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Wednesday, January 29, 2014

It just takes one bad trade

There are so many theories as to what could destabilize an inherently unstable position. 

People liken the Fed Easy Money Policy stabilizing the economy to a doctor stabilizing a patient with drugs.  The analogy continues with just the right dose enabling the patient to lead a happy prosperous life.

The analogy falters when you consider the number of economic factors the Fed is attempting to stabilize.  Interest rates.  Money Supply.  Debt.  Employment.  The Stock Market.

Each factor takes the right amount of policy tweaking.  It's more like a shrink prescribing a huge drug cocktail.  Try stabilizing  a patient with drugs for depression, drugs for bipolar disorder, drugs for seasonal affect disorder, drugs to combat the lethargy that ensues from the other drugs, and see how tough it is over time to maintain a happy and prosperous life.

Because a drugged up patient is likely to go through spells where normal inhibitions are inoperative.  A drugged up patient is likely to misdirect his energies into a variety of inappropriate targets.  Just as a drugged up economy is likely to misdirect hot money into a variety inappropriate targets.

There are all sorts of theories about how the Fed might lose control of its delicate drug cocktail.  Most of these theories center around Inflationary and Deflationary events.  These certainly might happen.

But the over-riding likelihood, which is never discussed because it can't be planned for, combated, or treated, is that of a massive counter-party collapse resulting from a single bad trade.  Obviously it would have to be a huge trade.  But plenty of those are put on every day.  And because of the herd mentality, a massive bad trade misdirected at a single inappropriate source could cause a counterparty collapse at any moment.  Because these trades are stilled being levered up at fantastic ratios.

In fact, this disastrous scenario is every bit as likely as a massively drugged up patient committing a single massively inappropriate act that derails, once and for all, his happiness and prosperity.

Tuesday, January 28, 2014

Rising energy costs belie the self serving claims of Shale boosters:

Tim Morgan, in an important new book called Life After Growth suggests that the era of cheap energy is over. That the new unconventional forms of oil are far less efficient than old ones, meaning they require significant amounts of energy to produce. In effect, the energy production versus energy cost of extraction equation is rapidly deteriorating. (including shale and fracking).
Morgan goes a step further though. He says cheap energy has been central to the extraordinary economic growth generated since the Industrial Revolution. And without that cheap energy, future growth will be permanently impaired.

It’s a bold view that’s solidified my own thinking that higher energy prices are here to stay. And the link between cheap energy and economic growth is fascinating and worth exploring further today. Particularly given the implications for the world’s fastest-growing and most energy-intensive region, Asia.

Morgan begins his book outlining four key challenges facing economies today:
  1. The biggest debt bubble in history
  2. A disastrous experiment with globalisation
  3. The massaging of data to the point where economic trends are obscured
  4. The approach of an energy-returns cliff edge 
The first three points aren’t telling us much new so we’re going to focus on the final one.
Here, Morgan makes a key distinction between what he terms the money economy and the real economy. He suggests economists around the world have got it all wrong by focusing on money as the key driver of economies.

Instead, money is the language rather than the substance of the real economy. The real economy is a surplus energy equation, not a monetary one, and economic growth as well as the increase in population since 1750 has resulted from the harnessing of ever-greater quantities of energy.

Morgan goes on to say that the era of surplus energy, which has driven economic growth since 1750, is over. 

The key isn’t to be found in the theories of “peak oil” proponents and the potential for absolute declines in oil reserves. Instead, it’s to be found in the relationship between the energy extracted versus the energy consumed in the extraction process, also known as the Energy Return on Energy Invested (EROEI) equation.
The equation maths aren’t difficult to understand. If the EROEI is 10:1, it means that 10 units are extracted for every 1 unit invested in the extraction process. 

From 1750-1950, the EROEI of oil discoveries was very high. For instance, discoveries in the 1930s had 100:1 EROEIs. That ratio declined to 30:1 by the 1970s. Today, that ratio is at about 17:1 with few recent discoveries above 10:1.

