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"What creativity can there be, when only money can buy you your next opportunity?"
Unknown free-lance film maker in Netherlands, 2014

MSM: "As Goldman Risk Explodes, President Says "No One Should Question Viability Of US Banks" [02/10/16] Printer Friendly Version  "You know it's serious when the denials begin. Speaking in a Bloomberg TV interview, Goldman Sachs President Gary Cohn explained how "US banks took their medicine early," adding that "some European banks have been slow getting recapitalized." Having thrown his 'competitors' across the ocean under the bus, Cohn then unleashed his comments with regard Goldman's own spiking credit risk - demanding that "no one should question the viability of US banks."  [...]"  

MSM: "Global Markets Stunned By Biggest Japan Crash Since 2013; All Eyes On Deutsche Bank" [02/10/16] Printer Friendly Version  "With China offline for the rest of the week, global markets have found a new Asian bogeyman in the face of Japan which as reported last night saw its markets crash, and the Yen soar, showing that less than 2 weeks after the BOJ unveiled NIRP, yet another central bank has lost control.  [...] Aside from Japan, everyone is looking at the bank which we first asked if it was "the next Lehman" last June, namely Germany's Deutsche Bank, to see if yesterday's desperate scramble to publicly confirm it has sufficient liquidity will sufficient will stop the price from dropping and its CDS drom blowing out. For now, the stock is indeed up modestly, even if the CDS has refused to tighten suggesting that whatever management did, it is not enough and it is only a matter of time before the selling returns. As a result of this temporary stabilization in financials, the Europe 600 Index was little changed after closing Monday at its lowest level since 2014, and U.S. equity-index futures were also steady. European indexes of credit-default swaps on corporate debt fell for the first time in more than a week, Germany’s 10-year bund yield climbed the most this year and crude in New York rose above $30 a barrel. Equities in Tokyo slumped earlier by the most since August and the yield on 10-year Japanese government bonds turned negative for the first time.[...]" 

Commentary: "The Collapse Of The Too Big To Fail Banks In Europe Is Here " [02/10/16] Printer Friendly Version  "There is so much chaos going on that I don’t even know where to start. For a very long time I have been warning my readers that a major banking collapse was coming to Europe, and now it is finally unfolding. Let’s start with Deutsche Bank. The stock of the most important bank in the “strongest economy in Europe” plunged another 8 percent on Monday, and it is now hovering just above the all-time record low that was set during the last financial crisis. Overall, the stock price is now down a staggering 36 percent since 2016 began, and Deutsche Bank credit default swaps are going parabolic. Of course my readers were alerted to major problems at Deutsche Bank all the way back in September, and now the endgame is playing out. In addition to Deutsche Bank, the list of other “too big to fail” banks in Europe that appear to be in very serious trouble includes Commerzbank, Credit Suisse, HSBC and BNP Paribas. Just about every major bank in Italy could fall on that list as well, and Greek bank stocks lost close to a quarter of their value on Monday alone. Financial Armageddon has come to Europe, and the entire planet is going to feel the pain. The collapse of the banks in Europe is dragging down stock prices all over the continent. At this point, more than one-fifth of all stock market wealth in Europe has already been wiped out since the middle of last year. That means that we only have four-fifths left. [...]"   Related: "What's Dragging Down European Banks: Oil And Commodity Exposure As High As 160% Of Tangible Book" Printer Friendly Version | "European Sovereign Risk Soars As Bank Contagion Spreads" Printer Friendly Version    

MSM: "Negative Interest Rates Aimed At Driving Small Banks Out Of Business And Eliminating Cash" [02/10/16] Printer Friendly Version "More than one-fifth of the world’s total GDP is in countries which have imposed negative interest rates, including Japan, the EU, Denmark, Switzerland and Sweden. Negative interest rates are spreading worldwide. And yet negative interest rates – supposed to help economies recover – haven’t prevented Japan and Europe’s economies from absolutely going down the drain. [...]"  Related "$7 Trillion In Bonds Now Have Negative Yields" Printer Friendly Version "Just ten days ago, in the aftermath of the BOJ's -0.1% NIRP announcement, we reported that after more than one year after the ECB unleashed NIRP, the total number of government bonds with negative yields to a staggering $3 trillion, a number which nearly doubled overnight to $5.5 trillion. Overnight in a historic event, the latest consequence of the BOJ losing control, the yield on Japan's 10Y JGB dropped below zero for the first time, in the process joining Switzerland as the only other country (for now) with a NIRPing benchmark 10Y treasury.[...]"   See also below: 

MSM: "Fed: Lacks Physical Cash, Legal Authority And Computer Systems To Implement NIRP" [02/09/16] Printer Friendly Version "Over the weekend, we presented a comprehensive step by step analysis laying out both the mechanics (and implications) of the Fed unleashing NIRP (Negative Interest Rates) in the US when the time comes: a time which as JPM further defined, would be characterized by "recession-like conditions." In other words, right about now if Yellen so chose. Curiously, in a nostalgic deja vu to the ECB's own monetization of debt, which was illegal according to Article 123 (and Draghi himself back in the day), until Europe's "constitutional judges" decided that it was actually all quite legal before Draghi proceeded to announce it in late 2014, Bloomberg points us to one of the recently declassified Fed staff memos from August 2010 titled "Reducing the IOER Rate: An Analysis of Options", which states that the Fed "may not have the legal authority to set negative interest rates in the U.S." To wit: "There are several potentially substantial legal and practical constraints to implementing a negative IOER rate regime, some of which would be binding at any IOER rate below zero, even a rate just slightly below zero. Most notably, it is not at all clear that the Federal Reserve Act permits negative IOER rates, and more staff analysis would be needed to establish the Federal Reserve’s authority n this area." No legal authority? No problem. Just call in Mario Draghi's lawyer, or any other legal representative of Goldman Sachs and/or its former employees, and whatever amendments need to be made to the Federal Reserve Act, will be made. More curious is that as the Fed's paper admits, "the Federal Reserve computer systems used to calculate and manage interest on reserves do not currently allow for the possibility of a negative IOER rate, although these systems could be modified over time if needed." [...]" 

Commentary: "Feds Helped Hide Investigation Into Big Bank’s Money Laundering For Drug Cartels" [02/09/16] Printer Friendly Version  "A federal judge ruled last week that the Hong Kong and Shanghai Banking Corporation (HSBC) will be forced to share with the public a report on its business practices — a decision both the bank and the Department of Justice (DOJ) fought in court to prevent. The report is based on the findings of an ongoing government audit of the bank initiated amid revelations in 2012, that it laundered money for drug cartels and terrorist organizations. When HSBC’s sordid dealings were discovered in 2012, the DOJ declined to press charges, arguing the bank was too important to prosecute. As the Guardian reported at the time, Assistant Attorney General Larry Breuer argued “the Justice Department had looked at the ‘collateral consequences’ to prosecuting the HSBC or taking away its US banking license. Such a move could have cost thousands of jobs, he said.” Further, “Had the US authorities decided to press criminal charges,” the Guardian summarized, “HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized.” [...] The DOJ’s refusal to prosecute those responsible was widely criticized, as HSBC was found to have laundered over $850 million for cartels, while also laundering money for Saudi banks with ties to terrorist groups. The bank also helped nations like Libya and Iran bypass American financial laws. The lack of punishment for these transgressions appeared to reveal a double standard.[...] As Glenn Greenwald observed at the time: The US government is expressly saying that banking giants reside outside of — above — the rule of law, that they will not be punished when they get caught red-handed committing criminal offenses for which ordinary people are imprisoned for decades. Aside from the grotesque injustice, the signal it sends is as clear as it is destructive: you are free to commit whatever crimes you want without fear of prosecution. And obviously, if the US government would not prosecute these banks on the ground that they’re too big and important, it would — yet again, or rather still — never let them fail.[...]"    

Commentary: "HSBC Fined $470 Million For 2008 Financial Crisis, No One Jailed" [02/08/16] Printer Friendly Version "Multinational bank HSBC has agreed to a $470 million settlement with the U.S. government for mortgage lending and foreclosure abuses that worsened the 2008 financial crisis, but is it enough? The Justice Department’s Acting Associate Attorney General Stuart F. Delery said the agreement was “the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices. This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards.” Under the agreement HSBC must reduce mortgage interest rates as well as the principal on mortgages for homeowners who are at risk of default. HSBC must also improve their standards for handling service loans and foreclosures. The hope is that new practices will discourage the actions that lead to the financial crisis that started in 2007 due to banks like HSBC knowingly giving out bad loans. The U.S. government and the individual states involved will received $100 million in an escrow fund that will make payments to people who lost their homes due to foreclosure between 2008 and 2012. [...] In 2013 HSBC made a deal with the Federal Reserve and the Office of the Comptroller, agreeing to pay $249 million to settle federal complaints that the bank foreclosed homes on families who should have been eligible to stay in their homes. Benjamin C. Mizer, Principal Deputy Assistant Attorney General and head of the Justice Department’s Civil Division said, “The agreement is part of our ongoing effort to address root causes of the financial crisis.” Despite Mr. Mizers statements only one person in the U.S. has gone to prison for the largest theft in recent memory. The rest of the people held responsible were all considered “small fish”, bit players in an international game of banking and theft. Not everyone is convinced that the ruling is as strong as the Justice Department claims. Bartlett Naylor, a financial policy advocate at Public Citizen, a watchdog and advocacy group, told the Associated Press that a “strongly written press release is no substitute for true justice. This can’t be yet another immaculate fine, where the government alleges widespread fraud and yet no individual was responsible.” There is also the question of whether or not $470 million even covers the amount of wealth that was stolen from millions of people by the bankers. In 2012 Frontline wrote: For example, the Treasury Department, in an April assessment [PDF], put the total lost household wealth at $19.2 trillion. But that doesn’t take into account long-term effects of homeowners who may be less socially mobile — and therefore contribute less to the economy over time. In reality the numbers are likely much higher and the $470 million settlement barely even scratches the surface. As a result, banks like HSBC and the corrupt officials behind these institutions will continue to go free while government officials pretend to care about the American people. The sooner we let go of that fantasy the sooner we move towards empowering ourselves and our communities and creating real solutions.[...]"  

MSM: "2016 EPS Growth Estimates Slashed By 50% Just One Month Into The Year" Ø Hedge [02/08/16] Printer Friendly Version  "Several days ago, we showed the one chart which explains why Bank of America remains a stubborn non-BTFDer. This is what Michael Hartnett said last Thursday: "We remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations (currently heading sharply south – Chart 1) and credit conditions." Since then things appear to have gotten even worse, because while not only is the almost concluded Q4 earnings season on pace to confirm yet another earnings recession, with a blended earnings decline of -3.8%, which according to Factset "will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009", but both Q1 and Q2 2016 are looking just as bad: as Factset notes in its latest weekly update, "in terms of earnings, the estimated declines for Q1 2016 and Q2 2016 are -5.3% and -0.4%." [...]  As Factset then notes, as is usually the case, analysts are predicting significant increases in earnings and revenue growth in the 2nd half of the year. In terms of earnings, the estimated declines for Q1 2016 and Q2 2016 are -5.3% and -0.4%, while the estimated growth rates for Q3 2016 and Q4 2016 are 5.5% and 10.7%. In terms of revenues, the estimated declines for Q1 2016 and Q2 2016 are -0.1% and -0.1%, while the estimated growth rates for Q3 2016 and Q4 2016 are 2.3% and 4.5%. In other words, hockey sticks that would make any central bank proud. The only problem is that these forecasts will never materialize, which can be seen in the full year EPS forecast below. As highlighted in the box below, in just one month full year EPS has declined from 4.3% to 2.2%. [...]"  

Commentary: "Saudi Arabia's Reckless Policies Have Global Financial And Energy Markets On Edge" [02/07/16] Printer Friendly Version  "Saudi Arabia had been unloading at least $1 trillion in US securities and crashing global markets — in parallel to its oil price war. [...] As a New York investment banker explains it, "the House of Saud was creating tremendous surpluses since the 1970s — when OPEC dramatically increased the price of oil." The US Treasury wanted this tsunami of cash to purchase US Treasury bonds; and the Saudis were always scared to show that tsunami in motion. So "a deal was worked out that they would keep the trillions of US dollars in bonds secret." There was never any question the Saudis would be allowed to sell bonds en masse. The Saudis selling their stocks in the open market en masse, especially in the first weeks of January, spreading panic all around the world, appears to have seriously displeased another faction of the Masters of the Universe. This faction might eventually let everyone know what the secret Saudi position is in US Treasuries. Remember, we're talking about at least $8 trillion. [...] The House of Saud, predictably, is in total panic. Imagine a leak stating they are sitting on $8 trillion while asking the poor in Saudi Arabia for economic "sacrifices" to support their oil price war plus the unwinnable war on Yemen, fought with expensive mercenaries. A global uproar would be inevitable — claiming a freeze on Saudi assets that are being used to destroy world markets. A barely concealed secret is that the House of Saud is not exactly popular in all the crucial places, from Moscow to Washington and Berlin. The House of Saud cannot possibly believe that the FSB, SVR and GRU deeply love them for trying to destroy Russia; that Texans love them for trying to destroy the shale oil industry; that Germany or Italy love them for dumping a trillion dollars in securities on the markets to crash them as Mario Draghi pumps major QE trying to rescue the eurozone.[...]"  

MSM: "Resignation Of Economy Minister Plunges Ukrainian Gov't Into Another Crisis" [02/07/16] Printer Friendly Version  "The resignation of Lithuanian Economy Minister Aivaras Abromavicius has shaken the fragile balance in Ukrainian politics and could herald a collapse in the government of Prime Minister Arseniy Yatsenyuk. Kyiv's politicians have already been negotiating changes to the government for several weeks. The general logic of a reshuffle is rather simple: Yatsenyuk must stay as prime minister, but there must be "fresh blood" in the government. This formula was agreed upon after the visit of US Vice President Joe Biden, who opposed dismissing the PM in order to maintain the balance of power between the president and the government. [...]" Related: "In Hopelessly Corrupt Ukraine, Business Is Business for Joe Biden's Son" Printer Friendly Version "US vice- president Joe Biden has spoken out against the out-of-control corruption in Ukraine, but that hasn't deterred the intrepid Hunter Biden from wading into the sewer." Hunter Biden has acquired equity securities of a company in the country. 

MSM: "As ‘Madoff’ Airs On TV, Two Anonymous Whistleblowers Are Pounding On The SEC's Door Again" [02/06/16] Printer Friendly Version  "Thursday night ABC began its two-part series on the Bernie Madoff fraud. Viewers will be reminded about how investment expert, Harry Markopolos, wrote detailed letters to the SEC for years, raising red flags that Bernie Madoff was running a Ponzi scheme – only to be ignored by the SEC as Madoff fleeced more and more victims out of their life savings. Today, there are two equally erudite scribes who have jointly been flooding the SEC with explosive evidence that some Exchange Traded Funds (ETFs) that trade on U.S. stock exchanges and are sold to a gullible public, may be little more than toxic waste dumped there by Wall Street firms eager to rid themselves of illiquid securities. The two anonymous authors have one thing going for them that Markopolos did not. They are represented by a former SEC attorney, Peter Chepucavage, who was also previously a managing director in charge of Nomura Securities’ legal, compliance and audit functions. We spoke to Chepucavage by phone yesterday. He confirmed that two of his clients authored the series of letters. Chepucavage said further that these clients have significant experience in trading ETFs and data collection involving ETFs. Throughout their letters, the whistleblowers use the phrase ETP, for Exchange Traded Product, which includes both ETFs and ETNs, Exchange Traded Notes. In a letter that was logged in at the SEC on January 13, 2016, the whistleblowers compared some of these investments to the subprime mortgage products that fueled the 2008 crash, noting that regulators and economists were mostly blind to that escalating danger as well.  [...] “The vast majority of ETPs have very low levels of assets under management and illiquid trading volumes. Many of these have illiquid underlying assets and a large group of ETPs are based on derivatives that are not backed by physical assets such as stocks, bonds or commodities, but rather swaps or other types of complex contracts. Many of these products may have been designed to take what were originally illiquid assets from the books of operators, bundle them into an ETP to make them appear liquid and sell them off to unsuspecting investors. The data suggests this is evidenced by ETPs that are formed, have enough volume in the early stage of their existence to sell shares, but then barely trade again while still remaining listed for sale. This is reminiscent of the mortgage- backed securities bundles sold previous to the last financial crisis in 2008.” The authors also note in this same letter that they have been presenting their evidence of “significant red flags” and “fundamental flaws” to the SEC since March 2015 and that the industry has not disputed the evidence. However, disclosures of these risks in the product offerings has not been forthcoming either.[...]"  

MSM: "US Tech Companies Have Stashed Over $420 Billion Overseas" [02/06/16] Printer Friendly Version  "It's no secret that the US government wants companies to bring more of their offshore profits back home for the sake of taxes, and it's now exceptionally clear as to why. Bloomberg has sifted through financial filings and discovered that the top eight American tech firms, including Apple, Google and Microsoft, are keeping more than $420 billion overseas -- $69 billion of it added in just the past year. That's over a fifth of the $2.1 trillion held abroad by American companies, and would easily cover a lot of government expenses. A tax on Microsoft's recent profits alone ($29.6 billion) would cover NASA and the Commerce Department for a year; Apple ($23.3 billion) could take care of the Transportation Department and Social Security, and Oracle could foot the bill for the Labor Department. The reasoning for this creative accounting is the same as always: the companies don't want to pay the full US corporate tax rate (including repatriation taxes) when they know that they can easily shuffle that money elsewhere and shell out much less. It may be tough to keep this income out of the States forever, though. While President Obama didn't have much luck this year with a measure that would slap taxes on both past and ongoing foreign earnings, he's continuing to talk with executives in hopes of reaching a compromise. It's hard to imagine officials simply walking away from a huge potential revenue source.  [...]" 

Corbett Report"Kerry Lutz Reports On "The War On Cash" [02/05/16] [22:17] "Kerry Lutz of joins us today to discuss the war on cash. How long has it being going on? How does it manifest in our daily lives? What will it mean for the future of our NIRP-driven central bank-controlled economic future? And how do we hedge against it? [...]" 

MSM: "Afghanistan Is On The Brink After US Invests $100 Billion" [02/04/16] Printer Friendly Version "Afghanistan's economy is worsening and its security deteriorating despite more than a decade of U.S.-led reconstruction efforts and more than $100 billion poured into the country, according to the Special Inspector General for Afghanistan Reconstruction, an independent oversight agency created by Congress in 2008. The agency's investigation, conducted between October and December of last year, paints a grim picture of the country — including millions of dollars squandered on projects that never came to be, a resurgent Taliban, infiltration by the so-called Islamic State and a handful of guilty pleas from U.S. military personnel in bribery cases. Despite all that, however, the United States should not back out now, experts said, or it runs the risk of a completely failed state — which in turn is a green light for terrorist organizations to grow, and oppression and corruption to spread. A combination of lower U.S. troop levels, a huge amount of funds and poor project management has created a recipe for rampant corruption.[...] "Embezzlement and bribery have become institutionalized — more than in the past — partly because of the huge amount of funding and the weak management," said Zubair Iqbal, who worked for the IMF for more than three decades and is currently a scholar-in-residence at the Middle East Institute. The country has also been hit by capital flight. Afghan GDP growth rates slowed from more than 14 percent in 2012 to 1.3 percent in 2014, according to the World Bank. Waning business and consumer confidence and high uncertainty over the political transition and security situation are taking a toll on the country. [...] Private investment has shown "strong signs of slowdown," according to the World Bank, and registrations of new firms have shrunk by nearly half since 2012. Many young Afghans who were once employed by the reconstruction efforts or who have decided the country is no longer safe are leaving. "It's a huge loss," Ahmed Siar Khoreishi, chief executive of Ghazanfar Bank, said in the report. "The majority of these people are under the age of 30. This is really scary." The initial reaction to such bleak trends may be to withdraw all U.S. troops and funding. But that would come at a high price, experts said. "Unless the economy and the administration of the state — which are completely dependent on foreign aid — get off the ground, the country will collapse. It will disintegrate into civil war," said Vanda Felbab-Brown, senior fellow of foreign policy at the Brookings Institution.[...]"  

MSM: "Europe Falls, U.S. Futures Rise As Oil Halts Two-Day Plunge" Ø Hedge [02/04/16] Printer Friendly Version "... But while US equity futures are enjoying today's crude levitation, Europe’s benchmark equity gauge dropped for a third day, with Italian banks leading losses, and the Markit iTraxx Europe Index of credit-default swaps on investment-grade companies surpassed 100 basis points for the first time since October 2013. The yen strengthened for a third day. Oil recovered after its biggest two-day drop in almost seven years, buoying Russia’s ruble, and zinc climbed to the highest in almost three months. Where we stand now: [...]"  

MSM: "Trading Desks Stunned By 'Brutal' Selling" Ø Hedge [02/04/16] Printer Friendly Version "...Concerned about the dramatic market moves since the start of the new year, and especially in recent days? You are not alone, but as RBC's head of US cash equities S&T Charlie McElligott, says fear not: everyone is in a "sell (or short) now, ask questions later" mood as wholesale derisking has gripped the market and nobody really has a clue what is going on except for one thing: the most popular, crowded trades are getting blown up at a ferocious speed, as "some leveraged players outright taking grosses down by selling longs and covering shorts; while others are focused on taking net exposure lower, selling longs but adding selectively to shorts.[...]" Related: "Managing Risk Through A Commodity Downturn" Printer Friendly Version "... The only way to manage through a debt-fueled economic cycle is to do the opposite: Preserve Cash. In the commodity sector we are about to witness a lot of bankruptcies – so many companies followed central bank policies off a cliff. The ones that resisted the economic drugs pushed by the Fed will be in the position to prosper through prudent cash management as many competitors close their doors and will be forced to liquidate. The businesses or individuals that will prosper after all the smoke clears will be the ones who are run conservatively. Central banks are literally out of bullets as they desperately use negative rates to force even more risk. Unlike other late stage recoveries/early stage recessions we are entering it with empty guns.[...]"  

Commentary: "Central Bank Currency Wars Have Engaged The "Nuclear Option" Ø Hedge [02/04/16] Printer Friendly Version  "An enduring curse of this financial crisis is the inability of markets to disengage from the clutches of the correlation of one. We see it ad seriatim, often day to day: everything is wonderful, all hail the central bank (Friday); the world is crashing, these empty suits are running us over the cliff (Tuesday). Having gone on long enough, this phenomenon has turned traders into inveterate cynics who know the price of everything, and the value of nothing. Markets function effectively only when relative value among assets has some measure of reality. Discounting future returns in a world of zero and negative interest rates is a Sisyphean task in the theater of the absurd. In today’s world, we reduce everything to buy or sell the lot. You hear the term “safe haven” constantly. It is meaningless in a negative-rate induced carry trade world. No one is buying safety in JPY on bad days. They are busy getting blown out of the high risk stuff they funded with minus 0.1% rates. Currency wars can be nasty and don’t always have a winner. When they are waged with increasingly negative rates, it becomes the nuclear option. Central banks embracing uncontrollable volatility and the evil of one. [...]"  

Commentary: "Saudi Royal Family Gave $681M To Malaysian PM Who Banned Shia Islam" [02/03/16] Printer Friendly Version "On Wednesday last week the Malaysia’s attorney general confirmed that Saudi Arabia’s royal family gave Malaysian Prime Minister Najib Razak a $681 million personal gift. The confirmation of the scandal ended months of speculation about the source of the huge personal donation received from ‘a middle eastern donor’ by the Prime Minister. The country’s top anti-graft agency had recommended Najib Razak be charged with criminal misappropriation. The transfer of almost $700 million was made ahead of the 2013 re-election of the Prime Minister. Prime Minister Najib Razak who had been in office since 2009 is widely known for his clamp down on Shia minority Islam in the nation. [...]  n 2010 the nation declared that Shiites in the country, who have been termed a “deviant” sect, were barred from promoting their faith to other Muslims. In December that year, 200 Shi‘a were arrested by the Selangor Islamic Religious Department for celebrating ashura under the Selangor state shari‘a criminal enactment law. Religious authorities who accused them of “threatening national security” in multicultural Malaysia."  Related: See below 

MSM: "Malaysia Prime Minister Has $680 Million Cash In His Bank Account; Top Goldman Bankster Bolts The Country" [02/01/16] Printer Friendly Version "Malaysia’s anticorruption agency said Wednesday it wants to review the decision of the country’s top prosecutor to drop investigations into how nearly $700 million was transferred to Prime Minister Najib Razak’s private bank account. [...] The Wall Street Journal reported in July that an earlier Malaysian government investigation found that the $700 million had entered Mr. Najib’s accounts via banks, companies and entities linked to 1MDB, which Mr. Najib set up in 2009 to encourage more economic development in the country.[...] Tim Leissner, the driving force behind high-profile deals between Goldman Sachs and Malaysia’s troubled state investment fund, has taken “personal leave” from Goldman and moved from Singapore to Los Angeles. His departure comes as Najib Razak, Malaysia’s prime minister, fights to extricate himself from a donations scandal alleged to be linked to the investment fund, known as 1MDB. Mr Leissner was most recently Goldman’s Southeast Asia chairman, and spent more than a decade of his 18 years with the bank closely involved in the region. His close relationships with top officials in Kuala Lumpur produced what one executive described as a “golden period” for the bank. He became president of Goldman’s Singapore operations in 2006, having run its investment banking operation in the country since 2002. In 2014 the bank named him chairman of Southeast Asia as part of efforts to bolster Goldman’s presence in the region. Goldman declined to comment on Mr Leissner’s move or his leave.. Goldman’s relationships in Malaysia first came to the fore in 2013 when the bank collected a $300m fee on a $3bn bond arranged for 1MDB...Usually bond fees are a fraction of that amount. .. Mr Leissner was a key player in the bank’s relationships with power brokers in Kuala Lumpur, including Mr Najib , who chairs 1MDB’s advisory board....Mr Leissner’s wife has tweeted pictures of herself with Mr Najib’s wife, Rosmah, whom she described as “my friend”.[...]"  Related: "Switzerland Asks Malaysia To Explain $4 Billion In Misused Money From Goldman Backed Slush Fund" Printer Friendly Version "... 1MDB was set up by Najib in 2009 and owes some $11 billion thanks in no small part to a series of bond deals arranged by Goldman banker Tim Leissner, whose wife Kimora Lee is close friends with Najib's wife Rosmah Manso. Those deals were quite lucrative for Goldman. Leissner effectively bought the bonds for the bank's own books at 90 cents on the dollar. That discount amounted to a hefty underwriting fee. [...]" See also below:

Commentary: "Najib Of Malaysia And Netanyahu of Israel. Birds Of A Feather, Fly Together" Printer Friendly Version "Both politicians kept in power by huge transfers of money: one from the Saudi Arabian royal family, the other from the AIPAC lobby-led, US congress. Neither has apparently committed any crime by the acceptance of these sums but to call such activity ‘democratic’ is to call a pork chop, kosher. [...]" Such sums are routinely used to irrevocably damage the democratic principle of ‘government by the people, of the people and for the people’. In these two instances, it is government by the people but for Riyadh and Washington respectively. That is not democracy but a travesty of the democratic process perpetrated by vested business and political interests. For one state, or a cabal within a state, to seek to influence the choice of government of another state by the direct transfer of funds calculated to direct the result of a national election, should be designated a criminal activity. It is banned in European democratic elections – but neither Malaysia nor Israel are in Europe and nor, of course, is Saudi Arabia or America. More’s the pity. Then the world would not have had to deal with the ineptitude of the pathetic US president, George Bush, and similar results of corrupted democratic process. Both politicians kept in power by huge transfers of money: one from the Saudi Arabian royal family, the other from the AIPAC lobby-led, US congress. Neither has apparently committed any crime by the acceptance of these sums but to call such activity ‘democratic’ is to call a pork chop, kosher. Such sums are routinely used to irrevocably damage the democratic principle of ‘government by the people, of the people and for the people’. In these two instances, it is government by the people but for Riyadh and Washington respectively. That is not democracy but a travesty of the democratic process perpetrated by vested business and political interests. For one state, or a cabal within a state, to seek to influence the choice of government of another state by the direct transfer of funds calculated to direct the result of a national election, should be designated a criminal activity. It is banned in European democratic elections – but neither Malaysia nor Israel are in Europe and nor, of course, is Saudi Arabia or America. More’s the pity. Then the world would not have had to deal with the ineptitude of the pathetic US president, George Bush, and similar results of corrupted democratic process.[...]" 

