China Goes Dark: PBOC To Keep Goldbugs Clueless About Its Gold Buying Spree

One of the more perplexing divergences that have plagued precious metal watchers and goldbugs when it comes to the great “black box” that is the world’s biggest buyer of gold in recent years – China (which overtook India after that particular country established unprecedented capital controls to block the import of gold) is that on one hand China has been allowing the outside world to glimpse its ravenous buying of gold through the Hong Kong-Shenzhen corridor (where nearly 70% of the Chinese gold jewellery business is located) since Hong Kong customs provides a full breakdown of how much gold it exports into China, yet on the other the PBOC has refused to update its official gold holdings in exactly five years.

Recall that it was Zero Hedge who before anyone else in September 2011 disclosed not only what the reasons were for China’s historic, and largely under the radar, gold buying spree – namely that while consumer demand for gold would rise, it was mostly the Chinese central bank that was the origin of China’s seemingly endless demand. We got tangential confirmation as much when in January Shanghai Daily reported the PBOC was expected to announce its gold holdings have “more than doubled.” Of course considering China’s official gold inventory is a paltry 1054 tons, this would hardly surprise anyone at this point.

So now that everyone is breathing down the PBOC’s neck to finally reveal – with a five year delay – just how much gold it does hold, the Chinese central bank has done a U-turn on its indirect transparency and, as Reuters reports, has begun allowing gold imports through its capital Beijing, sources familiar with the matter said, “in a move that would help keep purchases by the world’s top bullion buyer discreet at a time when it might be boosting official reserves.

We have already started shipping material in directly to Beijing,” said an industry source, who did not want to be named because he was not authorised to speak to the media. The quantities brought in so far are small, as imports via Beijing have only been allowed since the first quarter of this year, sources said.

But are about to get much, much bigger.

In a nutshell, going forward China can continue importing hundreds of tons monthly, but without Hong Kong being the main transit route and without its monthly export updates, nobody will have a concrete number of just how much gold China is importing.

More from Reuters:

The opening of a third import point after Shenzhen and Shanghai could also threaten Hong Kong’s pole position in China’s gold trade, as the mainland can get more of the metal it wants directly rather than through a route that discloses how much it is buying.

China does not release any trade data on gold. The only way bullion markets can get a sense of Chinese purchases is from the monthly release of export data by Hong Kong, which last year supplied $53 billion (31 billion pounds) worth of gold to the mainland.

Finally, with a five year delay, the PBOC has finally woken up not only to the data disclosure…

One of the reasons why China could be encouraging more direct imports was because it wanted to avoid taking the Hong Kong-to-Shenzhen route that makes its gold purchases public, while China wants to keep the trade a secret, sources said.


There is a view that why should people know how much China is buying,” said one of the sources at a bullion banking operation in China. “With the Hong Kong route, there is a lot of transparency and people can easily monitor what is going in and out.”


Another source said the move to open up Beijing “is partly driven by the fact that Hong Kong is perhaps a little too transparent”, but it is also to accommodate upcoming free-trade zones and non-jewellery demand.

… but the discrepancies:

Besides the 1,160 tonnes of gold imported from Hong Kong last year, China had about 428 tonnes of local production. The WGC has said Chinese demand in 2013 was 1,066 tonnes, leaving industry guessing about the “surplus” of around 522 tonnes, not including the amount of direct imports.


The central bank last disclosed its gold reserves in 2009, when it announced that its bullion holdings had risen to 1,054 tonnes from 600 tonnes in 2003.

Which goes back to the original question: just how much gold does the PBOC own, and what other catalyst is it waiting for before it provides the much anticipated update:

Central banks tend to be very secretive about their gold purchases and sales because prices are extremely sensitive to their trades. Rumours last year of Cyprus selling its gold reserves to prop up finances sent the metal down more than 10 percent over two days – its biggest such decline in 30 years.



The major increase in gold supply to the Chinese market in 2012 and especially 2013 could be partly related to large-scale official purchases,” according to a Klapwijk-led survey for the WGC that was released last week.


The report said while a part of the surplus was being used for commodity financing deals, some of it could be for the PBOC as well.


Rumours on PBOC’s gold reserves range from 3,000 tonnes to 5,000 tonnes. The United States is the biggest holder of gold reserves with over 8,000 tonnes.


Even a 1,000 tonne increase from last announced levels could prompt a jump in gold prices, which would make the PBOC very cautious about the timing of any announcement, said two China gold market analysts, who didn’t want to be named due to the sensitivity of the issue.

One thing is certain: it is only a matter of time before China does reveal how much additional gold its has bought since April 2009, the date of its last official update. One other thing that is certain: the PBOC (and everyone else who has been piggybacking on this trade) has been able to buy up thousands of tons of physical gold at cheap prices not only due to the relentless manipulation of paper gold prices by central banks and their market proxies, but also by China itself: recall that it was Zero Hedge that first explained “How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring.” In short, it had to do with gold’s domiannt role (more so than copper) in Chinese financing deals, in which physical is bought in the spot market while gold futures are sold at the same time.

And since the physical gold would likely remain in China no matter what (likely transferred over to satisfy consumer demand), we suggested that the imminent unwind of various Chinese gold-backed funding deals, in addition to any reports out of the PBOC, would further add to the upward pressure on gold once financing deal intermediaries, were forced to cover their forward market shorts.

In either case, what the latest news out of China means is that what happens to gold once it enters the Chinese economy, where it is used not only as a simple commodity store of value, and money (much to the chagrin of the Chairmanwoman) but also as a major component of the carry-trade enabled gold financing deals, will be even more nebulous and an even bigger mystery than ever before. Just as the gold accumulating central bank wants it.

