Sunday, December 11, 2011
Friday, December 9, 2011
"The gold standard did not collapse. Governments abolished it in order to pave the way for inflation. The whole grim apparatus of oppression and coercion, policemen, customs guards, penal courts, prisons, in some countries even executioners, had to be put into action in order to destroy the gold standard."
-Ludwig von Mises
Commodity Online - The outlook for Gold is bullish for 2012. The European debt crisis, which dominated 2011, will continue to hang over markets in 2012. I’m extremely bearish on Europe. The political and financial systems are inadequate to deal with the serious fiscal and sovereign-debt problems the old continent faces.
Europe and Gold
The risk of contagion is large and the safety mechanism is convoluted (too many countries with too many conflicting interests). Europeans don’t have a handle on the situation; some banks and countries are already insolvent. The situation is extremely precarious.
Europeans will keep kicking the can down the road until it can’t be kicked any longer. When that happens, it’s going to get very ugly very quickly.
In this environment, gold should retain its safe-haven status. Investors will seek to protect their assets by using gold, one of the only currencies that’s a store of value that central banks can’t print at will. The volatility caused by the European markets will push gold prices as high as $2,500 in 2012.
Five reasons why 2012 will be golden for investors:
Gold is an institutionally underowned asset. While investment demand for gold has been increasing year-over-year, the yellow metal is still drastically underowned by many institutional investors. In fact, gold represents only 1.5 percent of all total global assets including equities, fixed income, private equity and real estate.
Increased market volatility boosts gold’s safe-haven status. Following the global turmoil that has been with us since September 2008, volatility has become a permanent staple in the markets. As measured by the VIX index, volatility is at historic highs. This increased volatility is pushing investors toward the safety of gold, which will continue in 2012 and for years to come.
Central banks starting to load up on gold. One of the biggest shifts we’ve seen in the Gold markets is central bank purchases of gold. Up until 2010, global central banks were net sellers of gold assets. Beginning in 2011, many of the world’s leading central banks began aggressive and active purchasing programs to buy gold. Gold purchases in 2011 are up more than 160 percent from the previous year. Indeed, the central banks of Kazakhstan, Mexico, Russia and South Korea all went to the open market to buy gold to diversify away from their dollar holdings.
Emerging market jewelry demand remains very strong. More than 50 percent of gold goes toward the manufacturing of high-end jewelry, and the majority of these purchases are made in emerging markets; particularly in India, China and the Middle East. While these economies could slow down as a result of a European crisis, the amount of wealth creation over the last decade has been staggering, and the high-end consumers who purchase gold should continue their purchases into 2012 and beyond.
Supply extremely tight, accompanied by rising production costs. In addition to all the bullish demand factors, the actual physical supply of gold is draconically tight. Yes, high prices incentivize miners to produce more, but that’s not enough: Ore-grade levels are at historic lows; it takes several years (5-7 years) for a new mine to start producing at commercial levels; and extraction costs are increasing dramatically (labor, energy and environmental costs are all higher). All this means that there’s only 1.5 percent of new gold coming online each year.
When you add up the tight supply scenario with all the bullish demand factors, gold prices have only one place to go, and that is higher.
Posted by Troy Ounce at 1:52:00 PM
Wednesday, October 19, 2011
Bank Of America Takes Sleaze to A New Level
If you keep your money at Bank of America, you are an idiot. BAC quietly moved $53 trillion in derivatives from its holding company to its subsidiary that holds $1 trillion in customer deposits and is insured by the FDIC. If any part of these derivatives blow up, the Taxpayer will then be on hook for the $1 trillion in deposits.
I said 8 years ago that we would eventually see things go on in this country that blow your mind. This is one of them. Although this kind of move is permitted to a very limited degree by the Federal Reserve Act, there is no way in hell that the loophole was intended to permit $53 trillion of shit to affect FDIC-insured deposits. Of course, the watchdogs who are supposed to prevent this kind of abuse are the same people who benefit from allowing it to occur.
That the BAC upper managment would be so completely devoid of ethics and do something like this is a tragedy. That Bernanke, Geithner and Obama would allow BAC to do this is a testament to the fact that our system is collapsing.
You can read the details HERE
Posted by Troy Ounce at 10:27:00 AM
Thursday, October 13, 2011
Hans Hermann Hoppe - Ludwig von Mises Institute
Imagine you are in command of the state, defined as an institution that possesses a territorial monopoly of ultimate decision making in every case of conflict, including conflicts involving the state and its agents itself, and, by implication, the right to tax, i.e., to unilaterally determine the price that your subjects must pay you to perform the task of ultimate decision making.
To act under these constraints — or rather, lack of constraints — is what constitutes politics and political action, and it should be clear from the outset that politics, then, by its very nature, always means mischief. Not from your point of view, of course, but mischief from the point of view of those subject to your rule as ultimate judge. Predictably, you will use your position to enrich yourself at other people's expense.
More specifically, we can predict in particular what your attitude and policy vis-à-vis money and banking will be.
Assume that you rule over a territory that has developed beyond the stage of a primitive barter economy and where a common medium of exchange, i.e., a money, is in use. First off, it is easy to see why you would be particularly interested in money and monetary affairs. As state ruler, you can in principle confiscate whatever you want and provide yourself with an unearned income. But rather than confiscating various producer or consumer goods, you will naturally prefer to confiscate money. Because money, as the most easily and widely saleable and acceptable good of all, allows you the greatest freedom to spend your income as you like, on the greatest variety of goods. First and foremost, then, the taxes you impose on society will be money taxes, whether on property or income. You will want to maximize your money-tax revenues.
In this attempt, however, you will quickly encounter some rather intractable difficulties. Eventually, your attempts to further increase your tax income will encounter resistance in that higher tax rates will not lead to higher but to lower tax revenue. Your income — your spending money — declines, because producers, burdened with increasingly higher tax rates, simply produce less.
In this situation, you only have one other option to further increase or at least maintain your current level of spending: by borrowing such funds. And for that you must go to banks — and hence your special interest also in banks and the banking industry. If you borrow money from banks, these banks will automatically take an active interest in your future well-being. They will want you to stay in business, i.e., they want the state to go on in its exploitation business. And since banks tend to be major players in society, such support is certainly beneficial to you. On the other hand, as a negative, if you borrow money from banks you are not only expected to pay your loan back, but to pay interest on top.
The question, then, that arises for you as the ruler is, How can I free myself of these two constraints, i.e., of tax-resistance in the form of falling tax revenue and of the need to borrow from and pay interest to banks?
It is not too difficult to see what the ultimate solution to your problem is.
You can reach the desired independence of taxpayers and tax payments and of banks, if only you establish yourself first as a territorial monopolist of the production of money. On your territory, only you are permitted to produce money. But that is not sufficient. Because as long as money is a regular good that must be expensively produced, there is nothing in it for you except expenses. More importantly, then, you must use your monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, you must see to it that worthless pieces of paper that can be produced at practically zero cost will become money. (Normally, no one would accept worthless pieces of paper as payment for anything. Pieces of paper are acceptable as payment only insofar as they are titles to something else, i.e., property titles. In other words then, you must replace pieces of paper that were titles to money with pieces of paper that are titles to nothing.)
Under competitive conditions, i.e., if everyone were free to produce money, a money that can be produced at almost zero cost would be produced up to a quantity where marginal revenue equals marginal cost, and because marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into "real values") — and the more so the cheaper the money commodity.
In a way, you have thus accomplished what all alchemists and their sponsors wanted to achieve: you have produced something valuable (money with purchasing power) out of something practically worthless. What an achievement. It costs you practically nothing and you can turn around and buy yourself something really valuable, such as a house or a Mercedes; and you can achieve these wonders not just for yourself but also for your friends and acquaintances, of which you discover that you have all of a sudden far more than you used to have (including many economists, who explain why your monopoly is really good for everyone).
