Friday, July 31, 2009

Peer Review and Scientific Consensus

There is something out there what I believe to be more destructive than derivatives or a stock exchange meltdown. And this is the lack of trust we are developing in anything that has to do with authority.
Do you still believe bankers and politicians, newspapers, experts, economists, statistics, etc? Are you relaxed when you check your paper claim from your broker? Are you absolutely sure Goldman Sachs is not tinkering with your data via their sophisticated computer system
. Are you 100% certain your gold ETF has been backed by the real thing? After all, the whole banking system is based on trust.

The following article by Robert Higgs calls another profession into question: the scientific community. We can just smell the overpowering stench as they produce crap as serfs for the highest bidder. And so science becomes politics, worthless and in the hands of the one with the biggest purse.

The problem is of course bigger than politicians and bankers and the question can be asked: can we operate a society without a certain level of trust?

And what is the role of governments in this: why the thousands of cctv camera's, extreme control at airports, credit card, telephone and email snooping? To fight terrorism? Do they really think harassing and snooping on (read: distrusting) their population will stop a determined terrorist from planting a bomb?

And why should we have faith in our government if they do not trust us?

Food for thought.

Peer Review and Scientific Consensus; Rogert Higgs, September 2007.

Journalists, politicians and advocacy groups refer to “peer-reviewed research” and “scientific consensus” as the authoritative last words on controversial matters involving the natural sciences, from climate change to stem-cell research and genetically engineered foods. But many people have an unrealistic view of how the scientific community actually works.

The peer-review process is not, contrary to popular belief, a nearly flawless system of Olympian scrutiny. Any editor of a peer-reviewed journal who desires to reject or accept a submission can easily do so by choosing appropriate referees.

Unfortunately, personal vendettas, ideological conflicts, professional jealousies, methodological disagreements, sheer self-promotion and irresponsibility are as much part of the scientific world as any other. Peer review cannot ensure that research is correct in its procedures and conclusions. A part of the work in every discipline—from the physical sciences to economics—consists of correcting previous mistakes.
At any given time, “scientific consensus” may exist about various matters. Over time, however, new interpretations, tests or observations may demolish that consensus. For instance, in the mid-1970s, an apparent scientific consensus existed that our planet was about to enter another Ice Age. Drastic proposals, such as exploding hydrogen bombs over polar icecaps to melt them. and damming the Bering Strait to prevent icy waters from entering the Pacific, were put forth by reputable scientists and seriously considered by the US government.

The truth is that scientific research at the upper echelons occurs within a fairly small world. Leading researchers attend the same conferences, belong to the same societies, review one another’s work for funding organizations, and so forth. If you do not belong to this tight fraternity, it becomes extremely difficult to gain a hearing for your work, to publish in a “top” journal, to acquire a government grant, to receive an invitation to participate in a scientific conference, or even to place your grad students in decent positions.

“Scientific consensus” often emerges because the members of this exclusive club, and those who support them, have too much invested in the reigning ideas to let go. In this context, it behooves bright young scientists not to rock the boat by challenging anything fundamental or dear to the hearts of those who constitute review committees of funders or journals. The terms “peer review” and “scientific consensus” often serve to suggest a process of disinterested neutrality and saintly pursuit of truth. Like every other human endeavour, however, science is conducted by people with the full range of human emotions and motives.

Good rules of thumb for the non-scientist might be the following: government-funded research that is used to justify that government’s policy should be suspect, whether or not it’s peer-reviewed; and the research of scientists who appear at press conferences in the company of politicians or activists whose agendas they are there to support should be suspect, whether or not the work upholds the consensus opinion.

African Children Forced into Becoming Politicians: Horror Story!

This one is for the weekend. From The horrible, horrible story of children being forced into becoming a politican in Africa. How dreadful. Being a politician is terrible as it is, but forcing children into this....really...too ghastly to contemplate.

Human Rights Group Campaigns To End Use Of Child Politicians In Africa

Tuesday, July 28, 2009

Romulus, Remus, Stimulus: A Brief History of Monetary Madness

To find out what our future will be we have to learn from the past. Bill Bonner describes monetary folly in history and guess what he finds: the same ego's, stupidity and policies as we have today: fight excessive debt with more debt. "Deficits do not matter", says Janet Yellen, SF FED governor. Translation: "what we do not admit to be real does not exist and therefore cannot hurt us". (h/t: Jesse). Bonner closes as follows:

"Future economic historians will look at these staggering efforts (of the Fed, TO) with awe and wonder; they will wonder what the Hell we were thinking".

We will ensure a "sustainable" deficit by 2013: Geithner
"Oops, sorry, we tried but the market was against us"

Lew Rockwell. com; by Bill Bonner

Those whom the gods would destroy are first granted stimulus. When a man wins the lottery, for example, it has a stimulating effect on everyone around him. He usually spends the money quickly – often even before he gets it. But no matter how much he wins, he is usually broke within a few years…often, even broker than he was before he bought the winning ticket.

A recent example from the British press: One of the first lottery millionaires punched a plumber and ended up in court, says The Telegraph. Michael Antonucci won 2.8 million pounds in 1995. But he “blew his entire fortune,” reported the paper last month. Now he’s reduced to stiffing tradesmen. The amount in dispute was just 400 pounds, what he was billed for a “gigantic ceiling mirror fitted above a whirlpool Jacuzzi.” He had the mirror installed when he was still flush. Now that he’s broke, he can’t pay…hence the altercation.

The phenomenon is little different when it happens on a national or even imperial scale. Any money that you don’t earn is stimulus. Without the sweat of honest toil on it, money seems to play a pernicious role in history. There are no examples – none – where it produced genuine prosperity. Instead, when a nation suddenly runs into some easy cash, it is soon spending more than it can afford…and getting into trouble.

The Roman Empire is in some measure a stimulus story. It conquered. It grew. Each conquest brought more booty…gold, silver, land and slaves. And each led to more conquests, which brought forth more booty. But the stimulus of this booty stimulated only the need for more stimulus. It did not stimulate real prosperity. Instead, it undermined it. First, slaves bought by rich landowners destroyed the free labor market and ruined small farmers. And then, imported wheat from the provinces – paid as tribute – put the large-scale farmers out of business too. Italy was then dependent on foreigners for its food.

In the first century AD, Roman conquests reached the point of diminishing returns; the stimulus came to an end. But borders still had to be protected. And Roman mobs, made up of displaced small landowners and out-of-work laborers, needed bread and circuses which drained the Treasury.

The first financial crisis of the imperial period came early. Caesar Augustus tried to solve it…with more stimulus. Neither paper money nor the printing press had yet been invented. So, Augustus increased the money supply in the only way he could; he ordered slaves in the silver mines in Spain and France to work around the clock! This extra money did not bring prosperity; it caused price inflation. In a period of about three decades, Rome’s consumer price index almost doubled. Then, when output from the mines could be increased no further, Augustus’s great nephew, Nero, found a new source of stimulus; he reduced the silver content of the coins. This source of stimulus proved ineffective, but enduring. By the time barbarians took over, the silver denarius contained almost no silver at all. Of course, Rome itself was played out too.

Another early and dramatic example of stimulus-in-action came in Spain in the 16th century. The conquistadors increased their supply of money in the time-honored fashion – by stealing it. Galleons brought treasure from the Americas; increasing the Spanish money supply substantially and fatally. The Spaniards had so much stimulus that they laid down their tools. Why should they work? They could buy things.

The discovery of a whole mountain of silver – Potosi – in the middle of the 16th century insured a supply of stimulus that would last for nearly a century. Results? Predictable. Inflation. In the “price revolution” from 1540 to 1640 the cost of living went up throughout Europe. In England, for which we have the most reliable data, prices went up 700%. And Spain, though it covered 40% of its state budget with this easy cash, still defaulted on its debts about once every 15–20 years, from 1557 for the next 10 decades. Spain, like Rome, welcomed stimulus; it never recovered from it.

