Friday, August 23, 2013

Larry Williams on Hot Handed Trading and Benn Steil on Treasury Auction Fails

Here’s what’s in your Prime Interest today:
The latest on Bloomberg-gate, as we’ve dubbed it — is that they allegedly misrepresented the truth. The scandal erupted when it surfaced that Bloomberg reporters were skimming personal data from Bloomberg’s prominent clients. The firm claimed they *fixed* the problem two years ago. However, a review by an independent firm has revealed otherwise.
And what would that independent firm be? None other than prominent shadow regulator, Promontory Financial Group. Yes, the very firm that signed off on MF Global’s risk controls before Jon Corzine blew up the firm with customer money. Apparently, antiquated Excel spreadsheets and human memory were good enough for Promontory, then. Imagine what passes now.
Switching gears, yesterday the Fed release its last meeting’s minutes. But it’s just more of the same — maybe the Fed will taper, maybe it won’t. There is, however, more relevant Fed news that’s flying under the radar. They’ve appealed a ruling asking them to lower transaction fees every time we swipe our debit cards. Unfortunately, these lower transaction fees have already passed costs onto consumers. Bob talks to Benn Steil, author of the Battle of Bretton Woods, about our global markets. Then Bob interviews with veteran futures trader, Larry Williams. They talk about how he turned $10,000 into over a million dollars in a trading competition in 1987.
Plus when the Fed began talking about tapering last April, many investors became worried. Then, no surprise, Treasury yields shot up. Since, May of this year 10 year yields are are up 130 basis points. Justine charts what’s called the “carry trade.” Finally we duel Breaking the Set Producer, Ameera David over stealth clothing. There is more or less than you think.

This Will Create Panic, Crush The Fed & Send Gold Soaring 21 August 2013, by Eric King (King World King)

“It’s all about the Fed and the removal of their bid, Eric.  We were told for years and years that the foreigners had to buy U.S. debt, and (they) had no other choice.  We learned a few days ago that in June they sold a record $40.8 billion of (U.S.) Treasuries, and that was an all-time record going back to 1977.
So even foreigners are now concerned about the final removal of the Fed’s bid, and massive manipulation of our interest rate yield curve spectrum.”
Eric King:  “Michael, there has been some discussion on KWN recently about how this could be destabilizing for the entire financial system because of the derivatives exposure there.”
Pento:  “Right, there are hundreds of trillions of dollars worth of interest rate derivatives around the world, and that’s just the beginning of the story....

Continue reading the Michael Pento interview below....

They Actually Expect Us To Have Faith In These Financial Markets After This Week?

By Michael Snyder
NASDAQ MarketSite TV studio - Photo by Luis Villa del Campo
What in the world is happening to our financial markets?  Trading on the Nasdaq was halted on Thursday for more than 3 hours, and the only formal explanation that we got was that it was a “technical issue”.  On Tuesday, Goldman Sachs made thousands of “erroneous trades” that are now being canceled.  If those trades had not been canceled, it could have cost Goldman “hundreds of millions of dollars” according to the Wall Street Journal.  How nice for them that they get a “do over”.  When Knight Capital made a similar “trading error”, they were not so fortunate.  Our financial system has become completely and totally dependent on computers, and that means that it is extremely vulnerable.  After what we have witnessed this week, how can they actually expect us to have faith in these financial markets?  And what happens if these “technical issues” get even worse?
The stoppage on the Nasdaq on Thursday was unprecedented.  Trading in literally thousands of stocks and options was halted.  Big names like Apple, Netflix, Intel and Facebook were affected.
As of right now, officials are not telling us what caused the “technical issue”, but there are rumblings that hacking was involved.
And the Nasdaq would hardly be the first exchange to be hacked.  In fact, according to NBC News, about half of all the security exchanges around the world were hacked last year.
USA Today is suggesting that a group of Iranian hackers known as “Cyber Fighters of Izz ad-Din al-Qassam” may be responsible for what happened to the Nasdaq.  Apparently they have been quite active since last September…
The first wave of denial-of-service attacks attributed to the Cyber Fighters of Izz ad-Din al-Qassam began last September and lasted about six weeks. Knocked offline for various periods of time were Wells Fargo, U.S. Bank, Bank of America, JPMorgan Chase & Co. and PNC Bank.
The second wave commenced in December and lasted seven weeks, knocking out mid-tier banks and credit unions.
And a third wave of high-powered denial-of-service attacks commenced in March targeting credit card companies and financial brokerages.
But of course the Iranians have not been the only ones hacking financial institutions.  According to Gartner banking security analyst Avivah Litan, some “profit-minded hackers” have had quite a bit of success attacking U.S. banks…
More recently, a copycat group of profit-minded hackers has conducted denial-of-service attacks against certain U.S. banks as a smoke screen to divert attention while they execute an Ocean’s 11-style wire transfer fraud.
Litan earlier this month blogged about that caper. These bad guys, she says, set into motion sophisticated denial-of-service attacks that overwhelmed pretty sturdy bank network security. While tech staff labored manually to get the banks’ websites back into service, the crooks scrambled behind the scenes to extract funds from a bank employee’s privileged account, which they had gained access to.
Instead of getting into one customer account at a time, the criminals used the employee’s account to control the master payment switch for wire transfers, and moved as much money as they could from as many accounts as possible for as long as possible, Litan reports.
“Considerable financial damage has resulted from these attacks,” says Litan.
However, let’s certainly not blame all of the “technical issues” in the financial markets on hackers.  What happened to Goldman Sachs on Tuesday appears to be very much their own fault
A programming error at Goldman Sachs Group Inc. caused unintended stock-option orders to flood American exchanges this morning, roiling markets and shaking confidence in electronic trading infrastructure.
An internal system that Goldman Sachs uses to help prepare to meet market demand for equity options inadvertently produced orders with inaccurate price limits and sent them to exchanges, said a person familiar with the situation, who asked not to be named because the information is private. The size of the losses depends on which trades are canceled, the person said. Some have already been voided, data compiled by Bloomberg show.
Of course if those trades had made hundreds of millions of dollars for Goldman they would have been allowed to stand.
But because Goldman was about to lose hundreds of millions of dollars authorities worked very rapidly to start “breaking” those trades.
This is just another example that shows how much of a joke our financial system has become.
Wall Street has become a massive computerized casino, and at some point this fraudulent house of cards is going to come crashing down hard.
The seeds for all of this were planted back in the late 1990s.  The Glass-Steagall Act was repealed and the big banks started to go hog wild.
And according to an absolutely shocking memo uncovered by investigative reporter Greg Palast, a certain U.S. Treasury official was at the heart of the plot to make this possible…
When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn’t believe it.
The Memo confirmed every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3 percent unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears.
The Treasury official playing the bankers’ secret End Game was Larry Summers. Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank.
If Summers and U.S. Treasury Secretary Robert Rubin had not beenworking so hard for the benefit of the big banks, we might not be facing a quadrillion dollar derivatives bubble today…
The year was 1997. US Treasury Secretary Robert Rubin was pushing hard to de-regulate banks. That required, first, repeal of the Glass-Steagall Act to dismantle the barrier between commercial banks and investment banks. It was like replacing bank vaults with roulette wheels.
Second, the banks wanted the right to play a new high-risk game: “derivatives trading”. JP Morgan alone would soon carry $88 trillion of these pseudo-securities on its books as “assets”.
Deputy Treasury Secretary Summers (soon to replace Rubin as Secretary) body-blocked any attempt to control derivatives.
But what was the use of turning US banks into derivatives casinos if money would flee to nations with safer banking laws?
The answer conceived by the Big Bank Five: eliminate controls on banks in every nation on the planet — in one single move. It was as brilliant as it was insanely dangerous.
To learn more about how they used the WTO to transform the global financial system into a gigantic casino, head on over and read the rest of Palast’s outstanding article right here.
And you know what is truly frightening?
Larry Summers appears to be Barack Obama’s top choice to become the next chairman of the Federal Reserve.
That statement should send chills up your spine.
The truth is that Larry Summers should not even be running a Dairy Queen, much less the most powerful financial institution on the planet.
If Larry Summers becomes the next head of the Federal Reserve, it will be an unmitigated disaster.
But it looks like that is exactly what we are going to get.
We are rapidly heading toward the next major global financial crisis, and on top of everything else we will probably have Larry Summers running things soon.
What a nightmare.

