Posts Tagged ‘fraud’
Posted February 9, 2012
Until very recently I reckoned this Upper Caste of loyal servants comprised about 20% of the American populace, but upon closer examination of various levels of wealth and analysis of advert targeting (adverts only target those with enough money/credit to buy the goods being offered), I now identify the Upper Caste as only the top 10% (the aristocracy is at most the top 1/10th of 1%). Wealth and income both fall rather precipitously below the top 10% line, and as globalization and other systemic forces relentlessly press productivity into fewer hands, then the rewards aggregate into a smaller circle of laborers.
As noted yesterday in Social Fractals and the Corruption of America (Of Two Minds, February 8, 2012), you cannot aggregate healthy, thrifty, honest, caring and responsible people into a group that is dysfunctional, spendthrift, venal and dishonest unless those individuals have themselves become dysfunctional, spendthrift, venal and dishonest.
Since non-pathological people will quit or be fired, then these fractals of corruption are self-selecting and self-perpetuating. This is true not just of financial America but of elected officialdom. Anyone who is still naive or delusional enough to think that getting elected to Congress or the state legislature will empower “doing good” will soon learn the ropes: the next election is less than two years away, and if you want to retain your grip on power you’re going to need a couple million dollars.
So much for “working within the system.” By the time all the donors, lobbyists, leeches and parasites have been properly serviced, the “reform” bill is 2,000 pages long. As a result of the feudal structure of wealth and power in America and the self-reinforcing, self-propagating fractals of pathological servitude, the citizenry are increasingly remote from power. The aristocracy, like feudal lords in distant, fortified castles, demands obedient service of the powerless citizenry: work hard, pay your taxes and service your debt – and fears any awakening of true self-interest.
Just because a devoted member of the Upper Caste is allowed to enter the castle to do his work doesn’t mean he is part of the aristocracy. That glow of proximity to power is his reward for dutifully slaving away as a higher-order serf.
from Jesse’s Café Américain
Posted August 7, 2011
YES, THE US HAS SOME VERY REAL LONG-TERM ISSUES WITH SOCIAL SECURITY AND MEDICARE. Social Security is being strangled by the refusal to raise the income limit on the Social Security withholding tax in response to the gradual creep of inflation. If this limit was raised periodically the Social Security ‘problem’ would be resolved.
Medicare and in particular the drug portions of the program added by the Bush II administration are driving costs much higher. And this is more of a problem because of the structural cost problems in US healthcare system. Big Pharma in the US is a powerful lobbying force, and Americans pay MUCH higher costs per benefit for their health care services. This is inhibiting the steps that are needed to restructure the US healthcare system.
But Social Security and Medicare, without the drug program, have not substantially changed since the 1990’s, when the US was running a budget surplus, and then Fed Chairman Greenspan was reassuring the public that the Fed had a plan to deal with the lack of debt.
So what changed?
The repeal of Glass-Steagall and the growth of unregulated financial products, the co-opting of the regulatory agencies, the growth of corporate influence in Washington, and two unfunded and very costly wars of long duration, founded largely on lies and distortions following a despicable terror attack by a small group of people, coupled with tax cuts for the wealthy.
There is relatively little discussion, much less investigation, indictments and convictions, from one of the largest financial frauds in history.
And within twelve months of the crisis breaking, Wall Street bonuses were back to record levels, even as the rest of the country began its long downward spiral into debt, downgrade, and despair.
That is the long and short of it. And it bodes ill that these issues are so infrequently mentioned in the political and economic discussions circling Washington and New York today. Rational discussion and factual analysis has been overwhelmed by a well funded program of propaganda and sloganeering, and bought and paid for politicians and media which serve to direct the discussions according to the program of the monied interests.
And this is why the outlook for the US is so negative. Governance has failed, the system has been thoroughly corrupted or co-opted, and the planning and discussions cannot gain traction. Some have recently referred to Obama’s clarity gap because it is so unclear what he stands for, what principles he is willing to fight for.
