Sunday, August 21, 2011

Goldman `Too Important' for Criminal Charges...Hintz Says (Looking For A...

Video - Banking Analyst Brad Hintz loves him some Goldman Sachs - June 2011

Cue the violins.

Following the theme of Matt Taibbi's piece published today, we present this clip of banking analyst and Goldman sycophant Brad Hintz telling Bloomberg:

  • “If an alleged violation is identified during a Goldman investigation, we expect a reasoned response from the Justice Department. In a worst case environment, we would expect a ‘too big to fail’ bank such as Goldman to be offered a deferred-prosecution agreement, pay a significant fine and submit to a federal monitor in lieu of a criminal charge.”

Goldman Sachs won’t face criminal prosecution related to sales of mortgage-linked securities because such a move could threaten the U.S. financial system, according to Brad Hintz, an analyst at Sanford C. Bernstein & Co.

The U.S. Department of Justice, which is reviewing a Senate subcommittee report that alleged Goldman Sachs misled clients before the financial crisis, will avoid jeopardizing the fifth- largest U.S. bank by assets because it’s viewed as “too big to fail,” according to Hintz.

Continue reading at Bloomberg...

Ron Paul: Corporations Are NOT People

Short clip in response to Romney's now infamous statement while being heckled at the Iowa state fair, which you can watch at the link below.

Meanwhile CNN's Jack Cafferty posed the following question on Tuesday:

We also have Paul's newest 2012 campaign ad below.

The script: “It’s the story of a lost city, lost opportunity, lost hope. A story of failed policies, failed leadership. A story of smooth-talking politicians, games of ‘he said, she said,’ rhetoric and division. One man has stood apart, stood strong and true. Voting against every tax increase. every unbalanced budget, every time. Standing up to the Washington machine. Guided by principle. Ron Paul, the one who will stop the spending, save the dollar, create jobs, bring peace, the one who will restore liberty. Ron Paul, the one who can beat Obama and restore America now.”


Jack Cafferty - Ron Paul Deserves More Attention - Aug. 17, 2011

G. Edward Griffin: The Mandrake Mechanism and Debt Cancellation

This is the tenth installment in a series of chapter summaries from G. Edward Griffin's must-read book The Creature From Jekyll Island.  This book may be the most important "red pill" available and we highly recommend that you read the full book.  Buy it today at RealityZone.

G. Edward Griffin

Buy Here
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Chapter 10 Summary: The Mandrake Mechanism

The American dollar has no intrinsic value.  It is a classic example of fiat money with no limit to the quantity that can be produced.  Its primary value lies in the willingness of people to accept it and, to that end, legal tender laws require them to do so.  It is true that our money is created out of nothing, but it is more accurate to say that it is based upon debt.  In one sense, therefore, our money is created out of less than nothing.  The entire money supply would vanish into bank vaults and computer chips if all debts are repaid.  Under the present System, therefore, our leaders cannot allow a serious reduction in either the national or consumer debt.  Charging interest on pretended loans is usury, and that has become institutionalized under the Federal Reserve System.  The Mandrake Mechanism by which the Fed converts debt into money may seem complicated at first, but it is simple if one remembers that the process is not intended to be logical but to confuse and deceive.  The end product of the Mechanism is artificial expansion of the money supply, which is the root cause of the hidden tax called inflation.  The expansion then leads to contraction and, together, they produce the destructive boom-bust cycle that has plagued mankind throughout history wherever fiat money has existed.

Because banks lend money that does not exist prior to the transaction, many debtors have concluded they are not obligated to repay. This is a compelling concept in view of the fact that bank and credit-card loan contracts typically lead customers to think they are borrowing someone else's money, which is why they are willing to pay interest. When challenged in court, these contracts often are judged to be fraudulent, and there now are companies offering "debt-cancellation" services to challenge these contracts with the end in mind that debts will be canceled.  A discussion of the pros and cons of these programs is beyond the scope of this work, but interested parties are invited to read or view a video of the author's analysis at the following website:

Get the book for yourself or for others you want to wake up.  It reads like a mystery novel and is filled with colorful metaphors that make the seemingly complex world of banking very easy to comprehend. Visit RealityZone for your copy today. Summary is re-printed with permission from G. Edward Griffin.

See other parts below:
PART 1: The Journey to Jekyll Island
PART 2: The Name of the Game is Bailout

PART 3: Protectors of the Public
PART 4: Home, Sweet Loan
PART 5: Nearer to the Heart's Desire
PART 6: Building the New World Order
PART 7: The Barbaric Metal
PART 8: Fool's Gold
PART 9: The Secret Science

Bank of America offers Rick Perry support

Secession and Predictability

One of the greatest benefits that can come from secession is predictability. No one ever talks about this, and even I haven’t mentioned it before. But predictability will be a welcome recompense to the state that secedes and designs its new government correctly.

Eventually, the American government will collapse, either from (a) the rejection of the dollar as world reserve currency, or (b) the collapse of the world bond market, or (c) hyperinflation. Either of the first two would be sudden and catastrophic…the third would be drawn out and catastrophic. The time frame of the Federal Government collapse is not predictable, but the surety of the event is.

The collapse will bring economic chaos, riots and burned cities, and rampant crime. Starvation and disease will kill millions across America…most severe in the places where populations are most dense. Shortly thereafter, pro-secession citizens, survivalists, and contrite politicians will finally begin to see the practicality and efficacy of secession. At that point it will be obvious to all that Washington has no answers, and that the regulation, taxation and overt fascism that emanated from DC actually CAUSED the grand America experiment to end after only 230-plus years. But do not blame Washington entirely…DC is a mirror held up to show the reflection of a nation that wanted something for nothing.

States will secede from the Union and become brand new nations. I predict that the first to secede will be Texas. After that, it’s anyone’s guess.

