Jesse’s Cafe Americain – Page 8

QUOTES OF THE DAY

“Just as in previous boom-bust cycles, the seeds of destruction are sewn in the illusion of trend masquerading as truth, with momentum seeming to validate a widening gap between perception and economic reality. And just as in past cycles, the manager who doesn’t subscribe to the new rules, who goes against the grain of convention is viewed as out of touch or left behind.

Since the beginning of our fund’s drawdown in early 2012, a Bloomberg index of the “Worst Balance Sheet” companies of the S&P500 has returned to-date over +30% on an annualized basis. An MSCI index of the “Most-Shorted” companies of the Russell 3000—a proxy for the visibility of bad valuations, bad managements, and bad fundamentals—has also returned over +30% annualized. These perversions are even more pronounced within EMs, exacerbated by record fund outflows in the first half of 2014, exceeding even those of the 2008 crisis.

This dash for trash puts to shame even the speculative excesses of the dot.com era. This is a circus market rigged by HFT and other algorithmic traders who prey on the rational behavior of warm-blooded investors. They only serve to further undermine the integrity of public markets, which will ultimately bring about their rationalization.”

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Andrew Cunagin, Rinehart Capital Partners LLC founder

“The Federal Reserve and the other public regulators are culpable for the carnival atmosphere in the US markets, in addition to the visceral and cynical pandering to greed which is the hallmark of the present day political class. At some point, someone must have the courage to stand, even if it is against the tide, for the rule of law.

These officials have taken the duties of their office and sworn to it, and thereby own the stewardship. They have systematically set the boundaries for the vital price discovery process of public markets, the protection of wealth, and of economic governance in order to favor a powerful few at the expense of their own obligations.

They cynically attempt to hide their malfeasance with a feigned ignorance and obfuscation. They pride themselves on their ability to deceive, to use words as a weapon against those that they are obliged to protect. They excuse their behavior by saying, ‘we did not know’ or ‘you did not do enough to stop us.’ By their example they sow the seeds of disorder and destruction.”

Jesse

THE LOOTING WILL CONTINUE UNTIL MORALE IMPROVES

Guest Post by Jesse

“A man must always live by his work, and his wages must at least be sufficient to maintain him.” – Adam Smith

“The issue isn’t just jobs. Even slaves had jobs. The issue is wages.” – Jim Hightower

Some analysts are confusing higher wages with monetary stimulus. Nothing could be further from the truth, at least in the real world of today.

Monetary stimulus is what the Federal Reserve does, that is, increasing the money supply by expanding the monetary base. It is a non-organic growth of money.

I think it is a well-noted and oft-remarked upon feature that the monetary stimulus that the Fed is providing is being given directly and almost exclusive to the Banks, in order to shore up their damaged balance sheets and provide them an artificial stream of profits.

And of that stimulus, the bulk of it seems to be finding its way into financial speculation and a new bubble in paper assets, and the acquisition of more companies to build even greater monopolies.

Wage increases, that are not merely a secondary effect of a general monetary inflation, are indeed not useful, except that the workers at least keep pace with the rate of price inflation. But I don’t think that this is what anyone is recommending who talks about higher wages. The Fed is not an actor on that stage.

The currently imbalanced and distorted financial system is taking the lion’s share of all new growth, and continues to do so as it has been doing for the past twenty years. This cannot last.

When consumers purchase things, they must either use cash or credit. And to obtain the cash they can work more hours, or have more family members working. To obtain more credit, they can mortgage their house, and increase their debts.

We have seen the explosion of a consumer credit bubble in housing debt, facilitated and engineered by historic levels of financial fraud by the very Banks who are now taking their subsidies of monetary stimulus from the Fed. It happened almost six years ago, but the economy remains in ‘the new noe-feudal normal.’

At some point the long abused consumer says ‘enough’ and cuts back their purchasing to the barest of essentials. And the economy grows stagnant at home, which gives the moneyed interests a strong incentive to seek captive markets overseas. And so a new round of neo-colonialism is born. Which in turn creates its own sets of problems, lies, and economic distortions.

The data indicates that we are now, at long last, finally at that point.

And corporate profit margins are at new highs.

And the one percent has never been richer, or had more influence with the political class.

How much is enough for them? When will they be content? With them it is with wealth as it is with power.

‘Wir haben keine Hemmungen, und einen großen Magen.’

I think that the solution is rather obvious. We have been here before.

“After many requests on my part the Congress passed a Fair Labor Standards Act, what we call the Wages and Hours Bill. That Act –applying to products in interstate commerce — ends child labor, sets a floor below wages, and a ceiling over hours of labor.

