Classic FX

Depth Trade · Nov 30, 2010

Still holding positions.
Current prices.

Xag/usd $28.24
+3.14%

Xau/usd $1388.25
+2.46%

Consumer Price Inflation: The Wolf at the Door
By The Mogambo Guru

11/29/10 Tampa, Florida – I knew I was pretty sloshed when I started giggling about the perverse idiocy in which bankrupted governments wallow, as The Wall Street Journal had a nice headline that said it all: “States Raise Payroll Taxes to Repay Loans.” Hahaha!

I mean, what kind of crazy crap is it when the government is so desperate for money that it is raising the cost of hiring people at the same time as 10% unemployment has, literally, decimated the workforce? This is crazy!

And as bad as it is being unemployed, this is at the same time that inflation is rising from the central banks of the world continuing to create so much new money, such an avalanche of new money, such a tidal wave of new money, so that their respective governments can deficit-spend it and provide bailouts to their Various And Sundry (VAS).

Oh, I’ve always had my fears about the inflation that comes from all this new money, and I knew that inflation would start showing up in real life as well as in my nightmares where prices are like ravenous wolves seeking to devour me, piece by piece, and while my neighbors are all around me being torn to pieces by the snarling rising price-wolves, I am whacking them on the head with a bar of gold, which gets bigger each time that a price-wolf takes a bite out of my leg, so that when I hit the wolf with it, I hit him so hard my leg grows back! Amazing!

I am sure that this is some kind of metaphor because of what I know about wolves, and I am not sure that I could successfully defend myself with a bar of gold against a pack of them, a knowledge gleaned from watching TV and reading books, one of which was the story of a single big, bad wolf devouring some old woman, whom I assume had a kitchen full of knives and cleavers to no avail, and a girl named Little Red Riding Hood.

Well, perhaps Little Red Riding Hood was British, as Britain seems to be leading the inflationary way. John Stepek of the Money Morning newsletter writes that their latest figures on inflation “came in at 3.2%.”

Junior Mogambo Rangers (JMRs) have doubtlessly noted the understated punctuation used by Mr. Stepek to announce 3.2% inflation, as those Truly Fearful Of Inflation (TFOI) would use at least one exclamation point!

Thus, a re-write would be “the latest figures on inflation ‘came in at 3.2%!’” followed by an explanatory, “We’re freaking doomed!”

And things must be heating up over here in the USA, too, as James Turk of The Free Gold Money Report notes that “since the date of its March 18, 2009 QE announcement, the CRB Continuing Commodity Index has risen 61.7%. Gold has risen 54.0%, while the US Dollar Index has dropped -7.2%.”

Predictably, I would immediately use this as a handy springboard to Go Freaking Berserk (GFB) that inflation in prices was over 3%, which is the historical dividing line between saving yourself from death by inflation in consumer prices and dying a horrible death from inflation in consumer prices, a fact of such importance that common sense says it should rate at least one exclamation point!

But Mr. Stepek is made of sterner stuff, and calmly goes on to disguise the horror of “if you look at the breakdown of all the items included in the CPI, not a single item actually fell in price compared to this time last year.”

This inflation is, of course, at the worst possible time, as he explains, “commodity price inflation at a time when unemployment is relatively high is stagflationary,” which is keenly felt in that “Your wages don’t rise to accommodate your rising cost of living, which is a grim situation to be in.”

Again with the lack of an exclamation point! Perhaps he would not be so stingy with his exclamation points if I give him an example that he can relate to: Imagine the year 1965. If you were 20 years old in 1965 and worked for 45 years, you would now be 65 years old and ready for retirement.

So how much retirement money did you put away in1965? Well, according to thepeoplehistory.com, the average income in 1965 was $6,500 a year, so you put away 10%, which is $650 a year.

By comparison, a new car cost $2,650 in 1965, rent was $118 per month, and a loaf of bread cost 21 cents.

Today, the average income in the private sector is around $40,000 a year, which is about right, since the Bureau of Labor Standards says that inflation since 1965 results in $1 of buying power in 1965 now requiring $6.94, which comes out to an annual inflation rate of 4.4% per year.

If you saved a whopping 10% of your 1965 gross income, or $650 a year, it would have to grow by a whopping 4.4% a year to $4,510 just to keep up with inflation, which is, sad to say, about what 10% of your $40,000 income today would be ($4,000).

And this is before paying taxes on the $3,860 gain, and not to mention all the fees and expenses paid along the way!

In short, because of inflation, expenses and taxes, you have to invest a month’s income to get a month’s income at retirement, meaning that your money did not grow at all.

And that is the absolute best-case scenario, in that investing is a zero-sum game, and with the government always taking money out, and the financial services industry always taking money out, there is less money for the investors to divide amongst themselves than was put in by the investors! Hahaha! “Investing for the long term!” Hahaha!

And if you needed another reason to buy gold, as if you needed another reason to buy gold when then Federal Reserve is creating so much money, then the fact that gold has kept up with inflation, without all the hassle, is it! Whee! This investing stuff is easy!

Depth Trade · Dec 1, 2010

Still holding positions.

Current prices.

Xag/usd: $28.58
+4.38%

Xau/usd: $1392.26
+2.76%

FDIC Takes Gloves Off for Failed Bank Losses
By Paul Bubny
Last Updated: November 30, 2010 06:45pm ET

NEW YORK CITY-The default rate on commercial mortgages approached historic highs in the third quarter, albeit at a far slower pace than before, Real Capital Analytics said this week. “The $604-million increase in the default balance in the third quarter is less than one-tenth of the $7.2-billion increase in the second quarter 2007,” writes Sam Chandan, RCA’s chief economist, in an RCA commentary on the Q3 results. “As property prices and rent measures stabilize in many markets, the increase in strain on bank health related to commercial real estate is also becoming more measured.”

However, even as banks have lowered their commercial real estate exposures, reducing their CRE balance sheets by $8.8 billion in Q3, the FDIC has made it clear that it plans to play hardball with recouping losses from failed financial institutions. Since the onset of the financial crisis in 2008, more than 300 banks have gone under, although Chandan, a regular blogger for GlobeSt.com, wrote in a June blog that “there has been little formal research thus far” on how significant a role CRE lending has played in pushing troubled institutions over the edge.

A recent directors-and-officers liability action taken by the agency centered on a defunct Illinois community bank that, according to the FDIC’s complaint, neglected to control its CRE exposure risks. The complaint filed Nov. 1 at US District Court in Chicago alleges that $20 million in losses incurred by Glenwood, IL-based Heritage Community Bank stemmed from a failure by 11 of the bank’s former directors and/or officers to “properly manage and supervise Heritage and its commercial real estate lending program.”

Named in the suit are former CEO John Saphir; former president Patrick Fanning; former CFO Stephen Faydash; former SVP of lending William Hetler; former CRE lending officer Thomas Jelinek; former VP of loan operations Lori Moseley; and former board members Stephen Anthony, Jerry Brucer, James Champion, Andrew Nathan and Mary Mills.

In a statement, the 11 defendants say the FDIC’s allegations are “utterly without merit” and call the agency’s actions “both regrettable and wrong. With the advantage of 20-20 hindsight, the FDIC blames the former officers and directors of a small community bank for not anticipating the same market forces that also caught central bankers, national banks, economists, major Wall Street firms and the regulators themselves by surprise.”

In an article on the FDIC’s Heritage action, Washington, DC-based attorneys Thomas P. Vartanian, Robert H. Ledig and Lawrence Nesbitt, all with Dechert LLP’s financial institutions group, write that the suit demonstrates the agency’s “willingness to seek to recover losses from directors and officers of even relatively small community banks in order to recoup, what may be considered by some to be, relatively small losses. FDIC estimated that the resolution of Heritage would cost the Deposit Insurance Fund approximately $42 million.” The three Dechert attorneys are not involved with the case; GlobeSt.com’s calls to Vartanian for further comment were not returned by deadline.

The Heritage complaint is only the second D&O suit brought by the FDIC in recent months. An earlier action was brought against four senior executives of the former IndyMac Bank’s Homebuilders Division, based in Pasadena, CA.

The IndyMac defendants—including HBD’s former CEO, former chief lending officer, former chief compliance officer and former chief credit officer—similarly denied any wrongdoing in the FDIC’s suit against them, which was filed in July in federal court in California and seeks $300 million in damages. “The FDIC has unfairly selected four hard-working executives of a small division of the bank to blame for the failure of IndyMac,” defense attorney Kirby Behre of Paul Hastings told the Los Angeles Times.

Yet there may be more to come. In an interview with the Wall Street Journal two weeks ago, Fred W. Gibson, deputy inspector general at the FDIC, said the agency is conducting about 50 criminal investigations of former executives, directors and employees at US banks that have failed since the financial crisis began.

Gibson did not provide specifics, but Business Insurance reported that a speech by the FDIC’s Floyd Robinson suggested that commercial mortgage lending might be a common factor in many of the investigations. “What you see in Heritage is what you are going to see in a number of cases” before the FDIC, said Robinson, the agency’s senior counsel for the professional liability and financial crimes unit, in a presentation to the Professional Liability Underwriting Society’s 23rd annual PLUS International Conference in November. “Unfortunately, a number of community banks in the country got caught up in the commercial real estate lending frenzy.”

Depth Trade · Dec 2, 2010

Still holding metal positions.

Current prices.

Xag/usd: $28.80
+5.19%

Xau/usd: $1392.44
+2.77%

Max Keiser's Plan To Destroy JP Morgan Goes Mainstream, After The Guardian Posts His "Silver Squeeze" Thoughts
by Tyler Durden on 12/02/2010

As Zero Hedge readers know, the reason why the US mint sold a record amount of silver American Eagle coins in November is unlikely a coincidence, and very possibly an indication that the recently disclosed plan as espoused by the MKs (Mike Krieger and Max Keiser) to destroy JP Morgan is working: to wit, if every person buys an ounce of silver, JP Morgan and its massive synthetic silver short position, will have no choice by the cover, face unprecedented margin calls, and possible lead to an end for the New York Fed's favorite bank. Today, Keiser goes mainstream, detailing his thoughts in The Guardian, which courtesy of its massive circulation is sure to reach far more readers to whom this idea is new. To keep a track of how well this plan is working, we suggest readers check in with the US mint, which frequently updates the amount of silver American Eagles sold on its website (link). The full Guardian article is below.

Want JP Morgan to crash? Buy silver, published in The Guardian

The campaign to buy silver and force JP Morgan into bankruptcy could work, because of the liabilities accrued by its short-selling

For decades, the world's banking system has been on a fiat currency standard that has led to banks that are "too big to fail". They have overreached their remit of providing loans and have leeched into the political system, using our money to change the political agenda in ways that boost bank management's compensation over the interests of their depositors.

