goldmap

Yersina pestis Revisited - 5/30/12

 

"The bizarre situation is, because we’ve got so many people around who haven’t lived through these previous cycles, they prefer to have the bullion. And they are prepared not to take the free thing that’s offered to you, which is a free 20-year call on the gold price when you invest in a good gold mine. It’s something you get to see very rarely in your lifetime, and yet people are choosing to pass it by.” --Strategist Don Coxe in a Kingworld News interview, 5/22/12 

 

Dear All,

This is truly Kafkaesque. In order to obfuscate reality and shaft taxpayers, unions and politicians are refusing to admit the dimension of the looming disaster. In a near-zero interest rate environment in which funds are struggling to make any returns at all, officials are bickering over lowering annual return assumptions from an absurd 8% to a ridiculous 7%. Either assumption results in avoiding the admission that the present values of these funds are negative.  As you read the following, ask yourself what differs here from the refusal of the Greek populace to accept austerity?  NYTimes: Public Pensions Faulted for Bets on Rosy Returns  

 

The following is not resolvable. The pervasive presence of derivatives among money-center banks is a hall of mirrors magnifying the ills of an over-leveraged financial system to such a degree that the only way to soften the havoc of interconnection is through dollar debasement. The Wall Street Journal is reporting that not surprisingly,  the derivative clearinghouses themselves have been declared too big to fail.

 

Matt Taibbi's latest on the underworld: Rollingstone: Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in 'Naked Short Selling'

 

Barack Obama is reportedly the country's first crack president. John Aziz comments: azizonomics: President Choomwagon 

 

Misc...

* La de da..Just another working day at a TBTF bank: WND EXCLUSIVE: Banking giant HSBC 'a criminal enterprise'...Whistleblower makes damning case in video interview

* Alan Greenspan Asked for Advice, Do People Ever Learn?

* It's worth reviewing this compilation of the Fed chief's forecasting ineptitude over the past several years: The Best of Ben

* Cryosat is the European Space Agency's orbital observer of the polar ice caps:  Arctic Ice Thickness (6.5 feet) has not changed since 1940 

* Our current central planners' curricula vitarum...On average, during the 20th century and thus far in the 21st, 44% of U.S. presidential cabinet members worked in the private business sector prior to their appointment. In the Obama administration it's 8%. The previous record low over 19 administrations was 30% (Teddy Roosevelt's in 1901).

 

The trend...

FT: Japanese pension fund switches to gold

Reuters: Turkish gold sales to Iran soar as sanctions bite

Yomiuri: Direct yen-yuan forex deal to start in June

Azizonomics: Is China Really Liquidating Treasuries?

 

Since this blog's inception it has emphasized the central dilemma of the financial system -- OTC derivatives -- as in this 2009 post; Yersina pestis.  The only thing surprising about JPMorgan's announcement of its derivative losses is that there was an announcement at all. Something significant has changed. As stated here on numerous occasions, the FASB has blessed the fictitious valuation of the derivative positions of JPMorgan Chase and the four other largest U.S. banks -- all of which, along with Deutsche Bank, are insolvent. The following was posted here in January 2011  (At year-end JPM and the five largest bank holding companies reported $71 trillion and $290 trillion respectively in notional derivative value on their books:

J.P.Morgan Chase reported "better than expected" earnings on Friday. The fact that the bank is the largest financial cesspool in history with $77.7 trillion in notional derivative value on its books (against $176 billion in shareholder equity -- a ratio of 441:1) that renders the company an insolvent zombie seems not to matter to most analysts -- and why should it? JPM has Too-Big-to-Care status. The Federal Reserve will backstop JPM's negative capital in perpetuity courtesy of US dollar holders. For JPMorgan Chase is no longer a privately functioning enterprise but rather a government entity masquerading as such. Since the financial crisis commenced the needle has barely budged on the exposure that JPM assigns to itself from its toxic derivative book, despite the fact that the financial world which it insures through that book has largely collapsed. Were JPM to increase its stated exposure by just one quarter of one percent of its derivative book's notional value it would more than wipe out the entirety of its shareholders' equity. Not to worry, not to care -- JPM's investment bankers are to receive an average payout of $369,651 for 2010 and the company said it is hoarding enough operating capital to soon increase its dividend. The U.S. Federal Reserve has effectively announced that JPM's balance sheet has no material relevance. Whatever is bad the Fed will eat -- whatever operating cash JPM can generate is free for the taking.

The derivative house of cards is unraveling. The ring of TBTF banks are camouflaging their interconnected insolvency through the myth of bilateral netting. The unmarked-to-market losses of these banks exceed their net worths, yet JP Morgan and financial media pundits continue to downplay the revelation of the company's losses relative to its "earnings" and "solid" balance sheet.  The Wall Street Journal's reporting has been so adolescent that one must assume it is playing the role of Fed propagandist. Only on the internet is there informed analysis of the import of JP Morgan's loss.

You have been reading much about the bank's 'Chief Investment Office' and its role in hedging JPM's aggregate risk exposure. In fact the office is Derivative Central of the world's financial rot and it doesn't hedge anything; its positions are simply not hedge-able.  Derivative fraud  is thoroughly embedded in our financial system. The exposure of vulnerabilities is only now beginning and as it unravels it will make sub-prime, securitized debt fraud and other sundry schemes seem trivial.

The Fed will never allow these banks to hemorrhage and will as surreptitiously as possible absorb their losses onto its own balance sheet. But doing so will require the creation of mountains of currency and inevitably, a revaluation of dollars as measured in gold.

 

Regarding gold and silver...

The contrarian in me loves this: NYPost: Laying a golden egg, particularly the expressed disdain -- "He would have been up 4 percent in the first quarter if it weren’t for the goddamned gold.” This is precisely the 'wall of worry' bull markets are made of.

Kudos to David Einhorn of hedge fund Greenlight Capital, who in a letter yesterday to his partners adroitly confronted the absurdity of Warren Buffet and Charles Mungers' vacuous assault on gold and gold-holders:

" The debate around currencies, cash, and cash equivalents continues. Over the last few years, we have come to doubt whether cash will serve as a good store of value. If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side. If you stacked the money seven feet high, you could store it in a warehouse roughly the size of a football field. The value of all that cash would be about a trillion dollars. In a hundred years, that money will have produced nothing. In a thousand years, it is likely that the cash will either be worthless or worth very little. It will not pay you interest or dividends and it won’t grow earnings, though you could burn it for heat. You’d have to pay someone to guard it. You could fondle the money. Alternatively, you could take every U.S. note in circulation, lay them end to end, and cover the entire 116 square miles of Omaha, Nebraska. Of course, if you managed to assemble all that money into your own private stash, the Federal Reserve could simply order more to be printed for the rest of us."

Chinese gold demand has doubled in the past 12 months and is now surpassing India as the world's largest gold consumer. In the face of lower prices China is sucking up unprecedented physical tonnage. In the last year Chinese gold imports from Hong Kong have increased 800%; in March alone it imported 64 tons. Contrast this to the paper price making occurring on the Comex and LBMA and you must conclude that something is amiss. There are parallel paper and physical gold markets and buyers in the physical continue to benefit from the gift of false price discovery being set -- for now -- on the paper exchanges in New York and London. The thinking investor has benefited greatly by arbitraging this anomaly, profiting every year since 2000 from successively higher annual prices.  Physical demand, price suppression, structural economic meltdown and OTC derivative rot is decreasing the influence of the paper market pricing.  The stars have never been more firmly aligned for dramatically higher gold prices.