Except perhaps for the Social Security Act, it is the most far-reaching, the most far-sighted program for the benefit of workers ever adopted here or in any other country. Without question it starts us toward a better standard of living and increases purchasing power to buy the products of farm and factory.

Do not let any calamity-howling executive with an income of $1,000.00 a day, who has been turning his employees over to the Government relief rolls in order to preserve his company’s undistributed reserves, tell you — using his stockholders’ money to pay the postage for his personal opinions — tell you that a wage of $11.00 a week is going to have a disastrous effect on all American industry.

Fortunately for business as a whole, and therefore for the Nation, that type of executive is a rarity with whom most business executives most heartily disagree…

Some of my opponents and some of my associates have considered that I have a mistakenly sentimental judgment as to the tenacity of purpose and the general level of intelligence of the American people.

I am still convinced that the American people, since 1932, continue to insist on two requisites of private enterprise, and the relationship of Government to it. The first is a complete honesty, a complete honesty at the top in looking after the use of other people’s money, and in apportioning and paying individual and corporate taxes (according to) in accordance with ability to pay. And the second is sincere respect for the need of all people who are at the bottom, all people at the bottom who need to get work — and through work to get a (really) fair share of the good things of life, and a chance to save and a chance to rise.

After the election of 1936 I was told, and the Congress was told, by an increasing number of politically — and worldly– wise people that I should coast along, enjoy an easy Presidency for four years, and not take the Democratic platform too seriously. They told me that people were getting weary of reform through political effort and would no longer oppose that small minority which, in spite of its own disastrous leadership in 1929, is always eager to resume its control over the Government of the United States.

Never in our lifetime has such a concerted campaign of defeatism been thrown at the heads of the President and the Senators and Congressmen as in the case of this Seventy-Fifth Congress. Never before have we had so many Copperheads among us — and you will remember that it was the Copperheads who, in the days of the Civil War, the War between the States, tried their best to make President Lincoln and his Congress give up the fight in the middle of the fight, to let the Nation remain split in two and return to peace — yes, peace at any price.

This Congress has ended on the side of the people. My faith in the American people — and their faith in themselves — have been justified. I congratulate the Congress and the leadership thereof and I congratulate the American people on their own staying power…

You will remember that from March 4, 1933 down to date, not a single week has passed without a cry from the opposition, a small opposition, a cry ‘to do something, to say something, to restore confidence.’ There is a very articulate group of people in this country, with plenty of ability to procure publicity for their views, who have consistently refused to cooperate with the mass of the people, whether things were going well or going badly, on the ground that they required more concessions to their point of view before they would admit having what they called “confidence.”

These people demanded ‘restoration of confidence’ when the banks were closed — and demanded it again when the banks were reopened.

They demanded ‘restoration of confidence’ when hungry people were thronging (the) our streets — and demanded it again now when the hungry people were fed and put to work.

They demanded ‘restoration of confidence’ when droughts hit the country — and demanded it again now when our fields are laden with bounteous yields and excessive crops.

They demanded ‘restoration of confidence’ last year when the automobile industry was running three shifts day and night, turning out more cars than the country could buy — and they are demanding it again this year when the industry is trying to get rid of an automobile surplus and has shut down its factories as a result.

But, my friends, it is my belief that many of these people who have been crying aloud for ‘confidence’ are beginning today to realize that that hand has been overplayed…”

Franklin D. Roosevelt, Fireside Chat June 24, 1937

Although they rarely mention it in the history books, it is ironic that around this time the moneyed interests and neo-cons of Roosevelt’s day were fomenting a domestic revolution, and investing heavily in European fascists whom they hoped would be obedient gangsters for crony capitalism.

A Warning From 1995 About the Repeal of Glass-Steagall

Guest Post by Jesse

Here is a reprint of a warning that was published in the NY Times in 1995 about Robert Rubin’s and Alan Greenspan’s misguided attempts to overturn Glass-Steagall.

Any reasonably informed student of economic history ought to have understood this argument.

There was a well-funded, decade long campaign led by the Banks to overturn Glass-Steagall. A lot of propaganda was written, and lot of political connections were made, and a lot of money was spent.

Too many were willfully blind. Some through their devotion to utopian ideology. Others through devotion to their careers. And even more just kept their heads down and hid their noses in their books and reams of irrelevant data.

And for the most part they still are, with many caught in a credibility trap.

Until the music stops.

