12/44. Switzerland has the only Real Democracy on the Planet
October 30, 2012 "meat" from "Letters FF Oct 30) by C. Vayenas, Brigg, Switzerland
Most people have no idea how the Switzerland has gained it's wealth and grows it. It has a government that makes most sense on the planet and here is how it works.
"The country has no prime minister and no head of state. There are no full-time members of parliament. The budget has to be balanced over the cycle. Taxes cannot be raised without the people's direct consent (the ballot papers, accompanied by return envelopes, are posted to the voter's home)."
"Consequently, there is not much left for politicians to be influential about."
"Such an approach works here, but I do not see it being copied elsewhere."
No wonder that the really wealthy people like to live and invest through Switzerland and no wonder the foreign corporations want to establish put their HQ's there.
The government works only part time and politicians cannot be lobbied. Lobbying in Switzerland has to be done by meeting personally every Swiss voter. Can any company afford this process where outcome can never be guaranteed?
The Swiss vote brings up the will of the people that gets then executed by the officials.
12/41. We Have The Smoking Gun - FED Controlling Gold
Zerohedge has recently presented several declassified documents from the pre-1971 "Nixon Shock" days, that endorse the case for gold as a major historical factor in US monetary and foreign policy, as demonstrated by State Department and CIA disclosure. Gold's special status in policy and administrative decision-making was a direct factor in Nixon's choice to abolish the gold reserve at a time of an exploding budget deficit.
Additionally, a curious tangent of the Burns memo below is the fact that gold was explicitly used as an engine to enact political doctrine: "If the United States took a stand on the gold question that failed to satisfy the French in current international negotiations, would there be adverse economic or political consequences? I doubt it... If we do ever accede to French views on gold, we should at least use our bargaining leverage to achieve some major political advantage." And while gold as a policy mechanism was unable to satisfy its role this time, one wonders on how many subsequent occasions was global democracy trampled over in order to placate the US Federal Reserve:
"I have consulted Henry Kissinger as to whether there is some political quid pro quo we might want to extract from the French in exchange for acceding to some part or all of their desired position on gold. But Henry tells me there is none at this time."
Be aware that at some point governments of advanced nations will say "enough" to the covert domination of their controlling bodies by the Federal Reserve, which through manipulation of its gold and money interests, effectively has control over not just the French, but every government which has a monetary basis to its respective economy and a relationship to the US "reserve" currency... Which means virtually every country in the world. The backlash, if and when it occurs, will be memorable.
Lastly, the memo presents a useful snapshot into the cloak-and-dagger, and highly nebulous world of Central Bank negotiations and gold price manipulation. It include all the details like this one found om page 6 in the following 7 page document below:
"I have a secret understanding in writing with the Bundesbank that Germany will not buy gold, either from the market or from another government, at a price above the official price." ( At the time official US gold price was $42.22 per oz while open markets traded between $160...$175 per oz )
12/40. 10 Topics Americans Don’t Want To Hear
Why's follow at the end...
by Mark Hanson
While overseas, unless you’re speaking with a real estate agent or a prostitute, chances are that people you meet are not going to be excited that you’re American. It’s not some badge of honor we get to parade around. Yes, we had Steve Jobs and Thomas Edison, but unless you actually are Steve Jobs or Thomas Edison (which is unlikely) then most people around the world are simply not going to care.
As Americans, we’re brought up our entire lives being taught that we’re the best, we did everything first and that the rest of the world follows our lead.
Not only is this not true, but people get irritated when you bring it to their country with you. So don’t.
Despite the occasional eye-rolling, and complete inability to understand why anyone would vote for George W. Bush, people from other countries don’t hate us either.
In fact — and I know this is a really sobering realization for us — most people in the world don’t really think about us or care about us. I know, that sounds absurd, especially with CNN and Fox News showing the same 20 angry Arab men on repeat for ten years straight. But unless we’re invading someone’s country or threatening to invade someone’s country (which is likely), then there’s a 99.99% chance they don’t care about us.
Just like we rarely think about the people in Bolivia or Mongolia, most people don’t think about us much. They have jobs, kids, house payments — you know, those things called lives — to worry about. Kind of like us.
Americans tend to assume that the rest of the world either loves us or hates us (this is actually a good litmus test to tell if someone is conservative or liberal). The fact is, most people feel neither. Most people don’t think much about us.
Remember that immature girl in high school, who every little thing that happened to her meant that someone either hated her or was obsessed with her; who thought every teacher who ever gave her a bad grade was being totally unfair and everything good that happened to her was because of how amazing she was? Yeah, we’re that immature high school girl.
For all of our talk about being global leaders and how everyone follows us, we don’t seem to know much about our supposed “followers.”
They often have completely different takes on history than we do.
Here were some brain-stumpers for me: the Vietnamese believe the Vietnam War was about China (not us), Hitler was primarily defeated by Russia (not us), Native Americans were wiped out largely disease and plague (not us), and the American Revolution was “won” because the British cared more about beating France (not us). Notice a running theme here?
We did not invent democracy. We didn’t even invent modern democracy. There were parliamentary systems in England and other parts of Europe over a hundred years before we created government. In a recent survey of young Americans, 63% could not find Iraq on a map (despite being at war with them), and 54% did not know Sudan was a country in Africa.
Yet, somehow we’re positive that everyone else looks up to us.
There’s a saying about English-speakers. We say “Go fuck yourself,” when we really mean “I like you,” and we say “I like you,” when we really mean “Go fuck yourself.”
Outside of getting shit-housed drunk and screaming “I LOVE YOU, MAN!”, open displays of affection in American culture are tepid and rare. Latin and some European cultures describe us as “cold” and “passionless” and for good reason. In our social lives we don’t say what we mean and we don’t mean what we say.
In our culture, appreciation and affection are implied rather than spoken outright. Two guy friends call each other names to reinforce their friendship; men and women tease and make fun of each other to imply interest. Feelings are almost never shared openly and freely. Consumer culture has cheapened our language of gratitude. Something like, “It’s so good to see you” is empty now because it’s expected and heard from everybody.
In dating, when I find a woman attractive, I almost always walk right up to her and tell her that a) I wanted to meet her, and b) she’s beautiful. In America, women usually get incredibly nervous and confused when I do this. They’ll make jokes to defuse the situation or sometimes ask me if I’m part of a TV show or something playing a prank.
Even when they’re interested and go on dates with me, they get a bit disoriented when I’m so blunt with my interest. Whereas, in almost every other culture approaching women this way is met with a confident smile and a “Thank you.”
If you’re extremely talented or intelligent, the US is probably the best place in the world to live. The system is stacked heavily to allow people of talent and advantage to rise to the top quickly.
The problem with the US is that everyone thinks they are of talent and advantage. As John Steinbeck famously said, the problem with poor Americans is that “they don’t believe they’re poor, but rather temporarily embarrassed millionaires.” It’s this culture of self-delusion that allows America to continue to innovate and churn out new industry more than anyone else in the world. But this shared delusion also unfortunately keeps perpetuating large social inequalities and the quality of life for the average citizen lower than most other developed countries. It’s the price we pay to maintain our growth and economic dominance.
In my Guide to Wealth, I defined being wealthy as, “Having the freedom to maximize one’s life experiences.” In those terms, despite the average American having more material wealth than citizens of most other countries (more cars, bigger houses, nicer televisions), their overall quality of life suffers in my opinion.
(Comment by GW team: This outsiders visible wealth is actually not real wealth as most of it is owed to credit card companies or banks. In reality the net worth of the average Canadian family today is actually $40,000 more than the wealth of the average American family.)
American people on average work more hours with less vacation, spend more time commuting every day, and are saddled with over $10,000 of debt. That’s a lot of time spent working and buying crap and little time or disposable income for relationships, activities or new experiences.
In 2010, I got into a taxi in Bangkok to take me to a new six-story cineplex. It was accessible by metro, but I chose a taxi instead. On the seat in front of me was a sign with a wifi password. Wait, what? I asked the driver if he had wifi in his taxi. He flashed a huge smile. The squat Thai man, with his pidgin English, explained that he had installed it himself. He then turned on his new sound system and disco lights. His taxi instantly became a cheesy nightclub on wheels… with free wifi.
If there’s one constant in my travels over the past three years, it has been that almost every place I’ve visited (especially in Asia and South America) is much nicer and safer than I expected it to be. Singapore is pristine. Hong Kong makes Manhattan look like a suburb. My neighborhood in Colombia is nicer than the one I lived in in Boston (and cheaper).
As Americans, we have this naïve assumption that people all over the world are struggling and way behind us.
They’re not. Sweden and South Korea have more advanced high speed internet networks. Japan has the most advanced trains and transportation systems. Norwegians make more money. The biggest and most advanced plane in the world is flown out of Singapore. The tallest buildings in the world are now in Dubai and Shanghai.
Meanwhile, the US has the highest incarceration rate in the world. (GW Comment: The leaders of the USA are no more looking for the best of the counry but instead for the best ways to enrich themselves using their political party as stepping tool. They no more care what is right and waht is wrong for the USA nor what is legal and what is criminal. The people on the streets have seen enough of this nionsense and understand perfectly what is going on. They simply exercise the same in their everyday lives. The difference is that whn they get caught they get prosecuted while those in power simply change the laws instead).
What’s so surprising about the world is how unsurprising most of it is. I spent a week with some local guys in Cambodia. You know what their biggest concerns were? Paying for school, getting to work on time, and what their friends were saying about them. In Brazil, people have debt problems, hate getting stuck in traffic and complain about their overbearing mothers. Every country thinks they have the worst drivers. Every country thinks their weather is unpredictable. The world becomes, err… predictable.
Not only are we emotionally insecure as a culture, but I’ve come to realize how paranoid we are about our physical security. You don’t have to watch Fox News or CNN for more than 10 minutes to hear about how our drinking water is going to kill us, our neighbor is going to rape our children, some terrorist in Yemen is going to kill us because we didn’t torture him, Mexicans are going to kill us, or some virus from a bird is going to kill us. There’s a reason we have more guns than people.
