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Deluded Currency Cultists Believe The Dollar Is Invincible

Deluded Currency Cultists Believe The Dollar Is Invincible.

Wednesday, 12 March 2014 05:25 Brandon Smith

At the onset of the derivatives collapse in 2007/2008 it would have been easy to assume that most of America was receiving a valuable education in normalcy bias.

In 2006, the amount of ego on display surrounding mortgage investment was so disturbingly grotesque anyone with any true understanding of the situation felt like projectile vomiting. To watch the smug righteousness of MSNBC and FOX economic pundits as they predicted the infinite rise of American property markets despite all evidence to the contrary was truly mind blowing. When the whole system imploded, it was difficult to know whether one should laugh, or cry.

The saddest aspect of the credit crisis of 2008 was not the massive chain reaction of bankruptcies or the threat of institutional insolvency. Rather, it was the delusional assumptions of the public that the grand mortgage casino was going to go on forever. There is nothing worse than witnessing the victim of a Ponzi scheme defend the lie which has ultimately destroyed him. As much as I am for people waking up to the nature of the crisis, there comes a point when those who are going to figure it out will figure it out, and the rest are essentially hopeless.

The cultism surrounding the U.S. economy and the U.S. dollar is truly mind boggling, and by “cultism” I mean a blind faith in the fiat currency mechanism that goes beyond all logic, reason and evidence.

In recent weeks it has become more visible as global financiers play both sides of the Ukrainian conflict, luring Americans into a frenzy of false patriotism and an anti-Russo-sports-team-mentality. My personal distaste for Vladimir Putin revolves around my understanding that he is just as much a puppet of the International Monetary Fund and international banks as Barack Obama, but many Americans hate him simply because the mainstream media has designated him the next villain in the fantasy tale of U.S. foreign policy.

Open threats from Russia that they will dump U.S. treasury bond holdings and the dollar’s world reserve status if NATO interferes in the Ukraine have been met with wildly naive chest beating from dollar cultists.  I am beginning to see the talking points everywhere.

“Let them dump the dollar, Russia’s holdings are minimal!” Or, “Let them throw out Treasuries, they’ll just be shooting themselves in the foot!” are the battle cries heard across the web. I wish I could convey how insane this viewpoint is, especially in light of the fact that many alternative economic analysts, including myself, have been predicting just such a scenario for years.

Despite the childish boastings of the dollar devout, there is an extraordinarily good possibility that the life of the greenback will be snuffed out in the near term. Here are the facts…

1) Russia will not be alone in its decouple from the dollar system. China, our largest foreign creditor, and India (a supposed ally) have clearly sided with Russia on the Ukranian issue. China has stated that it will back Russia’s play in the event that sanctions are brought to bear by NATO, or if a shooting conflict erupts.

2) China has already been slowly dumping the dollar as a world reserve currency using bilateral trade agreements with numerous countries, including Russia, India, Australia, Brazil, Germany, Japan, etc. These agreements allow FOREX currency swaps and export/import purchases to be made with China without the use of the dollar. China has been preparing itself for a divorce from U.S. economic dependence for at least a decade. The idea that they would actually follow through over political tensions should NOT surprise anyone if they have been paying attention.

3) A total drop of the dollar or U.S. treasury bonds by Russia and China would send shock waves through global markets. Russia is a major energy supplier for most of Europe. China is the largest export/import nation in the world. If they refuse to accept dollars as a trade mechanism, numerous countries will fall in line to abandon the greenback as well. The fact that so many Americans refuse to acknowledge this reality is a recipe for disaster.

The only advantage the U.S. has traditionally offered in terms of international trade has been the American consumer, whose unchecked debt spending partly fueled the rise of the industrialized East, not to mention the biggest credit bubble in history. The role of America as a consumer market is collapsing today, however. The mainstream media and the Federal Reserve can blame the steady decline in retail sales on the “weather” all they want, but negative indicators in global manufacturing often take many months to register in the statistics, meaning, this destabilization began long before the days turned cold.

4) China has been shifting away from export dependency since at least 2008, calling for a larger consumer based market at home. This process of enriching the Chinese consumer has almost been completed. The lie that China “needs the U.S.” in order to survive economically needs to be thrown out like the utter propaganda it is.

5) China (and most of the world) has ended new dollar purchases for their FOREX reserves, and has no plans to make new purchases in the future.

6) China executed the second largest dump of U.S. Treasury bonds in history in the past month.

7) Russia, China, and numerous other countries, including U.S. “allies”, have been calling for the end of the dollar’s world reserve status and the institution of a new global basket currencyusing the IMF’s Special Drawing Rights (SDR). Even Putin has suggested that the IMF take over administration of the global economy and issue the SDR as a world currency system. This flies in the face of those who argue that the IMF is somehow “American run”. The truth is, the IMF is run by global banks and no more answers to the U.S. government than the Federal Reserve answers to the U.S. government.

 

8) The Federal Reserve has been creating trillions of dollars in fiat just to prop up U.S. markets since 2008, and we are still seeing a considerable decline in global manufacturing, retail, personal home sales, and a general malaise in consumer demand. Without a full audit, there is no way to know exactly how much currency has been generated or how much is floating around in foreign markets. Any loss of world reserve status would send that flood of dollars back into the U.S., most likely ending in a hyperinflationary environment.

9) Another rather dubious argument I see often is the claim that the Federal Reserve and the U.S. Treasury could simply “negate” a Treasury dump by refusing to acknowledge creditor liabilities. Or, that they could simply print what they need to snap up the bonds, much like the German government tried to do during the Weimar collapse. Unfortunately, this plan did not work out so well for the Germans, nor has it worked for any other nation in history, so I’m not sure why people think the U.S. could pull it off. However, this is the kind of cultism we are surrounded by. These folks think the U.S. economy and the dollar are untouchable.

Yes, the Fed and the Treasury could hypothetically erase existing liabilities, but what dollar cultists do not seem to grasp is that the dollar’s value is not built on Treasury purchases. The dollar’s value is built on faith and reputation. If a nation refuses to pay out on its debts, this is called default. A default by the U.S. would immediately damage the reputation of bonds and dollars as a good investment. Global markets will refuse to purchase or hold any mechanism that they think will not earn them a profit. How many investors today are anxious to jump into Greek treasury bonds, for instance?

Finally, it is unwise to operate on the assumption that foreign creditors will accept dollars as payment on U.S. Treasury bonds if they believe the Federal Reserve is monetizing the debt. When Weimar imploded under the weight of currency devaluation, many foreign governments refused to accept the German mark as payment. Instead, they demanded payment in raw commodities, like coal, lumber and ore. Expect that China and other debt holders will demand payment in U.S. goods, infrastructure, or perhaps even land.

10) Most treasury holdings in foreign coffers are not long term bonds. Rather, they are short term bonds which mature in weeks or months, instead of years. Dollar proponents constantly cite the continued accumulation of treasury bonds by other governments as a sign that the dollar is still desirable as ever. Unfortunately, they have failed to look at the nature of these bond purchases. When China rolls over millions in short term bonds and replaces them with other short term bonds, this does not suggest they have much faith in America’s long term ability to service its debt. It would also make sense that if China had plans to remove itself from the dollar system, they would move into short term bonds which can be liquidated quickly.

11) China is on the fast track to becoming the largest holder of physical gold in the world. Russia has also greatly expanded its gold purchases. Whatever losses they might suffer from a dump of their Treasury bond investments; it will be more than made up in the incredible explosion in precious metals prices that would follow.

12) The most common argument against the dollar losing world reserve status has been that such a shift would be “impossible” because no other currency in the world has the adequate liquidity needed to replace the dollar in global trade. These people have apparently not been paying attention to the Chinese yuan. China has been quietly issuing trillions in yuan denominated bonds, securities and currency around the world. Current estimates calculate around $24 trillion created by the PBOC and the banks under its control.

Mainstream talking heads are calling this a “debt bubble.” However, this debt creation makes perfect sense if China’s plan is to create enough liquidity in its currency in order to offer a viable alternative to the U.S. dollar. Linking the yuan to the IMF’s basket currency would complete the picture, forming a perfect dollar replacement while dollar cheerleading-economists stand dumbstruck.