All the best,

Jeff

UPDATE: Allocated gold fraud - 5/20/12

 

Dear All,

You've got to be out of your mind to invest in a gold or silver ETF. The same banks operating "allocated" metal Ponzi schemes are serving as storage custodians for ETF's.

The rot is deep:  Customer Shocked “Allocated” Gold Not in Swiss Bank

- Jeff

 

UPDATE: Bill Gates and OTC derivatives - 5/10/12

 

Dear All,

Take a look at this video. Bill Gates has been recruited to bash gold, prompting this tweet from the astute and connected Jim Rickards:

Jim Rickards ? @JamesGRickards

"#BillGates probably hasn't spent 2 seconds in past 30 yrs thinking about #gold http://bit.ly/LSXeXL. If trotted out now, elites are worried."

Observe how out of his element Gates seems in discussing this. One must ask who's words were put into his mouth?  Rickards is correct, this is not a subject you would ever expect to find Gates pontificating on. Gates is a brilliant man but here he fumbles through a subject on which he's a lightweight, evidenced by his recitation of the typical banal commentary we've been hearing from the anti-gold crowd for the entire precious metals bull market.

Gates, Munger, Buffett  -- all going out of their way to bash gold -- Why? 

The rot in the financial system is coming to the surface and the establishment is working to keep the calm. OTC Derivatives are front and center as revealed following today's market's close: JPMorgan Reveals $2 Billion Trading Loss; Shares Plummet

Jeff

 

Surprise, surprise - 5/9/12

 

"While I'd love for our leaders to adopt sensible policies that would reduce the tail risks so that I could sell our gold, one nice thing about gold is that it doesn't even have quarterly conference calls."  - David Einhorn, Greenlight Capital, Inc. in a 5/3/12 Huffington Post column

  

Dear All,

Shadowstats' John Williams made the following observation about the most recent GDP report, which disappointing as it was, is vastly overstated

"The SGS-Alternate GDP estimate for first-quarter 2012 is an approximate annual contraction of 2.2% versus the official estimate of a 2.1% gain. Adjusted for gimmicked inflation and other methodological changes, the business downturn that began in 2006/2007 is ongoing; there has been no meaningful economic rebound.”

 

In the midst of the unemployment debacle is an under-reported trend.  In the past 26 months the number of people on Federal disability roles has doubled.  The trend actually began in the early 1990"s but has exploded in the past couple of years. In many cases disability benefits are comparable to what recipients would receive by working. Close to 11 million Americans are now receiving regular disability checks from the federal government. A good many of them are perfectly healthy and will never re-enter the work force. Not only is the Social Security system stressed by these fraudulent benefit recipients, ballooning disability roles further pressures Medicare, to which disability recipients (many in their 30's and 40's) become entitled after just 2 years:    Investors.com: 4 Million Join Disability Rolls Under Obama

 

As discussed: ETFs – The Next Accident Waiting to Happen?

 

Jim Quinn has penned this terrific essay: The Burning Platform: Epic Fail - Part One

"There are 240 million voting age Americans. About 130 million will likely vote in the 2012 election based upon recent voter participation results. This means that 110 million Americans don’t give a crap about who runs this country or they’ve come to their senses and realize our votes don’t matter."

Directed at the lowest intellectual common denominator, political campaigns vie for the attention of boobus americanus between episodes of 'Mob Wives' or the like. Yet a remarkable number of reasonably intelligent citizens condone the charade, willingly accepting it as legitimate discourse along with the daily doses of horseshit dispensed by media pundits (such as Chris Mathews and Sean Hannity -- political hucksters in their own right) that masquerades as analysis.  It is in fact the educated class (the product mainly of  state run schools) that is largely responsible for perpetuating the syndrome wherein they elect a sociopath to office, subsequently discover they've been deceived, and then proceed to find an alternate scoundrel to replace him.  I see this among my contemporaries.  Standing in line to pull levers (all of which result in the same outcome) on Election Day stirs a self-delusional impression of participatory governance and an entirely false sense of civic pride. I personally opted out of this burlesque show a number of years ago. Mencken nailed it in 1956:

"The main thing that every political campaign in the United States demonstrates is that the politicians of all parties, despite their superficial enmities, are really members of one great brotherhood. Their principal, and indeed their sole, object is to collar public office, with all the privileges and profits that go therewith. They achieve this collaring by buying votes with other people's money. No professional politician is ever actually in favor of public economy. It is his implacable enemy, and he knows it. All professional politicians are dedicated wholeheartedly to waste and corruption. They are the enemies of every decent man."

 

Few things are as repulsive as ubiquitous and inane platitudes on the virtues of education, so often held up as the cure-all panacea for everything from commercial competitiveness to world peace. Glossed over is the pathetic state of what passes for education in the U.S., including colleges and universities, which have evolved into bastions of waste, collectivist thinking and intolerance. 

Naomi Schaefer Riley was fired by The Chronicle for Higher Education this week for having penned this thoughtful piece which The Chronicle published: The Most Persuasive Case for Eliminating Black Studies? Just Read the Dissertations. Its readership expressed objection to Ms. Riley's reasoned views and The Chronicle folded to demands that she be terminated. Once upon a time editors defended their contributors, not necessarily for their views but their right to be heard. That academic world of open discussion, tolerance and debate no longer exists, having evolved into politically correct and intellectually corrupt "uni-think." Far from being the oasis for open dialogue and free expression of ideas it once was, higher education is today a leading force in censorship. The Weekly Standard's Jonathan Last weighs in.

Brandon Smith's piece, Has America Been Crippled By Intellectual Idiots? should be read.

This New York Times story on Saturday contained a quote from a Columbia University professor that typifies the sheltered and isolated world of campus rats:  

“The university should be a place for reflection for the young to explore areas of the human experience, to be fully aware of history and the arts,” Professor [Andrew] Delbanco said. “We don’t want to have a population that has technical competence but is not able to think critically about the issues that face us as a society.”

"Reflection, exploration, human experience and critical thinking about the issues that face us as a society?"  Really, Andy?  It's time you vomited up the brochure you swallowed and exited your cocoon of loathesome clich'es.  Could it be perhaps that among those critical issues facing society or more pointedly -- recent college grads, is that so many of them cannot find employment for lack of the very "technical competence" you eschew? Has it occurred to you that perhaps a good deal of that critical thinking and exploration might more appropriately come later in their lives, after they've received a return on their invested education capital and a foundation with which to make their financial way in the world?  

The good news is that this dinosaur of an industry as currently constructed is -- thanks to the internet -- headed for an extensive makeover.  Consumers of education products (yes, education is a product) are starting to get it and will be demanding better value for their education dollars -- less willing to pay for ideology indoctrination and frivolous curriculum. It is my hope and belief that my grandchildren will never attend college (at least as currently conceived).  For insight in to where the higher education racket is headed you'll find this Charlie Rose interview of Stanford's Sebastian Thrun quite interesting. His discussion of 'Udacity' begins at 10:08. The entire interview however, is fascinating.

