount of Registered Gold declined, the number of owners per ounce shot up over 100 by the beginning of 2014. Then the trend line fell and remained flat until the middle of 2015… when all hell broke loose. This was at the time there was a threat of a Greek Exit of the European Union and concern that the broader markets may crash by the end of the year. The owners per ounce of gold shut up to over 500 when the Registered Gold inventories declined to only 74,000 oz recently. Since then, there have been some small deposits of gold into the Registered Category and the current owners per ounce is about 250. [...] 1. Once again, the Comex delivery process is shown to be nothing but a Bullion Bank Circle Jerk where a bank takes delivery one month, only to turn around and issue the gold back out the next. Rarely does gold ever actually leave the Comex vaulting system and, today’s action notwithstanding, rarely does it even move from vault to vault. 2. Total Comex registered gold remains at all-time lows. Though some gold has recently been re-classified from eligible to registered as Feb16 deliveries begin, the total Comex registered gold vaults still hold just 145,000 ounces with 3,687 Feb16 contracts still open and standing, representing as much as 368,700 ounces of delivery obligations.[...] According to the data from Sharelynx.com, the Comex Registered Silver inventories and number of owners per ounce are heading in the same trajectory as gold. [...]"
MSM: "US Government Releases 2015 Financial Statements: "Keeps Getting Worse" [02/28/16] "The US government just published its audited financial statements this morning, signed and sealed by Treasury Secretary Jack Lew. These reports are intended provide an accurate accounting of government finances, just like any big corporation would do. And once again, the US government’s financial condition has declined significantly from the previous year. For 2015, the government reports $3.2 trillion in total "assets".[...] 37% of the government’s total reported 'assets' are student loans, now considered one of the most precarious bubbles in finance. [...]" Note: So the gov't is a major predator on millions of students who can't pay back loans based on a concept from the 1950's ... that a college education means a good job .. a living wage ... for the last 30 years, it has been increasingly a myth ... on the other hand, the students and their parents have not paid attention to the unfolding fiasco over the years, buying into the lie, so they got what they 'deserved'. The banks also profit greatly from these predatory and unconscionable loans to students .... all of which should rightly be forgiven ... but forgiving the loans would literally 'break the bank' .... vile system. Related: "Who’s Regulating For-Profit Schools? Execs From For-Profit Colleges" "College accreditors have come under scrutiny recently for allowing for-profit schools to collect billions in federal aid despite low graduation and high default rates. Accreditors are supposed to be watchdogs for college quality. They are not government agencies but colleges need an accreditor’s seal of approval so students can qualify for federal loans. The agency that has received the most heat is the Accrediting Council for Independent Colleges and Schools. ACICS allowed Corinthian Colleges Inc. to keep on operating right up until the for-profit college chain collapsed after evidence emerged that the schools hadlured thousands of poor students into predatory loans. The accreditor placed a Corinthian campus on its “honor roll” just months before the Education Department forced the school to shut down. ACICS, which oversees hundreds of for-profit colleges, is now the target of twogovernment investigations. A ProPublica analysis also found that schools overseen by ACICS had the lowest graduation rates compared with other accreditors. So who are the people behind the beleaguered accreditor? They include executives from some of the most scandal-plagued schools in the country. [...]"
MSM: "John Kerry Threatens US Banks Over Russia Bond Sale" [02/26/16] "Moscow is looking to issue “at least” $3 billion of foreign bonds in what amounts to the country’s first international issuance since the West imposed sanctions on The Kremlin in 2014 after the annexation of Crimea and Russia’s alleged role in “destabilizing” Ukraine (because it was very “stable” before). Since the sanctions were imposed, relations between Moscow and Washington have only gotten more contentious and when Russia began flying combat missions from Latakia on September 30, it was trotted out as evidence that Vladimir Putin is indeed determined to reassert Russian influence by sheer force. Meanwhile, the Russian economy is in trouble. Granted, Russia isn’t Brazil and Moscow isn’t running a double-digit budget deficit like Riyadh, but times are most assuredly tough. The ruble has plunged through 75 and will probably see the mid-80s if oil spends too much time in the 20s, inflation is running high, and collapsing crude threatens to weaken Moscow’s fiscal position. All of that is just fine with Washington and its European allies who attribute a large part of the malaise to sanctions even though slumping crude probably plays a larger role. It’s against this backdrop that Russia is set to sell $3 billion in debt and officials in the State Department and the Treasury are out warning US banks not to underwrite the deal. “The U.S. government has warned some top U.S. banks not to bid on a potentially lucrative but politically risky Russian bond deal, saying it would undermine international sanctions on Moscow,” WSJ reports, adding that “the rules don’t explicitly prohibit banks from pursuing the business, but U.S. State Department officials hold the view that helping finance Russia would run counter to American foreign policy.” Russia has invited BofA, Citi, Goldman, JPMorgan, and Morgan Stanley to bid on the business, but Washington’s threats have left the Street in a rather tenuous position. In response to banks’ inquiries as to whether they are allowed to participate, John Kerry’s State Department said this: “It is essential that private companies—in the U.S., EU and around the world—understand that Russia will remain a high-risk market so long as its actions to destabilize Ukraine continue. [There will be] reputational risks of returning to business as usual with Russia.” “Business as usual” was tens of billions in sovereign issuance and hundreds of millions in investment banking business for US financial institutions. [...]"
MSM: "A "Furious" Greece Recalls Austrian Ambassador: "We Will Not Be A Warehouse Of Souls" [02/26/16] "For Greece, Europe's worsening refugee crisis amounts to an "insult to injury" scenario. Just six months after Angela Merkel and the Brussels cabal put Athens through round after round of "mental waterboarding" on the way to granting the country a third bailout and preventing Greece from marking a messy exit from the common currency, Alexis Tsipras now finds himself on the front lines of a mass Mid-East migration to Western Europe. To be sure, it's not as though those who are (figuratively and literally) washing up on Greece's shores are keen on settling in the socialist paradise that at times last summer took on the trappings of a Third World country. Rather, Greece is a transit point for those fleeing war to Europe and Athens obviously has limited resources with which to work when it comes to controlling the situation. Now, a day after Austria held a meeting with Balkan nations on how to control the migrant flow without inviting Greece, Athens is recalling its minister. "The numerous splits in Europe over immigration policy were evident on Wednesday when Austria organised a meeting of interior and foreign ministers of several Balkan states in Vienna," The Guardian writes. "The Austrians snubbed the Germans and did not invite the Greeks, provoking a furious reaction from Athens." “A very large number here will attempt to discuss how to address a humanitarian crisis in Greece that they themselves intend to create,” the Greek migration minister, Yannis Mouzalas told reporters on Thursday. “Greece will not accept unilateral actions. Greece can also carry out unilateral actions. Greece will not accept becoming Europe’s Lebanon, a warehouse of souls, even if this were to be done with major [EU] funding.” [...]"
Commentary: "Bank Sued Over Cartel Money Laundering" [02/24/16] "Banks and drug cartels have some things in common. They are both very lucrative businesses and not particularly popular with the general public. And, of course, they use copious amounts of each other’s products – at least if anecdotal evidence of the behavior on Wall Street can be believed. While bankers can probably get their highs any number of ways, the Mexican drug cartels need financial institutions to clean their dirty money. And, it seems, there is no better bank for that than London-based HSBC, which is one of the world’s largest. In the first six months of last year, it reported a pre-tax profit of $13.6 billion. According to a lawsuit filed against HSBC earlier this month, it earned some of those profits by allowing the drug cartels to cycle billions of dollars through it. “From 2004 through at least 2008, HSBC Mexico accepted over $16.1 billion in cash deposits from customers throughout Mexico. This amount eclipsed the amount of USD cash deposits at financial institutions with market shares multiple times greater than HSBC Mexico’s,” the lawsuit alleges. [...] HSBC is no stranger to accusations of helping the cartels. In 2012, the bank paid $1.9 billion as part of an agreement with the United States and admitted that it had failed to establish an effective anti-money laundering (AML) program. In spite of having to pay such a massive penalty, no HSBC employees went to jail. After paying that fine, HSBC hired current FBI Director James Comey to help get its house in order. Even though the new lawsuit addresses an old problem, the legal action is unique for several reasons. It was brought on behalf of the families of several Americans killed by the Mexican cartels. The action seeks redress under a 1996 law (amended following the 9/11 attacks) that allows victims of terrorism to seek compensation from any organization that supported the perpetrators of such crimes.[...] This is the first attempt to apply the 1996 anti-terrorism law to the actions of the Mexican drug cartels. “The gruesome attacks on the innocent American victims on foreign soil were unquestionably acts of international terrorism,” said attorney Richard M. Elias, who represents the families. The lawsuit asserts that cartels now function as “paramilitary organizations” and have become one of the top threats to US national security.[...]"
Concepts and Practices: "The Follies & Fallacies Of Keynesian Economics" Ø Hedge [02/23/16] "Eighty years go, on February 4, 1936, one of the most influential books of the last one hundred years was published, British economist, John Maynard Keynes’s The General Theory of Employment, Interest and Money. With it was born what has become known as Keynesian Economics. Within less than a decade after its appearance, the ideas in The General Theory had practically conquered the economics profession and become a guidebook for government economic policy. Few books, in so short a time, have gained such wide influence and generated so destructive an impact on public policy. What Keynes succeeded in doing was to provide a rationale for what governments always like to do: spend other people’s money and pander to special interests. In the process Keynes helped undermine what had been three of the essential institutional ingredients of a free-market economy: the gold standard, balanced government budgets, and open competitive markets. In their place Keynes’s legacy has given us paper-money inflation, government deficit spending, and more political intervention throughout the market. It would, of course, be an exaggeration to claim that without Keynes and the Keynesian Revolution inflation, deficit spending, and interventionism would not have occurred. For decades before the appearance of Keynes’s book, the political and ideological climate had been shifting toward ever-greater government involvement in social and economic affairs, due to the growing influence of collectivist ideas among intellectuals and policy-makers in Europe and America. [...] Also discussed:• Before Keynes: Wise Free Market Policies • Lessons Learned: Gold Money and Balanced Budgets • Keynes’ Thinking on Markets, Wages and Government • The “Austrian” Alternative to Keynesian Economics • Deficit Spending and Special Interest Politics • Enduring Wisdom of the Free Market Economists • Keynes’s Ideology of Ethical Nihilism " [...] Related: "Schiff Warns "The Fed's Nightmare Scenario Is Becoming Reality" MSM "... Once markets figure out that the Fed is all hat and no cattle when it comes to fighting inflation, the bottom should drop out of the dollar, consumer price increases could accelerate even faster, and the biggest bubble of them all, the one in U.S. Treasuries may finally be pricked. That is when the Fed’s nightmare scenario finally becomes everyone’s reality. [...]"
Analysis: "The US Economy Has Not Recovered And Will Not Recover" Ø Hedge [02/23/16] "The US economy died when middle class jobs were offshored and when the financial system was deregulated. Jobs offshoring benefited Wall Street, corporate executives, and shareholders, because lower labor and compliance costs resulted in higher profits. These profits flowed through to shareholders in the form of capital gains and to executives in the form of “performance bonuses.” Wall Street benefitted from the bull market generated by higher profits. However, jobs offshoring also offshored US GDP and consumer purchasing power. Despite promises of a “New Economy” and better jobs, the replacement jobs have been increasingly part-time, lowly-paid jobs in domestic services, such as retail clerks, waitresses and bartenders. The offshoring of US manufacturing and professional service jobs to Asia stopped the growth of consumer demand in the US, decimated the middle class, and left insufficient employment for college graduates to be able to service their student loans. The ladders of upward mobility that had made the United States an “opportunity society” were taken down in the interest of higher short-term profits. [...] Without growth in consumer incomes to drive the economy, the Federal Reserve under Alan Greenspan substituted the growth in consumer debt to take the place of the missing growth in consumer income. Under the Greenspan regime, Americans’ stagnant and declining incomes were augmented with the ability to spend on credit. One source of this credit was the rise in housing prices that the Federal Reserves low interest rate policy made possible. Consumers could refinance their now higher-valued home at lower interest rates and take out the “equity” and spend it. [...] The debt expansion, tied heavily to housing mortgages, came to a halt when the fraud perpetrated by a deregulated financial system crashed the real estate and stock markets. The bailout of the guilty imposed further costs on the very people that the guilty had victimized. [...] Under Fed chairman Bernanke the economy was kept going with Quantitative Easing, a massive increase in the money supply in order to bail out the “banks too big to fail.” Liquidity supplied by the Federal Reserve found its way into stock and bond prices and made those invested in these financial instruments richer. Corporate executives helped to boost the stock market by using the companies’ profits and by taking out loans in order to buy back the companies’ stocks, thus further expanding debt. Those few benefiting from inflated financial asset prices produced by Quantitative Easing and buy-backs are a much smaller percentage of the population than was affected by the Greenspan consumer credit expansion. A relatively few rich people are an insufficient number to drive the economy.[...]"
Commentary: "The Stupidity of Those In Power Has No Boundaries, Whereas Genius Has Its Limits" Martin Armstrong [02/22/16] "The insanity of NEGATIVE INTEREST RATES, instigated by Larry Summers, is based upon the stupid idea that lowering interest rates will stimulate borrowing and thus spending. The idea is that penalizing people by moving negative will FORCE them to spend their money and revitalize the economy. But what happens if they invest the money in equities and do not spend it on junk? The whole theory will meltdown. A reader sent in a newsletter from Netherlands of a big Dutch insurance company informing all clients about the possibility of negative interest rates on savings. These people are out of their minds with NEGATIVE INTEREST RATES for they are wiping out pension funds and the elderly. Just what are they trying to do? Intentionally create revolution? Sometimes there is just no explanation for what they do other than pure stupidity, which has no limit or boundary, whereas genius certainly has its limitations. [...]" Related: See below: "Larry Summers Launches The War On Paper Money: "It's Time To Kill The $100 Bill" [02/18/16]
Commentary: "Banks Seek Monopoly Over Economy: “Cash Is Being Gradually Taken Away" [02/21/16] "It is the ultimate monopoly game, but there are those who are willing to put up a fight to keep cash in the game. The powers-that-be on Wall Street and in the central banks are aiming to eliminate paper money in large part to continue “sustaining and even intensifying the central banks’ nightmarish experiment with negative interest rates” – a doubly dangerous effort at economic control. [...] As Europe moves to take the 500 Euro note out of circulation, former (Harvard) Treasury Secretary Larry Summers, enabler of past crises, has called for an end to the Benjamins – the celebrated $100 note of outlaws, gangsters and all those who would oppose the new world economic order." [...] As Wolf Street notes in "War On Cash Escalates (Cash Lovers Fight Back In Germany And Japan)" : " Those motives include sustaining and even intensifying the central banks’ nightmarish experiment with negative interest rates, increasing public dependence on big banks, destroying the last vestiges of personal financial freedom and anonymity, expanding government surveillance of and control over the economy, and in the case of credit card companies and fintech firms, doing away with their biggest competitor, physical currency." [...] The powers that want to kill off cash already have vital technological and generational trends firmly on their side, as a result of which cash’s days as a commonly used payment method may well be numbered anyway. They also have the added bonus of widespread public ignorance, apathy, and disinterest." [...] "As Don Quijones argues – the countries that have been quickest to adopt cashless societies in Scandanavia tend to be very well adjusted and relatively trusting of their governments. By contrast, Americans, developing countries, and even Germany and Japan have less trust in their government, and will likely put up a fight against attempt to disarm cash: By contrast, Americans, developing countries, and even Germany and Japan have less trust in their government, and will likely put up a fight against attempt to disarm cash: All too often we hear about the countries in Europe and elsewhere that are furthest along the path toward a completely cashless existence — countries with high levels of public trust in public institutions such as Denmark, Sweden, Australia and Singapore. By contrast, we hardly ever hear about countries where public trust is low in government and financial institutions and physical cash is still revered. They include many of the nations of the Global South as well as two of the world’s biggest, most advanced economies, Germany and Japan. [...] “Cash allows us to remain anonymous during day-to-day transactions. In a constitutional democracy, that is a freedom that has to be defended,” tweeted the Green MP Konstantin von Notz. Even the head of the Bunderbank, Jens Weidmann, criticized the government’s proposals, telling Bild (emphasis added): “It would be fatal if citizens got the impression that cash is being gradually taken away from them.” [...] If cash dies, they will control authorization … they will hold nearly all the power.[...]" Note: Of course, this is how they do it on sequential worlds out there, so these people, who reincarnate here, have the memories of these control systems. It is also the case that they happen to be trying this on Earth, which is designated to host simultaneous higher self incarnations, who are more progressive and individualists. Typically the systems that the sequentials come up with are convoluted and self-destructive and represent a long-time loop of perspectives requiring control and manipulation of individuals. Ironically, they're so conceptually hobbled, they fail to recognize the significance of the core reality that groups are made up of individuals, and that their approach greatly retards individual progress, thus the progress of the very group they compose, which is why sequential worlds progress very very slowly as a group fascist collective ... and individual progression is put on the back burner. Related: "Swiss Politicians Slam Attempts To Eliminate Cash, Compare Paper Money To "A Gun Defending Freedom" Ø Hedge | See also below:
MSM: "The US Dollar Just Became the Official Currency of ISIS" [02/20/16] "It was reported this week that the terrorist group, ISIS, recently mandated U.S. dollars be the legal tender in their occupied territories. From now on, the U.S. dollar will be the only form of currency ISIS accepts for tax payments, fines, and utility payments. This recent policy is vastly different from the gold and silver minted currency that ISIS proposed over a year ago. In 2014, the group announced they would be minting their very own Islamic dinar, but now it seems they are back to relying on American currency. Rumors have circulated in the media that this shift in financial strategy is due to the fact that the ISIS regime is struggling to make ends meet, and that their once plentiful supply of money is now dwindling.[...]" Note: Thanks to the US one of the the enablers of ISIS, now the currency is associated firmly with the concept of terrorism, seemingly justifying the flawed logic which deems the $100 bill a liability. Related: "Obama Admits US-ISIL Terror Link" " Obama’s reference to US training “ISIL forces” has raised eyebrows, no less because of the White House’s odd edit in the transcript of the president’s speech on confronting Islamic State. After getting briefed on US efforts to fight the self-proclaimed Caliphate occupying large swaths of Syria and Iraq, Obama told reporters Monday at the Pentagon that the US was ramping up the training of local forces to complement airstrikes conducted by the US-led coalition. What he actually said, however, was “we’re speeding up training of ISIL forces, including volunteers from Sunni tribes in Anbar Province.” Obama’s omission and the White House’s attempt to explain it away have caused some perplexity on Twitter. [...]"
