The turth about Greece (and why it matters to every human on Earth)
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More info, consider yourself warned
By Jim Willie of the Hat Trick Newsletter
Divergence between paper gold and physical gold price is happening, the process begun. Actual physical shortages have kept the price up. The naked shorting of futures has kept the paper price down. The fraud cases and lawsuits, with no hint of prosecution, provide the levered force to create much wider divergence, as traders and entire firms depart the tainted crime scene that is the COMEX. Trust has vanished along with private accounts.At the center of the backdrop for the divergence, apart from the criminal events, is the economic deterioration and asset market downdraft. It leads to margin calls, loan payment obligations, fading investor confidence, negative sentiment, and a desire to avoid loss. Hence the huge liquidity concerns, selling of good assets that command a strong price, and central bank encouragement of gold sales even with lease. These forces conspire to push down the gold futures price from the discovery process, called the paper gold price. These forces, although real, are exaggerated by the Syndicate to explain all. On the other side is the desperation among central bankers to cover debt securities up for sale or rollover funding. They resort to utter hyper inflation by monetizing the many types of government bonds. They are obligated to aid their banker cohorts, and thus purchase truckloads of badly impaired sovereign bonds and other collateralized bonds. Over time these sovereign bonds have proved toxic. The compelling need to stimulate economies, to redeem toxic bonds, and to recapitalize and nationalize the big banks adds to the monetary inflation outcome. Therefore, two sides are in opposition in a battle to the death of one or the other. No middle ground can be achieved, not any longer. It is the quintessential battle between monetary hyper inflation and restoring bank system integrity to avert collapse. The insolvency has recently met illiquidity. The battle features strong forces on each side. The divergence between physical and paper gold price is widening.The incurable speculator junkies committed to the addictive leveraged game rigged by the Forces of Evil seem stuck at the casino tables, where fingers are lost, finally entire hands and arms. If their practice was to purchase physical, they could benefit from the paper price swoon, and join the Forces of Good team, rather than fighting the evil side on their dominated turf. To be sure, many aware analysts in the news maintain a small gold position in COMEX that is rolled over constantly. Many have physical positions but keep with the paper trades as a hobby, better described as an addition to the juice. Leverage cuts both ways. Their continued activity has left them exposed to theft, while knowing the criminality was widespread within the arena. So many players and firms are departing the arena altogether like Ann Barnhardt of BCM Capital. The divergence between physical and paper gold price is widening.The desperation of the bad team is growing. The gold cartel has benefited significantly from the fresh Libyan gold supply (144 metric tons) and Greek gold supply (111 metric tons), not to mention the ample Dollar Swap Facility. It is the bankers New Gold, as reported by intrepid Jeff Neilson. In a fresh sign of bankster desperation, the lease rates for gold have been pushed down to net negative levels. The fresh supply from the two broken nations has greatly aided the COMEX, providing new cannon fodder. Perhaps more wars to liberate the oppressed can be conjured up, to release more tyrant wealth. It is not a coincidence that negative gold lease rates came when Libyan gold was made available (heisted) and when Italian sovereign bonds went into critical DEFCON mode. The gold supply helped to aid the lack of bond demand. The gold lease story is analyzed more fully in the December Hat Trick Letter.
INELASTICITY BLEMISHA preface is warranted. The paper Gold market is very different in its internal dynamics from the physical. The paper Gold market shows signs of inelasticity that borders on comical. Witness the low demand in 2001 and 2002 when Gold had a paper price tag at $300 or less per ounce. Witness nowadays the amplified selling when the paper price declines. The leverage from the corrupted paper mechanisms forces margin pressures and sales. The leveraged game goes opposite to the real world of price mechanisms. On the upside, global demand rises with a rising physical price, called the gold fever. The inelasticity on the supply side is prevalent in the paper market, while the inelasticity on the demand side is prevalent on the physical market. To confuse the mix, mining firms realize some inelasticity as price falls, they are stuck with a liquidity crunch on their forward sales ruin. A huge amount of money is required to cover their losses, urged on by Wall Street advisors. Their mining operations suffer from lack of funds, and projects are curtailed. The paradoxical differences in dynamics help to push the gap between the paper and physical Gold price. The incompatible forces work to rip apart the COMEX. The divergence between physical and paper gold price is widening.
ILLICIT USAGE OF CLIENT FUNDS AS COLLATERALThe hypothecation battle will bring sufficient publicity to help the divergence along. As more assets are seen as committed, involved, and tainted in the process of grabbing, snatching, and securing collateral, even by illegal means, the physical assets will be removed from the system. Parties will remove accounts and metal from the COMEX in response from basic self-preservation. On the investment and speculation side, harm has been rendered to managed risk. The client funds have begun to flee. The protection and security of money in private accounts has been under siege in recent weeks since the MF Global crime scene was established and the yellow tape cordon has been put in place. Investors are pulling money out of hedge funds at a rapid rate. The COMEX will be increasingly isolated. Clients funds were redeemed to the tune of $9 billion in October, almost four times as much as they pulled in September, according to Barclay Hedge and TrimTabs Investment Research. Investors in October yanked more from hedge funds, setting a single month high over the last two years.The redemptions are the largest for the hedge fund industry since July 2009, when $17.8 billion was returned. The Barclay Hedge office put lipstick on the corrupt pig by commenting on how investors have lost patience with lackluster investor returns. To be sure, the average hedge fund is down by about 4% this year. The global hedge fund industry size has been reduced to $1.66 trillion, still sizeable. It is always interesting, if not amusing, to read the spin from the isolated corners. Hedge funds are seeing capital depart for the simple reason of moving away from crime centers. In the process the COMEX is being isolated. With increased isolation comes the easily recognized fraud. Look for some major stories soon about the raids to the GLD and SLV inventories by their custodians engaged in naked shorting. The Exchange Traded Fund fraud story is analyzed more fully in the December Hat Trick Letter. The divergence between physical and paper gold price is widening.
DYNAMICS OF PAPER VERSUS PHYSICAL BASISGrand divergence dynamics are becoming clear. Ann Barnhardt explained in detail how the COMEX will go away. It will not default, but rather fall into irrelevance. She laid it out in credible detailed form with numerous factors coming to play. The COMEX might still suffer the shame and spotlight of criminal prosecution. It will more certainly suffer from being ignored and shunned. The physical basis market will not respond to the declines in the paper futures market. The current dominant market will go away due to lost integrity and eroded trust. The consequences and implications of the recent major scandal and coverup are enormous, staggering, and sweeping. The changes from the MF Global failure and theft of private segregated accounts will come in time, perhaps accelerated by another similar event to slam the message home. The Syndicate has turned desperate, resorting to theft in the open daylight, which has resulted in direct consequences. Hundreds of COMEX clients waited in line for delivery of gold, and had their wallets stolen by JPMorgan. Their Gold & Silver set for delivery found its way into JPMorgan accounts at the COMEX. The details of the missing silver then reappearing silver is discussed in the December Hat Trick Letter. The slow mentally overlook this fact. The alert who point to fraud consider it a smoking gun. On its face, evidence mounts that JPMorgan simply converted 614k ounces of MF Global client silver into JPM licensed vaults. Big hats off to the Silver Doctors for excellent financial fraud forensic analysis. Do not expect prosecution over the crime, for MF Global, for JPMorgan, or for the accomplices in London, not even Jon Corzine. The Fascist Business Model in the Untied States does not permit prosecution. The bigger the crime, the more likely the perpetrator is in control of the government high offices, the financial ministry, the printing press, or the regulators.Ann Barnhardt explained how the COMEX will fade away into oblivion. Its final chapter will be marred by a grand price divergence, where the futures market price declines from shunned avoidance, while the cash physical market price holds steady then rises. Many including the Jackass had thought that a slew of delivery demands would force a drain in their gold & silver inventory, eventually leading to a slew of lawsuits, together to shut them down as a corrupt enterprise arena. The MF Global theft reveals the alternative route that seems more clear. The gold cartel led by JPMorgan and secretly by the USFed will not go quietly. They have resorted to theft of private accounts on the open stage. The money is not missing. That is the lie. It is held in JPMorgan accounts in London, where fraud laws are more relaxed. We have seen this Madoff movie before, but it will be shown on the silver screen again. The divergence between physical and paper gold price is widening.The backlash has begun and will gain strength. Barnhardt offered many cogent arguments with detail on how the COMEX will be ignored from distrust and suspicion of further thefts, as clients remove funds and close accounts. Here are her main points. They apply to Gold & Silver. She has the Barnhardt weblog:http://barnhardt.bizArbitrage is set to kick in. Players will buy at the cheaper corrupt paper market in COMEX and sell in the higher honest physical market, wherever brokers can match to make deals. (It is the same phenomenon that ripped the Euro sovereign bond market apart, as the German Govt Bond yields remained much lower than the Spanish and Greek.) They will take advantage of a strong basis, buy at the discount offered by COMEX, and sell into the cash spot physical market.A linchpin holds the market together. Keeping the futures markets tied to the underlying cash physical market is the fact that the futures contracts permit taking delivery. That delivery mechanism just broke as linchpin in full view. The futures market has lost viability and trustworthiness because of the MFG collapse and theft.The entire delivery mechanism has been corrupted and undermined. Taking delivery has meant a holding of physical metal bars is stored in a certified vault with your name attached. No longer are such holdings considered safe. Thefts occurred, and lawsuits have occurred to decided upon ownership of bars in dispute.The de-coupling process comes when arbitrageurs finally lose all confidence in market interaction dynamics, as the cash market will lose connection on price from the futures market. Players will not be willing to take the risk of having their money, positions, and physical metals stolen or confiscated.As players flee the futures market, the paper futures prices will decline. The cash physical market will hold steady. The divergence will come and be noticed, then be widely publicized. The players will realize that the physical market is the only remaining game to be played with honest rules in effect. The cash dealers will ignore the futures prices, no longer a valid price discovery, seeing that market demand for their physical inventory is robust, and maintain their prices steady. Later, they will even raise the physical prices. Then later still, the parabolic spikecomes for physical Gold & Silver.
