The One Percenters' Tax Loopholes and Unindicted Frauds: Audacious Oligarchy

What set this conversation going is the 'carried interest' tax loophole that allows wealthy hedge fund manager to pay much lower taxes on what is really ordinary income.  

 

There are many more egregious loopholes readily available to the tax-lawyered-up wealthy, and you probably have not even heard of, or can imagine, most of them.

What interested me more about this is not so much the discussion of an obvious tax loophole, but the reactions of the participants, and the lack of self-awareness.

Ken Langone is the epitome of what is wrong with the one percent and their distorted view of reality. And Stephanie Ruhle is their cheerleader and hagiographer.  Erik Schatzker gets props for at least trying to inject some realism and balance into the discussion in the most polite way.  Well, he is a Canadian after all.

Anyone who can distill 'poor Angelo Mozilo' and 'Barney Frank did it' as the only lessons out of the carnage and suffering of the housing financial crisis with its rampant, largely unindicted fraud, brazenly committed by financial institutions and their enablers in ratings agencies, is living in an alternate universe.

And unfortunately that is the case.   The uber-wealthy often live in a bubble of delusion because few if any will ever tell them the truth, and if they do, they do not wish to hear it and shout them down or use their money and influence to shut them up.  

 

This is the well spring of hubris and overreach.  No one wants to tell the Emperor that he is naked.  No one can tell a Caligula that his horse is a poor choice for the Senate.  No one wants to explain to the powerful that they have gone too far, and that the times, they are a changin'.   They seem to have to get hit with reality in the face, and that is too bad for a lot of innocent bystanders.

Langone is a walking, squawking, self-delusional example of the credibility trap in action.  And he is certainly not alone.  He has a lot of brothers among the uber-wealthy, and kissing cousins in the Congress and politicians in general, and throughout the media, think tanks, and universities.

This is why there will not be any kind of meaningful internal reform until the people clip the wings of the moneyed interests from buying elections, and politicians, and the networks.

And this should be an object lesson to any people overseas who think that the terrible consequences they have suffered endured from the exports of fraudulent paper and practices of the Anglo-Americans over the past ten years have changed.

They have not.   And the utterly distorted, unrepentant, and unreformed world view of the unfortunately powerful one percent is the reason.  Why stop when you are winning...

 

Here is a link to the interview on Bloomberg in case the embedded version is not working for you.

Ken Langone On Bloomberg

Gold Daily and Silver Weekly Charts - The Money Shot - To Say 'No' - Dalio on Gold

"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas. The wealth of another region excites their greed; and if it is weak, their lust for power as well.   Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

Tacitus, Agricola

I was interested to see that Greece may have agreed to 'privatize' their sea port and air port as a condition of reaching some agreement with their Euro/IMF creditors.   And even more interesting is the report that the Ukraine is said to have drawn up a long list of assets it too will be offering up for privatization, no doubt in grateful return for the protection of the US and its NATO allies, for the enrichment of a powerful few, and their sons and benefactors and servants. 

Money Shot: A money shot is an element of a film, video, broadcast, or print project that is disproportionately expensive to produce and/or is perceived as essential to the overall importance or revenue-generating potential of the work.

It is difficult to believe that the US and its corporate allies care anything about the Greek or Ukrainian people, their standards of living, their freedom, or their general welfare.  It is not even clear that they care about their own people in that way anymore.

 

They seem to be in it for the power and for the money, opportunities as they say, and not for the nation but for a favored few.  This overreach for profit and power of the corporatist state overseas and at home is the money shot. 

 

This is the reason that we see the Western leadership engaging in discretionary wars, and secret trade treaties, and paper asset bubbles, and rigging markets, private bailouts and public austerity, so that they can continue to enrich the one percent through an economic policy of  wealth transfer and plunder.

 

Gold and silver managed a decent rally up to overhead resistance today.  Since The Bucket Shop has not yet changed in any meaningful way we must patiently wait to see if there is any follow through.   Since the prices are apparently not connected to anything in particular, except for the whimsy of the most powerful and deep pocketed trading desk and their algos, anything is possible.

 

At the end of the day this is still just a game of Liar's Poker.  And they are very good at it.  Lying that is.

 

In that vein there were very few claim checks for bullion exchanged, and not much action in the warehouses. 

 

I have included the gold and silver warehouse inventories below.  

 

As a reminder there was overnight commentary about the near record number of potential claims per deliverable ounce of gold on the Comex here.

