Sunday, July 15, 2012

Balancing Liberty and Democracy

The problem with most contemporary political partisans is that they never developed an ability to perform the heuristic analysis that would allow them to grasp that liberty and democracy are eternal enemies. Democratic states may profess to venerate liberty and even pass laws making it sacred, but in practice democracies simply cannot tolerate it. In order to preserve the perception of adhering to the governmental process, to prevent the anarchy of free thought and action, the democrat must try to suppress the free expression of opinion by derision and criticism and failing that by law. In part, it seeks that end by mere propaganda or by the naked force of authority. In essence by attempting to make contrary doctrines officially unacceptable, politically incorrect as it were. To this end it then resorts to force, i.e., to law. The main purposes of such laws in a democratic society is to put burdens upon free thought and analysis to try and reduce it to impotence.

Ostensibly, their aim is to penalize, to define the contrary opinion as anti-social; actually their aim is to penalize what to the democrat regards as heretical opinions. Unfortunately most Americans believe that such a process is honest or even commendable. It has become practically impossible to convince them that there is anything corrupt or the antithesis of liberty in it. In other words, they simply cannot grasp what the concept of liberty really is.

All to often they condition it with the idea that the state, the transitory majority, has some sort of right over the ideas and acts of individuals, that the state, the democratic majority, is free, whenever it is so inclined, to forbid a man or group of men to say what they honestly believe. Whenever an individual’s notions start becoming "dangerous," i.e., being heard and considered by others, then the state should be free to exercise that prerogative. And then far to many citizens will support the state in it feigned outrage.

This is especially true of the liberal, who pretends and often honestly believes, that they are promoting liberty. Not really, because deep down they know, as doctrinal democrats, that liberty is anathema to, if not fatal to democracy, that a government based upon transitory majorities and shifting and often irrational opinion must be kept within bounds, bounds that only they are allowed to define. To do otherwise would be, to them at least anarchistic. They only believe in and advocate for certain narrow kinds of liberty, liberty for the persons they happen to be in favor of or who they agree with. The rights of others are of no consequence or interest to them. If a law were passed, as with the GM bailout, that takes away the property of a large group of presumably financially well off individuals (bondholders) without compensation and without even justifiable reasons, they would not, could not oppose it; they would promote it as fair and democratic. The liberty to have and hold property is not one they recognize. The only liberty they believe in is the liberty to envy, to covet and to hate and loot those who have it.

Saturday, July 14, 2012

Stacking Fraud Like Cordwood.

The scandals and disasters within the financial sectors are starting to stack up like cordwood and the so-called regulators continue turn a blind eye to blatant criminal activity. One political side screams for more regulation while the other side screams for less. What difference does it make when nobody is enforcing the regulations already in place? Is anyone really surprised when the regulators come from the very banks and institutions that are committing the fraud in the first place? 

The bankers profited hugely from the housing bubble and then when it burst they dumped their huge losses onto the taxpayer at par while they continued to collect their massive yearend bonuses. 

Jon Corzine, former Goldman Sachs chairman, US Senator and Governor of New Jersey, quite literally oversees the theft of $1.6 Billion out of supposedly segregated customer accounts as his MF Global operation goes bankrupt. And yet he remains free and walking the streets for no other reason than because he is connected to the Obama campaign and the banks that own it. 

PFG Financial implodes in the wake of its President and sole owner failing on an attempted suicide.  Another $220 Million of supposedly segregated customer accounts goes poof.  What was the CFTC doing while PFG was filing forged paper reports while the law required that the reports to the CFTC were to be electronic copies of the original bank statements. This apparently went on for over two years while “former” Goldman Sachs employee and CHTC Chairman Gary Gensler apparently sat on his hands. 

The banksters commit fraud after fraud after fraud and when they get caught they do nothing but pay a fine of only a fraction of what they gained from the fraud. No individuals are prosecuted for the crimes, so they then just move on to the next fraud.  These criminals don’t consider the fines to be anything more than a cost of doing business. And why should they when as I said before the politicians and regulator in charge of enforcement are their “former” employees. 

And now we have a new scandal, LIBOR (London Interbank Offered Rate) interest rate fixing.  They have for years been putting out a published rate lower than what they were actually charging.  By doing so they have lowered the cash margins they are required to put up for their trillions in derivatives and futures positions and cheated other investors who hold instruments who’s rates of return are based upon the published LIBOR number out of their fair return on investment. The class action lawyers are lining up in droves and the litigation costs alone may well expose these banks for the corrupt and insolvent institutions that they are for once and for all.  

