"The year 2011 proved a major setback for
the view that policymakers had global debt crisis
dynamics under control. Indeed, the European sovereign
debt crisis provided an historical inflection point
with respect to the capacity for fiscal and monetary
policy intervention to hold the downside of a Credit
bust at bay. I expect circumstances in 2012 to confirm
this dynamic of waning policy efficacy, but on a more
global basis. Last year, markets witnessed how policy
"The first tremor of the earthquake that is coming to the global financial system. And how the central banks and financial regulators treated the systemically important financial institutions (SIMFIN) that had exposure to MFGlobal, to the detriment of the ordinary blameless customer who got royally ripped off in its bankruptcy, is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner." ~ Gonzalo Lira (the SIMFINs define the syndicate financial core)
"The MFGlobal scandal has made it clear that the integrity of the system has disappeared. The banks are insolvent, the governments are insolvent. All that is left is for the people to realize what is going on, and that will start a panic." ~ Tuur Demeester (editor of Macrotrends, a Dutch language publication)
"I am demanding heavy sacrifices from Italians.
I can only do this if concrete advantages become visible.
[Otherwise] a protest against Europe will develop
"The answer, even though they see over and
over again that austerity leads to collapse of the
economy, the answer over and over [from politicians]
is more austerity. It reminds me of medieval medicine.
It is like blood-letting, where you took blood out
of a patient because the theory was that there were
bad humours. And very often, when you took the blood
out, the patient got sicker. The response then was
more blood-letting until the patient very nearly died.
What is happening in
"Europeans do not see what is coming. Watch
for February 21st and then again for March 20th as
turning point dates. The
Editor Note: please stop requests for me to join any and all social networks. Although your intentions are good, the entire system enables tracking my movement, monitoring my face, and putting me in danger. STOP!! Hardly a day goes by without an invitation, all deleted immediately. Risks rise with each passing month and each new threat in USGovt law.
◄$$$ LOOK FOR SOME EXTREME EVENTS TO
My source cannot be specific, or else risk his own
position and information flow. My own conjecture is
simply educated guesswork. Some important significant
systems are apparently ready for implementation, against
the desires and objectives of the
The USGovt does not command the role of global ruler,
although at times it assumes that role as the former
beacon of freedom. The
Other possibilities for a surprise event tap the
ripe fertile ground of imagination. 1) The shared
USDollar usage for crude oil payments could be
on the line for a major disruption. The exclusive
usage of the
You gotta love
◄$$$ PLANNED CONTROLLED DECAY AND DETERIORATION
TO LIMIT THE PRICE INFLATION HAS A HUGE RISK OF WIDESPREAD
BANK FAILURES AND SOVEREIGN DEBT COLLAPSE. THE SAD
PROCESS CONTINUES WHERE FINANCIAL FIRMS MUST SELL
THEIR BEST ASSETS IN ORDER TO JUST SURVIVE.
The European banks are being pressured into selling
Italian Govt Bonds and Spanish Govt Bonds. The squeeze
is on. The Euro Central Bank has gone back on Draghi's
original plan. He did not wish to become the buyer
of toxic bonds as last resort. Draghi caved in
from desperation, since the Italian and Spanish bond
markets sounded the alarms. Basel II has been such
a great wrecking ball that its motive must be suspected.
It seems collapse is desired, in order to place more
technocrats in power without election. The breakdown
of the European banks forces government budget funding
processes into chaos, and vice versa. Notice the
broad exemptions granted to the
The missing piece is that the hyper-inflation kills and retires capital. The treatment has been utter monetary creation in tremendous volume. As costs rise, many businesses must shut down. They are no longer profitable. It is so simple. This risk is never acknowledged by our cast of clowns calling themselves economists. They did not learn that in university. They regard liquidity provision (a nice euphemism for utter hyper-inflation) as good, but fail to recognize the risk of capital destruction from rising costs. Putting to work new capital creates more supply, which reduces costs and enables capital equipment to go to work, employing people, creating income. The current system is fascist, socialist, destructive, and impoverishing. The heaviest cost is liberty from failure.
December data showed a continued decline in the Chinese manufacturing sector. Higher inventory accumulation of finished goods occurred for the first time in 17 months. Although modest, the rate of inventory growth was the third fastest in the series history. Reduced new order levels contributed to a fall in work-in-hand (not yet completed) for the first time in 18 months. New business is falling faster than output. External demand slowdown has begun to be felt, as foreign importers react to recession. The entire industrial picture is aggravated by the ongoing property market corrections. Calls have come for more aggressive stimulus action. New business creation was down from the change in profit prospects. New export business fell back during December, ending a two month period of growth. Hongbin Qu is chief economist from Asian economic research at HSBC. He said, "While the pace of slowdown is stabilizing somewhat, weakening external demand is starting to bite. This, plus the ongoing property market corrections, adds to calls for more aggressive action on both fiscal and monetary fronts to stabilize growth and jobs, especially with prices easing rapidly. Hard landings should be avoided so long as easing measures filter through in the coming months." See the Markit Economics article (CLICK HERE).
Take for a microcosm example the small and medium
sized enterprises involved in manufacturing in the
Pearl River Delta. They are an important pillar. The
sharp decline in orders since 2008 has evolved into
a more severe problem. Tens of thousands of small
enterprises engaged in low value added manufacturing
are under pressure as foreign orders decrease,
costs rise, labor becomes scarce, profit margins decline,
and financing difficulties arise. Operations are difficult
to sustain under such hostile conditions. A recent
The Chinese Economy expanded at the slowest pace
in 10 quarters as export demand moderated and a prolonged
campaign directed against the torrid pace of consumer
and property price gains cooled growth. Gross Domestic
Product rose 8.9% in the 4Q2011 versus a year ago.
This is the first time GDP growth fell below 9% since
mid-2009. As price inflation concerns lessen, the
important perspective is on the more dim outlook on
export trade. A case in point is equipment maker Sany
Heavy Industry. Its chairman Liang Wengen, the richest
◄$$$ GULLIBILITY POINTS FROM THE GOLD COMMUNITY ARE VERY UPSETTING TO ALERT INVESTORS. THE SOUND MONEY CROWD IS SUBJECT TO DIM THOUGHTS AND REGULAR SHORTCOMINGS. $$$
In the last two years or more, some disappointment has come in watching analysts in the gold community who must contend with blind spots, ignorance, and gullibility. They are among our crowd of sound money advocates and hard asset investors. Many bought the crazy notion that the Commodity Futures Trading Commission would impose trading limits on the Big Four US banks. The Jackass never bit that lure. The CFTC is a tool of the Syndicate, always has been, always will be. They pacify the public with distractions. What nonsense! Many bought the crazy notion that forced disclosure of the USFed will bring the central bank under control. The Jackass never bit that lure. At best the public would be told what happened several months ago, long after the criminal grants were complete, after anything could be done about them. What nonsense! Many bought the crazy notion that hyper monetary inflation results in wide economic price inflation. The Jackass might have bit that lure gently. The vast efforts to contain the monetary expansion within the financial sector firewalls has been made vividly clear. What nonsense! My thought was that some would leak over the wall into the street. Many bought the crazy notion that the Asian metal exchanges would crush the US/Anglo corrupt corners and overrun their short positions. There was a Rothschild hidden in that Asian bush. To be honest, the Jackass accepted that notion too, incorrectly, admittedly, but backed off quickly. What nonsense!
