The man who trades freedom for security does not deserve nor will he ever receive either. – Benjamin Franklin
–The Fallacy Of The Volcker Rule (Or “Fixing” The Banks In 5 Easy Steps) (ZeroHedge, Dec 10, 2013):
Submitted by Peter Tchir of TF Market Advisors,
Volcker Rule – Who cares? I know we are supposed to care more about this convoluted rule, but we just can’t.
The concept that somehow “prop” trading brought down the banks seems silly. The idea that market making desks were a dangerous part of the equation is ludicrous.
Read moreThe Fallacy Of The Volcker Rule (Or “Fixing” The Banks In 5 Easy Steps)
– What A Confidential 1974 Memo To Paul Volcker Reveals About America’s True Views On Gold, Reserve Currency And “PetroGold” (ZeroHedge, Nov 11, 2013):
Just over four years ago, we highlighted a recently declassified top secret 1968 telegram to the Secretary of State from the American Embassy in Paris, in which the big picture thinking behind the creation of the IMF’s Special Drawing Right (rolled out shortly thereafter in 1969), or SDRs, was laid out. In that memo it was revealed that despite what some may think, the fundamental driver behind the promotion of a supranational reserve paper currency had one goal in mind: allowing the US to “remain masters of gold.”
Specifically, this is among the top secret paragraphs said on a cold night in March 1968:
If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.’s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years.
– The Federal Reserve Cartel: Part IV: A Financial Parasite (Veterans Today, Dec 14, 2012):
(Excerpted from Chapter 19: Big Oil & Their Bankers…Part four of a five-part series)
United World Federalists founder James Warburg’s father was Paul Warburg, who financed Hitler with help from Brown Brothers Harriman partner Prescott Bush. [1]
Colonel Ely Garrison was a close friend of both President Teddy Roosevelt and President Woodrow Wilson. Garrison wrote in Roosevelt, Wilson and the Federal Reserve, “Paul Warburg was the man who got the Federal Reserve Act together after the Aldrich Plan aroused such nationwide resentment and opposition. The mastermind of both plans was Baron Alfred Rothschild of London.”
Read moreThe Federal Reserve Cartel: Part IV: A Financial Parasite (Veterans Today)
FYI.
– The Federal Reserve Cartel: Part III: The Roundtable & the Illuminati (Veterans Today, Dec 10, 2012):
According to former British intelligence agent John Coleman’s book, The Committee of 300, the Rothschilds exert political control through the secretive Business Roundtable, which they created in 1909 with the help of Lord Alfred Milner and South African industrialist Cecil Rhodes. The Rhodes Scholarship is granted by Oxford University, while oil industry propagandist Cambridge Energy Research Associates operates out of the Rhodes-supported Cambridge University.
Rhodes founded De Beers and Standard Chartered Bank. According to Gary Allen’s expose, The Rockefeller Files, Milner financed the Russian Bolsheviks on Rothschild’s behalf, with help from Jacob Schiff and Max Warburg.
Read moreThe Federal Reserve Cartel: Part III: The Roundtable & the Illuminati
AGAIN: This is the ‘Greatest Depression’.
– Have the Last 5 Years Been Worse than the Great Depression? (ZeroHedge, Sep 21, 2012):
What Do Economic Indicators Say?We’ve repeatedly pointed out that there are many indicators which show that the last 5 years have been worse than the Great Depression of the 1930s, including:
- The housing slump
- The level of inequality between rich and poor (too much inequality destroys economies)
- The interconnectedness of financial systems and economies worldwide (interconnectedness leads to financial instability)
- Runaway spending and greed
Mark McHugh reports:
Velocity of money is the frequency with which a unit of money is spent on new goods and services. It is a far better indicator of economic activity than GDP, consumer prices, the stock market, or sales of men’s underwear (which Greenspan was fond of ogling). In a healthy economy, the same dollar is collected as payment and subsequently spent many times over. In a depression, the velocity of money goes catatonic. Velocity of money is calculated by simply dividing GDP by a given money supply. This VoM chart using monetary base should end any discussion of what ”this” is and whether or not anybody should be using the word “recovery” with a straight face:
In just four short years, our “enlightened” policy-makers have slowed money velocity to depths never seen in the Great Depression.
(As we’ve previously explained, the Fed has intentionally squashed money multipliers and money velocity as a way to battle inflation. And see this)
Indeed, the number of Americans relying on government assistance to obtain basic food may be higher now that during the Great Depression. The only reason we don’t see the “soup lines” like we did in the 30s only because of the massive food stamp program.