Still, if there is one thing that gives us comfort, it is that as we reported over the weekend, when it comes to the ordinary person on the street, the demand for physical, not paper, gold is higher than ever.


It is only a matter of time before this demand finally manifests itself in the manipulated price as well.


via Zero Hedge Tyler Durden

Forget Ferrari, The $803,300 Red Flag L5 Is The New Must-Have Car In China

For the wealthy Chinese with 5 million Yuan (around $800,000) burning a hole in their pocket, there is a new must-have 'toy'. Instead of the latest Ferrari or Lambo, it is none other than the provocatively named "Red Flag L5" that is popping eyeballs and leaving the wealthy Chinese breathless…


As Bloomberg reports,

Forget Ferraris. Someone paid at least 5 million yuan ($803,300) to buy a Chinese car.


China FAW Group Corp. began taking orders for the tailor-made Red Flag L5, the nation’s most expensive vehicle, with the first one sold to a customer in Nanjing, the automaker said in a statement today at the Beijing auto show. Delivery will take three months, said the buyer, Wang Zhonghua, who runs a company that operates a chain of furniture malls in China.


FAW produces the Red Flag luxury vehicles used by government officials and also makes Volkswagen AG (VOW)’s Audi cars in China as its local manufacturing partner. Formerly called First Automotive Works, which was started by the Communist Party as a linchpin of China’s industrial policy, the company is seeking to capitalize on a government campaign to buy local brands.


For the price of a Red Flag L5, one can buy a Ferrari FF in China, according to, an auto pricing website.

Are the Chinese shifting from decadent flashiness to understated luxury… in an effort to hide the graft? Or does this odd looking vehicle lay golden eggs, come with a happy ending, and exhaust unicorn tears?


Goregous? Inside…


and out?

via Zero Hedge Tyler Durden

Ron Paul Warns The Nevada Standoff Is A Symptom of Increasing Authoritarianism

Submitted by Ron Paul via The Ron Paul Institute,

The nation’s attention has for the past few weeks been riveted by a standoff in Nevada between armed federal agents and the Bundys, a ranching family who believe the federal government is exceeding its authority by accessing “fees” against ranchers who graze cattle on government lands. Outrage over the government’s use of armed agents to forcibly remove the Bundys’ cattle led many Americans to travel to Nevada to engage in non-violent civil disobedience in support of the family.

The protests seem to have worked, at least for now, as the government appears to have backed off from direct confrontation. Sadly, some elected officials have inflamed the situation by labeling the Bundys and their supporters “domestic terrorists,” thus justifying any future use of force by the government. That means there is always the possibility of another deadly Waco-style raid on the Bundys or a similar group in the future.

In a state like Nevada, where 84 percent of the land is owned by the federal government, these types of conflicts are inevitable. Government ownership of land means that land is in theory owned by everyone, but in practice owned by no one. Thus, those who use the land lack the incentives to preserve it for the long term. As a result, land-use rules are set by politicians and bureaucrats. Oftentimes, the so-called “public” land is used in ways that benefit politically-powerful special interests.

Politicians and bureaucrats can, and will, arbitrarily change the rules governing the land. In the 19th currently, some Americans moved to Nevada because the government promised them that they, and their descendants, would always be able to use the federally-owned land.  The Nevada ranchers believed they had an implied contract with the government allowing them to use the land for grazing. When government bureaucrats decided they needed to restrict grazing to protect the desert tortoise, they used force to drive most ranchers away.

By contrast, if the Nevada land in question was privately owned, the dispute over whether to allow the ranchers to continue to use the land would have likely been resolved without sending in federal armed agents to remove the Bundys’ cattle from the land. This is one more reason why the federal government should rid itself of all federal land holdings. Selling federal lands would also help reduce the federal deficit.

It is unlikely that Congress will divest the federal government’s land holdings, as most in government are more interested in increasing government power then in protecting and restoring private property rights.

A government that continually violates our rights of property and contract can fairly be descried as authoritarian. Of course, the politicians and bureaucrats take offense at this term, but how else do you describe a government that forbids Americans from grazing cattle on land they have used for over a century, from buying health insurance that does not met Obamacare’s standards, from trading with Cuba, or even from drinking raw milk! That so many in DC support the NSA spying and the TSA assaults on our privacy shows the low regard that too many in government have for our rights. 

History shows us that authoritarian systems, whether fascist, communist, or Keynesian, will inevitably fail. I believe incidents such as that in Nevada show we may be witnessing the failure of the American authoritarian warfare-welfare state — and that of course would be good. This is why it so important that those of us who understand the freedom philosophy spread the truth about how statism caused our problems and why liberty is the only solution.

via Zero Hedge Tyler Durden

Hubris. Greed. Distraction. Denial.

Submitted by James H. Kunstler via,

The wonder is that more Americans are not ticked off about the state of our country than whatever is happening ten thousand miles away. For instance, how come the US Department of Justice is not as avid to prosecute the pervasive racketeering in the US economy as the State Department is for provoking unnecessary wars in foreign lands on the other side of the planet, over matters that have little bearing on life here? This racketeering, by the way, amounts to a war against American citizens.

