Pictures of an Exhibition in Policy Error - Without Oath or Honor

The growth in money supply is very strong, both in M2 and MZM, both broad measures of overall supply, each with a differing emphasis on duration.  Both are growing at around 7 percent year over year.   This is certainly in excess of the GDP, and the growth of consumer loans and bank credit, which is only growing at 2.5 percent year over year.

What is particularly disturbing is that the growth rate of real disposable income at this late stage of The Recovery™ is sub one percent, even as corporate profits, cash levels, and executive pay return to stratospheric levels for the large multinationals with large cadres of lobbyists and significant political influence through the revolving door.

I am not saying this is solely a Federal Reserve driven policy error.  Not at all.

Quite a bit of it is being driven by fiscal policy, and specifically by the Congress and a Wall Street friendly Administration.  This is not a New Deal, it is the Raw Deal.

But the failure of the Fed to act aggressively in conjunction with other regulatory agencies to reform the financial system, given the additional powers as regulator which they actively sought in the aftermath of the financial crisis for which they were a primary contributor, makes them equally culpable for the folly of this 'trickle down' approach.  And the 'hands off, see no evil' approach to widespread financial fraud and abuse that continues even today.

There is a credibility trap at work, that prevents those in leadership positions from addressing the real problems frankly and honestly. They will attempt to shift the blame and the pain to the people, but with the pay and privilege of leadership comes responsibilities and obligations, what at another time would have been lumped together as 'honor.'  

Oaths and the highest principles of the land are just pieces of paper, not allowed to stand in the way of the personal god of the day, gettin' paid.

And I think that the ruling elite have lost all sight and sense of the consequences of this in a frenzy of personal advancement and enrichment.

This is neither sustainable nor decent, and will not end well.

 

"I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I'm going to put it very bluntly. I regard the moral environment as pathological. And I'm talking about the human interactions that I have. I've not seen anything like this, not felt it so palpably.

These people are out to make billions of dollars, and [think] nothing should stop them from that. They have no responsibility to pay taxes, they have no responsibility to their clients, they have no responsibility to people [or] counterparties in transactions.

They are tough, greedy, aggressive, and feel absolutely out of control, in a quite literal sense. And they have gamed the system to a remarkable extent and they have a docile president, a docile White House and a docile regulatory system that absolutely can't find its voice. It's terrified of these companies.

If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I'm afraid to say... both parties are up to their necks in this.

...But what it has led to is a sense of impunity that is really stunning, and you feel it on the individual level right now. And it's very very unhealthy. I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language.

And I've have not seen it once. And that is shocking to me. And if they won't, I've waited for a judge, for our president, for somebody, and it hasn't happened. And by the way it's not going to happen any time soon, it seems."

Jeffrey Sachs, Address By Video to a Conference At the Philadelphia Fed, April 2013

As a Reminder, Tomorrow Is Options Expiration On the COMEX

The goal line defense at 1400 gold is more understandable if one remembers that this is an important week on the COMEX.

Tomorrow is an option expiration for gold and silver, and $1400 is a psychologically important level for gold.

Round numbers like 1400 tend to attract a lot of 'buy to cover' stop orders and other types of speculative betting. So a break out through 1400 could trigger a quick run higher of another 30 or 40 dollars.

And perhaps even more significantly, this is the last week of the August delivery period, and gold is in relatively short supply for delivery. At this point a quick rise in price is likely to attract more contract holders to take delivery, rather than encourage eligible bullion holders to switch their COMEX warehoused gold to the 'registered' for delivery category.

I have included a snapshot of the calls that are subject to expiration this week in gold, and their distribution by strike price.  There are about 8,800 calls between 1400 to 1425 that will be expiring this week.

This is only a small part of the picture, but I think it is more relevant than usual for the reasons cited above.

We'll see how the price action continues through this week, for a better idea of what is happening. But it is hardly what one might call fundamentally honest and transparent.

If the cap on price seems counterintuitive you must have an old fashioned concept of what the markets are for, with such quaint notions as supply and demand and price discovery. These markets are all about power and influence, and using gimmicks and positional power and privileged information.

Sometimes when a coiled spring releases, it does so with some extraordinary power.

COMEX Registered Gold Falls To a New Low As JPM Takes a Large Delivery From Scotia Mocatta

Registered (deliverable) gold on the COMEX fell to a new low as JPM took delivery of 28,809 ounces from Scotia Mocatta.

There were a few transfers from the Eligible to Registered category with the only one of note being 4,605 ounces at Scotia Mocatta.

This is activity that occurred on Thursday.  We will have the information on Friday next week.  Let's see if the higher prices have shaken any more gold loose from weaker hands.

Next week we will see an option expiry on the COMEX for the precious metals on Tuesday,  and the end of the August delivery period on Friday.

The 'owners per ounce' remains very high at a little over 48 potential claims for every ounce of gold in the registered (deliverable) category.  It will take higher prices to move more of the gold from 'eligible,'  or stored in an approved COMEX warehouse, to 'registered,' or available for delivery.

Although it remains fairly stable at around 7 million ounces, the drop in total gold from all categories in all COMEX warehouses from over 11 million ounces at the beginning of the year is stunning.  It takes a bit of work to get that gold back into the system.  And much of it seems to have headed to other shores, and may not be coming back at any price.

I think that in their arrogance and greed, the gold cartel may have gone a bit too far in their latest pricing gambit, and painted themselves into a corner.  Higher prices may cause more accumulation of physical bullion by the ETFs, and nothing seems to halt the strong demand for physical bullion from Asia.  The writing is on the wall.

Weighed, and found wanting.

Stand and deliver.

Moyers: America's Gilded Capital and Losing Democracy to the Predator Class

"The political class has reached some kind of critical mass in the 21st century. There is something going on in Washington that needed to be called out. I do not think it can be sustained, and I think it is indecent. It is not how Americans want their government and their capital city to be."

I strongly recommend that you watch this inside look at the culture of unwarranted privilege, unprincipled greed, and self-delusional narcissism amongst the ruling elite in Washington and New York.

There appears to be nothing, up to and including pardons for serious crimes and excuses made for genocide, that cannot be bought and paid for in the Gilded Capital of the US.

Welcome to The Hunger Games.




I think Mark should talk with Elizabeth Warren, and that perhaps the voters should send more people like her to the Congress.

America’s Gilded Capital
August 23, 2013

Mark Leibovich covers Washington, D.C., as chief national correspondent for The New York Times Magazine. In his new book, This Town, he writes about the city’s bipartisan lust for power, cash and notoriety.

It’s the story of how Washington became an occupied city; its hold on reality distorted by greed and ambition. Leibovich pulls no punches, names names, and reveals the movers, the shakers and the lucrative deals they make — all in the name of crony capitalism.