Category Archives: Banksters

Trump Keeps Swamp Full of Goldman Sachs Scum

‘The swamp is Goldman Sachs’: how the bank is rewarded for putting profits over people

Sarah Jaffe
The Guardian : January 18, 2017

In a persistent drizzle on 17 January, a group of protesters swathed in green ponchos unfurled tarps and sleeping bags on the sidewalk in front of Goldman Sachs’ high-rise building on the West Side highway in New York City. A few of them wore handmade swamp creature masks; others bore signs with the swamp creatures on them. A light-board sign declared the bank “Government Sachs”.

The protest was the beginning of a multi-day camp-out aiming to stay on the sidewalk outside the investment bank until the inauguration of Donald Trump, and to bring people affected by the bank’s policies to the doorstep of some of the world’s richest people – some of whom will belong to the Trump administration.

“It’s about highlighting the lie that was told to millions of people in this country, the lie that Trump was draining the swamp. If we really want the swamp to be drained, we have to do it ourselves and we’re doing it by going to Goldman Sachs,” says Nelini Stamp of the Working Families party.

As the crowd of about 100 people set up camp, the police erected barricades around them but mostly held off as the crowd moved from chanting “The swamp is getting deeper! The swamp is Goldman Sachs!” to a series of speak-outs from the crowd about the bank’s connection to payday lending, the economic crisis in Puerto Rico, foreclosures and more.

For Jean Sassine, who lost his job and nearly lost his home during the 2008 financial crisis, fighting the influence of the big banks in Washington is personal. He became a member of community organization New York Communities for Change (NYCC) six years ago as a way to fight back, and for him the Goldman action “means trying to wake people up that these are the people who were part of the big crisis in 2008, that Steven Mnuchin was called Mr Foreclosure at OneWest and Goldman Sachs. Do you want Mr Foreclosure to be secretary of the treasury?”

The organizers targeted Goldman Sachs because, as Stamp explains, the bank “is a pipeline to government”. Through Democratic and Republican administrations, she notes, Goldman Sachs in particular has fed its bankers into high-ranking government positions – if Mnuchin is confirmed as treasury secretary, Trump will be the third of the past four presidents to have hired for that job from Goldman’s ranks. To Stamp, particularly in the post-financial crisis era, this means the bank is being rewarded for its involvement in subprime mortgages and the financial instruments created to profit from them.

On that front, says Renata Pumerol of NYCC, it is important to confront the power brokers directly as well as the elected officials who work with them. Calling them “Government Sachs” is a way to highlight the level to which they have captured Washington and influence policy that benefits themselves.

As for the occupation itself, the tactic obviously brings echoes of Occupy Wall Street, but Pumerol says that this demonstration differs in its specific demands – to halt the appointment of Mnuchin as well as fellow Goldmanites Gary Cohn, Anthony Scaramucci, Dina Powell and Steve Bannon. Also, she notes, this action is led by people of color and people who have been directly affected by Goldman’s actions.

“It’s an interesting circle of life for someone like myself, who was involved with Occupy,” Stamp adds, “to see this fake crony populism of ‘draining the swamp’ while the swamp is actually continuing to be filled.”

For many of the people involved in the Government Sachs action, it seemed obvious that Trump’s promises to drain the swamp were less than genuine. But for Richard Robinson, they resonated and led him to vote for the president-elect.

The 60-year-old veteran and truck driver from Utah lives on social security after a work accident nearly killed him and pushed him into medical retirement. Out of work, he says, he found himself “sitting at home feeling worthless, didn’t feel like I was accomplishing anything”. A friend suggested he get a hobby, and, he laughs: “I became an activist, I guess.”

Robinson lives in a manufactured home community, and through forming a group called MH Action to deal with the issues that he and his neighbors faced, he began to get in touch with other people working on similar issues around the country.

Robinson’s community is owned by a multistate corporation that also owns apartment complexes in New York and Chicago, which helped him get in touch with NYCC. “These companies are buying communities, buying apartment complexes and their business model is not acceptable to me. It’s to raise rents as quickly as possible and decrease maintenance of the communities, and that’s not a good business model for America,” he says.

His vote for Trump, he says, was based on the assumption that because the president-elect was not a career politician, “maybe things would be run differently in Washington”. But the number of Wall Streeters and ultra-wealthy in the administration has him frustrated, and brought him to New York in protest. “He actually hit Hillary Clinton over meeting behind closed doors with [Goldman Sachs] and now I believe he was meeting with them at the same time. He’s appointed them so quickly that I’ve got to believe at the same time he was campaigning hard on Hillary Clinton for meeting with them behind closed doors, I believe he was doing the same thing.”

Nomi Prins, former managing director at Goldman Sachs turned journalist and author of All the President’s Bankers, says that rather than make sincere promises Trump simply attacked weaknesses, taking advantage of widespread anger at Wall Street to score points against first his Republican opponents and then Clinton. Mnuchin, she points out, was his finance adviser the whole time. “There were more apparent Wall Street connections through Hillary Clinton because of the foundation, the speeches and because of Bill Clinton that were real,” she says, “but these are bipartisan relationships; Wall Street is a bipartisan opportunist.” (That relationship is visible in New York City, where Alicia Glen, formerly of Goldman Sachs, serves as deputy mayor to Bill de Blasio.)