What are the effects? First and foremost, more paper money does not in the slightest affect the quantity or quality of all other, nonmonetary goods. There exist just as many other goods around as before. This immediately refutes the notion — apparently held by most if not all mainstream economists — that "more" money can somehow increase "social wealth." To believe this, as everyone proposing a so-called easy-money policy as an efficient and "socially responsible" way out of economic troubles apparently does, is to believe in magic: that stones — or rather paper — can be turned into bread.
Rather, what the additional money you printed will affect is twofold. On the one hand, money prices will be higher than they would otherwise be, and the purchasing power per unit of money will be lower. In a word, the result will be inflation. More importantly, however, all the while the greater amount of money does not increase (or decrease) the total amount of presently existing social wealth (the total quantity of all goods in society), it redistributes the existing wealth in favor of you and your friends and acquaintances, i.e., those who get your money first. You and your friends are relatively enriched (own a larger part of the total social wealth) at the expense of impoverishing others (who as a result own less).
The problem, for you and your friends, with this institutional setup is not that it doesn't work. It works perfectly, always to your own (and your friends') advantage and always at the expense of others. All you have to do is to avoid hyperinflation. For in that case people would avoid using money and flee into real values, thus robbing you of your magic wand. The problem with your paper-money monopoly, if there is one at all, is only that this fact will be immediately noticed also by others and recognized as the big, criminal rip-off that it indeed is.
But this problem can be overcome, too, if, in addition to monopolizing the production of money, you also set yourself up as a banker and enter the banking business with the establishment of a central bank.
Because you can create paper money out of thin air, you can also create credit out of thin air. In fact, because you can create credit out of nothing (without any savings on your part), you can offer loans at cheaper rates than anyone else, even at an interest rate as low as zero (or even at a negative rate). With this ability, not only is your former dependency on banks and the banking industry eliminated; you can, moreover, make banks dependent on you, and you can forge a permanent alliance and complicity between banks and state. You don't even have to become involved in the business of investing the credit yourself. That task, and the risk involved in it, you can safely leave to commercial banks. What you, your central bank, need to do is only this: You create credit out of thin air and then loan this money, at below-market interest rates, to commercial banks. Instead of you paying interest to banks, banks now pay interest to you. And the banks in turn loan out your newly created easy credit to their business friends at somewhat higher but still submarket interest rates (to earn from the interest differential). In addition, to make the banks especially keen on working with you, you may permit the banks to create a certain amount of their own new credit (of checkbook money) in addition and on top of the credit that you have created (fractional-reserve banking).
What are the consequences of this monetary policy? To a large extent they are the same as with an easy money policy: First, an easy credit policy is also inflationary. More money is brought into circulation and prices will be higher, and the purchasing power of money lower, than would have been the case otherwise. Second, the credit expansion too has no effect on the quantity or quality of all goods currently in existence. It neither increases nor decreases their amount. More money is just this: more paper. It does not and cannot increase social wealth by one iota. Third, easy credit also engenders a systematic redistribution of social wealth in favor of you, the central bank, and the commercial banks within your cartel. You receive an interest return on money that you have created at practically zero cost out of thin air (instead of on money costly saved out of an existing income), and so do the banks, who earn additional interest on your costless money loans. Both you and your banker friends thereby appropriate an "unearned income." You and the banks are enriched at the expense of all "real" money savers (who receive a lower interest return than they otherwise would, i.e., without the injection of your and the banks' cheap credit into the credit market).
On the other hand, there also exists a fundamental difference between an easy, print-and-spend money policy and an easy, print-and-loan credit policy.
First off, an easy credit policy alters the production structure — what is produced and by whom — in a highly significant way.
You, the chief of the central bank, can create credit out of thin air. You do not have to first save money out of your money income, i.e., cut your own expenses, and thus abstain from buying certain nonmoney goods (as every normal person must, if he extends credit to someone). You only have to turn on the printing press and can thus undercut any interest rate demanded of borrowers by savers elsewhere in the market. Granting credit does not involve any sacrifice on your part (which is why this institution is so "nice"). If things then go well, you will be paid a positive-interest return on your paper investment, and if they don't go well — well, as the monopoly producer of money, you can always make up losses more easily than anyone else: by covering your losses with even more printed paper.
Without costs and no genuine, personal risk of losses, then, you can grant credit essentially indiscriminately, to everyone and for any purpose, without concern for the creditworthiness of the debtor or the soundness of his business plan. Because of your "easy" credit, certain people (in particular investment bankers) who otherwise would not be deemed sufficiently creditworthy, and certain projects (in particular of banks and their main clients) that would not be considered profitable but wasteful or too risky instead do get credit and do get funded.
Essentially, the same applies to the commercial banks within your banking cartel. Because of their special relationship to you, as the first recipients of your costless low-interest paper-money credit, the banks, too, can offer loans to prospective lenders at interest rates below market interest rates — and if things go well for them they go well; and if they don't, they can rely on you, as the monopolistic producer of money, to bail them out in the same way as you bail yourself out of any financial trouble: by more paper money. Accordingly, the banks too will be less discriminating in the selection of their clients and their business plans and more prone to funding the "wrong" people and the "wrong" projects.
And there is a second significant difference between a print-and-spend and a print-and-loan policy and this difference explains why the income and wealth redistribution in your and your banker friends' favor that is set in motion by easy credit takes the specific form of a temporal — boom-bust — cycle, i.e., of an initial phase of seeming general prosperity (of expected increases in future incomes and wealth) followed by a phase of widespread impoverishment (when the prosperity of the boom period is revealed as a widespread illusion).
This boom-bust feature is the logical — and physically necessary — consequence of credit created out of thin air, of credit unbacked by savings, of fiduciary credit (or however else you may call it) and of the fact that every investment takes time and only shows later on, at some time in the future, whether it is successful or not.
The reason for the business cycle is as elementary as it is fundamental. Robinson Crusoe can give a loan of fish (which he has not consumed) to Friday. Friday can convert these savings into a fishing net (he can eat the fish while constructing the net), and with the help of the net, then, Friday, in principle, is capable of repaying his loan to Robinson, plus interest, and still earn a profit of additional fish for himself. But this is physically impossible if Robinson's loan is only a paper note, denominated in fish, but unbacked by real-fish savings, i.e., if Robinson has no fish because he has consumed them all.
Then, and necessarily so, Friday must fail in his investment endeavor. In a simple barter economy, of course, this becomes immediately apparent. Friday will not accept Robinson's paper credit in the first place (but only real, commodity credit), and because of this, the boom-bust cycle will not get started. But in a complex monetary economy, the fact that credit was created out of thin air is not noticeable: every credit note looks like any other, and because of this the notes are accepted by the takers of credit.
This does not change the fundamental fact of reality that nothing can be produced out of nothing and that investment projects undertaken without any real funding whatsoever (by savings) must fail, but it explains why a boom — an increased level of investment accompanied by the expectation of higher future income and wealth — can get started (Friday does accept the note instead of immediately refusing it). And it explains why it then takes a while until the physical reality reasserts itself and reveals such expectations as illusory.
What a world we live in!
Posted by Troy Ounce at 5:01:00 PM
Tuesday, September 20, 2011
Advisers Emphasize Calm as Global Depression Gathers
I know a few. Super rich and convinced that the wheel will turn in a few months. Their financial advisors/friends have been instructed to convince their clients "to stay with them" as "it is only cyclical". I must say that it is very, very difficult to get them to change their opinion. But I am 100% convinced that they are wrong this time and that the super rich do have the wrong friends. The party is over as exlained in the article below and the glow you see is not the eternal light but a meterorite coming towards you...too late now..
Dominant Social Theme: The euro is collapsing, the dollar reserve system is failing, China is deflating and NATO military actions continue to expand. Investors should simply ignore the "noise" and concentrate on the soundness of their portfolio allocations, which have been made with the help of true investment professionals.
