Gold Daily and Silver Weekly Charts - End of Month, FOMC Tomorrow

Gold and silver were a little weak to flat today for the end of month.

FOMC announcement tomorrow and possibly something from the ECB on Thursday.

Rough seas ahead.

SP 500 and NDX Futures Daily Charts - End of the Month

Say goodby to July.

Stocks sold off slightly in to the close, with tech slightly stronger than the SP today as there was speculation that AAPl would give a dividend and may be included in the Dow Jones Industrial Average.

FOMC decision tomorrow, and perhaps something from the ECB the next day.

Its almost an even bet if Benny will do the twist, or anything else for that matter, tomorrow.

They *might* follow on the ECB if some news comes out. But if they do nothing this week the next meeting is in September, the last time they are likely to act before the elections.

Take Two Interactive had a big miss across the board after the bell.

Electronic Arts did poorly as well, but their stock is not being hammered like Take Two, which also guided lower.

Confessions of an Insider Trading M&A Attorney Sentenced to 12 Years in Prison

Matthew Kluger's rationalization, self-defense, and righteous indignation is interesting.

"We had a gentlemen's agreement. My accomplices cheated me!"

But it does illustrate the familiar axiom: There is no honor among thieves.

And you just have to love the line from Matthew Kluger's full interview, not included in this clip,

"This is not a victimless crime. I'm going to jail!"

This Week's US Economic Calendar

The Fed has a meeting scheduled this week with their decision to be announced on August 1.

There are rumours that the Fed will take some action this week after the ECB and the Bank of England take some action on Wednesday or Thursday first. The Fed may need 'air cover' for a decision that is likely to be viewed as political.

I suspect the Fed may wait for the Non-Farm Payrolls Report unless something happens in Europe. Or if they learn of something that we do not know.

The markets are expecting this. If nothing happens, or even worse, something negative occurs, we may see some volume show up, to the downside.

Gold Daily and Silver Weekly Charts - Silver Would Not Be Denied

They were sitting on gold most of the day, but silver would not be denied, rising higher to take out and hold the 28 handle.

This is the end of the month, but not the quarter, and the markets are hesitant ahead of more from Bernanke and the Non-Farm Payrolls at the end of the week.

I think the wiseguys are the only ones left in the room, and they are waiting for some sugar from the Fed and the other central banks to bid the markets up so they can drain a little more vitality from the real economy.

Keep an eye on the Fed, ECB and the Bank of England this Wednesday and Thursday.

The real economy is flagging badly, suffering under malinvestment, misdemeanors, felonies, and market rigging by the bully boy Banks.

Plenty of crime to go around, but no one can do anything, or even knows anything about it.

The Ballad of Mack the Knife
(Trans. John Willett):

See the shark has teeth like razors
And they thrust out from his face
And Macheath has got a knife too, but
Not in such an obvious place.

See the shark, how red his fins are
As he slashes at his prey,
Mack the Knife wears white kid gloves
Which give very little away.

On a beautiful blue Sunday,
See a body stretched out on the Strand
See a man dodge around the corner,
Mackie's friends will understand.

And Schul Meier who is missing
Like so many other wealthy men:
Mack the knife aquired his savings,
God alone knows how or when.

Jenny Towler turned up lately
With a knife stuck in her breast
While Macheath walked the embankment,
Nonchalantly unimpressed.

Where is Alfred Gleet the cabbie?
Who can get that story clear?
All the world may know the answer,
but Macheath has no fear.

And the ghastly fire in Soho,
Seven children at a go,
In the crowd stands Mack the knife, but
He's not asked and wouldn't know

And the child bride in her nightie,
Whose assailant's still at large,
Violently ravaged in her slumber,
Mackie how much did you charge?

SP 500 and NDX Futures Daily Charts - Not Even Enough Volume for End of Month Rally

The markets are drifting higher based on hopes that the ECB and the FED will inflate their currencies and send hot money directly into paper assets on Wednesday or Thursday.

Sometimes in these lazy midsummer days the Wall Street wiseguys become too lazy to steal.

Non Farm Payrolls at the end of the week. It will be interesting to see how that one comes out.

Market today was pathetic, better to tune in the Olympics.

Taibbi and Spitzer on Sandy Weill, Romney, LIBOR and Geithner

“The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least to neglect, persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.”

Adam Smith

Geithner and his apologists are the credibility trap in action. He epitomizes Obama's failure to reform and address the great financial crimes. While it is is interesting that LIBOR may have been manipulated going back to 1991, what is more alarming is that market manipulation still being committed on a broad scale today. This reminds one of the shocking murder of Kitty Genovese.

Geithner is no innocent anomaly. Obama shows quite a few signs of being a willing servant to the financial interests.

Sandy Weill senses that the tide is turning, and is worried about covering his derrière for the sake of history, and perhaps for the reckoning which may come, rats-and-ships-wise. I have also heard that there is very bad blood between Sandy and Jamie, and this is payback, with more to follow.

It seems almost like a deficiency in the American character that some of these jokers, like Weill, Greenspan, and Cheney, can walk around like big successes, and still be given a public platform and taken seriously when they speak.

If Charles Ponzi were still alive, I would not be surprised if he had his own show on financial television, with an avid following.

I suspect that the LIBOR scandal, as bad as it may be, will look like cheating at cards if the scandal of the metals and financial asset markets is ever fully revealed.

I am beginning to wonder if Mitt Romney has Asperger's Syndrome. Seriously. Besides being a loutish, prep school frat rat.

Thank You For All That You Have Done

This is the 4,000th post for this blog.

Thank you all for your support and your patronage.

It is not possible to sustain such an effort in isolation.

Big Banks Continue To Game the System With Public Money, Aided By the Fed

"The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true.

It really happened. These suspicions are valid.”

Neil Barofsky, TARP Inspector General

The Fed is not the solution; the Fed is a creature of the biggest banks, and very much a part of the problem.

Once again we hear a lone voice of common sense, and reason for reform, in this case Sarah Bloom Raskin, speak out forcefully for reform.

You may recall 'The Warning' which featured Brooksley Born, who sounded the alarm about the growing dangers of the unregulated derivatives market during the Clinton Administration. And who was thwarted and bullied by team Greenspan-Summers-Geithner.

And you might remember how the Wall Street Banks used the NY Fed and the Treasury's Tim Geithner to block the reforms proposed by the FDIC's Sheila Bair.

I do not think that these men who block reform and serious change are evil. Rather, I think they are just dead wood, who know nothing more than the system of privilege that has elevated them, and rewarded them, and which they are loathe to see change.

But the times are getting difficult, and so it is time for a change, which is necessary for there to be a sustainable economic recovery.

And in the election of the President this year the people are being given a choice, as someone so aptly put it, between an ineffective and compromised gamekeeper and one of the worst and greediest of the poachers. Obama was marketed as an independent outsider, but he is not. They are both owned by the system, each in their own way.

And that means change is not going to come from the top. But it will come nonethless.

If this continues the capitalists will eventually destroy themselves, because none of them will want to be the first that calls a stop. And that will be a tragedy.