THE GREAT SHUN BY MINERSAsset management funds are appealing to mining firms for direct metal supply. They are bypassing the COMEX in a new trend. It is a natural development, as miners seek a fair price and the funds seek a reliable supply. The COMEX is cut out of the process. The Sprott Funds have revealed how they sourced their precious metal from mining firms last year. The official exchanges are being cut off, a form of isolation as a result. The divergence between physical and paper gold price is widening.See the Ashanti story as typical. The COMEX is seeing reduced supply lines, reduced operations, more criminal implications, horrible publicity, and fewer clients. Criminal fraud does that, as lawsuits will follow like cold rain. The trend shapes up well for higher gold & silver prices. Mark Cutifani is CEO of AngloGold Ashanti, a $16 billion mining firm. He said, "Major [asset management fund] buyers are finding it is hard to get physical gold. People are coming directly to us [for large gold purchases,] people who want tonnes of physical gold, people with serious financial muscle, because they are finding it is very difficult to secure the volume of gold they want. That is something we have noticed over the last 18 months, and it has been increasing in the last six months. People are finding its hard to get physical gold." The clear message is that the COMEX has no spare available metal at all. Cutifani has good insights into the commodities and precious metals markets, and describes a fascination new trend regarding the global picture. He pointed out that major gold buyers are emerging from the Middle East and Asia. See the Bull Market Thinking article (CLICK HERE).
NEW MARKETS FLOWERINGNew gold centers are forming, where the safety is most assured. Hong kong and Dubai have emerged as reliable honest brokers, and will continue to provide valid safe haven. Switzerland, London, and other locations are fading fast. They are the corrupt centers where fascism has become prevalent, laced through the financial system.Takahiro Morita, the Japan director of the World Gold Council, reported that Japan's gold exports in the 10 months ended October totaled 95.6 metric tonnes, their highest level since 2008, when it registered at 95.5 metric tonnes. People who bought gold and jewelry in the 1980 and 1990 decades are selling back what they purchased, according to precious metals traders. Japan has turned into a big exporter. Contrast to the official side. Central bank purchases have risen by 114% over the previous quarter. Purchases by central banks could hit 450 metric tonnes this year, concludes the investment research at the council. The volume represents the highest level of central bank buying since at least 1970, perhaps the greatest in recent history. A veteran gold trader with actual experience in these locations pitched in to explain. He said, "These are not sales in Japan. They are exports, an important distinction. Many investors are busily relocating their precious metal bullion to Hong Kong and Dubai UAE. Look for Dubai to be the HK of the Middle East. The Chinese have made that decision, and it is being implemented with lightning speed." Most of the relocation from Japan shows up as exports, which require payments.October imports into China from Hong Kong rose 50% over September, and up 40-fold from last year. The more attractive fair price paid in Shanghai reached $50 above the corrupt controlled London price. The arbitrage has been very active. Chinese gold imports from Hong Kong hit a record. The Financial Times reported Chinese gold imports from Hong Kong hit a record high in October and astoundingly, they accounted for more than one quarter of the entire global demand. Data showed that China imported 85.7 tonnes of gold from Hong Kong in October, up 50% from the previous month and up more than 40 times from October of last year. It marks the fourth consecutive month that China's gold flows from Hong Kong have hit new highs. The article noted that the price arbitrage between London and Shanghai was favorable for Chinese imports during late September and early October, giving astute clever traders an edge. Gold on the Shanghai Exchange traded up to $50 per ounce above the main global market based in London, a record price difference. Purchases from China have fallen since October, as the recent strength in the USDollar has made gold more expensive. Also, considerable new strain has been felt inside China in recent weeks. Conclude that price arbitrage has begun to show itself across international boundaries. The divergence between physical and paper gold price is widening.
ONE GOLD EVENT, THE BIG SQUEEZENo gold chart will be shown in this article, out of disrespect deserved for the COMEX criminal activity. A story was recounted in recent days from my best source of solid reliable gold information. The aware gold community has overlooked a phenomenon that might be more profound in action here and now. A major squeeze is on that capitalizes on the artificially low COMEX price and the higher honest physical price. The Barnhardt effect can be seen, or at least recounted. A gold trader informed that some multi-$billion purchase Gold orders have been in the process of filling at or near the $1600 price per ounce. The price must remain near $1600 to complete the orders and permit them to clear. Call it Agent2000 who seeks the massive amount of Gold, one of the Good Guyz. The name fits since their goal is to force the Gold price back over $2000/oz after the sale transaction clears. Since so large, the orders take time to fill completely. The low-ball buy orders have been filling for over two weeks. At the same time, the Agent2000 buyer has enlisted the aid of numerous assistants to push down the paper Gold price by putting extreme pressure on some bad players, some nasty types from the usual list of suspects in the Western banking sector. These bankers are being squeezed out of their gold, as they contend with deep insolvency, reserves requirements, falling sovereign bond values, depositors exiting, and more. They are players in what has been widely called the Gold Cartel. The Jackass term has been applied in a wider sense, as they have been part of the Syndicate that reaches into the Wall Street banks, the defense contractors, news media, and big pharma.The other side of Agent2000 is where additional intrigue lies. He (they) have buyers lined up on the physical side some deals ready to close at $1900 per ounce. Later the price will push over the $2000 mark. The buyers are ready. One must infer that the buyers have a great deal of money ready to devote to the battle. Maybe some is piled up to escape the clutches of the cartel, removed from the system. Maybe some is piled up at a major new slush fund to do battle with the cartel at their own game. Maybe some is piled up and kept out of sight from greedy hands in government officials, like off-shore in the Caribbean or sequestered in the Persian Gulf. This story might be perplexing to many in the gold community since the Good Guyz are pushing down the Gold price in order to facilitate a gigantic order that will work toward crushing the cartel by draining their gold. Their gold cannot be drained without the completion of a great many orders. It is only natural to attempt to achieve the lowest possible price. If the gold cartel insists on pushing the price down, then they open the door for major volume sales at the artificially low and very much bargain price. It is happening, but the gold community does not enjoy the symptoms of the process.So a huge huge huge buyer of gold is busy, and a multi-$billion order is working through. The buyer demands a $1600 price, while on the other side of the table Agent2000 has a sale lined up for the same metal at a $1900 price on physical. The trade will take gold bullion from the Bad Boyz hands and put it into the Good Guyz hands. In the process, the COMEX supply lines will be drained more. This is consistent with mining firms removing supply lines to the COMEX. The Agent2000 buyer is pushing price down, squeezing some evil parties hard, crushing testicalia along the way. He (they) describe to the distressed seller at $1600 that pressures will continue until the deal is closed. The seller is in tremendous pain with open distress showing. So many assume the Bad Powerz are pushing down the Gold price. Not so!! This event and transaction displays how some pain comes in many isolated cases of Good Guyz pushing the Gold price down to empty the Bad Powerz vaults. My source would not reveal the identity of Agent2000 or the location of the squeeze. It seemed like London. The money is not exclusively coming from China. Word has it that Russia is also applying the pressure, with some Chinese teamwork. The Competing Currency War has a new major flank. The divergence between physical and paper gold price is widening
By Jim Willie of the Hat Trick Newsletter
Divergence between paper gold and physical gold price is happening, the process begun. Actual physical shortages have kept the price up. The naked shorting of futures has kept the paper price down. The fraud cases and lawsuits, with no hint of prosecution, provide the levered force to create much wider divergence, as traders and entire firms depart the tainted crime scene that is the COMEX. Trust has vanished along with private accounts.At the center of the backdrop for the divergence, apart from the criminal events, is the economic deterioration and asset market downdraft. It leads to margin calls, loan payment obligations, fading investor confidence, negative sentiment, and a desire to avoid loss. Hence the huge liquidity concerns, selling of good assets that command a strong price, and central bank encouragement of gold sales even with lease. These forces conspire to push down the gold futures price from the discovery process, called the paper gold price. These forces, although real, are exaggerated by the Syndicate to explain all. On the other side is the desperation among central bankers to cover debt securities up for sale or rollover funding. They resort to utter hyper inflation by monetizing the many types of government bonds. They are obligated to aid their banker cohorts, and thus purchase truckloads of badly impaired sovereign bonds and other collateralized bonds. Over time these sovereign bonds have proved toxic. The compelling need to stimulate economies, to redeem toxic bonds, and to recapitalize and nationalize the big banks adds to the monetary inflation outcome. Therefore, two sides are in opposition in a battle to the death of one or the other. No middle ground can be achieved, not any longer. It is the quintessential