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Italy’s Oldest Bank “Bails-In” Bondholders to Tune of $650 Million!

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DIESELBOOM’s template has just struck again, as Italy’s oldest bank Monte Paschi has just announced it will halt all coupon payments on Tier 1 bondholders, effectively bailing in $650 million in bondholders notes to recapitalize the bank!

As Bloomberg reports, Monte Paschi bondholders just received a $650 million haircut:

Banca Monte dei Paschi di Siena SpA said it suspended interest payments on three hybrid notes after European authorities demanded bondholders contribute to the restructuring of the bailed out Italian lender. The world’s oldest bank said in a statement that it won’t pay interest on about 481 million euros ($650 million) of outstanding hybrid notes issued through MPS Capital Trust II and Antonveneta Capital Trusts I and II. Under the terms of the undated notes, the Siena, Italy-based lender is allowed to suspend interest without defaulting and doesn’t have to make up the missed coupons when payments resume.

In the new world we’re in advises Bloomberg, governments impose losses wherever possible in order to keep the TBTF banks afloat:

“In the new world we’re in, bondholders pick up the tab when they can be forced to,” said John Raymond, an analyst at CreditSights Inc. in London. “State aid rules impose losses where possible.”

While the Monte Paschi bail-in for now is limited to Tier 1 bondholders, the bank made it clear it likely will not be able to continue paying Tier 2 bondholders much longer either:

While the bank is halting payments on the bonds that make up its Tier 1 capital, the most-junior layer of debt capital instruments, it also has the equivalent of about 2.6 billion euros of more-senior Upper Tier 2 debt in three issues in euros and pounds. While Monte Paschi is making payments on these notes, it isn’t clear that it will be able to go on doing so, said Raymond.

Do you suppose that the ISDA will rule that a bondholder bail-in qualifies as a default, resulting in the payout of CDS contracts?

The cost of insuring against losses on Monte Paschi’s subordinated debt rose, with credit-default swaps covering 10 million euros of the bank’s junior bonds for five years costing 2.1 million euros in advance and 500,000 euros annually, according to data provider CMA. That signals a 49.5 percent probability of default within that time.

Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.


Italy’s Oldest Bank Monte Paschi “Bails-In” Bondholders to Tune of $650 Million!


Written by testudoetlepus

September 25th, 2013 at 11:44 pm

Bob Chapman on The Liberty Round Table Radio Show

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December 19, 2011

Bob Chapman talks about the floods in southern Philippines, Internment Camps in New Hampshire, Americans in the line of fire, Ron Paul GOP nominations and how you should absolutely contribute to his campaign, Bob also talks about current events the situation in North Korea the debt crisis in Europe and the gold and silver market forecast.

<a href="!?hl=en"><img src="" alt="Play" style="border:0px;" /></a>

Liberty Round Table

Bob Chapman – Liberty Round Table – December 19, 2011

Bob Chapman

The Ironic, Prophetic Nature of the MF Global Bankruptcy Filing and It’s Potential Ramifications of Lehman 2.0!!!

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Time Sensitive Note: All paying subscribers are strongly urged to review the “Latest Subscription Documents” section in the right hand margin of the home page. This is strategic time to reinstitute positions while IV has been crushed and underlying prices have increased against the fundamentals and the macro backdrop. New subscription content will be added withing 24 hours.

Forthose who do not know, I was a real estate investor between 2000 and2006. By 2006, I came to the realization that there were no longerprofitable deals to be had on a sound risk/reward basis, and the entirePonzi scheme looked to be ready to do the Humpty Dumpty thing. So, Itook a year off to raise my brand new baby girl, and came back to pursueplans to start a hedge fund that focused on shorting the FIRE sectorand European banks – basically any and everybody who ever did businesswith me and my colleagues in real estate – the writing was evidently onthe wall for anyone who bothered to look at walls.

Those who have followed me for a few years know my mantra, and for those that don’t, review my early thoughts and calls on Europe and the global FIRE sector.

At a fundraiser that MF Global threw in Rockefeller Center’s rollingskating rink, I sat down with the then CEO of MF Global and his wife andinformed them of my plans. They sincerely wished me luck and told me tolet them know when I got started (I would speak to them on and offannually at the skating rink event or over lunch). I said nothing then,but I was highly suspect of the firms prospects going into what I sawwas a risky asset firestorm of a correction. As it turned out, itappears I may have had a point. Even more interesting is the fact that Iwas the only one that I knew of who proclaimed that Fed ZIRP policy wastruly poison laced in Myrrh. Contrary to that espoused by ink stainedivory towers of academia and those who so often correct in the SellSide, ZIRP is killing the banks while regulatory capture is hiding themetastizing tumors. I also now a few who used to work in the riskdepartments of MF (yes, they did have one) and they said thatGoldman/governer guy was the one that ran MF into the ground.Accordingly, MF was a good brokerage, but he came in and tried to makethem bankers and traders, which they were not (at least they weren’tgood ones, anyway). By forcing the firm to carry inexperiencedproprietary risk, he doomed the firm (according to this insider).

Hmmmm… Up is down, and down is up, I bendeth you over if you spilleth my cup! Again, as excerpted from There’s Something Fishy at the House of Morgan“:

Again,I have warned of this occurrence as well. See my interview with MaxKeiser below where I explained how the Fed’s ZIRP policy is literallystarving the banks it was designed to save. Listen to what was a highlycontrarian perspective last year, but proven fact this year!


Provisionsand charge-offs: I have been warning about the over-exuberant releaseof provisions to pad accounting earnings since late 2009!

Declinesin provision was one of the major contributors to bottom line. JPMorganreduced its provision for loan losses to $1.2bn (0.7% of loans) in Q12011 from $7.0bn (4.2% of loans) in Q1 2010 and from $3.0bn (1.8% ofloans) in Q4 2010 while charge-offs declined to $3.7bn (2.2% of loans)in Q1 2011 from $7.9bn (4.4% of loans) in Q1 2010 and from $5.1bn (2.9%of loans) in Q4 2010. Although banks delinquency and charge-off rate hasdeclined, the extent of decline in provisions is unwarranted comparedto decline in charge-off rates. As a result of higher decline inprovisions compared to charge-offs, total reserve for loan losses havedecreased to 4.3% in Q1 from 5.3% in Q1 2010 and 4.7% in Q4 2010. At theend of Q1 the banks allowances to loan losses is lowest since 2009.

Althoughthe reduction in provisions has helped the banks to improve itsprofitability it has seriously undermined the banks’ ability to absorblosses, if economic conditions worsen. As a result of under provisioningfor the past five quarters, the banks Eyles test, a measure of banks’ability to absorb losses, has turned to a negative 7.7% in Q1 2011compared with +6.4% in Q1 2010. A negative Eyles test has seriousimplications to shareholders – the losses from banks could not onlydrain entire allowances for loan losses which are inadequate but canalso wipe off c7.7% of shareholder’s equity capital. The negative valueof 7.7% for JPM’s Eyles is the lowest in this downturn.

MF Global Files for Bankruptcy; Shares Remain Halted

MF Global Holdings filed for Chapter 11 bankruptcy protection in New Yorkon Monday morning, after an effort to sell itself to Interactive BrokersGroup failed.

MFGlobal [MF 1.20 — UNCH ] had a tentative deal to sell assets toInteractive Brokers [IBKR 15.55 0.33 (+2.17%) ] as of late Sunday, butthe agreement fell apart as talks continued overnight, said peoplefamiliar with the matter. Discussions ended around 5 a.m. ET, one ofthese people said.