Morgan’s research suggests that going from EROEIs of 80:1 to 20:1 isn’t disruptive. But once the ratio gets below 15:1, energy becomes a lot more expensive. He suggests the ratio will decline to 11:1 by 2020 and the cost of energy will increase by 50% as a consequence.

Why Shale (Fracking) won't help: Estimates suggest that the physical depreciation of shale deposits are increasing, and not, as expected, decreasing as additional knowledge is accumulated about the structure and specific geology of various shale oil and gas properties. The simple truth is that estimated decline rates are so large that even in the Bakken (oil) region, which is constantly cited and praised to the high heavens, it is now believed that the average decline could turn out to be 75-85 percent in the first five years, as compared to a much lower average for conventional oil fields. A similar decline rate is expected for shale gas in most deposits.

Saturday, January 25, 2014

Coinage and History: what do we really know?

To know where you're going, you have to know where you've been.

The past is prologue.

Those ignorant of history are condemned to repeat it.

All the statements above contain some truth.  Recorded human history is about 5000 years old.  That's not a lot of history.  The history of the western world is only about 3000 years old if you count Biblical Judaea which dates back to about 1000 BCE.  That dates the beginning of alphabetic language.  Which is why we know about biblical Judaea.  Yet nothing written at that time exists except for a very few inscriptions on clay shards.  Certainly nothing we can call "history." 

In fact very little written Western history has survived from the period before the fifth century BCE  - when Herodotus began to write extensive histories in Ancient Athens.  Suddenly at that particular point there was an explosion of writing - and literacy.  It is also the period in which coinage began to exist in a system of widespread international trade.

But the fact is that from the 5th century BCE until about  the 15th century AD written history is very spotty.  Most of the "facts" about characters whom we regard as central to western history are unconfirmed by more than one source.  And most often the source was someone who never met these characters, and often someone who never met anyone who personally knew these characters. 

The fact is that much of true history - cold hard historical facts - come down to us through coins.

What do we really know about Caligula or Augustus or Alexander the Great?  Nothing that's isn't confirmed - or revealed - by their coinage.  Most of the rest is speculation. Sure the were many historians writing in Ancient Rome.  But much of what they write is speculative, based on rumor and innuendo - and much is contradictory.  And little of the writing survives.  Most has been translated and re translated by writers who have added their own speculative touches.

But the extensive coinage of all the characters from Ancient Rome attest to their titles, their victories: their physical attributes and the exact dates of these milestones of history.

Herodotus wrote extensively about Croesus of Lydia.  But he lived a generation after after Croesus died.  Can we be sure of the truth of anything he wrote that is not confirmed through the coinage of Croesus? 

Not really.  His writings lend color and flavor to the very few cold hard facts.  But without the coinage we could not be sure the Croesus even existed.  In the same way the coinage of Ancient Athens established dates and facts about the Athenian political economy and  that can not be otherwise confirmed even with all the the writings of Greek philosophers, historians and playwrights.

Fast forward 1500 years to Charlemagne.  Even at this later date - a seminal figure like Karolus Magnus' only  historical attestation is in Einhard's Vita Karoli Magni.  Of course Einhard actually knew Charlemagne, so some of what he wrote is probably true.  But we do not even know the date or place of his birth for example.  Can we even know for certain that Charlemagne really conquered the Lombards to the point where they were obliged to render fealty?  Yes, but only because his name appears on their coinage.  It is only through his coinage that we can accurately piece together his route of conquest.

Whose coinage functioned as the Western World's reserve currency and when?  Only the coins themselves can tell us.  This tells a story that no other written history can tell.

So much of what we really know about history is what we have learned from coinage - and conversely - to understand coinage one has to have a firm grasp of so much of what we consider to be history.

This is what makes coinage such a fascinating - and intrinsically valuable area for the collector.  History and Coinage are inextricably linked.

Friday, January 24, 2014

Nothing to worry about, move along....