Commentary: "How Wall Street Came To Own The Clintons And The Democratic Party" [01/31/16] Printer Friendly Version  "Former FX trader at Citigroup, Chris Arnade, just penned a poignant and entertaining Op-ed at The Guardian detailing how Wall Street came to own the Democratic Party via the Clintons over the course of his career. While anyone reading this already knows how completely bought and paid for the Clintons are by the big financial interests, the article provides some interesting anecdotes as well as a classic quote about a young Larry Summers. Here are some choice excerpts from the piece: " I owe almost my entire Wall Street career to the Clintons. I am not alone; most bankers owe their careers, and their wealth, to them. Over the last 25 years they – with the Clintons it is never just Bill or Hillary – implemented policies that placed Wall Street at the center of the Democratic economic agenda, turning it from a party against Wall Street to a party of Wall Street. That is why when I recently went to see Hillary Clinton campaign for president and speak about reforming Wall Street I was skeptical. What I heard hasn’t changed that skepticism. The policies she offers are mid-course corrections. In the Clintons’ world, Wall Street stays at the center, economically and politically. Given Wall Street’s power and influence, that is a dangerous place to leave them. [...]  The administration’s economic policy took shape as trickle down, Democratic style. They championed free trade, pushing Nafta. They reformed welfare, buying into the conservative view that poverty was about dependency, not about situation. They threw the old left a few bones, repealing prior tax cuts on the rich, but used the increased revenues mostly on Wall Street’s favorite issue: cutting the debt. Most importantly, when faced with their first financial crisis, they bailed out Wall Street. That crisis came in January 1995, halfway through the administration’s first term. Mexico, after having boomed from the optimism surrounding Nafta, went bust. It was a huge embarrassment for the administration, given the push they had made for Nafta against a cynical Democratic party.[...] Money was fleeing Mexico, and much of it was coming back through me and my firm. Selling investors’ Mexican bonds was my first job on Wall Street, and now they were trying to sell them back to us. But we hadn’t just sold Mexican bonds to clients, instead we did it using new derivatives product to get around regulatory issues and take advantages of tax rules, and lend the clients money. Given how aggressive we were, and how profitable it was for us, older traders kept expecting to be stopped by regulators from the new administration, but that didn’t happen. When Mexico started to collapse, the shudders began. Initially our firm lost only tens of millions, a large loss but not catastrophic. The crisis however was worsening, and Mexico was headed towards a default, or closing its border to money flows. We stood to lose hundreds of millions, something we might not have survived. Other Wall Street firms were in worse shape, having done the trade in a much bigger size. The biggest was rumored to be Lehman, which stood to lose billions, a loss they couldn’t have survived. As the crisis unfolded, senior management traveled to DC as part of a group of bankers to meet with Treasury officials. They had hoped to meet with Rubin, who was now Treasury secretary. Instead they met with the undersecretary for international affairs who my boss described as: “Some young egghead academic who likes himself a lot and is wide eyed with a taste of power.” That egghead was Larry Summers who would succeed Rubin as Treasury Secretary. [...]" 

Convolutions:  "Rumors of Bitcoin’s Death Have Been Greatly Exaggerated" MSM [01/30/16] [17:43] "Jeff interviews top Bitcoin expert, Roger Ver, to counter the misinformation about the death of Bitcoin that has been circulating recently. Topics include: Mike Hearn’s declaration on the death of Bitcoin, this is actually another buying opportunity, it is Bitcoin’s popularity that is causing the congestion, the block size situation is about to be resolved anyway, the rising fees issue is greatly exaggerated, banks charged Roger $80 to move dollars while the same transaction in BTC would be 4 cents, Mike Hearn’s motivations and conflict of interest, the arguments around increasing the block size, the censorship of dissenting opinion in BTC forums, BTC is actually the opposite of dead [...]"   Related: "Bitcoin Failure Blamed On Currency Control In The Hands Of A Few" Printer Friendly Version  "Mike Hearn rocked the Bitcoin world when he declared that the digital currency experiment had failed. Hearn, a software developer for Bitcoin, explained several reasons why this cryptocurrency had not been successful. He not only sold off his coins, but he felt compelled to warn the entire digital currency community that the system had reached its limit. [...] He wrote: “Bitcoin is an experiment and like all experiments, it can fail. What was meant to be a new, decentralized form of money that lacked ‘systemically important institutions’ and ‘too big to fail’ has become something even worse: a system completely controlled by just a handful of people.” [...]|  "Prominent Bitcoin Developer Predicts Death of Virtual Currency" [0:54] "Just a few years ago Mike Hearn thought the digital currency Bitcoin could change the world. He even left his well-paid engineering job at Google to pursue working with Bitcoin full time, producing a Bitcoin mobile app that helped the technology take off. But Now Hearn is selling off all his coins and turning his back on the currency altogether. He claims that the mechanisms behind the currency are broken, and that most of Bitcoin is owned by a small, toxic pool of investors who are not interested in using the digital currency in actual transactions. At some point last year, Bitcoin owners broke into factions over how to handle changes that needed to be made to Bitcoin's code. The currency community has not been able to recover. According to Hearn, Bitcoin will never recover and "the long-term trend should probably be downwards." [...]" |

MSM: "Cash Is King As Europe Adapts To Negative Interest Rates" [01/29/16] Printer Friendly Version  "Europe’s ATMs worked overtime in 2015. A record 1.08 trillion euros ($1.17 trillion) of banknotes were in circulation, almost double the value 10 years ago, according to data compiled by the European Central Bank. That’s a counterargument to some bankers who say that electronic forms of cash will replace paper money sooner rather than later. ECB Balance Sheet Banknotes in Circulation, value of notes in billions of euros. The value of banknotes in circulation rose 6.5 percent last year, the most since 2008. There are financial reasons - including negative rates on deposits - but part of the increase could be related to the influx of refugees, who don’t have bank accounts. “Stronger economic growth, low interest rates as well as maybe some worries. [...]" Related: Corbett Report: "The War on Cash: A Country by Country Guide" Printer Friendly Version "Information on the 16 countries making efforts to affect the use of cash in society: Australia, Canada, China, France, Denmark, India, Israel, India, Italy, Mexico, Norway, Philippines, Spain, Sweden, Uruguay, UK.[...]" 

Documentary: "Goldman Sachs: Power and Peril" [01/29/16] [42:22] Note: CNBC Documentary 2013. Interesting to watch. 

MSM: "Moral Hazard: China Will Use Public Funds To Cover Venture Capital Firms' Losses" Ø Hedge [01/28/16] Printer Friendly Version  "It should surprise nobody that when it comes to perpetuating the global central bank "put", China - which is at daily danger of having its house of trillions in non-performing loan card collapse at any moment - has perfected moral hazard better than any western central banker. However, even the staunchest cynics will be stunned by the latest development out of the Shanghai government where starting next month, venture capital firms which invested in high-tech startups since the beginning of 2015 can apply for government compensation if their investment loses money. In other words, while until now the government had bailed out corporate bond and bank loan investors, and was actively micromanaging the burst stock bubble (unsuccessfully), it will now enter the venture capital and private equity arena in what may be the grossest misallocation of capital unleashed by China to date. The policy is laid out in a regulation dated December 29 that the city's Science and Technology Commission put on its website on January 21. Under the regulation, if the sale of a VC's stake in a startup fails to cover its original investment, it can ask the government for a payout amounting to 30 or 60 percent of the shortfall depending on the size and revenue of the firm it backed.  The most any VC firm can receive in one year is 6 million yuan. The limit on individual investment projects is 3 million yuan although we are confident both these limitations will be breached grossly and repeatedly. Shanghai is not the first Chinese city to implement this lunacy: an investor with a financial institution in Shanghai said the city did not invent the idea of subsidizing high-risk private financial investment. Other local governments in China have implemented similar rules but none of them offer quite as much compensation, he said. [...]"   

MSM: "Info Graphic: The Periodic Table Of Commodity Returns" [01/28/16] Printer Friendly Version "At the beginning of each year, U.S. Global Investors puts out a fantastic visualization called the Periodic Table of Commodity Returns. This year’s version has an interactive design that allows users to sort returns by various categories including returns, volatility, and other groupings. [...]" 

MSM: "China: "Soros Hasn't Done His Homework, May Be Partially Blind" Ø Hedge [01/28/16] Printer Friendly Version  "On Tuesday, the People’s Daily laughed at George Soros. Literally. On the heels of comments Soros made in Davos last week about China’s “hard landing,” the Party mouthpiece ran an "op-ed" that carried the title “Declaring War On China’s Currency? Ha, Ha.”  It’s not clear that George Soros intends to “declare war” on the RMB. However, he did say he was betting against Asian currencies and because his reputation precedes him when it comes to breaking central banks, the Chinese apparently wanted to get out ahead of what the PBoC assumes will be an attack on the yuan. “Given how people know Soros and what he did in 1992 and during the 1997-1998 Asian crisis, he’s too important to ignore, so China felt that they had to counter any negative comments,” Tommy Xie, a Singapore-based economist at Oversea-Chinese Banking told Bloomberg.“They have to reassure local savers and show them a willingness that the government is looking after them and their savings.”  “Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt,” the People’s Daily continued, before calling the aging billionaire a “crocodile” and a “predator.”  As we noted yesterday, “China won't be able to arrest Soros and beat a confession out of him like Beijing is fond of doing to others suspected of launching ‘malicious’ short attacks, but the brash commentary does indicate that Chinese authorities are becoming increasingly sensitive to suggestions that a steeper RMB devaluation is a foregone conclusion.”  Of course a steeper RMB depreciation is a foregone conclusion because as we’ve outlined on several occasions, the days of China sitting idly by while the dollar peg saps the country’s export competitiveness are long gone and Beijing now seems determined not only to participate in the ongoing global currency wars, but in fact to win. But China is keen on orchestrating a controlled depreciation (despite the fact that getting it over with at once might be the better option if Beijing wants to limit capital flight) which means keeping hold of the narrative and using the captive Chinese media to fight back against those who, like the “crocodile” Soros, would seek to employ “malicious” tactics to spark a panic. Against this backdrop we get another hilarious “commentary” piece out of the Politburo on Wednesday, this time via Xinhua. The piece, presented in its entirety below, explains why Soros and the ubiquitous “short-sellers” “make claims that run counter to reality.” [...]"  

Corbett Report: "HSBC Hires Kissinger to Help Them Flee The Country" [01/27/16] Printer Friendly Version  "HSBC is the world’s fourth largest bank by assets and a sanctions busting, money laundering bank for terrorists and drug dealers, so it should be no surprise that they have just hired unconvicted war criminal Henry Kissinger to help advise them on fleeing the UK. You see, HSBC isn’t happy with the current banking environment in the UK. After “suffering” through the outrageous wrist slap of its drug money laundering settlement (equivalent to five weeks of income for the bank), HSBC began a temper tantrum over the UK’s bank levy, a bank tax that was instituted in 2011. Accordingly, last summer the UK government started the phase out of the levy exactly as requested, but added a surcharge on bank profits. This is evidently too much for the banksters, who are now threatening to move their racket to Canada or maybe Hong Kong or somewhere else entirely. So it’s only logical for them to turn to Heinz Kissinger, a man who has run from investigators in France, Spain, Chile and Argentina to help advise them on how to flee the country. (Ig)Nobel Peace Prize winner Kissinger is notorious for the war crimes he committed during his tenure as Secretary of State and National Security Advisor under Nixon and Ford. During that time he participated in Operation Condor, drafted a plan for food control genocide, orchestrated the 1973 oil crisis, illegally bombed Cambodia, neo-colonized China and generally acted as a good minion for the New World Order he’s constantly pimping. After all, who else would better understand how to help the HSBC banksters escape the suggestion that they might face the tiniest of consequences for their crimes? Sadly for the people of the UK, HSBC’s threats to move may just be a bargaining strategy they’re using to wring yet more concessions out of the British government. They are expected to come to a decision early this year and have reportedly brought in other international advisers along with Kissinger to discuss the potential geopolitical ramifications of such a move. [...]"   [...]"  

Commentary: "The Making of the “Big Four” Banking Oligopoly in One Chart" [01/26/16] Printer Friendly Version "The “Big Four” retail banks in the United States collectively hold 45% of all customer bank deposits for a total of $4.6 trillion. The fifth biggest retail bank, U.S. Bancorp, is nothing to sneeze at, either. It’s got 3,151 banking offices and employs 65,000 people. However, it still pales in comparison with the Big Four, holding only a mere $271 billion in deposits. Today’s visualization looks at consolidation in the banking industry over the course of two decades. Between 1990 and 2010, eventually 37 banks would become JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup. Of particular importance to note is the frequency of consolidation during the 2008 Financial Crisis, when the Big Four were able to gobble up weaker competitors that were overexposed to subprime mortgages. Washington Mutual, Bear Stearns, Countrywide Financial, Merrill Lynch, and Wachovia were all acquired during this time under great duress. The Big Four is not likely to be challenged anytime soon. In fact, the Federal Reserve has noted in a 2014 paper that the number of new bank charters has basically dropped to zero.  [...]"  

MSM: "Goldman Sachs Sends US Into Recession, Promptly Retracts Report’s Slide" [01/25/16] Printer Friendly Version "Despite being “too big to fail”, America’s “most important bank” Goldman Sachs may have done so this week, at least for a few minutes, when it possibly tipped off a new economic recession. A slide in the “Markets do not ‘Take it Easy’ to start the year” report posted online showed the US in a recession according to Goldman’s Current Activity Indicator. “Although EM assets remain in the cross-hairs – and the outlook there remains tenuous in spots – growth concerns have impacted the market’s view of US and European growth as well, pushing our market-based measure of US growth risk to new post GFC lows (see Exhibit 8),” the report read. Shortly after the financial watchdog website Zero Hedge tweeted their response, Goldman Sachs posted an altered slide, moving the dark blue line from zero to closer to two. [...] So if Goldman Sachs changed the chart, there’s no recession, right? Well, that’s where we get into a gray area. Economist Paul Samuelson once said “the stock market has predicted nine out of the last five recessions”, according to the Washington Post, which asked “Is the stock market telling us we’re headed for a recession?” on Wednesday. Andrew Levin, a Dartmouth professor and former adviser to Federal Reserve Chair Janet Yellen, pointed out in this document posted Monday that the “jobs boom doesn't look like it will last” and “industrial production is falling as fast as it does when there's historically been a recession”, according to the Washington Post. Art Cashin, Director of Floor Operations at UBS, told CNBC Tuesday: "If corporations start to pull back and say 'I don't want to advance anything; I don't want to hire anybody,' we could slide into a recession."[...] 

MSM: "The Warning" [01/25/16] [56:08] "A 2009 PBS Documentary revealing how Bill Clinton was influenced by the investment banking industry to create the conditions necessary for them to profit off the eventual 2008 financial collapse.  [...]"

MSM: "Saudi Arabia's Secret Holdings Of U.S. Debt Are Suddenly A Big Deal" [01/23/16] Printer Friendly Version  "It’s a secret of the vast U.S. Treasury market, a holdover from an age of oil shortages and mighty petrodollars: Just how much of America’s debt does Saudi Arabia own? But now that question -- unanswered since the 1970s, under an unusual blackout by the U.S. Treasury Department -- has come to the fore as Saudi Arabia is pressured by plunging oil prices and costly wars in the Middle East. In the past year alone, Saudi Arabia burned through about $100 billion of foreign-exchange reserves to plug its biggest budget shortfall in a quarter-century. For the first time, it’s also considering selling a piece of its crown jewel -- state oil company Saudi Aramco. The signs of strain are prompting concern over Saudi Arabia’s outsize position in the world’s largest and most important bond market. [...] A big risk is that the kingdom is selling some of its Treasury holdings, believed to be among the largest in the world, to raise needed dollars. Or could it be buying, looking for a port in the latest financial storm? As a matter of policy, the Treasury has never disclosed the holdings of Saudi Arabia, long a key ally in the volatile Middle East, and instead groups it with 14 other mostly OPEC nations including Kuwait, the United Arab Emirates and Nigeria. For more than a hundred other countries, from China to the Vatican, the Treasury provides a detailed breakdown of how much U.S. debt each holds. “It’s mind-boggling they haven’t undone it,” said Edwin Truman, the former Treasury assistant secretary for international affairs during the late 1990s, and now a senior fellow at the Peterson Institute for International Economics in Washington. Because relations were rocky and the U.S. needed their oil, the Treasury “didn’t want to offend OPEC. It’s hard to justify this special treatment for OPEC at this point.[...]" 

MSM: "How The Banks Are Tightening The Noose On U.S. Oil Firms" Ø Hedge [01/21/16] Printer Friendly Version "Two weeks ago, we reported that even as U.S. lenders were professing to their investors that there is no risks with their energy exposure and that they are comfortably reserved for any potential losses, they were reducing their unfunded (and total) exposure to oil and gas exploration companies due to balance sheet, default and contagion concerns. We showed a list 25 deeply distressed companies, whose banks we found have quietly shrunk the borrowing base of their credit facilities anywhere from 6% in the case of Black Ridge Oil and Gas to a whopping 51% for soon to be insolvent New Source Energy Partners. Following up on this disturbing development, here is Markit with its take on how "Leverage is tightening the noose on US oil firms." [...] Evaporating credit lines are set to finally squeeze US energy firms as oil prices break through $30 a barrel and US banks sound the alarm on rising bad loans in the sector. [...] After the lifting of sanctions in Iran this week, expectations for increased oil output has put further pressure on oil prices with both Brent and West Texas Intermediate prices dropping to the lowest levels seen this century. In the US, embattled producers are finally being forced to consider ceasing production as banks reign in on credit lines for fear of rising bad debts.[...]" 

Commentary: "Government Sachs Gets Golden Wrist Slap For Global Financial Crisis" James Corbett [01/20/16] Printer Friendly Version "... In the midst of this beginning-of-the-end of the 8 year long QE re-leveraging heroin binge we have news that seems to put a bow on the 2008 crisis: Goldman Sachs has announced that it has reached a $5.1 billion settlement as its wrist slap for participating in the wholesale swindle that was the subprime mortgage meltdown. The settlement breaks down into $2.385 billion in civil monetary penalties, $875 million in cash payments and $1.8 billion in consumer relief. [...] Here’s the kicker: the settlement is the largest in the bank’s history, but still small potatoes compared to some of its cohorts in crime who have already reached their settlements, such as Bank of America ($16.6 billion) and JPMorgan Chase ($13 billion). For those who don’t remember the subprime mortgage meltdown and Goldman’s role in it (along with the other big banks), they intentionally blew up the housing bubble by creating Structured Investment Vehicles to keep mortgage backed securities and other risky investments off their main books. This allowed them to raise money on the commercial paper market at low interest rates and earn high interest rates by buying toxic subprime mortgage securities. Then they paid off the ratings agencies to AAA certify their toxic mortgage CDO garbage. Then (and here’s the psychopathic genius of it) knowing that it was all going to melt down sooner or later, they pawned the subprime-backed derivative garbage on their customers at the same time as they secretly bet against it. Internal emails released in subsequent investigations show they referred to their own CDOs as “shitty deals” and called their customers “muppets” for buying them. The end result? Goldman had its most profitable year to date in 2007 as the market started to turn with a staggering $17.6 billion profit. By 2009, in the depths of the crisis that they helped bring about and as the rest of the world faced total financial armageddon, they did even better, netting just shy of $20 billion profit.[...] So, just to recap: Goldman makes tens of billions by selling the very toxic assets they were secretly betting against and in the end they pay a $5 billion penalty. …Oh, and (needless to say) the Injustice Department practically fell over themselves to announce at the earliest possible opportunity that no one would even be prosecuted for this fraud (let alone go to jail). …Oh, and poor Goldman will make a slightly smaller profit this year as a result of this golden wrist slap, equivalent to one measly fiscal quarter of profit for the banking behemoth. All hail Government Sachs, surely a Vampire Squid if ever there was one. And now that their last engineered crisis has been finally covered up for good, it’s time to live through the next one. Happy 2016![...]" 

Commentary: "US 'Cash Flow Negative' Energy Companies With $325 Billion In Debt Among Them" [01/20/16] Printer Friendly Version  "With the topic of distress among U.S. oil and gas exploration and production companies becoming more important with every passing day that oil not only continues to drop, but certainly fails to rebound to levels that allow US energy companies to return to a cash flow positive state, we would like to show just how much debt is at stake. To do that, drawing inspiration from a tweet by J Pierpont Morgan, we have conducted a quick CapIQ sort through all US energy companies - both public and private - that have at least $100 million in annual revenue, and whose EBITDA less CapEx was a negative number in the LTM period. To be sure, this gives listed companies the benefit of not only higher EBITDA in the early quarters when the drop of oil was not as severe, but also of oil price hedges. As such as the true negative cash flow going forward assuming no rebound in the price of oil for the foreseeable future will be far worse as the benefit of the base effect dissipates with every passing quarter and as oil price hedges, which have so far cushioned the oil price blow, are unwound. [...]  None of these companies are bankrupt, yet. As a reminder, putting as many of these companies out of business, and thus slashing non-OPEC oil production (as OPEC forecasted in its latest bulletin earlier today), is the primary motive behind Saudi Arabia's relentless pumping spree."  There is just one problem with the Saudi plan: even assuming all of these companies file Chapter 11, all that would happen is their debt would be wiped out, with the existing creditors getting the equity keys, and becoming the new owners of streamlined, debt-free corporations. This would means that the All In Cost Of Production would plunge as no debt payments would have to be satisfied with the free cash flow. Meanwhile, the entire existing E&P infrastructure would still be in place and ready to pump as before. This means that after the default and debt-for-equity deluge, US shale would be able to pump even more at far lower breakeven costs, forcing Saudi Arabia to overproduce for even longer ultimately shooting itself in the foot when its reserves run out!

Commentary: "The Citadel Is Breached: Congress Taps The Fed For Infrastructure Funding" [01/19/16] Printer Friendly Version "For at least a decade, think tanks, commissions and other stakeholders have fought to get Congress to address the staggering backlog of maintenance, upkeep and improvements required to bring the nation’s infrastructure into the 21st century. Countries with less in the way of assets have overtaken the US in innovation and efficiency, while our dysfunctional Congress has battled endlessly over the fiscal cliff, tax reform, entitlement reform, and deficit reduction. Both houses and both political parties agree that something must be done, but they have been unable to agree on where to find the funds. Republicans aren’t willing to raise taxes on the rich, and Democrats aren’t willing to cut social services for the poor. In December 2015, however, a compromise was finally reached. On December 4, the last day the Department of Transportation was authorized to cut checks for highway and transit projects, President Obama signed a 1,300-page $305- billion transportation infrastructure bill that renewed existing highway and transit programs. According to America’s civil engineers, the sum was not nearly enough for all the work that needs to be done. But the bill was nevertheless considered a landmark achievement, because Congress has not been able to agree on how to fund a long-term highway and transit bill since 2005. That was one of its landmark achievements. Less publicized was where Congress would get the money: largely from the Federal Reserve and Wall Street megabanks.         [...] According to Zachary Warmbrodt, writing in Politico in November, the Fed registered “strong concerns about using the resources of the Federal Reserve to finance fiscal spending.” But former Federal Reserve Chairman Ben Bernanke, who is now at the Brookings Institute, acknowledged in a blog post that the Fed could operate with little or no capital. His objection was that it is “not good optics or good precedent” to raid an independent central bank. It doesn’t look good. Rep. Peter DeFazio (D-Oregon), ranking member on the House Transportation Committee, retorted, “For the Federal Reserve to be saying this impinges upon their integrity, etc., etc. — you know, it’s absurd. This is a body that creates money out of nothing.” DeFazio also said, “[I]f the Fed can bail out the banks and give them preferred interest rates, they can do something for the greater economy and for average Americans. So it was their time to help out a little bit.”[...] It may be their time indeed. For over a century, populists and money reformers have petitioned Congress to solve its funding problems by exercising the sovereign power of government to issue money directly, through either the Federal Reserve or the Treasury."  

MSM: "China Banks Seem To Be Doing Whatever They Can To Avoid Paying Anyone In Dollars" [01/18/16] Printer Friendly Version  "... So what has been going on lately? Well, if there is a common theme, it is that China banks seem to be doing whatever they can to avoid paying anyone in dollars. We are hearing the following: 1. Chinese investors that have secured all necessary approvals to invest in American companies are not being allowed to actually make that investment. I mentioned this to a China attorney friend who says he has been hearing the same thing. Never heard this one until this month. 2. Chinese citizens who are supposed to be allowed to send up to $50,000 a year out of China, pretty much no questions asked, are not getting that money sent. I feel like every realtor in the United States has called us on this one. The Wall Street Journal wrote on this yesterday. Never heard this one until this month. 3. Money will not be sent to certain countries deemed at high risk for fake transactions unless there is conclusive proof that the transaction is real — in other words a lot more proof than required months ago. We heard this one last week regarding transactions with Indonesia, from a client with a subsidiary there. Never heard this one until this month. 4. Money will not be sent for certain types of transactions, especially services, which are often used to disguise moving money out of China illegally. This is not exactly new, but it appears China is cracking down on this. For what is ordinarily necessary to get money out of China for a services transaction, check out Want to Get Paid by a Chinese Company? Do These Three Things.  5. Get this one: Money will not be sent to any company on a services transaction unless that company can show that it does not have any Chinese owners. The alleged purpose behind this “rule” is again to prevent the sort of transactions ordinarily used to illegally move money out of China. Never heard this one until this month. [...]" 

Commentary: "Israeli And AIPAC Big Lies About Iran’s Intended Use of Unfrozen Assets" [01/18/16] Printer Friendly Version "AIPAC devotes a section on its web site to malicious Big Lies about Iran intending use of its unfrozen assets to spread its nonexistent “malign global influence,” once international sanctions are lifted this weekend as expected. It discusses dozens of countries on six continents, making fraudulent claims - ignoring Israel’s scourge, complicit with Washington and other rogue partners.[...]"  

MSM: "China-Led AIIB Development Bank Officially Launched, Elects First President" [01/17/16] Printer Friendly Version  "The Board of Governors of the Asian Infrastructure Investment Bank (AIIB) has held its inaugural meeting, declaring the bank open for business and electing its first president, Jin Liqun. Chinese president Xi Jinping, as well as Prime Minister Li Keqiang, delivered opening addresses at the official ceremony, which was also attended by high officials from other multilateral banks. “Asia’s financing needs for basic infrastructure are absolutely enormous,” President Xi said, adding that the bank is going to invest in high-quality, low-cost projects. Premier Li Keqiang said that Asia needs investment in infrastructure and connectivity to remain the most dynamic region for global growth. One of the main decisions made on Saturday was the selection of AIIB’s president. Jin Liqun, who has served as AIIB’s President-designate since September 1, 2015, was elected to that position. “AIIB is now ready to join the family of multilateral financial institutions, investing in sustainable infrastructure for the improvement of lives across Asia,” Liqun said in his first statement as president.  The AIIB was established as a new multilateral financial institution aimed at providing “financial support for infrastructure development and regional connectivity in Asia.” It was founded in October, 2014, and will have its headquarters in Beijing. Its goals are also to boost economic development in the region, create wealth, prove infrastructure, and promote regional cooperation and partnership.[...] Luxembourg Finance Minister Pierre Gramegna sees the establishment of the bank as “further proof of the rebalancing of the world economy.” The value of AIIB’s authorized capital amounts to $100 billion, with almost $30 billion invested by China. The bank, which unites 57 member states, expects to lend $10 billion to $15 billion a year for the first five years of its operations, beginning in the second quarter of 2016. One more development bank with significant Chinese participation is the New Development Bank (NDB), also known as BRICS Development Bank, which was established last year. Russian officials believe that, despite the fact that the banks share similar goals, they will complement each other rather than compete.[...]"  

MSM: "Goldman Sachs Pays $5 billion To Settle Investigation Of Role In Selling Subpar Mortgages" [01/16/16] Printer Friendly Version "Goldman Sachs said on Thursday it will pay roughly $5 billion to settle federal and state probes of its role in the financial crisis. The company is accused of selling shoddy mortgages in the years leading up to the housing bubble and subsequent financial crisis.  Coming nearly eight years after the crisis, the settlement is by far the largest the investment bank has reached related to its role in the meltdown. But the payment is dwarfed by those made by some of its Wall Street counterparts. Goldman will pay $2.39 billion in civil monetary penalties, $875 million in cash payments and provide $1.8 billion in consumer relief in the form of mortgage forgiveness and refinancing. The Mortgage Forgiveness Act passed in 2007 by George W. Bush offers relief to homeowners who would have owed taxes on debt after facing foreclosure. The U.S. Department of Justice, the attorneys general of Illinois and New York, and other regulators who are part of the settlement have not officially signed off on the deal, which could take some time. The government agencies are part of a joint state-federal task force created by President Barack Obama after the 2008 financial crisis that has extracted some of the largest settlements out of Wall Street. Goldman, like other Wall Street banks, has been under investigation for allegedly misleading investors on the safety of the securities they created by bundling and selling mortgages. [...]"  

