Baltic Dry Index. 2156 -69
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
Banking was conceived in iniquity and
born in sin.
Josiah Stamp.
Josiah Charles Stamp, 1st Baron
Stamp, Bt, GCB, GBE, FBA, was a British civil servant, industrialist,
economist, statistician, writer, and banker. He was a director of the Bank of
England and chairman of the London, Midland and Scottish Railway.
Is there
anything on earth our larcenous banksters aren’t rigging? We open today with
more on our new lawless age. As the Great Nixonian Error of fiat money and
centrally planned controlled banksterism staggers towards its final bad end,
Bloomberg covers our rigged currency markets. Stay long fully paid up physical
precious metals. A fiat currency revulsion lies ahead later in this decade.
But if you want to continue to be slaves
of the banks and pay the cost of your own slavery, then let bankers continue to
create money and control credit.
Josiah Stamp.
How Secret Currency Traders’ Club Devised Biggest Market’s Rates
Dec 19, 2013 12:07 AM GMT
It’s 20 minutes before 4 p.m. in London and currency
traders’ screens are blinking red and green. Some dealers have as many as 50
chat rooms crowded onto four monitors arrayed in front of them like shields.
Messages from salespeople and clients appear, get pushed up by new ones and
vanish from view. Orders are barked through squawk boxes. This is the closing “fix,” the thin slice of the day when foreign-exchange traders buy and sell billions of dollars of currency in the unregulated $5.3-trillion-a-day foreign-exchange market, the biggest in the world by volume, according to the Bank for International Settlements. Their trades help set the benchmark WM/Reuters rates used to value more than $3.6 trillion of index funds held by pension holders, savers and money managers around the world.
Now regulators from Bern to Washington are examining evidence first reported by Bloomberg News in June that a small group of senior traders at big banks had something else on their screens: details of each other’s client orders. Sharing that information may have helped dealers at firms, including JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), UBS AG (UBSN) and Barclays Plc (BARC), manipulate prices to maximize their own profits, according to five people with knowledge of the probes.
----At the center of the inquiries are
instant-message groups with names such as “The Cartel,” “The Bandits’ Club,”
“One Team, One Dream” and “The Mafia,” in which dealers exchanged information
on client orders and agreed how to trade at the fix, according to the people
with knowledge of the investigations who asked not to be identified because the
matter is pending. Some traders took part in multiple chat rooms, one of them
said.
The allegations of collusion undermine one of society’s fundamental principles -- how money is valued. The possibility that a handful of traders clustered in a closed electronic network could skew the worth of global currencies for their own gain without detection points to a lack of oversight by employers and regulators. Since funds buy and sell billions of dollars of currency each month at the 4 p.m. WM/Reuters rates, which are determined by calculating the median of all trades during a 60-second period, that means less money in the pension and savings accounts of investors around the world.
At stake is the integrity of a market that affects the daily valuations of private and public money alike, from the $261 billion Sacramento-based California Public Employees’ Retirement System to the $237 billion Scottish Widows Investment Partnership in Edinburgh, from the $4.1 trillion BlackRock Inc. (BLK) in Manhattan, the world’s largest asset manager, to the $1.2 trillion Tokyo-based Government Pension Investment Fund, the biggest pension.
“This is a market that is far more
amenable to collusive practices than it is to competitive practices,” said Andre Spicer, a professor at the Cass
Business School in London, who is researching the behavior of traders.
More
In yet more
rigging, the Fedster’s said yesterday they will start “tapering” QE Forever from
January, albeit only by a miniscule 10 billion a month, still leaving QE
Forever running at 75 billion a month, or 900 billion a year. More than Hank Paulson’s 700 billion “one off”
emergency TARP cash injection in 2008. The
“Tiny Taper” is to be split 50:50 between bonds and mortgages. To cover the
announcement, stock markets from NY to Tokyo were goosed/rigged higher for the
benefit of Ebenezer Squid and his ilk. We speed on towards the ultimate Great
Crash and Bust.
Below,
compare and contrast, The Telegraph goes for “magic,” the more conservative
prepare for the bursting of the Fed’s final bubble.
When a government is dependent upon bankers for money, they and
not the leaders of the government control the situation, since the hand that
gives is above the hand that takes… Money has no motherland; financiers are
without patriotism and without decency; their sole object is gain.”
Napoleon Bonaparte
Farewell QE, you have been a magnificent success
The moral contours of QE depend on your angle of vision. But would you rather be surrounded by mass unemployment?
As the US Federal Reserve starts
to drain dollar liquidity from the global system at long last, let us celebrate
success. Quantitative easing has worked marvellously well. Monetary policy has
been vindicated.
The US, UK and Japan are all
recovering, moving closer to "escape velocity". The Swiss National
Bank - that bastion of orthodoxy - has kept its economy on an even keel by
quietly amassing a bond portfolio equal to 85pc of GDP.
The crippled eurozone alone has
chosen to stagger on defiantly without monetary crutches. The result has been a
double-dip recession of nine quarters, the longest since the Second World War.