Baseline Scenario
Fed Governor Speaks Out For Stronger Rules
By Simon Johnson
July 28, 2012

A powerful new voice for financial reform emerged this week – Sarah Bloom Raskin, a governor of the Federal Reserve System. In a speech on Tuesday , she laid out a clear and compelling vision for why the financial system should focus on providing old-fashioned but essential intermediation between savers and borrowers in the nonfinancial sector.

Sadly , she also explained that she is a dissenting voice within the Board of Governors on an essential piece of financial reform, the Volcker Rule. Her colleagues, according to Ms. Raskin, supported a proposed rule that is weaker, i.e., more favorable to the banks; she voted against it in October. At least on this dimension, financial reform is not fully on track.

Two years after the passage of the landmark Dodd-Frank financial reform legislation, you might imagine that the crucial detailed regulations would already be in place.

But, not so, at least with regard to the Volcker Rule, which is intended to limit the ability of big banks to make large “proprietary ” bets. (Proprietary trading is jargon for speculation – betting on asset prices going up and down.)

The basic idea of this is simple and completely compelling. Paul A. Volcker, the former chairman of the Federal Reserve System, has stressed that this measure will help us move away from an arrangement in which the people who run big banks get the upside when they are lucky – and the rest of us are stuck with some enormous, awful bill when things go awry . Senators Jeff Merkley , Democrat of Oregon, and Carl Levin, Democrat of Michigan, fought long and hard to get meaningful provisions into the legislation. But these still need to be turned into regulations that must be followed.

The final Volcker Rule was due out last week but did not appear. The current expectation is that it will appear at some point in August. (The Fed is one of five regulators involved in setting the Volcker Rule;  the others are the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Securities and Exchange Commission.)

As Ms. Raskin explained in her speech, “I view proprietary trading as an activity of low or no real economic value that should not be part of any banking model that has an implicit government backstop.”

Our largest financial institutions are bank holding companies, which include both banks and enormous trading operations. These activities are intermingled deliberately by bank management – and typically with the approval of regulators.

In a recent study released by the Federal Reserve Bank of New York, Dafna Avraham, Patricia Selvaggi and James Vickery found that legal and organizational complexity – for example, measured by total number of corporations within a single global financial institution (think Citigroup or JPMorgan Chase) – has increased greatly in recent years.

These structures are intended to benefit from association with federally guaranteed deposits as well as the broader but more nebulous protection that comes from being perceived – by officials and by markets – as too big to fail. A commercial bank gives trading operations huge financing advantages, in part because they have the implied backing of depositors and taxpayers; this is why so many banks have put their enormous derivatives trading operations in their insured banks.

Goldman Sachs this week announced that it will expand its regulated bank as a way to obtain lower-cost financing. The federal insurance on deposits is a great deal for a high-risk trading operation like Goldman’s, lowering its financing costs by perhaps 200 basis points (two percentage points, an enormous amount in today’s markets).

Without government guarantees, creditors to Goldman would want to be compensated for the risks they are taking. As things now stand, Goldman is receiving a large implicit government – and taxpayer – subsidy . The same is true at all the other large banks...

Read the rest here.

Gold Daily and Silver Weekly Charts - Capping Will Continue Until Confidence Improves

The equity market took off like a scalded cat this afternoon in the US as word went out that Mario Draghi was going to visit Germany and spread the gospel of saving Europe by printing money and rigging the markets.

Gold and silver rallied as one might expect, but they were stepped on repeatedly, keeping it to a modest eight dollar gain for gold and 25 cents for silver.

Let's see how real this latest twist may be. I don't think it is Bundesbank that Mr. Draghi must persuade so much as it is Frau Merkel, because it will be her very difficult task to persuade the German government to go along with whatever the banks may concoct.

A brief video of their planned victory tour across Europe is excerpted below.

Have a pleasant weekend. See you Sunday evening.

Non-Farm US payrolls number next week.

Mario Draghi, Christine Lagarde, und Angel Merkel mit das Europäische Zentralbank Orchester

und spielte die Band auf...



Original 1930 version Hallo Du süsse Frau with Lilian Harvey & Oskar Karlweis

SP 500 and NDX Futures Daily Charts - Mario Daquiri Spikes the PunchBowl, Or at Least Suggests It

The markets were relieved that the first look at Q2 US GDP looked good today (wink wink, nod nod) with such a tame chain deflator number. Especially after all the corporate earnings that betray a growing weakness in the real economy.

But the markets really took off intraday when Mario Draghi, Mr. I will Do Anything pledged to meet with the Bundesbank, presumably to lighten them up on the subject of inflating the currency and rigging the bond markets.

I've got a flask, and I am not afraid to pour it into the punchbowl and liven this snoratorium up. Capice?

Now, we don't know how seriously to take this. Maybe he has looked deeply into the abyss, and gotten a new form of conviction in the matter of a Bernanke like conversion.

But it is also possible that Mr. Draghi might have merely been helping a brother out, in the manner of LIBOR, you know what I mean?

"Yo, Mario. Could you loosen up and say something suggestive of an easing today? I've got these positions on and they're killing me.

Consider it done my good man."

We'll have to wait and see what is real and what is not.

Non-Farm Payrolls next week.

Bill Gates: China Has Created a New Form Of Capitalism

 

This is an old story from 2005. It is getting harder to find on the web, and so I wanted to copy it here for future reference.

I remember vividly when this came out, because only a month or two before Mr. Gates had reportedly condemned the Opensource software movement in the west as the work of 'communists.'

Irony is like candy to the restlessly cynical mind.

Now we must keep in mind that this story was written before the suicides at the factories like Foxconn in China, that exposed the horrific working condition in those cheerless and faceless manufacturing combines where people live and work like indentured servants or serfs. And we do not know what Bill Gates was shown or told during his official visit to China.

I imagine it was also before the Chinese provoked him for the serial violation of his copyrights. Funny how regulation and good government protects property from unbridled, unprincipled greed for the same people who abhor the protections it might also provide for their workers and customers.

And he was certainly not alone in his opinion at that time. Walmart was actually requiring their key suppliers to shift manufacturing to China to break the back of US labor for their stores, and engage a spiral of lower costs for a competitive advantage.

In the technology sector there was a mass migration to the big box factories with their wonderfully 'low medical and legal overheads.'

And I question how really 'new' this 'new capitalism' might be. It sounds quite a bit like the old British East India company to me, without the gin and tonics.

The neo-liberals economists were gung ho for this, and Clinton and his administration was smoothing the way for them, even before the arrival of Bush II on the scene, who delivered the coup de grace. By the way, remember that scandal involving large campaign contributions from official Chinese sources?

As I recall a certain number of venture capital firms made quite a bit of money encouraging that trend. And that has not stopped some of them from running for President. So one might not be hard at all on Bill.

But I did not appreciate his reported remarks about Opensource which I think is a marvelously capitalist free market force for the busting up of inefficient, overpriced, and underachieving software monopolies, which are too often only challenged by other would be monopolies.

This article struck a chord in me at the time, and I wanted to preserve it, and share it with you.

China has created brand-new form of capitalism: Bill Gates

Sat Jan 29, 2005 3:49 AM ET

DAVOS, Switzerland, (AFP) - US software giant Bill Gates (news - web sites) has high praise for China, which he says has created a brand-new form of capitalism that benefits consumers more than anything has in the past.

