Saturday, May 18, 2013
The value of gold is being supressed by at lease 14 colluding traders of paper gold. Paul Craig Roberts: "This was an attack ordered by the Federal Reserve, which is why there is no investigation of the illegality." "[This] tells us that the Federal Reserve sees no way out of printing money in order to support the federal deficit and the insolvent banks. If the dollar came under attack and the Federal Reserve had to stop printing dollars, interest rates would rise. The bond and stock markets would collapse. The dollar would be abandoned as reserve currency. Washington would no longer be able to pay its bills and would lose its hegemony." "The dollar’s demise awaits the world’s decision how to get out of it. The Federal Reserve can print dollars with which to keep the bond and stock markets high, but the Federal Reserve cannot print foreign currencies with which to keep the dollar afloat."
Washington Signals Dollar Deep Concerns — Paul Craig Roberts
May 18, 2013 | Original Here Go here to sign up to receive email notice of this news letter
Over the past month there has been a statistically improbable concurrence of events that can only be explained as a conspiracy to protect the dollar from the Federal Reserve’s policy of Quantitative Easing (QE).
Quantitative Easing is the term given to the Federal Reserve’s policy of printing 1,000 billion new dollars annually in order to finance the US budget deficit by purchasing US Treasury bonds and to keep the prices high of debt-related derivatives on the “banks too big to fail” (BTBF) balance sheets by purchasing mortgage-backed derivatives. Without QE, interest rates would be much higher, and values on the banks’ balance sheets would be much lower.
Quantitative Easing has been underway since December 2008. During these 54 months, the Federal Reserve has created several trillion new dollars with which the Fed has monetized the same amount of debt.
One result of this policy is that most real US interest rates are negative. Another result is that the supply of dollars has outstripped the world’s demand for dollars.
These two results are the reason that the Federal Reserve’s policy of printing money with which to purchase Treasury bonds and mortgage backed derivatives threatens the dollar’s exchange value and, thus, the dollar’s role as world reserve currency.
To be the world reserve currency means that the dollar can be used to pay any and every country’s oil bills and trade deficit. The dollar is the medium of international payment.
This is very helpful to the US and is the main source of US power. Because the dollar is the reserve currency, the US can cover its import costs and pay for its cost of operation simply by creating its own paper money.
If the dollar were not the reserve currency, Washington would not be able to finance its wars or continue to run large trade and budget deficits. Therefore, protecting the exchange value of the dollar is Washington’s prime concern if it is to remain a superpower.
The threats to the dollar are alternative monies–currencies that are not being created in enormous quantities, gold and silver, and Bitcoins, a digital currency.
The Bitcoin threat was eliminated on May 17 when the Gestapo Department of Homeland Security seized Bitcoin’s accounts. The excuse was that Bitcoin had failed to register in keeping with the US Treasury’s anti-money laundering requirements.
Washington has stifled the threat from other currencies by convincing other large currencies to out-print the dollar. Japan has complied, and the European Central Bank, though somewhat constrained by Germany, has entered the printing mode in order to bail out the private banks endangered by the “sovereign debt crisis.”
That leaves gold and silver. The enormous increase in the prices of gold and silver over the last decade convinced Washington that there are a number of miscreants who do not trust the dollar and whose numbers must not be permitted to increase.
The price of gold rose from $272 an ounce in December 2000 to $1,917.50 on August 23, 2011. The financial gangsters who own and run America panicked. With the price of the dollar collapsing in relation to historical real money, how could the dollar’s exchange rate to other currencies be valid? If the dollar’s exchange value came under attack, the Federal Reserve would have to stop printing and would lose control over interest rates.
The bond and stock market bubbles would pop, and the interest payments on the federal debt would explode, leaving Washington even more indebted and unable to finance its wars, police state, and bankster bailouts.
Something had to be done about the rising price of gold and silver.
There are two bullion markets. One is a paper market in New York, Comex, where paper claims to gold are traded. The other is the physical market where personal possession is taken of the metal–coin shops, bullion dealers, jewelry stores.
The way the banksters have it set up, the price of bullion is not set in the markets in which people actually take possession of the metals. The price is set in the paper market where speculators gamble.
This bifurcated market gave the Federal Reserve the ability to protect the dollar from its printing press.
On Friday, April 12, 2013, short sales of gold hit the New York market in an amount estimated to have been somewhere between 124 and 400 tons of gold. This enormous and unprecedented sale implies an illegal conspiracy of sellers intent on rigging the market or action by the Federal Reserve through its agents, the BTBF that are the bullion banks.
The enormous sales of naked shorts drove down the gold price, triggering stop-loss orders and margin calls. The attack continued on Monday, April 15, and has continued since.
Before going further, note that there are position limits imposed on the number of contracts that traders can sell at one time. The 124 tons figure would have required 14 traders with no open interest on the exchange to sell all together in the same few minutes 40,000 futures contracts. The likelihood of so many traders deciding to short at the same moment at the maximum permitted is not believable. This was an attack ordered by the Federal Reserve, which is why there is no investigation of the illegality.
Note also that no seller that wanted out of a position would give himself a low price by dumping an enormous amount all at once unless the goal was not profit but to smash the bullion price.
Since the April 12-15 attack on the gold price, subsequent attacks have occurred at 2pm Hong Kong time and 2 am New York time. At this time activity is light, waiting on London to begin operating. As William S.Kaye has observed, no entity concerned about profits would choose this time to sell 20,000 to 30,000 futures contracts, but this is what has been happening.
Who can be unconcerned with losing money in this way? Only a central bank that can print it.
