David Cay Johnston on the Crony Capitalism, and Part 2 on Plans for Funding For Your Old Age

"A pension is not a 'gratuity.'  A pension is wages you could have taken in cash, but prudently and conservatively set aside for your old age.   It's your money.  If your employer, for every pay period, does not set aside and designate it to go into a pension plan, your employer is stealing from you. The way to get this is to require pay stubs to itemize the amount of money that has been contributed to your pension plan."

David Cay Johnston


“Capitalism is at risk of failing today not because we are running out of innovations, or because markets are failing to inspire private actions, but because we’ve lost sight of the operational failings of unfettered gluttony. We are neglecting a torrent of market failures in infrastructure, finance, and the environment. We are turning our backs on a grotesque worsening of income inequality and willfully continuing to slash social benefits. We are destroying the Earth as if we are indeed the last generation.”

Jeffrey Sachs


"We are coming apart as a society, and inequality is right at the core of that.  When the 90 percent are getting worse off and they’re trying to figure out what happened, they’re not people like me who get to spend four or five hours a day studying these things and then writing about them — they’re people who have to make a living and get through life.  And they’re going to be swayed by demagogues and filled with fear about the other, rather than bringing us together.

President Theodore Roosevelt said we shall all rise together or we shall all fall together, and we need to have an appreciation of that.

I think it would be easy for someone to arrive in the near future and really create forces that would lead to trouble in this country. And you see people who, they’re not the leaders to pull it off, but we have suggestions that the president should be killed, that he’s not an American, that Texas can secede, that states can ignore federal law, and these are things that don’t lack for antecedents in America history but they’re clearly on the rise.

In addition to that, we have this large, very well-funded news organization that is premised on misconstruing facts and telling lies, Faux News that is creating, in a large segment of the population — somewhere around one-fifth and one-fourth of it — belief in all sorts of things that are detrimental to our well-being.

So, no, I don’t see this happening tomorrow, but I have said for many years that if we don’t get a handle on this then one of these days our descendants are going to sit down in high-school history class and open a textbook that begins with the words: The United States of America was … and then it will dissect how our experiment in self-governance came apart."

David Cay Johnston, May 2014

Another More Terrible Financial Crisis Is Coming— For the Benefit of a Few

"So we may not be that far away from the next bubble bursting, and I could imagine, if I think about policy, what we just talked about, with the end of a recovery cycle, we’ve pumped $4 trillion in this country, $30 trillion globally, into the economy with monetary policy.   So that’s tapped out.

We are now using fiscal policy to overheat a late-stage recovery in order to keep the Republicans in office.  We are doing nothing to bolster underlying growth with educational reform, infrastructure reform, et cetera."

Rana Foroohar, The Rich Have an Escape Plan


"I think it’s important in the power of finance and how pervasive this is throughout the economy, this has very little to do with Republicans and Democrats. In fact, some of the key opening doors for finance happened in the Clinton administration."

Paul Jay, Clinton's Committee To Save the World Unleashes Wall Street

Rana Foroohar is an associate editor and global business columnist for The Financial Times, and CNN’s global economic analysts. She’s the author of Makers and Takers: The Rise of Finance and the Fall of American Business.

Competing Crime Families Crony Capitalism - The Dark Heart of the Credibility Trap

The Republican and Democrat insiders seem like two competing crime families, struggling for control of the spoils—  like the Marranzanos and Lucianos, for example, in 1930s New York.

Or maybe Bill and Hillary are just a better educated, more fortunate, white collar version of Bonnie and Clyde.  Someone certainly selected Bill for 'greatness' and quite a few breaks for a kid from Hot Springs early on.  And Hillary wears her ambition like Lady Macbeth.

As for Trump, the outsider, in the end he may be less like Thomas Dewey than Dutch Schultz.

"They are also the grandees of our national media; the architects of our software; the designers of our streets; the high officials of our banking system; the authors of just about every plan to fix social security or fine-tune the Middle East with precision droning. They are, they think, not a class at all but rather the enlightened ones, the people who must be answered to but who need never explain themselves...

The dramatis personae of the liberal class are all present in this amazing body of work [Podesta emails]: financial innovators. High-achieving colleagues attempting to get jobs for their high-achieving children. Foundation executives doing fine and noble things. Prizes, of course, and high academic achievement.

