Remember when auditors were, by their very definition, supposed to be the embodiment of credibility, trustworthiness and moral fiber? The Brazilian arm of Big Four auditing giant, Deloitte, forgot these simple prerequisites and as a result the US auditing watchdog fined the firm a record $8 million for what amounts to massive fraud: falsifying audit reports, altering documents and providing false testimony during an investigation that unearthed what it described as its “most serious” finding of misconduct.
The US Public Company Accounting Oversight Board, or PCAOB, also penalized or barred 12 former partners, including a national practice director, and auditors of the Brazil-based Deloitte Touche Tohmatsu Auditores Independentes.
The Deloitte Brazil case is the first time the PCAOB has “charged a member of the Big Four auditing firms with fraud and for failing to co-operate with an investigation” according to the FT. Worse, unlike banks which resolve similar cases without admitting or denying guilt, in settling, Deloitte Brazil admitted it had violated quality control standards and failed to co-operate with the auditing board’s inspection and subsequent investigation.
“This is the most serious misconduct we’ve uncovered. It’s cover-up after cover-up after cover-up,” Claudius Modesti, director of enforcement at the PCAOB, said. “As an investor you’re expecting that the audit was done properly and sufficiently and that wasn’t the case here.”
Not only was that not the case, but the details read like straight out of a fictional account of third-world crime.
As the FT details, the PCAOB alleges Deloitte knew that its client, low-cost airline Gol Linhas Aéreas Inteligentes, did not have enough evidence to support “a potentially material amount of the maintenance deposits” that it was reporting. Deloitte’s senior auditors also knew the books were being reviewed for potential material misstatements when it released its audit report and signed off on the accuracy of the financial statements.
In 2012, PCAOB inspectors looked at the Gol audits during their review of Deloitte Brazil. The engagement partner for the Gol account allegedly instructed his team to alter the work papers, according to the settlement. The partner also told his staff to alter the work papers for another client whose audit was also under review, the PCAOB alleged.
The auditing watchdog later opened an investigation and alleges that this was further obstructed by the Deloitte auditors who provided the altered work papers to regulators. Senior Deloitte auditors falsely testified under oath that the altered work papers were the original documents, according to the settlement.
Investigators compared documents and realised something had changed. “The documentation that they had generated during the audit had changed so that our inspectors wouldn’t be able to identify, for example, the significance of these maintenance deposit deficiencies,” said Mr Modesti.
After Deloitte conducted its own internal investigation when regulators brought concerns about altered documents, it found 70 altered work papers related to the Gol audits. PCAOB said senior leaders of the firm also obstructed investigators when they sought to look into the second client.
In January, a senior manager who worked on the Gol audit gave PCAOB investigators recordings taken on his mobile phone of conversations he had had with a senior partner. In one of those recordings, made in 2014 amid the enforcement investigation, the senior partner told the manager, “any evidence that you have of this, remove it from your machine. Keep it in a — if you have that, keep it somewhere else, but not in your machine, not in the office. OK?”
“Everything you told me, everything we discussed, never happened,” the senior partner added.
In an attempt to save face after this “massive fraud” was uncovered, Deloitte tried to cast it off as a one-time event, the result of a few corrupt individuals, and said: “Integrity in delivering high-quality services is
critical to our business, our clients and the public interest; it is
non-negotiable.” It added that the actions of “a limited number” of
individuals was “wholly unacceptable”. And yet, all but one of the former partners and auditors have been banned from working for companies and broker dealers that fall under the PCAOB’s oversight.
In addition to the fine, which is the largest that the PCAOB has ever
obtained, Deloitte agreed to an independent monitor and is banned from
accepting new audit clients in Brazil until the firm meets remedial
benchmarks.
One wonders if Deloitte was caught with one such brazenly egregious case, just what else is there that goes unreported, and undiscovered when it comes to corporate “books”, not only in Brazil but also in the US.
India’s Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes will no longer be legal tender. Linked are Part-I, Part-II, Part-III, and Part-IV , which provide updates on the rapidly encroaching police state
Expect a continuation of new social engineering notifications, each sabotaging wealth-creation, confiscating people’s wealth, and tyrannizing those who refuse to be a part of the herd, in the process destroying the very backbone of the economy and civilization.
There are clear signs that in a very convoluted way, possession of gold for investment purposes will be made illegal. Expect capital controls to follow. Chaos from people’s inability to access the money in their bank accounts is now spreading to the people who have so far been unaffected: the middle class.
This is a completely unnecessary man-made disaster, with the single aim of glorifying Narendra Modi.