battle between monetary hyper inflation and restoring bank system integrity to avert collapse. The insolvency has recently met illiquidity. The battle features strong forces on each side. The divergence between physical and paper gold price is widening.The incurable speculator junkies committed to the addictive leveraged game rigged by the Forces of Evil seem stuck at the casino tables, where fingers are lost, finally entire hands and arms. If their practice was to purchase physical, they could benefit from the paper price swoon, and join the Forces of Good team, rather than fighting the evil side on their dominated turf. To be sure, many aware analysts in the news maintain a small gold position in COMEX that is rolled over constantly. Many have physical positions but keep with the paper trades as a hobby, better described as an addition to the juice. Leverage cuts both ways. Their continued activity has left them exposed to theft, while knowing the criminality was widespread within the arena. So many players and firms are departing the arena altogether like Ann Barnhardt of BCM Capital. The divergence between physical and paper gold price is widening.The desperation of the bad team is growing. The gold cartel has benefited significantly from the fresh Libyan gold supply (144 metric tons) and Greek gold supply (111 metric tons), not to mention the ample Dollar Swap Facility. It is the bankers New Gold, as reported by intrepid Jeff Neilson. In a fresh sign of bankster desperation, the lease rates for gold have been pushed down to net negative levels. The fresh supply from the two broken nations has greatly aided the COMEX, providing new cannon fodder. Perhaps more wars to liberate the oppressed can be conjured up, to release more tyrant wealth. It is not a coincidence that negative gold lease rates came when Libyan gold was made available (heisted) and when Italian sovereign bonds went into critical DEFCON mode. The gold supply helped to aid the lack of bond demand. The gold lease story is analyzed more fully in the December Hat Trick Letter.
INELASTICITY BLEMISHA preface is warranted. The paper Gold market is very different in its internal dynamics from the physical. The paper Gold market shows signs of inelasticity that borders on comical. Witness the low demand in 2001 and 2002 when Gold had a paper price tag at $300 or less per ounce. Witness nowadays the amplified selling when the paper price declines. The leverage from the corrupted paper mechanisms forces margin pressures and sales. The leveraged game goes opposite to the real world of price mechanisms. On the upside, global demand rises with a rising physical price, called the gold fever. The inelasticity on the supply side is prevalent in the paper market, while the inelasticity on the demand side is prevalent on the physical market. To confuse the mix, mining firms realize some inelasticity as price falls, they are stuck with a liquidity crunch on their forward sales ruin. A huge amount of money is required to cover their losses, urged on by Wall Street advisors. Their mining operations suffer from lack of funds, and projects are curtailed. The paradoxical differences in dynamics help to push the gap between the paper and physical Gold price. The incompatible forces work to rip apart the COMEX. The divergence between physical and paper gold price is widening.
ILLICIT USAGE OF CLIENT FUNDS AS COLLATERALThe hypothecation battle will bring sufficient publicity to help the divergence along. As more assets are seen as committed, involved, and tainted in the process of grabbing, snatching, and securing collateral, even by illegal means, the physical assets will be removed from the system. Parties will remove accounts and metal from the COMEX in response from basic self-preservation. On the investment and speculation side, harm has been rendered to managed risk. The client funds have begun to flee. The protection and security of money in private accounts has been under siege in recent weeks since the MF Global crime scene was established and the yellow tape cordon has been put in place. Investors are pulling money out of hedge funds at a rapid rate. The COMEX will be increasingly isolated. Clients funds were redeemed to the tune of $9 billion in October, almost four times as much as they pulled in September, according to Barclay Hedge and TrimTabs Investment Research. Investors in October yanked more from hedge funds, setting a single month high over the last two years.The redemptions are the largest for the hedge fund industry since July 2009, when $17.8 billion was returned. The Barclay Hedge office put lipstick on the corrupt pig by commenting on how investors have lost patience with lackluster investor returns. To be sure, the average hedge fund is down by about 4% this year. The global hedge fund industry size has been reduced to $1.66 trillion, still sizeable. It is always interesting, if not amusing, to read the spin from the isolated corners. Hedge funds are seeing capital depart for the simple reason of moving away from crime centers. In the process the COMEX is being isolated. With increased isolation comes the easily recognized fraud. Look for some major stories soon about the raids to the GLD and SLV inventories by their custodians engaged in naked shorting. The Exchange Traded Fund fraud story is analyzed more fully in the December Hat Trick Letter. The divergence between physical and paper gold price is widening.
DYNAMICS OF PAPER VERSUS PHYSICAL BASISGrand divergence dynamics are becoming clear. Ann Barnhardt explained in detail how the COMEX will go away. It will not default, but rather fall into irrelevance. She laid it out in credible detailed form with numerous factors coming to play. The COMEX might still suffer the shame and spotlight of criminal prosecution. It will more certainly suffer from being ignored and shunned. The physical basis market will not respond to the declines in the paper futures market. The current dominant market will go away due to lost integrity and eroded trust. The consequences and implications of the recent major scandal and coverup are enormous, staggering, and sweeping. The changes from the MF Global failure and theft of private segregated accounts will come in time, perhaps accelerated by another similar event to slam the message home. The Syndicate has turned desperate, resorting to theft in the open daylight, which has resulted in direct consequences. Hundreds of COMEX clients waited in line for delivery of gold, and had their wallets stolen by JPMorgan. Their Gold & Silver set for delivery found its way into JPMorgan accounts at the COMEX. The details of the missing silver then reappearing silver is discussed in the December Hat Trick Letter. The slow mentally overlook this fact. The alert who point to fraud consider it a smoking gun. On its face, evidence mounts that JPMorgan simply converted 614k ounces of MF Global client silver into JPM licensed vaults. Big hats off to the Silver Doctors for excellent financial fraud forensic analysis. Do not expect prosecution over the crime, for MF Global, for JPMorgan, or for the accomplices in London, not even Jon Corzine. The Fascist Business Model in the Untied States does not permit prosecution. The bigger the crime, the more likely the perpetrator is in control of the government high offices, the financial ministry, the printing press, or the regulators.Ann Barnhardt explained how the COMEX will fade away into oblivion. Its final chapter will be marred by a grand price divergence, where the futures market price declines from shunned avoidance, while the cash physical market price holds steady then rises. Many including the Jackass had thought that a slew of delivery demands would force a drain in their gold & silver inventory, eventually leading to a slew of lawsuits, together to shut them down as a corrupt enterprise arena. The MF Global theft reveals the alternative route that seems more clear. The gold cartel led by JPMorgan and secretly by the USFed will not go quietly. They have resorted to theft of private accounts on the open stage. The money is not missing. That is the lie. It is held in JPMorgan accounts in London, where fraud laws are more relaxed. We have seen this Madoff movie before, but it will be shown on the silver screen again. The divergence between physical and paper gold price is widening.The backlash has begun and will gain strength. Barnhardt offered many cogent arguments with detail on how the COMEX will be ignored from distrust and suspicion of further thefts, as clients remove funds and close accounts. Here are her main points. They apply to Gold & Silver. She has the Barnhardt weblog:http://barnhardt.bizArbitrage is set to kick in. Players will buy at the cheaper corrupt paper market in COMEX and sell in the higher honest physical market, wherever brokers can match to make deals. (It is the same phenomenon that ripped the Euro sovereign bond market apart, as the German Govt Bond yields remained much lower than the Spanish and Greek.) They will take advantage of a strong basis, buy at the discount offered by COMEX, and sell into the cash spot physical market.A linchpin holds the market together. Keeping the futures markets tied to the underlying cash physical market is the fact that the futures contracts permit taking delivery. That delivery mechanism just broke as linchpin in full view. The futures market has lost viability and trustworthiness because of the MFG collapse and theft.The entire delivery mechanism has been corrupted and undermined. Taking delivery has meant a holding of physical metal bars is stored in a certified vault with your name attached. No longer are such holdings considered safe. Thefts occurred, and lawsuits have occurred to decided upon ownership of bars in dispute.The de-coupling process comes when arbitrageurs finally lose all confidence in market interaction dynamics, as the cash market will lose connection on price from the futures market. Players will not be willing to take the risk of having their money, positions, and physical metals stolen or confiscated.As players flee the futures market, the paper futures prices will decline. The cash physical market will hold steady. The divergence will come and be noticed, then be widely publicized. The players will realize that the physical market is the only remaining game to be played with honest rules in effect. The cash dealers will ignore the futures prices, no longer a valid price discovery, seeing that market demand for their physical inventory is robust, and maintain their prices steady. Later, they will even raise the physical prices. Then later still, the parabolic spikecomes for physical Gold & Silver.
