Gold Is Pale Because It Has So Many Thieves Plotting Against It

“GOLD IS PALE BECAUSE IT HAS SO MANY THIEVES PLOTTING AGAINST IT”

Antal E. Fekete*
Professor of Money and Banking
San Francisco School of Economics

* The title is a quotation from Diogenes Laertius (fl. 2nd century A.D.)
This was the favorite quotation of the late Chicago economist and gold expert Melchior Palyi.

25 years ago I visited Comex at the World Trade Center, watching the feverish activity in the gold pit from behind the glass wall in the gallery. A gentleman standing next, unknown to me, remarked: “One day this make-believe charade will come to a bad end. All that these guys are doing down there is creating ever more claims to the same lump of gold — just as governments have been doing before they met their ignominious fate.”

Later that day I went to see the Director of Research of Comex. During our chat that lasted about an hour he intimated that he was greatly disturbed by the mystery that the gold basis has been steadily declining year in and year out. Perhaps it was the fact that he could not solve the puzzle that bothered him so much that he quit his job a few months later.

I must confess that I could not solve that puzzle myself until the Twin Towers of the World Trade Center came tumbling down many years later. For me it was a symbolic event, conjuring up the unknown gentleman and bringing back his cryptic remark. We are watching a game of musical chairs. When the music stops, paper claims to gold will be dishonored, and the gold futures markets will tumble down just like the Twin Towers.

In my earlier article The Dress Rehearsal for the Last Contango I observed that “a very strange phenomenon has been manifesting itself during the past thirty-five years, since the inception of gold futures trading. The basis as a percentage of the rate of interest, rather than remaining constant, has been vanishing and, by now, it has dropped to zero.” In the rest of that article I drew attention to the apocalyptic consequences of the prospect of permanent backwardation in gold threatening the world, which is completely ignored by the makers of monetary policy, as I had opportunity to convince myself during my recent encounter with Paul Volcker, the Chairman of President Obama’s Economic Recovery Advisory Board. As I see it, the Debt Tower will topple, just as the Twin Towers of the World Trade center have, when hit by permanent gold backwardation. The reason is that the availability of gold is absolutely indispensable for maintaining our system of irredeemable debt. Only then will bondholders, like the participants of the game of musical chairs, be satisfied that there is a goodly number of vacant chairs available, so let’s get on with bond trading, gold futures trading, and let the music roar on.

But once permanent backwardation in gold establishes itself, gold is no longer available at any price. Bondholders will scramble to sell their irredeemable bonds before they lose all their remaining value. There is no other way to pacify bondholders than letting the game of musical chairs go on, that is, continue the charade of gold futures trading putting ever more claims on the same lump of gold.

The response to my article was overwhelming. I have never realized how many people out there are following my writings on the internet so closely. I want to thank every one of you and assure you that I take this responsibility most seriously. Even if I cannot answer every message I get from you individually, I will continue to do my best to explain the results of my research in simple, understandable terms.

Let me spell out for my readers what the vanishing of the gold basis means from the point of view of the puppet-masters of the gold futures markets. It means that they are fighting a losing battle. They are desperately trying to coax gold out of hiding by offering ever higher bribes — not in terms of the price but in terms of the basis. A low basis means that they offer to take your cash gold and let you have gold futures in exchange at a discount price. (The discount is contango minus the basis, so that the two are inversely related: as the basis falls, the discount increases.) This will allow you to invest an amount equal to the price of gold (less five percent, the margin on the gold future) in any way you want and, having paid the reduced contango, you can keep the profits. The point is that you will still benefit from any advance in the gold price, same as you would if you owned cash gold. You can have your cake and eat it. Remember, in a full carrying charge market, such as the gold futures markets were at inception, no such bribe money was offered.

But, lo and behold, people who are willing to take the bribe are few and far in between. So the pot is sweetened. The basis is lowered. Maybe at one point gold will be coaxed out of hiding, once the bribe is high enough.

No such luck. When the basis gets as low as zero, it means that the discount on gold futures has gone so high that it is equal to the opportunity cost of holding gold. Therefore, again, if you give up your cash gold in exchange for gold futures, you can invest an amount equal to the price of gold (less five percent) in any way you wish, but now they let you keep your profit in its entirety. And you can still benefit from any advance in the gold price, same as you would if you had the cash gold in your hands.

