Posts Tagged ‘white collar crime’

Our Predicament In Numbers

August 10, 2012

Tony Robbins puts the numbers of our predicament in perspective. I came across this video via Mike Shedlock’s blog. Although Mr. Robbins does a spectacular job in helping you relate to the numbers we are talking about, he stops short of asking the obvious questions:

Who benefits?
Why do elected criminals allow this to happen?

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Does Easy Monetary Policy Enrich The Financial Sector?

August 9, 2012

via Zerohedge

http://www.zerohedge.com/news/guest-post-does-easy-monetary-policy-enrich-financial-sector

The easing of credit conditions (in other words, the enhancement of banks’ ability to create credit and thus enhance their own purchasing power) following the breakdown of Bretton Woods — as opposed to monetary base expansion — seems to have driven the growth in credit and financialisation. It has not (at least previous to 2008) been a case of central banks printing money and handing it to the financial sector; it has been a case of the financial sector being set free from credit constraints.

Who’d ‘ave thunk!!

The Next World War a re-post

July 23, 2012

We’ve come a long way since this October 2009 post:

Begin quote:

The next World War

This is not a catchy title aimed at getting your attention. This is what our governments are planning if not by choice then by necessity.

(NB) Some of you have complained that the first iteration of this post was too disjointed. I am now altering it to highlight some of the relationships that have been discussed in previous posts in an attempt to connect the dots for those that have not followed my posts previously.

Mike Shedlock puts out a great summary of the illegal shenanigans our governments are tolerating and or colluding in and outlines the basis for what should be public outrage but is not… yet. Mike Shedlock does not go as far as predicting a global conflict. I do. Here’s why:

The defining characteristic of fiat money is inflation. One of the characteristics of inflation is that it brings forward and compresses in time the demand and production cycles.

Thus towards the end of the inflationary dynamic, you have excessive industrial capacity thus low pricing power.

Keep that in mind.

The only reason the West will engineer a war is because the coffers are empty. I know that alarmists have been jumping up and down for decades claiming that the coffers are empty. But they have been and still are empty. The difference is that for as long as a government is able to generate inflation, then you can borrow and spend thus maintaining the appearance of solvency (think of the pension trust fund that has been spent for example). However, inflation has a mathematical limit. Essentially, when interest rates are approaching zero and your entire issue of government securities goes towards servicing the debt, you no longer can borrow.

Printing money is a solution IF the money circulates. But if it doesn’t, then all you are doing is destroying the currency.

http://research.stlouisfed.org/fred2/series/MULT

Keep that in mind too.

Now!

One of the more insidious characteristics of deflationary recessions is that as unemployment rises, social costs go through the roof. However, government tax revenue drops dramatically (because of forced liquidation of which more later).

So, governments have to cut back on social expenditure just at the time that unemployment is rising.The other characteristic of deflation is that it forces a liquidation of assets thereby decreasing nominal earnings and the nominal value of balance sheets. The direct result is that all pyramid schemes and illegal finance arrangements are blown out of the water.

Therefore, we will have rising unemployment and a reduction of social expenditure at a time when many politicians and select members of the business elite will be implicated in scandal after scandal; and trust me, we are not done finding out about illegal or criminal practices. I know this because as the beneficial effect of inflation pumping wanes, government has a vested interest in aiding, abetting and colluding in criminal action (Fannie Mae… Goldman Sachs).

http://globaleconomicanalysis.blogspot.com/2009/10/where-hell-is-outrage.html

http://market-ticker.org/archives/1514-Tying-It-Together-Massive,-Pernicious-Fraud.html

The unemployed, the retired and the students will not take well to the new juncture and civil disorder will follow in short order.Civil disorder means that governments will fall.Politicians in the West are not about to relinquish power and they are certainly not about to admit that they are no better than your garden variety Mugabe.

Before enough unemployed will be roaming the streets looking for some politician to lynch, we’ll have us a world war.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6QpSf.s4NaA

It’s been done before for exactly the same reasons. There is absolutely no reason why it should not be done again.

We don’t need resources. We need to destroy plenty of infrastructure so that we may restart the inflation dynamic. No inflation = government default

Forward this post to anyone and everyone on your mailing list. You are the only ones that can prevent the next world war by forcing accountability and legal consequences on our politicians.

– ADDENDUM MARCH 11TH, 2012 –

As I go over posts written over the past few years, I realize that till very recently I have made use of the words “inflation” and “deflation” in erroneous thus ambiguous ways.

Inflation of course, is the expansion of the monetary base and credit. Deflation is the contrary.

Till very recently, whenever I mentioned “inflation” I meant the expansion of the monetary base and credit. So that is correct. However, whenever I mentioned “deflation” I meant the nominal decrease in asset prices thus in balance sheet.

You will forgive me as I am new at this writing stuff.

Below is the link to as well as the entire text of Mike Shedlock’s post

http://globaleconomicanalysis.blogspot.com/2009/10/where-hell-is-outrage.html

Where The Hell Is The Outrage?

The number of articles and opinions on Goldman Sachs earnings, bonuses, and influence pedaling over the past several days is quite stunning.

Many have pointed out the problems; few have expressed outrage over what is happening in general, not just at Goldman Sachs. Let’s take a look.

My take is at the end.

Letting The Dice Roll

Rolfe Winkler at Contingent Capital is writing Letting Goldman Roll The Dice.

Is Goldman really such an indispensable financial intermediary? One look at the firm’s revenue breakdown shows that it’s more casino than anything else, and some of the markets it makes still put the economy in danger.

Goldman, in other words, generates most of its revenue trading its own money and earning vigorish on customer transactions. It’s a hybrid hedge fund and bookie, with an investment bank and asset management business thrown in for good measure.

With that in mind, one is left to wonder whether Goldman was really worth saving last year. What have taxpayers received for the $50 billion worth of cash and guarantees, for giving Goldman access to the Federal Reserve as its lender of last resort?

Saving Goldman was largely about saving the derivatives market, which is so big and unstable that the death of one counterparty could mean the death of all. With big commercial banks like JPMorgan Chase in deep, saving the derivatives business was as much about protecting depositors and maintaining the integrity of the payment system as it was derivatives themselves.