Many bought the crazy notion that the European collapse would lift Gold. To the extent that the monetary system would suffer, the Jackass bought into that notion, since Gold would be a pursued island in the storm. The arrival of Dollar Swap Facilities and negative gold lease rates, combined with the 144 tonnes of Qaddafi gold bullion sure slammed that notion down. What nonsense! The Jackass was disappointed for a wrong viewpoint on Gold, in under-estimating the forces of darkness. Many bought the crazy notion that expecting QE3 to happen in the future. The Jackass never bit that lure. The quantitative easing never ended, only changed names, and the deception intensified. Like how the Operation Twist was a disguised QE to neutralize all the USTBonds that foreign creditors sold. My analysis detailed how the central bankers would create a Global QE, and keep their bond monetization efforts quiet. What nonsense! Many bought the crazy notion that interest rates must rise as the USGovt deficits piled up new mountains of paper to sell. Since late 2009, the Jackass never bit that lure. Before mid-2009, my naive ways to Interest Rate Swaps and other devices to control rates had not yet been subjected to an education. Thanks goes to Rob Kirby for elucidation. What nonsense! Sadly, too much gullibility exists in the gold community. Despite being grounded in the correct faith in gold, the human condition calls for many shortcomings of intellect, and blind spots from emotion. The biggest dolts include Adam Hamilton and Antal Fekete.
◄$$$ MINING FIRM REVENUES SHOULD RISE WITH HIGHER GOLD PRICES, EVEN THOUGH COSTS RISE WITH ENERGY AND MATERIALS. BUT THAT ARGUMENT MADE BY CHAPMAN MISSES THE REST OF THE PROBLEMS. THAT HIGH COSTS, STOCK DILUTION, LONG WAITS FOR PRODUCTION, MARKET CORRUPTION, AND JURISDICTION RISK ALL THREATEN THE MINING STOCKS IS A MISSED POINT AND CAUSE FOR DEAD INVESTMENT MONEY. $$$
Several meaningful perceptions by Bob Chapman warrant comment on a topic of interest, mining stock investment prospects. We are in disagreement on the viability and outlook toward mining stocks present and future valuations. His position on a few important aspects are so far off the mark as to warrant a rebuttal. Take this as an update on the troubled mining stock niche sector, for which my gloomy forecast back in 2008 has come true. My desire is never to misrepresent any analyst, not anywhere. We disagree on this topic, for which we each have strong opinions. My view has been and remains that mining stocks are stifled and bound in dead money, whose investors often feel somewhat trapped since heavily invested and on negative ground. My focus is broader. Chapman acknowledges that precious metals are heavily manipulated and remain far cheaper than they should be. He expects an eventual fast rise up, given how attractively low priced they are. That argument misses the mark and avoids explanations on why they have suffered on valuations for the past three years. He expects because of recognized danger in the Exchange Traded Funds (like GLD & SLV), the mining shares will benefit handsomely. He describes the Price/Earnings ratio for producers right now to be 15 times. He scoffs at the mere 1:1 leverage in physical gold & silver investments, and thereby suggests a limit of 33% in bullion asset allocation (bars or coins). He continues to advocate strong portfolio positions in the mining stocks.
The Jackass belief is that he will be wrong about
North American mining firms enjoying a grand resurrection.
They will be gobbled up easily by the Boyz in buyouts
for pennies, unless they choke on their own rules
and arrogance and corruption. Here are some Chapman
points marked by "BC" with supporting arguments,
and my rebuttals marked by "ME" afterwards.
BC: Energy costs don't mean much. They are
reflected in inflation which in turn is reflected
in the price of Gold & Silver. So mining firms
realize bigger income as both costs and gold rise
in value. He went on to criticize most newsletter
writers who could not figure this out, because they
have no background in economics. ME: The argument
falls flat on its face for the diverse long list of
mining firms that have yet to enter production output.
Their costs rise without any matching income, as in
zero income. Read ZERO. Many firms as they approach
income streams must put up huge capital for expensive
but critical mills, more dilution. While in normal
times, gold & crude oil are linked directly, that
is no longer the case. The funds in gold fled for
crude oil, which was not under attack. In 2010, gold
rose much more strongly than crude oil. In late 2011,
gold fell much more than crude oil. So the major commodities
have NOT run together in the last two years. The funds
like Paulson were attacked by various tools, as crude
oil rose from the
BC: Nationalization will not happen in
BC: MFGlobal had nothing to do with Gold &
Silver. He went on to claim that what they did
was legal because the losers had margin accounts.
He emphatically states that from the very beginning,
he has expected everybody will get their money back.
He believes there have been so many lies about MFG,
that they cannot be counted. In fact, he called the
Jackass ignorant since my written and stated expectation
is for over a million private accounts to go missing
in future months (pension funds, mutual funds, money
market funds, stock accounts, bank CDs). ME: A big
wow! is required. Private segregated accounts are
sacred, and are to be protected, according to regulatory
bodies and the ethical thread of the
BC: In 250 years no one has ever lost their stocks or bonds, since this is where the Illuminists make all their money. He explains they will not put aside the theft of stocks and bonds and deprive themselves of the system based upon looting. ME: He must not be aware of the fact that over half of small mining stocks have lost tremendous value. They have been driven down by naked shorting done by their own finance team partners, Canaccord the worst offender, Alpha One their agent for theft. They have been driven down by extreme dilution so as to raise cash for continued operations, and to build mills. If Chappy refers to stocks beyond the mining walls, then he should check out Enron, WorldCom, Nortel, Fannie Mae, even Bank of America and Citigroup. In fairness, maybe Chappy only means nobody has ever lost a stock from failing to demand a certificate, an even shallower point.
Chapman makes really small man sweeping accusations. Calling the Jackass ignorant obviously sticks in my craw, but Chappy is a great guy and a strong loyal soldier. He has some great successful mining stocks in his portfolio, recommended to his followers. Some of his sources are great, but the sector is rotten. Some reliable sources in my camp have explained the extreme situation with segregated account losses, the impact spreading widely. The sources discuss a trend, with Swiss accounts ravaged for their allocated gold, with MFGlobal accounts stolen instead of seeing gold in delivery. One source of mine directly warned of widespread vanishing acts for US financial accounts, a warning the Jackass heeds responsibly, given his great track record (one month pre-warning on Lehman Brothers and Fannie Mae). Chappy openly stated that many misstatements have come from people who want to sell coins or newsletters or DVDs, who are untrained unprofessional louts. The Jackass might qualify. My educational training was not lacking. Chappy lays into Jim Sinclair for urging investors to take stock certificates in investor names. He claims the great majority of brokers cannot satisfy such requests, and charge $250 per certificate. My queries are not consistent on providing certificates, but one must be persistent with the brokerage firm. Many still provide them. My ears have heard $25 to $30 on the cost. It is unclear whether a notarization process is required to sell the stocks. Chappy quotes a Barrons article that reports how Sinclair sold out all the mining stock from his company. If a JPMorgan research report issued the same report, it should not be believed either.
