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- Today In Commodities: Further Weakness
- Gold Seeker Closing Report: Gold and Silver Fall Almost 3%
- An Unlikely Winner In The War For Income
- Global Wheat Stocks At Highs Not Seen in 12 Years
- Gold touches 3-week lows as crisis boosts dollar
- Jim Sinclair: “MF Global Is Dynamite Under Gold Price”
- Silver Update: “Observations”
- LISTEN: Interview with Michael Snyder
- NEWSFlash 12/12/2011
- Jamul Jadamba talks Gold with Dominic Frisby
- ETF and Central Bank Gold Lent to Banks Being Relent Into Market?
- Rare 1787 gold coin fetches $7.4 million
- Hong Kong’s golden IPO
- If Silver Goes Down All Hell Will Break Loose In The Physical Market: Silver Investment Update [Video]
- Eric Sprott issues a powerful "call to action" on silver
- Tax insanity:You won't believe what the gov't is considering now
- Why natural gas is plummeting again
- Special Year End Gold Deal
- Special Year End Silver Deal
- Morning Outlook from the Trade Desk - 12/12/11
- MF Global and HSBC case
- Special VB Update for December 12, 2011
- Gold and Silver Prices Drop
- Jamul Jadamba talks to Dominic Frisby
- European Bank Situation
- Gold and silver prices drop with latest Indian production data
- Tim Tebow vs. The U.S. Economy
- Gold Shortages Are Real
- Raw Materials Commodities Are Topping Equities With Economic Expansion
- Matt Stoller: How the Federal Reserve Fights
| Today In Commodities: Further Weakness Posted: 12 Dec 2011 07:23 AM PST By Matthew Bradbard: Stocks and commodities are expected to see more downside with Treasuries and the dollar seeing the inverse…in my opinion. Inside day in Crude oil with prices closing lower by 1.3%. Considering outside markets I expected more downside. The test will be if we can break $98 in January on a closing basis in the coming sessions. We are still targeting a trade closer to $90 and would continue to use rallies as selling opportunities. Natural gas was lower by 2% today trading near $3.25 yet to find a bottom. Even though clients have light long exposure it is a slow death. If we do not see stabilize soon we will use rallies as exit doors. January will need to convincingly re-take $3.50 before expiration for me to believe an interim bottom is in. Equities are lower by 1.5-2% starting the week on a bearish note. A settlement below the 20 Complete Story » |
| Gold Seeker Closing Report: Gold and Silver Fall Almost 3% Posted: 12 Dec 2011 07:14 AM PST Gold fell all the way to $1657.28 by about 10:30AM EST before it bounced back higher midday, but it still ended with a loss of 2.66%. Silver slipped to as low as $30.883 and ended with a loss of 2.67%. Euro gold fell to about €1263, platinum lost $28.75 $1481.25, and copper fell 10 cents to about $3.45. |
| An Unlikely Winner In The War For Income Posted: 12 Dec 2011 07:01 AM PST By Michael J. Ray: Now there really isn't a war for income as the title might suggest, but one cannot deny the huge number of choices that compete for an income investor's dollar. Ranging from mReits, energy companies, trusts, partnerships, shipping, pipelines, business development companies, and a host of others makes choosing difficult. Even if one decides on a specific type or kind of equity, one does not have to look far to be inundated in a sea of never ending information dealing with the companies. The lists go on and on and it is easy for income investors to get quickly bogged down in the quagmire of data. As a result of such a large amount of information, it is easy to see how smaller and less well known investment vehicles get forgotten in the thunderous roar of the markets. There is one seemingly forgotten income investment out there that has actually produced Complete Story » |
| Global Wheat Stocks At Highs Not Seen in 12 Years Posted: 12 Dec 2011 06:48 AM PST By The Mays Report: By G.C. Mays The USDA published its World Agricultural Supply and Demand Estimates Report and as expected, export demand issues caused estimates of ending stocks to rise to their highest levels since the 2000/01 growing season. Falling demand for US exports is due to increased global supplies and more competitive pricing caused by the debt crises in Europe, which has caused the dollar to strengthen against the Euro. Higher ending stocks combined with a strengthening dollar could spell trouble for fertilizer companies Mosaic (MOS), Potash Corp (POT), Intrepid Potash (IPI) and to a lesser extent CF Industries (CF), all of which have exposure to the EUR/US exchange rate and the supply demand dynamics of wheat. Global Supplies Estimate of global wheat supplies are 9.3 million tons higher in large part due to increases in production around the globe. Upward revisions to beginning stocks in Australia and Argentina also contributed to Complete Story » |
| Gold touches 3-week lows as crisis boosts dollar Posted: 12 Dec 2011 03:44 AM PST |
| Jim Sinclair: “MF Global Is Dynamite Under Gold Price” Posted: 12 Dec 2011 03:37 AM PST
I had the chance recently to speak with the legendary Jim Sinclair, publisher of JSMineSet.com and CEO of Tanzanian Royalty Exploration Corp. It was an incredible interview—Jim spoke about gold, MF Global, mining shares, risks of the paper gold market and much more. During the interview Jim commented on how truly misunderstood gold still is, as well as the market being nowhere near an ultimate top. His comments were, "The general thinking amongst the youngsters who run the hedge funds, is not a very pro-gold school, and its very much in error…Gold will ultimately be a top brought about by violence in the most spectactular manner—the idea that gold made a top in the $1900′s could only be drawn by those with no experience in the previous major moves in the gold market." When asked about the widening price ratio between gold and mining shares, Jim said, "Many gold shares are selling at a significant discount to the price of gold, but also at a discount to simple logic," for reasons that, "there are significant competing investments that didn't exist back in the 70s and 80s, such as exchange traded funds in gold and silver…The largest of these funds, if you read the prospectus, you find out you're investing in a f In regards to the recent MF Global collapse, Jim said, "When problems like this occur, and when investors question whether or not their statements means anything, assets without liabilities attached to them held physically or stored personally by the investor become very attractive." He concluded by saying, "the MF Global situation—is a piece of dynamite sitting underneath the gold price." Jim is known by many as "Mr. Gold," and his depth of knowledge on gold & the financial markets is quiet uncommon. This is another "must-listen" interview for gold and silver investors. More at BullMarketThinking.com |