Indian prime minister Narendra Modi
Photo credit: Reuters
Fracturing Institutions
Several petitions in various courts across India were immediately filed against the central bank, the Reserve Bank of India (RBI), for repudiating its IOU obligation which the currency bills represent, after Modi’s announcement on 8th November.
Several postponements later, the first hearing at the Supreme Court will likely take place on 5th December 2016, almost a month after the announcement of the ban. That does not mean that the court did not deliberate over “more important issues” affecting this wretched poor country.
It inter alia heard a petition and passed a judgment that makes playing the national anthem compulsory at cinema halls before the start of every movie, to promote nationalism. It also decreed that people have to stand up while the anthem is played. Henceforth one can be charged with sedition for not actively showing proper respect to the flag and the anthem.
Only someone very numb can avoid being horrified by this.
By law, the national anthem must henceforth be played in Indian cinemas before the start of a movie (as an aside, the anthem sounds actually interesting from a musical standpoint). Per the court’s order, everyone present must stand up while it is playing, so as to show proper respect. A failure to stand up can lead to an indictment for sedition, and sometimes it leads to offenders being berated and getting beaten up on the spot by irate nationalists. Happily, it is not yet mandatory to shout “Sieg Heil”. [PT]
Salaried middle class Indians — lacking moral instincts and incapable of imagining the concept of individual liberty in this extremely irrational society — are happy with the court’s decision. Insecure in their own skin, they prefer the comfort of the collective. They are the true source of this collectivist poison.
Indian courts are often referred to as “honorable court” and they very actively taking steps against anyone who shows the slightest of disrespect or challenges their judgments. So any direct challenge to their “authority” would be unwise.
Indian institutions have continued to deteriorate and mutate since the British left India. They are now merely hollowed out structures, devoid of any meaning or essence. We are in the final phase in which these institutions are crumbling, but in the meantime pomp and show are amped up to fool the gullible.
Indian culture in its immense irrationality does not provide the glue to even maintain these institutions, let alone improve on them. That glue could only have come from reason and moral instincts.
Anyone with a sense of history also realizes that India produced its finest leaders while it was still under the control of the British. It was during British rule that a cultural renaissance was happening in India, which ended with the emergence of the politicized, so-called independence movement.
Britain had set up institutions that allowed the ablest and the best to rise up. Not only is this no longer happening, but Indian institutions today actively suppress the ablest and the finest, as the recent judgment of the Supreme Court on the anthem exemplifies. This happens because most Indians euphorically support suppression of the individual both in theory and practice.
Institutions of liberty have mutated into institutions of slavery. It is this inversion that is hastening the rapid decay of Indian society. India must eventually end up with institutions that reflect its underlying culture: a hugely fractured, tribal set-up, and very likely a disintegrated India.
Without reason, institutions are destroyed by entropy
Modi’s policies on demonetization are changing on a daily basis, sometimes more than once a day. This had to happen, for once you take up a mindless social engineering project of this enormity — killing 88% of monetary value in circulation overnight in a country where most people depend on cash — massive patch-up jobs have to be undertaken for the foreseeable future, helping India to degrade and sprint toward becoming a police state.
Alas, there are simply not enough patches available. India’s economy and society will are facing massive problems. So far, it has been the poorest citizens who have suffered the most.
The horrendous struggles of more than 50% of the population, whose situation is worse than that of the average African on virtually every metric – who have no toilets, no electricity, no water supply, no access to even primary health care or basic education – will go unrecorded.
These poorest of India’s people are seen as nobodies. International organizations only have an interest in them in terms of aggregate headline figures — Gini coefficient, poverty level, population growth, etc. India’s middle class, while it might claim to be against the caste system, does not really see these people or account for them, as they are widely perceived as mere servants.
The western media, the IMF and many international economists — if they are paying attention to the current demonetization at all — are siding with the Indian government. It is as if the forces in favor of one-world government and their craving to control people’s cash and private lives have become their sole aim in life.
Obsessed with Keynesian economics, they think that all one has to do to increase wealth is to finely adjust the currency-printing machine. Most of these people have never studied philosophy, watched or understood human psychology, investigated society in its complexity outside of econometrics and statistics, or participated in running a business.
In their eyes, India is on the path of progress and institutional reform. From their perspective — colored by a rather simplistic, socialistic indoctrination — they are completely failing to see the situation in its entirety, particularly the massive suffering the ban on currency has inflicted on society and the inevitable systemic risks it has imposed on India’s future.