Now we turn to the biggest misadventure in stimulus ever – the period after the United States “closed the gold window” in 1971. In the 150 years before then, nations could stimulate their own economies with cash and credit, but only to a point. They could overspend; but they had to settle up in gold. After 1971, on the other hand, the sky was the limit – especially in the United States of America. The US could settle its bills in paper, which was then used by foreign central banks as monetary reserves. Since foreign banks were eager to add to their supplies of reserves, there was no effective limit on the amount of stimulus available. The Fed’s adjusted monetary base grew 900% since 1985, and more than doubled this year alone. Total US debt tripled – as percent of GDP.

As it did with Rome and Spain, more and more stimulus stimulated spending and speculation, but not real output. During the 2001–2007 period, for example, credit in the United States increased by $22 trillion. The nation’s GDP increased only by $4 trillion. For every extra dollar of output, Americans took on $5.50 of debt.

But now the bubble has blown up; the feds are on the case. What do they offer? More stimulus! Cometh a report this week that $23 trillion has already been put at risk in the various bailouts and credit guarantees. As for the US public debt, it is expected to increase until the country goes broke.

Future economic historians will look at these staggering efforts with awe and wonder; they will wonder what the Hell we were thinking.

Monday, July 27, 2009

Financial Information of EU Citizens Sold to US.

Big Brother is watching you

Despite the decision in 2001 not to exchange bank information of EU citizens with the USA the EU has decided to reverse this decision.
The explanation is "terrorism" but I just wonder if the Americans would provide Europeans with financial information of their people. To get a glimpse on the attitude of the American officials just listen to Sarah Palins' remark yesterday: "never apologize for your country" or their consistent opposition to an international court that could hold US military and political leaders to a uniform global standard of justice.
The big fat middle finger in your face says it all.
So, if you ever were wondering what that red dot was on your forehead, the clicks in the telephone line or that coughing guy in the black cape you regularly see disappearing in the shadow outside your house, you now know it might have something to do with that Iranian rug you bought last week with your VISA credit card.

Story: Die Welt (German)

Government by Goldman Sachs

Scam central

"The Financial Services Modernization Act.'

"The Commodity Futures Modernization Act."

Goldman Sachs wrote them...

Clinton teed them up and Bush & Co. knocked them down the fairway.

Now Goldman owns the new president too.

The bankrupting of America (and the world) on the behalf of a handful of New York investment bankers.

Kleptocracy - government of the thieves, by the thieves, for the thieves.

Saturday, July 25, 2009

Stock Trading On The Internet Is 100% Failure

Are you one of the hundred of thousand trading stocks on the internet? Well, there are a few people, right at the top of the food chain, who know exactly what you all are doing...and flashing this valuable information to the selected few. These few can than use that information so you will earn some money sometimes...but no too much. Just enough to brag the results of your trading knowledge and capabilities to your friends and just enough to keep you interested in their the game. Result: a few hundred of billions of Dollars of commissions. No, no, not for you....for them, silly. Conclusion: you are being set up for failure while trading via the internet on the stock exchange. This is because they want your money....and they want lots of it.

Update: Flash trading for the selected few (certainly not you) (Zero Hedge)
Update 1: Senator wants SEC to ban "flashing" (Reuters)
Update 3: High Frequency trading is Insider trading (Huffington Post)
Update 4: Sen. Edward Kaufman: A level Playing Field For Investors (Real Clear Markets)

Market manipulation and insider trading with the exchange's OK


It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors' orders, and, critics say, even subtly manipulate share prices.

It is called high-frequency trading -- and it is suddenly one of the most talked-about and mysterious forces in the markets.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else's expense.

These systems are so fast they can outsmart or outrun other investors, humans, and computers alike. And after growing in the shadows for years, they are generating lots of talk.

Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.

And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes -- software that a federal prosecutor said could "manipulate markets in unfair ways" -- it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading but disputes that it has an unfair advantage.

Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy.

"This is where all the money is getting made," said William H. Donaldson, former chairman and chief executive of the New York Stock Exchange and today an adviser to a big hedge fund. "If an individual investor doesn't have the means to keep up, they're at a huge disadvantage."

For most of Wall Street's history, stock trading was fairly straightforward: Buyers and sellers gathered on exchange floors and dickered until they struck a deal. Then, in 1998, the SEC authorized electronic exchanges to compete with marketplaces like the New York Stock Exchange. The intent was to open markets to anyone with a desktop computer and a fresh idea.

But as new marketplaces have emerged, PCs have been unable to compete with Wall Street's computers. Powerful algorithms -- "algos," in industry parlance -- execute millions of orders a second and scan dozens of public and private marketplaces simultaneously. They can spot trends before other investors can blink, changing orders and strategies within milliseconds.

High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits -- and then disappear before anyone even knows they were there.

High-frequency traders also benefit from competition among the various exchanges, which pay small fees that are often collected by the biggest and most active traders -- typically a quarter of a cent per share to whoever arrives first. Those small payments, spread over millions of shares, help high-speed investors profit simply by trading enormous numbers of shares, even if they buy or sell at a modest loss.

"It's become a technological arms race, and what separates winners and losers is how fast they can move," said Joseph M. Mecane of NYSE Euronext, which operates the New York Stock Exchange. "Markets need liquidity, and high-frequency traders provide opportunities for other investors to buy and sell."

The rise of high-frequency trading helps explain why activity on the nation's stock exchanges has exploded. Average daily volume has soared by 164 percent since 2005, according to data from NYSE. Although precise figures are elusive, stock exchanges say that a handful of high-frequency traders now account for a more than half of all trades. To understand this high-speed world, consider what happened when slow-moving traders went up against high-frequency robots earlier this month, and ended up handing spoils to lightning-fast computers.

It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom's price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.

The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds -- 0.03 seconds -- in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

In less than half a second, high-frequency traders gained a valuable insight: The hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.

Soon thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors' upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.

The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.

Multiply such trades across thousands of stocks a day, and the profits are substantial. High-frequency traders generated about $21 billion in profits last year, the Tabb Group, a research firm, estimates.

"You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient," said Andrew M. Brooks, head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. "But we're moving toward a two-tiered marketplace of the high-frequency arbitrage guys and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise the markets lose their integrity."

Friday, July 24, 2009

News Update

News snippets:
  • China buying big quantities of iron ore in South Africa (Fin24)
  • Nigerian railway infrastructure fucked (Railwayafrica)
  • Do you have 100 diesel locomotives for sale? (Railwayafrica)
  • No locomotives? What about 20.000 km of railway line? (Fin24)
  • Dutch banker Gilissen believes gold will go to US$ 650 (; Dutch)
  • We are in the early stage of a depression (BNN; video)

Wednesday, July 22, 2009

Executives receive one-third of all pay in the U.S.

You see, you are most probably in the wrong job.
How the FIRE (Finance, Insurance and Real Estate) economy paper shufflers in the US made themselves indispensable and took over the economy.

Executives receive one-third of all pay in the U.S.

According to a Wall Street Journal analysis of Social Security Administration data, more than one-third of all pay in the U.S. now goes to executives and other highly-paid employees:

Executives and other highly compensated employees now receive more than one-third of all pay in the U.S., according to a Wall Street Journal analysis of Social Security Administration data — without counting billions of dollars more in pay that remains off federal radar screens that measure wages and salaries. Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available. The compensation numbers don’t include incentive stock options, unexercised stock options, unvested restricted stock units and certain benefits.

Between 1979 and 2006, the inflation-adjusted after-tax income of the richest 1 percent of households increased by 256 percent, compared to 21 percent for families in the middle income quintile. Despite these numbers, Democratic leaders, “bowing to unease among lawmakers and governors in their own party,” are reconsidering the House Ways and Means committee’s proposal to implement a surtax on the richest one percent of Americans as a way of financing a portion of health care reform. The Wonk Room has more.

Monday, July 20, 2009

Bailouts could cost U.S. $23 trillion

US$ 1 Trillion stacked: Look at the little guy on the left

Put in perspective:

“If you spent a million dollars a day going back to the birth of Christ, that wouldn’t even come close to just one trillion dollars – $23.7 trillion is a staggering figure.”
Got gold?

Bailouts could cost U.S. $23 trillion

A series of bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23 trillion, the U.S. government’s watchdog over the effort says – a staggering amount that is nearly double the nation’s entire economic output for a year.