THE GREAT SHUN BY MINERSAsset management funds are appealing to mining firms for direct metal supply. They are bypassing the COMEX in a new trend. It is a natural development, as miners seek a fair price and the funds seek a reliable supply. The COMEX is cut out of the process. The Sprott Funds have revealed how they sourced their precious metal from mining firms last year. The official exchanges are being cut off, a form of isolation as a result. The divergence between physical and paper gold price is widening.See the Ashanti story as typical. The COMEX is seeing reduced supply lines, reduced operations, more criminal implications, horrible publicity, and fewer clients. Criminal fraud does that, as lawsuits will follow like cold rain. The trend shapes up well for higher gold & silver prices. Mark Cutifani is CEO of AngloGold Ashanti, a $16 billion mining firm. He said, "Major [asset management fund] buyers are finding it is hard to get physical gold. People are coming directly to us [for large gold purchases,] people who want tonnes of physical gold, people with serious financial muscle, because they are finding it is very difficult to secure the volume of gold they want. That is something we have noticed over the last 18 months, and it has been increasing in the last six months. People are finding its hard to get physical gold." The clear message is that the COMEX has no spare available metal at all. Cutifani has good insights into the commodities and precious metals markets, and describes a fascination new trend regarding the global picture. He pointed out that major gold buyers are emerging from the Middle East and Asia. See the Bull Market Thinking article (CLICK HERE).
NEW MARKETS FLOWERINGNew gold centers are forming, where the safety is most assured. Hong kong and Dubai have emerged as reliable honest brokers, and will continue to provide valid safe haven. Switzerland, London, and other locations are fading fast. They are the corrupt centers where fascism has become prevalent, laced through the financial system.Takahiro Morita, the Japan director of the World Gold Council, reported that Japan's gold exports in the 10 months ended October totaled 95.6 metric tonnes, their highest level since 2008, when it registered at 95.5 metric tonnes. People who bought gold and jewelry in the 1980 and 1990 decades are selling back what they purchased, according to precious metals traders. Japan has turned into a big exporter. Contrast to the official side. Central bank purchases have risen by 114% over the previous quarter. Purchases by central banks could hit 450 metric tonnes this year, concludes the investment research at the council. The volume represents the highest level of central bank buying since at least 1970, perhaps the greatest in recent history. A veteran gold trader with actual experience in these locations pitched in to explain. He said, "These are not sales in Japan. They are exports, an important distinction. Many investors are busily relocating their precious metal bullion to Hong Kong and Dubai UAE. Look for Dubai to be the HK of the Middle East. The Chinese have made that decision, and it is being implemented with lightning speed." Most of the relocation from Japan shows up as exports, which require payments.October imports into China from Hong Kong rose 50% over September, and up 40-fold from last year. The more attractive fair price paid in Shanghai reached $50 above the corrupt controlled London price. The arbitrage has been very active. Chinese gold imports from Hong Kong hit a record. The Financial Times reported Chinese gold imports from Hong Kong hit a record high in October and astoundingly, they accounted for more than one quarter of the entire global demand. Data showed that China imported 85.7 tonnes of gold from Hong Kong in October, up 50% from the previous month and up more than 40 times from October of last year. It marks the fourth consecutive month that China's gold flows from Hong Kong have hit new highs. The article noted that the price arbitrage between London and Shanghai was favorable for Chinese imports during late September and early October, giving astute clever traders an edge. Gold on the Shanghai Exchange traded up to $50 per ounce above the main global market based in London, a record price difference. Purchases from China have fallen since October, as the recent strength in the USDollar has made gold more expensive. Also, considerable new strain has been felt inside China in recent weeks. Conclude that price arbitrage has begun to show itself across international boundaries. The divergence between physical and paper gold price is widening.
ONE GOLD EVENT, THE BIG SQUEEZENo gold chart will be shown in this article, out of disrespect deserved for the COMEX criminal activity. A story was recounted in recent days from my best source of solid reliable gold information. The aware gold community has overlooked a phenomenon that might be more profound in action here and now. A major squeeze is on that capitalizes on the artificially low COMEX price and the higher honest physical price. The Barnhardt effect can be seen, or at least recounted. A gold trader informed that some multi-$billion purchase Gold orders have been in the process of filling at or near the $1600 price per ounce. The price must remain near $1600 to complete the orders and permit them to clear. Call it Agent2000 who seeks the massive amount of Gold, one of the Good Guyz. The name fits since their goal is to force the Gold price back over $2000/oz after the sale transaction clears. Since so large, the orders take time to fill completely. The low-ball buy orders have been filling for over two weeks. At the same time, the Agent2000 buyer has enlisted the aid of numerous assistants to push down the paper Gold price by putting extreme pressure on some bad players, some nasty types from the usual list of suspects in the Western banking sector. These bankers are being squeezed out of their gold, as they contend with deep insolvency, reserves requirements, falling sovereign bond values, depositors exiting, and more. They are players in what has been widely called the Gold Cartel. The Jackass term has been applied in a wider sense, as they have been part of the Syndicate that reaches into the Wall Street banks, the defense contractors, news media, and big pharma.The other side of Agent2000 is where additional intrigue lies. He (they) have buyers lined up on the physical side some deals ready to close at $1900 per ounce. Later the price will push over the $2000 mark. The buyers are ready. One must infer that the buyers have a great deal of money ready to devote to the battle. Maybe some is piled up to escape the clutches of the cartel, removed from the system. Maybe some is piled up at a major new slush fund to do battle with the cartel at their own game. Maybe some is piled up and kept out of sight from greedy hands in government officials, like off-shore in the Caribbean or sequestered in the Persian Gulf. This story might be perplexing to many in the gold community since the Good Guyz are pushing down the Gold price in order to facilitate a gigantic order that will work toward crushing the cartel by draining their gold. Their gold cannot be drained without the completion of a great many orders. It is only natural to attempt to achieve the lowest possible price. If the gold cartel insists on pushing the price down, then they open the door for major volume sales at the artificially low and very much bargain price. It is happening, but the gold community does not enjoy the symptoms of the process.So a huge huge huge buyer of gold is busy, and a multi-$billion order is working through. The buyer demands a $1600 price, while on the other side of the table Agent2000 has a sale lined up for the same metal at a $1900 price on physical. The trade will take gold bullion from the Bad Boyz hands and put it into the Good Guyz hands. In the process, the COMEX supply lines will be drained more. This is consistent with mining firms removing supply lines to the COMEX. The Agent2000 buyer is pushing price down, squeezing some evil parties hard, crushing testicalia along the way. He (they) describe to the distressed seller at $1600 that pressures will continue until the deal is closed. The seller is in tremendous pain with open distress showing. So many assume the Bad Powerz are pushing down the Gold price. Not so!! This event and transaction displays how some pain comes in many isolated cases of Good Guyz pushing the Gold price down to empty the Bad Powerz vaults. My source would not reveal the identity of Agent2000 or the location of the squeeze. It seemed like London. The money is not exclusively coming from China. Word has it that Russia is also applying the pressure, with some Chinese teamwork. The Competing Currency War has a new major flank. The divergence between physical and paper gold price is widening
Bloomberg News; JP Morgan sacked Italy.
http://www.businessweek.com/news/2011-12-29/jpmorgan-s-swaps-occupying-cassino-prove-curse-like-world-war-ii.html
Dec. 28 (Bloomberg) -- World War II’s Battle for Cassino leveled the Italian town and its hilltop abbey. Now, the 33,000 residents are digging out from the rubble left by Wall Street.
Six decades after U.S.-led forces ousted the Nazis from Cassino, a new generation is grappling with the fallout from the debts of postwar rebuilding -- borrowings that grew because of a derivative that backfired. Soaring costs forced Cassino, 80 miles southeast of Rome, to settle an interest-rate swap with JPMorgan Chase & Co. in 2009, leaving the town unable to pay for daycare for 60 infants and services for the poor.
