CYNK Short Squeeze Scam Costs Trader His Job

“My 10-year-old knew it was a scam. It was a complete joke,” rages Tom Laresca – a market-maker at Buckman Buckman & Reid – who sold “pure madness” stock CYNK Technology short at $6 last week. Laresca assumed (reasonably so) that the SEC would suspend trading, sending the price towards zero. Despite Zero Hedge’s initial exposure of this farce to the world (and the rest of the mainstream media’s attention following), the SEC was slow and CYNK soared to $16, squeezing Laresca and forcing his firm to cut off his ability to hold positions – he plans to resign today. “I wish people would just not trade the stupid things.”

 

As Bloomberg reports, a Wall Street trader said Cynk Technology Corp.’s (CYNK) 36,000 percent stock surge cost him his job, and he blames a short squeeze and regulators who didn’t halt the shares before the company’s value shot past $6 billion.

“The stock looked worthless, if there’s even a company behind it,” Laresca said. “My 10-year-old knew it was a scam. It was a complete joke.”

 

He sold it short last week around $6 — which means selling stock you don’t own with a plan to buy it cheaper soon, pocketing the difference. Laresca figured the Securities and Exchange Commission would suspend trading, sending the price toward zero.

Instead of falling, the share price more than doubled the next day, July 9, starting the squeeze. Market-makers who had sold the stock short got nervous and scrambled to buy stock to close their positions, driving it even higher, Laresca said.

“If you’re short, you have to buy it within five days,” Laresca said of market-making rules. “That’s what was driving the stock higher.”

The SEC stopped trading two days later, citing concerns about the accuracy of information in the marketplace and “potentially manipulative transactions.”

 

That was too late, Laresca said, and slammed the SEC…

When it goes from 6 cents to $16 and you haven’t done anything about it, I’m sorry but you fell asleep at the wheel,” he said. “Everybody knew it. How come they didn’t know it?

 

While Cynk’s $6 billion paper valuation was unusual, spikes and crashes are common in the over-the-counter markets where it traded. Regulators bust alleged pump-and-dump scams there regularly. Many involve defunct companies, or shells, with shares that still trade. The SEC has suspended trading in at least 255 shells this year.

 

“You lure other people into the marketplace, whether they believe it’s legit or they’re just along for the pump and believe they can get out before the dump,” Sporkin said. “It’s like a big game.”

The end result of this farce… more unemployment…

Laresca said that his firm cut off his ability to hold positions after the Cynk fiasco and that he plans to resign today. He declined to say what the trades cost.

OTC Markets Group Inc., which runs the trading venue once known as the pink sheets, marks questionable stocks on its website to warn investors. It branded Cynk with a skull and crossbones. Cromwell Coulson, the trading venue’s chief executive officer, who predicted the SEC suspension, said the agency will eventually figure out what happened with Cynk.

I wish people would just not trade the stupid things,” he said.

It’s not just Laresca who has a major problem, as we noted previously – cost of carry on the short is adding up all the time CYNK is halted

Case in point, this sad individual who on that bulletin board of epic retail investor comedy, Yahoo Finance, has explained their problem: it appears some brokers actually did allow shorting of CYNK, at a cost. A rather high and recurring cost it would appear.

 

 

Oops.

*  *  *
But all the other momo stocks trading at triple-digit P/Es are not stupid…? Or are they – according to Yellen?




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Rep. Justin Amash Facing “Ugliest House Primary”

W. James Antle III at American
Conservative 
takes
a close look
at the bruising attempts to bash
libertarian-leaning Republican congressman Justin Amash in his
ongoing Michigan primary:

Primary challenger Brian Ellis says he has just “been very
factual” about Michigan Republican Rep. Justin Amash’s voting
record, but National Journal has dubbed the
contest “the ugliest House primary of the cycle.”

Ellis has plowed at least $400,000 of his own money into a
primary challenge against Amash, whom he has called “al Qaeda’s
best friend in Congress,” among other pleasantries. The businessman
has made himself the candidate of K Street Republicans, the
Michigan Chamber of Commerce, and the neoconservatives.

So far, the polling doesn’t suggest this is enough to make him
the candidate of the Republican Party in his district. A Wenzel
Strategies poll commissioned by the Amash campaign shows the
incumbent trouncing Ellis by 22 points, with Amash taking 56
percent of the vote to Ellis’s 34 percent….

