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Following the Bodies: “We Are at the Precipice of Something So Big, It Will shake the Financial World”

Following the Bodies: “We Are at the Precipice of Something So Big, It Will shake the Financial World”.

Douglas J. Hagmann
February 15th, 2014
Northeast Intelligence Network

Editor’s Note: In the investigative report below, Douglas Hagmann of the Northeast Intelligence Network delves deep into a world that most only believe exists in the realm of cinematic thrillers. It’s one of intrigue, corruption and murder, and it involves some of the world’s most influential firms, business leaders and politicians. There are billions, if not trillions, of dollars on the line. When the nefarious agendas of these sycophants are threatened it’s not much of a stretch of the imagination to suggest that those involved will do whatever is necessary to protect their wealth, power and influence. For them, the only way to deal with the problem is to silence it – permanently.

One can chalk off the recent string of banker suicides to coincidence, but what if there were more to it? What if, for example, 39 year old Vice President of JP Morgan Gabriel Magee, who emailed his girlfriend to tell her he was “leaving the office and would see her shortly,” didn’t actually throw himself off of a 33-story building in what police claim was a “non-suspicious” fatal fall? What if the circumstances surrounding many of the deaths of these bankers and a Wall Street Journal financial reporter were the result of, as one financial insider noted a week before the deaths unfolded, a “clean up” of people who knew too much and posed a threat to the overall agenda? Much of this may be difficult to stomach for some, but considering that the people responsible for collapsing the global economy five years ago not only never faced justice for their crimes, but were rewarded with billion dollar bank deals as a result, is it foolish to suggest that there’s much more going on here than the mainstream media and Justice department officials would have us believe?

It all just seems… a bit too convenient.


Exposing what lies beneath the bodies of dead bankers and what lies ahead for us
By Douglas Hagmann

I feel that this is one of the most important investigations I’ve ever done. If my findings are correct, each of us might soon experience a severe, if not crippling blow to our personal finances, the confiscation of any wealth some of us have been able to accumulate over our lifetimes, and the end of the financial world as we once knew it.  The evidence to support my findings exists in the trail of dead bodies of financial executives across the globe and a missing Wall Street Journal Reporter who was working at the Dow Jones news room at the time of his disappearance.

If the bodies were dots on a piece of paper, connecting them results in a sinister picture being drawn that involves global criminal activity in the financial world the likes of which is almost without precedent.  It should serve as a warning that we are at the precipice of something so big, it will shake the financial world as we know it to its core. It seems to illustrate the complicity of big banks and governments, the intelligence community, and the media.

Although the trail of mysterious and bizarre deaths detailed below begin in late January, 2014, there are others. Not only that, there will be more, according to sources within the financial world. Based on my findings, these are not mere random, tragic cases of suicide, but of the methodical silencing of individuals who had the ability to expose financial fraud at the highest levels, and the complicity of certain governmental agencies and individuals who are engaged in the greatest theft of wealth the world has ever seen.

It is often said that life imitates art. In the case of the dead financial executives, perhaps death imitates theater, or more specifically, the movie The International, which was coincidentally released in U.S. theaters exactly five years ago today.

We are told by the media that the untimely deaths of these young men and men in their prime are either suicides or tragic accidents. We are told what to believe by the captured and controlled media, regardless of how unusual or unlikely the circumstances, or how implausible the explanation. Such are the hallmarks of high level criminality and the involvement of a certain U.S. intelligence agency intent on keeping the lid on money laundering on a global scale.

Obviously, it is important that this topic is approached with the utmost respect for the families of those who died, that they be allowed to grieve for the loss of their loved ones in private. However, it is extremely important that the truth about what is happening in the global financial arena is not kept from us, as we will also be victims of a different nature.

The missing and the dead: a timeline

The following is provided as a chronological list of those who have gone missing or been found dead under mysterious circumstances. It is important to note that this list consists of names of the most recent incidents. There are more that extend back through 2012 and beyond.

January 11, 2014

MISSING: David Bird, 55, long-time reporter for the Wall Street Journal working at the Dow Jones news room, went for a walk on Saturday, January 11, 2014 near his New Jersey home and disappeared without a trace. Mr. Bird was a reporter of the oil and commodity markets which happened to be under investigation by the U.S. Senate Permanent Subcommittee on Investigations for price manipulation.

January 26, 2014

DECEASED: Tim Dickenson, a U.K.-based communications director at Swiss Re AG, was reportedly found dead under undisclosed circumstances.

DECEASED: William Broeksmit, 58, former senior manager for Deutsche Bank, was found hanging in his home from an apparent suicide. It is important to note that Deutsche Bank is under investigation for reportedly hiding $12 billion in losses during the financial crisis and for potentially rigging the foreign exchange markets. The allegations are similar to the claims the institution settled in 2013 over involvement in rigging the Libor interest rates.

January 27, 2014

DECEASED:  Karl Slym, 51, Managing director of Tata Motors was found dead on the fourth floor of the Shangri-La hotel in Bangkok. Police said he “could” have committed suicide. He was staying on the 22nd floor with his wife, and was attending a board meeting in the Thai capital.

January 28, 2014

DECEASED:  Gabriel Magee, 39, a JP Morgan employee, died after reportedly “falling” from the roof of its European headquarters in London in the Canary Wharf area. Magee was vice president at JPMorgan Chase & Co’s (JPM) London headquarters.

Gabriel Magee, a Vice President at JPMorgan in London, plunged to his death from the roof of the 33-story European headquarters of JPMorgan in Canary Wharf. Magee was involved in “Technical architecture oversight for planning, development, and operation of systems for fixed income securities and interest rate derivatives” based on his online Linkedin profile.

It’s important to note that JPMorgan, like  Deutsche Bank, is under investigation for its potential involvement in rigging foreign exchange rates. JPMorgan is also reportedly under investigation by the same U.S. Senate Permanent Subcommittee on Investigations for its alleged involvement in rigging the physical commodities markets in the U.S. and London.

Regarding the initial reports of his death, journalist Pam Martens of Wall Street on Paradeastutely exposed the controlled, scripted details of the media accounts surrounding Magee’s death in an article written on February 9, 2014. Ms. Martens writes:

“According to numerous sources close to the investigation of Gabriel Magee’s death, almost nothing thus far reported about his death has been accurate. This appears to stem from an initial poorly worded press release issued by the Metropolitan Police in London which may have been a result of bad communications between it and JPMorgan or something more deliberate on someone’s part.” [Emphasis added].

Ms. Martens also notes:

No solid evidence exists currently to suggest that the death was a suicide. In fact, there is a strong piece of evidence pointing in the opposite direction. Magee had emailed his girlfriend, Veronica, on the evening of January 27 to say that he was about to leave the office and would see her shortly. [Emphasis added].

Based on information she developed, it appears likely that Magee did not meet his fate on the morning his body was discovered, but hours earlier. Considering the possibility that Magee might now have died in the manner publicized, Ms. Martens offers speculation, and notes it as such:

If Magee became aware that incriminating emails, instant messages, or video teleconferences were not turned over in their entirety to Senate investigators or Justice Department prosecutors, that might be reason enough for his untimely death.

Looking at the death of Magee in the context of a larger conspiracy, it is difficult not to suspect foul play and media manipulation.

January 29, 2014

DECEASED: Mike Dueker, 50, who had worked for Russell Investment for five years, was found dead close to the Tacoma Narrows Bridge in Washington State. Dueker was reported missing on January 29, 2014. Police stated that he “could have” jumped over a fence and fallen 15 meters to his death, and are treating the case as a suicide.

Before joining Russell Investments, Dueker was an assistant vice president and research economist at the Federal Reserve Bank of St. Louis from 1991 to 2008. There he served as an associate editor of the Journal of Business and Economic Statistics and was editor ofMonetary Trends, a monthly publication of the St. Louis Federal Reserve.

In November 2013, the New York Times reported that Russell Investments was one of several investment companies that were under subpoena from New York State regulators investigating potential “pay-to-play” schemes involving New York pension funds.

February 3, 2014

DECEASED: Ryan Henry Crane, 37, was the Executive Director in JPMorgan’s Global Equities Group. Of particular relevance is that Crane oversaw all of the trade platforms and had close working ties with the now deceased Gabriel Magee of JPMorgan’s London desk. The ties between Mr. Crane and Mr. Magee are undeniable and outright troublesome. The cause of death has not yet been determined, pending the results of a toxicology report.

February 6, 2014

DECEASED: Richard Talley, 57, was the founder and CEO of American Title, a company he founded in 2001. Talley and his company were under investigation by state insurance regulators at the time of his death. He was found in the garage of his Colorado home by a family member who called authorities. Talley reportedly died from seven or eight “self-inflicted” wounds from a nail gun fired into his torso and head.

The enormity of the lie

One must look back far enough to understand the enormity of the lie and the criminality of bankers and governments alike. We must understand the legal restraints that were severed during the Clinton years and the congress that changed the rules regarding financial institutions. We must understand that the criminal acts were bold and bipartisan, and were designed to consolidate wealth through the destruction of the middle class. All of this is part of a much larger plan to establish a one world economy by “killing” the U.S. dollar and consequently, eradicating the middle class by a cabal of globalists that existed and continue to exist within all sectors of our government. The results will be crippling to not just the United States, but the entire Western world.

What began decades ago is now becoming more transparent under the Obama regime. Perhaps that’s the transparency Obama promised, for we’ve seen little else in terms of transparency with regard to the man known as Barack Hussein Obama. For those not locked into the captured corporate media, we’re starting to see the truth emerging. The truth is that we’ve been living under a giant Ponzi scheme and we, the American citizens, are the suckers. As illustrated by the list of dead bankers above, however, the power elite need a bit more time before the extent of their criminality is revealed. The need a bit more time to transfer the remaining wealth from middle-class America to their private coffers. Timing is everything, and a magic act only works when all props are in place before the illusion is performed. Only when their timing is right will the slumbering Americans realize the extent of the illusion by which they’ve been entranced, at which time they will be forced into submission to accept a financial reset that will ultimately subjugate them to a global economy. I contend that this is the reason for the recent spate of deaths, for those who met their tragic and untimely end had the ability to expose this nefarious agenda by what they knew or discovered, or what they would reveal under subpoena and the damage they could cause to the globalist financial agenda.

It is an insult to the public intellect that the media so readily pushes the official line that the deaths were all suicides given the unusual circumstances surrounding nearly all of those listed. This itself should be ringing alarm bells with anyone of reasonable sensibilities, or at last those who are paying the slightest bit of attention to the larger picture. The media is either complicit or completely inept. While incompetence is evident in many areas, even the most inept journalist or media company cannot possible deny what exists directly in front of them. They can only withhold the truth.

Connecting the dots

To understand what is taking place, I contacted a financial source who has accurately predicted many events that we are now seeing taking place, including the deaths of certain financial people for an explanation. In fact, he actually predicted that we would see a “clean-up” of individuals who posed a serious threat to certain too-big-to-fail-or-jail banks and “banksters” a full week before the events began to unfold. Truth be told, I initially greeted his prediction with some skepticism, for such things don’t really happen in the real world, or so the obedient and well-managed media tells me.

