US Government Current Expenditures - Corporatism

Here is a review of the US government's current expenditures.

I suspect that these charts might induce cognitive dissonance in some, and I am sorry for that.  But these are things are they are. 

The sharp increase in debt under Obama is not because of increased spending, which had already increased significantly with Bush's unfunded wars, but was precipitated primarily by a very sharp decrease in receipts, because of the tax cuts, organized tax avoidance in the predominant financial sector, and most of all the sharp falloff in economic activity from the deepest dive in employment in post war history.

Yes, there are longer term issues with which one must deal.  But to provide a medical analogy, when one has been hit by a bus and is in hospital, perhaps that is not the most opportune time to consider going on that long deferred diet and exercise program that you have been considering.  The time to undertake that is after you have recovered, or when you are in good health and normal condition.   Otherwise you might just end up back in hospital as the cure is worse than the malady, given the circumstances.

Now, I am not saying that stimulus is called for, or that Obama is doing a fine job, or that the economy is back to normal.  Anyone who has read this blog regularly should know exactly what I think about the imperative to reform the financial system and the political campaign funding process, which I consider the sine qua non to any sustainable recovery.

But I think it is important to note that what preceded Obama was also not working, not working at all.  Those policies led to a massive credit bubble, and a yawning problem in the economy that exploded roughly at the end of Bush' second term.  That is not to say that the phony surplus under Clinton was any better, and his own policies as articulated by Robert Rubin and Alan Greenspan that led to the first of the bubbles in tech.

A return to those policies of unfunded wars, tax cuts for the wealthy, privatization and deregulation for ideology's sake, the trickle down economic theory of packing the 'job creators' with excess wealth, and allowing fraud and the shadow banking system to run wild under the guise of efficient markets freedom, will lead to a similar result, of bubble and bust, and a growing inequality of power and wealth that will destabilise the political fabric of society.

The truth is often less comfortable than the oft-repeated lie, which is simpler and easier to understand, and more comforting in its reliance on reflexive primitive emotions. But the lie is always a trap and a snare, and a major impediment to improvement and well being.

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

And for the love of God, corporations are NOT people, and do not deserve primacy of the peoples' Bill of Rights. When a corporation can shoulder a rifle, or even offer a son or daughter to fight and perhaps die on a battlefield, and spill out its last measure of devotion for its country, then perhaps one might make such a thing equal in rights and protections to a living human being.

But since it is not a life, but an artificial construct, to give corporations equality, much less supremacy of place due to their collective power and wealth, over a living breathing person, is the act of a Frankenstein, and not of a thoughtful and sustainable democracy, but corporatism in its rawest form.

Federal current expenditures are general government final consumption expenditure and includes all government current expenditures for purchases of goods and services (including compensation of employees). It also includes most expenditures on national defense and security, but excludes government military expenditures that are part of government capital formation. Data are in current U.S. dollars.

It should be noted that in the latest quarterly update, which is not yet included in this table, the level of government expenditures has stabilized and is no longer in a sharp decline in relative growth.

"US Federal Government Current Expenditures is at a current level of 3.71T, up from 3.708T last quarter. This represents a quarterly annualized growth rate of 0.24%, compared to a long term average annualized growth rate of 7.27%."

Weekend Viewing: Declassified - Joseph Stalin And an Interview with Robert Service

A more general discussion of Stalin, Lenin and Trotsky by biographer Robert Service

Weekend Viewing: Inside Job by Charles Ferguson

(h/t Capitalism Without Failure)

Gold Daily and Silver Weekly Charts - Moral Hazard - With Liberty and Justice For Some

"These executives knew that they could take these huge risks and even break laws and pay no real price, and that’s what happened. It’s not just a travesty of justice that we haven’t punished them for past transgressions. The real danger is that we’re continuing to send the signal to the world’s most powerful financial actors that they don’t have any fear of criminal accountability when they commit these obvious crimes."

