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JPM Chase Bank Preparing For Cyprus-Style Gouging in US?
Published on Oct 16, 2013
Silverdoctors
(special thanks to basserdan)
Video link below
Why is Chase Bank banning wire transfers and limiting cash withdrawals for business customers?
Is the bank preparing for some kind of financial crisis or Cyprus-style account gouging?
(Select HD and full screen to read letters).
More at:
http://www.silverdoctors.com/chase-bank-initiates-capital-controls-limits-cash-withdrawals-bans-international-bank-wires/
Creeping Capital Controls At JPMorgan Chase?
by Tyler Durden on 10/16/2013
A letter sent to a ZH reader yesterday by JPMorgan Chase, specifically its Business Banking division, reveals something disturbing. For whatever reason, JPM has decided that after November 17, 2013, it will halt the use of international wire transfers (saying it would "cancel any international wire transfers, including recurring ones"), but more importantly, limits the cash activity in associated business accounts to only $50,000 per statement cycle. "Cash activity is the combined total of cash deposits made at branches, night drops and ATMs and cash withdrawals made at branches and ATMs."
Why? "These changes will help us more effectively manage the risks involved with these types of transactions." So... JPM is now engaged in the risk-management of ATM withdrawals?
Reading between the lines, this sounds perilously close to capital controls to us.
While we have no way of knowing just how pervasive this novel proactive at Chase bank is and what extent of customers is affected, what is also left unsaid is what the Business Customer is supposed to do with the excess cash: we assume investing it all in stocks, and JPM especially, is permitted? But more importantly, how long before the $50,000 limit becomes $20,000, then $10,000, then $5,000 and so on, until Business Customers are advised that the bank will conduct an excess cash flow sweep every month and invest the proceeds in a mutual fund of the customer's choosing?
Full redacted letter below:
http://www.zerohedge.com/news/2013-10-16/creeping-capital-controls-jpmorgan-chase
The Speculative Endgame: The Government “Shutdown” and “Debt Default”, A Multibillion Bonanza for Wall Street
By Prof Michel Chossudovsky
Global Research, October 16, 2013
The “shutdown” of the US government and the financial climax associated with a deadline date, leading to a possible “debt default” of the federal government is a money making undertaking for Wall Street.
A wave of speculative activity is sweeping major markets.
The uncertainty regarding the shutdown and “debt default” constitutes a golden opportunity for “institutional speculators”. Those who have reliable “inside information” regarding the complex outcome of the legislative process are slated to make billions of dollars in windfall gains.
Speculative Bonanza
Several overlapping political and economic agendas are unfolding. In a previous article, we examined the debt default saga in relation to the eventual privatization of important components of the federal State system.
While Wall Street exerts a decisive influence on policy and legislation pertaining to the government shutdown, these same major financial institutions also control the movement of currency markets, commodity and stock markets through large scale operations in derivative trade.
Most of the key actors in the US Congress and the Senate involved in the shutdown debate are controlled by powerful corporate lobby groups acting directly or indirectly on behalf of Wall Street. Major interests on Wall Street are not only in a position to influence the results of the Congressional process, they also have “inside information” or prior knowledge of the chronology and outcome of the government shutdown impasse.
They are slated to make billions of dollars in windfall profits in speculative activities which are “secure” assuming that they are in a position to exert their influence on relevant policy outcomes.
It should be noted, however, that there are important divisions both within the US Congress as well as within the financial establishment. The latter are marked by the confrontation and rivalry of major banking conglomerates.
These divisions will have an impact on speculative movements and counter movements in the stock, money and commodity markets. What we are dealing with is “financial warfare”. The latter is by no means limited to Wall Street, Chinese, Russian and Japanese financial institutions (among others) will also be involved in the speculative endgame.
Speculative movements based on inside information, therefore, could potentially go in different directions. What market outcomes are being sought by rival banking institutions? Having inside information on the actions of major banking competitors is an important element in the waging of major speculative operations.
Derivative Trade
The major instrument of “secure” speculative activity for these financial actors is derivative trade, with carefully formulated bets in the stock markets, major commodities –including gold and oil– as well as foreign exchange markets.
These major actors may know “where the market is going” because they are in a position to influence policies and legislation in the US Congress as well as manipulate market outcomes.
Moreover, Wall Street speculators also influence the broader public’s perception in the media, not to mention the actions of financial brokers of competing or lesser financial institutions which do not have foreknowledge or access to inside information.
These same financial actors are involved in the spread of “financial disinformation”, which often takes the form of media reports which contribute to either misleading the public or building a “consensus” among economists and financial analysts which will push markets in a particular direction.
Pointing to an inevitable decline of the US dollar, the media serves the interests of the institutional speculators in camouflaging what might happen in an environment characterized by financial manipulation and the interplay of speculative activity on a large scale.
Speculative trade routinely involves acts of deception. In recent weeks, the media has been flooded with “predictions” of various catastrophic economic events focusing on the collapse of the dollar, the development of a new reserve currency by the BRICS countries, etc.
At a recent conference hosted by the powerful Institute of International Finance (IIF), a Washington based think tank organization which represents the world’s most powerful banks and financial institutions:
“Three of the world’s most powerful bankers warned of terrible consequences if the United States defaults on its debt, with Deutsche Bank chief executive Anshu Jain claiming default would be “utterly catastrophic.”
This would be a very rapidly spreading, fatal disease, … I have no recommendations for this audience…about putting band aids on a gaping wound,” he said.
“JPMorgan Chase chief executive Jamie Dimon and Baudouin Prot, chairman of BNP Paribas, said a default would have dramatic consequences on the value of U.S. debt and the dollar, and likely would plunge the world into another recession.” (…)
Dimon and other top executives from major U.S. financial firms met with President Barack Obama and with lawmakers last week to urge them to deal with both issues.
On Saturday, Dimon said banks are already spending “huge amounts” of money preparing for the possibility of a default, which he said would threaten the global recovery after the 2007-2009 financial crisis.
Dimon also defended JPMorgan against critics who say the bank has become too big to manage. It has come under scrutiny from numerous regulators and on Friday reported its first quarterly loss since Dimon took over, due to more than $7 billion in legal expenses. (Emily Stephenson and Douwe Miedema, World top bankers warn of dire consequences if U.S. defaults | Reuters, October 12, 2013
What these “authoritative” economic assessments are intended to create is an aura of panic and economic uncertainty, pointing to the possibility of a collapse of the US dollar.
What is portrayed by the Institute of International Finance panelists (who are the leaders of the world’s largest banking conglomerates) is tantamount to an Economics 101 analysis of market adjustment, which casually excludes the known fact that markets are manipulated with the use of sophisticated derivative trading instruments. In a bitter irony, the IIF panelists are themselves involved in routinely twisting market values through derivative trade. Capitalism in the 21st century is no longer based largely on profits resulting from a real economy productive process, windfall financial gains are acquired through large scale speculative operations, without the occurrence of real economy activity. at the touch of a mouse button.
The manipulation of markets is carried out on the orders of major bank executives including the CEOs of JPMorgan Chase, Deutsche Bank and BNP Paribas.
The “too big to fail banks” are portrayed, in the words of JPMorgan Chase’s CEO Jamie Dimon’s, as the “victims” of the debt default crisis, when in fact they are the architects of economic chaos as well as the unspoken recipients of billions of dollars of stolen taxpayers’ money.
These corrupt mega banks are responsible for creating the “gaping wound” referred to by Deutsche Bank’s Anshu Jain in relaiton to the US public debt crisis.
Collapse of the Dollar?
Upward and downward movements of the US dollar in recent years have little do with normal market forces as claimed by the tenets of neoclassical economics.
Both JP Morgan Chase’s CEO Jamie Dimon and Deutsche Bank’s CEO Anshu Jain’s assertions provide a distorted understanding of the functioning of the US dollar market. The speculators want to convince us that the dollar will collapse as part of a normal market mechanism, without acknowledging that the “too big to fail” banks have the ability to trigger a decline in the US dollar which in a sense obviates the functioning of the normal market.
Wall Street has indeed the ability to “short” the greenback with a view to depressing its value. It has also has the ability through derivative trade of pushing the US dollar up. These up and down movements of the greenback are, so to speak, the “cannon feed” of financial warfare. Push the US dollar up and speculate on the upturn, push it down and speculate on the downturn.
It is impossible to assess the future movement of the US dollar by solely focusing on the interplay of “normal market” forces in response to the US public debt crisis.
While an assessment based on “normal market” forces indelibly points to structural weaknesses in the US dollar as a reserve currency, it does not follow that a weakened US dollar will necessarily decline in a forex market which is routinely subject to speculative manipulation.
Moreover, it is worth noting that the national currencies of several heavily indebted developing countries have increased in value in relation to the US dollar, largely as a result of the manipulation of the foreign exchange markets. Why would the national currencies of countries literally crippled by foreign debt go up against the US dollar?
The Institutional Speculator
JPMorgan Chase, Goldman Sachs, Bank America, Citi-Group, Deutsche Bank et al: the strategy of the institutional speculators is to sit on their “inside information” and create uncertainty through heavily biased news reports, which are in turn used by individual stock brokers to advise their individual clients on “secure investments”. And that is how people across America have lost their savings.
It should be emphasized that these major financial actors not only control the media, they also control the debt rating agencies such as Moody’s and Standard and Poor.
According to the mainstay of neoclassical economics, speculative trade reflects the “normal” movement of markets. An absurd proposition.
Since the de facto repeal of the Glass-Steagall Act and the adoption of the Financial Services Modernization Act in 1999, market manipulation tends to completely overshadow the “laws of the market”, leading to a highly unstable multi-trillion dollar derivative debt, which inevitably has a bearing on the current impasse on Capitol Hill. This understanding is now acknowledged by sectors of mainstream financial analysis.
There is no such thing as “normal market movements”. The outcome of the government shutdown on financial markets cannot be narrowly predicted by applying conventional macro-economic analysis, which excludes outright the role of market manipulation and derivative trade.
The outcome of the government shutdown on major markets does not hinge upon “normal market forces” and their impacts on prices, interest rates and exchange rates. What has to be addressed is the complex interplay of “normal market forces” with a gamut of sophisticated instruments of market manipulation. The latter consist of an interplay of large scale speculative operations undertaken by the most powerful and corrupt financial institutions, with the intent to distorting “normal” market forces.
It is worth mentioning that immediately following the adoption of the Financial Services Modernization Act in 1999, the US Congress adopted the Commodity Futures Modernization Act 2000 (CFMA) which essentially “exempted commodity futures trading from regulatory oversight.”
Four major Wall Street financial institutions account for more than 90 percent of the so-called derivative exposure: J.P. Morgan Chase, Citi-Group, Bank America, and Goldman Sachs. These major banks exert a pervasive influence on the conduct of monetary policy, including the debate within the US Congress on the debt ceiling. They are also among the World’s largest speculators.
What is the speculative endgame behind the shutdown and debt default saga?
An aura of uncertainty prevails. People across America are impoverished as a result of the curtailment of “entitlements”, mass protest and civil unrest could erupt. Homeland Security (DHS) is the process of militarizing domestic law enforcement. In a bitter irony, each and all of these economic and social events including political statements and decisions in the US Congress concerning the debt ceiling, the evaluations of the rating agencies, etc. create opportunities for the speculator.
Major speculative operations –feeding on inside information and deception– are likely take place routinely over the next few months as the fiscal and debt default crisis unfolds.
What is diabolical in this process is that major banking conglomerates will not hesitate to destabilize stock, commodity and foreign exchange markets if it serves their interests, namely as a means to appropriate speculative gains resulting from a situation of turmoil and economic crisis, with no concern for the social plight of millions of Americans.
Speculation in Agricultural Commodities: Driving up the Price of Food Worldwide and plunging Millions into HungerOne solution –which is unlikely to be adopted unless there is a major power shift in American politics– would be to cancel the derivative debt altogether and freeze all derivative transactions on major markets. This would certainly help to tame the speculative onslaught.
The manipulation through derivative trade of the markets for basic food staples is particularly pernicious because it potentially creates hunger. It has a direct bearing on the livelihood of millions of people.
As we recall, “the price of food and other commodities began rising precipitately [in 2006], … Millions were cast below the poverty line and food riots erupted across the developing world, from Haiti to Mozambique.”
According to Indian economist Dr. Jayati Ghosh:
“It is now quite widely acknowledged that financial speculation was the major factor behind the sharp price rise of many primary commodities , including agricultural items over the past year [2011]… Even recent research from the World Bank (Bafis and Haniotis 2010) recognizes the role played by the “financialisation of commodities” in the price surges and declines, and notes that price variability has overwhelmed price trends for important commodities.” (Quoted in Speculation in Agricultural Commodities: Driving up the Price of Food Worldwide and plunging Millions into Hunger By Edward Miller, October 05, 2011)
The artificial hikes in the price of crude oil, which are also the result of market manipulation, have a pervasive impact on costs of production and transportation Worldwide, which in turn contribute to spearheading thousands of small and medium sized enterprises into bankruptcy.
Big Oil including BP as well Goldman Sachs exert a pervasive impact on the oil and energy markets.
The global economic crisis is a carefully engineered.
The end result of financial warfare is the appropriation of money wealth through speculative trade including the confiscation of savings, the outright appropriation of real economy assets as well as the destabilization of the institutions of the Federal State through the adoption of sweeping austerity measures.
The speculative onslaught led by Wall Street is not only impoverishing the American people, the entire World population is affected.
http://www.globalresearch.ca/the-speculative-endgame-the-government-shutdown-and-debt-default-a-multibillion-bonanza-for-wall-street/5354420
Michel Chossudovsky is an award-winning author, Professor of Economics (emeritus) at the University of Ottawa, Founder and Director of the Centre for Research on Globalization (CRG), Montreal and Editor of the globalresearch.ca website.
He is the author of The Globalization of Poverty and The New World Order (2003) and America’s “War on Terrorism”(2005).
His most recent book is entitled Towards a World War III Scenario: The Dangers of Nuclear War (2011).
He is also a contributor to the Encyclopaedia Britannica. His writings have been published in more than twenty languages.
He can be reached at crgeditor@yahoo.com
If I Had To Pick Just 1 Silver Miner, SilverCrest Mines Is It
Oct 15 2013, 14:47
Steve Nicastro
Seeking Alpha
Disclosure: I am long SLW, SAND. (More...)
A friend of mine asked me the other day, "If you had to choose to invest in just one silver mining stock going forward, which would it be?" It didn't take me too long to respond to his question. I told him SilverCrest Mines (SVLC), with great confidence.
I believe shares of SilverCrest mines present a great value at current prices and I think the best is yet to come. This is a silver/gold miner that will survive this period of depressed precious metals prices and will come out very strong when prices do eventually recover.
Company Overview
Credit: SilverCrestMines.com
- SilverCrest Mines owns and operates the 100%-owned Santa Elena Mine in the State of Sonora, México. The mine is a 2,500 tonnes per day open pit heap leach operation which is expected to yield 625,000 ounces of silver and 33,000 ounces of gold in 2013, for a total of 2.4 million silver equivalent ounces. Santa Elena first reached commercial production on July 13, 2011.
- Santa Elena is a very high-grade gold and silver mine, one reason why the company is able to mine precious metals at a lower cost than its peers.
- The company is undergoing an aggressive expansion plan to increase production next year. While the mine only has an estimated mine life of 8 years (previously 6.5 years before recent drilling), the company has been very successful in exploration and I believe the life of the mine can be extended further.
- The company aims to bring production at Santa Elena to 3.5 million silver equivalent ounces next year. The company's long-term goal is to produce more than 10 million silver equivalent ounces a year from both Santa Elena and the La Joya project. I will discuss how the company plans to do this later on.
Share Structure and Stock Price
- Silvercrest shares trade on the TSX under SVL.V and on the AMEX under the symbol SVLC.
- The company has 108 million shares outstanding with 6.3 million options for a fully diluted share count of 115 million. With 108 million shares outstanding and a current share price of $1.58, Silvercrest has a market cap of $172 million.
- The company has no warrants outstanding, which is somewhat rare for a small cap mining company. For example, Aurcana Corporation (AUNFF.OB), one of its competitors, has over 10 million warrants outstanding. Warrants are often included in an equity financing and they are dilutive to shareholders, so I see it as a positive that Silvercrest has zero warrants issued.
- One way SilverCrest was able to get into production with minimal dilution was by a stream financing agreement with Sandstorm Gold (SAND). Sandstorm gets 20 percent of the life of mine gold production at Santa Elena at a price per ounce of $350. For the stream, Sandstorm gave SilverCrest $12 million cash and 700,000 common shares of Sandstorm Gold. The stream was acquired in May of 2009.
As a Sandstorm shareholder and a future shareholder of Silvercrest, I believe this agreement has been a great deal for both companies. Sandstorm only invests in projects and management teams that they are really confident in, so I see this as a third-party validation of the quality of both the Santa Elena mine and the management team.
Silvercrest - Outperforming its Peers
- Silvercrest shares are down 37.7 percent this year, compared to a decline of over 50 percent in the Silver Miners Index (SIL).
- You will see in this chart below that, while the damage has been quite brutal for the silver miners, Silvercrest has outperformed all of its peers. Here I've compared Silvercrest to the SIL, as well as fellow Mexican miners Great Panther Silver (GPL), Endeavor Silver (EXK) and First Majestic Silver (AG), which, besides Silver Wheaton (SLW), is considered by many to be the best silver stock out there.
Silver Wheaton, with its streaming model which produces cash costs less than $6 per silver ounce, is the only silver stock that comes close to Silvercrest.
(click to enlarge)Credit: Yahoo! Finance
- This one chart is one example of how great of a job the management team at SilverCrest is doing.
Below are three main reasons why I believe Silvercrest has outperformed its peers and why I believe they will continue to do so going forward.
#1 Profitable, Even at Current Precious Metals Prices
- For the second quarter of 2013, Silvercrest reported cash flow from operations of $5.58 million with an impressive all-in sustaining cost per ounce of $13.26. The company sold 647K of silver equivalent ounces, putting them on track to beat their 2013 full-year estimate of 2.4 million ounces.
- The company reported net earnings of $2.87 million or .03 cents per share. You can make a strong case that the company is undervalued at current prices. The current P/E for Silvercrest is just 6.99. Analysts estimates for full-year 2014 are earnings of .21 cents a share, giving the company a forward P/E ratio of just 7.5. For comparison, Endeavor Silver has a P/E of 15.84 and First Majestic Silver has a P/E of 17.02.
- Perhaps most impressive, the company reported an average cash operating cost of just $7.80 per silver equivalent ounce for the quarter and an all-in sustaining cost per ounce of $13.26, which is well below the industry average of $22-24.
(click to enlarge)Credit: SilverCrest Mines Corporate Presentation- All of these results came with the price of silver at three-year lows of $22 an ounce. The bottom line is while most silver miners are struggling to record a profit, SilverCrest is.
#2 Massive Reserve Base and Production Upside
- SilverCrest has 37.7 million silver equivalent ounces in reserves with 16.7 million in the indicated category, plus 223 million ounces in the inferred category, for a total resource base of over 276 million silver equivalent ounces.
- The chart below will show you that the growth of SilverCrests' reserves since 2006 has been quite massive. In 2006, the company had just 17.5 million in total silver equivalent ounces. By 2013, that number has grown to the current total of 276 million, with the biggest growth spurt coming in the past year.
(click to enlarge)Credit: SilverCrest Mines Corporate Presentation
- SilverCrest has a current enterprise value of $145 million (Market cap of $172 million minus cash and equivalents balance of $29.6 million).
- Based on these numbers, the market is placing a value on SilverCrests' reserves of just $1.90 per silver equivalent ounce, which is lower than the industry average of $3-5 an ounce.
*St. Elena Expansion Upside
- As on June 30, 2013, 65 percent of the budgeted 2013 capital cost has been committed, with the expansion on time and on budget. The scheduled mill start up date is January 2013. A total of $16 million remains in the Santa Elena expansion after 2013, with $66 million budgeted for 2013.
- With working capital of $41.6 million and an undrawn line of credit of $40 million available, the company has more than enough money to complete this expansion without having to issue equity or taking on debt.
- Pre-feasibility results for the Santa Elena expansion were released in April 2013. Results of the study were very positive, even using base-case prices of $1,250 gold and $19 silver. At these prices, the project carries a Net Present Value of $108.7 (Discount of 5 percent) and an internal rate of return of 49 percent, which is very high. Payback is just 1.7 years, which is outstanding.
- With gold at $1,450 and silver at $28, however, the project carries a NPV of $223 million (Discount of 5 percent) with a super-high IRR of 88 percent and a payback of just 1.1 years! If you think precious metals prices will get back to these levels, like I do, then the best is yet to come for Santa Elena.
The expansion production profile is listed below.
