Thursday, January 31, 2013

Virginia alternative currency plan moves forward

Del. Bob Marshall did a little strategic name-dropping Thursday, and it had the desired effect.
For two years, the Prince William County Republican has been seeking a study of whether Virginia should adopt an alternative currency to replace the dollar in case the Federal Reserve System has a major meltdown.
His quest always ended in failure - until this year.
Presenting the latest version of his proposal (HJ590) to a subcommittee of the House Rules Committee, Marshall said his worry about a breakdown of the federal monetary system is no idle fear. There have been cyber attacks on banks, he said, and the Pentagon is preparing for economic warfare.
"My purpose is to have a Plan B," he said, so Virginians would still be able to conduct commerce without using greenbacks.
Then he pulled out his trump card.
This year, he said, he has the support of Judy Shelton, an economist who happens to be a friend and neighbor of House Speaker William Howell, R-Stafford County, who chairs the Rules Committee. And the speaker himself has gotten behind the measure, Marshall added.
Then, with almost no discussion, the panel approved the bill on a 4-0 vote, advancing it to the full committee.
The cost of the study is capped at $22,560 - in greenbacks.

Peter Schiff: Fed Wants To Keep Economy High As A Kite, Will Print Money Until We're Greece


Daily Show: CNN Is The Pretend News Network

CNN shuts down their investigative news division.
John Oliver discovers that pretend news is the mainstream media's sole remaining home for intrepid journalists.

Last week:

Jon Stewart: The Ungrateful Bastards Of AIG


'Daddy Keeps Cash In The Wall Cuz He Doesn't Trust Banks'

This is pretty funny.
How to screw up your kids with conspiracy theories.
More from Bill Burr:

Most difficult job on the planet.

A must see:

Bill Burr On Obama, Guns And The NDAA

US taxpayers are set to lose $27 billion from financial bailout: Report

American taxpayers are expected to lose USD 27 billion from the 2008 financial bailout.
American taxpayers are expected to lose USD 27 billion from the 2008 financial bailout.

American taxpayers are expected to lose USD 27 billion from the 2008 financial bailout, as a report reveals further losses attributed to the US Treasury Department.

US taxpayers can expect to lose even more than the estimated USD 22 billion made in the fall last year, due to increased losses for the Treasury Department on sales of shares in bailed-out companies, according to a report released on Wednesday by the special inspector general for the Troubled Asset Relief Program (TARP).

The report said taxpayers could lose USD 5.5 billion specifically on Ally Financial - formerly called GMAC under a partnership with General Motors - in losses based on unsafe mortgages given right before the financial crisis. Ally owes USD 14.6 billion of the USD 17.2 billion in assistance it received.

The US government would also need to sell all General Motors shares it holds at USD 71.86 per share, more than double the current price of USD 28. GM still owes USD 21.6 billion of the USD 49.5 billion bailout it received.

"Taxpayers saved GMAC, and they should not be put in the position of needing to save the company again," said Special Inspector General Christy Romero, adding that both Ally and General Motors owe more than half of the USD 67.3 billion still owed to taxpayers by companies that were bailed out during the financial crisis.

The government watchdog went on to reveal fraud related to TARP during investigations that subsequently led to criminal charges against 119 people, including 82 senior company executives.

This comes as Romero accused the Treasury Department for providing “excessive” pay for executives tied to the bailed-out corporations rescued from the financial crisis including General Motors, Ally Financial and AIG - the largest bailout recipient at USD 182 billion.

After the 2008 financial crisis, Congress authorized USD 700 billion for the bailout of some of America’s largest companies. About USD 413 billion was eventually issued.


Marc Faber Tells Maria Bartiromo on CNBC's Closing Bell 'You Should Buy Some Gold'

Marc Faber Tells Maria Bartiromo on CNBC's Closing Bell 'You Should Buy Some Gold'

US debt headed toward 200 percent of GDP even after 'fiscal cliff' deal

The nation's long-term fiscal outlook hasn't significantly improved following the recent agreement between Congress and the White House over tax and spending issues, according to a new analysis.
The "fiscal cliff" deal, combined with the debt-limit agreement of August 2011, only slightly delays the United States reaching debt-to-gross domestic product levels that would damage the economy and risk another fiscal crisis, according to a report from the Peter G. Peterson Foundation released on Tuesday.

The agreement "may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem," said Michael A. Peterson, president and COO of the Peterson Foundation. "The primary goal of any sustainable fiscal policy is to stabilize the debt as a share of the economy and put it on a downward path, and yet our nation is still heading toward debt levels of 200 percent of GDP and beyond," he said.
The report concludes that the recent round of deficit-reduction measures won't make major improvements because they fail to address most of the major contributors to the debt and deficit, including rapidly rising healthcare costs.

The analysis suggests that lawmakers take action quickly to ensure that the nation is on a sustainable fiscal path.
At a House Ways and Means Committee hearing last week, lawmakers and budget experts agreed that rising healthcare costs, such as Medicare, must be addressed this year as part of efforts to overhaul the tax code and entitlement programs.
"Until spending in those areas is reduced, tax revenues are increased, or policymakers implement a combination of both, the United States will continue to have a severe long-term debt problem," the report said.
"Reforms should be implemented gradually, and fiscal improvements must be achieved before our debt level and interest payments are so high that sudden or more draconian reforms are required to avert a fiscal crisis."
The latest deal that stopped income tax increases for those making $400,000 a year or less may have only improved the burgeoning debt situation by a year.
Scheduled spending cuts from the 2011 budget deal, combined with the fiscal cliff agreement, put the debt on track to reach 200 percent of GDP by 2040, five years later than was projected prior to the passage of the two deals.
The recent deficit-reduction measure gave the nation an additional year before hitting that 200 percent threshold, the report showed.
Sequestration does not improve the outlook much, either.
Even if the budget sequester is fully implemented, federal debt would still reach 200 percent of GDP within about 28 years.

On top of that, the debt will continue to grow between now and 2022, and will accelerate significantly after that.

Debt is now projected to grow from 72 percent of GDP in 2012 to 87 percent in 2022, down only slightly from the 90 percent that was estimated before passage of the most recent deal.
Many economists suggest keeping debt at or below 60 percent of GDP, with research showing that economic growth slows for countries that have debt levels exceeding 90 percent of economic growth.
"Americans shouldn’t be under any false impression that our debt problems are behind us," Peterson said.
"And because it takes years to implement policies fairly and gradually, we need to make decisions now, before we are forced by markets to take severe action that hurts our economy and our citizens."