Free-Market Analysis: It used to be that stock drummers were more than happy to share a hot tip with their clients. Today, more than half (55%) of advisors say the most valuable service they provide to clients in or near retirement "is helping the client maintain perspective and think clearly about events and trends," according to a survey by Russell Investments.
These are not happy times for investment advisers. While it is true that stock markets have not entirely collapsed following the financial crisis of 2008, the headier estimates of equity advancements have been discarded. With the US in a permanent slump and Europe headed into an ever greater depression, only Asia (and China in particular) are holding up the world's economy.
When China has what will likely be some sort of hard landing, it is hard to see how the world can avoid a generalized depression of the sort that afflicted it in the 1930s. Advisers and their clients are spectacularly unprepared for this sort of occurrence as neither group unfortunately seems to have the psychological fortitude or the mental capacity to accept the increasingly grim reality of the 21st Century.
The projections of "Dow 20,000," so popular in the late 1990s and early 2000s, have shrunken to a whisper, replaced by campaigns that promote the effectiveness of financial advice regardless of the markets. Charles Schwab, which makes hefty fees as a custodian of assets, is rolling out one such campaign starting this week, a multimedia marketing campaign for advisers, according to Advisor One.
"The campaign will include sharable, digital banners with the tagline 'RIA-Stands for You. Discover the difference with a registered investment advisor,' and an affiliated website, RIAStandsForYou.org."
It is easy to see why advisers may be in need of promotional support. While the advent of the personal computer and putative advancements in Modern Portfolio Theory contributed to the theoretical arsenal of financial advisers, the fundamental weakness of the financial industry continues to be its refusal to recognize that modern money itself is flawed. This has led to all sorts of conclusions that have simply not held up in the 21st Century from an investment standpoint.
The fundamental one has to do with the creation of currency. Almost no modern advisers will admit that central banks fix the price of "money" – or that money itself in the 21st Century, delinked from an underlying asset, is suspect. This gives rise to terrible misjudgments in the industry, mostly having to do with not comprehending the business cycle, which is controlled by the inflationary afflatus of the central banking mechanism.
Central banks inevitably print too much money in good times and bad. They are virtual inflation manufacturers, though the rhetoric that surrounds them has to do with "controlling" inflation. Inevitably, there are said to be central banking "hawks" and "doves" – with the hawks wanting a severely restrictive monetary policy and the doves wanting a looser one. This obscures the real issue, of course, which is that there would not be modern monetary inflation without central banking.
The business cycle itself is generated by this overprinting of money. First central bankers print money to inflate staggering economies and then, when economies inevitably "overheat," central bankers print even more money to cushion the inevitable bust.
Over time this distorts the free-market price mechanism so grievously that people cannot tell a healthy business from one propped up by government subsidies and central banking favoritism. When this happens, economies basically freeze up. No one hires or sets aside funds for expansion because the free market itself is being held captive by an elaborate contraption of regulations, tax distortions and monetary favoritism that makes capital formation impossible
Most Western financial advisers doubtless missed much of the runup of gold and silver, advising their clients to hold paper assets while precious metals valuations grew tenfold during the fiat-money collapse of the early 2000s.
Financial advisers, even independent ones, serve as distribution arms for financial product companies. These financial product companies, some of them massive indeed, are the logical outcome of a central banking economy that has reorganized the investment industry around paper-based securities (and now electronic digits).
Central banking blows up economies regularly, and during economic contractions the middle class becomes increasingly unprosperous while more and more wealth is centralized in the hands of great Anglosphere banking families. These families then use their wealth to create dominant social themes – fear-based promotions featuring scarcity memes – that are intended to push Western middle classes into surrendering wealth and power to the globalist solutions (UN, IMF, WHO, etc.) that the familial elites have already prepared.
One of the dominant social themes that was remarkable successful in America during the late 20th Century was the idea that various forces were conspiring to erode middle class wealth. The only way to address this potential ruination was through "investing" in a menu of pre-prepared investment solutions featuring rigid, fragile and highly controlled "public" money pools.
Of course, the available solutions such as mutual funds and limited partnerships never work very well because the central banking business cycle itself precludes their ongoing viability. Every few years, what passes for money itself becomes unstable, stock markets deflate and public investment structures themselves lose altitude and in some cases crash. Regulation only makes the structures more rigid.
Over time, the constant inflations and deflations caused by central banking give rise to entirely dysfunctional economies. Stock markets are decimated; credit freezes; economies seize up. This happened in 2008, when central banks around the world rushed in to inject something between US$20 and US$50 trillion to prevent an entire liquidation of the global fiat-money financial system.
People still don't understand that the dollar-reserve system of the 20th Century likely ended in 2008. And today the ruination has continued and even expanded. Central banks are again, in a concerted effort, printing yet more money to liquefy a system that basically doesn't exist anymore. It is impossible to maintain a monetary system for a lengthy period of time that is divorced from an underlying asset such as gold and silver.
Most financial advisers, unfortunately, are not much more sophisticated when it comes to money than their clients. Financial advisers may manage lots of money, but this does not mean they understand the underlying history of money or what money actually is today. Additionally, their clients may have made a great deal of "money" but this doesn't mean they understand it any better.
Financial advisers, even the best of them, are caught up in the modern investment meme. It is one that mandates "allocation" across a personal portfolio, with distribution in numerous types of paper assets – and a determined refusal to consider an overweighting in physical assets even during an appropriate time in the business cycle.
Advisers, in fact, do not realize that they are ultimately in the employ of the great banking families that want to create one-world government and are doing so through the boom/bust mechanism of central banking. They would consider such a statement to be "conspiratorial" and reject it outright.
Thus it is that Western financial advisers remain in the grip of this merciless system, trying futilely to protect their clients from the worst of its depredations by advising aggressive allocation of assets using the somewhat flawed applications of Modern Portfolio Theory. Unfortunately, this doesn't protect their clients from the overall deflation that central banking causes on a regular basis.
The collapse of the dollar-reserve system has made the advisers' job that much harder. Most advisers believe that the cyclical nature of the fiat-money system – which they have experienced historically – will eventually lift asset valuations once again. They seemingly do not understand that there has probably been a terminal dollar-reserve blow-off and that the cyclicality they count on may not occur in ways they and their clients expect.
This is why there is so much emphasis on "keeping clients cool and clam" in the industry today. Both advisers and their clients (having failed to understand the underlying malevolence of the system) are like children holding hands and looking up at the night sky with awe and wonder as a large meteor bears down upon them.
Conclusion: They mistake the distant glow for the promise of better times tomorrow.
Posted by Troy Ounce at 1:24:00 PM
Saturday, September 10, 2011
Saturday, August 27, 2011
You have no idea how much of our economic confidence is based on "trust". Trust that you wll get your money back after a bank deposit; trust that your monthly payments into the pension account will guarantee you a good retirement; trust in our leaders that what they say is not a lie, trust, trust, trust.
We have to believe, where would be without it? Our society would fall apart!
But when the rot sets in, trust evaporates quickly. First with a question mark, then denial, then anger. Exponentially, the fury will burn the soothing words of the msm, the main stream media. We are there now, people demand answers as they are getting uncertain.
How can this be? Teflon USA, we are the biggest nation in the world? What did we do? What happened? Who is responsible for this mess?
Read the always entertaining (and angry) explanation of Jim Willie:
Something big is going on in the United States in a sentiment change, an altered state of psychology, a growing sense of panic. My opinion is that the nation has entered the early stage of comprehension among the population of systemic failure. The most immediate measures are the rash of heavy selling down days in the US Stock market, the strong purchases in Gold, as well as the reactions to constant news of sovereign debt in trouble, and the big banks teetering. Several other softer measures have been noted, made overwhelming by their sheer numbers. A perception wave has taken hold of a toxic USEconomy, a toxic US financial sector, a toxic US housing sector, a toxic economic brain trust in the US towers. A sense of doom is creeping into the nation's living rooms and board rooms, that the nation is in deterioration. Worse, they are realizing how US Federal Reserve is toothless, unable to address or treat the problems.