Economy imperiled as QE bag of tricks fails

Question: What do you call it when you are screwed if you do and screwed if you don’t?
Answer: Federal Reserve policy.
The policymaking Open Market Committee yesterday released the minutiae of its last meeting, and it is now clearer than ever that Fed members don’t have a clue about what to do.
No, let me change that. They don’t even have a clue about where to find a clue about what to do.
A more important question is this: Should the Fed continue to print gobs and gobs of greenbacks so that it can further rig the bond market in a maniacally wrongheaded effort to keep interest rates artificially low and Wall Street happy?
In case you like titles for things, this money-printing experiment is called quantitative easing. And it is Fed Chairman Ben Bernanke’s pet project, so you know how hard it will be to kill this dog.
Those extra trillions of dollars are used to buy government bonds and mortgage-backed securities. With the government acting as a shill buyer at the bond auctions, rates have stayed exceptionally low for years.
This has benefited some Americans — mostly the rich — and has been detrimental to the majority of us who happen to be living in a rich man’s world.
But interest rates have been rising lately and doing so without Fed permission. Some would have you believe that the increase in borrowing costs is a reaction to talk that the Fed will slow down — or even stop — the $85 billion a month bond-buying program.
Sorry. Rates started rising in early May, and Bernanke didn’t start opening his yap about slowing QE until later, when he realized the bond market wasn’t stepping up.
It isn’t a question of whether this so-called “tapering” of the bond purchases will happen. It’s only a question of when.
And it is becoming a more urgent question since legitimate buyers of government bonds have been in short supply lately. In fact, Treasury Department surveys show that foreign governments, which hold US bonds as a security blanket, have actually been sellers of Washington’s debt of late.
So interest rates have been rising. And the stock market, which doesn’t like rising interest rates for a number of reasons, has been falling.
In fact, interest rates are up around 1.2 percentage points on 10-year bonds since early May. And the Dow Jones industrial average is off 760 points since it peaked in early August.
I’ve been warning readers all along that trouble was brewing for stocks, which are still up 14 percent this year.
And the pace is quickening. The Dow has lost 440 points since last Wednesday, a day before I wrote “the stock market is obviously headed for difficult times.”
Stocks and bonds fell again yesterday after the Fed released a summary of the discussion that took place at its July 30-31 meeting.
I’d like to summarize what the Fed members were saying at that meeting, but I can describe it better.
Picture Thanksgiving dinner with 12 adults trying to give their opinion about any important topic — all at once. What kind of consensus could possibly be reached?
Some governors, in the minutes, seemed worried that the trigger for tapering should be a different unemployment rate than one already stated. Others were worried that inflation was too low.
Still more governors thought the economy would improve later this year, a hope that’s been bandied about for years. Others said the stock market’s gains weren’t making Americans feel rich enough to spend money and help the economy.
Ugh! Can’t you all just shut up for a minute?
If you are looking to draw a conclusion from all the jabbering, an online headline from someone who sped-read the statement will do: “Fed members split on tapering.”
The financial markets didn’t know what to make of it all either. The Dow was down before the Fed announcement; fell some more; recovered all the losses and went into positive territory and then ended the day with a 105-point loss.
The much more important bond market just kept declining, which automatically caused rates to rise some more.
I’ve made you read a whole lot to get to this point, but here’s all that really matters: The Fed has trapped itself.
When it ultimately decides to taper QE or stop the bond purchases altogether, rates will rise. Substitute buyers will have to show up to purchase all the bonds that the Fed won’t be purchasing.
And those subs will want higher yields on the bonds for their effort.
What if the Fed doesn’t taper?
Then market forces will take over, just like they have since May. Interest rates will rise, perhaps a lot more, on their own as investors worldwide will worry that the Fed has lost control of the US currency.
But it’s even more unpredictable than that.
Nothing will really be permanent until President Obama decides who will take over when Bernanke leaves in January.
And that next guy — or, less likely, gal — won’t have much room to maneuver.

The One Comic That Explains Just How Screwed America Is

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Nasdaq: 'Connectivity issue' led to three-hour shutdown

Nasdaq said it halted trading for three hours Thursday after a "connectivity issue between an exchange participant" and a system that disseminates all stock prices for the industry.
According to Nasdaq, the problem "led to a degradation in the ability of the SIP to disseminate consolidated quotes and trades."

Nasdaq did not identify which exchange had the issue connecting with the Securities Information Processor, also known as SIP.
In its statement, it did say the "cause of the issue has been identified and addressed."
Nasdaq: Identified & addressed 'connectivity issue'
CNBC's Josh Lipton reports the Nasdaq has identified and addressed a connectivity issue in regards to today's trading glitch.
Nasdaq said once it became aware of the problem, it halted trading in all Nasdaq-listed securities to "protect the integrity of the markets."
The SIP's technical issues were resolved in the first 30 minutes, Nasdaq added. The remaining time was needed to coordinate with other exchanges, regulators and market participants for an "orderly re-opening" of trading.
Trading resumed at 3:25 pm ET after the longest shutdown at the exchange in recent memory. It halted trading in such high-profile companies such as Apple, Microsoft and Facebook.
Despite the freeze, Nasdaq said that it would not cancel orders.

(Read more: Nasdaq shutdown: Follow the software)
SEC Chair Mary Jo White said in a separate statement the "serious" interruption underlines the need to address "technological vulnerabilities."

The exchange closed at its normal time of 4 pm ET. Despite the troubles, stocks closed slightly up for the day.
(Read more: Nasdaq shuts down, but stock market shrugs it off)
There were reports Thursday morning that NYSE Euronext was telling traders its electronic exchange Arca was having technical issues with some Nasdaq-listed stocks. Nasdaq stopped routing orders to Arca temporarily, but reportedly the issues were resolved before Nasdaq halted all trading.
Nasdaq officials would not comment when asked if the "exchange participant" that had the "connectivity issue" was Arca. The NYSE also had no comment.
Once Nasdaq resumed trading, there were some technical issues when Arca went to reconnect, an NYSE spokesman said. He made the comment in response to a question before the latest Nasdaq statement.
Nasdaq 'flash freeze' fallout
A major technical glitch halted the Nasdaq this afternoon. The "Fast Money" traders and CNBC's Bertha Coombs and Bob Pisani.
The shutdown brought sometimes vehement criticism from across Wall Street.