| Silver Update: “Observations” Posted: 12 Dec 2011 03:36 AM PST from BrotherJohnF: Got Physical ? ~TVR |
| LISTEN: Interview with Michael Snyder Posted: 12 Dec 2011 03:35 AM PST
Michael Snyder joins us today to discuss the impending global economic collapse and what you and your family can do to survive it. The statistics are bleak, but you shouldn't allow yourself to become a statistic. We are obviously near a new inflection point in the ongoing collapse saga. Most people refuse to even entertain the possibility, that life as they know it is going to change dramatically in the months and years ahead. Easy credit and the ability to shift vast amounts of debt around the globe is rapidly coming to an end. Those who recognize the new reality and have prepared for it, will not only survive but thrive in the New Economy. Michael has written a number of recent articles that clearly demonstrate the United States and the World are becoming poorer by the day. Illusions of prosperity aside, standards of living will decline and unemployment will increase to pandemic proportions. The need to adapt and invest in yourself has never been greater. The ability to create new income opportunities and to assist your friends and neighbors will make all the difference. Much more @ KerryLutz.com or @ 347.460.LUTZ |
| Posted: 12 Dec 2011 03:13 AM PST
 When we take into account the value of the dollar, with today's level, the model gives resistance for the POG at 1715 and support for the POG at 1540. It's still all in the dollar. Once the dollar starts going down, it will be a different game!  |
| Jamul Jadamba talks Gold with Dominic Frisby Posted: 12 Dec 2011 02:48 AM PST Jamul Jadamba of AU Mogul Group talks to Dominic Frisby of the GoldMoney Foundation about gold mining and natural resources in Mongolia. Mongolia is one of the less densely populated countries in the world. The countries amazing store of commodities and natural resources are still very undeveloped and big exploration opportunities abound. Jamul talks about coal, copper, gold and the extraordinary market in China for raw materials from Mongolia. They talk about the 20 years of democracy in Mongolia, the nomadic culture and the particularities of property rights. ~TVR |
| ETF and Central Bank Gold Lent to Banks Being Relent Into Market? Posted: 12 Dec 2011 01:55 AM PST |
| Rare 1787 gold coin fetches $7.4 million Posted: 12 Dec 2011 01:30 AM PST |
| Posted: 12 Dec 2011 01:30 AM PST An interesting way to look at global gold demand is through the scope of two of the most basic, yet powerful human emotions: fear and love. Understanding this duality - the "fear ... |
| Posted: 12 Dec 2011 01:24 AM PST There simply isn't enough physical silver to deal with the demand of a fiat currency crisis. As the paper silver market pushes prices down, all hell will break loose in the physical market. |
| Eric Sprott issues a powerful "call to action" on silver Posted: 12 Dec 2011 01:00 AM PST From Zero Hedge: In what is likely the most logical follow-up to our post of the day, namely the news of the lawsuit between HSBC and MF Global over double-counted gold, or physical – not paper – that was "commingled" via rehypothecating or otherwise, we present readers with the monthly note by Eric Sprott titled "Silver Producers: A Call to Action" in which the Canadian commodities asset manager has had enough of what he perceives as subtle and/or not so subtle manipulation of the precious metal market... and in not so many words calls the silver miners of the world "to spring to action" and effectively establish supply controls to silver extraction to counteract paper market manipulation in the paper realm by treating their product as a currency and retaining it as "cash." To wit: "Instead of selling all their silver for cash and depositing that cash in a levered bank, silver miners should seriously consider storing a portion of their reserves in physical silver OUTSIDE OF THE BANKING SYSTEM. Why take on all the risks of the bank when you can... Read full article... More on silver: Precious metals guru Sprott: $100 silver is coming A new gold and silver threat you need to watch out for China could be the big reason behind yesterday's silver selloff |
| Tax insanity:You won't believe what the gov't is considering now Posted: 12 Dec 2011 12:45 AM PST From Bruce Krasting: We have a week left to resolve the issue of extending the 2% break on Social Security taxes (FICA&SECA). I still think there will be a last-minute fix on this. It’s too important. Without this tax break, the economy will hit a wall next year. Whatever your thoughts are today about the prospects for a recession in the next 12 months, you'll have to revise the odds way up if congress fails to get a deal. It's a measure of just how economically vulnerable we are that 2012 is make-or-break as a consequence of how this plays out. The latest insanity on this topic comes from the WSJ today... Read full article... More on taxes: These popular tax deductions could soon be history What you should know about putting gold in your retirement accounts Must-read: A fantastic quote on the government's tax and spend policies |
