Monday, November 5, 2012

Pre-Election Farce

October Jobs and Unemployment Numbers Were Not Credible, Artifacts of a Broken Reporting System and/or Direct Manipulation - John Williams,
Also from John Williams' latest report, which is worth the price of subscription if you want to have access to someone who has studied and analyzed Government statistics over several decades:
The headline numbers (or the general substance of the reporting results) usually are known a week or so in advance, and early release of data to officials in various administrations and at the Federal Reserve has been common in the past and as suggested in former Clinton Labor Secretary Robert Reich’s autobiography
With a downturn in October’s online help-wanted advertising, weakening employment growth in the ISM’s October purchasing managers manufacturing survey, and significant indications of slowing activity, not accelerating economic growth—to be discussed in the upcoming Special Commentary—the October labor data indeed were not credible.
Enough of that.  I think the market's response to the jobs report on Friday told the real tale, if you don't want to believe the facts as they are presented by guys like John Williams...

Along with any credibility associated with the jobs report, I want to bury the idea that either Presidential candidate will have a specific effect on the stock market, precious metals, or the catastrophic U.S. fiscal/economic situation.  The popular promotion in the media is that Romney will be good for stocks and bearish for metals.  The latter idea I guess because of his threat to get rid of Bernanke, who is an economic strawman for the banks anyway - as would be his successor.

Let's take a look beneath the hood of this argument.  We'll look at the black and white numbers with no editorial or slant.  The Government is currently borrowing 40 cents of every dollar it spends.  If it were to cut spending in a meaningful way to reduce that number - let's say a 10% cut across the board in order to reduce that borrowing rate to 30 cents - imagine what that would do to the economy.  Imagine if they cut entitlement spending by 10%.  People would starve and seniors would go without healthcare.  The Dept of Defense,  the largest employer in the world with 3.6 million employees, would have to unload close to 400,000 employees.  The only thing a 10% cut would do is reduce the rate at which the Government is accumulating debt, if the economy stayed the same, which it woudn't.

If the Government cut spending 10% to try and take a whack at the deficit spending, it would send our system in an economic tailspin and throw our economy into a depression that would make the 1930's look like a day at Disneyland..  Now imagine that Congress passed a hard law require immediate balancing of the budget.  40% of all Government would stop.  That would annihilate our system.  Armageddon.  Mad Max.  A balanced budget would only stop the increase in debt accumulation, it would do nothing to reduce the $16+ trillion outstanding.  Ahh, but under any of these scenarios, Romney is promising 12 million new jobs...

My point here is that there isn't any possible "fix" for our system that either Romney or Obama can implement in order to solve the fiscal cliff problem without sending our country into chaos.  To be sure, this would lead to the "reset" our country needs, and in the long run it would be a good thing, but there isn't one sane person out there who would sign up for that.  Neither Romney or Obama have any choice except to extend the madness of more deficit spending, more debt accumulation and more money printing.

If you think Romney has some sort of "magic underwear" solution he's hiding, please read the quote from Bill Buckler's Privateer, probably the most candidate and truthfully analytic newsletter available:
Mr Romney has now been the official Republican candidatefor two months. Over that time, he has spent an unprecedented amount of money (as has his opponent) to get out a “message” that boils down to this:  “You’re better off with me than you would be with him!”  He has said absolutely nothing about his “plans” to address the fiscal and financial condition of the US and its government. There is a good reason for this, Mr Romney doesn’t have any plans.
I've been whining about the latter statement since the first debate.  And the reason neither Romney nor Obama have laid out a specific plan is because any plan to cut spending and debt accumulation would destroy the economy.  This is what happens when you have an economic system that is based entirely on fiat currency and very little actual substantive economic production.  Hell even Apple's Iphones and Ipads are manufactured in China.  For some reason many Wall Street analysts have said that the new Iphone would add 1% to economic growth.  Given that Apple's stock price is down over 13% since the new Iphone was introduced, I think we can see how retarded that notion is.

In addition, anyone notice how the Fiscal Cliff deadline was never addressed in the debates.  It's related to the previous point, but it's worth pointing out, because neither candidate can possibly do anything with that situation except override the legislation and increase the Treasury debt limit by quite a bit.  Even if the Fiscal Cliff were allowed to kick in - and we know it won't be - the Treasury debt limit would still have to be raised.  I've seen some estimates which suggest that we would be looking at an initial increase of at least $2 trillion in order to fund the Government for the next 12 months.

So as you can see, regardless of which candidate prevails tomorrow, they both face the same unsolvable, catastrophic problem for which neither has laid out a gameplan to address because any action taken to address the problem sends our country into economic and social Armageddon.  For that reason, the Fed will have to continue increasing QE in order to continue buying Treasury bonds in order to finance the voracious, unstoppable Government spending.  Moreover, for those reasons, the current price pullback in gold and silver should be bought with both hands, as it is a true gift from JP Morgan and the CFTC.