Those responsible for the New Texas nation will likely call a constitutional convention and rewrite the Texas Constitution to better serve a sovereign nation in the early part of the 21st century. And those doing the rewriting should be made mindful of the importance of predictability in their new nation.

The most crucial predictability will be found in the method of taxation chosen by the new nation and the type of money the new nation creates.

Since 2008, when the Bush bailouts and Federal stimulus packages began occurring, the American economy has been in a severe recession. Washington has been writing laws and spending money wildly, writhing like a monster in a fire. America’s business class has noticed, and they see a Federal Government that will enact a law or a tax today that may be repealed or superceded tomorrow. A business cannot afford to ignore the unpredictability of business regulation or the business tax code. They see Washington react, not act. And Washington’s reactions are ALWAYS wrong, because the reactions are founded in a philosophy that government is the answer. In a situation in which a business cannot reasonably plan for the future, the business will exhibit hesitancy and reticence in all it does.

Think about it. If you own a business, and you don’t know how the Obama Health Care law or a new EPA or OSHA regulation is going to affect your business, would you take a chance on hiring new people when there is so much unknown that could ruin your business? If you price your product competitively, but the inflation rate increases from 5% annually to 5% a month…how do you stay in business? How do you protect your profit margin? How do you make plans for a month from now, much less make plans for 12 months from now?

It is no different for individuals. Unpredictability causes chaos. Wages have lagged behind inflation for 40 years. All of us that saved money for retirement have seen inflation eat out our substance, and have watched the markets tumble, drastically shrinking our retirement money. It is impossible for the average person to save and invest enough money in this present uncertain economy to have a comfortable retirement…with or without Social Security. But the same question about inflation affects the individual; how do you budget your income and expenses when inflation jumps from 5% annually to 5% a month…or 5% a week?

The most profound source of future predictability will be found in a monetary system built around gold and silver. Why? Because gold/silver money prevents government from spending more then they take in. Period. “Hard currency” eliminates inflation. Do you understand what I’m saying here? All of us that are 80 years old and younger have lived our entire lives under a government monetary system that includes inflation. Inflation has been as familiar to us as oxygen. We have lived our lives hearing about the inflation rate…some years high, some years low…but never nonexistent. We have never experienced a money that does not lose value over time. When we consider a return on an investment, we always subtract the inflation rate from the gross return to find the net return. In a nation without inflation, the gross return IS the return on investment.

What would you do if you knew that the money you saved this year would have the same value in 20 – 30 - 40 years? Answer…the amount you had to save for retirement would be considerably less than in the American economy now. For the average citizen, that would mean more cash available today that is not being deferred until “tomorrow.” More cash today means a higher standard of living. Anybody out there against a higher standard of living?

Want to know the REAL reason the world stock markets are fluctuating wildly? There is one reason. The world reserve currency is the US Dollar, and its value is entirely unpredictable.

The next big source of predictability is taxation. A state that becomes a new nation must stop thinking like the serf state it was, and begin to think thoughts of independence and sovereignty. I have written extensively about taxation, and I am promoting the national sales tax as THE ONLY SOURCE of tax revenue for the new nation. Set the tax rate in the constitution at 10% on all transactions. No more property taxes, ad valorem taxes, tariffs, excise taxes…no other taxes of any kind. No subsidies, no exemptions for ANYONE. The tax revenue will flow into the nation’s treasury, and the new nation can pay for ALL government programs… city, county, township, police, fire, militia, courts, etc… the national treasury pays for it all. Of course, this would also require the new nation to drastically slash the services it provided in order to live within its means.

Finally, as the new nation crafts new laws, it should keep the principle of predictability in mind. When individuals and businesses can plan for the future knowing that the money will not lose value, that taxation is not going to increase, or that regulations are not going to restrict their individual liberty and property rights, they will enjoy a predictability that none of us living have ever known or experienced. Don't ever underestimate the importance that predictability could have in your life.

Secession is the Hope For Mankind. Who will be first?

DumpDC. Six Letters That Can Change History.

© Copyright 2011, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

US politicians 'must act to avert a recession'

The United States must start tackling its long-term economic problems head on instead of relying on the Federal Reserve to revive the economy, according to one of Wall Street's leading economists who predicted the last recession.

US President Barack Obama
As President Barack Obama called for members of Congress to put their country before politics as the US economy stutters, David Rosenberg, chief economist at Gluskin Sheff, said there was now a real risk of the world's largest economy going into recession.

"If you're looking for something positive it will have to be from the political arena," said Rosenberg. Washington should deliver a serious plan for the deficit, reform of the tax system and overhaul the country's energy policy.

After another blitz of worrying data from the US, pressure is growing on the Federal Reserve chairman Ben Bernanke to announce new measures to pull the economy from the brink at the US central bank's annual gathering in Jackson Hole, Wyoming, this coming week.

Mr Rosenberg, who in 2007 forecast the last recession some months before it began, said there was little left the Federal Reserve could do. "The Fed doesn't have the cannon," said Mr Rosenberg. "I'm sure Bernanke has more rabbits in the hat, but the question is how effective will they be?"

While many expect Mr Bernanke to go no further than lay out the Fed's options, including a third round of quantitative easing, much attention will be focused on the Fed chairman's speech this Friday.

The latest batch of weak data signalled that US consumers are again retrenching on a scale that threatens to topple the world's largest economy back into recession.