Rush To Safety: Americans Buy Nearly Half a Billion Dollars Of Gold and Silver In January

While public officials may be ignoring the continued deterioration of our economy, job losses to the tune of hundreds of thousands of people weekly, and the unprecedented demand for government emergency support services like unemployment insurance and food assistance, Americans who sense uncertainty in the air are flocking to the safety of physical resources.
Our first point of interest is a recent report from the Federal Reserve that indicates some $114 billion dollars in cash was withdrawn from the nation’s largest banks in the last thirty days. Those holding their money at bailed out financial institutions are understandably concerned because the government’s $250,000 deposit insurance guarantee program, originally implemented to restore confidence in the wake of the 2008 financial crisis, expired at the end of 2012. That and the US fiscal situation has never been worse, with one Obama official recently having said the solution to the country’s woes is to simply kill the dollar.
This suggests investors and cash savers are no longer confident in the purported safety of the country’s “too-big-to-fail” institutions.
The next obvious question then is, “where did this money go?”
Part of the mystery may have been unraveled when the US Mint released its latest sales and inventory report.
According to the mint, investors purchased nearly half a billion dollars in gold and silver in the last 30 days. There was, in fact, so much money shifting into physical precious metals in January that the mint was actually forced to cease operations because they couldn’t meet demand.
massive 7.4 million Silver Eagles were purchased from the U.S. Mint in January, considerably higher than the previous record from early 2011.
After halting Silver coin production/sales for over a week, the Mint re-opened yesterday and demand once again surged.
Having almost doubled from the first week in January, there remains two more days before the book is closed on January’s sales.
At 140,000 ounces, the Mint has also sold the most ounces of gold in January in almost three years, suggesting the rising ‘currency wars’ are stoking people’s ongoing rotation from paper-to-physical assets as their ‘wealth’ slowing loses its value.
With a Silver Eagle trading at around $31 per ounce and the gold spot price at near all time highs of $1650, the US Mint saw some $460 million dollars shift into precious metals in the month of January alone.
What’s equally as interesting, and perhaps a harbinger of the coming chaos, is that the People’s Republic of China is also shifting a large amount of its cash reserves into physical resource based investments that include agriculture, energy, and precious metals, a move that has caused confusion among experts at the United Nations.
With the political situation in this country rapidly dwindling because of government interference on all levels, a recession for 2013 already baked into the cake, and a global economy on the brink of collapse, there is one primary motivating factor driving money into gold and silver.
As we’ve seen recently with shortages in emergency food rations and supplies, firearms and magazines, and now gold and silver, Americans are no longer confident in the stability of the system as a whole, and they are diversifying their assets into physical resources that will retain value should the global financial, economic, monetary, and geo-political systems come unhinged.

Rumors Swirling On Germany's Gold Grab

Report from Stuart Varney, perhaps the last person to have seen the Fed's foreign gold vaults.
Don't skip the last 5 seconds.
Here are the details:
Bundesbank - Official Statement On Germany's Gold Repatriation
How German Gold Storage Will Look In The Year 2020
The German central bank is planning a “phased relocation” of 300 tonnes (metric tons) of gold from New York to Frankfurt as well as an additional 374 tonnes from Paris to Frankfurt by 2020.  The reserves should end up looking like this:
  • Frankfurt (31%, currently) 50% by Dec. 31, 2020
  • New York (45%, currently) 37% by Dec. 31, 2020
  • London 13% no change
  • Paris (11%, currently) 0% by Dec. 31, 2020

More here:

"Germany's Gold Is Being Held Hostage By The Fed"

GDP Shows Surprise Drop for US in Fourth Quarter

Getty Images
The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.
The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.
The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.
The surprise contraction could raise fears about the economy's ability to handle tax increases that took effect in January and looming spending cuts.
Still, the weakness may be because of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.
And those volatile categories offset faster growth in consumer spending, business investment and housing -- the economy's core drivers of growth.
Another positive aspect of the report: For all of 2012, the economy expanded 2.2 percent, better than 2011's growth of 1.8 percent.
The economy may stay weak at the start of the year because Americans are coming to grips with an increase in Social Security taxes that has left them with less take-home pay.
Subpar growth has held back hiring. The economy has created about 150,000 jobs a month, on average, for the past two years. That's barely enough to reduce the unemployment rate, which has been 7.8 percent for the past two months.
Economists forecast that unemployment stayed at the still-high rate again this month. The government releases the January jobs report Friday.
The slower growth in stockpiles comes after a big jump in the third quarter. Companies frequently cut back on inventories if they anticipate a slowdown in sales. Slower inventory growth means factories likely produced less.
Heavy equipment maker Caterpillar, Inc. said this week that it reduced its inventories by $2 billion in the fourth quarter as global sales declined from a year earlier.
The biggest question going forward is how consumers react to the expiration of a Social Security tax cut. Congress and the White House allowed the temporary tax cut to expire in January, but reached a deal to keep income taxes from rising on most Americans.
The tax increase will lower take home pay this year by about 2 percent. That means a household earning $50,000 a year will have about $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.
Already, a key measure of consumer confidence plummeted this month after Americans noticed the reduction in their paychecks, the Conference Board reported Tuesday.
Economists expected the first reading on gross domestic product to show growth of 1 percent, down from the third quarter's reading of 3.1 percent.

Why A Fed President Wants To Break Up The Banks

Richard Fisher's plan.
'The system is biased towards Goldman Sachs and JPMorgan.'
Excellent Bloomberg interview.  Dallas Federal Reserve President Richard Fisher details his plan to break up the banks.  Here's a quick summary:
  • There are 12 banks that meet the criteria for too big to fail.
  • Dodd-Frank is killing small community banks.
  • Fed is constantly reassessing stimulus.
  • QEternity is false.  Will not last forever.
  • Voted against latest round of QE.
  • Worried about Treasury bubble bursting.
  • Worried about Fed's exit strategy.
  • Biggest inflation hawk on the Fed and he sees little inflation.

