"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years." ~ Alexis de Tocqueville
"I am perfectly willing to be killed in the name of security, to have my organs sold to protect freedom, for my leaders to sell narcotics to finance our way of life, to have my fellow patriots jailed without due process to keep dangerous types away, to chant fascist incantations at public events in respect, and to have the votes rigged to assure the best candidates win, if it means that the American citizens are kept safe and secure and allowed to be free and mobile within the fenced borders. What incredibly mindless lunacy! This is fascism growing ripe on the dead tree of liberty, where capitalism has been trampled by corruption and gutted by devotion to war." ~ the Jackass
"In this environment, policy makers are finding their authority, credibility, and firepower being tested. In turn, they are finding it tempting to pursue financial repression, suppressing market prices that they do not like. But this is bad policy, not least because it signals diminished faith in the market economy itself. Now that I am out of government, I can tell you what I really believe. Central banks are now so heavily influencing asset prices that investors are unable to ascertain market values. This influence is especially evident with the Fed's purchase of government bonds, which has made it impossible for investors to use bond prices to learn anything about markets." ~ Kevin Warsh (former Federal Reserve governor)
"So here we are. Displeased with an incumbent's policies, presented with a worthy alternative, Americans took a pass and rested with the status quo. The reasons for this do not speak well for our national fabric." ~ Mark Davis (radio show host)
EDITOR NOTE: Given the pivotal and extreme importance of this election and the
events on foreign soil related to embassies,
a Special Report entitled "Rise of
Fascism & Syndicate Exposure"
is included in the November package. It might
have belonged in a Crisis Coverage Report
in the past, which was discontinued in November
2010. Such controversial topics will not be
typically covered. But the fraud-ridden election
(as forecasted) and the deception related
to the Libyan events along with the purge
at the Pentagon present a story that must
be told. The developing roots of fascism with
a strong national socialism cannot be overlooked,
along with the important implications for
a risk toward global rejection of the USDollar
and repudiation of its USTreasury Bond debt.
The story will be told with no follow-up.
Do your own research to discover what is happening
## INTRO MONETARY FRAGMENTS
Ryan Puplava summarized well the current confusion, predicament, and puzzle
wrapped in the
◄$$$ BILL GROSS OF PIMCO REPORTS ON THE TERMINAL PHASE. HE REBUTTS THE NOTION OF USFED LOW RATES BEING A STIMULUS. HE ARGUES THE CHEAP MONEY IS BEING INVESTED, AS IN SPECULATED. HIGHER COSTS ARE THE RESULT, A CONSISTENT JACKASS POINT. HE SEES A PERSISTENT ECONOMIC MORASS WITH LOWER CAPITAL INVESTMENT, AND THUS LOWER INCOMES AND FEWER JOBS. $$$
Bill Gross of PIMCO is a realist who speaks against the grain. His words are
important because of his bond expertise, and
due to a close alliance with the USDept Treasury.
He argues that cheap money offered through
zero-based interest rates and Quantitative
Easing is often spent or invested. He overlooked
curiously a powerful phenomenon of fund managers
and wealthy individuals hedging against the
USDollar debasement in aggravated volume,
with commodity vehicles. That has lifted the
cost structure, a steady Jackass theme. It
is largely not going into new capital investment,
a major consistent Jackass theme. The arrival
of an industrial
Gross wrote, "In the past three years of Quantitative Easing and financial
repression, can we see a noticeable effect
on investment as opposed to consumption? Is
the Bernanke model working or is the $9975
being spent on consumption? At first blush,
an observer might vote for the Bernanke model.
After all, the stock market has doubled in
three plus years, risk spreads are at historical
lows, and housing prices are moving up, 10%
Gross points to work by a new colleague on the PIMCO staff, who replaces Paul McCulley (retired). Focus on net national savings, which is the amount of government, household, and corporate savings that remains after the existing investment stock is depreciated. Savings has dwindled down to zero after reaching 7% in year 2000. It is actually negative since 2010, which just happens to be when the Quantitative Easing desperation set in by the USFed. Its 0% rate with unlimited bond monetization has been acting like a wet blanket atop a wrecking ball, since not temporary. It is a fixture in the monetary policy, precisely as the Jackass warned in summer 2009. The USFed talked of an Exit Strategy, and my words were contradictory and loudly stated, correctly so. ZIRP & QE are permanent, as forecasted.
Gross points out that no evidence exists that investment incentive is being realized by the QE largesse by the USFed central bank monetary policy. He admits the money created and freed up has elevated asset prices, but not any notable rise in corporate investment in production capacity. His focus is more directed at stock prices (asset) than hedging vehicles (crude oil, gold, silver, other metals). Thus no new jobs, only higher costs, the Jackass point harped upon for two full years. Capital destruction is rampant within the USEconomy. This continues to be an enormous blind spot by American economists, European too. They regard the ZIRP and QE as double doses of stimulus, when they are in fact double doses of capital poison. Gross confirms my consistent point of capital destruction, offering the evidence, but not repeating my precise point. He chooses the words financial repression, in describing a gateway to the terminal phase. See the PIMCO article (CLICK HERE).
◄$$$ A NEW
The next avidly watched focused financial signal flare event will be the selection of a new Treasury Secretary for the Obama II Admin. If the selection emerges from the same old same old Wall Street and Goldman Sachs hideouts, then trouble brews. Given the deep disdain maintained by Wall Street toward Obama, the decision will be made more interesting with possible intrigue. Obama angered Wall Street firms with attempts to reach out for guidance following the Lehman disaster and financial regulatory discussions. But the executives almost without exception regard the Obama actions as stabbing them in the back, playing to the anti-banker public sentiment, and grandstanding in an amateurish manner. The see a loud pedagogue. The Obama Admin has been forceful in attempting to put the Financial Regulatory Bill provisions in force, which the firms believe is putting the screws to them.
Many expect the top priority of incoming Treasury Secy to be tackling the fiscal
problems and debt limit issues. That is obvious.
Mack is correct, that with all the coordinated
bond monetization by foreign central banks,
with all the anti-USDollar activity rallying
In 2008, much banter was heard about requiring a Treasury Secy with experience
of how the system works, so that on the job
training could be avoided. That was nothing
more than coded admission that criminal enterprised
had to be protected. The top priority for
the incoming Trez Secy will be to keep concealed
the multi-$trillion bond fraud and counterfeit
that centers on mortgage bonds sold by Wall
Street firms, in addition to the $2.2 trillion
in counterfeited USTBonds sold by JPMorgan.
The counterfeit records were in World Trade
Center Building 7 that was felled without
aircraft impact. Given the public hatred brewing
against JPMorgan, the slow development in
the imploding Interest Rate Swap contract
flying buttresses, and the mountain of investor
lawsuits for mortgage fraud, the House of
Morgan will be toppling or teetering. The
next Treasury Secy must keep the defensive
walls in place with dexterity, aplomb, and
cool temperament, to defend against assaults
like a USGovt debt downgrade, the next being
with deeper consequence. Lastly, the new
secretary must be in a position to tackle
those who wish to extend the LIBOR bank scandal
to two other highly charged third rail areas.
The Allocated Gold Account scandal is pushing
to the surface, what with
Sheila Bair is often mentioned, whose most recent post has been Chair of the FDIC. In the past positions she served as Senior VP of Govt Relations of the New York Stock Exchange, and the Asst Secretary for Financial Institutions. However, Bair might not evoke confident cover-up protection for the entrenched criminal Wall Street camp. Erskine Bowles is mentioned, Co-Chair of the National Commission on Fiscal Responsibility in the Obama Admin. He is touted by former Morgan Stanley head John Mack, for his global perspective, which Mack believes is much more essential nowadays. Jack Lew is mentioned, currently working as White House Chief of Staff. He has held posts as the Director of Office Mgmt & Budget, the Deputy Secretary of State, but more importantly a Member of the Council on Foreign Relations. Larry Fink is mentioned, currently Chairman & CEO of Blackrock. He has held posts as First Boston Bank Managing Director, but more importantly a Member of the Council on Foreign Relations. An outside dark horse is Roger Altman, currently Chairman of Evercore Partners, the former General Partner of Lehman Brothers, and former Vice-Chairman of Blackstone. He served as Asst Treasury Secretary in the Carter Admin.