For Iris Volante, who chairs Cassino’s assembly finance committee, the bankers who share responsibility for peddling the derivatives should pay with their jobs. She, like Occupy Wall Street protesters around the world, is demanding an overhaul of the financial system to stop history from repeating itself.
“Heads rolling is the least we would expect,” Volante, a 57-year-old gynecologist who also has worked for the city for more than a decade, said in an interview in a Cassino cafe earlier this month. “When people’s attitude is to cheat others, new rules are needed to prevent it happening again.”
Cassino, whose government office overlooks a U.S. tank and other war relics in the town’s central square, plans to cut funding for its daycare center and may ask families to pay several hundred euros a month per child after running out of other cost-cutting measures, said Volante. The town already has reduced staff to about 250 employees from about 450 by not replacing those who left or retired, she said.
Milan Trial
While the New York-based bank led by Chief Executive Officer Jamie Dimon has no retail branches in Italy, it didn’t hesitate to sell complex swaps to municipalities over the past decade. In Milan, JPMorgan and its employees are on trial, along with Frankfurt-based Deutsche Bank AG, Germany’s Depfa Bank Plc and Switzerland’s UBS AG, for allegedly tricking the city into buying the contracts in 2005. The banks deny any wrongdoing.
Across Italy, cities faced with shrinking income and rising expenses bought swaps from JPMorgan, the largest U.S. bank by assets, and other lenders to cut short-term interest costs, putting them at risk of paying more in the long run. Cassino purchased a 22 million-euro ($28.7 million) contract from New York-based Bear Stearns Cos., acquired by JPMorgan in 2008, which switched interest payments on the town’s debt from a fixed rate to a variable one. The rate, a record low at the time the contract was signed in 2003, soared over subsequent years.
About 300 municipalities, from the toe of Italy’s boot to the Alps, were losing a total of 912 million euros on such derivatives as of March, Bank of Italy data show.
Brian Marchiony, a spokesman for JPMorgan in London, declined to comment.
Jefferson County
Local governments and regulators in Germany and the U.S. also have brought cases against banks, including JPMorgan, over derivatives contracts.
The German city of Pforzheim sued JPMorgan a year ago over 56 million euros of losses on interest-rate swaps. A hearing at the Frankfurt Regional Court is scheduled for Jan. 16. Marchiony declined to comment on the case.
In the U.S., JPMorgan was investigated by the Justice Department, the Securities and Exchange Commission and attorneys general in 25 states for its role in rigging the bids of investment contracts. The bank agreed to a $228 million settlement this year on charges that it conspired to overcharge cities at taxpayer expense, acknowledging responsibility for illegal, anticompetitive conduct by former employees.
In 2009, JPMorgan entered a $722 million accord with the SEC to end an investigation into its role in selling derivatives that helped push Jefferson County, Alabama, to declare the biggest municipal bankruptcy in U.S. history. The bank paid $75 million in fines and restitution and wrote off $647 million it was owed by the county.
Interest-Rate Swaps
The sales happened before Dimon took over as CEO in 2006. In September 2008, the bank said it would stop marketing interest-rate swaps to municipalities.
Banks globally sold $707.6 trillion of over-the-counter derivatives as of June 30, about 18 percent more than the $601 trillion at the end of 2010, according to data published by the Bank for International Settlements last month. Counterparties would have to pay $19.5 trillion to replace the contracts at market rates, the data show.
Interest-rate swaps account for more than three-quarters of the total, BIS data show. The Basel, Switzerland-based group doesn’t break out what percentage is bought by municipalities.
JPMorgan was the largest global dealer of interest-rate derivatives among U.S. banks in the third quarter, according to data from the Office of the Comptroller of the Currency. The bank had $75.4 trillion in notional derivatives within its JPMorgan Chase Bank NA subsidiary, of which 77 percent, or about $58.1 trillion, were interest-rate contracts, the data show.
‘Without Thinking’
Dimon, 55, led the charge in the U.S. against new banking regulation, criticizing Federal Reserve Chairman Ben S. Bernanke in June for saddling lenders with too many proposed rules. The rules, to be overseen by the Fed, are meant to avert future financial crises and banking abuses.
“Banks pitched deals without thinking about the well-being of others and created lots of financial problems for many towns,” said Carmelo Palombo, a former Cassino official who helped negotiate the settlement with JPMorgan. The agreement stopped the city from losing even more money, said Palombo, without providing details.
Secret Settlement
A 2001 Italian law said local authorities could buy swaps only if the transactions would improve municipal finances. Italy banned governments from signing new derivatives contracts in mid-2008, and the Senate finance committee approved recommendations in March 2010 that would prevent towns that aren’t provincial capitals and have fewer than 100,000 residents from using derivatives. Those rules are still pending.
Cassino sought to keep the settlement terms secret, citing a confidentiality clause in its agreement with JPMorgan. An administrative court in Latina, Italy, in September backed a case brought by Bloomberg News under Italian freedom of information law asking the town to make the swaps contract and settlement public.
The city plans to comply with the court order, said Enzo Salera, Cassino’s finance chief.
In Milan, Dimon’s bankers say they played by the book, adhering to rules that allow swaps dealers to withhold details, including how much they’re charging their customers. Hidden charges on derivatives contracts are what Milan prosecutor Alfredo Robledo says made them fraudulent.
Robledo says banks charged 101 million euros in fees in selling the derivatives that adjusted payments on the city’s 1.7 billion-euro bond offering in 2005 and in later restructurings.
Gross Margin
“Every time I sold a derivative to a public administration, even before getting to the details, the first question was always, ‘How does the bank make money?’” Antonia Creanza, an executive director at JPMorgan in London said in court Sept. 21 under questioning by her lawyer. “I would explain that we would retain a margin. Never has a legal adviser told me, ‘Look you need to detail the gross margin.’”
Banks seek to earn a gross margin when they agree to a swap with a client by skewing the terms to their advantage, Creanza, 42, a member of the bank’s interest-rate team at the time of the Milan deal, testified on Sept. 28.
The gross margin is “photographed” when the deal is struck, Creanza said. That value is then managed by a trader over the life of the contract, its magnitude varying as the derivative agreement changes in value, she said. The final profit for the bank can’t be known until maturity, said Creanza, who declined to elaborate further.
‘Asymmetry of Information’
The bank didn’t tell the city of Milan how much it was charging, and the municipality could have sought competing bids from other banks or independent advice, she said.
Creanza said she earned a bonus that year, a payment JPMorgan had guaranteed irrespective of her performance when the firm lured her from a competitor in December 2004. She didn’t say what the bonus was.
The city of Milan is seeking damages as part of the criminal trial.
“There’s an asymmetry of information between banks and local governments, which have stringent limits, not least in their spending,” Letizia Moratti, 62, Milan’s mayor from 2006 through May of this year, said in court last month. “There was a clear conflict that the banks didn’t highlight.”
Watershed Events
In Cassino, which lies on an ancient road connecting Naples and Rome, residents curse two watershed events: the five-month battle in 1944 that claimed more than 70,000 casualties and turned the town into a moonscape, and the day in 2003 that the government entered a seven-year swap with Bear Stearns.
The contract, which adjusted payments on about 22 million euros of debt, switched the city’s 4.7 percent fixed interest rate for a variable one, according to a June 2009 report by Italy’s financial police. The floating rate was based on the U.S.-dollar London interbank offered rate, or Libor, an “extremely risky” bet given that it was at a record low, police said in testimony to the Italian Senate that month.
Three-month U.S. dollar-Libor was at 1 percent in June 2003 and by January 2006 had surpassed 4.7 percent, according to data compiled by the British Bankers’ Association. The measure climbed as high as 5.7 percent in September 2007 as credit markets began to seize up, before declining to a record low of 0.25 percent by December 2009 after policy makers cut rates.
Depleted Funds
Cassino started losing money on the swap with the third half-yearly payment, paying about 2 million euros after Libor soared, according to police testimony. That depleted funds intended for sanitation and road works that the city raises from parking tickets and federal grants.
The transaction was presented as advantageous to the municipality at the time, said Volante, who worked as a city culture chief when Bear Stearns pitched the deal.
For Cassino, whose rundown postwar architecture bears little of the ancient charm of neighboring towns, the challenge now is to cut services without damaging the most vulnerable residents, said Danilo Grossi, the city’s education chief.
A new administration, which took over after May elections, will boost charges for the city-run nursery starting next year to help pay the 900,000 euros it costs to operate annually, said Grossi. Talks with the families have begun, he said. The town is still grappling with a shortfall that in 2010 forced out the previous administration and led the federal government to take financial control of the municipality.
Helping the Poor
Cassino’s pain has increased as Italy’s economy contracted in the third quarter, signaling that the country may have entered its fifth recession since 2001. Facing soaring borrowing costs amid investor concern that the nation may struggle to repay its debt, Prime Minister Mario Monti’s government is adopting austerity measures that may further weigh on growth.