As a final blow, hardly just a footnote, is a description of a new law to be enacted in 2013. It is the Windfall Profits Tax, given a more palatable name to prevent objections. After the Arab Oil Embargo in 1973, and a four-fold rise in the crude oil price in a complex Saudi-US deal of many hidden parts, oil firm profits were taxed heavily, to create a source of great USGovt income. Officially called Gold Miner Profit Tax Act, the new nasty legislation formed a compromise between the Obama Admin and the USCongress over the decontrol of gold prices. The Act is intended to recoup the revenue earned by miners as a result of the sharp increase in precious metal prices that has coincided with major financial market damage. According to the Congressional Research Service, the Act's proposed title is a misnomer. Despite its name, it will be an excise tax calculated in truly queer fashion. The USGovt elves will impose a tax on the difference between the market prices of gold and silver (removal price) and a statutory 2012 base price that will be adjusted quarterly for inflation and state severance taxes. The reaction to mining stocks will not be good, but fully anticipated for some time by the Jackass. The securities arena generally is in ruins in almost all sectors. Chapman should take notice.
MORE MFGLOBAL FALLOUT
◄$$$ LIRA SHARES THOUGHTS ON PERSONAL RISK DURING THE UPCOMING RUN ON THE FINANCIAL SYSTEM. HE SEES RISK IN HOLDING ANY PAPER SECURITY. HE EXPECTS A RUN ON THE ENTIRE PAPER-BASED FINANCIAL SYSTEM. HE IDENTIFIES THE KEY CRIMINAL ACT IN THE RESOLUTION, NOT THE THEFT ITSELF. IT IS TREATMENT OF THE MF-GLOBAL BUST AS AN EQUITIES FIRM, NOT A BROKERAGE FIRM. WITHOUT ANY DOUBT, MF-GLOBAL IS A BROKERAGE FIRM. $$$
Gonzalo Lira is outspoken and a little wild, but very astute. He summarized the risks in the wake of the November MFGlobal & JPMorgan crime scene. He hones in on a very crucial point on the prosecution of the grand crime, a veritable financial weapon of mass destruction. He wrote, "MFGlobal pledged customer assets to JPMorgan, in a process known as re-hypothecation, customer assets which MFGlobal did not have a right to [touch]. Needless to say, JPMorgan covered its ass legally. Ethically? Morally? Black as night. This was seriously wrong. This is the source of the scandal: Rather than being treated as a bankruptcy of a commodities brokerage firm under subchapter IV of the Chapter 7 bankruptcy law, MFGlobal was treated as an equities firm (subchapter III) for the purposes of its bankruptcy. In a brokerage firm bankruptcy, the customers get their money first, because after all, it is theirs, while in an equities firm bankruptcy, the customers are at the end of the line. In the case of MFGlobal, what should have happened was for all the customers to get their money first. Then everyone else, including JPMorgan, would have picked over the remaining scraps. The MFGlobal scandal means that there is no safety for any paper investment. The integrity of the systems has been completely shattered. If in the face of one medium sized brokerage firm going under, the regulators will openly allow ordinary people to be ripped off for the sake of protecting the so-called Systemically Important Financial Institutions, in this case JPMorgan. A subsequent run on the entire financial system is only a matter of time. In fact, the handling of the MFGlobal affair has sped up the timeframe for this run on the system, because the forward edge players realize that the regulators will side with the banksters, and not the ordinary investors. So we are preparing accordingly. Once there is a full-on panic, anyone with money in the system will lose at least a big chunk of it." See the Gonzalo Lira article (CLICK HERE). Great points!!
◄$$$ A FRESH LONG OVERDUE R.I.C.O. LAWSUIT TARGETS MF-GLOBAL, THE CME-GROUP, AND JPMORGAN CHASE FOR GRAND LARCENY AND RACKETEERING. THE CONSEQUENCES WOULD BE VAST, AS IN ASSET CONFISCATION. $$$
The Philadelphia law firm of Berger & Montague
in early January brought a class action lawsuit in
federal court in New York, charging theft and misappropriation,
against people connected with the failed commodity
brokerage firm MFGlobal, including its former CEO
Jon Corzine (former Senator and Governor), the CME
Group (main enabler of MFGlobal and supposed regulator),
and the investment bank JPMorganChase. The lawsuit
is brought under both the Commodity Exchange Act and
the Racketeer Influenced Corrupt Organizations Act,
the famous RICO law. Maybe the lawsuit can determine
where JPMorgan placed Judge Crater. The lawsuit's
complaint is posted at GATA's Internet site (CLICK
Bear in mind that any RICO confiscations after a court
judgment would send assets from the Syndicate to the
Syndicate, since they control the USGovt and its asset
disposal. What irony!! Sooner or later, a major RICO
slam will hit Wall Street. It is just a matter of
time. When it does, its likely vacated ruling will
unmask the Syndicate for what it is, a crime syndicate
in full view. The bigger issue is perception, since
the public could remove its money from the major
◄$$$ THE MF-GLOBAL AFTERMATH SLOWLY SHOWS CONFIRMATION OF THE DEEP EXTENT OF RE-HYPOTHECATION AND ITS EXTENDED RISK. THE IMPROPER USAGE OF CLIENT FUNDS AS COLLATERAL FOR BIG FINANCIAL FIRM GAMBLES IS MADE MORE CLEAR BY C.M.E. HEAD TERRY DUFFY. HE ESTIMATES AT $185 BILLION THE EXTENT OF THE COLLATERAL GRABS BY MAJOR FINANCIAL FIRMS IN THE UNITED STATES. $$$
A discerning analyst expects a few more MFGlobal scenarios right around the corner. As the system hurtles toward breakdown, decisions will be made to steal private accounts, rather than to permit the system to collapse. The next crime scenario will crush financial markets due to money rushing to the exits en masse. The CME Group has revealed the risk in its statements. CEO Terry Duffy has proclaimed in the first week of January that the exchange will not guarantee MFG client funds because that would set a $185 billion precedent. That figure is his estimate. The revelations came from the class action lawsuit, handled by the Commodity Customer Coalition. Its chief James Koutoulas is lead counsel in the lawsuit on behalf of MFG victims. Certain interviews shed clear light on the theft by MFGlobal and JPMorgan of the segregated client funds as a result of MFG re-hypothecation. They illicitly attached client assets as collateral for their doomed corporate bets on European sovereign bonds. Koutoulas states that Duffy told him personally that the CME could have made MFG clients whole on their re-hypothecated assets, but that the action would have set a $185 billion precedent. Seems like a spotlight on the ongoing practices. The CME refused to perform their duty in using their $8 billion official bailout fund to make good on segregated MFGlobal client funds. The reason why is basic. Because MFGlobal is the tip of the iceberg. Doing so would set a precedent for $185 billion in customer segregated funds that have been hypothecated & re-hypothecated at every other bank and brokerage house! Duffy cited the huge figure, in an estimation of the extent of the criminal activity in collateral grabs. See the Silver Doctors article (CLICK HERE).
Charlie Gasparino is bold, and must be careful to wage battle with the powerful Syndicate. He could suffer an induced heart attack, experience an odd car accident, or find himself diving off a bridge. He claims that a senior regulatory source has told Fox Business News that a breakup of the CME is on the table, in his words. Such breakup would be similar to that of the NASDAQ in the late 1990 decade. Blame is cast on Corzine for not upgrading the MFGlobal compliance mechanisms when he took MFG from being almost strictly a market maker to a functioning hedge fund. Gasparino concluded, "If the CME did not regulate it [MFG] like it should have, there is a very good likelihood there will be a breakup." See the Fox Business article (CLICK HERE).