I’m speaking especially of the US military racket, the banking and finance rackets, the health care racket and the college loan racket, all of which have evolved insidiously and elegantly to swindle the public in order to support a claque of American oligarchs. In other civilized lands, health care and college are considered the highest priority public goods (i.e. responsibilities of government), and national resources are applied to support them under the theory that bankrupting people for an appendectomy or a bachelor’s degree in electrical engineering is not in the public interest. In our land, that would be considered “socialism.” Instead, we “socialize” the costs of supporting Too Big To Fail banks — so their employees can drive Beemers to their Hamptons summer house parties — and a military machine that goes around the world wrecking one country after another to support a parasitical class of contractors, lobbyists, and bought-off politicians in their northern Virginia McMansions.

Hence, the laughable conceit pinging through the news media lately that some dynastic grifter like Jeb Bush or Hillary Clinton will slide into the White House in 2016 as easily as a watermelon seed popped into a shot glass. I don’t think it’s going to work out that way. The US political system needs to be turned upside down and inside out, and I expect that it will be. Either it happens within the bounds of electoral politics, or you’ll see it playing out in the streets and the windswept plains.

Just a glance around the USA these days ought to nauseate the casual observer. We have an infrastructure for everyday life that is failing in every way imaginable. Are you disturbed by the asteroid belts of vacant strip malls outside your town? Or the empty store fronts along your Main Streets?  What do you suppose these places will be like in ten years when the mirage of shale oil dissolves in a mist of disappointment and political grievance? How are Americans going to feel, do you suppose, when gasoline just isn’t there at a price they can pay, and they are marooned in delaminating strand-board-and-vinyl houses 23 miles away from anything? Does the sheer immersive ugliness of the human imprint on the American landscape not give you the shivers?

Look at the pathetic and disgusting appearance of our cities, which for the most part present themselves as demolition derby arenas or war zones — except the strongholds of the red-white-and-blue oligarchs: Washington, San Francisco, and especially New York, Financialization Central.

What happens at the “magic moment” when Facebook stops being a narcissistic virtual playground for “selfies” and becomes a bulletin board for political revolution? Think that can’t happen here? And what if that revolution is a kind that doesn’t appeal to you — say, a revolution of race hatred, or fascist zealotry, or Marxist gangsterism of the type that took Russia hostage for 70 years?

All this is happening, incidentally, because the supposed best minds in our nation are paying no attention whatsoever to the most important story of our lifetime: the winding down of the techno-industrial global economy. It doesn’t really matter anymore why they don’t get it. Hubris. Greed. Distraction. Denial. All that matters is that they can’t be depended on and when that happens authority loses legitimacy. And when it comes to that, all bets are off.

The disintegration of Ukraine would be best understood by Americans as a mirror of ourselves and our sclerotic republic, poised to sink into poverty and disorder. Everything we do and say rings hollow now. What used to be called The Establishment has run out of ways to even pretend to save itself. We have no idea what’s next, but it’s not going to be more of what’s been.

via Zero Hedge Tyler Durden

A Summary Of What Hedge Funds Are Buying And Selling

Large speculators reduced ther S&P 500 positioning to net short this week and their NASDAQ longs to a one-year low as BofAML reports on CFTC data. Macros funds decreased their long exposure to S&P500 and NASDAQ to now hold short exposure. They also decreased their long exposure to US Dollar (raising their AUD longs to a record high) and maintained their long exposure to 10-year Treasuries. They decreased their long exposure to commodities and increased their long exposure to EM. Across all asset classes, positioning is at extremes.

Significant HF moves across asset classes, based on CFTC data

Equities. Large specs decreased S&P 500 to net short and reduced NASDAQ longs. They also increased Russell 2000 shorts last week

Agriculture. Large specs increased their long positioning in Soybean futures but decreased longs in Corn and Wheat futures

Metals. Large specs decrease Gold and Silver longs and increased Copper shorts. They maintained Platinum and Palladium longs.

Energy. Large specs increased their Crude longs and Gasoline longs. They also increased Natural Gas shorts but Heating Oil shorts.

FX. Large specs increased their EUR, AUD and GBP longs. They decreased their JPY shorts and MXN longs position.

Interest Rates. Large specs increased their short positions in 10-year while increasing their long position in 30-yr. They also reduced 2-year shorts


One can't help but see this positioning and wonder just who the big boys are selling toas we noted here,

Based on Bloomberg's Smart Money Flow indicator, there is a very significant amount of distribution going on… the question is just who is soaking up the smart money selling? Company buybacks, Johnny 5, or a greater-fool retail investor?



Perhaps this chart from Lance Roberts at STA Wealth provides some color for who?


However, the idea that individual investors are still "out of the market" should be taken with a bit of caution. The chart below is data compiled by the American Association of Individual Investors (AAII) which surveys it membership on portfolio allocation.  The data is compiled and released monthly. 




With cash hovering at the lowest levels since the "Tech Wreck," and equity exposure at the highest, investors are more than just "warming up" to equities. They are effectively "all in" with respect to the financial markets.


via Zero Hedge Tyler Durden

Enlightened Self Interest and Financial Industry Hypocrisy – The Final Chapter

Enlightened Self Interest and Financial Industry Hypocrisy

Chapter Three of Three

We Are What We Eat


An Old Fashioned Rant By

Cognitive Dissonance



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Something that has been understood for thousands of years, and only recently conveniently forgotten (the word ‘recent’ being a relative term) in order to promote, and believe, the myth of a protective and benevolent government, is that there has never been any inalienable ‘rights’ regardless of what the ‘Constitution’ says, other than those that are given to us by our masters (the politically correct term is ‘elite’) for social/political cover and expediency, or those we take (often from others) for ourselves.