Related: The Long Demise of Glass-Steagall

NY Times
End Bank Law and Robber Barons Ride Again

Sunday, March 5, 1995

To the Editor:

Re “For Rogue Traders, Yet Another Victim” (Business Day, Feb. 28) and your same-day article on Treasury Secretary Robert E. Rubin’s proposal to eliminate the legal barriers that have separated the nation’s commercial banks, securities firms and insurance companies for decades: The American Bankers Association, Senator Alfonse M. D’Amato, Representative Jim Leach and Treasury Secretary Rubin are gravely misguided in their quest to repeal the Glass-Steagall Act.

Their contention that insurance companies, commercial banks and securities firms should be freed from legislative obstructions is predicated on fallacious, historically inaccurate statements. If the Baring Brothers failure does not give them pause, a history lesson is our only hope before the Administration and bank lobby iron out their differences and set the economy back 90 years.

The argument that American financial intermediaries will become “more efficient and more internationally competitive” is false. The American financial system is the most stable, most profitable and most dynamic in the world.

The notion that Glass-Steagall prevents American financial intermediaries from fulfilling their utmost potential in a global marketplace reflects inadequate understanding of the events that precipitated the act and the similarities between today’s financial marketplace and the market nearly a century ago.

Although Glass-Steagall was enacted during the Great Depression, it was put in place because the Aldrich-Vreeland Act of 1908, the blue-sky laws following 1910 and the Federal Reserve System of 1913 failed to keep the concentration of financial power in check.The investment climate that ultimately led to Glass-Steagall was one filled with emerging markets, interlocking control of productive resources and widespread bank ownership of securities.

Ever since railroad securities began driving secondary capital markets in the late 1860’s, “emerging markets” have existed for investors looking for high-yield opportunities, and banks have been primary agents in industrial development. In the 19th century, emerging markets were scattered throughout the United States, and capital flowed into them from New York, Boston, Philadelphia and London. In the same way, capital flows from the United States, Japan and England to Latin America and the Pacific rim — today we just have more terms to define the market mechanisms.

The economy and financial markets were even more interconnected in the 19th century than now. Commercial and investment banks could accept deposits, issue currency, underwrite securities and own industrial enterprises. With Glass-Steagall lifted, we will chart a course returning us to that environment.

J. P. Morgan and Andrew Mellon made their billions through inter locking directorates and outright ownership of hundreds of nationally prominent enterprises. Glass-Steagall is one crucial piece of a litany of legislation designed to place checks and balances on the concentration of financial resources. To repeal it would be tantamount to bringing back the days of the robber barons.

The unbridled activities of those gifted financiers crumbled under the dynamic forces of the capital marketplace. If you take away the checks, the market forces will eventually knock the system off balance.

MARK D. SAMBER

Stamford, Conn.

Feb. 28, 1995

The writer is a management consultant specializing in business history.

Nomi Prins: All the President’s Bankers

Via Jesse’s Cafe Americain

This is a walk through the twentieth century, and how the United States became, by design, a combination military, industrial, and financial global superpower. And how the US dollar hegemony was created over a number of political administrations by groups of well connected, powerful families and friends.

It may seem a bit long, but she opens it for questions about the 48 minute mark, so it really is not. Nomi speaks briskly with many fact laden vignettes and scenarios that help to explain how the current system has evolved.

The facts she brings out about the 50’s onwards were sometimes new to me, and absolutely fascinating. About minute 40 she shows the culmination of this historical process with the Clinton Whitehouse, and begins to describe where we are today, and how it appears that the problem will be insoluble without some major events taking place to change this alliance in power between the financial and the political.

The talk served to solidify some of my own thinking, and removed some of the shadows of doubt that I have had about where things are going and why.

She does is not able to delve into the international ties between the global central Banks, particularly between London and New York. She instead concentrates on what she might call ‘the Big Six’ of American Banks, which is a large enough subject itself.

I strongly recommend that you listen to it if you are at all interested in this subject.

Or if you have the time to invest, you may wish to read her book which also sounds very interesting. I have not done so yet, and I am not sure when I could get to it.

But this video is a very good start, and will probably make you much better informed than 90 percent of the people out there. Whether that is a good thing or not is another matter.

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AND THE TIMES, THEY ARE A CHANGIN’

Guest Post by Jesse

“In times of change learners inherit the earth; while the learned find themselves beautifully equipped to deal with a world that no longer exists.”

Eric Hoffer

There was intraday commentary here. I was struck by the continuing erosion of gold from Western trusts and funds, in stark contrast to silver. I like both metals, but gold is the deffest dog. And from my perspective the reasons are pretty obvious.