That bipartisan relationship, and the bipartisan anger at the power of finance, is what makes it so important to target the banks and lay groundwork for white working-class communities to come together with communities of color to fight, Pumerol says. Adds Sassine: “It is clear that they are ready to raid the American people as opposed to benefiting. Government is supposed to be for the benefit of the people, whether you believe in small government, big government, it’s supposed to be for the benefit of the people.”

(read the full article at the guardian

Newt Gingrich Admits – Donald Trump No Longer Wants to ‘Drain the Swamp’

Michael Krieger
liberty blitzkrieg : December 21, 2016

Not that he ever wanted to, but here’s Newt Gingrich admitting what many of us already knew regarding Donald Trump’s fake populism.

Politico reports:

President-elect Donald Trump campaigned on a promise to “drain the swamp” in Washington of corruption, but now that he’s preparing to move into the White House, Newt Gingrich said the Manhattan real estate mogul is looking to distance himself from that message.

“I’m told he now just disclaims that. He now says it was cute, but he doesn’t want to use it anymore,” the former House Speaker and close Trump adviser said of the “drain the swamp” message in an NPR interview published Wednesday morning. 

Trump’s Cabinet and other high-level appointments seem to have deviated somewhat from his “drain the swamp” message. After attacking Democrat Hillary Clinton regularly throughout the campaign for being too close to Wall Street banks, Trump has put three former Goldman Sachs executives in prominent White House positions, including Steven Mnuchin as treasury secretary, Steve Bannon as chief White House strategist and Gary Cohn as the director of the National Economic Council.

As I highlighted in the recent post, The Election Never Ended:

As Anthony Scaramucci, a hedge fund manager and top adviser to Trump, as well as a former Goldman Sachs banker himself, put it Thursday: “I think the cabal against the bankers is over.” 

Indeed, as we all know, U.S. government economic policy has been essentially handed over to Goldman Sachs during this transition period. Must be a reward for its most recent settlement for rigging yet another market.

Reuters reports:

Goldman Sachs Group Inc will pay a $120 million penalty to resolve civil charges that it attempted to manipulate a global benchmark for interest rate products known on Wall Street as “ISDAFIX,” U.S. derivatives regulators said Wednesday.

The case against Goldman Sachs, brought by the Commodity Futures Trading Commission, was the latest in a series of broad investigations into manipulation by big banks of a variety of global benchmark rates.

To date, the CFTC has imposed penalties of over $5.2 billion stemming from these probes, which include Libor and Euribor, foreign exchange benchmarks, and the U.S. Dollar International Swaps and Derivatives Association Fix, or USD ISDAFIX.

A number of banks have also resolved parallel criminal charges related to the manipulation of various global benchmarks.

Goldman Sachs, which was also accused by the CFTC of making false reports on the benchmark rate, will settle the case without admitting or denying the charges.

Penalties don’t change the behavior of white collar criminals. Jail sentences would, but we don’t see any of that when it comes to bank execs.

(full article at liberty blitzkrieg)

UPDATE: Trump is still using the phrase, denies that he was ever going to stop… but the swamp has certainly not been drained.

Report Confirms Canada’s Housing Market Money Laundering Fraud

AlternativeFreePress.com

Mainstream media has finally gotten to the truth: Vancouver’s real estate market is rife with money laundering. Back in February we compiled Vancouver’s Housing Market Money Laundering Fraud. In March, How Vancouver Is Being Sold To The Chinese: The Illegal Dark Side Behind The Real Estate Bubble…In September Globe & Mail Investigation confirms rampant fraud, money laundering, and tax evasion in Canada’s housing market did a great job highlighting some of the issues, and now mainstream media has, finally, put all the pieces together…

More than half of B.C.’s most expensive homes owned by secret shell companies spurring money laundering fears

By Sam Cooper
December 9, 2016: Vancouver Sun

Almost half of Vancouver’s 100 most expensive homes are bought using shell companies or other financial tools that obscure who the identity of the true owners, a report from anti-corruption group Transparency International says.

The report, which focuses on money laundering and tax evasion vulnerabilities in Canadian real estate through a study of Vancouver luxury homes, slams Canada for failing to close home-ownership loopholes related to shell companies, trusts and nominees.

The report also concludes the prevalence of non-transparent ownership in B.C. luxury real estate makes it impossible to measure how much offshore cash is invested in B.C. homes, even though B.C. is attempting to collect data on foreign ownership.

“An influx of overseas capital is one of several causes of rising property prices, (in Vancouver and Toronto) but the extent and impact of foreign investment remains unknown since very little data is collected on property owners,” the report says. “Individuals can use shell companies, trusts and nominees to hide their beneficial interest in Canadian real estate.”

(read the full article at calgary herald)

Investigation confirms rampant fraud, money laundering, and tax evasion in Canada’s housing market

Out of the shadows

by Kathy Tomlinson
Globe & Mail : September 10, 2016
[emphasis AlternativeFreePress.com]

Demetre Lazos says he couldn’t just stand by and watch real-estate speculation, as he puts it, destroy his city.