"It is a brand-new form of capitalism, and as a consumer its the best thing that ever happened," Gates told an informal meeting late Friday at the World Economic Forum (news - web sites) in this ski resort.

He characterised the Chinese model in terms of "willingness to work hard and not having quite the same medical overhead or legal overhead".

Manufacturers have created "scale economies that are just phenomenal", in part owing to companies there and elsewhere on the planet designing good products, Gates said.

Looking ahead, he added: "You know they haven't run out of labor yet, the portion that can come out of the agriculture sector" was still considerable.

"It's not like Korea, Korea got to a point where, boom, the wages went up a lot," he said, adding "that's good, you know, they got rich and now they have to add value at a different level.

"They're closer to the United States in that sense than they are to where China is right now."

Gates continued by heaping praise on the current generation of Chinese leaders.

"They're smart," he said with emphasis.

"They have this mericratic way of picking people for these government posts where you rotate into the university and really think about state allocation of resources and the welfare of the country and then you rotate back into some bureaucratic position."

That rotation continued, Gates explained, and leaders were constantly subjected to various kinds of ratings.

"This generation of leaders is so smart, so capable, from the top down, particularly from the top down," he concluded.

Official Corruption in Russia: The Torture and Death of Sergei Magnitsky

"Justice in these circumstances turns into a process of grinding human flesh, making mincemeat for prisons and camps. It is a process in which people can neither effectively defend themselves, or even realize what is happening to them. One can only think about when it will end."

Sergei Magnitsky

I know this is going to upset some people, including some that I like and respect. But it needs to be said.

There is quite a bit of romantic talk going around these days about what it is like living and doing business in Russia and China.

Although I have not personally been in Russia since the 1990's I do keep in touch with people I have known there. Less so for mainland China I regret.

Even in the 90's, during the breakdown and collapse of the ruble, and the wild west rise of the oligarchs and Mafia, if you were a pampered guest of the power brokers things could look pretty good, at least on the surface.

This is an old, old story. Life is always good at the top, and people see what they wish to see. If you do not believe this, read the accounts of visiting journalists at the Berlin Olympics of 1936.

Oligarchies are by their very nature corrupt. And the brutality and indifference to human rights that marks a government by dictatorship, of the supremacy of state power whether it is of the left or of the right, does not change all that much when it takes on the more finely tailored veneer of oligarchic capitalism. They just become more concerned about image.

Whatever one wishes to call it, crony capitalism, or to a greater degree state fascism, is still a system of the few exploiting the many, and enforcing their will with increasingly brutal repression as needed, just using different language and methods from time to time, and place to place.

People who believe in sustained, benevolent dictatorships are wonderfully self-deluded.  Or just rooting for 'the home team.'

Oh yes, I know, this story of what happened to Sergei Magnitsky was just the act of a few rogue policemen, and government and court officials.  Unfortunate, but nothing to see here, move along.

Fascism is corporatism, state sanctioned crony capitalism if you will, plus murder.

Even early on, as he was being lionized by his fawning corporate supporters in the West, Mussolini was little more than a brutal, narcissistic gangster and violent thug.

I am not saying that from a purely practical standpoint one cannot do business with or invest in any type of government, not at all. And some of the former dictatorships, or more properly captive states whom the West abandoned, of Eastern Europe that are now free are wonderful places to visit and do business. Even during their transition phase, which could be a little dicey, the difference was marked. Although again, it is not the same as home, and one must make allowances.

One can do business almost anywhere. Even a relatively small player such as myself has done it, I have had business dealings in well over fifty countries in my own modest corporate career. And because of the nature of what I did, providing communications to news agencies, multinational corporations, and a variety of official entities, not every place was cordial or safe.

But have no illusions. Not everyplace is the same, and not every corruption rises to the same degree. I liked China, and I love Russia and its wonderfully poetic people. But I do not love their form of government, even now, when things, compared to the Stalin years, are like a summer vacation. 

As for the West, with corruption as bad as it is, if you think this is really bad, then you ain't seen nothing yet. And I hope you don't, but the trend concerns me.  This Hermitage Fund fraud sounds like the bank bailouts.  But that is not the worst.  I have seen what it can be like, especially during a time of intense financial and monetary turmoil.

"On the night of 16 November 2009, Sergei’s condition became critical. Only then did they move him to a prison with an emergency room. However, when he arrived, he wasn’t treated, but was put into an isolation cell and chained to a bed.

Eight riot guards with rubber batons then entered the cell and beat him until he was dead. He was 37 years old."

Bill Browder, Turning the Tables on Russia's Elite: The Story Behind 'The Magnitsky Act'

The Magnitsky Act is currently being considered by the US House of Representatives. Here is a recent story on it by The Washington Post: The Kremlin's Blacklist.

And in addition to passing laws and pointing out the faults in another, and deservedly so, I hope the Justice League of America can take a lesson from it. Because that brutal carelessness towards the weak, and the individual, the progressive reformer, and the unfortunate other is exactly where they are heading in their untempered extremism and unbridled greed.

Violent, careless talk desensitizes a people, and too often presages violent careless actions.

Gold Daily and Silver Weekly Charts - Cap, Cap, Cap

Gold and silver had another rally today on the inflationary assurances from Mario Draghi of the ECB this morning that excited a stock market rally.

Real economy numbers continue to appear weak, based on weak consumer demand.

GDP number for Q2 is out tomorrow. A weak number will provoke more talk of QE.

SP 500 and NDX Futures Daily Charts - Facebook, Starbucks, Amazon

Amazon and Starbucks both guided lower on weak earnings reports.

Facebook beat by a penny.

Mario Draghi cheered the markets this morning by pledging that the ECB would do whatever it takes to support the Euro.

Tomorrow the US reports its advance GDP number for the 2Q. According to Briefing.com the consensus of economists is 1.2%. I would not be suprised to see a sub one percent print, and more talk of QE at the next Fed meeting.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

The PSLV premium seems on the historically cheap side, but the fund is still digesting their latest shelf offering that added units and is still adding silver it appears.

The cash level is high.

Late Night Reading: Jacques Lusseyran - the 'Blind Frenchman' - Poetry In Buchenwald

"It is always the soul that dies first, even if it's departure goes unnoticed. And it always carries the body along with it...Man is nourished by the invisible, man is nourished by that which is beyond the personal. He dies from preferring the opposite."

Jacques Lusseyran, Poetry at Buchenwald


"We can answer these questions from experience as well as on principle. The experiences of camp life show that man does have a choice of action. There were enough examples, often of a heroic nature, which proved that apathy could be overcome, irritability suppressed. Man can preserve a vestige of spiritual freedom, of independence of mind, even in such terrible conditions of psychic and physical stress.

We who lived in concentration camps can remember the men who walked through the huts comforting others, giving away their last piece of bread. They may have been few in number, but they offer sufficient proof that everything can be taken from a man but one thing: the last of the human freedoms — to choose one's attitude in any given set of circumstances, to choose one's own way."