 

It is a sad reality that the world's best broadcast journalism emanates today from foreign sources such as Al Jazerra and Russia Today, who's Capital Account program recently conducted two noteworthy interviews. James Grant and GATA's Bill Murphy. were interviewed by Capital Account's Lauren Lyster. Both interviews are worth viewing if only to see something rare -- an informed and bright broadcast interviewer:  

Jim Grant explains how Central Banks are Waging War on Supply and Demand

Bill Murphy exposes how the Gold Cartel is Bombing the Market for Precious Metals

 

It takes quite a lot for the Pentagon's civilian authority to appear more delusional than the military itself. The Secretary of Defense apparently has a lot of time on his hands, what with the war in Afghanistan going so well and a temporary dearth of flare-ups among rattlesnake pits the U.S. is stirring up.  So, during a slow week of drone activity, killing people, and breaking things the Secretary was dispatched to tell the sheep there's a new bogeyman in town. Seriously, he said this: Panetta: Climate change a national security threat 

Scientist James Lovelock admits he was 'alarmist' about climate change

 

The New York Sun responded to Charles Munger's comment to CNBC that "civilized people don't buy gold," an investment which incidentally, has over the past decade surpassed Berkshire Hathaway's stock performance by 350%.

 

The trend ('tales of the uncivilized') ...

Turkey Exports “Massive Quantities Of Gold” to Iran and Arab Spring Nations

Russia and Mexico Both Buy Nearly $1 Billion Worth of Gold in March

Bloomberg: China’s Gold Imports Jump Sixfold - May Become Biggest User

 

Regarding gold and silver...

John Aziz makes note of the decreasing market share of gold ETF's relative to investor ownership of physical gold since 2009. This is an important component of the physical demand force gradually overtaking the suppression of price on the London and the Comex paper mills: Azizonomics: Gold's Value Today

Mark Hulbert discusses The gold market’s steep wall of worry, precisely the sentiment that foretells upward price direction.

The financial system is again on the cusp (surprise, surprise) following the weekend's European elections. The takeaway is that voters are rejecting austerity (surprise, surprise), and politicians and central banks will provide the liquidity (i.e fresh curency) voters crave. The U.S. administration and the Fed, you can be sure, are taking note, which is not to say printing of massive amounts of fresh U.S. dollars wasn't pre-ordained. Do not be fooled by the price action in gold. I'll let John Embry sum up the war underway in the paper markets and particularly the shares. Their manufactured counter-intuitive price action is designed to shake out all but the strongest hands, which judging from my emails and calls, includes a number of readers here. GATA's Chris Powell likewise, articulates the dynamic manner in which gold has historically been re-priced, a wonderful perspective amid the current market turmoil: Gold has changed overnight, and likely will again

It takes a strong stomach to own the shares but they will reward you over time.  The goldmap index is currently at 15.0 but the GOI, which measures the out-performance of silver and gold stocks to the metals reads 3.1, its lowest ever. Unless prices of the metals are about to collapse, precious metals stocks are the buy of a lifetime.  Although he has morphed into a Federal Reserve cheerleader and defender of crony insider bailouts of which he's been on the receiving end, Warren Buffett once upon a time was merely an extraordinary capital allocator. Buffett, who has been diagnosed with prostate cancer and in recent years has displayed symptoms of ego malignancy, has nevertheless provided some axioms of his success, to wit,

"Be fearful when others are greedy and greedy when others are fearful."

My best,

Jeff

 

 

 

Waiting game - 4/22/12

 

"If you were in the [gold] market and had the cash and the courage to stay in the market from peak to trough, that is from the bottom of [the] 1975 decline, five years later you were up eight-fold...The market doesn’t care if you are frustrated. The market doesn’t care about your time frame." - Rick Rule, 4/18/12 in a KWN interview

 

Dear All,

 

Take a look at these youth unemployment figures in Europe. This is untenable.  Austerity and reality are on a collision course:

 

Spain 50.5%

Greece 50.4%

Portugal 35.4%

Italy 31.9%

Ireland 31.6%

UK 23.5%

France 21.7%

(Source: Thomson Reuters Datastream, Eurostat)

 

It is absolutely essential that you subscribe to Shadowstats to obtain credible, unbiased economic statistics. Its proprietor, economist John Williams was interviewed recently by Kingwold News. The chronic unemployment in the U.S., which Williams places at 22%, tells only part of the story;  Real worker earnings have been collapsing for over a decade and are now nearly 50% below the 1973 level.

 

Jim Clifton, CEO of Gallup states that U.S. unemployment is much closer to Shadowstats' figure than the fictional BLS version:

"Gallup shows real unemployment is close to 20 per cent in America. Not 8.5 but 20 per cent. 30 million people are out of work. 60 per cent of them told Gallup they have no hope of getting a job. That is 18 million."

  

The qualitative aspects of the unemployment story are constantly glossed over by headline-driven statistical releases that keep the emphasis solely on the quantitative dimension. An extension of the Woody Allen joke is this: "Those who can't do, teach -- those who can't teach, teach gym...Those who can't teach gym become nutritionists."  This country has an unprecedented  number of nutritionists and party-planners, yet somehow the waistlines of the hoi polloi have never been more abundant (resulting, one guesses from attending more parties). We may well eventually be reduced to a nation that supports itself by giving massages to one another (which would serve as an appropriate metaphorical footnote to the Federal Reserve having become the largest buyer of U.S. Treasury debt).

 

  

 

Charles Biderman has consistantly ridiculed not only the pseudo economic statistics put forth by government agencies but the antiquated and entirely absurd methodologies used to compile them. Here is Biderman this week in a must-watch video: Ignorance is Bliss Regarding Economic Data.  How many on Wall Street question why the U.S. census bureau uses "surveys" of a portion of U.S. retailers that are sent and returned by snail-mail to compile estimates of advance retail sales, when hard, accurate data comprising almost the entirety of actual U.S. retail sales is available in real-time at virtually any instant?   Does the financial press care?  -- turn on CNBC for your answer.  Is the economics profession bothered by its use of stale, garbage survey data when clean real-time stats are available? -- Not in the least.  

 

 

I have long been an admirer of Warren Buffet. In recent years the folksy thespian has played the political class like a fiddle, exploiting inside knowledge of bank bailouts and federal backstops for his personal gain.  As Gregg Hunter observes, the Oracle of Omaha is playing pied piper for the little guys, all the while raping them in a version of Three Card Monte.  Buffet has created a smokescreen which deflects on something that would do far more to reduce the deficit than raising income tax rates on billionaires -- that is, cracking down on the type of crony capitalism that Buffet has fully mastered.  USAWatchdog: Buffett Rule Hypocrisy

"Why doesn’t Buffett talk about one of the real problems facing America and that is the continuing bailouts for billionaires! These bailouts have greatly contributed to the ballooning $15.6 trillion U.S. deficit...I think Mr. Buffett is directing the debate away from the obscene corporate bailouts that have been going on since the financial crisis of 2008 and on to a contrived issue of class warfare that will do little to address America’s severe financial problems."

