Wednesday, April 3, 2013

The Sword of Damocles hangs over Cyprus

While bureaucrats and technocrats in Nicosia have been busy trying agree on an even more horrible haircut than each of the previous Troika proposals
While bureaucrats and technocrats in Nicosia have been busy trying agree on an even more horrible haircut than each of the previous Troika proposals, the EU’s deadly pathogen has begun to spread to the far corners of the country, hitting the southern seaside tourist town of Paphos.
Cyprus managed to avoid the initial danger of an all out bank run and the potential for mass rioting this week, which is probably down to the fact that no Cypriot wants to see their country become a lawless banana republic in the Mediterranean.
But that calm will not last for long if banking oligarchs continue to pressurize this economy.
No danger of a bank run on Friday, as some Cypriots taking it easy (Photo by Patrick Henningsen)
No danger of a bank run on Friday, as some Cypriots taking it easy (Photo by Patrick Henningsen)

Capital controls and frozen bank deposits mean thousands of businesses are now being strangled of operating funds. It’s a very bad scene. One successful Pathos bar owner, named Nicolas, is being hit particularly hard, and told us that his story is the same as every local trader he knows.
He explained, “Our credit card merchant account was with Laiki Bank and we cannot access it anymore, so we cannot take cards. People aren’t spending money. All my suppliers are demanding cash for deliveries, and we just haven’t got enough. They’ve got our cheques in the bank but we don’t have the funds to cover them. Staff need to be paid in cash daily now. My emergency funds are frozen in another bank account and cannot be accessed for 45 days. On top of that, tourism is down, and there’s no foreign money coming in anymore. We’ll be lucky if we’re still here in 4 or 6 months time.
“The only thing which might remedy the situation is if the government impose austerity cuts on government spending”.
Not quite Damocles, but local Nicosian demonstrates the concept to us in front of Bank of Cyprus (Photo by Patrick Henningsen)
Not quite Damocles, but local Nicosian demonstrates the concept to us in front of Bank of Cyprus (Photo by Patrick Henningsen)

In other words, things are likely to get much worse, as the Sword of Damocles is now hanging over the head of every Cypriot.
The story of Damocles is rather poignant in more ways than one. The Damocles fable can be applied two ways here. Everyone we spoke to here on Cyprus is aware that this sword is hanging over them, suspended by threads. That is obvious to the thousands of small to medium size businesses who are all hanging in there, and barely holding on in the face of capital controls and an acute liquidity shortage. If they didn’t have sufficient cash reserves before this crisis hit, then it’s doubtful that they will be able to weather the storm indefinitely.
The deeper aspect of Damocles here, is that before joining the EU and opting into the euro single currency, Cyprus was a closed economy and could more easily manage its domestic and incoming cash. It’s currency, the Cypriot Pound, was one of the strongest in the world. It filled a gap in the international market by offering a secure and profitable offshore destination for capital investment. Why worry when everyone seemed to be doing well? Then came the Russian money, and then the housing bubble, and the euro – which turned this small island of 800,000 into a speculative free-for-all, where incoming cheap money corrupted nearly every level of Cypriot society. This period of speculative gambling based in Nicosia was transposed on top of an already existing, pre-euro layer of backhanders and fat brown envelopes.
It was a perfect storm for our Damocles. All the while, shrewd shylocks in New York, London, Berlin and their court administrators in Brussels, where watching closely, and simply waiting for someone to spring the trap. Arguably, that someone was a Dubai-backed, high-flying Greek tycoon, Andreas Vgenopoulos, who took control of Cyprus’s Laiki Bank and proceeded to attach the Cyprus banks to a sinking Greek financial system.
You can blame Vgenopoulos, or Laiki management, or you can blame the money laundering, or the Troika. You can even blame the corrupt politicians, but in the end, all anyone could do in the end is stand and watch its balance sheet go up in flames. and watch it sink to the bottom. Corruption in Nicosia left the Troika mafia in control of the entire country of Cyprus. Like Damocles, some older Cypriots are now longing for their old farming lives, where living off the land was part and parcel of living here.
The bank run never happened, partly because everyone knew there would be capital controls (Photo by Patrick Henningsen)
The bank run never happened, partly because everyone knew there would be capital controls (Photo by Patrick Henningsen)

As is always the case these days, the elite financial wars and ponzi schemes end in disaster for the average saver, and even worse for the above average saver. The people are asked to pay for the collective losses of the elite.
A local restaurant owner in Larnaca, Mr Petreu, told us a story which made my heart sink, and one which illustrates the Greek tragedy unfolding before our eyes here. His business is already being ravaged by an EU funded motorway project which is running along the beach front and will cut off most of his trade as a result. Contractors are moving at a snails pace and is expected to take two years to complete. Eurocrats and the firms profiting from the work have offered no compensation, and some suspect that this EU road works project was lobbied for in Brussels and done by design, in order to crush already struggling long-term resident businesses, in order to redevelop the area with modern multimillion dollar properties and casinos in Larnaca in a bid to attract Gulf state billions and wealthy Northern European money there. Now the banking crisis has hit as a left-hook, knockout punch.
He explains, “For 29 years, I have always paid my rent on time, but this week I had to call my landlord to tell her to reduce my rent or I cannot afford to pay it. So I gave her that choice – reduce the rent or take me to court because either way, I can no longer afford it.”
The next call could be to his daughter at university, saying he cannot afford to help finance her higher education any longer.
These are the stories which people like Christine Lagarde and Angela Merkel will never hear, even though they have the power to rectify the situation. If you still think they really care, then you are probably still in denial.

Agent provocateur

Now that the danger of an immediate run on the banks has subsided, former President Demetris Christofias has become one such focus of the people’s anger.
Lucious Petrou, a retired local farmer says, ”Imagine the timing of Christofias resigning only five weeks ago, and then our banks closing their doors three weeks later?”
“Our Communist President came into power with a 1 billion euro surplus and left with what will be a 17.5 billion euro debt to the international bankers. Where is he now?”
Most residents are confident that Christofias will be dragged into the dock during the upcoming judicial inquiry into the banking collapse.
Of course, that’s the big question on everyone’s minds: why Cyprus? Why now? Social Democrat and avowed communist Demetris Christofias came to power in 2008 through a coalition government, after campaigning on the populist platform of the “reunification of Cyprus”, bringing the Greek and Turkish sides together in a bi-zonal federal state. The people liked the idea, but instead they got an economic meltdown.
Divided Cyprus – Capital Nicosia dreams on one day reuniting the Greek and Turkish Cypriots again (Photo by Patrick Henningsen)
Divided Cyprus – Capital Nicosia dreams on one day reuniting the Greek and Turkish Cypriots again (Photo by Patrick Henningsen)