If the feds end up spending that amount, it could be more than the federal government has spent on any single effort in American history

For the government to be on the hook for the total amount, worst-case scenarios would have to come to pass in a variety of federal programs, which is unlikely, says Neil Barofsky, the special inspector general for the government’s financial bail out programs, in testimony prepared for delivery to the House oversight committee Tuesday.

The Treasury Department says less than $2 trillion has been spent so far.

Still, the enormity of the IG’s projection underscores the size of the economic disaster that hit the nation over the past year and the unprecedented sums mobilized by the federal government under Presidents GW Bush and Barack Obama to confront it.

In fact, $23 trillion is more than the total cost of all the wars the United States has ever fought, put together. World War II, for example, cost $4.1 trillion in 2008 dollars, according to the Congressional Research Service.

Even the Moon landings and the New Deal didn’t come close to $23 trillion: the Moon shot in 1969 cost an estimated $237 billion in current dollars, and the entire Depression-era Roosevelt relief program came in at $500 billionm according to Jim Bianco of Bianco Research.

The annual gross domestic product of the United States is just over $14 trillion.

Treasury spokesman Andrew Williams downplayed the total amount could ever reach Barofsky’s number.

“The $23.7 trillion estimate generally includes programs at the hypothetical maximum size envisioned when they were established,” Williams said. “It was never likely that all these programs would be ‘maxed out’ at the same time.”

Still, the eye-popping price tag provoked an immediate reaction on Capitol Hill. “The potential financial commitment the American taxpayers could be responsible for is of a size and scope that isn’t even imaginable,” said Rep. Darrell Issa (R-Calif.), the ranking member of the House Oversight Committee. “If you spent a million dollars a day going back to the birth of Christ, that wouldn’t even come close to just one trillion dollars – $23.7 trillion is a staggering figure.”

Congressional Democrats say they will call for Treasury to meet transparency requirements suggested by the inspector general, said a spokeswoman for the Oversight committee. “The American people need to know what’s going on with their money,” said committee spokeswoman Jenny Rosenberg.

Sunday, July 19, 2009

The Zimbabwe-ification of South Africa?

Hat Tip:

Fundamentally I am a libertarian but I find it difficult to agree with the writers. Given the history of this country and the extreme poverty of people who are just not able to talk for themselves, I am of the opinion that the South African government should interfere. Why is it OK for Western European countries to seize properties "for the greater good" but everyone gets very uptight when the South African government sees a "greater good" in the redistribution of farmland.
Should the argument of incompetence within the Department of Land Affairs be a reason to to forget about redistribution? No, the ANC should take a deep breath, look in the mirror and ask themselves what they want. With an incompetent, illiterate and politised bunch of cronies at the top of the Department of Land affairs, the non-delivery will result in frustration and anger on both sides helping nobody; especially not the people who need it most.
Also the argument of pointing to Zimbabwe does not hold up as Zimbabwe is not South Africa.
'But all land expropriations result in failures" is another one. So what, educate them!
Privitisation is a beautiful word, but I wonder if the writers understand the extreme poverty, and lack of basic knowledge from farming to banking or just understanding the world. Privitisation will not help the poor; they will fail, only to confirm our prejudice. I wonder if the writers ever visited South Africa. With all respect, the ANC is being pressurised by their young black voters, immensely frustrated because the ANC promise of a better life with jobs and houses. What the ANC said is that the voters could look forward to some dignity. We should not underestimate the frustration and anger of these voters as they want it NOW, 15 years after the first free and fair elections in South Africa. Land is part of the search for dignity and actually small change for the rest of the country. Let's just hope that the process of expropriation will be a fair one, that's all. I can however agree with the writers that the ball is in the corner of the ANC.

The Zimbabwe-ification of South Africa?

A change in land policy would wreak havoc on the economy.

Wall Street Journal

"The road ends here," reads a makeshift sign in the middle of the highway connecting Bulawayo with South Africa. For many miles, the once busy commercial artery between Zimbabwe's second largest town and its main market has simply ceased to exist. Motorists have to wind their way on an improvised gravel path through the open bush. All along the route, they can observe once productive farms lying abandoned and once productive farm workers scavenging for food.

The dilapidated state of infrastructure and widespread poverty are the results of the destruction of property rights and the rule of law by the government of Zimbabwe. Yet South Africa's new Minister of Land Reform and Rural Development, Gugile Nkwinti, clearly has not been to Zimbabwe in recent years. Speaking in parliament late last month, he announced that the ANC government would scrap its current "willing buyer willing seller" land redistribution policy, which allows the government to acquire land only at a market price and only with the consent of the land owner, and replace it with "less costly, alternative methods of land acquisition." The new policy will almost certainly include some form of land expropriation that could spell disaster for the South African economy.

South Africa's current land problems hark back to colonial times, when native lands were expropriated from their rightful owners, usually without compensation. The 1913 Natives Land Act preserved some 87% of the country's land for the exclusive use of the white minority. Since coming to power in 1994, the ANC government has made land restitution and redistribution its priorities. The government aims to transfer 30% of commercial agricultural land to black South Africans by 2014. As of today, only 5% of the land has actually been distributed.

The ANC has blamed the failure of the current land distribution policy on high prices and obstinate farmers. Some land has appreciated in value because of foreign investment in game reserves and real estate. Such price appreciation should be seen as a sign of investor confidence as well as a source of much needed foreign capital.

According to Mr. Nkwinti, however, "It shouldn't be a situation where we can't get land because it's too expensive because it's owned by Americans, by Germans, by other Europeans and people outside this country, and not Africans. . . ." "To redress [the] imbalances of the past," Mr. Nkwinti continued, "the government must have enabling laws that can allow the pace and the price of land acquisition to be in the hands of the state, rather than in the hands of the seller."

But land redistribution has failed not because of a faulty policy, but because of the ANC's own incompetence. The land reform bureaucracy has a reputation for inefficiency and lack of delivery. Since 2005, it has not been able to spend its own budget. In 2006, there were 1,000 vacancies in the Department of Agriculture and Land Affairs. It is well-known that the lack of skills and capacity in government are partly a result of the politicization of the civil service and affirmative action.

Even when the government has succeeded in distributing land, much of it has ceased to be economically viable. According to the government's own statistics, some 50% of land reform projects have failed. A once thriving potato farm in the KwaZulu-Natal Midlands is now a makeshift soccer field. A former tea estate in Magoebaskloof in Limpopo has become an overgrown forest. The list goes on.

Many of the new land owners have no farming or management skills. They have nothing invested in the land because the government gave them their farms for free after buying the land from the original owners. Furthermore, the uncertainty over the future of farmland has led to a fall in agricultural production. There was, for example, a 7.3% fall in maize plantings in the 2008-09 season. And that was at a time when food prices were soaring.

A policy of expropriation and restriction on private land use will only aggravate the decline of South African agriculture. The weakening of property rights in the agricultural sector will raise questions over the government's commitment to defend property rights in other parts of the economy. That will discourage new investment and thwart the much needed economic growth.

A new approach to land reform in South Africa requires privatization, not expropriation. Some 25% of South African land is owned by the government. Some of it belongs to nature reserves or is of a low agricultural quality. But no serious attempt has been made to determine the viability of the government land for redistribution. Fifteen years after the ANC took over, only one-third of state land has been audited.

Land expropriation does not lead to justice or prosperity. As the case of Zimbabwe shows, it is a road to economic destruction. South Africa must turn back now before it is too late.

Mr. Tupy is a policy analyst at the Cato Institute's Center for Global Liberty and Prosperity. Mr. Kransdorff studies at the Harvard Kennedy School in Cambridge, Mass.

Saturday, July 18, 2009

Every Breath Bernanke takes: video

Must see:

$47 Trillion Toxic Derivatives the Banks/FED Are Hiding

Well, there are many reasons why I believe that we are heading for dark times. The problems are so big, they can only be resolved by a big re-set or war. The big re-set could result in internal unrest and blood on the street, but it is the best of the 2 options. A big re-set will be declared with a bank holiday which can be declared at any time.
You should prepare. There are a few web sites and articles discussing how one should prepare. Negative thinking? Nope, I am convinced of this. Timing is another problem, but we are not far out of a total implosion of trust of bankers and politicians. After that we will be in uncharted territory and your guess will then be as good as mine.