V, The Guerrilla Economist” as he is known in the alternative media, has provided numerous insider alerts for Steve Quayle‘s website and has appeared as a regular guest on The Hagmann & Hagmann Report. He has an undeniable track record for accuracy, which has earned my respect. However, I thought that he had taken temporary leave of his senses when he twice suggested that there will be some house cleaning done of anyone posing a threat to the agenda of certain banks and the globalist agenda on our broadcasts of November 20, 2013 and again on January 10, 2014. In a separate venue, he described what was about to take place by using the analogy of the movie The International. Several dead bodies and a missing journalist later, that analogy has been proven accurate.

The fact is that we are seeing a clean-up where JPMorgan and Deutsche Bank seems to appear at the epicenter of it all. In January, JPMorgan admitted facilitating the Bernie Madoff Ponzi scheme by turning its head to his activities.  Despite this admission, the U.S. Department of Justice under Eric Holder declined to send anyone to jail under a deferred prosecution agreement. Yet this is only the proverbial tip of the iceberg.

In March, 2013, the U.S. Senate Permanent Subcommittee on Investigations released a heavily redacted 307-page report detailing the financial irregularities surrounding the actions of JPMorgan and the deliberate withholding of critical financial information by JPMorgan. Prominent in the mix are the actions of Bruno Iksil, who earned the nickname the “London Whale,” for his “casino bets” of others money that caused billions of dollars in losses. Yet, no cooperation was provided by Dimon’s foot soldiers as they failed to testify or otherwise cooperate with Senate investigators.

Remember the damage control and the deliberate downplaying by Jamie Dimon, who maintained that there was nothing to see here with regard to the “London Whale” criminal activities? What was originally described as a loss of perhaps $2 billion ultimately turned into many more times that, yet the actual numbers are still hidden from the public. Such events occurred under the noses of numerous financial executives who had knowledge that went undisclosed.

As we fast forward to today and the current spate of mysterious deaths, we begin to see that many of those who died existed on the periphery of events in the criminal actions of the financial industry. Moreover, it is reasonable to conclude that they possessed knowledge that if disclosed, could have interrupted the magic act taking place for the awestruck audience, captivated by the carefully crafted words of Yellen, her predecessors and the operatives within government who’s duty it is to regulate whatever is left of our current financial system.

That regulation is now a thing of the past. What we have today is a system of facilitation and co-operation between the largest corporations and financial institutions and the U.S. and our intelligence agencies. We now have the “too-big-to-fails” operating with impunity as a result of an incestuous, if not outright unconstitutional relationship where the banks are acting as operational assets for the CIA, the NYPD, and other intelligence and police agencies.

The JPMorgan-CIA-NYPD connection

Perhaps one of the best kept secrets, at least from the majority of the American public, is the integration and overlap between the “too-big-to-fail-and-jail” banks and the most advanced system of surveillance in the U.S. Would it surprise you to learn that the very banks that brought the United States to the brink of financial collapse in 2008, who looted the American public and continue to engage in what most perceive as criminal behavior in the financial venue not only have ties to the CIA, but are actually partnered with the CIA and NYPD surveillance of all of lower Manhattan? That’s right, the big banks such as JPMorgan, Citigroup and others have their own desks and surveillance monitors at a facility known as the Lower Manhattan Security Coordination Center, located at 55 Broadway, deep in the center of New York’s financial district.

The big banks—the very banks that have been the focus of fraud and corruption investigations have their own system of cameras, more than 2,000 in number, and operate them in tandem with NYPD surveillance cameras at a center that was funded with taxpayer money. Every square inch of lower Manhattan is under surveillance 24/7, not just by NYPD, but by JP Morgan and other members of the so-called “one percent.” Carefully consider the implications of this pact.

JPMorgan Chase and others have had long and quite intimate ties with the CIA. Today, however, the line between the banks that control our financial present and future and police and intelligence agencies no longer exist. This relationship of mutual benefit permits the CIA to use the financial institutions to “handle the money” for their various global initiatives, while it provides the banks a stable of “professional assistants” to handle their “security,” whether such security issues arise in the U.S., London, or elsewhere. Highly trained and skilled CIA operatives now work within the system of interlocked financial institutions that have been at the epicenter of the most egregious crimes involving the theft from our bank accounts and retirement savings.

Please stop and consider this for a moment. The very banks and their top executives who have not only brought the U.S. to the brink of financial collapse and Martial Law, engaged or facilitated in various criminal actions that resulted in fines (but no jail time) for the perpetrators, are working hand-in-hand with the CIA. Not only that, they are working in tandem with the NYPD at their surveillance centers, watching and videotaping every move made by anyone—including potential whistleblowers within their vast purview. By the way, this is no ordinary surveillance or surveillance cameras. You won’t find these cameras on the shelves of your local spy shop. These cameras can focus on the footnotes of a book you might be reading, or the words written on a piece of paper being held by an unwitting person. They employ facial recognition and other advanced visual and data aggregation capabilities, and the extent of their technological abilities is increasing every day.

Additionally, the data is collected and maintained, and files are created of people and groups who are merely going about their daily lives. Equally important, files are created and maintained of problem children and groups, like the Occupy movement and others who lawfully exercise their constitutional rights to protest the actions of the one-percent. Consider this in the context of the Occupy Wall Street protests. where the protesters were not only under police surveillance, but surveillance by the banks and their corporate officers against whom they were protesting. And it was all done with the approval and assistance of the police, in this case the NYPD, and U.S. intelligence agencies.

Now consider the plight of a whistleblower who wants to expose criminality within the ranks of a too-big-to-fail. The institution who is engaged in purported criminality based on the findings of the whistleblower can observe the whistleblower’s every move. Where they go, who they meet and what they are carrying to such a meeting. They can be tracked to a residence, a business, or even to their psychiatrist’s office, place of ill repute, or the residence of some significant other outside of their marriage, all of which would be invaluable for blackmail.

Perhaps the potential whistleblower is clean and free from anything that might dissuade them from revealing what they know, their case could be turned over to the in-house security of former CIA agents for proper disposition. It makes the movie The Firm look like child’s play by comparison.

This is not some fanciful delusion. There is proof of this that exists. The New York Civil Liberties Union (NYCLU) has documented the increasingly extensive surveillance being conducted in lower Manhattan and throughout the city. They have verified that  not only are our constitutional rights being violated every minute of every day, but the fruits of surveillance by police and corporate entities are shared between the police, the intelligence agencies and private financial institutions, without restraint on the distribution on such findings.

Are you engaged in a protesting against the criminality of the one-percent? Well, they one-percent are watching you, and they are literally seated right next to the police. Are you a journalist following up on possible “bankster” corruption by meeting a potential whistleblower? You better understand that the bankster target of your investigation is watching you, in real-time, with the complete approval and cooperation of the police. As documented by the NYCLU, you are likely now “on file,” and all data compiled is maintained and accessible not just to law enforcement, but to the very target of your investigation—in real time.

Such surveillance and integration between big banks, law enforcement and spy agencies is not just limited to lower Manhattan or even the United States. It is also most prevalent in London and other cities where international banking is conducted.

Real-time surveillance and the close working relationship between the “one-percenters,” police and the intelligence agencies gives the targets of criminal probes the ability to be pro-active when necessary. It’s all being done under the pretext of national security when it would appear that the real objective is to insulate the banksters from potential problems that exposure of their criminal actions might cause.

Oh, and don’t forget that  it is us who are paying for this.

Perhaps we would be well advised to not only consider the capabilities of the surveillance apparatus that exists where the big banks and police are working at adjacent surveillance terminals at 55 Broadway and other locations, but the incestuous working relationship between the banks and the CIA when we read about banker suicides.

Do not expect to see any exclusive report on this in the corporate media, for they, as requested have dutifully maintained their code of silence by not showing pictures of the brass name plates that identify the bankster terminals situated adjacent to the police terminals during photo shoots of this super-secret surveillance complex a few years ago. As detailed by the tenacious and indefatigable Pam Martens, journalist for Wall Street on Parade in this article, the captured media took a pass on revealing the whole truth about what’s really going on at 55 Broadway.

What has been revealed here is merely the tip of the iceberg. The tentacles of the corporate elite, facilitated and empowered by the CIA, the NYPD top brass, and other agencies have now covertly and effectively succeeded in invading everything you do. The fruits of this operation are being used to advance their global financial agenda and silence the opposition.

Knowing this, is it possible that the dead bodies that are increasing in number are the results of this joint surveillance operation? You will not find any answers in the mainstream media. The big banks have chosen to remain silent, even in the face of subpoenas, and have yet to face any legal consequences for their contempt. It’s not, however, merely contempt of congress or pseudo-investigative bodies. It’s their contempt of humanity, of you and me, and the victims that lie dead, leaving their families broken and wanting for the truth.

This article has been reprinted with permission from the Northeast Intelligence Network.


Please visit SteveQuayle.com and RogueMoney.net for headlines, reports and updates on the growing threat to our financial future. Also, tune in the The Hagmann & Hagmann Report on Monday, February 17, 2014 from 8:00-11:00 PM ET as we welcome “V, The Guerrilla Economist” and Steve Quayle to discuss this topic in-depth.

Dan Ariely: Why Humans Are Hard-Wired To Create Asset Bubbles | Peak Prosperity

Dan Ariely: Why Humans Are Hard-Wired To Create Asset Bubbles | Peak Prosperity.

Our evolutionary programming often works against us
by Adam Taggart
Saturday, February 15, 2014, 12:25 PM

Renown behavioral economist Dan Ariely explain why humans are biologically wired to make irrational decisions when money is involved. It’s a case of our evolutionary wiring interfering with the decisions we face in a modern world very different from the one our ancestors adapted to.

For instance, he explains how one of the easiest phenomena to create in a lab are valuation “bubbles”. Our vestigial herding instinct encourages us to imitate the actions of those around us (e.g. bidding for a particular asset), which then strengthens that signal for others (leading to even higher bidding), resulting in behavior not justified by the underlying fundamentals of reality (asset prices destined to crash).

In this podcast, Chris and Dan explore the human cognitive triggers that have led us to our third major bubble in 15 years (tech stocks, housing, credit) and why our natural programming often works against our best interests. In certain cases, like the banking sector, bad decision-making has become so ingrained in our institutions that Ariely thinks the “clean slate” approach is our best option should we have the courage to deploy it:

In very general brushstrokes I think that most bankers are in fact inherently decent people. We just put them in situation in which their conflict of interest is tremendously high and their social norms are incredibly dysfunctional.

When you hear bankers talking about their customers as Muppets, for example, they are forgetting who they are serving. They are hired by the rest of us to do a particular job; and they forget this. And then they have terrible conflicts of interest.

Imagine that I give you a world in which, if you can adopt a particular perspective on life, you could get $5 Million as a bonus. Wouldn’t you start believing that world? And then everybody around you is doing the same thing, and you have some justification for it by talking about financial market theory and so on. All of a sudden you could see how you could take good people and you could put them in this distorted way — in the same way that we talked about how global warming is probably the perfect storm for inaction — I think Wall Street is the perfect storm for allowing people to rationalize their own selfish motivations as if they are serving other people.

It is really, really terrible because we have not done anything to change the way we pay bankers. And we have not changed anything in terms of the code of ethics and morality.