Read moreHave The Last 5 Years Been Worse Than The Great Depression?
– Jim Grant: We Are Now All Labrats Of Bernanke And The Fourth Branch Of Government (ZeroHedge, Sep 20, 2012):
You put Jim Grant on TV and someone mentions the Fed and the result every single time is the equivalent of waving a red curtain in front of a rabid bull. This time was no different, as the Interest Rate Observer once again let Bernanke, with whom he clarified is no longer on speaking terms, have it. The ensuing central-planner bashing was in line with expectations, and just as we presented yesterday in “The Experiment Economy“, so too does Grant believe that the Fed is “learning by doing” and follows up by clarifying that this is an experiment, “and we are lab rats in the financial markets.” He then proceeds to lament that the credit markets, clueless NYT econopundits notwithstanding, have now lost all informational value as every rate instrument is purely in the manipulated domain of the Fed. “We are all living in a land of speculation and manipulation” is Grant’s summary of the current predicament of anyone who wishes to trade these “markets” and it may as well be the best synopsis of the New (ab)normal. And aside from an odd detour into Government Motors, Grant once again hones in on the only true antidote to central planner idiocy, gold: “the best thing about gold is that it’s got no P/E multiple. Gold is a speculation on an anticipated macroeconomic outcome, the systematic debasement of currencies by central banks. Why wouldn’t they do QE4? What intellectual argument do they have against doing it again, and again, and again.” Well…none.
YouTube Added: 08.08.2012
Description:
Paul Volcker, former Chairman of The Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan, gets confronted by Luke Rudkowski of WeAreChange about his attendance of past Bilderberg meetings.
– This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied – The Sequel (ZeroHedge, July 19, 2012):
Two years ago, in January 2010, Zero Hedge wrote “This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied” which became one of our most read stories of the year. The reason? Perhaps something to do with an implicit attempt at capital controls by the government on one of the primary forms of cash aggregation available: $2.7 trillion in US money market funds. The proximal catalyst back then were new proposed regulations seeking to pull one of these three core pillars (these being no volatility, instantaneous liquidity, and redeemability) from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal would give money market fund managers the option to “suspend redemptions to allow for the orderly liquidation of fund assets.” In other words: an attempt to prevent money market runs (the same thing that crushed Lehman when the Reserve Fund broke the buck). This idea, which previously had been implicitly backed by the all important Group of 30 which is basically the shadow central planners of the world (don’t believe us? check out the roster of current members), did not get too far, and was quickly forgotten. Until today, when the New York Fed decided to bring it back from the dead by publishing “The Minimum Balance At Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market FUnds“. Now it is well known that any attempt to prevent a bank runs achieves nothing but merely accelerating just that (as Europe recently learned). But this coming from central planners – who never can accurately predict a rational response – is not surprising. What is surprising is that this proposal is reincarnated now. The question becomes: why now? What does the Fed know about market liquidity conditions that it does not want to share, and more importantly, is the Fed seeing a rapid deterioration in liquidity conditions in the future, that may and/or will prompt retail investors to pull their money in another Lehman-like bank run repeat?
Here is how the Fed frames the problem in the abstract:
– Former Fed Chairman Paul Volcker laughs at the great increase in wealth disparity over the past 10 to 15 years, and at Americans for not speaking out more forcibly against it (FauxCapitalist,Nov. 1, 2011):
In an October 24, 2011 interview with Charlie Rose, former Fed Chairman and fellow Bilderberger, Paul Volcker, laughed at the great increase in wealth disparity in the United States over the past 10 to 15 years, and at Americans for not speaking out more forcibly against it (starting at 18:27).
“But there is a feeling — which I’ve been a little surprised has not been expressed more forcibly before — the distribution of income, which has changed very radically in the last 10 or 15 years. And you have a situation in the United States where there’s been almost no growth in real income for the average family for 10 or 15 years, but way at the upper end of the income distribution, there’s been an enormous increase, of a kind that didn’t take place in my lifetime or even in your lifetime. (laughs)“
Gold and silver have always been money, the real money!
Ready for gold $10,000? It’s coming.
Oh, can you trust JP Morgan on anything?
NO!!!!!!!!!!, especially not with your gold and silver.
J.P. Morgan Chase & Co. announced on February 7, 2011 that it will accept physical gold as collateral for investors that want to make short-term borrowings of cash or securities.