Commentary: "U.S. Retail Spending Growth Slows Down: Americans Possibly Have Enough Stuff" [01/16/16] "While our economy is supposedly expanding and consumers have more money in our pockets thanks to lower gas prices, new data from the U.S. Census Bureau shows that that we’re not spending that money in retail stores, online or in real life. If we’re not out hitting the malls, where’s all that money going?  The country’s economy is so massive that tiny shifts make a huge difference. Retail and food spending in December of 2015 added up to $448.1 billion, or the equivalent of just under 300 Powerball jackpots. While December sales are up slightly (2.2%) from December 2014, Americans spent slightly less than in November of 2015. In news that will not surprise any readers of this site, “nonstore retail,” which includes e-commerce, had the largest increase at 7.1%. Other surveys have showed that Americans aren’t spending all of the money we’re saving due to lower fuel prices: credit card data from Chase showed that we’re spending more on restaurant meals and on services, not necessarily on stuff. In general, our spending (adjusted for inflation) has been increasing every year since the recession officially ended in 2009. The small expansion in 2015 signals that the economy is doing well, but that growth has slowed down. [...]" Related: "Monthly Advance Estimates Of U.S. Retail And Food Services Sales" PDF

Commentary: "Ghost Ships’ Tell A Frightening Story For Global Trade" [01/15/16] Printer Friendly Version "Each analyst has their favourite proxy measures, but one that leapt into the headlines during the global financial crisis was the Baltic Dry Index which tracks bulk dry cargo around the world – and which this month has been plumbing new lows. When trade is brisk, demand soars and so does the cost of moving bulk commodities around the world. The current plunge in the Baltic Dry is bad news for Australia, as our major exports are captured by the index, as is China’s stalling demand for those same commodities. However, for the world more generally the BDI is not the only measure of activity. Sensational headlines about shipping ‘grinding to halt’ have appeared in recent days, but are not accurate. For a more balanced view, there’s the Harper-Petersen index, which tracks container freight – capturing everything from industrial equipment to fridges, bicycles and iPads. When this crashes, we know that current economic activity has slumped – whereas the BDI tracks commodities that feed into future activity, the Harper-Petersen index is all about shifting product right now. So how is it looking? Not quite as bad as the BDI, which has fallen below the levels seen after the Lehman Bros event. [...] Putting the two measures of activity side by side, it’s likely that the leading index (the BDI) will be followed down by the current index. That is, trade will get thinner before it recovers. The American economy may not be in decline, but China’s economic woes, which in turn are dragging on European markets, mean just about everywhere else is – for now. The New Daily will be on the lookout for positive indicators through 2016 – heaven knows we need them – but these two shipping-based indicators are telling a frightening story of their own, with or without the wild gyrations of global stock markets.[...]" Related: Flashback: "Dry Bulk Will Get Worse Before It Gets Better, Says Analyst" Nov 2015 Printer Friendly Version "Allied Shipbroking Inc (Allied) says in its latest analysis that the dry bulk market is set to get worse before it sees real improvement, adding that low bunker prices have not helped the sector's recovery. "It seems as though trade is at a much more dire state than what had been expected," said George Lazaridis, Allied's Head of Market Research & Asset Valuations. [...] Allied says that one of the major issues driving the market's current condition is the "inward focus" of many governments import and export activities, particularly with steel. The company notes that while trade barriers are "falling left, right, and centre," oversupply paired with slowing economic growth has likewise seen the slowing of trade deals as governments look for ways to boost their own suffering industries. Overall, Lazardis says that even if the BDI continues to see new lows into the coming year's first quarter, forecasts seem to support continued low average freight rates in 2016. "As asset prices continue to tumble to levels never before seen, it will be the patient opportunists that will be able to squeeze the most out of this market trough once more," concluded Lazaridis. [...]" "Dry-Bulkageddon" Printer Friendly Version "Providing credit to dry bulk so they can buy bunkers is just getting incredibly difficult now," Adrian Tolson, Senior Partner at 20|20 Marine Energy, told Ship & Bunker today." | Track the status of this phenomenon at: "Ship & Bunker" | See below: "Baltic Dry Index Crashes As World Ocean Commerce Comes To A Halt" Ø Hedge [01/12/16] 

Commentary: "Demise Of Dollar Hegemony: Russia Breaks Wall St's Oil-Price Monopoly" F. William Engdahl [01/14/16] Printer Friendly Version   "Russia has just taken significant steps that will break the present Wall Street oil price monopoly, at least for a huge part of the world oil market. The move is part of a longer-term strategy of decoupling Russia’s economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy.  [...] Today, prices for Russian oil exports are set according to the Brent price in as traded London and New York. With the launch of Russia’s benchmark trading, that is due to change, likely very dramatically. The new contract for Russian crude in rubles, not dollars, will trade on the St. Petersburg International Mercantile Exchange (SPIMEX). The Brent benchmark contract are used presently to price not only Russian crude oil. It’s used to set the price for over two-thirds of all internationally traded oil. The problem is that the North Sea production of the Brent blend is declining to the point today only 1 million barrels Brent blend production sets the price for 67% of all international oil traded. The Russian ruble contract could make a major dent in the demand for oil dollars once it is accepted. Russia is the world’s largest oil producer, so creation of a Russian oil benchmark independent from the dollar is significant, to put it mildly. In 2013 Russia produced 10.5 million barrels per day, slightly more than Saudi Arabia. Because natural gas is mainly used in Russia, fully 75% of their oil can be exported. Europe is by far Russia’s main oil customer, buying 3.5 million barrels a day or 80% of total Russian oil exports. The Urals Blend, a mixture of Russian oil varieties, is Russia’s main exported oil grade. The main European customers are Germany, the Netherlands and Poland. To put Russia’s benchmark move into perspective, the other large suppliers of crude oil to Europe – Saudi Arabia (890,000 bpd), Nigeria (810,000 bpd), Kazakhstan (580,000 bpd) and Libya (560,000 bpd) – lag far behind Russia.[...]   The Russian move to price in rubles its large oil exports to world markets, especially Western Europe, and increasingly to China and Asia via the ESPO pipeline and other routes, on the new Russian oil benchmark in the St. Petersburg International Mercantile Exchange is by no means the only move to lessen dependence of countries on the dollar for oil. Sometime early next year China, the world’s second-largest oil importer, plans to launch its own oil benchmark contract. Like the Russian, China’s benchmark will be denominated not in dollars but in Chinese Yuan. It will be traded on the Shanghai International Energy Exchange. Step-by-step, Russia, China and other emerging economies are taking measures to lessen their dependency on the US dollar, to “de-dollarize.” Oil is the world’s largest traded commodity and it is almost entirely priced in dollars. Were that to end, the ability of the US military industrial complex to wage wars without end would be in deep trouble. Perhaps that would open some doors to more peaceful ideas such as spending US taxpayer dollars on rebuilding the horrendous deterioration of basic USA economic infrastructure. The American Society of Civil Engineers in 2013 estimated $3.6 trillion of basic infrastructure investment is needed in the United States over the next five years. They report that one out of every 9 bridges in America, more than 70,000 across the country, are deficient. Almost one-third of the major roads in the US are in poor condition. Only 2 of 14 major ports on the eastern seaboard will be able to accommodate the super-sized cargo ships that will soon be coming through the newly expanded Panama Canal. There are more than 14,000 miles of high-speed rail operating around the world, but none in the United States.[...]"  

Commentary: "Derailed? What Rail Traffic Tells Us About The U.S. Economy" Ø Hedge [01/13/16] Printer Friendly Version "Raw materials and goods need to be transported regardless of how modern or sophisticated an economy is. Every week the Association of American Railways (“AAR”) posts a free report on rail volumes transported across North America by major category. This provides some decent clues on the condition of the US economy, almost in real time. Let’s see what the latest report covering virtually all of 2015 is telling us. The rail intermodal traffic category registers the long-haul movement of shipping containers and truck trailers by rail whenever combined with (a much shorter) truck movement at one or both ends. In addition to its large relative size – accounting for 22% of 2014 revenue for major US railroads, more than any other single commodity group – intermodal is quite an important category since it covers a broad range of goods that Americans use every day, from computers to frozen chickens. [...] We can see that falling crude oil prices have finally impacted volumes transported by rail, with the latter part of the year showing a steep decline versus the top of the range (set in 2014). This reversal in trend is clearly not the friend of US oil & gas workers and their communities. [...]  Let’s move on to forest products, which includes lumber, a major component of house construction in the US. After a very robust start of the year, volumes have fallen almost off the chart towards the end, breaching the low end of the range in the last week of December. This trend is clearly not a good omen for US employment and economic vitality in general given the importance of the housing sector.[...] The motor vehicles and parts category includes all kinds of vehicles (used and new), passenger car and bus bodies, parts and accessories and other related equipment. The series has been very strong all year, setting new highs in this cycle on several occasions. Not much detail is provided so we can’t really say if these are predominantly new cars being built or used ones being sold, for instance. As such, this tells us more about the consumer than the underlying industrial activity. [...] What to make of all this? Our analysis of rail volumes provides a mixed picture of the US economy at this point: oil & gas and mining-related sectors are taking a real beating, some consumer sectors seem to be holding up and there are signs of weakness in the housing sector. 2016 should witness some type of a resolution here.[...]"  Related: "Bank of America: Rail Traffic Is Saying Something Worrying About the U.S. Economy" Printer Friendly Version  "Railroad cargo in the U.S. dropped the most in six years in 2015, and things aren't looking good for the new year. "We believe rail data may be signaling a warning for the broader economy," the recent note from Bank of America says. "Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009." BofA analysts led by Ken Hoexter look at the past 30 years to see what this type of steep decline usually means for the U.S. economy. What they found wasn't particularly encouraging: All such drops in rail carloads preceded, or were accompanied by, an economic slowdown.[...]"|"Sorry Warren Buffett: Things Just Went From Bad To Worse For U.S. Railroads" Printer Friendly Version "... From a peak in January 2015 to last October, movements of crude by rail declined more than a fifth, the latest data from the US energy department show. Genscape, a research group, said rail deliveries to US Atlantic coast terminals continued to drop to the end of the year and the spot market for crude delivered by rail from North Dakota’s Bakken region “is at a near standstill”. Once seen as a 19th century relic, moving crude oil by train re-emerged as a hot technology five years ago as surging output from long-neglected shale oil regions overwhelmed pipeline capacity. Investors from oil companies to Wall Street banks clamoured for tank cars, while fiery accidents prompted federal regulators to impose more stringent standards on rolling stock. And Buffett was there to provide the needed cars, for a generous fee of course, while doing everything in his power (it's a lot) to delay implementations of stringent, or even any standards, on "rolling stock."[...]"   

Commentary: "U.K. Industrial Output Plunges Most In Almost Three Years" [01/13/16] Printer Friendly Version "U.K. industrial production fell the most in almost three years in November as warmer-than-usual weather reduced energy demand. Output dropped 0.7 percent from the previous month, with electricity, gas and steam dropping 2.1 percent, the Office for National Statistics said in London on Tuesday. Economists had forecast no growth on the month. [...] According to manufacturers’ organization EEF, companies are feeling increasingly pressured by issues such as the strength of the pound. It said on Monday that only 56 percent of manufacturers say the U.K. is a competitive location, compared with 70 percent a year ago. Bank of England officials will probably keep their key interest rate at a record-low 0.5 percent this week. Minutes of the meeting released Thursday may reveal their thinking on the fall in oil prices and worries about China’s economy.[...]"

Commentary "Loss Of Faith" Escalates As Markets Enter Reality "Discovery Phase" Ø Hedge [01/12/16] Printer Friendly Version  "It looks like 2016 will be the year that humanfolk learn that the stuff they value was not worth as much as they thought it was. It will be a harrowing process because a great many humans are abandoning ownership of things that are rapidly losing value - e.g. stocks on the Shanghai exchange - and stuffing whatever “money” they can recover into the US dollar, the assets and usufructs of which are also going through a very painful reality value adjustment. Of course this calls into question foremost exactly what money is, and the answer is: basically a narrative construct. In other words, a story explaining why we behave the way we do around certain things. Some parts of the story have a closer relationship with reality than other parts. The part about the US dollar has a rather weak connection. [...] When various authorities - the BLS, the Federal Reserve, The New York Times - state that the US economy is “strong,” we can translate that to mean giant companies listed on the stock exchanges are able to put up a Potemkin façade of soundness. [...] It’s well-established by now that the “brick-and-mortar” retail operations are sucking major wind. Meaning, fewer people are driving to the Target store and venues like it to buy stuff. Supposedly, they are buying stuff at Amazon instead. What interests me in that story is the idea that every single object purchased these days has a UPS journey attached to it. Of course, people also drive to the Target store, though I doubt they leave the place with just one thing. That dynamic ought to call into question just how people are living in the USA, and the answer to that is: spread out all over the place in a suburban sprawl living arrangement that has poor prospects for being reformed or mitigated. Either you drive yourself to the Target store for a slow-cooker and a few other things, or Amazon has to send the brown truck to each and every house. Either way includes an insane amount of transport, and sooner or later both the brick-and-mortar chain store model and the Amazon home delivery model will fail. Unfortunately, it is difficult to imagine a resolution of that without also imagining a transition away from suburbia. The loss of faith in the suburban disposition of things will probably represent the greatest loss of perceived wealth in human history — which is how it should be, since it also happened to be the greatest misallocation of resources in human history. It seemed like a good idea at the time, and now its time has passed.[...]"   Related: "Global Corporate Debt is Coming Unglued" Printer Friendly Version |Perspectives: "Federal Reserve’s “Net Worth” Collapses 33% In Two Weeks" Printer Friendly Version 

Commentary: "China Discovers 470 Ton Gold Mine, Worth Over $16.4 Billion, 2000 Meters Undersea" [01/12/16] Printer Friendly Version "Scientists at the Shandong Provincial No. 3 Institute of Geological and Mineral Survey have located a mega-sized gold deposit, 2000 meters under the north coastal water near Sanshan Island off Laizhou city in the Shandong province, with at least 470 tons of reserves. The new-found deposit, the largest undersea gold mine found in China, is currently valued at over $16.4 billion and is estimated to hold at least 1,500 tons of gold. According to Ding Zhengjiang, the deputy director of the Shandong Provincial No. 3 Institute, the gold deposit is part of a crablike or belt that lies deep at the sea bottom. The marine ground investigation took three years, and involved over 120 kilometers of drilling, with 67 sea drilling platforms and about 1,000 drillers and geologists. [...] However, experts now face the daunting challenge of accessing the mine, which is currently out of reach for excavators. Despite being the world’s leading producer of gold, China lacks the technological ability to reach potential operations 1000 meters below the Earth’s surface. In 2012, the first drilling platform at sea took 24 hours to be constructed, and now it took 8 hours with more advanced offshore construction technology. More than 2,000 tons of gold deposits have been found in Lanzhou, which has the largest gold reserves in the country. In 2014, China produced 452 tons of gold. The China Gold Association recently disclosed that China produced 357 tons of gold during January-September 2015, an increase of 1.48% from a year earlier. By the end of September, China’s gold reserve has reached 1,700 tons, up from the 1,660 tons in June.[...]" 

Commentary: "Dozens Of Chinese Billionaires Are Mysteriously Disappearing" [01/12/16] Printer Friendly Version  "Amid stock market panic in China, many of the country’s most prominent billionaires are disappearing without a trace.[...]"  

Commentary: "Baltic Dry Index Crashes As World Ocean Commerce Comes To A Halt" Ø Hedge [01/12/16] Printer Friendly Version  "The continued collapse of The Baltic Dry Index remains ignored by most - besides we still have Netflix, right? But, as Dollar Vigilante's Jeff Berwick details, it appears the worldwide 'real' economy has ground to a halt! Last week, I received news from a contact who is friends with one of the biggest billionaire shipping families in the world. He told me they had no ships at sea right now, because operating them meant running at a loss. This weekend, reports are circulating saying much the same thing: The North Atlantic has little or no cargo ships traveling in its waters. Instead, they are anchored. Unmoving. Empty. You can see one such report here. According to it, "Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving." This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped. We checked and it appears to show no ships in transit anywhere in the world. We aren’t experts on shipping, however, so if you have a better site or source to track this apparent phenomenon, please let us know. We also checked, and it seemed to show the same thing. Not a ship in transit. [...] If true, this would be catastrophic for world trade. Even if it’s not true, shipping is still nearly dead in the water according to other indices. The Baltic Dry Index, (See Wiki) an assessment of the price of moving major raw materials by sea, was already at record all-time lows a month ago... and in the last month it has dropped even more, especially in the last week. Factories aren’t buying and retailers aren’t stocking. The ratio of inventory to sales in the US is an indicator of this. The last time that ratio was this high was during the “great recession” in 2008.[...] The storm has been building for some time, actually. Not so long ago, there was a spate of reports that the world’s automobile manufacturers were in trouble because cars were not selling and shipments were backing up around the world. ZeroHedge reported on it this way: "In the past several years, one of the topics covered in detail on these pages has been the surge in such gimmicks designed to disguise lack of demand and end customer sales, used extensively by US automotive manufacturers, better known as “channel stuffing”, of which General Motors is particularly guilty and whose inventory at dealer lots just hit a new record high." Related: "Is The Auto Loan Bubble Ready To Pop?" Printer Friendly Version [...]  Interruptions in goods and services, most critically food, almost happened in 2008 during the Great Financial Crisis. For three days worldwide shipping was stranded due to shipping companies not knowing whether or not the receiver’s bank credit was good. That crisis was staved off due to a massive amount of money printing. It was a temporary stay of execution, like bailing out the Titanic with coffee cups, however, and one that may reach much larger proportions in 2016.[...]"  Note: Automotive industries came out with 'sub-prime'-style auto loans ... now it's impossible to reconcile, along with the Student Tuition Loans, etc  

Commentary: "Feds Indict First Bank That Got TARP Bail-Out Money" [01/11/16] Printer Friendly Version  "A federal grand jury in Wilmington has indicted the former Wilmington Trust Corp. on criminal charges, alleging the bank illegally hid hundreds of millions of dollars in land-development loans that were so delinquent that one banker called them "credit turds." Although a number of larger U.S. banks were forced to sell themselves at bargain-basement prices as property values collapsed in the recession, Wilmington Trust is the only bank bailed out by the Troubled Asset Relief Program to face criminal charges, according to Charles Oberly, U.S. attorney for Wilmington. M&T Bank Corp., the Buffalo lender that bought Wilmington Trust as it faced financial collapse in 2010, has hired lawyers in New York and Washington to defend itself. Bank spokesman Philip Hosmer and Christopher Gunther, an attorney at Skadden, Arps who represents M&T, declined to comment. Oberly had previously charged the bank's former chief financial officer, Robert V.A. Harra Jr., and three other bank executives with signing off on fraudulent regulatory reports that underreported delinquent loans. The bankers have denied wrongdoing and are contesting those criminal charges, which were expanded in a Superseding Indictment that added Wilmington Trust as a defendant. [...]"  

MSM: "Wolves Of Wall Street Lose $194 Billion In First Week Of 2016" [01/10/16] Printer Friendly Version  "The top 400 richest people in the world, according to the billionaires index of Bloomberg, have lost about $194 billion during the first week of trading of 2016. The website Bloomberg Business notes that businesses were losing revenue due to weak economic statistics of China, falling oil prices and the largest collapse of the U.S. stock market. On the long time leader list, one of the founders of Microsoft , Bill Gates, lost $4.5 billion (minus 5.4%), and the second largest loser, the founder of Inditex (a major chain of clothing stores, including the brands Zara, Massimo Dutti) Amancio Ortega has lost $3.4 billion (minus 4.7 per cent). The value of Mexican Carlos Slim, who owns the largest telecommunications networks, decreased by 10.8%. "According to the index, the billionaires in their amounts lost accounted for 4.9% of the total state members in the list, and they are doing better than global equity markets, with the MSCI ACWI index showing the decline in the global securities markets by 6.2% over the week" — the newspaper notes. [...]" Related: "Charts Say: "US Stocks Are In Riskiest Position In Seven Years" Printer Friendly Version "After suffering the worst start to a new year in history, the U.S. stock market has entered correction territory which is defined by a drop of 10% from its old high. The charts pretty much speak for themselves. All three major stock indexes fell to three month lows in heavy trading.[...]" |"The US Economy Is Dead In The Water" Printer Friendly Version "Here’s a newsflash that CNBC didn’t mention. According to the BLS, the US economy generated a miniscule 11,000 jobs in the month of December. Yet notwithstanding the fact that almost nobody works outside any more, the BLS fiction writers added 281,000 to their headline number to cover the “seasonal adjustment.” This is done on the apparent truism that December is generally colder than November and that workers get holiday vacations. [...]" 

Commentary: "Henry Kissinger Partners With HSBC International Bank" [01/10/16] Printer Friendly Version  "The notorious Henry Kissinger and equally infamous international bank HSBC have reportedly partnered together to finalize the location of the new headquarters for Europe’s largest bank. SkyNews reports that board members of HSBC have met with former US Secretary of State Henry Kissinger to “discuss the geopolitical implications of the ongoing review of the bank’s domicile.” SkyNews writes: Sources said that Mr Kissinger, who has a role with JP Morgan, the Wall Street giant, as well as his own consulting firm, had been asked to provide advice on a number of options being considered by HSBC directors. Since April of 2015 HSBC has been considering moving its headquarters from London to several possible locations in the United States, Canada, and China. The international bank is attempting to escape taxes and regulations in the UK and is also still facing penalties from authorities for attempting to manipulate foreign exchange markets. [...] HSBC has not publicly commented on the SkyNews report but if the report is accurate, this partnership, whether it’s simply related to HSBC’s potential move, cannot be good for lovers of freedom and justice. Here’s a little background on why you should not support Henry Kissinger or HSBC.[...]"  

Commentary: "US Factory Orders Deep In Recession" Ø Hedge [01/07/16] Printer Friendly Version  "US factory orders have never dropped this far for so long without the US economy overall being in recession. November's 4.2% YoY drop is the 13th consecutive monthly drop. Revistions to durable goods data shows a 1% drop in new orders ex-defense in November after rising 1.4% in October.. and as a reminder, this data was buoyed by a 46.9% surge in defense aircraft and parts orders to all-time highs. Traders better hope for more war, or the reality of the economy will peak out from behind the military-industrial complex veil. This was the highest level of defense spending since 9/11.[...]"  Related: "Manufacturing Leads, Services Follow: "Pace Of Hiring" Slows" Printer Friendly Version "As goes US manufacturing, so goes US services. In a narrative-crushing print, US Services PMI dropped to 54.3 - the lowest since January 2015. Output and New business growth slumped to 11-month lows, optimism dropped, and input cost inflation continued to moderate as "suggests the pace of hiring has slowed since earlier in the year as businesses have become more cautious. It would appear the "yeah but The Services Economy will save us" meme just collapsed - so what next? [...]"  

Illustration: "Timeline: How the Global Economy Played Out in 2015" [01/06/16] Printer Friendly Version  "Many people start a new year with renewed optimism. However, the reality of each new year is not so detached from the previous. [...]" Note: Very good.

MSM: "Swiss To Hold Referendum On Whether To Ban Commercial Banks From Creating Money" [01/05/16] Printer Friendly Version "Iceland has gained the admiration of populists in recent years by doing that which no other nation in the world seems to be willing or capable of doing: prosecuting criminal bankers for engineering financial collapse for profit. Their effective revolt against the banking class, who drove the tiny nation into economic crisis in 2008, is the brightest example yet that the world does not have to be indebted in perpetuity to an austere and criminal wealthy elite. In 2015, 26 Icelandic bankers were sentenced to prison and the government ordered a bank sale to benefit the citizenry. Inspired by Iceland’s progress, activists in Switzerland are now making an important stand against the banking cartels and have successfully petitioned to bring an initiative to public referendum that would attack the private banks where it matters most: their power to lend money they don’t actually have, and to create money out of thin air. [...] According to a story in the UK Telegraph, “Switzerland will hold a referendum to decide whether to ban commercial banks from creating money. The Swiss federal government confirmed on Thursday that it would hold a plebiscite, after more than 110,000 people signed a petition calling for the central bank to be given sole power to create money in the financial system. The campaign – led by the Swiss Sovereign Money movement and known as the Vollgeld initiative – is designed to limit financial speculation by requiring private banks to hold 100pc reserves against their deposits.” [...] Switzerland is in a key position to play a revolutionary role in changing how global banking functions. In addition to being the world’s safest harbor for storing wealth, it is also home to the Bank for International Settlements (BIS), a shadowy private company owned by many of the world’s central banks, and acting as a lender to the central banks. The BIS is the very heart of global reserve banking, the policy that enables banks to lend money that does not actually exist in their bank deposits, but is instead literally created electronically from nothing whenever a bank extends a line of credit. Reserve banking is the policy that guarantees insurmountable debt as the outcome of all financial transactions. The Sovereign Money initiative in Switzerland aims to curb financial speculation, which is the intended and inevitable result of reserve banking, the tool that makes financial adventurism possible by supplying the banks with endless quantities of fiat money. Limiting a bank’s ability to produce money from nothing would be a direct blow to the roots of the banking cartel, and would cripple their ability to manipulate the world economy.[...] In Switzerland, 90% of all money in circulation is electronic, and for this, The National Bank of Switzerland has become the direct target of the Sovereign Money Campaign. Swiss law has in the past required banks to back all currency creation with collateral assets like physical silver or gold, however in recent decades the financial climate has changed, and, “due to the emergence of electronic payment transactions, banks have regained the opportunity to create their own money,” the grass-roots campaign said in a public statement regarding the intentions of the referendum, “banks won’t be able to create money for themselves any more, they’ll only be able to lend money that they have from savers or other banks.” This is an interesting twist in the human saga of man vs. banks, and while it remains to be seen if the referendum passes or not, it must be pointed out that it does have its own problems, articulated by Sam Gerrans: [...]"  

Commentary: "Bank of America Explains How Central Banks Rigged, Manipulated The Market" Ø Hedge [01/04/16] Printer Friendly Version "... Essentially central banks, by unfairly inflating asset prices have compressed risk like a spring to unfairly tight levels. Unfortunately, the market is aware the price of risk is not correct, but they can’t fight it, and everyone is forced to crowd into the same trade. By manipulating markets they have also reduced investors’ inherent conviction by rendering fundamentals less relevant." - Bank of America [...]"  

Commentary: "Municipal Bond Risk Becoming More Important, Especially For Under-Funded State Plans" Ø Hedge [01/04/16] Printer Friendly Version "As Wilbur Ross so eloquently noted, for Puerto Rico "it's the end of the beginning... and the beginning of the end," as he explained "Puerto Rico is the US version of Greece." However, as JPMorgan explains, for some states the pain is really just beginning as Municipal bond risk will only become more important over time, as assets of some severely underfunded plans are gradually depleted. [...] The direct indebtedness of US states (excluding revenue bonds) is $500 billion. However, bonds are just one part of the picture: states have another trillion in future obligations related to pension and retiree healthcare. In the summer of 2014, we conducted a deep-dive analysis of US states, incorporating bonds, pension obligations and retiree healthcare obligations. After reviewing over 300 Comprehensive Annual Financial Reports from different states, we pulled together an assessment of each state’s total debt service relative to its tax collections, incorporating the need to pay down underfunded pension and retiree healthcare obligations.  While there are five states with significant challenges (Illinois, Connecticut, Hawaii, New Jersey, and Kentucky) , the majority of states have debt service-to-revenue ratios that are more manageable. [...]" 

Commentary: "Hedge Funds Keep Losing (And Closing) - Why It Matters" Ø Hedge [01/04/16] Printer Friendly Version  "Hedge funds, generally the most aggressive species of money manager, do a lot of “black box” trading in which bets are placed on previously-identified patterns and relationships on the assumption that those patterns will repeat in the future. But with governments randomly buying stocks and bonds and bailing out/subsidizing everything is sight, old relationships are distorted and strategies that worked in the past begin to fail, as do the money managers who rely on them. [...] Why should regular people care about the travails of the leveraged speculating community? Because these guys are generally considered to be the finance world’s best and brightest, and if they can’t figure out what’s going on, no one can. And if no one can, then risky assets are no longer worth the attendant stress. In response, a system that had previously embraced leverage and “alternative” asset classes will go risk-off in a heartbeat, and all those richly-priced growth stocks and trophy buildings and corporate bonds will find air pockets under their prices. And since pretty much everything else now depends on high asset prices, things will get ugly in the real world.[...]"  

Concepts and Practices: "I Was Wrong: Big Banks Actually Were Exactly Like Counterfeiters" The Intercept [01/03/16] Printer Friendly Version  "In a recent post about the new movie The Big Short, I argued that it’s not actually necessary to decipher the abstruse jargon of the 2008 financial crisis — i.e., credit default swaps, mezzanine tranches, synthetic collateralized debt obligations, etc. — in order to understand what happened. What the big banks did during the housing bubble of the mid-2000s was in essence straightforward counterfeiting. The difference between what they did and regular counterfeiting was simply the kind of fake paper; regular counterfeiters print fake, valueless cash, while the banks were printing fake, valueless bonds. [...] If in 2005 a bank packaged worthless mortgages together into a bond with a face value of, say, $100 million, it would generally collect fees of about 1.5 percent, or $1.5 million. The $100 million face value wasn’t real, but the fees definitely were. What I didn’t understand, and commenter Larry Headlund pointed out, is that counterfeiting cash actually does work the same way. That is, counterfeiters would not print up $100 million in cash and then spend it all themselves. Instead, they sell their fake cash to others for a percentage of the face value. Ben Tarnoff explains the process in his book Moneymakers: The Wicked Lives and Surprising Adventures of Three Notorious Counterfeiters: "Counterfeiting cash in large quantities posed a problem. Spending it was risky, particularly among people who had reason to doubt you earned it honestly. The solution was to let others pass it for you either by selling them the counterfeits in batches or … lending the notes on consignment. At the top of the counterfeiting scheme was the engraver … Next came the printer … at the bottom were the passers, who exchanged the fake bills for real money, thus generating the profit that fueled the venture.[...]"  

Concepts and Practices: "Keynesian vs. Austrian Economics - The Infographic" [01/02/16] Printer Friendly Version "There has been an unsettled debate among economists for a century now of whether government intervention is beneficial to an economy. The heart of this debate lies between Keynesian and Austrian economists (though there are other schools as well). In order to get a full understanding of the two schools of economic thought, we offer the following via The Austrian Insider. [...]"  Note: Good.