US slips back into recession

Port of Los Angeles.(AFP Photo / Robyn Beck)
Port of Los Angeles.(AFP Photo / Robyn Beck)
The US economy unexpectedly took its biggest plunge in more than three years last quarter, contracting at an annual rate of 0.1 percent and indicating a new level of vulnerability for the economy.
The plummet marks the first time the economy contracted since the Great Recession ended and is causing concern that the US could be headed further downhill. The economy shrank from October through December, which economists attribute to a large cut in spending, fewer exports and lagging growth in company stockpiles.
Defense spending contracted at a 22 percent annual rate in the fourth quarter and saw its biggest cut in 40 years, while business inventories sharply declined, indicating that businesses will need to buy more goods in the next quarter to restock their shelves. The Hurricane Sandy recovery effort also cut about 0.5 percentage points off of fourth-quarter growth.
Gross domestic product fell at a 0.1 percent annual rate, which is a dramatic decrease from the economy’s 3.1 percent growth rate in the third quarter, the Commerce Department reported. The US economy had not plummeted this deeply since the second quarter of 2009, when the Great Recession was in its final stages.
Alan Krueger, head of President Obama’s Council of Economic Advisers, attributes the deep decline to the upcoming sequestration deadline.
“A likely explanation for the sharp decline in federal defense spending is uncertainty concerning the automatic spending cuts that were scheduled to take effect in January, and are currently scheduled to take effect on March 1st,” Krueger wrote in a White House blog post.
But uncertainty still exists as lawmakers have once again delayed a potential US default without coming up with a long-term budget plan. The new sequestration deadline could continue to harm the economy.
While a number of economists are hopeful that the deep contraction was a one-time event and the economy will spring back to life in the first quarter of 2013, the plummet should instead give policymakers a sense of urgency to deal with their outstanding budget issues. No economists predicted the contraction and they might also fail to predict any future declines.
Even though the fourth quarter’s deceleration may have been partially due to temporary factors, like the effects of Hurricane Sandy, it caused 2013 to begin with no momentum, and raises concern over a further decline in wake of another congressional budget battle and a looming sequestration deadline.
Fears over the effects of a fiscal cliff kept businesses from stocking up on inventories, but the fears of a US default could return in three months.
“Think of it as a giant hand holding down the economy,” Tim Hopper, chief economist at TIAA-CRED told the Wall Street Journal about the uncertainty over the long-term budget. And with a recession still holding down parts of Europe, US exports could continue to lag.
“The economy has less momentum going into 2013 than initially thought, making it vulnerable to external shocks,” said Stuart Hoffman, chief economist at PNC Financial Services Group.
Economists failed to predict the most recent contraction and if the economy continues to decline, then they will have also failed to predict the next US recession.

HOT LINKS: New Bill Requires Gold & Silver Registration

Bundled up against the extreme cold, Julie Caruso of Akron, Ohio, waits in a long line for a tour of the White House on Inauguration Day.
Morning reading.
New Bill Requires Gold & Silver Registration With State
It has been introduced in Illinois, the most anti-gun state in the U.S.
Creates the Precious Metal Purchasing Act.  Provides that a person who is in the business of purchasing precious metal shall obtain a proof of ownership, create a record of the sale, and verify the identity of the seller.  Provides that a person who is in the business of purchasing precious metal shall not pay for the precious metal in cash and shall record the method of payment.  Requires the purchaser to keep a record of the sale for one year or, if the purchase amount is over $500, for 5 years.  Provides that a person who violates the Act is guilty of a petty offense and subject to a fine not exceeding $500. Provides that the Attorney General may inspect records, investigate an alleged violation, and take action to collect civil penalties.

IMF Confirms Chinese Yuan/Renminbi Set to Become a Global Reserve Currency

The IMF has confirmed the Yuan/Renminbi is set to become a Global Reserve Currency at an Economic Forum in Hong Kong.

With China's economy gaining global strength, the renminbi is set to become a global reserve currency, Zhu Min, deputy managing director of the International Monetary Fund, said Tuesday at an economic forum in Hong Kong.

Yesterday I wrote about the crossborder loans China was doing, before the Yuan becomes a Reserve Currency, their saying the "unloved dollar' and the amount of gold they are importing.  Besides the rumors of them backing their currency by gold.

David Morgan of the Morgan Report and did an interview with me about the subject, Germany's gold and the Silver shortage/manipulation.

David mentioned that things take time to happen and as I add on the third part of the interview is that it already has been years and maybe the situation will start going faster.

It seems to me with the Yuan being called a Global Reserve currency now even by China itself, they have laid out the ground work for changes to be made in a short amount of time.  China does not reveal their hand until everything is already said and done.   Considering the dollar has been the only "Global Reserve" currency for decades but this month the Yuan is becoming attached with that name.

The dollar demise has been talked about for years now.  Many had been saying "anytime" but it has been long and drawn out.  China is very smart as they take their time and put everything in place before they reveal or make their big moves.   Has the time now come?

The Premier of China had gone to Saudi Arabi and Dubai a year ago.  He stayed a week there having meetings and making agreements.
Premier Wen Jiabao and the ruler of SharjahSultan bin Mohammed al-Qassimi,attend the Arab-China Business Conference in the Gulf emirate on Wednesday. [Photo / AFP]

  SHARJAH, UAE - China signed economic and trade agreements worth 100 billion yuan ($16billion) with Saudi Arabia and the United Arab Emirates (UAE) as Premier Wen Jiabao wrappedup a six-day visit to the Middle East on Thursday.
The first currency swap agreement with Arab nations, worth 35 billion yuan, was also signed inAbu Dhabi, Wen told the Fourth Arab-China Business Conference in Sharjah on Wednesday.
Are those agreements now coming into fruition?   Is Saudi Arabi ready to be one of the last Middle Eastern countries to trade in something other than the "Petrol Dollar?"  If Saudi Arabia begins oil trade in something other than the dollar, then it really is game over for the dollar as the Global Reserve Currency and any strength it now has.   It only has strength because all of the other countries are devaluing their currencies against the dollar for trade.  With the Fed printing the dollar non-stop, currency wars are raging, no one wants to have the strong currency due to trade and their products being un-affordable to other countries.

But once the dollar is no longer a worry or concern for trade then all the other countries will be able to stop their currency devaluations against the dollar because a new Global Currency backed by Gold will be the hero of the world.   The only country that will be left all to itself with their inflating currency will be the United States.

It seems the proximity of this occurrence is now much closer with both the IMF and China itself using the words "Global Reserve Currency" for the Yuan.

'Owner' of the Federal Reserve confronted!

Bailout Costing Taxpayers Billions, TARP Watchdog Warns

Guess what, American taxpayer: More than four years after the financial crisis started, you are still on the hook for a nearly $15 billion investment in a subprime mortgage lender.
That's just one of a litany of troubling facts in a new report by Christy Romero, the Special Inspector General for the Troubled Asset Relief Program, which pumped more than $600 billion into failing banks and other companies during the crisis. The report details the many billions of taxpayer dollars still sunk into hundreds of struggling banks, some of which are still failing, and the risks still festering that could create a future crisis.
The report is a striking reminder that, even as the stock market comes close to cruising to record highs, led by skyrocketing bank stocks, the crisis still haunts us.
In fact, the bailout could arguably have made a future crisis more likely, by encouraging big banks to take on even more risks, in the widespread belief that they can always turn to the government for more cash in the event they crash the Hindenburg, again.
"The people taking those risks are insulated from the consequences -- that's moral hazard," Romero said in a telephone interview. "It continues to exist, and it must be dealt with."
The government is still mopping up the mess from the last crisis, as Romero's report makes clear. Its portfolio of pain includes a 74 percent stake in Ally Financial, formerly known as GMAC, which was rescued repeatedly during and after the crisis, with little or no plan for ending the rescue, according to Romero.
Ally still owes the government $14.6 billion and might ultimately cost the Treasury Department $5.5 billion in losses, according to the White House Office of Management and Budget -- part of a total long-term TARP cost that could exceed $60 billion.