  

Avery Goodman has written an excellent and comprehensive piece providing Details of the $291 Trillion In Derivatives To Which American Taxpayers Are Exposed. 

 

There is no economic recovery; moreover it is an entirely false narrative. We are in the midst of the greatest credit collapse in history. By incessantly mis-pricing the cost of capital over so many years the Fed created an untenable credit bubble and mal-investment which cannot be allowed to self-correct without collapsing the system completely.  QE n is the Fed's only game plan. Ignore all the speeches to the contrary. The financial markets will figure this out in due time.

 

In January of 1980 the Dow:gold ratio was 1:1. Both the stock index and an ounce of the metal were trading at around $840. If you had asked 100 investors then which of the two would be the first to reach a price of 10,000, perhaps five would have answered "the Dow."  Investment sentiment is a function of the recent past.  Corporate assets, although at that time remarkably cheap were of no use to investors.  Stock prices then were stubbornly range-bound as evidenced by a Dow which seemed destined to remain perpetually below 1,000.  Gold on the other hand had been the place to be in those recent years, reaching what would become its muti-decade high that very month.  It was the perfect time to trade your gold for common stocks. Yet, investors, never patient and with their vision firmly on the rear-view mirror, have difficulty seeing the road ahead and the value under their noses.   Zerohedge features this forecast by Nomura Securities' Bob Janjuah of the Dow:gold ratio returning once again to 1:1.  I also neglected to bring a February Zerohedge post to your attention which featured this refreshing and accurate observation by Janjuah: "Markets Are So Rigged By Policy Makers That I Have No Meaningful Insights To Offer"

 

Last month I highlighted Wired Magazine's expose on Stellar Wind, the National Security Agency's massive intelligence gathering operation in Utah. Democracy Now has conducted this 3 part broadcast interview on out-of-control state surveillance which features the first television interview of NSA whistleblower William Binney. It is nothing short of chilling.

Amy Goodman: "Is [NSA Director] General [Keith] Alexander more powerful than President Obama?"

WB: "In the sense of making and presenting information for decision making, yes."

 

Polar bears are fine and penguins are thriving. What thrives mostly are extreme climate predictions that never come to pass: NYTimes 2/24/1895: PROSPECTS OF ANOTHER GLACIAL PERIOD; World May Be Frozen Up Again

Forty nine former NASA scientists have signed a letter blasting the agency for its "unbridled advocacy" of CO2 being the major cause of climate change. The letter is quite something and of course, not being reported in the liberal biased press. You can read the letter here. 

“The unbridled advocacy of CO2 being the major cause of climate change is unbecoming of NASA’s history of making an objective assessment of all available scientific data prior to making decisions or public statements...We believe the claims by NASA and GISS, that man-made carbon dioxide is having a catastrophic impact on global climate change are not substantiated.”

 

 

The trend...

The reason I include a section with each post taking note of the progression of events impacting the direction of gold, is to help you keep your eye on the big picture in the midst of market action and the daily blather that passes for insightful commentary. I highlight not only the currents in gold flows, but the fate of the U.S. dollar, which is a function not simply of debasement, but of its reserve-status replacement and increasing competition challenging its position as the premier settlement mechanism in international trade, to wit:

Reuters: China gives currency more freedom with new reform

BBC: Italy's gold exports to Switzerland soar

Reuters: More U.S. cities set to enter default danger zone

Chinese Gold Imports From Hong Kong Rise Nearly 13 Fold – PBOC Likely Buying Dip Again

 

Gold and silver...

John Hathaway does a fine job of describing the state of the gold market in this piece released tonight by Kingworld News.

Bear markets don't end until the last bull throws in the towel....I love to see articles like this: SmartMoney: Gold Bugs May Get Squashed  To his credit, Hoenig was a fairly early bull. I remember listening to his reasoning though at the time and feeling he never properly understood why he was here in the first place, something borne out by his exit now. I suppose it's perfectly fine to be clueless and lucky for a while but Hoeing became a frustrated long who never grasped that gold, silver, and the stocks are highly manipulated. 

It's a waiting game. The suppression of the gold price has never been more blatant or more important to the central bank. I reiterate again what I have stressed many times over the years --If you don't accept that the prices of gold and silver are highly manipulated, I don't know why you would want to own them.

For those that understand this, the rewards have been wonderful throughout this bull market.  Your rewards and pain however come in lumps.

All the best,

Jeff

Are we having fun yet? (Redux) - 4/5/12

 

“I think Goldman Sachs is a racketeering entity that does whatever they can to make a dime without conscience, thought, foresight or care about ramifications...I think they are cold-blooded and could care less about the law. That’s my opinion. I think I can back it up.” -- Former hedge fund head Marc Cohodes, testifying in a deposition brought by Overstock.com against Goldman Sachs.

 

Dear All,

With an interest in indoctrinating young minds into the cult of central economic planning as practiced at the Kremlin of central banking -- the U.S. Federal Reserve, Ben Bernanke gave a lecture to students at George Washington University recently on the wonders of helpful central banks such as his.  Mr. Bernanke took that occasion to denigrate gold.  The talk was not intended to inform his students about the monetary metal's historical role; Mr. Bernanke never explained to the students why gold has endured as a currency for at least 5000 years where no paper version has survived more than a few hundred, nor did he mention that it has managed to do so without having ever been  subjected to the oversight of a central bank.   GATA's Chris Powell put out this dispatch  following the professor's lecture:

"Since the gold standard determines the money supply," Bernanke said, "there's not much scope for the central bank to use monetary policy to stabilize the economy." You bet, there isn't! That's the whole #@*^!#$ point! Half the world is screaming at the Fed, "Spare us your 'stabilization'!" And the Fed is "stabilizing" only what it messed up in the first place. Then, with supreme cheek, Bernanke blames the gold standard for spreading to the rest of the world the U.S. central bank's "policy errors," as if spreading policy errors around quite without the gold standard hasn't lately been the Fed's main business. Well, that's American college education for you. And people come here from all around the world to get it."

 

A Wall Street Journal editorial on Friday referenced this scathing report commissioned by the UCLA Regents and published by the National Association of Scholars: A CRISIS OF COMPETENCE, The Corrupting Effect of Political Activism in the University of California. The report condemns the indoctrination of students to leftist thinking as well as the bastion of intolerance that the university has become. Noting that their findings are likely not UCLA specific, the association found that the infiltration of academic curriculum by political agenda comes at the cost of broad learning, civic sensibility and intellectual curiosity. 

"One study after another has found that they [students] write badly, can’t reason, can’t read any reasonably complex material, have alarming gaps in their knowledge of the history and institutions of the society in which they live, and are in general poorly prepared for the post-college workplace"

  

Guess who is not?  EconomicMusings: Who is REALLY paying in the $25bil TBTF mortgage settlement  This deal, which the Obama administration promoted as a punishment for the abusive practices of the large mortgage lenders, is a sham. It's actually another banking industry giveaway under which the federal government is confiscating the capital of innocent bondholders in order to pay the banks' costs.

