A Forex Trade for End of Week

Recent economic numbers from the US suggests the recovery may not be as rosy as desired.  This string of disappointments began with the US durable goods report, and goes from there to numerous US economic reports that fall short of expectations.  Today, we had the USD ADP Employment Change - at 158K was well short of the anticipated 200K.  

Following, came the US PMI-ISM Non-Manufacturing Component which was also short of the expected.  

This Friday, we can look forward to the US unemployment rate, expected to be unchanged at 7.7% and the always interesting US Change in NonFarm Payrolls.  The 195K expected new NFP jobs is down from last month's 236K.  The headline number for the NFP is what gets the crowd's attention and the market is quick to respond. 

Often, habitual traders first trade and then analyze.  Last month the big number was caused by an addition of part time as well as second jobs.  Full time jobs were reduced, but that did not stop an initial bullish response to the number.  When using leverage to trade forex, it always best to analyze and trade with a plan.

Prior to the important NFP report, we tomorrow have an announcement of central bank interest rate decisions in both the UK and the eurozone.  It is expected both banks will keep their rates unchanged at .5% and .75% respectively.

A surprise would occur if the ECB would reduce their rate from the current .75%. Since the ECB does not have the dual mandate to stimulate employment, but rather to only control inflation, it is perhaps foolish to consider a rate reduction.  However, the settlement of the Cyprus banking failure may give traders some lingering doubts about the EU and many other economic difficulties in Europe remain.

The unemployment rate in Europe keeps climbing.  It is now a record 12% which means there are 19M people out of work.  In countries operating under the guidelines of the ECB Bundesbank, and IMF rules unemployment is much higher, especially among the young.  But the austerity rules, higher taxes, and lower government expenditures is taking a toll even among the wealthy northern countries. 

The Netherlands, Germany's prudent neighbor, has begun to feel the pain.  According to Spiegelonline, consider the following: the GDP shrunk by .9% in 2012, unemployment went up to 7.7% and housing prices are down 8.6% in the last year. 

The 8.6% housing value decline may be only the iceberg's tip. Continuing, Spiegel says:

"Underwater" is a good description of the crisis in a country where large parts of the territory are below sea level. Ironically, the Netherlands, once a model economy, now faces the kind of real estate crisis that has only affected the United States and Spain until now. Banks in the Netherlands have also pumped billions upon billions in loans into the private and commercial real estate market since the 1990s, without ensuring that borrowers had sufficient collateral.
Private homebuyers, for example, could easily find banks to finance more than 100 percent of a property's price. "You could readily obtain a loan for five times your annual salary," says Scheepens, "and all that without a cent of equity." This was only possible because property owners were able to fully deduct mortgage interest from their taxes.

Instead of paying off the loans, borrowers normally put some of the money into an investment fund, month after month, hoping for a profit. The money was to be used eventually to pay off the loan, at least in part. But it quickly became customary to expect the value of a given property to increase substantially. Many Dutch savers expected that the resale of their homes would generate enough money to pay off the loans, along with a healthy profit."

Times have changed, real estate prices are down, and the banks have €650B of mortgage loans on their books.  Consumer debt, at 250% of disposable income is immense, about twice the amount Spain had in 2011.  The last thing Holland needs, like most of Southern Europe is more austerity.  This downward economic spiral will continue as long as these policies remain in place, and that spiral is moving North.

It will be a surprise if there is a reduction in the ECB rate tomorrow.  With the German 10 year bond yielding 54 basis points under the US rate, this reflects the perception Frankfurt is the safest place in Europe to park your euros.  If, however, the rate would be cut 25 basis points, how would the market react?

Perhaps traders would conclude the European economy is really worse than advertized.  In which case parking money outside of the EU might become fashionable.  Also, the EU bungling of the Cyprus bank crises might be another reason for money to flee Europe.

The EURUSD has enjoyed a small bounce after making a low of 1.2750, making it back close to the 200 day SMA around 1.2850.  (FXE, UUP).  We also note that there has been a sizable increase in the futures open interest over the past ten days.  This probably means the large specs, possibly funds, are adding to their short positions.  With tomorrow's report, followed by the Friday NFP, this pair must be closely monitored.  Our preference is to prudently sell strength, with a target around 1.2650.

About Ralph Shell: Traded personal account profitably for 19 of the 20 years at the CBOT. Ranked as one of the top five Forex opinion leaders on SeekingAlpha.com. Extensive career as a commodity broker and trader, formerly a commodity broker and grain analyst for Merrill Lynch in Chicago. Member of Chicago Board Of Trade for eighteen years. Floor broker for the Sparks Division of Refco for nine of those years. Also a former member of the Kansas City Board of Trade and the Minneapolis Grain Exchange. Floor trader for over twenty years, specializing in soy beans, wheat and the grains. Ten years as grain merchandiser for Continental Grain Company. Grain trading career included five years in the export grain markets as a wheat and then a soy bean trader. Also traded barge grain out of St Louis, and was the Assistant Manager of the South West Region of the US. First foreign exchange contracts in futures and options over 30 years ago well before the days of online retail fx trading. Today, Ralph is involved exclusively with analyzing and trading the forex market.

21 Statistics About The Explosive Growth Of Poverty In America That Everyone Should Know

by Michael

If the economy is getting better, then why does poverty in America continue to grow so rapidly?  Yes, the stock market has been hitting all-time highs recently, but also the number of Americans living in poverty has now reached a level not seen since the 1960s.  Yes, corporate profits are at levels never seen before, but so is the number of Americans on food stamps.  Yes, housing prices have started to rebound a little bit (especially in wealthy areas), but there are also more than a million public school students in America that are homeless.  That is the first time that has ever happened in U.S. history.  So should we measure our economic progress by the false stock market bubble that has been inflated by Ben Bernanke’s recklessmoney printing, or should we measure our economic progress by how the poor and the middle class are doing?  Because if we look at how average Americans are doing these days, then there is not much to be excited about.  In fact, poverty continues to experience explosive growth in the United States and the middle class continues to shrink.  Sadly, the truth is that things are not getting better for most Americans.  With each passing year the level of economic suffering in this country continues to go up, and we haven’t even reached the next major wave of the economic collapse yet.  When that strikes, the level of economic pain in this nation is going to be off the charts.
The following are 21 statistics about the explosive growth of poverty in America that everyone should know…
1 - According to the U.S. Census Bureau, approximately one out of every six Americans is now living in poverty.  The number of Americans living in poverty is now at a level not seen since the 1960s.
2 - When you add in the number of low income Americans it is even more sobering.  According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”.
3 - Today, approximately 20 percent of all children in the United States are living in poverty.  Incredibly, a higher percentage of children is living in poverty in America today than was the case back in 1975.
4 - It may be hard to believe, but approximately 57 percent of all children in the United States are currently living in homes that are either considered to be either “low income” or impoverished.
5 - Poverty is the worst in our inner cities.  At this point, 29.2 percentof all African-American households with children are dealing with food insecurity.
6 - According to a recently released report, 60 percent of all children in the city of Detroit are living in poverty.
7 - The number of children living on $2.00 a day or less in the United States has grown to 2.8 million.  That number has increased by 130 percent since 1996.
8 - For the first time ever, more than a million public school students in the United States are homeless.  That number has risen by 57 percent since the 2006-2007 school year.
9 - Family homelessness in the Washington D.C. region (one of the wealthiest regions in the entire country) has risen 23 percent since the last recession began.
10 - One university study estimates that child poverty costs the U.S. economy 500 billion dollars each year.
11 - At this point, approximately one out of every three children in the U.S. lives in a home without a father.
12 - Families that have a head of household under the age of 30 have a poverty rate of 37 percent.
13 - Today, there are approximately 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