Global markets take fright at the return of the zombie banks

Two and a half years ago, financial markets rallied strongly on the assumption that the worst of the slump was over – now the talk is over a double-dip recession

Film poster for I Walked With a Zombie
The fall in stock markets is down to fears that Europe and North America now have their own zombie banks Photograph: THE RONALD GRANT ARCHIVE
The activities of financial markets are often irrational. Prices go up for no apparent reason and then suddenly the mood changes. What's worrying about the latest spasm that has convulsed bourses in Europe, Asia and North America is that the sell-off is grounded in real and ever-more pressing concerns. Make no mistake, something serious is going on here.
That something can be divided into three parts. The first cause for anxiety is the global economy, and in particular the United States. The report released on Thursday by the Philadelphia Federal Reserve covers only a small part of the Eastern US but it has a good track record for charting the ups and downs of the world's biggest economy. The Philly Fed's barometer has just plunged deep into recession territory.
There are also simultaneous slowdowns going on in the rest of the world. Europe's economy has slowed to stall speed, the UK is still operating way below its pre-recession level and activity has come off the boil in China, even though to western eyes growth still looks amazingly strong in China.
Two and a half years ago, financial markets rallied strongly on the assumption that the worst of the slump was over. There was relief that Great Depression 2 had been avoided. Now the talk is over a double-dip recession.
Concern number one has re-ignited fears about the health of the global financial system. Again, markets have been operating for the past couple of years on the assumption that large dollops of financial help from the taxpayer and a return to growth have made the global banking system immune from a fresh collapse. This always looked questionable, and now that activity is slowing markets suspect that some banks may go under. In the 1990s, the Japanese government prevented its financial system from collapse but only at the expense of creating zombie banks, neither alive nor dead but kept functioning thanks to the largesse of the state. The reason the sell-off in financial stocks has been more pronounced than the fall in stock markets as a whole is that investors believe Europe and North America now have their own zombie banks.
Reports that US regulators are taking a close interest in European banks and comments from Sweden's chief financial regulator that it wouldn't take much for European interbank markets to freeze only serve to bring back memories of the long descent from credit crunch in August 2007 to the collapse of Lehman Brothers in September 2008.
At least then, though, governments were in a position to ride to the rescue. Today, governments are seen not as the solution but as part of the problem. The debt burden accumulated by the banks was, in effect, nationalised during the crisis. It was hoped this would prove temporary, but the persistence of weak growth means that a private debt crisis has now become a sovereign debt crisis. What's more, the markets sense that policymakers have run out of bullets to fire. They can't cut official interest rates, they find it hard to justify more quantitative easing when inflation is at current levels and almost every Western government is currently trying to cut its budget deficit.
Put all that together and you get the full Japanese package: weak growth, weak banks, weak policy response. That is not a good recipe for shares. Today Tokyo's Nikkei market is at less than 25% of its level at the peak of the stock market boom in the late 1980s.

Britain faces £50bn bill under Brussels tax raid to bail out euro

Britain faces a £50billion bill under plans for a new tax raid by Brussels, according to a report.
That is the price the UK might have to pay if the European Union imposes a financial transaction tax demanded by France and Germany.
German Chancellor Angela Merkel and French President Nicolas Sarkozy want to impose the levy across the EU to help bail out the euro.
Friends: German Chancellor Angela Merkel and French President Nicolas Sarkozy want to save the euro
Friends: German Chancellor Angela Merkel and French President Nicolas Sarkozy want to save the euro
But the vast majority of the cash would be seized from institutions in the City of London – which the Government fears would lead to major banks and investment firms leaving to set up shop elsewhere.
The so-called ‘Tobin Tax’ or ‘Robin Hood Tax’ is just one of ten direct taxes that the EU is considering introducing.

Eurosceptic think tank Open Europe has issued a report which concludes that each and every one of them is ‘economically flawed and unworkable’.
Open Europe has calculated that a financial transaction tax would cost financial markets across the EU between £20billion and £69billion.
target: A tax on financial transactions would raise cash from businesses in the City of London
target: A tax on financial transactions would raise cash from businesses in the City of London
Thanks to the dominance of London as a centre of Europe’s financial services industry, Britain would end up paying the lion’s share – between £15billion and £49.9billion.
The sums were calculated on the basis of European Commission calls for every bond transaction to be taxed at a rate of 0.1 per cent and derivative deals at 0.01 per cent, using figures on the scale of transactions compiled by the international watchdog, the World Federation of Exchanges.
Open Europe said the wide range between the high and low estimates is ‘due to uncertainties regarding the degree of relocation and evasion following the introduction’ of a financial transactions tax.
‘The introduction of an FTT at the EU- or eurozone-level, without a global agreement would lead to the relocation of financial firms away from European financial centres – something that would be particularly damaging for London, Frankfurt or Paris.’
Proposal: European Commission President Jose Manuel Barroso
Proposal: European Commission President Jose Manuel Barroso
The European Commission is drawing up plans for new direct taxes to keep swelling EU coffers while governments throughout the EU are groaning under debts and facing austerity cuts at home.
The EU budget shows that the Commission also wants an EU-wide sales tax like VAT, to raise £25billion a year by 2020.

Eurocrats have also drawn up plans for a European bank levy, an aviation tax, higher excise duty on cigarettes and alcohol, a separate financial activities tax, an EU corporate income tax and at least three different carbon taxes.
In each case Open Europe - which does not advocate British withdrawal from the European Union - concludes the taxes proposed would be too complex or would punish some countries disproportionately ad in several cases would not be worth the effort, because they will drive companies away from Europe, meaning tax take would fall.
Open Europe’s Research Director Stephen Booth said: ‘While some of the options offer minor benefits, every attempt to give the EU the power to raise its own taxes would be perceived as a major assault on national governments’ tax sovereignty and, ultimately, democratic accountability. EU taxes would have no democratic legitimacy.
‘However, all of the potential options for an EU-level tax also fall short on practical and economic grounds and are either prohibitively complex or come with a hugely disproportionate cost for certain countries, social groups or businesses.
‘The Commission’s push for EU taxes specifically to fund the EU budget ignores the fact that the current complexity and opacity of the budget has more to do with its size and the logic underpinning the EU’s spending programmes than how it is financed.’
The Treasury have vowed to prevent an EU-wide transaction tax if it threatens the City but said they would examine the specific details if one is formally proposed.
A spokesman said: ‘There is no proposal on table but we would not do anything that would harm British interests.’

