Saturday, March 2, 2013

It’s All Good: “They Can’t Stop Lending Us More Money”

Last month President Obama made it a point to outline the ever stronger state of our Union.
“Our housing market is healing, our stock market is rebounding, and consumers, patients, and homeowners enjoy stronger protections than ever before,” said Obama of a US economy that, according to the President’s numbers, has added six million new jobs over the last decade.
But as budget woes hit cities and states across America, and Congress battles with the White House over curtailing spending and a fiscal crisis, the real state of our union is becoming more apparent by the day.
According to benevolent billionaire politician Mayor Michael Bloomberg, spending is exactly what we need to keep doing.
Because we’re the United States of America, and even if we owed our creditors an infinite amount of money, it’d be all good.
You see, the more we owe, the less likely they are to stop lending us money.
It makes perfect sense in a world where insanity is considered normal behavior.
While saying the federal deficit does indeed need to be curtailed, Mr. Bloomberg argued the United States could owe “an infinite amount of money” and there is no specific amount that would cause the country to default.
“We are spending money we don’t have,” Mr. Bloomberg explained.
It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money.
When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. …Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more.
It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem.
And that’s a problem for the lenders. They can’t stop lending us more money.
Nevertheless, Mr. Bloomberg said it wouldn’t be easy to find the spending cuts that do emerge. Accordingly, when Mr. Gambling suggested cutting “waste” could solve a significant portion of the deficit, Mr. Bloomberg flat-out disagreed.
“Listen, I’ve worked now in government for 11 years,” he said. “One of the problems is the definition of ‘waste.’ You think the programs that I want are waste. And I think the problems that you want are waste.
It’s not like somebody is taking wheelbarrows full of dollar bills and throwing them out the window.
It’s a question of definition, what is ‘waste’ and what is not.

Source: Politicker
It’s not like we’re throwing dollar bills out the window.
Stupid Proles.
Why would we use wheelbarrows when we’ve got helicopters!?!

Meanwhile, in the real world, the economy is falling apart and the middle class is being destroyed.
Americans’ personal spending and savings rates are very rapidly dwindling:
Personal income decreased $505.5 billion, or 3.6 percent, and disposable personal income (DPI) decreased $491.4 billion, or 4.0 percent, in January
The “savings rate” collapsed to 2.4% from 6.4% last month.
Collapse is the proper word here, folks.
That’s a 62% decline month-over-month.
Wages with respect to price inflation for essential goods are going down, jobs are still disappearing, and the President’s tax plan, which was not supposed to affect middle income and low income workers, is now coming into effect. The result is, less money left in your bank account at the end of every month.
As Mike Snyder notes at the Economic Collapse Blog, the signs that consumers are running out of money are everywhere:
These days most Americans are living from paycheck to paycheck, and thanks to rising prices and rising taxes, those paychecks are getting squeezed tighter and tighter. Many families have had to cut back on unnecessary expenses, and some families no longer have any discretionary income at all.
According to one brand new survey, 24 percent of all Americans have more credit card debt than money in the bank.
The system is deteriorating.
Consumers, the drivers of our economy, are getting hammered at every turn. Higher prices for gas and food, more taxes, foreclosures, job losses, and emergency government safety nets that are unraveling are leaving wealth destruction in their wake.
From Main Street, it’s looking like another financial and economic collapse is imminent.
What’s the plan from the best and brightest of our politicians, economists and central bankers?
Two words: Infinite Borrowing.
It’s gonna work, seriously! It’s going to flippin’ work!

There Goes The Sequester

Today is the day when, if one listens to Obama whose idea it was in the first place, an unprecedented $85 billion spending cuts will be sequestered, unleashing famine, pestilence, the apocalypse and grizzly bears (as all park rangers will be dead from starvation). Which is why we applaud the administration's desire to preempt this tragic for the nation outcome, by issuing, in one day alone: February 28, $80 billion in Treasurys sending debt to (obviously) what is a new all time high $16,687,289,180,215.37.
In other words, the entire apocalyptic impact of the sequester for 2013 was offset by one day's debt issuance.
Oh, and we didn't label this post Friday humor because it rightfully falls under the Friday grotesque, surreal tragedy category.

From Debt To The Penny:

The Truth About The Sequester Cuts

Give this 2 minutes.  Much ado about nothing.
Excellent clip.  Bloomberg exposes the myths about the so-called sequester cuts.
These are spending caps on future growth NOT spending cuts.
There Goes The Sequester | Zero Hedge

A Modest Proposal
Seriously, how you can you not LOVE the sequester when the defense industry takes the majority of the hit.  We should have one every 6 months for 5 years or however long it takes until the budget is finally f***ing balanced.  Let the miserable hacks in Washington figure out the details, but the basics would be the same every 6 months.
Cut or die, punks.
In 3 years the debt will be $20 trillion.
Slap a normal 5% financing cost and you get $1 trillion in interest annually.
We only collect $2.5 trillion now.
That means interest on the debt will be approximately 40% of total tax receipts.
That's when the real fun will begin.
By the way, I'm still waiting for Keynesian acolytes to point out the supposed 'savage austerity' after 5 straight years of trillion-dollar deficits.
We borrow $50,000 dollars EVERY second from future generataions.
We wouldn't know austerity if it bit us on the nut sack.
This is excellent:
Remember when Obama supported the sequester cuts? - YouTube

Happy Sequestration Day


Hidden Secrets of Money – Currency Vs Money

Cash vs Credit
A picture speaks a thousands bars of gold…

USSR Redux: Top Eurocrats Indicate Europe’s Recovery Will Be Centrally Planned and Green

