Tag: news

Submitted by Golem XIV,

“We have broken no laws and cooperated with the government at all times.”

Variations of that statement seem to be the default defence of everyone from bankers to politicians when their names come up in the Panama Papers.

In the UK the latest to resort to some version of it, was first Downing Street on behalf of the Prime Minister David Cameron, and then HSBC on behalf of it’s notorious Swiss subsidiary.  The former because his father who lived in the UK, set up an off-shore company which has never paid any taxes in the UK, and the latter because it turns out HSBC has once again been handling dirty money, this time holding and moving money for off-shore companies owned by relatives of Syrian President Bashar al-Assad.

Now HSBC is a well known money laundering bank. They have been indicted and convicted of money laundering so many times in so many different countries.  The best known case was in 2012 when HSBC were found guilty of  laundering drug money out of Mexico. HSBC were tried in the US and fined $1.9 billion. They paid and said how sorry they were, and their group Chief Executive Stuart Gulliver accepted responsibility for their past mistakes, but assured everyone they had now put all that behind them and had even,

spent $290m on improving its systems to prevent money laundering,

That was 2012. In 2015 HSBC all that was found to be blather. HSBC were caught laundering  – again. This time it was HSBC’s Swiss subsidiary which had laundered

the proceeds of political corruption and accepted deposits from arms dealers while helping wealthy people evade taxes.

And so I have been thinking about this phrase we keep hearing, about not breaking laws and cooperating with governments.  Now obviously the first part is rubbish for the likes of HSBC, but perhaps not for the origin of the Panama papers themselves the Panamanian Law firm, Mossak Fonseca. I think they probably have been operating within the law. Doing so by having laws with more holes in than a sieve and governments who leave critical areas of compliance in the semi dark of self regulation or even connive with skirting round the rules.  And this connivance is why I am so interested in the second part of the phrase we keep hearing, the cooperating with governments.

You see I think when we hear the whole phrase, in one variation or another, we are meant to think the two halves of the statement are linked. The bank, law firm or individual has never, at least not ‘knowingly’, broken the law and is now cooperating with the government. The cooperating is seen as the antidote and response to the embarrassing lapse in obeying the law.

But let’s tease the two halves apart. The ‘knowingly’ is precisely how HSBC, Wachovia, Citi or Standard Chartered all admit laundering was done at the bank, but are never guilty of having laundered it…not knowingly.  It is always a huge surprise. A discovery which saddens and angers them. Which they then move on from…. with the blessing of their government.

This is how they are fined but never guilty, how dirty money can have engorged their balance sheet but they never lose their banking license.

I think we could be forgiven for getting the sneaking suspicion that governments cover for their banks.

So I look again at the phrase I started with and hear it differently now. Instead of hearing how the  bank, law firm or individual is contrite about an ‘unwitting error’ about which they are now cooperating with the government, I now hear first a lie about not breaking the law, but then a startling truth.  You see, I wonder if we shouldn’t think that the one truth being hidden in plain sight in all this is that the financial world has indeed been cooperating with governments – but doing so all along.

Does it not make more sense to think that what we are seeing is not a few rogue bank employees and lawyers breaking the law and embarrassing their employers and their pathetically useless, regulators, but rather two cooperating parts of a system of finance and government who are suddenly revealed together? It’s not dirty bankers and corrupt lawyers who are – now they have been caught – having to cooperate with government, to clean up. Not at all. I think we should at least consider that the better explanation is that the two, financial/legal world and government have been cooperating all along.

It stretches the limits of credulity to keep imagining that the bankers aren’t well aware who their clients are and how dirty the money is they are accepting. Equally it is ridiculous to think that governments aren’t aware of how oligarchs become wealthy or presidents suddenly become billionaires. And that dirty but hugely wealthy system is there just whispering to our leaders – who let’s face it are mostly drawn from the wealthiest families.

I suggest that what we are seeing with the Panama Papers is two partners in crime who have been caught together – The ‘criminal’ and the inside man/bent cop together. Normally the criminal – or at least the organisation that he works for – look to the bent cop to protect them. Someone will have to do time of course, but the arrangement remains hidden and therefore protected.

But now the arrangement itself might be uncovered. And if the bent cop, the inside man, is revealed, that threatens everything doesn’t it? That is far more serious. And so here they are, both caught in the light, both being questioned in public. The bankers and lawyers must be wondering how far they can trust the politicians.