On the consumer side, there is a tremendous loss of faith. We have been screwed and we know that we have been screwed. And we know that we are not trusting other people. And I think loss of trust is a central issue for this financial crisis and sadly nobody is trying to do anything about that. Human beings are incredibly forgiving, but nobody has really stood up and said, “I am really sorry. I made all of these terrible mistakes. I want this particular bank to start fresh and caring about people,” right? Nobody has admitted anything. So we as consumers feel that there are these other people on the other side who have behaved terribly, which is true, and that are smug about it, and that nothing is different. And why should we trust them? And we do not.

I don’t think it is a generational thing. I think there is a tremendous feeling of lack of control, agency, and helplessness. And the sad realization — this is one of the things that came out of financial crisis — is that it is much harder to start a new bank now. So young people are actually quite idealistic and I think people would have started new banks where they behaved very, very differently. But what happened is that it is really, really tough to open a new bank now. But I am still hopeful: I think that this anger and frustration just needs to be channeled in a better way.

I am not a religious person but the story from the Bible is that God made the people of Israel walk around the desert for 40 years until the old generation that worshipped the golden calf passed away. I do think that we need a new generation of bankers. I think you cannot take the old generation of bankers and rehabilitate them.

Recent history is not showing us that this is something we should hope for. But there is a real question of, How do we create a new generation of bankers that are going to think of themselves as the caretakers of society, rather than the rapists?

Click the play button below to listen to Chris’ interview with Dan Ariely (42m:54s):


Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. Traditionally economics assumes much. It assumes that resources from the natural world are a function of demand and capital. Perhaps most bizarrely, considering the evidence, it assumes that people are rational and make rational decisions based on cold logic and calculated self-interest. But are they really? And if not, what does it mean that the major core assumptions of the models that drive monetary and economic policy are irretrievably flawed? And beyond economics, speaking very widely here, what motivates people and even entire cultures to accept one set of beliefs while rejecting others even when cold hard facts would strongly encourage the adoption of new beliefs and associated behaviors?

Fortunately there is an entire new branch of inquiry that has been opened up that assumes nothing about how people make choices and decisions, and uses scientific inquiry and the resulting data to develop a view on what actually drives human behavior. And today, to help us explore these ideas, we have back on the program one of the leading researchers of behavioral economics. Dan Ariely is a professor of psychology and behavioral economics at Duke University, my alma mater, and is the founder of the Center for Advanced Hindsight. Dr. Ariely’s talks on TED have been watched nearly five million times. He is the author of Predictably Irrational, which I have recommended heartily before, and The Upside of Irrationality, both best sellers.

Dan publishes widely in leading scholarly journals in economics, psychology, and business. His work has been featured pretty much everywhere: New York Times, Wall Street Journal, Washington Post, Boston Globe, Scientific American, you name it. Dan, I am really excited to have you back on the program today.

Dan Ariely: I will try to keep you excited throughout and not just in the beginning.

Chris Martenson: Excellent. Well, as a starting point for this conversation I would like to talk about bubbles, specifically the idea that once upon a time a financial bubble happened, at most, maybe once a generation because the painful memories literally had to die away before the mistakes could be repeated. But in the US we went from a stock bubble in the ’90s, a housing bubble in the 2000s, and today I think we might have something of a faith bubble, if I can call it that, in the ability of the Fed to get things right this time even though there is nothing in the historical data to support that view, quite the opposite in fact. So what is it in the human psyche that allows selective amnesia to arise?

Dan Ariely: So a couple of things are actually interesting. So first of all the creation of bubbles turns out to be one of the easiest things to do in a lab setting. So you put people in the lab and you kind of create an experiment in which they all trade some fictitious product and the most common behavior that you observe are bubbles. Because if you think about it the natural inclination is to see what other people are doing and to try and follow other people. In psychology this is what is called “social proof.” It is about our herding instinct. It is about the fact that you see lots of people waiting in the line to a restaurant and you think to yourself this must be a great restaurant; let me stand in line as well.

Chris Martenson: Yes.

Dan Ariely: So it is almost instinctual that we look at the behavior of others and infer something about the value of the different options. And then of course it keeps on and on and on until there is not enough power to sustain it and then there is drop. And then you see the opposite result, which is people get very depressed and frightened when things go down and they sell at the worst possible time. So bubbles, sadly, are just a part of human nature. And it is all about the ability to see what other people are doing, right? The moment we can see what other people are doing we succumb to bubbles. And in this world today visibility is just much better. If you think about the internet, you think about amount of information out there, if you think about the news—so the temptation for bubbles is just much, much higher. So that is on one side.

On the other side the question is: What causes this amnesia? And I don’t think—of course lack of memory is part of it, but I think the other part of it is that when we live in a particular reality, we come up with stories that explain this reality. And these stories for our own sanity are not stories about randomness and they are not stories about bubbles. They are stories about this time it is real value. When somebody comes to our face and tells us something, we have a very hard time disbelieving it. Our initial instinct is to believe in what they are saying. And we are experiencing the reality that we are experiencing. And we have a sense that this time everything is going to be different. We have a feeling that this time whatever we are experiencing is much more real.

So there is this disassociation between what we know about history and the intensity and realism of our current experience. And because of that we just do not think that those are relevant cases.

Chris Martenson: So this is a case of herding then, and this is normal human behavior. I assume the Federal Reserve must be aware of this sort of material or do you think—does traditional economics completely ignore—it just sounds like a feedback loop and one that is pretty well understood, I guess, at this point. Is that correct?

Dan Ariely: So behavior economists understand very much bubbles and we understand people’s belief about the world in all kinds of ways. By the way, one of the nicest experiments ever was about our need to find reason and logic and structure even in random things. So you show people patterns of clouds in the sky, right, and initially, immediately, somebody says “Oh this dog was chasing somebody here.” You show people shapes on computers and they immediately tell stories about it. You show people random fluctuation in the stock market and they immediately come up with a theory about what is really going on. We really have a very deep need to have a story that describes what it is that we are seeing.

And the stories that we like are stories about causal relationship. This is causing that. And like a lot of things in behavior economics, these things have good things and bad things. So think about how quickly we learn causal relationship. You turn a switch when you come to a room and you learn that it’s a causal relationship to the light coming up. So we are basically looking for those relationships everywhere around us. And the experiment I was referring to was an experiment in which they gave people a machine, a ball machine, that would basically they would press on all kinds of buttons and balls would come out at different speeds and different rates. And then they asked people to what extent have they figured out how to control the machine. What levels would get more balls out and less balls out and so on.

And people thought that they had quite good control aside from the fact that the ball machine was perfectly random. So we have a sense of that. And what kind of people do you think had the best understanding that in fact they did not have much control over the machine? These were depressed people. And the question that arised from this in psychology was whether depressed people are depressed because they understand that they do not have much control over the world, or is the lack of control causes them to be depressed? And we do not have an answer for that.

Chris Martenson: So we do not know cause or effect on that one?

Dan Ariely: No we do not. But if you go back and say, “Does the Fed understand all of these effects?” I do not think so. I do not think when they think about policy those are the things that are driving them. I think it is really very, very sad. But I think that when people think about the behavior of masses, even when people understand irrational behavior, they still go with the standard models way too frequently.

Chris Martenson: It is interesting this part about where the Fed is getting their decision from or even anybody in any policy position. I am thinking about your machine with the random balls coming out. I was really taken by a piece of work, a study in a book that came out, called The Origin of Wealth, by this guy Eric Beinhocker. And he very convincingly proved that the economy is a complex system. And because it is complex it inherently is unpredictable. And we cannot—all sorts of complex systems defy us, earthquake fault zones are complex systems. All we can do is sort of categorize what the risks are: If this fault has not given way, and it is supposed to give way, we might predict an earthquake would come sooner and it might be larger. But that is as close as we can get.

And so the critique he has of economics is that it is still based on the idea that it is a deterministic model: You pull lever A, you get result B. And so I can imagine the Fed, if they have flawed models and they are pulling on lever A and the balls come out randomly, sometimes unemployment does what it wants it to do. I can see them falling into the same trap as well, they are humans, right? So what do we do with this idea that if the world is essentially random in some important respects, what is it in your work that tells us how we might improve our ability to navigate in such a world?

Dan Ariely: Yes, so again you can think about these questions about the need for simple models, a little bit similar to the people who need to feel that they can predict the world. And I think economics in some sense, the reason that standard economics is so tempting is because it gives people the illusion that they understand the world, right? So here is a two-period, two-player model of how the world would react and you basically—it is an oversimplification, and you know it is an oversimplification, but you have a temptation to think of it as a model for the world because it gives you a sense that you understand the world.

And I think the challenge of really understanding stochastic, large scale, complex systems—it is not just about understanding them. It is also about being willing to give decision control to a model that we do not understand very well. And that is really the challenge. So imagine I gave you a big equation and I said this equation should predict how much money you should save for retirement, right? I mean, the question of how much money you should save for retirement is really, really very tough to figure out. Here is a model; we do not understand it exactly. It has been calibrated on lots of other people, and so on. Would you trust it, right? And it is very, very tough.

Again, in economic language, you see all these people on TV at the end of each day telling you what happened today in the stock market and telling you a story about why this is the rational thing to do. But of course they explain it to you backwards: What happened today. And we are just suckers for simple stories. And when the stories are not so simple it is very hard to believe them. And it is very hard to give them power over our decisions.

Chris Martenson: So let me talk about something that came up before that relates to that. You mentioned beliefs, this idea that we are all holding beliefs, and I know that I do. And when I do I have noticed something. My belief systems, they really are very good at adroitly selecting some data for inclusion, I will accept this piece of data I see but I will reject competing data that is unsupportive. This data selectivity, is this something that you see often and contest in the lab?

Dan Ariely: Yes, there is no question about it. We see it in the lab. We see it in life.

Chris Martenson: Yes.

Dan Ariely: It is really quite incredible. Now, there is a vicious cycle in which if you have a particular belief now, you can choose to listen to a news channel that would just give you the beliefs that you believe in, right? So, it would be one thing if we all listen to the same news show, all Americans with all particular opinions and then we had to rationalize our behavior and justify some decisions. But now the people who watch Fox News and the people who listen to NPR are very different people and they basically choose to get exposed only to their opinions, which actually makes the problem much, much higher.

For me this was the toughest, but more interesting case. Together with Mike Norton, we wrote a paper on trying to figure out what is the wealth inequality that Americans would like? So if you remember the philosopher John Rawls he basically had the very nice definition of a just society. And he said a just society is a society that if you knew everything about it you would be willing to enter it in a random place. And if you think about it is a very beautiful definition because it means if you are very rich you do not just think about your own state you think about all possible states. And if you are very poor you do not just think about where you are you think about all possible states.

So we asked tens of thousands of Americans to basically tell us what they think is the wealth distribution that they would be willing to join a society like this in a random place. And if you think about it the way we did it was, we asked people to imagine the top 20% of Americans, the next, the third, the fourth, the fifth bucket. And we said how much money—how much of the wealth do you want to be owned by each of these buckets? And that will create the Gini coefficient or the rate of inequality. And there were two main results that emerged. First of all, it turns out that Americans want a much more equitable society than what we have right now. But most interesting, there was no differences between Republicans and Democrats, almost no differences.