Over the past 11 years, the Gata (Gold Anti-Trust Action) committee has worked to reveal the silver/gold price suppression scheme; thanks to whistleblower Andrew Maguire in London, an investigation has been opened. As part of the ongoing exposé, it has now become clear that JP Morgan is sitting on what is estimated to be 3.3bn ounce "short" position in silver (which they have sold short, meaning they don't own it to begin with) in an attempt to keep the price artificially low in order to keep the relative appeal of the dollar and other fiat currencies high. The potential liability for JP Morgan has been an open secret for a few years.

On my show, Keiser Report, I recently invited Michael Krieger, a regular contributor of Zero Hedge (the WikiLeaks of finance). We posited that if 5% of the world's population each bought a one-ounce coin of silver, JP Morgan would be forced to cover their shorts – an estimated $1.5tn liability – against their market capital of $150bn, and the company would therefore go bankrupt. A few days later, I suggested on the Alex Jones show that he launch a "Google bomb" with the key phrase "crash jp morgan buy silver".

Within a couple of hours, it went viral and hundreds of videos have been made to support the campaign.

Right now, silver eagle sales for the month of November hit an all-time record high and the availability of silver on a wholesale level is drying up. The most important indicator is the price itself – holding just under a 30-year high. With each uptick JP Morgan gets closer to going bust or requiring a bailout.

Here's how the campaign works: wealth tied to a fiat currency is easily overwhelmed by wealth tied to silver and gold. And the world is waking up to the fact that they have the ability, without government assistance or other interference, to create a new precious metals-based backed currency system by simply converting their fiat paper into real money.

This campaign has 100% chance of working; it falls into the category of a self-fulfilling prophecy. As more individuals buy silver and gold, all attempts to replenish the system with more paper money will only cause the purchasing power of the silver and gold to increase – thus prompting more people to buy more. Any attempts to bail out JP Morgan would have the same effect. If the US Fed was to flood the system with bailout money for JP Morgan to cover their silver short position (as they did after the collapse of Long-Term Capital Management), more inflation will ensue and the price of silver and gold will rise more, triggering more purchases. A virtuous circle is born.

If anyone is interested in helping to crash JP Morgan, buy silver. In the end, it's about transferring wealth back to the people from where it came.

Depth Trade · Dec 3, 2010

Still holding positions.
Current prices

Xag/usd $29.16
+$1.78
+6.5%

Xau/usd $1405.80
+$50.90
+3.76%

Fed wants to strip a key protection for homeowners
By Tony Pugh | McClatchy Newspapers

WASHINGTON — As Americans continue to lose their homes in record numbers, the Federal Reserve is considering making it much harder for homeowners to stop foreclosures and escape predatory home loans with onerous terms.

The Fed's proposal to amend a 42-year-old provision of the federal Truth in Lending Act has angered labor, civil rights and consumer advocacy groups along with a slew of foreclosure defense attorneys.

They're not only asking the Fed to withdraw the proposal, they also want any future changes to the law to be handled by the new Consumer Financial Protection Bureau, which begins its work next year.

In a letter to the Fed's Board of Governors, dozens of groups that oppose the measure, including the National Consumer Law Center, the NAACP and the Service Employees International Union, say the proposal is bad medicine at the wrong time.

"At the depths of the worst foreclosure crisis since the Great Depression, we are surprised that the Fed has proposed rules that would eviscerate the primary protection homeowners currently have to escape abusive loans and avoid foreclosure: the extended right of rescission."

Because the public comment period on the Fed's proposal is still open until Dec. 23, a spokesman declined comment on the matter.

But in a September passage in the Federal Register, the Fed said the proposal was designed to "ensure a clearer and more equitable process for resolving rescission claims raised in court proceedings" and reflects what most courts already require.

Since 1968, the Truth in Lending Act has given homeowners the right to cancel, or rescind illegal loans for up to three years after the transaction was completed if the buyer wasn't provided with proper disclosures at the time of closing.

Attorneys at AARP have used the rescission clause for decades to protect older homeowners stuck in predatory loans with costly terms. The provision is also helping struggling homeowners to fight a wave of foreclosure cases in which faulty and sometimes-fraudulent disclosures were used.

The violations must be of a material nature to invalidate a loan under the extended-rescission clause. To do so, homeowners — usually those facing financial problems or foreclosure — hire an attorney to scour their mortgage documents for possible violations regarding the actual cost of the loan or payment terms.

If problems are found, a notice of rescission is sent to the creditor, which can either admit to the alleged violation or contest it in court.

Creditors that end up rescinding a loan are then required to cancel their "security interest," or lien, on the property.

Once that occurs, the homeowner must then pay the outstanding loan balance back to the lender — minus the finance charges, fees and payments already made.

Dropping the lien provides homeowners with a defense against foreclosure and allows them to refinance to pay the outstanding loan amount.

Critics say the proposed change by the Fed would render the rescission clause useless. The Fed proposal would require homeowners who seek a loan rescission through the courts, to pay off the entire loan balance before the lender cancels the lien.

"This, of course, would be almost impossible for most consumers to do because they can't come up with the money until they get out of the loan. And they can't get out of the loan until the lien is released," said Barry Zigas, director of housing and credit policy at the Consumer Federation of America. "None of us are quite sure what purpose is being served by this proposal or what prompted it."

The Fed's proposal is part of an ongoing effort begun in 2005 to review and update rules and guidelines for disclosure in the rescission process, said Kathleen Keest, the senior policy counsel for the Center for Responsible Lending. That effort, which includes a review and update of the forms used for rescission, pre-dates the housing-market meltdown and the recession, she said.

The Fed "believes this adjustment would facilitate compliance with the Truth in Lending Act," adding that the "majority of courts that have considered this issue" condition the release of a lien on a homeowner's ability to repay the balance.

The Mortgage Bankers Association, the main trade group for the real estate finance industry, hasn't taken a position on the issue or submitted public comment to the Fed. But "we are inclined to support the direction the Fed is headed," said John Mechem, the MBA's vice president for public affairs.

Requiring homeowners to pay what remains of the original loan before a rescission can proceed is tantamount to a "verdict first, trial later" philosophy, Keest said.

"It basically puts the cart before the horse," she said, adding that securing the "right to rescind determines how much you have to (pay)."

David Certner, the legislative policy director at AARP, which also has criticized the proposal, said rescission is an effective tool to make sure creditors follow the rules and are transparent about the true cost of loans.

"It can help put off a foreclosure and give one the leverage in negotiating some other type of appropriate payment or settlement. It's a very powerful tool to help people stay in their homes," Certner said. He called the proposal "egregious."

Depth Trade · Dec 5, 2010

I have the USD being weak for this following week. Will continue to hold previous metal positions.

Current price on open positions.

Xag/usd $29.40
+7.36%

Xau/usd $1414.09
+4.37%

The con of the century – Federal Reserve made $9 trillion in short-term loans to only 18 financial institutions. Since 2000 the US dollar has fallen by 33 percent. The hidden cost of the bailouts.
Posted by mybudget360

The Federal Reserve released a stunning report showing the details of bailouts that occurred during the peak of the credit crisis. They won’t call it “bailouts” but giving money when others won’t is exactly that. What the report shows is that the Fed operated as a global pawnshop taking in practically anything the banks had for collateral. What is even more disturbing is that the Federal Reserve did not enact any punitive charges to these borrowers so you had banks like Goldman Sachs utilizing the crisis to siphon off cheap collateral. The Fed is quick to point out that “taxpayers were fully protected” but mention little of the destruction they have caused to the US dollar. This is a hidden cost to Americans and it also didn’t help that they were the fuel that set off the biggest global housing bubble ever witnessed by humanity. A total of $9 trillion in short-term loans were made to 18 financial institutions. Still think the banking bailout didn’t happen or cost us nothing? Let us first look at the explosion of assets on the Fed balance sheet.

The Fed is still carrying longer term debt on its books that shouldn’t be there:

The Fed typically would carry under $900 billion in high quality government Treasuries on its balance sheet. But today it is carrying roughly $2.4 trillion in “assets” and the biggest part of this is made up of questionable mortgages:

Over $1 trillion of mortgage backed securities sit on the Fed balance sheet and QE2 is only starting. Other tens of billions of dollars are sitting in the balance sheet as well that include failed commercial real estate projects and defunct shopping centers around the country. Of course the Fed would like to give the appearance that all is well but no one makes $9 trillion in short-term loans without undergoing serious problems. And doesn’t it bother the public that an institution that represents our banking system essentially bailed out the world at the expense of US taxpayers (without asking by the way) and now taxpayers are having to deal with a toxic banking system and a jobs market that is hammered into the ground?

This concern was raised:
“(NY Times) But Senator Bernard Sanders, independent of Vermont, who wrote a provision in the law requiring the disclosures by Dec. 1, reached a different conclusion.

“After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed’s multitrillion-dollar bailout of Wall Street and corporate America,” he said. “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations.”

Senator Sanders is absolutely right. Did you also know that billions of dollars went to foreign central banks as well? We all know the issues going on with the European Zone today but the Fed never mentioned this during the bailout frenzy. Don’t be fooled when the Fed says there is no cost associated. 26 million Americans are unemployed or underemployed and 44 million Americans are on food assistance. The US dollar has done the following in the last decade:

Yet this is the response:
“In a statement accompanying the disclosure, the Fed said it had fully protected taxpayers. “The Federal Reserve followed sound risk-management practices in administering all of these programs, incurred no credit losses on programs that have been wound down, and expects to incur no credit losses on the few remaining programs,” it said.”

Sound risk-management? The entire purpose is to destroy the currency in a slow methodical process and inflate away the debt. Yet there is a cost to this born by the many for the few. Over the last decade it has meant the depreciation of the dollar by 33 percent. That is a real cost. It might not be a big deal if you hold money in foreign countries but most Americans only have a paycheck that is issued in US dollars. The actual amount of Fed loans is simply jaw dropping:

“At home, from March 2008 to May 2009, the Fed extended a cumulative total of nearly $9 trillion in short-term loans to 18 financial institutions under a credit program.

Previously, the Fed had only revealed that four financial firms had tapped the special lending program, and did not reveal their identities or the loan amounts.

The data appeared to confirm that Citigroup, Merrill Lynch and Morgan Stanley were under severe strain after the collapse of Lehman Brothers in September 2008. All three tapped the program on more than 100 occasions.”