Read more:

History is about to repeat itself

We've been warned: the system is ready to blow

Only a new way of managing the global economy can prevent more mayhem in the markets and on the streets

New York stock exchange
Traders work at the New York Stock Exchange on 9 August. Photograph: Stan Honda/AFP/Getty Images
For the past two centuries and more, life in Britain has been governed by a simple concept: tomorrow will be better than today. Black August has given us a glimpse of a dystopia, one in which the financial markets buckle and the cities burn. Like Scrooge, we have been shown what might be to come unless we change our ways.
There were glimmers of hope amid last week's despair. Neighbourhoods rallied round in the face of the looting. The Muslim community in Birmingham showed incredible dignity after three young men were mown down by a car and killed during the riots. It was chastening to see consumerism laid bare. We have seen the future and we know it sucks. All of which is cause for cautious optimism – provided the right lessons are drawn.
Lesson number one is that the financial and social causes are linked. Lesson number two is that what links the City banker and the looter is the lack of restraint, the absence of boundaries to bad behaviour. Lesson number three is that we ignore this at our peril.
To understand the mess we are in, it's important to know how we got here. Today marks the 40th anniversary of Richard Nixon's announcement that America was suspending the convertibility of the dollar into gold at $35 an ounce. Speculative attacks on the dollar had begun in the late 1960s as concerns mounted over America's rising trade deficit and the cost of the Vietnam war. Other countries were increasingly reluctant to take dollars in payment and demanded gold instead. Nixon called time on the Bretton Woods system of fixed but adjustable exchange rates, under which countries could use capital controls in order to stimulate their economies without fear of a run on their currency. It was also an era in which protectionist measures were used quite liberally: Nixon announced on 15 August 1971 that he was imposing a 10% tax on all imports into the US.
Four decades on, it is hard not to feel nostalgia for the Bretton Woods system. Imperfect though it was, it acted as an anchor for the global economy for more than a quarter of a century, and allowed individual countries to pursue full employment policies. It was a period devoid of systemic financial crises.
Utter mess
There have been big structural changes in the way the global economy has been managed since 1971, none of them especially beneficial. The fixed exchange rate system has been replaced by a hybrid system in which some currencies are pegged and others float. The currencies in the eurozone, for example, are fixed against each other, but the euro floats against the dollar, the pound and the Swiss franc. The Hong Kong dollar is tied to the US dollar, while Beijing has operated a system under which the yuan is allowed to appreciate against the greenback but at a rate much slower than economic fundamentals would suggest.
The system is an utter mess, particularly since almost every country in the world is now seeking to manipulate its currency downwards in order to make exports cheaper and imports dearer. This is clearly not possible. Sir Mervyn King noted last week that the solution to the crisis involved China and Germany reflating their economies so that debtor nations like the US and Britain could export more. Progress on that front has been painfully slow, and will remain so while the global currency system remains so dysfunctional. The solution is either a fully floating system under which countries stop manipulating their currencies or an attempt to recreate a new fixed exchange rate system using a basket of world currencies as its anchor.
The break-up of the Bretton Woods system paved the way for the liberalisation of financial markets. This began in the 1970s and picked up speed in the 1980s. Exchange controls were lifted and formal restrictions on credit abandoned. Policymakers were left with only one blunt instrument to control the availability of credit: interest rates.
For a while in the late 1980s, the easy availability of money provided the illusion of wealth but there was a shift from a debt-averse world where financial crises were virtually unknown to a debt-sodden world constantly teetering on the brink of banking armageddon.
Currency markets lost their anchor in 1971 when the US suspended dollar convertibility. Over the years, financial markets have lost their moral anchor, engaging not just in reckless but fraudulent behaviour. According to the US economist James Galbraith, increased complexity was the cover for blatant and widespread wrongdoing.
Looking back at the sub-prime mortgage scandal, in which millions of Americans were mis-sold home loans, Galbraith says there has been a complete breakdown in trust that is impairing the hopes of economic recovery.
"There was a private vocabulary, well-known in the industry, covering these loans and related financial products: liars' loans, Ninja loans (the borrowers had no income, no job or assets), neutron loans (loans that would explode, destroying the people but leaving the buildings intact), toxic waste (the residue of the securitisation process). I suggest that this tells you that those who sold these products knew or suspected that their line of work was not 100% honest. Think of the restaurant where the staff refers to the food as scum, sludge and sewage."
Finally, there has been a big change in the way that the spoils of economic success have been divvied up. Back when Nixon was berating the speculators attacking the dollar peg, there was an implicit social contract under which the individual was guaranteed a job and a decent wage that rose as the economy grew. The fruits of growth were shared with employers, and taxes were recycled into schools, health care and pensions. In return, individuals obeyed the law and encouraged their children to do the same. The assumption was that each generation would have a better life than the last.
This implicit social contract has broken down. Growth is less rapid than it was 40 years ago, and the gains have disproportionately gone to companies and the very rich. In the UK, the professional middle classes, particularly in the southeast, are doing fine, but below them in the income scale are people who have become more dependent on debt as their real incomes have stagnated. Next are the people on minimum wage jobs, which have to be topped up by tax credits so they can make ends meet. At the very bottom of the pile are those who are without work, many of them second and third generation unemployed.
Deep trouble
A crisis that has been four decades in the making will not be solved overnight. It will be difficult to recast the global monetary system to ensure that the next few years see gradual recovery rather than depression. Wall Street and the City will resist all attempts at clipping their wings. There is strong ideological resistance to the policies that make decent wages in a full employment economy feasible: capital controls, allowing strong trade unions, wage subsidies, and protectionism.
But this is a fork in the road. History suggests there is no iron law of progress and there have been periods when things have got worse not better. Together, the global imbalances, the manic-depressive behaviour of stock markets, the venality of the financial sector, the growing gulf between rich and poor, the high levels of unemployment, the naked consumerism and the riots are telling us something.
This is a system in deep trouble and it is waiting to blow.

