Friday, September 28, 2012

Happy Friday - End Of Quarter

This is what QE to infinity looks like:
Unlike our past asset-purchase programs, this one doesn’t have a preset expiration date. Instead, it is explicitly linked to what happens with the economy.  We might even expand our purchases to include other assets.  - San Francisco Fed President John Williams  LINK
 This is what it is being used for:
Lindsey said that with the Fed purchasing at least $40 billion a month in mortgage debt through QE3, “they are buying the entire deficit.”  - Lawrence Lindsey, Chairmen of the National Economic Council and assistant to the President on economic policy for President George W. Bush.  LINK
I have maintained all along that the primary purpose of QE has been to keep the big banks from going insolvent and to finance Government deficit spending.  I guess Larry Lindsey agrees with me for the most part.

What has gone unnoticed in the commentary about QE3 is that the duration and commitment level to more QE has been pegged to the employment level, as reported by the Government.  As everyone knows, and as has been detailed on this blog exhaustively, the Government has insidiously manipulated the unemployment level to an unbelievably relative low level for political purposes.  Now, the Government can let the reported unemployment rate "breathe" a little by reporting a higher unemployment rate and thereby enabling the Fed to "justify" increasing the level of QE and expanding the range of assets purchased.  Several Fed Governors are already discussing the expansion of QE3 to include Treasuries.  Fait accompli.  It's all very systemically Orwellian.

As for what some of this Government spending is being used for, let's ask Barack.  He won't answer that question, but a new book, "Presidential Perks Gone Royal," by Robert Keith Gray outlines in detail the $1.4 billion spent by Taxpayers on perks for the Obama family during 2011.  Here's the report from The Daily Caller:  LINK  As an example, the baby-sitter and pooper-scooper of the family dog was paid $102,000 last year.  Nice work if you can get it...

Thankfully King Barack and Queen Michelle get to live the life of luxury while our economy falls to pieces.  Yesterday's durable goods orders plunged to a low not seen since January 2009.  Yesterday's final revision for Q2 GDP came in at 1.25%, well below consensus estimate and below even the lowest estimate.  If you assume the manipulated Government CPI rate of about 2%, that means that on a real basis the U.S. economy contracted in Q2.  Believe me, the real inflation rate is multiples higher than 2%.   And today the Chicago PMI - a widely followed economic barometer - fell below 50%.  It actually plunged, as a reading of 53 was expected.  Again, more indications that real GDP is negative.

On a more positive note, as most know, the NFL referee lock-out was ended Wednesday evening and we get the real referees back.  Thankfully.  Apparently there was a $500 million swing in gambling payouts from the wrong call by the referee on Monday Night Football that gave Seattle a win.  This Sunday my Broncos host the much-hated Oakland Raiders.  The Broncos have had two tough losses to two potential Super Bowl teams.  But for as poorly as Denver played during the first half of each of those games, Denver still had a chance to win them.  I expect Denver to hammer the Raiders this weekend.   Have a great weekend.


  1. We're going back to our roots or maybe we never really left??

    Queen’s hand washer dies at 82, butt wiper seeks promotion

    Peter Houison Craufurd, the Washer of the Sovereign’s Hands, dies at the age of 82.

    It is one of the more unusual roles occupied by the Queen’s courtiers, but Washer of the Sovereign’s Hands is a post that must now be filled.

    Mandrake learns that the holder of the title, Peter Houison Craufurd, died on Monday, at the age of 82. He always had a silver ewer, bowl and salver holding a linen towel on permanent standby.

    “We used to have to write to Buckingham Palace to offer to wash the monarch’s hands every time they were in residence at the Palace of Holyroodhouse,” said Houison Craufurd.

  2. Dave,

    Here is a question I have asked myself as it relates to QE3... Our currency is a currency backed by debt. Technically (as I understand it), in order for the Fed to print a dollar from thin air, a dollar of federal government debt has to come into existence. This made sense in the context of QE1 and QE2 because the Fed printed money and used that money to buy federal government debt. However, under QE3, the Fed is buying MBS, so the Fed can't just print, can it?

    Appreciate your thoughts on this and thanks for the great blog!