Presenting gold to satisfy demands for performance bond collateral has been allowed on the London CME in a limited way since October 2009. As of November 22, 2010, the Intercontinental Exchange Inc. (ICE) has accepted gold bullion as collateral on all credit default swaps and energy transactions.
I don’t recall the G-20 declaring gold a new currency. Yet JPMorgan Chase and a couple of financial market exchanges have effectively declared that gold is an alternative currency.
In other words, gold is money.
Abolish Credit Default Swaps on Sovereign Debt
In an earlier post, I wrote that Congress should act immediately to abolish credit default swaps on the United States, because these derivatives will foment distortions in global currencies and gold. Credit defaults swaps on the United States currently settle in euros, but there is talk of creating new contracts calling for settlement in gold. Congress should immediately ban all credit derivatives on the United States, since the opportunities for mischief making outweigh the hedging value.
Most traders in U.S. credit default swaps don’t think the U.S. will default as long as we have money printing presses, so they are speculating on price movements in U.S. Treasury bonds due to potential increases in interest rates. If speculators manage to get contracts to settle in gold, speculators on the winning side of a price move will demand collateral paid in gold.
Read moreGold Game Changer: JP Morgan Accepts Bullion as Money
– Bilderberg 2010: Final (Official) List of Participants:
Henry Kissinger, Larry Summers, Robert Rubin and Paul Volcker at Bilderberg 2010.
Change we can believe in! (Kissinger: Obama Will Create A New World Order)
Henry Kissinger, diplomat, strategist, Nobel laureate, wanted for questioning in Spain over war crimes
Queen Beatrix of the Netherlands, major stakeholder in Royal Dutch Shell
Viscount Etienne Davignon, former vice-president of the European commission, president of the Bilderberg steering committee
Paul Volcker, former chairman of the Federal Reserve and chairman of Barack Obama’s economic recovery board (centre); James Johnson, vice-chairman of Perseus (right)
Robert Zoellick, head of the World Bank (centre); John Micklethwait, editor-in-chief of the Economist (left)
Nout Wellink, president of the Bank of the Netherlands
From left to right: in background, Jyrki Katainen, Finnish minister of finance; in centre, with moustache, Dieter Zetsche, chairman of Daimler AG, head of Mercedes-Benz Cars; to right of pillar, Jorma Ollila, chairman of Nokia, member of the board of directors of Ford and non-executive chairman of Royal Dutch Shell
Neelie Kroes, Dutch politician. Former European commissioner for competition, current European commissioner for digital agenda
Olaf Scholz, vice-chairman of the German Social Democrat party (left); Craig Mundie, chief research officer of Microsoft (right)
Tommaso Padoa-Schioppa, the ‘founding father’ of the EU and ‘intellectual impetus’ behind the euro, president of the thinktank Notre Europe, member of the ‘Group of 30’ (chairman, Paul Volcker)
Joaquín Almunia, European commissioner (right)
Gustavo Cisneros, Cisneros Group, richest man in Latin America (beige suit)
Peter Voser, CEO of Royal Dutch Shell
Jacob Wallenburg, director of Coca-Cola, banker, industrialist, from Sweden’s billionaire Wallenburg family
Mustafa Koç, billionaire heir to Turkish corporation Koç Holdings
Francisco Pinto Balsemão, former prime minister of Portugal and CEO of Impresa, farewells an unknown delegate
Victor Halberstadt, Bilderberg steering committee, professor of public economics at Leiden University, Netherlands, and international adviser for Goldman Sachs
Javier Solana, secretary general of Nato from 1995 to 1999, and high representative for common foreign and security policy of the European Union from 1999 until 2009. He is a Knight of the Order of St Michael and St George, and a member of the Club of Rome
Bilderberg Meetings
Sitges, Spain 3-6 June 2010
Final List of Participants
Honorary Chairman BEL Davignon, Etienne Vice Chairman, Suez-Tractebel
DEU Ackermann, Josef Chairman of the Management Board and the Group Executive Committee, Deutsche Bank AG
GBR Agius, Marcus Chairman, Barclays Bank PLC
ESP Alierta, César Chairman and CEO, Telefónica
INT Almunia, Joaquín Commissioner, European Commission
USA Altman, Roger C. Chairman, Evercore Partners Inc.
