Everything Is Rigged: The Biggest Price-Fixing Scandal Ever

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world’s largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that’s trillion, with a “t”) worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it “dwarfs by orders of magnitude any financial scam in the history of markets.”

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world’s largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world’s largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It’s about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.

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Keiser Report: GDP Boosters (E437)

With the ECB easing inevitable, periphery yields hit new lows [SoberLook]

As France and Germany PMI measures converge on the rest of the Eurozone and with the area as a whole in a contraction mode, it is becoming increasingly clear that the ECB is likely to ease monetary policy further.

Composite Output PMI (reading below 50 indicates contraction; source: Markit)

Markit: – Activity fell sharply again in both manufacturing and services. While the former saw the steepest rate of decline for four months, the latter saw the downturn ease slightly compared with March.

New business fell for the twenty-first successive month, with the rate of deterioration accelerating for the third month in a row to signal the steepest decline since December. Marked falls were seen in both manufacturing and services.

Some have been hoping that the ECB will follow the Fed, the BOJ, and the BOE into the brave new world of QE on an unprecedented scale. The probability of such action is quite low however because the ECB does not have the dual mandate of the Fed and (for now) is only focused on price stability. The ECB also may hold back on buying periphery debt until/unless the nations request “assistance”.

The incredibly uneven recovery: Net worth of bottom 93 percent declines by $0.6 trillion while top 7 percent net worth increases by $5.6 trillion.

One unique signature of this economic recovery is how narrow it is.  When we look at actual wealth, thenet worth figures of Americans, we see some dismal numbers.  In fact, what we find really isn’t a recovery at all if we look at 93 percent of the country.  Then again, with most of Congress being millionaires they are so far removed from the real lives of the public that reality has become encapsulated in a very tiny bubble.  One piece of data that recently came out highlights this uneven recovery.  From 2009 to 2011, the heart of the so-called recovery, the net worth of Americans went up by $5 trillion.  Sounds great right?  Well, when the data is actually carefully examined we find out that the net worth of the bottom 93 percent of Americans actually fell by $0.6 trillion and the top 7 percent saw all the gains of $5.6 trillion.  In other words, for most Americans, this isn’t a recovery at all.

The uneven recovery

There is more mounting evidence that a modern day Gilded Age is in full effect:

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The Gov’t Has No Solution: 1 In 4 Now Jobless in Spain – Spain’s Jobless Above 6 Million For First Time

Crisis for Europe as trust hits record low [Guardian]

Totalitarian [LewRockwell]

There’s really no other word that would accurately describe the behavior of the many agencies that stormed through Boston and its suburbs this week. Thousands of State and local police, sheriff’s deputies, FBI SWAT employees, Homeland Security Shock Troops, and National Guard soldiers conducted a massive search – virtually none of it in compliance with the 4th Amendment – in search of a single teenager. They practically ordered an entire city “locked down” and were presumably prepared to begin arresting residents who refused to comply with what amounted to martial law.

Now, just for a moment consider what the effective lock down means. As Charles W. Johnson presented the situation on Facebook, lockdown is “from the vocabulary of prison wardens, referring to a condition in which inmates are temporarily completely restricted in their movements and confined to their cells, in order to allow prison guards to conduct searches or contain and control what the inmates are doing.” He then asks these two questions: “If the police have the power to put a city ‘on lockdown,’ then what does that make the city? And what does it make the innocent people living in it?” Well, it would make the city a prisons and the residents would be inmates, naturally.

Now, had the search not ended as early as it did, one question that seems appropriate is, “what about the 3rd Amendment?” Perhaps the least-addressed of all the amendments in the bill of rights, it’s no less relevant to the situation. While it refers specifically to soldiers, little distinction exists in light of these two photographs. The individual on the left is, according to the source, a member of the FBI, who helped in the search. The individual on the right is a soldier in Afghanistan. Note the similarities in the uniform, the equipment, and the weapons. Whatever legal differences exist between the military and civilian law enforcement are at this point irrelevant.

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Media magic: not one angry person in Boston [jonrappoport]

by Jon Rappoport

April 22, 2013

www.nomorefakenews.com

Shocked? Horrified? Grief-stricken? Determined? Yes, Boston residents who voiced those feelings passed through the media filters and were interviewed on camera.

But angry? Deeply angry at what happened at the Marathon and ready to give vent to it? The screeners took a pass.

I wrote about this subject after the Sandy Hook murders, and it applies to the Aurora massacre as well.

The sober sepulchral tones of media anchors, and their extreme deference to FBI, police, and politicians, form a hypnotic induction for viewers…and these leaders don’t want to break the spell, which is exactly what anger does.

Therefore, it’s a no-go.

