Wednesday, April 27, 2011

Short Sellers Now Screaming About a Buy Side Silver Conspiracy

It was only a matter of time. Now the talk of silver price conspiracies has shifted from long buyers to those on the other side of the fence. On April 21st, the historically anti-precious metals editorial staff of the London Financial Times ran an article titled "Silver Surge Prompts Conspiracy Theorists". Meanwhile, order was reestablished among the short side conspirators once the COMEX trading floor opened on Monday morning.

After silver prices had temporarily risen to over $49 per ounce during Asian trading, they were beaten down again to about $47 in a flood of newly opened short positions. From this return to discipline within the bullion bank ranks, we can assume that the Federal Reserve probably will temporarily halt QE-2 at the end of June or before.

At the close of business on Tuesday, April 26, 2011, the COMEX performance bond committee will, yet again, significantly raise silver margin requirements. We believe that this is an attempt to suppress prices and delay the inevitable reckoning. With the end of QE-2, short-sellers hope the exponential rise in the price of silver will also end. But, in our view, artificial price attacks in the futures markets are unlikely to help short sellers in the long run. The nexus of price appreciation is NOT at COMEX, but in the physical market. Physical silver buyers pay cash, and it doesn't matter to them how high or low COMEX committees set performance bonds.

If the performance bond committee is successful, they will manage to reduce the so-called "spot" price. In practical terms, however, the only thing they will have accomplished is to cause a few speculators to lose money while helping well-financed market vigilantes to buy more bars of physical silver for the same money. The bankers will then need to deliver even more physical silver than they would if the committee had done nothing. These futile attempts to fight back illustrate that a market manipulation cannot be effective in a market that is well aware of it.

The massive losses that short sellers have been taken has naturally led to some new urban myths. Some now claim that "evil" long side billionaires are out to "ruin" the market. Yet, even the Financial Times article points out the ridiculously paranoid nature of this theory. The author notes that silver prices were rising even as speculative positions at COMEX were reduced by 8.4%. This illustrates that the COMEX is now just a sideshow. A lot of people are simply buying physical silver.

The silver buyers do include some billionaires, undoubtedly, but most of them are simply folks who watched Jeffrey Christian's testimony at the well publicized CFTC position limits hearing back on March 25, 2010, and came away with the distinct impression that a small group of London banks have been creating alchemic silver. The banks were ostensibly "selling" and then "storing" so-called "unallocated silver bars" for silver investors. In reality, they seem to have been maintaining a fractional banking system in which only one physical ounce is really purchased for every 100 ounces they supposedly sell.

Let's go over that again...because once you understand the particulars, the reaction of the price of silver becomes perfectly understandable. 1) Bank sells silver, a very precious item, for big money; 2) Bank doesn't buy the silver it sells, or, if it does buy it, leases out or sells 99 ounces for every 1 ounce in the vault; 3) Bank gets paid "storage fees" from all its customers, even though their silver is not in the vault; 4) Bank profits are equal to 99 times what it sells initially, and then, the value of the stream of storage fees after that. Nice work if you can get it.

But, then there's the downside. 1) The market might discover your scam and you'll need to deal with investigations; 2) Leverage so high that, if discovered, it is a recipe for disaster; 3) Courts may deem the arrangement a fraud, in spite of disclaimers that say otherwise, and whereby customers waive liability for fraud; 4) the market will inevitably punish you severely with heavy losses after discovery of the scam. For more information on "unallocated storage" in London, see our previous article.

Had the worldwide silver scam remained a secret, suppression of precious metals prices might have gone on forever. But the genie is now out of the bottle and mortal men, not even those who run casino-banks, cannot hope to put him back in. Once it became clear that the bullion banks were leveraged 100 to 1 in a silver based fractional banking scheme, it was only a matter of time before the market clobbered them. That is what is happening.

People have only begun to scratch the surface of the precious metals markets, and few fully understand how undervalued all of them are. Silver has always been worth far more than it had been selling for in the last 30 years. People are starting to see not only this, but also how that corrupt pricing situation came to pass. The whole world now understands that the silver trade has been carried out in a deceitful manner for many years. So, naturally, many people are starting to buy physical silver again, just as they did for 10,000 years before COMEX began trading it. Those people happen to include, in all likelihood, a few billionaires, a few sovereign wealth funds, and a few Asian bankers. Many are politely refusing offers of "unallocated" bullion bank "storage".

The silver market is not rising because of a conspiracy. If so, it would be the most disorganized conspiracy that has ever existed. On the contrary. What we are seeing is the massive unwinding of a silver price control conspiracy that many of us predicted, in public or private for many years. The biggest scam in world history is ending. Sellers are now desperately trying to find metal. A lot of banks that were supposed to be storing silver are really storing air. Converting large amounts of air to large amounts of silver is difficult and bound to be costly. The process, once completed, will permanently increase the price of silver.

Intense upward pressure on silver prices is evident because physical silver is being purchased as never before. It is not stemming from trading on COMEX. In fact, deliveries at COMEX have been relatively small for several months. The process that is now ongoing is one that no performance bond committee can stop. COMEX could declare liquidation-only, as they did in 1980. The only end result would be to catapult the demand for and price of silver even higher. COMEX is now irrelevant except as a way for banks to bankrupt themselves if they continue to try to reduce the price of physical silver by manipulating futures prices there and taking on more short positions to do it. They can crash the paper futures price as much as they wish. It won't stop buyers from demanding physical silver in the real market outside COMEX.

The old prices were a result of a naive market, overwhelming short positions at the futures exchanges, manipulative trading techniques and a deceitful unallocated storage arrangement. The current silver pricing surge may look like a typical short squeeze, but it is nothing of the kind. It represents a permanent change in market perceptions. That is not to say that silver prices cannot fall, but the pressure to buy physical silver will continue to mount. When silver prices finally reach equilibrium, $50 per ounce might be the floor, rather than the ceiling. We don't know how high the price will climb under these circumstances.

One thing is clear. Buyers have discovered that they hold the power to defeat the largest financial firms in the world at their own game. But they still don't recognize the extent of their victory. Silver is the beginning, not the end. It is only one of the precious metals, but not the only one. The same unethical practices have been used for years to suppress the price of gold and platinum, for example. Both metals have been traded in a naive market, with overwhelming short positions at the futures exchanges, manipulative trading techniques and deceitful "unallocated" storage arrangements. There is no fundamental difference except that the metals have different names and appear at different locations on the periodic table.

Central bankers may be able to supply large amounts of the gold, for a while, to assist their minions in the commercial banking sector in the artificial suppression of gold prices. But, with emerging market central banks, the developed world's pension funds and university endowments, hedge funds and sovereign wealth funds all heavily buying gold, that resistance to the market cannot last forever. The most effective way to suppress gold would be to take steps to crash the entire world economy by cutting off most of the current flood of liquidity. However, even that would be only a temporary measure.

With stock prices collapsing, a mega shift from demand for stocks and bonds to demand for gold, silver and platinum would occur. One way or another, the current management of gold prices, which currently includes allowing a slow upward trend to relieve buying pressure without collapsing fiat currencies, will change into an explosion. This will happen with or without the help of market vigilantes.

So what will be the vigilante target after they are finished with normalizing the price of silver? Central banks like low platinum prices almost as much as low gold and silver prices. Manipulating platinum prices up and down helps bank profits. Since it has proven impossible to fully suppress price increases, the next best thing is to orient the manipulation process to create artificial high volatility, and thereby discourage conservative investors from buying the metal. This leaves more for industry at cheaper prices.