Certain industries loom large and virtuous here. Hillary’s ingratiating speeches to Wall Street are well known of course, but what is remarkable is that, in the party of Jackson and Bryan and Roosevelt, smiling financiers now seem to stand on every corner, constantly proffering advice about this and that. In one now-famous email chain, for example, the reader can watch current US trade representative Michael Froman, writing from a Citibank email address in 2008, appear to name President Obama’s cabinet even before the great hope-and-change election was decided (incidentally, an important clue to understanding why that greatest of zombie banks was never put out of its misery)...

Hillary Clinton staffed her state department with investment bankers and then did speaking engagements for investment banks as soon as she was done at the state department. Of course she appears to think that any kind of bank reform should 'come from the industry itself'. And of course no elite bankers were ever prosecuted by the Obama administration.

Read these emails and you understand, with a start, that the people at the top tier of American life all know each other. They are all engaged in promoting one another’s careers, constantly.

Everything blurs into everything else in this world. The state department, the banks, Silicon Valley, the nonprofits, the 'Global CEO Advisory Firm' that appears to have solicited donations for the Clinton Foundation. Executives here go from foundation to government to thinktank to startup. There are honors. Venture capital. Foundation grants. Endowed chairs. Advanced degrees. For them the door revolves. The friends all succeed. They break every boundary.

But the One Big Boundary remains. Yes, it’s all supposed to be a meritocracy. But if you aren’t part of this happy, prosperous in-group – if you don’t have John Podesta’s email address – you’re out."

Thomas Frank, Podesta Emails Show Who Runs America and How They Do It


"Most of them became wealthy by being well connected and crooked. And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful.   That’s what I have a problem with.   And I think most people agree with me."

Charles Ferguson, Predator Nation


"Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want.

But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: they don’t criticize other insiders."

Elizabeth Warren, A Fighting Chance


"Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it."

Mike Lofgren, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government, 5 January 2016

Related: The Bullet or the Bribe
               Changing the Culture of Wall Street Requires Ending Continuity Government in Washington

Stiglitz: TPP Is an Anti-Democratic Law For the Benefit of Corporations, Not a Trade Agreement

When you have corporations having a very short-sighted view, paying their CEOs such outrageous monies with less money spent on investment, of course you’re not going to make long-term investments that are going to result in long-term economic growth.

And at the same time, there’s going to be less money to pay for ordinary workers. And paying that low wages to ordinary workers, not giving them security, not giving them paid, you know, family leave, all that results in a less productive labor force.

So what we’ve done is we’ve actually undermined investments in people, investments in the corporation, all for the sake of increasing the income of the people at the very top. So there’s a really close link here between the growing inequality in our society and the weak economic performance.”

Joseph Stiglitz

Stiglitz tends to excuse Obama at some point and blames the Republicans, I think he is being naive at best, wrong-headedly kind perhaps to one of the worst betrayals of a public mandate for reform in American history.

Obama is, at the end of the day, a corporate brand, a clever vehicle to attract and divert reform-hungry Americans who are tired of being misused and lied to.  He has betrayed his supporters at every key turn and on every major political and social issue from financial reform to healthcare.

Nomi Prins: Crony Capitalism and Corruption - An Entirely Rigged Political-Financial System

I think you would do well to watch this video below.

Too big to fail is a seven-year phenomenon created by the most powerful central banks to bolster the largest, most politically connected US and European banks. More than that, it’s a global concern predicated on that handful of private banks controlling too much market share and elite central banks infusing them with boatloads of cheap capital and other aid.

Synthetic bank and market subsidization disguised as ‘monetary policy’ has spawned artificial asset and debt bubbles - everywhere. The most rapacious speculative capital and associated risk flows from these power-players to the least protected, or least regulated, locales.

There is no such thing as isolated 'Big Bank' problems. Rather, complex products, risky practices, leverage and co-dependent transactions have contagion ramifications, particularly in emerging markets whose histories are already lined with disproportionate shares of debt, interest rate and currency related travails.

The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system.

The connection between democracy and free markets is interesting though. Democracy is predicated on the idea that every vote counts equally, and in the utopian perspective, the government adopts policies that benefit or adhere to the majority of those votes. In fact, it's the minority of elite families and private individuals that exercise the most control over America's policies and actions.

The myth of a free market is that every trader or participant is equal, when in fact the biggest players with access to the most information and technology are the ones that have a disproportionate advantage over the smaller players. What we have is a plutocracy of government and markets. The privileged few don't care, or need to care, about democracy any more than they would ever want to have truly "free" markets, though what they do want are markets liberated from as many regulations as possible. In practice, that leads to huge inherent risk.

