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Nice article nlightn!
America is Going to Crash Big Time
Dr. Paul Craig Roberts
12/12/2012
Interview link:
http://www.silverbearcafe.com/private/12.12/bigtime.html
5 Commodity Stocks Moving On News
December 12, 2012
Matthew Smith
includes: KOG, MCP, PDCE, REXX, UEC
Uranium
We wanted to give readers an update on Uranium Energy Corporation (UEC) which released results and showed that they sold 50,000 lbs of U3O8 this past quarter which had a cost per pound of $26 (not including royalties). The company also accelerated construction at the Goliad ISR project now that they have the required approval and permits and that should greatly increase the company's production and could make them large enough to grab the attention of some of Canada's or Australia's producers who are looking to broaden their production bases. We really like the uranium story heading into 2013 and fully expect this to be one of the vehicles in which we invest to play what we think will be a strong trend upwards in the underlying price of 'the other yellow metal' as we like to call it.
http://seekingalpha.com/article/1059541-5-commodity-stocks-moving-on-news
Obama Likely to Approve Gold Sanctions on Iran, Currency Wars Escalate
Comment Posted by Wealth Wire - Wednesday, December 12th, 2012
Gold is hovering unchanged ahead of the U.S. FOMC policy statement that takes place at 1730 GMT and Ben Bernanke’s news conference is at 1915 GMT. Investors believe that the Fed will reveal more bond purchases and a continued loose monetary stance which will favour gold and silver’s appeal as hedges against inflation.
U.S. President, Barack Obama and John Boehner, Speaker of the House of Representatives, spoke by phone on Tuesday after exchanging new proposals on the fiscal cliff. Fiscal cliff concerns are likely affecting U.S. consumer and business confidence in the run up to Christmas and this will likely impact an already vulnerable U.S. economy.
Gold-backed ETF’s climbed again to a new record at 76.178 million ounces on Dec. 10th, after dropping off a record high in the prior session, due to robust demand – particularly from the institutional sector.
Gold should reach a new record again in 2013 according to UBS in their daily note today.
Gold reached a record nominal high of $1,921.15/oz (12% below today’s price of $1,714/oz) 15 months ago in September 2011.
Gold analyst Edel Tully said “we remain gold bulls” and maintains an average gold estimate of $1,900/oz for 2013 – 11% above today’s price.
She cited continuing loose central-bank monetary policies as a key driver of new record high prices.
Turkey’s trade balance may turn on whether President Barack Obama vetoes more stringent sanctions against Iran after the U.S. Senate passed a measure targeting loopholes in gold exports to the Islamic Republic.
Turkey’s gold trade with neighbouring Iran has helped shrink its trade deficit over the past year according to Bloomberg.
Incredibly, precious metals accounted for about half of the almost $21 billion decline.
That’s calmed investor concern over its current-account gap, and helped persuade Fitch Ratings to give Turkey its first investment-grade rating since 1994.
The U.S. Senate voted 94-0 on Nov. 30 to approve new sanctions against Iran, closing gaps from previous measures, including trade in precious metals. Obama, who opposes the move on the grounds it may undercut existing efforts to rein in the nation’s nuclear ambitions, signed an executive order in July restricting gold payments to Iranian state institutions.
Turkey exported $11.9 billion of gold in the first 10 months of the year, according to the Ankara-based statistics agency’s website.
A very large 85% of the shipments went to Iran and the United Arab Emirates.
Iran is buying the gold with payments Turkey makes for natural gas it purchases in liras, Turkish Deputy Prime Minister Ali Babacan told a parliamentary committee in Ankara on Nov. 23.
Iran provides Turkey with between 21% and 25% of its gas, data from the Energy Market Regulatory Authority and Energy Minister Taner Yildiz showed.
The current-account deficit may fall to $57.3 billion by year-end, according to a bi-weekly survey of economists by the central bank published on Dec. 6. That compares with $77.1 billion last year, when Turkey had the second-biggest deficit in the world, behind the U.S.
The U.S. and the European Union say Iran is secretly pursuing a nuclear weapons capability. Iran says its nuclear program is strictly for civilian energy and medical research.
The trade with Iran is a strategic necessity for Turkey, and the government will view any new U.S. sanctions according to its own interests, Prime Minister Recep Tayyip Erdogan said in Istanbul on Dec. 3. Turkey isn’t concerned with how it pays for the gas it buys from Iran and would pay in “potatoes” if necessary, Yildiz said two days later.
The proposed U.S. amendment introduced by senators Robert Menendez and Mark Kirk is confusing and inconsistent in applying sanctions, according to an e-mail from the White House on Nov. 29 that was obtained by Bloomberg News.
The Menendez-Kirk amendment would allow purchases of Iranian natural gas if payments are made in local currencies into an account that Iran could only use for approved trade.
The State Department said Dec. 7 that nine oil-importing nations, including Turkey, will continue to be exempt from the sanctions aimed at Iran, according to an e-mailed statement. A spokeswoman at the U.S. embassy in Ankara, who asked not to be identified in line with policy, declined to comment the next day.
The gold debate poses a dilemma for Turkey, and the nation’s finances may be affected by the outcome, according to Nilufer Sezgin, chief economist at Erste Securities in Istanbul.
The Turkey Iran gold for energy trade shows the benefits of gold.
While not a productive asset, it can create much employment, preserve wealth and has important monetary uses – especially in times of crisis.
Gold is becoming an essential means of payment again in the Middle East again. We expect to see this trend continue in the coming months as competitive currency devaluations are pursued by nations globally in order to prevent deep recessions and depression.
In time other large energy exporters such as Russia and Venezuela may take payment for their oil exports in gold.
Those continuing to simplistically call gold “a bubble” have yet to realise how gold is becoming money again.
As doubts grow about the euro, the dollar, the pound and fiat currencies internationally we expect currency devaluations and currency and gold wars to intensify.
Gold is going from a fringe investment asset to a mainstream store of wealth held by prudent individuals, institutions, banks and nations.
*Post courtesy of Mark O'Byrne at GoldCore. His daily ‘Market Updates’ are quoted and reported on in the international financial press on a daily basis. Read more at Gold Core.
http://www.wealthwire.com/news/metals/4288?r=1
Obama Likely to Approve Gold Sanctions on Iran, Currency Wars Escalate
Comment Posted by Wealth Wire - Wednesday, December 12th, 2012
Gold is hovering unchanged ahead of the U.S. FOMC policy statement that takes place at 1730 GMT and Ben Bernanke’s news conference is at 1915 GMT. Investors believe that the Fed will reveal more bond purchases and a continued loose monetary stance which will favour gold and silver’s appeal as hedges against inflation.
U.S. President, Barack Obama and John Boehner, Speaker of the House of Representatives, spoke by phone on Tuesday after exchanging new proposals on the fiscal cliff. Fiscal cliff concerns are likely affecting U.S. consumer and business confidence in the run up to Christmas and this will likely impact an already vulnerable U.S. economy.
Gold-backed ETF’s climbed again to a new record at 76.178 million ounces on Dec. 10th, after dropping off a record high in the prior session, due to robust demand – particularly from the institutional sector.
Gold should reach a new record again in 2013 according to UBS in their daily note today.
Gold reached a record nominal high of $1,921.15/oz (12% below today’s price of $1,714/oz) 15 months ago in September 2011.
Gold analyst Edel Tully said “we remain gold bulls” and maintains an average gold estimate of $1,900/oz for 2013 – 11% above today’s price.
She cited continuing loose central-bank monetary policies as a key driver of new record high prices.
Turkey’s trade balance may turn on whether President Barack Obama vetoes more stringent sanctions against Iran after the U.S. Senate passed a measure targeting loopholes in gold exports to the Islamic Republic.
Turkey’s gold trade with neighbouring Iran has helped shrink its trade deficit over the past year according to Bloomberg.
Incredibly, precious metals accounted for about half of the almost $21 billion decline.
That’s calmed investor concern over its current-account gap, and helped persuade Fitch Ratings to give Turkey its first investment-grade rating since 1994.
The U.S. Senate voted 94-0 on Nov. 30 to approve new sanctions against Iran, closing gaps from previous measures, including trade in precious metals. Obama, who opposes the move on the grounds it may undercut existing efforts to rein in the nation’s nuclear ambitions, signed an executive order in July restricting gold payments to Iranian state institutions.
Turkey exported $11.9 billion of gold in the first 10 months of the year, according to the Ankara-based statistics agency’s website.
A very large 85% of the shipments went to Iran and the United Arab Emirates.
Iran is buying the gold with payments Turkey makes for natural gas it purchases in liras, Turkish Deputy Prime Minister Ali Babacan told a parliamentary committee in Ankara on Nov. 23.
Iran provides Turkey with between 21% and 25% of its gas, data from the Energy Market Regulatory Authority and Energy Minister Taner Yildiz showed.
The current-account deficit may fall to $57.3 billion by year-end, according to a bi-weekly survey of economists by the central bank published on Dec. 6. That compares with $77.1 billion last year, when Turkey had the second-biggest deficit in the world, behind the U.S.
The U.S. and the European Union say Iran is secretly pursuing a nuclear weapons capability. Iran says its nuclear program is strictly for civilian energy and medical research.
The trade with Iran is a strategic necessity for Turkey, and the government will view any new U.S. sanctions according to its own interests, Prime Minister Recep Tayyip Erdogan said in Istanbul on Dec. 3. Turkey isn’t concerned with how it pays for the gas it buys from Iran and would pay in “potatoes” if necessary, Yildiz said two days later.
The proposed U.S. amendment introduced by senators Robert Menendez and Mark Kirk is confusing and inconsistent in applying sanctions, according to an e-mail from the White House on Nov. 29 that was obtained by Bloomberg News.
The Menendez-Kirk amendment would allow purchases of Iranian natural gas if payments are made in local currencies into an account that Iran could only use for approved trade.
The State Department said Dec. 7 that nine oil-importing nations, including Turkey, will continue to be exempt from the sanctions aimed at Iran, according to an e-mailed statement. A spokeswoman at the U.S. embassy in Ankara, who asked not to be identified in line with policy, declined to comment the next day.
The gold debate poses a dilemma for Turkey, and the nation’s finances may be affected by the outcome, according to Nilufer Sezgin, chief economist at Erste Securities in Istanbul.
The Turkey Iran gold for energy trade shows the benefits of gold.
While not a productive asset, it can create much employment, preserve wealth and has important monetary uses – especially in times of crisis.
Gold is becoming an essential means of payment again in the Middle East again. We expect to see this trend continue in the coming months as competitive currency devaluations are pursued by nations globally in order to prevent deep recessions and depression.
In time other large energy exporters such as Russia and Venezuela may take payment for their oil exports in gold.
Those continuing to simplistically call gold “a bubble” have yet to realise how gold is becoming money again.
As doubts grow about the euro, the dollar, the pound and fiat currencies internationally we expect currency devaluations and currency and gold wars to intensify.
Gold is going from a fringe investment asset to a mainstream store of wealth held by prudent individuals, institutions, banks and nations.
*Post courtesy of Mark O'Byrne at GoldCore. His daily ‘Market Updates’ are quoted and reported on in the international financial press on a daily basis. Read more at Gold Core.
http://www.wealthwire.com/news/metals/4288?r=1
Show This To Anyone That Believes That Taxes Are Too Low
Michael Snyder
12/10/12
Every year average Americans pay dozens of different types of taxes, and yet many of our politicians are very open about the fact that they want to raise rates even higher and invent even more ways to bleed us all dry. Someday historians will look back and be absolutely amazed at how stupid we were.
We have the most complicated tax code in all of human history and at this point the federal tax code is more than four times as long as the entire collected works of William Shakespeare. In many places it is so incomprehensible that nobody actually understands what it means and the entire thing is absolutely riddled with loopholes from the beginning to the end.
Trust me, I used to study this stuff. Nobody could ever read the entire thing - it is close to four million words long. But that is just for federal income taxes. We have a number of other taxes taken out of our paychecks such as state income taxes, Social Security taxes and Medicare taxes. Sadly, the taxes taken out of your paycheck are only just the beginning. As I will detail below, there are more than 40 other taxes that average Americans pay each year in addition to the taxes that are taken out of our paychecks. Our politicians love to find ways that they can "raise revenue" without us feeling it. Most people just focus on income tax rates and they forget about the dozens of other ways that they are bleeding us dry. It really is kind of like "death by a thousand cuts", and of course the middle class gets hit the hardest. The poor are exempt from many taxes, the ultra-wealthy are masters at cheating the system and avoiding taxes, and so the most pain is always felt by those in the middle. Hard working middle class families and small businesses all over America are being financially raped by this insidious system. If you know of anyone out there that believes that taxes are "too low", please show this article to them.
Just counting federal, state and local income taxes, some Americans will be paying marginal tax rates of over 50 percent in 2013. But like I said, there are a lot of other taxes we pay than just those.
The following are 44 more taxes that at least some average Americans are paying now or will be paying soon other than federal, state and local income taxes...
#1 Building Permit Taxes
#2 Capital Gains Taxes
#3 Cigarette Taxes
#4 Court Fines (indirect taxes)
#5 Dog License Taxes
#6 Drivers License Fees (another form of taxation)
#7 Federal Unemployment Taxes
#8 Fishing License Taxes
#9 Food License Taxes
#10 Gasoline Taxes
#11 Gift Taxes
#12 Hunting License Taxes
#13 Inheritance Taxes
#14 Inventory Taxes
#15 IRS Interest Charges (tax on top of tax)
#16 IRS Penalties (tax on top of tax)
#17 Liquor Taxes
#18 Luxury Taxes
#19 Marriage License Taxes
#20 Medicare Taxes
#21 Medicare Tax Surcharge On High Earning Americans Under Obamacare
#22 Obamacare Individual Mandate Excise Tax (if you don't buy "qualifying" health insurance under Obamacare you will have to pay an additional tax)
#23 Obamacare Surtax On Investment Income (a new 3.8% surtax on investment income that goes into effect next year)
#24 Property Taxes
#25 Recreational Vehicle Taxes
#26 Toll Booth Taxes
#27 Sales Taxes
#28 Self-Employment Taxes
#29 School Taxes
#30 Septic Permit Taxes
#31 Service Charge Taxes
#32 Social Security Taxes
#33 State Unemployment Taxes (SUTA)
#34 Tanning Tax (a new Obamacare tax on tanning services)
#35 Telephone Federal Excise Taxes
#36 Telephone Federal Universal Service Fee Taxes
#37 Telephone Minimum Usage Surcharge Taxes
#38 Telephone State And Local Taxes
#39 Tire Taxes
#40 Tolls (another form of taxation)
#41 Traffic Fines (indirect taxation)
#42 Utility Taxes
#43 Vehicle Registration Taxes
#44 Workers Compensation Taxes
Sadly, this list is far from complete. There are many more forms of taxation that could be included.
When you account for all forms of taxation, there are some Americans that "play by the rules" that are sending more than half of their incomes to the government.
This is why "tax avoidance" has become a multi-billion dollar industry in the United States. People are sick and tired of being drained dry by a system that is way too complicated and way too unfair.
Posted below are 30 reasons why the U.S. tax system is stupid. Some of these facts I have discussed before, and some of them are new. You might want to be sitting down while you are reading this, because this list is likely to make many of you very angry...
1. Thanks to Proposition 30, many high income residents of California will be paying marginal income tax rates of 51.9% in 2013 if the fiscal cliff is not avoided. Keep in mind that the 51.9% figure only includes federal and state income taxes. It does not count any of the dozens of other taxes that we pay each year.
2. If a fiscal cliff deal is not reached, many residents of New York and Hawaii will also be paying marginal income tax rates of more than 50 percent.
3. If Americans fully funded the government through their taxes without any borrowing, the average American would have to work for 197 days just to meet the expenses incurred by government.
4. The U.S. tax code is now 3.8 million words long. If you took all of William Shakespeare's works and collected them together, the entire collection would only be about 900,000 words long.
5. According to the National Taxpayers Union, U.S. taxpayers spend more than 7.6 billion hours complying with federal tax requirements each year. Imagine what our society would look like if all of that time was spent on more economically profitable activities.
6. 75 years ago, the instructions for Form 1040 were two pages long. Today, they are 189 pages long.
7. There have been 4,428 changes to the tax code over the last decade. It is incredibly costly to change tax software, tax manuals and tax instruction booklets for all of those changes.
8. According to the National Taxpayers Union, the IRS currently has 1,999 different publications, forms, and instruction sheets that you can download from the IRS website.