◄$$$ ANN BARNHARDT CONFIRMED THE C.O.M.E.X.
IS GOING INTO HYPER DEATH CON. PLAYERS ARE EXITING.
RISK OF THEFT IS PERCEIVED. TRUST HAS GONE. METAL
INVENTORY WILL VANISH NEXT FROM HONEST PLAYERS. THE
Ann Barnhardt made a huge splash last month in her decision to shut down BCM Capital brokerage firm, for fear that client funds were at great risk of theft. She outlines many carefully laid points. Here are some of her main points with fortified evidence. Notice the point about high frequency trading, which indirectly indicts the GLD & SLV (gold and silver) funds, whose inventory is likely connected to futures arbitrage schemes, as their bullion metal is drained. Notice the perceived spread of futures hedge exposure at the market peripheries. She wrote, "First, I absolutely totally completely and 105% confirm that the futures markets are withering and dying on the vine as we speak. I am hearing for every single one of my contacts, both floor guys (in both Chicago and NY) and introducing brokers (as I used to be) all over the country, that business is totally evaporating. And we are not talking the normal Christmas season slowdown. No. We are talking people explicitly stating that they are done trading and hedging with futures, both speculators and hedgers. It is over. No mas. This was going on to some extent before the MFGlobal rape/theft. The markets had grown thinner and thinner, ironically on more net volume, but the volume increases were due to the veritable fungal infection of the market that is the high frequency algorithm trading systems. Furthermore, any short hedger with a brain in their head over the last 18 months has known that short hedging in an inflationary environment is and would be needless suicide. At this point, anyone who actually believes any statistics that come out of the federal government or the Federal Reserve (there is no inflation!) has got to be mentally disabled. Literally, mentally disabled.
I taught one of my Level 2 Cornerstone Cattle Marketing schools a couple of weeks ago and we talked at length about cascading counter-party risk. Not only are producers not using the futures themselves, but they are also very keenly aware of the fact that if producers enter into a private treaty forward delivery contract with a grain elevator or a feedlot, that they would still be exposed to the futures market, and to the risk of a futures market collapse, or even just another wealth confiscation. Yes, even though the producer was not engaged in the futures markets himself, if his counter-party turned around and laid off the risk on their private treaty forward contract using the futures, if their private counter-party were to be caught up in either a single firm collapse or a total system collapse, it is highly probable that the effects of that would cascade back to them. For example, suppose a rancher forward sells his calf crop to a feedlot and locks in his price with the feedlot on a purely private basis. If the feedlot then turned around and sold futures to offset the private forward buy of the rancher's cattle and then got caught up in a futures market confiscation or collapse, the feedlot might be so financially hamstrung that they might then default on the private contract with the rancher. This same dynamic could also happen with grain farmers who forward sell grain to an elevator on a private contract. Or it could happen to a feedlot that forward buys feed grain from an elevator. It could also happen in the petroleum markets, and on and on.
There are lots of private treaty forward contracting
going on, and always have been. In fact, I have almost
always advocated to my clients that they look to a
private treaty cash market contract with feedlots
or elevators first before using futures, because that
way the feedlot or the elevator is the entity carrying
the hedge in the futures market, and thus posting
margin and meeting margin calls. But, it was fair
to say that whenever a private treaty forward contract
was entered into, eventually someone laid that risk
off on the futures market. Some big players are
still so attached and dependent on the futures market,
and simply cannot comprehend or execute a paradigm
shift, which betrays a massive weakness of intellect,
that they are still trying to operate as usual, with
their brokers, likewise in denial. The sensible
players and producers are wising up, and are now even
shunning private treaty forward contracts in fear
of counter-party risk, should a cascading collapse
occur. This MFGlobal situation is not just about
a few bucks being stolen from a brokerage firm. Both
the scope and cascading consequences of Corzine's
actions put this firmly in the domain of economic
treason, as in an act of economic war upon the
◄$$$ SANTELLI OF CNBC HAS BEEN THREATENED BY JPMORGAN. IF HE CONTINUES TO CAST BAD LIGHT ON THE SYNDICATE, THE BIG BANK WILL PULL HIS ACCOUNTS, SHARED WHEN HE COMMENTED ON MFGLOBAL. THE SYNDICATE TENDS TO HIT THE BIG MOUTHPIECES AND SPOKESMEN. $$$
Rick Santelli of CNBC and the Chicago Pits is hardly a whistleblower or a detailed reporter of Syndicate crimes. His style is usually bold and targeted. His isolated rants are both entertaining and illuminating. Lately, his criticism of the MFGlobal and JPMorgan crime scene has earned him some grief. He has been followed and being stalked by NSA goons from the USGovt. They are observing closely and quietly. A December 30th interview was telling, as Santilli discussed the whole story of the CME Group. When he finished, he immediately went into praising bonds, like a trained soldier doing a messy detail. Santelli might not have directly stated that JPMorgan stole the MFG client funds. He said that he had received threats from JPM to shut his mouth or they would shut down his accounts, something along those lines. A lawyer was present for the interview. See the CNBC video (CLICK HERE).
◄$$$ BLOOMBERG NEWS SUFFERED FROM THE MFGLOBAL COLLAPSE. THEY SELL NEWS & MARKET DATA SUBSCRIPTIONS. REVENUE HAS COME DOWN, SINCE FINANCIAL FIRMS ARE SHUTTERED. $$$
The hot item is Bloomberg terminals. When MFGlobal collapsed, Bloomberg lost nearly $1 million a month in revenue from their business. The financial information giant Bloomberg LP lost about 600 subscriptions to its computer terminal business after MF Global filed for bankruptcy on October 31st. The Bloomberg conglomerate generates nearly $7 billion in revenue per year. So a speedbump was the result. However, the hit underscores the symbiotic relationship between Wall Street and Bloomberg. That is why even though not as obsequious and fawning, with bootlicking to the degree of CNBC, the Bloomberg hosts still show far too much respect to the corrupt gamers on Wall Street and their legion of fund managers in tow.
My impression has been that Bloomberg points out the dark side much more than CNBC, but still only a little, and never enough. The terminals in question sport an orange type on black screens that spew real-time market quotes, news, and data ranging from FOREX to bonds to hedge fund holdings to credit default swaps. They are ubiquitous on Wall Street. Bloomberg has more than 314,000 terminal subscriptions worldwide. The income from those subscriptions accounts for about 85% of company revenue. Each terminal subscription costs about $20,000 per year. Bloomberg competes with Reuters, FactSet Research System, and Dow Jones (of News Corp). Given its reliance on subscriptions, Bloomberg is susceptible to turbulence on Wall Street, to financial firm failures, and to fraud events. The collapse of Lehman Brothers cost them 3500 terminal subscriptions. Sometimes the failed firms result in certain more competent employees starting hedge funds, which require their own terminals. See the New York Times article (CLICK HERE).
IMMINENT EUROPEAN BOND SHOCKS
◄$$$ UPDATE FROM
Not comprehending the intractible situation, the
Euro currency rose after Euro Central Bank President
Mario Draghi held firm at 1.0% on the official interest
rate. The USDollar softened slightly, as the Bank
of England also held firm at 0.5% on rates. The
◄$$$ AUCTION RESULTS HAVE BEEN FAVORABLE IN
THE LAST TWO WEEKS, AND BELIE THE CRISIS.