The politicians of both parties, the media, and the business leadership are caught in a credibility trap in which the root causes cannot even be discussed, must less addressed, because they have all been involved in or benefited from a massive injustice in the financial frauds. They are complicit, and cannot act openly and honestly for fear of losing control of the debate, and of subsequent discovery.
“Every thing secret degenerates, even the administration of justice; nothing is safe that does not show how it can bear discussion and publicity.” – Lord Acton
And who do we see on American television this morning, providing economic advice and promoting the Wall Street prescription for a cure through a return to more bank deregulation? The angel of economic death, Alan Greenspan, a man without shame or honor as one of the great authors of the misrepresentations and mismanagement that led US into the financial crisis which rewarded the few at the expense of the many.
“The liberties of a people never were, nor ever will be, secure, when the transactions of their rulers may be concealed from them.” – Patrick Henry
The real issue at the end of the day is reform. The US has been led down a dark alley and strangled in what history may recognize as a financial coup d’etat, and a campaign of economic war against the common people. The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
by Charles Hugh Smith
Posted April 15, 2011
The Con of the Decade, which I described last July, is being set up nicely.
I described The Con of the Decade last July (2010). The Con makes me a heretic in the cult religion of Hyperinflation. I consider myself an agnostic about the destruction of the U.S. dollar and hyperinflation (basically the same thing), but my idea that hyperinflation is fundamentally a political process makes me a heretic. I skimmed a few of the dozens of comments posted on Rick’s Picks and Zero Hedge after they posted one of my expositions on this dynamic, and didn’t see even one comment in favor of this perspective.
The Con is being set up right now, and the outlines are clearly visible. The Con works like this:
1. The Financial Elites/Oligarchy raked in billions in private profit from the orgy of leverage, credit expansion, fraud, embezzlement and misrepresentation of risk that resulted in the Housing Bubble.
2. The losses were transferred to the public (Federal government, i.e. The Central State) or its proxy, the Federal Reserve (i.e. the central bank), via bailouts, backstops, guarantees, the Fed’s purchase of taxic assets, and an open window for the financiers to borrow billions at zero interest (ZIRP) for further speculations.
3. The Treasury now borrows $1.6 trillion every year, fully 11% of the nation’s GDP, as the Central State has replaced private demand and credit expansion with its own borrowing and spending.
4. Non-U.S. central banks have largely ceased to support this unprecedented scale of borrowing, so the Federal Reserve now buys most of the Treasury’s issuance of debt via QE2 (quantitative easing, the direct purchase of $600 billion in Treasury bonds).
5. Unlike Japan, the U.S. cannot self-fund its own government borrowing: while U.S. investors, banks and insurance companies do own a significant chunk of Treasuries, the U.S. savings rate (capital accumulation) is still abysmally low, around 4%, which is half the historical average savings rate.
This is the result of the Keynesian Cult’s One Big Idea, which is to pull demand forward and encourage borrowing and spending now by any means necessary, and thus sacrifice capital formation/saving.
So the basic outline of the Con is that private losses from the financialization of the U.S. economy were shifted to the public. Now to keep the Status Quo and Financial Plutocracy from imploding, the public is on the hook for $1.6 trillion in additional borrowing every year until Doomsday (around 2021 or so).
Having secured the backing of the Central Bank and Central State, the Plutocracy’s only problem now is that it needs a risk-free source of high-yield income. Yes, it has a trillion dollars or so sitting in bank reserves, collecting interest from the Federal Reserve; this is certainly risk-free, but the Fed’s Zero Interest Rate Policy (ZIRP) keeps the rate of return absurdly low.
Here’s where we see the Con taking shape. The ideal setup for risk-free returns is to own Treasurys that pay a high yield. The way to get higher interest rates is to first make the Treasury market supremely dependent on a central bank or single buyer: Done. That buyer is the Federal Reserve.
Next, have that buyer stop buying. Suddenly, interest rates start moving up. If you don’t believe this is possible, or part of a larger project, then please explain why PIMCO sold all its Treasuries. Duh – because interest rates are set to rise, and not by a little bit or for a brief span, but by a lot and for years.
