If gold can take out this next level of trend resistance and stick it, the yearly high is in sight.
One might be emotionally prepared for a retest of the downtrend resistance that was just surpassed.
"If at the start this cancerous growth in the nation was not particularly noticeable, it was only because there were still enough forces at work that operated for the good, so that it was kept under control. As it grew larger, however, and finally in an ultimate spurt of growth attained ruling power, the tumor broke open, as it were, and infected the whole body." The White Rose, Munich 1942
"I think I'm signaling something a little bit shocking to Americans, and to myself, actually. Which is the situation we find ourselves in at this moment, this week, is very strongly reminiscent of the situations we've seen many times in other places.
But they're places we don't like to think of ourselves as being similar to. They're emerging markets. It's Russia or Indonesia or a Thailand type situation, or Korea. That's not comfortable. America is different. America is special. America is rich. And, yet, we've somehow find ourselves in the grip of the same sort of crisis and the same sort of oligarchs...
But, exactly what you said, it's a small group with a lot of power. A lot of wealth. They don't necessarily - they're not necessarily always the names, the household names that spring to mind, in this kind of context. But they are the people who could pull the strings. Who have the influence. Who call the shots...
...the signs that I see this week, the body language, the words, the op-eds, the testimony, the way they're treated by certain Congressional committees, it makes me feel very worried.
I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there's a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can't. You're stuck....
The powerful people are the insiders. They're the CEOs of these banks. They're the people who run these banks. They're the people who pay themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them...
But it really shows you the arrogance, and I think these people think that they've won. They think it's over. They think it's won. They think that we're going to pay out ten or 20 percent of GDP to basically make them whole. It's astonishing....
...these people are throughout the system of government. They are very much at the forefront of the Treasury. The Treasury is apparently calling the shots on their economic policies.
This is a decisive moment. Either you break the power or we're stuck for a long time with this arrangement."
Bill Moyer's Journal - Interview with Simon Johnson, February, 2009.
Here is the introduction to this in The Fall of the American Republic: The Quiet Coup d'Etat in August 2010.
"I am not so optimistic that this reform is possible, because there has in fact been a soft coup d'etat in the US, which now exists in a state of crony corporatism that wields enormous influence over the media and within the government.
Let's be clear about this, the oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own fascist ends and unslakable will to power.
This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price. And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill gotten gains.
But my model says that the oligarchs will continue to press their advantages, being flushed with victory, until they provoke a strong reaction that frightens everyone, like a wake up call, and the tide then turns to genuine reform."
"I have three precious things, which I hold fast and prize.
The first is gentleness; the second is frugality; the third is humility, which keeps me from putting myself before others. Be gentle, and you can be bold; be frugal, and you can be liberal; avoid putting yourself before others, and you can become a leader among men.
But in the present day men cast off gentleness, and are all for being bold; they spurn frugality, and retain only extravagance; they discard humility, and aim only at being first.
Therefore they shall surely perish.
Gentleness brings victory to him who attacks, and safety to him who defends. Those whom Heaven would save, it fences round with gentleness."
Lao Tzu
"A revolution is coming: a revolution which will be peaceful if we are wise enough; compassionate if we care enough; successful if we are fortunate enough. But a revolution which is coming whether we will it or not. We can affect its character; we cannot alter its inevitability."
Robert F. Kennedy
Miranda: O brave new world that has such people in it!
Prospero: 'Tis new, to thee.
The Tempest Act 5, scene 1
"Neoliberalism is a label for economic liberalizations, free trade, and open markets. Neoliberalism supports privatization of state-owned enterprises, deregulation of markets, and promotion of the private sector's role in society. In the 1980s, much of neoliberal theory was incorporated into mainstream economics."I have to reiterate my own perspective that economics is not a physical science with rules generally tested by replicable experimentation on the macro level, but is at most a 'social science' that attempts to approximate a complex human reality, like sociology.
"I believe that if a canvass of the entire civilized world were put to the vote in this matter, the proposition that it is desirable that the better sort of people should intermarry and have plentiful children, and that the inferior sort of people should abstain from multiplication, would be carried by an overwhelming majority...People forget that a whole range of intellectuals and popular thinkers, from George Bernard Shaw to H.G. Wells and a large measure of the economic, professional and political aristocracy of the day, embraced the notion of the natural superiority of certain human types, and the scientific necessity of encouraging their proliferation, and the dominance of the untermensch as not only their right but their obligation.
Indeed, Mr. Galton has drawn up certain definite proposals. He has suggested that "noble families" should collect "fine specimens of humanity" around them, employing these fine specimens in menial occupations of a light and comfortable sort, that will leave a sufficient portion of their energies free for the multiplication of their superior type."
Source: H.G. Wells, Mankind in the Making
"There is a lack of critical assessment of the past. But you have to understand that the current ruling elite is actually the old ruling elite. So they are incapable of a self-critical approach to the past."If one wishes to have an oligarchy or even a dictatorship based on power and unscrupulous behaviour in which the 'superior,' as one may choose to define them, use the weak as servants and prey, then decide to do so and say it, and hope the people will support it.