Platinum is an important metal in so many industries, not the least of which is the auto industry, that it seems to us that the Orwellian Ministry of Truth (aka, the New York Branch of the Federal Reserve) would strongly prefer a low, or at least, a very volatile price. Platinum, like gold and silver, also has a history of being used as money (in Russia) and possesses sufficient monetary qualities to be a significant threat to central bank emissions of fiat money. But, similar to silver and unlike gold, central bankers have no platinum reserves. Russia has large palladium reserves, but is unlikely to sell much, going forward, unless it is pressed against the wall by a steep drop in oil prices below its budgetary minimum (about $65 per barrel).

The platinum market is smaller than the silver market. The percentage of above-ground platinum is smaller, compared to consumption, than the percentage of above-ground silver. When the silver price revaluation runs its course, and silver is finally sell for a normalized value based upon its 16 to 1 ratio in the earth's crust, versus gold, we believe that vigilantes are most likely to turn toward platinum. We believe that J.P. Morgan Chase (JPM), accused of being one of the New York Federal Reserve's primary agents in manipulating stock, commodities and precious metals prices, knows this. It is actively buying huge amounts of physical platinum bars. Being 14.7 times rarer than gold, if platinum prices normalize to the metal's abundance, one troy ounce would be worth $22,000 right now, 14.7 times more than the current price of gold.

In a typical London Financial Times fashion, the silver long-side "conspiracy" article ends by saying that

History may be informative. After the Hunt brothers’ squeeze in 1980, the price of silver collapsed 80 per cent in four months.

Wishful thinking. We don't know where silver's price explosion will end. However, as more and more people realize that they have been duped into accepting fake prices for silver, bullion banks may need to buy 100 ounces of silver for every one ounce that is withdrawn. How high is that going to drive the price of silver? We'll leave that to you to decide.

Recently, we read an article published by Minyanville, which is usually a good source of information. But this particular Minyanville article advises buying U.S. dollars and selling silver short. The author claims not to be interested in past performance in making his decisions, but, then presents a chart of 1970s era silver prices to support his claim that the white metal is set up for a price collapse. There is great danger in blind adherence to charts. They are rear view mirrors, and cannot be used in the absence of common sense. If the focus of a driver's attention is on the rear view mirror, he will surely crash.

The first part of the Minyanville article recommended trade might work, because the U.S. dollar may rise for a while, if the Fed stops counterfeiting (aka quantitative easing) June. However, the second part of the trade will fail. At best, there will be a few weeks or a few months of fallout from the end of QE-2 if it happens. It is true that during that time the price could fall substantially, especially if helped along by the members of the silver price conspiracy. After that, however, it will be back to the races.

Assets in a collapsing stock market will eventually be shifted into precious metals. Since the silver vigilantes are extremely well capitalized, the main achievement of the price manipulators will simply be to allow them to buy more silver with the same money. In the end, their delivery obligations will simply be larger. Simply put, the old methods of price manipulation will no longer work against an informed market.

The question of where precious metals vigilantes' attention will turn after mopping the floor with the silver short sellers may be a moot point. If they manage to bankrupt the bullion banks (and associated hedge funds, shadow banking system entities, etc.), it will be game over. Free of price management, gold and platinum will join silver in a price explosion to the stratosphere, and they won't need any help from vigilantes. But private profit appears to be only one of the motives for silver market manipulators.

Another motive is to support irredeemable fiat paper money issued by central banks. Therefore, a massive bailout may save them from bankruptcy. After the short-side manipulators finally give up, many contracts for silver delivery will be settled for astronomical sums of fiat money. As schemes and scams continue to unwind, the next few years are going to be very interesting.

Disclosure: Long precious metals.

Homeowner Bill Wiped Out, Replaced With Fire Districting Bill

Senate Bill 1259 was supposed to be all about transparency, making sure homeowners could always have access to a copy of their home's deed.But it ended up having nothing to do with housing.
CBS 5 News wanted to know what happened so we sent our crew to the source to find out."The bill was very simple, this bill was to show people where your note is at," said state Sen. Michele Reagan.What started out as a half a page homeowner bill ended up anything but. When Reagan sponsored SB 1259, she never anticipated any problems."It sailed through the Senate, 28 I believe to 2, which is a good vote," Reagan said.The next step was the House Banking and Insurance committee, where Reagan expected a similar reaction.Instead committee chair Nancy McLain moved to strike the bill before it even had a chance to be read.CBS 5 News wanted to know why."Just to be clear, representative, it was solely your decision to not hear the original bill in committee, right?" asked reporter Elizabeth Erwin."That is correct, yes," McLain answered.McLain said the bill would have given folks in foreclosure false hope and given those who just don't want to pay their mortgage a loophole to get out of forking over the cash.How did she come to that conclusion?"I call it the 'lobbyists employment act' because I had banker lobbyists, down (at the capitol) like crazy trying to kill this bill in the house," said Reagan."I've got to ask, did lobbyists have anything to do with your decision?" Erwin asked McLain."Well, there were people that came and talked to me about it," she responded."Representative, of course the bankers aren't going to like this bill, it doesn't help them. But have you talked to the constituents, the folks in foreclosure who could have been assisted by this?" Erwin questioned."No, believe me, I have talked to many people, many constituents," McLain said.But she said her information on this bill came from the bankers.Reagan said she was told the bill didn't have a shot, so she agreed to strike it and replace it with one that would help fire districts."I think as a homeowner, you deserve that information. Apparently the House disagreed with me, so we turned it into something to help the folks," Reagan said.Reagan said she agrees with McLain on one thing, that as a committee chair she does have the right to hear or not hear any bills she wants.McLain says if a similar bill that fixes the problems she and the bankers saw pops up next year she might be willing to consider it.

He Scoops He SCORES: Tickerguy Expose' In Arizona

What do we have here......

CBS 5 News wanted to know what happened so we sent our crew to the source to find out.

"The bill was very simple, this bill was to show people where your note is at," said state Sen. Michele Reagan.

What started out as a half a page homeowner bill ended up anything but. When Reagan sponsored SB 1259, she never anticipated any problems.

"It sailed through the Senate, 28 I believe to 2, which is a good vote," Reagan said.

The next step was the House Banking and Insurance committee, where Reagan expected a similar reaction.

Instead committee chair Nancy McLain moved to strike the bill before it even had a chance to be read.

CBS 5 News wanted to know why.

"Just to be clear, representative, it was solely your decision to not hear the original bill in committee, right?" asked reporter Elizabeth Erwin.

"That is correct, yes," McLain answered.

Oh, and why did it get killed?

"I've got to ask, did lobbyists have anything to do with your decision?" Erwin asked McLain.

"Well, there were people that came and talked to me about it," she responded.

Remember, this viper wants to be a Senator, I hear.

A reprise of the video, for those who missed it.

And the original article:

That's right folks, in Arizona actually having a lender prove they own the debt they alleged you're not paying is asking too much, is "false hope", and is a violation of their rights...... to steal your house without proving they have the right to take it first!

Americans raiding retirement funds early

Nearly one-fifth of full-time employed Americans have raided retirement accounts in the past year to cover emergencies, according to a national Bankrate survey.

Financial Security Index

Despite increasing signs of a stabilizing U.S. economy, 19 percent of Americans -- including 17 percent of full-time workers -- have been compelled to take money from their retirement savings in the last year to cover urgent financial needs, the Financial Security Index found.

Though 80 percent of full-time workers didn't dip into retirement funds, far too many consumers are ill-prepared for emergencies, says Kim McGrigg, manager of community and media relations at Money Management International, a credit counseling agency.