Convinced that his boss, a local speculator, was dodging taxes and misleading lenders, he decided to act, approaching both the police and the Canada Revenue Agency (CRA) to divulge what he knows. Mr. Lazos, who has built luxury homes in Vancouver for three decades, offered documented evidence of possible fraud and tax evasion.

And yet, as he tells it, both the cops and the tax men blew him off: A CRA official who met him in the lobby of the agency’s downtown office told him to write to Ottawa; at Vancouver police headquarters, he was advised to call the Crime Stoppers hotline. (He did, he says, and got no results.)

“I am very angry at the system,” says Mr. Lazos, who has since quit his job. “I love this country – and it is my country – but I think we are Mickey Mouse.”

And so, next, he came to The Globe and Mail and, over the course of several months, delivered a large, and disturbing, cache of documents that expose how speculators can maximize – and conceal – their profits.

As a result of Globe investigations into Vancouver’s supercharged real-estate market, others have come forward, too, including a federal tax auditor, as well as an accountant who says he regularly files tax returns for wealthy clients who buy and sell houses – and appear to declare far less than they earn. “Canada,” he says, “is like a Swiss bank account” for his clients.

Ottawa says it is studying the issue, and B.C. has brought in a tax on foreigners who buy residential real estate in Vancouver. But those who see firsthand how real estate is traded like stocks and bonds say this isn’t nearly enough. “We have governments that are not doing their job,” argues Mr. Lazos, who acquired his inside knowledge while working for Jun Gang Gu, also known as Kenny Gu, a former civil servant originally from Nanjing, near Shanghai.

Mr. Gu came to Canada in 2009 under Ottawa’s now-defunct immigrant-investor program, which gave permanent residency to applicants who agreed to lend a significant amount of money to the federal government. He started out here as a developer, but the documents show that his business evolved to buying homes – using other people’s money– and then flipping them. His deals are financed with investor money from China and mortgages issued to those investors by Canadian banks.

The papers that Mr. Lazos provided The Globe paint a fascinating picture, revealing a network of players – local and foreign – who are parking money in Canadian real estate. They also show how loopholes and lax oversight make it easy for the speculators to play the system – and profit tax-free – by obscuring their ownership and earnings, all the while treating the properties as commodities, not homes.

    Hidden ownership</ul>

    Many people assume that speculators flip homes very quickly, but Mr. Gu and others have created a unique market in which they hold properties long enough for them to rise significantly in value. The Globe has examined numerous transactions involving properties held for years while prices in the city rose as more investors bought in. Some properties were developed, some rented out, and others left vacant.

    Mr. Gu did not respond to several requests for an interview, but Chinese-language contracts with his clients provide key insights into how his system works.

    Translated for The Globe, they show that Mr. Gu, or his companies, are hidden – the legal term is “beneficial” – owners of certain properties, even though absentee foreign clients bankroll everything from the down payment and mortgage payments to property-related taxes and other expenses. The homes and mortgages are registered in the names of his clients, their companies or spouses.

    The financing Mr. Gu’s companies receive from those clients comes in the form of loans that are not taxable, and that fall within what’s known as “shadow banking” – an unregulated system that has exploded in popularity in China, and now appears to be getting a toehold in Canada. Such “peer-to-peer” loans, as they are also called, sidestep banks entirely, and promise lenders significantly higher returns than they can get elsewhere.

    Mr. Gu’s lender clients earn their wealth primarily in China, while coming and going from Vancouver, according to Mr. Lazos. Records show that they give Mr. Gu power of attorney to facilitate everything through his small, nondescript Vancouver office, but his stake in the properties remains hidden. And although he is not licensed to broker mortgages or manage investments, records suggest he does both.

    Those records also link him and his clients to activity involving at least 36 properties over the past five years. Yet Mr. Gu, 45, paid next to nothing in taxes last year, while millions of dollars flowed through his business and personal accounts.


      ‘Unless it changes, this will get worse’

    An in-depth look at five of his deals this year reveals that he sold the properties for a cool $5-million more, in total, than he paid for them. One of those homes sat vacant for three years, in a city where many people can’t find a place to live. (The documents include two orders from the city to clean up the site.)

    In addition, Mr. Gu has billed some clients up to $1.2-million, per property, for “management” and “commissions,” in the last two years. Over that same period, he and his wife have moved large sums of money between their bank accounts, up to $600,000 at a time. As well, Mr. Gu made credit-card payments totalling $310,000 in a brief period. The family’s vehicles include a BMW and a Mercedes.

    Tax returns, among the documents, show that Mr. Gu, now a Canadian citizen, reported personal income of $45,865 last year. His wife, Min Tang, reported $23,612.

    And yet, Ms. Tang recently bought a brand new house in West Vancouver – one of Canada’s richest municipalities, known for its mansions and stunning views – for $2.1-million. She listed her occupation on the title as “homemaker.” And she didn’t need a mortgage. Records show she bought the property from one of Mr. Gu’s clients – and for significantly less than the market value for other homes in the upscale area.