  3. No matter what the facts that are stated in these blogs the MSM will not pay any attention and will continue to give the Big BO cover. He could murder White House reporter spouses but they would continue to make excuses for him.

  4. Black Financial and Fraud Report
    London and Wall St. in a dangerous competition to create a more unregulated environment for finance

    1. Martin Wheatley has revealed himself to be no less ‘captured’ than his FSA predecessors

      While being interviewed on the Today Programme this morning, Martin Wheatley proved that he was going to be no more effectual as a lead regulator than any of his spineless predecessors.

      How can we possibly have any faith in a man who is supposed to regulate one of the most criminogenic markets in the world, when he manifestly demonstrates that he understands so little about the criminal law, or the public attitude towards the organised criminal cesspit that the UK financial sector has become?

      This is exactly the same kind of twitchy, lily-livered, fearful attitude towards penalising City of London crime that has bedevilled the regulation of our financial markets for years; and which has made the Square Mile a byword for every kind of skulduggery, thievery, fraud, money-laundering, institutionalised tax evasion, and general cut-purse activity.

      It is this pathetic approach towards financial wrong-doing that is ensuring that the American regulators do not trust us, and who are increasingly being forced back on their own resources to go after the global criminals who find such an easy home in London.

      For the record, Mr Wheatley, any mis-selling activity is nothing less than institutionalised fraud at its widest scale. That is why this kind of inflated criminality had to be called ‘mis-selling’ in the first place because the government just did not have the moral courage to call it by its real name, ‘criminal fraud’, for fear of what such a description would do the future of the London market.

      When an industry sector is forced to set aside in excess of £10 billion to recompense victims of such crimes, you can hardly call this simply ‘inappropriate conduct’!

      In these few short words, Wheatley sent a loud message to every bankster, con-man, huckster and snake-oil salesman that, under his regime, it’s business as usual. He gave every single one of them a ‘get out of jail card free’ and none will have any illusions but that they are free to carry on defrauding ordinary people out of money they can ill afford to lose on some frolic dreamt up by the organised mafias who run Britain’s banks.

    2. The City of London has always been a centre of money laundering and organised crime. Back in the 60's when you wanted to sanctions bust in Rhodesia or South Africa you went ot a merchant bank. Money laundering, small scale a merchant bank, large scale a clearing bank. Lloyd's had a complete South American division doing nothing laundering money. Geez, when Norreiga was thrown out the officals even went round and packed his home up art works and all. When the big boys moved in like CitiBank moved in the little fish moved out and Lloyds shut up shop and sold the division.

      On the trading desks they don't describe London as the place where you can play cowboys and indians with real bows and real arrows for nothing. Look at the centre of all these frauds from Enron and before, Barclays with it's clever off-balance sheet pop up security that somehow manages to gain preference over client accounts without being a fraudulent time after time. It's the major activity in London, it's why over the counter derivatives are and hedge funds are based there to pawn off the global customer accounts. It's Dickins all over again, Faggin and the wrecking crew.

      Where is the heart of the global gold trading? Yes, London with it's dodgy depositories and a central bank that seems to be palming off tungsten bullion around the world. This is when they aren't doing dodgy pop ups on their gold leasing or selling off the customer deposits to the banks. The very term deposited witht the Bank of England seems to be short hand these days for turned into jewellery and exported to India.

  5. Judge Throws Out CFTC’s Position Limits Rule

    For anyone who wondered, the banksters are above the law- just ask Mr. Dimon and his Presidential cufflinks.

    DC District Court Jude Robert Wilkins this afternoon threw out the CFTC’s position limits rule, scheduled to go into effect Oct 12th.

    The metals manipulation will only end when FREE MARKET FORCES OVERWHELM the bullion banksters.