In the US, security trumps everything, even liberty. We’re paranoid.
I’ve probably been to 10 countries now that friends and family back home told me explicitly not to go because someone was going to kill me, kidnap me, stab me, rob me, rape me, sell me into sex trade, give me HIV, or whatever else. None of that has happened. I’ve never been robbed and I’ve walked through some of the shittiest parts of Asia, Latin America and Eastern Europe.
In fact, the experience has been the opposite. In countries like Russia, Colombia or Guatemala, people were so friendly it actually scared me. Some stranger in a bar would invite me to his house for a bar-b-que with his family, a random person on the street would offer to show me around and give me directions to a store I was trying to find. My American instincts were always that, “Wait, this guy is going to try to rob me or kill me,” but they never did. They were just insanely friendly.
I’ve noticed that the way we Americans communicate is usually designed to create a lot of attention and hype. Again, I think this is a product of our consumer culture: the belief that something isn’t worthwhile or important unless it’s perceived to be the best (BEST EVER!!!) or unless it gets a lot of attention (see: every reality-television show ever made).
This is why Americans have a peculiar habit of thinking everything is “totally awesome,” and even the most mundane activities were “the best thing ever!” It’s the unconscious drive we share for importance and significance, this unmentioned belief, socially beaten into us since birth that if we’re not the best at something, then we don’t matter.
We’re status-obsessed. Our culture is built around achievement, production and being exceptional. Therefore comparing ourselves and attempting to out-do one another has infiltrated our social relationships as well. Who can slam the most beers first? Who can get reservations at the best restaurant? Who knows the promoter to the club? Who dated a girl on the cheerleading squad? Socializing becomes objectified and turned into a competition. And if you’re not winning, the implication is that you are not important and no one will like you.
Unless you have cancer or something equally dire, the health care system in the US sucks. The World Health Organization ranked the US 37th in the world for health care, despite the fact that we spend the most per capita by a large margin.
The hospitals are nicer in Asia (with European-educated doctors and nurses) and cost a tenth as much. Something as routine as a vaccination costs multiple hundreds of dollars in the US and less than $10 in Colombia. And before you make fun of Colombian hospitals, Colombia is 28th in the world on that WHO list, nine spots higher than us.
A routine STD test that can run you over $200 in the US is free in many countries to anyone, citizen or not. My health insurance the past year? $65 a month. Why? Because I live outside of the US. An American guy I met living in Buenos Aires got knee surgery on his ACL that would have cost $10,000 in the US… for free.
But this isn’t really getting into the real problems of our health. Our food is killing us. I’m not going to go crazy with the details, but we eat chemically-laced crap because it’s cheaper and tastes better (profit, profit). Our portion sizes are absurd (more profit). And we’re by far the most prescribed nation in the world AND our drugs cost five to ten times more than they do even in Canada (ohhhhhhh, profit, you sexy bitch).
In terms of life expectancy, despite being the richest country in the world, we come in a paltry 38th. Right behind Cuba, Malta and the United Arab Emirates, and slightly ahead of Slovenia, Kuwait and Uruguay. Enjoy your Big Mac.
The United States is a country built on the exaltation of economic growth and personal ingenuity. Small businesses and constant growth are celebrated and supported above all else — above affordable health care, above respectable education, above everything. Americans believe it’s your responsibility to take care of yourself and make something of yourself, not the state’s, not your community’s, not even your friend’s or family’s in some instances.
Comfort sells easier than happiness. Comfort is easy. It requires no effort and no work. Happiness takes effort. It requires being proactive, confronting fears, facing difficult situations, and having unpleasant conversations.
Comfort equals sales. We’ve been sold comfort for generations and for generations we bought: bigger houses, separated further and further out into the suburbs; bigger TV’s, more movies, and take-out. The American public is becoming docile and complacent. We’re obese and entitled. When we travel, we look for giant hotels that will insulate us and pamper us rather than for legitimate cultural experiences that may challenge our perspectives or help us grow as individuals.
Depression and anxiety disorders are soaring within the US. Our inability to confront anything unpleasant around us has not only created a national sense of entitlement, but it’s disconnected us from what actually drives happiness: relationships, unique experiences, feeling self-validated, achieving personal goals. It’s easier to watch a NASCAR race on television and tweet about it than to actually get out and try something new with a friend.
Unfortunately, a by-product of our massive commercial success is that we’re able to avoid the necessary emotional struggles of life in lieu of easy superficial pleasures.
Throughout history, every dominant civilization eventually collapsed because it became TOO successful. What made it powerful and unique grows out of proportion and consumes its society. I think this is true for American society. We’re complacent, entitled and unhealthy. My generation is the first generation of Americans who will be worse off than their parents, economically, physically and emotionally. And this is not due to a lack of resources, to a lack of education or to a lack of ingenuity. It’s corruption and complacency. The corruption from the massive industries that control our government’s policies, and the fat complacency of the people to sit around and let it happen.
As background the two ancient truths below teach us an essentila fact how human mind works:
Excerpts from Romney's rumored "VP candidate" Condaleezza Rice's article in recent FT:
"US must recall it is not just any country" - it is a leader and should lead the World
FT July 27, 2012 - By Condoleezza Rice. She is Mit Romney's most likely running mate against President Obama. She is yet another megalomaniac of Neoconservative movement wanting to take over the workd and to create the "New Worl Order" as expressed by G. W. Bush earlier... So next is an exerts what she says today:
"In this young century, the 9/11 attacks, the global financial crisis and the unrest in the Arab world have struck at the heart of vital US interests. If Americans want the tectonic plates of the international system to settle in a way that makes the world safer, freer and more prosperous, the US must overcome its reluctance to lead. We will have to stand up for and promote the power and promise of free markets and free peoples, and affirm that American pre-eminence safeguards rather than impedes global progress." (we can challenge almost everty word above and in the below three excers pargraphs from the longer story in FT by simply by reading the summary of what the rest of the world thinks of us again.
"The list of US foreign policy challenges is long and there will be a temptation to respond tactically to each one. But today’s headlines and posterity’s judgment often differ. The task at hand is to strengthen the pillars of our influence and act with the long arc of history in mind."
"In the Middle East we must patiently use our aid, expertise and influence to support the creation of inclusive democratic institutions. The fundamental problem in the region is the absence of institutions that can bridge the Sunni-Shia divide, and protect the rights of women and minorities. Even as we make necessary immediate choices – including arming the Syrian rebels – we must insist upon inclusive politics. The US cannot afford to stand aside; regional powers will bring their own agendas that could exacerbate confessional divisions. "
"As we work with reformers across the region, we should not forget that Iraq has the kind of institutions that are meant to overcome these divisions. Given its geostrategic importance, the chaos engulfing its neighbours and Iran’s destructive influence, our re-engagement with Baghdad is sorely needed."
"The US needs to turn again to the development of responsible and democratic sovereigns beyond the Middle East. The George W. Bush administration doubled aid spending worldwide and quadrupled it to Africa. It channelled assistance to countries that were investing in their people’s health and education, governing wisely and democratically, building open economies and fighting corruption. Ultimately, these states will make the transition from aid to private investment, becoming net contributors to the international economy and global security. US tax dollars will have been well spent. "
"We must also not lose sight of how democracy is solidifying in the western hemisphere. US assistance and trade policy can help democracies in Latin America to provide an answer to populist dictators. At the same time, we must speak out for dissidents – from Cuba to Venezuela to Nicaragua. Mexico needs attention across a broad agenda that includes the devastating security challenge that threatens both it and the US."
Comments to MS Rice's thoughts:
Colonialism is a word associated with the 19th and 20th centuries, with an outside force (usually European) coming into a country, destroying and uprooting the culture and people, with the main goal being the extraction of resources for the gain of the ‘mother’ country. It is defined as “the policy or practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically.” Yet this definition of colonialism can be expanded from examining the external to examining the internal. For what may be the first time in US history, internal colonialism is occurring in addition to external colonialism as the very facades of democracy and the economic system begin to fall apart and the elite sense grave danger and to releave it have began to colonize also internally.
The internal colonization
The internal colonization of America by elites can be seen most starkly in the financial sector, specifically in the 2007-2009 economic crisis, the effects of which are still being felt. There was mass panic about the near global economic collapse which allowed financial corporations to convince the government to bail them out to the tune of $12.8 trillion, yet, once the dust cleared, the very banks that caused the crisis in the first place only grew larger. Bloomberg noted in April of this year that Bank of America, JP Morgan Chase, Wells Fargo, Goldman Sachs, and Citigroup had combined assets that “amounted to 43 percent of US output” in 2007. After the crisis those same banks now “held $8.5 trillion in assets (at the end of 2011) that equals to 56 percent of the U.S. economy,” their combined percentage of the economy had increased while people had seen their pension funds dwindle to almost nothing.
While the near collapse of the economy led to large amounts of growth for the banks and therefore the banksters getting massive bonuses, it had a devastating impact on average Americans. While one can go and generalize about the number of jobs and houses lost, it is much more telling to go and look at the actual numbers. After the crisis ended, it was stated that the entire fiasco “cost the U.S. an estimated $648 billion due to slower economic growth only” translating additionally into “approximately $5,800 in lost income for each U.S. household.” It was also found that 5.5 million more jobs were lost than were predicted in the Congressional Budget Office forecast of 2008.
The effects of this recession has not only resulted in droves of Americans being left destitute and unemployed to the point where just last year one million of them applied to McDonalds, but has also left towns and cities on almost utterly destroyed. A 2011 IHS report revealed that “37 metropolitan areas are not expected to return to peak employment until after 2021”.
While all this was going the we still continue implementing the Neoconservative politics started by Georg H. W Bush to spread our democracy around the globe.
This attempt will fail as surely as the sunrises from the east and sets to the west. This was crystal clear already to our second President John Adams who stated over 200 years ago: "The US constitution was made only for moral and religious people. It is wholly inadequate to the government of any other." Note that all those at the time were expatriates from the already existing democracy we call today United Kingdom.