Concepts and Practices: "Analysis: 'Wealth' In The Financial System, And Cash" [02/19/16] "Almost all of the “wealth” in the financial system is digital in nature. 1) The total currency (actual cash in the form of bills and coins) in the US financial system is a little over $1.36 trillion. [...] Put another way, actual physical money or cash (as in bills or coins you can hold in your hand) comprises less than 1% of the “money” in the financial system. As far as the Central Banks are concerned, this is a good thing because if investors/ depositors were ever to try and convert even a small portion of this “wealth” into actual physical bills, the system would implode (there simply is not enough actual cash). Remember, the current financial system is based on debt. The benchmark for “risk free” money in this system is not actual cash but US Treasuries.[...] In this scenario, when the 2008 Crisis hit, one of the biggest problems for the Central Banks was to stop investors from fleeing digital wealth for the comfort of physical cash. Indeed, the actual “thing” that almost caused the financial system to collapse was when depositors attempted to pull $500 billion out of money market funds. A money market fund takes investors’ cash and plunks it into short-term highly liquid debt and credit securities. These funds are meant to offer investors a return on their cash, while being extremely liquid (meaning investors can pull their money at any time). This works great in theory… but when $500 billion in money was being pulled (roughly 24% of the entire market) in the span of four weeks, the truth of the financial system was quickly laid bare: that digital money is not in fact safe. [...] To use a metaphor, when the money market fund and commercial paper markets collapsed, the oil that kept the financial system working dried up. Almost immediately, the gears of the system began to grind to a halt. When all of this happened, the global Central Banks realized that their worst nightmare could in fact become a reality: that if a significant percentage of investors/ depositors ever tried to convert their “wealth” into cash (particularly physical cash) the whole system would implode. As a result of this, virtually every monetary action taken by the Fed since this time has been devoted to forcing investors away from cash and into risk assets. The most obvious move was to cut interest rates to 0.25%, rendering the return on cash to almost nothing. [...] However, in their own ways, the various QE programs and Operation Twist have all had similar aims: to force investors away from cash, particularly physical cash. After all, if cash returns next to nothing, anyone who doesn’t want to lose their purchasing power is forced to seek higher yields in bonds or stocks. The Fed’s economic models predicted that by doing this, the US economy would come roaring back. The only problem is that it hasn’t. In fact, by most metrics, the US economy has flat-lined for several years now, despite the Fed having held ZIRP for 5-6 years and engaged in three rounds of QE. As a result of this… mainstream economists at CitiGroup, the German Council of Economic Experts, and bond managers at M&G have suggested doing away with cash entirely.[...]
MSM: "Larry Summers Launches The War On Paper Money: "It's Time To Kill The $100 Bill" [02/18/16] "Yesterday we reported that the ECB has begun contemplating the death of the €500 EURO note, a fate which is now virtually assured for the one banknote which not only makes up 30% of the total European paper currency in circulation by value, but provides the best, most cost-efficient alternative (in terms of sheer bulk and storage costs) to Europe's tax on money known as NIRP. [...] That also explains why Mario Draghi is so intent on eradicating it first, then the €200 bill, then the €100 bill, and so on. We also noted that according to a Bank of America analysis, the scrapping of the largest denominated European note "would be negative for the currency", to which we said that BofA is right, unless of course, in this global race to the bottom, first the SNB "scraps" the CHF1000 bill, and then the Federal Reserve follows suit and listens to Harvard "scholar" and former Standard Chartered CEO Peter Sands who just last week said the US should ban the $100 note as it would "deter tax evasion, financial crime, terrorism and corruption." Well, not even 24 hours later, and another Harvard "scholar" and Fed chairman wannabe, Larry Summers, has just released an oped in the left-leaning Amazon Washington Post, titled "It’s time to kill the $100 bill" in which he makes it clear that the pursuit of paper money is only just starting. Not surprisingly, just like in Europe, the argument is that killing the Benjamins would somehow eradicate crime, saying that "a moratorium on printing new high denomination notes would make the world a better place."[...] Yes, for central bankers, as all this modest proposal will do is make it that much easier to unleash NIRP, because recall that of the $1.4 trillion in total U.S. currency in circulation, $1.1 trillion is in the form of $100 bills. Eliminate those, and suddenly there is nowhere to hide from those trillions in negative interest rate "yielding" bank deposits.[...] For now, “I’d guess the idea of removing existing notes is a step too far,” Summers wrote. “But a moratorium on printing new high-denomination notes would make the world a better place.”[...] "
Commentary: "Russia Shuts Down Banks Caught Using Hackers To Withdraw Funds" [02/18/16] "The Russian Central Bank suspects that certain national banks have been using hackers to withdraw funds from the accounts of their clients according to the results of a recent investigation conducted by experts at the Central Bank. Georgy Luntovsky, first deputy chairman of the Central Bank, told SCMagazineUK.com through his representative that in recent months many Russian banks and financial institutions have begun using fake cyberattacks, which help them to cover up their previous crimes or violations, as well as to withdraw money from the accounts of their clients. Luntovsky has also added that in the fourth quarter of 2015 the Central Bank had revoked the licences of three domestic banks that had previously been reportedly subject to cybe- attacks by hackers. According to data from the Russian Central Bank, in Q4 2015 alone cyber-attacks resulted in the theft of more than 1.5 billion rubles (US$ 20 million) from the accounts of clients at some Russian banks and there is a strong suspicion that these attacks could have taken place with the knowledge of these banks and even with their direct participation. Criminals were able to cash funds using real credit cards, making thousands of anonymous bank transfers and falsifying accounting details of the banks' counterparties. [...]"
MSM: "Goldman Sachs Banker Embroiled In Massive Overseas Money Scandal" [02/17/16] "Goldman Sachs’ cozy relationship with the Malaysian government is coming back to haunt the firm and one of its regional chairmen. The fallout from the widening scandal hitting the white-shoe investment bank involves Tim Leissner, the Singapore-based chairman of Goldman’s Southeast Asia operations, who has left that country and relocated to Los Angeles on a leave of absence from the firm. A state fund — 1Malaysia Development Berhad (1MDB) — was set up with Leissner’s assistance, and Goldman was paid sky-high commissions for bond sales. Then $681 million tied to the fund mysteriously turned up in the bank account of Malaysian Prime Minister Najib Razak. The FBI reportedly is investigating all the fund’s transactions in concert with wider probes of money-laundering allegations spanning five countries. These probes could force Goldman to face the wrath of a congressional inquiry, according to one legal expert. [...]" Related: See also below: "Saudi Royal Family Gave $681M To Malaysian PM Who Banned Shia Islam" [02/03/16]; "Malaysia Prime Minister Has $680 Million Cash In His Bank Account; Top Goldman Bankster Bolts The Country" [02/01/16] ; "Switzerland Asks Malaysia To Explain $4 Billion In Misused Money From Goldman Backed Slush Fund" [02/01/16] ; "Najib Of Malaysia And Netanyahu of Israel. Birds Of A Feather, Fly Together" [02/01/16]
MSM: "Investors Are Sitting On The Most Cash Since 2001, Least Overweight Stocks Since 2012" Ø Hedge [02/17/16] "Judging by all the bearish commentary unleashed in recent weeks, one would think that the S&P has lost half of its gains since the artificial central-bank driven levitation was unleashed in 2009. Instead it is just over 10% below its all time highs. Still, for many the lack of the low-volume, low-vol levitation they have grown to love so much over the past 7 years, is making them nervous. So nervous, in fact, that they have liquidating so many of their marginal holdings that according to the latest Bank of America Fund Managers Survey, the cash held by investors is now the highest it has been since November 2001. [...] It is ironic how when central bankers take away the training wheels, nobody has any clue how to trade this "market."[...]" Related: "‘Systemic Fragility in the Global Economy’: Instability of Global Stock Markets"
Commentary: "Cartel Deathwatch: Russia Set To Flood Diamond Market With Firesale Of 167,500 Carats" [02/16/16] "Thanksgiving Day in 2014 will remain in the history books for one key event: that is the day when OPEC effective collapsed, after Saudi Arabia refused to comply with demands by other OPEC members to cut oil production, unleashing the biggest ever drop in the price of oil, ultimately surpassing even that seen after the great financial crisis in duration and severity. Now, another historic cartel may be on its last legs: the DeBeers diamond cartel, because according to Russian daily Izvestia, as part of Russia plan to combat its creeping budget deficit, Russia’s state minerals depository, known as Gokhran, will conduct two auctions on February 29 and March 10, in which it plans to sell as much as 167,500 carats of diamonds. By comparison, Russia sold only only 8,800 carats in all of 2015, generating proceeds of $3.6 million. This is a surprising development, because while many had expected Russia to potentially sell some of its extensive gold reserves as the Kremlin battles with low oil prices, few had anticipated that Russia would flood the diamond market. Furthermore, the proceeds from the auctions are de minimis: the budget proceeds will hardly exceed $ 15 million (1.2 billion rubles) from the diamond sales according to Izvestia. That, however, will not stop Russia. Initially, only medium-sized stones - those weighing up to 10.8 carats - will be sold. Citing experts, Izvetsia notes that such diamonds are found in abundance on the market, and do not represents a special interest for buyers, but the Russian media adds that the oversupply may adversely affect the market as a result of the sudden surge in supply. According to the expert from the analytical industry agency Rough and Polished Sergey Goryainov, there is little grounds to expect a successful auction. He said that the Russian Ministry of Finance can only sell diamonds on the domestic market, and in Russia demand for diamonds in now at a very low level. The recent record ruble devaluation is partially to blame for the lack of diamond demand. [...] Goryanov adds that "the diamonds that will be sold are currently overly abundant in the market. Starting prices will be low as one can't expect much excitement in the auction." While the Ministry of Finance is only expected to sell medium-sized diamonds, on previous occasions it marketed larger stones, heavier than 10.8 carats. It may have no choice but to resort to more of the same if there is no demand for the initial offered lots. The Russian Gokhran finds itself in possession of an substantial amount of small and medium-sized diamonds. The reason is the large-scale buying diamonds by the Russian government from the state company Alrosa in the 2008-2009 period. "Alrosa" has a monopoly on diamond mining in Russia (98% of production), and its largest owners are the Federal Property Management Agency - 43.9%, and the government of Yakutia at 25% of the stock.[...]"
Commentary: "Chinese Brokers' Profits Plunge 98% As Traders Flee Rigged, Burst Bubble Markets" [02/16/16] "While both sellside analysts and buyside investors are panicking over the collapse in bank stock prices and the evaporation of market liquidity as virtually nobody trades any more, perhaps it is time someone looked further east, specifically in China where in January the results reported by local brokerages have confirmed what we have been warning about, namely the local investors - disgusted with China's stock "market" which is not only a burst bubble now but also rigged beyond any measure - have pulled their money en masse, and left China's brokerage to disintegrated into a revenue-less, profitless mess. [...]"
MSM: "U.S. & British Officials Poised To Charge Banks With Rigging Interest Rates" [02/16/16] "American and British regulators are likely to charge several banks with rigging interest rates, including Citigroup, the third-largest U.S. bank, and London-based HSBC Holdings, the Wall Street Journal reported on Friday. The U.S. Commodity Futures Trading Commission (CFTC) and the U.K. Financial Conduct Authority were preparing a final round of civil charges against the banks for rate manipulation in the Libor scandal, the newspaper reported, citing people close to the investigation. The Journal said the CFTC was still investigating J.P. Morgan Chase, the largest American bank by assets, but that may not lead to charges. U.K. regulators said last year they dropped their probe of J.P. Morgan. [...]"
Concepts and Practices: "With Digital Payments, Civilization Comes To An End Until Power Is Restored" [02/16/16] "The coming brave new world may also be a fragile one. As most of the Western world is pushed into abandoning cash and embracing a fully digital cashless grid, it is apparent how vulnerable populations will become in times of crisis. If the power grid were to go down in a storm or an attack, it is readily apparent that the system of commerce would go down with it; payments would stop and desperate people would line up for help. Those with their own supplies, barter items and physical commodities will remain the most comfortable, but the very fabric of society could come unglued. Will they really ban cash (gives central banks more power) when so much could go wrong?[...] Cash is being displaced by credit and debit cards, which are themselves beginning to be displaced by new digital currencies and payment systems … But despite all the advances brought about by the digital revolution, there are still quite a few drawbacks. The most obvious is that it is reliant on electricity. One major hurricane knocking out power, a mid-summer brownout, or a hacker attack on the power grid could bring commerce to a halt. With cash, transactions are still possible. With digital payments, civilization comes to an end until power is restored. Unless you have food stored or goods with which to barter, you’re out of luck. Just imagine a city like New York with no power and no way to buy or sell anything. It won’t be pretty. […] With digital currencies such as Bitcoin, there is the problem that they are created out of thin air. One bitcoin represents the successful completion of a cryptographic puzzle, but all that means is that some computing power was used up to create a unique electronic file. That’s all it is, just a series of ones and zeros. There is nothing tangible about Bitcoin and, indeed, if you lose the hard drive on which you stored your bitcoins, those bitcoins are lost forever.[...]"
Commentary: "Canada Sells Off Its Remaining Gold Reserves" [02/15/16] "Canada is selling off most of its remaining gold reserves, mainly by selling gold coins, figures from the Bank of Canada and Finance Department show. The country held just $19 million US worth of gold as of last Monday. Through most of 2015, the country’s gold reserves stood at more than $100 million US. Finance Department figures show that Canada sold 41,106 ounces of gold coins in December and another 32,860 ounces of gold coins in January. That left Canada holding 21,929 ounces of gold in its reserves as of the end of January — a “negligible” amount, the Bank of Canada acknowledges — worth $24 million US.[...]"
MSM: "Keiser: Deutsche Bank ‘Technically Insolvent’, Running A ‘Ponzi Scheme’" [02/15/16] [29:32] "Max Keiser hit out against Deutsche Bank in the latest episode of his RT program Keiser Report, saying the bank was “technically insolvent” despite assurances from German Finance Minister Wolfgang Schaeuble that he had “no concerns” over his country’s biggest bank. Deutsche Bank shares are down 40 percent since the beginning of the year, falling below their price at the time of the 2008 financial crisis. The bank suffered record losses of €6.8 billion in 2015. With a balance sheet now eclipsing JP Morgan’s, Keiser warned that the bank will sooner or later have to admit to insolvency and say “we need either a huge bailout or we gotta close up shop.” [...]"
Max Keiser: "Keiser Report: Bail-Ins More Dangerous Than ‘ISIS’ (E875)" [02/14/16] [25:45] "We discuss what Uncle Fester might say about the fact that the bad, toxic, complicated and hybrid debts, having been allowed to fester and rot for the past five years, are now rising from the dead to shrink the economy. In the second half, Max continues his conversation with Ellen Brown, author of Web of Debt, about bail-ins being more dangerous than ISIS, the war on cash and which nations’ financial system might hold an example for others. [...]" Note: Good analysis of some major dynamics currently in play.
Commentary: "Global Stocks Continue To Crash As Oil Plummets And Gold Skyrockets" [02/13/16] "Stock markets around the world continue to collapse as this new global financial crisis picks up more steam. In the U.S., the Dow lost 254 more points on Thursday, and it has now fallen for five days in a row. European stocks continued to get obliterated, and financial institutions are leading the way. Overall, global stocks are well into bear market territory, and nearly 17 trillion dollars of global stock market wealth has already been wiped out. As panic rises, investors are seeking alternative investments. [...] On Thursday, the price of gold hit $1,260 an ounce at one point before settling back a bit. But even with the fade at the end of the day, it was still the biggest daily gain in more than two years. Overall, gold is having its best quarterly performance in 30 years.[...] Meanwhile, the price of oil continues to drop to stunning new depths. On Thursday U.S. oil dropped as low as $26.21, which was the lowest price in 13 years. [...] According to CNN, “67 U.S. oil and natural gas companies filed for bankruptcy in 2015″…[...] This is what a global financial crisis looks like. It began during the second half of last year, and now it is making major headlines all over the planet. At this point, things are already so bad that the elite are starting to freak out about what this could potentially mean for them. I want you to carefully consider the following two paragraphs from an editorial that I came across in the Telegraph earlier today… We are too fragile, fiscally as well as psychologically. Our economies, cultures and polities are still paying a heavy price for the Great Recession; another collapse, especially were it to be accompanied by a fresh banking bailout by the taxpayer, would trigger a cataclysmic, uncontrollable backlash. The public, whose faith in elites and the private sector was rattled after 2007-09, would simply not wear it. Its anger would be so explosive, so-all encompassing that it would threaten the very survival of free trade, of globalisation and of the market-based economy. There would be calls for wage and price controls, punitive, ultra-progressive taxes, a war on the City and arbitrary jail sentences.[...]"