Commentary: "Will 2016 Be the End of the Current Skyscraper Boom?" [01/02/16] Printer Friendly Version  "With more financing in place, the world’s tallest skyscraper is moving forward. Recent media reports indicate that the final segment of financing has been obtained for the $1.2 billion Jeddah Tower project in Saudi Arabia. This is the financing that would be necessary to bring the project to record heights. Media reports also show that the structure has risen to more than seventy-five meters (246 feet) and construction is proceeding at an uninterrupted pace. Above ground construction on the long delayed Jeddah Tower started in September 2014, but there was considerable doubt that the financing of the one kilometer (3,280.84 feet) tower could be obtained, given the shaky financial conditions in Saudi Arabia. But the Jeddah Tower is only the latest phase in an enormous boom that began setting new records in 2014. Super tall buildings, or skyscrapers, are being built at an astonishing rate. Ninety-seven buildings that exceed 200 meters (656 feet) high were constructed in 2014, setting a new record. The previous record was eighty-one buildings completed in 2011. The total number of skyscrapers in existence now is 935, a whopping 350 percent increase since the year 2000. The 200-floor Kingdom Tower will be part of a reported $8.4 billion project to construct Jeddah City. [...]  In other words, the Tower is just part of an even more massive project, and it’s time for a new skyscraper alert. A skyscraper alert is a market indicator suggesting a significant economic crisis in the near future. This alert could have been issued earlier because the alert is based on the ground breaking ceremonies of a world record setting skyscraper, not the initial announcement of the project which occurred in August of 2011. [...] The completion of record-setting skyscrapers has long seemed to indicate the beginning of economic crises. The Singer Building (September 1906) and Metropolitan Life Insurance Building (1907) began construction before the Panic of 1907 and were later completed in 1908 and 1909, respectively. Construction began on 40 Wall Street (now the Trump Building), Chrysler Building, and the Empire State Building all prior to the crash on Wall Street which began in the fall of 1929 only to have the record-setting buildings open in the beginning of the Great Depression in 1929, 1930, and 1931, respectively. Construction of the World Trade Center towers began in August 1968 and January 1969 and opened in December 1970 and January 1972, respectively. The economy was then in a bad recession and the Bretton Woods Crisis at hand. The Sears Tower (now the Willis Tower) began construction in April of 1971 and opened in May of 1973 during the 1973–1974 stock market crash and the 1973 oil crisis. Such alerts indicate looming danger in the economy of significance. However, the danger is not necessarily imminent. The skyscraper index is silent on the issue of timing so the dating of when the skyscraper curse is apparent is just guess work. It seems that the boom-bust cycle reaches its peak around the time the new record is set and is called a Skyscraper Signal, if imminent economic danger is looming. In most episodes, record breaking skyscrapers have their opening ceremonies when the economic crisis is readily apparent. The important thing to remember is that skyscrapers do not 'cause' economic crises. Rather they are just a very noticeable example of the distortions taking place throughout the economy when interest rates are keep artificially low by the central bank.[...]" Related: "Skyscrapers and Business Cycles"   

Commentary: "The Cultural Contradictions That Have Crippled The American Middle Class" [01/01/16] Printer Friendly Version "Conventional explorations of why the middle class is shrinking focus on economic issues such as the decline of unions and manufacturing, the increasing premiums paid to the highest-paid workers and the rising costs of higher education and healthcare. All of these factors have a role, but few comment on the non-economic factors, specifically the values that underpin the accumulation of capital that is the one essential project of middle class households. Daniel Bell’s landmark 1976 book The Cultural Contradictions of Capitalism held that“capitalism–and the culture it creates–harbors the seeds of its own downfall by creating a need among successful people for personal gratification–a need that corrodes the work ethic that led to their success in the first place.” I would phrase this in the language of values and capital:  The primary cultural contradiction of the Great American Middle Class is the disconnect between the values needed to build capital and those of gratification via debt-based consumption.  Accumulating capital–not just financial capital but human and social capital– requires a distinct set of values and soft skills: [...]" 

Commentary: "Now Comes The Great Unwind - Evaporating Commodity Wealth" Ø Hedge [01/01/16] Printer Friendly Version  "The giant credit fueled boom of the last 20 years has deformed the global economy in ways that are both visible and less visible. As to the former, it only needs be pointed out that an economy based on actual savings from real production and income and a modicum of financial market discipline would not build 65 million empty apartment units based on the theory that their price will rise forever as long as they remain unoccupied!  That’s the Red Ponzi at work in China and its replicated all across the land in similar wasteful investments in unused or under-used shopping malls, factories, coal mines, airports, highways, bridges and much, much more. But the point here is that China is not some kind of one-off aberration. In fact, the less visible aspects of the credit ponzi exist throughout the global economy and they are becoming more visible by the day as the Great Deflation gathers force. As we have regularly insisted, there is nothing in previous financial history like the $185 trillion of worldwide credit expansion over the last two decades. When this central bank fueled credit bubble finally reached its apogee in the past year or so, global credit had expanded by nearly 4X the gain in worldwide GDP. Moreover, no small part of the latter was simply the pass-through into the Keynesian-style GDP accounting ledgers of fixed asset investment (spending) that is destined to become a write-off or public sector white elephant (wealth destruction) in the years ahead. [...]  The credit bubble, in turn, led to booming demand for commodities and CapEx. And in these unsustainable eruptions layers and layers of distortion and inefficiency cascaded into the world economy and financial system. One of these was an explosion of CapEx in the oil patch and the mining sector in response to massive price and margin gains and the resulting windfall rents on existing assets. In the case of upstream oil and gas, for example, worldwide investment grew from $250 billion to $700 billion in less than a decade. Needless to say, there is now so much excess supply and capacity on the world market that oil has plunged into a collapse that is likely to last for years, as old investment come on-stream while world demand falters in the face of the gathering global recession. Already, investment is estimated to have dropped by 20% in 2015, and that is just the beginning.[..] This unfolding collapse of oil and gas investments, of course, will ricochet through the capital goods and heavy construction sectors with gale force. Eventually, annual investment may decline by $250 to $400 billion before balance is restored, meaning that what were windfall profits and surging wages and bonuses in these sectors just a year or two back will evaporate in the years ahead. Contrary to the circular logic of our Keynesian central planners and Wall Street stock peddlers, the pending massive loss of value added capital spending in the energy patch is not a part of some grand reallocation game; it won’t be made up by households—-which are already at peak debt—— borrowing even more in order to go to the restaurant or yoga studio. Instead, as the credit bubble begins to shrink it means that profits, incomes, balance sheets and credit-worthiness are all shrinking, too. So is the related GDP. The same kind of malinvestment occurred in the mining sectors where Australia’s boom in iron ore, coal, bauxite and other industrial materials provides a good proxy. As shown below, CapEx in mining grew by nearly 6X in less than a decade.[...]"  Related: "America In 2015 (The Chart)" Printer Friendly Version  

Commentary: "Income Defense': America's Super-Rich Spend Billions On Secret Tax System" [01/01/16] Printer Friendly Version "The richest people in the United States have created a shadowy tax system known as the "income-defense industry," which uses lobbyists, lawyers, and offshore accounts to reduce their tax rates. The super-rich have spent billions over the past two decades creating this system to shield their wealth, according to an investigation by the New York Times. "Operating largely out of public view – in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service – the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans," the newspaper reported. Twenty years ago, the 400 highest-earning taxpayers in America paid nearly 27% of their income in federal taxes, according to IRS data. By 2012, that figure had fallen to less than 17%, which is just slightly more than the rate paid by the typical family making $100,000 annually. This system, however, is unavailable to the typical family due to its cost and complexity. The ultra-wealthy "literally pay millions of dollars for these services," Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, told the Times. In return, he said, they "save in the tens or hundreds of millions in taxes."[...]"  

Commentary: "An Aging America Shies Away From Risk" MSM [01/01/16] Printer Friendly Version "Twenty years ago, Dutch journalist Sheila Sitalsing sat down with a demographer at the country’s statistics office to talk about how aging would change the Netherlands. His prediction, she recounts in a column that’s the most-read thing on the website of the Dutch newspaper de Volkskrant, was that aging would “change the atmosphere and the mentality of the country.” For example:  "Things that come with being young -- taking risks, seizing opportunities, daring to do things, diving into the deep end without thought and without water wings, doing drugs, making noise, calling after girls on the street corner, embracing the strange and the new -- would become less common. The atmosphere would be determined by the concerns of the old: avoiding risk, being careful, preserving what you have, saying goodbye, keeping quiet, suspicion of the foreign, avoiding fuss and noise -- absolutely no fuss and noise! -- and seizing every possible occasion to complain at length about alleged fuss and noise. [...] It’s better in Dutch (the translation is mine, with a little help from Google), but it’s a really interesting premise nonetheless. Timely, too, on both sides of the Atlantic. Republican primary voters -- and voters in general, actually -- skew pretty old, so maybe this explains the extreme fearfulness and suspicion of foreigners that has permeated the presidential campaign so far. More generally, could the aging of the U.S. population be behind all sorts of other phenomena, from anti-growth activism in high-priced cities and suburbs to the decline in business dynamism and entrepreneurship that has beset the country since about 2000? [...] The scientific evidence on aging and risk aversion is mixed. Here’s a summing-up from a 2012 article by Dan Ariely and six other authors :
One study found that older individuals show more risk aversion in their life insurance coverage than younger individuals (Halek & Eisenhauer, 2001). Similarly, some studies found that older investors tend to own less risky stocks than younger investors (Hunter & Kemp, 2004; McInish, 1982), and have a smaller proportion of their assets in risky investments (Jianakoplos & Bernasek, 2006; Morin & Suarez, 1983; Palsson, 1996). [...]"

Commentary: "Saudis Buy More Weapons, Dismantle Welfare State, Wage War With U.S. Shale"  [12/30/15] Printer Friendly Version "Earlier today, we parsed Saudi Arabia’s budget report in order to determine if the kingdom’s fiscal nightmare was better or worse than market expectations.  As it turns out, it was better. This year’s deficit is expected to come in at around 15-16% of GDP, considerably below the 20% some analysts feared. For 2016, it looks as though the number should be somewhere in the neighborhood of 13%, broadly in line with expectations.  Be that as it may, the Saudis are boxed in as long as they insist on, i) keeping oil prices depressed, ii) maintaining the riyal peg, and iii) holding subsidies steady. If something doesn’t give with at least one of those imperatives, then the kingdom will continue to burn through its SAMA reserves which fell by $12.55 billion in November from October. The problem is that deviating from any of the points outlined above has consequences. Allowing oil prices to rise risks putting uneconomic US production back online, dropping the riyal peg would be a significant black swan event for markets and would represent a landmark break with three decades of precedent, and easing up on the subsidies risks creating the type of social unrest that occurred elsewhere in the region during the Arab Spring. Well it looks like when it came time to choose, the Saudis decided that the people will have to suffer because today, Saudi Arabia raised the price of domestic fuel by up to 40%. And that’s not all.  Prices for gas, diesel, kerosene, water and electricity were also raised. "The kingdom's finance ministry also said it was considering plans to raise charges on public services and apply value-added tax (VAT) in cooperation with other Gulf Arab nations," Mid East Eye notes, adding that "public revenues are the lowest since 2009, when oil prices dived as a result of the global financial crisis." For those who might have missed it, here’s some helpful commentary and visual from Deutsche Bank which give you some insight into the subsidies and underscore just how “generous” the monarchy had been [...] But even as the kingdom looks set to rollback the state assistance, one thing it's not skimping on is defense spending. Saudi Arabia increased its military and security spending in 2015 by about 20 billion riyals ($5.3 billion), Economy and Planning Minister Adel Fakieh told reporters on Monday.[...]  We highlighted Saudi defense spending on Sunday when we noted that US foreign arms sales soared 35% in 2014 thanks in no small part to orders from Riyadh. So while Saudi citizens may have to do a bit of belt tightening in the new year, the kingdom isn't about to ease off the regional war- mongering because if there's anything more critical than preserving domestic stability, it's rolling back Iranian influence in the Arabian Peninsula by pushing the Houthis out of Sana'a. Actually, that's not true. There's something even more critical than that: persisting in the war of attrition against the US shale complex which much be crushed at all costs, even if means making life harder for everyday Saudis so the monarchy can buy itself some budget breathing room. We shall see if there's an attendant backlash among the Saudi populace. Who knows, it might just be that Saudi citizens decide to heed Bakr al-Baghdadi's recent call for a popular revolt, because at the end of the day, what's more absurd than soaring gas prices in the country with the most oil in the world? [...]" 

Commentary: "The Credit Crunch Is Back: Banks Scramble To Collateralize Loans To Record Levels" Ø Hedge [12/29/15] Printer Friendly Version "One of the biggest quandaries of this cycle for the US economy has been the amount and growth of commercial bank loans. Virtually non-existent for the first three years of the centrally-planned new normal, something changed in 2012 at which point US bank loans, led by Commercial and Industrial or C&I lending growing at a double-digit pop, started to rise at an impressive pace, asking many to wonder: maybe the biggest driver for a sustainable economic recovery is in fact present, because where there is loan demand, there is velocity of money. A few years later, as the loan growth persisted with virtually no flow through to GDP growth, we - and others - wondered: we know there is a "source of funds", but what about the "use of funds" - how can banks be creating tens of billions in loans if virtually nothing was ending up in the broader economy? [...]     The first flashing red flag appeared last July, when we reported that companies were using secured bank debt to repurchase stock: a stunning, foolhardy development, comparable to taking out a mortgage on one's house and using the proceeds to buy deep out of the money calls on the S&P 500.[...] After scratching our heads for a few weeks afterward, we let the subject go: after all there is no way banks would be lending companies secured loans to use the proceeds to cash out existing stakeholders, in the process asset- stripping the corporation. This would mean that the loan officers at these banks are either criminally stupid, or corrupt and have been bribed by the borrower to close their eyes when signing the dotted line and wiring the funds. [...] According to the latest "Survey of Terms of Business Lending", the banks have finally woken up to the risk their billions in C&I loans issued to fund "financial engineering" are exposed to. The reaction: an unprecedented surge in loan collateralization demands - as the chart below shows, the percent of total loans secured by collateral has soared by nearly 50% in the past quarter to a record 55.9% from 37.9%, the highest ever, surpassing even the loan collateralization demands hit after the financial crisis, which peaked at 52.3%. Where does this sudden demand for collateral come from? [...]  Since syndication involves bank balance sheet retention risk (anything not sold remains on the bank books), and since loan funds have been recently slammed with near record outflows... leading to a historic plunge in the price of the leveraged loan index, as all of a sudden nobody wants any loan exposure and is selling anything that is not nailed down ... suddenly banks don't want any risk from residual loan exposure which they can't offload, and as a result are demanding companies pledge assets and otherwise collateralize whatever loans they issue (via bank syndication) "just in case." Said simply, the credit crunch is back. And the kicker: all this took place when ZIRP was still around. Now that both LIBOR and Prime have jumped following the Fed's rate hike, and now that financial conditions are far tighter than they were even back in October, expect collateralization demands to approach 100%, as a result of which C&A loan issuance will fall off a cliff as corporations, delighted to issue loans when collateral demands were at 25%, suddenly realize they have an all too real risk of seeing their assets "repoed" if and when the cash flow to satisfy interest payments suddenly dries up.[...]

MSM: "Western Australia Suffers “Greatest Revenue Shock Since Great Depression" [12/28/15] Printer Friendly Version  "Three announcements this week in Western Australia—once known as the country’s greatest resources “boom state”—underscore the extent to which the fallout from the 2008 financial breakdown is now hitting Australia with increasing severity. [...] As measured by State Final Demand, Western Australia’s once booming growth rate has gone into reverse, with the mid-year review again revising it down to -2.25 percent (compared to the May budget estimate of -1.25 percent). [...] More than 1,200 jobs have been axed from Chevron’s $US54 billion Gorgon liquefied natural gas (LNG) project off the state’s northwest coast in the lead-up to Christmas. Last Thursday and Friday, 530 electrical workers were laid off, in addition to about 700 others over the past two weeks, including boilermakers, pipe fitters, welders and trades assistants. Many of these workers were sacked, without notice, by SMSs, phone calls or notes slipped under the doors of their accommodation. Such methods have increasingly become the norm to terminate the services of the tens of thousands of “fly-in, fly-out” workers nationally who once relied on these projects for their livelihoods. Not only is Chevron’s contraction a particularly harsh pre-Christmas blow to thousands of workers and their families, who had been led to believe that the jobs would last until at least March. It points to the likely acceleration—driven by falling world oil and gas prices—of job losses on the seven large LNG projects that have been under construction in Australia for the past several years.[...] These developments further expose the long-cultivated myth of Australian exceptionalism, which depicted a “lucky country” that was somehow shielded from the crises of global capitalism. In 2010, The Historical and International Foundations of the Socialist Equality Party, the SEP’s founding document, emphasized: “Throughout the history of the Australian workers’ movement, the Labor and trade union bureaucracies, together with the various ex-radical organisations, have promoted the myth of Australian exceptionalism as a counter to the development of socialist consciousness. In the latter part of the 19th century and the early part of the 20th, they characterised Australia as the ‘workingman’s paradise,’ where the laws of the class struggle did not apply.“ Today, in the midst of the greatest economic and financial crisis in three-quarters of a century, the illusion is once again being promoted that Australia is ‘exceptional’ and has ‘weathered’ the storm. While the first phase of the global financial crisis that began in 2007–2008 has passed, neither the world economy nor Australian capitalism can return to the past. A vast ‘restructuring’ of economic and class relations is underway on a global scale that will propel the working class into political struggle.” The sharp reversal that has confronted Australian capitalism over the past two years has already brought forward a deepening assault on workers’ jobs and living standards. This has been spearheaded by mass retrenchments and closures in the mining, auto and steel industries, together with major budget cutbacks to health and welfare provisions, widespread privatisations and cuts to the public sector, and a drive to slash wage levels, including the abolition of after-hours penalty rates.[...]"

Quotes: "And thus, overcoming our temerity, let each man choose: will he remain a witting servant of the lies, or has the time come for him to stand straight as an honest man, worthy of the respect of his children and contemporaries?" - Alexander Solzhenitsyn

Commentary: "The Mystery Of Dubai's Vaporized Gold: The Plot Thickens" Ø Hedge [12/27/15] Printer Friendly Version "Earlier this week, we told a fascinating story about an unprecedented, multi-year smuggling ring involving Turkey, Iran, and Dubai (as well as China, Russia and countless other nations) which saw corruption reaching to the very top of the political and financial establishment: from president Erdogan in Turkey, to one of Turkey's richest people, Iran-born Riza Sarraf, to Sheikh Sultan Bin Khalifa Al Nahyan, the son of the ruler of Abu Dhabi and one of the world's richest people. The smuggled object in question was gold, billions of dollars worth of gold. The focus of the story was the previously unknown Dubai gold trading house, Gold.AE, until recently managed by one Mohammed Abu-Alhaj, which as we showed was the primary conduit by which Turkish physical gold found its way "legally" in Dubai, from where it subsequently left for Iran but not before pocketing millions in "commissions." As we reported, Gold.AE - a subsidiary of Gold Holding, the largest gold-focused investment holding company headquartered in Dubai - and the company perhaps best known for launching gold ATMs in the Emirates back in 2010... [...]"  Related: See below

Commentary: "And It's Gone... It's All Gone" - The One Gold Scandal That Goes To The Very Top" Ø Hedge [12/26/15] Printer Friendly Version "Long before Turkey was flagrantly arming and funding of the CIA-created "terrorist organization" known as ISIS, there was another, far more elaborate way in which Turkey was flaunting international sanctions against an ostracized state - in this case Iran - which involved an epic gold smuggling triangle of Hollywood-thriller proportions, all made possible thanks to the United Arab Emirate city of Dubai. Best known known for its luxury shopping, ultramodern architecture including the world's tallest building, a lively nightlife scene, and a facade of openness and decorum, what Dubai is less known for is its unprecedented seedy underbelly of corruption and untouched criminality among the handful of billionaire oligarchs, princes, sheiks and sultans, who quietly dominate the local (and global) power and financial structure. But first, a little history. It may seem like a distant memory now, but just a few short years ago, instead of a close ally of Barack Obama, Iran was a pariah state subject to international financial sanctions due to its nuclear program development, one which Israel had repeatedly (and famously) threatened would attack preemptively to prevent Iran from obtaining a nuclear weapon. Iran, of course, had no choice but to find ways to keep its economy going, and in order to circumvent these sanctions, it resorted to the oldest form of trade known to man: gold. This, in itself, is not surprising. What is surprising is how and with whom Iran collaborated to breach the international embargo in order to obtain this valuable and much needed gold, which it could then barter with other countries - notably those along the Pacific Rim - in exchange for any and all needed products and services. A Reuters article from October 23, 2012 explained, in broad terms, just how Iran's intricate smuggling operation worked: [...]  So three years ago, Turkey was purchasing Iran oil and paying in gold. Now it is purchasing ISIS oil and paying in dollars, for the simple reason that there is no banking embargo against the Islamic State like there was against Iran in 2012. One almost wonders why the international community was far stricter with Iran than it is with ISIS now. Anyway, continuing on, we present: the Dubai connection: [...] However, instead of suddenly having a craving for Turkish gold, Dubai was merely a middleman which would then resell Turkey's gold to Iran, in exchange for a very generous commission.[...] And as everyone knows, what better way to "lose" gold at a moment's notice than to be involved in an "unfortunate shipping accident"...[...] Fear not: if the Erdogan family was guaranteed, say 5% of the total transaction price, it would gladly close its eyes, even if it meant the Ayatollah singing lullabies and war chants to Assad in his bedroom. But why gold? Simple: while Iran's banks had been locked out of SWIFT international money transfer system (until mid-2015 when Obama's historic nuclear deal with Iran was announced and let Iran back into the global financial community), and commerce was virtually impossible in fiat currency terms, the UN sanctions did not prohibit most forms of trade. As a result there was no suggestion that the gold trade involving Dubai was violating international sanctions. In fact, the west tacitly encouraged, and Turkey latched on to this great source of trade arbitrage, and unbridled corruption with both hands.[...]"  Note: A great article with extensive, detailed research. Another great article: Related: "Why 'The Regime' Hates Gold" Printer Friendly Version   

Concepts and Practices: "Switzerland To Vote On Ending Fractional Reserve Banking" Ø Hedge [12/25/15] Printer Friendly Version "One year ago (and just two months before the shocking announcement the Swiss Franc's peg to the Euro would end, dramatically revaluing the currency, and leading to massive FX losses around the globe and for the Swiss National Bank) the Swiss held a referendum whether to demand that their central bank should convert 20% of its reserves into gold, up from 7% currently. After the early polls showed the Yes vote taking a surprising lead, the Diebold machines kicked in and the result was a sweeping victory for the No vote, without a single canton voting for sound money. [...]  Ironically, this unexpected nonchallance about the Swiss central bank's balance sheet by one of Europe's more responsible nations took place just before the same bank announced CHF30 billions in losses on its long EUR positions following the revaluation of the CHF. It also took place when not just Germany, but the Netherlands and Austria announced they would repatriate a major portion of their gold in a move which, all spin aside, signals rising concerns about the existing monetary system. We wonder if the Swiss have changed their mind about just how prudent it is to have their central bank operate as one of the world's largest - and worst - after its CHF 30 billion loss in Q1 FX traders, and hedge funds with $94 billion in stock holdings, since then. We may soon have the answer, because in what is shaping up to be another historic referendum on the treatment of money, earlier today the Swiss Federal Government confirmed that it had received enough signatures and would hold a referendum as part of the so-called "Vollgeld", or Full Money Initiative, also known as the Campaign for Monetary Reform, which seeks to ban commercial banks from creating money, and which calls for the central bank to be given sole power to create the money in the financial system. In other words, an initiative to ban fractional reserve banking, and revert to a 100% reserve. [...]   As reports, after 111,763 signatures urging a referendum were submitted, of which 110,955 valid, the Federal Chancellery announced on Thursday that the popular vote would take place. [...] According to the Telegraph, unlike the gold vote - which was seen as a precursor to re-introducing the Gold Standard in Switzerland - economists have been more supportive of the idea of "sovereign money" as a way to stabilize the economy and prevent excess credit growth. A date for the Swiss referendum has not been set. If the vote passes, and if Swiss banks are barred from creating deposits (by way of loans), it would shake to the core the entire modern financial system, which these days is exclusively reliant on runaway fractionalization of sound money, as more and more layers are added to the top of the Exter's Pyramid, as the only possible "growth" left in a world that has never seen so much debt, is to find new and creative ways to borrow from the future, with banks getting all the benefits and stuffing taxpayers when the inevitable collapse happens.[...]"  

Commentary: "Chemtrails, Weather Derivatives And Financial Market Manipulation" [12/21/15] Printer Friendly Version "A key question in many investigations is: Who benefits? In Latin we say: Cui bono? So, as we continue to investigate chemtrails and geoengineering, let us inquire as to who benefits from this New Manhattan Project. What might be the advantages of conducting a global weather modification project such as this? This article examines the New Manhattan Project’s motives. [...] Weather Derivatives:  Since the heady days of the Travelers’ first excursions into weather related financial products, other weather related financial markets and products have arisen. The first of two markets to be discussed here is the weather derivatives market. The other market is the catastrophe reinsurance market which will be discussed shortly. In his paper “Why in the World Are They Spraying?,” journalist Michael Murphy floated the idea that chemtrails are sprayed (at least in part) in order to manipulate the weather derivatives market. He posted his story in October of 2011. He may not be too far off the mark as an investigation detailed here leads us to many questionable situations, strange bedfellows and none other than those legends of corruption and waste, Enron. The thoroughly disgraced and vilified corporation was the founder of the market. Would you put it past Enron?"  Weather derivatives are financial instruments (options, futures, and options on futures) anyone can buy that either pay off or don’t pay off according to recorded atmospheric conditions such as temperature and rainfall. These instruments are mostly traded on the Chicago Mercantile Exchange (CME). They are also traded on smaller ‘over the counter’ (OTC) markets. Weather derivatives are usually structured as swaps, futures, and call/put options. Although they are available for sunshine hours, snowfall, rain, wind speed and many other geophysical conditions, the most common type of weather derivative by far is based on temperature. According to industry experts, temperature based weather derivatives account for 75-99% of all weather derivatives sold. Atmospheric conditions are recorded and published by authorized organizations. This is how temperature based weather derivatives work. Indices take a location’s daily average temperature, then a number is determined by how much that day’s average temperature deviates from 65 degrees Fahrenheit (or 18 degrees Celsius outside the U.S.). The number deduced determines the derivative’s value and can be aggregated over a period of hours, days, weeks, months or seasons. Other indices simply aggregate average daily temperatures. In short, the day’s average temperature determines the derivative’s value. You can bet that temperatures will be above or below the long term daily average for a particular hour, date or group of dates. The first weather derivative transactions were conducted over the counter in 1997 between Willis Group Holdings, Koch Industries, Pxre Reinsurance Company and Enron. These transactions followed the deregulation of the energy market in the United States. The weather derivatives market was greatly expanded in 1999 when weather derivatives began trading on the Chicago Mercantile Exchange.[...] Discussed: A History of Weather Derivatives: [...]"

MSM: "Lawmaker: Russia Will Charge Back $3 Bln Debt From Ukraine In Court" [12/21/15] Printer Friendly Version "Chairman of the State Duma Committee for Economic Policy and Entrepreneurship, Anatoly Aksakov is confident that the international court will issue verdict in favor of Russia in its dispute over $3 bln debt with Ukraine. Earlier on Friday, the Ukrainian cabinet of ministers imposed a moratorium on payment of debt to Russia. "Of course, now our government will have to go to court. I am sure that we will win the case and we will charge back the money. If we don’t charge it back, Ukraine will have to declare default on its debts. And in this case problems will emerge for many creditors who gave money to Ukraine and continue to do it," he said in an interview with Rossiya 24 TV channel. "The court decision may be received next year, most likely in the second half of the next year. As I know, our lawyers have already taken some steps in this direction and after Ukraine officially said it is not going to return the money, they will submit documents to the international court," Aksakov said. In December 2013, Russian President Vladimir Putin and the then Ukrainian President Viktor Yanukovich reached an agreement that Moscow would extend a 15 billion U.S. dollar loan to Kiev through placing Ukrainian securities. Under the deal, three-billion-U.S. dollar worth of bonds were listed on the Irish Stock Exchange on December 20, 2013 and bought by Russia from its National Welfare Fund. Later on, Ukraine tried to challenge the loan’s status and reduce it to that of commercial credits subject to restructuring. Russia objected to this approach. However its suggestion that this loan be restructured under reliable Western guarantees was ignored. In November 2015, Putin said Russia was ready to restructure Ukraine’s debt in case the United States, the European Union or any big international financial institute gave its guarantees to Russia. No guarantees were granted. [...]"  

MSM: "Ukraine Defaults On $3bn Eurobond To Russia - Max Keiser Comments" [12/20/15] [5:02] "Ukraine has imposed a moratorium on the $3 billion Russian debt repayment, said the country’s Prime Minister Arseny Yatsenyuk at a cabinet meeting on Friday. The announcement comes ahead of the December 20 deadline for the debt redemption. [...]"  Related: "IMF ‘Forgives’ Ukraine’s Debt To Russia" Printer Friendly Version "On December 8, the IMF’s Chief Spokesman Gerry Rice sent a note saying: “The IMF’s Executive Board met today and agreed to change the current policy on non-toleration of arrears to official creditors. We will provide details on the scope and rationale for this policy change in the next day or so.” Since 1947 when it really started operations, the World Bank has acted as a branch of the U.S. Defense Department, from its first major chairman John J. McCloy through Robert McNamara to Robert Zoellick and neocon Paul Wolfowitz.  From the outset, it has promoted U.S. exports – especially farm exports – by steering Third World countries to produce plantation crops rather than feeding their own populations. (They are to import U.S. grain.) But it has felt obliged to wrap its U.S. export promotion and support for the dollar area in an ostensibly internationalist rhetoric, as if what’s good for the United States is good for the world. The IMF has now been drawn into the U.S. Cold War orbit. On Tuesday it made a radical decision to dismantle the condition that had integrated the global financial system for the past half century. In the past, it has been able to take the lead in organizing bailout packages for governments by getting other creditor nations – headed by the United States, Germany and Japan – to participate. The creditor leverage that the IMF has used is that if a nation is in financial arrears to any government, it cannot qualify for an IMF loan – and hence, for packages involving other governments. This has been the system by which the dollarized global financial system has worked for half a century. The beneficiaries have been creditors in US dollars. [...]"  