Michael Lewis' latest book on high frequency trading seems to have struck some sort of a national chord. Yet what he writes about is the mere tip of the iceberg covered in my book. He's talking about rigged markets - which have been a problem since small investors began investing with the big boys, believing they had an equal shot.

I'm talking about an entirely rigged political-financial system.

Nomi Prins

Why the Fed's Policy Actions Are Not Working

“Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

John Kenneth Galbraith

As I said earlier today in a reaction to the FOMC announcement:

"This is all a bit moot really, because except for the betting parlors it doesn't matter whether the Fed raises 25 basis points or not. You can print money and give it to the banking system and the very wealthy for their personal gambling and asset acquisitions activities all day long.

The system is broken, the real product of the nation has been hijacked by financialization, the international monetary exchange is in chaos, and almost all of the gains are going to the top.

And the Fed and the government are doing virtually nothing to change this."

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be an sustainable recovery.

And keep the financial system on life support while the rest of the economy languishes, the poor suffer, and the middle class deteriorates is not coherent, except for a narrow band of beneficiaries.

Let us be reminded that the Fed is also a primary regulator of the financial system as well as an interest rate joystick operator.

And the mainstream media and the politicians wonder why the public is not doing what they expect.

This chart below is from Bloomberg News, The Richest Americans Are Winning the Economic Recovery.

"U.S. Census Bureau data out Wednesday underscore just how lousy the recovery has been if you aren't rich.
Looking at eight groups of household income selected by Census, only those whose incomes are already high to begin with have seen improvement since 2006, the last full year of expansion before the recession. Households at the 95th and 90th percentiles had larger earnings through 2014, the latest year for which data are available.

Income for all others was below 2006 levels, indicating they're still clawing their way out of the hole caused by the deepest recession in the post-World War II era."

And this result, after eight years of some of the biggest expansion of a central bank balance sheet in US history!

'Among Major Economies, Only the Chinese Numbers Are More Suspect'

On the surface this report shows solid economic growth for the US economy during the second quarter of 2015. Unfortunately, all of the usual caveats merit restatement: 

-- A significant portion of the "solid growth" in this headline number could be the result of understated BEA inflation data. Using deflators from the BLS results in a more modest 2.33% growth rate. And using deflators from the Billion Prices Project puts the growth rate even lower, at 1.28%. 

-- Per capita real GDP (the number we generally use to evaluate other economies) comes in at about 1.6% using BLS deflators and about 0.6% using the BPP deflators. Keep in mind that population growth alone (not brilliant central bank maneuvers) contributes a 0.72% positive bias to the headline number. 

-- Once again we wonder how much we should trust numbers that bounce all over the place from revision to revision. One might expect better from a huge (and expensive) bureaucracy operating in the 21st century.

Among major economies, only the Chinese numbers are more suspect. 

All that said, we have -- on the official record -- solid economic growth and 5.3% unemployment.

What more could Ms. Yellen want? 

Consumer Metrics Institute, BEA Revises 2nd Quarter 2015 GDP Growth Upward to 3.70%

Thanks to Wall Street On Parade for pointing the way to this commentary above.

The campaign to smother the true state of the US economy with paper, both in terms of paper money and manufactured statistics, is an outgrowth of the credibility trap.

Having crippled the real economy with incompetent and corrupt policy decisions, the status quo of pampered privilege is going full out to try and save the day– for themselves.

Meanwhile, underneath the public relations campaign to persuade people that all is calm, the pressures of a decade or so of malinvestment and crony capitalism continue to build.   The persuasion of the official numbers is becoming more and more ineffective, as people hear one thing but see another in their daily lives.

Yes, there are more jobs.  And they are of an inferior quality with low pay and often little or no benefits such as basic healthcare, which despite assurances otherwise is becoming increasingly expensive, and as in the clear case of Big Pharma, unnecessarily so but supported by government policies.

And the urge is to spread this malicious monopolistic drug policy globally through secret trade deals such as the TPP and TTIP.

The public is rejecting the 'establishment' in increasing numbers, such that such voices of the privileged are now recognizing them, but dismissing them as a sociological phenomenon,  expressive individualism.

The political and economic establishment has failed, again and again and consciously so, because it was to their short term benefit to do it.   It is the failure of an oath, of personal morality, and of office.

