Showing posts with label BANKING INDUSTRY. Show all posts
Showing posts with label BANKING INDUSTRY. Show all posts
Monday, August 20, 2012
Wednesday, November 10, 2010
Bank Of North Dakota: America's Only 'Socialist' Bank Is Thriving During Downturn (VIDEO)
The Huffington Post
(AP) The Bank of North Dakota - the nation's only state-owned bank - might seem to be a relic.But now officials in other states are wondering if it is helping North Dakota sail through the national recession.
Gubernatorial candidates in Florida and Oregon and a Washington state legislator are advocating the creation of state-owned banks in those states. A report prepared for a Vermont House committee last month said the idea had "considerable merit." Liberal filmmaker Michael Moore promotes the bank on his Web site.
"There's a lot of hurt out there, a lot of states that are in trouble, and they're tying the Bank of North Dakota together with this economic success that we're having right now," said the bank's president, Eric Hardmeyer.
Hardmeyer says he's gotten "tons" of inquiries about the bank's workings, including questions from officials in California, Michigan, New Mexico, Ohio and Washington state. North Dakota has the nation's lowest unemployment rate at 4.4 percent, soaring oil production and a robust state budget surplus - but Hardmeyer says the bank isn't responsible for the prosperity.
"We are a catalyst, perhaps, or maybe a part of it," he said. "To put this at our feet is flattering, but it frankly isn't true."
WATCH: Exclusive sneak-peak of a DVD extra from Michael Moore's 'Capitalism: A Love Story
,' on the Bank of North Dakota. The DVD comes out March 9th.
,' on the Bank of North Dakota. The DVD comes out March 9th. Read Full Article
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Tuesday, October 26, 2010
Want to get away with murder? Become a bank
Fortune
October 26, 2010
The biggest danger to the U.S. capitalist system doesn’t come from communists or community activists or left-wing academics. It comes from some of the nation’s biggest financial institutions. These companies, which helped create the financial meltdown that touched off the Great Recession, have now found yet another way to undermine the public’s faith in capitalism and markets: the foreclosure fiasco.
Even before the foreclosure problem appeared, the level of public distrust of our financial and political systems was approaching the pathological. It’s going to get even worse when the true lesson of this episode sinks in. To wit: If you screw up big-time when you deal with a giant bank, you’re toast. If the giant bank screws up when it deals with you, it gets a do-over.
Sure, many — probably most — of the people whose mortgages are being foreclosed got in trouble because they overreached or lost their jobs, not because anyone cheated them. But if we’re going to have rules, they ought to be binding on everyone. If I’m supposed to obey the law and pay my bills, the people I’m paying ought to have to obey the law too.
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Thursday, October 14, 2010
World Financial System Not Sustainable
The financial system the world has evolved on the Bank of England model is not sustainable. It creates nearly all money as debt. Such money only exists as long as someone is willing and able to pay interest on it. It disappears, wholly or partially, in recurring financial crises. Such a system requires that new debt must be created faster than principal and interest payments fall due on old debt.
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| No sovereign government should ever, under any circumstances, give over democratic control of its money. Photo: Zack McCarthy. | |
A sustainable financial system would enable the real economy to be maintained decade after decade and century after century at its full employment potential without recurring inflation and recession. By this standard, a financial system that creates money only through the creation of debt is inherently unsustainable.
When a bank makes a loan, the principal amount of the loan is added to the borrower’s bank balance. The borrower, however, has promised to repay the loan plus interest even though the loan has created only the amount of money required to repay the principal-but not the amount of the interest.
Therefore unless indebtedness continually grows it is impossible for all loans to be repaid as they come due. Furthermore, during the life of a loan some of the money will be saved and re-lent by individual bond purchasers, by savings banks, insurance companies etc. These loans do not create new money, but they do create debt.
While we use only one mechanism – bank loans – to create money, we use several mechanisms to create debt, thus making it inevitable that debt will grow faster than the money with which to pay it. Recurring cycles of inflation, recession, and depression are a nearly inevitable consequence.
If, in the attempt to arrest the price inflation resulting from an excessive rate of debt formation, the monetary authorities raise the rate of interest, the result is likely to be a financial panic. This in turn may result in a sharp cutback in borrowing.
Monetary authorities respond to bail out the system by increasing bank reserves. Governments may also respond by increasing the public debt- risking both inflation and growing government deficits.
FOUR COMMON SENSE RULES
Governments got into this mess by violating four common sense rules regarding their fiscal and monetary policies. These rules are:
1. No sovereign government should ever, under any circumstances, give over democratic control of its money supply to bankers.
2. No sovereign government should ever, under any circumstances, borrow any money from any private bank.
3. No national, provincial, or local government should borrow foreign money to increase purchases abroad when there is excessive domestic unemployment.
4. Governments, like businesses, should distinguish between “capital” and “current” expenditures, and when it is prudent to do so, finance capital improvements with money the government has created for itself.