"As former SIGTARP Neil Barofsky tells Bloomberg, 'this would be comical if it wasn't so tragic'"

  

The denigration of truth generally comes subtly and incrementally until one day one wakes up and everything is a lie. And so it is that we have come to live in a country where the inflation rate is three and a half times the official government one.  Shadowstats places the February consumer inflation rate at 10.5% vs. the official 2.9% CPI. The 10.5% figure is nothing more than the calculation using the  Labor Departments very own CPI methodology from 1980, the year the Bureau of Labor Statistics began the process of incrementally corrupting the index through substitutions, hedonics, 'seasonal adjustments' and other forms of alchemy that weed out those unpleasant index components that contribute to politically unacceptable increases.

  

 

 

The United States, a country which manufactures almost nothing and whose consumers demand quality products at low prices, produces an inordinate number of busybodies. Apple has been scrutinized for worker conditions in its vendor factories in China. The fact that those workers do not welcome this "help" and are actually hurt by the imposition of a western-centric mindset and labor standards upon a rapidly developing manufacturing nation is of little concern to the interlopers. The arrogance is more easily recognizable when it pertains to foreign military incursions but less so to economic ones: Reuters: Apple supplier Foxconn cuts working hours, workers ask why

""We are here to work and not to play, so our income is very important...We are worried we will have less money to spend. Of course, if we work less overtime, it would mean less money...This is a good company to work for because the working conditions are better than a lot of other small factories."

  

The reputation of a website that is the largest U.S. under-aged prostitution sex trafficker was tarnished by the revelation that Goldman Sachs holds a 16% ownership stake in it. It may be that these [Wall] street thugs in suits are following the model of other organized crime syndicates which muscle in and infiltrate more legitimate businesses. NYTimes: Anger at Goldman Still Simmers

 

Aha! So it all comes together: Bloomberg: Perpetrator of Afghan massacre had Troubled Broker Career Before Army

 

Demand for Sturm Ruger guns is so strong that the company announced it is temporarily turning down new orders: Sturm, Ruger & Co. received orders for more than a million firearms in first quarter 

  

In the two jobs this gentleman held, it was the productive one that caused him trouble: FoxDC: TSA Manager Arrested for Running Prostitution Ring

 

 

The trend...

Bloomberg: Bank of Korea pares US dollar holdings

Reuters: HKMEx to launch yuan-settled gold, copper futures by July

Brics’ move to unseat US dollar as trade currency

 

Regarding gold and silver...

I often make reference to the inane gold commentary from Wall Street lightweights regularly paraded on financial television; Accordingly, I draw your attention to this dimly lit bulb.  The enlightenment begins at around 2:00.

In a report to the state legislature, South Carolina's Treasurer's Office determined that investing the state's funds in gold, silver and derivatives would be inappropriate. However, a notable inclusion in the report is this:

"Similar to other commodities, the value of gold and silver is determined by supply and demand, as well as speculation. The Federal Reserve, London Bullion Market Association, JP Morgan Chase, and HSCB Holdings have practiced fractional-reserve banking and engaged in naked short selling causing artificial price suppression."

The S.C. State Treasurer's Office has thus been able to conclude something the CFTC has been officially investigating for at least 4 years. But then, the CFTC has yet to determine that MF Global customer money was stolen by the Commission head's former mentor and partner at Goldman Sachs.

 

The U.S. Federal Reserve is the dam line in a daily war to prevent reality from colliding with confidence.  The balance sheets of the largest banks are a horror of toxic derivative liabilities marked at fictitious values, the flat-lined economy and employment is not responding to gargantuan stimulus. In spite of the massive run-up in the monetary base, money velocity is abysmal.  The Fed will see no solution other than to keep the stimulus coming -- if not accelerate, and hope for the best. All the while it is the largest buyer of U.S. Treasury debt (price manipulation), propping up the stock market through futures buying (price manipulation), intervening in the currency and gold markets (price manipulation) and supported in its activities by phony government economic reports (lying).  Lee Adler did a nice job of describing this week's gold bashing operation upon the release of the Fed minutes, although this is only partially what's behind it:

"But here’s the thing. The minutes are fake. They are fabricated, false, phony, ginned up and sterilized garbage, designed for public consumption. To put it bluntly, they’re propaganda. They are what the Fed and the Wall Street casino owners want you to think. They are a blatant attempt to manipulate the behavior of market participants through the use of clever turns of phrase. The Fed wants the market to go higher, but it doesn’t want commodities to go with it, so its story line is that the economy is healthy enough to continue growing without more QE."

No markets are more manipulated than the precious metals markets, which given the state of official intervention in both the stock and bond markets, is saying quite a lot. Gold is the messenger of financial stress and management of the gold price is what central banks do, particularly when stress is great.  When a financial system is actually on the cusp of collapse, the banks become desperate in their efforts. The "tell" in these manipulative operations is their character -- their frequency, the duration of their short term effect and the size of the footprints.  Now, on an almost daily basis we are seeing clumsy interventions of little lasting effect but embarrassing pretense,  One day a Fed governor is sent out to push perceptions this way, the next day another governor yaps to move it that way. FOMC minutes are released to alter perceptions away from stimulus, soon thereafter a governor makes comments with implications to the contrary.

After a week of a similar hammering of the gold price two years ago I posted commentary, the title of which I am reprising. It was a brutal week in February 2010 when that operation took place with gold closing the week at $1,058.00 and silver at $15.17.  Nothing since has changed since except that the manipulation is continuing at substantially higher prices.  I've been observing these shenanigans since 1998. What is most encouraging is the desperation of the central banks and the increasingly transparent character of their suppressive operations, Never in the course of this bull market have I been more confident and excited about the prospects for gold, but more particularly the silver and gold shares, which are being given away at absurd valuations.

Let them play their games. Trying to prevent the price of gold from moving higher is akin to attempting to hold back the oceans. 

Relax and enjoy what the volatility portends.

Jeff

 

 

UPDATE: "The most favorable era for gold prices in our lifetime" - 3/26/12

 

Dear All,

If you're at all prone to being confused by the price action of the precious metals and the inane commentary about gold and silver served up daily in the financial media, I suggest you seek out the opinions of men and women who actually know something about that which they pontificate.

BMO Capital Markets' Don Coxe is one such person and in his most recent report he describes the current opportunity in gold and gold equities as follows:

"In our view, we have entered the most favorable era for gold prices in our lifetime—and the share prices of the great mining companies will eventually outperform bullion prices"

Take the time to read this thoughtful piece: CoxeAdvisors: All Clear?

Jeff

Stellar Wind - 3/18/12

 

  

"I have to go back...I...I...uh...I...I'm not certain whether that was addressed or not," - FBI Director Robert Muller at a congressional hearing 3/7/12, responding to the question of whether the Administration has the authority to assassinate Americans on U.S. soil.

  

 

Dear All,

 

Gregg Smith's New York Times piece reciting his reasoning for resigning from Goldman Sachs was unsurprising insofar as his description of the culture and activities of his former employer. Two things stand out however:

 

The first is the disparaging use of the term"Muppet's" which Smith reveals was used derogatorily within Goldman to refer to clients who were seen as easy prey. As regular readers are aware, this blog has been at the forefront of calling attention to puppetploitation and the under-aged muppet slave trade, a dirty secret of the politically correct left (which includes inevitably -- certain clergymen who have an uncanny habit of involvement in such cases, as seen in this goldmap expose). While Mr. Smith has not accused any Goldman employee of inappropriate hand-puppetry, such activity is often associated initially with verbal degradation of the victim(s).