      ‘Pervasive and systematic’

    Mr. Gu’s three corporations all reported losses, in unaudited financial statements ending last year. Photocopies of some cheques made out to his companies – a fraction of the total – show that those companies received a minimum of $7.6-million in large payments between 2014 and 2016, many marked as “loans” from clients.

    When Mr. Gu flips a property, his contracts stipulate that lender clients get back what they put in, plus a set return – 15 per cent in one instance. After the mortgage and the bills are paid, Mr. Gu keeps whatever is left, which, in some cases, appears to be hundreds of thousands of dollars.

    According to legal and tax experts, this arrangement would allow him to avoid taxes, because the properties are not in his name. Mr. Gu can also maximize financing, because individual clients applying for mortgages, ostensibly to buy the homes, can borrow more money collectively than Mr. Gu could if he tried to finance properties on his own.

    On the tax front, records suggest that the clients classify some of the properties as their principal residences, even though they do not live in them. That’s despite the fact that Canadian rules stipulate that a taxpayer cannot call a home a principal residence and sell it tax-free, unless they purchased it to live in it, and didn’t sell it within the same year.

    “If you are buying and selling these homes as a business practice, that is business income and it’s taxable,” says Toronto-area accountant David Cramer, one of several experts The Globe consulted while reporting this story. He suggests that both Mr. Gu and his clients should be declaring that income. “If these guys paid proper taxes, these transactions would not go on as they do,” he explains. “It wouldn’t be nearly as profitable as it is.”

    Tax lawyer Jonathan Garbutt estimates that the tax revenue lost through such activity is massive, particularly in pricey Toronto and Vancouver. “I think this is yet another example of non-enforcement of penalties under the law. It’s pervasive and it’s systematic,” Mr. Garbutt says. “Unless it changes, this will get worse. We will have a corrupt system.”

      ‘This has become a huge mess’

    While many Canadians have come to resent the impact of foreign buyers on the real-estate market, the documents suggest that Mr. Gu pocketed much more than his clients did on some of his deals.

    In one contract involving a rental property, his client was guaranteed a return of one per cent a month for paying the down payment and property-transfer tax upon purchase. Mr. Gu would collect the rent and pay the mortgage, then keep the rest of the profits when the duplex sold.

    Mr. Gu sold the property two years later for $850,000 more than he paid for it, because the market price had jumped by that much. But according to the terms of the contract, his client stood to receive less than $90,000 of that windfall.

    Documents show some of Mr. Gu’s clients also pay very little tax in Canada, despite having significant cash flow and assets. For example, in 2014, records show that client Shen Lin Zhang paid $2,594 in Canadian taxes on $59,711 in reported income, while his “homemaker” wife owned and lived in a Vancouver house worth $2-million.

    In the same period, Mr. Zhang sold another house worth $3-million and backed the purchase of two more, worth almost $4-million, in deals facilitated by Mr. Gu. Documents show that Mr. Zhang also owns foreign property and has almost $3-million in Canadian and Chinese banks.

    Mr. Lazos says that Mr. Zhang earns his living in China. His CRA tax filing shows he is not a Canadian citizen, but he claims in it that he’s a B.C. resident. That allows him or his family members to classify any Canadian property as a principal residence and not report the profit when they sell.

    Mr. Zhang declined The Globe’s request for an interview.

    A Chinese-Canadian accountant in Vancouver estimates that he has filed tax returns for 1,000 clients just like Mr. Zhang in the past five years. He does not want to be named because he fears repercussions, but says the CRA is partly to blame for lost revenue, because it doesn’t require taxpayers to report the sale of any principal residence.

    “Every one of [those client families] has more than one house – two, three, four, sometimes more,” he says. “They don’t have to tell me. The CRA says they don’t have to tell anybody.”

    The accountant says that people like Mr. Zhang who work abroad but declare on their Canadian tax returns that they are residents of Canada are legally required to report their worldwide income as well. He says that most, however, do not, and because those financial records are in China, they are impossible to check.

    “They say, ‘I just want to pay around $5,000 in tax. How much does that work out to be in income?’ he says. “And then they say, ‘I have this much interest income from money I deposit with the Canadian bank or the company or whatever.’ That’s it.”

    “I have in my hands people who claim to be residents. They never live here for more than a month of the year,” he says. “These people can be buying and selling homes and claiming to be a resident all the time without getting into any trouble. The CRA doesn’t look to find out.”

    In fact, he believes the problem is so huge that the government should overhaul the tax code to get rid of the principal-residence exemption in its current form, which he acknowledges would be a very unpopular move. And one that would be a political non-starter: If the exemption were removed entirely, millions of Canadians would face the prospect of going deeply into debt – or, at minimum, forfeiting a major portion of their planned retirement incomes.

    Another Vancouver accountant told The Globe that she and her colleagues see questionable real-estate transactions all the time, which they believe have contributed to skyrocketing prices. “This has become a huge mess. You have no idea how angry I am,” says Corina Ciortan. “A generation of people has been screwed. It’s so obvious. Everyone I work with is so angry because there is a select group of people who have profited from this.”