Commentary: "Federal Reserve Chair Yellen Rattles Markets Citing Obstacles To Negative Rates" [02/13/16] "... Adding to the market angst was the jumble of questions Fed Chair Janet Yellen received during her semi-annual testimony before the House Financial Services Committee yesterday. One particular line of questioning from multiple members of the Committee was on whether the Federal Reserve has the legal authority to use negative interest rates as part of its monetary policy tools. Central banks in Europe and the Bank of Japan have deployed negative rates and financial markets have a built-in assumption that the Fed could do likewise. Yellen threw a bucket of cold water on that assumption with two revealing remarks. First, Yellen said that the Fed had looked at the possibility of using negative rates in 2010, explaining: We got only to the point of thinking it wasn’t a preferred tool. We were concerned about the impact it would have on money markets. We were worried it wouldn’t work in our institutional environment. If you’re a hedge fund and you’ve staked a billion dollar bet on the potential for the Fed using negative rates in the U.S., this is not the answer you wanted to hear. [...]"
MSM: "US Baby Boomers: Debt Of Average 67-Year-Old Soared 169% In Past 12 Years" [02/13/16] "For those who follow the monthly consumer credit report released by the Fed there was nothing surprising in today's release of the latest Household Debt and Credit Report by the New York Fed. It reports that total household debt rose to $12.12 trillion in Q4, up from $11.83 trillion a year ago.[...] It's mostly as a result of soaring student and auto debt, both trends we have observed on various occasions in the recent and not so recent past. There is more in the report (a notable discussion focuses on why housing credit has stagnated as much as it has with the Fed seemingly unable to grasp that the bulk of housing purchases in the US in recent years have been by offshore oligarchs using all cash transactions to park money in US luxury housing), but what is the topic of this post is another finding by the Fed, namely that Americans in their 50s, 60s and 70s - the Baby Boom generation - are carrying unprecedented amounts of debt, a shift which according to the WSJ "reflects both the aging of the baby boomer generation and their greater likelihood of retaining mortgage, auto and student debt at much later ages than previous generations." Incidentally, those debt "retention" are entirely thanks to the Fed which has only itself to thank for: with deposits yielding nothing, an entire generation of Americans 50 and older has been fored to resort increasingly to more and more debt, until this happens: What this chart shows is that while per capita debt at age 30 fell by 12%; per capita debt at age 65 grew by 48%! Worse, as the chart below show, while aggregate debt of Gen-Xers has admirably declined by 12% in the past 12 years, the aggregate debt of the average Baby Boomer has soared by an unprecedented 169%! The biggest shocker: an 886% increase in student loan debt of Americans aged 65 and older. Some more details from the WSJ: the average 65-year-old borrower has 47% more mortgage debt and 29% more auto debt than 65-year-olds had in 2003. Just over a decade ago, student debt was unheard of among 65-year-olds. Today it is a growing debt category, though it remains smaller for them than autos, credit cards and mortgages. On top of that, there are far more people in this age group than a decade ago. [...]"
Concepts and Practices: "What Is The Gold Standard?" [02/12/16] "The “gold standard” in its modern form was a monetary system that existed for roughly a century. While many nations (and empires) have based their monetary systems upon precious metals, this was most often done directly, via the usage of gold and/or silver money. Real “money” is distinct from currency because, among other reasons, money preserves the wealth of the holder, while currency does not. Thus, we get our first inkling of why any nation would want to use a gold standard as their monetary system: to preserve and protect the wealth of the citizens of that nation, and thus the nation itself. [...] On August 15th, 1971, the Nixon administration “closed the gold window,” which effectively put an end to the last vestige of our gold standard. Further elaboration is necessary. In the final decades of our “gold standard,” we no longer had a full gold standard, but rather only “partial convertibility” in our monetary system. What does that mean? With a true, hard gold standard, where official currency is fully and directly backed by gold, these (paper) currencies can be fully converted into gold at the option of the currency-holder. However, in the Bretton Woods Agreement of 1944, the global monetary system was officially altered. It became a system of partial convertibility, with the U.S. dollar as “reserve currency,” meaning that only one currency – the U.S. dollar – was still convertible to gold. Thus the only mechanism to convert paper to gold was for nations to exchange their U.S. dollars with the U.S. government in exchange for some of its gold reserves. Therefore, when the U.S. government “closed the gold window” in 1971, it defaulted on its gold obligations to the rest of the world, and the requirement that it convert U.S. dollars to gold at the option of the currency-holder. What caused this system to implode? Here it is essential for readers to grasp that, in a monetary system of perfect integrity, there would have been zero incentive for other nations to redeem or convert their U.S. dollars into gold; each would be equally valuable. Only one possible factor could have provided nations with an incentive to engage in such conversion: the fear (and knowledge) that the system had lost its integrity.[...]"
MSM: "The Exchange That Left A Stunned Janet Yellen Looking Like A Deer In Headlights" Ø Hedge [02/11/16] "For nearly one year, Wisconsin Rep. Sean Duffy has been Janet Yellen's nemesis over the ongoing probe into Fed leakage of material inside information via Medley Global and any other undisclosed channels, one which has seen subpoeans be lobbed at the Fed which has been doing everything in its power to stall said probe, and which cost Pedro da Costa his job when he dared to ask questions at a Fed presser that were not precleared by his WSJ "Fed mouthpiece" peers. Today, during Yellen's appearance before the House Financial Services committee, Duffy finally had enough, and in a heated exchange asked Yellen what on legal authority is the Fed exerting privilege to ignore a Congressional probe into what is clearly a criminal leak, one which has nothing to do with monetary policy and everything to do with the Fed providing material, market moving information to its favorite media and financial outlets. The exchange highlights are below: [...]" Note: Yellen can't quote any legal authority why she can't provide the Congressman with what he wants. "Market Angry About Yellen's "Is NIRP Legal" Confusion" "..."There are several potentially substantial legal and practical constraints to implementing a negative IOER rate regime, some of which would be binding at any IOER rate below zero, even a rate just slightly below zero. Most notably, it is not at all clear that the Federal Reserve Act permits negative IOER rates, and more staff analysis would be needed to establish the Federal Reserve’s authority in this area.[...]"
MSM: "UK: Treasury Officials Wined & Dined By Arms Giants & ‘Rogue Banks’" [02/11/16] "Treasury officials regularly accepted invitations to lavish dinners with lobbyists for banks that were being investigated for market rigging, a new report has found. The explosive research, which was conducted by the National Audit Office (NAO), was published on Tuesday. It reveals that banking lobby the British Bankers’ Association was a frequent provider of hospitality to senior Treasury officials, despite the fact some of its members were being investigated by UK authorities for market rigging. Arms manufacturer BAE Systems and auditing giants Deloitte and Price Waterhouse Coopers (PwC) were also frequent providers of gifts and hospitality. Because each of these organizations supply services to government, the NAO said such patterns of gift giving could create conflicts of interest. [...]"
Concepts and Practices: "Negative Rates Are Dangerous" OECD Chair Warns "Our Entire System Is Unstable" [02/11/16] "... WW: You used exactly the right word, it is a mindset. They believe that they understand how the economy works and they are going to do more of what they consider to be a good thing. And we’ve seen this process at work over the course of the years. I remind you that, when the Fed started this ultra-easy stuff, the Europeans were very hesitant to go into it. But, in the end, Mario Draghi and the ECB have gone into it with both feet and are proceeding along the broad lines of what the Americans initiated. The thing that strikes me about NIRP is the possible analogy between the zero lower bound and quantum mechanics. The Newtonian laws of motion apply as long as the body in motion is not too small and is not going too fast, otherwise you need to make use of quantum mechanics and the theory of relativity. And maybe with monetary policy there is a similar kind of a phase change that occurs at the zero lower bound. The Europeans were concerned about this, based on earlier Danish experience when the central bank started charging negative rates on excess reserves held by the banks at the central bank. The expectation is that this will lead to lower lending rates. But you can easily think of a story where this is not the outcome because those negative interest rates cut the banks’ profit margins. And then the question is what will the banks do to restore them? Well, one thing they could do is lower the deposit rate. I read in the Financial Times a few days ago that Julius Baer in Switzerland is thinking about doing just that. But then the worry is that people will take their money elsewhere, take it out in cash or whatever. If this is not possible, then what is possible is increasing the lending rate. What you end up with is a counterintuitive but highly plausible alternative description of what these policies are going to give you. So in the end they may end up being contractionary and not expansionary. So totally experimental in any event. [...] ET: Actually we do have some empirical evidence after some central banks adopted NIRP, such as Switzerland, Sweden and Denmark. As interest rates fell, people saved more, which is the opposite of the policy objective. It seems that because people, particularly the older folks, earn less interest they have to save more to meet their needs. WW: Absolutely. But I would associate that argument more with the general question of whether additional quantitative easing will produce the desired increase in aggregate demand. The NIRP is sort of an extension of that kind of argument.[...]"
Commentary: "The IMF Changes Its Rules To Isolate China And Russia" [02/10/16] "Dr. Hudson discusses his paper, The IMF Changes Its Rules To Isolate China and Russia; implications of the four policy changes at the International Monetary Fund in its role as enforcer of inter-government debts; the Shanghai Cooperation Organization (SCO) as an alternative military alliance to NATO; the Asian Infrastructure Investment Bank (AIIB) threatens to replace the IMF and World Bank; the Trans Pacific Partnership Treaty; the China International Payments System (CIPS); WTO investment treaties; Ukraine and Greece; different philosophies of development between east and west; break up of the post WWII dollarized global financial system; the world dividing into two camps. [...]"
MSM: "As Goldman Risk Explodes, President Says "No One Should Question Viability Of US Banks" [02/10/16] "You know it's serious when the denials begin. Speaking in a Bloomberg TV interview, Goldman Sachs President Gary Cohn explained how "US banks took their medicine early," adding that "some European banks have been slow getting recapitalized." Having thrown his 'competitors' across the ocean under the bus, Cohn then unleashed his comments with regard Goldman's own spiking credit risk - demanding that "no one should question the viability of US banks." [...]"
MSM: "Global Markets Stunned By Biggest Japan Crash Since 2013; All Eyes On Deutsche Bank" [02/10/16] "With China offline for the rest of the week, global markets have found a new Asian bogeyman in the face of Japan which as reported last night saw its markets crash, and the Yen soar, showing that less than 2 weeks after the BOJ unveiled NIRP, yet another central bank has lost control. [...] Aside from Japan, everyone is looking at the bank which we first asked if it was "the next Lehman" last June, namely Germany's Deutsche Bank, to see if yesterday's desperate scramble to publicly confirm it has sufficient liquidity will sufficient will stop the price from dropping and its CDS drom blowing out. For now, the stock is indeed up modestly, even if the CDS has refused to tighten suggesting that whatever management did, it is not enough and it is only a matter of time before the selling returns. As a result of this temporary stabilization in financials, the Europe 600 Index was little changed after closing Monday at its lowest level since 2014, and U.S. equity-index futures were also steady. European indexes of credit-default swaps on corporate debt fell for the first time in more than a week, Germany’s 10-year bund yield climbed the most this year and crude in New York rose above $30 a barrel. Equities in Tokyo slumped earlier by the most since August and the yield on 10-year Japanese government bonds turned negative for the first time.[...]"
Commentary: "The Collapse Of The Too Big To Fail Banks In Europe Is Here
" [02/10/16] "There is so much chaos going on that I don’t even know where to start. For a very long time I have been warning my readers that a major banking collapse was coming to Europe, and now it is finally unfolding. Let’s start with Deutsche Bank. The stock of the most important bank in the “strongest economy in Europe” plunged another 8 percent on Monday, and it is now hovering just above the all-time record low that was set during the last financial crisis. Overall, the stock price is now down a staggering 36 percent since 2016 began, and Deutsche Bank credit default swaps are going parabolic. Of course my readers were alerted to major problems at Deutsche Bank all the way back in September, and now the endgame is playing out. In addition to Deutsche Bank, the list of other “too big to fail” banks in Europe that appear to be in very serious trouble includes Commerzbank, Credit Suisse, HSBC and BNP Paribas. Just about every major bank in Italy could fall on that list as well, and Greek bank stocks lost close to a quarter of their value on Monday alone. Financial Armageddon has come to Europe, and the entire planet is going to feel the pain. The collapse of the banks in Europe is dragging down stock prices all over the continent. At this point, more than one-fifth of all stock market wealth in Europe has already been wiped out since the middle of last year. That means that we only have four-fifths left. [...]" Related: "What's Dragging Down European Banks: Oil And Commodity Exposure As High As 160% Of Tangible Book" | "European Sovereign Risk Soars As Bank Contagion Spreads"
MSM: "Negative Interest Rates Aimed At Driving Small Banks Out Of Business And Eliminating Cash" [02/10/16] "More than one-fifth of the world’s total GDP is in countries which have imposed negative interest rates, including Japan, the EU, Denmark, Switzerland and Sweden. Negative interest rates are spreading worldwide. And yet negative interest rates – supposed to help economies recover – haven’t prevented Japan and Europe’s economies from absolutely going down the drain. [...]" Related: "$7 Trillion In Bonds Now Have Negative Yields" "Just ten days ago, in the aftermath of the BOJ's -0.1% NIRP announcement, we reported that after more than one year after the ECB unleashed NIRP, the total number of government bonds with negative yields to a staggering $3 trillion, a number which nearly doubled overnight to $5.5 trillion. Overnight in a historic event, the latest consequence of the BOJ losing control, the yield on Japan's 10Y JGB dropped below zero for the first time, in the process joining Switzerland as the only other country (for now) with a NIRPing benchmark 10Y treasury.[...]" See also below:
MSM: "Fed: Lacks Physical Cash, Legal Authority And Computer Systems To Implement NIRP" [02/09/16] "Over the weekend, we presented a comprehensive step by step analysis laying out both the mechanics (and implications) of the Fed unleashing NIRP (Negative Interest Rates) in the US when the time comes: a time which as JPM further defined, would be characterized by "recession-like conditions." In other words, right about now if Yellen so chose. Curiously, in a nostalgic deja vu to the ECB's own monetization of debt, which was illegal according to Article 123 (and Draghi himself back in the day), until Europe's "constitutional judges" decided that it was actually all quite legal before Draghi proceeded to announce it in late 2014, Bloomberg points us to one of the recently declassified Fed staff memos from August 2010 titled "Reducing the IOER Rate: An Analysis of Options", which states that the Fed "may not have the legal authority to set negative interest rates in the U.S." To wit: "There are several potentially substantial legal and practical constraints to implementing a negative IOER rate regime, some of which would be binding at any IOER rate below zero, even a rate just slightly below zero. Most notably, it is not at all clear that the Federal Reserve Act permits negative IOER rates, and more staff analysis would be needed to establish the Federal Reserve’s authority n this area." No legal authority? No problem. Just call in Mario Draghi's lawyer, or any other legal representative of Goldman Sachs and/or its former employees, and whatever amendments need to be made to the Federal Reserve Act, will be made. More curious is that as the Fed's paper admits, "the Federal Reserve computer systems used to calculate and manage interest on reserves do not currently allow for the possibility of a negative IOER rate, although these systems could be modified over time if needed." [...]"
Commentary: "Feds Helped Hide Investigation Into Big Bank’s Money Laundering For Drug Cartels" [02/09/16] "A federal judge ruled last week that the Hong Kong and Shanghai Banking Corporation (HSBC) will be forced to share with the public a report on its business practices — a decision both the bank and the Department of Justice (DOJ) fought in court to prevent. The report is based on the findings of an ongoing government audit of the bank initiated amid revelations in 2012, that it laundered money for drug cartels and terrorist organizations. When HSBC’s sordid dealings were discovered in 2012, the DOJ declined to press charges, arguing the bank was too important to prosecute. As the Guardian reported at the time, Assistant Attorney General Larry Breuer argued “the Justice Department had looked at the ‘collateral consequences’ to prosecuting the HSBC or taking away its US banking license. Such a move could have cost thousands of jobs, he said.” Further, “Had the US authorities decided to press criminal charges,” the Guardian summarized, “HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized.” [...] The DOJ’s refusal to prosecute those responsible was widely criticized, as HSBC was found to have laundered over $850 million for cartels, while also laundering money for Saudi banks with ties to terrorist groups. The bank also helped nations like Libya and Iran bypass American financial laws. The lack of punishment for these transgressions appeared to reveal a double standard.[...] As Glenn Greenwald observed at the time: The US government is expressly saying that banking giants reside outside of — above — the rule of law, that they will not be punished when they get caught red-handed committing criminal offenses for which ordinary people are imprisoned for decades. Aside from the grotesque injustice, the signal it sends is as clear as it is destructive: you are free to commit whatever crimes you want without fear of prosecution. And obviously, if the US government would not prosecute these banks on the ground that they’re too big and important, it would — yet again, or rather still — never let them fail.[...]"