Victor Frankl, Man's Search for Meaning

Jacques Lusseyran was a high school student in Paris at the time the German army occupied France in 1940. Although he had been totally blind since age eight as the result of an accident, Lusseyran, who was then sixteen, decided to organize his friends and other students into an underground group to resist the occupation.

“News was needed, surely, but courage even more so, and clarity. We were resolved to hide nothing. For here was the monster to be fought: defeatism, and with it that other monster, apathy. Everything possible must be done to keep the French from growing accustomed to Nazism, or from seeing it just as an enemy, like enemies of other times, an enemy of the nation, an adversary who was victorious just for the moment. From our past we knew that Nazism (Fascism) threatened the whole of humanity, that it was an absolute evil, and we were going to publish its evilness abroad..."

Within a year the group numbered some 600 members who produced and distributed an illegal underground newspaper despite the risk of imprisonment, torture or death if they were caught. Lusseyran describes the mood of both surrender and joy he experienced in the resistance movement:

“I had not a single friend who had anything left to lose. They had given up literally everything except life. . . On my word of honor, the air was different where my friends were. There you could smell joy. Even when they were sad and talking about their own death, the smell of their talk was good and gave you a lift.”

Lusseyran was eventually betrayed by a pro-Nazi student who infiltrated the resistance group, resulting in the arrest of Lusseyran and other leaders of the group.

Following interrogation, Lusseyran was sent to the Buchenwald concentration camp.

In the camp, disease and malnutrition were rampant, and Lusseyran himself became sick and was very near death. But at that point he became aware that a will to live “had taken possession of me and filled me to overflowing ... Slowly I came back from the dead.”

He recalled that “on May 8, I left the hospital on my two feet. I was nothing but skin and bones, but I had recovered. The fact was I was so happy that now Buchenwald seemed to me a place which if not welcome was at least possible. I was free now to help the others; not always, not much, but in my own way I could help. I could try to show other people how to go about holding on to life. I could turn toward them the flow of light and joy which had grown so abundant in me.”

Lusseyran was asked by his fellow inmates to visit the various blocks of prisoners each day to share whatever factual information was available about the progress of the war and to dispel rumors.

The guards allowed prisoners to hear German news reports; Lusseyran was fluent in German and “read between the lines” of those reports to infer what was actually happening. He also received information from time to time via a clandestine radio which the prisoners had hidden.

Lusseyran writes: “The remarkable thing was that listening to the fears of others had ended by freeing me almost completely from anxiety. I had become cheerful, and was cheerful almost all the time, without willing it, without even thinking about it. That helped me, naturally, but it also helped the others. They had made such a habit of watching the coming of the little blind Frenchman with his happy face, his reassuring words, that on days when there was no news, they had him visit just the same.”

In April 1945, he was liberated by the Allies, surviving German massacres of the concentration camps in which some of his friends were killed. Many of his friends had died during the course of the war. After the war, Lusseyran taught French literature in the United States and wrote books, including And There Was Light and Against the Pollution of the I.

He died together with his third wife Marie in a car accident in France on July 27, 1971.

“We had to live in the present; each moment had to be absorbed for all that was in it. When a ray of sunshine comes, open out, absorb it to the depths of your being. Never think that an hour earlier you were cold and that an hour later you will be cold again. Just enjoy.

The amazing thing is that no anguish held out against this treatment for very long. Take away from suffering its double drumbeat of resonance, memory and fear. Suffering may persist, but already it is relieved by half.”

“Life had taken possession of me. I had never lived so fully before. Life had become a substance within me. It broke into my cage, pushed by a force a thousand times stronger than I. It was certainly not made of flesh and blood, not even of ideas. It came toward me like a shimmering wave, like the caress of light. I could see it beyond my eyes and my forehead and above my head. It touched me and filled me to overflowing. I let myself float upon it… I drew my strength from the spring. I kept on drinking and drinking still more. I was not going to leave that celestial stream… Here was the life which sustained the life in me..."

“The Lord took pity on the poor mortal who was so helpless before him… But there was one thing left which I could do: not refuse God’s help, the breath he was blowing upon me. That was the one battle I had to fight, hard and wonderful all at one: not to let my body be taken by the fear. For fear kills, and joy maintains life..."

“I was nothing but skin and bones, but I had recovered. The fact was I was so happy, that now Buchenwald seemed to me a place which if not welcome, was at least possible. If they didn’t give me any bread to eat, I would feed on hope..."

"I was carried by a hand. I was covered by a wing. One doesn’t call such living emotions by their names. I hardly needed to look out for myself…I was free now to help the others; not always, not much, but in my own way I could help. I could try to show other people how to go about holding on to life. I could turn toward them the flow of light and joy which had grown so abundant in me..."

"From that time on they stopped stealing my bread or my soup. It never happened again. Often my comrades would wake me up in the night and take me to comfort someone…I became “the blind Frenchman.” For many, I was just, “the man who didn’t die.” Hundreds of people confided in me. The men were determined to talk to me. They spoke to me in French, in Russian, in German, in Polish. I did the best I could to understand them all. That is how I lived, how I survived. The rest I cannot describe...”

"That is what you had to do to live in the camp: be engaged, not live for yourself alone. The self-centered life has no place in the world of the deported. You must go beyond it, lay hold on something outside yourself.

Never mind how: by prayer if you know how to pray; through another man's warmth which communicates with yours, or through yours which you pass on to him; or simply by no longer being greedy. Those happy old men were like the hoboes. They asked nothing more for themselves, and that put everything within their reach.

Be engaged, no matter how, but be engaged. It was certainly hard, and most men didn't achieve it.

Of myself I can't say why I was never entirely bereft of joy. But it was a fact and my solid support. Joy I found even in strange byways, in the midst of fear itself. And fear departed from me, as infection leaves an abscess and bursts.

By the end of a year in Buchenwald I was convinced that life was not at all as I had been taught to believe it, neither life nor society."

Gold Daily and Silver Weekly Charts - Up to the Trendline In Options Expiry - Summoning the Bernank

Gold and silver caught a pretty decent pop higher today as the markets turned their eyes from the awful earnings reports given by the real economy stocks, and looked in a candlelit mirror chanting, "Ben Bernanke, Ben Bernanke, Ben Benanke."

Once again we are in the shadow of Comex Options expiration, last trading and first notice days.

July 26 Comex August gold options expiry
July 26 Comex August copper options expiry
July 27 Comex August miNY gold futures last trading day
July 27 Comex July gold futures last trading day
July 27 Comex July silver futures last trading day
July 27 Comex July copper futures last trading day
July 27 Comex August miNY gold futures last trading day
July 27 Comex August E-mini copper futures last trading day
July 31 Comex August gold futures first notice day
July 31 Comex August copper futures first notice day

Far be it from me to tell anyone what to do. But I will say that I have stopped trading all options, both in stocks and commodities.

The rigging that characterizes the markets overall, through the manipulation of price and the mispricing of risk, is most pronounced in the paper derivatives such as options and artificial constructs like some of the ETFs which are designed to lose almost without regard to what the market does.

Gold and silver could go either way here. I do not have enough visibility into where the suckers are placing their bets, and where the wiseguys are placing theirs, at least for the short term.