Keep in mind that unemployment insurance will cost roughly $4 billion per month and most of this money will go back into the economy. Congress is stalling on this yet the media is completely silent on the $9 trillion in Federal Reserve loans? This should be the headline story over and over until people realize how big the bailout was (and how this false dichotomy is being used as propaganda in the media as if $4 billion a month is going to bankrupt the system). The banking elites just want to shift the blame to “poor” people while ignoring the elephant in the room which are the trillions of dollars in Fed loans.

Everyone got in the game:
“Big institutional investors, like Pimco, T. Rowe Price and BlackRock, borrowed from the TALF program. So did the California Public Employees Retirement System, the nation’s largest public pension fund, and several insurers and university endowments.”

Source: New York Times
Every big player got into this and you will recall the rhetoric that it was for small businesses and the American consumer. None of that happened. Banks are still sitting on incredibly large excess reserves:

The Fed is operating without any checks and balances from Congress and another trillion dollar exposure has come out with the mainstream media channels like ABC, CBS, and NBC all remaining silent. Can’t interrupt Wheel of Fortune right?

arabianights · Dec 5, 2010

Depth Trade, what's your view on those who insult islam?

Black Swan · Dec 5, 2010

when you post up an article or a blog post could you provide a link? TIA

Depth Trade · Dec 6, 2010

Hello arabian, just glad to see a reply on my thread. Was starting to think everyone had me on ignore.
Stoning seems fair to me

Depth Trade · Dec 6, 2010

Hello BS, yeah no problem.

Depth Trade · Dec 6, 2010

Still holding previous entered positions at the following prices.

Current prices:

Xag/usd $30.11
+$2.73
+9.97%

Xau/usd $1424.03
+$69.13
+5.10%

U.S., allies seek China, Russia help on North Korea
http://www.reuters.com/article/idUSTRE6B50KX20101206
By Arshad Mohammed and Michael Martina
WASHINGTON/BEIJING | Mon Dec 6, 2010 2:59pm EST

(Reuters) - The United States, Japan and South Korea pressed China and Russia on Monday to help defuse tensions on the Korean peninsula as Chinese President Hu Jintao warned U.S. President Barack Obama the situation could "spin out of control."

In a show of support for South Korea after the North's shelling of one of its islands killed four people on November 23, Admiral Mike Mullen, the top U.S. military officer, will leave on Monday evening to meet security officials in Seoul.

In Washington, Secretary of State Hillary Clinton opened what she said was a "landmark" meeting with her Japanese and South Korean counterparts, saying all three shared grave concerns over "provocative attacks from North Korea."

"We are committed to our partners and we are committed to the preservation of peace and stability in Northeast Asia and on the Korean peninsula," Clinton said.

Japanese Foreign Minister Seiji Maehara, in comments echoed by South Korean Foreign Minister Kim Sung-hwan, said all three countries hoped for more cooperation from Beijing and Moscow, which have appeared less eager to get tough with Pyongyang.

"We will turn this meeting into one that will get the firm engagement of China and Russia in our efforts," Maehara said.

China, the host of stalled international nuclear talks with Pyongyang, was not invited to the meeting in Washington. But the U.S.-Japan-South Korea session was expected to discuss Beijing's proposal for emergency regional talks on the crisis.

"PEACE, NOT WAR"

The White House said Obama, in a telephone call with Hu, urged Beijing to work with the United States and others to "send a clear message to North Korea that its provocations are unacceptable.

The conversation between Obama and Hu took place as South Korea started live-fire naval exercises, 13 days after North Korea shelled Yeonpyeong island close to a disputed maritime demarcation line.

China's foreign ministry said Hu told Obama: "Especially with the present situation, if not dealt with properly, tensions could well rise on the Korean peninsula or spin out of control, which would not be in anyone's interest."

"We need an easing, not a ratcheting up; dialogue, not confrontation; peace, not war," Hu was quoted as saying.

Analysts said Hu's comments showed greater urgency but that China was reluctant to lean too hard on the North, which is in the midst of a leadership transition, for fear of a collapse that could send refugees streaming across its border.

"They see an element of vulnerability and the consequences are not to their liking should there be a collapse" said Jack Pritchard, president of the Korea Economic Institute. "They can't afford to be applying too much pressure that causes a crack or the potential implosion of North Korea."

The International Criminal Court's prosecutor said it had opened a preliminary investigation into whether North Korean forces committed war crimes in South Korea, ramping up pressure on the isolated government in Pyongyang.

The main message of the trip by Mullen, head of the U.S. Joint Chiefs of Staff, "is to the South Koreans that we continue to stand by them in the defense of their territory and for the stability of the peninsula," said his spokesman, Captain John Kirby.

"I don't think anyone thinks we're in an emergency situation right now ... That said, it's still tense."

South Korea's foreign minister, noting North Korea's recent revelations about progress with uranium enrichment for its nuclear program and the shelling of Yeonpyeong island, signaled it was crucial to bring China and Russia to the table.

"I also look forward to having this discussion on how to cooperate with China and Russia. Through today's meeting I hope we can strengthen our cooperation on these issues," Kim said.

"POLITICAL AND STRATEGIC PROBLEMS"

While Beijing has not apportioned blame for the shelling of Yeonpyeong island, Hu said China expressed "deep regret" about the deaths.

Tensions on the Korean peninsula have risen to their highest level in decades since the attack, which added to strains over the sinking of a South Korean warship in March that Seoul has blamed on Pyongyang.

"China is gravely worried about the situation on the peninsula because if large-scale conflict were to erupt on its border, China would face enormous political and strategic problems," said Shi Yinhong, director of the Center on American Studies at Renmin University.

Two years ago, North Korea walked out of aid-for-disarmament talks that had brought together the two Koreas, host China, the United States, Japan and Russia.

Pyongyang has said it now wants to restart the talks and has won the backing of Beijing and Moscow. But Washington, Seoul and Tokyo say they will return only when the North shows it is sincere about curbing its nuclear ambitions.

South Korea began the live-fire naval drills in disputed waters off the west coast, ignoring Pyongyang's warnings that they showed Seoul was "hell-bent" on starting war.

The South's military said there would be exercises in the vicinity of the tense Northern Limit Line (NLL) but not near Yeonpyeong island as part of drills at 29 locations around the peninsula.

Depth Trade · Dec 7, 2010

Still holding previous entered metal positions.

Current prices:

Xag/usd $28.86
+$1.48
+5.41%

Xau/usd $1399.70
+$44.80
+3.31%

Meet The 35 Foreign Banks That Got Bailed Out By The Fed
Posted on December 2, 2010 at 8:52 am
http://www.themarketguardian.com/2010/12/meet-the-35-foreign-banks-that-got-bailed-out-by-the-fed/

Courtesy of Tyler Durden

One may be forgiven to believe that via its FX liquidity swap lines the Fed only bailed out foreign Central Banks, which in turn took the money and funded their own banks. It turns out that is only half the story: we now know the Fed also acted in a secondary bail out capacity, providing over $350 billion in short term funding exclusively to 35 foreign banks, of which the biggest beneficiaries were UBS, Dexia and BNP. Since the funding provided was in the form of ultra-short maturity commercial paper it was essentially equivalent to cash funding. In other words, between October 27, 2008 and August 6, 2009, the Fed spent $350 billion in taxpayer funds to save 35 foreign banks. And here people are wondering if the Fed will ever allow stocks to drop: it is now more than obvious that with all banks leveraging the equity exposure to the point where a market decline would likely start a Lehman-type domino, there is no way that the Brian Sack-led team of traders will allow stocks to drop ever… Until such time nature reasserts itself, the market collapses without GETCO or the PPT being able to catch it, and the Fed is finally wiped out in one way or another.

The 35 companies in question:

UBS
Dexia SA
BNP Paribas
Barclays PLC
Royal Bank of Scotland Group
Commerzbank AG
Danske Bank A/S
ING Groep NV
WestLB
Handelsbanken
Deutsche Post AG
Erste Group Bank AG
NordLB
Free State of Bavaria
KBC
HSH Nordbank AG
Unicredit
HSBC Holdings PLC
DZ Bank AG
Republic of Korea
Rabobank
Sumitomo Mitsui Banking Corporation
Banco Espirito Santo SA
Bank of Nova Scotia
Mizuho Corporate Bank, Ltd.
Syngenta AG
Mitsui & Co Ltd
Bank of Montreal
Caixa Geral de Depósitos
Mitsubishi UFJ Financial Group
Shinhan Financial Group Co Ltd
Mitsubishi Corp
Aegon NV
Royal Bank of Canada
Sumitomo Corp

Depth Trade · Dec 8, 2010

Still holding previous opened metal positions.

Current positions.

Xag/usd $28.22
+$0.88
+3.21%

Xau/usd $1382.35
+$27.45
+2.03%

Spain on the Verge of a Nervous Breakdown
BY EDWARD HUGH | DECEMBER 3, 2010
http://www.foreignpolicy.com/articles/2010/12/03spain_on_the_verge_of_a_nervous_breakdown?page=0,0

Europe's debt crisis continues to spread -- Greece and Ireland have already had to seek shelter from the European Union and the International Monetary Fund, while bond spreads in Portugal and Spain are giving strong indication they might meet the same fate in the not-too-distant future. And as the crisis develops, far from sending a much-needed signal of confidence and self-assurance, the rhetorical register we're seeing from Europe's leaders is becoming increasingly nerve-racked and even at times apocalyptic. In a typically troubling example, European Council President Herman Van Rompuy warned recently that the eurozone, and even the European Union itself, were in the process of fighting for their lives, telling the astonished audience at a Brussels think-tank conference, "We're in a survival crisis."

More... Only a few days later, another top EU official, European Competition Commissioner Joaquín Almunia, stunned market observers with a statement that was widely interpreted as suggesting there might be something behind the rumors that Spain's banking and government debt statistics were not as reliable as they should be. "There are no doubts that there is doubt [about Spain]," he said in an interview with a Spanish radio station, doubts that are connected with the possibility that Spain could "have something more than what it has already put on the table."

Then, Olli Rehn, the European Union's commissioner for economic and monetary affairs, tactlessly chose a day of extreme market tension to tell the world that in his considered opinion, the Spanish government was in danger of not complying with its 2011 deficit target of 6 percent. The result was predictable, and the next day yields on both Spanish and Italian bonds hit euro-era highs. The situation was brought under control only thanks to substantial intervention on the part of the European Central Bank (ECB), as well as bank President Jean-Claude Trichet's promise of a major change in policy at the next meeting. As American economist Barry Eichengreen recently put it: "You can say one thing for the European Commission, the ECB and the German government: they never miss an opportunity to make things worse."