(click to enlarge)Credit:SilverCrest Mines Corporate Presentation
- It is very possible the company will be able to expand the mine life at Santa Elena based on recent drill results. The following drill results were reported on September 5:
SE-13-144; 9.2 metres grading 4.83 gpt Au and 171.4 gpt Ag including 0.8 metres grading 30.20 gpt Au and 638.0 gpt Ag
SE-13-152; 15.0 metres grading 4.03 gpt Au and 243.2 gpt Ag including 2.0 metres grading 17.5 gpt Au and 664.0 gpt Ag
SE-13-160; 13.3 metres grading 3.52 gpt Au and 136.2 gpt Ag including 4.1 metres grading 6.46 gpt Au and 133.6 gpt Ag
SE-13-166; 11.7 metres grading 3.97 gpt Au and 189.5 gpt Ag including 5.0 metres grading 8.10 gpt Au and 334.4 gpt Ag
SE-13-175; 8.8 metres grading 1.91 gpt Au and 70.6 gpt Ag including 2.0 metres grading 6.70 gpt Au and 226.1 gpt Ag
- These are great drill results which extended mineralization beyond the current resource, discovering three new zones:El Cholugo, El Cholugo Dos and Tortuga.
*La Joya Upside?
- Enormous upside potential remains at the La Joya project, which holds a whopping 200 million silver equivalent ounces in the inferred category. The project has excellent infrastructure, located close to highway, railways and power lines very close by.
La Joya is interesting because it contains massive inferred copper reserves of 533,200,000 lbs. The project also contains 716,200 ounces of gold and 95,900,000 ounces of silver. Because of the huge amount of gold and copper, I believe this will lead to very low cash costs once in production.
- The latest drill results have been very encouraging, containing 80 meters of 78.8 gpt Ag, .31 gpt Au and 137 gpt Ag Eq).
- A preliminary economic assessment for La Joya is underway and it should be very interesting to see how this project develops. While Santa Elena is an already profitable operation with upside, La Joya has home-run potential and can be a company maker for SilverCrest.
#3 Rock-Solid Balance Sheet for a Small Cap Company
- Perhaps the best part of the SilverCrest story is the financial condition of the company.
- SilverCrest has a solid balance sheet. The company reported cash and equivalents of nearly $30 million at the end of June, with a working capital position of $41.6 million. The company has no debt.
- I think it is very rare to see a small company with such a solid balance sheet and profitability. If silver and gold were to remain at current levels, or drop even lower, SilverCrest could still be turning a profit, which is not the case for many other silver miners out there.
Conclusion - SilverCrest is a Buy and Best of the Bunch
I believe the following points can be made about SilverCrest:
- With a P/E of about 7, they are undervalued at the current stock price, even with silver at $22 and gold at $1250.
- The company has one of the best balance sheets of any silver miner of its size.
- Huge upside potential remains at both Santa Elena, an already profitable mine, and La Joya, which could be a "company-maker."
- Even with silver at three-year lows of $22 an ounce, SilverCrest is profitable, recording .04 EPS last quarter.
- SilverCrest has outperformed its peers in 2013 and should continue to do so going forward, due to its profitability, balance sheet, production upside potential, third-party validation by Sandstorm Gold, etc.
I've been following this company since early 2013 and will continue to do so. I plan on purchasing shares sometime next month and throughout 2013/14. Follow me here on Seeking Alpha for future articles on SilverCrest and other silver miners.
Additional disclosure: I may buy shares of SVLC within the next month.
http://seekingalpha.com/article/1746562-if-i-had-to-pick-just-1-silver-miner-silvercrest-mines-is-it?source=email_portfolio&ifp=0
Jim Rogers Blasts "This Is Going To End Badly... And The Rest Of The World Knows It"
Tyler Durden's pictureSubmitted
by Tyler Durden on 10/15/2013
The only thing exceptional about the USA is "its the largest debtor nation in the history of the world" is how Jim Rogers begins this brief interview with RT and he doesnt back away from the rhetoric. The sad truth, he notes, is that the US "has been kicking the can down the road for years..." how do you think we got so much debt, he chides. "Every year that goes by we go deeper and deeper into debt," adding, rather ominously, that it "will be solved one way or another." They will kick the can once more; then next week, we will be told that the problem is fixed and compromise is here. However, Rogers warns, eventually the market is going to turn away; "this is going to end badly... and the rest of the world knows it."
For some clarifying thought before an onslaught of headline hockey in US equity markets, Rogers comments are a must view to comprehend the game we are playing...
Video;
http://www.zerohedge.com/news/2013-10-15/jim-rogers-blasts-going-end-badly-and-rest-world-knows-it
Repo Market Implosion Financial Collapse Nightmare Scenario
Oct 13, 2013 - 06:38 PM GMT
By: Mike_Whitney
October 11, 2013 "Information Clearing House - President Barack Obama is determined to prevail in his battle with GOP congressional leaders on the debt ceiling issue, but not for the reasons stated in the media. Obama is less concerned with the prospect of higher interest rates and frustrated bondholders than he is with the big Wall Street banks who would be thrust back into crisis if there is no resolution before October 17. Absent a debt ceiling deal, the repurchase market–known as repo–would undergo another deep-freeze as it did in 2008 when Lehman Brothers defaulted triggering a run on the Reserve Primary Fund which had been exposed to Lehman’s short-term debt. The frenzied selloff sparked a widespread panic across global financial markets pushing the system to the brink of collapse and forcing the Federal Reserve to backstop regulated and unregulated financial institutions with more than $11 trillion in loans and other obligations. The same tragedy will play out again, if congress fails lift the ceiling and reinforce the present value of US debt.
Repo is at the heart of the shadow banking system, that opaque off-balance sheet underworld where maturity transformation and other risky banking activities take place beyond the watchful eye of government regulators. It is where banks exchange collateralized securities for short-term loans from investors, mainly large financial institutions. The banks use these loans to fund their other investments boosting their leverage many times over to maximize their profits. The so called congressional reforms, like Dodd Frank, which were ratified after the crisis, have done nothing to change the basic structure of the market or to reign in excessive risk-taking by undercapitalized speculators. The system is as wobbly and crisis-prone ever, as the debt ceiling fiasco suggests. The situation speaks to the impressive power of the bank cartel and their army of lawyers and lobbyists. They own Capital Hill, the White House, and most of the judges in the country. The system remains the same, because that’s the way the like it.
US Treasuries provide the bulk of collateral the banks use in acquiring their short-term funding. If the US defaults on its debt, the value that collateral would fall precipitously leaving much of the banking system either underwater or dangerously undercapitalized. The wholesale funding market would grind to a halt, and interbank lending would slow to a crawl. The financial system would suffer its second major heart attack in less than a decade. This is from American Banker:
As banking policy analyst Karen Shaw Petrou describes it, Treasury obligations are the “water” in the financial system’s plumbing.
“They’re the global reserve currency and they are perceived to be the most secure thing you can own,” said Petrou, managing partner of Federal Financial Analytics. “That is why it is pledged as collateral. … The very biggest banks fear that a debt ceiling breach breaks the pipes.”….
Rob Toomey, managing director and associate general counsel at the Securities Industry and Financial Markets Association, said institutions are concerned about whether Treasury bonds that default are no longer transferable between market participants.
“Essentially, whatever the size is of the obligation that Treasury is unable to pay, that kind of liquidity would just disappear from the market for whatever time the payment is not made,” Toomey said.”
By some estimates, the amount of liquidity that would be drained from the system immediately following a default would be roughly $600 billion, enough to require emergency action by either the Fed or the US Treasury. Despite post-crisis legislation that forbids future bailouts, the government would surely ride to rescue committing taxpayer revenues once again to save Wall Street.
Keep in mind, the US government does not have to default on its debt to trigger a panic in the credit markets. Changing expectations can easily produce the same result. If the holders of US Treasuries (USTs) begin to doubt that the debt ceiling issue will be resolved, then they’ll sell their bonds prematurely to avoid greater losses. That, in turn, will push up interest rates which will strangle the recovery, slow growth, and throw a wrench in the repo market credit engine. We saw an example of how this works in late May when the Fed announced its decision to scale-back its asset purchase. The fact that the Fed continued to buy the same amount of USTs and mortgage-backed securities (MBS) didn’t stem the selloff. Long-term rates went up anyway. Why? Because expectations changed and the market reset prices. That same phenom could happen now, in fact, it is happening now. The Financial Times reported on Wednesday that “Fidelity Investments, the largest manager of money market funds… had sold all of its holdings of US Treasury bills due to mature towards the end of October as a “precautionary measure.”
This is what happens when people start to doubt that US Treasuries will be liquid cash equivalents in the future. They ditch them. And when they ditch them, rates go up and the economy slips into low gear. (Note: “China and Japan together hold more than $2.4 trillion in U.S. Treasuries” Bloomberg)
Now the media has been trying to soft-peddle the implications of the debt ceiling standoff by saying, “No one thinks that holders of USTs won’t get repaid.”
While this is true, it’s also irrelevant. The reason that USTs are the gold standard of financial assets, is because they are considered risk-free and liquid. That’s it. If you have to wait to get your money, then the asset you purchased is not completely liquid, right?
And if there is some doubt, however small, that you will not be repaid in full, then the asset is not really risk free, right?
This is what the Fidelity flap is all about. It’s about the erosion of confidence in US debt. It’s about that sliver of doubt that has entered the minds of investors and changed their behavior. This is a significant development because it means that people in positions of power are now questioning the stewardship of the present system. And that trend is going to intensify when the Fed begins to reduce its asset purchases later in the year, because winding down QE will precipitate more capital flight, more currency volatility and more emerging market runaway inflation. That’s going to lead to more chin scratching, more grousing and more resistance to US stewardship of the system. None of this bodes well for Washington’s imperial aspirations or for the world’s reserve currency, both of which appear to be living on borrowed time.
The media has done a poor job of explaining what’s really at stake. While, it’s true that higher interest rates would make consumer loans more expensive and put the kibosh on the housing recovery, that’s not what the media cares about. Not really. What they care about is the looming massacre in shadow banking where USTs are used as collateral to secure short-term loans by the banks so they can increase their leverage by many orders of magnitude. In other words, the banks are using USTs to borrow gobs of money from money markets and financial institutions so they can finance their other dodgy investments, derivatives contracts and ancillary casino-type operations. If there’s a default, the banks will have to come up with more capital for their scams that are leveraged at 40 or 50 to 1. This systemwide margin call would trigger a deflationary spiral that would domino through the entire system unless the Fed stepped in and, once again, provided a giant backstop in the form of blank check support. Here’s how Tim Fernholz sums it up over at Daily Finance:
“…Many informed people are worried” (about) “A freeze in the tri-party repo market, akin to the cascade of troubles that followed the Lehman Brothers bankruptcy in 2008.”….
In 2008, more than a third of that collateral was mortgage-backed securities. When Lehman went bankrupt, its lenders began a “fire sale” of the securities it used as collateral, which drove down the value of other mortgage-backed securities, which led to more fire sales. This dynamic would eventually lead to a freeze in the repo markets, which, at the time, provided $2.6 trillion in funding to the banks each day…..
Today, most of the collateral in use is U.S. Treasuries and “agency securities” — mortgage-backed securities guaranteed by the U.S. government:
… if the ugly day of a default comes, lenders may simply stop accepting U.S. debt as collateral. That will have the effect of sucking some $600 billion in liquidity out of the banking system. Unable to get funding for Treasurys, securities dealers would be pressured to sell them-or other assets-to find new funding, creating a fire sale dynamic…..
And, of course, this scenario is only about how the Treasurys work in the repo markets. U.S. debt is used as collateral for derivatives swaps and numerous other transactions; if they are suddenly worth less than expected, lenders can be expected to demand more collateral up front, putting even more pressure on the financial system. That’s why pressure is building to raise the ceiling before the world’s largest economy enters a scenario with so much uncertainty.”
Repeat: “That’s why pressure is building to raise the ceiling before the world’s largest economy enters a scenario with so much uncertainty”.
So the Obama team isn’t worried that Joe Homeowner won’t be able to refi his mortgage or that the economy might slip back into recession. They just don’t want to see Wall Street take it in the shorts again. That’s what this is all about, the banks. Because the banks are still up-to-their-eyeballs in red ink. Because they still don’t have enough capital to stay solvent if the wind shifts. Because all the Dodd Frank reforms are pure, unalloyed bullsh** that haven’t fixed a bloody thing. Because the risks of another panic are as great as ever because the system is the same teetering, unregulated cesspit it was before. Because the banks are still financing their sketchy Ponzi operations with OPM (other people’s money), only now, the Fed’s over-bloated balance sheet is being used to prop up this broken, crooked system instead of the trillions of dollars that was extracted from credulous investors on subprime mortgages, liars loans and other, equally-fraudulent debt instruments.
Can you see that?
This is why the media is pushing so hard to end the debt ceiling standoff; to preserve this mountainous stinkpile of larceny, greed and corruption run by a criminal bank Mafia and their political lackeys on Capital Hill. That’s what this is all about.
By Mike Whitney
Email: fergiewhitney@msn.com
http://www.marketoracle.co.uk/Article42675.html
Ned Goodman and the 'Botox Economy'
2013-09-18
Northernminer
Ned Goodman, president and CEO of Dundee Corp., spoke about the perils of quantitative easing at the Toronto Resource Investment Conference on Sept. 12. He made the following remarks, as recorded by The Northern Miner:
Ned Goodman: I have a lot to say and I will give you my biases, no problem there. I believe I’m a sensible man. And as a sensible man I’ve been told by my mother, actually, that even though you don’t know the hour or the place of your demise — you do know, that without a doubt, it’s going to come.
So as a sensible investor, I’m ready for the day that the U.S. Empire crumbles, and that’s a hint as to where I’m going . . . I know that nothing lasts forever and the environment that we’re in could change. But we do not know anything other than nothing lasts forever, and right now it looks like whatever is happening is speeding up, not slowing down. I expect and hope to be here to watch it happen.
The slide that is on [the auditorium screen] is nothing more than to show you that the fixed income market since 1962, which is when I started my career, has had some unbelievable long runs. We’re not talking of short-term things, we’re talking about long-term things. And I’ve watched interest rates from 1962, when I started my career, I’ve watched interest rates go up to 15.8% in the late 1970s; lived through those inflationary days in the late 1970s; and then watched in absolute amazement that bonds outperformed stocks for over 30 years.
So nothing is going to happen to fix what we’ve got right now in a short period of time. Something is going to happen, I don’t know what it is, but when I think about what’s going on amidst the global and Middle East chaos that we have, and the violence around the world, and problematic economics that are in existence, and the financial news that emanates from the U.S., Europe and the U.K. — our world is all screwed up. It’s screwed up in a manner that I don’t think we’ve ever seen before. So the traditional economist has a lot of trouble, and that’s why you see so many different views.
So without any certainty, or reason for optimism or confidence of investors, yet the stock markets of the world appear to be blind to the news of the day. Nevertheless I’ve not been more concerned about the future for overall investment at any time in that entire period that you see there since 1962. While I definitely remain an optimist by nature, there are times when rationality takes over my psyche and questions optimism. I remain positive towards those kinds of investments that will retain inflationary protection like infrastructure, real estate and other hard assets such as gold and commodities.
We are fortunate and unfortunate that we live next door to the richest country in the world, and supposedly the most democratic, as established by its Constitution, but not necessarily by its president. But if you search through economic history books, you’ll never find another instance similar to the U.S. currently. This is all brand-new stuff. With their dollar serving as the world’s reserve currency, while backed solely by paper on which is written “In God We Trust — You Should Too.” I trust in God, but not the paper.
In addition to today’s environment, we have a new country — I’m calling Europe a country — with its own currency, which they promised when they put it out that they would never print any more, but it has the same kind of backing as the U.S. dollar has. Nothing other than the backing of these currencies is that “Don’t worry, if we need any more, we’ll print some more. And therefore you shouldn’t worry, you’ll get your interest because we’ll just print some, and when you need to get your money back we’ll print more.” The British are all confused about it, and maybe that’s why they had to reach out to Mark Carney, and maybe he’s going to help them. But at the same time, the Chinese are collecting U.S. dollars and gold. And what are they doing with it? They are spending it as fast as they can. They have hired or brought into the system prominent businessmen, non-political businessmen, giving them the actual advice that it’s important that they find some place to spend these U.S. dollars — $3.5 trillion.
I was fortunate enough to have a private luncheon meeting with Warren Buffett and a few other people and the question came to Buffett: “What is going to happen when the Chinese want all their money back? And they’re going to ask to have their bonds cashed in?”
And Buffett let out this huge guffaw, drinking his cherry coke, and he said, “It’s never going to happen.” And the questioner asked, “What do you mean?” He said there’s no way that the Chinese, who are very, very smart people, are going to take a piece of paper that says so long as you hold this, we will pay you 3% interest in our dollars, in exchange for a piece of paper that tells them they should trust in God and get nothing. And that’s not what is happening. The Chinese are cashing in their bonds to other countries who are using it as currency.
When he visited the U.S. in 2011, the then-president of China, Hu Jintao, said the current international currency system is a product of the past. The monetary policy of the U.S. has a major impact on global liquidity and capital flows, and therefore the liquidity of U.S. dollars should be kept at reasonable and stable levels. He then commented on the 2008 financial crisis, which is the crisis we are all living with right now. It hasn’t ended. And just like 1929 is a date that everybody remembers, as I remember when I graduated from university and told my mother I was going to become an investment counselor and she said: “Do you know what happened in 1929?” Yes I did, but she lived through it.
So Hu Jintao went on and said that the global institutions had failed to fully reflect the changing status of developing countries and the world economy and finance. He went on to suggest that what China and most of the G20 [want] is a reliable, disciplined and apolitical unit of account for global trade. Let us not forget that he was the leader of the country with the largest holding of global foreign exchange reserves and effectively speaks for China and another 143 members of the International Monetary Fund who have accumulated in excess of $5.5 trillion in U.S. currency, $3 trillion of which is held in U.S. dollars directly.
So as we look forward into the future and see the kinds of things that are going to happen, we wonder about a lot of things. This is the Big Mac versus the CPI chart. You can see that starting in 1985 McDonald’s hamburger used to cost a buck and a half. Today that same McDonald’s hamburger costs $4.35. If we used the phony inflationary numbers that are put out by the U.S., put out by the Federal Reserve and whoever does the calculation, it should be $3.35. Now that is minor compared to what John Williams — Dr. Williams who writes Shadow Stats — says that the current rate of inflation in the U.S. is not 2%, as Mr. Bernanke tells us every day, but it’s more like 8–9%, and maybe even higher when you play around with it. So what you’re getting from the U.S. is a bunch of lies.
This is an undervalue–overvalue [chart] for the S&P 500. You can see the S&P 500 is in fair-value territory. It’s not being undervalued, it’s in fair value. This is the Toronto version of it, likewise in fair value territory, that’s everything. Now look at the Canadian 30-year bond [chart], and it is a little overvalued. Bonds should not be in your portfolio, quite simply. Buffett said it two years ago — they’re dangerous to your wealth. Now here’s the materials [chart], and this is where you lump in all kinds of fertilizers, all kind of metals, and everything — it doesn’t have a big enough chart to get to the undervalue [portion] where it really trades at. It gets better. This is the diversified mining and metals [chart], and it too is in grossly undervalued territory.
Now this is the banks [chart]: Now, some of you probably saw the newspaper article that said “Ned Goodman sold all his banks and is buying gold.” Well now you know why. It was an easy decision. The banks are overvalued, they are a protected species. And they make money under any circumstance, but they are overvalued and they pay dividends, and people are frightened of everything else. So the banks are overvalued and gold is grossly undervalued — grossly undervalued, very undervalued.
And there is my view about the commodities model . . . you can see that big, blue line is headed up for commodities, and it goes back to 1932, and gold is at the top of it. I am comfortable that we are still in the supercycle for commodities, and I’ll tell you why.
Ayn Rand told us that as individuals we have innate mobility, and our highest duty is to flourish by realizing our potential — and we’ve got tremendous potential in this country and the people in this country. She also told us that we’re able to develop and/or join a culture that maybe is outside the norm, and create wealth in profoundly different ways.
So I believe gold is scarce. It is hard to find. It is difficult to extract. And it is valuable. The world needs a new gold standard in order to provide us with a true, positive outlook for the world’s investment climate, which today is in very, very, severe disorder. Its ability to create monetary stability, predictability and investment objectivity would be a boon and a blessing. And this from Jim Grant. We could have a monetary system whose exchange rate would be fixed, and business could be conducted on a global basis without even concern and guessing about what the politicians and policy mavens are going to do with the value of our money.
More than five years have passed since the Great Recession. The so-called Great Recession of 2007 and 2008. And at least three years have passed since what the U.S. has been calling a recovery. And there is no recovery. There’s been a lot of back-patting stuff going on in Washington . . . but it’s all a farce. It’s illusion. It’s all illusions of someone playing with numbers. Von Mises talked about illusions, and I’ll talk about that in a minute.