While Cassino eventually extracted itself from the swap, the damage may be lasting, according to Giuseppe Lauro, a retired manager for Italy’s largest power company, Enel SpA, who now volunteers for church-sponsored charity Caritas Italiana. The shrinking local economy and cuts in city spending are creating a growing class of poor, he said.
On a foggy December morning, as local politicians were busy hosting Italy’s Chamber Speaker Gianfranco Fini to mark the 150th anniversary of the nation’s unification with songs in the town’s Teatro Manzoni, Lauro was looking after the poor, picking up the pieces of the city’s financial wreckage.
About half of those who sought assistance from Caritas in Cassino for the first time in 2009 were of working age, seeking help with paying bills and food and clothes, a 2009 study by the charity showed. More than half of those who relied on Caritas were below 40.
“We need more city funds,” Lauro, 66, said in an interview at the charity’s shelter, a few hundred yards from town hall. “The city’s demise means there are new poor and they’re younger. They need jobs.”
--With assistance from Lorenzo Totaro in Rome, Karin Matussek in Berlin, William Selway in Washington and Martin Braun and Michael J. Moore in New York. Editors: Robert Friedman, Frank Connelly
To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net; Vernon Silver in Rome at vtsilver@bloomberg.net
To contact the editors responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net; Edward Evans at eevans3@bloomberg.net
http://www.businessweek.com/news/2011-12-29/jpmorgan-s-swaps-occupying-cassino-prove-curse-like-world-war-ii.html
Dec. 28 (Bloomberg) -- World War II’s Battle for Cassino leveled the Italian town and its hilltop abbey. Now, the 33,000 residents are digging out from the rubble left by Wall Street.
Six decades after U.S.-led forces ousted the Nazis from Cassino, a new generation is grappling with the fallout from the debts of postwar rebuilding -- borrowings that grew because of a derivative that backfired. Soaring costs forced Cassino, 80 miles southeast of Rome, to settle an interest-rate swap with JPMorgan Chase & Co. in 2009, leaving the town unable to pay for daycare for 60 infants and services for the poor.
For Iris Volante, who chairs Cassino’s assembly finance committee, the bankers who share responsibility for peddling the derivatives should pay with their jobs. She, like Occupy Wall Street protesters around the world, is demanding an overhaul of the financial system to stop history from repeating itself.
“Heads rolling is the least we would expect,” Volante, a 57-year-old gynecologist who also has worked for the city for more than a decade, said in an interview in a Cassino cafe earlier this month. “When people’s attitude is to cheat others, new rules are needed to prevent it happening again.”
Cassino, whose government office overlooks a U.S. tank and other war relics in the town’s central square, plans to cut funding for its daycare center and may ask families to pay several hundred euros a month per child after running out of other cost-cutting measures, said Volante. The town already has reduced staff to about 250 employees from about 450 by not replacing those who left or retired, she said.
Milan Trial
While the New York-based bank led by Chief Executive Officer Jamie Dimon has no retail branches in Italy, it didn’t hesitate to sell complex swaps to municipalities over the past decade. In Milan, JPMorgan and its employees are on trial, along with Frankfurt-based Deutsche Bank AG, Germany’s Depfa Bank Plc and Switzerland’s UBS AG, for allegedly tricking the city into buying the contracts in 2005. The banks deny any wrongdoing.
Across Italy, cities faced with shrinking income and rising expenses bought swaps from JPMorgan, the largest U.S. bank by assets, and other lenders to cut short-term interest costs, putting them at risk of paying more in the long run. Cassino purchased a 22 million-euro ($28.7 million) contract from New York-based Bear Stearns Cos., acquired by JPMorgan in 2008, which switched interest payments on the town’s debt from a fixed rate to a variable one. The rate, a record low at the time the contract was signed in 2003, soared over subsequent years.
About 300 municipalities, from the toe of Italy’s boot to the Alps, were losing a total of 912 million euros on such derivatives as of March, Bank of Italy data show.
Brian Marchiony, a spokesman for JPMorgan in London, declined to comment.
Jefferson County
Local governments and regulators in Germany and the U.S. also have brought cases against banks, including JPMorgan, over derivatives contracts.
The German city of Pforzheim sued JPMorgan a year ago over 56 million euros of losses on interest-rate swaps. A hearing at the Frankfurt Regional Court is scheduled for Jan. 16. Marchiony declined to comment on the case.
In the U.S., JPMorgan was investigated by the Justice Department, the Securities and Exchange Commission and attorneys general in 25 states for its role in rigging the bids of investment contracts. The bank agreed to a $228 million settlement this year on charges that it conspired to overcharge cities at taxpayer expense, acknowledging responsibility for illegal, anticompetitive conduct by former employees.
In 2009, JPMorgan entered a $722 million accord with the SEC to end an investigation into its role in selling derivatives that helped push Jefferson County, Alabama, to declare the biggest municipal bankruptcy in U.S. history. The bank paid $75 million in fines and restitution and wrote off $647 million it was owed by the county.
Interest-Rate Swaps
The sales happened before Dimon took over as CEO in 2006. In September 2008, the bank said it would stop marketing interest-rate swaps to municipalities.
Banks globally sold $707.6 trillion of over-the-counter derivatives as of June 30, about 18 percent more than the $601 trillion at the end of 2010, according to data published by the Bank for International Settlements last month. Counterparties would have to pay $19.5 trillion to replace the contracts at market rates, the data show.
Interest-rate swaps account for more than three-quarters of the total, BIS data show. The Basel, Switzerland-based group doesn’t break out what percentage is bought by municipalities.
JPMorgan was the largest global dealer of interest-rate derivatives among U.S. banks in the third quarter, according to data from the Office of the Comptroller of the Currency. The bank had $75.4 trillion in notional derivatives within its JPMorgan Chase Bank NA subsidiary, of which 77 percent, or about $58.1 trillion, were interest-rate contracts, the data show.
‘Without Thinking’
Dimon, 55, led the charge in the U.S. against new banking regulation, criticizing Federal Reserve Chairman Ben S. Bernanke in June for saddling lenders with too many proposed rules. The rules, to be overseen by the Fed, are meant to avert future financial crises and banking abuses.
“Banks pitched deals without thinking about the well-being of others and created lots of financial problems for many towns,” said Carmelo Palombo, a former Cassino official who helped negotiate the settlement with JPMorgan. The agreement stopped the city from losing even more money, said Palombo, without providing details.
Secret Settlement
A 2001 Italian law said local authorities could buy swaps only if the transactions would improve municipal finances. Italy banned governments from signing new derivatives contracts in mid-2008, and the Senate finance committee approved recommendations in March 2010 that would prevent towns that aren’t provincial capitals and have fewer than 100,000 residents from using derivatives. Those rules are still pending.
Cassino sought to keep the settlement terms secret, citing a confidentiality clause in its agreement with JPMorgan. An administrative court in Latina, Italy, in September backed a case brought by Bloomberg News under Italian freedom of information law asking the town to make the swaps contract and settlement public.
The city plans to comply with the court order, said Enzo Salera, Cassino’s finance chief.
In Milan, Dimon’s bankers say they played by the book, adhering to rules that allow swaps dealers to withhold details, including how much they’re charging their customers. Hidden charges on derivatives contracts are what Milan prosecutor Alfredo Robledo says made them fraudulent.
Robledo says banks charged 101 million euros in fees in selling the derivatives that adjusted payments on the city’s 1.7 billion-euro bond offering in 2005 and in later restructurings.
Gross Margin
“Every time I sold a derivative to a public administration, even before getting to the details, the first question was always, ‘How does the bank make money?’” Antonia Creanza, an executive director at JPMorgan in London said in court Sept. 21 under questioning by her lawyer. “I would explain that we would retain a margin. Never has a legal adviser told me, ‘Look you need to detail the gross margin.’”
Banks seek to earn a gross margin when they agree to a swap with a client by skewing the terms to their advantage, Creanza, 42, a member of the bank’s interest-rate team at the time of the Milan deal, testified on Sept. 28.
The gross margin is “photographed” when the deal is struck, Creanza said. That value is then managed by a trader over the life of the contract, its magnitude varying as the derivative agreement changes in value, she said. The final profit for the bank can’t be known until maturity, said Creanza, who declined to elaborate further.
‘Asymmetry of Information’
The bank didn’t tell the city of Milan how much it was charging, and the municipality could have sought competing bids from other banks or independent advice, she said.
Creanza said she earned a bonus that year, a payment JPMorgan had guaranteed irrespective of her performance when the firm lured her from a competitor in December 2004. She didn’t say what the bonus was.
The city of Milan is seeking damages as part of the criminal trial.