 

Below is a video  in which Ray Dalio, one of the biggest and most successful money managers in the world, discusses his views on gold at the Council on Foreign Relations.  Consider this an alternative view to some of the more banal, uninformed diatribes by the propeller heads. 

 

This is nothing new from Dalio, and I have cited his views here before.  His famous 'All Weather Fund' is thought to be holding about six billion dollars worth of gold.

Here is one of my favorite quotes from Ray Dalio on gold:

"Over the long run, the price of gold approximates the total amount of money in circulation divided by the size of the gold stock. If the market price of gold moves a long way from this level, it may indicate a buying or selling opportunity."

 

Have a pleasant evening.

 

 

 

 

 

 

SP 500 and NDX Futures Daily Charts - The Walking Dead

The PPI (Producer Price Index) this morning was shockingly negative. 

And so stocks rallied, on the basis that since we are seeing so many deflationary indications the Fed would not be raising rates anytime soon, and might even crack open the QE cookie jar again for a little more top down rainbow sprinkles of public money for the Banks and their speculations.

Again I would like to reiterate the Le Café view that the Fed never had any economically based intentions of raising rates at any time in the recent past.  

They would like to add a few basis points of upside for their own policy purposes, to get off ZIRP so that they can cut rates again in the future when The Recovery™ they and the government have been touting is exposed as a fraud.

And so our standing forecast of a symbolic raise of maybe fifty points, in two steps, is still in place unless we see some genuine signs of recovery, which we have certainly not seen yet.   And that will be the extent of their action until the next financial crisis comes, probably as a result of the collapse of this current financial asset bubble in stocks and bonds and Dollars.

It was almost funny to see a price manipulation hoax perpetrated on the stock of Avon today using the SEC website to propagate a phony takeover offer from a fake private equity firm.   Well, that is how things are in bubble land.  Our major exports are misery and fraud.  Buy first and ask valuation questions never if you can keep the momentum going.  Just look at Shake Shack.

Bloomberg TV has been slavering all over Kim Kardashian and her new phone app games all day.  I think the whole thing is emblematic of the banality of our culture and the one percent.  

 

Someone asked if I have nothing good to say about Bloomberg TV these days.   I do think Alix Steel's new haircut is really cute.   It frames her million dollar smile really well.

Have a pleasant evening.

 

 

 

Comex Gold Rises To A Near Record 107.7 Claims Per Registered Ounce

Well, here we are again.

As you may have noticed from my postings of the Comex Warehouse Gold inventories, lately there has been a significant drop in the level of 'registered' or deliverable gold held there.  And since the open interest or number of contract held by punters and investors is not dropping commensurately, the number of claims per deliverable ounce has risen.  Quite a bit actually.

As a snarky observer pointed out, somewhat presumptuously I thought, there is quite a bit of other gold stored in these warehouses.   It is called 'eligible' gold meaning that it is in the proper format for Comex trading. 

But, I retort, that which is not marked registered is not available for delivery at these prices, unless the owners change their minds.  Or the Comex starts confiscating private gold in storage. And I sincerely doubt they  follow the MF Global method of customer metals inventory management.  Although no on has yet to  pay the price for that one. 

Then again, ownership is a flexible concept in The Grift, which is what the US financial system has become.   And the exchanges are its Bucket Shops.

This can very well resolve itself neatly as it did last time, especially if a friendly possessor of physical gold, let's say a bullion bank or an official non-profit seeking agency like the IMF or the odd money printing central bank decided to lease or deliver some of their physical holdings into the market without regard to price and profit.

Then again, the players might decide to just roll over their contracts and claim checks and just keep the game rolling, taking the rigging skim from related markets and the vig.  This is perfectly acceptable behavior for The Bucket Shop.  It seems to be the new thing for stocks and even bonds as well.   Its a derivative universe.

Or, God forbid, the price of gold could rise to increase the available supply.  But that is very retro economics, certainly not modern, and so yesterday.

Musical chairs with only a limited number of seats is not a problem, if the music never stops and no one tries to sit down.  It's all just a game in The Grift.  And if they ever go cashless and purely electronic, it will be a brave new world of modern money.  Whoops, another bailout, and there went half your savings!   You won't even have to play to pay. 

So let's see what tune the carnival plays on this go round.  And a pleasant time is guaranteed for few, just a few.

These charts are from Nick Laird at sharelynx.com.

A More Ominous Note May Be Heard in the Global Bond Rout

I was only tangentially aware that there was anything that could be called a 'global bond rout' since I do not follow the bond markets much these days.

