Tuesday, September 30, 2014

The Federal Reserve
.. Helping Bankers ..
To Get Around The Regulations
Andrew Huszar* discusses the handling of Goldman Sachs in secret recordings & how the role of regulation has changed in the banking industry since the financial crisis .. points out the complexity of the banking sector & regulations are making it impossible for regulators to control too big to fail banks .."we've allowed too big to fail to become even more powerful, more too big to fail since the financial crisis" .. 6 minutes
Robert Latham Owen was a part-Cherokee Democratic Senator from Oklahoma between 1907 & 1925 who co-sponsored the bill that would change the world forever - The Federal Reserve Act of 1913 .. Writing later in his life, he reflected on a key reason for the Federal Reserve Act - click on the image above to enlarge or read below
LINK HERE to the source
The Final Nail On
The Coffin For 
The U.S.$?
Europe & China Start
Direct Trading In Euros & Yuan,
De-Dollarization Expands
Bloomberg reports China will start direct trading between its currency & the euro this week as China continues its currency's internationalization & the world moves away from the U.S.$ .. "The agreement marks a 'significant milestone' in yuan internationalization as the euro is the only G3 currency that has not had direct conversion with the yuan." .. 
LINK HERE to the article
LINK HERE to our prior post

From Our Archives:
September 14, 2014
The 'De-Dollarization'
Chart That China & Russia
Are Banking On
"Based on current trends China’s economy will overtake America’s in purchasing power terms within the next few years. The U.S. is now no longer the world’s sole economic superpower and indeed its share of world output (on a PPP basis) has slipped below the 20% level which we have seen was a useful sign historically of a single dominant economic superpower. In economic terms we already live in a bipolar world. Between them the U.S. and China today control over a third of world output (on a PPP basis) .. On the U.S. side, almost a century of economic dominance and half a century of superpower status has left its impression on the world. Power leaves a legacy .. Not only has China’s economy continued to grow far faster than America’s, perhaps more importantly, it can be argued that the USA’s geopolitical multiplier has begun to fall, reducing the dominance of the U.S. on the world stage and moving the world towards the type of balanced division of geopolitical power it has not seen since the end of the Cold War. If this is the case then it could be that the world is in the midst of a structural, not temporary, increase in geopolitical tensions .. America’s willingness to argue that the rest of the world should follow America’s model has waned .. One of the major lessons that the US seems to have taken away from the Iraq war is that it cannot solve all of the world’s problems and in fact will often make them worse .. America’s geopolitical multiplier has declined even as its relative economic strength has waned and the US has slipped backwards towards the rest of the pack of major world powers in terms of relative geopolitical power .. Markets might have to price in a higher degree of geopolitical risk in the years ahead."
- Deutsche Bank's Jim Reid 
LINK HERE to the commentary
The Next Crisis Is Nigh
Are The Goldman Tapes An Omen?
David Stockman* sees the emergence of the Goldman Tapes from the Federal Reserve regulator as being an omen of an impending financial crisis
.. sees an analogy with the Nixon tapes back in that era .. "What the tapes really show is that the Fed’s latest policy contraption - macro-prudential regulation through a financial stability committee - is just a useless exercise in CYA" (Cover Your Ass). Even the 'bubble blind' FED has started to get nervous about financial bubbles and instability in recent months .. Not 10,000 Carmen Segarra’s could stop the boom and bust cycle thus manufactured by the money printers at the FED. Stanley Fischer’s financial stability committee, therefore, is not merely a pointless farce. Its evidence that the next financial crash is nigh."
LINK HERE to the essay
When A New 
Financial System Emerges,
It Will Have The Same Flaws 
But Only Bigger
"It's fairly predictable now. A Wall Street transgression is noted and trumpeted and the call goes out for prosecutions. Often the rhetoric is accompanied by demands for additional regulatory rigor and perhaps a whole new strata of regulatory oversight .. It's really a meme of sorts .. Those performing this manipulation are inevitably those who want to continue with business-as-usual – and indeed, expand that sort of business. This globalist mentality is actually quite satisfied with the status quo .. People are indeed angry about the current economic and sociopolitical system; trust is at a minimum and even the most fundamental elements of society are seen as questionable .. Modern central banking justifies all sorts of market manipulations and interference. Most egregiously, monopoly central banking triggers asset bubbles that inevitably explode – bankrupting millions over time. This is happening now .. Eventually, there will be a significant downturn, a major crash. At that point, the cry will be for .. a more fully globalized financial system that will be 'safer' even though it will be the same as before, only bigger."