Commentary: "HSBC Fined $470 Million For 2008 Financial Crisis, No One Jailed" [02/08/16] "Multinational bank HSBC has agreed to a $470 million settlement with the U.S. government for mortgage lending and foreclosure abuses that worsened the 2008 financial crisis, but is it enough? The Justice Department’s Acting Associate Attorney General Stuart F. Delery said the agreement was “the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices. This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards.” Under the agreement HSBC must reduce mortgage interest rates as well as the principal on mortgages for homeowners who are at risk of default. HSBC must also improve their standards for handling service loans and foreclosures. The hope is that new practices will discourage the actions that lead to the financial crisis that started in 2007 due to banks like HSBC knowingly giving out bad loans. The U.S. government and the individual states involved will received $100 million in an escrow fund that will make payments to people who lost their homes due to foreclosure between 2008 and 2012. [...] In 2013 HSBC made a deal with the Federal Reserve and the Office of the Comptroller, agreeing to pay $249 million to settle federal complaints that the bank foreclosed homes on families who should have been eligible to stay in their homes. Benjamin C. Mizer, Principal Deputy Assistant Attorney General and head of the Justice Department’s Civil Division said, “The agreement is part of our ongoing effort to address root causes of the financial crisis.” Despite Mr. Mizers statements only one person in the U.S. has gone to prison for the largest theft in recent memory. The rest of the people held responsible were all considered “small fish”, bit players in an international game of banking and theft. Not everyone is convinced that the ruling is as strong as the Justice Department claims. Bartlett Naylor, a financial policy advocate at Public Citizen, a watchdog and advocacy group, told the Associated Press that a “strongly written press release is no substitute for true justice. This can’t be yet another immaculate fine, where the government alleges widespread fraud and yet no individual was responsible.” There is also the question of whether or not $470 million even covers the amount of wealth that was stolen from millions of people by the bankers. In 2012 Frontline wrote: For example, the Treasury Department, in an April assessment [PDF], put the total lost household wealth at $19.2 trillion. But that doesn’t take into account long-term effects of homeowners who may be less socially mobile — and therefore contribute less to the economy over time. In reality the numbers are likely much higher and the $470 million settlement barely even scratches the surface. As a result, banks like HSBC and the corrupt officials behind these institutions will continue to go free while government officials pretend to care about the American people. The sooner we let go of that fantasy the sooner we move towards empowering ourselves and our communities and creating real solutions.[...]"
MSM: "2016 EPS Growth Estimates Slashed By 50% Just One Month Into The Year" Ø Hedge [02/08/16] "Several days ago, we showed the one chart which explains why Bank of America remains a stubborn non-BTFDer. This is what Michael Hartnett said last Thursday: "We remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations (currently heading sharply south – Chart 1) and credit conditions." Since then things appear to have gotten even worse, because while not only is the almost concluded Q4 earnings season on pace to confirm yet another earnings recession, with a blended earnings decline of -3.8%, which according to Factset "will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009", but both Q1 and Q2 2016 are looking just as bad: as Factset notes in its latest weekly update, "in terms of earnings, the estimated declines for Q1 2016 and Q2 2016 are -5.3% and -0.4%." [...] As Factset then notes, as is usually the case, analysts are predicting significant increases in earnings and revenue growth in the 2nd half of the year. In terms of earnings, the estimated declines for Q1 2016 and Q2 2016 are -5.3% and -0.4%, while the estimated growth rates for Q3 2016 and Q4 2016 are 5.5% and 10.7%. In terms of revenues, the estimated declines for Q1 2016 and Q2 2016 are -0.1% and -0.1%, while the estimated growth rates for Q3 2016 and Q4 2016 are 2.3% and 4.5%. In other words, hockey sticks that would make any central bank proud. The only problem is that these forecasts will never materialize, which can be seen in the full year EPS forecast below. As highlighted in the box below, in just one month full year EPS has declined from 4.3% to 2.2%. [...]"
Commentary: "Saudi Arabia's Reckless Policies Have Global Financial And Energy Markets On Edge" [02/07/16] "Saudi Arabia had been unloading at least $1 trillion in US securities and crashing global markets — in parallel to its oil price war. [...] As a New York investment banker explains it, "the House of Saud was creating tremendous surpluses since the 1970s — when OPEC dramatically increased the price of oil." The US Treasury wanted this tsunami of cash to purchase US Treasury bonds; and the Saudis were always scared to show that tsunami in motion. So "a deal was worked out that they would keep the trillions of US dollars in bonds secret." There was never any question the Saudis would be allowed to sell bonds en masse. The Saudis selling their stocks in the open market en masse, especially in the first weeks of January, spreading panic all around the world, appears to have seriously displeased another faction of the Masters of the Universe. This faction might eventually let everyone know what the secret Saudi position is in US Treasuries. Remember, we're talking about at least $8 trillion. [...] The House of Saud, predictably, is in total panic. Imagine a leak stating they are sitting on $8 trillion while asking the poor in Saudi Arabia for economic "sacrifices" to support their oil price war plus the unwinnable war on Yemen, fought with expensive mercenaries. A global uproar would be inevitable — claiming a freeze on Saudi assets that are being used to destroy world markets. A barely concealed secret is that the House of Saud is not exactly popular in all the crucial places, from Moscow to Washington and Berlin. The House of Saud cannot possibly believe that the FSB, SVR and GRU deeply love them for trying to destroy Russia; that Texans love them for trying to destroy the shale oil industry; that Germany or Italy love them for dumping a trillion dollars in securities on the markets to crash them as Mario Draghi pumps major QE trying to rescue the eurozone.[...]"
MSM: "Resignation Of Economy Minister Plunges Ukrainian Gov't Into Another Crisis" [02/07/16] "The resignation of Lithuanian Economy Minister Aivaras Abromavicius has shaken the fragile balance in Ukrainian politics and could herald a collapse in the government of Prime Minister Arseniy Yatsenyuk. Kyiv's politicians have already been negotiating changes to the government for several weeks. The general logic of a reshuffle is rather simple: Yatsenyuk must stay as prime minister, but there must be "fresh blood" in the government. This formula was agreed upon after the visit of US Vice President Joe Biden, who opposed dismissing the PM in order to maintain the balance of power between the president and the government. [...]" Related: "In Hopelessly Corrupt Ukraine, Business Is Business for Joe Biden's Son" "US vice- president Joe Biden has spoken out against the out-of-control corruption in Ukraine, but that hasn't deterred the intrepid Hunter Biden from wading into the sewer." Hunter Biden has acquired equity securities of a company in the country.
MSM: "As ‘Madoff’ Airs On TV, Two Anonymous Whistleblowers Are Pounding On The SEC's Door Again" [02/06/16] "Thursday night ABC began its two-part series on the Bernie Madoff fraud. Viewers will be reminded about how investment expert, Harry Markopolos, wrote detailed letters to the SEC for years, raising red flags that Bernie Madoff was running a Ponzi scheme – only to be ignored by the SEC as Madoff fleeced more and more victims out of their life savings. Today, there are two equally erudite scribes who have jointly been flooding the SEC with explosive evidence that some Exchange Traded Funds (ETFs) that trade on U.S. stock exchanges and are sold to a gullible public, may be little more than toxic waste dumped there by Wall Street firms eager to rid themselves of illiquid securities. The two anonymous authors have one thing going for them that Markopolos did not. They are represented by a former SEC attorney, Peter Chepucavage, who was also previously a managing director in charge of Nomura Securities’ legal, compliance and audit functions. We spoke to Chepucavage by phone yesterday. He confirmed that two of his clients authored the series of letters. Chepucavage said further that these clients have significant experience in trading ETFs and data collection involving ETFs. Throughout their letters, the whistleblowers use the phrase ETP, for Exchange Traded Product, which includes both ETFs and ETNs, Exchange Traded Notes. In a letter that was logged in at the SEC on January 13, 2016, the whistleblowers compared some of these investments to the subprime mortgage products that fueled the 2008 crash, noting that regulators and economists were mostly blind to that escalating danger as well. [...] “The vast majority of ETPs have very low levels of assets under management and illiquid trading volumes. Many of these have illiquid underlying assets and a large group of ETPs are based on derivatives that are not backed by physical assets such as stocks, bonds or commodities, but rather swaps or other types of complex contracts. Many of these products may have been designed to take what were originally illiquid assets from the books of operators, bundle them into an ETP to make them appear liquid and sell them off to unsuspecting investors. The data suggests this is evidenced by ETPs that are formed, have enough volume in the early stage of their existence to sell shares, but then barely trade again while still remaining listed for sale. This is reminiscent of the mortgage- backed securities bundles sold previous to the last financial crisis in 2008.” The authors also note in this same letter that they have been presenting their evidence of “significant red flags” and “fundamental flaws” to the SEC since March 2015 and that the industry has not disputed the evidence. However, disclosures of these risks in the product offerings has not been forthcoming either.[...]"
MSM: "US Tech Companies Have Stashed Over $420 Billion Overseas" [02/06/16] "It's no secret that the US government wants companies to bring more of their offshore profits back home for the sake of taxes, and it's now exceptionally clear as to why. Bloomberg has sifted through financial filings and discovered that the top eight American tech firms, including Apple, Google and Microsoft, are keeping more than $420 billion overseas -- $69 billion of it added in just the past year. That's over a fifth of the $2.1 trillion held abroad by American companies, and would easily cover a lot of government expenses. A tax on Microsoft's recent profits alone ($29.6 billion) would cover NASA and the Commerce Department for a year; Apple ($23.3 billion) could take care of the Transportation Department and Social Security, and Oracle could foot the bill for the Labor Department. The reasoning for this creative accounting is the same as always: the companies don't want to pay the full US corporate tax rate (including repatriation taxes) when they know that they can easily shuffle that money elsewhere and shell out much less. It may be tough to keep this income out of the States forever, though. While President Obama didn't have much luck this year with a measure that would slap taxes on both past and ongoing foreign earnings, he's continuing to talk with executives in hopes of reaching a compromise. It's hard to imagine officials simply walking away from a huge potential revenue source. [...]"
Corbett Report: "Kerry Lutz Reports On "The War On Cash" [02/05/16] [22:17] "Kerry Lutz of FinancialSurvivalNetwork.com joins us today to discuss the war on cash. How long has it being going on? How does it manifest in our daily lives? What will it mean for the future of our NIRP-driven central bank-controlled economic future? And how do we hedge against it? [...]"
MSM: "Afghanistan Is On The Brink After US Invests $100 Billion" [02/04/16] "Afghanistan's economy is worsening and its security deteriorating despite more than a decade of U.S.-led reconstruction efforts and more than $100 billion poured into the country, according to the Special Inspector General for Afghanistan Reconstruction, an independent oversight agency created by Congress in 2008. The agency's investigation, conducted between October and December of last year, paints a grim picture of the country — including millions of dollars squandered on projects that never came to be, a resurgent Taliban, infiltration by the so-called Islamic State and a handful of guilty pleas from U.S. military personnel in bribery cases. Despite all that, however, the United States should not back out now, experts said, or it runs the risk of a completely failed state — which in turn is a green light for terrorist organizations to grow, and oppression and corruption to spread. A combination of lower U.S. troop levels, a huge amount of funds and poor project management has created a recipe for rampant corruption.[...] "Embezzlement and bribery have become institutionalized — more than in the past — partly because of the huge amount of funding and the weak management," said Zubair Iqbal, who worked for the IMF for more than three decades and is currently a scholar-in-residence at the Middle East Institute. The country has also been hit by capital flight. Afghan GDP growth rates slowed from more than 14 percent in 2012 to 1.3 percent in 2014, according to the World Bank. Waning business and consumer confidence and high uncertainty over the political transition and security situation are taking a toll on the country. [...] Private investment has shown "strong signs of slowdown," according to the World Bank, and registrations of new firms have shrunk by nearly half since 2012. Many young Afghans who were once employed by the reconstruction efforts or who have decided the country is no longer safe are leaving. "It's a huge loss," Ahmed Siar Khoreishi, chief executive of Ghazanfar Bank, said in the report. "The majority of these people are under the age of 30. This is really scary." The initial reaction to such bleak trends may be to withdraw all U.S. troops and funding. But that would come at a high price, experts said. "Unless the economy and the administration of the state — which are completely dependent on foreign aid — get off the ground, the country will collapse. It will disintegrate into civil war," said Vanda Felbab-Brown, senior fellow of foreign policy at the Brookings Institution.[...]"
MSM: "Europe Falls, U.S. Futures Rise As Oil Halts Two-Day Plunge" Ø Hedge [02/04/16] "... But while US equity futures are enjoying today's crude levitation, Europe’s benchmark equity gauge dropped for a third day, with Italian banks leading losses, and the Markit iTraxx Europe Index of credit-default swaps on investment-grade companies surpassed 100 basis points for the first time since October 2013. The yen strengthened for a third day. Oil recovered after its biggest two-day drop in almost seven years, buoying Russia’s ruble, and zinc climbed to the highest in almost three months. Where we stand now: [...]"
MSM: "Trading Desks Stunned By 'Brutal' Selling" Ø Hedge [02/04/16] "...Concerned about the dramatic market moves since the start of the new year, and especially in recent days? You are not alone, but as RBC's head of US cash equities S&T Charlie McElligott, says fear not: everyone is in a "sell (or short) now, ask questions later" mood as wholesale derisking has gripped the market and nobody really has a clue what is going on except for one thing: the most popular, crowded trades are getting blown up at a ferocious speed, as "some leveraged players outright taking grosses down by selling longs and covering shorts; while others are focused on taking net exposure lower, selling longs but adding selectively to shorts.[...]" Related: "Managing Risk Through A Commodity Downturn" "... The only way to manage through a debt-fueled economic cycle is to do the opposite: Preserve Cash. In the commodity sector we are about to witness a lot of bankruptcies – so many companies followed central bank policies off a cliff. The ones that resisted the economic drugs pushed by the Fed will be in the position to prosper through prudent cash management as many competitors close their doors and will be forced to liquidate. The businesses or individuals that will prosper after all the smoke clears will be the ones who are run conservatively. Central banks are literally out of bullets as they desperately use negative rates to force even more risk. Unlike other late stage recoveries/early stage recessions we are entering it with empty guns.[...]"
Commentary: "Central Bank Currency Wars Have Engaged The "Nuclear Option" Ø Hedge [02/04/16] "An enduring curse of this financial crisis is the inability of markets to disengage from the clutches of the correlation of one. We see it ad seriatim, often day to day: everything is wonderful, all hail the central bank (Friday); the world is crashing, these empty suits are running us over the cliff (Tuesday). Having gone on long enough, this phenomenon has turned traders into inveterate cynics who know the price of everything, and the value of nothing. Markets function effectively only when relative value among assets has some measure of reality. Discounting future returns in a world of zero and negative interest rates is a Sisyphean task in the theater of the absurd. In today’s world, we reduce everything to buy or sell the lot. You hear the term “safe haven” constantly. It is meaningless in a negative-rate induced carry trade world. No one is buying safety in JPY on bad days. They are busy getting blown out of the high risk stuff they funded with minus 0.1% rates. Currency wars can be nasty and don’t always have a winner. When they are waged with increasingly negative rates, it becomes the nuclear option. Central banks embracing uncontrollable volatility and the evil of one. [...]"
Commentary: "Saudi Royal Family Gave $681M To Malaysian PM Who Banned Shia Islam" [02/03/16] "On Wednesday last week the Malaysia’s attorney general confirmed that Saudi Arabia’s royal family gave Malaysian Prime Minister Najib Razak a $681 million personal gift. The confirmation of the scandal ended months of speculation about the source of the huge personal donation received from ‘a middle eastern donor’ by the Prime Minister. The country’s top anti-graft agency had recommended Najib Razak be charged with criminal misappropriation. The transfer of almost $700 million was made ahead of the 2013 re-election of the Prime Minister. Prime Minister Najib Razak who had been in office since 2009 is widely known for his clamp down on Shia minority Islam in the nation. [...] n 2010 the nation declared that Shiites in the country, who have been termed a “deviant” sect, were barred from promoting their faith to other Muslims. In December that year, 200 Shi‘a were arrested by the Selangor Islamic Religious Department for celebrating ashura under the Selangor state shari‘a criminal enactment law. Religious authorities who accused them of “threatening national security” in multicultural Malaysia." Related: See below
MSM: "Malaysia Prime Minister Has $680 Million Cash In His Bank Account; Top Goldman Bankster Bolts The Country" [02/01/16] "Malaysia’s anticorruption agency said Wednesday it wants to review the decision of the country’s top prosecutor to drop investigations into how nearly $700 million was transferred to Prime Minister Najib Razak’s private bank account. [...] The Wall Street Journal reported in July that an earlier Malaysian government investigation found that the $700 million had entered Mr. Najib’s accounts via banks, companies and entities linked to 1MDB, which Mr. Najib set up in 2009 to encourage more economic development in the country.[...] Tim Leissner, the driving force behind high-profile deals between Goldman Sachs and Malaysia’s troubled state investment fund, has taken “personal leave” from Goldman and moved from Singapore to Los Angeles. His departure comes as Najib Razak, Malaysia’s prime minister, fights to extricate himself from a donations scandal alleged to be linked to the investment fund, known as 1MDB. Mr Leissner was most recently Goldman’s Southeast Asia chairman, and spent more than a decade of his 18 years with the bank closely involved in the region. His close relationships with top officials in Kuala Lumpur produced what one executive described as a “golden period” for the bank. He became president of Goldman’s Singapore operations in 2006, having run its investment banking operation in the country since 2002. In 2014 the bank named him chairman of Southeast Asia as part of efforts to bolster Goldman’s presence in the region. Goldman declined to comment on Mr Leissner’s move or his leave.. Goldman’s relationships in Malaysia first came to the fore in 2013 when the bank collected a $300m fee on a $3bn bond arranged for 1MDB...Usually bond fees are a fraction of that amount. .. Mr Leissner was a key player in the bank’s relationships with power brokers in Kuala Lumpur, including Mr Najib , who chairs 1MDB’s advisory board....Mr Leissner’s wife has tweeted pictures of herself with Mr Najib’s wife, Rosmah, whom she described as “my friend”.[...]" Related: "Switzerland Asks Malaysia To Explain $4 Billion In Misused Money From Goldman Backed Slush Fund" "... 1MDB was set up by Najib in 2009 and owes some $11 billion thanks in no small part to a series of bond deals arranged by Goldman banker Tim Leissner, whose wife Kimora Lee is close friends with Najib's wife Rosmah Manso. Those deals were quite lucrative for Goldman. Leissner effectively bought the bonds for the bank's own books at 90 cents on the dollar. That discount amounted to a hefty underwriting fee. [...]" See also below:
Commentary: "Najib Of Malaysia And Netanyahu of Israel. Birds Of A Feather, Fly Together" [02/01/16] "Both politicians kept in power by huge transfers of money: one from the Saudi Arabian royal family, the other from the AIPAC lobby-led, US congress. Neither has apparently committed any crime by the acceptance of these sums but to call such activity ‘democratic’ is to call a pork chop, kosher. [...]" Such sums are routinely used to irrevocably damage the democratic principle of ‘government by the people, of the people and for the people’. In these two instances, it is government by the people but for Riyadh and Washington respectively. That is not democracy but a travesty of the democratic process perpetrated by vested business and political interests. For one state, or a cabal within a state, to seek to influence the choice of government of another state by the direct transfer of funds calculated to direct the result of a national election, should be designated a criminal activity. It is banned in European democratic elections – but neither Malaysia nor Israel are in Europe and nor, of course, is Saudi Arabia or America. More’s the pity. Then the world would not have had to deal with the ineptitude of the pathetic US president, George Bush, and similar results of corrupted democratic process. Both politicians kept in power by huge transfers of money: one from the Saudi Arabian royal family, the other from the AIPAC lobby-led, US congress. Neither has apparently committed any crime by the acceptance of these sums but to call such activity ‘democratic’ is to call a pork chop, kosher. Such sums are routinely used to irrevocably damage the democratic principle of ‘government by the people, of the people and for the people’. In these two instances, it is government by the people but for Riyadh and Washington respectively. That is not democracy but a travesty of the democratic process perpetrated by vested business and political interests. For one state, or a cabal within a state, to seek to influence the choice of government of another state by the direct transfer of funds calculated to direct the result of a national election, should be designated a criminal activity. It is banned in European democratic elections – but neither Malaysia nor Israel are in Europe and nor, of course, is Saudi Arabia or America. More’s the pity. Then the world would not have had to deal with the ineptitude of the pathetic US president, George Bush, and similar results of corrupted democratic process.[...]"