A front runner for the job is regrettably Gary Gensler, the walking puke from
Goldman Sachs currently serving as Commodity
Futures Trading Commissioner. He has done
well to appear to be fighting against the
big banks, like with the investigations into
the large Silver short position, and into
the outsized short positions that are not
economically justified. Given the criticism
that GSax has taken over the sweet deal within
AIG redemption of CDSwaps, and has been smeared
Some talk has circulated that Chairman Bernanke at the USFed is not too keen on continuing beyond his tenured end in 2014. Janet Yellen is the front runner by default to be tapped as USFed chair, more likely than for the Treasury Secy. That debate is for another day, since not an immediate concern. My belief is that she is more honest than her resume indicates, and therefore not qualified for further consideration. The USFed head post is far more elevated in rank and importance, while the Treasury post is well suited for a veteran club member or a lackey to follow orders. The USFed post is designed for managing the helm, but the Treasury is for executing in the field like with the huge Exchange Stabilization Fund and the Fannie Mae criminal slush fund clearing house function. The Jackass expectation is that the Treasury post will go to an older veteran with a scummy background that appears clean, who shows less noticeably ties to inner Wall Street connections. It will not be a guy who seems like a jolly uncle at the dinner table that one can trust. Too much is at stake, with a potential USTBond asset bubble accident centered on falling derivative support structural beams. Too much is at stake, with possible criminal allegations coming against the banker elite in the next couple years, who are in charge of the USGovt finance ministry.
◄$$$ THE BANK OF
Praise is in order for the Bank of England, as it released a research document that assaults the fiat money currency system as a failure in three important objectives. It has not provided for 1) internal balance, 2) allocative efficiency, or 3) financial stability. The international financial and monetary system (IFMS) has functioned under a number of different regimes over the past 150 years. Each has a different report card on performance, the worst being fiat money on all three objectives. The fiat regime is the favorite for the Syndicate, since crime flourishes unpunished. Its greatest failure is the systemic inability to maintain financial stability and minimize the incidence of disruptive sudden changes in global capital flows. The chart shows five-year moving averages. Notice how successful the Gold Standard years were until 1910, then how boring and stable and perfect they were from 1950 to 1973. The bankers could not tolerate rules that brought prosperity to the masses.
Do not look to the academic economist sphere for guidance, explanation, or enlightenment. Nor should one expect elucidation or solutions from compromised policymakers. They cannot identify the underlying problems in the global economy which have allowed excessive imbalances to build. They cannot explain the impeded corrective functions to counteract these imbalances in orderly adjustments. The current contrived system has resulted in dramatically more incidents of banking and currency crises than under a Gold Standard. That is the research conclusion at the Bank of England. It does not touch on deep bank criminality, the added spice of arsenic in every soup bowl imaginable.
The IMFS is the set of rules, practices, and institutions that facilitate international trade, while managing the allocation of investment capital across nations. An effectively functioning system should promote economic growth by channeling resources in an efficient manner across nations of the world. It should create fair and efficient conditions for international financial markets to operate in a smooth and sustainable fashion. It should discourage the build-up of balance of payments problems. It should prevent enormous imbalances and trade deficits, a direct sign of much like a 330 lb (150 kg) man. It should facilitate access to funds in the face of disruptive shocks. While there are some complementarities between prudent objectives, there may also be conflicts. These functions suggest that the ideal system should satisfy the following objectives:
A) Internal balance: the IMFS should enable countries to use macro-economic policies to achieve non-inflationary growth.
B) Allocative efficiency: the IMFS should facilitate the efficient allocation of capital by allowing flows to respond to relative price signals.
C) Financial stability: the IMFS should help to minimize the risks to financial stability.
The various IMFS regimes have involved different combinations of international and national frameworks. Members of the Gold Standard, for example, fixed their currencies to gold, allowed capital to flow freely across borders, and tended not to use monetary policy actively. So they gave ground on the internal balance objective in order to achieve allocative efficiency and financial stability. The Bretton Woods System (BWS) featured fixed but adjustable nominal exchange rates, constrained monetary policy independence, and enforced capital controls. It effectively sacrificed the allocative efficiency objective in order to allow greater control over internal balance and financial stability. The contrast to the present horrendous failure of the system is stark. In the current system, almost no binding international rules exist, which permits rampant corruption. Instead, a hybrid arrangement prevails in which countries are free to choose whether to fix or float their exchange rate and whether to impose capital controls or not. The current IMFS system affords countries the freedom to pursue policies to suit their domestic objectives, this flexibility opening the door to widespread corruption and government protection of criminal organizations. It has created insurmountable problems. The words of Tyler Durden describes a prozac patient working closely with a pharmacist. He wrote, "Fiat suppresses reality but the cumulative reality will always find a way to escape, in crisis." See the Zero Hedge article (CLICK HERE).
◄$$$ US-STUDENT LOAN DEBT HAS REACHED $500 BILLION. NEW DEFAULT RULES
WILL APPLY, WITH THE USGOVT ASSUMING THE LOSS
AFTER 20 YEARS IF NOT PROPERLY REPAID. THE
LENDER OF LAST RESORT FOR FUTURE
Direct government student loans have exceeded half a $trillion, the new subprime lending project. Higher education costs are out of control. Another sharp increase in government financed student loans has come forward. The figure does not include the student loans guaranteed by the USGovt, but not funded by loans. Consumers no longer can tap their home ATM source for cash. As a result, consumer credit is on the fast rise again. Consumer credit rose by $11.4 billion in September, compared to the very large revised gain of $18.4 billion in August. Student loans drive the total higher. The non-revolving component, home to the student loan category, rose $14.3 billion in the month on top of a $14.1 billion gain in August. Revolving credit actually declined to $2.9 billion for the third decrease in four months. It is where credit card debt is tracked.
In an attempt to ease the problem of rapidly rising student indebtedness, the USDept Education made it easier to repay student loans. In early November, the department issued the final regulations for the new generous student loan repayment program. The president led the program, known as 'Pay as You Earn' which adds to the socialist burden the nation cannot afford. The new program allows some graduates to peg their federal loan payments to 10% of discretionary income, followed by complete forgiveness of remaining balances after 20 years. So this Extend & Pretend cousin will have a firm reward. The policy effectively makes the taxpayer responsible for funding a larger portion of higher education costs. The standard policy at universities with financial aid has been to help the lower income gifted students, but at the expense of middle class families who have seen an escalation in costs over two decades. The only way many middle class families can manage the high tuition payments is by tapping student loans in growing amounts. Unfortunately colleges often raise tuition simply because they can or because their competitors are doing it. All their costs are rising. See the Sober Look article (CLICK HERE).
## FISCAL CRASH FOR USGOVT
◄$$$ THE USTREASURY BOND MARKET COMPETES WITH HIGH GRADE CORPORATE DEBT, WHICH LOOKS FAR SAFER AND EXHIBITS MORE INTEGRITY. THEIR BALANCE SHEETS ARE STRONGER. THE BOND SHARE FOR SOVEREIGN DEBT IN THE OVERALL BOND MARKET HAS ALMOST BEEN CUT IN HALF IN THE LAST THREE YEARS. THE DEFAULT INSURANCE FOR THE USTREASURYS IS HIGHER THAN EIGHT DOW JONES INDUSTRIAL INDEX COMPANIES. $$$
A consequence has come to USGovt Bonds, which pay piddling paltry puny yields.