The market has been stubbornly testing new, nominal, so-called highs for months, and is up over 85% from the bottom. They have made a big change to the Dow. The Dow is a 30-stock index. They’re going to take out three of them . . . and put in new names into the Dow. [The three-lowest priced stocks that were dropped were Bank of America, Hewlett-Packard and Alcoa, and they were replaced with Goldman-Sachs, Visa and Nike.] But what happens to ETFs these days is the automatic necessity for the ETFs to bring their portfolio back to where they say it’s going to be. So they buy all the new ones that have been put in and they sell all of the old ones that have been taken out, and guess what? The Dow is up over 100. And then down a little. And the Dow is going to go up, and I’m sure we’ll hear, “The world is great! The Dow went up! Look, through all this trouble the Dow is going up, we should be happy!”
The market has been stubbornly testing these so-called highs for months, but when you take your eyes off the stock markets and corporate profits for just a second, you find everything is falling apart. Cities are going bankrupt. Pensions are going to disappear from coast to coast as soon as the bills come due, roads are crumbling, bridges are collapsing, the U.S. is living in a police state that has spent nearly $17 trillion of its future wages.
The Americans don’t even have a high-speed rail train. If you go to countries like Korea you have high-speed trains; if you go to China they have high-speed rail trains. The U.S. doesn’t have them. They’re living in 100 years ago. The official unemployment rate is supposedly dropping, while in fact fewer Americans are employed than at any time in the last 30 years. How do they do it? Simple. You get unemployment insurance, you are deemed to be unemployed. As soon as you can’t get a job after a certain period of time, you get taken off the unemployment payments and now you’re counted as “employed.” Still unemployed.
So the unemployment numbers are totally phony, they are not real. If you average the monthly gains for jobs, you get around 179,000 jobs added. But 225,000 is what they really need. So since the recession began in December 2007, there are 5.8 million fewer full-time jobs and 2.8 million more part-time jobs. In other words, anyone who finds full-time work is an exception to the norm. Seventy-six percent of Americans are living paycheque to paycheque. Fifty percent have less than a three-month cushion. Forty-six percent have less than $800 in savings. Twenty-two percent have less than $100 to their name. And 27% have no savings at all. And this is all happening while corporate earnings, of course, are going up.
Why the disconnect? Well, the politicians and the Fed have abandoned their constituents to cater to lobbyists and donors, etc. So, while corporations are doing well, the people aren’t. The share of the economy being paid in wages is small. As it falls lower and lower, it goes to owners and to boardroom salaries and directors. We’re seeing the results of a nation and President Obama’s focus on making corporate health look good at the expense of everything and everyone else.
Now it’s time to give you a bias. One of my biases is that I think President Obama and his position will turn out to be the worst presidency the U.S. has ever had in its whole history. I think his total plan is to get rid of the Republican Party. Now, I have to say, they’re helping him, because if he gets rid of the Republican Party, and if he keeps taking from the rich to give to the poor, and the poor are the ones who vote for you, you will have more votes, so you’re going to keep taking from the rich to give to the poor.
The other thing that happens when you keep taking from the rich to give to the poor is that the rich become poor and they’ll vote for you too. So this is a design. And some will say, well, he can’t become another president, he’s served two terms and the Constitution says you can only serve two terms. But his wife can serve. His wife can run for president in 2016. She’s smarter than he is and a hell of a lot better looking than he is, and she will get not only the black vote but the entire womens’ vote. And the entire democratic vote. So I think that’s his whole plan. Now it’s a bias, I have no proof, it’s just a gut feeling. I hope I’m wrong. But we’re in a recession.
David Stockman wrote a book. He worked with Ronald Reagan and he wrote a book called The Great Deformation, and he said that his view was that we are at the shadow era, the Keynesian endgame of a failing, bankrupt, paralyzed state. The fact that so many voices of the establishment are at pains to shut him down provides me with the view that he might be right.
Will the U.S. dollar collapse? The pressure on the dollar will reflect not only the financial crisis inflicted on us and the U.S. in 2007 and 2008, and further to the president, but also includes the significant weakening of the U.S., a change to the negative on geopolitical status. It is said that God rules in heaven, and that’s part of “trust in him.” Money rules on earth. But even the devil dances for gold.
So temporary prosperity at the cost of long-term prosperity is what the U.S. is going through right now. Federal pension plans are un-funded. The country is running large deficits that don’t do much good for the economy. He spends it somewhere, running monetary policies that improve conditions today, but will worsen future conditions as a result. Social security and Medicare are unsustainable programs created by the grandparents of the country, sustained by the parents of the country, but will kill the young people with their costs. The Obamacare is not going to help the country. Obamacare’s front-end loaded taxes and back-end loaded benefits are not going to do their job. States and municipalities have played with their pension assumptions for years, often in generous benefits they could not afford. Tax policy encourages debt rather than equity, creating industries that over-borrow, and there are many of them. So the country is in a mess. The world is in a mess.
— Part II of Ned Goodman’s speech will appear in next week’s issue - See more at: http://www.northernminer.com/news/ned-goodman-and-the-botox-economy/1002594276/#sthash.2Dxg8JXI.dpuf
http://www.northernminer.com/news/ned-goodman-and-the-botox-economy/1002594276/
Analyst Favorites of the Metals Titans: Sibanye Gold Ranks As a Top Pick
Energy Stock Channel Energy Stock Channel, Contributor
Oct. 1, 2013
Forbes
A study of analyst recommendations at the major brokerages shows that Sibanye Gold Ltd (NYSE: SBGL) is the #3 broker analyst pick, on average, out of the 50 stocks making up the Metals Channel Global Mining Titans Index, according to Metals Channel. The Metals Channel Global Mining Titans Index is comprised of the top fifty global leaders from the metals and mining sector. The companies listed in the Metals Channel Global Mining Titans Index are not fixed, but instead variable — updating on a continuous basis to reflect the changing market environment with respect to commodity prices, government policy and market volatility.
In forming this rank, the analyst opinions from the major brokerage houses were tallied, and averaged; then, the underlying components of the Metals Channel Global Mining Titans Index were ranked according to those averages. Investors often interpret analyst opinions from different angles — a popular analyst pick could mean that many sharp minds individually came to the same bullish conclusion, and therefore the stock should do well, but it could also mean that if the company stumbles, that would come as a negative surprise. Click here to find out the Analyst Favorites of the Metals Channel Global Mining Titans Index »
From the other direction, when companies have a low rank among analysts, it isn’t necessarily the case that investors should conclude that the stock will perform poorly. It can, of course, but a bullish investor could also take the contrarian angle and read into the data that there is lots of room for upside because the stock is so out of favor.
According to the ETF Finder at ETF Channel, SBGL makes up 6.79% of the Pure Gold Miners ETF (GGGG)which is trading lower by about 6.2% on the day Tuesday.
SBGL operates in the Metals & Mining sector, among companies like Rio Tinto plc (RIO) which is off about 0.6% today, and Teck Resources Ltd (TCK) trading lower by about 1.1%. Below is a three month price history chart comparing the stock performance of SBGL, versus RIO and TCK.
SBGL,RIO,TCK Relative Performance Chart
SBGL is currently trading up about 0.8% midday Tuesday.
http://www.forbes.com/sites/energystockchannel/2013/10/01/analyst-favorites-of-the-metals-titans-sibanye-gold-ranks-as-a-top-pick/?partner=yahootix
Excellent article basserdan!
The Shutdown of the U.S. Government and “Debt Default”: A Dress Rehearsal for the Privatization of the Federal State System?
By Prof Michel Chossudovsky
Global Research, October 12, 2013
The “shutdown” of the US government and the financial climax associated with a deadline date, leading to a possible “debt default” of the federal government is a money making undertaking for Wall Street.
Several overlapping political and economic agendas are unfolding. Is the shutdown –implying the furloughing of tens of thousands of public employees– a dress rehearsal for the eventual privatization of important components of the federal State system?
A staged default, bankruptcy and privatization is occurring in Detroit (with the active support of the Obama administration), whereby large corporations become the owners of municipal assets and infrastructure.
The important question: is a process of “State bankruptcy” –which is currently afflicting local level governments across the land– possible in the case of the central government of the United States of America?
This is not a hypothetical question. A large number of developing countries under the brunt of IMF “economic medicine” were ordered by their external creditors to dismantle the State apparatus, fire millions of public sector workers as well as privatize State assets. The IMF Structural Adjustment Program (SAP) has also been applied in several European countries.
Will this gamut of deadly macro-economic reforms engineered by Wall Street and the Federal Reserve be conducive to widespread civil disorder across the United States?
While the declaration of a national emergency or martial law is not envisaged, reports confirm that the Department of Homeland Security (DHS) is currently “engaged in acquiring heavily armored tanks, which have been seen roaming the streets.” In the words of Ellen Brown, “somebody in government is expecting some serious civil unrest…”
Fiscal Collapse
Flash back to the meltdown of Wall Street in September 2008. In the wake of the economic crisis, a process of fiscal collapse was initiated.
The evolving fiscal crisis had set the stage. It has a direct bearing on the issue of shutdown of the federal government and “debt default”.
The Bush and Obama bank bailouts had led to the appropriation of $1.45 trillion of US tax revenues. This money was channeled to Wall Street under Bush’s Troubled Assets Relief Program (TARP) and Obama’s bailout program initiated at the outset of his first term. This money was transferred to the banks.
Meanwhile, “defense expenditure” in support of a war economy had spiraled: 740 billion dollars had been allocated (FY 2010) to fund a vast process of militarization including America`s wars in the Middle East and Central Asia.
“Black Budgets”
Of significance, there were several other unreported shadowy multibillion dollar bailouts which do not appear in government accounts, not to mention the Pentagon’s black budgets which are not included in the official expenditure accounts of the Department of Defense.
According to Aviation Week in a 2009 report:
“the Pentagon’s ‘black’ operations, including the intelligence budgets nested inside it, are roughly equal in magnitude to the entire defense budgets of the UK, France or Japan, and 10 per cent of the total.” (see Big Increases for Intelligence and Pentagon “Black” Programs in 2010 By Tom Burghardt, May 13, 2009
“War and Wall Street”: Spiraling Public Debt
In the wake of the 2008 financial crisis, a new structure of public indebtedness had been created. Without accounting for the “black budgets” and “shadowy bank bailouts”, reported defense expenditures plus the bank bailouts amounted to a staggering 2.35 trillion dollars. Total revenue in FY 2010 was of the order of $2.38 trillion.
In other words, these two categories of expenditure, namely War and Wall Street “had eaten up” (together with interest payments on the public debt) the totality of federal government revenues.
The $2.35 trillion included the handouts to the banks plus military expenditure and the funding of the multibillion dollar DoD contracts with Lockheed Martin, Raytheon, Northrop Grumman, British Aerospace, et al.
No Money Left Over From the Public Purse to Fund Regular Government Programs
What this warped budgetary structure implied (in FY 2009 and 2010) was that there was no money (i.e. residual funds) “left over” from the public purse (tax revenues and other sources of federal government revenue) to fund regular government programs.
All other categories of expenditure including medicare, medicaid, social security as well as public investments in infrastructure, etc. had to be financed through debt creation (emission of Treasury bills and government bonds), namely through a dramatic increase in the public debt from $9.9 trillion in FY 2008 to 16.7 trillion (October 2013), a staggering increase of almost 70 percent.
FRED Graph
Widening Budget Deficit
In essence, the federal government has been financing it own indebtedness through generous handouts to Wall Street and the military industrial complex.
These developments are inevitably also characterized by a widening budget deficit in the wake of the 2008 financial crash. See CBO graphs below, which indicate the figures for the budget deficit as well as the forecast for 2012-2022.
The Congress Budget Office (CBO) contends that the “estimates” for 2013-2022 are based on revised historical values of Gross Domestic Product by the Bureau of Economic Analysis (BEA). This is a nonsensical statement.
The Congress Budget Office (CBO) acknowledges that “the federal budget deficits [2013-2022] are now expected to shrink dramatically”. These are not our words but those of the CBO. And these “forecasts” have nothing to do with revised historical values of GDP. The have to do with austerity measures and macro-economic policy.
Budgetary Shift: “Economic Shock Therapy”
In a matter of three years, according to the CBO forecast, the budget deficit will be reduced from 7 percent of GDP in 2012 to 2 percent in 2015.
A budgetary shift of this nature can only be implemented by “economic shock therapy” leading to socially devastating cuts in public expenditure, which will inevitably result in a wave of civil unrest.
What is behind these “estimates” is the presumption that drastic austerity measures leading to major cuts in government spending will be implemented over a ten year period (2013-2022) thereby reducing the size of the budget deficit as well as its percentage ratio to GDP.
Medicare, Medicaid, Social Security
The so-called CBO “estimates” for 2013-2023 are based on the assumption that austerity measures (which have not yet been formally adopted) will lead to the downsizing, phasing out and/or privatization of a large number of State programs including medicare, medicaid and social security. How else would it be possible to slash the budget deficit from 7 to 2 percent of GDP in 3 fiscal years?
Medicare, Medicaid and Social Security represented in FY 2012, 45 percent of total government expenditure (See CBO Chart on Federal Government Spending for FY 2012, below).
It is highly unlikely that the budget of the Department of Defense (19 percent) will be used to reduce the budget deficit.
Quantitative Easing: “Keeping the Ship Afloat”
In a bitter irony, while the Wall Street financial institutions were the recipients of the bailouts, they are also the creditors of the federal government, which had been precipitated into a structure of deficit financing controlled by Wall Street. This deficit financing –which was facilitated by Quantitative easing– is distinct from the Keynesian framework. It is controlled by the creditors. It does not create employment, it is not expansionary. It has little bearing on the real economy.
This post 2008 fiscal structure has had a fundamental impact on the process of debt formation. Tax and other federal government revenues had been assigned in 2008-2009 to bailing out the banks while relentlessly funding the war economy including the financing through black budgets of a growing number of Private military and security companies (PMSC).
The public debt has increased by almost 70 percent in five years, from 9.9 trillion in 2008 to 16.7 trillion in 2013 (October 2013 estimate of the debt ceiling, see graphs above).
The various phases of Quantitative Easing (QE) throughout the Obama presidency were largely intended by Wall Street to keep the ship afloat, with an increasingly larger share of the debt owned by the Federal Reserve (in the form of Treasury bills). The Fed has largely been involved in propping its assets.
Under QE, tens of billions of dollars are injected into financial markets. Quantitative easing has not resulted in a positive stimulus of the real economy. “The real goal of the Federal Reserve is to guarantee the continual profitability of Wall Street and the personal incomes of the super-rich.”
The Fed is not a publicly owned central bank; it is a network of 12 private US banks, with the New York Federal Reserve Bank playing a key role. Operating under a semi-secret veil, major Wall Street financial institutions (including the big four) are the “stakeholders” of the Federal Reserve, which ultimately call the shots on Capitol Hill. At the outset of the Obama administration in 2009, The Federal Reserve Banking system (which is an unaccountable private entity) has been granted increased authority in its management of the US economy, overshadowing the prevailing system of public regulation of the financial system, as well as reinforcing the subordinate role of the US Treasury in relation to Wall Street.
Policies pertaining to the shutdown of the government and the statutory debt ceiling are determined by Wall Street and the Federal Reserve, the US government’s largest creditor. The Federal Reserve banks currently holds $2.1 trillion of US public debt. Japan and China respectively own 1.1 trillion and 1.3 trillion of the US public debt. Based on Jun 2012 figures, The Federal Reserve owns 16 percent of the Federal Debt held by the Public.
The New York Federal Reserve Bank (the largest of the Federal Reserve banks) holds a significant portion of the total holdings of the Federal Reserve system composed of 12 constituent banks.
Source: www.nationalpriorities.org
Were the Federal Reserve to be a publicly owned central bank, quantitative easing would have an entirely different dynamics: the government rather than the Fed (acting on behalf of Wall Street) would be calling the shots. Under a publicly owned central banking arrangement, two trillion dollars worth of public debt could be cancelled, thereby creating conditions for the funding of social programs.
The result of these macroeconomic reforms has been mass unemployment. The American people –including the middle class– have been impoverished by the Wall Street establishment, which ultimately decides on debt default and the statutory ceiling placed on the public debt.
Under pressure from Wall Street and the Federal Reserve, the choices of the US government are limited to the following options:
State programs can either be downsized, phased out or transferred out of the public purse to the private corporate sector, implying in all cases the layoff of tens of thousands of public employees.
No major reforms of the structure of indebtedness are contemplated by the US Congress, which could meaningfully change the government’s relationship to the Federal Reserve and its Wall Street handlers. The creditors ultimately decide.
What is contemplated are marginal modifications of the status quo including legislation to push the debt limit to December 31st 2014.
This token arrangement would temporarily increase the federal government’s borrowing ability through the issuing of Treasury bills and government bonds by about one trillion dollars. Under this scheme, however, the powers of the Wall Street Banks and the New York Federal Reserve would not only be maintained they would be reinforced.
The ultimate objective is to develop a full-fledged proxy State under the helm of the financial establishment. Both the Executive as well as the US Congress are to remain under the control of Wall Street.
The Privatization of the American State?
The inevitable scenario established in the wake of the 2008 crisis is fiscal collapse, leading to:
the possible phasing out and/or curtailment of social programs, the privatization of large sectors of public sector activity.
The fiscal ceiling having now been reached, possibly with a deadline, the government is being pressured by its Wall Street handlers –who control decision-making in the US Congress– to curtail and downsize social programs as well as initiate the transfer of public assets and institutions into the hands of private corporations. There is also a movement to cut as well as privatize Social Security and Medicare.
The privatization of public monuments, museums, national parks, the post office, etc. has been raised in recent media reports as a possible “solution” to the debt crisis. But let us not be misled: the process of acquisition of federal public property including infrastructure and State institutions is likely to go much further.
The public sector is up for grabs. Wall Street will eventually go on a buying spree picking up State owned assets at rock bottom prices.
Ironically, the money transferred by the US government to Wall Street under the bailouts in 2008-2009 can now be used by Wall Street to buy out state property and assets. What this means is that the federal government not only finances its own indebtedness, it is also financing the privatization program (at tax payers expense), leading to the demise of federal government programs.
This process of privatization of the State is nothing new, it has been applied in developing countries under the helm of the IMF whereby state corporations are auctioned off and transferred into the hands of foreign corporations. It has also been applied in Eastern Europe as well more recently in several countries of the European Union
The proceeds of the privatization program are channeled to the State Treasury to meet outstanding debt obligations. In Brazil in the 1990s, important state assets in mining and forestry were purchased by Citi Group, which was Brazil’s largest foreign creditor bank. Ironically, the proceeds of the privatization of the assets purchased by Citi Group were channeled back to Citi Group in the form of debt servicing.
Existing state programs are transferred to private corporations either through outright sale of state assets or through outsourcing of government services to the private sector.
Large numbers of government employees would be laid off as a result of restructuring and privatization. Government services would be sold to the public at a much higher price.
The Privatization of American Cities
The takeover of State assets in America is well under way largely at the municipal and state level. We recall Orange county which went bankrupt in 1994, Jefferson County, Alabama which filed for Chapter 9 bankruptcy in 2011, and more recently Detroit in 2013. In these and other county/municipal bankruptcies, public assets, lands and infrastructure are sold off to private investors. Across the US, more than 100 municipalities are facing bankruptcy:
All over the United States, politicians are selling off key pieces of infrastructure to foreign investors and big Wall Street banks like Goldman Sachs are helping them do it. State and local governments across the country that are drowning in debt and that are desperate for cash are increasingly turning to the “privatization” of public assets as the solution to their problems. Pieces of infrastructure that taxpayers have already paid for such as highways, water treatment plants, libraries, parking meters, airports and power plants are being auctioned off to the highest bidder. Most of the time what happens is that the state or local government receives a huge lump sum of cash up front for a long-term lease (usually 75 years or longer) and the foreign investors come in and soak as much revenue out of the piece of infrastructure that they possibly can. The losers in these deals are almost always the taxpayers. Pieces of America are literally being auctioned off just to help state and local governments minimize their debt problems for a year or two, but the consequences of these deals will be felt for decades. (Michael Snyder, American Dream, July 6, 2011)
The bankruptcies of local level governments immediately backlash on pension funds:
In California, the Orange County Employees Retirement System is estimated to have a 10 billion dollar unfunded pension liability….
How in the world can a single county be facing a 10 billion dollar hole?
The state of Illinois is facing an unfunded pension liability of more than 77 billion dollars. Considering the fact that the state of Illinois is flat broke and on the verge of default, it is inevitable that a lot of those pension obligations will never be paid.
… Pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.
That comes to about $22,000 for every single working adult in the state of California. (See Vanishing Pensions: All Over America Old Age Pensions Are Being Slashed or Eliminated, Global Research, March 14, 2012)
The privatization of federal State assets on a significant scale as well as the take over and privatization of public services is the next stage of this socially devastating economic restructuring process.
Speculative Onslaught
There is another related agenda, which will be the object of a forthcoming article.
originalThe uncertainty underlying the government shutdown and debt default is the object of a wave of speculative activity on major markets.
