SP 500 and NDX Futures Daily Charts

Stocks rallied higher on the first day of the FOMC meeting.

Tomorrow afternoon could be interesting.

SHIBOR Signaling Stress in the Financial System - Liquidity Crunch

Here is some interesting data out of China. The story is by Matt Phillips.

The inter-bank liquidity crunch is a classic banking problem for which the central bank as lender and regulator was created.

It would be nice if the bankers could get in front of these problems as they develop, and not merely throw the public's money at them after the fact when bad bank management, official corruption, and excessive greed have made the system vulnerable.

LIBOR itself is quiet, which suggests that this problem is particular to China, at least for now.  The only LIBOR stories breaking are charges against bank traders for manipulating that interbank rate.

Shibor
Here’s what’s behind the Chinese cash crunch
By Matt Phillips

"Remember Libor? When that once obscure measure of short-term interest rates shot higher in 2007 and 2008, it was one of the earliest warnings signs of what would eventually become the financial crisis. Now, its Chinese cousin—known as Shibor—is telegraphing the rising stress in the opaque financial system of the world’s second largest economy.

What does the spike in rates mean? Large banks are increasingly leery of tapping into their pools of cash to lend to each other. Recent reports that China Everbright Bank failed to repay a short-term loan to Industrial Bank Co. aren’t helping. Industrial Bank says that report is “untrue and exaggerated.” But short-term lending markets suggest other bankers are skeptical.

So what’s the solution? Chinese authorities tamed short-term interest rate spikes before. They could create new cash to lubricate lending, or lower reserve requirements for banks, which would boost liquidity. According to the Wall Street Journal, that’s what bankers are hoping for..."

Read the complete original here.

NAV Premiums of Certain Precious Metals Trusts and Funds

As expected we have a bear raid on the precious metals in honor of the FOMC meeting.

Make no mistake, this is political messaging. Buy our paper.

And a great deal of the world is ignoring it.

Harvey Organ Comments on the Gold Inventory at the COMEX

Time to send a distress flare to their friends and cohorts at the central banks?

Hey Rocky. Watch me pull a rabbit out of a hat.

From Harvey Organ this evening:

"Ladies and Gentlemen, we have a three-fold problem:

i) the total dealer inventory of gold is at a very dangerously low level of only 44.32 tonnes, and none of the 9.5 tonnes delivery notices from May and the 30 tonnes from June have been removed from inventory as of yet.

ii.a)   JPMorgan's customer inventory remains at an extremely low 136,380 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.

ii.b) JPMorgan's dealer account rests tonight at 413,000 oz. However all of this gold has been spoken for plus an additional 81,000 oz

iii) the 3 major bullion banks have collectively only 30.08 tonnes of gold left!"

I do not watch the Commitments of Traders and the broad sweep of inventory levels like Harvey and others do.

As you know I do not think that this is where the scheme breaks, except as a secondary effect perhaps. The COMEX is a paper shell game. The real fireworks will begin more likely in a run on the bullion banks, and the depletion of physical supply sparked by some major scandal or failure to deliver.

Keep an eye on silver. The central banks don't have any.

And do not think for a moment that this will go down easily. There are desperate but powerful forces at work.

But I do enjoy watching this sort of thing unfold.

"You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!"

President Andrew Jackson, February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

Pictures In an Exhibition: Who Profits?

Why keep the median wage low, despite rising profits and productivity?

Whom does an increasingly debt-based economy serve?

Who profits from the status quo?

Pictures in an exhibition of elephantine greed.

US Civilian Employment To Population Ratio Since 1970

What recovery was that again?

The lower employment to population ratios of the early post war decade were more manageable because it was prior to the long wage stagnation despite rising productivity. 

It was also an era when single worker households were able to maintain a livable income.