skip to main |
skip to sidebar
The markets were trying to shake off the weak bank earnings this morning and a post option expiration hangover, when shortly at 9 EDT the SP Ratings Agency changed its outlook on US sovereign debt to negative.
That sent the markets reeling, and the games played intraday were remarkable indeed.
There is intraday commentary on the downgrade and its market impact here
The timing of the downgrade seemed political to me, a note from the monied interests tagged to the Ryan plan which has passed in the Republican dominated House of Representatives.
What next? I expect the markets to try and shrug this off, and take a cue from the late day buying in the futures markets which removed much of today's losses. Like a hopeless drunk, these jokers will not stop until they get behind the wheel and hit the wall.
When does public policy go too far and become an instrument primarily serving private fraud?
I have had this video on the manipulation of the debt markets by the Fed in the Matières à Réflexion links since last week, but moved it here on request because apparently many missed it, and did not understand its importance, the implications.
It is a fairly good example of the rationale for the Fed and its member banks dealing in paper derivatives to manage perception and attempt to 'manage' longer term interest rates. And by extention it also provides the reason and even some of the means in manipulating the price of gold and silver.
Papers such Gibson's Paradox by Larry Summers demonstrate a belief that the price of gold and silver have a definite correlation to long term interest rates, which the Fed is admittedly trying to 'shape.'
One may make the argument that this correlation between gold and the bond no longer exists since the US is no longer on a gold standard, and futher, just because the FED may use derivatives to distort long term rates, that does not mean the Fed and their multinational banking associates are doing the same thing in related markets such as gold, silver, stock prices, LIBOR, etc. It is circumstantial.
But in point of fact the evidence from the Fed's own transcripts, and quotes from various members and bankers, demonstrates that the perception of at least gold and silver in the market is still an active concern and of serious interest to the Fed. So now we have motive and means, and indications in half hidden documents that it is indeed occuring.
Why else would JPM short multiples of the entire supply of silver that probably exists in the world, while also holding massive positions in the derivatives markets, except for the purpose of manipulating the prices?
The recent stonewalling on the release of the relevant documents by the Fed is not frivolous, as well as the antics at the CFTC concerning position limits and investigation into the silver market. What starts out innocently enough obtains a life of its own, and the cover ups ensue, along with the abuses and private profiteering as we saw in the TALF disclosures, and the situation becomes much greater and more far-reaching than its original intent. A well intentioned program can indeed become a money machine for looting the public trust.
The problem of course is that while the Fed and its associated private banks can never run out of their own paper, or the ability to write derivatives on that paper, they can and may very well run out of physical gold and silver to support their financial engineering, if the demand is made to 'stand and deliver.' This has long been identified here as one of their weak spots which may be reached before the more extreme limit of the value at exchange of the bonds and the notes of zero duration, the dollar.
It is never so much the original scheme that brings them down, but it is almost always the ever-expanding cover up of personal larceny.
In other words, gold and silver bullion may expose the weakness of the Treasury, and the Fed and their member banks, and thereby restrict their ability to operate freely in managing perception by manipulating prices and rates. This is why they hold such an animosity to it, and attempt to conceal so many of their dealings in it, even promoting hysterical attacks from friendly sources in the establishment media.
Related: More on the Literal Bernanke Put- FT
This is the same SP whose ratings were for sale to the banks throughout the build up to the financial crisis, and which has largely escaped investigation and indictment. So, even though their opinion here may be valid, how are we to know that it has not been bought again, with regard to timing and impact?
And of course the word of the downgrade was held completely confidential, even from insiders, right?
As I had cautioned last week, something wicked this way comes. Its tracks were on the tape, most likely in word leaking out to insiders who succeed as they usually do, not in any personal merit, but by breaking the rules for their benefit.
That is the problem in dealing with an unreformed, unindicted, and corrupt financial sector. Who do you trust? And this has a decided drag on economic recovery.
The failure to reform when he held the mandate was Obama's greatest mistake. But others made the same mistake, from the Congress to the Fed. Their motivation for this policy error will be the subject of much future speculation.
This negative outlook is not a surprise. It is consistent with a growing crisis in the US.
Notice that gold and the Swiss franc, and to a lesser extent silver, were safe havens choice of the people. The bonds were hit especially on the long end, with a flight to the short end. Stocks were hammered in the flight from risk down to support in a fairly cynical manner it seemed to me.
Of course in the secondary action the wiseguys took the opportunity to stage a calculated bear raid on the metals. Kind of like machine gunning the refugees and burning the life boats. Their criminality knows no bounds, has little self restraint, and is lawless, respecting nothing but power.
"Give me control over a Nation's Currency and I care not who makes its Laws."
I am not certain of the attribution of this quote, but as my old school economics professor demonstrated to us again and again, it is certainly the case as we analyzed the development of the European Union and World Trade Organizations in a transnational fiat currency regime.
There is opportunity in these short term swings but only for those will a cool head tempered by experience. In the short term fraudulent pricing and manipulation is widespread, with deceit as their currency. For most it is better to hold to your long term trend investments and not be overextended.
I shifted the weighting in my trading portfolio out of the overweight to the short side taking profits, to overweight bullion on the dip, still hedged.
If you wonder why these bear raids happen, and why the paper bullion bankers defend certain price levels so viciously, often stepping in to hold gains to one or two percent in a day, this may help.
"Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said."
University of Texas Takes Delivery of Bullion
The US markets cannot withstand a determined run on the assets which the banks, and funds, and probably even the Fed have already sold. The financial sector is a deepening cesspool of cover up and deception resembling a confidence scheme, an accident waiting to happen. If it did not involve so many of the well placed and powerful it would have already fallen of its own weight and arrogance.
What more can I do, what else is there to say? What wonders will persuade a people determined to be as gods? What, indeed, is truth, in times of general deception, when even the caretakers cannot be trusted to hold their sacred oaths and duties? And yet this is nothing, compared to what is to come. Walk carefully in the light of God's love, holding to His tender mercies, unless you be misled, gaining some objects and advantages, but losing yourself.
"Let him who walks in the dark, who has no light, trust in the name of the Lord, and rely on his God." Is. 50:10
AFP
S&P adopts 'negative' outlook for US debt
WASHINGTON — Ratings agency Standard & Poor's on Monday revised its outlook on US sovereign debt to "negative" from "stable", citing Washington's looming debt and fiscal deficits.
"Because the US has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a statement.