Wall Street financial institutions not only exert a decisive influence in the formulation of the Administration’s fiscal and monetary agenda, they also control the movement of currency markets, commodity and stock markets through large scale operations in derivative trade.
Most of the key actors in the US Congress and the Senate involved in the shutdown debate are controlled by powerful corporate lobby groups including, of course, Wall Street. The latter are those which ultimately decide on the outcome. They are not only in a position to influence the results of the Congressional process, they also have foreknowledge of the nature and timing of key decisions and they are in a position to reap multibillion dollar speculative gains in the derivative markets by speculating on policy outcomes of which they have advanced knowledge.
Those who determine the government’s debt policy, namely the Wall Street creditors, also have “inside information” or prior knowledge of the chronology and outcome of the government shutdown impasse. will make billions of dollars in windfall profits
While Wall Street is instrumental in triggering the debt ceiling impasse, major financial institutions will also be placing their bets in large scale speculative transactions.
Michel Chossudovsky is an award-winning author, Professor of Economics (emeritus) at the University of Ottawa, Founder and Director of the Centre for Research on Globalization (CRG), Montreal and Editor of the globalresearch.ca website. He is the author of The Globalization of Poverty and The New World Order (2003) and America’s “War on Terrorism”(2005). His most recent book is entitled Towards a World War III Scenario: The Dangers of Nuclear War (2011). He is also a contributor to the Encyclopaedia Britannica. His writings have been published in more than twenty languages. He can be reached at crgeditor@yahoo.com
Minor editing, October 13, 2013
http://www.globalresearch.ca/the-shutdown-of-the-u-s-government-and-debt-default-a-dress-rehearsal-for-the-privatization-of-the-federal-state-system/5354066
Derivatives and the Government Shutdown: Wall Street Bets One Thousand Trillion Dollars of Everybody Else’s Money
Derivatives Market Worth Over 16 Times Gross World Product
By Glen Ford
Global Research, October 10, 2013
Black Agenda Report 9 October 2013
The clock is ticking, we are told, on the “good faith and credit” of the United States government, which might technically be unable to pay its bills after October 17 if the two corporate parties don’t make a deal on the debt limit. Congressional Republicans and the White House are “playing Russian roulette with the global economy,” says an editorial in the Dallas Morning News, warning of impending “economic Armageddon” as financial markets “crater,” the economy stalls and interest on future federal borrowing skyrockets.
Given that capitalism has entered a terminal stage of acute and escalating crises, the Dallas editorialists may be right; anything could set off another spasm of financial mayhem in a system that is ever more unstable. However, it is the “markets” – a euphemism for the financial capitalist class – that are the ultimate source of instability, the folks who play Russian roulette 24-7 and have dragged humanity to a place where an actual Armageddon is only a twirl of the chamber away. In this game, everybody’s head is in play.
It is proper that the corporate press speak of the impending fiscal threat – a minor one, in the maelstrom of crises that beset the system – in gambling terms. An increase of interest rates by a few basis points (fractions of a percent) on trillions of borrowed dollars amounts to quite a chunk of public money, to be paid directly into the accounts of these very same private “markets” that are supposedly biting their nails with anxiety over the budget. The Dallas Morning News and its fellow corporate propaganda spores spread the myth that the “markets” (bankers, hedge funds, etc.) crave stability, when the vital statistics of the real world of finance capitalism scream the opposite.
The Lords of Capital (the “markets”) are pure gamblers who have transformed the global financial marketplace into a machinery of perpetual uncertainty, in which all the wealth of the world is bet many times over by people who don’t actually own it, in a casino whose operators scheme against each other as well as their patrons, most of whom are not even aware that they are in the game – much less, that it is Russian roulette.
The notional value of derivative financial instruments is now estimated at $1.2 quadrillion – that is, one thousand two hundred trillion dollars. This statistic is fantastic in every sense of the word, amounting to 16.7 times the Gross World Product, which is the value of all the goods and services produced per year by every man, woman and child on the planet: $71.83 trillion. Derivatives are valued at six times more than the total accumulated wealth of the world, including all global stock markets, insurance funds, and family wealth: $200 trillion.
The great bulk of known derivative deals are held by banks that are considered too big to be allowed to fail, with the top four banks accounting for more than 90 percent of the exposure: J.P. Morgan Chase, Citibank, Bank of America, and Goldman Sachs.
We are told that derivatives are simply bets between knowledgeable partners – hedges against loss – and that every time one of these financial institutions loses, another gains, so that there is no net loss or threat of global collapse. But that’s a lie. Never in the history of the world has finance capital so dominated the real economy, and only in the past two decades have derivatives been so central to finance capitalism. The players do not know what they are doing, nor do they care. The meltdown of 2008 was caused primarily by derivatives, requiring a bailout in the tens of trillions of dollars that is still ongoing, with the Federal Reserve buying up securities that no one would purchase – that is, bet on – otherwise. Yet, the universe of derivatives deals has grown much larger than in 2008, effectively untouched by President Obama’s so-called financial reforms.
The casino has swallowed the system. The sums the players are betting are not only far larger than the value of the rest of their portfolios, but six times larger than the combined assets of every human institution and family on Earth, and almost 17 times bigger than the worth of humankind’s yearly output. Even if the whole planet were offered as collateral, it could not cover Wall Street’s bets.
The events of 2008 demonstrated that derivatives collapses, like other speculative financial events, behave as cascades of consequences, rather than orderly “resolutions.” Derivatives deals infest or overhang every nook and cranny of the U.S. and other “mature” economies, poisoning pension systems and municipal finance structures. Detroit has been rendered a failed city by the full range of derivatives and securitization. When the casino is the economy, everyone is forced to play, and the poor go broke first.
Reformers of various stripes tell us that derivatives can either be regulated to a less lethal scale or abolished, altogether, while leaving Wall Street otherwise intact. That’s manifestly untrue. Finance capital creates nothing, reproducing itself through the manipulation of money. The derivatives explosion occurred because Wall Street needed a form of “fictitious” capital to continue posting ever higher profits, and ultimately, fictitious portfolios full of tradable bets. Derivatives deals are the ultimate expression of financial capitalism: they are primarily bets on transactions, rather than investments in production. The rise of derivatives signals that capitalism has run its course, and can only do further harm to humanity. The derivatives economy – all $1.2 quadrillion of it – is the last stage of capitalism.
If the Occupy Wall Street movement had understood this, and articulated the necessity to overthrow and abolish Wall Street, its impact would have been far more profound. As it stands, Americans are directed to quake in fear as the clock ticks down to some technical federal budgetary deadline on October 17 – as if that’s the sword of Damocles hanging over the world.
BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.
$2 Billion Bear Raid In Gold Futures
POSTED ON OCTOBER 11, 2013
BY CEO TECHNICIAN
At 8:42am EDT this morning an entity entered an order to sell 5,000 December gold futures contracts at market. This order represents roughly $640 million in notional gold value and triggered a temporary 10 second trading halt and a 5-minute period in which over $2 billion worth of gold futures contracts changed hands:
Click to enlarge
GC_5-minute
Perhaps the most interesting aspect of this latest large stop tripping market sell order in gold futures was the time of day in which the raid was executed. There was no market moving economic releases or events taking place at 8:42am EDT this morning – it just so happened that the market was vulnerable with a literal ‘gold mine’ of sell stop-loss orders on the south side of the key $1275 level.
It would be preposterous to think that any entity attempting to obtain best price execution would attempt to sell such a massive amount of gold in just a few seconds. Which leaves only one reasonable explanation: The 5,000 lot sell order was designed to wreak havoc and confusion (trigger stop-loss sell orders and breach a key technical support level) by an entity that was already short the market. Who might this entity be?……“Goldman Sachs Says Gold is a Slam Dunk Sell”
Our suspicions were further confirmed by two separate conversations with Commodity Trading Advisors (CTAs) who both use trend following strategies to trade commodity futures – both trader’s systems issued a short signal in gold on today’s close below $1275. Behemoth firms such as Goldman Sachs have enough information about market participant positioning to be able to identify price zones which will trigger maximum market impact – this morning’s 5,000 contract sell order in December gold futures is a textbook example of “maximum market impact” and predatory trading activity.
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321Gold.com Editor Bob Moriarty fired us the following comment via email, which we’re sharing here with his permission:
A lot of times you don’t do things because of your entry point, you do it because of your planned exit. But it’s a zero sum game with the number of shorts being perfectly matched with the number of longs. When someone sells 5,000 contracts, we know, because we understand the commodity markets, that they now have to buy 5,000 contracts. It’s perfectly logical, perfectly legal for anyone with the scratch, and hardly part of a conspiracy.
No one in history has ever made a single cent off a belief in a conspiracy. It may be true but it certainly is meaningless. All sound consists of signal and noise. This is noise.
http://ceo.ca/2-billion-bear-raid-in-gold-futures/
My Antidote to the Dirty Obamacare Pill
Oct 11, 2013 - 08:54 PM GMT
By: Don_Miller
I wish I never had to write this article, but I cannot put it off any longer. There are life-threatening secrets you need to know today.
In the fall of 2009, my wife Jo and I went to a town hall meeting in Illinois. The guest speaker was a member of the House of Representatives who served on the committee putting together the law now known as Obamacare. The Congressman stood next to a draft of the bill and answered our questions by reading straight from the text. Most of us left terrified, hoping the bill would never pass.
Jo and I were so aghast that we attended several International Living conferences and even traveled to Costa Rica and Panama to investigate international healthcare options. The thought of going to a hospital where we didn't even speak the language was unnerving, but we needed to know our options.
We spent time with the president of the Johns Hopkins Hospital in Panama—a real world-class facility with mostly US-trained and board-certified physicians. He laid out the details of international medicine for us: "We are gearing up for an onslaught of Americans coming here for health care which they will find denied or delayed in the United States." Much like Canada, eventually Americans will have to leave the country to get quality, timely health care.
Like most countries, in Panama you either have insurance from a carrier the hospital does business with, you pay out of pocket in advance, or you don't get treated.
So, we looked into obtaining international insurance and discovered two things. First, the policies are expensive: over $12,000 for the two of us, who are both currently covered by Medicare. Second, if you want a policy, you need to be under 75 years of age; 75-plus trips around the sun renders you uninsurable.
At the time, Jo and I decided to put it off. Health care in that part of the world is currently less expensive than in the United States, so we took our chances and self-insured. If we needed treatment, we would pay for it ourselves.
Obamacare is now the law of the land. We can't put it off dealing with it any longer. Disagree? Here's a frank look at the law's dirty secrets, courtesy of a few friendly experts.
During our webinar last month, David Galland asked FOX Business reporter John Stossel about his recent book:
"You write that, 'Where governments control health care, but want to limit the costs, everyone has to get in line.' … and then you go on to say, 'Once you accept the idea that taxpayers should pay, then individual choice dies. Someone else decides what treatment you get, and when.' …
"It sounds to me like the end result [is] the government basically decides who lives and who dies. Could that really happen?"
Stossel replied:
"Sure. I imagine it already happens under Medicaid; they won't pay for every experimental treatment. And in some cases that means who gets it lives and somebody who doesn't dies. But when somebody else is going to pay, there is going to be a limit on that. And the question is: who's going to set the limit? If you pay, you get to set the limit. … It should be an individual choice that you weigh based on the cost, but right now with no cost, nobody even thinks about it.
"The people at FOX are fond of saying … there's going to be this unelected committee of bureaucrats that's going to decide what you get, and they'll decide whether you live or die. … Would elected bureaucrats deciding for you be any better? No. It's the idea that others will decide for us, and that's what happens when it's a third-party payment."
That exchange jogged my memory back to an article Dr. Elizabeth Lee Vliet wrote in July: 10 Reasons Why Obamacare Is Going to Ruin Your Medical Care… and Your Life. Dr. Vliet is an acclaimed expert on the enigmatic law, and one of our featured speakers at this week's Casey Summit in Tucson. She wrote (all emphasis in original):
"Higher expenditures to provide medical services lead to rationing of medical care and treatment options to reduce costs. This is the mandated function of the Independent Payment Advisory Board (IPAB): to cut costs by deciding which types of medical services to allow… or disallow.
"If you are denied treatment, you have no appeal of IPAB decisions; you are simply out of luck, and possibly out of life. This is a radical departure from the appeals process required for all private health insurance plans. Further, the IPAB is accountable only to President Obama, and cannot be overridden by Congress or the courts. IPAB is designed to have the final word on your health.
"Under current regulations, if medical care is denied by Medicare, then a patient is not allowed to pay cash to a Medicare-contracted physician or hospital or other health professional. Patients who need medical care that is denied under Medicare or Medicaid will find themselves having to either: 1) look for an independent physician or hospital (quite rare these days); or 2) go outside the USA for treatment."
Huh. So my cash won't be good enough for US doctors or US hospitals. Good thing I was gearing up to interview Nick Giambruno, editor of International Man, for the August issue of Money Forever, when I first read those frightening statements. It's strange how Nick's comments on currency controls wound up speaking to my healthcare worries. Here's what he had to say:
"Currency or capital controls are a favorite option in the tool box of a desperate government and are fairly common in the world today. Though they come in many shapes and sizes, capital controls are government regulations that prevent you from taking your money in and out of a country. The imposition of capital controls usually precedes some form of wealth confiscation (a currency devaluation or deposit confiscation among other measures) and always comes as a surprise to the average person. By their nature, capital controls have to come as a surprise in order to be effective. …
"There were many… [Cypriots] who saw the writing on the wall and had previously moved to diversify a portion of their savings internationally—most commonly with a Swiss or other European bank account. …
"This concept of diversifying your sovereign risk through internationalization is universal and applies to everyone in the world. It is especially urgent for those who live under a government whose fiscal health is in bad and deteriorating shape. Of course it is only an effective strategy if you act before the capital controls and other restrictive measures are imposed."
It's clear how currency controls can cause one to lose a lot of money, but there can be far worse consequences, too.
As seniors, Jo and I will likely find our care denied or delayed under the new law. What happens if one of us needs a knee replacement or a quadruple bypass and care is denied? We won't have the option to pay cash here at home, so that leaves two choices: go offshore, or go without treatment. I know what my choice would be.
Nevertheless, what if I had the means to pay out of pocket offshore, but I couldn't take my money out of the country? How sad would it be to need a quadruple bypass, be denied care, and still be unable to pay for the procedure offshore because of currency controls?
Here's where things get really sinister: Our government would have no incentive to allow a medical loophole in its currency controls. If we die, we are off the Social Security payroll, and maybe it can even snatch some of our wealth through the estate tax.
While I am not qualified to discuss the pros and cons of health care in individual foreign countries, I can say that you will need money to pay for it. That means money you can easily access offshore. Remember, if IPAB denies treatment, there is no appeal process. You are simply up a creek without a paddle, so to speak.
Moving money offshore—now—could be the most important medical decision you make for yourself and your family. International investments make sense for a lot of reasons; protecting your life is sure one of them.
If you want to learn more, Nick and his team have published an inexpensive special report, Going Global 2013. While it does not outline healthcare options, it is the best, most comprehensive report on internationalization I have ever read. First things first: we need a safety net with money offshore. Then we can determine the best countries for health care and hope we never have to go there for treatment. Better safe than waiting penniless in a foreign ER.
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
http://www.marketoracle.co.uk/Article42656.html
Race to Debase - 2000 to 2013 Q3 - Fiat Currencies vs Silver & Gold
by Mike Maloney - GoldSilver
Published : October 10th, 2013
The following is a big picture view of how Silver & Gold Bullion have performed versus 120 different fiat currencies in this 21st Century Silver & Gold Bull Market.
http://www.24hgold.com/english/news-gold-silver-race-to-debase--2000-to-2013-q3--fiat-currencies-vs-silver--gold.aspx?article=4554517902G10020&redirect=false&contributor=Mike+Maloney&mk=1
10 Things That Every American Should Know About The Federal Reserve
http://theeconomiccollapseblog.com/archives/10-things-that-every-american-should-know-about-the-federal-reserve
You should find your answer here.
Three Not-So-Crazy Ways Out of the Debt Ceiling Crisis
Two are simple enough. The third one? Not so much
By Christopher Matthews @crobmatthews
Oct. 05, 2013
Business.Time
The United States is in the midst of its first government shutdown in nearly 20 years, and the practical effects on millions of Americans are significant. Even more worrisome: the impending debt ceiling, which the Treasury Department estimates the U.S. government will reach on or around October 17th.
The debt ceiling is the statutory limit of allowable federal debt, currently set at $16.7 trillion. Up until about one hundred years ago, Congress approved every individual new bond issue, but early in the 20th century Congress began to expedite the process by simply creating a debt limit and allowing the Treasury Department to borrow as it sees fit any amount below that. More recently, politicians have been squabbling over the debt ceiling and essentially threatening a default. Nobody is sure what the outcome of a default would be, but financial markets–which depend greatly on U.S. debt as a source of liquidity–would likely freeze up.
The possibility that Congress won’t reach an agreement to raise the debt ceiling has gotten economists and legal experts thinking of ways to get around the debt ceiling without Congress’ approval. Here are three possible strategies:
1. The Trillion-Dollar Coin: This idea, first raised by Jack Balkin, a Professor of Constitutional Law at Yale Law School, takes advantage of a loophole in the law which allows the Treasury to mint platinum coins without limit. The purpose of the law is to allow the creation of commemorative coins, but there’s nothing in the law that would prevent the minting a coin of any value. Therefore, to get around the debt ceiling, Balking suggests minting two platinum coins worth $1 trillion dollars and then just depositing them at the Federal Reserve in order to write checks based on the value.
2. The 14th Amendment: Another potential option is for the President to declare the debt limit unconstitutional because of in the 14th amendment. It states, ”the validity of the public debt of the United States, authorized by law . . . shall not be questioned.” The 14th Amendment was written to prevent Southern congressmen from threatening to default on U.S. debt unless the Confederacy’s debt was paid off too. University of Baltimore Law Professor Garrett Epps has argued that this amendment basically makes the debt limit unconstitutional and would allow the Treasury to continue to issue bonds without Congress’ approval.
3. Premium Treasury Bonds: While the previous two strategies for obviating the debt ceiling were prevalent during the last debt-ceiling showdown, the idea of issuing so-called “premium” Treasury bonds is newer. The idea was first raised earlier this year by Matthew Levine at Dealbreaker. Understanding the idea requires knowing a little bit about how bonds are sold. Bear with:
Bonds have both a “par” value and often times a different price at which a bond is actually sold to the public. Normally this is because interest rates can change pretty quickly: Say I want to issue a bond for $100 at a 4% interest rate, but a few weeks later, when I actually get around to issuing the bond, interest rate rises to 6%. To sell my 4% bond will require selling the bond at a discount to par–somewhat less than $100. The opposite would happen if interest rates falls to 2%. If I’m selling a 4% bond in a 2% environment, I’ll be able to garner more than $100 in that environment.
So how does this apply to the debt ceiling? The debt ceiling law only applies to the face value of bonds issued, rather than the actual value of the money raised. So when past Treasury debt expries, the Treasury Department could simply roll it over into bonds with much lower face values but that bring in higher revenues and pay out higher interest rates, allowing the total debt of the U.S. to continue to rise while still staying within the debt-limit law.
And as Levine points out, this is something that, unlike the platinum coin scheme, governments around the world have resorted to strategies like this before. It was a somewhat similar scheme involving derivatives that allowed the Greek government to hide the true value of its debt from EU officials until its debt crisis a few years ago. In our imagined scenario, however, Treasury wouldn’t be trying to hide the debt from the public. It would simply be looking for a way to skirt a law that doesn’t make a lot sense to begin with.
The brilliance of the premium bond scheme is that unlike the 14th amendment or platinum coin scenario, there isn’t an obvious way that opponents of it could challenge it in court. As former Treasury Chief of Staff told the Washington Post, one of the reasons the Obama White House has shunned the 14th amendment strategy is because it could be challenged in the courts, and the reason it avoided the platinum coin strategy is because the Fed might not play along. As for premium bonds, all we would need would be willing buyers for the bonds. And if recent history is any indication, that won’t be a problem at all.
Christopher Matthews @crobmatthews
Christopher Matthews is a Writer and Reporter for TIME.
Read more: http://business.time.com/2013/10/05/three-not-so-crazy-ways-out-of-the-debt-ceiling-crisis/#ixzz2hQxkoHTq
Ten "Real" Problems With the US Economy; A Behind the Scene Look at Auto Manufacturing
Oct. 10, 2013
Global Economic Trend Analysis
Here is a fascinating look at auto manufacturing at Tesla. Reflections on "Real Problems" follow. I will tie the two seemingly unrelated ideas together.
Link if video does not play: How the Tesla Model S is Made
"The Real Problem"
Please take that video into consideration when considering a rant from Paul Craig Roberts called The Real Crisis Is Not The Government Shutdown
Roberts claims the "The real crisis is that jobs offshoring by US corporations has permanently lowered US tax revenues by shifting what would have been consumer income, US GDP, and tax base to China, India, and other countries where wages and the cost of living are relatively low. On the spending side, twelve years of wars have inflated annual expenditures. The consequence is a wide deficit gap between revenues and expenditures."