OPEC States that Venezuela has World’s Largest Oil Reserves

Hugo Chavez Wiki image
Joao Peixe
Oil Price

The Organization of Petroleum Exporting Countries, a notoriously conservative organization, has stated that Venezuela has world’s largest oil reserves, even exceeding those of OPEC’s top producer, Saudi Arabia.

Oil production in Venezuela is under the control of the state-owned Petróleos de Venezuela, S.A. company, or PDVSA.

Petroleum Intelligence Weekly lists PDVSA as the world's fourth largest oil company, due to its proven reserves, production, refining and sales, MercoPress news agency reported.

PDVSA has recently been roiled by a pension scandal where millions were lost when they were invested in a Madoff-type Ponzi scheme overseen by Francisco Illarramendi, a Connecticut-based hedge fund manager with joint U.S.-Venezuelan citizenship, who used to work as a U.S.-based advisor to PDVSA.

PDVSA revenues underwrite many of the progressive social programs of Venezuelan President Hugo Chavez. Concerned about the ongoing effects of the global recession on the national economy, on Wednesday President Chavez said that he would repatriate $11 billion in gold reserves held in overseas banks and diversify the nation’s fiscal reserves away from Western nations and into emerging economies like China, Russia and Brazil.

Venezuela’s gold reserves of $18.3 billion represent two-thirds of the country’s total reserves, with $11.1 billion currently held in foreign banks and the remaining $7.2 billion residing in Venezuela’s Central Bank.

By. Joao Peixe, Deputy Editor

The Cartel Strikes Back: S&P Downgrades Venezuela to B+

The New Revolucion is GOLD
You didn't think that the cartel would just sit there and politely hand Mr. Chavez his 210 tons of gold back now, did you?

The first retaliatory shot has been fired in the great gold war. 
In another Friday night shocker, S&P tonight downgraded Venezuela's credit rating to B+ from BB-. 
Shockingly, S&P actually admited that the reason for the downgrade was Hugo Chavez demanding Venezuela's gold be repatriated from the BOE (kept by JP Morgan and friends)!
S&P "expressed concern" that Venezuela's gold will no longer be held at The Morgue.

Standard & Poor's on Friday downgraded Venezuela's credit ratings as it implemented a new methodology more heavily focused on political risk—a key weakness in the oil-producing country.

Walker and Walker | Getty Images

S&P cut Venezuela's long-term sovereign rating to B-plus from BB-minus. The outlook on the new rating is stable. The agency's new methodology was published on June 30, a little more than a month before it invoked political concerns to downgrade U.S. credit ratings.

 Political risk has been a constant issue in Venezuela, where change in economic rules and nationalization of companies are common. Uncertainty about the health of President Hugo Chavez, who had surgery in Cuba earlier this summer to remove a cancerous tumor followed by chemotherapy treatment, has added to those risks, S&P said in a statement.
 "In our opinion, changing and arbitrary laws, price and exchange controls, and other distorting and unpredictable economic measures have undermined private-sector investment and hurt productivity, weakening Venezuela's domestic economy," S&P analyst Roberto Sifon Arevalo wrote in a report.
 Venezuela's vast oil and gas reserves "somewhat" offset the policy uncertainty, S&P said. The country posts steady current account surpluses which, combined with strict capital controls, result in positive net asset positions.
However, S&P expressed concern about the actual level of Venezuela's gold and foreign exchange reserves after reports that the country plans to repatriate them.
"When you have the reserves held abroad, you do have some level of confidence," Arevalo told Reuters in an interview. "That is not going to be the case anymore. They are going to be held at the central bank domestically, then you fall in the same circle of lack of transparency that everything else has in Venezuela."

40 Years of Fiat Currency, Is Gold as ‘Cheap’ as it was in 1971?

Monday was the 40th anniversary of the irredeemable fiat dollar. Unlike the preceding 39 anniversaries, this one was actually noticed! Here, I present several charts that show the changes to the Fed’s balance sheet since 1971. I conclude that the current gold price may be as ‘cheap’ as it was in 1971!

To review what happened just over 40 years ago, I quote from Murray Rothbard’s fantastic little book, What Has Government Done to Our Money?:
On August 15, 1971, at the same time that President Nixon imposed a price-wage freeze in a vain attempt to check bounding inflation, Mr. Nixon also brought the post-war Bretton Woods system to a crashing end. As European Central Banks at last threatened to redeem much of their swollen stock of dollars for gold, President Nixon went totally off gold. For the first time in American history, the dollar was totally fiat, totally without backing in gold. Even the tenuous link with gold maintained since 1933 was now severed. The world was plunged into the fiat system of the thirties—and worse, since now even the dollar was no longer linked to gold. Ahead loomed the dread spectre of currency blocs, competing devaluations, economic warfare, and the breakdown of international trade and investment, with the worldwide depression that would then ensue.
For anyone who’s interested, here’s the video of Nixon’s announcement:

The Charts:

Federal Reserve's Assets Since the Collapse of the Bretton Woods Agreement Source: St Louis Fed
As can be seen on the chart above, the Fed’s assets have exploded since the collapse of the Bretton Woods agreement. Until 2007, the expansion was mainly in favor of US government securities. The period from 2007 to 2010 brought about a large increase in the quantity of ‘other assets’ (mainly Mortgage-backed Securities and other junk). With the most recent quantitative easing program (QE2), the Fed’s assets are reverting back in favor of Long-term US Government Securities.