I do believe that one of these days a major player is going to pop these markets, and rip the faces off some of the funds and specs who are leaning nakedly on the short side in a particularly painful and protracted rally from hell. I just do not know if we are there yet. The more I look at the structure of the Comex and their position and delivery policies the more it looks like a paper Ponzi scheme that could be tough to beat on its own turf.

Despite some of their identifiable predilictions, the Banks and big machers of the Street are very open minded about screwing anybody and everybody. They have no abiding loyalties or allegiances except to themselves.

I see where the House has passed the Ron Paul Bill to Audit the Fed. While that sort of thing may be gratifying I think the Senate also has to pass their own version of it, and then reconcile the two. And that prospect does not seem likely.

SP 500 and NDX Futures Daily Charts

More shenanigans as the equity market shook off the awful earnings reports from last night and came off the lows on expectations that Uncle Ben would crack open the beer barrels of quantitative easing again.

Tim Geithner testified to the Congress today, and he is the very picture of the bureaucrat. Intraday commentary inspired by his performance here.

"And he began to teach them, saying:

'Blessed are the poor in spirit,
  for theirs is the kingdom of heaven.
Blessed are they who mourn,
  for they shall be comforted.
Blessed are the meek,
  for they will inherit the earth.
Blessed are those who hunger and thirst for righteousness,
  for they will be satisfied.
Blessed are the merciful,
  for they will be shown mercy.
Blessed are the pure in heart,
  for they will see God.
Blessed are the peacemakers,
  for they will be called children of God.
Blessed are those who are persecuted for righteousness sake,
  for theirs is the kingdom of heaven.

And blessed are you when people insult you, persecute you, or falsely speak evil
  about you, because you stand with me.'"

About the Poor and Taxes

I see a push coming from the fortunate again, the ones who have been rewarded by the system as it has been, to 'scrap the tax system' and go to a lower flat tax, or even better, a much lower but general consumption tax. Whatever benefits them the most. And economics is a handmaiden flexible and malleable enough to provide them whatever rationale is required to support their arguments.

But the truth is that a consumption tax falls particularly hard on those with the least disposable income, who must still buy the necessities of life.

A flat tax is not much better, for much the same reason. The burden falls disproportionately on those who can bear it the least.

I should add that a shift from an income to a consumption tax is a great idea if you would like to stimulate and subsidize a new bubble in speculative financial paper that would bring down the financial system once and for all when it collapses.

Personally I would like to see a very nominal financial transaction tax of nominal flat of about $5 per trade, with NO exemptions including wiseguys trading for their own books in HFT. I would obviously like to dampen speculation and encourage real investment. And of course I would be in favor of the abolition of all 'dark pools' of publicly traded instruments or delays in reporting those trades. And charging for basic quotes in real time by the exchanges which should be a cost of their doing business. But that is a subject for another day.

The problem with the tax system we have today is that there are so many loopholes and ways to avoid taxes for those with the most power and money. It really is more of a scandal than you might know. It encourages and rewards expoitative behaviour and foments financial corruption.

Until you have some serious walking around money, and it draws in the lawyers and accountants, one does not see what a racket the current system is, and how well it serves those 'in the know,' to the disadvantage of everyone else.

Rather than put forward my own solution, I would like to address a current tagline that is being quoted by the 'tax reformers.'

The fortunate are indignant that the working poor, and the poor themselves, are paying so little in income taxes on the whole. And this is true, if one measures it by actual federal income tax receipts alone.

It is less so if one considers all the other taxes that add up, like sales taxes and gasoline taxes, and fees.

But even further, I contend that the poor are being taxed to death, by a rotten, corrupt crony capitalist economic system.

The tax may not be levied by the IRS, but it is set down by the system itself. It is set down by the banks that cheat them, by the powerful corporations that use the law for their own excessive profits to exploit them.

They are taxed by those who exploit and cheat them and collect their unjust rents, not because they are smart and hard working, but because they can.  They have carefully positioned themselves to do so.

The poor are taxed by sickness, and a healthcare system with insanely different classes of treatment and payments, and extractive and the predatory practices of pharma-healthcare trusts.

They are taxed by the accidents and tragedies of life, that if one is rich or comes from privilege are not a lasting problem, but if one is not, there is no second chance. One is held in debt bondage, forever.

And when it comes to it, it is the poor who predominantly offer their tears and blood, and their own children, to fight the wars for this nation around the world. And when those wars are not entered into reluctantly for the sake of defense, but rather as expansive adventures in nation building in far off places, for the benefit of the hellish combine of the manufacture of death for profits, that is the gravest injustice and most horrific tax of all.

The corporations, in one form or another, own the housing, pay the wages, charge what they will for the food and medicine, and essentially own the company store in a pernicious monopoly whose sole goal is to sustain and maximize itself as its own end.

The system is so unfair and so rigged now that the poor will pay the price of it, the taxes of its corruption and injustice, from the moment they are born until the day that they die.

We have presided over the destruction of almost one hundred years of social progress, almost without parallel in human history. Oh, well done.

That for the most part is the reason why they are poor. Not because they are lazy, not because they are stupid, and not because they engage in high risk behaviours. Yes, some people are poor for these reasons. I know we can always think of someone like that. But just as many of the rich do the same things and more, and remain rich despite it. The system carries and subsidizes their failures, again and again.

The indignation of the well-to-do is like a group of highwaymen, who rob the passengers on a bus, and strip and beat them senseless, and then become angry when the survivors try to go on their way, but do not have enough money left to pay the region's exit tax.

The crony capitalist system is rigged, and it exploits the poor, and that is what makes most of them poor, and keeps their children the same way unless they are both incredibly bright and incredibly lucky.  A few may make it, but most do not.  And sometimes those who make it are among the worst, because they wish to forget who they are and where they have been.

And such a system is not sustainable, without increasing repression and force, until it finally extinguishes itself.

Changing the tax system is not the answer. The real answer is genuine economic reform and real justice, and an end to the principles of the serving the greater greed and might makes right that has shaped the perverse economic system which we have today.

I dare not even bring up the parable of the talents here, that what you have has been given you, and you are obligated to use it well, or it will be taken from you.

And how can I appeal to the principles which have guided many of the progressive gains throughout western history. "When someone has been given much, much will be required in return; and when someone has been entrusted with much, even more will be required."

How can one appeal to noblesse oblige, when nobility and chivalry are dead, and craven grasping by the crudely nouveau riche is the highest example for all?  

One can only appeal to the practical wisdom of the parasites, that when you kill the host, you kill yourself. Or risk being targeted and removed like some intrusive and unproductive organism that you may be.

The fortunate will not admit their humanity, because it lowers them from their exalted and imagined ubermensch status to what they really are: ordinary people with more in common with the poor than they care to think. And that is what frightens them.  The stench of their own mortality drives them obsessively.

That is the lesson which we have forgotten.  Yes, you do not wish to hear it.   But it is the oldest story in the book. It is the sin that brought down the light-bearer, the Son of the Morning, first among angels. Pride. And so we cannot admit it, we cannot even see it in our own blindness to the fact:

There but for the grace of God go I.

