Jesse's Café Américain Wed 2010-04-07 19:14 EDT

The Case for Position Limits: What is the 'Spot Price' of Gold and Silver And How Is It Set?

Jesse

...almost all retail transactions for physical bullion in the US key off a 'spot price' that is derived from a paper market which is not based in the reality of physical supply, since the futures exchanges explicitly allow for the settlement in cash if physical bullion is not available. In fact, the vast majority of transactions are settled in cash, and are little more than derivatives bets it seems, and often hedges related to other things like another commodity or interest rates...As someone who approaches it as an amateur economist, and has been looking at its dynamics for the past few years, I may be missing something, but this seems less like an efficient market mechanism for price discovery and capital allocation, and more like a carney game.

Case; gold; Jesse's Café Américain; position limit; set; Silver; Spot Prices.

Jesse's Café Américain Wed 2010-04-07 19:06 EDT

Banks Come Back For Another Bailout in Ireland While the US 'Manages Perceptions'

Jesse

The whole notion of bank bailouts is a tremendous injustice when not accompanied by personal bankruptcy and civil and criminal prosecution for those banks managers who created them and are found guilty of fraud. In addition, the owners of the banks, whether through debt or shares, should be wiped out and the bank placed in a proper receivership while its books are sorted out. The US is an accounting mirage. The notion that it will make money from its stake in Citi is a sleight of hand. The enormous subsidies to the banks both in terms of direct payments, indirect payments through entities like AIG, and subsidies such as the erosion of the currency and the deterioration of the real economy, will never be repaid. ...the facts seem to indicate that the US is still pursuing a policy of managed perceptions, accounting deceptions, and old fashioned insider dealing and other forms of corruption that always accompany government, but reach a feverish pitch in times of crisis. It is the establishment's form of looting.

Bailout; banking comes; Ireland; Jesse's Café Américain; managing perception.

Jesse's Café Américain Wed 2010-04-07 19:03 EDT

King World Interview with Andrew Maguire the Silver Market 'Whistleblower'

Jesse

"The Biggest Fraud in the World" I do not know what to think about this, except to just offer it up to you for your own information. I am disappointed, however, that only the blogs, and almost no one in the mainstream media, have bothered to cover this story and to speak to the principals, and to either debunk them, support them, or even consider what they have to say. This really is like the Harry Markopolos story, trying to get a hearing on the Madoff ponzi scheme, and being repeatedly ignored, intimidated, and discouraged in every way possible by the establishment, and even fearing for his life... I have now listened to this tape five times, carefully. It is a bombshell. This has to be dealt with, one way or the other. Bring it out into the light of day, and let the facts be known. This is either the equivalent of the fictionalized testimony on the order of the Salem Witch trials, or one of the most damning accusations of malfeasance in office against quasi-governmental agencies, and probably US officials, since Teapot Dome...

Andrew Maguire; Jesse's Café Américain; King World Interview; silver markets; Whistleblower.

Satyajit Das's Blog - Fear & Loathing in Financial Products Mon 2010-04-05 15:01 EDT

Mark-to-Make Believe: Living on a Prayer

Satyajit Das

...Recent research indicates that MtM accounting may, in fact, distort the price of assets...The research highlights that MtM accounting is pro-cyclical and creates volatility of asset values through complex positive and negative feedback loops. Under normal market conditions where asset markets are liquid, MtM accounting works benignly. In volatile markets, where behaviour becomes linked by a common factor such as disclosure required by MtM accounting, co-ordinated actions of market participants can easily lead to sharp movements in asset prices. The process distorts market prices and ultimately the firm's financial position and value.

fears; financial products; lively; loath; Make-Believe; marked; prayers; Satyajit Das's Blog.

Fri 2010-04-02 10:36 EDT

Archein: Krugman as Failure

...I'd like to direct you to a scathing, sniveling little review, Krugman wrote fifteen years ago on Bill Greider's most excellent "One World Ready or Not". Greider's book documents the ravaging of the American middle-class caused by the processes of corporate globalization. Krugman counters with a ludicrous little tale about hot dogs, and then proceeds to defend it pushing all the pop-economic theory of the day, by so doing, an economist was bestowed with money and pats on the head from the mega-corporate boardrooms, you know, like the money Paul was paid working for Enron. According to the Nobel Laureate, replacing good paying steel jobs with McDonald's jobs was just great. Now today, fifteen years later, Mr. Krugman's contradicting what he's been saying his entire career, while Greider, no back page of the NYT for him, was right along...Mr. Krugman represents the most serious problem this republic currently faces, power has lost all accountability. From the top of government, to media, to finance, to our large corporations, we've seen spectacular failure, and no one held accountable. It's a lot bigger problem than the fact Paul Krugman is really a very silly man.

Archein; failure; Krugman.

naked capitalism Mon 2010-03-29 13:48 EDT

Thinking the Unthinkable: What if China Devalues the Renminbi?