US$ 47 Trillion Toxic Derivatives the Banks/FED Are Hiding

Daily Kos

There's this nagging question that just keeps coming back to me about the bailouts to all the 'surviving' Banks and especially Goldman Sachs, since they haven't missed a beat. I keep asking, how the hell did they do this? Most of the increase in our federal deficit this past year is specifically due to bailing out all the banks and their Wall Street pals, (with our money)while trying to save what is left of our tanking economy that they nearly destroyed.

So when I think about Goldman Sachs raking in $3.44 billion bucks in profits this quarter alone, while the US deficit went over a $1 trillion dollars for the first time in the nation's history, (and appears to now be heading towards doubling that figure in before the budget year is out,) I keep going back to Goldman Sachs and the other 100 'secret banks' the Federal Reserve doled out money to. It wasn't just our '$700 Billion' that is in play here.

But since we cannot get any answers from the Federal Reserve, some of this information must be gleaned by the likes of us little old taxpayers who bailed their asses out.

In case you haven't seen the OCC Quarterly Report on Bank Trading and Derivatives for 2009, I think you might be interested in seeing exactly what is being hidden off the balance sheets that most American are not aware of.....try $47 Trillion dollars of derivatives backed by the government or rotting in some toxic pool that nobody wants anyone to know about, or more important wants you to know about.

I mean, it's not like 'we' the people get a copy of the OCC report in the mail lodged between our National Geographic and Vanity Fair Magazines...... even if we are the ones that bailed all the crooks and liars out.

Nahhh, we gotta go looking for that little piece of information. Here it is if you want to take a look at it.

Here is some of the basic information that you need to know for this discussion in general:

* The notional value of derivatives held by U.S. commercial banks increased $1.6 trillion in the first quarter, or 1%, to $202.0 trillion, due to the continued migration of investment bank derivatives business into the commercial banking system.

* U.S. commercial banks generated record revenues of $9.8 billion trading cash and derivative.

* instruments in the first quarter of 2009, compared to a $9.2 billion loss in the fourth quarter of 2008.

* Net current credit exposure decreased 13% to $695 billion.

* Derivative contracts remain concentrated in interest rate products, which comprise 84% of total.

* derivative notional values. The notional value of credit derivative contracts decreased by 8% during the quarter to $14.6 trillion.

And the Hall of Greedy Bastards from Hell who would kill their own mothers for a sub-prime loan deal? You'll recognize the names of the absolute worst derivatives offenders:

1 JPMORGAN CHASE & CO. $81,108,352
4 MORGAN STANLEY $39,125,255
5 CITIGROUP INC. $31,715,734

The OCC states that 'we the people'(or the Banks, or the FED) have $ 47 friggin trillion dollars in bad toxic dept that these 'Addicted Gamblers' deregulating 'profoundly irresponsible' (Obama's words for them) have jacked up. I don't know about you, but I sure haven't heard that 'little piece of news' slipped into the media somewhere between Michael Jackson's Toxic Drug Report and reading about the famous 'Oscar Meyer Weiner' truck running into a house in Wisconsin.

$47 trillion dollars....OMFG. Why does that sound like all the money in all the world to me.............and it's all from those 'fake credit swaps mortgage crunching up bullshit David X. Li Fake economic theory from hell' gambling crash that no one, I mean no one is ever going to be able to pay off. Sigh. Hitting my head again a brick wall feels good right now. I wish I could put a curse on Hank Paulson and all these crooks to make their anuses itch (in public) all the time, 24/7 until they all just ends up in an 'anus itching mental hospital' for the criminally insane.

Back to Goldman Sachs - Why is this top dog investment 'team' doing so well? As Robert Sheer puts it so well:

Well, because that was the plan, as devised by Bush Treasury Secretary Henry Paulson, a former CEO of Goldman Sachs. Remember that Lehman Brothers, Goldman's competitor, was allowed to go bankrupt. The Paulson crowd wouldn't let Lehman change its status to that of a bank holding company and thus qualify for federal funds; soon afterward, Goldman was granted just such a deal, worth a quick $10 billion. Much is now made of Goldman paying back part of its bailout money, but forgotten is the $12.9 billion that Goldman got as its cut of the $180 billion AIG payoff. That is money that will not be paid back. Goldman is considered a very smart bank because it was early in reducing its exposure to the mortgage derivatives that in large part caused the meltdown. However, it had done much to expand the market and continued to sell suspect derivatives to unwary buyers as sound investments, even as Goldman divested. The firm still holds $1.85 billion in real estate and lost $499 million in the previous quarter on bad loans, but made up for it by playing the vulture role and issuing high-interest debt to governments and companies made desperate by the recession that the financial gimmicks of the banks brought on in the first place.

And Goldman was not just another bank. Before Paulson ran the Treasury Department, another former Goldman head, Robert Rubin, pushed through the repeal of the Glass-Steagall controls on banking activity. While some now play down the significance of this radical deregulation, not so Goldman Sachs CEO Lloyd C. Blankfein -- at least not back in June 2007, when the markets were still doing well. "If you take an historical perspective," Blankfein told the New York Times by way of explaining his company's spectacular success at the time, "we've come full circle, because that is exactly what the Rothschilds or J.P. Morgan the banker were doing in their heyday. What caused an aberration was the Glass-Steagall Act." That 1933 act was repealed in a law signed by President Bill Clinton at Rubin's urging, and in the following eight years Goldman Sachs recorded a 265 percent growth in its balance sheet. "Back then," the Wall Street Journal reports, "Goldman was churning out profits by trading credit derivatives, speculating on currencies and oil and placing big bets [on] the roaring stock market." Big bets made in a casino designed by Goldman, which now makes money off loans to the victims. High on the list of victims are state governments that have to turn to Goldman for money because the federal government that saved the banks won't do the same for the states, which have watched their tax bases shrink because of the banking meltdown. As the WSJ noted, "issuing debt to ailing governments" is now a growth industry for Goldman.

Why didn't the federal government just lend the money to the states? Why was all the money thrown at Wall Street instead of needy homeowners or struggling school systems? Because the federal government works for Goldman and not for us. Indeed, when it comes to the banking bailout, Goldman Sachs is the government. So much so that last fall the New York Times ran a story, headlined "The Guys From 'Government Sachs,' " that stated: "Goldman's presence in the [Treasury] department and around the federal response to the financial bailout is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs." One of those stars was Stephen Friedman, another former head of Goldman. Friedman was both a director of the company and chairman of the New York Federal Reserve Bank when he helped work out the details of the Wall Street bailout. The president of the N.Y. Fed at the time, Timothy Geithner, now secretary of the treasury, requested a conflict-of-interest waiver that allowed Friedman to buy more Goldman Sachs stock, and Friedman ended up with 98,600 shares. At market close on Tuesday that was worth $14,756,476. That's nothing -- three years ago, the 50 top Goldman execs made $20 million each, and this year could be better. They're not hurting.

Yes, Goldman Sachs and the their 'friends' at the Federal Reserve. No one knows how much the Federal Reserve has given them, and no one will, because guess what? That's none of our business. Hey, it's only our money, it's only our country, it's only our government....

Isn't it?

But the tide is changing now. No more 'conspiracy theory' excuses from the likes of Goldman Sachs or the Federal Reserve. The jig is up, and everyone knows it.

There is a growing huge bi-partisan support for both Bernie Sanders bill S604 and HR 1207 to put some Sunshine on Auditing the Federal Reserve who failed us miserably during the financial meltdown. Alan Greenspan changed the interests rates 18 times to keep that real estate bubble going and that now leaves $47 trillion dollars in toxic dept floating around in our financial systems caused by a bunch of out of control Wall Street Banksta Ganstas, who are the ONLY ones hording the money that was literally stolen from us, and who continue, unabated, unashamed and ruthlessly raping the American people every chance they can and without a doubt will continue unless we stop them. Let's remember that Goldman Sachs is at the top of that list and their next blood bath is going to be the Cap and Trade business where they've already got the inside track, as usual.

