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Plenty of money printing, and therefore money supply growth, but little of it is from organic expansion. Printing money in low growth environments creates asset bubbles and a top down wealth effect for the upper crust. It also facilitates speculation and fuels soft frauds.
The US economy is a broken machine, burdened by an oversized financial sector and policy failures abounding in taxation, trade, and regulation.
Unfortunately the governance failures have their roots in crony capitalism and a variety of white collar crimes, disinformation campaigns, and public ignorance, so they are going to be difficult to surmount.
The recurrence of evil, whether it be in physical or economic privation, never fails to surprise one with its lack of originality, if not its sheer banality. It is rarely elegant or complex, but merely dull and ignorant, a brutish force, self-centered, animalistic, and cruel. Beneath the surface the madness lurks, in dark places and hardened hearts, awaiting its hour to rise once again.
"The receptivity of the masses to information is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must repeat these until the lowest member of the public understands what you want him to understand by your slogans...The law of selection justifies this incessant struggle, by allowing the survival of the fittest. Christianity is a rebellion against natural law, a protest against nature. Taken to its logical extreme, Christianity would mean the systematic cultivation of the human failure."
Adolf Hitler
Although there were some efforts to push down price in the thin hours, the debt ceiling showdown has a bid under the metals, so most of the action was in capping the price to keep it manageable. So what next, declare victory and go home?
When Comex options expire, the holder receives an active long or short position in the contract the next day. And so we will have quite a few new futures contracts issued tomorrow given the number of 'in the money' calls.
The buyer of an option on a future contract is taking limited risk. Conversion to the actual futures contract itself, however, leaves the owner with substantial downside risk, so that holder often places a 'stop loss order'.
The Street crawlers can see those stops and their clustering and will often test that number and give the newbies a 'gut check' to see how serious they are.
But against that is the debt ceiling drama, so it might be quite quick unless there is some news being spread, even if it is only behind the scenes. There is quite a bit of that leakage going on in Washington these days.
The Dollar took a bit of a dive today, but is still above the critical support levels.
The actual mechanics of the debt ceiling timing are a bit more complex than many believe. Technically the Treasury can muddle along until August 15 I think given the need for new funding issuance, although the Credit Rating cartel has the power to rattle their pens and frighten everyone. But these things tend to involve anti-climactic moments and a dragging on. So timing is tough.
Certainly a deal or delay will be sought for Sunday evening before the Asian open. It is going to be a tough trade to decide how to go into the weekend.
I think the toughest trade might be to decide what to carry into the weekend.
I can't recall this amount of bare faced lying and misleadingly hysterical headlines in quite some time. Well, that's a currency and class war for you.
PSLV is carrying such a large premium, and is so low on cash holdings indicating a secondary offering may be coming, that I would not buy it now personally at this price in lieu of other ways to play silver for a trade, without the intention of taking physical delivery at some point.
Additionally I would never own GLD or SLV except for the most cynical day trade, if then. But that is a preference.
And the O-Man can be Aunty.
“Great occasions do not make heroes or cowards; they simply unveil them to the eyes of men. Silently and imperceptibly, as we wake or sleep, we grow strong or weak; and at last some crisis shows what we have become."
Brooke Foss Westcott
Gold and silver look particularly good in times of thuggery, deception, and the willful arbitrariness of the powerful to promote their own interests, the public be damned.
However, the markets are still clearly signalling that they believe that cooler heads will prevail, and there will be a fresh opportunity to game the market and steal from the many.
The US made a tragic mistake in not pursuing real reform earlier on, and speaking out for it forcefully when they had the momentum and opportunity. Co-opting the reform movement and turning it into a tool of the monied interests was a stroke of genius.
The best lack all conviction, while the worst are filled with passionate intensity.
Tomorrow is option expiration on the Comex. I hear that there are quite a few call options open around the 1600 strike. So we would expect the price of gold to get hammered down below 1600 sometime this week.
When options are in the money, they are converted into open futures contracts. So there may be a lot of new holders of futures contracts who get a stiff gut check on Wednesday through Friday, if it does not come tomorrow.
"When you spread out your hands in prayer, I will hide my eyes from you; even if you offer many prayers, I will not listen. Your hands are reddened with blood; wash and make yourselves clean. Take your evil out of my sight. Stop doing wrong, learn to do right. Seek justice, encourage the oppressed...
See how the faithful city has become a harlot. She once was full of justice; righteousness used to dwell in her, but now it is filled with destroyers. The silver of your goodness has become waste, the wine of your virtue is diluted. Your rulers are rebels, companions of thieves; they love bribes and seek after gifts...
