Michael Aston on Flickr

Barry Ritholtz on Causes of the Financial Crisis
Big government and big corporations work hand-in-hand. If you want to know who is the puppet and who is the puppet master, it sure looks like Wall Street has been pulling the strings of Congress for many, many, many years. I remember the Dick Durbin quote,  right in the middle of the crisis. He was astonished at all the bankers and bank lobbyists running around the halls of Congress, and said, “I can’t believe these guys – they act as if they own the place.” The fact is, it’s not an act – they do own the place....


                                   ....................... Barry Ritholtz

The Market Is Starting To Recognize Reality
 
"As we have long expected, the economy is tracing out a trajectory typical of the weak recoveries that follow balance-sheet induced recessions and credit crises caused by highly excessive debt.....In a balance sheet recession, as is happening now, the dire effects of debt deleveraging overwhelm the efforts of the government to stimulate the economy....ahead is the so-called "fiscal cliff", another conflict as we approach the debt ceiling again... We believe that the correction is only the beginning of a major downturn..."

 

                                                             .......... Comstock Funds

                                    Secular Bear Market?

...the bottom line is that the technical position of the market looks very weak to us (and the swings from up about 100% and down about 50% we believe will continue, with the next move down) and the global economy is not what we would call supportive to U.S. growth. Also, the U.S. debt will be an anchor around our necks until we figure out a way to grow our way out, pay it down (deleveraging), or inflate our way out. All of these solutions will be extremely difficult and painful...
                                                             ..................Comstock Partners

Benefit and Cost Tradeoffs of Quantitative Easing

By Stephen Jen, SLJ Macro Partners LLP.

 "...the benefits of QE are temporary and the magnitude of the impact may be diminishing, while the costs are significant and have been accumulating. Investors presumably understand the benefits (e.g., positive for equity prices, and the low interest rates should be helpful for both indebted households as well as the government). The list of potential costs is long. The main ones include (1) persistent QE raises inflation risk over the medium term, (2) QE in the US has important negative side effects on other countries, (3) QE could lead to moral hazard problems such as delayed structural/fiscal reforms, and (4) QE could significantly elevate financial volatility."

                              The Repo Market Awaits
                                                                            By Greg Canavan
.... Politicians may be our nominal leaders...but the bankers sustain the politicians. Therefore the bankers call the shots.... Central banks...commercial banks...they're all complicit. After they stuffed debt down people's throats for decades, the world threw up on them in 2008. This created a problem. The bankers were losing control. But like cornered rats, the banks fought back. They have survived and grown bigger, sinking their teeth into the real economy. The big players have completely commandeered the world's resources for themselves....

.....Because while you're focusing on Greece or China or something else tangible, the real danger lies where you can't see. It's deep in the plumbing of the financial system...the repo market and derivatives. We're convinced that the next blow-up will come from deep within the bowels of the financial system....There will be other blow-ups before the US. Europe is first in line, Japan is next.

Here's a chart from Fitch Ratings that shows the increased use of 'repo' by US MMFs:

William Black on JP Morgan and the Failure to Regulate Wall Street Fraud 

Here are two pieces by William K. Black on JPMorgan and the rampant and ongoing fraud and speculation on Wall Street. It tells the backstory of the subversion of the democratic process and how it is being rationalized by the corporate media......

William K. Black: " JPMorgan’s flacks and apologists have, unintentionally, exposed the fact that their cover story – hedging gone bad – is false. JPMorgan runs the world’s largest gambling operation in financial derivatives...."                                        ......................... Jesse..........

The Big Print is Coming

 

Those that know me understand clear as crystal that I don’t approve of massive money printing.  I think it is theft, plain and simple, and represents an egregiously deceptive manner of transferring wealth from the poor to the wealthy and from the productive to parasitic financial oligarchs...the public was increasingly making the connection between Central Banking/fiat money and the rise in their cost of living. 