We have come to the end of the informal Bretton Woods II agreement, which was to stay with the US dollar as the primary basis for world trade, an arrangement that had been in place since the end of WW II. The US dollar based on a relationship to gold became the petrodollar when Nixon unilaterally closed the gold window in 1971.

The banks agreed to continue to use it as the de facto standard for international currency valuation The ‘management’ of gold as just another currency was carried out through leasing arrangements and targeted sales. By 2004 at the latest, a number of the world’s central banks broke from this arrangement, which started quickly falling apart. By 2006 the central banks turned from net sellers of gold to net buyers.

The agreement finally succumbed to the Greenspan Fed, and the band of Merry Pranksters in the government, who finally played one too many one-sided games with the other sovereign nations. The credibility of the US hit a virtual brick wall in the aftermath of the obtuse behaviour that followed the world’s outpouring of favourable sentiment for the US after 9/11.

Bush laid the egg, and Obama hatched it, to borrow a historical metaphor about another Reformation that came after a long period of abuses and a rising tide of nationalism after the long fall of an Empire.

We know who these central banks are, and we have a good idea of why they are doing it, if we are still a little rough on the details, which is understandable given the strategic nature of their actions.

There are still a range of outcomes, obviously, even if all these assumptions and estimations we are making are correct. One outcome, that is very much desired by many in power, is to have a one world financial and currency system based on the dollar as it is defined and managed by a small elite group of bankers. That deal has been on the table for so long that it might have died of old age.

The greedy shenanigans of Wall Street, and the slavish acquiescence of their friends at the Fed and in the government, have thrown a serious monkey wrench into those longer term aspirations. Propaganda may serves to persuade and relieve your own people in their confusion and anxiety, and make them more compliant in believing just about anything, but it doesn’t always fool those who are looking in from the outside, and see things more objectively.

This seems to me to be one of those periods of very significant evolutionary change, that happen infrequently enough so that they do not seem to have much of a place in most people’s models and mindsets. And of course since they threaten the status quo, many of our modern King Canutes are standing on the shore, command the tide to stand fast, and exclaiming, “It ain’t happening man, it ain’t happening.’ Wait until the bloodbath in high yield garbage assets starts.

I have taken the liberty of using a good general revolutionary change chart, and include it below.

Have a pleasant evening.

C. S. Lewis On Kindness and Civility at the Table (And Online)

He couldn’t be talking about TBP. Could he?

Guest Post by Jesse

“We hear a great deal about the rudeness of the rising generation. I am an oldster myself and might be expected to take the oldsters’ side, but in fact I have been far more impressed by the bad manners of parents to children than by those of children to parents.Who has not been the embarrassed guest at family meals where the father or mother treated their grown-up offspring with an incivility which, offered to any other young people, would simply have terminated the acquaintance? Dogmatic assertions on matters which the children understand and their elders don’t, ruthless interruptions, flat contradictions, ridicule of things the young take seriously – sometimes of their religion – insulting references to their friends, all provide an easy answer to the question “Why are they always out? Why do they like every house better than their home?”Who does not prefer civility to barbarism?

If you asked any of these insufferable people – they are not all parents of course – why they behaved that way at home, they would reply, “Oh, hang it all, one comes home to relax. A chap can’t be always on his best behaviour. If a man can’t be himself in his own house, where can he? Of course we don’t want Company Manners at home. We’re a happy family. We can say anything to one another here. No one minds. We all understand.”

Once again it is so nearly true yet so fatally wrong.

Affection is an affair of old clothes, and ease, of the unguarded moment, of liberties which would be ill-bred if we took them with strangers. But old clothes are one thing; to wear the same shirt till it stank would be another. There are proper clothes for a garden party; but the clothes for home must be proper too, in their own different way. Similarly there is a distinction between public and domestic courtesy. The root principle of both is the same: “that no one give any kind of preference to himself.”

C. S. Lewis, The Four Loves

I suspect Mr. Lewis would be inclined to make similar observations about online manners as compared to public manners, where electronic anonymity tempts the worst part of a person to be belittling, dismissive, condescending, and in short, a bully.

Sometimes people come to confuse rudeness with strength and position, and choose to exercise it when they feel that they have some power, even if it is just the power to say what you will with relative impunity given the distance of electronics. The culture of the internet is nascent; and intelligence without education and cultural broadening can quickly degenerate into barbarism, even amongst people, not only commenters but bloggers, who might be otherwise appalled by how they act online.

Understanding, compassion, and kindness are the signs of real power and strength. Rudeness, incivility, and bad manners are the signs of ill-breeding and ignorance, of the disordered mind of the narcissist, who proceeds through life unaware and uncaring of those around them.