13) China’s retreat away from dollar denominated investments has left a hole in the U.S. bond market.  Recently, that negative space was filled by an unexpected source; namely Belgium.  A country whose GDP represents less than 1% of total global GDP buying more U.S. bonds than China?  The whole concept sounds bizarre.  Where is the capital coming from?

Think about it this way – Belgium is the political center of the European Union and a haven for international financiers.  There are more corporate cronies, lobbyists, bureaucrats, and foreign dignitaries in Belgium than in all of Washington D.C.  But more importantly, Belgium struck a deal with the IMF in 2012 to begin pumping SDR denominated funds into “low income economies”.  I would suggest that this funding flows both ways, and that now, the IMF is feeding capital into Belgium in order to buy U.S. Treasury Bonds.  That is to say, the IMF is going to start using smaller member countries with limited savings as proxies to purchase U.S. debt using IMF money.

The ultimate danger of the IMF (run by internationalists, not the U.S. government) pre-positioning itself as the primary buyer of U.S. debt is that when the U.S. finally defaults (and it will), the IMF is likely to become the “guardian angel” of the U.S. economy, offering aid in exchange for total administrative control of our financial system, and the institution of the SDR as a world reserve replacement for the dollar.

14) The serious prospect of regional conflict or world war over tensions between the Ukraine and Russia, Japan and China, the U.S. and Syria, the U.S. and Iran, the U.S. and North Korea, etc., could make the effort of exposing the plan to shift economic power into a one world system centralized under the IMF almost meaningless.  How many people will truly care about the financial power grab by banking elites if it drifts under the surface of catastrophic engineered wars?  They’ll be too busy hating and fighting artificially created boogeymen to pay attention to the real globalist culprits.

I have been pointing out for quite a long time that globalists need a “cover event”; a disaster, an economic war or a shooting war, in order to provide a smokescreen for the collapse of the dollar. Alternative analysts have been consistently correct in predicting the trend towards the dump of the dollar. Years ago, we were laughed at for suggesting China would shift towards a consumer based economy and away from U.S. dependence. Today, it is mainstream news. We were laughed at for suggesting that nations like Russia and China would drop the dollar as a reserve currency. Today, they are already in the process of doing it. And, we were laughed at for suggesting that Russia or China would use their debt holdings as leverage against the U.S. in the event of a geopolitical conflict. Today, they are openly making threats.

I have to say, I’ve grown tired of the dollar cultists. How many times can a group of people be wrong and still argue with those who have been consistently right? The answer is that zealots never actually escape their own delusions, even when their delusions lead them and those around them to ruin. I suspect that in the face of complete dollar collapse, they will still be rationalizing the chaos and pontificating on our “lack of understanding” while the theater burns down around them.

Five Steps To Help You Avoid Investment Fraud | Bob Stammers

Five Steps To Help You Avoid Investment Fraud | Bob Stammers.

Bob Stammers

CFA, Director of Investor Education

On the fifth anniversary of Bernie Madoff’s conviction, it might be tempting to try and forget about investment fraud. After all, one of the most notorious con men in modern history has been locked away until Nov. 14, 2139. So does that mean investors are safe from fraud?

Unfortunately, there will always be bad apples in the financial system and if you have money to invest then you are vulnerable to potential fraudulent behaviour. Latest figures from the Canadian Securities Administrators show that 56 per cent of Canadians agree they are just as likely to be a victim of investment fraud as anyone else.

The following five steps will help to minimize your chances of falling victim to investment fraud and limit your exposure in the unfortunate case that you do.

1. Clearly understand the investment strategy

The venerable portfolio manager, Peter Lynch, consistently advises people to invest only in what they understand. Investors should be alert to the possibility that complex jargon often hides suspicious inconsistencies. Some investment opportunities appear alluring simply because they are described in impressive, complicated terms and of course as investors we want to appear smart so we often nod, smile and agree to something we don’t actually understand. Investment strategies and financial products should be clear and understandable, and the professional advisers that you hire should ensure you’re comfortable with them before you take the plunge.

2. Be wary of “sure things”, quick returns and special access

Legitimate investment professionals do not promise sure bets; remember there is no such thing! Scammers often make the combination of safety and high returns seem plausible by granting you “special access” based on your relationship with a mutual acquaintance or affiliation with a specific group. Be sure to judge investments on their merits alone — do your best to ignore the social pressure that can often lead investors to misery and remember if it seems too good to be true, it probably is!

3. Is the investment subject to regulation and what if any protection does it provide?

Regulation varies by country and investment type. Hedge funds, for example, are less regulated than mutual funds and off-shore advisers may be subject to less stringent supervision in some countries. Regulation does not mean lower risk. A common mistake that investors make is to assume that because their investments are regulated the risks involved are reduced. Before making an investment decision, make sure you are aware of the relevant regulation and then you can fully assess the merits of the investment. It’s still possible to lose money in well-regulated markets so you need to make sure your investment decisions match your overall risk profile.

4. Trust, but verify

Ultimately, the reliability of any operation is predicated on the integrity and competence of its people. Remember that the company you choose to invest with could be overseeing your assets for many years to come so it’s important to build a trusting relationship with them. One of the best ways to do this is to adopt a “trust, but verify” mentality. Look for professionals who have achieved a mark of distinction in their career–like the Chartered Financial Analyst (CFA) designation–and professionals who abide by a Code of Ethics that requires them to place clients’ interests ahead of their own. Trust is built with consistency so looking at past experience can reveal a lot – what is their investment track record, can they provide references, are they registered with the national regulator? The more you know, the easier it is to detect a scam!

5. Don’t forget to use standard investing discipline

When the conversation turns to fraud, investors can sometimes forget that tried-and-tested investment management principles still need to be applied. Even though diversification is one of the most fundamental and enduring investment principles, many investors forget to ensure their assets are diversified widely enough. Doing so will help to limit the catastrophe associated with investment fraud but it is also more likely to provide a higher average return at lower average risk. Make sure that all investment decisions you make are aligning with your long-term financial goals and never invest in anything you don’t fully understand.

When navigating the markets, it will always be important to keep a watchful eye out for fraud. Throughout history, whenever money is involved there will tend to be an opportunity for unscrupulous people to take advantage of others. CFA Institute provides some helpful tools to educate investors on how to make informed investment decisions, so be prepared, do your homework and remember that taking steps to avoid fraud is part of a good investment strategy.

Five Steps To Help You Avoid Investment Fraud | Bob Stammers

Five Steps To Help You Avoid Investment Fraud | Bob Stammers.

Bob Stammers

CFA, Director of Investor Education

On the fifth anniversary of Bernie Madoff’s conviction, it might be tempting to try and forget about investment fraud. After all, one of the most notorious con men in modern history has been locked away until Nov. 14, 2139. So does that mean investors are safe from fraud?

Unfortunately, there will always be bad apples in the financial system and if you have money to invest then you are vulnerable to potential fraudulent behaviour. Latest figures from the Canadian Securities Administrators show that 56 per cent of Canadians agree they are just as likely to be a victim of investment fraud as anyone else.

The following five steps will help to minimize your chances of falling victim to investment fraud and limit your exposure in the unfortunate case that you do.

1. Clearly understand the investment strategy

The venerable portfolio manager, Peter Lynch, consistently advises people to invest only in what they understand. Investors should be alert to the possibility that complex jargon often hides suspicious inconsistencies. Some investment opportunities appear alluring simply because they are described in impressive, complicated terms and of course as investors we want to appear smart so we often nod, smile and agree to something we don’t actually understand. Investment strategies and financial products should be clear and understandable, and the professional advisers that you hire should ensure you’re comfortable with them before you take the plunge.

2. Be wary of “sure things”, quick returns and special access

Legitimate investment professionals do not promise sure bets; remember there is no such thing! Scammers often make the combination of safety and high returns seem plausible by granting you “special access” based on your relationship with a mutual acquaintance or affiliation with a specific group. Be sure to judge investments on their merits alone — do your best to ignore the social pressure that can often lead investors to misery and remember if it seems too good to be true, it probably is!