Europe’s Green Recovery … BRUSSELS – The need for clean energy has returned to the top of the global economic agenda … In his second inaugural address, US President Barack Obama discussed climate change more than any other issue, saying, “We cannot cede to other nations the technology that will power new jobs and new industries.” At the World Economic Forum in Davos, International Monetary Fund Managing Director Christine Lagarde and World Bank President Jim Yong Kim surprised business and government leaders with their warnings that genuine economic recovery would be impossible without serious action on climate change. And, at the most recent EU summit, leaders agreed to commit at least 20% of their entire common budget to climate-related spending. – Project Syndicate
Dominant Social Theme: Our centrally planned economic recovery will be just as rigorous Pre-War Germany’s or the USSR’s but it will work much better because it will be “green.”
Free-Market Analysis: It is no accident that people refer to the EU as the EUSSR. In a not very noticeable but nonetheless breathtakingly arrogant statement, a top EU Commissioner has just served notice that EU commissars intend to subject Europe to a massive amount of environmental central planning.
Central planning doesn’t work as it is essentially price fixing on a grand scale. As those who run these programs are cynically aware, people will pursue their own self-interest regardless of state-mandated regulation. What these mandates provide, therefore, are a recipe for intentional impoverishment and continued social unrest.
And presumably that, too, is part of the plan. Out of chaos, purposefully inflicted, comes a new kind of order, one shaped by those who are helping generate the chaos and are thus in position to provide pre-calibrated and increasingly globalist solutions.
The article in question (see excerpt above) is written by Connie Hedegaard, EU Commissioner for Climate Action, and provides us with a new and disturbing direction for the European Union’s recovery.
The article, posted to the elite-leftist Project Syndicate among other places, makes the case for a “green” European recovery – one that is to be managed to meet certain goals, in other words. The thrust of her argument is encompassed in this statement:
Beyond the global economic crisis, the world is experiencing a social and employment crisis, as well as a climate and resource crisis. And none can be resolved without addressing the others.
This is a breathtaking announcement of bureaucratic central planning. Europe’s “recovery,” which surely has not even begun to take place, is to be managed comprehensively.
This is, in fact, what appears to be the second stage of a two-part process to reshape Europe not just into a unitary political union but into a unified society that accepts – however reluctantly – the entirety of a controversial elite sociopolitical and economic paradigm.
There is no consensus on global warming, environmental solutions (or problems) or alternative energy facilities, but Ms. Hedegaard is indicating in this article that there will be no argument, either. Out of the ashes of an “old Europe,” a new Europe will emerge, one shaped around an elite “green” agenda implemented out of Brussels and designed by Money Power itself. Here’s more from the article:
Europe’s main commercial competitors have begun to recognize that pursuing short-term development policies, while ignoring long-term threats to the global economy, is both irresponsible and a strategic mistake for those who aspire to global leadership in the twenty-first century. Although Europeans have known this for decades, in the wake of the recent economic crisis, immediate goals took priority over – and often at the expense of – long-term objectives.
With the European Union’s economy growing more slowly than those of its major competitors, its leaders must take a more far-sighted approach to restoring – and preserving – its members’ growth potential. They must begin by identifying not only what is undermining Europe’s competitiveness today, but also those factors that are putting its long-term prospects at risk.
Analysts often point to Europe’s costly social-welfare systems, high labor costs, and increasing tax rates as a drag on competitiveness. But other, less widely discussed factors must be considered – particularly the costs of delayed action on climate change. For example, Unilever CEO Paul Polman reported that extreme weather cost his company $250-300 million in 2012. Once considered an issue for the future, action on climate change has become increasingly urgent, as the outlays required to mitigate its negative effects have grown …
Meanwhile, China – the world’s leading investor in renewable-energy projects – is undergoing a transformation from the world’s low-cost factory to a global leader in green innovation and a major exporter of clean technologies. In the contest for this global market, Europe cannot compete on price alone.
But Europe does have options. EU leaders can build an economy that is less dependent on imported energy through increased efficiency and greater reliance on domestically produced clean energy. At the same time, they should tackle other major threats to Europe’s long-term competitiveness, including low productivity, an incomplete internal market, and insufficient innovation.
Ms. Hedegaard has done us a favor by explaining clearly and succinctly just what is in store for the EU and its suffering citizens. Whatever recovery is to be tolerated will be shaped along certain lines – and highly inefficient ones. It is authoritarianism with a green face: Jettisoned is any notion that the Invisible Hand of marketplace competition should choose what people are comfortable and wish to use in their personal and professional lives.
Marketplace competition is democratic and empowering. Central planning is intolerant and brutal. Ms. Hedegaard is not asking permission when it comes to implementing her assertions. She is merely giving us notice.
It gets even worse, however. Later in the article, she states that “Europe’s high environmental standards are crucial to its future competitiveness, and should therefore be actively promoted, particularly in trade agreements.”
Not content with imposing questionable industrial policies on Europe, Brussels Eurocrats have in mind exporting their errors throughout the world. This is not hypothetical, either. It is happening now.
While trade deals have often come at the expense of stronger domestic climate action, the EU’s new trade agreement with Singapore aims to boost trade and investment in clean-energy technologies and promote green public tendering. This should serve as an environmental benchmark for future agreements – including with the US, despite some American constituencies’ expectations that EU standards could be relaxed in a bilateral trade deal.
The idea, we are told, is that by being a leader in environmental standards, Europe can support the growing global market for clean-energy technologies.” For Eurocrats it follows logically that once a market has been established, it can be cultivated and expanded.
The green-technology market is set to triple in value by 2020 – so the article explains – and thus Europe could “regain competitiveness and secure its role in the future global economy” by focusing its industrial policy on the green solutions.
In reality, trying to force billions of people to use questionable solutions to seemingly non-existent problems, the top elites behind these campaigns are wasting resources and lowering living standards. Again, from our humble point of view, they implement these schemes on purpose, and for just these reasons.
Conclusion: There is an active campaign underway to lower Europe’s living standards and weaken its middle classes. Creating and imposing a pan-European “environmental economy” on Europe’s suffering masses will likely promote both of these goals.

The Media Doesn't Matter Trend: Beppe Grillo Proves It

KINGSTON, NY, 28 February 2013 - The spectacular showing by Beppe Grillo's Movimento 5 Stelle, which just won more votes in Italy's general election than any other single party, represents a brand new, powerful, double-barreled trend that will reshape the way political campaigns are run and, in so doing, will reshape the future.

The unanticipated results sent a shock wave across Italy and rattled world equity markets. Taking 180 of Parliament's 630 seats, Grillo's party amassed enough votes to not only deny front runner Pier Luigi Bersani the clear majority needed to form a working government, it also sent an even louder message to the entire eurozone: Adesso basta - enough is enough!

Faced with the prospect of still-higher taxes and more German-inspired austerity-as-usual, the Five Star Movement's anti-establishment/anti-austerity populist showing far exceeded the predictions of the media, pollsters and politicians.

The resurgence of the embattled and disgraced media tycoon Silvio Berlusconi was also unanticipated. But his strong showing was less a sign of popular support than the consequence of the mogul's overt multi-media-vote-buying campaign, promising amnesty for tax evaders and a $5 billion tax refund to property owners.

Trend 1: Media Doesn't Matter Beppe Grillo, unlike all the other candidates, spurned Italian TV and instead built his personal presence and party strength via a 73-stop barnstorming tour and a brilliantly orchestrated Internet campaign. Nine months ago he was polling only 5 percent nationally. With the largest social media following of any politician in Europe, Grillo's "head on the Internet, feet on the ground" rise to prominence was generated through his one million Facebook and Twitter friends and followers.

This is the trend of the future!

It is also a new millennium megatrend Gerald Celente forecast in detail in the December 1999 Trends Journal. Moreover, in terms of presence, platform and personality, it is as though Beppe Grillo had been invented for the role of the Italian version of the "Internet Candidate" Celente predicted:

The Internet Candidate

Starting in 1999, the opening salvos will be fired in the battle against the hegemony of America's two-party political system. A combination of technological advances and seething public opinion has set the stage for the Internet candidate - a political newcomer beholden to no one and able to reach everyone.

Free At Last

No longer bound by conventional political rules of engagement, freed from the necessity to raise mega-millions to wage campaigns and no longer solely reliant on media approval for coverage, the Internet candidate will be a new-millennium voice speaking a new-millennium language that appeals to the politically disenchanted and disgusted.

Just as the advent of television changed political campaign strategies forever, so the Internet will shortly revolutionize the entire political process.

The potential Internet candidacy awaits its real-life Internet candidates... (The Trends Journal, Winter 1999)

Moreover, while The New York Times (and the rest of the mainstream media) now maintain that "Few experts anticipated the depth of anger displayed by Italian voters over the austerity" measures imposed by the Technocrat Monti, the fact is that nearly a year before the election Gerald Celente not only anticipated the "anger," he singled out Beppe Grillo as the man who would give voice to it and transform that anger into a coherent force. (Gerald Celente on CJAD, Montreal Canada, 29 May 2012)

Trend 2: Throw the Bums Out The dire political conditions that made it possible for Grillo's ascendance in Italy also prevail in countries big and small around the world. The "politically disenchanted and disgusted" citizenry Celente postulated as a pre-condition for the trend he predicted all those years ago, has essentially become the norm: polls report that 88 percent of Italians distrust political parties, as do 80 percent of the British, while 85 percent of Americans distrust their government ... and so on around the world.