I am certainly no stuffed shirt. Manners does not mean that famous English reserve. Rather, manners are no ritual. Ritual manners, like accents, are too often an artificial construct with the purpose of promoting a type of class system. Civility is a certain ease of behavior, supported by kindness.

Barbarism can become fashionable, almost contagious. One may even have learned such dismissive and condescending behaviour from a parent, who learned it from one of theirs, or in some deep disappointment in their lives.

Don’t tell yourself that this is just the way it is. Rather, tell yourself that this is just wrong, and let such incivility stop with me.

Beloved CEO Fired By Board For Being Insufficiently Ruthless: Employees Walk Off Their Jobs In Protest

Guest Post by Jesse

“Just remember this, Mr. Potter, that this rabble you’re talking about, they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?

Anyway, my father didn’t think so. People were human beings to him. But to you, a warped, frustrated old man, they’re cattle. Well in my book, my father died a much richer man than you’ll ever be!”

George Baily in It’s a Wonderful Life

This is by far the most remarkable story I have seen in a while.

In the latest development, Mr. Demoulas has made an offer to buy his company back.

If only more of us would put people before power and greed, and insist that our leaders live up to their duties to the people first, and not wallow in money and privileges for themselves and their cronies, while spreading fear and hatred to keep the people compliant.

Then that really might be ‘a wonderful life.’

Meet America’s Most Beloved CEO—Too Bad He Just Got Fired

Brad Tuttle

July 23, 2014

After the wealthy CEO of a supermarket chain was fired, thousands of workers walked off the job in protest—some getting fired themselves. What’s up with that?

Workers understandably tend to go on strike or protest for selfish reasons—more pay, better benefits, improved working conditions. Over the last week in New England, however, thousands of employees at Market Basket, a supermarket chain with 71 stores in New Hampshire and Massachusetts, have been sticking their necks out (and in some cases putting their jobs on the line) in support of Arthur T. Demoulas, who was the company CEO until he was fired in June.

Rallies pushing for “Arthur T.” to be given his job back were held at the Market Basket headquarters in Tewksbury, Mass., on Friday and Monday, drawing upwards of 5,000 protestors. Meanwhile, the shelves of many Market Basket locations have gone barren, as there are too few employees still on the job to stock them. At least eight employees were fired over the weekend related to the protests…

“He’s George Bailey,” Trainor explained to the Washington Post, comparing Arthur T. Demoulas to the beloved savings-and-loan manager played by Jimmy Stewart in It’s a Wonderful Life. “He cares more about people than he does about money….”

Read the entire story here.

Nanex: The Market Is Rigged, With Details

Guest Post by Jesse

“A rogue does not laugh in the same way that an honest man does; a hypocrite does not shed the tears of a man of good faith. All falsehood is a mask; and however well made the mask may be, with a little attention we may always succeed in distinguishing it from the true face.”

Alexandre Dumas

The market is rigged. Oh no, this could not possibly be correct, say the trolls, shills, revolving door careerists, media carnival barkers, and conmen’s assistants. They simply do not understand it!

The analysis from Nanex, rich in details, does not only apply to very large orders in excess of 10,000 shares. I have seen the same type of activity in smaller markets with orders of only a few thousand shares. Anyone who has Level 2 access can observe it if they look closely enough, and have the will to look with their eyes and see.

These pampered princes of Wall Street are steadily degrading the markets, and distorting and taxing the real economy with their bias to speculative grifting rather than facilitating productive investment.

I do not agree that a ‘free for all market’ would be better than this. Some of these schemes are as basically corrupt as a West Coast gangster’s attempt to control all the horse racing wire services information for his own benefit. And you don’t fix corruption by firing all the police and prosecutors.

There are a few things that would go a long way to fixing this. Fairness is not so terribly hard to establish if you do not wish to twist it with the faux complexity of a confidence racket that advantages some because.

I suspect that nothing will work until we root the big money out of politics. Its corrupting influence touches everything and is corrosive to the common good, giving scandal to all by its shameful example.

In some sense, this would be turning the markets back to what they were before they became utter casinos dominated by big players unleashed by the repeal of Glass-Steagall and the divestment of sound regulation in the name of a utopian market ideology that serves to promote a new level of systemic criminality.

This is analysis and conclusion below is from NANEX.

“…All this evidence points to one inescapable conclusion:

The order cancellations and trade executions just before, and during the trader’s order were not a coincidence. This is premeditated, programmed theft, plain and simple.

Michael Lewis probably said it best when he told 60 minutes that the stock market is rigged.