"Perhaps the most alarming thing about these numbers is that they suggest a lack of other options," she says. "Consumers generally consider using retirement funds only as a last resort."

Michael Masiello, founder of the Masiello & Associates wealth management firm in Rochester, N.Y., agrees. "I believe that 17 percent of full-time workers taking early withdrawals is a higher than normal number, and it's certainly higher than it should be," he says.

The potential consequences of tapping retirement funds include early withdrawal fees, taxes and the loss of compound earnings -- not to mention the prospect of being unable to retire.

While workers might be able to replenish the funds pilfered from tax-advantaged accounts once they regain their financial footing, one of the main benefits of long-term savings is time and compound interest. An early withdrawal of $10,000 is not just $10,000. It's actually $10,000 plus whatever that money would have earned over the lifetime of the account. Furthermore, with penalties and taxes an early $10,000 withdrawal may only yield $6,500 if you're in a 25 percent tax bracket.

Compounding gains turns money into a snowball, gaining size as it rolls forward. Without the advantages of compounding, workers who take an early withdrawal will later need to sock away more savings than they otherwise would have in order to fund retirement.

While it's fortunate that people do have the retirement savings to fall back on when they absolutely have no alternatives, they may be just delaying the day when they truly have no more resources and working is no longer be an option.

"That's the scary thing. People are turning to this as a last resort; they have exhausted their other resources. At that point there is very little in the way of alternatives," says Greg McBride, CFA, senior financial analyst at

In the years leading up to the recession, the easy availability of credit and plentiful home equity meant consumers could coast through emergencies with little money saved for a rainy day. But the Great Recession reaffirmed forgotten lessons from the Great Depression. Namely, saving money, minimizing debt and forgoing borrowing are the best insulation from financial adversity.

The survey suggests Americans increasingly feel their emergency preparedness is not what it should be. This month's Financial Security Index plunged to 93.5 from 97 in March.

"Despite data showing job creation, greater savings, lower debt burden, and rebounding household net worth, the new low in the FSI shows that people aren't feeling it," says McBride.

"Consumers are pessimistic on all five components of financial security. When you look at gasoline prices closing in on $4 a gallon and other events taking place around the globe, it can be unsettling."

View the accompanying slideshow for complete survey results.

The PSRAI April 2011 Omnibus Week 1 obtained telephone interviews with a nationally representative sample of 1,004 adults living in the continental United States. Telephone interviews were conducted by landline (673) and cell phone (331, including 138 without a landline phone). The survey was conducted by Princeton Survey Research Associates International, or PSRAI. Interviews were done in English by Princeton Data Source from April 7-10, 2011. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error for the complete set of weighted data is ±3.7 percentage points.

Dylan Ratigan: The Wall Street Heist Of 2010 - The Biggest Bank Robbery In The History Of The World

Video - Dylan Ratigan - The Biggest Bank Robbery in History

Start watching at the 1-minute mark. This is important. Do NOT miss the rant beginning at 3:00. Some of the best all time from Ratigan. More inside.


Source - Marketwatch

Reprinted with permission.

The Great Bank Heist of 2010

Commentary: Wall Street wins, Main Street pays — again

BOSTON (MarketWatch) — This was the year America finally took on the power and greed of the Wall Street banks. And the banks won.

They dodged the bullet of real reform, probably for all time. They bounced back to post huge profits, helped by legal theft from the middle class. They completed their takeover of both political parties — and bought themselves a new Congress even more pliable than the old one. Middle-class America is flattened, devastated and broke. The bankers that caused it all have escaped punishment. They’re raking in huge profits. Oh, and the tax cuts just got extended for high earners, too!

Game over.

Of all the signs of Wall Street’s gloating and arrogance this year, which one stands out the most? The image of the president of the republic, traveling to New York to reassure them that they wouldn’t suffer too much from new regulations? Or maybe billionaire Steve Schwarzman, the private-equity oligarch at Blackstone Group (NYSE:BX) , complaining that any attempt to make him pay actual income tax on his income was akin to “when Hitler invaded Poland.”

Not France. Not Belgium. Poland.

In the aftermath, he grudgingly issued a partial retraction. In any civilized society he would now be pariah. He’d have to eat alone at unfashionable restaurants, and the waiters would spit in his soup. Instead, as the year drew to a close, I saw him being interviewed on TV, the hosts hanging on his every word. In 2010, Wall Street’s year, Schwarzman’s only real sin was getting caught flaunting his contempt for the nation.

Far worse went on behind closed doors.

Consider the Dodd-Frank reform act — all 2,300 pages of it. Sure, it fills in a few regulatory gaps, ends a couple of the more gratuitous abuses. You have to throw a few scraps to the masses. But most of the reforms are meaningless. New rule books and committees. Bah. They’re like half-built fences. Anyone can just walk around them. As for the new consumer finance watchdog? The agency that’s supposed to stand up to the banks will be housed… within the Federal Reserve. Literally, it will be a tenant of the banking system. Champions of the “reforms” say this won’t really matter. But if that’s the case, why did Wall Street fight so hard to make sure it happened?

There are no coincidences in Washington.

  • Meanwhile, missing from this giant “reform” bill was any actual, serious reform like threatening crooked bankers with real jail time. Or ending the “other people’s money” racket of securitization, or smashing “too big to fail” megabanks into smaller firms that can never again threaten the republic.

Instead we’ve enshrined “too big to fail” as national policy. A standing taxpayer guarantee to the biggest banks. What a deal! It’s amazing when you think about it. Look at the chaos and catastrophe these guys have left in their wake. One middle-aged man in five is out of work. Tens of millions of families have been financially wiped out. The national debt has nearly doubled.

If inner-city gangs had done this to America, we’d have martial law. If Arabs had done it, we’d have launched another war. Wall Street bankers? They’ve walked away scot free. And they’re actually being rewarded.

By keeping short-term interest rates near zero, the Fed is basically robbing your grandmother, and other hard-working savers, and giving to Wall Street. The banks borrow from us for free, and then lend us back our own money at interest by purchasing Treasury bonds.

And in a perfect circle of cynicism, the beneficiaries of bailouts are now spending some of their loot lobbying our Congress to overrule us on reform. The commercial banks and investment firms spent a total of $118 million lobbying just in 2010, according to the Center for Responsive Politics.

That included $4 million spent directly by Citigroup Inc. (NYSE:C), nearly $3 million by Bank of America Corp. (NYSE:BAC), $3.5 million by Goldman Sachs Group Inc. (NYSE:GS) and $2.8 million by Schwarzman’s Blackstone. This is in addition to the vast campaign contributions the top brass at these firms have lavished on pliable congressman, and indirect political lobbying through trade bodies like the American Bankers Association.

But it’s unfair to give the bankers all the credit for subverting democracy. They couldn’t have done it without the Democrats. Wall Street has spent years capturing the party establishment. Think of the lavish campaign checks. The lucrative hedge fund “adviser” jobs. The pervasive influence of pinstriped “progressives” like Larry Summers and Bob Rubin. This was the year the investment paid off. Big time. Top Democrats were too terrified of alienating their sugar daddies to pass real reform.

But the joke was on them.

First, Wall Street’s campaign contributions aren’t that important — they only account for about 10% of the party’s money. The Democrats could have lost all of it (an unlikely scenario in any event) and still been in business.

Second, the Democrats would have got a lot more credit — and contributions — from the rest of America if they’d stood up to Wall Street.

