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Capitalism contains the impulse for self-destruction in the aversion to risk and the desire to control it. Risk is uncertainty, and uncertainty can engender fear.
By obsessing with what one fears, one brings about their eventual demise. I have seen this repeated in human institutions over and over again, both in direct experience and in the study of history.
We fear that freedom will be undermined by some exterior force, so we kill it first to save it. We fear that risk will erode our profits, so we ensure our profit by controlling risk and destroying the efficiency of the markets, thereby eliminating any real growth. But we have maintained the profits, for at least a short time, and in the end there is a furious struggle among the insiders to divvy up the remains and feed on the corpse.
Fear surrenders itself to control by dark powers, often precipitated by a traumatic event. Fear provides the rationale, the excuse, to suspend reason and conscience, and then the madness has its way with us.
Faced with the risk and rigor of 'free markets' and the drive to zero economic profit through increasing competition, there is the impulse to create monopolies, manipulate prices, and control information to line one's pockets.
It is the natural tendency for clever people to stretch the rules and even break them to gain an advantage over other participants. This is what makes the idea of the natural efficiency of free market systems so laughable. They work fine as long as there are no people involved in them. Freedom and justice take hard work and dedication, and are not the natural state of the world.
This is a basic principle of transactional systems, whether ownership resides in the capital or the labor end of the equation. It explains the quicker failure of state communism since it concentrated power in the corruptible few from the start rather than dispersing it more widely in 'the market.' It is the government of the few versus the government of the many. The one percent are the one percent, no matter the color of their flags.
Even better for the powerful is when the government can be subverted and brought into the picture to create the opportunities to obtain a license to collect rents.
This 'partnership' between corporations and the government is what is called 'crony capitalism' or corporatism. The power base shifts back and forth between the participants, but always it is based on the monopoly control of markets.
This is what Simon Johnson referred to when he said that a coup d'etat had occurred in the States. And it is where we are today.
The US has encountered this problem many times in its relatively short existence, under various names and characters. The 'Trusts' at the beginning of the 20th century were an example of this. They were reborn as the Trading Pools and Financial Trusts, the funds of funds, of the 1920s.
So, is the solution to eliminate government, the law? Destroy it so it can be reborn again, naturally better? What a romantic notion. This only eliminates the middle men, and puts the powerful directly in charge in the manner of an oligarchy. This was the solution chosen by Italy, Germany and Japan in the aftermath of the last Great Depression.
The US can recover from this current impasse as well. But it will take something to change it, because the impulse for change is not likely to come from the status quo. They are not that wise.
"We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time."
Bill Gross
Crony capitalists are never interested in the risk and rigor of 'free markets,' only in the surety of monopolies and obtaining a license from the authorities for extracting rents from them. They alternately create artificial abundance and scarcity to influence prices, with the objective of lining their pockets.
This move by JP Morgan to enlarge their warehouses and stockpile key commodities helps to demonstrate the growing scramble for resources which is a recurrent theme, and at the same time it shows the pernicious influence of mingling government guaranteed customer money and subsidized Federal Reserve funds with what is essentially private speculation.
JP Morgan is a bank that was rescued by public funds, and that exists at the sufferance of the US government and their money. Some of the pampered princes of the Republic would like to turn the financial sector into a new House of Lords.
Still, there may be a mutual interest between the government and their bankers in influencing the world's flow of key commodities. And if a few friends become wealthy in the process, well, so much the better.
Reuters
JP Morgan adds muscle to metal warehousing money
By Josephine Mason and Susan Thomas
NEW YORK/LONDON (Reuters) - Investment bank JP Morgan (NYSE:JPM - News) is bulking up its metal warehousing facilities in Rotterdam and Chicago, industry sources say, in a business that consumers complain deliberately delays delivery of metals to boost revenues from rent.
London Metal Exchange rules allow warehouse companies to release only a fraction of their inventories per day, much less than is regularly taken in for storage, creating long queues to get metal out and guaranteeing rental income.
JP Morgan's aim is to fill its Henry Bath warehousing arm with inventory in the two port cities large enough to rival trading house Glencore's Pacorini and U.S. bank Goldman Sachs'(NYSE:GS - News) Metro.
The Pacorini and Metro facilities in Vlissingen, Netherlands and Detroit combined are estimated to hold around half of the global London Metal Exchange (LME) aluminium stocks which stand at just under 5 million tonnes.