Far from serving as a call to arms, comments like these, especially at such a sensitive moment in the latest round of the crisis, merely leave the people who make them looking ridiculous and trivialize the institutions they represent. The European Union itself is not in any kind of survival crisis. Indeed, the risk that the union will actually break up is so small as to be virtually nonexistent -- and even though doubts remain about the long-term survival of the euro in its present form, this is not the immediate problem. The only meaningful way to ensure that the common currency survives in the long run is to find ways to adequately resolve Europe's present problems. Wandering from the script, as Van Rompuy is wont to do, simply doesn't help.

The problem Europe faces, as seen by the markets, is that it has half-emerged from one economic crisis only to be engulfed by another: the challenge of maintaining under reformed pension and health-care systems in the face of the most rapid population aging in human history, with very sharp increases in the elderly dependency ratio looming over the next 10 years. Add to this challenge the doubts about who is actually going to be responsible for whom: Will Irish citizens pay through taxes the losses incurred by Irish banks in the property bubble, or will the German government recapitalize the German banks that were irresponsible enough to lend the Irish the money to have the bubble in the first place? And at the heart of this sovereign-debt crisis is another tricky question: Whose sovereign goes with whose debt?

We are now into the third wave of the present crisis. The first tremors were effectively noticed around the turn of the year, when Abu Dhabi announced it was not going to take responsibility for all the excesses of its poorer but more reckless neighbor, Dubai. This news turned all eyes toward Greece and the issue of who was going to foot the bill for all that under-the-table deficit spending that had been going on since the euro was introduced.

Then in May came the second wave, when doubts about how the Greek crisis was being handled increasingly led investors to ask how many more countries on Europe's periphery might be engaging in reckless deficit spending without credible plans to rein them in. The elephant in the room was Spain because while it is evident that Ireland's and Portugal's problems are more serious in the short term, Spain is without a doubt the most dangerous threat due to its size and the level of its private sector's external indebtedness.

Last spring, a combination of well-timed crisis measures and good public relations were able to take the heat off Spain. What then followed could be called the long cool summer, as Spanish leaders grew increasingly relaxed and even almost nonchalant about their troubles. As Finance Minister Elena Salgado put it at the time, "I don't have nightmares anymore."

But the worst wasn't over, and the sleepless nights must now be coming back because at the start of November a third wave broke out. Although most of the focus was initially on Ireland and Portugal, Spain and then Italy became increasingly drawn in via a process that financial analysts aptly call "contagion."

But if the second wave was characterized by an obsession with the need for fiscal austerity -- ruthlessly cutting budgets -- this time the issue has broadened, with investors asking themselves and Europe's leaders the awkward question as to how, amid all this austerity, these countries are ever going to be able to return their economies to growth. What worries investors is not the size of this year's deficit, but the level of debt that will eventually exist and the extent to which this will be payable. To pay their debt (whether in the public or private sector), these countries need economic growth, and it is exactly here that Greece has come back to haunt everyone. Despite the sterling efforts the Greek government is making to keep to its fiscal-deficit targets, the economy is contracting so fast there that the level of debt (as a percentage of GDP) is simply rising and rising.

So the Spanish government finds itself trapped. All it can do to please the markets is keep to its existing targets. But it is here we find a Catch-22 double bind because keeping to target means watching the economy continue to contract, which means that the level of debt will continue to rise. Worse, if there is no return to growth, then Spain's 20 percent-plus unemployment rate will not come down, which means more nonperforming loans and eventually more bank bailouts. Spain is caught in a self-perpetuating loop, and investors know it.

Although it might be hard to believe given all those hair-raising quotes, what Europe's leaders at the EU and national levels are in theory focusing their strategy on is maintaining confidence on the part of both investors and consumers.

Consumer confidence is much easier to count on if consumers know what is happening. Confidence-building exercises of the "together we can do it" kind don't work if the man and woman on the street are continually being told by their government that the worst is over and that the country is on the verge of recovery. ("Let's wait a few weeks and we will see them [the green shoots of economic recovery]," Salgado told journalists outside the Spanish parliament at the height of the May crisis.)

Spanish leaders have consistently failed to prepare the public to accept the difficult sacrifices that will be required to really break out of the crisis, so it is hardly surprising if some workers decide to go on strike when told they will now need to continue to work until they are 67, rather than stopping at the current retirement age of 65.

And the same goes for investors, and it is here that the problem has become particularly tricky. When Europe's leaders are not busying themselves denouncing the very people they need to borrow money from as "speculators," they seem to be giving them replies to questions they aren't asking. Most savvy investors now understand that EU countries are involved in collective fiscal-adjustment programs to reduce their deficit level. Measures like extensions in the working life, reductions in government salaries, and increases in consumer taxes are now commonplace.

What investors have now moved on to ask is precisely how these programs are going to be able to stabilize debt-to-GDP levels if the most severely affected economies, such as Ireland, Greece, Portugal, and Spain, don't return to sustainable GDP growth. They are worried less about fiscal adjustment in the short term and more about sustainability in the long term. But rather than taking this long-term view, EU governments are insisting on trying to restore confidence simply by convincing investors of their willingness to make painful sacrifices. What investors are interested in is getting their money back, with interest, rather than seeing their debtors pained and humiliated.

All this reminds me of a powerful scene from the recent box-office hit Buried, in which the poor victim of a gang of unscrupulous kidnappers, having been nailed into an underground coffin somewhere in the middle of an Iraqi desert, is persuaded to cut off his own finger, on camera and linked to the world via a mobile-phone connection, just before the roof falls in on him and he is finally entombed in sand.

What policymakers sometimes seem to forget is that investors, just like citizens, are stakeholders in the future of the country they invest in. Indeed, the more they invest, the greater the stake they have. In this sense, they are far more realistic than many of Europe's leaders because they are fully aware that not all EU countries are going to be able to pay back everything they owe. What sparked the latest bout of market nervousness in Europe was German Chancellor Angela Merkel making clear that the German taxpayer wasn't willing to keep funding heavily indebted countries indefinitely and that private lenders were going to be asked to share part of the cost by taking their share of the haircuts in any future restructuring process. Fine, the investor might respond, but that bitter pill would be easier to swallow if countries were able to show meaningful signs of being able to kick-start their economies back into sustainable growth and pay a bigger proportion of the currently outstanding debt.

Yet one by one the countries fall. Ireland is already following Greece along the path of accepting an EU-IMF rescue program, and last weekend an 85 billion euro financial-support package was finally agreed on. Portugal is continuing to insist that no support package is coming. Spain is busily denying it is even a candidate for a bailout, and even Belgium's name is starting to be whispered nervously in online forums.

Clearly the European Union's decision to make 85 billion euros available to Ireland is a positive one, whatever issues arise about how the money is to be spent and the draconian nature of some of the measures demanded. The decision will give Ireland and Greece more time to put their houses in order.

On the other hand, the average interest rate charged under the plan (estimated to be around 5.8 percent) only takes Irish five-year interest rates back to where they were on Nov. 2. The financial markets clearly wanted to see Germany give some kind of direct guarantee on Irish bank debt, but what they got was Germany and the European Union lending money to the Irish government so that Ireland could then guarantee the bank debt. This clearly leaves the extent of German commitment to the maintenance of the monetary union a rather open question, even though with the new package now in place, European finance ministers have essentially accepted a potentially enormous fiscal burden on behalf of their electorates. Greece, for example, will need to have all its debts refinanced continuously by its European partners for many years ahead, while the Irish loan is on a seven-and-a-half-year basis from the outset.

Nor does the European Central Bank's policy posture make much sense. Having countries pay 5, 6, 7, or even 8 percent to finance their debt doesn't seem like a credible plan. And simply asking countries to make large fiscal adjustments will only lead to sizable economic contractions (the Greek economy is set to shrink 4.2 percent this year, and with the latest round of cuts that have just been announced the situation will hardly be better in 2011). Standing back and watching one country after another pay such sizable interest charges doesn't seem to be the best way to spark a recovery.

And it is not only the "what" that lies behind Europe's action plan that is disturbing observers. The "how" is also far from convincing. According to one popular metaphor, the eurozone is now like 16 Alpine climbers scaling the Matterhorn who find themselves tightly roped together in appalling weather conditions. One climber -- Greece -- lost his footing and slipped over the edge of a dangerous precipice. As things stand, the other 15 can easily take the strain of holding the Greeks dangling, however uncomfortable it may be for them. But others are starting to slide. Ireland has now slipped over the edge, while Portugal is moving even closer by the day. Just behind comes Spain, and somewhere further back Belgium. If all three finally go over, this will leave 11 countries supporting five, something that the May bailout package only expected as the worst-case scenario, and placing a strain on those remaining that might prove impossible to withstand. Italy in particular comes to mind.

Winning the battle to come will require two things. First, a clear response is needed at the national level, and in particular from the Spanish administration, because in many ways, given its sheer size, the future of Spain will determine the future of the rest.

And it is not only a question of additional measures. To convince financial markets, Spain's leaders must find a credible plan for returning their economy to growth. Presently, growth forecasts for the Spanish economy are being revised down, by the European Union from 0.8 percent to 0.7 percent for next year.

The markets also need evidence from Brussels and Frankfurt that those responsible for decision-making at the highest level fully understand the dimensions of the problem and are willing to do whatever it takes without putting limitations on areas of action in advance.

Letting the European Central Bank buy national bonds in the primary markets and issuing EU bonds would be two possible ways to move forward. Beyond that, Europe's leaders must instill in their citizens the message that we either are all in this together or will surely all hang separately. Rather than another bout of frivolous and inopportune comments from Van Rompuy, what we really need from Europe's leaders is a demonstration of calm and determination coupled with a large dose of courage and imagination.

It looks clear that things are set to get a lot worse before they get better. In fact, such deterioration might be the only thing that will knock the various national heads together because as we can see, the long slow process of developing the policy tools needed to get to grips with the problems took one lurch forward under the impact of last May's surge in sovereign bond yields and the latest round of pressure is producing another one. So despair not. Remedies are there, and they can be applied when the will to do so can be found. Until then, let's just hope the ropes hold.

leerees · Dec 9, 2010

Many thanks for this blog Depth Trade, keep up the good work.

Depth Trade · Dec 9, 2010

Hello Leerees, glad you enjoy it. Feel free to comment on here anytime.

Still holding previous held metal positions from $27.38 and $1354.90

Current positions.