And third: Sucking up to Wall Street didn’t help them anyway. Wall Street still turned Republican. The American Bankers Association, J.P. Morgan Chase & Co. (NYSE:JPM) , Citigroup, Bank of America, even Goldman Sachs: This time around, more than half their donations went to the GOP.

Most Americans don’t realize it, but this talk of a “grassroots” and “anti-establishment” election was a bunch of hooey. What really happened was that Wall Street has just bought itself a new, even more compliant Congress.

The new Republicans are already fawning over the bankers. They’re promising to stop the restrictions on (ahem) “financial innovation.” Congressman Spencer Bachus — the next chairman of the House Financial Services Committee — actually said “Washington and the regulators are there to serve the banks.” Let the good times roll!

It was the greatest heist in history. The bankers pulled it off under everyone’s nose.


Ken Lewis says 'thanks for the bonus billions, suckers.'

The financial tipping point of peak debt

Total credit market debt owed increased from $28 trillion in 2001 to over $52 trillion in 2011. Household debt contracting while Fed juices up the banking sector with more debt.

At the dark heart of our financial dilemma is debt. Too much debt was used to bolster households during the real estate bubble and now too much debt is being used by the government to bail out the financial sector. Is there a tipping point in the amount of debt the American economy can shoulder? I believe there is and looking at the data carefully we begin to see unusual patterns not seen in a generation. The mosaic of tools used for this financial crisis would have worked if the problems we faced were merely issues of confidence. Of course the problems were very real and dealt with more than just perception and instead of confronting the reality of an over leveraged debt addicted machine we have only stepped on the accelerator. Yet this time instead of credit flowing to households for added game rooms or a trip to Hawaii credit is being extended to Wall Street courtesy of the Federal Reserve. Total credit market debt owed jumped from $28 trillion in 2001 to over $52 trillion today. During this time GDP went from $10 trillion to $14 trillion. You do the math where the growth is occurring.

Peak debt

total credit market debt

I find the above chart startling because it shows how heavily our society relies on debt. Atlas can only support so much even in a myth. There is no doubt that credit serves a very useful purpose in society. Yet when debt begins to over shadow actual GDP or serves as a substitute for income, then we have a serious problem on our hands. During the real estate bubble many families started to rely on their home equity as if it were normal for homes to throw off $50,000 or $100,000 a year in appreciation like some money tree. Households enjoyed this because wages went stagnant and surely pulling money from a home is easier than saving money for a rainy day and living within a budget. However all of it was a charade and American households are now paying the bill.

household sector debt

For the first time in record keeping history have we seen total household debt contract. Yet think of how flawed our system was when we had American households in debt to $14 trillion while annual GDP was at $14 trillion. Much of the debt was linked to homes, cars, and consumer spending that really didn’t create anything long term for our economy. All the while banks were enjoying the system taking their cut at every turn.

The two previous charts tell you the actual story of where things now stand. The American household has to deal with austerity and deep cuts while other parts of the economy are being bailed out with additional debt. As the easy access debt is withdrawn American households are now waking up from a slumber and realizing how much of their economy is now lost. Much of this can be seen with the hidden tax of inflation:



It is helpful to keep in mind that the median household income since 2000 has not increased when looking at the above chart. What you will find above is not surprising and most Americans need only look at their monthly expenses to see this reality. The paycheck has shrunk like a cheap shirt thrown in the washer. Energy has gone up by 115 percent since 2000 and the most visible translation of this is seen at the gas pump. College tuition and fees have gone up 101 percent and since manufacturing jobs have been outsourced in droves, a college degree is necessary for solid middle class careers.

I found this chart fascinating in what awaits the new low wage capitalist world:

manufacturing costs

Source: BLS

The BLS uses the U.S. as a baseline here at 100. Manufacturing costs in the Euro Area are 34 percent higher than they are in the U.S. But more critical is how cheap it is to manufacture in places like China for example. It is 25 times cheaper to manufacture in China than it is in the U.S. Yet this brings up a question that Americans will have to contend with for years to come. Do people want to enter into a race to the bottom or actually play on an equal playing field where mercantilist and currency manipulation are not practiced? I’m not even sure if Americans view this as the key issue.

The current rhetoric revolves around cutting government and not adding jobs. I think the above chart should give pause to anyone that is part of the working or middle class. Do you think bailed out banks have loyalty to you? Just look at what they have done to average Americans that helped them survive the actual financial collapse. They are kicking people out of homes in droves and raising fees on credit cards and slamming access to credit to small businesses. A small business owner has a hard time competing with systems that play on a very different level than we do here in this country. Banks are investing with your subsidized dollars abroad and blaming you for the current mess. I think this is twisted and it is troubling Americans are not debating this more openly.

As I have mentioned the top 1 percent owns over 42 percent of all financial wealth in this country. For this group the recovery is going well:


The stock market is up nearly 100 percent since the March 2009 lows. Yet households are still mired in debt, wage growth is non-existent, and there is little sense of protection of a stable middle class in America anymore. The market is still over burdened by too much debt and banks are still seeking out new and innovative ways to speculate and siphon out real wealth from the global economy. It would be one thing if they did this with their own money but they are doing it with the aid of the Federal Reserve. Make no mistake, the Fed has become a dumping ground for bad bets from banks over the last decade:


Now think if you had the power to move over your mortgage, credit card debt, student loans, and any other debt you had into a “bad bank” for the moment. Not only can you move this debt, you now have access to loans at near zero percent and can invest anywhere you want. Sounds like a good deal right? Well this is essentially the deal the financial sector is getting and why the stock market has recently boomed. Banks at their core should serve as the grease that makes the real economy go around. Today they are the economy and the government for that matter and the fact that the total credit market debt owed is $52 trillion is simply stunning.

Have we reached peak debt? The Fed doesn’t think so at least when it comes to the too big to fail banks but the American households looks like it has reached a tipping point. If nothing is done in the next few years your children will wake up in a country with no middle class.

Sociapitalism: How the Government Became the Next Bubble

Jason Kaspar
Activist Post

In the last thirteen years, a new financial order replaced capitalism in America. With cat-like tread, this transformation has caught most Americans unaware, let alone some of country’s best financial minds (many of them fascist anyway).

This new order constitutes the socializing of risk, a concept I have termed: Sociapitalism.

Sociapitalism is different than Social Capitalism – a European concept. Social capitalism is the redistribution of wealth through social programs, such as unemployment benefits, food stamps, and government housing. Sociapitalism is not a redistribution of wealth, but a redistribution of risk. The government transfers risk from one entity to the system, securing the safety of the entity.

Social capitalism allows corporate failure. Sociapitalism does not, reducing the only possibility of failure to the sovereign state.

For the most part, our country was founded on the principle that success or failure should be predicated on one’s own merits. The weak died, the strong survived. Depressions and recessions cleansed the system, firming up the foundation for the next economic advancement. Capitalism brought corruption – true - but that corruption was eventually punished with failure. Failure distinguishes capitalism from all other economic systems.

That model has changed, and it became visibly apparent in 1998 when the government orchestrated the bailout of Long Term Capital Management. In hindsight, this intervention may have been the biggest mistake in American financial history. If Long Term Capital Management would have failed, Lehman Brothers would have likely failed at that time, and the United States would have fallen into a recession. Positively, the United States would have averted an equity bubble, Glass Steagall would have never been repealed, and the system would have been cleansed from the froth of the late nineties.

Instead, the orchestrated bailout of Long Term Capital Management ushered in the biggest equity bubble (in terms of valuation) in the history of the United States. The collapse of this tech bubble did wipe out large deposits of wealth, but valuations never corrected to the long term historical mean because the U.S. government buttressed the system by creating a private debt bubble. This intervention served to bail out the equity collapse. The private debt bubble instigated a handful of asset bubbles primarily centered on real estate.