 

The other rather grotesque element that emerged was JP Morgan Chase CEO James Dimon's ostensible (and clearly intended for public consumption) "internal memo" released the day following the Times publication. “I want to be clear that I don't want anyone here to seek advantage from a competitor's alleged issues or hearsay -- ever. It's not the way we do business," Dimon wrote, transparently seeking to do just that through sanctimonious grandstanding crafted so as to appear to take the high road. The concurrent element underlying Dimon's memo is that but for the grace of regulatory ineptitude is he not running his criminal enterprise from the inside of a prison cell: RollingStone: J.P. Morgan Chase's Ugly Family Secrets Revealed

 

The putrid culture that Gregg Smith describes is not company specific. Certainly there are good people within in its ranks serving their clients professionally and with integrity, but as a general rule the financial services industry has become a cesspool. In your dealings with Wall Street, you would be well advised to ask yourself who the muppet is. If you don't know, its probably you.

 

The more interesting whistle-blower story this week came not from a bank but from the Congressional Budget Office, which is so often cited for its non-partisan objectivity: Terminated CBO Whistleblower Shares Her Full Story With Zero Hedge, Exposes Deep Conflicts At "Impartial" Budget Office  

"I was repeatedly pressured by the CBO Assistant Director, Deborah Lucas… to not write nor discuss issues in the banking sector and mortgage markets that might suggest weakness in these sectors and their consequences on the economy and households."

  

This poor fraudster simply didn't travel in the proper New York banking circles; otherwise he would be as free as Jon Corzine.

 

 

Well over 1 million Greeks are now unemployed, officially a 21% unemployment rate -- 40% higher than a year ago.  More than half of Greece's youth are out of work and 30% of Greek businesses have closed their doors. Its socialistic model has now fully imploded and yet much of the financial world seems to accept the possibility that the non-ending "rescue" packages are viable. Never underestimate the propensity of politicians to willfully squander the money of the constituents they claim to serve. Greece is hopeless and the bailouts are nothing more than a desperate attempt to rescue banks and the monetary union itself. In the interim we have default by a thousand cuts in order to obfuscate the untenable losses in the credit default swaps held by the largest U.S. banks. The audacity with which the ISDA is perverting contract sanctity by re-defining the term default is having an effect on the debt market. This will reduce debt market liquidity, reduce private market participation in sovereigns and drive up borrowing costs: IFR: Greek CDS uncertainty fuels dumping

 

 

FBI director Muller's uncertainty quoted at the top of this post as to whether the FBI has the authority to kill within its borders citizens it deems a "threat," followed a speech two days earlier at Northwestern University in which Attorney General Eric Holder pledged to use care when going about the business of assassinating Americans, something I think we all appreciate. Mr. Holder also made the incredible assertion that the mere consideration by a U.S. president of whether an assassination is appropriate constitutes due process. Shoot and ask questions later, in other words, is the new due process. Actually, I'm unclear about the asking question component.

 

In its April issue Wired Magazine has done a cover story on the NSA's massive new spy center under construction in Bluffdale, Utah. As Wired bluntly puts it: "There is no doubt that it has transformed itself into the largest, most covert, and potentially most intrusive intelligence agency ever created."  Codenamed "Stellar Wind," the top-secret project has little interest in conforming to the legal safeguards most Americans assume prevent the unwarranted data gathering of law-abiding citizens' personal activities. The depth of intrusiveness is mind-boggling. Wired: Inside the Matrix

"When they started violating the Constitution, I couldn’t stay.” Binney says Stellar Wind was far larger than has been publicly disclosed and included not just eavesdropping on domestic phone calls but the inspection of domestic email. At the outset the program recorded 320 million calls a day...The former NSA official held his thumb and forefinger close together: 'We are that far from a turnkey totalitarian state.'"

 

A pithy photograph in which the rise of Asia and decline of the west are encapsulated in a single image is presented here.

 

 

Why are we not surprised?...MailOnline: How to get ANYTHING through TSA body scanners. Blogger exposes loophole in $1billion fleet  While the former Wendy's tray collectors now employed by the TSA are watching you disrobe and confiscating toothpaste, aircraft remain sitting ducks. These Keystone Cops are effective at nothing other than inconveniencing and harassing travelers. Watch this video:

"It can't possibly be that easy to beat the TSA's billion dollar fleet of nude body-scanners, right? The TSA can't be that stupid, can they? Unfortunately, the can and they are."

 

Republicrats love passing new laws and regulations to 'protect' us. If you find the following disturbing you have only yourself to blame. This is what habitually voting for the "lesser of evils" leads to. Unless you've been consistently supporting libertarian candidates both locally and nationally, you are contributing to the problem: Illegal Everything

 

 

Foreign aid is the process by which the working people in rich countries transfer their money to the rich people in poor ones: NYTimes: Intractable Afghan Graft Hampering U.S. Strategy

  

  

The trend...

 

Bloomberg: Currency wars - Brazil says 'it's on'

Bloomberg: China Expands Yuan Export Settlement to All Qualified Companies

ChinaDaily: China reduces holdings of US govt bonds

Reuters: Japan to purchase 65 billion yuan in Chinese government debt to diversify away from dollar

WSJ: Beijing Diversifies Away From U.S. Dollar

 

  

Gold and silver...

 

Gold weakness in the face of what has occurred in Greece is confusing and entirely counter-intuitive. As GATA's Bill Murphy says so often -- in the gold world , black is white and white is black. Bill understands that central bank manipulation of the gold price -- the financial world's stress barometer, is critical to influencing perception of the viability of the banking system. These short term interventions always prove meaningless and the central banks will continue to lose their ability to control the gold price. The shenanigans have been going on since gold $260. Wait them out while buying the dips.

 

In the past two and one half years the world's central banks have increased their balance sheets by 2/3 of the dollar value of all the gold on earth. That's just the increase.  The re-pricing of gold (and silver) that is coming will rattle your socks.

 

 

Jeff

 

 

UPDATE: Volatility, your friend - 3/6/12

 

Dear All,

Jeff Clark of Casey Research has put out an excellent piece assessing larger daily gold and silver price movements and what it portends. While it seems difficult to imagine, daily moves of several hundred dollars per ounce in the price of gold are going to become the norm, as will $10. moves in the price of silver. Try to enjoy the ride:             

The Face of Volatility

 

My best,

Jeff

Siduko, Anyone? - 2/29/12

 

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"We already have QE3 … Get out the Federal Reserve’s balance sheet. You’ll see that they’ve been pumping up – you can see unadjusted M2 is going through the roof. Look at their balance sheet. … All sorts of assets are suddenly appearing on their balance sheet. Where did they come from? They didn’t come from the Tooth Fairy; they came because they’re in there buying in the market as fast as they can. There IS QE3 already. They don’t call it that but it’s there." -- Jim Rogers, 2/23/12

 

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Dear All,

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As the Bundestag debated the propriety of imposing the funding of the Greek bailout du jour (130 billion Euros) upon the German people, Finance Minister Wolfgang Schauble was photographed playing a covert game of Sudoku (metaphors resisted):

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PHOTO: Bild Magazine

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Those determining Greece's fate are acting solely on behalf of banks that are up to their eyeballs in that government's debt. Under last week's announcement of yet another "rescue" deal, the country, which cannot service its existing debt is being forced to borrow an additional $130 billion Euro that will never be repaid. Yields on 1-year Greek debt are roughly 750% (not a misprint). The Greek economy is in accelerating decline with half of young Greek youths out of work. No sane person would throw good money after bad under such circumstances yet the political elitists are performing their role exactly as expected, seeing to it that the bank losses are socialized and continuing to move the ultimate recognition of the disaster a few weeks or months down the road until the next kick.