This is the water supply for the lucky ones. Many do not have even this.
Photo credit: Adnan Abidi / Reuters
A Banana Republic in the Making
Our interest here is in exploring deeper undercurrents and what they mean for the future of India. Every single indication is that India is on an inevitable path to becoming a full-scale police state. But the Indian police state will not be a Nazi-kind of system.
Being inherently disorganized, undisciplined and lacking the capacity to plan and having no commitment to values, India will go the way of autocracies in Africa, the Middle East, Pakistan and Bangladesh. With GDP per capita of USD 1,604, India is already drenched in poverty, and wallowing in suffering and disease.
In India, suffering and violence — not reason or moral instincts — bring stability. The concept of reason is conspicuous by its absence in Indian society. Such societies — as in the Middle East, Africa, and elsewhere in the backward part of the world — tend to go through a phase of violence before stability arises. If they could reason, they would be able to bypass the phase of violence.
The last thing anyone should do is to transplant such people into a different setting or to change the structure of their societies, as Modi has tried with the demonetization edict. People with tribal mindsets do not flourish, assimilate or evolve when transplanted or destabilized.
This has been the consistent experience from trying to enforce institutional changes in these countries through top-down mechanisms. In what way have Iraq or Libya become any better after their ruthless rulers were forcibly removed?
Societies lacking in reason also lack moral instincts. They are mostly oblivious to the pain of other people. In India, those from the lower castes — even though the formal caste system is crumbling — do not register as human beings in the minds of members of the richer classes.
Scores of people have died because of lack of treatment, having to queue for too long in their old age, etc., but in the imagination of the salaried middle class they are mere numbers, all somehow contributing to the greater good.
Throngs of desperate people are storming a bank. How can such scenes possibly strike anyone as symptomatic of “good economic policy”? [PT]
But now, with the month of November having ended, salaried people are starting to get hit as well. The money that they thought was safe in the banks is no longer available. It is now their turn to join the queues and return home empty-handed, as the banks have mostly run out of cash.
The middle class is now starting to suffer as well, as cash in the banking system has been depleted
Photo credit: PTI
Pensioners and salary earners will likely change their view about the demonetization policy as they increasingly realize that their pensions and salaries are now stuck in the banks
Gold Bullion Is Now Effectively Illegal
Assaults on people’s private property and the integrity of their homes through tax-raids continue. In a recent notification, government has made it clear that any ownership of jewelry above 500 grams of gold per married woman will be put under the microscopic scrutiny of tax authorities.
Steep taxes and penalties will be imposed on those who cannot prove the source of their gold. In India’s Orwellian new-speak this means that because bullion has not been explicitly mentioned, its ownership will be deemed to be illegal. Courts will do what Modi wants. Huge bribes will have to be paid.
Sane people are of course cleaning up their bank lockers. The secondary consequence of this will be a steep increase in unreported crimes, for people will be afraid of going to the police after a theft, fearing that the tax authorities will then ask questions. At the same time, the gold market has mostly gone underground, and apparently the volume of gold buying has gone up.
The salaried middle class is the consumption class, often heavily indebted. Poor people have limited amounts of gold. The government is merely doing what pleases the majority and their sense of envy, to the detriment of small businesses and savers. Now, the middle class is starting to face problems as well. This will worsen once the the impact of the destruction of small businesses becomes obvious.
India has always had a negative-yielding economy. It has suddenly become even more negative-yielding. Business risk has gone through the roof. Savers will be victimized. It is because of negative yields that Indian savers buy gold. They will buy more going forward.
Sane Indians should stay a step ahead of their rapacious government and the evolving totalitarian society, which are less and less inhibited by any institutions or values in support of liberty.
Conclusion
India will become a police state, likely with the full support of most Indians. Nationalism will be the thread that weaves them together. But it is a fake thread, devoid of any value. Eventually, there will be far too many stresses in the system, whose institutions are already in an advance stage of decay.
India as it exists today is a British creation. With the British now gone for 69 years, it is an entity has less and less reason to exist in its current form. The glue of reason that the British have applied is flaking, and it is doing so rapidly under the catalyst by name of Narendra Modi.
As we reported last night, the “Pizzagate” scandal took a turn for the bizarre, when a man with an assault rifle walked into the Comet Ping Pong restaurant on Sunday afternoon to “self-investigate” the popular Washington pizza parlor owned by James Alefantis that has been accused of being an international child sex ring run by prominent Democrats, following the release of Podesta emails. 28-year-old Edgar Maddison Welch, of Salisbury, N.C., fired the rifle at least once inside the restaurant but no one was injured, before he turned himself in.