A few words about the first two of these rules…
1. There is persistent pressure from central bankers and academic economists to free central banks from the obligation to consider the effects of their actions upon employment and output levels so that they can concentrate on price stability.
This is a very bad idea indeed. Dominated by bankers and economists, central banks are entirely too prone to give exclusive attention to creditor interests to the exclusion of worker interests. Amending central bank charters to give them independence from democratic oversight, or to set up “price stability” as their only goal would complete their subjection to banker interests. Canada’s own Mackenzie King said it all, “Without Government creation of money, talk of sovereignty and democracy is futile.”
2. Anyone who understands that banks create the money they lend can see that it makes no sense for a sovereign government, which can create money at near zero cost, to borrow money at high cost from a private bank.
The fact that most governments do borrow from private banks is one of the greatest errors of our times. If a government needs money created to pay for public spending it should create the money itself through its own bank; or spend the money debt and interest free as the United States did during the Revolution and again during the Civil War. If a government does not wish to “monetize” its deficits during periods of unusual need such as wartime, it should either make up the deficit with higher taxes or borrow only from the non-bank public-which cannot create the money it lends to the government….
When the Bank of Canada encourages the Canadian government, provinces, and municipalities to borrow in New York and Tokyo, it is a betrayal of Canada. Where should they borrow when new money is needed for government spending? They should borrow at the government owned Bank of Canada, paying near zero interest rates-just sufficient to cover the Bank’s running expenses.
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John H. Hotson was professor emeritus of economics University of Waterloo and executive director of the Committee on Monetary and Economic Reform (COMER), a Canadian based network of economists working for economic and monetary reform. This article is based on a series he published in the October 1994, November 1994, and January 1995 issues of Economic Reform, the COMER newsletter, Comer Publications, 3284 Yonge St., Suite 500, Toronto, Ontario, M4N 3M7, fax (416) 486-4674. He gave the PCDForum permission to use this material only five days before his untimely death on January 21, 1996 following heart surgery.
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Wednesday, October 13, 2010
Head of Investigator in Falcon Lake Case Delivered to Mexican Military
Kurt Nimmo
Infowars.com
October 13, 2010
Infowars.com
October 13, 2010
According to CNN, the severed head of the lead investigator in the Falcon Lake murder case, Rolando Armando Flores Villegas, was delivered to the Mexican military in a suitcase.
“His head was delivered to the army garrison this morning in a suitcase after he failed to report back home last night,” Zapata County, Texas, Sheriff Sigifredo Gonzalez Jr. said.
The report that Villegas was murdered appeared after the Tamaulipas state attorney general’s office provided conflicting information on whether authorities were looking for a pair of suspects in the case of David Michael Hartley’s disappearance. The murder of Villegas has fueled speculation that Hartley was killed by drug cartel enforcers.
Hartley was shot in the back of the head on the Mexican side of Falcon Lake in Texas while jet-skiing there with his wife on September 30. Tiffany Hartley escaped the gunfire by assailants described by the corporate media as “pirates.” She returned to the American side of the 60-miles-long “big fishing paradise” that straddles the U.S.-Mexican border after attempting to rescue her husband but was forced to abandon his body when the gunmen opened fire on her.
The attack on the Hartleys is not an isolated case. According to the Texas Department of Public Safety, gunmen armed with AK-47s and AR-15 rifles have attacked American tourists on Falcon Lake during a number of robberies in recent months. Gunmen use Argos-type fishing boats and are often dressed as Mexican police. Others have used duct-taped signs to disguise their boats as Texas Parks and Wildlife vessels, victims report. Since April 30, five incidents of armed robbery or attempted theft have been reported on the lake.
Humberto Palomares, a security expert at the Tamaulipas campus of the Colegio de Frontera Norte, told the Christian Science Monitor on October 7 that Mexican drug cartel thugs now claim to own public spaces.
Mexican drug cartels not only claim to own and control public spaces in Mexico, but also in the United States. In June, the U.S. ceded part of southern Arizona to the drug cartels. Pinal County Sheriff Paul Babeu said that a wide corridor of Arizona from the border North to the outskirts of Phoenix is effectively controlled by the cartels. In June, a drug cartel threatened police in Arizona after they confiscated a marijuana shipment. “The threats appear credible because various informants were able to identify the officers who intercepted the drug load,” ABC Newsreported.
In response to the situation in Mexico, the Obama administration said crime on the border is down, an assertion obviously at odds with reality. For more than two years, U.S. intelligence and law enforcement officials have been warning that the dramatic rise in violence along the southwestern border could eventually target U.S. citizens and spread into this country. Violence against Americans visiting Mexico has risen significantly over the last few years. According to the State Department, 79 U.S. citizens were killed last year in Mexico, up from 35 in 2007. In Juarez, across border from El Paso, Texas, 23 Americans were killed in 2009, compared with two in 2007.
After the Hartley story surfaced, the corporate media insinuated that Tiffany Hartley had fabricated it.