Contagion Spreads in Emerging Markets as Crises Grow

Jan 24, 2014 6:34 AM ET
The worst selloff in emerging-market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve’s tapering of monetary stimulus, compounded by growing political and financial instability.
The Turkish lira plunged to a record, while Ukraine’s hryvnia sank to a four-year low and South Africa’s rand fell to the weakest level since October 2008, after tumbling yesterday beyond 11 per dollar for the first time since 2008. Argentine policy makers devalued the peso by reducing support in the foreign-exchange market, allowing it to drop the most in 12 years to an unprecedented low.
Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.
“The current environment is potentially very toxic for emerging markets,” Eamon Aghdasi, a strategist at Societe Generale SA in New York, said in a phone interview yesterday. “You have two very troubling things: uncertainty about the Fed policy, combined with concerns about growth, particularly in China. It’s difficult to justify that it’s time to go out and buy emerging markets at the moment.”

Thursday, January 23, 2014

Statistics are meaningless

If you want to know how cold it is, you can check your accuweather app, and then listen to the weather models yakking about low pressure systems and barometric readings on the television news channel. 

Or you open your window and stick your face out.

The exact same is true of the economy.  You can listen to the econo-spokesmodels on Fox or CNBC or Bloomberg, you can read analysis from your favorite shills at your favorite banks or newsletter services all tell you what they think will make you buy crap they've already bought to drive prices higher.

Or you can open your eyes and look at the obvious.

The obvious:

A) The world governments and consumers are still in massive debt trouble.

B) Money is getting printed furiously and poured into the banks to heal their debt troubles and they gamble that free money in the risk markets.

C) The money multiplier has collapsed as none of this printed cash is making its way into the real economy.

A) This causes massive deflation of wages and debt servicing for 99 percent of the world's population.

B) This causes massive inflation in risk assets and basic commodities like food, oil, housing, education, health care and stocks.

C) This is great for the banks and everyone connected to them.  (the one percent.)

C) This sucks for everyone else. 

(Though home owner and stock owners are under the illusion they're richer until their paper profits collapse again.)

So, you can listen to all the massive econometric crap that proves this and that about anything and everything.

Or you can open your window and stick your face out.

Wednesday, January 22, 2014

Two stories emerged last week, which will create additional interest in the precious metals market.

Two stories emerged last week, which will  create additional interest in the precious metals market.

1)     Elke Koenig, the president of Germany's top financial regulator, Bafin, which apparently is not as corrupt, complicit and clueless as its US equivalent, and who said that in addition to currency rates, manipulation of precious metals "is worse than the Libor-rigging scandal."

2)     Deutsche Bank, one of the 5 banks involved in setting the daily AM and PM London fix gold prices has announced today it will quit participating in precious metals price setting due to the ongoing investigation by German authorities into alleged precious metals manipulation. It appears that the daily price fixes may be in jeopardy particularly in silver, as the bank’s exit would leave only HSBC and the Bank of Nova Scotia as the remaining banks involved in the daily silver fix, and reports indicate others may follow Deutsche’s lead

3)     The leverage of 112 times in Comex has reached unprecedented levels and is facing massive delivery problems.  Serious investors are moving from the western future exchanges and ETF’s into the physical market, making the exchanges obsolete

4)     The FED has no gold. Interestingly, this theory is simply getting stronger and stronger. The "theory" is that the NY Fed has rehypothecated out more gold contracts that it actually has physical gold in the vault. Over a year ago, the Bundesbank announced that it had decided to repatriate the 674 tons of gold that the FED held on its behalf, however, one year on, the FED has actually only managed to physically deliver into the Bundesbank, a grand total of 37 tonnes with 32 tonnes delivered by the Bank of France and 5 tonnes by the NY FED announcement according to Zerohedge.  See larger article below.