USA Arrison, Sonia Author and policy analyst
SWE Bäckström, Urban Director General, Confederation of Swedish Enterprise
PRT Balsemão, Francisco Pinto Chairman and CEO, IMPRESA, S.G.P.S.; Former Prime Minister
ITA Bernabè, Franco CEO, Telecom Italia S.p.A.
SWE Bildt, Carl Minister of Foreign Affairs
FIN Blåfield, Antti Senior Editorial Writer, Helsingin Sanomat
ESP Botín, Ana P. Executive Chairman, Banesto
NOR Brandtzæg, Svein Richard CEO, Norsk Hydro ASA
AUT Bronner, Oscar Publisher and Editor, Der Standard
TUR Çakir, Ru?en Journalist
CAN Campbell, Gordon Premier of British Columbia
ESP Carvajal Urquijo, Jaime Managing Director, Advent International
FRA Castries, Henri de Chairman of the Management Board and CEO, AXA
ESP Cebrián, Juan Luis CEO, PRISA
ESP Cisneros, Gustavo A. Chairman and CEO, Cisneros Group of Companies
CAN Clark, W. Edmund President and CEO, TD Bank Financial Group
USA Collins, Timothy C. Senior Managing Director and CEO, Ripplewood Holdings, LLC
ITA Conti, Fulvio CEO and General Manager, Enel SpA
GRC David, George A. Chairman, Coca-Cola H.B.C. S.A.
DNK Eldrup, Anders CEO, DONG Energy
ITA Elkann, John Chairman, Fiat S.p.A.
DEU Enders, Thomas CEO, Airbus SAS
ESP Entrecanales, José M. Chairman, Acciona
DNK Federspiel, Ulrik Vice President Global Affairs, Haldor Topsøe A/S
USA Feldstein, Martin S. George F. Baker Professor of Economics, Harvard University
USA Ferguson, Niall Laurence A. Tisch Professor of History, Harvard University
AUT Fischer, Heinz Federal President
IRL Gallagher, Paul Attorney General
USA Gates, William H. Co-chair, Bill & Melinda Gates Foundation and Chairman, Microsoft Corporation
USA Gordon, Philip H. Assistant Secretary of State for European and Eurasian Affairs
USA Graham, Donald E. Chairman and CEO, The Washington Post Company
INT Gucht, Karel de Commissioner, European Commission
TUR Gürel, Z. Damla Special Adviser to the President on EU Affairs
NLD Halberstadt, Victor Professor of Economics, Leiden University; Former Honorary Secretary General of Bilderberg Meetings
USA Holbrooke, Richard C. Special Representative for Afghanistan and Pakistan
NLD Hommen, Jan H.M. Chairman, ING Group
USA Hormats, Robert D. Under Secretary for Economic, Energy and Agricultural Affairs
BEL Huyghebaert, Jan Chairman of the Board of Directors, KBC Group
USA Johnson, James A. Vice Chairman, Perseus, LLC
FIN Katainen, Jyrki Minister of Finance
USA Keane, John M. Senior Partner, SCP Partners
GBR Kerr, John Member, House of Lords; Deputy Chairman, Royal Dutch Shell plc.
USA Kissinger, Henry A. Chairman, Kissinger Associates, Inc.
USA Kleinfeld, Klaus Chairman and CEO, Alcoa
TUR Koç, Mustafa V. Chairman, Koç Holding A.?.
USA Kravis, Henry R. Founding Partner, Kohlberg Kravis Roberts & Co.
USA Kravis, Marie-Josée Senior Fellow, Hudson Institute, Inc.