The demand has moved to corporate bonds, whose
financial condition is far better. The bond
monetization ruinous practice does that. The
USTBond demand has been soaked up by the broken
USFed, which dutifully buys over 80% of all
issued and recycled USGovt debt. The soaring
diverted demand has enabled companies of all
sizes to raise $1.2 trillion from issuing
debt in 2012, already the busiest year on
record, according to data provider Dealogic.
Some history was recently made. Bonds from Exxon coming due in 13 months were quoted last week at one basis point (=0.01%) less than the comparable USTreasury Bill, according to Benchmark Solutions. Bonds of Johnson & Johnson due in May 2014 also recently traded at one basis point below USTreasurys. Both are rated triple-A by Standard & Poors. According to Credit Suisse, the share of worldwide government debt rated triple-A has fallen to 39% of the total from 58% in early 2010. The sovereign debt merchants are losing ground, due to a faulty monetary foundation, reckless management and fealty to the banker elite, and debt saturation. Credit strategy analyst Fer Koch at Credit Suisse said, "Corporate bonds are definitely the new safe havens in this world." Big ooops for government finance ministers.
Another indication is the Credit Default Swap cost, which relates to insurance against bond default. The CDSwap cost for a 5-year USTNote is still below the average Dow Jones Industrial Index stock. However, several DJIA companies are perceived safer by the credit markets than USGovt debt, which grows uncontrollably and is supported by the USFed QE bond program and the leveraged Interest Rate Swap derivative machinery. The current CDS for a 5-year USTreasury stands at 37.35 basis points, which is higher than eight DJIA flagship stocks. Those corporations range from Merck at a meager 15.50 basis points, to Exxon Mobil, Chevron, McDonalds, Disney, 3M, Johnson & Johnson, and WalMart at 34.43 basis points. See the Financial Sense article (CLICK HERE). What comes next is the sound of the crash impact after falling off the fiscal cliff in 2008 long ago, whose sound finally is heard after a long delay. The speed of sound has been suppressed by the gods of Wall Street. It will be heard very soon.
◄$$$ THE OBAMA ADMIN HAS BEGUN A PUSH TO CONFISCATE IRA & 401K PERSONAL PENSION FUNDS. AS WARNED BY THE JACKASS FOR THREE FULL YEARS, PRIVATE PENSION FUNDS WILL BE CONVERTED TO USTBONDS. THE PROGRAM WILL BE INSTALLED WITHIN ALL EMPLOYERS, ALONGSIDE INCOME TAX AND SOCIAL SECURITY (FICA) TAXES. THE MANDATORY PROGRAM WILL BE UNAVOIDABLE. OWNERSHIP OF TOXIC USTBONDS WILL BECOME A NATIONAL PRACTICE WITH PUNY RETURNS, AND RISK OF LOSS WHEN THE USGOVT DEBT DEFAULT OCCURS. $$$
Three years ago, the Jackass had several conversations with family members and
key friends, urging them to close their IRA
and 401k fund accounts, pay the tax, invest
in Gold & Silver, vault in GoldMoney outside
Private retirement accounts are soon to be forced into long-term USTreasury Bonds, including both personally and professional managed funds. The Obama Admin is reportedly quickly moving on plans to nationalize private 401k and IRA retirement accounts, replacing them with government sponsored annuities. According to informed sources tuned into developments, a bill is before the USCongress would require all businesses to automatically enroll their employees in a new USGovt-sponsored IRA plan. Every worker paycheck would automatically see deductions, with deposits directed into this account. Passage of the bill would permit the USGovt to confiscate all organized private retirement accounts. Curiously, representatives of the AFL-CIO labor unions are advocating more federal regulation over private retirement accounts and the creation of USGovt-sponsored annuities to replace the 401k system.
The political spin actually being stated is that the 401k plans and IRAs are unfair to poor people. Deputy Treasury Secretary Mark Iwry, the driving force championing the program, is a habitual critic of 401k plans because of the favored treatment given the rich. He probably believes bank CDs also give favored treatment to the rich, due to the FDIC deposit insurance. The Jackass point has been steadily made every several months, that the USGovt will use the tax deferral feature of private pension funds, and the FDIC deposit insurance as leverage to confiscate pension funds and bank certificates of deposit. When the USGovt debt default occurs, these funds will be at great risk of loss, perhaps total. Consider it national re-hypothecation, a ticket to serfdom in the greatest country on earth, the beacon of freedom, and envy of liberty the world over. Count me out, as of January 2007, since the entire nightmare was seen in advance.
The program would be administered by the PBGC, the federal Pension Benefit Guarantee Corporation. This is the fund that guarantees pensions for corporations that file bankruptcy. How appropriate, since the nation (households, banks) is bankrupt. Realize that this program is a response to the horrendous corner the USGovt finds itself lodged in. The chronic $1.3 to $1.5 trillion federal deficit is not coming down, actually no effort to bring it down. The gap at this time is filled by the USFed in bond monetization, the printing of new money for the purpose of buying the new debt securities that nobody wants. The stalemate in the USCongress might find common ground in such pension fund attachments (not confiscations). The USGovt is pursuing a radical path to fund the $1.3 trillion annual deficit, using American citizen retirement funds. It is a pool of wealth, much like the money market funds, seen as vulnerable, just lying out there with no watchdog. It is not known whether the sponsored annuity based in USTBonds can be liquidated upon the death of the client owner. The battle might be ugly to win approval. See the Silver Doctor article (CLICK HERE). Investing in Gold & Silver seems 100 times better, especially if done a few years ago.
◄$$$ DEAD AHEAD, THE USGOVT WILL CRASH AFTER FALLING OFF THE FISCAL CLIFF.
THE CLIFF IS NOT BEING APPROACHED. RATHER,
THE NATION WENT OVER THE CLIFF ECONOMICALLY
AND FINANCIALLY FROM 2008 TO 2011, WHEN THE
FISCAL DEFICITS ROSE ABOVE $1.3 TRILLION EACH
YEAR AND REMAINED ABOVE THE LOFTY LEVEL. NO
ATTEMPT IS BEING MADE TO AVOID THE FISCAL
DISASTER, MARKED BY FIVE STRAIGHT YEARS OF
13-DIGIT DEFICITS (OVER $1 TRILLION). ALL
PLAYERS SEEM TO BE CONFORMING TO THE PARTY
The term Fiscal Cliff is laughable in usage. Since 2008, the USGovt debt has
spiraled above $1.3 trillion in annual new
debt burden, and remained above that level.
The USGovt just ran a $120 billion deficit in October,
a hefty 22% higher than the previous month. Nothing has changed the deadly trajectory
on the path down after falling off the fiscal
cliff. This marks the fifth consecutive year
of an annual deficit exceeding $1.0 trillion,
a correct Jackass forecast made in late 2008.
Watch the ship of fools wrestle with the budget
and national debt limit in the coming weeks.
The president achieved a highly tainted vote
mandate in re-election, but has shown no leadership
on the issue. He barely attends meetings,
but he sure looked presidential in reviewing
the storm damage. With a handy earpiece to
direct his comments, he sure looked in control
during the debate. His supporters are oblivious
to debt issues, concerned more about the glitz
of the office and continued welfare state
handouts. The Obama Admin has presided over
four straight $1 trillion deficits, the first
in history, which he successfully blamed on
the Bush II Admin to an inept population.
He has had ample opportunity to stimulate
the USEconomy, but his main attempt was a
state bandaid botch to fill their budget shortfalls.
It had no simulus in the package. His GM rescue
and clunker car credit was equally pathetic.
