Goldman Sachs Caught Manipulating Aluminum Prices

Stockpiles About 25% Of Global Inventories In Warehouses…

The derelict neighborhood off Michigan Avenue is a sharp contrast to Goldman’s bustling skyscraper headquarters near Wall Street, but the two operations share one important element: management by the bank’s savvy financial professionals.

A string of warehouses in Detroit, most of them operated by Goldman, has stockpiled more than a million tonnes of the industrial metal aluminum, about a quarter of global reported inventories.

Simply storing all that metal generates tens of millions of dollars in rental revenues for Goldman every year.

There’s just one problem: much less aluminum is leaving the depots than arriving, creating a supply pinch for manufacturers of everything from soft drink cans to aircraft.

The resulting spike in prices has sparked a clash between companies forced to pay more for their aluminum and wait months for it to be delivered, Goldman, which is keen to keep its cash machines humming and the London Metal Exchange (LME), the world’s benchmark industrial metals market, which critics accuse of lax oversight.

Analysts question why London’s metals market allows big financial players like Goldman to own the warehouses which store huge quantities of metal even as they trade the commodity. Robin Bhar, a veteran metals analyst at Credit Agricole in London says the conflict of interest is so acute he wants U.S. and European anti-trust regulators to weigh in.

“I think it makes a mockery of the market. It’s a shame,” Bhar said. “This is an anti-competitive situation. It puts (some) companies at an advantage, and clearly the rest of the market at a disadvantage. It’s a real, genuine concern. And I think the regulators have to look at it.”

Goldman said its warehouse subsidiary Metro International Trade Services has done nothing illegal, and abides by the LME’s warehousing rules. “Producers have chosen to store metal in Detroit with Metro,” a Goldman spokeswoman said. “We follow the LME requirements in terms of storing and releasing metals from our warehouses.”

The London Metal Exchange defends its rules. “There is a perception that consumers have not been able to get to their metal when the reality is that it is big banks, financing companies and warehouses that are not able to get to their huge tonnages of metal fast enough,” said LME business development manager Chris Evans.

Business Model

Goldman’s warehouse business relies on a lucrative opportunity enabled by the LME regulations. Those rules allow warehouses to release only a fraction of their inventories per day, much less than the metal that is regularly taken in for storage.

In the year to June 30 Metro warehouses in Detroit took in 364,175 tonnes of aluminum and delivered out 171,350 tonnes. That represented 42 percent of inventory arrivals globally and 26 percent of the metal delivered out, according to the London Metal Exchange said.

The metal that sits in the warehouse generates lucrative rental income.

Little wonder that so many want in. Metro was acquired by Goldman in February 2010, while commodities trading firm Trafigura nabbed UK-based NEMS in March 2010, and Swiss-based group Glencore International acquired the metals warehousing unit of Italy’s Pacorini last September.

Henry Bath, a warehousing firm and founding member of the London Metal Exchange in 1877, has been owned for about 40 years by traders or banks including Metallgesellschaft in the 1980s and failed U.S. energy trader Enron at the turn of the century. It now comes under the umbrella of JP Morgan, which bought the metals trading business of RBS Sempra Commodities in July last year.

Despite its rental income, Goldman’s warehouse strategy apparently hasn’t been enough to snap a slumping performance in commodity trading, with the company reporting a “significant” drop in revenues from a year ago in its latest quarter, the sixth time in the past 10 quarters that it has failed to expand.

Consumers Fume

The long delays in metal delivery have buyers fuming. Some consumers are waiting up to a year to receive the aluminum they need and that has resulted in the perverse situation of higher prices at a time when the world is awash in the metal.

“It’s driving up costs for the consumers in North America and it’s not being driven up because there is a true shortage in the market. It’s because of an issue of accessing metal … in Detroit warehouses,” said Nick Madden, chief procurement officer for Atlanta-based Novelis, which is owned by India’s Hindalco Industries Ltd and is the world’s biggest maker of rolled aluminum products. Novelis buys aluminum directly from producers but is still hit by the higher prices.

Madden estimates that the U.S. benchmark physical aluminum price is $20 to $40 a tonne higher because of the backlog at the Detroit warehouses. The physical price is currently around $2,800 per tonne. That premium is forcing U.S. businesses to fork out millions of dollars more for the 6 million tonnes of aluminum they use annually.

It has also had a knock-on impact on the global market, which is forecast to consume about 45 million tonnes of the lightweight, durable metal this year.

Also pushing aluminum costs higher are bank financing deals, which are estimated to have locked up about 70 percent of the 4.4 million tonnes of the metal sitting in LME-registered warehouses around the world. ME inventories hit an all-time record above 4.7 million tonnes in May.

In a typical deal, a bank buys aluminum from a producer, agrees to sell it at some future point at a profit, and strikes a warehouse deal to store it cheaply for an extended time period.

The combination of the financing deals and the metal trapped in Detroit depots, means only a fraction of the inventories are available to the market. Premiums for physical aluminum — the amount paid above the LME’s cash contract currently trading at $2,620 a tonne — in the U.S. Midwest hit a record high of $210 a tonne in May, up about 50 percent from late last year. In Europe, the premium is at records above $200 a tonne, double the levels seen in January 2010.

The ripple effect into Asia has seen the premium paid in Japan increase 6 percent to $120 a tonne in the third quarter from the previous quarter, the first rise in nearly six quarters.

Collecting the Rent

You won’t hear banks like Goldman complaining. Rental income continues to pour in at the 19 Detroit area warehouses run by Metro as of June.

From the outside one recent afternoon, a depot in the Detroit suburb of Mt Clemens appeared to be deserted. But neighbors say the place is a whirl of activity in the early hours of the morning when metal is usually delivered for storage.

The LME says the current maximum rent, set by warehouse operators, is 41 U.S. cents per day per tonne. At that rate, Goldman’s warehouse operation in Detroit — said to be holding more than 1.1 million tonnes — could be generating as much as $451,000 per day or about $165 million a year in revenue.

An exact figure cannot be calculated because many clients negotiate lower rental rates and Goldman declined to detail its income from its warehouse business. But when Swiss-based trading company Glencore listed earlier this year it revealed that its metals warehousing unit generated $31 million in profit on $220 million in gross revenue in 2010.

LONG HISTORY Caught between consumers and warehouse operators is the 134-year old LME, one of the world’s last exchanges with open-outcry trading. Sessions take place in a trading ring with red padded seats while visitors can watch from a gallery. Traders juggle multiple telephones and use archaic hand signals to fill orders from consumers, producers and hedge funds.