Ultimately the Constitution is simply a politically correct document (“Just a piece of paper.” G.W. Bush once said) that our masters (the elite) make a grand show of supporting in return for near total monetary and social control. The reality is that the Constitution can be revoked at any time (martial law being the most obvious, but not the only way) or just not enforced (laws are for the little people) which then requires ‘We the People’ to apply ‘force’ to bring it (back) into use…..assuming it was actually ‘used’ before and assuming ‘We the People’ have the stomach and will to suffer great harm in exchange for reinstating a collective lie. This is a root cause of our collective apathy and one of the reasons so many prefer to remain asleep.

In return for the continued perpetuation of the illusion of equally enforced laws of the land (what’s good for the master elite is good for “We the People” after all) we begrudgingly accept ‘minor’ imbalances and unjust infractions against our ‘person’ in order to partake of the system’s spoils and spillage. After all we ‘citizen/workers’ are junior members of the hierarchy, and thus ‘our’ compensation (aka earned income, capital gains and investment income/interest, private and public pensions, and many ‘entitlements’ of various shapes and forms from tax breaks to SS/Medicare for being part of the system) is presently, and will remain in the future, severely limited.

The fact of the matter is that we work cheap, having pooled our labor into cities decades ago where there is much competition for services similar to ours, and we give away more than we keep because we all practice our own version of greed and Unenlightened Self Interest. Alas, as long as we eke out enough to pay our bills with a little left over for some cheap thrills, we show up for work when called and do the dirty work when needed.

That’s the bargain we really want, right? We want little to no substantial effort, no hassle, and our inalienable right for entitlements to be paid out for as long as we are alive and for a minimum of work. And don’t bother me with the ugly details. I am not saying we won’t work hard to ‘better’ ourselves as long as their rigged game gives us a fighting chance. Of course the ones we usually fight over a few more crumbs are each other.

But we need to stop and seriously consider that we are playing ‘their’ game and not ours, so why are we so upset when ‘they’ change the rules and payouts. Oh…that’s right, because we have this piece of paper that says we are ‘free’ and thus we have ‘rights’. So stop treating me as a captive slave when I’m actually the free range variety.

As much as we like to convince ourselves we deserve what we have because we work hard, how much of our good fortune is an accident of birth to parents who lived in the mighty American Empire during the final leveraged economic expansion of the 80’s and 90’s, but not so much the double aught’s? The problem now is that we won’t work as hard to take (back) our ‘rights’ (aka our inalienable entitlements) as the masters will work hard to deny us of them. The elite mob knows that ultimately this is a war and they are prepared to go to the mattresses. Are we?


Elite Mob


Consider this twist. While each Plantation Owner Master (corporate entity/elite) works for his or her own benefit, the very definition of Unenlightened Self-Interest, they also work together to further their shared needs and for the benefit of their greater good. And that dear reader is the definition of Enlightened Self-Interest.

It is ‘We the People’ who do not organize and act together for the benefit of our own collective good. Rather we almost always act in an unenlightened manner that benefits only ourselves and our immediate family. Even then, only for a short period of time, lately just to the next paycheck. Ultimately we rely upon the benevolence of the master/elite to continue to slice, dice and distribute the pie in the same manner as before. We have allowed ourselves to be duped into believing there is only one greater good and that our masters will quickly agree to our demands for more simply because we are free citizens with inalienable rights.

Mesmerized as we were, we never looked deep enough to recognize that the system was a farce and an illusion from the very start, at least from the perspective of the wage slave. We have not received much of anything of real and substantial value in exchange for our labor since the late 1800’s when we flocked to cities and cheapened our labor by pooling it all in one place. I find it supremely ironic that ‘We the People’ have become modern day North American Indians and are taking fiat beads in exchange for our valuable land and labor.  

What little ‘real’ value we did manage to accumulate is now being taken from us in a brazen day light robbery. The sad fact is that we weren’t so must robbed as we willingly deceived ourselves by selling our souls for a hand full of baubles. Now that the USD Petrodollar Ponzi is collapsing, we are all standing around crying in our hands wondering who will make restitution. Restitution? With what? Moar fiat beads?

I’ll tell you with what. With a Petrodollar (or whatever it is morphed into) that at its core is debt based and thus worthless. Think about it for a second, a fiat dollar’s value comes from our faith and belief that nothing is worth something. Consider that our fiat currency only retains ‘value’ if we remain seduced by the insanity and drive ourselves deeper into slavery. Where I come from that is a Faustian bargain and incredibly we want more, not less.

Yes, I know what you are going to say, you didn’t sign up for this deal. You had something else in mind. Well folks, this didn’t happen overnight and any inaction or passivity on our part in the past or present is a loud and clear vote of support for the status quo into the future. The system survives because we support the system. There are no them, just us. Remove our consent and they/us/we collapse. But since we aren’t ready to fight as hard or suffer as much short term pain as ‘they’ are, we have lost long before we wake up in the morning. I owe, I owe, so off to work I go.

And now that we are screaming for collective relief (because we know deep down inside we will never ‘win’ fighting alone) why are we not accepting our part of the collective responsibility of getting us to this point in the first place? If we aren’t responsible for our small part of the problem, why are we ‘entitled’ to partake in a small part of the solution we are demanding? Instead we shuttle back and forth between Stockholm Syndrome and being the battered slave or child victim.

Somewhere along the line as we engorged ourselves on the baubles the fiat dollars bought (just like the North American Indians were ‘rich for a day’ when they brought the beads back to the tribe) we allowed ourselves to believe that the nation could be placed on autopilot while we examined our navels for lint. Now that we are faced with the stupidity of that collective decision, we have devolved into finger pointing, infighting and hoarding while demanding someone else fix the frigging problem.