Marshall Auerback

Conventional wisdom holds that the Chinese are due (as in overdue) for a revaluation of their currency, the renminbi...We question whether a revaluation is the right answer for them, and more important, whether the Chinese themselves see a revaluation as a plus. The government has engineered an enormous increase in money and credit in the past year. In fact, it seems to be as great as 5 years' growth in credit in the previous Chinese bubble. The increase in money and credit is so great and so abrupt that you tend to get a high inflation quite quickly even if there are under utilised resources. Add to this the fact that China simultaneously is providing massive fiscal stimulus...Inflation can take off and thereby begin to ERODE the competitiveness of Chinese exports. Nouriel Roubini pointed out this issue in 2007: if China didn't revalue, inflation would do the trick regardless. A continued high rate of inflation relative to its trade partners would push up the price of goods in home currency terms, which in turn translates into higher export prices. This might be the real reason why China is so reticent to revalue its currency. The Americans might go crazy if the Chinese devalued, but if the inflation is high enough, they might have to do it, as it will severely erode their terms of trade and cause their tradeables sector to collapse.

China Devalue; naked capitalism; renminbi; Think; unthinkable.

Tue 2010-03-09 18:09 EST

Fed Audit Bitterly Opposed By Treasury

Ryan Grim

The Treasury Department is vigorously opposed to a House-passed measure that would open the Federal Reserve to an audit by the Government Accountability Office (GAO), a senior Treasury official said Monday... "It's interesting that the Fed regards the simple fact that people find out what it does as somehow being unduly restrictive. We are a government of laws, not of men," [said Representative Alan Grayson]. "It's certainly no surprise that banking insiders at Treasury don't want transparency at the Fed," said Jesse Benton, a spokesman for Rep. Paul. "They are wrapped up in the central bank shenanagins too, and do not want their wheelings and dealings out in the open any more than Alan Greenspan or Ben Bernanke,"

Fed Audit Bitterly Opposed; Treasury.

THE PRAGMATIC CAPITALIST Tue 2010-03-09 17:12 EST

INSIDER SELLING HITS NEW 2010 HIGH

TPC

The recent uptick in stocks has not been met with much enthusiasm by corporate insiders. In fact, pessimism rules the day in the land of insider buying and selling trends...The selling was the highest level experienced this year. Interestingly, as the rally has continued insiders have actually increased their selling...

INSIDER SELLING HITS NEW 2010 HIGH; pragmatic capitalists.

naked capitalism Sun 2010-02-28 13:13 EST

Das: Mark to Make Believe -- Still Toxic After All These Years!

Satyajit Das

n 2007, as the credit crisis commenced, paradoxically, nobody actually defaulted. Outside of sub-prime delinquencies, corporate defaults were at a record low. Instead, investors in high quality (AAA or AA) rated securities, that are unlikely to suffer real losses if held to maturity, faced paper -- mark-to-market (``MtM'') -- losses. In modern financial markets, market values drive asset values, profits and losses, risk calculations and the value of collateral supporting loans. Accounting standards, both in the U.S.A. and internationally, are now based on theoretically sound market values that are problematic in practice. The standards emerged from the past financial crisis where the use of ``historic cost'' accounting meant that losses on loans remained undisclosed because they continued to be carried at face value. The standards also reflect the fact that many modern financial instruments (such as derivatives) can only be accounted for in MtM framework. MtM accounting itself is flawed. There are difficulties in establishing real values of many instruments. It creates volatility in earnings attributable to inefficiencies in markets rather than real changes in financial position...

Das; Make-Believe; marked; naked capitalism; toxic; years.

The Economic Populist - Speak Your Mind 2 Cents at a Time Sun 2010-02-07 18:20 EST

Is Residential Real Estate a Ticking Time Bomb?

...First is the latest SIGTARP report saying the Government has become the mortgage market with U.S. taxpayers shouldering the risk. From the SIGTARP report we have a 100% government mortgage market at this point...Fannie and Freddie now have an unlimited bailout and it is estimated they have lost $400 billion dollars. The plan is to purchase $1.25 trillion mortgage backed securities from these two GSEs until the end of March...The number of homeowners who are strategically walking away from their mortgages is up to 10% this year...All of the above free money, the government pouring in trillions of dollars to prop up the housing market. Yet while price declines have slowed, prices are still declining and the above simply cannot go on forever. In fact one thing isn't going on forever. The Fed will stop buying MBSes at the end of March, 2010. So, when our government created illusion does pop, do we then have the real housing bubble implosion?

economic populist; Mind 2 Cents; residential real estate; speaking; ticking time bomb; Time.

Debtor's prison Sun 2010-01-03 10:37 EST

Would a Single World Currency be GOOD for the world?

