Bill Holter

"Cleaning Up Our Act" ...Too Late and Too Dirty!

November 13, 2014

2014 is surely looking like a watershed type of year.  We have seen a few slaps on the wrist here and there since 2008 for fraud, rigging markets, trading against customers, bogus ratings, multiple re hypothecations of the same asset many times over and on down the line ...but no one ever seems to go to jail.  I take that back, China has reacted harshly by even executing a billionaire for fraud, so I will clarify by saying no one in the West has gone to jail with the exception of 3 hedge fund managers.  I say "watershed" year because even though no one seems to be doing jail time, some light is at least being shed on how crooked our markets are.

We've had the LIBOR and gold market revelations where firms paid fines (far smaller than their gains, so crime does in fact pay even after disgorging well over $30 billion in fines!) but no jail time.  The important thing is that market participants are getting to see on a nearly monthly basis, all of the major firms say "we don't deny or admit doing anything but we agree to your multi-billion dollar fine."  People are not foolish, well, they are, but not this foolish.  There has been much smoke but so far, no "fire" so to speak as the regulators don't seem to require ANY admission of guilt. 

I will give you my opinion on "why" the admission of guilt is never required.  It's really quite simple, were a firm to actually admit guilt for any sort of fraudulent activity, they could be barred from doing business in certain jurisdictions and exchanges.  In some cases they MUST be barred from doing business under current rules and laws ...but this is only a side show to the reality. 

The "reality" is that if a firm admitted guilt ...of anything, can you imagine the private slam dunk lawsuits that would arise?  These lawsuits could total more than ALL of the equity these firms have combined!  But wait, this is still not the real reason.  The real reason that these firms are not held to task is because of the word "discovery."  Do you understand?  If there were private lawsuits that actually went to trial and were not settled ahead of time with "gag orders" included, the process of discovery would go forward and who knows what would be uncovered!  "Who knows what?" such as what other firms were involved and yes ...which central banks or sovereign treasuries?!!!  Spam me if you like and tell me that "governments" would never participate in "frauds," my answer will be as simple as suggesting you look at the fiat you have in your pocket.  Would you like other examples?

So, this is why no one seems to go to jail and no firm ever "admits" guilt ...because the chain will ultimately lead up the totem pole and end at the central banks themselves and no one likes a "squealer."  We got a glimpse of this yesterday as Bloomberg reported that Martin Mallett, the head trader of FX for none other than The Bank of England was fired.  Please read this article closely, or maybe several times.  Do you see anything strange?  Maybe the author was smoking a left hander when it was written or maybe it is totally accurate but it doesn't make sense to me.  It seems that Mr. Mallett was fired 1 day prior to UBS being fined for FX fraud.  The article claims Mr. Mallett had "concerns" of collusion in the FX market going back to 2012 but did not relay his concerns to his superiors.  The story went on to note that Mallett had regular meetings with various FX traders every two months and then quotes Mark Carney (Governor at BOE) as saying "What Lord Grabiner found was that our chief dealer was aware of circumstances in the market that could facilitate or lead to improper behavior by market participants."  But wait, the article finishes with "Mallett "was not acting in bad faith," according to the Grabiner report. He wasn't "involved in any unlawful or improper behavior, nor aware of specific instances of such behavior." 

So why then was he fired?  Was he fired because he did not relay his "concerns" of FX collusion or did he get fired because he did try to go whistleblower with it?  This will be interesting to follow (if there is any follow up) because surely there has to be some sort of concrete reason for his termination.  I would add, if it were serious enough for termination and related to his job rather than bad conduct or the like, shouldn't he have been arrested?  I get it, you can't really "fine" a public servant so to speak and termination is the equivalent.  Again, this is interesting, not only because of "who and where," but because of "when" this is occurring.

The "when" is interesting not just because it was 1 day before this FX crackdown, negotiation, and fines being coordinated by UK, U.S. and Swiss authorities ... it was done during and before the G-20 meeting and final communique.  Do you see where I'm going with this?  Are "we" trying to show the world we are "cleaning up our act"?  In my opinion, this may have something to do with it for appearances but I also don't believe there is a chance it will work. 