3. Is the investment subject to regulation and what if any protection does it provide?

Regulation varies by country and investment type. Hedge funds, for example, are less regulated than mutual funds and off-shore advisers may be subject to less stringent supervision in some countries. Regulation does not mean lower risk. A common mistake that investors make is to assume that because their investments are regulated the risks involved are reduced. Before making an investment decision, make sure you are aware of the relevant regulation and then you can fully assess the merits of the investment. It’s still possible to lose money in well-regulated markets so you need to make sure your investment decisions match your overall risk profile.

4. Trust, but verify

Ultimately, the reliability of any operation is predicated on the integrity and competence of its people. Remember that the company you choose to invest with could be overseeing your assets for many years to come so it’s important to build a trusting relationship with them. One of the best ways to do this is to adopt a “trust, but verify” mentality. Look for professionals who have achieved a mark of distinction in their career–like the Chartered Financial Analyst (CFA) designation–and professionals who abide by a Code of Ethics that requires them to place clients’ interests ahead of their own. Trust is built with consistency so looking at past experience can reveal a lot – what is their investment track record, can they provide references, are they registered with the national regulator? The more you know, the easier it is to detect a scam!

5. Don’t forget to use standard investing discipline

When the conversation turns to fraud, investors can sometimes forget that tried-and-tested investment management principles still need to be applied. Even though diversification is one of the most fundamental and enduring investment principles, many investors forget to ensure their assets are diversified widely enough. Doing so will help to limit the catastrophe associated with investment fraud but it is also more likely to provide a higher average return at lower average risk. Make sure that all investment decisions you make are aligning with your long-term financial goals and never invest in anything you don’t fully understand.

When navigating the markets, it will always be important to keep a watchful eye out for fraud. Throughout history, whenever money is involved there will tend to be an opportunity for unscrupulous people to take advantage of others. CFA Institute provides some helpful tools to educate investors on how to make informed investment decisions, so be prepared, do your homework and remember that taking steps to avoid fraud is part of a good investment strategy.

Ponzi World (Over 3 Billion NOT Served): Collapse-O-Nomics: Commonsense is Extinct

Ponzi World (Over 3 Billion NOT Served): Collapse-O-Nomics: Commonsense is Extinct.

No Reasonable Idea Will Go unClusterfucked by the Idiocracy
The Lost Boys continue to decry today’s “Keynesian” policy failures – this obviously ludicrous idea of borrowing the economy out of debt. However, when I took (Macro) Econ 101 way back in 1987, the Professor at the time – an ardent Keynesian – taught us that correct application of fiscal stimulus is to run deficits during recessions and surpluses during expansion. Therefore, in the context of a typical five year business cycle, that would lead to one year of deficit followed by four years of surplus and hence a balanced budget (if not net surplus). However, today’s Keynesian bashers don’t know any of that, because they never took Econ 101 nor even Commonsense 101. These Keynesian bashers are as deluded as the Krugmanites who think they too know anything about appropriate use of fiscal policy. No sane doctor would prescribe using antibiotics for 30 years straight and then declare like a dumbfuck at the end of it all that antibiotics don’t work. This is all just a game by and for morons of which there is no shortage on all sides of this equation.

Keynes Didn’t Envision Reagan, Bush or Faux News
Unfortunately, Keynes never envisioned the Idiocracy, nor how bastardized his policies would become over the course of time, when placed in the hands of hill billies and B Actors looking for a retirement gig. Fiscal policy was never intended to sponsor tax cuts for the ultra-wealthy, military blunders, nor military build-ups. Nor did he envision this concept endorsed by Krugmanites of bailing out a 30 year leveraged consumption binge and multi-year housing boom via the application of totally unlimited government borrowing. And needless to say, he never envisioned monetization of debt solely to prop up the stock market while the real economy was outsourced in the background. All of this chicanery is the result of what happens when Frat Boys go to college to socialize rather than to get a real education. They become very good at pretending to know things, while having absolutely zero judgement as to how these policies need to be applied in order to be effective. In other words, a little bit of knowledge is an extremely dangerous thing.
Extreme Deflation Doesn’t Mean Cheaper Computers at Best Buy
Keynes himself was an extremely intelligent man – whose ideas were far beyond the grasp of today’s policy-making game show hosts. Anyone who has ever read “The General Theory of Employment, Interest and Money” is standing on the shoulders of an intellectual giant, if they understand what he is saying, at all. Moreover, the problem he was trying to solve was how to mitigate the devastating human impacts resulting from The Great Depression. He was addressing a real depression, not a three month hiatus from shopping binges and expensive dinners, which is what the Idiocracy deems to be this recent “great recession”.
Worse yet, the Lost Boys seem to believe that deflation means lower prices at Best Buy. Unfortunately in a real depression, deflation means a total collapse in demand leading to a collapse in prices. In a fixed cost-based world wherein all corporate entities have taken full advantage of 0% interest rates to maximize financial leverage – then deflation means bankruptcy. In other words, every possible mistake that could be made leading up to this lethal juncture, has been made, specifically around subsidizing cheap debt. In a fixed cost world, deflation means mass unemployment and accompanying turmoil. Which gets us to the next point.
The Polling Booth (and/or Molotov Cocktail) is the Final Arbiter of all Economic Theories
The rule of one vote per woman or man can work eventually. In the interim, however, it may not work well, if at all. The subversion of democracy via mass brainwashing aka. Faux News in addition to the dumbing down of a population via junk food and junk culture, is a lethal combination. In the interim, democracy can lead to any ludicrous outcome including the mass accumulation of wealth in the hands of an ever-dwindling minority.
Ultimately, however, there is only so much pain the masses can take and then they revolt. At that point, political democracy becomes economic democracy. No one can predict what new bastardized economic model will result from this ensuing pandemonium, however, rest assured it will look nothing like the current one.
In other words, in the fullness of time, economics and politics are one and the same. No economic model regardless of how textbook “efficient” it is deemed to be, can indefinitely withstand the polling booth. That’s just one more lesson that today’s frat boys and billionaires are going to find out the hard way. The future will not be about what a handful of entitled people want for themselves, with zero concern for their fellow man. That childish fantasy will be flushed down the toilet of history, where it belongs.The Pendulum Swings
At this late juncture, the political pendulum is still hard to the right on economic policy, not withstanding the feel good election of Obama to Bush’s third and fourth terms. The political economy is the furthest to the right it has been since the early 1900s just prior to the Great Depression, during the heyday of the “robber barons”. Today’s power elite have pushed their luck to the absolute limit and then a lot further. What they don’t realize is that momentum has halted and the pendulum is getting set to swing back in the other direction. The Idiocracy has been conned into voting against their own economic interest for thirty fucking years straight. It’s an unprecedented run in modern history. When the political pendulum begins to swing the other way, the status quo political ideologies will be obliterated in lockstep with the status quo pseudo-economy. The recalibration will be instantaneous and the elite’s grasp on power will be challenged, violently.

Commonsense Doesn’t Sell Text Books
Lastly, this omnipresent buffoonish devotion to economic ideology – Keynesianism, Monetarism, Austrianism, Communism, Socialism, Capitalism etc. has meant that commonsense has been thrown out the window. Commonsense of course being the only moderating control rod in all of these economic “systems”. However, to be a commonsense-based centrist is to be seen as being weak and lacking confidence. Clearly, the “best ideas” deserve slavish unquestioning devotion. Unfortunately, in the real world, all of these theories – which is what they are – have massive flaws so wide you can drive a truck through them, therefore it’s only a matter of time before their brainwashed proponents take the application of theory to the ludicrous extreme, at which point these “systems” all collapse in their own uniquely spectacular fashion.Voila.

JPMorgan Vice President’s Death Shines Light on Bank’s Close Ties to the CIA | Global Research

JPMorgan Vice President’s Death Shines Light on Bank’s Close Ties to the CIA | Global Research.

Global Research, February 13, 2014
wallstreet

By Pam Martens and Russ Martens

The nonstop crime news swirling around JPMorgan Chase for a solid 18 months has started to feel a little spooky – they do lots of crime but never any time; and with each closed case, a trail of unanswered questions remains in the public’s mind.

Just last month, JPMorgan Chase acknowledged that it facilitated the largest Ponzi scheme in history, looking the other way as Bernie Madoff brazenly turned his business bank account at JPMorgan Chase into an unprecedented money laundering operation that would have set off bells, whistles and sirens at any other bank.