But now that the consequences of their actions are becoming apparent, they cannot possibly admit to them because, after all, it was they who are responsible.  And there is still plenty of money left on the table.

And so they must deny the problems, cover them and distract attention away from them, and continue to press on with what has been working all along, for them and their friends. The oligarchy has indeed become audacious. both in its lust for looting the system, and its bravura in the attempts to cover up the consequences of their decisions.

"Some appear to believe that 'confidence in the banks' can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit."

James K. Galbraith, Testimony to Congress, May 2010

Related:   LBMA Apparently Restated Its 2013 Gold Refining Number 2,200 Tonnes Lower

Wilkerson: Who Makes US Foreign Policy

Part of what I teach is how since World War II and the acquisition of this enormous power by what in essence is the new Rome in the world, the United States, part of the shift that takes place in manipulating and managing that new power is a centralization of foreign policy away from the old cabinet places where it used to take place, most prominently through the Foreign Service and through the secretary of state, to the White House and to the creation of the 1947 National Security Act, the National Security Council.

So if you ask me pro forma where does it exist today, it exists more in the National Security Council and its staff than it does anywhere else, certainly anywhere else in the cabinet. So what I'm saying is it's centralized in the White House.

But what does that mean in terms of, I think, your real question, who's behind the White House, and who's therefore behind U.S. foreign policy, more or less? I think the answer today is the oligarchs, which would be the same answer, incidentally, ironically, if you will, for Putin in Russia, the people who own the wealth, the people who therefore have the power and who more or less (and I'm not being too facetious here, I don't think) buy the president and thus buy American foreign policy. So that's as succinct an answer as I can give you and touch on a few historical points...

And you could say in some respects this shadow behind the power that makes money off war, period, no matter who's the belligerent, makes money off that volatility now, especially with computers that are able to assist them in doing so, like currency manipulation, for example, or just general speculation. With computers you can do it at lightning speed and you can do it in a nanosecond, and you can make billions in that nanosecond, and you don't care about what you're doing to the real economy, because you're raking in the dough.

Lawrence Wilkerson

You may watch the entire three video interview here.

Letter to Edward M. House
Warm Springs, November 21, 1933

My dear Friend:

...I had a nice talk with Jack Morgan the other day and he and he seemed more worried about Tugwell's speech than about anything else, especially when Tugwell said, "From now on property rights and financial rights will be subordinated to human rights." J.P.M. did not seem much troubled over the gold purchasing, and confessed that he had been completely misled in regard to the Federal expenditures.

The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson— and I am not wholly excepting the Administration of WW [Woodrow Wilson]— The country is going through a repetition of Jackson's fight with the Bank of the United Stated - only on a far bigger and broader basis.

I am having a grand rest and am catching up on much needed sleep. Take care of yourself and do write me soon.

Franklin Roosevelt

War is a racket. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one in which the profits are reckoned in dollars and the losses in lives.

I spent thirty-three years and four months in active military service as a member of this country's most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General.

The trouble with America is that when the dollar only earns 6 percent over here, then it gets restless and goes overseas to get 100 percent. Then the flag follows the dollar and the soldiers follow the flag.

I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912.

I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.

There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights.

Major General Smedley Butler, USMC

President Carter: US Is Now 'Just an Oligarchy With Unlimited Political Bribery"

You might not have heard about this interview on the mainstream media.  It occurred several days ago.  Apparently Jimmy is not gleefully participating in the triumphant Clinton-Bush winners road tour and congenial yukfest. 

 

Some, nearing the latter part of their days, tend to feel the weight of their conscience.  But certainly not all, especially not those who believe in nothing greater than themselves.

 

Carter's startling admission is at the root, the very heart of the lack of reform and recovery. 

 

But the pundits, even the so-called liberal media and the disgruntled conservative media, will not discuss it frankly and openly.   They traffic in shallow anger and distraction, and faithfully serve the special interests.

And there is as little serious discussion in the pampered corporatist media, whose mission is to obfuscate and distract the public from the key issues with 'bread, circuses, and sensationalism.'

This is the kind of thing that everyone in power, and almost all those who bask in that power, know but never talk about openly, feigning ignorance with dismissive ridicule.  

 

They are caught in a credibility trap of their own making.  And so they while away the days with private looting, waiting to see which way and when the winds of reaction may blow, while doing everything they can to maintain the status quo which they have created for their own benefit.