Standard, entrenched political systems everywhere - ostensibly democratic, autocratic, left-wing, right-wing or monarchical - are ripe for revolution, non-violent or otherwise. The Internet Candidate is an "idea whose time has come." Adesso basta, the message from Italy is being heard around the austerity-ravaged world.

Perhaps it is no more than coincidence, but Italy, where the European Renaissance first took root and flourished, may be the breeding ground for Renaissance 2.0.

Shock! $307 Billion paid to Africa while America goes over cliff

Africa 6
The Big Bad Bank – by George Washington Hunt
Obama Budgets $307 Billion For the African Internet, etc.
The “Alliance For An Affordable Internet” is a public-private partnership which intends to build a huge, expensive African Internet. Its headquarters are in Nairobi, Kenya, now dubbed “Africa’s Silicon Valley”.
Hillary Clinton alluded to this monstrous State Department project when she stepped down from her Secretary job on February 1, 2013. She said, “One billion more persons will have access to the Internet”. She did not expand her sentence to include… “and Americans will pay for most of it”.
Africa 5Here is the scheme: Bloomberg News reported on Feb 14, 2011 that President Obama’s budget for FYE2012 will include $307 billion in grants to Silicon Valley. Specifically, the individual grant amounts in Obama’s budget are: $148 billion for research and development, $80 billion for federal information systems and $77.4 billion for computer education. Much (most?) of the grant money will be spent for Africa’s Internet.
The partners of “Alliance For An Affordable Internet” include the U.S Department of State, the World Wide Web Foundation and five Silicon Valley computer giants (Google, Microsoft, Yahoo!, Intel and Cisco Systems).
Americans will get little benefit from these huge grants, nor can we endure the $307 billion in the cash Africa 1outflow from the U.S. treasury. While we struggle to pay for health and indigent assistance, our constant wars and our corroding infrastructure, these grants will indeed bury us further into debt.
The World Bank, the UN and many foundations are available to fund an African Internet. If the international funds refuse to assist, the E.U. and the U.K. should fund this project because of their large African associations.

Top Economist: Nuclear power is over — “Frankly I think from a business perspective it’s over, I think it’s over… here’s the situation” (VIDEO)

Title: Q&A with Jeremy Rifkin on nuclear power
Source: Wermuth Asset Management
Date Published: Mar. 1, 2013

Wermuth Asset Management, 5th Annual Investors Event
Question: What would be your view on nuclear energy? […]
Jeremy Rifkin*: [...] Frankly, I think from a business perspective, it’s over. I think it’s over. Let me explain why. There may be a lot of ideological issues, but from a business perspective here’s the situation […]
*CNN: “Internationally renowned economist”; Forbes: “Economist and energy visionary [...] advisor to the European Union and to heads of state around the world.”
Summary of Rifkin’s points:
  • Won’t be the solution for climate change
  • Don’t know how to recycle nuclear waste, other storage problems
  • Cost
  • Plutonium, terrorist threat
  • We don’t have the water
  • Centralized power, moving to distributed power

Druckenmiller: Storm worse than ’08 coming as seniors steal from youth

Hedge fund icon Stanley Druckenmiller sat down for a rare one-on-one interview with Bloomberg Television’s Stephanie Ruhle, saying that he’s decided to speak out now because he sees “a storm coming, maybe bigger than the storm we had in 2008, 2010.”
Druckenmiller said that the mushrooming costs of Social Security, Medicare and Medicaid, with unfunded liabilities as high as $211 trillion, will bankrupt the nation’s youth an pose a much greater danger than the debt currently being debated in Congress. He said, “While everybody is focusing on the here and now, there’s a much, much bigger storm that’s about to hit…I am not against seniors. What I am against is current seniors stealing from future seniors.”
Tune in for the interview at 10 am on “Market Makers.” Full transcript available upon request. Video for viewing and embedding here:

Druckenmiller on why he’s speaking out now:
“I see a storm coming, maybe bigger than the storm we had in 2008, 2010. And really, the reason could happen without people looking as for a lot of similar reasons that we could get into. But the basic the basic story is, the demographic bubble I was looking at way back in ’94 that started in 2011, we are right at the first ramp-up of this thing that is about to hit.”
On U.S. demographics:
“Something remarkable has occurred since 1994 until now, which is entitlement spending, or let me say transfer payments to be a little more correct. Transfer payments which were 28% and 60, and were 50% when we were in the budget mess in ’94. Lo and behold, they’ve gone up to 67% of government outlays. But they haven’t gone up because of demographics. They’ve gone up because the seniors have a very, very powerful lobby. They keep getting more and more transfer payments from the youth.But the demographic storm is just starting now. It reminds me of ’05 when people just extrapolated housing prices going up for 50 years…Everyone sorta lives with their rulers in the past and doesn’t look at coming changes. So what’s going to happen is we now have a working population, this is the way entitlements work, where the current workforce is paying for the benefits of the seniors. And since 2000, we’ve had about 4.5 to 4.8 workers for every retiree.  By 2050, that number will drop to 2.4 workers per retiree. Another catchy way to say it is by 2030, the average population of the United States is gonna be older than the average Floridian right now.”
On who is going to stop seniors from stealing from the next generation:
“You asked me why I’m here. And I think people like me and others need to speak out. It’s about the future, not about the present where the problem is. And let me just say one thing. I am not against seniors, okay. I love seniors. Unfortunately I’m going to be one in the not-too-distant futures. What I am against is current seniors to me stealing from future seniors.”
On who should be blamed for hurting the economy:
“It’s hard to tell who’s going to be blamed– if we don’t act and this occurs…There’s plenty of blame to go around. If I had to analyze how do we get into the financial crisis, I would say it started way back in the ’90s when then-Chairman Greenspan refused to address the dot-com bubble, came up with some new theory of productivity and therefore we’re not going to have a problem, so all these NASDAQ companies who were never going to earn money went to hundreds-of-times earnings and then of course, we had a major bust. And instead of taking a recession and having the cleanup…they needed an offset. So they created the housing bubble. So now by hindsight, everybody says, ‘Well, you had these horrible Wall Street actors,’ and I’m sure there were quite a few horrible Wall Street actors. And I don’t doubt that they were part of the problem. In fact, I know they were part of the problem. But I also know it was negative real interest rates for 12 outta 20 years that enabled these actors to do the things they were doing and incented, yes, incented them to go out and gamble the way they were gambling.”
On gridlock in Washington:
“I’m pretty frustrated. This sequester thing– if you just look at how it came about, first of all, every five minutes all the suffering and all this horrible stuff is going to happen in various sectors if this goes through. But there’s three things that are not on the table in the sequester. I know you’re gonna be shocked by this. Medicare, social security and Medicaid, okay.”
On why Medicare, Medicaid and Social Security are not on the table:
“I’m sure it’s because of short-term politics. The problem with politicians is, they really only do have a four-year life cycle. The rest of us should have the responsibility to look a little further than that ahead.  But yeah, I don’t know whether ‘mad’ is the word. I’m extremely frustrated by their refusal to deal with this problem. And the sequester thing, I think the president made a deal. It was a deal so they would extend the debt ceiling, which they did, all right. I am very much for tax reform. But I don’t think it should be part of this particular thing and we should be parading out the crowd we’d been parading about to say how horrible this is going to affect the economy. Let me tell ya, I don’t know what the economy’s going to do. But it’s just a little ridiculous to say a $600 billion tax increase over ten years and $150 billion increase in the payroll tax is going to have no affect on the economy. But an $85 billion cut in discretionary spending is going to tank the economy? If the economy were to soften, I can tell you it won’t be because it will not be because of this $85 billion.”
On why he doesn’t become a policymaker:
“Because my wife loves New York and I love my wife.”
On equities vs. bonds:
“One of the things that is kinda one of my pet peeves is hearing all these people on TV say, ‘Well, you gotta go into equities ’cause they’re so cheap relative to bonds and there’s no other game in town.’ They are cheap relative to bonds. But everything is cheap relative to bonds…So just because equities are cheap relative to bonds doesn’t mean their price isn’t subsidized. I’m not making a forecast here because the subsidization could go on for a long time. But real estate, gold, equities, they’re all priced off of ZIRP, zero interest rates, and they’re all subsidized.”
On whether the hedge fund industry could be in hot water 12-24 months from now and become even further consolidated:
“Oh, I don’t know. I think the hedge fund’s short-term thinking is just a manifestation of our entire society. Whether it’s the fed or whether it’s– the administration or whether it’s Congress, no one bothers to think about the long term anymore. And the hedge funds are just one more manifestation of that.”
On where investors should put their money right now:
“That’s hard for me to answer. Because I have the luxury of a lot of experience in sitting in front of a screen. And I can go into currency markets where it’s at a relative price. So it’s the one area where prices aren’t subsidized. And I’m arrogant enough to think I can time these things. But I don’t really know how to answer that question for public invest– but let me just say that this idea that you’ve got go plowing into risk because rates are zero, that they will rue the day one day. The music will stop. And I would probably be invested right now thinking I’m smart enough to know that we’re quite away from the music stopping. I don’t think Bernanke is about to end these policies for a while. But let’s just know what we’re dealing with here.”
On whether there needs to be more consolidation in the banking industry:
“I’d like to see them be more like utilities. I could care less whether they make money, unless I happen to own equities in it. But if we’re talking about as a United States citizen–I have no problem with banks being utilities and going back to what banks used to do…”
On whether banks should just be making loans:
On whether the most sophisticated bankers should work at hedge funds, not on sell-side trading desks:
“You said it, Stephanie, not me.”
On what his future looks like:
“I’m probably going to disappear again at some point. But in the meantime, I’m gonna do what I can to try and bring the awareness of this issue out because with respected economists, again, focusing on a little problem over here when you’ve got this big problem over here, I think the message needs to be out there.”
On whether he’ll start tweeting:
“No tweeting for me.”