"This is such an embarrassment to the entire financial community. To have the Nasdaq go down as it has; to be down three hours—it's one thing to be down for five minutes—to be down for three hours is absolutely inexcusable," said Dennis Gartman, editor and publisher of The Gartman Letter.

(Read more: Cramer: We need a disaster plan, now!)

"It reminds me of sitting at the US Airways terminal and hearing nothing from nobody and you're getting angrier by the hour," he said.

Former SEC chairman Harvey Pitt told CNBC: "It looked like Nasdaq was clueless about how to deal with this emergency."
"Nasdaq has, in my view, serious issues and there are two particular problems here. The first is, is there technology up to the task. That's number one and then the second is, that when technology goes bad, do they have an established crisis management program?," Pitt said.
(Read more: Recent market delays due to technical glitches)

Within an hour of the shutdown starting, the Nasdaq options markets issued a "system update" saying they were recommending firms route all open orders elsewhere. An average of 1.6 billion shares have been traded on the Nasdaq every day this August, according to statistics from Sandler O'Neill.
Nasdaq: Halts trading in all tape C securities
CNBC's Bob Pisani and Bertha Coombs report the Nasdaq has halted trading in options market as of 12:20p.
The New York Stock Exchange halted trading in all Nasdaq securities at its request and canceled orders. The NYSE otherwise declined comment. The CME said it saw 'no impact' from Nasdaq's trading halt.
(Read more: 'Knight-mare': Trading Glitches May Just Get Worse)
"You can't trade if you can't get the quotes out," said Rich Repetto of Sandler O'Neill Partners.
"If I was back in the days of 10 years ago managing 300 traders I'd put the directive out to every one of them 'we don't put any orders in at the open' ... no one trades for 60 minutes," said Joe Terranova, chief market strategist for Virtus Investment Partners and a CNBC contributor.
The shutdown of exchanges without an external crisis is rare, but a stray squirrel shut down the Nasdaq in 1987, according to the New York Times.
- Written by CNBC's Matt Hunter and Alex Crippen. CNBC's Patti Domm and Reuters contributed to this report

Peter Schiff: The Market That Lives By Q.E. Dies By Q.E.

The Confidential Memo at the Heart of the Global Financial Crisis

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn't believe it.
The Memo confirmed every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3 percent unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears.
The Treasury official playing the bankers’ secret End Game was Larry Summers. Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank. If the confidential memo is authentic, then Summers shouldn’t be serving on the Fed, he should be serving hard time in some dungeon reserved for the criminally insane of the finance world.
The memo is authentic.
I had to fly to Geneva to get confirmation and wangle a meeting with the Secretary General of the World Trade Organisation, Pascal Lamy. Lamy, the Generalissimo of Globalisation, told me,
“The WTO was not created as some dark cabal of multinationals secretly cooking plots against the people... We don’t have cigar-smoking, rich, crazy bankers negotiating.”
Then I showed him the memo.
It begins with Larry Summers’ flunky, Timothy Geithner, reminding his boss to call the Bank bigshots to order their lobbyist armies to march:
“As we enter the end-game of the WTO financial services negotiations, I believe it would be a good idea for you to touch base with the CEOs…”
To avoid Summers having to call his office to get the phone numbers (which, under US law, would have to appear on public logs), Geithner listed the private lines of what were then the five most powerful CEOs on the planet. And here they are:
Goldman Sachs: John Corzine (212)902-8281
Merrill Lynch: David Kamanski (212)449-6868
Bank of America: David Coulter (415)622-2255
Citibank: John Reed (212)559-2732
Chase Manhattan: Walter Shipley (212)270-1380
Lamy was right: They don’t smoke cigars. Go ahead and dial them. I did, and sure enough, got a cheery personal hello from Reed – cheery until I revealed I wasn't Larry Summers. (Note: The other numbers were swiftly disconnected. And Corzine can’t be reached while he faces criminal charges.)
It's not the little cabal of confabs held by Summers and the banksters that’s so troubling. The horror is in the purpose of the "end game” itself.
Let me explain:
The year was 1997. US Treasury Secretary Robert Rubin was pushing hard to de-regulate banks. That required, first, repeal of the Glass-Steagall Act to dismantle the barrier between commercial banks and investment banks. It was like replacing bank vaults with roulette wheels.
Second, the banks wanted the right to play a new high-risk game: “derivatives trading”. JP Morgan alone would soon carry $88 trillion of these pseudo-securities on its books as “assets”.
Deputy Treasury Secretary Summers (soon to replace Rubin as Secretary) body-blocked any attempt to control derivatives.
But what was the use of turning US banks into derivatives casinos if money would flee to nations with safer banking laws?
The answer conceived by the Big Bank Five: eliminate controls on banks in every nation on the planet -- in one single move. It was as brilliant as it was insanely dangerous.
How could they pull off this mad caper? The bankers' and Summers' game was to use the Financial Services Agreement (or FSA), an abstruse and benign addendum to the international trade agreements policed by the World Trade Organisation.
Until the bankers began their play, the WTO agreements dealt simply with trade in goods – that is, my cars for your bananas. The new rules devised by Summers and the banks would force all nations to accept trade in "bads" – toxic assets like financial derivatives.
Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products”.
And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.
The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organisation.

Bankers Go Bananas
Why in the world would any nation agree to let its banking system be boarded and seized by financial pirates like JP Morgan?
The answer, in the case of Ecuador, was bananas. Ecuador was truly a banana republic. The yellow fruit was that nation’s life-and-death source of hard currency. If it refused to sign the new FSA, Ecuador could feed its bananas to the monkeys and go back into bankruptcy. Ecuador signed.
And so on – with every single nation bullied into signing.
Every nation but one, I should say. Brazil’s new President, Inacio Lula da Silva, refused. In retaliation, Brazil was threatened with a virtual embargo of its products by the European Union's Trade Commissioner, one Peter Mandelson, according to another confidential memo I got my hands on. But Lula’s refusenik stance paid off for Brazil which, alone among Western nations, survived and thrived during the 2007-9 bank crisis.
China signed – but got its pound of flesh in return. It opened its banking sector a crack in return for access and control of the US auto parts and other markets. (Swiftly, two million US jobs shifted to China.)
The new FSA pulled the lid off the Pandora’s box of worldwide derivatives trade. Among the notorious transactions legalised: Goldman Sachs (where Treasury Secretary Rubin had been co-chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation. Ecuador, its own banking sector de-regulated and demolished, exploded into riots. Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim – and the continent is now being sold off in tiny, cheap pieces to Germany.
Of course, it was not just threats that sold the FSA, but temptation as well. After all, every evil starts with one bite of an apple offered by a snake. The apple: the gleaming piles of lucre hidden in the FSA for local elites. The snake was named Larry.
Does all this evil and pain flow from a single memo? Of course not: the evil was The Game itself, as played by the banker clique. The memo only revealed their game-plan for checkmate.
And the memo reveals a lot about Summers and Obama.
While billions of sorry souls are still hurting from worldwide banker-made disaster, Rubin and Summers didn’t do too badly. Rubin’s deregulation of banks had permitted the creation of a financial monstrosity called “Citigroup”. Within weeks of leaving office, Rubin was named director, then Chairman of Citigroup – which went bankrupt while managing to pay Rubin a total of $126 million.
Then Rubin took on another post: as key campaign benefactor to a young State Senator, Barack Obama. Only days after his election as President, Obama, at Rubin’s insistence, gave Summers the odd post of US “Economics Tsar” and made Geithner his Tsarina (that is, Secretary of Treasury). In 2010, Summers gave up his royalist robes to return to “consulting” for Citibank and other creatures of bank deregulation whose payments have raised Summers’ net worth by $31 million since the “end-game” memo.
That Obama would, at Robert Rubin’s demand, now choose Summers to run the Federal Reserve Board means that, unfortunately, we are far from the end of the game.
Special thanks to expert Mary Bottari of Bankster USA without whom our investigation could not have begun.
The film of my meeting with WTO chief Lamy was originally created for Ring of Fire, hosted by Mike Papantonio and Robert F. Kennedy Jr.
Further discussion of the documents I laid before Lamy can be found in “The Generalissimo of Globalization,” Chapter 12 of Vultures’ Picnic by Greg Palast (Constable Robinson 2012).
Follow Greg on Twitter: @Greg_Palast
Previously – 'The Con' Is Leaving a Trail of Blood Across the Planet
By Greg Palast