14 - About 40 percent of all unemployed workers in America have been out of work for at least half a year.
15 - At this point, one out of every four American workers has a job that pays $10 an hour or less.
16 - There has been an explosion in the number of “working poor” Americans in recent years.  Today, about one out of every fourworkers in the United States brings home wages that are at or below the poverty level.
17 - Right now, more than 100 million Americans are enrolled in at least one welfare program run by the federal government.  And that does not even include Social Security or Medicare.
18 - An all-time record 47.79 million Americans are now on food stamps.  Back when Barack Obama first took office, that number was only sitting at about 32 million.
19 - The number of Americans on food stamps now exceeds the entire population of Spain.
20 - According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
21 - Back in the 1970s, about one out of every 50 Americans was on food stamps.  Today, close to one out of every six Americans is on food stamps.  Even more shocking is the fact that more than one out of every four children in the United States is enrolled in the food stamp program.
Unfortunately, all of these problems are a result of our long-term economic decline.  In a recent article for the New York Times, David Stockman, the former director of the Office of Management and Budget under President Ronald Reagan, did a brilliant job of describing how things have degenerated over the last decade…

Since the S&P 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

For the last couple of years, the U.S. economy has experienced a bubble of false hope that has been produced by unprecedented amounts of government debt and unprecedented money printing by the Federal Reserve.
Unfortunately, that bubble of false hope is not going to last much longer.  In fact, we are already seeing signs that it is getting ready to burst.
For example, initial claims for unemployment benefits shot up to385,000 for the week ending March 30th.
That is perilously close to the 400,000 “danger level” that I keep warning about.  Once we cross the 400,000 level and stay there, it will be time to go into crisis mode.
In the years ahead, it is going to become increasingly difficult to find a job.  Just the other day I saw an article about an advertisement for a recent job opening at a McDonald’s in Massachusetts that required applicants to have “one to two years experience and a bachelor’s degree“.
If you need a bachelor’s degree for a job at McDonald’s, then what in the world are blue collar workers going to do when the competition for jobs becomes really intense once the economy experiences another major downturn?
Do not be fooled by the fact that the Dow has been setting new all-time highs.  The truth is that we are in the midst of a long-term economic decline, and things are going to get a lot worse.  If you know someone that is not convinced of this yet, just share the following article with them: “Show This To Anyone That Believes That ‘Things Are Getting Better’ In America“.
So what are all of you seeing in your own areas?
Are you seeing signs that poverty is getting worse?
Please feel free to post a comment with your thoughts below…

 
William Penn Adair “Will” Rogers (1879–1935) was an American cowboy, vaudeville performer, humorist, social commentator and motion picture actor. He was one of the world’s best-known celebrities of the interwar period and by the mid-30s was internationally known as a leading political wit and top-paid Hollywood movie star. At the peak of his success, in 1935, he died when a small airplane he was travelling in crashed in Alaska. He joked about his own early death:

When I die, my epitaph, or whatever you call those signs on gravestones, is going to read: “I joked about every prominent man of my time, but I never met a man I dident like.” I am so proud of that, I can hardly wait to die so it can be carved.

In this recording Rogers turns his satirical wit to the world of bankers.

Police Find Gold Bars Worth $7.5M Hidden In Small Car

Border checkpoint finds gold.  HSBC had no comment.
'Just headed over to Switzerland for the afternoon.  Nothing to declare.'
No word if HSBC bankers were on scene to facilitate the money-laundering exchange.
Italian Border Police find one ton of gold bars hidden in the car of a family on a supposed Easter day trip to Switzerland.  Here's a wild guess: they were transporting the gold bars for the mafia who has taken over the gold business in Italy, as you will see in the report below.

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Italy's growing gold business taken over by the mafia.
At 35 seconds in this clip, they mention that the gold is generally smuggled to Switzerland.

GRAND THEFT BANK: 80% Of Your Money Will Be Stolen In Cyprus

Grand Theft Bank: Cyprus and the 80% solution.
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More confirmation on the 80% number from the WSJ last night.
Wall Street Journal
After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.
In the process, Cyprus became the first country in the three-year-long euro-zone crisis to hit depositors to fund its survival: Cyprus Popular's uninsured depositors will probably take losses of as much as 80% of their holdings over the guaranteed limit of €100,000; Bank of Cyprus depositors stand to incur losses of as much as 60% of their uninsured deposits, according to initial government estimates.
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Cyprus Finance Minister: Uninsured Laiki Depositors Could Face 80% Haircut
Cyprus's finance minister said Tuesday that large deposit holders at Cyprus Popular Bank, the island's second biggest lender, could face losses of as much as 80% on their deposits as the government moves to wind down its operations.
Speaking in a television interview with state broadcaster RIC, Michalis Sarris indicated that it could also take years before those depositors see any of their money returned.

"Realistically, very little will be returned," Mr. Sarris said.

Bonus clips:


Cyprus residents burn EU flags.

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Laiki Bank employees protest at Cyprus parliament.

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Bank employees demand Central Bank chief resign.

Christine Lagarde Speaks On Cyprus Bailout

Obama and Bernanke Pump a New Housing Bubble

What Bernanke had decided to do was so outrageous that it made low rates pale by comparison. When there are reports of Bernanke writing checks for up to US$16 trillion, it is hard to summon a great deal of interest in discussions over too-low rates.