As preface, take note that the Swiss National Bank
President Philipp Hildebrand resigned as part of the
insider trading his wife executed. Think pillow talk,
as she profited handsomely. Traders see the Swiss
Franc currency as vulnerable to a sizeable jump upward.
Its stability could be challenged. The financial rain
Without doubt the Euro Central Bank is choking on
sovereign bonds, and remains the primary buyer, the
buyer of last resort since big European banks continue
to sell sell sell, especially with the buyers entering
avidly to avert any deeper throes in the unresolvable
crisis. EuroCB head Draghi reported that the record
EUR 489 billion (=US$628 bn) in three-year ECB loans
to banks made last month have begun to unlock markets
and have prevented the credit contraction from becoming
more serious. He pointed to tentative signs of
EuroZone stability on the economic front. That is
a lot of printed money. Europe matches the
◄$$$ MORE SOVEREIGN DEBT DOWNGRADES HAVE HIT
Standard & Poors has delivered another bombshell.
The prized AAA rating for
David Schnautz is a fixed income strategist at Commerzbank
News came that Standard & Poors cut the credit
rating of the European Financial Stability Facility,
the EuroZone bank rescue fund, by one notch from triple
A to AA+, in the ultimate insult. In defensive reaction,
Klaus Regling, the CEO of the facility said the downgrade
will not hamper its of EUR 440 billion capacity. He
said "EFSF has sufficient means to fulfill
its commitments under current and potential future
adjustment programs until the (permanent) European
Stability Mechanism becomes operational in July 2012."
Luxembourg Prime Minister Jean-Claude Juncker, the
leading EuroZone finance minister, said "[The
EFSFacility] has sufficient means to fulfill its commitments
under current and potential future adjustment programs
and will continue to be backed by unconditional and
irrevocable guarantees by Euro area member states."
They are clearly sensitive to the critical blow, their
denials mere confirmation. The S&P downgrade is
insult to injury, kind of like downgrading the USFed
Liquidity Facility flavor of the month. Global politics
appears obvious, as whacks to
Meanwhile, the French Economy is sliding into a recession. President Nicolas Sarkozy has opposition, and the economy is a big issue, along with the bond picture. He has strived to protect their creditworthiness by announcing tax increases and spending cuts, both to assure even greater fiscal deficits and worse problems for French Govt Bonds. What an intractible position! He might not be seen as a credible candidate soon. He might become the whipping boy. Sarkozy trails his main rival, Socialist Party candidate Francois Hollande, by about 14 points, according to a January 9th poll for BVA, Le Parisien newspaper. He stresses the placement of sound economic policy and the strategy of reducing spending. As seen in other nations, austerity in spending only worsens the economic recession, cuts jobs, terminates projects, adds to deficits, and harms the bond valuation. They are poison pills without recognition, in the most blatant blind spot of pervasive ignorance.
What started the high level downgrade was the individual
nation downgrades, a slew of them. Once more, Standard
& Poors cut
The financial crisis has destroyed
The brokenness of the Greek situation is given bold
emphasis every time a conference is held to solve
it. Last week,
Without a new bond swap,
◄$$$ GERMAN LEADERS ARE OUT OF TOUCH WITH BOTH REALITY AND THE POPULAR DESIRES. THE DEALS STRUCK, THE BANK TRAFFIC, AND THE ASSET COMMITMENTS ARE ALL MADE WITHOUT POPULAR APPROVAL BY THE ELITE PENTHOUSE TIER. THEY SCOFF AT THE PEOPLE. THE GERMANS WANT OUT OF THE EURO CURRENCY. $$$
Cold, heartless, and indifferent to the plight of
the people, German Chancelor Angela Merkel repeated
in a public radio interview her expectation that
The hypocrisy is thick. Back in August, certain EU nations imposed a ban on bank stock sales. No visible positive effect has been seen, nor has the ban been lifted, even though called temporary at the onset. Next came Merkel's public admission that she would consider calls for legislation to bar institutional investors such as insurance companies from selling bonds when ratings were downgraded, or fell below investment grade. The German Govt is entering the bond market controls. This is a form of capital control. Before long the entire market will be a closed store with Euro Central Bank dominance, a travesty to the market. insurance companies are being targeted. Just like AIG, they are being completely ignored for the time being. Tyler Durden repeated his call that Allianz & Generali (A&G) is soon to be the European equivalent of AIG, whose demise also began with that one particular rating agency downgrade. See the Zero Hedge article (CLICK HERE).
German anger is rising fast, as the consensus is
building to exit the Euro currency. The finance
minister Schaeuble has objected to the new role taken
by the Euro Central Bank. He believes serving
as buyer of last resort would not calm the bond market,
and the ban on Euro region bond sales were not a solution.
Enter important corporate executives. They see the
European project as going down the road of perdition
and failure, with the damage from staying in the Union
growing. Wolfgang Rietzle is the CEO of Linde, an
industrial conglomerate. He is a former BMW board
member and former head of Jaguar and Land Rover. His
views echo the sentiment that grows against the Euro.
Wisdom is thick in noting the negative impact of central
bank involvement. Reitzle calls a complete EU breakup
unlikely, but believes
Rietzle believes motive for reform goes away with
further aid packages. He said, "I fear
the willingness of crisis countries to reform themselves
is abating if, in the end, the European Central Bank
steps in. If we do not succeed in disciplining
A colleague with a keen perspective summarized the
Greek direction in his sassy manner. BobO in
EUROPEAN BANKS ON THE EDGE
◄$$$ EUROPEAN BANKS ACTUALLY OBTAIN LOANS FROM CASH-RICH FIRMS, NOT A MISPRINT. CASH RICH CORPORATIONS ARE SIGNING UP FOR REPO DEALS THAT BRING FRESH FUNDS TO STRAPPED BANKS. SOME COLLATERAL IS GIVEN BY THE BANKS DURING THE PROCESS. BANKS SO DISTRUST EACH OTHER THAT THEY HAVE TURNED TO THRIVING CORPORATIONS. $$$
Major brand names like Johnson & Johnson, Pfizer, and Peugeot are among the corporate funding agents to bail out large distressed European banks. It is an incredible role reversal between clients and lenders. They are called repo deals for short-term secured lending. Third party firms administer the collateral in the tri-party repos. The usual traditional participation in such deals is 2% to 5% of the repo market, but due to the deep distress and funding needs, Euroclear estimates that up to 25% of the tri-party market was on provided by companies. The tri-party market grew at 22.3% in the first half of 2011, according to the Intl Capital Market Assn. In a repo trade, one party buys collateral from the other, with the obligation to sell it back at a designated future date and for a slightly altered price, the so-called haircut. In the process, the seller (company) provides cash to the buyer (bank). One must wonder what rubbish assets the broken banks put up as collateral to the thriving companies. The total European repo market was worth EUR 6.2 trillion (=US$7.88 tn) in the first half of 2011, from the same ICMA source in a September survey. The vast majority of the repo business conducted was between banks, and across banks to central banks. The big banks are insolvent, leading to grand distrust among themselves. Their inter-bank processes are broken.