The ring is a perhaps more civilized version of the tumultuous trading pits made famous in Chicago. Each of six major industrial metals including copper and nickel are traded for five minute bursts in the morning and afternoon. Only 12 firms have access to the ring, arranged in fixed positions in a circle, with many others involved via the ring dealers and on the LME’s electronic trading system.

Longer sessions in the late morning and afternoon allow trading of all metals simultaneously and are known as “the kerb” from the days when dealers continued to trade on the kerb, or sidewalk, after leaving the exchange.

The LME certifies and regulates the Detroit sheds as part of a global network of more than 640 warehouses. The network is meant to even out swings in volatile metals markets. During recessions, surplus metal can be stored until economies recover and demand picks up, when the metal can be released.

But that function is now being undermined by the backlog in Detroit.

LME rules stipulate that warehouses must deliver a certain amount of metal each day. However the rules apply not to each warehouse but to each city that a company has warehouses in. At the moment, a warehouse operator needs to deliver just 1,500 tonnes a day per city, whether it owns one warehouse there or dozens. That means each of Metro’s Detroit warehouses need to release only 79 tonnes of aluminum a day. At that rate, it would take two years to clear the stocks held by Goldman’s Detroit warehouses.

The backlog sparked outrage last year, prompting the LME to task London-based consultancy Europe Economics to look into its rules. Europe Economics recommended the exchange raise its minimum delivery rates and earlier this month the exchange announced a new regime for operators with stocks of over 900,000 tonnes in one city.

From April 2012 the minimum delivery rate will double to 3,000 tonnes a day.

Critics dismiss the move as too small to have any real effect, especially because of the delay until it comes in.

“The move is too little and too late to have a material effect in the near-term on an already very tight physical market, particularly in the U.S.,” Morgan Stanley analysts said in a July note.

A senior executive at a metals brokerage told Reuters “the recommendations won’t change anything. The problem will still be there six, nine months down the line.” “If Detroit has 1.1 million tonnes at the moment, what’s to say it won’t have 2 million tonnes next year,” he said.

Moving More Metal

One obvious solution would be to impose minimum delivery requirements per warehouse or per square meter of warehouse space rather than per city. It’s not as if the warehouses can’t cope with delivering more stock: large operations can shift much more than 3,000 tonnes a day, warehousing sources say. An experienced forklift driver takes about 20 minutes to load one 20-tonne truck with aluminum in the United States. That means one warehouse in Detroit with two doors, two forklifts and an eight-hour working day could move out as much as 1,920 tonnes of metal every day.

“If you take Detroit in particular, those warehouses historically extracted metal at a faster rate … the infrastructure is there,” a senior analyst in the metals industry told Reuters.

Madden at Novelis said: “I don’t know the specific details of every warehouse but our view is that they seem to be able to absorb metal coming in at almost an infinite rate and so we feel there’s a lot more they can do on the output side to push up the (load out) rates.”

The LME could also crack down in the same way it did in 1998 when it banned Metro from taking any more copper into its Long Beach and Los Angeles warehouses. Then the complaints were said to have come from copper consumers worried that 80 percent of total copper stocks in LME-approved warehouses were held in California. The exchange argues that any change right now might disrupt the market.

“Changes to the delivery out rate have required careful consideration because it will impact the cost structure for those holding metal, and were those costs to rise sharply it could affect the way that metal is stored and traded,” said the LME’s Evans.

The exchange could also rule that a warehouse cannot charge rent once aluminum has been purchased, no matter how long it takes to ship it. But a change like that would hit the LME itself as it receives about 1 percent of the rental income earned by the warehouses it approves.

Legal Fears

Nobody at the LME will say whether the Europe Economics study — industry sources said it talked to more than 40 companies — advised more radical measures, arguing that such information is “proprietary.” In any case, say metal markets sources, LME officials may be hesitant to make bigger changes because they fear legal action from the likes of Goldman, which could argue that Metro’s business model has been based on existing LME warehouse rules.

The LME declined to comment on possible legal challenges, but its Chief Executive Martin Abbott said at a recent briefing that the warehouse delays were not causing market and price distortions.

“No, I don’t believe it is,” Abbott said, when asked if the situation was causing distortions in the market. Abbott said the exchange had received no official complaints from consumers about bottlenecks at warehouses. The LME also dismisses concerns about banks trading metal and owning the warehouses where it is stored.

While a British parliamentary committee raised the issue in May, Britain’s Office of Fair Trading declined to open a probe. The U.S. Commodity Futures Trading Commission, which regulates the futures and options markets, said it would not comment. Britain’s Financial Services Authority, which regulates exchanges where commodity futures are traded but not warehouses that store physical material, declined to comment.

What Next?

The lack of real change has some in the industry questioning the very structure of the LME, which, unlike its publicly owned U.S.-based rival commodities exchanges, is owned by many of the financial institutions that trade there.

“The belief is that they are focused on serving their shareholders; most of them being the banks … We see our clients and contacts trying to avoid the LME as much as possible now,” said Jorge Vazquez, Managing Director of the Aluminum Intelligence Unit at HARBOR Commodity Research.

That concern is growing. Critics of the exchange point to a potential problem with zinc supply though New Orleans, where inventories now account for 61 percent of total LME-registered stocks. Most of the warehouses in New Orleans are owned by Goldman and Glencore.

Metal industry sources believe regulators should take a closer look at the possible conflict of interest that arises when trading houses also own the warehouses.

“If the whole thrust of regulation and regulatory reform is increased transparency and open and above board operations, letting banks own warehouses seems to run entirely counter to that,” said Frances Hudson, global thematic strategist at Standard Life Investments said.

The LME says it enforces a strong separation between warehouses and the trading arms of their owners. Just this week it proposed that companies which own warehouses should engage an independent third-party to verify the robustness of Chinese walls.

“We enforce it through regular audits of warehouses,” said the LME’s Evans. “If people say Chinese walls are leaking then they should bring us evidence and we’ll investigate.”

(This story was updated to add details about how much aluminium was taken in and delivered by Metro warehouses in Detroit in the past year (paragraph 13) and to correct who sets the maximum rent for metal storage—it’s the warehouse owners, not the LME (paragraph 30). In paragraph 5 “a trickle” of aluminium leaving the warehouses was changed to “much less is leaving the depots than arriving…”)

Source: reuters.com

It’s Always About The Money So On With This REVOLUTION!