    Federal figures reviewed by The Globe and confirmed by the tax agency show that auditors discovered $14.3-million in unpaid taxes from 339 individuals and companies last year through increased scrutiny of flips and other real-estate transactions in Vancouver.

    A CRA auditor who came forward to The Globe with concerns about enforcement said that that is barely scratching the surface of the dodging going on. “CRA will catch very few people, because the [inexperienced] auditors … have no idea of foreign income and how individuals hide income,” says the auditor, who requested anonymity, for fear of being fired.

    Management has known of this issue for at least three years but did not want to pursue the real-estate flips, because most of the auditees were Chinese in descent. They were scared of being racist … I can confirm this fact, based on meetings held.”

    In a statement sent to The Globe, the CRA said that 2,203 files related to real estate were audited last year in Ontario and B.C., and that the agency plans to do “as many or more” next year. “The Canada Revenue Agency takes non-compliance very seriously, and is committed to protecting the fairness and integrity of the tax system,” it says.

      Richer banks, poorer Canadians

    In addition to holes in the tax system, speculators like Mr. Gu also rely heavily on Canadian financial institutions to give their clients multimillion-dollar loans. “They are using this money temporarily – to make more money – instead of using their own money,” Mr. Lazos says. “Then prices go up. We are making the bank richer and the Canadians poorer.”

    Correspondence in the documents that Mr. Lazos supplied suggests that lenders think they are approving mortgages for his investor clients, not for Mr. Gu. If lenders are in the dark, experts say, they may be unwittingly violating anti-money-laundering laws, which require them to know detailed information about all their clients – which, in this instance, should include Mr. Gu.

    “If the client defaults, who are they going to collect from? Because they don’t know who the beneficial owner is of these properties,” says Christine Duhaime, an expert on anti-money-laundering laws. “The bank thinks it’s complying with anti-money-laundering laws in knowing its client, but it isn’t. No bank likes being lied to.”

    E-mails in the records show that RBC questioned Mr. Gu when it realized mortgage payments from a bank client were coming from Mr. Gu’s business account, but let it continue after the client gave his permission for the payments to continue. The Globe asked RBC about this; it declined to comment.

    (read the full article including images at Globe & Mail)

    Related articles:

    How Vancouver Is Being Sold To The Chinese: The Illegal Dark Side Behind The Real Estate Bubble (March 10, 2016)

    Vancouver’s Housing Market Money Laundering Fraud (February 6, 2016)

Clinton Emails Confirm NATO Destroyed Libya to Prevent African Gold-Backed Currency

CoNN
ANONHQ : January 29, 2016

Hillary’s emails truly are the gifts that keep on giving. While France led the proponents of the UN Security Council Resolution that would create a no-fly zone in Libya, it claimed that its primary concern was the protection of Libyan civilians (considering the current state of affairs alone, one must rethink the authenticity of this concern). As many “conspiracy theorists” will claim, one of the real reasons to go to Libya was Gaddafi’s planned gold dinar.

One of the 3,000 Hillary Clinton emails released by the State Department on New Year’s Eve (where real news is sent to die quietly) has revealed evidence that NATO’s plot to overthrow Gaddafi was fueled by first their desire to quash the gold-backed African currency, and second the Libyan oil reserves.

The email in question was sent to Secretary of State Hillary Clinton by her unofficial adviser Sydney Blumenthal titled “France’s client and Qaddafi’s gold.”

From Foreign Policy Journal:

“The email identifies French President Nicholas Sarkozy as leading the attack on Libya with five specific purposes in mind: to obtain Libyan oil, ensure French influence in the region, increase Sarkozy’s reputation domestically, assert French military power, and to prevent Gaddafi’s influence in what is considered ‘Francophone Africa.’

“Most astounding is the lengthy section delineating the huge threat that Gaddafi’s gold and silver reserves, estimated at “143 tons of gold, and a similar amount in silver,” posed to the French franc (CFA) circulating as a prime African currency.”

And here is the section of the email proving that NATO had ulterior motives for destroying Libya:

“This gold was accumulated prior to the current rebellion and was intended to be used to establish a pan-African currency based on the Libyan golden Dinar. This plan was designed to provide the Francophone African Countries with an alternative to the French franc (CFA).

“(Source Comment: According to knowledgeable individuals this quantity of gold and silver is valued at more than $7 billion. French intelligence officers discovered this plan shortly after the current rebellion began, and this was one of the factors that influenced President Nicolas Sarkozy’s decision to commit France to the attack on Libya. According to these individuals Sarkozy’s plans are driven by the following issues:

a. A desire to gain a greater share of Libya oil production,

b. Increase French influence in North Africa,

c. Improve his internal political situation in France,

d. Provide the French military with an opportunity to reassert its position in the world,

e. Address the concern of his advisors over Qaddafi’s long term plans to supplant France as the dominant power in Francophone Africa)”

Ergo as soon as French intel discovered Gaddafi’s dinar plans, they decided to spearhead the campaign against him- having accumulated enough good reasons to take over.

Sadly, Gaddafi had earlier warned Europe (in a “prophetic” phone conversations with Blair) that his fall would prompt the rise of Islamic extremism in the West. A warning that would go unheeded; what’s a few lives in France and Libya, if the larger goal lines the pockets of politicians and the elite so much better after all?

