Thursday, July 30, 2009
Gallup Poll: Americans Turning Against Federal Reserve
As momentum builds for Ron Paul's efforts to audit the Fed, a new Gallup poll shows that Americans are turning against the Federal Reserve, with just 30 per cent saying the agency is doing a good job.
35 per cent rate the job the Fed is doing as "only fair" and 22 per cent say it is doing a "poor" job.
The contrast compared with when the question was last asked in 2003 is clear. Six years ago, just 5 per cent thought the Fed was doing a "poor" job, while 53% thought it was doing a "good/excellent" job.
According to Gallup editor in chief Dr. Frank Newport, "Americans are blaming to some degree the actions or inactions of the Federal Reserve board" for the economic turmoil.
Increasing skepticism towards the role of the Federal Reserve arrives alongside efforts on behalf of Congressman Ron Paul to audit the Fed with his widely supported H.R.1207 bill.
The legislation would amend existing law to allow the Comptroller General to audit the Federal Reserve Board and its member banks.
Fed Chairman Ben Bernanke seems frightened to death at what might be revealed if the Federal Reserve were forced to open its books and has been busy scuttling around lying about the bill in order to try and shoot it down.
During an appearance on PBS NewsHour which will be aired later this week, Bernanke claims that the bill will hand Congress the power to run monetary policy in the United States.
However, as CBS News' Declan McCullagh points out, it does nothing of the sort.
"This is an odd claim," writes McCullagh. "If you read the bill (H.R.1207), it simply amends existing law to say "under regulations of the Comptroller General, the Comptroller General shall audit" the Federal Reserve Board and its member banks."
Bernanke has proven that he will stoop to any level in order to try and sink the bill, which has the support of over half of the U.S. House of Representatives, even committing an act of economic terrorism last month when he threatened a collapse of the dollar and the entire financial system if the bill was passed.
No escape for Fed
By Hossein Askari and Noureddine Krichene
In contrast to Federal Reserve chairman Ben Bernanke’s testimony last week, we cannot see a safe "exit strategy" for the Fed from its current loose monetary policy. Bernanke’s ambivalent testimony of a safe exit strategy can only heighten uncertainty and exacerbate instabilities. Let’s explain.
In his recent testimony on July 21 before the Committee on Financial Services of the House of Representatives, Bernanke was felicitous that aggressive money policy had averted the collapse of the financial system. However, he omitted to say that the same policy had failed to avert a collapse of real gross domestic product (GDP) and private investment and rising unemployment.
The economic recession continues despite interest rates being near-zero, money supply rising at 22% a year, unprecedented stimuli packages, and record fiscal deficits reaching 13% of GDP in 2009. Bernanke and President Barack Obama’s team had clearly believed that a combination of aggressive money and fiscal policies would secure the return to full-employment and quickly. After all, Larry Summers had predicted the unemployment cresting at about 8%. These expectations were standard Keynesian predictions that have proven to be substantially off the mark.
As clearly implied by Bernanke himself, this policy has so far been self-defeating: "Aggressive policy actions taken around the world last fall may well have averted the collapse of the global financial system, an event that would have had extremely adverse and protracted consequences for the world economy. Even so, the financial shocks that hit the global economy in September and October were the worst since the 1930s, and they helped push the global economy into the deepest recession since World War II.
"The US economy contracted sharply in the fourth quarter of last year and the first quarter of this year. More recently, the pace of decline appears to have slowed significantly, and final demand and production have shown tentative signs of stabilization. The labor market, however, has continued to weaken."
Aggressive policies might have saved bankrupt banks through massive liquidity injections and bailouts and even turned them into profit-making institutions, but these same policies have only shifted the losses to the government and taxpayers, increased the potential of an inflation tax, and could bankrupt the government itself. They have also caused economic losses in form of millions of joblessness and falling economic growth.
In his recent testimony, Bernanke sent conflicting messages describing an "exit strategy" from the unprecedented monetary expansion while reassuring the political establishment that such exit is not immediately in the offing and near-zero interest rates and abundant liquidity would be maintained for some time to come: "The Federal Open Market Committee anticipates that economic conditions are likely to warrant maintaining the federal funds rate at exceptionally low levels for an extended period."
Bernanke noted that many instruments are available to a central bank for draining reserves; however "the most important such tool is the authority that the Congress granted the Federal Reserve last fall to pay interest on balances held at the Fed by depository institutions. Raising the rate of interest paid on reserve balances will give us substantial leverage over the federal funds rate and other short-term market interest rates, because banks generally will not supply funds to the market at an interest rate significantly lower than they can earn risk free by holding balances at the Federal Reserve.”
Past experience showed that any slightest attempt to drain reserves could easily send interest rates to two-digit levels. Would the Fed pay high interest rates on reserves, say at 19%, which was the federal funds rate in 1981 when the Fed slightly drained banks reserves, compared with 0.25% it is paying now? If it would, that would entail huge subsidies to banks, at the expense of the US Treasury, with serious implications for financing the US budget deficits.
Bernanke's ambivalent exit strategy can only heighten uncertainty and exacerbate instabilities. Continued fiscal and monetary expansion may widen US external deficits and end-up creating employment elsewhere in the world. Speculation will continue to be fueled by near-zero interest rates, affording speculators huge arbitrage potentials, or free lunches, between money and non-money assets. Rising public debt could weigh on future economic growth.
Bernanke and the Obama team wanted a short-term miracle of full employment through a narrow mix of unorthodox money and fiscal policies, the consequences of which, namely inflation and violent business cycles, are very well known, and they have ignored supply-oriented policies that could remove distortions, lessen foreign dependence, and restore stable growth.
Most disturbing is that exit from unorthodox monetary policies can only come at the cost of a deep recession, much higher interest rates and effectively placing the exit strategy burden on the Congress and on fiscal policy.
We must emphasize that the prediction of large deficits for the next 10 years by the Congressional Budget Office will do more than unnerve financial markets. The latest prediction, that the deficit will only be $1.2 trillion by 2019, leaves it at a still unmanageable deficit level on the order of 5.5% of GDP. How can the Fed have a safe exit strategy when the higher interest rates of a "safe strategy" would blow what are already unprecedented deficits out of the ballpark?
Opinion: Let's Break Up the Fed
provided by The Wall Street Journal
The Obama administration's plan to increase the powers of the Federal Reserve, says one critic, is like giving a teenager "a bigger, faster car right after he crashed the family station wagon." Treasury Secretary Timothy Geithner disagrees. He argues that the Fed is "best positioned" to oversee key financial companies, and that the Obama plan would give the Fed only "modest additional authority."
Mr. Geithner is right about one thing: The Fed's power is already vast. But it wasn't even well-positioned to supervise the likes of Citicorp. Broadening the Fed's responsibilities won't help. Instead, we should think of how best to dismantle an overextended Fed.
In principle, an exceptionally talented theorist might capably run a Fed focused just on monetary policy. Setting the discount rate and regulating the money supply are centralized, top-down activities that do not require much administrative capacity. But without deep managerial experience and considerable industry knowledge, effective chairmanship of a Fed that relies on far-flung staff to regulate financial institutions and practices is almost unimaginable. The vast territory the Fed covers would challenge the most exceptional and experienced executives.
As it happens, the Fed has been led for more than 20 years by chairmen who had no senior management experience. Prior to running the Fed, Alan Greenspan started a small consulting firm and Ben Bernanke was head of Princeton's economics department. Given their understandable preoccupation with monetary and macroeconomic matters, how much attention could they be expected to devote to mastering and managing the plumbing side of the Fed? While the record of the Fed's monetary policy has been mixed, its supervision of financial institutions has been a predictable and comprehensive failure.
At the very least we should split the monetary policy and regulatory functions of the Fed, as was done through the Maastricht Treaty that established the European Central Bank. What we need now is a debate about how to break up the Fed -- and some of the sprawling financial institutions it supervises -- in order to make both the regulator and the regulated more manageable and accountable.
Bernanke Sidesteps the Three Big Questions, Again
By: Gary North
In a recent international Bloomberg poll, Bernanke was rated by investors as the greatest central banker, the man who saved the world's economy.
All it took was a doubling of the monetary base and $3 trillion – as of today – of government bailout money.
The FED still faces three problems. (1) If it deflates, the financial markets will collapse. (2) If it does nothing, there will be mass price inflation if banks start lending, making use of the FED's doubling of the monetary base. (3) If banks don't start lending, the recovery will not appear. The FED wants to avoid all three.