As the August 2nd deadline fast approaches to raise the government-borrowing limit, President Obama called on Congress two days before this Independence Day to make a deal and announced, “Nothing can be off-limits…We’ve got to cut the deficit.” [1]

Republican Senator Dan Coats responded, “It’s time for bold action and a new plan to address our current crisis” and that it was time for the government to “stop spending money we don’t have and to enact policies that will grow our economy and get Americans back to work.” [Ibid]

Two hundred and thirty five years ago to this 4th of July, America’s Founding Fathers established the following principals and truths to be self-evident: that all PEOPLE are created equal; that they are endowed by their creator with certain unalienable RIGHTS; that, among these, are life, liberty and the pursuit of happiness; that, to secure these RIGHTS, governments are instituted among PEOPLE, deriving their just powers from the consent of the governed; and, whenever any form of government becomes destructive of these ends, it is the RIGHT of the people to alter or to abolish it.

The Declaration of Independence of 4 July 1776,  indicted a government that engaged in barbaric conduct contrary to the laws of Humanity that included “works of death, destruction and tyranny unparalleled in the most barbaric ages” that is until the Age of Now!

Where ever we lay our money down reflects our heart and mind and citizens of conscience comprehend that budgets are moral documents.

Obama’s 2012 budget request to Congress not just adds to our current debt of $14.3 trillion but Obama’s $3.7 Trillion Budget Calls for Military Spending Increases and Deep Cuts to Social Service Programs!

“Any nation that year after year continues to raise the Defense budget while cutting social programs to the neediest is a nation approaching spiritual death.”-Rev. MLK

Obama’s budget adds another $3.075 billion in military aid to Israel although Israel has consistently misused U.S. Made weapons in violation of America’s Arms Export and Control and Foreign Assistance Acts and in spite of the fact that everywhere except in this republic the 44 years of military occupation of Palestine is viewed as a US-Israeli collaboration!

Khalid Sheikh Mohammad involvement in the terror upon America, “By his own account…stemmed from his violent disagreement with U.S. foreign policy favoring Israel.” [2]

Abdulmutallab’s attempt to blow up a plane on Christmas Day in 2009, was fueled by “his sympathies toward the Palestinians and anger over Israel’s actions in Gaza.” [Ibid]

President ‘Nuclear Free World’ Obama’s FY 2012 for the National Nuclear Security Administration includes 7.6 billion for nuclear weapons research and production, which is 8.4% above his FY 2011 request and 19% above his FY 2010 request.

Funding for a new “Uranium Processing Facility” for production of thermonuclear secondaries at the Y-12 production plant near Oak Park Ridge, TN, is proposed to increase to $160.2 million from $115 million in FY 2011.

Obama’s FY 2012 budget request also creates a new Life Extension Program for the B61 warhead funded at $223.6 million, even though that gravity bomb’s original mission of forward deployment in Europe against a Soviet threat vanished at the end of the Cold War.

Life Extension Programs extend the service lives of existing nuclear weapons for three decades or more, in contradiction to our declared national security goal of a future world free of nuclear weapons, and it also endows them with new military capabilities. [3]

Life Extension Programs also undermine sound national security by introducing major changes to America’s existing nuclear weapons stockpile that had been extensively tested and known to be most reliable weapons of mass destruction.

“The dominant mission of Y-12 today is the production of new and or/refurbished thermonuclear secondaries for existing US nuclear warheads as part of the Stockpile Life Extension Program [LEP]. These include life extension upgrades to the W-76 that will result in the W-76 Modification 1, a warhead with new military capabilities.”-[4]
“All W-76 and W-76-1 thermonuclear secondaries produced at Y-12 are designed and produced to unleash 100 KT of uncontrollable and indiscriminate heat, blast and radiation, six times more than the Hiroshima Bomb.” [5]

On 8 July 1996, the International Court of Justice issued the statement:

“The destructive power of nuclear weapons cannot be contained in either space or time. They have the potential to destroy all civilization and the entire ecosystem of the planet.”

The ICJ also affirmed the “fundamental, cardinal and intransgressible” rule that “States must never make civilians the object of attack and must consequently never use weapons that are incapable of distinguishing between civilians and military targets.”

States have obligations. People have rights.

“If it is a basic human right to be free of threat or violence, if the right to life is a basic human right, if the protection of children and future generations is a basic human duty, international law must unhesitatingly recognize that the right to non violent resistance activities for the prevention of such an international crime is basic to human dignity.” [6]

On 1 July 2011, Archbishop Desmond Tutu wrote:

“Eliminating nuclear weapons is the democratic wish of the world’s people…squandering billions of dollars on modernization of nuclear [weapons, makes] a mockery of United Nations disarmament pledges. If we allow this madness to continue, the eventual use of these instruments of terror seems all but inevitable.

“The nuclear power crisis at Japan’s Fukushima power plant has served as a dreadful reminder that events thought unlikely can and do happen…it must not take another Hiroshima or Nagasaki – or an even greater disaster – before [we] finally wake up and recognize the urgent necessity of nuclear disarmament.

“One standard must apply to all countries: zero.

“Nuclear arms are wicked, regardless of who possesses them. The unspeakable human suffering that they inflict is the same whatever flag they may bear. So long as these weapons exist, the threat of their use – either by accident or through an act of sheer madness – will remain.

“We must not tolerate a system of nuclear apartheid, in which it is considered legitimate for some states to possess nuclear arms but patently unacceptable for others to seek to acquire them. Such a double standard is no basis for peace and security in the world.

“Every dollar invested in bolstering a country’s nuclear arsenal is a diversion of resources from its schools, hospitals, and other social services, and a theft from the millions around the globe who go hungry or are denied access to basic medicines.” [7]

In 1987, Israel’s Nuclear Whistle Blower, Mordechai Vanunu wrote from Ashkelon Prison:

“No government, not even the most democratic, can force us to live under this threat. No state in the world can offer any kind of security against this menace of a nuclear holocaust, or guarantee to prevent it.

“Any country, which manufactures and stocks nuclear weapons, is first of all endangering its own citizens. This is why the citizens must confront their government and warn it that it has no right to expose them to this danger. Because, in effect, the citizens are being held hostage by their own government, just as if they have been hijacked and deprived of their freedom and threatened.

“When governments develop nuclear weapons they are violating the basic rights of their citizens, the basic right not to live under constant threat of annihilation.” [8]

Common Sense comprehends that getting America out of its immoral debt will require more than what Obama admitted in eliminating “tax breaks for millionaires and billionaires, or for hedge fund managers and corporate jet owners, or for oil and gas companies pulling in huge profits without our help…we’ll have to make even deeper cuts somewhere else.” [9]

The deep cuts that must be made require the revolutionary political will that Thomas Paine, America’s most forward thinking Founding Father comprehended:

“Soon after I had published the pamphlet “Common Sense” [on Feb. 14, 1776] in America, I saw the exceeding probability that a revolution in the system of government would be followed by a revolution in the system of religion…The world is my country, all mankind are my brethren, and to do good is my religion.”