On Monday, the police released the criminal complaint against Welch, in which he admitted that he was motivated by the numerous online reports about a suspected child trafficking ring allegedly operating out of the restaurant and run by top Democrats, including Mrs. Clinton and her campaign chairman, John D. Podesta.
Welch said in an arraignment released on Monday that he had read online that the Comet Ping Pong restaurant in Northwest Washington was “harboring child sex slaves, and he wanted to see for himself if they were there,” according to court documents. He said he was armed to help rescue children but surrendered peacefully “when he found no evidence that underage children were being harbored in the restaurant.”
Welch was charged with four counts, including felony assault with a deadly weapon and carrying a gun without a license outside a home or business. Wearing a white jumpsuit and shackles, Welch told the judge his name and stood silently as he was advised of his rights. The judge ordered him to remain in custody.
Welch, 28, of Salisbury, N.C., fired from an assault-like AR-15 rifle. The police had found two weapons in the restaurant, and one in the suspect’s car. No one was hurt.
Will this arrest mute the relentless online allegations of a pedophile ring run out of the pizza store, and which allegedly implicates some of the top democrats in the country? Somehow we doubt it.
We have an incoming administration under President-Elect Donald Trump that’s more likely to see surveillance whistleblower Edward Snowden as a traitor than a protector of Americans’ right to privacy and government transparency.
During the lengthy presidential election race, you would have been hard-pressed to find very much discussion or debate on surveillance issues at all, even as the United States (and other countries) hammer out rules directly affecting the strength of citizens’ rights to protect private data and communications from unwarranted and secretive snooping.
But Reason has not backed off keeping readers up-to-date in government snooping issues. Trump (along with the likes of Senators Dianne Feinstein and Richard Burr) may not have understood why Apple refused to simply help the FBI unlock an iPhone that was in the possession of one of the terrorists responsible for the deadly attacks in San Bernardino, California, but Reason was there to help explain.
Not only is it abhorrent for the government to use the courts to draft a company and force it to assist in its investigations via court order; Apple deliberately cracking its own encryption for the benefit of government officials created a huge vulnerability for every user of its products, not just a dead terrorist. As pretty much every tech company under the sun attempted to get the government to understand, once the security or encryption of a phone, or an app, or an operating system has a “back door” that would allow the FBI or other law enforcement officials in, that manner of getting access to data was doomed to spread. Politicians seem to think it’s possible for companies to create “golden keys” to allow just the “right people” to break encryptions. Even if we were to accept the FBI and prosecuting attorneys around the country as the “right people” (and you really shouldn’t), if there’s a vulnerability in a system’s security, the “wrong people” will eventually find it.
While America has avoided bad legislation on encryption so far, the United Kingdom has jumped full-force into citizen surveillance, thanks to new Prime Minister Theresa May, a huge fan of snooping on her own citizens. Not only does the newly passed Investigatory Powers Bill give dozens of British agencies the authority to access citizens’ private browsing history, it gives the government permission to demand that tech companies remove or bypass their own encryption on demand. Reason has been tracking the journey of this legislation and its potential consequences not just on British citizens, but for anybody who uses a smart phone, tablet, or computer (in other words, just about everybody).
Reason will be staying on top of exactly what Trump’s administration might do (will we follow in the United Kingdom’s footsteps?) and what might be done to protect your basic right to privacy from unwarranted government snooping in an era where everything about our personal lives has become digitized.
Your donations help Reason keep sounding the alarm on these high-tech government-led privacy intrusions and also helps us discuss and debate policy-based solutions. For example, Reason’s Scott Shackford will be leading a panel discussion at the popular South by Southwest Interactive conference in Austin, Texas, in March. The panel, titled “Get a Warrant: The Fourth Amendment and Digital Data,” brings together a pack of tech and privacy experts to discuss what sort of legislative solutions Congress might pursue that could potentially keep America off the path selected by the U.K. Your donations help make outreach into venues like this possible.
This is becoming a familiar pattern. Every time Lavrov and Kerry appear to be making some sort of progress on ending hostilities in Syria, an unwarranted, and oddly timed attack on forces sided with the Syrian government occur.
On September 9th, Russian Foreign Minister Sergey Lavrov and US Secretary John Kerry agreed to a cessation of hostilities in Syria, amid an ultimatum for the US to finally separate the “moderate rebels” from the Al Qaeda-Al Nusra jihadi fighters.