That means holders of long-term Treasuries (and other debt) will be cremated as rates rise. (Holders of TIPS will do OK, unless the government fraudulently sets the rate of inflation well below reality. Hmm, isn’t that exactly what’s it’s already doing?)
Once long-term rates have leaped up, then start accumulating the high-yield bonds. Why would rates jump? Supply and demand: as the demand for low-yield Treasuries dries up, the supply keeps rising: every month, the Treasury has to auction tens of billions of dollars of bonds, or even hundreds of billions of dollars. There is no Plan B, the bonds must be sold, and if there are no buyers, then the yield has to rise.
Once rates have been engineered much higher, the Financial Oligarchy accumulates the high yielding bonds.
Here’s where “austerity” comes in. Once rates are so high that they’re choking the real economy, then voices arise demanding the Federal government stop borrowing and spending so much. Austerity (forced or otherwise) soon reduces the supply of bonds hitting the market and so rates decline, boosting the value of the high-yield debt.
by Theodore Butler
Originally posted 8 May, 2011
This is an excerpt from the Weekly Review of May 7, 2011
THE HISTORIC DECLINE THIS WEEK IN SILVER CREATES STRONG EMOTION. Watching great amounts of wealth disappear, quite literally in minutes amid disorderly trading conditions is a genuine fear for any investor. Worse is seeing no obvious legitimate reason to explain the carnage. If that doesn’t scare you, nothing will. Especially if you already harbored unease about how the whole silver market operated.
But fear is an emotion that burns out fairly quickly. A human being can’t stay in an intense state of fear of financial catastrophe without selling out at some point or mentally adjusting to the new level of price. Then the conditions that led to the fear in the first place are replaced by some other emotion. If evidence exists that the sudden financial loss could and should have been prevented, the new emotion becomes one of anger. Anger at who or what might have caused the loss and who should have prevented it. I think there is compelling evidence pointing to who and what caused this silver crash as well as who should have prevented it.
The first thing we must recognize is that this was an unusually intense price smash. Silver fell 30% for the week, its biggest price loss in 31 years. The decline was highlighted by record trading volume on the COMEX and in shares of SLV. From any objective measure, the trading was disorderly, indicating little true liquidity despite the record volume. That’s because much of the trading was conducted by high frequency trading (HFT) computer bots whose clear purpose seems to be to cause disruptions to prices. These are the same disruptive traders that caused the flash crash in the stock market last year. I believe it was these traders who started the price decline with the $6 hit in 12 minutes on last Sunday evening. Their primary reason for existence seems to be causing prices to collapse.
Why these HFT cheaters are allowed to pollute our markets is beyond me. The only clear beneficiary to their trading is the exchange itself which pockets fees on every contract traded. After they crashed the stock market last year, I believe the HFT computer bots toned down their stock market activity due to regulatory pressure. That’s fine, but why were they then allowed to infect silver trading with their disruptive practices? This is just one question I have about this week’s events in the silver market and I will list them all in a moment. First I would like to get something off my chest.
I am appalled at what happened in silver this week for a very special reason. I can’t say this latest blatant take down looks out of place for a manipulated market which I have been alleging for 25 years. In fact, not that we needed additional proof that the silver market was rigged, but this intentional price smash provided that proof in spades. Admittedly, I look at silver differently than most folks, but there was something very special about this week. The special reason I am particularly appalled this time is that this is the first silver price smash for the record books that took place during the tenure of Gary Gensler as Chairman of the CFTC. There have been some multi-dollar price declines since Gensler was confirmed in May of 2009, but this week’s smash is the first mega-down move under his watch. That makes it very special to me.
As you know, I have put Gensler on a pedestal, repeatedly referring to him as the greatest chairman in CFTC history. Considering my past experiences with the agency, I still marvel at my transformation. I think he has done more than anyone ever to reform commodity regulation, including working diligently, although very quietly, to end the silver manipulation. As you also may know, I have generally come under great criticism and disagreement from many of you about my opinion of Gensler. I have respected that criticism and have used it to reflect on and test my continued belief in the chairman.