The U.S. Justice Department allowed JPMorgan to pay $1.7 billion and sign a deferred prosecution agreement, meaning no one goes to jail at JPMorgan — again. The largest question that no one can or will answer is how the compliance, legal and anti-money laundering personnel at JPMorgan ignored for years hundreds of transfers and billions of dollars in round trip maneuvers between Madoff and the account of Norman Levy. Even one such maneuver should set off an investigation. (Levy is now deceased and the Trustee for Madoff’s victims has settled with his estate.)

Then there was the report done by the U.S. Senate’s Permanent Subcommittee on Investigations of the London Whale episode which left the public in the dark about just what JPMorgan was doing with stock trading in its Chief Investment Office in London, redacting all information in the 300-page report that related to that topic.

Wall Street On Parade has been filing Freedom of Information Act (FOIA) requests with the Federal government in these matters, and despite the pledge from our President to set a new era of transparency, thus far we have had few answers coming our way.

One reason that JPMorgan may have such a spooky feel is that it has aligned itself in no small way with real-life spooks, the CIA kind.

Just when the public was numbing itself to the endless stream of financial malfeasance which cost JPMorgan over $30 billion in fines and settlements in just the past 13 months, we learned on January 28 of this year that a happy, healthy 39-year old technology Vice President, Gabriel Magee, was found dead on a 9th level rooftop of the bank’s 33-story European headquarters building in the Canary Wharf section of London.

The way the news of this tragic and sudden death was stage-managed by highly skilled but invisible hands, turning a demonstrably suspicious incident into a cut-and-dried suicide leap from the rooftop (devoid of eyewitnesses or  motivation) had all the hallmarks of a sophisticated covert operation or coverup.

The London Evening Standard newspaper reported the same day that “A man plunged to his death from a Canary Wharf tower in front of thousands of horrified commuters today.” Who gave that completely fabricated story to the press? Commuters on the street had no view of the body because it was 9 floors up on a rooftop – a rooftop that is accessible from a stairwell inside the building, not just via a fall from the roof. Adding to the suspicions, Magee had emailed his girlfriend the evening before telling her he was finishing up and would be home shortly.

If JPMorgan’s CEO, Jamie Dimon, needed a little crisis management help from operatives, he has no shortage of people to call upon. Thomas Higgins was, until a few months ago, a Managing Director and Global Head of Operational Control for JPMorgan. (A BusinessWeek profile shows Higgins still employed at JPMorgan while the New York Post reported that he left late last year.) What is not in question is that Higgins was previously the Senior Officer and Station Chief in the CIA’s National Clandestine Service, a component of which is the National Resources Division. (Higgins’ bio is printed in past brochures of the CIA Officers Memorial Foundation, where Higgins is listed with his JPMorgan job title, former CIA job title, and as a member of the Foundation’s Board of Directors for 2013.)

According to Jeff Stein, writing in Newsweek on November 14, the National Resources Division (NR) is the “biggest little CIA shop you’ve never heard of.” One good reason you’ve never heard of it until now is that the New York Times was asked not to name it in 2001. James Risen writes in a New York Times piece:

[the CIA’s] “New York station was behind the false front of another federal organization, which intelligence officials requested that The Times not identify. The station was, among other things, a base of operations to spy on and recruit foreign diplomats stationed at the United Nations, while debriefing selected American business executives and others willing to talk to the C.I.A. after returning from overseas.”

Stein gets much of that out in the open in his piece for Newsweek, citing sources who say that “its intimate relations with top U.S. corporate executives willing to have their companies fronting for the CIA invites trouble at home and abroad.” Stein goes on to say that NR operatives “cultivate their own sources on Wall Street, especially looking for help keeping track of foreign money sloshing around in the global financial system, while recruiting companies to provide cover for CIA operations abroad. And once they’ve seen how the other 1 percent lives, CIA operatives, some say, are tempted to go over to the other side.”

We now know that it was not only the Securities and Exchange Commission, the U.S. Treasury Department’s FinCEN, and bank examiners from the Comptroller of the Currency who missed the Madoff fraud, it was top snoops at the CIA in the very city where Madoff was headquartered.

Stein gives us even less reason to feel confident about this situation, writing that the NR “knows some titans of finance are not above being romanced. Most love hanging out with the agency’s top spies — James Bond and all that — and being solicited for their views on everything from the street’s latest tricks to their meetings with, say, China’s finance minister. JPMorgan Chase’s Jamie Dimon and Goldman Sach’s Lloyd Blankfein, one former CIA executive recalls, loved to get visitors from Langley. And the CIA loves them back, not just for their patriotic cooperation with the spy agency, sources say, but for the influence they have on Capitol Hill, where the intelligence budgets are hashed out.”

Higgins is not the only former CIA operative to work at JPMorgan. According to aLinkedIn profile, Bud Cato, a Regional Security Manager for JPMorgan Chase, worked for the CIA in foreign clandestine operations from 1982 to 1995; then went to work for The Coca-Cola Company until 2001; then back to the CIA as an Operations Officer in Afghanistan, Iraq and other Middle East countries until he joined JPMorgan in 2011.

In addition to Higgins and Cato, JPMorgan has a large roster of former Secret Service, former FBI and former law enforcement personnel employed in security jobs. And, as we have reported repeatedly, it still shares a space with the NYPD in a massive surveillance operation in lower Manhattan which has been dubbed the Lower Manhattan Security Coordination Center.

JPMorgan and Jamie Dimon have received a great deal of press attention for the whopping $4.6 million that JPMorgan donated to the New York City Police Foundation. Leonard Levitt, of NYPD Confidential, wrote in 2011 that New York City Police Commissioner Ray Kelly “has amended his financial disclosure forms after this column revealed last October that the Police Foundation had paid his dues and meals at the Harvard Club for the past eight years. Kelly now acknowledges he spent $30,000 at the Harvard Club between 2006 and 2009, according to the Daily News.”

JPMorgan is also listed as one of the largest donors to a nonprofit Foundation that provides college tuition assistance to the children of fallen CIA operatives, the CIA Officers Memorial Foundation. The Foundation also notes in a November 2013 publication, the Compass, that it has enjoyed the fundraising support of Maurice (Hank) Greenberg. According to the publication, Greenberg “sponsored a fundraiser on our behalf. His guest list included the who’s who of the financial services industry in New York, and they gave generously.”

Hank Greenberg is the former Chairman and CEO of AIG which collapsed into the arms of the U.S. taxpayer, requiring a $182 billion bailout. In 2006, AIG paid $1.64 billion to settle federal and state probes into fraudulent activities. In 2010, the company settled a shareholders’ lawsuit for $725 million that accused it of accounting fraud and stock price manipulation. In 2009, Greenberg settled SEC fraud charges against him related to AIG for $15 million.

Before the death of Gabriel Magee, the public had lost trust in the Justice Department and Wall Street regulators to bring these financial firms to justice for an unending spree of fleecing the public. Now there is a young man’s unexplained death at JPMorgan. This is no longer about money. This is about a heartbroken family that will never be the same again; who can never find peace or closure until credible and documented facts are put before them by independent, credible law enforcement.

The London Coroner’s office will hold a formal inquest into the death of Gabriel Magee on May 15. Wall Street On Parade has asked that the inquest be available on a live webcast as well as an archived webcast so that the American public can observe for itself if this matter has been given the kind of serious investigation it deserves. We ask other media outlets who were initially misled about the facts in this case to do the same.

Ponzi World (Over 3 Billion NOT Served): This Graceless Age…

Ponzi World (Over 3 Billion NOT Served): This Graceless Age….

This Graceless Age…

Leaves nothing left to believe in, beyond its demise.

The consumption-oriented lifestyle could in no way scale across 7 billion people, so this was always a zero sum game between haves and have nots.