I will grant him that war-mongering is a huge problem. As for the loss of manufacturing jobs, I would point out that even China is losing them - to automation.
More importantly Roberts fails to understand the relationship between Fed policy and Nixon closing the gold window for the initial outsourcing. Roberts also fails to understand that unions wrecked GM and that GM is on the rebound because of wage reductions made in GM's bankruptcy.
Gold and the Trade Deficit
For an explanation as to how gold is related to the trade deficit, please see Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited
Roberts continues with his mostly-nonsensical rant:
The real crisis is the absence of intelligence among economists and policymakers who told us for 20 years not to worry about the offshoring of US jobs, because we were going to have a “New Economy” with better jobs.
As I report each month, not a single one of these “New Economy” jobs has appeared in the payroll jobs statistics or in the Labor Department’s projections of future jobs. Economists and policymakers simply gave away a good chunk of the US economy in order to enhance corporate profits. One result has been to create in the US the worst distribution of income of all developed countries and of many undeveloped ones.
In the scheme of things, the enhanced profits are a short-run thing, because by halting the growth in consumer income, jobs offshoring has destroyed the US consumer market.
Disability Fraud and the Demand for Goods
The demand for consumer goods is surprisingly high. And I believe that's a bad thing. People ought to be more concerned about retirement, and less concerned about the latest toy or gadget, than they are.
Rampant fraud in collecting disability checks and welfare just may explain the lack of concern, or at least a healthy chunk of it.
I have been talking about disability fraud for five years, but mainstream media is just now investigating: Mainstream Media Finally Catches on to Disability Fraud: 60 Minutes Reports on "Disability USA"
The "real" problem is not offshoring, NAFTA, or declining real wages as Roberts suggests. Those are symptoms of problems not the "real problem". However, I can easily name many real problems.
Ten Real Problems
1. Fractional Reserve Lending
2. The Fed
3. Lack of a gold standard
4. Deficit Spending
5. Public unions
6. Davis Bacon and prevailing wage laws drive up costs
7. Disability fraud
8. Warmongering
9. Politicians get into bed with corporations, unions, and crony constituents
10.Lack of incentives to hold down costs on medicare, food stamps, and entitlements
If you fix the first four or five, most of the rest of the problems will be fixed automatically.
Wage Inequality and Declining Real Wages
The primary reason for wage inequity is the Fed's inflationary boom-bust practices. In addition, public unions and untenable pension obligations drive up costs (and taxes).
As I have stated dozens of times, inflation benefits those with first access to money (the banks and the already wealthy).
Three Key Reads On Who Benefits From Inflation
* Top 1% Received 121% of Income Gains During the Recovery, Bottom 99% Lose .4%; How, Why, Solutions
* Reader Asks Me to Prove "Inflation Benefits the Wealthy" (At the Expense of Everyone Else)
* Illusion of Prosperity: Deflating the American Dream; No Recovery in "Real" Income
Ironically, "onshoring" is now the buzzword. Thanks to robotics, some manufacturing has returned to the US (but the jobs didn't, and won't).
When it comes to "real" problems, Roberts really misses the boat.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2013/10/behind-scene-look-at-auto-manufacturing.html#GrsDaRpO28htu0XQ.99
IMF has plans to impose 10% tax on deposits
Oct. 10, 2013
Katchum's Macro-Economic Blog
What happened to Cyprus, doesn't stay in Cyprus. We already warned everyone about this in this article. What they do to Cyprus, they will do to every European country. That was my statement.
And here we finally have it. The IMF is setting up plans to impose a 10% tax on the savings of citizens of European countries.
After citing their colleagues, IMF economists are throwing themselves into the water. "The tax rate needed to bring debt ratios (relative to GDP) to the level of the end of 2007 would require a tax of about 10% of all households with positive net savings." These calculations, we specify the IMF has been made to 15 countries in the euro zone. Let us recall that such arguments are intended merely suggestions to "theoretical" character. They are no less iconoclastic. But is it soft solutions leveraging outside of inflation, the most hypocritical of all?
I wonder what will happen to the deposits of the European banks. If I had savings in the bank, I would take them out of the bank and store them at home or buy gold.
And yes, the bank deposits are falling.
(chart at link below)
Geplaatst door Albert Sung op 22:22
http://katchum.blogspot.com/2013/10/imf-has-plans-to-impose-10-tax-on.html
Oct. 17 Is a Phony Deadline for Default: Rickards
Bloomberg
(Video) 6 min
Video Text:
As we sit here panicked waiting for it, how worried should we be?
The october 17 deadline is a phony deadline.
The u.s. is not going to default on its debt.
The october 17 issue -- think of some of the great secretaries of the treasury, james baker, george schultz, he comes off as a political hack.
He says we have to make a choice between paying the debts and paying social security.
That is a false choice.
The computers are programmed.
It ignores the fact that they ate a entry from computers comes from human beings.
-- that the data entry from computers comes from human beings.
Maybe lockheed does not get a payment on an aircraft carrier.
They can auction 300 tons of gold a week.
That could fund the government for six months.
That is not a good idea, but that is a thing they could do.
The house has three trump cards.
Sequester, shutdown, debt ceiling.
They never said they would go up against the debt ceiling.
It was the president who made an issue out of it.
You are not impressed with jack lew?
He comes off as a political operative.
Not someone who is looking out for the dollar or the credit of the united states government.
You are not the only one seeing signs of a potential deal . the dow is up.
You have been looking at this idea that october 17 is not a hard deadline.
Talk to us about what is going to happen.
What is going to happen in the days at after -- after october 17. jim says we will not do a clean debt ceiling.
You are wrong about that.
The problem with this deal is that it is predicated on them negotiating a deal.
Obama said he would not negotiate until they opened the government.
There are a number of things the administration can do, a number of them have been rejected.
Selling gold would drive the price down immensely.
You would lose money on your holdings.
Prioritization is what people are talking about.
They could have procurement officers mess with the switches.
None of those people are working right now so they cannot do it because the government is closed.
There is great difficulty in trying to do that.
This has been looked at a number of people.
Mike, let's bring up the chart showing what would be involved in prior to rosacea and -- involved in prior to reservation -- prioritization.
You can roll those over.
That does not increase the debt ceiling.
The imf sold 400 tons of gold with no market impact.
You do not do this on ebay.
You can call the chinese.
There are some conditions.
Should rolling over give us any confidence in the market?
That is just can kicking.
It is really not good for the market.
It just extends the problem.
A lot of people do not think they can reach any kind of heel in 4-6 weeks.
What is everyone so encouraged about?
They could not do this in august.
The president has said numerous times that he will not do anything unless there are tax increases.
They are going to talk about it.
That is encouraging.
That is why the market is up.
One of the things i was thinking about this morning is if the president rejects this because the republicans took -- put on conditions, we will see the markets move down more than they moved up.
Prioritization is just default by another name.
It says we will default on a subset of our obligations.
If we do not have enough money to pay all of our bills, we will be in default.
Prioritization is default by another name.
Government contracts are pretty complicated.
There are all kinds of conditions.
The president can -- can instruct contract is.
I am a government contract or.
-- government contractor.
There is plenty of leeway.
A former economic university at harvard university -- economic advisor at harvard says privatization is not the fault by another name as long as holders get paid interest in principle.
We are only talking about bondholders as the most important class.
There are other people who expect to get paid and who would get a. -- get paid.
This is not a cap structure contract.
It is considered most important because you do not want to damage the credit of the united states.
Whether or not they do it, social security payments might be delayed.
We are talking about the salaries of government workers with operating expenses to keep the lights on and a lot of other places that would not be paid very whether they will continue that will be problematic.
How long do you think this could last?
It could go on indefinitely.
I do not think selling gold is a good idea.
I think it is a bad idea.
You can fund the government six months.
If the white house wanted to have an impact, instead of the phony red line on october 17, why not say, we own up.
That is the point at which their borrowing runs out because the extraordinary measures they have taken right out.
They have not said we will be in a borrowing position.
Let's talk about the red line.
Here is the problem.
The scaremonger sequester, nothing happens.
The pleasant and true a red line around syria -- the president drew a red line around syria and nothing happened.
80% of the government is working.
Tsa is on the job.
Critical functions are on the job.
More like 50%. it is sort of a vacation for them.
A vacation for government workers?
If you get back pay.
What if i am a worker and i do not know if i will get back pay?
I do not feel confident that i can pay my rent.
What about the taxpayers who cannot pay their rent?
Money is not free.
We are on the road to going broke.
David walker has done excellent work on this.
We all know we are going broke.
Can government really go broke?
This is the united states.
They can print the money and create inflation.
I consider that default by another name.
The winners are the banks and the speculators.
The losers are those with insurance policies, savers, retirees.
The winners are the big banks.
Stick around.
This text has been automatically generated. It may not be 100% accurate.
http://www.bloomberg.com/video/oct-17-is-a-phony-deadline-for-default-rickards-Xfsk0wt2RRus~~zWXgok8g.html
Ten "Real" Problems With the US Economy; A Behind the Scene Look at Auto Manufacturing
Oct. 10, 2013
Here is a fascinating look at auto manufacturing at Tesla. Reflections on "Real Problems" follow. I will tie the two seemingly unrelated ideas together.
Link if video does not play: How the Tesla Model S is Made
"The Real Problem"
Please take that video into consideration when considering a rant from Paul Craig Roberts called The Real Crisis Is Not The Government Shutdown
Roberts claims the "The real crisis is that jobs offshoring by US corporations has permanently lowered US tax revenues by shifting what would have been consumer income, US GDP, and tax base to China, India, and other countries where wages and the cost of living are relatively low. On the spending side, twelve years of wars have inflated annual expenditures. The consequence is a wide deficit gap between revenues and expenditures."
I will grant him that war-mongering is a huge problem. As for the loss of manufacturing jobs, I would point out that even China is losing them - to automation.
More importantly Roberts fails to understand the relationship between Fed policy and Nixon closing the gold window for the initial outsourcing. Roberts also fails to understand that unions wrecked GM and that GM is on the rebound because of wage reductions made in GM's bankruptcy.
Gold and the Trade Deficit
For an explanation as to how gold is related to the trade deficit, please see Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold's Honest Discipline Revisited
Roberts continues with his mostly-nonsensical rant:
The real crisis is the absence of intelligence among economists and policymakers who told us for 20 years not to worry about the offshoring of US jobs, because we were going to have a “New Economy” with better jobs.
As I report each month, not a single one of these “New Economy” jobs has appeared in the payroll jobs statistics or in the Labor Department’s projections of future jobs. Economists and policymakers simply gave away a good chunk of the US economy in order to enhance corporate profits. One result has been to create in the US the worst distribution of income of all developed countries and of many undeveloped ones.
In the scheme of things, the enhanced profits are a short-run thing, because by halting the growth in consumer income, jobs offshoring has destroyed the US consumer market.
Disability Fraud and the Demand for Goods
The demand for consumer goods is surprisingly high. And I believe that's a bad thing. People ought to be more concerned about retirement, and less concerned about the latest toy or gadget, than they are.
Rampant fraud in collecting disability checks and welfare just may explain the lack of concern, or at least a healthy chunk of it.
I have been talking about disability fraud for five years, but mainstream media is just now investigating: Mainstream Media Finally Catches on to Disability Fraud: 60 Minutes Reports on "Disability USA"
The "real" problem is not offshoring, NAFTA, or declining real wages as Roberts suggests. Those are symptoms of problems not the "real problem". However, I can easily name many real problems.
Ten Real Problems
1. Fractional Reserve Lending
2. The Fed
3. Lack of a gold standard
4. Deficit Spending
5. Public unions
6. Davis Bacon and prevailing wage laws drive up costs
7. Disability fraud
8. Warmongering
9. Politicians get into bed with corporations, unions, and crony constituents
10.Lack of incentives to hold down costs on medicare, food stamps, and entitlements
If you fix the first four or five, most of the rest of the problems will be fixed automatically.
Wage Inequality and Declining Real Wages
The primary reason for wage inequity is the Fed's inflationary boom-bust practices. In addition, public unions and untenable pension obligations drive up costs (and taxes).
As I have stated dozens of times, inflation benefits those with first access to money (the banks and the already wealthy).
Three Key Reads On Who Benefits From Inflation
* Top 1% Received 121% of Income Gains During the Recovery, Bottom 99% Lose .4%; How, Why, Solutions
* Reader Asks Me to Prove "Inflation Benefits the Wealthy" (At the Expense of Everyone Else)
* Illusion of Prosperity: Deflating the American Dream; No Recovery in "Real" Income
Ironically, "onshoring" is now the buzzword. Thanks to robotics, some manufacturing has returned to the US (but the jobs didn't, and won't).
When it comes to "real" problems, Roberts really misses the boat.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2013/10/behind-scene-look-at-auto-manufacturing.html#GrsDaRpO28htu0XQ.99
Forced into Bankruptcy, the Privatization of Detroit and the Protest Movement against the Banks
By Abayomi Azikiwe
Global Research, October 10, 2013
Detroit Gathering Internationalizes the Struggle Against the Banks and Austerity
People from around the United States and the world express solidarity
Grand Circus Park in downtown Detroit was the scene for the first International People’s Assembly Against Banks and Against Austerity that placed the blame for the city’s financial crisis squarely on the shoulders of the bankers and bosses. Detroit was illegally forced into bankruptcy court by a state-imposed emergency manager Kevyn Orr who is acting as an enforcer of the political will of the leading financial institutions seeking to exploit the majority African American municipality at an even higher level.
This event was organized by a cadre of activists from the Moratorium NOW! Coalition, Detroiters Resisting Emergency Management, Fight Imperialism Stand Together (FIST), along with the endorsements and support of a host of groups and individuals including AFSCME Retiree Sub-Chapter 98, the Rosa and Raymond Parks Institute, Stop the Theft of Our Pensions Committee (STOPC) Southeast Michigan Jobs With Justice, City Councilperson JoAnne Watson, Congressman John Conyers, Wayne County Commissioner Martha G. Scott, the United National Anti-War Coalition (UNAC), Central United Methodist Church in Detroit, Glen Ford, Executive Editor of Black Agenda Report (BAR), the MOVE organization based in Philadelphia, the International Action Center in New York, 1515 Broadway theater in downtown Detroit, the Michigan Welfare Rights Organization, Detroit Eviction Defense, among others.
Over three hundred individuals and organizations endorsed the Assembly and many contributed by publicizing of the event that took on the banks and multi-national corporations for the crimes they have committed against the people of Detroit and the world. Many of the speakers who addressed the Assembly pointed out that if the ruling class can effectively carry outs it full agenda in Detroit then other cities throughout the country would be victims of the same process of disempowerment and theft of public resources.
The two-day event was truly international in its scope and character. Endorsements and statements of solidarity poured in from various organizations and leading personalities throughout the U.S. and the world. Through videotape and the written word, statements were delivered from Prof. Jose Maria Sison, chairperson of the International League of Peoples Struggle (ILPS); Manik Mukherjee, General Secretary of the International Anti-Imperialist Coordinating Committee (India); Mohammed Kasin, Secretary General of the Lebanese Teachers Union; Eni Lestari, chairperson of the International Migrants Alliance; Marcia Campos, President of the Women’s International Democratic Federation; the Peoples Union Confederation—National Struggles Coordination of Brazil, French Bank Workers Union; Jorge Parra of the Association of Injured Workers and Ex-Workers of General Motors in Colombia; the Women’s Fightback Network, Marva Patterson of Carl Stokes Brigade of Cleveland and others.
National endorsers included the Missourians Organizing for Reform and Empowerment, Occupy Oakland Foreclosure Defense Committee, Oregon Jericho Movement, Solidarity Against Austerity (Portland), Wisconsin Bailout the People Movement, the Women’s Health in Women’s Hands and Workers World Party. Delegations of people attended from Cleveland, Chicago, the Bay Area in California, West Virginia, Oberlin College in Ohio, Philadelphia, New York City, Baltimore and Durham, North Carolina.
March on Emergency Manger’s Penthouse
One of the highlights of the first day of the Assembly was a march on the Book Cadillac Hotel where emergency manager Kevyn Orr has a penthouse costing $4,200 per month paid for by the taxpayers of Detroit. Activists left Grand Circus Park and took the streets on Washington Blvd. where the hotel is located.
Orr, a bankruptcy attorney, who recently resigned from Jones Day law firm to take on the task of forcing the City of Detroit into deeper austerity and bankruptcy, is widely disliked among the masses. Just two days prior to the convening of the International Peoples Assembly, organizers from the Moratorium NOW! Coalition and other activists, demonstrated outside the Motor City Casino Hotel where Orr was delivering an address to the Detroit Economic Club.
The organization of the Assembly was genuinely a grassroots effort. Youth and workers who were a part of the Coalition for the International Peoples Assembly Against the Banks and Against Austerity, distributed over 15,000 leaflets throughout Detroit and its suburbs.
Teams of youth put up over a thousand posters in the Midtown, Downtown, East, West and Northwest areas of the city. The Michigan Citizen newspaper ran ads for the Assembly for two weeks in advance of the event.
People’s Cultural Program Held
The owners of 1515 Broadway theater donated the use of their facility for a cultural program on Saturday evening October 5. The event was coordinated by the Moratorium NOW! Coalition organizers Andrea Egypt and Writer L. Bush.
Cultural presentations were delivered by Insurgency, Jim Perkinson, Rise Up with Antonio Cosme, Aurora Harris, Walter Blaney, Wardell Montgomery and additional artists. Food for the Assembly participants was donated by local merchants committed to community development.
Workers Assembly Held on Day Two
The final sessions of the event featured a Workers Assembly where people were able to speak out about the impact of low-wage capitalist employment, two-tier automotive pay structures and the need to link community struggles with those involving people at the point of production and services. This session was chaired by long time UAW autoworker, labor historian and Moratorium NOW! Coalition organizer Martha Grevatt.
Grevatt discussed the impact of the new work schedules on automotive employees where people have been forced to toil in ten hour shifts. Newer employees are making sometimes half of what veteran workers are earning in an attempt to maximize profits for the bosses and breakdown solidarity among the employees.
Concluding the Assembly was a workshop on action proposals that was chaired by Fred Vitale to continue the struggle against the banks and emergency management in Detroit and throughout the state of Michigan. October 23 has been designated as an international day of solidarity with the people of Detroit when hearings begin on the eligibility of the city for bankruptcy.
The action proposal workshop endorsed the call to surround the federal courthouse on October 23 demanding an end to the bank-imposed austerity and illegal bankruptcy proceedings. Efforts are underway to encourage people from all over the city and state of Michigan to participate in this mobilization and speak out at the federal courthouse on Lafayette Blvd.
A call has been issued for activists in other cities around the U.S. and internationally to hold demonstrations and actions in support of the working people of Detroit who are under siege by the banks and their agents in government. Larry Holmes of New York said that “Detroit is the Greece of North America” and should be viewed by the movement as such.
“What is happening in Detroit sets a dangerous precedent for the working class as a whole,” Holmes said.
In a leaflet circulated by the Moratorium NOW! Coalition during the final session of the Assembly it called for the people to “Come out and make your voice heard.” A series of demands for the October 23 includes the “cancellation of the debt payments to the banks which have destroyed our communities and to make the banks pay for the rebuilding of Detroit.”
Additional demands listed on the leaflet calls for the halting of attacks on city workers’ pensions, benefits and union contracts; the stopping of the privatization of city jobs, services and assets; the restoration of federal grants to serve Detroiters—under control of city workers and not private corporations; the immediate halt to the $62 million looting of Detroit by Jones Day law firm and other Wall Street consultants and the end to the unconstitutional, anti-democratic, racist emergency management of this overwhelmingly African American city.
Abayomi Azikiwe Editor, Pan-African News Wire
Additional speakers addressing the Assembly at Grand Circus Park and 1515 Broadway included
foreclosure attorney Vanessa Fluker, City Councilperson JoAnne Watson, Wayne County Commissioner Martha G. Scott, Debbie Johnson, Sharon Feldman, Marianne McGuire, Andrea Egypt, Kris Hamel, Jerry Goldberg and Martha Grevatt of the Moratorium NOW! Coalition, Lila Cabil and Fred Vitale of the Detroiters Resisting Emergency Management, William Williams, Vice President of the Amalgamated Transit Union (ATU), Renee Manley of the Service Employees International Union (SEIU) Capital Stewardship Program, Jono Shaffer, Deputy Research Director for SEIU, John Riehl, trustee of the Detroit General Retirement Program, Cecily McClellan, Vice President of the Detroit Association of Professional and Technical Employees (APTE), S. Baxter Jones, anti-foreclosure activist and former Detroit Public Schools teacher, Paul Felton, retired postal worker, poet and novelist, Dianne Bukowski, retired City of Detroit employee and editor of the Voice of Detroit, Sara Flounders, co-director of the International Action Center in New York, Tovy Fry, Oakland Occupy activist, Larry Holmes, First Secretary of Workers World Party in New York, Raquelle Saade, Puerto Rican human rights activist, Eva Panwanji and Tachae J. Davis of FIST, Johnnie Stevens of the Community Labor United for Postal Jobs and Services, Betsey Piette, anti-fracking activist from Pennsylvania, Sharon Black of the Peoples Power Assembly (PPA) in Baltimore, Nick Mirzoeff of the Militant Research Collective, New York, Lamont Lily, community organizer from Durham, as well as many others.
http://www.globalresearch.ca/forced-into-bankruptcy-the-privatization-of-detroit-and-the-protest-movement-against-the-banks/5353847
What's up with the new format on posted messages? ads running all over the place.