MFGlobal had been considering filing just its holding company forbankruptcy protection and then executing the sale. That plan is now offthe table, one of the people said.

Thisperson said MF Global’s parent company would be included in thebankruptcy filing. Voluntary bankruptcy petitions for MF Global Holdingsand MF Global Finance USA hit the docket in a U.S. bankruptcy court inManhattan mid-morning on Monday.

TheChicago Mercantile Exchange said on Monday that customers ofbroker-dealer MF Global were limited to liquidating their positions. Theexchange, which owns the Chicago Board of Trade, said it would nolonger recognize MF Global, which has filed for Chapter 11 bankruptcyprotection, as a guarantor for floor trading.

…”It was quite difficult to get our money out on Friday, because theyhad a lot of redemption calls,” a trader, whose firm used MF Global as abrokerage said. “The company is not initiating any new position. Theyare trying to close down positions that they already have with clientsthat are open.”

At MF Global’s London office, in Canary Wharf, staff were coming and going from the office as normal at Monday lunchtime.

There was a tense atmosphere and most declined to speak to

“We’re not allowed to speak to you; so you can probably read into that what you will,” one MF Global worker told

Thelast set of statements are teiling, indeed. MF Global is a mini-Lehman,and while many may not be taking MF Global’s demise as seriously, itdefinitely is. They died from the same disease that afflicts much ofWall Street, and most of European banking. They are smaller, that’s theonly real difference – and the asset management company that they werespun off is doing just as bad. I said it before, and I’ll say it again,Europe is housing Lehman Brothers x 4!

From ZeroHedge: Presenting The Bond That Blew Up MF Global

Reaching for yield (and prospectively capital appreciation) while shorteningduration had become the new ‘smart money’ trade as we saw HY creditcurves steepen earlier in the year (only to become the pain trade veryquickly). The attraction of those incredible yields on short-datedsovereigns was an obvious place for momentum monkeys to chase and itseems that was the undoing of MF Global. The Dec 2012 Italian bonds (inwhich MF held 91% of its ITA exposure), as highlighted in today’sBloomberg Chart-of-the-day, appears to be the capital-sucking instrumentof doom for the now-stricken MF. As if we need to remind readers, thereis a reason why yields are high – there is no free lunch – and whilesome have already leaped to the defense of the bet-on-black Corzine riskmanagement process with comments such as ‘He was simply early and willbe proved correct’ should remember that only the central banks havebottomless non-mark-to-market pockets to withstand the vol. It also setsup a rather useful lesson for those pushing for EFSF leverage to buy risky sovereign debt – but given today’s issue demand, perhaps that is moot.

Hmmmm!I remember over the summer, when MF probably put these trades on, Iwarned about Italy sparking France while NEARLY EVERYONE ELSE was stillfocusing on Greece! Reference the following excerpt from Wednesday, 03August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer

Incase the hint was strong enough, I explicitly state that although thesell side and the media are looking at Greece sparking Italy, it isFrance and french banks in particular that risk bringing theFranco-Italia make-believe capitalism session, aka the French leveragedItalian sector of the Euro ponzi scheme down, on its head.

I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!

So, how accurate was I? Well, we’ll see in a few… In this morning’s headlines:

So, What’s the Next Shoe To Drop? Read on…

Forthose who claim I may be Euro bashing, rest assured – I am not. Just aweek or two later, I released research on a big US bank that will quitepossibly catch Franco-Italiano Ponzi Collapse fever, with the prodocument containing all types of juicy details. This is the next big thing, for when (not if, but when) European banks blow up, it WILL affect us stateside! Subscribers,be sure to be prepared. Puts are already quite costly, but there areother methods if you haven’t taken your positions when the research wasfirst released. For those who wish to subscribe, click here.

Now, let’s refresh the output from And The European Bank Run Continues…and more importantly BoomBustBlog BNP Paribas “Run On The Bank” Models (they range from free up to institutional, I strongly urge those who haven’t to click upon said link and download your intellectual weapon of choice!) where I modeled Greek losses on BNP.  Below is sample output from the professional level model (BNP Exposures – Professional Subscriber Download Version) that simulates the bank run that the news clippings below appear to be describing in detail…(Click to enlarge to printer quality)This scenario was run BEFORE the Greek bonds dropped even further in price…

Using more recent market inputs (you know, assuming this stuff was Level 1), we get the following…

Noticehere the base case TEC impairment is now approaching the adverse casefrom just a few weeks ago – and this is using market pricing, not somepie in the sky model!

Ihave not recalculated the adverse scenario in this example, but you cansimply use your imagination, or download the model and run it foryourself.

A Greek default with haircuts somewhat inline with market prices willwipe out 13% of BNP TEC, with a more severe cut (quite likely) takingout nearly 20%. This is not even glancing upon the many problems wediscussed in our forensice reports ( French Bank Run Forensic Thoughts – Retail Valuation Note – For retail subscribers, Bank Run Liquidity Candidate Forensic Opinion – A full forensic note for professional and institutional subscribers).

Now,if the ZH referenced report above is accurate (and I believe it is) thebanks are going to try to delever by selling assets in the open markets(all at the same time, selling the same assets to the same pool ofpotential buyers at the same bad times). This means that the prices usedto populate this model are probably still too optmistic. Even if theyweren’t, look at the capital short fall the Greek default will leave BNPwith assuming our institutional bank run thesis holds true and they seea slight withdrawal of liquidity of 10% this year and 15% next (knowingfull well the numbers for Lehmand and Bear were much, much higher thanthat before they collapsed). First, a refesher on our European bank runtheory expoused 5 months ago…

    1. Let’s Walk The Path Of A Potential Pan-European Bank Run, Then Construct Trades To Profit From Such
    2. Greece Is Fulfilling Our Predictions Of Default Precisely As Predicted This Time Last Year
  1. The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!
    1. The Fuel Behind Institutional “Runs on the Bank” Burns Through Europe, Lehman-Style!

And the BNP results????


Halftrillion euros here, half trillion euros there… Sooner or later,we’ll be talking about some real money! Since the problems have not beencured, they’re literally guaranteed to come back and bite ass.Guaranteed! So, as suggested earlier on, download your appropriate BoomBustBlog BNP Paribas “Run On The Bank” Models (they range from free up to institutional).

On Derivatives Implosions and Debt Destruction…

Just like the US banks and EU leaders have somehow gamed (or at least triedto game) the CDS market into a sham, they look to do the same in thediscorporation of those entities who have been destroyed by the highlydeflationary forces taking hold. To wit: MF Global Creditors Led By JPMorgan

The following are MF Global Holdings’ largest unsecured creditors and shareholders, according to the company’s bankruptcy filing and related court papers submitted today in U.S. Bankruptcy Court in Manhattan.

Unsecuredcreditors rank behind secured lenders in getting repaid in abankruptcy, and are ahead of preferred and common shareholders.

Unsecured Creditors:

JPMorgan Chase & Co. (JPM)’s JPMorgan Chase Bank, bondholder trustee, $1.2 billion.

Deutsche Bank AG, trustee for $1.02 billion in bonds:

Deutsche Bank Trust Co., bondholder trustee for 6.25% notes, $325 millionbondholder trustee for 3.375% notes, $325 million bondholder trustee for1.875% notes, $287.5 million bondholder trustee for 9% notes, $78.6million.

From ZeroHedge, we are sourced the ISDA “determinations committee“:

Americas Voting Dealers Bank of America / Merrill Lynch Barclays Citibank Credit Suisse Deutsche Bank Goldman Sachs JPMorgan Chase Bank, N.A. Morgan Stanley Société Générale UBS


Voting Dealers Bank of America / Merrill Lynch Barclays BNP Paribas Credit Suisse Deutsche Bank Goldman Sachs JPMorgan Chase Bank, N.A. Morgan Stanley Société Générale UBS

To suscribe to our research services, click here. This will be a very, very profitable quarter!