| Why natural gas is plummeting again Posted: 12 Dec 2011 12:42 AM PST From Pragmatic Capitalism: Looking back at a two-year-old post on natural gas called "Natural gas prices below zero?," it feels as though we are back to the same price dynamics. Price for the "nearby" Henry Hub contract hit new lows today at $3.317/mmBtu. What is driving this price collapse? As before, it is the usual suspects: limited storage, strong production (particularly in U.S. shale), increasing reserves, and warm weather. Let's take a quick look at the first three... Read full article... More on natural gas: ExxonMobil: Why natural gas will soon replace coal This could be the industry that "reignites" the U.S. economy How the U.S. could gain almost 1 million more jobs in the next three years |
| Posted: 12 Dec 2011 12:13 AM PST Rock bottom pricing available only to our Austin Report readers! |
| Posted: 12 Dec 2011 12:13 AM PST Rock bottom pricing available only to our Austin Report readers! |
| Morning Outlook from the Trade Desk - 12/12/11 Posted: 12 Dec 2011 12:08 AM PST The European generated euphoria over a " Deal" lasted one day and global markets this morning are lower taking the metals down to dangerous levels. As said many times in the past, the issues facing the United States and Europe are massive. Thirty years of debt accumulation at the private level and current Government debt measured in Trillions ( when I was in school, I am not sure the word even existed), cannot be fixed without severe contraction and a major blow to Western lifestyles. The leg of the stool that gives Bulls hope is the expectation that politicians are weak and will continue to kick the can down the road, by engorging the money supply and thus creating inflation. The real fix would be too painful to contemplate, but the reality would be extremely bearish for the commodity markets. I mentioned recently that the metals are forming a wedge, where support and resistance lines converge. The conclusion of a wedge formation almost always suggests the next major move. $1,660 ish and $1,700 appear to be the break points. Two weeks to Christmas. Too much time for the market to remain in a tight range. The managers will do everything they can to hold the upside to dress up their returns for year-end. I think the Pumpkin will soon re-appear. ( for you younger kids, read Cinderella ) |
| Posted: 12 Dec 2011 12:07 AM PST As usual, Zero Hedge and others hype a story way beyond the reality (see here for the Bloomberg story), such as: ZH: "is whether or not MF Global was rehypothecating (there is that word again), or lending, or repoing, or whatever you want to call it, that one physical asset that it should not have been transferring ownership rights to under any circumstances." TF: "A lawsuit such as this one could easily bring about the total destruction of the Comex/LBMA-based, fractional bullion banking system" Here is a suggestion, read the actual Interpleader Complaint for the facts: 1. Mr. Fane and MFGI entered into five COMEX gold contracts and three COMEX silver contracts relating to the Property. HSBC is the depository for the Property pursuant to a certain Gold Delivery Point Agreement and a certain Silver Delivery Point Agreement entered into between HSBC and the New York Mercantile Exchange, Inc. 2. By e-mail dated October 25, 2011, MFGI notified HSBC that "MF Global's customer Mr. Fane would like to take possession of [the Property] and move [the Property] to his account at Brinks (sic). I have already canceled for load out. Customer will advise of date and time." 3. Mr. Fane did not contact HSBC to request that the Property be transferred to his account at Brink's prior to the Commencement Date. 4. By letter dated November 18, 2011, HSBC, through its undersigned counsel, notified the Trustee that it had possession of the Property. HSBC also notified the Trustee, in light of HSBC having received instructions from MFGI prior to the Commencement Date to transfer the property to Mr. Fane upon his request, that HSBC would act in accordance with MFGI's prior instructions barring an injunction or contrary instructions from the Trustee. 5. By letter dated November 21, 2011, Mr. Fane requested that HSBC transfer the Property to his account at Brink's. 6. By letter dated November 22, 2011, the Trustee, through his counsel, asserted to HSBC that the Property constitutes customer property under Part 190 Regulations of the Commodity Futures Trading Commission and that the treatment of the Property must be administered by the Trustee. The Trustee further instructed HSBC not to release the Property to Mr. Fane. 7. By letter dated November 22, 2011, HSBC notified Mr. Fane that the Trustee had instructed HSBC not to release the Property to him and that the Trustee asserted an interest in and claim to the Property. Not being a lawyer, I read this as "before you went bankrupt, you said I could have my metal", "yeah, well, you didn't take it before I went bankrupt, so it is now part of the bankruptcy proceedings". So no rehypothecation or loaning, no "suing" by HSBC, no stealing or counterfeiting of the bars and certainly not the total destruction of bullion banking. Just another lesson in counterparty exposure and possession is nine tenths of the law.  |
| Special VB Update for December 12, 2011 Posted: 12 Dec 2011 12:01 AM PST HOUSTON -- This will be an unusual Got Gold Report. It is more of a postponement of a full report than a GGR, because looking down through the data yields few significant signals we can point to that are all that different from the last look. That is why we are including this note in the archives as a Special Vulture Bargain Update instead of a GGR. In a moment we shall name our newest Vulture Bargain, VB# 14, but first: Gold Consolidation Nears Resolution Technically the gold market is still confined in a tightening triangular consolidation, inside a larger triangular consolidation setup, but we have to note that the resolution point of that "inside" triangular set up is growing nigh. Vulture members please refer to our comments in the linked gold graphs this week for more on the gold market, including information on the COT reports. In lieu of a full Got Gold Report, Vultures (Got Gold Report Subscribers) please log in to the password-protected GGR subscriber pages for an important Vulture Bargain Update posted today, Monday, December 12, 2011. We share our outlook for gold and silver and we also name the newest fully fledged Vulture Bargain Issue during what is likely near a peak in tax loss selling pressure. To continue reading, please log in or click here to subscribe to a Got Gold Report Membership. |
