Tuesday, December 11, 2012

Government Waste In Extremis

Just so everyone is clear, "in extremis" is a Latin phrase that essentially means "to the point of death."
Our Government is growing, spending and transferring private wealth to the point at which our system is nearing its death.  Just to be clear, I'm not referring directly to the tax policy debate or the so-called "class warfare" discussion.  My own view is that the tax system is so irrevocably convoluted that nothing short of a full "reset" will fix that problem.

What I'm referring to is the fact that the Government is taking taxpayer money and paying many of its employees an absurdly egregious amount of compensation.  Here's two examples that hit the news in the last 24 hours:  " $822,000 Worker Shows California Leads U.S. Pay Giveaway"  LINK  Pay for State-sponsored psychologists and school Administrators seems to be leading the way.  Psychologists? Give me a break.  I never signed up to pay for that.

We all know that including retirement benefits, the average pay per employee for Government workers is a little over $100k/year.  For now, all of that is guaranteed.  Contrast this with the average private sector all-in compensation which a little over $60k/yr, with nothing guaranteed.

But here's a fact that is even more outrageous:  the top 90 employees for Fannie Mae and Freddie Mac get paid an average of a little over $1 million/year LINK  That figure just blows my mind given that FNM/FRE exist only because of trillions in taxpayer subsidies.  I can guarantee you that at least 90% of those people making an average of $1 million per year could never in their wildest dreams make even 1/3 of that amount in the private sector.  No way.  I would bet the life of my dog on that.

This type of rampantly out of control Government waste could NEVER occur with a democratic capitalist system using a true gold-backed currency (as opposed to the defunct, phony Bretton Woods system).  Never.  This is why the Government will never revert to a real money currency until our system hits the wall.

The only thing to prevent our system from slamming into a wall is a huge amount of additional QE. There's an invisible depression going on beneath the surface.  48mm people on food stamps as of the end of September.  That's one in every 6.67 people.  If the Government/taxpayer wasn't putting food in their mouths, what would it be like in the streets?

A lot more QE is coming and so are much higher gold/silver prices.  Keep that in mind if you are irritated, as am I, by the blatant paper raid on the metals today.


  1. It Never Ends: Top Obama Housing Advisor Jumps Ship to Wells Fargo

    Mr. Ryan is currently a senior advisor to Shaun Donovan, the secretary for Housing and Urban Development. He joined HUD in 2009 as the first ever chief risk officer at the Federal Housing Administration and served briefly last year as the agency’s acting FHA commissioner. He previously spent 26 years at Freddie Mac.

    Mr. Donovan called Mr. Ryan “a key source of advice and reason for the last three years at HUD,” in a statement. “We will miss his expertise, wisdom, and candor,” he said.

    Mr. Ryan played a key role shepherding the $25 billion mortgage-foreclosure settlement between five of the nation’s largest lenders, including Wells Fargo, and 49 state attorneys general and federal regulators this past March.

    Mr. Ryan will become a senior vice president within the capital markets group at Wells Fargo Home Mortgage, where he will coordinate strategy with industry trade groups and consult with policy makers on a range of housing-finance issues.


  2. Richard Russell: Stage Now Set For Public To Enter Gold Market

    Since when does making money make one a sage? Ever since Warren Buffett bought a chunk of the Washington Post, he's turned himself (or the media has turned him) into an oracle. Buffett says, yes, we should "tax the rich." That doesn't concern Buffett, who could drop a few billion and not know it.

    Buffett may be a great company-picker, but when it comes to taxes and government, he's no oracle in my eyes. Of course, I'm bitter. I bought ten shares of Berkshire at $250 a share and sold them when the stock hit $500. Who knew? Who ever knows? Actually, I bought the shares of Berkshire so I could read Warren's annual report.

    In the 1974 bear market, Berkshire's shares dropped in half. I wonder how many BRK followers held their stock through the 1974 disaster?


    think wfc...

  3. You know what's crazy Dave, the malls are still packed down here in South Florida. I was at Disney in Orlando over the weekend with my 3 grandchildren and it too was packed. I'm thinking the real pain is still on the way.

    1. It doesn't cost anything to walk around malls and look. Good for people-watching. Based on the retail sales reports I've seen, foot traffic is not translating into to dollars spent.

  4. A newspaper has three things to do. One is to amuse, another is to entertain and the rest is to mislead.
    – Ernest Bevin British Foreign Minister

    Regarding AIG:

    This is rich. The Treasury made a ‘profit’ of $22 billion based on some, we’ll call them questionable, accounting practices. But we’re still printing $45 billion a month (until Operation Twist ends, then it’ll be at least $85 billion), so the ‘profit’ doesn’t even cover half a month of printing. What a great success story for the administration! *gag*

    It is becoming clear that it’s not just another silly rule, but a LAW like gravity. I refer to the now routine morning market ‘cram-down’ of the precious metals by the Cartel.