  1. amen: the only real way to solve this crisis is to reduce spending and increase taxes.

    And few understand that and if they did they would not want to sacrifice their "free lunch" to save the system.

    Let someone else do it.

    1. I politely disagree, Hal. I believe that the fix to what ails America should allow for the introduction of competing currencies. Is it not a strange thing that a country which calls itself "capitalist" allows for no competition with regard to the creation of money? How is it that one privately owned institution alone can create all the money a country needs (and charge interest on that which has been created from nothing), and nobody dares utter the word "monopoly"? Are there no anti-competition laws which can be applied? Strange that in America, capitalism is ultimately dependent upon communism (what else can one call the Federal Reserve but a communist entity?).

    2. Look at how well that worked for Indonesia. Good luck with that one.

  2. It was just a few months ago we were mesmerized with "9 9 9"! I long for the good old days.

    Where does the Fed get the capital to buy Treasury bonds?

  3. The only way out is a worldwide debt jubilee. However this will still lead to Mad Max as sheeple realise they have been robbed and most countries , not just Greece, begin to starve and realise they are part of the third world, and the gravy train has left them at the platform.

  4. Yeah well at the moment nowhere. The Fed having promised QE3 has failed to follow through and their balance sheet is unchanged, they haven't bought any bonds. If the Fed don't real soon we are going to see Morgan Stanley go down and we will have another Lehman event. Th is time with 300,000 custodial accounts cleaned out.

  5. On the eve of a sad, sad day in American history.... Going to drink a few and listen to some Grateful Dead. I'm starting with Liberty.

  6. There is one way out of this mess, but it is sneaky, dirty, underhanded, evil, (in other words, the politicians and banksters will love it)
    The Plan- As you know (or should know) there are two prices for gold, the at market price as fixed by the market and the 'official' price of gold set by the US government where gold is $42.2222 per ounce (look up gold $42.2222 on google for more information)
    Suppose the governments and central baks get together and declare "gold is now one billion dollars an ounce". All of a sudden, broke countries are financially solvent and debts are wiped out with a few million ounces sold off, then it is wash, rinse repeat for the financial elite. Of course, to insure that the masses don't take advantage of the situation, laws are passed so gold can only be sold to governments and the announcement is postponed so 'da boyz' can unwind their gold shorts before the announcement is made.
    As I said, it is a sneaky, dirty underhanded evil idea, but I wouldn't put it past the banksters or their pet politicians to try it.

  7. The fiscal cliff was mentioned by Obama. He said it won't happen, which sounds like 'kick the can'.

  8. The Fed having some failures and their balance sheet is unchanged!
    Construction Companies Australia


  9. One Safety Net that Needs to Shrink

    In other words, these lucky eight got the best of both worlds: access to the Fed’s money and no penalty for failure.
    Which institutions hit this jackpot? Clearinghouses. These are large, powerful institutions that clear or settle options, bond and derivatives trades. They include the Chicago Mercantile Exchange, the Intercontinental Exchange and the Options Clearing Corporation. All were designated as systemically important financial market utilities under Title VIII of Dodd-Frank. People often refer to these institutions as utilities, but that’s not quite right. Many of these enterprises run lucrative businesses, have shareholders and reward their executives handsomely. Last year, the CME Group, the parent company of the Chicago Mercantile Exchange, generated almost $3.3 billion in revenue. Its chief executive, Craig S. Donohue, received $3.9 million in compensation and held an additional $10 million worth of equity awards outstanding, according to the company’s proxy statement.
    Make no mistake: these institutions are stretching the federal safety net. The Chicago Merc clears derivatives contracts with a notional value in the trillions of dollars. I.C.E. clears most of the credit default swaps in the United States — billions of dollars a day, on paper. No wonder they are considered major players in our financial system.
    But placing them at the bailout trough is wrong, according to Sheila Bair, the former head of the Federal Deposit Insurance Corporation. In a recently published book, Ms. Bair wrote that top officials at the Treasury and the Fed, over the objections of the F.D.I.C., pushed to gain access for the clearinghouses to Fed lending

  10. The False Dodd-Frank Narrative: Occupy Wall Street Attacks Huge Hot Money Loophole in the Law

    Matt Stoller is a fellow at the Roosevelt Institute. You can follow him at

    Proponents of Dodd-Frank have an incentive to argue the law is a tough crack-down on Wall Street. It’s a core part of Barack Obama’s narrative, that he bailed out the banks, but then did what FDR did in the 1930s with a series of tight regulations. Of course, it was immediately obvious that Dodd-Frank was an afterthought of the Bush/Obama administrations, that the real policy framework involved three key fights – the Fannie/Freddie bailouts under the Housing and Economic Recovery Act of 2008 (the so-called bazooka law), TARP, and the reappointment of Ben Bernanke. These fights were supplemented by Eric Holder’s decision to give legal forbearance to Wall Street executives, to not prosecute for rigging the CDO market or any number of illegalities in the foreclosure space.