| Posted: 11 Dec 2011 11:16 PM PST Gold and Silver Prices Drop With Latest Indian Production Data by Roman Baudzus, GoldMoney.com:
Indian industrial production data for October turned out to be much lower than economists and analysts had expected. This indicates that it will be very difficult for Asia to detach from the economic problems of the eurozone and the US. Indian data came as a shock for many market participants, as expectations that the BRIC states (Brazil, Russia, India and China) might be able to detach from the economic problems of the industrialised countries wane. The same developments took place during the financial crisis in 2008, when emerging markets suffered a significant slowdown. Nevertheless, the extent of the slowdown in Indian industrial production is still remarkable, since October production has dropped to the same level it was at in the first quarter of 2009, during the peak of the financial crisis. Read More @ GoldMoney.com |
| Jamul Jadamba talks to Dominic Frisby Posted: 11 Dec 2011 10:45 PM PST Jamul Jadamba, of AU Mogul Group Inc., talks to Dominic Frisby, of the GoldMoney Foundation, about gold mining and natural resources in Mongolia. Mongolia is one of the less densely populated ... This posting includes an audio/video/photo media file: Download Now |
| Posted: 11 Dec 2011 09:48 PM PST Rick Moran at American Thinker places the European condition in perspective: Euro zone banks near collapse Rick Moran The recently completed summit of EU leaders came up with a solution of sorts to deal with the sovereign debt crisis. But what it didn't address was the growing crisis over credit access for european banks. The Telegraph: The European [...] |
| Gold and silver prices drop with latest Indian production data Posted: 11 Dec 2011 09:15 PM PST In October, India's industrial production dropped drastically. According to recently published data by the Indian government, the country's industrial production has weakened by 5.1% in comparison ... |
| Tim Tebow vs. The U.S. Economy Posted: 11 Dec 2011 08:50 PM PST The Tim Tebow Comeback Story Continues But There Will Be No Miracle Comebacks For The U.S. Economy from The Economic Collapse Blog:
Never in the history of the NFL has there ever been anything like this. Today, Tim Tebow engineered yet another miraculous 4th quarter comeback. Almost everyone has been expecting this unprecedented string of comebacks to come to an end, yet Tebow just keeps pulling off miracle after miracle. It seems like nearly every week now we are talking about another unbelievable Tim Tebow comeback. It is truly a great story, and what is wonderful about Tebow is that he is not out to glorify himself. He is very humble, he always recognizes his teammates and he is a terrific role model for a generation of American youth that is in desperate need of one. Unfortunately, there is not going to be a similar comeback story for the U.S. economy. It is late in the 4th quarter, we have accumulated over 50 trillion dollars of total debt as a nation, and our economic guts are being ripped out at a rate that is almost impossible to believe. The game is essentially over and we are headed for an incredible amount of economic pain as a nation. We desperately need a "political Tim Tebow" to come along to dismantle our current debt-based economic system. But instead, the corrupt politicians in Washington D.C. just keep patching up our current system and hope that somehow it will recover. Read More @ TheEconomicCollapseBlog.com |
| Posted: 11 Dec 2011 08:50 PM PST Precious Metals Stock Review |
| Raw Materials Commodities Are Topping Equities With Economic Expansion Posted: 11 Dec 2011 08:38 PM PST "Commodities are beating equities for a fifth consecutive year, a sign that demand from developing economies is sustaining global growth that drove prices up almost fourfold in a decade." Traders need to distinguish between the commodity markets that pay in a depression. Base metals and basic industrial products sell-off as demand falls radically. Precious metals, food and energy are all good places to be on fear, security and absolute must have needs. "Combined stockpiles of coarse grains including corn and wheat will drop to the lowest since 2009, according to USDA data compiled by Bloomberg. Global oil demand will exceed production for a third year, the U.S. Department of Energy estimates." –Barclays & Bloomberg.net 11-28-11 "The S&P GSCI more than doubled from a four-year low in February 2009 as shortages emerged. China, the biggest user of everything from energy to copper to cotton, will lead gains in a projected +6.1% expansion in emerging economies next year, more than compensating for the anticipated +1.9% growth in the developed world, the International Monetary Fund says. The odds favor that the emerging world has succeeded in producing a soft landing rather than a crash landing," said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which manages about $340 billion. "A crash landing would make it more like 2008 for commodities, but a soft landing means we probably are in an ongoing recovery, which makes it very likely that commodities go onto new highs." "Hedge funds and other large speculators are holding a net- long position, or bets on higher prices, of almost 755,000 futures and options contracts across 18 raw materials, Commodity