Ellis, as Antle notes, faces a challenge that a fellow
Republican would have to face against someone as libertarian as
Amash:

He simultaneously portrays himself as more moderate and more
conservative than Amash. So far, the latter message doesn’t seem to
be breaking through. In the June poll, Amash led 60 percent to 31
percent among Tea Party supporters while Ellis led 53 percent to 35
percent among self-described Tea Party opponents.

Ellis uses Amash’s generally strong defense of his constituents’
civil liberties as a hook to seem “tougher on national security”
including using a Marine vet’s voice in an attack ad. 

“We were out there fighting for the country, and he’s voting
against anything that would help us,” the veteran says in the
voice-over.

Perhaps what would most help American troops is bringing them
back from pointless and useless foreign entanglements, an idea that
is making more and more sense to more and more Republicans.

I interviewed Amash after his last successful election as
part
of a package of liberty-minded Republicans in Congress
.

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FEC Recycled Hard Drive of Attorney Under Investigation for Potentially Illegal Political Activity

Until April of this year, April Sands was an attorney at the
Federal Elections Commission’s (FEC) Enforcement Division. That
division is responsible for enforcement of federal elections law
generally and is specifically charged with investigating “alleged
violations of the law” and well as making recommendations to the
FEC about “appropriate action to take with respect to apparent
violations.”

During her time at the FEC,
however, Sands sent out numerous tweets expressing support for
President Obama and other Democrats, opposing Republicans, and even
explicitly urging followers to donate to a Democratic
candidate.

In her tweets, sent from the handle @ReignOfApril, Sands
expressed an intense dislike of Republicans.

“I just don’t understand how anyone but straight white men can
vote Republican. What kind of delusional rhetorical does one use?”
she tweeted in July of 2012.

“If you’re still calling yourself a Republican after the
#WarOnWomen, their stated RNC platform, & Birtherism, you are
my enemy,” she wrote in August of the same year.

She noted her own donations, and pushed others to give as well.
“Our #POTUS’s birthday is August 4. He’ll be 51. I’m donating at
least $51 to give him the best birthday present ever: a second
term,” she said in a July 2012 tweet. “Donate to @clairecmc [the
Twitter handle of Missouri Democratic Sen. Claire McCaskill]
today,” she tweeted the next month. “Romney is toast,” said a
message sent in September. “But POTUS can’t do it all on his own.
Don’t forget Congressional races. We need a Democratic sweep. Stay
focused.” 

Sands is, of course, entitled to her political opinions,
whatever they are. But as an Executive Branch employee, she was
prohibited from engaging in partisan political activity while on
duty in a federal workplace. The Hatch Act, which places limits on
such activity, also makes it a crime for employees to solicit money
in connection with an election “while in any room or building
occupied in the discharge of official duties.”

Did Sands engage in criminal
activity? The FEC’s Office of Special Counsel and Inspector
General’s office investigated Sands’ behavior, and last April,
announced that she had resigned as part of a settlement agreement.
Sands admitted to conducting political activity, including
fundraising, on Twitter, and also to taking part in a political
discussion using a webcam while in an FEC conference room. She was
on duty at the time.

But
as a letter
from House Oversight Committee Chairman Darrell
Issa (R-Ca.) and Regulatory Affairs Subcommittee Chairman Jim
Jordan (R-Oh.) notes, the investigation stopped short of pursuing
criminal charges.

According to the letter, which provided background on Sands and
copies of her tweets, Sands computer hard drive was recycled. Its
records were wiped before the FEC’s Inspector General could get
access to it.

“The bias exhibited [by Sands’ tweets] is striking,” the letter
says, “especially for an attorney charged with the responsibility
to enforce federal election laws fairly and dispassionately.” The
letter requests comprehensive information explaining how the FEC
managed to let Sands’ hard drive be recycled.

The odd kicker to the story: Prior to 2001, long before the
tweets were sent, Sand worked at the FEC under the supervision of
Lois Lerner, who for the last year has been at the center of an
ongoing congressional investigation into possible targeting of
conservative non-profit groups by the Internal Revenue Service
(IRS). Lerner headed the IRS office in charge of tax exemptions,
but has indicated that many of her emails during the time frame
under investigation cannot be produced for congressional
investigators. Her hard drive crashed less than two weeks after the
House sent its first letter investigating scrutiny of non-profit
groups, and it could not be restored, preventing investigators from
accessing its contents.