Peter Schiff: We Will Never Pay It Back, We Can't Pay It Back, That's Why We Raise The Debt Ceiling!

Peter Schiff: We Will Never Pay It Back, We Can't Pay It Back, That's Why We Raise The Debt Ceiling!

Rick Santelli On Gold ETFs: 'If World Collapses, You're Stuck With Paper'

CNBC's Rick Santelli talks with Frank Lesh, FuturePath Trading, about how ETFs have changed the way investors trade gold.  Feb. 27, 2013.

Santelli on owning 'paper gold.'
Solid clip.  Santelli discusses trading gold back in the late 1970s.
This isn't good news:
World's Biggest Gold Storage Company Bans All Accounts From U.S. Citizens...

'How Central Banks Lease Out Their Gold'...

'Charles Ponzi audits the Fed's gold' by William Banzai7.
Ponzi can surely attest
The gold in the vault is the best
But then he checked leases
For 10 times the pieces
And said: "Now I'm really impressed!!!"
The Limerick King

Stunning List of Economists, Financial Experts and Bankers Say We Need to Break Up the Big Banks

Top Economists and Financial Experts Say We Must Break Up the Giant Banks

The following top economists and financial experts believe that the economy cannot recover unless the big, insolvent banks are broken up in an orderly fashion:
  • Current Vice Chair and director of the Federal Deposit Insurance Corporation – and former 20-year President of the Federal Reserve Bank of Kansas City – Thomas Hoenig (and see this)
  • Former Federal Reserve Bank of New York economist and Salomon Brothers vice chairman, Henry Kaufman
  • Dean and professor of finance and economics at Columbia Business School, and chairman of the Council of Economic Advisers under President George W. Bush, R. Glenn Hubbard
  • Former chief economist for the International Monetary Fund, Simon Johnson (and see this)
  • The leading monetary economist and co-author with Milton Friedman of the leading treatise on the Great Depression, Anna Schwartz
  • Economics professor and senior regulator during the S & L crisis, William K. Black
  • Professor of entrepreneurship and finance at the Chicago Booth School of Business, Luigi Zingales
  • The Director of Research at the Federal Reserve Bank of Dallas, Harvey Rosenblum
  • Director, Max Planck Institute for Research on Collective Goods, Bonn, and Professor of Economics, University of Bonn, Martin Hellwig
Even current Fed chairman Ben Bernanke says that the big banks should be downsized:

And the head of the New York Federal Reserve Bank – and former Goldman Sachs chief economist – William Dudley says that we should not tolerate a financial system in which certain financial institutions are deemed to be too big to fail.
Federal Reserve Board governor Daniel Tarullo also backs a cap on the size of banks, and Former Treasury secretary under Reagan and George H.W. Bush, Nicolas Brady, says that we need to put a cap on leverage.

Top Bankers Call for Big Banks to Be Broken Up

While you might assume that bankers themselves don’t want the giant banks to be broken up, many are in fact calling for a break up, including:
  • Former managing director of Goldman Sachs – and head of the international analytics group at Bear Stearns in London- Nomi Prins
  • Numerous other bankers within the mega-banks (see this, for example)
  • Founder and chairman of Signature Bank, Scott Shay
  • Former Natwest and Schroders investment banker, Philip Augar
  • The President of the Independent Community Bankers of America, Camden Fine
Indeed, a bipartisan consensus is forming regarding the need to break up the big banks. Click here for background on why so many top bankers, economists, financial experts and politicians say that the big banks should be broken up.
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Peter Schiff: The Economy Is Actually Getting “Sicker” While Wall Street Is Rising Back Thanks To FED Policy And Taxpayers

Peter Schiff: The Economy Is Actually Getting “Sicker” Because of FED Policy

Peter Schiff: Wall Street’s rising back thanks to the taxpayers

 If inflation is zero, why does my paycheck feel like it’s shrinking?
So how can inflation be at zero percent when so many of us feel like our paychecks don’t go as far as they used to?
Mark Thoma is a professor of economics at the University of Oregon. When I told him about the comments from people who said  inflation is real for them, he said, “they’re probably right.”
Thoma points out that that some people’s individual inflation rate is not zero. The zero percent rate that was released last week is an average based TALEB: ‘If I Were President, I’d Fire Bernanke!’on the Consumer Price Index, or CPI. The CPI is made up of thousands of different goods and services. But not everyone buys the same goods and services.
For example, take retiree Dennis Sedam. He was born in 1944, so he probably spends a larger percentage of his income on health care than the average person.