The citizenry is not adept or gifted enough to conclude that the problem is national insolvency, whose errant prescription has been a flood of liquidity. But they sense something is horribly wrong, and worse, that no current treatment will fix anything. They detect the backfire of the blunt banker solution and the misfired futility of the federal government solution. Witness the rooted perception and horrifying awareness that the United States is moving gradually and unavoidably into a systemic failure. The perception is that neither governments nor bankers have any solutions to help the people, who must impose their own gold standard. The Gold price registered a new high over $1900 per ounce, this after mental midget clowns and propaganda wags in May pronounced the bull market as finished. Their opinions are worthless. Watch them vanish behind the tall shrubbery when Gold surpasses $2000 this autumn.
ROOT OF NATIONAL ILLNESS
In my view, the national illness is a toxic USEconomy dominated by pervasive profound grotesque insolvency. In the early part of the 2000 decade, a strong hint of near-term future failure was obvious. The USEconomy shed its industry to Asia since the 1980 decade. In the early years of last decade, the migration of factories was to China. In its place, the US consumers relied upon home equity withdrawal, blessed as good by the American economists and high priest of heretical ideology Alan Greenspasm. The hint to sound money economists such as the Jackass from the dependence shift was a clear signal of ruin in a few years, as in now. It came on time. In my view, the national illness is a toxic US financial sector dominated by pervasive insolvency and massive fraud. The FASB accounting rule change permitted grotesque falsification of the bank balance sheets, reflected in market capitalizations above zero. The value zero has been and still is more accurate, still is the price target. The big US banks continue to fight off the powerful forces of a housing market in resumed chronic decline, sovereign bonds overseas beset by heavy losses, and a spate of bond investor lawsuits that rack up. All attempts to limit lawsuit exposure have failed. Litigants line up in court like Wal-Mart shoppers on a big sale. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.
The Achilles Heel, the broken leg, the ruined road, and the toxic field is HOUSING & MORTGAGES. The contaminated blood, the leaking gangrene into the circulation system, the sewer line in the water supply is BANKING & FINANCE. The USEconomy grew dependent upon the two-sided asset bubble. No resolution or remedy or liquidation means rotting flesh and gangrene on the body economic. Americans have noticed. The US banking system remains insolvent, worse each quarter from toxic assets. Home prices have resumed their decline, despite all incorrect announcements by banking, political, and economic leaders over public address propaganda loudspeakers. The crowd control devices are not working, as the people are deeply worried. The banks are plagued by an REO inventory bloat extended from home foreclosures, where they do not dare release all the homes onto the already bloated market for sale. The banks are peppered in attacks by bond investor lawsuits, which work to resolve the bond fraud from misrepresentation of mortgages packaged in AAA toxic bundles. They lost 30% to 60% in a matter of months and a few years. The banks have a dirty secret of hundreds of thousands of home loans operating in strategic default, whether the homeowners refuse to pay anything more on their mortgages, often demanding to see the proper title on the property. The news media will not cover this story. In every court challenge, the banks have lost the cases, resulting in the homeowners taking clear title with the loan fully forgiven. The newest threat to the banks is the next Option ARM wave, the second round of adjustable rate mortgage that will continue in a storm until 2013 ends. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.
No meaningful home loan balance scheme conducted by the USGovt means the housing mass & mortgage connective tissue circle the toilet in a flush. The reason is simple. Home loan balance reductions would expose gigantic bond fraud in tracing the mortgage bonds to home loans with title registrations. It would result in exposure of Fannie Mae counterfeit bonds having circulated widely. It would result in forced bank asset writedowns amidst the pervasive accounting fiction at work on the balance sheets, blessed as good by the FASB. It would expose MERS as a fraudulent device to hold titles without legal standing. It would embolden half the nation into civil disobedience, as in outright refusal to pay banks on home loans. It would expose the nation as insolvent generally. It might interfere with some perverse national plan to use Fannie Mae as some devious device to become landlord to one third of the nation's homes, a plan of collectivism that Karl Marx might approve. Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.
PANHANDLE DOCTRINE & PARASITE DOCTRINE
The tragedy that struck the US nation has a great connection to toxic economic thought from its economic brain trust. It is thoroughly toxic, corrupted, and destructive ideology woven in an acidic blanket with rampant impairment to working capital. It earns a D grade on economics effectiveness, and in fairness is not what Keynes prescribed. It is toxic thinking. It seems to have elevated the Voodoo Economics of the 1980 decade to the Fascist Business Model in the 2000 decade. The license to engage in fraudulent activity is engrained in the pact between big business (led by big banks) and the USGovt policy making groups which are dominated by Wall Street firms (led by Goldman Sachs). The summary line is vividly clear to astute adept students of economics: the United States no longer has any concept of capitalism, and has undergone three decades of capital destruction. The crescendo of the capital destruction has taken place in the last three or four years, whose climax tune is the shrill Quantitative Easing. The cast of American economists is wedded deeply to the notion of credit dispensation and monetary growth under the illusion of control. They do not comprehend capital formation anymore, relying instead upon what the Jackass calls with bitter intended mockery the Panhandle Doctrine applied to consumers, matched by a Parasite Doctrine applied to banks. If you give a street bum money, he will buy coffee and maybe a sandwich. The USEconomy is based upon coffee and sandwiches, not much more, as the consumer is given money in pockets and purses to spend. The depravity of economic thought is shocking. The stock market & housing sector (FIRE) replaced industry & factories with tragic outcome. FIRE means finance, insurance, and real estate, a great ironic moniker since the fires burned capital at a rapid rate.
A prevailing belief exists among American economists that if the consumer picks up, then industry will expand with big capital spending and job hires. The belief is entirely backwards, a symptom of American economist ignorance and stupidity. The consumer (street bum) relies upon tax breaks, reduced Social Security & Medicare contributions, extended jobless benefits, clunker car gifts, first time home buyer tax credits, and more. They are all examples of the Panhandle Doctrine from which the USEconomy have grown dependent upon. Observe the toxic American economist ideology. For banks, a parallel Parasite Doctrine hard at work has gutted the financial sector. The regular fare offered as examples as strategic crutches to a broken sector are sponsored USTreasury carry trade (aided steered by Interest Rate Swaps), betting on their own stocks lifted by phony FASB accounting rules, participation in USFed frequent flyer programs like the Money Market giveaways, flash stock trading (High Frequency Games) done with impunity, short stock sale bans (Goldman Sachs given an exemption), and naked selling of USTBonds (grandaddy fraud). See failures to deliver, buttressed by Interest Rate Swap artificial end demand that serves to cover the other end and qualify as a bonafide bucket shop.
Thanks to Aaron Krowne and his Mortgage Implode website, for the intrepid work on the mortgage market and recently on the USTreasury market. He provided the graph on Failures to Deliver on USTBonds. See the ML Implode article (CLICK HERE). The total is roughly $1 trillion in bond fraud, an ongoing figure. The story broke in mid-2009, only to disappear with organized suppression. The Wall Street firms lost their investment banking business, but found a fertile source of liquidity from naked short sales of USTBonds, whose buyers were the artificial factory of Interest Rate Swaps. Without this naked shorting line of liquidity, the Wall Street job cuts would have been much worse, equal to the London and European bank sector job cuts. The Parasite Doctrine has a poster boy project with these fraudulent sales given cover by the Securities & Exchange Commission, whose official ranks are filled by Wall Street henchmen.