My kingdom will be restored by justice; those who repent will be reborn. Those who desert the Lord will be consumed by shame, but rebels and sinners will be cast out into the void, forever."
Isaiah 1:15-29
Great drama in Washington. Does anyone recall that there was a budget surplus in Washington not ten years ago? What transpired to change that is unfunded wars on two fronts, and tax cuts for the wealthy to promote growth in support of a trickle down economic theory that is a hoax. And of course the financial crisis from the banking bubble and the decline in employment and associated tax revenues.
The markets are signalling that they do not think the US will default. But as the week progresses, and if nothing changes, look for a possible flash crash to signal to Washington that their apparent nonchalance is misplaced.
They could accidentally stumble over the cliff, and there are some large financial firms and powerful people that would welcome this.
Speaking of tumbling over a cliff, Netflix is getting hammered after the bell on a brief glimpse of reality in their quarterly financial report. I spent years as a product manager, doing all the planning, operations and pricing. When I saw their new pricing proposal I assumed that they were planning on exiting the DVD business for some cost based strategic reason. If this is not the case, someone should lose their job.
If I were ever to give any advice to a leader in troubled times it is this:
"I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts."
Abraham Lincoln
For all his eloquence and presence, Obama is one of the more timid and abstract communicators I have seen. And this makes people suspicious of him. It makes it appear that he has something to hide. Does he even know how to use a visual aid like a chart? He needs to stop being overwhelmed by the spin in his message, and start using it to convey real information and thereby make his case. There are a few intelligent people out there, but he is losing them quickly.
I think this is an interesting discussion and worth a listen.
I agree with quite a bit of it. I could be wrong, but I do not think that the Obama Administration has willfully passed up a few convenient ways to circumvent this debt ceiling impasse, two of which were relatively doable, and the last being a 'little more radical.' I looked into each one and they all appeared to be risky and improbable of success.
Invoking the 14th Amendment to nullify the debt ceiling would undoubtedly provoke a Constitutional challenge by the Republicans. It would go to the Supreme Court and would likely be overruled there after generating considerable uncertainty, given the current makeup of the court. The debt ceiling has been in place for a long time, since 1917 as I recall, and it would not be easily dispensed. I do think it is a bad law, and should be nullified, but by legislation, not by the judiciary and not in a crisis of this sort.
Selectively defaulting on Treasury debt being held by the Fed is also probably a non-starter because the ratings agencies have said that this would be considered a default, and would trigger a CDS event. Selectively defaulting even if the Fed agreed would be a far-reaching event. I did consider some action by the Fed to write off the debt on its own accord, but I don't see that happening as it would appear to be overtly partisan. This is more an artificial political fight than a genuine financial crisis. If you don't understand this, you are not understanding the ebb and flow of the drama.
As for the third alternative, slightly more complex, it involves the Mint creating a falsely valued asset, like a trillion dollar platinum coin, and selling it to the Fed at face value. The Constitutionality of this would also be challenged, as it would be a form of fraud and pure money printing. I think it is much more awkward than having the Fed just buy more Treasury debt in the open market and send the interest back to Washington, ex expenses, which they already do. But that does not help with the debt ceiling.
There is a possibility that Obama could resort to Executive Order after the deficit ceiling deadline passes, but that would be a very clumsy political maneuver. It will be interesting to see if the CDS are triggered, in which case the government may have to nationalise some of the banks. Hardly a desirable outcome.
So I don't see a viable solution in any of these three suggestions, and view them as being clever, without being practical. Just as political people rarely understand the finer points of economics, so the economists rarely understand the finer points of Washington politics.
I hasten to add at this point that Yves is far more knowledgeable in the financial area than I am, and I have the utmost respect for her. She has knowledge and integrity, which are rare commodities to find in combination these days. I do not want this to be viewed as a criticism in general, but it is an important point since some do believe in these alternatives, and they did seem to play into some of her later thinking. Yves has probably forgotten more about finance than I know, and her book is an absolute gem and a must read.
I struggle with the question of Obama's motives, that he always wanted to cut entitlements. I don't agree with this based on what I have seen, although it is difficult to assess someone's motives. I think this theory is weakened because there really is not any 'easy way out' yet shown, and the House Republicans are hardly allies of Obama. In fact, they have shown a determination to make this a political event, and to stretch it out if possible into the 2012 elections.