To Goldman’s credit, they’ve rebuilt their capital levels faster than anyone. Their leverage ratio has fallen from 35 to 16 in less than two years, despite pressure from equity analysts to juice returns by deploying “excess capital”. But at $50 billion, the bank’s mark-to-myth, or level 3, assets remain as high as its tangible common equity, the cushion it has to absorb losses.

Wall Street and its protectors at the Fed and Treasury tell us the bailout was necessary to protect the financial system, to protect Main Street. That may be. But Main Street still owns much of the risk while Wall Street gets all of the profit.

Geithner’s Appointment Book

The New York Times is taking A Look Inside Geithner’s Appointment Book

As Treasury secretary in the aftermath of last fall’s Wall Street meltdown, Timothy F. Geithner needs to keep in touch with the nation’s top bankers. But it seems that he connects with some financial chiefs much more often than others.

An analysis of Mr. Geithner’s calendars, which the Associated Press obtained through the Freedom of Information Act, shows that Mr. Geithner had contact with top executives at Citigroup, Goldman Sachs and JPMorgan Chase more than 80 times during his first seven months at Treasury — while the heads of Bank of America and Morgan Stanley appeared on his calendars a total of just six times.

The Associated Press describes one spring evening when Mr. Geithner had a series of particularly high-powered calls:

After one hectic week in May in which the nation faced the looming bankruptcy of General Motors and the prospect that the government would take over the automaker, Mr. Geithner wrapped up his night with a series of phone calls.

First he called Lloyd Blankfein, the chairman and C.E.O. at Goldman. Then he called Jamie Dimon, the boss at JPMorgan. Obama called next, and as soon as they hung up, Mr. Geithner was back on the phone with Mr. Dimon.

Gee what might those calls have been about? Derivative bets on GM by any chance?

How Goldman Sachs Leveraged $70 Billion In Government Money

Jesse’s Café Américain is reporting How Goldman Sachs Leveraged $70 Billion In Government Money.

Guess which two Wall Street banks were acting as informal agents of the government in order to support the bond and stock markets and reinflate them?

Two big banks that are showing record trading profits, and a small group of enablers and assistants.

Exchange Stabilization Fund – wise, its a near layup when the US fronts you the money and then works with you to take the markets higher. Especially when it is on thin volumes based on ‘news’ which you help to create and control via frequent calls to young Tim who is your coordinator, in addition to all your other well-placed backchannel sources. You get a heads up, you use the futures to prop the markets. You need some good news, some can be arranged. Just like the good old days when Timmy was riding herd on the NY Fed desk.

All for the good of the country. And if you happen to make a billion per month in trading profits, well, that is the price of freedom for a job well done.

Max Keiser On Fraud

Robert Parsons: Is this froth and no substance or is there something to this?

Max Keiser: The word is not froth the word is fraud. JPMorgan, Goldman Sachs, Citigroup, are all engaged in accounting fraud. They are not realizing losses on trillions of dollars worth of bad debts on their books, giving themselves big bonuses this year, deferring losses to next year ….”

Part One

Part Two

The Goldman Tithe

Joe Peyronnin at The Huffington Post is writing Tithe Goldman Tithe

So Goldman Sachs is now concerned its company has a perception problem? They are even going to undertake a huge public relations offensive to turn things around? Well they sure have plenty of money to throw at this problem.

For sure, Goldman Sachs bankers work hard at creating value for their customers and shareholders. And their success should be rewarded. But a report that the firm had set aside about $20 billion for employee bonuses has caused a backlash. Critics say that Goldman Sachs is just back to its old money making ways.

Sadly Goldman Sachs doesn’t really care what Main Street thinks. Rather they are concerned what Congress or the U.S. Government might do.

The projected 2009 Goldman Sachs bonus pool will be around $20 billion, a near record amount. Therefore the average pay out per employee could be more than the $661,490 given in 2007. Memo to Goldman Sachs: most Americans don’t make that much in a lifetime of working.

This year Goldman Sachs should tithe. Take 10% right off the top of the bonus pool, or $2 billion, and donate it to rebuilding New Orleans and the Gulf Coast of Mississippi and Alabama. Tap into their own brainpower to develop a plan to target the money on specific worthwhile projects so it does not get diverted to corrupt contractors and politicians. For starters, money could be used to rebuild the 9th ward of New Orleans, and devastated sections of Biloxi and Bay St. Louis, Mississippi.

Subsequently, Goldman Sachs should donate 10% of their bonus pool each year to a particular cause, helping injured and needy US military veterans, underwriting national after school programs designed to keep kids off the streets and out of trouble, curing diseases and the list goes on.

The US taxpayers supported the financial community when its collapse was imminent. Now it is time for financial institutions to help their country in its time of need.

Goldman’s Public Relations Bind

The New York Times says Bonuses Put Goldman in Public Relations Bind

.

Goldman executives are perplexed by the resentment directed at their bank and contend the criticism is unjustified. But they find themselves in the uncomfortable position of defending Goldman’s blowout profits and the outsize paydays that are the hallmark of its success.

For Goldman employees, it is almost as if the financial crisis never happened. Only months after paying back billions of taxpayer dollars, Goldman Sachs is on pace to pay annual bonuses that will rival the record payouts that it made in 2007, at the height of the bubble. In the last nine months, the bank set aside about $16.7 billion for compensation — on track to pay each of its 31,700 employees close to $700,000 this year. Top producers are expecting multimillion-dollar paydays.

Goldman employees reaped rewards that most people can only dream about. Goldman paid out $4.82 billion in bonuses last year, awarding 953 employees at least $1 million each and 78 executives $5 million or more. The rewards for 2009 will be far greater.

Goldman executives know they have a public opinion problem, and they are trying to figure out what to do about it — as long as it does not involve actually cutting pay.

Another Goldman Executive Named To Key Government Post

Glenn Greewald writing for Salon notes Another Goldman executive named to key government post as its profits skyrocket.