This week’s events in silver have created what may be a seminal moment. I still hold a deep belief in Gensler’s character and purpose, but it is important to judge how he and the Commission react to this week’s silver price plunge. Certainly, Gensler doesn’t answer to me, but he does answer to the public who he has sworn to serve and protect. The public was not protected this week in silver. I don’t think he had any inkling beforehand about what transpired this week in silver, but he is too smart not to grasp the significance of the silver price plunge and the circumstances that caused it. How he reacts to his first real-time case of blatant fraud and manipulation in silver will be a key test for him. I sure hope his reaction is different from the typical CFTC reaction before he arrived. You know, the three monkeys’ see, hear and speak no evil reaction.
by Matt Taibbi
Posted originally April 12, 2011
Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?
AMERICA HAS TWO NATIONAL BUDGETS, ONE OFFICIAL, ONE UNOFFICIAL. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we’re broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year’s retirees from the IRS, the SEC and the Department of Energy.
Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.
Now, following an act of Congress that has forced the Fed to open its books from the bailout era, this unofficial budget is for the first time becoming at least partially a matter of public record. Staffers in the Senate and the House, whose queries about Fed spending have been rebuffed for nearly a century, are now poring over 21,000 transactions and discovering a host of outrages and lunacies in the “other” budget. It is as though someone sat down and made a list of every individual on earth who actually did not need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. “Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.”
But if you want to get a true sense of what the “shadow budget” is all about, all you have to do is look closely at the taxpayer money handed over to a single company that goes by a seemingly innocuous name: Waterfall TALF Opportunity. At first glance, Waterfall’s haul doesn’t seem all that huge — just nine loans totaling some $220 million, made through a Fed bailout program. That doesn’t seem like a whole lot, considering that Goldman Sachs alone received roughly $800 billion in loans from the Fed. But upon closer inspection, Waterfall TALF Opportunity boasts a couple of interesting names among its chief investors: Christy Mack and Susan Karches.
Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley’s investment-banking division. Neither woman appears to have any serious history in business, apart from a few philanthropic experiences. Yet the Federal Reserve handed them both low-interest loans of nearly a quarter of a billion dollars through a complicated bailout program that virtually guaranteed them millions in risk-free income.
The technical name of the program that Mack and Karches took advantage of is TALF, short for Term Asset-Backed Securities Loan Facility. But the federal aid they received actually falls under a broader category of bailout initiatives, designed and perfected by Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner, called “giving already stinking rich people gobs of money for no fucking reason at all.” If you want to learn how the shadow budget works, follow along. This is what welfare for the rich looks like.
In August 2009, John Mack, at the time still the CEO of Morgan Stanley, made an interesting life decision. Despite the fact that he was earning the comparatively low salary of just $800,000, and had refused to give himself a bonus in the midst of the financial crisis, Mack decided to buy himself a gorgeous piece of property — a 107-year-old limestone carriage house on the Upper East Side of New York, complete with an indoor 12-car garage, that had just been sold by the prestigious Mellon family for $13.5 million. Either Mack had plenty of cash on hand to close the deal, or he got some help from his wife, Christy, who apparently bought the house with him.
by Prof. Antal E. Fekete
Posted originally Monday, 11 April 2011
from: “Hearken to the Sacred Geese of Juno Moneta”, Source: GoldSeek.com
The combined Federal Reserve credit creation of QE I and II exceeds one trillion dollars. There is no way underneath the Sun to come up with unencumbered collateral of that magnitude to make this miraculous money proliferation legal.
I FIRST CAME TO SUSPECT THAT IN INJECTING Federal Reserve credit into the domestic and world economy the Fed was in violation of the law when former Chairman Alan Greenspan inundated the money markets shortly after taking office following the stock market crash in 1989. My suspicion was that he got away with it by simply reversing the two-step creation of Federal Reserve credit, namely, FIRST STEP: posting collateral; SECOND STEP: issuing Federal Reserve notes and creating Federal Reserve deposits.