I cannot imagine that he wants this, and if anything has been bending over backwards to try and avoid it. He is a compromiser, non-confrontational, and although one would like to think that there is a method to his madness, and there may well be, in fact we just don't know what his motives are. I suspected he was positioning the Republicans to take the blame, but the excesses and extortion are their own. Like Clinton, he is trying to force them to eat the consequences of their actions. Hence the exaggerated gestures of compromise to look reasonable. He could be sincere, but since politicians rarely are I would not count on it.
The Republican right and the financiers are indeed looking like extortionists, as they mention in this video, and setting up opportunities to threaten the operational integrity of the country in order to get their way, in support of ideas not accepted by the majority of the people. They can obstruct, they can use the threat of damage, but they cannot win by normal means because they are a minority. But since they are an ideological minority they are willing to use methods not usually considered appropriate, and that are dangerous and potentially destructive.
This debt ceiling 'crisis' is not an aberration but a recognizable modus operandi from the new Right's playbook, cutting taxes for the wealthy, and then declaring a financial crisis, and seeking to gut social and popular policies and laws and organizations which the monied interests oppose. It is using crisis to circumvent the political process. This is being done at the state level in Wisconsin and New Jersey, for example.
I was involved with politics on the periphery, and did some work in Washington years ago. I don't have any inside knowledge or insights anymore, but I like to think I am seasoned enough to figure out what is going on. And I don't think it is honorable or in the best interests of the country.
The apparent lack of a viable debt deal sent stocks dropping and gold soaring in Sunday evening NY trade.
Gold needs to break out from here, or risk a correction back down to support. The reverse is the story for broad equities.
Notice how the SP futures dropped right down to key support at 1322, to mark it firmly. While stocks remain above the 1320 level, Wall Street does not seriously believe that a budget impasse will prevail.
If stocks break down below 1300 we could be in for a Nantucket sleigh ride on the world market. And below 1290 it might be time to head for the exits.
I thought all along that the teenage drama queens in Washington would take this into last minute sturm and drang to impress their constituents that they are major players with serious concerns and must be appreciated.
The financiers like to create crises when they wish to get their way. It is always a mistake to give in, since it just encourages them for the future.
As a reminder it is Comex option expiry this week.
It is said that during the Roman Triumph, in which a great hero was recognized by a procession through the city, generally for a military victory, a slave was positioned behind them, whispering in their ear:
"Memento mori," roughly speaking 'Remember that thou art a man.'
As you may recall, Rome had become a Republic, after the overthrow of its monarchy, and enjoyed a period of Hellenistic influence, both in science and philosophy.
In its decline into the reign of the imperial, god-like emperors and their increasingly idiot and sociopathic successors and sons, the elite became utterly distinct from the people by self-decree. 'They would become as gods' is a hallmark of an empire on the road to decline and decay, repeatedly endlessly through history. It is the logical end of the will to power, in which none will be served but oneself, with power as an obsessive distortion of self-preservation and ego.
Death is the great leveler, and the balancer of the scales of fortune.
Perhaps one of their retinue can whisper this to the financiers and the politicians, those newly made masters of the universe, as they bask in their moments of power and triumph, and forget their commonality with the people.
Better to have someone whisper in your ear, than succumb to the excess of self-delusion and have the crowd cut it off with your head. But madness has no discourse with logic.
Roman Art: Memento mori, a philosophical theme the Hellenistic period, an allegory of death that has rebalanced and weighs the same as all people regardless of their wealth and social status, with symbols of Life and Death.
Mosaic from Pompeii. 2nd style. Sun 47×41 cm Museo Archeologico Nazionale, Naples
"On the eve of a national election, it is well for us to stop for a moment and analyze calmly and without prejudice the effect on our Nation of a victory by either of the major political parties.
The problem of the electorate is far deeper, far more vital than the continuance in the Presidency of any individual. For the greater issue goes beyond units of humanity—it goes to humanity itself.
In 1932 the issue was the restoration of American democracy; and the American people were in a mood to win. They did win. In 1936 the issue is the preservation of their victory. Again they are in a mood to win. Again they will win.
More than four years ago in accepting the Democratic nomination in Chicago, I said: "Give me your help not to win votes alone, but to win in this crusade to restore America to its own people."
The banners of that crusade still fly in the van of a Nation that is on the march.
It is needless to repeat the details of the program which this Administration has been hammering out on the anvils of experience. No amount of misrepresentation or statistical contortion can conceal or blur or smear that record. Neither the attacks of unscrupulous enemies nor the exaggerations of over-zealous friends will serve to mislead the American people.
What was our hope in 1932? Above all other things the American people wanted peace. They wanted peace of mind instead of gnawing fear.
First, they sought escape from the personal terror which had stalked them for three years. They wanted the peace that comes from security in their homes: safety for their savings, permanence in their jobs, a fair profit from their enterprise.