INT Kroes, Neelie Commissioner, European Commission
USA Lander, Eric S. President and Director, Broad Institute of Harvard and MIT
FRA Lauvergeon, Anne Chairman of the Executive Board, AREVA
ESP León Gross, Bernardino Secretary General, Office of the Prime Minister
DEU Löscher, Peter Chairman of the Board of Management, Siemens AG
NOR Magnus, Birger Chairman, Storebrand ASA
CAN Mansbridge, Peter Chief Correspondent, Canadian Broadcasting Corporation
USA Mathews, Jessica T. President, Carnegie Endowment for International Peace
CAN McKenna, Frank Deputy Chair, TD Bank Financial Group
GBR Micklethwait, John Editor-in-Chief, The Economist
FRA Montbrial, Thierry de President, French Institute for International Relations
ITA Monti, Mario President, Universita Commerciale Luigi Bocconi
INT Moyo, Dambisa F. Economist and Author
USA Mundie, Craig J. Chief Research and Strategy Officer, Microsoft Corporation
NOR Myklebust, Egil Former Chairman of the Board of Directors SAS, Norsk Hydro ASA
USA Naím, Moisés Editor-in-Chief, Foreign Policy
NLD Netherlands, H.M. the Queen of the
ESP Nin Génova, Juan María President and CEO, La Caixa
DNK Nyrup Rasmussen, Poul Former Prime Minister
GBR Oldham, John National Clinical Lead for Quality and Productivity
FIN Ollila, Jorma Chairman, Royal Dutch Shell plc
USA Orszag, Peter R. Director, Office of Management and Budget
TUR Özilhan, Tuncay Chairman, Anadolu Group
ITA Padoa-Schioppa, Tommaso Former Minister of Finance; President of Notre Europe
GRC Papaconstantinou, George Minister of Finance
USA Parker, Sean Managing Partner, Founders Fund
USA Pearl, Frank H. Chairman and CEO, Perseus, LLC
USA Perle, Richard N. Resident Fellow, American Enterprise Institute for Public Policy Research
ESP Polanco, Ignacio Chairman, Grupo PRISA
CAN Prichard, J. Robert S. President and CEO, Metrolinx
FRA Ramanantsoa, Bernard Dean, HEC Paris Group
PRT Rangel, Paulo Member, European Parliament
CAN Reisman, Heather M. Chair and CEO, Indigo Books & Music Inc.
SWE Renström, Lars President and CEO, Alfa Laval
NLD Rinnooy Kan, Alexander H.G. Chairman, Social and Economic Council of the Netherlands (SER)
ITA Rocca, Gianfelice Chairman, Techint
ESP Rodriguez Inciarte, Matías Executive Vice Chairman, Grupo Santander
USA Rose, Charlie Producer, Rose Communications
USA Rubin, Robert E. Co-Chairman, Council on Foreign Relations; Former Secretary of the Treasury
TUR Sabanci Dinçer, Suzan Chairman, Akbank
ITA Scaroni, Paolo CEO, Eni S.p.A.
USA Schmidt, Eric CEO and Chairman of the Board, Google
AUT Scholten, Rudolf Member of the Board of Executive Directors, Oesterreichische Kontrollbank AG
DEU Scholz, Olaf Vice Chairman, SPD
INT Sheeran, Josette Executive Director, United Nations World Food Programme
INT Solana Madariaga, Javier Former Secretary General, Council of the European Union
ESP Spain, H.M. the Queen of
USA Steinberg, James B. Deputy Secretary of State
INT Stigson, Björn President, World Business Council for Sustainable Development
USA Summers, Lawrence H. Director, National Economic Council
IRL Sutherland, Peter D. Chairman, Goldman Sachs International
GBR Taylor, J. Martin Chairman, Syngenta International AG
PRT Teixeira dos Santos, Fernando Minister of State and Finance
USA Thiel, Peter A. President, Clarium Capital Management, LLC
GRC Tsoukalis, Loukas President, ELIAMEP
INT Tumpel-Gugerell, Gertrude Member of the Executive Board, European Central Bank
USA Varney, Christine A. Assistant Attorney General for Antitrust
CHE Vasella, Daniel L. Chairman, Novartis AG
USA Volcker, Paul A. Chairman, Economic Recovery Advisory Board
CHE Voser, Peter CEO, Royal Dutch Shell plc
FIN Wahlroos, Björn Chairman, Sampo plc
CHE Waldvogel, Francis A. Chairman, Novartis Venture Fund
SWE Wallenberg, Jacob Chairman, Investor AB
NLD Wellink, Nout President, De Nederlandsche Bank
USA West, F.J. Bing Author
GBR Williams, Shirley Member, House of Lords
USA Wolfensohn, James D. Chairman, Wolfensohn & Company, LLC
ESP Zapatero, José Luis Rodríguez Prime Minister
DEU Zetsche, Dieter Chairman, Daimler AG
INT Zoellick, Robert B. President, The World Bank Group
Rapporteurs
GBR Bredow, Vendeline von Business Correspondent, The Economist
GBR Wooldridge, Adrian D. Business Correspondent, The Economist
Source: Bilderberg Meetings
See also:
– Spanish PM to Open Secretive Bilderberg Club Meeting in Sitges
– Bilderberg 2010: The Shadowy Global Elite Is Meeting In Sitges
We are witnessing an epic battle between two banking giants, JPMorgan Chase (Paul Volcker) and Goldman Sachs (Geithner/Summers/Rubin). Left strewn on the battleground could be your pension fund and 401K.