Other shadowy players in this story mentioned in the cafes of Nicosia include the USA, who with the help of Henry Kissinger, were the architects of the Turkish invasion in 1974 and masters of the IMF today. Like the British, the US also have a military presence on the island to go with their 300 plus other bases and installations scattered throughout Turkey. Many Cypriots believe that the US have been using their multi-lateral institutions like the IMF to kick Russian influence – and money out of Cyprus, and thus, out of Europe. There are an estimated 50,000 Russians living in Cyprus, concentrated around the city of Limassol, along with many off-shore corporations, and hundreds of thousands more coming to visit year-round. If the US, or the EU wanted to lean on Russia – particularly in Syria, then this would be the first place to start.
We also discovered that there are an estimated 20,000 plus Chinese who have established a burgeoning European beachhead in and around Pathos, and one would expect that there were at least a few hundred Chinese millionaires, or billionaires, who took a sizable haircut too this week – but you won’t find that one in the mainstream media.
One other name kept coming up again, and again, as we combed the back streets of the old town in Nicosia. His name is Andreas Vgenopoulos, the Greek tycoon and chairman of the controversial Marfin Investment Group, and the man who inflated the now failed Laiki Bank’s financial balloon – which was doomed to pop three weeks ago, taking the whole of the Cyprus economy down with it.
The story behind his inflated success and failure is a bizarre Ménage à trois between Dubai, Athens and Nicosia. It appears that Mr Vgenopoulos steered a massive ponzi scheme which attracted the usual suspect crowd of high-flying financiers, naive and corrupt politicians and overpaid government bureaucrats, who flocked to his over-cooked honey pot of accessible capital backed by the same junk bonds and overvalued paper which brought down Cyprus’s EU neighbor Greece only 2 years earlier. By the time Cypriots knew what was going on, the bottom had already fallen out of their balance sheet – forcing Nicosia to go cap in hand to the ECB, and later to the IMF.
Vgenopoulos, it seems, was the Troika’s agent provocateur in this story – he lit the match, left the building with all the loot and watch it burn from across the sea.
Reporter Patrick Henningsen finds out what the people are saying in the coffee houses of Nicosia (Photo by Patrick Henningsen)
Reporter Patrick Henningsen finds out what the people are saying in the coffee houses of Nicosia (Photo by Patrick Henningsen)

Last but not least, people seemed very suspect, and somewhat offended, by the Germans, who magically opened-up their bond market, promoting investment into everything from solar energy to “secure investment” – at the very same time the Cyprus economy was flushed down the Euro- toilet by the Troika.
What’s worse, however, is that the elite Troika (Brussels, Berlin and the IMF) had known about this contagion and also that Cyprus would collapse well in advance of this month’s bank holiday – but they just stood back and watched as the moussaka to hit the fan, to swoop in with more crisis loans which has ultimately given them complete financial control over the economic destiny of the island. It’s like the heroin dealer trying to help a recovering addict by giving them a kilo of smack. What will happen if the European and Cyprus banks re-hypothecate all this new debt-based issued money from the Troika? And what about the bankers’ using these latest loans to parlay a piece of Cyprus’s untapped gas and oil reserves? We’ll find out in a year, until then, it’s watch and wait.
Even worse, imagine the heroin dealer, after giving the recovering addict a final kilo smack, proceeds to steal the addict’s furniture, sell-off his house and cut the wages and pensions of everyone living in the house.
G4S private security conglomerate has cleaned up in contracts over the Cyprus collapse (Photo by Patrick Henningsen)
G4S private security conglomerate has cleaned up in contracts over the Cyprus collapse (Photo by Patrick Henningsen)

One winner so far, is the private security company G4S, who have been contracted to provide extra guards throughout Cyprus in case the people lose their patience with the government and their Troika masters in Europe. It’s been a relatively easy gig for them so far in Cyprus. If it happened anywhere else, there would have been riots in the streets. If the Troika tries to steal depositor’s money in Spain, G4S probably won’t cut it, and the Spanish government would probably give the security contract to someone like Blackwater - as was done already in Greece.
When the dust settles, it doesn’t take a genius to figure out that every Cypriot will know who robbed them, and how it was done. Now, in their deceptive laid back fashion it seems, the people are deciding how best to even the score.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

Broke: Stockton Goes Bankrupt: “Precedent-Setting Implications” – There Is No Stopping This. The Debt Loads On Every Level Of Government Have Become Wholly Unsustainable.

Mac Slavo
April 1st, 2013

One of the most dangerous cities in America has just declared bankruptcy, leaving creditors out hundreds of millions of dollars.
U.S. Bankruptcy Judge Christopher Klein said the bankruptcy declaration was needed to allow the city to continue to provide basic services.
“It’s apparent to me the city would not be able to perform its obligations to its citizens on fundamental public safety as well as other basic government services without the ability to have the muscle of the contract-impairing power of federal bankruptcy law,” Klein said.
The city of nearly 300,000 people has become emblematic of government excess and the financial calamity that resulted when the nation’s housing bubble burst.
Its salaries, benefits and borrowing were based on anticipated long-term developer fees and increasing property tax revenue. But those were lost in a flurry of foreclosures beginning in the mid-2000s and a 70 percent decline in the city’s tax base.

Attorneys for the city said the city’s budget and services had been cut to the bone.
“There’s nothing to celebrate about bankruptcy,” said Bob Deis, Stockton’s city manager. “But it is a vindication of what we’ve been saying for nine months.”
The Chapter 9 bankruptcy case is being closely watched nationally for potential precedent-setting implications.
The $900 million that Stockton owes to the California Public Employees’ Retirement System to cover pension promises is its biggest debt. So far Stockton has kept up with pension payments while it has reneged on other debts, maintaining that it needs a strong pension plan to retain its pared-down workforce.

By 2009 Stockton had accumulated nearly $1 billion in debt on civic improvements, money owed to pay pension contributions, and the most generous health care benefit in the state—coverage for life for all retirees plus a dependent, no matter how long they had worked for the city.
Creditors, who invested tens of millions of dollars into city bonds to help cover pension payment shortages have been left holding the bag. And now, with the city officially bankrupt, even those pensions are under threat.
Stockton is the first of many large cities that will soon declare bankruptcy, with more troubled local city councils likely to seek bankruptcy protection in the near future.
Like many indebted citizens of America, the Stockton government based their salaries, pensions and city development plans on the notion that economic growth could never end.
Their plan worked until it didn’t.
This is only the beginning.
First, we’ll see major cities across America lay off hundreds of thousands of employees, a trend that has been gaining momentum over the last several years.
Then, entire States, likely starting with California, Illinois, and New York, will fall under the weight of billions of dollars in debt. They will turn to the Federal government, who will happily engage the Federal Reserve to print more Bernanke Bucks to bail them out.
Finally, the United States of America, in its entirety, will succumb to what can only be described as the largest sovereign debt collapse in the history of the world.
The implications will be severe as the paradigm of peace and prosperity Americans have come to know will turn to riots, starvation and bloodshed.
There is no stopping this. The debt loads on every level of government have become wholly unsustainable.