9. Our tax system has become so complicated that it is almost impossible to file your taxes correctly. For example, back in 1998 Money Magazine had 46 different tax professionals complete a tax return for a hypothetical household. All 46 of them came up with a different result.
10. In 2009, PC World had five of the most popular tax preparation software websites prepare a tax return for a hypothetical household. All five of them came up with a different result.
11. The IRS spends $2.45 for every $100 that it collects in taxes. That is incredibly inefficient.
12. According to The Tax Foundation, the average American has to work until April 17th just to pay federal, state, and local taxes. Back in 1900, "Tax Freedom Day" came on January 22nd.
13. When the U.S. government first implemented a personal income tax back in 1913, the vast majority of the population paid a rate of just 1 percent, and the highest marginal tax rate was just 7 percent.
14. Residents of New Jersey pay $1.64 in taxes for every $1.00 of federal spending that they get back.
15. The United States is the only nation on the planet that tries to tax citizens on what they earn in foreign countries.
16. According to Forbes, the 400 highest earning Americans pay an average federal income tax rate of just 18 percent.
17. Warren Buffett had an effective federal income tax rate of just 17.4 percent for 2010.
18. The top 20 percent of all income earners in the United States pay approximately 86 percent of all federal income taxes.
19. Sadly, as Bill Whittle has shown, you could take every single penny that every American earns above $250,000 and it would only fund about 38 percent of the federal budget.
20. The United States has the highest corporate tax rate in the world (35 percent). In Ireland, the corporate tax rate is only 12.5 percent. This is causing thousands of corporations to move operations out of the United States and into other countries.
21. Some tax havens are doing a booming business in setting up sham headquarters for U.S. corporations. For example, the city of Zug, Switzerland only has a population of 26,000 people but it is the headquarters for 30,000 companies.
22. In 1950, corporate taxes accounted for about 30 percent of all federal revenue. In 2012, corporate taxes will account for less than 7 percent of all federal revenue.
23. In a previous article, I discussed how many of our largest corporations make huge profits and yet pay less than nothing in taxes....
What U.S. corporations are able to get away with is absolutely amazing.
The following figures come directly out of a report by Citizens for Tax Justice. These are combined figures for the tax years 2008, 2009 and 2010.
During those three years, all of the corporations below made a lot of money. Yet all of them paid net taxes that were below zero for those three years combined.
How is that possible? Well, it turns out that instead of paying in taxes to the federal government, they were actually getting money back.
So for these corporations, their rate of taxation was actually below zero.
If you have not seen these before, you are going to have a hard time believing some of these statistics.....
*Honeywell*
Profits: $4.9 billion
Taxes: -$34 million
*Fed Ex*
Profits: $3 billion
Taxes: -$23 million
*Wells Fargo*
Profits: $49.37 billion
Taxes: -$681 million
*Boeing*
Profits: $9.7 billion
Taxes: -$178 million
*Verizon*
Profits: $32.5 billion
Taxes: -$951 million
*Dupont*
Profits: $2.1 billion
Taxes -$72 million
*American Electric Power*
Profits: $5.89 billion
Taxes -$545 million
*General Electric*
Profits: $7.7 billion
Taxes: -$4.7 billion
Are you starting to get the picture?
24. Exxon-Mobil paid $15 billion in taxes in 2009, but not a single penny went to the U.S. government.
25. If Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
26. The number of traffic accidents spikes each year right around April 15th. The following is from a recent Bloomberg article....
Deaths from traffic accidents around April 15, traditionally the last day to file individual income taxes in the U.S., rose 6 percent on average on each of the last 30 years of tax filing days compared with a day during the week prior and a week later, according to research published in the Journal of the American Medical Association.
27. The elite are not stupid. They are not just going to sit there and let our politicians tax them into oblivion. In fact, many of them will openly cheat if that is what it takes to avoid taxes. Most of them have become masters at avoiding taxes or they have hired people that do that kind of work for them. According to the IMF, the global elite are holding a total of 18 trillion dollars in offshore banking havens such as the Cayman Islands.
28. It has been reported that 80 percent of all international banking transactions involve offshore banks. A whopping 1.4 trillion dollars is being held in offshore banks in the Cayman Islands alone.
29. An article that appeared in the Guardian estimated that a third of all the wealth on the entire planet is being kept in offshore banks. One of the primary reasons for this is tax avoidance.
30. If a deal is not reached and the "fiscal cliff" is not avoided, the average American taxpayer can expect to pay about $3,500 more in taxes next year.
Clearly, the tax system that we are using right now is not working.
The big corporations and the ultra-wealthy have mastered the art of moving money offshore and using loopholes to make their tax burdens as low as possible.
So our politicians just keep finding more ways to squeeze more money out of the middle class and small businesses in order to make up the difference.
If you are a middle class American and you don't think that you are paying enough taxes already then you are one sick puppy.
They are draining blood from us in dozens of different ways, and they are constantly inventing new ways to tax all of us.
So what is the solution?
Well, a good first step would be to completely abolish the federal income tax. It is terribly inefficient, it is way too complicated and it is terribly unfair. It rewards those that know how to exploit loopholes and those that know how to cheat the system. Those that "play by the rules" always get the short end of the stick.
Our government could easily be funded by tariffs and other forms of taxation that are more equitable. There were vast stretches of American history when there was no federal income tax, and the federal government did just fine.
And of course one of our biggest problems is that the federal government simply spends way, way too much money. There is not a single category of government spending that does not need to be reduced and/or made much more efficient. The amount of waste that goes on in Washington D.C. is absolutely mind boggling.
Unfortunately, both political parties seem content to be married to the current system so I would not expect any significant changes any time soon.
So what do you think about all this?
Do you believe that taxes are too low, or do you believe that they are too high?
Please share this article with as many people as you can.
http://www.silverbearcafe.com/private/12.12/taxes.html
Obama Likely To Approve Gold Sanctions on Iran As Currency Wars Escalate
From GoldCore Gold Bullion
12/12/2012
Submitted by Tyler Durden
Turkey’s trade balance may turn on whether President Barack Obama vetoes more stringent sanctions against Iran after the U.S. Senate passed a measure targeting loopholes in gold exports to the Islamic Republic.
Turkey’s gold trade with neighbouring Iran has helped shrink its trade deficit over the past year according to Bloomberg.
Incredibly, precious metals accounted for about half of the almost $21 billion decline.
That’s calmed investor concern over its current-account gap, and helped persuade Fitch Ratings to give Turkey its first investment-grade rating since 1994.
The U.S. Senate voted 94-0 on Nov. 30 to approve new sanctions against Iran, closing gaps from previous measures, including trade in precious metals. Obama, who opposes the move on the grounds it may undercut existing efforts to rein in the nation’s nuclear ambitions, signed an executive order in July restricting gold payments to Iranian state institutions.
Turkey exported $11.9 billion of gold in the first 10 months of the year, according to the Ankara-based statistics agency’s website.
A very large 85% of the shipments went to Iran and the United Arab Emirates.
Iran is buying the gold with payments Turkey makes for natural gas it purchases in liras, Turkish Deputy Prime Minister Ali Babacan told a parliamentary committee in Ankara on Nov. 23.
Iran provides Turkey with between 21% and 25% of its gas, data from the Energy Market Regulatory Authority and Energy Minister Taner Yildiz showed.
The current-account deficit may fall to $57.3 billion by year-end, according to a bi-weekly survey of economists by the central bank published on Dec. 6. That compares with $77.1 billion last year, when Turkey had the second-biggest deficit in the world, behind the U.S.
The U.S. and the European Union say Iran is secretly pursuing a nuclear weapons capability. Iran says its nuclear program is strictly for civilian energy and medical research.
The trade with Iran is a strategic necessity for Turkey, and the government will view any new U.S. sanctions according to its own interests, Prime Minister Recep Tayyip Erdogan said in Istanbul on Dec. 3. Turkey isn’t concerned with how it pays for the gas it buys from Iran and would pay in “potatoes” if necessary, Yildiz said two days later.
The proposed U.S. amendment introduced by senators Robert Menendez and Mark Kirk is confusing and inconsistent in applying sanctions, according to an e-mail from the White House on Nov. 29 that was obtained by Bloomberg News.
The Menendez-Kirk amendment would allow purchases of Iranian natural gas if payments are made in local currencies into an account that Iran could only use for approved trade.
The State Department said Dec. 7 that nine oil-importing nations, including Turkey, will continue to be exempt from the sanctions aimed at Iran, according to an e-mailed statement. A spokeswoman at the U.S. embassy in Ankara, who asked not to be identified in line with policy, declined to comment the next day.
The gold debate poses a dilemma for Turkey, and the nation’s finances may be affected by the outcome, according to Nilufer Sezgin, chief economist at Erste Securities in Istanbul.
The Turkey Iran gold for energy trade shows the benefits of gold.
While not a productive asset, it can create much employment, preserve wealth and has important monetary uses – especially in times of crisis.
Gold is becoming an essential means of payment again in the Middle East again. We expect to see this trend continue in the coming months as competitive currency devaluations are pursued by nations globally in order to prevent deep recessions and depression.
In time other large energy exporters such as Russia and Venezuela may take payment for their oil exports in gold.
Those continuing to simplistically call gold “a bubble” have yet to realise how gold is becoming money again.
As doubts grow about the euro, the dollar, the pound and fiat currencies internationally we expect currency devaluations and currency and gold wars to intensify.
Gold is going from a fringe investment asset to a mainstream store of wealth held by prudent individuals, institutions, banks and nations.
http://www.zerohedge.com/news/2012-12-12/obama-likely-approve-gold-sanctions-iran-currency-wars-escalate
BofA Favors Gold, Copper for 2013 as Commodities Outlook Neutral
By Maria Kolesnikova - Dec 11, 2012
Gold, copper, silver, platinum and palladium will outperform other commodities next year on easing by the U.S. Federal Reserve and supply constraints, according to Bank of America Corp.
Global economic growth will average 3.2 percent in 2013, “modestly” supporting demand for raw materials, analysts led by Francisco Blanch said in a report today. The so-called fiscal cliff of automatic tax increases and budget cuts could tip the U.S. economy into recession and “abrupt policy changes” in Europe may cause “large commodity price swings,” the analysts wrote. The bank is neutral on commodities, John Bilton, European investment strategist, told reporters in London today.
“We expect large-scale policy easing by the Fed and the ECB should push gold prices higher,” the analysts wrote, forecasting gold prices at $2,000 an ounce for 2013 and $2,400 for the end of 2014. “A stronger Chinese economy will likely lend support to supply constrained metals next year, and we expect copper prices to average $7,750 a ton in the fourth quarter of 2013.”
Commodities as tracked by the Standard & Poor’s GSCI Spot Index are down 2 percent this year, led by declines in coffee, sugar and cotton. The gauge almost doubled in the three years to 2011 as central banks and governments around the world took action to boost their economies hurt by the global financial crisis in 2008.
Spot gold, up 9.2 percent in 2012, is rallying for a 12th year as central banks join investors buying bullion to diversify assets. Holdings in exchange-traded products are at a record, data compiled by Bloomberg show, and central banks are also adding to their holdings. Silver has “scope” for a 20 percent rally from the current levels, the bank said.
Bank of America expects grain prices to ease gradually into 2013, while “precariously low inventories” can drive prices higher at the start of the year, it said.
To contact the reporter on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
http://www.bloomberg.com/news/2012-12-11/bofa-favors-gold-copper-for-2013-as-commodities-outlook-neutral.html
Obama Likely To Approve Gold Sanctions on Iran As Currency Wars Escalate
From GoldCore Gold Bullion
12/12/2012
Submitted by Tyler Durden
Turkey’s trade balance may turn on whether President Barack Obama vetoes more stringent sanctions against Iran after the U.S. Senate passed a measure targeting loopholes in gold exports to the Islamic Republic.
Turkey’s gold trade with neighbouring Iran has helped shrink its trade deficit over the past year according to Bloomberg.
Incredibly, precious metals accounted for about half of the almost $21 billion decline.
That’s calmed investor concern over its current-account gap, and helped persuade Fitch Ratings to give Turkey its first investment-grade rating since 1994.
The U.S. Senate voted 94-0 on Nov. 30 to approve new sanctions against Iran, closing gaps from previous measures, including trade in precious metals. Obama, who opposes the move on the grounds it may undercut existing efforts to rein in the nation’s nuclear ambitions, signed an executive order in July restricting gold payments to Iranian state institutions.
Turkey exported $11.9 billion of gold in the first 10 months of the year, according to the Ankara-based statistics agency’s website.
A very large 85% of the shipments went to Iran and the United Arab Emirates.
Iran is buying the gold with payments Turkey makes for natural gas it purchases in liras, Turkish Deputy Prime Minister Ali Babacan told a parliamentary committee in Ankara on Nov. 23.
Iran provides Turkey with between 21% and 25% of its gas, data from the Energy Market Regulatory Authority and Energy Minister Taner Yildiz showed.
The current-account deficit may fall to $57.3 billion by year-end, according to a bi-weekly survey of economists by the central bank published on Dec. 6. That compares with $77.1 billion last year, when Turkey had the second-biggest deficit in the world, behind the U.S.
The U.S. and the European Union say Iran is secretly pursuing a nuclear weapons capability. Iran says its nuclear program is strictly for civilian energy and medical research.
The trade with Iran is a strategic necessity for Turkey, and the government will view any new U.S. sanctions according to its own interests, Prime Minister Recep Tayyip Erdogan said in Istanbul on Dec. 3. Turkey isn’t concerned with how it pays for the gas it buys from Iran and would pay in “potatoes” if necessary, Yildiz said two days later.
The proposed U.S. amendment introduced by senators Robert Menendez and Mark Kirk is confusing and inconsistent in applying sanctions, according to an e-mail from the White House on Nov. 29 that was obtained by Bloomberg News.
The Menendez-Kirk amendment would allow purchases of Iranian natural gas if payments are made in local currencies into an account that Iran could only use for approved trade.
The State Department said Dec. 7 that nine oil-importing nations, including Turkey, will continue to be exempt from the sanctions aimed at Iran, according to an e-mailed statement. A spokeswoman at the U.S. embassy in Ankara, who asked not to be identified in line with policy, declined to comment the next day.
The gold debate poses a dilemma for Turkey, and the nation’s finances may be affected by the outcome, according to Nilufer Sezgin, chief economist at Erste Securities in Istanbul.
The Turkey Iran gold for energy trade shows the benefits of gold.
While not a productive asset, it can create much employment, preserve wealth and has important monetary uses – especially in times of crisis.
Gold is becoming an essential means of payment again in the Middle East again. We expect to see this trend continue in the coming months as competitive currency devaluations are pursued by nations globally in order to prevent deep recessions and depression.
In time other large energy exporters such as Russia and Venezuela may take payment for their oil exports in gold.
Those continuing to simplistically call gold “a bubble” have yet to realise how gold is becoming money again.
As doubts grow about the euro, the dollar, the pound and fiat currencies internationally we expect currency devaluations and currency and gold wars to intensify.
Gold is going from a fringe investment asset to a mainstream store of wealth held by prudent individuals, institutions, banks and nations.
http://www.zerohedge.com/news/2012-12-12/obama-likely-approve-gold-sanctions-iran-currency-wars-escalate
Secret IMF report: Hide gold loans and swaps for market manipulation
By: Chris Powell, Secretary/Treasurer, GATA
Tuesday, 11 December 2012 |Source: GoldSeek.com
Dear Friend of GATA and Gold:
Western central banks conceal their gold loans and swaps because information about them is "highly market-sensitive" and accountability about them would hinder secret currency market interventions by central banks, according to a confidential report by the International Monetary Fund obtained this week by GATA.
The report, provided to GATA by its researcher R.M., was written in March 1999 as the IMF staff proposed to strengthen financial reporting standards for central banks. The report shows that the objections by gold-lending central banks were decisive in weakening the standards. While the first draft of the new reporting rules would have required disclosing central bank gold loans and swaps, the revised rules, later adopted, allowed central banks to hide their gold loans and swaps within their gold reserves and even not to disclose the amount of their monetary gold at all, just the value assigned to it.
That is, the explicit but secret policy of Western central banking toward gold is to deceive and manipulate markets, as GATA long has complained.
The confidential IMF report says that to strengthen its financial reporting standards for central banks -- its Special Data Dissemination Standard reserves template -- IMF staff members consulted top officials of the organization as well as the Bank for International Settlements, the European Central Bank, the Bank of England, the German Bundesbank, the Bank of France, and other European central banks.