The late Libertarian economist, Murray Rothbard, wrote that U.S. politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players. No popular third party candidate had a real chance at winning, because the bankers had the exclusive power to create the national money supply and therefore held the winning cards.
In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that gained notoriety for its speculative practices in the 1920s. In 1928, it launched the Goldman Sachs Trading Corp., a closed-end fund similar to a Ponzi scheme. The fund failed in the stock market crash of 1929, marring the firm’s reputation for years afterwards. Former Treasury Secretaries Henry Paulson, Robert Rubin, and Larry Summers all came from Goldman, and current Treasury Secretary Timothy Geithner rose through the ranks of government as a Summers/Rubin protégé. One commentator called the U.S. Treasury “Goldman Sachs South.”
Read moreThe Illuminati Banksters: JPMorgan vs. Goldman Sachs
Must-read! Don’t miss to take a close look at the members of the the Group of Thirty!
When Henry Paulson publishes his long-awaited memoirs, the one section that will be of most interest to readers, will be the former Goldmanite and Secretary of the Treasury’s recollection of what, in his opinion, was the most unpredictable and dire consequence of letting Lehman fail (letting his former employer become the number one undisputed Fixed Income trading entity in the world was quite predictable… plus we doubt it will be a major topic of discussion in Hank’s book). We would venture to guess that the Reserve money market fund breaking the buck will be at the very top of the list, as the ensuing “run on the electronic bank” was precisely the 21st century equivalent of what happened to banks in physical form, during the early days of the Geat Depression. Had the lack of confidence in the system persisted for a few more hours, the entire financial world would have likely collapsed, as was so vividly recalled by Rep. Paul Kanjorski, once a barrage of electronic cash withdrawal requests depleted this primary spoke of the entire shadow economy. Ironically, money market funds are supposed to be the stalwart of safety and security among the plethora of global investment alternatives: one need only to look at their returns to see what the presumed composition of their investments is. A case in point, Fidelity’s $137 billion Cash Reserves fund has a return of 0.61% YTD, truly nothing to write home about, and a return that would have been easily beaten putting one’s money in Treasury Bonds. This is not surprising, as the primary purpose of money markets is to provide virtually instantaneous access to a portfolio of practically risk-free investment alternatives: a typical investor in a money market seeks minute investment risk, no volatility, and instantaneous liquidity, or redeemability. These are the three pillars upon which the entire $3.3 trillion money market industry is based.
Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to “suspend redemptions to allow for the orderly liquidation of fund assets.“ You read that right: this does not refer to the charter of procyclical, leveraged, risk-ridden, transsexual (allegedly) portfolio manager-infested hedge funds like SAC, Citadel, Glenview or even Bridgewater (which in light of ADIA’s latest batch of problems, may well be wishing this was in fact the case), but the heart of heretofore assumed safest and most liquid of investment options: Money Market funds, which account for nearly 40% of all investment company assets. The next time there is a market crash, and you try to withdraw what you thought was “absolutely” safe money, a back office person will get back to you saying, “Sorry – your money is now frozen. Bank runs have become illegal.“ This is precisely the regulation now proposed by the administration. In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous “extraordinary circumstances” arise. The second the game of constant offer-lifting ends, and money markets are exposed for the ponzi investment proxies they are, courtesy of their massive holdings of Treasury Bills, Reverse Repos, Commercial Paper, Agency Paper, CD, finance company MTNs and, of course, other money markets, and you decide to take your money out, well – sorry, you are out of luck. It’s the law.
A brief primer on money markets
A very succinct explanation of what money markets are was provided by none other than SEC’s Luis Aguilar on June 24, 2009, when he was presenting the case for making even the possibility of money market runs a thing of the past. To wit:
Money market funds were founded nearly 40 years ago. And, as is well known, one of the hallmarks of money market funds is their ability to maintain a stable net asset value – typically at a dollar per share.
In the time they have been around, money market funds have grown enormously – from $180 billion in 1983 (when Rule 2a-7 was first adopted), to $1.4 trillion at the end of 1998, to approximately $3.8 trillion at the end of 2008, just ten years later. The Release in front of us sets forth a number of informative statistics but a few that are of particular interest are the following: today, money market funds account for approximately 39% of all investment company assets; about 80% of all U.S. companies use money market funds in managing their cash balances; and about 20% of the cash balances of all U.S. households are held in money market funds. Clearly, money market funds have become part of the fabric by which families, and companies manage their financial affairs.
Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers “at the expense of hardworking Americans.” Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it’s not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.
Then he got elected.
What’s taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.
How could Obama let this happen? Is he just a rookie in the political big leagues, hoodwinked by Beltway old-timers? Or is the vacillating, ineffectual servant of banking interests we’ve been seeing on TV this fall who Obama really is?
Whatever the president’s real motives are, the extensive series of loophole-rich financial “reforms” that the Democrats are currently pushing may ultimately do more harm than good. In fact, some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street’s political power by institutionalizing the taxpayer’s role as a welfare provider for the financial-services industry. At one point in the debate, Obama’s top economic advisers demanded the power to award future bailouts without even going to Congress for approval — and without providing taxpayers a single dime in equity on the deals.
How did we get here? It started just moments after the election — and almost nobody noticed.
‘Just look at the timeline of the Citigroup deal,” says one leading Democratic consultant. “Just look at it. It’s fucking amazing. Amazing! And nobody said a thing about it.”
Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency. In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama’s election.
“When the people find they can vote themselves money, that will herald the end of the republic.”
– Benjamin Franklin
Added: 22. October 2009
Fall Of The Republic documents how an offshore corporate cartel is bankrupting the US economy by design. Leaders are now declaring that world government has arrived and that the dollar will be replaced by a new global currency.
President Obama has brazenly violated Article 1 Section 9 of the US Constitution by seating himself at the head of United Nations’ Security Council, thus becoming the first US president to chair the world body.
A scientific dictatorship is in its final stages of completion, and laws protecting basic human rights are being abolished worldwide; an iron curtain of high-tech tyranny is now descending over the planet.
A worldwide regime controlled by an unelected corporate elite is implementing a planetary carbon tax system that will dominate all human activity and establish a system of neo-feudal slavery.
Read moreFall Of The Republic – The Presidency Of Barack H. Obama (The Full Movie HQ)
Paul Volcker, former chairman of the U.S. Federal Reserve, testifies at a House Financial Services Committee hearing in Washington, Sept. 24, 2009. Photographer: Joshua Roberts/Bloomberg
Sept. 29 (Bloomberg) — Former Federal Reserve chairman Paul Volcker said the rise of China and other emerging economies has underscored a decline in the comparative economic and intellectual leadership of the U.S.
“I don’t know how we accommodate ourselves to it,” Volcker, an economic adviser to President Barack Obama, said in an interview with PBS’s Charlie Rose taped yesterday in New York. “You cannot be dependent upon these countries for three to four trillion dollars of your debt and think that they’re going to be passive observers of whatever you do.”
By James Tyson and Michael McKee
Full article: Bloomberg
Former fed chair Paul Volcker, TARP bailout overseer Elizabeth Warren and Nobel economist Joseph Stiglitz all slammed the government’s approach to the economic crisis today:
“Perhaps the entire strategy is flawed? Perhaps what is needed is a fundamental rethinking. The Paulson-Bernanke-Geithner strategy was … based on a failure to grasp some of the fundamental changes in our financial sector since the Great Depression, and even in the last two decades.“
Will Bernanke, Summers and the other people who got us into this mess keep on steering the ship over the waterfall? Or will the powers-that-be start to listen to those telling where we are, and start steering away before it is too late?
Thursday, February 5, 2009
Source: George Washington’s Blog
The problem was never really liquidity.
Says who?
Says Anna Schwartz, co-author of the leading book on the Great Depression, and someone who actually lived through it.
The Wall Street Journal ran an interview with Schwartz last weekend:
Most people now living have never seen a credit crunch like the one we are currently enduring. Ms. Schwartz, 92 years old [but still sharp as a tack], is one of the exceptions. She’s not only old enough to remember the period from 1929 to 1933, she may know more about monetary history and banking than anyone alive. She co-authored, with Milton Friedman, “A Monetary History of the United States” (1963). It’s the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.
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Federal Reserve Chairman Ben Bernanke has called the 888-page “Monetary History” “the leading and most persuasive explanation of the worst economic disaster in American history.” Ms. Schwartz thinks that our central bankers and our Treasury Department are getting it wrong again.
Worldwide, it is $596 TRILLION dollars *. The derivatives market dwarfs the real market for goods and services, and acts likes an unregulated black market.