Greg McCoach Says Keep the Best and Dump the Rest
Source: Kevin Michael Grace of The Gold Report (10/9/13)
Greg McCoach Greg McCoach, publisher of Mining Speculator newsletter, is not ashamed to admit he has taken a big hit in juniors in the last couple of years. What he has done in response is what he advises all investors to do in this interview with The Gold Report: Get rid of the also-rans and keep and build positions in those companies that have what it takes to gain in multiples when the market recovers. And he suggests six companies that could do just that.
The Gold Report: You wrote recently, "The 2008 crisis will pale in comparison to what is now on the horizon." Given that the 2008 crisis nearly destroyed the world economy, how bad will the next crisis be?
Greg McCoach: The derivative issues were never fixed after the last crisis. In essence, the laws were changed so that the banks didn't have to keep derivative liabilities on their books. That way, bank stocks could soar again. But the banks have acted even more recklessly since 2008 and are now in bigger trouble. The recent White House meeting with all the big financial players should be a warning to investors that something big is about to hit. The media touted this as a meeting to discuss the debt ceiling, but I would say it was about the crisis that is about to envelope the big banks again. Barack Obama didn't run that meeting, JP Morgan Chase ran the meeting and told everyone what was coming. The banks don't have the capital to cover their interest rate derivative problems that are as big as the Pacific Ocean. I would tell investors to expect ten times worse conditions from what we saw in 2008.
TGR: I've read that even if only 4% of the derivatives held by the banks are at risk, and only 10% of that goes south, it would completely wipe out the net worth of the top five banks.
GM: At this point, the acceleration of what I consider tyrannical measures on the part of the U.S. government has reached such a degree it's obvious that something is coming. Why would it buy billions of rounds of hollow-point ammunition? Why is it buying millions of ready-to-eat meals? Why would it take all these extra security measures? Obviously, the U.S. government knows more than the general public does and it reveals something is wrong and the government is worried about it.
TGR: We had this situation after the scandal with HSBC Holdings Plc (HSBA:LSS; HK5:HKG) where the U.S. Department of Justice admitted that criminal acts were probably committed, but prosecution would be unthinkable because the big banks cannot be allowed to fail.
GM: Well, that pretty much tells the story right there. The bureaucrats, Rebooblicans and Dumocrats, as Jim Willie says, don't represent the people of America anymore. They represent themselves and their elitist banker puppeteers. They're trying to control the message and all the outcomes. It's a train wreck in process, but you have to tip your hat to them—they have been able to keep it together for so long. We could have experienced the end game at multiple occasions in the past 12 years, but it now seems to me that the limits of their good fortune are quickly coming to a close.
"Things are not going to get better at least until 2014, and in the meantime a lot of juniors hanging by their fingernails are going to go out of business."
If you're just watching CNN and FOX News, you're oblivious to what's really going on. But if you're a thinking person, you should start getting together food storage and get your investments in line for the major problems ahead. I can't tell you when it's going to happen because I don't have a crystal ball, but it's not a matter of if this is going to happen; it's just a matter of when.
TGR: What will be the warning signs of the next crisis?
GM: The warning signs are all around us right now and have been for the last six months. The big meeting at the White House with all the financial people I already mentioned was a huge sign. The erratic behavior lately of the U.S. government with the Middle East, particularly Syria, is also a sign. In recent weeks we have heard about a worldwide currency reset that is to take place in the very near future. This is telling those who have ears to listen that the Keynesian fraud of creating monies out of this air has reached a limit so they need to reset.
All of this means that we'll wake up one morning and life will be very different. You'll see markets performing erratically. You'll see civil unrest. Most people think it will have something to do with another banking crisis, a derivatives situation. It could be a new war. I think things could happen quickly and take us down a very dark path. All we can do is prepare for ourselves and our families. You have got to own physical gold and silver that is in your possession.
TGR: The macroeconomic indicators suggest that the prices of gold and silver should be much higher than at present. Why do you think that 2013 looks to be the year that the bull markets in these metals ended?
GM: I don't think the secular precious metals bull market has ended. I think we're just taking a pause. I liken this to the move that happened in the 1970s when we made the U.S. dollar the official reserve currency of the world, and people could again own physical gold and silver. Gold went from $35/ounce ($35/oz) all the way up to $195/oz. Then it collapsed to $105/oz. A lot of people thought that was it for gold. But then it ran to $855/oz.
Since then, we've hit $1,950/oz, which was then corrected back to the $1,200–1,300/oz level. We've been bouncing around $1,200–1,400/oz, and I believe this is just setting us up for the foundation of the next big move in gold, which will take us to much, much higher levels. I'm thinking $3,500–5,000/oz. It will be associated with collapsing currencies, the devaluing dollar, problems in the banking sector, etc.
TGR: What will be China's role in this?
GM: China is the world's biggest producer of gold, and now it is becoming the biggest holder of gold. It is dumping U.S. Treasury bills and buying anything it can get its hands on.
TGR: Is there no question in your mind that gold and silver are bargains now?
GM: Absolutely. People should be lining up to buy on this dip. This is a great opportunity. Nothing has fundamentally changed. Has the government started to become fiscally responsible? I laughed out loud when I heard about this "taper" of quantitative easing. What a complete joke. This should show thinking people the gig is up for the financial fraud being perpetrated at the Federal Reserve.
TGR: Many people argue that interest rates can't go up because then the U.S. won't be able to pay its debt, and the whole derivatives market will be threatened.
GM: If interest rates go up they are damned. If interest rates go down they are damned. Either way the Fed is screwed because of the derivative situation with their largest banks. I would expect interest rates to move in the direction that allows their banks and the U.S. government to survive the longest, but there is no way out of this that I can see.
TGR: What do you think of the argument made by the Gold Anti-Trust Action Committee that the big banks and the central bankers are suppressing the prices of gold and silver?
GM: The government doesn't like rising gold and silver prices because it tells the public that something is wrong. Now, does the government come into our market and play games? Absolutely, but I don't really pay too much attention because, ultimately, I believe free markets will dictate the course of the metals prices. It's yet another sign on just how out of control the powers that be are when they seek to control the outcome of everything. They think they are God, but they're about to find out otherwise.
Cont...
http://www.theaureport.com/pub/na/greg-mccoach-says-keep-the-best-and-dump-the-rest
Greg McCoach Says Keep the Best and Dump the Rest
Source: Kevin Michael Grace of The Gold Report (10/9/13)
Greg McCoach Greg McCoach, publisher of Mining Speculator newsletter, is not ashamed to admit he has taken a big hit in juniors in the last couple of years. What he has done in response is what he advises all investors to do in this interview with The Gold Report: Get rid of the also-rans and keep and build positions in those companies that have what it takes to gain in multiples when the market recovers. And he suggests six companies that could do just that.
The Gold Report: You wrote recently, "The 2008 crisis will pale in comparison to what is now on the horizon." Given that the 2008 crisis nearly destroyed the world economy, how bad will the next crisis be?
Greg McCoach: The derivative issues were never fixed after the last crisis. In essence, the laws were changed so that the banks didn't have to keep derivative liabilities on their books. That way, bank stocks could soar again. But the banks have acted even more recklessly since 2008 and are now in bigger trouble. The recent White House meeting with all the big financial players should be a warning to investors that something big is about to hit. The media touted this as a meeting to discuss the debt ceiling, but I would say it was about the crisis that is about to envelope the big banks again. Barack Obama didn't run that meeting, JP Morgan Chase ran the meeting and told everyone what was coming. The banks don't have the capital to cover their interest rate derivative problems that are as big as the Pacific Ocean. I would tell investors to expect ten times worse conditions from what we saw in 2008.
TGR: I've read that even if only 4% of the derivatives held by the banks are at risk, and only 10% of that goes south, it would completely wipe out the net worth of the top five banks.
GM: At this point, the acceleration of what I consider tyrannical measures on the part of the U.S. government has reached such a degree it's obvious that something is coming. Why would it buy billions of rounds of hollow-point ammunition? Why is it buying millions of ready-to-eat meals? Why would it take all these extra security measures? Obviously, the U.S. government knows more than the general public does and it reveals something is wrong and the government is worried about it.
TGR: We had this situation after the scandal with HSBC Holdings Plc (HSBA:LSS; HK5:HKG) where the U.S. Department of Justice admitted that criminal acts were probably committed, but prosecution would be unthinkable because the big banks cannot be allowed to fail.
GM: Well, that pretty much tells the story right there. The bureaucrats, Rebooblicans and Dumocrats, as Jim Willie says, don't represent the people of America anymore. They represent themselves and their elitist banker puppeteers. They're trying to control the message and all the outcomes. It's a train wreck in process, but you have to tip your hat to them—they have been able to keep it together for so long. We could have experienced the end game at multiple occasions in the past 12 years, but it now seems to me that the limits of their good fortune are quickly coming to a close.
"Things are not going to get better at least until 2014, and in the meantime a lot of juniors hanging by their fingernails are going to go out of business."
If you're just watching CNN and FOX News, you're oblivious to what's really going on. But if you're a thinking person, you should start getting together food storage and get your investments in line for the major problems ahead. I can't tell you when it's going to happen because I don't have a crystal ball, but it's not a matter of if this is going to happen; it's just a matter of when.
TGR: What will be the warning signs of the next crisis?
GM: The warning signs are all around us right now and have been for the last six months. The big meeting at the White House with all the financial people I already mentioned was a huge sign. The erratic behavior lately of the U.S. government with the Middle East, particularly Syria, is also a sign. In recent weeks we have heard about a worldwide currency reset that is to take place in the very near future. This is telling those who have ears to listen that the Keynesian fraud of creating monies out of this air has reached a limit so they need to reset.
All of this means that we'll wake up one morning and life will be very different. You'll see markets performing erratically. You'll see civil unrest. Most people think it will have something to do with another banking crisis, a derivatives situation. It could be a new war. I think things could happen quickly and take us down a very dark path. All we can do is prepare for ourselves and our families. You have got to own physical gold and silver that is in your possession.
TGR: The macroeconomic indicators suggest that the prices of gold and silver should be much higher than at present. Why do you think that 2013 looks to be the year that the bull markets in these metals ended?
GM: I don't think the secular precious metals bull market has ended. I think we're just taking a pause. I liken this to the move that happened in the 1970s when we made the U.S. dollar the official reserve currency of the world, and people could again own physical gold and silver. Gold went from $35/ounce ($35/oz) all the way up to $195/oz. Then it collapsed to $105/oz. A lot of people thought that was it for gold. But then it ran to $855/oz.
Since then, we've hit $1,950/oz, which was then corrected back to the $1,200–1,300/oz level. We've been bouncing around $1,200–1,400/oz, and I believe this is just setting us up for the foundation of the next big move in gold, which will take us to much, much higher levels. I'm thinking $3,500–5,000/oz. It will be associated with collapsing currencies, the devaluing dollar, problems in the banking sector, etc.
TGR: What will be China's role in this?
GM: China is the world's biggest producer of gold, and now it is becoming the biggest holder of gold. It is dumping U.S. Treasury bills and buying anything it can get its hands on.
TGR: Is there no question in your mind that gold and silver are bargains now?
GM: Absolutely. People should be lining up to buy on this dip. This is a great opportunity. Nothing has fundamentally changed. Has the government started to become fiscally responsible? I laughed out loud when I heard about this "taper" of quantitative easing. What a complete joke. This should show thinking people the gig is up for the financial fraud being perpetrated at the Federal Reserve.
TGR: Many people argue that interest rates can't go up because then the U.S. won't be able to pay its debt, and the whole derivatives market will be threatened.
GM: If interest rates go up they are damned. If interest rates go down they are damned. Either way the Fed is screwed because of the derivative situation with their largest banks. I would expect interest rates to move in the direction that allows their banks and the U.S. government to survive the longest, but there is no way out of this that I can see.
TGR: What do you think of the argument made by the Gold Anti-Trust Action Committee that the big banks and the central bankers are suppressing the prices of gold and silver?
GM: The government doesn't like rising gold and silver prices because it tells the public that something is wrong. Now, does the government come into our market and play games? Absolutely, but I don't really pay too much attention because, ultimately, I believe free markets will dictate the course of the metals prices. It's yet another sign on just how out of control the powers that be are when they seek to control the outcome of everything. They think they are God, but they're about to find out otherwise.
Cont...
http://www.theaureport.com/pub/na/greg-mccoach-says-keep-the-best-and-dump-the-rest
Kerry reassures Asia as concerns grow over U.S. fiscal impasse
Reuters
BANDAR SERI BEGAWAN, Brunei |
Thu Oct 10, 2013 3:37am EDT
(Reuters) - Secretary of State John Kerry assured Asian nations that the United States was committed to resolving a fiscal impasse as some leaders, including Chinese Premier Li Keqiang, expressed anxiety over the lingering U.S. government shutdown and a possible debt default.
In a meeting on the sidelines of an Asian summit in Brunei, Kerry made clear to Li that the U.S. government shutdown, now in its ninth day, and friction over the U.S. budget "is a moment in Washington politics and reaffirmed the President's commitment to resolving the issue," a senior State Department official said.
The official said the debt issue was "briefly referenced" during the meeting.
China is the biggest holder of U.S. debt and some Chinese officials have raised concerns over a drawn-out crisis in Washington. According to data from the U.S. Treasury, Beijing holds $1.28 trillion of Treasury debt. It also has additional U.S. agency debt.
The U.S. Congress has so far failed to strike a deal to raise the U.S. government's $16.7 trillion borrowing limit, which is set to expire on October 17, roiling markets and pushing the dollar close to its recent eight-month low against other major currencies.
The budget crisis in Washington already forced President Barack Obama to cancel his planned trip to the Asia-Pacific Economic Cooperation summit in Bali, and the East Asia Summit now underway in Brunei.
Philippine President Benigno Aquino said the country's central bank had begun to take unspecified steps to cushion the potential impact of a default.
"It's like if the world's biggest economy turns belly-up, how can you actually protect yourself? But I don't think that will happen," he told reporters.
Several diplomats expressed concern about the potential impact on the region's economies and markets if the crisis drags on, particularly if there is no agreement to raise the U.S. debt limit, which could trigger a debt default after October 17.
"The world is worried about it and everyone is bracing for its impact," said a senior Indian official, who declined to be identified.
"There is anxiety ... The longer it goes on, the more risks are magnified in the international financial system."
A chink of light emerged on Wednesday when a Republican leadership aide said U.S. House of Representatives Republicans are considering signing on to a short-term increase in the government's borrowing authority to buy time for negotiations on broader policy measures.
How long of an increase might suffice - a few weeks or a few months - was unclear. But agreement by Republicans and Democrats to raise the debt ceiling would at least stave off a possible default after October 17, when Treasury Secretary Jack Lew has determined the government will no longer be able to borrow.
The 10-member Association of Southeast Asian Nations (ASEAN)did not discuss the U.S. fiscal issue in formal talks on Wednesday, but diplomats said the issue had come up in informal discussions. Several ASEAN economies, including regional giant Indonesia and Malaysia, have seen sharp falls in their currencies in recent months on concerns over an end to the U.S. Federal Reserve's super-easy monetary policy.
"While we want to sound outwardly that we're not concerned about the U.S., we have to take into account all possible impact to our economy ... The U.S. has to get its act together," said a senior Malaysian diplomat.
"Our central bank is monitoring what's happening in the U.S., we are in touch with them."
(Additional reporting by Manuel Mogato; Editing by Stuart Grudgings and Raju Gopalakrishnan)
http://www.reuters.com/article/2013/10/10/us-usa-china-debt-idUSBRE99901W20131010
Rehypothecation of Collateral
Oct 09, 2013 - 10:47 AM GMT
By: BATR
Before you get a headache or a pain in your side, rehypothecation is not as difficult to understand as spelling the word. Definition of 'Rehypothecation':
“The practice by banks and brokers of using, for their own purposes, assets that have been posted as collateral by their clients. Clients who permit rehypothecation of their collateral may be compensated either through a lower cost of borrowing or a rebate on fees.
Large Banks Use of Investor's Collateral Graph:
In a typical example of rehypothecation, securities that have been posted with a prime brokerage as collateral by a hedge fund are used by the brokerage to back its own transactions and trades. While rehypothecation was a common practice until 2007, hedge funds became much more wary about it in the wake of the Lehman Brothers collapse and subsequent credit crunch in 2008-09.
In the United States, rehypothecation of collateral by broker-dealers is limited to 140% of the loan amount to a client, under Rule 15c3-3 of the SEC.”
Well, now that it is clear, isn’t it? Still need a better explanation, watch the video Rehypothecation.
Video at Link below:
Look at the practice as a giant musical chairs orchestra, conducting a continuous symphony. As long as the tune plays, the multi pledged collateral is safe from foreclosure.
Consider that the entire fiat paper financial system is based upon a promise to pay. The original capital plus the interest juice is incorporated within the pledge from the borrower to the lender. However, in the real world only the super privileged and connected negotiate market rate or below, loans without collateral. For the rest of the garden-variety beggars that need to go hat in hand to scrounge money, they had better be willing to put up security for the note obligation.
Of course, unsecured credit card usury rates are the exception to manageable interest rates.
In the realm of high finance the rules for swinging deals takes on surreal implications when leveraging, gearing and syndication pooling share the risk by pledging security instruments to gain loan approval.
The complications are that such guarantees often do not hold unencumbered rights to the underlying security. Obtaining insurance coverage to warrant the value of the collateral is one way to satisfy the lender. Add to this expose the practice of re-insurance when the original underwriter books out their portions of the default risk to another more daring insurer.
While the security industry rules limit the percentage of rehypothecation, do not forget this is the same fraternity that invented the practices of derivatives and swaps.
Do you really believe that any set of rules will prevent the security brotherhood from comingling customer funds? Maybe putting Jon Corzine, the MF Global Holdings guru in charge of regulation enforcement would bring clarity to a complex system of double-dealing.
Sure, such an expert on circumventing the law would be the optimum sheriff to round up the rehypothecation bandits. Well, just understand the significance that the lawyers and barristers acknowledge, in the WGMR report.
"Cash is fully fungible, making it difficult to segregate from other assets, lawyers point out. Full title to the cash is given to the dealer, and all the customer has is a contractual claim for repayment of an equal amount of cash, meaning it would effectively rank as an unsecured creditor in the event of a default. In contrast, securities posted as collateral under a security interest arrangement can be segregated and traceable."
Oh golly, the smoking gun verbalized by the officers of the court . . .
The depositor relinquishes their ownership of funds to the security dealer. When the music is over, turn out the lights. Maybe the message from the Jim Morrison’s song is a warning to investors and borrowers alike. Just close the door on the opaque scheme to overestimate the underlying value of collateral security.
When the only recourse to recoup your losses rests upon an unsecure creditor status in a bankruptcy, the capital formation of the economic system ceases to function. Conversely, before the borrower rejoices that the financial institution takes a mortal hit to their balance sheet, the collapse of liquidity brings hardship to the entire economy.
Common sense in banking is gone. Indemnity protection in securities is worthless. If left to the financial elites to rescue the paper monitory structure, the gnomes of default will just rehypothecate the entire system by claiming the same ownership, of all-collateral as the financial dealers take full title to your cash.
This is how you have become the unsecured creditor of your own assets. When You Wish Upon A Star, Anything your heart desires – REHYPOTHECATION - Will come to you.
Source : http://www.batr.org/negotium/100913.html
Discuss or comment about this essay on the BATR Forum
http://www.batr.org
Great Graphic: International Ownership of US Treasuries
BY MARC CHANDLER 10/09/2013
Financial Sense
http://www.financialsense.com/contributors/marc-chandler/great-graphic-international-ownership
Great article Cork!
Wave Of The Future Investment From The Ground Up: Byron King
Oct 8, 2013 1:48 PM
The Gold Report
about stocks: CVV, ENZR.OB, FCSMF.PK, GTI, PLG, PORMF.PK, PNIKF.OB, ZENYF.PK
Source: JT Long of The Metals Report (10/8/13)
http://www.theaureport.com/pub/na/wave-of-the-future-investment-from-the-ground-up-byron-king
Byron KingAn increasingly high-tech world is on the horizon, but technological revolution can't take place without the right materials, especially graphite and platinum group metals. This is where mining, one of the oldest industries in human history, comes in. In this interview with The Metals Report, Byron King, editor of the Energy & Scarcity Investor and Outstanding Investments newsletters, profiles companies poised to deliver graphite and platinum group metals to tech companies working to change the way we communicate, travel and harness energy.