    After this radical consolidation of banking power in the hands of bailed out Too Big To Fail institutions, the Obama administration went to work on Dodd-Frank, which was essentially a 2000 page mash note to regulators saying “please don’t let that crisis happen again, it was awkward’. And now the evidence is beginning to trickle out that Dodd-Frank is a nothingburger. As Yves has already show regarding bank size and profits, Dodd-Frank, unlike TARP, is not particularly relevant to trends in the financial services industry. We will keep hammering on the flaws in Dodd-Frank as the opportunities arise.

    One of the most egregious problems in the crisis were money market funds, which were large pools of money that funded the unstable repo market in the shadow banking system. Money market funds function effectively as uninsured bank accounts. And like uninsured bank accounts, they are prone to massive de facto bank runs, or withdrawals. There were two obvious solutions to this. One, treat them as bank accounts and force them to be insured and regulated. Two, treat them as non-bank securities and let their Net Asset Value (or NAV) float as the price of stocks or bonds do. Both of these would get rid of the risk of another bank run.

    If this doesn’t get fixed, as I suspect it won’t, then Dodd-Frank will literally have done nothing about one of the core problems in the crisis of 2008 – the $4 trillion of uninsured bank run prone money market.


    whether they fix it or will be lost....either to printing or actual discount...think about it.

  11. The DTCC’s $36.5 TRILLION Flood Fraud

    The DTCC’s claim that a large amount of their $36.5 Trillion in securities holdings at 55 Water Street in NYC have been “damaged” by flooding from Hurricane Sandy. How convenient.

  12. Romney's hedge-fund backers plan to party on election night

    Julian Robertson, a billionaire hedge fund manager who helped launch the careers of more than a dozen other money managers, will be in Boston, where Romney and his family will be watching the results come in.

    Robertson and Romney have known each other for decades, going back to when Romney was running Bain Capital and Robertson's Tiger Management was one of the largest hedge funds around. At the height of Tiger's success, the fund was overseeing more than $20 billion.

    Conventional wisdom suggests that if Romney defeats President Barack Obama, he will be less likely to raise taxes on the rich and will ease off on tough regulation of Wall Street. The stock market is expected to rise as a result.

    It is a scenario that appeals to many hedge fund managers, many of whom feel Obama has demonized Wall Street and the rich in general while backing tougher regulations on the financial sector.

    Joining Robertson in Boston will be other big donors to the Romney campaign, including New York Jets owner Woody Johnson and controversial casino magnate Sheldon Adelson, who has emerged as one of the biggest contributors to Republican candidates this year.

    Anthony Scaramucci, founder of investment firm Skybridge Capital, organizer of the popular SALT hedge fund conference in Las Vegas and a long-time Romney supporter, is also heading to Boston. Paul Singer, who runs the $20 billion Elliott Associates hedge fund and has been another strong Romney supporter, was invited to spend the evening in Boston but his plans are unknown.

  13. FINRA Arrives After The Fact To Put Out The Fire Caused By Burning Apples At Dick Boves Employer reports: The Financial Industry Regulatory Authority is investigating alleged unauthorized trading at Rochdale Securities LLC

    Daniel Crowley, Rochdale's president,
    said Finra, a Wall Street self-regulator, was investigating trading that
    has put the company in a precarious financial position, adding, "The
    firm is recapitalizing and should be talking to the market shortly." He
    declined to offer more details on the trading or the investigation.

    A person familiar with the thinking of Rochdale executives said a trader at the firm received an order for stock in Apple Inc. AAPL +0.63%
    but bought 1,000 times the number of shares requested. The trader is
    saying the extra shares were ordered by mistake, the person said, but
    the firm is alleging the actions were intentional. The company suspects
    the trader was working with an outside party to execute the trade and
    profit at the firm's expense, according to this person.

    Amazingly enough, very few (if any) queried as to why Rochdale, with a
    capital base of $3.4 million dollars could execute a trade worth a
    billion dollars. Let's take an off the cuff measure of the leverage
    involved here... $1,000,000,000/$3,400,000 = roughly 294x the trader
    levered up the firms capital base, give or take. Who was the idiot(s) on
    the other side of the trade and more importantly where the hell was
    FINRA before this tiny bank had the nerve to go against BoomBustBlog
    research with a 294x levered trade? Methinks FINRA was a little less
    than effective here, no? Dick Bove, the rosk star bank analysts paid by
    Rochdale Securities (and probably paid nearly as much as Rochdale's
    capital base), should have alerted Rochdale to the risks therein, no?