WILL 2013 BE ‘FALL OF AMERICAN EMPIRE’? The Five BRICS Nations Account For 42% of World Population And Nearly All of Current Growth In The Global Economy Push For A New World Bank And Ditch US Dollar

The “American empire” will fall this year, the head of Iran’s Basij forces claimed Sunday, a message that was approved by the Islamic regime’s supreme leader.
“America should not think that with some diplomatic dialogue it can solve its dossier (problem) with the nation of Iran,” Brig. Gen. Mohammad Reza Naghdi said. “The path of this land is directed by the martyrs. America with its hollow slogans … thinks the Iranian nation will believe it.”
China-Australia to Ditch US Dollar
A month ago we pointed out that as a result of Australia’s unprecedented reliance on China as a target export market, accounting for nearly 30% of all Australian exports (with the flipside being just as true, as Australia now is the fifth-biggest source of Chinese imports), the two countries may as well be joined at the hip.
“This is something which Australian business I think including the banking sector has been pushing for some time,” Mr Sinodinos said.
The United States and a couple of other countries have already gone down this route.
Japan and China Ditches Dollar – Will Start Direct-Currency Trading on Friday (2012)
China dismisses US’s Iran oil embargo. Russia ditches almighty Dollar.
China has dismissed the new US sanction against Iran’s oil sector, saying that the commercial ties with Iran are totally legitimate and should not be subject to any punishment.Chinese Foreign Ministry spokesman Hong Lei:“China maintains normal and transparent energy and economic cooperation with Iran which does not violate UN Security Council resolutions and these interactions should not be affected,” Chinese Foreign Ministry spokesman Hong Lei told a daily news briefing on Thursday.“China opposes the placing of one’s domestic law above international law and imposing unilateral sanctions on other countries,” he added.
Iran, Russia Replace Dollar with National Currencies in Trade ExchangesSpeaking to FNA, Tehran’s Ambassador to Moscow Seyed Reza Sajjadi said that the proposal for replacing US Dollar with Ruble and Rial was raised by Russian President Dmitry Medvedev in a meeting with his Iranian counterpart Mahmoud Ahmadinejad in Astana on the sidelines of the Shanghai Cooperation Organization (SCO) meeting.”Since then, we have acted on this basis and a part of our interactions is done in Ruble now,” Sajjadi stated, adding that many Iranian traders are using Ruble for their trade deals.
Killing the Dollar: G20 & IMF Push for Global Fed, Global Currency
While headline stories about averting the dangers of an international “currency war” dominated news coverage of the recently concluded G20 meeting in Moscow, the real unreported story is that the global gathering of central bankers and finance ministers is pushing forward with their plan for “supersizing” the International Monetary Fund.The end goal is to transform the IMF into a global Federal Reserve, with the ability to flood the world with huge new volumes of loans and currency. It would also wield vast financial regulatory powers.The IMF’s unit of account, or “currency,” known as a Special Drawing Right (SDR), is being readied for eventual adoption as the replacement for the U.S. dollar in international transactions, to lead the way toward eventual adoption of the SDR or some other designated unit as the global currency, much in the same way that the euro was foisted upon the people of Europe as a replacement of their national currencies.
New BRICS bank to rival World Bank, IMF… China and Brazil Ditch US Dollar
The BRICS group of emerging economies has unveiled a new development bank, which is aimed at breaking the monopoly held by Western-backed institutions.
“It’s done,” said Pravin Gordhan, South African Finance Minister, on Tuesday, adding that “we made very good progress” on the formation of a World Bank-analogue development agency.
A Dollar Crisis: BRICS Nations Are Negotiating Towards A Common Currency
China and Brazil to sign trade deal for local currency at summit of BRICS nations
DURBAN, South Africa –  China and Brazil plan to sign a deal to do up to $30 billion of trade in their local currencies, as the five-nation BRICS forum of emerging market powers work to lessen dependence on the U.S. dollar and euro.
Read more:
BRICS Nations Plan New Bank to Bypass World Bank, IMF
The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund.
The leaders of the so-called BRICS nations — Brazil, RussiaIndiaChina and South Africa — are set to approve the establishment of a new development bank during an annual summit that starts today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.
“The deepest rationale for the BRICS is almost certainly the creation of new Bretton Woods-type institutions that are inclined toward the developing world,” Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, which provides research on emerging markets, said in a phone interview. “There’s a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the western world.”
The BRICS nations, which have combined foreign-currency reserves of $4.4 trillion and account for 43 percent of the world’s population, are seeking greater sway in global finance to match their rising economic power. They have called for an overhaul of management of the World Bank and IMF, which were created in Bretton Woods, New Hampshire, in 1944, and oppose the practice of their respective presidents being drawn from the U.S. and Europe.
This just confirms that the next goal is to set a common currency between BRICS countries…

BRICS nations slowly creating a new power center
The leaders of China, Brazil, Russia, India and South Africa pledged last week to increase cooperation to achieve the twin goals of faster growth and reforms in global governance. Collectively, the five BRICS nations account for 42% of world population, 20% of output, and nearly all of current growth in the global economy.
It was the fifth annual summit of the BRICS nations, which comprise the fastest growing emerging markets. At China’s urging South Africa, a much smaller economy that is seen as a gateway to resource-rich Africa, was admitted to the group two years ago.
Vladimir Putin, the Russian president and host of this year’s G-20 global economic summit in September, said the BRICS are coordinating their positions on investment, mining, and combating the drug trade. China’s new leader Xi Jinping stopped in Moscow en route to Durban and called for closer economic links between China and Russia.
5 of 10 Top Economies in the World Drop the Dollar
The U.S Dollar is quickly losing its status as the world reserve currency. Five of the top ten economies in the world, plus a few others, no longer use the dollar as an intermediary currency for trade. This trend poses a huge risk to the dollar and the United States along with it.
The following are 11 international agreements that are nails in the coffin of the petrodollar….

#1 China And Russia
China and Russia have decided to start using their own currencies when trading with each other.  The following is from a China Daily articleabout this important agreement….