“There’s an asymmetry of information between banks and local governments, which have stringent limits, not least in their spending,” Letizia Moratti, 62, Milan’s mayor from 2006 through May of this year, said in court last month. “There was a clear conflict that the banks didn’t highlight.”
Watershed Events
In Cassino, which lies on an ancient road connecting Naples and Rome, residents curse two watershed events: the five-month battle in 1944 that claimed more than 70,000 casualties and turned the town into a moonscape, and the day in 2003 that the government entered a seven-year swap with Bear Stearns.
The contract, which adjusted payments on about 22 million euros of debt, switched the city’s 4.7 percent fixed interest rate for a variable one, according to a June 2009 report by Italy’s financial police. The floating rate was based on the U.S.-dollar London interbank offered rate, or Libor, an “extremely risky” bet given that it was at a record low, police said in testimony to the Italian Senate that month.
Three-month U.S. dollar-Libor was at 1 percent in June 2003 and by January 2006 had surpassed 4.7 percent, according to data compiled by the British Bankers’ Association. The measure climbed as high as 5.7 percent in September 2007 as credit markets began to seize up, before declining to a record low of 0.25 percent by December 2009 after policy makers cut rates.
Depleted Funds
Cassino started losing money on the swap with the third half-yearly payment, paying about 2 million euros after Libor soared, according to police testimony. That depleted funds intended for sanitation and road works that the city raises from parking tickets and federal grants.
The transaction was presented as advantageous to the municipality at the time, said Volante, who worked as a city culture chief when Bear Stearns pitched the deal.
For Cassino, whose rundown postwar architecture bears little of the ancient charm of neighboring towns, the challenge now is to cut services without damaging the most vulnerable residents, said Danilo Grossi, the city’s education chief.
A new administration, which took over after May elections, will boost charges for the city-run nursery starting next year to help pay the 900,000 euros it costs to operate annually, said Grossi. Talks with the families have begun, he said. The town is still grappling with a shortfall that in 2010 forced out the previous administration and led the federal government to take financial control of the municipality.
Helping the Poor
Cassino’s pain has increased as Italy’s economy contracted in the third quarter, signaling that the country may have entered its fifth recession since 2001. Facing soaring borrowing costs amid investor concern that the nation may struggle to repay its debt, Prime Minister Mario Monti’s government is adopting austerity measures that may further weigh on growth.
While Cassino eventually extracted itself from the swap, the damage may be lasting, according to Giuseppe Lauro, a retired manager for Italy’s largest power company, Enel SpA, who now volunteers for church-sponsored charity Caritas Italiana. The shrinking local economy and cuts in city spending are creating a growing class of poor, he said.
On a foggy December morning, as local politicians were busy hosting Italy’s Chamber Speaker Gianfranco Fini to mark the 150th anniversary of the nation’s unification with songs in the town’s Teatro Manzoni, Lauro was looking after the poor, picking up the pieces of the city’s financial wreckage.
About half of those who sought assistance from Caritas in Cassino for the first time in 2009 were of working age, seeking help with paying bills and food and clothes, a 2009 study by the charity showed. More than half of those who relied on Caritas were below 40.
“We need more city funds,” Lauro, 66, said in an interview at the charity’s shelter, a few hundred yards from town hall. “The city’s demise means there are new poor and they’re younger. They need jobs.”
--With assistance from Lorenzo Totaro in Rome, Karin Matussek in Berlin, William Selway in Washington and Martin Braun and Michael J. Moore in New York. Editors: Robert Friedman, Frank Connelly
To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net; Vernon Silver in Rome at vtsilver@bloomberg.net
To contact the editors responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net; Edward Evans at eevans3@bloomberg.net
fenderburn84
Well-Known Member
Damn coals do your hands hurt? Scary stuff though definitely scary.
Ha ha, its copy and paste. Just trying to get the real news that the lamstream media is ignoring out to as many as possible.
fenderburn84
Well-Known Member
I can dig it. How do you propose this situation is rectified? What real steps in your opinion can save Greece and the rest of us for that matter?
ZeeBuds
Member
i'm not like crazy about politics, but i have heard of a lot happening in greece..
i've heard from a few sources that the euro is one of the biggest problems that all the countries that are indebt are faced with
since they all have the same currency, they can't devalue it within their own country when their economy struggles(not sure how it works exactly but i think the jist of it is that people would be required to purchase within their own economy and therefore strengthen it...i think..)
i'm pretty sure germany is gunna take over the economy in europe if this doesn't get corrected in europe
i've heard from a few sources that the euro is one of the biggest problems that all the countries that are indebt are faced with
since they all have the same currency, they can't devalue it within their own country when their economy struggles(not sure how it works exactly but i think the jist of it is that people would be required to purchase within their own economy and therefore strengthen it...i think..)
i'm pretty sure germany is gunna take over the economy in europe if this doesn't get corrected in europe
Return the power of monetary creation back to the people. NAtional usury is immoral, and unsustainable. It always ends badly. Throughout histroy fiat currencies back by monopolistic monetary creation policies always have ended in complete and total economic collapse or a totalarian facist/millitary take over or a combination of both. We are no different, we are not special.
Problem is, the people that own the monoply on monetary creation arent going to give up that power without a fight, they own the worlds millitaries. Just loolk at Japan. They are on the edge of collapse, GDP to debt ratio of 990%. Totally insolvent. Now they are being forced to take a loan of many hundreds of billions of dollars to buy a fleet of JSF stealth fighters. Stealth fighters they don't need, can not afford and the people do not want.
We owe these people trillions, if the people rise up and demand their financial freedom back (as garunteed to them in the constitution) our owners will come for their assets, just like they would come for your house if you owed them trillions.
This war, the people versus usury, has been fought for thousands of years. Throughout history there has been tiny victories of freedom. America WAS the last example of these victories, but that dream ended about a hundred years ago. We either go through the pain now and try to get it over with or we continue to kick the can down the road, allowing our owners to continue to manipulate the laws and policies and minds of the people and befor you know it its Germany 1933.
They Thought They Were Free; The Germans 1933-1945 http://www.press.uchicago.edu/Misc/Chicago/511928.html
Learn about histroy and you can predict the future.
[youtube]A7IvLEpjPmc[/youtube]
fenderburn84
Well-Known Member
Right on but as you said they own everything, how does one or a group take it back?
doc111
Well-Known Member
I'm not a financial guy (I make no apoloigies for it either. lol!), but if people stopped using credit wouldn't that help the situation? If the people aren't indebted to big banks (or whomever), or aren't AS indebted, doesn't that take a big chunk of their power away from them? I am not into redistribution of wealth or class warfare, but if I were some uber-rich elite, I think I would start getting nervous.
Yes that all helps. Pulling your money out of the big banks and putting it into much more stable and safer credit unions helps as well. The problem with the credit card thing is that everyone is poor for the most part. Wages have been stagnant for about 25 years while inflation measured through the CPI has gone up about 9 percent year after year after year. People are compensating with credit. No one likes to downgrade. Besides if your firdge breaks you need it fixed, your babies formula is in there. It doesnt matter if it costs a months wages, you need it fixed, this is where the credit card comes in.I'm not a financial guy (I make no apoloigies for it either. lol!), but if people stopped using credit wouldn't that help the situation? If the people aren't indebted to big banks (or whomever), or aren't AS indebted, doesn't that take a big chunk of their power away from them? I am not into redistribution of wealth or class warfare, but if I were some uber-rich elite, I think I would start getting nervous.
Remember the saying 'we need to put money in consumers pockets"? What that meant was we need to kick the can down the road by providing all the peope we stole from and made poor with some money to slow down the rate of water this sinking ship was taking on. How about jobs that pay living wages? No one ever said that. They just said "a house for all through credit".
At the end of the day though our government still has to buy our money off the same people we do. Every dollar in your pocket is indebted befor it is even put into circulation. Theres a good explaination of how our government buys its money, and who steals all the fees to allow it to be done (Goldman Sachs) in the QE Explained video.
[youtube]PTUY16CkS-k[/youtube]
"because the printing money is the last refuge of failed economic empires and bannana republics and the fed doesnt want to admit this is their only idea" - priceless.
SapereAude
Member
We are all LEAGLE SALVES NOW. Dont bilive me? Check out Admiralty law and common law.
Ron Paul is the only viable solution at this point in time.
www.noagendashow.com
much love
Ron Paul is the only viable solution at this point in time.
www.noagendashow.com
much love
fenderburn84
Well-Known Member
Oh lord here comes the straw man buissness. Sovereignty is bs it has never actually worked has it?
[h=1]Greece’s Extortion Racket Maxed Out 
[/h]
Wolf Richter www.testosteronepit.com
Just how bad is the real economy in Greece after five years of recession, countless strikes, and 17.7% unemployment? Registrations of new and used vehicles plunged 30% in 2011, after having already plunged 37% in 2010. Only 107,737 vehicles were registered, the lowest level in over 20 years.
