Speaking Privately to Wealthy Donors

I should preface this by saying that politics is a dirty business, given the ways of the world. And most politicians are not admirable creatures close up, especially the current crop in the Western world. That is just how the struggle for money and power goes these days. But the quality of public servant, like the tide of freedom, ebbs and flows.

I think this revelation about Romney is important not because of American politics per se, but rather that Mr. Romney is truly emblematic of the spirit of the financialization of American business culture for the past thirty years.

He is the embodiment of Gordon Gekko. And a number of people will resonate to his message. It is an old story, might makes right, and the strong prey on the weak. We the fortunate have worked for what we have, and the unfortunate, after we are done with them, are a drag on us, a burden, losers, things which are to be ignored, used, and eventually eliminated.

The greedy elite would rather be extremely rich in a suffering nation than modestly rich in a successful nation. The greater the misery, the greater their power, since power is the difference in wealth and influence between one person and another.

At the heart of wealth concentration and economic cannibalism are two simple pieces of tax policy: the interest expense deduction for non-productive activity, and the policy of taxing wages at much higher rates than capital gains and dividends. This is what breathes life into financialization.

Instead of viewing government as a failure, consider the possibility that it is a success. The question we need to ask is: "what is government actually trying to accomplish?"  If in economic policy he is a domestic form of economic hitman, in foreign policy, Romney is what used to be called The Ugly American.

It is not that he is the worst. He just disguises it badly. But he is the epitome of the financialization process, an extractive force that feeds on the real economy around the world.

It is a subtle transformation and a seductive message. But as one looks back, the change can be shocking. See what you are becoming.

First there is a recent video of Matt Taibbi describing Mr. Romney. Quite a few people heard it and dismissed it.  I think Matt confuses venture capital with vulture capital, but lately that is easy to do as financialization has crowded out productive investment.  As you may recall I had a second career in the tech venture capital game in Boston and Silicon Valley, and saw the best and the worst of it.

I had to chuckle at Matt's characterization of Romney as speaking one way to people outside the tent, and another way in private. Especially now in light of this series from Mother Jones.

After Matt's interview there are links to the new Mother Jones videos that show Mr. Romney speaking privately to his wealthy donors in Boca Raton. What he says he believes, and what he believes has rocked his candidacy. But he speaks for a good portion of the wealthy, the one percent. He is their guy.




Before you too glibly swallow this picture of America below, bear in mind that Romney is speaking about roughly half the country. Not only the poor, but the working poor, and a good chunk of the middle class. These are the people who were victimized by the financialization and Wall Street fraud, which has catapulted so many into the ranks of the uber-wealthy.

And before you start cheering for a system where it is acceptable to get ahead by kicking the face of the other guy a rung or two lower on the ladder from you, as you see it, keep in mind that to the people in this room, most of the people in the country are deservedly well below them on the ladder of success, including you.

It is all about values. And western values have been co-opted by a disordered view of what value is and how to measure it. We never seem to learn. These things always seem to end in roughly the same way.

"God whispers to us in our pleasures, speaks to us in our conscience, but shouts in our pains. It is His megaphone to rouse a deaf world."

C. S. Lewis

Mother Jones: Romney Speaking to Wealthy Donors here

Gold Daily and Silver Weekly Charts - Sell Rosh Hashanah...

Stocks were weak and commodities largely unchanged until a big macher walked into oil and dumped 25,000 contracts on 'a rumour that the US would open the SPR.'

It looked like teen spirit to me, and the kind of hijinks the Fed and government encourage in the pits to manage perceptions.

The Sprott precious metals funds are continuing to underperform as the large expansions press on the premiums.

The old Street saying is to sell Rosh Hashanah and buy Yom Kippur.

It looks like things are heating up in Iran, with the British Navy massing.

There will be blood, of that I have little doubt. The question is when and where.

I remain long bullion, weighted to gold, and with a little short stocks hedge left over from what I put on Friday. I added a little gold on weakness. Silver not so much.

The more things change, the more they remain the same.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Sell Rosh Hashanah...

The old Wall Street adage says:

"Sell on Rosh Hashanah and buy on Yom Kippur."

Rosh Hoshanah began at sundown on Sunday, 16 September this year and continues until tomorrow. Yom Kippur will begin at sundown on Tuesday, 25 September.

And the selling did come in today as stocks turned lower after a strong week  off the Fed's open ended debt monetization program.

The cheerleaders on financial TV had the equity pom poms out in a big way. I am still running the short hedge to my bullion longs which I had on Friday.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

The Sprott funds, while respectable, continue to underperform the the Spicer funds, and their own historical norms, because of their recent expansions no doubt.

The Sprott Gold Trust shows the newly acquired bullion on its balance sheet.

Purchasing Power Of Various Currencies and Gold

Chart from our friends at nowandfutures.com

JPM Faces Money Laundering Probe

Force and fraud are the major export industries in the US.

Reuters
JPMorgan faces money laundering probe
By Carrick Mollenkamp

(Reuters) - JPMorgan Chase & Co's compliance with U.S. anti-money laundering laws is being reviewed by a banking regulator, a source said, making the largest U.S. bank the latest target of a wide investigation of how banks prevent transactions involving drug money and sanctioned countries.

The Office of the Comptroller of the Currency, an independent branch within the Treasury Department, is examining JPMorgan's systems that are designed to monitor and filter such transactions, said the source, who is familiar with the situation.

The exact scope of the inquiry and the size of potential liabilities for the bank could not be learned.

JPMorgan spokesman Joseph Evangelisti declined to comment on Saturday.

In its quarterly filing with the U.S. Securities and Exchange Commission last month, JPMorgan said it expected heightened scrutiny by regulators of its compliance with new and existing regulations, including anti-money laundering laws.