Moodys conducted a survey to measure cash levels. In aggregate across the continent, the European companies held a total of $872 billion cash by July 2011, which banks have tapped in such deals. The biggest European companies are sitting on huge mounds of cash. British Petroleum has over $20 billion, as does Volkswagen. Although loans from the strong firms is typical in tapping the reliable cash flows, corporate treasurers are typically wary of sharing information about daily cash management. The above named firms declined to comment on details. Central banks actually have been cracking down on such shadow banking activity, deals made in secrecy. Money laundering could be involved at times. The central banks use the ruse of avoiding a repeat of the 2008 financial crisis in order to pry open data from the deals. Central banks are the clearing houses for narcotics transactions, like JPMorgan, the USFed operating agent. See the CNBC article (CLICK HERE).
The effects of the Fascist Business Model are being
acutely felt in
The irony is thick, the tragedy stirring. The Italian
cruise liner Costa Concordia went aground, a fitting
symbol of the nation of
The ship crew clearly was not trained for such accident.
Neither is the Italian system prepared to handle rough
waters, given the most egregious nepotism in all of
◄$$$ THE MAFIA HAS A TUCKED ROLE IN
Organized crime has tightened its grip on the Italian Economy during the economic crisis. The Mafia is the country's biggest and perhaps its only strong bank. Smaller companies are being squeezing. A report was released by the anti-crime group SOS Impresa, calling the situation a national emergency. Over 200,000 businesses are involved with extortionate lenders and tens of thousands of jobs had been lost as a result. The Italian Mafia generates EUR 140 billion (=US$180 bn) in annual revenue, and profits over EUR 100 billion. With EUR 65 billion in cash, the Mafia is the nation's premier bank. Typical victims of extortionate lending are small businessmen struggling to avoid bankruptcy. The report cited the victims as being traditional retail niches like food, green grocers, clothes or shoe shops, florists or furniture shops. A separate report from small business association CNA cited 56% of companies had seen banks tighten their lending requirements in the past three months. Through their professions, the mob managers know the mechanisms of the legal credit market, and often know the financial position of their victims perfectly. See the Reuters article (CLICK HERE).
◄$$$ BIG BANK STOCKS DID HORRIBLY LAST YEAR. ONE MUST WONDER IF BANK EXECUTIVES SAW THE STORM COMING, AND SHORTED THEIR OWN STOCKS, MAKING OUT LIKE BANDITS. THE LOSSES IN EQUITY VALUE WERE ACROSS THE SECTOR UNIFORMLY. BANK ANALYSTS WERE BADLY WRONG, BUT THEY ARE JUST AS OPTIMISTIC THIS YEAR. EXPECT THE WORST, A REPEAT. $$$
The bank stock performance last year was somewhere
between atrocious and miserable. It almost came with
a gloat of pleasure, except that the financial system
touches all aspects of life. Misery, worry, and anxiety
accompany such unfolding of events. Be sure to know
that the biggest accounting fraud came from JPMorgan,
the king. They pass off losses to the USFed, never
properly account for COMEX gold & silver losses,
and much more. The big question is which bank dies
first. Either Bank of America or Societe Generale,
my guess, perhaps a big Italian bank not displayed
below. A better question might be which bank executives
shorted their own stock and profited with wild success.
They obviously have access to accurate balance sheet
information, unlike the falsified data given to the
public. My guess is probably most in
◄$$$ MONEY MARKET FUNDS ARE FLEEING
Money market funds are fleeing
◄$$$ PORTER STANSBERRY HAS MADE A BOLD CALL,
THAT UNICREDIT OF
Porter Stansberry is a fine analyst, the editor of
a longstanding newsletter. Below are several outlined
key points he makes in arguing the case of the wrecked
Italian banking system. Porter anticipates the
first big important bank failure to be UniCredit.
Porter's research estimates UniCredit will undergo losses of 10% or more on its European debt, resulting in losses of at least EUR 100 billion, dwarfing its equity. The bank cannot appeal to private investors or to the Italian Govt for aid, closed doors. The bank cannot rely upon private investors for financing either. UniCredit has more bonds coming due in 2012 than any other major European bank, $51 billion in all. Its bonds are currently trading at prices that reflect four notches below investment grade and eight notches below its official Moodys A2 rating. A desperate move has come with a registered secondary stock issuance, the equity offering likely to fail in a very visible manner. It could go quickly downhill afterwards.
Stansberry expects this next phase of the financial
crisis will be far worse than the Lehman Brothers
failure. UniCredit could be the first of many bank
failures. What should unfold is the failure of
an entire system, the largest banking system in the
world. The European banking system has approximately
EUR 55 billion in assets, and is four times larger
CENTRAL BANKS WITHOUT TOOLS
◄$$$ THE RESPONSE TO BANK FAILURES IS A CORNUCOPIA OF PATHWORK SOLUTIONS, NOTHING COMPREHENSIVE, CERTAINLY NO ACTUAL REMEDY. JUST A STREAM OF NEW INFLATION AND NEW DEBT. DESPITE THE LAME EFFORT TOWARD SOLUTION, THE CRISIS BUILDS AND RISKS MOUNT. AT RISK STILL IS A MASSIVE CHAIN OF BANK FAILURES. WHEN THE USFED AND EURO CENTRAL BANK HAVE HAD THEIR FILL OF TOXIC PAPER, THE SYSTEM WILL IMPLODE. $$$
New bonds do not repair a system with toxic bonds. The responses have been as magnificent as they are ineffective and misdirected. Swap lines from central banks have gone bigger. Direct aid packages for individual banks have been huge. Gold lease lines have been enormous. Rescue packages have been numerous and fleeting, if not vaporous. We have seen a tremendous piecemeal patch job. The systemic fix is heretical, bound in a serious solutions reeking of hyper monetary inflation, pocked by poison pill demands, littered with asset seizures, all bent on elite power grabs. Yet the patch job blows off course if the collection of corrupted bankers lose control of the situation. The big issue is whether the crisis is contained. In no way it is contained, not when debt and inflation are the dressings and ointment applied. Losses worsen as the bond markets deteriorate further and the property market deteriorates further. The major risk is for a string of bank failures when some seemingly minor bank goes out of control from lack of attention. Given that hundreds of banks are on the ropes, it is just a matter of time.
What bankers and economists miss is the destruction of capital from added debt and unfettered inflation. The resident economies cannot sustain the past debt, let alone the current debt. The illusion is that near 0% can permit the debt growth until the economies recover. They will not recover. The gigantic recapitalization of the banking systems, country by country, cannot happen while capital is being retired and killed, not when people continue to lose jobs. The maestros can point to confidence and volatility all they wish, but the problem is insolvency and capital ruin. The system will implode when the central banks halt their intervention into the bond market. Price inflation will arrive again, when officially admitted QE programs are reinstated. They will return.
◄$$$ TOTAL GLOBAL GOVT BOND FUNDING REQUIREMENTS TOTAL $7.6 TRILLION IN THE NEW 2012 YEAR. THE BROAD BOND SQUEEZE WILL BE ON, AS ALL PRIVATE SOURCES WILL BE STRAINED BADLY. THE ECONOMIC CONTROLLED DEMOLITION CONTINUES, TO KEEP PRICE INFLATION UNDER WRAPS, BUT ALSO TO INSTALL UNELECTED LEADERS ONTO THE BROKEN STAGES. $$$
Governments of the leading global economies face
$7.6 trillion of debt maturing this year. Most nations
The pressure for putting the printing press to work
toward debt monetization will be much greater this
new year. It was not slight in 2011, a year that
started with open QE programs and ended with hidden
QE programs. The devious nature of keeping it
secret will be maintained. Worse, let's watch the
high jinx game of chicken being played on major economies.