Do not feel envious, or fearful, or even angry at the parade of the powerful now, the pampered princes of corruption.  I had a terrible vision, a vivid dream, of what they will look like in the time that comes.  Their souls are so empty, so shallow, so broken and insubstantial, that when stripped of their earthly husks there will not be enough of them left to be recognizable as a personality.  

They look like the remnants of dried brown leaves, blowing along the gutters and alleyways of a hard and unyielding hell.   No one remembers them, or even know what they are.

They still think and feel, but the sounds and cries that they make blend together into an indistinguishable rustling, a chorus of soft scratching from dried remnants on the pavement, made of unyielding alabaster paving blocks, as they cling to their lies and self-delusions.  

And no one hears them, their dry scratching cries, and they are alone.   It is hard to even think of it again, much less imagine falling into that state.  And yet, that is not the worst that I saw.

Charles Biderman On the Markets and the Treasury Ponzi Scheme - The Speculative Life

I am not so sure the Bernanke put is dead. But this is certainly well worth watching.

I lost well over a million dollars, marked to market, underestimating Bernanke and Greenspan, and the government's willingness to whore out the public and the integrity of the markets in the most obvious of fashions once before, in the American housing bubble and fraudulent credit frenzy, whilst all the regulators, economists, and pundits stood aside and did or said nothing. Their hypocrisy knew no bounds.

I am not likely to do that again. That sort of experience leaves an impression. And I learned a great deal from it.

Traders will always tell you about their wins, but rarely about the losses. They think the wins are due to their superior intellect, and the losses are just bad luck. And it keeps them coming back for more, until most of them bust their banks.

I don't think you can really be called a seasoned trader until you have at made and lost a million and won it back again. Or more, if you are playing with Other People's Money. Most just lose.

But don't feel badly for me. I am well ahead of the game, in large part on the other ends of the same deals, both going in and coming out, and that I think is by the grace of God and not by my own devices.

I have made most of my money by taking a sound position and then doing nothing with it, not tinkering with it, or frittering it away in fees and small losses that add up over time. The mispricing of risk creates an enormous amount of transactional friction that is almost impossible to beat.

Investment is one thing, and speculation is another. One rises in wisdom by falling in folly.

The speculative life has a lot of volatility, too much my tastes now, although I have been a 'gamer' most of my life, from horsetracks to computer screens to casino tables. It is not for the money, it is for the effects of a game on a restless mind.

Although like the old dog that I am, I still rise to the hunt, just more slowly and quietly. But with much less interest, now that the markets are so obviously rigged. The Banks and wiseguys are destroying them with their excessive greed and cheating, as they have done so many times before.

When I first started trading many years ago the market was a dead fish, and no average person wanted anything to do with it. We will go back there again, if we are not there already.

As I told my son, who is going on so well at university through his diligent work and bright intellect, the speculative life is not a worthwhile use of one's time and mind, especially if I compare to to the creating of new products and technologies. Or even being a plumber, if one is a good one. They have my sincere admiration; water is unforgiving of error. Whenever I do it, it seems as though one thing always leads to another.

As Thomas More said to Sir Richard Rich, 'Better to be a teacher.' Speculators produce nothing, but a teacher can bring light to the darker corners of life.

Chris Hedges: The Careerists and the Banality of Evil - The Sickness Unto Death

“We run heedlessly into the abyss after putting something in front of us to stop us from seeing it.”

Blaise Pascal, Pensées

The consciousless functionary guided by expediency is the very image of the regulatory and banking bureaucrat of today, from Tim Geithner to Gary Gensler to Ben Bernanke, and further, almost every member of the governments of the Western World. Expedient amorality is de rigeur these days among the entitled class of power brokers who serve the system, which in their minds is themselves, as a privileged, ruling class.

And it is that very dryness of human empathy, the lack of vigor in moral conviction, the willingness to accept great crimes and injustices as the unfortunate but "necessary outcomes" required by The System, that makes all the difference between a Franklin D. Roosevelt and a Barack H. Obama, between a living human being and a whited sepulchre full of dead men's bones.

After a time it becomes so easy to day, 'I am sorry madam, but the system requires that your child must die.' And so the ceremony of innocence is drowned.

This is not capitalism.  Capitalism does not demand that we destroy human lives for the sake of maximizing profits using any and all means which that end justifies.  The Market is not an end to itself. The Market is not God.  This is beyond capitalism.  This is tyranny.  It is a pernicious form of selfishness and self-indulgence, a privileged arrogance.

To paraphrase John Kenneth Galbraith, 'The modern economist is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior justification for selfishness.'

And this is not a choice between poverty for the sake of truth and a very comfortable living, but the overwhelming need for a fabulous, ostentatious wealth and power that seems to have become the god of  this generation.   And it is a sickness, a sickness unto death.

TruthDig
The Careerists
By Chris Hedges
Jul 23, 2012

The greatest crimes of human history are made possible by the most colorless human beings. They are the careerists. The bureaucrats. The cynics. They do the little chores that make vast, complicated systems of exploitation and death a reality. They collect and read the personal data gathered on tens of millions of us by the security and surveillance state. They keep the accounts of ExxonMobil, BP and Goldman Sachs. They build or pilot aerial drones. They work in corporate advertising and public relations. They issue the forms. They process the papers. They deny food stamps to some and unemployment benefits or medical coverage to others. They enforce the laws and the regulations. And they do not ask questions.

Good. Evil. These words do not mean anything to them. They are beyond morality. They are there to make corporate systems function. If insurance companies abandon tens of millions of sick to suffer and die, so be it. If banks and sheriff departments toss families out of their homes, so be it. If financial firms rob citizens of their savings, so be it. If the government shuts down schools and libraries, so be it. If the military murders children in Pakistan or Afghanistan, so be it. If commodity speculators drive up the cost of rice and corn and wheat so that they are unaffordable for hundreds of millions of poor across the planet, so be it. If Congress and the courts strip citizens of basic civil liberties, so be it. If the fossil fuel industry turns the earth into a broiler of greenhouse gases that doom us, so be it. They serve the system. The god of profit and exploitation. The most dangerous force in the industrialized world does not come from those who wield radical creeds, whether Islamic radicalism or Christian fundamentalism, but from legions of faceless bureaucrats who claw their way up layered corporate and governmental machines. They serve any system that meets their pathetic quota of needs.

These systems managers believe nothing. They have no loyalty. They are rootless. They do not think beyond their tiny, insignificant roles. They are blind and deaf. They are, at least regarding the great ideas and patterns of human civilization and history, utterly illiterate. And we churn them out of universities. Lawyers. Technocrats. Business majors. Financial managers. IT specialists. Consultants. Petroleum engineers. “Positive psychologists.” Communications majors. Cadets. Sales representatives. Computer programmers. Men and women who know no history, know no ideas. They live and think in an intellectual vacuum, a world of stultifying minutia. They are T.S. Eliot’s “the hollow men,” “the stuffed men.” “Shape without form, shade without colour,” the poet wrote. “Paralysed force, gesture without motion.”