The latest investigation comes in the midst of stepped-up efforts by regulators to crack down on money laundering, including transfers of drug money through bank networks and funds from countries facing international sanctions such as Iran.

The problem also has become a focus area for the Department of Justice, which wants to ramp up the number of criminal cases it brings under the Bank Secrecy Act, a law that requires financial institutions and their employees to take steps to prevent money laundering.

U.S. regulators also are potentially examining illicit transactions tied to Venezuela, the source said....

Martin Luther King: Rediscovering Lost Values

Chris Hedges: The Absurdity of Empire with Laura Flanders

Gold Daily and Silver Weekly Charts - So Far So Good

Next week should tell us quite a bit.

Now the really tough work begins for the Fed and the financial engineers in turning paper into growth, enough to overcome the harmful side effects of their monetary manipulations.

See you Sunday evening.

SP 500 and NDX Futures Daily Charts - Bully Sticks the Breakout

The bulls were able to hold their ground for the week and stuck the close above resistance.

Now the hard work begins, as the initial sugar high of QE3 fades a bit, and harsh reality sets in.

How will the Fed translate lower mortgage prices and the monetization of junk into real growth in the non-financial economy?

And how will the President and a hard core in the Congress make any progress towards reforming and restructuring the economy from a predatory trash heap to a well ordered garden of blooms of growth?

Hope, but not optimism.

Gold Daily and Silver Weekly Charts - Benny Has a Printing Press - QE3 Begins

Jeff Christian's clients were being carried out on stretchers today as the Fed made it rather clear to any who were still in doubt that they do have a printing press and, by hell's heart, they are going to use it.

The Fed clearly signalled their intent to spend, and gave some indications of their willingness to 'do whatever it takes' in their own Draghi moment.  What will restrain them? The difference is that the US has no Merkel, just Urkel(D).  Or Herman Munster(R).

Remember that in this sort of reserve fiat currency the only limiting factor to their printing is the value of the bonds and the dollar, which is after all a bond of zero coupon and unrestricted duration. Well, unrestricted until there is a default, but that is another matter. And they all do it, sooner or later.

Gustav Klimt, Portrait of Adele Bloch-Bauer

Gold and silver both ran higher along with stocks. The stock market action was interesting if you looked at volume and which sectors were leading, and which ones lagged. Volatility is on Quaaludes.

So what next. Gold has made its 'cup' which I showed intraday. What happens next will determine what we will make of it. We need to see it stick the rim, and then form a decent handle. I will review the technical rules soon if that happens. Remember the retracements.

Blythe Masters had an interesting addition to her CV at JP Morgan which was noted in intraday commentary. As you may recall, Blythe is of special interest to us because she is the Captain of the USS Silver Short Position, currently racing through the North Atlantic at top speed with its running lights off.

I am reading a Berlin Noir novel Prague Fatale by Philip Kerr, a remarkable writer who ornaments his well structured and researched story with an amazing, almost exuberant display of wide learning and broad cultural erudition.  I am curious to know how he accumulated such an array of knowledge. He weaves it together well.

It was very entertaining and is his latest work.   I intend to read more of his other books to see if this was the full flowering or more par for the course.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Bernanke in Drag(hi)?

The markets went coo-coo for Cocoa Puffs today as the Fed threw a gallon of vodka into the punchbowl.

The financials were leading the charge. When Citi outdistances AAPL you know its not Kansas that they put on that blotter paper that day.

Is this Ben's Draghi moment? So far the Fed has not made much of a dent in the real economy, just the banks and bonds. And helped some gold bugs feel better about themselves I think.

Part of this is certainly the government's fault, but quite a bit is the Fed's, for their coddling of the Banks with their excess reserves and gambling ways. They are the regulator and a strong voice for policy after all.

A reckoning is coming.

Blythe Masters Appointed to Regulatory Affairs In Addition To Rolling the Dice at JPM

Can a pit boss also be a good casino host?

"Blythe Masters, a widely known figure in the securities industry who oversees JPMorgan's commodities businesses, has been given the additional assignment of running regulatory affairs for the corporate and investment bank under her boss James Staley.

"Having her in this role will be critical to helping us drive the business's strategy in light of changing regulations," Cavanagh and Pinto wrote in the memo.

In her regulatory role, Masters will report to Barry Zubrow, the former chief risk officer who came under the microscope after the bank in early summer reported an expected $6 billion trading loss. Zubrow has been head of the bank's corporate and regulatory affairs office since January."

It appears that Blythe Masters will be dual reporting to James Staley and Barry Zubrow.

Dual reporting is an interesting situation to be in.  It is generally a sign of an unresolved management conflict.

As you may recall, Mr. Zubrow was appointed the head of Regulatory Affairs in January 2012, after the London Whale breeched and then blew up on his watch as Chief Risk Officer, a position now held by a Mr. Hogan.

"John Hogan, who only became chief risk officer in JP Morgan Chase in January, will likely be facing some uncomfortable questions following the bank's revelation yesterday it had made $2bn in trading losses since the beginning of April. Hogan, 46, who previously been head of risk in the investment banking division, replaced Barry Zubrow as chief risk officer for the whole firm in January, when Zubrow took on the newly-created role of head of corporate and regulatory affairs."

Generally people appointed to Regulatory Affairs have some serious background as a regulator. I suspect that as one of the chief risk centers and derivatives jugglers at JPM, Blythe Masters role will be to assess and manage the impact of any government changes in her highly volatile domain. It smells like it could be one of those top down corporate inititatives, generated in response to a crisis and a slide presentation by McKinsey and Company, that look good on flip charts but are useless and awkward in implementation. A trip to Liaison Land.

Or it could be the precursor of a fall from grace.

More change is coming I am sure.