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The "firewall" that the European Central Bank is talking about building to insulate Europe from the Greek fallout is code for massive currency printing. There exists no capital with which to build it.

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Let us not forget that Goldman Sachs was at the center of the shenanigans when the Euro was formed, propping up Greece's balance sheet with its derivative product line in order to "assist" the country in its qualification for entry into the monetary union. The formation of the Euro in the late 90's was a fee-generation bonanza for Goldman and others; with governments dressing-up their balance sheets for entry into the Union, the bankers were kids in a candy store. Buying off Greek government officials was a financial lap-dance; the politicians came like files to manure. The current president of the European Central Bank is a former vice-chairman and managing director of Goldman Sachs International. Nothing changes.

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I haven't seen one major publication pick up on what the Financial Times has reported: FT: US taxpayers to subsidize 40bn housing settlement

"However, a clause in the provisional agreement – which has not been made public – allows the banks to count future loan modifications made under a 2009 foreclosure-prevention initiative towards their restructuring obligations for the new settlement, according to people familiar with the matter."

 

The only thing more criminal than the ineptitude of the financial press in reporting on the MF Global collapse were the activities of the firm's former CEO, Jon Corzine. If the press deployed 2% of the energy it devoted to the death of singer/diva-person Whitney Houston (which came as quite a surprise to me -- I had thought she was already dead) there might be a chance that this key Obama fundraiser would be prosecuted. Janet Tavakoli sees it similarly: MF Global: Crime, Comedy and the Cover-Up

"MF Global CEO Jon Corzine, a former head of Goldman Sachs, signed off on statements that said his internal controls were adequate. After Enron, the Sarbanes Oxley Act was meant to assure Americans that officers that signed such statements would be held accountable for their accuracy...Federal law enforcement is trying to get away with saying no crime has been committed, because there was no direct criminal intent. Proving intent is very difficult. Here's something that isn't at all difficult to prove. Jon Corzine should have a big problem under Sarbanes Oxley."

 .

Too bad -- he could have been reading this blog the past few years: Obama: 'A lot of us didn't understand how bad it was going to get.'

.

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More college bubble fallout -- CNBC: Student Loan Crisis Busts Retirement Savings

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The lunch police...The nanny state is in full force: State agent inspects preschooler's homemade lunch sack -- Child forced to eat "healthy" cafeteria food (chicken nuggets) instead

"The girl’s turkey and cheese sandwich, banana, potato chips, and apple juice did not meet U.S. Department of Agriculture guidelines, according to the interpretation of the agent who was inspecting all lunch boxes in her More at Four classroom that day"

 

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Happy belated Presidents Day!...Here's a 2010 clip of Ralph Nader interviewing Judge Andrew Napolitano about his book "Lies the Government Told You" in which Napolitano addresses the real Abraham Lincoln:

"He [Lincoln] was the most tyrannical, most disingenuous, least faithful to the constitution president we've had in American history."

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Actually, I think Napolitano may understate the case. The effect of recycled fokelore through government school curriculum (with plenty of spillover to private ones as well) is considerable. Lincoln was a callous bastard who is credited with ending slavery, something he cared little about. But he has a nice statue so we must perpetuate the myth.

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Please take the time to read this superb piece by QB Management's Lee Quaintance and Paul Brodsky, which includes both Mayer Amschel Rothschild's famous1838 comment on the power of central bankers and those made by Nathan Rothschild (who controlled the Bank of England) before the House of Commons Secret Committee in 1819: An Adult Approach - 1 (Investing in a Vulgar Age)

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The trend...

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Yahoo: Vietnam battles 'gold fever' as price soars

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The Pension Benefit Guarantee Corporation is a disaster (i.e. mega-bailout) in the making: Politico: Feds fret over underfunded corporate pensions

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Regarding gold and silver...

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Separating disinformation and emotion from fact and intellect is among the most challenging components of investment analysis. The constant barrage of headlines, information-age media opinion, talking heads, false government statistics and real-time price obsession compounds the effort like never before. Few can do it. One of the best is Eric De Groot, whose erudite commentary is as good as it gets. He recently offered the following: Buy Gold Stock Weakness, Says The Market and Are the Gold Shares Following Gold?

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Warren Buffet made some disparaging remarks about gold in Berkshire Hathaway's annual shareholder letter. Actually he's been making such comments for at least 10 years. An investor who followed Buffet's sentiment and bought a share of Berkshire Hathaway's stock a decade ago would today be able to buy 4 of those same shares had she invested that amount in physical gold instead. Had she invested in the goldmap Index of precious metals companies she could now buy 10.4 BRK shares. This trend is going to accelerate.

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As the next phase of the precious metals bull market unfolds, economists and Wall Street analysts are today nearly as clueless about precious metals as they were a decade ago, before the initial phase commenced. They are curious about gold and at the same time dismissive of it, still unable to grasp the seismic shift that is decimating stock portfolios in real (gold) terms. All day long on the business channels which pass along headlines of phony government reports, the chatter is about Apple's stock price or the direction of the Dow for the next 15 minutes. Then there is the nail-biting prattle anticipating QE3 (or not?) which unbeknown to these lollipops has already occurred under their noses (see Jim Rogers' quote at top). In fact the entire facade of the Fed's quantitative easing programs being done in phases is a smokescreen for continuous stealth swaps and other liquidity drops, not to mention its zero-bound interest rate policy. As the infrastructure of the financial system is imploding the stock jockeys are old generals continuing to battle the only market they've ever known. As the Dow is again touching 13,000, few seem to notice that since the Dow was last at that level the price of gold has nearly doubled.

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The most dynamic financial asset over the coming years will continue to be gold, potentially outdone only by silver. Expect money to continue to flow out of debasing paper into just about anything else -- stocks, real estate, artwork. The Fed needs to force money velocity higher and it will succeed, pushing the dollar prices of all these things up. The rate of acceleration in the dollar price of gold and silver however will continue to trump all of the foregoing. It has been this way throughout history during periods of acute currency debasement and geopolitical upheaval and absolutely nothing is different this time except that the debasement is today international. Gold, the most liquid repository of paper currency flight is the only money without a flag, government managers and debasement risk.

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Today, the last day of the month saw another (yawn) coordinated central bank takedown of paper gold and silver. In congressional testimony the Fed chairman took the opportunity to talk down the need for QE3, notwithstanding it being a fait accompli. Nevertheless, the rise in both metals thus-far this year (11% for gold; 23% for silver) is a small appetizer in the next course in this bull market. Gold and silver equities, particularly smaller and mid-cap companies with proven ounces will explode in price.

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My best,

.

