What are the options in Syria? Can the West try a 'limited' intervention there? Should it consider any kind of intervention since Kofi Annan's plan seems to have failed? And will NATO's footsteps cost the country even more bloodshed? CrossTalking with Mark Almond, Sinun Ulgen and Samer Araabi on May 30.
Thursday, May 31, 2012
CrossTalk: War Unlimited
May 30, 2012 by RussiaToday
What are the options in Syria? Can the West try a 'limited' intervention there? Should it consider any kind of intervention since Kofi Annan's plan seems to have failed? And will NATO's footsteps cost the country even more bloodshed? CrossTalking with Mark Almond, Sinun Ulgen and Samer Araabi on May 30.
What are the options in Syria? Can the West try a 'limited' intervention there? Should it consider any kind of intervention since Kofi Annan's plan seems to have failed? And will NATO's footsteps cost the country even more bloodshed? CrossTalking with Mark Almond, Sinun Ulgen and Samer Araabi on May 30.
Attack on Assange: 'Whistleblowers warned as war criminals walk free'
May 31, 2012 by RussiaToday
Julian Assange looks set to be extradited to Sweden after Britain's Supreme Court dismissed his appeal. The Wikileaks founder has been under house arrest in the UK for more than 500 days now. He's wanted in Sweden for questioning over sex crime accusations, which the whistle blower himself strongly denies.
Julian Assange looks set to be extradited to Sweden after Britain's Supreme Court dismissed his appeal. The Wikileaks founder has been under house arrest in the UK for more than 500 days now. He's wanted in Sweden for questioning over sex crime accusations, which the whistle blower himself strongly denies.
Wednesday, May 30, 2012
Swiss Debt Is Now Repaying Itself
This is a very bad thing, funds are so scared that they are willing to pay a premium to ensure they are holding an instrument that they feel will still be worth something between now and 2 years time.
From Zerohedge.com
Original source
The Swiss National Bank may have pegged the EURCHF (and as noted earlier, is progressively accumulating losses defending the barrier - even as EURCHF options are leaning further and further towards the peg breaking), but what about its bonds? At the current rate, Swiss debt, which is quite negative, with 2 year bonds now trading at record NEGATIVE rates, will repay itself quietly in a few short decades: ahhh the benefits of compounding. And for an example of how this is done, hours ago, the government issued debt at a rate of 0.62%. Oh sorry, we forgot the negative sign.
From Zerohedge.com
Original source
The Swiss National Bank may have pegged the EURCHF (and as noted earlier, is progressively accumulating losses defending the barrier - even as EURCHF options are leaning further and further towards the peg breaking), but what about its bonds? At the current rate, Swiss debt, which is quite negative, with 2 year bonds now trading at record NEGATIVE rates, will repay itself quietly in a few short decades: ahhh the benefits of compounding. And for an example of how this is done, hours ago, the government issued debt at a rate of 0.62%. Oh sorry, we forgot the negative sign.
Keiser Report: Asymmetric Accounting
May 29, 2012 by RussiaToday
In this episode, Max Keiser and co-host, Stacy Herbert, discuss 'asymmetric accounting,' flatulent dark market clubs in austerity London and the $72 trillion claim against Limewire, while President Obama settles for $26 billion for widescale, systemic mortgage fraud. In the second half of the show Max talks to Jan Skoyles of TheRealAsset.co.uk about her campaign to Buy Britain's Gold Back.
In this episode, Max Keiser and co-host, Stacy Herbert, discuss 'asymmetric accounting,' flatulent dark market clubs in austerity London and the $72 trillion claim against Limewire, while President Obama settles for $26 billion for widescale, systemic mortgage fraud. In the second half of the show Max talks to Jan Skoyles of TheRealAsset.co.uk about her campaign to Buy Britain's Gold Back.
Tuesday, May 29, 2012
Hey Banksters: We Are Fully Awake
May 28, 2012 by SGTbull07
Memorial Day 2012: To the International Banksters, We the people know your crimes. We mourn the fallen heroes you took from us through your contrived wars. But we celebrate the heroes who are still with us. Heroes like Dr. Ron Paul who have the courage to stand against you. And like Dr. Paul, we the people stand against you - We stand for Liberty. We are fully awake.
Memorial Day 2012: To the International Banksters, We the people know your crimes. We mourn the fallen heroes you took from us through your contrived wars. But we celebrate the heroes who are still with us. Heroes like Dr. Ron Paul who have the courage to stand against you. And like Dr. Paul, we the people stand against you - We stand for Liberty. We are fully awake.
James Turk in the future of the Euro and Gold
Monday, May 28, 2012
Direct Trading of Yen and Yuan to Start
08:13, May 28, 2012
Original source
China and Japan plan to launch direct trading of the yen and the yuan as early as June, a step that could promote the two counties' trade and financial transactions and push forward yuan internationalization, analysts said yesterday.
Several banks of the two countries, including Bank of Tokyo-Mitsubishi UFJ and Bank of China, will start the direct trading in Tokyo and Shanghai, and set exchange rates themselves, the Japanese newspaper Yomiuri Shimbun reported over the weekend.
People's Bank of China could not be reached for comment on weekend.
The step follows an agreement between the two countries signed in December 2011,when Japanese Prime Minister Yoshihiko Noda visited China, to push for trading of the currencies.
The yen will become the first major foreign currency besides the US dollar that can be traded directly with the yuan.
"Rising bilateral trade volume would be the driving force for the move," Zhang Yongjun,deputy director-general of the Research Department at the China Center for International Economics Exchange, a Beijing-based government think tank, told the Global Times yesterday.
The two countries' total trade volume last year amounted to 27.54 trillion yen ($358billion), up 3.9 percent from the previous year, according to Japan's Ministry of Finance.
Top leaders of China, Japan and South Korea reached an agreement during a summit this month to begin free-trade negotiations later this year, amid an expected drop in transactions with key markets like the US and Europe.
Direct trading between the two currencies could lower financial risks caused by fluctuations in the dollar, as well as reducing trade transaction costs, the Japanese media reported.
Currently, trading of the two countries' currencies can only be completed via the interim step of being exchanged into dollars.
The commission charge for this that must be paid to the US Federal Reserve Board every year is estimated to be around $3 billion.
"It is a necessary step for yuan internationalization," Guo Tianyong, director of the Research Center of China Banking at the Beijing-based Central University of Finance and Economics, told the Global Times yesterday.
"Direct trading of the yuan with other currencies like the euro and the pound may also be realized in the future, driven by demand for bilateral trade and investment with other economies," Xiang Songzuo, deputy director of the International Monetary Institute with the Renmin University of China, told the Global Times yesterday.
But Xiang warned of financial risks caused by currency fluctuation. "Each side of the trade transactions and investments needs to pay attention to the possibility of speculation," Xiang said.
The People's Bank of China said in December 2011 that it would not only promote cross-border transactions between the yuan and the yen, but also support Japanese companies to issue Renminbi bonds in Tokyo and other overseas markets.
China and Japan plan to launch direct trading of the yen and the yuan as early as June, a step that could promote the two counties' trade and financial transactions and push forward yuan internationalization, analysts said yesterday.
Several banks of the two countries, including Bank of Tokyo-Mitsubishi UFJ and Bank of China, will start the direct trading in Tokyo and Shanghai, and set exchange rates themselves, the Japanese newspaper Yomiuri Shimbun reported over the weekend.
People's Bank of China could not be reached for comment on weekend.
The step follows an agreement between the two countries signed in December 2011,when Japanese Prime Minister Yoshihiko Noda visited China, to push for trading of the currencies.
The yen will become the first major foreign currency besides the US dollar that can be traded directly with the yuan.
"Rising bilateral trade volume would be the driving force for the move," Zhang Yongjun,deputy director-general of the Research Department at the China Center for International Economics Exchange, a Beijing-based government think tank, told the Global Times yesterday.
The two countries' total trade volume last year amounted to 27.54 trillion yen ($358billion), up 3.9 percent from the previous year, according to Japan's Ministry of Finance.
Top leaders of China, Japan and South Korea reached an agreement during a summit this month to begin free-trade negotiations later this year, amid an expected drop in transactions with key markets like the US and Europe.
Direct trading between the two currencies could lower financial risks caused by fluctuations in the dollar, as well as reducing trade transaction costs, the Japanese media reported.
Currently, trading of the two countries' currencies can only be completed via the interim step of being exchanged into dollars.
The commission charge for this that must be paid to the US Federal Reserve Board every year is estimated to be around $3 billion.
"It is a necessary step for yuan internationalization," Guo Tianyong, director of the Research Center of China Banking at the Beijing-based Central University of Finance and Economics, told the Global Times yesterday.
"Direct trading of the yuan with other currencies like the euro and the pound may also be realized in the future, driven by demand for bilateral trade and investment with other economies," Xiang Songzuo, deputy director of the International Monetary Institute with the Renmin University of China, told the Global Times yesterday.
But Xiang warned of financial risks caused by currency fluctuation. "Each side of the trade transactions and investments needs to pay attention to the possibility of speculation," Xiang said.
The People's Bank of China said in December 2011 that it would not only promote cross-border transactions between the yuan and the yen, but also support Japanese companies to issue Renminbi bonds in Tokyo and other overseas markets.
Greek exit scenarios and what it means for gold
Sunday, May 27, 2012
Nigel Farage on the future of the Euro
Nigel Farage discusses the Greek tragedy and the future of the Euro with Eric King of King World News. Listen here
On the Edge - Greece financial crisis
May 26, 2012 by PressTVGlobalNews
In this edition of the show Max interviews Karl Denninger from market-ticker.org
He talks about the finical crisis in Greece and how it will unfold in near future.
In this edition of the show Max interviews Karl Denninger from market-ticker.org
He talks about the finical crisis in Greece and how it will unfold in near future.
The 911 Generation
May 26, 2012 by AssociatedPress
Vice President Joe Biden said Saturday that the United States can now focus on new global challenges after a long decade of war in an election-year commencement address to jubilant graduates of the U.S. Military Academy at West Point. (May 26)
UK recession deepens as euro zone woes mount
By Fiona Shaikh and Olesya Dmitracova LONDON | Thu May 24, 2012 10:26am BST
Original source
(Reuters) - Britain fell deeper into recession than initially thought in the first quarter of 2012 due to a slump in construction output, raising the likelihood that the Bank will opt to inject more stimulus to protect the economy from the euro zone debt crisis.
Britain is in its second recession since the 2007-2008 financial crisis, and the prospects for a recovery are cloudy as leaders in the euro zone, Britain's biggest trading partner, are still far from resolving their debt woes.
The Bank's Monetary Policy Committee (MPC) has indicated it is ready to pump more money into the economy, having paused its quantitative easing programme at 325 billion pounds this month, amid growing worries about a break-up of the currency union.
"The economy is not recovering properly and with the uncertainty over Europe hanging over the outlook as well, our suspicion is the MPC will sanction further QE at some point later on this year," said Philip Shaw, economist at Investec.
The Office for National Statistics said the economy shrank by 0.3 percent in the first quarter of this year, more than an initial estimate of a 0.2 percent decline, and confounding analysts' forecasts for an unchanged reading.
Year-on-year, the economy contracted by 0.1 percent, the first annual decline since Q4 2009.