Jamie's Blues

Gold Chart: The 'Cup' Has Formed As Confidence Continues to Erode

"A moment guessed-- then back behind the Fold
Immersed in Darkness, round the Drama rolled
Which, for the pleasure of Eternity,
He doth Himself contrive, enact, behold.

But if in vain, down on the stubborn floor
Of Earth, and up to Heaven's unopening Door,
You gaze Today, while You are You-- what of
Tomorrow, when You will be You, no more?

Omar Khayyám, Rubaiyat

Today's Fed statement confirmed that QE3 is here.

After some initial hesitation the markets shot higher, believing that the Fed would do 'whatever it takes' to bring down real unemployment and to protect the financial markets.

Given that most if not all of the stimulus provided by the Fed has gone to the top percent of the economy's participants, I am struggling with what has changed that will suddenly spread the wealth to the 99 percent. The trickle down theory? Oh please.

He is monetizing the wrong debt for the wrong people in the wrong ways.

Without reform, Bernanke can print until the dollars come home to roost, before he will meet any broad employment targets in this economic structure. Unless the wealthy start hiring people to push their wheelbarrows of money to the stores.

The country needs to find a backbone and act on reform. But like Achilles, it dithers on the beach. For what reasons we may never know for certain, until history has its say.

Gold and silver took off higher like scalded cats. The charts had predicted it but I did not believe it, at least not so quickly. But there it is.

Gold has completed a 'cup' on the daily chart.

Now we would need to see a nice 'handle' to go with it.

There certainly remains the possibility that the 'cup' could fail, and gold could fall back into its broad trading range. That would be manipulation, and it could continue to work for the time being. Modern money is a funny little magician that way. I don't think we have seen anything quite like it, even in some of the more famous manias.

Bonds are the mother of bubbles. But momma swings a big stick.

Here is a look at my 'shadow' chart on gold, that I keep in background to watch developing scenarios without having to engage in unnecessarily tedious redrawing of the published chart.

The 'rim' looks to be around 1770 to 1790.

If this works, the target for this formation would be 2000+ in the next two months or so.

There are larger patterns forming on the chart that call out higher targets.  As to where this ends, it ends when the economy is reformed and the median wage is healthy.

The chart situation in silver is similar, but the percentages are greater. The targets there would be roughly 43, and then 60+. This is by no means a top target.

One step at a time.  In the event of a liquidity panic or exogenous event the charts may defer.

Federal Reserve Statement

Release Date: September 13, 2012

For immediate release

Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.

Statement Regarding Transactions in Agency Mortgage-Backed Securities and Treasury Securities
September 13, 2012


On September 13, 2012, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to begin purchasing additional agency mortgage-backed securities (MBS) at a pace of $40 billion per month. The FOMC also directed the Desk to continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities as announced in June and to maintain its existing policy of reinvesting principal payments from the Federal Reserve’s holdings of agency debt and agency MBS in agency MBS.

The FOMC noted that these actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

Purchases of Agency MBS

The purchases of additional agency MBS will begin tomorrow, and are expected to total approximately $23 billion over the remainder of September. Going forward, details associated with the additional amount of MBS to be purchased each month will be announced on or around the last business day of the prior month.

Consistent with current practice, the planned amount of purchases associated with reinvestments of principal payments on holdings of agency securities that are anticipated to take place over each monthly period will be announced on or around the eighth business day of the prior month. The next monthly reinvestment purchase amount was also published today, and can be found here: http://www.newyorkfed.org/markets/ambs/ambs_schedule.html.

The Desk anticipates that the agency MBS purchases associated with both the additional asset purchases and the principal reinvestments will likely be concentrated in newly-issued agency MBS in the To-Be-Announced (TBA) market, although the Desk may purchase other agency MBS if market conditions warrant.

Consistent with current practices, all purchases of agency MBS will be conducted with the Federal Reserve’s primary dealers through a competitive bidding process and results will be published on the Federal Reserve Bank of New York’s website. The Desk will also continue to publish transaction prices for individual operations on a monthly basis.

No Recovery: Real Median Household Income Continues Its Decline

There is no recovery, not yet at least, except for the one percent.

“You’re really struck by the unevenness of the recovery. The top end took a whack in the recession, but they’ve gotten back on their feet. Everyone else is still down for the count.”

Lawrence Katz, Professor of Economics, Harvard

There is a lot of wishful thinking and perception management going around, but the bailouts and tax breaks are flowing upwards in this predatory economy.

I know. Let's have another bubble, for old time's sake.

The economic hitmen have come home.

This is from John Williams:

Real Median Household Income Is at Its Lowest Level Since 1995. Consumer income remained in contraction during 2011, with both real (inflation-adjusted) median household income and real median individual income sinking on an annual basis. Given consumers lack of ability to expand their borrowing in order to make up for shortfalls in income, the chances of there having been a full economic recovery since 2009 (as reflected in the GDP), or of a recovery pending in the immediate future, are nil.

Gold Daily and Silver Weekly Charts - Pre-FOMC Bear Raid

PHYS raised $392 million to buy more gold bullion, the wiseguys pulled a Dr. Evil strategy in the metals market today, and Ray Dalio, one of the top fund managers in the US, said now is the time to move your financial assets into gold and tangible assets.

Details can be found in the Intraday commentary on the metals here.

 

SP 500 and NDX Futures Daily Charts - FOMC Announcement Tomorrow

Fairly inconsequential day, except for a few intraday 'wiggles' and an end of day pop higher.

PPI and initial unemployment claims in the morning before the bell, and FOMC announcement at 12:30 in the afternoon.

Metals Bear Raid - Sprott Raises $392 Million For Gold for PHYS - Dalio Says 'Shift Assets Into Gold'

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium...I see a great future for gold and silver coins as the currency people may increasingly turn to when paper currencies begin to disintegrate."