You Say You Want a Revolution?
Americans should have been in the streets to reclaim the country long ago. Patrick Henry and his fellow patriots are turning over in their graves about the present day USA. The savvy folks I talk to on a regular basis are exceedingly pessimistic that our blessed republic can pull out of this present financial, economic and political tailspin. The US as we have known it is on the ropes.
Our third President and signer of the Declaration of Independence, Thomas Jefferson, long ago stated …”Banking establishments are more dangerous than standing armies”.
He also declared …“If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless.”
A second American Revolution is now at least as necessary as the first one was though few citizens have an overall understanding of the problems we face. Anything short of a complete house cleaning will be mostly a waste of time and effort. The elitist banking entities running and ruining this country must be shown the highway. Nothing less will suffice!
Who exactly am I talking about? The Federal Reserve is exhibit one. Their partners in financial crime like Goldman Sachs (NYSE:GS), JP Morgan Chase (NYSE:JPM), et al absolutely must be excised like the cancer they are.
America’s biggest exports over the last decade have been toxic and fraudulent financial products. The creators of this crap are the ones who have brought us to the present disaster – yet they remain in charge of sweeping changes designed to perpetuate their power and imprison us.
All of these Wall Street entities and the lackey politicians who support them must hit the road. Those behind the scenes pulling the strings have to be stripped of their illicit power.
Concerned Americans have a critical choice. We can rid the system of all the parasites and malignancies or just stay home and continue to get our reality through television.
Goldman Sachs: Gambling With Your Money?
Goldman Sachs is using its new taxpayer-subsidized status to bring increased risk to the financial system, a group of House members charged Monday. They want to know why the Federal Reserve is allowing it.
The group on Monday sent a letter to the Fed asking for an explanation of why Goldman Sachs is being allowed to speculate wildly even while officially redesignating itself a bank holding company, which theoretically means stricter regulation. The bank designation gives Goldman access to dirt-cheap Federal Reserve loans.
Goldman initially applied for the new designation last fall, so that it could access bailout funds (since paid back). Because bank holding companies, unlike investment banks, have access to a host of valuable taxpayer subsidies, they are required to reduce the risk associated with their investment activity. But Goldman then applied to the Federal Reserve for an exemption to the rules, saying that it takes time to alter a business model. The exemption was granted in February -- and Goldman went on to take even greater risks. Its Value-at-Risk model, a widely used measure of the risk of loss, recently showed potential trading losses at $245 million a day; in May 2008, it was $184 million a day.
The bets paid off in the most recent quarter as the market rose and Goldman posted stellar earnings. Morgan Stanley, meanwhile, was similarly given an exemption by the Fed but did what it said it would do and reduced its risk. The company lost money, largely as a result of that decision.
The likely result: Other players on Wall Street will follow Goldman back toward the cliff they dangled over just months ago. In announcing its lousy earnings, Morgan Stanley assured that it will increase the risk it takes in the future. Citigroup is racing to increase its exposure, too, handing another billion dollars worth of chips to its riskiest traders, bringing its hedge fund operations to close to $2 billion. On the brink of collapse, it had scaled such investing down to around $800 million.
Lucas van Praag, a Goldman spokesman, declined to respond directly to the charges in the letter, but said that the firm is working to reduce its exposure.
"We're very cognizant of risks inherent in risk taking. We have one of the highest capitalizations of any bank," said van Praag. He said that the Value-at-Risk numbers, while the only publicly released measure of risk, are only one metric and that internal measures show the bank has reduced its exposure over the past year.
He also took a dig at other Wall Street players who have avoided using mark-to-market accounting in an effort to fluff their balance sheets. Earlier this spring, banks lobbied Congress and the Financial Accounting Standards Board to soften mark-to-market rules. The new rule allowed banks to inflate their balance sheets by claiming that an asset was worth more than it could fetch on the market because the market was frozen. Goldman Sach, said van Praag, doesn't use that slight of hand, so its balance sheet is an honest reflection of its exposure.
"We have dramatically reduced our leverage and as a mark-to-market firm--we aggressively mark our assets to market--our leverage ratio is a true reflection of risk," said van Praag.
Nevertheless, as Wall Street follows Goldman, overall systemic risk is ramped up. Meanwhile, Congress is debating whether to give the Fed authority to regulate systemic risk throughout the economy. The congressional letter puts the Fed on the spot, demanding that it explain why it's allowing Goldman to use taxpayer dollars to increase systemic risk.
"The only difference between Goldman Sachs today and Goldman Sachs last year is that today, the company is officially gambling with government money. This is the very definition of 'heads we win, tails the taxpayers lose,'" reads the letter.
Read the full letter:
Skating on Thin Ice
Posted Jul 23, 2009
In combination with reassuring remarks by senior administration officials and retail investors' wish not to be left behind, money has started to move back into American equities. The resultant rally in stocks seems to have validated the preceding optimism.
Among these desperate green-shootniks, the smoking gun of recovery can be found in the exceptional earnings reported last week by Goldman Sachs and JPMorgan Chase, both of which surpassed estimates by healthy margins. These reports may have led to a general market rally, which even bad news about CIT failed to defuse.
In looking realistically beneath the Wall Street and political hype, seven fundamental points emerge which investors should note carefully:
First, much of last week's rise was based on small ‘up' volume. This indicates that the surprisingly good earnings reports led the ‘shorts' to cover in near panic.
Second, we cannot forget that the banks in receipt of TARP funds, including Goldman and JPMorgan, have been able to invest these surplus tens of billions of dollars in the markets, allowing them to capitalize on the great run-up of the last few months. But this is a temporary phenomenon.
Third, some of the major banks, such as Citi and Bank of America, appear to be falling behind government demands for recovery plans. This, combined with the massive exposure of U.S. banks to the declining value of commercial real estate, raises the possibility of another round of bank bailouts.
Fourth, statewide budget crises, such as the one that is coming to light in California, are likely to hit every state with a big city, save perhaps Texas.
Fifth, many investors have become shell-shocked by the 40 percent erosion in their portfolios. They can be forgiven for not jumping back into the equity market action for awhile.
Sixth, the recent spate of federal deficit spending has placed an enormous strain on Treasury debt markets. The United States now faces a sharp interest rate hike, or a loss of its prized Triple-A credit rating.
Finally, while the U.S. stock markets may be rising, the economic picture is far from promising. It is becoming increasingly apparent that short-term recovery is unlikely to occur without significant increases in consumer spending. With unemployment still rising at about 500,000 workers a month, this is unlikely.
Most importantly, long term recovery is impossible without significant structural changes in the economy. Such movements are nowhere to be seen.
Tuesday, July 28, 2009
Geithner: US to address deficits after recovery
WASHINGTON (AP) -- Treasury Secretary Timothy Geithner says he has reassured China that the United States will take steps to address rising budget deficits once the economic recovery is firmly in place.
China has huge investments in the United States and has worried it could be undermined by U.S. budget deficits. Geithner says the Obama administration plans to reverse the spending of hundreds of billions of dollars devoted to stimulating the economy and propping up a teetering financial system.
Geithner spoke at a news conference Tuesday capping two-days of high-level talks between Chinese envoys and U.S. officials.
LOL! When pigs fly! Timmy, you assume to much. Recovery? LOOOOOOOOOOOOOOOL! Good luck! Someday maybe... Maybe not. Why not promise the Chinese you will build a bridge across the Pacific from San Francisco to China. Timmy, you are fool. It would be difficult to categorize anybody that believes you will get US budget deficits under control. The only certainty pertaining to this "problem" is that if and when US budget deficits are ever brought under control, YOU and the Obama will be mere footnotes in history. Neither of you will have done a damn thing to reign in US Government spending by the time you are banished from office. In fact, I will predict here and now that US Government spending as a percent of GDP will be higher on Election Day in 2012 than it is today.
What we witnessed today in the currency markets, the bond markets, and the commodity markets was pure unadulterated BULLSHIT. Nothing fundamentally changed today to warrant purchasing the US Dollar or US Treasuries. NOTHING! Nothing fundamentally changed today to warrant a $20 drop in the price of Gold. NOTHING! What we witnessed today was a naive US Government trying to pull the wool over the Chinese eyes. The Chinese must be laughing all the way back to the Mainland.
"Who are they kidding?" They must be asking themselves as they pause to catch their breath after each belly laugh.
The Chinese know, the Russians know, the Brazilians know, the Indians know, the whole freakin' World knows the USA is addicted to spending money. Spending money they don't have...