More from Reggie Middleton…

The Street’s Most Intellectually Aggressive Analysis: We’ve Found What Bank of America Hid In Your Bank Account!

This Bank Is Much Worse Than the Rest and the (Guaranteed?) Bust Will Probably Be Funded Right Out Of Your Bank Account!

French Banks Can Set Off Contagion That Will Make Central Bankers Long For The Good ‘Ole Lehman Collapse Days!

The Ironic, Prophetic Nature of the MF Global Bankruptcy Filing and It’s Potential Ramifications of Lehman 2.0!!!

[Zero Hedge]

MF Global Caught Stealing Hundreds of Millions from Customers

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Jon S. Corzine

One by one, the big banks and investment firms appear destined to go broke. Behind all other crises looms the mother of all bubbles – the derivatives debacle. The worsening situation is simply sped up by the criminal actions of brokerage firm MF Global, so desperate to stay afloat that it sank hundreds of millions of dollars of customers’ money into its losing position and failed. This latest example of crony capitalism will hurt a lot of people, although NESARA will save most of them.

Two articles here, the first one from the New York Times and the second one from Zero Hedge. Someone will have to go to jail, says Zero Hedge. This time I think that very well may happen. Thanks to Luisa and Ramona.

Regulators Investigating MF Global for Missing Money


New York Times, Oct. 31, 2011

Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.

The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.

Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse.

The discovery that money could not be located might simply reflect sloppy internal controls at MF Global. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said. Additional funds are expected to trickle in over the coming days.

But the investigation, which is in its earliest stages, may uncover something more intentional and troubling.

In any case, what led to the unaccounted-for cash could violate a tenet of Wall Street regulation: Customers’ funds must be kept separate from company money. One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.

Neither MF Global nor Mr. Corzine has been accused of any wrongdoing. Lawyers for MF Global did not respond to requests for comment.

Now, the inquiry threatens to tarnish further the reputation of Mr. Corzine, the former Goldman Sachs executive who had sought to revive his Wall Street career last year just a few months after being defeated for re-election as New Jersey’s governor.

When he arrived at MF Global — after more than a decade in politics, including serving as a Democratic United States senator from New Jersey — Mr. Corzine sought to bolster profits by increasing the number of bets the firm made using its own capital. It was a strategy born of his own experience at Goldman, where he rose through the ranks by building out the investment bank’s formidable United States government bond trading arm.

One of his hallmark traits, according to the 1999 book “Goldman Sachs: The Culture of Success,” by Lisa Endlich, was his willingness to tolerate losses if the theory behind the trades was well thought out.

He made a similar wager at MF Global in buying up big holdings of debt from Spain, Italy, Portugal, Belgium and Ireland at a discount. Once Europe had solved its fiscal problems, those bonds would be very profitable.

But when that bet came to light in a regulatory filing, it set off alarms on Wall Street. While the bonds themselves have lost little value and mature in less than a year, MF Global was seen as having taken on an enormous amount of risk with little room for error given its size. By Friday evening, MF Global was under pressure to put up more money to support its trading positions, threatening to drain the firm’s remaining cash.

The collapse of MF Global underscores the extent of investor anxiety over Europe’s debt crisis. Other financial institutions have been buffeted in recent months because of their holdings of debt issued by weak European countries. The concerns about MF Global’s exposure to Europe prompted two ratings agencies to cut their ratings on the firm to junk last week.

The firm played down the effect of the ratings, saying, “We believe that it bears no implications for our clients or the strategic direction of MF Global.”

Even by Sunday evening, MF Global thought it had averted its demise after a disastrous week. Over five days, the firm lost more than 67 percent of its market value and was downgraded to junk status, which prompted investor desertions and raised borrowing costs.

Mr. Corzine and his advisers frantically called nearly every major Wall Street player, hoping to sell at least some of the firm in a bid for survival.

On Friday, the asset manager BlackRock was hired to help MF Global wind down its balance sheet, which included efforts to sell its holdings of European debt. BlackRock was able to value the portfolio, but did not have time to find a buyer for it given the other obstacles MF Global faced, according to people close to the talks.

By Saturday, Jefferies & Company became the lead bidder to buy large portions of MF Global, before backing out late in the day.

On Sunday, a rival firm, Interactive Brokers, emerged as the new favorite. But the Connecticut-based firm coveted only MF Global’s futures and securities customers.

While MF Global was resigned to putting its parent company into bankruptcy, Interactive Brokers was also willing to help prop up other MF Global units, including a British affiliate.

By late Sunday evening, an embattled MF Global had all but signed a deal with Interactive Brokers. The acquisition would have mirrored what Lehman Brothers did in 2008, when its parent filed for bankruptcy but Barclays of Britain bought some of its assets.

But in the middle of the night, as Interactive Brokers investigated MF Global’s customer accounts, the potential buyer discovered a serious obstacle: Some of the customer money was missing, according to people close to the discussions. The realization alarmed Interactive Brokers, which then abandoned the deal.

Later on Monday, when explaining to regulators why the deal had fallen apart, MF Global disclosed the concerns over the missing money, according to a joint statement issued by the Commodity Futures Trading Commission and the Securities and Exchange Commission. Regulators, however, first suspected a potential shortfall days ago as they gathered at MF Global’s Midtown Manhattan headquarters, the people briefed on the matter said. It is not uncommon for some funds to be unaccounted for when a financial firm fails, but the magnitude in the case of MF Global was unnerving.

For now, there is confusion surrounding the missing MF Global funds. It is likely, one person briefed on the matter said, that some of the money may be “stuck in the system” as banks holding the customer funds hesitated last week to send MF Global the money.

But the firm has yet to produce evidence that all of the $600 million or $700 million outstanding is deposited with the banks, according to the people briefed on the matter. Regulators are looking into whether the customer funds were misallocated.

With the deal with Interactive Brokers dashed, MF Global was hanging in limbo for several hours before it filed for bankruptcy. The Federal Reserve Bank of New York and a number of exchanges said they had suspended MF Global from doing new business with them.

It was not the first time regulators expressed concerns about MF Global.

MF Global confirmed on Monday that the Commodity Futures Trading Commission and the S.E.C. — had “expressed their grave concerns” about the firm’s viability.

By midmorning on Monday, the firm filed for bankruptcy.

Azam Ahmed contributed reporting.

Someone Is Going To Jail For This: MF Global Caught Stealing Hundreds Of Millions From Customers?

Tyler Durden's picture

Submitted by Tyler Durden on 10/31/2011 21:06 -0400

Say you are the head back office guy at MF Global, it is the close of trading on Thursday, the firm has already completely drawn down on its revolver, and all the resulting cash in addition to all the firm’s cash at your disposal in affiliated bank accounts, up to and including petty cash, has been used to satisfy margin demands due to declining collateral value, yet the collateral calls just won’t stop, and impatient voices on the other side of the phone line demand you transfer even more cash over immediately or else risk default proceedings commenced against you within minutes.