Murray N. Rothbard

On the bright side, the Sprott Physical Gold Trust (PHYS) completed its secondary offering and the underwriters allotment, raising $392 million to buy additional gold bullion to be held in the trust.

The report does not indicate if they have secured title to the gold yet. Even after they have secured title, it often takes weeks and even months to achieve actual delivery to their vaults. The recent lag times in their Silver Trust expansion, and the types of bars they received, suggested a tight market for the real thing.

As you may recall, I think that it will be in the high quality bullion bar bulk market where the initial signs of failure to deliver will occur. The peripheral and coin markets will stay relatively healthy until the dawning comes, and then dry up overnight. The retail crowd are always the last to know. So lets keep an eye on this.

The metals were smacked hard today in what *looked like* a secondary reaction to the complications in Europe over their rescue funds. What initially looked like good news for the fans of Draghi was tarnished by a misunderstanding about the role and scope of the German Parliament.  There are also quite a few unanswered questions about how it could be implemented in specific countries.

Stocks recovered quickly but the metals remained a bit subdued.

The primary reason for the drop seems to be the traditional pre-FOMC metals smackdown. As you know the FOMC is in a two day meeting with their announcement coming tomorrow. Why does these attempts to dampen any enthusiasm for gold and silver seem happen around key central banking events?

"The modern mind dislikes gold because it blurts out unpleasant truths."

Joseph Schumpeter

The violence of the selling was concentrated and hard as you can see from the intraday silver chart below. It looks like the infamous "Dr. Evil" strategy in which a big player comes in to a thin market and runs the stops with a mass of concentrated sell orders in order to manipulate the price lower.  They make their money and then move along.  

It is illegal to do this, but in some cases and markets the regulators turn a blind eye to these shenanigans.  Professional courtesy, indirect policy action, perception manipulation, call it what you like.  It may be why futures volume on the CME is down 40%.

Bad behaviour drives out the good, in exchanges as well as companies and other organizations.  Corruption is a steep tax on expected profits, unless you are one of the profiteers, and a member of the audacious oligarchy.

"Ok guys, you're mad.  Now how are you going to stop me?" 

JPM must be quaking in their shoes over the rumoured exposé from the CFTC.  

I will say it again. This will end, eventually. And badly.

But in the meanwhile, investments with less counterparty risk that offer a stable store of value will command increasing interest among first the smart money, and then more widely by the public after it has appreciated even more significantly.

"Gold is primarily an alternative to fiat currency and a storehold of wealth. The main advantage that gold has over other currencies is that it can’t be printed. While we have just gone through a period in which the degree of monetary stimulation has ebbed, the ongoing deleveraging means that developed economic will remain highly reliably on continued stimulation for years.

By the end of the quarter, central banks were starting to shift back toward renewed stimulation. In addition, one of the primary disadvantages of gold relative to fiat currencies, that it doesn’t pay interest, is mitigated by low rates in the current environment. Real interest rates are likely to remain very low and below real growth rates as a means of combating deleveraging and improving debt sustainability (as described in our “beautiful deleveraging” work). As such, deleveragings strongly favor shifts from financial assets into gold and other tangible assets."

Ray Dalio, from his most recent hedge fund letter

As a side note, a virus of some sort has kept me struggling and a little shaky this week, and so I am especially grateful for the help and support I am getting from 'the invisible community of the mind and of the spirit.' They are helping me to stay abreast of the news. You know who you are, and you make a difference in so many ways, some of which you may not even realize, from passing along news items to helpful feedback and even highly welcome encouragement. Special thanks to 'Delray Beach.'

Sprott Physical Gold Trust Announces Completion of Its Follow-on Offering of Trust Units
Sep 12, 2012

TORONTO, Sept. 12, 2012 /CNW/ - Sprott Physical Gold Trust (the "Trust") (NYSE: PHYS / TSX: PHY.U), a trust created to invest and hold substantially all of its assets in physical gold bullion and managed by Sprott Asset Management LP, today announced that it has completed its follow-on offering of 26,450,000 transferable, redeemable units of the Trust (the "Units") at US$14.84 per Unit for gross proceeds of US$392,518,000 (the "Offering"). This includes the exercise in full by the underwriters of their over-allotment option.

The Trust will use the net proceeds of the Offering to acquire physical gold bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering. The net proceeds of the Offering per Unit are greater than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering, as required under the trust agreement governing the Trust...

Ex-President Carter: US Political System Is Corrupted By Big Money

Financial reform and political reform go hand in hand. 

The current system is an artifice of soft bribery and political corruption that isolates the representatives from the people in meaningful ways, encourages "mass persuasion," which is a euphemism for propaganda, and substitutes spectacle and demagoguery for compromise and effective governance.

Bernie Sanders has some insights into the problem in this interview published below here.

The media may show pictures of politicians eating hot dogs, shaking hands, and even getting hugs with the common people, but in the back rooms the real players are handing over suitcases full of money. And when you have someone who loves money and power by the wallet, their heart will follow.  

The problem is that the big media loves the ad dollars and access, the politicians love huge slush funds that allow them to become overnight multimillionaires and power brokers, academics love important appointments and funding, and the corporations love the ability to buy influence that circumvents the political process for their own ends.   Freedom and truth have few powerful friends in a society consumed by the unashamed worship of greed, where honor and integrity are looked upon as quaint relics from the past. 

"And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

John Dalberg Lord Acton

This is going to end. Badly.

CBC
Jimmy Carter slams ‘financial corruption’ in U.S. elections
Sep 12, 2012 3:57 AM ET


(AP) Former U.S. president Jimmy Carter issued a blistering indictment of the American electoral process Tuesday, saying it is shot through with "financial corruption" that threatens democracy.