Photo: Dees Illustrations

The Daily Bell

Obama administration pushes banks to make home loans to people with weaker credit … The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place. President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession. − Washington Post
Dominant Social Theme: No homeowner left behind.
Free-Market Analysis: It’s happening again … In the late 1990s, credit was screwed down in the US, creating in the tech bubble and bust. In the early 2000s, the Fed kept rates so low that some homebuyers actually received offers of remuneration were they to take advantage of credit offers.
There was a lot of talk early on during the financial crisis about the Fed’s too-low rates. But all that died away with Ben Bernanke‘s various quantitative easing programs.
It was a kind of “shock and awe.” What Bernanke had decided to do was so outrageous that it made low rates pale by comparison. When there are reports of Bernanke writing checks for up to US$16 trillion, it is hard to summon a great deal of interest in discussions over too-low rates.
And no doubt, this is what the Obama administration is counting on – though why they would seek to repeat the mistakes of the earlier 2000s when they are still fresh in the minds of many is a puzzle. But it seems the administration is going too push ahead.
… Administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs − including those offered by the Federal Housing Administration − that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.
Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.
Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.
“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.
Administration officials say they are looking only to allay unnecessary hesi-ta-tion among banks and encourage safe lending to borrowers who have the financial wherewithal to pay.
When reading the last paragraph of the above the term “famous last words” comes to mind. Everything about the US economy at this point is not just distorted but distorted cyclically. Distortions are countered with more distortions until the inevitable collapse takes place.
The solution to prosperity is getting government planners out of the way. The market itself and the Invisible Hand need a few years to reacquaint themselves with the economy which thanks to endless central bank stimulation has never unwound.
We don’t think the economy is “recovering” anyway, so the chances of the new program doing a great deal of damage is slim. What is more bothersome is its arrogance and determination to repeat past mistakes even when they are widely acknowledged. In a sense one gets the feeling the administration simply doesn’t care.
Conclusion: Perhaps that’s even more frightening than the policies now being recycled.

The Rumor Mill News Reading Room

Last week, a rubicon was crossed in the precious metals market as one of the largest banks in Europe defaulted on their gold contracts, and informed their customers there was no physical gold available for delivery.
ABN AMRO, the largest Dutch bank in the Eurozone, issued a letter to their gold contract customers of failure of delivery, and instead will pay account holders in a paper currency equivalent to the current spot value of the metal.
ABN AMRO, the biggest Dutch bank, has sent a letter to its clients stating that they will no longer be able to take physical deliveries of the gold they have bought through ABN. Instead they are offered money at the current market rate for gold. Basically, instead of owning a risk free, physical asset (a gold bar or a gold coin), the bank’s clients now own a monetary claim on ABN AMRO, being exposed to the bank's credit risk. - Voice of Russia
Over the past two months, there has been a concerted effort by the major Western banks to bring down the price of gold and silver, even as countries like Russia, Iran, and China continue to accumulate the physical metal in large quantities. Like the folly of betting against the stock markets when the Fed is pumping up equities with $85 billion per month, going against the J.P. Morgan silver short machine in the futures market has been a losing proposition for silver bulls.
Interestingly for Europe however, since the Eurozone crisis spread from Greece to Spain, Italy, and Cyprus, the fastest growing currency being purchased by retail investors is Bitcoin. Bitcoin is a digital currency that is out of the control of sovereign central banks, and to this point, has not been manipulated by inflationary monetary policy.
In investing circles there is an adage which says, if you don't hold it, you don't own it. Whether it is land, metals, or other hard assets, if it is held in a bank, in a paper instrument, or in a paper currency, the documented owner has management control, but not physical control. And as the world saw last month in Cyprus, the government, or even a major bank like ABN AMRO, can change the terms of a contract at any time, and return to investors asset values set by the bank, and not the customer's intention.

a tipping point in the financial system

By GE Christenson

March and April 2013 may go down in history as the tipping point for the western financial system.
We have already seen:

• Lehman Brothers and many other financial firms collapse.
• $700 Billion in TARP funds arranged by banking insiders for banking insiders at the expense of US taxpayers.
• Over $16 Trillion in bailouts, guarantees, swaps, and loans created by the Fed and given to various banks, nations, and other insiders.
• MFGlobal took “segregated” customer funds, the exchange provided no compensation to customers, and yet no criminal indictments have been issued.
• Global derivatives total $700 Trillion to well over $1,000 Trillion, depending on who is counting. Some are “toxic waste.”
• Many European bailouts and “fixes.”
• Spain, Italy, Slovenia, and perhaps France in trouble.
• US official debt approaching $17 Trillion with unfunded liabilities many times larger.
• The Federal Reserve creating $85 Billion per month (over $115,000,000 per hour) to support banks and the US government.

So what other disasters could occur? In a word, Cyprus!

• Not because the EU and Cyprus took Russian money.
• Not because several banks will close.
• Not because some deposits will be confiscated and/or frozen.

In my opinion, the sign that a tipping point has occurred in the financial system is the real story:

• The veil of banker honesty has been lifted. The EU/IMF/ECB will do whatever is necessary to support the banks, even if it means they will confiscate (tax, steal, bail-in) customer deposits.
• Customer deposits are NOT assets held in the bank for safe-keeping, but are liabilities of the bank and are not guaranteed to be made whole.
• Billions of dollars were removed prior to the Cyprus freeze, so insiders clearly knew in advance of the ordinary depositors (see below). There is no “level playing field” when billions of dollars/euros are in play.
• According to Jeroen Dijsselbloem, Dutch finance minister and Euro Group President, this is “the template for any future bank bailouts.” In other words, your deposits are considerably less safe than you thought. Your bank could fail, and your deposits might be used to compensate for derivative losses or other losses that the bank incurred.
• The FDIC in the US, as well as England, Canada, and New Zealand, has announced similar policies, agreements, and plans to confiscate deposits in the case of an emergency. Is this a sign that an emergency is not only possible but probable and imminent?
• Confidence in the banking and financial system has been seriously damaged, perhaps irreversibly.