Ally is widely known as the financing arm of General Motors (which was also bailed out). Less well-known is that Ally is hauling around a struggling subprime-mortgage lending unit called Residential Capital, or ResCap, which Romero calls "a millstone around taxpayers' necks."
Treasury bailed out Ally without making the lender prepare a plan for unwinding its subprime mortgage portfolio. The government then pumped more money into Ally on two separate occasions, again without any conditions or plans for dealing with its toxic mortgages. And even as taxpayers took an increasing stake in Ally, the lender was getting into trouble for its mortgage-foreclosure practices: Last year Ally agreed to pay $310 million to settle "robosigning" charges.
"There are these liabilities and issues surrounding GMAC mortgages that caused massive losses and federal enforcement actions like the robosigning settlement," Romero said, "but there is no real requirement in TARP to address these issues."
The Treasury Department, in a response letter, says there are "a number of inaccuracies" in Romero's report. The agency says the government is working on a plan to restructure ResCap's debts and then spin off its ownership in the "good" parts of Ally in a public stock offering.
Ally is just one of 291 troubled institutions in which the government is still invested, according to Romero's report. Treasury has warrants to buy stock in 47 others, including the insurance giant American International Group.
Many of the banks the government owns are still struggling to make ends meet. Nearly 200 institutions participating in a TARP program supposedly aimed at "healthy, viable institutions" have skipped dividend payments to the government, costing the Treasury Department an estimated $506.2 million, according to Romero's report. By the end of last year, 22 of those supposedly healthy banks had failed.
Another 137 banks in that program simply refinanced their TARP debts through other government loan programs designed for small banks and businesses, according to Romero.
In another point of contention, Romero says that the government is ultimately going to lose billions of dollars on the bailout, not turn a profit as Treasury claims. By her office's count, the government has already written off investment losses of $27.1 billion on TARP and is still owed $67.3 billion. The White House Office of Management and Budget recently estimated that TARP will ultimately cost the government $63.5 billion -- though that figure includes $45.6 billion in housing-relief programs that were never meant to be paid back.
Treasury, on the other hand, says taxpayers may ultimately realize a net gain on all of the government and Federal Reserve programs created to stop the bleeding during the crisis.
But these accounting quibbles mask more significant and lingering problems. The biggest and most interconnected banks are bigger and more interconnected than ever before, and the government has no idea whether it will be able to safely wind down a too-big-to-fail bank in the event of another crisis, Romero warns.
Meanwhile, these banks are no closer to figuring out the risks on their own balance sheets, as evidenced by JPMorgan Chase's $6 billion in credit-derivatives losses caused by one trader known as the "London Whale." And the prospect of future bailouts may embolden banks to take still more risks.
"It's up to regulators," Romero said, "to make clear that there is not going to be another government bailout."


What is a Central Bank?

Wall Street Banks Seize Opportunity to Profit from Nation's Unemployed

Big to Fail' banks including JP Morgan Chase, U.S. Bancorp and Bank of America have seized on an opportunity to profit off the nation's jobless by siphoning millions of dollars in fees from state unemployment programs, according to a new report by the National Consumer Law Center.
(Charles Krupa/Associated Press) Privatizing the task of distributing unemployment benefits, the banks have created a "fee-heavy" check card system. Instead of having payments deposited directly to bank accounts or recieving checks sent in the mail from their state governments, individuals across the nation are increasingly forced to use costly bank issued payment cards that are loaded with a "plethora" of costly fees for the recipient.
The large banks pitched the operation to states as a scheme that would "save millions in overhead costs" but have instead externalized such costs to America's jobless.
The Associated Press reports:
People are using the fee-heavy cards instead of getting their payments deposited directly to their bank accounts. That’s because states issue bank cards automatically, require complicated paperwork or phone calls to set up direct deposit and fail to explain the card fees, according to a report issued Tuesday by the National Consumer Law Center, a nonprofit group that seeks to protect low-income Americans from unfair financial-services products. [...]
Banks make more money when more people use the cards. In the past, some of their deals with states prevented states from offering direct deposit, or required states to promote the card program as a first option.
To cover the cost of issuing cards and running the programs, banks charge a plethora of fees, including charges for balance inquiries, phone calls to customer support, leaving an account inactive for a period of months, or making a purchase using a personal identification number.
Read more on this story here.

The big bad business of exploiting eager interns for free labour

Put upon: Anne Hathaway in The Devil Wears Prada
THE disillusioned young worker struggles out of bed at dawn and heads off to a menial and mindless job, offering only pitiful pay, poor treatment, and long hours. Happens in Asia, right? Africa? Well it happens here too. I met two people recently with worrying stories.
Betti was excited about the world. She had just graduated with a good degree in Language, Literacy, and Communication. All the hard work through high school and university had paid off. Looking forward to an exciting career, she decided to expand her experience by doing a one month, unpaid internship with a PR company. Once there, she was given a wide range of trivial tasks, things other people didn’t want to do: photocopying, filing, and running errands. She was treated as very junior and was even severely reprimanded for talking to a client at a champagne function. Her role there, it was made clear, was simply to hand out brochures.
So while Betti wasn’t enjoying the internship, she told herself that there were plenty of positives. She was building a CV, learning about office life, and hopefully picking up background information about the business world. With this in mind, she agreed to extend the unpaid internship for a further three months on the promise that she would then be offered a paid position. She should have agreed the salary in advance, because when the offer finally came, her heart sank – it was only £12,000. As a graduate, she had expected £18,000. She was close to walking out the door in disgust but, fearful of the job market and mindful of the four months invested, she reluctantly accepted. With the long hours she works, she calculates that she earns less than an unqualified school leaver working at Tesco.
Another young girl, Alex, graduated with a good degree in Art, History and Italian, and saw an ad on Twitter for an internship at a fashion company. The company was putting on a big show and was “hiring” interns to help out. The people were very pleasant and treated her well. The mistake Alex made was to use her own debit card to purchase minor items for the company, such as materials, tools and glue. At the end of the six-week stint she was owed about £150. The company didn’t reimburse her. After being run around in circles, she eventually started legal action. That finally nudged the company into paying her. When Alex told me this story, I had some sympathy for her employers, because I suspected they were struggling to survive. However that sympathy quickly evaporated when she told me that they seemed to be prospering. And with a staff of four full-time employees, they used – wait for it – 12 unpaid interns.
Now, I do know that many interns are treated very well. However, in some cases, maybe many cases, I fear their biggest business lesson is that the more free labour you can hire and tire, the better. Even in the UK.
Richard Farleigh has operated as a business angel for many years, backing more early-stage companies than anyone else in the UK.