It is the dark heart of corruption, the quiet coup d'état that has overthrown the American republic.

 

The people are beginning to ask, 'After six years, why is there tremendous profits for those who caused the problems in the first place, but no recovery for the rest of us?'

And the elite look with bewilderment, fear, and anger at the fruits of their treachery and deceit.  

They think to themselves, 'We know that we are superior people, tasked with the burdens of leadership, so they must simply be ungrateful,  jealous of our success.'

 

A small but highly visible minority may look to the worst of the oligarchs as their leader and savior.  One might call it a kind of Stockholm Syndrome, but really it is just a perverse reaction, the impulse of the camp follower that identifies with their abusers, thinking that this elevates them from the rest.

 

And the media wisely warns them, slurring any candidates out of the mainstream control, the narcissist and the socialist, urging the people to stick with the familiar oligarchic brand names, Bush and Clinton, and in extremis that slickly formed alloy and extruded creation of the money masters, brand Obama.

Hubris begets nemesis.  If they were not so self-absorbed and morally stunted by their pride and selective experience they would understand that people will not stand by and allow themselves to be abused forever.

Transcript:

HARTMANN: Our Supreme Court has now said, “unlimited money in politics.” It seems like a violation of principles of democracy. … Your thoughts on that?

CARTER: It violates the essence of what made America a great country in its political system. Now it’s just an oligarchy, with unlimited political bribery being the essence of getting the nominations for president or to elect the president. And the same thing applies to governors and U.S. senators and congress members.

So now we’ve just seen a complete subversion of our political system as a payoff to major contributors, who want and expect and sometimes get favors for themselves after the election’s over. … The incumbents, Democrats and Republicans, look upon this unlimited money as a great benefit to themselves.

Hat tip for the above to Sam Sacks and especially to Jon Schwarz at The Intercept.

 

NAV Premiums of Precious Metal Trusts and Funds - Why There Is No Recovery

 

Another 7,285 ounces of gold bullion were redeemed from the Sprott Physical Gold Trust.

My friend Arby had an interesting observation.  I have not checked it out specifically.  I thought Australia was in second place, but I have not looked at the latest figures for 2014.

 

But if the numbers are generally right, which they seem to be, it gives us some idea of the magnitude of what is going on.

US 52 WEEKS gold mine production 2014 (estimate from Mineweb) ... ...    210 tonnes

China first 3 WEEKS gold imports 2015 (calculated by Koos Jansen)      .... 202 tonnes

The largest producer of gold is China, second Russia, third USA.

The two largest producers are net importers of their world leading mining output.  The third largest producer is a net exporter.

 

And then there's Australia, but I'm not sure that they even know what they're doing as one of the attendant nations.

 

No matter what the exact numbers and who makes the most, gold is flowing from West to East. 

Anyone who does not understand this is missing one of the most dramatic monetary phenomena of this century.

I wonder who will blink first in this 'suicide squeeze.'  Because that is what this latest gold pool is becoming.

Speaking of monetary phenomenon, the professor of numbers and all things housing Tony Sanders notes that Mortgage Bonds Have Underperformed the Worst Since 2008 on Refi Risks.

 

As part of a different discussion, I noticed the other week that the Fed stepped up purchases of agency mortgage debts considerably since they 'ended QE' and own a boatload of them.

 

Janet and Bill Dudley must be running handcarts up and down Wall and Broad Streets telling the Banks to, 'bring out your dead.'

 

Fan and Fred buy them, and the Fed buries them.   With nothing going to the people whose homes are being foreclosed.   

And finally,  Zerohedge reminds us this morning that the numbers indicate that the biggest flows of capital into the US equity markets are from.. wait for it... companies using their profits to buy back their own stocks, by far.

 

So the Fed is using its ability to print money to buy bad debts from the Banks which they created to cheat their customers, and companies are using the outsized profits they are obtaining through government subsidies and underpaying their workers to buy back their own stock and enrich their upper management. 

 

And as Wall Street On Parade reminds us this morning, the corporatized media, owned by a handful of corporations, is cheerleading all this, and is very much captured by the crony capitalist culture.

 

And people wonder why there is no recovery.  Who says they want one, when this new normal is paying off for a privileged few so well.  And they get to buy even more of the remaining productive assets on the cheap.

 

That's trickle down stimulus, par excellence.