The Federal Reserve on Trial

Keeping it in the family: How nepotism in the workplace helps the rich stay wealthy

  • A Canadian economist said wealthy people hire their children as a way of holding onto their money
  • Research found sons with rich fathers are more likely to work for the same firm at some point in their lives than sons with less wealthy fathers
  • Social mobility expert Miles Corak said nepotism combined with labour markets and public policies, are damaging the American dream

A Canadian economist has demonstrated that it really is who you know
A Canadian economist has demonstrated that it really is who you know rather than what you know that helps some sons of wealthy fathers get jobs
A Canadian economist has demonstrated that it really is who you know rather than what you know that helps some sons of wealthy fathers get jobs.
Wealthy people hire their children as a way of holding onto their money, the study said.
Social mobility expert Miles Corak said the strategy enables money and power to stay within a family instead of being distributed to others.
He found sons with rich fathers are more likely to work for the same firm at some point in their lives than sons with less wealthy fathers.
He believes nepotism as well as other factors including labour markets and public policies, are damaging the American dream.
Dr Corak's research shows the likelihood of a son working at the same firm as one that his father either works at or has worked at, at some point in his life.
The study examined elite businessmen in Canada and Denmark and found the proportion of sons sharing an employer with their father is high.
The Professor of economics at Ottawa University, studied workers in Canada and Denmark, but noted the pattern is very probably applicable to the composition of workplaces in more places, including the U.S.
The study said a rise in income of the top one per cent of businessmen, their access to sources of high quality education and enrichment for their children and the inter-generational transmission of employers and wealth, 'implies a much higher rate of  transmission of economic advantage at the very top, in a way that many  will perceive as evidence of inequality in opportunity'.
A U.S. economist said the strategy enables money and power to stay within a family instead of being distributed to others
A U.S. economist said nepotism enables money and power to stay within a family instead of being distributed to others. The graph shows the proportion of sons who work or have worked at the same firms as their fathers as well as examining the earnings of the fathers studied

Dr Corak believes declining mobility is eroding the concept of the American dream.
Writing in the study, he said: 'Evidence suggests that more inequality of likely to make family background play a stronger role in determining the adult outcomes of young people, with their own hard work playing a commensurately weaker role.'
The research found inter-generational earnings mobility is low in countries with more inequality, such as the U.S. Italy and the UK.
Earnings mobility is much higher in Nordic countries such as Denmark where income is distributed more equally.
Dr Corak said countries with more inequality at one point in time also experience less earnings mobility across the generations, which he has illustrated with a chart dubbed 'The Great Gatsby curve'.
Dr Corak said countries with more inequality at one point in time also experience less earnings mobility
Dr Corak said countries with more inequality at one point in time also experience less earnings mobility across the generations, which he has illustrated with a chart dubbed 'The Great Gatsby curve'

The study says: 'the interaction between families, labour markets and public policies all structure a child's opportunities and determine the extent to which adult earnings are related to family background'.
Dr Corak suggested these factors will probably curb earnings mobility across generations and arguably deter less advantaged Americans coming-of-age from climbing up the corporate ladder in a polarised labour market.
He wrote: 'This trend will likely continue unless there are changes in public policy that promote the human capital of children in a way that offers relatively greater benefits to the relatively disadvantaged'.
Family background plays a stronger role in determining the adult outcomes of young people
Dr Corak believes declining mobility is eroding the concept of the American dream. Writing in the study, Dr Corak said: 'Evidence suggests that more inequality of likely to make family background play a stronger role in determining the adult outcomes of young people and with their own hard work playing a commensurately weaker role'

How the Fed could cause another 1987 crash

Commentary: Rising interest rates and the gathering storm


By Brett Arends
Are investors high?
Stock market investors continue to ignore one of the biggest, fastest jumps in long-term interest rates on record.
Yes, the Dow slipped below 15,000 this week, but it remains near its long-term peak — despite the harrowing plunge in the bond market in the past couple of months, which has sent rates surging.
The Federal Reserve's July policy minutes sent markets on a ride Wednesday afternoon. Steve Russolillo joins The News Hub with a look at the market's confused reaction as it hedges when the central bank will begin tapering. Photo: AP
Indeed, I suspect one reason the stock market has risen is that some naive investors have calculated that they can be safe by “rotating” out of bonds and into stocks.
I sat down this week with one of the most experienced bond market gurus I know. When I asked him for his advice, he first suggested — only half jokingly — “panic.”
His second bit of advice? Keep calm and carry on. His wife just bought him a large “Keep Calm and Carry On” poster and had it framed. He’s going to take it into his office and hang it “where all the traders on our bond desk can see it.” We are, he believes, in an era of rising interest rates, and they’ll continue to rise much further than most people realize.
He concedes that that’s only his guess, of course.
But here’s what we do know.
At the start of May, the U.S. government could borrow money for 10 years at 1.6% interest. Today, barely four months later, it has to pay 2.88%.
At the start of May, someone buying a new home with a $200,000 mortgage was locking in monthly interest costs of $566. Today, thanks to the surge in mortgage rates, someone making the exact same purchase will have to pay $766 a month in interest.
A company with a BAA credit rating has seen its bond rates spike from 3% to 4% over the same period, and a riskier company with a BA rating jumped from 3.9% to 5.2%.
It’s easy to be fooled by the low absolute level of interest rates into thinking these are small moves. Rates are “only” up by 1% or 1.5%, after all. But actually these are huge moves, because they come from a low base. Mortgage costs are up about a third in a short period, from 3.4% to more than 4.4%. Uncle Sam’s cost of 10-year money has rocketed by 80%.
Traders continue to focus on the minutiae of Federal Reserve minutes and the timing of the Fed’s likely moves in the bond market. Ordinary investors should focus on the bigger picture. The Fed has announced that the era of quantitative easing, and aggressive manipulation of long-term interest rates, is coming to an end. We are due to move, sooner or later, back to an era of “normal” interest rates. Typically, that would mean 10-year Treasury rates about two percentage points above expected inflation, meaning today’s 2.88% yield would become more like 4.5%.
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FBI Partners with Banks and Blames Mortgage Fraud on Poor Borrowers

Instead of prosecuting banks for mortgage fraud, the Department of Justice is working with them.