Read more
Saturday, May 26, 2012
The Tax Whose Name Cannot be Spoken
May 25, 2012 by TheAlexJonesChannel
Praised by Barack Obama as a model for the world, Australia's highly unpopular carbon tax, set to take effect from July 1st, is set to be policed by laws which forbid business owners from criticizing it for causing price rises -- with thought criminals who do so under threat of being hit with huge fines of over $1 million dollars.
"SHOPS and restaurants could face fines up to $1.1 million if waiters or sales staff wrongly blame the carbon tax for price rises or exaggerate the impact," reports the Daily Telegraph.
Praised by Barack Obama as a model for the world, Australia's highly unpopular carbon tax, set to take effect from July 1st, is set to be policed by laws which forbid business owners from criticizing it for causing price rises -- with thought criminals who do so under threat of being hit with huge fines of over $1 million dollars.
"SHOPS and restaurants could face fines up to $1.1 million if waiters or sales staff wrongly blame the carbon tax for price rises or exaggerate the impact," reports the Daily Telegraph.
Carbon Based Life Forms Tax Fines Target Australian Businesses
Link to the Carbon Price Claim section of the ACCC website
May 25, 2012 by TheAlexJonesChannel
Praised by Barack Obama as a model for the world, Australia's highly unpopular carbon tax, set to take effect from July 1st, is set to be policed by laws which forbid business owners from criticizing it for causing price rises -- with thought criminals who do so under threat of being hit with huge fines of over $1 million dollars.
"SHOPS and restaurants could face fines up to $1.1 million if waiters or sales staff wrongly blame the carbon tax for price rises or exaggerate the impact," reports the Daily Telegraph.
According to ACCC deputy chairman Dr Michael Schaper, the warning applies, "to comments made by staff over the phone, on the shop floor or in meetings. It also covers advertising, product labels, websites, invoices, contracts and contract negotiations."
May 25, 2012 by TheAlexJonesChannel
Praised by Barack Obama as a model for the world, Australia's highly unpopular carbon tax, set to take effect from July 1st, is set to be policed by laws which forbid business owners from criticizing it for causing price rises -- with thought criminals who do so under threat of being hit with huge fines of over $1 million dollars.
"SHOPS and restaurants could face fines up to $1.1 million if waiters or sales staff wrongly blame the carbon tax for price rises or exaggerate the impact," reports the Daily Telegraph.
According to ACCC deputy chairman Dr Michael Schaper, the warning applies, "to comments made by staff over the phone, on the shop floor or in meetings. It also covers advertising, product labels, websites, invoices, contracts and contract negotiations."
Bank Runs - Go Short Banks, Long Mattresses
May 25, 2012 by TheAlexJonesChannel
While the global elite are still clinging to the hope that the euro single currency can survive a Greek exit that now looks inevitable, some members of the financial aristocracy have already given up on the entire eurozone altogether.
In an article for the Financial Times entitled, We must break up the failing euro, former Bilderberg attendee Sir Martin Jacomb concedes that all efforts to rescue the euro have been in vain, calling for "all 17 members to decide at once to revert to national currencies."
Jacomb attended the 1985 Bilderberg Group meeting in New York but has not been invited back to the elitist confab since. No wonder given the fact that he is obviously an ardent skeptic of the single currency that Bilderberg hatched as far back as 1955.
Jacomb, former chairman of Canary Wharf Group, argues that a "five day bank holiday" should be imposed to allow financial markets to absorb the shock of the collapse of the euro.
"Experience shows that currency break-ups, like devaluations, have to be handled so as to avoid anticipatory speculative activity. The essential requirement is a single, unequivocal decision to revert to national currencies, reached confidentially by all 17 governments and announced without prior notice," he writes.
As we reported last week, most of Jacomb's contemporaries are still of the mind set that the single currency can ride the storm.
The dominant view was echoed by the Peter G. Peterson Institute for International Economics, which counts amongst its members prominent Bilderbergers such as Paul Volcker, Lawrence Summers, and David Rockefeller.
The institute's thinking was summarized in a piece by Senior Fellow Arvind Subramanian, who argued that Greece should not be allowed to exit the single currency because if the nation were to then stage a dramatic economic recovery it would provide a path for other eurozone countries to follow, and in turn torpedo dreams of a European federalist superstate.
Bilderberg is so desperate to save the euro because it represents the entire foundation of their global financial agenda to create regional currencies and carefully-managed bureaucratic federations on the same model as the European Union.
Bilderberg-chairman Étienne Davignon bragged that Bilderberg helped create the euro by first introducing the policy agenda for a single currency in the early 1990′s, which was later formalized into the 1992 Maastricht Treaty.
http://www.infowars.com/5-day-bank-holiday-to-prepare-for-collapse-of-euro/
by Paul Joseph Watson
While the global elite are still clinging to the hope that the euro single currency can survive a Greek exit that now looks inevitable, some members of the financial aristocracy have already given up on the entire eurozone altogether.
In an article for the Financial Times entitled, We must break up the failing euro, former Bilderberg attendee Sir Martin Jacomb concedes that all efforts to rescue the euro have been in vain, calling for "all 17 members to decide at once to revert to national currencies."
Jacomb attended the 1985 Bilderberg Group meeting in New York but has not been invited back to the elitist confab since. No wonder given the fact that he is obviously an ardent skeptic of the single currency that Bilderberg hatched as far back as 1955.
Jacomb, former chairman of Canary Wharf Group, argues that a "five day bank holiday" should be imposed to allow financial markets to absorb the shock of the collapse of the euro.
"Experience shows that currency break-ups, like devaluations, have to be handled so as to avoid anticipatory speculative activity. The essential requirement is a single, unequivocal decision to revert to national currencies, reached confidentially by all 17 governments and announced without prior notice," he writes.
As we reported last week, most of Jacomb's contemporaries are still of the mind set that the single currency can ride the storm.
The dominant view was echoed by the Peter G. Peterson Institute for International Economics, which counts amongst its members prominent Bilderbergers such as Paul Volcker, Lawrence Summers, and David Rockefeller.
The institute's thinking was summarized in a piece by Senior Fellow Arvind Subramanian, who argued that Greece should not be allowed to exit the single currency because if the nation were to then stage a dramatic economic recovery it would provide a path for other eurozone countries to follow, and in turn torpedo dreams of a European federalist superstate.
Bilderberg is so desperate to save the euro because it represents the entire foundation of their global financial agenda to create regional currencies and carefully-managed bureaucratic federations on the same model as the European Union.
Bilderberg-chairman Étienne Davignon bragged that Bilderberg helped create the euro by first introducing the policy agenda for a single currency in the early 1990′s, which was later formalized into the 1992 Maastricht Treaty.
http://www.infowars.com/5-day-bank-holiday-to-prepare-for-collapse-of-euro/
by Paul Joseph Watson
Struggling Spanish bank seeks state aid package
May 26, 2012 by PressTVGlobalNews
Spain's economic crisis continues to bite. And though it's all too obvious how much businesses such as these are suffering, the scale of the problem facing the country's banking sector is only just starting to become apparent.
The Elite Are Digging Their Own Grave
May 16, 2012 by TheAlexJonesChannel
Alex welcomes long-time returning guest and contributing writer Dr. Paul Craig Roberts to discuss the impact of the Euro's instability on world markets amidst looming fears of Greece's departure. They'll also touch on why governments feel compelled to blame events like 9/11, the Euro decline, and other manufactured crises on scapegoats.
http://www.paulcraigroberts.org/
http://www.infowars.com/
Alex welcomes long-time returning guest and contributing writer Dr. Paul Craig Roberts to discuss the impact of the Euro's instability on world markets amidst looming fears of Greece's departure. They'll also touch on why governments feel compelled to blame events like 9/11, the Euro decline, and other manufactured crises on scapegoats.
http://www.paulcraigroberts.org/
http://www.infowars.com/
Occupy Bilderberg 2012
May 17, 2012 by weavingspider
Help Press for Truth cover Bilderberg! Contribute to the "Chip In" here: http://pressfortruth.tv/
Help Press for Truth cover Bilderberg! Contribute to the "Chip In" here: http://pressfortruth.tv/
May 25, 2012 by wearechange Bill O'Reilly Caught on Tape Smearing Occupiers as Terrorists.
Occupy Bilderberg 2012! Bilderberg is the secretive elite meeting gathering at the Westfields Marriott in Chantilly, Virginia from May 31st to June 3rd. Come and help occupy Bilderberg and bring light to this secretive meeting! http://occupybilderberg.org
Occupy Bilderberg 2012! Bilderberg is the secretive elite meeting gathering at the Westfields Marriott in Chantilly, Virginia from May 31st to June 3rd. Come and help occupy Bilderberg and bring light to this secretive meeting! http://occupybilderberg.org
Keiser Report: Stripped To Teeth
May 24, 2012 by RussiaToday
In this episode, Max Keiser and co-host, Stacy Herbert, discuss self-reporting financial crimes and private equity ripping teeth out of four year olds for profit. In the second half of the show Max talks to Teri Buhl about JP Morgan's Wells Notice and what bad news that could mean to the troubled bank's fortunes.
In this episode, Max Keiser and co-host, Stacy Herbert, discuss self-reporting financial crimes and private equity ripping teeth out of four year olds for profit. In the second half of the show Max talks to Teri Buhl about JP Morgan's Wells Notice and what bad news that could mean to the troubled bank's fortunes.
Weekend Chillout - The Faceplant
With the refusal this week of Facebook to sing "pop goes the Tech Stock" I thought Kate Miller-Heidke's song on the perils of of being poked was apt. Careful she sings rude words.
Friday, May 25, 2012
Euro Set For Biggest 5-Day Drop In 2012 On Growth Concern
 |
| Chart from xe.com |
From Bloomberg.com
Original source
The euro headed for its biggest weekly decline this year as signs that Europe’s debt crisis is damping growth curbed demand for the currency.
The 17-nation euro has fallen versus all but one of its 16 major counterparts since May 18 before figures next week that may show consumer confidence in the currency bloc was little changed this month, while the jobless rate climbed in April to a 21-year high. The yen slid versus the dollar as Japan’s consumer-price gains remained far from the central bank’s target. The Dollar Index rose to a 20-month high as investors sought the relative safety of the U.S. currency.
“Europe’s economy is showing clear signs of a slowdown,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency margin company. “People can’t buy the euro even from the perspective of its fundamentals.”
The euro was little changed at $1.2537 as of 6:53 a.m. in London, after falling to $1.2516 yesterday, the least since July 6, 2010. It traded at 99.90 yen from 99.76 after dropping 0.2 percent yesterday. The yen slid 0.1 percent to 79.69 per dollar.
Europe’s shared currency is set for a 1.9 percent slide against the dollar this week, the biggest since the period ended Dec. 16. It has fallen 1.1 percent versus the yen.
The euro may weaken to the 2010 low of $1.1877 as early as next month, FX Prime’s Ueda said.
The euro headed for its biggest weekly decline this year as signs that Europe’s debt crisis is damping growth curbed demand for the currency.
The 17-nation euro has fallen versus all but one of its 16 major counterparts since May 18 before figures next week that may show consumer confidence in the currency bloc was little changed this month, while the jobless rate climbed in April to a 21-year high. The yen slid versus the dollar as Japan’s consumer-price gains remained far from the central bank’s target. The Dollar Index rose to a 20-month high as investors sought the relative safety of the U.S. currency.
“Europe’s economy is showing clear signs of a slowdown,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency margin company. “People can’t buy the euro even from the perspective of its fundamentals.”