Following are a few quotes from respected commentators:
Jim Sinclair: If the fools that have attacked Cyprus persist then it is the start of an avalanche that will destroy confidence in fiat currency, the fractional reserve system and central banks. What are the central bankers terrified of? My answer is the mountain of old OTC derivative coming home to roost.” Link.
Tyler Durden: “With every passing day, it becomes clearer and clearer the Cyprus deposit confiscation “news” was the most unsurprising outcome for the nation’s financial system and was known by virtually everyone on the ground days and weeks in advance: first it was disclosed that Russians had been pulling their money, then it was suggested the president himself had made sure some €21 million of his family’s money was parked safely in London, then we showed a massive surge in Cyprus deposit outflows in February, and now the latest news is that a list of 132 companies and individuals has emerged who withdrew their €-denominated deposits in the two weeks from March 1 to March 15, among which the previously noted company Loutsios & Sons which is alleged to have ties with the current Cypriot president Anastasiadis.” Link.
Peter Cooper: “Depositors in the beleaguered Bank of Cyprus are now facing losses of 60 per cent on deposits over 100,000 euros as the Cyprus Government seems to have woken up to the fact that this is its last chance to steal money off these mainly foreign depositors. It’s an absolute travesty and a red letter day for European Union banks…
“Money in EU bank accounts is clearly now up for grabs by any government that recapitalizes its banking sector. Moreover, the Cyprus precedent is going to cause a run on the weaker banks that will make this sort of recapitalization inevitable. Standby for a systemic banking crisis in the EU…
“What the EU has done in Cyprus is the modern equivalent of the failure of the Credit Anstaldt in 1931 that brought on the Great Depression with thousands of banking failures around the world.” Link.
Jim Sinclair: “I believe Cyprus is the defining moment whereby the physical market for gold overtakes the paper market for gold as the arbiter of price. When that occurred in 1979 the price of gold began its move to seek its maximum valuation.” Link.
Julian DW Phillips: “When it was announced [in Cyprus] that both large and small depositors were to have a percentage of their deposits seized, it was not the amount that horrified the world but the discovery that you do not own your own bank deposits… Most investors worldwide are of the belief that when you deposit your money in a bank, it simply has safe-keeping of that money. The realization that you have lent the bank your money and are an “Unsecured Creditor” of the bank is an unpleasant revelation.” Link.
Michael Snyder: “What you are about to see absolutely amazed me when I first saw it. The Canadian government is actually proposing that what just happened in Cyprus should be used as a blueprint for future bank failures up in Canada.
The following comes from pages 144 and 145 of “Economic Action Plan 2013″ which you can find right here. Apparently the goal is to find a way to rescue “systemically important banks” without the use of taxpayer funds…”
“In addition, branches of the two largest banks in Cyprus were kept open in Moscow and London even after all of the banks in Cyprus itself were shut down. So wealthy Russians and wealthy Brits have been able to take all of their money out of those banks while the people of Cyprus have been unable to…”
“The global elite are fundamentally changing the game. From now on, no bank account on earth will ever be able to be considered “100% safe” again. This is going to create an atmosphere of fear and panic, and no financial system can operate normally when you destroy the confidence that people have in it.
Confidence is a funny thing – it can take decades to build, but it can be destroyed in a single moment.” Link.
Ellen Brown: “Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.” Link.
Richard Russell: “I’ve been asked to name one future situation of which I’m most certain. My answer is this – I believe the surest situation (change) in America’s future is a decline, even a drastic decline, in our standard of living. We’ve spent it; we’ve spent what we didn’t have. And somewhere ahead, probably much sooner than we think, will come payback time. And it won’t be pretty.” Link.

Summary

• Bank deposits are neither safe nor sacred. What you think is true might be false and costly.
• More financial disasters are inevitable and imminent. Your standard of living is likely to decline.
• Insiders – the political and financial elite – will benefit at the expense of the other 99%. (Nothing new here.)
• Governments, agencies, and bankers are preparing for more confiscations. Plan on it! It’s going to end badly!
• Buy gold and silver and remove it from the banking system.
• The next few years will be very problematic for citizens of Europe and the United States. Preparation is essential.