This Pharmaceutical Company Used NSA-Like Tactics to Monitor Parents’ Concerns About Vaccines

Imagine you are about to be a new mother in three months and you want to learn more about vaccines. You read information on a website discussing the different toxic chemicals and dangerous biological agents contained in vaccines. (Get the list here.)
Reading about viruses cultured on monkey kidneys, mouse brains, and aborted fetal tissue makes you sick to your stomach. You decide to post the following question, “How do I tell my doctor I don’t want this stuff injected into my new baby? I’m scared and don’t know what to do. Please help!”
Fast forward three months after having your child.
You take your newborn into the pediatrician’s office, armed with your research and facts. You expect confrontation from a nurse or doctor, as so many other parents have reported. What you hear next surprises you and sounds very familiar.
Your doctor repeats back to you, in parrot-like fashion, all of your concerns about vaccines. He has all of the exact studies and counter-arguments that ultimately convince you to vaccinate your child. How can this be?
Is your doctor some sort of mind reader?
He has been given your online posting profile. We’re actually closer to George Orwell’s novel 1984 than you think. If you want to know more, read on.

Pharma Collects Data on Your Vaccine Concerns

All of the recent news of the National Security Administration (NSA) illegally monitoring your communications and personal life may bring this information into a different perspective for you.
According to a recent news article, GlaxoSmithKline (GSK) hired a text analytic software company, called Luminoso, to find out what parents were most concerned about with vaccines. [1]
The news article stated information on two websites were collected, and One of the main purposes was to learn what factors motivate parents to delay vaccinating their children.
In similar NSA-like-fashion, neither the website owners nor parents were aware of their information being anonymously collected. Additionally, the rationale given in the article for doing such an act is because current laws restrict how Big Pharma can interact with consumers (parents) of their products (vaccines).
However, unlike the NSA, GlaxoSmithKline and others are probably not doing anything illegal – even though their behavior is still very chilling. But, private companies have been known to share information with governments in the past and I think we shouldn’t forget that.
Let’s take a look at how Big Pharma will likely use this information …

A Slip of the Tongue

Every year, pharmaceutical companies spend billions of dollars more on their marketing campaigns than actual research and development of new products. [2]
Looking a bit closer into the original article, marketing is indeed how GSK will most likely be using the data collected.
As mentioned above, Pharma can’t interface directly with patients. Regarding this law, one spokeswoman for GSK stated, “That’s why it’s important for us to have this research directly from patients, so we can hear what they’re saying and address it through doctors.”
Still, another GSK representative communicated, “It has led us to question whether we are doing enough to help pediatricians having this discussion.”
If you can read between the lines here, GSK recognizes the “authority” and “shame” cards doctors learned in medical school to play on parents aren’t working so well anymore. If doctors were equipped to address the concerns from parents, GSK and others wouldn’t be doing this research, in my opinion.
Also understand – doctors are the main targets for pharma marketing dollars. A good book I recommend on understanding the topic in detail is called Our Daily Meds, by Melody Peterson.

What Can You Do About it?

If pharmaceutical companies are eavesdropping and collecting data on your concerns, you might feel intimidated and helpless. However, this feeling should be a signal to you!
The message is quite clear: You have the power and they want to influence your decision!
Next, I’ll give you some very specific actions to radically increase your personal power.
1. Remove fear. In this day, many people think their problems can be fixed with a pill or a magical injection. This is a fear-based mindset. Take personal responsibility for your own health by educating yourself at websites like
2. Ask doctors to cite their source(s) of information. There are volumes of books written on how pharma uses ghost writers or “consultants” to write published papers to support a new drug. Make sure to check the references and who paid for the study.
3. Take time to make an informed decision based on evidence. Don’t make a decision on the spot because you’re being pressured. Making an intelligent decision takes time and research to consider the data.
4. Understand the power and influence the Pharmaceutical Industry has. Understanding their methods and marketing tactics negates their effect. A fantastic source of information can be reviewed in the following report entitled The Influence of the Pharmaceutical Industry. [3] In it, you will discover gems like these:
“The pharmaceutical industry’s promotional efforts are relentless and pervasive. The evidence presented showed the lengths to which the industry goes to ensure that promotional messages reach their targets, and that these targets include not only prescribing groups, but patients and the general public.” (page 76)
“It is clear that PR activity is vital and part of a coherent strategy, both reactive and proactive, for many pharmaceutical companies. Specifically, this activity is consistently designed to tap into and exploit the target audience’s emotions and deliberate efforts are made to build emotional elements into campaigns.” (page 79)
The documents highlighted the tactics employed by pharmaceutical companies to create a need among the medical profession before the launch of specific brands. For example, one company devised a five-stage mail-out to doctors for the launch of a new brand. The first two stages were used to create a need for new treatments and did not include any information about, or branding of, the new product. The remaining three stages were used to introduce the new brand and outline its safety and efficacy and the impression that it was being widely prescribed.” (page 60)
“[Public Relation] activities may include placing articles in the lay press, TV documentaries, soap operas etc. (page 61)
5. Pharma companies spend many millions of dollars targeting doctors. [4] There is good reason for this. They know your doctors will prescribe their preferred brand to you. Next time you are in your doctor’s office, look to see if they have pens, posters, or any other pharma-branded items lying around. This may be evidence pharmaceutical representatives are frequently visiting the office.
6. Investigate vaccine adverse reactions. Remember, vaccines are the exception – by law, no vaccine manufacturer or doctor can be sued if your child is killed or maimed by a vaccine. Just so you know, according to the FDA, there are over 2 million Adverse Drug Reactions (ADR) per year. [4] This is currently the fourth leading cause of death in the United States. Vaccines are also drugs. Think about it.
Look at what has happened to other children by reviewing the Vaccine Adverse Events Reporting System (VAERS) database. [5]
7. Know what is being injected into your child. Get a list of vaccine ingredients here.
8. Be aware of psychological triggers. [6] If your doctor is insecure, he or she may use psychological triggers to get you to vaccinate your child. Don’t fall for them. Learn how they operate ahead of time and you will be able to withstand any attack.


In today’s digital age, it is difficult to be one hundred percent anonymous. Data is literally everywhere on the web. This article is a good reminder to you to be careful with what information you have made available on the web.
GlaxoSmithKline hired a third party to anonymously collect data regarding parents’ concerns on vaccines. Expect this type of activity to become more ubiquitous and accepted practice. Another expectation you can anticipate is doctors, especially pediatricians, will become better “Vaccine Salesmen.”
Lastly, remember regardless of how polished a message from your doctor sounds, it doesn’t take away the fact vaccines can injure and maim your child.