Sources at JPM say the bank is pursuing a strategy to consolidate warehousing in the two locations to create the next Detroit or Vlissingen. A JPMorgan spokesman declined to comment.
"They (JPMorgan) are rebuilding stocks again," a high-level industry source in the Netherlands said.
Complaints about long queues, particularly in Detroit, prompted the LME to raise minimum delivery rates - 3,000 tonnes a day for operators with stocks of over 900,000 tonnes in one city - but traders and analysts say the new rules will make little difference when they come into effect in April.
The JPM strategy is likely to inflame consumers and traders already angry about the influence of warehousing companies on the flow of metal.
J.P. Morgan is already preparing to store aluminium in Europe's largest port, Rotterdam, where it has over 30 sheds.
The bank, the largest by assets in the United States, was behind the cancellation of 500,000 tonnes of LME aluminium warrants in Vlissingen, just 50 miles away from Rotterdam, on December 21, traders and warehousing sources told Reuters. Cancelled warrants show metal is earmarked for delivery.
"They are taking material from producers or traders, or trying to get it out of the market place - they were lucky to get 500,000 tonnes out of Vlissingen -- and moving it to Rotterdam," said the industry source.
Citigroup analyst David Wilson said there had been a large number of copper cancelled warrants in St Louis and New Orleans, many carried out by JP Morgan.
"It wouldn't be a surprise if they wanted to move metal into their own warehouses," Wilson said. "The cancellations don't fit in with the underlying demand picture."
It is unclear how much metal JPM wants to eventually hold in the two locations, but to compete with its two closest rivals, it will require millions of tonnes, most likely aluminium which has the most ideal characteristics for long-term storage deals.
Glencore drove Pacorini's emergence as a dominant force in New Orleans and Vlissingen. The Dutch port holds nearly one million tonnes of aluminium.
Traders said Metro holds most of Detroit's 1.4 million tonnes of aluminium stocks, and is ideally located to attract surplus aluminium in North America.
There were other signs in recent weeks that the bank's focus has shifted after traders reported JPM sold a large number of warrants, or ownership titles to metal, to release funds.
"JPM have dumped a large amount of warrants or sold very cheaply," a senior source at a warehousing company said. "They've let go of a lot of warrants they were holding onto."
Read the rest here.
You have to read this latest news item with a discerning eye, and in the context of what has gone on so far including the piece the other day from the Wall Street mouthpiece that the money simply 'vaporized.'
It is a variation of the spin. No the money is not vaporized, but its complicated. There are lots of possibilities just too complicated to explain to the public, and you have to be patient, little customers, while a pile of creditors' lawyers sit on your money until you hopefully go away.
Real journalism and critical news analysis is apparently dead. The mainstream media outlets merely repeat sound bites supplied to them.
But one has to ask themselves, could this situation become more ludicrous? Does anyone actually buy this clumsy handling of serious wrongdoing and gross seizure of customer assets? The professionals and those in the know do not, and it is putting a chill on the markets, and people are afraid to talk about it above a whisper. It's an old story, of droit du seigneur, of the lord of the manor drunk with power doing something unspeakable.
Why are these people so afraid to tell the simple story of what actually happened? Because they are falling all over themselves to avoid talking about 'he who must not be named.'
Still, it is as I forecast the case would progress all the way back in November.
NY Times
After a Delay, MF Global’s Missing Money Is Traced
By BEN PROTESS and AZAM AHMED
January 31, 2012, 9:42 PM
Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing, people briefed on the investigation said.
While authorities have traced hundreds of millions of dollars to banks, MF Global’s trading partners and even the firm’s securities customers, investigators remain uncertain about whether they can retrieve the money.
Some recipients were entitled to payouts from MF Global, which could make clawing back the money difficult. For instance, securities customers withdrawing their money as MF Global began to collapse were paid from accounts that belonged to futures clients, according to other people briefed on the matter.
But the Commodity Futures Trading Commission, the regulator leading the investigation, will examine whether anyone accepted customer cash without verifying the source of the money, one of the people briefed on the matter said.
This person and others who discussed the case did so on the condition of anonymity because the investigation is not public.
The findings shift the pressing question surrounding the collapse of MF Global from what happened to the money to how to recover it and who is at fault.