 ...Instead, what has happened is that the global ponzi is completely and totally incapable of holding itself together without consistent and increasingly large infusions of Central Bank money.  The debt burden is too large, the mal-investments too pervasive, the corruption too systemic.  The whole house of cards that is the global economy will vanish into dust rather quickly without more and more printing.  So what do you think they are going to do?....

                                                      ...................... Michael Krieger

The Separation of Bank and State

The euro monetary system is flawed.... In fact, what we are seeing today is that the structure of the monetary system is so poorly designed, it actually creates perverse fiscal linkages across member states that incentivize strategic default and exit.....There is sadly no separation of member-state financials and bank financials in our imaginary European-like financial system. So what's the end game?.....The reality is that European Monetary System was broken from the start. It just took a crisis to expose the flaws. Because the member nations failed to federalize early on, they created a structure that allows strategic default and exit to tear apart the entire financial system....

The reality is that European Monetary System was broken from the start. It just took a crisis to expose the flaws. Because the member nations failed to federalize early on, they created a structure that allows strategic default and exit to tear apart the entire financial system.

Source: JohnMauldin.com (http://s.tt/1cNAL)

There is sadly no separation of member-state financials and bank financials in our imaginary European-like financial system. So what's the end game?

Source: JohnMauldin.com (http://s.tt/1cNAL)

In fact, what we are seeing today is that the structure of the monetary system is so poorly designed, it actually creates perverse fiscal linkages across member states that incentivize strategic default and exit.

Source: JohnMauldin.com (http://s.tt/1cNAL)

In fact, what we are seeing today is that the structure of the monetary system is so poorly designed, it actually creates perverse fiscal linkages across member states that incentivize strategic default and exit.

Source: JohnMauldin.com (http://s.tt/1cNAL)

............ David Zervos (courtesy of John Mauldin)

How Will the US Dollar be replaced 

There is only one factor that shields the dollar from implosion, and that is its position as the world reserve currency. Without this exalted status, the currency’s value vanishes. Backed by nothing but massive and unpayable debt, it sits frighteningly idle, like a time bomb, waiting for the moment of ignition.

The horrifying nature of the dollar is that it is only valuable so long as foreign investors believe that we will pay back the considerable debts that we (the American taxpayer at the behest of our criminally run Treasury) owe, and that we will not hyperinflate in the process. If they EVER begin to see their purchases of dollars and treasuries as a gamble instead of an investment, the façade falls away. Yet again this year Congress and the Executive Branch are “at odds” over the expansion of the debt ceiling, which has been raised to levels beyond the 100% of GDP mark.

                                            ............................. Brandon Smith 

Central Bank Gold Buying

Central banks internationally continue to diversify their foreign exchange reserves into gold bullion due to concerns about fiat currencies – including the dollar and especially the euro.

Central banks added 456.4 tons last year, the most in almost five decades, and will buy as much as 400 tons this year, the London-based World Gold Council estimates....

 

IMF data shows that central banks were again net buyers in April with Turkey and Philippines being the largest buyers of gold.

                                          ...........................  GoldCore, Zero Hedge

The Natural Gas Massacre Gets Bloodier

With money running out to drill new wells, the steep production declines inherent in all shale gas wells are oozing into P&L statements, and suddenly, all that debt that made so much sense a year or two ago is unmanageable. Assets have to be sold off in a hurry, drilling diminishes further, and a vicious cycle overtakes the false promises of yore. And production, which lags behind rig count movements, will drop, and drop steeply.

Meanwhile, the low price of gas has bent the demand curve: utilities are shifting massively from coal to gas for power generation. Their demand is eating through the record amount in storage and will clash later this year with diminishing production. It’s a classic example of how a price that is too low will spike, but only after a monumental massacre in the industry.

 .......... Testesterone Pit

Death of Globalization will Shatter China

The huge monetary stimulus led to an over-heating of the economy, because productive investment opportunities were already non-existent. “Free money” fueled wide-spread inflation and powered a speculative real estate bubble. Chinese wages rose so dramatically that labor costs are now cheaper in Vietnam, Bangladesh and even Mexico; consequently, Chinese exports are under heavy price pressure. Now with faltering global demand, financially overextended Chinese businesses are only surviving because bank loans have been refinanced and rolled-over.