  14. Colombia’s Peso Surges as Seized Brokerage’s Trading Taken Over

    Colombia’s peso rose the most in four months as the government said Bancolombia SA (BCOLO) will take over bond trading of the country’s biggest brokerage after it was seized by authorities.

    The peso appreciated 1 percent to 1,812.48 per U.S. dollar at 11:15 a.m. in Bogota, the biggest rally since June 29 on a closing basis, as the announcement bolstered investor confidence that the takeover of Interbolsa SA’s brokerage won’t disrupt the country’s financial markets.

    The government reached an agreement with Bancolombia, the nation’s largest bank, early this morning as part of its effort to prevent the collapse of Interbolsa’s brokerage from curtailing trading and sparking a broader crisis. Officials seized the brokerage on Nov. 2, a day after the parent company’s stock sank 30 percent amid a funding shortage.

    “People were seeing a risk of non-compliance” on trades Interbolsa was involved in, said Camilo Perez, the head analyst at Banco de Bogota SA, the nation’s second-biggest bank.

    Funding Shortage

    Colombia’s financial authorities stepped in after Interbolsa’s brokerage said last week that it couldn’t make a payment on a 20 billion peso loan, saying it faced a “temporary” funding shortage.

    The stock exchange suspended trading in Interbolsa on Nov. 2 for five trading days, and Hernandez said that day that the government may decide within two months whether the brokerage should be liquidated.

    coco puffs?

  15. Rome Killed Its Soldiers, Dug Sewers to Conquer World: Review

    Rome’s Undoing

    But militarism and expansionism were also the republic’s undoing. Land that was annexed by conquest or depopulated by war fell under the control of a wealthy few and efforts to redistribute it met with violent response.

    The rural populace, displaced by slaves captured in war, crowded into the city. Warlords like Marius, Sulla and, finally, Caesar exploited loyal soldiers and restive urban mobs to seize power and circumvent the political institutions that had taken centuries to build.

    That’s when things really get interesting.

    the only difference is the warlords are financial and the slaves are chained to debt.

  16. Changes Are Approved to Ease Germans’ Costs for Welfare Programs

    BERLIN — Leaders from Chancellor Angela Merkel’s coalition agreed Monday on a raft of changes to social welfare programs aimed at easing costs for average Germans, to bolster the government’s sagging popularity less than a year before parliamentary elections.

    Germany, Europe’s strongest economy, can easily afford the measures. But they come at a time when Ms. Merkel has been pressing Germany’s struggling European partners to slash public spending, underscoring just how uneven the economic outlook is across the continent.
    The measures include scrapping an unpopular quarterly medical fee, increasing spending to improve transportation infrastructure and introducing a bitterly disputed child care subsidy. Over all, they are expected to cost $3.9 billion a year. In contrast, the Greek Parliament will be voting Wednesday on yet another round of austerity measures, this one worth $17 billion — equal to 7 percent of gross domestic product — to meet the demands of international lenders standing between Greece and sovereign default. Unions have announced a series of strikes and protests against the cuts that will decimate the country’s already stretched social services net.

  17. While Nobody Was Paying Attention, The Bank Of Japan Took A Surprise Step That Could Change The Future Of Central Banks

    So here we have two executive branch government ministers issuing declarations on the monetary policy portion of the BoJ website regarding price stability. Can anyone imagine if Tim Geithner, Ben Bernanke and Hillary Clinton were to issue a joint statement on fighting deflation that was in turn prominently displayed under in the monetary policy section of the Fed's website? It would be mutiny!

    The executive branch politicians in Japan have, for the first time ever, infiltrated the mother ship. BoJ independence is now under explicit political attack. This should be a warning to all central bankers with "sound money" religion - if you don't let the inflation dogs out and crank up the printing presses as the economy deteriorates, the politicians will come and shut you down. What we are witnessing is the beginning of the end for independent Japanese monetary policy.

    Zervos was far from the only analyst to notice the big news.

    Read more:

  18. Hey Dave,

    Which global puppet were you dressed up as at the Broncos game Sunday: Romny or Obama LOL

    1. LOL. Had my Peyton Manning authentic Bronco football jersey on! I'd vote for Peyton if he were running. Otherwise, I'm not voting.

  19. Interesting comments above to say the least. The FED experiment of testing the market on what the Nank SAYS before what he DOES has gone full limit, but what is happening in Japan is very VERY noteworthy.

    The analogy from anonymous is spot on.

    Strawberry fields forever !!