Glenn Greenwald

These are thinly traded markets in this holiday shortened week, and following on the end of quarter, the funds and trading desks were having their way with it.

Jobs Report came in light, which is no surprise, since the number one American export these days is fraudulent financial paper.

Long bullion, short stocks.

Silver just cannot seem to sustain a rally. Gold is struggling to break the downtrend as well.

See you Sunday evening.

SP 500 and NDX Futures Daily Charts

Weaker than expected Jobs Report for June had stocks in retreat after the end of quarter run up of the last week, and a false euphoria over a European solution.

Non-Farm Payrolls Report for June 2012 - Bush Slump and Obama Recovery, Still Weak

"Global megabanks have an incentive to deceive customers, including both individuals and nonfinancial corporations. Their size confers both market power and the political power needed to conceal the extent to which they engage in economic fraud. The lack of transparency in derivatives markets provides them with an opportunity to cheat, but the abuses are much wider – as the Libor scandal demonstrates.

The ripoff is not just of retail investors. Chief financial officers of major corporations should be up in arms. Boards and shareholders of companies that buy services from big banks should be asking much harder questions about all kinds of derivatives transactions – and who exactly is served by the terms of such agreements."

Simon Johnson, Lie More As a Business Model

The weak recovery from the depths of the economic slump caused by the credit bubble collapse continues, with 80,000 jobs added.

I did not notice anything unusual in the compilation and adjustments of the numbers.

If anything the number appear to be understated a bit.

The economy is moving from a housing centric focus to something else. But what is that something else to be?

That in large part is the problem.

Manufacturing? The global trade regime still suffers from labor arbitrage and exchange rate 'tinkering' in the mercantilist Asian countries.

Government is not growing but instead remains flat to down from the layoffs in the state and municipal sectors.

Service? The service sector is already outsized in comparison to the rest of the economy, and the jobs added there tend to be lowpaying on average, except for the unusually large salaries in the FIRE sector which is also shrinking as a result of the bubble.

If there was ever a need for a strong national policy to stimulate rebuilding of infrastructure this is it. And this is unlikely to happen because of the political gridlock in Washington, and the continuing power of the financial sector and corporate lobbies over lawmakers.

But as you know from reading this blog, the big drag on policy action and real economic activity is the stubborn corruption at the heart of 'the rotten financial system.'

Brown's Bottom: Why Gordon Brown Sold England's Gold On the Cheap To Bail Out the Banks

Although this is nothing new, as I and several others have reported this several times in the past, with a very nice documentary on it having been done by Max Keiser, this is still a very important article for two reasons.

First, it lays out rather nicely the gold panic of 1999 and Brown's Bottom, which is the low in the price of gold achieved by the dumping of 400 tons of gold into the world market at an artificially low price by the British government.

This was done apparently to bail out a bullion bank or two who were enormously and irretrievably caught short of gold by the carry trade.

Second, it provides a good description of the gold carry trade. When gold is leased out by a central bank, the bullion bank takes possession of it and sells it into the market, and invests the proceeds. At the end of the lease period, the bullion bank buys the gold bank in the open market and returns it to the central bank.

Although the gold likely never changes physical location in this process, the claim or title to the gold does change hands, although that change in claim may not be adequately reflected in the public records.

Although the author does not mention it here, there is some thought that the 'sale' of the central bank gold at private auction is in reality a paper transaction between the central bank and the bullion banks who are short leased gold from the bank, and are unable to return it without causing a price disruption in the world market.

This is something which could be easily cleared up with the kind of disclosure one might think is owed the people when their national heritage items are sold away by the government.

And again, although it is not mentioned in the article, Britain's gold depletion to save the private banks is infamous only because of the clumsy manner in which it was conducted. It is thought that several other European central banks have gold listed on their books which they no longer have, because of this pernicious habit of lending out the gold on the cheap to the banks, only to have it sold off in the market, never to return, leaving only a stack of paper promises.