LOL, recovery! The USA's economy has been all but destroyed by a multi-megaton debt bomb. And their only answer to the crisis is to borrow and spend more money? Wake up America! You cannot spend your way to prosperity! You're damned if you continue to spend, and you're damned if you stop spending. Folks, AMERICA IS F***ED!
Little Timmy, do us all a favor: SHUT THE F*** UP!
Recovery? What makes these government stooges think there is even/ever going to be a recovery? Hoping for one isn't going to bring one. Wishing for one won't help much either. Pretending there is one, will only make the likelyhood of there ever being one even more remote.
Little Timmy, what if there is no recovery? What will you promise the Chinese then?
The charts posted above tell the whole story of why the US Government had to once again step into the markets to make things "appear" better than they really are. [As in "see, here's our recovery now..."] The US Dollar has been pressuring support at it's recent interim low at 78.33 for the past four days. The Dollar craps out here, and the US Government is exposed for what it is: penniless and buck naked before the entire World.
Gold is up against and attempting to take out major resistance at 957 as the Dollar clings to the edge of another cliff. The Dollar loses it's grip, and Gold explodes upwards in price.
The energy building up in Gold because of US Government suppression of it's price is about to go off the scale. The beach ball has been pushed underwater just about as far as anybody can hope to hold it. Consider the price of Gold the last time the US Dollar Index plumbed the depths it is at right now. June 2, 2009, the Dollar's low that day was 78.33. On the very next day Gold reached a high of 989.80.
Today, the Dollar gets pushed to the edge of it's fiat money grave, again hitting the low of exactly 78.33, AND GOLD IS SMASHED FOR A $20 LOSS AND A PRICE TAG OF 934.60?
The US Dollar is sitting at the exact same price it was at 8 weeks ago, and Gold is $55.20 lower in price? This goes beyond the absurd. This goes beyond criminal. THIS IS WAR!
The harder the US Government presses it's fat ruddy thumb down on Gold, the higher the price the US Government is going to pay for it's theft of World savings. The price of Gold is about to teach the US Government a lesson it will not soon forget.
The TRUTH is out there people. It's name is Gold, and patience is it's virtue. Soon the TRUTH will expose the lie that is the US Government. And Little Timmy, I promise you this: You can't handle the TRUTH, and this time the TRUTH is really gonna hurt...
Saturday, July 25, 2009
By Paul Craig Roberts
There is no economy left to recover. The U.S. manufacturing economy was lost to offshoring and free trade ideology. It was replaced by a mythical "New Economy."
The "New Economy" was based on services. Its artificial life was fed by the Federal Reserve's artificially low interest rates, which produced a real estate bubble, and by "free market" financial deregulation, which unleashed financial gangsters to new heights of debt leverage and fraudulent financial products.
The real economy was traded away for a make-believe economy. When the make-believe economy collapsed, Americans' wealth in their real estate, pensions, and savings collapsed dramatically while their jobs disappeared.
The US government's budget is 50 percent in the red. That means half of every dollar the federal government spends must be borrowed or printed. Because of the worldwide debacle caused by Wall Street's financial gangsterism, the world needs its own money and hasn't $2 trillion annually to lend to Washington.
As dollars are printed, the growing supply adds to the pressure on the dollar's role as reserve currency. Already America's largest creditor, China, is admonishing Washington to protect China's investment in U.S. debt and lobbying for a new reserve currency to replace the dollar before it collapses. According to various reports, China is spending down its holdings of U.S. dollars by acquiring gold and stocks of raw materials and energy.
The price of 1-ounce gold coins is $1,000 despite efforts of the U.S. government to hold down the gold price. How high will this price jump when the rest of the world decides that the bankruptcy of "the world's only superpower" is at hand?
And what will happen to America's ability to import not only oil but also the manufactured goods on which it is import-dependent?
When the oversupplied U.S. dollar loses the reserve currency role, the U.S. will no longer be able to pay for its massive imports of real goods and services with pieces of paper. Overnight, shortages will appear and Americans will be poorer.
The worst of the economic crisis has not yet hit. I don't mean the rest of the real estate crisis that is waiting in the wings. Home prices will fall further when the foreclosed properties currently held off the market are dumped. Store and office closings are diminishing the ability of owners of shopping malls and office buildings to make their mortgage payments. Commercial real estate loans were also securitized and turned into derivatives.
The real crisis awaits us. It is the crisis of high unemployment, of stagnant and declining real wages confronted with rising prices from the printing of money to pay the government's bills and from the dollar's loss of exchange value. Suddenly Wal-Mart prices will look like Nieman Marcus prices.
Nothing in Obama's economic policy is directed at saving the U.S. dollar as reserve currency or the livelihoods of the American people. Obama's policy, like Bush's before him, is keyed to the enrichment of Goldman Sachs and the armament industries.
Matt Taibbi describes Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Look at the Goldman Sachs representatives in the Clinton, Bush, and Obama administrations. This bankster firm controls the economic policy of the United States.
Little wonder that Goldman Sachs has record earnings while the rest of us grow poorer by the day.
US dollar about to pop?
The second anniversary of the credit crisis has arrived and, in the light of the plethora of fiscal and monetary policy initiatives, it makes for interesting reading to reflect upon how the US economic landscape has changed since the start of the crunch.
• Fed funds rate: down from 5.25% to zero
• Fiscal deficit: up from 2% to 13%
• Mortgage rates: down from 6.5% to 4.7%
• Home affordability: 70% improvement
• Fed’s balance sheet: up from $850 billion to $2 trillion
Yes, the Fed has tried just about everything, and yet real GDP growth is negative at about 5% and the unemployment rate has doubled to almost 10% over the past two years.
David Rosenberg, chief economist and strategist of Gluskin Sheff & Associates, points out that there is one policy tool that is practically unchanged since two years ago … the US dollar. “It is the only policy tool that has not budged one iota since the crisis erupted two years ago. But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, it would make perfect sense for a country that always operates in its best interest - even if it may not be in everyone’s best interest - to sanction a US dollar devaluation as a means to stimulate the domestic economy,” he said.
Dismantling the Temple [Good Read]
By William Greider
The financial crisis has propelled the Federal Reserve into an excruciating political dilemma. The Fed is at the zenith of its influence, using its extraordinary powers to rescue the economy. Yet the extreme irregularity of its behavior is producing a legitimacy crisis for the central bank. The remote technocrats at the Fed who decide money and credit policy for the nation are deliberately opaque and little understood by most Americans. For the first time in generations, they are now threatened with popular rebellion.
During the past year, the Fed has flooded the streets with money--distributing trillions of dollars to banks, financial markets and commercial interests--in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers.
Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really--not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities.
"Many of us were...if not surprised, taken aback, when the Fed had $80 billion to invest in AIG just out of the blue," Pelosi said. "All of a sudden, we wake up one morning and AIG was receiving $80 billion from the Fed. So of course we're saying, Where is this money coming from? 'Oh, we have it. And not only that, we have more.'" So who needs Congress? Pelosi sounded guileless, but she knows very well where the Fed gets its money. She was slyly tweaking the central bankers on their vulnerability.
Fed chair Ben Bernanke responded with the usual aloofness. An audit, he insisted, would amount to "a takeover of monetary policy by the Congress." He did not appear to recognize how arrogant that sounded. Congress created the Fed, but it must not look too deeply into the Fed's private business. The mystique intimidates many politicians. The Fed's power depends crucially upon the people not knowing exactly what it does.
Many in Congress will be afraid to take on the temple and reluctant to violate the taboo surrounding the Fed. It will probably require popular rebellion to make this happen, and that requires citizens who see through the temple's secrets.
World Prepares to Dump the Dollar
By Robert Morley
What do China, India, Brazil, Russia, France and Germany have in common? These countries most often can’t agree on anything. But they are united in one strange—and ominous—way. They blame the United States for wrecking the global economy. And they think the dollar is the wrecking ball.
One rock-solid, foundational belief underpins almost all economic theory in America: faith in the dollar’s unassailable status as the world’s reserve currency. Foreigners hold so many dollars that they can’t afford to stop buying them, the theory goes. Therefore the dollar’s status as the world’s reserve currency is sound. But the dollar is now coming under a concentrated attack. Are American economists about to get schooled?
Angela Merkel summed up the dollar-skeptic viewpoint last year. “Excessively cheap money in the U.S. was a driver of today’s crisis,” she told the German parliament. And America’s solution—even more cheap money—was just setting the world up for another crisis, she said. It was just a matter of time.