Federal Reserve's Liabilities Since the Collapse of the Bretton Woods Agreement. Source: St Louis Fed
Of course, we can see precisely the same explosion in the Fed’s liabilities. Until 2007, this expansion was largely in favor of Federal Reserve Notes. Since 2007, the increase in the Fed’s liabilities has been in favor of Reserve Deposits. This was the real bailout of the banks. If one takes a moment to contemplate this, one realizes that all dollar holders (Worldwide!) took an enormous implicit haircut to preserve the status quo of the American Banking System!!!

Federal Reserve's Assets Since the Collapse of the Bretton Woods Agreement (Proportional Basis) . Source: St Louis Fed
The chart above shows the Fed’s assets on a proportional basis. ‘Gold Reserves’ as a proportion of the total balance sheet have been declining ever since the collapse of the Bretton Woods Agreement. Currently, ‘Gold Reserves’ seem negligible (this is partly due to the Fed’s funky accounting). It is clear that there have been some periods where large changes were made to the composition of the Fed’s assets, however it is equally clear that such changes pale in comparison to the drastic alterations seen over the past 3-5 years.

Federal Reserve's Liabilities Since the Collapse of the Bretton Woods Agreement (Proportional Basis) . Source: St Louis Fed
Again, the sheer size of the bank bailout is evident from the chart above. After declining proportionally for 35 years, ‘Reserve Deposits’ exploded in 2007/2008. The declining proportion of ‘Reserve deposits’ shows the progressively greater doses of leverage used in the American banking system. The recent explosion in ‘Reserve deposits’ demonstrates the enormity of the bailout! The low in the light blue portion on the chart above was the peak in excitement about banking. The current peak represents the banking industry’s march towards boredom.
[NOTE: The following charts are available on the 'Long-Term Charts' page (where they go back to 1915). They are updated every week.]

Total Size of the Federal Reserve's Balance Sheet Since the Collapse of the Bretton Woods Agreement - Click to enlarge. Source: St Louis Fed
Since August 11, 1971, the Federal Reserve’s total balance sheet size has expanded from $88’711 million to $2’876’236 million (over 32 times!).

Total Size of the Federal Reserve's Balance Sheet Since the Collapse of the Bretton Woods Agreement (Log Scale) - Click to enlarge. Source: St Louis Fed
Same data on a logarithmic scale.

Market Value of the Federal Reserve's Gold Since the Collapse of the Bretton Woods Agreement - Click to enlarge. Source: St Louis Fed
Since August 11, 1971, the market value of the Federal Reserve’s gold has increased from $12’050 million to $463’229 million.

Gold Covering or Backing the Gold Since the Collapse of the Bretton Woods Agreement - Click to enlarge. Source: St Louis Fed
Using the data just mentioned above, we might conclude that the ‘degree to which the dollar is backed by gold’ (at market prices) hasn’t changed very much. On August 11, 1971, the dollar was 13.6% ’backed by gold’ and now the dollar is 16.1% ‘backed by gold’! This begs the rather startling question; is gold roughly as cheap as it was in 1971? Was the early part of the mid-20th century gold bull market covered up by the semantics of governmental meddling with money?
Aftab Singh is an independent analyst. He writes about markets & political economy at .
© 2011 Copyright Aftab Singh - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2011 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

As America Crumbles Greedy bankster Leon D. Black throws himself multimillion dollar birthday party

Birthdays Are Still Big in Buyout Land

Leon D. Black, managing partner of Apollo Global Management.Fred Prouser/ReutersThe billionaire financier Leon D. Black celebrated his 60th birthday with some 200 people, who were treated to a show by Elton John, below.
Elton JohnMike Coppola/Getty Images 
When the billionaire buyout titan Stephen A. Schwarzman gave himself a boom-era-defining 60th birthday party in 2007, the global economy was soaring.
Four years and one financial crisis later, the world looks very different. But not much has changed in the private equity world — at least when it comes to birthday parties.
Last Saturday night, the financier Leon D. Black celebrated his 60th with a blowout at his oceanfront estate in Southampton, on Long Island. After a buffet dinner featuring a seared foie gras station, some 200 guests took in a show by Elton John. The pop music legend, who closed with “Crocodile Rock,” was paid at least $1 million for the hour-and-a-half performance.
“The great Sir Elton John performing at my friend Leon Black’s fabulous 60th bday,” wrote the fashion designer Vera Wang on her Facebook page. “I had the honor of dressing his wife, my friend, Debra Black, the hostess! If there was ever a great family … this was it! Xx Vera”
The stars of music and fashion collided with a who’s who of Wall Street. Revelers included Michael R. Milken, the junk-bond pioneer and Mr. Black’s boss at Drexel Burnham Lambert in the 1980s; Julian H. Robertson Jr. , the hedge fund investor; Lloyd C. Blankfein, the chief executive of Goldman Sachs; and Mr. Schwarzman, head of the Blackstone Group.
Rounding out the guest list were politicians including Mayor Michael R. Bloomberg and Senator Charles E. Schumer of New York, who rubbed elbows with media celebrities like Martha Stewart and Howard Stern.

Capitalism Is The Crisis: Radical Politics in the Age of Austerity

In a September 20, 1912 article in the New York Times titled “The Age of the Superlative,” a writer admired the fact that a French aviator had achieved an altitude of 18,635 feet and that the new Equitable Life Insurance building, erected on the spot where the old one had just burned down, “is sure to be the biggest in the world.” Nothing could be done about the vast amounts of wealth dedicated to breaking such records. “We know well that there are better kinds of glory,” the writer soberly concluded, “but the age of the superlative must take its course.”