To the High Frequency Traders (HFT) that make fantastic claims about providing liquidity, perhaps one should ask: “what kind of liquidity”? To the now obvious, ludicrous claim that “everyone’s order uses the same tools that HFT uses”, we’ll just say, the data shows otherwise. To Mary Jo White and other officials who claim the market isn’t rigged and that regulators need to look at the data before making any decisions: well, you made it this far – if things aren’t clear, re-read this expose (or the nearly 3000 others pages we’ve published), or simply call us and we’ll explain it to you. Or dust off Midas and lets us show you how to work with market data.

One more note to the SEC in particular – if you believe that the industry can fix these problems on their own, then we believe you are no longer fit to regulate, because that is not, and never was, how Wall Street works. Honestly, a free for all, no–holds–barred environment would be better than the current system of complicated rules which are partially enforced, but only against some participants. And make no mistake, what is shown above is as close to automatic pilfering as one can get. It probably results in a few firms showing spectacularly perfect trading records; it definitely results in people believing the market is unfair and corrupt.

And to CNBC and other financial media companies who say these problems have all been fixed – we think you might have been lied to. Probably by the ones doing the market rigging. A certain HFT lobbyist group immediately comes to mind – the one that presents the same tired “liquidity, spreads, costs” argument, without data to back it up. This paper shows that the liquidity claim is clearly a lie.

Academics interested in continuing the study shown on this page – we believe we know how you can find and quantify these events. Serious inquiries only please.

Note that none of this would be possible if the direct feeds weren’t illegally supplying HFT with faster information than the SIP.

And finally, to our regular readers: we are taking a break. Everyone has a limit to how much corruption they can witness and digest in a given period of time and we’ve simply reached our limit.”

You may read the detailed examination and explanation of this from Nanex here.

The Recovery™ In One Graph

Guest Post by Jesse

“Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank.

You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!

You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!”

Andrew Jackson, On the Bank of the United States

“…supply-side economics was merely a cover for the trickle-down approach to economic policy — what an older and less elegant generation called the horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows.”

John Kenneth Galbraith

Recovery. For some.

I am not sure what is trickling down in this recovery. It is not oats, or wealth.

But I am fairly sure that I know why the recovery is so disjointed and selective.

It is one of the oldest stories. It is about the abuse of privilege, of foolish people led in herds shouting slogans crafted by the clever and the unscrupulous, of the treacherous and self-destructive fury of unbridled greed.

It is about the lust for power, the deceptiveness of hubris, the blindness of pride, and the lessons from history that have been carefully and intentionally unlearned. It is about the madness that brings the fire, in hearts and minds of men.

h/t Anthony Sanders, Confounded Interest

Currency War: 140 Years of Monetary History in Ten Minutes

Guest Post by Jesse

Like most complex subjects reduced to a ten minute summation, there are plenty of nuances lost here, and one might certainly take issue with some of the conclusions. And the perspective of the discussion is largely centered on the US and Europe.

Nevertheless, I like the succinct overview of certain key events in recent world monetary history that lead up to the situation in which we find ourselves today.

Since most people are abysmally ignorant of where we have been, perhaps that is a good place to start once again, for those of you who have not heard this previously.

I would have liked them to have dealt with the gold confiscation and revaluation of 1933, in which FDR used the nation’s gold to recapitalize the banking system, and changing the nature of the US currency while devaluing it, but that might have become over complicated. Most do not understand it for what it was, a currency transformation.

People tend to discuss money from an emotional basis, and that is understandable. I don’t consider myself a ‘hard money’ person per se. At this point I would merely wish governments to leave gold and silver alone, and allow them to function as a private market force, co-existing with whatever currency schemes they choose to set up. The monetary authorities struggle with this concept, because they inevitably seem to abuse the currency system and resort to increasing amounts of fraud and force. This is not a facet of government, but of bad government.

I am not in favor of a ‘gold standard’ for that reason now, because that would merely allow governments to once again monopolize the metals and set the prices artificially in order to control them. Gold cannot cure the corruption in the current political system, and could quickly be turned into a force for more repression. Better that the metals exist as free market alternatives for those who may choose them.

After listening to this presentation, one can surely understand why the central banks both fear and covet gold. It resists their wills, but has a natural tendency to be seen as money.

I do think that the nature of gold, and how it has been used as money over thousands of years, illustrates several important qualities that any sustainable monetary system must emulate and approximate. Those who dabble in monetary theory would do well to understand them.

De Gaulle’s words are quite important, and I am glad they include that piece in which Charles de Gaulle speaks to the ‘exorbitant privilege’ of the US Dollar. The principled objection he is raising is the same question being raised by the BRICs today, and the resolutions being discussed behind the scenes are quite contentious over some of these very issues.