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A couple of months ago, a financial analyst who sells derivatives told me that fears about a meltdown in the derivatives market were unfounded.
Yesterday, he told me – with a very worried look – “THE DERIVATIVES MARKET IS UNWINDING!”
What does this mean? What are derivatives and why should you care if the market is unwinding?
Well, it turns out that the reason that Bear Stearns was about to go belly-up before JP Morgan bought it is that it had held trillions of dollars in derivatives, which were about to go south. (The reason that JP Morgan was so eager to buy Bear Stearns is that it was on the other side of these derivative contracts — if Bear Stearns had gone under, JP Morgan would have taken a huge hit. But the way the derivative agreements were drafted, a purchase by JP Morgan canceled the derivative contracts, so that JP Morgan didn’t experience huge losses. That is probably why the Fed was so eager to broker – and fund – the shotgun marriage. JP Morgan is a much larger player, and if Bear’s failure had caused the derivatives hit to JP Morgan, it probably would have rippled out to the whole financial system and potentially caused an instant depression).
In addition, the subprime prime loan crisis is intimately connected to the unwinding of the derivatives market. Specifically, loans were repackaged into derivatives called collateralized debt obligations (or “CDO’s”) and sold to both big and regional banks and investment companies worldwide. The CDO’s were highly-leveraged — many times the amount of the actual loans. When the subprime loan crisis hit, the high leverage magnified the fallout, and huge sums of CDO derivatives became essentially worthless.
Do you remember when wealthy Orange County, California, went bankrupt in 1994? Yup, that was because it had invested in bad derivatives.
And, according to a recent article by one of the world’s top derivative insiders, the market for credit default swap (“CDS”) derivatives is also unraveling.
And reported just today, Lehman Brothers is now on the edge, due to exposure to derivatives.
Derivatives are the Elephant in the Living Room
The subprime mortgage crisis is bad, and is hurting many people, and slowing the economy. High oil and food prices are bad, and are hurting many people, and bringing down the economy. But — according to top insiders — derivatives are the elephant in the room . . . the single largest threat to the U.S. and world economy.
One reason is that, according to Paul Volcker, the former chairman of the Federal Reserve, the entire modern financial system is based upon derivatives, and the financial system today is entirely different from the traditional American or global financial system because derivatives – a relatively new concept – now underly the entire fabric of the financial system. In short, many of the people who know the most about derivatives say that the current system is a house of cards built upon derivatives.
Moreover, as mentioned above, the subprime and derivatives crises are closely linked. Similarly, Britian’s New Statesman newspaper links derivatives and rising food and commodity prices:
We are now importing inflation. This does not only apply to the cost of commodities, such as oil, but also to consumer goods imported from Asia. This is a newer trend as, in our analysis, Asia had been exporting deflation until the summer of 2006; since then, we have seen increased pricing power by Asian exporters.
Inflation is not just a U.S. phenomenon; as Asian economies are far more dependent on agricultural and industrial commodities, rising inflation may become a serious concern in the region. The stronger and more prudent Asian central banks may realize that allowing their currencies to float higher versus the U.S. dollar may be the most effective way to combat inflationary pressures.
Until now, I have given equal credence to two possible scenarios:
So what caused me to settle on number two?
I received John Williams’ recent newsletter “Shadow Government Statistics,” www.shadowstats.com in which he describes his case for a hyper-inflationary depression. It was most persuasive. It certainly persuaded me, and is consistent with what I’ve said for years.
I spent the ’70s fending off the media label of “Prophet of Doom,” arguing that I expected much less than doom. It turned out to be so.
With my new book in circulation, I’ll face the same accusations, and this time they are right. The financial world we know and love is facing genuine doom. You could lose the value of all your assets in the stock market. You could find yourself unable to buy essential commodities, when you want them, and gold and silver will be valued, not in the tens or hundreds of dollars per ounce, but in the thousands!
John Williams’ Shadow Government Statistics newsletter is most unusual. John is a consulting economist with all of the academic credentials. Most of his clients are bank officers and high-ranking corporate officers. He has rearranged the government data according to historical analysis.
For example, the government says inflation is under four percent by the simple expedient of eliminating energy and food from their calculations. John says inflation is over 11 percent, including energy and food.
His academic credentials are way ahead of mine, but at least I know enough to understand his work. It’s my job to try to reduce such things to terms my subscribers can grasp.
Here are some brief paragraphs from this 25-page report.
“With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.”