- The Daily Bell
link here to the essay
Unsustainable Debt
Boom Bu$t .. discussion with Dr. Ann Pettifor, author & executive director of Advocacy International, on the recently released Geneva report on the world’s total debt .. Dr. Pettifor explains that debt levels are increasing, contrary to the widespread belief that some sort of deleveraging has taken place, looks to private debt as the big problem .. also a discussion with Warren Mosler on the impact of monetary policy on the real economy .. 1/2 hour total program
click to enlarge
A New Financial System Is Coming
"I believe an entirely new system will be needed in view of the world being choked on ever-increasing debts. But before a new system can be instituted, the old (current) system will have to be destroyed. This, I'm afraid, will necessitate a brutal bear market that will bring about the absolute need for change .. Change will be very painful .. In its battle to make its fiat currency the only legal currency, the Fed has adopted a strategy of denouncing the precious metals. But ultimately the truth will win out, and the fiat dollar will join all the other dead fiat currencies that have become footnotes in economic history. Remember every currency that has left the gold standard has died. Without the backing of gold, no currency has survived, and there are no exceptions. Sooner or later, a new world reserve currency will be adopted. It will be at least partly backed by gold."
- Richard Russell*
link here to the article
Debt Crisis & 
How to Prepare
Interview with John Rubino* on going back to a gold standard, how to prepare for inflation or deflation, what world currency will collapse first, is the housing market contracting .. NNOO.. 22 minutes
About To Cross 
Major Milestone
Zero Hedge: "History did not end with the Cold War and, as Mark Twain put it, whilst history doesn’t repeat it often rhymes. As Alexander, Rome and Britain fell from their positions of absolute global dominance, so too has the US begun to slip. America’s global economic dominance has been declining since 1998, well before the Global Financial Crisis. A large part of this decline has actually had little to do with the actions of the U.S. but rather with the unraveling of a century’s long economic anomaly. China has begun to return to the position in the global economy it occupied for millenia before the industrial revolution. Just as the dollar emerged to global reserve currency status as its economic might grew, so the chart above suggests the increasing push for de-dollarization across the 'rest of the isolated world' may be a smart bet." .. click on chart to enlarge
LINK HERE to the commentary
Biggest Challenges:
Investing In Financial Repression
& Unorthodox Policies
Article highlights the challenges of investing in today's abnormal environment characterized by financial repression & unorthodox policies of record low interest rates & money printing.
LINK HERE to the article
The Important Underpinnings 
of Gold
It's bulls vs. bears on gold prices, jewelry, U.S. dollar, GDP, ECB .. Holmes begins by discussing the gold market's response to the recent U.S. dollar rally, which has left the price of gold under pressure .. Holmes discusses the correlation between GDP & gold jewelry consumption, citing a WGC study that states a 1% increase in U.S. GDP usually coincides with a 5% increase in gold jewelry consumption .. 8 minutes
"In Weimar hyperinflation, biggest losers were 'educated' middle class because they trusted the system. Rich knew better & poor always poor." - Jim Rickards*
click to enlarge
Yield Curve Reverses
CNBC's Rick Santelli discusses the latest action in the bond market, the U.S. dollar.

Richard Cantillon &
Fiat Money
Hugo Salinas Price*: "Richard Cantillon is worth remembering. An Irishman, Cantillon was born in 1680 and died in 1734. He went into banking in Paris and witnessed the rise and fall of John Law’s huge speculative business in all its glory, which ruined France .. Cantillon was a man of extraordinary intelligence .. he clearly understood its terrible and inevitable consequences .. Cantillon’s relatives came to see him, beseeching him to get some shares for them in John Law’s Enterprise. He told them he did not recommend that investment at all, but his relatives insisted he purchase shares for them .. Cantillon purchased the shares they wanted, with their money; as a banker, he had the shares in his power and could do with them what he wished, so long as they did not ask for delivery or give him instructions to sell. He immediately sold the shares of his relatives in exchange for gold. He also liquidated his own shares, in exchange for gold .. John Law’s financial Project soon went into a spectacular bankruptcy. Cantillon repurchased his relatives’ shares for pennies .. Cantillon delivered to them the shares they had insisted on purchasing, now worth nothing. He had purchased the shares they wanted, and delivered to them said shares, as specified under contract .. There are few men like Cantillon. Many millions of investors will be totally ruined when the present version of John Law’s fraud – the Stock Exchanges of the whole world, based on fiat money – go to the garbage can of History, as will have to happen."
link here to the essay
Deleveraging? What Deleveraging? 