Commentary: "How Wall Street Came To Own The Clintons And The Democratic Party" [01/31/16] "Former FX trader at Citigroup, Chris Arnade, just penned a poignant and entertaining Op-ed at The Guardian detailing how Wall Street came to own the Democratic Party via the Clintons over the course of his career. While anyone reading this already knows how completely bought and paid for the Clintons are by the big financial interests, the article provides some interesting anecdotes as well as a classic quote about a young Larry Summers. Here are some choice excerpts from the piece: " I owe almost my entire Wall Street career to the Clintons. I am not alone; most bankers owe their careers, and their wealth, to them. Over the last 25 years they – with the Clintons it is never just Bill or Hillary – implemented policies that placed Wall Street at the center of the Democratic economic agenda, turning it from a party against Wall Street to a party of Wall Street. That is why when I recently went to see Hillary Clinton campaign for president and speak about reforming Wall Street I was skeptical. What I heard hasn’t changed that skepticism. The policies she offers are mid-course corrections. In the Clintons’ world, Wall Street stays at the center, economically and politically. Given Wall Street’s power and influence, that is a dangerous place to leave them. [...] The administration’s economic policy took shape as trickle down, Democratic style. They championed free trade, pushing Nafta. They reformed welfare, buying into the conservative view that poverty was about dependency, not about situation. They threw the old left a few bones, repealing prior tax cuts on the rich, but used the increased revenues mostly on Wall Street’s favorite issue: cutting the debt. Most importantly, when faced with their first financial crisis, they bailed out Wall Street. That crisis came in January 1995, halfway through the administration’s first term. Mexico, after having boomed from the optimism surrounding Nafta, went bust. It was a huge embarrassment for the administration, given the push they had made for Nafta against a cynical Democratic party.[...] Money was fleeing Mexico, and much of it was coming back through me and my firm. Selling investors’ Mexican bonds was my first job on Wall Street, and now they were trying to sell them back to us. But we hadn’t just sold Mexican bonds to clients, instead we did it using new derivatives product to get around regulatory issues and take advantages of tax rules, and lend the clients money. Given how aggressive we were, and how profitable it was for us, older traders kept expecting to be stopped by regulators from the new administration, but that didn’t happen. When Mexico started to collapse, the shudders began. Initially our firm lost only tens of millions, a large loss but not catastrophic. The crisis however was worsening, and Mexico was headed towards a default, or closing its border to money flows. We stood to lose hundreds of millions, something we might not have survived. Other Wall Street firms were in worse shape, having done the trade in a much bigger size. The biggest was rumored to be Lehman, which stood to lose billions, a loss they couldn’t have survived. As the crisis unfolded, senior management traveled to DC as part of a group of bankers to meet with Treasury officials. They had hoped to meet with Rubin, who was now Treasury secretary. Instead they met with the undersecretary for international affairs who my boss described as: “Some young egghead academic who likes himself a lot and is wide eyed with a taste of power.” That egghead was Larry Summers who would succeed Rubin as Treasury Secretary. [...]"
Convolutions: "Rumors of Bitcoin’s Death Have Been Greatly Exaggerated" MSM [01/30/16] [17:43] "Jeff interviews top Bitcoin expert, Roger Ver, to counter the misinformation about the death of Bitcoin that has been circulating recently. Topics include: Mike Hearn’s declaration on the death of Bitcoin, this is actually another buying opportunity, it is Bitcoin’s popularity that is causing the congestion, the block size situation is about to be resolved anyway, the rising fees issue is greatly exaggerated, banks charged Roger $80 to move dollars while the same transaction in BTC would be 4 cents, Mike Hearn’s motivations and conflict of interest, the arguments around increasing the block size, the censorship of dissenting opinion in BTC forums, BTC is actually the opposite of dead [...]" Related: "Bitcoin Failure Blamed On Currency Control In The Hands Of A Few" "Mike Hearn rocked the Bitcoin world when he declared that the digital currency experiment had failed. Hearn, a software developer for Bitcoin, explained several reasons why this cryptocurrency had not been successful. He not only sold off his coins, but he felt compelled to warn the entire digital currency community that the system had reached its limit. [...] He wrote: “Bitcoin is an experiment and like all experiments, it can fail. What was meant to be a new, decentralized form of money that lacked ‘systemically important institutions’ and ‘too big to fail’ has become something even worse: a system completely controlled by just a handful of people.” [...]| "Prominent Bitcoin Developer Predicts Death of Virtual Currency" [0:54] "Just a few years ago Mike Hearn thought the digital currency Bitcoin could change the world. He even left his well-paid engineering job at Google to pursue working with Bitcoin full time, producing a Bitcoin mobile app that helped the technology take off. But Now Hearn is selling off all his coins and turning his back on the currency altogether. He claims that the mechanisms behind the currency are broken, and that most of Bitcoin is owned by a small, toxic pool of investors who are not interested in using the digital currency in actual transactions. At some point last year, Bitcoin owners broke into factions over how to handle changes that needed to be made to Bitcoin's code. The currency community has not been able to recover. According to Hearn, Bitcoin will never recover and "the long-term trend should probably be downwards." [...]" |
MSM: "Cash Is King As Europe Adapts To Negative Interest Rates" [01/29/16] "Europe’s ATMs worked overtime in 2015. A record 1.08 trillion euros ($1.17 trillion) of banknotes were in circulation, almost double the value 10 years ago, according to data compiled by the European Central Bank. That’s a counterargument to some bankers who say that electronic forms of cash will replace paper money sooner rather than later. ECB Balance Sheet Banknotes in Circulation, value of notes in billions of euros. The value of banknotes in circulation rose 6.5 percent last year, the most since 2008. There are financial reasons - including negative rates on deposits - but part of the increase could be related to the influx of refugees, who don’t have bank accounts. “Stronger economic growth, low interest rates as well as maybe some worries. [...]" Related: Corbett Report: "The War on Cash: A Country by Country Guide" "Information on the 16 countries making efforts to affect the use of cash in society: Australia, Canada, China, France, Denmark, India, Israel, India, Italy, Mexico, Norway, Philippines, Spain, Sweden, Uruguay, UK.[...]"
Documentary: "Goldman Sachs: Power and Peril" [01/29/16] [42:22] Note: CNBC Documentary 2013. Interesting to watch.
MSM: "Moral Hazard: China Will Use Public Funds To Cover Venture Capital Firms' Losses" Ø Hedge [01/28/16] "It should surprise nobody that when it comes to perpetuating the global central bank "put", China - which is at daily danger of having its house of trillions in non-performing loan card collapse at any moment - has perfected moral hazard better than any western central banker. However, even the staunchest cynics will be stunned by the latest development out of the Shanghai government where starting next month, venture capital firms which invested in high-tech startups since the beginning of 2015 can apply for government compensation if their investment loses money. In other words, while until now the government had bailed out corporate bond and bank loan investors, and was actively micromanaging the burst stock bubble (unsuccessfully), it will now enter the venture capital and private equity arena in what may be the grossest misallocation of capital unleashed by China to date. The policy is laid out in a regulation dated December 29 that the city's Science and Technology Commission put on its website on January 21. Under the regulation, if the sale of a VC's stake in a startup fails to cover its original investment, it can ask the government for a payout amounting to 30 or 60 percent of the shortfall depending on the size and revenue of the firm it backed. The most any VC firm can receive in one year is 6 million yuan. The limit on individual investment projects is 3 million yuan although we are confident both these limitations will be breached grossly and repeatedly. Shanghai is not the first Chinese city to implement this lunacy: an investor with a financial institution in Shanghai said the city did not invent the idea of subsidizing high-risk private financial investment. Other local governments in China have implemented similar rules but none of them offer quite as much compensation, he said. [...]"
MSM: "Info Graphic: The Periodic Table Of Commodity Returns" [01/28/16] "At the beginning of each year, U.S. Global Investors puts out a fantastic visualization called the Periodic Table of Commodity Returns. This year’s version has an interactive design that allows users to sort returns by various categories including returns, volatility, and other groupings. [...]"
MSM: "China: "Soros Hasn't Done His Homework, May Be Partially Blind" Ø Hedge [01/28/16] "On Tuesday, the People’s Daily laughed at George Soros. Literally. On the heels of comments Soros made in Davos last week about China’s “hard landing,” the Party mouthpiece ran an "op-ed" that carried the title “Declaring War On China’s Currency? Ha, Ha.” It’s not clear that George Soros intends to “declare war” on the RMB. However, he did say he was betting against Asian currencies and because his reputation precedes him when it comes to breaking central banks, the Chinese apparently wanted to get out ahead of what the PBoC assumes will be an attack on the yuan. “Given how people know Soros and what he did in 1992 and during the 1997-1998 Asian crisis, he’s too important to ignore, so China felt that they had to counter any negative comments,” Tommy Xie, a Singapore-based economist at Oversea-Chinese Banking told Bloomberg.“They have to reassure local savers and show them a willingness that the government is looking after them and their savings.” “Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt,” the People’s Daily continued, before calling the aging billionaire a “crocodile” and a “predator.” As we noted yesterday, “China won't be able to arrest Soros and beat a confession out of him like Beijing is fond of doing to others suspected of launching ‘malicious’ short attacks, but the brash commentary does indicate that Chinese authorities are becoming increasingly sensitive to suggestions that a steeper RMB devaluation is a foregone conclusion.” Of course a steeper RMB depreciation is a foregone conclusion because as we’ve outlined on several occasions, the days of China sitting idly by while the dollar peg saps the country’s export competitiveness are long gone and Beijing now seems determined not only to participate in the ongoing global currency wars, but in fact to win. But China is keen on orchestrating a controlled depreciation (despite the fact that getting it over with at once might be the better option if Beijing wants to limit capital flight) which means keeping hold of the narrative and using the captive Chinese media to fight back against those who, like the “crocodile” Soros, would seek to employ “malicious” tactics to spark a panic. Against this backdrop we get another hilarious “commentary” piece out of the Politburo on Wednesday, this time via Xinhua. The piece, presented in its entirety below, explains why Soros and the ubiquitous “short-sellers” “make claims that run counter to reality.” [...]"
Corbett Report: "HSBC Hires Kissinger to Help Them Flee The Country" [01/27/16] "HSBC is the world’s fourth largest bank by assets and a sanctions busting, money laundering bank for terrorists and drug dealers, so it should be no surprise that they have just hired unconvicted war criminal Henry Kissinger to help advise them on fleeing the UK. You see, HSBC isn’t happy with the current banking environment in the UK. After “suffering” through the outrageous wrist slap of its drug money laundering settlement (equivalent to five weeks of income for the bank), HSBC began a temper tantrum over the UK’s bank levy, a bank tax that was instituted in 2011. Accordingly, last summer the UK government started the phase out of the levy exactly as requested, but added a surcharge on bank profits. This is evidently too much for the banksters, who are now threatening to move their racket to Canada or maybe Hong Kong or somewhere else entirely. So it’s only logical for them to turn to Heinz Kissinger, a man who has run from investigators in France, Spain, Chile and Argentina to help advise them on how to flee the country. (Ig)Nobel Peace Prize winner Kissinger is notorious for the war crimes he committed during his tenure as Secretary of State and National Security Advisor under Nixon and Ford. During that time he participated in Operation Condor, drafted a plan for food control genocide, orchestrated the 1973 oil crisis, illegally bombed Cambodia, neo-colonized China and generally acted as a good minion for the New World Order he’s constantly pimping. After all, who else would better understand how to help the HSBC banksters escape the suggestion that they might face the tiniest of consequences for their crimes? Sadly for the people of the UK, HSBC’s threats to move may just be a bargaining strategy they’re using to wring yet more concessions out of the British government. They are expected to come to a decision early this year and have reportedly brought in other international advisers along with Kissinger to discuss the potential geopolitical ramifications of such a move. [...]" [...]"
Commentary: "The Making of the “Big Four” Banking Oligopoly in One Chart" [01/26/16] "The “Big Four” retail banks in the United States collectively hold 45% of all customer bank deposits for a total of $4.6 trillion. The fifth biggest retail bank, U.S. Bancorp, is nothing to sneeze at, either. It’s got 3,151 banking offices and employs 65,000 people. However, it still pales in comparison with the Big Four, holding only a mere $271 billion in deposits. Today’s visualization looks at consolidation in the banking industry over the course of two decades. Between 1990 and 2010, eventually 37 banks would become JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup. Of particular importance to note is the frequency of consolidation during the 2008 Financial Crisis, when the Big Four were able to gobble up weaker competitors that were overexposed to subprime mortgages. Washington Mutual, Bear Stearns, Countrywide Financial, Merrill Lynch, and Wachovia were all acquired during this time under great duress. The Big Four is not likely to be challenged anytime soon. In fact, the Federal Reserve has noted in a 2014 paper that the number of new bank charters has basically dropped to zero. [...]"
MSM: "Goldman Sachs Sends US Into Recession, Promptly Retracts Report’s Slide" [01/25/16] "Despite being “too big to fail”, America’s “most important bank” Goldman Sachs may have done so this week, at least for a few minutes, when it possibly tipped off a new economic recession. A slide in the “Markets do not ‘Take it Easy’ to start the year” report posted online showed the US in a recession according to Goldman’s Current Activity Indicator. “Although EM assets remain in the cross-hairs – and the outlook there remains tenuous in spots – growth concerns have impacted the market’s view of US and European growth as well, pushing our market-based measure of US growth risk to new post GFC lows (see Exhibit 8),” the report read. Shortly after the financial watchdog website Zero Hedge tweeted their response, Goldman Sachs posted an altered slide, moving the dark blue line from zero to closer to two. [...] So if Goldman Sachs changed the chart, there’s no recession, right? Well, that’s where we get into a gray area. Economist Paul Samuelson once said “the stock market has predicted nine out of the last five recessions”, according to the Washington Post, which asked “Is the stock market telling us we’re headed for a recession?” on Wednesday. Andrew Levin, a Dartmouth professor and former adviser to Federal Reserve Chair Janet Yellen, pointed out in this document posted Monday that the “jobs boom doesn't look like it will last” and “industrial production is falling as fast as it does when there's historically been a recession”, according to the Washington Post. Art Cashin, Director of Floor Operations at UBS, told CNBC Tuesday: "If corporations start to pull back and say 'I don't want to advance anything; I don't want to hire anybody,' we could slide into a recession."[...]
MSM: "The Warning" [01/25/16] [56:08] "A 2009 PBS Documentary revealing how Bill Clinton was influenced by the investment banking industry to create the conditions necessary for them to profit off the eventual 2008 financial collapse. [...]"