And finally, the most intractable problem which the bullion banks face today is that no central bank has a stockpile of silver left with which to bail them out. So they are caught playing a shell game, robbing Peter to pay Paul, and living in dread of the day of reckoning when their schemes will be exposed, and the markets will go into default on their naked short positions.

Telegraph UK
Revealed: why Gordon Brown sold Britain's gold at a knock-down price
By Thomas Pascoe
5 July 2012

A great deal of Gordon Brown’s economic strategy would strike a sane man as troubling. Not a great deal was mysterious. The orgy of consumption spending, frequent extensions of the cycle over which he would “borrow to invest”, proclamations of the “end of boom and bust”: these are part of the armoury of modern politicians, of all political hues.

One decision stands out as downright bizarre, however: the sale of the majority of Britain’s gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today.

When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.

First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of “open government”, but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.

Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model. The price of gold was usually determined at a morning and afternoon "fix" between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.

The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.

It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.

One of the most popular trading plays of the late 1990s was the carry trade, particularly the gold carry trade.

In this a bank would borrow gold from another financial institution for a set period, and pay a token sum relative to the overall value of that gold for the privilege.

Once control of the gold had been passed over, the bank would then immediately sell it for its full market value. The proceeds would be invested in an alternative product which was predicted to generate a better return over the period than gold which was enduring a spell of relative price stability, even decline.

At the end of the allotted period, the bank would sell its investment and use the proceeds to buy back the amount of gold it had originally borrowed. This gold would be returned to the lender. The borrowing bank would trouser the difference between the two prices.

This plan worked brilliantly when gold fell and the other asset – for the bank at the heart of this case, yen-backed securities – rose. When the prices moved the other way, the banks were in trouble.

This is what had happened on an enormous scale by early 1999. One globally significant US bank in particular is understood to have been heavily short on two tonnes of gold, enough to call into question its solvency if redemption occurred at the prevailing price.

Goldman Sachs, which is not understood to have been significantly short on gold itself, is rumoured to have approached the Treasury to explain the situation through its then head of commodities Gavyn Davies, later chairman of the BBC and married to Sue Nye who ran Brown’s private office.

Faced with the prospect of a global collapse in the banking system, the Chancellor took the decision to bail out the banks by dumping Britain’s gold, forcing the price down and allowing the banks to buy back gold at a profit, thus meeting their borrowing obligations.

I spoke with Peter Hambro, chairman of Petroplavosk and a leading figure in the London gold market, late last year and asked him about the rumours above.

“I think that Mr Brown found himself in a terrible position,” he said.

“He was facing a problem that was a world scale problem where a number of financial institutions had become voluntarily short of gold to the extent that it was threatening the stability of the financial system and it was obvious that something had to be done.”

While the market manipulation which occurred when the gold reserves were sold was not illegal as the abuse at Barclays may have been, the moral atmosphere in which it took place was identical.

The crash which began in 2007 and endures still was the result of an abdication of responsibility across the financial sector. This abdication ranged from the consumer whose thirst for goods pushed him beyond into grave debt to a government whose lust for popularity encouraged it to do the same.

Responsibility is evaded by all bar those on whose shoulders it ought to rest. The gold panic of 1999 was expensively paid for by the British public. The one thing politicians ought to have bought with that money was a lesson in the structural restraints which needed to be placed on banks now that the principle that they were ultimately public liabilities had been established.

It was a lesson which could have acted to restrain all players in the credit market boom of the 2000s. It was a lesson which nobody learnt.

Gold Daily and Silver Weekly Charts - Metals Rigging Worse Than LIBOR

"Or one may say that there were no real human villains; that given the economic and political cues, actors would have been in the wings to come on and play the parts which circumstances dictated.

Certainly there were many others as reprehensible and irresponsible as those who played the leading roles. The German people were the victims. The battle, as one who survived it explained, left them dazed and inflation-shocked.