Speaking at the international human rights centre that bears his name, Carter said "we have one of the worst election processes in the world right in the United States of America, and it's almost entirely because of the excessive influx of money."

The dynamic is fed, Carter said, by an income tax code that exacerbates the gap between the wealthiest Americans and the rest of the electorate, allowing the rich even greater influence over public discourse and electioneering.

The 39th president lamented a recent U.S. Supreme Court decision that allows unlimited contributions to third-party groups that don't have to disclose their donors.

He added that he hopes the "Supreme Court will reverse that stupid ruling," referring to the case known as Citizens United.

Carter praised Mexico and several countries where staff at his centre have monitored publicly financed elections, and he said the United States should return to publicly financed elections for president. The system technically is still in place, but it is voluntary and both President Barack Obama and Republican challenger Mitt Romney have chosen to bypass the taxpayer money because they can amass far more on their own.

"You know how much I raised to run against Gerald Ford? Zero," Carter said, referring to his 1976 general election opponent. "You know how much I raised to run against Ronald Reagan? Zero. You know how much will be raised this year by all presidential, Senate and House campaigns? $6 billion. That's 6,000 millions."

Source

Bill Moyers and Bernie Sanders On the Dysfunctional US Political System

Big money has corrupted the US electoral process, again.

I am not sure what the answer might be, but it is becoming fairly evident that the two party system as it is now constructed is failing.

How can it be called successful when it is so widely viewed as a choice between the lesser of two evils, with people voting AGAINST the other guy, more than they are voting FOR their own candidate?

This is not a good sign for a sustainable system of the people, by the people, and for the people.

Gold Daily and Silver

The metals are just bouncing around here, waiting for something to happen, in a manner similar to the equity markets.

It is hard to believe that it is almost mid-September. It feels like summer.

SP 500 and NDX Futures Daily Charts

Equities marked time again today as traders wait to see if the money printing starts up in earnest again.

So the current sideways move could resolve into a bull flag and continuation IF Benny opens the money gates again.

The real economy continues to languish.

The Hunger Games And a Dystopian View of America's Future from Chris Hedges

"One may safely say that it would be no sin if statesmen learned enough of history to realise that no system, which implies control of society by privilege seekers, has ever ended in any other way than collapse."

William E. Dodd, US Ambassador, Address to the American Chamber of Commerce in Berlin, 1933


"America's corporate and political elites now form a regime of their own and they're privatizing democracy. All the benefits, the tax cuts, policies and rewards, flow in one direction: up."

Bill Moyers

Spokesmodel for the 1 Percent Interviews Our Heroine

If you wish to see a vision of the future of America you may want to read the book that many of your brighter 'young adults' are reading, The Hunger Games, in which an almost frivolous, certainly decadent, and highly predatory elite located in the Rocky Mountains (Aspen?) rules the 13 districts of North America through its heavily armed squads of Peacekeepers.

Poverty and privation is the rule in most of the districts as the economy is largely extractive rather than productive. For whatever reasons, most districts seem rather lightly populated and underdeveloped. I suspect it is a nod to neo-feudalism where efficiency and productivity take a back seat to control.

I started reading the first book because I like to keep a finger on the pulse of what the kids are reading.  It gives us something to talk about, in addition to hearing the names and habits of these fellows in One Direction.

I ended up reading all three books. They are easily read and quite entertaining as a story, with decent character and plot development for a young adult book. They have a huge following judging by the backlogs for them at the public libraries.   I am sure that many teens have not read them, or read them with understanding, in the same way that most adults are similarly unaware of what is happening around them.

But there are certain pivotal books that capture the thinking minds of the young, and give us a cultural indication of what they are thinking and where they may be heading.  In my own generation, The Catcher in the Rye was one such book.

On one level beneath the drama and entertainment, The Hunger Games is a disingenuously brilliant political satire about today. 

Is this the future? No one can say. But for the moment at least, that is the direction in which we are heading. All that may be lacking is a war or natural catastrophe.

But certainly something is in the wind, if one only looks at the recent proliferation of dystopian essays and novels, which seem to spring up during periods pregnant with change. And this is certainly a recurrent theme even in important scholarly works as cited in Inequality Matters: Why Nations Fail.

Here is a recent video discussion with Alex Jones and Chris Hedges that piqued my interest, even though I am not a regular listener to Mr. Jones. But it reminded me that I wanted to write a brief piece about the substory in The Hunger Games.

And below that is one of the better maps of Panem which I have found, showing the Capitol and the Thirteen Districts, with a brief description of what they supply to their parasitic elites.  Spoiler Alert.  A rebellion occurs, triggered by a seemingly trivial act of defiance and individualism by the heroine. Much of it is powered by those hardy souls in District 13.

I have seen the first movie based on book one, and it does not quite capture the depth and detail of the book, given the limitations of the time and the medium.  But it is well done for what it is, but it is a supplement, not a substitute.



Watch the entire interview here.

"And may the odds be ever in your favor."

Speculation in China On Possible Assassination Attempt on Number Two Man Xi Jinping

It is hard to tell exactly what is happening in China from these reports of two top officials who were injured on the same night in two separate car accidents, one in which Xi was sandwiched between two military jeeps, and another where He Guoqiang was mysteriously hit from behind by a truck.

Perhaps there is a need to create an initiative in driver safety in China especially for their military and truck drivers.

But it does underscore the variability and risks with a key world player where the leadership is unusually opaque.

The China Post
Media speculate Xi injured in accident
10 September 2012

There were a series of media reports saying that Chinese Vice President and presumptive future top leader Xi Jinping was injured in a traffic accident, barring him from some public functions.

Xi and He Guoqiang, who supervises discipline affairs in China, have been receiving medical treatments at Beijing's 301 Military Hospital after they were injured in two separate road accidents on the evening of Sept. 4, according to reports of Boxun, a U.S.-based citizen news website.