It was the careerists who made possible the genocides, from the extermination of Native Americans to the Turkish slaughter of the Armenians to the Nazi Holocaust to Stalin’s liquidations. They were the ones who kept the trains running. They filled out the forms and presided over the property confiscations. They rationed the food while children starved. They manufactured the guns. They ran the prisons. They enforced travel bans, confiscated passports, seized bank accounts and carried out segregation. They enforced the law. They did their jobs.

Political and military careerists, backed by war profiteers, have led us into useless wars, including World War I, Vietnam, Iraq and Afghanistan. And millions followed them. Duty. Honor. Country. Carnivals of death. They sacrifice us all. In the futile battles of Verdun and the Somme in World War I, 1.8 million on both sides were killed, wounded or never found. In July of 1917 British Field Marshal Douglas Haig, despite the seas of dead, doomed even more in the mud of Passchendaele. By November, when it was clear his promised breakthrough at Passchendaele had failed, he jettisoned the initial goal—as we did in Iraq when it turned out there were no weapons of mass destruction and in Afghanistan when al-Qaida left the country—and opted for a simple war of attrition. Haig “won” if more Germans than allied troops died. Death as score card. Passchendaele took 600,000 more lives on both sides of the line before it ended. It is not a new story. Generals are almost always buffoons. Soldiers followed John the Blind, who had lost his eyesight a decade earlier, to resounding defeat at the Battle of Crécy in 1337 during the Hundred Years War. We discover that leaders are mediocrities only when it is too late.

David Lloyd George, who was the British prime minister during the Passchendaele campaign, wrote in his memoirs: “[Before the battle of Passchendaele] the Tanks Corps Staff prepared maps to show how a bombardment which obliterated the drainage would inevitably lead to a series of pools, and they located the exact spots where the waters would gather. The only reply was a peremptory order that they were to ‘Send no more of these ridiculous maps.’ Maps must conform to plans and not plans to maps. Facts that interfered with plans were impertinencies.”

Here you have the explanation of why our ruling elites do nothing about climate change, refuse to respond rationally to economic meltdown and are incapable of coping with the collapse of globalization and empire. These are circumstances that interfere with the very viability and sustainability of the system. And bureaucrats know only how to serve the system. They know only the managerial skills they ingested at West Point or Harvard Business School. They cannot think on their own. They cannot challenge assumptions or structures. They cannot intellectually or emotionally recognize that the system might implode. And so they do what Napoleon warned was the worst mistake a general could make—paint an imaginary picture of a situation and accept it as real. But we blithely ignore reality along with them. The mania for a happy ending blinds us. We do not want to believe what we see. It is too depressing. So we all retreat into collective self-delusion.

In Claude Lanzmann’s monumental documentary film “Shoah,” on the Holocaust, he interviews Filip Müller, a Czech Jew who survived the liquidations in Auschwitz as a member of the “special detail.” Müller relates this story:

“One day in 1943 when I was already in Crematorium 5, a train from Bialystok arrived. A prisoner on the ‘special detail’ saw a woman in the ‘undressing room’ who was the wife of a friend of his. He came right out and told her: ‘You are going to be exterminated. In three hours you’ll be ashes.’ The woman believed him because she knew him. She ran all over and warned to the other women. ‘We’re going to be killed. We’re going to be gassed.’ Mothers carrying their children on their shoulders didn’t want to hear that. They decided the woman was crazy. They chased her away. So she went to the men. To no avail. Not that they didn’t believe her. They’d heard rumors in the Bialystok ghetto, or in Grodno, and elsewhere. But who wanted to hear that? When she saw that no one would listen, she scratched her whole face. Out of despair. In shock. And she started to scream..."

Read the rest here.

Choose your loyalty wisely, because you may be spending a very long time with what you serve. And even if it is not a conscious choice of the moment, what you do, or do not, determines to whom you belong.

"Know you not, that to whom you yield yourselves as servants to obey, his servants you are; whether of a corruption unto death, or of a righteousness unto life?"

It is not surprising that people sell themselves so badly, but rather that they also do it so cheaply.

SP 500 and NDX Futures Daily Charts - APPL and Netflix

Stocks were lower much of the day, with a brief short covering pop into the close.

AAPL missed its numbers, both earnings and revenues in a big way, and the stock is down about six percent after the bell. They also guided lower on lackluster iPhone sales. There is some speculation that consumers are waiting for the new version.

Netflix is taking the gas pipe after hours, as it came in line on the numbers, but streaming subscribers was light. Stock is down ten percent.

Norfolk Southern nailed earnings but missed revenues.

UPS gave a forecast today that boded ill for the US GDP for the rest of the year, showing numbers in the one percent growth range.

Gold Daily and Silver Weekly Commentary

Gold and silver are still obviously coiling into a compression end formation.

Gold Continues Coiling

It is of course a matter of probability as to which way it breaks, and even moreso dependent on a few exogenous monetary events.

But the boundaries of breakout, subject to confirmation to weed out the headfakes, is not a mystery.

It could even resolve into a trading range, that is also well bounded, until someone pulls the trigger and turns the presses on high, or more properly, the din of their running reaches the ears of the public.

Thought For the Day

Do random acts of love and beauty for His sake, and the world is yours.

'Fight the fighters, don't fight their wars.'

Banksy

About Those Excess Reserves At the Fed

"Some men weave their sophistry until their own reason is entangled."

Samuel Johnson

IOER is Interest On Excess Reserves.

The next time some economist says that paying interest on Excess Reserves does not matter, show them this newswire copied below, and let them argue it with Alan Blinder.   San Francisco Fed President John C. Williams made a similar argument about four weeks ago. And Bernanke concurs that this is a powerful weapon in his mad scientist's toolkit.

But then we see pieces in the financial press or on econo-chatboards like this, scornfully dismissing the notion that interest payments on excess reserves matter at all because the excess reserves don't matter.  Base Money Confusion by Izabella Kaminska.

I have even seen the Fed arguing out of both sides of their mouth on this one.  I know there is room for disagreement, but that is just a bit too much. This is like one of those nice little jargon related sophistries that engineers like to use to make annoying marketing managers go away in despair.

I suspect that some economists argue that Fed interest payments on reserve do not matter because they do not want to deal with the political issue of paying what is essentially a subsidy to the banks for the reserves that the Fed creates for them.

And there are plenty  of economists who seem to make whatever argument that the Banks want them to make on any issue on any given day. It seems to be almost a cottage industry at some university economics departments.

Or in some cases it could be that like most money misconceptions, some folks like to get caught up in the details of the thing, putting an inappropriate linear bustier on a dynamic system process, and thereby become mesmerized by 'chicken and egg questions,'  losing sight of the big picture but 'proving' some outlandish theory about how money is created and how the banking system really works.

If reserves do not matter, if they are a meaningless accounting entity, then it would not matter what the Fed pays on them, except for the purposes of a risk free handout to their banking buddies.  And there may be a valuable insight in that after all.

Regardless, I would just like the Fed to make up its collective mind what their position on this really is, and not trot out whatever argument they feel suits the moment, although that does seem to be à la mode amongst economists these days. They have become as bad as attorneys and accountants.  The truth is whatever we say it is, whatever the guy with the most money wants it to be.