What do you do? Do you go ahead and tell your superior that the firm is broke even though the co-opted media is trumpeting every 5 minutes that “MF Global is fine”, knowing full well you will be immediately fired for being the bearer of bad news, or do you assume that courtesy of your uber-boss being the former head of the Vampire Squid, and thanks to infinite moral hazard which after Lehman made sure nobody would ever fail ever again, that there is simply no way that you will be left without some miraculous rescue, if only you can last one more day, and as a result proceed to “commingle” some client funds with the firm’s cash.
It turns out that at MF Global you do the latter… over and over… until you have literally stolen hundreds of millions from the firm’s client accounts in hopes that the miracle rescue will come on Friday… then over the weekend… and then you realize no miracle is coming, partly because your actions have been exposed, partly because miracles only exist in fairy tales. The next thing you know, your firm is bankrupt and hundreds of clients are about to learn that all their money is gone. Poof.

This is not a fictional tale. This is precisely what very likely happened at MF Global in the past 72 hours. And someone has to go to jail. That someone, if indeed this criminal act is proven to have taken place, should be none other than Jon Corzine himself.

The sad truth of just how low Wall Street has fallen comes to us courtesy of the New York Times:

Federal regulators have discovered that hundreds of millions of dollars in customer money have gone missing from MF Global in recent days, prompting an investigation into the company’s operations as it filed for bankruptcy on Monday, according to several people briefed on the matter.

The revelation of the missing money scuttled an 11th hour deal for MF Global to sell a major part of itself to a rival brokerage firm. MF Global, the powerhouse commodities brokerage run by Jon S. Corzine, had staked its survival on completing the deal.

As for the details:

What began as nearly $1 billion missing had dropped to less than $700 million by late Monday. It is unclear where the money went, and some money is expected to trickle in over the coming days as the firm sorts through the bankruptcy process, the people said.

But regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse. If that was the case, it could violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money.

And just like in the Lehman collapse where tens if not hundreds of international prime brokerage hedge fund clients, due to no fault of their own, found themselves insolvent after their cash ended up being caught at the London Lehman office (the details of how that money was illegally transferred from London to the US is a different topic entirely) and never to be seen again except to satisfy general unsecured claims, so thousands of MF clients are about to realize that money they thought they had, even if completely unencumbered with other assets, read pure cash, read money not at risk, is now gone forever, and they will have to wait years until the bankruptcy process determines if the claim deserves priority status to the unsecured bondholders. Best case: assume a 70% haircut on the money, if it is ever to be seen again at all.

So who can be sued? Who can be blamed for this malicious and purposeful criminal act? Why everyone from the back office clerk presented in the thought experiment above, all the way up to the man at the very top, Jon himself, who, like in every other act of Wall Street impropriety will plead stupidity and deny he ever knew of this crime. Unfortunately, our criminal regulators, who will be just as complicit in clearing him of all wrongdoing, will aid and abet this latest destruction of faith in US capitalism.

What happens next? Why customers at all other brokerages, all other exchanges, afraid that their money will suffer the same fate as MF, even if they transact with perfectly solvent clearers and agents, will proceed to pull their money, as they know they have nobody to trust but their own prudent and forward looking actions. Which in turn will start the kind of liquidity drain that killed not only Lehman, but froze money markets, and with that brought the complete capital markets to a standstill, only to be thawed after the Fed pledged multiples of the US GDP to rescue Wall Street in October of 2008.

And that, dear reader, is called unintended consequences, and how the bankruptcy of a small exchange can avalanche into a crippling Ice Nine of what is left of capital markets all over again, courtesy of crony capitalism, rampant criminality and a regulator and enforcement body that is more fascinated with midget porn than any regulating or enforcing of the very firms it hopes to get an assistant general counsel job from in a few short years.

MF Global Caught Stealing Hundreds of Millions from Customers

[The 2012 Scenario]

A Guide To Closing Your Bank Account

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Bank Transfer Day is gaining some serious steam. Although it’s not technically affiliated with Occupy, it’s being embraced by the movement and is the first specific call to action since the Occupy protests began.

The description and goal of Bank Transfer Day is straightforward: If you currently have checking and savings accounts (deposit accounts) with a big bank, the organizers encourage you to remove all of your funds, close your accounts, and place your money in a new deposit account with a not-for-profit credit union. The organizers ask that you do this by November 5. And since November 5 is a Saturday, you should definitely do it before November 5 since many big banks aren’t open on weekends.

Bank Transfer Day can significantly impact the way banks are able to make a profit. In simplest terms, banks rely on our deposit account balances to make loans that net substantial profits. Without our deposits, banks can’t make loans. And if banks can’t make loans, they’re going to take notice. And they’re surely going to freak out.

So if you currently have a deposit account with a big bank and you want to participate in Bank Transfer Day, read the following steps. It’s a field guide that will help you accomplish this meaningful task of shifting your money from corporations that serve the 1% and put it with an organization that cares about the remaining 99%.

What You Need To Do Before Walking Into Your Big Bank Branch

  1. Go through previous big bank statements to see exactly which accounts you have. Be sure to check the names on each account. If you are closing a joint account with two holders, it makes a difference whether the word joining your names is “and” or “or.” If the account in your name is in your name and someone else’s, you will both need to go in and close the account. If the account is in your name or someone else’s, either of you can close the account. Some big banks may vary on this policy, so it’s best to call your big bank to find out exactly what you need to do prior to walking into your local branch.
  2. lf you have any loans with a big bank, look closely at your statements and paperwork you signed at the time of closing. There very well might be penalties that will trigger a higher interest rate if you close your checking account. Big banks excel at offering customers lower interest rates on mortgage and auto loans if you open a checking account and maintain a minimum balance. A primary checking account is a bank’s ultimate goal to securing your, ahem, loyalty. A primary checking account also leads to, on average, the opening of three additional accounts with that financial institution. Decide whether or not you can or have the willingness to pay off the outstanding loan balance. If you do not pay off the loan balance, call your bank to ask about escalating fees or rate increases by closing your checking account before walking into your local branch to close the checking account.
  3. Stop using your deposit accounts ASAP. You need to allow everything to clear the accounts completely before you close them. This clearing process takes about two weeks to complete. Keep close tabs online to see which transactions are still outstanding.
  4. Research non-profit credit unions. You will need a place to deposit your money, so perform this research before closing your big bank accounts. A good resource for finding credit unions is Find A Credit Union. Make your decision on which non-profit credit union you will join before walking in to the big bank branch to close your deposit accounts.

What To Do When You Walk Into Your Big Bank Branch

  1. Approach a branch teller and tell him/her that you would like to close your accounts. The teller might hand you off to a customer service representative due to the bank’s account opening and closing protocol. Or the teller might hand you off because they don’t want to tie up customers’ wait time in the teller line.
  2. If the bank employee asks why you are closing your account, decide in advance the reason you’re going to provide. You can tell them you’re unhappy with big banks. You can tell them you’re a part of the 99%. Or you can decline to give them a reason. The most important thing is to remain focused and not do anything imprudent that will keep you from accomplishing your goal of closing your deposit accounts and walking out of the big bank branch with your money.
  3. Once the account closing process begins, ask the bank employee if you have any cash reserve accounts tied to your deposit accounts. It doesn’t make sense to keep a line of credit open that was tied to your soon-to-be closed account.  
  4. The bank employee will ask if you would like to receive your money in the form of a check or cash. If you want to make it rain outside of the big bank branch, request to receive cash. If you don’t want to make it rain, we advise you to request a check.
  5. The bank employee will either give you a confirmation letter of your accounts being closed or they will mail it to you. Once you receive the letter, keep it on file for up to five years.
  6. Walk out of the big bank branch.