 

Related:  The Big Lie:  5.6% Unemployment

 

 

The Japanese Economic Dilemma in a Nutshell

Here is a note from a friend in Japan:

In today's Nikkei (Japanese version), on page 5, tucked behind all the hype about the government's decision to lower corporate taxes, in hopes that major companies will raise wages, was a short article on "three miscalculations about the economy" this year.

1. Tax revenues increased with the increase in the sales tax but consumer spending fell. Tax revenues expected to increase by about 5 trillion yen.

2. Weaker yen and higher stock market improved family assets for some I would say, but exports did not improve, and were about 8% lower than 4 years ago.

3. CPI (excluding fresh food) increased, resulting in a real wage decline. Rreal wages have been falling since mid 2013 and are now around 4% lower year over year.

Over the past few days I have been reading about the so-called lost decade of the 1990s and the government's policy decisions to try to kick-start the economy.

In 1990 the government had about 60 trillion in tax revenues and 69 trillion in general account total expenditures.

Now, the government estimates 52 trillion in tax revenues for fiscal 2014 but has more than 95 trillion in expenditures.

Even a second grade student can see that something is not working.

As you know, I think that there are three things that must be done.

Reform, reform, reform.

The Japanese economy is burdened with an unusually bad demographic problem, made much worse by the burdens of insider dealing, crony capitalism, and zombie banks and their corporations.

And its greatest burden of all is an elite that serves itself and its friends first and foremost, and that finds a greater kinship with its global counterparts than with the people whose interests it purports to represent.

 

"The conflict between the East and West was designed to scare the people of the world into accepting a convergence of these two monopoly systems of authoritarian power. The end result was to be a new Imperial Order and a New World Empire run by an elite self-perpetuating oligarchies from the leading nations of the earth."

Carroll Quigley, Tragedy and Hope, p. 860

 

Related:

Princes of the Yen: Central Banks and the Transformation of an Economy

Why the (Global) Kleptocrats Do Not Want a Recovery

The Pursuit of Global Corporatism

David Cay Johnston: Keynote Address to Symposium on Wealth Disparity In America

David Cay Johnston is an American investigative journalist and author, a specialist in economics and tax issues, and winner of the 2001 Pulitzer Prize for Beat Reporting.

Since 2009 he has been a Distinguished Visiting Lecturer who teaches the tax, property and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management.' From July 2011 until September 2012 he was a columnist for Reuters, writing, and producing video commentaries, on worldwide issues of tax, accounting, economics, public finance and business. Johnston is the board president of Investigative Reporters and Editors.

Matt Taibbi On the Passage of the Spending Bill With Wall St Giveaway By the Senate

A brief word from Matt Taibbi on the passage of the 2015 Spending Bill by the Senate.

Basically, the American People were pushed aside by the Congress to favour JPM and Citigroup who lobbied heavily for public coverage for their gambling on derivatives.

We might expect this from the Republicans, although it is difficult to understand how they can rationalize supporting corporate welfare when they are so tough on entitlements for the poor.  And as for the Democrats...

"If the Democrats actually stood for anything other than sounding as progressive as possible without offending their financial backers, then they would do what Republicans always do in these situations: force a shutdown to save their legislation. How many times did Republicans hold the budget hostage to rescue the Bush tax cuts?

But the Democrats won't do that here, because they're not a real party. They're a marketing phenomenon, a big chunk of oligarchical Blob cleverly sold to voters as the more reasonable and less nakedly corrupt wing of a two-headed political establishment.

So they'll punt on this issue in the name of "maturity" or "bipartisanship," Wall Street will get a nice win, and Hillary Clinton or whoever else is being set up as the Blob candidate on the Democratic side will receive an avalanche of Financial Services donations to stave off Warren (who will begin appearing in the press as an unhinged combination of Lev Trotsky and Spartacus). A neat little piece of business all around. I don't know whether to applaud or throw up."

Read the entire Taibbi article in Rolling Stone here.

US 2nd District Court of Appeals Issues the Economic Equivalent of the Dred Scott Decision

SEC. 20A. (a) PRIVATE RIGHTS OF ACTION BASED ON CONTEMPORANEOUS TRADING.

Any person who violates any provision of this title or the rules or regulations thereunder by purchasing or selling a security while in possession of material, non-public information shall be liable in an action in any court of competent jurisdiction to any person who, contemporaneously with the purchase or sale of securities that is the subject of such violation, has purchased (where such violation is based on a sale of securities) or sold (where such violation is based on a purchase of securities) securities of the same class.