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A Visual History Of All Asset Bubbles [Zerohedge]

Maybe not all, but certainly the vast majority of the most popular asset bubbles since before even the Tulip Mania of 1637 (including the Kipper and Wipper currency debasement of the German 30 years War, circa 1621, which is appropriately enough deja vu in contemporary retrospect, only the war is missing). 

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Meet the Disastrous “Internet Sales Tax” Bill Congress is Trying to Sneak Through [libertyblitzkrieg]

Congress sure is hard at work at the moment trying to pass one horrific bill after the other. With the disastrous CISPA, aka the “Patriot Act for the Internet,”rightfully getting most of the attention since it represents such a treasonous attack on civil liberties (it passed the House of Representatives last week and now moves on to the Senate), another awful bill is also moving forward that we must all be aware of and fight hard against.  I am referring to S. 743, or the Marketplace Fairness Act (MFA), colloquially known as the “internet or online sales tax bill.” While it is being sold by its sponsors and the Obama Administration as helping brick and mortar mom and pop retailers level the playing field with online retailers, what it actually does in practice is create a bureaucratic tax nightmare and could be the final nail in the coffin for the U.S. economy.  But don’t take my word for it…

A bipartisan group of Senators have written a letter to Harry Reid expressing not only their concerns with the bill, but also outrage at the fact that he is trying to sneak it through without normal committee process.

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Here It Comes: Internet Sales Taxes? [market-ticker]

Never let a crisis go to waste.

Let’s add to that: Consume the idiots on the ‘Net with tinfoil crap about false flags while you find a way to rob them, and you’ve really accomplished something.

Guess what — you’re about to get rammed — again.

As early as Monday, the Senate will vote on a bill that was introduced only last Tuesday. The text of this legislation, which would fundamentally change interstate commerce, only became available on the Library of Congress website over the weekend. And you thought ObamaCare was jammed through Nancy Pelosi’s Democratic House in a hurry.

This is Enzi’s “Marketplace Fairness Act”, and would impose a 50-state and audit liability requirement on all web-based businesses that don’t qualify for the “small business” exemption (US $1 million in sales.)

This is an attempt to get around the Quill decision that made such attempts to impose tax liability on entities not in a given state unlawful.  Quill essentially set a demarcation line — as a merchant with no offices or people in a given state you had no obligation to comply with the demands of that state.

This is an inherent part of a federalist system of government — there are 50 state laboratories for what works and that doesn’t, including different systems of taxation and spending.  Those who approve of one particular state’s handling of such things can move themselves (and their business interests) there, while those who disagree can move away.

Enzi’s proposal, along with other similar ones and this “sneak it in the back door” game, would in fact discriminate against online retailers.  Those retailers in a given state with no sales tax don’t have to inquire or document where their customers come from — you can drive across the border, buy something and drive back.

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Jim Rogers: On Gold, All Governments Debasing Their Currency at the Same Time and More

SWITZERLAND REVISES 1934 BANKING ACT TO ALLOW BAIL-IN DEPOSIT CONFISCATIONS [silverdoctors]

The Swiss Financial Market Supervisory Authority (FINMA) has quietly joined the growing parade of western nations who have quietly re-written banking laws to allow depositor bail-ins upon the next banking crisis.
If Switzerland, the once ultimate safe haven for banking deposits across the world is preparing to confiscate depositors funds, there truly is no protection anywhere other than physical gold and silver in your own possession!

In the event that a bank is failing or where its capitalization is no longer adequate, the Swiss Financial MarketSupervisory Authority (“FINMA”) may take measures to improve such bank’s financial viability rather thanliquidating it. “Loss absorption” and “bail-in” are important instruments to support any such measures.

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Gold’s Black Market? [thedailybell]

Meltdown? 15% of world’s gold miners face collapse after plunge in price strips $169-billion off market value … Gold’s 9.3% plunge on April 15, the biggest one-day drop in New York since March 1980, couldn’t have come at a worse time for gold companies. Barrick Gold Corp. and Newmont Mining Corp., the world’s two largest producers, are among companies in the FTSE Gold Mines Index that have collectively lost about US$169 billion in market value since bullion peaked in 2011. Gold equities are trading at the lowest level relative to gold. – National Post

Dominant Social Theme: It is getting grim out there.

Free-Market Analysis: So here is the conundrum: There are reports from all around the world that it is difficult to buy physical gold and silver.

Yet the price of gold has plunged by hundreds of dollars and now mining companies are getting ready to shut down.

What’s that all about? Here’s more from the article:

Gold producers, ignored as global stocks rebounded in the past two years and investors turned to exchange-traded funds that track bullion, face closing mines or shutting themselves down after the metal’s worst slump in three decades this week made 15% of miners unprofitable …

Barrick took another hit this week when the cost to insure its debt surged to the highest in four years after Moody’sInvestors Service said it may downgrade the company’s bonds.