THE CONFIDENCE GAME RUSE
The American public is told that confidence is the root cause of the absent woefully low business spending. The confidence took on damage after the vacant USGovt & USCongress budget deal and debt extension to be sure. But the true source of absent business capital investment is broad deep insolvency, the poor business risk, extending from the broken housing market, the wrecked banking sector, and the inadequate industrial base. The government finance requirements serve to crowd out the bond market, which in a normal system would rely upon the financial sector for capital formation, business development, and construction of platforms that offer job growth. In the US financial sector, the innovation is with carry trade speculation, exploitation of easy money facilities, and profound bond fraud, hardly the stuff of growth mechanisms. Big banks do not lend when they can reliably make money on the USTreasury Bond carry trade. The American corporate sector has responded to the liquidity flood, aka monetary hyper-inflation, and the corresponding acidic undermine to capital, by moving investment overseas. See Cisco, General Electric, and Hewlett Packard, which is instead raising a white flag to Asian PC makers. The most glaring consequence to the monetary policy, marred (not aided) by QE and QE-Lite and QE2 and Secret Global QE, has been the entire cost structure has risen, without benefit of rising incomes.
Furthermore check Economics 201, Chairman Bernanke. Low interest rates suppress the USEconomy, not stimulate it. Almost twice as much interest income is earned versus interest costs paid. The pensioners and retirees are struggling with inadequate income, spending less. The bond investors sought out higher yields in mortgage bonds, only to be burned by 25% to 40% losses in principal. Pension fund income is way down. Of course the motive has been to support and stimulate speculation in Wall Street, where the USFed primary loyalty lies, surely not with Main Street and business interests.
FEAR SETS IN, PANIC BEGINS, RUIN PERCEIVED
A confluence of major perceptual factors is flowing in the national mindset. Fear is setting in. The early stage of panic is evident. A growing perception of ruin can be spotted. People are responding to numerous high profile stories, each of which is important in painting a mosaic of extremes, none of which would have occurred in the 1990 decade. The chorus of crisis is loud and shrill. Here are some important events that the American public must examine.
- The broken USGovt budget and upcoming huger deficits. With tax receipts trending down, and the need for economic stimulus programs clear, the USGovt deficit next year will be larger, not smaller, despite what the errant Govt Accountability Office statement reads.
- The blatantly obvious USeconomic recession, whose billboard signs litter the highway, the latest being the Richmond Fed down 10% (called good), and the Philly Fed down 37 (could not be called anything but horrible). The Philly Fed forecast was minus 2 by the intrepid marketing prop carnival barker American economists.
- The EUR 850 billion bailout by the Euro Central Bank, intended to cover the mountain of Italian and Spanish Govt bonds. But the bailout will accomplish nothing, just like Greece, where numerous bank bond bandaids have been applied. And besides, the Germans have refused to offer any more bailout funds, calling Italy and Spain too big to bail out, quite properly.
- The creepy feeling of a global monetary system breakdown. The major currencies are being debased to such a grand extent that even the less gifted American public can notice. They see the onslaught of sovereign bonds overseas, and might harbor more distrust for USTreasury Bonds that the media reports. They might be buying gold & silver coins from the USMint, which cannot keep up with demand.
- The anticipated QE3 heresy is certain to continue. It has already come in Global QE form, as the Jackass expected. My forecast is that the USFed will formally support the US Stock market and violate its charter. But the move will be applauded and serve as the next heroin injection to the body economic, with certain additional capital destruction and rising cost structure.
- The Swiss and Japanese central bank futile actions, designed to halt their rising Franc and Yen currencies. The lesson learned is that all major central banks have turned toothless, their policies ineffective, wasteful, and destructive. The Competing Currency War is making all of them big losers. Their economies suffer.
- The pitiful paltry puny USTreasury long-term yield of 2.0% to 2.2% does not offer the American saver the proper incentive to save, nor the proper return on investment, certainly not an adequate yield to reflect the risk taken. The yield now stands at 7% to 8% below the true CPI rate.
THE SHAPE OF QE3
As the Jackson Hole Conference is set to begin in the spectacular picturesque mountains of Wyoming, anticipation and anxiety rise. The Grand Tetons serve as a fitting location to announce the renewed dependence from the USFed teats, the monetary spigot. Where the spigot is directed remains the main question in debate. Given the robust supposed USTreasury Bond rally, it hardly seems suitable to direct QE3 toward more USTBond buying, unless they wish to avoid USTreasury auction failures. The ultra-low yield combined with ultra-high supply makes for extremely high risk. Bond investors might not show up at all. A failed auction would be highly embarrassing as a event after the highly publicized bond rally, an irony worthy of Rolling Stone exposure or a Saturday Night Live comedy segment. The USGovt minions and Wall Street made men had crowed that the bond rally contradicted the Standard & Poors downgrade for the USGovt debt. My forecast is that the QE3, when it comes, will be designed and intended openly to support the Stock market. It will not arrive this week. It will arrive with full bore announcement in response to the next round of deep US stock market declines. History will be made. The spin on the USTBond rally to 2% on the 10-yr is deafening and deceptive. We are told the bond market anticipates QE3 but that is patently false. The bond market smells with great dread the next USEconomic recession, or more accurately, recognition of the ongoing chronic powerful recession that began in 2008 and never ended. The bond market smells unfixable recession, all current tools having failed. The bond market detects correctly that the US Stock market from mid-2010 has been propped by QE initiatives, now absent.
The irony, intrigue, and corruption is both bizarre and macabre. The Standard & Poors President Deven Sharma has decided to step down only three weeks after the agency downgraded the US credit rating. What a predictable move. The post will be occupied by Douglas Peterson, chief operating officer of Citibank, to take effect on September 12th. Business as usual on Wall Street. The S&P lead role will be in capable hands. One might wonder if the outgoing officer will be charged with child pornography or a rape in a hotel. That event might not be needed.
GOLD MAKES RECORD HIGHS
This week has been tumultuous. The best summary in my view is to conclude that the Gold price set a record high, and fully revealed what direction it will take this autumn. In the low volume vacation dominated days of summer, an opportunity to engineer a selloff has begun in earnest. Gold has gone down to $1765 and Silver to $40 flat, still way up on the year. Hats off to Ben Davies, who has been impressively accurate in his precious metals forecasts. He nailed the silver forecast in April, expecting a steep pullback to $35. We saw it!! In June, when Gold was trading in the low $1500 level, Davies boldly forecasted that Gold would break above $2000 by yearend 2011. The strong upward moves seen so far in August have captured global attention. After action last week, Davies fine tuned his 2011 gold call, stating he expects Gold to reach $2100 by the end of December after first a correction to $1675. Today we saw it!! The hefty pullback will lose some faithful followers, but offer savvy investors a great chance to add to their positions. The cartel is busy making countless grateful Chinese, Indians, and Asians who have not stopped buying precious metals in defense of rapid inflation. They see the American bankers as the inflation villains. The sudden pullback has assured the last fire sale before the autumn gold bull romp, a great trampling event to come. It is written, it will happen. See the King World News interview (CLICK HERE).
The compromised clowns have been busy citing how the Gold price is $150 to $200 too high based upon price inflation, or even 50% over-valued based on some cockeyed Fed Business Model. They overlook the broken distorted market is the USTBonds, supported by powerful usage of Interest Rate Swaps, aided by USFed monetization still and the migration from stocks to bonds. The volatile moves in the Gold market can be interpreted with high predictability. The big down move today signals even bigger upward moves in the next few months. The money is moving quickly today on Wednesday. The 10-yr USTreasury has rallied on the TNX from 2.14% to 2.21% as a decent move. The crude oil price is up from $85.40 to $86.1 as a modest move. Nobody can deny that panic has hit the stock market, as the recession can be seen without rose colored glasses. Expect much more debasement of the USDollar, as tax revenues fall and stimulus costs rise. The bigger USGovt deficits must be financed, during a truly hostile climate. The complete ruin of major global currencies is in progress, not stoppable. Money is being ruined to such an extent that people are bewildered, wondering what constitutes money if sovereign bonds are being attacked and losing value. The tainted USTreasury Bond market has become almost a source of great amusement. The entire major currency market is in turmoil. See the Swiss Franc, the Japanese Yen, and their rapid rise several standard deviations above their norms or trendlines. Havoc has taken root.
