Deep State: Inside Washington's Shadowy Power Elite

“Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it. If one can afford private security, public safety is of no concern; to the person fortunate enough to own a Gulfstream jet, crumbling bridges cause less apprehension, and viable public transportation doesn’t even compute. With private doctors on call and a chartered plane to get to the Mayo Clinic, why worry about Medicare?”

― Mike Lofgren, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government


"Our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts. Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association, and a widespread (if still contested) franchise.

But we believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened."

Martin Gilens and Benjamin I. Page, Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens, Princeton 2014

"As a congressional staff member for 28 years specializing in national security and possessing a top secret security clearance, I was at least on the fringes of the world I am describing, if neither totally in it by virtue of full membership nor of it by psychological disposition.

But, like virtually every employed person, I became, to some extent, assimilated into the culture of the institution I worked for, and only by slow degrees, starting before the invasion of Iraq, did I begin fundamentally to question the reasons of state that motivate the people who are, to quote George W. Bush,  'the deciders.'

Cultural assimilation is partly a matter of what psychologist Irving L. Janis called groupthink,  the chameleon-like ability of people to adopt the views of their superiors and peers. This syndrome is endemic to Washington: The town is characterized by sudden fads, be it negotiating biennial budgeting, making grand bargains or invading countries. Then, after a while, all the town's cool kids drop those ideas as if they were radioactive.

As in the military, everybody has to get on board with the mission, and questioning it is not a career-enhancing move. The universe of people who will critically examine the goings-on at the institutions they work for is always going to be a small one. As Upton Sinclair said,  'It is difficult to get a man to understand something when his salary depends upon his not understanding it.'"

Mike Lofgren

Gold Daily and Silver Weekly Charts - Continuing Flight to Safety

"If we lived in a state where virtue was profitable, common sense would make us saintly. But since we see that abhorrence, anger, pride, and stupidity commonly profit far beyond charity, modesty, justice, and thought, perhaps we must stand fast a little - even at the risk of being heroes."

Robert Bolt, A Man For All Seasons


"I wonder, Madam, that you have not penetration to see the strong inducement to this excess; for he who makes a beast of himself gets rid of the pain of being a man."

Samuel Johnson, from Anecdotes of the Revd. Percival Stockdale

Gold continued to push higher today after some early weakness.  Interestingly enough the dollar has shown some weakness, but the overall flavor of the markets has the tang of a repricing in of risks that have been sore neglected, and for far too long.

The FOMC deferred on doing anything at their meeting today in grudging recognition of the deteriorating 'recovery.'

There was intraday commentary on the little noted 'informal one-on-one' meeting between Bernie Sanders and the President.   You may read about it here.

Hillary Clinton announced today that she would considering appointing Barack Obama to the US Supreme Court.

"Why Richard, it profits a man nothing to give his soul for the whole world... but for Wales?"

Let's see if the 'cup and handle' in gold can continue its formation and become activated.  If it does I will go over the formation and its implications.  But for now I will save myself the effort, since no charts may work in markets divergent from market fundamentals.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Fed Bends a Bit Towards Reality

Need little, want less, love more.

There was intraday commentary about the FOMC decision and statement here.

Things continue to unfold, slowly but with almost relentless certainty.

Have a pleasant evening.

FOMC Statement for January 27, 2016

Net-net the Fed is bothered by the dampening effects of the stronger dollar on exports, and the lack of inflation.

They continue to promote the fantasy of a recovery in the labor markets, but that vain hope will dissipate no doubt given time.

They may *get it* but their complicity in and personal advancement from a broken system hampers their ability to recognize and act on the real state of the economy, which is a weakening recovery and broad mispricing of risk in financial assets.

The Fed has been and is still playing a major role in the failure to reform and recover as advisor, regulator, and central banker.

Like the Congress, they are creatures of Big Money who go along to get along, while persuading themselves perhaps, and certainly the public, of their virtue.  But in an environment made generally corrupt it would be improbable for such a key institution not to have fallen into this credibility trap.

Federal Reserve Open Market Committee
Release Date: January 27, 2016

For release at 2:00 p.m. EST

Information received since the Federal Open Market Committee met in December suggests that labor market conditions improved further even as economic growth slowed late last year. Household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further; however, net exports have been soft and inventory investment slowed.

A range of recent labor market indicators, including strong job gains, points to some additional decline in underutilization of labor resources. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined further; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.

Given the economic outlook, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.  However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee 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 and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo.