Apparently, the U.S. government didn’t have enough Goldman Sachs executives in key financial and regulatory positions so Goldman Exec Named First COO of SEC Enforcement.
In October of last year, a Goldman Sachs Vice President, Neel Kashkari, was named by former Goldman CEO and then-Treasury Secretary Hank Pauslon to oversee the$700 billion TARP bailout. In January of this year, Tim Geithner hired a former Goldman Sachs lobbyist, Mark Patterson, to be his top aide and Chief of Staff. In March, President Obama nominated Goldman Sachs executive Gary Gensler to head the Commodity Futures Trading Commission, which regulates futures markets, even though (or “because”) Gensler confessed to lax regulation during the Clinton administration over the very derivative instruments that caused the financial crisis. In April, Goldman hired as its top lobbyist Michael Paese, the top aide to Rep. Barney Frank on the House Financial Services Committee which Frank chairs.

According to ABC News in October, 2008, Goldman “spent more than $43 million dollars on lobbying and campaign contributions to cultivate friends and buy influence in Washington, D.C. since 1989″ and their “bankers have been the country’s top political campaign contributors this year.” “They are almost in a class by themselves,” said Sheila Krumholz, the executive director for the Center for Responsive Politics. As Michael Moore has been pointing out, Goldman was the number one source of funding for the Obama 2008 presidential campaign. The bailout of AIG — which resulted in massive federal government monies to Goldman — was engineered at a meeting between Paulson, Geithner and Goldman CEO Lloyd Blankfein. Last year, Goldman paid top Obama economics adviser Larry Summers $135,000 for a one-day visit to Goldman.

That the administration continues, so brazenly, to place Goldman Sachs executives in the very government positions with the greatest power over the financial industry illustrates how little effort is devoted to hiding what is really taking place.

Adam Storch COO of the SEC

The Business Insider has posted an image and qualifications of Adam Storch, 29-Year-Old Goldman Guy Who Is Now COO Of The SEC

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Storch graduated from SUNY Buffalo. During college he did a stint as a summer intern at Neuberger Berman and worked at Deloitte & Touche for two years after graduating.

Storch then went to NYU’s Stern School of Business. This lead to a job at Goldman, where he worked for the last five years.

Derivatives Bill’s Loophole May Exempt Most Firms

Gary Gensler, Chairman of the Commodity Futures Trading Commission says Derivatives Bill’s Loophole May Exempt Most Firms.

Legislation by Representative Barney Frank to tighten derivatives regulation contains an exemption that may let most financial firms escape new collateral and disclosure rules, the head of the Commodity Futures Trading Commission said.

A plan offered by the Obama administration would subject all swaps dealers and “major market participants” to new regulations for capital, business conduct, record-keeping and reporting. Frank’s version would exempt corporations from that definition if they use derivatives for “risk management” purposes.

“It is clearly the weakest of all the proposals I’ve seen to date,” said Christopher Whalen, managing director of Institutional Risk Analytics in Torrance, California, in an interview before the hearing. Whalen, who has testified before Congress on derivatives regulation, is an independent bank analyst. “Frank’s committee seems to be intent on gutting any meaningful reform.”

The draft would ease trading and clearing requirements for derivatives dealers such as Morgan Stanley and Goldman Sachs Group Inc., compared with the administration’s proposal.

The Rich Have Stolen the Economy

Paul Craig Roberts, writing for CounterPunch says From Offshoring Jobs to Bailing Out Bankers The Rich Have Stolen the Economy.

Bloomberg reports that Treasury Secretary Timothy Geithner’s closest aides earned millions of dollars a year working for Goldman Sachs, Citigroup and other Wall Street firms. Bloomberg adds that none of these aides faced Senate confirmation. Yet, they are overseeing the handout of hundreds of billions of dollars of taxpayer funds to their former employers.

The gifts of billions of dollars of taxpayers’ money provided the banks with an abundance of low cost capital that has boosted the banks’ profits, while the taxpayers who provided the capital are increasingly unemployed and homeless.

Except for the banksters and the offshoring CEOs, there is no source of consumer demand to drive the US economy.

The political system is unresponsive to the American people. It is monopolized by a few powerful interest groups that control campaign contributions. Interest groups have exercised their power to monopolize the economy for the benefit of themselves, the American people be damned.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions.

Tenacious Goldman

Here is one more article, from July, courtesy of New York Magazine: Tenacious G

On the weekend of September 12, 2008, as the financial system shuddered and appeared to be on the verge of lurching to a halt, two Goldman Sachs men, former CEO Hank Paulson and current CEO Lloyd Blankfein, huddled with other banking heads at the Federal Reserve Bank of New York to consider how to stave off disaster. Bear Stearns was dead. Merrill Lynch, run by another former Goldman man, John Thain, was in desperate need of a savior. And now Lehman Brothers was on the brink. As secretary of the Treasury, Paulson asked the banks to come up with a private-funding solution for Lehman before it imploded from lack of cash. But all the banks had been scrambling for cash reserves or strategic mergers to buffer against a rapid freeze in lending. No one was able, or willing, to help. And Paulson, a free-market purist, had made one thing clear up front: The government would not bail out the firm. Lehman Brothers, a longtime Goldman rival, prepared to declare bankruptcy, ending its 158-year run on Wall Street.

By Sunday night, Paulson realized he had an even bigger problem: the insurance giant AIG. AIG had sold billions in credit-default swaps to several major banks, what amounted to unregulated insurance on risky subprime-mortgage investments, the very ones that were bringing down the economy.

Hank Paulson and then–New York Fed chief Tim Geithner called an emergency meeting for the following Monday morning at the Federal Reserve Bank, ostensibly to discuss whether a private banking syndicate could be established to save AIG—one in which Goldman Sachs and JPMorgan Chase, two of the ailing insurance giant’s clients, would play prominent roles.

At the meeting, it was hard to discern where concerns over AIG’s collapse ended and concern for Goldman Sachs began: Among the 40 or so people in attendance, Goldman Sachs was on every side of the large conference table, with “triple” the number of representatives as other banks, says another person who was there. The entourage was led by the bank’s top brass: CEO Blankfein, co-chief operating officer Jon Winkelried, investment-banking head David Solomon, and its top merchant-banking executive Richard Friedman—all of whom had worked closely with Hank Paulson two years prior. By contrast, JPMorgan CEO Jamie Dimon did not attend.