Next, they wanted peace in the community, the peace that springs from the ability to meet the needs of community life: schools, playgrounds, parks, sanitation, highways—those things which are expected of solvent local government. They sought escape from disintegration and bankruptcy in local and state affairs.
They also sought peace within the Nation: protection of their currency, fairer wages, the ending of long hours of toil, the abolition of child labor, the elimination of wild-cat speculation, the safety of their children from kidnappers.
And, finally, they sought peace with other Nations—peace in a world of unrest. The Nation knows that I hate war, and I know that the Nation hates war.
I submit to you a record of peace; and on that record a well-founded expectation for future peace—peace for the individual, peace for the community, peace for the Nation, and peace with the world.
Tonight I call the roll—the roll of honor of those who stood with us in 1932 and still stand with us today.
Written on it are the names of millions who never had a chance—men at starvation wages, women in sweatshops, children at looms.
Written on it are the names of those who despaired, young men and young women for whom opportunity had become a will-o'-the-wisp.
Written on it are the names of farmers whose acres yielded only bitterness, business men whose books were portents of disaster, home owners who were faced with eviction, frugal citizens whose savings were insecure.
Written there in large letters are the names of countless other Americans of all parties and all faiths, Americans who had eyes to see and hearts to understand, whose consciences were burdened because too many of their fellows were burdened, who looked on these things four years ago and said, "This can be changed. We will change it."
We still lead that army in 1936. They stood with us then because in 1932 they believed. They stand with us today because in 1936 they know. And with them stand millions of new recruits who have come to know.
Their hopes have become our record.
We have not come this far without a struggle and I assure you we cannot go further without a struggle.
For twelve years this Nation was afflicted with hear-nothing, see-nothing, do-nothing Government. The Nation looked to Government but the Government looked away. Nine mocking years with the golden calf and three long years of the scourge! Nine crazy years at the ticker and three long years in the breadlines! Nine mad years of mirage and three long years of despair! Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent.
For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up.
We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.
They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.
Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.
I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.
The American people know from a four-year record that today there is only one entrance to the White House—by the front door. Since March 4, 1933, there has been only one pass-key to the White House. I have carried that key in my pocket. It is there tonight. So long as I am President, it will remain in my pocket.
Those who used to have pass-keys are not happy. Some of them are desperate. Only desperate men with their backs to the wall would descend so far below the level of decent citizenship as to foster the current pay-envelope campaign against America's working people. Only reckless men, heedless of consequences, would risk the disruption of the hope for a new peace between worker and employer by returning to the tactics of the labor spy.
Here is an amazing paradox! The very employers and politicians and publishers who talk most loudly of class antagonism and the destruction of the American system now undermine that system by this attempt to coerce the votes of the wage earners of this country. It is the 1936 version of the old threat to close down the factory or the office if a particular candidate does not win. It is an old strategy of tyrants to delude their victims into fighting their battles for them.
Every message in a pay envelope, even if it is the truth, is a command to vote according to the will of the employer. But this propaganda is worse—it is deceit.
They tell the worker his wage will be reduced by a contribution to some vague form of old-age insurance. They carefully conceal from him the fact that for every dollar of premium he pays for that insurance, the employer pays another dollar. That omission is deceit.
They carefully conceal from him the fact that under the federal law, he receives another insurance policy to help him if he loses his job, and that the premium of that policy is paid 100 percent by the employer and not one cent by the worker. They do not tell him that the insurance policy that is bought for him is far more favorable to him than any policy that any private insurance company could afford to issue. That omission is deceit.
They imply to him that he pays all the cost of both forms of insurance. They carefully conceal from him the fact that for every dollar put up by him his employer puts up three dollars three for one. And that omission is deceit.
But they are guilty of more than deceit. When they imply that the reserves thus created against both these policies will be stolen by some future Congress, diverted to some wholly foreign purpose, they attack the integrity and honor of American Government itself. Those who suggest that, are already aliens to the spirit of American democracy. Let them emigrate and try their lot under some foreign flag in which they have more confidence.
The fraudulent nature of this attempt is well shown by the record of votes on the passage of the Social Security Act. In addition to an overwhelming majority of Democrats in both Houses, seventy-seven Republican Representatives voted for it and only eighteen against it and fifteen Republican Senators voted for it and only five against it. Where does this last-minute drive of the Republican leadership leave these Republican Representatives and Senators who helped enact this law?
I am sure the vast majority of law-abiding businessmen who are not parties to this propaganda fully appreciate the extent of the threat to honest business contained in this coercion.