Global policy-makers saved the globalized ponzi scheme from itself in 2008. Now having squandered all resources, the odds that they can save it again are somewhere between zero and impossible. The first melt-down to weaken the model. This next one to kill it, for good…


The New Rome
Worthless political thought dealers. Vacuous media buffoons. Country club CEOs hell bent on liquidating their own country. Wall Street greed idolators. Self-important billionaires sprinkling their Central Bank-inflated wealth on the indolent masses. Hollywood’s fake gods and goddesses saving the world one comic book remake at a time. Steroid-bloated millionaire athletes pimping factory slave made sneakers to poverty-stricken inner city youth at $150 a pair. Testosterone-depleted boy-men running around like refugees, incapable of anything beyond their own immediate self-gratification. Idiocratic masses, stewing in a lethal cauldron of junk food and junk culture – too stoned to realize how stoned they are.

Life Without SUVs: Inconceivable
Third grade math indicates that the consumption-oriented lifestyle is in no way scalable across 7 billion people. In the U.S. alone, 5% of the world’s population consume 20% of global resources. It’s a tale of moral and intellectual bankruptcy that today’s thought dealers would allow so much legacy industrial assets to be liquidated just to propagate the fundamentally unsustainable for a few years longer. Despite doubling 229 years worth of national debt in just the past 7 years, today’s dumbfucked leaders, clueless academics, and the Idiocracy at large just can’t face the idea that their overriding mission to consume this planet, is now ending.
MELTDOWN IS INEVITABLE
Anyone who reads this after-the-collapse, must come to terms with the fact that they were financially bludgeoned merely because they took all of the above decadence for granted – “business as usual”. And the fact that they were incapable of third grade math or otherwise had their heads buried straight up their own ass. Even at this late stage, the vast majority are totally bought in to the status quo and its inherent exploitation-based mentality. It’s totally unquestioned. 

What to tell the grandchildren? 
“Yeah, we thought it was odd – trying to borrow our way out of a debt crisis. And we really felt bad about bankrupting your generation, but those shopping sprees were fantastic. Personally, I was skeptical trusting the same morons with the global financial system after they crashed it in 2008, but then Bernanke gave them a free bailout and a lot more gambling money, so they seemed happy. I was really taken aback when the Chinese stopped lending us their money – after all, we’d been paying them $.10 on the dollar in wages. Totally ungrateful. Overall though, I’ll be honest, I was too busy watching the Dow, the NFL and Faux News, so I really had no clue what the hell was going on in the real world…”.
Losing My Religion

And now, we just learned, 400 Priests defrocked by the Pope over a two year period, for child molestation. A thousand plus years of shameful secrets disgorged in one exhale. Do we really believe that this is all a modern problem? That this legacy of sexual abuse has not been secretly propagated for centuries? Of course not. Suffice to say, This is a bad time to be left faithless, going into what will very likely be the most deadly period in human history. 

The New Dark Ages
Christianity was conceived (literally) near the height of the Roman Empire. This nascent religion challenged the Roman ideals of the time and was violently repressed. Over hundreds of years, Christianity spread quietly and unobtrusively until it became the de facto religion of the late stage Roman Empire, by then removed to Constantinople. And when that Empire collapsed into the Dark Ages, and was eviscerated by barbarians – Goths, Visigoths, Vandals, Huns etc., it was the Christian Church – the Holy Roman Empire that maintained order during the darkest depths of those Dark Ages. It was a time when people actually lived according to the central tenets of Christianity – quiet piety and self-less altruism – as opposed to counting their hours spent in church only to recycle their guilt for another week of Ayn Rand-worthy exploitation.
Does anyone honestly believe that today’s crippled church(es), riddled with their own corruption, will provide stability in the days to come? Will the masses turn to the dominant religions of today i.e. the ones who turned a blind eye to all of today’s iniquities and madness? Will the church have any moral authority left to play such a role? Will credit card collecting Televangelists become our new beacons of hope? With their perma-smiling sociopathic charisma which would be selling used cars if it wasn’t selling religion? Highly doubtful. As we all know, Profit Killed that Prophet a long time ago.
Barbarians At the Gate: Medieval Taliban
The Taliban have essentially rolled back their Islamic beliefs to the Middle Ages. They are ahead of the curve. No one would want to live that way, but it’s working for them. They have an ideology they can cling to and that is gathering adherents constantly. One can argue that the various radicalized Islamic factions, left to their own devices will eventually annihilate each other, and we can only hope so. However, more than likely at least a couple of these factions will arise intact and stronger than ever. Granted, predictions of this sort are no more than mere parlour games, however, it seems clear that the Taliban have been preparing for the decline of the current world order and are prepared across multiple dimensions. Back in 2001 right after 9/11, B-52s carpet bombed the Taliban in Afghanistan for over a month straight. I know, because they flew over my house every night at 1 am. It sounded like the end of the world – on their way to Diego Garcia for the hop to Tora Bora. After that, we all thought the Taliban were ancient history. Now they’re running around like they never left the place. Unbelievable.
 
Neo-Marxism
I’ve noticed a nascent increase in references to Marxism recently. It’s not showing up in Google Trends yet, but it will, on the other side of the reset. As we see below, there was a spike in search relevance for this term during 2008 and we can expect a much larger sustained spike in interest in the days to come.
 
Google Trends “Marxism”

 
Faith In Capitalism
The words faith and capitalism should never be used in the same sentence. That said, after 2008, no surprise, faith in capitalism declined significantly, including here in the U.S. Back in 2010, only 59% of Americans felt that “free markets” were the best system for the world economy. That was down from 80% in 2002. Meanwhile, all of these types of polls show that high income earners generally evince strong faith in capitalism while low income earners evince low faith in capitalism. Go figure. In 2010 only 44% of low income Americans had faith in the system.
 
Put that above dichotomy in the context of Mitt Romney’s mythical 47%. Vulture capitalists laid off half of the country and then scorned people for not being able to find jobs. If that “dependency” figure is 47% now, what does that portend on the other side of the reset? Elitists call this impending scenario, the “tyranny of the masses”. i.e. wherein the majority vote for a system that is in theirbest interests for a change, rather than in the best interests of billionaires who sold their country to foreign interests. If rule by majority is “tyranny of the masses”, then surely the current system is tyranny of the jackasses.
Which gets me to my point. If, as die-hard Libertarians tell us constantly – this current system, attendant with outsized profit margins, record billionaires, and minimalistic labour protections is NOT in fact true capitalism i.e. if this is not Ayn Rand’s wet dream (even though it is). Then it seems that the burden of proof is on today’s apologists to invent a better version pronto, while there is still time and (albeit minimal) credibility left. Because on the other side of the “reset” that line above is going to spike upwards in direct inverse correlation to the Dow. And at that point in time, no one is going to give a flying fuck what today’s apologists for capitalism have to say about their model.In A Real Economy Supply Is Demand
I highly doubt that the U.S. would ever turn full blown communist – let’s face it, today’s phony Obama-socialism is nothing more than foodstamp-based riot control while billionaires complete the estate sale. Those Americans who honestly think that the U.S. is on the verge of socialism, need to take their first-ever trip outside of the U.S. and get some fucking perspective. That said, there are several well known countries where opinions are turning decidedly against capitalism, not the least of which is Japan. Suffice to say, the age of Sociopathic Corporations run by sociopathic frat boys is coming to its inevitable bad ending.

Life After Extend and Pretend
What difference can one man make in all of this madness? I’ve met enough good people in my lifetime to know that they are out there. They are just few and far between. Therefore the hope is that the impending “reset” bludgeons today’s amoral self-absorbed jackasses and their dumbfuck ideas into abject oblivion, all while keeping enough of decent humanity still intact to rebuild upon. 

I realize that’s a stretch, but it’s all I’ve got…

P.S. Scroll down. My new blog background reflects the end of a graceless age and the (eventual) promise of a new and better one. Not the end. The beginning. 

Or it might just be the stronger Prozac. Who knows?

Ponzi World (Over 3 Billion NOT Served): Put A Fork In It: The Collapse in Globalization Is Well Underway

Ponzi World (Over 3 Billion NOT Served): Put A Fork In It: The Collapse in Globalization Is Well Underway.