The Neoconservative movement originates from Academia in Chicago. Its academic developed and leaders have never really understood the ordinary people in the USA nor elsewhere. They cannot accept that it is impossible to bypass the ancient power structures of any existing society just by dictating them some new rules to follow. Tribal nations will not adopt democratic process on the spot. These nations have to evolve internally and that takes generations.
People must see the benefits. Our Neoconservative way has so far only destroyed cities, stores and homes of ordinary people, killed millions of them and maimed a multitude of more. This means sorrow and misery for countless families. They see only material impoverishment caused by our democracy. John Adams knew this from his experience and we know in our hearts that nothing has changed.
Continuing this Neoconservative agenda will only support dictatorial/fascist forces to surface and to steal the power..
Unfortunately we Americans have been brainwashed almost to perfection by Fox, CNN & aliases and we now seem to support the Neoconservative agenda while we all know in our hearts that it does not work. And by following these policies we end up paying for more exuberantly expensive high tech wars costing us more young lives. These senseless ego trip wars impoverished us. Our money turns to fiat money that has best value in starting the fires so we can stay warm in out tent cities.
The reality might be too unbelievable and too painful to most Americans but unfortunately the 10 statements above by Mark Hanson represents typical views of the 6.8 million American expats living abroad:
12/39. Libor was manipulated already in 1991
FT July 27, 2012 - By Douglas Keenan - an independent mathematical scientist and a former Morgan Stanley trader
My thwarted attempt to tell of Libor shenanigans
In 1991, I began trading for Morgan Stanley, the investment bank, in London. I was trading bonds, derivatives and related securities. One of those securities was based on the three-month Libor rate: the interest rate at which banks can borrow money for three months from each other. Morgan Stanley does not trade on the interbank market so I could not directly borrow or loan money at Libor rates. What I could do, however, was trade a futures contract on the three-month Libor rate.
As an example of how a futures contract works, consider the following. Suppose that we are concerned about three-month Libor rates increasing in the future; in particular, we are concerned about what the three-month rate will be in September. If that rate is, say, 1 per cent, we can agree today to effectively lock it in. If, come September, the actual three-month rate is 2 per cent, then our contract will ensure we can still borrow at 1 per cent. Futures contracts on three-month Libor were – and are – traded on the London International Financial Futures Exchange (Liffe, now part of NYSE Euronext). There was a standard contract for the month of September. That contract had its rate settled on the third Wednesday of the month, at 11 o’clock.
In 1991, I had live trading screens that showed the Libor rates. In September of that year, on the third Wednesday, at 11 o’clock, I watched those screens to see where the futures contract should settle. Shortly afterwards, Liffe announced the contract settlement rate. Its rate was different from what had been shown on my screens, by a few hundredths of a per cent.
As a result, I lost money. The amount was insignificant for me, but I believed that I had been defrauded and I complained to Liffe. Liffe explained that the settlement rate was not determined by what rates were actually in the market. Instead, the British Banker’s Association polled banks, asking them what the rates were. The highest and lowest quoted rates were discarded and the rest were averaged, giving the settlement rate. Liffe explained that, in doing this, they were adhering to the terms of the contract.
I talked with some of my more experienced colleagues about this. They told me banks misreported the Libor rates in a way that would generally bring them profits. I had been unaware of that, as I was relatively new to financial trading. My naivety seemed to be humorous to my colleagues.
Simply put, then, it seems the misreporting of Libor rates may have been common practice since at least 1991. Although the difference between the reported rate and the actual rate might seem small, the total amount of money involved is material, given that Libor rates affect contracts worth hundreds of trillions. Also important is what such misreporting says about the culture of finance.
During 1991, at the London office of Morgan Stanley, the head of interest rate trading was a person who has been at the centre of the current scandal: Bob Diamond. I do not recall discussing Libor misreporting with Mr Diamond but since the misreporting was common knowledge among traders, I presume he was aware. (That, however, is not a criticism of Mr Diamond: what could he have done about this?)
There have been two distinct motivations for banks to misreport Libor rates. One motivation is discussed above: to directly increase profits. The other motivation arose during the 2008 financial crisis: to mask liquidity problems.
Libor misreporting has been going on for decades. Why have investigations only recently begun? It seems highly implausible that all the investigating agencies could have been unaware for decades. Indeed, the regulators have a reputation among traders of being like Potemkin villages. I suspect what has happened is that, after the financial crises of 2008, the agencies decided they ought to perform more of their stated duties. That would also explain why the investigations appear to be ignoring any misreporting in years before 2005: to cover up the illusoriness of their earlier work.
One of the investigations is being undertaken by the House of Commons Treasury Committee. I telephoned the Committee on July 3 and spoke with a Committee specialist. I told the specialist about the foregoing and said that I was willing to testify under oath. The specialist seemed extremely interested. They said they were to have a meeting about the Libor scandal and would call me back afterwards. I did not hear back, however, so I telephoned to ask what was happening. My testimony was not wanted, the specialist told me.
GW Comments: Real Experts recognize their own personal limits better than most CEO's and their Boards. Today our Presidents and CEO's seem to believe they execute God's will on earth. CEO's sit in each others Boards and return the favors whenever CEO's compensations is discussed. Citygroup's retired "God" Sandy Weill just surprised the world by recanting the heresy he did while at Citygroup and also in masterminding the cancellation of Glass-Steagall act.
July 24, 2012 - Vikram Mansharamani wrote in HBR Daily Alerts
Among the many qualities that distinguish successful leaders from millions of less-successful executives in the world is an awareness of the limits of their knowledge. They know what they know, they appreciate what they don't know, and they have a healthy respect for what they don't know they don't know. In short, they have great meta-knowledge.
Meta-knowledge can be thought of as a lack of hubris, an intellectual humility of sorts. Those who see the world probabilistically seem to better navigate volatile environments because they are wired to embrace uncertainty. They understand that they don't know anything with 100% certainty and are therefore open to ideas different from their own.
The psychologists Daniel Kahneman and Amos Tversky demonstrated quite convincingly that we human beings are not the model-optimizing "rational" actors that many economists historically believed we are. One of their key findings was that humans are consistently overconfident, suggesting that we generally have poor meta-knowledge. We tend to think we know more than we actually know. A corollary of this result is that we also tend not to know what we do not know.
In my experience, experts are among the least successful predictors in times of massive uncertainty. This is not to suggest that experts don't have significant and valuable knowledge; quite the opposite, they likely do. Rather, it implies that they think they know more than they actually do and therefore exhibit more confidence than is warranted. The result: a significant number of very visible expert predictions have gone embarrassingly wrong.
Consider for instance, two books that made it to the top of the bestseller lists: The Population Bomb and The Great Depression of 1990. The first, by Stanford biologist Paul Ehrlich, noted in 1968 that "the battle to feed all of humanity is over...in the 1970s, the world will undergo famines — hundreds of millions of people will starve to death...." Ehrlich failed to appreciate the possibilities of the "Green Revolution" which dramatically increased agriculture's productivity. Incidentally, the green revolution was already underway when Ehrlich wrote his book, he just didn't grasp the potential impact. The Great Depression of 1990, by Southern Methodist University economist Ravi Batra (which stayed on the bestseller list for 10 months in hardcover and over 19 months as a paperback), totally missed the technological developments that made the 1990s among the most productive decades ever.
Lest we conclude it's only doomsday experts that miss the mark, it's worth highlighting that Yale economist Irving Fisher noted on October 17, 1929 that "stocks prices have reached what appears to be a permanently high plateau," a mere days before the Great Crash welcomed the Great Depression. And of course, there's James Glassmann and Kevin Haskett's Dow 36,000, published in 1999, mere months before the Dow Jones Industrial Average began a slow, long, and painful decline.
Many of these "experts" adopted single-discipline approaches to developing insights; they were, to use the language of my prior HBR blog post, "specialists." They were truly knowledgeable within their domain, but it was often developments outside of their domain that derailed their predictions. They failed, it seems, to have a broad enough perspective.
Generalists, on the other hand, are those who have broad knowledge but lack deep domain expertise. Most generalists do not claim to be expert at anything, making them psychologically more receptive to ideas distant or different from their own. They are, it seems, more aware of what they do not know and understand that there is a large body of information that they do not know they do not know.
Why does this matter? When facing massive uncertainty, as exists in today's highly interconnected global economy, it is essential to appreciate both what one does know as well as what one does not know. Such logic is not shocking, but it has significant ramifications for how one should manage his or her career, and how organizations should manage their human resources. Specifically, the best decision-makers (i.e. leaders) in times of uncertainty are likely to be those who possess above-average skepticism and intellectual humility. Individuals should therefore seek career paths that constantly put them in unfamiliar roles and through which they can learn what they don't know. The feedback one receives through these roles will likely improve one's intellectual self-awareness.
Another interesting implication is that specialists and experts should be seen as resources to tap into when needed. They have a very valuable role to play; it just may not be as a leader. (Of course, the ideal would be to develop expertise in dozens of domains en route to becoming a leader, but that may make for a very long career trajectory.) My friend Michael W. Sonnenfeldt, founder of Tiger21, a peer-to-peer education group for high-net worth individuals, has eloquently observed a key insight: "Many of us have learned it's best to keep experts on tap, not on top."
Unfortunately the above summarizes the views of the CEO's, Politicians and especially the Banksters in the West.
Are these characters the most brilliant an capable people on this planet? Of the bat we say NO! All evidence today point overwhelmingly to a different direction like referred in the title already.
The smaller countries in the North with less resources have learned this lesson already long time ago.
Of course CEO's and alike all are verbally top class people and smart. However, too many of them are not equipped with two more equally critical skill elements: Wisdom and the lowly layman's Know How.
The best know person ever having all these skills was Genghis Khan (1162-1294).
Rome was not built in one day, nor did the Great Wall of China.