In 2007, as we all know by now, this real estate bubble finally began to deflate, taking much of the private debt bubble with it, and forcing a collapse of the entire private market – equity and debt. The private market needed to collapse; it needed the long overdue cleansing it did not receive in 1998 or in 2003. Instead, beginning in 2008, the biggest government intervention in U.S. history prevented the market cleansing once again, and it has subsequently led to the final bubble – the government bubble.

Like the private debt market bubble which supported equity valuations, the government bubble is now propping up equity market valuations and the private debt market. I fully realize that the world would be in a full depression had the United States not intervened, but I firmly believe the consequences of the latest intervention will only prolong and increase the inevitable misery. At each interval, the ante has increased; the pressure has been notched ever higher. The U.S. needed a slight recession in 1998; in lieu of that recession, the country needed a severe recession in 2002; without that severe recession, it needed a depression in 2008.

Now, the system has been put at risk.

Over the last two years, the government has supported virtually every private sector function. Through extension of unemployment benefits, home buying tax credits, cash for clunkers, build America bonds, quantitative easing, and myriad other programs, the government has propped up the private sector. Once the support structure surpasses the point of sustainability, the private sector will likely collapse along with the system. Where previously an American business’s success had been self-determining, its success is now predicated upon the outcomes of the domestic collective. This risk is pervasive; a family owned restaurant in rural Texas, muni bonds, government bonds, equities, commodities, a new venture in Vietnam . . . all share in the risk of the collective.

As an example of how the economic model has changed, my great-great-grandfather started a manufacturing company in 1898 that employs to this day hundreds of Americans. It has survived because of successful calculations in business risks and a robust understanding of the business cycle. Its tenure spans twenty recessions, one depression, two world wars, oil embargos, steel shortages, and twenty presidential administrations. It has achieved its longevity largely by avoiding debt and making very conservative business decisions.

One hundred and thirteen years later, the company’s future depends almost strictly on forces outside its control. It now shares risk with companies like Citigroup, Wachovia, Wells Fargo, and General Electric, since the risk of these companies has been transferred to taxpaying entities through massive government leveraging. Not only is this redistribution of risk anti-American, it is potentially hazardous to the whole because of coupling in the system. Historically, if a company failed, there might be losses, but American capitalism contained the damage. Capitalism acted like an emergency brake on an assembly line.

Conversely, the government has created an environment where excess risk is allowed to flourish without penalty. Now we have a new bubble, a government bubble; one that will end all bubbles for decades to come.

Homebuilders: A Prime Example

Yesterday, the Census Bureau reported New Homes Sales on a seasonally adjusted basis. The first three months of this year witnessed the fewest home sales since 1962, the first year records were kept.

One might conclude that stocks of homebuilders would approach the historical lows of the last ten years, or have at least bottomed six months ago anticipating this might be the worst print. Not only has housing not bottomed, homebuilders are instead UP over 100% since their lows in November of 2008 and March of 2009. You can see this in the XHB etf (XHB also has building suppliers and retailers such as Home Depot). The system has salvaged companies like Hovnanian from the brink of Chapter 11. No longer is the mantra “only the strong survive” accurate, because weak companies have been pampered, accommodated, and allowed to flourish, creating over capacity and driving up risk across the system.

In my office, I have 75-page annual reports of Hovnanian, Toll Brothers, and DH Horton - three very large U.S. homebuilders. The reports are irrelevant; worthy of a good ol’ fashioned Texas bonfire. What matters is how far the U.S. government allows the homebuilders to extend tax losses backwards, how the U.S. government will support interest rates by keeping them artificially low, and what kind of home buying tax credit the U.S. government will offer its home buyers. System support now determines future success, and stock prices are uncorrelated to financial statements.

Investing Implications

What this means for investors is that valuations are presently converging. The riskiest companies/assets are individually worth more because their risk has been diluted. They have offloaded the risk with the safest assets, which in corollary means that the safest assets are intrinsically worth less. Netted together, the valuations should be substantially diminished when taking into account the coupling. Nevertheless, liquidity - and money managers whose careers began in the eighties and nineties when you always bought - have blinded the market.

Secondly, historically the majority of an asset’s risk has been unique to that asset. Now, many companies and many industries collectively share the majority of an asset’s risk. In years past, investing legends made fortunes by studying an individual asset and determining that its risk was mispriced. They were great handicappers. I believe that sociapitalism has rendered this skill inconsequential. There may be some mispricing on individual assets, but it is far outweighed by the mispricing of the risk connected to all assets, which means that all assets are overpriced in real terms.

Thirdly, the implications of the government bubble are dramatically different than those of previous bubbles. Since the risk is systemic, it is inherently impossible for asset owning investors to avoid it. When investors discovered that something was amiss with Bernie Madoff, they invested elsewhere through the thousands of other investment options. Likewise, during the equity bubble in 2000, an investor could diversify into other assets besides overpriced tech stocks. Today there are few, if any, viable alternatives.

Finally, when the risk is repriced, the only way to benefit is to bet directly against the group risk. There are very few vehicles for this purpose and even fewer for those who do not have tens of millions of dollars. Additionally, the U.S. government continues to blame market participants who anticipate the fallout, and its actions limit the ability for these participants to benefit from a repricing. The government is trying to ensure that there are no winners, while finding a scapegoat for its own sins.

When the government bubble pops, America will be changed forever.

Jason Kaspar is the Chief Investment Officer for Ark Fund Capital Management, focusing on investment and portfolio management. This article first appeared on Gold Shark.

Wealthy Leaving Las Vegas Mansions as Pain of Foreclosure Crisis Spreads

Nicolas Cage, the Oscar-winning star of “Leaving Las Vegas,” bought a seven-bedroom home with a panoramic view of the city’s casino-lined Strip in 2006 for $8.5 million. By January 2010, it was in foreclosure.

The next owner, who property records show paid $4.2 million, has put the house on the market for $7.9 million -- an “unrealistic” price, according to Zar Zanganeh, the broker handling the listing.

“It’s sad,” Zanganeh said, his high-heeled boots clacking on the marble floor as he gave a tour of the 14,000-square-foot (1,300-square-meter) mansion featuring a six-person steam shower and a closet the size of a small apartment. “There’s a lot of inventory, a lot of homes like this waiting for an owner.”

A growing number of high-end homes are selling at a loss or facing repossession by lenders in Las Vegas, which already has the highest rate of foreclosure filings among large U.S. cities. The wave of defaults that began with subprime borrowers and the unemployed has spread to upscale homeowners who see no point of staying even if they can afford to.

In the 15 months through March, at least 25 houses in the Las Vegas area changed hands for more than $3 million, with at least seven doing so through foreclosure or by selling at a loss, according to the Greater Las Vegas Association of Realtors and Clark County property records. In 2009, 14 homes sold for more than that amount, with one trading at a loss.

‘A Sucker’

In the first quarter, 30 Clark County homes with loans exceeding $1 million were repossessed by banks or bought by third-parties in foreclosure sales, up from 20 homes a year earlier, according to, a Discovery Bay, California-based company that tracks defaults. Short sales, in which the bank agrees to accept less than the loan balance, and bank-owned properties accounted for about three-quarters of all home sales, according to the Las Vegas Realtors.

“You feel like a sucker if you’re paying a $5 million mortgage on a house that’s worth $2 million,” Zanganeh, 28, said while showing the grounds of an 11-acre Las Vegas estate built by Prince Jefri Bolkiah, brother of the Sultan of Brunei. “These days, there are no traditional sales. They’re all short sales or bank-owned.”