There were also reports in Hong Kong media about the accidents, sparking speculation and rumors that they were assassination attempts.

Xi, aged 59 and a new-generation leader in China, has been widely tipped to take over the top Communist post from General Secretary Hu Jintao at the Communist Party Congress expected to take place in October this year. Xi is also expected to take over national presidency in next March.

But there were rife rumors after Xi canceled a public appearance for a meeting with visiting U.S. Secretary of State Hillary Clinton on Sept. 5.

There were also unconfirmed reports that Xi was suffering from a painful spinal cord problem.

The media cited internal Beijing sources claiming that Xi was involved in a mysterious car accident in Beijing.

His vehicle was sandwiched by jeeps and Xi was said to have passed out during the collision before being rushed to Beijing's 301 Military Hospital with injuries.

According to the source, He Guoqiang, the secretary of the Commission for Discipline Inspection, was involved in a separate road accident on the same night when a truck traveling at high speed hit his car from behind, causing it to turn over.

He also was rushed to the 301 Military Hospital and was said to be in a more critical condition.

There were rumors that the perpetrators could be military officers and supporters of Bo Xilai, former commerce minister and Chongqing party boss, who has been in detention for investigation concerning unspecified “serious discipline violations” since March.

Bo's wife, Gu Kailai, was given a suspended death sentence last month for her role in murdering British businessman Neil Heywood. Bo was believed to have helped cover up the crime.

General Liu Yuan, political commissar of the General Logistics Department of the People's Liberation Army of China, was reportedly to have personally coordinated the medical treatment for Xi and tightened security at the military hospital.

Liu, son of former Chinese President Liu Shaoqi, who was persecuted by ex-Communist leader Mao Zedong, was once thought to be among the senior military officers that have built close ties with Bo, son of another former Chinese Communist leader.

But Liu was thought to have ceded relations with Bo because of his close relations with Xi, who is expected to treat Liu as one of his own men in the influential military sector...

Inequality Matters: Why Nations Fail

"To Egyptians, the things that have held them back include an ineffective and corrupt state and a society where they cannot use their talent, ambition, ingenuity, and what education they can get. But they also recognize that the roots of these problems are political.

All the economic impediments they face stem from the way political power in Egypt is exercised and monopolized by a narrow elite. This, they understand, is the first thing that has to change.

Yet, in believing this, the protestors of Tahrir Square have sharply diverged from the conventional wisdom on this topic. When they reason about why a country such as Egypt is poor, most academics and commentators emphasize completely different factors.

Some stress that Egypt’s poverty is determined primarily by its geography, by the fact that the country is mostly a desert and lacks adequate rainfall, and that its soils and climate do not allow productive agriculture. Others instead point to cultural attributes of Egyptians that are supposedly inimical to economic development and prosperity. Egyptians, they argue, lack the same sort of work ethic and cultural traits that have allowed others to prosper, and instead have accepted Islamic beliefs that are inconsistent with economic success.

A third approach, the one dominant among economists and policy pundits, is based on the notion that the rulers of Egypt simply don’t know what is needed to make their country prosperous, and have followed incorrect policies and strategies in the past. If these rulers would only get the right advice from the right advisers, the thinking goes, prosperity would follow. To these academics and pundits, the fact that Egypt has been ruled by narrow elites feathering their nests at the expense of society seems irrelevant to understanding the country’s economic problems.

In this book we’ll argue that the Egyptians in Tahrir Square, not most academics and commentators, have the right idea. In fact, Egypt is poor precisely because it has been ruled by a narrow elite that have organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated, and has been used to create great wealth for those who possess it, such as the $70 billion fortune apparently accumulated by ex-president Mubarak. The losers have been the Egyptian people, as they only too well understand.

We’ll show that this interpretation of Egyptian poverty, the people’s interpretation, turns out to provide a general explanation for why poor countries are poor. Whether it is North Korea, Sierra Leone, or Zimbabwe, we’ll show that poor countries are poor for the same reason that Egypt is poor.

Countries such as Great Britain and the United States became rich because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to citizens, and where the great mass of people could take advantage of economic opportunities.

We’ll show that to understand why there is such inequality in the world today we have to delve into the past and study the historical dynamics of societies. We’ll see that the reason that Britain is richer than Egypt is because in 1688, Britain (or England, to be exact) had a revolution that transformed the politics and thus the economics of the nation. People fought for and won more political rights, and they used them to expand their economic opportunities. The result was a fundamentally different political and economic trajectory, culminating in the Industrial Revolution.

The Industrial Revolution and the technologies it unleashed didn’t spread to Egypt, as that country was under the control of the Ottoman Empire, which treated Egypt in rather the same way as the Mubarak family later did. Ottoman rule in Egypt was overthrown by Napoleon Bonaparte in 1798, but the country then fell under the control of British colonialism, which had as little interest as the Ottomans in promoting Egypt’s prosperity.

Though the Egyptians shook off the Ottoman and British empires and, in 1952, overthrew their monarchy, these were not revolutions like that of 1688 in England, and rather than fundamentally transforming politics in Egypt, they brought to power another elite as disinterested in achieving prosperity for ordinary Egyptians as the Ottoman and British had been. In consequence, the basic structure of society did not change, and Egypt stayed poor."

Daron Acemoglu and James Robinson, Why Nations Fail

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.

Gold Daily and Silver Weekly Charts - Japan Banking Minister Leading Insider Probe Found Hanged

The metals pulled back a bit today, as the first blush of QE in Europe and the US gave way to more dour concerns about the mechanics and the reality of the things.

Not to worry just yet. A pullback to prior big resistance would be normal in this sort of a run, and we are nowhere near that yet.