This video shows the wide support of the FED under Fire, and I urge all of you to call your representatives to support S604 and HR 1207. Many of your representatives may already be on the list of sponsors. 267 House members - 55 percent of the House are already signed up, and that list is growing.

$47 Trillion - wow what a party these assholes had and who in the hell do you think is going to CONTINUE to pay for it as they continue their rampage with no new regulations in sight? It is up to us to stop the insanity, because if we don't do it, no body else will.

President Obama wants to make the Federal Reserve the 'all powerful Oz' and god only knows what's really behind that idea, since we the 'peasants and serfs' and not allowed to see what is behind the curtain.

Pick up the phone and call this week. The secrecy has got to end. The Federal Reserve is not the CIA, (or maybe they are the 'financial CIA') but it has become very clear that what they are is a conduit for Wall Street and the idea of making them the new 'All Powerful Regulator' is nothing short of complete capitulation to the Corporate madness and power that had brought our nation to where it is today.

Friday, July 17, 2009

The real price of Goldman’s giganto-profits

Henry Paulson responds to President George W. ...Image via Wikipedia

A great article by Matt Taibbi: the guy writes as he speaks and that is colourful and direct. This is a "must-read" for everyone interested in US politics and Wall street. Matt writes:
"This is the final evidence that the bailouts were a political decision to use the power of the state to redirect society’s resources upward, on a grand scale. It was a selective rescue of a small group of chortling jerks who must be laughing all the way to the Hamptons every weekend about how they fleeced all of us at the very moment the game should have been up for all of them".
Bloggers and critical writers are furious, but the mainstream media and American public apparently do not care. "What is a Trillion between friends"? There is hardly anger. And if there is anger it is directed at the critics. But wait! Krugman, is also worried about the dealings of Goldman Sach. This is new! If Krugman takes aim at Goldman/Treasury would this mean that I am wrong about my claim that Krugman is looking for a government job because of all his whining about the stimulus being too small? Or does he think the economy is a lost cause and it actually does not matter anymore who you support? This will be a very interesting 2009.

The real price of Goldman’s giganto-profits

So what’s wrong with Goldman posting $3.44 billion in second-quarter profits, what’s wrong with the company so far earmarking $11.4 billion in compensation for its employees? What’s wrong is that this is not free-market earnings but an almost pure state subsidy.

Last year, when Hank Paulson told us all that the planet would explode if we didn’t fork over a gazillion dollars to Wall Street immediately, the entire rationale not only for TARP but for the whole galaxy of lesser-known state crutches and safety nets quietly ushered in later on was that Wall Street, once rescued, would pump money back into the economy, create jobs, and initiate a widespread recovery. This, we were told, was the reason we needed to pilfer massive amounts of middle-class tax revenue and hand it over to the same guys who had just blown up the financial world. We’d save their asses, they’d save ours. That was the deal.

It turned out not to happen that way. We constructed this massive bailout infrastructure, and instead of pumping that free money back into the economy, the banks instead simply hoarded it and ate it on the spot, converting it into bonuses. So what does this Goldman profit number mean? This is the final evidence that the bailouts were a political decision to use the power of the state to redirect society’s resources upward, on a grand scale. It was a selective rescue of a small group of chortling jerks who must be laughing all the way to the Hamptons every weekend about how they fleeced all of us at the very moment the game should have been up for all of them.

Now, the counter to this charge is, well, hey, they made that money fair and square, legally, how can you blame them? They’re just really smart!

Bullshit. One of the most hilarious lies that has been spread about Goldman of late is that, since it repaid its TARP money, it’s now free and clear of any obligation to the government - as if that was the only handout Goldman got in the last year. Goldman last year made your average AFDC mom on food stamps look like an entrepreneur. Here’s a brief list of all the state aid that is hiding behind that $3.44 billion number they announced the other day. In no particular order:

1. The AIG bailout. Goldman might have gone out of business last year if AIG had been allowed to proceed to an ordinary bankruptcy, as AIG owed Goldman about $20 billion at the time it went into a death spiral. Instead, Goldman gets to call upon its former chief, Hank Paulson, who green-lights this massive, $80 billion bailout of AIG (with Lloyd Blankfein in the room), at least $12.9 billion of which went straight to Goldman. Moreover, let’s not forget this: both Goldman and Bank Societe Generale had been tattooing AIG with collateral calls in the period before AIG’s collapse, with Goldman extracting a full $5.9 billion from the company during that time. It was those collateral calls that really killed AIG.

Now, ask yourself: exactly how big would Goldman’s profits be this year, if they had to fill a still-extant $13 billion or even a $20 billion hole on its balance sheet from AIG’s collapse? You think it would still be $3.44 billion? What if Hank Paulson had elected to save Lehman instead of saving AIG/Goldman, how big would Goldman’s profits be then? Is anyone even asking this question?

I keep hearing people say, “Well, so what — it’s only fair that Goldman got paid off for its deals with AIG. After all, AIG was contractually obligated to Goldman. Goldman deserves that money, because it was doing the right thing in buying insurance from AIG in the first place.”

That’s bullshit, too. As Rich Bennett over at the hilarious monkey business blog pointed out to me the other day, Goldman was insane and reckless in making those deals with AIG. Goldman wasn’t removing risk from its books by buying CDS protection from AIG, they were exchanging one kind of risk for another kind of risk, counterparty risk. “If you have too much risk to one entity and they go bust, you’re shit outta luck,” Rich says. “They took AIG for a ride, and when the music stopped, they and their partners were going to be taking up the proverbial tookus.”

So to review: Goldman makes insane bets, runs wild on AIGFP’s house idiot Joe Cassano for a while, sticking him with $20 billion in risk, and when it all went to shit — as it inevitably had to — they drove a big stake through AIG’s heart and got the government to step in and pay them off using our money. How’s that for market capitalism? Just like Adam Smith drew it up, right? They’re just smart guys!

2. TARP. Much discussed, no need to really review here. Goldman got its $10 billion. It paid off its $10 billion. Good for them. However, there’s one thing to note here, and it hasn’t been mentioned really at all in the press. It is continually reported that now that Goldman has repaid its TARP money, it no longer has restrictions on its executive compensation. That’s actually not true. The government still holds warrants from Goldman and other companies that it acquired during the TARP process, and until the banks pay off those warrants (and they’re all already trying to pay them off at below market prices), the Treasury still technically has the authority to prevent lavish bonuses. Not that that will happen, of course, and this is yet another government handout — a firmer government would be hard on Goldman to the end of the process, while this government is doing its matador job and waving through these massive bonuses early on in the repayment schedule.

3. The Temporary Liquidity Guarantee Program. So Goldman last year converts from an investment bank to bank holding company status, which now makes it eligible for a new program that gives commercial banks FDIC backing for unsecured debt. This is not a direct subsidy in the sense of us actually handing over a bunch of money to Goldman, but it’s almost better, in a way. This basically hands over a free AAA rating to the big banks and allows them access to mountains of cheap money, with all of us on the hook if something went wrong. This is the equivalent of telling Exxon it can take crude from the Strategic Petroleum Reserve at below-market rates during an energy crisis and then turn around and sell it on the market at whatever price it wants, and pocket the difference, for the good of God and country. Goldman took full advantage of this deal, issuing $28 billion in FDIC-backed debt after its conversion. Exactly how hard is it for a bank to make a profit when it has unlimited access to virtually free money? It is almost impossible for banks to not make money when their cost of capital sinks this low.

Ask yourself this question: has borrowing money gotten any cheaper for you this year? Did someone from the government walk up to you after you foreclosed on your house or missed payments on your charge card and, as a favor, just because you’re so cool, jack your credit score back up to the 99th percentile and invite you to start all over again? Because that’s what happened to these assholes. They made every bad move you can think of and they not only got a clean credit slate but a vitually ceiling-free spending limit.