GE Christenson

How The Criminal Banking Cartel Is Destroying America

Part Two: How Obama Surrendered Sovereignty to the Criminal Banking Cartel
By John Titus
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Summary of Part One:
The U.S. government openly conceded that its sovereign authority to enforce its own laws is gone when Attorney General Eric Holder testified that the Justice Department’s failure to prosecute any big banks is based on anonymous “expert” opinions that prosecutions would destabilize the financial system.
This notion of “systemic importance” has been thoroughly discredited. According to Tim Geithner, it’s an intellectually bankrupt phrase.  What’s more, it’s been debunked both legally and empirically, which is likely one reason the DOJ’s “experts” wish to remain anonymous.
If it turns out that these “experts” are in fact agents of the big banks whose crimes are being immunized by the very entities whose discredited opinions the DOJ is relying on, then those “opinions” are nothing more than assertions of criminal sovereign immunity—a privilege that is legally limited to the President of the United States.
Since “the King can do no wrong”—the legal foundation of sovereign immunity—the real King here is the criminally immune cartel of banks, not the President, since real sovereigns don’t surrender the right to enforce their laws.  And following the long series of unprosecuted crimes by the cartel, in which the President’s own constituents are the undisputed victims, “surrender” is the most charitable description of the Obama’s acts before the banking cartel.
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Part Two: Inside The Criminal Banking Cartel
There are two very big and related clues as to the identity of the anonymous experts behind whose opinions U.S. Attorney General Eric Holder hides whenever explaining away his failure to prosecute big banks on the basis of their “systemic importance.”
The first, noted in an article last week by Golem XIV, is a list of international banks that parade under the rather obvious label of “Globally Systemically Important Financial Institutions,” or G-SIFIs. There are 28 banks in total, 9 of them headquartered in the U.S.:
Citigroup
Deustsche Bank
HSBC
JP Morgan Chase
Barclays
BNP Paribas
Bank of America
Bank of New York Mellon
Credit Suisse
Goldman Sachs
Mitsubishi UFJ FG
Morgan Stanley
Royal Bank of Scotland
UBS
Bank of China
BBVA
Group BPCE
Group Credit Agricole
ING Bank
Mizuho FG
Nordea
Santander
Societe Generale
Standard Chartered
State Street
Sumitomo Mitsui FG
Unicredit Group
Wells Fargo
This list of cartel members is updated annually by the Financial Stability Board, a collection of international organizations. The FSB is a global meta-body of bankers.
But the formal edifice, whether called the FSB or the NWO (hat tip Alex), really doesn’t matter, because, as Golem XIV states: “Guess which institutions provide the membership for all of the above international bodies? Yes, you got it—the big banks.”
These are the banks that are above the law in the U.S. In Part One, we mentioned four banks—Citigroup, Wells Fargo, HSBC, and UBS—whose massive crimes had been taxed at a de minimis rate by the Department of Justice rather than prosecuted. All four are on the list of G-SIFIs above.
So what, you may ask, that’s just a list compiled by some international convention of cokehead bankers, how do they make sure a rogue federal prosecutor doesn’t break ranks and haul a cartel member or two off to criminal trial?
Enter clue no. 2: Covington & Burling, the law firm from which both the head of the DOJ (Eric Holder) and the DOJ’s head of criminal enforcement (Lanny Breuer) were recruited. Actually, Breuer is no longer with the DOJ. Following a four-year stint in which “the enforcer” failed to prosecute a single big bank, Breuer has returned to Covington & Burling, where he will earn be rewarded with $4 million in annual compensation.
The significance of Covington & Burling lies in its list of current clients, which looks remarkably like the list of criminally immune cartel members above (particularly the more recognizable names): Citigroup, Deutsche Bank, JP Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, UBS, Wells Fargo, and ING Bank.
Not to put too fine a point on it, but Eric Holder and Lanny Breuer have the financial motivation not to prosecute their firm’s clients. In Breuer’s case, it turned out to be $4 million of motivation. Per year.
Under any functioning system of law, of course, both Holder and Breuer would submit to screening procedures at the DOJ to insulate them from prosecutorial decisions involving their former clients. We're sure they did the same thing under our impotent system as well. But so what? When laws against crimes are a dead letter, who in his right mind would put any trust in a conflict screen?
As Cheyenne told Jill in Once Upon a Time in the West, “when you’ve killed four, it’s easy to make it five.”
Now commentators are starting to point out where the slippery slope of sovereign immunity for criminal banks will lead.  Jim Chanos, who detected the fraud at Enron well before it destroyed the company and its shareholders, notes that not only are criminal cartel members now motivated to continue cheating and stealing, they have a fiduciary duty to do so. (Speaking of the Enron-ization of the U.S., Eric Holder is working to release CEO Jeff Skilling from prison early in yet another act of prostrate submission before his real masters, the criminal banks.)
As Golem XIV points out, immunity extends not only to criminal behavior, but to assets that a cartel member bank acquires through crime: “if by doing those illegal things [the bank] makes out-sized profits for its shareholders and staff, that money, those profits are also above the law.”
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Cyprus Vs. MF Global: The Rule Of Law Is Dead
Thus, anyone who thinks account confiscation a la Cyprus can’t happen in the U.S. is dreaming of a bygone republic.  Not only is account seizure possible in the U.S., or even likely, it is guaranteed.  Just ask MF Global’s segregated account holders or GM senior bondholders if you have any doubts.
In the MF Global case, Jon Corzine "brazenly took liquid assets like Treasuries and warehouse receipts, but not cash which would have been more quickly missed, from customer accounts to post as illegal collateral for emergency funding with a lender who must have known that they were receiving stolen goods." The lender, of course, turned out to be JP Morgan--a prominent international cartel member. Jon Corzine was of course one of Obama's top fundraisers and an alumnus of Goldman Sachs--a cartel member.
In the GM bankruptcy, the age-old pecking order of creditor priority was turned upside down, literally "rewriting law," when senior unsubordinated secured creditors' claims were trumped by payouts to junior unsecured creditors in a patently political sop to Obama's perceived union supporters.
In both cases, the black letter law that's supposed to gird markets with trust and predictablity was trampled in favor of Obama's political allies. Now that Obama has altogether surrendered the DOJ's law enforcement functionality to the criminal international banking cartel, those dangerous precedents turn out to have been short-sighted in the extreme: there is nothing left to stop the plunder of customer accounts in Cyprus from crashing like a tidal wave across U.S. shores. The timing depends only on the restraint that the banking cartel elects to show.
There is no remedy in sight, only more financial crime as Americans are robbed deeper into serfdom.  The Executive Branch is merely an agent of the criminal banking cartel for the reasons given. That fact, in turn, has cut the Judiciary out of the equation altogether: a court cannot try criminals who are never brought before it to face charges.
That leaves Congress, which in theory could initiate impeachment proceedings. But how likely is success when the Senate, which would try any impeachment cases, couldn’t even obtain the names of the DOJ’s so-called experts in the first place?
As noted in Part One, Senator Grassley asked the DOJ for the experts’ names in a letter on January 29, 2013. Eric Holder testified on March 6, more than a month later. The issue of the experts’ identities was thus as ripe as could be, but rather than obtaining the names, the ranking member of the Judiciary Committee put on a clinic in how to conduct an incompetent examination:

Q. On January 29, Senator Sherrod Brown and I requested details on who these so-called 'experts' are. So far we have not received any information. Maybe you're going to but why have we not yet been provided the names of experts the DOJ consults as we requested on January 29? We continue to find out why we aren't having these high-profile cases.

A: We will endeavor to answer your letter, Senator. We did not, as I understand it, endeavor to obtain experts outside of the government in making determinations with regard to HSBC.

Just putting that aside for a minute though, the concern that you have raised is one that I, frankly, share. I'm not talking about HSBC here, that would be inappropriate. But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy. I think that is a function of the fact that some of these institutions have become too large.

Again, I'm not talking about HSBC, this is more of a general comment. I think it has an inhibiting influence, impact on our ability to bring resolutions that I think would be more appropriate. I think that's something that we — you all [Congress] — need to consider. The concern that you raised is actually one that I share.

Note that Senator Grassley asked one question: why haven’t you answered our letter? Holder doesn’t answer it. Instead, he promises to supply the names later. At that point, Grassley should have put two questions to Holder. First, answer my question by explaining why you ignored our letter. Second, when will you supply the names of the “so-called experts”?
A mediocre first-year litigation associate would’ve gotten this information within seconds. But not Senator Grassley, who earned his masters degree during the Eisenhower Administration. Here is his completely irrelevant follow-up question:

Q: Do you believe that the investment bankers that were repackaging bad mortgages that were AAA-rated are guilty of fraud or is it a case of just not being aggressive or effective enough to prove that they did something fraudulent and criminal?

Huh? Not surprisingly, Eric Holder has been in no hurry to disclose the names of the “experts” retained by Covington & Burling’s clients since dancing around Grassley like a cigar store Indian. Holder has completely blown off the Senate, which has done nothing to follow up the issue.
Frankly this disgusting charade has surprised no one who’s paying any attention, coming, as it does, from the same august body that exempted itself from insider trading laws and has failed to pass any meaningful reform legislation since the 2008 meltdown, an even worse repeat of which is on its way.
On the contrary, both Congress and the Executive Branch are now just tools of fraud used by the criminal international banking cartel against the people, who for their part are drooling iDope dreams oblivious to their own last act, proving Edward Murrow right, a nation of sheep having begotten a government of wolves.
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Postscript: for an altogether different analysis that reaches the same conclusion (it's open season for international bankers on U.S. bank accounts), please see what Jesse has to say.