It ha become Crystal Clear that American CEO's and financiers have forgotten why they were given their current positions! Their only dream seem to be getting megabucks to their own valets. One of our current Presidential candidates is a good example.
A similar group of characters tried the same in 1933 but they failed. This is second attempt of likely even the same group to take over now not only America but also Europe.
A few years ago the tiny Iceland was used as testing ground how it all would work in large scale. Little did these characters understand of the nature of the Nordic peoples.
The Icelanders could not stop the crime at the time it was done but afterwards the story is different. This Nation of 300,000+ people refused to follow the "advice" from such giants like IMF, FED and Bank of England and instead took the justice to their own hands. To finish it all they have just sent bounty hunters around the globe to bring the rest of the criminals back to their own island. These criminals are lucky as after caught they will no more face the ancient justice of the North.
July 25, 2012 By Robert Reich
I’m in Alaska, amid moose and bear, trying to steal some time away from the absurdities of American politics and economics. But even at this remote distance I caught wind of Sanford Weill’s proposal this morning on CNBC that big banks be broken up in order to shield taxpayers from the consequences of their losses. Forget the bear and moose for a moment. This is big game.
If any single person is responsible for Wall Street banks becoming too big to fail it’s Sandy Weill. In 1998 he created the financial powerhouse Citigroup by combining Traveler’s Insurance and Citibank. To cash in on the combination, Weill then successfully lobbied the Clinton administration to repeal the Glass-Steagall Act – the Depression-era law that separated commercial from investment banking. And he hired my former colleague Bob Rubin, then Clinton’s Secretary of the Treasury, to oversee his new empire.
Weill created the business model that Wall Street uses to this day — unleashing traders to make big, risky bets with other peoples’ money that deliver gigantic bonuses when they turn out well and cost taxpayers dearly when they don’t. And Weill made a fortune – as did all the other executives and traders. JPMorgan and Bank of America soon followed Weill’s example with their own mega-deals, and their bonus pools exploded as well.
Citigroup was bailed out in 2008, as was much of the rest of the Street, but that didn’t alter the business model in any fundamental way. The Street neutered the Dodd-Frank act that was supposed to stop the gambling. JPMorgan, headed by one of Weill’s protégés, Jamie Dimon, just lost $5.8 billion on some risky bets. Dimon continues to claim that giant banks like his can be managed so as to avoid any risk to taxpayers.
Sandy Weill has finally seen the light. It’s a bit late in the day, but, hey, he’s already cashed in. You and I and millions of others in the United States and elsewhere around the world are still paying the price.
What’s the betting that one of the presidential candidates will take up Weill’s proposal?
July 23, 2012 - Keiser Report
Hank the banksters, hang them high,
point their necks up too the sky!
It's as nice as a day can be!
won't you come hang a bankster with me!
Hang the banksters hang them well!
Send their thieving souls to hell,
and when they're dangling on the noose we'll know,
it's the end of the fraud and we all can go home!
July 23, 2012 7:11 pm - By Pat Buchanan
Triumphant in the first Gulf war, George H.W. Bush, in October 1991, went before the UN to declare that the US’s goal was now to build a “New World Order”.
Rejecting this as Wilsonian utopianism, my 1992 presidential campaign called for an end to US military intervention where no vital interest was imperilled, for federal action to secure our southern border and for a halt to the outsourcing of US manufacturing jobs.
We advocated a Hamiltonian policy to support industry and a Jeffersonian foreign policy of peaceful commerce with all nations but entangling alliances with none. And we were denounced as isolationists and protectionists.
We lost. But Mr Bush lost too, when Ross Perot, running on the same theme – putting America first – stripped away a third of the coalition Richard Nixon and Ronald Reagan put together, leaving Mr Bush with an incumbent’s smallest share of the vote since William Howard Taft.
Mr Bush’s foreign policy record could not save him. The US was looking inward in 1992, as it does today. As Mitt Romney burnishes his foreign policy credentials this week, he should keep this lesson in mind.
Having learnt from his father’s defeat, George W. Bush offered a “more humble” policy. But after September 11, he had a Damascene conversion, went nation-building in Afghanistan and Iraq, and declared the US’s goal was “to end tyranny in our world”. Americans responded by relieving the Republican party of both houses of Congress in 2006 and the presidency in 2008.
We cannot afford any more neo-imperial nonsense. With trillion-dollar deficits, a soaring national debt, and 10,000 baby boomers reaching eligibility for Social Security and Medicare every day, the US is beginning to break under the strain of its commitments.
What doth it profit a man if he gain the whole world but suffer the loss of his soul? A biblical hubris took hold of our republic. By pushing Nato into Russia’s front yard, planting bases in central Asia, dispatching democracy crusaders to subvert regimes in Ukraine, Belarus and Georgia, we undid the good work of Reagan and drove Moscow back into alliance with Beijing.
US influence in the Middle East is at a nadir. Our alliances with Turkey and Saudi Arabia are frayed. Pakistan bristles. Israel impatiently dismisses our pathetic pleas for it to stop building settlements. And as the Muslim Brotherhood rose when Hosni Mubarak fell in Cairo, so it looks likely to rise again when Bashar al-Assad falls in Damascus.
America needs a new foreign policy rooted in today’s reality, not in yesterday’s cold war or in tomorrow’s dream of global democracy. For as Turkey’s Recep Tayyip Erdogan reminds us, in his region democracy is a bus you get off when it reaches your stop.
We must roll up the empire and put America first again. We should swiftly complete Barack Obama’s work, end the war in Afghanistan and close US bases in central Asia. We should tell Ukraine and Georgia that Nato membership is closed. No US interest there justifies risking a clash with Russia. Let us tell Vladimir Putin that if he stays out of our yard, we will stay out of his.
Half a century ago, Dwight Eisenhower told John F. Kennedy to start pulling troops out of Europe, or else the continent would end up permanently dependent on the US. Was Ike not right? Europeans should take full responsibility for their own defence. The near debacle in Libya, where Britain and France might have been fought to exhaustion by Muammer Gaddafi had not the US intervened, exposed the atrophied state of Nato’s European members.
South Korea has a population twice that of North Korea and an economy 40 times as large. What are US soldiers still doing in the demilitarised zone? The frontier that will determine the fate of the US is not the 38th parallel, but the 2,000-mile border with Mexico.
Elsewhere in Asia, it is Russia’s land that China covets but India’s that China holds. Vietnam and the Philippines are defying Beijing’s claims to the Spratly Islands. Japan is showing a resolve to hold the Senkaku Islands. Let the neighbours do the containment.
In the Islamic world, Victor Hugo’s dictum applies: stronger than all the armies of earth is the power of an idea whose time has come. Islamic fundamentalism and ethno-nationalism, the two forces tearing countries apart from central Africa to south Asia, are not problems that can be solved by Seal Team Six.
Let us cease our interventions and call a halt to our endless hectoring. How other nations rule themselves is not really the US’s business. If there is nation-building to be done, let it begin here. The watchword of the Romney campaign and presidency should be enlightened nationalism. Time, again, to put America first.
The writer is a political commentator and a two-time candidate for the Republican nomination for president
Reported 07/17/2012 by MarketWatch
One of every seven (7) Americans is on food stamps. If this is not a Great Depression then waht is it? If those all on food stamps would stand in line for the soup kitchens it for sure would look like the Great Depression of 1929.
However, now the people now receive a small card in mail that they can use in grocery stores like any credit cards. There is no more stigma over using these cards openly. We are told by FED and GOP that we are in slow recovery. The invisible signs tells us something totally different:
Submitted 07/16/2012 by Tyler Durden and John Aziz of Azizonomics
I have always found something inherently creepy about Mitt Romney — indeed, in a choice between Obama and Romney with a gun to my head, the gun looks like an increasingly attractive proposition. Most puzzling is his defence of corporate personhood:
Corporations are people, my friend… Everything corporations earn ultimately goes to people
Do corporations breathe? Do they eat, sleep, feel and think? Do they require housing? Do they have families? Or medical care? Do they pay income tax? Do they have DNA? Eyes? Ears? Teeth? Has Texas ever executed one?No. Corporations are not people. Corporations are composed of people, and for a very good reason. From Wikipedia:
Limited liability is a concept whereby a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership with limited liability. In other words, if a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors. A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of their investment in that company.
Corporations essentially exist to allow groups of people to act collectively, without taking personal responsibility if the entire thing goes down like a lead balloon. Sure, if an employee of a corporation behaves in a criminal manner, they are sometimes jailed. Yet corporations — ever since the birth of the modern corporation through Rockefeller's Standard Oil — have created what is known as the agency problem. Corporations allow their owners to win, without the possibility of deep losses. And what does this mean in terms of responsibility? It means that things like the BP Oil spill are much, much more likely. Because if you can’t get hurt, you’re not going to exercise diligence in the same way you would if you could get more hurt. This is why the juggernauts of global industry — the titans of Wall Street in particular — blow up so frequently and so violently. Corporations are firewalls, spinning mammoth profits through risky bets, but allowing management and shareholders to hide behind them when their risky behaviour comes home to roost. And what happens if the house falls down? The creditors — or more frequently in recent years since we adopted this perverse bailout culture, the taxpayer — take the hit. The philosopher Nassim Nicholas Taleb wrote on his Facebook page:
Hammurabi’s code, ~3800 years ago, removed the agency problem as a condition for transaction: “If a builder builds a house and the house collapses and causes the death of the owner – the builder shall be put to death. If it causes the death of the son of the owner , a son of that builder shall be put to death.” Everything in past 100 years has been to shield managers from liabilities. Think of Fukushima.
Either limited liability should be abolished — corporations could still exist, but their owners and management are personally responsible for any debts and destruction incurred — or their behaviour should be taxed punitively to encourage individual and small business initiatives — the real wealth creators, job creators and innovators — over large scale destructo-juggernauts. At the very least, we should completely stop bailing them out when they blow up. That’s responsibility.
