"What scares the banks is any criticism that goes beyond claims of greed or fraud or even incompetence, and instead questions the system itself. The sanctity and perfection of the system and its right to ‘regulate’ itself, is what they are totally committed to protect. The system is what gives them their status and wealth. Question that and you threaten them where they are vulnerable.
It seems to me therefore that it is high time we questioned not just the probity, or even the solvency of the big global banks but their very intellectual foundation. The financial elite have spent all this last year rewriting history so that blame for the banking crisis has been turned away from them and laid instead at the door of ‘people’ and then entire nations who ‘took’ on debts they coudn’t afford.
It was not a break down in an otherwise fine system which caused this crisis but that it was a result and consequence of a system which is an utter failure at doing what it prides itself most on being able to do – managing risk. Not just a onetime failure but a systemic failure which presents an on-going danger to the rest of us."
Golem XIV, Risk Weighted Lies, 28 February 2012
"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."
Eddie George, Governor Bank of England, Reg Howe v. BIS, JPM et al.
"Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counter-parties to them.
But before a contract is settled, the counter-parties record profits and losses – often huge in amount – in their current earnings statements without so much as a penny changing hands. Reported earnings on derivatives are often wildly overstated. That’s because today’s earnings are in a significant way based on estimates whose inaccuracy may not be exposed for many years.
The errors usually reflect the human tendency to take an optimistic view of one’s commitments. But the parties to derivatives also have enormous incentives to cheat in accounting for them. Those who trade derivatives are usually paid, in whole or part, on “earnings” calculated by mark-to-market accounting. But often there is no real market, and “mark-to-model” is utilized. This substitution can bring on large-scale mischief.
In extreme cases, mark-to-model degenerates into what I would call mark-to-myth.
I can assure you that the marking errors in the derivatives business have not been symmetrical. Almost invariably, they have favored either the trader who was eyeing a multi-million dollar bonus or the CEO who wanted to report impressive “earnings” (or both). The bonuses were paid, and the CEO profited from his options. Only much later did shareholders learn that the reported earnings were a sham."
Warren Buffett, Berkshire Hathaway Annual Report, 2002
I have to leave early today for an appointment, so I will post the charts as they are, and square things up tomorrow.
Chairman Powell in a speech and interview today made dovish sounds when the markets were postured for hawkishness.
And so the wash and rinse begins again.
The oligarchy is audacious.
Gold and silver and stocks rallied hard.
The Dollar slumped.
Non-Farm Payrolls report.
Shenanigans are abounding.
Have a pleasant evening.