The estate -- with 18 bedrooms, 36 bathrooms, a 20,000- bottle wine cellar, an 11-car garage and air-conditioned stables for 10 horses -- sold for $14 million in 2004 to Eric Petersen, who owned Consumer Credit Services Inc., a Las Vegas-based catalog-merchandising company that closed in 2008. Petersen, 44, said he spent $20 million to make the estate habitable.

Giving Up

It’s back on the block for $25 million -- $9 million less than his investment -- with an offer “for considerably less on the table,” Petersen said in a telephone interview from Las Vegas. He has slashed the listing price four times since October from an initial $37.5 million.

“I gave up on Vegas,” Petersen said. “There’s no opportunity for anything in this town that I can see.”

Another listing with Zanganeh’s firm, Luxe Estates Collection, is a never-occupied, bank-owned mansion overlooking a Jack Nicklaus-designed golf course in the gated Ridges community west of Las Vegas. The asking price is $3 million for the 8,550-square-foot house, which was repossessed in 2010 and had a $3.2 million mortgage from the Community Bank of Nevada, a lender seized by regulators in August 2009.

About 100 homes in the county are listed for $3 million or more, according to the Las Vegas Realtors, a five-year supply at the current sales pace.

‘Rolled the Dice’

In Nevada, 23 percent of delinquent borrowers said they “strategically defaulted,” or walked away from their homes by choice rather than necessity, according to a January report by the Nevada Association of Realtors.

“It’s folks that feel the hopelessness of it all,” Rob Wigton, chief executive officer of the state association, said in a telephone interview from Reno. “They’ve rolled the dice and lost.”

The population of Clark County, home of Las Vegas, has fallen by about 16,000 from its estimated high of 1.97 million in 2008, according to the government-funded Nevada State Demographer. Almost 15 percent of homes in the county -- 125,000 residences -- were vacant, according to the 2010 Census, following a construction boom in the last decade that peaked with 39,000 housing permits issued in 2005.

Las Vegas home values plunged 58 percent from the 2006 high-water mark through February, the biggest drop of the 20 metropolitan areas tracked by the S&P/Case-Shiller index, and are the lowest since June 1999, the group said today in New York. Prices fell 7.4 percent in March from a year earlier to a median $125,950, the Las Vegas Realtors reported April 8.

70% Underwater

Almost 70 percent of Las Vegas-area homeowners with mortgages were underwater at the end of 2010, meaning they owed more than the value of the property, according to CoreLogic Inc. (CLGX), a Santa Ana, California-based real estate information company. Among cities with a population of more than 200,000, Las Vegas has led the nation in the pace of foreclosure actions since November 2009, with one of every 31 homes receiving a filing in the first quarter of this year, RealtyTrac Inc., an information provider in Irvine, California, reported April 14.

About 20 percent of Las Vegas homeowners seeking short sales owe at least $750,000, said Jamie Cogburn, a Las Vegas plaintiff’s attorney who said he has handled 350 such sales and is working on 200 more. One client is a doctor with a home now valued at about half of its $1 million mortgage, Cogburn said. The doctor earns enough to save for a 20 percent down payment on his next home within a few months at current prices, he said.

“People with a higher income can go buy another house,” Cogburn said in a telephone interview. “You’ve got to cut your losses at some point, just like with a stock.”

Four Weekends

Cage, who won an Academy Award for 1995’s “Leaving Las Vegas,” in which he portrays an alcoholic who drinks himself to death in the city, stayed in the house now being marketed by Zanganeh for four weekends, according to the broker.

The actor sued his manager in October 2009 for placing him in “numerous highly speculative and risky real estate investments, resulting in Cage suffering catastrophic losses,” according to court filings. The manager, Samuel Levin, countersued, saying Cage ignored advice and “set off on a spending binge of epic proportions,” acquiring 15 homes, four yachts, an island in the Bahamas, a Gulfstream jet and millions of dollars of jewelry and art, according to a November 2009 complaint in state court in Los Angeles County. The case was settled out of court in August.

Cage, 47, who also starred in the 1992 film “Honeymoon in Vegas,” “is working and not doing press at this time,” his publicist, Samantha Hill, said in an e-mail. He was arrested in New Orleans on April 16 for domestic abuse and public drunkenness after arguing with his wife about the address of a house they are renting, according to a statement by the city’s police department.

Sales Pick Up

Las Vegas’s economic collapse has made it hard for many executives and business owners who own mansions to keep up with their mortgages, said Brian Gordon, a partner at Applied Analysis LLC, an economic-consulting firm in the city.

“People on the lower end were forced out a long time ago,” he said. “People on the high end had a longer staying power. Now they’ve chewed through their resources.”

While high-end homes fall in price, total residential- property sales have accelerated, rising 8.2 percent in March from a year earlier to 4,316 units, the Las Vegas Realtors reported. More than half of this year’s purchases were all-cash transactions, a sign that investors are finding bargains at the low end of the market, said Robert Lang, a professor of sociology at the University of Nevada, Las Vegas.

Making Lemonade

“Prices are below the cost of materials and labor,” said Lang, also a senior fellow at the Brookings Institution in Washington. “If you’re betting the U.S. economy won’t go back to Armageddon, you might see one-third appreciation if you buy now.”

Las Vegas’s affordable housing and warm weather will be the theme of a promotional campaign the city plans to use to attract out-of-town investors and potential new residents, Mayor Oscar Goodman said.

“We’re going to make lemonade out of this ‘crisis’ by promoting our foreclosures here,” Goodman, who’s stepping down in July after 12 years in office, said during an April 5 campaign party for his wife, Carolyn Goodman, a candidate to succeed her husband.

The city, he said, will be “showing the opportunities to people who are freezing to death in the middle of the country in the worst winter imaginable -- that they can come out here and buy a home at one-third what it cost five years ago and have a wonderful quality of life.”

As the dollar fails gold soars

More and more people are worried about the economy, and one big indicator of that fear is the price of gold.

It's in record territory and people are trading their dollars for it.

The experts say it's always a bad sign when people dump their dollars, but that's what's happening in the biggest move to gold ever.

It's never been more valuable.

Gold closed this week at over fifteen hundred dollars an ounce, which is an all-time high.

People are selling their jewelry.

The one thing driving up gas prices, speculation, is the main thing driving up gold.

There's also fear that the U.S. dollar will dive.

"The dollar is much weaker but it stands a good chance of getting much weaker from where we are," said Richard Hastings of global hunter securities.

Thursday, President Obama fired up contributors about the recovery since he was sworn in "the economy is growing again.

Two and a half years later, we're creating jobs again," said President Obama.

But most Americans are not cheering.

39% in the New York Times/CBS poll say the economy's getting worse.

It's a 13-point jump in one month.

And currency speculators are selling dollars and buying gold, a sign of fear.

But gold goes up and down so much and so fast.

So far this year, stocks are beating gold as an investment.

The Decline of the Dollar, Gold and silver continue to surge, IMF bombshell: Age of America nears e

Don’t Like a Weak Dollar? Might as Well Get Used to It
Jeff Cox
April 25, 2011

Weakness in the US dollar, which is causing everything to go up—including gas prices, food and stocks—is unlikely to go away soon as a selling frenzy hits the currency market.

The greenback is approaching pre-financial crisis lows and threatening to smash through its all-time low when measured against the world’s predominant national currencies.