So for example, in one question we showed them a distribution of wealth that was slightly more equal than Sweden and a distribution of wealth based in the US, and 92% of Americans on average chose the Swedish distribution. But for Democrats it was 93%, for Republicans it was 91%. So, different but not that different. So we showed this result and we said basically, when you think about wealth and equality in abstract under the veil of ignorance, kind of Rawls’ definition, the reality is that all sides of politics seem to be very similar. We do not have that many differences. And we thought it is a great result basically showing that we are not as different as we think we are. And perhaps politicians are making us think we are more different than what we really are.

The amount of hate mail we got over this [laughter] piece of research was amazing. What happened was, I mean, there is lots of flavors of it. But the one that was the most interesting was a guy who told me that we have not calculated wealth correctly because the wealthy people, their wealth could be taken away by the government at any moment to pay for more social programs. So he basically said that we have not taken the liability of the wealthy people correctly into our model. And I saw lots of those things where people basically were trying very hard—rather than focusing on the result that we are actually much more similar than we think, people were just looking for all kinds of ways to discount the results. And I am perfectly happy with discounting the results. But the thing I was trying to tell these people, I said, even if we overestimated or underestimated by three times, by a factor of four, wouldn’t the results still suggest that we have a more inequitable society than what we want? And wouldn’t we still have the result that we are much more similar to each other than we think?

But I have not been able to convince them. So it was a very interesting, kind of personal case, about the power of desire to see reality in a certain way.

Chris Martenson: Well, it is fascinating because what you are describing is that there is a cultural narrative that we have, something about how we are a free and fair and just society and that when you ask people about that narrative in the abstract they come up with a set of results that are out of comportment with the actual reality of the world they live in. Is that not the definition of cognitive dissonance?

Dan Ariely: So, first of all, when we asked this question, of course the issue is—when we asked the question in the abstract, the question is: “Which answer is correct?” And I actually like the Rawls version of it because—think about tasting wine. When you taste wine you are influenced by the price, you are influenced by the label, you are influenced by your preconceived notions. But when you are doing the Rawls constraint and you say, what society would I like to join, in principle? All of a sudden you are not married to your own position. You are not thinking about your own particular issue and how much you want to pay taxes and do not want to pay taxes. So I think that the correct version is the abstract Rawls version. I think that when we vote on politics we should vote thinking about abstract, long-term ideas rather than what will happen next year.

Now in terms of cognitive dissonance, there are lots of versions of what people refer to as “cognitive dissonance.” But the general approach is a difference between a behavior and a belief. So Festinger’s original experiments—he would get people to the lab and he would get them to do something really boring for a long time. And some people he paid a lot and some people he paid very little. And then he asked them to recommend how much they enjoyed the task and would they recommend it to a friend and so on. Now the people who worked on this task and got paid a lot had no dissonance. They basically said, “This was a boring task. I got paid a lot, okay that is fine.” The people who did not get paid a lot, they got paid a dollar, they had a dissonance. They basically said, “Oh, I worked on this for a long time, I got paid very little, how does this work?”

And the way they resolved that, they could not have said to themselves, “Oh it must mean that I am stingy or something else.” They basically said, “It must been that I actually enjoyed that task more,” and then they recommended it more to others. So the idea is that when behavior is one way and our belief is another way, it is very hard to change our behavior. We remember what we did, so we change our belief to coincide with that. That is why, for example, it is really good to play hard to get in romantic adventures. Because somebody would say, “Oh I worked so hard to get this person. Why did I do that? It must mean I really love them.” Or another romantic example is why big weddings are actually useful. You could say to yourself, “Why did I spend so much money on this wedding? It must mean that I really love this person.”

So cognitive dissonance, this idea that we can get people to act and once we get them to act in a certain way we can get them to adjust their beliefs to fit with that, is a very important, powerful notion.

Chris Martenson: So I want to get back to that in just a minute because that is exactly where I wanted to go with this conversation. But right before then there is a step and it is this—and this is one of the most burning questions we have on our site, and it goes like this: Suppose that someone had some really important information. It has been vetted. It is data. It is as good as they can get. And they want to share this with friends, families, colleagues, maybe even strangers. But that information runs counter to the narrative or the belief structure that that person is holding individually or it runs counter to maybe the collective narrative. What can behavioral economics tell us about how to go about that process of sharing, knowing that the subtext of this is people find this to be an incredibly frustrating position to be in?

Dan Ariely: So this is really about my life as a teacher, right. [laughter] That is what I do all the time. And I will tell you what I do is, I start by showing people visual illusions. And visual illusions are something that people just get wrong, it is easy to show people that they are getting wrong this visual illusion. It is not threatening. It is clear that everybody is doing it and it just clear that it is something very basic about being human. So I start with that as a starting point and I basically said, “Let us agree that there are some things that we are all going to be wrong about. It is not about being smart. It is not about knowing anything. This is just how we function.” So that is kind of step one, and I try to get people prepared for that.

And then as step two, I do not talk to people about themselves because that would immediately increase their defense system, right?

Chris Martenson: Yes.

Dan Ariely: So talking about other people is always good. I have an amazing mother-in-law but if I did not I think that would be a good category to try. But you basically try to tell about other people. And another thing that I try and do is, I do not try to say that anything is definitive—which is always the case, right? We just have this big data. And I say, “Look, this is what we have right now; it is truly kind of an amazing data. And rather than trying to push it down, let us think, what if this was correct, what would it tell us?” So that is when they kind of – okay, so let us think about what does that mean, which changes people’s perspective, hopefully, from attacking to thinking about the implications. And then at the end, I tell people, “Look, if you saw a piece of data that contradicts your set of beliefs, I do not think you should abandon your set of beliefs immediately, right? No data should be used to change you completely.”

“But you should take it into account to some degree,” right? This is what we call “Bayesian Updating.” Think about it, right? So here is what you thought before, here is what you know now; what should you potentially do differently? And then finally I encourage people to do experiments. Because I think that once people understand data with their own hands, with their own clients, with their own workplace and so on, their belief changes quite dramatically. So in my case here is an effect, let us say it is the context effect where you add another very expensive item to a list and all of a sudden people buy something differently. I said, “Try it on your colleagues, try it on your customers, see what happens.” And the first time people do an experiment and see the results for themselves, it is a very different process.

Chris Martenson: So this is kind of a go-gently approach, right? So you start out with a visual thing, “Hey look, we are all subject to having—being human, which means we can interpret things in a variety of ways, some of which may be correct or not.” And then secondarily saying, “If this were the case, then what might the implication of this actually be?” Which sort of abstracts it a little bit, gets people to think about it. But fundamentally we are talking about belief structures and positions people might hold as defended fortifications that you are saying it would be better to be a sort of, come in gently, more like a spy than a battalion.

Dan Ariely: Yes and I think it is a combination of going gently and also trying to make it their own. So the moment that people kind of think about the data as their own, say, “Okay, here is a hypothesis, test it out,” those things are very hard to do about macroeconomics questions, right? Like levels of inequality and so on. But in my little world this is actually possible and relatively easy to do. So I think that it is a combination of go gently, try it for yourself, consider the possibility, and then kind of try to own that.

Chris Martenson: Yes. You really shifted my views a number of years ago when I was thinking about climate change and that climate change is a difficult motivating topic because it lacks some features. It lacks a face, or worse, the face that we might associate with it is staring at us in the mirror. It is abstract. It is distant. It is not near and immediate. That there are a variety of things around that story that would require transforming it out of just the strict statistical data into a more human accessible compelling sort of an argument. And what I am wondering then is to get back to this idea is, what are the best ways of motivating people towards taking new actions? That is the work I care about, but marketers would care about it the same or doctors. We could be talking about—we want to try and motivate somebody towards maybe weight loss or saving more money for retirement, reducing excessive consumption, whatever that new action is. What does behavioral economics tell us about the best ways of motivating people to new actions?

Dan Ariely: So a couple of things. First of all what you said about global warming is absolutely the case. In fact if you kind of search the whole globe for the one problem that would maximize human apathy you would come up with global warming, right? It is, as you said, it is long in the future, it will happen to other people first, we do not see it progressing, it does not have a face. And anything we would do is a drop in the bucket, right. And you could contrast it with, what happens when one guy gets on one plane with a small bomb in his shoe, right? It is clearly terrible, but since then we all take our shoes off every time we go on a flight, right? Clearly taking an action. Global warming, if you believe the science, is a much bigger risk than one person going on the plane with a small bomb in his shoe, but we do not react to it. It does not have the same emotional reaction.

And the issue there really is that, knowing, even the people who are environmentalists, right, so people who are environmentalists are trying to convince the non-environmentalists. But even the people who are environmentalists are not behaving that well. So the issue really is, and this is a deep problem, is that we think that we are motivated by goals and by high order aspirations, and so on. The reality is that we are not. And one of the saddest results I think ever in social science is a recent paper by John Lynch and his colleagues. And in this paper they looked at all the literature of financial education, financial literacy and tried to estimate how much can we hope that financial literacy would help people do better. So how much is knowing something about financial literacy can help people achieve better outcomes?

And the result is that the best we can hope for is an improvement of about 6%. And even that is lower for people from lower economic status, and it goes down over time. So in the history of mankind we have tried lots and lots of things. We have not yet been able to show any success on teaching about financial literacy and have that impact people. And the reason is actually quite easy to understand when you think about it. So here is a situation: You need to think about something, you need to learn about it, and then every time you walk in the street you have to think about that. Every time you buy coffee, every time you go to pay rent, every time you go to do something, you have to think about that piece of knowledge. Really, really hard to do, right? I mean, everybody knows that texting and driving is dangerous and stupid. Does it change our daily behavior? Not so much. You find lots of cases in which this general knowledge just does not penetrate your daily behavior.

So the notion from behavioral economics kind of boils down to this notion of choice architecture, which is the idea that our decisions are partly a function of what we know, they are partly a function of our preferences, but to a large degree they are a function of the environment in which we are in. If I came to your office every morning and layered your desk with donuts, fresh donuts, what are the odds that at the end of the year you would not weigh more? Right, very, very low. Now, no matter what you know about donuts and health and so on, this temptation every morning would just be too much. Now I am not saying you will eat all of them but you will eat enough to make your life worse off. So the question that we want to ask is, “What kind of world do we want to create?” Right? If you think that people are an outcome of the world that they are being given, the question is, “What world do we create?”

And the world right now is all about tempting us to do things that are in the world’s short interest and not in our long term interest. So Dunkin’ Donuts, what are they trying to optimize? They want you to buy another donut today. It is not about your health in thirty years from now. What is Facebook trying to optimize? For you to check Facebook one more time today, not your productivity thirty years from now. What are banks trying to get you to do? Use your credit card a couple of more times today. If you think about it, we are in a world where all of the other players are determining our environment, and all of the other players want us to do something now that is good for them. And, what are the forces that are focusing on long term? You would hope it would be the government, but with elections every two years that is very hard to imagine. You would hope it would be your significant other and your family members, and maybe that is the case, maybe religion to some degree, if we had preventative health that might be it as well.

But really our environment is one that just wants to take, take, take from us all the time and we have to fight with this ongoing temptation in a very, very tough way.