It took five years of Extend and Pretend, but global thought dealers have finally squandered enough financial resources to kill the globalized ponzi model for posterity. All of Harvard’s frat boys plus 520 global interest rate cuts combined with $33 trillion of fiscal and monetary stimulus, can’t put Humpty Dumpty together again…

Capacity Utilization is Falling
The vast majority still believe that interest rates have been falling (Treasury bonds rallying) these past years, due to Central Bank stimulus programs. Therefore, according to conventional wisdom, the Fed’s tapering of monetary stimulus MUST cause interest rates to rise:
“The search for bond alternatives is urgent. Interest rates almost certainly will rise this year as the Federal Reserve continues scaling back its massive stimulus program — and bond prices fall as interest rates rise”
Unfortunately, even a one-eyed man looking sideways can see below that interest rates (red) fall EVERY time the Fed ends one of its quantitative easing programs. The economy is in a state of deep underlying deflation. Therefore every time the Fed takes its foot off the gas, deflation accelerates and risk assets sell off aka. stocks and interest rates fall.
The Mother of All Output Gaps
The longer-term view of interest rates (below) is the scariest chart on the internet. The implications of this chart have even me wanting to change my underwear. Despite trillions in monetary inflation, forward inflation expectations are still falling. The bond market has already determined that deflation is inevitable. Central Banks can’t save globalization from cannibalizing the world economy and leaving nothing in its wake except massively expanded supply capacity and collapsed demand i.e. the mother of all output gaps.

The Mystery of the Missing Jobs
Therefore, the real reason there are no jobs is simply because there is too much global spare capacity and under the fundamentally imbalanced globalization paradigm, the output gap just keeps growing.

 
Long-term interest rates over the past 20 years:
The trend in interest rates is still down even though the money supply and economy are still expanding. Totally unbelievable. Wait until that black line (S&PCasino) collapses; as we see in 2008, interest rates went straight down with the stock market. This time nominal interest rates will go firmly negative, even if real (deflation-adjusted) rates remain positive:
 
 
Game Over, Man
The Fed did its best (below) to save globalization from self-imploding, but they can’t save something that is totally imbalanced and unsustainable from collapsing. With respect to jobs and debt-adjusted GDP, The underlying economic collapse is already well advanced despite what the public at large has been led to believe.
 
Low interest rates are only confirming what the jobs market is clearly saying about spare capacity.
The Labor Force Participation Rate – now at a fresh 35 year low – is the best indication that the globalized pseudo-economy is throwing off massive amounts of spare capacity aka. people. It was either this, or lower profits, so DowCasino took priority…

Obamanation

Using 2008 as a baseline for GDP and the deficit, then we see that debt-adjusted incremental GDP is firmly negative. This implies a Keynesian/Fiscal economic multiplier of less than 1 i.e. a negative ROI for each dollar of debt. Conventional demand (and supply) side economic theory is irretrievably broken. We are in uncharted territory on a rudderless ship.

The illusion-formerly-known-as-the-economy is 120% borrowed money. We can thank the grandchildren for giving up their future so that today’s shrink-wrapped zombies could have a few more years of shopping sprees:

 
China “Won” the Globalized Trade War – A Totally Pyrrhic (Empty) Victory
Over two decades ago, the Chinese Communist Party set out to create the leading capitalist economy on the planet. You can’t make this shit up. Fast forward and they have now surpassed the U.S. in global trade as of just this week.
It was text book export mercantilism. China ran the long game against America’s political attention deficit retards. No different than how England amassed Spain’s gold back in the 1600s:
The Balance of our Forraign Trade is The Rule of Our Treasure
“We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them.”

U.S. (Im)balance of Trade:
Lesson learned: No nation is obligated to be mercantilist in its trade relations, however, those that are not mercantilist certainly can’t trade with those that are.

America is Run by Political Retards
Apparently people four hundred years ago were not this stupid…

In any event, China is now Communist in name only and have thereby become the world’s largest Fascist state followed by the U.S. and Russia both of which are puppet democracies owned by and for ultra wealthy oligarchs. China’s *reward* for this metamorphosis is a society populated by millions of factory wage slaves making $.80/hour minimum wage, unsustainably polluted cities, trillions of non-amortizingunsecured foreign (Ponzi) debt and what will ultimately prove to be thousands of idled factories closely followed by widespread discontent.

Congratulations. You finally made it.

JPMorgan, Madoff, And Why No One Dared Ask “The Cult” Any “Serious Questions As Long As The Performance Is Good” | Zero Hedge

JPMorgan, Madoff, And Why No One Dared Ask “The Cult” Any “Serious Questions As Long As The Performance Is Good” | Zero Hedge.

As was well-known in advance, today JPMorgan entered into a deferred prosecution agreement with the DOJ, whereby Jamie Dimon’s enterprise, where legal fees and litigation charges are no longer “non-recurring” items but a cost of doing business, paid $1.7 billion (non tax-deductible) to settle all criminal charges that it was aware well in advance that Madoff was a ponzi scheme and did nothing to alert authorities or the general public. What was less known is just how acutely JPM was aware of the developments at Madoff’s pyramid scheme, and that while apparently JPM was not convinced enough of Madoff’s criminality to alert regulators using “Suspicious Activity Reports”, it had seen enough to quietly reduce its exposure with the Ponzi from $369 million at the beginning of October 2008, or just after the Lehman collapse, to just $81 million at the time of Madoff’s arrest.

There is much more on the sequence of events in JPM’s realization that Madoff was a fraud (see filing below), but the punchline is the following extract from lengthy internal email in October 2008 by a JPM trading analyst that raised concerns about Madoff’s investment returns, and which explains why frauds are never caught until it is too late: “The October 16 Memo ended with the observation that: “[t]here are various elements in the story that could make us nervous,” including the fund managers “apparent fear of Madoff, where no one dares to ask any serious questions as long as the performance is good.… personnel at one feeder fund seem[ed] very defensive and almost scared of Madoff. They seem unwilling to ask him any difficult questions and seem to be considering his ‘interests’ before those of the investors. It’s almost a cult he seems to have fostered.”

And there you have the biggest failing of modern capital markets in a nutshell: nobody dares to ask any serious questions as long as the performance is good, and where there a cult-like following of the ringleader (see Central Banks). By the time the performance turns bad, and all the overdue questions are finally asked, it is always too late, and the cult blows up.

What is strangely missing in today’s action by the DOJ, which slams JPM (rightfully), is any mention of the SEC, you know – the regulators – those people whose job it was to catch Madoff in the act. Because while pocketing $1.7 billion from JPM may be an enjoyable exercise in populist propaganda for an administration that suddenly realizes it has created an unprecedented social class hatred schism and needs to punish bankers on a recurring, monthly basis, where is there any mention of the SEC’s fault for being completely oblivious to what JPM uncovered on its own? And yes, JPM did not alert the authorities, but at the end of the day its fiduciary obligations are first and foremost to its shareholders, which it executed, and not to a gullible public which opted for yet another “get rich quick” scheme, hoping foolishly that the SEC has some idea what it is doing.

Finally, we can’t help but wonder: when the current bubble to end all bubbles implodes, who will be punished for failing to point out that the emperor is naked, and that it is the cult of the Federal Reserve and its central bank peers around the globe, that have created the biggest Ponzi scheme the world has ever seen?

For those curious about the details of how JPM succeeded in realizing what the SEC failed to grasp, despite numerous vocal warnings from Harry Markopolos, read on.

From U.S. v. JPMorgan Chase – Deferred Prosecution Agreement PacketExhibit C

October 2008: JPMC Concludes In A Report To U.K. Regulators That Madoff s Returns Are Probably Too Good To Be True

In mid-September 2008, following the collapse of Lehman Brothers and growing concerns about counter-party risk, JPMCs Head of Global Equities directed investment bank personnel to substantially reduce JPMC’s exposure to hedge funds, which had increased following JPMCs March 2008 acquisition of Bear Stearns. This directive was reiterated by the Investment Bank Risk Committee on October 3, 2008. Acting at the direction of the Head of Global Equities, the Equity Exotics Desk began analyzing which hedge funds to reduce exposure to, including by directing the Desk’s due diligence analyst (the “Equity Exotics Analyst”) to scrutinize investments in various hedge funds, including the Madoff feeder funds. The Equity Exotics Analyst conducted this due diligence by, among other things, analyzing the reported strategy and returns of Madoff Securities, speaking to personnel at Madoff feeder funds and financial institutions administering Madoff feeder funds, and unsuccessfully seeking from the feeder funds and administrators documentary proof of the assets of Madoff Securities.