Time to grow up boys and girls because we can’t fix what we don’t acknowledge is broken……over selves. And as good as it makes us feel when we point to they, them and those as the evil culprits, ‘they’ aren’t going away until we accept our role in this mess and our responsibility to change everything. Are we really so childish that we would think the elite master will see the error of his or her way and hand over the keys to the plantation and walk away? Why would ‘they’ do so when they are willing and able to fight to the bitter end, then change clothes and start all over again? This is the same problem that has repeatedly faced the peasants of the last two thousand years.


Peasant Revolt


Society’s fuzzy ethical and moral lines and shady boundaries are regularly violated, then subtlety twisted and reinforced in the mainstream media as well as in movie and television dramas. These transgressions are part of our cultural conditioning and most never recognize its impact because rarely do we make an attempt to apply critical thinking to what we do, say and think.

For example, who can forget Fox TV’s Jack Bauer (“24”) suffering terrible bouts of moral conflict and emotional distress just before breaking some alleged terrorist’s finger or hand, then proceed directly to outright torture in order to extract just-in-time-to-save-the-world information? Hey, just as long as he saved the world I guess it was OK to shoot that guy in the knee cap. Besides, he was a frigging terrorist, so he deserved it.

Was it coincidence that our televised Predictive Programming and collective social training in torture justification came around just in time to hate those dirty brown Taliban? In America, just as long as the good guy sincerely regrets being bad, it’s all good dawg. After all, that’s what rehabilitation is all about even if one must rehabilitate on a weekly basis.

We love to hand out second, third and fourth chances because we want them offered to (or more importantly self bestowed upon) us as well. We call this doing well by doing good, and ignore the double standard and blatant self interest in the actions and result. Moral certainty for the TV viewer is always important when playing near the edges of the ethically crumbling moral cliff.

Speaking of gray areas and cliff diving, what about Leone “Léon” Montana, the hitman or ‘cleaner’ character at the center of the movie “The Professional”?  The endearing house plant loving (“it’s my best friend”) Leon certainly demonstrates ethical behavior (“No women, no kids, that’s the rules”) by taking in young Mathilda Lando, almost certainly saving her from a brutal death. And he acted to further the interests of his employer and various innocents caught in his line of fire.

Since Leon was kind hearted and never really profited financially from his ‘killing work’ (his boss was his bank, so you know what was going on there) it was a bit safer to…..kind of…….you know……like him. Even think of him as a hero of sorts. But he still was a killer, so what do we do with this cognitive dissonance? Thank goodness we were spared the moral uncertainty of caring for a ruthlessly efficient hired killer when Leon was killed by Stansfield, the real ‘bad guy’ (who was a DEA good guy) while once again saving Mathilda from herself and the world.

Thankfully Leon manages to take Stansfield with him to an early grave with a concealed booby trap grenade, thus also removing the bad good bad guy. The movie ends with Mathilda planting Leon’s houseplant outdoors, symbolically putting down roots in the memory of Leon. The viewer is now morally and emotionally released from any moral uncertainty for his or her attraction to the good bad guy (Leon) and his or her hate for the bad good bad guy (Stansfield).

This is all very confusing. Isn’t it simply about the egalitarian financial workers of America versus the too big to fail (TBTF) evil empire bagmen and rouge traders? If Goldman Sachs is doing God’s work, and I have no doubt that Blankfein’s declaration was honestly believed when spoken, what’s wrong with dipping your beak into a little of the frosting when you are serving the people their cake? Show me the line of demarcation between doing God’s work and dancing with the devil because from my vantage point my admittedly older eyes see nothing but fuzzy ethical ideas and bottom lines throughout the population.

From an individual trader’s point of view I am not sure how someone can act to further the interests of others if they’re simply trading their own personal book. Maybe this also has something to do with intent. Are there really ethical standards to meet or the greater good to serve when all you are serving is yourself and Mr. Pocket? Alas, supporting the rigged markets by buy buy buying is just a few degrees of separation from the Goldman Sachs traders and their bonus pool.


Future Bonus Pool


The same can be asked of those average Joes who say they aren’t responsible for anyone or anything else but themselves. At least until the apocalypse has passed. Then of course they will most certainly lend a hand in rebuilding. Is this position any more or less self serving than those Goldman traders? I would say the only difference is the degree of self service and the compensation…..or lack thereof.

While I don’t wish to label things as good or bad because it just leads to hard feelings, raised hackles and feet cemented in place, I do think it is fair to say that Enlightened Self Interest (ESI) is more outward looking and Unenlightened Self Interest (USI) is more inwardly focused. But even here there are no absolutes, just an ethical measurement taken from a stationary point of view that one is more or less than the other. It serves no purpose to declare black and white boundaries in a world that is gray all over.

But as much as ESI’s success might be hard(er) to measure (define greater good in a world of unlimited fiat creation funneled through the wealthiest one percent first) it seems to be much easier to measure USI using several measures, including 100% profitable trading days in a quarter by TBTF banks or large year-end bonuses during a period of national economic difficultly. “Greed is good”, in theory at least, is the driving force behind so called efficient market capitalism, where greed supposedly drives waste and non efficiency out of the capital (re)allocation process, allowing the wealth to be spread throughout the economy. There is that promised mafia ‘taste’ again.