What To Do After You Have Closed Your Big Bank Deposit Accounts

  1. Shred all remaining checks and debit cards. This is an essential step. If you mistakenly use the checks or debit cards, you will be going back to the big bank branch—except this time it will be to clean up your mess.
  2. Go to the non-for-profit credit union you selected prior to closing your deposit accounts at the big bank. Open the accounts, get a new checkbook and debit card, and shake the employee’s hand, or even give him/her a hug.
  3. Sync up your new deposit account information (ABA routing number and account number for checks, card number, expiration date, 3-digit security code for debit card) to any relevant accounts that require automatic payments. For example, if you automatically pay your car insurance on a monthly basis with your checking account, be sure to sync up your checking account with your car insurance company. You may also want provide your new account information for online products such as iTunes, eBay, and PayPal.

  4. Stand in front of a full-length mirror. Admire yourself. You’ve earned it.

That’s all there is to it. Sounds like a lot, and perhaps it is. After all, big banks played a role in making this process difficult because it acts as a deterrent for people to withdraw their money and close their accounts. But if you stick to this guide and remain focused on your goal, you can impact meaningful and measurable change by participating in Bank Transfer Day.

This article originally appeared in FearLess Revolution.

Bank Transfer Day is gaining some serious steam. Although it’s not technically affiliated with Occupy, it’s being embraced by the movement and is the first specific call to action since the Occupy protests began.

Bank transfer day: A guide to closing your account

[Energy Bulletin –]

Written by testudoetlepus

October 26th, 2011 at 6:00 pm

Occupy Everything

without comments

“Recession Officially Over,” The New York Times‘ lead headline declared around 7 o’clock this morning. (Watch: they’ll change it.) That was Part A. Part B said, “US Incomes Kept Falling.” Welcome to What-The-Fuck Nation. I suppose if you include the cost of things like the number of auto accident victims transported by EMT squads as part of your Gross Domestic Product such contradictions to reality are possible. Elizabeth Kübler-Ross, where are you when we really need you?

I dropped in on the Occupy Wall Street crowd down in Zuccotti Park last Thursday. It was like 1968 all over again, except there was no weed wafting on the breeze (another WTF?). The Boomer-owned-and-operated media was complaining about them all week. They were “coddled trust-funders” (an odd accusation made by people whose college enrollment status got them a draft deferment, back when college cost $500 a year). Then there was the persistent nagging over the “lack of an agenda,” as if the US Department of Energy, or the Senate Committee on Banking, Housing, and Urban Affairs was doing a whole lot better.

This is the funniest part to me: that leaders of a nation incapable of constructing a coherent consensus about reality can accuse its youth of not having a clear program. If the OWS movement stands for anything, it’s a dire protest against the country’s leaders’ lack of a clear program.

For instance, what is Attorney General Eric Holder’s program for prosecuting CDO swindles, the MERS racket, the bonus creamings of TBTF bank executives, the siphoning of money from the Federal Reserve to foreign banks, the misconduct at Fannie Mae and Freddie Mac, the willful negligence of the SEC, and countless other villainies? What is Barack Obama’s program for restoring the rule of law in American financial affairs? (Generally, the rule of law requires the enforcement of laws, no?)

Language is failing us, of course. When speaking of “recession,” one is forced into using the twisted, tweaked, gamed categories of economists whose mission is to make their elected bosses look good in spite of anything reality says. I prefer the term contraction, because a.) that is what is really going on, and b.) the economists haven’t got their mendacious mitts around it yet. Contraction means there is not going to be more, only less, and it implies that a reality-based society would make some attempt to acknowledge and manage having less – possibly by doing more.

Instead, our leaders only propose accounting tricks to pretend there is more when really there is less. The banking frauds of the past twenty years were a conspiracy between government and banks to provide the illusion that an economy based on happy motoring, suburban land development, continual war, and entertainment-on-demand could go on indefinitely. The public went along with it following the path of least resistance, allowing themselves to be called “consumers.” They also went along with the nonsense out of the Supreme Court that declared corporations to be “persons” with “a right to free speech” where political campaign contributions were concerned – thereby assuring the wholesale purchase of the US government by Wall Street banks.

Praise has been coming in from all quarters for the peacefulness of the OWSers. Don’t expect that to last. In the natural course of things, revolutionary actions meet resistance, generate friction, and then heat. Anyway, history is playing one of its little tricks by simultaneously ramping up the OWS movement in the same moment that the banking system is actually imploding, with the fabric showing the most stress right now in Europe. I shudder to imagine what happens when OWS moves into the streets of France, Germany, Holland, Italy, and Spain.

All of the action right now has the weird aura of being an overture to the year 2012, fast approaching as we slouch into the potentially demoralizing holidays of the current year. I don’t subscribe to Mayan apocalypse notions, but there’s something creepy about the wendings and tendings of our affairs these days. OWS is nature’s way of telling us to get our shit together, or else. This means a whole lot more than bogus “jobs” bills and Federal Reserve interest rate legerdemain. It means coming to grips with the limits of complexity and purging the system of the idea that anything is too big to fail. What happens when Occupy Wall Street becomes Occupy Everything, Everywhere?


My books are available at all the usual places.


Occupy Everything

[Clusterfuck Nation]

Illusion of Stable Currency Vortex

without comments

by Jim Willie

The Jackson Hole Conference was a dud. To the astute student observer, something happened never seen before. The US central bank chief admitted failure, if only people could properly interpret and translate his words of helplessness and disappointment. A more apt description was that USFed Chairman Bernanke used the forum to announce on stage that the central bank failed and is powerless to react to the current lapse into recession. Many watchers no longer believe that a Quantitative Easing chapter #3 will be announced. Surely it will come sooner or  later. Watch the USTreasury auctions for the best clue. The QE2 program was about prevention of auction failure, not economic stimulus. A quick review of monetary policy and its effect is horrifying for its utter complete failure. The FedFunds rate has been under 0.5% for three years, yet neither the USEconomy nor the US housing market have recovered. That is a first in history. The USFed gobbled up over $1 trillion in toxic mortgage bonds and related derivatives, also with no resulting rebound in the housing or mortgage finance markets. The QE2 debt monetization program averted USTreasury auction failures, but the bold monetary inflation gesture sustained for several months did cause a backfire. It lifted the entire cost structure to the USEconomy in painful fashion. The profit margin squeeze and household spending squeeze have been radically evident and deeply damaging.

Chairman Bernanke admitted on stage before his peers, in full admiration of his failure and lost leadership, that the USFed has no more tools at its disposal, and that the USEconomy must recover on its own. For the first time he mentioned tools at his disposal without delineation what they were. He has none. His heavy doses of liquidity to treat insolvency have not succeeded in achieving anything except higher costs without job growth. He even attempted to point the finger of responsibility to the USGovt for its budget extravagance and intractable deficit. Big Ben has crashed his helicopter without any cash drops on citizen homes. Worse, he has shown all on stage that he has nothing under the hood, and that the bulge below is nothing but a massive paperwad in his pocket. The USFed is impotent. Its board members are in open dispute on the chosen path for QE3, even the scored success of QE2. The US Federal Reserve is a failure, its franchise system a failure, its monetary policy a failure, its balance sheet a failure, its analysis chronically incorrect, its initiatives in backfire, its toolbag empty. Perhaps it is time for the USFed to resign its contract with the USCongress. The crowning blow should have been the $16 trillion in unauthorized loans to global banks, given cloud cover by the TARP Fund and its confusion. This is a syndicate fortress with its own agenda, nothing more.