But I found this theory below to be an interesting hypothesis, because the state of global growth, and the slide into a secular stagnation in the developed Western economies in particular, is of keen interest to me. If a major market like bonds is seeing the same thing then this would indeed be noteworthy.

It would eventually result in a stagflation, as persistent money printing and competitive devaluations with no resulting organic economic growth might eventually find some inflationary traction, even if it was a break in international monetary confidence, despite the ongoing stagnation in real growth caused by policy errors.

Whatever the cause of this global bond rout, or any other trouble approaching in the gathering storm, I am sure the public will be the last to find out.

"There is a growing concern that the extreme levels of wealth and income inequality here and abroad are creating a permanent, rather than temporary, rate of tepid economic growth worldwide.  This translates into a future where governments are forced to issue ever more debt to plow into fiscal spending to prevent their economies from lapsing into deflation and, potentially, a depression.

Markets trade on anticipation of where economic data will stand three to six months down the road. The big selloff in sovereign debt is telling us that global investors see major economies mired in the hangover of the 2008 crash indefinitely with deficit spending on infrastructure soon to replace Quantitative Easing (QE) as the new monetary tool to ward off deflation...

The global rout in sovereign debt markets is a collective epiphany that we’re six years and counting from the 2008 crash and we’re still on central bank life support."

Read the rest of this at Wall Street On Parade.

Stiglitz: Why Western Capitalism Has Been Failing Since 1980

As I had written some time ago in the The Fall of the American Republic: The Quiet Coup:

"I am not so optimistic that this reform is possible, because there has in fact been a soft coup d'etat in the US, which now exists in a state of crony corporatism that wields enormous influence over the media and within the government.

To be clear about this, the oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own ends and unslakable will to power.

This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price. And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill gotten gains.

But my model says that the oligarchs will continue to press their advantages, being flushed with victory, until they provoke a strong reaction that frightens everyone, like a wake up call, and the tide then turns to genuine reform."

 

The article which I wrote was based on the insightful and largely ignored work by renowned economist Simon Johnson called The Quiet Coup.

 

This lecture by Stiglitz below is a little 'wonky' and uses some terminology which may be unfamiliar.

Nevertheless if you listen to it and just try to capture the main points of his discussion it will be worthwhile.

 

His basic premise is to ask why capitalism has shown a tendency to stagnation since 1980 in the United States and other parts of the West.

 

I am, as you know, an adherent to the belief that there has been a soft coup d'état in the US.  One can always quibble about the exact dates, but that is of less importance.   I have said it was shortly after Greenspan's 'irrational exuberance' speech, although the stage was certainly set for this during the 1980's with the rise of the efficient markets hypothesis, the assumption of rational wealth optimizers in the markets, and of course, the laughable supply side economics which are the old trickle down canard in drag.

 

The point, rather, is to understand what has happened, to continue to shine a light on it, and to hope that Simon Johnson is correct, that the overreach of the 'winners' will eventually provoke a reaction. 

 

Quite frankly I had thought it would have come by now.  One can rarely go wrong betting on the power of apathy and momentum, and the persistent greed of the sociopaths and their enablers.

 

After all, in the aftermath of a tragic derailment of the flagship train line in the US from Washington to Boston that could have been prevented by continuing investments in fundamental railroad infrastructure, the House of Republicans have voted to further slash Amtrak funding by $260 million. 

They are instructed to hate anything that benefits the public without putting an abundant stream of income into the pockets of their corporate money masters.  This explains their virulent animosity to Social Security, public transportation, public healthcare, public education, public infrastructure, consumer protections, environmental laws, safety regulations, product safety measures, and any sort of financial regulation that inhibits the greed and power of the Banks.

And we should be ashamed for continually standing quiet in the face of such pathological incivility.

 

But I can almost guarantee that if this crash had been the result of some sort of despicable act of terrorism for example, the public coffers would already be wide open, flowing with a Niagara of funds for homeland security and the militarization of domestic law enforcement.   Millions for the corporatized state, but little or nothing for the people.

 

I am increasingly concerned that, as has happened so many times in the past, the status quo will greet this eventual reaction for reform, justice, and equality with repression and even draconian measures to maintain what they perceive as their rightful place and power. 

 

Like apathy and momentum, it is also difficult to underestimate the self-delusion and overreach of sociopaths who would be as gods, even if they are gods of the damned.

History is replete with examples.