MSM: "Saudi Arabia's Secret Holdings Of U.S. Debt Are Suddenly A Big Deal" [01/23/16] "It’s a secret of the vast U.S. Treasury market, a holdover from an age of oil shortages and mighty petrodollars: Just how much of America’s debt does Saudi Arabia own? But now that question -- unanswered since the 1970s, under an unusual blackout by the U.S. Treasury Department -- has come to the fore as Saudi Arabia is pressured by plunging oil prices and costly wars in the Middle East. In the past year alone, Saudi Arabia burned through about $100 billion of foreign-exchange reserves to plug its biggest budget shortfall in a quarter-century. For the first time, it’s also considering selling a piece of its crown jewel -- state oil company Saudi Aramco. The signs of strain are prompting concern over Saudi Arabia’s outsize position in the world’s largest and most important bond market. [...] A big risk is that the kingdom is selling some of its Treasury holdings, believed to be among the largest in the world, to raise needed dollars. Or could it be buying, looking for a port in the latest financial storm? As a matter of policy, the Treasury has never disclosed the holdings of Saudi Arabia, long a key ally in the volatile Middle East, and instead groups it with 14 other mostly OPEC nations including Kuwait, the United Arab Emirates and Nigeria. For more than a hundred other countries, from China to the Vatican, the Treasury provides a detailed breakdown of how much U.S. debt each holds. “It’s mind-boggling they haven’t undone it,” said Edwin Truman, the former Treasury assistant secretary for international affairs during the late 1990s, and now a senior fellow at the Peterson Institute for International Economics in Washington. Because relations were rocky and the U.S. needed their oil, the Treasury “didn’t want to offend OPEC. It’s hard to justify this special treatment for OPEC at this point.[...]"
MSM: "How The Banks Are Tightening The Noose On U.S. Oil Firms" Ø Hedge [01/21/16] "Two weeks ago, we reported that even as U.S. lenders were professing to their investors that there is no risks with their energy exposure and that they are comfortably reserved for any potential losses, they were reducing their unfunded (and total) exposure to oil and gas exploration companies due to balance sheet, default and contagion concerns. We showed a list 25 deeply distressed companies, whose banks we found have quietly shrunk the borrowing base of their credit facilities anywhere from 6% in the case of Black Ridge Oil and Gas to a whopping 51% for soon to be insolvent New Source Energy Partners. Following up on this disturbing development, here is Markit with its take on how "Leverage is tightening the noose on US oil firms." [...] Evaporating credit lines are set to finally squeeze US energy firms as oil prices break through $30 a barrel and US banks sound the alarm on rising bad loans in the sector. [...] After the lifting of sanctions in Iran this week, expectations for increased oil output has put further pressure on oil prices with both Brent and West Texas Intermediate prices dropping to the lowest levels seen this century. In the US, embattled producers are finally being forced to consider ceasing production as banks reign in on credit lines for fear of rising bad debts.[...]"
Commentary: "Government Sachs Gets Golden Wrist Slap For Global Financial Crisis" James Corbett [01/20/16] "... In the midst of this beginning-of-the-end of the 8 year long QE re-leveraging heroin binge we have news that seems to put a bow on the 2008 crisis: Goldman Sachs has announced that it has reached a $5.1 billion settlement as its wrist slap for participating in the wholesale swindle that was the subprime mortgage meltdown. The settlement breaks down into $2.385 billion in civil monetary penalties, $875 million in cash payments and $1.8 billion in consumer relief. [...] Here’s the kicker: the settlement is the largest in the bank’s history, but still small potatoes compared to some of its cohorts in crime who have already reached their settlements, such as Bank of America ($16.6 billion) and JPMorgan Chase ($13 billion). For those who don’t remember the subprime mortgage meltdown and Goldman’s role in it (along with the other big banks), they intentionally blew up the housing bubble by creating Structured Investment Vehicles to keep mortgage backed securities and other risky investments off their main books. This allowed them to raise money on the commercial paper market at low interest rates and earn high interest rates by buying toxic subprime mortgage securities. Then they paid off the ratings agencies to AAA certify their toxic mortgage CDO garbage. Then (and here’s the psychopathic genius of it) knowing that it was all going to melt down sooner or later, they pawned the subprime-backed derivative garbage on their customers at the same time as they secretly bet against it. Internal emails released in subsequent investigations show they referred to their own CDOs as “shitty deals” and called their customers “muppets” for buying them. The end result? Goldman had its most profitable year to date in 2007 as the market started to turn with a staggering $17.6 billion profit. By 2009, in the depths of the crisis that they helped bring about and as the rest of the world faced total financial armageddon, they did even better, netting just shy of $20 billion profit.[...] So, just to recap: Goldman makes tens of billions by selling the very toxic assets they were secretly betting against and in the end they pay a $5 billion penalty. …Oh, and (needless to say) the Injustice Department practically fell over themselves to announce at the earliest possible opportunity that no one would even be prosecuted for this fraud (let alone go to jail). …Oh, and poor Goldman will make a slightly smaller profit this year as a result of this golden wrist slap, equivalent to one measly fiscal quarter of profit for the banking behemoth. All hail Government Sachs, surely a Vampire Squid if ever there was one. And now that their last engineered crisis has been finally covered up for good, it’s time to live through the next one. Happy 2016![...]"
Commentary: "US 'Cash Flow Negative' Energy Companies With $325 Billion In Debt Among Them" [01/20/16] "With the topic of distress among U.S. oil and gas exploration and production companies becoming more important with every passing day that oil not only continues to drop, but certainly fails to rebound to levels that allow US energy companies to return to a cash flow positive state, we would like to show just how much debt is at stake. To do that, drawing inspiration from a tweet by J Pierpont Morgan, we have conducted a quick CapIQ sort through all US energy companies - both public and private - that have at least $100 million in annual revenue, and whose EBITDA less CapEx was a negative number in the LTM period. To be sure, this gives listed companies the benefit of not only higher EBITDA in the early quarters when the drop of oil was not as severe, but also of oil price hedges. As such as the true negative cash flow going forward assuming no rebound in the price of oil for the foreseeable future will be far worse as the benefit of the base effect dissipates with every passing quarter and as oil price hedges, which have so far cushioned the oil price blow, are unwound. [...] None of these companies are bankrupt, yet. As a reminder, putting as many of these companies out of business, and thus slashing non-OPEC oil production (as OPEC forecasted in its latest bulletin earlier today), is the primary motive behind Saudi Arabia's relentless pumping spree." There is just one problem with the Saudi plan: even assuming all of these companies file Chapter 11, all that would happen is their debt would be wiped out, with the existing creditors getting the equity keys, and becoming the new owners of streamlined, debt-free corporations. This would means that the All In Cost Of Production would plunge as no debt payments would have to be satisfied with the free cash flow. Meanwhile, the entire existing E&P infrastructure would still be in place and ready to pump as before. This means that after the default and debt-for-equity deluge, US shale would be able to pump even more at far lower breakeven costs, forcing Saudi Arabia to overproduce for even longer ultimately shooting itself in the foot when its reserves run out!
Commentary: "The Citadel Is Breached: Congress Taps The Fed For Infrastructure Funding" [01/19/16] "For at least a decade, think tanks, commissions and other stakeholders have fought to get Congress to address the staggering backlog of maintenance, upkeep and improvements required to bring the nation’s infrastructure into the 21st century. Countries with less in the way of assets have overtaken the US in innovation and efficiency, while our dysfunctional Congress has battled endlessly over the fiscal cliff, tax reform, entitlement reform, and deficit reduction. Both houses and both political parties agree that something must be done, but they have been unable to agree on where to find the funds. Republicans aren’t willing to raise taxes on the rich, and Democrats aren’t willing to cut social services for the poor. In December 2015, however, a compromise was finally reached. On December 4, the last day the Department of Transportation was authorized to cut checks for highway and transit projects, President Obama signed a 1,300-page $305- billion transportation infrastructure bill that renewed existing highway and transit programs. According to America’s civil engineers, the sum was not nearly enough for all the work that needs to be done. But the bill was nevertheless considered a landmark achievement, because Congress has not been able to agree on how to fund a long-term highway and transit bill since 2005. That was one of its landmark achievements. Less publicized was where Congress would get the money: largely from the Federal Reserve and Wall Street megabanks. [...] According to Zachary Warmbrodt, writing in Politico in November, the Fed registered “strong concerns about using the resources of the Federal Reserve to finance fiscal spending.” But former Federal Reserve Chairman Ben Bernanke, who is now at the Brookings Institute, acknowledged in a blog post that the Fed could operate with little or no capital. His objection was that it is “not good optics or good precedent” to raid an independent central bank. It doesn’t look good. Rep. Peter DeFazio (D-Oregon), ranking member on the House Transportation Committee, retorted, “For the Federal Reserve to be saying this impinges upon their integrity, etc., etc. — you know, it’s absurd. This is a body that creates money out of nothing.” DeFazio also said, “[I]f the Fed can bail out the banks and give them preferred interest rates, they can do something for the greater economy and for average Americans. So it was their time to help out a little bit.”[...] It may be their time indeed. For over a century, populists and money reformers have petitioned Congress to solve its funding problems by exercising the sovereign power of government to issue money directly, through either the Federal Reserve or the Treasury."
MSM: "China Banks Seem To Be Doing Whatever They Can To Avoid Paying Anyone In Dollars" [01/18/16] "... So what has been going on lately? Well, if there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars. We are hearing the following: 1. Chinese investors that have secured all necessary approvals to invest in American companies are not being allowed to actually make that investment. I mentioned this to a China attorney friend who says he has been hearing the same thing. Never heard this one until this month. 2. Chinese citizens who are supposed to be allowed to send up to $50,000 a year out of China, pretty much no questions asked, are not getting that money sent. I feel like every realtor in the United States has called us on this one. The Wall Street Journal wrote on this yesterday. Never heard this one until this month. 3. Money will not be sent to certain countries deemed at high risk for fake transactions unless there is conclusive proof that the transaction is real — in other words a lot more proof than required months ago. We heard this one last week regarding transactions with Indonesia, from a client with a subsidiary there. Never heard this one until this month. 4. Money will not be sent for certain types of transactions, especially services, which are often used to disguise moving money out of China illegally. This is not exactly new, but it appears China is cracking down on this. For what is ordinarily necessary to get money out of China for a services transaction, check out Want to Get Paid by a Chinese Company? Do These Three Things. 5. Get this one: Money will not be sent to any company on a services transaction unless that company can show that it does not have any Chinese owners. The alleged purpose behind this “rule” is again to prevent the sort of transactions ordinarily used to illegally move money out of China. Never heard this one until this month. [...]"
Commentary: "Israeli And AIPAC Big Lies About Iran’s Intended Use of Unfrozen Assets" [01/18/16] "AIPAC devotes a section on its web site to malicious Big Lies about Iran intending use of its unfrozen assets to spread its nonexistent “malign global influence,” once international sanctions are lifted this weekend as expected. It discusses dozens of countries on six continents, making fraudulent claims - ignoring Israel’s scourge, complicit with Washington and other rogue partners.[...]"
MSM: "China-Led AIIB Development Bank Officially Launched, Elects First President" [01/17/16] "The Board of Governors of the Asian Infrastructure Investment Bank (AIIB) has held its inaugural meeting, declaring the bank open for business and electing its first president, Jin Liqun. Chinese president Xi Jinping, as well as Prime Minister Li Keqiang, delivered opening addresses at the official ceremony, which was also attended by high officials from other multilateral banks. “Asia’s financing needs for basic infrastructure are absolutely enormous,” President Xi said, adding that the bank is going to invest in high-quality, low-cost projects. Premier Li Keqiang said that Asia needs investment in infrastructure and connectivity to remain the most dynamic region for global growth. One of the main decisions made on Saturday was the selection of AIIB’s president. Jin Liqun, who has served as AIIB’s President-designate since September 1, 2015, was elected to that position. “AIIB is now ready to join the family of multilateral financial institutions, investing in sustainable infrastructure for the improvement of lives across Asia,” Liqun said in his first statement as president. The AIIB was established as a new multilateral financial institution aimed at providing “financial support for infrastructure development and regional connectivity in Asia.” It was founded in October, 2014, and will have its headquarters in Beijing. Its goals are also to boost economic development in the region, create wealth, prove infrastructure, and promote regional cooperation and partnership.[...] Luxembourg Finance Minister Pierre Gramegna sees the establishment of the bank as “further proof of the rebalancing of the world economy.” The value of AIIB’s authorized capital amounts to $100 billion, with almost $30 billion invested by China. The bank, which unites 57 member states, expects to lend $10 billion to $15 billion a year for the first five years of its operations, beginning in the second quarter of 2016. One more development bank with significant Chinese participation is the New Development Bank (NDB), also known as BRICS Development Bank, which was established last year. Russian officials believe that, despite the fact that the banks share similar goals, they will complement each other rather than compete.[...]"
MSM: "Goldman Sachs Pays $5 billion To Settle Investigation Of Role In Selling Subpar Mortgages" [01/16/16] "Goldman Sachs said on Thursday it will pay roughly $5 billion to settle federal and state probes of its role in the financial crisis. The company is accused of selling shoddy mortgages in the years leading up to the housing bubble and subsequent financial crisis. Coming nearly eight years after the crisis, the settlement is by far the largest the investment bank has reached related to its role in the meltdown. But the payment is dwarfed by those made by some of its Wall Street counterparts. Goldman will pay $2.39 billion in civil monetary penalties, $875 million in cash payments and provide $1.8 billion in consumer relief in the form of mortgage forgiveness and refinancing. The Mortgage Forgiveness Act passed in 2007 by George W. Bush offers relief to homeowners who would have owed taxes on debt after facing foreclosure. The U.S. Department of Justice, the attorneys general of Illinois and New York, and other regulators who are part of the settlement have not officially signed off on the deal, which could take some time. The government agencies are part of a joint state-federal task force created by President Barack Obama after the 2008 financial crisis that has extracted some of the largest settlements out of Wall Street. Goldman, like other Wall Street banks, has been under investigation for allegedly misleading investors on the safety of the securities they created by bundling and selling mortgages. [...]"
Commentary: "U.S. Retail Spending Growth Slows Down: Americans Possibly Have Enough Stuff" [01/16/16] "While our economy is supposedly expanding and consumers have more money in our pockets thanks to lower gas prices, new data from the U.S. Census Bureau shows that that we’re not spending that money in retail stores, online or in real life. If we’re not out hitting the malls, where’s all that money going? The country’s economy is so massive that tiny shifts make a huge difference. Retail and food spending in December of 2015 added up to $448.1 billion, or the equivalent of just under 300 Powerball jackpots. While December sales are up slightly (2.2%) from December 2014, Americans spent slightly less than in November of 2015. In news that will not surprise any readers of this site, “nonstore retail,” which includes e-commerce, had the largest increase at 7.1%. Other surveys have showed that Americans aren’t spending all of the money we’re saving due to lower fuel prices: credit card data from Chase showed that we’re spending more on restaurant meals and on services, not necessarily on stuff. In general, our spending (adjusted for inflation) has been increasing every year since the recession officially ended in 2009. The small expansion in 2015 signals that the economy is doing well, but that growth has slowed down. [...]" Related: "Monthly Advance Estimates Of U.S. Retail And Food Services Sales" PDF
Commentary: "Ghost Ships’ Tell A Frightening Story For Global Trade" [01/15/16] "Each analyst has their favourite proxy measures, but one that leapt into the headlines during the global financial crisis was the Baltic Dry Index which tracks bulk dry cargo around the world – and which this month has been plumbing new lows. When trade is brisk, demand soars and so does the cost of moving bulk commodities around the world. The current plunge in the Baltic Dry is bad news for Australia, as our major exports are captured by the index, as is China’s stalling demand for those same commodities. However, for the world more generally the BDI is not the only measure of activity. Sensational headlines about shipping ‘grinding to halt’ have appeared in recent days, but are not accurate. For a more balanced view, there’s the Harper-Petersen index, which tracks container freight – capturing everything from industrial equipment to fridges, bicycles and iPads. When this crashes, we know that current economic activity has slumped – whereas the BDI tracks commodities that feed into future activity, the Harper-Petersen index is all about shifting product right now. So how is it looking? Not quite as bad as the BDI, which has fallen below the levels seen after the Lehman Bros event. [...] Putting the two measures of activity side by side, it’s likely that the leading index (the BDI) will be followed down by the current index. That is, trade will get thinner before it recovers. The American economy may not be in decline, but China’s economic woes, which in turn are dragging on European markets, mean just about everywhere else is – for now. The New Daily will be on the lookout for positive indicators through 2016 – heaven knows we need them – but these two shipping-based indicators are telling a frightening story of their own, with or without the wild gyrations of global stock markets.[...]" Related: Flashback: "Dry Bulk Will Get Worse Before It Gets Better, Says Analyst" Nov 2015 "Allied Shipbroking Inc (Allied) says in its latest analysis that the dry bulk market is set to get worse before it sees real improvement, adding that low bunker prices have not helped the sector's recovery. "It seems as though trade is at a much more dire state than what had been expected," said George Lazaridis, Allied's Head of Market Research & Asset Valuations. [...] Allied says that one of the major issues driving the market's current condition is the "inward focus" of many governments import and export activities, particularly with steel. The company notes that while trade barriers are "falling left, right, and centre," oversupply paired with slowing economic growth has likewise seen the slowing of trade deals as governments look for ways to boost their own suffering industries. Overall, Lazardis says that even if the BDI continues to see new lows into the coming year's first quarter, forecasts seem to support continued low average freight rates in 2016. "As asset prices continue to tumble to levels never before seen, it will be the patient opportunists that will be able to squeeze the most out of this market trough once more," concluded Lazaridis. [...]" "Dry-Bulkageddon" "Providing credit to dry bulk so they can buy bunkers is just getting incredibly difficult now," Adrian Tolson, Senior Partner at 20|20 Marine Energy, told Ship & Bunker today." | Track the status of this phenomenon at: "Ship & Bunker" | See below: "Baltic Dry Index Crashes As World Ocean Commerce Comes To A Halt" Ø Hedge [01/12/16]
Commentary: "Demise Of Dollar Hegemony: Russia Breaks Wall St's Oil-Price Monopoly" F. William Engdahl [01/14/16] "Russia has just taken significant steps that will break the present Wall Street oil price monopoly, at least for a huge part of the world oil market. The move is part of a longer-term strategy of decoupling Russia’s economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy. [...] Today, prices for Russian oil exports are set according to the Brent price in as traded London and New York. With the launch of Russia’s benchmark trading, that is due to change, likely very dramatically. The new contract for Russian crude in rubles, not dollars, will trade on the St. Petersburg International Mercantile Exchange (SPIMEX). The Brent benchmark contract are used presently to price not only Russian crude oil. It’s used to set the price for over two-thirds of all internationally traded oil. The problem is that the North Sea production of the Brent blend is declining to the point today only 1 million barrels Brent blend production sets the price for 67% of all international oil traded. The Russian ruble contract could make a major dent in the demand for oil dollars once it is accepted. Russia is the world’s largest oil producer, so creation of a Russian oil benchmark independent from the dollar is significant, to put it mildly. In 2013 Russia produced 10.5 million barrels per day, slightly more than Saudi Arabia. Because natural gas is mainly used in Russia, fully 75% of their oil can be exported. Europe is by far Russia’s main oil customer, buying 3.5 million barrels a day or 80% of total Russian oil exports. The Urals Blend, a mixture of Russian oil varieties, is Russia’s main exported oil grade. The main European customers are Germany, the Netherlands and Poland. To put Russia’s benchmark move into perspective, the other large suppliers of crude oil to Europe – Saudi Arabia (890,000 bpd), Nigeria (810,000 bpd), Kazakhstan (580,000 bpd) and Libya (560,000 bpd) – lag far behind Russia.[...] The Russian move to price in rubles its large oil exports to world markets, especially Western Europe, and increasingly to China and Asia via the ESPO pipeline and other routes, on the new Russian oil benchmark in the St. Petersburg International Mercantile Exchange is by no means the only move to lessen dependence of countries on the dollar for oil. Sometime early next year China, the world’s second-largest oil importer, plans to launch its own oil benchmark contract. Like the Russian, China’s benchmark will be denominated not in dollars but in Chinese Yuan. It will be traded on the Shanghai International Energy Exchange. Step-by-step, Russia, China and other emerging economies are taking measures to lessen their dependency on the US dollar, to “de-dollarize.” Oil is the world’s largest traded commodity and it is almost entirely priced in dollars. Were that to end, the ability of the US military industrial complex to wage wars without end would be in deep trouble. Perhaps that would open some doors to more peaceful ideas such as spending US taxpayer dollars on rebuilding the horrendous deterioration of basic USA economic infrastructure. The American Society of Civil Engineers in 2013 estimated $3.6 trillion of basic infrastructure investment is needed in the United States over the next five years. They report that one out of every 9 bridges in America, more than 70,000 across the country, are deficient. Almost one-third of the major roads in the US are in poor condition. Only 2 of 14 major ports on the eastern seaboard will be able to accommodate the super-sized cargo ships that will soon be coming through the newly expanded Panama Canal. There are more than 14,000 miles of high-speed rail operating around the world, but none in the United States.[...]"