This is where we are now. Indications are that the game fish still does not bite. What now? Where do the futures markets in gold go from here? Well, the pot can be further sweetened. The basis can be pushed down into negative territory. Gold could be forced into backwardation. Let’s see what that means. It means that you can sell cash gold and buy it back for future delivery at an outright discount. Somebody wants your gold so badly that he is willing to pay you for the privilege of holding it for a few days, few weeks, few months paying your storage and insurance fees. You get your gold back at a cheaper price. You make a risk-free profit on this deal. If the gold price goes up in the meantime, you benefit fully, just as if you have held on to the cash gold.

Now risk-free profits are a promise of unlimited profits because, if you are nimble enough, then you can make any number of round trips. However, opportunities to earn risk-free profits from arbitrage do not last. Other nimble speculators would jump in and their unlimited action would close the spread that gave rise to the risk-free profit in the first place. Yet I predict that, after a period of initial vacillation between backwardation and contango (due to action by misinformed traders) gold will settle in permanent backwardation.

Wouldn’t that be loverly? Risk-free profits galore. No need to bother with storage charges and insurance premiums. Just sit back and enjoy the ride to riches.

But hey, wait a minute! Is the arbitrage really risk-free? You give up your cash gold, but what if your gold futures contract expires and they refuse to return your gold? Commodity markets can change the rules of the game mid-stream. They just declare ‘cash settlement only’ for outstanding contracts. Unsaid and unstated, not even mentioned in small print, is the fact that the trap door may be slammed shut. The investor who has taken the bribe is neatly separated from his gold when the hairy godfather waves his magic wand. “Gold is pale because it has so many thieves plotting against it.” There are all too many trap doors, sprung wide open, ready to devour gold belonging to the unweary.

That’s it. That’s why more people do not fall for the bribe even when tickled with promises of risk-free profits. The promise is mendacious. There is a risk: the risk that you lose your gold and you may never be able to buy it back at any price. There is no other explanation for the fact that the promise of risk free profits does not eliminate the discount on the futures price of gold. This is the true explanation for the coming permanent backwardation in gold.

Gold futures trading is clearly a con-game, but it is in a symbiotic relation with the regime of irredeemable currency and irredeemable debt, on which our ‘democracy’ is based. So we have a double con-game. We have a smaller con-game of gold future trading inflicted upon gullible people who want to have their cake and eat it and, then, we have the much bigger, all-embracing con-game of irredeemable currency, inflicted upon the rest of us, innocent bystanders. It is inflicted by the United States government that stoops so low as to trample on the Constitution mandating a metallic monetary system for this country precisely in order to outlaw all Ponzi-schemes. The government could never muster the moral courage to propose an Amendment that would make the Constitution conform to its monetary system — as it would open Pandora’s box. Rather, it would live with the onus of being in contempt of the Constitution. The government of the United States had looted gold from its own subjects in 1933. It looted even more gold from people not under its jurisdiction in 1971. It continues to operate in the same tradition.

The larger con-game of the irredeemable dollar could not have gone on so long, but for the smaller con-game of gold futures trading from which it takes its strength. Historically, every regime of irredeemable currency has met its Nemesis in no more than 18 years. The present experiment with irredeemable currency has been going on for twice that long. Of course, gold futures trading is a relatively new invention that was not available to the managers of the assignats, mandats, or the Reichsmarks. Nor was it available to the managers of the most recent experiment with the Zimbabwe dollar. But, as the relentless fall in the gold basis clearly shows, people cannot be conned forever. The clock is ticking. Sand in the hourglass keeps dropping. When it runs out, the present experiment with fiat dollar will also meet its Nemesis, as all the earlier experiments have. That’s the good news.

The bad news is that the government of the United States persists in continuing the double con-game and Ponzi-scheme through thick and thin. It is callous to the economic damage it is causing world-wide, and it disregards the danger of permanent gold backwardation that would inflict utter economic pain on the innocent people of this country, to say nothing of the people of the rest of the world. As explained above, it would make the runaway debt-tower of Babel topple, burying people under the rubble as the Twin Towers of the World Trade Center buried people working inside.