The euro was little changed at $1.2537 as of 6:53 a.m. in London, after falling to $1.2516 yesterday, the least since July 6, 2010. It traded at 99.90 yen from 99.76 after dropping 0.2 percent yesterday. The yen slid 0.1 percent to 79.69 per dollar.
Europe’s shared currency is set for a 1.9 percent slide against the dollar this week, the biggest since the period ended Dec. 16. It has fallen 1.1 percent versus the yen.
The euro may weaken to the 2010 low of $1.1877 as early as next month, FX Prime’s Ueda said.
US TBond Tower of Babel Teeters
By Jim Willie
The Biblical story is told of a tower built ever higher in order to achieve contact with the heavens, lest they be scattered upon the earth. They were scattered when the tower fell. Fast forward to today, where the earth has a multitude of tribes, languages, and several major alphabets. When the Lehman Brothers failure occurred, and the Fannie Mae and AIG activities were to be concealed under court orders, the land turned barren, and a financial plague befell the Western nations led by the United States. They were after all, the keepers of the ark (printing press for USDollars). But a plague of debt locusts was cast upon the US nation, with annual $1.5 trillion deficits. The Americans in their unending arrogance, chose to speak from the tower top and to proclaim 0% forever, suspending gravity. They have attempted to force free money to finance their USGovt debts, to preserve power, to ensure privilege, but in doing so they defy nature in testing gravity itself.
The recent losses from JPMorgan have proved to be much more based upon suspending gravity with 0% official rates in the Delta-Hedging complex game tied to the vast over-burdened Interest Rate Swap contracts, rather than the European sovereign bonds as first claimed. The Jackass is on record on May 11th, aided by the indefatigable forensic analyst Rob Kirby, in pointing to Interest Rate Swap stresses from the sudden March and April movement in the 10-year USTreasurys within the strained bloated USGovt sovereign bond market. The IRSwap setbacks were the underlying cause of the JPM losses. The giant bank does not want attention give to this derivative tool which controls the bond market in a devious artificial manner. As far as debt is concerned, the United States is Greece times 100. It is Italy times 20. It receives a pass from the bond market, precisely because the nation prints the money and controls the vast Interest Rate Swap support mechanism. But the tower is finally exposed.
The IRSwaps act like giant buttresses to support the evergrowing USTreasury Tower of Babel that stretches to the sky. Every year, the expansive tower grows another $1.5 trillion higher. Every year, the challenge grows exponentially for the JPMorgan master financial engineers to apply their control panel magic to achieve equilibrium. Every year, the degree of difficulty becomes more arduous. Every year, the tower must withstand the high winds from Europe, where the bond market is doing more than undergoing stress. It is crumbling before our eyes. In a way, Europe helps to conceal the great strains from the broken USTreasury Bond market, held together by interest derivatives. Few analysts connect the failure of the Draghi LTRO funds to the JPMorgan losses. They do not grasp the gravity of the USTBond problem. They prefer to focus on FINREG for regulatory changes centered on the Volcker Rule, or on the division of proprietary trading. They focus on the personalities of the so-called Whale. Now a new verb has entered the lexicon, as a firm was just "Iksil-ed" to mean they suffered massive leveraged losses in a high risk game of playing god in the financial markets. JPMorgan cannot hedge since THEY ARE THE MARKET. What the Whale or JPMorgan do is attempt to maintain balance of the USTreasury Tower of Babel, which grows every year to try to touch the sky, to achieve the perfect world. They scrape the devil's attic door instead.
THE ULTIMATE PROBLEM
Without any doubt whatsoever, the ultimate problem is that the bond market cannot defy the natural forces (gravity on the tower) from enormous new supply coming to the USTBond market (higher tower) in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. Essentially the 0% rate is an engineering display of the most extreme arrogance. It is tantamount to placing the buttress support structure at a very low position. The sovereign bonds of Southern Europe with their 5% or 6% bond yields have the equivalent of buttresses place in very high positions, sufficient to endure the whips and sways from the high winds and routine vagaries dealt by the never-ending global financial crisis. In my opinion, the global financial crisis is far more than that. It is instead a global monetary war, to preserve the USDollar supremacy at all costs, with victims being the Western banking systems and the Western economies. The entire platform that supports the major fiat currencies is collapsing, namely the sovereign bonds. The platform is breaking at its weakest points, where it has non-homogeneous planks in Southern Europe that do not fit together. Imagine how the USTreasury Bond market would look if all 50 states had their own sovereign debt as components to the entire USGovt. Imagine each year the $1.5 trillion in debt were apportioned as 15% to California, 4% to Texas, 8% to New York, 8% to Florida, in shared responsibility. Imagine each state had its own bond traded in a market that strived for equilibrium, each with a unique bond yield, all tethered to the USDollar. The United States would fracture in six months from the stress, not the least factor for which would be the apportionment of syndicate banker benefit and divvying up the war costs. That is Europe in parallel.
HIDDEN TOOL WITH GRAND DECEPTION
Back to the ultimate problem. The USTreasury Bond market cannot defy the natural forces from enormous new supply coming to the USTBond market in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. To add strain to the tower, the foreign buyers have removed themselves due to the grand debasement of the USDollar from the program. Too much hidden USDollar output comes behind the curtains. They are disgusted that the US bankers make unilateral decisions on central bank monetary policy, like setting the 0% rate, like monetizing another $1 trillion in USTBonds or USAgency Mortgage Bonds, like consenting to lavish executive bonuses to those responsible for fracturing the global financial ramparts, all done without consulting foreign creditors. Their significant US$-based bond holdings are eroding in value, not earning a yield in compensation for risk. The 0% payout is an insult to creditors, especially during constant QE initiatives. The published CPI measure of 2% to 3% is another insult, when 8% to 10% is the reality.
Many inexperienced observers, naive bank analysts, clueless fund managers, and deceptive news anchors fail to ask the basic question of how the USTBond market can continue with 0% when supply is an annual flood of $1.5 trillion in new debt while the demand is vanishing from the absent foreign creditors. It is hardly a mystery. The visible piece is the USFed itself with its awkwardly named Quantitative Easing initiatives, which make it sound so sophisticated and professional. Its bond monetization is highly destructive, since it is effectively pure hyper monetary inflation. The wayward financial market mavens crave even more QE, even more monetary inflation flows to aid the market, without realizing the utter destruction of capital. They might notice out of the corner of the eye some rising costs, but they minimize them in their mental process. They deceive themselves into thinking that the financial assets will rise in value also. Except valuation is greatly distorted. The end result is that the cost structure is rising without benefit of rising incomes. In many cases, where liquidation is often the rule, the end products are not rising in price. So profit margins are squeezed, businesses are shut down, equipment is taking offline, and workers are cut along with incomes. The zinger is the globalization concept, when China hit the scene. The Western economies cannot withstand the competition. The West has in effect replaced much of its legitimate income sources with debt from dubious areas like home equity. The home foreclosure movement is a direct consequence of Chinese industrialization.
ENGINEERED FLIGHT TO SAFETY
The hidden tool to maintain the 0% interest rate when supply grows by $1.5 trillion annually, and when dependence on the USFed for bond monetization picks up the slack, is the Interest Rate Swap contract. JPMorgan would prefer that the public not learn about it. Back in December 2010, Morgan Stanley added $8 trillion to its Interest Rate Swap book in a single quarter. Look to see the wondrous effect from that lever pulled behind the curtain. Bear in mind that the accounting for the derivative book, listed in the Office of the Controller to the Currency, is quarterly and tallies the past quarter of activity. My belief is there is more lag to the proper accounting. Notice how the 10-year USTreasury Bond yield (aka TNX) went from a threat to the 4.0% mark in early 2010 and rallied hard all the way down to the 2.4% mark by summer's end. The US financial press hailed a grand flight to safety in the USGovt Bond securities. No such flight to safety like a thundering herd was part of the reality landscape. Let the chart be shown with GREEN text to reflect the application of USDollars from the financial engineering rooms.
What the Interest Rate Swap does is to create artificial demand for the end product USTBond, no real buyer, in a magnificent display of 50:1 leverage, sometimes as much as 100:1 leverage. Repeat that -- no real buyer of the USTBond, all artificial, all coming from the IRSwap device. Few bond experts even realize this fact of bond life. The pronounced effect on the US bond market brought about a change in sentiment, and reinforced the phony notion that investors were flocking to the USTBond market for safety. The reality was the exact opposite. Bill Gross of PIMCO was exiting the USTBond market. A slew of foreign creditors exited the USTBond market. The bank analysts were confused, unable to explain the rally in USTBonds and falling bond yields when supply was growing in a big way, but demand was vanishing. The USFed had to admit its bond purchases within its QE initiative in order to explain the inconsistency. The huge annual deficits and departure of bond buyers forced the USFed into the open, where they had to admit their QE and its hyper monetary inflation.
ENGINEERED REJECTION OF USGOVT DEBT DOWNGRADE
In early August 2011, the debt rating agency Standard & Poors downgraded the USGovt debt. It was an insult of high order, delivered during the Greek Govt Bond crisis, as the Southern European bond market was under great scrutiny and strain. The JPMorgan situation room was obviously tipped off, pressed into action, and ready at the Interest Rate Swap lever. The result was profound as the TNX fell from 3.2% down to under 2.0% by the time the dust cleared. Notice a near accident in June in the USTBond market just before the big decline in bond yields, a big oops! The TNX jumped from 2.88% to 3.20% in a single week, a hefty 32 basis point scare. The JPM situation room responded quickly. Word leaked out about the S&P debt downgrade, the first in US history. The market move was becoming clear, a selloff. The Interest Rate Swap lever was yanked, and the effect pulled down the TNX significantly, as the financial press obediently proclaimed a victory over the S&P defiant downgrade. It was all phony, again!! The USGovt barkers even pounded the tables to point out a grand market contradiction of the Standard & Poor debt downgrade of the USGovt debt. Victory over the marketplace was won, and no big debt insurance contract rise either. All hail the IRSwap weapon in private Wall Street offices, of course without recognition of its heavy usage.
By this time, in late summer 2011, the financial market sentiment had solidified its phony psychological notion of the USTreasury Bond being a reliable safe & secure place to hide. The USFed was repeating its assured interest yield paid to Excess Bank Reserves, another false story. In reality, the USFed was paying the big US banks to place their Loan Loss Reserves at the USFed in order to conceal the insolvency of the USFed balance sheet. The big US banks compounded the flagrancy of the action by removing loss reserves later, calling them profit, in order to conceal their own business decline and deep deterioration. They did so because they became dangerous illiquid.
USFED STUCK AT 0% FOREVER
Something happened in March 2012. It is not entirely clear. Perhaps it was simply the stupidity of the Bernanke Fed in declaring the need to embark on an Exit Strategy at some point soon. Once more, Professor Bernanke is a poor economist, unaware that he is stuck in the 0% corner forever. That bears repeating. THE USFED IS STUCK WITH AN OFFICIAL ZERO PERCENT RATE FOREVER, NEVER TO RISE. It can never rise due to the extreme increase in borrowing costs that would hit the USGovt deficit tally. The amount would equal the endless war costs. However, the USFed is stuck at 0% forever, due also to a very different hidden market force. Any rise, even a moderate rise, in the USTBond yield would result in multi-$trillion losses from the derivatives hidden at work. The vast Interest Rate Swap would deliver massive blows like a machete across the entire financial sector. Every big US bank involved in heavy IRSwap enforcement as bond market intervention would suffer losses in the multiple $trillions. That process is starting to be seen. The Jackass has warned about the potential losses for three years, explaining the permanent corner the USFed has found itself, a result of its own failure. The USFed talked about an Exit Strategy in 2009, and the Jackass correctly rejected the notion as lunatic wishful thinking. The USFed backed off, and worse, assured the banking sector of zero percent policy almost forever. You see, the big US banks are earning easy money in the USTreasury carry trade, borrowing short and investing long. If the USFed were to hike rates, they would remove the US bank income stream, since they sure are not earning it the old fashioned way, with IPOs and debt offerings. They are not so much investment banks anymore, just plain speculative houses. They love their High Frequency Trades in the stock market too.
The USEconomy has lost its potential traction, since it forfeited the bulk of its industry to China in the last decade, after forfeiting much more in the 1980 and 1990 decade. Back then it was called the migration to the Pacific Rim. Therefore, the USEconomy cannot respond to 0% rate, does not take advantage of the low rate to expand business investment, to kick start the various industries as it did in past recessions. This recession is both permanent and a march to the cemetery. At the end of this current cycle is a massive implosion of the big US banks, followed by global isolation of the USDollar, ending with an inevitable USGovt debt default. The implosion of the big US banks has begun, with JPMorgan making its defensive deceptive admissions of serious loss and worse, lost control. The isolation of the USDollar is a new chapter underway, in response to the ill-fated Iran sanctions. The East is mobilizing.
The USGovt debt default, laughed off by the same clowns who expected the subprime mortgage mess to be contained, will come in the form of global rejection of USTBond debt and a grand summit conference to restructure the debt. The many debt downgrades handed out in recent months to Europe, today to Japan, and elsewhere have carefully avoided the United States. The second downgrade will come, this time with the Interest Rate Swap machine in view at the side of the stage, and with JPMorgan executives at center stage. They will be fumbling to explain their losses and the backlash of the IRSwap machinery. It is their special tool (buttress) to hold the sprawling USTBond Tower of Babel upright, and to prevent it from falling in a heavily populated urban location.
SPRING HIGH WINDS HIT THE TOWER OF BABEL
Again, something happened in March 2012. It is not entirely clear. Perhaps it was simply the stupidity of the Bernanke Fed declaring the need to embark on an Exit Strategy at some point in the not too distant future. Bond investors might have sold bonds in heavy volume in anticipation of the lunatic professor actually hiking rates in the face of annual $1.5 trillion deficits and a vast overhang of derivatives. They might have feared a great unwind of leverage that could have gone out of control easily. Perhaps the USFed itself conducted some active Stress Tests on the derivative complex, with some arrogant assurance from JPMorgan's CIO office that they could handle anything that came their way. Perhaps the arrival of Volcker Rule adaptations, reorganizations, and disruptions took the JPM IRSwap team off guard. Perhaps something more sinister occurred, like China acting to kick one leg from under the stool, selling a vast block of USTBonds to awaken the Wall Street megalomaniacs. It could be that China sold a big block of USTBonds without malice of forethought, but instead expedience in dealing with its own economic slowdown and pervasive banking holes. Maybe they just did some rebalancing of their huge SAFE Fund and other sovereign wealth funds that must be approaching $3 trillion in size.
On May 10th, the JPMorgan machine issued some deceptive public comments in response to a large estimated $2 billion loss. The deception was from putting blame on the European sovereign bonds and their instability, wreckage, and chain effects. The other deception was not admitting the fuller extent of losses, and giving empty assurance of being in control. The JPMorgan machinery could not properly and accurately assess and measure their losses unless a full audit were to be conducted that spanned three months at least. They have lost control. In a radio interview with Turd Ferguson (CLICK HERE), the Jackass pointed a finger at the USTreasury Bond tower, the Interest Rate Swap support mechanism, and offered an argument that the losses for JPMorgan were closer to $18 billion. Furthermore, an argument was made that the losses would top $100 billion in a year's time. Tyler Durden of Zero Hedge correctly boasts that their excellent publication first broke the story of the outsized JPMorgan losses, even the possibility of greater losses. But it was the Jackass that first pointed to the Interest Rate Swap to defend the outrageous USTBond tower during a March whipsaw event. The Jackass pointed to the tame European sovereign bond yields during the six weeks in question where JPMorgan offered their typical deception. PIGS bond yields were tame over those six weeks. During the interview, a big hat tip was given to Rob Kirby who exposed me to the tame bond market in Europe, and with emphasis to the whipsaw of high winds against the USTBond market in March. He identified the location of the source of disturbance. It caused a big shock wave that knocked the JPM machine off its footing. It has been suffering from loose cargo ever since.
One must ask a preliminary question, of why with national security exceptions, the JPMorgan loss had to be admitted at all. It could have been swept under the rug, doctored on the balance sheet with the help of the USDept Treasury and USFed. The regulators would look the other way as they always do. Something unusual in the parental rules has occurred, and it is not certain. My guess is a new sheriff is in town, fresh off a jet from the East, who read the riot act to its wayward debtor, and did so recently. What else has changed? To be sure, the big US banks are operating under big illiquidity problems from European sovereign debt, along with troubles in FOREX currencies, drainage from mortgage bonds, even litigation costs from bond investor lawsuits. They suffer from a panoply of losses. A private source reports the big money center banks in New York are all under great strain from lack of cash, as in they are broke. The trouble with standing as insolvent structures is the grand risk of an illiquidity bout. The longstanding rule in banking is that INSOLVENCY plus ILLIQUIDITY equals BANKRUPTCY. Last and hardly least, the JPMorgan losses and financial strains admitted confirm something for a Grand Jury. They scream out a Prima Facie case for the MFGlobal client fund thefts, establishing a motive.
Some truly devastating implications. My European banker source shared a dire opinion. He fully expects the total loss to be several 100 $billion in JPM losses. He shared his $18 billion figure two weeks ago that tipped me and Rob Kirby off. That figure seems to be the target being approached. Early last week, the JPMorgan talking heads revealed they are struggling to provide an accurate estimate of their outsized loss. In truth, they cannot estimate it, since the IRSwap and other Delta-Hedging mechanisms are dynamic and too complex. They revealed the loss was closer to $3 billion, not the original $2 billion cited. At least they have started the process of upgrades toward truth. Then late last week, the Wall Street Journal reported that the loss might be around $8 billion. But the WSJ revealed something more important, that the loss stemmed from the Delta-Hedging program that involves the Interest Rate Swap contracts in their vast derivative book. The JPMorgan derivatives contain about $57.5 trillion in interest rate derivatives. They are teetering, like the USTBond Tower of Babel. Bingo!! The IRSwap is on the table as the culprit in the outsized JPM losses, precisely as the Jackass (and RKirby) concluded on May 11th.
My European banker source shared an update this week. He believes the ultimate JPM loss will reach several hundred $billion and grow with time. He mentioned a trigger having gone off in a chain reaction that is not stoppable, which will bring down the USTreasury Bond market and topple the USDollar. Refer to the USTBond Tower of Babel.
Notice the progression of truths. Within one week, JPM admitted the loss was $3 billion, but difficult to calculate. One week later, CEO Dimon admitted Interest Rate Swaps involved in Delta-hedging to defend with the Interest Rate Swap, as the estimated loss reached $5 billion. A few days later, Zero Hedge dissected the post-LTRO2 loss, as they called it, with an updated estimate of $8 billion and some dire warnings of still naked unhedged huge positions. Let me share my own overall impression of the IRSwap and its handiwork.
THE ZERO PERCENT PURE FUEL
Never lose sight of the fact that 0% is absurd in the USTreasury Bond market with annual $1.5 trillion deficits, held together with the USFed monetary inflation glue. Never lose sight of the fact that negative real interest rates (actual rate minus price inflation) is the powerful fuel for the gold bull market. It is no coincidence that the gold bull market began with the advent of negative real rates back in 2002 when the Greenspasm Fed pushed the FedFunds rate down hard to avoid a financial sector collapse. The negative real rate of interest has remained, and even gone more negative, since the Quantitative Easing programs hit in 2010.
JPMORGAN AND ITS INTEREST RATE SWAPS ARE A DYNAMIC ENGINE OF CAPITAL DESTRUCTION WHOSE EXHAUST EFFLUENT IS THE PURE FUEL OF NEGATIVE INTEREST RATES THAT POWERS THE GOLD BULL.
Ferguson is an alert analyst, capable of piecing the puzzle together. Some call it connecting the dots. He has come up with a simple deduction. The New York Fed as part of their shoddy Bank Stress Tests this January made a conclusion (directive) that JPM would have to suspend their stock buyback and dividend payouts, IF THEIR DERIVATIVE LOSSES EXCEEDED $31.5 BILLION. Well lookie here!! The JPMorgan colossus just announced no more stock buyback or dividends. Although not a necessary & sufficient condition of the outsized losses, we have an indication of over $31.5 billion in losses. It will all come out gradually, especially since the trigger has been hit. The internal breakdown of the USTBond reserve banking system from has been hit with a shock, and the internal breakdown of the USDollar toll taker system from has been hit with mounting defection and avoidance. The alternative trade settlement systems are coming online, with bilateral swap facilities, settlement in gold, and eventually a rival method to the SWIFT bank settlement. Nations are actively seeking out the alternatives.
CONCLUSION
A great urgent need has come for a rally to 1.5% in the TNX (10-year USTreasury yield) in order to save the IRSwaps from implosion. The Tower of Babel is teetering. A bond rally would thus render the tower wider at the base. The final losses will be in the hundreds of $billions in the next several months, eventually possibly to top the $1 trillion mark by next year. My source from Europe wrote, "An event driven chain reaction has been triggered deep inside the system, with Interest Rate Swaps at the center. This has already gone viral. They will have to trigger some mega-crises, most likely in Europe & Greece, as a diversionary tactic. They need to have something to blame things on. Once Greece implodes, so will the big French banks and likely some Italian banks. It is all so obvious and predictable."
Look also for losses to London banks, enough to topple one or more. Hats off to Rob Kirby for correctly concluding the Interest Rate Swaps were at the center of the mega mushrooming JPM losses. It is coming to light slowly. Many analysts naively believe the USFed can monetize whatever ails the system. Not so, when the biggest credit market in the world (USTBonds) is involved. They can use the 0% money to paper over the hurricane for a while. In the May Hat Trick Letter report, several times it was repeated that the central problem is 0% rate with annual $1.5 trillion deficits, held together by hyper monetary inflation at the hands of the USFed central bank. The report contains a full 12-page chapter on JPMorgan alone and its events, traps, and basis for future loss. The USTBond Tower of Babel is very narrow and tall, like a tower that grows higher and higher each year, subject to the heavy winds. The recent bond market volatility has acted like slamming a hedge hammer into the Babel Tower base when strong winds from Europe hit the sides. The vagaries and complexity and wreckage of the sovereign bond market have begun to topple the tower. The tower will fall, and fall in a heavily populated urban area. It is going to be the most dangerous and exciting event in modern financial history, that climaxes with the death of the USDollar and announcement of the USGovt debt default. The main tough questions are timing of events. But as usual, the sequence will be from an event schedule. It has begun, and cannot stop.
When the USTBond tower topples, it will lead to the great release upward in the Gold price. A grand Gold bull market is near. As the safety and security of the USTreasury Bond market is unmasked (an asset bubble), enduring a devastating wreck, the global funds will flock into Gold. The timing will be simultaneous with the rejection of the USDollar in trade settlement, and the end of the famed Petro-Dollar. The Gold cartel cannot stop the price rise, because they will have no physical gold. They are being raided of their gold bullion by the East, to the tune of 5,000 (five thousand) metric tons since the end of February. That figure was confirmed by my source, who also claims that the major banks are short well over 20,000 metric tons after illegally grabbing the Allocated gold accounts held in their custody. Law suits are occurring in Switzerland to this effect.
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a Ph.D. in Statistics. His career has stretched over 22 years. He aspires to one day join the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com
The Biblical story is told of a tower built ever higher in order to achieve contact with the heavens, lest they be scattered upon the earth. They were scattered when the tower fell. Fast forward to today, where the earth has a multitude of tribes, languages, and several major alphabets. When the Lehman Brothers failure occurred, and the Fannie Mae and AIG activities were to be concealed under court orders, the land turned barren, and a financial plague befell the Western nations led by the United States. They were after all, the keepers of the ark (printing press for USDollars). But a plague of debt locusts was cast upon the US nation, with annual $1.5 trillion deficits. The Americans in their unending arrogance, chose to speak from the tower top and to proclaim 0% forever, suspending gravity. They have attempted to force free money to finance their USGovt debts, to preserve power, to ensure privilege, but in doing so they defy nature in testing gravity itself.
The recent losses from JPMorgan have proved to be much more based upon suspending gravity with 0% official rates in the Delta-Hedging complex game tied to the vast over-burdened Interest Rate Swap contracts, rather than the European sovereign bonds as first claimed. The Jackass is on record on May 11th, aided by the indefatigable forensic analyst Rob Kirby, in pointing to Interest Rate Swap stresses from the sudden March and April movement in the 10-year USTreasurys within the strained bloated USGovt sovereign bond market. The IRSwap setbacks were the underlying cause of the JPM losses. The giant bank does not want attention give to this derivative tool which controls the bond market in a devious artificial manner. As far as debt is concerned, the United States is Greece times 100. It is Italy times 20. It receives a pass from the bond market, precisely because the nation prints the money and controls the vast Interest Rate Swap support mechanism. But the tower is finally exposed.
The IRSwaps act like giant buttresses to support the evergrowing USTreasury Tower of Babel that stretches to the sky. Every year, the expansive tower grows another $1.5 trillion higher. Every year, the challenge grows exponentially for the JPMorgan master financial engineers to apply their control panel magic to achieve equilibrium. Every year, the degree of difficulty becomes more arduous. Every year, the tower must withstand the high winds from Europe, where the bond market is doing more than undergoing stress. It is crumbling before our eyes. In a way, Europe helps to conceal the great strains from the broken USTreasury Bond market, held together by interest derivatives. Few analysts connect the failure of the Draghi LTRO funds to the JPMorgan losses. They do not grasp the gravity of the USTBond problem. They prefer to focus on FINREG for regulatory changes centered on the Volcker Rule, or on the division of proprietary trading. They focus on the personalities of the so-called Whale. Now a new verb has entered the lexicon, as a firm was just "Iksil-ed" to mean they suffered massive leveraged losses in a high risk game of playing god in the financial markets. JPMorgan cannot hedge since THEY ARE THE MARKET. What the Whale or JPMorgan do is attempt to maintain balance of the USTreasury Tower of Babel, which grows every year to try to touch the sky, to achieve the perfect world. They scrape the devil's attic door instead.
THE ULTIMATE PROBLEM
Without any doubt whatsoever, the ultimate problem is that the bond market cannot defy the natural forces (gravity on the tower) from enormous new supply coming to the USTBond market (higher tower) in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. Essentially the 0% rate is an engineering display of the most extreme arrogance. It is tantamount to placing the buttress support structure at a very low position. The sovereign bonds of Southern Europe with their 5% or 6% bond yields have the equivalent of buttresses place in very high positions, sufficient to endure the whips and sways from the high winds and routine vagaries dealt by the never-ending global financial crisis. In my opinion, the global financial crisis is far more than that. It is instead a global monetary war, to preserve the USDollar supremacy at all costs, with victims being the Western banking systems and the Western economies. The entire platform that supports the major fiat currencies is collapsing, namely the sovereign bonds. The platform is breaking at its weakest points, where it has non-homogeneous planks in Southern Europe that do not fit together. Imagine how the USTreasury Bond market would look if all 50 states had their own sovereign debt as components to the entire USGovt. Imagine each year the $1.5 trillion in debt were apportioned as 15% to California, 4% to Texas, 8% to New York, 8% to Florida, in shared responsibility. Imagine each state had its own bond traded in a market that strived for equilibrium, each with a unique bond yield, all tethered to the USDollar. The United States would fracture in six months from the stress, not the least factor for which would be the apportionment of syndicate banker benefit and divvying up the war costs. That is Europe in parallel.
HIDDEN TOOL WITH GRAND DECEPTION
Back to the ultimate problem. The USTreasury Bond market cannot defy the natural forces from enormous new supply coming to the USTBond market in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. To add strain to the tower, the foreign buyers have removed themselves due to the grand debasement of the USDollar from the program. Too much hidden USDollar output comes behind the curtains. They are disgusted that the US bankers make unilateral decisions on central bank monetary policy, like setting the 0% rate, like monetizing another $1 trillion in USTBonds or USAgency Mortgage Bonds, like consenting to lavish executive bonuses to those responsible for fracturing the global financial ramparts, all done without consulting foreign creditors. Their significant US$-based bond holdings are eroding in value, not earning a yield in compensation for risk. The 0% payout is an insult to creditors, especially during constant QE initiatives. The published CPI measure of 2% to 3% is another insult, when 8% to 10% is the reality.
Many inexperienced observers, naive bank analysts, clueless fund managers, and deceptive news anchors fail to ask the basic question of how the USTBond market can continue with 0% when supply is an annual flood of $1.5 trillion in new debt while the demand is vanishing from the absent foreign creditors. It is hardly a mystery. The visible piece is the USFed itself with its awkwardly named Quantitative Easing initiatives, which make it sound so sophisticated and professional. Its bond monetization is highly destructive, since it is effectively pure hyper monetary inflation. The wayward financial market mavens crave even more QE, even more monetary inflation flows to aid the market, without realizing the utter destruction of capital. They might notice out of the corner of the eye some rising costs, but they minimize them in their mental process. They deceive themselves into thinking that the financial assets will rise in value also. Except valuation is greatly distorted. The end result is that the cost structure is rising without benefit of rising incomes. In many cases, where liquidation is often the rule, the end products are not rising in price. So profit margins are squeezed, businesses are shut down, equipment is taking offline, and workers are cut along with incomes. The zinger is the globalization concept, when China hit the scene. The Western economies cannot withstand the competition. The West has in effect replaced much of its legitimate income sources with debt from dubious areas like home equity. The home foreclosure movement is a direct consequence of Chinese industrialization.
ENGINEERED FLIGHT TO SAFETY
The hidden tool to maintain the 0% interest rate when supply grows by $1.5 trillion annually, and when dependence on the USFed for bond monetization picks up the slack, is the Interest Rate Swap contract. JPMorgan would prefer that the public not learn about it. Back in December 2010, Morgan Stanley added $8 trillion to its Interest Rate Swap book in a single quarter. Look to see the wondrous effect from that lever pulled behind the curtain. Bear in mind that the accounting for the derivative book, listed in the Office of the Controller to the Currency, is quarterly and tallies the past quarter of activity. My belief is there is more lag to the proper accounting. Notice how the 10-year USTreasury Bond yield (aka TNX) went from a threat to the 4.0% mark in early 2010 and rallied hard all the way down to the 2.4% mark by summer's end. The US financial press hailed a grand flight to safety in the USGovt Bond securities. No such flight to safety like a thundering herd was part of the reality landscape. Let the chart be shown with GREEN text to reflect the application of USDollars from the financial engineering rooms.
What the Interest Rate Swap does is to create artificial demand for the end product USTBond, no real buyer, in a magnificent display of 50:1 leverage, sometimes as much as 100:1 leverage. Repeat that -- no real buyer of the USTBond, all artificial, all coming from the IRSwap device. Few bond experts even realize this fact of bond life. The pronounced effect on the US bond market brought about a change in sentiment, and reinforced the phony notion that investors were flocking to the USTBond market for safety. The reality was the exact opposite. Bill Gross of PIMCO was exiting the USTBond market. A slew of foreign creditors exited the USTBond market. The bank analysts were confused, unable to explain the rally in USTBonds and falling bond yields when supply was growing in a big way, but demand was vanishing. The USFed had to admit its bond purchases within its QE initiative in order to explain the inconsistency. The huge annual deficits and departure of bond buyers forced the USFed into the open, where they had to admit their QE and its hyper monetary inflation.
ENGINEERED REJECTION OF USGOVT DEBT DOWNGRADE
In early August 2011, the debt rating agency Standard & Poors downgraded the USGovt debt. It was an insult of high order, delivered during the Greek Govt Bond crisis, as the Southern European bond market was under great scrutiny and strain. The JPMorgan situation room was obviously tipped off, pressed into action, and ready at the Interest Rate Swap lever. The result was profound as the TNX fell from 3.2% down to under 2.0% by the time the dust cleared. Notice a near accident in June in the USTBond market just before the big decline in bond yields, a big oops! The TNX jumped from 2.88% to 3.20% in a single week, a hefty 32 basis point scare. The JPM situation room responded quickly. Word leaked out about the S&P debt downgrade, the first in US history. The market move was becoming clear, a selloff. The Interest Rate Swap lever was yanked, and the effect pulled down the TNX significantly, as the financial press obediently proclaimed a victory over the S&P defiant downgrade. It was all phony, again!! The USGovt barkers even pounded the tables to point out a grand market contradiction of the Standard & Poor debt downgrade of the USGovt debt. Victory over the marketplace was won, and no big debt insurance contract rise either. All hail the IRSwap weapon in private Wall Street offices, of course without recognition of its heavy usage.
By this time, in late summer 2011, the financial market sentiment had solidified its phony psychological notion of the USTreasury Bond being a reliable safe & secure place to hide. The USFed was repeating its assured interest yield paid to Excess Bank Reserves, another false story. In reality, the USFed was paying the big US banks to place their Loan Loss Reserves at the USFed in order to conceal the insolvency of the USFed balance sheet. The big US banks compounded the flagrancy of the action by removing loss reserves later, calling them profit, in order to conceal their own business decline and deep deterioration. They did so because they became dangerous illiquid.
USFED STUCK AT 0% FOREVER
Something happened in March 2012. It is not entirely clear. Perhaps it was simply the stupidity of the Bernanke Fed in declaring the need to embark on an Exit Strategy at some point soon. Once more, Professor Bernanke is a poor economist, unaware that he is stuck in the 0% corner forever. That bears repeating. THE USFED IS STUCK WITH AN OFFICIAL ZERO PERCENT RATE FOREVER, NEVER TO RISE. It can never rise due to the extreme increase in borrowing costs that would hit the USGovt deficit tally. The amount would equal the endless war costs. However, the USFed is stuck at 0% forever, due also to a very different hidden market force. Any rise, even a moderate rise, in the USTBond yield would result in multi-$trillion losses from the derivatives hidden at work. The vast Interest Rate Swap would deliver massive blows like a machete across the entire financial sector. Every big US bank involved in heavy IRSwap enforcement as bond market intervention would suffer losses in the multiple $trillions. That process is starting to be seen. The Jackass has warned about the potential losses for three years, explaining the permanent corner the USFed has found itself, a result of its own failure. The USFed talked about an Exit Strategy in 2009, and the Jackass correctly rejected the notion as lunatic wishful thinking. The USFed backed off, and worse, assured the banking sector of zero percent policy almost forever. You see, the big US banks are earning easy money in the USTreasury carry trade, borrowing short and investing long. If the USFed were to hike rates, they would remove the US bank income stream, since they sure are not earning it the old fashioned way, with IPOs and debt offerings. They are not so much investment banks anymore, just plain speculative houses. They love their High Frequency Trades in the stock market too.
The USEconomy has lost its potential traction, since it forfeited the bulk of its industry to China in the last decade, after forfeiting much more in the 1980 and 1990 decade. Back then it was called the migration to the Pacific Rim. Therefore, the USEconomy cannot respond to 0% rate, does not take advantage of the low rate to expand business investment, to kick start the various industries as it did in past recessions. This recession is both permanent and a march to the cemetery. At the end of this current cycle is a massive implosion of the big US banks, followed by global isolation of the USDollar, ending with an inevitable USGovt debt default. The implosion of the big US banks has begun, with JPMorgan making its defensive deceptive admissions of serious loss and worse, lost control. The isolation of the USDollar is a new chapter underway, in response to the ill-fated Iran sanctions. The East is mobilizing.
The USGovt debt default, laughed off by the same clowns who expected the subprime mortgage mess to be contained, will come in the form of global rejection of USTBond debt and a grand summit conference to restructure the debt. The many debt downgrades handed out in recent months to Europe, today to Japan, and elsewhere have carefully avoided the United States. The second downgrade will come, this time with the Interest Rate Swap machine in view at the side of the stage, and with JPMorgan executives at center stage. They will be fumbling to explain their losses and the backlash of the IRSwap machinery. It is their special tool (buttress) to hold the sprawling USTBond Tower of Babel upright, and to prevent it from falling in a heavily populated urban location.
SPRING HIGH WINDS HIT THE TOWER OF BABEL
Again, something happened in March 2012. It is not entirely clear. Perhaps it was simply the stupidity of the Bernanke Fed declaring the need to embark on an Exit Strategy at some point in the not too distant future. Bond investors might have sold bonds in heavy volume in anticipation of the lunatic professor actually hiking rates in the face of annual $1.5 trillion deficits and a vast overhang of derivatives. They might have feared a great unwind of leverage that could have gone out of control easily. Perhaps the USFed itself conducted some active Stress Tests on the derivative complex, with some arrogant assurance from JPMorgan's CIO office that they could handle anything that came their way. Perhaps the arrival of Volcker Rule adaptations, reorganizations, and disruptions took the JPM IRSwap team off guard. Perhaps something more sinister occurred, like China acting to kick one leg from under the stool, selling a vast block of USTBonds to awaken the Wall Street megalomaniacs. It could be that China sold a big block of USTBonds without malice of forethought, but instead expedience in dealing with its own economic slowdown and pervasive banking holes. Maybe they just did some rebalancing of their huge SAFE Fund and other sovereign wealth funds that must be approaching $3 trillion in size.
On May 10th, the JPMorgan machine issued some deceptive public comments in response to a large estimated $2 billion loss. The deception was from putting blame on the European sovereign bonds and their instability, wreckage, and chain effects. The other deception was not admitting the fuller extent of losses, and giving empty assurance of being in control. The JPMorgan machinery could not properly and accurately assess and measure their losses unless a full audit were to be conducted that spanned three months at least. They have lost control. In a radio interview with Turd Ferguson (CLICK HERE), the Jackass pointed a finger at the USTreasury Bond tower, the Interest Rate Swap support mechanism, and offered an argument that the losses for JPMorgan were closer to $18 billion. Furthermore, an argument was made that the losses would top $100 billion in a year's time. Tyler Durden of Zero Hedge correctly boasts that their excellent publication first broke the story of the outsized JPMorgan losses, even the possibility of greater losses. But it was the Jackass that first pointed to the Interest Rate Swap to defend the outrageous USTBond tower during a March whipsaw event. The Jackass pointed to the tame European sovereign bond yields during the six weeks in question where JPMorgan offered their typical deception. PIGS bond yields were tame over those six weeks. During the interview, a big hat tip was given to Rob Kirby who exposed me to the tame bond market in Europe, and with emphasis to the whipsaw of high winds against the USTBond market in March. He identified the location of the source of disturbance. It caused a big shock wave that knocked the JPM machine off its footing. It has been suffering from loose cargo ever since.
One must ask a preliminary question, of why with national security exceptions, the JPMorgan loss had to be admitted at all. It could have been swept under the rug, doctored on the balance sheet with the help of the USDept Treasury and USFed. The regulators would look the other way as they always do. Something unusual in the parental rules has occurred, and it is not certain. My guess is a new sheriff is in town, fresh off a jet from the East, who read the riot act to its wayward debtor, and did so recently. What else has changed? To be sure, the big US banks are operating under big illiquidity problems from European sovereign debt, along with troubles in FOREX currencies, drainage from mortgage bonds, even litigation costs from bond investor lawsuits. They suffer from a panoply of losses. A private source reports the big money center banks in New York are all under great strain from lack of cash, as in they are broke. The trouble with standing as insolvent structures is the grand risk of an illiquidity bout. The longstanding rule in banking is that INSOLVENCY plus ILLIQUIDITY equals BANKRUPTCY. Last and hardly least, the JPMorgan losses and financial strains admitted confirm something for a Grand Jury. They scream out a Prima Facie case for the MFGlobal client fund thefts, establishing a motive.
Some truly devastating implications. My European banker source shared a dire opinion. He fully expects the total loss to be several 100 $billion in JPM losses. He shared his $18 billion figure two weeks ago that tipped me and Rob Kirby off. That figure seems to be the target being approached. Early last week, the JPMorgan talking heads revealed they are struggling to provide an accurate estimate of their outsized loss. In truth, they cannot estimate it, since the IRSwap and other Delta-Hedging mechanisms are dynamic and too complex. They revealed the loss was closer to $3 billion, not the original $2 billion cited. At least they have started the process of upgrades toward truth. Then late last week, the Wall Street Journal reported that the loss might be around $8 billion. But the WSJ revealed something more important, that the loss stemmed from the Delta-Hedging program that involves the Interest Rate Swap contracts in their vast derivative book. The JPMorgan derivatives contain about $57.5 trillion in interest rate derivatives. They are teetering, like the USTBond Tower of Babel. Bingo!! The IRSwap is on the table as the culprit in the outsized JPM losses, precisely as the Jackass (and RKirby) concluded on May 11th.
My European banker source shared an update this week. He believes the ultimate JPM loss will reach several hundred $billion and grow with time. He mentioned a trigger having gone off in a chain reaction that is not stoppable, which will bring down the USTreasury Bond market and topple the USDollar. Refer to the USTBond Tower of Babel.
Notice the progression of truths. Within one week, JPM admitted the loss was $3 billion, but difficult to calculate. One week later, CEO Dimon admitted Interest Rate Swaps involved in Delta-hedging to defend with the Interest Rate Swap, as the estimated loss reached $5 billion. A few days later, Zero Hedge dissected the post-LTRO2 loss, as they called it, with an updated estimate of $8 billion and some dire warnings of still naked unhedged huge positions. Let me share my own overall impression of the IRSwap and its handiwork.
THE ZERO PERCENT PURE FUEL
Never lose sight of the fact that 0% is absurd in the USTreasury Bond market with annual $1.5 trillion deficits, held together with the USFed monetary inflation glue. Never lose sight of the fact that negative real interest rates (actual rate minus price inflation) is the powerful fuel for the gold bull market. It is no coincidence that the gold bull market began with the advent of negative real rates back in 2002 when the Greenspasm Fed pushed the FedFunds rate down hard to avoid a financial sector collapse. The negative real rate of interest has remained, and even gone more negative, since the Quantitative Easing programs hit in 2010.
JPMORGAN AND ITS INTEREST RATE SWAPS ARE A DYNAMIC ENGINE OF CAPITAL DESTRUCTION WHOSE EXHAUST EFFLUENT IS THE PURE FUEL OF NEGATIVE INTEREST RATES THAT POWERS THE GOLD BULL.
Ferguson is an alert analyst, capable of piecing the puzzle together. Some call it connecting the dots. He has come up with a simple deduction. The New York Fed as part of their shoddy Bank Stress Tests this January made a conclusion (directive) that JPM would have to suspend their stock buyback and dividend payouts, IF THEIR DERIVATIVE LOSSES EXCEEDED $31.5 BILLION. Well lookie here!! The JPMorgan colossus just announced no more stock buyback or dividends. Although not a necessary & sufficient condition of the outsized losses, we have an indication of over $31.5 billion in losses. It will all come out gradually, especially since the trigger has been hit. The internal breakdown of the USTBond reserve banking system from has been hit with a shock, and the internal breakdown of the USDollar toll taker system from has been hit with mounting defection and avoidance. The alternative trade settlement systems are coming online, with bilateral swap facilities, settlement in gold, and eventually a rival method to the SWIFT bank settlement. Nations are actively seeking out the alternatives.
CONCLUSION
A great urgent need has come for a rally to 1.5% in the TNX (10-year USTreasury yield) in order to save the IRSwaps from implosion. The Tower of Babel is teetering. A bond rally would thus render the tower wider at the base. The final losses will be in the hundreds of $billions in the next several months, eventually possibly to top the $1 trillion mark by next year. My source from Europe wrote, "An event driven chain reaction has been triggered deep inside the system, with Interest Rate Swaps at the center. This has already gone viral. They will have to trigger some mega-crises, most likely in Europe & Greece, as a diversionary tactic. They need to have something to blame things on. Once Greece implodes, so will the big French banks and likely some Italian banks. It is all so obvious and predictable."
Look also for losses to London banks, enough to topple one or more. Hats off to Rob Kirby for correctly concluding the Interest Rate Swaps were at the center of the mega mushrooming JPM losses. It is coming to light slowly. Many analysts naively believe the USFed can monetize whatever ails the system. Not so, when the biggest credit market in the world (USTBonds) is involved. They can use the 0% money to paper over the hurricane for a while. In the May Hat Trick Letter report, several times it was repeated that the central problem is 0% rate with annual $1.5 trillion deficits, held together by hyper monetary inflation at the hands of the USFed central bank. The report contains a full 12-page chapter on JPMorgan alone and its events, traps, and basis for future loss. The USTBond Tower of Babel is very narrow and tall, like a tower that grows higher and higher each year, subject to the heavy winds. The recent bond market volatility has acted like slamming a hedge hammer into the Babel Tower base when strong winds from Europe hit the sides. The vagaries and complexity and wreckage of the sovereign bond market have begun to topple the tower. The tower will fall, and fall in a heavily populated urban area. It is going to be the most dangerous and exciting event in modern financial history, that climaxes with the death of the USDollar and announcement of the USGovt debt default. The main tough questions are timing of events. But as usual, the sequence will be from an event schedule. It has begun, and cannot stop.
When the USTBond tower topples, it will lead to the great release upward in the Gold price. A grand Gold bull market is near. As the safety and security of the USTreasury Bond market is unmasked (an asset bubble), enduring a devastating wreck, the global funds will flock into Gold. The timing will be simultaneous with the rejection of the USDollar in trade settlement, and the end of the famed Petro-Dollar. The Gold cartel cannot stop the price rise, because they will have no physical gold. They are being raided of their gold bullion by the East, to the tune of 5,000 (five thousand) metric tons since the end of February. That figure was confirmed by my source, who also claims that the major banks are short well over 20,000 metric tons after illegally grabbing the Allocated gold accounts held in their custody. Law suits are occurring in Switzerland to this effect.
