Author Archives: Lila

Geithner Demands More Stick-Up Powers

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Orange alert moves to red: these folks keep changing the name of the game but the moves are all the same: give us more power.

Latest from the DC Klepto-class (I’ve bolded the significant parts):

“As we have seen with AIG, distress at large, interconnected, non-depository financial institutions can pose systemic risks just as distress at banks can,” Geithner said. “The administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context”

Geithner made it clear he believes the treasury secretary should be granted unprecedented power, after consultation with Federal Reserve Board officials, to take control of a major financial institution and run it. The treasury chief is an official of the administration, unlike the FDIC, which is an independent regulatory agency.”

More here.

Translation: Treasury/Goldman Sachs/banking cartel is going to get its hands on non-bank financial institutions that are bleeding…..

Madoff Fraud In Europe Has Criminal Implications

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“Ward said U.S. prosecutors were working with law enforcement authorities in other countries, including the Serious Organized Crime Agency in London.

She said there were “criminal implications” involved in Madoff’s international securities business. The judge did not immediately decide the issue….”

More here.

Madoff’s accountant Friehling (of Friehling & Horowitz) has been charged with creating sham audits and falsely testifying that they were up to professional standards. He faces a jail sentence of upto 105 years. Madoff faces upto 150 years.

Comment

Well, we already knew that. Question: what’s the difference between crime and serious crime?

Modern Economics Masquerading as Hard Science

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“The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (Swedish: Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), sometimes referred to as the “Nobel Memorial Prize in Economic Sciences”, is an award for outstanding contributions in the field of economics and is generally considered one of the most prestigious awards in that field.[1] It is commonly referred to as the Nobel Prize in Economics[2] and it is identified with the Nobel Prizes, although it is not one of the five Nobel Prizes (in Physics, Chemistry, Physiology or Medicine, Literature, and Peace) which were established by the will of Alfred Nobel in 1895.[1][3][4][5][6] The Prize in Economics, as it is frequently referred to by the Nobel Foundation, is a prize established and funded by the Bank of Sweden, in memory of Alfred Nobel. It was instituted in 1968 on the 300th anniversary of Sveriges Riksbank (the central bank of Sweden, sometimes called the Bank of Sweden or the Swedish National Bank).”

So says wiki.

Notice that the prize is actually an award made by a central bank.

Bringing Water to Villages in Haiti

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The 2008 Templeton Freedom Award winner, Deep Springs International a Pennsylvania group that coordinates the work of NGOs (which provide point-of-use water treatment technologies that are relatively inexpensive – about $3 to $80), microfinance institutes (which provide money to train the poor and to help them start businesses), and local schools and institutions (which usually don’t focus on water treatment).

Deep Springs has a number of ways you can help them, from donating, to buying items on their page, to changing your search engine to

Good Search and iGive.

Remember that gold mining is one of the worst offenders in using up water. So if you do hold physical gold (I don’t and it’s one of the reasons I don’t), remember you may be contributing to water problems in those areas and have some responsibility to help where you can.

Gold Forming A Base for Future Rise

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From the Aden Sisters

“If there was ever a doubt that gold‘s bull market is forming an eight year low, it’s gone now. The Fed’s action guarantees that gold has much further to rise in the years ahead. So far, gold’s four week intermediate decline we call B has been moderate, but it’ll remain underway if June gold again declines below $953. Gold will stay firm above $880. Keep in mind, gold has been much stronger than most markets over the last several months, which means the other markets are poised to outperform gold for the time being...”

 Comment

I still think (and this could be wishful on my part) that gold will go lower than 880 (and under 750). But, as always, the price action dictates my opinion.

Meanwhile, supporting my cautious hopefulness about the stock market, here is Investor’s Business Daily on the often repeated assertion that this is a replay of 1929. IBD  suggests that our 1929 has already happened. What we have now is 1938:

The Nasdaq’s price action since the 1990s, like clockwork, closely parallels, tracks, and eerily replicates the Dow Jones Industrials’ wild speculative run-up to its 1929 bubble peak, the ensuing three-year, 88% collapse to the Depression lows in June 1932, followed by the recovery run-up to 1937 and the ensuing sharp correction. Based on historical data, today’s market is likely to be a repeat of 1938 — not 1929.

The only problem with that scenario is 1938 was a year before World War II began. I hope IBD isn’t pushing that parallel too hard.

File IBD’s report as Wall Street boosting the market…

Kevin Duffy On The Wall Street Shuffle, March 23

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Kevin Duffy of Bearing Asset Mgt., a contributor to Lew Rockwell, and a non-interventionist on the bail-out will be a guest this afternoon on “The Wall Street Shuffle,” hosted by Dan Kofal and Ed Butowski, from 5:30-5:58 pm EST.  The show is anti-bailout so they should be open to a non-interventionist view of the financial crisis. 

  www.thewallstreetshuffle.com. 