Your Paying Interest on a Loan that Never Existed | TV New Zealand Expose

The Banking Fraud & Ponzi Scheme was exposed on New Zealand Television where a short exposē into where money is created has opened a small but ever so growing can of worms. Nice to see this slowly making it’s way into mainstream media. Money is created out of thin air. Banks have been scamming the people for many years and a few of us are fighting back. - See more at:

Obamanomics Working as Planned: Forever 21 Apparel Company Will Have NO Non Management Full Time Employees After August

We have seen cities and government colleges and universities move people from full time to part time, so as not to qualify for the budget busting ObamaCare. Applebees, other restaurants and hotels have moved as many full time workers to part time, low pay/no benefits status, to protect themselves from Obamacare. Since the first of the year about 950,000 new jobs have been created—of those, more than 770,000 are part time.090611-acorn vote early-sm
This may be a story in the media every day till the end of the year. Firms can not afford the cost of ObamaCare. Sick people can not afford the lack of doctors and care under a health care run where the medical decisions are made by those who did not attend medical school.
The predictions and fears of the Affordable Care Act’s adversaries have begun to materialize, specifically fears that the law will encourage employers to demote their employees to part-time positions in order to evade federal health care requirements. Popular clothing company Forever 21 is the first of what might be many companies to limit its non-management workers’ hours to 29.5 a week, just below the 30-hour minimum that the ACA deems full-time work.
Explaining that the company “recently audited its staffing levels, staffing needs, and payroll in conjunction with reviewing its overall operating budget,” Associate Director of Human Resources Carla Macias informed employees that effective August 31, they will no longer be full-time employees of Forever 21.
It is a move that will likely harm the reputation of the company, will absolutely harm the economic circumstances of its employees, and will function as a tangible example of the Affordable Care Act’s consequences and shortcomings.
Although the ethical nature of Forever 21’s decision is debatable, it is both rational and understandable. A company that boasts regularly low prices and frequent, sensational sales, Forever 21′s competitive success is largely dependent upon its ability to maintain low manufacturing and operational costs. The ACA is an undeniable burden on this principle, and Forever 21’s management has the prerogative to take any legal measures necessary to avoid raising the costs of its products.
It is a decision that will pose moderate public-relations consequences for the company and it is an unfortunate result for its employees, but it is a pragmatic choice for any profit-driven company to make. Forever 21 will subsequently be just one of many others to take such an action if the ACA isn’t revised or repealed.
The private sector relies on minimizing costs and maximizing earnings. And those who compete within the economy must achieve those standards within the confines of rules established by the government. New rules from the ACA have been set, and Forever 21 has acted accordingly and eventually so too will its competitors and others in different sectors.
It is probable that in a perfect world, Forever 21’s management would love to continue employing full-time workers, provide them with substantial health care benefits, and maintain low prices for its customers. But in a nation with uniquely high health care costs, an issue that the Affordable Care Act fails to address, this is a regrettably unrealistic business model.
As long as health care costs remain as high as they are in the United States, many American companies will not be able to fund their employees’ health insurance and provide their consumers with quality, cheap products. And as is inevitable in a capitalist economy, companies compelled to reduce costs will find a way to do so, even if their employees are disadvantaged in the process.

US Economic Policy: Keeping Wages Flat Since 1979

In the United States of America the rich get richer, the poor stay poor, and the middle class—if they’re lucky—just stay “flat”.
(Credit: Kokouu/Getty Images) For the last tens years, according to a new report by the Economic Policy Institute, the failure of the economy to provide a living wage to a majority of its workers has created a decade of stagnation.
The central problem, say the report’s authors Lawrence Mishel and Heidie Shierholz, is that “wage and benefit growth of the vast majority” of workers has remained steady—or even declined—amid rising costs of living while the “fruits of overall growth have accrued disproportionately to the richest households” in the country.
“The wage-setting mechanism has been broken for a generation,” write Mishel and Shierholz, “but has particularly faltered in the last 10 years.”
“Corporate profits, on the other hand, are at historic highs,” they continue. “Income growth has been captured by those in the top 1 percent, driven by high profitability and by the tremendous wage growth among executives and in the finance sector.”
The cause of this situation, according to the report, began just as Ronald Reagan was about to be ushered into power in 1979 and is “the result of intentional policy decisions—including globalization, deregulation, weaker unions, and lower labor standards such as a weaker minimum wage—that have undercut job quality for low- and middle-wage workers. These policies have all been portrayed to the public as giving American consumers goods and services at lower prices,” but their real impact has been to cut earning power and upward mobility Credit: Kokouu/Getty Images( while making widely shared prosperity an impossibility.
To reverse this trend, the EPI analysis calls for two key policy initiatives. First, a commitment to severely curb unemployment by promoting a new surge in public investment, including a restoration of public services cut during the recent years of recession. And secondly, a national increase in wages across all sectors and the restoration of strong labor protections, including collective bargaining protections for union workers and an increase in the national minimum wage as key components of that effort.
This paper’s other key findings include:
  • According to every major data source, the vast majority of U.S. workers—including white-collar and blue-collar workers and those with and without a college degree—have endured more than a decade of wage stagnation. Wage growth has significantly underperformed productivity growth regardless of occupation, gender, race/ethnicity, or education level.
  • During the Great Recession and its aftermath (i.e., between 2007 and 2012), wages fell for the entire bottom 70 percent of the wage distribution, despite productivity growth of 7.7 percent.
  • Weak wage growth predates the Great Recession. Between 2000 and 2007, the median worker saw wage growth of just 2.6 percent, despite productivity growth of 16.0 percent, while the 20th percentile worker saw wage growth of just 1.0 percent and the 80th percentile worker saw wage growth of just 4.6 percent.
  • The weak wage growth over 2000–2007, combined with the wage losses for most workers from 2007 to 2012, mean that between 2000 and 2012, wages were flat or declined for the entire bottom 60 percent of the wage distribution (despite productivity growing by nearly 25 percent over this period).
  • Wage growth in the very early part of the 2000–2012 period, between 2000 and 2002, was still being bolstered by momentum from the strong wage growth of the late 1990s. Between 2002 and 2012, wages were stagnant or declined for the entire bottom 70 percent of the wage distribution. In other words, the vast majority of wage earners have already experienced a lost decade, one where real wages were either flat or in decline.
  • This lost decade for wages comes on the heels of decades of inadequate wage growth. For virtually the entire period since 1979 (with the one exception being the strong wage growth of the late 1990s), wage growth for most workers has been weak. The median worker saw an increase of just 5.0 percent between 1979 and 2012, despite productivity growth of 74.5 percent—while the 20th percentile worker saw wage erosion of 0.4 percent and the 80th percentile worker saw wage growth of just 17.5 percent.
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License
Republished from: Common Dreams

Wells Fargo to cut 2,300 mortgage jobs as refinancing slows

By Peter Rudegeair
(Reuters) - Wells Fargo & Co (NYS:WFC), the largest mortgage lender in the United States, will cut 2,300 jobs in its home loan business because fewer customers are refinancing as interest rates rise, according to an internal memo reviewed by Reuters.
The cuts would represent around 3.3 percent of the bank's consumer lending employees, the bank said. Although the bank does not disclose how many of its staff work in home loans specifically, Wells Fargo had over 11,000 mortgage loan officers on its payroll at the end of March.
Mortgage refinancing made up more than 70 percent of U.S. home lending volume in the first half of 2013, but it has fallen to around 50 percent of lending and could fall further in coming months, Franklin Codel, Wells Fargo's head of mortgage production, said in the memo.
"We've had to recalibrate our business to meet customers' needs, and to ensure we're operating as efficiently and effectively as possible. Unfortunately, displacements within our team are necessary," Codel said.
The bank had expected higher lending rates to cut into its mortgage business. Chief Financial Officer Tim Sloan said on a July 12 conference call with analysts that rising mortgage rates would likely end the bank's streak of seven consecutive quarters of making more than $100 billion (64 billion pounds) of home loans.
"We just don't think that we are going to see $100 billion of mortgage volume, given the current rates today, in the third quarter," Sloan said. "We will need to go ahead and make some adjustments."
At Wells Fargo there is typically a 60 to 90 day lag between refinancing volume slowing and the ability to cut mortgage production costs, according to an August 6 report from Goldman Sachs Global Investment Research, which cited conversations with top Wells Fargo executives.
The 2,300 employees whose positions are to be eliminated received their 60-day notice on Wednesday, a Wells Fargo spokeswoman said in an email.
News of the layoffs was first reported by Bloomberg News.
Wells Fargo made $112 billion in mortgage loans in the second quarter, down from $131 billion from the same quarter in 2012, but up from $109 billion in the first quarter.
The San Francisco-based bank extended more than one out of every five home loans in the second quarter and collected payments on nearly as many, according to Inside Mortgage Finance, an industry publication.
Wells Fargo executives have stressed that the bank has a diversified business model and that its fortunes are not solely determined by what happens in the mortgage market.
"The mortgage horse has been a big, strong horse. We've got 89 other horses that are going to be able to grow," Sloan said on the July 12 call, referring to Wells Fargo's stagecoach logo.
(Editing by Dan Grebler)