There is no direct connection between the recycling of Sands’
hard drive and Lerner’s conveniently timed crash. But, especially
when combined with the fact that six other IRS employees have
apparently also lost record, at least one because of another
computer crash, it does appear that federal employees are having a
remarkably difficult time maintaining electronic records that might
be useful to investigators.

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The Return To Normalcy – Even The Supply Of Greater Fools Is Limited

Submitted by Joe Calhoun of Alhambra Investment Partners,

I think sometimes, with the stock market doing its best imitation of the Energizer bunny, we forget just how extraordinary are the times in which we live. We’ve been lulled to sleep by the relentless and mesmerizing march higher of stocks and all manner of risky assets. Maybe it’s just that having lived through two booms and busts already that people have come to believe that another boom in risky behavior is not just the new normal but the old one as well.  And having survived the last two busts, none the wiser apparently, everyone figures we’ll survive the next one too. Maybe. Or maybe people just don’t realize how truly weird things are right now.

I’m guilty of this type of thinking too but it seems like every week I get some kind of reminder that snaps me back to reality. Last week it was an article on MarketWatch about a convicted murderer passing out investment advice while serving a 54 years to life sentence. The article detailed some of his stock picks which included a healthy dose of social media stocks and other tidbits such as his affinity for penny stocks. When the stock market mania has reached all the way to San Quentin, one can’t help but think maybe things have gotten a bit frothy. Stocks are not, as I’ve said more than a few times recently, cheap by any measure but as the market has demonstrated repeatedly in this bull phase, that is no reason prices can’t continue to go higher. The supply of greater fools however is not unlimited and at some point reality and rationality will return, likely with a vengeance.

It isn’t just stock markets that are acting extraordinarily. If anything, debt investors have gone even more bonkers than stock buyers. Leveraged loans, junk bonds and the sovereign debt of governments just about everywhere are trading at prices that incorporate no margin of safety. Banks are lending to companies to buy back stock, an action that increases the risk to existing bondholders (a lot of the bank debt is secured) who seem oblivious to the leverage being taken on to keep the junior part of the capital structure happy. Private equity deals are being struck at unprecedented prices with bonds issued at unprecedented low yields. Merger Monday is back with companies announcing takeover deals struck over the weekend, trying to buy the growth they can’t generate on their own. Having wrung all the excess out of their own operations the only path left for higher earnings and bonuses is to combine with another company, eliminate the duplications and reduce taxes through international tax arbitrage. That is not good news no matter how much it excites existing shareholders and the talking heads of CNBC.

The extraordinary extends to the economy and economic policy as well. The Fed has kept interest rates at zero for 6 years now and their expectations setting forward guidance says 7 is in the bag. For all those who worried that the US might turn into Japan, well worry no more, that ship has sailed. Over a half decade of zero interest rates says we already have become Japan, with the same demographic, productivity and structural problems so well documented. High taxes, a shrinking workforce, offshored production, protection of large incumbent firms, political gridlock, a falling savings rate,  a growing xenophobia and an affinity for sushi all point to America as the economic kissing cousin of the land of the setting sun. Turns out the Vapors were not just one hit wonders but keen eyed economic forecasters as well.

The US economy isn’t acting normally, now in the 6th year of an anemic expansion the likes of which we haven’t seen since, well, never. The temptation is to compare this period with the Great Depression but even the recovery from the early part of that self inflicted economic wound was better in some respects. The unemployment rate has fallen but the path of improvement has been a road less traveled in economic history. No matter the reason, full time employment has become an unreachable dream for too many Americans. Multiple part time jobs and underemployment have made debt a way of life, starting with the ubiquitous student loan and throughout life as a way to achieve the perception, the illusion, of success, if not the real thing.

Companies aren’t investing for the future, preferring to spend on the present through stock buybacks and dividends that in many cases exceed their current cash flow, the difference being plugged with debt. Balance sheets are seen as sound by investors who see cash on the asset side of the ledger, forgetting apparently that there is a liability side as well. Where we have seen investment, the returns have left much to be desired. The capital sunk into extracting high cost oil and gas is staggering, approaching $1 trillion per year and $5.5 trillion globally since 2008. What we got for that staggering sum is not a single field that can produce profitably at less than $80/barrel and $4.5 per foot of gas. In some cases, the search for oil has gone to such extremes the breakeven prices are well over $100/barrel. You don’t have to be an Austrian to see that as malinvestment.