On Monday, David Michael Hartley’s widow said that she was frustrated by the lack of response from the federal government.
Mexico is now a narco state controlled by powerful and murderous drug cartels.
In large parts of the country, the drug cartels employ up to one-fifth of the population and own everyday businesses such gyms and a day-care centers. “We are approaching that red zone,”Edgardo Buscaglia, an expert on organized crime at the Autonomous Technological University of Mexico, told AZCentral in February. “There are pockets of ungovernability in the country, and they will expand.”
In July, it was reported that nearly 50 candidates and public figures were assassinated in the run up to Mexico’s 2010 state elections. Political murders have also targeted Americans. In March, a U.S. Consulate worker in Ciudad Juarez was ordered murdered by high-ranking drug cartel enforcer.
The drug cartel takeover of Mexico was facilitated in part by American banks. In June, it was discovered that Wachovia Corp. and Bank of America were involved in laundering drug money for the cartels. “This was no isolated incident,” Bloomberg reported. “Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers — including the cash used to buy four planes that shipped a total of 22 tons of cocaine.”
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Sunday, September 26, 2010
Credit Collapse and the Shadow Banking System
Web of Debt
While local banks are held in check by the new banking czars in Basel, Wall Street’s “shadow banking system” has hardly been curbed by regulators at all; and it is here that the 2008 credit crisis was actually precipitated. The banking system’s credit machine is systemically flawed and needs a radical overhaul.
On September 13, the Bank for International Settlements issued heightened capital requirements that will make lending even more difficult for local banks, which do most of the consumer and small business lending today. The new rules are ostensibly designed to prevent a repeat of the 2008 credit collapse, but they fail to address its real cause, which involves a “shadow” banking system that has largely escaped regulation.
What went wrong in September 2008 was not that the existing Basel II capital requirements were too low but that banks found a way around the rules. The Basel II rules base a bank’s capital requirement on how risky its loan book is, and banks can make their books look less risky by buying unregulated “insurance contracts” known as credit default swaps (CDS). This insurance, however, proved to be a fraud, when insurer AIG went bankrupt on September 15, 2008. The credit collapse that followed has normally been blamed on the collapse of the subprime housing market. But according to Yale economist, Gary Gorton, (whose views were recently embraced by Fed Chairman Ben Bernanke), the subprime problem was not itself sufficient to trigger a global credit freeze. What it did trigger was an old-fashioned bank run, in the not-so-familiar market known as the shadow banking system.
Bank runs don’t generally occur in the traditional banking system anymore, because (a) depositors are now protected by FDIC insurance, and (b) banks that run out of reserves can borrow from the Federal Reserve, which is empowered to create money ex nihilo (out of nothing). But FDIC insurance covers only $250,000 in deposits, and there is a massive and growing demand for banking by large institutional investors – pension funds, mutual funds, hedge funds, sovereign wealth funds – which have millions of dollars to park somewhere between investments. They want an investment that is secure, that provides them with a little interest, and is liquid like a traditional deposit account, allowing quick withdrawal.
The shadow banking system evolved in response to this need, operating largely through the repo market. “Repos” are sales and repurchases of highly liquid collateral, typically Treasury debt or mortgage-backed securities. The collateral is bought by a “special purpose vehicle” (SPV), which acts as the shadow bank. The investors put their money in the SPV and keep the securities, which substitute for FDIC insurance in a traditional bank. (If the SPV fails to pay up, the investors can foreclose on the securities.) To satisfy the demand for liquidity, the repos are one-day or short-term deals, continually rolled over until the money is withdrawn. This money is used by the banks for other lending, investing or speculating. But that puts the banks in the perilous position of Jimmy Stewart in “It’s a Wonderful Life,” funding long-term loans with short-term borrowings. When the investors get spooked for some reason and all pull their money out at once, the banks can no longer make loans and credit freezes.
In September 2008, investors were spooked when the mortgage-backed securities backing their repo “deposits” proved not to be “triple A” as represented. But the next time it might be something else, and Basel III has not fixed this systemic weakness. Arguably, the weakness cannot be fixed under the current scheme of private banking and credit. As noted in an article on Seeking Alpha by The Business Insider:
Our financial system remains vulnerable to another credit crunch, with many of the same exact features as the last. All it needs is someone to strike the match of panic.The question is how to eliminate this systemic risk:
Regulate shadow banking more tightly, and you probably have to also provide government backstops. Shudder. Try to shut the thing down or restrict it and you suck credit out of the system, credit which much of the non-financial ‘real’ economy uses and needs.The real economy needs credit, and choking it off by over-regulating the banks will kill the real economy. Indeed, according to Gary Gorton, the shadow banking system evolved because banks were already so over-regulated that they could not turn a profit. He writes:
Holding loans on the balance sheets of banks is not profitable…. This is why the parallel or shadow banking system developed. If an industry is not profitable, the owners exit the industry by not investing; they invest elsewhere. Regulators can make banks do things, like hold more capital, but they cannot prevent exit if banking is not profitable. ‘Exit’ means that the regulated banking sector shrinks, as bank equity holders refuse to invest more equity.