Gallup: Unemployment Rate Jumps from 7.7% to 8.9% In 30 Days

`Outside of the federal government's Bureau of Labor statistics, the Gallup polling organization also tracks the nation's unemployment rate. While the BLS and Gallup findings might not always perfectly align, the trends almost always do and the small statistical differences just haven't been worthy of note. But now Gallup is showing a sizable 30 day jump in the unemployment rate, from 7.7% on July 21 to 8.9% today.

This is an 18-month high.

At the end of July, the BLS showed a 7.4% unemployment rate, compared to Gallup's 7.8%. Again, a difference not worthy of note. But Gallup's upward trend to almost 9% in just the last three weeks is alarming, especially because this is not a poll with a history of wild swings due to statistical anomalies. Gallup's sample size is a massive 30,000 adults and the rolling average is taken over a full 30 day period.
Gallup also shows an alarming increase in the number of underemployed (those with some work seeking more). During the same 30-day period, that number has jumped from 17.1% to 17.9%.

Europe can't take four more years of Angela Merkel's Thatcherism

The privatisation of public assets across the continent is destroying the European social model. Die Linke would protect it
Anti-austerity protests in Athens, Greece
Anti-austerity protests in Athens, Greece: 'The next round of this everything-must-go clearance is set to include the Greek national gas company.' Photograph: Keystone USA-ZUMA / Rex Features
The EU remains mired in the biggest economic mess since its foundation and the response to it has been nothing short of a catastrophe. Angela Merkel has spearheaded a disastrous re-enactment by EU leaders of the structural adjustment and austerity policies imposed on developing countries in the 1980s and 1990s – policies that discredited the IMF and the World Bank. Today, austerity and the large-scale transfer of public assets to the private sector are inciting widespread disenchantment with the entire European project.
Next month's elections in Germany will be crucial for the future of the whole EU. Europe, under the unmerciful influence of Merkel and her government, is treading a dangerous path as intensified deregulation and the privatisation of public assets (industries, infrastructure and utilities) across the continent are demolishing key elements of the social model and challenging the notion of the common good itself.
This has been chiefly apparent in countries such as Greece and Portugal, where bailouts are pushing towards the privatisation of services such as water provision. Privatisation's apostles claim that selling public assets stimulates the market competition that prevents monopolies from fixing prices, benefiting both state coffers and consumers. What we have seen instead are higher costs, increased inefficiencies, service deterioration and redundancies.
Angela Merkel vision is of a Europe of shrivelled public ownership and a minimal welfare state. The overarching conception of European integration here is competition among member states for the lowest wages, pensions and benefits. There can thus be little doubt about what is in store for all Europeans if the current German government is not thrown out in September.
The crisis has led to immense pressure from the German government on bailout countries to sell off pubic bodies. As state assets are bought up at low crisis prices and banks involved in reckless lending have been bailed out at taxpayers' expense, the shift from public to private that has taken place in Europe constitutes an attack on democratic governance and the sense of social solidarity and community that healthy democracies require. The next round of this everything-must-go clearance over the coming months is set to include a chunk of the Madrid region's hospitals and health centres, the Greek national gas company, Slovenia's main telecoms provider and Cyprus's national electricity outfit.
British people are all too familiar with the consequences of fanatical neoliberalism. Hypocritically, right now with re-election in mind, the chancellor tends to refuse to impose on Germans what she is pushing on other countries. But, with the risk of four more years of Merkel at the helm, Thatcherism on a continental scale – Germany included – is a serious threat.
But the European left has learned a lot from British experience. Today, the importance of common goods is gaining traction as a key concept as people react with smart, controlled anger to the selling off of efficient and profitable public agencies while financial sector losses are socialised. Against this theft of public property, local initiatives have been springing up and often halting the privatisation of municipal utilities such as water services and hospitals. Water provision is being put back under local administration control in Berlin and a return to public water services in other big European cities such as Paris has certainly helped progressives to put the costs and downsides of privatisation on the agenda in the current German federal electoral campaign.
Five years of crisis under Merkel's leadership have set the scene for an unprecedented and dangerous transfer of power from the public to the private sphere in Europe. The Left (Die Linke) in Germany, together with our allies throughout Europe, is advancing a vision of economic democracy, equality and sustainable growth in Europe. This includes campaigning for fair taxation systems, closing down tax havens, a financial sector at the service of society, a genuine education and investment plan to tackle youth unemployment, and an accountable European Central Bank.
Defeating current and future waves of privatisation must be at the heart of any efforts to re-establish the primacy of the citizen within a democratic Europe. This is how we can offer an alternative to Merkel's rotten vision for the future of the continent. Next month, the German electorate can strike a blow for all Europeans.

Gold & Silver Recover Fed Drop, S.African Mining “In Crisis”

Gold & Silver Recover Fed Drop, S.African Mining “In Crisis”

The PRICE of gold recovered overnight losses after the release of US Federal Reserve meeting notes in London trade Thursday morning, rising back to $1375 as major stock markets also rose with commodities.

The Dollar continued to strengthen, helping the gold price rally faster for non-US investors.

Reversing an earlier 1.5% drop, the gold price in Euros regained last Friday’s finish above €1030 per ounce – the highest weekly close in ten.

Silver prices also rose back to last week’s finish above $23.25.

“[The Fed] minutes were generally consistent with our view,” says Goldman Sachs economist Jan Hatzius, “that tapering of asset purchases is likely to occur at the September meeting,”

But “The Fed has not settled on a September taper,” says the Financial Times. Instead, the July 31st minutes show it is now “flirting with recalibrating its forward guidance to mitigate tapering fears.”

In the bullion market, “It was correct that the [gold price] came off,” says broker Marex Spectron, also commenting on the Fed minutes, “eventually making a low of almost $1355 before being rescued by a stronger than expected Chinese PMI number.”

New data Thursday showed the manufacturing sector in China – the world’s #2 gold consumer market – expanding for the first time since April.

“Gold is likely to stay choppy in the near term on thin liquidity,” says a precious metals note from bullion market maker HSBC.

“While the metal remains above $1348,” says fellow bullion dealer Scotia Mocatta, “we believe there is a high probability of gold making a move to $1416.”

On the supply-side Thursday, shares in South Africa’s second largest producer, Gold Fields, dropped almost 10% after it posted a loss for the April to June quarter.