Global confidence will hit new lows in the
The USGovt business sheet has major problems. The tax revenue increased to $184.3 billion, up 13% than the same October month last year. Still the spending rose to $304.3 billion, a monster 16.4% rise. The budgeted fiscal year begins in October, where the norm has been to load a bunch of costs from late in the last fiscal year. The USGovt (so we are told) ran a $1.1 trillion annual budget deficit in fiscal year that ended in September. The final figure avoids special war costs and other inconveniences. The chronic $trillion deficit is lodged firmly. The debate remains of spending cuts, entitlement protection, tax hikes, wealthy tax break defense, with the tacit understanding never to discuss defense (aggressive war) costs. A package of tax increases and spending cuts is ready to take effect in January unless the White House and Congress reach a budget deal by then. They call it the fiscal cliff, but very improperly. Over the past three years, tax revenue has fallen below 16% of the total economy as measured by the Gross Domestic Product. This data makes an ugly lie of the talk of recovery, since the decline confirms a recession, precisely as the Jackass has claimed. Spending has exceeded 22% of GDP. The USGovt has been forced to borrow to finance the 6% gap, which has pushed the cumulative federal debt to $16.2 trillion. The government is expected to hit its borrowing limit of $16.39 trillion by the end of December, unless Congress votes to raise it again. Watch the adolescent bickering, as it makes good theater. See the Fox News article (CLICK HERE).
The Extended Alternative Fiscal Scenarios are becoming a theater of the absurd. Projections reach exponentially to the heavens for debt, while the economic size measured by GDP stumbles. The odds are rising fast for going over the fiscal cliff, in the sense that a severe sequence of events in consequence is likely. The pathways are more clear, with the presidential election over, and the past patterns likely to extend in straight lines due to continued reckless behavior by the Obama Admin and the arena of partisan fools known as the USCongress. Harry Reid is a special kind of pugilist fool, who stole his own Nevada Senate re-election in 2008. Nancy Pelosi is another special kind of harlot fool, always there to protect her family investments. See the Zero Hedge article (CLICK HERE).
For a worthwhile tour of the USGovt debt nightmare on
◄$$$ SOCIALISM THAT GALLOPS INTO
The Obama re-election, whether tainted or not, brings extreme emphasis to a nasty concept of socialism. When adopted, when the welfare state expands, a certain tipping point can be reached. The wealth necessary to sustain a socialist system must be enormous, or else it topples when the beneficiaries grow too large. A great quote was heard, with unknown source, packed with wisdom. "Sooner or later, Big Government's clients will outnumber those who pay for the criminal extravagances of their voracious welfare state." How deeply and sadly true, a lesson few seem to comprehend.
Debt by nature is not bad or good, but rather depends on the usage and the borrower's standing. The private sector has reacted to the national excessive indebtedness by de-leveraging. Often to be sure, it has been done through bankruptcy and home foreclosure. Some paid debt down purposefully, while others under duress defaulted. Meanwhile, the USGovt has done the exact opposite. Since 2008, households and businesses have extinguished 67% of their debt when measured against GDP. In sharp contrast, the USGovt has ramped up its borrowing by 52% of GDP since 2008. When done for business purposes, hiring people, building the client base, expanding business, it is for good. When done for enriched entertainment like with an extra plasma television or a extra vacation or a new wardrobe or a lavish home addition, it is not for good. See the Testosterone Pit article (CLICK HERE) to monitor the data on the government drag on the USEconomy, and its refusal to participate in the debt reduction process.
President Obama will go down in history as the worst fiscal president in the nation's history, worse than Bush Jr. The USGovt will be bankrupt after another four years of on the same path. The end of the road with a debt default should arrive before his tenure ends. The Fitch debt rating agency has threatened another debt downgrade, which will cause a wakeup call possibly, but possibly not. Charles Biderman from TrimTabs summarized the painful medicine from the last four years. Since Obama took office, the after-tax takehome pay for citizens who pays taxes is still down by 5% nominally (before any adjustment) and down over 10% after inflation. The outspoken and vitriolic Biderman said, "My guess is that Mr Obama and his close buddies have no idea what they are doing, or else they would not be doing what they have been doing. The most dangerous are those people who think they are smarter than they are." See the Zero Hedge article (CLICK HERE).
A slight disagreement here. My belief is that Obama was selected to bring down
the nation, and to establish a marxist dictatorship
on the scorched earth and ashes. The ObamaCare
project is the extraordinary wet blanket to
smash small business. The most dangerous men
are those who sabotage the system and deceive
the public along the path to destruction.
That opinion is confirmed by some powerful
contacts who have access to various
◄$$$ SIGNIFICANT JOB CUTS WILL FOLLOW THE OBAMA RE-ELECTION VICTORY, EVEN IF TAINTED. SMALL BUSINESS WILL REACT TO THE HIGHER COSTS. THE UNCERTAINTY HAS BEEN REMOVED, WHILE THE CORPORATE OPPRESSION BECOMES MORE CLEAR. THE COST BURDEN WILL RESULT IN WIDESPREAD JOB CUTS AND PRICE HIKES, SURE TO HAMPER THE USECONOMY AND MAKE WORSE THE RECESSION IN PROGRESS. THE JOB CUTS ARE THE MICRO-ECONOMIC EFFECT. THE FISCAL DEFICIT GROWTH IS THE MACRO-ECONOMIC EFFECT, ALONG WITH GLOBAL REJECTION. $$$
Murray Energy Corp, whose
The Kevin Wall talk radio show in
The owner of the national restaurant chain Dennys reacted in a different way.
John Metz has given orders for a new 5% surcharge
to be put on every customer bill, which will
cover the ObamaCare expense. The menu will
not change otherwise. He also will cut back
on worker hours. Some precedent exists, as
airlines attach a surcharge on ticket costs
for the added security measures mandated following
the 911 attacks.
## USDOLLAR CHALLENGED BY THE YUAN
◄$$$ THE CHINESE YUAN COULD GRADUALLY BECOME THE GLOBAL STANDARD SETTLEMENT
CURRENCY AS FAR AS TRADE IS CONCERNED. THE
CONSEQUENCE WILL DIRECTLY AFFECT GLOBAL BANKING
RESERVES MANAGEMENT. IT IS UNCLEAR HOW THE
QUASI-STANDARD WOULD AFFECT RESERVES HELD
IN THE MAJOR GLOBAL BANKING CENTERS. TRADE
DICTATES CURRENCY ADOPTION, WHICH LEADS TO
BANKING SYSTEM ACCUMULATION OF RESERVES. NATIONS
HOLDING MORE YUAN CURRENCY WILL CONDUCT MORE
Much debate and consternation have come concerning the ascendance of the Chinese
Yuan currency, in its upcoming role to replace
the USDollar as the world's reserve currency.
Implications to bank reserves management are
important and huge. Trade settlement adopted
standards will drive the shifting process.
Unlike what many American analysts believe,
the Yuan is coming on fast to take over the
role as trade settlement currency, a big blind
spot to Western think tanks. The Asians
have almost adopted it in a uniform trade
pact, for usage widely. The phalanx of the
Chinese bilateral swap agreements clears the
path for wide usage.
The same authors present a case for the Chinese currency ro rise in a region
The authors concluded, "This development has two implications. First,
it is one more important marker in the shift
of economic dominance away from the
Frequently a rehash of easily rebutted arguments must be done, since much disinformation
circulates concerning the Chinese Yuan and
its ascendancy. The critics seem ignorant
of the absent
Some believe the Chinese Yuan could never act as global reserve since the Chinese
bond markets are not big enough or deep enough.
The volume is too small. True enough. But
a massive additional economic expansion could
be enabled if the Chinese embarked on a broader
more liquid bonded security debt offering
program. They could field a bigger military,
for instance. They could buy all the world's
shipping facilities and distribution centers.
The risk would be taken by foreign investors.
Foreign direct investment in industrial plant
and equipment would be replaced by bond offerings.
Furthermore, if more nations hold the Yuan
as reserve currency, they are more likely
to conduct large scale trade with Chinese
companies. This is the whiplash against the
USEconomy, as foreign nations will eventually
grow intolerant of unfettered
Even though Michael Shedlock believes Michael Pettis to be the foremost expert
on international trade, his admired analyst
made some highly obtuse comments. He has his
cranium squarely placed up his rectum with
the point that the
This erroneous viewpoint to deny advantage is common among the entrenched financial
harlot community led by Wall Street. Also,
contrary to Pettis logic, an artificially
lower interest rate afforded by global purchase
of the USTBond debt securities has enabled
much lower costs for consumer loans and even
mortgage loans. Pettis claims that no country
can accumulate its own currency in reserves.
Tell that to the US Intelligence agencies,
which accumulate containers loaded with shrink
wrapped $100 bills in the multiple $billions.
They also store hundreds of $billions in US$-based
accounts in the
◄$$$ CLEARING THE PATH FOR GLOBAL CURRENCY. NEW METHODS ARE LINED UP TO BOOST INTERNATIONAL USAGE OF THE YUAN. IN THE LAST TWO YEARS, AN IMPRESSIVE SURGE IN YUAN USAGE IN GLOBAL TRADE HAS BEEN REALIZED. MORE IMPROVED YUAN CLEARING FUNCTIONS ARE REQUIRED AND BEING URGED BY TRADE PARTNERS. ONLY 10% OF CHINESE TRADE INVOLVES THE YUAN CURRENCY, THUS A SMALL HOT MONEY RISK. THE PROCESS IS EVOLVING TOWARD THE YUAN ACTING AS A GLOBAL TRADE STANDARD, WHICH IS PRECURSOR TO GLOBAL RESERVE CURRENCY. $$$
Irony runs thick. The SWIFT organization actually advocates a more efficient
system to be in place for facilitating the
increasingly wide use of the Chinese Yuan
in global transactions. The Society for
Worldwide Interbank Financial Telecommunication
(SWIFT) is the platform among international
The PBOC central bank has been working to ease so-called hot money fears. If
the Yuan is suddenly the victim of fast money
Offshore Yuan clearing can be accomplished in two ways. The first would have
the transaction go through the designated
clearing bank, Bank of China in
By the way, in a defiant action
◄$$$ THE ENFORCED
The Hong Kong Monetary Authority moved to weaken their domestic currency in
response to a slow rise. In late October,
the HKMA sold 4.67 billion HK dollars (=US$0.60
bn) worth of foreign bonds to reduce the value
of the local currency. Over the last two
weeks in November, another US$3.5 billion
has been sold in addition. The HKDollar started
trading at 7.7500 per 1US$, the upper limit
of its managed trading band. This is the
first time since December 2009 for the HKMA
to intervene in the FOREX market to balance
the massive capital inflow that
KC Chan, Secretary for Financial Services and the Treasury, re-asserted the
Some comments came from a sharp bond and currency analyst contact watching the
situation closely. He pointed out that over
the last two weeks, the HKMA has intervened
four times to hold the peg, which itself is
unprecedented. It means that pressure is building
with the destructive policy adopted by the
USFed. Also, the usage of Chinese Yuan
is increasing at the expense of the USDollar,
The HK banks have imposed measures to curb the property bubble. They are requiring
buyers to post more capital (down payment)
and limit the tenure of mortgages to 30 years.
They are using regulations to curb the monetary
speculation. Hence breaking the currency peg
is going to be very difficult. The peg
will eventually break, but only when pressure
reaches extreme levels, and the USDollar loses
its prestigious role in trade settlement more
emphatically. That event could come with
the removal of the
Any global peg to the USD is bound to fail after sustained pressure. About a
year ago, my excellent gold trader source
was asked his view on the HKD. He does significant
business with both Hong Kong and mainland
With all the recent commotion happening inside
◄$$$ THE ARRIVAL OF PRICE INFLATION WITHIN THE UNITED STATES IS NEXT, OF THE PAINFUL VARIETY. THE USDOLLAR PROBLEMS WILL CAUSE PRICE INFLATION, RATHER THAN PRICE INFLATION RENDERING HARM TO THE USDOLLAR EXCHANGE RATES. A CRUCIAL DISTINCTION. THE USFED BOND PURCHASES AND USGOVT DEPENDENCE HAVE UNDERMINED THE GLOBAL PRESTIGE BEHIND THE USDOLLAR. HOWEVER, THE GLOBAL REJECTION OF THE USDOLLAR IS FAR MORE A FACTOR FOR THE ARRIVAL OF PRICE INFLATION WITHIN THE USECONOMY. IT COMES NEXT. $$$
The gold community is abuzz about the onset of radical price inflation. It will
not arrive directly from the USFed bond monetization,
even though their hyper monetary inflation
is ramped up with steroids. No question that
the central bank has installed a vast inflationary
apparatus, starting a few years ago with numerous
(alphabet soup) liquidity facilities, and
climaxing with a series of unsterilized and
sterlized bond monetization initiatives. However,
the price inflation has been contained from
widespread economic damage, seemingly intentional
deep harm to worker income due to job cuts,
and common liquidations of businesses.
The USFed research calls it the restriction
of final demand, enough to calm commodity
prices. The financial sector has been the
first, second, and third recipients of the
monetary largesse, seen in the form of bond
redemption and bailouts to cover huge losses.
The effect has not overrun into
The price inflation soon to hit the USEconomy again will be much like what hit in 2011, given as prelude. Rising costs were felt due to the badly debased USDollar. Back then, the USDollar was more isolated in the impact effect. In the last year, the impact has been shared by mutually assured destruction among the major currencies, as each major central bank has joined the QE debasement parade. Thus the Gold price has risen even when the USDollar DX index has been flat for seven years. The central bankers have side-stepped the Competing Currency War, by turning to universal uniform debasement. What comes next is the rejection of the USDollar and repudiation of the USTBond, its main vehicle. Price inflation will hit the nation from a weakened currency, which will be increasingly isolated. The impact will be located on rising cost structure for households and businesses. But it will be much greater than 2011.
Many pundits have it backwards, as usual. The USDollar will not be harmed as
a result of price inflation hitting the national
economy. Instead, the USDollar will fall in
valuation, resulting in higher import costs
and thus higher price inflation. Focus
Expect shortages to arrive in the next year, from controlled market price efforts.
The controls will be done in pure Socialism
lunacy. The maestros never stop attempting
to control the financial markets, as almost
every single one is under heavy control mechanisms.
As for when the USDollar will no longer be
used in global trade, difficult to say, but
the movement is gaining momentum in a frightening
pace. The USDollar will continue to be used
with Eastern Canada, Breat
## BANKS REELING IN DESPERATION MODE
◄$$$ DAVID EINHORN EXPLAINS HOW BEN BERNANKE IS DESTROYING
David Einhorn is from Greenlight Capital has fast become an insightful superstar. He barely looks 25 years old, but he is both bold and brilliant. He dissects what is wrong with the USFed constant punch bowl theme, dubbed QE, the free monetary lunch. Einhorn essentially accuses the central bank of wrecking the nation with destructive monetary policy, acting as the liquor dealer with infinite supply and near zero cost. More is not better, and forever is not temporary. The Jackass point made for over a year is that 0% destroys capital. Einhorn would concur with my main theme, as he adds many points to the indictment. Here are his major points.
USFed policies are not helping the USEconomy, but rather actively destroying
it. Group-Think contributes to expanded and
amplified false assumptions, having produced
a wrong-minded consensus. The entire established
economist community has chosen the perpetuation
of their jobs, their tenure, and their paycheck
for as long as possible, and thus backs the
Chairman fully and unconditionally. Research
funds and salaries are at stake. The ever
easing monetary policy has reached beyond
the point of diminishing returns. Their policy
is a major drag, a headwind that slows any
recovery. The investment community merely
front runs the USFed, with no mind at all,
seeking a risk-free trade. The result is
fewer market participants, lower bank bank
revenues, bank employee terminations, lower
federal and state tax refunds, and so on,
in a vicious cycle. The central banks
have seen broken ranks with the recent Bundesbank
decision to pull its gold inventory from
Einhorn misses an important point. He assumes that the motive of the USFed actions behind Quantitative Easing is centered on best intentions to stimulate the economy at the consumer level, to produce jobs, and to kickstart the recovery. That is grossly incorrect. The QE motive is to avert a USGovt debt default, to avoid exposure of the global disdain shown by typical USTBond holders (boycott) to purchase new debt, to enable the redemption of toxic fraud-ridden mortgage bonds, and to cover up multiple $trillions in mortgage bond fraud and USTreasury Bond counterfeit. To be sure, Einhorn deserves credit for his boldly stated position presented at the Buttonwood Conference.