We the people are suppose to be the government and thus it is up to US to bring in the Intifada [Arabic for rise up and cast off] against nuclear insanity so that future generations will have their right to life, liberty and the pursuit of happiness.

1. Obama: ” Nothing can be off- limits in budget
2. Washington Report on Middle East Affairs, March 2010, page 35
3. BudgetRequest.pdf
4. Oak Ridge Environmental Peace Alliance [OREPA], November 2009.
5. Bulletin of Atomic Scientists, March/April 2009.
6. Judge Weeramantry, “The Trident and International Law, Scotland’s Obligations” Feb. 3, 2009.
7. www.WagingPeace.org
8. BEYOND NUCLEAR: Mordechai Vanunu’s FREEDOM of SPEECH Trial and My Life as a Muckraker: 2005-2010

Corruption In America

In the United States today, it is not just the economy that is crumbling.  The entire fabric of society is coming apart as well.  Literally almost wherever you look you can find rampant corruption in America.  Our federal government is corrupt, our state and local governments are corrupt, our corporations are corrupt and unfortunately average Americans seem to become more corrupt all the time.  As corruption becomes widespread in America, trust is breaking down.  It is very difficult to know who to trust these days.  But a society cannot function without trust.  So what are we going to do when all the trust is gone?

The SEC announced today that JPMorgan has come to an agreement to pay out 153 million dollars to settle charges related to the sale of a controversial collateralized debt obligation back in 2007.  It turns out that a hedge fund that helped pick the underlying assets for the CDO also bet very heavily that it would fail.  JPMorgan marketed the CDO as a good investment when they knew that it was garbage.

Robert Khuzami, the SEC’s top enforcement officer, summed up the charges against JPMorgan this way….

“J.P Morgan marketed highly-complex CDO investments to investors with promises that the mortgage assets underlying the CDO would be selected by an independent manager looking out for investor interests”

So is anyone going to go to jail for this?

Of course not.

In fact, not a single bank executive has gone to jail for anything that happened during the financial crisis.

So how are we supposed to have faith in the system if nobody is ever held accountable?

Are little slaps on the wrist supposed to make us all feel better?

The truth is that what JPMorgan did was far from an isolated incident.  If you doubt this, just read the following article….

“How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps”

Our system is totally sick and corruption is everywhere.

Cronyism has become so endemic to our system that nobody really seems bothered by it anymore.  For example, just check out this example that was recently reported in The New York Times….

In 2009, a judge in Manhattan had a lucrative appointment to hand out: oversight of a diamond district building that was drifting into foreclosure.

Nearly 600 people in Manhattan had been approved for such work. But the job went to a lawyer named Mark D. Lebow, who is the husband of Patricia E. Harris, Mayor Michael R. Bloomberg’s most trusted aide.

Since then, Mr. Lebow has earned $352,000 in fees, more than $5,000 a week, according to court records.

It sure is nice to be “politically-connected”, eh?

It is not by accident that so many of our politicians (and their family members) become incredibly wealthy.

But it is not just among the wealthy and powerful that we are seeing an increase in corruption.

All over the United States, thieves are stealing copper wire, train tracks and even drain covers.  People are stealing stuff that nobody would have ever dreamed of stealing in the past.  Just consider the following example from the Atlanta area….

Kids in two Atlanta communities won’t have their neighborhood pools to help beat the summer heat, at least for now. Thieves used what is believed to be sledge hammers to bust walls and break fixtures in bathrooms at Adams and South Bend parks to steal copper, brass and steel.

This is how desperate people throughout America are becoming.

In another example from the Atlanta area, thieves recently busted into a southwest Atlanta beauty supply store and took off with $30,000 in hair extensions.

America is becoming a really crazy place.

When times get really hard, people will do whatever they feel they need to do in order to survive.

One elderly man down in North Carolina was so desperate that he actuallyrobbed a bank so that he could be put in prison and be given free health care.

Yes, you read that correctly.

59-year-old Richard James Verone walked into an RBC Bank in North Carolina, handed a clerk a note demanding $1 and sat down and waited for the police to arrive.

It turns out that he has a growth on his chest and two ruptured disks but he does not have any health insurance.  So he robbed the bank so that he would get free health care in prison.

The truth is that our country is rapidly coming apart.  As I have written about so many times before, the American Dream is in an advanced state of decay.

Once upon a time, cities such as Detroit, Michigan were the envy of the entire world.

Today, they are a joke to the rest of the world.  Many of our biggest cities have become war zones.  There are dozens of homes that you can purchase in Detroit right now for literally next to nothing.

For example, 14769 Liberal Street in Detroit is listed for sale on Zillow for just $100.

Not that anyone would actually want to live there.  Many homes in Detroit are literally being ripped to pieces by looters, vandals and thieves.

Of course many Americans are just taking their cue from the government.  Washington D.C. is drowning in so much corruption that it is almost hard to describe.

One of the biggest offenders in Washington D.C. is the Federal Reserve. In , reporter Matt Taibbi exposed some of the folks that the Federal Reserve sent money to during the financial crisis….

The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. “Our jaws are literally dropping as we’re reading this,” says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. “Every one of these transactions is outrageous.”

Did we really need to send billions of dollars to “millionaires and billionaires” in the Cayman Islands in order to save the U.S. economy?

Something really stinks, but since our politicians are too gutless to authorize a comprehensive audit of the Federal Reserve we may never know what has been going on.

So who does get probed in America today?

The American people do.  The ridiculous airport security measures that we have to put up with have gotten completely out of control.

In the name of “national security”, we now allow security goons to feel up our women and children.

Recently, one video of a 6-year-old girl having her private areas touched in public went viral on YouTube.  You can watch the video .

The little girl was also apparently drug tested.

How perverse is that?

A 6-year-old girl has to go through all of that, but the corruption of the Federal Reserve and the big Wall Street banks is allowed to continue.

Even the mainstream media is deeply corrupt.  As I wrote about recently, they love to get the American people obsessed with the latest celebrity news or the latest “Twitter scandal”, but they often purposely ignore some of the most important news stories that are happening because they do not fit in with the agenda that their corporate owners are trying to push.

Of course one of the worst examples of corruption in America is the U.S. Congress.  A new scandal involving Congress seems to erupt almost weekly, and almost everything Congress tries to do ends up being corrupt in one way or another.

The sad thing is that Congress is not even working most of the time.  Most Americans have no idea how much time off members of Congress get.  Just check out the video posted below.  This is going to shock you….