Toward a Better Solution
Only a complete overhaul of the banking system can eliminate these systemic flaws, flaws that ultimately stem from a misconception about what money is. We think of it as a “thing,” something that must be dug out of the ground or borrowed from someone who already has it. Since banks don’t have enough of this thing to cover their loans and investments, they engage in a shell game in which they advance credit and scramble to cover it with short-term loans, exposing them to the systemic risk of sudden and unpredictable withdrawals.
That is the old model, but today money and credit are something else. No gold or other commodity backs our money today. Nothing backs it but “the full faith and credit of the United States.” Money and credit are creatures merely of legal agreement, a tally of accounts keeping track of who owes what to whom. Two or more parties can enter into a legal agreement without having any money at all. They can advance credit against goods or services and engage in productive trade. The tribute exacted by a private banking monopoly actually hampers this productive flow. As Thomas Jefferson complained to Treasury Secretary Gallatin in 1815:
The treasury, lacking confidence in the country, delivered itself bound hand and foot to bold and bankrupt adventurers and bankers pretending to have money, whom it could have crushed at any moment.Jefferson wrote to John Eppes in 1813:
Although we have so foolishly allowed the field of circulating medium to be filched from us by private individuals, I think we may recover it…. The states should be asked to transfer the right of issuing paper money to Congress, in perpetuity.The “full faith and credit of the United States” could, and should, be overseen by a branch of the United States, just as legal agreements are overseen by the judiciary. Publicly-owned banks could issue the full faith and credit of the nation without worrying about capital or reserves. After all, if you are the United States, why do you need “reserves” of your own credit?
While we’re waiting for the Calvary to swoop down from Washington and save us – something that could take a while – we might consider setting up some state-owned banks. The Bank of North Dakota, currently the country’s only state-owned bank, is very stable and very profitable, returning a 26% dividend to the state. A bank of that sort could be an attractive investment for all those state and local rainy day funds, pension funds and other local government funds looking for greater returns from the low-risk investments allowed by their legislative mandates. We need to set up some banks that serve the needs of the real economy rather than those of Wall Street bankers, brokers and their super-rich clients for yet more bonuses, bailouts and paper profits. State-owned banks could fill the role the Wall Street banks have declined to fill, providing an effective credit engine for state and local economies.
Ellen Brown is an attorney and author of Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free
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Thursday, September 16, 2010
Foreclosures Rise; Repossessions Set Record
Joseph Pisani
Bank repossessions, often the final step in the foreclosure process after a home fails to sell at auction, increased about 2 percent from the month before to 95,364, a record high. At the same the number of properties that received default notices—the first step in the foreclosure process—decreased 1 percent from a month ago and fell 30 percent from a year ago, a sign that lenders are focusing on their backlog of foreclosure inventory before tackling new distressed loans, according to foreclosure listing website RealtyTrac, which released the report.
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Wednesday, September 15, 2010
Real IRA Targets Banks and Bankers
Henry McDonald
The Guardian
September 15, 2010
The Guardian
September 15, 2010
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| “We have a track record of attacking high-profile economic targets and financial institutions such as the City of London.” Photo of the Bank of England by Denis Barber. | |
Banks and bankers are now potential targets for the Real IRA, leaders of the dissident republican terror group have warned in an exclusive interview with the Guardian. Despite having only 100 activists they also said that targets in England remained a high priority.
In an attempt to tap into the intense hostility towards the banks on both sides of the Irish border they branded bankers as “criminals” and said: “We have a track record of attacking high-profile economic targets and financial institutions such as the City of London. The role of bankers and the institutions they serve in financing Britain’s colonial and capitalist system has not gone unnoticed.
“Let’s not forget that the bankers are the next-door neighbours of the politicians. Most people can see the picture: the bankers grease the politicians’ palms, the politicians bail out the bankers with public funds, the bankers pay themselves fat bonuses and loan the money back to the public with interest. It’s essentially a crime spree that benefits a social elite at the expense of many millions of victims.”
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Tuesday, September 14, 2010
Gold and Silver Explode as Banksters Abandon Market Manipulation
Kurt Nimmo
Infowars.com
September 14, 2020
Infowars.com
September 14, 2020
Gold has surged to a new high as the prospect of inflation reared its ugly head in the United Kingdom on bad news from a report indicating a weaker-than-expected eurozone industrial production. Germany and France, despite sovereign debt fears, have been able to manage anemic growth but today’s data signals a slow down.
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| Gold traded as high as $1,261.90 on Tuesday. Photo: Bullion Vault. | |
On Tuesday the gold price traded as high as $1,261.90 and as low as $1,246. “The U.S. dollar index was adding 0.03% to $81.90 while the euro was losing 0.19% to $1.28 vs. the dollar. The spot gold price was rising $14.30, according to Kitco’s gold index,” writes Alix Steel for The Street.
Silver also experienced a boost today. The precious metal was up 14 cents to $20.31. Earlier this month, spot silver trading reached its highest point since March 2008.
“While silver has many of the same investment attributes as gold, it enjoys the added advantage of industrial demand. And as a currency alternative, silver is more practical. It’s been used as a currency, most notably by the United Kingdom (pound sterling). The French word for money is argent, or silver. In fact, the United States and Great Britain were both on a silver standard up until the 1800’s,” explains Gabriel Wisdom, writing for Forbes on September 8.
Market observers believe silver prices will soon rise on speculation that JP Morgan is in the process of winding down its proprietary trading operations. “In the past years, compelling evidence of silver and gold price manipulation by JP Morgan has been found,” writes Elisheva Wiriaatmadja.
“JP Morgan was not just an accommodative good corporate citizen in the illegal transfer of the manipulative silver (and gold) COMEX short position. In addition to undisclosed government guarantees against loss, JP Morgan was given free reign to liquidate the COMEX short position at their discretion, knowing full-well the regulators would look the other way, no matter what dirty tricks were necessary to cause the price to collapse,” MarketWatch noted over two years ago.
Now that the banksters have decided to abandon their artificially low price scheme, the price of silver will rise, making it an excellent investment.
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Thursday, September 9, 2010
Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011
Matthias Chang
Global Research
September 9, 2010
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Global Research
September 9, 2010
Readers of my articles will recall that I have warned as far back as December 2006, that the global banks will collapse when the Financial Tsunami hits the global economy in 2007. And as they say, the rest is history.
Quantitative Easing (QE I) spearheaded by the Chairman of Federal Reserve, Ben Bernanke delayed the inevitable demise of the fiat shadow money banking system slightly over 18 months.
That is why in November of 2009, I was so confident to warn my readers that by the end of the first quarter of 2010 at the earliest or by the second quarter of 2010 at the latest, the global economy will go into a tailspin. The recent alarm that the US economy has slowed down and in the words of Bernanke “the recent pace of growth is less vigorous than we expected” has all but vindicated my analysis. He warned that the outlook is uncertain and the economy “remains vulnerable to unexpected developments”.
Obviously, Bernanke’s words do not reveal the full extent of the fear that has gripped central bankers and the financial elites that assembled at the annual gathering at Jackson Hole, Wyoming. But, you can take it from me that they are very afraid.
Why?
Let me be plain and blunt. The “unexpected developments” Bernanke referred to is the collapse of the global banks. This is FED speak and to those in the loop, this is the dire warning.
So many renowned economists have misdiagnosed the objective and consequences of quantitative easing. Central bankers’ scribes and the global mass media hoodwinked the people by saying that QE will enable the banks to lend monies to cash-starved companies and jump start the economy. The low interest rate regime would encourage all and sundry to borrow, consume and invest.
This was the fairy tale.
Then, there were some economists who were worried that as a result of the FED’s printing press (electronic or otherwise) working overtime, hyper-inflation would set in soon after.
But nothing happened. The multiplier effect of fractional reserve banking did not take off. Bank lending in fact stalled.
Why?
What happened?
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Claims of Recovery But Results Nowhere To Be Found
The American public is alarmed at what they see going on. Most of them do not understand what has been done to them. The propaganda fed to them daily has them completely confused and that is understandable. They know the financial sector has been bailed out and they somehow have to pay the bill. They have been deceived and few of them want to admit it. They have been told their economy is in recovery, but improvement is nowhere to be found. Government tells them inflation is 1.6% when they know it’s certainly higher than that and has been for some time. The only beacon of light, if they can discover it, is the truth of talk radio and the Internet. Through these methods of communication the truth can be found and it is reaching all around the world.
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| Between now and the end of February gold and silver should do very well. | |
The American and European banking sectors are generally insolvent and have been so now for a few years. Almost every day there are bank mergers you never hear about and more than 110 banks have gone under so far this year. Thousands of bank branches have disappeared and many unceremoniously have had name changes. The key to banking today is to carry two sets of books. One for the good assets and the other for the bad assets, as sanctioned by the Bank for International Settlements, the BIS, the governments in the US and Europe and the FASB. Most assets are marked to model, which means the bank determines their value arbitrarily, because no visible market exists for the assets. The bookkeeping is a travesty. The idea is to not let the public know how difficult and irreparable the situation really is. It is admitted that 829 banks are on a problem list, but that is just the tip of the iceberg. Failures should accelerate during the coming year. This loss of trust in the system is going to take its toll. Confidence will continue to wane as more and more pressure is brought up to bear versus dollar, which in turn will force gold higher, as it continues to reassert itself as the world’s only real currency. In the end it will spell failure for dollar denominated assets. That will finally bring recognition that the system has failed. This will bring great pressure on the banking system and some major banks will fail. This is why only enough cash should be kept in banks for three months expenses, or six months for businesses and in your safe at home along with your gold and silver coins and weapons, you should have $5,000 in small bills, for emergencies.
It is important to remember that this is part of a plan to nationalize the American banking system, so that it fits into the new National Socialist structure – the corporatist structure that members of the Council on Foreign Relations, the Trilateralists and the Bilderbergs have planned for us. This national banking system is to be the key to future World Government, or a New World Order.
As that effort moves forward the Fed is just short of two years of zero interest rates, a policy that they cannot easily change. If they raise rates at this juncture or stop increasing money and credit the bottom will fall out of the economy. These are the only methods they have of keeping the system alive. The Fed struggles to keep the ship afloat knowing this may be the last time this Band-Aid solution will work. The bubbles that were created, like in real estate, is in its fifth year of decline. Next will be bonds, the stock market and with them insurance companies and retirement plans. Looking at the scene objectively everything the Fed has thus far done has been a failure. A good part of the public is aware of all this and they seethe with anger. Just consider all the unemployed over 40, who will never have a job again and if they do become employed the wage will be ½ to 1/3 of what they once earned. We get letters every day describing the plight of the average American.
Bailing out the financial system hasn’t worked. The loans and special deals have only covered up the crimes these corporations were involved in and allowed them to escape bankruptcy, which they so richly deserve. There is no other way to describe what has transpired in the financial community than welfare for the mega rich. What is worse is that they go right on looting the public as if nothing has happened.
That brings us to the antithesis, which is gold.
We are sure you all remember the supposed swap of 349 tons of gold between commercial banks and the BIS, the Bank for International Settlements. Commercial banks usually work through central banks that represent them at the BIS; thus, this was an unusual procedure, only discovered when someone picked up a footnote in the BIS statement. Making the event more sinister was that there were no BIS official announcement and that the BIS refused to name the banks involved. This is similar to the Fed refusing to divulge to whom they lent $12.8 trillion. We believe these swaps terminate in January, so we anxiously wait to see what the conclusion will be. Will the gold be redeemed or will it become the property of the BIS, or will the swap terms be extended? We guess the real question is were those who did the swap gold bullion banks? Was the public sale of gold by the IMF a factor? Remember the IMF swore they would never dump gold on the open market, but yet they did just that. Adding to the mystery is that the BIS have seldom used gold swaps in recent years. Due to the secrecy involved we tilt toward a billion-bank bailout. In addition we saw fully qualified buyers rejected and gold sold into the market by the IMF. There can be only one reason for that and that is gold price suppression. As it has turned out every time the IMF sells the Russians go into the market and buy it. We also remember a similar episode in the late 1990s when Gordon Brown, the British Treasury Secretary, sold off half of England’s gold at about $275.00 an ounce to bail out London bullion banks.
For those who have an interest in gold they should be paying close attention to gold and silver shares. As of late they have been moving up strongly. Some eight to 20 percent depending on which indicator you watch. The tenor of the market has changed decidedly over the past several months. We could well be experiencing a renewal of share influence. Up until our government decided to manipulate gold and silver, bullion, share prices always led bullion.
We believe this renewal is being led by several factors. The triumph of gold as the only world currency as witnessed over the past 16 months; the use of massive amounts of money and credit in QE1, and now at the beginnings of QE2, which will have equally bad results; trillions of dollars being stolen by those in and around government; the realization that gold and silver production have fallen; the lack of affect of massive naked net shorts in the bullion pits and the LBMA and Comex and the multitude of naked shorts in the shares, all of which have failed to deter higher prices. Higher inflation is on the way, thus $1,600 gold looks very probable this year and $3,000 next year.
Historically September sees higher gold prices 81% of the time. Between now and the end of February gold and silver should do very well. Silver is poised to soon break out to $25.00 or higher. We are also about to see a parting of the ways in gold and silver versus commodities, just like we began to see between the US dollar and gold. In the future gold and silver will be assisted by a major fall in confidence in the Federal Reserve, which is already underway. Their failure to produce a recovery with $2.5 trillion that they injected into the system, along with the administration, has not sat well in the business world. Now the Fed is beginning another $2.5 trillion rescue, which may end up being $5 trillion. Monetary expansion and monetization means higher inflation, which means higher gold and silver prices. As you see in this issue the administration is going to mark mortgages to the market and rewrite new loans. That will add to more monetary expansion. In fact it may be part of the QE2. Word is that this program could put $50 billion into consumer’s hands to spend, which the taxpayer would be on the hook for. We also estimate, even with the programs, 40% to 50% would go into foreclosures.
Rumors reach us that Bank of America was in serious trouble in July and had the Fed not poured in funds the bank would have failed. We described earlier in the year why BofA had such problems; it had been a dumping ground for the Fed. It now looks like the bank may be dismembered with the biggest and best pieces going to JPM and GS.