Germany Has Recovered A Paltry 5 Tons Of Gold From The NY Fed After One Year

Submitted by Tyler Durden on 01/19/2014 13:35 -0500
 On December 24, we posted an update on Germany's gold repatriation process: a year after the Bundesbank announced its stunning decision, driven by Zero Hedge revelations, to repatriate 674 tons of gold from the New York Fed and the French Central Bank, it had managed to transfer a paltry 37 tons. This amount represents just 5% of the stated target, and was well below the 84 tons that the Bundesbank would need to transport each year to collect the 674 tons ratably over the 8 year interval between 2013 and 2020. The release of these numbers promptly angered Germans, and led to the rise of numerous allegations that the reason why the transfer is taking so long is that the gold simply is not in the possession of the offshore custodians, having been leased, or worse, sold without any formal or informal announcement. However, what will certainly not help mute "conspiracy theorists" is today's update from today's edition of Die Welt, in which we learn that only a tiny 5 tons of gold were sent from the NY Fed. The rest came from Paris.

As Welt states, "Konnten die Amerikaner nicht mehr liefern, weil sie die bei der Federal Reserve of New York eingelagerten gut 1500 Tonnen längst verscherbelt haben?" Or, in English, did the US sell Germany's gold? Maybe. The official explanation was as follows: "The Bundesbank explained [the low amount of US gold] by saying that the transports from Paris are simpler and therefore were able to start quickly." Additionally, the Bundesbank had the "support" of the BIS "which has organized more gold shifts already for other central banks and has appropriate experience - only after months of preparation and safety could transports start with truck and plane." That would be the same BIS that in 2011 lent out a record 632 tons of gold...

Going back to the main explanation, we wonder: how exactly is a gold transport "simpler" because it originates in Paris and not in New York? Or does the NY Fed gold travel by car along the bottom of the Atlantic, and is French gold transported by a Vespa scooter out of the country?

Supposedly, there was another reason: "The bullion stored in Paris already has the elongated shape with beveled edges of the "London Good Delivery" standard. The bars in the basement of the Fed on the other hand have a previously common form. They will need to be remelted [to LGD standard]. And the capacity of smelters are just limited."

So... New York Fed-held gold is not London Good Delivery, and there is a bottleneck in remelting capacity? You don't say...

Furthermore, Welt goes on to "debunk" various "conspiracy websites" that the reason why the gold is being melted is not to cover up some shortage (and to scrap serial numbers), but that the gold is exactly the same gold as before. Finally, to silences all skeptics, the Bundesbank says that "there is no reason for complaint - the weight and purity of the gold bars were consistent with the books match." In conclusion, Welt reports that in 2014 "larger transport volumes" can be expected from New York: between 30 and 50 tons.

Here we would be remiss to not point out that the reason why the German people and the Bundesbank have every reason to be skeptical is that as Zero Hedge reported exclusively in November 2012, before the Buba's shocking repatriation announcement and was the reason for the escalation in lack of faith between central banks, it was the Fed and the Bank of England who in 1968 knowingly sent Germany "bad delivery" gold.  Which is why we have a feeling that the pace of gold transportation will certainly not accelerate until such time as the German people much more vocally demand an immediate transit of all their gold held at the New York Fed: after all, it's there right - surely the Bundesbank can be trusted to melt the gold (if any exists of course) into London Good Delivery or whatever format it wants.

Unless of course, the gold isn't there...

Tuesday, January 21, 2014

Century-Old London Gold Fix Said to Face Overhaul Amid Scrutiny

Jan 21, 2014 5:53 AM ET

Photographer: Chris Ratcliffe/Bloomberg
Banks are considering an overhaul of London’s century-old gold benchmark used by miners, jewelers and central banks to buy, sell and value the precious metal, according to a person with knowledge of the process.
The five banks who oversee the so-called London gold fixing -- Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA (GLE) -- have formed a steering committee that’s seeking external firms to advise how the process could be improved, according to the person, who asked not to be identified because the review isn’t public.
The fixing refers to a rate-setting ritual dating back to 1919 in which representatives of the five member banks speak by telephone from a couple of minutes to more than an hour about buying and selling gold. The method has faced scrutiny in recent months, with regulators in London, Bonn and Washington -- who are already looking into manipulation of interest rates and currencies -- investigating how prices are set in the market.
While there’s no evidence the gold fix is being manipulated, economists and academics have said the way the benchmark is set is outdated, vulnerable to abuse, and lacking in any direct regulatory oversight. Deutsche Bank, Germany’s largest lender, said in a statement last week it plans to withdraw from the panels for setting gold and silver fixings.