Chris Martenson: Well, this idea of choice architecture then, one of the more vexing aspects of our current environment for a lot of people at my site and elsewhere obviously is the choice architecture that our leaders both monetary and fiscal have set up around this whole banking disaster. So what you are talking about, if you put those donuts on my desk top, that is my personal hazard. But this idea of moral hazard that exists when bad decisions get bailed out, when individual losses at the big banks get spread across a larger society, that creates an environment that is very different for the bankers than for everybody else—I will put myself in the “everybody else” bucket. I look at that and I get demotivated by it because I say, “These are people, they behaved badly, they did not suffer any consequences for their actions. In fact I am the one who is going to shoulder this at some point either now or in the future with a dilution of money. And there seems to be no corrective behavior.”

The environment—people respond very quickly to incentives, don’t they? And if they do, how do you read everything that has transpired in, sort of, the macro lack of—in the macro environment — lack of, what shall I call it, accountability or any sort of responses?

Dan Ariely: So, in very general brushstrokes I think that most bankers are in fact inherently decent people. We just put them in situation in which their conflict of interest is tremendously high and their social norms are incredibly dysfunctional, right? When you hear bankers talking about their customers as Muppets, for example.

Chris Martenson: Right.

Dan Ariely: So, they forget who they are serving, right? That they are basically—they are hired by the rest of us to do a particular job. And so they forget this. And then they have terrible conflicts of interest. So, I wrote a lot about conflicts of interest. It is a topic that I worry a lot about. But imagine again this rationalization story that we talked about throughout this discussion. Imagine that I give you a world in which if you can adopt a particular perspective on life you could get $5 Million as a bonus. Wouldn’t you start believing that world? And then everybody around you is doing the same thing and you have some justification for it by talking about the financial market theory and so on. All of a sudden you could see how you could take good people and you could put them in this distorted way, in the same way that we talked about how global warming is probably the perfect storm for inaction, I think Wall Street is the perfect storm for allowing people to rationalize their own selfish motivations as if they are serving other people.

And so I think that is terrible on that side and it is really, really terrible because we have not done anything to change the way we pay bankers. And we have not changed anything in terms of the code of ethics and morality. On the consumer side I think the issue that you describe is absolutely correct. I think there is a tremendous loss of faith. So we have been screwed and we know that we have been screwed. And we know that we are not trusting other people. And I think loss of trust is a central issue for this financial crisis and sadly nobody is trying to do anything about that. Human beings are incredibly forgiving, but nobody has really stood up and said, “I am really sorry. I made all of these terrible mistakes. I want this particular bank to start fresh and caring about people,” right? Nobody has admitted anything. So we as consumers feel that there are these other people on the other side who have behaved terribly, which is true, and that are smug about it, and that nothing is different. And why should we trust them? And we do not.

And it has been really sad because lots of people have basically taken their money out of the market. They are putting it aside. And now they will never be able to retire. And I saw some report on this yesterday that shows that young people do not want to put money in the stock market.

Chris Martenson: Well, I talk with a lot of young people, millennials and whatnot, and the conversation for those who are really paying attention, it comes down to this idea that occupy Wall Street was sort of a signature moment for some of them. And they felt the way that the system responded to them was to take relatively peaceful, in fact entirely peaceful people in most respects, and surround them with the arms of the state. I mean, I was at Zuccotti Park and it was absolutely surrounded with the latest DHS hardware. There was obvious weird cameras going on all over the place. There were riot police literally ringing the entire place. So their sense of agency, that sense of control that you found lacking in the global warming story, I think the young people feel that loss of—they feel they do not have a voice and they do not have a way of remedying that lack of voice.

And so that sense of—that is maybe the opposite of conflict of interest or related topic is that sense of, How do we feel that we have a sense of control or a narrative that has us as part of the storyline? That is something, when I talk with young people, they are not just opting out of the stock market. Many of them are opting out of much of what they see around them. And maybe that is a typical generational thing to happen. I do not know.

Dan Ariely: I do not think it is a generational thing. I think there is a tremendous feeling of lack of control, agency, and helplessness. And the sad realization, and this is one of the things that came out of financial crisis, is that it is much harder to start a new bank now. So young people are actually quite idealistic and I think people would have started new banks where they behaved very, very differently. But what happened is that it is really, really tough to open now a new bank. So that is making it less likely. But I am still hopeful. I think that this anger and frustration just need to be channeled in a better way. And I think that eventually there will be some—I am not a religious person but the story from the Bible is that God made the people of Israel walk around the desert for 40 years until the old generation that worshipped the golden calf passed away. I do think that we need a new generation of bankers. I think you cannot take the old generation of bankers and rehabilitate them.

Recent history is not showing us that this is something we should hope for. But there is a real question of,How do we create a new generation of bankers that are going to be—think of themselves as the caretakers of society rather than the rapists.

Chris Martenson: Yes. And it is that idea of bringing that idealism and having that coalesce into a vision that people can believe in. You have seen the studies. Most—a large majority of people, I think 68% last study I saw, or poll, said that the country is on the wrong track. And so, to have a sense of what the right track is you need a leadership that is willing to articulate what is clearly a new and different vision. Not just the bankers are lacking that. It seems to be lacking at a number of levels. But I think it is out of that vacuum that, obviously, that people will step into those roles and start to articulate a vision. And so maybe that is the interregnum we are in is, we are kind of between visions. We have the ’50s and ’60s that sort of morphed into ’80s and ’90s and now we are sort of wondering what comes next, and by my judgment I do not see a good articulation of that yet.

So with that, I really want to thank you for your time and most importantly your work. I think your work is just fantastic. It has changed how I think about the world. And it is just fantastic. So Dan, how can people follow your work more closely if they are inspired?

Dan Ariely: So, I have a website. It is DanAriely.com. D-A-N-A-R-I-E-L-Y. And actually, in the middle of March, we are starting a free online course on behavioral economics.

Chris Martenson: Great!

Dan Ariely: This would be on the website called Coursera, coursera.org. And our website is called A Beginner’s Guide to Irrational Behavior. I will also post information on my website. But it is going to be a time consuming class. So, every week there will be video lectures and discussion groups and some readings. But if people want to, kind of, delve a bit more seriously about behavior economics that is, I think, one good way to do it.

Chris Martenson: Oh that will be fantastic. I am sure we will have people signing up for that. We will put links right below this podcast so people can follow all of that nice and easily. And I am looking forward to it. So again Dan, thank you so much for your time.

Dan Ariely: My pleasure, and nice talking to you again and looking forward to next time.

Chris Martenson: Fantastic.

BOE Stress Testing Banks For Property Crash – Risk Of Bail-Ins | www.goldcore.com

BOE Stress Testing Banks For Property Crash – Risk Of Bail-Ins | www.goldcore.com.

Published in Market Update  Precious Metals  on 12 February 2014

By Mark O’Byrne


Today’s AM fix was USD 1,286.50, EUR 942.84 and GBP 778.47 per ounce.
Yesterday’s AM fix was USD 1,282.75, EUR 938.09 and GBP 780.83 per ounce.

Gold climbed $15.30 or 1.2% yesterday to $1,289.90/oz. Silver rose $0.15 or 0.75% to $20.20/oz.

Gold in British Pounds, 10 Years – (Bloomberg)

Gold is marginally lower today in all currencies after eking out more gains yesterday after Yellen confirmed in her testimony that ultra loose monetary policies and zero percent interest rate policies will continue.

Citi Futures are looking for gold to increase by a further 8.5% by the end of March after gold closed above its 50 DMA every day for the last two weeks and closed above its 100 DMA for two straight days. RBC are less bullish but expect gold prices to increase another 10% and surpass $1,400/oz in 2014.

Gold touched resistance at $1,294/oz  yesterday. A close above the $1,294/oz to $1,300/oz level should see gold quickly rally to test the next level of resistance at $1,360/oz. Support is now at $1,240/oz and $1,180/oz.

Yellen confirmed that the U.S. recovery is fragile and said more work is needed to restore the labor market. She signalled the Fed’s ultra loose monetary policies will continue and the Fed will continue printing $65 billion every month in order to buy U.S. government debt.

The dovish take from Yellen’s testimony yesterday should support gold prices. Continuing QE makes gold attractive from a diversification perspective.

Market focus shifts from the U.S. to the UK today and the Bank of England’s quarterly inflation report.

The U.K. has already almost breached the unemployment level that was a target for considering tightening policy, and Governor Mark Carney is widely expected to update the market on interest rate guidance.

Possibly of more importance is the fact that the Bank of England is to test whether UK banks and building societies would go bust if house prices crash. A ‘stress test’ will examine whether banks will need bailing out, or bailing in as seems more likely now, if house prices materially correct again.

Preparations have been or are being put in place by the international monetary and financial authorities, including the Bank of England for bail-ins. The majority of the public are unaware of these developments, the risks and the ramifications.

The test is being drawn up by the Bank’s Financial Policy Committee, whose members include Governor Mark Carney.

A Nationwide Building Society survey just out showed house prices had risen by 8.8% in January over the same month last year. London house prices have all the symptoms of a classic bubble.

Many UK banks are already over extended and the real risk is that many banks would not be able to withstand house price falls. This heightens the risk of bail-ins.

Download our Bail-In Guide: Protecting your Savings In The Coming Bail-In Era(11 pages)

Why is the Federal Reserve Tapering the Gold Market? | Global Research

Why is the Federal Reserve Tapering the Gold Market? | Global Research.


On January 17, 2014, we explained “The Hows and Whys of Gold Price Manipulation.”

Naked Gold Shorts: The Inside Story of Gold Price Manipulation By Dr. Paul Craig Roberts and David Kranzler,

In former times, the rise in the gold price was held down by central banks selling gold or leasing gold to bullion dealers who sold the gold. The supply added in this way to the market absorbed some of the demand, thus holding down the rise in the gold price.

As the supply of physical gold on hand diminished, increasingly recourse was taken to selling gold short in the paper futures market. We illustrated a recent episode in our article. Below we illustrate the uncovered short-selling that took the gold price down today (January 30, 2014).

When the Comex trading floor opened January 30 at 8:20AM NY time, the price of gold inexplicably plunged $17 over the next 30 minutes. The price plunge was triggered when sell orders flooded the Comex trading floor. Over the course of the previous 23 hours of trading, an average of 202 gold contracts per minute had traded. But starting at the 8:20AM Comex, there were four 1-minute windows of trading here’s what happened:

8:21AM: 1766 contracts sold
8:22AM: 5172 contracts sold
8:31AM: 3242 contracts sold
8:47AM: 3515 contracts sold




Over those four minutes of trading, an average of 3,424 contracts per minute traded, or 17 times the average per minute volume of the previous 23 hours, including yesterday’s Comex trading session.

The yellow arrow indicates when the Comex floor opened for gold futures trading. There was not any news events or related market events that would have triggered a sell-off like this in gold. If an entity holding many contracts wanted to sell down its position, it would accomplish this by slowly feeding its position to the market over the course of the entire trading day in order to avoid disturbing the price or “telegraphing” its intent to sell to the market.

Instead, today’s selling was designed to flood the Comex trading floor with a high volume of sell orders in rapid succession in order to drive the price of gold as low as possible before buyers stepped in.