Answers will not come easy. A significant impediment has been clashes among the parties trying to resolve the MF Global mess: three federal agencies and two bankruptcy trustees.
At the center of the squabbling are e-mails sent by top executives at MF Global — communications that have been withheld from federal authorities, according to the people briefed on the matter. Investigators suspect the e-mails, sent just before the firm collapsed, contain clues about who transferred the money from protected customer accounts.
The clashes stem from the conflicting interests of those involved. James W. Giddens, the trustee overseeing the liquidation of the brokerage unit, is charged with returning money to wronged customers. That mission is at odds with the interests of Louis J. Freeh, the trustee overseeing the liquidation of the firm, who is seeking to recover money for MF Global’s creditors. (JP Morgan at the head of them - Jesse)...
“We understand the frustration of customers, but the C.F.T.C. must take the necessary time — however long it takes — to get to the bottom of what happened at MF Global and take appropriate actions,” the agency said in a statement on Tuesday. (That could be a while. They have been sitting on their investigation of the silver market for over three years - Jesse)
Customers, including farmers, hedge funds and other small traders, have been very frustrated with the pace of the investigation and the dearth of updates about their missing money...
Read the rest here.
"Nothing is so unworthy of a civilized nation as allowing itself to be governed without opposition by an irresponsible clique that has yielded to base instinct."
Sophie Scholl
"Many people think of our times as being the last before the end of the world. The evidence of horror all around us makes this seem possible.
But isn't that an idea of only minor importance? Doesn't every human being, no matter which era he lives in, always have to reckon with being accountable to God at any moment? Can I know whether I'll be alive tomorrow morning?
A bomb could destroy all of us tonight. And then my guilt would not be one bit less than if I perished together with the earth and the stars.”
Sophie Scholl
The White Rose
First Leaflet
Munich, 1942
We will not be silent.
Nothing is so unworthy of a civilized nation as allowing itself to be governed without opposition by an irresponsible clique that has yielded to base instinct.
It is certain that today every honest German is ashamed of his government. Who among us has any conception of the dimensions of shame that will befall us and our children when one day the veil has fallen from our eyes and the most horrible of crimes - crimes that infinitely outdistance every human measure - reach the light of day?
If the German people are already so corrupted and spiritually crushed that they do not raise a hand, frivolously trusting in a questionable faith in lawful order of history; if they surrender man’s highest principle, that which raises him above all other God’s creatures, his free will; if they abandon the will to take decisive action and turn the wheel of history and thus subject it to their own rational decision; if they are so devoid of all individuality, have already gone so far along the road toward turning into a spiritless and cowardly mass - then, yes, they deserve their downfall.
Goethe speaks of the Germans as a tragic people, like the Jews and the Greeks, but today it would appear rather that they are a spineless, will-less herd of hangers-on, who now - the marrow sucked out of their bones, robbed of their center of stability - are waiting to be hounded to their destruction.
So it seems - but it is not so. Rather, by means of gradual, treacherous, systematic abuse, the system has put every man into a spiritual prison. Only now, finding himself lying in fetters, has he become aware of his fate.
Only a few recognized the threat of ruin, and the reward for their heroic warning was death. We will have more to say about the fate of these persons. If everyone waits until the other man makes a start, the messengers of avenging Nemesis will come steadily closer; then even the last victim will have been cast senselessly into the maw of the insatiable demon.
Therefore every individual, conscious of his responsibility as a member of Christian and Western civilization, must defend himself as best he can at this late hour, he must work against the scourges of mankind, against fascism and any similar system of totalitarianism.
Offer passive resistance - resistance - wherever you may be, forestall the spread of this atheistic war machine before it is too late, before the last cities, like Cologne, have been reduced to rubble, and before the nation’s last young man has given his blood on some battlefield for the hubris of a sub-human. Do not forget that every people deserves the regime it is willing to endure!
Please make as many copies of this leaflet as you can and distribute them.
"I was satisfied that I wasn't personally to blame and that I hadn't known about those things. I wasn't aware of the extent of the crimes. But one day I went past the memorial plaque which had been put up for Sophie Scholl in Franz Josef Strasse, and I saw that she was born the same year as me, and she was executed the same year I started working for Hitler. And at that moment I actually sensed that it was no excuse to be young, and that it would have been possible to find things out."
Traudl Junge, Im toten Winkel - Hitlers Sekretärin