When that happens, the government of the United States will not have the excuse that it has not been warned. I have delivered the message in person to the Chairman of President Obama’s Economic Recovery Advisory Board, Paul Volcker, when we met at the Santa Colomba Conference last July. I also consider it my moral duty to warn all the people who are willing to listen of the danger lying ahead. It is incredibly naïve to believe that gold can be removed from the international monetary system with impunity at the stroke of a pen, as they pretended to do it in 1973. The gold corpse still stirs. When it rises from its prostrate position it will, like Gulliver, dust off the Lilliputians who like ants have been scurrying all over his body. The day of reckoning will have dawned.

Keynesian and Friedmanite economists bear a special responsibility for the disaster. They dug in and monopolized their positions at universities and research institutes. They never allowed a free discussion on the gold standard. They did everything to aggrandize and perpetuate their own power as the sole advisors on government policy. They will not be able to live down this shame in a thousand years.

Masters Gold Fund

In my previous article More Dress Rehearsal of the Last Contango (see References below) I mentioned the unique Masters Gold Fund, soon to come on stream, structured to take advantage of the permanent backwardation in gold when it comes, which would ground all other gold funds. I have acted as advisor from inception and during the incubation period. In that article I listed seven exclusive features spelling out how the Masters Gold Fund would operate in these perilous times. It would take its clues, not from the gold price that is open to manipulation, but from the gold basis which is a pristine indicator telling you about the willingness of gold holders to carry on in playing the game of musical chairs and putting their gold at stake.

In response to subsequent inquiries that I have received, I provide the name and e-mail address of the manager of the Masters Gold Fund, who will be happy to send the prospectus to interested parties upon request:

Sandeep Jaitly (Sandeep.Jaitly@soditic-cbip.co.uk)

If you come to our Seminar in Canberra, Australia, in November, then you will be able to meet Mr. Jaitly in person, and ask him questions directly.

Disclosure

I have not been paid by Masters Gold Fund or its parent company for writing this article, or any other article representing it. My interest in the project is purely intellectual. I want to demonstrate that, under the regime of irredeemable currency, it is possible to have gold locked up in a vault and still make it bear a return in gold — to disprove Aristotle’s dictum: pecunia pecuniam parare non potest (gold does not beget gold).

What we have here is an historical anomaly. Never before could one earn a return on gold in gold unless one surrendered control, thus incurring a risk. The risk in investing in the Masters Gold Fund is that the gold price stabilizes, that is, the world willy-nilly goes back to a gold standard. However, this is a risk that anybody should be glad to take.
August 29, 2009

BRIC, SCO Discuss "Super-Sovereignty" Currency, USD Alternatives

A little insight into the internal mechanics of China's changing financial policies. What does this mean?

BRIC, SCO Discuss "Super-Sovereignty" Currency, USD Alternatives

China continued to consider a “super-sovereignty” currency among the countries of Shanghai Cooperation Organization (SCO), an intergovernmental mutual-security organization that met today in the Russian city of Yekaterinburg, in the Urals at the division of Asia and Europe. Members include China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan, with India as one of its four observers.

Right after the SCO meeting, the BRIC country (Brazil, Russia, India and China) leaders met formally for the first time. It is not merely coincident that three of them have expressed a desire to adjust their foreign exchange reserve portfolios by reducing the share or volume of US dollar assets.

China has just halted the increase its holding of US Treasury debt. By the end of April, China held $763.5 billion of it, a fall of $4.4 billion, month on month, the first time China has reduced its Treasury holdings. Since May, 2008, China has increased its holding by $260 billion.

Inside China, USD is a hate-more-than-love story. Analysts have long argued that China should be very cautious on buying US government bonds since dollar is bound to weaken. Others hold that US treasury debts are still the best and first choice for China's near $2 trillion foreign exchange reserve.

In March, Madam Hu Xiaolian, the chief of China's State Administration of Foreign Exchange and a deputy governor of the People's Bank of China, China's central bank, said that investing in US national debt is an essential part of China's reserve management. But while continuing to buy US national debt, China is concerned about the risk of the fluctuation in value of its assets.

China has announced that it would buy up to $50 billion in bonds issued by the International Monetary Fund (IMF). Meanwhile, Russia and Brazil have said they are planning to buy up to $10 billion in IMF bonds, which would mean selling Treasury bonds. India has expressed the same interest. In April, China, Russia, and Brazil all reduced their holdings of US treasury debt.