As pressure mounted to have the full text of the Lavrov – Kerry agreement published for the international community to understand the exact conditions outlined (something the US was admittedly opposed to), the American air force “accidentally” attacked the Syrian Arab Army positions at Deir Ezzor, which resulted in the death of 80 soldiers who were making strong gains against ISIS.
–the timing of the event, the political response, the way in which the US has disregarded the UN as a serious forum, and the uncertainty over whether the crime was an intentional or unintentional blunder, cannot be ignored.
The Russian Foreign Ministry have said quite frankly that the US airstrike has been an aid to ISIS. This is material fact and will be recorded in the annals of military history.
This morning, The Duran’s Alexander Mercouris reported that the Syrian army is rapidly moving closer to taking back Aleppo from US-Saudi backed Al Qaeda jihadists…some predict the end game is days away, the Syrian army predicts final defeat of Jihadis “within weeks”.
Lavrov and Kerry are once again discussing a diplomatic end to hostilities in and around Aleppo. The US, Turkey, Saudi Arabia, and the EU, are anxious to save whatever remains of their Al Qaeda regime change investment.
The Duran’s Alexander Mercouris reported that Russian Foreign Minister Sergey Lavrov has spelled out clearly the terms Russia is giving to the US and to the Jihadis in eastern Aleppo: “they must all leave the city by a fixed date or be treated as terrorists.”
As diplomatic talks between Lavrov and Kerry intensify, to bring an end to fighting, the pattern of oddly timed attacks on forces sided with the Syrian government once again hit the news wires. This time the victim is not the Syrian army, but Russian doctors.
RT reported today that Russian doctors were killed in rebel shelling of a hospital in Aleppo…
A female Russian medical specialist has been killed and two more medics have been injured in a militant shelling of a mobile military hospital in Aleppo, the Russian Defense Ministry said.
Some local residents attending medical appointments were also injured during the shelling that targeted one of the field hospitals set up in the government held part of the city, the ministry added.
Russian military medics have begun to consult the residents of Syrian Aleppo’s eastern districts liberated from militants. They opened a clinic, a medical ward for children, a surgery department, an intensive care department, a laboratory and an x-ray room.
Some of my team in the hospital now say it's overflowing with injured civilians, lots of kids from non stop shelling 2day #Aleppohttp://pic.twitter.com/CZB5gDWzmj
Russian Defense Ministry spokesman Maj. Gen. Igor Konashenkov issued a statement on the sudden attack that may ensure a decisive end to any sort of diplomacy that remains between Kerry and Lavrov.
The statement not only condemns the attack, but clearly places the blame on “terrorists’ patrons from the US, UK, France and their sympathizers” who, according to Konashenkov “provided the militants with information on the Russian hospital and its exact coordinates.”
“Today, between 12:21 and 12:30pm [local time], a medical center of the Russian Defense Ministry’s mobile hospital in Aleppo was shelled by the militants during the reception time.”
“As a result of the direct hit of the reception ward, one female Russian military medic was killed [and] two medical specialists were severely injured.”
“We know who provided the militants with information on the Russian hospital and its exact coordinates.Therefore it’s not only the actual perpetrators who are responsible for murdering and wounding our medics who were administering aid to Aleppo children.”
“The hands of those who instigated this murder are also coated with the blood of our servicemen. Those who created, fed and armed those beats in human disguise, naming them ‘opposition’ for justification before their own conscience and voters. Yes, [this blood is on your hands], terrorists’ patrons from the US, UK, France and their sympathizers.”
The Russian Defense Ministry is calling on the international community to condemn the attack. We will wait and see if the establishment mainstream media even mentions the story within their news cycle.
We may also expect a western inspired false flag attack on, “say a UN convoy“, so as to divert attention away from this crime and thrust some good old “fake news” blame on Russian aggression.
“We calls on the entire international community, as well as the International Red Cross and Red Crescent, Doctors Without Borders (MSF) and other international organizations to strongly condemn the murder of Russian doctors who carried out their duty by delivering medical assistance to the civilians in Aleppo. All perpetrators and all those who ordered the shelling of the Russian Defense Ministry’s hospital in Aleppo must be held accountable for their actions.”
Wall Street bonuses have been under pressure since the onset of the “great recession” as the demand for massively overpriced, Ivy League egos suddenly dipped well below supply. Unfortunately, the supply overhang still seems to be weighing on banker bonuses, a fact we’ve pointed out a couple of times this year.
While previous reports suggested that asset managers would fair better than trading and advisory bankers, an update from the Wall Street Journal indicates that might be changing in 2017. For the first time in a decade, Morgan Stanley has announced plans to raise their “Pay Grid” thresholds by 10%.