We live in an age of the superlatives as well, ironically being touted as the Age of Austerity by the state-capitalist oligarchs. But the superlative qualities of our age mark a world in decline. Consider some of our superlative achievements:
  • Scientists have renamed this era the Anthropocene, to denote the unprecedented impact humans are having on the planet, an impact that is driving the sixth mass extinction in the history of the planet.

  • The US financial “crisis” of 2008 was the largest private sector theft of public money in history, an estimated $16 trillion, followed by an aggressive global “austerity” push that targets the poor, the middle class, and people of colour to pay for the systemic fraud that caused the crisis.

  • The US income disparity gap between rich and poor is the greatest of any industrialized country.

  • For the first time in US history, student debt exceeds consumer debt. Never has a young generation of Americans seen this much debt, and consequently they await a life of serfdom in the capitalist order.

  • The global 2011 Billionaires List recorded a record number of billionaires and combined wealth.

  • There are more slaves today than at any time in human history.

  • Worldwide military spending reached a record high in 2011.
And those are just a few records.

Notice a trend?

The world is dying, and capitalists are making record profits as it dies. There are more slaves and billionaires than ever before. The military-industrial complex is the largest it has ever been.

In this context, poor and working people have been asked—well, told—to reduce their expectations for the future and for their quality of life in the present. The word of the year for 2010 was “austerity.”

The systemic fraud of 2008—a comma in the run-on sentence of capitalist exploitation—for which the poor are being asked to pony-up was not some hiccup in the benevolent functioning of capitalism: it was fraud, in an economic system predicated on fraud and massive exploitation. They stole trillions from the global poor, in particular from racialized people in the US. Now they want us to pay for their crisis.

I decided to make a documentary film about austerity, about a year and half ago, because I was perplexed by the absence of a mass rebellion against capitalism in North America, especially in the aftermath of 2008, and because I believe if we don’t stop the austerity agenda we will collectively be

That may sound like hyperbole, but consider the trends in the statistics above and the near-complete control corporatism has over the existing political institutions.

In the US, several states have begun to repeal workers’ rights (or what’s left of them) and pass laws allowing state governments to default on state pension plans, plans already made venerable by their investments in the same marketplace now trying to destroy them.

President Obama, hailed by some liberals as the progenitor of change, has continued the same policies of economic and military imperialism as his predecessor. His top advisers upon taking office were a collection of silk-suited thugs from the very same investment-banking coterie that pulled off the heist in 2008.

One of the objectives of the capitalist Age of Austerity is to break what remains (and that’s not saying much) of organized labour, most of which exists in public sector unions. In Canada, Harper’s hostile treatment of the postal workers’ union indicates an embrace of the austerity agenda: workers’ rights, such as they are, will not be respected. Recent layoffs at Environment Canada, and the regressive agenda of Toronto Mayor Rob Ford, suggest a massive evisceration of public services in Canada is on its way. Some union heads estimate as many as 30,000 civil servants may be axed.

The bankers and finance capitalists caused the crisis. Now public services such as education, health care, environmental protections, and essential infrastructure are going to pay for it. Unless, of course, we fight back.

I asked academics, activists and authors to define “austerity” and to suggest how we might fight back. The result is Capitalism Is The Crisis: Radical Politics in the Age of Austerity, a feature documentary that examines the nature of capitalist crisis, and some of the places where people have confronted capitalism including Greece, the G20 summit protest in Toronto, and the exhibition of mass solidarity in Madison, Wisconsin.

In the film, Chris Hedges (author of Death of the Liberal Class) and Derrick Jensen (author of Endgame) discuss the pathological character of capitalism. Hedges describes the BP executives as “executioners” at the helm of a system that will “kill most of us” if it is not stopped. I held a conversation with the unlikely pair back in July 2010, during the BP oil spill.

York University political scientists David McNally and Leo Panitch discuss the context for the current crisis of capitalism, which Panitch calls the “first great depression of the 21st century.” McNally suggests the Age of Austerity may last for “a generation.”

I talked to a variety of radicals. Michael Hardt, the Duke University professor who co-authored Empire, Multitude, and Commonwealth with Tony Negri, discusses an autonomist Marxist reading of the Great Depression and FDR. In some sense, we have to see ourselves as the crisis. We have to acknowledge that we have agency, that we can determine the outcome of this ongoing social war.
Max Haiven, a professor from Halifax, talks about the social ways in which debt narrows the radical imagination, leading to a mass forgetting of anti-capitalist movements of the past, and produces gestural and ineffective forms of resistance.

Ajamu Nangwaya, a graduate student at the University of Toronto and a former VP of CUPE Ontario, warns us not to be confused by the apparent resurgence of Keynesian economics in mainstream media discussions. The ruling class, he says, will do whatever it takes to preserve the system. The embrace of Keynesian economics by some capitalists is not an endorsement of socialism.

Queen’s University professor Richard J.F. Day talks about the long history of capitalist accumulation. He also comments on Harper’s probable agenda at the G20 summit crackdown.

I don’t want to give away the entire film here. Actually, I do (below). But I hope you will watch it and join the fight against austerity. This is not a fight that can be won through electoral politics. It requires a mass social movement, and it requires that capitalism be erased from the face of the earth forever.

Now is not the time to “restore the middle class,” the message from Big Labour; now is the time to restore human dignity and prevent the current crisis from being our last, by building an alternative to capitalism. We need a revolution, not a reformation.

It may be their crisis, but it’s our problem.