In past analysis, a Jackass viewpoint has been shared concerning the Competing Currency War. A sense of stability can be achieved, if only the European mess can be equated with the American mess on equal footing. For the past two years, the bounces and jumps in the USDollar have often come by wretched comparisons to the Euro currency. The Euro is uglier, therefore the USDollar looks better. But Europe has a huge distinction. Their many broken sovereign bonds from member nations trade at different bond yields, thus differentiating them. The Euro currency thus trades on interest rate expectations, rather than what Wall Street compromised analysts believe. EuroCB head Trichet is the object of language dissection also. His latest utterance indicated no longer a concern over inflation, thus prompting forecasts of no more ECB rate hikes. The European banks have a colossal problem as an extension of the rate differential Trichet brought about with the official rate hikes this year. The European inter-bank lending is in the process of seizure, as in the money market funds. Call it an unintended consequence from the EuroCB attempting to make distance from the reckless USFed monetary policy. Just another casualty in the Competing Currency War. The Euro Central Bank did not want to follow the USFed into the monetary hell-hole in 2009. The USFed went down to 0%, but the EuroCB chose not to follow. The Euro currency rose too high as a result, up to the 150 level, harming the German import trade. Just another casualty in the Competing Currency War. In fact, the war kills all economies and destroys capital uniformly.

The corps of sell side analysts seem never to factor in the bond yield effect, choosing to paint Europe with a single broad brush incorrectly. My theory is that the USFed is waiting for Europe to announce and come to a more firm agreement on bailouts of the expanding sovereign debt crisis. The EUR 850 billion pledge to the European Financial Stability Fund hit the rocks quickly, as German bankers pulled their support. The Europeans must contend with contagion, as the sovereign bond toxicity has moved across the borders into Italy and France. Funny how Spain has avoided the axe, but France has been thrust onto the firing line.

The USFed is waiting for the Euro Central Bank to take action. The key is the EuroCB debasing its Euro currency in the next move, which will give the USFed permission to debase its USDollar currency in its next move. They require coordination. Japan and Switzerland are doing their part in monetary debasement, having learned much from the Americans. The inescapable truth is that in the larger context it does not matter since both the Euro and USDollar are doomed. When Greece or Italy or Spain defaults on sovereign debt, or France is bailed out on sovereign debt, all of which are inevitable, the landscape will see 20 Lehman-type bank failures, perhaps some in London and New York. The strategy is clear. The central banker rats are cornered. The USFed is tangled in a US$ straitjacket. It cannot continue on its QE2 or advance into QE3 without a dance partner in Europe capable of stepping in the quicksand at a matching pace. If Bernanke Fed goes it alone, then the puss from the USDollar will break through the FOREX skin surface. That would cause a rash of rising costs in the entire commodity sector, from gasoline to food to cotton to metals to paper to scrap. The myopic wrong-footed analytically incompetent Bernanke, still widely revered for his leadership to ruin in a sequence of direct iceberg hits, would prefer that European monetary authorities dispense trillions more Euros to save their wrecked banks. The tragedy lies in the fact that neither the large American nor European nor London banks can be saved. Ample or accelerated liquidity does not fix their insolvency. The key is the falling housing markets, still on a downward course. The key is lost industrial bases, handed to China as part of the grand plan. That plan pertains to designed ruin, gold leases, and consolidated power.


The USFed, like the USDollar, is cornered. The historically unprecedented nearly $2 trillion in debt monetization fixed nothing. Take a look backwards at the lack of options that the USFed faced. In 2007, debate was over whether the USFed should drop the interest rate. The mortgage crisis was erupting from its subprime core. The USFed openly admitted its reluctance to lower rates, since doing so would invite inflation to the dinner table. After crisis struck the banks, after the stock market dived, after the recession was obvious, the USFed took action with sharp sudden big rate cuts. They were suddenly heroes whose elbows rested over the liquor cabinet. They are as lousy at policy delivery as with economic analysis topped by forecasts. In early 2010, the USFed was again cornered without options. It was pressured to keep the near 0% steady, since the housing market was so fragile. They openly spoke about an Exit Strategy from the ZIRP jail. The Zero Interest Rate Policy, for adept students, is a permanent prison, something American economists refuse to comprehend or believe, due to blindness, incompetence, intellectual compromise, and syndicate devotion. So instead of exiting from the 0% corner, then doubled down with a Quantitative Easing enema, both forecasted by the Jackass. Being in a straitjacket is compounded by massive bloat of liquid infusions. The excrement is played out on the USEconomy directly, but the global economy as well, from the rising cost structure.

Questions abound while for almost five years, the USFed has been out of options. Should they pop the housing bubble they so eagerly created in 2006 by hiking interest rates? Should they instead encourage price inflation by lowering rates below the prevailing inflation rate, as in free money? Should they prevent a galloping recession, or encourage more asset bubbles? Should they lap up the excess liquidity, or rely upon inflation as a growth engine? Should they take away bank loan loss reserves, or leave the Fed balance sheet exposed as wrecked? Should they go it alone with QE3, or enlist the aid of other central bankers in a Global QE? Should the primary bond dealers be hung out to dry as they swallow huge USTBond supply, or continue the 3-week roundtrip to FOMC coverage to hide the complete auction farce of indirect backdoor bond monetization? Should the stock market be used as a justification for massive QE3 liquidity infusions in a departure from the Fed charter, or permit the stock indexes to settle at lower levels in synch with the reality of recession and profit squeeze? Should they attempt to let the banking system run without crutch props and intravenous lines, or continue them in a manner that displays the USFed acting as the entire banking system intermediary octopus? Should they let the USEconomy falter badly in order to encourage USTreasury Bond demand in a stock fund migration, or stand aside and not crowd out the bond market which is vital to capital formation? Should they permit a large already dead US bank to fail, in order to gain more emergency powers and earn the side benefit of a black hole to lose more data? Should they simply continue doing what they wish, and simply lie much more?

It is extremely safe to conclude that the USFed has no good choices. It is without alternatives or tools. The deception is topped off by decisions to deploy the powerful leveraged Interest Rate Swaps. They enabled the 10-year USTNote yield to fall to 2.0% and paint a billboard to contradict the risk of USGovt credit worthiness. Soon the Office of the Comptroller to the Currency will not report such derivative data, since it is so clearly the tool to keep long-term interest rates down. The IRSwap not only pushes down rates, but creates artificial end demand for bonds that covers the $trillion bond fraud committed by Wall Street firms. They lost their investment banking business, but found a ripe channel with USGovt cloud cover. All hail the resilient USTreasury Bond asset bubble. It is a sponsored Black Hole. It will starve the USEconomy for capital. Its supply will grow from even larger deficits. Its appetite will grow. Its funding needs will grow. It will demand QE To Infinity. The USTBond bubble will destroy the USDollar. It will destroy the entire fiat monetary system. The pathogenesis will require the passage of time before conclusion, more than the Sound Money advocates believe, but not as much time as the Powerz believe. The pace of internal systemic devastation has turned rapid.

The language to cover their actions is full of deception and veiled intrigue. The USFed never discusses the risk to USTreasury auctions, the real reason they instituted QE1 and QE2, and the actual reason they will be forced to institute QE3. They further cloud the stage with their nonsense about deflation. The pendulum moves from inflation to deflation over the many years and back whenever the USFed must justify its destructive policy. The ringtones of deflation were frequently heard a year ago when QE2 was announced. They actually said that with higher risk of falling prices, the need for QE2 was urgently pressing. The latest ringtones direct attention to an economy denied as showing signs of recession. Bear in mind that the Bernanke Fed has not correctly assessed breakdown risks, has not correctly analyzed any risk of bond contagion, has not correctly anticipated any price shocks, and has dutifully channeled $trillions to big banks in the open and in large quantities shrouded by secrecy.