The Top 1% Must Stop Insisting They’re Not Rich Right This Instant

Take a deep breath. Relax. Center yourself. Think about your bank account. Now. Are you ready for an article explaining why $196,000 per year is not that much money? Good.
This is a common theme, reiterated everywhere from golf course bars to the pages of various rich person-centric newspapers and magazines: "[Salary much higher than yours] might sound like a lot, but once you consider the cost of living, I'm really not even close to being 'rich.'" Yeah. Fuck you. Today's entry in this category comes in the form of a Toronto Life essay by Jonathan Kay, which is god damn enraging, assuming you make less than $196K per year (the cutoff line for Canada's top 1%). "That's no small amount of money, but hardly the means for a life of leisure," Jonathan writes. OH? "In an increasingly pricy city like Toronto, where we pay a premium for everything from milk to car insurance, $196,000 can seem positively middle-class." Please Jonathan, justify yourself, with numbers.
Break it down, and it translates to roughly $10,400 a month, after taxes. For many Torontonians, that $10,400 disappears fast. Thousands go to the mortgage. For those with young kids, daycare can cost upwards of $1,500 a month. There are the car and RSP payments, wardrobe refreshes, utility bills and something to set aside for when the furnace inevitably conks out. Plus the cost of the sushi, pad Thai and butter chicken that we order in three nights a week-because we're all too tired to cook by the time we get home from work.
Then there's the stuff that fills our houses-the calibre of which is the subject of intense, unspoken competition among my peers and neighbours.
And here we see the fundamental dishonest characteristic of each and every article which advances this particular enraging argument. "Sure, it's an objectively large sum of money," they say. "But it is far smaller after I spend it."
No shit.
Money pays for the costs of life. That is what money does. You can't fucking argue that, hey, your money doesn't go that far after you've already spent it. You used it! Paying taxes and paying bills and paying the mortgage and putting money in a retirement fund and going out to dinner are the things that money gets you. You asshole. Just because you didn't blow it all on jewelry, caviar, and cocaine doesn't mean you didn't get anything out of it. This argument is like a man eating a hearty meal, licking his plate clean, then turning to a starving person and saying, "Look, we're in the same boat. My plate is empty too!"
Now let's examine a few of the expenses listed by the five "prosperous Torontonian" households that this piece uses to illustrate the fact that $196K a year really ain't all that much. Here, a sampling of some of the monthly expenses of these "positively middle-class" folks:
Gas for their Jeep Commander and Ford F-150 truck: $440.
Cleaning lady: $160.
Condo fees: $900.
Gas for their Mercedes E320: $150. ("We buy a new Mercedes every three years; it's our big indulgence," says Doug. "We always pay cash. This one was $80,000.")
Wine: $800.
Clothes at Harry Rosen and shoes from online collectible sneaker stores: $1,000.
Groceries at Loblaws, Metro, Fortino's and the Oriental Food Mart on Finch West: $1,600
Hair salon: $400.
Vitamins, creams and lotions at Shoppers: $400.
Eating out, mostly at Swiss Chalet and Jack Astor's: $840.
Money: once you spend it all, you don't feel rich any more. Someone should write an essay about that.
[Toronto Life. Image via. Thanks, L.Y.]

Swiss Banks Offer Allocated Accounts As Move To Allocated Internationally

Today’s AM fix was USD 1,666.25, EUR 1,230.70, and GBP 1,057.20 per ounce.
Yesterday’s AM fix was USD 1,660.50, EUR 1,235.12, and GBP 1,057.17 per ounce.
Silver is trading at $31.36/oz, €23.25/oz and £19.25/oz. Platinum is trading at $1,690.00/oz, palladium at $754.00/oz and rhodium at $1,200/oz.

Cross Currency Table – (Bloomberg)

Gold rose $7.80 or 0.47% in New York yesterday and closed at $1,662.70/oz. Silver surged to a high of $31.47 and finished with a gain of 1.59%.
Gold managed to hold firm after recovering from a 4 day slide on the likelihood that the U.S. Fed will continue with its ultra loose quantitative easing policy.
The U.S. FOMC is expected to confirm in a statement at 1915 GMT that it will continue the $85 billion in monthly bond purchases until unemployment rates drop significantly. Even though some Fed officials and many market participants have expressed concern over the side effects from such measures.
The U.S. nonfarm payrolls data expected on Friday will give a closer look at the labour market.  A poll of economists by Reuters shows that they expect U.S. unemployment to be unchanged from last month at 7.8%.
Climbing oil prices continue to stir investor worries about inflation.  Brent crude hit a 3 month high in the prior session.
Silver jewellery exports from India are projected to rise to 30% this year as world demand grows, noted the India's Gems and Jewellery Export Promotion Council.
American Eagle silver coin sales in January surged to an all time monthly high. The U.S. Mint recently resumed sales after huge demand led to a lack of inventory and created a temporary suspension of sales.
Gold bullion coins also saw their highest sales since July 2010.
As of January 29, Silver Eagle sales for the month were 7.1 million ounces, data from the U.S. Mint's website showed, surpassing its previous record of 6.1 million ounces set in January 2012.
Reuters reports that “huge quantities” of silver bullion coins were being bought by investors, including entire monster boxes full with 500 1 oz bullion coins sealed by the US Mint.
Swiss banks, UBS and Credit Suisse, have moved to offer allocated gold and silver accounts to their clients – including high net worth individuals, hedge funds, other banks and institutions.

Gold in U.S. Dollars, Monthly – (Bloomberg)

The move allows these entities to take direct ownership of their bullion in allocated accounts.
According to the Financial Times, the banks say that they are making the move in order to reduce exposure and risks on balance sheets and in an effort to be more transparent.
“Under more common "unallocated" gold accounts, depositors' bullion appears on the banks' balance sheets, forcing them to increase their capital reserves. Like their global peers, UBS and Credit Suisse are under pressure from regulators to reduce capital-intensive activities ahead of the introduction of new Basel III global banking rules.”
It is more likely that the banks made the move to allocated storage due to an increased preference from their investors who are weary of continuing systemic risk.
We have spoken and written about this trend for some time.
In recent months there has been a definite change by our clients and by bullion owners internationally from owning gold and silver in unallocated accounts, to owning bullion coins and bars in allocated and segregated accounts.
Investors who were unwilling before to pay annual storage fees on allocated accounts are now willing to pay the extra cost. This is due to increased awareness and concern about systemic risk and a preference for owning gold directly and eliminating counter party risk.
Indeeed, we and other bullion dealers who offer allocated storage outside the banking and financial system have seen flows out of bullion banks unallocated gold account offerings and into allocated accounts such as with the Perth Mint and Via Mat.