The Goldman domination of the meetings might not have raised eyebrows if a private solution had been forthcoming. But on Tuesday, Paulson reversed course and announced that the government would step in and save AIG, spending $85 billion in government money to buy a majority stake.

Of the $52 billion paid to AIG’s counterparties, Goldman Sachs was the biggest recipient: $13 billion, the entire balance of its claim. The amount was surprising: Banks like Merrill Lynch that had bought credit-default swaps from failed insurers other than AIG were paid 13 cents on the dollar in deals moderated by New York’s insurance regulator. Eric Dinallo, the former New York State insurance commissioner, who was at the AIG meetings, characterizes the decision this way: AIG’s counterparties, Goldman being the most prominent, “got to collect on an insurance policy without having the loss.”

Somehow not recognizing (or perhaps not caring about) the brewing backlash, Paulson continued to appoint Goldman Sachs alumni to positions of power after the AIG decision—he named Edward C. Forst, a former head of Goldman’s investment-management division, to help draft the $700 billion Toxic Asset Relief Program (of which $10 billion went to Goldman Sachs), and then Neel Kashkari, a former Goldman V.P., as the TARP manager. And of course Edward Liddy, former Goldman board member, was already serving as the new CEO of AIG. Suddenly, everywhere you looked, men who had passed through the Goldman gauntlet of loyalty and rewards were now in key positions overseeing the rescue of the financial system. The company was earning its nickname: “Government Sachs.”

Both Rogers and Paulson (who’s publishing a book this fall that will presumably attempt to justify his decisions and save his damaged legacy) have argued that the AIG decision was about saving the system as a whole, not Goldman in particular.

Similarly, they say, when it came to AIG, the firm was “prudent” in hedging its bets, buying credit-default swaps from Bank of America, JPMorgan, Société Générale and other banks in case AIG failed to pay the money it owed Goldman—in effect, hedging its hedge against the mortgage market. Goldman Sachs had no “material exposure” to AIG, they argue. One senior executive goes so far as to suggest the firm might even have benefited from AIG’s demise. “We might have done very well,” he says, “but I wouldn’t be so presumptuous as to say that. Who knows?”

Not a single Wall Street executive I spoke with, including several Goldman Sachs alumni, believe those hedges would have survived an overall collapse of the financial system. A large loss would have been inevitable as lending evaporated, and Goldman Sachs would have struggled to shrink the company to a fraction of its size overnight. But the most glaring argument against Goldman is Goldman’s own: If AIG’s biggest and most important bank customer was hedged against losses in AIG, as it claims, why did the government need to pay Goldman Sachs the full $13 billion?

Lost in the haze of Goldman’s recent record profits is the fact that the firm nearly went under even after the AIG bailout last fall. As the market continued to plunge and Goldman’s stock price nose-dived, people inside the firm “were freaking out,” says a former Goldman executive who maintains close ties to the company.

Salvation came on November 25, a few days after Goldman’s stock price plunged to $52 a share, down from the year’s high of $200 and the lowest price the company had seen since it went public. Again, the white knight was the government. It turned out that Goldman’s conversion to a garden-variety bank-holding company offered an amazing advantage: Goldman now had access to incredibly cheap money. Exploiting its new status, Goldman became the first financial institution to sell $5 billion in government-backed bonds through the Federal Deposit Insurance Corporation, which allowed Goldman to start doing deals when the markets were at a near standstill.

Those FDIC notes they got were lifesaving because they couldn’t issue any debt. If it had gone on another week or two, Goldman would have failed, they would have gone the way of Lehman, and you’d be talking about Lloyd the way you talk about [Lehman CEO] Dick Fuld.”

Even Goldman alumni were struck by the company’s shameless posture in ramping up the leverage again so soon after the government bailouts. “It’s a statement of arrogance,” says one former executive.

Goldman claims that there is a Chinese Wall between the advisory business and the trading business. “There are rules and laws regarding information sharing, and we scrupulously follow them,” says a company spokesman.

But two former clients told me they had observed firsthand how Goldman traded against their interests to improve its own bottom line—one who didn’t like it, the other accepting it with a shrug and saying, admiringly, that Goldman’s ability to convince the world that it is a “client-oriented” business was its most masterful PR coup.

Goldman’s profiting from this ethical gray area was exemplified by the real-estate market and the subprime-mortgage collapse: Goldman Sachs sold subprime-mortgage investments to its clients for years, but then in 2006 began trading against subprime on its own balance sheet without informing its clients, a hedge that ultimately let it profit when the real-estate market cratered. For some, this was a prescient call; for others, a glaring conflict of interest and inherently dishonest, since the firm let its clients take the fall.

Earlier this month, Goldman had an ex-employee arrested for allegedly stealing computer codes that could be used, as the prosecutor noted, “to manipulate markets in unfair ways.” Some hedge-fund traders and financial bloggers have speculated that Goldman itself could have been using the codes for the same purpose.

Now attention is turning to Goldman’s dominance of trading on the New York Stock Exchange—as the exchange’s biggest high-speed program trader as well as a provider of liquidity to other traders—and whether that ubiquity has afforded the firm undue advantage. If Goldman’s database knows nearly every trade that is about to be made, sophisticated computer codes could, theoretically, instantly execute fail-safe trades on Goldman’s behalf milliseconds beforehand. This, some are insisting, is where the company is manipulating the markets and making hundreds of millions of dollars a day.

The New York Magazine article is 8 pages long and well worth a read in entirety.

My Take

As long as the playing field is level, corporations are entitled to make what they can and do with the profits what they want, and that includes granting whatever bonuses a corporation wants.

Let’s see how level the playing field was and still is.

AIG

Goldman Sachs makes the case that it was hedged so it deserved not to lose anything. However, as the New York magazine points out, the odds are high that those hedges were worthless because of the sheer amount of leverage and counterparty risk. Yet, Goldman received $13 billion, the entire balance of its claim on AIG while “Banks like Merrill Lynch that bought credit-default swaps from failed insurers other than AIG were paid 13 cents on the dollar.“

Every financial institution involved should return every cent of that money because they all would have failed without government (taxpayer) handouts.