You know what I’m talking about, the old lifting all boats analogy that is still carried by the ‘haves’ like a blazing torch through the dark nights of abject greed and pure self interest. An honest read of history tells me that greed in this ‘pure’ form is a myth of the highest order. But it is an important myth that is perpetuated by those who would profit from others who wish to believe the myth, if for no other reason than to sooth the pain of being a wage slave ‘have not’.


Caution - Boat Lifting in Progress


Several questions and observations spring to mind after reading (and re-reading several times) the ESI and USI definitions and I will get to them in a second. But let us take a look at a few more definitions because it is important to understand what I meant in an earlier chapter when I said the financial industry might be suffering from a Cognitive Dissonance (CD). Again let us look at Wiki since it is in general agreement with several other sources.

Cognitive dissonance is an uncomfortable feeling caused by holding conflicting ideas simultaneously. The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance. They do this by changing their attitudes, beliefs, and actions. Dissonance is also reduced by justifying, blaming, and denying. It is one of the most influential and extensively studied theories in social psychology.

Experience can clash with expectations, as, for example, with buyer’s remorse following the purchase of an expensive item. In a state of dissonance, people may feel surprise, dread, guilt, anger, or embarrassment. People are biased to think of their choices as correct, despite any contrary evidence. This bias gives dissonance theory its predictive power, shedding light on otherwise puzzling irrational and destructive behavior.

I don’t think this definition goes far enough because in many cases a person will seek to hold two conflicting ideas simultaneously precisely because they are trying to avoid the uncomfortable feeling or anxiety of cognitive dissonance. The technical term is tension and sometimes a person feels they must hold two conflicting views because holding only one is causing the tension and the anxiety won’t allow them to do as they wish. This leads us to the definition of denial which works hand in hand with CD.

Again, from Wikipedia…..

Denial is a defense mechanism postulated by Sigmund Freud, in which a person is faced with a fact that is too uncomfortable to accept and rejects it instead, insisting that it is not true despite what may be overwhelming evidence. The subject may use:

simple denial – deny the reality of the unpleasant fact altogether

minimization – admit the fact but deny its seriousness (a combination of denial and rationalization, or

projection – admit both the fact and seriousness but deny responsibility.

The concept of denial is particularly important to the study of addiction. The theory of denial was first researched seriously by Anna Freud. She classified denial as a mechanism of the immature mind, because it conflicts with the ability to learn from and cope with reality. Where denial occurs in mature minds, it is most often associated with death, dying and rape. More recent research has significantly expanded the scope and utility of the concept. Elizabeth Kubler-Ross used denial as the first of five stages in the psychology of a dying patient, and the idea has been extended to include the reactions of survivors to news of a death. Thus, when parents are informed of the death of a child, their first reaction is often of the form, "No! You must have the wrong person, you can't mean our child!"


Cognitive Dissonance Migraine


As in everything else in life, nothing is straight forward nor do simple answers ever really apply. How is it that someone of obvious sound and ethical mind such as the esteemed money managers mentioned in a previous chapter advocate the destruction of a financial system that is so clearly corrupt and beyond redemption, yet still believe that Enlightened Self Interest would or could still apply?

It seems that the only real answer might be that we wish to believe that the majority of financial professionals are honest and are truly trying to fulfill the basic requirements of Enlightened Self Interest (ESI). In order to believe this, by extension we must believe that only a minority are driven by greed or Unenlightened Self Interest (USI).

The entire concept behind ESI is that with enough people engaged in ESI a sort of flow or creative energy occurs that creates both a greater good and a rewarded self interest. I often say that we make our own reality and that goes for groups as well as individuals.

But I don’t know if this is a realistic view of reality, of what is actually going down on a daily basis on various trading floors and in private offices. It is hopelessly myopic, naïve and even disingenuous to think that everyone at Goldman Sachs and other Too Big To Fail (TBTF) banks are practicing USI and everyone else is following the path to ESI. Do I really believe that greed only exists at TBTF banks and that everyone else is in the clear?

If I am going to conduct myself in a manner that fulfills the tenants of ESI, a whole host of questions need to be asked and answered. How many individuals must honestly and consistently participate in Enlightened Self Interest in order for it to be effective or quantifiable? Are the effects of USI offset on a one to one basis by those of ESI? If 80% of the industry participates in ESI and the other 20% do not (and the 20% are responsible for 80% of the sales/profit assuming the 80/20 rule is alive and well) does it matter? Meaning should ESI be measured by production, profits or participation?

I am being completely serious here. If I am going to follow an ethical standard which in effect declares my intentions good and my character moral and I do this as justification for participating in a corrupt and conflicted economic system, shouldn’t I be ready and able to prove that I am ‘better’ than the Unenlightened? Ostensibly there is no burden of proof needed to be greedy since the act alone is the epitome of self interest that just so happens to be declared Unenlightened principally by those who declare themselves Enlightened.

To be quite frank I don’t think the so called Unenlightened give a fig about what other people think about them unless it affects their bottom line. And the bottom line is their self interest. So how exactly does one ‘act to further the interests of others (or the interests of the group or groups to which they belong)’ and how does it ultimately serve their own self interest if they do so? On the surface it seems this is a matter of faith that it will all work out or that Karma will reward those who are putting their own self interest second or third in priority.


Bankers' Bottom Line


I could argue that the term Enlightened Self Interest is simply a marketing ploy similar to ‘new and improved’ that is stamped on the forehead of the same ole same old to provide cover for blatant self enrichment. Where is my Good Housekeeping Seal of Approval that certifies that I am grade ‘A’ ethically upstanding and Enlightened? Does that stamp come from passing my latest compliance field exams?