The irony is that America is completely blind to the catastrophe heading its way. As the economic crisis unfolded at the end of last year, investors made a mad rush out of global stock markets and into other assets. The biggest beneficiary of the panic was the one market large enough and liquid enough to handle the trillions of dollars being moved: the U.S. dollar market. This caused the dollar to surge in value.
America grossly misdiagnosed the demand for dollars as a vote of confidence in the U.S. economic system. In fact, it was primarily a case of investors looking for a place they could quickly and easily get their money in—and out.
Now that the initial panic has subsided, the dollar’s international purchasing power has resumed its former downward trajectory. Since the post-crisis high in March, the dollar has fallen by a portfolio-shredding 10 percent.
America’s foreign creditors are again questioning the wisdom of holding so many U.S. dollars. And they’re looking for a way out.
Fed Has Become ‘Embroiled’ in Politics, Poole Says
July 22 (Bloomberg) -- The Federal Reserve is “embroiled” in politics and has “stretched beyond reason” its authority to make loans, said William Poole, who served as president of the St. Louis Fed from 1998 to 2008.
“ I don’t think independent can mean the Fed can do whatever it wants under any circumstance,” Poole, a senior economic adviser to Palo Alto, California-based Merk Investments LLC, said in an interview today on Bloomberg Radio. “The Fed has chosen to make loans to certain firms and not others.”
Traditionally, central banks “deal in government securities,” and control “overall liquidity” and “overall interest rates,” Poole said. The Fed is “embroiled in fundamentally political questions,” he said.
In the aftermath of last year’s credit market collapse, the Fed instituted a series of emergency lending programs. Fed policy makers decided at their meeting June 24 to maintain plans to buy as much as $1.75 trillion of Treasuries and housing debt to lower interest rates.
The central bank “has not made loans of this sort since the Great Depression,” Poole said. “The Federal Reserve has responded very aggressively to this crisis we are living through” and “has doubled its balance sheet.”
No Exit for Ben
By: Peter Schiff, Euro Pacific Capital, Inc.
In a Wall Street Journal op-ed on Monday, and in congressional testimony later in the week, Fed Chairman Ben Bernanke reassured all that thanks to his accurate foresight and deft use of the Fed's policy toolkit, he could maintain near zero percent interest rates for an extended period without creating inflation. With supernatural powers such as these, one wonders if Ben would be better employed by the Justice League rather than the Federal Reserve.
Ben's game plan is apparently simple: once he determines that the economy is on solid ground, he will use the monetary equivalent of Superman's laser vision to strategically evaporate all the excess liquidity that he has recently created without endangering the recovery. Don't try this at home, kids.
In other words, as he did just a few years ago when the subprime fiasco began to emerge, Bernanke is assuring us that inflation is contained. He is just as wrong now as he was then.
The idea that the inflation genie can be painlessly rebottled has no historic precedent. Even mainstream economists, who've never met a fiscal stimulus they didn't like, agree that central banks must act preemptively with regard to inflation. Bernanke is making the case that the new set of liquidity tools, hastily developed in the panic of late 2008, will act just as well in reverse. But liquidity is a lot like liquid, it's a lot easier to spill than to un-spill. The Chairman believes that his new gadgetry will allow him to perform a feat of monetary magic no other central banker has managed to pull off. But given his history of getting it wrong, why should we assume that this time he will get it right?
The bottom line is that Bernanke has no exit strategy. He can talk about it all he likes, but when it comes time to actually pull the trigger, his nerves will buckle. The current communications campaign is simply an attempt to calm the markets. I doubt few citizens or members of Congress had any hope of understanding the exit strategy mechanisms that Bernanke described. Many likely place their faith in his seeming mastery of financial minutiae. Sadly, as with the mythical “strong dollar policy,” confident talk may be the sum total of the Chairman's strategy.
The Record of the Federal Reserve
By: Erik Voorhees
Let’s talk about The Federal Reserve. Consider the following facts:
A) From 1776 to 1912 (136 years), the value of the dollar, relative to the Consumer Price Index, increased by 11%. A dollar could buy 11% more goods in 1912 than in 1776. Thus, if in 1776, you sat on your savings pile of $1,000,000 for 136 years, it would then be worth $1,110,000 in purchasing power (it will have appreciated in value by 11%). A loaf of bread for Thomas Jefferson cost the same as a loaf of bread for Lincoln 50 years later and again the same for J.P. Morgan 50 years after that.
B) The United States Federal Reserve was created in 1913. The stated purpose of the Fed, by its own definition taken from its website, is to "conduct the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices." Note that "stable prices" is another way of saying "stable dollar," they are two sides of the same coin (couldn’t resist the pun).
C) Then after The Fed’s creation, from 1913 to 2008 (95 years), the value of the dollar, relative to the Consumer Price Index, decreased by 95%. A dollar could buy 95% fewer goods in 2008 than in 1913. Thus, if in 1913, you sat on your savings pile of $1,000,000 for 95 years, it would then be worth only $50,000 in purchasing power (it will have depreciated in value by 95%). One would now need to pay about 20X more than J.P. Morgan for one’s bread. Ask my mother how much the price of milk has increased just in the last ten years alone.
In other words, the value of the dollar remained extremely stable for 150 years, then The Fed was created in order to "stabilize the value of the dollar" and the result has been a 95% devaluation of the dollar in less than 100 years following its creation.
Thursday, July 23, 2009
"The Federal Reserve, in collaboration with the giant banks, has created the greatest financial crisis the world has ever seen," said Rep. Ron Paul, R-Texas. "The problem with debt must be addressed."
On Tuesday, The Captain of our sinking financial ship, Bumbling Ben Bernanke, went before the House Financial Services Commitee for the bi-annual Congressional inquisition of the Fed on the Economy and Monetary Policy.
The Commitee showed up carrying ugly sticks, and from the git-go appeared out for blood. Congressman Ron Paul went for Bumbling Ben's jugular immediately. In a two and half minute rapid fire opening statement, Mr Paul laid bare the truth about the US Federal Reserve's complicity in the ongoing financial crisis, and effectively called Bernanke onto the carpet. The rumble was on.
Bumbling Ben, sitting in front of the Commitee and the C-Span viewing audience, sat there as smug as ever and proceeded as usual to hide behind the illegal Federal Reserve Act of 1913.
Questions about unemployment, debt, stimulus, and government regulation of the players in the financial markets were common. Unfortunately there were far too few questions of Bumbling Ben regarding his ill fated monetary policy. Ron Paul of course got his monetary policy shot in during his opportunity to grill Bernanke. Mr. Paul lectured Bumbling Ben on the "real" definition of Inflation, a growing money supply. Mr. Bernanke replied Inflation is "the growth in prices of goods" while refusing to admit the Fed is "growing the money supply".
Florida Congressman Alan Grayson stepped to the plate in the very late innings of the Inquisiton carrying the biggest of ugly sticks to take a swing at Bumbling Ben. Bernanke was caught with his pants down as Mr. Grayson proceeded to fillet, grill, and fry Bumbling Ben about currency swaps with foreign banks and where he gets the authority to hand out "half a Trillion Dollars" of the taxpayers money to foreigners without consulting the Congress [and the Constitution] first. Hiding once again behind the Federal Reserve Act, Bernanke refused to answer Mr. Graysons questions demanding to know "where the money went".
"I don't know," was Bumbling Ben's reply. Congressman Grayson laughed in his face.
The House Financial Services Commitee Inquisiton of Ben bernanke revealed little in the way of answers about the Economy and Monetary Policy. It did, however, serve notice to Bumbling Ben Bernanke and his FOMC cronies that the Congress and the American people are watching closely now, and unlikely to remain content to sit in the dark any longer and allow the Fed to continue sqaundering the nation's wealth as they line the pockets of their friends on Wall Street.
The American public must not allow the Fed to come up for air here. We must continue to pressure them for answers to our questions regarding their actions behind closed doors that we are being asked to pay for. We must continue to pressure our elected representatives to "go after the Fed" and either clean that Constitutional travesty up, or close it down.
VIDEO HIGHLIGHTS OF THE HOUSE FINANCIAL SERVICES HEARING CAN BE VIEWED AT THE LINKS BELOW.
Ron Paul Opening Statement Fed Hearing
Ron Paul with Federal Reserve Chairman on definition of inflation
Florida congressman Alan Grayson laughs in Ben Bernanke's face - priceless!