This might be a fine question for some astute Congressperson to pin Benny down on for the record the next time he stops by for a chat. I seem to recall the NY Fed dissing a Congressperson on this matter a few years ago when they suggested that paying interest on Bank Reserves was inhibiting the flow of money out of the banking system and into the real economy.

So the next time I get into a discussion on this with some condescending obscurantist from the NY Fed, I am just going to send them this link and let them have at it with Ben, Alan, John and the other Sorcerer's Apprentices of finance who, like Alice's souffletic friend, choose to define reality to suit their changing needs.

08:12 Former Fed Vice Chairman Blinder says Fed should cut IOER -WSJ

Former Fed Vice Chairman Alan Blinder, in an opinion piece, said the Federal Reserve has many weapons left to provide a boost to the economy, but the most powerful tool would be lowering the interest rate on excess reserves (IOER) held by banks.

Blinder said Operation Twist, QE3, and forward guidance are weak weapons that won't be as effective as cutting the IOER to zero, and if nothing goes wrong, to -25bp.

He argues that doing such would provide a powerful incentive for banks to put some of their idle reserves to work, possibly lending it out or putting it in the capital markets.

Fed Chairman Ben Bernanke said last week that the Fed still has a number of tools available should it decide to implement additional stimulus, including its balance sheet, communications strategy, IOER and the discount window.

Postscript: By the way, I do understand how Excess Reserves are created, and why that really is not relevant to the discussion of paying modest interest on them. I can be playful too.

It is more a matter of the Fed taking extreme measures to cover up the rottenness of the assets on the Banks' balance sheets and their real insolvency, whilst providing them the equivalent of monetary food stamps.

The best argument against Blinder's plan is that since the market is already willing to buy short term Treasuries at negative interest rates, why would not paying interest on excess reserves, or even charging a modest amount, cause the banks to reduce their reserves? Especially when they have access to the gaming tables thanks to the repeal of Glass-Steagall. Easy money chases beta.

It *could* drive more short term money into the longer end of the curve which is another one of the Fed's fruitless attempts to provoke the real economy by imitating vitality.

What makes this problem difficult is not that it is some advanced form of maths, but that it is so enshrouded with prevarication, privilege, fraud, and the other trappings of the credibility trap and a self-serving elite who abuse their good fortune and their talents.

Goûter en Fin de Soirée: Michael Wood's In Search of Shakespeare

The BBC documentary In Search of Shakespeare by Michael Wood is a little gem. I generally like Michael Wood's videos.
And when it comes to documentaries, the BBC is legendary.

It is in four parts. Here is part one.

Chris Hedges' Appearance in NYC on July 25

Wednesday, July 25 at 7pm - A Conversation on the Economy + Performance by The Civilians

Tickets are $10 at the door. 45 Bleecker Street (at Lafayette Street)

Sam Seder, comedian, writer, actor, director, producer and political talk show host of The Majority Report, moderates a conversation on banks, government, housing crisis & Occupy.

With Pulitzer Prize-winning author Chris Hedges (journalist, author, war correspondent & columnist for Truthdig) Robert Johnson, (Executive Director of the Institute for New Economic Thinking and a Senior Fellow and Director of the Global Finance Project at the Roosevelt Institute), and Patrick Markee (Coalition for the Homeless).

The Civilians, a noted Obie award-winning theater company, will share performances from their Occupy Your Mind grassroots project that is dedicated to collecting the living history of the Occupy movement through interviews and live performances. The Civilians will perform monologues crafted from interviews they conducted with Occupy demonstrators over the year offering a unique glimpse into the personal stories behind this current exercise of democracy that is leaving its mark on our nation’s history. Performers for this event include: Matt Dellapina, Dan Domingues, Erika Rose and Jordan Mahome. Learn more about their LET ME ASCERTAIN YOU quarterly cabaret at: TheCivilians.org

Join Chris Hedges in the lobby after the event, where he’ll be signing copies of his latest book Days of Destruction, Days of Revolt, a collaboration with cartoonist Joe Sacco. This searing on-the-ground report on the crisis gripping underclass America will be available for purchase both before and after the event.

IMPACT 2012 July 25

Gold Daily and Silver Weekly Charts - A War On Silver and Gold

"I believe the origins of the manipulation can be traced to collusive and concentrated short selling for profit by large financial institutions, starting with Drexel Burnham, then on to AIG Trading, Bear Stearns and finally to JPMorgan. These were the firms at war with higher silver prices, which the US Government subsequently joined...

The war has been waged against all silver market participants by a few well-connected financial firms and banks for the purpose of price control. This price control enables JPMorgan and others to capture profits on a variety of derivatives transactions, including COMEX futures and options contracts. This is exactly the same motive that caused Barclays to manipulate LIBOR; interest rates were manipulated for mostly short-term payoffs on derivatives contracts valued by the rates being manipulated. Likewise, JPMorgan and others manipulate the price of silver on the COMEX to capture short term profits on silver derivatives contracts.

An important characteristic of the war on silver is that it is centered in the world of derivatives, as opposed to the actual world of metal production and consumption. The main objective of JPMorgan and the other silver manipulators is to take as much money as possible away from those holding the counterparty and opposite derivatives positions. Nevertheless, all producers and holders of metal are harmed when derivatives manipulation causes silver prices to fall for no legitimate supply/demand explanation, as is a regular feature of the silver market."

Ted Butler, The War On Silver

Paper is their ground, and bullion in hand is ours.

They are strong, monied, influential, unscrupulous, greedy, heartless, and cunning.

But we know what they know and greatly fear, that their success is not based on hard work and true excellence but on deceit, on a fraud, and a mass of falsely valued paper holdings.

The fraud that has propelled them into the ranks of the wealthy has them caught in a trap of their own devices. And they are crawling with fear as the house of cards closes in on them, and may soon turn on themselves. They have no conscience.

Although any help from the regulators would be welcome, we ought not to count on it.   If this job be done, then we must do it ourselves. For they have not declared their war just on monetary assets, but on us, the people, as well.

So we hold our ground, and do not go recklessly into their maze of paper when the turn of advantage comes our way, as it always will.   Stand fast, and let them come to us, onto our own chosen field of hard assets, where we are firmly placed on solid ground, and aware of their treachery and deceit.

And if all goes well, the price they pay will be so great that all may see it, and remember.

Fiat justitia ruat caelum. Let justice be done, though the heaven's fall. 

When I despair, I remember that all through history the ways of truth and love have always won. There have been tyrants, and murderers, and for a time they can seem invincible, but in the end they always fall. Think of it--always.

First they ignore you, then they laugh at you, then they fight you, then you win."

Mohandas K. Gandhi

As a reminder, 25 October is St. Crispin's Day.

SP 500 and NDX Futures Daily Charts

Stocks swooned today, and reached their lows around 10:00 Eastern US time, as fresh concerns about Spain and Greece caused a sell off.

After the European close stocks gained back about half their losses.

I think it might be useful to begin looking at this stock market action as the crooked carnival game that it is.

So really in the short term it means nothing except that the financial mechanisms that are intended to support the real economy are broken.

Washington and Wall Street need to be reformed before there can be any sustained economic recovery. And that is not likely to happen anytime soon.