I do not think it is a stretch to assume that most, if not all, the boys and girls at Goldman Sachs or J.P. Morgan also pass their compliance reviews. So what makes me any better than them? What makes them worse than me? Is it that they make more money than I or that they have a sweeter deal than I can get? Or just that they are more blood money thirsty and can live with the consequences to boot?

Finally I would like to point out a contradiction in the following point of view that I mentioned in the first chapter. Sometimes I will hear a fellow trader/advisor talk about his/her adherence to Enlightened Self Interest while also proclaiming that he or she has to make a living. Well, which one is it? Am I saying that because I need to make a living I will continue to participate in the corrupt system, but since I’m ethical in my actions I will call it ESI? Why not just say that I am ethical? I seem to be inflating my ego by conflating my ‘need to earn a living’ protestations with slaving away for the greater good, which by-the-way feeds me.

One can ‘make a living’ doing many different things. But what about a ‘very good living’, as in lots of money and toys and….well, you get the idea? Did I enter the financial field because I wished to make a boat load of money, then discovered the greed and corruption and decided to practice ESI? Or was ESI something I simply adopted when some pesky ethical issues began nagging at my brain, but I didn’t want to give up the good life? I don’t pretend to believe that my actions are pure as driven snow, so why do I need to dress up my profession in such a manner?

Quite frankly it stinks and always has. And while those in the financial ‘industry’ can rightfully claim that hypocrisy is alive and well throughout corporate America, that absolutely correct observation doesn’t justify their hypocrisy nor does it justify all of ours, it just rationalizes it as business as usual for all. The business of America, regardless of what it once was, is corruption; greed, self dealing and self interest run amok. And ‘we’ allow it because we believe, perceive or have been assured that we benefit from it as well.



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A booming business for Comforting Lies

A Booming Business for Comforting Lies

via Zero Hedge Cognitive Dissonance

Fukushima Manager Admits Water Woes “Out Of Control”, Refutes Lies By PM Abe

Last September, Japanese PM Shinzo Abe told Olympic dignitaries in Buenos Aires in an address that helped Tokyo win the 2020 Games: “Let me assure you the situation is under control.” It would seem, just as he ‘assured’ his people that Abenomics would ‘fix’ Japan, in the case of Fukushima, he lied. As Japan Times reports, the manager of the Fukushima No. 1 nuclear power plant has embarrassingly admitted that repeated efforts have failed to bring under control the problem of radioactive water.

Just 8 months ago, Abe sounded the all-clear…

Last September, Abe told Olympic dignitaries in Buenos Aires in an address that helped Tokyo win the 2020 Games: “Let me assure you the situation is under control.”

But, as Japan Times reports, things keep going wrong

Last week, Tepco said it had directed 203 tons of highly radioactive water to the wrong building, flooding its basement. Tepco is also investigating a leak into the ground a few days earlier from a plastic container used to store rainwater.


In February, a tank sprouted a 100-ton leak of radioactive water, the most serious incident since leaks sparked international alarm last year.


A hangar-like structure houses Toshiba Corp’s ALPS system, able to remove all nuclides except for less noxious tritium, found at most nuclear power stations, its planners say.


It sat idle for 19 months after a series of glitches. The latest miscue occurred on Wednesday, when a ton of radioactive water overflowed from a tank.

Which has forced admissions of guilt and failure…

Abe’s government pledged half a billion dollars last year to tackle the issue, but progress has been limited.


“It’s embarrassing to admit, but there are certain parts of the site where we don’t have full control,” Akira Ono told reporters touring the plant last week.


He was referring to the latest blunder at the plant: channeling contaminated water into the wrong building.


Ono also acknowledged that many difficulties may have been rooted in Tepco’s focus on speed since the 2011 disaster.


“It may sound odd, but this is the bill we have to pay for what we have done in the past three years,” he said.


“But we were pressed to build tanks in a rush and may have not paid enough attention to quality. We need to improve quality from here.”

In summary, Tepco had pledged to have treated all contaminated water by March 2015, but said this week that was called a “tough goal.” But building the giant wall of ice remains more fact than fiction for now (still)

Plans also call for building an experimental 1.4-km underground freezer to create a wall of ice around the plant to block the groundwater. Tests began last month and Tepco hopes next year to begin construction — sinking giant refrigeration rods into the ground to create an impermeable wall of frozen earth.

We hope that this works out better than the failed belief that devaluing your currency can solve a nation’s indebtedness

via Zero Hedge Tyler Durden

POMO Pump-And-Dump Leaves Stocks In The Red

Volume is light, as Europe remains on Easter holiday, but the volatility is back. Biotechs opened notably higher, dumped to unch, ripped to new highs, then dumped again… The S&P 500 managed to regain all last week’s dump losses – but stalled then as POMO struck (the biggest in April) and AUDJPY took off in its front-running way but left stocks behind. Of course, there’s no need to worry though – tomorrow is Tueaday after all.


Biotechs couldn’t hold gains…


As AUDJPY decoupled on POMO and S&P revrted to USDJPY weakness…


which sent stocks to last week’s highs…


before they started to dump…


Charts: Bloomberg

via Zero Hedge Tyler Durden

Sorry Janet: Technology Is Deflationary

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Technology, like Nature itself, has no emotional stake in what is creatively destroyed.

We all know the Federal Reserve is terrified of deflation, because they keep telling us that deflation is the equivalent of death and inflation is the equivalent of oxygen. What they fail to mention is that inflation is only oxygen for debtors barely able to service their debt and those who profits from debt, i.e. bankers and financiers.