Senate Banking Hearing with Fed. Reserve Chairman Bernanke [full hearing]
US Fed's Bernanke On Defense At Capitol Hill Hearing
WASHINGTON -(Dow Jones)- U.S. Federal Reserve Chairman Ben Bernanke spent the first day of his Capitol Hill testimony on defense, with Republicans criticizing the central bank and attacking the Obama administration's plans to make it a new super regulator of the financial system.
But Bernanke fired back with a strong defense of the central bank's crisis measures. He rejected assertions that the Fed's liquidity programs are stoking inflation and argued in favor of the Fed keeping its consumer protection role.
Bernanke also made clear that he thinks the central bank can monitor systemic risk while maintaining its ability to protect consumers.
"I'm proud of the work we've done," he told the House Financial Services Committee.
Bernanke said inflation concerns are misguided, and reiterated to lawmakers that central-bank policy makers expect inflation to be subdued for the next two years.
"I don't think the financial markets are indicating a great deal of concern about inflation," he said, pointing to long-term Treasury rates that are still " quite low."
Furthermore, Bernanke defended the Fed's plans to purchase up to $300 billion in longer-term Treasury securities against charges that the Fed is monetizing the debt and stoking inflation. When those purchases are completed, the Fed will still have fewer Treasurys on its balance sheet than it did two years ago, Bernanke said. "We are not taking a significant portion of U.S. Treasurys."
"Let's be clear about what's going on - the Federal Reserve is not putting money out into the economy. What we're doing is creating bank reserves. It's not chasing any goods," Bernanke continued.
Posey of Florida, like Paul of Texas earlier, was unconvinced.
"It's going to cause inflation," Posey insisted.
Additionally, the committee's top Republican, Spencer Bachus, R-Ala., said CIT Group Inc.'s (CIT) near-collapse represents another example of the poor job the Fed has done in identifying and averting systemic risks.
Bachus also criticized the Obama administration's plans to deem the Fed a new regulator of systemic risk. Asking the Fed to take on such a role would only result in a "false sense of security which will inevitably be shattered at the expense of the taxpayer," said Bachus.
Bernanke says Fed can take on supercop role
WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke ran into skepticism Tuesday from U.S. lawmakers wary of expanding the Fed's duties to police big financial companies. They argued that the Fed failed to spot problems that led to the financial crisis in the first place.
"The Fed has made some big mistakes," said the House panel's highest-ranking Republican, Spencer Bachus.
An Obama administration proposal to make the Fed the supercop of globally interconnected financial companies would be "just inviting a false sense of security that inevitably will be shattered at the expense of the taxpayer," Bachus warned.
Bernanke countered that the administration's proposal would be a "modest reorientation" of the Fed's powers, not a great expansion of them.
Bernanke also argued against congressional proposals to let the Government Accountability Office, Congress' investigative arm, audit the central bank. He feared that audits that delve into the Fed's interest-rate decisions could compromise its independence in setting interest-rate policies.
"A perceived loss of monetary policy independence could raise fears about future inflation," he warned.
Rep. Ron Paul, a Reopublican and a frequent Fed critic, rejected that argument and said the Fed already makes political calculations.
"Just the fact that (the Fed) can issue a lot of loans and special privileges to banks and corporations," Paul said. "That's political."
Rep. Bill Posey, a Republican, who wants the Fed to be more open, argued that some people rightly say "you can find out more about the operations of the CIA, than the Fed. The public has the right to know."
Don't Reappoint Ben Bernanke
By John Tamny
...in an August 2005 Wall Street Journal op-ed, he asserted that there is a "highest level of employment that can be sustained without creating inflationary pressure." More recently the Bernanke Fed addressed the prospect of future inflation amid economic weakness. This time it was the Phillips Curve in reverse, specifically an FOMC release that noted that due to "increasing economic slack here and abroad, the Committee expects that inflation will remain subdued."
It would be hard to contemplate a more impoverishing notion than the one that says economic growth is the cause of inflation, and economic weakness is its cure. What this means is that should the U.S. economy reverse direction in such a way that unemployment falls, the Bernanke Fed would use rate machinations to pour cold water on it as a way of keeping unemployment higher than it otherwise might be. For this reason alone, Obama should not re-nominate Bernanke.
Importantly, there are other reasons to send Bernanke back to academia. As is well-known, the Fed's basic mission as approved by Congress centers on unemployment and inflation. If both are kept low on the Fed's watch, our central bank is doing its job. Sadly for Bernanke, the direction of both unemployment and inflation point to an impressive failure on the part of the Fed in terms of its core mission.
Indeed, the rate of unemployment--admittedly not the most reliable of government statistics--sat at 4.8% when Bernanke took over in January of 2006. Since then, the rate of joblessness in the U.S. has risen all the way to 9.5%.
As for inflation, while economic thinkers will continue to debate whether it's the Fed or Treasury that sets the tone when it comes to the value of the dollar, those who believe the Fed should keep the greenback strong and stable can't possibly be happy with its decline on Bernanke's watch. The dollar has collapsed against gold since his nomination. Trading at $470 per ounce back in 2005, gold has nearly doubled against the dollar during his Fed tenure.
Fed apologists will doubtless point to low government measures of inflation as a counterargument, but as has regularly been shown, the consumer prices which make up the Consumer Price Index (CPI) change for all manner of reasons that have nothing to do with the value of money. Looking at gold's surge, we can see that inflation has been and remains very much a problem. But hostage to a Phillips Curve mindset learned on campus, Bernanke is blind to the very inflation that holds down the economy like nothing else.
Monday, July 20, 2009
By now many of us have seen Henry Paulson grilled like an Oscar Meyer Wiener during a recent Congressional hearing. Stop for a moment and put yourself in Hank's shoes. Suddenly you're at the center of the financial universe...or so you'd like to believe.
Perhaps Henry Paulson was correct in his assessment that if nothing was done, the financial system would collapse...sure it would Hank, if one believed the financial system "was Goldman Sachs".
As Goldman Sachs posts huge profits from the economic crisis, the question is: Did it cause the problems in the first place?
By Alex Brummer
No name is more ubiquitous in the pantheon of global finance than that of Goldman Sachs. At a time when world commerce and banking has been brought to a shuddering halt by greed, excess and foolishness, this investment bank provoked astonishment and disgust this week by handing out record bonuses.
Certainly, there can be no dispute that while much of the world is being devastated by falling trade and reduced living standards and when governments are faced with the biggest debt mountains in history, Goldman Sachs is living high off the hog. The group's earnings in the past three months alone were $3.44billion - 65 per cent up on the same period last year.
As the financial crisis unfolded, the fingerprints of Goldman Sachs have been seen on almost everything that has happened. Along with the other Wall Street investment houses, it was at the centre of the scandal under which sub-prime mortgages - provided to the lowest echelons of American society - were packaged up as solid investments with a good return and sold on to unsuspecting investors.
Goldman even went as far as to buy a couple of brokerage firms who sold these corrupt mortgages 'so that it better understood how the market worked'.
Having helped to create a market in which it underwrote $76.5bn of sub-prime mortgages, it sold off these broker firms which meant it had protected itself from huge losses when the mortgage market went bad.
Goldman Sachs's greatest triumph of all, however, has been to emerge from the credit crisis not only unscathed, but extravagantly enriched - despite having to be bailed out itself.
It has achieved this by a mixture of guile and influence. In the wake of the Lehman collapse, Goldman Sachs was also facing the precipice. Its share price was plunging and it had to take any help it could get. This, of course, came from its former boss Hank Paulson.
He allowed both Goldman and Morgan Stanley to change their status from broker-dealers to bank holding companies. This meant that Goldman could borrow directly from the U.S. central bank, the Federal Reserve, and shore up its business as money drained away. It also was forced to allow the taxpayer to take a $5bn stake in the company.
The paradox is that Goldman Sachs had come as close to destruction as at any time in its long history. Indeed, the boast from its chairman, Lloyd Blankfein, to me (at a briefing session for London-based writers) that the firm had enough liquidity to withstand almost anything, turned out to be poppycock.
Even now, Goldman Sachs could not be operating at its current velocity without the help of the trillions of dollars being flushed through the financial system by central banks including the Federal Reserve and the Bank of England.
Because of its friends in the highest places of global finance, no one even dares question the notion that what is good for Goldman Sachs is good for the global economy.
That, I suspect, is a precept that is going to be increasingly challenged.