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a Ph.D. in Statistics. His career has stretched over 22 years. He aspires to one day join the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.comPeter Cooper - On the Stock Market and Money Printing
May 23, 2012 by mydubaimycity
Global markets tumbled for weeks as the euro zone debt crisis. But GCC as well as global markets have now seen a relief rally. Sandra heads down to the Dubai Financial Market and meets with Peter Cooper, Editor, ArabianMoney.net to find out how long the markets will hold on to their gains.
Global markets tumbled for weeks as the euro zone debt crisis. But GCC as well as global markets have now seen a relief rally. Sandra heads down to the Dubai Financial Market and meets with Peter Cooper, Editor, ArabianMoney.net to find out how long the markets will hold on to their gains.
Thursday, May 24, 2012
Central Banks Still Significant Buyers On Gold Dip
Original source
Central banks internationally continue to diversify their foreign exchange reserves into gold bullion due to concerns about fiat currencies – including the dollar and especially the euro.
IMF data shows that central banks were again net buyers in April with Turkey and Philippines being the largest buyers of gold.
The Philippines increased their gold holdings significantly by 32.13 tonnes to 194.241 tonnes in March – a 17% increase in their gold reserves in the month.
It was the single largest addition Philippines has made since September 2008. They have been pretty consistent buyers of gold over the last few years, but the 17% increase in April was another big rise.
Turkey expanded its gold reserves by 29.7 metric tons in April. Turkey’s bullion reserves climbed to 239.3 tons last month meaning that Turkey increased their gold reserves by 14% in April.
The central bank on March 27 doubled the share of lira reserves banks can hold in gold to 20%, saying it would provide 6.1 billion liras ($3.3 billion) of extra liquidity.
Mexico increased gold holdings by 2.92 tonnes to 125.5 tonnes in April.
Kazakhstan raised gold holdings by 2.02 tonnes to 98.19 tonnes in April.
Ukraine upped gold reserves by 1.4 tonnes to 30.607 tonnes in April.
Sri Lanka raised gold reserves by 2.177 tonnes to 7.807 tonnes in January. There is a delay in Sri Lanakan gold reserve reporting to the IMF.
Central banks added 456.4 tons last year, the most in almost five decades, and will buy as much as 400 tons this year, the London-based World Gold Council estimates.
While the gold tonnage demand from central banks in recent months has been significant, gold remains a tiny fraction of most central banks, especially emerging market creditor nations such as China, foreign exchange reserves and therefore the trend is sustainable and indeed may accelerate.
Central bank reserve diversification into gold may increase given the Eurozone debt crisis and the risk of debt crisis spreading to Japan, the UK and the U.S.
Indeed, there is the increasing possibility that some G8 debtor nations, such as the UK and Japan, may decide to once again add to their gold reserves in order to protect their currencies and guard against the risk of devaluations of the euro, dollar, yen, pound and a wider international monetary crisis.
Price is not a determining factor in central bank buying rather they are more likely being guided to secure an allocation of a percentage of their overall foreign exchange reserves into gold bullion.
Sovereign government buying of gold is likely to support gold at these levels and indeed could be the driver to higher prices in the coming weeks and months.
Bilderberg Meeting in Virginia to Reveal Whether Financier Elite Backs Obama or Romney
Webster Tarpley on Alex Jones Show Sunday May 20, 2012.
Bilderberg Meeting in Virginia to Reveal Whether Financier Elite Backs Obama or Romney; Romney-Netanyahu Axis Gives GOP Upper Hand to Carry out Sinister "White Horse Prophecy"; Support Alexis Tsipras and Syriza Bloc in Greek Elections.
Get source video and audio files of this interview at http://tarpley.net/?p=4084
Dollar Backwardation
From ZeroHedge.com
Original source
by Keith Weiner of the New Austrian School of Economics
Dollar Backwardation
The current financial crisis, may progress to a phase where people demand and hoard dollar bills but take electronic deposit credits only at a discount which increases until electronic deposit credits are repudiated entirely. The Federal Reserve would be powerless to solve the problem, because while they can create unlimited electronic deposit credits they can’t create unlimited paper dollar bills, “money you can fold” as Professor Antal Fekete calls it. There would be a glut of electronic deposits, but a shortage of dollar bills.
Before the financial crisis metastasized in 2008, Fekete wrote a paper that I think is underappreciated and under-discussed. “Can We Have Inflation and Deflation at the Same Time?” (http://www.safehaven.com/article/8507/can-we-have-inflation-and-deflatio...) In his paper, he discussed the “tectonic rift” between paper Federal Reserve Notes (i.e. dollar bills) and electronic deposits. By statute, the Federal Reserve cannot print dollar bills without collateral (e.g. Treasury bonds). Also, they have limited printing press capacity that is insufficient to keep up with a catastrophic crisis.
He discussed the inverted pyramid of John Exter. Gold is the triangle at the bottom, and then above is silver, dollar bills, and then the various kinds of electronic deposits, stocks, real estate, etc. In a crisis, people want to move from top to bottom of the pyramid, but of course there isn’t enough of the stuff at the bottom.
In a scenario in which desperate, panicky people are trying to cope with the enormity of a collapse that they don’t and can’t understand, I think this split between “physical” dollars and “electronic” dollars is very plausible.
Just as there is nothing to be accomplished by selling an underlying security as it becomes worthless, only to buy a derivative of it, selling Treasury bonds and buying dollars is equally nonsensical. The dollar is the Federal Reserve’s liability, backed by the Treasury bond as the asset. If you believe the Treasury bond is worthless, then you ascribe no value to the dollar either. This is why gold will go into permanent backwardation. Holders of dollars will provide an unlimited bid for gold that will not be reciprocated by holders of gold. The latter own the only safe asset, and the only monetary asset that is not ultimately backed by the Treasury bond or the dollar, and they will have no desire to give it up.
The concept of backwardation is simple. It is when people accept a future promise to deliver only at a discount to physical stuff handed over right now. This could be when there is a shortage, such as wheat before the harvest. Or in the case of gold, backwardation signifies a collapse in trust. But isn’t this the same phenomenon of a tectonic rift between paper dollars and electronic deposits?
In a certain sense, the “money you can fold” behaves like a physical commodity, a present good (I realize I am stretching the concept here more than a bit). The electronic deposit credit is most definitely a future promise. In my gold backwardation thesis, the action begins with the offer on the futures contract falling below the bid on spot gold. The bid-ask spread on spot gold widens, as the offer is relentlessly advancing, pulling the bid behind it. The bid-ask spread on the futures contract also widens, as the offer remains stubbornly high, but the bid withdraws and retreats as gold buyers don’t trust futures and buy physical gold instead. Eventually, there are no more sellers of physical gold and that is that (except for the dollar-commodities-gold arbitrage, a backdoor way for dollar holders to get a little gold before the end of the game).
If this split occurs in the dollar, I think it will play out the same way. At first, sellers of real goods may accept electronic credit money, but demand a higher price. The spread on the electronic dollar widens, with the bid from real goods falling. At the same time, virtually unlimited demand for the “real” paper you can fold causes the bid on the paper dollar to rise.
Who knows how long it could last? People could go on accepting paper dollars out of long habit. Obviously, this is an unstable situation that must necessarily collapse. Unlike gold, the paper dollar has no value other than the broken promises that back it.
I dub this “dollar backwardation”.
Original source
by Keith Weiner of the New Austrian School of Economics
Dollar Backwardation
The current financial crisis, may progress to a phase where people demand and hoard dollar bills but take electronic deposit credits only at a discount which increases until electronic deposit credits are repudiated entirely. The Federal Reserve would be powerless to solve the problem, because while they can create unlimited electronic deposit credits they can’t create unlimited paper dollar bills, “money you can fold” as Professor Antal Fekete calls it. There would be a glut of electronic deposits, but a shortage of dollar bills.
Before the financial crisis metastasized in 2008, Fekete wrote a paper that I think is underappreciated and under-discussed. “Can We Have Inflation and Deflation at the Same Time?” (http://www.safehaven.com/article/8507/can-we-have-inflation-and-deflatio...) In his paper, he discussed the “tectonic rift” between paper Federal Reserve Notes (i.e. dollar bills) and electronic deposits. By statute, the Federal Reserve cannot print dollar bills without collateral (e.g. Treasury bonds). Also, they have limited printing press capacity that is insufficient to keep up with a catastrophic crisis.
He discussed the inverted pyramid of John Exter. Gold is the triangle at the bottom, and then above is silver, dollar bills, and then the various kinds of electronic deposits, stocks, real estate, etc. In a crisis, people want to move from top to bottom of the pyramid, but of course there isn’t enough of the stuff at the bottom.
In a scenario in which desperate, panicky people are trying to cope with the enormity of a collapse that they don’t and can’t understand, I think this split between “physical” dollars and “electronic” dollars is very plausible.
Just as there is nothing to be accomplished by selling an underlying security as it becomes worthless, only to buy a derivative of it, selling Treasury bonds and buying dollars is equally nonsensical. The dollar is the Federal Reserve’s liability, backed by the Treasury bond as the asset. If you believe the Treasury bond is worthless, then you ascribe no value to the dollar either. This is why gold will go into permanent backwardation. Holders of dollars will provide an unlimited bid for gold that will not be reciprocated by holders of gold. The latter own the only safe asset, and the only monetary asset that is not ultimately backed by the Treasury bond or the dollar, and they will have no desire to give it up.
The concept of backwardation is simple. It is when people accept a future promise to deliver only at a discount to physical stuff handed over right now. This could be when there is a shortage, such as wheat before the harvest. Or in the case of gold, backwardation signifies a collapse in trust. But isn’t this the same phenomenon of a tectonic rift between paper dollars and electronic deposits?
In a certain sense, the “money you can fold” behaves like a physical commodity, a present good (I realize I am stretching the concept here more than a bit). The electronic deposit credit is most definitely a future promise. In my gold backwardation thesis, the action begins with the offer on the futures contract falling below the bid on spot gold. The bid-ask spread on spot gold widens, as the offer is relentlessly advancing, pulling the bid behind it. The bid-ask spread on the futures contract also widens, as the offer remains stubbornly high, but the bid withdraws and retreats as gold buyers don’t trust futures and buy physical gold instead. Eventually, there are no more sellers of physical gold and that is that (except for the dollar-commodities-gold arbitrage, a backdoor way for dollar holders to get a little gold before the end of the game).
If this split occurs in the dollar, I think it will play out the same way. At first, sellers of real goods may accept electronic credit money, but demand a higher price. The spread on the electronic dollar widens, with the bid from real goods falling. At the same time, virtually unlimited demand for the “real” paper you can fold causes the bid on the paper dollar to rise.
Who knows how long it could last? People could go on accepting paper dollars out of long habit. Obviously, this is an unstable situation that must necessarily collapse. Unlike gold, the paper dollar has no value other than the broken promises that back it.
I dub this “dollar backwardation”.
Quote of the Week
CHARLES CALEB COLTON, Lacon
UNCLE SAM BULLYING BROKERS OVER SILVER?
