Thursday, December 30, 2010
The Most Dangerous Man In America.
Viz a viz Wikileaks, Julian Assange, Bradley Manning, lying and corrupt governments, unjust wars, debasement of their currencies, a population impregnated by the sound bites of a cowardly media and journalists like Jon Hilsenrath, paid for by big money and the promise of power. Will history repeat itself? A great documentary on heroes and peak-empire. Visit www.ellsberg.net to read about Daniel Ellsberg and what an incredible struggle he must have gone through between career & patriotism (read: keeping your mouth shut despite knowing your government is lying) and ethics & conscience. There is presently another Daniel Ellsberg out there and his name is Bradley Manning. He is now our hero. Read about and support Bradley Manning here: http://www.bradleymanning.org/
(Hat tip: Clive)
Saturday, December 25, 2010
<-- a well deserved pension after 20 years of hard work........?
2 former executives of the Dutch Pension Fund ABP (now APG), Jan Frijns, former Investment Director 1993-2005 and Jan van der Poel, financial executive 1997-2002, seem to be desperate in trying to get the attention of msm to highlight government looting which occurred from 1997 and 2002 in order to pay for the implementation of an early retirement scheme, called VUT.
Well, I've explained before how the market works, money is never a problem, ask the politician, when he cannot steal he will print. After all, the only thing the politican wants is to get re-elected. And nothing will stop him there.
In a november 2010 interview Frijns said in the Parool, a Dutch daily newspaper:
"The government, the largest employer in the country, withdrew in the nineties around 25 billion euros from the financial reserves of the Pension Fund ABP, according to Jean Frijns, former director of ABP Investments, in the television section KRO Reporter Saturday.
For years the authorities paid too little premium to the ABP, said Frijns. In the privatization of the pension fund in 1996 the backlog had risen to around 15 billion euros, Frijns said, who from 1993 to 2005 was director of investments. He says the government is therefore partly responsible for the current financial problems of the ABP.
Frijns, now professor of investment management at the Free University in Amsterdam, says that ''a large part of the early retirement scheme''by the government was funded with money that ABP had reserved for regular pensions. That would be a sum of 10 million euro's."
Big schandal, but no outrage from msm at all? Why should there be? The entitement thinking in Holland is arguably second to only the USA. So Frijns' old time colleague Jan van der Poel got on his horse and tried again with a subsequent interview in the same Parool newspaper, now in stronger wording:
"Without any problems, the Dutch government could plunder dozens of billion of guilders from the ABP Pension Funds, despite the outrage of the Dutch Court of Audits"
This newspaper interviewed Jan van der Poel, who was from 1997 up to 2002 a financial executive of ABP. ''I received a report of the Court of Audits and read in this report that the government had stolen 30 billion guilder (app. Euro 13,6 Billion) from our Fund. The Court of Audits was furious. But nobody read that report and no journalist wrote about it".
Also private companies looted the fund, said van der Pond, but not on such a large scale as the government.
Van der Poel has no good word for the politicians who were for many years in charge of the ABP. According to him politicans are egoists who always blame others
and they regarded the ABP as a haven for early and safe retirement
The ABP has suffered greatly because of he credit crisis of the last 2 years. Investments were less profitable than originally calculated. Also, these investments were regarded as too risky. Over 2008 the pension cover degree which is the proportion between the capital of a pension fund and the amount to be paid out to pensioners, decreased with almost sixty percent points to the lowest point of 83 per cent at the beginning of last year. Afterwards the pension contribution was raised. Meanwhile the pension cover degree increased to 105 per cent.
According to van der Poel there is presently too much attention for investment results. '' The pension problem is extremely simple. With the rising life expectancy and our current life style it cannot be that you start to work on your 27st, stop working on your 60th and go on holiday for forty years for free. That is possible only in a state which works on slavery. Therefore, if people are healthy, they must work. This demographic time bomb has been ticking for a long time, it is a pyramid scheme. But the Dutch labor Unions never wanted to talk about these problems. Today, they still act as if there are no problems."
But let's get real, the fact that the Dutch would not be able to afford their pension pyramid scheme must have been known for at least 30 years. 1 + 1 = 2, still is and always will be, unless you are a politician in a comfortable chair, with a wood paneled board room, a great salary and pension and an ulterior motive not to make decisions. After all, the decision of today could very well be your personal problems of tomorrow. Only now I understand the slogan of the APG which is "tomorrow is today".
The waiting is now for "The Big Reset", which will come with or without the market riggers, politicans and bankers. A return to reality is imminent.
English translations: google translation
UPDATE 1: European Nation begin seizing private pensions. Christian Science Monitor
UPDATE 2: License to Steal?: ZeroHedge
UPDATE 3: All OK! Worried Dutch Government will "rescue" pension funds
Wednesday, December 22, 2010
"I also have a family and need to put food on the table!", he says, "everybody does it!"
Without criticism or additional questions, he just copied and pasted the nonsense he must have received from FoxNews. Just leave the important parts out, a screaming headline and the money is in the bank. Sell your intelligence for £ 75.23, VAT inclusive and please come back next time. After all, what is journalism about?