As noted earlier in the article, without trust a society cannot function. That is why all of this corruption in America is such an important issue.

If we do not reverse this trend, society will continue to break down.  When faith in our major institutions is gone, it is going to be incredibly difficult to get back.

Please pray for the United States of America.  We really need it.

Source: The American Dream

The Rich Are Destroying The Economy

Ever since the Great Recession shook the foundations of the U.S. economy, President Obama has been promising recovery.  Evidence of this recovery, we were told, was manifested in the massive post-bailout profits corporations made. Soon enough, the President assured us, these corporations would tire of hoarding mountains of cash and start a hiring bonanza, followed by raising wages and benefits. It was either wishful thinking or conscious deception. The recent stock market meltdown has squashed any hope of a corporate-led recovery.

The Democrats fought the recession by the same methods the Republicans used to create it: allowing the super rich to recklessly dominate the economy while giving them massive handouts. This strategy, commonly referred to as Reaganomics or Trickle Down Economics, is now religion to both Democrats and Republicans; never mind the staged in-fighting for the gullible or complicit media.

When it becomes obvious to even the President that the economic recovery never existed beyond the bank accounts of the rich, questions will have to be answered. Why, for example, did nobody in either political party foresee the disastrous consequences of the bailouts? Not only did the U.S. deficit drastically increase but the same U.S. corporations that caused the recession were given reinforcement for their destructive actions, ensuring that it would continue unabated.

In his book, Crisis Economics, Nouriel Roubini outlines the insane response to the recession by Republicans and Democrats. Because both parties simply threw money at the banks and hedge funds instead of punishing them, a condition of “moral hazard” was created, meaning, that banks would assume another bailout would come their way if they destroyed the economy again — too big too fail, remember? Roubini explains how the Democrats allowed the “too big” banks to get even bigger; how Wall Street salaries based on short-term profits went unregulated; how the regulations that were put into place were inadequate and filled with loopholes; how nothing of any significance changed.

Roubini has also written extensively about how the post-bailout Federal Reserve policies were fueling a commodity bubble that may be in the midst of bursting, possibly triggering a double dip recession. Essentially the big banks and rich investors were borrowing cheap dollars from the Fed and investing abroad in commodities with the hopes of higher returns. Roubini states:

“The risk is that we are planting the seeds of the next financial crisis…this asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals.” (October 27, 2009).

This investor-created commodity bubble pushed up prices in oil, food, and other basic products, causing further pain for working families and the economy as a whole. This speculative bubble was easily predictable but ignored by both political parties, since they claimed the bubble was a sign of recovery.

Another mainstream economist, Paul Krugman, also admits that the rich’s death-grip on the U.S. political and economic system is causing pain for everybody else:

“Far from being ready to spend more on job creation, both parties agree that it’s time to slash spending – destroying jobs in the process – with the only difference being one of degree…policy makers are catering almost exclusively to the interests of rentiers [rich investors] – those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else’s expense.” (June 10, 2011).

Krugman explains that this process continues because the rich dominate the political system through campaign contributions, “access to policy makers,” promises of high paying corporate jobs after their congressional term is over, and good o’l fashion corruption. Because he’s a true blue Democrat at heart, Krugman nevertheless focuses most of his rage on Republicans.

Krugman’s repeated calls to Democrats and Republicans to create jobs have fallen on deaf ears. Both parties agree that the “private sector” [corporations] should create jobs; until they decide to hire, nothing will happen. This is not merely “bad policy,” as liberals like Krugman like to fret about, but the conscious agenda of the rich. Corporations and rich investors love high unemployment. The Kansas City Star explains why:

“Last year [2010], for the second year in a row, U.S. companies got more work out of their employees while spending less on overall labor costs.” (February 3, 2011).

It really is that simple. High unemployment creates a downward pressure on wages, allowing employers to work the remaining employees harder and thus to increase profits. This dynamic, combined with the above commodity speculation, has been the entire basis for the corporate recovery, while working people have literally seen nothing beneficial.
This process is an extension of the bailouts, in the sense that more wealth is being transferred from working people to the corporations. Since consumer spending accounts for 70 percent of the U.S. economy, policies like these ensure that another crisis is inevitable.

Further complicating matters is the ending of the Federal Reserve’s Quantitative Easing program (printing money), which amounted to the Fed buying $600 billion in U.S. Treasury bonds since last fall, essentially funding the U.S. debt and driving down interest rates.

Since the Fed was buying 60 percent of the bonds, a new creditor will need to be found; and this lender will likely require higher interest rates before loaning to the U.S. government, to make sure the loan is profitable.  And although different nations buy U.S. debt for different reasons, much of this debt is bought by rich U.S. citizens, who will put the squeeze on the rest of us that have to pay back this debt. The Washington Times explains:

“…Bill Gross, the head of America’s own Pimco bond fund, the largest buyer of bonds worldwide, recently reduced Pimco’s holdings of Treasuries to zero out of concern that they weren’t yielding enough given the risks of inflation and deficit spending.” (June 7, 2011).

When the Federal Reserve raises interest rates to satisfy these rich investors, the economy will likely take a further nosedive.  It appears, then, that the rich have a win-win situation: they got free bailout money, which increased the deficit; and because the deficit is too high, the rich want higher interest rates for investing in U.S. Treasury Bonds. In both instances working people pay the bills.

This insanity cannot be stopped by conventional measures, since politicians are tone deaf to anything that doesn’t ring of corporate cash. The jobs crisis continues as a result of the policy agreed to by both Democrats and Republicans. The labor movement has a special role to play in reversing the above policies.

The corporate-led discussion around cutting social programs to fix the deficits — on a state and national level — can be challenged by a nationally coordinated campaign of unions and community allies demanding: Tax the Rich! This demand is significant because it can address both the deficits and the jobs crisis: a massive public works program can be funded by taxing the corporations and the wealthy to pre-Reagan levels. And it makes complete sense because the growing inequalities in wealth over the past three decades has meant a spectacular concentration of wealth at the top. The rich have plenty of money to spare.

Organized labor needs to bring masses of people in the street all over the country in order to get attention and pressure the government to respond to these demands. And it can succeed, especially if it organizes a serious, protracted campaign and especially if this campaign does not get funneled into supporting Democratic candidates, the surest way to kill campaign momentum.

AFL-CIO President Richard Trumka recently spoke in favor of a strong, independent labor movement. This is the direction it must take, rather than relying on the Democrats. The labor movement must get its act together, unite to put up a fight and demand specific policies that can concretely address the crisis faced by millions of working people.