"Central bank officials," the confidential report says, "indicated that they considered information on gold loans and swaps to be highly market-sensitive, in view of the limited number of participants in such transactions. Thus, they considered that the Special Data Dissemination Standard reserves template should not require the separate disclosure of such information but should instead treat all monetary gold assets, including gold on loan or subject to swap agreements, as a single data item. They also confirmed a view, taken by a number of countries (both inside and outside the G-10) at the December board meeting that the disclosure of the composition of reserves by individual currencies would be market-sensitive but that they would have no objection to disclosure of such information by groups of currencies. ..." (Page 6, Paragraph 15.)
"Conversations with a few executive directors confirmed the reluctance of their authorities at present to disclose information on their international reserve positions on a highly frequent and timely basis, as a matter of policy. The motivations underlying this position were: (a) a desire to preserve the confidentiality of foreign exchange market intervention for a period, in order to enhance its effectiveness; b) a reluctance by some monetary authorities to reveal information on their official transactions in exchange markets on a more frequent and timely basis than the disclosure of transactions by major international investors; and c) a concern by some countries that weekly reserves data could be inherently more volatile than monthly data, which could be misleading and potentially destabilizing to exchange markets. This position had stimulated, during the December board meeting, a lively discussion of the costs and benefits of increased transparency under various circumstances and the information requirements for well-functioning international financial markets." (Page 8, Paragraph 20.)
Specifying changes to be made in the reporting standards proposed by the IMF staff, the confidential report says: "On the assets side of the template, the major changes are: a) the elimination of any requirement to disclose the amount of gold loans, and of the explicit requirement to disclose the volume of monetary gold. The revised template would require only that the total value of monetary gold (including gold loans) be disclosed." (Page 8, Paragraph 23.)
The confidential IMF report confirms and elaborates on the Bank of England's admission to GATA a year ago that the bank's gold swap and leasing information is "market sensitive" and its disclosure "would allow enquirers to find out what gold transactions have been taking place." Such knowledge of what the bank was doing in the gold market, a spokesman for the bank said, would harm the interests of both the British government and the bank's "private customers," to whom the bank "owes a duty of confidentiality":
www.gata.org/node/10635
While disclosure of the confidential IMF report is unlikely to prompt any acknowledgment from the most determined purveyors of misinformation in gold market analysis and the mainstream financial news media -- nothing is likely to get them to be truthful -- it will enable individual investors and citizens to confront their central bank and elected officials and ask more authoritatively for an accounting and explanation of the purposes of secret central bank gold loans and swaps, transactions in which even the U.S. Federal Reserve is participating, according to a statement extracted by GATA from a member of the Fed's Board of Governors in 2009:
www.gata.org/node/9917
The confidential IMF report on the authorization of secrecy for gold loans and swaps is posted in PDF format at GATA's Internet site here:
http://www.gata.org/files/IMFGoldDataMemo--3-10-1999.pdf
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
http://news.goldseek.com/GATA/1355239080.php
That's a great site with educational videos itsonlymuni. Here's another video on fractional reserve banking;
Fractional Reserve Banking
Google avoided $2bn tax by funnelling profits through Bermunda
Google managed to halve its tax bill last year and avoided $2bn (£1.2bn) of global income levies by funnelling most of its profits through Bermunda, regulatory filings show.
By Louise Armitstead, Chief Business Correspondent
4:59PM GMT 10 Dec 2012
The American internet giant, whose company motto is “Don’t be Evil”, swept $9.8bn of revenues from international subsidiaries into Bermuda last year. The figure, which is equates to around 80pc of its total pre-tax profits, is nearly twice as big as it was three years ago, according to Bloomberg.
The documents, filed last month in the Netherlands, show that Britain is Google’s second biggest market generating 11pc of its sales, or $4.1bn last year. But the company paid just £6m in corporation tax. Overall, Google paid a rate of 3.2pc on its overseas earnings, despite generating most of its revenues in high-tax jurdisdictions in Europe.
The company reportedly uses complex tax schemes called the Double Irish and Dutch Sandwich, which take large royalty payments from international subsidiaries and pay tax in low rate regimes.
The tax arrangements add fuel to accusations made by British MPs that Google and other firms including Starbucks and Amazon, have been “immorally” minimising its tax bills.
Google declined to comment. But two weeks ago Matt Brittin, Google’s UK boss, said MPs were blaming companies for a system that they had designed. “Google plays by the rules set by politicians,” he said. “The only people who really have choices are politicians who set the tax rates.”
Last week, Starbucks caved into public pressure and promised to pay £20m to the Treasury over the next two years. However the trigger more criticism of “optional” tax payments.
George Osborne has pledged give the OECD “more resources” to fund a clamp-down to ensure global firms pay their “proper share of taxes.” Pascal Saint–Amans, the director of the OECD’s centre for tax policy and administration, said that the issue of tax avoidance is now recognised as a “political concern.”
At the weekend it emerged that Microsoft pays no UK tax on £1.7bn of online revenues. Although it pays full corporation tax on its other units, the US technology group is understood to be channelling online payments for its Windows 8 operating system and other downloads of software through Luxembourg and Ireland, where corporation tax is lower than the UK.
As a result, Microsoft’s Irish registered company, Microsoft Ireland Operations Ltd, reported £1.7bn of revenues from the UK on which the company has paid no UK corporation tax.
Microsoft has denied any wrongdoing in the US and said that it complies with tax laws.
http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/9735448/Google-avoided-2bn-tax-by-funnelling-profits-through-Bermunda.html
CFTC Files Lawsuit for Multimillion-dollar Metals Scheme
Tuesday December 11, 2012, 4:45am PST
By Michelle Smith2 - Exclusive to Silver Investing News3
On December 5, 2012, the Commodity Futures Trading Commission (CFTC) filed a lawsuit5 in a US district court alleging that a network of firms and their principals are participating in a precious metals scheme. The CFTC accuses the defendants of fraudulently marketing illegal off-exchange retail commodity contracts for silver, gold6 and other metals. This fraud has allegedly allowed the orchestrator to take in at least $46 million since July 2011.
Defendants
Hunter Wise Commodities, Hunter Wise Services, Hunter Wise Credit and Hunter Wise Trading operate as a common enterprise, according to the CFTC. The CFTC notes that Hunter Wise describes itself as “a physical commodity trading company, wholesaler, market maker, back office-support service provider, and finance company.” The CFTC describes Hunter Wise as “the orchestrator” of a multimillion-dollar precious metals scheme.
Lloyds Commodities, Lloyds Commodities Credit Company and Lloyds Services also operate as a common enterprise. Lloyds claims to provide services such as the “delivery of physical precious metals, financing and data processing services,” but the CFTC alleges that in this scheme, Lloyds plays the role of an intermediary between Hunter Wise and approximately 30 telemarketing firms.
Four of those telemarketing firms — Blackstone Metals Group, Newbridge Alliance, United States Capital Trust and CD Hopkins Financial — are named in the lawsuit and are described as dealers.
CD Hopkins’ affiliate, Hard Asset Lending, is also named in the lawsuit and is supposedly a loan provider.
The lawsuit names 20 defendants, including the principals at these companies.
On March 22, 2010, Hunter Wise entered into a contract with Lloyds in order to outsource trading, financing and data processing services, according to the CFTC’s complaint. This contract did not provide for the purchase or storage of any physical metal. But Lloyds then signed contracts with dealers based on a template from Hunter Wise and those agreements included the purchase, sale and delivery of precious metals.
Mechanics of the precious metals scheme
The CFTC claims that dealers contacted prospective customers by phone and using their individual websites, touting the value of investing in physical precious metals.
The dealers would convince people to open an account and then would solicit retail commodity transactions (RCTs). With an RCT, customers were led to believe that they could purchase physical metal, such as silver, while only initially investing 20 to 25 percent of the purchase price. The remainder was supposed to be covered by loans arranged by the dealers.
“By using credit, the investor gains the ability to multiply the effect of his or her investment dollars, while still owning the actual physical metal,” explains promotional material from Newbridge.
After making purchases, account holders were allowed to place long or short trades to speculate on metal price movements.
The associated fees for these services included commissions of up to 38 percent, a price spread representing a 3 to 5 percent mark up or mark down of the current metal price, interest of approximately 9.5 percent per year on the loans and costs such as an annual service fee of approximately 7 percent on the total account value.
A customer’s equity was supposed to increase or decrease as metal prices fluctuated. When a customer’s equity fell below 15 percent of the total trading position, there was a margin call requiring the deposit of additional funds. If equity fell to 9 percent open trading positions were liquidated.
Customers were led to believe that metal was purchased, received and shipped on their behalf. They were also told their metal was stored in a depository on a fungible basis.
Blackstone’s false statements went so far as to claim that customers purchasing physical metal would receive a receipt from a COMEX-regulated establishment and that bullion assets were 100-percent insured by Lloyds of London.
After each transaction was completed, customers were informed with Transfer of Commodity Notices.
But according to the CFTC, no metal was being bought, sold or transferred.
Dealers sent the customers’ funds and trade orders to Lloyds, which in turn sent them to Hunter Wise.
Hunter Wise deposited a portion of the funds into its bank accounts. Another portion was deposited into Hunter Wise margin trading accounts, which the company allegedly used to trade futures, forward and rolling spot contracts to manage exposure to the retail customers’ trading positions.
Lloyds and the dealers were also paid a portion of the price spreads, interest and service fees.
Hunter Wise, which maintains all account and trading records, according to the CFTC, generated the Transfer of Commodity Notices, account statements and trade confirmations on the letterhead of the various dealers.
The firm does not have an inventory of physical metals and does not pay in full for the purchase of commodities in margin accounts, the CFTC says of Hunter Wise.
Furthermore, no funds were ever disbursed for loans. Hunter Wise merely made a book entry in its database, then debited customers’ accounts for service fees and interest.
Between January 1, 2010 and March 31, 2012 the CFTC says Hunter Wise charged customers $5,533,401.81 for interest on these purported loans.
The CFTC also alleges that when a customer goes to a dealer’s website and logs into their account, they are actually redirected to a website owned and maintained by Hunter Wise.
Buyer beware
Retail customers caught up in this scheme believed that they owned or held titles to physical metal.
“In effect,” the CFTC notes, “Defendants charge customers commissions for purchasing metal, charge interest on loans to buy metal and charge storage and insurance fees for metal in connection with paper transactions that only provide retail customers a way to speculate on the price direction of metals.”
These investments were marketed on the merits of safety, security and limited risk. But the CFTC states that the majority of customers lost money.
Earlier this year, the regulator advised8 investors to beware of companies selling precious metals investments that offer easy profits, especially when the opportunities allegedly involve low risk and purchases through finance agreements. The CFTC reported an increase in companies offering precious metals and associated investment products, but warned that many do not actually purchase or store any metal.
Warning signs that investors should look out for include statements that transactions are not regulated, failure to identify where metal is located, claims that metal is held in foreign facilities and failure to identify lenders in financed transactions.
Securities Disclosure: I, Michelle Smith, do not hold equity interests in any companies mentioned in this article.
http://silverinvestingnews.com/14877/cftc-lawsuit-multimillion-dollar-metals-scheme-fraud.html
Incredibly Easy to Balance Budget Without Repealing Obamacare and Without Fiscal Cliff Tax Hikes
by Mike Shedlock
The Wall Street Journal has a nice interactive map that lets you Make Your Own Deficit-Reduction Plan.
I balanced the budget easily without doing things that I think need to be done such as eliminating the department of energy, the department of education, slashing military spending by 35%, etc., etc.
Increased Revenues
Under the category of "revenue increases", I clicked everything except ...
•Repeal health care coverage
•Add a government run health care plan
•Limit ability to sue doctors
That raised $480 billion in a manner far better than the tax hikes in the fiscal cliff.
Appropriated Spending Cuts
Under the category of "cuts to appropriated spending" I clicked everything except ...
•Allow automatic spending cuts (mutually exclusive with keep spending levels at 2011 levels)
•Prevent military retirees from signing up for cheapest version of Tricare
•Increase passenger fees for airport security
•Finance food and safety inspection with fees on meet and egg processing facilities
That reduced appropriated spending by $191 billion
Entitlement Spending Cuts
Under the category of "cuts to benefits or Entitlements" I clicked everything except ...
•Repeal expansion of health-care
•Add government run health-care plan
•Limit ability to sue doctors
That reduced spending by $445 billion.
Grand Total
•$480 billion in increased revenues
•$191 billion reduction in appropriated spending
•$445 billion reduction in entitlement spending
Pragmatic Approach
The grand total above nets $1,116 billion and a projected $14 billion surplus for 2020.
I was surprised by how easy this was.
It's not that I thought balancing the budget would be difficult, rather I have seen these setups before, and they are typically structured as to require massive, punitive tax hikes.
I was pragmatic.
Readers know I have no love of Obamacare, but the president does. Pragmatically speaking, repealing Obamacare is simply not an option. Also recall that Republicans wanted to close loopholes instead of raising taxes. So, for the most part, I simply closed loopholes.
The compromise (not shown) would have been to raise taxes on those making $1 million or more instead of those making over $250,000. That option, if provided and checked (in addition to everything else I checked) would have made the projected surplus even bigger.
Notice I said projected surplus.
Future revenue assumptions by the CBO are far too optimistic for that surplus to be valid. However, there is ample room to slash military spending, slash student aid, and eliminate entire unneeded departments.
A Bit of Compromise and a Lot of Pragmatism
From all the bitching and moaning in Congress, one might think balancing budget would be impossible. Instead, all it takes is a bit of compromise and a lot of pragmatism.
Yet, I suppose I may as well ask for world peace because "a bit of compromise and a lot of pragmatism" from this Congress does seem damn near impossible.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
http://globaleconomicanalysis.blogspot.com/2012/12/incredibly-easy-to-balance-budget.html
The Bare Naked Truth About The Federal Reserve's Socialist Agenda
December 11, 2012
By Shah Gilani, Capital Wave Strategist, Money Morning
The top line story, according to the FDIC's latest Quarterly Banking Review, is that the majority of U.S. banks are in better shape today than they have been in years.
The untold story is that when the Federal Reserve is done transitioning the United States from capitalism to socialism, the few dozen banks that remain in America will all be profitable until they need bailing out again, but will never die and live on in infamy.
Is that just hyperbole or some wild conspiracy theory? It's neither. Unfortunately, it's the bare, naked truth about the Fed.
It doesn't matter that you didn't know the Federal Reserve System was the brainchild of a handful of the world's most powerful bankers.
Or that all of them took a secret train from New Jersey to Jekyll Island, Georgia (owned by J.P. Morgan) in 1910 aboard Rhode Island Senator Nelson Aldrich's private car to devise and orchestrate the creation of the Federal Reserve.
Or that Aldrich was an investment associate of J.P. Morgan, that his son-in-law was John D. Rockefeller, Jr., or that he was the political spokesman for big business and banking interests in Congress.
It doesn't matter if you don't know who the powerful bankers are today that run the Fed's twelve district banks. Or that the Fed's New York Bank conducts all its open market operations with a bunch of favored big banks it protects (Case in point, MF Global).
Or that one former Chairman of the New York Bank's Board, who was also and still is a Goldman Sachs board member, resigned from the Fed when it was discovered he bought $3 million worth of Goldman's stock right before the Fed made sure Goldman wouldn't have to go out of business at the height of the financial crisis.
What matters, is that without the Federal Reserve the banking system in the United States would be more honest, more competitive and less of a risk to the economy than it is now.
And what really matters, is understanding the Federal Reserve could never exist and do what it does in an open democracy, and that it's agenda of socializing risks (making taxpayers eat bankers' losses) and privatizing their profits (letting them keep their bonuses) for the benefit of its club members (the banks) means the Federal Reserve has to transform America to a socialist model in order to maintain its own growth and ultimate power.
Of course, it's not a stretch to see how the Fed's socialist agenda will eventually encompass most of the American economy over time.
But to keep it simple, let's look at how the Fed has already done that to the benefit of its primary constituents: banks and bankers.
It's All Thanks To The Federal Reserve...
With the Fed at the helm, the FDIC's Quarterly Banking Review shows aggregated FDIC insured banks' net operating revenues (net interest income plus total noninterest income) in the third quarter of 2012 came to $169.6 billion. That's up 3% from a year ago, or year-over-year (YOY).
Total quarterly aggregate net income was $37.6 billion, up $2.3 billion YOY to the highest level in 6 years.