On October 16, 2008, the Equity Exotics Analyst wrote a lengthy e-mail to the head of the Equity Exotics Desk and others summarizing his conclusions (the “October 16 Memo”), The October 16 Memo described the inability of JPMC or the feeder funds to validate Madoff s trading activity or custody of assets. The October 16 Memo noted that the feeder funds were audited by major accounting firms, which had issued unqualified opinions for 2007, but questioned Madoff s “odd choice” of a small, unknown accounting firm. The October 16, 2008 Memo reported that personnel from one of the feeder funds “said they were reassured by the claim that FINRA and the SEC performed occasional audits of Madoff,” but that they “appear not to have seen any evidence of the reviews or findings,” The October 16 Memo also questioned the reliability of information provided by the feeder funds and the willingness of the feeder funds to obtain verifying information from Madoff. For example, the memo reported that personnel at one feeder fund “seem[ed] very defensive and almost scared of Madoff. They seem unwilling to ask him any difficult questions and seem to be considering his ‘interests’ before those of the investors. It’s almost a cult he seems to have fostered.” The Equity Exotics Analyst further wrote that there was both a “lack of transparency” into Madoff Securities and “a resistance on the part of Madoff to provide meaningful disclosure.”

The October 16 Memo ended with the observation that: “[t]here are various elements in the story that could make us nervous,” including the fund managers “apparent fear of Madoff, where no one dares to ask any serious questions as long as the performance is good.” The October 16 Memo concluded: “I could go on but we seem to be relying on Madoff s integrity (or the [feeder funds’] belief in Madoff s integrity) and the quality of the due diligence work (initial and ongoing) done by the custodians . . . to ensure that the assets actually exist and are properly custodied, If some[thing] were to happen with the funds, our recourse would be to the custodians and whether they had been negligent or grossly negligent.”

The Head of Due Diligence responded by complimenting the Equity Exotics Analyst on the October 16 Memo, making reference to other long-running fraud schemes, and suggesting in a joking manner that they should visit the Madoff Securities accountant’s office in New City, New York to make sure it was not a “car wash.”

* * *

JPMC’s Redemptions From Madoff Feeder Funds

On October 16, 2008 — the day of the October 16 Memo — an Equity Exotics employee requested by e-mail a “list of all external trades and the exact counterparty trade” for each of the Madoff-related feeder funds, noting that “[t]le list needs to be exhaustive as we may be terminating all of these trades and we cannot afford missing any.” The Equity Exotics Desk, which had already placed redemption orders for approximately $78 million from the Madoff feeder funds between October 1 and October 15, thereafter sought to redeem almost all of its remaining money in the Madoff feeder funds.

In addition to redeeming its positions in the Madoff feeder funds, JPMC sought, with the assistance of legal counsel, to cancel or otherwise unwind certain of the structured products issued related to the performance of the Madoff feeder funds. In an attempt to unwind these transactions, JPMC told the distributors of the Madoff notes that it was invoking a provision of the derivatives contract that enabled it to de-link the notes from the performance of the Madoff feeder funds if JPMC could not obtain satisfactory information about its investment. For example, in a letter dated October 27, 2008,JPMC warned that it would declare a “Lock-In Event” under the terms of the contract unless the recipient — a distributor that the Equity Exotics Analyst had spoken to as part of his due diligence underlying the October 16 Memo — could provide the identity of all of Madoff Securities’ options counterparties by 5:00 PM the following day.

In the Fall of 2008, the amount of JPMC’s position in Madoff feeder funds fell from approximately $369 million at the beginning of October 2008 (which was down slightly from its high-water mark of $379 million, in July 2008) to approximately $81 million at the time of Madoff s arrest, on December 11, 2008 — a reduction of approximately $288 million, or approximately 80% of JPMC’s proprietary capital invested as a hedge in Madoff feeder funds. During the same period, JPMC spent approximately $19 million buying back Madoff-linked notes and approximately $55 million to unwind a swap transaction with a Madoff feeder fund that eliminated JPMC’s contractual obligation with respect to those structured products. When Madoff was arrested, JIPMC booked a loss of approximately $40 million, substantially less than the approximately $250 million it would have lost but for these transactions.

At the same time, the Equity Exotics Desk also held through the time of Madoff s arrest a gap note providing JPMC with $5 million in protection if the value of a Madoff feeder fund collapsed completely. In a November 28, 2008 e-mail, an Equity Exotics banker declined a third party’s request to buy this protective gap note from JPMC, and described the gap note as being “as of today. . . very valuable” to JPMC.

D

JP Morgan Pays $2 Billion to Avoid Prosecution for Its Involvement In Madoff Ponzi Scheme Washington’s Blog

JP Morgan Pays $2 Billion to Avoid Prosecution for Its Involvement In Madoff Ponzi Scheme Washington’s Blog.

JP Morgan: Ponzi Schemer

Bernie Madoff has said all along that JP Morgan knew about – and knowingly profited from – his Ponzi schemes.

So JP Morgan has agreed to pay the government $2 billion to avoid investigation and prosecution.

While this may sound like a lot of money, it is spare sofa change for a big bank like JP Morgan.

It’s not just the Madoff scheme.

As shown below, the big banks – including JP Morgan – are  manipulating virtually every market – both in the financial sector and the real economy – and breaking virtually every law on the books.

Here are just some of the recent improprieties by big banks:

  • Engaging in mafia-style big-rigging fraud against local governments. See thisthis and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details hereherehereherehere,herehereherehereherehere and here
  • Pledging the same mortgage multiple times to different buyers. See thisthisthisthis and this. This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Committing massive fraud in an $800 trillion dollar market which effects everything from mortgages, student loans, small business loans and city financing
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See thisthisthisthis and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See thisthis and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments

The executives of the big banks invariably pretend that the hanky-panky was only committed by a couple of low-level rogue employees. But studies show that most of the fraud is committed by management.

Indeed, one of the world’s top fraud experts – professor of law and economics, and former senior S&L regulator Bill Black – says that most financial fraud is “control fraud”, where the people who own the banks are the ones who implement systemic fraud. See thisthis and this.

The failure to go after Wall Street executives for criminal fraud is the core cause of our sick economy.

And experts say that all of the government’s excuses for failure to prosecute the individuals at the big Wall Street banks who committed fraud are totally bogus.

The big picture is simple:

  • The big banks manipulate every market they touch
  • The government has given the banks huge subsidies … which they are using for speculation and other things which don’t help the economy. In other words, propping up the big banks by throwing money at them doesn’t help the economy
  • The big banks own the D.C. politicians … so Congress and the White House won’t do anything unless the people force change

India Savings Deposit Scam Collapse Leaves Thousands Penniless – Bloomberg

India Savings Deposit Scam Collapse Leaves Thousands Penniless – Bloomberg.

Sudipta Sen was on the run when police arrested him on April 23 at Hotel Snow Land, a resort with views of the Himalayas in Sonamarg, India, about 2,700 kilometers northwest of his Kolkata base.

Sen’s Saradha Realty India Ltd., the anchor of an empire that took in small deposits and promised payouts of land, apartments or a refund of clients’ money with interest rates as high as 24 percent, was defaulting on thousands of deals. Employees of Sen’s media companies hadn’t gotten paychecks in months. As cash dried up, 1.74 million customers saw savings vanish, Bloomberg Markets magazine will report in its February issue.

The upheaval didn’t end with Saradha. Panicked depositors rushed to pull money from similar companies. Since April, more than 34 people have committed suicide, 13 of them Saradha agents and investors. A 50-year-old domestic helper south of Kolkata in Baruipur, one of many hubs of Sen’s activities, set herself ablaze after losing 30,000 rupees ($482).

Saradha Group, the parent of Saradha Realty, was among hundreds of unlicensed deposit-taking enterprises that serve India’s poor — and skirt regulators.

Clients scraped up as little as 100 rupees a month in a country where the World Bank’s Global Financial Inclusion Database found just 35 percent of adults had a bank account and 8 percent borrowed through formal channels in 2011.