Italy on Financial Brink as “Former” Communist Tries to Lead

By William F. Jasper, The New American

While much of world attention has focused, understandably, on Pope Benedict XVI’s February 11 resignation announcement, another resignation and election in Italy are at the center of global financial concerns. When Italian Prime Minister Mario Monti (shown) resigned in December 2012, he set in motion the process for general elections, which took place February 24-25. The results of the election have been indecisive, to say the least, with no party gaining a majority in the parliament, and no candidate for prime minister commanding a clear mandate. Pier Luigi Bersani, the ex-Communist Party leader who now heads the Democratic Party, scored a narrow victory in the Chamber of Deputies, the lower house of Parliament, but was unable to come up with a majority in the upper house, the Senate. Bersani is now scrambling to fashion a workable coalition with opponents. Unless and until he does that, Italy, the eurozone’s third largest economy and the world’s eighth largest economy, is faced with a “hung parliament,” without a prime minister and without a government.
Nouriel Roubini, the New York University economist known as “Dr. Doom,” said the election results “make Italy ungovernable. It is political, economic and financial chaos.” He is not alone in that assessment; many predict that Bersani will be unable to pull together a workable coalition and that Italian voters will have to go back to the polls again within six months.
Bersani’s Democratic Party/Italy Common Good leftist coalition took 29.5 percent of the national vote. The People of Freedom coalition led by billionaire media mogul and three-time prime minister Silvio Berlusconi, claimed 29.1 percent of the vote. The wild card that upset all expectations is the populist, anti-establishment Five Star Movement, a recent phenomenon launched by comedian Beppe Grillo, who struck a chord with millions of Italian voters by attacking and exposing the corruption in both the Berlusconi and Monti governments. Grillo’s Five Star Movement took 25.5 percent of the vote. Mario Monti’s outgoing Civic Choice coalition won the support of only 10.5 percent of voters.
Grillo has said his party would not back a confidence vote on a new government formed by any of the mainstream parties. He has called for new elections, which he may expect would bring even more voters to his banner. Having already exceeded the expectations of most analysts, and with disgust among Italian voters for the corruption and scandals of the current parties, it’s likely that Grillo’s vote tallies would swell in a rematch.
Kremlin’s Hand in Italy’s Politics
What has gone virtually unmentioned in coverage and analysis of the Italian elections is the win-win-win situation for Putin with the Bersani/Berlusconi/Monti lineup; the only unknown in this respect is Grillo.
Pier Luigi Bersani’s past history as a Communist Party leader has been passed off by media pundits as nothing to be concerned about, which is a strange nonchalance considering the extensive information concerning critical infiltration of the Italian government by the Soviet KGB/Russian FSB over many decades, as exposed by the Mitrokhin Commission, KGB/FSB defector Alexander Litvinenko, and others. The Kremlin strategists targeted Italy as a top priority not only because of its economic prominence and its key roles in the EU and NATO, but also, of course, because it is home to the Vatican and the Holy See. As the headquarters of the worldwide, billio
In addition to his long Communist Party pedigree, Bersani also served as minister twice in the administrations of Romano Prodi, whom Alexander Litvinenko identified as the KGB’s top man in Italy. It was very likely his exposure of Prodi that led Vladimir Putin to arrange Litvinenko’s public assassination by polonium poisoning in November 2006.
The New American reported in 2007:
The revelation that most likely sealed Alexander Litvinenko’s death warrant was his charge that Italy’s current prime minister, Romano Prodi, was known as the KGB’s top man in Italy. If true, that would also make him one of Russia’s top assets in all of Europe, since Prodi served as president of the European Commission from September 1999 through November 2004, one of the most critical periods of the European Union, which included the launching of the euro currency, expansion of the EU to include former communist countries, and drafting of the proposed EU constitution. And if true, it would make Litvinenko a bomb that could, potentially, topple governments, end high-level careers, send government officials to prison, and destroy a vast intelligence network that has taken more than a generation to put in place.
According to Alexander Litvinenko, when he was planning to flee from Russia in 2000, he consulted his former KGB boss and trusted friend, General Anatoly Trofimov, who advised him not to seek refuge in Italy, since it was loaded with KGB agents. “Don’t go to Italy,” General Trofimov said, “there are many KGB agents among the politicians: Romano Prodi is our man there.” At the time, Signor Prodi was Italy’s prime minister. That was immediately before his stint as EU Commission president, which was followed by his return as Italy’s prime minister in May 2006.
The Mitrokhin Commission faced enormous pressures, obstructions, and stonewalling, along with vicious attacks from press. Little wonder: Among the many individuals fingered as KGB operatives in Italy by KGB defector Vasili Mitrokhin were diplomats, military officers, cabinet ministers, intelligence officers, and prominent journalists and editors of the nation’s top newspapers.The New American reported at the time:
There has been speculation in political and intelligence circles that a particular Italian professor/politician revealed by Mitrokhin, but referred to only by the KGB code name UCHITEL (“the Teacher”), pointed to Prodi, a former professor and longtime insider in Italy’s top business and political echelons. This would help explain why Prodi, during his earlier stint as prime minister, failed to take any action when British intelligence provided his government with information in 1996 about 261 Italians who had been operating for decades as agents for the KGB. When British sources publicly released this information in 1999, Prodi claimed not to have been informed about it earlier. However, his defense minister confirmed that he had given the British information to Prodi.
Subsequently, when the Mitrokhin Commission began delving into the matter, Prodi and his influential media and political backers went into hyper drive to stop publication of the report. It was due out in March 2006, but still remains unpublished. More recently, on November 20, just three days before Litvinenko’s death, Prodi fired the chiefs of three of Italy’s intelligence agencies, all of whom would have been important to any investigation of the Mitrokhin information. If Prodi is Moscow’s man, as General Trofimov is alleged to have said, then Russia’s intelligence structures would stop at nothing to protect such a valuable, long-term investment.
The New American reported further, in a separate article on Prodi, that even without the Mitrokhin and Litvinenko revelations, there were plenty of clues from the public record that Prodi was “Moscow’s Man.” Among those clues was the huge presence of “former” Communist Party officials in his cabinet, which was high even for Italy, where the communists have had a firm foothold for much of the past century, running openly for office, winning election to Parliament and serving in top government posts. We noted in 2007:
Prodi’s left-wing Olive Tree coalition government boasts current and “former” communists, such as Deputy Prime Minister and Foreign Minister Massimo D’Alema, who was secretary of the Italian Federation of Young Communists in the 1970s, then a top member of the Italian Communist Party, and now head of the Democrats of the Left, an offshoot of the Communist Party; Minister of Social Solidarity Paolo Ferrero, a leader of the Communist Refoundation Party; and Economic Minister Pier Luigi Bersani and Labor Minister Livia Turco, both former members of the Italian Communist Party, now with the Democrats of the Left. Not to mention radical Marxists in the Prodi cabinet such as Emma Bonino, Giuliano Amato, Fabio Mussi, Francesco Rutelli, and Alessandro Bianchi.
Is Bersani himself one of the KGB recruits mentioned under code name in the Mitrokhin investigation? What about his main opponents? Silvio Berlusconi may seem like an unlikely prospect for a KGB operative, but there are more ways to recruit — or trap — an agent of influence than with ideology or money. Sex appears to be the ticket for the scandal-plagued billionaire, who is infamous for his “Bunga Bunga” parties with underage girls. And as we noted in “The KGB Chief & the Media Mogul: The Strange Putin/Berlusconi Relationship,” Berlusconi has developed a troubling relationship with the “Godfather of the Kremlin” and his Mafiya oligarchs. Berlusconi and Putin have neighboring luxury villas on Sardinia’s Emerald Coast, and Putin has even sent his daughters to live in Berlusconi’s villa.
Then there’s Mario Monti, the “technocrat” economist, dubbed “Super Mario” by the press during his glory years on the European Commission (1994-1999), where he helped engineer the financial integration of the European Union. Like many other EU politicians, Monti epitomizes the “Davos Man,” the jet-setting globalist denizen of the World Economic Forum (WEF) who is comfortable confecting a socialist-corporatist New World Order with the communist leaders of Russia and China. Monti is not only a regular WEF attendee, but also a member of the Atlantic Council, an advisor to Goldman Sachs — and a member of that ultimate Insiders’ club, the Bilderberg Group.
Yet there is another very important elite “club” that is rarely mentioned in which Monti is not only a member, but a founding member: the Spinelli Group. Named for Altiero Spinelli (1907-1986), a leader of the Italian Communist Party and a key activist for European federalism, it includes the following members: Jacques Delors, a leader of the French Socialist Party and former president of the European Commission; Joschka Fischer, a former communist student leader and associate of the terrorist Red Army Faction, and later German foreign minister; Daniel Cohn-Bendit, a 1960s communist student leader, ally of terrorists, confessed child sex abuser, and member of the European Parliament on the Greens ticket; and Pier Virgilio Dastoli, an assistant to Spinelli and a leader in the Communist and Allies Group of the European Parliament.
Beppe Grillo’s Five Star Movement may turn out to be a front for other forces than are apparent on the surface, but it is clear that the alternative parties led by Bersani, Berlusconi, and Monti are all hopelessly corrupt and would lead Italy to disaster.