GM

It is incredibly peculiar that in “one hectic week in May in which the nation faced the looming bankruptcy of General Motors and the prospect that the government would take over the automaker, Mr. Geithner wrapped up his night with a series of phone calls” to JPMorgan and Goldman Sachs.

I suspect those calls were in regards to concerns over the derivative books of JPMorgan and Goldman Sachs. It is no secret that more credit default swaps were bet on GM than there were underlying bonds.

Of course, the realm of possibilities says those calls may have been to arrange last-minute details for a group fly fishing trip to Paulson’s private island off the coat of Georgia. However, the realm of probabilities is much narrower.

Is it too much to ask the precise nature of those calls? I suppose it is.

The SEC Appointment

Is Storch really the most qualified candidate? Will a Goldman appointee overlook or squelch investigation into the practices at Goldman in favor of investigating Aunt Martha or some firms that Goldman just might want to step on?

Regardless, It sure does not hurt when you have someone at the SEC who will turn a blind eye to anything Goldman might have done wrong or is still doing wrong or alleged to be doing wrong.

There are a lot of allegations against Goldman about front running trades, naked shorting, high-speed program trading, and the sheer volume of program trading at Goldman Sachs. What are the odds any of this gets investigated, or that if is investigated any wrong-doing will be found?

Derivatives Legislation

Think any derivatives legislation will be passed that is not specifically beneficial to Goldman Sachs and JPMorgan? Think again.

Influence Pedaling

All hail “Government Sachs” the king of kings and master of the universe of influence pedaling. Salon.Com details position after position of ex-Goldman Sachs employees in positions of influence.

Yes, there is some public anger about Goldman Sachs. Sadly, much of it is misdirected towards the bonuses. The real outrage should be over the favoritism, influence pedaling, and business as usual environment in which Goldman Sachs can do what it wants, when it wants, while in a position to know in advance (and potentially trade off that knowledge) of what the government is about to do.

Where’s The Outrage?

I don’t know about you, but I am outraged.

I am outraged and not just about Goldman Sachs, but about a process that allows, even encourages political pandering, by time and time again rewarding leveraged riverboat gamblers and failed institutions and at taxpayer expense.

I am outraged that real people are suffering massively while the influence peddlers have stolen the country for their own personal benefit.

I am outraged at a political system that is totally unresponsive to the American people.

I am outraged by campaign contribution and lobbying processes that allows corporations to buy votes with donations.

I am outraged how legislators ignored the wishes of the people who clearly did not want these bailouts in the first place.

I am outraged that very little of this is in mainstream media. Why is this stuff not on the frontpage of every newspaper in the country or at least in the editorial pages?

I am outraged that the average US citizen is not aware of any of this, instead depending on CNBC, or “The View” for their interpretation of the world.

I am outraged how special interest groups have exercised their power to monopolize the economy for the benefit of themselves, US citizens be damned.

I am outraged that all these bailout programs are doing nothing to alleviate the massive consumer debt problems. Every program, virtually every program was designed to bailout lending institutions, not consumers.

I am outraged at fees charged by banks receiving bailouts.

I am outraged over government pension plans and government pay scales massively out of line with the private sector.

I am outraged that Congress and this administration thinks the solution to massive budget deficits are still higher budget deficits in excess of a trillion dollars.

I am outraged about indictments. Paulson Admitted Coercion to force a shotgun wedding between Bank of America and Merrill Lynch yet no indictments were handed out. Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis.

I am outraged that US citizens are not concerned enough and not educated enough to demand change.

I am outraged that the two party system has failed. Neither party has delivered meaningful change on budgets, on taxes, on social security, on deficit spending, on the size of government, on military spending, or fighting needless wars.

I am outraged that the Obama Administration promised changed and did not deliver. “Yes We Can” was a lie. The reality is “It’s Business As Usual, Only Worse, With Higher Deficits”.

I am outraged there is not enough outrage over this.

Where the hell is the outrage?

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

End quote –

Hypocrisy

July 21, 2012

Hot on the heels of the resignation of an IMF insider, The Telegraph (and countless other main stream publications) tell us with a tone of bewilderment that:

“The International Monetary Fund deliberately suppressed evidence that Europe was heading for a debt crisis, according to a blistering resignation letter from a senior economist at the fund”.

If our leaders, main stream pundits and economists need the IMF to warn them of the inevitable brick wall built into our monetary model, the inescapable conclusion is that our leaders and their acolytes must have an agenda. It is mathematically impossible for everyone to be unable to calculate the ramifications of this:

FRED Graph
FRED Graph
Now that a 20 year veteran of the IMF for God knows what reason stormed out of the building in a huff blaming all and sundry for what he suddenly feels is a wasteful, self serving corrupt entity (and I suspect it may be something personal that made Mr. Doyle throw his toys out of the pram after 20 years of riding the gravy train), the press and the punditry are shocked, shocked I tell you, that something like what Mr. Doyle describes in his letter may be going on at the IMF.
If some of you may wonder what the IMF has to do with US GDP and Debt figures, then you have not understood the implications of the US$ as a reserve currency let alone the implications of a Floating Exchange Rates.
All together now. We are shocked!

The bitter sweet reality

July 12, 2012

I don’t mean to be self congratulatory as this is nothing to celebrate and, to be sure, even I am astounded at the speed and depth of how events are unfolding.

I am finding it both stupefying and incredible to witness events that I had reason to think might come to pass and that, three, four and five years down the line, are actually unfolding before our own very eyes.

I have come a long way in the past decade. Although I am one of a few lucky people to have had a father whom was fully aware of the realities of life, I can only imagine his chagrin at my inability to comprehend what he was trying to convey to me. Today, although belatedly, I am fully cognizant of what freedom is and I can only observe in helpless horror at the near term destiny of the men, women and children of the world.