Corporations are certainly not free market entities. Their very reason for existence — limited liability — is created through government fiat. Capitalism and markets existed long before the creation of limited liability, and surely will exist for a long time after its demise.
July 14, 2012 Published by RussiaToday
In this episode, Max Keiser and co-host, Stacy Herbert, discuss the mainstream media joining the 'hang bankers' bandwagon, as it becomes increasingly obvious that the space race has been replaced with a fraud race and getting your Series 7 broker's license makes stealing a risk-free business proposition.
In the second half of the show, Max talks to analyst and newslettter writer, Rob Kirby of Kirby Analytics, about the derivatives complex as a price control grid and about the fact that every time the JP Morgan monster needs a feeding, something must die. Follow Max Keiser on Twitter: http://twitter.com/maxkeiser
July 16, 2012 by Xiaowei Rose Luo, Morten T. Hansen, Herminia Ibarra, and Urs Peyer
"A general who fears to unsheathe his sword is not a good general," says Mr. Li Jiaxiang, Chairman of Air China from 2004 to 2008 and the #1 performing corporate leader in China according to our new ranking (just published in the Harvard Business Review China and the centerpiece for the magazine's launch events in Beijing and Shanghai). Under his leadership, the company's total shareholder return outperformed its industry peers by 1,022%, corresponding to a compound annual return above the industry average of 129%, with a corresponding market capitalization increase of CNY 237 bn (USD 36.7 bn). A former general in the China Air Force, Mr. Li put into practice leadership skills he honed in his military career.
Though ours is not the first ranking of Chinese business leaders, it is the first ever such ranking to rely on objective long-term stock market performance.
The problem with many of the other current rankings is that they are heavily influenced by company reputation and media coverage. Those that do use financial measures tend to use quarterly earnings. But that's a poor measure, especially in China where short-term stock price fluctuations are higher than in Western markets.
Our ranking — and the study it is based on — bridges the Chinese and Western worlds by measuring leader and company performance in a way that makes sense for investors and management thinkers across the globe — long-term financial performance. We used the same method we employed in our widely-read global ranking of CEOs of the largest companies in the world, published in Harvard Business Review in 2010.
We track shareholder returns and market capitalization changes from the first day the leader took the helm to the last (or until March 31 2012 if still in office). The only difference is that in the China study, we defined the "corporate leader" as the person holding the highest executive position, i.e., with ultimate profit and loss responsibility for the firm. In Western countries this person is typically the CEO; in China they typically have the title Chairman of the Board.
Our measure is objective, using stock market data as opposed to reputation. It's also systematic, as we analyzed all large listed companies. And it's long-term, by tracking shareholder performance during the entire tenure of the leader. We used it to assess 509 leaders of the 244 largest state-controlled and non-state-controlled (private) companies on the Chinese stock exchanges. Measured this way, we found several patterns that run counter to popular myths about Chinese companies and the leaders who run them.
Myth #1: Manufacturing is the key to Chinese competitiveness
A quick look at the top rankers reveals that success for many came from actively pursuing an international strategy — 19 of the leaders in the top 50 ranking have done so. For example, the #2 in our ranking — Mr. Wang Dongming, Chairman of Citic Securities, the top firm in China's securities market — used international diversification to reduce the risk of a potential slow-down in China. Likewise, the #3 leader, Ms. Dong Mingzhu, of air-conditioning company Gree Electric Appliances saw the global downturn as a "golden chance for overseas customers to recognize that they can pay less for the best quality machines." Her strategy consisted of internationalizing Gree's brands, not merely setting up plants all over the world. While not household names today, Gree and a bunch of others on the top of our list may soon become internationally recognized brands like Samsung, Sony and Starbucks.
Myth #2: Private firms have a performance advantage over state-controlled firms, or vice versa
A surprising finding for us was that ownership control does not explain performance. Although our top 50 list has more leaders from state-controlled than private firms, state ownership has no statistical impact on the leader's place in the ranking. Leaders of state-controlled firms may receive more favors and thus do better, but that's not the case among our top 50. Leaders of private firms may be freer from the shackles of the Government and thus perform better, but that's not the case in our top 50 either. Perhaps these two advantages cancel each other out in China. In any case, there is more than one route to top long-term performance.
Myth #3: Leaders of large firms do better
Size does matter but small is beautiful in China. Leaders who took over a smaller firm (measured by the market capitalization when they started out) performed better than those that had a larger market cap, taking into account whether company is private or public. Take for example, Mr. Li Jianhong, # 4 on our list, who took over China International Marine Containers in 1995 with a market cap of less than CNY 1 bn. He increased the company's market capitalization by 31 times over his tenure (1995 to 2007) and generated an outstanding industry adjusted total shareholder return of 3,425%.
Myth #4: Chinese top leaders stay in power a long time
Given their cultural and political history, one might imagine that Chinese leaders typically stay in power a long time. But, compared with the global average tenure of 8.8 years (among the top 50 global leaders), the average tenure of the top 50 leaders in China is shorter (6.8 years). The tenure of leaders in the state-controlled firms (6.7 years) is comparable with that in the private-controlled firms (6.9 years) in our ranking. Clearly, the market for Chinese business leaders, even if heavily internal (most leaders were promoted from within), is as dynamic as their economy.
These findings surprised us because they go against conventional wisdom. But we also found some commonalities with other leader rankings we've done around the world. (Earlier this year we published a ranking of the best Indian CEOs in Business Today.) Just as in our global ranking, Chinese leaders have a better shot at performing well during their tenure if they inherit a poor-performing company. The better-ranked the predecessor's performance during his or her entire tenure, the more poorly-ranked is his or her successor. This finding suggests that the Chinese market has become highly competitive — thus it is hard for top performers to stay on top.
Competence or impotence of the EU leaders - how can you believe politicians who say one thing in Brussels and another when back at home?
July 13, 2012
July 13, 2012
CNBC's Jim Grant claimed that Central Banks of the Western World manipulate the interest rates and not the private banks like Barclay's scandal on LIBOR rates show. Accordingly all private banks must be cleared of all illegal activities in this LIBOR case.
The erroneous public opinion must be corrected and the Private Banks accusing opinions must be ridiculed and destroyed as quickly as possible before the masses turn against the Private Banks.
The Private Banks are totally separate entities from the Central Banks. The reality is different as reported.
Since Templar banking empire was destroyed through a joint effort by Pope Clement and King Philip IV "the Fair" of France the bankers have dreamed to establish again their supreme power over all Nations and peoples.
Templars showed this to be possible. They however, became too arrogant by refusing to accept the supreme power of the most powerful nation in Europe. Their political skills and military might were no match with the might of the King of France.
Since then the Bankers have recovered and have worked now for the past two centuries in the USA to win control over the political system. They did that about half a century ago and finally today they have started believing that they even control the mightiest army on the planet. Unfortunately for Bankers, they still cannot be 100% sure of the army.
With his claims Mr Grant conveniently "forgets" that the FED that was established in 1913 is fully owned by private banks and not by the US government. He also "forgot" that the same private banks are involved into creating the LIBOR scandal and by combining that with MBS (Mortgage Backed Securities) they caused our financial - it was not an accident but a carefully executed plan.
The bankers have a "secret" superior weapon in their hands in the global derivatives markets valued today between US$ 800 ... 1,200 trillion depending who's statistics or reports one trusts. This amount of money is far more than the combined global GDP of US$ 65 trillion.
He also ignores that Goldman Sachs is already running all major central banks in Europe and they are almost certain to get their people to run the Bank of England shortly, as both gentlemen under consideration for it's next leader are Goldman Sachs' people.
The effort to reach global domination has been hastily speeded up as the technological and military power both in China and in Russia are increasing much faster that expected.
Russia is actually dangerous with their nuclear ability to total destruction of anybody who attacks them.
"New World Order" under the Banking elite is already almost 100% certain. Rothschilds and Rockefellers just joined the forces and Rockefellers have started moving their influence HQ to the USA.
At one point Rockefellers had one monopoly over the US oil industry but at that time Congress broke their monopoly to 34 separate "independent" companies. Rockefellers also control today the majority of the US health care industry and is apparently opposing any changes in the current system costing Americans 17% of their GDP while the rest of the world get by with 7%-11% of GDP and people there have much longer life expectancy than in the USA.
The Rothschilds have a long financial history behind them and were instrumental in changing the British society by gaining ownership to the british industry and also Bank of England in the aftermath of the Napoleonic wars. Prime Minister Churchill nationalized the Bank of England after the WW II.
July 12, 2012
The two graphs below show the Wealth Survey results from GlobeScan covering 23 countries. It is pity that they did not include the highly educated trend setting people from Scandinavia, Switzerland and Austria into this survey.
The first graph summarizes global opinion covering large majority of earth's population and as such it is more accurate than the second graph covering the 23 individual countries.
The second graph is perhaps misleading as it gives an impression of high agreement with the statement "Rich Deserve Their Wealth" . This is done by including also those who are even slightly leaning towards agreeing with the statement.
Globally only 15% agreed in 2012. This is a good example why the reader has to be careful as this graph is intended to move the public opinion. It does not lie but it does not tell the full truth either and it serves well GOP and Tea Party during this prsidential election year in the USA.
Who are the people who agree that "Rich Deserve Their Wealth"?
In the USA that certainly include the 1% of the population that have more wealth than the 150 million of the poorest in the country. The rest will include a great majority of business owners and those who one day want to own a business. But who are the rest? In the USA South we have large majority of poor and less educated people who have been "conditioned" to believe on heavenly and earthly authorities. We suspect that majority of them still trust the bankers nd business leaders regardless what they have seen during this financial crisis so far. And in any case they have now other options left than to wait that some authority gets everything working again.
How this might be elsewhere is difficult for any outsider to judge
With above reservation the data tells it all.