SOURCE: ANONHQ(cc)

Central bankers don’t have things under control

Doug Noland
Credit Bubble Bulletin : January 23, 2016

Global markets were too close to dislocating this week. Wednesday saw the S&P500 trade decisively below August lows. Japan’s Nikkei 225 Index sank to test November 2014 lows. Emerging stocks fell to six-year lows, with European equities at 13-month lows. Wednesday also saw WTI crude trade below $27 (sinking almost 7%), boosting y-t-d losses to 25%. Credit spreads were blowing out, and currency markets were increasingly disorderly. Early Thursday trading saw the Russian ruble down 5.3% (at a record low vs. dollar), with Brazil’s real also under intense pressure. The Hong Kong dollar peg was looking vulnerable. The VIX traded to the highest level since the August “flash crash,” while the Japanese yen traded to one-year highs (vs. $). De-risking/de-leveraging dynamics were quickly overwhelming global markets.

Something had to be done…

Bloomberg adjusted its original Friday morning headline, “Global Stocks Charmed by Draghi Effect as Oil Rallies With Ruble,” to “Global Stocks Charmed by Central Banks as Oil Jumps, Bonds Fall.” Draghi did have some help. The People’s Bank of China (PBOC) injected $61 billion of liquidity into the system, the “most in three years.” China’s Vice President assured the markets that Beijing will “look after” Chinese stock investors. There was also talk of added stimulus from the Bank of Japan (BOJ) and a much more dovish Fed. The markets interpreted a feistily dovish Draghi as evidence that global central bankers had assumed crisis-management mode.

The markets will now have six-weeks to ponder whether Draghi can deliver. Even assuming that he successful drags ECB hawks along, it’s not easy to envisage how an additional $10 billion or so of QE will have much impact on (bursting) global Bubble Dynamics. An emphatic Draghi was, however, certainly capable of reversing global risk markets that were increasingly positioned/hedged for bearish outcomes. Over the years we’ve witnessed powerful short squeezes take on lives of their own, repeatedly giving the global Bubble an extended lease on life. And while bear market rallies tend to be the most spectacular, at this point I expect nothing beyond fleeting effects on the unfolding global Bubble unwind. Draghi is a seasoned pro at punishing speculators betting against Europe.

The media fixates on “corrections,” “bottoms” and “bear markets.” Of late, there’s been some comparison of the current backdrop to previous periods, most notably 2008/09 and 2000. I have no desire to try to leapfrog other bearish commentary. My objective is always to present an analytical framework that assists in understanding the extraordinary world in which we live and operate.

Going back to 2009, I’ve referred to the “global government finance Bubble” as the “Granddaddy of All Bubbles.” I am these days more fearful than ever that this period has indeed been the terminal phase of decades of serial Bubbles. Bubble excess made it to the heart of contemporary “money” and Credit – central bank Credit and government debt. This period also saw a historic Bubble engulf the emerging markets, including China. It encompassed stocks, bonds, derivatives and financial assets generally – virtually everywhere. Central bankers “printed” Trillions out of thin air.

Today’s predicament is becoming increasingly apparent: as the current global Bubble deflates and risk aversion takes hold, there is both a lack of sources of reflationary Credit and insufficient economic growth potential necessary to inflate an even bigger reflationary global Bubble. With confidence in central banking waning and the monstrous Chinese Bubble faltering, there is confirmation in the thesis that a most prolonged period of inflationary financial Bubbles is drawing to a close.

The collapse of the Soviet Union coupled with the Greenspan Fed’s push into activist central banking ushered in what was almost universally accepted as an epic victory for free-market capitalism. Too much of this was a quite powerful illusion. U.S. finance was becoming increasingly state-directed. The Fed manipulated interest-rates and the shape of the yield curve. The Washington-based GSEs moved to completely dominate mortgage Credit. The massive U.S. “too big to fail” financial conglomerates came to dictate securities and derivatives-based finance – and market-based finance monopolized the real economy. And each faltering Bubble ensured more aggressive central bank “activism” – lower rates, greater market intervention and increasingly outlandish talk of “helicopter money” and the government printing press.

With the bursting of the mortgage finance Bubble, the Fed and global central banks resorted to desperate measures – reckless “money” printing, manipulation and market liquidity backstops. Along the way, virtually the entire world adopted U.S.-style market-based finance and policymaking. The process culminated with communist China adopting U.S.-style finance. So long as inflating financial markets were supportive of central planner objectives, everyone could pretend it was a move toward free markets.

What began with Greenspan’s early-nineties covert bank recapitalization evolved into Bernanke’s foolish policy to openly inflate risk markets with new central bank Credit. Amazingly, U.S. inflationism took the world by storm.

The issue today goes much beyond a stock market correction, a bear market or even global financial crisis. Contemporary central banking has failed. Theories have failed. Doctrine has failed. The inability to spur self-sustaining economic recovery has been a major issue. Yet, from my perspective, the critical failure has been the incapacity to generate general price inflation. The delusion has been that central bankers would always enjoy the capacity to inflate away excessive debt levels. Bubbles needn’t be feared, not with central banks “mopping” up with reflationary monetary stimulus. And for quite a while it seemed that “enlightened” contemporary inflationist doctrine had it all figured out.