Reversing the process would have meant that Greenspan had FIRST issued the notes and created deposits and, SECOND: with them he had purchased Treasury paper pledging them for the purpose of creating credit ex post facto (retroactively).
To the uninitiated this simple reversal may look innocuous enough and, indeed, Greenspan could have argued that nothing more than a simple house-keeping change was put into effect that fell well within his authority. On closer scrutiny, however, it appeared that it was not a housekeeping change at all. It was, if indeed it happened the way I have assumed it did, an instance of usurpation of power that Congress alone has: to amend the Federal Reserve Act. No abundance of words would change the fact that, if Greenspan had done that, then he had created Federal Reserve credit in blatant violation of the law. The difference made by the reversal was the difference between issuing this credit lawfully, or issuing it unlawfully.
Pirates have taken over our government’s finances, and are getting ready to help themselves to the public purse. [They have already done so. –Aurick] These pirates apparently believe that members of the Legislative Branch, congressmen and senators, are simpletons. They can be easily persuaded that no more than a mere technical housekeeping change is involved. After all it is inconsequential, is it not, whether the cleaning people wash the windows first and scrub the floor afterwards, or whether they do them in the opposite order. The same is true, for the stronger reason, for the experts at the Fed.
It is time to blow the whistle. It is time for the sacred geese of Juno Moneta to honk, sounding the wake-up call for the sleepers to start defending themselves against mortal danger: that of being sold into slavery.
If you asked French boys and girls where the French equivalent of the word ‘money’ had come from, they would answer: “Why, it means ‘silver’, doesn’t it?” By contrast, most native English speakers don’t know the origin of the English word ‘money’. That’s a pity because the explanation is fascinating. It is wrapped in a fairy-tale like story. Well, schools do not teach fairy tales any more, even if they have a moral on which your life may one day depend.
Many years after the rape of Troy by the Greeks, Rome was similarly threatened by its enemy, the barbarian tribe of the Gauls that invaded the peninsula and put Rome under siege. Inhabitants took refuge in the Capitolium.
The patroness of Rome was the supreme goddess Juno, wife of Jupiter, the father of the Olympian gods and goddesses. The Romans built a magnificent temple for her honor inside Capitolium, the citadel at the top of the hill which doubled up as the Mint where the gold, silver and coper coins of Rome were struck. In the garden around the temple the sacred geese of Juno dwelt.
In the back of the temple the hill was steep and full of cliffs with no roads. The Romans expected the assault to come from the opposite side that was less steep and where the roads were. Accordingly, the Romans left the back of the hill undefended. The invaders decided to take advantage of that. They approached the hill from that side and wanted to surprise the inhabitants under the cover of the night and murder them in their sleep.
They climbed the cliffs. Their plan would have probably succeeded but for the sacred geese of Juno that started honking loud when they noticed the invaders. That in turn woke up the defenders who drove off the enemy and defeated them decisively in the battle that followed next day. Unlike the story of Troy, this one had a happy ending.
The Romans gave thanks to their patroness Juno and thereafter called her Juno Moneta (Juno the warner, or Juno the admonitor). And Rome went on to great things. Her coins carried her fame, glory and riches to the far corners of the known world. And because they were minted in the temple of Juno Moneta, people lovingly called them ‘money’.
Let this be the wake-up call for America. Terrorism is a red herring. The real enemy is already inside of the citadel. The pirates have taken over the Fed. The sacred geese of Juno are honking loudly.
May Juno Moneta once more save our civilization.
From Wikipedia: Juno Moneta
Juno Moneta, an epithet of Juno, was the protectress of funds. As such, money in ancient Rome was coined in her temple. The word “moneta” is where we get the words “money”, or “monetize”, used by writers such as Ovid, Martial, Juvenal, and Cicero. In several modern languages including Russian and Italian, moneta is the word for “coin.”
As with the goddess Moneta, Juno Moneta’s name is derived either from the Latin monēre, since, as protectress of funds, she “warned” of instability or more likely from the Greek “moneres” meaning “alone, unique”, an epithet that every mother has.