Quotes: "History is the sum total of things that could have been avoided." --German statesman Konrad Adenauer

MSM: "IMF Says It May Freeze Aid To Ukraine If Kiev Does Not Comply With Requirements" [12/19/15] Printer Friendly Version "In particular, the budget of Ukraine should be approved in compliance with the requirements of the IMF, its first deputy director David Lipton says [...]  The IMF may freeze the Western financial assistance to Ukraine if the Ukrainian government acts not in compliance with the fund’s requirements, according to a statement made by IMF's first deputy director David Lipton on Friday. In particular, the budget of Ukraine should be approved in compliance with the requirements of the IMF, Lipton said. He stressed that the IMF is concerned about the discussions in the Ukrainian parliament, which effectively rejected the government proposal for a new tax code and the draft budget for 2016. Ukraine will have to cut social spending if it wants to continue receiving assistance from the IMF, Pavel Nefidov, director of the Financial and Banking Council of CIS said in an interview with TASS. [...] Konstantin Bondarenko, head of the Institute of Ukrainian politics, said that Ukraine will have to comply fully with the requirements of the IMF. "In April 2014, the government of Yatsenyuk announced that it would meet all the requirements of the IMF, making the Ukrainian economy absolutely dependent on the requirements of the fund. Today, the IMF is taking fairly draconian measures against the Ukraine. The terms of loans are very tough. But that is the choice that was made by the government and breaking relations with the IMF would mean even greater losses for the Ukrainian economy, than to be under the fund’s thumb," Bondarenko said.[...]" Related: "IMF Chief Lagarde To Face Trial In France Corruption Case" Printer Friendly Version "A French court has ordered Christine Lagarde, the head of the International Monetary Fund (IMF), to face trial over her role in a pay-out of some 400 million euros ($434 million) to businessman Bernard Tapie, her lawyer said on Thursday. The case will be heard by magistrates at the Cour de justice de la Republique – which judges ministers for crimes in office, France’s prosecutor general confirmed. The decision came despite the prosecutor’s recommendation in September that investigations be dropped against Lagarde for alleged negligence in the affair while she was France’s finance minister. Lagarde’s lawyer, Yves Repiquet, said he would be recommending that she appeal against the decision, which would bring her to court over an affair that dates back more than 20 years. [...]"  

Concepts and Practices: "All Of The World’s Money And Markets In One Visualization" [12/19/15] "In this data visualization of the world’s total money supply, we wanted to not only compare the different definitions of money, but to also show powerful context for this information. That’s why we’ve also added in recognizable benchmarks such as the wealth of the richest people in the world, the market capitalizations of the largest publicly-traded companies, the value of all stock markets, and the total of all global debt. The end result is a hierarchy of information that ranges from some of the smallest markets (Bitcoin = $5 billion, Silver above-ground stock = $14 billion) to the world’s largest markets (Derivatives on a notional contract basis = somewhere in the range of $630 trillion to $1.2 quadrillion). [...]" 

MSM: "Identity Theft Company LifeLock Again Failed To Keep Identities Protected, Must Pay $100M" [12/19/15] "Five months after federal and state regulators accused identity theft protection company LifeLock of violating a 2010 settlement in which it paid $11 million for allegedly using false claims regarding effectiveness of its services, the company has been ordered to pay $100 million in penalties and refunds for once again misleading consumers. The Federal Trade Commission announced the new settlement [PDF] today after finding that from at least October 2012 to March 2014, LifeLock violated four components of its previous agreement. Under the previous deal, LifeLock was barred from making deceptive claims about services and was required to take more stringent measures to safeguard the personal information it collects from customers. LifeLock had essentially promised not to misrepresent that its services offer “absolute protection against identity theft because there is, unfortunately, no foolproof way to avoid ID theft.” But those are promises LifeLock hasn’t abided by, the FTC claims in its recently filed order. According to the FTC, LifeLock failed to establish and maintain a comprehensive information security program to protect users’ sensitive personal information, including their social security, credit card and bank account numbers. [...]"  

Commentary: "Martin Shkreli Arrested For Securities Fraud, Released On $5 MM Bond" Ø Hedge [12/18/15] Printer Friendly Version  "Shkreli, the baby faced, former Jim Cramer protege and serial biotech mogul who famously raised the price of a toxoplasmosis drug by 5000% in September, igniting a media and political firestorm in the process, is accused of using Retrophin (a company he founded and ran until he was ousted by the board) as a kind of slush fund. As an aside, you’re reminded that Retrophin once raised the price of a drug used to treat a rare condition that causes reoccurring kidney stones from $1.50 a pill to $30.  Shkreli was released on a $5 million bond after a hearing Thursday, and had his travel restricted to parts of New York. It was not immediately clear how he pleaded to the charges. Evan Greebel, whom the SEC said was Shkreli's lawyer, also faces a count of wire fraud conspiracy. He was arrested Thursday and released on a $1 million bail. It is unclear if somehow Shkreli got 2.5x leverage on repackaged Collateralized Wu Tang Obligations. [...] At one point, Shkreli allegedly decided to reclassify a $900,000 investment MSMB made in Retrophin as a loan. So basically, he invested in himself and then decided later that he had actually loaned himself money and needed to pay himself back. Retrophin did indeed pay back the “borrowings” and Shkreli subsequently used the funds to “settle another unrelated legal dispute.” As Bloomberg goes on to note, “The Securities and Exchange Commission, which according to court documents opened an investigation into Shkreli in 2012, is expected to file a parallel civil complaint against him, according to people familiar with the matter.” While Shkreli is known for laughing in the face of criticism and ridicule, this one might be hard to shrug off. It’s at least possible he could end up banned from running a public company, meaning Turing Pharmaceuticals and KaloBios would need to find new executives (maybe Joe Campbell's KBIO short will pay off after all).[...]" 

MSM: "UN Security Council Unanimously Adopts Resolution Targeting ISIS Finances" [12/18/15] Printer Friendly Version "The UN Security Council has passed a resolution strengthening legal measures against those doing business with terrorist groups. It targets mainly Islamic State militants (IS, formerly ISIS/ISIL). The resolution is the result of a joint effort by Russia and the US, which are both leading anti-IS campaigns in Syria. It stems from a UNSC action taken in February against illegal trafficking of antiquities from Syria, which threatened sanctions on anyone buying oil from IS or the Al-Qaeda-linked Al-Nusra Front and urged that kidnap ransoms not be paid. Before the Council meeting on Thursday, Russian UN envoy Vitaly Churkin told reporters that one of the main objectives of the new resolution is to “circle IS as a separate, most vital terrorist threat.” “Formerly… the Security Council’s documents referred to IS as one of Al Qaeda’s divisions,” he said. “Now the document offers expanded criteria of listing, which makes it possible to impose limitations on any individuals or corporates smudged by relations with IS.” The key objective of the new resolution, according to Churkin, is the “enforcement of a framework to reveal and disrupt illegal financing of IS and groups related to it by means of trade in oil, artifacts, and other illegal sources.” “The countries did have respective obligations well before this, but, unfortunately, those obligations have not been observed by everyone and constantly,” he said. Under the revised document, UN monitoring and sanction mechanisms “will be focused clearly on eradication of those developments.”[...]"  

Commentary: "We Disappeared Some Folks: Details Emerge In China's Sweeping Probe Of Stock Market Rescue" [12/18/15] Printer Friendly Version  "It was exactly one week ago today when we reported that Guo Guangchang, a self-styled Chinese Warren Buffett worth some $7 billion, had disappeared.  For those who follow developments in China’s capital markets, it was obvious what had happened. Guo was swept up in Xi’s campaign to root out misconduct tied to the country’s equity market meltdown and subsequent government-engineered rescue effort. Dubbed “kill the chicken to scare the monkey,” the witch hunt has ensnared a number of high profile government officials and bankers tied to Beijing’s plunge protection “national” team, which poured in excess of CNY1.5 trillion into Chinese stocks in Q3 in a desperate attempt to push back against an epic unwind in the half dozen backdoor margin lending channels that helped push stocks to nosebleed valuations earlier this year. Guo’s detention (he was allegedly met by authorities when he arrived in Shanghai on a flight from Hong Kong) sent shockwaves through Chinese markets. “His disappearance will fuel anxieties in the private sector that the anti-corruption crackdown launched by President Xi Jinping three years ago is being extended to high-profile entrepreneurs,” FT noted last week. [...]"  Related: See below "Market Panics As "China's Warren Buffett" Detained In "Richter Scale 9 Event" Ø Hedge [12/13/15] 

Commentary: "Big Banks Caught Using Credit Default Swaps To Destroy Nations" [12/17/15] Printer Friendly Version "At the beginning of 2010, readers were presented with what was (at the time) merely a theory. The Big Bank crime syndicate was engaged in the serial manipulation of credit default swaps, in order to (among other things) destroy the economies of entire nations. It’s one of the reasons these “financial weapons of mass destruction” ( Warren Buffett ) were illegal in the U.S. for roughly 100 years, banned under anti-gambling statutes. The theory was supported by a combination of compelling empirical evidence and logical deduction (i.e. “circumstantial evidence”) – roughly the same evidentiary basis by which we obtain most of our criminal convictions in our courts of law. The difference here is that with our governments having abandoned the Rule of Law, there was no one ready or willing to adjudicate over such evidence. [...]  Readers were presented with a detailed explanation of the tag-team of fraud which made possible such extreme manipulation of interest rates. It begins with manipulation of the credit default swap “market,” a crooked book-making operation where the “bookies” taking the bets not only place most of the bets themselves, they also adjudicate on any disputes on the settlement of bets. More pure fraud . First the Big Banks manipulate credit default swap prices higher in the debt market of the intended victim. Then the tag-team operation moves to the corporate media, another tentacle of the crime syndicate which readers know as the One Bank . The media mouthpieces gasp-and-moan in mock anguish about the supposed “increased risk” in the debt market of the victim, while nothing has changed except the manipulative betting of the Big Bank crime syndicate. The last tag-team partner in this chain of economic terrorism is the so-called “credit rating agencies.” These agencies claim to assess the manipulative betting in the CDS market, and the Chicken Little hysteria from the mainstream media, and then downgrade the debt of the victim’s market on the basis of a supposed “change in risk” – when, still, nothing has changed in the victim’s economy. The downgrade on the victim’s debt results in automatic, upward revisions in the interest which the victim must pay on all of its debt. With essentially no regulation of the crime-saturated “derivatives market,” the crime syndicate could (and did) repeat this cycle of manipulation as often as was necessary to officially bankrupt Greece. Via the economic terrorism of credit default swap manipulation alone, the Wall Street terrorists were able to drive interest payments on Greece’s debt higher by roughly a factor of 600%. Meanwhile, U.S. interest rates were manipulated in the opposite direction. What would have happened if those on Wall Street manipulated U.S. interest rates to 30% (the same level as Greece), resulting in U.S. interest payments rising by more than 1,000%? Just to pay the interest on its debt (to the same, Big Bank crime syndicate), the U.S. government would have to begin by shutting down the entire government, and disbanding the U.S. military, in order to bring spending down to zero. Then it would have to double everyone’s taxes in order to come up with the full payments to the parasitic bankers. And then, in a few weeks, the U.S. economy would totally collapse – just as Greece’s economy did in 2011. This is no longer a “conspiracy theory,” however, it is now another conspiracy fact, as shown by this headline: "Banks Said to Face SEC Probe Into Possible Credit Default Swap Collusion". First we see the (reluctant) “probe.” Then we see the even more-reluctant token prosecution. Then we see the Big Banks handed their token “punishment”: microscopic fines (in relation to the size of the crimes). And then the same Big Banks repeat the same crimes, and are caught again and again [...]"  

MSM: "U.S. Stocks Hold Gain, Bonds Fluctuate With Dollar As Fed Hikes" [12/16/15] Printer Friendly Version "U.S. stocks maintained gains after the Federal Reserve ended seven years of near-zero interest rates, while Treasuries and the dollar fluctuated as the central bank reaffirmed subsequent tightening will be gradual over the next year. The Standard & Poor’s 500 Index extended the biggest three-day rally in a month as the Fed raised its target rate by 25 basis points. The Bloomberg Dollar Spot Index erased gains that pushed it near a 10-year high, while two-year Treasury notes pared losses as officials signaled four quarter-point increases next year. Emerging-market stocks maintained a rally, and gold advanced. Crude slumped to $36 a barrel. Financial markets, reacting to the first rate hike since before the 2008 recession, reflected growing conviction among investors that the U.S. economy is strong enough to withstand higher borrowing costs even as the threat of inflation increases. American shares are in the midst of the biggest three-day rally in a month, reversing losses from last week, when the S&P 500 tumbled. [...]"   Related: "Fed Removes Reverse Repo Cap to Ensure Control Over Rates" Printer Friendly Version "The Federal Reserve removed the daily limit on aggregate borrowings through its overnight reverse repurchase facility, previously set at $300 billion, in a step designed to make sure the benchmark interest rate stays inside its new target range. The size of the facility will be "limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day," the Fed said in a statement on Wednesday in Washington. [...]"  "Fed Reveals Rate Hike "Plumbing" Details" Printer Friendly Version "...What is missing from the analysis is how the Fed will approach the fact that securities pledged to the Fed remain outside of the traditional repo pathway, and thus the liquidity shortage among the treasury market is likely to continue if not worsen."

Commentary: "Futures Surge, Oil Rebounds As Fed Starts Historic Two-Day "Rate Hike" Meeting" Ø Hedge [12/16/15] Printer Friendly Version "The start of the Fed's most eagerly awaited two-day policy meeting in years has finally arrived with the market expecting Yellen to announce the first 25 bps rate hike in 9 years tomorrow with nearly 80% probability, and so far US equity futures are enjoying a last minute relief rally, while emerging market stocks rose for the first day in ten after the longest losing run since June. Europe's Stoxx 600 Index has also rebounded from a five-day losing streak, the worst in over four months.  [...]"  Related: "3 Charts The Fed Should Consider"   "This week, the Fed will meet to decide the “fate of the universe,” as they are highly anticipated to announce the first rate hike in a decade. This is a momentous occasion as it marks the end of the “ultra-accommodative” monetary policy that has been the primary driver behind asset prices since the end of the financial crisis as shown in the chart below. Importantly, note that the market has struggled, or corrected, whenever liquidity support was absent from the market. [...]"| See also below 

Commentary: "The Fed And The European Central Bank Part Ways On Monetary Policy. Now What?" [12/16/15] Printer Friendly Version " ... Ever since the crisis thrust central banks center stage as " the only players with the resources to fight global recession", their actions have become more controversial and politically sensitive. The Fed’s first rate-hike since 2006 is fraught with political intrigue in the U.S. Conservatives who love to bash the Fed say it is long past time for the central bank to remove itself as the dominant economic policy making machine in Washington. Many on the right will likely dismiss the rate hike as coming far too late. And if markets react badly and the economy takes a significant hit, it will give conservatives even more ammunition to criticize the Fed and push efforts in Congress to open the central bank to more political scrutiny while curtailing some of its powers. “The Fed should have raised interest rates in 2010 and 2011 and if they did that they would actually be in a position to cut them today,” said James Rickards, a central bank critic and chief global strategist at West Shore Funds. “The Fed is on the brink of committing a historic blunder that may rank with the mistakes it made in 1927 and 1929. By raising into weakness, they will likely cause a recession.” The Fed move also has major implications for the 2016 presidential campaign. Democratic front-runner Hillary Clinton is counting on an improving economy and rising wages to help drive her into the White House next year. The Fed’s gentle rate hikes — and Yellen’s promise to pause at any sign of trouble — may not change that dynamic. [...] What will the Fed do after Wednesday? That’s what most market participants would really like to know. Unlike previous rate-hiking cycles, this time U.S. economic growth does not appear to be on a solid path. Many economists believe the Fed is raising rates now so it has room to cut them again should the economy enter a rough patch in 2016. Michael Pento, an outspoken Fed critic, is not convinced. “It’s like saying that someone who is freezing to death should take off their coat so they can put it back on while they are close to dying,” said Pento, president of Pento Portfolio Strategies, a money management and research firm. Others, however, believe that if the unemployment and wage growth data remain strong, the Fed will embark on a sustained period of rate hikes which could include three or four more moves in 2016.[...] Long-suffering Wall Street executives have been waiting for days like Wednesday for a long time. By raising rates, the Fed will help a key driver of financial groups’ profitability: their lending margins — the difference between the rate at which they borrow and the one at which they lend. That number is now hovering around 11-year-lows, pinching profits and shareholders returns. One, small rate increase may not be enough to boost bank profits at a time of increased regulation, slow trading in fixed-income products and market turbulence. Executives caution that the Fed would have to move more aggressively before banks feel some relief from years of crimped margins and can restart their lending engines. For European banks, the Fed’s decision will be less important since few have ventured into the U.S. lending markets. With troubled European sovereign debt now mostly off their books, the main worry for lenders based in London and on the Continent will be the bleak growth prospects in the eurozone.[...]" Related: James Howard Kunstler summarized what we they're currently facing: " Equities barfed nearly four percent just last week, credit is crumbling (nobody wants to lend), junk bonds are tanking (as defaults loom), currencies all around the world are crashing, hedge funds can’t give investors their money back, “liquidity” is AWOL (no buyers for janky securities), commodities are in freefall, oil is going so deep into the sub-basement of value that the industry may never recover, international trade is evaporating, the president is doing everything possible in Syria to start World War Three, and the monster called globalism is lying in its coffin with a stake pointed over its heart."[...] |  "This Is What A Financial Crisis Looks Like" Printer Friendly Version "Just within the past few days, three major high yield funds have completely imploded, and panic is spreading rapidly on Wall Street. Funds run by Third Avenue Management and Stone Lion Capital Partners have suspended payments to investors, and a fund run by Lucidus Capital Partners has liquidated its entire portfolio. We are witnessing a race for the exits unlike anything that we have seen since the great financial crash of 2008, and many of those that choose to hesitate are going to end up getting totally wiped out. In case you are wondering, this is what a financial crisis looks like. In 2008, other global stock markets started to tumble, then junk bonds began to crash, and finally U.S. stocks followed. The exact same pattern is playing out again, and the carnage that we have seen so far is just the tip of the iceberg. [...]"  

Max Keiser: "Reinventing Banking: From Russia To Iceland To Ecuador" [12/15/15] Printer Friendly Version "Global developments in finance and geopolitics are prompting a rethinking of the structure of banking and of the nature of money itself. Among other interesting news items: • In Russia, vulnerability to Western sanctions has led to proposals for a banking system that is not only independent of the West but is based on different design principles. • In Iceland, the booms and busts culminating in the banking crisis of 2008-09 have prompted lawmakers to consider a plan to remove the power to create money from private banks. • In Ireland, Iceland and the UK, a recession-induced shortage of local credit has prompted proposals for a system of public interest banks on the model of the Sparkassen of Germany. • In Ecuador, the central bank is responding to a shortage of US dollars (the official Ecuadorian currency) by issuing digital dollars through accounts to which everyone has access, effectively making it a bank of the people. [...] Discussed: • Developments in Russia • Iceland’s Radical Money Plan • Public Banking Initiatives in Iceland, Ireland and the UK • Ecuador’s Dinero Electronico: A National Digital Currency • Banking Moves into the 21st Century [...] The catastrophic failures of the Western banking system mandate a new vision. These transformations, current and proposed, are constructive steps toward streamlining the banking system, eliminating the risks that have devastated individuals and governments, democratizing money, and promoting sustainable and prosperous economies. They also raise some provocative questions: • Would issuing “quantitative easing” to the tune of 20 trillion rubles for Russian development and trade trigger hyperinflation? • Could merging the Iceland version of the Chicago Plan with a public banking initiative return the power to create money to the public without collapsing credit? • How does the Ecuadorian national digital currency mesh with the “war on cash” underway in Europe? These and related questions will be explored in later articles.[...]" 

MSM: "World Markets Jittery Ahead Of Fed Meeting" [12/15/15] Printer Friendly Version "Currencies and stocks in major Latin American markets fell on open Monday as investors braced for an expected US Federal Reserve interest rate hike. Brazil’s real and Colombia’s peso both slid at least 0.8 per cent on fears that a rise in interest rates would lure investors back to the US. [...]"   Related: "December 14th To 18th: A Week Of Reckoning For Global Stocks If The Fed Hikes Interest Rates?" Printer Friendly Version  

Commentary: "Chinese Officials Admit To "Significantly Faking And Overstating" Economic Data" Ø Hedge [12/15/15] Printer Friendly Version  "Slowly all the wheels of the legacy propaganda narrative are falling off, only this time dealing not with some ridiculous economic "recovery" tripe (for those still confused, the global economy just suffered its worst USD-denominated GDP collapse in 50 years), but with the credibility of Chinese data, which most have known is completely fabricated, only there was never an actual admission from within. Now there is. [...]  Why? As a staff member in the Jilin provincial finance department, who asked not to be identified, told China Daily that in past years, local officials competed each other to lure external investment projects. They reported the promised investment value, whether it had been achieved or not, as the investment figure. So the bigger the "reported" growth, the higher the likelihood of being awarded the project, which in turn means millions in government funds being directly embezzled by corrupt local officials, money which would promptly then end up in some duplex in NYC, San Fran or Vancouver. But why is all this emerging now? Simple: it is all the fabricated data's fault why the current growth (or rather, economic collapse) is so terrible: "If the past data had not been inflated, the current growth figures would not show such a precipitous fall," one official was quoted as saying. Brilliant: if only we hadn't made up ridiculously high data in the past, the comps to one, two or more years ago would not look so terrible. What was left unsaid is that if "data had not been inflated", it would be negative and instead of 7% GDP growth we would be asking just how big China's GDP contraction will be this year. We bring all this up in the aftermath of this weekend's "strong" Chinese industrial production and retail sales data because it too is completely fabricated and goal-oriented. Only now there is no doubt. [...]"  

MSM: "Energy-Related Junk Bonds In Crisis Mode" [12/15/15] Printer Friendly Version "...This is merely the tip of the iceberg. Standard & Poor’s Rating Service recently warned that 50 percent of energy junk bonds could default, along with 72 percent of bonds in the metals, mining and steel industries. Distressed debt in the US is at its highest level since the official end of the recession in June of 2009. Corporate defaults have topped 100 this year, nearly one-third being oil, gas or energy companies. There have been 40 bankruptcy filings by North American oil and gas producers this year, and more than $1 trillion in US corporate debt has been downgraded. The mounting crisis in the junk bond market has profound and convulsive implications for the entire credit system, in the US and internationally, because these bonds, particularly those tied to the oil and energy industry, have mushroomed in volume since the collapse of the subprime mortgage bubble in 2007-2008. [...] The decay of American and world capitalism that underlies the mounting crisis is reflected in the rise to the top of an underclass of financial parasites. One representative is the founder of Third Avenue Management, Martin Whitman, revered on Wall Street as the dean of “vulture investors.” Whitman has assembled a multi-billion-dollar fortune by gambling on distressed assets. The junk bond crisis exemplifies the diseased state of capitalism that finds expression in the political superstructure in the ever-rising tide of militarism and war, the drive toward dictatorship and the relentless assault on the living conditions of the broad mass of working people. The tectonic shifts at the economic base of society sent shockwaves throughout the political system, intensifying class tensions and conflicts between the major powers.[...]"  

MSM: "Corporate Insiders Dumping Stock - Profit Growth Turned Negative Beginning In Q2 April 2015" [12/14/15] Printer Friendly Version  "Corporate insiders have been selling their shares at near-record levels, and according to some, this could be a sign for outside investors to start selling as well. Investment research firm TrimTabs reported on Wednesday that insider selling reached $7.6 billion for the month of November, the fourth-highest monthly level on record. For some this may be an alarming indicator, as corporate insiders tend to have more knowledge than public shareholders on the inner workings of the company, and what may drive stock prices up or down. “Historically when insiders are selling heavily it’s not the greatest sign,” TrimTabs’ chief executive, David Santschi, told CNBC in a phone interview Wednesday. “I’m surprised given the valuations in the market that they’re not selling more than they are.” According to Todd Gordon of, this combined with widening disparities in stock leaders and laggers could spell some short-term trouble for the market. Why isn’t it a surprise that insiders are bailing? Because they see the reality of their businesses up close and personal. Revenues have been falling for the past year in many industries and have absolutely cratered in commodities. See the New York Times’ If it owns a well or a mine, it’s probably in trouble. And after years of boosting reported profits with various kinds of financial engineering, corporations seem to have run out of tricks. Earnings have begun to reflect reality, and it’s not pretty: [...] And remember that insiders are selling while the corporations they run continue to buy back huge numbers of shares with borrowed money. Implication? They’re supporting their stock in order to get out while the getting is good. [...]"  

MSM: "Who’s Profiting From $1.2 Trillion of Federal Student Loans" [12/14/15] Printer Friendly Version "Jody Sofia borrowed $92,500 to get a degree from Florida Coastal School of Law. Now she’s in default, her outstanding balance having ballooned to almost $144,000, and she spends her days fielding calls from government-contracted debt collectors. The companies making those calls are just one part of an ecosystem feeding on federal student loans. There are also debt servicers, refinance lenders, firms that help former students stay out of default and for-profit schools that make money as borrowers try to repay more than $1.2 trillion in government-backed education debt. Sofia is one of 7 million former students in default on a record $115 billion of federal loans, an amount that has grown almost 25 percent in two years, according to U.S. government data. The mountain of debt, for which taxpayers are on the hook, has provided a stream of revenue to companies at every stage of the process. “This is not some small cottage industry,” said Rohit Chopra, the former student-loan ombudsman for the U.S. Consumer Financial Protection Bureau, which oversees loan servicers, debt collectors and private student lenders. “There is a large student-loan industrial complex. Rising costs of college and flat family incomes have created enormous business opportunity for every step of the loan process.” [...]"   Related: "7 Things We Learned About Federal Student Loans & The Companies That Profit From Them" "Here are seven things we learned from Bloomberg’s report on who’s profiting from $1.2 trillion of federal student loans: [...]"  

Commentary: "Market Panics As "China's Warren Buffett" Detained In "Richter Scale 9 Event" Ø Hedge [12/13/15] Printer Friendly Version "As several CSRC officials have learned over the past four months, being a “connected guy” vis-a-vis the Politburo does not necessarily mean you are immune when Xi and the Party decide it’s time to make an example of a few “chickens” in order to scare some “monkeys.”  China’s sweeping crackdown on sellers, “manipulators”, frontrunners, financial journalists and anyone else “suspected” of acting in such a way as to sow fear and uncertainty in the wake of the dramatic meltdown in Chinese equities that unfolded over the summer has ensnared money managers, high profile executives, and government officials alike. Earlier this week, it reached a crescendo with the disappearance of Guo Guangchang, known to some as “China’s Warren Buffett.”  As we reported on Thursday, the Fosun chief was “unreachable” according to the company which said only that it was “handling the situation.” [...] For anyone familiar with Beijing’s “kill the chicken to scare the monkey” campaign, it was easy to venture a guess as to what might have happened. While it seemed obvious that Guo had been “disappeared” by the Party, it wasn’t as yet clear what he was ultimately suspected of doing “wrong.” “Whether Beijing is questioning Guo about his habit of eschewing investments in China in favor of deploying capital overseas or whether Fosun did something 'wrong' in the markets during the selloff is hard to know,” we said. We now have a bit more in the way of color regarding Guo’s detention and sure enough, he’s being “held in connection with an investigation.” In a statement, Fosun did not divulge Guo’s whereabouts, saying only that he’s helping with “certain investigations carried out by the mainland judicial authorities” and that he is still able to oversee “major matters” pertaining to his businesses. As FT notes, “rumours of Mr Guo’s disappearance began to circulate in China on Thursday when influential financial publication Caixin cited unconfirmed reports that police had detained him when he arrived in Shanghai on a flight from Hong Kong.” Subsequently, business partners have only been able to establish “minimal contact” - his family has not been able to reach him.  As usual, there’s no word on whether Guo is in fact the subject of the investigation. If you’ve followed the witch hunt - which we recently learned is being run by Fu Zhenghua, a former Beijing police chief responsible for orchestrating an infamous prostitution bust, a campaign against "popular bloggers whose sometimes anti-establishment comments drew the ire of party leaders," and a decree prohibiting police officers from drinking alcohol outside of their homes - China likes to keep the explanations as vague as possible presumably for the chilling effect the ambiguity has on the rest of the market. Guo, who earlier this year called himself an “apprentice” of everyone’s favorite octogenarian from Omaha, is worth nearly $8 billion, a fact which may have landed him in Xi’s crosshairs. “As China’s economy slows after three decades of furious expansion, conspicuous wealth has become suspect,” WSJ says, adding that “uncertainty about his situation has added to a chill in finance circles.”[...]" Related: "China’s Top Bankers Who “Disappeared,” Were Detained, Or Died Unnaturally This Year" Printer Friendly Version " [...]"  

Commentary: "Bank of America: "Sadly, It Took World War II" Ø Hedge [12/12/15] Printer Friendly Version "....What happened to both the US economy and the stock market the last time the Fed tightened financial conditions back in 1936 when it, like now, erroneously thought the economy was strong enough to sustain it: "The Fed exit strategy completely failed as the money supply immediately contracted; Fed tightening in H1’37 was followed in H2’37 by a severe recession and a 49% collapse in the Dow Jones. In 1938, the stock market began to recover some. However, despite the easing stocks didn't fully regain their 1937 highs until the end of the war nearly a decade later. It needed a world war for that. Alas, the sad reality that a war is what will be needed to get out of the ridiculous broken market/record debt state the world finds itself in due to the unprecedented central bank intervention over the past 7 years to make the rich richer, is spreading. Today we read from none other than the same Bank of America strategist who points out that while the Fed's next step may well be the opposite of success, i.e., quantitative failure, the resulting shock to the system will have to endure the same type of catharsis, as what "saved" the US financial system from the first Great Depression. A flip to fiscal stimulus is the most likely catalyst for a Great Rotation out of “deflation plays” into “inflation plays”, undoubtedly the biggest investment decision of 2016. Sadly it took the New Deal and WW2 to end the dominance of “growth” over “value” in the 1930s. In addition to forcing the rotation out of "growth" and into "value" stocks - hardly the most important consequence of, well, a global war - it also took World War 2 to pull the US out of the Second Great Depression. Which may explain why it took World War 2 to pull the US out of the Second Great Depression. Which may also explain why currently in the Syria proxy war there already are US, British, French, German, Saudi, Turkish, Russian, Iranian (and shortly Chinese) forces in the air and on the ground. Because if the $200 trillion in global debt will not inflate itself on its own, it may just need the "push" of a few million tons of TNT to get it rolling." [...]"  Related: "Illustration: Syria Decoded" Ø Hedge "Shows relationships between all factions in the current Syria dynamic [...]" 