Tax havens explained: How the rich hide money

Super wealthy have vast array of options to take cash offshore

CBC News

Last Updated: April 3, 2013

Recent leaks of secret banking information have helped authorities around the world crack down on tax cheats who go offshore, resulting in billions of dollars recovered for the public purse. Now, in one of the biggest ever leaks of financial data, the International Consortium of Investigative Journalists has released data on a whopping 120,000 secret offshore entities in 10 different jurisdictions.

Read more about how unscrupulous investors hire high-priced lawyers and financial advisers to move money offshore in the interactive below. Select the blue button to make choices and move through each step. Read more of CBC's coverage of the massive leak of offshore data and how tax havens sell secrecy in our special series.

New York McDonald's, Domino's Pizza workers strike

Noel Scott, a Domino's Pizza deliveryman, protested in New York City for higher wages and the right to organize.

NEW YORK (CNNMoney)

Noel Scott has been delivering Domino's Pizza in New York City for three years. He makes $5.45 an hour plus tips and has to work two other jobs to pay the bills.

Scott joined a protest Thursday outside of a Wendy's in midtown Manhattan, along with about 100 other fast food workers and activists. They were part of demonstrations held at 70 of New York City's McDonald's (MCD, Fortune 500), Wendy's (WEN), Burger King (BKW) and Yum Brand (YUM, Fortune 500)s-owned Pizza Hut and KFC locations. The protests were organized by a coalition of labor, community and clergy groups called Fast Food Forward.


The day started with dozens of workers walking off work at a McDonald's location near Times Square, according to Jonathan Westin, executive director of protest sponsor New York Communities for Change. He said that a Burger King on Flatbush Ave. in Brooklyn had trouble opening on time in the morning because so many of its workers had walked out.
A Burger King spokesman confirmed the restaurant opened 15 minutes late.
The group is asking employers to pay workers a minimum of $15 an hour, and for the right to organize without retaliation and intimidation. Currently, the median pay for the nearly 50,000 fast food workers in New York City is $9 an hour, or $18,500 a year, according to the New York Labor Department. That's about $4,500 lower than Census Bureau's poverty income threshold level of $23,000 for a family of four.
Related: Foreign worker hoopla forces McDonald's franchisee out
Scott said he delivers pizza about 25 hours a week. He also moonlights as a security guard and repairman in order to pay rent. In total, he works about 43 hours each week and gets no benefits.
While minimum wage in New York is $7.25 an hour, food service workers may earn $4.65 an hour because their total compensation includes expected tips.
"You don't have a life when you get paid this little. My body is breaking down," he said. "And with no benefits, we can't afford to get sick."
Domino's Pizza said that it's likely Scott works for an independent franchise. Tim McIntyre, a spokesman for the pizza chain, said its company-owned stores pay deliverymen minimum wage on top of tips. They also get reimbursed for using personal vehicles.
KFC, Burger King and McDonald's wouldn't comment specifically on the strikes, saying that the majority of their restaurants are owned by franchisees.
Some experts said that raising wages would be a burden for the franchisees, most of whom are small business owners.
"Any additional labor cost can negatively impact a restaurant's ability to hire or maintain jobs," said Scott DeFife, executive vice president of policy and government affairs at the National Restaurant Association.
Under the National Labor Relations Act, workers are protected from retaliation as long as they work in concert with at least one other employee to try to change their working conditions. However, they can be permanently replaced if they strike for purely economic reasons. 

The protest organizer Westin said that more workers were participating Thursday, because the November protests raised awareness of their labor rights.
"The protestors in November showed that workers were able to look their managers in their faces and say they deserve better," he said. "Other workers were emboldened and the numbers are continuing to grow."
The walk outs were scheduled to coincide with the 45th anniversary of the assassination of Rev. Martin Luther King Jr., who was shot in Memphis on April 4, one day after he delivered his famous "I've been to the mountaintop" speech in support of striking sanitation workers.
"To think that in 2013 we're having the same discussion about gaining a respectable wage and the right to organize as we had in 1968 is ludicrous," said Minister Kirsten John Foy, a civil rights activist at the National Action Network in Brooklyn who is participating in the protests.
Labor experts say there have been scattered attempts to organize over the last several decades, but very little in the fast food industry has stuck. Many say that's because there is a high turnover rate of labor in the industry.

Goldman Sachs Trader Faces Prison For Secret $8B Position

Perp walk for Matthew Taylor on Wednesday.
Former Goldman trader Matthew Taylor exits federal court in New York on April 3, 2013.
How is this materially different from Goldman Sachs hiding from clients the fact that the CDO they just bought was custom-built by hedge fund manager John Paulson, designed to fail -- stuffed with the worst of subprime mortgage dreck on purpose -- and that both Goldman and Paulson would be taking a secret short position on the CDO.
Here's your answer: there is no difference.
But Goldman won big with Paulson, only the client got hurt, so no one went to jail.
In this case, Goldman lost $118 million.
So you can bet your ass that trader is going to prison.
By far the best part of the story is Taylor's admission that he created the secret position in order to boost his bonus.  For the first time in a while, bonus-driven fraud hurts a Wall Street bank more than it hurts taxpayers.  And for a final laugh, Morgan Stanley hired Taylor in March 2008, three months after Goldman Sachs fired him.

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Ex-Goldman Trader Faces Prison For Hiding $8 Billion Position
Bloomberg
Matthew Taylor, a former Goldman Sachs trader, pleaded guilty to concealing an unauthorized $8.3 billion trading position in 2007, causing the bank to lose $118 million.
Under an agreement with the government, Taylor, 34, pleaded guilty to a single count of wire fraud yesterday before U.S. District Judge William H. Pauley in Manhattan federal court. He told the judge he took the position to boost his standing, and his bonus, at Goldman Sachs.
Reading from a prepared statement, Taylor told Pauley that on Dec. 13, 2007, he accumulated a position 10 times the amount he was allowed to take in futures contracts tied to the Standard & Poor’s 500 Index.  He said he made false entries in a manual trading system to hide the position on the CME Globex electronic-trading platform used by Goldman Sachs.  He said he lied when questioned about the position by other Goldman Sachs employees.
“I accumulated this trading position and concealed it for the purpose of augmenting my reputation at Goldman and increasing my performance-based compensation,” Taylor said. “I am truly sorry.”
In a one-count charging document, prosecutors said Taylor made the unauthorized trades to compensate for losses in his trading account the previous month.  Taylor’s salary in 2007 was $150,000 and he expected a $1.6 million bonus, prosecutors said.
After Taylor ran up the $8.3 billion position, which exceeded the combined limit for his 10-trader desk, he was contacted by a member of the Market Risk Management and Analysis team.  He falsely claimed the trading account had a position of $65 million, rather than about $8 billion, according to the government.
The maximum sentence for wire fraud is 20 years in prison.  Both sides agreed that federal sentencing guidelines, which aren’t binding, call for Taylor to get 33 to 41 months in prison and pay a fine of $7,500 to $75,000.
Pauley asked why prosecutors didn’t seek a higher guideline range for Taylor for jeopardizing the safety and soundness of a financial institution.  “I want to just make it very clear to the defendant and his counsel that the court is puzzled by the lack of any enhancements in this case, with a loss of $118 million,” the judge said.
Morgan Stanley hired Taylor in March 2008, three months after Goldman Sachs fired him.
Continue reading...
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Update - How Matthew Taylor tried to regain his Goldman bonus

