Sunday, October 23, 2016

What I Learned from the Second Most Powerful 
Central Banker in the World
"I was at a private dinner in New York City with William Dudley, president and CEO of the Federal Reserve Bank of New York and arguably the second most powerful central banker in the world after Janet Yellen. The most important view Dudley expressed was his belief that the Fed will raise interest rates 'before the end of the year.'  .. The Fed will definitely raise rates then, as I advised readers weeks ago and as Dudley confirmed last night .. Dudley then suggested that the Fed is not worried at all about any damage that might be done to stock markets from the next rate hike. Dudley said it is 'not our job' to put a floor under stock prices .. The status of the stock market is not an impediment to a December rate hike by the Fed, and that the Fed is unprepared for the market damage that will arise when it does hike rates .. The Fed and markets are not moving down a path together. They are going around in a feedback loop of offsetting initiatives and reaction functions that leave markets fatigued and confused — and leave the Fed impotent to achieve its goals .. The systemic dangers are clear. The world is moving toward a sovereign debt crisis because of too much debt and not enough growth. Declining productivity is the last nail in the coffin in terms of countries’ ability to deal with the debt .. This raises the prospect of a new liquidity crisis and financial panic worse than the financial crisis .. Persistent low rates have not caused inflation, but they have caused asset bubbles, which threaten to pop and unleash a financial panic on their own — independent of tight financial conditions. When this new panic hits (either from a liquidity shortage or bursting asset bubbles), investors will have no confidence in the ability of central banks to limit the panic .. The next panic will be unstoppable without extreme measures — including IMF money printing, lock-downs of banks and money market funds, and possible martial law in response to money riots. Bottom line: The Fed will raise rates in December. That will be bad news for the economy and for stocks. The Fed does not see the market carnage coming."
- Jim Rickards*
LINK HERE to the essay


Anonymous said...

People like me just got screwed. — Christopher Van Meter, former Army captain

US Government Aggressively Clawing Back Its Own Soldiers Enlistment Bonuses Given In Time of War

A rational person might ask, why is the US government aggressively going after the soldiers themselves, who accepted a bonus to re-enlist and actually served again in a war, putting themselves in harm's way, in good faith?

If there was active collusion to defraud it should be prosecuted, but if not, why make the soldiers pay the price?

If there is a problem why are they not addressing it with the local government officials who may have offered the bonuses in error to achieve the ends demanded by the powers that be in Washington?

It is because the soldiers, who faithfully served their country and kept their end of the deal, are the most vulnerable. They are individually weak, and not equipped to lawyer up and fight back against legalistic injustice.

Does the US government really need the money from those soldiers? The bonuses obviously mean a lot to their lives and those of their families, but is just a drop in the bucket to the technocratic war machine.

It is because they can. When the going gets tough, the amoral pervert justice and go after the weak and the disabled and 'the other.'

You might be further tempted to wonder why the government does almost nothing to hold the perpetrators of all these massive financial frauds and corporate healthcare abuses we have been seeing for the past twenty year accountable in the same aggressive way, when it might be much more justifiable to do so?

Good question.

Anonymous said...

Who Would You Clawback?
Consider the following scenarios where people received bonuses as a result of fraud:

1) Short of troops to fight in Iraq and Afghanistan a decade ago, the California National Guard enticed thousands of soldiers with bonuses of $15,000 or more to reenlist and go to war. Audits reveal widespread bonus overpayments by the California Guard at the height of the wars. Investigations determined that lack of oversight allowed for widespread fraud and mismanagement by California Guard officials under pressure to meet enlistment targets. Army Master Sgt. Toni Jaffe, the California Guard’s incentive manager, pleaded guilty in 2011 to filing false claims of $15.2 million and was sentenced to 30 months in federal prison. Three officers also pleaded guilty to fraud and were put on probation after paying restitution. (source: Los Angeles Times)

2) For years, mortgage giant Fannie Mae has produced smoothly growing earnings. And for years, observers have wondered how Fannie could manage its inherently risky portfolio without a whiff of volatility. Now, thanks to Fannie’s regulator, we know the answer. The company was cooking the books. Big time. Fannie set aside an artificially large cash reserve. And — presto — in any quarter its managers could reach into that jar to compensate for poor results or add to it to dampen good ones. This ploy, according to Ofheo, gave Fannie “inordinate flexibility” in reporting the amount of income or expenses over reporting periods. This flexibility also gave Fannie the ability to manipulate earnings to hit — within pennies — target numbers for executive bonuses. In one particularly volatile year target EPS for maximum payout was $3.23 and Fannie reported exactly . . . $3.2309. This bull’s-eye was worth $1.932 million to then-CEO James Johnson, $1.19 million to then-CEO-designate Franklin Raines, and $779,625 to then-Vice Chairman Jamie Gorelick. (source: Wall Street Journal)

Here’s what our government did.

The government let Johnson, Donilon and Gorelick keep every penny of their fraudulent gains. That same government is going after 10,000 soldiers who received re-enlistment bonuses as a result of Pentagon incompetence or malfeasance:

Nearly 10,000 soldiers, many of whom served multiple combat tours, have been ordered to repay large enlistment bonuses — and slapped with interest charges, wage garnishments and tax liens if they refuse — after audits revealed widespread overpayments by the California Guard at the height of the wars last decade.

Roughly 9,700 current and retired soldiers have been told by the California Guard to repay some or all of their bonuses and the recoupment effort has recovered more than $22 million so far.

There are two systems of justice in our country.

Rules for the politically connected, the “Just Us” crew, are far different from those for common folk.

The soldier bonus clawback is but one example.