China now believes that a long-term dollar decline is inevitable, and the risk to the value of its $2 trillion foreign exchange reserve has become realistic, if not imminent.

China has been a huge beneficiary of the order of the world economy and a monetary system with the US dollar as the reserve currency. China's economy has been anchored by a stable dollar exchange pegged by China's currency, RMB.

But the financial crisis has given China a wake up call that the present monetary system is not sustainable, and neither is China's foreign exchange regime and mode of economic growth, which has been largely based on relentless exporting.

What, then, is the role RMB can play in the future? Russia has been urging China for years to settle their bi-lateral trade in their respective currencies. Brazil intends to trade with China by RMB and the real. Recently Russia suggested making RMB convertible to become an international reserve currency.

China can not challenge US directly. The BRIC summit is a convenient platform for China and the other BRIC powers, set to become the 4 of the 6 largest economic entities by 2050, to put a bit of pressure on the US. Held before the first China-US Strategic and Economic Dialogue in late July in Washington DC, the BRIC summit may give China some leverage in dealing with the US.

Russia is ready to use its exchange reserve to buy securities issued by BRIC countries. In return, Russia hopes the others will be willing to buy financial instruments issued by Russia. The leaders discussed increasing of the share of settlement currencies for trade among them. They also discussed adjusting their reserve assets portfolio in a coordinated way.

At the SCO meeting held just before the BRIC summit and attended by China, Russia and India, China proposed to research the feasibility of using a super-sovereignty currency among SCO member countries.

Kazakhstan president Nursultan Nazarbayev proposed that trade among SCO countries be settled by currencies of member countries. He also suggested that a super-sovereignty currency used inside the SCO eventually become a SCO reserve currency. Russian President Dmitry Medvedev also supported the idea.

Jim Sinclair on CNN Your Money

Finally, they interview this man.

What's that Tonya Tucker song? It's a Little Too Late To Do The Right Thing Now?



"The degree of amoral sociopathic individuals are more on Wall Street than anywhere else on the planet. And you can't grow a conscience if you don't have one. I've lost sight in one eye. I tell you that blindness is not seeing dark, its simply not seeing. That's similar to the condition of a sociopath whose only purpose in life is to make money at any cost and to do any damage, and actually to enjoy the fact that you're doing that. That's what's called 'ripping faces off'. All laughing and filling up their wine glasses. Now its come home to roost." - Jim Sinclair

5/13: Rob Kirby - Forensic Examination of the Gold Carry Trade

by Ron Kirby

Forensic Examination of the Gold Carry Trade

Is There A Supply Deficit?

If you ask the World Gold Council or their “official numbers keeper” - GFMS – they’ll say there is no persistent gold supply deficit. If you ask the folks at GATA – they’ll claim there is an annual 1,000 – 1,500 tonne gold supply deficit.

So who’s telling the truth?

What’s interesting to note in this regard – the World Gold Council and GFMS haven’t always shared the same view regarding gold supply / demand aggregates. Empirically their positions, at times, have been ambiguously at odds with each other and have lacked continuity. Here’s how GATA consultant Frank Veneroso explained the disparity back in 2005;

“As I explained in the Gold Book, gold demand had been understated for years by GFMS, the ‘official’ keeper of the global gold statistics, as has been the flow of official sector gold. Official stocks were falling faster than the GFMS data would suggest. I presented abundant statistical information to make that case. We believe that the trend in the official data since then simply flies in the face of obvious facts and this discredits it further.

People ask us where we think supply and demand are now. Our standard response is that we don’t know, because the data available to us has become ever less reliable. In the old days, the World Gold Council produced a data series on gold demand for most (but not all) of the world. It was based on extensive survey data and it had no reason to be biased. It clearly showed a stronger trend in the growth of gold demand (excluding Western investment) than did the GFMS supply/demand statistics. For us it was an anchor that allowed us to see a growing error in the GFMS data (see the Gold Book).

In the 1990s GFMS was faced with a problem. From the late-1980s to the late-1990s, there was a growing flow of borrowed gold associated with speculative short sales, the hedging of central bank options and commercial inventory hedging, in addition to the well recognized producer forward selling. There were also some official sector liquidations that were not reported. These totaled to extremely large official supplies. For some strange reason GFMS refused to acknowledge most of these official supplies, particularly those associated with speculator short sales. This resulted in a gross understatement of annual supplies.