  6. US Press Still Ignoring JPMorgan’s Biggest Money Laundering Offenses
    The Vatican has been embroiled in conspiracy since the Vatileaks scandal of last Fall. And, currently, the trial of the butler of Pope Benedict, who is accused of leaking secret documents, is underway. Motivated by a desire to expose corruption and greed from within, the butler released the documents to journalists. In them, skulduggery and intrigue at the highest levels of the Catholic Church should have served to surprise nobody. Mr Gabriele, the defendant, said he was appalled by the “evil and corruption” of the Church, which he called “the kingdom of hypocrisy.” What is being missed by the US media, to be sure, is the closeness of the US’s biggest bank, JPMorgan, to Vatican City disregard for moral hazard and law. Sure, the press has recently covered JPMorgan failing to comply with anti-money laundering laws, but JPMorgan has been implicated (not legally) in a laundering scandal much more grave than the ones being investigated by US authorities. While currently the Office of the Comptroller of the Currency is looking into JPMorgan’s systems designed to monitor money laundering, there has been no word in the US press (except for here at Silver Vigilante) regarding JP Morgan laundering money for the Vatican.

  7. Plutarch (Historian of the Roman Republic)

    "The abuse of buying and selling votes crept in and
    money began to play an important part in determining
    elections. Later on, this process of corruption spread to
    the law courts. And then to the army, and finally the
    Republic was subjected to the rule of emperors — Plutarch (Historian of the Roman Republic)

    1. I am a job creator: A manifesto for the entitled

      I am entitled to have the company pay for breakfasts and lunches, a luxury car and private jet travel, my country club dues and home security systems, box seats to all major sporting events, a pension equal to my current salary and a full package of insurance — life, health, dental, disability and long-term care — through retirement.
      I am entitled to operate my business free of all government regulations other than those written or approved by my industry.

      I am entitled to load companies up with debt in order to pay myself and investors big dividends — and then blame any bankruptcy on over-compensated workers.

      I am entitled to contracts, subsidies, tax breaks, loans and even bailouts from government, even as I complain about job-killing government budget deficits.

      I am entitled to federal entitlement reform.

      I am entitled to take credit for all the jobs I create while ignoring any jobs I destroy.

      I am entitled to claim credit for all the profits made during a booming economy while blaming losses or setbacks on adverse market or economic conditions.

      an extreme devaluation will cure everyone of their megalomania!

  8. They're back! Yield hunt pushes funds into CLOs, CDOs

    So far this year, hedge funds specializing in securitized credit and mortgage-backed securities have benefited the most from the Fed's loose monetary policies. Hedge fund tracking firm eVestment|HFN said that as of August 31 securitized credit-focused funds were up 12 percent for the year, followed by mortgage-backed funds, which are up 10.67 percent.

    Meanwhile, the average hedge fund was up only about 4 percent during the first eight months of the year, lagging well behind the broader stock market, which gained 13.5 percent through August.

    Mark Okada, the co-founder and Chief Investment Officer of the $19 billion Highland Capital Management, said bank debt, CLOs, and some mortgage securities will provide the best returns in credit as the Fed continues to depress yields in the United States until the job market springs back to life.
    "The government is in their market," Okada said of MBS, which has been so profitable for hedge funds this year. "The government isn't in my market buying loans and bonds."
    That translates into big opportunities for Highland and other managers who have the expertise - and stomach - for such exotic securities. Of the $19 billion in assets Highland manages, $14 billion is invested in CLOs.

    The main risk of investing in CLOs is "a broader market selloff, which would erode CLO relative value," the analysts wrote earlier this month. But those dangers are offset by the commitment of central banks to prop up global financial markets- - widely known as the "Central Bank put" - and the hunger for yield in general, they added.

    If the economy were to severely weaken, CLOs could be hit hard as they were in the financial crisis by a rise in corporate defaults. Many of the loans in CLOs were sold to finance leveraged buyouts for heavily indebted companies.

    these guys can only play 1 song

  9. Hands off homeowners’ tax break, HUD chief says
    In an interview scheduled to air Sunday on C-SPAN, Donovan said it would be unwise to get rid of — or even scale back in any significant way — the tax break that allows homeowners to deduct the interest they pay on their mortgages.

    “Anything that would change the system substantially now,” he said, would create “a real risk of stopping the momentum that we have in the housing market.”

    The White House has, however, proposed phasing out the mortgage-interest deduction for taxpayers making more than $250,000.
    The tax break, which powerful industry groups such as the National Association of Realtors have vowed to protect at all costs, predominately benefits the top fifth of income earners because they own larger houses and hold larger mortgages. Many Americans don’t make enough income to take advantage of the tax break.