China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.
Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.
“About trade settlement, we have decided to use our own currencies,” Putin said at a joint news conference with Wen in St. Petersburg.
The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.
#2 China And Brazil
Did you know that Brazil conducts more trade with China than with anyone else?
The largest economy in South America has just agreed to a huge currency swap deal with the largest economy in Asia.  The following is from a recent BBC article….
China and Brazil have agreed a currency swap deal in a bid to safeguard against any global financial crisis and strengthen their trade ties.
It will allow their respective central banks to exchange local currencies worth up to 60bn reais or 190bn yuan ($30bn; £19bn).
The amount can be used to shore up reserves in times of crisis or put towards boosting bilateral trade.
#3 China And Australia
Did you know that Australia conducts more trade with China than with anyone else?
Australia also recently agreed to a huge currency swap deal with China.  The following is from a recent Financial Express article….
The central banks of China and Australia signed a A$30 billion ($31.2 billion) currency-swap agreement to ensure the availability of capital between the trading partners, the Reserve Bank of Australia said.
“The main purposes of the swap agreement are to support trade and investment between Australia and China, particularly in local-currency terms, and to strengthen bilateral financial cooperation,” the RBA said in a statement on its website. “The agreement reflects the increasing opportunities available to settle trade between the two countries in Chinese renminbi and to make RMB-denominated investments.”
China has been expanding currency-swap accords as it promotes the international use of the yuan, and the accord with Australia follows similar deals with nations including South Korea, Turkey and Kazakhstan. China is Australia’s biggest trading partner and accounts for about a quarter of the nation’s merchandise sales abroad.
#4 China And Japan
The second and third largest economies on the entire planet have decided that they should start moving toward using their own currencies when trading with each other.  This agreement was incredibly important but it was almost totally ignored by the U.S. media.
According to Bloomberg, it is anticipated that this agreement will strengthen ties between these two Asian giants….
Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.
China is Japan’s biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier.
#5 India And Japan
It is not just China making these kinds of currency agreements.  According to Reuters, India and Japan have also agreed to a very large currency swap deal….
India and Japan have agreed to a $15 billion currency swap line, Japan’s Prime Minister Yoshihiko Noda said on Wednesday, in a positive move for the troubled Indian rupee, Asia’s worst-performing currency this year.
#6 “Junk For Oil”: How India And China Are Buying Oil From Iran
Iran is still selling lots of oil.  They just aren’t exchanging that oil for U.S. dollars as much these days.
So how is Iran selling their oil without using dollars?
Bloomberg article recently detailed what countries such as China and India are exchanging for Iranian oil….
Iran and its leading oil buyers, China and India, are finding ways to skirt U.S. and European Union financial sanctions on the Islamic republic by agreeing to trade oil for local currencies and goods including wheat, soybean meal and consumer products.
India, the second-biggest importer of Iran’s oil, has set up a rupee account at a state-owned bank to settle as much as much as 45 percent of its bill, according to Indian officials. China, Iran’s largest oil customer, already settles some of its oil debts through barter, Mahmoud Bahmani, Iran’s central bank governor, said Feb. 28. Iran also has sought to trade oil for wheat from Pakistan and Russia, according to media reports from the two countries.
#7 Iran And Russia
According to Bloomberg, Iran and Russia have decided to discard the U.S. dollar and use their own currencies when trading with each other….
Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow.
The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization, the ambassador said.
#8 China And Chile
China and Chile recently signed a new agreement that will dramatically expand trade between the two nations and that is also likely to lead to significant currency swaps between the two countries….
The following is from a recent report that described this new agreement between China and Chile….
Wen called on the two nations to expand trade in goods, promote trade in services and mutual investment, and double bilateral trade in three years.
The Chinese leader also said the two countries should enhance cooperation in mining, expand farm product trade, and promote cooperation in farm product production and processing and agricultural technology.
China would like to be actively engaged in Chile’s infrastructure construction and work with Chile to promote the development of transportation networks in Latin America, said Wen.
Meanwhile, Wen suggested that the two sides launch currency swaps and expand settlement in China’s renminbi.
#9 China And The United Arab Emirates
According to CNN, China and the United Arab Emirates recently agreed to a very large currency swap deal….
In January, Chinese Premier Wen Jiabao visited the United Arab Emirates and signed a $5.5 billion currency swap deal to boost trade and investments between the two countries.
#10 China And Africa
Did you know that China is now Africa’s biggest trading partner?
For many years the U.S. dollar was dominant in Africa, but now that is changing.  A report from Africa’s largest bank, Standard Bank, says the following….
“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”
#11 Brazil, Russia, India, China And South Africa
The BRICS (Brazil, Russia, India, China and South Africa) continue to become a larger factor in the global economy.
A recent agreement between those nations sets the stage for them to increasingly use their own national currencies when trading with each other rather than the U.S. dollar.  The following is from a news source in India….
The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders here Thursday.
The two agreements that will enable credit facility in local currency for businesses of BRICS countries will be signed in the presence of the leaders of the five countries, Sudhir Vyas, secretary (economic relations) in the external affairs ministry, told reporters here.
The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 percent over the last few years, but at $230 billion, remains much below the potential of the five economic powerhouses.
So what does all of this mean?
It means that the days of the U.S. dollar being the de facto reserve currency of the world are numbered.

Miami Vice Prodigal son Wall Street

Another Warning Sign – NY Times Columnist Favors Capital Controls

International Man – by Nick G.
NY Times columnist Paul Krugman recently penned an article in which he comes out in favor of capital controls.
Not surprisingly, his argument follows the near cookie cutter justification used by governments throughout history to seize more control over their citizens.
  1. Spuriously shift the blame for the crisis onto foreigners.
  1. Claim the increase in government control is for “your own good.”  
Krugman doesn’t see irresponsible government spending and the resulting debt as the core cause of recent crises in Europe and around the world. Instead, he blames inflows of money by undefined foreigners.
He even says that the US, too, is victimized by inflows of foreign money when he claims, “It’s not just Europe. In the last decade America, too, experienced a huge housing bubble fed by foreign money.”
According to Krugman, it’s not the fault of the Federal Reserve’s artificially low interest rates for blowing up the housing bubble, nor the proliferate spending habits of European welfare states for causing the debt crisis, but rather those vague evil “foreigners” who are to blame. And we need government actions (i.e. capital controls) to protect us.
Nixon followed this pattern, too, when he infamously severed the last link of the dollar to gold on August 15, 1971, thereby removing any limit on the government’s ability to finance itself by debasing the currency and stealthily confiscating the wealth of savers through inflation.
In the years preceding this announcement, the US government financed its out of control spending, stemming from the Vietnam War and new welfare programs, by printing more dollars than it had gold backing for.
Nixon claimed he was removing the last links of the gold standard, because it was “in everybody’s best interest” and that he was protecting us from foreigners, i.e. “international speculators.” He also claimed that he was taking further action to “increase jobs for Americans.” See the 2 minute sales pitch below.

It is not a stretch of the imagination to think that another president could take similar measures and then sell it to the American people the same way Nixon did.
I view it as a near certainty that the US government will impose some form of capital controls and wealth confiscation when the US dollar loses its spot as the world’s premier reserve currency. It will be the next August 15th, 1971 moment.
Selling such measures to the majority of the American people will probably be an easy task. Paul Krugman is already on board, and the rest of the mainstream media functions more like a bunch of government stenographers than an independent press.
It would be wise not to underestimate their ability to take something that is abjectly false and convince the American people that it’s true.
Take for example the role the media played in helping to convince a whopping 70% of Americans of the falsehood that Saddam Hussein was personally responsible for the 9/11 attacks.
There should be no doubt that when the US government decides to implement capital controls or other restrictive measures, they will likely have the near-total support of the media and by extension the majority of the people (aka the mob).
The moment there is another August 15th, 1971-style event is the moment the window closes for Americans. Nobody knows exactly when that will happen, but it appears to get closer each week. You want to be internationalized before that happens. Join the International Man community for free so you will know how to do exactly that.

Nick G.