And yet, more cuts are coming. Mid January, inspectors from the Troika (EU Commission, IMF, and ECB) will once again head to Greece to inspect its books and come up with a budget deficit number for 2011—no one trusts Greek numbers anymore. And they will once again leave angry. Indications are that the deficit ranged from 9.5% to 10.7% of GDP, significantly higher than the already revised Troika-set limit of 9% that Greece had vowed to abide by.
So, new “structural reforms,” as they’re called, will have to be implemented, including cutting everything in sight ... auxiliary pensions, public sector salaries, social and welfare benefits, healthcare, defense, tax exemptions. Agencies will have to be closed and tens of thousands of civil servants will finally have to be laid off.
All to get the next bailout installment. Of the first bailout package of €110 billion, €73 billion have already been paid. The sixth installment, €5 billion, has been moved from December to March due to lack of progress, and the seventh installment, €10 billion, has been moved from March to June.
“If our mission in mid-January reaches the conclusion that there are delays, then we should revise the March installment,” announced Olivier Bailly, spokesperson for the EU Commission. Piling pressure on Greece is the name of the game.
Then there is the second bailout package of €130 billion put together last October. €89 billion are to be released in February. It will enable Greece to pay for €17.5 billion in maturing bonds due in March. But the Troika imposed conditions.
First, Greece needs to force the financial institutions that hold $206 billion of its bonds to accept a “voluntary” 50% haircut as demanded during the Eurozone summit in October. Negotiations have been dragging. But now word is that bondholders buckled under the threat of losing their entire principle if Greece tumbles into a disorderly default. And a deal has emerged: a 50% haircut with a hit to net present value not to exceed 60%. Their old bonds would be swapped for new bonds with a coupon of 5%. They would have the same status as loans Greece receives from the Eurozone and the IMF.
Second, Greece needs to implement "structural reforms" in the private sector to make it competitive. Among the targets: cutting salaries, reducing the minimum wage of €751 (in France it’s €1,39
, scrapping the still existing 13th and 14th monthly salary, and eliminating automatic pay raises.
“So we can get the next loan installment,” Papademos explained at a meeting with the major labor unions. Employers and unions would have to come to an agreement this month to meet the Troika’s demands. And then the nuclear option: “Without an agreement with the troika and the ensuing funding, Greece faces the threat of a disorderly default in March.”
Disorderly default. Greek politicians muttered threats before, and each time, money materialized. But last October, the Troika said no. For how Greece solved that situation, read... Greece 'Finds' Treasure, Stays Solvent For Another Month.
But cutting wages didn’t sit well with the unions. At the forefront: Giannis Panagopoulos, president of the GSEE, the highest confederation of private-sector unions in Greece. His resistance was vehement. Salaries, he said, were not the reason for Greece's lack of competitiveness. Instead, companies should secure their jobs. Other union officials spoke up too. So, there won’t be any progress in implementing “structural changes.”
Hence, the Troika inspectors will once again leave angry. But Greek politicians have become expert at their extortion game—even with bond holders. They found that the Troika, after some huffing an puffing, will keep Greece afloat another month. And if the people with the money lose their fear of that threatened end of the world, accept their losses, and move on without Greece?
"True Hell," is how Giorgos Provopoulos, Governor of the Bank of Greece, described the possibility of life without the euro.
Even Beatrice Weder di Mauro, member of Germany’s Council of Economic Experts confirmed that a breakup of the euro in 2012 “cannot be excluded." For more on this, and why people hang on to leftover Deutschmarks, read.... Missing: 13.3 Billion Deutschmarks.
[/h] Wolf Richter www.testosteronepit.com
Just how bad is the real economy in Greece after five years of recession, countless strikes, and 17.7% unemployment? Registrations of new and used vehicles plunged 30% in 2011, after having already plunged 37% in 2010. Only 107,737 vehicles were registered, the lowest level in over 20 years.
And yet, more cuts are coming. Mid January, inspectors from the Troika (EU Commission, IMF, and ECB) will once again head to Greece to inspect its books and come up with a budget deficit number for 2011—no one trusts Greek numbers anymore. And they will once again leave angry. Indications are that the deficit ranged from 9.5% to 10.7% of GDP, significantly higher than the already revised Troika-set limit of 9% that Greece had vowed to abide by.
So, new “structural reforms,” as they’re called, will have to be implemented, including cutting everything in sight ... auxiliary pensions, public sector salaries, social and welfare benefits, healthcare, defense, tax exemptions. Agencies will have to be closed and tens of thousands of civil servants will finally have to be laid off.
All to get the next bailout installment. Of the first bailout package of €110 billion, €73 billion have already been paid. The sixth installment, €5 billion, has been moved from December to March due to lack of progress, and the seventh installment, €10 billion, has been moved from March to June.
“If our mission in mid-January reaches the conclusion that there are delays, then we should revise the March installment,” announced Olivier Bailly, spokesperson for the EU Commission. Piling pressure on Greece is the name of the game.
Then there is the second bailout package of €130 billion put together last October. €89 billion are to be released in February. It will enable Greece to pay for €17.5 billion in maturing bonds due in March. But the Troika imposed conditions.
First, Greece needs to force the financial institutions that hold $206 billion of its bonds to accept a “voluntary” 50% haircut as demanded during the Eurozone summit in October. Negotiations have been dragging. But now word is that bondholders buckled under the threat of losing their entire principle if Greece tumbles into a disorderly default. And a deal has emerged: a 50% haircut with a hit to net present value not to exceed 60%. Their old bonds would be swapped for new bonds with a coupon of 5%. They would have the same status as loans Greece receives from the Eurozone and the IMF.
Second, Greece needs to implement "structural reforms" in the private sector to make it competitive. Among the targets: cutting salaries, reducing the minimum wage of €751 (in France it’s €1,39
, scrapping the still existing 13th and 14th monthly salary, and eliminating automatic pay raises.“So we can get the next loan installment,” Papademos explained at a meeting with the major labor unions. Employers and unions would have to come to an agreement this month to meet the Troika’s demands. And then the nuclear option: “Without an agreement with the troika and the ensuing funding, Greece faces the threat of a disorderly default in March.”
Disorderly default. Greek politicians muttered threats before, and each time, money materialized. But last October, the Troika said no. For how Greece solved that situation, read... Greece 'Finds' Treasure, Stays Solvent For Another Month.
But cutting wages didn’t sit well with the unions. At the forefront: Giannis Panagopoulos, president of the GSEE, the highest confederation of private-sector unions in Greece. His resistance was vehement. Salaries, he said, were not the reason for Greece's lack of competitiveness. Instead, companies should secure their jobs. Other union officials spoke up too. So, there won’t be any progress in implementing “structural changes.”
Hence, the Troika inspectors will once again leave angry. But Greek politicians have become expert at their extortion game—even with bond holders. They found that the Troika, after some huffing an puffing, will keep Greece afloat another month. And if the people with the money lose their fear of that threatened end of the world, accept their losses, and move on without Greece?
"True Hell," is how Giorgos Provopoulos, Governor of the Bank of Greece, described the possibility of life without the euro.
Even Beatrice Weder di Mauro, member of Germany’s Council of Economic Experts confirmed that a breakup of the euro in 2012 “cannot be excluded." For more on this, and why people hang on to leftover Deutschmarks, read.... Missing: 13.3 Billion Deutschmarks.
HAHAHAHAHAHAHAHA I laughed my ass off at this one, Jamie Dimon still loves Blythe Masters, LMAO.
NLXSK1
Well-Known Member
Very interesting video.
But who put Greece into the position where it is now?
The politicians.... They funded massive welfare programs on credit and ran up their debt. Now the politicians have to sell the country to the Germans to pay back their overspending.
Who ran up the debt? Who wrecked the Greek economy? Who is offering no solutions to the problem? Oh yeah, the politicians.
Just like in America.
But who put Greece into the position where it is now?
The politicians.... They funded massive welfare programs on credit and ran up their debt. Now the politicians have to sell the country to the Germans to pay back their overspending.
Who ran up the debt? Who wrecked the Greek economy? Who is offering no solutions to the problem? Oh yeah, the politicians.
Just like in America.
Yes and no. The politicians at the end of the day are puppets of the banks. The ECB through the Euro is a parasite in the same way the Fed through the USD is. Goldman Sachs and other banks played a very direct role in sacking Greece. Greece (and the rest of the EU) practices the same perpetual debt scam system as us. If the government spends one penny, it is doomed, it's just a matter of GDP, resources, taxable population, government spending etc. that dictates when.
As long as nothing changes we will be in the same situation as Greece sooner than you think. This is why it is important to pay attention to what is happening over there, why it is happeneing and who is doing what. We are the top of the pyramid, which means we fall last, but it also means we have the furthest to fall.