May 22, 2012 by SGTbull07
Woody O'Brien says that he's decided to do a "Barnhardt' and get out of the markets while the gettin' is good. O'Brien says he's been told by regulators that federally regulated brokers should not be giving advice about buying physical silver, so he's decided he no longer wants to be 'federally regulated'. Remember, physical silver really is the Achilles' heel of the corrupt fiat banking system.
We also talk about JP Morgan's now $7 BILLION derivatives blunder - and we cover what Woody calls the Facebook victory.
Woody's site:
http://www.abolishfiatslavery.com/
Woody O'Brien says that he's decided to do a "Barnhardt' and get out of the markets while the gettin' is good. O'Brien says he's been told by regulators that federally regulated brokers should not be giving advice about buying physical silver, so he's decided he no longer wants to be 'federally regulated'. Remember, physical silver really is the Achilles' heel of the corrupt fiat banking system.
We also talk about JP Morgan's now $7 BILLION derivatives blunder - and we cover what Woody calls the Facebook victory.
Woody's site:
http://www.abolishfiatslavery.com/
Wednesday, May 23, 2012
Keiser Report: Scatological Finance
May 22, 2012 by RussiaToday
In this episode, Max Keiser and co-host, Stacy Herbert, discuss naked short selling by Goldman Sachs and piling on JP Morgan all while being hounded by a Fox News helicopter. In the second half of the show Max talks to Francine McKenna of reTheAuditors.com about Jamie Dimon, London whales and MF Global.
In this episode, Max Keiser and co-host, Stacy Herbert, discuss naked short selling by Goldman Sachs and piling on JP Morgan all while being hounded by a Fox News helicopter. In the second half of the show Max talks to Francine McKenna of reTheAuditors.com about Jamie Dimon, London whales and MF Global.
Alex Jones - A philosophy of Liberty
Alex discusses stories like posted earlier today, amongst other issues.
May 22, 2012 by TheAlexJonesChannel On the Tuesday, May 22 edition of the Alex Jones Show, Alex talks about the continued outrages of the TSA as its goonish Gestapo gropers and sexual molesters are now trained to feel up crotches for terrorist bombs following yet another zany al-Qaeda bomb plot. He also takes a look at the video of a school teacher who launches into an irrational tirade after a student dares to make a mild criticism of Obama. Alex updates the latest on Obama's Kenyan birth and covers cops gone wild as they confiscate money from motorists and other shakedown operations.
May 22, 2012 by TheAlexJonesChannel On the Tuesday, May 22 edition of the Alex Jones Show, Alex talks about the continued outrages of the TSA as its goonish Gestapo gropers and sexual molesters are now trained to feel up crotches for terrorist bombs following yet another zany al-Qaeda bomb plot. He also takes a look at the video of a school teacher who launches into an irrational tirade after a student dares to make a mild criticism of Obama. Alex updates the latest on Obama's Kenyan birth and covers cops gone wild as they confiscate money from motorists and other shakedown operations.
Third World USA - Beggars with Guns
Cops confiscate cash on Tennessee highways
I can only imagine what would have happened to the poor bugger in the following story if he had said he had a "monster box" of US Silver Eagles in the car (value: $15,645)? Tasered to death no doubt for daring to carry Constitutional Money. Although he might have got lucky and the cop, only every being paid in fiat paper tokens wouldn't have recognised that silver is money and assumed it was some worthless industrial metal.
This story typical of all Third World countries.It reminds me when I was traveling in Thailand in 2004. I was driving on a 4 lane divided highway in Southern Thailand about 2am, I was the only car on the section of road that I was on and in the distance I saw a person standing the middle of my lane with a red torch wand (like cops use in NSW to pull you over for drink driving checks). I wasn't speeding (well not by Thai standards), but like a good citizen I took my foot of the accelerator and started slowing down. My Thai relative in the passenger seat turned to me aghast and said "คุณกำลังทำอะไร? คุณกำลังชะลอตัวลงทำไม? ตำรวจเพียงต้องการที่จะหยุดคุณจะเรียกร้องเงิน ให้ไป ความเร็ว" (What are you doing? Why are you slowing down? Police only want to stop you to demand money. Keep going. Speed up!), being a well educated country girl she no doubt added some colourful adjectives and references to penned farm animals, but you get the picture. As we passed the cop doing about 160km/h (100 miles/hr), he had the good sense to no longer be standing in the middle of my lane, she exclaimed "พวกเขาเป็นเพียงขอทานที่มีปืน" (They are just beggars with guns). At which point I hoped she was right as I was not sure my Thai made Honda could have outrun the cop's old Australian made General Motors V8 Commodore.
From RT.com
Original source
A New Jersey man was recently pulled over for speeding in the state of Tennessee. Although George Reby drove off without be charged with a crime, he was instantly $22,000 poorer.
"If somebody told me this happened to them, I absolutely would not believe this could happen in America,” Reby tells Tennessee’s News Channel 5 during an interview earlier this month.
Once you hear his story, you might say the same thing.
Reby was traveling across state lines with 20 grand in cash because he was looking to purchase an automobile he saw on the online auction site eBay. That cash was in his possession when Officer Larry Bates of the Monterey Police Department pulled him over for speeding. According to the cop, having the money just didn’t seem right.
When Officer Bates asked Mr. Reby what he had in the car, he told him the truth: there was $20,000 in cash in a bag.
“Then, at the point, he said, 'Do you mind if I search your vehicle?' I said, 'No, I don't mind.' I certainly didn't feel I was doing anything wrong. It was my money,” Reby tells the station.
Bates didn’t believe Reby’s claim, though, even though the driver offered to show proof on his computer.
“I had active bids on EBay, that I was trying to buy a vehicle. They just didn't want to hear it,” says Reby.
Bates explains to News Channel 5 that, during training, police officers are told, "common people do not carry this much U.S. currency." Under those alleged instructions, he took it upon himself to confiscate all $20,000.
"The safest place to put your money if it's legitimate is in a bank account," Officer Bates lectures the station." He stated he had two. I would put it in a bank account. It draws interest and it's safer."
(Tears: LOL, if US banks are so safe why do they have to be insured by the FDIC against collapse? So safe that 22 US banks have already failed this year. As for US interest rates, cash management accounts are paying a huge 0.8%. Yes that is $8 per $1,000 invested (less taxes and inflation), that should set you up nicely for retirement).
Reby, however, doesn’t operate like Bates. Not only was Reby never charged with a crime, but it took him four months and another trek to Tennessee to eventually recover his money.
When News Channel 5 caught up with the officer, his explanation for the seizure seemed as ridiculous as Reby claimed.
Prompted for a reason for not arresting Reby, Bates told the network, "Because he hadn't committed a criminal law.”
Bates extrapolated by saying, "No, it's not illegal to carry cash," but, “…it's what the cash is being used for to facilitate or what it is being utilized for."
The cop decided that the money could have been tied to drugs, but Officer Bates willfully admits to News Channel 5 that he couldn’t prove it.
And for Reby’s defense? Bates tells the station, “He couldn't prove it was legitimate.”
"You live in the United States, you think you have rights – and apparently you don't," says Reby. Luckily for him, he was able to pursue the case with the help of an attorney. Drivers in Tennessee and other states aren’t necessarily as lucky, though.
Tuesday, May 22, 2012
FX TUTORS: AUDUSD, Tuesday May 22, 2012
FX TUTORS: AUDUSD, Tuesday May 22, 2012: As predicted, the AUDUSD stopped the downtrend at 0.98 USD as displayed in the monthly chart below. Theoretically, given the...
Monday, May 21, 2012
CrossTalk: Banking Mafia
May 21, 2012 by RussiaToday
The banks can't help themselves when it comes to taking on risky investments that endanger not only their livelihood if they fail, but the economy of the entire country. Do the words Lehman Brothers mean nothing to the crew directing JP Morgan? Just as the "99 per cent" start to recover (maybe) from the Great Recession, the banks are again playing roulette with the global economy's future. Is the recent JP Morgan case merely another one-off miscalculation or is it actually a good reflection of the world of banking to this day? If the banks need to be reformed, then how should it be done and by whom? CrossTalking with Andrew Schiff, Sam Bowman and Robert Gnaizda.
The banks can't help themselves when it comes to taking on risky investments that endanger not only their livelihood if they fail, but the economy of the entire country. Do the words Lehman Brothers mean nothing to the crew directing JP Morgan? Just as the "99 per cent" start to recover (maybe) from the Great Recession, the banks are again playing roulette with the global economy's future. Is the recent JP Morgan case merely another one-off miscalculation or is it actually a good reflection of the world of banking to this day? If the banks need to be reformed, then how should it be done and by whom? CrossTalking with Andrew Schiff, Sam Bowman and Robert Gnaizda.
Europe woes loom over Australian Super Funds
From SMH.com.au
By Madeleine Heffernan
Original source
Australians should brace themselves for the prospect of a loss in their super funds for the 2012 financial year, after fears over the European debt crisis once again knocked performances in May, according to projections by an industry researchers.
SuperRatings says the median balanced fund - the most common kind of fund in Austrlaia, with exposure to growth assets of between 60 and 76 per cent - edged up 0.3 per cent in the month of April, the fourth consecutive month of growth.
But the flaring up of the European debt crisis is tipped to send performance lower in May, with SuperRatings estimating losses of 3.2 per cent since the start of the month.
A fall of about 3 per cent fall in May would leave the median Australian balanced super option down about 5 per cent from its October 2007 high, it says.
For the three months to April 2012, the return for the median balanced option was 3.62 per cent, and for the financial year to April, 2.41 per cent, SuperRatings says.
Chairman Jeff Bresnahan says the markets' reactions to the ongoing European challenges over the next six weeks will be crucial to determining superannuation returns for the 2012 fiscal year.
Read more: http://www.smh.com.au/business/europe-woes-loom-over-super-funds-20120521-1z08l.html#ixzz1vUJTl9rp
Aussie Dollar to plunge if Greece quits Euro
From SMH.com.au
THE Australian dollar could fall below US90¢ if Greece pulls out of the eurozone, the chief currency strategist at Commonwealth Bank warned as leaders from the G8 group of nations worked over the weekend to combat the region's financial turmoil.
The dollar fell to US98.24¢ on Friday, its lowest level in nearly six months, after Moody's downgraded 16 Spanish banks, and the Fitch Ratings agency reduced Greece's credit rating to CCC on fears that anti-austerity parties would win the country's new elections.
Currency strategists say if Greece pulls out of the eurozone the dollar could fall much further.
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Last week the S&P/ASX200 suffered its worst five-day return since September, shedding 5.6 per cent in value. The local bourse shed 110.9 points on Friday, or 2.67 per cent, to 4046.5 points, its biggest one-day loss since November.
Not helping the local market were increasing concerns that the Chinese economy is slowing appreciably. The big miners were among the stocks sold off the most last week.
In the US the Dow Jones Industrial Average shed 73.1 points, to 12,369.4, and the S&P500 index losing 9.64 points, or 0.7 per cent, to 1295.22.
Read more: http://www.smh.com.au/business/dollar-to-plunge-if-greece-quits-euro-20120520-1yz10.html#ixzz1vRxHvxmj
Sunday, May 20, 2012
Where is Australia's Gold? - Update 2
My local federal member - Tony Abbott
Leader of The National Party in the Senate - Barnaby Joyce
The Greens
And the only result was my email address being added to the budgie-smugglers distribution list :-(
If any readers wish to take up this question with their local federal member or directly to a political party I would be interested in the result - just leave a comment in this post.
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