Commentary: "Turkey Is Tanking - Lira Plunges Most In 6 Months; Stocks, Bonds Hammered" Ø Hedge [12/12/15] Printer Friendly Version  "While one could take their pick of bloodbathery today, Turkey seemed like an appropriate place to focus as its bond yields are exploding higher, currency collapsing, and stocks plunging to the lowest since March 2014. How long before Erdogan decrees all of this impossible and fires another 'dependent' central banker? The Lira is plunging at its fastest in 6 months... Given Russian sanctions, it would appear Bilal is going to have to transport a lot more ISIS oil (allegedly) to keep the economic dream alive in Turkey.[...]" 

MSM: "Americans' Faith In "Good Times Ahead" Plunges To 15-Month Lows" [12/12/15] Printer Friendly Version "Americans' (fixed reality) belief that the country "will have good times for the next 12 months" has plunged. With the biggest Year-on-Year drop in 3 years, and despite stocks near record-highs and The Fed telling everyone how awesome everything is, the fewest people believe good time are ahead since September 2014. [...]"  Note: Since the larger reality isn't fixed, adopting a rigid perspective while 'inside' it is counterproductive.

MSM: "Economic Slowdown Induces Commodity Crash And Major Deflationary Dynamic" [12/12/15] Printer Friendly Version " ...Economic slowdown in China as the primary reason. For years, the Chinese economy voraciously gobbled up commodities from sources all over the planet, but now things are changing. The Chinese economy is really, really slowing down, and some recently released numbers give us some clues as to the true extent of that slowdown… -Chinese exports fell 6.8 percent in November on a year over year basis after being down 6.9 percent on a year over year basis in October. -Chinese imports were down 8.7 percent in November on a year over year basis. -Chinese manufacturing activity has been contracting for nine months in a row. -Last week, the China Containerized Freight Index plummeted to 718.58 – the lowest level ever recorded. [...] And of course it isn’t just China. Goldman Sachs says that the seventh largest economy on the entire planet, Brazil, has plunged into a “depression“. And as I pointed out the other day, of the 93 largest stock market indexes in the entire world, an astonishing 47 of them (more than half) are down at least 10 percent year to date. [...] Even though stocks slid in the U.S. this week, the major indexes still seem somewhat stable.  But this is a bit of an illusion.  Yes, the biggest names on Wall Street are still flying high for the moment, but shares of a multitude of smaller and mid-size firms have been plummeting.  At this point, nearly 70 percent of all U.S. stocks are already below their 200 day moving averages.  This is yet another thing that we would expect to see just before the bottom falls out for stocks.[...]"  Related: "Credit Suisse Warns On China: "Some Companies Are Having To Borrow To Pay Staff Salaries" Printer Friendly Version  

MSM: "Russia's Biggest Payment System QIWI Begins Operations In Europe" [12/11/15] Printer Friendly Version  "QIWI has started its payment service in Latvia. It will operate in euro and be available in the Russian, English and Latvian languages. The move became possible after QIWI’s European subsidiary received a license from Latvia’s Financial and Capital Market Commission (FKTK). Latvia allows companies to issue electronic money and provide payment services specified in the license, and open representative offices in all EU countries. The European market has got many financial services in various formats. They are developed both by major banks and start-ups. We are confident that we have created a really competitive payment service for the European market,” said SIA QIWI Wallet Europe Executive Director Stanislav Tchaikovsky. The payment system will have iOS and Android apps. The currency for all transactions, including deposits and transfers between users will be in euro. Latvians will be offered an expanded list of providers that includes both Russian and local companies. The QIWI payment service currently has more than 149,000 terminals that can be used for money transfers, banking services and other purposes. The company processes more than $1 billion in transfers a month. Apart from terminals, the company offers clients a Visa-backed eWallet. Using the service, customers can create a QIWI Visa Virtual or order a QIWI Visa card for $1.50.[...]"  

MSM: "Corrupt IMF “Forgives” Ukraine’s Debt to Russia" [12/10/15] Printer Friendly Version "On December 8, the IMF’s Chief Spokesman Gerry Rice sent a note saying: “The IMF’s Executive Board met today and agreed to change the current policy on non-toleration of arrears to official creditors. We will provide details on the scope and rationale for this policy change in the next day or so.” [...] Since 1947 when it really started operations, the World Bank has acted as a branch of the U.S. Defense Department, from its first major chairman John J. McCloy through Robert McNamara to Robert Zoellick and neocon Paul Wolfowitz. From the outset, it has promoted U.S. exports – especially farm exports – by steering Third World countries to produce plantation crops rather than feeding their own populations. (They are to import U.S. grain.) But it has felt obliged to wrap its U.S. export promotion and support for the dollar area in an ostensibly internationalist rhetoric, as if what’s good for the United States is good for the world. The IMF has now been drawn into the U.S. Cold War orbit. On Tuesday it made a radical decision to dismantle the condition that had integrated the global financial system for the past half century. In the past, it has been able to take the lead in organizing bailout packages for governments by getting other creditor nations – headed by the United States, Germany and Japan – to participate. The creditor leverage that the IMF has used is that if a nation is in financial arrears to any government, it cannot qualify for an IMF loan – and hence, for packages involving other governments. [...]  This has been the system by which the dollarized global financial system has worked for half a century. The beneficiaries have been creditors in US dollars. But on Tuesday, the IMF joined the New Cold War. [...] It has been lending money to Ukraine despite the Fund’s rules blocking it from lending to countries with no visible chance of paying (the “No More Argentinas” rule from 2001). With IMF head Christine Lagarde made the last IMF loan to Ukraine in the spring (The IMF is not supposed to give loans to countries with internal conflict going on), she expressed the hope that there would be peace. But President Porochenko immediately announced that he would use the proceeds to step up his nation’s civil war with the Russian-speaking population in the East – the Donbass. That is the region where most IMF exports have been made – mainly to Russia. This market is now lost for the foreseeable future. It may be a long break, because the country is run by the U.S.-backed junta put in place after the right-wing coup of winter 2014. Ukraine has refused to pay not only private-sector bondholders, but the Russian Government as well. This should have blocked Ukraine from receiving further IMF aid. Refusal to pay for Ukrainian military belligerence in its New Cold War against Russia would have been a major step forcing peace, and also forcing a clean-up of the country’s endemic corruption. Instead, the IMF is backing Ukrainian policy, its kleptocracy and its Right Sector leading the attacks that recently cut off Crimea’s electricity. The only condition on which the IMF insists is continued austerity. Ukraine’s currency, the hryvnia, has fallen by a third this years, pensions have been slashed (largely as a result of being inflated away), while corruption continues unabated. Despite this the IMF announced its intention to extend new loans to finance Ukraine’s dependency and payoffs to the oligarchs who are in control of its parliament and justice departments to block any real cleanup of corruption.[...]"   Related: "Kremlin Considers IMF Decision On Kiev’s Debt Very Dangerous Precedent" Printer Friendly Version Note: "The IMF has been exposed for what it is, a global conspiracy. [...]"| "Yatsenyuk Says That Ukraine Is Ready To Sue Russia For Debt" Printer Friendly Version "Kiev is ready to begin legal proceedings with Moscow regarding the return of a loan of three billion dollars. This was stated on Wednesday, 9th December, by Ukrainian Prime Minister Arseniy Yatsenyuk, reports the TV channel "112 Ukraine". "If Russia sues Ukraine — we are ready to sue Russia, we are fully armed," — said the head of government. [...]"  Note: Clown. | "Putin Orders Finance Ministry To Sue Ukraine Over Unpaid $3bn Debt" Printer Friendly Version  

Commentary: "America’s Road to Serfdom – 51% of Home Renters Are Over 40 Years Old" [12/10/15] Printer Friendly Version "Today’s story from the Associated Press perfectly illustrates how millions of Americans were reduced to neo-feudal serfs by the financial crisis, and how those who ruined the economy profited handsomely from the process. While popular perception holds that debt-ridden, broke millennials are the ones driving the rental market, the truth is far more nuanced.  The majority of U.S. renters are now older than 40, a fundamental shift over the past decade that reflects the lasting damage of the housing crash and an aging population. Nearly 51 percent of renters have celebrated their 40th birthday, according to the report’s analysis of Census Bureau data. That amounts to 22.4 million households.  A decade ago when the housing bubble peaked in 2005, 47 percent of renters — or 16.4 million households — were older than 40. Their share was 43 percent in 1995.  Rents increased 7 percent between 2001 and 2014 after adjusting for inflation, while incomes fell 9 percent, the report said. The result is that a larger number of Americans must devote more than 30 percent of their income to rent, a level that the government considers to be financially burdensome. Over the past decade, that number has jumped from 14.8 million to 21.3 million, or 49 percent of all renters. [...]  The worst part about all this, is that a small segment of the population made a fortune off the crash and subsequent rental rebound. These people were some of the same Wall Street players who the U.S. taxpayer was forced to bail out with the ruse of “saving Main Street.”[...] One of these individuals is an ex-Goldman Sachs banker named Donald Mullen, who also happens to be a huge Hillary Clinton donor. Here’s what we learned from last weeks’ post, Ex-Goldman Banker Who Profited from Housing Crash and Subsequent Bailout Donates $100k to Hillary SuperPAC: Mullen, while a Goldman Sachs employee, pioneered the trades that allowed the mega-bank to profit from the collapse of the housing market. Mullen’s team utilized financial instruments called collateralized debt obligations to essentially bet against subprime mortgages. In 2012, Mullen left Goldman Sachs to do the opposite of what he did in 2007: He started a hedge fund whose purpose was to buy up foreclosed homes and rent them out. New York magazine’s Kevin Roose described the career change this way: “A guy whose most famous trade was a successful bet on the full-scale implosion of the housing market is now swooping in to pick up the pieces on the other end.”[...] This guy literally profited from people losing their homes, then profited on the other side from the government bailout by buying these same homes from the victims who lost them. This is precisely how Wall Street makes money.[...]"  

Commentary: "Apocalyptic Capitalism" Chris Hedges [12/07/15] Printer Friendly Version "The charade of the 21st United Nations climate summit will end, as past climate summits have ended, with lofty rhetoric and ineffectual cosmetic reforms. Since the first summit more than 20 years ago, carbon dioxide emissions have soared. Placing faith in our political and economic elites, who have mastered the arts of duplicity and propaganda on behalf of corporate power, is the triumph of hope over experience. There are only a few ways left to deal honestly with climate change: sustained civil disobedience that disrupts the machinery of exploitation; preparing for the inevitable dislocations and catastrophes that will come from irreversible rising temperatures; and cutting our personal carbon footprints, which means drastically reducing our consumption, particularly of animal products.  “Our civilization,” Dr. Richard Oppenlander writes in “Food Choice and Sustainability, “displays a curious instinct when confronted with a problem related to overconsumption—we simply find a way to produce more of what it is we are consuming, instead of limiting or stopping that consumption.” [...] The global elites have no intention of interfering with the profits, or ending government subsidies, for the fossil fuel industry and the extraction industries. They will not curtail extraction or impose hefty carbon taxes to keep fossil fuels in the ground. They will not limit the overconsumption that is the engine of global capitalism. They act as if the greatest contributor of greenhouse gases—the animal agriculture industry—does not exist. They siphon off trillions of dollars and employ scientific and technical expertise—expertise that should be directed toward preparing for environmental catastrophe and investing in renewable energy—to wage endless wars in the Middle East. What they airily hold out as a distant solution to the crisis—wind turbines and solar panels—is, as the scientist James Lovelock says, the equivalent of 18th-century doctors attempting to cure serious diseases with leeches and mercury. And as the elites mouth platitudes about saving the climate they are shoving still another trade agreement, the Trans-Pacific Partnership (TPP), down our throats. The TPP permits corporations to ignore nonbinding climate accords made at conferences such as the one in Paris, and it allows them, in secret trade tribunals, to defy environmental regulations imposed by individual states. [...] New technology—fracking, fuel-efficient vehicles or genetically modified food—is not about curbing overconsumption or conserving resources. It is about ensuring that consumption continues at unsustainable levels. Technological innovation, employed to build systems of greater and greater complexity, has fragmented society into cadres of specialists. The expertise of each of these specialists is limited to a small section of the elaborate technological, scientific and bureaucratic machinery that drives corporate capitalism forward—much as in the specialized bureaucratic machinery that defined the genocide carried out by the Nazis. These technocrats are part of the massive, unthinking hive that makes any system work, even a system of death. They lack the intellectual and moral capacity to question the doomsday machine spawned by global capitalism. And they are in control.  [...]"  

Commentary: "Is The Fed Finally Being Forced To Consider Main Street?" MSM [12/07/15] "To help Main Street, the Fed simply needs to stop incentivizing speculation over investment and end policies that have shifted wealth and income to the top of the wealth pyramid. If there is anything about Federal Reserve policy that is now widely accepted as self-evident, it is that Fed policies have further enriched the super-rich and vastly widened wealth inequality. That this is now mainstream is remarkable, for it completely blows apart the Fed's PR claims to be "serving the people" by boosting inflation and making it easy for the super-wealthy to borrow unlimited sums of new money at near-zero rates. As I noted in The Federal Reserve, Interest Rates and Triffin's Paradox, there is no way Fed policy can be win-win-win for all participants. As I explained in Why the Fed Has to Raise Rates, the Fed's unspoken Prime Directive is maintaining U.S. and dollar hegemony, and this requires a strong dollar, which pressures exports and Corporate America's global sales and profits. You can't it both ways: you can't weaken your currency to boost exports and retain a global reserve currency.  But the Fed is also in another lose-lose conflict: the public-relations fight for its political legitimacy. Though it generated very little news flow, you can be sure Fed insiders saw the writing on the wall when the House of Representatives approved a measure to audit the Fed--in essence, a move to bring the Fed to heel. [...]" Related: "Fed To Main Street: Screw You - Wall Street Matters More" Printer Friendly Version  Ø Hedge

MSM: "Obama: US Highway Bill Falls Short of Meeting Infrastructure Needs" [12/06/15] Printer Friendly Version "US President Barack Obama said that the United States needs to spend more on infrastructure than the amount allocated in the Highway Bill that Congress passed on Thursday. Obama said he applauded the bipartisan compromise that was required to pass the legislation, but added that the Congress ought to recognize they still have work to do to address America’s infrastructure requirements. [...]"  Note:  See below: "How A Single Manhattan Bank Hijacked The Highway Bill" [12/03/15] and it will be clear that the annual approval of bill has little to do with actual highways.

Commentary: "Draghi Disappoints, Gold Rises, Euro Surges, Stocks and Bonds Battered Globally" MSM [12/05/15] Printer Friendly Version  "‘Super Mario’, the European Central Bank’s monetary magician, disappointed markets yesterday as continuing and unprecedented monetary easing failed to prevent a sharp sell-off in stock and bond markets which has continued today. There are sharp losses on financial markets after the ECB’s President’s – nicknamed ‘Super Mario’ and more recently ‘Magic Mario’ – latest radical measures stopped well short of market expectations and traders desperation for more cheap money and deepening ultra loose monetary policies. Draghi announced a deepening of probably the most radical monetary policies of any major central bank in history. The ECB will extend its massive 60 billion euro ($63.5 billion) a month money printing, or debt monetisation, scheme to at least March 2017, an additional six months. Debt monetisation will now include both regional and local government debt and be reinvested upon maturity. While stocks and bonds fell, gold rose and the euro surged 3% against the dollar. Disappointment rattled stock markets on both sides of the Atlantic, with many European indices suffering their worst day since the chaotic August 24 rout. The benchmark S&P 500 fell into negative territory for the year again.[...]"  

Commentary: "As The Credit Cycle 'Turns', Global Defaults Surge To 6-Year Highs" Ø Hedge [12/04/15] Printer Friendly Version  "After asking rhetorically "if something just blew up in junk," as CCC-yields explode to crisis-peak levels - suggesting something "spectaculor" is occurring as one trader noted, The FT reports that, according to Standard & Poor’s, companies have defaulted on $78bn worth of debt so far this year with 2015 set to finish with the highest number of worldwide defaults since 2009. Something is wrong... [...] So the soaring default rates, as The FT reports, are the latest sign financial stress is beginning to rise for corporate borrowers, led by US oil and gas companies. The rising tide of defaults comes as investors reassess their exposure to companies, who have borrowed heavily in recent years against the backdrop of central bank policy suppressing interest rates. Without a rebound in oil and commodity prices, and the Federal Reserve seen lifting its policy rate higher for the first time in nine years, strategists predict a further rise in corporate defaults for 2016. The amount of debt owed by US companies relative to the size of their profits has been increasing, according to Alberto Gallo, macro credit strategist for RBS, with the proportion of the most indebted borrowers rising since mid- 2014. “This tail of highly-levered borrowers is likely to be vulnerable to rising rates,” he said in a note to clients. In other words, as junk bonds have been the leading edge to the domestic end of the “dollar” run, this demands close and ongoing scrutiny in light of a potential escalation. After all, this is just another indication of how advanced the deterioration has become, when the “usual” carnage and selloff is no longer noteworthy, giving way to only the (possibly) spectacular.[...]" 

Commentary: "QE Has Failed... Central Banks Are Simply Trapped" Ø Hedge [12/03/15] Printer Friendly Version  "Martin Armstrong: "The central banks are simply trapped. They have bought in bonds under the theory that this will stimulate the economy by injecting cash. But there are several problems with this entire concept. This is an elitist view to say the least, for the money injected does not stimulate the economy for it never reaches the consumer. This attempt to stimulate by increasing the money supply assumes that it does not matter who has the money. If we are looking only at the institutional level, then this will not contribute to DEMAND inflation only ASSET inflation by causing share markets to rise in proportion to the decline in currency value. [...] The European Central Bank (ECB) then pushes interest rates negative to punish savers and consumers for not spending money that never reaches their pocket. Negative rates promotes hoarding cash outside of banks which in turn then inspires the brilliant idea of eliminating cash to force the objective and end hoarding. But negative rates have been simply a tax on money. The attempt to “manage” the economy from a macro level without considering the capital flow within the system is leading to disaster.[...] Then we have the problem that the central banks in attempting QE operations, cannot figure out how to reverse the process. They cannot sell the debt back to the market thereby defeating the original concept of creating elastic money supply. You increase the money supply during a recession to prevent banks being forced to sell assets to meet a panic demand for cash. Transactional banking has altered the classic borrow short lend long operations of banks cancelling out the idea of requiring and elastic money supply. All central banks can do now is allow the bonds they bought to mature and expire. If they attempt to sell the bonds they bought back into the marketplace, they will drive rates higher in a panic.[...] European economic growth remains extremely weak and inflation has failed to pick up as much as the ECB had anticipated BECAUSE they are NOT lowering taxes and that is the ONLY way to reignite DEMAND inflation from the consumer. Increasing the money supply which never reaches their pockets is pointless especially when banks are not interested in lending in the face a serious unperforming loans as taxes and tax enforcement increase. Clearly, the ECB has already changed its tone on the September 2016 deadline.[...]"

Criminal Corruption: "How A Single Manhattan Bank Hijacked The Highway Bill" [12/03/15] Printer Friendly Version "The biggest winner from a bipartisan highway funding deal hammered out by congressional negotiators on Tuesday isn't a Republican, a Democrat, or even the nation's roadways. It's Emigrant Savings Bank. A single line slipped into the package will help the Manhattan-based lender dodge a rule from the 2010 Dodd-Frank financial reform law designed to prevent large and mid-sized banks from relying too heavily on borrowed cash. Emigrant is literally the only firm affected by the change. The provision has nothing to do with repairing roads and bridges, of course. It doesn't even help lawmakers come up with money to pay for that construction. It only helps Emigrant boost its profit ratios by operating with more borrowed money. The Emigrant bank aid won't damage the economy. The bank holds less than 1 percent of the assets owned by multi-trillion-dollar behemoths like JPMorgan Chase or Bank of America. But Congress could grant multimillion-dollar favors to just about anyone without risking a banking panic. There's a reason why legislators granted it to a bank controlled by a billionaire family.  Emigrant is owned by the Milsteins -- real estate kingpins who have been power players in New York state politics for decades. Bank Chairman Howard Milstein bundled funds for President Barack Obama's 2008 campaign, and convinced then-Rep. Michael Grimm (R-N.Y.) to introduce an earlier version of the one-sentence bill in 2012 after making a $2,500 contribution to his campaign. The bill faded away after garnering a host of bad press, and lost its chief advocate when Grimm pleaded guilty to felony tax fraud and resigned his office in January. But the Emigrant largesse didn't stop with Grimm. Bank vice chairman Harriet Edelman has given $3,000 to Sen. Richard Shelby (R-Ala.) since the 2014 elections. Over the same time period, Howard Milstein and his wife Abby have given $16,200 to Sen. Ron Wyden (D-Ore.) and $5,400 to Sen. Chuck Schumer (D-N.Y.). In the 2012 cycle, the Milsteins gave $10,000 to Sen. Sherrod Brown (D-Ohio). [...] Such campaign finance figures are typically associated with shepherding a bill through a committee -- not ensuring that they actually become law. But Shelby, Wyden, Schumer and Brown all were all part of the highway bill negotiating team. After Democrats fought off GOP efforts to defang broader Dodd-Frank policies, they let the Emigrant provision slide. Highway bill negotiators are betting their colleagues in Congress won't jeopardize a bipartisan infrastructure project over a policy change that happens to help Emigrant juice its capital without creating other problems. [...] Potentially more destructive efforts at targeted, opportunistic sleaze almost made it into the highway bill. As recently as Monday night, the bipartisan deal included a major change to the Franklin D. Roosevelt-era Trust Indenture Act that would have rewritten bankruptcy standards to help Education Management Corp. -- one of the nation's largest for-profit college operators that just agreed to pay $95.5 million to settle a fraud case with the Department of Justice. The change would have altered bondholder rights in order to help EDMC slough off debt outside of bankruptcy court. The for-profit school is desperate to avoid a formal bankruptcy filing, which would strip it of the federal funding that constitutes a significant portion of its revenue -- thanks to government-backed student loans. [...] Those changes could have had repercussions well beyond a single student lender -- potentially hammering pension funds and investors in other distressed firms. "One basic rule of thumb is, don't fuck with laws passed in the 1930s," said a Democratic Senate aide. "They were usually passed to fix a problem that led to the Great Depression." The EDMC bailout failed. But a few other changes to consumer law survived. The final highway bill authorizes banks to barrage the Consumer Financial Protection Bureau with applications to be exempted from key mortgage standards adopted after the financial crisis. The CFPB already allows rural lenders leeway on the rules, but as a result of the highway bill, any bank that does not operate in a region the agency designates as rural can apply for rural status anyway. That allows bank lobbying groups to coordinate application drives to inundate the agency with paperwork, eating up its resources and hamstringing its enforcement efforts. Money for federal highway funding typically comes from a gas tax. But inflation has gradually eroded the power of that tax, which hasn't been increased since 1993. Instead of raising that tax to pay for new highway work, the bill raids other programs, and embarks on at least one pointless new revenue-generation project. [...]"  

Commentary: "Collapse In US Manufacturing Sparks Buying Panic In Bonds... And Stocks" Ø Hedge [12/02/15] Printer Friendly Version  "So to summarize the day, CEO's outlook for next year is the weakest in 3 years, US Manufacturing ISM is the weakest in 2009, bond yields are collapsing, and rate-hike odds are dropping... so stocks rallied (because auto sales in the past were soaring?)... Before we start, the faith remains strong in stocks... [...]" Related: "The Most Extreme Point Of Stock Market Overvaluation In History" Ø Hedge Printer Friendly Version "Our broad view remains that stocks are in the late-stage top formation of the second most extreme episode of equity market overvaluation in U.S. history, second only to the 2000 peak, and already beyond the 1929, 1937, 1972, and 2007 episodes, not to mention lesser extremes across history. [...] On the economic front, much of the uncertainty about the current state of the economy can be resolved by distinguishing between leading indicators (such as new orders and order backlogs) and lagging indicators (such as employment). It’s not clear whether the weakness we’ve observed for some time in leading indicators will make its way to the employment figures in time to derail a Fed rate hike in December, but as we’ve demonstrated before, the market response to both overvaluation and Fed actions is highly dependent on the state of market internals at the time. Presently, we observe significant divergence and internal deterioration on that front. If we were to observe shift back to uniformly favorable internals and narrowing credit spreads, our immediate concerns would ease significantly, even if longer-term risks would remain.[...]"  

Legal Case: "Biggest Wall St. Banks Facing Legal Action For Price Fixing $320 Trillion Derivative Market" [12/02/15] Printer Friendly Version "A class action lawsuit, filed last week, accuses two trading platforms and ten of Wall Street’s largest megabanks of conspiring to stifle competition in the $320 trillion dollar derivatives market for interest rate swaps. The lawsuit claims the banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case.” [...] The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs Group (GS.N), Bank of America Merrill Lynch (BAC.N), JPMorgan Chase(JPM.N), Citigroup(C.N), Credit Suisse Group (CSGN.VX), Barclays Plc (BARC.L), BNP Paribas SA (BNPP.PA), UBS (UBSG.VX), Deutsche Bank AG (DBKGn.DE), and the Royal Bank of Scotland (RBS.L) of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded. As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative. [...]  The Public School Teachers’ Pension and Retirement Fund of Chicago brought the suit against the elite global financial powerhouses, after purchasing interest rate swaps from numerous banks as a means of assisting the fund in hedging against interest rate risk on debt. Those purchases led to the Chicago Teachers’ Pension and Retirement Fund vastly overpaying for those swaps, according to the suit. The suit alleged that the banks “have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors,” since at least 2007.  “Defendants did this for one simple reason: to preserve an extraordinary profit center,” the lawsuit said.[...]  Similar allegations of bank collusion in the market for another type of derivative, known as credit default swaps, have been the subject of investigations by the United States Department of Justice and the European Commission, as well as a separate class-action lawsuit brought by investors, according to Reuters. In September, twelve banks and two industry groups settled that lawsuit by agreeing to pay $1.87 billion, making it one of the largest antitrust class action lawsuits in U.S. history, according to the Wall Street Journal. The scale of alleged theft is almost unimaginable. If you want to understand who/what controls governments, you have found the industry that stands above all others in its ability to bend the will of states and from which all other industries bow at the alter of; the true ‘Masters of the Universe.’[...]"  

MSM: "Half of Global Gold Production Is No Longer Profitable" [12/01/15] Printer Friendly Version "When you examine the precious metals market, what you’re really looking at is two separate markets, being fueled by two very different buyers. There are those who feel that the stock market is a great investment, and those who feel that our financial system can’t be trusted. Stock buyers are feeling good right now, so they’re pushing “safe haven” assets out of their portfolios. Meanwhile, the folks who don’t trust the system have put their faith in real gold, and buy it whenever they can. Unfortunately for gold miners, this asset is priced by the former of the two. Paper gold sets the price of real gold, even though paper gold is being backed by less and less real gold as time goes on. We’re approaching a unique moment where the paper market and the physical market become untangled from each other. They’re beginning to move in opposite directions. As the stock market crowd ditches their paper assets, the price just keeps falling, and the gold bugs are taking advantage of this artificially lowered price while they still can. As a result, the gold mining community is feeling the pinch. These low prices, coupled with the fact that physical demand is rising, has created the perfect conditions for a supply crunch in the near future. Gold fell to a five-year low on Friday as a rising dollar and speculation that U.S. policy makers will boost interest rates next month curbed the appeal of bullion as a store of value.[...]"  

Concepts and Practices: "Paris Climate Summit: $90 Trillion Up For Grabs" [11/30/15] Printer Friendly Version "The fossil fuel industry has taken a very cavalier bet that China, India and the developing world will continue to block any serious effort to curb greenhouse emissions, and that there is, in any case, no viable alternative to oil, gas or coal for decades to come. Both assumptions were still credible six years ago when the Copenhagen climate summit ended in acrimony, poisoned by a North-South split over CO2 legacy guilt and the allegedly prohibitive costs of green virtue. At that point the International Energy Agency (IEA) was still predicting that solar power would struggle to reach 20 gigawatts by now. Few could have foretold that it would in fact explode to 180 gigawatts – over three times Britain’s total power output – as costs plummeted, and that almost half of all new electricity installed in the US in 2013 and 2014 would come from solar. Any suggestion that a quantum leap in the technology of energy storage might soon conquer the curse of wind and solar intermittency was dismissed as wishful thinking, if not fantasy. Six years later there can be no such excuses. As The Telegraph reported yesterday, 155 countries have submitted plans so far for the COP21 climate summit to be held by the United Nations in Paris this December. These already cover 88pc of global CO2 emissions and include the submissions of China and India. [...]" Note: its no wonder that the global corporations of the world are stampeding to get their fill of taxpayer and nation-state wealth. Remember that this $90 trillion market was no market at all until it was declared to be so by the same global elite who created the climate-change dogma in the first place. Related: "Every UN Climate Summit Hailed As ‘Last Chance’ To Stop ‘Global Warming’" Printer Friendly Version " [...]" We are wearied of the UN always claiming that each meeting is the “last chance”, but if they didn’t say this, they couldn’t get anyone to do anything. The claims are obviously bogus if not downright incredulous. [Cross-Posted]

Commentary: "Morgan Stanley To Cull 25% Of Fixed Income Jobs Within 2 Weeks As Revenues Plunge" Ø Hedge [11/30/15] Printer Friendly Version "Morgan Stanley, the investment bank that saw bond-trading revenue plunge 42 percent in the third quarter, is planning a significant reduction in its fixed-income staff, according to people with knowledge of the plans. The cuts, which could total as much as a quarter of fixed-income trading employees, will be across all regions and are set to take place in the next two weeks, said two of the people, who asked not to be identified because the decision hasn’t been publicly announced. Hugh Fraser, a spokesman for the New York-based bank, declined to comment. “The trick for us is to size our business appropriately to what we think the fee pool is,” he said at the conference. While trying to gauge that, the investment bank needs to keep the unit “credibly sized” to complete globally, and “make sure we have enough flex or leverage that when the markets recover, which we do think they’ll recover, you’ll be able to participate in the upside of that', he said.