What Are Sanders and Obama Going To Discuss

Apparently President Obama and Senator Sanders are going to have an 'informal one-on-one meeting with no agenda' and no press today.

This presidential election has really framed up as an attempt at a popular revolt against a Big Money political establishment. And it is fascinating to watch.

Although the mainstream media keeps feigning astonishment, the broader public is clearly seeking two non-establishment candidate who, for better or worse, they think cannot be bought off by Big Money and the revolving door.

This meeting is an informal one with no set agenda.

Perhaps Obama will share the insight he allegedly had early in his Presidency about reformers as recounted by the ex-CIA whistleblower Ray McGovern.

"He’s afraid of what happened to Martin Luther King Jr. And I know from a good friend who was there when it happened, that at a small dinner with progressive supporters – after these progressive supporters were banging on Obama before the election, Why don’t you do the things we thought you stood for? Obama turned sharply and said, “Don’t you remember what happened to Martin Luther King Jr.?” That’s a quote, and that’s a very revealing quote."

Ray McGovern

I am sure Obama was being flip.   They was no need to buy him because he was a well-crafted brand backed by Big Money from the very start.  What he was voicing, if indeed he said this, was the time honored motto of political corruption, to go along to get along.  This was the great lesson to the Democratic party from the Clintons.

I have included a short but interesting video at the very bottom about how things work in Washington these days as recounted by Neil Barofsky to Bill Moyers.

And finally I include a short video describing the state of politics in the US from that wild eyed radical, former President Jimmy Carter.

Bernie Sanders Meets With Obama Today: What They Might Talk About
By Pam Martens and Russ Martens
January 27, 2016

Expensive media real estate is reporting that presidential candidate, Senator Bernie Sanders of Vermont, will meet with President Obama in the Oval Office today. Much is being made of the fact that the meeting comes less than a week before the politically important Iowa caucuses and just two days after Politico published an exclusive interview with the President in which he appeared to favor a Clinton presidency. (Memo to the President: this election is about finding an authentic non-establishment candidate, so your opinion as the quintessential establishment figure is not likely to sway folks – at least not in a good way.)

The first thing that came to mind when we heard about the meeting was that one or more kingpins on Wall Street might have asked the President to whisper in Senator Sanders’ ear to stop repeating at every campaign stop that the business model of Wall Street is fraud. Sanders is also regularly stating on the stump that one of his top priorities as President will be to break up those Wall Street banks that would require another taxpayer bailout if they should fail.

Would Wall Street actually be brazen enough to try to censor the message of a sitting U.S. Senator? Back in March of last year, Reuters reported that representatives of Citigroup, JPMorgan, Goldman Sachs and Bank of America “have met to discuss ways to urge Democrats, including [Elizabeth] Warren and Ohio Senator Sherrod Brown, to soften their party’s tone toward Wall Street.” The article noted that withholding campaign donations to Senate Democrats was one option that was on the table at the Wall Street banks...

Read the entire story at Wall Street On Parade.

Gold Daily and Silver Weekly Charts - Fed Rate Decision Tomorrow, Registered Gold Plunges

Gold and silver were both in rally mode today, continuing the 'bounce' off the recent bottom and a desire to move higher.

There was intraday commentary in which I suggested that we are seeing a flight to safety, wherein gold bullion tends to lead riskier aspects of the precious metals higher, and moves in conjunction with the dollar pretty much.

I also mentioned the potential 'cup and handle' bottom which I have alluded to previously, and posted a closeup of what the chart formation would look like if it was activated.

You may read that here.

There was a bit of bad news today. According to Koos Jansen, China has stopped publishing the Shanghai Gold Exchange's Withdrawal figures. You may read his recent article on this at his blog site here.

When I was looking up the latest reports on activity in the CME licensed warehouses, I was a little surprise to see that the registered for delivery gold bullion plunged by about 2/3rds. And so I posted an update on it which you may read about here.

As I have said before, this does not imply a default to deliver is imminent, or any of ther other things that some will say it means.  It is likely an indication of physical tightness and gold being held in strong hands not for sale at these prices.

But it also does not mean nothing, as some apologists for the current way of conducting this business would have you think. When something has not happened before, over a period of many years of data, chances are pretty good that something has changed.

As my friend Nick says, 'Let the shorts burn.'

FOMC tomorrow. And as a continuing reminder, these markets have hardly become transparent and efficient, so be ready for anything in the short term.

Have a pleasant evening.