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org)  He can be reached at 

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atlyygQuBLUI
http://www.nytimes.com/2011/06/10/opinion/10krugman.html?_r=1&hp
http://www.kansascity.com/2011/02/03/2631479/productivity-increased-in-2010.html#ixzz1OzV4hhF8
http://www.washingtontimes.com/news/2011/jun/7/lack-of-buyers-may-force-treasury-to-boost-interes/?page=all

Bernanke’s Bubblenomics; Who Wins and Who Loses

Let’s talk Bubbles.

Assets bubbles require massive amounts of leverage. But too much leverage can destabilize the system, so it needs to be regulated. But Wall Street doesn’t like restrictions on leverage because it can make more money by borrowing like crazy, inflating a ginormous bubble, skimming off the profits, and cashing in before the crash. So, the Fed ignores Wall Street’s “gearing” operations and pretends not to see what’s going on. It becomes a bubble “enabler” by lowering interest rates, easing credit and waving-off tighter regulations. It’s all part of the game. The Fed works to help its core constituents while everyone else is put at risk.

But there’s another reason for bubbles, too. Stagnation is a chronic problem in mature capitalist economies. As businesses become more efficient in their various widget-making operations, demand for their products drops off making it harder for owners to find profitable outlets for investment. And when investment starts to flag, then grip of economic inertia begins to tighten. As author Robert Skidelsky says, “investment fills the gap between production and consumption”, so when investment hits a speed-bump, spending starts to wither and the economy slows to a crawl.

The Fed’s remedy: Zero rates, easy money and more bubbles; Professor Bernanke’s one-size-fits-all, magic elixir for sclerotic economies. In other words, the emerging stock and commodities bubbles are not a sign that the Fed is flubbing the policy. Bubbles are the policy, and have been for a very long time. Bernanke is no fool. He knows that each business cycle is weaker than the last, creating fewer jobs, more slack in the economy, and more anemic growth. His job is to endlessly tweak the process in order to maintain profitability for the people at the top of the economic foodchain, his real bosses.

Here’s a clip from an interview with history professor Robert Brenner who sums it up perfectly:

Robert Brenner: “… Economic forecasters have underestimated how bad the current crisis is because they have over-estimated the strength of the real economy and failed to take into account the extent of its dependence upon a buildup of debt that relied on asset price bubbles. In the U.S., during the recent business cycle of the years 2001-2007, GDP growth was by far the slowest of the postwar epoch. There was no increase in private sector employment. The increase in plants and equipment was about a third of the previous, a postwar low. Real wages were basically flat. There was no increase in median family income for the first time since World War II. Economic growth was driven entirely by personal consumption and residential investment, made possible by easy credit and rising house prices. Economic performance was weak, even despite the enormous stimulus from the housing bubble and the Bush administration’s huge federal deficits. Housing by itself accounted for almost one-third of the growth of GDP and close to half of the increase in employment in the years 2001-2005. It was, therefore, to be expected that when the housing bubble burst, consumption and residential investment would fall, and the economy would plunge.” (“Overproduction not Financial Collapse is the Heart of the Crisis”, Robert P. Brenner speaks with Jeong Seong-jin, Asia Pacific Journal)

Sound familiar? Flat wages, weak demand, slow growth and more and more debt? All signs of an aging, hobbled system that’s slipping inexorably into stagnation. This is why the Fed adopted its present policy of bubblemaking, because the only way to avoid stagnation is by increasing the debt-load. Authors John Bellamy Foster and Fred Magdoff traced the origins of the policy back to the 1970s. They revealed what their findings in an article in The Monthly Review titled “Financial Implosion and Stagnation”. Here’s an excerpt:

“It was the reality of economic stagnation beginning in the 1970s, as heterodox economists Riccardo Bellofiore and Joseph Halevi have recently emphasized, that led to the emergence of “the new financialized capitalist regime,” a kind of “paradoxical financial Keynesianism” whereby demand in the economy was stimulated primarily “thanks to asset-bubbles.” Moreover, it was the leading role of the United States in generating such bubbles—despite (and also because of) the weakening of capital accumulation proper—together with the dollar’s reserve currency status, that made U.S. monopoly-finance capital the “catalyst of world effective demand,” beginning in the 1980s. But such a financialized growth pattern was unable to produce rapid economic advance for any length of time, and was unsustainable, leading to bigger bubbles that periodically burst, bringing stagnation more and more to the surface.

A key element in explaining this whole dynamic is to be found in the falling ratio of wages and salaries as a percentage of national income in the United States. Stagnation in the 1970s led capital to launch an accelerated class war against workers to raise profits by pushing labor costs down. The result was decades of increasing inequality.” (“Financial Implosion and Stagnation”, John Bellamy Foster and Fred Magdoff, Monthly Review)

Foster and Magdoff do a fine job of explaining how the system has been rejiggered to overcome stagnation. Financial assets provide a place where surplus capital can go and grow via paper profits. But this type of investment does not add to productive capacity or real wealth; it merely enlarges the amount of money capital while creating the means for transferring wealth from one class to another. And that’s the point. Every burst bubble thrusts middle class households further and further into the red, while bank moguls and Wall Street tycoons get even richer. It is all by design, nothing is left to chance.

It might surprise you to know that the Fed has become so skilled at bubble-making, that the condition of the underlying economy doesn’t really matter any more. By fixing interest rates below the rate of inflation and attaching a liquidity-tailpipe to the stock market (QE2), the Fed has been able engineer a boom in equities, while the so-called “real” economy languishes in a near-Depression. In fact, consumer credit is actually shrinking (excluding student loans) while margin debt (the amount that speculators borrow to buy stocks) continues to soar. This is an astonishing development. The Fed has created a bifurcated market where bankers and hedge fund managers are able to rake in billions off their gaming operations while 300 million working Americans remain mired in debt.

But there are a few drawbacks to the Fed’s policy. After all, one can only hollow out the economy for so long before the society begins to unravel. But, unfortunately, widening inequality and destitution don’t show up in GDP, which continues to balloon even while working people slip further into debt. What’s missing in the GDP-readings is the fact that we are getting poorer as a nation and weaker as an economic force in the world. Here’s how Rob Arnott of Research Affiliates summed it up in an article in Fortune magazine:

“We are, in a word, considerably poorer than we imagine – something politicians of all stripes should, but probably won’t, consider as they grapple with our massive deficit. GDP that stems from new debt — mainly deficit spending — is phony: it is debt-financed consumption, not prosperity,” Arnott writes. “Net of deficit spending, our prosperity is nearly unchanged from 1998, 13 years ago.”…

“Instead of the financial world being the lubricant for business, they are out there manufacturing products with no utility whatsoever except for generating fees,” he said. “Somebody’s got to do something about Wall Street. It is destroying the country.” (“Lost decade? We’ve already had one, Fortune)

The growth we see in rising GDP is mainly “attributable to debt-financed spending, rather than real wealth creation.” Indeed, Bernanke is merely leveraging his way out of a Depression. But the calamitous downstream effects of the policy are obvious; the middle class is being decimated, the dollar is getting hammered, and the productive sectors of the economy are being cannibalized. These are the failures of bubblemaking, a theory whose sole purpose is to further enrich a tiny segment of the population that’s already as rich as Croesus.