Unlike the World Gold Council, which tried to only come up with an estimate of demand, GFMS estimated both supply and demand. In the end GMS had to make their estimates of demand and supply balance. Because they were underestimating supplies to an increasing degree, they had to underestimate demand to an increasing degree to make these accounts balance. That is why the World Gold Council survey showed a stronger gold demand trend in the 1990s than the GFMS statistics.

Several years ago the World Gold Council decided to merge its statistical efforts with GFMS leaving us, in effect, with only the GFMS supply/demand estimates. It has been my opinion that the GFMS balances became so flawed by the end of the 1990s that they had become virtually worthless. Therefore, I’ve regarded the new World Gold Council/GFMS statistics in recent years as basically useless. We no longer have any anchor for estimating gold demand and supply.”

That Central Banks “swap” and “lease” gold is an undeniable matter of public record. The extent of this activity is not acknowledged by GFMS or the World Gold Council. We do know that it necessarily has been responsible for filling any and all recurring gold bullion supply deficits.

The bottom line is that Central Banks claim to “officially” have somewhere in the neighborhood of 30,000 metric tonnes of gold bullion in their vaults. However, the reality is that Central Banks possess LESS physical gold than they officially report – how much less is a matter of speculation and a closely guarded secret.

The following formula explains the mechanics of the Gold Carry [lease] Trade:



** Do not confuse the Gold Forward Rate [GOFO] with the Gold futures price – they are not related.

Now, we shall apply our lease rate formula to a “real world” case study where there is plenty of irrefutable evidence that gold leasing occurred; namely, in the aftermath of the Sept. 26, 1999 announcement of the first Washington Agreement on Gold – which was “sold” [as in a bill of goods, perhaps?] to the world as being ‘gold friendly’.

In the aftermath of the announcement of original Washington Agreement [WAG], announced Sept. 26, 1999, the World Gold Council reported:

“Lease rates jumped to 10% in the first few days after the agreement, and though they have fallen back, they remain at a still high level of 4-5%, more than two times the rate the 1-2% the market is historically used to. The market remains tight, with very little gold coming onto it.”

What Happens When Gold Is Leased?

When Central Banks lease gold, it PHYSICALLY leaves the vault and the recipient / borrower sells the physical metal into the marketplace to raise cash – to invest or to finance capital expenditures. In this regard, we can say that “GOLD LEASING” is a means by which physical bullion is made available in the market place – thereby lowering the gold price. After the gold physically leaves the vault of the Central Bank, it is replaced with an I. O. U. and the Central Bank, for accounting purposes, “double counts” by continuing to claim that they still possess the same amount of physical bullion in the vault. It is notable that fraudulent accounting practices relating to gold is promoted by lawmakers the world over. This is contrary to generally accepted accounting practices and promotes market opacity instead of the much talked about need for transparency. Explicitly, it serves to promote the supremacy of the fiat U.S. Dollar as the world’s reserve currency.

I’ve circled the 10 % spike in lease rates on the chart below:

Ladies and gentlemen, what the spike in lease rates above depicts is the INDUCEMENT that was required to get BULLION BANKS to accept the “ELEVATED COUNTERPARTY RISK” inherent in arranging further bullion loans since, in the days following the Washington Agreement, the subsequent rise in the price of gold weakened existing bullion borrower’s financial position and made repayment of their physical bullion loans a trickier proposition:



(Mister Goldbug - There is a table in the article that I can't figure out how to reproduce here so I'm leaving it out and skipping to the next part. Its a minor part of the article and I'm sure the author of the piece, Ron Kirby, would think it is important since after all he wrote it. Its for this purpose I'm including his website in this article so that the reader can, if so desired, sign up to his website.)

Now, let’s stop and consider WHO did the lending of metal in Sept. 1999 – expelling physical precious metal, intentionally at a loss, in the face of a RISING PRICE of GOLD. Remember folks, 3 month GOFO [the gold forward rate] is the return “earned” by the lender of bullion:


So ask yourself WHO would lend physical gold bullion to ANYONE with a guarantee that you would get LESS bullion back in 3 months????????????

Sir Alan of “I-looted-the-free-world” Greenspan gave us a good hint as to who might do such a thing when he twice testified before Congress in 1998 that "central banks stand ready to lease gold in increasing quantities [read: lose money] should the price rise."