    Still, it is one of the most expensive giveaways in the nation’s tax code, amounting to about $90 billion a year.

    housings healthy, right?...what's the big deal?...cut it...but...but...but...

  10. But What of Truth

    Poetry can often achieve the same communication with
    far fewer words than prose. This poem sums it up.

    by Hal O’Leary

    For now, the loss of truth’s the only known.
    The truth’s become old fashioned. Could this be?
    With lies, we have decided to condone,
    Just what the end will be, I cannot see.

    The truth is now old fashioned. Could this be,
    Like chastity and people you can trust?
    Just what the end will be, I cannot see,
    For those believing life was somehow just.

    Like chastity and people you can trust,
    A thing called love could also disappear
    For those believing life was somehow just.
    We’ve got to make an effort, or I fear

    A thing called love could also disappear,
    To set each individual apart.
    We’ve got to make an effort, or I fear
    There is the chance that we could lose the heart.

    To set each individual apart,
    With lies we have decided to condone,
    There is the chance that we could lose the heart.
    For now, the loss of truth’s the only known.

  11. Helicopter Ben flies again
    Experience tells us that the only increase in money supply finding its way into the economy is by welfare spending. The banks and also their credit-worthy customers are simply risk-averse. They either leave this money with the Fed in the form of excess reserves, or they speculate with it in capital markets. It is no accident that derivatives have expanded dramatically in recent years, and large amounts of QE money have been recycled into other more dynamic economies offering higher returns. Banks think they do better by not lending money to cash-strapped Americans and their businesses.

    The financial system is now going to have up to $2.3 trillion in cash added to it by mid-2015. If the economy is reluctant to absorb this extra money, where will it go? Derivatives are already a mature game, and the more dynamic economies are slowing down. And so long as capital asset prices continue to exceed their productive value, it won’t go into the economy except by way of government spending. It is not just the Fed printing money: all the other major central banks are similarly expanding their money quantities.

    This extra money will be an embarrassment for banks everywhere: what will they do with it? The search for good non-cyclical returns is on, and two possibilities stand out: one for the traders, which is agricultural commodities and energy; and one for treasury departments, which is gold.

    Gold will catch the attention of bank treasury officers, because of the impending changes in Basel III rules that upgrade gold to the equivalent of cash for balance sheet purposes. At the moment few banks other than the 40 or so bullion banks have any gold on their balance sheets, a situation that can only lead to a significant new source of buying for the metal.

  12. Added to your write up here a good schematic about where the "Feds" stand...

    I know this is out of date but for a foreigner it gives me a good overview...

    What is interesting is that recently two of the hawkish ones have come out to say interesting things.

    First Plosser who has said they are prepared for Europe - (tell me in what way? And tell me what crisis is it in Europe? Duh - a debt crisis! So is there no crisis in the US? And would he be prepared for a US crisis? It shows he would! So is he that hawkish? Not a chance!!!!!!)

    The other is today - Richard Fisher (Dallas Fed).. First off he admits that they have no clue, drowning in unemployment!! Then certainty on taxes and regulation would jump start hiring!! Tell me lower taxes or higher taxes, lower regulations or higher regulations - either way they cost money or revenue will be less. Basically he now also admits it crap out there.

    Then after QE3 was announced the idiot Bullard said it was too early. It just shows that these guys haven't a clue since an economy has a certain momentum and I would argue that it was too late and so the recession was already in the cake and now you need more energy to get out of it. Better to prevent getting stuck in the mud then trying to get out of it!

    Then also the UK hails a "new" pension scheme. So the assumption is that these schemes are better savers!!! Aren't we going thro a time where we are witnessing that Governments and these kind of schemes are even worse at saving than the private person? And we are like Pavlov's dogs because we have grown up to be assisted in troubles and so we don't need to save!!!

    It's all a little arse about face!!!

  13. Macleod is just another confused commentator who doesn't get it. Just in time and outsourcing have completely done for classical economics - all schools. Just listen to Craig Roberts talking about it as a labor economist. You can no longer do any sort of monetary fix for the economy as the whole multiplier theory is as dead as the dodo.