The Libyan chapter will be properly told in a year or two. Tyrant Qaddafi wanted to install a Gold Dinar for North African usage, a similar sin committed by Saddam Hussein. These guys never learn that a challenge to the USDollar is met with armed resistance. The US & UK forces entered the fray. The secondary goal might have been to take oil producing capacity offline, thus lifting the crude oil price. Big Oil interests do not want the global recession to rock the crude oil price too much. The other benefits have been the $50 billion in funds frozen solid in US & London banks. Another $50 billion is frozen in European banks. Expect it to remain out of reach by Libya's new leaders, despite talk. It is too badly needed within the Anglo banking system. See Oslo. The search is on not only for Qaddafi, who is surely comfortable somewhere in a desert bunker, but also well fed, and well medicated with his usual fare of psycho-tropic drugs. The hunt is also on for Libyan gold bullion. The Anglo bankers need it, since the COMEX and LBMA are just about bone dry, and the big US & UK banks are insolvent on the edge of failure. See their Credit Default Swap rates on debt insurance. For the greater good of the Anglo Empire, gold must be found and secured and locked up in the banking system, regardless of the propaganda messages put forth.
Prepare for $2100 gold by January, and $60 silver by January. The last open door is being made possible in the final days of August. Like last year, the months of September through January will be ones for the history books. The start of big bank failures in the United States, London, and Europe should add to the gold run. Contagion has hit Italy, Spain, and France (the newest PIGS lookalike). The breakdown will be broad, deep, and frightening in the next few months. The twisted thinking is probably that gold must be brought down as much as possible, to make a lower base before the next gigantic upward moves beyond the $2000 level and probably past $2100. The gold breakout will capture global attention and make major headline news. This is 2008 all over again, but much worse!! The story line will be that nothing was fixed, but that nothing can be fixed, and much more debasement of money will come. The Gold Meter will rise in direct reflection.
Posted by Troy Ounce at 9:24:00 AM
Wednesday, July 20, 2011
If does not happen often, but as it happens it is a delight to read: a blogpost with an intelligent view point which makes the inner workings of the system a bit clearer. Wonderful, to make a comparison between the banking system and the media and that both are suffering from a generational conflict.
But...is the older generation so much wiser? Are our rulers young Jack Russells without any decency? If so, where is the older generation? Why do they keep their mouth shut?
The media industry is not much different from the banking industry
Surely the most spectacular moment in the hearings on Tuesday occurred when Robert Murdoch's young 42 year old wife, Wendi Deng, got up and slugged an intruder throwing a paper plate full of shaving foam at her husband, according to the Daily Mail.
I have no way of knowing whether either Rupert Murdoch or his son James lied during the dramatic hearing on Tuesday, but I do know that Murdoch's testimony is completely consistent with the the culture of fraud and extortion that I've been describing for many years on my web site, among politicians, and in the financial and computer industries. (For the latter, see "Boomers and Gen-Xers: Dumbing down IT.")
Now, you can that his answer is self-serving, but whether he had any other motives, I felt he was genuinely at what had happened, and his response describes a lot of what's been going on in the last decade:
"I feel that people I trusted, I'm not saying who, I don't know at what level, have let me down. And I think they behaved disgracefully, betrayed the company and me, and it's for them to pay. I think that frankly, I'm the best person to clean this up."This is exactly what happened in the financial industries, where those tens of trillions of dollars of toxic assets still in banks' portfolios didn't just come from nowhere. They were created by Gen-Xers who poured out of colleges in the 1990s with masters degrees in financial engineering. Those people knowingly created these fraudulent securities, and sold them to investors knowing that they were defrauding the investors.
Their greedy, incompetent Boomer bosses went along with this, because they were making so much money by defrauding investors. The extortion came in when the bosses started asking too many questions; then the perpetrators threatened to go to another firm or create other problems. (See "BlogWatch: Yves Smith at 'Naked Capitalism' adopts generational model of financial crisis.")
These tens of trillions of dollars of fraudulent securities did not just come from the tooth fairy. Almost every major financial institution in the world was involved as perpetrator, and that could only happen generationally. That doesn't mean that every Boomer and Gen-Xer is a crook; quite the contrary, most people are decent, honest people.
But it's amazing how much the culture has changed since the 1990s, when the Silent generation was still in charge. In today's culture, unlike earlier decades, people who are willing to commit fraud and extortion are able to get away with it, and have a big advantage over people who are decent, honest, competent and professional.
The Rupert Murdoch scan exploded into world headlines only in the last couple of weeks, after it was revealed by the Guardian that reporters from Murdoch's News of the World newspaper had hacked into the cell phone account of a missing 13 year old schoolgirl, Milly Dowler, after she had been abducted in 2002.
The reporters actually listened to Milly's phone messages and deleted some of them, to keep other reporters from getting the scoop. Milly's distraught parents, not knowing whether she was alive or dead, discovered that the messages had been deleted, and assumed that Milly must have deleted them herself, meaning that she was still alive. Her decomposed body was found in the woods several months later.
At Tuesday's hearing, Rebekah Brooks, the editor of the paper at that time, described her reaction when she read the Guardian article two weeks ago, as quoted by BBC:
"The idea that Milly Dowler's phone was accessed by someone being paid by the News of the World, or even worse authorised by someone at the News of the World, is as abhorrent to me as it is to everyone in this room. ... I don't know anyone in their right mind who would authorise, know, sanction, approval, anyone listening to the voicemails of Milly Dowler in those circumstances. I just don't know anyone who would think it was the right and proper thing to do at this time or at any time."Once again, I don't know what additional motives Brooks might have had in making this statement, but her anger and disgust is very credible to me, because there are two kinds of people in the world. There are people who think that there's nothing particularly wrong with hacking into the cell phone messages of an abducted 13 year old girl, and there are people who think that no one in his right mind would do so, or who would go ballistic at learning about someone else doing it. I'm firmly in the second of these two categories, and I can easily believe that Brooks was also in the second category.
What's different about our culture now that's different from the 1970s, 80s and 90s is that today there are a lot more people in the first category. For these people, decency, honesty, competence and professionalism count for nothing.
We know that the culture of fraud and extortion permeates the entire financial industry, as well as the politicians in Washington and Brussels. We know that it also exists in the computer industry, and now we also know that it media.
This is not surprising. What WOULD be surprising is if anyone could name an industry which was not permeated by fraud and extortion in the last few years.
Posted by Troy Ounce at 10:54:00 AM
Tuesday, July 5, 2011
US Department of Defense & Homeland Security are going to promote rural development and economic growth in rural USA....huh?... Executive order 13575 is designed to begin taking control over almost all aspects of the lives of 16% of the American people. In the middle of the Anthony Weiner scandal, as the press and most of the American people were distracted, President Obama created something called “The White House Rural Council” (WHRC).
What has Homeland Security & Defense to do with fishing & hunting? No explanation given, just an "Executive Order" order by stealth while you were looking the other way. Janet Napolitano and her brainless thugs are now interested in promoting flowers or controlling your life. Read and judge for yourself.
Executive Order 13575 of June 9, 2011
Establishment of the White House Rural Council
By the authority vested in me as President by the Constitution and the laws of the United States of America and in order to enhance Federal engagement with rural communities, it is hereby ordered as follows:
- Section 1. Policy.