The review of Barrick’s Baa1 debt rating was prompted by a legal challenge to its US$8.5 billion project in the Andes, Moody’s said in a statement. Toronto-based Barrick is the biggest producer of the precious metal with US$7.5 billion of bonds.

This month’s futures price drop to as low as US$1,361.10 an ounce brings gold closer to the global average production cost of about US$1,200 an ounce, according to Nomura Holdings Inc. That puts producers such as Canada’s Semafo Inc. and Golden Star Resources Ltd. at risk of mine closures or “financial distress” if prices fall to that level, according to Macquarie Group Ltd. Tanzania, Africa’s fourth-largest gold-producer, said a sustained slump may shut mines there.

“Any company that hasn’t been focused on efficiencies and costs for the last three to four years is going to fail in this market,” said Gavin Thomas, chief executive officer of Sydney- based gold miner Kingsgate Consolidated Ltd.

Gold’s 9.3% plunge on April 15, the biggest one-day drop in New York since March 1980, couldn’t have come at a worse time for gold companies.

Despite 12 consecutive years of rising gold prices, shareholders have lost faith in the gold-mining industry, which has seen soaring production costs and made money-losing acquisitions. Investors have instead flocked to exchange-traded funds, or ETFs, such as the SPDR Gold Trust, which are backed by bullion and track the price of the metal.

Have investors really lost faith? We read that gold demand in Asia and India remains very strong and informal reports from gold buyers (for physical gold) seem to indicate that it is difficult to buy gold at any price. Silver, not much better.

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“Wise Men” Propose Theft to Bail Out Banks [Mish]

Far be it from bondholders or banks that caused the debt crisis to be punished for their sins, German ‘Wise Men’ push for wealth seizure to fund EMU bail-outs.

 Two top advisers to German Chancellor Angela Merkel have called for a tax on private wealth and property in eurozone debtor states to force the rich to fund rescue costs, marking a radical new departure for EMU crisis strategy.

Professors Lars Feld and Peter Bofinger said states in trouble must pay more for their own salvation, said arguing that there is enough wealth in homes and private assets across the Mediterranean to cover bail-out costs. “The rich must give up part of their wealth over the next ten years,” said Prof Bofinger.

The two economist are members of the Germany’s Council of Economic Experts or “Five Wise Men”, a body that advises the Chancellor on major issues. There is no formal plan to launch a wealth tax but the council is often used to fly kites for new policies.

Prof Feld said a new survey by the European Central Bank had revealed that people in the crisis countries are richer than the Germans themselves. “This shows that Germany has been right to take a tough line of euro rescue loans,” he said.

Read more at http://globaleconomicanalysis.blogspot.com/2013/04/wise-men-propose-theft-to-bail-out-banks.html#wYEtk2GvMViBl4KW.99

Portugal’s elder statesman calls for ‘Argentine-style’ default [Telegraph]

‘Venezuela to be US puppet if opposition leader wins elections’ [RT]

30-40% Decline Ahead? [Marc Faber]

Dr. Marc Faber, the Swiss fund manager and publisher of the ‘Gloom, Boom and Doom Report’ always enjoys shocking the financial pundits with the real truth. Discussing the recent stock market highs he said: “I love it because we are just climbing to a higher diving board…if we go straight up like in ’87, the probability of a crash increases.”

Faber went on to say that due to the record highs “I wouldn’t be surprised to see a 30-40 percent decline from the peak”. Although he hasn’t shorted the market yet, he’s being tempted to now. (5:46)

Link to video

Ten Great Economic Myths [LewRockwell]

Our country is beset by a large number of economic myths that distort public thinking on important problems and lead us to accept unsound and dangerous government policies. Here are ten of the most dangerous of these myths and an analysis of what is wrong with them.

Myth 1: Deficits are the cause of inflation; deficits have nothing to do with inflation.

In recent decades we always have had federal deficits. The invariable response of the party out of power, whichever it may be, is to denounce those deficits as being the cause of perpetual inflation. And the invariable response of whatever party is in power has been to claim that deficits have nothing to do with inflation. Both opposing statements are myths.

Deficits mean that the federal government is spending more than it is taking in in taxes. Those deficits can be financed in two ways. If they are financed by selling Treasury bonds to the public, then the deficits are not inflationary. No new money is created; people and institutions simply draw down their bank deposits to pay for the bonds, and the Treasury spends that money. Money has simply been transferred from the public to the Treasury, and then the money is spent on other members of the public.

On the other hand, the deficit may be financed by selling bonds to the banking system. If that occurs, the banks create new money by creating new bank deposits and using them to buy the bonds. The new money, in the form of bank deposits, is then spent by the Treasury, and thereby enters permanently into the spending stream of the economy, raising prices and causing inflation. By a complex process, the Federal Reserve enables the banks to create the new money by generating bank reserves of one-tenth that amount. Thus, if banks are to buy $100 billion of new bonds to finance the deficit, the Fed buys approximately $10 billion of oldTreasury bonds. This purchase increases bank reserves by $10 billion, allowing the banks to pyramid the creation of new bank deposits or money by ten times that amount. In short, the government and the banking system it controls in effect “print” new money to pay for the federal deficit.