    The idea that the derivatives market is now mature is insane. The interest swap market is a market with no known end user. How can a market with no consumer become mature or saturated? The derivatives were written pre-2004 90% with 82 on the USD (all the rainbows) and 50% implied $1,000 on gold (all the equity). Now both sets of hedges are outside their trading ranges the pricing model has completely broken down. OTC derivatives are operating in accordance with a model called random walk now. Governments are trying to keep the system together but they can't chaos theory dictates it's going to fail.

    We see this is the balance sheet accounting which is constantly being restructured to disguise the hideous growth in these markets. This would be called kiting the losses in a bygone era. The banks have to kite the losses while the central banks try to inflate them away, but chaos theory dictates that this balancing act will fail how it has got so far is only due to the other feature of derivatives the pop up clause over third party accounts.

    The one thing we no longer have to listen to is the "experts" telling us that the UCC derivatives don't have a pop clause that wipes out customer accounts, MFG et al have finally shut them up. I don't know exactly how this happened but it is crystal clear that the $21 trillion taken off-shore after the GFC was the first part of the looting of the western world. The second part will be the foreclosure on the customer accounts of banks like CitiBank which has moved it's derivative book into the main bank to ease this process. Access to the customer deposits has given bankrupt banks a new very large source of trading capital to support their OTC exposures. How long this new shell game lasts G-d alone knows. But one thing for sure is that the OTC derivative market is certainly not saturated but has a rosy and growing future ahead of it funded and fed by the Monster from Jekyll Island.

    Oh to be an OTC derivatives dealer like our Nigerian the London Whale. How did he get that job by the way. Did he write to Jamie Dimon in the classic way from his container in Lagos... "Dear Meester Jamie, I have unlimited funds available for you. Pleez send $200 million upfront and I will let you have access to them. Yours sinceerly the Lagos Whale" Jamie obviously saw him as a man with a mission and the whole thing took off from there.

  14. The Tawdry Tycoon Who Hosted That ‘47 Percent’ Party

    Although roughly 25 firms held by Sun have gone bankrupt, perhaps the best known example involves Friendly’s, the family restaurant and ice cream chain that went under at the hands of Sun Capital in 2010 after more than 70 years in business. After acquiring Friendly’s in 2007 for a premium price, Sun took the company into bankruptcy only three years later, supposedly due to rising milk prices.

    But the Pension Benefit Guaranty Corporation—the federal agency that insures benefits to workers victimized by failed corporate pension plans—accused Sun of sinking Friendly’s to dump pension costs onto the government. By pushing the company’s pension burden onto federal taxpayers, who fund the PBGC, Sun could then reorganize Friendly’s in bankruptcy, get rid of laid-off workers and less profitable restaurants, and, as Romney likes to say, give the company a “turnaround.” So far, that is precisely what Sun appears to doing, and getting away with it.

    So there on the videotape shot in Leder’s huge Boca mansion stood Romney, complaining about the income taxes that the working poor don’t pay and their dependence on government assistance, while the host surely nodded in agreement. At $50,000 a plate, the lobster was garnished with a nice helping of irony.


    Sia prima che dopo il '96, le amministrazioni dello Stato hanno versato «solo la quota della contribuzione a carico del lavoratore (8,75%, ndr ) e non la quota a loro carico» pari al 24,2%.

  16. The Petro-Dollar Explained

    As I have written about for many years now, our increasingly aggressive foreign policy overseas revolves around one thing and one thing only: The Petro-Dollar. The problem is the Petro-Dollar doesn’t represent freedom or American values, it is the heart of a Federal Reserve and financial oligarch scam, and they are willing to burn down the whole world to protect their wealth and power. This is a very well done video on the Petro-Dollar that I think can help wake up many people still asleep or only partially awake and looking for more answers.

  17. Have A Money Market Fund? Geithner Has You In His Sights!

    Ever since, the push has been on for reform. These efforts have largely been led by the SEC, but have been stymied by the mutual fund industry. Players like William Dudley, the President of the NY Fed, have been active in these efforts. However, when progress seemed to stop recently, Geithner stepped in, as head of the Financial Services Oversight Committee (FSOC). Put Dudley and Geithner together, and you should be afraid - very afraid! The direction of their efforts is quite illustrative.