4. The Fed Programs. By converting to a bank holding company, Goldman also became eligible for a whole galaxy of new bailout programs administered through the federal reserve like the Term Asset-Backed Securities Loan Facility (TALF); it also became eligible to borrow cheap money from the Fed’s discount window. There is so much to cover here that it would take forever to get to all of it, but the key number to remember here is $2.2 trillion (not billion, trillion). That’s how much the Fed has lent out in assistance since this crisis started and we have no idea how much of it went to Goldman or any other firm, thanks to Ben Bernanke, who refuses to disclose this information. But you can bet that Goldman has taken full advantage of all the various programs designed to relieve the banks of the worthless crap assets they acquired while they were playing roulette the past ten years or so. We just have no idea how much crap they unloaded on the Fed, or how much they borrowed. Would you really bet that it wasn’t much?

5. The TARP Repayment Bonanza. See the story at the top of this piece. As part and parcel of the TARP program, the banks that received money had strict guidelines imposed on them by the state in the area of how they could raise the money to repay. TARP recipients had to issue new equity according to certain parameters, and guess who one of the only major equity underwriters left on Wall Street is? That’s right, Goldman, Sachs. So say International Reckless Dickwad Bank needs to issue $100 million in new stock to pay off TARP; they hire Goldman to do the deal, and since the fee for equity underwriting is 7%, Goldman gets, in essence, a state-mandated $7 million fee. Because so much money was lent out under TARP, the underwriters on Wall Street made a massive bonanza on all the new bank stock. As noted above, Goldman’s equity underwriting department hauled in $736 million this quarter. Does this happen without the bailouts? No. Do the bailouts happen if banks like Goldman hadn’t blown up the universe in the first place? No. You do the math; this is another subsidy.

And that’s just some of the help they’ve gotten. Should we bother to count Goldman’s status as one of just 17 remaining primary dealers in U.S. Treasuries, which naturally did a crisp business last year as the U.S. borrowed its way out of a hole the banks had themselves created? Should we count the ban on short-selling Goldman asked for and got last year? Or how about the seemingly obvious fact that the bank used all of this state assistance and guarantees as a crutch to prop up lots of new risk-taking activity, which was the exact opposite of what was supposed to have been achieved by the bailouts, which were supposed to usher in an new era of austerity and temperance?

As Felix Salmon notes, Goldman last year, after it converted to bank holding company status, announced that it was “taking steps to reduce leverage.” But what’s happened since then is that Goldman has actually been emboldened by all its state backing to borrow more and gamble more than ever. This is the equivalent of a regular casino gambler who hears that the house has doubled down on his credit line and decides to stay up at the tables all night, instead of going home and sobering up. Just look at Goldman’s VaR, or Value at Risk, which measures the amount of money the bank puts at risk on any given day: it’s soared since last year.


Taken altogether, what all of this means is that Goldman’s profit announcement is a giant “fuck you” to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it’s untouchable and it’s not going to change its behavior for anyone. And it doesn’t matter who knows it.

There are going to be some people who say that some of this stuff isn’t government subsidy so much as ordinary government contracting. After all, do we criticize Boeing for making airplanes or Electric Boat for making submarines during a war? If we don’t do that, then why should we be pissed about Goldman making a profit underwriting TARP repayment stock issuances, or Treasuries?

The difference is that Boeing and Electric Boat didn’t start the war. But these guys on Wall Street causesd this crisis, and now they’re raking in money on the infrastructure their buddies in government have devised to bail them out. It’s a self-fulfilling cycle — beautiful, in a way, but at the same time sort of uniquely disgusting. That they’re going to get away with it is bad enough — that they’re getting praised for it, for being such smart guys, is damn near intolerable.

Thursday, July 16, 2009

Support Max Keiser!

Not many people have access to the main stream media, have knowledge about financial markets and dare to tell it how it is. Most of the commentators are parrots and dependent on advertising money from financial institutions.
This is Max Keiser, long range missile and commentator. We should support him, together with Tracy, as an unique voice.



Wednesday, July 15, 2009

International Accounting Standards Board Proposal: Banks Will Be Allowed to Hide Losses.

According to a proposal of the IASB (International Accounting Standards Board), banks and insurers will soon be allowed to hide losses on certain investments. The proposal, made under the headline "improving financial instrument accounting" has potentially significant implications for the reporting by financial institutions. My conclusions are the following:
  1. Do not confuse "accurate reporting about an organisation" with "truth". The answer is clouded by politics and big money.
  2. The proposal is also a strong driver for average Joe to stop paying taxes as at the end he will be urged to foot the bill.
  3. Given the rush for this proposal, the panic for a total meltdown of the financial industry is real;
  4. Investments in financial institutions will be based on gobbledygook financial statements.
  5. Money wins over politics or Wall street owns the politicians.
  6. After trust in accounting is gone, what's next?
  7. Buy physical gold
Update August 5, 2009: Some good news. Brother FASB does not agree with IASB and both are in meetings at the moment.

The International Accounting Standards Board (IASB) published for public comment an exposure draft of proposals to improve (:)) financial instrument accounting.

IASB Web site

The proposals form part of the IASB’s comprehensive review of financial instrument accounting. The proposals, which the IASB believes will significantly reduce complexity and make it easier for investors to understand financial statements, address how financial instruments are classified and measured. The proposals also answer concerns raised by interested parties during the financial crisis (for example, eliminating the different impairment approaches for available-for-sale assets and assets measured using amortised cost). The IASB plans to finalise the classification and measurement proposals in time for non-mandatory application in 2009 year-end financial statements.

The proposals also respond directly to and are consistent with the recommendations and timetable set out by the G20 leaders and other international bodies. In order to be responsive to calls for improved accounting, the IASB decided to split the comprehensive project into three phases (the other phases address the impairment methodology and hedge accounting). The IASB plans to complete the replacement of IAS 39 during 2010, although mandatory application will not be before January 2012.

Introducing the exposure draft, Sir David Tweedie, Chairman of the IASB, said:

The financial crisis has demonstrated that investors need to be given a better understanding of information presented in the financial statements about financial instruments held or issued by a company. Making it easier for investors to understand financial statements is an essential ingredient to the recovery of investor confidence.

The proposals today are an important first step in this process. They also respond directly to concerns raised about the accounting for financial instruments. In finalising these proposals we will continue to work jointly with the US standard-setter, the Financial Accounting Standards Board, to achieve a common and improved accounting standard on financial instruments.

The IASB will host two live Web presentations to introduce its proposals on Wednesday 15 July 2009. The first will take place at 9:30am London time. For the convenience of interested parties in different time zones the second webcast will take place at 3:00pm London time. An IASB ‘Snapshot’, a high level summary of the proposals, is also available to download free of charge from the project section of the IASB website.

Tuesday, July 14, 2009

Meredith Whitney Sucks Up to Goldman Sachs

Meredith Whitney: My Golden US$ Man wink, wink

Mike Morgan Behind Enemy Lines
. h/t Jesse

"When the people fear their government, there is tyranny; when the government fears the people, there is liberty." - Thomas Jefferson

"When the people and the government fear Goldman Sachs, there is economic dictatorship that will destroy the very fabric of our existence as a civilized society." - Mike Morgan

Meredith Whitney Sucks Up to Goldman Sachs

Meredith in the Mud -When Meredith left the Street to strike out on her own, there were two outcomes. One, she would have the freedom to tell the truth, instead of being under pressure to color the truth to maintain relationships. That is what I hoped for.

Instead, we got the dark side of Meredith. This morning Meredith Whitney official admitted that she cannot make it on her own, and she needs the power and might of the scraps Goldman Sachs will throw her way. Meredith is emulating the former dark Queen of the Homebuilders, Ivy Zelman, before she was booted out of Credit Suisse. Ivy now makes it a practice to suck up to homebuilders that can throw her a few bones.

Shame on Meredith - Today she prostituted herself in her nauseating glowing remarks about Goldman Sachs. What Meredith failed to point out, was exactly how and where Goldman Sachs is making their money . . . on the backs of pension funds, endowments and other fiduciary money that they are manipulating and front running. I should also mention, Meredith has failed to even hint at the problems facing Goldman Sachs as a going concern.

If Meredith were truly providing relevant and unbiased information, she'd be talking about the plethora of problems Goldman Sachs is facing as our economy falls deeper and deeper into what will eventually be a violent Depression.