They did not understand how it had happened to them, and who the foe was who had defeated them."

Adam Fergusson, When Money Dies: The Nightmare of the Weimar Collapse

The loss of confidence in their money, their fiat currency, which to some people becomes the touchstone for all value in their life, is almost too difficult to adequately describe, and for most people too awful, unthinkable, to fully understand.

And yet it happens. I have seen it happen first hand in Russia. It is happening now again in Europe and elsewhere. And it will bring a sea change, and an anger and despair that is hard to imagine in advance in its enormity.

The work of one's life can be stolen in an instant by the modern money masters and their criminal accomplices, with a few touches on the keyboard and a newswire release. If you do not believe it is possible, have a discussion some time with one of the account holders at MF Global, or the holders of a tech stock post bubble.

This is the pernicious nature of a fraud, because it robs not only the confidence in the peculiar aspects of the con itself, but undermines the very confidence that allows the commerce of society among people to continue.

All the transactions of life are based on some level of confidence in the honesty of measures and the integrity of contracts and product representations.

And if that trust is sufficiently undermined, shaken to its foundations, the people will at first freeze up in fear and stop buying and selling, and then eventually rise up in anger looking for redress and justice, if they are still free to think and to act. 

And there are those that would welcome that crisis, and attempt to use it for their own ends. Anarchists. Demagogues. Oligarchs. They would subvert the Constitution and the rule of law, and create a new way for themselves and their adherents, a grab for resources and power, thereby subjugating the common people, whom they secretly despise, to their will to power.


Intraday commentary here.

SP 500 and NDX Futures Daily Charts - the Muppets Are Restless

Non-Farm Payrolls Report tomorrow. My forecast is that whatever the monthly number might be, high or low, it will be much ado about nothing. What is important is the trend, the quality of jobs, and median wages paid.

The people, primarily of Europe and the UK, are perturbed over the LIBOR scandal and its implications.

Americans for the most part, with a few significant exceptions, toddle on in blissful ignorance, although they have a sneaking suspicion that 'something is not right' and are feeling restless, ripe targets for demagoguery.

Volume on the exchanges are very thin, not unusual for a summer holiday week. And as Joe Saluzzi observes below, much of that volume is phony activity generated by the parasites of the HFT world.

The financial world is sick, in critical condition, infested with fees and frauds and cons. And no one is even sending flowers, so great is the denial.

Is this how it ends, not with a bang but a whimper? That is how the Soviet Union fell.

Taibbi, Spitzer, and Kelleher On LIBOR - But Even They Don't Understand the Bigger Picture

"Bleed, bleed, poor country!
Great Tyranny! lay thou thy basis sure,
For goodness dares not check thee!"

William Shakespeare, Macbeth. Act IV. Sc. 3.

The LIBOR scandal is shaking the remaining confidence that people have in the financial system.

It is the equivalent to rigging the US benchmark interest rates with advance insider knowledge to benefit the banks' personal accounts to the loss of everyone else.

 Oh wait, they already do that, don't they?

Bear in mind, the Federal Reserve is a private institution, owned and managed by the Banks. The government itself uses the bankers to achieve their own policy ends, both domestically and abroad, and turns a blind eye to their more brazen extracurricular privateering for their own accounts out of professional courtesy, and blackmail.

What is equally outrageous is the long term manipulation of gold and silver, which are also foundational benchmarks of the monetary system. 

The manipulation in the metals has been exposed for some time now, and is virtually in plain sight. 

The same parties involved in LIBOR are involved in manipulation across multiple markets, actively mispricing risk and misallocating capital to serve the greed of the privileged few.

And the pity is so few people get it.  But they will.  As I had forecast, this is the year of revelations.

When it comes out they will say, 'we did it for the sake of the system.' 

And don't be a sap, because after all, everybody knows.