A combination of factors accounts for the weakness, with the Federal Reserve’s easy-money policies, huge national debts and deficits and the consequential possibility of a debt downgrade because of the financial mess in Washington leading the way.

Read Entire Article

China should cap forex reserves at 1.3 trillion U.S. dollars: China banker

China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China’s foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Read Entire Article

Gold and silver continue to surge
Neil Dennis
Financial Times

Gold hit a record high, while silver surged more than 5 per cent to within a whisker of its all-time peak, as the dollar continued its decline and inflation concerns drove haven flows.

Driven also by government debt concerns, gold rose 1 per cent to $1,518.20 a troy ounce, the seventh-consecutive trading session in which it has hit a record high. Silver surged 5.5 per cent to $49.17 an ounce, having hit a 30-year high of $49.80, within sight of the landmark $50 level.

Read Entire Article

Fresh food that lasts from eFoods Direct (Ad)

IMF bombshell: Age of America nears end
Brett Arends

For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.

And it’s a lot closer than you may think.

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.

Read Entire Article

Fairewinds Calls for the NRC to Delay Licensing Until Fukushima Lessons ...

Monster Mash: Philadelphia Orchestra filing for bankruptcy; Seattle's Intiman Theatre cancels season


Financial mess: The Philadelphia Orchestra has decided to file for Chapter 11 reorganization. It is believed to be the first major U.S. orchestra to seek bankruptcy protection. (Philadelphia Inquirer)

Desperate measures: Seattle's Intiman Theatre has canceled the remainder of its season and is laying off its employees as a result of ongoing money problems. (Seattle Times)

Feeling the pain: A national survey shows that museums across the country are reporting significant financial stress for the second year in a row. (Associated Press)

Getting busy: The London Philharmonic Orchestra is to record the national anthems of all 205 countries participating in the 2012 Summer Olympics. (BBC News)

Not backing down: The ballet dancer who served as Natalie Portman's double in "Black Swan" said the filmmakers are lying about how much dancing the actress did in the movie. (E! Online)

Temporary shutdown: Broadway's "Spider-Man" has started its planned four-week hiatus in order to implement changes to the critically panned production. (New York Daily News)

Making a statement: An artist has created a mocking portrait of ultra-conservative religious leader Fred W. Phelps Sr. near the pastor's Westboro Baptist Church complex. (The Topeka Capital-Journal)

Guilty: A court in Egypt has sentenced Zahi Hawass, the minister for antiquities, to jail in a case involving a land dispute. (Agence France-Presse)

Red-carpet affair: The annual Opera News Awards took place Sunday in New York. (Broadway World)

Honored: The nominees have been announced for the newly created off-Broadway Alliance Awards. (Playbill)

And in the L.A. Times: A review of the China Philharmonic at the Valley Performing Arts Center.

-- David Ng

Photo: Members of the Philadelphia Orchestra. Credit: Jessica Griffin / The Philadelphia Orchestra Assn.

US, China to hold economy meeting in May

© AFP/File/Nicholas Kamm

WASHINGTON (AFP) - Top officials from the United States and China will meet in Washington early next month, the Treasury Department said Monday, as tensions between the two economic superpowers simmer.

Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton will host Chinese Vice Premier Wang Qishan and State Councilor Dai Bingguo, amid continued tensions over debt, exports and the value of China's currency.

The Treasury Department has delayed the publication of a report that could lead to sanctions against Beijing until after the meeting, despite US lawmakers complaining that China is still manipulating its currency for trade advantage.

The semi-annual report, which was due on April 15, has become a focal point for critics who accuse Beijing of unfairly keeping the yuan weak against the dollar to boost Chinese exports.

The US government said it would wait until a meeting of the Group of 20 finance chiefs, the IMF's annual spring meetings and the bilateral meeting on May 9 and 10 before publishing the document.

The yuan has strengthened almost five percent against the dollar in the last year, amid fierce political pressure from Washington. But experts say it still remains undervalued.

With China the largest foreign holder of US bonds, the two sides are also likely to discuss the outlook for US debt.

China urged the United States last Tuesday to adopt "responsible measures" after ratings agency Standard & Poor's cut the outlook on US sovereign debt to negative.

S&P sent stocks plunging worldwide when it slashed its outlook from "stable" to "negative" Monday, pointing to doubts about Washington's ability to tackle looming debt and fiscal deficits -- concerns raised by Beijing in the past.

"US Treasury bonds are a reflection of US government credit and are important investment products for domestic and international institutional investors," foreign ministry spokesman Hong Lei said in a statement.

"We hope the US government will earnestly adopt responsible policy measures to guarantee the interests of investors," he added.

© AFP -- Published at Activist Post with license

North Korea visit to focus on food crisis: Carter

© AFP Frederic J. Brown

BEIJING (AFP) - A group of former statesmen led by ex-US president Jimmy Carter said Monday they will focus on food shortages, human rights and denuclearisation when they visit North Korea this week.

A delegation of "The Elders" group of retired state leaders will visit Pyongyang on Tuesday in a bid to ease tensions over North Korea's nuclear weapon programmes, they told a news conference in Beijing.

The four-member group, led by Carter, includes former Finnish president Martti Ahtisaari, ex-Norwegian prime minister Gro Harlem Brundtland and former Irish president Mary Robinson.

Besides discussing ways in which to push forward multi-nation talks on the denuclearisation of North Korea, Carter said he would be looking at how to ease sanctions on Pyongyang that have exacerbated a serious food crisis.

"It is a horrible situation there and we hope to induce other countries to help alleviate (the food crisis), including South Korea, which has cut off all supplies of food materials to North Koreans," Carter told journalists.

"When there are sanctions against an entire people, the people suffer the most and the leaders suffer the least."

Robinson said one-third of North Korea's children had suffered stunted growth due to a lack of food, while up to 3.5 million people were vulnerable to the widening crisis that saw average food rations cut in half this year to 700 calories a day per person.

"It is very, very important to ensure that the women, children and the elderly do not suffer because of a political situation," Robinson said. "We will very much be emphasizing this.

"We really feel that the humanitarian and human rights issues are also very important."

United Nations food agencies that recently visited the North say more than six million people -- a quarter of the population -- urgently need food aid.

Carter said the delegation hopes to meet with North Korean leader Kim Jong-Il, but so far such a meeting has not been announced. The trip was arranged at the invitation of top North Korean leaders, he said.

The delegation was to meet with China's Foreign Minister Yang Jiechi and other Chinese experts on North Korea later Monday. The group, which will issue a report on their findings, will fly to Seoul Thursday.

Six-party disarmament talks between the two Koreas, China, the United States, Japan and Russia have been at a standstill since Pyongyang walked out in April 2008 and staged its second nuclear test a month later.

Cross-border tensions were heightened when North Korea bombarded a border island in November, killing four South Koreans, including two civilians, and sparking fears of war.

The first attack on civilians since the 1950-53 Korean War came weeks after Pyongyang disclosed an apparently operational uranium enrichment plant to visiting US experts.

The North claimed it was a peaceful energy project but experts said it could be reconfigured to produce weapons-grade uranium.

Carter has mediated in North Korea before. In 1994 he visited Pyongyang after the United States came close to war with North Korea over its nuclear weapons programme.

Last August the 2002 Nobel Peace Prize winner visited Pyongyang to secure the release of jailed US citizen Aijalon Mahli Gomes.

Some analysts believe Carter will also seek to secure the freedom of a Korean-American detained by the North since last November who is facing trial for unspecified crimes against the nation.

A source has said the man was involved in missionary work.