In all, some 57.5% of FDIC insured banks had higher earnings than a year ago. A year ago, in 2011's third quarter, 62.6% had higher earnings than in the third quarter of 2010.
One thing to watch, is whether the downward move in the percent of banks earning more than in year-earlier periods is an aberration or the beginning of a downtrend.
This quarter, just 10.5% of banks reported losses vs. 14.6% one year ago. Problem banks totaled 694 vs. 732 in Q2 of 2012. That's the sixth consecutive quarter of fewer problem banks and a full three years since the number was less than 700. Still, problem banks are 913% higher since the 2008 crisis. There were only 76 problem banks at the end of 2007.
Total assets of problem banks fell from $282.4 billion to $262.2 billion, an average of $377million in assets per bank. Still, that's a lot of pain if they have to be rescued.
In the meantime, everybody wants to know if banks are making loans. The answer to that is, yes, but not a lot.
FDIC Chairman Martin Gruenberg called the loan picture an "extended period of increasing loan balances. But still relatively modest."
Loans rose 0.9% to $7.8 trillion. Some 55% of banks reported loan growth.
Commercial and industrial loans (C&I) rose 2.2% to $1.45 trillion. But construction and development loans were down 3.2% to $210 billion , that's 18 straight down quarters. One bright spot was the 2.4% increase in auto loans in the quarter.
Loans to individuals rose just 1% to $1.29 trillion and residential mortgage loans rose only 0.8% to $1.89 trillion. Still, total industry assets rose 1.4% from Q2 to $14.2 trillion.
Net gains on assets sold totaled $5.6 billion vs. only $639 million a year ago.
Of that $4.9 billion increase in net gains, $3.9 billion actually came from loan sales.
Banks saw a 7% rise in non-interest income and a 0.7% increase in interest- earning assets (net interest income) to $746 million. That's for all banks, keep that in mind.
Loan loss provisions declined to $14.8 billion , that's down 5.4% sequentially and down 20.6% year- over- year. All in all, loan loss provisions have fallen in 12 straight quarters.
Meanwhile, average net interest margins fell 13 basis points to 3.43%.
So, on the surface the banking picture looks calm. That's thanks to the Fed rescuing banks, most of whom would have been insolvent and gone bankrupt in any other industry.
But here's the real deal....
You only have to look at a few important metrics to see that not everything is as good as the FDIC and the industry will let on.
And as we take quick note of them, understand that it's because banks are still fragile and pretending to be strong and that the Fed is continuing its rescue efforts in the form of quantitative easing and other backstopping programs.
Not a lot of loans are being made and net interest margins (the core of banking profitability) are falling to dangerously low levels. Net earnings growth is coming from a long history of reducing loan loss provisions, selling assets, and still a fair amount of trading at the big banks.
How else can banks in the aggregate have managed a 7% rise in non-interest income while only a 0.7% increase in interest earning assets to $746 million for all banks?
Another problem brewing for banks is that they're upping their exposure to the same high octane instruments (collateralized debt obligations, collateralized loan obligations, commercial mortgage-backed securities, and leverage structured finance products in general) that brought them down in the last crisis.
They just bought an additional $48 billion of structured finance "securities" and packaged loans in the latest quarter according to the FDIC report. Their leverage structured holdings are now the highest they've been since mid-2009.
On top of reaching for interest income by grabbing more leveraged products, banks are extending "duration" on their balance sheets. That means they're holding assets with longer maturities because they yield more. But they are also far more prone to losses in a rising rate environment, if and when we get into a period of inflation or rate adjustments.
Of course the Federal Reserve knows all this. And they have given their blessing.
How else are the banks going to make money but take more risks by purchasing leveraged instruments with the Fed's no-interest loans which they use as capital?
There's no rush to make loans when the Fed let s banks go for the quick bucks to look healthy so they can pay back the federal government and pay out dividends again, all to make their stock prices firm up or rise.
Why? To get more stupid investors to buy more of their equity so their options become "on the money" and they can get bigger and bigger bonuses, until they implode again.
So what if they do? The Fed is there to socialize their losses, as they will from now on until the twelfth of never, or until the curtain is pulled back and we see the Fed for what it really is.
Oh, and there's more. The whole socialization thing, it's not just domestic. The Fed has taken it global with the help of the biggest socialist governments on the planet.
Don't believe me? Wait until you hear what I have to say next Tuesday about the Fed.
Unless you're a closet socialist you're going to be very, very mad. Maybe even mad enough to do something.
http://moneymorning.com/2012/12/11/the-bare-naked-truth-about-the-federal-reserves-socialist-agenda
The Bare Naked Truth About The Federal Reserve's Socialist Agenda
December 11, 2012
By Shah Gilani, Capital Wave Strategist, Money Morning
The top line story, according to the FDIC's latest Quarterly Banking Review, is that the majority of U.S. banks are in better shape today than they have been in years.
The untold story is that when the Federal Reserve is done transitioning the United States from capitalism to socialism, the few dozen banks that remain in America will all be profitable until they need bailing out again, but will never die and live on in infamy.
Is that just hyperbole or some wild conspiracy theory? It's neither. Unfortunately, it's the bare, naked truth about the Fed.
It doesn't matter that you didn't know the Federal Reserve System was the brainchild of a handful of the world's most powerful bankers.
Or that all of them took a secret train from New Jersey to Jekyll Island, Georgia (owned by J.P. Morgan) in 1910 aboard Rhode Island Senator Nelson Aldrich's private car to devise and orchestrate the creation of the Federal Reserve.
Or that Aldrich was an investment associate of J.P. Morgan, that his son-in-law was John D. Rockefeller, Jr., or that he was the political spokesman for big business and banking interests in Congress.
It doesn't matter if you don't know who the powerful bankers are today that run the Fed's twelve district banks. Or that the Fed's New York Bank conducts all its open market operations with a bunch of favored big banks it protects (Case in point, MF Global).
Or that one former Chairman of the New York Bank's Board, who was also and still is a Goldman Sachs board member, resigned from the Fed when it was discovered he bought $3 million worth of Goldman's stock right before the Fed made sure Goldman wouldn't have to go out of business at the height of the financial crisis.
What matters, is that without the Federal Reserve the banking system in the United States would be more honest, more competitive and less of a risk to the economy than it is now.
And what really matters, is understanding the Federal Reserve could never exist and do what it does in an open democracy, and that it's agenda of socializing risks (making taxpayers eat bankers' losses) and privatizing their profits (letting them keep their bonuses) for the benefit of its club members (the banks) means the Federal Reserve has to transform America to a socialist model in order to maintain its own growth and ultimate power.
Of course, it's not a stretch to see how the Fed's socialist agenda will eventually encompass most of the American economy over time.
But to keep it simple, let's look at how the Fed has already done that to the benefit of its primary constituents: banks and bankers.
It's All Thanks To The Federal Reserve...
With the Fed at the helm, the FDIC's Quarterly Banking Review shows aggregated FDIC insured banks' net operating revenues (net interest income plus total noninterest income) in the third quarter of 2012 came to $169.6 billion. That's up 3% from a year ago, or year-over-year (YOY).
Total quarterly aggregate net income was $37.6 billion, up $2.3 billion YOY to the highest level in 6 years.
In all, some 57.5% of FDIC insured banks had higher earnings than a year ago. A year ago, in 2011's third quarter, 62.6% had higher earnings than in the third quarter of 2010.
One thing to watch, is whether the downward move in the percent of banks earning more than in year-earlier periods is an aberration or the beginning of a downtrend.
This quarter, just 10.5% of banks reported losses vs. 14.6% one year ago. Problem banks totaled 694 vs. 732 in Q2 of 2012. That's the sixth consecutive quarter of fewer problem banks and a full three years since the number was less than 700. Still, problem banks are 913% higher since the 2008 crisis. There were only 76 problem banks at the end of 2007.
Total assets of problem banks fell from $282.4 billion to $262.2 billion, an average of $377million in assets per bank. Still, that's a lot of pain if they have to be rescued.
In the meantime, everybody wants to know if banks are making loans. The answer to that is, yes, but not a lot.
FDIC Chairman Martin Gruenberg called the loan picture an "extended period of increasing loan balances. But still relatively modest."
Loans rose 0.9% to $7.8 trillion. Some 55% of banks reported loan growth.
Commercial and industrial loans (C&I) rose 2.2% to $1.45 trillion. But construction and development loans were down 3.2% to $210 billion , that's 18 straight down quarters. One bright spot was the 2.4% increase in auto loans in the quarter.
Loans to individuals rose just 1% to $1.29 trillion and residential mortgage loans rose only 0.8% to $1.89 trillion. Still, total industry assets rose 1.4% from Q2 to $14.2 trillion.
Net gains on assets sold totaled $5.6 billion vs. only $639 million a year ago.
Of that $4.9 billion increase in net gains, $3.9 billion actually came from loan sales.
Banks saw a 7% rise in non-interest income and a 0.7% increase in interest- earning assets (net interest income) to $746 million. That's for all banks, keep that in mind.
Loan loss provisions declined to $14.8 billion , that's down 5.4% sequentially and down 20.6% year- over- year. All in all, loan loss provisions have fallen in 12 straight quarters.
Meanwhile, average net interest margins fell 13 basis points to 3.43%.
So, on the surface the banking picture looks calm. That's thanks to the Fed rescuing banks, most of whom would have been insolvent and gone bankrupt in any other industry.
But here's the real deal....
You only have to look at a few important metrics to see that not everything is as good as the FDIC and the industry will let on.
And as we take quick note of them, understand that it's because banks are still fragile and pretending to be strong and that the Fed is continuing its rescue efforts in the form of quantitative easing and other backstopping programs.
Not a lot of loans are being made and net interest margins (the core of banking profitability) are falling to dangerously low levels. Net earnings growth is coming from a long history of reducing loan loss provisions, selling assets, and still a fair amount of trading at the big banks.
How else can banks in the aggregate have managed a 7% rise in non-interest income while only a 0.7% increase in interest earning assets to $746 million for all banks?
Another problem brewing for banks is that they're upping their exposure to the same high octane instruments (collateralized debt obligations, collateralized loan obligations, commercial mortgage-backed securities, and leverage structured finance products in general) that brought them down in the last crisis.
They just bought an additional $48 billion of structured finance "securities" and packaged loans in the latest quarter according to the FDIC report. Their leverage structured holdings are now the highest they've been since mid-2009.
On top of reaching for interest income by grabbing more leveraged products, banks are extending "duration" on their balance sheets. That means they're holding assets with longer maturities because they yield more. But they are also far more prone to losses in a rising rate environment, if and when we get into a period of inflation or rate adjustments.
Of course the Federal Reserve knows all this. And they have given their blessing.
How else are the banks going to make money but take more risks by purchasing leveraged instruments with the Fed's no-interest loans which they use as capital?
There's no rush to make loans when the Fed let s banks go for the quick bucks to look healthy so they can pay back the federal government and pay out dividends again, all to make their stock prices firm up or rise.
Why? To get more stupid investors to buy more of their equity so their options become "on the money" and they can get bigger and bigger bonuses, until they implode again.
So what if they do? The Fed is there to socialize their losses, as they will from now on until the twelfth of never, or until the curtain is pulled back and we see the Fed for what it really is.
Oh, and there's more. The whole socialization thing, it's not just domestic. The Fed has taken it global with the help of the biggest socialist governments on the planet.
Don't believe me? Wait until you hear what I have to say next Tuesday about the Fed.
Unless you're a closet socialist you're going to be very, very mad. Maybe even mad enough to do something.
http://moneymorning.com/2012/12/11/the-bare-naked-truth-about-the-federal-reserves-socialist-agenda/
How Much Do Tech Giants Stash Overseas? Billions
By Jon Fortt | CNBC – 12 hours ago
We often talk about the staggering amount of cash some of the biggest multinationals are holding, so I want to take a peek at that, courtesy of some of the top names in tech.
Specifically, I spent some time searching the latest SEC filings to see just how much cash some major techs have in overseas bank accounts where it's not subject to U.S. taxes.
Here's a snapshot: Percentage-wise,(MSFT) near the top of the list, with 87 percent of its $66.6 billion outside the U.S. (CSCO) not far behind at 83 percent of its $45 billion, (ORCL) at 80 percent of $31.6 billion, (AAPL) at 68 percent of $121.3 billion, and (GOOG) at 64 percent of $45.7 billion.
Why is all that cash over there? It's not necessarily because they're hiding it. A big part of the reason is that they've become global growth stories.
When Microsoft sells product overseas, the proceeds naturally go into an overseas account. The money doesn't come to the U.S. unless Microsoft needs to buy something here.
This is actually a big issue for a company like Cisco, where John Chambers has been very straightforward about saying if the feds let him bring this cash to the U.S. without a big tax bill, he'll hire in the U.S. If not, he'll hire a lot less.
Also, there's the acquisition wrinkle: Cisco used to do nearly all of its big acquisitions in the U.S.
But as domestic targets have gotten more expensive and the proportion of Cisco's cash it's generating outside the U.S. remains steady at about 80 percent, it's harder to buy anything big. Not only does Cisco have to look at the purchase price of its target, it has to add another 30 percent or so to factor in the cost of repatriating the cash.
Chambers said just last week that Cisco has gone too long without a big acquisition. Given the dynamics here, you've got to wonder: Does that mean he's about to make a major overseas buy?
http://finance.yahoo.com/news/much-tech-giants-stash-overseas-233526584.html
What Gold Junior is a Screaming BUY According
to a Top Casey Research Analyst...
Dec. 9, 2012
FutureMoneyTrends.com just released an important interview with Marin Katusa of Casey Research. Marin is a brilliant young analyst who also runs the KCR Fund which includes himself, Rick Rule of Sprott Asset Management, and Doug Casey of Casey Research.
During this interview, Marin went over the resource sector extensively and focused on investing right now. Marin believes that the bearishness in the resource sector has created an opportunity for big money to be made.
When we asked what he is buying right now, he said he is actively buying Brazil Resources (TSXV: BRI & OTC: BRIZF). His exact words at about the 5 minute mark are, "Brazil Resources is a screaming buy."
This is a MUST WATCH interview with one of the most respected and successful resource analysts.
http://www.futuremoneytrends.com/index.php/category-table/303-top-analyst-at-casey-research-marin-katusa-talks-gold-energy-and-what-hes-buying
What Gold Junior is a Screaming BUY According
to a Top Casey Research Analyst...
Dec. 9, 2012
FutureMoneyTrends.com just released an important interview with Marin Katusa of Casey Research. Marin is a brilliant young analyst who also runs the KCR Fund which includes himself, Rick Rule of Sprott Asset Management, and Doug Casey of Casey Research.
During this interview, Marin went over the resource sector extensively and focused on investing right now. Marin believes that the bearishness in the resource sector has created an opportunity for big money to be made.
When we asked what he is buying right now, he said he is actively buying Brazil Resources (TSXV: BRI & OTC: BRIZF). His exact words at about the 5 minute mark are, "Brazil Resources is a screaming buy."
This is a MUST WATCH interview with one of the most respected and successful resource analysts.
http://www.futuremoneytrends.com/index.php/category-table/303-top-analyst-at-casey-research-marin-katusa-talks-gold-energy-and-what-hes-buying
Expect a Uranium Supply Shortage in 2013: An Interview with David Talbot
By The Energy Report | Tue, 04 December 2012
After two years of uncertainty, David Talbot tells The Energy Report why he expects 2013 to be the year that the balance in the uranium energy equation finally begins its tilt toward the demand side, with 2014 marking a probable supply shortfall. Talbot discusses which uranium producers, developers and explorers he expects to benefit most from the coming market turn.
The Energy Report: It's been just over three months since we last discussed the nuclear industry and the market prospects for companies in the uranium space. What have been the most important developments since then?
David Talbot: There have been a number, both on the supply side and the demand side, since early August. All the catalysts appear to strengthen the long-term fundamentals of the sector, and while they haven't necessarily moved the market, we believe they ultimately will help.
On the demand side, Paladin Energy Ltd. (PDN:TSX; PDN:ASX), on which we have a Buy rating and a $2.55 target price, signed an offtake deal with France's EDF Group to supply a total of 13.7 million pounds (13.7 Mlb) of yellowcake between 2019 and 2024. It received $200 million ($200M) up front to secure supplies, with delivery still six years away.