But the Fed is not the worst offender in this regard. The real problem is the banks.

The Fed can induce spending by lowering interest rates, easing credit or buying bonds, but the banks do the heavy lifting. That’s where the zillions in leverage are created via off-balance sheets operations, repo transactions and derivatives contracts. These asset-pumping operations remain largely concealed from the public, so no one really knows what’s going on. That’s why the connection between money supply and financial asset prices is so tenuous and misleading, because the banks create money that doesn’t appear in the data. That’s what off-balance sheets operations are all about. They generate unknown amounts of credit which stimulates activity, but remains invisible. The printing presses have essentially been handed over to private industry. Here’s how it all works according to Independent Strategy’s David Roche

“The reason for the exponential growth in credit, but not in broad money, was simply that banks didn’t keep their loans on their books any more – and only loans on bank balance sheets get counted as money. Now, as soon as banks made a loan, they “securitized” it and moved it off their balance sheet.

There were two ways of doing this. One was to sell the securitized loan as a bond. The other was “synthetic” securitization: for example, using derivatives to get rid of the default risk (with credit default swaps) and lock in the interest rate due on the loan (with interest-rate swaps). Both forms of securitization meant that the lending bank was free to make new loans without using up any of its lending capacity once its existing loans had been “securitized.”

So, to redefine liquidity under what I call New Monetarism, one must add, to the traditional definition of broad money, all the credit being created and moved off banks’ balance sheets and onto the balance sheets of nonbank financial intermediaries. This new form of liquidity changed the very nature of the credit beast. What now determined credit growth was risk appetite: the readiness of companies and individuals to run their businesses with higher levels of debt.” (“The Global Money Machine”, David Roche, Wall Street Journal)

The Fed is not the main culprit in this new paradigm where banks and shadow banks stealthily add to the money supply without any oversight. The problem is the lack of regulation. There needs to be strictly enforced guidelines on the amount of leverage a bank can use and–more importantly–any financial institution that acts like a bank must be regulated like a bank. (Dodd-Frank reforms don’t fix this problem.)

The present system is doomed because it depends on the willingness of bankers to behave ethically when all the incentives are pulling them in the opposite direction. The rewards for gouging the public are just too great to resist. All one has to do is lend tons of money to people who can’t repay the debt, sell those same loans to investors looking for higher yield, skim-off the profits in stock options and bonuses, and find a safe place when the bubble bursts. Wash, rinse, repeat.

The IMF released a report last week that confirms this basic theory. The report aptly titled “A Fistful of Dollars” shows how the worst offenders deployed their lobbyists to ease regulations in order to legalize the type of sleight-of-hand that triggered the crash. Here’s an excerpt:

“We find that lobbying was associated with more risk-taking during 2000-07 and with worse outcomes in 2008. In particular, lenders lobbying more intensively on issues related to mortgage lending and securitization (i) originated mortgages with higher loan-to-income ratios, (ii) securitized a faster growing proportion of their loans, and (iii) had faster growing originations of mortgages. Moreover, delinquency rates in 2008 were higher in areas where lobbying lenders’ mortgage lending grew faster. These lenders also experienced negative abnormal stock returns during the rescue of Bear Stearns and the collapse of Lehman Brothers, but positive abnormal returns when the bailout was announced. Finally, we find a higher bailout probability for lobbying lenders. These findings suggest that lending by politically active lenders played a role in accumulation of risks and thus contributed to the financial crisis……

CONCLUSION

…..We carefully construct a database at the lender level combining information on loan characteristics and lobbying expenditures on laws and regulations related to mortgage lending and securitization. We show that lenders that lobby more intensively on these specific issues engaged in riskier lending practices ex ante, suffered from worse outcomes ex post, and benefited more from the bailout program.”
(“A Fistful of Dollars: Lobbying and the Financial Crisis”, Deniz Igan, Prachi Mishra, and Thierry Tressel, Research Department, IMF

There it is in black and white. The bankers gamed the system and raked in trillions, all according to plan. Not surprisingly, they used their political clout to create a safety net for themselves (TARP) when the bubble burst, while everyone else watched as their retirement savings and home equity went up in smoke.

There’s no disputing that massive leverage played a critical role in the crash of ’08. Nor is there any doubt that hawking mortgage-backed securities (MBS) and other garbage assets (CDOs, ABS) to credulous investors was the main vehicle for executing the heist. So, why hasn’t the Fed acknowledged its mistakes and stepped up its supervision of the banks? Is Bernanke so “captured” by Wall Street that he’d rather see another meltdown than take steps to reign in leverage? That seems to be the case.

Here’s how Bernanke responded to Keith Ellison, when the congressman explicitly warned Bernanke of “excessive leverage” that had reached “stratospheric levels” putting the entire system in danger.

Bernanke: “The Board’s authority and flexibility in establishing capital requirements, including leverage requirements, have been key to the Board’s ability to require additional capital where needed based on a banking organization’s risk profile…

We note that in other contexts, statutorily prescribed minimum leverage ratios have not necessarily served prudential regulators of financial institutions well.” (“Excessive Leverage Helped Cause the Great Depression and the Current Crisis … And Government Responds by Encouraging MORE Leverage”, Washington’s blog)

“Minimum leverage ratios” will not make the system safer and more stable?!? You gotta be kidding me?

This is Bernanke’s way of saying that he understands the risks, but plans to do nothing.

But, why?

Because Bernanke’s job is to assure that Wall Street’s massive looting operation continues apace. That’s Job#1. And, while “systemic instability” may be a concern, it’s largely irrelevant. Maintaining profitability for uber-rich speculators takes precedent over everything else. That’s the way Bubblenomics is designed to work.

Hedge Funds Speculators and Their Poverty Premium

The short sale protection racket known as hedge funds is a speculators’ dream come true.

According to Investopedia, What Does Hedge Fund Mean? is defined as,

“An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Hedge funds use dozens of different strategies, so it isn’t accurate to say that hedge funds just “hedge risk”. In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market”.