I have expressed indignation at this form of campaigning and I am confident that the overwhelming majority of employers, workers and the general public share that indignation and will show it at the polls on Tuesday next.
Aside from this phase of it, I prefer to remember this campaign not as bitter but only as hard-fought. There should be no bitterness or hate where the sole thought is the welfare of the United States of America. No man can occupy the office of President without realizing that he is President of all the people.
It is because I have sought to think in terms of the whole Nation that I am confident that today, just as four years ago, the people want more than promises.
Our vision for the future contains more than promises.
This is our answer to those who, silent about their own plans, ask us to state our objectives.
Of course we will continue to seek to improve working conditions for the workers of America—to reduce hours over-long, to increase wages that spell starvation, to end the labor of children, to wipe out sweatshops. Of course we will continue every effort to end monopoly in business, to support collective bargaining, to stop unfair competition, to abolish dishonorable trade practices. For all these we have only just begun to fight.
Of course we will continue to work for cheaper electricity in the homes and on the farms of America, for better and cheaper transportation, for low interest rates, for sounder home financing, for better banking, for the regulation of security issues, for reciprocal trade among nations, for the wiping out of slums. For all these we have only just begun to fight.
Of course we will continue our efforts in behalf of the farmers of America. With their continued cooperation we will do all in our power to end the piling up of huge surpluses which spelled ruinous prices for their crops. We will persist in successful action for better land use, for reforestation, for the conservation of water all the way from its source to the sea, for drought and flood control, for better marketing facilities for farm commodities, for a definite reduction of farm tenancy, for encouragement of farmer cooperatives, for crop insurance and a stable food supply. For all these we have only just begun to fight.
Of course we will provide useful work for the needy unemployed; we prefer useful work to the pauperism of a dole.
Here and now I want to make myself clear about those who disparage their fellow citizens on the relief rolls. They say that those on relief are not merely jobless—that they are worthless. Their solution for the relief problem is to end relief—to purge the rolls by starvation. To use the language of the stock broker, our needy unemployed would be cared for when, as, and if some fairy godmother should happen on the scene.
You and I will continue to refuse to accept that estimate of our unemployed fellow Americans. Your Government is still on the same side of the street with the Good Samaritan and not with those who pass by on the other side.
Again—what of our objectives?
Of course we will continue our efforts for young men and women so that they may obtain an education and an opportunity to put it to use. Of course we will continue our help for the crippled, for the blind, for the mothers, our insurance for the unemployed, our security for the aged. Of course we will continue to protect the consumer against unnecessary price spreads, against the costs that are added by monopoly and speculation. We will continue our successful efforts to increase his purchasing power and to keep it constant.
For these things, too, and for a multitude of others like them, we have only just begun to fight.
All this—all these objectives—spell peace at home. All our actions, all our ideals, spell also peace with other nations.
Today there is war and rumor of war. We want none of it. But while we guard our shores against threats of war, we will continue to remove the causes of unrest and antagonism at home which might make our people easier victims to those for whom foreign war is profitable. You know well that those who stand to profit by war are not on our side in this campaign.
"Peace on earth, good will toward men"—democracy must cling to that message. For it is my deep conviction that democracy cannot live without that true religion which gives a nation a sense of justice and of moral purpose. Above our political forums, above our market places stand the altars of our faith—altars on which burn the fires of devotion that maintain all that is best in us and all that is best in our Nation.
We have need of that devotion today. It is that which makes it possible for government to persuade those who are mentally prepared to fight each other to go on instead, to work for and to sacrifice for each other. That is why we need to say with the Prophet: "What doth the Lord require of thee—but to do justly, to love mercy and to walk humbly with thy God." That is why the recovery we seek, the recovery we are winning, is more than economic. In it are included justice and love and humility, not for ourselves as individuals alone, but for our Nation.
That is the road to peace."
Franklin D. Roosevelt
Madison Square Garden, October 31, 1936
As the old WW I ballad said, "I don't know where we're going, but we're on our way."
"Goodbye everybody I'm off to fight the foe
Uncle Sammy is calling me so I must go
Gee I'm feeling fine don't you wish that you were me?
For I'm sailing tomorrow over the deep blue sea.
And I don't know where I'm going but I'm on my way
For I belong to the regulars I'm proud to say
And I'll do my duty night or day
I don't know where I'm going but I'm on my way."
Boehner Pulls Out of Debt Talks - Economist's View
Although a complete failure is not likely, the drama queens, carnies, and thespians in Washington may take the budget deficit talks down to the wire to deeply impress the yokels and the locals of the seriousness of the situation, and be duly grateful that it is in the hands of major players.