Securities and Exchange Act of 1934

In their zeal to exonerate some Wall Street wiseguys associated with the infamous insider trading ring involving SAC Capital, the sophists on the 2nd US Court of Appeals, located in lower Manhattan near Wall Street, just issued the equivalent of the Dred Scott decision for US markets.

"Although the government might like the law to be different, nothing in the law requires a symmetry of information in the nation's securities markets."

Barrington Parker, 2nd U.S. Circuit of Appeals Judge

Are you kidding me?  Equal protection under the law?   Who says we have to do that? We can do whatever we want, and just try and stop us.  We own the lawmakers and we own the courts.

Symmetry of information, also known as a 'level playing field,' is the cornerstone and underlying principle of US Securities laws since 1933.

"Information symmetry is a condition in which all relevant information is known to all parties involved. For example, in the stock market, stock information has a full public disclosure, and all investors are in the same position to share information."

"In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection, moral hazard, and information monopoly."

Is this the point where the pigmen take the masks off and say, 'what the hell, we really are just robbing and cheating you. So what are you going to do about it?  We own the system, and can have our sophists rationalize just about anything.'

Some judicial propeller head was encouraged to put themselves into super-literalist, laser-beam mode, and twist the letter of the law hard enough to find a reason for excusing some particularly blatant insider trading, and the substance of the law be damned.

As long as the exchanging of favors is sufficiently soft and undocumented, and not the explicit exchange of cash, videotaped and posted to Youtube, it's all good.  Cry havoc, and let slip the dogs of financial fraud on the general public.

The purpose of information symmetry is to prevent certain market actors from engaging in control frauds. This principle taken to a perfect and natural ideal was a cornerstore of one of the great economic canards that justified deregulating the markets. 

"In finance, the efficient-market hypothesis asserts that financial markets are 'informationally efficient'. In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made."

And now they are dropping the pretext. Are they counting on most people not understanding what 'symmetry of information' means?   Are they counting on you doing nothing about this?

Information symmetry means that some analyst or CEO cannot tell his friends that they are going to give downward guidance in a week, so that they can all sell their stock and even short it ahead of the public.

It means that the most powerful players in the market cannot traffic in private knowledge, presenting two sorts of datastreams, one for the public and one for themselves.

It's a big club.  And you aren't in it.

I expect this decision to be reversed, because otherwise there can be no confidence in US markets any longer, and no one who is not an insider can no longer believe in their impartiality and honesty.  They are worse than any casino, because the dealer can signal some of the players when he has an ace in the hole.

The basis of the reversal will be the judgement that the 2nd Court has misapplied the principles in Dirks v SEC.   In this case the Supreme Court sought to exonerate the recipient of information from a whistleblower who wished to exposed a corporate fraud, and in doing so released information to Dirks, who while passing it on to the Wall Street Journal, also passed it on to clients who used it to sell their stock in advance of the fraud and stock sell off. 

This led to the establishment of 'The Dirks Test' by the SEC:

A standard used by the Securities and Exchange Commission (SEC) to determine whether someone who receives and acts on insider information (a tippee) is guilty of insider trading. The Dirks Test looks for two criteria

1. Whether the individual breached the company's trust
2. Whether the individual did so knowingly

Tippees can be found guilty of insider trading if they know or should know that the tipper has committed a breach of fiduciary duty.

I believe this is one of those cases where courts can and will argue about reasonableness. Is it more reasonable to expect a trader who is licensed under Securities Laws to know the difference between legitimate information and material non-public information, moreso than an unlicensed amateur?

 And I think that the 2nd District Court has overreached in declaring that the prosecution ought to demonstrate that the tipper received personal benefit, rather than violated fiduciary trust of the corporation, and that the tippees needed to know this fact, rather than understanding the difference, as a professional, between gossip, information, and material non-public information which provides them a trading advantage which has been obtained in some manner which most certainly involves the violation of fiduciary responsibility in the chain of communication.
 

The most rational response from the rest of the world will be to shun US markets, and take steps to prevent the contagion of this abuse of privilege.

The only law the moneyed interests recognize is 'Do what you will,' and just don't document the evidence of wrongdoing and post it on the internet for bragging rights.

This is the kind of situation where the locker room talk at the Country Club gets leaked out in public, and the Very Important People who do it are suddenly exposed for exactly who and what they really are, and what they really believe. 

 

And brother, its a brave new world if this decision stands.