Concepts and Practices: "In Wake Of Attacks, France Moves To Regulate Prepaid Bank Debit Cards" [11/30/15] Printer Friendly Version "French Finance Minister Michel Sapin told reporters Monday that the government will move to more rigorously regulate prepaid debit cards, which he said were used in preparation for the Nov. 13 attacks in Paris. He said the changes were necessary to restrict terrorists' ability to transfer and access money while remaining anonymous. "The struggle against terrorism ... is first and foremost [for us] a struggle against its financing," Sapin said, according to The Financial Times. Currently, users can refill prepaid bank cards without having to show identification unless more than 2,500 euros (about $2,660) is added over one year, the FT says. Single-use cars have a 250-euro threshold. The announcement was part of a larger package of reforms. Sapin also wants more information sharing between European Union member states and also broader powers within the EU to freeze assets of suspected terrorists. Bloomberg Business quotes Sapin as saying that terrorists want to "be completely untraceable" and that the way forward is to "tighten the links in the chain to make that more difficult." The finance minister reportedly will outline the proposals at a meeting of European finance ministers Monday in Brussels. That city is currently under lockdown as authorities search for suspected extremists, including Salah Abdeslam, a 26-year-old Frenchman who is believed to have taken part in the attacks in Paris, which killed 130 people and injured hundreds more. [...]" 

MSM: "Bad Omen When Goldman Sachs' Compliance Staff Is Charged With Insider Trading" [11/28/15] "Perhaps Goldman Sachs needs to hire compliance staff to monitor its compliance staff. That’s the takeaway after reading insider trading charges the Securities and Exchange Commission has leveled against a former associate in Goldman’s compliance division, who monitored activity in the firm’s vaunted investment banking unit. Instead of using their seat at Goldman to defend against potential illegal activity amid today’s steady clip of merger deals, the associate is accused of using it to commit crimes. [...]" Related: "Yet More Rigging By Big Banks – This Time It’s Interest Rate Swaps" Printer Friendly Version "Time and time again over the last number of years the largest global banks have been found complicit in the manipulation of key rates, indices and markets. Now, a large and important pension fund has taken the largest of banks to task and filed a class action lawsuit alleging conspiracy to thwart competition and extract large fees and margins from the vast and critical interest rate swap market. The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the suit states. Interest rates swaps are used by companies and investors alike to manage interest rate risk. It is critical in smoothing returns and removing interest rate sensitivity. Providing an efficient trading market is lucrative, but when managers of that market collude to keep margins elevated at the cost of market participants, then we all suffer. The lawsuit goes on to state that banks had “jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.” This policy had one purpose, “to preserve an extraordinary profit centre,” the lawsuit said. It is alleged that the banks disguised their collusion by using code names for projects such as “Lily”, “Fusion,” and our favourite, “Valkyrie,” according to the suit. [...]"  

MSM: "Puerto Rico Is About To Default: Your Complete Guide To An Island Debt Debacle" [11/27/15] Printer Friendly Version "Last week, we brought you the latest from Puerto Rico’s debt debacle. The commonwealth is desperately trying to restructure some $72 billion in debt while staring down a $354 million bond payment due on December 1.  As we discussed at length on Friday, some $270 million of what’s due next week is GO debt guaranteed by the National Public Finance Guarantee Corp. Defaulting on that is bad news and as Moody’s warned earlier this month, a missed payment on the commonwealth’s highest priority obligations “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention.”  Make no mistake, federal intervention is likely to be anything but “swift.” A Senate judiciary committee headed by Iowa Republican Charles Grassley will meet on December 1 to discuss a legislative proposal to assist the Padilla government, but it’s hard to imagine that a decision will be made in time to avert at least a partial default.  Ultimately, the decision will be between paying bondholders and ensuring that the government can continue to provide public services, and just as Greece prioritized pensions over IMF payments last summer, Padilla isn’t likely to sacrifice the public interest at the altar of the island’s debtors.  So, as the clock ticks, we bring you the following helpful guide courtesy of Bloomberg who has made a “list of the island’s debt, how much is outstanding, when major monthly payments are due, and the source of funds that back the securities: [...] As a reminder, Puerto Rico's Treasury Single Account likely has negative cash balance, which, according to Height Securities analyst Daniel Hanson, "will make it 'nearly impossible' to meet all government payroll obligations over the next six weeks." In other words, even if the government does default in order to save money for the provision of public services, social unrest may now be unavoidable." 

Debate: "The Failure of Capitalism | Paul Craig Roberts Debates Stefan Molyneux" [11/26/15] [1:16:05] "Stefan Molyneux and Dr. Paul Craig Roberts debate these issues and more in a discussion about Dr. Roberts’ recent book “The Failure of Free Market Capitalism.” [...]" 

Commentary: "Profound Political Disunity Is Now Pitting Rising Elites Against Fading Elites" [11/25/15] Printer Friendly Version "The American Power Elite may yet discover that throw the bums out applies to all existing Establishment parties and Elites. As I have often noted, historian Michael Grant identified profound political disunity in the ruling class as a key cause of the dissolution of the Roman Empire. Grant described this dynamic in his excellent account The Fall of the Roman Empire, a book I have been recommending since 2009.[...] Today we focus on the rising profound political disunity of the Power Elites of the U.S. As a general observation, the largely theatrical polarization of the two political parties is being replaced by fault lines within each party and American society that no longer respect the ideological lines of Republican and Democrat. While conventional media pundits have observed the disorder in Republican ranks with more than a little schadenfreude (pleasure derived by someone from another person's misfortune), relatively little attention has been paid to the equivalent fractures in the Democratic Party. Longtime correspondent Mark G. forwarded an insightful article by Joel Kotkin that explains one of the key fractures: Tech titans want to be masters of all media we survey. In effect, the Old Left (currently represented by Bernie Sanders) is splintering from the mainstream Imperial Democrats (my term) of Hillary Clinton, while Kotkin's Tech Titans are pursuing a Libertarian-flavored dominance.[...]  (Excerpt from Kotkin:) "The rising tech oligarchy, having disrupted everything from hotels and taxis to banking, music and travel, is also taking over the content side of the media business. In the process, we might see the future decline of traditional media, including both news and entertainment, and a huge shift in media power away from both Hollywood and New York and toward the Bay Area and Seattle." [...]  Game theory has shown that participants will choose to punish cheaters over skimming rewards, until the cheaters are in the majority. At that point, everyone converts to cheating/free-riding and the system collapses. This rising sense of injustice applies to three classes: the super-wealthy skimmers who buy political influence; protected state workers drawing benefits that are distant memories for 99% of private-sector workers, and the free-riders at the bottom buying groceries with SNAP cards and non-food items with wads of cash earned without the burdens of taxes. So we have two volatile brews being mixed together: the anger and resentment of what's left of the middle and working classes against those above and below them, and the widening political disunity of the Elites. All those Democratic Party stalwarts whose power base is being disrupted by digital forces beyond their control are not happy campers. Unfortunately for them, history can't be turned back. As for the Republicans, the party's long reliance on social polarization for its support is wearing thin, as thin as the wallets and purses of traditional Republican audiences. What's upending the existing political Elites is this: there's no free lunch. As the phantom free lunch of the past seven years is shattered by economic realities, the parties' fiefdoms are discovering there isn't enough money for all fiefdoms to expand as they have for 60 years. As a result, each fiefdom is forced to battle other Elites for increasingly scarce financial and political oxygen. [...]"  

Commentary: "Congress Votes To Raid Fed’s Slush Fund To Pay For Highways" [11/24/15] Printer Friendly Version "In its never-ending quest to spend money it doesn’t have, but not wanting to raise taxes, especially during the current election cycle, on Thursday, November 5 Congress passed a $325-billion, six-year transportation bill that is to be financed by selling off some of the country’s strategic petroleum reserves and raiding the Federal Reserve.  In its editorial complaint about the bill, the Washington Post said that the bill “takes money out of one government pocket — the Fed — and puts it into another — the highway program.” The implication is that Congress should use “real” money, taken by force from the American taxpayer, whether he likes it or not, instead of using “paper” money created by the Fed out of nothing. It’s hardly a distinction. The Fed has, for the last 102 years, been a gigantic money printing press that has morphed — via “mission creep” — into the government’s largest and most invasive federal agency, with its actions affecting every financial transaction undertaken by every American every time he or she spends a dollar. Sold initially back in 1913 as the “lender of last resort” for banks that got themselves into trouble, the Fed has since the Great Depression become Congress’ “lender of first resort” when taxpayers refused to be mulcted further directly through tax increases. As a result, the Fed has been financing congressional deficit spending for years, indirectly taxing those taxpayers through inflation — the gradual incremental loss of purchasing power of their money. The usual apologists for the Fed showed up in print shortly after the bills were passed by Congress (which are waiting now for conference to iron out differences before being sent to the president) to explain, as best they could, why using the Fed’s capital to pay for highways was a bad idea. First up was former chairman of the Fed, Ben Bernanke, who now holds forth at the liberal Brookings Institute as a distinguished fellow. Writing in his Brookings blog, Bernanke did his best to come up with reasons why this taking of funds from the Fed’s capital account is a bad idea: “It’s not good optics or good precedent for Congress to be seen as raiding the supposedly independent central bank to pay for spending.” [...] To say that the Fed — a creature of Congress — is exempt from congressional maneuvering and manipulation is to give the Fed much more independence than the original Federal Reserve Act ever envisioned. Even its very adoption — the assigning of a constitutional power to an independent federal agency — is questionable. With the highway bill, Congress is establishing a very important principle: The Fed is its creature, and Congress can modify or abolish it, at its will. That’s what really makes the Fed officials nervous.[...]"  

Commentary: "Scenario: Fed Hikes Rates, Starts A Recession, And Launches QE4" Ø Hedge  [11/24/15] Printer Friendly Version  "Seven years after the Fed unleashed ZIRP and QE to “fix the economy”, it has finally admitted that ZIRP and QE failed to do that (although they certainly succeeded in blowing the biggest asset bubble ever), and for the past 6 months the Fed has engaged in what may be the most ridiculous case of revisionist history, as the narrative has been flipped on its head, and now the all too wise career economists of the Fed (with the help of a few good ex-Goldman bankers) are pitching the first rate hike in nearly a decade as the solution to all the economy’s problems. For now the equity market has played along with this grotesque flip-flop in monetary policy, first by rising two months ago on terrible job numbers which made the December rate hike less realistic, and then rising some more in the aftermath of the October “hawkish” Fed announcement and minutes, which in no uncertain terms warned a December rate hike is coming after all, poor economic data be damned. To be sure, while stocks as usual remain stuck in their imaginary ivory tower where good news is great, and bad news is even greater, other assets have been far less enthusiastic. In fact, as we have shown repeatedly, the dramatic flattening of the yield curve (via the 2s30s) is now screaming policy error. [...]"  

MSM: "Homeless Ex-Banker: “American Dream Is A Load of Crap" [11/23/15] Printer Friendly Version "If you are an American who hasn’t chemically lobotomized yourself with prescription drugs, you probably know that “something is wrong around here.” Even the genetically modified potatoes at your local Walmart are aware that something is horribly amiss. But the full weight of our current nightmare is difficult to comprehend; it certainly can’t be condensed into a 100 character “tweet”. But the story of “Allen”, a former banker who now spends his days in San Francisco soup kitchens, serves as an sobering allegory for America’s universal decline. Allen, who worked for 30 years in the corporate world, is 61 years old with 2 college degrees. Now he has nothing. His story was featured in an HBO documentary, “San Francisco 2.0”. Coming from an ex-banker, Allen’s comments about the state of America are both damning and poetic:"I think we’re rapidly becoming something like Venezuela, where there’s a very small, ultra-rich class, and everybody else is poor — and the middle class is shrinking. I think the American Dream is a load of crap. There is no American dream. It’s a nightmare for most people." And he’s right. The irony is that HBO’s documentary is about America’s “young, successful innovators” — but the vast majority of young Americans face the same fate as Allen. And unlike Allen, they will never experience, even briefly, “the good life.” Consider: [...] Factor in our totally dysfunctional, overpriced education and healthcare systems, and you begin to see the terrifying reality facing young Americans: Cut-throat wage slavery that not even John Steinbeck could have fathomed. We can’t help but chuckle — or weep? — at how HBO presents Allen: He’s a “dinosaur” who can’t survive in our “adapt or die” world — driven, of course, by young, hip “innovation.” What are these people smoking? According to HBO, Allen is nothing more than a regrettable byproduct of our glorious, cellphone app-driven economy. He represents “the dark side of progress”. Ha-ha. Bullshit. George Carlin said it best: "The owners of this country don’t want people who are smart enough to sit around the kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 years ago. They don’t want that. You know what they want? They want obedient workers. People who are just smart enough to run the machines and do the paperwork, and just dumb enough to passively accept all of these increasingly shittier jobs with the lower pay…The owners of this country know the truth. It’s called the American Dream, because you have to be asleep to believe it." [...] 

Commentary: "Europe Cracks Down On Bitcoin, Virtual Currencies To "Curb Terrorism Funding" Ø Hedge [11/21/15] Printer Friendly Version "In the past we have explained why when it comes to circumventing capital controls, primarily in the context of China, there are few as simple and as efficient alternatives to Bitcoin – contrary to what Bernanke may think, gold is concentrated money (and in India it now pays interest) but when it comes to transferring it across borders, it tends to be rather problematic. And now Europe appears to have figured this out, and as Reuters reports, European Union countries are preparing to crackdown on virtual currencies such as bitcoin, and anonymous payments made online and via pre-paid cards “in a bid to tackle terrorism financing after the Paris attacks, acording to a draft document.” Just a week after the Paris terrorist attack, showing a dramatic ability for coordinated work by a continent that is known for anything but, today EU interior and justice ministers are gathering in Brussels for a crisis meeting called after the Paris carnage of last weekend. This happens days after the European Commission already announced it would make procurement of weapons across Europe virtually impossible, if only for citizens who wish to obtain protection legally. According to Reuters, the justice minister will urge the European Commission, the EU executive arm, to propose measures to “strengthen controls of non-banking payment methods such as electronic/anonymous payments and virtual currencies and transfers of gold, precious metals, by pre-paid cards,” draft conclusions of the meeting said. [...]" Related: "The War On Encryption And Bitcoin – Nothing To Do With Terrorism, Everything To Do With State Control" Printer Friendly Version  

Commentary: "US Economy: Americans Are "Out Of Money" [11/21/15] Printer Friendly Version "Retail sales this holiday season are setting up to be a disaster. Already most retailers are advertising “pre-Black Friday” sales events. Remember when holiday shopping didn’t begin, period, until the day after Thanksgiving? Now retailers are going to cannibalize each other with massive discounting before Thanksgiving. The collapsing economy is affecting everyone, across all income demographics. Wall Street, fearful that consumers are running out of cash heading into the crucial Christmas retail season, are selling off retail stocks and everything else sensitive to consumer spending. [...] Last week we saw the stocks of Macy’s, Nordstrom and Advance Auto Parts do cliff-dives after they announced their earnings. I mentioned to a colleague that the Nordstrom’s report should be the most troubling for analysts. Nordstrom in their investor conference call said that they began seeing an “unexplainable slowdown in sales in August in transactions across all formats, across all categories and across all geographies that has yet to recover.” Nordstrom caters to the “keep up with the Jones’” middle class household who works hard to project an image of prosperity but uses credit cards, auto loans and home equity debt to keep the gerbil wheel spinning. That game has hit a wall.[...]"   Related: "Most Americans Hit "Peak Income" More Than 15 Years Ago" Printer Friendly Version 

Commentary: "Clinton Foundation Running A $20 Million Private Equity Firm In Colombia" [11/20/15] Printer Friendly Version  "The Clinton Foundation is operating a $20 million private equity firm in Colombia, raising concerns from government and consumer watchdog groups who say the practice is unusual and could pose a significant conflict of interest. The line between the firm and the Clinton’s nonprofit world is hazy. Fondo Acceso is run out of the Clinton Foundation’s Bogota office and staffed by foundation employees, a representative at the office told the Washington Free Beacon on Tuesday. A charitable foundation running a private equity fund is “not something one hears about commonly” and is “very concerning,” according to Craig Holman, the government affairs lobbyist at the watchdog group Public Citizen. Ken Boehm, chairman of the National Legal and Policy Center, a government watchdog group, said the lack of transparency was a troubling. He said the public has a right to know whether any of Fondo Acceso’s companies received U.S. government support while Hillary Clinton was secretary of state. [...] The ties between the Clinton Foundation, Canadian billionaire businessman Frank Giustra and the nation of Colombia run deep. This is a topic explored earlier in the year in the post, How Hillary Does Business – An Oil Company, Human Rights Abuses in Colombia and the Clinton Foundation. Here’s an excerpt: The details of these financial dealings remain murky, but this much is clear: After millions of dollars were pledged by the oil company to the Clinton Foundation — supplemented by millions more from Giustra himself — Secretary Clinton abruptly changed her position on the controversial U.S.-Colombia trade pact. Having opposed the deal as a bad one for labor rights back when she was a presidential candidate in 2008, she now promoted it, calling it “strongly in the interests of both Colombia and the United States.” The change of heart by Clinton and other Democratic leaders enabled congressional passage of a Colombia trade deal that experts say delivered big benefits to foreign investors like Giustra. The details of her family’s entanglements in Colombia echo talk that the Clintons have blurred the lines between their private business and philanthropic interests and those of the nation. And Hillary Clinton’s connections to Pacific Rubiales and Giustra intensify recent questions about whether big donations influenced her decisions as secretary of state.[...]" 

Commentary: "Ex-World Bank Chief Economist Exposes “Failure” Of Austerity, Deregulation" [11/19/15] Printer Friendly Version "Joseph Stiglitz, a senior OECD expert, slams OECD’s own policies to prevent global slowdown. In a little-known speech at the United Nations University, renowned Nobel Prize-winning economist Joseph Stiglitz criticised Western approaches to addressing the global economic crisis for being obsessed with market solutions that cannot work. [...]  The most controversial aspects of Stiglitz’s presentation lay in his rejection of conventional economic models, which he argued have both contributed to the economic crisis and prevented policymakers from finding meaningful solutions to it. These models fail to capture the actual behavior of individuals, including on issues like saving and consumption, and ignore the crucial role of institutions in reducing efficiencies and serving to “preserve power structures” that benefit a tiny minority. Contrary to the prevailing wisdom amongst policymakers, “Pervasive market failures [are] associated with competition, externalities, risk, capital markets.” The market “on its own, will lead to excessive borrowing, especially in foreign-denominated debt” as well as leading “to too big and too intertwined financial institutions.” “Markets are not efficient or stable,” declare Stiglitz’s slides. “That there are not just environmental externalities, but also information and learning externalities and macroeconomic externalities.” These wider social and environmental realities in which markets are embedded give rise to “multiple needs for government intervention — not just macro-stabilisation, but also industrial and trade policies.” There is also a need for “strong financial sector regulations” including macro-prudential regulations and “regulations on cross border flows,” and a recognised role for the state in “promoting equality and equality of opportunity.” Stiglitz also advocated stronger forms of political regulation to prevent what he called “government failure and capture” by special interests, “especially in societies marked by high inequality.” “Democracy may not provide an adequate check,” he warned. A solid “system of checks and balances” is required, including “more transparency, strong right-to-know laws, restrictions on the influence of money in campaigns, restrictions on revolving doors.” Stiglitz’s presentation, based on the latest research in economics, calls into question the British government’s continuing infatuation with neoliberal Washington Consensus-style policies. It further suggests that conventional efforts to stave off another global recession will fail.[...]"  

Commentary: "Conspiracy Theorists, We Skeptics Owe An Apology: The World Is A Rigged Game" [11/18/15] Printer Friendly Version "... You may have heard of the Libor scandal, in which at least three and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that’s trillion, with a “t”) worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it “dwarfs by orders of magnitude any financial scam in the history of markets.” That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world’s largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. [...] The banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure. Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolving-door legal system, and what you get is unstoppable corruption. Every morning, 18 of the world’s biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the “Libor panel,” and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures. Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps. Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the “Libor submitters”) and asking them to fudge the numbers. [...] The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. “It’s almost hilarious in the irony,” says David Frenk, director of research for Better Markets, a financial-reform advocacy group, “that they called it ISDAfix.” The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. “In general,” it wrote, “those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion.” Translation: When prices are set by companies that can profit by manipulating them, we’re fucked. “You name it,” says Frenk. “Any of these benchmarks is a possibility for corruption.” The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it. It’s not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever’s in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it’s only just coming into view.[...]" 

Commentary: "Putin: Islamic State Financed From 40 Countries, Including G20 Members" [11/17/15] Printer Friendly Version "President Vladimir Putin says he’s shared Russian intelligence data on Islamic State (ISIS/ISIL/Daesh) financing with his G20 colleagues: the terrorists appear to be financed from 40 countries, including some G20 member states. During the summit, “I provided examples based on our data on the financing of different Islamic State (IS, formerly ISIS/ISIL) units by private individuals. This money, as we have established, comes from 40 countries and, there are some of the G20 members among them,” Putin told the journalists. Putin also spoke of the urgent need to curb the illegal oil trade by IS. “I’ve shown our colleagues photos taken from space and from aircraft which clearly demonstrate the scale of the illegal trade in oil and petroleum products,” he said. “The motorcade of refueling vehicles stretched for dozens of kilometers, so that from a height of 4,000 to 5,000 meters they stretch beyond the horizon,” Putin added, comparing the convoy to gas and oil pipeline systems. [...] Putin pointed out the change in Washington’s stance on cooperation with Moscow in the fight against the terrorists. “We need to organize work specifically concentrated on the prevention of terrorist attacks and tackling terrorism on a global scale. We offered to cooperate [with the US] in anti-IS efforts. Unfortunately, our American partners refused. They just sent a written note and it says: ‘we reject your offer’,” Putin said. “But life is always evolving and at a very fast pace, often teaching us lessons. And I think that now the realization that an effective fight [against terror] can only be staged together is coming to everybody,” the Russian leader said." [...] Putin also disagreed with Western criticism of Russia’s actions in Syria, where the country has been carrying out a large-scale air campaign against Islamic State and other terror groups since September 30.[...] “It’s really difficult to criticize us,” he said, adding that Russia has repeatedly asked its foreign partners to provide data on terrorist targets in Syria. “They’re afraid to inform us on the territories which we shouldn’t strike, fearing that it is precisely where we’ll strike; that we are going to cheat everybody,” the president said. “Apparently, their opinion of us is based on their own concept of human decency,” he added. Putin told the media that Russia has already established contact with the Syrian opposition, which has asked Moscow not to carry out airstrikes in the territories it controls.[...]" Note: Also at Russia Today Printer Friendly Version   

Commentary: "Stock Prices Of Weapons Manufacturers Soaring Since Paris Attack" [11/17/15] Printer Friendly Version "The Paris attacks took place on Friday night. Since then, France’s president has vowed “war” on ISIS and today significantly escalated the country’s bombing campaign in Syria (France has been bombing ISIS in Iraq since last January, and began bombing them in Syria in September). Already this morning, as Aaron Cantú noticed, the stocks of the leading weapons manufacturers – what is usually referred to as the “defense industry” – have soared: [...] Also enjoying a fantastic day so far is one of the leading Surveillance State profiteers:  [...] France’s largest arms manufacturer, Thales, is also having an outstanding day, up almost 3%, even as the leading French index is down: [...]"  

MSM: "Economic Collapse, Bailout & All The Presidents’ Bankers With Nomi Prins" [11/17/15] [47:59] "Too big to fail is a seven-year phenomenon created by the most powerful central banks to bolster the largest, most politically connected US and European banks. More than that, it’s a global concern predicated on that handful of private banks controlling too much market share and elite central banks infusing them with boatloads of cheap capital and other aid. Synthetic bank and market subsidization disguised as ‘monetary policy’ has spawned artificial asset and debt bubbles - everywhere. The most rapacious speculative capital and associated risk flows from these power-players to the least protected, or least regulated, locales. There is no such thing as isolated 'Big Bank' problems. Rather, complex products, risky practices, leverage and co-dependent transactions have contagion ramifications, particularly in emerging markets whose histories are already lined with disproportionate shares of debt, interest rate and currency related travails. The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system. The connection between democracy and free markets is interesting though. Democracy is predicated on the idea that every vote counts equally, and in the utopian perspective, the government adopts policies that benefit or adhere to the majority of those votes. In fact, it's the minority of elite families and private individuals that exercise the most control over America's policies and actions. The myth of a free market is that every trader or participant is equal, when in fact the biggest players with access to the most information and technology are the ones that have a disproportionate advantage over the smaller players. What we have is a plutocracy of government and markets. The privileged few don't care, or need to care, about democracy any more than they would ever want to have truly "free" markets, though what they do want are markets liberated from as many regulations as possible. In practice, that leads to huge inherent risk. Michael Lewis' latest book on high frequency trading seems to have struck some sort of a national chord. Yet what he writes about is the mere tip of the iceberg covered in my book. He's talking about rigged markets - which have been a problem since small investors began investing with the big boys, believing they had an equal shot. I'm talking about an entirely rigged political-financial system. Nomi Prins[...]"

MSM: "IMF Greenlights Addition Of Chinese Yuan To SDR Basket: Wall Street Responds" [11/16/15] Printer Friendly Version "While the world was following the tragic events unfolding on Friday night in France where hundreds of innocent civilians were killed or injured, an important economic development took place at the IMF, whose staff and head Christine Lagarde, officially greenlighted the acceptance of China’s currency – the Renminbi, or Yuan – into the IMF’s foreign exchange basket, also known as the Special Drawing Rights. As Reuters summarizes, the recommendation paves the way for the Fund’s executive board, which has the final say, to place the yuan on a par with the U.S. dollar Japanese yen, British pound and euro at a meeting scheduled for November 30. At this point only an explicit veto by US political interests deep behind the stage can derail the CNY’s ascension into the SDR. The United States, the Fund’s biggest shareholder, has said it would back the yuan’s inclusion if it met the IMF’s criteria, a U.S. Treasury spokesperson said, adding: “We will review the IMF’s paper in that light.” If the yuan’s addition wins 70 percent or more of IMF board votes, it will be the first time the number of currencies in the SDR basket – which determines the composition of loans made to countries such as Greece – has been expanded.” I would say that the likelihood of China’s yuan joining the IMF currency basket this year is very high,” said Hong Kong-based Shen Jianguang, chief economist at Mizuho Securities Asia. “The only thing that could deter this is if the U.S. led a group rejecting the yuan’s inclusion, which could complicate things. But the United States’ current official stance doesn’t reflect such an attitude,” he said. [...] The executive board, which represents the Fund’s 188 members, is seen as unlikely to go against a staff recommendation and countries including France and Britain have already pledged their support for the change. This would take effect in October 2016, during China’s leadership of the Group of 20 bloc of advanced and emerging economies [...]"  Related: See below: "IMF May Consider Adding Yuan To Its Currency Basket In December" [11/13/15] 

MSM: "Bank of England: Automation To Eliminate Roughly Half Of U.S. And British Jobs" Link Fixed [11/14/15] Printer Friendly Version "80 million jobs in the United States are at risk of being taken over by robots in the next few decades, a Bank of England (BoE) official warned on Thursday. With U.S. data showing that total non-farm employment hit 142.6 million in October, that’s roughly over half of the total jobs at risk. [...]"  Note:  Observation: They know all this is coming, and at the same time refuse to take steps to provide new jobs under new constructive paradigms (which makes them criminally negligent and ethically bereft) ... jobs to take the place of those expected to be lost, now, BEFORE those jobs get lost. All this because they are not very intelligent and have no foresight or creativity when it comes to people other than themselves. No larger systemic perspectives. Pitiful creatures at the top ... stuck in their little fixed realities ... and experiential loops. Such is the nature of the game, to be endured by all.

MSM: "Kiev Doesn’t Rule Out Default On Russian Debt" [11/14/15] Printer Friendly Version "As Ukraine’s $3 billion Russian debt deadline looms, Petro Poroshenko’s government is considering its options, including default. Kiev could default if it fails to make repayment on the $3 billion Eurobonds maturing this December, said the Ukrainian Finance Minister Natalie Jaresko in an interview with local TV. US-born Jaresko said currently Kiev cannot make the payment because the IMF restructuring program clearly defines the payout procedure. The finance minister said she’s ready to meet her Russian counterpart Anton Siluanov after the G20 summit in Turkey to discuss the possibility of restructuring Kiev’s debt. However, Kremlin has said that “the so-called debt operation, which Russia takes no part in, cannot ease Ukraine’s debt burden,” and that litigation costs and penalty interest for overdue payments would cost Kiev much more than paying on time.[...] The IMF’s current policy forbids it loaning to countries that default on other government debt. But last month the organization said it would go ahead with the promised $17.5 billion loan to Ukraine even if the country defaults on its debt to Russia. The IMF might amend its rules, allowing lending as long as the borrowing nation meets its obligations under the IMF program and bargains in good faith with the creditor country. This week Bloomberg speculated that Russia is looking at ways of blocking the IMF loan to Ukraine. [...]"