Futures Trading Commission data show. While that's down from a record 1.56 million in September last year, it's 11 times more than at the bottom of the slump in 2008. Commodities under management are within 9% of a record $451 billion in April." "The U.S., the world's biggest oil consumer, expanded at a +2 percent annual rate in the third quarter, the government said November 22. The economy, more than twice the size of its nearest rival China, will gain 2.2% next year, compared with a 3.5% contraction in 2009, according to 63 economist estimates compiled by Bloomberg. The Euro region will advance +0.5% in 2012, compared with a -4.2% drop in 2009, estimates show. Commodity investor inflows rebounded to $2.1 billion in October, after a record outflow of $10 billion in September, Barclays Capital said in a November 21 report." "Holdings in exchange-traded products backed by gold increased to an all-time high of 2,351 metric tons November 25, data compiled by Bloomberg show. Gold for immediate delivery rose +21 percent this year to $1,713.05 an ounce as of 12:10 p.m. in New York, more than twice the low of $682.41 reached in October, 2008." "There are no signs yet of a collapse in demand. China's October copper imports were the most in 18 months, customs data show. Global stockpiles monitored by exchanges in London, New York and Shanghai dropped -19% since March, the lowest since December, according to Bloomberg. Futures declined -22% to $7,487.25 a ton on the London Metal Exchange this year, still more than twice as much as the $2,817.25 reached in December 2008. Inventories of crude and refined products in industrialized nations fell below the five-year average for a third consecutive month in October, the first time that's happened since 2004, according to the Paris-based IEA. Stockpiles declined by 11.8 million barrels to 2.68 billion. Crude oil advanced +7.4 percent to $98.14 a barrel in New York this year, three times the low of $32.40 touched in December. 2008." "Inventory levels and spare capacity in commodities, certainly in the oil sector, are a lot lower than they were in 2008," said Colin O'Shea, at Hermes Investment Management Ltd., which has about $2 billion in raw-material holdings. "I don't feel that the demand loss that we could potentially have now is the same as it was in 2008." -Whitney McFerron & Elizabeth Campbell 11-28-11 Bloomberg.net
        This posting includes an audio/video/photo media file: Download Now |
| Matt Stoller: How the Federal Reserve Fights Posted: 11 Dec 2011 07:36 PM PST By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller. Two weeks ago, Bloomberg released a significant story on the actions of the Federal Reserve as the lender of last resort during the crisis and the extent of that lending. The article, an homage to the late great reporter Mark Pittman, revealed lending and guarantees of roughly $8 trillion, and estimated government-granted profit garnered by the big banks of $13 billion. More disturbing were inconsistent statements by Bernanke publicly claiming he was lending only to sound institutions when the Fed's internal assessments of those same banks showed otherwise. This article prompted a remarkable back-and-forth between Bloomberg and the Fed, in which neither side backed down while coming close to calling the other a liar. Bloomberg essentially argued that the Fed gave ill-gotten profits to money center banks through facilities set up to flood the system with liquidity. The Fed responded that it charged "penalty" rates to these banks, that it was fulfilling a well recognized function of central banks by serving as the lender of last resort. I side with Bloomberg, and I'll explain why. American money is a political commodity, backed by nothing except the willingness of collective holders of that money to believe in the American system of wealth production and trade. Steve Waldman noted to me over email that the idea that there is a "penalty rate" in a liquidity crisis is absurd, since one can see a liquidity crisis as a period in which lending ceases. Other correspondents patiently explained to me that the Fed did a good job in its lender of last resort function, that it heroically unfroze credit. Indeed, 71% of investors prefer Bernanke's Fed to the European Central Bank. The problem with the Fed's argument comes down to trust – and the institution that is asking us to trust it has aggressively fought every effort to obtain public disclosure and misled Congress about the state of the banks it was regulating. I have sympathy for the Fed's predicament – it couldn't say Citigroup was insolvent, but at the same time, the New York Fed did not have to, say, take the downside of $220 billion of that bank's bad assets, with no upside and no resource (see page 20 of this SIGTARP report). That Citi didn't use this specific facility is not important – once investors realized that Citi is now version 2.0 of Government Sponsored Entity, it didn't have to. These banks now have lower costs of funding than smaller banks, which is an annual subsidy of between $6B and $34B. And this doesn't include these banks' increased liquidity, which very obviously matters when you see a company like MF Global go down despite very likely putting on very similar bets as others (who are too big to fail) have. Economist Ed Kane, for one, has estimated the value of the de facto guarantee as over $300 billion annually. Even more than this assistance, it is important to put something on the record about the Federal Reserve's politics. From 2009 onward, the Fed fought bitterly and fought dirty to prevent any disclosure whatsoever. I've never told this story before, about the Fed's nasty and dishonorable lobbying campaign against a Fed audit. But first, it's important to understand the Fed's enormous influence on Capitol Hill. While you and I see banks and public officials as self-interested actors, most political policy makers simply do not question the credibility of insiders in