- Sixteen percent of the American population lives in rural counties. Strong, sustainable rural communities are essential to winning the future and ensuring American competitiveness in the years ahead. These communities supply our food, fiber, and energy, safeguard our natural resources, and are essential in the development of science and innovation. Though rural communities face numerous challenges, they also present enormous economic potential. The Federal Government has an important role to play in order to expand access to the capital necessary for economic growth, promote innovation, improve access to health care and education, and expand outdoor recreational activities on public lands.To enhance the Federal Government's efforts to address the needs of rural America, this order establishes a council to better coordinate Federal programs and maximize the impact of Federal investment to promote economic prosperity and quality of life in our rural communities.
- Sec. 2. Establishment.
- There is established a White House Rural Council (Council).
- Sec. 3. Membership.
|(a)||The Secretary of Agriculture shall serve as the Chair of the Council, which shall also include the heads of the following executive branch departments, agencies, and offices:|
|(b)||A member of the Council may designate, to perform the Council functions of the member, a senior-level official who is part of the member's department, agency, or office, and who is a full-time officer or employee of the Federal Government.|
|(c)||The Department of Agriculture shall provide funding and administrative support for the Council to the extent permitted by law and within existing appropriations.|
|(d)||The Council shall coordinate its policy development through the Domestic Policy Council and the National Economic Council.|
- Sec. 4. Mission and Function of the Council
- The Council shall work across executive departments, agencies, and offices to coordinate development of policy recommendations to promote economic prosperity and quality of life in rural America, and shall coordinate my Administration's engagement with rural communities. The Council shall:
|(a)||make recommendations to the President, through the Director of the Domestic Policy Council and the Director of the National Economic Council, on streamlining and leveraging Federal investments in rural areas, where appropriate, to increase the impact of Federal dollars and create economic opportunities to improve the quality of life in rural America;|
|(b)||coordinate and increase the effectiveness of Federal engagement with rural stakeholders, including agricultural organizations, small businesses, education and training institutions, health-care providers, telecommunications services providers, research and land grant institutions, law enforcement, State, local, and tribal governments, and nongovernmental organizations regarding the needs of rural America;|
|(c)||coordinate Federal efforts directed toward the growth and development of geographic regions that encompass both urban and rural areas; and|
|(d)||identify and facilitate rural economic opportunities associated with energy development, outdoor recreation, and other conservation related activities.|
- Sec. 5. General Provisions.
|(a)||The heads of executive departments and agencies shall assist and provide information to the Council, consistent with applicable law, as may be necessary to carry out the functions of the Council. Each executive department and agency shall bear its own expense for participating in the Council.|
|(b)||Nothing in this order shall be construed to impair or otherwise affect:|
|(c)||This order shall be implemented consistent with applicable law and subject to the availability of appropriations.|
|(d)||This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.|
The White House,
June 9, 2011.
Posted by Troy Ounce at 9:19:00 AM
Friday, June 17, 2011
Sunday, June 5, 2011
"....and while the banks were raising money for the Greek government, the same banks were silently betting and speculating against the same loans. Sounds familiar? The same people, same plan, same action, same rating agencies and same result in the US, Ireland, Belgium, Portugal, (wait for Spain, Italy, etc). Also called "racketeering & collusion".... These banks knew damn well Greece would never be able to pay back their loans, so for this they should be punished. Not only with jail but also with a so called "haircut". Capice?...Καταλαβαίνετε?"
The Greek people are angry and nobody is helping them. The courts are the last refuge. After that it is civil war.
On April 09, 2010, in Athens, together with the Greek Lawyer Mr. George Noulas, we filled a Criminal Fraud Charge file submitted to the Attorney General of the Supreme Court.
The file is claiming against fraudulent Speculators who, by running an organized criminal plan, they manipulated the Greek Government Bonds Market, with the intent to perform multiple financial profits, deceiving and damaging Greek National Economy and Greek Citizens and Taxpayers wealth.
The Greek sovereign debt crisis analysis could help the world to realize the extreme vulnerability of all our national economies.
To understand how sovereign countries can be easily destroyed and brought to financial slavery by some few fraudsters, through the combination of both naked CDS trading and naked short selling on Government bonds, issued by the Governments in order to finance our Govt debts and the economic development of our countries.
The most important lesson we learned from the Greek case study, is the definition of the limit between market speculation and financial crime.
This explains how financial speculation could turn into a fraud crime, transforming fraudulent market profits in pure money laundering and changing economic sovereignty of a country in a financial slavery scam.
The crime is a typical financial fraud against the State, consisting in the manipulation of the Greek Government debt by a group of fraudulent Speculators and their Accomplices, Greek and foreign citizens and Government Officers.
Those persons, by running an organized criminal plan, represented falsities on the existing Greek sovereign debt and national economy facts and figures, with the intent to manipulate the Greek Government Bonds Market, in order to perform multiple and consecutive financial profits, with the knowledge and the purpose to deceive and damage Greek National Economy and Sovereign Debt, Greek GDP and, consequently, Greek Citizens and Taxpayers wealth.
The direct and consequent damage, only for the year 2010, was calculated at 13 billion euro, stretching Greek National Economy, Next Generations Wealth and Economic Sovereignty of the country.
The Greek Government debt financial scam fits with all fraud elements, as required by the most EU criminal laws.
Speculators and accomplices made representations of existing facts with the knowledge of their falsity and with the intent that it shall be acted upon by the plaintiffs ignoring the falsity, their reliance on the truth of those false representations, their right to rely upon it and the consequent damage suffered by the Greek citizens and taxpayers.
Each of the above mentioned elements has been pled with particularity and proved with clear, cogent and convincing evidence, in order to establish the case.
Some of the persons, corporations and institutions involved in the Greek case, have been recently charged with similar fraud crimes in the USA and EU, following to investigations of Justice and other State and International Authorities.
The Fraudulent Actions & the Omissions to Act
The crime consists in a double financial scam, committed under consecutive actions by the persons identified as fraudulent speculators.
First, with Naked CDS multiple trading actions (transactions) against Greek Govt bonds, in order to manipulate CDS and spreads rates.
This fraudulent trading pushed the lending cost of the Greek sovereign debt to unacceptable interest rate levels, higher than 15%.
Second, with multiple Naked Short Selling actions (transactions) on Greek Govt Bonds, in order to manipulate the bonds market itself.
This fraudulent short selling created a fake and artificial bonds offer in the international markets, with the intent to depreciate Greek Govt Bonds values by up to 30%-40%.
In both those circumstances, some of the physical persons directly or indirectly identified as responsible persons of the crimes committed, were at the same time representing as principals, managers, officers, delegates and brokers the Prime Dealers of the Greek Govt Debt, that means the international Banks who, under agreements with the Greek Government, are placing the Greek Govt debt to the international markets.
This is the most important of the accusations, as the same persons responsible for the placement of the Greek Govt debt in the international markets, were double dealing with CDS and Govt Bonds Short Selling, covered or naked transactions, acting against the interest of their customer, that means Greek Republic, omitting intentionally to inform any of the local Supervision and Regulation Authorities regarding their double dealing position.
This represents the most clear and direct case of both conflict of interest, insider trading and financial scam, as the same persons and corporations were first dealing with their customer’s Govt bonds and, at the same time, were double dealing against their customer’s interest, selling the bankruptcy of that customer (Greek Republic) to other customers they had, taking advantage of the inside information and the knowledge they had on the particular circumstances and the expires of the Greek Govt debt, as a result of their first position as Prime Dealers of the Greek Govt bonds.
This is the main reason we accused them to act under a precise and organized criminal plan.
The persons we charged are the same fraudsters involved in the USA scandal during the years 2007-2008, speculating on the CDOs and the CDS issued on the USA subprime mortgages that brought to the Lehman and AIG collapse and to the world financial crisis.
Same persons, same actions, same plan, same money, same scam, same damage.
That means there were knowledge, manipulation experience, inside information and organization.The one and unique difference consists in the fact that the Greek case was the first financial scam where market manipulation was organized in order to destroy a sovereign country, instead of a bank or a private corporation.