....................... Chriss Street

The E.U., Neofeudalism and the Neocolonial-Financialization Model

Forget "austerity"and political theater--the only way to truly comprehend the Eurozone is to understand the Neocolonial-Financialization Model, as that's the key dynamic of the Eurozone.

….The Power Elites are attempting to set the serfs of the periphery against the serfs of the Core, and this is necessary to keep both sets of serfs from realizing they are equally indentured to the Core's pathological Financial Elite-State partnership.

                                               ...................... Charles Hugh Smith 

Panic Like It’s March 2009

As everyone is well aware, Europe is an absolute mess and while the U.S. stock market has been remarkably resilient, it has finally succumbed to news across the Atlantic and is now the final region to experience a decline...The market’s selloff accelerated this week partly on news that Greeks have pulled about $898 million in deposits from Greek banks since the May 6th elections....

                            .................. Chris Puplava 

Some Things Are "Riskier" Than Others

....the manipulation today is a lot more brazen than ever before. But the fundamental reason for it has not changed, it has merely become more pressing. Gold (and Silver) can NOT be allowed to emerge as any kind of a viable alternative to "traditional" mainstream paper investments. Even more to the point, Gold (and Silver) can NOT be allowed to emerge as any kind of viably alternative MONEY.

                                                         ................ The Privateer

FHA Subprime Default's at 9% in California

The Obama Administration’s Office of Management and Budget estimated in October 20111 that FHA's $4.7 billion capital reserves will be wiped out this year, forcing FHA to seek at least $700 million bail-out from the U.S. Treasury. Americans are justifiably angry at being required to bail-out the banks’ irresponsible sub-prime lending. Think how angry they are going be this election season, when they have to bail-out the government’s irresponsible sub-prime lending.

                                .......................... Chriss W. Street

Gold and Silver Mining: A Post-Mortem

There are potentially over 3000 gold and silver mining companies in existence today. Expect that number to halve over the next 2-3 years through an increasing wave of M&A activity and closures....
We would focus on companies that have current cash flow or imminent cash flow from operations and don’t need to death-spiral finance and we would focus on the highest grade deposits (the difference between 4 grams/tonne resource and 0.25 grams/ tonne, in basic terms means you have to shift 16 times less rock for the same gold which is one of the best ways of controlling costs) and those with largest exploration upside...
                                                   ................ Mark Mahaffey

Gold Bugs will be Vindicated

When a government goes bust, its paper is valueless: not just its bonds, but its fiat currency as well. On the surface it is different in euroland, because the nation states do not issue their own currency.....The destruction of fiat currencies themselves is becoming more likely by the day. Meanwhile, the weakness of “risk-on” gold has led to a serious mispricing in the market. This has happened because the financial community, sucked into the bond market bubble, has not even begun to discount the debt threat to government paper from sovereign bankruptcies.

                                            ................ Alasdair Macleod

                                                 

The Canary in the Gold Mine 

With the euro-area crisis and associated uncertainty escalating rapidly of late, safe-haven assets are outperforming, with the notable exception of gold. Why are high-quality government bonds rallying to new highs, while gold sinks to a six-month low? A key explanation is surprisingly simple if technical: Government bonds are Tier1 capital assets, gold is not (yet). With many banks already undercapitalised, as losses mount anew, so must banks acquire additional Tier1 assets to maintain their mandated capital ratios. As such, to the extent that banks or other financial institutions hold gold, but need to raise regulatory capital, they must sell the former for the latter.
Regulatory capital is just that, regulatory. In 2008, distressed banks had no choice but to maintain adequate Tier1 ratios or risk being shut down or taken over by the regulators. ….from a peak of nearly $1,000 reached in March that year, notwithstanding its fundamental safe-haven status, gold plummeted 30%, to nearly $700 by November.
In a recent article in the Financial Times, it was reported that, “The Basel Committee for Bank Supervision, the maker of global capital requirements is studying making gold a bank capital Tier 1 asset. ”This is a hugely underappreciated development. For if it happens, it will be an important step toward the re-monetisation of gold. Gold would be able to compete on a level playing field with government bonds…..In my opinion, if gold becomes eligible as Tier1 collateral, the price is likely to soar to a new, all-time high.