Eurozone unemployment hits all-time high: 19 million out of work

People queue outside a government employment office in Burgos.(AFP Photo / Cesar Manso)RT News
Eurozone unemployment levels have hit 12 percent – the highest in the history of eurozone record-keeping, since the currency was launched in 1999.
The average unemployment rate across the eurozone’s 17 constituent European Union countries rose from January’s initial 11.9 percent high to 12 percent in February, meaning a further 33,000 people were put out of work. Overall, 19.071 million are jobless across Europe.  
Some countries, including Spain and Greece suffered unemployment rates as high as 26 percent over the month of February.
Spain and Greece have both been shaken by violent protests, with Greece experiencing a massive increase in suicides and attempted suicides in 2010 and 2011.
Conversely, the lowest unemployment rates are still to be found in Luxembourg (5.5 percent), Germany (5.4 percent), Austria (4.8 percent) and the Netherlands (6.2 percent).
Youth unemployment (under-25s) has also soared, leaving 5.694 million out of work in the EU 27 (3.581 million of whom were in the euro area).
In Greece, the figure of unemployed under-25s borders on 60 percent, while in Spain, 55.7 percent of the nation’s youth are still out of work.
In January, unemployment in the eurozone had reached a previous record high of 11.8 percent, according to the original Eurostat report, meaning it is continuing to rise, fueling concerns over the region’s economic crisis.
Some economic experts had forecast the rise in unemployment, especially after the earlier January figure was later revised upwards, to verge on 12 percent.
As the statistics relate to February, they do not yet take the impact of Cyprus’ bailout into account.
A separate survey, also released on Tuesday, indicated that the eurozone recession continued in the first quarter.
Workers and trade union representatives from all over Europe hold a demonstration against austerity near the European Commission and Council headquarters in Brussels March 14, 2013.(Reuters / Yves Herman)
Workers and trade union representatives from all over Europe hold a demonstration against austerity near the European Commission and Council headquarters in Brussels March 14, 2013.(Reuters / Yves Herman)
Within the last two weeks, Markit’s chief economist Chris Williamson aired serious concerns to AFP.
“Instead of the eurozone economy stabilizing in the second quarter, as many – including the ECB – have been hoping to see, the downturn could therefore intensify in coming months,”  he said, expressing unease over the prospect.
The eurozone PMI shrank in March. Although not as bad as estimated a couple of weeks ago, the PMI stood at 46.8 points in the most recent survey. A figure below 50 is indicative of economic contraction. The overwhelming worry is that manufacturing activity has weakened across the region.
While there has been steady trade and good gains with non-EU countries, the drag on manufacturing order from within the eurozone is still significant.
Spanish manufacturing hit an especially steep slump in February, which follows news that the government plans to revise its economic forecasts for 2013, from an initially anticipated 0.5 per cent decline to a 1 per cent decline.
They Cyprus crisis in the last week of March seems to have had little overall impact so far. However, its effects could potentially strike later on in the year.
“While in some respects it is reassuring to see the events in Cyprus did not cause an immediate impact on business activity, the concern is that the latest chapter in the region’s crisis will have hit demand further in April,” Chris Williamson told Reuters on Tuesday.

California city becomes America’s largest, latest to enter bankruptcy

Justin Sullivan / Getty Images / AFPRT News
A federal judge has ruled that Stockton, California will be allowed to enter bankruptcy. The city, located near San Francisco and home to 300,000, is the largest yet in the US to file for bankruptcy, marking a new low point in a trend sweeping California.
US Bankruptcy Judge Christopher Klein ruled Monday that Stockton would be allowed to begin reorganizing its debt in order to continue carrying out “its obligations to its citizens on fundamental public safety as well as other basic government services.”  
Next, city officials must win the judge’s approval for a specific adjustment plan that allows them to adjust financial debts held by Wall Street creditors who have fought Stockton’s bankruptcy claim and, in the opinion of Judge Klein, acted in bad faith.
The creditors got a big black eye today,” attorney Karol Denniston, who helped draft bankruptcy legislation for city officials, told the Los Angeles Times. “Now the stage is set for the real dogfight.”
Legal experts have kept a close watch on the case, because when it comes to massive pension bills combined with housing market debt, Stockton is far from alone and could set legal precedents. Last year Moody’s Investors Service warned of a domino effect on American cities crippled by poor financial planning.
In the early 2000s Stockton’s financial planners forecast city salaries, benefits, pensions and borrowing on long-term developer fees and slowly-rising tax revenue. That plan fell apart in the mid-2000s as tax revenues plummeted amid the national economic recession.
There’s nothing to celebrate about bankruptcy,” said Stockton city manager Bob Deis. “But it is a vindication of what we’ve been saying for nine months.”
Financial gurus from California Common Sense, a state legislative think tank, pointed the blame squarely on Stockton politicians who, they say, staked the area’s financial future on booming home property values that were unlikely to last. The biggest piece of debt is a $900 million bill to the California Public Employee’s Retirement System (CalPERS) that the city has, so far, been able to continue paying while ignoring other fees.
Since Stockton filed for Chapter 9 in June of 2012, fellow California cities San Bernardino and Mammoth Lakes have followed suit.
To summarize, we expect…more bankruptcy filings and bond defaults among California cities reflecting the increased risk to bondholders as investors are asked to contribute to plans for closing budget gaps,” read an August 2012 report by California Common Sense.
In the current environment, as more municipalities approach the economic or political limit to raising taxes or adjusting spending, we expect an increase in defaults and bankruptcies over the next few years.”
While California has carried the heaviest debt, areas including Jefferson County, Alabama and the City of Central Falls, Rhode Island have also filed for bankruptcy.
“Every city in the state is looking on with some concern,” said Dave Vossbrink, a spokesman for the city of San Jose, California in an interview with CBS. “Governments of all kinds borrow money, usually to build infrastructure that lasts a long time. It’s like getting a mortgage to build roads, a sewage plant, whatever it might be. If the investment community perceives greater risk, you may not be able to borrow as much for public purposes.”

David Stockman: Phony Money From The Fed Corrupting Capitalism In America

Are You Ready For What’s Coming Our Way From Europe?

by Phoenix Capital Research

The EU Crisis went into overdrive in the spring of 2012 when the Spanish banking system as a whole nearly collapsed. Having pumped €1 trillion into EU banks via its LTRO 1 and LTRO 2 programs in December 2011 and February 2012, the European Central Bank found itself facing a problem far greater than Greece (Spain’s banking system is over €3.7 trillion assets in size, compared to Greece’s  €338 billion) and on the verge of losing control of the entire system.

To understand why this happened, you first need to understand that European banks as a whole are leveraged at 26 to 1. In simple terms, this means they have just €1 in capital for every €26 in assets (bought via borrowed money).

When you are leveraged at these levels you only need the assets you invest in to fall 4% before you’ve wiped out all of your underlying capital (€26 * 0.04 = €1.04). At that point you are total insolvent.

In the case of Spain, Spanish banks were leveraged at 20 to 1 with most of their borrowed money invested in Spanish sovereign bonds. At these leverage levels Spanish Sovereign bonds only needed to fall 5% to render the Spanish banks insolvent. And in the spring of 2012, Spanish bonds were plummeting.

At this point, ECB President Mario Draghi had to do something to make Spanish bonds rally. He couldn’t simply start buying them because Germany had stated time and again it was against the open monetization of bonds. And the ECB cannot do anything without Germany’s support if it wants to keep the EU whole.

So Mario Draghi delivered the mother of all head fakes, first hinting at providing unlimited bond buying for EU sovereign bonds in June 2012, before officially stating that this would be the ECB’s policy is September 2012.

Note very carefully that Draghi didn’t actually buy any bonds. He simply stated that he would if he had to and if countries formally requested a bailout (handing over control of their finances to the ECB and Germany in the process).

The promise worked, effectively putting a floor beneath EU sovereign bonds. Investors, now convinced that the ECB would buy if it had to, began to buy Spanish debt again. Spanish bonds rose, and Europe’s banking solvency crisis was considered “over.”

And then came Cyprus.

With some €83 billion in assets, Cyprus’s banking system is well over FOUR times the size of its GDP, putting it in far worse shape than Spain, France, even Greece.

The Cyprus situation has been brewing for months, with Cyprus first formally requesting a bank bailout back in June 2012. The media largely ignored this development due to the country’s small size. By November 2012, Cyprus announced it had reached an informal agreement on the bailout terms, though the actual amount requested wouldn’t be formalized until Cyprus banks had been reviewed by the EU, ECB, and IMF.