Income Posts Largest Drop In 20 Years As Consumer Spending Rises

WASHINGTON, March 1 (Reuters) - U.S. consumer spending rose in January as Americans spent more on services, with savings providing a cushion after income recorded its biggest drop in 20 years.

The Commerce Department said on Friday consumer spending increased 0.2 percent in January after a revised 0.1 percent rise the prior month. Spending had previously been estimated to have increased 0.2 percent in December.

January's increase was in line with economists' expectations. Spending accounts for about 70 percent of U.S. economic activity and when adjusted for inflation, it gained 0.1 percent after a similar increase in December.

Though spending rose in January, it was supported by a rise in services, probably related to utilities consumption. Spending on goods fell, suggesting some hit from the expiration at the end of 2012 of a 2 percent payroll tax cut. Tax rates for wealthy Americans also increased.

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The impact is expected to be larger in February's spending data and possibly extend through the first half of the year as households adjust to smaller paychecks, which are also being strained by rising gasoline prices.
Economists expect consumer spending in the first three months of this year to slow down sharply from the fourth quarter's 2.1 percent annual pace.

Income tumbled 3.6 percent, the largest drop since January 1993. Part of the decline was payback for a 2.6 percent surge in December as businesses, anxious about higher taxes, rushed to pay dividends and bonuses before the new year.

A portion of the drop in January also reflected the tax hikes. The income at the disposal of households after inflation and taxes plunged a 4.0 percent in January after advancing 2.7 percent in December.

With income dropping sharply and spending rising, the saving rate - the percentage of disposable income households are socking away - fell to 2.4 percent, the lowest level since November 2007. The rate had jumped to 6.4 percent in December.

Savings were the smallest since December 2007. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)

Huge setback for economy as shock fall in manufacturing activity points to triple-dip recession

  • British manufacturing has dropped to worrying levels in February
  • It was at 47.9 last month, below 50 mark that splits growth and contraction
  • Mortgage approvals also fell when a rise had been predicted
  • Experts fear news will slash GDP and dump Britain into triple-dip recession

  • Fears that Britain is heading for a triple-dip recession were reignited today after new official figures revealed a shock fall in manufacturing.

    The industry contracted in February for the first time since November, falling to 47.9 according to the latest Markit/CIPS purchasing managers’ index (PMI).
    The headline reading is considerably below the 50 level that separates growth from contraction, with activity hit by Britain's poor weather and tough economic conditions at home and abroad. 
    The contraction in manufacturing marks a considerable setback, increasing the likelihood that output in the sector has dropped by as much as 0.5 per cent this quarter, which will act as a significant drag on the wider economy. 
    The sector contributed to the worse-than-expected 0.3 per cent decline in gross domestic product (GDP) in the fourth quarter of 2012.

    The GDP blow has raised fears that the UK is heading for an unprecedented triple-dip recession if the economy contracts again this quarter.

    The Markit/CIPS Manufacturing PMI contracted to 47.9 in February, new figures reveal
    The Markit/CIPS Manufacturing PMI contracted to 47.9 in February, new figures reveal
    Sterling tumbled to a fresh two-and-a-half-year low against the dollar following the news. It fell nearly one per cent to $1.5011, its weakest level against the dollar since May 2010.

    The figures come at the end of a week of bad news for the economy, in which the UK was stripped of its prized AAA rating by Moody’s and new data confirmed GDP contracted by 0.3 per cent in the final quarter of last year.

    Chris Williamson, chief economist at Markit, said: ‘The return to contraction of the manufacturing sector is a big surprise and represents a major setback to hopes that the UK economy can return to growth in the first quarter and may avoid a triple-dip recession.
    ‘The data so far this year point to manufacturing output falling by as much as 0.5 per cent, meaning a strong rebound is needed in March to prevent the sector from acting as a drag on the economy as a whole in the first quarter.’
    Difficult times: UK manufacturing contracted last month, stoking fears the economy is heading for a triple-dip
    Difficult times: UK manufacturing contracted last month, stoking fears the economy is heading for a triple-dip
    The disappointing figures will put more pressure on the Bank of England to resume money printing – or quantitative easing.

    The most recent minutes signalled a split in the committee, with governor Sir Mervyn King and Paul Fisher joining previously lone voice David Miles in calls to restart the printing presses.
    David Tinsley, UK economist at BNP Paribas predicted that the figures bring the chance of further quantitative easing up to about 45 per cent. 'It's a very disappointing set of data and makes next week's Bank of England policy decision very finely balanced,' he said.
    The sector also saw its greatest fall in employment for 40 months, with large enterprises making the biggest cuts as they continued to shed backlogs of work. Some reported spare capacity.
    David Noble, chief executive of the Chartered Institute of Purchasing & Supply, said the figures were a ‘reality check’ for the manufacturing sector.
    He said: ‘Of concern is the dearth of encouraging signs for the future. The sector witnessed a fall in new orders at home and a continued lack of demand abroad and, perhaps most ominously, we saw the greatest fall in employment for 40 months.
    ‘Moreover, the sector seems to continue to grapple with the ongoing problems of playing hostage to European fortunes, whilst unable to fully take advantage of emerging growth markets,’ he added.