Thus, deficits are inflationary to the extent that they are financed by the banking system; they are not inflationary to the extent they are underwritten by the public.

Some policymakers point to the 1982–83 period, when deficits were accelerating and inflation was abating, as a statistical “proof” that deficits and inflation have no relation to each other. This is no proof at all. General price changes are determined by two factors: the supply of, and the demand for, money. During 1982–83 the Fed created new money at a very high rate, approximately at 15% per annum. Much of this went to finance the expanding deficit. But on the other hand, the severe depression of those two years increased the demand for money (i.e., lowered the desire to spend money on goods) in response to the severe business losses. This temporarily compensating increase in the demand for money does not make deficits any less inflationary. In fact, as recovery proceeds, spending picked up and the demand for money fell, and the spending of the new money accelerated inflation.

Myth 2: Deficits do not have a crowding-out effect on private investment.

In recent years there has been an understandable worry over the low rate of saving and investment in the United States. One worry is that the enormous federal deficits will divert savings to unproductive government spending and thereby crowd out productive investment, generating ever-greater long-run problems in advancing or even maintaining the living standards of the public.

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Carmen Reinhart: “No Doubt. Our Pensions Are Screwed.” [Zerohedge]

“The crisis isn’t over yet,” warns Carmen Reinhart, “not in the US and not in Europe.” Known for her deep understanding that ‘it’s never different this time’, the Harvard economist drops the truth grenade a number of times in this excellent Der Spiegel interview. Sweeping away the sound and fury of a self-serving Federal Reserve or BoJ, she chides, “no central bank will admit it is keeping rates low to help governments out of their debt crises. But in fact they are bending over backwards to help governments to finance their deficits,” and guess what, “this is nothing new in history.”

After World War II, all countries that had a big debt overhang relied on financial repression to avoid an explicit default. After the war, governments imposed interest rate ceilings for government bonds; but, nowadays, she explains, “monetary policy is doing the job. And with high unemployment and low inflation that doesn’t even look suspicious. Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments.”

Nations “seldom just grow themselves out of debt,” as so many believe is possible, “you need a combination of austerity, so that you don’t add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation,” with the consequence that people are going to lose their savings. Reinhart succinctly summarizes, “no doubt, our pensions are screwed.”

This will take 3 minutes to read – read it. Understand what she is saying.

Via Der Spiegel,

… governments are incapable of reducing their debts and that central banks are now stepping up to resolve the crisis themselves. In the end, she argues, everyday savers will pay the price.

…

Researcher hacks aircraft controls with Android smartphone

A presentation at the Hack In The Box security summit in Amsterdam has demonstrated that it’s possible to take control of aircraft flight systems and communications using an Android smartphone and some specialized attack code.

Hugo Teso, a security researcher at N.Runs and a commercial airline pilot, spent three years developing the code, buying second-hand commercial flight system software and hardware online and finding vulnerabilities within it. His presentation will cause a few sleepless nights among those with an interest in aircraft security.

“You can use this system to modify approximately everything related to the navigation of the plane,” Teso told Forbes. “That includes a lot of nasty things.”

First, Teso looked at the Automatic Dependent Surveillance-Broadcast (ADS-B) system that updates ground controllers on an aircraft’s position over a 1Mb/s data link. This has no security at all, he found, and could be used to passively eavesdrop on an aircraft’s communications and also actively interrupt broadcasts or feed in misinformation.

Also vulnerable is the Aircraft Communications Addressing and Reporting System (ACARS), the communication relay used between pilots and ground controllers. Using a Samsung Galaxy handset, he demonstrated how to use ACARS to redirect an aircraft’s navigation systems to different map coordinates.

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Food Inflation Everywhere, But Not A Bit In CPI (Yet) [Zerohedge]

George Orwell explains the markets

“That is the world that we are preparing, Winston. A world of victory after victory, triumph after triumph after triumph: an endless pressing, pressing, pressing upon the nerve of power. You are beginning, I can see, to realize what that world will be like. But in the end you will do more than understand it. You will accept it, welcome it, become part of it.”"

Poking the hive of DSGE (Distinctly Sensitive Group of Economists) [physicsoffinance]

I like how this blogger cites a GMU Ph.D. student as an example of someone considering alternatives to rational expectations. The author has no idea that such work has been going on for decades. He doesn’t know s**t.

Cyprus to finance bailout by selling €400mn of gold reserves. *idiots*

Cyprus is going to sell 400 million euros worth of gold reserves to finance part of its bailout, Reuters reports citing Troika documents.

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