Light volumes and really still a dull market. I think you saw the notice that volumes on the CME are down substantially, something like 40%. And that is with all the phony baloney High Frequency Trading that occurs so regularly on all the markets.

In some sad news, the Japanese Minister of Banking, Mr. T. Matsushita, who was leading an investigation into insider trading, was found hanged in his home. He had been treated for prostate cancer early this year but it was said to be in remission. The police are treating it as a suspected suicide. The minister was also responsible for reforming the massive Japan Postal Savings System.

And apparently two of the top leaders in China, including Xi the number two man widely expected to rise to power in October, have been injured in two unrelated car accidents. Rumours are rife in Hong Kong that they were assassination attempts.

Edgy times ahead.

SP 500 and NDX Futures Daily Charts

Stocks pulled back today as the negative divergence of tech over the financially heavy SP 500 gained some traction.

The news about slack auto sales in China is just more evidence of a disjointed world economy.

So far this is just the market exhaling, or back and filling if you prefer.

There are concerns with the proposed ECB bond buying plans, and high expectations for Bernanke's latest model of QE which has yet to hit the showroom floor.

Let's see what happens.

Thoughts For Believers On a Sunday Afternoon - God As Vending Machine

I have some words of caution in particular for the believers in God today.

The struggles of the faithful may provide some false cheer for those who believe in nothing but themselves, and who delight in the failings of those who follow the Way, and those who aspire to God in His vastness, and in the Truth. But that is just another portion of their confusion and delusion. They say, 'see these are not perfect, and this is why I do not believe.' No, that is just another excuse from a hardened heart. The past century alone is dripping with the blood of those who worship nothing but the dark powers of this world, and themselves.

And as for believers who condemn the differences amongst themselves, let them be concerned for themselves. Let he who is without sin cast the first stone at another, because as you judge, so it will be given to you.

We are all sinners, even those of the faithful, who continually stumble and fall, even with the best of intentions. And yet we need not despair, because God is merciful, and sees deeply into our hearts, as He made us.

But there is always a tendency in some of the faithful of God, those Jews, Christians, and Muslims, and those who worship God in other ways, to begin to love the rituals and the mannerisms, the words and status of their faith, the comfortable accoutrements, moreso than what the faith itself represents, and what it commands of us.

"Love the Lord your God with all your heart and with all your soul and with all your strength and with all your mind, and love your neighbor as yourself."

And some think of faithfulness to God as a transaction, as if God were merely a vending machine. If I say the right words, if I am born to the right people and worship in the finest buildings, if I pronounce the ritual properly as prescribed, then I am among the faithful, the elect, and I am saved, no matter what else I may do. And all too often that 'saving' implies a worldly prosperity and honors. 

The words and the covenant compel God, since I have called out to Him in accordance with the ritual, as if I were not calling out to the purest being above all else, the Holy Spirit, but pushing buttons on a machine, or summoning a demon to be my personal servant.

Your words will provide what your heart commands.

And this may even include the most zealous, who with grand gestures and exorbitant demonstrations seem to be the most ardent, the first among the faithful. But when one listens to them, their words betray them, because there is nothing of the love of God and of His creation and of their fellows in their words, which are mottled with hash judgements, violence and a defiant hardness of heart.

"Whatever you have done to the least of these, you have done to Me...Whatever you have not done for the least of these, you have not done for Me."

Be careful of this. This gospel of greed and abuse of the faith is a sin against the Spirit, the one sin which will not be easily forgiven. It is the desecration of the word, and what is most holy.

"And so I tell you, every kind of sin and slander can be forgiven, but blasphemy against the Spirit will not be forgiven. Anyone who speaks a word against the Son of Man will be forgiven, but anyone who speaks against the Holy Spirit will not be forgiven, either in this age or in the age to come.

Make a tree good and its fruit will be good, or make a tree bad and its fruit will be bad, for a tree is recognised by its fruit. You brood of vipers, how can you who are evil say anything good? For the mouth speaks what the heart is full of. A good man brings good things out of the good stored up in him, and an evil man brings evil things out of the evil stored up in him.

But I tell you that everyone will have to give account on the day of judgment for every empty word they have spoken. For by your words you will be acquitted, and by your words you will be condemned."

Matthew 12:31-37


"If I speak in the tongues of men or of angels, but do not have love, I am only a resounding gong or a clanging cymbal. If I have the gift of prophecy and can fathom all mysteries and all knowledge, and if I have a faith that can move mountains, but do not have love, I am nothing. If I give all I possess to the poor and give over my body to hardship that I may boast, but do not have love, I gain nothing.

Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonour others, it is not self-seeking, it is not easily angered, it keeps no record of wrongs. Love does not delight in evil but rejoices with the truth. It always protects, always trusts, always hopes, always perseveres.

Love never fails. But where there are prophecies, they will cease; where there are tongues, they will be stilled; where there is knowledge, it will pass away. For we know in part and we prophesy in part, but when completeness comes, what is in part disappears. When I was a child, I talked like a child, I thought like a child, I reasoned like a child. When I became a man, I put the ways of childhood behind me. For now we see only a reflection as in a mirror; then we shall see face to face. Now I know in part; then I shall know fully, even as I am fully known.

And now these three remain: faith, hope and love. But the greatest of these is love."

1 Corinthians 13


"Those who disbelieve after believing, then plunge deeper into disbelief, their repentance will not be accepted from them; they are the real strayers.

Those who disbelieve and die as disbelievers, an earthful of gold will not be accepted from any of them, even if such a ransom were possible. They have incurred painful retribution; they will have no helpers.

You cannot attain righteousness until you give to charity from the possessions you love. Whatever you give to charity, God is fully aware thereof."

Quran 3:90-92


"Love your neighbor as yourself."