Xag/usd $28.78
+$1.4
+5.11%

Xau/usd $1390.60
+$35.70
+2.63%

Global bond rout deepens on US fiscal worries
http://www.telegraph.co.uk/finance/...l-bond-rout-deepens-on-US-fiscal-worries.html
By Ambrose Evans-Pritchard 8:03PM GMT 08 Dec 2010

Agreement in Washington on a fresh fiscal package has set off dramatic rise in yields of US Treasuries and bonds across the world, threatening to short-circuit any benefits of stimulus. The bond rout raises concerns that the US authorities may be losing control over events.
The yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since President Barack Obama agreed on Monday to compromise with Senate Republicans on tax cuts.

The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs in Asia, Europe and Latin America. Japan's finance ministry braced as borrowing costs on seven-year debt jumped by a sixth in one trading session, while German Bunds punched through 3pc.

The White House deal with Congress will renew the Bush tax cuts for rich and poor alike for two years, as well as adding a further a 2pc cut in payroll taxes and an extension of unemployment aid.

David Bloom, currency chief at HSBC, said it is hard to disentangle whether investors are shunning bonds because they expect US stimulus to boost growth next year, or whether they are losing patience with profligacy in Washington.

"If this is all about growth, that's brilliant. But if yields are rising because people think Amirca's fiscal situation is unsustainable, then its armaggedon," he said.

"The US can get away with this only because it is the world's reserve currency. This would be totally unacceptable in any other country. We think these problems will start to crystallise for the US in the second half of 2011, once the European debt crisis has stabilised," he said.

The warnings were echoed by Li Daokui, a rate-setter for China's central bank. "The focus of the market is still in Europe, but we must be aware that the US fiscal situation is much worse than in Europe," he said.

The US tax deal adds $1 trillion of stimulus over two years, according to BNP Paribas. America's budget deficit will remain stuck near 10pc of GDP, not just in 2011 but also in 2012. This will push gross public debt to 110pc of GDP under the IMF definition, near the brink of a debt compound spiral. The contrast with fiscal tightening in Europe has become starkly evident.

Both Moody's and Fitch warned that the US must map out a credible strategy to control spending. "We have long-term concerns about the US rating outlook and they're not yet being addressed," said Stephen Hess, chief US analyst for Moody's.

Stephen Lewis, from Monument Securities, said the bond rout is a sign that Washington can no longer take global markets for granted. "We have reached the limits of tolerance for budget deficits. There is a feeling around the world that nobody in Washington is paying any attention to the implications of what they are doing, but there is a very real risk that this will backfire if it causes mortgage rates to keep going up," he said.

"At the same time we've seen a loss of confidence in Fed strategy. There is a feeling that the Fed doesn't care about inflation – in fact, wants more of it – and that is certainly not in the interest of bondholders," he said.

The standard rate for 30-year mortgages in US has moved up in tandem with Treasury yields. The rate has been creeping up ever since the US Federal Reserve first signalled plans for a fresh blast of quantitative easing, rising 85 basis points in three months.

The housing squeeze raises serious doubts about the Fed's plan to purchase a further $600bn in Treasuries over coming months, or QE2 as it is known. Fed chair Ben Bernanke stated on Sunday that the explicit purpose of the policy – which he calls "credit easing" – is to bring down yields.

"We're not printing money. What we're doing is lowering interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster," he said.

US data on foreign holdings of Treasuries and agency bonds are published with a delay, but monthly figures show that China sold a net $24bn in September and Russia sold $10bn. The concern is that investor flight from US debt will overpower the monthly purchases of $100bn by the Fed, making it ever harder for Washington to raise the $1.4 trillion needed next year to cover the deficit.

The rise in yields risks becoming a textbook case of a central bank losing control over long-term rates. The danger is that market fears of future bond losses – whether from inflation or higher default premiums – will neutralise the stimulus, or lead to stagflation.

Tom Porcelli, from RBC Capital Markets, said the Fed rates might be nearer 4pc by now if the Fed had not acted. However, he said there was no justification for QE2 at a time when the economy is growing at more than 2pc, and core inflation – though the lowest since the 1960s – is positive at 1pc. "Nobody believes that we're slipping into deflation anymore. That phase has passed," he said.

Depth Trade · Dec 12, 2010

Have exited precious metal long positions.

Xag/usd out $28.61
+$1.23
+4.49%

Xau/usd out $1385.74
+$30.84
+2.28%

Wall Street's Pentagon Papers: Biggest Financial Scam In World History
$12.3 TRILLION in taxpayers' money.
http://www.globalresearch.ca/index.php?context=va&aid=22291

The Wall Street Pentagon Papers: Biggest Scam In World History Exposed - Are The Federal Reserve's Crimes Too Big To Comprehend?What if the greatest scam ever perpetrated was blatantly exposed, and the US media didn’t cover it? Does that mean the scam could keep going? That’s what we are about to find out.

I understand the importance of the new WikiLeaks documents. However, we must not let them distract us from the new information the Federal Reserve was forced to release. Even if WikiLeaks reveals documents from inside a large American bank, as huge as that could be, it will most likely pale in comparison to what we just found out from the one-time peek we got into the inner-workings of the Federal Reserve. This is the Wall Street equivalent of the Pentagon Papers.

I’ve written many reports detailing the crimes of Wall Street during this crisis. The level of fraud, from top to bottom, has been staggering. The lack of accountability and the complete disregard for the rule of law have made me and many of my colleagues extremely cynical and jaded when it comes to new evidence to pile on top of the mountain that we have already gathered. But we must not let our cynicism cloud our vision on the details within this new information.

Just when I thought the banksters couldn’t possibly shock me anymore… they did.

We were finally granted the honor and privilege of finding out the specifics, a limited one-time Federal Reserve view, of a secret taxpayer funded “backdoor bailout” by a small group of unelected bankers. This data release reveals “emergency lending programs” that doled out $12.3 TRILLION in taxpayer money - $3.3 trillion in liquidity, $9 trillion in “other financial arrangements.”

Wait, what? Did you say $12.3 TRILLION tax dollars were thrown around in secrecy by unelected bankers… and Congress didn’t know any of the details?

Yes. The Founding Fathers are rolling over in their graves. The original copy of the Constitution spontaneously burst into flames. The ghost of Tom Paine went running, stark raving mad screaming through the halls of Congress.

The Federal Reserve was secretly throwing around our money in unprecedented fashion, and it wasn’t just to the usual suspects like Goldman Sachs, JP Morgan, Citigroup, Bank of America, etc.; it was to the entire Global Banking Cartel. To central banks throughout the world: Australia, Denmark, Japan, Mexico, Norway, South Korea, Sweden, Switzerland, England… To the Fed’s foreign primary dealers like Credit Suisse (Switzerland), Deutsche Bank (Germany), Royal Bank of Scotland (U.K.), Barclays (U.K.), BNP Paribas (France)… All their Ponzi players were “gifted.” All the Racketeer Influenced and Corrupt Organizations got their cut.

Talk about the ransacking and burning of Rome! Sayonara American middle class…

If you still had any question as to whether or not the United States is now the world’s preeminent banana republic, the final verdict was just delivered and the decision was unanimous. The ayes have it.

Any fairytale notions that we are living in a nation built on the rule of law and of the global economy being based on free market principles has now been exposed as just that, a fairytale. This moment is equivalent to everyone in Vatican City being told, by the Pope, that God is dead.

I’ve been arguing for years that the market is rigged and that the major Wall Street firms are elaborate Ponzi schemes, as have many other people who built their beliefs on rational thought, reasoned logic and evidence. We already came to this conclusion by doing the research and connecting the dots. But now, even our strongest skeptics and the most ardent Wall Street supporters have it all laid out in front of them, on FEDERAL RESERVE SPREADSHEETS.

Even the Financial Times, which named Lloyd Blankfein its 2009 person of the year, reacted by reporting this: “The initial reactions were shock at the breadth of lending, particularly to foreign firms. But the details paint a bleaker and even more disturbing picture.”

Yes, the emperor doesn’t have any clothes. God is, indeed, dead. But, for the moment at least, the illusion continues to hold power. How is this possible?

To start with, as always, the US television “news” media (propaganda) networks just glossed over the whole thing - nothing to see here, just move along, back after a message from our sponsors… Other than that obvious reason, I’ve come to the realization that the Federal Reserve’s crimes are so big, so huge in scale, it is very hard for people to even wrap their head around it and comprehend what has happened here.

Think about it. In just this one peek we got at its operations, we learned that the Fed doled out $12.3 trillion in near-zero interest loans, without Congressional input.

The audacity and absurdity of it all is mind boggling…

Based on many conversations I’ve had with people, it seems that the average person doesn’t comprehend how much a trillion dollars is, let alone 12.3 trillion. You might as well just say 12.3 gazillion, because people don’t grasp a number that large, nor do they understand what would be possible if that money was used in other ways.

Can you imagine what we could do to restructure society with $12.3 trillion? Think about that…

People also can’t grasp the colossal crime committed because they keep hearing the word “loans.” People think of the loans they get. You borrow money, you pay it back with interest, no big deal.

That’s not what happened here. The Fed doled out $12.3 trillion in near-zero interest loans, using the American people as collateral, demanding nothing in return, other than a bunch of toxic assets in some cases. They only gave this money to a select group of insiders, at a time when very few had any money because all these same insiders and speculators crashed the system.

Do you get that? The very people most responsible for crashing the system, were then rewarded with trillions of our dollars. This gave that select group of insiders unlimited power to seize control of assets and have unprecedented leverage over almost everything within their economies - crony capitalism on steroids.

This was a hostile world takeover orchestrated through economic attacks by a very small group of unelected global bankers. They paralyzed the system, then were given the power to recreate it according to their own desires. No free market, no democracy of any kind. All done in secrecy. In the process, they gave themselves all-time record-breaking bonuses and impoverished tens of millions of people - they have put into motion a system that will inevitably collapse again and utterly destroy the very existence of what is left of an economic middle class.

That is not hyperbole. That is what happened.

We are talking about trillions of dollars secretly pumped into global banks, handpicked by a small select group of bankers themselves. All for the benefit of those bankers, and at the expense of everyone else. People can’t even comprehend what that means and the severe consequences that it entails, which we have only just begun to experience.

Let me sum it up for you: The American Dream is O-V-E-R.

Welcome to the neo-feudal-fascist state.

People throughout the world who keep using the dollar are either A) Part of the scam; B) Oblivious to reality; C) Believe that US military power will be able to maintain the value of an otherwise worthless currency; D) All of the above.

No matter which way you look at it, we are all in serious trouble!

If you are an elected official, (I know at least 17 of you subscribe to my newsletter) and you believe in the oath you took upon taking office, you must immediately demand a full audit of the Federal Reserve and have Ben Bernanke and the entire Federal Reserve Board detained. If you are not going to do that, you deserve to have the words “Irrelevant Puppet” tattooed across your forehead.