XAU/JPY Gold in Japanese Yen, Monthly – (Bloomberg)

Smart money internationally is moving towards allocated storage and away from more risky unallocated storage and this trend is set to continue.
With unallocated storage one is an unsecured creditor of the provider or bank whereas with allocated storage the client directly owns the gold and the gold cannot become encumbered.
Allocated and segregated storage costs more money as more space is required in vaults and there is a higher insurance cost. Banks have realised that there is a preference to own allocated gold and are moving to offer that. They may also be able to make a small margin on the annual storage fee, in and above, the cost of storage to them.
The move by the Swiss banks is a reactive one in order to prevent the loss of clients who are concerned about systemic risk and want to own bullion in the safest way possible.

How they bleep you

Who Owns The Federal Reserve?

The Fed is privately owned. Its shareholders are private banks


“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”
– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s
The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JPMorgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JPMorgan, sits on the board of the New York Fed and participated in the secret weekend negotiations.1 In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a “government takeover,” but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency. Also unprecedented was the way the deal was funded. The Associated Press reported:
“The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs.”2
This is extraordinary. Why is the Treasury issuing U.S. government bonds (or debt) to fund the Fed, which is itself supposedly “the lender of last resort” created to fund the banks and the federal government? Yahoo Finance reported on September 17:
“The Treasury is setting up a temporary financing program at the Fed’s request. The program will auction Treasury bills to raise cash for the Fed’s use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.”
Normally, the Fed swaps green pieces of paper called Federal Reserve Notes for pink pieces of paper called U.S. bonds (the federal government’s I.O.U.s), in order to provide Congress with the dollars it cannot raise through taxes. Now, it seems, the government is issuing bonds, not for its own use, but for the use of the Fed! Perhaps the plan is to swap them with the banks’ dodgy derivatives collateral directly, without actually putting them up for sale to outside buyers. According to Wikipedia (which translates Fedspeak into somewhat clearer terms than the Fed’s own website):
“The Term Securities Lending Facility is a 28-day facility that will offer Treasury general collateral to the Federal Reserve Bank of New York’s primary dealers in exchange for other program-eligible collateral. It is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. . . . The resource allows dealers to switch debt that is less liquid for U.S. government securities that are easily tradable.”
“To switch debt that is less liquid for U.S. government securities that are easily tradable” means that the government gets the banks’ toxic derivative debt, and the banks get the government’s triple-A securities. Unlike the risky derivative debt, federal securities are considered “risk-free” for purposes of determining capital requirements, allowing the banks to improve their capital position so they can make new loans. (See E. Brown, “Bailout Bedlam,”, October 2, 2008.)
In its latest power play, on October 3, 2008, the Fed acquired the ability to pay interest to its member banks on the reserves the banks maintain at the Fed. Reuters reported on October 3:
“The U.S. Federal Reserve gained a key tactical tool from the $700 billion financial rescue package signed into law on Friday that will help it channel funds into parched credit markets. Tucked into the 451-page bill is a provision that lets the Fed pay interest on the reserves banks are required to hold at the central bank.”3
If the Fed’s money comes ultimately from the taxpayers, that means we the taxpayers are paying interest to the banks on the banks’ own reserves – reserves maintained for their own private profit. These increasingly controversial encroachments on the public purse warrant a closer look at the central banking scheme itself. Who owns the Federal Reserve, who actually controls it, where does it get its money, and whose interests is it serving?
Not Private and Not for Profit?
The Fed’s website insists that it is not a private corporation, is not operated for profit, and is not funded by Congress. But is that true? The Federal Reserve was set up in 1913 as a “lender of last resort” to backstop bank runs, following a particularly bad bank panic in 1907. The Fed’s mandate was then and continues to be to keep the private banking system intact; and that means keeping intact the system’s most valuable asset, a monopoly on creating the national money supply. Except for coins, every dollar in circulation is now created privately as a debt to the Federal Reserve or the banking system it heads.4 The Fed’s website attempts to gloss over its role as chief defender and protector of this private banking club, but let’s take a closer look. The website states:
* “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations – possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.”
* “[The Federal Reserve] is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.”
* “The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. . . . After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.”5
So let’s review:
1. The Fed is privately owned.
Its shareholders are private banks. In fact, 100% of its shareholders are private banks. None of its stock is owned by the government.
2. The fact that the Fed does not get “appropriations” from Congress basically means that it gets its money from Congress without congressional approval, by engaging in “open market operations.”
Here is how it works: When the government is short of funds, the Treasury issues bonds and delivers them to bond dealers, which auction them off. When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. These maneuvers are called “open market operations” because the Fed buys the bonds on the “open market” from the bond dealers. The bonds then become the “reserves” that the banking establishment uses to back its loans. In another bit of sleight of hand known as “fractional reserve” lending, the same reserves are lent many times over, further expanding the money supply, generating interest for the banks with each loan. It was this money-creating process that prompted Wright Patman, Chairman of the House Banking and Currency Committee in the 1960s, to call the Federal Reserve “a total money-making machine.” He wrote:
“When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check.”
3. The Fed generates profits for its shareholders.
The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.
In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in “reserve” can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total “loans and leases in bank credit” as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.
The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ — for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks.
Time to Change the Statute?
According to the Fed’s website, the control Congress has over the Federal Reserve is limited to this:
“[T]he Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute.”
As we know from watching the business news, “oversight” basically means that Congress gets to see the results when it’s over. The Fed periodically reports to Congress, but the Fed doesn’t ask; it tells. The only real leverage Congress has over the Fed is that it “can alter its responsibilities by statute.” It is time for Congress to exercise that leverage and make the Federal Reserve a truly federal agency, acting by and for the people through their elected representatives. If the Fed can demand AIG’s stock in return for an $85 billion loan to the mega-insurer, we can demand the Fed’s stock in return for the trillion-or-so dollars we’ll be advancing to bail out the private banking system from its follies.
If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves. Among other benefits to the taxpayers. a truly “federal” Federal Reserve could lend the full faith and credit of the United States to state and local governments interest-free, cutting the cost of infrastructure in half, restoring the thriving local economies of earlier decades.
Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine. Her websites are  and .