Monday, January 20, 2014

How to value graded and ungraded coins

how do you price this coin?

The price of an ancient coin has three major components:

1) Demand or Desirability.  With ancient coins, desirability has two major components. 

A) First, it is often a function of historical importance.  A Caesar or Alexander portrait is obviously fascinating as these are two of the most important figures in history.  A gold Croesus stater has obvious appeal as the first gold coin in history.  Beyond the obvious there are any number of historical factors that appeal to buyers from different countries for different reasons.

B) Second, there is beauty.  Ancient coins are works of art.  A dekadrachm signed by Kimon has obvious appeal.  Fine style portraits have obvious appeal.  Beyond the obvious, there are coins of every issue and denomination that were simply rendered by superior artists in ways that outclass all other coins of that particular issue.  These coins make look and grade similarly to many coins from the issue but can be valued many times greater than coins of pedestrian engraving styles.

2) Rarity.  This is difficult for collectors from World or US coins to appreciate, because even the most common issues in the Ancients world are extremely rare by US and World standards.  But understanding rarity is difficult as there are no population reports.  Often coins culled from fresh hoards appear to be far more common for a short period of time.  Then they disappear.  The same thing can happen when major collections are sold.  Other times, a coin rarely appears over many years, and sells at great prices at auction.  Then a small hoard is found and it is suddenly available.  To understand rarity you have to examine the market over many years.

3) Condition.  This is the provenance of grading - which brings up traditional grading versus Third Party Grading or slabbing.

A) Traditional grading values an overall appeal.  Good metal, die state, centering and strike are paramount.  Coins struck from "fresh dies" have a particular appeal as do coins struck from "good metal."  These factors are difficult to recognize without seeing thousands and thousands of coins. But connoisseurs still accord huge premiums to these factors.

B) Third party grading or slabbing brings are much needed uniformity to grading.  And even more important it weeds out a vast number of coins that are altered, repaired, tooled and outright fakes.  When buying ungraded coins, the collector is open to fantastic losses when fooled by artists of great talent who have altered or faked ancient coins.  A beautiful coin with just a bit of smoothing in the field might cost $25,000 at auction.  But once described as smoothed by NGC (the third party grading service) it might be worth a tenth of the original cost.  Therefor, there can be a huge premium for certified coins as it takes all the risk out of buying,

However, third party grading does not and can not distinguish die state and other factors.  Coins with die rust, double striking, die flaws can have the exact same grade as coins without these problems.  Similarly one fine style coin can be of much finer style than another.  No two coins are alike.  Even two coins with exactly the same grade can be vastly different.

The only way to understand valuation is to take all the above factors into account.  And learn to reconcile them over time.

Saturday, January 18, 2014


The winter auctions at the Waldorf yielded healthy results this year.  And it exposed a vast and growing gulf between the US and European markets: the attitude towards graded coins.  The New York International Coin Show is truly international.  All the top European houses were represented, and the auctions rooms were filled with European bidders.  And the Europeans have not yet embraced graded coins, especially in the Roman market - where they absolutely dominate.  But Americans are beginning to flock to Ancients, especially Greek, and they consider holders to be essential.

Heritage kicked off the schedule, as per usual with its World and Ancients auction.  Heritage represents bidder worldwide - but they have an especially deep pool of US clients.  Many collectors who have been buying US Coins are being lured across the aisle into World and Ancients precisely on account of the NGC graded holders.  Heritage is making a great push to auction slabbed ancients - particularly Greek, and it's driving the market here in the US.  And Heritage is doing a terrific job of hiring new experts who can accurately describe the coins, and put them in an historical context.  They also take great photos and have developed the single best online platform in the coin world.  Thus good material fetched great prices throughout the Heritage auctions which included a healthy Ancients sections, a world section, and then the Eric P Newman collection of World coins.  Tops material went for top prices, uniformly.  And because Heritage is putting in the resources to develop their Ancients and World departments and platforms it is clear that they will continue to attract bidders from their deep pool of US clients, as well as from clients worldwide.  If things keep going in this direction, within a few short years Heritage will dominate the US ancients market.