I think this acceptance of the extraordinary as usual is just the normal human desire, after the shocks of the last 15 years – economic, social and geopolitical – for, as Warren Harding put it, a return to normalcy. We want to believe that the Fed’s policies will eventually work their magic and bring back the good old days. Recently, the metric upon which everyone has seized as evidence that normal is right around the corner is the renewed uptrend in borrowing, particularly via credit cards. The optimistic explanation is that it is confidence in their future that allows individuals to go out and spend money they don’t have to fulfill desires they didn’t know they had. There are alternate explanations of course – people borrow on credit cards because they don’t have the income to maintain their lifestyles –  but we latch onto the one that allows us to continue enjoying the mass delusion of debt fueled prosperity.

A return to normalcy would mean a rejection of the idea that debt is the sine qua non of economic growth. A return to normalcy would mean a recognition that the Fed’s monetary gnomes are the ones who got us in this mess and are therefore wholly unsuited in their role as the economy’s knight in shining armor. A return to normalcy would mean rewarding and recognizing savers as the unsung heroes of economic growth. A return to normalcy would mean a shared prosperity for all rather than just the privileged few with access to the Fed or the ear of their congressional representative.

Achieving the goals of the Fed’s extraordinary policies – full employment and low inflation – would require an extraordinary set of conditions to develop. The economy would have to achieve a rate of growth that has escaped it for years while the Fed would have to extricate itself from a policy regime they barely – and that is generous – understand. I see no reason other than wishful thinking to believe those conditions can be met.




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Should Pro-Choice Libertarians Support the Women’s Health Protection Act?

On Tuesday morning, the Senate
Judiciary Committee
held a hearing on the “Women’s Health Protection Act
,” which
was designed to “remove barriers to constitutionally protected
reproductive rights.” The bill—introduced last fall by Sens.
Richard Blumenthal (D-Conn.) and Tammy Baldwin (D-Wisc.)—aims to
stunt the growth of
state laws placing unnecessary restrictions
on abortion
patients, clinics, and doctors.

These new regulations don’t directly attack the legality of
abortion but instead focus on the supposed medical risks for
women—risks which the medical community routinely denies. Still,
the new tack seems to be working. Already these sorts of
regulations
have been forcing abortion clinics to close
: A Texas bill
passed in 2013 required 14 of the state’s 36 clinics to shut down.
Laws passed this spring
in Mississippi
and
Louisiana would
require these states’ only remaining abortion
clinics to close. 

Putting an end to this sort of infringement on women’s abortion
access is a noble goal. But it’s one thing to fight states
passing these
types of laws
and another to say the federal government should
pass a law blocking states from passing these types of
laws. If the state laws are unconstitutional, shouldn’t that be
left to the courts to determine? Why a federal act? 

“We’re here today because 200 of these underhanded laws have
been passed” in 2011-2014, said Nancy Northup, president of the
Center for Reproductive Rights, in today’s committee hearing. “It
is not right that women should have to go to court year after year
to get the medical services that the constitution guarantees
them.”

I put this question to some libertarians I know, inside and out
of Reason, and received a range of responses. Some pointed
out that the text of the Women’s Health Protection Act was very
vague—under what standard do we determine if an abortion
restriction is “medically unwarranted” or oppressive? And under
what constitutional provision is Congress claiming the power to
enact this law?

But others said that when it comes to protecting individuals
from government intrusion, federal action can be appropriate; and
where government is passing laws to restrict itself to uphold the
Constitution, that can be a good thing. “I’m a peoples’-rights
advocate, not a states-rights advocate,” as one Facebook friend
commented. “What matters is if individual liberty is, on net,
increased.”

It’s perhaps worth noting that as courts have been striking down
these provisions, less state legislatures have been passing them.
According to reproductive rights organization the Guttmacher
Institute,
the number of new abortion restrictions
passed in the first
half of 2014 is half that passed in the first part of last year (21
versus 41). Furthermore, the types of abortion
restrictions we’re seeing now are quite different than the ones
passing three or five or 10 years ago. As courts strike down
various state restrictions, anti-abortion advocates keep coming up
with new tactics. If Congress passed a law banning their pet
regulations du jour, you can sure bet new ones will spring up
Hydra-like in their place.

But this discussion is largely rhetorical anyway—there’s little
chance the Women’s Health Protection Act will go anywhere. As
another Facebook comment noted, this bill is “more a noise-making
venture than a legislative one.” A New
York Times editorial notes
 that “the bill stands
little chance of enactment in this Congress,” but still asserts
that the Senate hearing “can serve a valuable purpose if it alerts
legislators and the public to a pernicious charade by removing the
‘patina of respectability’ from what are essentially phony
restrictions of no medical value.”  