Jeff

Firing the Unemployed - 2/12/12

 

"If you spend a little time with these numbers you will know that they are being made up."-- Former Reagan budget director David Stockman, 2/5/12, commenting on the Bureau of Labor Statistics' employment report.

 

Dear All,

On Thursday evening, February 2nd, as the pencil-pushers at the Bureau of Labor Statistics put the finishing touches on the theoretically modeled fictional labor report they would release the following morning, a mass of unemployed Americans were theoretically summoned to a hastily called meeting at the U.S. Department of Labor's headquarters on Washington's Constitution Avenue. Funneling into a basement level meeting room they were largely silent as they sought seats. The vast majority was forced to stand; there were 1.2 million of them. A representative from the BLS took a microphone and spoke. 

"Good evening. Thank you for coming on such short notice. I'll get right to the point. We've got a Labor Report due out tomorrow and we've had to make some tough decisions.  I know how difficult the past number of months have been and that you've been diligently looking for work for quite a while now. But this isn't working out and we need to make a change in the headcount. So we're letting you go. You're no longer unemployed."

As discussed here often (most recently Discarded Denominators -- 12/4/11) the U.S. Department of Labor drastically overstates the percentage of the country's employed workers by simply reducing the stated size of the U.S. labor force. True to form, it produced a report on February 3rd that "beat" unemployment rate expectations by notably (which is not to ignore the other BLS fantasy modeling techniques) simply removing 1.2 million people from the labor force in one month.  By so doing the government was able to cosmetically shrink the visible rate of unemployment in January, although the labor force participation rate (the ratio between the labor force and the population) dropped in January to a new 30 year low of 63.7%. Zerohedge neatly sums it up: Explaining Yesterday's Seasonally Adjusted Nonfarm Payroll "Beat"

"What is very notable is that in January, absent BLS smoothing calculation, which are nowhere in the labor force, but solely in the mind of a few BLS employees, the real economy lost 2,689,000 jobs, while net of the adjustment, it actually gained 243,000 jobs: a delta of 2,932,000 jobs based solely on statistical assumptions in an excel spreadsheet!"

Shadowstats' John Williams in fact calculates that the rate of unemployment actually moved higher in January to 22.5% from 22.4% in December.

In reviewing the most recent release from the Ministry of Disinformation, the Bureau of Labor Statistics, Charles Biderman notes that last Friday's happy  unemployment report also flies in the face of real-time daily income tax collection receipts, something almost nobody questions: 

"Remember, most financial journalists and even stock market strategists do nothing more than rewrite government press releases. So do not expect very few others to question the good news"

As Biderman points out, to the extent that the theoretically modeled BLS reports even use hard data, it is many months stale. But then, why use hard real-time hard data when you can concoct modeling propaganda in a laboratory that better suits your political agenda, particularly when hardly anyone questions it?

And then, in the face of the uplifting unemployment report there is this: Challenger: Planned layoffs surge in January 

Contrast BLS stats with others that are not seasonally adjusted,' subject to substitutions or 'birth-death" modeling, to wit:

 

Gee, I dunno....perhaps it's because people don't have jobs? OfTwoMinds: Why Is Gasoline Consumption Tanking?

"Retail gasoline deliveries, already well below 1980 levels, have absolutely fallen off a cliff...Even if you dismiss the recent plunge as an outlier, the declines in retail gasoline deliveries are mind-boggling."

 

Establishing yet again that crime pays, The 5 largest banks have agreed to partly fund a $26 billion settlement that will result in payments to a select group of Americans, some of whom were actual bona fide victims of mortgage fraud.  It is an Obama administration led wrist-slap upon the banking industry from which it receives oodles of campaign cash.  The settlement is another thinly disguised bank bailout and immunity from prosecution deal for bank executives and servicers, dressed up as punitive enforcement using government/taxpayer largess. Bank fraud expert William Black was asked about the pending settlement in an interview Tuesday: "The bad news is that the Obama administration has proven even more disgraceful failures in holding elite criminals accountable than did the Bush administration. "The Obama administration has convicted a few bankers from non-elite banks and it may eventually convict a token elite banker, but it will continue to fail systemically to hold elite bankers accountable for their frauds."

Here is the president in his State of the Union address:

"Let's never forget: Millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same. It's time to apply the same rules from top to bottom. No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody.

We've all paid the price for lenders who sold mortgages to people who couldn't afford them, and buyers who knew they couldn't afford them. That's why we need smart regulations to prevent irresponsible behavior...And I will not go back to the days when Wall Street was allowed to play by its own set of rules."

Nice speech.  Sure, pile on more regulations for ineffective agencies such as the CFTC and SEC to pretend to enforce.  Prosecute criminals? Not so much:  Washington'sBlog: Obama Prosecuting Fewer Financial Crimes Than Under Reagan or Either Bush

  

 

If you've never seen a bank run, here's what one looks like (Source: Credit Suisse):

 

As discussed here previously, narco-finance is one of the structural pillars of the banking system and perhaps its most important private source of liquidity. Who is kidding whom?  The investigation will go nowhere: Former HSBC employee claims evidence of an international $ multi-billion money laundering scheme 

ReutersExclusive - Senate investigating HSBC for money laundering

 

I would add an additional point; in regulated insurance it is unacceptable to insure a party that lacks an insurable interest in the subject asset: OfTwoMinds: Counterfeit Value Derivatives: Follow the Bouncing Ball

 

In a letter to the Wall Street Journal sixteen highly distinguished scientists stated that CO2 (even at 10x the current amount) is beneficial, not harmful, global warming alarmism is motivated by money and power, and that governments fund academics who promote alarmism because it justifies more political control and higher taxes. They point as well to academic intimidation of those who dissent from the party line.

For the melting busybodies... -- TheGuardian: The Himalayas and nearby peaks have lost no ice in past 10 years, study shows

"The discovery has stunned scientists, who had believed that around 50bn tonnes of meltwater were being shed each year and not being replaced by new snowfall."

And in a new book, "Die kalte Sonne" ["The Cold Sun'"] that comes as a huge blow to Europe's climate change movement, one of the fathers of Germany’s modern green movement has changed his view and is now calling global warming a myth and the product of UN's IPCC twisted science to further its political agenda: 

"Vahrenholt’s skepticism started when he was asked to review an IPCC report on renewable energy. He found hundreds of errors. When he pointed them out, IPCC officials simply brushed them aside. Stunned, he asked himself, “Is this the way they approached the climate assessment reports?”

  

The bubble in graduate degrees is an extension of the college bubble: The Law School Bubble           TheIveyFiles: "We should be Ashamed of Ourselves"

"At 50 law schools, 20% of the students are either unemployed, flunked out, or are unknown, yet the ABA and LSAC disavow the use of data to rank law schools.”

  

The trend...

RussiaToday: Chinese 'gold rush': Country diversifying assets

  

On gold and silver...

As the paper prices of both precious metals bide their time the financial system deteriorates daily.  The inevitability of drastic gold and silver re-pricing is a lock -- the fate of the dollar and other paper currencies assures it.  Well managed gold and silver companies with meaningful reserves are simply a slam-dunk.

Block out the noise. Keep your ear to the tracks, not to the pundits.

Jeff