    Their proposals center around two specific items:

    1. Floating NAV's: This would allow MMFs to adjust their share prices down as the value of their assets deteriorate. In today's ZIRP environment, where no safe asset delivers any yield to speak of, many MMFs have taken to subsidizing their funds in order to maintain the $1.00 NAV. According to Barclays, "the number of actual instances of direct sponsor support between 2007 and 2011 is much smaller – 123 – and of this, there were only 21 instances in which the direct support exceeded 0.5% of AUM (assets under management). The total amount of support across all 123 instances was $4.4bn." With floating NAVs, these subsidies would stop, and the $10,000 in your MMF "checking account" might suddenly be worth $9,000.

    2. Redemption Restrictions: Currently, MMF investors can remove as much of their investment as they want from a fund instantly, as long as that fund is not in danger of breaking the buck. Under the proposed guidelines, investors may only be able to withdraw 95% of their holdings, having to leave 5% in the fund for thirty days, where it would be put in a first-loss position.

    Dudley and Geithner's efforts are not motivated by a desire to preserve your MMF wealth. Rather, by combining floating NAVs with redemption restrictions and minimum balances at risk (MBRs), they are attempts to lock your money up as a liquidity buffer to keep the financial system operating the next time there is a crisis. Furthermore, they may be paving the way for more financial repression from the Federal Reserve.

    1. Rush to turn European gold paper into real metal vaulted in Singapore

      Starting Monday, the Southeast Asian city-state is scrapping a 7% tax on gold and silver in an effort to turn the city into a precious-metals trading hub to rival London and Zurich, where value-added taxes don't apply to the investment-grade gold trade.
      Investors have flocked to gold and silver in recent years as the world economy sputtered. The most nervous among them shunned the futures and funds often used to invest in gold and instead bought bars, ingots and coins to stash their wealth.
      "There has been a dramatic increase in customers wanting to move out of paper, that is over-the-counter gold, and into physical," said Cedric Chanu, director, Asia precious-metals trading at Deutsche Bank. "We're seeing customers wanting to move their gold from Europe into Singapore."

      Following the tax exemption, Singapore is aiming for a 10%-15% share of global gold demand within five to 10 years, up from around 2% now, government agency IE Singapore said at the time the exemption was announced early this year.

  18. Bernanke: Stimulus helps savers, too

    NEW YORK (CNNMoney) -- The Federal Reserve's efforts to keep interest rates exceptionally low are in the best interest of those living off their savings, Fed Chairman Ben Bernanke argued Monday.

    but he's got the biggest, balls of them all

  19. Where is Gold Going?

  20. Steve Cohen's Press Release on SAC's Alleged Insider Trading: I'm a Genius!
    I'm shocked, shocked I tell you, to learn some of my managers used insider information when trading at SAC Capital Advisors LP!
    I suspected it was happening at many of my competitors' hedge funds. Why? It's because I'm a genius, and they're not! Other hedge fund managers apparently think they can achieve my consistent double digit returns when U.S. Treasuries are paying a pittance just because they are taller, or fatter, or better looking than I. But they can't, because I'm a genius! When they outperform, it's because they relied on insider information passed on from an analyst they hired from an investment bank or otherwise illegally obtained insider information. When I consistently outperform, it's because I'm a genius!
    How did I not know alleged illegally obtained insider information was used by managers at my own fund? Same reason; it's because I'm a genius. If you don't get it, it's because you're not a genius. But don't worry. I'll explain it to you later in this press release.

    Wall Street: Wake Up Call

  21. Gold is Good Money

    Why is gold good money? Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce - making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history. Gold rose to nearly $1800 an ounce after the Fed's most recent round of quantitative easing because the people know that gold is money when fiat money fails.

    Central bankers recognize this too, even if they officially deny it. Some analysts have speculated that the International Monetary Fund's real clout is due to its large holdings of gold. And central banks around the world have increased their gold holdings over the last year, especially in emerging market economies trying to protect themselves from the collapse of Western fiat currencies.

    Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes. Fiat money benefits those who create it and receive it first, enriching government and its cronies. And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow.