Total Pageviews

Wednesday, November 30, 2011


U.S. stocks rally on global moves

By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks rallied Wednesday after the Federal Reserve and five other central banks together moved to ease the flow of funds to banks hit by Europe’s debt crisis, and China cut the level of cash that banks have to set aside as reserves.
“The coordinated action by the global central banks is welcome news. [It] appeared to be a surprise jolt designed to lift investor confidence in euro-zone financial institutions as well as provide much needed liquidity to banks feeling a liquidity squeeze,” Fred Dickson, chief investment strategist at Davidson Cos., wrote in emailed commentary. 

NOW, many analysts will wonder why another massive bailout for the banks is good for the markets.  Think of it this way:  The bailout money is Iced Tea.  The banks are the world's financial bladder.  The markets are the toilet of the financial system Where else is all that Iced Tea going to go?

Now, you can stock up on Iced Tea if you want.  Me, I'm buying gold.

Monday, November 28, 2011


U.S. stock futures rise as ECB buys bonds

By Kate Gibson and Nick Godt, MarketWatch
NEW YORK (MarketWatch) — U.S. stock futures climbed Friday, with Wall Street readying for an opening bounce following two days of losses, as investors scrutinized Italian and Spanish bond yields after the European Central Bank reportedly bought the debt of both nations. 

The central bank purchased Spanish and Italian debt in an effort to cap yields, at least three people with knowledge of the trades told Reuters.
On a related note, European officials could start discussions with the International Monetary Fund on a means for the European Central Bank to lend to the International Monetary Fund in the event of sovereign rescues in the region, Dow Jones Newswires reported.

Dealers See Fed Buying $545 Billion Mortgage Bonds in QE3

Read more:


Central Banks Ease Most Since 2009

  Central Banks Still Stuck in Crisis Mode
The European Central Bank, seen here, extended liquidity support for banks into 2011 on Sept. 2. Photographer: Hannelore Foerster/Bloomberg
Mario Draghi, president of the European Central Bank (ECB), is seeking to limit contagion in the 17-nation euro zone as Greece’s economic meltdown worsens. Photographer: Hannelore Foerster/Bloomberg
Central banks across five continents are undertaking the broadest reduction in borrowing costs since 2009 to avert a global economic slump stemming from Europe’s sovereign-debt turmoil.
The U.S., the U.K. and nine other nations, along with the European Central Bank, have bolstered monetary stimulus in the past three months. Six more countries, including Mexico and Sweden, probably will cut benchmark interest rates by the end of March, JPMorgan Chase & Co. forecasts.

Saturday, November 26, 2011

What's Wrong? Fundamentally - what's wrong?

Society is a very complex system.

Complex systems require exponentially more energy to function, the more complex they become.
(for example: the human brain uses 75,000 times as much energy as the Sun - relative to mass.)

In their most efficient (ie: Simplest) form - governments can organize society so that energy use becomes more efficient - thus energy output in the form of productivity and rents are greater than the sum of the inputs -as measured by potential energy: Money.

In their most efficient (ie Simplest) form the creation and distribution of money through the Government/Banking System can facilitate the output of money in the form of productivity and rents.

As government become increasingly complex, as the banking system becomes increasingly more complex, as society itself becomes increasingly more complex, it reaches an INFLECTION POINT by which it requires more energy (Read Money) to sustain it than it is capable of outputting.

At this point the society - like any inefficient organism - begins to DIE.

At this point the ELITES: Those closest to the Money Producing Mechanism (Politicians and Bankers) become more concerned with the shrinking pie than the welfare of the society.

They begin to act like parasites- accumulating wealth through non-productive means: government patronage and postmodern finance: Leverage, exotic unregulated derivatives, off balance sheet accounting vehicles, cleverly disguised fraudulent gambling instruments.

These do not cause the death of society, but they greatly hasten the moment of collapse.

Where are we on the Efficiency curve?

It seems to me we have reached the stage of Elite Money Leeching from the dying system.

A pretty advanced state.

At this point there are only three choices.  A) Collapse and Die.  B)Conquer and steal resources.  C) Simplify both the Government and the Banking System.

To simplify the government you'd have to cut the Federal government in half, close down the army, and return administrative duties to the States.  Anything less, is a waste of time.  And you'd have to regulate the issuance of money.  The only way to do this is to tie it to a Convertible Gold Standard.  Any fiat system of money creation will be abused.

Or we can always implode and die.  It happens all the time, throughout history.  Then we rebuild - probably using a greatly simplified government and a money system tied to gold.

(this is basic Complexity Theory as developed by Joseph Tainter and explicated by James Rickards in "Currency Wars.")

Friday, November 25, 2011

Pop Quiz of the Day: What does this all have to do with US?

Portugal hit by downgrade to junk status, strike

France Erupts as 1M Protest: Protests over plan to raise retirement age continued to rock the country

Analysts: Egyptian civil unrest to escalate despite military's efforts

Libya, Jordan And Yemen Hit By Renewed Unrest

Italy Borrowing Costs Almost Double at Auction as Euro Tumbles

Spain Economy Stalls in Third Quarter, Adding to Government’s Difficulties

Hungary Credit Rating Cut to Junk at Moody’s

Greece anti-austerity protesters join annual rally

Ireland demands debt relief, warns on EU treaties

Europe's plans for treaty changes to enforce fiscal discipline in the eurozone may fall foul of popular anger in Ireland unless the EU creditor states agree to share more of the pain.

Europe's plans for treaty changes to enforce fiscal discipline in the eurozone may fall foul of popular anger in Ireland unless the EU creditor states agreee to share more of the pain.
Mr Noonan said Ireland's public mood has turned very sour. Photo: AP
The Irish government has suddenly complicated the picture by requesting debt relief from as a reward for upholding the integrity of the EU financial system after the Lehman crisis, though there is no explicit linkage between the two issues.
"We carried an undue burden for protecting the European banking system from contagion," said finance minister Michael Noonan.

Wednesday, November 23, 2011

How did we get here?

Happy Thanksgiving

When will the ECB backstop this mess?

"Disastrous" bond sale shakes confidence in Germany:

The Bundesbank was forced to retain almost half of a sale of 6 billion euros due to a shortage of bids by investors.

Fortunately, that could never happen here in the good old USA.  Why not?  Because the Fed would buy all the rest of the bonds.

 But wait.  Isn't that like the Fed borrowing money from the Fed?  Yes, it's exactly like that.

It's like you needing money and your wife printing the money, loaning it to you, then you turn around and issue a bond to pay your wife back - and your wife buys the bond.

 Too bad they won't do that in Europe.  Yet.  They better do it soon, though, or the world economy will collapse.  Unfortunately it's the only solution the markets will tolerate.

German Chancellor Angela Merkel speaks during a federal budget debate in the Bundestag, the lower house of parliament in Berlin, November 23, 2011.   REUTERS-Thomas Peter

(Reuters) - A "disastrous" German bond sale on Wednesday sparked fears that Europe's debt crisis was even beginning to threaten Berlin, with the leaders of the euro zone's two strongest economies still firmly at odds over a longer-term structural solution.
Financial markets were also unnerved by newspaper reports that Belgium may be pressing France for an expansion of a 90 billion euro ($120 billion) bailout of failed bank Dexia.
On top of this, a special report by Fitch Ratings suggested France had limited room left to absorb shocks to its finances like a new downturn in growth or support for banks without endangering its cherished AAA credit status.
After one of the least successful debt sales by Europe's powerhouse economy since the launch of the single currency, the euro fell and European shares sank to 7-week lows.

Tuesday, November 22, 2011


MF Global trustee doubles estimates of shortfall

The sign marking the MF Global Holdings Ltd. offices at 52nd Street in midtown Manhattan is seen in New York November 2, 2011.  REUTERS/Shannon Stapleton
NEW YORK | Tue Nov 22, 2011 5:59am EST
(Reuters) - The shortfall of commodity customer funds at MF Global Holdings Ltd (MFGLQ.PK) may be around $1.2 billion, about double initial estimates from regulators, the trustee liquidating the company said on Monday.
The news was a blow to customers still hoping to get more of their cash out of frozen broker accounts and raised new questions about why the authorities managed to locate only about 60 percent of the segregated customer funds three weeks after the parent firm's October 31 bankruptcy.
"I'm flabbergasted," said Tom Ward, a retired Chicago Board of Trade member whose two sons cleared their futures trades through MF Global and have been blocked from accessing their money. "The bottom line is, there's going to be a haircut involved. It's devastating, what this has done to the industry."
Monday's announcement was trustee James Giddens' first public statement on the size of the shortfall, which regulators initially said was about $600 million.

With the failed Super Committee and the European Debt Implosion this story is being glossed over.  What is means is this: your broker, your bank, may be using your money to gamble in the markets.  If they lose, your money may be gone.  How will you know?

Commodity Brokerage Firm Closes, Says Markets Not Safe

November 19th, 2011
in econ_news
Econintersect:  The following is the introduction to a letter sent by a real CEO of a real brokerage firm specializing in agricultural commodities.
icebergDear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,

It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.
The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States.

Saturday, November 19, 2011

Who's to blame?

 Europe is coming apart at the seems.  No, actually, from the center.

The banking crisis that began in 2008 with a mass of bad mortgage debt was momentarily assuaged by many trillions of taxpayer dollars administered to Fannie and Freddie, AIG, Goldman Sachs, and a host of other banks, as the Fed took many more trillions of bad debt onto its own balance sheet.

Unfortunately, we're only just finding out now (we - the unsuspecting public - many other knew) that the crisis was far worse than we imagined.  Many trillions more of this bad debt were marketed to Europe by Goldman Sachs et al and then resold between the European sovereign banks.  On top of that, Goldman Sachs et al were busy helping insolvent European governments hide their debt in off-balance sheet swaps so that they could gain entry into the EEC.

Yes, this is a European "Sovereign Debt" crisis.  But so much of that debt is mixed in with bad mortgage debt that is still intertwined with the Fed and the US Banking system that a collapse of the Euro will undoubtedly bring down much of the US banking system.

And China depends on the US and Europe for about 60 percent of its GDP.

So there's a huge impetus for both the Fed and China to step in here along with the EEC and backstop all this - again with taxpayer money.  (Or by printing money - which amounts to the same thing.)

 So who's to blame?

The Republicans would have us believe that there's plenty of blame to go around.  Starting with those poor folk who lied on their mortgage applications, and the corrupt politicians that supported Fannie and Freddie.  Yeah, sure.  Lying is wrong.  And Fannie and Freddie are grossly incompetent and corrupt.

But that's not what brought down the world banking system.

The OWS crowd blames corporate greed, the banks, income inequality, political corruption, and the general unfairness of life.  All that may be true too.  But we need to understand what's happened here.

Until 1970 all debt in the world could be settled with a demand for gold in payment for that debt,  This limited the amount of debt that could be created.  When Nixon closed the gold window for US debt, the world banking system was cut loose from any sort of responsibility to tether debt creation to hard assets.  What has resulted is in inconceivable tsunami of debt.

The big Wall Street Banks like Goldman Sachs are filled with very smart guys.  They spend their time thinking up ways to create garbage debt and sell it to everyone else.  That's all they do.  Because it's vastly profitable and unregulated.  Because they can.  Even the vast majority of "Mortgage Debt" have NO UNDERLYING MORTGAGES.  That's why they can't be unwound.

There is no solution but to tie money - and debt - back to a hard asset.  Back to gold. If it is settled in gold it limits the creation of debt to the amount of gold.  And it measures the debt by the price of gold.

Tuesday, November 15, 2011


In the Land of Make Believe (the land of Supply Side Nonsense) you can Grow your way out of a Debt Crisis.  We all just roll up our sleeves, get government off our backs and put our noses to the grindstone, LOWER TAXES,  and pull together, and by golly dig ourselves out of this ditch!

HERE:  “No amount of synthesized growth can evaporate global debt. Trying to sell creditors, debtors and taxpayers on the idea that it can be done is a futile and dangerous proposition. Time is not a variable. There is debt that is owed and only money or assets-in-kind can satisfy it.”

– Paul Brodsky / Lee Quanitance

In the Land of Make Believe: The prudent combination of Debt Restructuring and Austerity Programs can give economies "breathing room" to start to grow their way back to prosperity.

HERE: "Those in charge of the SS Europe are left with a stark choice – print money or allow the break-up of the Eurozone and the end of the common currency known as the Euro. At this point it really IS that simple.”

--Grant Williams

In the Land of Make Believe: Central Banks are the cornerstones of stability, guiding our economies through wise and deliberate policies.

HERE:"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution....Bankers are more dangerous than standing armies......(and) if the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and CORPORATIONS that will grow up around them will deprive the People of all their property until their children will wake up homeless on the continent their Fathers conquered."

        --Thomas Jefferson -

In the Land of Make Believe: Karl Marx was an evil Jew who hated Freedom and Democracy and advocated for the Tyranny of the State .

HERE: Karl Marx was a philosopher who said this: "Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take on more and more expensive debt, until their debt becomes unbearable. The unpaid debt will lead to the bankruptcy of all banks, which will have to be nationalised, and the State will have to take the road which will eventually lead to communism.

In the Land of Make Believe: We have a free market facilitated by a Free Market Banking System
HERE: Marx got it wrong: The Banks have indeed become bankrupt, but instead of being Nationalized, they've been subsumed by the Central Banks, which they in turn own.  Get your head around that one.

Monday, November 14, 2011


In the Land of Make Believe we love our kids.  There's nothing we wouldn't do for our kids.  Our children are the Future.  We buy them all the sugar snacks they can shove down their hungry gullets.  We devote entire industries to amusing them: movies, television, video games.  And we do it all with money we've borrowed - from them.  Well, not really from them.  Most of them are fat diabetic TV addicted morons (just kidding!).  But from their future earnings.

 The same way the Banks are stealing from all of our Futures by printing and distributing money to themselves, we're stealing from our kid's futures by printing money to distribute massive medical benefits to ourselves, and borrowing every last cent we can get our fat fingers on in order to live in houses that are too grand and drive cars that are too big.

All the borrowing creates an massive Demand Imbalance that forces prices up, just as all the money printing creates a massive supply imbalance that forces prices up.  And like every Ponzi Scheme all of us Old Maddofs do fine, while our precious kids, for whom we'd do anything,  are left to hang themselves from a beam in the living room, while their kids sleep in their cradles in the next room.

The young and the broke: 37 percent of young households hold zero or a negative net worth. The median net worth of those 35 and younger is $3,600.

And the really sad part is the best hope Our Precious Children have to better themselves is education, the cost of which is becoming so prohibitive that the average student comes out of undergraduate college with $26,000 of debt - and just barely able to read and write.  And Meanwhile you have a Republican field of candidates for President just falling over themselves to brag about how they'd destroy what's left of the educational system in this country.
Thank Gold for all TV Shows,  Movies and Video Games, so that our Precious Kids, for whom we'd do anything (except stop spending on ourselves) so that those precious tykes will have something to do while they live on our couch after graduating with all that Debt.

nto the overall systemic pilfering of the middle class.