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German Committee May Use Typewriters to Combat American Espionage

As the U.S.-German spy scandal
continues to unfold, the German committee that was allegedly being
spied on is actively seeking ways to keep its work hidden from
American informants. One option they’re looking at is good,
old-fashioned typewriters.

The Guardian
reports
:

Asked “Are you considering typewriters” by the interviewer on
Monday night, the Christian Democrat politican Patrick Sensburg
said: “As a matter of fact, we have – and not electronic models
either”. “Really?”, the surprised interviewer checked. “Yes, no
joke”, Sensburg responded. …

“Unlike other inquiry committees, we are investigating an
ongoing situation. Intelligence activities are still going on, they
are happening,” said Sensburg. …

According to German media, revelations about digital
surveillance have triggered a fundamental rethink about how the
government conducts its communications. “Above all, people are
trying to stay away from technology whenever they can”, wrote
Die Welt.

The spied-on committee was, interestingly enough, a task force
for investigating National Security Agency (NSA) surveillance on
the German public.

Of course, Germany cannot rely exclusively on typewriters to
keep its secrets safe. From
Ars Technica
:

In addition to the typewriting initiative, [Sensburg] announced
publicly that he was going to have a security audit performed on
his smartphone. “I’m going to ask the other chairmen and
committee members to have their phones checked at once,” Sensburg
said.

That declaration came just one day after German
media reported (Google
Translate) that two members of the German parliament—including a
former member of the intelligence committee—had their phones
compromised.

“We have to try to keep our internal communication sure to send
encrypted e-mails, use crypto phones and other things, and other
things that I won’t mention, of course,” Sensburg noted.

The alleged spy who has provoked this, identified only as Markus
R., apparently worked for Germany’s Federal Intelligence Service,
and sold 218 documents to the CIA for a
modest $34,000

This isn’t the first time a country has turned to typewriters in
light of NSA snooping. Just about a year ago, following the Edward
Snowden deluge, Reason
noted
that one Russian federal agency bought 20
typewriters for spy-proof internal communication.

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Shikha Dalmia on Foreign Kids and America’s Huckleberry Finn Problem

Border KidsHardline immigration
opponents are marching in the streets demanding that the
unaccompanied foreign kids arriving at our doorstep be “returned to
sender.” This, they say, is necessary to protect our borders. But
these kids are refugees of America’s drug war that respects no
nation’s borders or sovereignty.

America is experiencing arguably its worst spasm of nativism
since the early 20th Century. But calls to enforce a
cruel borderline, notes Reason Foundation Senior Analyst Shikha
Dalmia, will run into the Huckleberry Finn problem. Just as the
argument that blacks be kept in chains because slavery was the law
of the land lost, so will nativism.

View this article.

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Why Taxi Medallion Owners Don’t Deserve a Government Bailout

Andrew Murstein (right), with his father Alvin. |||Who’s going to shed a tear for Andrew
Murstein, the wealthy founder and president of the investment
firm Medallion Financial, if
his net worth plummets
because the high-tech car services Uber,
Lyft, and Sidecar obliterate the traditional taxi industry? Among
other things, Murstein’s firm is a holding company for
taxi medallions—transferable licenses to operate cabs that in
New York City sell for over $1 million a piece. Mediallions
are now losing value because Uber and its competitors—whose drivers
don’t pick up hail passengers off the street and therefore aren’t
required to hold medallions—are luring drivers and passengers
from the traditional cab industry.

But how about New York City’s independent cabbies whose
retirement savings are tied up in medallions they borrowed to
purchase and have spent years paying off? Or the “40 young Ghanaian
men” featured in Emily Badger’s
recent story on Chicago’s taxi industry
, “mostly in their
20s,” who in the past two years bought medallions in the Windy City
with “little or no money down?” As Badger notes, these
investments are probably already underwater, since a recent city
auction of medallions apparently drew no bidders.


In
an article in

Truthout
,
economist Dean Baker recounts how he caught a
ride from a worried Pakistani driver in San Francisco who saved for
years to buy a medallion, and is now spending $2,300 in monthly
mortgage payments on the purchase. Baker argues that his driver’s
losses should be viewed “in light of the larger issue of…growing
inequality:”

On the current path, these medallion owners will just be out of
luck. Their life savings will be made worthless by young kids who
are better at evading regulations than immigrant cab drivers; so
much for the American Dream.