Ryszard Kapuscinski
The Tyranny of Neoliberalism
Unapologetic in its implementation of austerity measures that cause massive amounts of human hardship and suffering, neoliberal capitalism consolidates class power on the backs of young people, workers, and others marginalized by class, race, and ethnicity. Neoliberal capitalism appears to no longer need the legitimacy garnered through its false claim to democratic ideals such as free speech, individual liberty, or justice—however tepid these appeals have always been. (cf. Glenn Greenwald - Jesse)
In the absence of alternative social visions to market-driven values and the increasing separation of global corporate power from national politics, neoliberalism has wrested itself free of any regulatory controls while at the same time removing economics from any consideration of social costs, ethics, or social responsibility. Such a disposition is evident in the fact that neoliberalism's only imperatives are profits and growing investments in global power structures unmoored from any form of accountable, democratic governance.
The devastating fallout of neoliberal capitalism's reorganization of society, the destruction of communities and impoverishment of individuals and families, now becomes its most embraced mode of expression as it is championed, ironically, as the only viable route to economic stability.
In this widely accepted, yet dystopian world view, collective misfortune is no longer interpreted as a sign of failing governance or the tawdry willingness of politicians to serve corporate interests, but attributed to the character flaws of individuals and defined chiefly as a matter of personal responsibility. In fact, government-provided social protections are viewed as pathological. Matters of life and death are removed from traditional modes of democratic governance and made subject to the sovereignty of the market. (Don't feed the 'losers' or the undesirables - isolate and then euthanise them, indirectly at first - Jesse)
In this new age of biocapital, or what Eric Cazdyn calls "bioeconomics," "all ideals are at the mercy of a larger economic logic" —one that unapologetically generates policies that "trample over millions of people if necessary." Neoliberalism's defining ideologies, values, and policies harness all institutions, social practices, and modes of thought to the demands of corporations and the needs of the warfare state. They are as narrowly self-serving as they are destructive. (The individuals, even in their millions, must die if not for the good of the state or the race, then for the good of the market and corporate profits. - Jesse)
As collective responsibility is privatized, politics loses its social and democratic character, and the formative culture necessary for the production of engaged critical agents is gravely undermined. An utterly reduced form of agency is now embodied in the figure of the isolated automaton, who is driven by self-interest and eschews any responsibility for the other.
As Stuart J. Murray points out, neoliberalism's totalizing discourse of privatization, commodification, deregulation, and hyper-individualism "co-opts and eviscerates the language of the common good." The ascendancy of neoliberal ideology also manifests in an ongoing assault on democratic public spheres, public goods, and any viable notion of equality and social justice.
As corporate power is consolidated into fewer and fewer hands, ideological and structural reforms are implemented to transfer wealth and income into the hands of a ruling financial and corporate elite. This concentration of power is all the more alarming since both Canada and the United States have experienced unprecedented growth in wealth concentration and income inequality since the 1970s.
Henry Giroux, Days of Rage: The Quebec Student Protest Movement
"What a piece of work is a man, how noble in reason, how infinite in faculties, in form and moving how express and admirable, in action how like an angel, in apprehension how like a god! the beauty of the world, the paragon of animals...
William Shakespeare, Hamlet
"What is man that you are mindful of him, the son of man that you care for him?"
Psalm 8:4
"Private equity fund managers are compensated in two primary ways: management fees and carried interest. The management fee, traditionally two percent annually, is paid to the managers to cover overhead, salaries, and so forth. The carried interest, traditionally twenty percent, is a share of the profits from the underlying investments. My paper Two and Twenty described the typical arrangement.
Management fees are taxed at ordinary income rates; carried interest is often taxed at capital gains rates (around 15 percent - Jesse). I focused in the article on why the carried interest portion is better viewed like bonus compensation and should be taxed at ordinary income rates.
Current law on carried interest is already a sweetheart tax deal for private equity, but why not make it better? Private equity folks are not the type to walk past a twenty-dollar bill lying on the sidewalk.
In the 2000s it became common for private equity fund managers to “convert” their management fees into carried interest. There are many variations on the theme, but here’s how many deals worked: each year, before the annual management fee comes due, the fund manager waives the management fee in exchange for a priority allocation of future profits. There is minimal economic risk involved; as long as the fund, at some point, has a profitable quarter, the managers get paid. (If the managers don’t foresee any future profits, they won’t waive the fees, and they will take cash instead.)
In exchange for a minimal amount of economic risk, the tax benefit is enormous: the compensation is transformed from ordinary income (taxed at 35%) into capital gain (taxed at 15%). Because the management fees for a large private equity fund can be ten or twenty million per year, the tax dodge can literally save millions in taxes every year.
The problem is that it is not legal. Because the deals vary in their aggressiveness, there is some disagreement among practitioners about when it works and when it doesn’t. But in my opinion, and the opinion of many tax practitioners, the practices that were common in the private equity industry in the 2000s became very, very questionable, and it’s unlikely that they would have stood up in court.