Interest-Rates / US Bonds May 24, 2012 - 02:54 AM
The Biblical story is told of a tower built ever higher in order to achieve contact with the heavens, lest they be scattered upon the earth. They were scattered when the tower fell. Fast forward to today, where the earth has a multitude of tribes, languages, and several major alphabets. When the Lehman Brothers failure occurred, and the Fannie Mae and AIG activities were to be concealed under court orders, the land turned barren, and a financial plague befell the Western nations led by the United States. They were after all, the keepers of the ark (printing press for USDollars). But a plague of debt locusts was cast upon the US nation, with annual $1.5 trillion deficits. The Americans in their unending arrogance, chose to speak from the tower top and to proclaim 0% forever, suspending gravity. They have attempted to force free money to finance their USGovt debts, to preserve power, to ensure privilege, but in doing so they defy nature in testing gravity itself.
The recent losses from JPMorgan have proved to be much more based upon suspending gravity with 0% official rates in the Delta-Hedging complex game tied to the vast over-burdened Interest Rate Swap contracts, rather than the European sovereign bonds as first claimed. The Jackass is on record on May 11th, aided by the indefatigable forensic analyst Rob Kirby, in pointing to Interest Rate Swap stresses from the sudden March and April movement in the 10-year USTreasurys within the strained bloated USGovt sovereign bond market. The IRSwap setbacks were the underlying cause of the JPM losses. The giant bank does not want attention give to this derivative tool which controls the bond market in a devious artificial manner. As far as debt is concerned, the United States is Greece times 100. It is Italy times 20. It receives a pass from the bond market, precisely because the nation prints the money and controls the vast Interest Rate Swap support mechanism. But the tower is finally exposed.
The IRSwaps act like giant buttresses to support the evergrowing USTreasury Tower of Babel that stretches to the sky. Every year, the expansive tower grows another $1.5 trillion higher. Every year, the challenge grows exponentially for the JPMorgan master financial engineers to apply their control panel magic to achieve equilibrium. Every year, the degree of difficulty becomes more arduous. Every year, the tower must withstand the high winds from Europe, where the bond market is doing more than undergoing stress. It is crumbling before our eyes. In a way, Europe helps to conceal the great strains from the broken USTreasury Bond market, held together by interest derivatives. Few analysts connect the failure of the Draghi LTRO funds to the JPMorgan losses. They do not grasp the gravity of the USTBond problem. They prefer to focus on FINREG for regulatory changes centered on the Volcker Rule, or on the division of proprietary trading. They focus on the personalities of the so-called Whale. Now a new verb has entered the lexicon, as a firm was just "Iksil-ed" to mean they suffered massive leveraged losses in a high risk game of playing god in the financial markets. JPMorgan cannot hedge since THEY ARE THE MARKET. What the Whale or JPMorgan do is attempt to maintain balance of the USTreasury Tower of Babel, which grows every year to try to touch the sky, to achieve the perfect world. They scrape the devil's attic door instead.
THE ULTIMATE PROBLEM
Without any doubt whatsoever, the ultimate problem is that the bond market cannot defy the natural forces (gravity on the tower) from enormous new supply coming to the USTBond market (higher tower) in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. Essentially the 0% rate is an engineering display of the most extreme arrogance. It is tantamount to placing the buttress support structure at a very low position. The sovereign bonds of Southern Europe with their 5% or 6% bond yields have the equivalent of buttresses place in very high positions, sufficient to endure the whips and sways from the high winds and routine vagaries dealt by the never-ending global financial crisis. In my opinion, the global financial crisis is far more than that. It is instead a global monetary war, to preserve the USDollar supremacy at all costs, with victims being the Western banking systems and the Western economies. The entire platform that supports the major fiat currencies is collapsing, namely the sovereign bonds. The platform is breaking at its weakest points, where it has non-homogeneous planks in Southern Europe that do not fit together. Imagine how the USTreasury Bond market would look if all 50 states had their own sovereign debt as components to the entire USGovt. Imagine each year the $1.5 trillion in debt were apportioned as 15% to California, 4% to Texas, 8% to New York, 8% to Florida, in shared responsibility. Imagine each state had its own bond traded in a market that strived for equilibrium, each with a unique bond yield, all tethered to the USDollar. The United States would fracture in six months from the stress, not the least factor for which would be the apportionment of syndicate banker benefit and divvying up the war costs. That is Europe in parallel.
HIDDEN TOOL WITH GRAND DECEPTION
Back to the ultimate problem. The USTreasury Bond market cannot defy the natural forces from enormous new supply coming to the USTBond market in the form of $1.5 trillion deficits, and keep the bond yield at 0% for the FedFunds and under 2.0% on the TNX. To add strain to the tower, the foreign buyers have removed themselves due to the grand debasement of the USDollar from the program. Too much hidden USDollar output comes behind the curtains. They are disgusted that the US bankers make unilateral decisions on central bank monetary policy, like setting the 0% rate, like monetizing another $1 trillion in USTBonds or USAgency Mortgage Bonds, like consenting to lavish executive bonuses to those responsible for fracturing the global financial ramparts, all done without consulting foreign creditors. Their significant US$-based bond holdings are eroding in value, not earning a yield in compensation for risk. The 0% payout is an insult to creditors, especially during constant QE initiatives. The published CPI measure of 2% to 3% is another insult, when 8% to 10% is the reality.
Many inexperienced observers, naive bank analysts, clueless fund managers, and deceptive news anchors fail to ask the basic question of how the USTBond market can continue with 0% when supply is an annual flood of $1.5 trillion in new debt while the demand is vanishing from the absent foreign creditors. It is hardly a mystery. The visible piece is the USFed itself with its awkwardly named Quantitative Easing initiatives, which make it sound so sophisticated and professional. Its bond monetization is highly destructive, since it is effectively pure hyper monetary inflation. The wayward financial market mavens crave even more QE, even more monetary inflation flows to aid the market, without realizing the utter destruction of capital. They might notice out of the corner of the eye some rising costs, but they minimize them in their mental process. They deceive themselves into thinking that the financial assets will rise in value also. Except valuation is greatly distorted. The end result is that the cost structure is rising without benefit of rising incomes. In many cases, where liquidation is often the rule, the end products are not rising in price. So profit margins are squeezed, businesses are shut down, equipment is taking offline, and workers are cut along with incomes. The zinger is the globalization concept, when China hit the scene. The Western economies cannot withstand the competition. The West has in effect replaced much of its legitimate income sources with debt from dubious areas like home equity. The home foreclosure movement is a direct consequence of Chinese industrialization.
ENGINEERED FLIGHT TO SAFETY
The hidden tool to maintain the 0% interest rate when supply grows by $1.5 trillion annually, and when dependence on the USFed for bond monetization picks up the slack, is the Interest Rate Swap contract. JPMorgan would prefer that the public not learn about it. Back in December 2010, Morgan Stanley added $8 trillion to its Interest Rate Swap book in a single quarter. Look to see the wondrous effect from that lever pulled behind the curtain. Bear in mind that the accounting for the derivative book, listed in the Office of the Controller to the Currency, is quarterly and tallies the past quarter of activity. My belief is there is more lag to the proper accounting. Notice how the 10-year USTreasury Bond yield (aka TNX) went from a threat to the 4.0% mark in early 2010 and rallied hard all the way down to the 2.4% mark by summer's end. The US financial press hailed a grand flight to safety in the USGovt Bond securities. No such flight to safety like a thundering herd was part of the reality landscape. Let the chart be shown with GREEN text to reflect the application of USDollars from the financial engineering rooms.
What the Interest Rate Swap does is to create artificial demand for the end product USTBond, no real buyer, in a magnificent display of 50:1 leverage, sometimes as much as 100:1 leverage. Repeat that -- no real buyer of the USTBond, all artificial, all coming from the IRSwap device. Few bond experts even realize this fact of bond life. The pronounced effect on the US bond market brought about a change in sentiment, and reinforced the phony notion that investors were flocking to the USTBond market for safety. The reality was the exact opposite. Bill Gross of PIMCO was exiting the USTBond market. A slew of foreign creditors exited the USTBond market. The bank analysts were confused, unable to explain the rally in USTBonds and falling bond yields when supply was growing in a big way, but demand was vanishing. The USFed had to admit its bond purchases within its QE initiative in order to explain the inconsistency. The huge annual deficits and departure of bond buyers forced the USFed into the open, where they had to admit their QE and its hyper monetary inflation.
ENGINEERED REJECTION OF USGOVT DEBT DOWNGRADE
In early August 2011, the debt rating agency Standard & Poors downgraded the USGovt debt. It was an insult of high order, delivered during the Greek Govt Bond crisis, as the Southern European bond market was under great scrutiny and strain. The JPMorgan situation room was obviously tipped off, pressed into action, and ready at the Interest Rate Swap lever. The result was profound as the TNX fell from 3.2% down to under 2.0% by the time the dust cleared. Notice a near accident in June in the USTBond market just before the big decline in bond yields, a big oops! The TNX jumped from 2.88% to 3.20% in a single week, a hefty 32 basis point scare. The JPM situation room responded quickly. Word leaked out about the S&P debt downgrade, the first in US history. The market move was becoming clear, a selloff. The Interest Rate Swap lever was yanked, and the effect pulled down the TNX significantly, as the financial press obediently proclaimed a victory over the S&P defiant downgrade. It was all phony, again!! The USGovt barkers even pounded the tables to point out a grand market contradiction of the Standard & Poor debt downgrade of the USGovt debt. Victory over the marketplace was won, and no big debt insurance contract rise either. All hail the IRSwap weapon in private Wall Street offices, of course without recognition of its heavy usage.
By this time, in late summer 2011, the financial market sentiment had solidified its phony psychological notion of the USTreasury Bond being a reliable safe & secure place to hide. The USFed was repeating its assured interest yield paid to Excess Bank Reserves, another false story. In reality, the USFed was paying the big US banks to place their Loan Loss Reserves at the USFed in order to conceal the insolvency of the USFed balance sheet. The big US banks compounded the flagrancy of the action by removing loss reserves later, calling them profit, in order to conceal their own business decline and deep deterioration. They did so because they became dangerous illiquid.