    Graph showing GDP estimates and revisions from the last quarter of 2008 to the end of 2012 (Source: ONS)
    Graph showing GDP estimates and revisions from the last quarter of 2008 to the end of 2012 (Source: ONS)
    New export orders declined for the 14th successive month as growth in emerging markets was offset by weak demand in Europe.
    But Howard Archer, chief UK and European economist at IHS Global, said signs that eurozone activity bottomed out around October did offer some hope for UK manufacturing exporters.
    He said: ‘In addition, sterling's sharp recent retreat will be largely welcomed by UK manufacturers as it should boost their competitiveness both in foreign and domestic markets.’
    But he warned the pound's weakness could lift manufacturers' costs for imported materials and parts.
    The figures showed manufacturers had increased prices as they battled rising costs into the start of 2013, but there were signs that costs fell marginally during February following negotiations with suppliers.
    The housing sector also revealed signs of weakness.
    Mortgage approvals fell to 54,719 in January from 55,632 in December, short of analysts' forecasts for a rise to 56,500, the central bank said.
    A rise in the flow of credit in recent months, particularly in home loans, fed hopes that the BoE's flagship Funding for Lending Scheme is helping home buyers, though lending to companies remains sluggish.
    Mortgage lending grew by £147million, the smallest increase since August, also less than forecast.

    US offers $60m for Syrian intervention as sequester cuts loom

    So, Congress and Obama are poised to slash Social Security, Medicare, and Medicaid -- but there's no shortage of money to back the thugs and war criminals trying to overthrow al-Assad so US corpora-terrorists can steal Syria's oil?]
    28 Feb 2013 Syria’s opposition has won fresh financial and material support from the US but its demands for weapons to fight Bashar al-Assad were ignored in favour of calls for a “political solution” to end the crisis. John Kerry, the new US secretary of state, announced at a conference in Rome on Thursday that $60m (£45m) in “non-lethal” assistance would go to the western-backed Syrian National Coalition (SNC) while food and medical supplies would — for the first time — go directly to the opposition’s supreme military council, attempting to co-ordinate strategy by the Free Syrian Army and other units.

    LIBOR: Viewing the Biggest Financial Crime in History

    It’s been five years since a few academics and journalists began to dig up evidence that something was wrong with the London Inter-Bank Offered Rate, or LIBOR (pronounced appropriately as “lie-bore.”) The data that curious researchers were compiling couldn’t be explained using the prevailing definition of what LIBOR supposedly was: a trustworthy interest rate that accurately gauged the market price of borrowed US dollars held overseas by the world’s biggest banks. Instead, their findings pointed toward something other than an idealized neoliberal market, influenced only by impersonal supply and demand forces. Many began to realize that the data could easily be explained if the banks were rigging the LIBOR rate in their favor. Strange discrepancies in LIBOR’s correlation to other rates, and to the economic fundamentals of the bank companies responsible for formulating the rate, showed something seriously amiss, but it made sense if the banks were cheating.
    The motives of the banks have been clear from the beginning. A few banks that dominate the marketplace for derivatives stand to make billions if LIBOR moves in their favor on particular days when contractual payments between them and their customers come due. They therefore suppressed the rates in order to skim billions of dollars off derivatives and investments. Later these same banks suppressed LIBOR rates to create the illusion that their balance sheets were robust during the financial crisis. This also allowed them further rounds of money-siphoning from their unwitting derivatives customers.
    Until recently LIBOR rates have been set by a panel of banks that are members of the British Bankers Association (BBA). The BBA is a private industry group established almost 100 years ago to lobby for the financial industry in one of its global hubs, London. The BBA really came into power in the mid-1980s with the creation of LIBOR. LIBOR was created to further integrate the giant global money market in US dollars held in overseas banks or holding companies, and therefore unregulated by the US Federal Reserve. Called “Eurodollars,” because they originally were dollar savings accumulated in European banks, especially banks in London, these funds quickly became a de facto global currency. LIBOR began as a way for the banks to standardize investment products for these vast pools of American dollars flowing through Europe, and later Japan, the Middle East, and Latin America. By the 1990s LIBOR had become such an important set of interest rates, and US dollars held overseas had becomes such an important source of credit for US consumers, that LIBOR became the key global interest rate around which many financial products were pegged. As LIBOR became more and more important to the globalization of finance, it accrued a sort of official, trusty gloss; nearly everyone assumed that LIBOR was a market rate reflecting competition. Instead, LIBOR has probably all along been a fudged rate, determined less by vast market forces and invisible hands, and more by the vulgar self-interest and power of the elite banks that set LIBOR rates.
    Last year government investigations into this globe-spanning crime —rightly called the biggest financial scam in all of history— led to multi-billion dollar fines against Barclays, the Royal Bank of Scotland, and UBS, the 7th, 8th, and 20th largest banks in the world, respectively. Criminal investigations spearheaded by US, UK, Japanese, Canadian, Swiss, and Singaporean authorities are ongoing and aimed at other banks such as Citigroup, JP Morgan, Bank of America, and other “too big to fail” institutions. More details of the crime will be forthcoming as e-mails, internal documents, phone tapes, text messages, and other evidence, is made public, and as the banks are forced to pay significant fines, and sign plea agreements.
    While this scandal might seem worlds away, concerning complex financial concepts and obscure money market instruments dealt by bankers out of skyscraper offices in the City of London, the importance of uncovering the complete truth about the LIBOR rigging conspiracy cannot be overstated for local communities across the United States, especially here in California.
    Why? First, LIBOR has been used since the 1990s to determine cash flows on interest rate swaps that local governments have purchased from banks to insure themselves against wild swings in variable interest rates owed on billions of municipal debt. Messing with LIBOR messes with the payments due on these instruments.
    Second, LIBOR has also been used as a main interest rate of reference for an array of investment products that yield a variable return, dipping and rising in concert with LIBOR. Local and state governments have used these investment products, called “municipal derivatives reinvestment products” to temporarily park public funds, while pension systems and government enterprises like utilities use them make investments. Governments and public agencies earn LIBOR rate returns on their dollars invested in numerous kinds of municipal derivatives, so if LIBOR is illegally fixed downward, they earn less income.
    Through both of these forms of exposure, local governments have potentially been harmed by LIBOR-fixing perpetrated by the banks, often times the very same banks that have sold them swaps or municipal derivatives investment products.
    California is fast emerging as a center of investigation and litigation into the LIBOR-fixing conspiracy. California is the largest single municipal debt market in the United States, and one of the largest in the world. Last year alone the state of California and its cities, counties, school districts, and other public entities issued $65.7 billion in total public debt. Because of California’s regressive tax structure and chronic budget crises, the state’s multitude of governments have been among the most aggressive in issuing variable rate debt hedged with interest rate swaps.
    The Golden State’s local governments have also been the largest purchasers of municipal derivatives contracts from banks because streams of tax and fee revenues often don’t match up with the dates that payments to public employees and contractors come due. Collusive suppression of LIBOR rates by the 16-member panel who were trusted to provide accurate quotes could mean that California local governments have paid untold millions to their interest rate swap counterparties (the banks) that should otherwise have remained in budgets and used to fund school construction, bus lines, street paving, water and sewerage services, etc.
    In the 1990s and 2000s local governments across California increasingly issued bonds with variable rates. Investment bank underwriters and municipal debt advisers from the private sector encouraged variable rate bond financing because it promised lower interest rates for California’s cash-strapped municipalities. To hedge against the risk that variable rates might explode, as they did in the 1980s, the banks sold interest rate swaps to local governments. The swaps effectively converted floating rate debt into a fixed rate. Under a typical swap contract the bank seller agrees to pay a floating rate designed to mimic the variable rate interest on the bond debt, and in return the local government agrees to pay a fixed rate. I’ve written elsewhere about how this deal blew up and created a financial injustice when variable interest rates plummeted during and after the Financial Crisis, but the LIBOR rigging conspiracy adds to these harms. The US government bailed out the banks and assisted them in taking “toxic” derivatives assets off their hands, but stood idly by while cities, counties, and public agencies suffered without aid during the Financial Crisis, allowing derivatives instruments on the public’s books to blow up and drain budgets. At this very moment the banks perpetrated an illegal scam to suck even more money from the public via further depression of LIBOR.
    Barclays, RBS, UBS, and other banks worked together to suppress LIBOR below even the depths to which it sank after 2008. A number of lawsuits filed by various cities, counties, and public agencies in California asserts the banks did this to skim off an unknown, but very large, amount of money from their public victims, and also to bolster their own balance sheets during the crisis. By suppressing LIBOR the banks ensured that the net difference between the variable rates they owed, and the fixed rates the public was paying on swaps, was wider than it would otherwise have been. This net difference meant that the public owed the banks higher amounts when the interest rate swap payments came due (usually twice a year).
    For San Francisco this could mean that millions have been stolen from the capital budget of its Airport. SFO currently has seven interest rate swaps it has purchased to convert variable rate bond debt into synthetic fixed rates. The airport’s counterparties on its swaps included JP Morgan Chase, Merrill Lynch (owned by Bank of America), and Goldman Sachs. Each of these banks likely benefited from conspiratorial suppression of LIBOR, even if it was by just a few basis points (hundredths of a percent). JP Morgan Chase and Merrill’s parent Bank of America are both members of the panel that sets LIBOR, and are both believed to have played a role in the conspiracy.
    San Francisco’s pension system may have also been raided by the banks through its speculative investments in swaps. According to the most recent audit of the San Francisco Retirement System’s portfolio, the city’s pension system holds two interest rate swaps on its books with a notional value of $15 million. In prior years, SFERs held other swaps. In 2010, the Retirement System’s audit showed three interest rate swaps with a total notional value of $41 million. Over the last two years these swaps drained $5.3 million from the pension system, and some of these losses might have been due to the downward manipulation of LIBOR. Also on the Retirement System’s books are other investments in bank loans, options, and other securities that might have been impacted by the LIBOR fraud.
    San Francisco’s LIBOR damages are probably small in comparison to other local governments and public agencies. The East Bay Municipal Utility District has already filed a lawsuit in federal court alleging damages from bank rigging of LIBOR. The water district’s complaint, filed in January of 2013, alleges that LIBOR suppression drained potentially millions, again from interest rate swap agreements with some of the very banks that sit on the LIBOR-panel: Citibank, JP Morgan Chase, and Bank of America. East Bay MUD lists nine interest rate swaps potentially affected by LIBOR rigging in its lawsuit.
    East Bay MUD’s swaps had a total notional amount of $481 million in 2012, according to the utility’s most recent financial report. Downward manipulation of LIBOR by just 10 to 50 basis points (1/10th to 1/2 of a percent) could have drained between $481,000 to $2,400,000 through East Bay MUD’s swap payments every six months. Over a few years, say the conspiracy’s 2007-2010 time-frame alleged in EBMUD’s lawsuit, this would add up to millions of dollars stolen by the banks.
    The cities of Richmond, San Diego, and Riverside, and the County of San Mateo, are other California governments that have now filed lawsuits against the banks responsible for setting LIBOR. All of these lawsuits have been consolidated into a larger class action case currently being heard in the U.S. District Court, Southern District of New York, before Judge Naomi Buchwald. There are now about two dozen LIBOR manipulation lawsuits that have been filed and consolidated in New York. The lead case is the City of Baltimore and the New Britain Firefighters’ and Police Benefit Fund lawsuit against the 16-bank LIBOR panel, filed in April of 2012.
    More California cities, counties, and public agencies are expected to file their own lawsuits soon, however. CalPERS, which has numerous investments that fluctuate in value and yield with LIBOR, is also said to be investigating its own exposure to rate rigging.
    Darwin Bond-Graham is a sociologist and author who lives and works in Oakland, CA. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion.