Now we come to the physical market where people take possession of bullion instead of betting on paper instruments. Look at this chart from ZeroHedge. http://www.zerohedge.com/news/2013-05-16/gold-demand-one-chart-physical-vs-etf The demand for physical possession is high, despite the assault on gold that began in 2011, but as the price is set in the non-real paper market, orchestrated short sales, as in the current quarter of 2013, can drive down the price regardless of the fact that the actual demand for gold and silver cannot be met.
While the corrupt Western financial press urges people to abandon bullion, everyone is trying to purchase more, and the premiums above the spot price have risen. Around the world there is a shortage of gold and silver in the forms, such as one-ounce coins and ten-ounce bars, that individuals demand.
That the decline in gold and silver prices is an orchestration is apparent from the fact that the demand for bullion in the physical market has increased while naked short sales in the paper market imply a flight from bullion.
What does this illegal manipulation of markets by the Federal Reserve tell us? It tells us that the Federal Reserve sees no way out of printing money in order to support the federal deficit and the insolvent banks. If the dollar came under attack and the Federal Reserve had to stop printing dollars, interest rates would rise. The bond and stock markets would collapse. The dollar would be abandoned as reserve currency. Washington would no longer be able to pay its bills and would lose its hegemony. The world of hubristic Washington would collapse.
It remains to be seen whether Washington can prevail over the world demand for gold and silver. Can the dollar remain supreme when offshoring has deprived the US of the ability to cover its imports with exports? Can the dollar remain supreme when the Federal reserve is creating 1,000 billion new ones each year, while the BRICS, China and Japan, China and Australia, and China and Russia are making deals to settle their trade balances without the use of the dollar?
If the consumption-based US economy deprived of consumer income by jobs offshoring takes a further dip down in the third or fourth quarter–a downturn that cannot be masked by phony statistical releases–the federal deficit will rise. What will be the effect on the dollar if the Federal Reserve has to increase its Quantitative Easing?
A perfect storm has been prepared for America. Real interest rates are negative, but debt and money are being created hand over foot. The dollar’s demise awaits the world’s decision how to get out of it. The Federal Reserve can print dollars with which to keep the bond and stock markets high, but the Federal Reserve cannot print foreign currencies with which to keep the dollar afloat.
When the dollar goes, Washington’s power goes, which is why the bullion market is rigged. Protect the power. That is the agenda. Is it another Washington over-reach?
Wednesday, May 15, 2013
If you think your medical insurance is more than you can afford now, read this to find out what the greedy corporations have in store for you next. Only in America!
Welcome to the Brave New World of Corporatized Medicine: Just Hope You Don't Get Sick!
"Business freedom" in America increasingly means the God-given right to exploit the vulnerability of the public.
May 13, 2013 | One of the most effective scare techniques employed to preserve our grotesquely inefficient, overpriced health care system has been to invoke the red peril of “socialized medicine”. Never mind that foreigners in advanced economies fail to recognize the caricatures scaremongers supply, or that Americans who need emergency care while overseas are almost without exception impressed with the caliber of care and astonished by the low (sometimes no) cost to them. After all, Americans live in the best of all possible worlds, and consumer and business freedom are always better.
In fact, business freedom here increasingly means the God-given right to exploit the vulnerability of the public. The example slouching into view is more corporate control over the practice of medicine. And based on the previews, it will make the horrors falsely attributed to socialized medicine look pale.
Two accounts last week bring the issue home. The first came in the Health Care Renewal blog (hat tip Lysa). It’s a reminder of how the current institutional efforts to regiment doctors undermine the caliber of medical care. It has become distressingly common for HMOs and other medical enterprises to have business-school trained managers putting factory-style production parameters on doctor visits. Outside of foreclosure mills, it’s hard to find similar approaches in other professions.
The post describes how a pediatrician, Pauline, who has developed a reputation for treating chronic conditions is at loggerheads with her for-profit practice. The suits don’t like her patient mix. She gets too many tough cases, when they’d rather have basically healthy kids who are there for a cold or ear infection. Mind you, this is only partly a money issue. These visits can be “up coded” so as to get larger insurance/patient payments, but she gets a higher level of patients in less-generous state insurance programs. But some of the pushback is that her practice is perceived as disruptive, since she uses what is perceived as too much of her and staff time, separate and apart from the economics. She’s constantly breaking management’s precious guidelines. One of her turf struggles:
She had set up a visit to see a new medically complex patient and had blocked off 40 minutes, the amount of time she felt she needed to do a good job. The child had a complex genetic disorder, cerebral palsy, and heart, lung, and kidney problems. Both the cardiologist and the nephrologist had called asking her to take this patient. She agreed. After she had scheduled the visit, a manager called her and told her that she was being allowed only 15 minutes to see that patient. After some fruitless discussion with him, Pauline finally said, “Okay, I guess that means that you’ll be seeing the patient instead of me, right?” The shocked voice at the other end of the phone line replied, “What do you mean? I don’t know how to take care of patients.” “That’s exactly my point,” Pauline put in.And to add insult to injury, how long did this discussion take? All those minutes the doctor spent fighting with a petty bureaucrat come at the expense of patient care.
Pauline explained that this manager assigned to her office is not even a college graduate. Physicians cannot access the schedule electronically and have no control over scheduling. These functions are controlled by the office manager and (amazingly) by some of the medical assistants who have received some “leadership” training. These medical assistants are even allowed to evaluate the clinical competency and skills of the physicians.
As an aside, it’s hard to stress enough that this sort of demoralizing micromanagement and unwillingness to listen to and learn from workers, is a widespread shortcoming of management American-style. And it has weirdly been airbrushed out of the media. When I was a kid in business school, US manufacturers were having their clocks cleaned by Germans and the Japanese. There was a good deal of critical self examination back then. One source of foreign ascendancy was that they had newer factories, so you couldn’t really blame American management for that one. But the second was that it was widely acknowledged that US managers were generally poor at dealing with labor. And this wasn’t “labor” in the union sense, but at having productive relationships with factory workers (note that there has been massive revisionist history since then. When I was in Bschool, none of my classmates, nearly half of whom had worked in major manufacturing companies, had bad things to say about unions.) Now you’ll often see the decline of American manufacturing attributed to unions in an “everybody knows that” tone.
So let me add a further nugget about Pauline’s background. In one of her previous jobs, she was made the manager of a pediatric outpatient center within a county hospital caring for a largely indigent population. This center had been running in the red for a good while. Pauline took over and within 28 months she’d streamlined the place and had them running well in the black, while still administering a quality of care that Pauline and her colleagues could be proud of. In short, Pauline could probably tell the managers of her current practice a thing or two about how to optimize patient scheduling without compromising care or cost —if they’d listen.As bad as that is, most patients are unware of how much their care has been fitted to a Procrustean bed. The deliberate degradation in the name of profits is going to become more obvious, at least if the health care industry has its way.
I strongly encourage you to read this post from Whole Health Chicago (hat tip Lambert) in full. It shows how the future of American medicine is to fire the ones who are unhealthy. No, I am not making that up. The writer, Dr. David Edelberg, describes a recent presentation by a large insurance company. They’ve apparently been hosting similar sessions with physicians in the Chicago area in large medical practices. Here are the key bits (emphasis original):
The speaker at these evenings is always a physician employed by the insurance company. His/her title is medical director (I begin to think there must be dozens and dozens on their payroll) and he always begins by reassuring the audience that he was in clinical practice himself so he understands something of what physicians–especially primary care physicians–are facing. I view this physician more as a “Judas steer,” the animal that leads an innocent but doomed herd of cattle through the slaughterhouse corridors to the killing floor.And why do the powers that be regard this as desirable? Although the article does not stress this point, doctors have an established revenue stream. So the acquirers buy them out and impose discipline on those artistic, freewheeling doctors. The “practice style,” which used to mean the independence that doctors once enjoyed, is now an Orwellianism and includes hewing to corporate guidelines as to how to operate.
• The health industry hopes that individual medical practices and small medical groups will ultimately disappear from the landscape by being financially absorbed into larger groups owned by hospital systems.
And here’s what to expect:
Physicians are expected to spend a limited amount of time with each patient, and are encouraged to see as many patients as possible during a workday. The insurance companies, sometimes with the token cooperation of a few physician-employees, create vast books of patient-care guidelines to which they believe their physicians must be “accountable” (remember this word, it will crop up again). These guidelines might mean documented Pap smear and mammogram frequency, weight management and exercise, colonoscopies for patients over 50, and getting that evil LDL (bad cholesterol) below 99 by any means possible…Now of course, you might say, “Well, in fairness, medicine is too much of a cottage industry. Look at how many doctors give unnecessary annual EKGs to patients in low risk groups. How else are we going to get to evidence-based medicine?” The problem is that what we as patients will get isn’t driven by best outcomes, it’s driven by profits. Edelberg explains:
If the chart audit system discovers that a physician, for whatever reason, is an “outlier”–that she’s either not following the guidelines exactly or not getting the results anticipated for her patient population—she’ll be financially penalized. A quick example of what might occur: if your LDL is 115, you may be on the receiving end of a statin sales pitch from your doctor, not because bringing it down to 99 will improve your longevity, but because your refusal to do so will impact her financial bottom line.
…the subtext of “standardized” always includes the unspoken “spend less money on the patient.” Thus, a doctor might be financially penalized for recommending nutritional counseling to lower cholesterol (“counseling is expensive”) instead of writing a generic statin drug (cheap). Or recommending psychotherapy (“therapy is very expensive”) instead of generic Prozac (cheaper than M&M’s). Or referring patients for massage, acupuncture, or even chiropractic (“expensive, expensive, expensive!”) instead of pushing an over-the-counter antiinflammatory (free to the insurance company, as it’s OTC).And I shudder to think what becomes of patients who don’t hew to standard templates: the person who had a high body mass but not due to dangerous abdominal fat (which is what creates the health risk) who is pushed to take the latest, greatest diet drug. What about people who don’t buy into the religion of getting your LDL down to below 100 (one reader argued that while it may lower your risk of heart disease, it increases your all-factor death risk by reducing your ability to fight MRSA)? Will they face penalties if they fail to comply?
No, you just will find it nearly impossible to get a doctor to take you:
• Let me close with a best-as-I-recall quote from an insurance company medical director. “We can no longer afford to pay for health care under the PPO model. Our plan is to phase out all fee-for-service care during the next few years. We’ll pay you doctors a finite amount of money to take care of a defined population. We tell doctors, ‘Don’t spend much money and you can keep the difference. Period. Don’t follow guidelines, and you’ll be leaving behind some serious money on the table and we’ll just take it back.’”In case you think I overstated the implications, Edelberg recapped the discussion that ensued:
One physician piped up…. “But what about the non-compliant patients who won’t take the meds, don’t eat well, don’t have mammograms, continue to smoke? And what about super-health-conscious patients who want their vitamin levels measured and want referrals to acupuncturists?”In other words, if you are high maintenance because you don’t do what your doctor says (and remember, “non-compliant” includes people who don’t follow orders because they think the cookie-cutter approach isn’t right for them) or want higher service or per the example of the pediatrician Patricia’s 40 minute case, have a complicated set of ailments, you’ll be shunted. The brave new world of corporate medicine will eject you.
Another physician answered wearily for the medical director (who didn’t disagree): “You’ve got to fire patients like that. Get the non-compliant and the super-demanding out of your system. They’ll drag your numbers down. Hit your personal bottom line.”
Hey you, patient. Yes, I mean YOU. Pink slip time! Canned! Take your medical records and don’t let the frosted glass door hit you in the…on the way out.
The rich are unlikely even to know that this change is occurring. There will be a tier of doctors on the high end to cater to patients who want more personalized, cutting edge treatment and might need some prodding. And they can always go abroad if they can’t find what they need here. But for ordinary schlubs, expect to find the doctor’s office become more hostile as the brave new world of corporatized medicine becomes entrenched.
Yves Smith is the founder of Naked Capitalism and the author of 'ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.'
Tuesday, May 14, 2013
The criminality of the megabanks caused the present recession, yet the Federal government treats them as too big to fail and too big to jail. But what if the states were to sue individual bankers accused of defrauding the public? How sweet that would be! And California's Attorney General is contemplating doing just that. Support her!
Will JPMorgan Chase Bankers Finally Pay the Piper?
Will California Attorney General Kamala Harris hang tough in her new lawsuit against JPMorgan Chase, the first to target individual bankers accused of defrauding the public? If so, it would be the first time in five years that executives at a major bank have personally paid a price for their misdeeds.
Weekend at Jamie’s
Recent revelations have shown the world that JPMorgan Chase comes as close as any institution in America to embodying all that is corrupt, contemptible, and criminal about today’s megabanks. This is gratifying, at least on a personal level, since that was not a popular assessment when we first started writing about JPM and CEO Jamie Dimon a few years back.
In those days Dimon was help up as the “good banker” by the president and the press. His institution was considered well-managed and ethical by some of the more shallow members of the popular press, despite the plethora of scandals and crimes like the Alabama bribery case.
Since then we’ve had a variety of Chase revelations: the “Burger King kids” details behind its massive foreclosure fraud; its confessed criminal mistreatment of active duty military personnel; its deeds in fraudulently propping up a failed mortgage lender (it was like a financial Weekend at Bernie’s); and (speaking of “Bernies”) its negligence (at best) in the handling of the fraudulent Madoff accounts, which should have triggered all sorts of red-flag warnings.
Now there’s the London Whale scandal and what appears to be a subsequent case of investor deception.
The bank wound up paying a staggering $16 billion in fines and settlements over a four-year period, more than 12 percent of its net income during that time.
The Scandal of Our Time
An ethically healthy society would never have lionized a CEO like Jamie Dimon or an institution like JPMorgan Chase. That’s why we’ve called it “the scandal of our time.” What explains Dimon’s inability to stem the lawbreaking and correct his organization’s broken ethical system? The most generous interpretation is that he’s an incompetent manager — so incompetent that, even after numerous suits, revelations, and settlements, “Jamie didn’t know“ about all the illegal and unethical behavior that continued unabated in his institution.
And yet, in those cases where the bank has been called to account with fines and settlements, it has been shareholders and not the wrongdoing bankers themselves,who have paid cost. Ironically, that even happens when the shareholders themselves are the ones who were defrauded. That’s why we say that bank fraud is the only crime on Earth in which the victims make restitution on behalf of the wrongdoers.
Is this ugly pattern finally changing?
Meet the Does
Blogger and finance expert Yves Smith thinks so. California Attorney General Kamala Harris is suing JPMorgan Chase and individual bankers (named as “Does 1 through 100″) for “commit(ting) debt collection abuses” against Chase credit card holders, “flooding California’s courts with… collection lawsuits based on patently insufficient evidence.”
The Harris suit calls on the Court to assess $2,500 against each defendant for each violation of “Business and Professions Code section 17200,” and an additional $2,500 penalty for each violation perpetrated against a senior citizen or disabled person.
That may not sound like a lot of money for a banker but, as Smith points out, there are more than 100,000 potential violations. Smith writes: “If (Harris) can get the individuals who were supervising the robosigning operations (better yet, the C level execs ultimately responsible) and the complicit law firms, she might bankrupt some well-placed people. This could be extremely entertaining.”
Indeed. In fact, I’ll buy the popcorn.
Walking the Walk
From Yves Smith:
“Now Harris has been widely depicted as an opportunist. But she’s kicking up more dirt on the banking front right now than any other official … This case has enough headline value that Harris might go a few rounds before settling. JP Morgan is known for throwing vast amounts of lawyers at opponents to bury them in legal costs and busywork, so this case, sadly, is unlikely to go to trial. But if she can get the goods on the right sort of DOES, she might make some individuals pay in a serious way, which would have far more deterrent effect.
Adds Smith: “If nothing else, we should applaud what she’s so far and press her to keep going.”
I generally agree with all of the above. But some of us have been burned by even the most cautious cheerleading for seemingly promising Wall Street investigations and lawsuits. That’s especially been true when the actions in question are being conducted by elected officials with any sort of connection to the Obama White House, an institution which has become synonymous with efforts to protect bankers and restrict their punishment to the merely symbolic.
Attorney General Harris is considered close to the president. She’s undoubtedly being either cajoled or pressured (or both) to cave on this issue.
So I’m going to emphasize the words “press her” in Smith’s last sentence. If Harris is determined to see this through, her suit is potentially the kind of sea change in banker law enforcement we’ve been waiting for. But that means she’ll need emphatic expressions of support to strengthen her resolve (and to explain to the Administration why she can’t and won’t back down).
And if this is merely another publicity stunt, she needs to know that a choreographed cave-in will be very poorly received by her constituents.
Harris therefore deserves strong expressions of support, along with statements that citizens expect her to see this action through — at least far enough to ensure that the malefactors involved pay some personal penalty for their misdeeds.
(Contact information for Kamala Harris, Attorney General for the State of California, can be found here.)
Republished from Huffington Post with the author’s permission.
Saturday, 11 May 2013
Saturday, May 11, 2013
Memo to my fellow Democrats: The enemy is not “the Republicans,” rather it is the Republicans AND Democrats “elected” to Congress and the White House. (I put “elected” in quotes because the elections are systematically rigged.) Here Paul Craig Roberts, a highly educated old-school Republican with on-the-job credentials in both Reagan’s cabinet and Wall Street, relates the work of other educated out-side-the-box thinkers who see the U.S. media for what it is: a propaganda machine that would make Goebbels jealous. Roberts finishes with a critic of Obama’s recent speech to the graduating class of The Ohio State University: “Outdoing George Orwell’s Big Brother, Obama said in public to a graduating class of a great university without shame: ‘You have grown up hearing voices that incessantly warn of government as . . . some sinister entity that’s at the root of all our problems; some of these same voices also doing their best to gum up the works. They’ll warn that tyranny is always lurking just around the corner. You should reject these voices.’” Well, tyranny is already here my friends. But thanks to the “presstitute” media, the majority of Americans are unaware that the U.S. Constitution has long since been shredded.
How Elites and Media Minimize Dissent and Bury Truth — Paul Craig Roberts
May 11, 2013 | Original Here Go here to sign up to receive email notice of this news letter
Over the last several years I have watched the rise of an important new intellect on the American scene. Ron Unz, publisher of The American Conservative, has demonstrated time and again the extraordinary ability to reexamine settled issues and show that the accepted conclusion was incorrect.
One of his early achievements was to dispose of the myth of immigrant crime by demonstrating that “Hispanics have approximately the same crime rates as whites of the same age and gender.” You can imagine the uproar, but Unz won the debate.
Unz provoked and prevailed in another controversy when he concluded that Mexican-Americans have approximately the same innate intelligence as whites, with their lower IQs being due to transitory socio-economic deprivation.
He next surprised by showing the connection between the declining real value of the minimum wage (about one-third less than in the 1960s) and immigration. Americans cannot survive on one-third less minimum income than four decades ago, and the unfilled jobs are taken by Hispanics who live many to the room. A higher minimum wage, Unz pointed out, would cure the illegal immigration problem as American citizens would fill the jobs.
I wrote about some of Unz’s remarkable findings. One of my favorites is his comparison of the responsiveness of the Chinese and US governments to their publics. I found his conclusion convincing that the authoritarian one-party Chinese government was more responsive to the Chinese people than democratic two-party Washington is to the American people.
The person is rare who can take on such controversial issues in such a professional way that he wins the admiration even of his critics. In my opinion, Ron Unz is a national resource. He has established online libraries of important periodicals and magazines from the pre-Internet era, information that otherwise essentially would be lost. I have not met him, but he donates to this site and is an independent thinker free of The Matrix.
Unz’s latest article, “Our American Pravda,” http://www.theamericanconservative.com/articles/our-american-pravda/ is a striking account of the failure of media, regulatory, and national security organizations and subsequent coverups that leave the public deceived. Unz uses the Iraq war as one example:
“The circumstances surrounding our Iraq War demonstrate this, certainly ranking it among the strangest military conflicts of modern times. The 2001 attacks in America were quickly ascribed to the radical Islamists of al-Qaeda, whose bitterest enemy in the Middle East had always been Saddam Hussein’s secular Baathist regime in Iraq. Yet through misleading public statements, false press leaks, and even forged evidence such as the “yellowcake” documents, the Bush administration and its neoconservative allies utilized the compliant American media to persuade our citizens that Iraq’s nonexistent WMDs posed a deadly national threat and required elimination by war and invasion. Indeed, for several years national polls showed that a large majority of conservatives and Republicans actually believed that Saddam was the mastermind behind 9/11 and the Iraq War was being fought as retribution. Consider how bizarre the history of the 1940s would seem if America had attacked China in retaliation for Pearl Harbor.
“True facts were easily available to anyone paying attention in the years after 2001, but most Americans do not bother and simply draw their understanding of the world from what they are told by the major media, which overwhelmingly—almost uniformly—backed the case for war with Iraq; the talking heads on TV created our reality. Prominent journalists across the liberal and conservative spectrum eagerly published the most ridiculous lies and distortions passed on to them by anonymous sources, and stampeded Congress down the path to war.
“The result was what my late friend Lt. Gen. Bill Odom rightly called the “greatest strategic disaster in United States history.” American forces suffered tens of thousands of needless deaths and injuries, while our country took a huge step toward national bankruptcy [and a police state]. Economics Nobel Laureate Joseph Stiglitz and others have estimated that with interest the total long-term cost of our two recent wars may reach as high as $5 or $6 trillion, or as much as $50,000 per American household, mostly still unpaid. Meanwhile, economist Edward Wolff has calculated that the Great Recession and its aftermath cut the personal net worth of the median American household to $57,000 in 2010 from a figure nearly twice as high three years earlier. Comparing these assets and liabilities, we see that the American middle class now hovers on the brink of insolvency, with the cost of our foreign wars being a leading cause.
“But no one involved in the debacle ultimately suffered any serious consequences, and most of the same prominent politicians and highly paid media figures who were responsible remain just as prominent and highly paid today. For most Americans, reality is whatever our media organs tell us, and since these have largely ignored the facts and adverse consequences of our wars in recent years, the American people have similarly forgotten. Recent polls show that only half the public today believes that the Iraq War was a mistake.”
Unz covers a number of cases of criminality, treason, and coverups at high levels of government and points out that “these dramatic, well-documented accounts have been ignored by our national media.” One reason for “this wall of uninterest” is that both parties are complicit and thus equally eager to bury the facts.
Unz is raising the question of the efficacy of democracy. Does the way democracy works in America provide any more self-rule than in undemocratic regimes? He offers this example:
“Most of the Americans who elected Barack Obama in 2008 intended their vote as a total repudiation of the policies and personnel of the preceding George W. Bush administration. Yet once in office, Obama’s crucial selections—Robert Gates at Defense, Timothy Geither at Treasury, and Ben Bernake at the Federal Reserve—were all top Bush officials, and they seamlessly continued the unpopular financial bailouts and foreign wars begun by his predecessor, producing what amounted to a third Bush term.”
In an article not long ago, I raised the issue whether Americans live in The Matrix with their perceptions and thoughts controlled by disinformation as in George Orwell’s 1984.
Unz adds to this perspective. He tells the story of Russian oligarch Boris Berezovsky’s plan to transform Russia into a make-believe two-party state complete with heated battles fought on divisive and symbolic issues. Behind the scenes the political elites would orchestrate the political battles between the parties with the purpose of keeping the population divided and funneling popular dissatisfaction into meaningless dead-end issues. In such a system, self-serving power prevails. After describing Berezovsky’s plot, Unz asks if Berezovsky got his idea from observing the American political scene.
Thinking further about the propagandistic nature of the US media, Unz writes:
“Individuals from less trusting societies are often surprised at the extent to which so many educated Americans tend to believe whatever the media tells them and ignore whatever it does not, placing few constraints on even the most ridiculous propaganda. For example, a commentator on my article described the East German media propaganda he had experienced prior to Reunification as being in many respects more factual and less totally ridiculous than what he now saw on American cable news shows. One obvious difference was that Western media was so globally dominant during that era that the inhabitants of the German Democratic Republic inevitably had reasonable access to a contrasting second source of information, forcing their media to be much more cautious in its dishonesty, while today almost any nonsense uniformly supported by the MSNBC-to-FoxNews spectrum of acceptable opinion remains almost totally unquestioned by most Americans.” http://www.theamericanconservative.com/american-pravda-reality-television/
Unz’s view of the US media as propagandists for power is consistent with that of John Pilger, one of the last remaining real journalists who refuses to serve power, and with Gerald Celente, who sums up the sordid American media in one word–”presstitutes.” I know from my own media experience that an independent print and TV media no longer exists in the West. The American media is a tightly controlled disinformation ministry.
Those few Americans who are free of the constraints imposed by dogmas on their ability to think and to process information have a huge responsibility for their small number. The assault on the rule of law began in the last years of the Clinton regime, but the real destruction of the US Constitution, the basis for the United States, was achieved by the neoconservative George W. Bush and Obama regimes. Wars without declarations by Congress, torture in violation of both US and international law, war crimes in violation of the Nuremberg standard, indefinite detention and assassination of US citizens without due process of law, universal spying on US citizens without warrants, federalization of state and local police now armed with military weapons and uniforms, detention centers, “your papers, please” (without the Gestapo “please”) not only at airports but also on highways, streets, bus terminals, train stations, and at sporting events.
On May 5 Obama gave the commencement address at Ohio State University. No doubt that the graduates thought that they were being honored by being addressed by the world’s greatest tyrant.
Obama told the graduating class, to applause, that their obligation as citizens is to trust the government. Outdoing George Orwell’s Big Brother, Obama said in public to a graduating class of a great university without shame: “You have grown up hearing voices that incessantly warn of government as . . . some sinister entity that’s at the root of all our problems; some of these same voices also doing their best to gum up the works. They’ll warn that tyranny is always lurking just around the corner. You should reject these voices.”
Listen to my propaganda, not to those constitutional experts, legal authorities, and critics of me, the First Black President, who tell you to beware of unaccountable government. Due process is decided by the demands of the war on terror. If there is a war on terror, do you want a fair trial or do you want to be safe? I am going to make you safe by not giving defendants accused of terrorism, who some liberal-pinko-commie judge would set free, a fair trial.Blogger's Note: You should understand the monologue below as PCR's parody of what Obama might have been thinking in that moment, as opposed to the words he was actually using at the Ohio State commencement.
Making you safe by enveloping you in a police state is a nonpartisan undertaking. Just listen to Lindsay Graham and Peter King and John McCain. These Republican leaders are demanding the police state that I am providing.
As my own legal department, The US Department Of Justice, decided, the Dictator, I mean, elected president, has the power to save the country from domestic and foreign terrorists by abrogating the US Constitution, an out-of-date document that binds our hands and prevents us from keeping you, our serfs and minions, I mean our cherished citizens, safe.
Trust me. That is your obligation as a US citizen. Trust me and I will make you free, happy, employed sometime later in this century when the Amerikan Empire controls the world.
The US Constitution was written by people who opposed Empire. These people were misguided, just like the Roman Republicans who did not understand the need for a Caesar. The American Empire, as the neoconservatives have made clear, is what keeps you free from terrorism. We have to kill them over there before they come over here. And those who are over here will be killed too. We tolerate no dissent. That part of the Constitution is gone, along with the rest of it.
Now give me my honorary doctorate, another sign of approval of my usurpation.
Friday, May 10, 2013
Those who disbelieve conspiracy theories are doomed to be victims of massive global conspiracies regarded by our complicit government to be too big to jail: The latest stunning evidence is reported here.
Everything Is Rigged: The Biggest Price-Fixing Scandal Ever
The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix
Read more: Go here. Follow us: @rollingstone on Twitter | RollingStone on Facebook
|Illustration by Victor Juhasz|
By MATT TAIBBI
|Matt Taibbi is a contributing editor
Rolling Stone. He’s the author of five
books and a winner of the National
Magazine Award for commentary.
Please direct all media requests to
Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.
You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.