[Added on August 5, 2017. My security software gives a malware alert for this link. I have removed the link. Please retype it into your browser to reach the site.]

Click on “Listen Live.”  It may work on Firefox, but it definitely works on Explorer.

 

Give Immigrants Residency to Prop Up Housing Market

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“The Obama administration should seriously consider granting resident status to foreigners who buy surplus houses in this country. This makes more sense than the president’s $275 billion housing bailout plan, which Americans greeted with a Bronx cheer.”

Comment:

A great proposal and one I wrote up here on March 6 2009….

http://www.google.com/search?hl=en&q=lila+rajiva&start=30&sa=N

Lila Rajiva: The Mind-Body Politic. Individuals Not Ideologies ….. Lila Rajiva on Washington Won’t Let Skilled Immigrants Solve Housing Crisis …
lilarajiva.org/ – 57k

Some of my pieces have this weird way of getting tucked behind the others, even when they’ve been opened many more times.

The immigration piece only shows up on the second or third page when you do a search for Lila Rajiva. Same for this piece:

The Paulson Putsch

Sep 25, 2008 … Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, …
www.lewrockwell.com/rajiva/rajiva10.html – 56k – Cached –

But this one with far fewer hits is on the first page.

Three Card Capitalists.

Oct 1, 2008 … Lila Rajiva [send her mail] is the author of the ground-breaking study, The Language of Empire: Abu Ghraib and the American Media (MR Press, …

www.lewrockwell.com/rajiva/rajiva11.html – 35k

It’s from the same site, Lew Rockwell, so I don’t see why Google wouldn’t put that on the first page of a search. Got to figure that out.

That Darn Elusive Black Swan

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“The profit motive is a good thing when it operates in an environment where bad bets are punished with losses and good investments are rewarded. Only government can distort that healthy profit-and-loss system, giving people incentives to make bad decisions. And it’s in this environment that greed is no good to anyone. It turns out, however, that greed—or better, rational self-interest—can help our economy stabilize faster than government ever could. As the lubricant of our economic system, self-interest will cause a million market actors to recalibrate and to direct resources to projects that create value in our society. We the people will temper our irrational urges and mitigate our risks if government restores the rules that let profit and loss bring discipline. But if government continues to change the rules to bias the market in favor of irrational behavior, rent-seeking, and corporatism, the chaotic aspects of the system will continue to wobble out of equilibrium. Black swans will become commonplace.”

Max Borders in The Freeman

Thanks to Mike Martin for pointing out the piece.

Comment:

This is a nice piece pointing out how metaphors govern our thinking – we talk about the economy as it were a machine when it’s actually more like an  eco-system. Interestingly, Tom Wolfe made a similar point about the misuse of metaphors in Freudian psychology (for eg. the term repression, as though the body were in need of an outlet to blow-off steam).

But there are at least two things I object to here.

One is – greed isn’t rational self-interest. That’s a complete confusion of terms. Gordon Gekko-like greed is anything but rational. It’s compulsive.  The self has many other  interests and drives besides doing down other people. Rational self-interest is the prudent self-interest of “right reason,” as the Catholics call it. A well-ordered reason. Not one that’s the slave of your drives. It’s self=governing reason which produces genuine self-interest.

And two: sigh.  None of this was a black swan.  Taleb himself doesn’t claim it was, either.  Black swans only make sense in talking about  an un-manipulated world, I would think. Taleb was talking about the way risk is modeled. He says on his website that he uses the banks in his book as an illustration and then gives some quotes in support, which, he says he wrote between 2003-2006 (the book was published April 2007).

But Felix Salmon at Portfolio.com points out that his actual comments on Fannie in an interview before they went bust were quite vague.

However, the author of this piece is spot on in the rest of this comments.

I’ll try to  post my calls on this, not to prove I can predict the markets (I can’t), but to prove that we don’t have a market. We have a kind of rigged puppet show, which you can (sort of) predict, not because of any genius on your part, but because of the obviously crooked motives of of several leading actors. The only special skill you need for this is the ability to recognize propaganda.

I know I came across Fannie’s corruption when I was researching Goldman Sachs in July 2006 from the Washington Post which had a long series of excellent articles on it from 2004. So, how was this crisis unexpected?

Here’s my piece (from 2006)

“Most recently, regulators are looking into claims that Goldman (among others) helped managers at the US Federal National Mortgage Association (known as Fannie Mae) prettify their books to maximize performance bonuses at the company entrusted with keeping US home loans afloat. Which means that Goldman was center-stage not only in the credit and derivative booms, but in the housing boom too. (Goldman and the other firms deny wrongdoing.)”