    OK, if all you see with your nose pressed against your monitor are the nanosecond-by-nanosecond criminal/fraudulent activity I can easily understand losing sight of the BIG picture for gold/silver vs. dollar-denominated nominal assets. After all, that IS exactly the point. Ignore the long-term and focus on the short-term. One is SUPPOSED to miss the point while the Cartel continues to run the table.

    This is what happens when there is no longer any rule of law, but only ‘rules’ under a corrupt Wall Street kleptocracy. This is also a fantastic opportunity to dump paper fiat and acquire physical assets. Hard assets, whether in your hand or in the ground.

    Of course, the Swiss-watch precision of the market shenanigans and the FOMC meeting (and Wednesday’s anticipated announcement) are merely coincidental, right?

    Wink, wink; nudge, nudge.

    G’day Jim,

    As a suggestion to your followers with regard to what I’m reading of them "Freaking Out " at the moment on the metals market , could you please pass on my thoughts. It really doesn’t matter what the price of Gold and Silver is on a daily or monthly basis. What really, really matters is that you, your family and pets are safe! Everything else with regard to the BS offered by MSM is just that: BS. Don’t sweat the small stuff people, and it’s ALL SMALL STUFF.

    Dear Mr. Jim,

    Why do US banks keep all the cash (bailout money refills received) in the 10Y & 30Y bond market? The rates of interest are so low. It cannot beat inflation. Why don’t they deploy this cash into emerging markets or into commodities? Does Ben restrict this type of activity?

    1. It is not all the funds that are in far out treasuries.
    2.To use bailout funds to buy any treasury is payback to the Fed for the dollar rescue. It is without any doubt QE by proxy.
    3. Supposedly the US Fed has nothing to do with emerging markets and commodities.

    Dear Jim,

    Do you think that over $1,400 trillion of derivatives are going to surface into the real economy some day in a sense that the government will incur that much amount in the form of debt to bail out the banks, the pensioners, the union workers, and anyone else the government can think of as an excuse, thus bringing forth what was in the shadow into the real economy?

    The can has been kicked forward on OTC derivatives of the past to all eternity. It is losses on closed positions that the government has so far financed by bailing out the losers to pay the good ole boy winners. If the present notional value of OTC derivatives are not closed, thanks to FASB capitulation of their assigned duty as auditors, there is no loss, supposedly.

    The quiet result is that the balance sheets of every major financial entity are total cartoons.


  5. In exchange for un-needed bank bailout, Cyprus gives up its sovereignty
    As reported by Der Spiegel, in exchange for a bank bailout, Cyprus has effectively given up its sovereignty to the Troika (the IMF, ECB and European Commission) and accepted permanent austerity.

    With this action, Cyprus has become the poster child for what the future holds for Greece, Spain, Italy and France so long as policy makers insist that protecting bank book capital levels comes ahead of protecting the real economy and society.

    The negotiations produced the draft version of a 30-page Memorandum of Understanding (MoU), in which the troika dictates to Cyprus what steps it will have to take in the coming years, down to the smallest detail....

    [Cyprus President] Christofias left no doubt as to who he blames for the disaster, saying: "It's true that the decisions of bank executives and the miserable control by the Cypriot central bank have cost Cyprus billions of euros."

    "With the goal of minimizing the cost to taxpayers, bank shareholders and junior debt holders will take losses before state-aid measures are granted," the MoU draft reads. This means that creditors of Cypriot banks won't just be able to withdraw their money. Instead, their claims will be converted into bank shares.

    In taking this step, the troika is avoiding a potential embarrassment.

    Substantial sums of Russian capital are deposited into Cypriot banks, and some of it is probably of dubious origin. It would be difficult to explain to the European public why its taxes are being used to rescue wealthy oligarchs....


  6. Dave,

    You putting any faith in this aumn rally today? This the beginning of a bull move or just a blip. I see CDE bought mirasols joaquin project for essentially $60mm which perhaps helps value aumns elf quevar which might explain the pop today. Just interested to hear your thoughts.


    1. Hard to say why it popped like this. Fundamentally it's extremely underavlued, especially given the fact that they've finally engineered a nice turnaround and should go cash flow positive next year.

      I don't analyze day to day moves anymore, especially is seriously manipulated stocks like AUMN. It's all manipulated now but AUMN more than others.

      There's a big difference between its current mkt cap and the intrinsic value of the company. One of these days that gap will close.

  7. Secret IMF report: Hide gold loans and swaps for market manipulation

    Western central banks conceal their gold loans and swaps because information about them is "highly market-sensitive" and accountability about them would hinder secret currency market interventions by central banks, according to a confidential report by the International Monetary Fund obtained this week by GATA.

    The report, provided to GATA by its researcher R.M., was written in March 1999 as the IMF staff proposed to strengthen financial reporting standards for central banks. The report shows that the objections by gold-lending central banks were decisive in weakening the standards. While the first draft of the new reporting rules would have required disclosing central bank gold loans and swaps, the revised rules, later adopted, allowed central banks to hide their gold loans and swaps within their gold reserves and even not to disclose the amount of their monetary gold at all, just the value assigned to it.