It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.
The Scam Wall Street Learned From the Mafia
Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.
"It's a double conspiracy," says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. "It's the height of criminality."
The bad news didn't stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. "Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry," CFTC Commissioner Bart Chilton said.
But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants' incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.
"A farce," was one antitrust lawyer's response to the eyebrow-raising dismissal.
"Incredible," says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.
All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation's GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it's increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.
If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it's no secret. You can stare right at it, anytime you want.
The banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure.
Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolving-door legal system, and what you get is unstoppable corruption.
Every morning, 18 of the world's biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the "Libor panel," and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures.
Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps.
Gangster Bankers Broke Every Law in the Book
Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the "Libor submitters") and asking them to fudge the numbers. Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off.
Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:
SWISS FRANC TRADER: can u put 6m swiss libor in low pls?...Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it's hard to imagine an image that better captures the moral insanity of the modern financial-services sector.
PRIMARY SUBMITTER: Whats it worth
SWSISS FRANC TRADER: ive got some sushi rolls from yesterday?...
PRIMARY SUBMITTER: ok low 6m, just for u
SWISS FRANC TRADER: wooooooohooooooo. . . thatd be awesome
Hundreds of similar exchanges were uncovered when regulators like Britain's Financial Services Authority and the U.S. Justice Department started burrowing into the befouled entrails of Libor. The documentary evidence of anti-competitive manipulation they found was so overwhelming that, to read it, one almost becomes embarrassed for the banks. "It's just amazing how Libor fixing can make you that much money," chirped one yen trader. "Pure manipulation going on," wrote another.
Yet despite so many instances of at least attempted manipulation, the banks mostly skated. Barclays got off with a relatively minor fine in the $450 million range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give up $615 million. Apart from a few low-level flunkies overseas, no individual involved in this scam that impacted nearly everyone in the industrialized world was even threatened with criminal prosecution.
Two of America's top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it's dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to "collateral consequences" in the economy.
The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation. Instead, it flowed mindlessly into government coffers. So it was left to towns and cities like Baltimore (which lost money due to fluctuations in their municipal investments caused by Libor movements), pensions like the New Britain, Connecticut, Firefighters' and Police Benefit Fund, and other foundations – and even individuals (billionaire real-estate developer Sheldon Solow, who filed his own suit in February, claims that his company lost $450 million because of Libor manipulation) – to sue the banks for damages.
One of the biggest Libor suits was proceeding on schedule when, early in March, an army of superstar lawyers working on behalf of the banks descended upon federal judge Naomi Buchwald in the Southern District of New York to argue an extraordinary motion to dismiss. The banks' legal dream team drew from heavyweight Beltway-connected firms like Boies Schiller (you remember David Boies represented Al Gore), Davis Polk (home of top ex-regulators like former SEC enforcement chief Linda Thomsen) and Covington & Burling, the onetime private-practice home of both Holder and Breuer.
The presence of Covington & Burling in the suit – representing, of all companies, Citigroup, the former employer of current Treasury Secretary Jack Lew – was particularly galling. Right as the Libor case was being dismissed, the firm had hired none other than Lanny Breuer, the same Lanny Breuer who, just a few months before, was the assistant attorney general who had balked at criminally prosecuting UBS over Libor because, he said, "Our goal here is not to destroy a major financial institution."
In any case, this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments. Robert Wise of Davis Polk, representing Bank of America, told Buchwald that the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive. "It is essential to our argument that this is not a competitive process," he said. "The banks do not compete with one another in the submission of Libor."
If you squint incredibly hard and look at the issue through a mirror, maybe while standing on your head, you can sort of see what Wise is saying. In a very theoretical, technical sense, the actual process by which banks submit Libor data – 18 geeks sending numbers to the British Bankers' Association offices in London once every morning – is not competitive per se.
But these numbers are supposed to reflect interbank-loan prices derived in a real, competitive market. Saying the Libor submission process is not competitive is sort of like pointing out that bank robbers obeyed the speed limit on the way to the heist. It's the silliest kind of legal sophistry.
But Wise eventually outdid even that argument, essentially saying that while the banks may have lied to or cheated their customers, they weren't guilty of the particular crime of antitrust collusion. This is like the old joke about the lawyer who gets up in court and claims his client had to be innocent, because his client was committing a crime in a different state at the time of the offense.
"The plaintiffs, I believe, are confusing a claim of being perhaps deceived," he said, "with a claim for harm to competition."
Judge Buchwald swallowed this lunatic argument whole and dismissed most of the case. Libor, she said, was a "cooperative endeavor" that was "never intended to be competitive." Her decision "does not reflect the reality of this business, where all of these banks were acting as competitors throughout the process," said the antitrust lawyer Sokol. Buchwald made this ruling despite the fact that both the U.S. and British governments had already settled with three banks for billions of dollars for improper manipulation, manipulation that these companies admitted to in their settlements.
Michael Hausfeld of Hausfeld LLP, one of the lead lawyers for the plaintiffs in this Libor suit, declined to comment specifically on the dismissal. But he did talk about the significance of the Libor case and other manipulation cases now in the pipeline.
"It's now evident that there is a ubiquitous culture among the banks to collude and cheat their customers as many times as they can in as many forms as they can conceive," he said. "And that's not just surmising. This is just based upon what they've been caught at."
Greenberger says the lack of serious consequences for the Libor scandal has only made other kinds of manipulation more inevitable. "There's no therapy like sending those who are used to wearing Gucci shoes to jail," he says. "But when the attorney general says, 'I don't want to indict people,' it's the Wild West. There's no law."
The problem is, a number of markets feature the same infrastructural weakness that failed in the Libor mess. In the case of interest-rate swaps and the ISDAfix benchmark, the system is very similar to Libor, although the investigation into these markets reportedly focuses on some different types of improprieties.
Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn't that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you've got the basic idea of an interest-rate swap.
In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to "swap" that loan to a more predictable fixed rate. In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.
Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix's U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.
And here's what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company's office in Jersey City, New Jersey. Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated. Oliver Wyman is the same company that the British Bankers' Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.
"It's obviously reminiscent of the Libor manipulation issue," Darrell Duffie, a finance professor at Stanford University, told reporters. "People may have been naive that simply reporting these rates was enough to avoid manipulation."
And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they're paying the real price for swaps or a price being manipulated by bank insiders for profit. Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it's also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some state-pension annuities.
So although it's not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.
"How is some municipality in Cleveland or wherever going to know if it's getting ripped off?" asks Michael Masters of Masters Capital Management, a fund manager who has long been an advocate of greater transparency in the derivatives world. "The answer is, they won't know."
Worse still, the CFTC investigation apparently isn't limited to possible manipulation of swap prices by monkeying around with ISDAfix. According to reports, the commission is also looking at whether or not employees at ICAP may have intentionally delayed publication of swap prices, which in theory could give someone (bankers, cough, cough) a chance to trade ahead of the information.
Swap prices are published when ICAP employees manually enter the data on a computer screen called "19901." Some 6,000 customers subscribe to a service that allows them to access the data appearing on the 19901 screen.
The key here is that unlike a more transparent, regulated market like the New York Stock Exchange, where the results of stock trades are computed more or less instantly and everyone in theory can immediately see the impact of trading on the prices of stocks, in the swap market the whole world is dependent upon a handful of brokers quickly and honestly entering data about trades by hand into a computer terminal.
Any delay in entering price data would provide the banks involved in the transactions with a rare opportunity to trade ahead of the information. One way to imagine it would be to picture a racetrack where a giant curtain is pulled over the track as the horses come down the stretch – and the gallery is only told two minutes later which horse actually won. Anyone on the right side of the curtain could make a lot of smart bets before the audience saw the results of the race.
At ICAP, the interest-rate swap desk, and the 19901 screen, were reportedly controlled by a small group of 20 or so brokers, some of whom were making millions of dollars. These brokers made so much money for themselves the unit was nicknamed "Treasure Island."
Already, there are some reports that brokers of Treasure Island did create such intentional delays. Bloomberg interviewed a former broker who claims that he watched ICAP brokers delay the reporting of swap prices. "That allows dealers to tell the brokers to delay putting trades into the system instead of in real time," Bloomberg wrote, noting the former broker had "witnessed such activity firsthand." An ICAP spokesman has no comment on the story, though the company has released a statement saying that it is "cooperating" with the CFTC's inquiry and that it "maintains policies that prohibit" the improper behavior alleged in news reports.
The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. "It's almost hilarious in the irony," says David Frenk, director of research for Better Markets, a financial-reform advocacy group, "that they called it ISDAfix."
After scandals involving libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation? The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we're forced to trust.
"In all the over-the-counter markets, you don't really have pricing except by a bunch of guys getting together," Masters notes glumly.
That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it. The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.
All of these benchmarks based on voluntary reporting are now being looked at by regulators around the world, and God knows what they'll find. The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. "In general," it wrote, "those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion."
Translation: When prices are set by companies that can profit by manipulating them, we're fucked.
"You name it," says Frenk. "Any of these benchmarks is a possibility for corruption."
The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it. It's not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever's in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it's only just coming into view.
This story is from the May 9th, 2013 issue of Rolling Stone.
Thursday, May 09, 2013
Posted below is an email appeal received just today from one of the few totally uncorrputed members of the U.S. House of Representatives, Alan Grayson. It exposes the most grotesgue plan ever initiated by the global corporations to enslave we-the-99%. Please read it and then sign the petition. (A donation would be welcome but is not necessary.)
The United States Trade Representative has invited public comments on the "Trans-Atlantic Trade and Investment Partnership." (God, even the title makes you ill, doesn't it?) The "Partnership" actually is a partnership between multinational corporations and their sellout tools in government. It features "investor-state" dispute resolution, which permits huge corporations to file lawsuits to prevent government actions that they just don't like, such as health and safety regulations.
Tell our government what you think about this huge power-grab by multinational corporations. Submit your comment here.
This is not just a theoretical possibility. "These provisions elevate corporations to the level of nation states and allow them to sue governments over nearly any law or policy which reduces their future profits," the Sierra Club warns. The government of Canada has been sued under a similar clause in the North American Free Trade Agreement (NAFTA) for refusing to export Canada's water. Canada also has been sued for keeping a pollutant out of its gasoline supply, and for taxing windfall profits by oil companies.
Why are we even thinking about handing over our sovereign rights to huge corporations who care nothing about us? Make your voice heard, by clicking here.
Who needs these "free trade" sell-outs, anyway? Since NAFTA went into effect in 1994, the United States has lost almost four million manufacturing jobs. Moreover, huge U.S. subsidies for corn have made it impossible for millions of Mexican families to survive on the farm. NAFTA accomplished something that hardly seems possible - impoverishing both American workers and Mexican ones. Can't we learn from our mistakes? And why are our leaders treating us like sheep being led to the slaughter?
Stop this subversive betrayal right now. Click here, and click now, to put in your two cents.
The First Amendment gives us the right to "petition the Government for a redress of grievances." Anyone who has been paying attention to these Judas-kiss trade "deals" is feeling mighty, mighty "aggrieved." So do something about it: click here to try to put an end to this nonsense.
The window for comments closes on Friday. So give them a piece of your mind today.
Rep. Alan Grayson
[D-Fl, 9th district]