Einhorn goes on with sharp astute criticism, much of which coincides with Jackass points. He points out how lower rates drive up the cost of commodities, especially food and energy. The oil costs go directly out of the country in flow of funds. The absent yield on savings causes both higher risk investments and money hoarding in the form of money market funds. Money exits the banking system. The hoarding from denied interest on individual savings is driving down consumption and business expansion. The USFed policies are protecting the upper class at the expense of the shrinking middle class, in an ongoing catastrophe. A change in behavior is in the works, a profound change, as a consequence of multiple years of a Zero Interest Rate Policy, probably to last at least seven years, very likely until the runaway inflation finally slams the nation. The dampening effect from low yields is at work, to enforce a change in behavior on a multiplied basis. Most theoretical macro economists are locked within their myopic models, never having worked in the real world, never having held responsibility for profit & loss. Their sample sets do not include the current financial situation in any similar past era, which is both bizarre and the new norm. No macro models have any value whatsoever anymore. The moral hazard has opened up gigantic tail risks, which means extremely unlikely events suddenly thrust forward as highly likely. The main perceived risk is that the USFed loses control or suffers from its own insolvency.
The last 15 years have been spent learning that a monetary policy to create asset bubbles is both bad science and highly destructive to economies and wealth. Yet the USFed is desperate to find a new asset bubble to replace the housing & mortgage twin bubbles. That new bubble is the USTreasury Bond itself. The central bank knows nothing else, only inflation engineering. One should not criticize an institution steeped in inflation science from doing what it does best, creating the next bubble. The USTBond bubble is the last bubble, the Towel of Babel as described by the Jackass this May, to be followed by the Black Hole when it collapses most assuredly. Accolades and Nobel Economics Prizes mean nothing when those receiving adulation and holding medals preside over ruin. The same goes for Obama and his spurious Nobel Peace Prize without a single accomplishment. That was a giant FU to the world from the narco barons.
The epitaph of the central bank franchise system has been written by Bernanke. By promising to continue the QE until the USEconomy recovers convincingly and until the labor market improves, the Chairman is issuing a death warrant. The QE and ZIRP assure continued capital destruction from a rising cost structure, reduced business investment, and inefficient allocation of capital toward speculation. The hedge practices conducted in defense of the caustic USFed monetary policy work against recovery and improvement. The take money out of the system and raise costs, in a vicious cycle. The big banks are committed to the USTBond carry trade for easy profits, guaranteed by the USFed itself. More money removed from the system. Such aberrant bank behavior also assures inadequate capital for business formation at a time when the cost structure is rising. The economists at the USFed must realize this, but they are committed to toxic bond redemption and bond fraud coverup. They are also liars. The monthly commitment of $40 billion for bond purchases is actually $85 billion per month ($1 trillion per year), made clear in public statements with much smaller audience. See the Zero Hedge article (CLICK HERE). The central bank monetary policy is managing a death process, an unstoppable pathogenesis.
◄$$$ US-BANK REGULATORS BACKED OFF ON THE HARSH RESERVE REQUIREMENTS THAT ARE KNOWN AS BASEL-III. THEY BLINKED BECAUSE THE US-BANKS DO NOT HAVE THE ADDITIONAL $1 TRILLION IN COLLATERAL REQUIRED TO FORTIFY THE DERIVATIVES INSANITY. THE NEW HARSH RULES ARE INDEFINITELY PUT ASIDE AND POSTPONED. THE INSOLVENT US-BANKING SYSTEM WILL REMAIN A SHAM SHELL GAME. $$$
Predictably, in early November the USFed issued a statement
to notify of the fromal delay in implementation
of the Basel III capital rules which were
to go into effect January 1st. Apparently JPMorgan and Goldman Sachs
whined that they were not ready for the implementation,
and were hundreds of $billions short on the
collateral required. The prudent but harsh
rules have been postponed indefinitely. So
no additional capital buffers will be required
to sustain the $zillions in derivatives which
serve as levered cables and pylons for the
Conclude that the big
◄$$$ THE THREAT OF A US-BANK RUN COULD BE IMMINENT, SINCE THE EXPANDED
F.D.I.C. DEPOSIT INSURANCE ENDS DECEMBER 31ST.
THREATS TO THE SYSTEM ABOUND AS THE NATIONAL
ATTENTION IS FOCUSED ON THE USGOVT FISCAL
CLIFF, THE VAST STORM DAMAGE TO THE NORTHEAST,
AND THE CONCLUDED PRESIDENTIAL ELECTION. THESE
THREE EVENTS COULD TRIGGER A SUDDEN DEPARTURE
OF FUNDS IN ACCOUNTS. IF THE USDEPT TREASURY
FOLLOWS THE EUROPEAN SAFE HAVEN EXAMPLE, THEY
MIGHT OFFER NEGATIVE YIELDS ON SHORT-TERM
USTBILLS. THAT WOULD CAPTURE A
With the media fixated on the USGovt debt with the fanciful fiscal cliff, few
seem to be noticing the fact that the expanded
100% FDIC coverage for insured deposits ends
January 1st. That is a mere 44 days away.
Other major distractions are the massive hurricane
and flood damage, primarily located in
◄$$$ RESERVE BANK OF
The Reserve Bank of Australia (RBA) might be printing money. Desperation will do that. The RBA could be printing heaps of Aussie Dollars, so claim UBS analysts. A close scrutiny of the central bank balance sheet indicates regular interventions in the foreign exchange market. Here are the clues. The level of deposits of overseas institutions held at the RBA rose in the three months to end October 2012. These are custodial accounts, which appear to be abused to conceal the activity. Some surmise that the RBA is printing Australian Dollars and selling them to overseas central banks for foreign currencies. It is a sleight of hand easily detected. Fortunately for the central bankers, most people are too ignorant to read financial statements. See the ABC News article (CLICK HERE).
Let's see. A central bank can print money for free, but they deny such activity.
We shall call them liars. They must print
because they can, and no prosecution will
ever come. Heck, the USFed printed up $23
trillion and distributed it to a gaggle of
their banker buddies across the world, so
far with no legal consequence. Without legal
enforcement, no prosecution, not even debate,
the other central banks observe what is happening.
They too print money. They find themselves
in a corner, in need of money. So the Aussies
print money and try to hide their tracks in
the FOREX market with foreign accounts under
their custody, like a mattress next door.
A person with a new credit card, an unlimited
balance, with no requirement to pay back the
borrowed money for purchases, sure, that person
will use it. To claim they never would take
advantage goes contrary to human nature. Thanks
to The Shamrock out of the
◄$$$ THE SWISS CENTRAL BANK HAS BEEN A BIG BUYER OF SOUTHERN EUROPEAN BONDS IN RECENT MONTHS. DESPERATION IS SETTING IN, AS THEY STRUGGLE TO MAINTAIN THE SWISS FRANC 120 PEG TO THE EURO CURRENCY. THE SWISS HAVE A MONUMENTAL PROBLEM IN PROCESSING THE INFLUX OF FUNDS SEEKING SAFE HAVEN IN THE YODEL HILLS. THEY MUST INVEST IN EURO-BASED SECURITIES, OR ELSE LOSE THEIR PURSUED PEG. EITHER THE PEG GOES AWAY, OR HIGHER RISK RESULTS ON CONVERSION OF TOXIC BONDS FROM THE SOUTHERN PERIPHERY TO CORE NATION DEBT. THE SWISS FRANC CURRENCY WILL EXPLODE HIGHER, ALL IN TIME. THE PEG CANNOT BE DEFENDED. $$$
The Swiss National Bank is driving down yields for EuroZone sovereign bonds.