the political process. If Bernanke says something, to most members of Congress and staffers, that means it's true. This is perhaps a holdover from Alan Greenspan's time as "the oracle", or perhaps it says something deeper about the psychology of those in power. Regardless, it's how staffers and members tended to absorb information. The few that questioned the credibility of those in authority did so furtively because it was remote from the consensus position. The Chairman of the Financial Services Committee during Dodd-Frank negotiations was Barney Frank. Sometimes, he made skeptical noises, but for the most part he accepted that the Federal Reserve was the adult in the room. He hired staffers from the Fed, listened to the Fed, and respected the Fed's role. He often seemed to dislike hearings with Fed officials because he thought the hearings were a waste of their time. And if you watch how most members interact with officials, it's not an entirely unreasonable posture. These hearings drone on for hours, with very few moments where a member fluently confronts the official with something relevant. More often, a Congressman with a somewhat limited sense of how banking works is reading a question prepared by a staffer, and then has to go off to do some fundraising work (which is unfortunately the real job of most junior members). This is not a criticism of the intelligence of any of these members of Congress – they simply don't have time to learn the policy substance on top of the already time consuming tasks of doing politics, fundraising, Congressional procedure, daily votes, constituent services, and multiple committee assignments. But it meant that Frank didn't believe much productivity came out of these back-and-forths. Frank gaveled members down hard when they went over their allotted 5 minutes with Fed officials. And while Barney talked a good game about Fed transparency, going so far as to actually talk of his agreement with Ron Paul on Fed transparency on Reddit (see minute 2:30), it was clear that his priorities were elsewhere. When the time came, he actually voted against a Fed audit in committee, and I suspect he would have removed the provision from the overall bill if there had not been so much public heat on the issue. It's not that he was adamantly against Fed transparency, it was just worth sacrificing for other political priorities. Here's what he said immediately after the Fed audit amendment passed.
Of course, it had no measurable impact, and certainly, banks are still clamoring to borrow from the Fed. But the pattern, of promising crackdowns while delivering little, is consistently. While year, Barney introduced a bill to make the powerful President of the New York Fed a Presidential appointment instead of hired by banks on the Reserve Bank board, he actually killed such a provision during the conference negotiations over the final Dodd-Frank bill (when it would have mattered and structurally changed the Fed in a critical manner). This is just part of the posturing that goes on around policy reform – being loud against powerful interests when the vote isn't being held, and then using that posture as a negotiating chip to get something else you think is important when the game is on the line. Part of why people call Barney brilliant –and he is brilliant – is because he is an utter master at such policy maneuvering, and this policy maneuvering is an essential part of legislating. It just sucks to be working on the priority that gets traded away. Aside from Barney's personal faith in the Federal Reserve, the institutional links among the central banking system and financial policy-makers are immensely strong. When the Financial Services Committee needed extra staff, they grabbed people from the Fed to come in and help. When Congressional staff left the Hill, many of them went to various parts of the Fed. In fact, the most aggressive people in favor of Fed secrecy during the eventual Fed audit fight were staff-level. Barney supported the Federal Reserve, but he showed some skepticism. And I believe part of his reluctance to challenge the Fed was reasonable and based in committee politics – he knew he needed to carry votes to pass bills, and the Fed's opposition would make his job much harder. So posturing can be useful in politics. Chris Dodd, though, has no such excuse of managing the politics; he simply did not have the expertise or confidence to challenge the Fed. In 2009, Grayson grew worried about the Federal Reserve's use of a half a trillion dollars of currency swap lines with foreign central banks in 2008, an issue that has now been resurrected in the wake of the Euro-zone crisis.) Grayson actually got an amendment with Ron Paul through the House requiring the Treasury Secretary grant permission before the Fed could open said swap lines. In the conference committee, one of Dodd's staffers took it out at the behest of the Fed. This staffer told us on the phone that there was simply no way any central bank would ever default. And thus, the Fed can now lend unlimited dollars to foreign banks through the ECB without any checks from the executive or legislative branch. But perhaps the best way to illustrate the political strength of the Fed is to show how in small ways, it could and did move the ball at the behest of large banks, for no particularly good reason. There was a provision in early drafts of Dodd-Frank to allow big banks to open new branches without having to ask permission from state regulators (see this Ryan Grim story "Senate Bill Contains A Gift For Big Banks") . No Congressman formally asked for this provision, so I was told, it just sort of wound up in the draft bill -which is a good argument against thousand page bills). I remember when small Florida banks asked Grayson to pull it out, and I went to House side staffers and asked them to remove the provision. They did. But then it popped up again in random amendments, and manager's amendments (this is an obscure procedural