                                                            ………… John Butler.

The Recovery is an Illusion 

“…The primary function of the Federal Reserve is to keep the banking system healthy, to keep it afloat. Taking care of the economy and containing inflation are secondary goals.

The federal government and the Fed created, spent, guaranteed or loaned whatever money was needed to keep the banking system alive, and the government will do that again. The problem is, that creates inflation and is not very effective. Yes, we avoided a systemic collapse, but the banking system is still in trouble four years later. The solvency crisis continues. The economy has not recovered. All they have done is kick the proverbial can down the road.”

…I would expect we will see QE3 from the Fed in the not-too-distant future.

                                                       .............. John Williams

The Emperor is Naked

 

The Fed is destroying the capital market by pegging and manipulating the price of money and debt capital. Interest rates signal nothing anymore because they are zero. The yield curve signals nothing anymore because it is totally manipulated by the Fed. The very idea of "Operation Twist" is an abomination.
Capital markets are at the heart of capitalism and they are not working. Savers are being crushed when we desperately need savings. The federal government is borrowing when it is broke. Wall Street is arbitraging the Fed's monetary policy by borrowing overnight money at 10 basis points and investing it in 10-year treasuries at a yield of 200 basis points, capturing the profit and laughing all the way to the bank. The Fed has become a captive of the traders and robots on Wall Street.

                                        ........................ David Stockman

Euro Area Banks - Europe's Zombies On the Brink

…..Valencia, which represents 10% of Spain's economy and is a Rajoy stronghold has seen the yield on its 2013 bonds rise to 16.48% yesterday…

                                                              ........Pater Tenebrarum

A great example of the coming financial repression


…Investors who bought conventional Gilts in 1973 had to wait for 12 years to earn a positive real return on their investment. And this is exactly the sort of financial repression we have to look forward to under the current system controlled by the political and central banking elite.………

                                                            .................................... Simon Black

Gold Tells the Truth

One of gold’s greatest powers is that it is a unit of account which cannot be fudged nearly as easily as the fiat all-you-can-print buffet.
Feel like your wages are buying less in real terms?
John Maynard Keynes, Charlie Munger and Warren Buffett all said or implied that gold was a barbarous relic. But what’s the barbarous relic? The precious metal that shows prices without a veneer of manipulation, or the paper currency that smudges the true state of supply and demand through money printing, thus misleading markets and society?
                                                        ............... Tyler Durden

Documents Show How Goldman et al Engaged in 'Naked Short Selling'

It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.
                                                                     ................ Matt Taibbi

 

Major Bottom in Precious Metals

Our work leads us to argue that the metals will successfully retest their lows and soon emerge from what in the future will be considered a major bottom in-line with 2008, 2005 and 2001.
 ............ Jordan Roy-Byrne

Jim Grant Gives the Fed a "Piece of His Mind" In Speech At NY Fed

In the not quite 100 years since the founding of your institution, America has exchanged central banking for a kind of central planning and the gold standard for what I will call the Ph.D. standard. I regret the changes and will propose reforms, or, I suppose, re-reforms, as my program is very much in accord with that of the founders of this institution. Have you ever read the Federal Reserve Act? The authorizing legislation projected a body "to provide for the establishment of the Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper and to establish a more effective supervision of banking in the United States, and for other purposes." By now can we identify the operative phrase? Of course: "for other purposes."


The below speech comes via John Mauldin.
By Jim Grant

Robert Wenzel's Speech at the Fed

"In present day America, the government focus has changed a bit. In the new focus, the government attempts much more to prop up the unemployed by extended payments for not working. Is it really a surprise that unemployment is so high when you pay people not to work.?...." (April 2012)
                                                    ............... Robert Wenzel