Liar, Liar - And you gotta love the Dark Queen's comment that she was afraid to tell us how bad things really were. Is she kidding? She had no clue what was going on until after the fact, and she was late to the party. Moreover, she's still late to the party if she thinks unemployment is going to stop at 13% and if she thinks Goldman Sachs can get away with criminal conduct to generate profits.

I'd love to sit and write a long piece on this, but I simply don't have the energy yet, and I have too many other things on my plate. Hopefully, the pros at Zero Hedge will expose the Dark Queen's dirty underwear.

Even though my heart attack and bypass surgery has slowed me down, there are others that are hot on the stinky scent of Goldman Sachs and Lord Blankfein. Zero Hedge does a great job, as does Reggie Middleton. On our website, I can no longer run like I was, but we will not simply walk away. There are a couple of posters that have been approved, and two more coming on board this week.

POSTING - We will be inviting all legitimate bloggers and posters to post at - I will provide you with access to write your post, and our editors will review it prior to going live. For guys like Zero Hedge and Reggie, it is a great way to draw more attention to the cause. All they need to is post one or two paragraphs of their original post, and then have a link to their blogs for readers to read the full post and other relevant material about Goldman Sachs. So if you are interested, just email me -

Sunday, July 12, 2009

South Africans for the first time allowed to own gold bars via Wikipedia

Outdated 1911 law changes.

Wow. This is good news! We can now own legally gold bars. Until now, South Africans were allowed to own jewelry and gold coins. Before last Saturday, owning a gold bar was a criminal offence. Big Brother knows what is best for you (and them!). With the purchase, one pays 14% VAT , as is the case with jewelry, However, Krugerrands are zero-rated for VAT but expect a mark-up of app 7-9% (which is 5% for Rand Refinery and 2-4% for the gold coin trader) on the net gold price.
The advantage of the Krugerrand is of course that it is the biggest gold coin brand in the world (more Krugerrands have been sold than all other gold coins in the world together), they are easily recognisable and can therefore there should be no problems with selling these coins.

Law change means you can own gold bars July 11, 2009

By Bruce Cameron, Personal Finance

You can now own gold bars for the first time since 1911. Until now, you were limited to gold jewellery or gold coins, which are often sold at outlandish prices.

The ownership by individuals of unwrought gold and gold bars was restricted in 1908 in terms of the Transvaal Precious and Base Metal Act, and this legislation was placed on the statute books of the Union of South Africa in 1911. This was reinforced in 1967 with the Mining Rights Act, which made it a criminal offence to be in possession of unwrought gold.

Unlicensed South Africans could own gold only in the form of jewellery and coins.

This changed in 2005 when Parliament approved the Precious Metals Act, permitting the manufacture of minted bars.

Permission granted
Bernard Stern, the chief executive of precious metal refiner Metal Concentrators, says his company applied for a permit to produce precious metal bars last year. Permission was granted last month by the precious metals regulator after consultation with the Reserve Bank.

"We are licensed to produce 20 000 troy ounces of gold in 10g, 50g and 100g bars, and 2 000 ounces of platinum in one-ounce bars," Stern says.

He says the 100g bars will carry a premium of five percent above the gold spot price, and the 10g bars will have a premium of eight percent.


COMEX: Paper Gold Sets The Price And Your Pension Is Most Probably Worth Nothing.

My banker is not picking up the phone

We are all waiting for the COMEX (Commodity Exchange in New York) to default. Thanks to the investigative work of GATA (; the Gold Anti-Trust Action Committee) it is becoming clear that gold prices on the COMEX are being set to suit the interests of Wall Street/ US Treasury and have NOTHING TO DO with the physical market of supply and demand. Present gold prices are manipulated prices. If they would leave these prices to the physical market, gold would be minimum US$ 2.500/Oz.
Pension funds and very sophisticated investors did put millions of US$ of gold investments in the COMEX, believing they invested in the metal. Now it seems that the investors only have a piece of paper in their hands. The day will come that the investment brokers/bankers will flee for the hills and the investors will be roaming the street looking for the highest trees in town. In the one hand they will hold their infamous worthless piece of paper and in the other hand a rope
The biggest crime of the century is unraveling.....but the financial media in South Africa is fast asleep.

Commodity exchanges can dump gold debts on ETFs


1p ET Saturday, July 11, 2009

Dear Friend of GATA and Gold:

GATA board member Adrian Douglas discloses in the report below, titled "The Alchemists," that the New York and Tokyo commodity exchanges have been permitting their gold futures contracts to be settled not in real metal but in shares of gold exchange-traded funds (ETFs). This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have and that, in any case, are operated by the investment banks running major short positions in gold.

Thus it is likely that the paper claims to the world's supply of gold are greater than even GATA has suspected -- that the gold supply is even more oversubscribed and that "paper gold" is being created at an ever more frantic rate to suppress gold's price.

The ability to offload futures contract gold obligations to the ETFs could become the principal mechanism of the gold price suppression scheme. GATA asks its supporters to call Douglas' report to the attention of financial journalists, market regulators, and elected officials everywhere.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

The Alchemists

By Adrian Douglas
Saturday, July 11, 2009

In the Middle Ages alchemists toiled in vain to transmute lead into gold. One wonders why they used such an expensive starting material, such as lead, when modern alchemists in the gold world have succeeded in transmuting paper into gold. This article reveals the anatomy of a scam that has been perpetrated on investors and goes a long way to explain and tie together developments in the precious metals markets in recent years.

As many readers may know, I have recently been reporting on how delivery notices at the COMEX cannot be reconciled with movements of metals from and into the warehouse. Clearly these are not going to match on a daily basis, just as orders into a factory will not match shipments out on any given day, as there is a time lag. But when averaged over a month, the "flow" of metal inventory should be comparable to the delivery notices issued. This is just basic accounting. But I have observed that reconciliation is almost impossible with the COMEX data. The only explanation I could think of is that settlement of contracts must be bypassing the warehouse. But how could this be possible, as I thought all contracts had to be delivered via a COMEX registered warehouse?

The COMEX states:

- - - -


Gold delivered against the futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository licensed by the Exchange."

This seems unequivocal until you find this exception:

Exchange of Futures for Physicals (EFP)

The buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position.

- - - -

The COMEX trading rulebook clarifies further:

- - - -

104.36 Exchange of Futures for, or in Connection with, Product (Physical)

(A) An exchange of futures for, or in connection with, product (EFP) consists of two discrete, but related, transactions; a cash transaction and a futures transaction. At the time such transaction is effected, the buyer and seller of the futures must be the seller and the buyer of a quantity of the physical product covered by this Section. The quantity of physical product must be approximately equivalent to the quantity covered by the futures contract.

- - - -

So what this means is that contracts can essentially be settled without going through the COMEX warehouse. Futures contracts and a physical commodity equivalent can be exchanged outside of the exchange and an EFP form can be filed to the clearing department at the COMEX. What's more, the physical commodity doesn't have to meet the specification of the COMEX Gold Contract of being a 100 troy ounce bar or three 1Kg bars of .995 fineness.

So what can be delivered as the physical gold commodity?

This is where it gets very interesting. On February 18, 2005, the NYMEX, parent of the COMEX, issued this announcement:

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Exchange Rule 104.36, which governs exchange of futures for physicals ('EFP') transactions on the COMEX Division, refers to a 'physical commodity' as one of the required components of an EFP transaction but also indicates that the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged.

The purpose of this Notice is to confirm that the Exchange would accept gold-backed exchange-traded funds ('ETF') shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.

Thus, acceptable gold-backed and exchange-traded ETF funds include, but are not limited to, the iSharesCOMEX Gold Trust (ticker: IAU), which began trading on the American Stock Exchange on January 28, 2005.

The trust is an exchange-traded fund that provides a means of obtaining a level of participation in the gold market through the securities market. The trust shares are intended to constitute a means of making an investment similar to an investment in gold. Each trust share represents a fractional undivided beneficial interest in the trust's net assets which consist primarily of gold held by a custodian on behalf of the trust. The shares of that trust are expected to reflect the price of gold less the trust's expenses and liabilities.