    Wal-Mart Situation "Getting Worse" New Leaks Reveal

    Two weeks ago, Wal-Mart stunned the world when a leaked memo discloses that February sales had been a "total disaster" and the company was facing the worst February start since 2006. Today, Bloomberg's deep throat in Bentonville strikes again, as a new leak emerges. "Wal-Mart Stores Inc (WMT), already struggling to woo shoppers constrained by higher taxes, is “"getting worse" at keeping shelves stocked, the retailer’s U.S. chief told executives, according to minutes of an officers’ meeting obtained by Bloomberg News. "We run out quickly and the new stuff doesn’t come in," U.S. Chief Executive Officer Bill Simon said, according to the minutes of the Feb. 1 meeting. Simon called “self-inflicted wounds” Wal-Mart’s “biggest risk” and said an executive vice president had been appointed to fix the restocking problem, according to the minutes."
    So even as the market completely ignored the Wal-Mart revenue issue, which is "getting worse", the bigger problem is that now it appears to be affecting the company's supply-chain, which likely means that all of WMT's upstream vendors are suffering from the same malaise that has gripped all those entities that still rely on such historical trivia as profitability and cash flow:
    Wal-Mart’s inability to keep its shelves stocked coincides with slowing sales growth. Same-store sales in the U.S. for the 13 weeks ending April 26 will be little changed, Simon said in the company’s Feb. 21 earnings call. Comparable sales increased 1 percent in the fourth quarter, compared with an average of 1.4 percent from analysts surveyed by Bloomberg. This year the shares gained 4.2 percent through yesterday, compared with a 5 percent advance for the Standard & Poor’s 500 Index.

    Evelin Cruz, a department manager at the Wal-Mart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.”

    “There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”

    Cruz, 41, who has worked at Wal-Mart for nine years and oversees the photo and wireless sections at her store, said it can take weeks or months for merchandise to be replaced after it sells out.

    “My camera bar hasn’t had cameras since early January,” she said. “They let the merchandise phase out but nothing new comes in to replace them. We’re supposed to have 72 cameras but we maybe have 12. What are customers supposed to buy?”
    Sure enough, WMT again has pre-canned (pardon the pun) excuses for what this second leak is supposed to mean:
    “There’s a number of misinterpretations and half- thoughts” in the documents, which were not official company minutes, David Tovar, a Wal-Mart spokesman said in a telephone interview.

    When Simon said things were “getting worse” he was referring to “modular changes,” the process of replenishing merchandise to keep up with customer demand and changing seasons, Tovar said. Wal-Mart is working to “manage this in the most efficient way possible,” he said.

    “We’re very pleased with our in-stock position,” he said, adding that products audited by the company and its consultants match or exceed historical levels. He declined to disclose what those levels are.

    Tovar declined to make Simon available for comment
    Naturally, following WMT's earnings, which showed that in the fourth quarter all was well, the market promptly forgot the recent "totally disastrous", completely oblivious that February is in the current quarter, and the management is obviously stonewalling the reality facing the retailer.
    Yet if indeed there is a major issue affecting the world's most efficient logistical chain, what can other retailers say? And what are the implications for all other global trade routes, both macro and micro? Because if trade, which has been a casualty of central planning for years, is buckling, then is the scenario so vividly described in ""Trade-Off": A Study In Global Systemic Collapse" finally starting to come true?