We are also getting disturbing reports that some kind of secret rules regarding gold and silver bullion. It seems that naked shorting has become a major problem. It may be the only way they can neutralize the problem; and that is to seize bullion accounts to cover their shorts. We are sure holders will be compensated, but they’ll lose their positions and have to buy them back somehow. We just saw the Swiss government and the banking community rollover for imperial America, so it is conceivable that they would pull something like this. Forewarned is forearmed. That is why we always recommend taking physical delivery if possible. All banks and governments are no longer to be trusted.
Second quarter GDP was 1.6%, we had predicted 1.5% months ago. As we forecast the third and fourth quarters will be dreadful, probably between minus 1 and plus 1. The quantitative easy is not coming fast enough; banks finally trying to lend to small and medium businesses, which create 70% of the jobs has had only moderate success and the new US government mark-to-market bailout of mortgage holders won’t affect the market until next year. Adjusting payments by bringing loans down will push $50 billion into the economy will only create more debt and still 40% to 50% of homeowners will fall into foreclosure. Without jobs there can be no solution.
Worse yet, corporate earnings for 2011 should be flat.
Unemployment still is going nowhere although recent numbers on the face were not all that bad. Of the 67,000 in job growth 10,000 was the result of the end of a construction strike. A figure government loves to hide is those forced into part-time employment by an additional 331,000, which certainly keeps the figure close to 10 million. In case you didn’t notice all the gains were part-timers – hours worked were flat. Manufacturing lost 27,000 jobs. In April the diffusion index was 68 and in August it was 53. Probably the most important figure of all U6 rose in August to 16.7% from 16.5% in July, as real unemployment after taking out the birth/death ratio rose again to 21-3/8%. This news should keep wage increases flat to slightly higher.
Retail was all over the place in distortion. There were jobless benefits that were released to those that had previously been cut off, and there were 17 states implementing tax holidays that added 2% to overall sales.
The Conference Index fell to 24.9 in August from 26.4 in July. We won’t quote the ISM manufacturing Index because we do not believe it. It was statistically impossible for it to be where it was reported to be. All employment increases were in the private service sectors in health and education, which was statistically impossible as well. We find no confusion, just more lies. The economy is slowing and it’s as simple as that. Productivity was dismal at a minus 1.8%; normal is plus 2.5%. This will negatively affect profit margins as labor costs grow 1.1% and that will force up prices and inflation. As far as GDP growth is concerned we are back to the last quarter of 2008 and the first quarter of 2009 officially. Who knows what the real numbers are. The momentum is gone and if it is to be regained QE2 had best come fast and furious. The loss of traction is now close to where it was when Lehman was destroyed, but 20% to 40% higher than other unfortunate events took place. The difference is the slowdown has been stealth and there has been no panic and no negative events. Such an event would bring the economy down to some of the worst levels in the last dozen years.
After seeing new home sales on an adjusted seasonal basis we suspect they are not correct. The unadjusted numbers fell 7% and that is hard to reconcile. We see no shift in direction. The coming mortgage giveaway will only delay the inevitable for a year or two. It is certainly no solution. Coming in September it amounts to cheap political pandering at the expense of all American taxpayers.
Business sees what we see and it does what it has to do to stay alive. You might call it a state of neutrality as business again dries up and more small and medium-sized businesses fall by the wayside. Owners are sick and tired of more regulations and taxes and idiotic car and appliance programs that do not work. They just steal future sales. The passing of the healthcare reform with onerous rules, additional taxes and confusion haven’t helped. The disagreements over the extension of the Bush tax cut renewals don’t help, especially with the President vowing to kill them. Then how dumb can rewriting underwater loans be? It’s just another temporary solution to aid the financial sector. Most small businesses will pay the fine and opt out of health care for employees completely, leaving valued employees at the mercy of the government and socialized medicine, as 25% of doctors, dentists and other professionals either retire or leave the country. We saw the same thing happen in England in the 1950s. Why would businesses expand and hire under these woeful circumstances? They know real growth is zero.
We know tariffs on goods and services would turn everything around, but our House and Senate have been purchased by the New World Order crowd that want America and Europe on their knees financially and economically so the public will be forced to accept a corporate fascist world government. Free trade, globalization, offshoring and outsourcing have been in full swing for 20 years and the damage done to the American economy has been incalculable. The only way the system can be saved before it crashes is for the system to be purged. The financial sector and others have to be allowed to go into bankruptcy and if they are not eventually chaos and revolution will ensue. Yes, we know that financial sector controls the government, so won’t voluntarily allow that to happen. That is why the November election is so important. All the incumbents have to be swept from Congress. Even removing half of these purchased criminals would give us a chance to heal the system. Without that there is little hope of a positive solution. At least you have been forewarned and at least you can protect what assets you have left by being invested in gold and silver related assets. It is all a sad commentary on our country and its citizens.
In addition, we found it illuminating that Sir Alan Greenspan, an Illuminist, is working with the Paulson Group advising them on monetary matters, money supply and gold prices. This is the same elitist who got us into this mess in the first place, at the direction of his controllers. Quantitative easing one and now quantitative easing 2 should cause inflation to surge and in that process gold and silver will surge as well. That has to be a reason why Greenspan is selling his services. That is to make sure Paulson understands the relationship created by the Fed, which is the creation of massive amounts of money and credit, overall monetary policy, inflation and hyperinflation and the prices of gold and silver.