In addition, the United Arab Emirates signed a $3 billion ($3B) nuclear fuel supply contract covering the first seven years of operations at the first four of its reactors. Uranium Energy Corp. (UEC:NYSE.MKT), on which we have a Buy rating and a $3.50 target price, is one of the six suppliers involved in that deal. AREVA (AREVA:EPA) also signed a contract to supply more than 66 Mlb of U3O8 to EDF from 2014 to 2075.
Cont.
http://oilprice.com/Finance/investing-and-trading-reports/Expect-a-Uranium-Supply-Shortage-in-2013-An-Interview-with-David-Talbot.html
Two Economic Developments Every Investor Needs to Be Aware Of
Submitted by Phoenix Capital Research on 12/10/2012
Last week I outlined the reason why we are very likely going over the fiscal cliff: there are little if any political incentives for the GOP or Dems to fix the problem; the best option politically is to let us go over the cliff and then offer targeted tax breaks in late 2013 early 2014 as part of their 2014 Congressional campaigns.
With that in mind, corporations are now rushing out special dividends to shareholders in an effort to beat the coming tax hikes on dividends.
Between Nov. 1 and Dec. 5, 349 companies moved up their dividends or paid special dividends, according to Silverblatt. That is higher than the 314 irregular dividends paid last year in all of November and December. Silverblatt expects the pace of early dividends to pick up if Washington keeps dawdling.
Many companies go beyond moving up ordinary payments. They are declaring special, one-time dividends to take advantage of the lower tax rate while it lasts.
http://www.lasvegassun.com/news/2012/dec/10/us-wall-street-week-ahead/
This is a serious red flag for the US economy’s future: all of the capital being paid out to shareholders will not be going into corporate expansions or hiring. This, when taken along with the recent rush of capital into savings accounts ($150 billion was shifted into savings accounts following Obama’s re-election), indicates that big money is either going into hibernation or being paid out to shareholders.
In simple terms: none of these funds will be used to grow the US economy or create jobs. Which means the US economy will be taking an even sharper nose-dive than expected in 2013.
On the other side of the pond, the EU as a whole is in recession. However, recent data coming from Germany indicates things are going to be getting significantly worse.
Month over month, German industrial production fell 2.6% in October. It fell 1.3% the month before. This contraction has resulted in the Bundesbank lowering its 2013 GDP growth projection to just 0.4%.
The entire EU bailout process has been based on the notion that Germany will write the check to fund various bailouts/ interventions. If Germany enters a recession then politically it will be much harder for German politicians to push for additional aid to the rest of the EU.
Remember, Chancellor Angela Merkel is up for re-election next year. So she will be turning her attention increasingly towards her campaign. And running on the idea of more bailouts when the German economy is contracting is political suicide.
Thus, we have something of a capital freeze occurring in the US at the very same time that the primary pillar of EU stability (Germany) will very likely begin to pull back from providing additional aid (case in point, Greece is still waiting on receiving proposed aid from six months ago).
All of these items point towards what will be a particularly ugly 2013.
On that note, we’ve published a report showing investors how to prepare for the break-up of the EU. It’s called What Europe’s Collapse Means For You and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.
This report is 100% FREE. You can pick up a copy today at:
http://gainspainscapital.com/eu-report/
Best Regards,
Graham Summers
http://www.zerohedge.com/contributed/2012-12-10/two-economic-developments-every-investor-needs-be-aware
A real cliff of incompetence, excuses
As the stakes for our financial future ratchet higher, so do the rhetoric, political posturing and hypocrisy. And still the Federal Reserve and lax regulators escape blame.
By Bill_Fleckenstein Fri 3:01 PM
OK, everyone, buckle up. This is going to be a bumpy ride.
First off, I would like to turn to our eventual funding crisis. Yes, I have been talking about this for some time, and no, it hasn't started yet. But it will. One day the markets will take the printing press away from central bankers by spurning their bonds, and governments needing to get their debt funded will see rates rise dramatically.
Whether it will start here, in Japan or somewhere else I don't know, nor do I know when it will start. But I do know that the catalyst will most likely be the world losing its fear of a deflationary accident.
I decided to bring up the subject, thanks to the most recent letter from Hayman Capital -- that's the money-management firm run by Kyle Bass, who made millions betting against subprime loans. In it, he talked about the funding crisis, and I wanted to share his thoughts because they dovetail quite well with my own.
This Bass is not biting
In the letter, Bass summed up the financial predicament the world is in by saying, "We have a hard time understanding how the current situation ends any way other than a massive loss of wealth and purchasing power through default, inflation, or both."
He next quotes John Maynard Keynes on the subject of money printing: "'Thus, we might aim in practice at an increase in capital until it ceases to be scarce, so that the functionless investor will no longer receive a bonus.'" To that, Bass responds, "This is nothing more than a chilling prescription for the destruction of wealth through the dilution of capital by monetary authorities."
He continues, "It is both our primary fear and unfortunately our prediction that the quixotic path of spending and printing will continue ad infinitum until real cost-push inflation manifests itself. . . .Given the enormity of the existing government debt, it will not be possible to control the very inflation that the market is currently hoping for. As each 100 basis points in cost of capital costs the U.S. government over $150 billion, the U.S. simply cannot afford another (former Federal Reserve Chairman) Paul Volcker to raise rates and contain inflation once it begins . . .
"Our belief is that markets will eventually take these matters out of the hands of central bankers. These events will happen with such rapidity that policy makers won't be able to react fast enough. . . . A handful of investors and asset managers have recently discussed an emerging school of thought, which postulates that countries, as the sole manufacturers of their currency, can never become insolvent, and in this sense, governments are not dependent on credit markets to remain fiscally operational. It is precisely this line of thinking which will ultimately lead the sheep to slaughter."
Where there's a 'will,' there may not be a 'soon'
One thing I would like to point out is that while events will happen fast once they begin, this does not mean they will begin anytime soon. Look at what has transpired in Greece: It took quite some time to spin out of control, but once that occurred, events moved quickly. That will also be the case when the markets take the printing press away from the central bankers -- which does not mean that will happen shortly, though it could.
Bass also made an interesting point about the moves to the left by our government (ditto Europe), though he didn't quite set it up that way. Let me emphasize that I detest politics (and politicians), but from time to time it impacts economics, and thus becomes part of the financial equation and consequently must be analyzed. From that standpoint, I believe the country is in the process of making a strong economic move further to the left, and as such, is part of how I view the landscape.
Bass writes, "The current modus operandi by central banks and sovereign governments threatens to take us down Friedrich von Hayek's 'Road to Serfdom.' Published in 1944, its message, that all forms of socialism and economic planning lead inescapably to tyranny, might prove to have been prescient." (Research the book on Bing.)
"The genius in the book was the argument that serfdom would not be brought about by evil men like Stalin and Hitler, but by the cumulative effect of the wishes and actions of good men and women (emphasis added), each of whose interventions could be easily justified by immediate needs. We advocate social liberalism, but we also need to get there through fiscal responsibility (which is exactly how I feel). Pushing for inflation at this moment in time will wreak havoc on those countries whose cumulative debt stock represents multiples of central government tax revenue."
Unfortunately, we are pursuing the wrong policies, both fiscally and monetarily, which is a recipe for terrible stagflation, which is where I believe we are headed. That won't be good for financial assets, though certain stocks could do OK. But it is exactly that sort of environment that gold provides protection against.
Two-faced tax talk pays dividends
Turning now to the policy side, I have been particularly irritated lately by what I view as the disingenuousness of certain people regarding tax policy. To cite one example, last week the op-ed section of the Wall Street Journal noted Costco's (COST 0.00%) board of directors announced that it would pay a special dividend in December (before higher tax rates kick in), and summed up the issue as follows:
"Here we have people at the very top of the top 1% who preach about tax fairness voting to write themselves a huge dividend check to avoid the Obama tax increase they claim it is a public service to impose on middle-class Americans who work for 30 years and finally make $250,000 for a brief window in time. If they had any shame, they'd send their entire windfall to the Treasury."
(On a related note, as long as we're talking about the supposed rich in America, I think that $250,000 of income is a non-sequitur. Granted people who make that much are doing pretty well, thank you, but that does not make them rich, especially if they live in an expensive city with bad public schools.)
Speaking of tax BRKs
Coincidentally, in a Nov. 30 Forbes article by Daniel Schuchman, the author does a little sleuthing to illuminate just how, shall we say, "evolved" Warren Buffett's thinking has become on taxes. Schuchman analyzes the recent op-ed Buffett wrote for The New York Times in which he derisively noted that, "Never did anyone mention taxes as a reason to forgo an investment opportunity," and "Only in Grover Norquist's imagination" do people modify their investment plans based on tax decisions.
However, that is certainly not what he thought when he was building his net worth. In a 1963 letter to his investment partners he wrote, "My net worth is the market value of holdings less the tax payable upon sale. The liability is just as real as the asset. . . . Investment decisions should be made based on the most probable compounding of after-tax net worth with minimum risk" (emphasis added).
It strikes me as a bit unfair that, now that he has all his money, he is less in favor of other folks having a chance to make some for themselves. In that same 1963 letter, he also wrote, "I am an outspoken advocate of paying large amounts of income taxes -- at low rates." Obviously, his philosophy has changed.
'Do not imagine, comrades, that leadership is a pleasure'
The point I am trying to make is about inconsistency of telling folks to do one thing while doing something else yourself. It reminds me of my favorite line in George Orwell's "Animal Farm" on the propensity of certain people in power to think that their views are so good for society as a whole (even if their policies are detrimental to many) that they themselves should be exempt from them, i.e., "Some animals are more equal than others."
This is not to say there has not been a huge disparity in wealth creation, as the folks that are rich have gained to the disadvantage of the middle class and the poor. That is all true, but it wasn't as though people who made lots of money created the conditions to prosper at the expense of others. That was caused by the gross policy errors of the Federal Reserve.
Granted, many banksters in the world of Wall Street effectively broke laws in what they got away with running their financial institutions (and should have gone to jail). But that is no reason to set up a policy that might disadvantage the country as a whole. There is no point in punishing those with money or trying to earn money just because the Fed was incompetent and eviscerated the middle class.
To be clear, this rant is not about higher taxes, but rather about their politicization (which borders on class warfare). The maddening part of all the tax-rate posturing is that higher taxes by themselves are not going to solve the financial mess the U.S. finds itself in. They could be part of a solid, comprehensive plan, but that is not what any of this is about.
The public at large has been hurt not by the current tax regime but by a grossly incompetent Fed and government regulators who didn't do their jobs. While folks with a lot of money can afford to pay more (and will), it would certainly serve the country better if we could intelligently discuss the real roots of the problems and stop all the demagoguery.
http://money.msn.com/bill-fleckenstein/post.aspx?post=f280eff9-72dc-4a9d-95ac-343c136352a0
Basel Liquidity Rule May Be Watered Down Amid Crisis
By Jim Brunsden on December 09, 2012
Global banking regulators will this week seek to resolve clashes over how far to ease a planned liquidity rule, amid calls for the standard to be watered down and delayed because it may thwart economic recovery.
Regulators face an end-of-the-year deadline to revamp the draft liquidity coverage ratio, or LCR, criticized by top officials such as European Central Bank President Mario Draghi for threatening to choke interbank lending. The Basel Committee on Banking Supervision will try to find a compromise as it meets in the Swiss city on Dec. 13-14.
“If the LCR doesn’t come together next week into a consensus standard with credible prospects for EU and U.S. implementation -- a very iffy proposition, -- the concept of global liquidity standards will collapse,” Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics Inc., said in an e-mail.
While Draghi and Bank of England Governor Mervyn King have urged caution on the LCR, other regulators and central bankers including Stefan Ingves, the Basel committee’s chairman and governor of Sweden’s Riksbank, claim there is no hard evidence of damaging side-effects. U.S. and German supervisors also argue that heavily diluting the LCR, scheduled to become binding in 2015, risks rendering the standard meaningless.
Basel III
The LCR would force banks to hold enough easy-to-sell assets to survive a 30-day credit squeeze. It’s a key component of a package of capital and liquidity measures, known as Basel III, drawn up to avoid a repeat of the 2008 financial crisis.
The rule sets out a stress test that banks (BNP) should apply to their books, assessing whether they would be able to generate enough cash from asset sales to meet their obligations.
One conundrum facing regulators this week is how far to expand the list of assets that banks can use to meet the LCR compared with a 2010 draft, said three people familiar with the negotiations, who asked not to be identified because the talks are private.
The negotiations will discuss whether banks should be allowed to use asset-backed securities as part of their efforts to meet the standard, two of the people said.
Banks have advocated a wide expansion in the list of eligible securities, saying that a failure to overhaul the standard would force them to cut back lending.
Asset Range
“In practice, there are a range of assets that can provide liquidity,” said Mark Bearman, a director at the Association for Financial Markets in Europe, said by e-mail. These include “equities, high quality securitizations, gold and other commodities.”
The same applies to other assets that central banks accept as collateral, Bearman said. AFME represents international lenders including Deutsche Bank AG (DBK), BNP Paribas SA, and Goldman Sachs Group Inc. (GS)
While there is only limited support on the committee for including gold or equities in the LCR, views are more evenly divided on the question of asset-backed securities, two of the people said.
The 2010 draft version of the LCR largely limits the assets that banks can use to meet the standard to cash and government bonds. It says highly rated corporate debt and covered bonds could count toward bank’s LCR buffers, with a cap of 40 percent in most cases.
The Basel group is also weighing whether to delay the rule past 2015 or start a phased rollout in that year, said one of the people. The panel could also opt to proceed with the previous schedule.
Potentially Fatal
While some regulators favor a delay, other authorities are concerned that such a step could be fatal to the LCR, as it would give reluctant countries further opportunities to kill the rule off entirely, said another person familiar with the talks.
A sample of 209 banks assessed by the Basel committee had a collective shortfall of 1.8 trillion euros ($2.3 trillion) at the end of 2011 in the assets needed to meet the LCR, according to figures published by the Basel group.
Regulators are set to reduce the severity of the stress scenario that banks will be pitted against in the LCR, one of the people familiar with the talks said.
Central banks including the ECB have also warned that the LCR could make it harder for them to implement their monetary policies, as banks wouldn’t be able to offer their highest quality assets as collateral.
The Bank for International Settlements, which houses the Basel committee, said on Dec. 9 that while the LCR won’t “impair central banks’ ability to implement monetary policy,” they may need to “adjust their operational frameworks to better fit the new environment.”
On ‘Brink’
“At a minimum, they will need to monitor developments that materially affect the LCR of the banking system,” the BIS said.
The Basel committee brings together regulators from 27 nations including the U.S., U.K., Japan, and China to co- ordinate their regulation and supervision of banks.
Global central bank and regulatory chiefs will review the Basel group’s work on the LCR at a meeting in January.
Failure to reach a consensus on the measure would add to uncertainty surrounding the implementation of Basel III. U.S. and EU regulators have already declared they will fail to meet the international Jan. 1, 2013 deadline to begin phasing in the measures.
“Basel is, in my view, on the brink,” said Petrou.
To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net
http://www.businessweek.com/news/2012-12-09/basel-liquidity-rule-may-be-watered-down-amid-crisis-concerns
Jim Rickards: The Fed Is Trying to IMPORT INFLATION
12/6/2012
Tangent Capital’s Jim Rickards was on Bloomberg today discussing Currency Wars and the global fiat race to the bottom, and informed the financial MSM host of the fact that the Fed is attempting to IMPORT inflation.
Full interview below:
( 3 minutes)
http://www.silverdoctors.com/jim-rickards-the-fed-is-trying-to-import-inflation/
Follow the Management Names: Taylor MacDonald
Source: Brian Sylvester of The Gold Report (1/6/12)
TM: One way is by refocusing on a list of core names. We are investing in fewer new deals and trying to play them much better; buy once and get as much as you can. We are looking to positions that are much more consolidated and focused, to know the companies better and be much closer to them.
Typically, we look for companies with a fair bit of cash on the balance sheet. The only exception to that would be investing in a company with a really high-torque management team that will be able to raise money irrespective of the markets. There are certain guys I would be confident in even if the treasury is looking a little skinny.
TGR: Do you follow certain people in terms of management?
TM: We are trying to figure out whom the next mining industry "rock stars" will be. So far, I would name Amir Adnani, Ian Slater and Nolan Watson.
Amir is the co-founder of Uranium Energy Corp. (UEC:NYSE.A), North America's most widely followed new uranium producer. The company is about to turn the key on its Goliad In-Situ Recovery project in Texas.