CNG followed with Triton which has the deepest and most impressive array of ancients - Greek, Roman, and Byzantine of any US coin house.  The auctions was filled with European bidders - especially from other top European auctions houses who were on the phone to their top bidders.  NAC, notably, was on the phone to the Sheik, who has paid off enough of his debts to make him eligible to continue bidding in many auctions.  Predictably, lots he wanted, he bought.

But the Europeans buy differently from Americans.  They are not so obsessed with the tiny gradations in quality as they are with rarity, provenance, and historical importance.  Therefor, some coins that would have brought much more at Heritage went very reasonably, and other connoisser pieces that would have fallen off the charts at Heritage - such as tiny electrum fractions, and regional rarities brought tremendous high prices.

Baldwin's of London followed with the New York Sale which included an array of impressive Roman gold Aurei - all of it unslabbed, and all of it going for very high prices - again bid up by top European dealers all on the phones to their top clients - many of whom are wealthy Russians, seeking to get money out of Russia.   Many of them would certainly not bid on the same coins is plastic holders.  Day two included mostly Russian coins and medals, which all brought healthy prices - certainly through some of the same bidders.

Stacks Bowers followed with a large auction of notably lower quality.  There's always a few gems in an auction of this size and prices were fine considering the quality, but they are having trouble competing with Heritage and the world and ancients departments.

Gemini followed, though this auction was notably lacking in top Greek and Roman gold.

Finally, the floor show itself was something of a disappointment as so much of the top quality now goes into auction, there was very little of interest left for the show.  This can't be healthy for floor shows over time.

Thursday, January 16, 2014

Metals, Currency Rigging Worse Than Libor, Bafin’s Koenig Says

Germany’s top financial regulator said possible manipulation of currency rates and prices for precious metals is worse than the Libor-rigging scandal, which has already led to fines of about $6 billion.
The allegations about the currency and precious metals markets are “particularly serious, because such reference values are based -- unlike Libor and Euribor -- typically on transactions in liquid markets and not on estimates of the banks,” Elke Koenig, the president of Bafin, said in a speech in Frankfurt yesterday.
Koenig is the first global finance regulator to comment publicly on the investigations as probes into the London interbank offered rate, or Libor, expand into other benchmarks. Joaquin Almunia, the European Union’s antitrust chief, said this week that its preliminary probe into possible foreign-exchange manipulation covers similar practices as in the regulator’s probe into Libor-rigging.
Bonn-based Bafin said earlier this week it is investigating currency trading, joining regulators in the U.K., U.S. and Switzerland, who are examining whether traders at the world’s largest banks colluded to manipulate the WM/Reuters rates, used by money managers to determine the value of holdings in different currencies.

‘Public Reaction’

At least a dozen firms have been contacted by authorities and more than 13 traders have been suspended, fired or put on leave in the currency case. Regulators are examining how traders, who communicated in instant-message groups, exchanged information on client orders and agreed how to trade at the time of the fix, five people with knowledge of the probes said last month.
“That the issue is causing such a public reaction is understandable,” Koenig said. “The financial sector is dependent on the common trust that it is efficient and at the same time, honest. The central benchmark rates seemed to be beyond any doubt, and now there is the allegation they may have been manipulated.”

Monday, January 13, 2014

Why harp on income inequality? Jealous?

Really.  Why harp on income inequality, unless you're just a bitter, jealous malcontent, not willing to get off your ass and work hard to become part of the 1 percent?

That's the line you hear if you listen to the spokesmodels at Fox News, folks who are themselves paid fantastic salaries for looking pretty and reading teleprompters and memorizing lines.  It doesn't occur to them that had any of them been born before the age of television they would have been eeking out  subsistence livings as radio pitchmen or vaudeville comedians. 

But really, why harp on income inequality.  Isn't that just a fact of human existence from time immemorial?

Yes, it is.