Looming on the horizon is yet another scandal.  One that may be at the base of all the others, namely the manipulation and suppression of bullion spot prices and the theft of allocated customer bullion deposits as a means of doing it.  Just as futures traders like MFG and PFG are supposed to treat customer cash accounts as in viable, so are the bullion banks supposed to treat customer allocated bullion deposits.  In fact an allocated deposit certificate list not just the amount of the deposit, but the specific serial numbers of the bars on deposit as well.  For this the customers pay the banks a monthly fee for the secure storage of their property.  This is as opposed to an unallocated account which is merely a promise to deliver X amount of bullion on demand, not specific bars and carries no storage fees.  The problem that has come up is that holders of allocated accounts are asking for delivery and receiving bars who serial numbers don’t match their deposit certificates and in some cases are receiving bars that were not produced until after they had made their deposits. This logically raises the question of where did the original bars go? Did the banks lease them or sell them into the market to cover their naked short positions based on their alleged unallocated account deposits? Are the banks replacing allocated bars with paper gold certificates in order to maintain reported account balances? If they actually have adequate unallocated deposits to cover their shorts why are allocated bars disappearing? 

As word of this spreads among allocated deposit holders, and if they suspect any of this speculation is true they could start a run on the bullion banks. This could force the bankers into the physical market to try and replace bars they may have illegally sold or leased to try and cover their crimes. 

When, not if this happens, gold and silver prices will explode and it will be game over for the likes of JP Morgan and HSBC and any other banks caught up in their web of deception.  Their collapse will in turn pull down the rest of the banks and possibly the dollar itself.  The only question then will be one of who goes to jail and when and for how long.

Friday, July 6, 2012

It Ony Gets Better (Not).

The deterioration of the financial crisis in Europe continues not just unabated by the latest “deal” over bailouts for Spain and Italy but is about to get pushed into an accelerated mode by the growing LIBOR scandal. 

Capital flight from south to north has picked up as well as even tiny Denmark has not only seen its bond yields go negative but deposit rates have also gone negative at –0.2%. (Anyone with savings accounts now must pay the bank for the privilege of having them hold their money.)  As soon as this bizarre phenomenon spreads to the other northern Euro states all hell could break loose, as people will move savings out of accounts and into either safe deposit boxes and or commodities.  Knowing you are loosing money to inflation is one thing but having to pay for even trying to save is quite another. 

France, always willing to outdo its neighbors in terms of insane policy, is now going to raise its top tax rate to 75% and place salary caps on executive pay along with once again lowering the retirement age to 60.  Capital and businesses will soon start to leave France as well. 

Meanwhile in Germany the confirmation of the ESM (European Stabilization Mechanism), although passed buy both houses of the Bundestag, has been put on hold due to challenges in the Constitutional Court.  Its decision may prove moot, as both Finland and The Netherlands have said they will not participate.  The fantasy bubble that Germany can just pony up what ever the rest of Europe needs to continue funding debt that can’t ever be repaid has about reached its limits.  German debt to GDP has already breeched the 80% mark and they have raised their own retirement age to 67.  To think they will continue to work until 67 and strip out 30% (if France slips into the bailout pool over 50%) or more of their GDP so that the rest of Europe can retire at 60 is foolish at best, delusional at worst.  The Europeans ought to start worrying less about Greece leaving the EURO and more about Germany leaving. 

Underneath all the latest maneuverings is the ongoing and deepening LIBOR scandal.  If the investigations expose even a fraction of what is suspected to have been going on it could blow up not just Barclays Bank and the Bank of England, but the ECB (European Central Bank and the U.S. FED as well.  Eventually municipalities and states (and in Europe, provinces) that had heavily invested in LIBOR based interest rate swaps will be launching law suits to recover losses and/or minimized gains that resulted from the manipulation of LIBOR rates.  What were their losses were of course the banks gains. 

Whether or not the British Parliamentary investigation committees will be as sycophantic as the banking committees in the U.S. Congress is yet to be seen, but with growing numbers of municipalities going bankrupt because of not being able to meet pension requirements you can pretty much bet they will soon start to point finger at the banks that steered them into these investments.