WATCH: Christine Lagarde On Cyprus Bailout

Grand theft Cyprus sounds good to us.
IMF Chief Christine Lagarde speaks at Cyprus bailout press conference last week, while a few hours ago the IMF put the finishing touches on its separate bailout loan to Cyprus.
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IMF sets terms of Cyprus bailout
The International Monetary Fund has demanded that Cyprus cut state pension costs and reform its welfare system as the price of a €1bn loan to help bail out the stricken island.
The IMF's managing director, Christine Lagarde, said the poorest Cypriots would be protected from the worst of the cuts, but Cyprus must press ahead with measures to bring its annual state budget into surplus by 2018.
The deal, agreed in principle by the Cypriot government, provoked an immediate reaction from trade unions, which called on bank workers to strike over potential pension cuts. Officials from the Cyprus Union of Bank Employees called on bank staff in Nicosia to walk off their jobs at lunchtime on Thursday, and gather in a protest march towards the parliament.
Underlining the sense of panic, the Cypriot central bank was reportedly preparing to extend capital controls to prevent a run on the banks despite previously lifting some more draconian elements earlier in the week.
The three-year IMF loan was secured against a series of reforms agreed by the government two weeks ago that involved shutting the island's second largest bank, Laiki, and restructuring the biggest lender, Bank of Cyprus.  A tax on bank deposits of more than €100,000 was also put in place to raise €5.8bn from domestic funds, amid reports that the haircut could be between 40% and 80% of deposits.

Cyprus Bailout Details Emerge After IMF Deal - WSJ
Cyprus will limit first-class travel for senior officials, make it easier for banks to seize a person's home, and cut Easter bonuses to pensioners in exchange for a multibillion-euro bailout from its euro-zone peers and the International Monetary Fund.
The country has promised spending cuts and tax increases equal to more than a tenth of its $21.8 billion a year economy through 2018 in order to meet budget targets.
Other measures include raising retirement ages for public and private-sector workers, cuts to health-care spending and raising €1.4 billion from privatizations over the next five years, according to a draft document outlining parts of the deal.
On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in early May.  A final deal still needs the approval of other euro-zone members, who are footing 90% of the rescue, and are set to review its terms over the next two weeks.

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Bonus videos:


Cyprus residents burn EU flags.

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Laiki Bank employees protest at Cyprus parliament.

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 Bank employees demand Central Bank chief resign.

PHOTO OF THE DAY: Goldman Sachs CDO Scam

Thai Gem Scam Vs. Goldman Sachs CDO Scam
By William Banzai7
The Thai gem scam involves layers of con men and helpers who tell a tourist in Bangkok of an opportunity to earn money by buying duty-free jewelry and having it shipped back to the tourist's home country.  The mark is driven around the city in a tuk-tuk operated by one of the con men, who ensures that the mark meets one helper after another, until the mark is persuaded to buy the jewelry from a store also operated by the swindlers.  The gems are real but significantly overpriced.  This scam has been operating for 20 years in Bangkok, and is said to be protected by Thai police and corrupt politicians.  A similar scam usually runs in parallel for custom-made suits.  Many tourists are hit by conmen touting both goods.
The CDO Scam involves layers of quant engineers, portfolio selection agents, rating agencies and investment bankers who tell visiting Dutch and German bankers in London and New York of an opportunity to earn money by buying synthetic CDOs (Q Bunk) and having it shipped back to their home country.  The mark is driven around the city in a Lincoln Town Car operated by one of the con men, who ensures that the mark meets one helper after another, until the mark is persuaded to buy the Q Bunk in an investment banking office also operated by the swindlers.  The Q Bunk is a real genuine synthetic CDO but grossly overpriced.  This scam has been operating for 10 years on Wall Street, and until recently was said to be protected by the FRB, SEC and corrupt politicians.  A similar scam usually runs in parallel for counterfeit suits, viagra and OTC derivatives.  Many visiting German and Dutch bankers are hit by Wall Street con men touting both goods. -- William Banzai7.

Jobless Claims Rise By 28,000 To 4-Month High

A job seeker looks at a job listing board at the East Bay Career Center February 2, 2006 in Oakland, California. According to a government report, U.S. unemployment benefits claims dropped to about 273,000 last week, sending a four-week average of claims to the lowest level in nearly six years. (Photo by Justin Sullivan/Getty Images) 

 

The number of Americans filing new claims for unemployment benefits rose to its highest level in four months last week, suggesting the labor market recovery lost some steam in March.
Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000, the highest level since November, the Labor Department said on Thursday.
It was the third straight week of gains in claims. Coming on the heels of data on Wednesday showing private employers added the fewest jobs in five months in March, the report implied some weakening in job growth after hiring accelerated in February.
Economists polled by Reuters had expected first-time applications last week to fall to 350,000.
The four-week moving average for new claims, a better measure of labor market trends, rose 11,250 to 354,250.
A Labor Department analyst said claims for California and the Virgin Islands had been estimated and there were no special factors in the underlying state-level data.
While the claims report has no bearing on Friday's nonfarm payrolls data for March as it falls outside the survey period, it hinted at some weakness in hiring.

Employers are expected to have added 200,000 jobs to their payrolls last month, according to a Reuters survey, slowing from February's brisk 236,000. The jobless rate is seen unchanged at 7.7 percent.
Claims over the next several weeks will be watched closely for signs of layoffs related to $85 billion in government budget cuts known as the "sequester."
The labor market is key to the Federal Reserve's monetary policy. This month the central bank said it would maintain its monthly $85 billion purchases of mortgage and Treasury bonds to keep rates low and foster faster job growth.
The number of people still receiving benefits under regular state programs after an initial week of aid dropped 8,000 to 3.06 million in the week ended March 23.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

 

Kyle Bass On ¥1 Quadrillion in Debt: The Japanese Zone of Insolvency-They’re Finished!