Coincidentally, it is the lack of transparency concerning Central Bank gold leasing and the existence of double counting of gold stocks that, in Dec. 2007, prompted GATA to launch a freedom of information request campaign to wrest all documents from the Fed and U.S. Treasury in their possession that have been generated since 1990 and mention swaps of gold involving the U.S. government. Heck, even the I.M.F. admits that Central Banks double count gold, excerpted from I.M.F. issues paper # 11, April, 2006;

7. The current statistical treatment of gold swaps should be consistent with that of repos. The guidance of paragraph 85 (iii) of the Guidelines, which is applied to gold swaps by paragraph 101, results in overstating
reserve assets because both the funds received from the gold swap and the gold are included in reserve assets. While the gold is swapped, it cannot be the case that both the claims and the gold are simultaneously liquid and readily available to the monetary authority.

The United States of America claims to possess a little more than 8,100 metric tonnes of sovereign gold stored principally at Fort Knox, Kentucky, West Point, N.Y. and The New York Fed. The sovereign U.S. gold reserve has not been independently audited since the 1950’s during the Eisenhower Administration. GATA’s freedom of information requests are all about ensuring that the 8,100 metric tonnes of U.S. sovereign gold is still owned the U.S. and is where it is purported to be.

In April, 2008 the Federal Reserve responded to GATA’s request, releasing part or all of hundreds of pages of worthless information, but also claiming that it was withholding all or part of the information of about 400 pages of documents. The status of the withheld documents is currently under appeal.

These stonewalling tactics – with holding details - are eerily similar to those employed by Messer’s Bernanke, Paulson and Geithner refusing to divulge frank details as to “who” the beneficial recipients were of TARP and TALF funds.

Can the AIG bonuses be undone

AIG must be completely unaware of reality. AIG just received an absolute ton of money from the taxpayers and apparently AIG thinks it is ok to give that money away as bonuses to the geniuses that forced them to need a bailout. Call me crazy but shouldn't they be handing out pink slips and walking papers and not multimillion dollar bonuses. Besides the fact that AIG is now a nationalised entity, they shouldn't really be worried about potential lawsuits concerning not paying the bonuses that were promised, the good ole U S of A's lawyers can get ya out of that obligation I'm sure. Govt lawyers vs sleazy wall street types over unearned bonuses, I'm picking the lawyers in this one. Somewhere on this blog was mention of a certain person and his timely award due to his position on nationalisation, and while I can see where the author was coming from, I cannot agree. I think nationalisation is needed. It may not work out well and all the fears of going to the bank being like going to the DMV might end up being correct but hopefully these ridiculous institutions that paraded around like banks can be gutted, burned, and set out on a fresh start. Is it 100% capitalist and the 'way we do things'? Of course not but not much in this country is 100% like the way we think it is. So here's to nationalisation comrades, see you in the bread lines.

welcome to nationalized citibank

The New F***ing Citibank - watch more funny videos

enjoy.

here's something different

With gold selling for around $970 per ounce, some people are selling off their jewelry at gold selling parties. I found this story over at boingboing, and it seems like a good plan if you feel like you must dump your gold valuables (better than that $forGold scam). Apparently you can host a party and take a percentage of the sales and whoever buys the gold on site tests it and appraises it and pays out about 65% market value. Not bad considering the alternatives of pawn shops or other less than reputable buyers. Although considering some of the previous posts here regarding the artificial suppression of gold prices, 65% of a bogus price point doesn't sound so great. Gold has definitely been trending upwards over the last 10 years, makes you wonder what an unsuppressed price would be right now.

Old banks further my confusion

Apparently the Bank of England has cut interest rates to 1.5%, reminiscent of the US Fed dropping rates to nothing. I understand what dropping the interest rate is supposed to accomplish, but why the hell isn't it working. Our economy is still in free fall, and it appears that the BoE is ready to further drop rates in the next quarter. If it didn't work the first time why bother trying again. Maybe try a different tactic to free up lending or maybe just suck it up and realise we are in a worldwide depression and start saving what little money you may have. The rate cuts seem to be completely ineffective at stimulating lending, much like the bailouts which have accomplished much of nothing aside from furthering our own indebtedness. Maybe business should start slashing prices to an amount that's actually a good deal for people with no money, clearing out a lot of inventory and rejiggering their business models to account for a crippled economy. Currently we don't make much of anything and if you want work you had better be looking in the crap pay service sector, businesses need to be prepared for that and start catering to the paycheck to paycheck demographic if they expect people to buy their shit. For some reason I can't get my head around the need for people to borrow money when they won't likely have a job in which to pay it back. Lending really shouldn't be critical point in a sustainable economy. Good jobs and healthy savings seem much more important to me.