Saradha Group Chairman and Managing Director Sudipta Sen was arrested on April 23 as…Read More

Goat Farmers

India requires such quasi-banks to register with state or federal authorities. Many don’t. Saradha and others avoid oversight by disguising themselves as real estate developers, goat farmers and emu raisers, says U.K. Sinha, chairman of the Securities and Exchange Board of India, the nation’s capital markets regulator, known as SEBI.

Sen, chairman and managing director of Saradha Group, said he owned 160 companies. About 15 operated as real firms, Sen’s lawyer Samir Das says.

Unlawful deposit companies proliferate in India. Saradha took in at least $200 million based on preliminary figures, Sinha says. Actual numbers may be bigger, he says. Such firms have raised a total of more than $2 billion, Sinha estimates.

Sen has been jailed since his arrest. Police have filed 155 charge sheets, formal documents of accusation, against Sen, Das says. Sivaji Ghosh, additional director general of the West Bengal police’s criminal investigation department, said in mid-December he expects a special court that will handle all Saradha-related cases to be set up soon.

Photographer: Subhankar Chakraborty/Getty Images

Sudpita Sen has been jailed since his arrest in April. A special court may be set up to… Read More

Saradha Fallout

What makes Saradha’s collapse noteworthy is the turmoil it spread across six states, a territory the size of Spain in eastern India, where access to banks is limited.

Depositors protested and mobs ganged up on agents. Abhimanyu Nayak, who worked for another unregistered collection firm called Seashore Group, jumped in front of a train in Odisha state in May as investors hounded him for their cash.

Saradha and its aftermath hurt so many people that the government had to step in, says Pratip Kar, who served as SEBI’s executive director from 1992 to 2006 and now works as a World Bank consultant.

“Ponzi schemes like Saradha create widespread havoc, like a tsunami,” says Kar, describing ploys in which companies repay depositors with money from new investors. “When the shopkeeper and the household helper and the rickshaw pullers are robbed of their minuscule savings, it is painful.”

New Powers

The Saradha fiasco sparked an overhaul of SEBI’s powers. The regulator has shut 15 companies and barred the owners from the capital markets. It’s investigating 20 more, Sinha says.

That’s a fraction of India’s fraudulent collection businesses, says Prithvi Haldea, chairman of researcher Prime Database in New Delhi.

“There are countless scams currently in operation in various sizes, shapes and forms,” he says. “Saradha led to a new law and that’s a good thing, but is it geared toward conquering all scams? Certainly not.”

In India, several regulators supervise banks and financial companies — creating gaps that scammers exploit. SEBI monitors so-called collective investment schemes, known as CISs, which typically deal with money pooled from customers.

SEBI, which had power to investigate but not enforce, can now search and seize property and recover wrongful gains, Sinha says. The government can also classify pools of more than 1 billion rupees as CISs and put them under SEBI’s purview. In the past, no threshold existed.

‘Nothing Escapes’

As for smaller scams outside SEBI’s radar, Sinha says, some states have passed a measure to protect depositors against unauthorized money raising. SEBI will share information with states, the corporate affairs ministry and the Reserve Bank of India to help fight fraud.

“We want to ensure nothing escapes,” Sinha says.

The reforms don’t go far enough, says Satyajit Das, author of a dozen books on financial risk, including “Extreme Money: Masters of the Universe and the Cult of Risk.”

“The regulatory infrastructure doesn’t actually keep up with reality,” he says, adding that scammers will simply create dozens of small companies to avoid the 1 billion rupee threshold.

“The authorities need to accept that in the modern financial system, these quaint distinctions between banks, nonbanks and CISs are a complete waste of time,” he says. Das says India needs one powerful financial regulator.

Ajay Shah, an economist at the National Institute of Public Finance and Policy in New Delhi, says hasty laws may not address the scope of a malfeasance.

‘Ponzi Schemes’

“Laws are enacted as a knee-jerk response to an event and often poorly thought through,” he says, commenting about the government’s reactions to financial scandals. “Ponzi schemes like Saradha are a visible sign that the government’s strategy is fundamentally broken.”

Lax law enforcement and India’s slow judicial system aid fraudulent companies, says Prime Database’s Haldea, who is also an investor-protection activist with a website listing economic offenders.

“People assume that they will never be caught or will get off lightly,” he says. “Ultimately, the fear of law has to go down the throats of fraudsters.”

Financial scams are hurting India as it battles an economic slump. The central bank predicts growth will remain at 5 percent in the 12 months ending on March 31, the same pace as in the previous fiscal year and the slowest growth in a decade.

Undermining Confidence

Harm to small investors undermines confidence in the financial system. When Indians lose cash, they put money into physical assets such as gold, which India imports, Shah says. That reduces household capital that powers the economy.

India raised the tax on gold imports three times in 2013 to curb demand and tackle a record $87.8 billion current-account deficit that weakened the rupee in August to an all-time low of 68.845 to the dollar.

“Beyond the actual dollars lost, these Ponzi schemes contaminate people’s confidence, and the financial markets become weak,” Shah says. “To have a comprehensive, vibrant economy, you need to have households that have confidence in an array of financial institutions and products, whether it’s a bank or mutual funds.”

Tuku Biswas lost her life savings to Saradha. Biswas, a sex worker in Kolkata’s Sonagachi neighborhood of multistory brothels, was 28 in 2012, when she discovered she had the HIV virus.

‘Sister’s Future’

Determined to support her 11-year-old sister, Biswas deposited 7,500 rupees a month with Sen’s Saradha Tours & Travels Pvt. Biswas expected a lump sum of 131,250 rupees — including the promised 17 percent interest — by August 2013. When Saradha imploded in April, she got nothing.

“That money was my sister’s future,” she says. “All I want is my money back. I don’t know how long I have left to live.”

Saradha lured clients with an array of pitches. Saradha Realty took cash as an advance for properties that the company didn’t identify at the outset, according to an April 23 statement from SEBI.

Investors chose land, an apartment or a refund of their money with average interest of 12 to 24 percent at the end of the agreement. Saradha also took as little as 100 rupees a month for 12 to 60 months. Some investors put in 10,000 to 100,000 rupees for 15 to 120 months or lump sums for 12 to 168 months.

Sen documented his own downfall in an April 6 letter to India’s Central Bureau of Investigation, four days before he fled Kolkata.

‘Women, Wine’

He said he made a costly foray into the media industry by acquiring television channels and newspapers in 2011. Close aides kept a major chunk of depositors’ money, he wrote. And marketing officials who recruited agents were illiterate, he said.

“They only understood money, women and wine,” Sen wrote.

Sen described his aspirations in the letter. “I never thought about my limitations,” he wrote.

“A few of my well-wishers cautioned that it is not possible to organize a big empire. But I did not hear anyone’s advice.”

Starting as a property agent in the 1990s, Sen became the owner of Saradha Construction Co. in West Bengal, according to local newspapers.

In July 2008, he established Saradha Realty as his deposit-taking business, hiring thousands of agents in four months. Saradha paid them about 30 percent of the cash they brought in — sparking a stampede for customers.

SEBI began questioning Sen’s business in 2010. He went on a takeover spree, his letter and corporate filings show.

Bogus Factory

He bought debt-ridden motorcycle assembler Global Automobiles Pvt. and kept 150 employees on the payroll, who pretended to work when people visited. The factory never produced a single motorcycle, former employee Lakhinder Ram says.

Sen denied to SEBI that he was running a collective investment scheme. He handed over 63 cartons of irrelevant information in 2012 to delay the regulator, according to SEBI’s statement.

In an April 1 letter, Sen again denied Saradha was running CISs, saying he was receiving money from sales and advance bookings with the help of brokers — a claim SEBI rejected.

Sen was with two associates when he was arrested in April, including Debjani Mukherjee, who joined Saradha Tours in 2008 and by 2011 was a director of 38 companies. As of early December, clients and employees had filed 390 so-called first information reports against Sen and his aides to police, which set criminal investigations in motion.

As officials dissect Sen’s enterprise aided by expanded powers, economist Shah says the lesson for India must extend beyond Saradha.

“Our entire approach to financial regulations today is completely wrong because it hurts the people and the economy,” he says.

To contact the reporter on this story: Yoolim Lee in Singapore at yoolim@bloomberg.net

To contact the editor responsible for this story: Michael Serrill at mserrill@bloomberg.net

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