USFED STUCK AT 0% FOREVER
Something happened in March 2012. It is not entirely clear. Perhaps it was simply the stupidity of the Bernanke Fed in declaring the need to embark on an Exit Strategy at some point soon. Once more, Professor Bernanke is a poor economist, unaware that he is stuck in the 0% corner forever. That bears repeating. THE USFED IS STUCK WITH AN OFFICIAL ZERO PERCENT RATE FOREVER, NEVER TO RISE. It can never rise due to the extreme increase in borrowing costs that would hit the USGovt deficit tally. The amount would equal the endless war costs. However, the USFed is stuck at 0% forever, due also to a very different hidden market force. Any rise, even a moderate rise, in the USTBond yield would result in multi-$trillion losses from the derivatives hidden at work. The vast Interest Rate Swap would deliver massive blows like a machete across the entire financial sector. Every big US bank involved in heavy IRSwap enforcement as bond market intervention would suffer losses in the multiple $trillions. That process is starting to be seen. The Jackass has warned about the potential losses for three years, explaining the permanent corner the USFed has found itself, a result of its own failure. The USFed talked about an Exit Strategy in 2009, and the Jackass correctly rejected the notion as lunatic wishful thinking. The USFed backed off, and worse, assured the banking sector of zero percent policy almost forever. You see, the big US banks are earning easy money in the USTreasury carry trade, borrowing short and investing long. If the USFed were to hike rates, they would remove the US bank income stream, since they sure are not earning it the old fashioned way, with IPOs and debt offerings. They are not so much investment banks anymore, just plain speculative houses. They love their High Frequency Trades in the stock market too.
The USEconomy has lost its potential traction, since it forfeited the bulk of its industry to China in the last decade, after forfeiting much more in the 1980 and 1990 decade. Back then it was called the migration to the Pacific Rim. Therefore, the USEconomy cannot respond to 0% rate, does not take advantage of the low rate to expand business investment, to kick start the various industries as it did in past recessions. This recession is both permanent and a march to the cemetery. At the end of this current cycle is a massive implosion of the big US banks, followed by global isolation of the USDollar, ending with an inevitable USGovt debt default. The implosion of the big US banks has begun, with JPMorgan making its defensive deceptive admissions of serious loss and worse, lost control. The isolation of the USDollar is a new chapter underway, in response to the ill-fated Iran sanctions. The East is mobilizing.
The USGovt debt default, laughed off by the same clowns who expected the subprime mortgage mess to be contained, will come in the form of global rejection of USTBond debt and a grand summit conference to restructure the debt. The many debt downgrades handed out in recent months to Europe, today to Japan, and elsewhere have carefully avoided the United States. The second downgrade will come, this time with the Interest Rate Swap machine in view at the side of the stage, and with JPMorgan executives at center stage. They will be fumbling to explain their losses and the backlash of the IRSwap machinery. It is their special tool (buttress) to hold the sprawling USTBond Tower of Babel upright, and to prevent it from falling in a heavily populated urban location.
SPRING HIGH WINDS HIT THE TOWER OF BABEL
Again, something happened in March 2012. It is not entirely clear. Perhaps it was simply the stupidity of the Bernanke Fed declaring the need to embark on an Exit Strategy at some point in the not too distant future. Bond investors might have sold bonds in heavy volume in anticipation of the lunatic professor actually hiking rates in the face of annual $1.5 trillion deficits and a vast overhang of derivatives. They might have feared a great unwind of leverage that could have gone out of control easily. Perhaps the USFed itself conducted some active Stress Tests on the derivative complex, with some arrogant assurance from JPMorgan's CIO office that they could handle anything that came their way. Perhaps the arrival of Volcker Rule adaptations, reorganizations, and disruptions took the JPM IRSwap team off guard. Perhaps something more sinister occurred, like China acting to kick one leg from under the stool, selling a vast block of USTBonds to awaken the Wall Street megalomaniacs. It could be that China sold a big block of USTBonds without malice of forethought, but instead expedience in dealing with its own economic slowdown and pervasive banking holes. Maybe they just did some rebalancing of their huge SAFE Fund and other sovereign wealth funds that must be approaching $3 trillion in size.
On May 10th, the JPMorgan machine issued some deceptive public comments in response to a large estimated $2 billion loss. The deception was from putting blame on the European sovereign bonds and their instability, wreckage, and chain effects. The other deception was not admitting the fuller extent of losses, and giving empty assurance of being in control. The JPMorgan machinery could not properly and accurately assess and measure their losses unless a full audit were to be conducted that spanned three months at least. They have lost control. In a radio interview with Turd Ferguson (CLICK HERE), the Jackass pointed a finger at the USTreasury Bond tower, the Interest Rate Swap support mechanism, and offered an argument that the losses for JPMorgan were closer to $18 billion. Furthermore, an argument was made that the losses would top $100 billion in a year's time. Tyler Durden of Zero Hedge correctly boasts that their excellent publication first broke the story of the outsized JPMorgan losses, even the possibility of greater losses. But it was the Jackass that first pointed to the Interest Rate Swap to defend the outrageous USTBond tower during a March whipsaw event. The Jackass pointed to the tame European sovereign bond yields during the six weeks in question where JPMorgan offered their typical deception. PIGS bond yields were tame over those six weeks. During the interview, a big hat tip was given to Rob Kirby who exposed me to the tame bond market in Europe, and with emphasis to the whipsaw of high winds against the USTBond market in March. He identified the location of the source of disturbance. It caused a big shock wave that knocked the JPM machine off its footing. It has been suffering from loose cargo ever since.
One must ask a preliminary question, of why with national security exceptions, the JPMorgan loss had to be admitted at all. It could have been swept under the rug, doctored on the balance sheet with the help of the USDept Treasury and USFed. The regulators would look the other way as they always do. Something unusual in the parental rules has occurred, and it is not certain. My guess is a new sheriff is in town, fresh off a jet from the East, who read the riot act to its wayward debtor, and did so recently. What else has changed? To be sure, the big US banks are operating under big illiquidity problems from European sovereign debt, along with troubles in FOREX currencies, drainage from mortgage bonds, even litigation costs from bond investor lawsuits. They suffer from a panoply of losses. A private source reports the big money center banks in New York are all under great strain from lack of cash, as in they are broke. The trouble with standing as insolvent structures is the grand risk of an illiquidity bout. The longstanding rule in banking is that INSOLVENCY plus ILLIQUIDITY equals BANKRUPTCY. Last and hardly least, the JPMorgan losses and financial strains admitted confirm something for a Grand Jury. They scream out a Prima Facie case for the MFGlobal client fund thefts, establishing a motive.
Some truly devastating implications. My European banker source shared a dire opinion. He fully expects the total loss to be several 100 $billion in JPM losses. He shared his $18 billion figure two weeks ago that tipped me and Rob Kirby off. That figure seems to be the target being approached. Early last week, the JPMorgan talking heads revealed they are struggling to provide an accurate estimate of their outsized loss. In truth, they cannot estimate it, since the IRSwap and other Delta-Hedging mechanisms are dynamic and too complex. They revealed the loss was closer to $3 billion, not the original $2 billion cited. At least they have started the process of upgrades toward truth. Then late last week, the Wall Street Journal reported that the loss might be around $8 billion. But the WSJ revealed something more important, that the loss stemmed from the Delta-Hedging program that involves the Interest Rate Swap contracts in their vast derivative book. The JPMorgan derivatives contain about $57.5 trillion in interest rate derivatives. They are teetering, like the USTBond Tower of Babel. Bingo!! The IRSwap is on the table as the culprit in the outsized JPM losses, precisely as the Jackass (and RKirby) concluded on May 11th.
My European banker source shared an update this week. He believes the ultimate JPM loss will reach several hundred $billion and grow with time. He mentioned a trigger having gone off in a chain reaction that is not stoppable, which will bring down the USTreasury Bond market and topple the USDollar. Refer to the USTBond Tower of Babel.
Notice the progression of truths. Within one week, JPM admitted the loss was $3 billion, but difficult to calculate. One week later, CEO Dimon admitted Interest Rate Swaps involved in Delta-hedging to defend with the Interest Rate Swap, as the estimated loss reached $5 billion. A few days later, Zero Hedge dissected the post-LTRO2 loss, as they called it, with an updated estimate of $8 billion and some dire warnings of still naked unhedged huge positions. Let me share my own overall impression of the IRSwap and its handiwork.
THE ZERO PERCENT PURE FUEL
Never lose sight of the fact that 0% is absurd in the USTreasury Bond market with annual $1.5 trillion deficits, held together with the USFed monetary inflation glue. Never lose sight of the fact that negative real interest rates (actual rate minus price inflation) is the powerful fuel for the gold bull market. It is no coincidence that the gold bull market began with the advent of negative real rates back in 2002 when the Greenspasm Fed pushed the FedFunds rate down hard to avoid a financial sector collapse. The negative real rate of interest has remained, and even gone more negative, since the Quantitative Easing programs hit in 2010.
JPMORGAN AND ITS INTEREST RATE SWAPS ARE A DYNAMIC ENGINE OF CAPITAL DESTRUCTION WHOSE EXHAUST EFFLUENT IS THE PURE FUEL OF NEGATIVE INTEREST RATES THAT POWERS THE GOLD BULL.
Ferguson is an alert analyst, capable of piecing the puzzle together. Some call it connecting the dots. He has come up with a simple deduction. The New York Fed as part of their shoddy Bank Stress Tests this January made a conclusion (directive) that JPM would have to suspend their stock buyback and dividend payouts, IF THEIR DERIVATIVE LOSSES EXCEEDED $31.5 BILLION. Well lookie here!! The JPMorgan colossus just announced no more stock buyback or dividends. Although not a necessary & sufficient condition of the outsized losses, we have an indication of over $31.5 billion in losses. It will all come out gradually, especially since the trigger has been hit. The internal breakdown of the USTBond reserve banking system from has been hit with a shock, and the internal breakdown of the USDollar toll taker system from has been hit with mounting defection and avoidance. The alternative trade settlement systems are coming online, with bilateral swap facilities, settlement in gold, and eventually a rival method to the SWIFT bank settlement. Nations are actively seeking out the alternatives.