Changes in Morgan Stanley’s basic pay formula for its financial advisers next year will oblige many of them to do more business–or risk getting paid a lower percentage of the revenue they generate.
Morgan Stanley Wealth Management, the largest brokerage by headcount with more than 16,500 advisers, told its ranks this week that it is increasing some key thresholds in its so-called pay grid by 10%. Advisers are paid on the basis of fees and commissions they bring in each year, with higher producers keeping a higher percentage of revenue. The pay grid sets thresholds for moving up from one production category to another.
For example, to qualify for a 41% payout, advisers must generate at least $440,000 in fees and commissions in 2014, compared with at least $400,000 this year. To move up to a 42% payout, they will need to produce at least $660,000 next year, compared with $600,000 this year.
While the move won’t mean much for those sitting comfortably between pay tiers, it cut mean big bonus cuts for those right on the cusp. Of course, this is just more unwelcome news for NYC real estate that is “peaking.”
Meanwhile, as we previously noted back in May, Wall Street bonuses are expected to decline by as much as 20 percent this year according to estimates from compensation consultant Johnson Associates Inc.
While bonuses are predicted to fall across the board, the firm noted that fixed income trading and investment bank underwriting would be hardest hit, estimating that bonuses for those roles will fall as much as 15 percent to 20 percent from last year.
We noted that on average, Wall Street bonuses in 2015 fell to the lowest level since 2012, and we also showed that layoffs are increasing as of late on Wall Street as firms try to make up for weaker revenues. In the face of the recent layoffs and the slowing economy, we suspect that those still lucky enough to be gainfully employed by the end of the year will be happy with any bonus that is received.
And besides, Wall Street has had a good run relative to Main Street for a few years…
When gold exploded to the upside earlier this year amid the biggest New Year’s stock market panic in history, we noted that the bull market had awoken. And despite arguments to the contrary from mainstream financial pundits that gold and silver were not monetary metals and nothing but historical relics, it became apparent during the Brexit vote that precious metals were the assets of last resort during market panic. On the night of Presidential election, as it became clear that Donald Trump would become the leader of the free world, stock markets once again sold off. And just as had happened earlier this year, prices for physical gold and the companies that mine it skyrocketed in a matter of hours, this time to the tune of over $100 per ounce.
All the while, there has been an effort by a conglomeration of market players over the last six months to suppress precious metals prices, in numerous cases through the dumping of literally billions of dollars in paper gold and silver contracts. But that effort has done little to significantly damage the bull market in gold and silver. It appears, according to Inca One Gold Corp. Chairman Bruce Bragagnolo, that the correction is now over and another big move to the upside is coming:
My belief is that gold is going much higher here… It’s just that you get so tired of the manipulation in the market and I’m sure it’s got a lot of investors in gold and silver really down and wondering what the heck they are doing these days… I don’t think this is the end of it… I really think that we’re going to see a good bounce out off the bottom here… This is a bad correction… It’s a very long and deep correction… It was predicted by analysts… The bottom line is we’re going to come out of this in a big way… We should be close to bottoming here and may have bottomed last week…
Overall, this is a good time to get out your shopping list and look at quality companies like Inca One and see which ones you want to buy… It’s the farthest thing from a lot of peoples’ minds right now, but you’ve got to buy low and sell high.
Watch the full interview:
Bragagnolo says that though paper prices listed on exchanges like the U.S.-based COMEX show one value for gold and silver, it is a totally different story on the ground, as evidenced by the $1700 “street price” being paid in India where cash is being outlawed.
The COMEX has nothing to do with gold. That is simply a casino where gamblers place their bets on the gold price… The claims are well over 500-to-1 now. I think the COMEX is a very faulty mechanism for pricing the real, physical, tangible gold. Let’s face it, buying paper gold, it defeats the whole purpose of it. There’s no reason to own paper gold or a claim on gold. You want the physical in your hand.
The manipulations are being exposed and it’s only a matter of time before their schemes backfire, especially considering that for every 500 paper ounces of gold, there is only one ounce of gold backing it.
Deutsch Bank, arguably one of the most well respected banks in the world, agreed last week to pay a $60 million settlement to investors for engaging in silver price fixing. This on the heels of a $38 million settlement in October for manipulating gold prices. Thus, we know for a fact that there has been collusion among some of the globe’s largest financial institutions.