The Standard & Poors rating agency has
raised attention to the plight of
Deposit inflows originating in the EuroZone periphery are clearly being recycled
through the Swiss National Bank into the more
highly rated core
◄$$$ GROTESQUE BOND MARKET DISTORTIONS ARE REVEALED AS THE EUROZONE SOVEREIGN DEBT SHOWS EXTREME STRAIN. NEGATIVE SHORT-TERM YIELDS SHOW THAT MONEY IS SEEKING SAFE HAVEN IN VOLUMES THAT THE BOND MARKET CANNOT HANDLE. MONEY APPEARS LIKE REFUGEES IN OVERFLOWED SAFE HAVEN CAMPS. $$$
The London Siren adds for proof to the bond market flow of funds argument. The yield curve tells a story of extreme volume in movement, evident in the negative yields in German Bunds, and worse in Swiss Govt Bonds. It is amazing that the Swiss 10-year is only 0.40% in yield. Their savers are being punished with no reward. The Swiss short-term is more negative than the short-term Bund, the most visible sign of extreme stress.
◄$$$ THE BOSS OF THE
JPMorgan Chase has filed lawsuit against the executive responsible for supervising
Bruno Iksil, the trader nicknamed the London
Whale. The case is: JP Morgan Chase &
Co versus Javier Martin-Artajo, High Court
of Justice, Queen's Bench Division, HQ12X04391.
The once celebrated London Whale trader was
a genius for moving the markets until the
Interest Rate Swap leveraged buttresses began
to fall on the JPMorgan chief investment office,
resulting in a $6.2 billion trading loss.
The division was under management by Javier
Martin-Artajo. He is a defendant in a
Dimon took credit as genius for the corporation during good times, but sued the office manager when losses occurred. He is a small man, a mole, a wart on a pig, and a superstar thief. The estimated size of the losses had risen through the first nine months of 2012, and might increase further. Iksil was allegedly urged to put higher values on his trades than they would have fetched on the open market. The defendant asserts no attempts were made to conceal the losses, which Dimon surely received regular briefings on. In its true vindictive manner, JPMorgan told the financial community that it intends to claw back the lucrative bonuses given to Iksil. The former Europe CIO head Achilles Macris was also responsible for overseeing the trades.
JPMorgan is facing regulatory scrutiny and criminal probes over the CIO group trading. It also must defend against US-based lawsuits from pension funds claiming losses of $52 million within the elite CIO shop. Here is where the duplicity comes. The CIO unit was pushed by Dimon to make bigger and riskier bets with bank assets in the years leading up to the losses, according to former departed employees. The botched bets spawned management changes and dismissals, as others were career victims. The Chief Investment Officer Ina Drew retired four days after the loss was disclosed on May 10th. Barry Zubrow had overseen the JPMorgan risk management function during the period. He will retire at the end of this year. See the Bloomberg article (CLICK HERE). Look for gradual exposure of the inner workings of the managed Interest Rate Swap contracts, which produced a phony flight to safety in USTreasury Bonds. The big loser might be JPMorgan, which is doubling down with an attendant risks of much worse harmful exposure that could put the USTBond market in very dubious light.
◄$$$ U.B.S. SEEKS TO CUT 10 THOUSAND JOBS IN THE SWISS BANKING SECTOR. THE BANK IS UNDER SIEGE FOLLOWING THE OUTSIZED SUBPRIME MORTGAGE LOSSES AND THE CURRENCY TRADING SCANDAL LAST YEAR. IN THAT TRADING FIASCO, U.B.S. FORFEITED ITS ENTIRE GOLD ACCOUNT, 100% OF IT. THE SEVERITY OF THE CORPORATE CUTBACKS IS CONSISTENT WITH THE JACKASS CLAIM THAT U.B.S. IS A RUINED DEAD BANK. $$$
The embattled Swiss bank UBS announced up to 10,000 eliminated jobs as it made deep cuts to its investment banking operations, more so its fixed income business. A radical restructuring is underway. Some observers regard a transformational change for UBS is in progress. More like an undertaker preparation of the embalming process. The plan appears to make cost cuts at the margin, to increase the capital ratios, and to return more capital to shareholders. The UBS cuts are piled atop the 50 to 60 thousand already executed in the financial sector. The domestic rival Credit Suisse also announced it was also making more cost cuts. A domino effect is expected, as further industry restructuring could come. The poor quarterly results prompted reaction with some accelerating plans.
A savvy eye noted that UBS is taking actions to return its investment banking to the historic core franchise under Warburg. In 1995, UBS bought SG Warburg, a British merchant bank. The UBS bank is a mess. It racked up $50 billion in subprime mortgage bond losses in 2008, prompting a Swiss government bailout. In early 2011, UBS was stung by a trading scandal that it lied about publicly. It lost its legs with huge VP-approved trading losses, blamed it on a rogue trader, ruined his career, which resulted in the bank forfeiting 100% of its gold bullion account. My solid gold trader source was part of the process that gutted UBS entirely, a witness with his own hands and eyes. He knows of the lies, the VP approvals, and the fully depleted gold account.
Watch the death process play out. The UBS work force was 63,520 in staff at
end June. The massive cuts come on top of
3500 job losses announced last year. See the
Fox Business article (CLICK HERE).
To celebrate their funeral, the UBS bankers
went to the pubs in
Tyler Durden pitched in with a funeral speech. It was not a eulogy, since full disrespect was shown for the rotting corpse. He wrote, "There is down-sizing; there is trimming the fat; and then there is UBS. The once giant Swiss Bank just announced it will cut up to 10,000 jobs. This comes on top of the 3500 from last year, which makes a rather dramatic weight loss strategy for the 63,500 employee firm. As the Financial Times reports, they will not happen all at once, but will lead to the closure of a sizable part of the UBS fixed income trading operations (and other capital intensive areas of the investment bank). Perhaps in the understatement of the day: 'THERE WERE SEVERAL OPTIONS ON THE TABLE BUT UBS HAS DECIDED ON THE MOST RADICAL ONE,' a person familiar commented as the plan is hoped to reduce complexity and costs. So no more Bloomberg Terminals?" To be removed from the corporate offices will be the fixed income trading operations and other capital intensive areas of the investment bank. When capital is gone, certain business segments that depend upon capital base must depart. UBS is dead, my allegation for 18 months. See the Zero Hedge article (CLICK HERE).
◄$$$ THE BANK OF
Credit to the London Siren for an excellent insight into the devious workings
of the Bank of England. He works in the fixed
income arena inside the
In the continuing theme of bad UKGovt judgment, a quick update on its horrendous investment in corrupt broken banks. The Financial Times reported that the Public Accounts Committee (spending watchdog for Parliament) is not convinced that the government will be able to sell its stakes in the big rescued banks for the price it paid any time soon. In addition, the accounts committee report cites the 66 billion Pounds cash spent purchasing shares in RBS and Lloyds may never be recovered. The report comes just weeks after Jim O'Neil, CEO of UKFI (which controls the stakes in RBS and Lloyds) admitted that a sale was not imminent, and both firms remain in trouble. The cost of liquidation for the two firms would have been much less, but would have revealed massive bank corruption in the post-mortem.
◄$$$ BAILOUTS ARE GOING TOWARD MONEY LAUNDERING EFFORTS.
A sizeable portion of bank and bond bailouts is finding its way to
◄$$$ THE JAPANESE ECONOMY IS AT GRAND RISK. NO LONG-TERM BENEFIT FROM
ANY TSUNAMI OR NUKE PLANT RECONSTRUCTION ARRIVED,
ONLY BURDEN WITH HEADWINDS.