Normally this sort of thing is covered over by finding some poor low level fall-guy. Who even if he tries to say the corruption goes higher is easy to discredit or shut up. But now big level people on all sides are blinking in the unwelcome lights.

I think we should admit that both the global financial/legal system, and our governments are both systemically corrupt and have been partners in crime – laundering money and evading taxes – as a matter of undeclared policy. It has been and remains just the way the system they profit by, works.  The only people who were not to know is us – The little people of every country, who are told they must pay their taxes, accept cuts because they aren’t paying enough taxes, and obey the laws and respect their betters.

Time to wake up surely?

via Zero Hedge http://ift.tt/1qAu8E8 Tyler Durden

Even with today’s 3% surge – the most in a month – on the heels of Unicredit’s CEO proclaiming that EU banks are “intensely” looking for fundin solutions, European banking stocks have collapsed for a 4th straight week for the worst losses since 2012.

 

 

Following the brief exuberance after Draghi unleashed his latest bazooka – which it seems was all front-run – European banking stocks have collapsed almost 20% – the biggest loss since April 2012.

via Zero Hedge http://ift.tt/20eRoDy Tyler Durden

Since The Fed ended QE3, the world's FX markets have become increasingly turmoily as the loss of Janet's foot on the throat of volatility sends chaotic sprres through carry traders' P&L. In fact, after rising 6 days in a row amid Japanese Yen strength, Global FX rates are the most turbulent since January 2012.

 

Chart: Bloomberg

As Bloomberg reports, volatility in currencies of the Group-of-Seven nations climbed for a sixth straight day Friday, the longest streak of increases this year. Price swings accelerated after the yen strengthened past 110 per dollar for the first time in almost 18 months this week, fueling speculation on whether the Bank of Japan will intervene to weaken its currency.

The trouble with turmoiling FX markets is it forces deleveraging in carry trades and tightens the much-needed liquidity that unerlies the fast-money purchasing of risky-assets around the world.  It is no coincidence that as FX volatility has surged in the last year, so equity performance has ebbed.

via Zero Hedge http://ift.tt/1qAu9YK Tyler Durden

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

Yesterday, the Wall Street Journal published an editorial that merits careful examination: “Jack Lew’s Political Economy”. The Journal correctly points out that the Obama administration’s meddling with regulations and red tape is killing U.S. investment and jobs. The most recent example being the Treasury’s new rules on so-called tax inversions, which burried a merger between Pfizer, Inc. and Allergan PLC.

As the Journal concluded: “This politicization has spread across most of the economy during the Obama years, as regulators rewrite longstanding interpretations of longstanding laws in order to achieve the policy goals they can’t or won’t negotiate with Congress. Telecoms, consumer finance, for-profit education, carbon energy, auto lending, auto-fuel economy, truck emissions, home mortgages, health care and so much more.”

“Capital investment in this recovery has been disappointingly low, and one major reason is political intrusion into every corner of business decision-making. To adapt Mr. Read [Pfizer CEO Ian Read], the only rule is that the rules are whatever the Obama Administration wants them to be. The results have been slow growth, small wage gains, and a growing sense that there is no legal restraint on the political class.”

Washington’s destructive policies have been dubbed “regime uncertainty” in a strand of innovative analyses pioneered by Robert Higgs of the Independent Institute. Regime uncertainty relates to the likelihood that an investor’s private property – namely, the flows of income and services it yields – will be attenuated by government action. As regime uncertainty is elevated, private investment is notched down from where it would have been. This can result in a business-cycle bust and even economic stagnation. I recommend Higgs’ most recent book for evidence on the negative effects of regime uncertainty: Robert Higgs. Taking a Stand: Reflections on Life Liberty, and the Economy. Oakland, CA: The Independent Institute, 2015.

via Zero Hedge http://ift.tt/1VdvK2W Steve H. Hanke

Submitted by Mish of

Goldman Sach’s Dubious Advice “Short Gold!”

Those betting against Goldman Sach’s retail investment advice have generally been on the right side of things.

The same thing is about to happen again.

“Short gold! Sell gold!” said Goldman’s head commodity trader, Jeff Currie, during a CNBC “Power Lunch” interview.

 

Currie’s advice was in response to the question “Is there any commodity you are recommending that can help our viewers make some money?”

Currie’s provided several reasons for shorting gold, blatantly wrong.

MarketWatch explains, and I will rebut, Why Goldman’s Commodity Chief Wants Investors to Bet Against Gold.

“Short gold! Sell gold!” That was Currie’s unabashed advice during a CNBC interview Tuesday after discussing the outlook for crude-oil futures.