The austerity regime has been self-defeating even on its own crude terms. Debt
ratios have ratcheted up even faster.
There is no safe recovery yet.
France already has one foot back in recession. The OECD expects growth of 1pc
for the eurozone in 2014, with unemployment stuck above 12pc into the middle of
the decade. Such is the price of EMU ideology.
The diverging fortunes of the QE
bloc and the EMU bloc prove beyond doubt that monetary stimulus packs a
powerful punch. Without becoming entangled in the vendetta between Friedmanites
and Keynesians - I value the insights both in the post-bubble phase, as well as
"Austrian" insights before the bubble builds - the central bank
experiment of 2008-2013 shows that blasts of money can greatly offset the pain
of budget cuts, even when interest rates are zero.
This should come as no surprise. There
is nothing new about QE. The Bank of England conducted variants of it in
Napoleonic times, watching the weather vane for easterly winds up the Thames.
It would calibrate liquidity needs by buying Gilts as the ships came in. The
Venetian Grain Office did much the same in the 14th Century. The Genoese and
the Flemish had their own variants.
----- The Fed's $3.2 trillion bond spree since 2009 has certainly been imperfect. It has fuelled asset bubbles, not by mistake, but by design. Fed chairman Ben Bernanke puts much faith in the wealth effect, the trickle down theory that understandably disgusts Pope Francis in his latest apostolic exhortation. If it were done again, at least some of the stimulus should go straight into the veins of the economy through public works projects. But let us not quibble.
America has this year weathered
the most drastic austerity cuts since demobilisation at the end of the Korean
War in the 1950s. Net fiscal tightening has been 2.5pc of GDP, yet the economy
has muddled through. The Fed's $85bn monthly bond purchases - soon to be $75bn
- have blunted the shock.
The US has not spiralled into
inflation as so many feared. The Fed's measure of core PCE inflation (without
food and energy) has dropped to 1.1pc, close to the post-Lehman trough, and too
low for comfort. Mr Bernanke has surely taken a risk tapering into this
deflation downdraft, and may live to regret it. The Fed may be underestimating
the sheer force of the deflationary wave spreading through the global economy
from China as the country invests $4 trillion each year, much of it in
factories and industrial plant.
Be that as it may, the US budget
turnaround is impressive. The deficit is running at 3pc of GDP on a quarterly
basis, a remarkable fall from the 12pc peak in 2009. The debt ratio has
stablilised and even begun to fall as recovery causes a delayed surge in tax
revenues. The federal debt has dropped from 101.5pc to 99pc of GDP in the past
six months.
This may surprise those who think
it necessary to generate a surplus in order to cut debt ratios. That is the
Schwabian housewife syndrome, which confuses an economy with a family budget.
This error is written into EMU law through the Fiscal Compact, a formula for
two decades of depression. In reality, nominal GDP merely has to grow faster
than the debt stock. Magic does the rest.
More
The Real Numbers Behind America’s Phony Recovery
Bill Bonner Bonner & Partners Posted Dec 18, 2013Tomorrow is the big day.
Investors are on the edges of their seats, waiting to find out what the Fed will do.
Taper? No taper? Or maybe it will taper on the tapering off?
Our guess is the Fed will not commit to a serious program of reducing its support to the bond, equity and housing markets.
It’s too dangerous.
Ben Bernanke – the man who didn’t see the housing crash coming – won’t want to see the stock market collapse just before he leaves office. He’ll want to go out on a high note…
…and that means guaranteeing more liquidity.
Investors don’t seem worried. Yesterday, the Dow rose 130 points. Gold was up $10 an ounce.
Most of the reports we read tell us the economy is improving. Unemployment is going down. Meanwhile, manufacturing levels are rising.
Compared to Europe, the US is a powerhouse of growth and innovation, they say. Compared to emerging markets, it is a paragon of stability and confidence.
How much do investors love the US?
Let us count the ways:
1. GDP
per capita is running 7% – ahead of where it was in 2007. Among the world’s
major developed economies only Germany can boast of anything close. All the
rest are falling behind.
2. The
budget deficit – which was running at about 10% of GDP – is now down to just 4%
of GDP.
3. Unemployment
is going down, too. Heck, just 7 out of 100 Americans are officially jobless.
Didn’t Bernanke say he would tighten up when it hit that level?
4. And
look at prices. Consumer price inflation is running at just 1% over the last 12
months. No threat from inflation, either.
Statistical Folderol
But wait…
What if all these things were delusions… statistical folderol… or outright lies? What if the true measures of the economy were feeble and disappointing? What if the US economy was only barely stumbling and staggering along?
Well, dear reader, you surely expect us to tell that the US economy is a hidden disaster… and we won’t disappoint you.
GDP? Carmen Reinhart studied the performance of rich economies following a financial crisis. Her paper, “After the Fall,” showed that, six years after a crisis, per capita GDP was typically 1.5 percentage points lower than in the years before the crisis. But in the US, per capita GDP growth is running 2.1% lower than its pre-crisis level – significantly worse than average.