Last weekend, Cyprus formalized the bailout amount at €10 billion (lower than the expected €17 billion). However, it lowered the amount by stating that it would raise €6+ billion itself by TAXING Cyprus savings accounts.

Words almost cannot describe the seriousness of this. Cyprus proposed to simply STEAL money from those with savings accounts in its banking system to help fund a bailout of its banks. The theft was presented as a “levy” or “tax,” but the act of confiscating someone’s property without permission is THEFT no matter how you word it.

Indeed, the very fact that this option was even considered, indicates several MAJOR issues. They are:

  1. During times of Crisis, personal property and common rule of law will be discarded if deemed necessary by the political and financial elites.
  2. Germany has reached the limit of its willingness to aid Europe.
  3. The IMF and ECB are essentially out of options and funds.
  4. European leaders are growing truly desperate.

If you’re an individual investor worried about what Europe’s Crisis really means for your portfolio, we’ve published a FREE Special Report outlining exactly that. It’s titled, What Europe Means For You and Your Savings.

In this report, we outline the risks Europe’s banking crisis holds not only for those in Europe, but for savers around the world. We also explain how this crisis will most likely unfold, including which areas are most at risk in the financial system. And we cap it off by listing multiple backdoor plays on Europe that investors can use to profit from Europe’s Crisis.

You can pick up a FREE copy here:

Thank you for reading!

Graham Summers

Today’s Massive Attempt To Break Gold

by in the category General Editorial |
My Dear Extended Family,
This is a massive attempt to break gold in order to camouflage the weakening Western banking sector. Paid bashers are flooding in to all pro-gold sites and many other pro-gold sites are under attack in other ways.
Gold banks are flogging the paper market seeking to depress the price but without selling too much.
It is so obvious that this is a gold bank organized strategy to keep gold under $1600. Old lows will hold and the reversal will be at a spiritual level.
My strategy is to simply to do nothing.

It's a stunt! Iain Duncan Smith dismisses demands to live on £53 a week

Iain Duncan Smith dismissed demands for him to try to make ends meet on £53 a week as a "complete stunt" and insisted he had experienced life "on the breadline" as ministers confronted their critics over wider-ranging cuts to benefits.
The Work and Pensions Secretary was backed by the Chancellor George Osborne in arguing that welfare reforms were essential to helping recipients back into work and tackling Britain's previously burgeoning benefits bill. They believe the majority of voters - particularly lower-paid workers - back the Coalition's moves to trim welfare spending.
By last night almost 300,000 people had signed an online petition challenging Mr Duncan Smith to survive on £53 a week, or £7.57 a day, after he insisted he could "if I had to".
It was set up when David Bennett, a market trader, told BBC Radio 4 that the sum was all he had to live on after his housing benefit was cut - and Mr Duncan Smith responded by claiming he could manage on that amount.
But the Work and Pensions Secretary told his local newspaper: "This is a complete stunt which distracts attention from the welfare reforms which are much more important and which I have been working hard to get done. I have been unemployed twice in my life so I have already done this. I know what it is like to live on the breadline."
Both Downing Street, on behalf of David Cameron, and Mr Osborne sidestepped questions on their ability to cope on such an income.
But Greg Clark, the Treasury minister, admitted that any politician would find it difficult to live on £53 a week.
"I think it's an incredible struggle to do that and I think any MP, anyone earning the comfortable wage that an MP has would certainly struggle.
"I think the context is this - we're all having to tighten our belts…right across the board there are difficult choices to be made, it is an incredibly difficult situation," he told BBC Radio 5Live.
The row began as cuts to benefits came into force this week. They include reductions of up to 25 per cent in housing benefit payments if recipients are deemed to have spare rooms - the so-called "bedroom tax" - and below-inflation increases in benefit rates.
Disability living allowance is being replaced by the personal independence payment, while trials are due to begin in four London boroughs of a £500-a-week cap on household benefits. The first pilot of the new Universal Credit system also begins this month.
In a speech in Kent yesterday, Mr Osborne said the welfare system was "fundamentally broken" and hit out at critics of the Government's plans, who include church leaders and charities, accusing them of talking "ill-informed rubbish".
Arguing that ministers were simply trying to restore "some common sense and control on costs" on spending, he said that by the year 2010 an "unaffordable" one pound in seven paid in tax was being spent on working age benefits.
The Chancellor said the changes were "all about making sure that we use every penny we can to back hard working people who want to get on in life".
He also mounted a fierce defence of his decision to lower the top rate of tax from 50p to 45p, asserting that it was "essential" to help get the economy growing. The reduction comes into effect on Saturday.
Acknowledging the move was "controversial", he said: "In a modern global economy, where people can move anywhere in the world, we cannot have a top rate of tax that discourages people from living here, setting up businesses here, investing here, creating jobs here."
The Chancellor cited France, where the Government is planning to "whack up their top rate of tax" and job creation rates were falling.
"The opposite is happening here because we are welcoming entrepreneurs and wealth creators - and the jobs they bring with them," he said.
He said the 50p rate - brought by Labour weeks before the election in 2010 was a "con" as amounts of tax collected fell.
"We got the worst of both worlds: a tax rate that discouraged enterprise and didn't raise more money from the rich. You can't pay down the deficit with that."
Mr Duncan Smith came under fresh pressure last night over his scheme to replace as string of benefits and tax credits with Universal Credit, which is due to be rolled out from October.
MPs on the Commons Communities and Local Government select committee raised fears that the overhaul will leave the benefits system more vulnerable to fraud.
It highlighted concerns that the computer system underpinning Universal Credit will have trouble distinguishing between genuine and bogus claims.
It said in a report published today that it is "worrying that the system still seems to be at the development stage".
Iain Duncan Smith’s first taste of life on the dole came at the age of 27 after he left the Army, where he had been a Captain in the Scots Guards.
He claimed unemployment benefit for several months before joining GEC-Marconi in 1981. He joined the Conservative Party the same year and stood in the general election six years later.
After seven years with GEC, Mr Duncan Smith moved to a property company as its marketing director, but was made redundant after just six months when the housing market crashed.
By now he was married to his wife Betsy, who is a baron’s daughter, with a child and a second on the way.
He once recalled: “It was a shock – absolutely awful. I felt pathetic. I remember telling my wife. We looked at each other and she said: ‘God, what are we going to do for money?’.”
During his second spell out of work, he applied unsuccessfully for several jobs before joining the military publishers Jane’s Information Group as its sales and marketing director in 1989. He eventually was promoted to the company’s operations board.
Three years later he succeeded fellow right winger Norman Tebbit as the MP for Chingford – and a political career was underway that led him to his party’s leadership and David Cameron’s Cabinet.

BERNANKE: "Bank Account Seizure Unlikely In U.S."

Bernanke on Cyprus and taxing bank deposits in the U.S.
Highlight clip from Bernanke's press conference last week.  Runs 2 minutes, and it takes Ben nearly that long to answer the question, before finally, in the last 10 seconds, he says it is "extremely unlikely" to happen in the U.S.  He does not say, however, that taxing or seizing assets from bank accounts is impossible.  This is a door left wide open.
More highlight clips below.