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Madoff Whistleblower: Big Banks Are Ripping Off Pension Funds

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Amid all the market volatility and weakness in the financial sector of late, you may have missed this WSJ front page story: "States Go After Big Bank on Forex".
The story is about growing scandal in the banking industry centered around banks allegedly overcharging pension funds for currency transactions.
"Attorneys general in Virginia and Florida filed civil suits against BNY Mellon alleging that the bank cheated pension funds in those states by choosing improper prices for currency trades the bank processed for the funds," The WSJ reports. "The Virginia lawsuit, filed in a Fairfax, Va., state court, cites internal bank emails allegedly showing that senior bank officials knew about, and endorsed, a currency-trading method that hurt state pensioners."
In addition to Virginia and Florida, California and Tennessee are also suing BNY Mellon and State Street Corp. over the alleged fraud.
The man who uncovered the alleged scam, Harry Markopolos, expects all 50 states to eventually join the suit. If the name sounds familiar that's because Markopolos was a whistleblower on the Madoff Ponzi scheme, only to have his claims ignored by the SEC for the better par of a decade. (See: Harry Markopolos Says Big Banks Worse Than Madoff)
In this case, Markopolos says BNY Mellon and State Street we're taking about "three tenths of a percent from every forex transaction for pension funds" by back-timing the trade to benefit banks at the detriment of their pension fund clients. "It's almost the exact same scheme as the market timing scandals of 2003," he claims.
When and if these cases go to trial is unknown, but Markopolos sure hopes to avoid a settlement. "I want to see them admit guilt," he tells Aaron Task in the accompanying interview. "If [banks] settle it feel like justice denied because they also will settle without admitting or denying guilt. That's just too easy. "

Golden Retrieval: Chavez wants his billion back

Roman shipwreck found in Albania

Archeologists found a Roman ship wreck with more than 300 amphoras onboard in Albania.
A team of Albanian and American archaeologists has found the remains of a Roman ship off the Karaburun Peninsula in Albania's southern coast.

Researchers discovered the 30 meter-long ship wreck at a depth of 50 meters and believe it to date back to a time between the second and first century BCE, BalkanInsight reported.

Experts say the find can reveal new facts about the ancient population of the southern Illyrian coast and its trade relations in the Mediterranean.

“The growing maritime evidence points toward an intense wine industry and associated heavy trade that developed in the 2nd century BCE and continued into the 1st century CE,” Dr. Jeff Royal of the RPM Nautical Foundation said in a statement.

“The heavy traffic of this commodity ran southward down the Eastern Adriatic route to the Vlora area before cutting over to Southern Italy and continuing into the West Mediterranean,” Royal added.

The vessel was found with more than 300 amphoras-a type of ceramic container- onboard.

The Albanian coast was part of an important trade route, receiving traffic from Greece, Italy, North Africa and the western Mediterranean.

“This discovery is important not only for the expedition but also for Albania's underwater archaeology,” said Dr. Adrian Anastasi of Albania's Institute of Archeology.

Financed by the RPM Nautical Foundation, the expedition has discovered 20 shipwrecks from ancient, medieval and modern times in the Albanian coast over the past five years.


MOODY'S WHISTLEBLOWER BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts, Corruption And Greed

Last night we had word that the Justice Department is probing S&P over mortgage bond ratings, so perhaps we will now see a similar investigation into Moody's.
Business Inisder
By Henry Blodget
A former senior analyst at Moody's has gone public with his story of how one of the country's most important rating agencies is corrupted to the core.
The analyst, William J. Harrington, worked for Moody's for 11 years, from 1999 until his resignation last year.
From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody's issued during the housing bubble.
Harrington has made his story public in the form of a 78-page "comment" to the SEC's proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody's processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.
The primary conflict of interest at Moody's is well known: The company is paid by the same "issuers" (banks and companies) whose securities it is supposed to objectively rate. This conflict pervades every aspect of Moody's operations, Harrington says. It incentivizes everyone at the company, including analysts, to give Moody's clients the ratings they want, lest the clients fire Moody's and take their business to other ratings agencies.
Moody's analysts whose conclusions prevent Moody's clients from getting what they want, Harrington says, are viewed as "impeding deals" and, thus, harming Moody's business. These analysts are often transferred, disciplined, "harassed," or fired.
In short, Harrington describes a culture of conflict that is so pervasive that it often renders Moody's ratings useless at best and harmful at worst.
Harrington believes the SEC's proposed rules will make the integrity of Moody's ratings worse, not better. He also believes that Moody's recent attempts to reform itself are nothing more than a pretty-looking PR campaign.
We've included highlights of Harrington's story below. Here are some key points:
  • Moody's ratings often do not reflect its analysts' private conclusions. Instead, rating committees privately conclude that certain securities deserve certain ratings--and then vote with management to give the securities the higher ratings that issuer clients want.
  • Moody's management and "compliance" officers do everything possible to make issuer clients happy--and they view analysts who do not do the same as "troublesome." Management employs a variety of tactics to transform these troublesome analysts into "pliant corporate citizens" who have Moody's best interests at heart.
  • Moody's product managers participate in--and vote on--ratings decisions. These product managers are the same people who are directly responsible for keeping clients happy and growing Moody's business.
  • At least one senior executive lied under oath at the hearings into rating agency conduct. Another executive, who Harrington says exemplified management's emphasis on giving issuers what they wanted, skipped the hearings altogether.
Harrington's story at times reads like score-settling: The constant conflicts and pressures at Moody's clearly grated on him, especially as it became ever clearer that his only incentive not to "cave" to an issuer's every demand was his own self-respect.
But Harrington's story also makes clear just how imperative it is that the ratings-agency problem be addressed and fixed. The current system, in which the government anoints organizations as deeply conflicted as Moody's with the power to determine sanctioned bond ratings is untenable. And the SEC's proposed rule changes won't fix a thing.
Harrington's story is startling, both in its allegations and specificity. (He names many Moody's executives and describes many instances that regulators and plaintiffs will probably want to take a closer look at.)
Given this, we expected Moody's might want to share its side of the story--or denounce Harrington as a disgruntled ex-employee. Instead, Moody's did not return multiple calls seeking comment.
Read the rest at BI, including the key excerpts from Harrington's testimony...