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So the gold ETF with the symbol IAU started trading on January 28, 2005, and three short weeks later the shares of IAU became equivalent to real physical gold in the eyes of the COMEX for delivery against futures contracts in an EFP transaction! I

If that doesn't blow your socks off, I don't know what will.

Also note that the ETF mentioned is a COMEX product! How convenient!

Where are the regulators? This ETF is not equivalent to gold. Note the description: "Each trust share represents a fractional undivided beneficial interest in the trust's net assets which consist primarily of gold."

All that is being guaranteed is that each share is a fraction of the ETF assets. The net assets could be 1 oz of gold while the face value of the total shares sold could be 100 million ounces!

The notice does not restrict which gold ETFs are eligible, so clearly the infamous GLD is also eligible to be considered as good as physical gold in an EFP transaction.

Right from the inception of the gold ETFs GLD and SLV, the Gold Anti-Trust Action Committee has deduced from studies of the ETF prospectuses that these funds very likely do not hold gold and silver to fully back the issued shares because the prospectuses don't categorically require it. (See footnotes 1 and 2.) In fact, the ETFs may have no gold or silver at all.

What seemed bizarre to GATA at the time was that the two mega-short anti-gold investment banks, JPMorgan and HSBC, would be involved in the launch and operation of precious metal investments that, on the face of it, would create huge investor demand for the very metals in which the banks hold massive and clearly manipulative concentrated short positions.

Now all becomes clear. The system is the ultimate alchemy. If ETF shares are NOT backed by gold but are accepted by the COMEX as equivalent to physical gold ... presto! You have turned paper into gold -- and paper is a lot cheaper than lead.

A futures market is supposed to provide price discovery for a commodity. In the gold market this notion has been hijacked because settlement can be made with a derivative instrument, such as an unbacked or partially backed ETF share. If that derivative instrument is not backed by gold on a 1:1 basis the scheme allows an artificial apparent increase in the supply of gold and so distorting price discovery toward lower prices.

Such a scam would be in grave danger of becoming exposed if anyone knew the true inventory condition of the vaults of the ETFs. That problem is easily solved by having HSBC be the custodian of GLD and JPMorgan be the custodian of SLV.

I have not found anywhere that COMEX accepts ETFs as an equivalent to physical silver for an EFP transaction, which probably explains why silver warehouse movements are much larger than those of gold, and perhaps may indicate that physical silver is the cartel's Achilles heel.

We have all wondered how GLD could have amassed a stunning 1,100 tons of gold in less than five years without the gold price exploding. This represents buying 10 percent of all global gold output each year. What's more, in the last nine months the ETF holdings almost doubled, adding approximately 500 tonnes or 23 percent of annual global production. And this when the signatories to the second Washington Agreement on Gold have reduced their gold sales to a trickle, from 500 tonnes per year. If the GLD shares are unbacked or only partially backed by gold, the alleged 1,100-tonnes gold holding would be easy to achieve with just the use of a printing press for the share certificates.

In looking at COMEX reports the EFP transactions are reported under "Other Volume." This category is huge compared to delivery notices. For example, on July 8, 2009, the gold price fell by $20. Looking at the relevant COMEX report --

-- on Page 4 "Other Volume" is 9,540 contracts or 954,000 ounces, while the much more visible delivery notices were only 17 contracts or 1,700 ounces! Judging from many reports the "Other Volume" category is orders of magnitude larger than the delivery notices.

What I don't know is how many of these trades are settled with the COMEX-approved gold equivalent ETFs or even if any are. I have sent an email to the COMEX to ask them. I won't hold my breath for a reply. My guess is that a lot of EFPs are settled this way, which would account in part for the meteoric issue of GLD shares. But the COMEX should be transparent; it should be required to publish exactly what is being traded as "Other Volume." In fact if the COMEX wants to be above suspicion it should insist in its rules that EFPs must be settled with gold that meets exactly the COMEX gold contract specification. The EFP then would facilitate delivery instead of facilitating a change in delivery obligations.

Why was it necessary to introduce a mechanism to exchange ETF shares in lieu of physical gold? Where there is smoke there is fire.

Adding credence to this supposition is that GLD has gained wide acceptance with mutual funds, pension funds, and university endowment funds. Many sophisticated investors believe ETFs to be equivalent to investing in bullion. This makes this fiat paper bullion scam easy to perpetrate.

It would appear that the COMEX gold warehouse is merely a window dressing displaying an almost static 2.5 million ounces of dealer-owned gold inventory. But it would appear the vast majority of settlement occurs out of the average investor's view AND, therefore, out of the view of the regulators.

This means that the COMEX is not what it seems. Delivery for an EFP only needs to be "substantially the economic equivalent" of the deliverable commodity! A default could occur at any time if this sorcery of swapping paper for paper suffered a serious setback.

The members of the Gold Cartel must be very proud of themselves for succeeding where the ancient alchemists failed. In fact, they are so proud they decided they didn't need to limit the scam to the COMEX. They have implemented it on the Tokyo Commodity Exchange too.

On October 29, 2008, the TOCOM made the following announcement:

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Based on the Memorandum of Understanding signed in January this year, The Tokyo Commodity Exchange (TOCOM) and Tokyo Stock Exchange (TSE) have launched 'Inter-market Cooperation Workshop' in efforts to improve convenience for participants of both markets, and studied to reinforce cooperation between the commodity market and the stock market.

In light of the study at the workshop, TOCOM has added a 'physically backed commodity ETF' as a possible physical for EFP (Exchange of Futures for Physicals) transactions at the exchange, which allows seller and the buyer, who holds agreement for physical transactions, to conclude the contracts in the commodity futures market without continuous trading of physicals.

Therefore, the SPDR Gold Shares, physically backed commodity ETF listed on the TSE, which has a correlation with the gold spot price, can now be used as a physical for EFP transaction on TOCOM's gold market.

Thanks to this new arrangement, it is expected that the link between TSE's SPDR Gold Shares market and the TOCOM gold market will be strengthened and that the price reliability, as well as the liquidity of both markets, will be enhanced.

For inquiries about this news release, please contact:

Planning Department, The Tokyo Commodity Exchange

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Notice the comment that the "liquidity of both markets will be enhanced." There can be little doubt about that! They can print as many ETF shares as they want and they can then settle as many EFPs as they want ... and guess what happens to the price of gold with such an apparent increase in liquidity. Yes, it will be suppressed. As they said in the release, "the price reliability will be enhanced."

Now that reminds me of Alan Greenspan, who said, "Central Banks stand ready to lease gold in increasing quantities should the price rise." But why get the central banks to lease the real stuff when an ETF can print up an IOU that the unsuspecting investor will accept to be as good as gold?

Does this mean that the alchemists of the Gold Cartel have discovered the Elixir of Life for their gold suppression scheme so that it will go on forever?

No, absolutely not. Faith in anything paper is going out of fashion. California is shortly going to discover that people don't like IOUs. Central banks outside of the G7 countries are buying gold, and I am sure they know about this alchemy. I doubt that the Chinese will accept GLD shares for settlement of futures contracts.

If you want an investment in bullion, then make sure you have an investment in bullion. In my opinion what I have presented here, and what other analysts have written, indicate that GLD and SLV are not investments in bullion. They are mere IOUs in bullion. Take physical delivery of gold and silver from the COMEX. They have only 2.5 million ounces of the real stuff in the gold inventory. That is a paltry $2.3 billion at today's price.

The Gold Cartel is desperate to suppress gold and keep the dream of a "strong dollar" alive along with maintaining low interest rates by using a mechanism described by Professors Summers and Barsky in their research paper "Gibson's Paradox and the Gold Standard." The London Gold Pool used real gold to try to suppress the gold market, and it failed. The paper IOU is going to be even less successful. Imagine what will happen to the gold price when the holders of the paper IOUs go looking for physical gold instead. The Gold Cartel has built a dam on the river of physical gold demand, thinking that it is clever enough to defy the laws of supply and demand. Wait until the dam bursts to experience gold fever such has never been seen before.

Buy real gold and silver before the dam bursts!