Yes, those are obviously strong words, but they are the truth.

The Global Banking Cartel has now been so blatantly exposed, you cannot possibly get away with pretending that we live in a nation of law based on the Constitution. The jig is up.

It’s been over two years now; does anyone still seriously not understand why we are in this crisis? Our economy has been looted and burnt to the ground due to the strategic, deliberate decisions made by a small group of unelected global bankers at the Federal Reserve. Do people really not get the connection here? I mean, H.E.L.L.O. Our country is run by an unelected Global Banking Cartel.

I am constantly haunted by a quote from Harry Overstreet, who wrote the following in his 1925 groundbreaking study Influencing Human Behavior: “Giving people the facts as a strategy of influence” has been a failure, “an enterprise fraught with a surprising amount of disappointment.”

This crisis overwhelmingly proves Overstreet’s thesis to be true. Nonetheless, we solider on…

Here’s a roundup of reports on this BernankeLeaks:

Prepare to enter the theater of the absurd…

I’ll start with Senator Bernie Sanders (I-Vermont). He was the senator who Bernanke blew off when he was asked for information on this heist during a congressional hearing. Sanders fought to get the amendment written into the financial “reform” bill that gave us this one-time peek into the Fed’s secret operations. (Remember, remember the 6th of May, HFT, flash crash and terrorism. “Hey, David, Homeland Security is on the phone! They want to ask you questions about some NYSE SLP program.”)

In an article entitled, “A Real Jaw-Dropper at the Federal Reserve,” Senator Sanders reveals some of the details:

At a Senate Budget Committee hearing in 2009, I asked Fed Chairman Ben Bernanke to tell the American people the names of the financial institutions that received an unprecedented backdoor bailout from the Federal Reserve, how much they received, and the exact terms of this assistance. He refused. A year and a half later… we have begun to lift the veil of secrecy at the Fed…

After years of stonewalling by the Fed, the American people are finally learning the incredible and jaw-dropping details of the Fed’s multi-trillion-dollar bailout of Wall Street and corporate America….

We have learned that the $700 billion Wall Street bailout… turned out to be pocket change compared to the trillions and trillions of dollars in near-zero interest loans and other financial arrangements the Federal Reserve doled out to every major financial institution in this country.…

Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations including two European megabanks — Deutsche Bank and Credit Suisse — which were the largest beneficiaries of the Fed’s purchase of mortgage-backed securities….

Has the Federal Reserve of the United States become the central bank of the world?… [read Global Banking Cartel]

What this disclosure tells us, among many other things, is that despite this huge taxpayer bailout, the Fed did not make the appropriate demands on these institutions necessary to rebuild our economy and protect the needs of ordinary Americans….

What we are seeing is the incredible power of a small number of people who have incredible conflicts of interest getting incredible help from the taxpayers of this country while ignoring the needs of the people. [read more]

In an article entitled, “The Fed Lied About Wall Street,” Zach Carter sums it up this way:

The Federal Reserve audit is full of frightening revelations about U.S. economic policy and those who implement it… By denying the solvency crisis, major bank executives who had run their companies into the ground were allowed to keep their jobs, and shareholders who had placed bad bets on their firms were allowed to collect government largesse, as bloated bonuses began paying out soon after.

But the banks themselves still faced a capital shortage, and were only kept above those critical capital thresholds because federal regulators were willing to look the other way, letting banks account for obvious losses as if they were profitable assets.

So based on the Fed audit data, it’s hard to conclude that Fed Chairman Ben Bernanke was telling the truth when he told Congress on March 3, 2009, that there were no zombie banks in the United States.

“I don’t think that any major U.S. bank is currently a zombie institution,” Bernanke said.

As Bernanke spoke those words banks had been pledging junk bonds as collateral under Fed facilities for several months…

This is the heart of today’s foreclosure fraud crisis. Banks are foreclosing on untold numbers of families who have never missed a payment, because rushing to foreclosure generates lucrative fees for the banks, whatever the costs to families and investors. This is, in fact, far worse than what Paul Krugman predicted. Not only are zombie banks failing to support the economy, they are actively sabotaging it with fraud in order to make up for their capital shortages. Meanwhile, regulators are aggressively looking the other way.

The Fed had to fix liquidity in 2008. That was its job. But as major banks went insolvent, the Fed and Treasury had a responsibility to fix that solvency issue—even though that meant requiring shareholders and executives to live up to losses. Instead, as the Fed audit tells us, policymakers knowingly ignored the real problem, pushing losses onto the American middle class in the process.” [read more]

Even the Financial Times is jumping ship:

Sunlight Shows Cracks in Fed’s Rescue Story

It took two years, a hard-fought lawsuit, and an act of Congress, but finally… the Federal Reserve disclosed the details of its financial crisis lending programs. The initial reactions were shock at the breadth of lending, particularly to foreign firms. But the details paint a bleaker, earlier, and even more disturbing picture…. An even more troubling conclusion from the data is that… it is now apparent that the Fed took on far more risk, on less favorable terms, than most people have realized. [read more]

In true Fed fashion, they didn’t even fully comply with Congress. In a report entitled, “Fed Withholds Collateral Data for $885 Billion in Financial-Crisis Loans,” Bloomberg puts some icing on the cake:

For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities. Among them was the Primary Dealer Credit Facility, created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.

“This is a half-step,” said former Atlanta Fed research director Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Sarasota, Florida. “If you were going to audit the facilities, then would this enable you to do an audit? The answer is ‘No,’ you would have to go in and look at the individual amounts of collateral and how it was broken down to do that. And that is the spirit of what the requirements were in Dodd-Frank.”

Depth Trade · Dec 12, 2010

I have a bias for USD being strong for this next week. Am shorting Xag/usd silver, Xau/usd gold.

New ATM glitch hits top bank
Hundreds queue for 'extra' cash after more BoI technical problems
http://www.independent.ie/national-news/new-atm-glitch-hits-top-bank-2452109.html

By Charlie Weston and Kevin Keane

Wednesday December 08 2010

Hundreds queued at Bank of Ireland (BoI) ATMs around the country last night after the machines started dispensing large amounts of cash which people did not have in their accounts.

BoI spokeswoman Mary Brennan confirmed people had been able to withdraw more money than they had in their accounts. She warned the customers would be "liable" for the extra cash they took out.

But Ms Brennan said the bank categorically denied that people received more money than they had requested from machines.

"When our systems go offline as they did, we can't see people's balances and they can't see their balance so we take a decision to make a certain amount of cash available to customers. So some customers were able to obtain money from the ATM that they did not have in their account," she said.

Ms Brennan continued, "We took a decision to allow some flexibility to our customers . . . it has been exploited by a minority of people." A system in place for when there is a technical failure means some people can get money as they have been pre-approved by the bank, even if there is no cash in their account, she said.

She said customers would be "liable" for the extra cash they had taken out but added that BoI hadn't decided how it would go about recovering its money.

Customers

Reports first spread on social-network site Twitter and soon banks had long queues outside ATMs in several locations.

A spokesperson had initially dismissed the reports.

In Limerick, for example, one man with just €20 in his account was able to withdraw €200.

Earlier, the bank was forced to apologise to its one million customers after a separate technical problem meant they were unable to withdraw cash on their ATM cards. The bank rushed to reassure customers the matter was only a technical one. There was no suggestion of any funding issues, it insisted.

Earlier a spokesman for the bank said its electronic payments systems were knocked out at 9.20am, with the bank struggling throughout the day to rectify the breakdown.

The fault meant ATMs were not working and customers were unable to make online transactions. The malfunction only affected BoI debit and ATM cardholders. People with cards issued by other banks were able to withdraw cash from the 1,000 BoI ATM machines countrywide. However, all transactions will be taken from their accounts.

Some customers reported being unable to withdraw any cash or use their Laser debit cards to make purchases. However, a bank spokeswoman said customers were able to withdraw some cash from ATMs, although the amount was restricted. BoI credit cards were working, the bank said.

It suggested that customers could use their credit cards to withdraw cash, but would not commit to waiving the high charges on credit-card withdrawals. In a statement, the bank confirmed that "an unforeseen technical issue" affected its in-branch and online banking systems.

"All branches are open and operating as normal but with a temporary restricted cash service. All ATMs are operating normally but with a restricted cash service for BoI cardholders," the bank said.

In October last year, BoI admitted it had double-charged its customers for the second month in a row after thousands were mistakenly overcharged on Laser card transactions.

- Charlie Weston and Kevin Keane

Depth Trade · Dec 14, 2010

Still holding shorts from the following prices.

Xag/usd: short from $28.68
currently: -3.54%

Xau/usd: short from $1386.08
currently: -1.06%

Post Mortem for the world's "Reserve Currency"
Dec 14, 2010 - 03:06 AM
By: Mike_Whitney
http://www.marketoracle.co.uk/Article24991.html

Paul Volcker is worried about the future of the dollar and for good reason. The Fed has initiated a program (Quantitative Easing) that presages an end to Bretton Woods 2 and replaces it with different system altogether. Naturally, that's made trading partners pretty nervous. Despite the unfairness of the present system--where export-dependent countries recycle capital to US markets to sustain demand---most nations would rather stick with the "devil they know", then venture into the unknown. But US allies weren't consulted on the matter. The Fed unilaterally decided that the only way to fight deflation and high unemployment in the US, was by weakening the dollar and making US exports more competitive. Hence--QE2.

But that means that the US will be battling for the same export market as everyone else, which will inevitably shrink global demand for goods and services. This is a major change in the Fed's policy and there's a good chance it will backfire. Here's the deal: If US markets no longer provide sufficient demand for foreign exports, then there will be less incentive to trade in dollars. Thus, QE poses a real threat to the dollar's position as the world's reserve currency.

Here's what Volcker said: “The growing sense around much of the world is that we have lost both relative economic strength and more important, we have lost a coherent successful governing model to be emulated by the rest of the world. Instead, we’re faced with broken financial markets, underperformance of our economy and a fractious political climate.....The question is whether the exceptional role of the dollar can be maintained." (Bloomberg)

This is a good summary of the problems facing the dollar. And, notice that Volcker did not invoke the doomsday scenario that one hears so often on the Internet, that China--which has more than $1 trillion in US Treasuries and dollar-backed assets--will one day pull the plug on the USA and send the dollar plunging. While that's technically true, it's not going to happen. China has no intention of crashing the dollar and thrusting its own economy into a long-term slump. In fact, China has been adding to its cache of USTs because it wants to keep its own currency weak and maintain its hefty share of the global export market. Besides, China didn't become the second biggest economy in the world by carrying out counterproductive vendettas against its rivals. It's going to stick with the strategy that got it to where it is today.