move spearheaded by the Chairman of a committee). On the Senate-side, it was also in the draft bill – someone asked Dodd about the provision, and he didn't even know it was there! He had it removed. But then it popped up again, and of course, it was included in the final draft of the bill. I later learned that the Fed was probably behind the amendment, and thus inserted it anywhere and everywhere they could. So that was and is the strength of the Fed. Even if you didn't believe them, it was very hard to find an alternative who had the skills, the information, and the lawyers to write law on central banking reform, and push it through. It's why I turned to the financial blogs as a new class of information mediators to educate me on our financial architecture – these were vocal end-users in the capital markets who could for the first time talk back. The story of how I became involved with the Fed audit fight starts with a semi-random event. I connected with Grayson in the fall of 2008, when a Democratic landslide seemed imminent; he hired me to work on policy. My title was "Senior Policy Advisor", a Lake Wobegon-ish line used on the Hill to designate catch-all advisor (there are no "Junior Policy Advisor" titles). Soon after, in the beginning of the session, he got put on the Financial Services Committee, because that's where Democratic leadership put a lot of freshmen in swing districts. We had no other policy staffers yet, which caused some chatter of the "did you hear the only person they have working on policy is a BLOGGER?!?!" variety. Still, despite my handicap of having written stuff on the internet, I ended up covering the Financial Services Committee in my issue portfolio. Our specific fight with the Fed started in January, 2009, when I put a stack of blog posts and Bloomberg articles on the trillion dollar expansion of the Fed's balance sheet in front of Grayson to prep him for a hearing with Fed Vice Chair Don Kohn. It was Grayson's second Congressional hearing. And what I didn't know, and what Kohn was about to find out, was that Grayson was basically the best cross-examiner in Congress and fluent in central banking parlance and international investing. Members get just five minutes to ask questions, and when the witnesses are important, they can't ask for more time. As I noted before, Barney was especially aggressive about preventing members from getting more time, especially when the witnesses were from the Fed and the questions were probing. But Grayson made his time count. Kohn never saw it coming – Grayson asked him which banks received the $1.2 trillion in spending from the Fed. The scene was electric, and fortunately, it's preserved on Youtube. Grayson would ask a question, and when Kohn didn't answer, simply repeat the question. Who got the money? Did Credit Suisse get the money? Citigroup? Etc. The droning contrast of Kohn's evasive answers, combined with Grayson's clear questions, was an entertaining metaphor for the power of a cold and enormous bureaucracy up against a scrappy iconoclast. As Kohn got tripped up, and confused spending and lending, bored observers in the committee room woke up and note. One experienced journalist told me that Kohn is a master of these hearings, and it was shocking to see him embarrassed by a random freshman legislator The video went viral, because Grayson was the only member who had theatrically focused on what Mark Pittman of Bloomberg reported, a remarkable and unprecedented expansion of the Fed's balance sheet. And Grayson was fun about it. After the hearing, banks began calling our office, afraid that we knew something about their relationship with the Fed. We didn't, which they quickly realized. But it turns out they had good reason to worry, since they were in fact borrowing trillions. Soon thereafter, I met Pittman, and a whole suite of people on the right and the left skeptical of the Fed's behavior (including Yves Smith, Bob Ivry, Barry Ritholz, Walker Todd, Chris Whalen, Josh Rosner, Jane D'Arista, Bill Greider, Karl Denninger, Dean Baker, Simon Johnson, and lots of others, including over email Tyler Durden). The financial blogs formed a sort of shadow financial elite, making counter-arguments against the standard establishment norms peddled by centrist, conservative, and liberal Fed defenders. These people became increasingly influential over the course of several years, which is an important reason the financial reform bill became stronger over the course of 2009-2010, unlike most bills which get chipped away at by special interests. During the next year and a half, heat on the Fed ratcheted up as the AIG counterparties story came out (due to Darryl Issa), and as Bloomberg and many others (like Elijah Cummings) began digging into what was going on during the crisis. Grayson continued with a remarkable use of YouTube and Congressional hearings, including one hearing with the Fed's inspector general that now has over 4 million views. Bernanke had a rough confirmation ride in 2009, because of the focus and heat on the Fed from this newly interested public. As the confirmation vote neared, blogger Mike Stark kicked off the mania around Bernanke's hearings when he asked Dodd whether the confirmation was a certainty (as Dodd had implied a few months earlier). Dodd said his confirmation wasn't a certainty, which led to furious lobbying by the White House, some market panic, and ultimately a record 30 no votes on Bernanke, "the weakest endorsement ever extended to a chairman in the Fed's 96-year history." The fight over the Fed, at least on the House side, was largely within the Democratic Party. Ron Paul was able to persuade all of his Republican colleagues to support his Fed audit bill, and much of the opposition to Bernanke's renomination came from conservative Senators. So the swing votes were moderate and conservative Democrats, as well as a few anti-establishment liberals. It was a motley combination, but I wouldn't be doing the fight justice if I