Commentary: "Derailed? What Rail Traffic Tells Us About The U.S. Economy" Ø Hedge [01/13/16] "Raw materials and goods need to be transported regardless of how modern or sophisticated an economy is. Every week the Association of American Railways (“AAR”) posts a free report on rail volumes transported across North America by major category. This provides some decent clues on the condition of the US economy, almost in real time. Let’s see what the latest report covering virtually all of 2015 is telling us. The rail intermodal traffic category registers the long-haul movement of shipping containers and truck trailers by rail whenever combined with (a much shorter) truck movement at one or both ends. In addition to its large relative size – accounting for 22% of 2014 revenue for major US railroads, more than any other single commodity group – intermodal is quite an important category since it covers a broad range of goods that Americans use every day, from computers to frozen chickens. [...] We can see that falling crude oil prices have finally impacted volumes transported by rail, with the latter part of the year showing a steep decline versus the top of the range (set in 2014). This reversal in trend is clearly not the friend of US oil & gas workers and their communities. [...] Let’s move on to forest products, which includes lumber, a major component of house construction in the US. After a very robust start of the year, volumes have fallen almost off the chart towards the end, breaching the low end of the range in the last week of December. This trend is clearly not a good omen for US employment and economic vitality in general given the importance of the housing sector.[...] The motor vehicles and parts category includes all kinds of vehicles (used and new), passenger car and bus bodies, parts and accessories and other related equipment. The series has been very strong all year, setting new highs in this cycle on several occasions. Not much detail is provided so we can’t really say if these are predominantly new cars being built or used ones being sold, for instance. As such, this tells us more about the consumer than the underlying industrial activity. [...] What to make of all this? Our analysis of rail volumes provides a mixed picture of the US economy at this point: oil & gas and mining-related sectors are taking a real beating, some consumer sectors seem to be holding up and there are signs of weakness in the housing sector. 2016 should witness some type of a resolution here.[...]" Related: "Bank of America: Rail Traffic Is Saying Something Worrying About the U.S. Economy" "Railroad cargo in the U.S. dropped the most in six years in 2015, and things aren't looking good for the new year. "We believe rail data may be signaling a warning for the broader economy," the recent note from Bank of America says. "Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009." BofA analysts led by Ken Hoexter look at the past 30 years to see what this type of steep decline usually means for the U.S. economy. What they found wasn't particularly encouraging: All such drops in rail carloads preceded, or were accompanied by, an economic slowdown.[...]"|"Sorry Warren Buffett: Things Just Went From Bad To Worse For U.S. Railroads" "... From a peak in January 2015 to last October, movements of crude by rail declined more than a fifth, the latest data from the US energy department show. Genscape, a research group, said rail deliveries to US Atlantic coast terminals continued to drop to the end of the year and the spot market for crude delivered by rail from North Dakota’s Bakken region “is at a near standstill”. Once seen as a 19th century relic, moving crude oil by train re-emerged as a hot technology five years ago as surging output from long-neglected shale oil regions overwhelmed pipeline capacity. Investors from oil companies to Wall Street banks clamoured for tank cars, while fiery accidents prompted federal regulators to impose more stringent standards on rolling stock. And Buffett was there to provide the needed cars, for a generous fee of course, while doing everything in his power (it's a lot) to delay implementations of stringent, or even any standards, on "rolling stock."[...]"
Commentary: "U.K. Industrial Output Plunges Most In Almost Three Years" [01/13/16] "U.K. industrial production fell the most in almost three years in November as warmer-than-usual weather reduced energy demand. Output dropped 0.7 percent from the previous month, with electricity, gas and steam dropping 2.1 percent, the Office for National Statistics said in London on Tuesday. Economists had forecast no growth on the month. [...] According to manufacturers’ organization EEF, companies are feeling increasingly pressured by issues such as the strength of the pound. It said on Monday that only 56 percent of manufacturers say the U.K. is a competitive location, compared with 70 percent a year ago. Bank of England officials will probably keep their key interest rate at a record-low 0.5 percent this week. Minutes of the meeting released Thursday may reveal their thinking on the fall in oil prices and worries about China’s economy.[...]"
Commentary: "Loss Of Faith" Escalates As Markets Enter Reality "Discovery Phase" Ø Hedge [01/12/16] "It looks like 2016 will be the year that humanfolk learn that the stuff they value was not worth as much as they thought it was. It will be a harrowing process because a great many humans are abandoning ownership of things that are rapidly losing value - e.g. stocks on the Shanghai exchange - and stuffing whatever “money” they can recover into the US dollar, the assets and usufructs of which are also going through a very painful reality value adjustment. Of course this calls into question foremost exactly what money is, and the answer is: basically a narrative construct. In other words, a story explaining why we behave the way we do around certain things. Some parts of the story have a closer relationship with reality than other parts. The part about the US dollar has a rather weak connection. [...] When various authorities - the BLS, the Federal Reserve, The New York Times - state that the US economy is “strong,” we can translate that to mean giant companies listed on the stock exchanges are able to put up a Potemkin façade of soundness. [...] It’s well-established by now that the “brick-and-mortar” retail operations are sucking major wind. Meaning, fewer people are driving to the Target store and venues like it to buy stuff. Supposedly, they are buying stuff at Amazon instead. What interests me in that story is the idea that every single object purchased these days has a UPS journey attached to it. Of course, people also drive to the Target store, though I doubt they leave the place with just one thing. That dynamic ought to call into question just how people are living in the USA, and the answer to that is: spread out all over the place in a suburban sprawl living arrangement that has poor prospects for being reformed or mitigated. Either you drive yourself to the Target store for a slow-cooker and a few other things, or Amazon has to send the brown truck to each and every house. Either way includes an insane amount of transport, and sooner or later both the brick-and-mortar chain store model and the Amazon home delivery model will fail. Unfortunately, it is difficult to imagine a resolution of that without also imagining a transition away from suburbia. The loss of faith in the suburban disposition of things will probably represent the greatest loss of perceived wealth in human history — which is how it should be, since it also happened to be the greatest misallocation of resources in human history. It seemed like a good idea at the time, and now its time has passed.[...]" Related: "Global Corporate Debt is Coming Unglued" |Perspectives: "Federal Reserve’s “Net Worth” Collapses 33% In Two Weeks"
Commentary: "China Discovers 470 Ton Gold Mine, Worth Over $16.4 Billion, 2000 Meters Undersea" [01/12/16] "Scientists at the Shandong Provincial No. 3 Institute of Geological and Mineral Survey have located a mega-sized gold deposit, 2000 meters under the north coastal water near Sanshan Island off Laizhou city in the Shandong province, with at least 470 tons of reserves. The new-found deposit, the largest undersea gold mine found in China, is currently valued at over $16.4 billion and is estimated to hold at least 1,500 tons of gold. According to Ding Zhengjiang, the deputy director of the Shandong Provincial No. 3 Institute, the gold deposit is part of a crablike or belt that lies deep at the sea bottom. The marine ground investigation took three years, and involved over 120 kilometers of drilling, with 67 sea drilling platforms and about 1,000 drillers and geologists. [...] However, experts now face the daunting challenge of accessing the mine, which is currently out of reach for excavators. Despite being the world’s leading producer of gold, China lacks the technological ability to reach potential operations 1000 meters below the Earth’s surface. In 2012, the first drilling platform at sea took 24 hours to be constructed, and now it took 8 hours with more advanced offshore construction technology. More than 2,000 tons of gold deposits have been found in Lanzhou, which has the largest gold reserves in the country. In 2014, China produced 452 tons of gold. The China Gold Association recently disclosed that China produced 357 tons of gold during January-September 2015, an increase of 1.48% from a year earlier. By the end of September, China’s gold reserve has reached 1,700 tons, up from the 1,660 tons in June.[...]"
Commentary: "Dozens Of Chinese Billionaires Are Mysteriously Disappearing" [01/12/16] "Amid stock market panic in China, many of the country’s most prominent billionaires are disappearing without a trace.[...]"
Commentary: "Baltic Dry Index Crashes As World Ocean Commerce Comes To A Halt" Ø Hedge [01/12/16] "The continued collapse of The Baltic Dry Index remains ignored by most - besides we still have Netflix, right? But, as Dollar Vigilante's Jeff Berwick details, it appears the worldwide 'real' economy has ground to a halt! Last week, I received news from a contact who is friends with one of the biggest billionaire shipping families in the world. He told me they had no ships at sea right now, because operating them meant running at a loss. This weekend, reports are circulating saying much the same thing: The North Atlantic has little or no cargo ships traveling in its waters. Instead, they are anchored. Unmoving. Empty. You can see one such report here. According to it, "Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving." This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped. We checked VesselFinder.com and it appears to show no ships in transit anywhere in the world. We aren’t experts on shipping, however, so if you have a better site or source to track this apparent phenomenon, please let us know. We also checked MarineTraffic.com, and it seemed to show the same thing. Not a ship in transit. [...] If true, this would be catastrophic for world trade. Even if it’s not true, shipping is still nearly dead in the water according to other indices. The Baltic Dry Index, (See Wiki) an assessment of the price of moving major raw materials by sea, was already at record all-time lows a month ago... and in the last month it has dropped even more, especially in the last week. Factories aren’t buying and retailers aren’t stocking. The ratio of inventory to sales in the US is an indicator of this. The last time that ratio was this high was during the “great recession” in 2008.[...] The storm has been building for some time, actually. Not so long ago, there was a spate of reports that the world’s automobile manufacturers were in trouble because cars were not selling and shipments were backing up around the world. ZeroHedge reported on it this way: "In the past several years, one of the topics covered in detail on these pages has been the surge in such gimmicks designed to disguise lack of demand and end customer sales, used extensively by US automotive manufacturers, better known as “channel stuffing”, of which General Motors is particularly guilty and whose inventory at dealer lots just hit a new record high." Related: "Is The Auto Loan Bubble Ready To Pop?" [...] Interruptions in goods and services, most critically food, almost happened in 2008 during the Great Financial Crisis. For three days worldwide shipping was stranded due to shipping companies not knowing whether or not the receiver’s bank credit was good. That crisis was staved off due to a massive amount of money printing. It was a temporary stay of execution, like bailing out the Titanic with coffee cups, however, and one that may reach much larger proportions in 2016.[...]" Note: Automotive industries came out with 'sub-prime'-style auto loans ... now it's impossible to reconcile, along with the Student Tuition Loans, etc
Commentary: "Feds Indict First Bank That Got TARP Bail-Out Money" [01/11/16] "A federal grand jury in Wilmington has indicted the former Wilmington Trust Corp. on criminal charges, alleging the bank illegally hid hundreds of millions of dollars in land-development loans that were so delinquent that one banker called them "credit turds." Although a number of larger U.S. banks were forced to sell themselves at bargain-basement prices as property values collapsed in the recession, Wilmington Trust is the only bank bailed out by the Troubled Asset Relief Program to face criminal charges, according to Charles Oberly, U.S. attorney for Wilmington. M&T Bank Corp., the Buffalo lender that bought Wilmington Trust as it faced financial collapse in 2010, has hired lawyers in New York and Washington to defend itself. Bank spokesman Philip Hosmer and Christopher Gunther, an attorney at Skadden, Arps who represents M&T, declined to comment. Oberly had previously charged the bank's former chief financial officer, Robert V.A. Harra Jr., and three other bank executives with signing off on fraudulent regulatory reports that underreported delinquent loans. The bankers have denied wrongdoing and are contesting those criminal charges, which were expanded in a Superseding Indictment that added Wilmington Trust as a defendant. [...]"
MSM: "Wolves Of Wall Street Lose $194 Billion In First Week Of 2016" [01/10/16] "The top 400 richest people in the world, according to the billionaires index of Bloomberg, have lost about $194 billion during the first week of trading of 2016. The website Bloomberg Business notes that businesses were losing revenue due to weak economic statistics of China, falling oil prices and the largest collapse of the U.S. stock market. On the long time leader list, one of the founders of Microsoft , Bill Gates, lost $4.5 billion (minus 5.4%), and the second largest loser, the founder of Inditex (a major chain of clothing stores, including the brands Zara, Massimo Dutti) Amancio Ortega has lost $3.4 billion (minus 4.7 per cent). The value of Mexican Carlos Slim, who owns the largest telecommunications networks, decreased by 10.8%. "According to the index, the billionaires in their amounts lost accounted for 4.9% of the total state members in the list, and they are doing better than global equity markets, with the MSCI ACWI index showing the decline in the global securities markets by 6.2% over the week" — the newspaper notes. [...]" Related: "Charts Say: "US Stocks Are In Riskiest Position In Seven Years" "After suffering the worst start to a new year in history, the U.S. stock market has entered correction territory which is defined by a drop of 10% from its old high. The charts pretty much speak for themselves. All three major stock indexes fell to three month lows in heavy trading.[...]" |"The US Economy Is Dead In The Water" "Here’s a newsflash that CNBC didn’t mention. According to the BLS, the US economy generated a miniscule 11,000 jobs in the month of December. Yet notwithstanding the fact that almost nobody works outside any more, the BLS fiction writers added 281,000 to their headline number to cover the “seasonal adjustment.” This is done on the apparent truism that December is generally colder than November and that workers get holiday vacations. [...]"
Commentary: "Henry Kissinger Partners With HSBC International Bank" [01/10/16] "The notorious Henry Kissinger and equally infamous international bank HSBC have reportedly partnered together to finalize the location of the new headquarters for Europe’s largest bank. SkyNews reports that board members of HSBC have met with former US Secretary of State Henry Kissinger to “discuss the geopolitical implications of the ongoing review of the bank’s domicile.” SkyNews writes: Sources said that Mr Kissinger, who has a role with JP Morgan, the Wall Street giant, as well as his own consulting firm, had been asked to provide advice on a number of options being considered by HSBC directors. Since April of 2015 HSBC has been considering moving its headquarters from London to several possible locations in the United States, Canada, and China. The international bank is attempting to escape taxes and regulations in the UK and is also still facing penalties from authorities for attempting to manipulate foreign exchange markets. [...] HSBC has not publicly commented on the SkyNews report but if the report is accurate, this partnership, whether it’s simply related to HSBC’s potential move, cannot be good for lovers of freedom and justice. Here’s a little background on why you should not support Henry Kissinger or HSBC.[...]"
Commentary: "US Factory Orders Deep In Recession" Ø Hedge [01/07/16] "US factory orders have never dropped this far for so long without the US economy overall being in recession. November's 4.2% YoY drop is the 13th consecutive monthly drop. Revistions to durable goods data shows a 1% drop in new orders ex-defense in November after rising 1.4% in October.. and as a reminder, this data was buoyed by a 46.9% surge in defense aircraft and parts orders to all-time highs. Traders better hope for more war, or the reality of the economy will peak out from behind the military-industrial complex veil. This was the highest level of defense spending since 9/11.[...]" Related: "Manufacturing Leads, Services Follow: "Pace Of Hiring" Slows" "As goes US manufacturing, so goes US services. In a narrative-crushing print, US Services PMI dropped to 54.3 - the lowest since January 2015. Output and New business growth slumped to 11-month lows, optimism dropped, and input cost inflation continued to moderate as "suggests the pace of hiring has slowed since earlier in the year as businesses have become more cautious. It would appear the "yeah but The Services Economy will save us" meme just collapsed - so what next? [...]"
Illustration: "Timeline: How the Global Economy Played Out in 2015" [01/06/16] "Many people start a new year with renewed optimism. However, the reality of each new year is not so detached from the previous. [...]" Note: Very good.
MSM: "Swiss To Hold Referendum On Whether To Ban Commercial Banks From Creating Money" [01/05/16] "Iceland has gained the admiration of populists in recent years by doing that which no other nation in the world seems to be willing or capable of doing: prosecuting criminal bankers for engineering financial collapse for profit. Their effective revolt against the banking class, who drove the tiny nation into economic crisis in 2008, is the brightest example yet that the world does not have to be indebted in perpetuity to an austere and criminal wealthy elite. In 2015, 26 Icelandic bankers were sentenced to prison and the government ordered a bank sale to benefit the citizenry. Inspired by Iceland’s progress, activists in Switzerland are now making an important stand against the banking cartels and have successfully petitioned to bring an initiative to public referendum that would attack the private banks where it matters most: their power to lend money they don’t actually have, and to create money out of thin air. [...] According to a story in the UK Telegraph, “Switzerland will hold a referendum to decide whether to ban commercial banks from creating money. The Swiss federal government confirmed on Thursday that it would hold a plebiscite, after more than 110,000 people signed a petition calling for the central bank to be given sole power to create money in the financial system. The campaign – led by the Swiss Sovereign Money movement and known as the Vollgeld initiative – is designed to limit financial speculation by requiring private banks to hold 100pc reserves against their deposits.” [...] Switzerland is in a key position to play a revolutionary role in changing how global banking functions. In addition to being the world’s safest harbor for storing wealth, it is also home to the Bank for International Settlements (BIS), a shadowy private company owned by many of the world’s central banks, and acting as a lender to the central banks. The BIS is the very heart of global reserve banking, the policy that enables banks to lend money that does not actually exist in their bank deposits, but is instead literally created electronically from nothing whenever a bank extends a line of credit. Reserve banking is the policy that guarantees insurmountable debt as the outcome of all financial transactions. The Sovereign Money initiative in Switzerland aims to curb financial speculation, which is the intended and inevitable result of reserve banking, the tool that makes financial adventurism possible by supplying the banks with endless quantities of fiat money. Limiting a bank’s ability to produce money from nothing would be a direct blow to the roots of the banking cartel, and would cripple their ability to manipulate the world economy.[...] In Switzerland, 90% of all money in circulation is electronic, and for this, The National Bank of Switzerland has become the direct target of the Sovereign Money Campaign. Swiss law has in the past required banks to back all currency creation with collateral assets like physical silver or gold, however in recent decades the financial climate has changed, and, “due to the emergence of electronic payment transactions, banks have regained the opportunity to create their own money,” the grass-roots campaign said in a public statement regarding the intentions of the referendum, “banks won’t be able to create money for themselves any more, they’ll only be able to lend money that they have from savers or other banks.” This is an interesting twist in the human saga of man vs. banks, and while it remains to be seen if the referendum passes or not, it must be pointed out that it does have its own problems, articulated by Sam Gerrans: [...]"
Commentary: "Bank of America Explains How Central Banks Rigged, Manipulated The Market" Ø Hedge [01/04/16] "... Essentially central banks, by unfairly inflating asset prices have compressed risk like a spring to unfairly tight levels. Unfortunately, the market is aware the price of risk is not correct, but they can’t fight it, and everyone is forced to crowd into the same trade. By manipulating markets they have also reduced investors’ inherent conviction by rendering fundamentals less relevant." - Bank of America [...]"
Commentary: "Municipal Bond Risk Becoming More Important, Especially For Under-Funded State Plans" Ø Hedge [01/04/16] "As Wilbur Ross so eloquently noted, for Puerto Rico "it's the end of the beginning... and the beginning of the end," as he explained "Puerto Rico is the US version of Greece." However, as JPMorgan explains, for some states the pain is really just beginning as Municipal bond risk will only become more important over time, as assets of some severely underfunded plans are gradually depleted. [...] The direct indebtedness of US states (excluding revenue bonds) is $500 billion. However, bonds are just one part of the picture: states have another trillion in future obligations related to pension and retiree healthcare. In the summer of 2014, we conducted a deep-dive analysis of US states, incorporating bonds, pension obligations and retiree healthcare obligations. After reviewing over 300 Comprehensive Annual Financial Reports from different states, we pulled together an assessment of each state’s total debt service relative to its tax collections, incorporating the need to pay down underfunded pension and retiree healthcare obligations. While there are five states with significant challenges (Illinois, Connecticut, Hawaii, New Jersey, and Kentucky) , the majority of states have debt service-to-revenue ratios that are more manageable. [...]"
Commentary: "Hedge Funds Keep Losing (And Closing) - Why It Matters" Ø Hedge [01/04/16] "Hedge funds, generally the most aggressive species of money manager, do a lot of “black box” trading in which bets are placed on previously-identified patterns and relationships on the assumption that those patterns will repeat in the future. But with governments randomly buying stocks and bonds and bailing out/subsidizing everything is sight, old relationships are distorted and strategies that worked in the past begin to fail, as do the money managers who rely on them. [...] Why should regular people care about the travails of the leveraged speculating community? Because these guys are generally considered to be the finance world’s best and brightest, and if they can’t figure out what’s going on, no one can. And if no one can, then risky assets are no longer worth the attendant stress. In response, a system that had previously embraced leverage and “alternative” asset classes will go risk-off in a heartbeat, and all those richly-priced growth stocks and trophy buildings and corporate bonds will find air pockets under their prices. And since pretty much everything else now depends on high asset prices, things will get ugly in the real world.[...]"
Concepts and Practices: "I Was Wrong: Big Banks Actually Were Exactly Like Counterfeiters" The Intercept [01/03/16] "In a recent post about the new movie The Big Short, I argued that it’s not actually necessary to decipher the abstruse jargon of the 2008 financial crisis — i.e., credit default swaps, mezzanine tranches, synthetic collateralized debt obligations, etc. — in order to understand what happened. What the big banks did during the housing bubble of the mid-2000s was in essence straightforward counterfeiting. The difference between what they did and regular counterfeiting was simply the kind of fake paper; regular counterfeiters print fake, valueless cash, while the banks were printing fake, valueless bonds. [...] If in 2005 a bank packaged worthless mortgages together into a bond with a face value of, say, $100 million, it would generally collect fees of about 1.5 percent, or $1.5 million. The $100 million face value wasn’t real, but the fees definitely were. What I didn’t understand, and commenter Larry Headlund pointed out, is that counterfeiting cash actually does work the same way. That is, counterfeiters would not print up $100 million in cash and then spend it all themselves. Instead, they sell their fake cash to others for a percentage of the face value. Ben Tarnoff explains the process in his book Moneymakers: The Wicked Lives and Surprising Adventures of Three Notorious Counterfeiters: "Counterfeiting cash in large quantities posed a problem. Spending it was risky, particularly among people who had reason to doubt you earned it honestly. The solution was to let others pass it for you either by selling them the counterfeits in batches or … lending the notes on consignment. At the top of the counterfeiting scheme was the engraver … Next came the printer … at the bottom were the passers, who exchanged the fake bills for real money, thus generating the profit that fueled the venture.[...]"
Concepts and Practices: "Keynesian vs. Austrian Economics - The Infographic" [01/02/16] "There has been an unsettled debate among economists for a century now of whether government intervention is beneficial to an economy. The heart of this debate lies between Keynesian and Austrian economists (though there are other schools as well). In order to get a full understanding of the two schools of economic thought, we offer the following via The Austrian Insider. [...]" Note: Good.
Commentary: "Will 2016 Be the End of the Current Skyscraper Boom?" [01/02/16] "With more financing in place, the world’s tallest skyscraper is moving forward. Recent media reports indicate that the final segment of financing has been obtained for the $1.2 billion Jeddah Tower project in Saudi Arabia. This is the financing that would be necessary to bring the project to record heights. Media reports also show that the structure has risen to more than seventy-five meters (246 feet) and construction is proceeding at an uninterrupted pace. Above ground construction on the long delayed Jeddah Tower started in September 2014, but there was considerable doubt that the financing of the one kilometer (3,280.84 feet) tower could be obtained, given the shaky financial conditions in Saudi Arabia. But the Jeddah Tower is only the latest phase in an enormous boom that began setting new records in 2014. Super tall buildings, or skyscrapers, are being built at an astonishing rate. Ninety-seven buildings that exceed 200 meters (656 feet) high were constructed in 2014, setting a new record. The previous record was eighty-one buildings completed in 2011. The total number of skyscrapers in existence now is 935, a whopping 350 percent increase since the year 2000. The 200-floor Kingdom Tower will be part of a reported $8.4 billion project to construct Jeddah City. [...] In other words, the Tower is just part of an even more massive project, and it’s time for a new skyscraper alert. A skyscraper alert is a market indicator suggesting a significant economic crisis in the near future. This alert could have been issued earlier because the alert is based on the ground breaking ceremonies of a world record setting skyscraper, not the initial announcement of the project which occurred in August of 2011. [...] The completion of record-setting skyscrapers has long seemed to indicate the beginning of economic crises. The Singer Building (September 1906) and Metropolitan Life Insurance Building (1907) began construction before the Panic of 1907 and were later completed in 1908 and 1909, respectively. Construction began on 40 Wall Street (now the Trump Building), Chrysler Building, and the Empire State Building all prior to the crash on Wall Street which began in the fall of 1929 only to have the record-setting buildings open in the beginning of the Great Depression in 1929, 1930, and 1931, respectively. Construction of the World Trade Center towers began in August 1968 and January 1969 and opened in December 1970 and January 1972, respectively. The economy was then in a bad recession and the Bretton Woods Crisis at hand. The Sears Tower (now the Willis Tower) began construction in April of 1971 and opened in May of 1973 during the 1973–1974 stock market crash and the 1973 oil crisis. Such alerts indicate looming danger in the economy of significance. However, the danger is not necessarily imminent. The skyscraper index is silent on the issue of timing so the dating of when the skyscraper curse is apparent is just guess work. It seems that the boom-bust cycle reaches its peak around the time the new record is set and is called a Skyscraper Signal, if imminent economic danger is looming. In most episodes, record breaking skyscrapers have their opening ceremonies when the economic crisis is readily apparent. The important thing to remember is that skyscrapers do not 'cause' economic crises. Rather they are just a very noticeable example of the distortions taking place throughout the economy when interest rates are keep artificially low by the central bank.[...]" Related: "Skyscrapers and Business Cycles"
Commentary: "The Cultural Contradictions That Have Crippled The American Middle Class" [01/01/16] "Conventional explorations of why the middle class is shrinking focus on economic issues such as the decline of unions and manufacturing, the increasing premiums paid to the highest-paid workers and the rising costs of higher education and healthcare. All of these factors have a role, but few comment on the non-economic factors, specifically the values that underpin the accumulation of capital that is the one essential project of middle class households. Daniel Bell’s landmark 1976 book The Cultural Contradictions of Capitalism held that“capitalism–and the culture it creates–harbors the seeds of its own downfall by creating a need among successful people for personal gratification–a need that corrodes the work ethic that led to their success in the first place.” I would phrase this in the language of values and capital: The primary cultural contradiction of the Great American Middle Class is the disconnect between the values needed to build capital and those of gratification via debt-based consumption. Accumulating capital–not just financial capital but human and social capital– requires a distinct set of values and soft skills: [...]"
Commentary: "Now Comes The Great Unwind - Evaporating Commodity Wealth" Ø Hedge [01/01/16] "The giant credit fueled boom of the last 20 years has deformed the global economy in ways that are both visible and less visible. As to the former, it only needs be pointed out that an economy based on actual savings from real production and income and a modicum of financial market discipline would not build 65 million empty apartment units based on the theory that their price will rise forever as long as they remain unoccupied! That’s the Red Ponzi at work in China and its replicated all across the land in similar wasteful investments in unused or under-used shopping malls, factories, coal mines, airports, highways, bridges and much, much more. But the point here is that China is not some kind of one-off aberration. In fact, the less visible aspects of the credit ponzi exist throughout the global economy and they are becoming more visible by the day as the Great Deflation gathers force. As we have regularly insisted, there is nothing in previous financial history like the $185 trillion of worldwide credit expansion over the last two decades. When this central bank fueled credit bubble finally reached its apogee in the past year or so, global credit had expanded by nearly 4X the gain in worldwide GDP. Moreover, no small part of the latter was simply the pass-through into the Keynesian-style GDP accounting ledgers of fixed asset investment (spending) that is destined to become a write-off or public sector white elephant (wealth destruction) in the years ahead. [...] The credit bubble, in turn, led to booming demand for commodities and CapEx. And in these unsustainable eruptions layers and layers of distortion and inefficiency cascaded into the world economy and financial system. One of these was an explosion of CapEx in the oil patch and the mining sector in response to massive price and margin gains and the resulting windfall rents on existing assets. In the case of upstream oil and gas, for example, worldwide investment grew from $250 billion to $700 billion in less than a decade. Needless to say, there is now so much excess supply and capacity on the world market that oil has plunged into a collapse that is likely to last for years, as old investment come on-stream while world demand falters in the face of the gathering global recession. Already, investment is estimated to have dropped by 20% in 2015, and that is just the beginning.[..] This unfolding collapse of oil and gas investments, of course, will ricochet through the capital goods and heavy construction sectors with gale force. Eventually, annual investment may decline by $250 to $400 billion before balance is restored, meaning that what were windfall profits and surging wages and bonuses in these sectors just a year or two back will evaporate in the years ahead. Contrary to the circular logic of our Keynesian central planners and Wall Street stock peddlers, the pending massive loss of value added capital spending in the energy patch is not a part of some grand reallocation game; it won’t be made up by households—-which are already at peak debt—— borrowing even more in order to go to the restaurant or yoga studio. Instead, as the credit bubble begins to shrink it means that profits, incomes, balance sheets and credit-worthiness are all shrinking, too. So is the related GDP. The same kind of malinvestment occurred in the mining sectors where Australia’s boom in iron ore, coal, bauxite and other industrial materials provides a good proxy. As shown below, CapEx in mining grew by nearly 6X in less than a decade.[...]" Related: "America In 2015 (The Chart)"
Commentary: "Income Defense': America's Super-Rich Spend Billions On Secret Tax System" [01/01/16] "The richest people in the United States have created a shadowy tax system known as the "income-defense industry," which uses lobbyists, lawyers, and offshore accounts to reduce their tax rates. The super-rich have spent billions over the past two decades creating this system to shield their wealth, according to an investigation by the New York Times. "Operating largely out of public view – in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service – the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans," the newspaper reported. Twenty years ago, the 400 highest-earning taxpayers in America paid nearly 27% of their income in federal taxes, according to IRS data. By 2012, that figure had fallen to less than 17%, which is just slightly more than the rate paid by the typical family making $100,000 annually. This system, however, is unavailable to the typical family due to its cost and complexity. The ultra-wealthy "literally pay millions of dollars for these services," Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, told the Times. In return, he said, they "save in the tens or hundreds of millions in taxes."[...]"
Commentary: "An Aging America Shies Away From Risk" MSM [01/01/16] "Twenty years ago, Dutch journalist Sheila Sitalsing sat down with a demographer at the country’s statistics office to talk about how aging would change the Netherlands. His prediction, she recounts in a column that’s the most-read thing on the website of the Dutch newspaper de Volkskrant, was that aging would “change the atmosphere and the mentality of the country.” For example: "Things that come with being young -- taking risks, seizing opportunities, daring to do things, diving into the deep end without thought and without water wings, doing drugs, making noise, calling after girls on the street corner, embracing the strange and the new -- would become less common. The atmosphere would be determined by the concerns of the old: avoiding risk, being careful, preserving what you have, saying goodbye, keeping quiet, suspicion of the foreign, avoiding fuss and noise -- absolutely no fuss and noise! -- and seizing every possible occasion to complain at length about alleged fuss and noise. [...] It’s better in Dutch (the translation is mine, with a little help from Google), but it’s a really interesting premise nonetheless. Timely, too, on both sides of the Atlantic. Republican primary voters -- and voters in general, actually -- skew pretty old, so maybe this explains the extreme fearfulness and suspicion of foreigners that has permeated the presidential campaign so far. More generally, could the aging of the U.S. population be behind all sorts of other phenomena, from anti-growth activism in high-priced cities and suburbs to the decline in business dynamism and entrepreneurship that has beset the country since about 2000? [...] The scientific evidence on aging and risk aversion is mixed. Here’s a summing-up from a 2012 article by Dan Ariely and six other authors :
One study found that older individuals show more risk aversion in their life insurance coverage than younger individuals (Halek & Eisenhauer, 2001). Similarly, some studies found that older investors tend to own less risky stocks than younger investors (Hunter & Kemp, 2004; McInish, 1982), and have a smaller proportion of their assets in risky investments (Jianakoplos & Bernasek, 2006; Morin & Suarez, 1983; Palsson, 1996). [...]"
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