(h/t Capitalism Without Failure)





"Separate But 'Equal'"

Synchronized Easy Money: Central Banks Cutting Key Rates - Denmark Goes Negative

"Decency, security and liberty alike demand that government officials shall be subjected to the same rules of conduct that are commands to the citizen. In a government of laws, existence of the government will be imperiled if it fails to observe the law scrupulously. Our Government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example.

Crime is contagious. If the Government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy."

Louis D. Brandeis, US Supreme Court Justice, Olmstead v. United States, 1928

Gentleman, start your presses, and rig the markets to both enhance the effect in some and to hide it in others.  And this produces a mindset towards manipulation in all the key market participants.

Bob Diamond is a sociopathic child of a monied culture of privilege and deceit, a collegiality of crime.

They may try to bury the stench of corruption in the banking system by further diluting the value of money, but this will not restore vitality to the real economy.  It will only continue the malicious trends and increase the misery of the people.  And this energizes the feedback loop of repression.

Eventually the monied interests must accept reform, but because of the credibility trap this will be something that is more likely forced upon them when they go too far.

US Non-Farm Payrolls Report for June on Friday. It may appear a little better than expected, or it may not.

The monthly figures, as are several key market indicators and prices, all a part of the show, masking the real trends at times like these. This was shown clearly in the manipulation of LIBOR by the Bank of England, in addition to the extracurricular privateering of the banks for their own accounts.

USAToday
Central banks worldwide cut key interest rates
By David McHugh, Associated Press
5 July 2012

FRANKFURT, Germany – The European Central Bank has cut its key interest rate by a quarter percentage point to a record low of 0.75% to boost a eurozone economy weighed down by the continent's crisis over too much government debt.

The move followed a rate cut by China's central bank and new stimulus measures by the Bank of England as global financial authorities seek to shore up a slowing global economy.

Stock markets rose briefly on the news, mainly because China's rate cut was unexpected. But the gains did not last long as investors seemed worried about the extent of the slowdown in the global economy. Germany's DAX was up 0.4% while the Dow futures were flat...


 

Reuters
Denmark cuts rates, one to negative for first time
By John Acher and Ole Mikkelsen
5 July 2012

* Central bank cuts main policy rate by 25 bps to 0.20 pct
* Cuts CD rate by 25 bps to negative 0.20 pct
* Keeps current account rate unchanged at 0.0 pct
* Lifts current account limits

COPENHAGEN, July 5 (Reuters) - Denmark's central bank cut interest rates by a quarter point on Thursday, shadowing the European Central Bank's action earlier in the day, in a historic move that put one of its secondary rates below zero for the first time.

"The interest rate reduction is a consequence of the reduction by the European Central Bank of its monetary policy rates by 0.25 percentage point," the Nationalbank said in a statement.  (a spiral of competitive devaluations of fiat currency - Jesse)

The Nationalbank cut its lending rate to 0.20 percent from 0.45 percent and lowered its certificates of deposit (CD) rate to negative 0.20 percent from 0.05 percent to match the ECB's move and to curb strength in the Danish currency... 

PBS Frontline: Money, Power, and Wall Street: Part Four

"Wall Street has lost its way. And it all began when the Banks started trading for their own profits, and not for their customers."

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

Watch Money, Power and Wall Street: Part Four on PBS. See more from FRONTLINE.

Reaction in the UK To This Morning's Bob Diamond Testimony

After the hearing, Conservative MP David Ruffley, a member of the Treasury Committee, said he was not satisfied with Mr Diamond's evidence.

"Either he was complicit or, frankly, incompetent," Mr Ruffley told the BBC.

He said he was astonished that Mr Diamond said he only became aware of the rate-rigging at Barclays last month.

"It was quite shocking testimony, in the sense that there was serious wrongdoing and he didn't know about it," the MP said. "Heaven knows what else was going on inside the bank."

BBC


"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."

John Dalberg Lord Acton

I found much of his testimony troubling when viewed within the context of what had actually happened, which is a long term criminal conspiracy involving many of the major Banks to 'fix' one of the public financial system's most important, foundational benchmarks.