The public intuitively understands the practice of speculators. Gambling to make a quick buck is a simple concept. However, the use of esoteric financial instruments to squeeze out gains and shift risks onto the backs of other parties escapes most observers. Yet it smells of a stacked deck.

Shorting a market or a currency is a tactic used to make fast cash. If you are correct in the collapse of the stock or exchange rate, you can make a killing. However, if you bet wrong the losses can be terminal. Thus the invention of managing risk by hedging your positions became commonplace.

On the surface, this protection seems prudent. However, the mechanics of manipulating puts becomes a session of playing musical chairs. When the song stops, the abrupt result has someone holding the bag.

Gabriel Kurland in Hedge Fund Hidden Risks Identification makes the following points.

• Option Sellers can exhibit no down month for a long period of time until their fat tail show up

• Since the 1998 Russian Debt crisis, financial markets around the world have experienced at least 10 extreme shocks none of which were supposed to occur more than once every few billion years (assuming a normal distribution)

• Strategies like Convertible Arbitrage or Mortgage Backed Securities are exposed to an array of very complex Default risk, Credit Risk, Interest Rates risk, Early Repayment risk, Volatility risk

If a hedge fund wants to speculate with funds of high net wealth players, charge 2% fee on the capital, and take 20% of the gains, some may say so what. Yet the full negative impact of shorting is hidden from the public with parodies of greedy capitalists, when the largest speculator of all is the Federal Reserve. The accompanying proof demonstrates the desperate condition of the counterfeit national currency.

It is imperative to view the video, , to understand the severity of the obscene measures that are keeping the inevitable financial crash from a long overdue implosion.

For more evidence of the absurdity of destroying your own currency, read directly from the Fed’s own Minutes of the Federal Open Market Committee Meeting on June 24-25, 2003.

“The Committee could sanction the use of various derivative instruments on conventional Desk operations as a way to influence longer-term yields, which is outlined in exhibit 8. Options of some form are a possibility, as are forward operations. For example, we could sell a sequence of options on term RPs, covering interlocking time segments that collectively extend as far into the future as desired. In this way, longer-term yields could be influenced and a visible signal of the Fed’s desired path of interest rates could be demonstrated. Forward operations in term RPs could be structured in a similar fashion. Alternatively, we could sell put options on longer-term Treasury securities at strike prices associated with desired longer-term yields.

The other idea I found interesting is selling put options on Treasury securities. Cynically, this could be the salvation for everybody who hedges mortgage securities with long Treasuries. We may be the counterparty of choice. I would like to understand that because the options market is not very deep and I’d like to see how deep it is. If we went that way, how much room would we really have to inject a quantity of liquidity? Or is the scope relatively limited so that we’d have to build a market? So, I think it would be useful to explore further some of these issues that deal with liquidity and the options we have if we want to go the quantitative route.”

The Greenspan era at the Fed provided the fuel to burn up the dollar and heightened the oxygen level to expand the debt. In Greenspan We Trust, irrational exuberancewas perfected.

“Greenspan, or any Fed head, contrary to popular perception, is no more an architect of prosperity than a president. But the oracle of the central bank can engender conditions that can severely inhibit the normal course of wealth creation. While juggling interest rates effect markets and redirects business decisions, their setting are not instantly transformed into profit. Confidence is the name of the game. A reasonable expectation that financial conditions will generate ongoing and profitable commerce is the desired objective.”

The hedge fund model contradicts the fundamental tenants of capitalism. The goal of free enterprise is to create tangible wealth through commerce and business endeavors. By definition, the fruits of production and innovation flow to Main Street if the venture operates under the canons of utilitarian function. Capital is just one component in the process of organizing and operating a real business.

The speculator is spawned in a stateroom on the Mississippi River paddlewheel. Their passion is for the excitement of the game and money is the tally for keeping score. They are not serious businessmen. Merge the adrenalin junkie of a future trader background with the peddler of a traveling snake oil salesman and you have the profile of a hedge fund manager.

The adverse financial consequences of their ritual euthanasia practice, destroys a healthy economy and starves citizens from access to capital for productive activities. Whining hedge fund proponents will scream that their transactions enhance liquidity for markets. This viewpoint ignores the only real legitimate purpose for a mercantile exchange, which is the raising of capital to fund business enterprises that actually create wealth. Hedge funds skim off money that should be used to build businesses that employ domestic workers. When the velocity of money changes hands with rapidity and consumers and businesses have solid confidence that future spending can and be made from earnings and creative efforts, you have the makings of a viable economy.

The mechanics of how a hedge fund operates is described effectively in How Investment Banks and Hedge Funds Steal Money Legally! The scheme is too long to cite, so read the example for the nuts and bolts techniques that speculators use to wangle out their pound of flesh from the ordinary equity owners of a stock. The result of this lewd process is summed up accordingly.

“When all is said and done, you more than likely doubled the initial investment capital on one stock in just three weeks. Sure, the back and forth of buying and selling is nerve wracking and time consuming. Trying to keep the buying and selling of options straight is obviously no small feat but you can always take the next month off now that you’ve legally stolen millions of dollars in investment capital from smaller investors through your effective understanding of how BIG money can manipulate the stock market and legally steal the small investor’s capital for your profit!”

If a hedge fund operator with $100,000,000 can cash in so handsomely, just what are the limits on the private Federal Reserve when they control the actual origination of the world reserve currency itself? How could any moral person deny that Ron Paul’s initiative to audit the Fed is a rational and necessary requirement?Banning thievery practices of sophisticated exploitation has never been more important. The reason why hedge funds are protected under the cover of legal auspices is that the banksters are blood brothers of the speculators family of con men, and their godfathers are the controllers of the Federal Reserve money machine.

Bubbles in markets are designed collapses that benefit the short seller. When arbitrage betting a market has no real risk, ill-gained proceeds are virtually guaranteed. In the instant of a rare market reversal beyond their hegemony, their over leverage losses are made good by the taxpayer. The transfer of the net wealth of Middle America is a foregone conclusion under a regime that games the financial markets under the pretext of hedging risks.

The saying, “Bulls Make Money, Bears Make Money, Pigs Get Slaughtered – Wall Street Truisms that Stand the Test of Time”, does not apply to the Fed. Ben Bernanke is the Myron Lansky of the ultimate syndicate. The prosecutor told jurors in his summation at the insider-trading trial of the Galleon Group LLC, co-founder “Raj Rajaratnam corrupted friends and employees of his hedge fund to “conquer” Wall Street.”Bernanke and his crew at the Fed are bent on conquering the globe by selling short the dollar. The needful lesson for the biggest hedge fund hoaxer is: “A chazer bleibt a chazer” – A pig remains a pig.

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