The reason for this is two-fold: Driving down the price of gold assists the Fed in its efforts to support the dollar, and the Comex is running out of physical gold available to be delivered to those who decide to take delivery of gold instead of cash settlement.

The February gold contract is subject to delivery starting on January 31st. As of January 29th, 2 days before the delivery period starts, there were 2,223,000 ounces of gold futures open against 375,000 ounces of gold available to be to be delivered. The primary banks who trade Comex gold (JP Morgan, HSBC, Bank Nova Scotia) are the primary entities who are short those Comex contracts.

Typically toward the end of a delivery month, these banks drive the price of gold lower for the purpose of coercing holders of the contracts to sell. This avoids the problem of having a shortage of gold available to deliver to the entities who decide to take delivery. With an enormous amount of physical gold moving from the western bank vaults to the large Asian buyers of gold, the Comex ultimately does not have enough gold to honor delivery obligations should the day arrive when a fifth or a fourth of the contracts are presented for delivery. Prior to a delivery period or due date on the contracts, manipulation is used to drive the Comex price of gold as low as possible in order to induce enough selling to avoid a possible default on gold delivery.

Following the taper announcement on January 29, the gold price rose $14 to $1270, and the Dow Jones Index dropped 100 points, closing down 74 points from its trading level at the time the tapering was announced. These reactions might have surprised the Fed, leading to the stock market support and gold price suppression on January 30.

Manipulation of the gold price is a foregone conclusion. The question is: why is the Fed tapering?

The official reason is that the recovery is now strong enough not to need the stimulus. There are two problems with the official explanation. One is that the purpose of QE has always been to support the prices of the debt-related derivatives on the balance sheets of the banks too big to fail. The other is that the Fed has enough economists and statisticians to know that the recovery is a statistical artifact of deflating GDP with an understated measure of inflation. No other indicator–employment, labor force participation, real median family income, real retail sales, or new construction–indicates economic recovery. Moreover, if in fact the economy has been in recovery since June 2009, after 4.5 years of recovery it is time for a new recession.

One possible explanation for the tapering is that the Fed has created enough new dollars with which to purchase the worst part of the banks’ balance sheet problems and transfer them to the Fed’s balance sheet, while in other ways enhancing the banks’ profits. With the job done, the Fed can slowly back off.

The problem with this explanation is that the liquidity that the Fed has created found its way into the stock and bond markets and into emerging economies. Curtailing the flow of liquidity crashes the markets, bringing on a new financial crisis.

We offer two explanations for the tapering. One is technical, and one is strategic.

First the technical explanation. The Fed’s bond purchases and the banks’ interest rate swap derivatives have made a dent in the supply of Treasuries. With income tax payments starting to flow in, fewer Treasuries are being issued to put pressure on interest rates. This permits the Fed to make a show of doing the right thing and reduce bond purchases. As a weakening economy becomes apparent as the year progresses, calls for the Fed to support the economy will permit the Fed to broaden the array of instruments that it purchases.

A strategic explanation for tapering is that the growth of US debt and money creation is causing the world to turn a jaundiced eye toward the US dollar and toward its role as world reserve currency.

Currently the Russian Duma is discussing legislation that would eliminate the dollar’s use and presence in Russia. Other countries are moving away from the dollar. Recently the Nigerian central bank reduced its dollar reserves and increased its holdings of Chinese yuan. Zimbabwe, which was using the US dollar as its own currency, switched to Chinese yuan. The former chief economist of the World Bank recently called for terminating the use of the dollar as world reserve currency. He said that “the dominance of the greenback is the root cause of global financial and economic crises.” Moreover, the Federal Reserve is very much aware of the flight away from the dollar into gold, because it is this flight that causes the Fed to manipulate the gold price in order to hold it down and in order to be able to free up gold for delivery.

The Fed knows that the ability of the US to pay its bills in its own currency is the reason it can stand its large trade imbalance and is the basis for US power. If the dollar loses the reserve currency role, the US becomes just another country with balance of payments and currency problems and an inability to sell its bonds in order to finance its budget deficits.

In other words, perhaps the Fed understands that a dollar crisis is a bigger crisis than a bank crisis and that its bailout of the banks is undermining the dollar. The question is: will the Fed let the banks go in order to save the dollar?

Paul Craig Roberts is a former Assistant Secretary of the US Treasury for Economic Policy.

Dave Kranzler traded high yield bonds for Bankers Trust for a decade. As a co-founder and principal of Golden Returns Capital LLC, he manages the Precious Metals Opportunity Fund.

Shutting Off the Money Tap – International Man

Shutting Off the Money Tap – International Man.

By Jeff Thomas

Recently, an HSBC depositor in Swindon, UK attempted to withdraw £10,000 from his account (which was in credit of about £50,000) and was told that he could withdraw no more than £1,000 without providing adequate proof as to how the funds would be used.

The depositor later stated:

“HSBC will not let me take out anything over £1,000 cash over the counter. I gave them warning, but they say they must know what I will use it for—they want to see evidence of hotel bookings, etc. In short, they refuse to give me my cash. HSBC say it is new internal rules to help prevent money laundering.”

An HSBC spokesman stated:

“In these instances we may also ask the customer to show us evidence of what the cash is required for. The reason for this is twofold, as a responsible bank we have an obligation to our customers to protect them, and to minimise the opportunity for financial crime.”

Further Developments

After less than a week of this policy having been implemented, it generated significant outcries from depositors—so much so that HSBC has already backed down. They had this to say:

“However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologise to any customer who has been given incorrect information and inconvenienced.”

So… apparently, it was a mere misunderstanding. Some mid-level manager apparently became overzealous in exercising what he considered to be “reasonable caution.”

So, what are we to make of this? Well, the message is clearly that we are to say to ourselves, “Cooler heads have prevailed. Tempest in a teacup. Problem solved.”

But this is not so. Similar instances of refusal to return funds over £1,000 have taken place in HSBC branches in Wilshire and Worcestershire in the past week. This tells us that this was an HSBC policy decision—that it came from senior HSBC management.

This attempt at greater control over depositors’ funds has a broader significance. Over the years, we have predicted that as the Great Unravelling progresses, we shall observe the seizing of wealth and monetary control by governments and banks, acting in concert.

Over time, both wealth in general and the control over it will move inexorably into the hands of the banks and the political leaders. As this unfolds, we shall see numerous trial balloons, such as this one by HSBC and others. (The Cyprus bail-in was a similar but more successful trial balloon.)

Some will succeed, others will fail, but the central programme will move inexorably on. That programme will be driven by a new assumption—that the holding of wealth and the management of wealth are so central to national and international stability that only the central banks and governments can be entrusted with them. The individual cannot be trusted to control his own wealth.

The Bank Takes on the Role of a Regulatory Body

In floating this new policy, the banks have changed their traditional role as a monetary storage facility. They have now been granted the authority to refuse the return of funds that have been entrusted to them, based upon their authority to be satisfied that the money will be well spent by the depositor. If the depositor is, in effect, being expected to prove to the bank that he does not plan to perform a criminal act, the bank goes beyond its function as a business and becomes a regulatory body.

Without delving into conspiracy theories, there can be little doubt that the UK government has provided extraordinary latitude to HSBC (and presumably other banks)—latitude that, not long ago, would have been considered reprehensible.

However, throughout Europe, the US, and much of the rest of the world, we are seeing a growing tendency for governments to allow banks to control depositors’ funds.

As stated above, the 2013 Cyprus bail-in is a similar case—one in which the banks literally stole depositors’ funds with the tacit approval of the Cypriot government, and to much encouragement from the EU.

Since that time, Canada has passed legislation allowing its banks to do the same; and, more recently, the IMF has announced a similar plan for the EU.

As regular readers of this publication will know, we frequently publish reminders that, historically, when a nation is in the final stages of decline, the government invariably performs a last squeeze of the lemon—a final confiscation of the public’s wealth.

They tend to do this through whatever means they feel may succeed. As that is the case, in the future, we can expect to see increasing:

  • Confiscation: As we have already seen and will soon see on a larger scale, banks will be given the right to steal depositors’ funds, as stated above.
  • Capital Controls: This will take many forms, but of particular interest will be an increase in governmental control over the expatriation of individuals’ money.
  • Civil Forfeiture: Law enforcement authorities of all branches now have the authority to seize the assets of any individual who is under suspicion of a crime. (This is particularly the case in the US. It is not necessary that the individual be convicted or even charged.) This will be on the increase and has begun to reach the point of “shakedowns”—stopping people expressly to seize assets.
  • Freezing of Assets: In the EU and US, accounts are presently frozen for a variety of reasons—the client may be “suspected of a crime,” or his transactions may be deemed to be “inappropriate.” In the future, reasons for freezing assets will expand to “the threat of a possible run on the bank,” and “concern for the stability of the economy.” Governments will additionally simply use the nondescript blanket term, “temporary emergency measure.” (As Milton Friedman noted, “Nothing is so permanent as a temporary government program.”)

As these events unfold, the average depositor will be pressed to continue to function economically, but, as troubled as he might be, he will go along, as he really doesn’t have a choice. (Should he object too strenuously, he may well be investigated.)

Each of the above justifications for shutting off the money tap sound reasonable… It’s just that they happen to be a lie.

As stated above, when a nation is in the final stages of decline, the government invariably performs a last squeeze of the lemon—a final confiscation of the public’s wealth.

That process has now begun and will inexorably expand and continue until the confiscations have reached the point of greatly diminished returns or collapse of the governments’ power, whichever comes first.

If the reader sees this as even a 50/50 possibility, he would be wise to take steps to safeguard his wealth by removing it from a system that has become a threat to his continued ownership of his wealth.

Editor’s Note: The best way you can safeguard yourself and your savings from the measures of a desperate government is through internationalization. There are some very practical strategies you can implement from your own living room. Going Global from Casey Research is a comprehensive A-to-Z guide on this crucially important topic. Click here to learn more.

Enough Is Enough: Fraud-ridden Banks Are Not L.A.’s Only Option Washington’s Blog

Enough Is Enough: Fraud-ridden Banks Are Not L.A.’s Only Option Washington’s Blog.

Guest post by Ellen Brown.

“Epic in scale, unprecedented in world history. That is how William K. Black, professor of law and economics and former bank fraud investigator, describes the frauds in which JPMorgan Chase (JPM) has now been implicated. They involve more than a dozen felonies, including bid-rigging on municipal bond debt; colluding to rig interest rates on hundreds of trillions of dollars in mortgages, derivatives and other contracts; exposing investors to excessive risk; failing to disclose known risks, including those in the Bernie Madoff scandal; and engaging in multiple forms of mortgage fraud.

So why, asks Chicago Alderwoman Leslie Hairston, are we still doing business with them? She plans to introduce a city council ordinance deleting JPM from the city’s list of designated municipal depositories. As quoted in the January 14th Chicago Sun-Times:

The bank has violated the city code by making admissions of dishonesty and deceit in the way they dealt with their investors in the mortgage securities and Bernie Madoff Ponzi scandals. . . . We use this code against city contractors and all the small companies, why wouldn’t we use this against one of the largest banks in the world?