Still, as Volcker points out, there are real threats to the dollar, and they're getting more serious all the time. For example, if the deficits continue to balloon as they have recently ($1.3 trillion in 2010) or if Fed chairman Ben Bernanke follows QE2 with QE3, QE4, QE5 ad infinitum, then foreign investors and central banks will begin to lose confidence in the US's ability to manage its finances and they will begin to ditch the dollar. That will increase the cost of funding government operations by many orders of magnitude. In fact, it looked like something like that was happening just last week when President Obama announced his approval for extending the Bush tax cuts. The markets figured that extending the cuts would swell the deficits which would force the Treasury to issue more debt. That triggered a flight out of USTs that sent yields up sharply. The bond market suffered its biggest 2-day selloff since 2009. The incident provided a snapshot of what's in store when the economy begins to recover and the government has to pay higher rates to service the debt.

In any event, the one-two punch of bigger deficits and QE cannot help but push the dollar lower, but that does not necessarily imply that the dollar will lose its top-spot as reserve currency. It's more complex than that.

Here's how economist Menzie Chinn summed it up when he was asked how it would effect the US economy if the dollar lost its position as the world's reserve currency:

"If the dollar does indeed lose its role as leading international currency, the cost to the United States would probably extend beyond the simple loss of seigniorage narrowly defined. We would lose the privilege of playing banker to the world, accepting short-term deposits at low interest rates in return for long-term investments at high average rates of return. When combined with other political developments, it might even spell the end of economic and political hegemony."

Maintaining reserve status is the great imperative, because reserve status is the cornerstone upon which the empire rests. Lose that, and the whole superpower phenom begins to teeter. So, quirky, untested policies, like QE, are not initiated without a great deal of thought. The Fed tries to anticipate what could go wrong and work out an exit strategy. Kevin Warsh, who is a member of the Board of Governors at the Fed, gave a good rundown of the potential problem with QE in an article in the Wall Street Journal. Here's an excerpt:

"The Fed's increased presence in the market for long-term Treasury securities also poses nontrivial risks. The Treasury market is special. It plays a unique role in the global financial system. It is a corollary to the dollar's role as the world's reserve currency. The prices assigned to Treasury securities--the risk-free rate--are the foundation from which the price of virtually every asset in the world is calculated. As the Fed's balance sheet expands, it becomes more of a price maker than a price taker in the Treasury market. And if market participants come to doubt these prices--or their reliance on these prices proves fleeting--risk premiums across asset classes and geographies could move unexpectedly. The shock that hit the financial markets in 2008 upon the imminent failures of Fannie Mae and Freddie Mac gives some indication of the harm that can be done when assets perceived to be relatively riskless turn out not to be." ("The New Malaise", Kevin Warsh, Wall Street Journal)

This is an astonishing admission for an acting member of the Fed. Warsh is conceding that the Fed is essentially price-fixing on a global scale ("more of a price maker than a price taker") and he worries that this could undermine confidence in the bond market. The danger, as he sees it, is that investors will see through the ruse of government guarantees (like Fannie and Freddie) and exit the asset class altogether sinking the dollar on their way out. This is the grimmest scenario I've seen yet, but it seems much more plausible than the "China will dump its Treasuries all at once" theory.

The administration's support for Bernanke's "weak dollar" policy is evident in the way that Obama keeps reiterating his promise to double exports in 5 years. It simply can't be done without hammering the dollar, which appears to be Obama's intention. QE will lower the dollar's value against a basket of currencies which will make US exports cheaper than the competition. Bernanke sees it as a way to narrow the output gap and lower unemployment by cranking up the printing presses.

Foreign trading partners see it as beggar-thy-neighbor monetary policy at its worst, and they are deeply resentful. They'd rather see Congress do what it's done in the past, and push through a second round of fiscal stimulus to boost demand. They don't care about how big the US deficits are as long as they are used for a good purpose. And pulling the world out of a global slump is a good purpose. But that's not going to happen because the new GOP majority wants to implement their madcap "austerity" scheme which will bankrupt the states and dismantle popular social programs. They're as committed to "starve the beast" as ever, and they're convinced it's a winning strategy for retaking the White House in 2012. But belt-tightening reduces demand which makes American markets less attractive for foreign products. If the US economy continues to underperform, there will be less reason for foreign investors and central banks to stockpile dollars. The Fed's QE, Obama's export strategy, and the GOP's plan for debt consolidation are creating ideal conditions for an unexpected plunge in the dollar.

But there are other problems facing the dollar besides falling value and droopy demand, and this is where Volcker really hits the nail on the head. He says, "We have lost a coherent successful governing model to be emulated by the rest of the world. Instead, we’re faced with broken financial markets, underperformance of our economy and a fractious political climate."

Indeed. Public confidence in US markets has steadily eroded as one scandal follows the other and the people involved are never held accountable. So far, not one CEO or CFO of a major investment bank or financial institution has been charged, arrested, prosecuted, or convicted in what amounts to the largest incident of securities fraud in history. In the much-smaller Savings and Loan investigation, more than 1,000 people were charged and convicted. As Volcker points out, the system is broken and the old rules no longer apply. The small gains that were recently made in Dodd-Frank financial regulation, are now under attack by the new majority in congress. The GOP has pledged to either roll back entire provisions of the bill or do what they can to make the law unenforceable. Here's a quick look at two of the Republican leaders who will be leading the effort to "defang" Fin-Reg:

"A heated battle is underway between Rep. Spencer Bachus, R-Ala., who is in line to become the next chairman of the House Financial Services Committee, and Rep. Ed Royce, R-Calif., who is challenging him for the post currently held by Democrat Barney Frank of Massachusetts....More than half the $1.25 million donated to Royce’s Road to Freedom political action committee (PAC) over the last two election cycles came from banks, auditors and insurance companies, according to the Center for Public Integrity.

Bachus... too, has deep financial ties to the industry, which contributed more than half the $2.7 million in PAC money he received in the past four years. ("Defang and Delay—Wall Street Plans to Neuter FinReg", Merrill Goozner, The Fiscal Times)

There's no doubt that Royce and Bachus are in Wall Street's pocket and are ready to do their bidding. Whatever inroads were made on the main issues-- Too Big To Fail, resolution authority, central clearinghouses and capital standards for derivatives, securitization, funding for the Consumers Financial Protection Agency (CFPA) etc.---will either be sabotaged or challenged by financial industry agents working from within the congress and senate.

Here's a blurp from a post by Zach Carter who hangs some big numbers on congressional influence peddling:

"A full 90 members of Congress who voted to bailout Wall Street in 2008 failed to support financial reform reining in the banks that drove our economy off a cliff. But when you examine campaign contribution data, it's really no surprise that these particular lawmakers voted to mortgage our economic future to Big Finance: This election cycle, they've raked in over $48.8 million from the financial establishment. Over the course of their Congressional careers, the figure swells to a massive $176.9 million.... When it comes to dealing out economic damage, no special interest group has been able to wreak more havoc that Big Finance...("Crony Capitalism: Wall Street's Favorite Politicians", Zach Carter, ourfuture.org)

Wall Street is the epicenter of global corruption; the world's biggest sewer. It's multi-trillion dollar Ponzi-mortgage scheme brought down the global financial system which was hastily resurrected by blanket Fed guarantees on fraudulent bonds and securities generated by undercapitalized financial institutions. But as bad as the bailout was, the Fed's ongoing meddling in the equities markets is even worse because shows to what extent the markets are being juiced. Consider this excerpt from an article on Bloomberg on Monday that shows the connection between the Fed's purchases of US Treasuries (QE) and the predictable surge in stock prices:

"Nine of the S&P 500’s 10 main industry groups, led by shares of financial companies, rose more on days when the Fed opened its checkbook for, or announced results of, what it calls Permanent Open Market Operations. The group of 81 banks, insurers and investment firms, including New York-based JPMorgan Chase & Co. and Wells Fargo & Co. of San Francisco, climbed an average 0.32 percent, compared with a 0.04 percent drop on non- POMO days.

FX Concepts LLC, the world’s largest currency hedge fund, buys higher-yielding assets such as stocks and the Australian dollar when the Fed is purchasing bonds, said John R. Taylor, who manages about $8 billion as chairman of the New York-based firm. The days have become “incredibly important for the market,” Taylor said." ("Stocks Rally With Bernanke Bond Purchases as QE Buoys S&P 500", Bloomberg)

This phenomenon has long been a topic of debate on economics blogs, but now that it's in the mainstream, people are likely to sit up and take notice. Bernanke's money is going in one end and coming out the other in the form of "frothy" stocks. Just like high-frequency trading, dark pools, off-balance sheets operations, shadow banking, securitization, and the billions in unreported mark-to-fantasy toxic assets; this latest discovery by Bloomberg will further confirm that Wall Street murky underworld of insider trading, criminal activity and Fed-sanctioned grand larceny.

DOOMSDAY FOR THE BUCK

The dollar's days as reserve currency may be coming to an end, but it won't be because China decided to jettison its pile of US Treasuries. It will be because austerity measures in the US reduced demand for imports making it less necessary to trade in dollars. And, it will be because Obama's "weak dollar" policy led to the demise of Bretton Woods 2 which kept interest rates low by recycling capital into the US. And, it will be because Congress and the White House were incapable of fixing the financial system, reigning in Wall Street, or restoring credibility to the markets.

As Volcker opines, "We’re faced with broken financial markets, underperformance of our economy and a fractious political climate" because we no longer have "a successful governing model" that the rest of the world admires. Absent radical restructuring and a new regulatory regime, the dollar will be unable to maintain its "exceptional role" as the world's reserve currency. It's only a matter of time
By Mike Whitney

Depth Trade · Dec 15, 2010

Still holding metal shorts from the following positions.

Short from $28.68, $1386.08

Current prices:

Xag/usd: $29.22
-$0.54
-1.88%

Xau/usd: $1387.00
-$0.92
-0.66%

The Dire Collapse Taking Place
Posted: Dec 15 2010 By: Jim Sinclair
http://jsmineset.com/2010/12/15/the-dire-collapse-taking-place/

There is a dire collapse taking place below the radar screens of the public. The financial condition of the fellow states of a currency union is the most critical component of a common union currency’s value today. It is the challenged financial integrity of member states and their constituents, the cities, towns and villages that make up the state where risk is most prevalent.

The municipal bond market is today in a second freefall as such entities now are failing in paying their obligations to suppliers and services. In many instances the overdue payments are 6 to 9 months in arrears.