The 16th Geneva Report 
on the World Economy
The 16th annual Geneva Report, commissioned by the International Centre for Monetary and Banking Studies, is written by a panel of senior economists including 3 former senior central bankers .. The report predicts interest rates across the world will have to stay low for a "very, very long" time to enable households, companies & governments to service their debts and avoid another crash .. report summary: "The world has not yet begun to deleverage its crisis-linked borrowing. Global debt-to-GDP is breaking new highs in ways that hinder recovery in mature economies and threaten new crisis in emerging nations – especially China. The latest Geneva Report on the World Economy argues that the policy path to less volatile debt dynamics is a narrow one, and it is already clear that developed economies must expect prolonged low growth or another crisis along the way." .. the report warns of a "poisonous combination of high and rising global debt and slowing nominal GDP, driven by both slowing real growth and falling inflation" .. "Contrary to widely held beliefs, the world has not yet begun to delever and the global debt to GDP ratio is still growing, breaking new highs."
LINK HERE to the report
LINK HERE to FT's excerpt
Interview with Jim Rickards*
in Istanbul Turkey
Japan's Abenomics will fail .. BIS, IMF, G20 warning that the system is going to collapse .. in the next financial crisis, stock markets & banks may close  .. on the Bank for International Settlements (BIS): "The BIS is very important for two reasons. Number one: They are the primary intermedia for manipulating the gold market. That is not a mystery… BIS is manipulating the gold market. They are the intermedia between the central banks and commercial banks and other central banks of the world .. Very interestingly BIS about a month ago issued a warning of systemic risk. They said that the system is getting dangerously close to collapse. A few weeks later the IMF issued a similar one. And then last week G20 finance ministers meeting at Australia issued a warning. What was the last time you saw the three most powerful multilateral financial bodies BIS, IMF and G-20 issued warnings. I have never seen it before. They are telling you it is going to collapse. They see what I say and they are warning you .. I think I have never seen anything like this."
LINK HERE to the transcript
Morgan Stanley Warns 
.. Asia Debt Shock Coming
Ambrose Evans-Pritchard observes debt ratios in developing Asia have surpassed extremes seen just before the East Asian financial crisis in the late 1990s .. foreign debt in emerging Asia has soared from $300 billion to $2.5 trillion over the last decade, creating the risk of a currency shock as the dollar strengthens to a four-year high & threatens to go even higher .. "In stark contrast to the late 1990s, Asian states have borrowed in their own currencies and have little foreign debt. Most have large reserves. However, the BIS fears the region may be vulnerable through different channels, this time via private dollar debt and extreme sensitivity to rising rates on local debt."
LINK HERE to the article
El-Erian*: Damning Gold 
With a Half-Hearted Nod
The Daily Bell analyzes Mohamed El-Erian*'s recent essay on Bloomberg regarding gold .. coming from a mainstream perspective, El-Erian is hesitant to come out with a clear buy recommendation on gold, but he does so in a way which is cautiously optimistic - "It is typical of El-Erian in the sense that it purveys mainstream wisdom while weakly acknowledging that there is something else .. This is El-Erian's strength, actually. Many financial journals are so steeped in Keynesian propaganda that their rhetoric is entirely predictable. El-Erian occasionally allows a bit of light to shine in." .. El-Erian recommends a 3%-8% weighting of total assets into gold, concludes: "The biggest risk facing investors today is a large and sustained fall in assets whose prices have been artificially supported by central banks -- particularly bonds and equities. This is especially the case should a decline in global growth be accompanied by greater geopolitical turmoil. There are good reasons for gold to be unloved at this stage and thus having a position in gold toward the lower end of the allocation range is justifiable. But only brave investors would omit it from their investment portfolios given the fluid world we live in."
LINK HERE to The Daily Bell
LINK HERE to the Bloomberg essay
Stock Market
Heading for Minsky Moment
Saxo Bank's Chief Economist Steen Jakobsen: "We’re still not wise enough to realize that our current model is a ‘Ponzi’ scheme rushing toward its inevitable ‘Minsky moment’ .. We’re still working with the same dog-eared script we were introduced to all a few years ago - Maintain sufficiently low interest rates to service the debt burden, pretend to have credible plan, but never address the structural problem and simply buy more time. But while we were able to get away with this theme for an awfully long time, the dynamic is now changing." .. 4 minutes