Some of you will roll your eyes to the heavens but I defy any of you to dispute the realities on the ground. You may think that what is happening today with PFG Best, with LIBOR, with the ESM or the EFSM or with any number of innocuous sounding acronym foisted upon the masses may have nothing to do with you but, in fact, it touches the very core of your freedom.

If you can take a few minutes to rationalize your life, I hope you can see that the “freedom” we have been sold is not only carefully circumscribed but it is designed to gradually reel the individual into a web of dependency that is in every respect as deleterious as dependency on drugs may be and, in fact, very often leads to it.

Just the other day, I was yet again reminded of the absurdity of our predicament when a high level civil servant complained to me about feeling exploited, cheated and misunderstood by her colleagues, her superiors and by a system that she describes as wasteful, impersonal and self serving. To my suggestion that she should quit her job and find something more rewarding to do, her predictable reply was that she would if it were not for the loan she had to service and that she would find difficult to service if working in the slightly less gilded real world.

And that is the reality.

We have grown up in an environment where the education system, academia, the main stream press, chosen pundits and a select group of commercial entities convey selected ideas and half truths all the while telling us that we are free. When confronted by critics, the system is unanimous in pointing out our “freedoms” as opposed to the condition of societies in the former USSR for example. We are free to associate. We are free to chose where to go to school. We are free to chose what car to buy. We are free to seek employment either in the private or the public sectors. We are free to chose what we want to produce and sell. We are free to buy a house. We are free to sell our house. We are free to bring our grievances to a court of law and be judged by our peers… but in truth all of these freedoms are not only well circumscribed but they are arithmetically diminishing till they disappear.

Today, as the noose of our self imposed but thoroughly self serving ignorance tightens, we find ourselves at the vanishing point of our freedoms. What is happening today is not a freak accident that could not have been foreseen. What is happening today could have been inferred long ago and in fact it was. But if a tree falls in the forest and nobody is around to see it fall, does it make noise?

The freedom we have been sold is predicated on deliberately false premises. Our freedoms are predicated on debt.

I am reminded here of my time working in London where it was very fashionable amongst my colleagues to juggle credit card debt. The women in particular used to boast of their excessive use of credit cards and overdraft facilities to highlight their nonchalant ease at living life to the fullest cost what it may. Having a “cab hand” was considered very cool as they competed to see whom used a cab for the shortest trip.

Our freedom is inexorably tied to our currency; to our money. We may be free to chose the schools we send our children to or the companies we want to be associated with but crucially, the money we must inevitably make use of, gradually but inexorably draws us into a web of dependency till the point we are no longer free to act upon our ideals and stand for what we believe to be right against what we believe to be wrong, because doing so would deprive us of what we construe is our freedom. Today, few people are free to make the choices they would like to make or should make and this constraint renders them accomplices of a system that now shows clear signs of oligarchy be it bureaucratic or corporatist. They may still be able to go out to a restaurant or take a trip across county lines (for now) but the overarching direction of their life is dialed in. This would not be such an undesirable situation if it were not for the pesky condition known as the diminishing marginal utility of debt which ensures that our currency loses purchasing power over time. Thus, whereas a family could make do comfortably with one salary till the 50s, today, all members of a family must work and rely on credit as well as state hand-outs in order to make ends meet. Today the vast majority of people in the West are tied to a system that was designed to reel them in and tie them to the state; a state that, ironically, is growing larger, more demanding, more intrusive, more aggressive and more absolutist as a self declared necessity to safeguard our “freedoms”.

What the bankruptcies of MF Global and PFG Best finally uncover is what till the bankruptcy of Fannie Mae or General Motors the government was still able to hide. In observing the bankruptcies of PFG Best and MF Global it becomes clear that the authorities no longer even bother to try to dissimulate the malfeasance, the deliberate criminal fraud and the preferential legal treatment of certain entities over the rest of society. The price fixing scandal that is now breaking out over LIBOR finally confirms and exposes in its full tawdry and arrogant  glory that there really is a malevolent entity devoted to the eventual destitution of society. We are no longer in the realm of conspiracy here. Today, we are faced with a reality so horrifying I am reminded of what someone “greater” than I said:

“the individual is handicapped by coming face to face with a conspiracy so monstrous he cannot believe it exists.”
J. Edgar Hoover, 1956, speaking of communism

And since I am at it:

“Facts must be distorted, relevant circumstances concealed, and a picture presented which by its crude coloring will persuade the ignorant people that their Government is blameless, their cause is righteous, and that the indisputable wickedness of the enemy is beyond question.
A moment’s reflection would tell any reasonable person that such obvious bias cannot possibly represent the truth. But the moment’s reflection is not allowed; lies are circulated with great rapidity. The unthinking mass accept them and by their excitement sway the rest.
The amount of rubbish and humbug that pass under the name of patriotism in wartime in all countries is sufficient to make decent people blush when they are subsequently disillusioned.”
Arthur Ponsonby, Falsehood in Wartime, 1928

“It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.”
Ayn Rand

“It is also important for the State to inculcate in its subjects an aversion to any “conspiracy theory of history;” for a search for “conspiracies” means a search for motives and an attribution of responsibility for historical misdeeds. If, however, any tyranny imposed by the State, or venality, or aggressive war, was caused not by the State rulers but by mysterious and arcane “social forces,” or by the imperfect state of the world or, if in some way, everyone was responsible (“We Are All Murderers,” proclaims one slogan), then there is no point to the people becoming indignant or rising up against such misdeeds. Furthermore, an attack on “conspiracy theories” means that the subjects will become more gullible in believing the “general welfare” reasons that are always put forth by the State for engaging in any of its despotic actions. A “conspiracy theory” can unsettle the system by causing the public to doubt the State’s ideological propaganda.”
Murray N. Rothbard, in The Anatomy of the State

“The terrible thing about the quest for truth is that you find it.”
Remy de Gourmont

And finally, from Jesse’s Cross Roads Cafe: The Political Continuum

Government As The Biggest Actor In The Economy

July 2, 2012

As outlined in these pages over the past five years, DBFM and Fractional Reserve Banking can only result in government becoming the largest actor in the economy. As a corollary to this mathematically inevitable dynamic, profits gradually concentrate in the finance industry till they finally concentrate in the hands of a very restricted group of banks with the result that the productive capital of society is gradually taken away from individuals and redistributed to these banks.