Gawker today posted some Bain documents today showing that Bain, like many other PE firms, had engaged in this practice of converting management fees into capital gain. Unlike carried interest, which is unseemly but perfectly legal, Bain’s management fee conversions are not legal. If challenged in court, Bain would lose. The Bain partners, in my opinion, misreported their income if they reported these converted fees as capital gain instead of ordinary income."
Victor Fleischer, Romney’s Management Fee Conversions
Read the entire article here.
"The World Gold Council recently released its second quarter statistics on gold “demand and supply trends”. For those not familiar with the WGC, it is an “industry trade group” composed of large-cap gold miners who love bankers.
How much do these mining companies love bankers? So much that they allow the bankers to keep all the records for their sector, and pretty much do all of their of their promotion to the world. It is the WGC which elevated two private “consultancies” (of bankers) – GFMS and the CPM Group – to the status of quasi-official record-keepers for the entire global gold (and silver) industry.
It would be problematic at best for the gold industry to allow itself to be almost entirely represented by a “profession” now known only for its rampant fraud. However, given the known hatred of the banking community toward gold and silver, and their relentless attacks on both the bullion market and the miners themselves; it’s almost beyond comprehension that the world’s largest gold miners choose bankers as their spokesmen.
I’ve already exposed the devious/perverse manner in which these consultancies produce phony inventory numbers in the silver market. In the upside-down world of these “record-keepers”, when someone purchases an ounce of silver from a silver-ETF (and thus takes that ounce of silver off of the market), the CPM Group adds another ounce to total inventories.
In other words, if silver investors were to buy-up every ounce of silver currently available in the world (via silver-ETF’s), global silver inventories would supposedly double, while if silver-ETF holders were to sell all their holdings it would (apparently) collapse inventories..."
Jeff Nelson, Why a Gold Crisis Looms
"Sprott's Physical Silver Trust reported receiving 320,000 ounces of silver yesterday...and still has over a bit over a million ounces left to be delivered from their latest offering. Since they got the first tranche on July 11th, they have received just under seven million ounces...and since they purchased a bit more than eight million ounces, they're just awaiting the balance...44 days [6+ weeks] since receiving the first shipment. It will be interesting to see how long it takes to get the rest. From this information it should be obvious that good delivery bars are not exactly laying around."
A credibility trap is when the regulatory, political and/or informational functions of a society have been compromised by a corrupting influence and a fraud, so that they cannot address the situation without implicating, at least incidentally, a broad swath of the power structure. The status quo has at least tolerated the corruption and the fraud, if not profited directly from it, and most likely continues to do so. The power brokers have become susceptible to various forms of blackmail. And so a failed policy can become almost self-sustaining long after it is seen to have failed, and even become counterproductive, because admitting failure is not an option for those in power.Another example is the blatant fraud, and principles not of productivity but of prey, that prevail on the financial asset exchanges and the monetary system, the stealing of customer funds, and the manipulation of commodity markets such as silver. And it expresses itself in the frivilous coarseness of spectacle, and careless brutality of decline.
"Happy Hunger Games. And may the odds be ever in your favor."Normally a two party system or a balance of powers would correct such a situation, but if the fraud is pervasive and enduring enough, those remedies can lose their effectiveness since the fraud binds even seemingly diverse elements in its grasp. And therein lies the trap.
"You can often, and I would say more often than not, in leading opinion-making elite circles, find an expressed renouncement or repudiation of that principle [of the rule of law]...All of these acts entail very aggressive and explicit arguments that the most powerful political and financial elites in our society should not be, and are not, subject to the rule of law because it is too disruptive, it is too divisive, it is more important that we should look forward, that we find ways to avoid repeating the problem...the rule of law is not that important of a value any longer...And thanks to the apathy of the people and the gullibility of the badly used, self-proclaimed 'patriots' they are winning.
The law is no respecter of persons, but the law is also a respecter of reality, meaning if it is too disruptive or divisive that it is actually in our common good, not the elite criminals, but in our common good, to exempt the most powerful from the consequences of their criminal acts, and that has become the template used in each of these instances."
“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.”Such unsustainable social arrangements are backed by force and fraud. And as the fraud loses its power over time, force must increase, until there is an end in genuine reform, or evenutal self-destruction.
Adam Smith
An anonymous blogging site with a pleasant relaxed feel ("an oasis of civility in an increasingly uncivil world", the site includes images from the Café's signature dishes in the left margin), wry humour and a global readership. Jesse has a strong interest in reining in the banks and reforming economics and incorporates some stunning graphs into his blog posts.I don't feel as resigned as exasperated at times. But that is the nature of a sea change which happens slowly and quietly over a long interval until one suddenly notices it and, voilà.
However in a a recent, somewhat resigned post, he wrote: "I do not think the US is ready to insist on serious reform. It will take another crisis. The anti-regulatory slogans are too effectively ingrained in the public psyche. And self-deception is a powerfully addictive state of mind. Especially for those whose expansive lifestyles depend on it."
Q. If you could travel back in time and change something in the financial world that would benefit society, what would it be?Enjoy.
A. I would help Alan Greenspan achieve a wonderfully rewarding career as a professional clarinetist.
And then I would skip forward ten years or so and stop the Bankers' campaign to repeal Glass Steagall.