Confirming the $300m purchase of Australian properties from world #1 Barrick, CEO Nick Holland also offered today to waive his 2013 bonus “in recognition of concerns” over how 9% of Gold Fields’ giant South Deep mine was given to black investors three years ago to meet the national government’s Black Economic Empowerment (BEE) targets.

Holland’s bonus in 2012 was worth some $840,000.

The National Union of Mineworkers, which represents nearly two-thirds of South Africa’s 140,000 gold miners, is currently demanding a basic wage of $800 per month – a rise of 60% from current levels according to Reuters.

Yesterday the NUM quit talks with management and said it will ballot members about joining tens of thousands of construction and auto workers already striking over pay claims.

“In other words,” says a note from Germany’s Commerzbank, “the fifth-largest gold producing country is soon likely to see supply outages.”

“The [South African] gold industry is frankly in crisis at the moment,” says Holland.

With global prices falling by a quarter in 2013, some 60% of the country’s gold output– down by more than one half from leading the world a decade ago – was operating at a loss last month according to Business Day.

“When you talk about costs there are two elements,” says diversified mining giant BHP Billiton’s CFO Graham Kerr, speaking to Reuters.

“One is how you tighten your belt and make the easy changes. The second is productivity – getting more out of your existing people, your equipment and your infrastructure.”

BHP this week announced a $2.2 billion cut to operating expenses for the year, helping offset an $8.9bn drop in operating profits due to lower base metal and other mineral prices.

In contrast to Western gold mining firms, who have been told by shareholders “we’d rather you not do M&A transactions” according to world #1 Barrick, Chinese mergers and acquisitions in gold have risen to new records this year, says Bloomberg.

“Price declines are good for key Chinese producers to buy overseas assets,” the newswire quotes China #4 Zhaojin Mining’s head of overseas resources development Chen He.

Back in the bullion market meantime, “Gold appears to be more stable these days,” says a note from Swiss refining and finance group MKS, “with a reversal in ETF outflows and still strong physical demand by China, India and Turkey.”

Bullion holdings needed to back the world’s largest gold ETF – the SPDR Gold Trust – slipped 0.6% tonnes on Wednesday, edging back towards 54-month lows at 913 tonnes.

“We expect ETF selling to pick up again,” said commodities analysts at Societe Generale in a report last week, “with the expectation of Fed tapering, rising real [interest] rates, and a stronger Dollar.”

Adrian Ash

U.S. Mint American Eagles Sales Fall In August But Robust For 2013

by GoldCore
Today’s AM fix was USD 1,370.50, EUR 1,027.28 and GBP 879.60 per ounce.
Yesterday’s AM fix was USD 1,360.00, EUR 1,015.38 and GBP 867.29 per ounce.
Gold fell $3.90 or 0.28% yesterday, closing at $1,367.40/oz. Silver fell $0.07 or 0.3%, closing at $22.93. Platinum fell $3.11 or .2% to $ 1,509.49/oz, while palladium was down $5.78 or .8% to $741.22/oz.
Gold edged down for a second session yesterday but spiked higher today prior to determined selling was seen at the $1,375/oz level. Geopolitical instability in the Middle East with the deteriorating situations in Syria and Egypt will support gold.
The U.S. FOMC policy meeting minutes told investors nothing new. The next Fed policy meeting is September 17th and 18th. Investors believe that decreasing the $85 million per month in bond purchases will happen in September.
This will likely create significant volatility in markets with the stock market vulnerable to a sharp correction after recent strong gains.

Gold Prices/ Fixes/ Rates / Volumes – (Bloomberg)

Premiums on the Shanghai gold exchange rose from $21 yesterday to $22.40 (0800 GMT) over London spot showing robust physical demand in China. Demand from the over 2 billion people, rich and poor,  in China and India alone this year alone is set to be 1,000 metric tonnes which is worth over $87 billion or roughly what the Federal Reserve is printing every single month.
Gold is off almost 20% year to date, but has  risen 16% from a 34-month low of $1,180.71/oz on June 28 as lower prices led to physical bullion demand throughout the world.

Source: U.S. Mint

Sales of U.S. Mint American Eagle gold coins so far in August are down sharply from August last year and from recent months sales as gold coin buyers, particularly in the U.S. ease off their recent gold coin buying spree which has seen record demand in recent months and recent years.
The U.S. mint sold 3,500 ounces of gold American Eagles so far this month, down from the near record levels seen in recent months.
Demand may have fallen as the relatively small eagle coin buying community, primarily in the U.S., has secured their allocation to bullion in recent months and indeed years and many are now fully allocated.
The U.S. mint was cleared out of its gold coin inventory in April after the astonishing 15% two day price plunge saw store of value buyers buy gold coins and bars in volume. This may have brought forward some of the demand that we were likely to see in the summer months this year.
There has also been some large liquidations in the secondary market with some high net worth coin buyers choosing to reduce allocations and take profits in recent months.

Source: True Economics

Total gold coin sales may still reach a new record in 2013 especially if markets become volatile if QE slows down and as Bernanke leaves office.  Gold coin purchases are at 684,500 ounces so far this year, compared with 753,000 ounces in all of 2012, Mint data shows.
Sales of American Eagle silver coins are on track for a record. Sales are at 31.9 million ounces eight months into this year, compared with 33.7 million in all of 2012.

Gold bar and coin purchases reached a record last quarter and jewelry usage rose to the most since 2008, World Gold Council figures showed last week. American Eagle gold coin sales were valued at $1.26 billion last year.
Dr Constantin Gurdgiev is one of the few economists in the world to have looked at and researched the gold bullion coin market and continues to do.
On his excellent economics research website, True Economics, he has conducted another analysis of U.S. Mint gold coin sales looking at US Mint Gold Sales: H1 2013 .
The key insights from his research piece are the following:
In H1 2013, US Mint sold 629,000 oz of coinage gold, marking the 5th highest ranked H1 in sales terms since H1 1987. Year on year, H1 2013 sales were up 86.1% and relative to crisis period average, sales were up 22.0%, while relative to the pre-crisis period (2001-2007) H1 2013 coinage gold sales were up 261.5%. For comparison, historical H1 average sales are currently at 336,520 oz.
In H1 2013, US Mint sold 1,088,500 coins, marking the third busiest H1 sales period since 1987. For comparison, historical average sales for H1 are at 592,615 coins.
In terms of average gold volume per coin sold, H1 2013 came it at 0.578 oz/coin, which is relatively moderate, given the historical average of 0.577 oz/coin.
Chart above shows that both coins sales and oz sales of coinage gold remained in H1 2013 on the upward trend established since 2007 and the overall 2009-2013 activity for H1 period remains at post-1999 highs. There is little indication of any serious long-term slowdown in demand for US Mint coins in the data and H1 2013 strengthened the trend away from such moderation. The correction sustained over 2011-2012 has now been more than reversed and H1 2013 numbers in terms of coins sold is sitting comfortably above previous post-1999 maximum attained in 2010.
At the same time, demand for coinage gold (oz sold), while partially correcting upward in H1 2013 remains below the local maxima set in 2009-2010.
It is worth noting that H1 2013 figures were driven largely by January )month 1 of Q1) and April (month 1 of Q2) sales. This dynamic did not replicate in July (month 1 of Q3), so we should tread cautiously in expecting robust continuation of the H1 sales in H2.