IRS Report: We Could Lower Tax Rates 44% Just By Closing Loopholes

IRS Ombudsman: We Could Lower Tax Rates By 44% Just By Closing Loopholes
"Congress could lower individual rates across the board by 44 percent and come up with the same amount of revenue if it eliminated all tax breaks" Washington Post reporter Josh Hicks noted in a January 10 column.  Given the ongoing battles over taxes, spending, and the national debt in Congress, you'd think this would be worthy of front-page placement in the Post.  Editors apparently disagreed, placing it on the bottom of page A13, today's edition of The Fed Page.
Woman Battles Bank Giants Over Faulty Foreclosure (Must Read)
BILL GROSS: Bundesbank Gold Move Means Central Banks Don't Trust Each Other
Pentagon Sponsors Parade, Football Games While Moaning Over Budget Cuts
NRA: Membership Has Grown By 250,000 In One Month
Pentagon Shifts Tactics On Sequestration Cuts - The Hill's DEFCON
Fitch Reiterates Rating Threat On Debt Ceiling
Bain Alumni Vie For Australia's Billabong
Euro-Zone Bailout Fund Is TOO SMALL For Debt Crisis
Feds Order J.P. Morgan To Improve Anti-Money Laundering Program
Obama Considering Two Women For Top Spots At Treasury
John McAfee: My Story in Belize Is Far From Over: Video - Bloomberg
It's Official: Worst. Congress. Ever.
Cockroaches, Colonoscopies And Nickelback - More Popular Than Congress
Obama: 'I'm A Pretty Friendly Guy, I Like A Good Party'
U.S. Listed China MediaExpress Declared 'Complete Fraud'
TWITTER Heads To Paris Court After Flood Of 'Nazi' Posts
Dolce And Gabbana Become Billionaires
Stripping For Big Money: The Secret To Rick's Cabaret: Video - Bloomberg
Chicago To Pay $22 Million To Woman Released In High-Crime Area (Horrible Story)
VIDEO - First Humanoid Robot Working In Space

Photo by William Banzai7...

Krugman And The Imaginary Treasury Secretary Job Offer

Krugman's megalomania.
Krugman turned down the job to replace Geithner as Treasury Secretary, while overlooking the salient fact that no one ever offered him the job.  Megalomania is a psychopathological disorder characterized by delusional fantasies of power, relevance, or omnipotence.
Working For Obama Would Be A Step Down
Krugman Turns Down Job As Treasury Secretary...The Problem Is That No One Ever Offered Him The Job
Krugman's NYT Blog - The Irresponsible Keynesian
Yes, I’ve heard about the notion that I should be nominated as Treasury Secretary. I’m flattered, but it really is a bad idea.
Part of the reason is that I am indeed the World’s Worst Administrator — and that does matter. Someone else can do the paperwork — but an administrative job requires making hiring and firing decisions, it means keeping track of many things, and that, to say the least, is not my forte.
Oh, and there’s not a chance that I would be confirmed.
But the main point, as I see it, is that it would mean taking me out of a quasi-official job that I believe I’m good at and putting me into one I’d be bad at.
So first of all, let’s talk frankly about the job I have. The New York Times isn’t just some newspaper somewhere, it’s the nation’s paper of record. As a result, being an op-ed columnist at the Times is a pretty big deal — one I’m immensely grateful to have been granted — and those who hold the position, if they know how to use it effectively, have a lot more influence on national debate than, say, most senators. Does anyone doubt that the White House pays attention to what I write?
Now, officials inside the administration can of course have even more influence — but only if they’re good at a very different kind of game, that of persuading the president and his inner circle in behind-closed-doors discussion. And everything I know about myself says that I’m not very good at that game.
By my reckoning, then, an administration job, no matter how senior, would actually reduce my influence, leaving me unable to say publicly what I really think and all too probably finding myself unable to make headway in internal debates.
So again, I’m flattered — but I think I should stay in my current position as Mr. Outside, an annoying if sympathetic voice they can’t ignore.
The Weekly Standard also picked up this story...

Wednesday, January 30, 2013

Report: TARP Pay Czar Patricia Geoghegan Permitted Excessive Executive Pay at Bailed-Out Companies:

  28 Jan 2013 Top executives at three major companies that received taxpayer-financed bailouts received excessively generous pay packages last year, in an apparent violation of Treasury guidelines aimed at restricting their compensation, a government watchdog asserted in a report Monday. The Office of the Special Inspector General for the Trouble Asset Relief Program — which keeps tabs on taxpayer bailouts — singled out for blame “pay czar” Patricia Geoghegan, the Treasury official tasked with reining in excessive pay increases for executives at bailed-out companies. The SIGTARP report directly questioned Geoghegan’s judgment in ignoring directives set by her predecessor as well as recommendations from a previous report, saying she accepted companies’ own justifications for high executive pay.y.

The Disappearing Gold

During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany. It was assumed at that time that the US would be a safer storage location, and of course, they could always ask to have it returned if they wished.
But German citizens have become increasingly worried about the security of the 1,536 tonnes of German gold reputedly held at the Federal Reserve in New York. This has resulted in the Bundesbank pursuing repatriation of the gold, beginning with a request to view it in the basement of the Federal Reserve Building, where it is claimed to reside.
Of course, the German government had received periodic assurances from the Fed that the gold is there; however, the issue began to get a bit sticky recently, when the Fed refused a request for inspection.
The world then raised a collective eyebrow, and, whilst not panicking over this development just yet, closer attention has come to bear, not only on the Fed, but on any institution that is entrusted with the storage of gold for other parties.
Concern spread to Austria, where a question arose in Parliament as to where Austria’s gold is stored. The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)
Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK.
To many, a second eyebrow might go up at this point. Lease out the wealth of another nation? Isn’t this a bit… irresponsible?

The New Gold Shuffle

Not to worry, it’s done all the time. In fact, the practice has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return.
The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee.
In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.”
Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.

The New Risks

But even if it became generally known that the Fed (and others) are holding paper, rather than physical gold, couldn’t we carry on as before? What could go wrong? Here are some immediate possibilities:
  • If there were a dramatic rise in the price of gold and the lessor were to call in the return of the gold by the bullion bank, the bullion bank could easily lose far more than the small two to three percent margin it had been enjoying.
  • If there were a crash in the bond market and hyperinflation set in, the bonds that the bullion bank had purchased could become worthless.
  • If the nations who shipped their gold to London and New York for safekeeping were to request their return, the storage banks could only deliver if they were to purchase gold at the current rate. If that rate were significantly above the rate at which the gold had been leased to the bullion banks, the storage banks would sustain a significant, possibly unsustainable, loss.
That’s quite a bit of risk.
In the present market, there are any number of possible triggers that could cause the people of Germany, Austria, or a host of other nations to demand that their gold be returned home. Indeed, pressure is on the increase. The governments who have shipped out their gold for “safekeeping” would have a lot of explaining to do to their constituents, if the storage banks are not forthcoming.
So, is it time for the odiferous effluvium to hit the fan? Not quite yet. Before that occurs, there will still be some dancing around by the Fed and others.
The Fed has already stated, in so many words, “We’re sorry, but we can’t let you have all your gold at one time, but we’d be prepared to send it to you over a period of years.”
For many observers, the present situation should be well beyond the point of the raised eyebrow. It should be glaringly apparent that the amount of gold presently claimed to be in storage in the world’s banks is, to a greater or lesser extent, overstated.