Unemployment still too high, QE to remain.
Bernanke updates the Fed's view of the economy.
Read the official FOMC statement...
Bernanke's complete remarks...


No risk of Cyprus contagion.
Runs 30 seconds.
"We Have No Idea How Much Money We're Giving The Banks..."


Full press conference video.

Another clip from same press conference:

Bernanke: "We Have No Idea How Much Money We're Giving The Banks"

Robert Wiedemer, Martin Feldstein, & Peter Schiff: Bernanke’s Money From Heaven Will Be The Path To Hell. Interest Rates Will Rise, And Bubbles Will Burst. Market-Crushing Treasury Collapse To Hit Around 2013

Controversial Interview Exposes 5 Signs Stocks Will Collapse in 2013

“After putting $803,436 in Obama’s re-election campaign, a media giant attempted to keep Americans from seeing the video by banning it from their sites,” stated Aaron DeHoog, the financial publisher who is unapologetic for the release of controversial footage that has gained international attention.
The video DeHoog is referring to is a stunning interview with famed economist Robert Wiedemer, author of the New York Times best-selling book Aftershock.
Wiedemer, best known for correctly predicting the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States during the “Great Recession”, provides disturbing evidence in the video interview for 50 percent unemployment, a 90 percent stock market crash, and 100 percent annual inflation . . . starting as soon as 2013.

At one point, Wiedemer even calls out Bernanke, saying that his “money from heaven will be the path to hell.”
But it’s not just the grim predictions that are causing the sensation in Wiedemer’s video interview. Rather, it’s his comprehensive blueprint for economic survival that’s really commanding global attention.

Banks still being too risky, say executives
This Is the Most Critical Time for the Market Since 2007

Martin Feldstein: Interest Rates Will Rise, And Bubbles Will Burst

…The low interest rate on long-term Treasury bonds has also boosted demand for other long-term assets that promise higher yields, including equities, farm land, high-yield corporate bonds, gold, and real estate. When interest rates rise, the prices of those assets will fall as well.
The Fed has pursued its strategy of low long-term interest rates in the hope of stimulating economic activity. At this point, the extent of the stimulus seems very small, and the risk of financial bubbles is increasingly worrying.
The US is not the only country with very low or negative real long-term interest rates. Germany, Britain, and Japan all have similarly low long rates. And, in each of these countries, it is likely that interest rates will rise during the next few years, imposing losses on holders of long-term bonds and potentially impairing the stability of financial institutions.
Even if the major advanced economies’ current monetary strategies do not lead to rising inflation, we may look back on these years as a time when official policy led to individual losses and overall financial instability.

Peter Schiff: Market-Crushing Treasury Collapse To Hit Around 2013

Peter Schiff, the divisive investor and commentator that predicted the subprime/real-estate bubble, is forecasting a U.S. dollar and bond crisis over the next couple of years.  Schiff blames intervened bond markets, where rates are artificially and excessively low, and expects the coming crisis to blow the 2008-9 financial crisis out of the water.
There is little doubt that the Federal Reserve, with Chairman Ben Bernanke at the helm, is holding markets by the hand.  Bernanke, himself a divisive figure, has done all he can to push interest rates lower, using quantitative easing and Operation Twist once nominal rates had hit the zero-range.  While many believe ultra-loose monetary policy is dangerous, Schiff thinks it will lead to a catastrophic correction.
“The more you delay it, the bigger it will be,” Schiff tells Forbes in a phone interview Tuesday, “so we need to raise interest rates during the recession to confront the inefficiencies.”  Schiff, who runs Euro Pacific Capital and is seen by many as permanently bearish, argues that government-intervened bond markets are leading to massive distortions in capital allocation that have only been exacerbated as the Fed reacted to the last couple of recessions.

The system, he argues, is as broken as it was before the financial crisis.  Schiff, who was very prescient in his forecast and prediction of how the subprime debacle would filter through to the broader real estate market and thus bring down the economy, believes complacency is widespread.  “All of the people who were 100% wrong [back in ‘08] are saying that everything’s OK [now]. I am telling them they didn’t solve the problem and are making it so much worse.”
Schiff, who knows how to build his case, concludes it thusly: “I didn’t get lucky, I just understood the problem, and we are going to get another big one coming soon.”
Two-Thirds Of U.S. Adults Cutting Back On Spending, Survey Finds

David Stockman: We’ve Been Lied To, Robbed, And Misled And We’re Still At Risk of It Happening All Over Again

It's on, finally - Malaysia Parliament dissolved today

After months of playing a guessing game with voters, Prime Minister Najib Abdul Razak has announced the dissolution of Parliament today, paving the way for the 13th general election.
Please login to read full story.

Madoff Contacts Congress: 'JPM Was Complicit In My Crime'

JPM knew all about my Ponzi.
Madoff sends info on Ponzi-complicit banks to Congress.
Start watching at 55 seconds.  Bernie keeps banging the drum, this time with a letter from prison sent to Marketwatch editors, after already reaching out to CNBC and Fox Biz in the past 60 days.
Bernard Madoff, speaking out from prison, says the banks knew of his Ponzi scheme all along.  The perpetrator of a history-making $50 billion Ponzi scheme wrote in a letter to MarketWatch from jail that he is now telling government committees the story.
Madoff: “From my first interview to the media I have said that ‘the banks must have known,’ and were complicit and contributing to my crime.”
In the emailed letter, he pointed to J.P. Morgan, Bank of New York, HSBC and Citigroup as having access to information about his scam.  He added that other banks also knew.
Madoff wrote that “the trustee seems unwilling to act on my offer” to help and is therefore “offering this information to the appropriate governmental committees in the hope that this information will prove helpful in future regulation of the appropriate institutions.”
The House Financial Services Committee and the Senate Banking Committee had no immediate comment on whether they had received information from Madoff.  A spokesman for the Office of the Comptroller of the Currency declined to comment.
Madoff’s comments come as prosecutors are looking at whether J.P. Morgan failed to fully alert authorities to suspicions about Madoff’s finances, according to a report in the New York Times on Wednesday.
J.P. Morgan is reportedly also embroiled in a squabble with regulators over a government probe into the institution’s relationship with Madoff.  According to a January report by Reuters, the OCC, J.P. Morgan’s chief regulator, has been unable to obtain documents it requested from the bank in connection with an investigation into its relationship with Madoff.
The report cites a letter from Treasury Department Inspector General Eric Thorson to J.P. Morgan’s general counsel, Stephen Cutler, saying the OCC has been unable to obtain what it is seeking.  Madoff had an account at J.P. Morgan Chase that he used to transfer funds between offices.