Deficits? Super-low interest rates have helped debtors everywhere. “Never have American companies brought a greater share of their sales to the bottom line,” writes Bill Gross. How did they do that? Largely by taking advantage of the Fed’s interest rate suppression program. But hey, the US government is the world’s biggest debtor. It is the primary beneficiary of the Fed’s miniscule rates.
That’s part of the reason why deficits are low. Let the yield on the 10-year T-bond return to a “normal” 5%, and we’ll see deficits soar again. (Interest payments, under this scenario, would add an additional $360 billion a year to the deficit.)
Besides, it’s not only the deficit that counts. It’s also the total level of debt… and particularly the debt financed with funny money from the Fed.
Only twice in US history has the ratio of US Treasurys held at the Fed gone over 10% – once in 1944 and again today. The first time, it was a national emergency: World War II. Now, the Fed is merely fighting to protect a credit bubble.
Inflation? Yes, consumer price inflation is low. But what that shows is that real demand is still in a deleveraging trough. The money multiplier – the ratio of money supply to the monetary base – collapsed in 2008. It has not come back. Neither has the economy.
Unemployment? The rate has been doctored by removing people from the labor pool. The workforce is now smaller – as a percentage of the eligible pool – than at any time since 1978.
Besides, what is important is not the rate, but what people get from employment. On that score, it is a catastrophe. According to a Brookings Institution study, the average man of working age earns 19% less in real (inflation adjusted) terms today than he did during the Carter administration!
A Strange Kind of Recovery
What kind of economy is it that reduces a man’s wages over a 43-year period?
We don’t know. But it’s not likely to win any prizes.
But why, with so many strikes against it, does the US economy still have the bat in its hands?
It’s partly because the Fed has pumped up stock, bond and house prices – not to mention net corporate profit margins (by reducing the interest expenses on corporate debt) and consumer spending (through entitlement programs funded through the Treasury with ultra-low interest rates). So, the averages look pretty good… and they mask the ugliness beneath them.
The rich got richer on the Fed’s EZ money. But the average “capita” is actually poorer.
The bottom 90% of the population – people in 9 houses out of 10 – have 10% less income than they had 10 years ago.
This is not a success story. It’s a disaster. And not one that tempts us into an overvalued US stock market.
The last
time a central bank attempted a tiny taper was back in Japan in 2006. All went
well for the first few weeks then the stock market collapsed almost 25% as
everyone attempted to sell out at the top.
It is easy to dodge our responsibilities,
but we cannot dodge the consequences of dodging our responsibilities.
Josiah Stamp.
At the Comex
silver depositories Wednesday
final figures were: Registered 52.28 Moz, Eligible 119.46 Moz, Total 171.74 Moz. Someone seems to be expecting a massive
December delivery.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more
on the skirmish war between China and Japan. The bitcoin was “invented” in
Japan by no one knows or why. After China bombed the bitcoin late last week, it
looks like Japan’s bitcoiner’s have struck back. Yen, yuan, euros anyone?
China’s central bank hacked; angry bitcoin traders may be to blame
December 18, 2013, 11:31 PM
As
bitcoin halved in value after a two Chinese exchanges halted yuan deposits,
China’s central bank was the target of a hacking attack on Wednesday, with
state media suggesting angry bitcoin investors may be to blame.
The official site of People’s Bank of China (PBOC) went down around 5 p.m. local time Wednesday, possibly due to an attack by bitcoin traders after the central bank curbed bitcoin transactions in China, the state-run China News Service said.
The news agency cited central-bank officials as saying were aware of the issue and had been working to bring the site back online, but they didn’t confirm whether the problem was related to bitcoins.
“Some Internet users claimed the central bank was hit by a DDoS [distributed denial-of-service] attack. We strongly condemn those hackers,” BTC38, a Chinese bitcoin exchange, said in an online statement on Wednesday. “Our site has also been DDOS’d several times. No matter what, those attacks are irrational and illegal.”
Last Thursday, the PBOC and several top regulatory agencies warned in a joint statement that bitcoin “is not a real currency” and that Chinese financial institutions and payment processors shouldn’t handle bitcoin transactions.
The central bank also met on Monday with several third-party payment processors and ordered them not to provide service for the bitcoin exchanges, according to China News Service.
On Wednesday, China’s two major bitcoin exchanges — BTC China and OKCoin — announced they would temporarily stop accepting yuan deposits.
History records that the money changers have used every form of
abuse, intrigue, deceit, and violent means possible to maintain their control
over governments by controlling money and its issuance. –
James Madison
The monthly
Coppock Indicators finished November:
DJIA: +190 Up. NASDAQ: +281 Up. SP500: +232 Up. The Fed’s final bubble
continues to grow, until QE Forever isn’t forever. Up will remain up, until one
fine day out of the blue the Fed finally loses control, or the next Lehman
hits.
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