As I pointed out in The Stuff Revolutions Are Made Of in early 2009, scandals will be the hallmark of this period of asset deflation. I am not a prophet and neither am I a world class economist. Nonetheless, a basic understanding of the mechanics of our monetary and political systems are sufficient to deduce how things evolve and how they will end. The only unknown is time of course but the eventual denouement is arithmetically preordained.

This monetary system and the system of electoral politics that derives from it, is a self reinforcing dynamic that results in banks becoming perceived as the one and only pillar of our life:

http://www.zerohedge.com/contributed/2012-07-01/77-jp-morgan%E2%80%99s-net-income-comes-government-subsidies

That Western governments have been shoveling public money into banks could have been inferred long ago but, as of Paulson’s “bazooka” stunt, it has now become clearly glaring… for those that wanted to see…

Now, we have the latest scandal that has made the pages of the main stream media.

http://www.zerohedge.com/contributed/2012-07-01/big-banks-have-criminally-conspired-2005-rig-800-trillion-dollar-market

However, it is clear that the magnitude, depth and significance of this latest scandal has not yet dawned neither on politicians nor on media hacks let alone on the great unwashed.

The usual suspects of the banking world have been caught manipulating LIBOR. In its narrowest definition, LIBOR is merely an interest rate. But as interest rates go, LIBOR packs a punch as LIBOR governs a market that in 2007 was estimated by the Bank of International Settlements at US$500Trillion and that the following year grew to US$650Trillion. LIBOR governs the derivatives market the bulk of which consists of interest rate swaps and credit default swaps (those instruments that, for example, bankrupted Jefferson County in Alabama, lost about $400M for Harvard Uni or allowed Greece to mask gargantuan debt in order to qualify for EU membership).

Just for context, the entire world GDP was estimated at one point to be worth US$50Trillion of which the USA commands about US$15Trillion.

Although I have not followed up on the latest BIS estimate of the derivatives market, I can guarantee that in light of the gargantuan sums that our elected criminals are throwing around as ostensible solutions to what is by now a global depression, the derivatives market is certainly much larger than US$650Trillion. You would think that in light of recent developments since 2007 this market would have unwound at least some of its positions but this monetary system guarantees that cannot and will not happen.

Apologists will rush to claim that the derivatives market only represents “notional value”. This of course begs the question as to why, if this is only notional value, should the great and the good of the banking world bother to manipulate LIBOR? If that makes no sense to these nitwits, then the following question would be to ask them what happened to the derivatives Lehman was a counter-party to? The answer of course is that when one of the counter-parties to a derivative packs it in, notional becomes very real value in a hurry.

This is another breach in an already unstable dam. It is a serious breach.

What remains to be seen is how our elected criminals will deal with this latest structural blow. What is certain is that a catastrophic event is nigh and, therefore, so is a comparably dramatic “solution”. The type of solution I envision the elected criminals to devise, includes a good old fashioned war. You know; the type of war that requires something similar to a draft to be implemented. The type of war that will distract and galvanize the unemployed, homeless, soon to be hungry and likely very angry throngs that would otherwise precipitate a revolution at home.

What is now needed is something to galvanize our populations. Will it be religion? Will it be ethnicity? Will it be territorial claims? How about all of the above?

I say we have time till 2015 at the most.

I told you so… (negative interest rates)

June 27, 2012

If this goes through, I may have been right in speculating some two years ago that Sweden was floating a trial balloon.

http://www.bloomberg.com/news/2012-06-26/draghi-may-enter-twilight-zone-where-bernanke-fears-to-tread.html

Negative interest rates! The same crowd that advocates this asinine idea is the same crowd that cannot or does not want to understand that inflation has a mathematical limit.

Graph of 10-Year Treasury Constant Maturity Rate
If lowering interest rates artificially, inexorably and aggressively was a solution to spurring economic growth and wealth, we would not be where we are today. Thirty years of data should be sufficient to dispel this galactically stupid idea.
Obviously something else is at work here.
If by lowering interest rates over the past thirty years our “leaders” have brought about not only the full dependency of society on the state but also its almost total destitution, then what do you think might be the rationale for doubling down on this policy?
Somebody please tell me how suddenly doing more of what has been done over the past thirty years could suddenly turn things around for any of us.

G7 Leaders Vow To Cooperate On Woes… (a re-post)

June 7, 2012

Although under a different title, this is a re-post of a 2009 post on this blog:

https://guidoromero.wordpress.com/2009/03/16/some-more-thoughts-on-the-g20-meeting/

Not much has changed since the above post.

http://www.businessweek.com/news/2012-06-04/g-7-officials-to-speak-on-europe-tomorrow-ahead-of-summit?r=bloomberg

Although this time, rather than meet in fancy resorts surrounded by a Billion Dollar security apparatus and stuffing their faces on lobster and caviar, our elected criminals have teleconferenced, the outcome is more of the same:

“European representatives “said they will speed up their efforts to resolve those problems, which was encouraging to us,” Azumi said. “Japan is ready to provide support if there is anything we can do.”

But never fear. In a few days, G20 elected criminals will meet in Mexico and will vomit much the same hokum whilst stuffing their faces on caviar and lobster whilst surrounded by a Billion Dollar security apparatus.

And we keep voting them into office because we like the drug they peddle unto us.

Are you not yet feeling that penetrating sensation at the base of your back?

It must be me I guess.

g

Tic-toc… tic-toc… to global war

November 28, 2011

I have been trying to find an analogy that would adequately illustrate what it feels like to watch the development of an event all the while being helpless to do anything about it.

Try as I may, the only image that comes to mind is that of the 1937 newscaster that witnessed the destruction of the Hindenburg. The only difference being that I could see this happening before hand.

Today, via Zerohedge, we have bonafide, third party, main stream confirmation of what was already clear was happening a decade ago:

“Multi Trillion Bank Bailout Leads To Multi Billion Bank Profits Bloomberg Finds

What remains to be seen is whether this “finding” by a serous main stream publication can open the eyes of the general public.