Here's Matt Taibbi's controversial article on how Goldman-Sachs helped bring about and profit from our current financial crisis. It originally appeared in Rolling Stone Magazine. Please read it in its entirety. The article is an eye opener, and it exposes and offers an easy to follow timeline into the organization that has stolen the American Government from it's citizens:
Inside The Great American Bubble Machine
It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers - one of Goldman's last real competitors - collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investment-banking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.
Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year-old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bankholding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding - most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs - and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.
Glenn Beck. Love him or hate him the man can make a point that is difficult to argue with most times. In the following video from his Glenn Beck Show, Glenn offers us a scintillating look at the web of deceit that is Goldman Sachs. Glenn gives us a relatively easy to understand chalk talk that uncovers Goldman Sachs' infiltration of the US Government. If this doesn't scare you, and prompt you to contact your Congressman demanding an investigation and the dismantling of Goldman Sachs, then why are you here reading this? This is MUST SEE TV!
You Won't BELIEVE The Goldman Sachs Governmental Ties Chart! [VIDEO]
The next video is a conversation about Goldman Sachs that includes Rolling Stone writer Matt Taibbi, Rob Johnson, and Mike Lux. This is a most revealing conversation, and should further enrage those looking for someplace to put the blame for this Global Financial Crisis.
We Don't Care. We Don't Have To Care. We're Goldman Sachs.[VIDEO]
Goldman Sachs has openly, blatantly gone back to business as usual, knowing they will be bailed out by taxpayers if their high rolling gambles don't work, and they don't care who knows about it.
The reason they can be so breathtakingly arrogant, so stunningly cavalier about not giving a damn about things that any other company's PR and government relations department would advise them against, is that they know they have the power to do anything they want to do. The Obama White House needs to take Goldman Sachs to the woodshed rhetorically, and they should have the Justice Department investigating them for anti-trust violations and all manner of stock manipulation. It is time to start squeezing the management at Goldman, and making them nervous about being broken up into pieces that are not too big to fail.
Goldman Sachs: A Vampire On The Jugular of America
By Darryl Robert Schoon
We are in for some truly terrible times. The green shoots “seen” by Geithner and Bernanke make the LSD-based hallucinations of my generation seem rooted in rational experience; but those believing in these hallucinatory green shoots will find reality to be far different when the banker’s world of credit-based paper disintegrates.
According to Mancur Olsen’s theory, it is the dominance of special interest groups, e.g. the bankers, the healthcare industry, the military-industrial complex, etc., that led to the demise of the power and influence of the US.
Bankers are well aware of this entropic decline and are repositioning themselves in China and other nations where expansion still seems to be the order of the day. In this, they will fail, for the collapse of the West’s paper-based financial system will affect all nations, not just those now in decline.
Credit-based capital markets are in extreme distress everywhere and were it not for heavy government aid and intervention, they would have already collapsed. The bankers’ credit-based paper money has weakened the entire global economy and when it collapses, all credit-based paper money could be virtually worthless with only gold and silver retaining monetary value.
The case for gold and silver is simple as it is old; as the same story has been repeated during the last 1,000 years, first in the East then in the West. Gold and silver were money. Then paper currencies backed by gold and silver were introduced by bankers and governments and were substituted for gold and silver. Then gold and silver were removed from paper money because governments had spent the gold while printing more and more paper money. As a result, every experiment with paper money ended in disaster.
This is the true cost of accepting the banker’s paper coupons as money. Over time, the banker’s paper money loses more and more value. We are in the end-times of our experiment with the bankers’ paper money and the system it gave rise to, credit-based capital markets.
Those who have their wealth invested in paper-based IOUs, e.g. treasuries, bonds, etc., will suffer the most in the coming meltdown. In the coming days, paper-based IOUs will become increasingly worthless and in the coming years, most IOUs will have little or no value, including government treasuries and currencies, as IOUs increasingly become ICPs—I Can’t Pay.
This is because the largest bubble of capitalism’s end-game is being formed right now, a bubble of stupendous proportions, a bubble composed of extraordinary amounts of government debt; and, when this bubble bursts, governments and their citizens will be its victims.
Of course, Goldman Sachs and the rest of the paper boys are hoping the vast majority of investors will continue to believe in their paper promises and will continue to leave their paper money on the table, their table, and to let the bankers do with it what they will.
This is the reason that financial interest groups have marshaled their considerable resources to defend paper markets against the increasing threat of rising prices of gold and silver as the price of gold and silver indicates the level of systemic distress in paper-based capital markets.
Over the past decade, private bankers have emptied national treasuries of gold bullion, selling this bullion on the open market in order to keep the price of gold low in order to mask the increasing vulnerability of their paper-based assets.
The US claims the US Treasury still holds approximately 7,000-8,000 tons of gold but has not allowed a public audit of its reserves since 1954; and since 1999 the UK and Swiss have seen their gold reserves decimated as bankers freely sold their gold in order to cap the rise in the price of gold to keep the banker’s paper money scheme intact.
This is perhaps the last opportunity for private investors to purchase gold when it is being diverted from public treasuries in order to keep gold prices artificially low. These publicly subsidized prices will not be available forever; for when the banker’s Ponzi-scheme of paper money collapses, gold will never again be this cheap.
But most investors will continue to play the banker’s game with the banker’s paper money and continue to invest in paper assets as it is the only game they know. What they don’t know is that the banker’s game is almost over; and, for those who understand what is happening, this is the opportunity of a lifetime to profit—and to survive.
Every American MUST be educated on the TRUTH about the fall of their Government via the coup organised by Goldman Sachs and its alumni. This it what happens when Americans don't pay attention, and put far too much "faith" in their Government. The "evil empire" that threatens America, threatens it from deep within. And that evil has a name, and it's name is Goldman Sachs. Goldman Sachs, and its surrogate the US Federal Reserve, must be destroyed if we are to save our country, and save our constitution. Contact your Congressman TODAY!
Thursday, July 16, 2009
Congress got their chance today to grill Paulson for his actions last fall as Treasury Secretary. His intimidations, threats, interference with the free market, and intentional misperceptions with regards to Ken Lewis, TARP, stimulus, bailouts, Bank of America, Merrill Lynch, Lehman Brothers, etc. were repeatedly brought up and questioned. And grill him they mostly did, as they should have, at least the parts that we were allowed to see… The media’s treatment of this hearing was beyond sickening. CNBC continuously broke from coverage not only to bring useless updates on the current collapse of CIT, or an untimely interview with JPMorgan’s CFO to express how stupidly awesome their last quarter was (when ignoring all the derivative losses they no longer need to report, of course), but CNBC also, and repeatedly, broke in to let Kudlow or some other media shill defend Paulson and admonish Congress for their treatment of Paulson. They even had a former fed governor, McTeer, come on to agree with Kudlow’s defense of the man who oversaw this historic financial debacle. Is any of this any surprise? No, not at all unfortunately. We are more than familiar with CNBC’s ultra biased slant on their reporting of business. But today was a new low, a far more reaching new low when you thought they were already as low as they could get.
-Chris Mullen, Gold-Seeker.com
Rep. Jordan on CSPAN's "Washington Journal"
Representative Jim Jordan had probably the best five minutes of allotted time with former U.S. Treasury Secretary Henry Paulson before a House of Representatives Oversight subcommittee this morning. ...here is an interview with Susan Swain in which Jordan discusses the Oversight hearing and his thoughts on the Bank of America/Merrill Lynch deal.
Highlights of Former U.S. Treasury Secretary Henry Paulson before Congress
This is MUST SEE TV! See Rat Fink Henry Paulson squirm before Congress like no other has before him. Mr. Paulson has elevated stammering speech to a new level. PRICELESS! To watch the Paulson Wigglefest in it's entirety, follow the links below:
Paulson Hearing: AM Session
Paulson Hearing: PM Session
Goldman Sachs is in big trouble, but the media refuses to dig and get the same story the alternative media has dug up. As usual the SEC is looking in a different direction, as far away from the real action as possible.
The latest allegation is front-running their own client orders, never mind everyone else’s. As we reported earlier they are using a government created program. A good question is are they front-running for both themselves and the government, which might make it semi-legal? Of course nothing ca be semi legal. It is either legal or it isn’t. Goldman has been confronted on the issue and refuses to answer detailed questions, just saying, “your suggestion that we monitor our website to facilitate front-running is untrue and offensive.” Unfortunately, this confirms our worst suspicions. If we were using the Goldman 360 portal for trading we’d stop until we at least investigate to make sure we were not being cheated. Where may we ask is the SEC? Camping out on the moon most likely. This episode is just beginning. This is another example of cross corruption and arrogance by both our government and Goldman.