The problem is, that governments from time immemorial were mostly forms of Imperialism that  were only meant to benefit the very upper echelon of society.  Malcontents were jailed or shot.

We live in a democratized world, where imperialistic economies tend to implode over relatively short periods of time.  This experiment with modern democracy is only a couple of hundred years old so generalizations tend to be difficult to defend.

Yet nothing could be more intuitively obvious than the idea that trends that destroy the object of Democracy will be deleterious to the maintaining of a democratic system.

The fact of extreme income inequality is one such trend.  Not simply because of the result of income inequality but because the method through which this is achieved is the printing of fresh money that is only available to the financial elites closest to the printing process.  The result is the the rest of the money owned by the lower echelons of society is debauched in value.

This basic ineluctable trend destroys the objects of democracy.

What are the objects of Demcoracy?

1) One man one vote.  Income inequality destroys the efficacy of an individual vote in many obvious ways.  Elections can be bought and paid for.

2) The Level Playing Field.  The idea that anyone can succeed with hard work and education.  This is only true for those going into professions closest to the Banking cartel and the corporations that service it.  Everyone else suffers.  The best middle school teacher in America makes one millionth the salary of the worst trader at Goldman Sachs.  And the teacher's the one going to get your kids into High School.  The trader is the one front running all your trades.

3) Equality Under the Law.  How can this exist when lawmakers are owned by the Banks and the Corporations that service the Banks?  Nobody has yet been prosecuted for  the financial implosion of 2008.  Or anything since.

4) Freedom of expression.  How can this exist, when the instruments of mass media are owned by the banks and the corporations that service the banks?

Obviously all these objects suffer by varying degrees.  The question is: where is the tipping point?  At what point do the objects of Democracy suffer to the extreme that results in mass lawlessness?

At what point does the average citizen stop paying taxes, and start stealing, cheating and disrespecting rules and laws of society as a matter of course?  Everyone else is doing it, they think, why shouldn't I?

At what point does routine lawlessness devolve into armed conflict?

It seems to many like we're miles away from this.

And it seems to many like we're teetering on the brink

It probably depends on how close your are (and how close you think you can get) to the financial printing press.

Fiancialization = joblessness, wealth inequality

Low wage capitalism with a dab of cronyism: Of job sectors with the highest growing raw number of positions 9 out of 10 will pay $35,000 a year or less with little to non-existent benefits.

There was a big miss with the latest employment report.  The addition of 74,000 jobs produced the weakest employment report going back to January of 2011.  Yet part of this is not a surprise given the weak retail sales over the holidays at the expense of cash strapped American consumers.  If you dig deep into the data you find a continuing pattern of low wage employment taking over the nation.  This trend is accelerating as wealth inequality reaches record proportions.  When the Great Recession struck many good paying jobs were washed away in a bathtub of corporate financilization that has truly set the country on a fast track to economic inequality.  Austerity for the public and corporate welfare for Wall Street.  Even the “Wolf of Wall Street” still lives in a multi-million dollar home in California while fleeced investors take a walk down memory lane.  Low wage jobs are here to stay.  This might be stunning for older Americans but young Americans are faced with this once the minted college degree paid by debt is picked up.  What does it say that the vast majority of the top 10 job sectors in America will pay $35,000 or less?

Low wage America
The latest BLS jobs report was a big disappointment.  It frankly caught the market off guard because they were used to the juiced up stock market of 2013.  Of course, not much of the gains going to the financial sector or even the highly speculated real estate market are trickling down to working Americans.  The lords of finance are sucking out every penny from the real economy and are living high on the hog with 75 percent of wealth controlled by the top 10 percent of earners in our country.

well said, Acting Man

Charts We Have Recently Pondered

We come across a large number of charts every day, and below we show a few stock market related ones that we have found especially interesting. First a chart that was recently published by John Hussman. It shows the total value of   US equities and bonds divided by GDP. Although one might object that GDP is a somewhat arbitrary choice for the purpose of this comparison, the chart nevertheless is testament to the economy's increasing 'financialization', which in turn is a direct consequence of decades of massive monetary inflation. Inflation spreads from its point of origin throughout the economy, but there are 'inner circles' that profit from it, as they are the earliest receivers of newly created money. Their profit comes to the detriment of later receivers, who find the purchasing power of their incomes diminished.
In the innermost circles we naturally find the government and the banking cartel, hence the 'financialization' effect. The financial sector becomes ever bigger, and represents an ever larger share of corporate profits. His happens notwithstanding interruptions like the 2008 crisis, as the largest financial firms as a rule are always bailed out when things go seriously wrong. That is what the banking cartel was set up for after all!