The Metals Report: Byron, you recently visited Lawrence Livermore National Lab in California. What did you see there that could affect our lives in the next decade?
Byron King: The focus of my visit was a massive physics experimental project known as the National Ignition Facility, or NIF. It uses laser beams to simulate the effects of almost incomprehensibly powerful phenomena like the inside of a star or the inside of a nuclear explosion.
NIF is a gigantic facility-almost as big as an aircraft carrier. It's a huge building filled with laser-beam systems that focus intense energy on tiny spots inside a 30-foot diameter target chamber. Essentially, the NIF lasers create hydrogen fusion, a sort of tiny hydrogen bomb. Scientists can use it to simulate fundamental physics issues down to the star-like levels of pressure and temperature on protons, neutrons and electrons in the nucleus of an atom. One of the key government purposes, if you will, is to calibrate instrumentation that tests nuclear weapons without actually setting them off. Projects at NIF push the envelope of our understanding of atomic physics. This has the potential to change our lives in ways that we can't even begin to understand. It's wide open.
Sitting here talking with you during the current government shutdown, it's easy to criticize government for being too big, too expensive, etc. But this kind of big science-like we see at NIF-can only be done through a dedicated, long-term, national government effort. In terms of pushing the fundamentals frontiers of human knowledge, I think it's worth the money we put into it.
TMR: It sounds like NIF could impact technology and energy in many ways. You call graphite the next industrial revolution. Why graphite, and why now?
BK: For most of human history, people have only used a very few materials: cellulose in the form of wood, cotton or other fibers, and metals like bronze, copper, lead and steel. Aluminum only came into widespread use in the early 20th century.
Since the end of World War II and the space race of the 1960s, we are using a larger variety of materials in our daily lives. Today, cell phones, TVs, even light bulbs are filled with all sorts of exotic materials.
I think the next big leap for fundamental material science will be in the field of carbon. This takes us immediately to graphite and what are called allotropes of carbon, such as graphite nanotubes and graphene.
One of the primary carbon raw materials will be a naturally occurring form called graphite. Humankind already uses lots of graphite. Consider what's called amorphous carbon, which you'll find in all manner of things-brake pads and pencils, for example. Flake graphite is a higher-end form of carbon; it comes in different grades. Small-flake graphite is only somewhat better than the amorphous stuff, with many of the same applications like brake pads and such. Large-flake graphite is critical to many modern applications. Examples include advanced storage batteries and the heat-conducting foil that dissipates the heat from your smartphone so you can hold it in your hand without getting burned.
We're barely into the early innings of the materials revolution using advanced forms of graphite.
TMR: Different types of graphite come with their own challenges. What are some of the differences among crystalline, amorphous, lump and vein graphite when it comes to mining it and processing it?
BK: People have been mining and using graphite for centuries. The root of the name is the Greek wordgraphein, which means to write. Someone in the ancient past figured out how to use this interesting mineral to make marks on a parchment.
But let's dwell on today, and not ancient Greece. People mine graphite all over the place these days, with China being a key world supplier. Gee, where have we heard that before, eh?
Unlike with, say, rare earths, mining and processing graphite isn't super technically advanced. With graphite mining, as with everything, you have what you have and not what you might wish you had. If you have really high-quality, large flake graphite, it makes it easier to mine but you have to be careful at the mouth of the mine not to crush the material too hard. If you handle it the wrong way, you'll destroy the very properties that you're seeking; you'll destroy the crystalline aspects that might make it most useful.
Natural graphite deposits differ from one locale to another. Mineralogical research seems to be showing that the deeper and the hotter the burial and the temperature at which the graphite forms, the better the crystallinity, and the more suitable it is for high-value end products.
Another angle is that the users-the firms that make batteries, electrical components or electrodes-all have their own secret chemistry for putting the graphite and other additives together into a component. It's very important for a mining player to work with the downstream users early on. That's what will make a project succeed. It's forming partnerships up front, with the downstream users.
TMR: You mentioned the importance of flake size. How much of a price difference can a company demand for large-flake graphite?
BK: Graphite has experienced big price swings in the last five years. A $500-600/ton price for lower quality material is just about the cost of production. Higher-quality material ranges from $1,500-2,000/ton. There has been very exotic, one-off, super-high-quality material that sold for 10 times that, although not just any company can build a mining model using a $20,000/ton price, which is exceptional.
TMR: What do you use as a standard price?
BK: To be very conservative, I look at numbers in the $1,250-1,500/ton range for really good, high-quality material at the 99.9% level.
I see rapid demand growth for material at that level, for use in batteries and foils and innovative uses in fire insulation and heat resistance.
Graftech International Holdings Inc. (GTI:NYSE) is an intriguing story. It makes carbon electrodes for steel mills, graphite foils for companies that make things like the iPad. GrafTech uses engineered graphite for fire proofing in a way that when fire gets to the graphite coating, the graphite will expand and form a char which insulates the substrate. That keeps the substrate from burning or if it's a metal, it keeps it from melting. If you can crack the building codes of the world and get a material like that approved as a fire insulator, you would have a multibillion-dollar market for graphite right there. It's a midstream or downstream user, a technology application. It buys its material from mines and material brokers who deal with miners.
TMR: As demand and use for things like insulation develops, when do you expect the graphite price to rise?
BK: Graphite prices, as well as many other metals, have had a tough 18-24 months, but I think we've found a bottom. I expect graphite prices to hold their own, if not increase in a gentle way. There is a market for good-quality material.
In the graphite world, it's interesting to note that we haven't seen a new mine open up outside of China in the last 25 years. There are precious few mine-building graphite plays out there. Many of the working mines are getting long in the tooth. It's time for mid- and downstream users to take a hard look at the life of those mines, how much reserve is left and where things can go from here.
TMR: What companies could fill the demand for graphite, and what type of graphite does each project have?
BK: Focus Graphite Inc. (FMS:TSX.V) has a very high-grade deposit in Lac Knife, Québec, on the border with Labrador, near Fermont. This graphite play was discovered several decades ago by miners looking for iron or gold. Focus has done a lot of drilling and defining the graphite ore body.
Focus is still developing its mine and processing capabilities, but management has built the company into more of a technology play on graphite. The company invested heavily in developing applications for graphite that involve other forms of carbon, such as graphene and nanotubes. Focus wants to create a branded, high-spec, high-tech product it can sell to downstream users looking for the high-end stuff.
If you want a down-to-earth company-so to speak-that's more of a traditional graphite miner, take a look at Energizer Resources Inc. (EGZ:TSX.V; ENZR:OTCQX). Its deposit is on the island of Madagascar. The deposit is so extensive that you can see it from space on satellite photographs. It originated deep underground and was heated to high temperatures 400 million (400M) years ago. Now it's all large-flake graphite-and I mean beautiful mineralogy!-exposed at the surface.
When I visited, we drove for miles across the scrub of southern Madagascar. The tires kicked up graphite dust. You could do geologic mapping by looking at the termite mounds. The gray mounds were graphite, the brown ones weren't. It's very mineable. In terms of strip ratio, there's virtually no waste.
Energizer has put together plans for a mining and processing facility, logistics, transport and shipping. The company recently hired two well-known mine builders. The company has had successful bench-scale testing and is building a pilot plant to demonstrate the processing capabilities of the material. The next step is to get together with mid- and downstream users, to understand their needs. Madagascar is far away if you look at the map from North America, but it's also that much closer to major markets in India and East Asia. Plus, Madagascar has a stable government and is relatively mining friendly. Rio Tinto Plc (RIO:NYSE) and Sherritt International Corp. (S:TSX) have operations there.
TMR: Energizer's new CEO and board are talking to potential offtake partners for its Molo graphite project. Is an offtake deal the next expected catalyst?
BK: The next announcement will probably be about the pilot project, probably around the end of November. A deal with offtake users is the next logical step in the company's development.
Considering the size of the deposit, the quality of the material, the lead time involved in making the arrangements and commitments on something this big, there isn't a lot of time for any grass to grow beneath anybody's feet.
Focus and Energizer are two of the most advanced, most attractive graphite mining plays in terms of their ability to deliver product to an end user that can then add more value to it.
TMR: Some people are saying that synthetic graphene might be more practical than graphene made from graphite. How much demand could be created and how quickly by some of these innovative, but still not very commercial, products being discussed?
BK: Graphene and nanotubes are already finding their way into very high-end, high-spec, high-tech applications. At the NIF, for example, the little targets that they shoot the laser beam at are made of diamond. The laser scientists are thinking about replacing the diamond with nanotubes. That's a truly exotic application, but it tells you that these materials are finding their ways into the most interesting places.
There are many very aggressive R&D projects out there for the use of graphene in things like touch screens on personal digital devices. One of the largest patent holders on graphene applications is IBM Corp. The fact that IBM holds a very large patent portfolio on graphene ought to make you feel warmer and fuzzier about this whole arena.
I think we will see nanotube, graphene and other carbon allotropes coming from both ends. It's like you're building a brick wall held together by mortar. The brick would be the nanotubes or the graphene that comes from the natural graphite. The bonding or "healing" process would be with a process called chemical vapor deposition (CVD), which is like the mortar that holds bricks together.
Right now, graphene and nanotubes can be manufactured using CVD. This is a well-known technique used in the computer chip fabrication industry. One example is CVD Equipment Corp. (CVV:NASSDAQ) of Long Island, New York, which makes very high-end fabrication equipment for CVD applications. The CVD customer list is a who's who of scientific research organizations: I mean research universities, national laboratories like Oak Ridge and Livermore, big industrial corporations like IBM, Pratt & Whitney, Advanced Micro Devices (AMD:NYSE) and KLA-Tencor Corporation (KLAC:NASDAQ).
CVD makes equipment that deposits graphene and nanotubes on a substrate. This gets us closer to mass production of a very complex, nano-scale product with unbelievably high tolerances. Mass production drives down the unit cost, which means you can start to put this nanotube or graphene material into more applications. It's important to devise a way to produce larger amounts of high-quality material at a predictable cost, so designers can create items that use these materials.
TMR: What other companies could supply some of this graphite?
BK: In terms of minerals in the ground, we have to mention Zenyatta Ventures Ltd. (ZEN: TSX.V), which has had a remarkable share price run in the last year or so. The company drilled up a couple of geophysical anomalies and found a remarkable graphite-based material that appears to be quite a scientific curiosity. While the stock has had a great price run, this remains a very early-stage idea with a lot of development work left to do.
Mason Graphite Inc. (LLG:TSX.V) has the Lac Guéret deposit in Québec, a discovery of fairly recent vintage. It was discovered as a graphite deposit, unrelated to any gold or iron exploration. The grade of the ore appears to be even better then Focus' project. Where Mason can go with this is wide open, but the company definitely has the right materials to start with. It's possible that the high grade could lead to much higher purities and higher prices. That would benefit the bottom line, because it would allow the company to sell high-end product out of the mill, and capture premium pricing sooner in the value chain.
TMR: Let's shift over to platinum and palladium. Is the ongoing strike at Anglo American Plc (AAUK:NASDAQ) in South Africa making projects outside of Africa more viable?
BK: Anything that diminishes the South African supply of platinum and palladium is generally good for pricing around the world, although it does make supply more problematic.
September and October tends to be a season for strikes in South Africa. Last year, strikes got very violent and people died. That was very bad for South Africa's political risk profile. This year we've seen strikes, but the overall climate hasn't been as violent. Anything that affects the labor climate and the output from any of the major South African platinum mines will affect world supply.
One key point to keep in mind is that we're still dealing with the effects of the unending recession. We've got the China slowdown, the Japan doldrums, the Eurozone issues, the slowdown in other developing nations like Brazil and of course the issues in the U.S.
On the positive side, at least in a global sense, the automobile industry is doing very well. North American auto sales are up to nearly the pre-crash levels of five years ago. People are buying big cars; SUVs and pickup trucks are rolling off the lines as fast as the makers can build them. Every one of those vehicles has a catalytic converter installed on its engine exhaust system. The rebound in auto sales has to feed back to the demand for platinum and palladium for those catalytic converters. If the European automobile market ever starts to recover, it could be another real kicker for platinum and palladium prices.
TMR: Are there any projects outside of Africa that could fill that demand?
BK: There are only a couple of small players outside of Africa.
I like the management and early-stage work being done by Prophecy Platinum Corp. (NKL:TSX.V; PNIKF:OTCPK; P94P:FSE). It has an intriguing project up in the Yukon north of Skagway, Alaska, which would be the company's shipping port.
We won't see a mine there for several years. Meanwhile, management is doing good work revitalizing an old platinum play that operated in the 1970s and '80s. It closed for several reasons, but lack of ore was not one of them.
Yukon is a mining-friendly jurisdiction, and because the Prophecy mining claims are in the rain and snow shadow of the Chugach mountain range of Alaska, it gets relatively little snowfall. It could operate year-round. You move the product across the border to the U.S. and export out of Alaska. The company has good geology and good management. It's all very doable.
TMR: That's one to watch. Any others?
BK: Platinum Group Metals Ltd. (PTM:TSX; PLG:NYSE.MKT), a South African play, has made great progress. The deposit is in a sweet spot of the old Bushveld complex, where the company has discovered entire new zones-to the degree that the geology books on the Bushveld almost need to be rewritten. The company is finishing up a brand-new mine, scheduled to start producing ore in 2014. Platinum Group Metals will deliver ore with excellent grades from a brand-new mine with all modern safety equipment and production technology.
TMR: Should all of that help with the labor issues?
BK: I think the company has its labor issues under control. It doesn't have any legacy issues of mine pit alumni or government meddling. It's new.
TMR: Last time you talked about recycling. Does that remain a viable option for meeting demand?
BK: Oh, yes. Recycling, in particular recycling catalytic converters, is an important option. I've mentioned Pro-Or Inc. (POI:TSX.V) before. Its pilot plant has been up and running in Quebec for eight or nine months with excellent output. It seems to have a very workable chemical process, with astonishing yields and a cost curve to make grizzly old miners weep. Pro-Or is now raising funds to build more, similar reactors to improve the technology and the process.
In the U.S. and Canada, 12M or more catalytic converters are scrapped every year. Right now almost all of them are exported to Japan or South Africa, and we buy them back at full price on the showroom floor. Pro-Or offers a technological option that allows that recycling value chain to occur here in North America. The materials would stay in the North American market and we could keep that added value inside the U.S. and Canadian economies.
TMR: When could that new plant be operational?
BK: Depending on the fundraising, it could be operational in 2014. The people who run Pro-Or could crank these reactors out pretty fast if the tech took hold.
TMR: What will the world look like twenty, thirty years from now? What commodities will be critical? And what can we invest in that will make the world a better place for the long term?
BK: We're going to see absolute transformations in energy use and energy efficiency. No, we'll never defeat the laws of thermodynamics, but it will take less and less energy to do many of the things that we already take for granted today. Energy conversion levels will be much higher. Prices will fall for the technology, and it'll become more and more available to a mass market.
Materials will change, including the strength of materials. We will still use cars, but they will be stronger and more lightweight. Actually, in the future, I think the cars will be driving us. Also, the devices we carry around in our hands will get even smaller. Some communications technology might get small enough to be implanted in your skin. People will become walking specimens of technologically enhanced humanity-a more pleasant form of the Borg, of Star Trek fame, you might say.
Along the way, we have to convince our children and teenagers to study math, science and foreign languages. People who don't understand these subjects will be on the outside of the economy looking in. That is, if you can only do certain basic things, you are destined to be replaced by a robot. If you can work with other people and enhance the technology that's already there, then there's a place for you.
That's my happy version of the future. There's plenty of room for apocalyptic thinking as well. Just as technology allows more people to do good things with greater efficiency, it also allows bad people to do more bad things with greater efficiency.
TMR: Let's hope that your happy version is the one that plays out. Byron, thanks for your time and insights.
Byron King writes for Agora Financial's Daily Resource Hunter. He edits two newsletters: Energy & Scarcity Investor and Outstanding Investments. He studied geology and graduated with honors from Harvard University, and holds advanced degrees from the University of Pittsburgh School of Law and the U.S. Naval War College. He has advised the U.S. Department of Defense on national energy policy.
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DISCLOSURE:
1) JT Long conducted this interview for The Metals Report and provides services to The Metals Report as an employee. She or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Metals Report: Prophecy Platinum, Pro-Or Inc., Mason Graphite Inc. and Energizer Resources Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
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http://seekingalpha.com/instablog/399928-the-gold-report/2294592-wave-of-the-future-investment-from-the-ground-up-byron-king
Spin-Offs: The Best Way To Beat The Market Every Year
Oct 2 2013 by: Lou Basenese
Seeking Alpha
I'm going to share a simple strategy that's not only trouncing the S&P 500 this year (it's up 38% – more than double the market's return), it routinely crushes the market year in, year out. By an average of 13 full percentage points, according to Credit Suisse (CS). Oh, and the best part? It couldn't be easier (or cheaper) to implement. No excessive research involved. No complex options strategies required. Just a simple click of your mouse. And no, this isn't a marketing piece. It's a straight-up investment recommendation. So let's get to it, shall we?
It's Time to Enter the Spin Zone
In the entertainment world, spin-offs almost always flop (think Joey from Friends). In the investment world, however, they almost always pop. To be clear, I'm talking about when a large, publicly traded company decides to spin out a specific division to form a new, independent company. For example…
When Altria (MO) spun off its international division, Philip Morris (PM), in 2008 through a share distribution.
Or when EMC Corp. (EMC) spun out VMware (VMW) in 2007 via an IPO.
Or, more recently, when travel website, Expedia (EXPE), spun off TripAdvisor (TRIP).
And almost without exception, spin-offs hand investors market-beating returns. Case in point: Over the last 12 years, the average spin-off delivered a 70% return to shareholders, according to a Forbes analysis of more than 80 transactions. By comparison, the S&P 500 only returned 22%.
The trend has continued this year, too. While the S&P 500 is up almost 17% year-to-date, the Beacon Spin-Off Index is up nearly 40%.
(click to enlarge)
So as long as large companies keep spinning off smaller ones, we're all but guaranteed to beat the market by investing in them. And they will, given their need to continually unlock hidden value, as well as the tax efficiency of a spin-off over an outright sale.
The question then becomes: What's the best way to get a piece of the action?
How to Invest Spin-Offs That Pop, Not Flop
We could scour SEC filings and the internet for upcoming spin-off opportunities. And then purchase shares of the parent company in advance. Put simply, if "iPhone, Inc." ever spun off from Apple, it'd draw our investment attention, for sure. A more relevant example would be what's happening with Bob Evans Farms, Inc. (BOBE). Activist shareholders are calling for the company to spin off its packaged goods business. But this kind of strategy is fraught with risk. For one, it pegs our investment fortunes on a single deal. It also involves owning the parent company, which we don't always want to do. Not to mention, it requires a considerable amount of time to sleuth out the most attractive opportunities.
Instead, it makes much more sense – and involves considerably less risk and time – to buy the Guggenheim Spin-Off ETF (CSD). Here's why…
Diversity: Right off the bat, we get exposure to up to 40 of the market's most compelling spin-off opportunities in a single purchase.
Protection: In addition, no single company accounts for more than 5% of the overall portfolio. That means in the rare event of a spin-off flop, it won't even make a dent in the fund's performance – and, in turn, our investment.
Maximum Opportunity, Minimum Effort: The fund is rebalanced every six months, too, giving us access to the freshest opportunities without lifting a finger.
Small-Cap Weighting: The fund tends to be dominated by small- and mid-cap companies. As I've shared before, that's precisely where we want to invest right now.
Smart Weighting: The fund is currently overweighted to the consumer discretionary and industrials sectors. That's a positive. The former is the S&P 500's top-performing sector this year, up 27.7%. The latter is no laggard, either – up 21.9% year-to-date.
And according to Bank of America's (BAC) Head of U.S. Equity and Quantitative Strategy, Savita Subramanian, industrials are poised to continue outperforming, too. Her latest report outlines 10 reasons to be bullish on the industrial sector, including price momentum, improving global growth, compelling valuations and a tendency to outperform during rising interest rate environments.
In other words, the Guggenheim Spin-Off ETF gives us exposure to three sweet spots for growth in the market. But there's more. And it's not a second ShamWow at absolutely no extra cost! It concerns how much money we'll have to shell out in fees. The fund's expense ratio checks in at an affordable 0.65%. For that price, there isn't a single money manager on the planet who can consistently outperform the market like the Guggenheim Spin-Off ETF.
Bottom line: If you're looking to consistently outperform the market, easily and affordably, it's time to enter the spin zone. Add some shares of the Guggenheim Spin-Off ETF, or miss out.
http://seekingalpha.com/article/1724672-spin-offs-the-best-way-to-beat-the-market-every-year
Post Unavailable
Additional Information
China Gross Gold Imports Rise in August 2013
Oct. 8, 2013
Katchum's Macro-Economic Blog
China is on pace to grow its gold reserves once again. There is no stopping of the gold imports to China.