One example of his dissembling is the finger pointing at the Bank of England,  which may have encouraged Barclays to jigger rates during the 2008 liquidity crisis. There should be little doubt that governments intervene in markets during crises. But they also turn a blind eye to much criminal activity in ordinary times as well, as a professional courtesy it appears.

This allegation of Barclays deliberately misstates and misdirects the history of LIBOR fixing.  For some three years at least prior to the crisis with evidence dating from 2005 the rigging of LIBOR proceeded. Felix Salmon of Reuters enlightens us on this little bit of prevarication. Defiant Barclays.

Is Mr. Diamond not only negligently incompetent but delusional as well, or merely a pathological liar?

The standard CEO defense is well known to the readers here, and to those who have closely followed the series of scandals from Enron to MF Global to JPM. The leaders of the companies are paid astronomical sums to run their firms and take credit for the results, but if anything should go wrong, they are never involved and know almost nothing, barely paying any attention at all to the business which they direct.

And they throw their employees, their shareholders, and the public under the bus.

There will be plenty of excuses made and defenses of a thoroughly rotten financial system offered. This is all a part of the credibility trap, and the corruptibility of even the best of us, and certainly of the worst.

Can you believe that there are those in the American Congress who are already calling for and engaged in the weakening and overturning even the little reforms that have been pushed through the formidable lobbying pressure of the Banks, as if the financial crisis and widespread bank fraud had not ever occurred but a few years ago.

Power not only corrupts, it also attracts into its service the weak, the morally ambivalent, the greedy, and the corruptible.

"There is no error so monstrous that it fails to find defenders among the ablest men...The danger is not that a particular class is unfit to govern. Every class is unfit to govern...The strong man with the dagger is followed by the weak man with the sponge.”

John Dalberg Lord Acton

Mr. President, Fix This Power Grid...

"The trouble with capitalism is capitalists; they're too damn greedy."

Herbert Hoover

Mr. President, fix this power grid, and bring it up to modern uniform standards of resiliency and excellence.

Put forward a coherent national energy policy that is robust enough to withstand natural disasters, the demands of changing sources, the requirements of clean air and water, and the manipulation of financial institutions who use their money power to prey on the natural resources and foodstuffs, taking the profits for themselves and charging their losses to the public through the Treasury and the Federal Reserve, turning every attempt at reform into a new con game for the one percent.

That would be a genuine renewal of the Declaration of Independence.

More than 1 million in U.S. still without power five days after storm

(Reuters) - More than 1 million homes and businesses in a swath from Indiana to Virginia remained without power early on Wednesday, five days after deadly storms tore through the region. The outage meant no July 4 holiday for thousands of utility workers who scrambled to restore power across the region. Much of the afflicted areas faced yet another day of scorching heat, with the National Weather Service forecasting temperatures from 90 Fahrenheit (32 Celsius) to more than 100 F (37.7 C) from the Midwest to the Atlantic Coast. .

The Defense of Fort McHenry

O! say can you see by the dawn’s early light
What so proudly we hailed at the twilight’s last gleaming?
Whose broad stripes and bright stars through the perilous fight,
O’er the ramparts we watched were so gallantly streaming?
And the rockets’ red glare, the bombs bursting in air,
Gave proof through the night that our flag was still there.
O! say does that star-spangled banner yet wave
O’er the land of the free and the home of the brave?

On the shore, dimly seen through the mists of the deep,
Where the foe’s haughty host in dread silence reposes,
What is that which the breeze, o’er the towering steep,
As it fitfully blows, half conceals, half discloses?
Now it catches the gleam of the morning’s first beam,
In full glory reflected now shines in the stream:
’Tis the star-spangled banner! Oh long may it wave
O’er the land of the free and the home of the brave.