Amir also recently founded a new company called Brazil Resources Inc. (BRI:TSX.V; BRIZF:OTCQX). It has a stellar management team. The CEO, Stephen Swatton, was head of business development and exploration for BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK). The management team also includes the former head of exploration for Kinross Gold Corp. (K:TSX; KGC:NYSE) in Brazil and Herb Dhaliwal, who was Canada's Minister of Natural Resources. In all, this team has been involved in discovering 10 million ounces (Moz) gold in Brazil. The company is looking for large, district-scale opportunities. Brazil Resources also has a strategic partnership with the Brasilinvest Group, Brazil's first and best-recognized merchant bank. Brazilinvest bought 10% of the company and is using its considerable local network to bring in gold projects.
This company has a very tight share structure with only 35M shares out. It just closed a $4.8M private placement at $1.10/share. All told, the company has over $10M in cash on hand.
http://www.theaureport.com/pub/na/12186
Jim Rickards: Fed Won’t Stop Printing Until Dollar Collapses
Nov. 23, 2012
Yahoo Finance has released an interview with Jim Rickards discussing QE8. Rickards states that the Fed will continue printing until the bottom falls out of the dollar, and at that point, the chickens will come home to roost, and US citizens can expect MASSIVE INFLATION OVERNIGHT.
Full interview below:
(4 MIN)
http://www.silverdoctors.com/jim-rickards-fed-wont-stop-printing-until-dollar-collapses/
Jim Rickards: The Fed Is Trying to IMPORT INFLATION
12/6/2012
Tangent Capital’s Jim Rickards was on Bloomberg today discussing Currency Wars and the global fiat race to the bottom, and informed the financial MSM host of the fact that the Fed is attempting to IMPORT inflation.
Full interview below:
( 3 minutes)
http://www.silverdoctors.com/jim-rickards-the-fed-is-trying-to-import-inflation/
Fools gold? CTFC says 12 firms sell phantom metals
12/5/2012
Rob Varnon
The CFTC is cracking down on firms playing up demand for metals during these uncertain economic times.
The U.S. Commodity Futures Trading Commission announced Wednesday, it filed a civil injunctive enforcement action in the U.S. District Court for the Southern District of Florida against 12 firms and their executives for fraudulently marketing illegal, off exchange retail commodity contracts.
The firms and individuals are: Hunter Wise Commodities, LLC; Hunter Wise Services, LLC; Hunter Wise Credit, LLC; Hunter Wise Trading, LLC; Lloyds Commodities, LLC; Lloyds Commodities Credit Company, LLC; Lloyds Services, LLC; C.D. Hopkins Financial, LLC; Hard Asset Lending Group, LLC; Blackstone Metals Group, LLC; Newbridge Alliance, Inc.; United States Capital Trust, LLC; Harold Edward Martin, Jr.; Fred Jager; James Burbage; Frank Gaudino; Baris Keser; Chadewick Hopkins; John King; and David A. Moore.
According to the CFTC complaint, the defendants claim to sell physical metals, including gold, silver, platinum, palladium, and copper, to retail customers in retail commodity transactions. Under the defendants’ retail commodity transactions investment contract, customers allegedly make a down payment on certain quantities of physical metals, usually 25 percent of the total purchase price. Defendants allegedly claim to arrange loans for the balance of the purchase price, and advise customers that their physical metals will be stored in a secure depository.
But the CFTC alleged that the defendants do not purchase any physical metals, arrange loans for their customers to purchase physical metals, or arrange for storage of physical metals for any customers participating in their retail commodity transactions. Instead, all the transactions are just paper transactions, according to the complaint. Defendants allegedly do not own or sell metals to customers; customers are charged storage and insurance fees on metals that do not exist; and are charged interest on loans, which are never made by the defendants.
Hunter Wise Commodities, the orchestrator of the alleged fraud according to the CFTC , has taken in at least $46 million in customer funds since July 2011.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 expanded the CFTC’s jurisdiction over transactions like these, and requires that such transactions be executed on or subject to the rules of a board of trade, exchange or commodity market, according to the complaint. This new requirement took effect on July 16, 2011. The complaint alleges that all of the defendants’ financed commodity transactions after July 16, 2011, were illegal. The complaint also alleges that the defendants defrauded customers in all of these financed commodity transactions.
David Meister, the CFTC’s Director of Enforcement stated: “Here is a prime example of how the Dodd-Frank Act provided the Commission with additional strong authority to go after wrong-doers, such as, as alleged in the complaint, individuals who prey on people looking to make retail investments in commodities like gold and silver. We will use this new authority to the fullest extent possible.”
Source: CFTC announcement.
http://blog.ctnews.com/financialmines/2012/12/05/wheres-the-gold-cftc-says-12-firms-sell-phantom-metals/
Thanks for posting the Wall Street Breakfast: Must-Know News basserdan. Important news there.
US Senate set to approve Russia trade, rights bill
Thu Dec 6, 2012 12:00am EST
* Russia would get normal trade relations with U.S.
* House approved bill in November, Obama expected to sign it
* Names of Russian human rights violators to be publicized
By Doug Palmer
WASHINGTON, Dec 6 (Reuters) - The U.S. Senate was poised on Thursday to approve legislation to punish Russian human rights violators as part of a broader bill to expand U.S. trade with the former Cold War enemy.
The vote would send the package to President Barack Obama, who is expected to sign it into law despite Moscow's warning that the human rights provisions will damage relations.
The House voted 365-43 last month to approve the bill, which grants "permanent normal trade relations" (PNTR) to Russia by lifting a Cold War-era restriction on trade.
Senate Majority Leader Harry Reid said the Senate would vote on the bill on Thursday after wrapping up five hours of debate earlier in the week.
"Russia is a fast-growing market. For the United States to share in that growth, we must first pass PNTR. And if we do, American exports to Russia are projected to double in five years," Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said on Wednesday on the Senate floor.
Business groups have been pushing Congress for months to approve the bill, which would ensure that U.S. companies get all the benefits of Russia's entry into the World Trade Organization. Russia joined the WTO on Aug. 22.
Without it, the groups fear they will be left at a disadvantage to companies around the world that already have full WTO relations with Russia.
The United States also cannot use the WTO dispute-settlement system to challenge any Russian actions that unfairly restrict U.S. imports until PNTR is approved.
But many U.S. lawmakers refused to take the step, which requires lifting a 1974 human rights measure known as the Jackson-Vanik amendment, without new human rights legislation.
Jackson-Vanik tied the most favorable U.S. tariff rates to the rights of Jews in the former Soviet Union to emigrate freely. While it is broadly considered a success, it is a relic of the Cold War and at odds with WTO rules.
DEATH OF ANTI-CORRUPTION LAWYER
The PNTR bill, in a provision that infuriates Moscow, directs Obama to publish the names of Russians allegedly involved in the abuse and death of Sergei Magnitsky, a Russian anti-corruption lawyer who died in a Russian jail in 2009.
It also would require the United States to deny visas and freeze the assets of any individual on the list, as well as other human rights violators in Russia on an ongoing basis.
Moscow has warned that the human rights provision would hurt relations and has promised to retaliate if it becomes law.
"The allegations that this legislation infringes on Russian sovereignty is nonsense ... It can not force human rights abusers in Russia to stop what they're doing," Senator John McCain, an Arizona Republican, said.
"But if they continue, what this legislation does is to tell those individuals that they can not bank their money in the United States, they are not welcome in this country and they can not visit this country and they will have no access to the U.S. financial system," McCain said.
Senator Ben Cardin, a Maryland Democrat who helped craft the Magnitsky provision, said he would continue pushing to make it universal in scope so it could be used to punish other human rights violators around the world.
The PNTR bill also contains measures that put pressure on the White House to make sure that Russia abides by WTO rules.
"If there are areas where Russia is not in compliance with its obligations, the administration is required to develop an action plan to address them," said Senator Orrin Hatch, the top Republican on the Senate Finance Committee.
http://www.reuters.com/article/2012/12/06/usa-russia-trade-idUSL1E8N5IWV20121206
No More Pennies Or Nickels Next Year in the U.S.A.
12/5/2012
Mr. Geithner has been busy lately. Amongst his many other pressing tasks, he took the time to announce that the U.S. Mint will be removing the penny and nickel from circulation in the U.S. starting early next year. The reason is clear. It now costs the mint $US 0.048 to make a penny and $US 0.162 to make a nickel. They are still just above the break even point on the dime, which costs them $US 0.092 to produce. That won't last, according to Mr Geithner, so the dime will be the next to go - probably in 2014. - Bill Buckler, Gold This Week...01 December 2012.
http://www.caseyresearch.com/gsd/edition/no-more-pennies-or-nickels-next-year-usa
Wonder Why States Are Broke? One Reason is Companies Play Them Off Against Each Other
12/6/2012
By David Segal, executive director of the online organizing group Demand Progress and former member of the Rhode Island House of Representatives
The New York Times published an expose this week on Texas’s regime of business incentives, but for anybody who pays passing attention to so-called municipal and state economic development schemes, there wasn’t much news: Our states and localities are cannibalizing one another as they concoct targeted tax breaks which they use to lure corporations from their neighbors. Meanwhile, a bevy of middlemen wet their beaks by helping corporations pit sucker states off of one another and brokering deals to sell the tax credits that comprise much of the ensuing largess. Here’s the rub:
Granting corporate incentives has become standard operating procedure for state and local governments across the country. The Times investigation found that the governments collectively give incentives worth at least $80 billion a year.
That’s an especially big deal for cash-strapped states, banned from deficit spending, no printing presses on hand. The $80 billion figure represents a full ten times the budget of my state of Rhode Island, and more than 15 times the amount spent from locally-generated funds.
It’s the most basic of game theory dilemmas, and in a less corrupt political dynamic, one that could be solved by the intervention of sensible federal government actors, or perhaps even through the initiation of an interstate compact that had states agree to stop poaching from one another. (It would still be open season on those states who failed to join said compact, incentivizing their joining the protected bloc.) Rhode Island is rare in that it, at least, has a provision in place that bans its cities from using subsidies to swipe existing businesses from one another — though it’s never enforced. I’d heard (and seem to remember having once found) that Puerto Rico has miraculous language on the books that requires its lawmakers ot consider the impacts of its subsidies on the jurisdictions from which they’re stealing businesses — but perhaps that’s apocryphal.
Good Jobs First has done yeoman’s work to expose the machinations of the “Site Location Consultancy” industry, spearheaded by the maniacal-sounding Fantus companies. (Fantus Factory Locating Service and Fantus Area Research.) Prior to seeing them on paper, I’d always envisioned the spelling as the more malevolent-looking “Phantus” which comports with the shadowy, yet profound, nature of their work.) Felix Fantus got to work in the 1950s, and as GJF describes it:
For the next four decades, Fantus dominated the site location consulting industry, playing a central role in the relocation of thousands of workplaces, most of them factories moving out of the Northeast and Midwest to the South. By its own count, it helped engineer more than 4,000 relocations by the time Yaseen retired in 1977, and 2,000 more in the next decade….
Fantus survives today as a Chicago-based consulting affiliate of the Big Four accounting firm Deloitte & Touche.
A couple of case studies:
Boeing is a master of this manipulative art, flipping the usual government-to-contractor relationship in 2003 as the company put out a 2003 RFP for states to respond to, to see who would offer up the most lucrative package of tax incentives for a manufacturing plant for the 787. Washington State residents bested a couple dozen other states, offering to pay the hometown company $3 billion not to forsake them. (Well, it’s not quite fair to say that they were still deserving of the ‘hometown’ moniker at that point — corporate HQ had moved to Chicago a few years earlier, drawn by a mere $50 million in public funds.) Tragedy became farce in 2009, when South Carolina offered Boeing around $1 billion to open a Dreamliner plant there. Evidence of just how sad is this state of affairs: The WTO is the only body that’s threatened to provide any sort of meaningful check on this sordid dynamic, ruling that several billions of such subsidies to Boeing were problematic — but that European subsidies to Airbus were even more severely infringing.
Perhaps the most transparently absurd manifestation of war-between-the-states phenomenon is the case of the film tax credit, driven by the movie industry’s exploitation of star-struck state legislators who seem to believe that the likes of Boise and Des Moines stand to become the next Hollywood. The film tax credits spurred the most precipitous race to the bottom I’ve witnessed in my time in politics. It came to a head in 2009, when Wisconsin had just spent $100,000 dollars to support Johnny Depp’s personal grooming expenses and Connecticut was fixing to subsidize episodes of Jerry Springer’s talk show — lots of broken chairs to pay for. The capstone of this farce was California’s institution of tax credits to entice productions back to Hollywood. As my friend and former Massachusetts state rep Steve Damico and I wrote at the time:
This sprint to the bottom has just reached its predictable, pathetic conclusion: Burned particularly by the loss of the television show Ugly Betty, California’s recent budget includes a half-billion in tax credits of its own, under the guise of “stimulus,” as a bribe to keep Hollywood from off-shoring to Manhattan, Indianapolis, and Santa Fe, which are offering bribes of their own. The floor has been lowered across the land, achieving a new equilibrium where public subsidies accrue to industry moguls to make movies that would be made anyway. At least 42 states now provide incentives, with some exceeding 40% of production costs.
Even in the seemingly impossible universe in which a particular state seems to benefit from instituting such credits, it’s easy to see that once one abstracts to the regional or national level, all that we’re doing is paying people to move jobs to-and-fro, creating no new social value, and reducing net public benefit.
It’s worth deconstructing the particular form these subsidies tend to take. The terminology “tax credit” is construed to obfuscate the particulars of the mechanism at hand: Most people think it means that there’s a reduction in taxation on expenditures in service of the given project. Far from it, and far worse, here’s how it works: A movie films in State X, and spends $20 million therein. If State X offers a 50% transferable tax credit for film expenditures within its borders, it forks over $10 million thereof. In the case of a state like Rhode Island — or any state that isn’t the production company’s home base — the production company will have a accrued negligible state tax liability, so it will sell these credits to an entity that has a more substantial tax burden — usually a sizable corporation — at a rate of, perhaps, 80 cents on the dollar. A broker will take a cut of perhaps a nickel on the dollar. So the entity that the state was striving to subsidize gets only 75% of the funds the state is expending.
In the case study above the intended recipient of the benefit is an entity that’s achieving little social good (not hard to argue that much Hollywood schlock is, in fact, a social detriment) but even if it’s a worthy project that’s meant to achieve the benefit — say, renewable energy installations — tax credits of this form are always a raw deal for the public, unless a substantial percentage of the credits go unclaimed: A full 25% or so of the subsidy is misfiring, going to middlemen and corporations with significant tax burdens. If you want to fund something efficiently, just fork over cash. (This, of course, could never be made to happen, since then the public would understand that all we’re really doing is forking over cash to millionaires.)
It’s no surprise that tax credit brokers often make for generous campaign contributors. Such a figure is at the center of a still-growing scandal in Rhode Island which has been the subject of a fair amount of national reporting: Curt Schilling’s failed video game company 38 Studios, which received a $75 million loan guarantee and various tax credits in exchange for its locating in Rhode Island. The loan guarantee program was sold to us as that rare economic development proposal that seemed mostly sensible: A way to incubate and grow businesses indigenous to Rhode Island in the midst of the downturn, with credit very tight. Yet within a few months, state leaders had designated 60% of the fund for use by the (Republican, anti-tax, anti-welfare) former Red Sox pitcher. The company’s since gone bust, leaving the public on the hook for on the order of $115 million at last check.
It’s a mess, wrought by the usual mix of corrupt cash, a rotten philosophical paradigm, insane, inverted conceptions of capitalism (“States competing against one another is just the free market at work!”) and, especially in the case of the film credits, narcissism. In Rhode Island, all of the female reps of a certain age were giddy to get to do a photo op with Richard Gere in 2009, when he came to Woonsocket to film a movie called Hachi, which never saw substantial domestic release. (Nothing gendered here — no doubt most of my male colleagues would have been just as delighted to schmooze with a female lead, had one of equivalent standing every made her way to the state.)
http://www.nakedcapitalism.com/2012/12/wonder-why-states-are-broke-one-reason-is-companies-play-them-off-against-each-other.html
Ditching Before the Fiscal Cliff
By Peter Schiff
Thursday, December 6, 2012
(special thanks to gtsourdinis)
Turn on the TV and this is what you'll hear: The US budget is heading for a fiscal cliff. If a deal isn't reaching in Congress by the end of this year, a combination of automatic tax hikes and budget cuts will sink America into economic depression. There is no escape.