    That is, the explicit but secret policy of Western central banking toward gold is to deceive and manipulate markets, as GATA long has complained.


  8. No wonder the house (society) is on the point of collapse; the foundation (the monetary base) upon which it rests is made of crap.

    Honest money, honest society. Dishonest money, dishonest society.

  9. Some commentators have suggested that the Perth Mint will not default with the rest of the Central Bank gold cartel default. As a Western Australian I must ask why the bloody hell wouldn't my local state mint join in a general default? There have been some nasty and unwarranted allegations about us being a convict nation, but really from an American that is the pot calling the kettle black.

    Autralians and particularly Western Australians have never been accused of being morons, culturally challeged perhaps but stupid? No.

    Why in hell would we pay out a bunch of foreign speculators when the rest of the world was calling a default. Let's get this clear London has called a force majeure, New York has called a force majeure, Tokyo has called a force majeur, Singapore and Hog Kong maybe. Everybody is getting cents on the dollar aand we here in Western Australia are supposed to penurise ourselves for a bunch of international speculators? Why? The Perth Mint if it blows up is guaranteed by the Western Australian Government. Why should we pay out when everybody else is refusing are we really that stupid? Maybe but it doesn't look good odds to me.

  10. Was flipping through some tv programs last night (something rarely done here, due to the lack of anything worth watching). I all of a sudden came upon a show depicting a heist of gold. When asked as to who's gold that it was thought to be, the answer given by the higher up was that it was being shipped from the Federal Reserve to the central banking system in weight form that is not available to Joe public....heh !??? Are there certain sized bars of gold that the public are not allowed to hold in their possession ?And since when did the Federal Reserve ship anything gold or for that matter even hold it physically ? Is this just another way for the media/HOLLYWOOD/whoever to snow the people into believing that these baffooms are in control of something that they're NOT !?

  11. Obama Administration Essentially Admits That Some Banks Are Too Big To Jail, Which Is Troubling

    For one thing, according to University of Notre Dame law professor Jimmy Gurulé, a former assistant U.S. Attorney General and former Undersecretary for Enforcement for the U.S. Treasury Department, the government could have formally charged Europe's biggest bank in such a way as to help it avoid death. The bank's U.S. business may have been disrupted for some time, but the bank could have survived. The punishment that was meted out -- taking about half a quarter's profit -- was so far removed from a "death penalty" that it can't possibly be a deterrent for any other big bank.

    And even if the government felt it could not formally charge HSBC, it could easily have charged individuals at the bank without causing financial armageddon. Instead, not a single HSBC individual faces criminal prosecution, despite evidence that billions of dollars were laundered on behalf of Mexican drug lords, the Iranian government and other evildoers for years.

    Nor have any individuals been charged at the five other big European banks that have also managed to dodge formal money-laundering charges in recent years, including British bank Standard Chartered, which entered its own deferred prosecution agreement on Monday. Apparently, all of this constant money laundering was done by robots.

    "The message this is sending is if you want to engage in money laundering, make sure you're doing it within the context of your employment at a bank," Gurulé said in a phone interview. "And don't go small. Do it on a very large scale, and you won't get prosecuted."

    Finally, if the Obama administration's attitude about banks is truly that it is terrified of prosecuting them, for fear of upsetting the global economic order, then that is a damning statement about our financial system -- though it is of a piece with everything else we've learned since the crisis: If you're a bank and you're big enough, you're basically going to get away with everything short of murder. And maybe that, too. You can certainly create and sell toxic securities while also betting against them and trigger a global depression without having to worry about doing any jail time.

    "Somebody else is bound to look for the next hole in the system at another international bank, and exploit it," Anthony Michael Sabino, a professor at St. John's University's Peter J. Tobin College of Business, wrote in an email. "It’s time we started asking are these banks just too big to meaningfully regulate.”


  12. Ahh all these Goldbugs aren't the ones in charge - it's the other guys who determine where it goes - none of you do!! They want the Gold price up but skin everyone else on the way. None of the technicals and fundamentals work and all look like idiots.

    Bill Murphy the biggest. Now slowly you are beginning to realize that the people in charge aren't the ones who write these idiotic news letters etc. It's the ones who keep their mouth shut. Now some idiots are using another excuse and that is the East is manipulating - blah blah.

    TFmetalreport must get better, stronger friends if he want's to give advice. All this bullshit about physical metal - the point is it's still possible.

    So tell me then QE4 and Gold reacts like this. Ontop of that the you are now not even getting compensated by the week dollar.

  13. Inflationary Depression.

    -Sicilian Gold

  14. I agree. I have a few tidbit articles perhaps others would enjoy on the subject of BEN (the shank) Bernake and stock market fraud.
    Here's one