And where is that band who so vauntingly swore
That the havoc of war and the battle’s confusion,
A home and a country should leave us no more!
Their blood has washed out their foul footsteps’ pollution.
No refuge could save the hireling and slave
From the terror of flight, or the gloom of the grave:
And the star-spangled banner in triumph doth wave
O’er the land of the free and the home of the brave.

O! thus be it ever, when freemen shall stand
Between their loved home and the war’s desolation!
Blest with victory and peace, may the heav’n rescued land
Praise the Power that hath made and preserved us a nation.
Then conquer we must, when our cause it is just,
And this be our motto: ’In God is our trust.’
And the star-spangled banner in triumph shall wave
O’er the land of the free and the home of the brave!

Francis Scott Key, 1814

Rhyme of History: The Banks, the City, and England

"From the time I took office as chancellor of the exchequer I began to learn that the state held in the face of the Bank and the City an essentially false position as to finance.

When those relations began, the state was justly in ill odour as a fraudulent bankrupt who was ready on occasion to add force to fraud. After the revolution it adopted better methods though often for unwise purposes, and in order to induce monied men to be lenders it came forward under the countenance of the Bank as its sponsor.

Hence a position of subserviency which, as the idea of public faith grew up and gradually attained to solidity, it became the interest of the Bank and the City to prolong.

This was done by amicable and accommodating measures towards the government, whose position was thus cushioned and made easy in order that it might be willing to give it a continued acquiescence. The hinge of the whole situation was this: the government itself was not to be a substantive power in matters of finance, but was to leave the money power supreme and unquestioned.

In the conditions of that situation I was reluctant to acquiesce, and I began to fight against it by financial self—assertion from the first, though it was only by the establishment of the Post Office Savings Banks and their great progressive development that the finance minister has been provided with an instrument sufficiently powerful to make him independent of the Bank and the City power when he has occasion for sums in seven figures.

I was tenaciously opposed by the governor and deputy—governor of the Bank, who had seats in parliament, and I had the City for an antagonist on almost every occasion."

William Ewart Gladstone

Gold Daily and Silver Weekly Charts

"We view gold as a currency, not a commodity. Its importance as a currency will continue to increase as the major central banks around the world continue to print money."

John Paulson, Business Week, June 28, 2012

The world will have to carry on while the Masters of the Universe go to the beaches for a holiday.

See you Wednesday evening.

SP 500 and NDX Futures Daily Charts - Another Low Volume Melt Up

There is an ECB meeting on Thursday, and the markets are looking for a 25 basis point rate cut.

The US markets will be closed tomorrow for the 4th of July holiday.

And Bob Diamond Resigns 'Under Pressure'

"And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

John Dalberg Lord Acton

What I hear is that Mr. Bob Diamond's arrogant defiance so outraged Whitehall, and so embarrassed the monied interests,  that the word went down to the Bank of England to show him the door, immediately as an example, in the Old Lady's role of making and breaking the major players in the City.

And for good measure, they encouraged the resignation of his recently promoted heir apparent, Mr. Jerry del Missier.

Mr. Diamond would have been lauded in the States, and offered a settlement and a wristslap, soft pillows and sweet praises by fawning lawmakers and the captive corporate media.

He will still have to appear before the government for questioning on Wednesday. That might be worth watching.

Someone should have cautioned him that the Jamie Dimon model of deriding the regulators and attempting to intimidate the government does not work as well in the UK.

The Tories may not be any more interested in serving the interests of their people, but they do have some measure of pride in their office and self-respect, of decorum, in comparison to Wall Street's bawds in the Congressional corporate campaign contributions bordello.

Coventry Telegraph
Diamond Quits As Barclays Chief
3 July 2012

Barclays chief executive Bob Diamond has resigned with immediate effect in the wake of the rate-rigging scandal.

The American banker, who has faced mounting calls to step down, said: "The external pressure placed on Barclays has reached a level that risks damaging the franchise."

He added: "I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."

The move comes after Barclays was fined £290 million by UK and US regulators for manipulating the Libor, the rate at which banks lend to each other.