US shows stronger growth as investors look to 2011 tax cuts
Existing homes sales across the country climbed 5.6pc last month, which though weaker than economists had pencilled in, caps a consistent improvement from the summer. Meanwhile, the government's final estimate for GDP growth in the third quarter came in at a 2.6pc annual pace, a slight upward revision on the 2.5pc seen in the second estimate.
The question Wall Street economists are now asking is whether the $858bn (£558bn) in tax cuts agreed by Congress last week, including a surprise reduction in a payroll tax companies have to pay when taking on staff, will prompt consumers to spend their extra income and encourage businesses to hire. Their answer, for now at least, appears to be yes. JP Morgan, for example, has increased its forecast for growth in the first quarter to 3.5pc from 2.5pc.
With most countries in the eurozone – Germany apart – struggling to stage sustainable recoveries, investors are looking anxiously to the US to improve on growth that has proved underwhelming this year.
"The more recent data suggest we're seeing reasonably healthy (? troy ounce) retail sales growth, pretty healthy investment spending, some growth in employment," said Zach Pandl, an economist at Nomura.The world's biggest economy will enter the new year backed by an unprecedented wave of stimulus. Alongside the tax cuts, the Federal Reserve is working its way though a second, $600bn round of quantitative easing designed to lower long-term interest rates. Each policy has proved controversial abroad and at home.
Sunday, December 19, 2010
The mechanics of what is happening with money now is fascinating, and seems to be clarifying in my mind. It is hard to imagine a more inherently ineffective system of capital and resource allocation than crony capitalism. It is like playing a game in which the rules are rigged to deliver the money in the system to a relative minority of insiders, thereby bankrupting all the customers.
It is said that in a purely competitive capitalist system, all businesses are vectored to zero profit in a process of creative destruction. As a certain class of particpants clearly recognizes this they take every opportunity to corrupt and game the system through fraud. This is why markets must have regulators. At times the fraud overcomes the regulation to such a degree that the normal market balances are rendered ineffective and the system passes to a crony capitalist system, if not an outright oligarchy.
In a crony capitalist system a similar outcome can be achieved, but with the insiders and powerful interests holding most of the money which ultimately becomes worthless because the foundation of the money, the labor of the people, is destroyed.
In other words, greed compels the materially obsessed to obtain the greatest piles of chips, but in the long term renders their chips to be worthless because they are unable to stop their fraud and plundering even when it is in their best interests. They are not governed by rationality or conscience or even common sense. For periods of time oligarchies are able to survive in an uneasy equilibrium enforced by power, but ultimately these wicked die forever on their great piles of gains.
I now give more weight to the potential for hyperinflation, and will be exploring this topic during 2011. The Congress and the Fed are reckless to the point of self-destruction.
Saturday, December 18, 2010
If you believe you are safe, where ever you are, think again: the interconnected financial world will make sure you will be affected. It will be interesting to see what is going to happen: Obama still in charge promoting "a new plan", the Bernanck with QE 2, 3 and 4 and the military out in full force. The Europeans throwing rocks and Molotov cocktails but I am afraid the American protests will not be peaceful. It is gun country. Prepare for the worst, hope for the best.
US Empire Could Collapse At Any Time: Pullitzer Price Winner Tells Raw Story
America's military and economic empire could collapse at any time, but predicting the precise day, week or month of its potential demise is unattainable, according to a former New York Times war correspondent who spoke with Raw Story.
"The when and how is very dangerous to predict because there's always some factor that blindsides you that you didn't expect," Pulitzer-winning journalist Chris Hedges said in an exclusive interview. "It doesn't look good. But exactly how it plays out and when it plays out, having covered disintegrating societies, it's impossible to tell."
He explained that he learned this lesson as events unfolded around him in the fall of 1989. Then, members of the opposition to the Soviet Empire told him that they predicted travel across the Berlin Wall separating East from West Germany would open within the year.
"Within a few hours, the wall didn't exist," he said.
Hedges was one of the 131 activists were arrested in an act of civil disobedience outside the White House yesterday, even as Obama was unveiling a new report citing progress in the Afghanistan war.
"We're losing [the war in Afghanistan] in the same way the Red Army lost it," he said. "It's exactly the same configuration where we sort of control the urban centers where 20 percent of the population lives. The rest of the country where 80 percent of the Afghans live is either in the hands of the Taliban or disputed."
"Foreigners will not walk the streets of Kabul because of kidnapping, and journalists regularly meet Taliban officials in Kabul because the whole apparatus is so porous and corrupt," he said.
One day after this interview was conducted, reports hit the global media noting the CIA's warning to President Obama, that the Pakistan-supported Taliban could still regain control of the country.
Hedges predicted that President Obama's war report released Thursday would "contradict not only [US] intelligence reports but everything else that is coming out of Afghanistan."
His prediction came startlingly true: the CIA's own assessment was said to stand in striking contrast with President Obama's report.
Defense Secretary Robert Gates, however, insisted that the US controlled more territory in Afghanistan than it did a year ago.
'A corporate coup d'état in slow motion'
Hedges said he attended the protest and planned to get arrested because he is against the corporate powers that have enveloped the nation.
"We've undergone a corporate coup d'état in slow motion," he said. "Our public education system has been gutted. Our infrastructure is corroding and collapsing. Unless we begin to physically resist, they are going to solidify neo-feudalism in this country."
"If we think that Obama is bad, watch the next two years because these corporate forces have turned their back on him," Hedges warned.
Hedges, author of "Death of the Liberal Class," said that his vision of America is one with a functioning social democracy, which stands in stark contrast to the nihilism of the corporate state.
"American workers, as they are repeatedly told, will have to become competitive with prison labor in China," he said. "That's where we're headed, and all the pillars of the liberal establishment are complicit in this."
"At least if you get sick in the UK, you don't go bankrupt or die," he added.
Hedges said that another pressure point is the US dollar, which he pointed out had been dropped by Russia and China in favor of modified ruble/renminbi exchanges.
"A few more deals like that, and our currency becomes junk," he said.
Hedges continued, "As long as we have relative stability, these lunatic fringe movements can be held at bay, but if we don't undertake serious structural reform, which we're not doing, then it is inevitable that we will come to a tremendous crisis - economic and political as well as environmental."
With editing by Stephen C. Webster.
Thursday, December 16, 2010
A great post from Simon Black. His recommendation to young people: escape from our country and try your luck somewhere else. Governments are trying to let you pay for their mistakes. Go for it. Do not be scared; the world is big, many countries offer great opportunities and are full of good people.
Notes from the Field
Date: December 16, 2010
Reporting From: Auckland, New Zealand
If you're reading this and under 30, let me be absolutely clear about one indubitable point: your government is going to sacrifice your future in order to pay for its own mistakes from the past.
To give you an example, students in London came out to the streets in droves last Friday to protest the British parliament's most recent austerity measures which tripled the cap on their university tuition to $15,000.
Sure, Britain is imposing all sorts of austerity measures on its citizens... and while I won't get into a discussion about the absurdity of government controlled education, I will point out that students are having their benefits cut far more drastically than any other segment of the population.
Are pensioners seeing their costs triple? No. Are middle-aged workers seeing 50% tax hikes? No. Aside from the very small segment of high-income earners who will be forever robbed and pillaged of their wealth, the younger generation is next in line to receive the butt end of the crisis fallout.
Younger folks have comparatively lower incomes, benefits, job opportunities, and political clout than their seniors, yet they are increasingly expected to assume a disproportionately larger burden of the consequences of government folly.
It's the younger generation that is called on to go fight and die in pointless wars in faraway lands; it's the younger generation that is forced to assume the debts of their forefathers; and it's the younger generation that gets relegated to the back rows of the political amphitheater and dismissed by the establishment.
Meanwhile, retirees aren't seeing massive benefits cuts, and middle-aged wage earners income earners are being protected from above by politicians. In fact, let's take a minute and look at the looming fate of the average young person today:
1) Your government-run university tuition is going to go through the roof, saddling you with unfathomable debt before you even enter the world as an adult;
2) Once you graduate, you'll be the last in the hiring queue;
3) If you do get hired, you'll be the lowest on the totem pole and the first to be let go when tough times befall your business;
4) Once the labor market eventually stabilizes, you'll enter your prime earning years with some of the highest tax rates ever seen as your government continues to cannibalize your generation to pay off its largess and indebted entitlement programs that benefited older generations;
5) For your entire working life, you'll pay into a pension system that is going to be bankrupt by the time you're qualified to draw on it;
6) More than likely, you'll never achieve the standard of living that your parents achieved;
7) Whatever wealth your parents accumulated won't be left to you-- the bulk of it will be confiscated by the state (unless your folks were smart enough to plant multiple flags) due to a host of death taxes.
If you're in the millennial Facebook generation, this is going to be the standard storyline of your peers. The system that's in place right now-- the failed cycle of debt and consumption fed by continuous government intervention-- has stuck you with the bill.
Fortunately, there's a silver lining (as always). Younger people are generally less anchored and more mobile than their elders, hence it's much easier to opt out of this perverse system.
If you're angry that your government is saddling you with the responsibility to pay off generations of bad decisions, then get out of dodge. Stop playing by the same rules of the game that used to work in the past-- the old playbook of "go to school, get a good job, work your way up the ladder" simply doesn't apply anymore.
Don't stick around a society that has completely forsaken you and is waiting with knife and fork in hand to carve up your earnings once you finally enter the labor market... get out of dodge now, while it's easy to do and you have little to risk.
Go explore the world and get an education based on experience, not expensive academic theory. Seek opportunities in thriving, frontier markets overseas... places like Kurdistan, Mongolia, Botswana, Kazakhstan. Soak up the local intelligence and become the grease guy on the ground who can make things happen.
Find people whose lifestyles you want to emulate and make yourself indispensable to them as an apprentice... this will be the only time in your life that you can afford to work for nothing in exchange for a valuable, first-hand education.
Most of all, stop playing by everyone else's rules. Refuse to be enslaved by the idea that it's your civic and moral responsibility to pay off the debts of your government's failures. Cast off the yoke of their control... and summon the courage to live a life by your own design.
The path to prosperity in the Age of Turmoil depends on this ability to reject the old system, declare your economic independence, and carve your own path.
Senior Editor, SovereignMan.com
Sunday, December 12, 2010
Break The Power Of The Big Banks
It cannot be said enough; that's why they also call the big Wall Street Bank "financial terrorists". They have the world economy by the balls. Together with the IMF and rating agencies they invented a criminal racket to let the middle class pay for their gambling addiction. From Max Keiser: "
The pattern is the same. The rating agencies downgrade. The bond assassins start selling sovereign debt with naked (counterfeit) short-sales. The politicians start talking austerity. The IMF is called in to steal the country’s assets. This organized crime racket has been active in Central and South America for decades (read John Perkins, “Confessions of an economic hit man”). And we’ve seen this technique used on Wall St. for just as long as one company targets another with a ‘leveraged buy out’ (buying another company by pledging the assets of the company being taken over as the basis for a loan big enough to swallow the company). Now we are seeing this in Western Europe and the folks in the U.S. who have been insulated from this predatory financial terrorism are getting a taste of it first hand. There is no end for the suicide bankers. They will continue like this until every economy they can find has been stripped and left for dead.
A lot of people still haven't heard that the economy cannot recover until the big banks are broken up.
But as everyone from Paul Krugman to Simon Johnson has noted, the banks are so big and politically powerful that they have bought the politicians and captured the regulators.
In addition, as Fortune pointed out last February that the only reason that smaller banks haven't been able to expand and thrive is that the too-big-to-fails have decreased competition:
Growth for the nation's smaller banks represents a reversal of trends from the last twenty years, when the biggest banks got much bigger and many of the smallest players were gobbled up or driven under...
As big banks struggle to find a way forward and rising loan losses threaten to punish poorly run banks of all sizes, smaller but well capitalized institutions have a long-awaited chance to expand.
Small banks have been lending much more than the big boys. And the giant banks which received taxpayer bailouts actually slashed lending more, gave higher bonuses, and reduced costs less than banks which didn't get bailed out.
JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together hold 80% of the country's derivatives risk, and 96% of the exposure to credit derivatives. Experts say that derivatives will never be reined in until the mega-banks are broken up.
As I pointed out in December 2008:
Now, Greece, Portugal, Spain and many other European countries - as well as the U.S. and Japan - are facing serious debt crises. See We are no longer wealthy enough to keep bailing out the bloated banks. We have serious debt problems. See this, this, this, this, this and this. By failing to break up the giant banks, the government is guaranteeing that they will take crazily risky bets again and again and again, and the government will wrack up more debt bailing them out again. (Anyone who thinks that Congress will use Dodd-Frank to break up banks in the middle of an even bigger crisis is dreaming. If the giant banks aren't broken up now - when they are threatening to take down the world economy - they won't be broken up next time they become insolvent, either. And see this).
The Bank for International Settlements (BIS) is often called the "central banks' central bank", as it coordinates transactions between central banks.
BIS points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps:The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened.In other words, by assuming huge portions of the risk from banks trading in toxic derivatives, and by spending trillions that they don't have, central banks have put their countries at risk from default.
Moreover, Richard Alford - former New York Fed economist, trading floor economist and strategist - recently showed that banks that get too big benefit from "information asymmetry" which disrupts the free market.
Nobel prize winning economist Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market:
"The main problem that Goldman raises is a question of size: 'too big to fail.' In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information."
Further, he says, "That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that's why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you're going to trade on behalf of others, if you're going to be a commercial bank, you can't engage in certain kinds of risk-taking behavior."
The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorted the markets - making up more than 70% of stock trades - but which also let the program trading giants take a sneak peak at what the real (aka “human”) traders are buying and selling, and then trade on the insider information. See this, this, this, this and this. (This is frontrunning, which is illegal; but it is a lot bigger than garden variety frontrunning, because the program traders are not only trading based on inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).
Goldman also admitted that its proprietary trading program can "manipulate the markets in unfair ways". The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with the government's blessings.Again, size matters. If a bunch of small banks did this, manipulation by numerous small players would tend to cancel each other out. But with a handful of giants doing it, it can manipulate the entire economy in ways which are not good for the American citizen.
No wonder so many independent economists and financial experts are calling for the big banks to be broken up, including:
- Nobel prize-winning economist, Joseph Stiglitz
- Nobel prize-winning economist, Ed Prescott
- Former chairman of the Federal Reserve, Alan Greenspan
- Former chairman of the Federal Reserve, Paul Volcker
- Former Secretary of Labor Robert Reich
- Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard
- President of the Federal Reserve Bank of St. Louis, Thomas Bullard
- Deputy Treasury Secretary, Neal S. Wolin
- The President of the Independent Community Bankers of America, a Washington-based trade group with about 5,000 members, Camden R. Fine
- The head of the FDIC, Sheila Bair
- The head of the Bank of England, Mervyn King
- The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
- Economics professor and senior regulator during the S & L crisis, William K. Black
- Economics professor, Nouriel Roubini
- Economist, Marc Faber
- Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
- Economics professor, Thomas F. Cooley
- Economist Dean Baker
- Economist Arnold Kling
- Former investment banker, Philip Augar
- Chairman of the Commons Treasury, John McFall
- Leading bank analyst, Chris Whalen
Economics professor, James Galbraith
Monday, November 29, 2010
Of Two Minds, Charles Hugh Smith
Ireland would save the world from much misery by defaulting now and driving the vampire banks into liquidation.
The alternative title for today's entry is: Ireland, please drive a stake through the heart of the vampire banks which have the world by the throat. The entire controlled demolition of the Eurozone's finances can be summed up in one phrase: privatize leverage and profits, socialize losses and risk.
The basic deal is this: protect the bank's managers, shareholders and bondholders from any losses, while heaping the socialized losses and risks on the taxpayers and citizens.
While there are murmurings of "forcing bondholders to share the pain," any future haircut will undoubtedly be just for show, while the Irish pension funds are gutted to bail out the banks.
EU Outlines Bond Restructuring Plan (WSJ.com)
Europe Goes "Completely Mad" At Suggestion Of Irish Default Demanded By 57% Of Irish Population (Zero Hedge)
Here is a chart which illustrates the dynamic at play in Greece, Ireland and indeed, the rest of the world as well: leveraged speculation and mal-investment lead to asset deflation and collapse.
Here is a chart which illustrates how asset deflation leads to taxpayer-funded bank bailouts and then sovereign default. It's fairly self-explanatory:
It's rather straightforward: as asset bubbles rise, they enable vast leveraging of credit and debt. Once mal-invested assets collapse in value, then the debt remains, unsupported by equity or capital.
As the Financial/Political Elites transfer these catastrophic losses onto the citizenry, they set off a positive (runaway) feedback loop: the Central State austerity required to pay the borrowing costs of the bailout sends the economy into recession, which reduces borrowers' incomes, triggering more defaults which further sink housing prices. As prices continue falling, bank capital declines, requiring ever-larger bailouts to provide the banks with a simulacrum of solvency.
Austerity measures must be tightened to channel more of the citizens' incomes to the banks, which further suppresses the economy, lowering tax revenues and incomes, which leads to more austerity to fund more bailouts, and so on, until the haggard remnants of a once-wealthy citizenry finally rebel against their Financial/Political Overlords and topple the government which arranged the bailout.
A new populist government announces a sovereign default, to widespread huzzahs from the unyoked citizenry.
The EU's bailout of Greece and Ireland will only hasten this dynamic. The Power Elites are rapidly losing their credibility; just compare the market's euphoric reaction to the Greek bailout in May and the openly negative response to the Irish bailout.
The money is lost, and Capitalism requires those who took on the risk to earn outsized returns must take the loss, come what may. When a nation such as Ireland is running a State deficit equal to 32% of GDP, austerity cannot generate the stupendous surpluses needed to make good the vast sums which are already lost.
And even if they could, why should the citizens save the banks and bondholders from the losses Capitalism requires? Mal-investments should be sold, for pennies on the dollar if need be, insolvent banks liquidated and bondholders handed 95% losses. Managers would be sacked, bonuses cancelled and shareholders wiped out.
It's a little late to decide Capitalism is only fun when reaping gargantuan profits from highly leveraged mal-investment and fraud. Ireland, and indeed the world, will survive if all the vampire banks are liquidated. That is the end-state, and "buying time" just increases the misery of the citizens who have been yoked to save their "betters."
Ireland, please drive a stake through the heart of the vampire banks which have the world by the throat. By defaulting, you would be doing the world (and your own nation) an immense favor.
Monday, November 22, 2010
Saturday, November 20, 2010
JP Morgans life is on the line and Max Keiser is leading this great viral campaign.
Please read below the "must-read" article of Jason Hommel in which he explains the manipulation of JP Morgan's silver exposure.
Key problem: How can the world's leading banks, (probably mostly JP Morgan) sell $100 billion worth of silver in 6 months, which is 6.66 times the entire world's annual production of only $15 billion worth of silver, and about 50 times the actual physical silver investment market, and it not be fraudulent silver, not real silver, which creates this problem?
To the Top Shareholders of JP Morgan:(Your company is bankrupt in terms of silver!)
Silver Stock Report
by Jason Hommel, November 13th, 2010
To the Top Ten Institutional Shareholders and Top Ten Mutual Fund Shareholders of JP Morgan:
It's news that JP Morgan is being sued for manipulating the silver market by maintaining a large concentrated naked short position in futures contracts on the CME's COMEX metals exchange.
The lawsuits were announced just days after a brave man in government, Bart Chilton, Commissioner of the CFTC (http://www.cftc.gov/), the Commodities Futures Trading Commission, made a statement that acknowledged silver price manipulation.
The lawsuits mean that very intelligent lawyers believe that JP Morgan's short position is so obvious and provable that there is a case to be made, and money to be won from JP Morgan, and they feel that perhaps they will get help even from those in government, such as Judges. Blood is in the water, and JP Morgan is the one bleeding.
The news articles of the lawsuits don't tell the full story. See, I know the men who helped expose JP Morgan as the silver short, and I help to inform those men, and promote their work. I was the first to file an antitrust complaint to the US Justice Department against JP Morgan for silver manipulation in April of 2010. http://silverstockreport.com/2010/doj.html
JP Morgan is also the custodian of the silver ETF, SLV, which also does not likely have all the silver, which would be another short position.
JP Morgan's third short position in silver is likely a much larger naked short position in silver than the other two combined, and it's through the "over the counter" silver market, which has been up to $200 billion in size according to the BIS, the Bank of International Settlements.
See the second link, above, the pdf file, the second table, Table 22A:, under the category "other precious metals". The "Notional Amounts Outstanding" in June 2009, were $203 billion.
Jeffrey Christian, bullion bank apologist, at the CFTC hearing on silver on March, 25th, 2010, admitted that silver was traded and leveraged "over 100 to 1" in the London market.
JP Morgan also holds the largest derivatives positions of any banks, at $69 Trillion, according to the US OCC. Thus, it is likely that JP Morgan also holds the largest short position in silver derivatives, too, as a matter of course, since they dominate derivatives trading in general. So, to them, a $100 billion short position in silver would be "chump change" compared to their other derivatives positions, and may, in actual fact, be a part of a larger overall strategy to maintain the value of their other derivatives, (including the US dollar) to keep interest rates low.
See the last page of the second link, the pdf link, above. The OCC sometimes changes the location of these links, so if the link breaks, you might want to ask one of your junior researchers to locate them for you, or look around the occ.gov page for a few minutes to find it yourself, or simply contact the OCC as ask them for a copy of their "Quarterly Report on Bank Trading and Derivatives Activities" Second Quarter 2010
So, the problem is simple to understand, but complex to solve, because JP Morgan's market influencing positions cannot be closed without massive losses that will bankrupt JP Morgan, and perhaps also significantly devalue the US dollar.
The world's annual silver production is estimated at between about 550 million ounces of silver to about 650 million ounces. At 600 million oz., at $25/oz., that's a tiny $15 billion market. The investment side of the silver market is even smaller, at only 100 million oz annually, which, at today's silver prices, is a much smaller $2.5 billion market.
Key problem: How can the world's leading banks, (probably mostly JP Morgan) sell $100 billion worth of silver in 6 months, which is 6.66 times the entire world's annual production of only $15 billion worth of silver, and about 50 times the actual physical silver investment market, and it not be fraudulent silver, not real silver, which creates this problem?
But the problem is much bigger than how it might appear from just that. See, in 1980, silver prices hit $50/oz. That was when M3, the money supply in the US, was a tiny $1.8 trillion. Today, it's $18 trillion, and growing at a rate of about $2 trillion per year, which is the what the US government must print to pay their bills. So, the inflation-adjusted price of silver could be ten times higher, or up to $500/oz., if only 1% of the population of the USA began to buy silver.
See, 1% of $18 trillion is $180 billion. How can $180 billion pour into the real and actual physical tiny silver market of $15 billion (or the tinier silver investment market of $2.5 billion) without driving the silver price to $500/oz.?
See, the problem is that the silver price will hit $500/oz. just for starters, by the time only 1% of people in the USA alone try to protect their wealth from inflation by buying silver and gold, and the way things are going in government, that's nearly a given by now.
If my reading of the OCC report is any indication, then JP Morgan's short position in silver could be as high as 25% to 50% of the entire world banking system's short position of $200 billion in silver (and that was when silver was $15/oz.)!
JP Morgan's short position in silver could thus be as high as 3.3 billion ounces if we are conservative, and estimate their position at only 25% of the BIS report numbers. By $500/oz., JP Morgan's short position could be worth a negative $1.5 trillion, and that's just for starters. It could grow worse if they add to their short position, in a misguided attempt to manipulate a market that is clearly moving against them.
That kind of activity by a rogue trader brought down Barrings Bank, as showcased by the 1999 movie, "Rogue Trader".
The other problem is that silver is mostly consumed by industry, as it's the greatest conductor of electricity in the world, and is used up in 10,000 applications. Only oil has more applications, but oil can't be used as money. It's just way too hard for the average person to store $8000 worth of oil in 100 barrels on their front lawn, and apartment dwellers never could. Gold is also unsuitable as money for most people, because a tiny tenth ounce piece is just too valuable if it became worth about a month's salary, a historic norm.
I submit the problem is bigger than what your brightest minds, your brightest economists, and brightest students in today's world can solve.
See, there is no central bank of silver. There is no lender of last resort for silver. And you can't print silver to solve this problem, because at the end of the day, real silver is needed by industry.
Developed nations, such as the USA, consume, in industry, about 6/10ths of an oz. of silver per year, per person. As the world economy grows, that will increase.
Silver also has the smallest number of years of resources in the ground of nearly any major metal. It's about a 14 year supply. (This is substantially smaller than the world's 40 year supply of oil.)
But the solution is simple if you can trust in God.
Be honest. Be honest first. Trust that honesty brings rewards and blessings from God.
May I humbly suggest a few simple solutions to your problems concerning your positions in JP Morgan, given JP Morgan's major financial problems with their short position and shortage of physical silver?
1. Buy silver.
2. Sell JP Morgan shares.
Or, well, scratch that, or you can reverse it. You could sell JP Morgan shares and use the proceeds to buy physical silver.
Most of all 20 of your institutions own about $2.5 billion worth of shares, on average, of JP Morgan.
I can guarantee you that the facts dictate that your shares of JP Morgan will not retain their value nearly as well as will silver.
I can also guarantee you that it's a race to get silver, and you are all probably not even in the race, given the tiny size of the silver market.
If even one out of 20 of you decided to act, I can guarantee you that silver prices would double and exceed $50/oz, before any one of you were able to buy even $1 billion worth of physical silver.
On September 2nd 2010, at the start of this rally in silver prices, I wrote a simple letter to the top 25 billionaires of the world, declaring that none of them would be able to buy much silver below $20/oz. Based on recent silver prices rising to over $29/oz., and holding at $26, it appears I was right.
Dear Billionaires of the World
I gave specific advice on how to accumulate large positions in silver, and who to contact to get it. Of course, you, or anyone else, can also simply call me or my associates at the JH MINT. www.jhmint.com
It is actually against my best interests to write to you, for several reasons. See, since I know silver is money, I therefore use silver as my "unit of accounting" internally as a bullion dealer at the JH MINT. I count all my assets in terms of dollars, and also in terms of silver. During the recent rise in silver prices, our assets are increasing in terms of dollars, of course. But not in terms of silver. Why not? Because we lose "silver value" on our small cash positions, and we lose "silver value" on our larger gold positions. So, even though over 65% of our assets are in the form of silver, and even though we are having record sales volumes, we are not able to "accumulate silver value" from operations during this bull market in silver, because silver prices are simply rising too fast.
Furthermore, by sharing with you this information, I risk creating a silver shortage at many of my own suppliers, which could literally put my successful silver dealing business out of business.
I can therefore state with near absolute certainty that if you tried to value the wealth of your institutions in terms of ounces of silver, you would do nothing but "lose money" in terms of ounces of silver, no matter what you do, no matter how great you think your investment decisions will be, no matter how much silver you accumulate, during the next ten to twenty years of the continuing bull market in silver.
This is your first and only warning about the facts of silver that I will ever give you. I will not contact you again, just as we never pester any of our clients by phone.
Saturday, November 13, 2010
Thursday, November 11, 2010
This discussion goes to the heart of the financial problems and the power of bankers and politicians.
Will they let their power go and use a measurement tape, the gold standard?
This, nobody knows. I guess it will depend on the severity of the crisis.
Roubini: Here's Why a Gold Standard Won't Work ... A gold standard would just make business cycles more extreme, according to economist Nouriel Roubini (left). ...What's more, a gold standard would make central banks unable to fight inflation or deflation, much less do anything to combat persistent unemployment, Roubini said in an interview with NetNet yesterday. "A fixed exchange regime, even if it is not a gold standard... that world just doesn't work. Because in that world, monetary policy by definition instead of being countercyclical becomes procyclical," Roubini told NetNet. Nouriel Roubini "Suppose you have a fixed exchange rate regime... it just exacerbates the business cycle." – NetNet/CNBC.com
Dominant Social Theme: Get this idea out of your heads! Gold is finished. It's nonsense. Only more fiat money can save us.
Free-Market Analysis: This is an important article from our standpoint because Nouriel Roubini has always been positioned (or positioned himself) as a practical thinker and "hawk" when it comes to monetary policy. This means that unlike many other economists, Roubini is always criticizing the Federal Reserve for being too soft on inflation. He wants higher interest rates and presumably less money printing in order to retain the value of the dollar. He is in other words a friend to those who are generally critical of the Fed and a protector as well of people's wealth. Or that is what we have been led to think.
But this article seems to reveal that much of Roubini's reputation is based on a kind of posturing. He is happy to pose as a protector of sound money, but as gold rises and the battered fiat dollar continues to unwind, Roubini is willing to come strongly to the defense of the current system. In our view (as we regularly state) central banking is a basic dominant social theme that the Western elite has promoted vigorously as a way to make sure that its efforts to set up world government are well funded. Roubini in this article supports that theme.
The article ends with the words, "Over to you Ron Paul and the Mises Institute!" While this is a surprising conclusion to find within a mainstream article, from our perspective, it is certainly appropriate. The von Mises Institute has in many ways provided us with the initial frame of reference to judge Roubini's statements. What Austrian hard-money economics gives us is a fully formed knowledge-base of how free-market money SHOULD work, and this is precious knowledge indeed, given it almost went extinct in the 20th century.
What Austrian economics shows us is that gold and silver are marketplace money and that only the marketplace itself can determine the volume of money and its value. There are differences, of course, between various hard money schools and the Mises Institute has always made a principled case for full-reserve banking. Here at the Bell we have explored private fractional reserve banking and have presented the Antal Fekete's rediscovery of Real Bills and their role within a private banking system. .
But the important point re-pioneered by the Mises Institute is that the MARKET decides on money; the state cannot. In fact the market might well decide on full-reserve banking. And in a crisis people's real views begin to emerge. This happened during the Bush years in America when the Republican party showed itself not as a Reaganesque-oriented party of the free-market and the entrepreneur but as a big-spending, big-war, big-state adjunct of the Democratic machine it supposedly opposed. Because of the financial crisis we are learning Roubini's real views. Here's a little more about him:
Nouriel Roubini (born 29 March 1959) is an American professor of economics at New York University's Stern School of Business and chairman of Roubini Global Economics, an economic consultancy firm. After receiving a BA in political economics at Bocconi University, Milan, Italy and a doctorate in international economics at Harvard University, Cambridge, Massachusetts, he began academic research and policy making by teaching at Yale while also spending time at the International Monetary Fund (IMF), the Federal Reserve, World Bank, and Bank of Israel.