Have you noticed a tendency amongst the pigmen to threaten dire consequences and annihilation whenever they are running a bluff and wish to get their way? These financial fellows and their minions have issued more threats and ultimatums in the last few years than al Qaeda.
While they are dancing on the edge of a precipice, it is possible that they could slip and fall. However, since no one in their right mind really wishes to see a default, except perhaps for a few delusional political opportunists and talk show Bonapartes, perhaps cooler heads will prevail. There are however, the ever present carrion feeders and sociopaths from Wall Street, who would benefit from any economic crisis, and would do so gladly no matter the pain endured by others.
Beside political campaign reform, it appears as though Washington is badly in need of adult supervision.
Have a pleasant weekend.
Markets were shocked when CAT came in light on earnings this morning despite posting a healthy 37 percent increase in revenue. The profit shortfall was attributed to "inflation in raw materials and labor." Of course there was no inflation in that revenue right? I wonder if they are having trouble hedging their forex exposure again.
Markets are coiling for moves which may be large based on the resolution of the US budget impasse, one way or the other.
I think it is theater, but it is not impossible that the players might accidentally stumble over a cliff. More likely the can will be kicked down road-wise, and both sides will claim victory, although the Dems will eat crow served up by that rascally Uncle Obama. How come he never betrays the money men? Oh, dumb question, never mind.
However, out of all this, I think a credible challenge to Obama is shaping up for the elections next year, and not from the extruded corporate man, Mitt Romney, or the banjo-playing daisy mae's Palin and Bachmann.
The fat cats were begging Chris Christie to run, but he knows he is over his head as it is and the skeletons in his closet might not survive national exposure. There is Perry of course, but that strawman needs a brain like Karl Rove to pull it off.
The O-Man talks a great game, and he might pull it off again, but this time he is burdened with a track record that does not match his words.
No I think we will see a dark horse candidate, maybe a third party or even a Democrat primary challenge, take Obama on. And he has no one to blame but himself. He will most likely cry all the way to the bank, following young Timmy to Wall Street in some capacity. I think he has blown his chance to be the greeter at Wynn's Las Vegas.
This interview was done in 1994, when Bill Clinton was promoting free trade and multinationalism, but had not yet made a deal with China to allow them to devalue their currency and then receive favored nation status.
You can decide for yourself, with the benefit of retrospect, the value of the arguments presented.
"Free trade" as defined by neo-liberal policies is a leveling tool that creates a few big winners and many more big losers, and reduces the middle class to the lowest common denominator of indentured servitude.
The goal of multinationalism is to destroy local government, choice, and sovereignty, through financial and military means. The will to power cuts across diverse forms of government, because of its attitude of the power of the few and the worth of the many. It defines what is 'human' to suit its needs of the moment.
The primary problem with unregulated trade, not considered within the context of overall social and public policy, is that it becomes a natural weapon for oligarchies and multinationals to use against local and regional government and public policy decisions, taxation, environmental laws, human rights. It is a major stepping stone to world government. There is a recurring movement among the powerful to bring the world under their control. It is the natural extension of their greed for power. There is never 'enough.' Sociopathic greed is a disease, and it sows the seeds of its own destruction. Always.
And this is why idealistic models of unregulated free market economics fall apart in practice, always.
Trade *could* be used to uplift the developing world, if it was accompanied by local reforms and progressive public policy, but in practice is most often used to create a huge social divide in the developed countries, and promote a return to a feudalistic political structure. Rather than uplift, it reduces the world to the least common denominator of quality of life and freedom.
One of the most significant problems is mercantilism, employed by oligarchic countries and multinational corporations, within the context of a fiat currency system wherein they are relatively free to short circuit all the market mechanisms that would prevent a few countries from creating enormous trade imbalances in a partnership with powerful elites and the privileged around the world.
Macro-economics has never been a pure science, but is often represented as such by those who are promoting theories that are purely political, cloaking them in false objectivity. Macro-economics is a social science, more like sociology than physics. In reality it is a subset of public policy discussions, highly slanted to ends and assumptions, attitudes and points of view about what is 'good' and valuable rather than what is a hard and replicable principles of nature, objectively true based on some endurable physical law.
So for example, if someone were to come out and say, "I think we should adopt the social structure of a nation and form of government your father spent much of their lives fighting and dying, where you give up most of your wealth and freedom to serve the powerful few who run the state," there would be a general uprising. But if the proposition is structured as the logical consequence of 'hard economic choices,' and a serious of crises, people can be led off the cliff, a few steps at a time.
