04 March 2012

MF Global: What Happened to the Money - 'This Is Not a Boat Accident'


Money does not just 'vaporize' or go missing because of sloppy bookkeeping.  The crony capitalists and their friends would have you think that it was just an accident, or some unfortunate act of God for which no one can be held responsible.   Like the financial crisis in the world caused by massive fraud at the big Banks for which no one has been held accountable.

The facts suggest that the customer money at MF Global was stolen, twice.

First, it was stolen by the management of MF Global, who brazenly used it to cover their own gambling losses.

Then it was stolen by the recipients of the stolen money, probably the Banks and powerful financiers, who knew that MF Global was going under, and did not want to take the losses on their own unsecured claims.

So the system was twisted to hide the involvement of powerful figures with strong ties to the political system and multinational corporations operating out of New York and the City of London.

As Richard Dreyfuss said in the movie, Jaws, "Well, this is not a boat accident."

And until the people do something, say something, to stop it, this kind of wanton theft will almost certainly happen again.

CNN
Farmer faces planting season with seeds of distrust
By Wayne Drash
March 4, 2012

...Tofteland held the farm together after his father was killed, survived drought and the great flood of 1993. Then, commodity prices sank in the mid-1990s. And like most farmers, he has seen too many friends die young.

Such are the hazards of life on a farm.

But all that Tofteland has worked for was nearly lost in one fell swoop last October. This time, it wasn't a crisis brought on by tragedy or Mother Nature. It was the work of Wall Street and commodity power players in Chicago, a scandal that has become known simply as MF Global.

Tofteland had $253,000 in an account with the brokerage firm, money he planned to use to cover his farm's operating loan. As MF Global went bankrupt last fall, customers' segregated accounts were raided in clear violation of exchange rules. When the dust settled, more than 38,000 MF Global customers -- including thousands of farmers, ranchers and grain operators who used the firm to hold money for transactions on the futures market -- were out more than $1.2 billion.

On a recent February day, Tofteland points to the stirrups hanging in his barn. They've been there since the 1930s, when the first tractor arrived. Nearby, his fields stretch nearly to the horizon.

His seed bill last year was $230,000; fertilizer cost $150,000. In addition to his own land, he farms acreage he rents at a cost of $450,000. He has another $1 million tied up in equipment, plus four full-time employees. "We're talking big numbers, and you're taking all these risks," he says. "And you can get hailed out, droughted out, flooded out at any time."

That's why the MF Global scandal hurt so much: a financial tsunami that nearly wiped everything away. Tofteland had come to rely on the futures market. So eroded is his trust in the system, he hasn't used it since.

He notes he can track a hog from his farm to somebody's table. Yet somehow, he ponders, authorities haven't fully tracked the missing $1.2 billion, or who was behind it.

"It's either ignorance or fraud," he says. "Money doesn't vaporize. If my account is empty, somebody else's is full."

Tofteland opens the door to one of his four hog barns. More than 250 piglets scamper in pens in the climate-controlled barn. The smell is so wretched it takes every ounce of strength for a newcomer not to vomit. The analogy is inescapable: What stinks worse, a hog barn or ...?

Tofteland doesn't even pause to think. "I would say MF Global. Our money was stolen and nobody is being held accountable..."

Read the rest here.



In a cover up like this it is never the initial act, but almost always the subsequent actions to hide the truth, that festers, and can bring down corrupt organizations.



03 March 2012

Former Japan Government Officials Promoted AIJ to Pension Funds



Crony capitalism is one of the reasons for Japan's stagnant economy.

Their economic system is highly structured, and almost feudal in nature, organized around keiretsus. Crony capitalism in the States and the UK is more informal, gang-oriented, and fluid, more beneficial to a few powerful men than entire organizations.

But in both cases what makes it 'work' is the revolving door and mutually beneficial relationships between government and the corporations.

One key difference is that in Japan the power is held more by the organization, and not a narrow personal elite. There is also a much stronger 'safety net' for the public at large. Both societies tend to cover up their financial scandals involving the powerful: the Japanese out of a deep sense of shame, and in the West, out of a deep sense of personal entitlement.

In other words, Japanese crony capitalism it is not as predatory with respect to its own people as is seen in the West. Their policies are designed to procure advantage internationally. That is what makes this AIJ scandal so shocking to the Japanese public.

It has defrauded pensioners and involved western financial firms. We're not in Hokkaido anymore, Toto.

Even with their aging demographics, such protracted stagnation, when not attributable to an exterior force, almost always involves a serious policy error on the part of the fiscal and monetary authorities.

The Japan Times
Ex-insurance official plugged AIJ to pension pals
Saturday, March 3, 2012
Kyodo

A former official of the defunct Social Insurance Agency has revealed he used to recommend troubled AIJ Investment Advisors Co. to pension fund executives.

The former official said Friday that AIJ, which is believed to have lost some ¥210 billion in corporate pension money under its management, invested heavily in his consulting company and also paid fees to it.

He said he recommended AIJ to other former agency officials he met at pension fund seminars. While he denied forcing them into contracts, these former officials may have contributed to AIJ's expansion.

His firm received half its capital from AIJ, as well as some ¥6 million annually in consulting fees for about four years. AIJ also lent employees to his company and paid their salaries.

According to a labor ministry survey, 23 former senior officials of the agency, the predecessor to the Japan Pension Service, landed jobs at pension funds across the country after retiring between August 1999 and September 2010.

A pension fund in Hokkaido where one of the 23 retired officials was offered a post had a pension management contract with AIJ...

02 March 2012

A Closer Look At This Week's Intervention In the Metals Markets



Here is a somewhat lengthy video but is quite good.

It goes into a long discussion of bullion bank activity and leasing.

I think that the silver shorts are still staring into the abyss and are quite concerned about their precarious market positions.

But it could have been something more 'official.'

The recent rigging of the LIBOR market is not a bad model for the carry on effect of this market operation that I alluded to the other day. However, I think some of the participants who went along for the ride are getting set up as 'the Big Shorts' are trying to offset their untenable risk.

Silver looks like a ticking time bomb waiting to blow a hole in the paper markets.




Additionally, there was nothing unusual in the lease rates.




Gold Daily and Silver Weekly Charts



The metals continued to consolidate after this week's very calculated and heavy handed 'selling for effect.'