Central bankers and market-based finance are a dangerous mix. Over the years, I have referred to market-based finance as the most powerful monetary policy transmission mechanism in the history of central banking. Greenspan could inflate the markets – and the entire system – with inklings of a 25 bps rate cut. Later it took Dr. Bernanke Trillions – the dawn of “whatever it takes,” and markets rejoiced.

Central banks around the world abused their newfound power and the power of financial markets. And for seven years egregious monetary inflation has been used specifically to inflate global securities markets. And “shock and awe,” “whatever it takes,” and “push back against a tightening of financial conditions” all worked to ensure the markets that central bankers would no longer tolerate crises, recessions or even a bear market.

For seven long years, risk misperceptions and market price distortions turned progressively more severe. Inflating securities markets around the globe became, as they do, self-reinforcing. “Money” flooded into the markets – especially through ETFs and derivatives. Trillions flowed into perceived safe equities index and corporate debt instruments. With central bankers providing a competitive advantage for leveraging and professional speculation, the hedge fund industry swelled to $3.0 TN (matching the $3 TN ETF complex). Wealth effects and the loosest financial conditions imaginable boosted spending, corporate profits, incomes, investment, tax receipts and GDP – not to mention M&A, stock repurchases and financial engineering.

But this historic wealth illusion has been built on a foundation of false premises – that central bank monetization can inflate price levels and spur system inflation necessary to grow out of debt problems; that securities markets should trade at higher multiples based upon contemporary central banker capacities to spur self-reinforcing economic recovery and liquid securities markets; that 2008 was “the hundred year flood.” In reality, central bankers inflated history’s greatest divergence between global securities prices and economic prospects.

Global markets have commenced what will be an extremely arduous adjustment process. Markets must now confront the harsh reality that central bankers don’t have things under control. Risk premiums must rise significantly – which means the destabilizing self-reinforcing dynamic of lower securities prices, faltering economic growth, uncertainty, fear and even higher risk premiums. This means major issues for global derivatives markets that have inflated to hundreds of Trillion on misperceptions and specious assumptions. I’ll assume Draghi, Kuroda, Yellen, the PBOC and others resort to more QE – and perhaps they prolong the adjustment period while holding severe global crisis at bay. But the global Bubble has burst. And if QE has been largely ineffective in the past, we’ll see how well it works as confidence in central banking withers. Perhaps this helps explain why global financial stocks now trade like death.

Excerpted from credit bubble bulletin

Trudeau nearly triples Harper’s climate corporate welfare commitment

AlternativeFreePress.com

A couple weeks ago Prime Minister Justin Trudeau made an additional five-year $2.65-billion contribution to help multinational corporations develop countries under the guise of fighting climate change. The $2.65-billion is in addition to the $1.5 billion of corporate welfare contributed by the previous Conservative government.

While Trudeau campaigned on a slogan of “real change”, so far it’s billions in handouts to corporations, as usual.

The climate change fund is a scam, positioned as channeling money “to poor countries to help them adapt to climate change”, it may sound nice, but typically this money is loaned to poor countries with significant strings…

In Confessions of an Economic Hit Man, John Perkins describes how he would convince the government leaders of underdeveloped countries to accept huge loans they could never pay off. He explains how those countries were then pressured politically so much that they were effectively neutralized and their economies crippled. Perkins describes the role of an Economic Hit Man as “a highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign “aid” organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.”

These international agreements seek to destroy nations sovereignty, they attempt to override laws of local, regional and national governments.

While we do need to take our impact on the planet seriously, we can’t allow ourselves to be manipulated… In 1990 The Club of Rome published The First Global Revolution, where they outlined how they would create or exaggerate environmental threats with the intention of manipulating the public into giving up their sovereignty to one world government:

The common enemy of humanity is man.
In searching for a new enemy to unite us, we came up
with the idea that pollution, the threat of global warming,
water shortages, famine and the like would fit the bill. All these
dangers are caused by human intervention, and it is only through changed attitudes and behavior that they can be overcome. The real enemy then, is humanity itself.

This climate agreement is being presented under the guise of rich countries helping countries in need, but really it is countries already in debt, getting into more debt, in order to get other countries into debt.

The “rich” countries are not really rich when you consider their debt, every dollar of aid given is borrowed with interest owing and compounding. Increasing debt and devaluing the dollar.

The “developing” countries can certainly use help, but the strings attached to this type of help will leave them with more debt than they can handle. This will leave them vulnerable to exploitation and allow corporations to pillage resources.

This article borrowed heavily from our previous article:
Harper commits Canada to contribute corporate welfare

Written by Alternative Free Press
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The IMF forgives Ukraine’s debt to Russia

Michael Hudson
The Saker: December 9, 2015

On December 8, the IMF’s Chief Spokesman Gerry Rice sent a note saying:

“The IMF’s Executive Board met today and agreed to change the current policy on non-toleration of arrears to official creditors. We will provide details on the scope and rationale for this policy change in the next day or so.”