"The liberties of our country, the freedoms of our civil Constitution are worth defending at all hazards; it is our duty to defend them against all attacks. We have received them as a fair inheritance from our worthy ancestors. They purchased them for us with toil and danger and expense of treasure and blood. It will bring a mark of everlasting infamy on the present generation – enlightened as it is – if we should suffer them to be wrested from us by violence without a struggle, or to be cheated out of them by the artifices of designing men."
Samuel Adams
If this trend continues, I would imagine the next step is civil unrest, and political crises that will be used to tighten the control over the public in the 'free countries,' and repress them for their own safety. We are seeing this now in the Anglo-American client states and unpopular dictatorships overseas.
Most men are easily fooled, entrapped by their emotions, easily herded by clever arguments and the dialectic of false enemies. It is only when they step back, and look at what is happening, who benefits and who is above the law, that they begin to realize the truth. But they will not do this for quite some time, because to do so is to admit that they have been fools.
How sad that the heirs to the 'greatest generation,' almost surely the most privileged generation in history, have in their excess become selfish, petty, and cruel.
The corollary of a few "Too Big To Fail" is that there are many individuals and small businesses who become "Too Small To Care" and then "Too Weak To Survive."
And so the weak and the undesirable are eliminated, first slowly and then with growing efficiency, for the good of the chosen few, the ubermensch, however a society chooses to define it.
Does this sound *conspiratorial* and outlandish? Check back in another ten years, and let me know how you and your children are doing. There was a budget surplus in the 1990's. And now the nation is throwing the middle class and the weak under the bus for the sake of the financial sector and the wealthy.
Once a single global currency is achieved, it is the end game for freedom for all but a few. Those who imagine that they are part of the few are all for this, although they are sadly mistaken. The few view them as useful idiots, disposable, and prey.
What the few themselves may not yet realize is that tyrants and empires tend, almost inevitably, to fall in disgrace, blinded and betrayed by the will to power, overcome by the love of freedom and the tide of history. So there is hope. But sometimes hope can become a distant memory, and freedom regained only by significant pain and loss of life, once you have released it from your grasp.
"When I despair, I remember that all through history the ways of truth and love have always won. There have been tyrants, and murderers, and for a time they can seem invincible, but in the end they always fall. Think of it--always.
Mohandas K. Gandhi
Risk on, and there was consolidation in gold and silver, while the US dollar slumped against the euro.
Markets soared today as it was risk on, with hopes buoyed by the 'European Deal' and 'better than expected' results from Leading Indicators and the Philly Fed.
There was a rumour of a US budget deal that was released intraday, but it was quickly denied by the White House.
Forecast: cloudy with a chance of fraud, high heat, and isolated disasters.
Surmise on my part, based on the facts at hand, but Mr. Sprott seems to have an interesting problem with his Physical Silver Trust. And that problem is indicative of a physical bullion market that is riddled with leverage and irredeemable paper, reminiscent of the Collateralized Debt Obligation and Credit Default Swaps markets, before their virtual default and meltdown.
Cash levels in his fund are rather low, down to about 2 million US dollars or so, which is not much cash on hand for a decent sized fund with a market cap of slightly over one billion US dollars. As a note, I have to extrapolate the cash on hand since PSLV does not release this figure, but they do put out the figures surrounding it. It could be as high as 4 million, which is still rather slim, and a testimony perhaps to their belief in the silver bull and low operating expenses.
But the question remains, with a premium to NAV of over 19%, and with strong demand in silver and their units, how do they respond to this need for additional cash reserves and units?
The answer of course is a follow-on, a secondary offering, acquiring more silver and adding more units, and selling them into the public demand.
Now that they have digested their follow on gold offering of several hundreds of millions of dollars, perhaps they can turn to the silver market again.
But here is the catch. Funds like Sprott don't do paper, to the extent that a listed company's equity might do. They just print more shares.
Even supposed bullion offerings like SLV and GLD do paper chases almost every week. They do swaps for for virtual metal, for example, throwing IOUs on the pile that may or may not be good in a demand crunch for bullion, because they are tracking ETFs, and not closed end funds. They have to manage inventory to the fluctuations in almost real time.
What you see with PSLV and PHYS, and funds like them, is presumably what you get, and in these days of what appears to be a shell game in the silver market, that type of product commands a substantial premium if one has some chance of taking possession in something approaching a reasonable manner.
And in this market structure, no responsible fund manager would agree to do a follow on unless they were able to secure potential bullion inventory in advance at something approaching the market price, which today is around 39.60 per ounce, and have a reasonable plan to take delivery in the foreseeable future. I hear that their last purchase took THREE MONTHS for delivery. Three months or more is a significant period of time in today's volatile global markets. Three months puts us in the historically stormy seas of October, well beyond the known horizon these days.