The Japanese miracle is coming to an end, victim of a combination of the Chinese
ascendance and the rotten global economy,
together with the earthquake, tsunami, and
nuke plant devastation. The Japanese have
been outsourcing a significant portion of
their production to
Shipments to Asia, Europe, and the
Private consumption across
The Bank of
Corporate losses are impressive and never seen before, causing shock and dismay. Sharp Corp and Panasonic Corp expect to lose a combined 1.2 trillion yen (=US$15 billion) this fiscal year. Hitachi Construction Machinery and Nissan Motor cut their full year profit forecasts. Several other big firms outside of the industrial sector are in trouble, some on the ropes. Machinery orders, an indicator of capital spending, fell the most in four months in September, while industrial production fell by 10%, the most since the earthquake slammed the export trade. Net exports, equal to shipments less imports, subtracted 0.7% from GDP on a quarterly basis, the largest decline in three quarters. Public investment rose 4% in the period, the third quarter of growth. The GDP deflator, a measure of price changes across the economy, fell 0.7% last quarter from the same period of 2011. See the Bloomberg article (CLICK HERE).
◄$$$ THE JAPANESE MIRACLE HAS TURNED TO NIGHTMARE, AS THE TRADE SURPLUS IS GONE (ANOTHER CORRECT JACKASS FORECAST). THE TRADE DEFICIT IS BIG AND GROWING RAPIDLY, MADE WORSE BY THE CHINESE TENSIONS. THE JAPANESE CAPITAL POOL IS AT RISK, BEING USURPED BY THE GROWING DEFICIT. $$$
Two features permitted
The Fukishima earthquake and tsunami surely wrecked havoc. The reconstruction
was touted as potentially positive, but the
nuke plants are still not stable, a story
suppressed. Following the harmful effects
of Chinese tension, the Japanese trade surplus
status in recent weeks has turned into a sea
of red ink. It has gone into deficit, and
rapidly so. Like their American counterparts,
the only source of capital left is BOJ monetization
of the most acidic kind. A footnote reads
that the central bank has failed in all eight
iterations of Quantitative Easing. No
The Asian juggernaut is in trouble. The nation's export trade sector is not
languishing, but rather enduring a remarkable
collapse. In one year's time, the world will
see something more obvious off kilter in
◄$$$ EUROZONE CRISIS HAS THREE FULL YEARS OF PAIN, AND NOTHING SOLVED.
THE FIASCO IN
Scanning the world comparatively,
A French-born subscriber living in
◄$$$ STANDARD & POORS DOWNGRADED THE FRENCH BANKS AGAIN. THE PROCESS
WILL HAPPEN LIKE AN ENDLESS CASCADE. AS THE
Credit rating agency Standard & Poors cut its ratings on BNP Paribas and two other major French banks. The impetus again is rising economic risks. The downgrade also cut the ratings for Banque Solfea and Cofidis. The official statement read, "We see [these banks] as more exposed to this more difficult European environment. In our view, the economic risks under which French banks operate are increasing, leaving them moderately more exposed to the potential of a more protracted recession in the EuroZone." Expect further debt downgrades to hit the French banking system in coming months like a flurry of severe kicks to the gut and face to a man already on the ground. The consequence is felt immediately with investment funds like pensions which are forbidden to invest unless of investment grade. The S&P agency changed the outlook on 11 other major banks to negative from stable, leaving the door open for future downgrades sooner rather than later. That group with reduced outlook included Societe Generale, Credit Agricole, and Allianz Banque. The first two are flagship giants along with BNP Paribas, already downgraded. As these three banks, so goes the French banking system.
Many people believe
The Spanish Bad Bank emerges, and two impressions are clear. The national
real estate market in all of
The Spanish Govt expects even with massive discounts, the property will move in the liquidation arena. The initial results and indications are not promising. The de-leveraging process has gone NO BID so far. The discount on property loans is set for 46% in writedowns. The discount for foreclosed assets is set for 63% in writedowns. The discount for land is set between 56% and 80% incredibly. The investor reaction from the banks in line to suffer the writedown losses will come soon, expected to be filled with shock and grim faces. Expect some public outcry, but such is the consequence of at least six years of accounting delays bordering on criminal to the investors. What comes would have been much less severe but perhaps manageable and orderly if done four or five years ago. But delays in bank accounting will result in a catastrophe several times worse than what would have occurred in controlled liquidations, say in 2007 or 2008 or 2009. It will next be several times worse, enough to cause a systemic free lockup from the powerful shock. Refer to shock to the financial structure, businesses, and the people, with certain chaos and disorder.
Prepare for book value on bank portfolios to come way down. The following graph
indicates the minimum writedowns for a host
of property assets, derived from auction activity.
Up to the listed percentages, no bid is seen
on the given Spanish assets. In other words,
nobody will bid on
The reader should be clear on the strategy attempted, or at least planned. The
leadership crew in Spain wants its banks to
default on its assets, without actually going
through the default process, have the discounted
liability be transferred to a third party,
and then not have this third party's debt
be counted against the debt of the country.
The current Bad Bank iteration attempt will in time be
deemed inadequate as a concept, since badly
flawed in its rules and guidelines for proceeding.
Usually the entire concept is a cowardly attempt to sidestep the reality of
bank writedowns, or to saddle the losses with
an imaginary national uncle, or both. If
◄$$$ BANKSIA HAS BEEN SENT TO RECEIVERSHIP IN THE SPANISH BANKING SYSTEM, JUST MONTHS AFTER BEING BAILED OUT, AND ONE MONTH AFTER BEING GIVEN A QUASI CLEAN BILL OF HEALTH. THE FARCE CONTINUES WITH A MAIN ACT. $$$
Auditors gave Banksia Securities a tailored clean bill
of health less than four weeks before its
collapse in the last week of October. Legions of investors are stuck in limbo, unclear of the value of EUR 660 million
in investments, as the financial firm fell
into receivership. Amazingly, on September
27th, accountants signed off on accounts that
found no significant changes in the state
of affairs during the year, in their words.
Either they are incompetent, ordered to falsify,
or paid off in bribes. The company's 2012
full year accounts by the chartered accountants
Richmond Sinnott & Delahunty in
◄$$$ A SWEEPING DUTCH DEBT DOWNGRADE ON THEIR BANKS SERVES AS A REMINDER THAT THE EUROPEAN CORE HAS SOME CRITICAL WEAKNESS ALONG WITH THE SOUTHERN PERIPHERY. IMPLICATIONS WILL COME IN FORM OF MORE COLLATERAL TO POST FOR BANKS, FINANCIAL FIRMS, AND INDIVIDUALS. IN ADDITION TO THE ECONOMY, THE DUTCH HOUSING MARKET WAS CITED FOR ITS PROLONGED CORRECTION. $$$
Standard & Poors downgraded a group of Dutch banks, due to economic downturn
risk and continued housing market prolonged
correction. They cited wider EuroZone risk
as well. The Dutch property bubble has not
received much attention, which has some similarities
In their statement, Standard & Poors wrote, "Furthermore, we consider that the prolonged housing market slump, elevated household leverage, and measures to reduce the budget deficit are constraining consumer confidence and private sector activity in general. We anticipate that the impact of these constraints could lead to moderately higher impairment charges among Dutch banks over the next two years." The implications are clear. Notice that budget reduction (often poison pills) is mentioned as a risk, implying even steps toward solutions are harmful. The Dutch Govt debt AAA rating could come under pressure, which is already on negative outlook by Moodys and S&P. The Euro currency takes one more small but notable step toward implosion. As always, the downgrades mean more margin posting and need for more collateral by investors.
◄$$$ BRITISH CONCERN GROWS OVER AN EXIT FROM THE EURO COMMON CURRENCY.
THE NATION COULD RESORT TO A REFERENDUM ON
DEPARTURE FROM THE ECONOMIC BLOC ENTIRELY.
THE TABLES HAVE TURNED IN THE LAST 70 YEARS,
VIS-A-VIS FASCISM, NAZISM, AND CAPITALISM.
The nations of
Unlike the founding six nations of the European Union,
The emergence of a more distinct two-tier Europe is putting
great strain on
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.