For everyone earning a wage or salary, inflation is the equivalent of death by a thousand cuts and deflation is the elixir of life. When prices decline, our money goes further, i.e. our purchasing power increases.

Only bankers, governments and other parasites that live off the carrion of debt fear deflation and try to destroy the purchasing power of wages with everything in their power. The irony of all the parasites pushing inflation as the cure-all is the only real cure-all to our present stagnation and decline is the complete renunciation/write-off of unpayable debts, a systemic bankruptcy that rights the ship of state and the economy by writing off bad debt and blowing off phantom collateral, i.e. assets that are supporting debt whose valuations have been pushed to the moon by easy-money and low interest rates.

Let's start our discussion of technology and deflation by asking one question: has there ever been a central authority that tried to stop the spread of technology and won?Not to my knowledge; new technologies that offer enormous benefits (think affordable eyeglasses) and astounding reductions in cost spread like wildfire, even when central banks and states are dead-set on suppressing their creative destruction of Status Quo vested interests.

Sorry to bring the bad news, Fed inflationistas, but technology is irrevocably deflationary. The exceptions are: regulations that require additional technology to benefit life safety, and entrenched interests that erect barriers to competition and new technology, for example, Big Pharma and the sickcare industry.

When state-protected cartels rule the roost, costs go up no matter how much new technology is introduced. State-protected monopolies (sickcare, higher education, etc.) can suppress disruptive technologies, at least for a while, until their bloated, high-cost, diminishing-return structure collapses under its own weight.

Obamacare is a Catastrophe That Cannot Be Fixed (December 6, 2013)
The real unsubsidized cost of Obamacare for two healthy adults ($23,244 annually) exceeds the cost of rent or a mortgage for the vast majority of Americans. Please ponder this for a moment: buying healthcare insurance under Obamacare costs as much or more as buying a house.

The Orwellian Affordable Care Act will not last, because it is intrinsically unaffordable, wasteful and inefficient. Only those whose care is paid by others via subsidies think it affordable; on a systemic level, it is doomed to implode, and the sooner the better in terms of enabling technology to creatively destroy vested interests.

Technology is enormously deflationary on a number of fronts.
1. Perhaps most importantly, technology eliminates costly human labor. In the late 19th century, roughly 50% of the labor force worked on farms. Today, the number is 2% of the workforce.

At the turn of the 19th century, the largest category of employment was domestic help. The rise of electrical appliances and machines of convenience eliminated much of the need for domestic labor.

The next sector to undergo large-scale destruction of jobs was manufacturing. The process of replacing human labor with robots and software automation in factories is still underway.

Advances in software are now eliminating white-collar office jobs and retail employment. People like me (self-employed information workers) can now produce output and manage services that required three to five people a mere 25 years ago.

Although many believe new technologies create more jobs than they eliminate, there is precious little evidence of that today. Anyone who thinks biotech is going to create millions of new jobs needs to survey the job market for PhDs and those with Masters degrees in biotech fields–biochemistry, etc. The job market is tight, not expansive; these high-tech sectors can only absorb so many graduates, regardless of their level of training.

Just issuing diplomas does not create jobs for graduates.

As technology eliminates millions of jobs by replacing human labor, wages decline and the percentage of national income that goes to labor also declines. This means there is less money for consumption, pressuring prices of consumer goods. This is broadly deflationary.

Here is labor's share of income:

The bedrock of employment, small business, has cratered:

The wholesale elimination of white-collar labor has barely started.

2. Technology consolidates rentier services via convergence. A few years ago everyone needed a landline telephone, a separate phone line for a modem, a television, a DVD player, a mobile phone, a stereo system and a laptop computer. Now all anyone under the age of 30 needs is a smart-phone and perhaps a cheap laptop or tablet.

The rentier skims being eliminated by convergence are significant. Now people can get rid of cable or satellite and watch most programming via the web.

3. Technology gets cheaper. The first sequencing of the human genome cost hundreds of millions of dollars. Now it's down to a few hundred dollars per sequencing. An Android tablet with full functionality can be had for $40 wholesale in China.

As competition drives prices down, profits erode. This is why the ideal set-up for profits has always been monopoly. But technology has a way of disrupting monopolies.

4. Technology enables transparency and thus lower prices. Transparency is anathema to cartels, which is why the actual cost of healthcare is obscured by providers desperate to avoid competition. But the web is introducing transparency and that alone is disrupting and creatively destroying profits based on information asymmetry.

5. Technology improves efficiency and reduces consumption. Volkswagen's 283-mile-per-gallon car is currently very costly, but how long will it take for those technologies to spread to the mainstream. How much less fuel will a 140-mile-per-gallon vehicle burn than a current generation car?

Reduced consumption means reduced sales and profits.

6. Profits go down as creative destruction takes down profitable rentier skims, cartels and bloated, inefficient industries. And what happens when profits decline for systemic reasons? Stock market valuations based on absurdly optimistic expectations of future profits implode along with profits.

And when the stock market finally reflects declining sales and profits, even the Fed won't be able to prop it up.

Technology, like Nature itself, has no emotional stake in what is creatively destroyed. Technology had no attachment to lamplighters or buggy-whip manufacturers, and it has no attachment to the Fed, sickcare, higher education, manufacturing or the state itself, all of which are being remorselessly disrupted.

As Bob Dylan put it, he not busy being born is busy dying. That is equally true for enterprises, industries and institutions.

via Zero Hedge Tyler Durden