The current deliverable inventory at the Comex, the single largest depository of tradeable, traceable silver in North American, stands around 27 million ounces, with total value of just over one billion dollars. Not much in today's world of billions flying about, even through individual accounts.
Can Mr. Sprott obtain about 1/5 of the 'visible float' in silver bullion without buying against himself in the market, that is, raising the prices he pays by the demand he himself presents, chasing his tail in the market as it were?
He might turn to the LBMA, the storied London Metals Exchange which is the locus of bullion trade. But with their secretive inventories that change hands in daily multiples of themselves, and purported 100:1 paper leverage, the problem remains the same. When you pull actual bullion out of that system, you start raising leverage, and risk, geometrically.
Alas, the central banks do not have stores of silver which they can strategically sell into the market to satisfy demand and help their cronies in the bullion banks as they do with gold.
Doing a deal to satisfy demand in size is going to become increasingly difficult in such an imbalanced, poorly regulated market. A default tends to occurs at the core of the market, even while supply is available on the retail level, 'at the margins.' Until it is not.
In other words, you will probably be able to buy a few coins locally the day before the wholesalers default on their obligations, there is a run on supply, and nothing is available as deliverable inventory is quickly pulled off the market, except at the most usurious prices. And of course the governments intervene to save, and probably somewhat selectively, the naked shorts from ruin.
Ah, the problems of the successful entrepreneur in times of collapsing paper and its associated delusions.
"Why, this is very midsummer madness.”
William Shakespeare, Twelfth Night, 3.4.55
"We are developing processes and procedures by which the Treasury communicates to us what we are going to do," Plosser said, adding that the task was manageable. "How the Fed is going to go about clearing government checks. Which ones are going to be good? Which ones are not going to be good?"
Fed Preparing for US Default - Reuters
Very bullish reversal in the metals intraday, with closes in gold and silver above the psychological numbers of 1600 and 40 respectively.
If they can move higher and stick a close, and hold it through option expiration next week, you can say goodbye to these levels, the dollar, and quite a bit more.
As an aside, the other day I read an essay in a recent issue of Discover Magazine called, The End of Morality. I also found this commentary on it.
In this article, which promotes the triumph of scientific reason, utilitarianism, over what it contends are mere emotions, holdovers from history, it was put forward that it makes rational economic sense to kill one healthy person and harvest their organs, in order to provide them to five other people who can then live a higher quality of life, as an increase of goodness on the whole. The revulsion that one feels at murder is an unthinking instinct which can be overcome by higher thinking, the power of the will.
And it held this out as the higher 'good' in the new scientific morality, freed of the restraints of the mere instinct to preserve innocent life.
"You have these gut reactions and they feel authoritative, like the voice of God or your conscience. But these instincts are not commands from a higher power. They are just emotions hardwired into the brain as we evolved."
The logical extensions of such reasoning should be perfectly obvious to anyone with a sense of history.
And one does not even have to kill them to put them to the good service of the State, and those predestined for a higher quality of life, the übermenschen. At least, not in the beginning.
Plus ça change, plus c'est la même chose.
Not a constructive day for the bulls. Let's see if they can gather themselves together tomorrow. If not, downside beckons.
The intramurals in Washington are shaking the confidence of the markets. The House Republicans are starting to resemble economic brownshirts, in the radical service of their masters, the monied interests.
"Government has coddled, accepted, and ignored white collar crime for too long. It is time the nation woke up and realized that it's not the armed robbers or drug dealers who cause the most economic harm, it's the white collar criminals living in the most expensive homes who have the most impressive resumes who harm us the most. They steal our pensions, bankrupt our companies, and destroy thousands of jobs, ruining countless lives."
Harry Markopolos, Madoff Investigation Congressional Testimony
The 'good news' from IBM and especially a hint that the debt ceiling talks are making progress rallied the market hard today, as the shorts scrambled to cover.
It was 'risk on' and gold and silver were hit hard in a cheap shot on weakness, in the manner of a calculated bear raid as the Comex closed and the thin Globex session opened.
The dollar gave up a little more ground.
Nothing is resolved in Europe, and the debt ceiling crisis in Washington is highly artificial, more of an ideological impasse, or even coup d'etat, than a genuine crisis.
Let's see how the correction goes. Just for reference, gold has had its strongest rally off support since 1980, so a pullback is warranted and expected here.
As a reminder it is option expiry on the Comex next week.