What will it take to prevent The Great Depression II?

Over at Alternet, Paul Krugman has a piece detailing some dire facts about our current economic situation. His forecast is yet again not rosy or optimistic, but unfortunately quite plausible. Krugman thinks that a large spending spree by the government on public works type infrastructure will be a hard sell, even to a Democratic congress. I tend to agree, but hard sell or not, it may be the best way to pump some money into the economy and still get some value for it. Much better than stimulus checks or tax cuts for the top rich-as-fuck %. Krugman also kinda throws some shit into the face of Bernanke and the Fed in general and makes claims that Keynes was right all along. It seems like a much better deal to get some nicer roads, maybe a new school or even a sturdy bridge or two, than whatever it is you get when the government throws $600 checks at poor people. Granted, I could use one of those checks and I wouldn't complain to the bank teller when I cashed it, but I don't see where it helps much in the long run. So I guess the question is, do we throw prayers at the approaching storm in hopes that it will change course, or do we employee the unemployed on the government dime and build a shelter that will withstand the storm and be of use well into the future?

Calling out the ruling class

Over at Alternet, David Sirota calls out the ruling class for being, yet again, wrong on nearly everything, this time regarding the bailouts. Highlights include criticism for passing a credit-card industry written bankruptcy law, the 'trust us' attitude for passing the bailout bill, and the outright falsehoods that business to bank lending, inter-bank lending, and commercial paper had frozen. Plus it's just nice to see some one calling the ruling class what it is, and not dancing around the myth that we are an egalitarian society and that everyone gets a fair shake.

The Fed continues to evade transparency

From Bloomberg . The Fed just will not tell us where our money went. Secrecy is obviously essential when it comes to throwing away taxpayer money. Why all the opacity? I'm sure some of us have a few theories on that question. The Fed says that it's allowed to withhold internal memos, trade secrets and commercial information. Because you can do something is a good enough reason to do it. A secretary for the Fed sent an email to Bloomberg saying “In its considered judgment and in view of current circumstances, it would be a dangerous step to release this otherwise confidential information,”. The most cataclysmic financial crisis in America since the great depression; That's a phrase that pops up a few times in the article, some what worryingly. The Fed may be right in not wanting to disclose this information, it could very well be harmful, but the longer they stick with this refusual to cooperate with FOIA requests the more they deteriorate what little sheen may have been on their operation. Maybe it will do some good to get more people interested in what exactly they are and how they can skirt legal requests for information regarding taxpayer money.

Tainted Lunch Meat : I love the money fires

Everyone here thought the Onion video about the National Money Hole was hilarious. I think. Anyway, apparently other more serious people are coming around to the conclusion that setting the bail-out money on fire, in a hole or not, is a more sensible idea than using it to invest in continually falling bank stocks. No longer questioning the wisdom of bail-outs, they seem to benefit the people they were intended to benefit. Not me. Still wondering why we get suckered into going along with bail-outs. Capitalism at it's finest, unless the ruling class is in some way inconvenienced, then socialism for them, jack for everyone else. Fucking bizarre that we can't see how badly we're being fleeced.

Second link found on Alternet , and followed to Sadly, No!

Tainted Lunch Meat : could be worse

Inflation has been high this year, 5.6% in July and consistently above 4% most of the year, but it could be worse. Let's take a look at Zimbabwe. That country just issued $200,000,000 notes right on the heels of the $100,000,000 notes. A loaf of bread could cost you $35,000,000 in Zimbabwe. Of course $500,000 Zimbabwe is only worth about a quarter here, as in 25 cents. Their inflation rate, the highest in the world, is running at 231 million percent. Here's the full story on CNN.

Tainted Lunch Meat : Modern Money Mechanics

This may be of some interest for some of you. It was printed by the Federal Reserve Bank of Chicago, and is out of print.