A great urgent need has come for a rally to 1.5% in the TNX (10-year USTreasury yield) in order to save the IRSwaps from implosion. The Tower of Babel is teetering. A bond rally would thus render the tower wider at the base. The final losses will be in the hundreds of $billions in the next several months, eventually possibly to top the $1 trillion mark by next year. My source from Europe wrote, "An event driven chain reaction has been triggered deep inside the system, with Interest Rate Swaps at the center. This has already gone viral. They will have to trigger some mega-crises, most likely in Europe & Greece, as a diversionary tactic. They need to have something to blame things on. Once Greece implodes, so will the big French banks and likely some Italian banks. It is all so obvious and predictable."
Look also for losses to London banks, enough to topple one or more. Hats off to Rob Kirby for correctly concluding the Interest Rate Swaps were at the center of the mega mushrooming JPM losses. It is coming to light slowly. Many analysts naively believe the USFed can monetize whatever ails the system. Not so, when the biggest credit market in the world (USTBonds) is involved. They can use the 0% money to paper over the hurricane for a while. In the May Hat Trick Letter report, several times it was repeated that the central problem is 0% rate with annual $1.5 trillion deficits, held together by hyper monetary inflation at the hands of the USFed central bank. The report contains a full 12-page chapter on JPMorgan alone and its events, traps, and basis for future loss. The USTBond Tower of Babel is very narrow and tall, like a tower that grows higher and higher each year, subject to the heavy winds. The recent bond market volatility has acted like slamming a hedge hammer into the Babel Tower base when strong winds from Europe hit the sides. The vagaries and complexity and wreckage of the sovereign bond market have begun to topple the tower. The tower will fall, and fall in a heavily populated urban area. It is going to be the most dangerous and exciting event in modern financial history, that climaxes with the death of the USDollar and announcement of the USGovt debt default. The main tough questions are timing of events. But as usual, the sequence will be from an event schedule. It has begun, and cannot stop.
When the USTBond tower topples, it will lead to the great release upward in the Gold price. A grand Gold bull market is near. As the safety and security of the USTreasury Bond market is unmasked (an asset bubble), enduring a devastating wreck, the global funds will flock into Gold. The timing will be simultaneous with the rejection of the USDollar in trade settlement, and the end of the famed Petro-Dollar. The Gold cartel cannot stop the price rise, because they will have no physical gold. They are being raided of their gold bullion by the East, to the tune of 5000 (five thousand) metric tons since the end of February. That figure was confirmed by my source, who also claims that the major banks are short well over 20,000 metric tons after illegally grabbing the Allocated gold accounts held in their custody. Law suits are occurring in Switzerland to this effect.
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June 18, 2012, by Ellen Brown
When Jamie Dimon, CEO of JPMorgan Chase Bank, appeared before the Senate Banking Committee on June 13, he was wearing cufflinks bearing the presidential seal. “Was Dimon trying to send any particular message by wearing the presidential cufflinks?” asked CNBC editor John Carney. “Was he . . . subtly hinting that he's really the guy in charge?”
The groveling of the Senators was so obvious that Jon Stewart did a spoof news clip on it, featured in a Huffington Post piece titled “Jon Stewart Blasts Senate's Coddling Of JP Morgan Chase CEO Jamie Dimon,” and Matt Taibbi wrote an op-ed called “Senators Grovel, Embarrass Themselves at Dimon Hearing.” He said the whole thing was painful to watch.
“What is going on with this panel of senators?” asked Stewart. “They’re sucking up to Jamie Dimon like they’re on JPMorgan’s payroll.” The explanation in a news clip that followed was that JPMorgan Chase is the biggest campaign donor to many of the members of the Banking Committee.
That is one obvious answer, but financial analysts Jim Willie and Rob Kirby think it may be something far larger, deeper, and more ominous. They contend that the $3 billion-plus losses in London hedging transactions that were the subject of the hearing can be traced, not to European sovereign debt (as alleged), but to the record-low interest rates maintained on U.S. government bonds.
The national debt is growing at $1.5 trillion per year. Ultra-low interest rates MUST be maintained to prevent the debt from overwhelming the government budget. Near-zero rates also need to be maintained because even a moderate rise would cause multi-trillion dollar derivative losses for the banks, and would remove the banks’ chief income stream, the arbitrage afforded by borrowing at 0% and investing at higher rates.
The low rates are maintained by interest rate swaps, called by Willie a “derivative tool which controls the bond market in a devious artificial manner.” How they control it is complicated, and is explored in detail in the Willie piece here and Kirby piece here.
Kirby contends that the only organization large enough to act as counterparty to some of these trades is the U.S. Treasury itself. He suspects the Treasury’s Exchange Stabilization Fund, a covert entity without oversight and accountable to no one. Kirby also notes that if publicly-traded companies (including JPMorgan, Goldman Sachs, and Morgan Stanley) are deemed to be integral to U.S. national security (meaning protecting the integrity of the dollar), they can legally be excused from reporting their true financial condition. They are allowed to keep two sets of books.
Interest rate swaps are now over 80 percent of the massive derivatives market, and JPMorgan holds about $57.5 trillion of them. Without the protective JPMorgan swaps, interest rates on U.S. debt could follow those of Greece and climb to 30%. CEO Dimon could, then, indeed be “the guy in charge”: he could be controlling the lever propping up the whole U.S. financial system.
So should Dimon be regarded as a national hero? Not if past conduct is any gauge. Besides the recent $3 billion in JPMorgan losses, which look more like illegal speculation than legal hedging, there is JPM’s use of its conflicting positions as clearing house and creditor of MF Global to siphon off funds that should have gone into customer accounts, and its responsibility in dooming Lehman Brothers by withholding $7 billion in cash and collateral. There is also the fact that Dimon sat on the board of the New York Federal Reserve when it lent $55 billion to JPMorgan in 2008 to buy Bear Stearns for pennies on the dollar. Dimon then owned nearly three million shares of JPM stock and options, in clear violation of 18 U.S.C. Section 208, which makes that sort of conflict of interest a felony.
Financial analyst John Olagues, a former stock options market maker, points out that the loan was guaranteed by $55 billion of Bear Stearns assets. If Bear had that much in assets, the Fed could have given it the loan directly, saving it from being swallowed up by JPMorgan. But Bear did not have a director on the board of the NY Fed.
Olagues also notes that JPMorgan received an additional $25 billion in TARP payments from the Treasury, which were evidently paid off by borrowing from the NY Fed at a very low 0.5%; and that JPM executives received some very large and highly suspicious bonuses called Stock Appreciation Rights and Restricted Stock Units (complicated variants of employee stock options and restricted stock). In 2009, these bonuses were granted on the day JPMorgan stock reached its lowest value in five years. The stock quickly rebounded thereafter, substantially increasing the value of the bonuses. This pattern recurred in 2008 and 2012.
Olagues has evidence of systematic computer-generated selling of JPMorgan stock immediately prior to and on the dates of the granted equity compensation. Collusion to manipulate the stock to accommodate the grant of options is called “spring-loading” and is a violation of SEC Rule 10 b-5 and tax laws, with criminal and civil penalties.
All of which suggests we could actually have a felon at the helm of our ship of state.
There is a movement afoot to get Dimon replaced on the Board, on the ground that his directorship represents a clear conflict of interest. In May, Massachusetts Senate candidate Elizabeth Warren called for Dimon’s resignation from the NY Fed board, and Vermont Senator Bernie Sanders has used the uproar over the speculative JPM losses to promote an overhaul of the Federal Reserve. In a release to reporters, Warren said:
“Four years after the financial crisis, Wall Street has still not been held accountable, and that lack of accountability has history repeating itself—huge, risky financial bets leading to billions in losses. It is time for some accountability. . . . Dimon stepping down from the NY Fed would be at least one small sign that Wall Street will be held accountable for their failures.”
But what chance does even this small step have against the gun-to-the-head persuasion of a nightmare collapse of the entire U.S. debt scheme?
Is there no alternative but to succumb to the Mafia-like Wall Street protection racket of a covert derivatives trade in interest rate swaps? As Willie and Kirby observe, that scheme itself must ultimately fail, and may have failed already. They point to evidence that the JPM losses are not just $3 billion but $30 billion or more, and that JPM is actually bankrupt.
The derivatives casino itself is just a last-ditch attempt to prop up a private pyramid scheme in fractional-reserve money creation, one that has progressed over several centuries through a series of “reserves”—from gold, to Fed-created “base money,” to mortgage-backed securities, to sovereign debt ostensibly protected with derivatives. We’ve seen that the only real guarantor in all this is the government itself, first with FDIC insurance and then with government bailouts of too-big-to-fail banks. If we the people are funding the banks, we should own them; and our national currency should be issued, not through banks at interest, but through our own sovereign government.
Unlike Greece, which is dependent on an uncooperative European Central Bank for funding, the U.S. still has the legal power to issue its own dollars or borrow them interest-free from its own central bank. The government could buy back its bonds and refinance them at 0% interest through the Federal Reserve—which now buys them on the open market at interest like everyone else—or it could simply rip them up.
The chief obstacle to that alternative is the bugaboo of inflation, but many countries have proven that this approach need not be inflationary. Canada borrowed from its own central bank effectively interest free from 1939 to 1974, stimulating productivity without creating inflation; Australia did it from 1912 to 1923; and China has done it for decades.
The private creation of money at interest is the granddaddy of all pyramid schemes; and like all such schemes, it must eventually collapse, despite a quadrillion dollar derivatives edifice propping it up. Willie and Kirby think that time is upon us. We need to have alternative, public and cooperative systems ready to replace the old system when it comes crashing down.
Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com.