But those manipulations are not enough to keep prices down for long, explains Bruce Bragagnolo, despite the pain already inflicted on investors:
We’ve got overbought conditions in some of the indexes and oversold in gold. It takes a real gut check right now to be buying gold… some people are saying this is the bottom and this is the time to get in… It’s almost like The Powers That Be who impact the gold price, whoever they might be, want to inflict the maximum pain on people and this might be the maximum pain right now.
… You’d think that this would be a good time to be buying… but it goes against investor psychology, of course… to buy at the bottom… because you’re paralyzed with fear, basically… but this is the type of reaction that the big banks… the so-called smart traders… you see the reports every week… they’re all out of the short-trade now and they’re into the long trade and they’re going to be making a pile of money on the way up here.
What needs to be understood is that the election of Donald Trump to the Presidency of the United States will not be enough stop the inevitable wealth destruction to come. The economy is likely already in recession and the U.S. dollar will be crushed under the weight of trillions of dollars in debt.
When the panic starts it will look very similar to what we saw at the beginning of 2016 and the night of the Presidential election. As stocks sold of en masse, gold skyrocketed.
As Inca One Gold Corp’s Bruce Bragagnolo suggests, the time to buy any asset is when prices are low. After a multi-month correction that saw gold and silver prices suppressed by market manipulators, this may be the last fairly priced entry point for precious metals.
In a speech delivered at the Liverpool John Moores University on Monday, Bank of England head, and former Goldman partner, Mark Carney defended his central bank’s near-zero borrowing costs which have been increasingly criticized by local politicians ever since the Brexit vote, claiming that central bank monetary policies have not been the cause behind wealth transfer.
Carney said the BoE’s actions had softened the hit to Britain’s economy since the global financial crisis, easing the blow for poorer households who suffer most from recessions.
“Has monetary policy robbed savers to pay borrowers? Has the MPC been Robin Hood in reverse? In a word, no.”
Which is surprising, because in many more words, some 20 pages worth, in March of this year, the BIS released a research report titled “Wealth inequality and monetary policy“, in which it said that its “simulation suggests that wealth inequality has risen since the Great Financial Crisis. While low interest rates and rising bond prices have had a negligible impact on wealth inequality, rising equity prices have been a key driver of inequality” and conclude that “this suggests that monetary policy may have added to inequality to the extent that it has boosted equity prices.“
So, in more than one word, yes.
That said, we can understand why Carney feels threatened: in October, Prime Minister Theresa May said the BoE’s policy of cutting interest rates to just above zero and buying hundreds of billions of pounds worth of government bonds had “bad side effects” for savers.
Carney said most people whose savings income had been hit by low rates had gained from a rise in value of assets, paradoxically citing data which showed only 2% of households had savings of over 5,000 pounds, but few other assets and did not own a home. Meanwhile, what Carney ignored is that according to the annual high net worth report by Credit Suisse, the net worth of the pinnacle of the global weath pyramid, those 0.7% of global adults who are worth more than $1 million, has nearly doubled from $69.2 trillion in 2010…
… to over $116 trillion in 2016…
… even as those adults who were worth less than $10,000 in 2010 had a combined net worth of $8.2 trillion, a number which has since declined to $6.1 trillion in 2016 despite a half a billion increase in the sample size, while the combined net worth of the layer worth between $10K and $100K also declined from $32.1 trillion to $29.1 trillion, confirming the rich got richer, while the middle class (and poor) got even poorer.
So if not monetary policy, then what was the culprit according to Carney for record wealth inequality and such political shocks as Brexit, Trump and Renzexit? Here the central bank chief offered a familiar scapegoat, one first proposed by none other than the IMF itself: globalization, which in March the IMF accused of being the catalyst behind rising inequality and market crashes.
In his paper, Carney warned that “to address the deeper causes of weak growth, higher inequality and rising insecurity requires a globalisation that works for all.” Oh, so now, 8 years later they decide that globalization was only working for “some.”
Only Carney took it one step further, and he did not explicitly blame globalization, but rather the threat of doing away with it entirely, and warning about the risk of a return of protectionism in the global economy, a concern which has grown for investors since the election victory of U.S. President-elect Donald Trump. “Turning our backs on open markets would be a tragedy, but it is a possibility. It can only be averted by confronting the underlying reasons for this risk upfront,” he said.
Because why not just blame Trump now: after all, in just a few years when global economies and stock markets are crashing, everyone will be doing it, may as well have a head start.
Finally, Carney reiterated his view that the BoE was prepared to further slam the poor and middle classes by letting British inflation run above its 2% target, in the process hurting those who Carney is suppoedly protecting, and not been a “Robin Hood in reverse to.”