The powers are permitting a nasty economic deterioration
in order to keep down commodity demand and price inflation.
However, their larger motive might be to cause the
chaotic breakdowns in order to fill prime minister
posts with henchmen bearing Goldman Sachs pedigrees,
all of course un-elected. My eyes are still on
◄$$$ OBAMA REQUESTED A $1.2 TRILLION LIFT IN THE USGOVT DEBT LIMIT. NOTHING HAS BEEN RESOLVED. COSTS CONTINUE TO SPIRAL. THE SUPER COMMITTEE WAS A GRAND FIASCO. THE DEFICITS ARE LEADING THE NATION INTO THE ABYSS. $$$
President Barack Obama formally notified Congress last week that that the USGovt needs another $1.2 trillion in borrowing authority. The written certification to raise the debt ceiling to $16.394 trillion last August was part of an accord between the White House and USCongress. The added $1.2 trillion is sufficient to keep the broken USGovt operating until the end of the year, after the presidential election. The usual gimmickry with account borrowing and shuffles laden in familiar extraordinary measures employed by the USDept Treasury would take the next debate over the debt limit approval into the spring of 2013. The USHouse is expected to vote on a resolution of disapproval on January 18th, according to the Republican opposition camp. The haggling extends to the USSenate too. The executive branch has consistently punted on difficult decisions. The USCongress did its part in the stalemate, rejecting an Administration proposal made in September to trim the long-term deficit by $3 trillion beyond the $1 trillion that was agreed to as part of the deal to raise the debt ceiling. The battles continue on entitlement cuts on one side and tax hikes on the other side. They are as far apart as Hitler and Stalin, from the right and left, an accurate indication of the political polarization without much public recognition. The USDept Treasury has been relying on typical accounting maneuvers to ensure that the previous $15.194 trillion limit was not breached. Since the budget law was approved, the debt limit has been raised twice, by a total of $900 billion. See the Bloomberg article (CLICK HERE).
◄$$$ USGOVT DEBT MARCHES ONWARD AND UPWARD IN INSANE FASHION. DEBT GROWTH IS UNSTOPPABLE. THE DEBT LIMIT WILL BE HIT EVERY SIX MONTHS WITHOUT RESOLUTION. NO POLITICAL RESOLVE IS EVIDENT. EVEN THE MAJOR STATES CANNOT ESTIMATE THEIR NEW DEBT LOAD. THE INSANITY WILL BE PROLONGED UNTIL THE WORLD REFUSES TO ACCEPT THE USDOLLAR. $$$
The Obama Admin has formally requested a raised debt ceiling again. Confusion is to be expected, since a deal reached in August was supposed to put the problem to rest. It only bought time. Time is up, again. The previous accord raised the ceiling to $16.4 trillion. In follow-up, another patch deal was struck in September, which put the ceiling at $15.2 trillion but would ultimately take the debt ceiling up to $16.4 trillion, contingent on budget cuts. None were made, as the Super Committee was a public charade failure. With the current limit at $15.2 trillion, President Obama must be given Congressional approval in order to utilize the final $1.2 trillion of capacity. The USGovt wreckage continues, pushed up the debt by $200 billion per month, from $15.2 trillion to $14.2 trillion over five months, an exercise in insanity. On a 30-day calendar month, that comes to $278 million per hour. The ultimate extension in the limit should enable the USDept Treasury to operate through 2013, after the elections. Theoretically agreements on massive budget cuts will be signed into law, or not. USGovt spending persists at a record rate, while tax revenues are coming in lower than was forecast by the budget officials. In my view, one of the indisputable honest statistical series is the payroll tax revenue stream, an ultimate indicator of economic health. Its decline is testament to an ongoing stubborn recession.
The dire deficit disaster extends to the states.
Several remain in extreme straits.
◄$$$ USDEPT TREASURY ADMITTED NO TOOLS LEFT IN THE MONETARY BAG. A DEAD END LIES AHEAD, AS NEAR 0% OFFICIAL INTEREST RATE WILL CONTINUE TO PERSIST FOR A FEW YEARS. THE USFED IS STUCK IN A TRAP OF ITS OWN MAKING. THE MANAGED MONETARY GROWTH IGNORED INFLATION, IGNORED BANK RISK, IGNORED DEPENDENCE UPON ASSET INFLATION, AND ADVOCATED PHONY BANK ACCOUNTING. NOW THE USFED IS THE BANKING SYSTEM, A TRAGIC CORNER WITH NO EXIT STRATEGY. THE USFED IS STUCK IN MONETARY QUICKSAND. THE FOREIGN CREDITORS MUST REALIZE IT. $$$
The admission was the tip of the iceberg. Treasury
Secretary Geithner was honest and direct, but surely
not comprehensive and sincere. Recall in the summer
months of 2009, the reference to an Exit Strategy
from the ultra-low near 0% official rate was constant.
It was pure deception, or else the USFed was grotesquely
incompetent. They must have realized the corner they
were in on monetary policy. So the diminutive finance
minister from the broken USGovt whose patient Uncle
Sam is stuck in the Intensive Care Ward, went to creditor
Two major effects are at work. The USFed can never hike short-term rates. Doing so would torpedo the USGovt debt structure and lay it to waste quickly. Doing so would even set off derivative explosions in succession rapidly. Futhermore, the USTreasury Bond complex will become more and more dominant as time passes, since the ultra-low rates kill capital. The USFed has put to practice a policy to permit the USEconomy to deteriorate in order to control prices. The 0% rate and the benign neglect combine to force capital into retirement and to shut down marginal businesses that cannot turn a profit. Notice the talk of central bank purchase of mortgage bonds, a case in point. That market segment has been stuck in death throes for over three years. The USTBond game will eventually be the only credit market left standing. Then comes the debt default tragedy with climax. A year from now, and beyond, discussion will continue stuck on USFed bond purchase with a 0% background. It is permanent. Regard it as monetary quicksand. See the FOREX Live article (CLICK HERE).
Some perspectives are worth citing, steeped in reality.
As Craig McC in
◄$$$ USFED SWAP LINES JUMPED 59% IN A SINGLE WEEK AT THE END OF DECEMBER. THE CHIEF BENEFICIARIES ARE EUROPEAN BANKS, WHICH WORK CLOSELY WITH THE EURO CENTRAL BANK, USING A NEW MONETARY TOY TO HELP THE BIG BANKS. JUST LIKE WITH THE USFED, THE EURO-CB HAS GONE BERSERK WITH ASSET PURCHASES. THE EURO CENTRAL BANK IS ON AN UNSUSTAINABLE COURSE ON ITS BALANCE SHEET EXPANSION. BOTH THE USFED AND EURO-CB ARE DOOMED TO BECOME TOXIC INDUSTRIAL VATS. $$$
In addition to the Europeans, the Swiss and Japanese gorged themselves like at holiday dinner tables. But they take down toxic turkeys. Foreign central banks grabbed USDollars with both hands, taking as much of the two-week maturity FX swap lines as possible on the final week of the 2011 year. The USFed has been a generous host. Their total outstanding USDollar Liquidity Swap Facility jumped from $62.599 billion to $99.823 billion, almost 60% during the week ending December 28th. Equally out of control is the European Central Bank, the buyer of last resort for toxic sovereign bonds. Enter a nifty device to enable endless big bank credit via a new class of bonds. That any financial firm or investment fund would purchase such bonds is perplexing, knowing what is coming akin to the Greek marathon, or better yet the Battan Death March. If the EuroCB did not buy Italian or Spanish or French bonds, they would implode in a matter of a few months. Instead, they will implode in a matter of several months, perhaps more like 12 to 18 months. The USFed and EuroCB are destined to become overgrown industrial dumping grounds of toxic paper. No economies under their watch can possibly recover or even remotely prosper.