NO! NOT THE VENERABLE GOLDMAN SACHS !
By: Jim Willie CB, GoldenJackass.com
So Goldman Sachs was allegedly caught with their clever Ultimate Insider Trading software, whose handy Unix boxes monitor trade orders at the New York Stock Exchange. The secured information was then in microseconds used to create rafts of computer trade orders intended to snatch pennies per trade but with hundreds of millions of shares, enough to log beaucoup profits at quarter’s end. Yes, GSax has plenty of expertise, just maybe not the legal kind. They might have taken insider trading to a new level worthy of the history annals. They supposed smarter than genius cadre really screwed up when they admitted the code and the trade program could be used to manipulate markets. So the public and authorities must believe that the venerable Goldman Sachs could gather illicit trading profits, had the capability to gather illicit trading profits, but did not gather illicit trading profits. Finally, the masses have some evidence of how GSax has managed to beat the market consistently. They appear to have front-run the NYSE stock market, and brazenly defy the prosecutors because they might exert considerable control over them. Thanks to their strong control of most USGovt financial apparatus, the FBI helped to contain the problem. The only trouble is that London and Germany have their hands on the software, and might actually reveal its inner workings. One can only hope they reveal more about it than exploit its usage further. Is this a trade secret issue or a crime secret issue? You decide! One might wonder if GSax might become too distracted and preoccupied with managing the leak, so that they take their eye off the five game fields they attempt to control. One colleague claims the Powerz are stuck managing bigger and heavier and more numerous balls in a vast juggling act bound to end.
Putting the Gold in Goldman
By Eric J. Fry
Meanwhile, back at the former Treasury Secretary's old stomping grounds, business continues as usual…or rather, as UN-usual.
Despite the enormous volatility besetting all major financial markets during the last two years, Goldman Sachs has steadily increased its risk exposure, as measured by value-at-risk (VAR) – a widely utilized risk metric. VAR, as presented in Goldman’s quarterly reports, displays the firm’s probable maximum loss per trading day. During the recent quarter, Goldman’s daily VAR established a new record high for the firm of $245 million.
One might have imagined that last fall's stock market collapse, coupled with the near-implosion of the financial system, would have reduced Goldman's appetite for risk just a smidge. But the VAR data tell the exact opposite story.
Goldman upped its risk exposure, even while borrowing billions of dollars from the government. And by the way, Goldman's VAR did not merely increase in absolute terms, it also increased relative to the size of the company’s shareholder equity. In other words, no matter how you slice or dice the numbers, this swashbuckling financial firm has been ramping up its risk exposure.
The USDollar is vulnerable here and now, as a new wave of bank losses is imminent from numerous types of mortgages along with some basic types. Let’s see if the grapevine is correct, that the USDollar will begin to see a trashing initiative starting this weekend, out of Asia. They must be impatient beyond description. This autumn is expected to see some rather tumultuous events unfold, as the US financial structures are breaking across most of its ramparts even as loyalty to it is fading like a mist. There will be no return to the US of yesteryear, only a tragic march.
-Jim Willie CB
Tuesday, July 14, 2009
Unlocking the Money Matrix - The Summers Gold Price Suppression Scheme
By Jake Towne, the Champion of the Constitution
Here is how the scheme works:
1. Central banks, like the FED, takes gold bars from their vaults and leases them to cartel entities like Goldman Sachs at a low rate typically around 1%. Unless the sale is announced like Gordon Brown's infamous sale of 60% of England's gold reserves from 1999-2002 at $275/oz., the central bank continues to carry gold on lease and gold in the vault as one line item on their balance sheet.
2. The cartel then sells the physical gold into the futures market at spot price. The spot and future prices were suppressed by this extra supply. Large dumps can be orchestrated to cause "waterfalls" in the price due to algorithm or stop-loss trading.
3. Now the cartel has plenty of capital which could be leveraged by an investment bank at 30:1 or higher and used for ANY transaction. (Similar plays on interest rate mismatches were also executed on fiat currencies, most infamously the Japanese Yen-US Treasury carry trade, but these plays were made far easier with the golden 'canary' silenced.)
4. The physical gold bars leave the exchanges. Most of the central bank gold is melted down to meet the supply deficit, and now adorns the necks of Indian women or rests in the vaults of investors.
There are approximately 160,000 metric tons of aboveground gold stock. The World Gold Council reports that the world's central bank gold reserves are at 29,698 metric tons as of June 2009, and this is a fall from the 35,582 metric tons reported in 1990 while the world's money supply has more than tripled since then. However, the WGC statistics do not have the rigor of independent audits and are incorrect as shown by the abrupt doubling of China's disclosed reserves overnight. As Ed Wener of GATA reported in 2005 and James Turk related in 2009, it is highly probable that 12,000 to 15,000 additional metric tons has been leased by the central banks into the marketplace.
In the March 2001 audit of the Exchange Stabilization Fund (ESF), the Treasury refers its (unconstitutional) powers to "deal in gold, foreign exchange, and other instruments of credit and securities the Secretary considers necessary" to promote "orderly exchange arrangements and a stable system of exchange rates." Along with the blatant remark by Greenspan above, this appears to me to be a carte blanche to trade in the gold market, and as late as 2000 the FED still publicly reported the ESF as controlling an unspecified portion of our nation's gold. To this day, the US government and the FED report gold stock on lease and gold in the vault as a single line item.
It is not outside the realm of possibility – though unproven - that the US government completed a gold swap transaction with Germany, where we traded gold stored in the US for gold stored in Germany as Turk surmised in "Behind Closed Doors," which was based on FED meeting minutes in 2001. Of course, the swapped gold from Germany would then have been used by the US government to dump gold on the London market. Recent events with Germany and subsequent Obama-Merkel meetings hint that they may be calling for the return of their gold. The Bundesbank even published a document back in 2000 that gave a hypothetical example of a gold swap with the FED.
Federal Reserve Warns of Economic Disaster If HR 1207 Passes
Presently, the Government Accountability Office has not been able to audit the Federal Reserve System. Mr. Kohn said on this topic, “The Federal Reserve strongly believes that removing the statutory limits on GAO audits of monetary policy matters would be contrary to the public interest by tending to undermine the independence and efficacy of monetary policy.” Mr. Kohn, and others within the Federal Reserve, believes that government meddling in the U.S. Central Bank could come at a high cost, “The bond rating agencies view operational independence of a country’s central bank as an important factor in determining sovereign credit ratings, suggesting that a threat to the Federal Reserve’s independence could lower the Treasury’s debt rating and thus raise its cost of borrowing.”
Government meddling in the US Central Bank? Who is this jackass kidding? Himself, obviously. The money the US Central bank plays with is, quite frankly, the government's money. The government created the Federal Reserve, and if the government so choses they can destroy the Federal Reserve just as easily. The US Government backs the money, NOT the Federal Reserve. Their assertion here is ludicrus. Mr Kohn, Mr Bernanke, and their bankster buddies have all gotten far to big for their britches. It is high time the American people demand the death penalty for these thieves. The Federal Reserve is a 100% unconstitutional entity that has been stealing the wealth of the American People for FAR TO LONG. Contact your congressman and senator today and DEMAND the destruction of the US Federal Reserve.
The Game Changer?
By: Theodore Butler
I am convinced that the CFTC now fully appreciates the position limit and manipulation problem in silver. Fix the position limit problem in silver and the manipulation is over. Let me repeat that. If the CFTC sets position limits in COMEX silver at 1000 to 1500 contracts for both longs and shorts and discontinues the phony hedging exemptions currently granted to the big US banks and other shorts, the silver manipulation is history. I think this is in the cards. I think this is what Chairman Gensler and Commissioner Chilton intend. But it won’t happen if the big shorts get their way. If they are allowed to continue to hold their manipulative short positions, then we must wait for the physical shortage to break the manipulation.
For more than 20 years, the CFTC has turned a blind eye and a deaf ear to the problem of legitimate position limits in silver. Apparently, that has changed. The new Chairman appears to be interested in the public’s opinion on this issue. It’s time for you to speak up. It’s time to be specific. The issue is position limits, not the budget deficit, not the dollar, not his previous employment at Goldman Sachs. He is doing what he should be doing and as such, deserves to be treated with respect. Ask him and the other commissioners to reduce the position limits in silver to between 1000 to 1500 contracts, or please explain why that limit is not appropriate. Ask him to do away with the phony exemptions granted to a few big shorts or make transparent the reason why they are short. Make it short, sweet and specific - lower the silver limits to equal all other commodities and disallow phony exemptions. Send this article if you want. This could be a game changer. Don’t delay.