Net imports, after deducting flows from China into Hong Kong, were 110.2 metric tons, from 113.2 tons a month earlier, according to calculations by Bloomberg. Mainland buyers purchased 131.4 tons in the month, including scrap, compared with 129.2 tons in July, data today from the Hong Kong government showed.
Charts at link below;
Geplaatst door Albert Sung op 17:41
http://katchum.blogspot.com/
US Debt Already Exceeds Debt Limit by $48 Billion Minimum; Gold vs. Debt Ceiling
Wednesday, October 09, 2013 1:17 AM
Mish's Global Economic Trend Analysis
A few days ago, a reader sent me a chart of the price of gold vs. the national debt.
The chart was a bit out of date so I asked Nick at Sharelynx Gold (my favorite proprietor of historical and current gold charts) if he had a similar chart. He did. And here's the chart.
Debt and Debt Ceiling vs. Gold
click on chart for sharper image
Please note that the current debt limit is $16.699 trillion.
Debt to the Penny
Interestingly, the US Treasury website Debt to the Penny and Who Hold It shows the current public debt as 16,747,429,285,635.12 (the same as Nick shows in the above chart).
Treasury Stops Updating National Debt
You do not have to be a math genius to figure out that "debt to the penny" already exceeds the debt limit.
I asked Nick about that and he replied ...
Since mid-May, "debt to the penny" hasn't been rising. When they postponed raising the debt limit they stopped showing any increase in the debt.
We're currently $48 billion over and have been there since May 21st or so.
I would like to know what the real figure now is but little chance of that until they raise the debt limit.
What's the "real" national debt? No one knows at the moment.
Cheers Nick
Gold Considerably Undervalued
Given that over 4 months have passed since the Treasury stopped updating "debt to the penny", the national debt is considerably more than $48 billion over the limit.
Finally, please take a good look at that from Sharelynx. Unless "it's different this time" gold is rather undervalued here.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/#5FZZ3eCKFtjaHci1.99
US Debt Already Exceeds Debt Limit by $48 Billion Minimum; Gold vs. Debt Ceiling
Wednesday, October 09, 2013 1:17 AM
Mish's Global Economic Trend Analysis
A few days ago, a reader sent me a chart of the price of gold vs. the national debt.
The chart was a bit out of date so I asked Nick at Sharelynx Gold (my favorite proprietor of historical and current gold charts) if he had a similar chart. He did. And here's the chart.
Debt and Debt Ceiling vs. Gold
click on chart for sharper image
Please note that the current debt limit is $16.699 trillion.
Debt to the Penny
Interestingly, the US Treasury website Debt to the Penny and Who Hold It shows the current public debt as 16,747,429,285,635.12 (the same as Nick shows in the above chart).
Treasury Stops Updating National Debt
You do not have to be a math genius to figure out that "debt to the penny" already exceeds the debt limit.
I asked Nick about that and he replied ...
Since mid-May, "debt to the penny" hasn't been rising. When they postponed raising the debt limit they stopped showing any increase in the debt.
We're currently $48 billion over and have been there since May 21st or so.
I would like to know what the real figure now is but little chance of that until they raise the debt limit.
What's the "real" national debt? No one knows at the moment.
Cheers Nick
Gold Considerably Undervalued
Given that over 4 months have passed since the Treasury stopped updating "debt to the penny", the national debt is considerably more than $48 billion over the limit.
Finally, please take a good look at that from Sharelynx. Unless "it's different this time" gold is rather undervalued here.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/#5FZZ3eCKFtjaHci1.99
Jim Rickards: Gold Price Could Double Overnight In US Dollar Crisis
Gold Silver Worlds | October 7, 2013
Before proceeding, please be adviced that the statement in the title is not a forecast nor an expectation. The potential for the gold price to double overnight is real and existing, which is not the same as sure.
In a major US dollar devaluation crisis, which would occur if the US would fail to raise the debt ceiling on Thursday October 17th, there should be a significant impact on the gold price. Jim Rickards wrote about this in his book ‘Currency Wars: The Making of the Next Global Crisis’ in which he “envisages a series of ‘black swan’ events that trigger a loss of confidence in the US dollar precipitating a rush to get out of the greenback.”
In such a scenario, the market would question the Fed’s staying power, which is the most fundamental aspect of the current monetary system. A dollar collapse would ensue and gold could double in price overnight.
The following comes from Arabianmoney:
The US President is then left with no alternative but to take charge under the 1977 International Emergency Economic Powers Act. He nationalizes all gold held on US soil and suspends bond trading to halt the dollar’s fall. A bipartisan commission is appointed with 30 days to sort out what to do next.
Basically the US dollar has to be reissued and reset to a new value based on a much higher price of gold. If this all sounds far-fetched then it is. But so was the subprime mortgage crisis before it actually struck and yet it happened.
The unsinkable can sink, and so could the US dollar, just as HSBC was the biggest loser in the subprime crisis (although the bank did not sink because its compartments held and it managed to right itself without a government bailout).
Other currencies in over-indebted economies have suffered this fate in the past. However, as Jim Rickards points out in his book the US still has a final card to play in the global currency wars as it has 57 per cent of the world’s gold reserves within its boundaries and so would command any new global monetary system as it did the old. To that extent it would not be different this time around.
But the gold price would be reset permanently higher, and $7,500-10,000 an ounce in old dollars is Mr. Rickards best estimate.
http://goldsilverworlds.com/money-currency/jim-rickards-gold-price-double-overnight-dollar-crisis/
The Next Big Rate Manipulation Scandal Is About to Break
Oct 7th, 2013
By Shah Gilani
Wallstreetinsightsandindictments
Back in June, the U.K.’s Financial Conduct Authority said it was “aware of allegations” of manipulation in the biggest trading market on the planet…
The $5.3-trillion-a-day cash foreign exchange (FX) market.
Well apparently there’s more than just “awareness” going on.
The Swiss Financial Market Supervisory Authority (FINMA), according to its website on Friday, is “currently conducting investigations into several Swiss financial institutions in connection with possible manipulation of foreign exchange markets.”
The site goes on to say, “FINMA is coordinating closely with authorities in other countries as multiple banks around the world are potentially implicated.”
Without getting too complicated here, FX (foreign exchange) manipulation is pretty similar to Libor (the London Interbank Offered Rate) manipulation.
It’s not about a bunch of traders and brokers manipulating interest rates (or FX “fixings,” (in the case of the cash foreign currency trading markets) to throw the world off its axis. It’s about traders manipulating data, prices, rates, and “fixes” to profit individually, in most cases, and to benefit the bank’s balance sheet or liquidity needs in desperate times.
Here’s everything you need to know about the next big scandal…
Libor manipulation is managed by conspirators who agree to post misleading rates – rates at which they say they would make certain term loans to each other. The idea being that those rates are “base rates” that banks then mark up to other borrowers.
There are some $300 trillion worth of loans in the world that are priced off Libor.
Currencies are traded all day by banks. You can get a quote at any time of the day on any currency (all currencies trade in pairs; one currency is always priced relative to another currency) from your bank or a broker (who gets it from his trading platform, which is really just an aggregation point for multiple quotes posted by multiple banks).
Contracts and trading positions and balance sheets denominated in currency terms have to be valued regularly, sometimes every day. Because currencies trade almost 24/7, there has to be a point in time that currency prices are “fixed.” The principal time for currency “fixes” is 4:00 pm London time. That’s the London fix.
Prices are fixed, similarly to the way Libor is fixed, by banks submitting quotes or actual prices to an aggregation point, where a single number is derived from submitted data to arrive at the fix or prices used for accounting purposes.
And as with Libor, there are traders that have positions whose profit and loss are dependent on what FX fixes are.
Who is involved in the FX manipulation? I don’t know, but I can guess.
And while I don’t know exactly how the game was played, I can guess.
But rather than guess, I’ll tell you how the “marking game” has been played… and here I’m not guessing. These are the facts.
How to Play the “Marking Game”
Tom Hayes was a big-shot, big-deal, mucky-muck trader at UBS. He’s now fighting fraud charges in a London courtroom and faces possible charges here in the U.S. too.
Tom used to put on huge interest rate trades, most of them denominated in Japanese yen.
Besides the Libor you know – which pertains to dollar-denominated interest rates – there are other currency-specific Libor fixings, yen-Libor being one. Tom’s trades, being mostly denominated in yen, were priced regularly using yen-Libor fixings that are themselves quotes from panel-member banks that get aggregated, sliced and diced, and come out as rates for the day that everybody who needs to calculate their positions’ value and profit and loss uses.
Tom liked making millions and being a big deal at the bank. So to accomplish both of those ends, he needed his positions to be profitable. To ensure they were regularly marked at good prices, Tom “allegedly” manipulated the same yen-Libor rates that everyone in the world had to price their stuff off too.
While Tom’s plight is playing out right now, we know he had help doing what he allegedly did.
We know that because the London-based broker ICAP, who Tom used to allegedly manipulate yen-Libor, said several of their brokers were involved. ICAP fired them (they will likely be prosecuted), paid $87 million in fines for doing it, and said they were sorry.
That ICAP brokers manipulated yen-Libor for Tom so he could make millions from his bonus, out of which brokers at ICAP expected payment, is a matter of fact.
It worked like this: Tom told the brokers what yen-Libor rates he needed. The brokers got on their phones to all the other bank traders who were on the submission panels posting quotes into the aggregation hopper that spits out Libor rates, and talked them into posting the rates Tom wanted to see.
Here’s where brokers come in.
How Brokers Help Traders Hide Their Tracks
Brokers are middlemen. Big traders use them to buy and sell through.
Traders all want an edge. They all want information about where the market is, who’s doing what, and whatever objective insight they can get, from whomever they can get it. They are supposed to get some of that information from the brokers they do business with.
As a trader with a big position, let’s say you’re selling a huge position. You don’t want the potential buyers of the massive position you’re unloading to know you want to sell, or worse, have to sell. Other traders will back away and won’t buy and even sell what you’re trying to sell to knock the price down on you to force you to sell at cheaper prices. And who’s going to buy at those cheaper prices? The traders who want to buy what you have at better prices, if they can get them.
Traders hide who they are and what they are doing by using brokers.
Brokers know who’s doing what. They generally don’t want to screw their clients, because if it’s found out that they’ve screwed you, you won’t use them again. And sometimes, if you are an angry trader, you might rip the throat out of a broker who screwed you out of tens or hundreds of millions of dollars, and yes, sometimes billions.
It happens. It happens because brokers always protect their biggest clients and will screw other clients to help their best clients. Tom was a big client at ICAP. ICAP is no small-time broker either. According to their annual report, they handle about $1.4 trillion in trades… a day.
Brokers provide “color” to their clients. Color includes their insights and sometimes inside information about other traders’ positions. ICAP’s brokers colored other bank traders’ outlooks with information and actual suggestions as to what they should submit to the aggregators pricing Libor based on what Tom wanted those rates to be.
That’s how easy manipulation can be.
See, nothing fancy. Just some color added to an otherwise unprofitable day for some grateful trader somewhere.
Are there co-conspirators? Of course there are. Was Tom Hayes the only person allegedly manipulating Libor for a bigger bonus? Of course not. Did Tom’s bosses know? Who knows? But I allege that of course they knew. They got bonuses based on Tom’s profitability.
I’m not speculating whether there was any FX manipulation at any banks. I’m not speculating whether there was or is any manipulation of the ISDAFIX used to price derivatives (more on that one another time). Nor am I speculating whether there was any manipulation of Libor.
I would never speculate on anything that I already know is true.
Shah
http://www.wallstreetinsightsandindictments.com/2013/10/the-next-big-rate-manipulation-scandal-is-about-to-break/
great article basserdan.
great article basserdan.
Markit Group Said to Avoid U.S. Antitrust Claims as EU Proceeds
By Keri Geiger, Matthew Leising & Sara Forden
Oct 7, 2013 2:00 AM ET
Bloomberg
Markit Group Ltd., the data provider controlled by Wall Street firms including JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC), probably won’t face U.S. sanctions for impeding competition in the $22 trillion credit-derivatives market, according to two people with direct knowledge of the four-year investigation.
The Justice Department’s antitrust division isn’t planning to press London-based Markit, led by Chief Executive Officer Lance Uggla, to alter business practices because investigators’ concerns are being addressed by the 2010 Dodd-Frank Act, the people said. The European Commission is still preparing penalties in a parallel probe, said the people, who asked not to be identified because the reviews aren’t public.
Markit provides customers with derivative and bond data and sells licenses to companies seeking to offer clients its credit-swap indexes, the most actively traded contracts. Authorities have been examining whether banks controlling the firm colluded to withhold that information to block the development of exchange trading, a shift that could have crimped their profits from handling client transactions. Dodd-Frank is opening the swaps market to competition and making it easier for new users to participate.
“Dodd-Frank has made a significant difference, and it’s therefore understandable that this is not so much on the front burner for the Department of Justice as it once was,” said Darrell Duffie, a finance professor at Stanford University in California, who researches the structure of over-the-counter derivatives markets. “The grip of the major dealers on the over-the-counter market is dramatically loosened by Dodd-Frank.”
Civil Inquiry
The Justice Department examined whether banks conspired to use Markit to maintain their dominance in credit-default swaps and prevent new players from gaining a foothold, said the people. The probe was civil, according to one of the people. That means if the government were to pursue a case, the goal would be to end anticompetitive practices rather than imposing criminal penalties.
Dodd-Frank and Commodity Futures Trading Commission rules created under the law have weakened Markit’s ability to limit which companies can obtain its licenses to trade the contracts or offer clearing services, Duffie said.
The Justice Department hasn’t ended its probe, is monitoring Europe’s push for sanctions and could reverse its position on whether U.S. intervention is needed, the people said.
Adora Jenkins, a Justice Department spokeswoman, and Alex Paidas at Markit declined to comment on the Justice Department’s plans. Bloomberg LP, the parent of Bloomberg News, competes with Markit in selling information to the financial-services industry.
Europe’s Warning
The European Commission signaled in a July press release that it may bring claims against targets of its probe. The competition authority said it sent Markit, 13 banks and the International Swaps & Derivatives Association a statement of objections, giving them a chance to dispute allegations before the commission issues a ruling or imposes penalties.
Citigroup Inc. (C), UBS AG (UBSN), Royal Bank of Scotland Group Plc (RBS), Deutsche Bank AG (DBK) and Goldman Sachs Group Inc. also are among banks with the largest stakes in Markit, according to a list of voting shares in a 2012 filing with the U.K.’s Companies House.
Exchanges Thwarted
Spokesmen for the banks, all of which were named in the commission’s July news release, and for the ISDA, which sets standards for credit-default swaps, declined to comment. Antoine Colombani, a spokesman for Joaquin Almunia, the EU’s antitrust chief, also declined to discuss the inquiries. Goldman Sachs, Citigroup and Morgan Stanley, all based in New York, have said in regulatory filings this year that they are cooperating with U.S. investigators.
The European Commission has said it examined difficulties faced by Deutsche Boerse AG (DB1) and Chicago-based CME Group Inc. (CME), two of the world’s largest derivatives clearinghouses, as they sought to start a central clearing platform for instruments including credit-default swaps from 2006 to 2009. Credit derivatives with a notional value of more than $22 trillion were outstanding as of the week ended Sept. 27, according to the Depository Trust & Clearing Corp., which runs a data repository for the contracts. The value outstanding of credit-default swaps surged almost 100-fold from 2000 to 2007 to $62 trillion, ISDA estimates show.
Threatening Fees
That market has been a boon to Wall Street. JPMorgan, Citigroup, Goldman Sachs and Bank of America, the top four U.S. derivative-dealer banks, generated $11.2 billion in revenue in the first half of 2013 from trading both cash and derivative contracts according to the Office of the Comptroller of the Currency. Similar revenue figures for non-U.S. banks active in the global market aren’t available.
The exchanges’ plan threatened to reduce fees that Wall Street firms reaped for arranging over-the-counter trades with their customers. To thwart the shift, banks instructed Markit and the ISDA to deny the exchanges licenses needed to obtain data and index benchmarks, Europe’s competition authority wrote in the July announcement.
“The commission takes the preliminary view that the banks acted collectively to shut out exchanges from the market because they feared that exchange trading would have reduced their revenues from acting as intermediaries in the OTC market,” the authority wrote.
Different Approaches
The Justice Department investigation began in 2009 after clearinghouses owned by CME Group and Atlanta-based IntercontinentalExchange Inc. negotiated with Markit to obtain licenses to guarantee trades based on its credit-swap indexes, people familiar with the situation said at the time. The potentially anticompetitive practices included requiring clearinghouses to buy bundled services and restricting which trades can be cleared, the people said then.
The divergence in how the European Union and the U.S. are ending the inquiries spotlights different approaches to policing anti-competitive behavior on either side of the Atlantic.
“Europe tends to be more aggressive on antitrust issues than the U.S. due to the more business-friendly free-market approach in the U.S.,” said Michael A. Carrier, a professor at Rutgers School of Law in New Jersey. Almunia’s office “has shown a willingness to really push big companies and get more out of them on antitrust violations.”
‘Uphill Battle’
Once European authorities issue a statement of objections, “the target typically faces an uphill battle,” said Edward B. Schwartz, a partner at law firm Steptoe & Johnson LLP in Washington, who specializes in antitrust cases. He didn’t speak specifically about the Markit probe.
In the U.S., the Justice Department staff generally “knows upfront if the conduct is criminal or civil,” Schwartz said. “Criminal conduct includes hard-core antitrust violations such as price-fixing.”
While such criminal cases can lead to fines in the U.S., civil complaints usually seek court injunctions forcing companies to alter practices.
Dodd-Frank, passed in response to the financial crisis, includes provisions designed to move swaps that helped fuel the 2008 credit crisis from largely unregulated trading off exchanges to more transparent systems including swap-execution facilities, or SEFs, overseen by the CFTC and Securities and Exchange Commission. As the rules took shape, the Justice Department opted to hold back on bringing a case, according to the people with knowledge of the investigation.
‘Markets Changing’
Bloomberg LP created a SEF that is among new systems to have been granted a license to offer trading of Markit credit-swap indexes, Markit said in an Oct. 3 statement.
“Derivatives markets are changing and we remain focused on helping market participants migrate from bilateral trading to an electronic, multilateral market,” Armins Rusis, managing director and global head of information at Markit, said in the statement.
Markit also is changing how it offers licenses on its products. When the only way to buy or sell a swap was from a dealer bank, the firms bought licenses from Markit to trade credit-default swaps indexes with their clients, serving as the de facto venues, according to people familiar with the market.
Earlier this year, Markit began offering trading venues such as exchanges or swap-execution facilities an option to obtain a license by paying the company $10 per index trade, according to a copy of the terms reviewed by Bloomberg News. That includes dealer-to-customer trades, as well as transactions between two banks or two hedge funds, according to the term sheet.
To contact the reporters on this story: Keri Geiger in New York at kgeiger4@bloomberg.net; Matthew Leising in New York at mleising@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net
http://www.bloomberg.com/news/2013-10-07/markit-group-said-to-avoid-u-s-antitrust-claims-as-eu-proceeds.html
Now MasterCard Wants Your Fingerprints…
Posted on October 4, 2013
Earlier this week, USA Today reported that massive payment processor MasterCard had joined the FIDO alliance. FIDO is an acronym for Fast IDentity Online, and the group describes itself as:
The FIDO (Fast IDentity Online) Alliance is a 501(c)6 non-profit organization nominally formed in July 2012 to address the lack of interoperability among strong authentication devices as well as the problems users face with creating and remembering multiple usernames and passwords. The FIDO Alliance plans to change the nature of authentication by developing specifications that define an open, scalable, interoperable set of mechanisms that supplant reliance on passwords to securely authenticate users of online services. This new standard for security devices and browser plugins will allow any website or cloud application to interface with a broad variety of existing and future FIDO-enabled devices that the user has for online security.
USA Today reports that:
SAN FRANCISCO — MasterCard is joining the FIDO Alliance, signaling that the payment network is getting interested in using fingerprints and other biometric data to identify people for online payments.
MasterCard will be the first major payment network to join FIDO. The Alliance is developing an open industry standard for biometric data such as fingerprints to be used for identification online. The goal is to replace clunky passwords and take friction out of logging on and purchasing using mobile devices.
It’s for your own good, and it’ll probably fight terrorism too!
Apple’s new iPhone 5s smartphone has a fingerprint sensor, but the tech giant is not part of FIDO. However, Google is part of the Alliance, and devices running Google’s Android operating system will have fingerprint sensors by next year.
I’m sure the folks at the Department of Homeland Security will be more than happy that the financial giant will make mass collection under its Biometric Optical Surveillance System (BOSS) that much easier. Serfs up suckers!
Full article here.
In Liberty,
Mike
http://libertyblitzkrieg.com/2013/10/04/now-mastercard-wants-your-fingerprints/