For those unable to attend the Initiative on Global Markets conference in March, legendary fund manager Kyle Bass gave a shocking and eye-opening 48 minute presentation on Japanese debt, and how the ¥ will be the first currency to crash and burn in the rapidly escalating global currency war:  
The Japanese interest expenditure is nearly ¥11 Trillion.  To put that in perspective, their tax revenues are ¥43 Trillion.  Japan is spending 1/4 of their tax revenue on interest alone today, with interest rates at zero (5 year bonds are at 17 basis points). 
This is the zone of insolvency!  There is no looking back!  If Abe and Kuroda really achieve some sort of inflationary outcome, and the swaps move, they’re finished.  Every 100 basis point move in cost of capital costs Japan ¥11 Trillion.  A 200 basis point move has their debt service exceeding central government tax revenue! Those wishing for inflation do not know what they wish for!

Bass’ full MUST, MUST WATCH presentation on Japanese & global debt markets is below:

We suspect Bass’ call is rather prescient, particularly as Japan recently passed the ¥ 1 Quadrillion mark in official debt- roughly 25 X the official Japanese GDP.

Marc Faber: 'Because Of Inflation The Majority People Are Much Worse Off Than Five Or Ten Years Ago"

Marc Faber: 'Because Of Inflation The Majority People Are Much Worse Off Than Five Or Ten Years Ago"

Leaks reveal secrets of the rich who hide cash offshore

Exclusive: Offshore financial industry leak exposes identities of 1,000s of holders of anonymous wealth from around the world

The British Virgin Islands, the world's leading offshore haven used by an array of government officials and rich families to hide their wealth. Photograph: Duncan Mcnicol/Getty Images

Millions of internal records have leaked from Britain's offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world, from presidents to plutocrats, the daughter of a notorious dictator and a British millionaire accused of concealing assets from his ex-wife.
The leak of 2m emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI), has the potential to cause a seismic shock worldwide to the booming offshore trade, with a former chief economist at McKinsey estimating that wealthy individuals may have as much as $32tn (£21tn) stashed in overseas havens.
In France, Jean-Jacques Augier, President François Hollande's campaign co-treasurer and close friend, has been forced to publicly identify his Chinese business partner. It emerges as Hollande is mired in financial scandal because his former budget minister concealed a Swiss bank account for 20 years and repeatedly lied about it.
In Mongolia, the country's former finance minister and deputy speaker of its parliament says he may have to resign from politics as a result of this investigation.
But the two can now be named for the first time because of their use of companies in offshore havens, particularly in the British Virgin Islands, where owners' identities normally remain secret.
The names have been unearthed in a novel project by the Washington-based International Consortium of Investigative Journalists [ICIJ], in collaboration with the Guardian and other international media, who are jointly publishing their research results this week.
The naming project may be extremely damaging for confidence among the world's wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours.
BVI's clients include Scot Young, a millionaire associate of deceased oligarch Boris Berezovsky. Dundee-born Young is in jail for contempt of court for concealing assets from his ex-wife.
Young's lawyer, to whom he signed over power of attorney, appears to control interests in a BVI company that owns a potentially lucrative Moscow development with a value estimated at $100m.
Another is jailed fraudster Achilleas Kallakis. He used fake BVI companies to obtain a record-breaking £750m in property loans from reckless British and Irish banks.
As well as Britons hiding wealth offshore, an extraordinary array of government officials and rich families across the world are identified, from Canada, the US, India, Pakistan, Indonesia, Iran, China, Thailand and former communist states.
The data seen by the Guardian shows that their secret companies are based mainly in the British Virgin Islands.
Sample offshore owners named in the leaked files include:
• Jean-Jacques Augier, François Hollande's 2012 election campaign co-treasurer, launched a Caymans-based distributor in China with a 25% partner in a BVI company. Augier says his partner was Xi Shu, a Chinese businessman.
• Mongolia's former finance minister. Bayartsogt Sangajav set up "Legend Plus Capital Ltd" with a Swiss bank account, while he served as finance minister of the impoverished state from 2008 to 2012. He says it was "a mistake" not to declare it, and says "I probably should consider resigning from my position".
• The president of Azerbaijan and his family. A local construction magnate, Hassan Gozal, controls entities set up in the names of President Ilham Aliyev's two daughters.
• The wife of Russia's deputy prime minister. Olga Shuvalova's husband, businessman and politician Igor Shuvalov, has denied allegations of wrongdoing about her offshore interests.
•A senator's husband in Canada. Lawyer Tony Merchant deposited more than US$800,000 into an offshore trust.
He paid fees in cash and ordered written communication to be "kept to a minimum".
• A dictator's child in the Philippines: Maria Imelda Marcos Manotoc, a provincial governor, is the eldest daughter of former President Ferdinand Marcos, notorious for corruption.
• Spain's wealthiest art collector, Baroness Carmen Thyssen-Bornemisza, a former beauty queen and widow of a Thyssen steel billionaire, who uses offshore entities to buy pictures.
• US: Offshore clients include Denise Rich, ex-wife of notorious oil trader Marc Rich, who was controversially pardoned by President Clinton on tax evasion charges. She put $144m into the Dry Trust, set up in the Cook Islands.
It is estimated that more than $20tn acquired by wealthy individuals could lie in offshore accounts. The UK-controlled BVI has been the most successful among the mushrooming secrecy havens that cater for them.
The Caribbean micro-state has incorporated more than a million such offshore entities since it began marketing itself worldwide in the 1980s. Owners' true identities are never revealed.
Even the island's official financial regulators normally have no idea who is behind them.
The British Foreign Office depends on the BVI's company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries.
They claim the tax-free offshore companies provide legitimate privacy. Neil Smith, the financial secretary of the autonomous local administration in the BVI's capital Tortola, told the Guardian it was very inaccurate to claim the island "harbours the ethically challenged".
He said: "Our legislation provides a more hostile environment for illegality than most jurisdictions".
Smith added that in "rare instances …where the BVI was implicated in illegal activity by association or otherwise, we responded swiftly and decisively".
The Guardian and ICIJ's Offshore Secrets series last year exposed how UK property empires have been built up by, among others, Russian oligarchs, fraudsters and tax avoiders, using BVI companies behind a screen of sham directors.
Such so-called "nominees", Britons giving far-flung addresses on Nevis in the Caribbean, Dubai or the Seychelles, are simply renting out their names for the real owners to hide behind.
The whistleblowing group WikiLeaks caused a storm of controversy in 2010 when it was able to download almost two gigabytes of leaked US military and diplomatic files.
The new BVI data, by contrast, contains more than 200 gigabytes, covering more than a decade of financial information about the global transactions of BVI private incorporation agencies. It also includes data on their offshoots in Singapore, Hong Kong and the Cook Islands in the Pacific.