In last
week’s episode of Russ Roberts’ podcast
EconTalk,
Duke University political scientist Mike Munger mused about whether
medallion holders deserve a government bailout:

Suppose that we don’t take any action and the value of these
medallions falls to zero. Are we obliged to offer compensation,
because we in effect made a regulatory decision that is a taking?
This property right, this medallion, had significant value. We made
a choice, without due process, that said we are going to reduce the
value of this medallion to zero…There is a
difference between private property
and…rent-seeking…[But] I’m not as sure as
was that the difference is as clear as I
thought.

Here’s why medallion owners shouldn’t get a bailout, and why the
issue is far more clear-cut than how Munger and Baker frame
it||| Source: http://ift.tt/W7rDcI: As I mentioned above, medallions are only for
cars that pick up hail passengers, not for car services, which were
never required to hold these exclusive permits. Uber, Lyft, and
Sidecar aren’t  “evading regulations.” Several states have
enacted new laws to insure that their drivers carry commercial
insurance, but medallioned cabbies still hold a monopoly on picking
up hail passengers off the street.

By introducing great mobile apps, Uber and its competitors
simply made car services more convenient for many customers than
stepping off the sidewalk and sticking an arm in the air. In other
words, it’s technological innovation not a policy change that’s
transforming the cab industry.

As Emily Badger notes, taxi medallions have “been the best
investment in America for years,” outpacing the S&P 500 by
a longshot (see her chart above); with great reward comes great
risk. Even small investors shouldn’t be protected from the
consequences of their investment decisions.

In this recent Reason TV video, I looked at how Lyft is
transforming D.C.’s taxi market:

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When you see this happen, you’ll know it’s game over for the dollar. I give it 2-3 years.

shutterstock 161445872 When you see this happen, youll know its game over for the dollar. I give it 2 3 years.

July 15, 2014
Malaga, Spain

Exactly 70 years ago to the day, hundreds of delegates from 44 nations were busy at work in Bretton Woods, New Hampshire creating a brand new financial system.

World War II had just ended. Europe was in ruin.

And since the US was simultaneously the largest economy in the world, the primary victor in the war, and the only major power with its productive capacity intact, it was easy to dictate terms: the dollar would dominate the new system.

Every nation would hold dollars as the primary reserve currency, and the dollar would be redeemable for gold at $35/ounce.

Also, global commerce would be conducted and settled in dollars, and these settlements would clear through the US banking system.

Naturally this created substantial demand from foreign governments who needed to begin accumulating dollars for trade and reserves.

So through a variety of programs, from the Marshall Plan to the IMF and World Bank, the US began flooding the world with dollars.

Initially everything went according to plan.

But soon the US government realized something important– foreign demand for the dollar was so strong that they could get away with printing more dollars than they had gold.

This allowed them to run all sorts of deficits and spending initiatives– more war, more welfare, more waste… all with minimal accountability.

Initially the consequences were insignificant.

Sure, the price of gold in London was a few dollars higher than in the US (they called this the ‘gold window’).

But demand for the dollar was still strong. So why bother changing?

By 1971, the situation had gotten far worse. Another decade of war, excessive spending, trade deficits, and money printing had pushed many foreign nations to their breaking points.

Foreign nations’ dollar reserves far exceeded the US government’s gold holdings. And with confidence waning, many began redeeming their dollars for gold.

Only days later, Richard Nixon put a stop to this and unilaterally terminated the US dollar’s convertibility to gold.

Think about the magnitude of this decision: Nixon was effectively defaulting on US obligations to the rest of the world– a complete betrayal of their trust.

Yet despite this massive shock that reset the global financial system, the dollar somehow managed to remain the world’s #1 reserve currency.

You’d think they would have been grateful, thanking their lucky stars that the rest of the world gave them a second chance. But no.

Over the past 43 years, the US has continued to print, devalue, and mismanage the dollar.

Along the way, they’ve created epic bubbles and financial shocks.

They’ve run up the biggest deficits and debt levels ever seen in the history of the world.

They’ve bickered internally to the point of shutting down government.

They’ve passed arrogant, painful regulations and commanded the rest of the world to comply under threats tantamount to financial homicide.

They’ve unleashed their tax and securities authorities to terrorize anyone doing business with the US.