As you know, I suggested one solution would be an SDR, but reconstituted with a more contemporary and inclusive weighting system, together with a mechanism that does not permit the IMF to issue amounts of SDRs at will. The problem is that the IMF is dominated by the status quo and the Banks, and really no class of people is capable of wielding that sort of discretionary power well for any period of time. So I don’t see that happening yet, because an acceptable version of it is being fiercely resisted by the Anglo-American banking cartel. They are content to continue with their looting of the system for the foreseeable future.

Money is power, after all, and greed will too often refuse to relinquish any power or claim willingly, even to its own destruction. The American abuse of financial power for political purposes is causing a bifurcation in global finance, along the expected fault lines, and it will be interesting to see how that develops.

I think most predictions about this that I have heard are just opinions, and they louder they are, the less valid they are likely to be. Others that are more well founded are heavily biased to a particular outcome. This is natural. People talk their book and book their talk, if they are not mere hypocrites and spokesmodels.

Managing ourselves and our situation with objectivity, flexibility, and adaptability is a key survival skill in periods of great change. The trick is not to lose yourself in the process. There truly are times when a man holds his own soul in his own hands like water, and if he allows it to slip away, he may not hope to regain it so easily again.

LOOKING INTO THE ABYSS

Guest Post by Jesse

Life Is a Cabaret

“We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.”

Edward ‘Eddie’ George, Governor Bank of England 1993-2003

Yesterday I said,

“The capping in the metals is obvious.

There is no economic news or theory that is needed otherwise to explain it.

The question is how long it can last.”

Someone asked ‘why then is it happening?” I am sorry I had thought it was also obvious based on any number of recent posts.

The Anglo-American Gold Pool, and their coterie of client Banks, have made a policy decision to hold the price of gold and silver below 1300 and 20.

Why those particular levels? Because any lower, and the miners would start going out of business, and the flow of physical bullion to the East might become unmanageable. They are nice round numbers, with the obvious appeal to the bureaucratic mind. Anything higher, or rather, with a more aggressive rate of ascent, and some of the natives might become restless, and the positions of some Banks might become untenable.

Their reasons are of course theirs, but I would imagine it is something along the lines of ZIRP, the TARP, selective justice, and the rigging of LIBOR and any other number of markets.

The preservation of the status quo becomes paramount to those caught in a credibility trap, and especially among those who have risen to great wealth and power through ‘extraordinary means.’

L’etat, c’est moi.

High Tide for the Dollar: Revenge of the Sith

Guest Post by Jesse

I have certainly considered this scenario many times, of how the dollar regime might evolve, and the one discussed below remains one possible outcome.

There is an intense international discussion going on about the future of the international currency system, and relations in general. I have referred to this generally as the ‘currency wars’ for some time.

Most Americans have yet to notice this, due in no small part to the silence of the mainstream media. If the US and the BRICs cannot engage in a rapprochement over the future of the international monetary system, and keep pushing a hard line for a US dollar hegemony, then of course the BRICs may pursue those discussions by other means.

One way to do this would be to revalue gold at let’s say $10,000 per ounce, and use it to partially back their own currency, or currencies. Bill Holter does a good job of outlining that in the article excerpted below. The details of how that one might play out is certainly open to much debate.

The counter to this is force, which the US has been employing much more aggressively and pre-emptively of late than it otherwise has done in the post-Cold War era.

I had assigned this somewhat unilateral devaluation of the Dollar to Gold outcome a low probability, thinking that the US and its allies, Britain, Japan, and parts of the EU, would continue supporting each other’s currencies and policies of foreign exchange valuations through non-transparent swaps and buying, in a managed devaluation amongst themselves of course. But I thought they would at least open the door to allowing the SDR to be reconstituted with a broader basket of currencies and metals not under NATO control.

The events of late in Ukraine make me wonder if the negotiations have not broken down because the hard liners in the Anglo-American cartel have prevailed over those who might favor accommodation and compromise. When the coup d’état occurred, with the US involvement becoming known, I had one of those ‘WTF’ moments many of us had when the US made a hard right turn and attacked Iraq, seemingly out of nowhere as a response to 911. Wow, where did that come from?

Certainly it must be obvious that the neo-cons are back in force in Washington, although the neo-liberal economists in the Obama cabinet are certainly capable of carrying the financial side of that American Century outlook.

This is not to say that Russia and China are in the right, or are ‘good.’ They have positions and the Anglo-American financiers have positions. One can certainly debate the relative merits, but for my own case I wish to try and understand what is happening, so that we may best adjust to it and understand what is happening and why.