Simple common sense tells you that if suppliers and servicers cannot be paid, you cannot meet your interest due obligation to the bond funding upon which these constituents of the state depend.

Fancy financial manoeuvres have been utilized at year-end to camouflage this growing and now transparent risk of bankruptcy. There is no difference between the use of OTC derivatives to camouflage Greece’s financial weakness and the present procedures of fancy bookkeeping on behalf of the 40 now identified states of the United States.

Worst of all is that these municipalities are now in line at the gates of the Barbarians that actually caused all of this. They are seeking assistance from the very same international investment banks that are the OTC derivative manufactures and distributors of that singular cause of all the Western world monetary suffering. They are the chickens walking into the fox’s lair that can only means their bones will be cleaned of flesh.

The momentum decline of the euro in operation short of the euro, named "Shark Feed," is the best precursor of the " Shark Feed" being a terminal attack on the US dollar very soon.

Gold is the only insurance against this unprecedented Western world financial malaise. It will rise in price to $1650 and beyond.

Respectfully,
Jim in Africa

Depth Trade · Dec 16, 2010

Still holding metal short positions.

Prices:

Xag/usd: short from $28.68%
Current: $28.60
+$0.08
+0.28%

Xau/usd: short from $1386.08
Current: $1367.68
+$18.40
+1.33%

Changing America
Walter E. Williams
http://townhall.com/columnists/WalterEWilliams/2010/12/15/changing_america/page/full/

Dr. Thomas Sowell, in "Dismantling America," said in reference to President Obama, "That such an administration could be elected in the first place, headed by a man whose only qualifications to be president of the United States at a dangerous time in the history of the world were rhetoric, style and symbolism -- and whose animus against the values and institutions of America had been demonstrated repeatedly over a period of decades beforehand -- speaks volumes about the inadequacies of our educational system and the degeneration of our culture." Obama is by no means unique; his characteristics are shared by other Americans, but what is unique is that no other time in our history would such a person been elected president. That says a lot about the degeneration of our culture, values, thinking abilities and acceptance of what's no less than tyranny. As Sowell says, "Barack Obama is unlike any other President of the United States in having come from a background of decades of associations and alliances with people who resent this country and its people." In 2008, Americans voted for Obama's change. Let's look at some of it.

Obama's Health and Human Services Secretary Kathleen Sebelius threatened that there would be "zero tolerance" for "misinformation" in response to an insurance company executive who said that ObamaCare would create costs that force up health insurance premiums. That's not only an attack on our constitutionally guaranteed free speech rights but an official threat against people who express views damaging to the administration.

Not to be outdone by his HHS secretary's attack on free speech, Obama wants full disclosure of the names of people who were backers of campaign commercials critical of his administration, saying that there has been a "flood of deceptive attack ads sponsored by special interests, using front groups with misleading names." Disclosure would leave administration critics open to government and mob retaliation.

Obama and his congressional and union allies have lectured us that socialized medicine is the cure for the nation's ills, but I have a question. If socialized medicine, Obamacare, is so great for the nation, why permit anyone to be exempted from it? It turns out that as of the end of November, Obama's Health and Human Services secretary has issued over 200 waivers to major labor unions such as the International Brotherhood of Electrical Workers Union and Transport Workers Union of America and major companies such as McDonald's and Darden Restaurants, which operates Red Lobster and Olive Garden. Keep in mind that the power to grant waivers is also the power not to grant waivers. Such power can be used to reward administration friends and punish administration critics by saddling them with millions of dollars of health care costs.

Obama's heath care legislation contains deviousness that has become all too common in Washington. What was sold to the American people as health care reform legislation includes a provision that would more heavily regulate and tax gold coin and bullion transactions. Whether gold and bullion transactions should or should not be more heavily regulated and taxed is not the issue. The administration's devious inclusion of it as a part of health care reform is.

Fighting government intrusion into our lives is becoming increasingly difficult for at least two reasons. The first reason is that educators at the primary, secondary and university levels have been successful in teaching our youngsters to despise the values of our Constitution and the founders of our nation -- "those dead, old, racist white men." Their success in that arena might explain why educators have been unable to get our youngsters to read, write and compute on a level comparable with other developed nations; they are too busy proselytizing students.

The second reason is we've become a nation of thieves, accustomed to living at the expense of one another and to accommodate that we're obliged to support tyrannical and overreaching government.

Adolf Hitler had it right when he said, "How fortunate for governments that the people they administer don't think."

Depth Trade · Dec 17, 2010

Still holding metal short positions.

Prices:

Xag/usd: short from $28.68%
Current: $28.98
+$0.30
-1.05%

Xau/usd: short from $1386.08
Current: $1367.68
+$12.88
+0.93%

Totally Busted: The Truth About Goldman's Bailout by the Fed
http://www.economicpolicyjournal.com/2010/12/totally-busted-truth-about-goldmans.html

Eric Fry has put together the pieces, searched the articles and has done the timeline that show's how the Fed shoveled money into the coffers of Goldman Sachs. Even to help Goldman pay off its TARP debt.

This investigative report from Eric Fry is must reading. It should also be kept in mind that this is separate from the Goldman/AIG antics that Janet Tavakoli has been reporting on. Here's Fry :

Recent disclosures from the Federal Reserve reveal that honesty was one of the earliest casualties of the 2008 financial crisis. These disclosures contain a number of juicy tidbits, like the fact that Goldman Sachs received tens of billions of dollars in direct and indirect succor from the Fed.

Thanks to these spectacularly large taxpayer-funded bailouts, Goldman was able to continue “doing God’s Work” – as CEO Lloyd Blankfein infamously remarked – like the work of producing billion-dollar trading profits without ever suffering a single day of losses.

Thanks to the Fed’s massive, undisclosed assistance, Goldman Sachs managed to project an image of financial well-being, even while accessing tens of billions of dollars of direct assistance from the Federal Reserve.

By repaying its TARP loan, for example, Goldman wriggled out from under the nettlesome compensation limits imposed by TARP, while also conveying an image of financial strength. But this “strength” was illusory. Goldman repaid the TARP loans with funds it procured days earlier from the Federal Reserve. Then, over the ensuing months, Goldman recapitalized its balance sheet by selling tens of billions of dollars of mortgage-backed securities to the Fed.

And the public never knew anything about these activities until two weeks ago, when the Fed was forced to reveal them....

Secret bailouts do not merely benefit recipients; they also deceive investors into mistaking fantasy for fact. Such deceptions often punish honest investors, like the honest investors who sold short the shares of insolvent financial institutions early in 2009.

Some of these investors had done enough homework to understand that no private-market remedy could ride to the rescue of certain financial firms. Therefore, these investors sold short the shares of certain ailing institutions and waited for nature to take its course. But the course that nature would take would be shockingly unnatural. We now know why. The Federal Reserve altered the course of nature, and did so without telling anyone.

Many of the investors who sold short ailing financial firms in 2009 were alert to the possibility that bailouts by the Federal Reserve could change the calculus. In other words, the Fed could make the bearish case less bearish...at least temporarily. Therefore, many of these investors studied the Federal Reserve’s disclosures, as well as corporate press releases, in order to quantify the Fed’s influence.

Based on all available public disclosures, the story remained fairly grim into the spring of 2009. Accordingly, the short interest – i.e., number of shares sold short – on Goldman Sachs common stock hit a record 16.3 million shares on May 15, 2009 – about 3.3% of the public float. But over the ensuing six months, Goldman’s stock soared more than 30% – producing roughly $500 million in losses for those investors who had sold short its stock. Not surprisingly, the total short interest during that timeframe plummeted to less than 6 million shares, as short-sellers closed out their losing positions.

Was it just bad luck? Or was something more nefarious at work here?

Let the reader decide. But before deciding, let the reader carefully examine the chart below, while also carefully considering a selection of public announcements from Goldman Sachs during this timeframe.

Based upon contemporaneous public disclosures, Goldman Sachs was “forced” by the Federal Reserve to accept a $10 billion loan from the TARP facility in October 2008. But Goldman’s top officers repeatedly – and very publicly – bristled under the compensation limits the TARP loan imposed.
Therefore, as early as February 5, 2009, Goldman’s chief financial officer, David Viniar, remarked, “Operating our business without the government capital would be an easier thing to do. We’d be under less scrutiny...” And on February 11, 2009, CEO Blankfein magnanimously remarked, “We look forward to paying back the government’s investment so that money can be used elsewhere to support our economy.”

But at that exact moment, we now know, Goldman was operating its business with at least $25 billion of undisclosed “government capital.”

In April, 2009, The Wall Street Journal observed, “Goldman Sachs group Inc., frustrated at federally mandated pay caps, has been plotting for months to get out from under the government’s thumb... Goldman’s managers have a big incentive to escape the state’s clutches. Last year, 953 Goldman employees – nearly one in 30 – were paid in excess of $1 million apiece... But tight federal restrictions connected to the financial-sector bailout have severely crimp the Wall Street firm’s ability to offer such lavish pay this year.”

On May 7, 2009, a Goldman press release states: “We are pleased that the Federal Reserve’s Supervisory Capital Assessment Program has been completed... With respect to Goldman Sachs, the tests determined that the firm does not require further capital... We will soon repay the government’s investment from the TARP’s Capital Purchase Program.”

On June 17, 2009, Goldman finally got its wish, thanks to some timely, undisclosed assistance from the Federal Reserve. Goldman repaid its $10 billion TARP loan. But just six days before this announcement, Goldman sold $11 billion of MBS to the Fed. In other words, Goldman “repaid” the Treasury by secretly selling illiquid assets to the Fed.

One month later, Goldman’s CEO Lloyd Blankfein beamed, “We are grateful for the government efforts and are pleased that [the monies we repaid] can be used by the government to revitalize the economy, a priority in which we all have a common stake.”

As it turns out, the government continued to “revitalize” that small sliver of the economy known as Goldman Sachs. During the three months following Goldman’s re-payment of its $10 billion TARP loan, the Fed purchased $27 billion of MBS from Goldman. In all, the Fed would purchase more than $100 billion of MBS from Goldman during the 12 months that followed Goldman’s TARP re-payment.

Did private investors not have the right to know that the Federal Reserve was secretly recapitalizing Goldman’s balance sheet during this period? Did they not deserve to know that the Fed’s MBS buying was producing Goldman’s “perfect” trading record during this timeframe?

Yes, would seem to be the obvious answer.

“There’s a saying in poker: If you don’t know who the patsy is at the table, it’s you,” observes Henry Blodget, the once and again stock market analyst, “Next time you feel like bellying up to the Wall Street poker table, therefore, ask yourself again who the sucker is.”

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