My original investment report on which this article is based had much more on Fannie and I will post it here. I’m pretty sure there were plenty of  prominent people in the financial world who had already decided that Fannie was going to go bust. In fact, I think a lot of people had taken short positions on it.  I’m not sure how on that basis you could argue this crisis was a Black Swan.

Madoff’s Swiss Account

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“In the case of the Fulds, it might not be that challenging because the transfer was made after Lehman’s collapse already occurred, and the home “was obviously sold for well below fair-market value,” said Roccy DeFrancesco, an asset protection attorney and founder of the Wealth Preservation Institute in St. Joseph, Mich. “On the surface, that would seem to have all the signs of a fraudulent transfer,” he said. The Madoffs, however, present a much more challenging scenario: Many of the major assets that are currently in Ms. Madoff’s name, including three residencies in the United States and France worth a combined $19 million — were purchased directly by Ms. Madoff years ago, according to court documents.

She bought the New York penthouse in 1984, according to a financial statement Mr. Madoff submitted to the Securities and Exchange Commission that was disclosed earlier this month. Ms. Madoff also ponied up for the family’s $11 million mansion in Palm Beach , Fla. , in 1994, and then she bought a $1 million home in France ‘s Cap d’Antibes in 2000 or 2001, according to court documents. The Madoffs’ $3 million home in Montauk, N.Y., was jointly purchased by the couple in 1979.

Given the timing of these purchases, the assets may now be considered “old and cold,” or off-limits to Mr. Madoff’s victims, noted Mr. Rothschild.

Mr. Madoff, when he entered his guilty plea this month, said that “to the best of my recollection, my fraud began in the early 1990s.”

More at Investment News.com

Comment:

Oh well, that takes care of that. We’ll just have to take the gentleman’s word for it.

The game started in the 1990s, eh? In the beginning he said the game began only in 2005. Now, it’s aged by 15 years. A few more months and we’ll find the truth out. It probably began 15 years before that. Prosecutors have already said it began in the 1980s,  – which sounds much more likely.

Zim or Bust? (Update)

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“Matt Stiles, who writes at Stockhouse.com, who also happens to identify with the Austrian School of economics, argues why these hyperinflation fears are way overblown, and why we won’t see a Zimbabwe scenario here:

It is often said that we live with a “fiat currency” or with “paper money.” This is not entirely accurate. A very small portion of our total supply of money and credit is in the form of physical currency. It depends on how you count it, but regardless, it is under 10% of the total. This is what differentiates our monetary system with that of Zimbabwe or Weimar Germany circa 1920’s. Their economies were based on nearly 100% physical currency because nobody would accept the promises of government in order to issue credit.

The vast majority of our money supply is in the form of electronic credit. Electronic credit can be destroyed, while physical notes issued by a central bank cannot. This is why deflation is possible in a credit based monetary system, but not in a paper based monetary system.

…

All in all, the central banks are not nearly as powerful as they’d have you believe. The amount of the total money supply that is controlled by them is minimal. They won’t tell you that. They’d prefer you to think that just by them moving their lips they can affect the entire economy’s decision making processes. It simply ain’t so.

This begs the question: why is gold going up? Who knows. It has a mind of it’s own. But if it really only moved due to inflation concerns, it wouldn’t have declined 75% over two inflationary decades (80’s, 90’s) would it? If inflationary concerns were real, we would see TIP yields rising along with the gold price. They’re not. We’d also be seeing other typical inflation hedges rising – like property prices. That is obviously not the case. A better explanation is that gold is rising because of increased instability….”

More here

Comment:

Back later with more. But just one demurral. We won’t see Zimbabwean inflation because…well, because, Zimbabwe doesn’t influence the world in a million ways, through global institutions and laws and propaganda. The rest of this argument, I simply don’t understand. Electronic credit is still a claim on paper money.

But notice stocks are up…and we can see the reason why here:  existing home sales for Feb rebounded at the fastest pace in 6 years, according to Reuters. That’s mostly (45%) in the foreclosure market as we’ve been telling you guys. There are cheap deals out there – and not just in Detroit.

Meanwhile, the Treasury  came out with a detailed explanation of their bail-out which has people reassured. It’s the details of Geithner’s public-private partnership which has been overdue by 2 months and is cheering up the market.

Update:

Gold ended down, pressured by the rising stock market and the dollar. It  rebounded against the pound, euro, and yen, but ended down.

Update:  My conclusion is that this piece by Stiles is just more stock-boosting to mask the (long-term) bullish scenario for gold.

Short to midterm we are probably due for a correction in gold.