Earlier tonight:

NYT: JPMorgan Faces Multiple Criminal Investigations

More detail is here:

Madoff Emails CNBC From Prison, Accuses JPM Of Fraud

David Stockman: Ben Bernanke Is The Most Dangerous Man In US History

David Stockman: The Federal Reserve Has Become A 'Serial Bubble Machine'

U.S. Senator Inhofe: Banks Never Paid Back Bailouts

U.S. Senator Inhofe: Banks Never Paid Back Bailouts

Stockman Warns of Crash of Fed-Fueled Bubble Economy

The U.S. economy is in a bubble inflated by “phony money” from the Federal Reserve and will burst within a few years, warned David Stockman, who was budget director for President Ronald Reagan.
In an essay published yesterday in the New York Times (NYT), Stockman wrote that the Fed’s quantitative easing policies following the credit crisis have flooded stock markets with cash even while the “Main Street economy” remains weak. The combination, he wrote, is “unsustainable.”
David Stockman, who was budget director for U.S. President Ronald Reagan, is the author of “The Great Deformation: The Corruption of Capitalism in America,” which will be published April 2. Photographer: Douglas Healey/Bloomberg
April 1 (Bloomberg) -- David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, talks about the impact of Federal Reserve policy on financial markets and the outlook for the U.S. economy. Stockman, author of “The Great Deformation: The Corruption of Capitalism in America,” speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
April 1 (Bloomberg) -- Alfred Broaddus, former president of the Federal Reserve Bank of Richmond, talks about the Fed's ability to wind down its stimulus measures and Chairman Ben S. Bernanke's future at the central bank. Broaddus speaks with Sara Eisen and Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)
“When it bursts, there will be no new round of bailouts like the ones the banks got in 2008,” wrote Stockman, a former senior managing director at Blackstone Group LP (BX) and a former Republican congressman from Michigan. “Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.”
Stockman, 66, is the author of “The Great Deformation: The Corruption of Capitalism in America,” which will be published tomorrow.
He rose to prominence during the early 1980s in the Reagan administration while pushing supply-side economics, which held that income tax cuts would boost economic growth and raise more revenue for the government.

‘Trojan Horse’

Stockman quickly turned on supply-side economics. He said the benefits would only “trickle down” to the non-wealthy and that the tax plan “was always a Trojan horse” for accomplishing the primary goal. That objective was bringing down the top income-tax rate to 50 percent from 70 percent.
He resigned as budget director in 1985 and published a book criticizing the Reagan administration.
In an interview today on Bloomberg Television, Stockman said, “We’re borrowing money and burying the future generations in debt.”
The Fed, led by Ben S. Bernanke, is purchasing $85 billion in assets every month. The Fed is leaving its key interest rate near zero while it tries to reduce unemployment below 6.5 percent and hold inflation below 2.5 percent.
Those policies, Stockman said today, benefit speculators and bond traders and have created the “greatest bond bubble in history.”
The Standard & Poor’s 500 Index (SPX) rose to a record high last week, closing at 1,569.19 on March 28. That surpassed the previous record of 1,565.15 set in October 2007. Today, the S&P 500 fell 0.3 percent to 1,565.05 as of 10:06 a.m. in New York.

‘State Wreck’

Among the culprits Stockman blamed for what he termed a “state-wreck” are President Franklin Delano Roosevelt for weakening the gold standard in 1933, President Richard Nixon for removing the convertibility of dollars to gold and “lapsed hero” Alan Greenspan, the former Fed chairman, for keeping interest rates too low for too long.
Investors will sell, Stockman wrote, at any hint that the Fed is starting to remove assets from its balance sheet.
“Notwithstanding Bernanke’s assurances about eventually, gradually making a smooth exit, the Fed is domiciled in a monetary prison of its own making,” he wrote, warning of unsustainable fiscal policies as well. “These policies have brought America to an end-stage metastasis. The way out would be so radical it can’t happen.”
In 2010, Stockman agreed to pay $7.2 million to settle a lawsuit with the Securities and Exchange Commission that claimed he had misled investors as chief executive officer of Collins & Aikman Corp., a maker of auto parts.

‘Inflate’ Income

According to the SEC’s announcement, Stockman participated in transactions designed to “inflate” the company’s reported income and “obtained false documents from suppliers to mislead” auditors. Stockman neither admitted nor denied wrongdoing.
Paul Krugman, the Princeton University economist and New York Times columnist, responded on his blog yesterday, saying that he was “disappointed” in Stockman’s “gee-whiz, context- and model-free numbers embedded in a rant -- and not even an interesting rant.”
Krugman called Stockman’s piece “cranky old man stuff,” and summarized it this way:
“We’ve been doomed, yes doomed, ever since FDR took us off the gold standard and introduced unemployment insurance. What about those 80 years of non-doom? Just a series of lucky accidents. Now we’re really doomed. I mean it!”

Casino economics: How the S&P 500 endured two 50 percent dips in the 2000s and sent the middle class packing.

It took the S&P 500 about 13 years to get back to where it was in 2000.  Of course the power of inflation has taken an even deeper toll on this trend.  The stock market is largely a spectacle for most average Americans.  It is a dramatic sideshow like going to the track and betting on horses.  The reality is, most Americans do not own any sizeable amount of stocks.  1 out of 3 Americans have no savings and about half of Americans are one paycheck away from being on food stamps.  By the way, 47 million Americans are still on food stamps in this recovery.  The stock market over the last few decades has operated like a casino swinging from one bubble to another.  After every subsequent bust, middle class households have seen a chunk of their standard of living diminish.  This is not hyperbole because simply looking at Census data, adjusting for inflation median household income is back to where it was in the mid-1990s.  In fact, the S&P 500 has endured two dips of 50+ percent between 2000 and 2010, both precipitated by bubbles.  Can the average American compete in casino economics?

The big dips
The S&P 500, a much better of stock wealth in the US than the DOW has seen some major volatility in the last decade:
stock market dips
Source:  ZeroHedge
This is an interesting chart.  The dip in the early 2000s was led by the tech bust and the recent dip was brought on by the massive housing bubble.  The Federal Reserve is back at it inflating their balance sheet to over $3.1 trillion buying mortgage backed securities as if it were a clearance sale.  Yet the market being up is a good thing for Americans, right?  Well a big part of the gains has come from cutting wages and squeezing productivity of remaining workers.  Wealth inequality in the US is now reviving memories of the Gilded Age.
What is underlying a large part of this growth is massive debt expansion.  We are quickly on our way to approaching a total credit market of debt of $60 trillion.  The recession barely stunted this path:
total credit market debt
Those who can get their hands on debt are buying things up from real estate to other investments.  Banks are leveraging up and bonuses are back in fashion.  The government continues to spend way more than it is bringing in:
fed spending and revenues
Yet the Fed is also allowing banks to leverage back up and go back into their black box models of investing.  It seems like a large portion of the population is simply not interested in why the financial crisis took place.  Our politicians are certainly not interested and prevention is rarely a good selling point.
The stock market is operating under a system of casino economics.  A boom and bust system is nearly inevitable with the Federal Reserve flooding the market with cheap interest rates.  Yet using the word “market” may not be right here.  They are providing member banks with easy money to speculate.  The public is actually seeing tighter standards on lending:
fed spending and revenues
A big part of this adjustment has come from foreclosures but also a tighter credit market.  From the first chart regarding total debt outstanding, you realize that what applies to the average household is not the norm.  I’m sure many people look at the stock market and think about buy and hold philosophies.  Yet the market stands today where it did in 2000 (actually lower if we adjust for inflation).  Unfortunately the market is setup for boom and bust cycles and those that create them are usually the people that profit.  Take a look at Japan for a case in long-term quantitative easing after a housing bust.  Ironically, some of the banks that caused the housing bust are now using cheap Fed money to buy up properties as rentals or for other investment ventures.  This is simply part of the plan in casino economics.  The house always wins.