And it would certainly be difficult to give high marks to the Anglo-American elites for taking care of those at home, and managing the domestic infrastructure and prosperity. As we see so often throughout history, this appears to be the case of an oligarchy versus another oligarchy, as they grow restless within their domains.

Therefore I continue to believe that we will see change, rather than collapse. Although if I were writing a book, or selling my site for clicks, the temptation for blaring headlines of doom might be stronger. Things change, and periods of change always invoke dire predictions and phantoms of doom.

I am more concerned about a union amongst the oligarchs and the rise of a global governance that is anti-human, to be frank. But even that is most likely an outlier I would like to think. Of more real concern perhaps are the unsuspecting believers and the gullible who may be proudly riding the gospel of prosperity, and a fascination for the trappings but not the substance of devotion, into the maws of hell, with ‘Lord, Lord’ on their lips. But that is another matter for a smaller audience, and a preoccupation for some of us here.

So grab something solid and hang on. I don’t know enough to be able to predict how this will turn out, and anyone who might be able to do so realizes that the fog of war is descending quickly. Predictions and guesses are cheap, and will become even more plentiful as things progress. But knowledge is the coin of the realm.

There could be rough waters ahead, mateys. But one can always hope that cooler and wiser and stronger heads will prevail. This will play out slowly, until something happens, and then events may being to move rather quickly. Pray for the best, and prepare for the worst.

“Next Tuesday, Vladimir Putin will meet with Chinese President Xi Jinping, I believe that the odds are quite high that an energy deal will be announced where Russia will supply China with oil and gas and that infrastructure (pipelines) will also be built to the express exclusion of the dollar. Please understand that this is not a deal where a few million barrels of oil are sent and then get settled for, no, this will be a very long term partnership which is why the infrastructure will be built.

My intent was to explain that China has imported 1,000′s of tons of gold over the last several years and that they (even though their system is very highly leveraged just as ours) have prepared themselves for what is coming. ‘What is coming’ is that China will have just as many massive defaults as the U.S. will …but with a “small difference.” I believe that China will mark gold up to an arbitrary number of let’s say $10,000 per ounce which will do a number of things. First, this will make China’s holdings worth much much more which can and will be used as collateral to steady their debt markets. This collateral will serve to re liquefy the banks AND back their currency should they wish to (I believe they do).

Another added ‘benefit’ is that this will expose the fact that the West no longer has any gold. The dollar will go into a spiral because not just ‘one lunatic’ like Saddam Hussein is proposing to no longer use dollars. No, we are talking about 2 major oil producers and our largest trading partner who may just be the largest economy in the world having eclipsed us. Another little tidbit is that these 3 taken together were for years the absolute arch enemy of the U.S. and now they are forming a unified triad where Russia and Iran can say, ‘Hey, you told us not to use dollars anymore, we’re just doing what you’ve told us to do.’ Talk about forming ‘policy’ without looking 5 seconds into the future, our sanctions would be the definition of this.”

Bill Holter, They Don’t Need Us, We Need Them

Read the entire article here.

HAS ANYONE EVER THANKED TIMMY GEITHNER FOR SAVING THE REPUBLIC?

Edward Bernays must be looking up with a proud smirk on his face. His teachings have been perfected beyond his wildest dreams. It had to be done in the name of democracy. Truth, freedom and liberty have always been dangerous and unnecessary concepts for the ruling class to allow. The propaganda media will do there duty until the very end.

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. …In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” – Edward Bernays – Propaganda

Guest Post by Jesse

Tweeting the Decline and Fall of Western Civilization, One Institution At a Time

“[Edmund] Burke said that there were Three Estates in Parliament; but, in the Reporters’ Gallery yonder, there sat a Fourth Estate, more important far than they all.”

Thomas Carlyle

“In the First Amendment, the Founding Fathers gave the free press the protection is must have to fulfill its essential role in our democracy. The press was to serve the governed, not the governors. The Government’s power to censor the press was abolished so that the press would remain forever free to censure the Government. The press was protected so that it could bare the secrets of government and inform the people.”

Hugo L. Black

“The TV business is uglier than most things. It is normally perceived as some kind of cruel and shallow money trench through the heart of the journalism industry, a long plastic hallway where thieves and pimps run free and good men die like dogs, for no good reason.”

Hunter S. Thompson

“We become slaves the moment we hand the keys to the definition of reality entirely over to someone else, whether it is a business, an economic theory, a political party, the White House, Newsworld or CNN.”

B.W. Powe