US Markets

market cap-GDP

Saturday, January 11, 2014

You do the math:

US GDP: 15 trillion dollars:

World GDP: 84 Trillion dollars:

Total number of dollar denominated financial instruments floating around the world economy: 1.3 Quadrillion dollars.

450 Trillion are in Forex Exchange deals.

800 Trillion of those are in unregulated Over the Counter deals.  

Nobody anywhere understands where all those dollars are, who owns them, and how sound any of the transactions are.  Nobody understands or can quantify in any reasonable way what the COUNTERPARTY RISKS are to all of these dollar denominated transactions.  

The last time a major counterparty default occurred was way back in 2008.  The world central banks threw 30 to 50 trillion dollars at this problem.  Perhaps a drop in the bucket considering the quadrillion dollars floating around.

It certainly has given the world economy the veneer of stability.

Nobody anywhere has any idea what will happen the next time a major counterparty default occurs.  Can they print another 30-50 trillion dollars again?

I don't know.  Neither does anyone else.  But every time they do, the foundation becomes commensurately more unstable.

Total paper dollars in circulation: 2.2 trillion:

Average Forex Trading volume of Dollar Contracts: 5 trillion


Total Forex outstanding US Dollars: 450 Trillion


Total outstanding OTC dollar denominated derivatives: 800 Trillion

Wednesday, January 8, 2014

JP MORGAN: 29 Billion in fines and not One Single Criminal Prosecution!


Gee: what do you think would happen if you got convicted of Money Laundering?

JPMorgan to Pay $2.6 Billion Over Madoff Scheme Lapses

2013FebMarAprMayJunJulAugSepOctNovDec45.0050.0055.0060.00* Price chart for JPMORGAN CHASE & CO. Click flags for important stories. JPM:US58.32-0.68 -1.15%

JPMorgan Chase & Co. (JPM) will pay $2.6 billion to resolve criminal and civil allegations it failed to stop Bernard Madoff’s Ponzi scheme, bringing its legal settlements from the past two years to more than $29 billion and further eroding its once-record earnings.

JPMorgan avoided prosecution by acknowledging in an accord with the U.S. that it ignored red flags for about 15 years that Madoff used his account to run a fraud, Manhattan U.S. Attorney Preet Bharara said. The bank will pay $1.7 billion to settle the government’s charges, $350 million in a related case by the Office of the Comptroller of the Currency and $543 million to cover private claims, the firm said in a filing.
The company “failed miserably” in its responsibility as a financial firm, Bharara said yesterday at a press conference. “The bank connected the dots when it came to its own profits but not when it came to its own legal obligations.”
JPMorgan, led by Chief Executive Officer Jamie Dimon, has announced settlements of government and private disputes in the past two years equal to about three-fourths of the $39 billion of profit analysts estimate the bank will have earned in that time after it reports fourth-quarter results next week.
Photographer: Jin Lee/Bloomberg
Bernard Madoff walks out of Manhattan federal court in New York, U.S., on Jan. 5, 2009.
The bank will probably say earnings fell about 20 percent to $17 billion in 2013, ending three straight years of record profits under Dimon’s watch, according to analysts’ estimates compiled by Bloomberg. The cost of yesterday’s settlements reduced net income for the fourth quarter by about $850 million, the bank said.
The agreements, which include a record Justice Department penalty for a violation of the Bank Secrecy Act, highlighted inadequate programs for policing money laundering. The actions take JPMorgan a step closer to resolving a slate of probes that have engulfed the bank since the 2008 financial crisis.