A similar move has been recommended for the City of Los Angeles by L.A. City Councilman Gil Cedillo. But in a January 19th editorial titled “There’s No Profit in L A. Bashing JPMorgan Chase,” the L.A. Times editorial board warned against pulling the city’s money out of JPM and other mega-banks – even though the city attorney is suing them for allegedly causing an epidemic of foreclosures in minority neighborhoods.

 “L.A. relies on these banks,” says The Times, “for long-term financing to build bridges and restore lakes, and for short-term financing to pay the bills.” The editorial noted that a similar proposal brought in the fall of 2011 by then-Councilman Richard Alarcon, backed by Occupy L.A., was abandoned because it would have resulted in termination fees and higher interest payments by the city.

It seems we must bow to our oppressors because we have no viable alternative – or do we? What if there is an alternative that would not only save the city money but would be a safer place to deposit its funds than in Wall Street banks?

The Tiny State That Broke Free

There is a place where they don’t bow. Where they don’t park their assets on Wall Street and play the mega-bank game, and haven’t for almost 100 years. Where they escaped the 2008 banking crisis and have no government debt, the lowest foreclosure rate in the country, the lowest default rate on credit card debt, and the lowest unemployment rate. They also have the only publicly-owned bank.

The place is North Dakota, and their state-owned Bank of North Dakota (BND) is a model for Los Angeles and other cities, counties, and states.

Like the BND, a public bank of the City of Los Angeles would not be a commercial bank and would not compete with commercial banks. In fact, it would partner with them – using its tax revenue deposits to create credit for lending programs through the magical everyday banking practice of leveraging capital.

The BND is a major money-maker for North Dakota, returning about $30 million annually in dividends to the treasury – not bad for a state with a population that is less than one-fifth that of the City of Los Angeles. Every year since the 2008 banking crisis, the BND has reported a return on investment of 17-26%.

Like the BND, a Bank of the City of Los Angeles would provide credit for city projects – to build bridges, restore lakes, and pay bills – and this credit would essentially be interest-free, since the city would own the bank and get the interest back. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

Awesome Possibilities

 Consider what that could mean for Los Angeles. According to the current fiscal budget, the LAX Modernization project is budgeted at $4.11 billion. That’s the sticker price. But what will it cost when you add interest on revenue bonds and other funding sources? The San Francisco-Oakland Bay Bridge earthquake retrofit boondoggle was slated to cost about $6 billion. Interest and bank fees added another $6 billion. Funding through a public bank could have saved taxpayers $6 billion, or 50%.

If Los Angeles owned its own bank, it could also avoid costly “rainy day funds,” which are held by various agencies as surplus taxes. If the city had a low-cost credit line with its own bank, these funds could be released into the general fund, generating massive amounts of new revenue for the city.

The potential for the City and County of Los Angeles can be seen by examining their respective Comprehensive Annual Financial Reports (CAFRs). According to the latest CAFRs (2012), the City of Los Angeles has “cash, pooled and other investments” of $11 billion beyond what is in its pension fund (page 85), and the County of Los Angeles has $22 billion (page 66). To put these sums in perspective, the austerity crisis declared by the State of California in 2012 was the result of a declared state budget deficit of only $16 billion.

The L.A. CAFR funds are currently drawing only minimal interest. With some modest changes in regulations, they could be returned to the general fund for use in the city’s budget, or deposited or invested in the city’s own bank, to be leveraged into credit for local purposes.

Minimizing Risk

 Beyond being a money-maker, a city-owned bank can minimize the risks of interest rate manipulation, excessive fees, and dishonest dealings.

Another risk that must now be added to the list is that of confiscation in the event of a “bail in.” Public funds are secured with collateral, but they take a back seat in bankruptcy to the “super priority” of Wall Street’s own derivative claims. A major derivatives fiasco of the sort seen in 2008 could wipe out even a mega-bank’s available collateral, leaving the city with empty coffers.

The city itself could be propelled into bankruptcy by speculative derivatives dealings with Wall Street banks. The dire results can be seen in Detroit, where the emergency manager, operating on behalf of the city’s creditors, put it into bankruptcy to force payment on its debts. First in line were UBS and Bank of America, claiming speculative winnings on their interest-rate swaps, which the emergency manager paid immediately before filing for bankruptcy. Critics say the swaps were improperly entered into and were what propelled the city into bankruptcy. Their propriety is now being investigated by the bankruptcy judge.

Not Too Big to Abandon

Mega-banks might be too big to fail. According to U.S. Attorney General Eric Holder, they might even be too big to prosecute. But they are not too big to abandon as depositories for government funds.

There may indeed be no profit in bashing JPMorgan Chase, but there would be profit in pulling deposits out and putting them in Los Angeles’ own public bank. Other major cities currently exploring that possibility include San Franciscoand Philadelphia.

If North Dakota can bypass Wall Street with its own bank and declare its financial independence, so can the City of Los Angeles. And so can the County. And so can the State of California.


Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of 12 books includingThe Public Bank Solution. She is currently running for California state treasurer on the Green Party ticket.

Bank-Run Fears Continue; HSBC Restricts Large Cash Withdrawals | Zero Hedge

Bank-Run Fears Continue; HSBC Restricts Large Cash Withdrawals | Zero Hedge.

Following research last week suggesting that HSBC has a major capital shortfall, the fact that several farmer’s co-ops were unable to pay back depositors in China, and, of course, the liquidity crisis in China itselfnews from The BBC that HSBC is imposing restrictions on large cash withdrawals raising a number of red flags. The BBC reports that some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it. HSBC admitted it has not informed customers of the change in policy, which was implemented in November for their own good: “We ask our customers about the purpose of large cash withdrawals when they are unusual… the reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime.” As one customer responded: “you shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

Via The BBC,

Some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it, the BBC has learnt.

Listeners have told Radio 4’s Money Box they were stopped from withdrawing amounts ranging from £5,000 to £10,000.

HSBC admitted it has not informed customers of the change in policy, which was implemented in November.

The bank says it has now changed its guidance to staff.

When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.”

Mr Cotton says the staff refused to tell him how much he could have: “So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ ”

He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day.

Mr Cotton cannot understand HSBC’s attitude: “I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

HSBC has said that following customer feedback, it was changing its policy: “We ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account. Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for.”

The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime. However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologise to any customer who has been given incorrect information and inconvenienced.”

But Eric Leenders, head of retail at the British Bankers Association, said banks were sensible to ask questions of their customers: “I can understand it’s frustrating for customers. But if you are making the occasional large cash withdrawal, the bank wants to make sure it’s the right way to make the payment.”

The arrogance is incredible…

Banks Aid U.S. Forex Probe, Fullfilling Libor Accords – Bloomberg

Banks Aid U.S. Forex Probe, Fullfilling Libor Accords – Bloomberg.

Photographer: Chris Ratcliffe/Bloomberg

UBS AG’s signage is displayed outside the company’s Finsbury Avenue offices in London…. Read More

Banks bound by cooperation agreements in an interest-rate rigging probe are providing a windfall of information to U.S. prosecutors investigating possible currency manipulation, according to a Justice Department official and a person familiar with the matter.

“We’ve seen tangible, real results,” Mythili Raman, the acting head of the Justice Department’s criminal division, said in an interview. The cooperation “expanded our investigations into the possible manipulation of foreign exchange and other benchmark rates,” said Raman, who declined to name the banks or comment further on the probe.

The accords have compelled some lenders to conduct internal examinations of their foreign-exchange businesses and share findings with the Justice Department, speeding the government’s criminal probe into the $5.3 trillion-a-day market, according to a person with knowledge of the investigation.

Some banks are handing over lists of potential witnesses, making employees available for interviews and giving up documents without subpoenas, said the person, who asked not to be identified because the inquiry is confidential. Investigators are holding weekly and sometimes daily phone calls with the banks, the person said.

UBS AG (UBSN)Barclays Plc (BARC) and Royal Bank of Scotland Group Plc resolved a Justice Department investigation into how the London interbank offered rate, or Libor, was set, paying more than $800 million in criminal fines and penalties and agreeing to cooperate in other inquiries. The three lenders are among the largest currency traders in the world.

Dominik von Arx, a spokesman for UBS, Nichola Sharpe at Barclays and Sarah Small at RBS, declined to comment.

Libor Probe

Rabobank Groep, which also paid the U.S. a $325 million criminal penalty to settle Libor-rigging allegations in a deferred-prosecution agreement, doesn’t rank among the top 20 currency traders in the world, according to Euromoney Institutional Investor Plc. (ERM)

“Rabobank fully cooperates with regulators pursuant to the deferred-prosecution agreement,” Roelina Bolding, a spokeswoman for the Utrecht, Netherlands-based firm, said in an e-mail. “Rabobank does not otherwise comment on pending investigations of Rabobank or of any other person or entity.”

In addition to the settlements with the four banks, the U.S. Libor probe, which is continuing, has led to criminal charges against eight individuals.

Without the cooperation agreements, the banks would have been less motivated to come forward about currency trading, said Laurie Levenson, a professor at Loyola Law School in Los Angeles.

“I don’t think they would have as much incentive and you’d have pushback from individuals at the bank who are saying ‘Why are we doing this?’” Levenson said in an interview. “‘This is our own business and we’re being overly cautious.’”

Cooperation Agreements

The cooperation agreements also allow the government to advance the probe without overtaxing law enforcement resources, which have been stretched by budget cuts, hiring freezes and furloughs in recent years. In addition to the Justice Department’s criminal and antitrust divisions, European Union antitrust regulators, the U.K. Financial Conduct Authority and the Swiss Competition Commission are probing rigging of currency benchmarks. The Federal Reserve also is examining the matter, Bloomberg reported earlier this month.

“You could be talking about potentially millions of e-mails and thousands of hours of tape,” said Douglas Tween, a former Justice Department lawyer, now at law firm Baker & McKenzie LLP in New York.

The Justice Department “doesn’t have the resources to cull through all of that times 10 banks or 20 banks. They really to a large extent rely on the banks to cooperate and essentially give them all this evidence on a silver platter.”

Financial Benchmarks

Authorities around the world are investigating alleged abuse of financial benchmarks by companies that play a central role in setting them. Other rates under investigation include the ISDAfix, used to determine the value of interest-rate derivatives. European and U.S. regulators also are reviewing allegations of collusion in crude oil and biofuels markets in scrutinizing how the Platts oil benchmark is set.

Financial institutions have paid about $6 billion so far to resolve criminal and civil claims in the U.S. and Europe that they manipulated benchmark interest rates.

To resolve the Justice Department’s charges, UBS, RBS and Barclays signed deferred-prosecution or non-prosecution agreements within the past two years that effectively put the banks on probation and obliged them to report possible misconduct and cooperate in benchmark-rigging investigations. The banks risk indictment if the government decides they aren’t being cooperative, Tween said.

‘Criminal Conduct’

“Once they’ve got you on one thing, they’ve really got you,” said Tween. “They’ll say ‘You haven’t been cooperative and haven’t lived up to the terms of your deferred-prosecution agreement, and we’re going to pull the plug on that and indict you.’”

Barclays, based in London, agreed to notify the Justice Department of “all potentially criminal conduct by Barclays or any of its employees that relates to fraud or violations of the laws governing securities and commodities markets.” Zurich-based UBS agreed to similar terms.