The bottom line is the Illuminists, the Fed and Greenspan are advocating purchasing gold. The Fed as we have said so often has no other alternative but to reflate. This is the final stamp of approval on designating gold the only real world currency, which we have strongly forecasted for the past 16 months. They realize they have lost control of the dollar, finances and the economy. Gold is reassuming its rightful place as the only world currency.
Obama to Ask Congress to Pass $100 Billion Research Tax Credit
Obama to Propose Tax Write-Off for Capital Investments allowing businesses to deduct from their taxes through 2011 the full value of qualified capital investments.
U.S. to Deploy Broader Mortgage Aid – mortgage balances for homeowners that owe more than their homes are worth.
Officials say between 500,000 and 1.5 million so-called underwater loans could be modified through the program, the first initiative to target homeowners who are current on their mortgage payments but are at risk of default because they have no equity in their homes.
Obama to Link Tax Plan, Hiring With the job market stuck in neutral, the Obama administration is moving toward using the revenue from expiring tax cuts for the wealthy to finance about $35 billion of tax cuts for small businesses and workers, administration and congressional officials said Friday.
William C. Dunkelberg, chief economist for the National Federation of Independent Business, said small business doesn’t need another tax cut and that allowing the money to stay in the hands of consumers including by extending all the Bush tax cuts is what will ultimately help the economy recover.
“History shows that letting Washington have the money and spend it is very ineffective,” he said. “If you give a small biz guy $20,000, he’ll say, ‘I could buy a new delivery truck, but I have nobody to deliver to.’ ”
A combative President Barack Obama rolled out a long-term jobs program Monday that will exceed $50 billion to rebuild roads, railways and runways, and coupled it with a blunt campaign-season assault on Republicans for causing Americans’ hard economic times.
GOP leaders instantly assailed Obama’s proposal, and many Democrats will likely be reluctant to approve additional spending and higher federal deficits just weeks before elections that will determine control of Congress. That left the plan with low odds of becoming law this year.
It appears that Obama’s latest Stimulus scheme is a political gambit that tries to get Republicans to vote against small business tax cuts. But there have already been several small biz tax cuts that have produced zilch. The plan will have little to no effect on the economy in coming months because businesses still see the record tax hike that will appear in four short months.
The BLS increased Birth/Death Model jobs to 115k vs. 98k last August. This is ludicrous and has been the prime ruse that the BLS has exploited to overstate job growth for years.
Another dubious fact in NFP is the 19k job gain in construction. 10k workers returned from strike. Part time workers for economic reasons soared by 331k. Working one hour per week counts as employment according to the BLS…Full-time employment tanked 254k per the Household Survey. According to the BLS, 331,000 Americans were forced to downgrade their employment status to part-time or some chunk of them would have lost their jobs.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 331,000 over the month to 8.9 million. [This is a sign of econ weakness.]
If the ISM and Chicago PMI are so great and its employment component was so great why did August manufacturing jobs decline 27k vs. the expected gain of 10K? And why did stocks rally on negative manufacturing employment, when it rallied on ISM employment strength?
John Williams: The ability to play monthly games with seasonals, the nature of assumptions in the handling of hard data and revisions to same, and a 95% confidence interval of +/- 129,000 jobs around the reported payroll number change, provide significant reporting leeway should someone choose to target payroll reporting in the context say of consensus expectations tied to the financial markets, or of related media hype that could impact public political perceptions.
Please understand what John Williams is saying. Statistically, the confidence or accuracy of the employment report is 95% according to the BLS. This means any variance within +/-129k jobs is within the statistical margin of error.
Protection of money market investors at risk Investors in loss-making money market funds are less likely to be bailed out by fund sponsors in the future, increasing the risks of a run on the $5,000bn (£3,247bn, €3,896bn) sector, according to Moody’s, the ratings agency.
Justin Meadows, chief executive of the MyTreasury trading platform: “To be perfectly frank, neither the funds or their parents are prepared to wear the risk [of implicit guarantees] any more.”
One senior industry figure concurred, saying: “The bills are becoming bigger and bigger. $2.9bn is a big cheque and you wonder how long people are going to go on like this. “But the role that money market funds play in financing the economy is substantial. We are the ones that swallow all the short-term paper.” http://www.ft.com/cms…
Banks Bought Bonds Amid Debt Crisis Even as Europe’s sovereign debt crisis intensified early this year, banks continued to load up on debt from Greece and other countries with the most acute fiscal problems, according to a report released Sunday that also suggested that the European Central Bank inadvertently encouraged institutions to increase their risk.
Fury Over Public Pensions Sparks Lawsuits – Several state and local retirement funds have balked at disclosing the pensions of individual government workers, triggering lawsuits that claim taxpayers have the right to such information.
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