(How were there crimes executed in Ireland, Spain and Portugal? Are there similarities with Greece? Troy Ounce)
(How were there crimes executed in Ireland, Spain and Portugal? Are there similarities with Greece? Troy Ounce)
And instead of the CDOs, the crime was committed with the Greek Govt Bonds.
All those fraudulent actions were realized by a series of multiple and consecutive transactions, consisting in buy and sell orders, covered or naked and then recycled, which were left to happen thanks to the omissions to act by the Greek supervision and regulation authorities for the domestic financial market, such as Bank of Greece, Ministry of Finance and Public Debt Management Agency in first.
Those combined fraudulent actions, consisting mainly in both Naked CDS and Naked Short Selling transactions on Greek Govt Bonds by the Prime Dealers of the Greek Govt Debt, created a sovereign debt financial bomb exploded on Greek national economy, destroying the country.
This is the reason we identify the scam as a financial terrorism crime.
The persons we charged
All physical persons identified as fraudulent speculators on the Greek Govt debt manipulation.
That means all responsible principals, officers, managers, delegates, brokers, etc., of the major commercial and investment banks involved in the scam, hedge funds, rating agencies and, together with them, all Greek partners, representatives, brokers and other physical persons identified as accomplices, such as Greek Banks and Funds principals, officers, managers, traders and, more than them, blue chip business owners, experts and financial analysts, politicians, Govt officers, Media Owners, etc.
The direct damage
Following to the direct and consequent damage of 13 billion euro suffered by the Greek citizens and Taxpayers, on May 2010, Greece entered under an IMF, EU and ECB bailout scheme called «MNIMONIO».
This is nothing the less than a tailor made Government lending program ruled by a Memorandum of Understanding (MOU) with the lenders, similar to those imposed in Argentina and other Latin America countries.This MOU was imposed in Greece after a real parliamentary coup organized by the Greek government, violating the primary and most essential principles of the Greek Constitution map.
There was not any referendum, Greek citizens were never asked in any way on that and decision was made in Parliament without to respect the quorum majorities required by the Greek Constitution for the international contracts and agreements signed by any Greek Government in charge.
And the most terrible thing was that persons, institutions and corporations identified as responsible for the speculation and the financial crimes committed against the country, through years of government debt manipulation and falsities, they have been self appointed as the ultimate country rescuers.
That means Greek Government itself, Banks, Bank of Greece, ECB and EU Commission.
The indirect damage – Debt Restructuring
Through the IMF, EU and ECB M.O.U. bailout, Greek government debt real restructuring procedure started on May 2010.
This is a very important step, we need to understand.
MOU bailout modified both the nature and jurisdiction of the Greek sovereign debt.This was the first, real restructuring procedure started on the Government debt of the country.
Greek sovereign debt issued until 2010, was under a form of a regular uncover debt, simply issued through government bonds, without any understanding securities or any other kind of collateral assets.
That means, existing Greek sovereign debt was not collateralized.
Going under the MOU bailout scheme, the 110 billion euro loan approved on May 2010, was the first Greek government debt issued as a collateralized debt obligation, similar to a CDO contract, and was approved only with the purpose of the down payment of the previous government bonds expires.
That means, Greece signed a new loan agreement, in order to pay older debts expires.
This is a typical and pure refinance operation.
But the real truth beside is that previous debts were not collateralized and new MOU debts they are.
Through this refinance procedure, Greece will gradually transform all the existing non collateralized sovereign debt, in a new, collateralized sovereign debt, offering as collateral securities all public properties, future revenues and all tangible and intangible assets of the country.
This is how sovereign debt nature was modified through MOU bailout agreement.
How that will happen ?
After the first 110 billion MOU loan agreement, signed on May 2010, a second one will follow.
This will happen as Greece will not be allowed to return to the markets on 2012 and 2013.
This is the reason why speculation against the country is continuing, even after the approval and the realization of the first MOU agreement.
Government’s financial policy agreed with the lenders of the MOU agreement, encourage international speculators to continue with manipulation against country’s national economy and sovereign debt.Internal market experiences a day after day continues downturn, private business are constantly closing or bankrupting, inflation and unemployment are blowing, recession is running on an average 4% year rate, poverty and criminality are growing up, and all this explosive, hard recession economic mix, introduces Greece in the vicious circle of a new and continue deficit generation that will keep creating additional, new sovereign debt, as deficits could never be financed by the future economic revenues of the country, as GDP is constantly dropping down.
After all that, there will not be any market in the world intended to finance a country in such a financial situation, and that means on the year 2012 a second MOU bailout will follow the first one.
And again, this one will be also issued as a collateralized debt.
And again this will also be approved limited with the purpose to pay older government debt expires,continuing through this refinance procedure to transform the whole Greek sovereign debt into a new, collateralized debt obligation.
When over a 50% quote of the existing sovereign debt of the country will be transformed in a collateralized debt obligation, only then default will be leaved to happen in Greece.
In this way, all Greek national assets and resources will become ownership of the country lenders, as the new Government loans under the various MOU bailout agreements, not only will be 100% collateralized but they will also be regulated by the English Law.
And this is how jurisdiction of Greek government debt is gradually changing, as existing debt is regulated by the Greek law.That means execution procedures on public properties and any kind of tangible and intangible assets will be admitted and Government debt transfer to any third parties, partially or totally, will also be free to happen.
After all that, Greece will never allowed in the future to be a sovereign country, as Government debt could be easily transferred under a regular factoring agreement to any physical person, institution, corporation or country, such as Turkey for example.
What is the actual status of the case
The criminal charge case is now at the most important point.
Preliminary investigations are recently concluded, after a very detailed exam from both Prosecutor General Office and Greek Financial Police Authorities (SDOE).
On February 2011, we were invited by the Financial Police Dept in Athens to give additional information regarding Greek Govt bonds short selling transactions, between January – April 2010.
On this purpose we submitted an additional file with all that information.
On May 2011, Mr. Panos Kammenos, a deputy of the Greek Parliament, following to the Greek justice authorities investigation on the criminal fraud charge file, submitted a parliamentary interrogation to the Minister of Economy and Finance, asking from the Government to inform Greek Parliament on all the specific details regarding Govt debt Prime Dealers, CDS and Naked CDS Traders, Govt Bonds Short Sellers, Banks, Funds and physical persons indentified as buyers, sellers or short sellers and, additionally, to inform Greek Parliament on the official results of the recent EU and USA state and justice authorities investigations on Greek Govt debt speculation, CDS cartel frauds, etc.
After that, the complete charge file is now transmitted to the Prosecutor for the Financial Crimes at the Athens Court, who is starting with the main investigation procedure and, during this phase, he will investigate on all specific physical persons and corporations, both Greek and foreign citizens.
This is a criminal charge case and only physical persons can be indicted, that means all responsible persons indicted with the charge file, such as banks and funds principals, managers, officers, representatives, brokers, dealers, CDS traders, Short Sellers, etc., Govt Ministers and Officers, Bank of Greece principals, officers and directors, together with the others who will be indicted during the preliminary investigation process.
All those indicted persons will be called to the Prosecutor’s Office to explain their actions or omissions to act, that means they have to explain what exactly they did, how they did it, why they did it, on behalf of whom they acted, etc., etc.
Having a good experience on previous similar cases, I’m sure that this moment is very critical as a lot of them will start to talk.
Some of them because they’ll get afraid, others because they didn’t share any of the profits, some others because they didn’t got the profits promised by the speculators who organized the scam, etc., etc.
We trust in God, Justice and Common Sense, hoping that the Greek charge file will push other European citizens and taxpayers to do the same, as happened recently in Spain, where a similar criminal file was submitted to the local Justice Authorities.
For more information: Dr. Kiriakos Tobras * www.stopspeculators.gr
(Google translation) h/t www.maxkeiser.com
Posted by Troy Ounce at 3:13:00 AM