MAAA

...One Single World Currency (SWC) is a topic that we have discussed many times from the very early days of this blog. For months, our discussions have focused on the causes behind the eventual collapse of the current USD-backed financial system, the apparent INEVITABILITY of this collapse and the very high LIKELIHOOD that the proposed solution to this will be a global monetary system backed by a single currency unit -- perhaps a modified version of an IMF SDR as Jesse suggests, or something new altogether. While most of our energy has been spent demonstrating the high likelihood (in our opinion, inevitability) of a SWC, we have been cowards when it comes to taking a stance on a SWC either way. Our apparent neutrality thus far has been largely motivated by a desire to remain unbiased while we explored some of the Numbers/definitions first. Having set these foundations and thought about the matter for some time, the gloves finally come off and we declare ourselves to be VEHEMENTLY OPPOSED to a SWC, both technically and in principle and spirit...we argue that the significantly increased trade granularity of the past few decades diminishes the need for a SWC, and in fact, creates ideal situations for the establishment of more localized currencies, which would be infinitely more stable than a SWC...increased trade granularity (which is a fact) increases the pheasibility and stability of local, floating currencies, to the point that they might be a preferable alternative to a SWC.

Debtor s Prison; good; Single World Currency; world.

naked capitalism Tue 2009-12-29 09:03 EST

Guest Post: Investor Psychology ... Fear Turns People Into Sheep

George Washington

Investors are basically rational, right? In fact, as many studies have demonstrated, the answer is no...Rather than search rationally for information that either confirms or disconfirms a particular belief, people actually seek out information that confirms what they already believe. For the most part people completely ignore contrary information...

Fear Turns People; Guest Post; Investor psychology; naked capitalism; sheep.

naked capitalism Sun 2009-11-29 12:53 EST

Obama: Debt could cause a double dip recession

Edward Harrison of Credit Writedowns

Barack Obama has now come clean about his thinking on why his administration has decided to focus first on reducing the deficit and next on jobs. He fears a double-dip recession will occur if foreigners lose confidence in the U.S. dollar, causing interest rates to spike. This is nonsense and it demonstrates how much at odds Obama's economic thinking is with reality. This is the clearest indication that the Obama Administration doesn't understand how modern money works. In fact, by focusing on deficit reduction, he has increased the chances of a double dip instead of decreasing them.

caused; debt; double-dip recession; naked capitalism; Obama.

zero hedge Sun 2009-11-29 12:33 EST

Fed's Bull Dudley Explains Bank Runs, Discusses Collateral Risks, Suggests Way To Prevent Systemic Collapse

An impressively comprehensive presentation by Bill Dudley before the Center for Economic Policy Studies Symposium earlier, discusses, and ties in, all the key concepts Zero Hedge has been discussing over the past several months, among these the tri-party repo system, bank runs (what and why), collateral, moral hazard, maturity mismatch, unsecured markets, Primary Dealer Credit Facility, Commercial Paper Funding Facility, and liquidity. In fact, at some points in the speech we get the feeling Mr. Dudley is indirectly refuting some of Zero Hedge's recent allegations vis-a-vis the Fed's actions and regulatory oversight. The presentation is largely devoid of bias except for some of the proposals on how to avoid future systemic meltdowns, which of course are moral hazard prevention lite and philosophy heavy.

Discusses Collateral Risks; Fed's Bull Dudley Explains Bank Runs; Prevent Systemic Collapse; suggested way; Zero Hedge.

naked capitalism Wed 2009-11-25 10:14 EST

Ivy Zelman: ``Home prices are going back down''

Edward Harrison of Credit Writedowns

This is a post I wrote overnight about rising delinquencies and shadow housing inventory. I am not convinced house prices in the U.S. are headed higher permanently...The Mortgage Bankers Association is reporting that nearly one in ten households with mortgages are at least one payment behind. That is a record, my friends...Look, the fake recovery is now in full swing. But I expect the recovery to hit a brick wall by 2011, if not earlier. While the proximate cause of my concern is the likelihood of increased taxes and/or reduced spending by the Obama Administration, it is jobs that concern me. See Calculated Risk's post showing the correlation between unemployment and mortgage delinquency and you see the connection. The fact is we have a record number of foreclosures and that is a direct result of rising unemployment. Unemployed people don't have any money, so they don't pay mortgages.

Go; home prices; Ivy Zelman; naked capitalism.

Bruce Krasting Thu 2009-11-19 10:52 EST

FHFA's DeMarco Speaks - Ouch!

Bruce Krasting

FHFA's Acting Director Edward DeMarco provided written testimony to the Senate today. I would give his presentation a B+. There is little room for optimism in this story. Mr. DeMarco did not gloss that fact over. A few snips from that speech: -From July 2007 through the first half of 2009--combined losses at Fannie Mae and Freddie Mac totaled $165 billion. In the first half of 2009, Fannie Mae and Freddie Mac together reported net losses of $47 billion. -Since the establishment of the conservatorships, the combined losses at the two Enterprises depleted all their capital and required them to draw $96 billion. The combined support from the federal government exceeds $1 trillion. -The short-term outlook for the Enterprises remains troubled and likely will require additional draws...

Bruce Krasting; FHFA's DeMarco Speaks; Ouch.