Continuing the Charade

The Bundesbank should, of course, now say, “I’m afraid that’s not good enough. It’s our gold. We’ve advised you how much of it we want back now, and we must insist that you produce it immediately.”
If they were to take this perfectly logical step and the Fed refused, there could be a run on the banks, and, very possibly, within as short a period as twenty-four hours, a worldwide bank holiday might be declared with regard to gold.
However, this is not what will transpire. Neither logic nor sound banking practices are the object here. The object is to maintain the charade that exists within the banking community. The Bundesbank is just as fearful of a run as the Fed and will be only too willing to accept the Fed’s terms.
What must be borne in mind is the root cause of the request. It was not the Bundesbank itself that originally wanted the transfer to take place; it was the German people who, quite rightly, have become distrustful of the fact that their gold has been in New York for so long and want to see it repatriated. It is not the banks who wish to correct the situation. Not one bank wishes to expose the inappropriate practices of any other bank. Their loyalty is to each other and not to their depositors.
So, is that it? Have we heard the last of this issue? I think not. The cat is out of the bag at this point, and the depositors’ distrust and uncertainty will not be quelled by the counter-offer. Tension will continue to mount amongst depositors, and, at some point, the situation will reach an impasse.
All those who presently have gold in a banking institution would be prudent to keep an eye on the present situation. We might consider taking delivery of any gold we have in a bank, wherever it may be. Regardless of what form it is in, from ETFs to allocated gold, we would do well to assess the degree to which we feel our gold is at risk. In doing so, we may determine that a gold account is more at risk in, say, a New York or London bank than a Swiss bank. (Not all banks will be equal in terms of risk.)
If we do resolve to divest ourselves of bank-related precious metal holdings, it would be prudent to take action soon. (Clearly, those who attempt to remove their wealth the day after a run has occurred tend to do less well than those who attempt to remove their wealth the day before the run.)
We might also consider whether a possible run may become systemic, causing a bank holiday on all the bank’s activities, thus freezing any currency that we may have on deposit. We may conclude that it is prudent to only retain in our bank enough money to allow cheques to clear – an amount sufficient to cover a few months’ expenses.
In the near future, we may well find that a significant amount of gold that is claimed to exist in the world will “disappear.” Whilst we cannot control this eventuality, we may be able to save the gold that is being held in our names from disappearing.

Chinese News Article: Crossborder Yuan Loans - "Before it becomes a Global RESERVE Currency."

It is the first time I am seeing the words from China that comes right out and says what the plans for the Yuan is.

The first batch of cross-border yuan loans agreements were signed on Monday after thecentral government approved the Qianhai area in Shenzhen to test a freer yuan before it becomes a global reserve currency.
 As the loans come from Hong Kong, the move is a test offurther capital accounts opening by allowing offshore funds tobe transferred to the mainland.
Previously, offshore yuan could flow back to the mainland onlythrough yuan-denominated trade and renminbi qualified foreigninstitutional investors.He added that the yuan is marching gradually and steadily toward becoming a global currency,and he expects more breakthroughs on that front this year.

They have never said "Global Reserve Currency" before.  They have said "Convertible currency" and other words.

China has actually imported more gold and silver than they admit to.  They imported an estimated 1000 tons of gold over the last few years but experts believe it was much more than that.   They have also been importing silver in major quantities that are not being revealed.  I read a story the other day about someone in China trying to buy silver and gold bullion but the place was nuts with crowds all trying to buy the gold and silver the dealer had just gotten.

Kingworld News has an article about China being a gold backed currency.

Jim Willie did an interview last week and he mentioned that China was going to take it slow and not be totally overt in becoming the Global currency because they don't want the U.S. to start a war for some made up reason against china. has the rumor China plans on importing 5000 to 6000 tons of gold this year (article from 2012). 

unconfirmed speculation" that China – the world's number one producer and second-placed consumer (at the moment) – is gearing up to buy up to at least 5,000 to 6,000 tonnes starting before the end of the year.

Silver is huge in China too.  There has been a lot of talk in the "silver world" saying there is a major shortage.  Besides the fact that the 2013 Eagles sales have been suspended due to over 5 million orders in the first few days of 2013.   The majority of silver mined is used for industrial purposes and it seems there is a shortage happening.

The writing is on the wall.  China plans on having a Gold backed Global Reserve Currency.  I have written about the agreements China has with other countries and has already began trading in Yuan instead of dollars.  The BRICS began those trades last year.  The only thing that is keeping the dollar as the "reserve currency" right now is because it is the "Petrol Dollar."   Saudi Arabia is the reason the dollar is still the oil trading currency.  Is it any wonder that Obama bows to the King of Saudi Arabia as the U.S. is obviously beholden to them otherwise it would not still be the official reserve currency of the world.

Once Saudi Arabia decides to go with the rest of the world and begins using other currencies for oil as India, Iran, Russia and China already do.... it will be game over for the dollar.

Obviously the day is getting closer since the article says "Global Reserve Currency" from China Daily.  Again they have never used those words before from what I have seen.  They have used "Global convertible currency."  Remember China purchased the London Metals exchange last year, which began using the Yuan and the CME began added the Yuan as a trading currency last year too 

China holds things very close to their chest in information and they don't put information out normally until deals are done.  So with them allowing "Global Reserve Currency" words out, what deals have been done already and how fast will it all go down and the dollar with it?

Some of my favorite metals sites are: David Morgan of Silver-Investor always has great information about Silver and what is really going on.   I go to Gata, Got Gold Report , and 24 hour Gold for the latest in gold information.

Few probably are aware of this, but long time subscribers to The Morgan Report (TMR) were notified that a meeting had taken place in South East Asia roughly a decade ago discussing -- you guessed it --A GOLD BACKED YUAN.
Most people in the West do not understand the Chinese mind set of looking out several generations, 

Edit to add:   I found another article today on the same Chinese News site - Their frustration with the dollar titled "The Unloved Dollar"

But the dollar's role as international anchor is beginning to falter, as emerging markets everywhere grow increasingly frustrated by the Fed's near-zero interest-rate policy, which has caused a flood of "hot" capital inflows from the United States. That, in turn, has fueled sharp exchange-rate appreciation and a loss of international competitiveness - unless the affected central banks intervene to buy dollars.
Wow - they have really put out information now as I have never seen before and the two articles being out on the same day...... says something is already happening, we just don't know the full extent yet.  But I have a feeling since they have come right out and said "Reserve Currency" and "Unloved Dollar" whatever the changes of Currency will happen this year.

Update - 1/29/13  - David Morgan of Silver Investor allowed me to interview him today about this subject, the silver shortage and Germany and their gold.