MSM: "IMF May Consider Adding Yuan To Its Currency Basket In December" [11/13/15] Printer Friendly Version "The board of directors of the International Monetary Fund (IMF) may consider the inclusion of China’s yuan to the IMF basket of currencies in December, Alexey Mozhin, IMF executive director for Russia told TASS on Thursday. "So far the date has not been defined and is not on the agenda. But there are expectations that it will be very soon. End of November - early December," Mozhin said when taking part in the conference on the development of the BRICS countries (Brazil, Russia, India, China, South Africa) in the Russian Embassy in Washington. He also added that he expects a positive decision on the matter. [...]" Related: "China Makes Bid For IMF Reserve With Swiss Franc Deal" [1:31] "China to Allow Direct Conversion Between Yuan and Swiss Franc" Printer Friendly Version "China took another step to boost the yuan’s global usage, saying it will start direct trading with the Swiss franc, as the nation pushes its case for reserve-currency status at the International Monetary Fund. The link will start on Tuesday, the China Foreign Exchange Trade System said in a statement, making the franc the seventh major currency that can bypass a conversion into the U.S. dollar and be directly exchanged for yuan. The rate will be allowed to fluctuate a maximum 5 percent on either side of a daily fixing, according to CFETS. “This is an important step in strengthening bilateral economic and trade connections between China and Switzerland,” the People’s Bank of China said in a statement on its website on Monday. The link will help lower conversion costs and facilitate the use of both currencies in bilateral trade, it added. The announcement, which confirmed an earlier report, comes as the IMF prepares to meet this month to review its Special Drawing Rights. The executive board of the Washington-based institution will gauge whether the Chinese currency has fulfilled the criterion of being "freely usable," after rejecting its bid in 2010. The other major currencies that can be directly converted into yuan are the U.S., Australian and New Zealand dollars, the British pound, the Japanese yen and the euro. [...]"

Commentary: "If It Wasn't For These 8 Companies The Market Would Be Down In 2015" Ø Hedge [11/13/15] Printer Friendly Version "While FANG (Facebook, Amazon, Netflix, Google) has become ubiquitous among the retail investing public still 'trading stocks', now it is time to meet NOSH (Nike, O'Reilly, Starbucks, Home Depot). The reason is simple - without these 8 stocks, the S&P 500 would be down year-to-date... "solid foundation" for the next leg in the bull market? Or teetering inverted pyramid scheme? Finally, we couldn't help but notice that this list of 8 stocks is basically all the names that Jim Cramer is jamming down retail investors' throats (and thus hedge fund momo chasers) as the only stocks "that work." Such 'weak' hands do not bode well if this whole ponzi scheme turns down once again. [...]"  These eight stocks which are keeping the S&P 500 being negative this year: Amazon, Google, Facebook, Home Depot, O’Reilly, Netflix, Nike and Starbucks, are the stocks in which momentum-chasing hedge funds have highly concentrated holdings.

MSM: "Russia To Loan Iran $7 Billion" [11/13/15] Printer Friendly Version "Iran will receive from Russia a loan of $7 billion. This was stated by Mojtaba Khosrowtaj, first Deputy Minister of industry, mines and trade of the Islamic Republic of Iran, reports RIA Novosti. $5 billion will be allocated to the government from the Federal budget, and another $ 2 billion will be given in addition. "Today, the international cooperation of credit and financial schemes plays a key role in the implementation of various projects — international and national. So we raised this issue with our friends in Russia and we came to the conclusion that such schemes would be very useful," said Mojtaba Khosrowtaj. He explained that currently the two governments are working on two options for financing projects. Money can be allocated either under the guarantees of the Iranian state or under the guarantees of banks. In addition, the Iranian representative stated that his country is excited for the launch of this kind of loan scheme. "In a competitive market, a competitive world, if a country spends a long time postponing [projects], then other countries will come and take their place," said Mojtaba Khosrowtaj. Earlier, Minister of energy of Russia Alexander Novak said that Iran has applied to the Russian side for the credit in 5 billion dollars for infrastructure projects in Iran. “We are talking about cooperation between the two countries in the field of electricity and the development of railway transport”, he said. [...]"  

Concepts and Practices: "Biggest-Ever U.S. Data Breach Hits 100 Million People With Bank Accounts" [11/12/15] Printer Friendly Version "U.S. banks and other financial institutions have suffered their largest ever data breach. U.S. officials confirmed the hack on Tuesday while bringing charges against four men for the theft of customer data of more than 100 million people. J.P. Morgan is among the banks that were hit, the company confirmed to Bloomberg. Hackers gained access to customer information of nine companies, according to an indictment from Preet Bharara, U.S. Attorney in Manhattan, including two newspapers. The Wall Street Journal, which announced in October that it had been hacked, is among that group. Preet Bharara held a press conference in which he touted the bust as "securities fraud on cyber-steroids," in which hackers gained access to a variety of systems that helped them generate money from numerous illegal activities including running a digital currency exchange and gambling websites. The group also participated in stock manipulation. Bharara said that the group was also able to hack into the email accounts of a security firm that had been tracking their activities. That information was then used to avoid the firm's investigation. Gery Shalon, Joshua Aaron and Ziv Orenstein face a variety of charges as part of the case. U.S. authorities allege that the various schemes generated "hundreds of millions of dollars in illicit proceeds" that was than laundered through at least 75 shell companies and bank accounts around the world. [...]"  

Max Keiser: "Technology, Competition And The ‘Crapification’ Of Jobs" [11/09/15] Printer Friendly Version "As a general starting point: if you want to understand the ‘crapification’ of jobs and wages, we have to look at the ‘crapification’ of the economy from the perspective of those who are doing the hiring: the employers.  From the perspective of employees, the ‘crapification’ of jobs boils down to 1) low/stagnant wages for 2) highly structured, boring, repetitive and often difficult work. The decline in the quality, pay and upward mobility of jobs is directly related to the dynamics of globalization, financialization, and the surplus of ordinary labor and capital: 1. Increased competition suppresses wages as employers seek to cut expenses. Rents, taxes, healthcare, government fees, etc. all rise like clockwork; that leaves labor as the largest component that can be trimmed. [...] 2. Cheap capital incentivizes replacing labor with new software/technology. With the cost of capital at all-time lows, the pressure to replace costly labor with new software, robotics, etc. is intense. Software, robotics and related technologies are dropping in price even as their productivity increases. The reality is that humans can only be pushed to produce more if the tools they’re using become more productive. The second reality is that for many enterprises, these global pressures boil down to automate or die, with the purpose of automating being to reduce labor costs and boost productivity, as both are required to survive competition and stagnating sales. [...]  3. The total compensation costs of employees is rising even if wages are flat. Employees (and the vast majority of pundits, most of whom have never hired a single employee with their own money) tend to overlook the overhead costs paid by employers: workers compensation insurance (soaring), healthcare insurance (soaring), disability insurance, unemployment insurance, 401K or pension contributions, etc. Total compensation costs = wages + labor overhead. If labor overhead costs are climbing, the employer is paying more per employee even though the employees aren’t getting a dime more in wages. [...] 4. As system costs rise, those with stagnant incomes have less to spend. We can’t say no to higher taxes, higher healthcare costs, higher junk fees, higher fees imposed by monopolies, etc. and so the share of income that is truly disposable is declining as the big-ticket expenses continue rising. This means stretched consumers are foregoing expenses that they once paid for without thinking: the $350 blood test for the ailing pet, the broken air conditioner in the car ($500+ to repair), the after-school enrichment class, the Friday dinner out, etc., etc., etc. The net result of stagnating income for 90% of the households is stagnant sales. The cheerleaders on propaganda-TV never mention that the rising corporate profits they are trumpeting are typically accompanied by declining sales and declining same-store sales. In other words, the “profits” are accounting gimmicks, not true profits earned on rising sales.  [...] 5. It is increasingly difficult to generate a profit in this environment unless you own/operate a monopoly or quasi-monopoly. Those focusing on the ‘crapification’ of jobs tend to look at global corporations–those with thousands of low-paying jobs or those doing extremely well (Google, Facebook, Apple, etc.)– while everyone from Mom and Pop small businesses to mid-sized corporations are generally being squeezed by slumping sales and higher total compensation costs. [...] If the management of public companies don’t meet Wall Street’s grandiose profit expectations, they’ll be fired. If small businesses lose money, the owners are forced to either close the business or go bankrupt. So everyone in the managerial food chain hoping to avoid the crapified employment market below their current job (i.e. those trying not to get fired) must crapify every job they manage to wring enough productivity and profit out of stagnant sales to keep their job. The ‘crapification’ of jobs is the direct result of the ‘crapification’ of the economy.[...]"  Related: "Low Labor Participation As The Result Of The Crapification Of Jobs" Printer Friendly Version  | 

MSM: "Eurozone To Indict Several Countries For Not Passing Bail-In Laws" [11/08/15] Printer Friendly Version "On Oct. 22, the European Commission (EC) indicted six EU nations for not not passing bail-in legislation after both a G20 resolution, and an EC mandate for depositor funded capitalization programs were passed earlier this year. The purpose behind bail-ins was in response to the taxpayer based bailouts that took place for the banking system following the 2008 credit crisis and the subsequent insolvency of both American and European financial institutions at the time of the bailouts. Costing tens of trillions of dollars to both taxpayers and central banks, governments were excoriated following these bailouts as sovereign legislatures chose to protect banks who had collapsed the system due to their greed and speculation, and founded the new financial paradigm known as 'too big to fail'.  [...] The European Commission is taking legal action against member states including the Netherlands and Luxembourg, after they failed to implement rules protecting European taxpayers from funding billions in bank rescues. Six countries will be referred to the European Court of Justice (ECJ) for their continued failure to transpose the EU's "bail-in" laws into national legislation, the European Commission said. The referral comes after the Commission issued a warning against Poland, the Netherlands, Luxembourg, Sweden, Romania and the Czech Republic for their non- compliance earlier this year. The rules - known as the Bank Recovery and Resolution Directive (BRRD) - are designed to stop citizens from ever having to foot the bill for saving banks from going bust, preventing a re-run of events that imperiled Spain and Ireland in the wake of the financial crisis. - [...] Perhaps what is most interesting is the attempt by the European Commission to separate taxpayers from depositors since in the majority of these instances, they are one in the same. Only now instead of a government having to print money to bailout a failed bank, the institutions are legally allowed to confiscate a depositors savings, checking, money market, and investment monies to re-capitalize the bank under the imposed EC mandates. Banks as a whole in the West no longer function as a protected facility to hold and secure people's money, and anyone who trusts in these institutions does so at their own risk thanks to laws and resolutions brought about following the last financial collapse. And with several mainstream economists looking to raise the bar even higher by proposing a ban on cash itself, it appears to be only a matter of time before the zombie banks created out of the Credit Crisis feel the need to use your money and wealth to keep their propped up institutions afloat.[...]"  

Commentary: "JPMorgan CEO Jamie Dimon Says The Government Will 'Stop' Bitcoin" [11/07/15] Printer Friendly Version  "One of these days I'm finally going to get around to writing the piece I've been planning for the better part of a year on the importance of the blockchain and cryptocurrencies, but in the meantime, it's still fun to see the way traditional bankers try to wrap their heads around it. Apparently, for JPMorgan CEO Jamie Dimon, it's to say he's not at all concerned about it because he's sure that the government will step in and kill Bitcoin should it ever really matter: “Virtual currency, where it’s called a bitcoin vs. a U.S. dollar, that’s going to be stopped,” said Dimon. “No government will ever support a virtual currency that goes around borders and doesn’t have the same controls. It’s not going to happen.”  That's kind of an incredible statement when you think about it -- a sort of direct admission that Wall Street knows how tightly it's in bed with Washington DC, that should something like Bitcoin ever challenge Wall Street's power, he has no fear that the politicians will "stop" the virtual currency. Talk about regulatory capture... Of course, that confidence that the US government will kill the innovation is perhaps the biggest weakness of Dimon's argument. We have no doubt that governments are already trying their damnedest to kill off innovation around cryptocurrencies, but the larger question is really whether or not that's even really possible. Here's the problem for Dimon: should Bitcoin really reach the point at which Wall Street really views it as a true threat, then it's probably too late for it to be stopped. That's one of the (many) interesting parts about cryptocurrencies. The ability to stop them as they get more and more successful becomes significantly more difficult, to the point of reaching a near impossibility. But, it sure will lead to some amusing and ridiculous regulatory fights. [...]"   Related: "Jamie Dimon: Virtual Currency Will Be Stopped" [1:23] "Speaking on Wednesday at the Fortune Global Forum, the CEO of JPMorgan Chase JPM 3.04% said that the market for the virtual currency isn’t large and it would be stopped by the government before it ever got to that point. Dimon said despite the fact that bitcoin was getting some lip service in Washington, as politicians try to say they support Silicon Valley innovation, he thinks eventually there will be a crackdown. “Virtual currency, where it’s called a bitcoin vs. a U.S. dollar, that’s going to be stopped,” said Dimon. “No government will ever support a virtual currency that goes around borders and doesn’t have the same controls. It’s not going to happen.” Just the same, Dimon said JPMorgan had established a study group to examine the blockchain technology used to record bitcoin transactions. “Blockchain is like any other technology,” said Dimon. “If it is cheaper, effective, works, and secure, then we are going to use it.” Right now, the verdict on blockchain tech is mixed, Dimon said. He added that the loan market could be a good candidate for blockchain because there is a lot of paperwork involved in that line of business and that transactions can take 20 days to close. But he said in other areas of financial markets, like trading stocks, the block chain probably wouldn’t offer significant improvement. That said, Dimon made it clear that bitcoin, or any other virtual currency, would never be a major competitor to the U.S. dollar. “The technology will be used, and it could be used to transport currency, but it will be dollars, not bitcoins.”[...]"   Note: The fact that Blythe Masters is involved with blockchain and such, says that it is a foregone conclusion that it is not going anywhere soon. See also below:  "VPRO Backlight: The Bitcoin Gospel" [11/02/15] Video [48:51] ; "Blythe Masters’ Firm Acquires Blockstack, A Blockchain Start-Up Founded By Google And NASDAQ Alum" [11/02/15] 

Concepts and Practices: "China’s Renminbi As A World Currency, Endorsed By The City Of London" [11/06/15] Printer Friendly Version "Beijing wants the yuan to be converted into a world reserve currency. It is true that the road to full convertibility is still a very long one. China has seen the presence of their currency increased more than any other country in recent years. The yuan is today the second most utilized currency for commercial financing, and the fourth most demanded for cross-border payments, according to data from the Society of World Interbank Financial Telecommunications (SWIFT). The strategy of the Asian giant to yuan-ize the global economy is centred in ‘gradualism’. The Chinese leaders are in no hurry. The Communist Party [of China] is conscious of the fact that any false movement can provoke ‘financial wars’ against them. Both the Federal Reserve and the US Treasury Department resist a movement that the dollar and Wall Street would see their influence in world finances diminish. The Chinese Government takes precautions, since to reach long term objectives, it is better to move step by step, under cover, than to assume high risks. For this reason, in the first place, China added the support of the Asian continent, either underwriting swap agreements, or installing Offshore Clearing Banks (OCB), or giving investment quotas for participation in the Renminbi Qualified Foreign Institutional Investor Program (RQFII). [...] The United Kingdom became the first country to promote the use of the yuan in Europe. Germany, France, Switzerland and Luxembourg entered the competition through the installation of OCB to facilitate the use of the «people’s currency» (‘renminbi’). Nevertheless, none of these constituted a serious threat to the United Kingdom. The City of London has more than half of operations denominated in yuan in the European continent. As the economy of the United Kingdom is in a state of stagnation, and closely threatened by deflation (a fall of prices), the Government of David Cameron desperately insists on strengthening his ties with Asia-pacific countries, especially with China, that even with their deceleration of the last few years, contributes 25% of the growth of the world Gross Domestic Product (GDP). For the UK Chancellor of the Exchequer – and the favorite of the Conservative Party to occupy the post of Prime Minister in 2020 – George Osborne, the world today witnesses a new geopolitical and economic configuration, in which China plays the preponderant role. Business affairs are no longer concentrated in the United States and the European Union. Because of this, for the City of London, commercial opportunities and investment with Beijing are more important than the commandments of alignment with Washington. One proof of this is that last March the United Kingdom was added to the convocation of the China’s Asian Infrastructure Investment Bank (AIIB), the institution that ended the domination of the World Bank and the Asian Development Bank in Asia. [...]"  

MSM: "IMF Credibility To Collapse If Ukraine Allowed To Default To Russia" [11/05/15] Printer Friendly Version "The International Monetary Fund (IMF) is breaking its own rules and making a mockery of its global credibility by allowing Ukraine to default on its $3 billion debt to Russia, Trends Research Institute head Gerald Celente told Sputnik. “Allowing Kiev to default on their $3 billion Eurobond deal with Russia is against IMF rules. But now they are ready to break their own rules,” Celente said. In March 2015, the IMF approved a four-year $127.5 billion financial package to stabilize Ukraine’s troubled economy. However, by the IMF’s own rules, the aid package is forfeit if Ukraine defaults on its Eurobond debt to Russia by the end of 2015. Now, the IMF is reassessing its lending-into-arrears policy and could change it before November 30, according to media reports. “This is a symptom of how central bankers behave. They behave as if there is no such thing as rules and laws. They do what they want,” Celente said. [...]  The noted US analyst recalled that the Obama administration, spearheaded by Assistant Secretary of State Victoria Nuland (Kagan), had urged then-Ukrainian President Viktor Yanukovych to accept IMF terms for its aid in December 2013. “Nuland said the reforms that IMF requires are necessary for the long-term economic health of Ukraine. I guess she was wrong. Because they got the reforms … but they don’t have long-term stability and economic growth,” Celente pointed out. [...]"  

MSM: "China Proposes Phasing-Out Manipulative Trading Algorithms" [11/05/15] Printer Friendly Version  "Over the past decade; our markets have ceased to behave like “markets”, at all. We see obvious perversity, such as the simultaneous (and extreme) bubbles in U.S. stocks and bonds, something which is mathematically impossible in any legitimate marketplace. More generally; we see what are supposed to be divergent stock markets (representing diverse, independent economies), diverse sectors, and diverse companies being marched up-and-down, collectively, like some gigantic, synchronized yo-yo. This is more impossible behavior – in legitimate markets. Such insanity, and such extreme/impossible market phenomena are not confined to Western markets. Two weeks ago; blockbuster news emerged out of China, via Zero Hedge. China’s government is: …seeking public opinion on limiting the use of automated trading programs in the stock market. [...] This comes on the heels of China’s government banning one of the largest U.S. trading companies from China’s market (which specialized in algorithm trading), as well as suspending the accounts of dozens of U.S. based-traders – for their algorithm trading. Here what is most notable is the highlighted portion of the previous excerpt, the intention of China’s government to “review the mechanisms behind automated trading systems”.  All these investigations (and suspensions) occurred immediately after China’s stock market was marched (literally) straight up, and then crashed straight down. It doesn’t take much reading-between-the-lines to deduce that the “review” currently being undertaken is a search for this same, Invisible Hand – which regular readers know better as the One Bank. There was no organic/economic catalyst for China’s stock market bubble, which erupted from trough-to-peak in an improbable span of little more than six months. It came “out of nowhere”, for no reason at all. Of course it did serve one purpose: it was a major distraction from the even-larger U.S. bubbles, which had been steadily pumped-up not over a span of a mere six months, but rather over six, consecutive years. Note that these manipulative trading algorithms have been foisted upon us for the flimsiest of reasons: to make markets “more efficient”. Yes with structural unemployment across the Western world exceeding 100 million people (and growing), we need to look for ways to eliminate human labour, and replace it with a computer program. Now refer back to the final portion of the previous excerpt, to “authorize stock exchanges to levy extra charges on such automated systems”. With such additional levies, it’s quite possible that such computerized trading would no longer be cost-effective, or only minimally so. In that context; what then is the pretext for allowing the continued use of such automated stupid money? This computerized insanity already forces us to impose “circuit breakers” on what are supposed to be “free markets.” How much further do we pervert our markets to accommodate obviously manipulative (and thus obviously illegal) computer trading algorithms? It should be further noted that the bankers used precisely the same excuse to introduce their equally manipulative (and equally illegal) “short-selling” into our markets. It would “make markets more efficient”, they told us, by supposedly promoting better “price discovery”. Really? There has been very little “price discovery” in the precious metals sector for decades, and absolutely zero since 2011. We see commodities with perennial supply-deficits, which regularly/continually trade below the average cost of production. It is price-discovery which is the mechanism which is supposed to promptly remedy such market disequilibrium. It is the only mechanism for restoring equilibrium to markets.[...]  We got no “efficiency” from short-selling, just a lot more financial crime. The most-obvious of this crime is “naked shorting”, meaning naked fraud; criminal traders being allowed to literally counterfeit their own shares, and then dump those shares onto the market, in order to (illegally) depress prices. The only thing more heinous than such market fraud is that it is an activity which is almost completely unpoliced in our corruption-ridden markets. Now we supposedly “need” computerized trading algorithms, in order to bring even more fraud and corruption to these pseudo-markets? Where does it end? Many markets have already been forced to initiate bans on short-selling. We got none of the benefits promised by the banker con-men, but now we’re saddled with all the crime, and perversion of asset prices. Now these markets are overrun with the bankers’ manipulative trading algorithms. Indeed, to “manage” (i.e. manipulate) markets in the collective manner which we observe every day requires a Master Trading Algorithm, a single, dominant program, which (in turn) herds all of the individual trading algorithms, like the Pied Piper herded rats.[...]"

Commentary: "Russia Can Solve All Its Own Economic Problems " [11/04/15] Printer Friendly Version "Since Washington and the EU imposed hostile and unwarranted financial and economic sanctions on Russia after the spring of 2014, President Putin and the Russian government have made many praiseworthy and sometimes brilliant moves to respond to the de facto acts of financial warfare. However they have avoided dealing with fundamental deeper distortions and vulnerabilities in the Russian economy and monetary order. Failure to do so in the future will prove to be Russia’s Achilles Heel if not addressed soon. Fortunately Russia can do something about it even before an alternative currency to the US dollar is at hand. It requires simply a bit of consequent rethinking about the situation. The key to Russia’s economy, to any economy for that matter, is the question of who controls the issue and circulation of credit or money, and whether they do it to serve, directly or indirectly, private special interests or for the common national good. [...] Chaos swept the Union of Soviet Socialist Republics after the fall of the Berlin Wall in November 1989. In July 1990, one of the first acts of “democrat” and Western media hero, Boris Yeltsin, the newly elected President of the Russian Soviet Socialist republic, one month after declaring independence from the USSR, was to change the Russian Constitution with Article 75 to create the Central Bank of The Russian Federation. At the time US hedge fund speculator, George Soros had brought Jeffrey Sachs and Sweden’s Anders Aaslund to Russia to “guide” Yeltsin “shock therapy” advisers such as Yegor Gaidar and Anatoly Chubais. Together, along with pressure from the IMF, they turned the country into an impossible chaos and economic collapse for most of the 1990’s. Pensions were wiped out as the Russian National Bank under the leadership of Viktor Gerashchenko, printed endless supplies of worthless rubles, creating a mammoth hyperinflation of prices. A handful of favored Russian oligarchs close to the Yeltsin family, such as Mikhail Khodorkovsky or Boris Berezovsky, became staggeringly wealthy oligarchs while the vast majority barely survived. This was the social petri dish in which the Article 75 mandating the new Central Bank of the Russian Federation was adopted. The Russian Central Bank, which is today a member of the western-controlled Bank for International Settlements in Basle, has the explicit constitutional mandate to be an independent entity, with primary responsibility of protecting the stability of the national currency, the ruble. It also holds exclusive right to issue ruble banknotes and coins. That’s de facto life and death power over Russia’s economy. With Article 75 the Russian Federation de facto gave away sovereignty over her most essential power–the power to issue money and create credit. Today that has come home to haunt President Putin, his government and the Russian people as a US-imposed financial warfare and targeted sanctions forced the Central Bank to raise key interest rates December 2014 threefold to 17% to try to defend a ruble in free-fall. Today, despite a significant stabilization of the ruble, central bank rates remain a severe 11%. The Russian Central Bank, no matter how patriotic the person running it, is a monetarist institution not an arm of sovereign state policy. To keep the Ruble “stable” means stable against the US dollar or the Euro. That means the independent Russian Central Bank is de facto hostage to the US dollar, hardly an ideal circumstance in the current state of de facto war by other means underway from NATO, the Obama Treasury Department, the CIA, Pentagon and US neoconservative warhawk circles. During the June 2015 St. Petersburg International Economic Forum I was told by a quite senior Russian government minister that there was an intense internal debate inside the government and around Putin’s advisers, about re-establishing a public national bank, as opposed to the independent BIS-modelled central bank imposed by the West on Russia in 1990.[...] National Development Bonds: [...] The little-known secret: There is a secret about economic infrastructure investment. Unlike various literal “windmill-building” government subsidized projects in today’s EU or USA, construction of necessary economic infrastructure such as high-speed rails–projects that make the arteries of the national and international economy flow faster and more efficiently–such infrastructure projects bring manifold economic gains to the overall economy. This is the long-forgotten “secret” of infrastructure investment discovered in America during the Great Depression when the government issued bonds to build the huge hydroelectric complex in the Government’s Tennessee Valley Authority and other massive infrastructure projects. Various USA studies from the 1960’s, back when America still invested in its national infrastructure, found that spending on such vital economic infrastructure repays the state in new tax revenues approximately 11 dollars, or in this case rubles, for every dollar or ruble initially invested. That is the secret of well-conceived infrastructure spending. [...]"  

Corbett Report: "9/11 Insider trading – Follow The Money – 9/11 Trillions" [11/03/15] [59:34] "9/11 was a crime. And as with any crime, there is one overriding imperative that detectives must follow to identify the perpetrators: follow the money. This is an investigation of the 9/11 money trail. [...]"  

Concepts and Practices: "Global Financial System of Fake GDP Statistics Exposed" [11/03/15] [6:57]   

Commentary: "Rothschild Bankster Indicted For Illegal Banking Activities" [11/02/15] Printer Friendly Version "Video" [2:40] "Baron David de Rothschild was recently indicted by the French government after he was accused of fraud in a scheme that allegedly embezzled large sums of money from British pensioners. It has taken many years to bring this case against Rothschild and his company the Rothschild Financial Services Group, which trapped hundreds of pensioners in a bogus loan scheme between the years of 2005 and 2008. One by one the pensioners lost their money and pressed charges against the notorious banker, beginning a case that would take many years to get even an indictment. This week, Paris-based liaison judge Javier Gómez Bermudez ruled that Rothschild must face a trial for his crimes, and ordered local police to seek him out in his various mansions that are spread throughout the country. “It is a good step in the right direction. The courts are now in agreement with us that there is enough evidence to interrogate Baron Rothschild. The first thing they will have to do is find him. Once they have done that they can begin to question him. It is a real breakthrough moment for everyone involved,” lawyer Antonio Flores of Lawbird told the Olive Press after the ruling. “In short, independently of what happened to the investment, Rothschild advertised a loan aimed at reducing inheritance tax, which is a breach of tax law,” he added. The Rothschild banking dynasty is a family line that has been accused of pulling the political strings of many different governments through their control of various economic systems throughout the world. [...]" 

Commentary: "VPRO Backlight: The Bitcoin Gospel " [11/02/15] [48:51] "Is Bitcoin the blueprint for a bankless currency, or the biggest pyramid scheme? Related: "Blythe Masters’ Firm Acquires Blockstack, A Blockchain Start-Up Founded By Google And NASDAQ Alum" Printer Friendly Version 

Concepts and Practices: "Sweden Close To Becoming Cashless Society With Negative Interest Rates" [11/01/15] Printer Friendly Version  "If banks charge customers negative interest rates in a cashless society, those customers are not able to withdraw their money as cash to shield it under their putative mattresses. Consumers' only choice in such a scenario is to spend it or let the bank take it. (The theory is that by forcing people to spend cash rather than save it, you can spur economic growth.) Rather than going further into negative territory — a move that carries political risks the more negative it becomes — the Riksbank chose instead to do another round of quantitative easing (a forced bond-buying program that flushes more cash from the central bank into the economy). But the pressure for negative interest rates to drive cash out of bank deposits and into the economy is building. Switzerland, for instance, has negative central-policy rates that cost its banks $1 billion a year. Those costs haven't yet been passed down to consumers. But how much longer will banks eat that before adding fees and charges to Swiss accounts to defray the cost? [...] We reported at the weekend how central bankers and investment-bank analysts are increasingly discussing when this might happen. And Tuesday, Italy sold a two-year bond at an interest rate of -0.023%, which means investors have to pay to lend Italy money rather than receive interest on their loans. (Why would you buy such a bond? Well, if you believe that you'll get even worse terms in the future from other creditors — hello, Sweden! — then suddenly -0.023% starts to look pretty good.) So two trends are converging on Sweden at the same time: Sweden is using less and less cash. Sweden is an environment of negative interest rates. And that means many Swedes have no way to "hide" their money. So Sweden may become the first country whose citizens may have to accept negative interest rates (probably in the form of higher bank charges or fees) or be forced to spend their money to "save" it from those rates. A resistance is forming, and some people are protesting the impending extinction of cash. Björn Eriksson, former head of Sweden's national police and now head of Säkerhetsbranschen, a lobbying group for the security industry, told The Local, "I've heard of people keeping cash in their microwaves because banks won't accept it." [...]"  Related: "Swedish Minister: ‘In The Long Run Our System Will Collapse’" Printer Friendly Version "Wallström, who was deputy chairperson of the EU commission in 2004-2010, told the Dagens Nyheter newspaper that Sweden would be taking a tougher stance in summits in an attempt to secure financial support and help to accommodate the 140,000-190,000 asylum seekers the country is expected to receive in 2015. Sweden is currently campaigning for other EU member states to take in a greater share of refugees fleeing violence in the Middle East and Africa. But the minister said negotiations have so far not produced the desired result. [...]"   


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