They’ve totally ignored foreign pleas to restructure the IMF and World Bank.

They’ve slammed foreign banks with record fines simply for doing business with nations that the US doesn’t like.

They’ve waged pointless wars. They’ve spied on their allies. They’ve meddled in other nations’ affairs.

And they’ve demonstrated absolutely no willingness or ability to improve.

Simply put, other nations are done. Fed up, really. And it’s not just words.

Consider that in a matter of months, the US will be overtaken by China as the world’s largest economy.

Not to mention, the total combined GDPs of China, India, Russia, and Brazil are roughly the same as the US and EU combined.

Just as the US was the biggest player back in 1944, China is the biggest player today. So it seems clear that the renminbi will become a critical component of a new financial system.

The renminbi already has experienced rapid growth as a dollar alternative for trade; in May, cross-border settlement surged 52% from the year prior.

Renminbi settlement banks are being set up from London to Canada, and the central banks of both France and Luxembourg have signed agreements for renminbi clearing.

There have already been numerous Western companies (like McDonalds) that have issued renminbi-denominated bonds.

And even the provincial government of British Colombia issued a renminbi bond earlier this year. It was a whopping five times oversubscribed.

I’d expect within the next 2-3 years we’ll start seeing trade settlement in renminbi, even when none of the parties are in China.

Today, for example, a transaction between a Paraguayan merchant and a company in Angola will likely settle in US dollars.

Soon, I think we’ll start seeing that transaction done in renminbi. And once that happens, you’ll know it’s game over for the dollar.

Shortly after, national governments in western countries will issue renminbi bonds (perhaps Greece or Portugal will be first). And eventually, even the US government itself.

Today, 70 years after Bretton Woods, leaders from China, Russia, India, Brazil, South Africa, and several other nations are hard at work in Fortaleza, Brazil creating a new development bank that will compete against the US-controlled World Bank.

This is a major step in an obvious trend towards a new financial system. Every shred of objective data is SCREAMING for this to happen.

It’s a different world. Everyone realizes it except for the US government, which is still living in the past where they’re #1 and get to call all the shots.

The consequences of missing this boat are enormous, and it’s going to be a rude awakening for anyone not paying attention.

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Goldman Explains What Yellen Really Said: “Hawkish Shift”

Who best to summarize what Yellen just said (aside from Bernanke of course, however he will demand at least $250,000/hour for his profound insight), than the bank which actually runs the NY Fed: Goldman Sachs. So without further ado, here is Goldman’s Jan Hatzius on what Yellen really said.

BOTTOM LINE: The Q&A of Yellen’s semi-annual monetary policy testimony contained a few bits of interesting information, including a slightly hawkish shift in her description of when FOMC participants think the first rate hike may occur.

MAIN POINTS:

1. Asked about the timing of the first rate hike, Yellen noted that “almost all” participants expected the first rate hike at some time in 2015, and that the median projection for the fed funds rate at the end of 2015 was “around 1%.” Although simply describing the content of the Summary of Economic Projections (SEP), this language was slightly more hawkish than her response to a similar question in her May Joint Economic Committee testimony, in which she noted “most members believe that in 2015 or 2016 normalization would begin under their baseline outlook.” (The June SEP dots indeed shifted up slightly relative to the March dots, although the number of participants projecting the first hike in 2015 actually increased from 2 to 3.)

2. Despite acknowledging improvement, Yellen generally continued to focus on the substantial degree of slack in the labor market, and highlighted wage growth failing to significantly outpace inflation.

3. Regarding downside risks, Yellen noted that “housing is a sector where we expected to see better recovery, but it’s not quantitatively important enough to cause use to judge that it would hold back the recovery.”

4. Chair Yellen did not appear supportive of proposed legislation that could require the Federal Reserve to follow a formulaic policy rule. We do not think such legislation has a significant prospect of becoming law.

5. Regarding the exit strategy, Yellen stated that she thinks of the fixed-rate reverse repo (RRP) facility as a “backup tool,” consistent with the description of most participants’ views in the June FOMC minutes. She noted financial stability concerns regarding the facility, but indicated that maintaining a wide spread between the interest rate paid on excess reserves and the RRP rate or maintaining per-counterparty or total usage limits on the facility could mitigate these concerns.

6. Yellen noted that she had a “strong preference” for using macroprudential tools to deal with any potential financial imbalances (as opposed to shifting the core stance of monetary policy), similar to her remarks on this issue in the past.




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