didn't point out how important Ron Paul and his staff, Brad Sherman and his staff, Elijah Cummings and his staff, and Bernie Sanders and his staff were. But there was a robust outside campaign as well. The campaign for liberty made incessant calls. The AFL-CIO signed onto the bill after we had made a sufficiently strong case. One of the key organizers in the outside campaign, Jane Hamsher, brought a number of important liberal validators onto the campaign in last minute letters supporting the Fed audit. These were pivotal, as I'll explain a bit later. The campaign to spotlight the need for transparency on the Fed showed me something about legislating, which is the importance of oversight. Congress doesn't pass good laws because a majority supports them, that's just the technical piece of the puzzle. Congress passes good laws because someone has made an excellent public case that a problem needs to be solved, often using hearings and investigations to highlight the problem. Elizabeth Warren, for instance, built the political case for reining in the banks with her time at the Congressional Oversight Panel. One of the simplest ways to tell that Congress wasn't serious about financial reform was that the commission they empowered to find the root of the financial crisis, the Financial Crisis Inquiry Commission, was mandated to come out with its report after Dodd-Frank passed. They weren't marshaling public support, because they knew what they wanted to pass before making the public case for it. As heat built up on the Fed, Rep. Grayson was going down to the floor every day for votes, collecting Democratic co-sponsors for the bill to audit the Fed (HR 1207). Ron Paul's supporters were constantly calling members on the Financial Services Committee, which meant that staffers I interacted with were often getting those calls. They held me responsible for them. I was called in meetings of Democratic legislative assistants a "Larouchie", and the bill to audit the Fed was referred to by one staffer as a "piece of shit". Yet, despite the staff opposition, the number of sponsors continued to climb, first hitting 100, then 200, then a majority of the House (218), then 300. Eventually, the heat was so heavy that the committee held a hearing on the bill. The question was no longer whether the bill would pass, but whether it could be attached to Dodd-Frank. Most bills are introduced as message pieces, and don't go anywhere. The only way they actually move is by attaching them as amendments to larger bills that are going to pass, like annual spending bills or bills like Dodd-Frank that are Presidential priorities. So whether the Fed audit bill could be attached to Dodd-Frank was pivotal, because a majority is mostly meaningless if you can't get a vote on it. So this was a question of jurisdiction; fortunately, the committee's parliamentarian ruled that the Fed audit provision was germane to the overall financial reform bill. The whole time, the Fed was defending itself by screaming in bureaucracy-speak "Federal Reserve independence" through every economist and validator it could. This was a way of preying on the insecurity of Congressmen, who are afraid of making governance mistakes and desperately want someone else to blame in case something goes wrong. In making the claim that it was above politics, the central bank turned its back on its own history, ignoring the time it was controlled by a very political Treasury Department and financed the winning of World War II. The period of the non-independent Fed, which ended in the early 1950s, saw an enormous flattening of income equality. The Fed knows this, but pretended that it did not. The idea of democratic accountability in the Federal Reserve system was simply unthinkable, a clear indication of how the public simply could not be trusted. Senator Judd Gregg, who is now a senior advisor at Goldman Sachs now claiming that he was unaware of the extent of the Fed lending, led the charge on this point. He used the talking point that the public knowing which banks got trillions of dollars from the Fed was tantamount to iron-clad Congressional control of the Fed. It was an absurd argument, but it was what they had. Here's Gregg.
This was a key part of the attack, that this was populism run amuck, and that Congress wanted to control monetary policy like it does fiscal policy. Aside from the fact that monetary policy is very clearly in the Constitution as a Congressional responsibility, and that the Fed constantly argues it is a creature of Congress, this was simply not what the bill did. It was a disclosure bill, pure and simple, which is why people on the right and the left could side together on it. Economists joined in to the "Fed independence" chorus, but their credibility was damaged by a remarkable article written by Ryan Grim on how the Federal Reserve funded most monetary policy research (which Congressional investigator Robert Auerbach had noted in the 1990s). In fact, one of the key letters used by the main committee opponent of a Fed audit, Congressman Mel Watt, was discredited when Grim figured out that the economist organizers of the letter were or had been on the payroll of the Fed. The Fed also argued it w |
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In October, India's industrial production dropped drastically. According to recently published data by the Indian government, the country's industrial production has weakened by 5.1% in comparison with the same period last year, and market observers are starting to worry about India's economic development. In recent months an increasing number of foreign investors have been withdrawing their capital and the Indian rupee has been under strong sales pressure. After this data were released both gold and silver prices were under sales pressure. In today's early Asian trading, gold and silver prices could not detach from the price depreciations in other asset markets.
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