Monday, July 13, 2009
Production of United States Mint American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .”
The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.
Commodity exchanges can dump gold debts on ETFs
Dear Friend of GATA and Gold:
GATA board member Adrian Douglas discloses in the report below, titled "The Alchemists," that the New York and Tokyo commodity exchanges have been permitting their gold futures contracts to be settled not in real metal but in shares of gold exchange-traded funds (ETFs). This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have and that, in any case, are operated by the investment banks running major short positions in gold.
Thus it is likely that the paper claims to the world's supply of gold are greater than even GATA has suspected -- that the gold supply is even more oversubscribed and that "paper gold" is being created at an ever more frantic rate to suppress gold's price.
The ability to offload futures contract gold obligations to the ETFs could become the principal mechanism of the gold price suppression scheme. GATA asks its supporters to call Douglas' report to the attention of financial journalists, market regulators, and elected officials everywhere.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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By Adrian DouglasSaturday, July 11, 2009
Fed Independence or Fed Secrecy?
By: Dr. Ron Paul, U.S. Congressman
Last week I was very pleased that hearings were held on the independence of the Federal Reserve system. My bill, HR 1207, known as the Federal Reserve Transparency Act, was discussed at length, as well as the general question of whether the Federal Reserve should continue to operate independently.
The public is demanding transparency in government like never before. A majority of the House has cosponsored HR 1207. Yet, Sen. Jim DeMint's heroic efforts to attach it to another piece of legislation elicited intense opposition by the Senate leadership.
The hearings on Capitol Hill provided us with a great deal of information about the types of arguments that will be levied against meaningful transparency and how the secretive central bankers will defend the status quo that is so beneficial to them.
Claims are made that auditing the Fed would compromise its independence. However, by independence, they really mean secrecy. The Fed clearly cherishes its vast power to create and spend trillions of dollars, diluting the value of every other dollar in circulation, making deals with other central banks, and bailing out cronies, all to the detriment of the taxpayer, and to the enrichment of themselves. I am happy to challenge this type of "independence."
They claim the Fed is endowed with special intellectual abilities with which to control the market and that central bankers magically know what the market needs. We should just trust them. This is patently ridiculous. The market is a complex and intricate thing. No one knows what the market needs other than the market itself. It sends signals, such as prices, that should be reacted to and respected, not thwarted and controlled. Bankers are not all-knowing and cannot ignore the rules of supply and demand. They might act as if they are, but their manipulation of the market just ends up throwing it wildly off balance, which gives us the boom and bust cycles.
They claim the Fed must remain apolitical. No organization is apolitical that relies on the president to appoint the chairman. In fact, it is subject to the worst sort of politics -- power to create trillions of dollars and affect the value of every dollar in the country without the accountability of direct elections or meaningful oversight. The Fed typically enacts monetary policy that is favorable to particular administrations close to elections, to the detriment of long term considerations. They do this partly because of the political appointee process for the chairmanship.
The only accountability the Federal Reserve has is ultimately to Congress, which granted its charter and can revoke it at any time. It is Congress' constitutional duty to protect the value of the money, and they have abdicated this responsibility for far too long. This was the issue that got me involved in politics 35 years ago. It is very encouraging to finally see the issue getting some needed exposure and traction. It is regrettable that it took a crisis of this magnitude to get a serious debate on this issue.
Audit would harm country, Fed vice chair warns
WASHINGTON -- Federal Reserve Vice Chairman Donald Kohn on Thursday launched a robust defense of the U.S. central bank's independence and warned that efforts to put monetary policy under political sway would hurt the economy.
Curbing the Fed's independence could both result in higher long-term interest rates and hurt the United States' credit rating, Kohn said.
"Any substantial erosion of the Federal Reserve's monetary independence likely would lead to higher long-term interest rates as investors begin to fear future inflation," Kohn said in remarks prepared for delivery before a congressional committee.
Kohn is due to testify later on Thursday. A copy of his remarks was released before the hearing.
Kohn's testimony comes as Congress debates President Barack Obama's plan for regulatory reform, which envisions the Fed taking on the role of systemic risk regulator, in a bid to fix a system that failed to prevent a financial crisis last year.
The proposal to expand the Fed's powers has increased calls for accountability at the central bank, and a bill put forward by Republican Congressman Ron Paul to expose it to a full audit by a government watchdog has won support from a majority in the House of Representatives.
Kohn said such a move could be highly detrimental.
"The bond rating agencies view operational independence of a country's central bank as an important factor in determining sovereign credit ratings, suggesting that a threat to the Federal Reserve's independence could lower the Treasury's debt rating and thus raise its cost of borrowing," he said.
Kohn said allowing that the Government Accountability Office to audit Fed monetary policy would be a bad mistake.
"The Federal Reserve strongly believes that removing the statutory limits on GAO audits of monetary policy matters would be contrary to the public interest by tending to undermine the independence and efficacy of monetary policy," he said.
U.S. banks still dominate COMEX gold, silver shorts
By: Gene Arensberg
ATLANTA -- Both gold and silver continued to get sold down this past week, probably a case of fearful investors raising cash ahead of a perceived storm brewing. However, both metals are nearing obvious areas of implied technical support and the news lately sure seems to be more supportive of gold and silver prices than not.
Trouble is that public support for the “governistas” in Washington has become the new bear market. Barack Obama and the current majority in Congress were elected by people who expected them to fix a broken economy. Instead there is a rapidly growing sentiment in the U.S. that the new majority representation decided to take advantage of the situation (and take advantage of every American) to force their radical, big spending, socialist agenda through on the basis of their “mandate.”
“Yes we can,” has become, “Yes we can because we are in power.”
“Hope” is quickly morphing into disillusionment, mistrust and despair as more and more Americans end up in the unemployment line and the official unemployment rate approaches double digits.
Americans don’t like it when their elected officials take obvious advantage of them.
For the national economy, confidence is a prerequisite to recovery, but when the government is more interested in pushing through controversial new, higher tax plans and shaky-science “green” save-the-planet-at-our-expense proposals during a crisis (when the economy is reeling and the taxpayers are just plain unable to pay for them) … well, confidence can be hard to come by.
The economy is just going to have to recover in spite of, not because of all the “help” being thrown at it.
It may not be too late for the in-your-face politicos to reverse course and salvage or repair some of the damage done, but that seems unlikely. Moderates and independents are already distancing themselves from the crew they voted for this past big election. Unless there is a real recovery showing soon, it won’t be long before even the president’s rank and file supporters turn on him, just like they did with another smiling democratic president ridden in to “correct the economy due to Republican abuses” in 1976.
The “good news?” It was under that 1977-1981 “leadership” by Jimmy Carter that we last saw a parabolic spike higher for gold and silver.
U.S. Budget Gap Exceeds $1 Trillion for Fiscal Year
July 13 (Bloomberg) -- The U.S. budget deficit topped $1 trillion for the first nine months of the fiscal year and broke a monthly record for June as the recession subtracted from revenue and the government spent to rejuvenate the economy.
The shortfall for the fiscal year that began Oct. 1 totaled $1.1 trillion, the first time that the gap for the period surpassed $1 trillion, Treasury figures showed today in Washington. The excess of spending over revenue for June was $94.3 billion, the first deficit for that month since 1991, according to data compiled by Bloomberg.
Individual and corporate tax receipts are sliding even as the worst recession in five decades shows signs of easing because the jobless rate continues to rise -- reaching a 26-year high in June -- and companies have yet to see a sustained increase in demand. The shortfall is also widening as the government ramps up spending from the $787 billion stimulus program President Barack Obama signed into law in February.
“This is a difficult pill to have to swallow,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “The economy and banking system need these funds to recover, yet it will ultimately hit Americans’ wallets hard. It’s a necessary evil.”
The Treasury is increasing auctions of securities to finance the government’s spending. After more than doubling Treasury note and bond offerings to $963 billion in the first half, another $1.1 trillion may be sold by year-end, according to Barclays Plc. The second-half sales would be more than the total amount of debt sold in all of last year. http://www.bloomberg.com/apps/news?pid=20601103&sid=a4huQyL1pP2k