Colleague Aaron Krowne of the Mortgage Lender Implode
website offered some added insight. He wrote, "Last
week the Goldman Sachs technocrats in
◄$$$ BERNANKE CAN BE VIEWED AS GIVING SIGNALS OF RECOGNIZING HIS FAILURE TO REINVIGORATE THE HOUSING MARKET. HE SEEMS UNABLE TO COMPREHEND THE PROBLEM OF BANK SYSTEM INSOLVENCY AS AN ECONOMIC DISEASE. THE PAPER MONETARY SYSTEM IS THE SPREADING CANCER. THE FLIP SIDE TO HOUSING MARKET DEPENDENCE AS AN INFLATING ASSET IS THE MILLSTONE ON THE USECONOMY WHEN THAT ASSET SUFFERS FROM CHRONIC DECLINE. THE NEW USFED SIGNAL TO DOUBLE DOWN ON A BAD HOUSING BET ASKS GOVERNMENT TO HELP WITH MORTGAGES. $$$
USFed Chairman seems to be looking into the mirror
and seeing failure on the housing market. Despite
Frustration has given way to disappointment. The
dullard economics professor seems not to comprehend
the problems plaguing the USEconomy. Back in 2003
to 2006, the USFed cheered on the housing bubble,
in a celebration of the economic dependence upon an
asset bubble for cash withdrawal to feed consumption.
Not investment, but consumption. Investment revitalizes
an economy, while consumption drains it. They do not
comprehend the deleterious nature of consumption.
Buying trinkets and stuff made in
Chairman Bernanke is given clear signals of renewed willingness to double down on a three-year bet that has failed to revive housing, a principal cause for the powerful recession still in progress but denied routinely. No longer can the swagger be seen in refusing to conduct a QE3 program with gusto. To be sure, the bond monetization purchase program has never ended, but its volume is much smaller than big heralded plans. With smeared scorecard and a string of lost games, the beseiged chairman is close to sucking it up and admitting the need for a big grand gigantic new QE program. The USFed displays the emotions of a loser. The USGovt still avoids vigorously any plan that reduces home loan balances for over ten million underwater home owners, a kick start toward a solution. In such a climate steeped with insolvency in every major sector, low mortgage rates under 4% mean little. Banks are broken, unwilling to lend, offering pale excuses to reject qualified home buyers. They cannot admit their insolvency, since their public forgeries on balance sheets are works of profound fraud.
Check some data. With mortgage rates under 4%,
home loan borrowing in 2012 is forecast to decline
to the lowest level in 15 years. Americans who
might refinance and buy properties are being shut
out by stricter lending standards, often obstructed
by lower home valuations. Home foreclosures continue
to apply the intense pressure, reducing values of
entire neighborhoods and communities. The reluctance
for banks to clear hidden inventory extends the time
for the acute problem, not avoid it. In the Bernanke
report to the USCongress, more vacant vapid vacuous
ideas were put forth, like widening the role of Fannie
Mae & Freddie Mac, the government supported mortgage
guarantors, the largest centers of fraud and pilferage
◄$$$ PIMCO HAS DOUBLED DOWN ON A SIGNIFICANT BET THAT THE USFED WILL MONETIZE MORTGAGE BACKED ASSET BONDS. THE TOTAL RETURN FUND HAS DRAWN CASH LEVELS TOWARD ZERO. WRONG ON USTBONDS LAST YEAR, NOT ANTICIPATING A CORRUPTED PUSH TO MAKE THEM THE PREFERRED SAFE HAVEN INVESTMENT, GROSS FORESEES A MAJOR NEW PROGRAM IN QUANTITATIVE EASING, AS KNOWN AS BOND MONETIZATION. $$$
Bill Gross has taken much criticism in the last year for his missed opportunity on the wonderful return on USTBonds. He expected a rise in bond yields. The brilliant bond king probably did not anticipate an $8 trillion application of Interest Rate Swaps, plain spit in the eye of debt rating agencies who downgraded the USGovt on its debt. Morgan Stanley did the IRSwaps, hurling the spit. He probably did not anticipate the measure of controlled demolition in financial markets in order to spur bond demand. CEO Gross timed the arrival of QE2 perfectly. He made outsized USTBond purchases in the summer of 2010 ahead of the August announcement of the second massive monetized bond purchases. His big bet on mortgage bonds in late 2010 did not pan out, as no transition from QE2 occurred. The USTreasury Bond Haven parade was orchestrated and conjured effectively. In fact, PIMCO was net short USTreasurys starting in March 2011, when the IRSwap lever was pulled hard, really hard, but secretly hard.
Back in December, the PIMCO Total Return Fund closed 2011 at $244 billion in the till, a modest $4 billion gain over the year. The fund held a $60 billion cash position. It was let loose to purchase a near record $103 billion in Mortgage Backed Securities. In December 2011 the fund doubled down on its QE3 bet, going ALL IN, as it borrowing a record $78 billion, using the credit to buy even more MBS, even more USTreasurys. The tally comes to 31% for mortgage bonds in the total fund, and a combined 79% of the Total Return Fund holdings, mostly in long duration exposure. Interpret the placements to mean Gross is convinced that the USFed will make a powerful QE bid in the coming months. If not open and announced, it will be hidden and still powerful. In the chart below, the mortgage commitment is in red, and just below the USTreasurys are rising in blue. The cash position in dotted green has fallen toward zero. See the Zero Hedge article (CLICK HERE).
◄$$$ JAPANESE BANKS ARE GOBBLING UP THE MOST CREDIT. THEY HOLD MORE GOVT BONDS THAN CORPORATE AND CONSUMER DEBT. THE PRIVATE SECTOR IS FUNDING THE STATE ON AN INCREASING BASIS. $$$
A few weeks ago, some senior officials at Bank of
Tokyo Mitsubishi reported a fascinating financial
data point. For the first time ever, the volume
of Japanese Govt Bonds sitting on the bank sector
balance sheet rose above corporate and consumer loans.
A turning point has been reached. It is now the government,
not the private sector, that secures most credit funds.
The banks are gobbling up JGBonds, despite their rock
bottom low rates offered. The key theme of 2012 is
being carved out. During the past four decades, in
the Western world the main role of banks and asset
managers had been to provide funding to the private
sector. The tables have turned. Nowadays, they act
as a piggy bank for the state, supplying needed funds.
The big banks are insolvent, leading to grand distrust
among themselves. Their inter-bank processes are broken.
The trend is true not just in
Thanks to the following for charts StockCharts, Financial Times, UK Independent, Wall Street Journal, Zero Hedge, Business Insider, Calculated Risk, Shadow Govt Statistics, Market Watch.