Since 1947 when it really started operations, the World Bank has acted as a branch of the U.S. Defense Department, from its first major chairman John J. McCloy through Robert McNamara to Robert Zoellick and neocon Paul Wolfowitz. From the outset, it has promoted U.S. exports – especially farm exports – by steering Third World countries to produce plantation crops rather than feeding their own populations. (They are to import U.S. grain.) But it has felt obliged to wrap its U.S. export promotion and support for the dollar area in an ostensibly internationalist rhetoric, as if what’s good for the United States is good for the world.

The IMF has now been drawn into the U.S. Cold War orbit. On Tuesday it made a radical decision to dismantle the condition that had integrated the global financial system for the past half century. In the past, it has been able to take the lead in organizing bailout packages for governments by getting other creditor nations – headed by the United States, Germany and Japan – to participate. The creditor leverage that the IMF has used is that if a nation is in financial arrears to any government, it cannot qualify for an IMF loan – and hence, for packages involving other governments.

This has been the system by which the dollarized global financial system has worked for half a century. The beneficiaries have been creditors in US dollars.

But on Tuesday, the IMF joined the New Cold War. It has been lending money to Ukraine despite the Fund’s rules blocking it from lending to countries with no visible chance of paying (the “No More Argentinas” rule from 2001). When IMF head Christine Lagarde made the last IMF loan to Ukraine in the spring, she expressed the hope that there would be peace. But President Porochenko immediately announced that he would use the proceeds to step up his nation’s civil war with the Russian-speaking population in the East – the Donbass.

That is the region where most IMF exports have been made – mainly to Russia. This market is now lost for the foreseeable future. It may be a long break, because the country is run by the U.S.-backed junta put in place after the right-wing coup of winter 2014. Ukraine has refused to pay not only private-sector bondholders, but the Russian Government as well.

This should have blocked Ukraine from receiving further IMF aid. Refusal to pay for Ukrainian military belligerence in its New Cold War against Russia would have been a major step forcing peace, and also forcing a clean-up of the country’s endemic corruption.

Instead, the IMF is backing Ukrainian policy, its kleptocracy and its Right Sector leading the attacks that recently cut off Crimea’s electricity. The only condition on which the IMF insists is continued austerity. Ukraine’s currency, the hryvnia, has fallen by a third this years, pensions have been slashed (largely as a result of being inflated away), while corruption continues unabated.

Despite this the IMF announced its intention to extend new loans to finance Ukraine’s dependency and payoffs to the oligarchs who are in control of its parliament and justice departments to block any real cleanup of corruption.

For over half a year there was a semi-public discussion with U.S. Treasury advisors and Cold Warriors about how to stiff Russia on the $3 billion owed by Ukraine to Russia’s Sovereign Wealth Fund. There was some talk of declaring this an “odious debt,” but it was decided that this ploy might backfire against U.S. supported dictatorships.

In the end, the IMF simply lent Ukraine the money.

By doing so, it announced its new policy: “We only enforce debts owed in US dollars to US allies.”

(read the full article at The Saker)

Europe Cracks Down On Bitcoin, Virtual Currencies To “Curb Terrorism Funding”

ZeroHedge : November 20, 2015

European Union countries are preparing to crackdown on virtual currencies such as bitcoin, and anonymous payments made online and via pre-paid cards “in a bid to tackle terrorism financing after the Paris attacks, according to a draft document.”

Just a week after the Paris terrorist attack, showing a dramatic ability for coordinated work by a continent that is known for anything but, today EU interior and justice ministers are gathering in Brussels for a crisis meeting called after the Paris carnage of last weekend. This happens days after the European Commission already announced it would make procurement of weapons across Europe virtually impossible, if only for citizens who wish to obtain protection legally.

According to Reuters, the justice minister will urge the European Commission, the EU executive arm, to propose measures to “strengthen controls of non-banking payment methods such as electronic/anonymous payments and virtual currencies and transfers of gold, precious metals, by pre-paid cards,” draft conclusions of the meeting said.

Conveniently, Reuters reminds us that “Bitcoin is the most common virtual currency and is used as a vehicle for moving money around the world quickly and anonymously via the web without the need for third-party verification. Electronic anonymous payments can be made also with pre-paid debit cards purchased in stores as gift cards.”

But no more: “EU ministers also plan “to curb more effectively the illicit trade in cultural goods,” the draft document said.”

And with all of Europe sliding ever deeper into negative rates, and where a ban on cash bank notes is an all too realistic possibility, the easiest mechanism to evade the ECB’s creeping financial oppression is about to be made illegal.

Finally, there was no word about the true source of terrorism funding: those mysterious “third parties” which keep pumping the Islamic State with hundreds of millions in cash in exchange for its crude oil. Perhaps Europe is so unwilling to dig down into this most important question (which as we said last night nobody is willing to ask) because it either already knows the answer, or realizes that the people implicated just may be some of the wealthiest and most respected Europeans, and the resulting stench could spread all the way to the various unelected politicians and ex-Goldmanite central bankers?

(read the full article at ZeroHedge)

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