Edinburgh-based RBS promised to cooperate in “any and all matters” related to “manipulation, attempted manipulation, or interbank coordination of benchmark rate submissions.”


Bloomberg News reported in June that currency dealers said they had been front-running client orders and attempting to rig foreign-exchange rates for at least a decade by colluding with counterparts and pushing through trades before and during the 60-second windows when the benchmarks are set.

The world’s seven biggest foreign-exchange dealers have now all taken action against their employees: at least 17 traders have been suspended, put on leave or fired.

The Justice Department’s use of deferred- and non-prosecution agreements has been rising over the past decade from an average of four per year between 2000 and 2004 to 27 in 2013, according to data compiled by the law firm Gibson, Dunn & Crutcher LLP. Last year was the fifth consecutive year with at least 20 such settlements, the firm said.

Broader Investigations

“These agreements are now a fixture in the federal corporate law enforcement regime, and all indications point to their use holding steady for the foreseeable future,” the firm said.

The agreements help the government conduct broader investigations faster, said Robertson Park, a former federal prosecutor who worked on the Libor investigation.

“If suddenly you have an institution that is effectively giving you the information and documents and data you need, if they’re motivated to provide it in formats that are immediately available and useful to you and if they’re making witnesses available, that can be a significant time savings,” said Park, a lawyer at Murphy & McGonigle in Washington.

To contact the reporters on this story: David McLaughlin in Washington atdmclaughlin9@bloomberg.net; Tom Schoenberg in Washington attschoenberg@bloomberg.net

To contact the editor responsible for this story: Sara Forden at sforden@bloomberg.net

Chris Martenson: “Endless Growth” Is the Plan & There Is No Plan B | Peak Prosperity

Chris Martenson: “Endless Growth” Is the Plan & There Is No Plan B | Peak Prosperity.

After five years of aggressive Federal Reserve and government intervention in our monetary and financial systems, it’s time to ask: Where are we? 

The “plan,” such as it has been, is to let future growth sweep everything under the rug. To print some money, close their eyes, cross their fingers, and hope for the best.

On that, I give them an “A” for wishful thinking – and an “F” for actual results.

For the big banks, the plan has involved giving them free money so that they can be “healthy.” This has been conducted via direct (TARP, etc.) and semi-direct bailouts (such as offering them money at zero percent and then paying them 0.25% for stashing that same money back at the Fed), and indirectly via telegraphing future market interventions so that the big banks could ‘front run’ those moves to make virtually risk-free money.

This has been fabulously lucrative for the big banks that are in the inner circle. As we’ve noted somewhat monotonously, the big banks enjoy “win ratios” on their trading activities that are, well, implausible at best.

Here’s a chart of J.P. Morgan’s trading revenues for the first three quarters of 2013, showing how many days the bank made or lost money:


Do you see the number of days the bank lost money? No? Oh, that’s right. There weren’t any.

Now, for you or me, trading involves losses, or risk. Sometimes you win, and sometimes you lose. There appears to be zero risk at all to JP Morgan’s trading activities. They won virtually all of the time over this 9-month period.

That’s like living at a casino poker table for months and never losing.

Of course, Bank of America/Merrill Lynch, Goldman Sachs, and a few other U.S.-based banks were able to turn in roughly similar results. Pretty sweet deal being a bank these days, huh?

So one might think, Well, that’s just how banks are now. Bernanke’s flood of liquidity is allowing them to simply ‘win’ at trading. If true (which it appears to be), we can’t call this trading. The act of “trading” implies risk. And it’s clear that what the big banks are doing carries no risk; otherwise they would be posting at least some degree of losses. We should call it sanctioned theft, corporate welfare, cronyism  the list goes on. And it is most grossly unfair, as well as corrosive to the long-term health of our markets.

Therefore, sadly, I have to give Bernanke an A++ on his objective of handing the banks a truly massive amount of risk-free money. He’s done fabulously well there.

But will this be sufficient to carry the day? Will this be enough to set us back on the path of high growth?

And even if we do magically return to the sort of high-octane growth that we used to enjoy back in the day, will that really solve anything?

Endless Growth Is Plan A Through Plan Z

The problem I see with the current rescue plans is that they are piling on massive amounts of new debts.

These debts represent obligations taken on today that will have to be repaid in the future. And the only way repayment can possibly happen is if the future consists of a LOT of uninterrupted growth upwards from here.

It’s always easiest to make a case when you go to silly extremes, so let’s examine Japan. It’s no secret that Japan is piling on sovereign debt and just going nuts in an attempt to get its economy working again. At least that’s the publicly stated reason. The real reason is to keep its banking system from imploding.

After all, exponential debt-based financial systems function especially poorly in reverse. So Japan keeps piling on the debt in rather stunning amounts:


That’s up nearly 40% in three years (!).

It’s the people of Japan who are on the hook for all that borrowing, now standing well over 200% of GDP. So here’s the kicker: In 2010, Japan had a population of 128 million. In 2100, the ‘best case’ projected outcome for Japan is that its population will stand at 65 million. The worst case? 38 million.

So…who, exactly, is going to be paying all of that debt back?

The answer: Japan’s steadily shrinking pool of citizens.

This is simple math, and the trends are very, very clear. Japan has a swiftly rising debt load and a falling population. Whoever it is that is buying 30-year Japanese debt at 1.69% today either cannot perform simple math, or, more likely, is merely playing along for the moment but plans on getting out ahead of everybody else.

But the fact remains that Japan’s long-term economic prospects are pretty terrible. And they will remain so as long as the Japanese government, slave to the concept of debt-based money, cannot think of any other response to the current economic condition besides trying to shock the patient back to vigorous life by borrowing and spending like crazy.

If, instead, Japan had used its glory days of manufacturing export surpluses to build up real stores of actual wealth that would persist into the future, then the prognosis could be entirely different. But it didn’t.

The U.S. Is No Different

Except for some timing differences, the U.S. is largely in the same place as Japan twenty years ago and following a nearly identical trajectory.  Currently, it’s an economic powerhouse, folks are generally optimistic on the domestic economic front (relatively speaking), and its politicians are making exceptionally short-sighted decisions. But the long-term math is the same.

There’s too much debt representing too many promises. The only possible way those can be met is if rapid and persistent economic growth returns.

However, even under the very best of circumstances, where the economy rises from here without a hitch  say, at historically usual rates of around 3.5% in real terms (6% or more, nominally)  we know that various pension and entitlement programs will still be in big trouble.

Worse, we know that the environment is screaming for attention based on our poor stewardship. Addressing issues such as over-farming, water wastage, and oceanic fishery depletion  to say nothing of carbon levels in the atmosphere – will be hugely expensive.

Likewise, a complete focus on consumer borrowing and spending at the exclusion of everything else (except bailing out big banks, of course), along with a dab of excessive state security spending, has left the U.S. with an enormous infrastructure bill that also must be paid, one way or the other. That is, short-term decisions have left us with long-term challenges.

But what happens if that expected (required?) high rate of growth does not appear?

What if there are hitches and glitches along the way in the form of recessions, as is certain to be the case?  There always have been moments of economic retreat, despite the Fed’s heroic recent attempts to end them. Then what happens?

Well, that’s when an already implausible story of ‘recovery’ becomes ludicrous.

If we take a closer look at the projections, the idea that we’re going to grow – even remotely – into a gigantic future that will consume all entitlement shortfalls within its cornucopian maw becomes all but laughable.

Of course, the purpose of this exercise is not to make fun of anyone, nor to mock any particular beliefs, but to create an actionable understanding of the true nature of where we really are and what you should be doing about it.

In Part II: Why Your Own Plan Better Be Different, we examine more deeply the unsustainability of our current economic system and why it is folly to assume “things will get better from here.”

Given the unforgiving math at the macro altitudes, the need for adopting a saner, more prudent plan at the individual level is the best option available to us now.

Click here to access Part II of this report (free executive summary; enrollment required for full access).

Fed’s Dirty Little Secret: “The Gold Isn’t There… Exists as Paper IOU’s”

Fed’s Dirty Little Secret: “The Gold Isn’t There… Exists as Paper IOU’s”.

The assumption by global depositors who have entrusted their national savings with the Federal Reserve and US Government has always been that when they request to repatriate their holdings the Fed would simply open the vault, access said assets and ship them back to where they belong.

That’s exactly what Germany expected would happen last year when the country requested that the Federal Reserve return about one-fifth of their gold reserves. But that’s when things got really dicey. The Fed announced that Germany’s gold would be returned… but it would take seven years to get back home.

The response to Germany’s request turned heads all over the world and raised concerns that the Federal Reserve had squandered its gold holdings. But this isn’t the only red flag that was raised. Public pressure reached such levels that the Fed was forced to take steps to maintain confidence in its operations, so it started shipping gold to Germany. Except it turns out that the gold being sent back to the Bundesbank wasn’t actually German gold. It contained none of the original serial numbers, had no hallmarks, and was reportedly just recently melted.

The implications are earth shattering and hit the very core of the problems facing America today. The whole system as it exists is just one big paper IOU.

In this must-watch interview with Future Money TrendsJefferson Financial CEO Brien Lunden weighs in on Germany’s gold, what is happening at the Fed and what other central banks are doing right now. Brien also shares his thoughts on where the gold market is today, what to expect in coming years as gold supplies tighten up, how mining companies like Brazil Resources are taking advantage of the current environment, and how to profit from gold in coming years.

(Full transcript and interview)

For the reply to be that it would take seven years for this Gold to be sent back to you, your Gold to be sent back to you, was an obvious admission that the Gold just isn’t there.

Yes, it’s an admission that the German reserves were not still sitting there in the vault in the same form that they were sent there after WWII. They were not the original Central Bank Gold bars, same serial numbers etc. It’s an admission that at some point since then, that Gold has been used for other purposes.

So the dirty little secret here, is that a significant portion of central bank Gold reserves, including the U.S., don’t exist now in their original bar form. In fact, they exist as IOU’s, paper IOU’s, from the very banks that were bailed out in 2008 by the Federal Reserve.

So the Gold isn’t there, and the secret that they’re hiding is that it’s been replaced by IOU’s, and importantly those IOU’s are for Gold that was borrowed at much lower prices.

The Fed, through their recent actions, has essentially admitted that the gold stored in their vaults isn’t really there. Just as our government refuses to be openly transparent to with the American people, the Fed has resisted all calls to open their books (and vaults) to impartial third-party accountants for review.

The whole system, it seems, is now operating on IOU’s. Be it consumers, banks, the Fed or even the US government, all of the US dollars being exchanged are nothing but worthless pieces of paper, because given the lack of transparency at the Fed, we have to assume that the physical assets supposedly backing all this currency have already been spent.

Are we wrong in making this assumption?

If you were to store some emergency funds with a friend who promised to get them back to you whenever you asked, and then you ask and are told it’ll be a few years before he’ll get you the cash, what assumption would you make?  That your friend has the money on him right now, or that he’s used it for other purposes and doesn’t really know exactly when he’ll have it available for repayment?

Our entire consumer economy, as well as the credit worthiness of our nation, is built upon confidence. It’s took decades to get America in a position where our country’s monetary issues and services would be trusted by the international community. It’s taken just a few years for that confidence to be lost.

It’s now only a matter of time before our creditors and global investors pull the plug on the whole thing.

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