In the meantime, the UK Foreign Office is warning of the imminent break down of social order in Europe. Read the article. There is rare use of conditionals in any of the phrases. The Foreign Office is warning that there will be strife. Admittedly, the FO only warns of strife in Europe. But the reality on the ground says that the USA will not be immune either.

http://www.telegraph.co.uk/news/politics/8917077/Prepare-for-riots-in-euro-collapse-Foreign-Office-warns.html

This is, by the way, the reason behind the gradual militarization of formerly civic institutions such as the police. Any of you remember the repatriation of a combat brigade from the Iraq war theater for deployment at home in the USA… in urban settings… in civilian urban settings? If not, do a search on the internet or on this blog.

As the arithmetic underpinning out monetary system assures us, unless our current monetary system can assimilate a new currency and a new market of import, then this is it. The debt load now weighing on the global monetary system is such that no degree of productivity that may be found henceforth can service the debt.

http://www.zerohedge.com/news/707568901000000-how-and-why-banks-increased-total-outstanding-derivatives-record-107-trillion-6

[…] the Bank of International Settlements reported a number that quietly slipped through the cracks of the broader media. Which is paradoxical because it is the biggest ever reported in the financial world: the number in question is $707,568,901,000,000 and represents the latest total amount of all notional Over The Counter (read unregulated) outstanding derivatives reported by the world’s financial institutions to the BIS for its semi-annual OTC derivatives report titled “OTC derivatives market activity in the first half of 2011.”

And here is the problem.

When the benefits of open society are gradually and glaringly eroded; when civil liberties are progressively withdrawn; when social promises are rolled back; when public infrastructure and services can no longer be maintained;  when the time between what a politician promises in order to be elected and when they renege on their promises is counted in weeks; … and when a restricted gang of politicians and bankers are caught defrauding the public and making away with Billions over and over again throughout Western countries….

… why would anyone think that revolution would be unthinkable?

But today, no Western politician can in good conscience do what needs to be done. Not if doing what needs to be done means recognizing that despite our self proclaimed standing on the moral high ground, they (our politicians) are no better than your garden variety Mugabe.

So, when you are financially and socially cornered and you are not willing to admit that you have fucked up, what do you do?

Traditionally, you precipitate a war.

2013/2015 and we’ll have us our global war. Stand by for the next foreign evil to be foisted upon the unemployed, homless, hungry masses.

 

 

 

 

 

Considerations on the monetary system

September 13, 2011

I grew up in a family where discussing money was considered to be in bad taste and lowbrow. There was of course an understanding that money is necessary but the overarching goal of one’s life was supposed to be characterized by the attainment of ideological goals and the pursuit of intellectual endeavor.  Openly discussing how to make money and the pursuit of brands was for the hoi polloi and the arrivistes; people that should not be frequented.

This past week then I had the opportunity to spend some time with two rather intellectual friends whom I do not get to see half as much as I should. My friends are my age. They are modern and do not necessarily despise brands. They are well read, they both work in artistically creative fields and they are both successful. Discussing money and how to make money beyond making ends meet is not taboo.

And yet, despite not being averse to discussing money or seeking to increase their income, like my parents, my friends do not understand what money is and how it works.

This is not new to me. If you read the introduction to this blog, I already bemoan ignorance of the monetary system on the part of most everyone including professionals in the fields of finance and economics.

Most everyone believes money just is. And despite most being aware of the ability of the central bank to print money, few understand that money must be and is managed and printing money is but one of the manifestations of the management of money thus the manipulation of society.

At this point, it is worth considering what role money plays in society. Could we live without money? The answer is that although we could definitely live without money, we would have to be ready to return to barter; a much more cumbersome economic system where the expansion of the economy and the development of society would depend entirely on a perpetual series of coincidence of wants.

Money plays a vital role in exchange thus in social development. The role of money is so vital in fact that whether we like it or not, money is THE ultimate driver of all human choices; choices that are political, economic and social thus choices that are made at individual level as much as at state level.

Intellectuals the world over would do well to make the study of money their primary intellectual pursuit so as to better understand the forces that drive a society towards efficiency, expansion and wealth or towards frivolity, consumption and indenture. People that embrace those intellectual ideals pertaining to the undesirability of the excessive accumulation of wealth, social equality, the protection of the environment, the prevention of abject poverty, equal opportunity education and tutti quanti should imperatively get to grips with the monetary system and the nature of money. Greens the world over should make the study of money a priority. Not economics, not social science or politics but money; what it is and how it does what it does and how it can or how it should be managed  so as to understand the dynamics that drive things like excessive consumption and pollution and how it is all related to the depletion of natural resources.

In human, social and economic development, nothing comes upstream of money. The choice of monetary system dictates and shapes our entire lives. Everything else evolves within the monetary system and is necessarily a potential proximate cause. The monetary system is THE ultimate cause and driver of all our choices. It is the logic inherent in the monetary system that drives all other choices, because money is the construct that allows humans to interact.

Today, an understanding of money is sorely missing. People are happy to discuss Marxism and Capitalism, they are happy to discuss tax rates and subsidies, they are happy to discuss the desirability of constantly lowering interest rates or not, but nobody discusses money. Money just is and whether the central bank prints more of it or not, money is taken for granted as, indeed, the fact that prices always rise. And even though people hear that the central bank prints more money and even though some may understand that printing more money results in rising prices, few understand the reason why a central bank prints money.

And this is the point at which in people’s mind money assumes a duality that has no reason of being. Essentially, people have difficulty equating how money is managed at state level and how it is managed at individual level. Of course, it doesn’t help that some politicians perpetuate the idea that the state is not bound by the same laws of arithmetic as the rest of society. Even less does it help that some politicians wish to inculcate the idea in the electorate that the state can create its own reality.

It is safe to assume nobody wants to return to barter. But since we have established that money is vital to our socio-economic development, the question arises as to why such a vital component of our lives should be the exclusive preserve of a restricted number of unelected officials to manipulate as they see fit. Worse still, why do we collectively feel it appropriate that in our ostensibly open societies predicated on democratic principles neither the choice nor the management of the monetary system should be put to the people?