 

Currie’s rationale is fairly straightforward: The closely followed Goldman strategist sees the Federal Reserve raising benchmark interest rates at some point in 2016 and believes the result of higher rates will be a drag on the dollar-denominated precious metal.

 

“The Fed has signaled two [rate hikes]. Data is signaling three and what do higher interest rates do to gold? Send it down,” said Currie.

Exploring Currie’s Claim “Higher Interest Rates Send Gold Down”

Recall that gold fell from $850 to $250 from 1980 to 2000 with interest rates generally declining all the way.

In more recent history (shown above), gold sometimes rises with rising yields and sometimes with falling yields.

In short, Currie’s statement is easily disproved nonsense.

With that out of the way, let’s turn our spotlight on his idea that data signals three hikes.

 

“Fed Signaling Two Hikes, Data Signaling Three”

What data is that?

On April 5, I noted GDPNow Forecast Sinks to 0.4% Following More Weak Economic Report.

 

GDPNow History

Back on March 21, Atlanta Fed president Dennis Lockhart made a speech to the Rotary Club of Savannah on March 21.

His speech was called Kaleidoscopic Context for Monetary Policy. In his speech, Lockhart stated there was sufficient momentum for a rate hike as soon as April.

I commented on his speech with my take called Kaleidoscope Eyes.

Here is the data since Lockhart’s speech.

• On March 21, the same day as Lockhart’s speech, I commented Existing Home Sales Plunge “Surprising” 7.1%, Price Concessions the Norm; What Happened? … Data was so bad the National Association of Real Estate cheerleaders showed concern. “Know Before You Owe” kinks have been worked out. The “surprise” downtrend continues.
• On March 23, I commented New Home Sales Near Consensus on Muddle-Through Track … It’s easy to spot the lack of momentum in housing starting a year ago. This is a muddle-through track, and a weak one at that.
• On March 24, Durable Goods Orders Plunge 2.8%; Will a Falling Dollar Soon Help? … The answer to my falling dollar question is “no”. I used a chart to explain why.
• On March 28, we noted Consumer Spending Outlook Buckles with “Surprisingly Weak” Income Report
• On March 29, Fed Chair Janet Yellen reversed course and gave a Lovey-Dovey Speech Citing “Other Tools” and More QE
• On April 4, we noted Factory Orders Dive 1.7%, Core Capital Goods Dip 2.5%, Last Month Revised Lower
• On April 5, the Trade Deficit Unexpectedly Widens

* * *

Kaleidoscope Currie

Somehow Currie got a hold of Lockhart’s kaleidoscope and is using it.

Did Lockhart throw that thing away?

That would make sense because clearly it’s not functioning properly.

* * *

Stagflation Anyone?

Should the Fed actually manage to get in a couple hikes, the most likely reason would be inflation concerns, not an overheating economy from a GDP perspective.

Call that the stagflation scenario. Historically, that is an environment in which gold rates to do extremely well.

However, there is no sign of that just yet, at least from the bond market.

Instead, the bond market looks like it’s begging for more QE.

* * *

Yield Curve 2002 to Present

The above chart shows monthly closing yields for US treasuries from 3-month to 30-years in duration. Current data points are month-to-date.

There is nothing remotely strong about recent action in Treasuries. In contrast to the recession that started in 2007, the Fed does not have runaway housing prices to contend with.

Should consumer prices rise enough for the Fed to hike, there is every indication the yield curve has room to invert. This is at a time when the 30-year long bond yields a mere 2.58%.

The all-time low yield on the long bond is 2.25%.

* * *

Why the Persistent Hike Talk?

Why does the Fed seem desperate to hike (market willing of course)?

I offer three possibilities.

1. The Fed wants room to cut when the next recession hits.
2. The Fed is clueless about the next recession (which may already be here).
3. The Fed is concerned about wage-push inflation from various minimum wage hikes.

Point #1 discussion: The idea of hiking to have room to cut is nonsensical, but that is the way these guys think.

Point #3 discussion: The Fed may very well be concerned about a series of minimum wage hikes due to escalate every year from now until 2022. (See my post Good Ole Days Return: Nixonian Wage and Price Controls for an explanation).

My preferred explanation is #2. The Fed is clueless in general, not just about recession odds.

I am not arguing for low rates. Rather, I propose the Fed has no idea whatsoever where rates should be.

Talk of negative rates as if they are normal is proof enough.

via Zero Hedge http://ift.tt/1VdvHUz Tyler Durden