Leviticus 19:18

or as Rabbi Hillel said so eloquently,

"That which is despicable to you, do not do to your fellow, this is the whole Torah, and the rest is commentary. Go and learn it."

Elizabeth Warren: 'The System Is Rigged'

Friday Night: Chris Hedges and Jonathan Haidt on Corporations, Liberals, and Conservatives

"Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of smaller ones.

The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organized political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature.

The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population. Moreover, under existing conditions, private capitalists inevitably control, directly or indirectly, the main sources of information (press, radio, education).

It is thus extremely difficult, and indeed in most cases quite impossible, for the individual citizen to come to objective conclusions and to make intelligent use of his political rights.

Albert Einstein, Why Socialism? 1949

While I agree with Einstein's diagnosis of the systemic flaw in market capitalism, which can be addressed by regulatory actions prohibiting monopolies and the abuse of power, I have to note that his follow on endorsement of central planning and socialism makes the same Utopian leap of faith about the natural goodness and rationality of human nature that the proponents of free market capitalism make.

The first video is part of an interesting discussion between Chris Hedges and Jonathan Haidt on the financial crisis at the 92nd Street Y.

Haidt is a psychologist who is doing some fascinating work in examining human values, and has done some interesting testing in the differences between liberals and conservatives, which is included in the second video.

I have to note that Haidt assumes what seems to be a normal distribution, or perhaps rather a distribution of normality, that does not seem to take sociopaths and psychopaths into their proper account. And more generally there is an element of the irrational that seems to introduce the occasional random act into human behaviour that runs contrary to the values of otherwise rational people.

 Like economists, the psychologists sometimes crush the individuality of the person to fit their models a bit.

The concept he presents is not entirely new. Such approaches to human values, including testing not for political preference but for a wider range of measures, go back to the 1970s at least, using six dimensions of perceived value called Order, Physical, Emotional, Scientific, Social, Enterprising. It had some remarkable applications in vocational and therapeutic testing. And there have been other such tests and measures, often with four or five dimensions.

I would also make a distinction between ends and means, between moral values and politics.  For my way of thinking moral values are ends we may hold, and politics, which is what Haidt is describing, are the means to achieve those ideals.

 What Hedges is saying is that we have lost a sense of values, 'the sacred,'  which has been sacrificed on the altar of commerce, led by the high priests of a destructively anti-human economic, almost to the point of psychopathy. And that is the source of his concerns.  And I think that is why he and Haidt talk past one another a bit.  Haidt talks about what he can measure, whereas Hedges is thinking at a level above that.

Hedges also references the way in which people's values can be twisted and manipulated by lies and even propaganda, so that they do things that are unintended and even irrational, outside of their normal value system, as in the objectification of the individual by the stereotype.  Haidt seems to miss that, as it is crushed out of his model.

Haidt's talk is nonetheless thoroughly enjoyable, and his development of his ideas highly entertaining. And you may even go and take his online test, and see how you stack up as a conservative and a liberal and what that really implies. I drew some insights from it, and you may do so as well.

Gold Daily and Silver Weekly Charts - Another Turn in the Downward Spiral

Gold and silver have broken out, as the weak employment report and the debacle in Europe have renewed 'investors' expectations in additional monetization by the ECB and the Fed. I say 'investors' in quotes because there are no investors anymore, only speculators and gamblers.

However, to say that this may end badly is an understatement.

Intraday commentary on the Non-Farm Payrolls report and the state of the economy is available here. It is not particularly upbeat, but it is not downbeat either. Rather, the forecast is for greater uncertainty, and therefore, risk.

"Efficient market theory is a fraud, and further deregulation is little more than a license to steal. It is no coincidence that the gap between the wealthy few and the public is at levels not seen since the last Great Depression. This is the mark of a very unhealthy kleptocracy based not on merit but on position, power, and payoffs.

The corruption in the system acts like a huge tax on the real economy, diverting resources, labor, and investment away from productive activity and towards monopolies, cartels, and the fraudulent accumulation of wealth through the manipulation of financial assets, making money from money.

There will be no sustainable recovery until there is substantial, genuine reform of the financial and political systems, both of which have been tainted by big money and corporate power promoting a very narrow and self-servingly destructive agenda.

Agree or not, things will continue to get worse, even if in a long, dwindling cycle of decay and despair, until change comes. And it will come, one way or the other. And the longer it takes, the more volatile the outcome."

I am not sure how far they can take the equity markets in expectations of more QE. But at some point, even if it is after that QE arrives, the markets will begin to sell off, slowly at first, as the focus on the candy delights of monetization turn back towards the decline in earnings and median wage, and the malaise that will continue to grip the broader economy.

This *could* be masked by a bout of serious inflation, if not hyperinflation, but I still do not see that actually developing yet, except perhaps as a precipitous series of devaluations and the resetting of the global monetary system, with a commensurate redistribution of paper wealth as occurred in the Soviet Union on its collapse.

But the risks are great, with many exogenous variables, and so any forecast that one can offer is bound to be diminished by uncertainty.

Whatever may happen, there should be little doubt that this generation will be tested in unfamiliar ways, at least to them, but with many analogues and similarities in modern human history.

SP 500 and NDX Futures Daily Charts - Divergence

There was a bit of a divergence between the tech heavy Nasdaq 100 and the more financially weighted SP 500. The stodgy Dow Jones Industrial Average was largely unchanged.

This is indicative of today's market action which was driven by expectations of more monetary stimulus from the Fed and the ECB, feeding into the banks, and trickling down to the real economy.

Intraday commentary on the Non-Farm Payrolls report here.

Once the QE comes, I expect the market to begin selling off as the focus turns once again to slack earnings, weak employment, and more revelations of financial fraud. The elections may provide a temporary diversion, bread and circuses.