Much of his early studies focused on emerging markets. During the administration of President Bill Clinton, he was a senior economist for the Council of Economic Advisers, later moving to the United States Treasury Department as a senior adviser to Timothy Geithner, who is now Treasury Secretary.
Roubini is today a major figure in the U.S. and international debate about the economy, and spends much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. Although he is ranked only 410th in terms of lifetime academic citations; he was #4 on Foreign Policy magazine's list of the "top 100 global thinkers." He has appeared before Congress, the Council on Foreign Relations, and the World Economic Forum at Davos.
We can see how smart Roubini is from this Wikipedia bio, but as we pointed out yesterday in our previous article on the gold standard, intelligence does not always equal wisdom. What Roubini is claiming in the article/interview excerpted above is that fixing money to a certain gold ratio does not give central banks enough room to maneuver (ie: print more money). This is a standard central banking argument against a formal "gold standard" as it is often presented.
But in our view, the interviewer at NetNet should have asked Roubini about free-market gold and silver. He could even have asked Roubini if he believed the free-market was capable of regulating money on its own and how central bankers know how much money is enough and how much is too much.
In fact, what is illustrated by Roubini's argument about a "gold standard" is that he conceives of it in statist terms (the state will set the ratio of gold to currency). Apparently, he has never contemplated the idea of a privately run full-reserve gold-and-silver system let alone one that utilizes a variant of free-banking as the United States attempted in pre Civil War days. Here's some more from the article on Roubini and gold:
Roubini seems to think a gold standard is a pretty awful idea. "There are many fundamental problems with any variant of a gold standard," he said. A general summary of Roubini's position on the issue would likely begin by saying that, generally speaking, a fixed exchange rate regime or gold standard limits the flexibility and range of actions that central banks can take to improve a nation's economy in fundamental ways. (For example, in a fixed exchange rate regime, central banks have less ability to maximize employment, stimulate growth and manage price stability.) And, as Roubini specifically pointed out to me, fixed rate regimes inhibit the ability of banks to provide lender of last resort support to an economy when necessary.
The point Roubini is making is simple. He believes that a handful of bankers in a room consulting together can set the price of money more effectively than the invisible Hand. This is a form of price fixing; and we would have liked the interviewer to ask Roubini if price-fixing is effective generally. If Roubini were honest he would answer that price fixing is not effective.
The interviewer could then have asked Roubini what was the dividing line between classical and neo-classical economics. If Roubini was honest, he would have had to answer "marginal utility," which changed the nature of economics forever. Marginal utility explains how the consumption of goods and services becomes less satisfying as they are consumed; in doing so, it emphasizes how only the free-market itself can determine the prices of these units. It is, in a sense, an elaboration of Adam Smith's "Invisible Hand" that regulates the marketplace via competition.
These are powerful concepts and yet the central banking ideology of the 21st still maintains that a few individuals can determine how much money an economy needs. It basically denies 300 years of accumulated economic knowledge.
The cognitive dissonance is startling, as is the realization that Roubini is held in such high esteem and has been named a top 100 global thinker. Roubini is supposed to be a hard-nosed proponent of the free-market, sound money and entrepreneurialism. But he is evidently and obviously a statist, a socialist who believes that groups of powerful people can make up prices for the market and then attempt to enforce them successfully. It would seem to be an economically illiterate position.
Not only that but Roubini does not even seem to understand monetary history generally or he would know that gold and silver have been considered money by cultures around the world for thousands of years. He would know that private market money – gold and silver – with or without free-banking has provided the backbone of many successful economies. He would know that these days gold can be digitalized endlessly and that supply is not even an issue when it comes to using gold to drive a free-market economy these days.
Perhaps we are being too hard on Roubini, and if so we apologize. The interviewer did a good job in many ways and a successful interview involves both parties. Roubini doesn't seem to have offered much that is not standard fare, so we are only reacting to what was said (or reported) in this interview. Roubini may well know all about monetary history (being a top-100 world thinker), but if he does, we wish he would have revealed it. As it is, we are left to wonder if he is avoiding mentioning what he knows, or if he doesn't know it.
As we mentioned above, the interviewer did write the following encouraging words at the end of the article: "Roubini's views challenge the Austrian economists where they live: at the intersection of monetary policy and the business cycle ... We eagerly await the response. Over to you Ron Paul and the Mises Institute!"
Conclusion: It would seem to us that the interviewer is aware that there is an alternative view and is eager to solicit it. It is very possible that it is becoming more fashionable for "mainstream" financial journos to acknowledge Austrian economics as a sign of a certain level of sophistication in their craft. We have noticed this elsewhere, mainly in the friendly reception that hard-money proponent Congressman Ron Paul often receives in mainstream financial interviews. Honest money seems to be coming back into vogue after a 100-year hiatus. We dearly hope this is a developing trend.