Of course, my readers know that the fiscal cliff is merely an example of the piper having to be paid. The problem isn't the bill, but that we ran it up so high in the first place. Any deal to avoid the cliff by borrowing even more money may allow the piper to keep playing a while longer, but when the music finally stops, the next fiscal cliff will be that much larger.
My readers also know that there are several ways for investors to avoid the cliff altogether. Perhaps the most secure is buying precious metals. However, given what we know, it may seem confusing that the spot prices of gold and silver have been moving sideways.
However, these headline prices have largely concealed a more important indicator: physical bullion sales are booming.
An Under-the-Radar Rally
The figures are astounding. For US Gold Eagle coins, mint sales are up some 150% from the QE3 announcement on September 13th. Despite what the spot prices show, there has been a tremendous surge in people buying physical gold.
But why hasn't this translated into higher spot prices?
It seems clear that the spot prices of both gold and silver are being driven right now by a large pool of institutional capital moving into and out of instruments like commodity ETFs. The movements have been predictable: When there is a sign of a deal coming out of Washington, the spot prices move up. If negotiations are faltering, there is instead a major selloff.
Physical bullion investors are a different breed. We are in this market for the long haul. When I increase my physical gold and silver holdings, I do it because I see the long-term fundamental picture for the US getting worse.
Getting a Read on the Bullion Bull
While the ETF speculators are trying to anticipate the market's - and each other's - immediate reaction to whatever 11th hour deal is struck, I believe physical bullion investors are sending a clear signal: this whole debate is out of order.
A J.P. Morgan study concluded that 82% of the hit to GDP if we go over the fiscal cliff would be related to tax increases, not spending cuts. And if the legislators reach a deal? It will only result in more tax increases and much fewer spending cuts. These guys just don't get it.
Looking back to the debt ceiling debate of August 2011, we saw big movements into physical gold there as well. What investors are concluding as they hear these grand debates is that whatever the result, the budget, the dollar, and the taxpayer will lose.
They are deciding to get off this runaway train. Because the real fiscal cliff isn't coming on December 31st - it is coming when there is a global flight from the US dollar.
The Real Fiscal Cliff
The Democrats are complaining that the fiscal cliff imposes too steep demands on those who receive entitlements. Republicans are trying to protect the military budget. What no one seems to want to address is what happens as foreign creditors increasingly decide to stop financing this bonanza.
To a large extent, this is already happening. China has already become a net-seller of Treasuries and is diverting more of its reserves into gold. The Chinese government recently approved banks holding gold as a reserve asset and made it easier for banks to trade gold amongst themselves.
While Japan and other Keynes-drunk governments have filled some of the gap with increased purchases, a supermajority of new issues are being bought directly by the Fed. That was the idea behind QE3 Plus, as described in last month's commentary.
Because of the acute trauma in Europe and certain institutional mandates to hold Treasuries, much of this new inflation is being absorbed. This has caused what may be the most dangerous of situations. It has allowed the inflationists to paint people like me as the boy who cried wolf. It seems to them that no matter how irresponsible Congress and the Fed are, we are immune from economic consequences.
In reality, all this money printing is like pulling back a spring. Pent up inflationary forces are building, and when they are unleashed, the debate will be over faster than they can say "oops."
The Only Way to Win Is Not to Play
Those buying into physical gold and silver see this inevitability and are getting prepared. We believe there is no sense playing Russian roulette with our savings. Every time Washington raises that debt ceiling or announces another stimulus, it's like one more click of the trigger.
When the global markets finally wrap their heads around the scale of US insolvency, the response will be as fierce as it is rapid. In such a once-in-a-century scenario, physical gold and silver are among the few assets without counterparty risk. From the looks of the physical bullion sales charts, I'm not the only investor who has figured this out.
http://www.safehaven.com/article/27943/ditching-before-the-fiscal-cliff
TAG: More Subsidies for the TBTF Banks? You Bet
by rcwhalen on 12/06/2012
Newport Beach -- When Congress authorized the Transaction Account Guarantee (“TAG”) program in 2008, the measure was sold as as a temporary response to the financial crisis. The Federal Deposit Insurance Corporation now covers up to $250,000 per bank deposit account, but TAG provides unlimited coverage for non-interest-bearing transaction accounts. The banks do not pay for the TAG insurance.
The theory was that smaller banks which do not fall under the comfortable umbrella of “too big to fail” needed insurance to keep from losing important business customers. The trouble is, the largest banks led by JPMorgan, Wells Fargo and Citigroup were the main beneficiaries.
As the Wall Street Journal noted last month: “FDIC data show that the giant banks benefit most from TAG and rely on it for a larger share of deposits than do the little guys. So TAG is rightly seen as a subsidy for all banks, and especially giant ones.” Yet for some reason the WSJ is the only major media outlet that is opposing this odious subsidy for the largest banks.
Banks such as WFC and US Bancorp used TAG to swell their funding base and thereby came to dominate the market for new mortgages. Together, WFC and USB now account for half of the new origination market for home mortgages. Allowing TAG to expire at the end of this month would help to restore some competitive balance in the market for mortgage loans. Yet there is not a peep about this important issue from the New York Times, Bloomberg, Financial Times or Reuters.
In the case of JPM, the hundreds of billions of dollars in new deposits helped to fuel the speculative mischief we now know as the “London Whale” trade. Faced with vast amounts of cash that the bank could not deploy in the loan market, JPM instead gave the TAG funds to the JPM office of the chief investment officer. The London-based trader Bruno Iksil and his colleagues gambled the excess funds generated by TAG in the OTC derivatives market, causing a significant financial and reputational loss for the bank.
Despite what JPM says about hedging and all of the bad acts by employees happening in 2012, in fact JPM CEO Jamie Dimon was fully aware of the risk as early as 2010. That is when the bank actually considered taking a special reserve against the trades by Iksil because of the illiquid nature of the OTC derivatives contracts used in his strategy. Were it not for TAG, the London Whale trade and billions of dollars in losses to the largest US bank might not have happened at all.
In the case of other institutions, the excess funds generated by TAG have depressed asset returns and actually hurt the financial position of these banks. But none of these facts dissuades the Independent Community Bankers Association in Washington from pushing for an extension of TAG. Despite the evidence that the TAG program has caused more harm than good for small and large banks,m and fueled unsafe and unsound practices in larger zombie banks, the ICBA still wants to see TAG extended for another two years.
Republicans in the House and Senate are opposed to extension of TAG as is the FDIC itself, although the agency won’t say so publicly. The reasons virtually all regulators support an end to TAG is that deposits in all banks continue to grow strongly even with the impending end of the subsidy. Keep in mind that banks are not actually paying for the additional FDIC insurance for transaction accounts via higher assessments.
The most recent data from the FDIC and Fed show deposits are growing at a rapid pace, this even though the reflation policies being pursued by the central bank have driven yields on bank paper down to just about nada. This rise in deposits is an extension of a well-established trend that has left small banks at near historic levels of liquidity.
Quarterly FDIC Call Report data for banks not ranked among the top 25 in terms of assets shows that deposit growth at these banks has so far outstripped their lending. Their aggregate loan to deposit ratio has fallen from 94.6% as of 12/31/2008 to 79.5% as of 6/30/2012, a near generational low. In fact, these banks could lose all of their current TAG funding and still remain well below their average loan to deposit ratios of the past several decades. Where is the problem?
So as in the case of JPM and the London Whale, it seems appropriate to ask why the smaller banks are pushing so hard for renewal of TAG – especially when the small banks have no deficit in terms of funding. Lending by smaller banks is weak at best, so why should taxpayers be supporting federal subsidies for bank funding?
"We've now seen … an extended period of increasing loan balances. But that's still relatively modest. What we really would like to see is more revenue being generated by expanded lending," FDIC Chairman Martin Gruenberg said at the release of the Quarterly Banking Profile this week.
This taxpayer-funded subsidy is helping the largest banks the most, so why is the ICBA so focused on getting an extension through Congress. The answer it seems is Washington politics. I hear that the ICBA has told Democratic Senate Leader Harry Reid they can deliver 7 Republicans for a cloture vote. With the Democrats (who always support more subsidies for large banks) a vote on the TAG extension bill could happen in a couple of legislative days. Yet most of the media refuses to engage on this issue.
Sometimes trade associations like the ICBA follow policies that help their senior officials more than the members. The leadership of the ICBA has made renewal of TAG their number one priority in 2012. Indeed, I am told that the top people in the ICBA will lose their jobs if TAG is not extended. But, of note, both the American Bankers Association and the Credit Union Association are working to kill TAG.
A recent poll conducted by American Banker shows that, in fact, most bankers believe that TAG can be allowed to expire without any impact on community banks. But there remains a hard-core group of smaller banks that believe they deserve taxpayer subsidies in order to counter the perceived advantage that large banks have via “Too Big to Fail.” While such arguments may generate sympathy in the halls of Congress, adding a new permanent subsidy for small community banks is not the answer.
The better course is to let TAG expire and work to end TBTF for the largest banks. But the only way to make this a reality is for members of the public and the media to get angry at this latest attempt by the banking industry to extract yet another taxpayer subsidy from Washington. Remember, the ICBA is not offering to pay for the additional FDIC insurance in the TAG program via higher assessments. This is just another unfunded government welfare subsidy for all banks, large and small.
http://www.zerohedge.com/contributed/2012-12-06/tag-more-subsidies-tbtf-banks-you-bet
sludgehound you're right. The manipulation continues in the financial system, none of the banks are reporting real numbers. With Germany being viewed as a sound economy in the ECB a bailout of DB would have had tremendous negative ramifications. When AIG received bailout in 2009, Deutsche Bank was one of the European banks that got paid.
"March 15 - AIG discloses that several U.S. and European banks were beneficiaries of the taxpayer bailout of the insurer and said that more than $90 billion had been paid to various banks between the September bailout and the end of the year. The banks include Goldman Sachs, Societe Generale, Deutsche Bank, Barclays, Merrill Lynch and Bank of America."
http://uk.reuters.com/article/2009/04/17/us-zurich-aig-timeline-idUKTRE53G46U20090417?sp=true
Bombshell: Deutsche Bank Hid $12 Billion In Losses To Avoid A Government Bail-Out
Tyler Durden on 12/05/2012
Forget the perfectly anticipated Greek (selective) default. This is the real deal. The FT just released a blockbuster that Europe's most important and significant bank, Deutsche Bank, hid $12 billion in losses during the financial crisis, helping the bank avoid a government bail-out, according to three former bank employees who filed complaints to US regulators. US regulators, whose chief of enforcement currently was none other than the General Counsel of Deutsche Bank at the time!
From the FT:
The three complaints, made to regulators including the US Securities and Exchange Commission, claim that Deutsche misvalued a giant position in derivatives structures known as leveraged super senior trades, according to people familiar with the complaints.
All three allege that if Deutsche had accounted properly for its positions – worth $130bn on a notional level – its capital would have fallen to dangerous levels during the financial crisis and it might have required a government bail-out to survive.
Instead, they allege, the bank’s traders – with the knowledge of senior executives – avoided recording “mark-to-market”, or paper, losses during the unprecedented turmoil in credit markets in 2007-2009.
Two of the former employees allege that Deutsche mismarked the value of insurance provided in 2009 by Warren Buffett’s Berkshire Hathaway on some of the positions. The existence of these arrangements has not been previously disclosed.
Naturally, DB is defending itself in the only way it knows: "this is complicated stuff, and we know better than those guys." In other words, this is just a "tempest in a teapot." Where have we heard that before...
The bank said the investigation revealed that the allegations “stem from people without personal knowledge of, or responsibility for, key facts and information”. Deutsche promised “to continue to co-operate fully with the SEC’s investigation of this matter”.
The complaints were made at different times in 2010 and 2011 independently of each other. All of the men spent hours with SEC enforcement attorneys and provided internal bank documents during multiple meetings, people familiar with the matter say.
SEC enforcement attorneys eh? Because this is where it gets really fun: the person who was in charge of DB's legal compliance at the time was none other than Robert Khuzami. The same Robert Khuzami who just happens to be the chief of enforcement at the SEC!
Robert Khuzami, head of enforcement at the SEC, has recused himself from all Deutsche Bank investigations because he was Deutsche’s general counsel for the Americas from 2004 to 2009. Dick Walker, Deutsche’s general counsel, is a former head of enforcement at the SEC. The SEC declined to comment on the investigation.
Sadly, the "we are too sophisicated" defense may not be very effective this time.
Two of the former Deutsche employees have alleged they were pushed out of the bank as a result of reporting their concerns internally.
One of them, Eric Ben-Artzi, a risk manager at Deutsche, was fired three days after submitting a complaint to the SEC. In a separate complaint to the Department of Labor, he claims his dismissal was retaliation for his allegations.
Matthew Simpson, a senior trader at Deutsche, also left the company after submitting his own complaint to the SEC. Mr Simpson declined to comment. Deutsche Bank paid Mr Simpson $900,000 to settle his anti-retaliation lawsuit. Reuters reported in June 2011 that Mr Simpson had raised concerns about improper valuation of the derivatives portfolio.
The third complainant, who worked in risk management and has requested anonymity, raised his concerns to the SEC and voluntarily left the bank.
Or actually, since every bank in the world is forced to lie, cheat and mismark its own balance sheets every single day, not least of all the European Central Bank which as of moments ago has to accepted defaulted Greek bonds as collateral, this may just be completely ignored.
After all opening this particular Pandora's Box may well reveal that not only DB but the world's entire financial system is completely and totally insolvent.
* * *
And for those curious why the SEC's chief enforcer will never lift a finger against his own bank, all other considerations and recusals aside, here is what we wrote back in May 2010
Robert Khuzami Stands To Lose Up To $250,000 If He Pursues Action Against Deutsche Bank
When the SEC'a Robert Khuzami recently recused himself of pursuing an investigation against Deutsche Bank in regard to potential CDO malfeasance, a bank where it is common knowledge the CDOs flowed (and were shorted "where appropriate" by Mr. Lippmann and his henchmen) like manna from heaven, we were curious just how large the conflict of interest must be for him to not pursue his official duty. Luckily, we were able to answer this question when we recently encountered Mr. Khuzami's Public Financial Disclosure Report for Executive Branch Personnel. It appears that Mr. Khuzami, who from 2002 to 2009 worked at DB, most recently as General Counsel, might have directly profited quite handsomely from the very activity he is now prosecuting Goldman, and other banks very likely soon, for engaging in. How handsomely? His 2007 bonus, 2008 salary and bonus, and 2009 salary added up to $3,804,537. This works out to about $1.9 million in comp per year. And let's not forget that 2006/2007 was the peak years for DB's CDO issuance. It sure seems Mr. Khuzami benefited nicely as a participant in precisely the kind of CDO gimmickry that he is currently all over Goldman for. Yet most ironic, is that Robert is expecting to receive between $100,001 and $250,000 in vested deferred stock comp from Deutsche Bank in August 2010. Should he, or someone else at the SEC, commence an investigation into Khuzami's former employer, the SEC's Director of Enforcement is sure to lose a substantial amount of money tied into the absolute value of Deutsche Bank stock.
And it doesn't end there. Khuzami lists the following asset holdings as of June 2009:
•Federated US Treasury Cash Reserves: $1,001-$15,000
•US Treasury Cash Reserves: $1,000,001-$5,000,000
•Fidelity Advisor New Insights Fund: $15,001-$50,000
•Henderson Int'l Opportunities Fund: $15,001-$50,000
•Deutsche Bank Cash Account Pension Plan: $100,001-$250,000
•DB Stable Value Fund: $1,001-$15,000
•Goldman Sachs Mid Cap Value Fund: $1,001-$15,000
•Dodge and Cox Int'l Stock Fund: $50,001-$100,000
•SSGA Money Market Fund: $15,001-$50,000
•Delaware Emerging Markets: $50,001-$100,000
•Gateway Fund (401k): $15,001-$50,000
•Third Avenue Real Estate Fund (401k): $15,001-$50,000
•Touchstone MidCap Growth Class A (401k): $15,001-$50,000
•Wells Fargo Endeavor Select FD (401k): $15,001-$50,000
•Yacktman Fund (401k): $15,001-$50,000
•PIMCO Real Return Class A (401k): $50,001-$100,000
•Principal Short-Term Fixed Income (401k): $1,001-$15,000
•Personal Residence - New York (Gross Rental Income): $1,000,001-$5,000,000
•Deutsche Bank Common Stock (Vested Amount Compensation): $100,001-$250,000
•Vanguard 529 Moderate: $50,001-$100,000
•Vanguard 529 Aggressive: $1,001-$15,000
It appears Mr. Khuzami has done quite well while working in the private sector, undoubtedly defending his German employer from precisely the same actions he, or someone else at the SEC, may soon charge the firm was defrauding investors by. His total disclosed asset range from $2,525,000 to $11,375,000. It is also ironic that nearly half Mr. Khuzami's assets are contained in real estate, and not to mention that a substantial amount of his assets are also contained in Deutsche Bank plans as well as DB stock deferred comp. In fact, let's take a look at that deferred comp of $100,001-$250,000 a little closer.