Chairman Marcus Agius, who announced his intention to resign over the affair yesterday, will lead the search for a new chief executive immediately, Barclays said. (At Broadmoor Hospital? - Jesse)

Read more here.

"Power corrupts, and absolute power corrupts absolutely."

John Dalberg Lord Acton

Guardian
Bankers and the Neuroscience of Greed
Ian Robertson
2 July 2012


On 11 August 2011, Bob Diamond, chief executive of Barclays, delivered the BBC Today Programme business lecture. In it he declared that "culture" was the critical element in responsible banking, and the best test of it is "how people behave while no one is watching." We now know that banking failed the test and so must ask why, in Sir Mervyn King's words, "excessive compensation", "shoddy treatment of customers", "mis-selling" and "the deceitful manipulation of a key interest rate", flourished in the banking sector. Cognitive neuroscience can point to some answers.

Senior bankers hold enormous power, greater than that of many elected national leaders. Largely unaccountable except to occasional shareholders meetings and often quiescent boards, their power is much less constrained than that of democratically elected leaders. And given that power is one of the most potent brain-changing drugs known to humankind, unconstrained power has enormously distorting effects on behaviour, emotions and thinking.

Holding power changes brains by boosting testosterone, which in turn increases the chemical messenger dopamine in the brain's reward systems. Extraordinary power causes extraordinary brain changes, which in their extreme form manifest themselves in personality distortions, such as those seen in dictators like Muammar Gaddafi.

The "masters of the universe" who have arisen out of a deregulated world financial system were given unprecedented power that inevitably must have caused major changes to their brains. While power in moderate doses can make people smarter, more strategic in their thinking, bolder and less depressed, in too-large doses it can make them egocentric and un-empathic, greedy for rewards – financial, sexual, interpersonal, material – likely to treat others as objects, and with a dulled perception of risk...

Read the rest here.


AP
Diamond in the rough; Banker Bob falls on sword
By Gregory Katz
Jul. 3, 2012

LONDON (AP) — He was a poster boy for corporate arrogance, telling Parliament last year that the time for bankers to apologize had passed.

Now Bob Diamond is just the latest victim of growing public anger at a British establishment they regard as greedy and ethically challenged. Bankers, politicians and journalists have all felt the full force of the growing disdain at a time of economic troubles.

The hard-driving CEO of Barclays bank resigned Tuesday, buckling under massive media pressure and a few none-too-subtle hints from top politicians that his days at the top should be numbered.

In the few short days since Barclays was fined $453 million for its role in the LIBOR interest rate fixing scandal, Diamond, an American with a stratospheric pay package, came to symbolize everything wrong with international banking...

Read the rest here.

Credibility Trap: Barclays' Bob Diamond Threatens British Parliament With 'Embarrassing Revelations'

"Oh what a tangled web we weave,
When first we practise to deceive."

Sir Walter Scott, Marmion

This is the credibility trap for government regulators and officials who have played fast and loose with market manipulation when it suited their purposes in the past.

I wonder if Jamie Dimon has similar 'dirt' on the Congress and the regulators. JPM would be in a good position for that, given their past involvement with the Exchange Stabilization Fund and their major role in the metals markets.

The power brokers say that bribery is good, but blackmail is better, more reliable. And so it may be.

Let's see if Mr. Diamond can intimidate the British Parliament and make them dance to his tune. He has certainly thrown down the gauntlet as they say.

Financial Times
Barclays chief threatens to hit back
By Patrick Jenkins, Brooke Masters and George Parke

Bob Diamond is threatening to reveal potentially embarrassing details about Barclays’ dealings with regulators if he comes under fire at a parliamentary hearing on Wednesday over the Libor rate-setting scandal, according to people close to the bank’s chief executive.

“If he is attacked, he will fight back,” said one person familiar with preparations for the Treasury select committee hearing...

Read the entire story here.