“The MPC is choosing a period of somewhat higher consumer price inflation in exchange for a more modest increase in unemployment,” he said. “There are limits, however, to the extent to which above-target inflation can be tolerated.”
Those limits will be tested when millions of poor people realize just what running “somewhat higher consumer prices” means to their bottom line, and their already soaring anger at a political establishment that continues to test the breaking limits of some 90% of the population just so it can, one day, inflate away the world’s gargantuan debt load.
It appears Tom Hanks and Oprah are unavailable and so, speaking to a small group of reporters tonight, Vice-President Jo Biden announced that he is going to run for President in 2020.
Today Donald J. Boudreaux, who is Professor of Economics and Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center at George Mason University, wrote an open letter to Dilbert creator Scott Adams. The letter was a rebuttal to Scott disagreeing with Michigan Rep Justin Amash about Trump’s trade policy.
Justin Amash had tweeted out that tariffs will hurt the consumer in higher prices. Scott retorted that the tariffs will not be applied because the threat of applying a tariff on firms who chase cheap foreign labor but then sell that production back to the US consumer they just laid off will disincentivize the firms from leaving in the first place. It was then that Mr. Boudreaux jumped in, stating unequivocally that Scott is wrong and Justin is right.
Boudreaux argues that while he agrees the tariff would actually not be applied it would stifle competition and thus consumers would pay a higher price. Boudreaux seems to imply that low consumer prices are a top priority of trade policy. Below is the main argument within Boudreaux’s open letter to Scott Adams.
Rep. Amash is right and you are wrong. Although no formal tax collection is triggered if Mr. Trump’s threats prevent all offshoring, Trump’s tariff – by restricting competition – would artificially reduce outputs and raise prices. American consumers would pay unnecessarily higher prices, an outcome inseparable from the very purpose of the tariff. That consumers pay these extra, unnecessary amounts to domestic producers rather than to domestic customs agents is irrelevant: the tariff forces all consumers of these products to pay extra, unnecessary amounts to some small group of fellow Americans who, rather than earn these higher payments, extract them using threats of state coercion.
Let me explain the logical fallacies that Mr. Boudreaux fails to recognize in his chivalrous attempt to defend Rep Amash and our existing international trade agreements (note there is nothing free trade about these agreements).
Boudreaux’s entire argument is based on an unsubstantiated notion that offsetting the labor cost savings from cheap foreign labor with a tariff somehow limits competition. This is equivalent to saying American production limits competition. There are currently 28.5 million private firms producing in the US, more than ever before. I’ve never seen any data to substantiate that American production limits competition. In fact, I find it quite an absurd proposition. Unless Boudreaux can substantiate that claim, it simply cannot be accepted. And if the basis of his argument is unsound then the rest of it is invalid.
Secondly is the implication that US firms chase cheap foreign labor so that they can pass those cost savings onto the consumer. Price models are a function of what the market will bear, not cost. The point of the cost savings is to drive profits, profits which over the past 5 years are paid directly to shareholders. Dividends have almost no money multiplier effect. And so reallocating labor income, which has the highest money multiplier effect, to profit is a net economic value destroyer not creator.
Even if consumers paid a higher price as a result of the tariff, which we know isn’t true based on points 1 & 2 above, the offset of that is they would be paying a higher price with labor income earned as opposed to credit or welfare. Meaning if I can keep my job, I’m ok paying a slightly higher price because while I might be able to buy less things I can still support my family without private or public debt. And so to suggest the top objective of trade or any economic policy should be getting the lowest possible price is another absurd proposition.
Boudreaux suggests the tariff is state coercion yet fails to recognize the tariff is a reaction to a state intervention of free markets i.e. international trade agreements that allow labor cost arbitrage to exist without the naturally higher risks of the undeveloped nations that offer the cheaper labor (the cheap labor and higher risk being a function of the same underdeveloped societal infrastructure). Higher return means higher risk. Lower labor cost means higher ROI. Higher ROI means higher risk. But through state coercion, the higher risk is negated leaving just the higher ROI. This is not free market. This is state intervention. The tariff is being used to level the playing field so to speak.
Mr. Boudreaux, while I appreciate your zeal for trade agreements, I am slightly surprised as to the naivety of your argument. You haven’t given the readers enough credit. Something you PhD economists are going to be facing much more of in the coming years. There is a movement to educate and draw in the American public to such economic discussions. We will be better prepared to understand your theoretical, applicable and logical fallacies. You should take note, and be better prepared next time.