It appears the SEC's Enforcement Director has between $100,001 and $250,000 in DB deferred stock compensation, which becomes payable in August 2010. Obviously this is not a trivial number. And while Khuzami may have recused himself from pursuing DB for CDO infarctions, that does not mean that some other SEC enforcer (surely, their $1 billion a year budget allows them at least more than one enforcement professional) would not be able to go after DB. The problem as we see it is that since the announcement of the SEC case against Goldman the firm has lost about 25% of its market cap. It is conceivable that DB, which dabbled far more in CDOs, and thus the SEC would have a much stronger case agaisnt the bank, would thus lose far more of its market cap should the SEC announce a case against the Germans. In fact, we could be looking at Mr. Khuzami's Vested Deferred Compensation value dropping from $100,001 - $250,000 to maybe even as low as $15,001-$50,000. Then again, this becomes irrelevant after August, when the former DB GC will have collected all his dues. Does this mean we should expect nothing from the SEC against Deutsche Bank for at least 4 more months? And is September 1 the day when the SEC formally announces charges against Deutsche? We would love to get the SEC's feedback on this.
Mr. Khuzami's potential conflicts of interest do not end with his open exposure to Deutsche Bank. His Schedule A appendix indicates that the man has open equity positions with firms such as Bank of America, Deutsche Bank, and JP Morgan. To wit:
Would this mean that Mr. Khuzami, and thus the entire SEC Enforcement Division, if judging by the Deutsche Bank case study, would recuse itself of investigating these three firms from an enforcement standpoint?
We certainly do not begrudge Khuzami's generous winnings as part of the private sector. If anything, any borderline criminal activity he may have helped cover up as GC of Deutsche (an act he was supposed to do so no ill-will there) should provide him with the knowledge to prosecute just such activity. However, when the head of the main US regulator's enofrcement body is so terminally ensnared in not just the Wall Street complex, but in the very fabric of Keynesianism (that up to $5,000,000 Treasury holding for example and not to mention his up to $5,000,000 rental property), the population should ask just how extremely biased this man can be when prosecuting the very system that allows him to have up to $11 million in assets currently tied in to the perpetuated status quo. Surely, should the Fed, and the market in general, be "surprisingly" uncovered to be the same ponzi construct as Madoff's pyramid scheme, Khuzami, and who knows how many other people, stand to lose virtually the bulk of their assets. This makes them very much conflicted in any real enforcement action, and certainly not independent or impartial. Perhaps Dodd, in his joke of a bill, can consider just how to establish a securities regulator which by its very nature is not constantly in bed with the very subject it is supposed to be investigating.
http://www.zerohedge.com/news/2012-12-05/bombshell-deutsche-bank-hid-12-billion-losses-avoid-government-bail-out
Gold is the Anti-Bubble-Jim Willie
12/5/2012
By Greg Hunter’s USAWatchdog.com
Jim Willie is the editor of the “Hat Trick Letter.” He has a PhD in statistics and crunches the numbers on things like gold, currencies and bonds. Jim Willie says, “Gold is the anti-bubble. . . . It is the response to the biggest bubble in the history of the modern world, and that is Treasury bonds.” It was recently reported the Federal Reserve is buying 90% of all Treasuries. To that, Willie says, “The supply of gold is lacking and demand for Treasuries is evaporating. It’s that simple.” Willie thinks the global economy will not get better because, “. . . they have no solutions, and they are praying they can keep this going.” Like it or not, gold is going to make its way back into the monetary system. Jim Willie contends, “The gold standard will return because gold will be the last asset left standing. Everything in paper is going to go to Hell.” The transition will be very painful. Willie says, “We have a climax bust coming for bonds, currencies and the banking system because they are all interrelated.” Join Greg Hunter as he goes One-on-
One with Jim Willie of GoldenJackass.com (38min interview)
http://usawatchdog.com/gold-is-the-anti-bubble-jim-willie/#more-9581
Gold is the Anti-Bubble-Jim Willie
12/5/2012
By Greg Hunter’s USAWatchdog.com
Jim Willie is the editor of the “Hat Trick Letter.” He has a PhD in statistics and crunches the numbers on things like gold, currencies and bonds. Jim Willie says, “Gold is the anti-bubble. . . . It is the response to the biggest bubble in the history of the modern world, and that is Treasury bonds.” It was recently reported the Federal Reserve is buying 90% of all Treasuries. To that, Willie says, “The supply of gold is lacking and demand for Treasuries is evaporating. It’s that simple.” Willie thinks the global economy will not get better because, “. . . they have no solutions, and they are praying they can keep this going.” Like it or not, gold is going to make its way back into the monetary system. Jim Willie contends, “The gold standard will return because gold will be the last asset left standing. Everything in paper is going to go to Hell.” The transition will be very painful. Willie says, “We have a climax bust coming for bonds, currencies and the banking system because they are all interrelated.” Join Greg Hunter as he goes One-on-
One with Jim Willie of GoldenJackass.com (38min interview)
http://usawatchdog.com/gold-is-the-anti-bubble-jim-willie/#more-9581
Central Banks Hedge Their Bets
Wednesday, December 05, 2012 – by John Browne
John BrowneGold appears to be headed for an impressive price appreciation for the second half of 2012. Since the beginning of July, gold is up almost 10 over the same time frame. What is noteworthy here is that in recent months, fears of a worldwide recession have increased markedly. It used to be considered axiomatic that recession created adverse conditions for commodities (a reality that has helped push down the price of crude oil thus far in 2012). How then can we understand the movement in gold?
Reports have recently been released that throw particular light on the degree to which central banks around the world are accumulating gold. These activities must be playing a significant role in keeping the heat turned up when it may be otherwise cooling down. Given the extraordinary degree of insight that central bankers are expected to have, what do they see that drives them to buy gold when classically the metal should be falling in times of recession?
As we have said many times, there are two fundamental investment reasons to buy gold. The first is as a hedge against the loss of purchasing power of fiat currency, caused either by inflation or currency debasement. The second is as insurance against political and financial uncertainty or collapse. Central bankers are not giving either scenario much lip service.
By the latest analysis, it appears that the European Union (EU) is headed toward depression. After twelve years of stagnation, the Japanese economy remains flat at best. With an Obama victory at the polls, Obamacare, and massive tax increases threatened, the U.S. economy looks set increasingly for recession. If recession hits the world's two largest economies, the EU and U.S., the international economy, including that of China and its prime raw material suppliers such as Australia, Brazil and Canada, can't be expected to grow robustly. Runaway inflation, according to the models to which most central bankers subscribe, would then be considered a distant risk. Is it possible that these individuals, at the apex of the economic and financial worlds, don't trust their own policy papers?
Perhaps they understand the net effect of massive quantitative easing and the distortions being made by the ultra-low interest rates that have been held far too low for far too long. The unconventional monetary policies unleashed on the world since the beginning of the Great Recession have upended the financial rule book. But don't expect central bankers to openly acknowledge this change. Instead, they will talk loudly about the threats of deflation while quietly expanding gold reserves.
At present, these loose monetary policies are actively debasing currencies like the U.S. dollar and euro. In order to protect their exports into those economies, other hard-currency countries have engaged in competitive currency devaluation. Examples would include Switzerland, Japan and China.
Even in the absence of high inflation, currency debasement has contributed to a higher gold price. This, in turn has encouraged some central banks to increase the proportion of the gold content and decrease the amount of fiat currency in their reserves. This is somewhat surprising given that many countries had agreed to sell gold under the Central Bank Gold Agreements (CBGA's) I and II.
Russia, Ukraine, India, Turkey and the Kyrgz Republic have all increased their gold holdings recently. Turkey has even gone so far as to demand an increase in the proportion of gold held by its commercial banks as part of their reserves. Perhaps most important of all, James Rickards, a CIA and Pentagon senior advisor, released data recently showing that, in 2009, China secretly possessed gold holdings of 1,054 tonnes, or some 450 tonnes more than previously disclosed. This places China as the seventh largest holder of gold, or some 14 tonnes ahead of Switzerland. Perhaps this explains the recent news that gold is now the #1 Australian export to China, passing coal this year.
China's gold holdings amount to a relatively small 1.8 percent of her foreign currency reserves. This is far behind the largest holders. The U.S. has 8,133.5 tonnes, or 78.3 percent of its reserves; Germany has 3,412.6 tonnes, or 69.3 percent, the IMF 3,217 tonnes; and even Italy, in fourth place, has 2,451.8 tonnes or 66.5 percent.
Clearly, China has a long way to go before challenging the United States' vast holdings. However, China appears to be set upon a course of serious gold accumulation. Now the world's largest gold producer, China retains all its domestic production and buys additional tonnage on the international market.
The crucial message that many central banks are buying gold has not been lost on the private sector. The Exchange Traded Fund (ETF) SPDR has some 1,120.6 tonnes, making it the world's sixth largest holder and excludes other privately held accumulations.
Central banks are at the epicenter of the apparently coordinated unconventional monetary policies of quantitative easing and distorted low interest rates. The fact that many of them are buying gold surely carries a generally bullish message for the yellow metal, despite the increasing signs of worldwide recession or even of depression.
John Browne is a Senior Economic Consultant to Euro Pacific Capital.
http://thedailybell.com/28414/John-Browne-Central-Banks-Hedge-Their-Bets
The Coming Derivatives Panic That Will Destroy Global Financial Markets
By Michael, on December 4th, 2012
When financial markets in the United States crash, so does the U.S. economy. Just remember what happened back in 2008. The financial markets crashed, the credit markets froze up, and suddenly the economy went into cardiac arrest. Well, there are very few things that could cause the financial markets to crash harder or farther than a derivatives panic. Sadly, most Americans don't even understand what derivatives are. Unlike stocks and bonds, a derivative is not an investment in anything real. Rather, a derivative is a legal bet on the future value or performance of something else. Just like you can go to Las Vegas and bet on who will win the football games this weekend, bankers on Wall Street make trillions of dollars of bets about how interest rates will perform in the future and about what credit instruments are likely to default. Wall Street has been transformed into a gigantic casino where people are betting on just about anything that you can imagine. This works fine as long as there are not any wild swings in the economy and risk is managed with strict discipline, but as we have seen, there have been times when derivatives have caused massive problems in recent years. For example, do you know why the largest insurance company in the world, AIG, crashed back in 2008 and required a government bailout? It was because of derivatives. Bad derivatives trades also caused the failure of MF Global, and the 6 billion dollar loss that JPMorgan Chase recently suffered because of derivatives made headlines all over the globe. But all of those incidents were just warm up acts for the coming derivatives panic that will destroy global financial markets. The largest casino in the history of the world is going to go "bust" and the economic fallout from the financial crash that will happen as a result will be absolutely horrific.
There is a reason why Warren Buffett once referred to derivatives as "financial weapons of mass destruction". Nobody really knows the total value of all the derivatives that are floating around out there, but estimates place the notional value of the global derivatives market anywhere from 600 trillion dollars all the way up to 1.5 quadrillion dollars.
Keep in mind that global GDP is somewhere around 70 trillion dollars for an entire year. So we are talking about an amount of money that is absolutely mind blowing.
So who is buying and selling all of these derivatives?
Well, would it surprise you to learn that it is mostly the biggest banks?
According to the federal government, four very large U.S. banks "represent 93% of the total banking industry notional amounts and 81% of industry net current credit exposure."
These four banks have an overwhelming share of the derivatives market in the United States. You might not be very fond of "the too big to fail banks", but keep in mind that if a derivatives crisis were to cause them to crash and burn it would almost certainly cause the entire U.S. economy to crash and burn. Just remember what we saw back in 2008. What is coming is going to be even worse.
It would have been really nice if we had not allowed these banks to get so large and if we had not allowed them to make trillions of dollars of reckless bets. But we stood aside and let it happen. Now these banks are so important to our economic system that their destruction would also destroy the U.S. economy. It is kind of like when cancer becomes so advanced that killing the cancer would also kill the patient. That is essentially the situation that we are facing with these banks.
It would be hard to overstate the recklessness of these banks. The numbers that you are about to see are absolutely jaw-dropping. According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives. Just check out how exposed they are...
JPMorgan Chase
Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)
Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)
Citibank
Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)
Bank Of America
Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)
Goldman Sachs
Total Assets: $114,693,000,000 (a bit more than 114 billion dollars - yes, you read that correctly)
Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)
That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.
To get a better idea of the massive amounts of money that we are talking about, just check out this excellent infographic.
How in the world could we let this happen?
And what is our financial system going to look like when this pyramid of risk comes falling down?
Our politicians put in a few new rules for derivatives, but as usual they only made things even worse.
According to Nasdaq.com, beginning next year new regulations will require derivatives traders to put up trillions of dollars to satisfy new margin requirements.
Swaps that will be allowed to remain outside clearinghouses when new rules take effect in 2013 will require traders to post $1.7 trillion to $10.2 trillion in margin, according to a report by an industry group.
The analysis from the International Swaps and Derivatives Association, using data sent in anonymously by banks, says the trillions of dollars in cash or securities will be needed in the form of so-called "initial margin." Margin is the collateral that traders need to put up to back their positions, and initial margin is money backing trades on day one, as opposed to variation margin posted over the life of a trade as it fluctuates in value.
So where in the world will all of this money come from?
Total U.S. GDP was just a shade over 15 trillion dollars last year.
Could these rules cause a sudden mass exodus that would destabilize the marketplace?
Let's hope not.
But things are definitely changing. According to Reuters, some of the big banks are actually urging their clients to avoid new U.S. rules by funneling trades through the overseas divisions of their banks...
Wall Street banks are looking to help offshore clients sidestep new U.S. rules designed to safeguard the world's $640 trillion over-the-counter derivatives market, taking advantage of an exemption that risks undermining U.S. regulators' efforts.
U.S. banks such as Morgan Stanley (MS.N) and Goldman Sachs (GS.N) have been explaining to their foreign customers that they can for now avoid the new rules, due to take effect next month, by routing trades via the banks' overseas units, according to industry sources and presentation materials obtained by Reuters.
Unfortunately, no matter how banks respond to the new rules, it isn't going to prevent the coming derivatives panic. At some point the music is going to stop and some big financial players are going to be completely and totally exposed.
When that happens, it might not be just the big banks that lose money. Just take a look at what happened with MF Global.
MF Global has confessed that it "diverted money" from customer accounts that were supposed to be segregated. A lot of customers may never get back any of the money that they invested with those crooks. The following comes from a Huffington Post article about the MF Global debacle, and it might just be a preview of what other investors will go through in the future when a derivatives crash destroys the firms that they had their money parked with...
Last week when customers asked for excess cash from their accounts, MF Global stalled. According to a commodity fund manager I spoke with, MF Global's first stall tactic was to claim it lost wire transfer instructions. Then instead of sending an overnight check, it sent the money snail mail, including checks for hundreds of thousands of dollars. The checks bounced. After the checks bounced, the amounts were still debited from customer accounts and no one at MF Global could or would reverse the check entries. The manager has had to intervene to get MF Global to correct this.
How would you respond if your investment account suddenly went to "zero" because the firm you were investing with "diverted" customer funds for company use and now you have no way of recovering your money?
Keep an eye on the large Wall Street banks. In a previous article, I quoted a New York Times article entitled "A Secretive Banking Elite Rules Trading in Derivatives" which described how these banks dominate the trading of derivatives...
On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.
The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.
According to the article, the following large banks are represented at these meetings: JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup.
When the casino finally goes "bust", you will know who to blame.
Without a doubt, a derivatives panic is coming.
It will cause the financial markets to crash.
Several of the "too big to fail" banks will likely crash and burn and require bailouts.
As a result of all this, credit markets will become paralyzed by fear and freeze up.
Once again, we will see the U.S. economy go into cardiac arrest, only this time it will not be so easy to fix.
Do you agree with this analysis, or do you find it overly pessimistic? Please feel free to post a comment with your thoughts below...
http://theeconomiccollapseblog.com/archives/the-coming-derivatives-panic-that-will-destroy-global-financial-markets