Last week the Jackass was on high alert for the trigger for a US Stock market rebound. Anything reasonable would serve the purpose. It arrived with vivid deception and full banner. The durable goods report was the road car decided upon to wave the green flag on the track. The headline number was sufficient to paint on the pace setter car. It stated a 4.0% rise in durable goods orders for July. Yippie!! But please do not bother to read the details, since the audience was both mathematically challenged and in desperate need of good news. The quick hint was given when the huge Boeing order was a key item on the supposedly positive news. The durable goods order figure excluding transportation was up only 0.7%, not good, not bad. Those big one-time aircraft orders do skew the data indeed. Another item skews the data, basic weapon system orders required to sustain the endless sacred wars. They are devoted to destruction and fraud, not nation building, at home or abroad.

Since the Hat Trick Letter began, the focus has been given to the real CAPEX order statistic. It is defined as the ex-defense, ex-transportation capital goods orders. For July this figure came in at MINUS 1.5%, heavily watched by competent economists. The revision for June was plus 0.6% growth. The competent economists were either drowned out, or decided to swallow their integrity. Their voices were not heard, or their mouths were covered. Often they do speak about the more meaningful CAPEX orders. Much more additional extra weight of recession and its pressure comes from the federal and state budget slashing and immediate job cuts. This is basic science that escapes the compromised majority.

Alcoholics Anonymous has a wonderful principle put to practice, which cuts through the maze, the nonsense, and the denials. If a USEconomic recession was not painfully obvious even to the street bums and bank parasites, then why is the question asked 38 times per day?? At the household level, if the chronic question of Uncle Albert being a drunk keeps being asked and repeated in discussion, even at the dinner table, then the question itself is a confirmation of his alcoholic condition. The other rationalization tools often relied upon by the denial experts have been brought forth in the financial press. The bad weather from the spring rains in the Plains and Midwest were a drag. The Japanese supply chain disruption from their earthquake and tsunami disasters, followed by the Fukushima nuclear meltdown, they too were a certain drag. Then came the freeze in business decisions and commitments from the stalemate on the USGovt budget impasse. It also contributed to the drag. Lately, the crutch is Hurricane Irene which slammed the entire eastern seaboard, causing floods and power outages. The storm and its damage are an unmistakable drag. To be sure, monetary policy, fiscal policy, stimulus policy, and economic policy are all fine and dandy. The problem is all the one-off exogenous factors. What a crock!!

A truly perverse dynamic is at work. The expectation of economic recession is widely seen as a byproduct extension of the major US Stock indexes. This is backwards, since the painted tapes and high frequency trading and foreign subsidiary profits and doctored economic statistics are the norm. The S&P500 stock index has become a quintessential leading indicator, and thus the object of manipulative control, a major piece to Management of Perceptual Expectations. The pre-occupation with consumer spending dominates the distorted attention span. In a healthy system, the focus would be on capital spending instead. The nation continues to be stuck in false ideology preached by heretical high priests, a strong remnant from the last decade. The USEconomy was believed in 2001 through 2006 to be dominated by assets as engines, rather than industry and factories. The blockheaded called it the Macro Asset Economy, the latest chapter in their Book of Ruin. Just check the recent data.

  • Philly Fed logged in at minus 30.7 after recently careening into negative ground

  • Richmond Fed logged in at minus 10 after treading near zero for two months

  • Dallas Fed logged in at minus 11.4 after a minus 2.0 the previous month

  • Empire State logged in at minus 7.72 after a 3.76 the previous month

  • CAPEX business investment down 1.5% in July

  • Jobless claims stuck at 400 thousand per week

  • Gross Domestic Product at 1.0%, after a 5% lift from corrupted inflation adjustment

  • West Texas oil price at $89.14, but European Brent at $114.80


The USDollar appears vulnerable from two fronts. Since mid-2010, the US$ DX index has been under siege due to the heavy debt monetization of USTreasury and US Mortgage Bonds, during a hyper monetary inflation exercise of grand debasement. The threat from the other side is a US$ DX decline from a return slide into the quicksand of another USEconomic recession. A recession, whether recognized or not, will result in another round of stimulus initiatives of equally questionable effectiveness. More USDollars will be wasted, used, with certain debasement the outcome. Regardless of the next USFed move, or no move, the USDollar is extremely vulnerable. The only factor keeping it up is the ruin in Europe. Given the double barreled threat of an Inflationary Recession (my forecast), the USDollar is dangerously vulnerable.

The biggest upcoming beneficiary to the USDollar and major currency debasement will be Silver. The Gold price made its summer run impressively, reaching 1900. Huge profits are in the process of being switched from gold to silver positions. The 44:1 ratio in price enables sizeable new silver positions to be leveraged. Look out for a significant upward price move in Silver, as its technicals are showing a very positive bullish signal. The simple Moving Aveage is set for a crossover, an event noticed by thousands of commodity and FOREX traders. Silver is unique, being both an industrial metal in shortage deficit, and a monetary metal pursued as a safe haven during a time of crumbling monetary system and rancid sovereign bonds. Always remember that Gold fights and wins the political battles, but Silver rides through the broken phalanx on a white horse to take triple the gains.


A hilarious display of vested interest, lifting of fellow broken brethren, and market props of bank stocks came last week. The flagship Deutsche Bank has been a primary player with the London, Wall Street, and Swiss bankers for two decades, working diligently to keep the fiat paper game going, to conceal the gold leasing, and other sundry duties like money laundering with the US agencies. The mighty D-Bank was caught in the toxic US mortgage bond trap, was caught in the housing toxic asset trap, was caught in the naked gold shorting trap, and has been caught in the Southern Europe sovereign bond toxic bond trap. Embattled CEO Josef Ackermann might continue his ruinous tenure until 2013, but that will not remove the criminal charges that lurk over his head. The hilarious display last week came in the form of D-Bank giving a strong recommendation to Barclays and Royal Bank of Scotland, two giant banks in deep throes of insolvency. So a dead bank recommends other dead banks. Perhaps intrepid Barclays analysts can recommend Deutsche Bank, and RBS analysts too. Maybe analysts at Bank of America can recommend Barclays, RBS, and D-Bank all. They surely all participate in flash trading to lift in rapid round robin their exchanged stock shares.

Closer to home, Bank of America is a wreck of a diseased hollow tree, a reflective symbol of the irreparably insolvent US bank sector. A quick glance is useful. BOA is very busy selling off its best and only viable assets. It will be left with the hollow tree incapable of withstanding even a mild storm. They took in the Berkshire Hathaway $5 billion in funds from Warren Buffet. Regard this as a second payment toward syndicate membership for Buffet, the first being the Goldman Sachs preferred stock purchase two years ago. Membership has its privileges, avoided scrutiny, and protection from Wall Street ambushes. Then BOA sold its 5% stake in the Chinese Construction Bank, reaping $8.3 billion. The funny part was that BOA executives claimed they did not need the money. Neither does any dying man need food or water. The latest blow was the Federal Deposit Insurance Corp and their rejection of the $8.5 billion cap on the mortgage bond fraud case payoff. This is the bond fraud restitution ring fence, as BOA rounded up its favorite fraud victims, and attempted to strike a deal to limit its liability. The list of plaintiffs in the accord included Blackrock, MetLife, and the New York City. The only problem is that several important mortgage bond fraud victims were not included, like American Intl Group, the USGovt adopted dead orphan. AIG has filed a $10 billion lawsuit against Bank of America. But never fear, the putrid “BAC” stock shares from the grotesquely insolvent bank are rising. Apparently the whiff of Pine Sol and Glade fresheners can produce a short cover stampede, followed by moronic go-go speculator types. The fact of the matter is that 475 thousand jobs have been lost among Wall Street firms, but not enough for executives. European banks have shed 40 thousand jobs in just the last month. BOA has cut all non-essential businesses. Unfortunately, they cut all lines from profitable businesses. They are left with the more pure rot.