© AFP -- Published at Activist Post with license

A Brand New Prison Sits Empty & It's Not Because We Don't Have Plenty Of...

Hedge Funds Speculators and Their Poverty Premium

SARTRE, Contributing Writer

The short sale protection racket known as hedge funds is a speculators’ dream come true.
According to Investopedia, What Does Hedge Fund Mean? is defined as,
An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Hedge funds use dozens of different strategies, so it isn't accurate to say that hedge funds just "hedge risk". In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market.
The public intuitively understands the practice of speculators. Gambling to make a quick buck is a simple concept. However, the use of esoteric financial instruments to squeeze out gains and shift risks onto the backs of other parties escapes most observers. Yet it smells of a stacked deck.

Shorting a market or a currency is a tactic used to make fast cash. If you are correct in the collapse of the stock or exchange rate, you can make a killing. However, if you bet wrong the losses can be terminal. Thus the invention of managing risk by hedging your positions became commonplace.

On the surface, this protection seems prudent. However, the mechanics of manipulating puts becomes a session of playing musical chairs. When the song stops, the abrupt result has someone holding the bag.

Gabriel Kurland in Hedge Fund Hidden Risks Identification makes the following points.

• Option Sellers can exhibit no down month for a long period of time until their fat tail show up
• Since the 1998 Russian Debt crisis, financial markets around the world have experienced at least 10 extreme shocks none of which were supposed to occur more than once every few billion years (assuming a normal distribution)
• Strategies like Convertible Arbitrage or Mortgage Backed Securities are exposed to an array of very complex Default risk, Credit Risk, Interest Rates risk, Early Repayment risk, Volatility risk
If a hedge fund wants to speculate with funds of high net wealth players, charge 2% fee on the capital, and take 20% of the gains, some may say so what. Yet the full negative impact of shorting is hidden from the public with parodies of greedy capitalists, when the largest speculator of all is the Federal Reserve. The accompanying proof demonstrates the desperate condition of the counterfeit national currency.

It is imperative to view the video, FRAUD: Federal Reserve Is Selling Put Options On Treasury Bonds To Drive Down Yields, to understand the severity of the obscene measures that are keeping the inevitable financial crash from a long overdue implosion.
For more evidence of the absurdity of destroying your own currency, read directly from the Fed’s own Minutes of the Federal Open Market Committee Meeting on June 24-25, 2003.
The Committee could sanction the use of various derivative instruments on conventional Desk operations as a way to influence longer-term yields, which is outlined in exhibit 8. Options of some form are a possibility, as are forward operations. For example, we could sell a sequence of options on term RPs, covering interlocking time segments that collectively extend as far into the future as desired. In this way, longer-term yields could be influenced and a visible signal of the Fed’s desired path of interest rates could be demonstrated. Forward operations in term RPs could be structured in a similar fashion. Alternatively, we could sell put options on longer-term Treasury securities at strike prices associated with desired longer-term yields.
The other idea I found interesting is selling put options on Treasury securities. Cynically, this could be the salvation for everybody who hedges mortgage securities with long Treasuries. We may be the counterparty of choice. I would like to understand that because the options market is not very deep and I’d like to see how deep it is. If we went that way, how much room would we really have to inject a quantity of liquidity? Or is the scope relatively limited so that we’d have to build a market? So, I think it would be useful to explore further some of these issues that deal with liquidity and the options we have if we want to go the quantitative route.
The Greenspan era at the Fed provided the fuel to burn up the dollar and heightened the oxygen level to expand the debt. In Greenspan We Trust, irrational exuberance was perfected.
Greenspan, or any Fed head, contrary to popular perception, is no more an architect of prosperity than a president. But the oracle of the central bank can engender conditions that can severely inhibit the normal course of wealth creation. While juggling interest rates effect markets and redirects business decisions, their setting are not instantly transformed into profit. Confidence is the name of the game. A reasonable expectation that financial conditions will generate ongoing and profitable commerce is the desired objective.
The hedge fund model contradicts the fundamental tenants of capitalism. The goal of free enterprise is to create tangible wealth through commerce and business endeavors. By definition, the fruits of production and innovation flow to Main Street if the venture operates under the canons of utilitarian function. Capital is just one component in the process of organizing and operating a real business.
The speculator is spawned in a stateroom on the Mississippi River paddlewheel. Their passion is for the excitement of the game and money is the tally for keeping score. They are not serious businessmen. Merge the adrenalin junkie of a future trader background with the peddler of a traveling snake oil salesman and you have the profile of a hedge fund manager.
The adverse financial consequences of their ritual euthanasia practice, destroys a healthy economy and starves citizens from access to capital for productive activities. Whining hedge fund proponents will scream that their transactions enhance liquidity for markets. This viewpoint ignores the only real legitimate purpose for a mercantile exchange, which is the raising of capital to fund business enterprises that actually create wealth. Hedge funds skim off money that should be used to build businesses that employ domestic workers. When the velocity of money changes hands with rapidity and consumers and businesses have solid confidence that future spending can and be made from earnings and creative efforts, you have the makings of a viable economy.

The mechanics of how a hedge fund operates is described effectively in How Investment Banks and Hedge Funds Steal Money Legally! The scheme is too long to cite, so read the example for the nuts and bolts techniques that speculators use to wangle out their pound of flesh from the ordinary equity owners of a stock. The result of this lewd process is summed up accordingly.
When all is said and done, you more than likely doubled the initial investment capital on one stock in just three weeks. Sure, the back and forth of buying and selling is nerve wracking and time consuming. Trying to keep the buying and selling of options straight is obviously no small feat but you can always take the next month off now that you've legally stolen millions of dollars in investment capital from smaller investors through your effective understanding of how BIG money can manipulate the stock market and legally steal the small investor's capital for your profit!
If a hedge fund operator with $100,000,000 can cash in so handsomely, just what are the limits on the private Federal Reserve when they control the actual origination of the world reserve currency itself? How could any moral person deny that Ron Paul’s initiative to audit the Fed is a rational and necessary requirement?
Banning thievery practices of sophisticated exploitation has never been more important. The reason why hedge funds are protected under the cover of legal auspices is that the banksters are blood brothers of the speculators family of con men, and their godfathers are the controllers of the Federal Reserve money machine.

Bubbles in markets are designed collapses that benefit the short seller. When arbitrage betting a market has no real risk, ill-gained proceeds are virtually guaranteed. In the instant of a rare market reversal beyond their hegemony, their over leverage losses are made good by the taxpayer. The transfer of the net wealth of Middle America is a foregone conclusion under a regime that games the financial markets under the pretext of hedging risks.

The saying, "Bulls Make Money, Bears Make Money, Pigs Get Slaughtered - Wall Street Truisms that Stand the Test of Time", does not apply to the Fed. Ben Bernanke is the Myron Lansky of the ultimate syndicate. The prosecutor told jurors in his summation at the insider-trading trial of the Galleon Group LLC, co-founder "Raj Rajaratnam corrupted friends and employees of his hedge fund to "conquer" Wall Street."
Bernanke and his crew at the Fed are bent on conquering the globe by selling short the dollar. The needful lesson for the biggest hedge fund hoaxer is: "A chazer bleibt a chazer" - A pig remains a pig.

SARTRE is the pen name of James Hall, a reformed, former political operative. This pundit's formal instruction in History, Philosophy and Political Science served as training for activism, on the staff of several politicians and in many campaigns. A believer in authentic Public Service, independent business interests were pursued in the private sector. Speculation in markets, and international business investments, allowed for extensive travel and a world view for commerce. SARTRE is the publisher of BREAKING ALL THE RULES. Contact