The path to recovery seems so elusive. The obstacles are obvious to any competent economist, of which there are few. To be an American economist in recent years requires great compromise, since the employer doling out the paycheck or research grant has deeply vested interests to protect. One could provide a long recital of principles of capital formation, of tangled control lines extended to USGovt finance ministries, of profound fraud engrained in programs old and new, but suffice it to be simple. Two requirements are basic in fostering a recovery, apart from necessary tax reform or regulatory reform. Neither required step will remotely occur, since doing so would remove from power the bankers who control the USGovt, the bankers who control the USDollar printing press, the bankers who profit from counterfeit and fraud. They will never order their own removal from power, their own ruin financially, their own exposure to criminal prosecution. Therefore the system will march along down the edges of the abyss. The irony is that with each major bank bailout or bond buy program or organized regulatory lapse or blessed accounting hypocrisy, a new deeper crash bottom potential in the abyss is defined. Here are the two requirements for recovery:

  • Liquidation of big US banks deemed too big to fail, since rotten and loaded with toxic paper that inhibits their ability to function as credit engines, while they require unlimited funds to perpetuate their garden of ruin.

  • Liquidation of big housing inventory, since bloated and hanging over the entire market, preventing a price stability situation for another two years (2013), and whose continued bank held inventory expansion assures two more years (2015) on top of that, a result of deep distress if not internal chaos, voluntary loan defaults by homeowners, job insecurity, and property title challenges in court (i.e. permanent market decline).

Any bank liquidation would cause the biggest ten US banks to enter a disruptive failure, much worse than Lehman Brothers. The fallout would take years to clean up, complete with a derivative meltdown nuclear chain of events. Any housing liquidation would result in at least a 20% to 30% additional home price decline, sufficient to topple another 500 midsized US banks. So neither liquidation will occur, not even close. All attempted solutions save the broken zombie banks, perpetuate their propped insolvent structure, waste new money, debase the currency further, and require 0% rates to continue. The deep distortions continue to rip apart the nation. None of the current steps taken are sincere legitimate attempts to remedy the system. The countless captains of the ship, mostly wearing Goldman Sachs and JPMorgan uniforms, have no vested interest in remedy. It is as simple as that. Just recently the Standard & Poors head was replaced by a Citigroup vice president. No end to the club tokens used to seat members of the clan.


From subscribers and readers:

At least 30 recently on correct forecasts regarding the bailout parade, numerous nationalization deals such as for Fannie Mae and the grand Mortgage Rescue.

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  (AlanS in New Mexico)

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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at For personal questions about subscriptions, contact him at

Illusion of Stable Currency Vortex

[The Daily Gold]


without comments

For a month, Egypt has been a magic mirror for America to behold its own wonderfulness, like a diorama of “Freedom and Democracy” out of a Kentucky creationist museum. In this, our hour of national narcissism, we imagine a replay of Bunker Hill, Valley Forge, and Yorktown – with a falafel on top – in the streets of Cairo in order to prop up our own disintegrating self-esteem, while committing arson on our national household.

Also conveniently forgotten for the moment – because there’s nothing dramatic about nothing happening – is that a particular corner of the Middle East remained stable for thirty-odd years. Did we fork over $70 billion to Hosni Mubarak during that period so he wouldn’t start another war? Could be. But it was surely money better spent than the even larger nut we dropped all at once on AIG, Goldman Sachs, and a few other domestic fungi on the tree of liberty back home. And we’re still shoveling billions from the Federal Reserve into a claque of Too-Big-To-Fail banks in the form of a ZIRP loan carry trade under the pretense that they can use it to shore up their “reserve ratios.” A lot of people from New Jersey to Seattle need their reserves shored up, too, but they can forget about running personal ZIRP carry trade rackets out of the Fed’s loan window.

Contrary to what some readers suppose, cynicism (as in, thinking the worst of everything about everyone) is really not my bag – though comedy is another matter. However, if ever cynicism was an appropriate response to something, it would be the initial throes of a political revolution. The early triumphs in and around Paris after 1789 must have been soul-stirring, but you could forgive a casual observer who caught the scent of trouble in the air – and what followed was a years-long dismaying merry-go-round of mis-rule that climaxed in the Reign of Terror and finally resolved a full decade later in the crowning of another absolute monarch: the emperor Napoleon. Gazing back at all that, it really took France nearly a century to get its act together politically from the moment that the governor of the Bastille surrendered his keys.

All forms of government in recent times find themselves in the same predicament: the mismanagement of contraction. Too many people and too many enterprises are competing for a contracting resource base. In many poor countries it expresses itself plainly as expensive food, or no food at all for some. The expensive food part of the story is already being felt in the wealthier countries, too, but the contraction expresses itself more in terms of money – many people do not have enough, or else much less than they were used to having, and at the same time the money that does circulate seems increasingly worthless. So we have the great debate over whether the contraction is deflationary or inflationary.

That debate could not happen if money retained its essential meaning as a reliable medium of exchange, but the idea of what exactly money is, is becoming increasingly clouded everywhere as compound interest fails in the face of contraction. And as compound interest fails – in the form of loans that can’t be repaid – the banking system implodes. This implosion has been artfully papered over with enough accounting tricks so that many citizens do not even perceive it as being underway. The results are insidious: falling living standards, no role to play in the economy (that is, a job), and a shocking array of social pathologies ranging from nearly universal family dysfunction to men acting like babies to obscene discrepancies in income.

The one thing that’s not contracting for now is the human population, inarguably in overshoot in relation to available resources, but population is a lagging indicator. Some people will still have sex, and produce the results of it, even when they’re starving. But meanwhile disease and strife creep into picture and you get the failure of public health systems, and military misadventures over oil or water, and after a while even a lagging indicator gets dragged into center stage. Of course, I’m persuaded that arguing about “overpopulation” is rather silly, since we are not going to do a goshdarn thing about it in terms of policies or protocols. (My own suggestion to make abortion retroactive has not been greeted with enthusiasm.)

You could probably pick the next location in the Middle East revolution derby by pitching a dart at the map. Just about all of them are ready to go up in flames for one reason or another – that really boil down to dwindling resources. And then, there are the various beefs, grudges, and jealousies that could prompt conflict between them, too. Lots of folks, for instance, are probably wondering what Hezbollah aims to do with its impressive collection of rockets.

I don’t blame poor Mr. Obama for trying to keep the lid on all this – which is arguably a conceit in itself – since the country that he is most in charge of whirls around a very impressive drain of hopeless debt and vanishing prospects. But my guess is that the next big event in the center ring of current affairs will be a First World money crisis. It is true that the stock market only goes up. And then, one fine day, a large, angry, long-necked bird unfurls a set of elegant black wings and goes honking off into a red sun, and suddenly you are in a new realm where the stock market only goes down… and certain sovereign bond rates soar with that angry bird… and things Too-Big-To-Fail fall on their asses and fail… and everything changes.

We read this morning that Egypt is under martial law with a suspended constitution – a logical step, given the army takeover, but not something that makes you want to buff up your flag lapel pin and say a prayer for the ghost of Winston Churchill. Things are definitely in flux. Here in upstate New York, the sap is about to run in the diseased maple trees.


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[Clusterfuck Nation]

Written by testudoetlepus

February 14th, 2011 at 6:58 pm