As I wrote yesterday regarding a "G-20 massacre," it is my opinion the world (led by China) may be sufficiently positioned to dictate all of the rules going forward.  The Chinese are not foolish people and know fully that our markets are a rigged sham, ALL markets!  Why have the Chinese not said anything prior to now?  Well, they have, several times and done it politely as far back as 2010 regarding our fiscal and monetary decadence.  The answer to "why" is quite simple in my opinion, it is because "we" the West, still had deliverable gold.  Did they think or know the prices of gold and silver have been rigged?  Of course, they would put in big orders to buy and then watch as the price went down.  They have done the math, they know how much gold we "had" and they know how much is produced ...and subtracted what they have imported to know probably within 100 tons of where exactly the bottom of the barrel is!

Let me finish with pure opinion and what I think the global mindset is.  The Chinese have allowed the sham to run and I must think that they feel a little bit embarrassed for the people of the West.  They have held the APEC and BRICS summits prior to this weekend's G-20 meeting.  President Obama showed up to meet President XI while chewing gum and then refused to ride in Chinese provided limousines.  Do you see how bad this looks and really IS?  Chewing gum?  Did he believe his life was in danger riding in Chinese transportation?  Any more danger than the 40 or so "fence jumpings" at the White House?  Did he really believe the Chinese would ever let anything bad happen to a foreign head of state ...especially the U.S.?  These meetings are all about "pomp and circumstance," even university professors have expressed their outraged opinions on China's censored and monitored internet!  None of these blogs would ever have been allowed without "official" permission, at the least, these professors would be out of a job without it. 

As for the rest of the world, they are lining up behind China and gathering collectively to move out from under U.S. hegemony.  Some Americans see this, many do not.  The world is not happy with us and even many of our allies are shuffling away from us.  If the intent on any of the fines (without jail time or "executions" of course) over the last 2-3 years was in any way to placate or "appear" as though we are cleaning up our act, forget it.  Just like the crazy aunt in the basement that everyone knows about but won't admit to or speak of, Western markets are too dirty and have been so for too long.  Any attempt at "cleansing" at this point will require a total gutting of the house.  This will happen not by the good intentions of our leaders, rather by Mother Nature burning the whole thing down to start over again from scratch. 

Chasm of Destruction

November 12, 2014

In yesterday's "fatal flaw," we wrote of the imminent currency war between Japan and China, as the "final currency war" turns nuclear. In fact, we specifically stated...

...it's only a matter of time before the aforementioned full-scale currency war goes global; and when we say a 'matter of time,' we mean NOW; possibly, starting with this month's APEC, BRICS, and G-20 meetings.

Apparently, NOW couldn't have come sooner - as just after we published that comment, Shinzo Abe addressed last week's Bank of Japan "kamikaze attack" on the Yen by lying to the entire world. To wit, when questioned at the aforementioned APEC or Asia-Pacific Economic Co-operation summit, he claimed "Japan abides by the agreement of G7 and G20 nations that currency rates ought to be determined by markets."

In other words, Abenomics and its new-born twin brother, "Abenomics II" are not targeting yen depreciation, despite countless comments to the contrary; including his own in December 2012 - just after being elected Prime Minister, and four months prior to Abenomics implementation...

Central banks around the world are printing money, supporting their economies and increasing exports. America is the primary example.

If it goes on like this, the yen will inevitably strengthen. It's vital to resist this.

-The Wall Street Journal, December 23, 2012

Well, I guess "resisting upward movement" isn't the same as "targeting downward movement," but only if one's a semantics lawyer - and the F. Lee Bailey of semantics lawyers at that. To that end, I wonder what good old F. Lee would have to say about the Abenomics policy goals described by Wikipedia; i.e., "correction of the excessive yen appreciation." Or, for that matter, the Yen's 35% collapse since Abenomics was proposed two years ago.

Last year, ten such banks were fined $3.6 billion for manipulating the $350 trillion LIBOR market for nearly a decade. And today, UBS, Citibank, HSBC, JP Morgan and RBS were fined $3.4 billion for manipulating the $1.3 quadrillion foreign exchange market for gosh knows how long. Even the Bank of England's Head Foreign Exchange trader was fired for his role in the latter scandal, although it should hardly be surprising as Central banks have become official customers of commodity exchanges like the COMEX. Or, for that matter, that Central bankers have been well aware of such criminality for years, since it surfaced that former New York Fed President - and later, Treasury Secretary - Tim Geithner traded memos with Bank of England Chairman Mervyn King in 2008, discussing potential methods of "fixing" the LIBOR process.

In other words, manipulation has not only become common practice amongst both politicians and bankers, but the recognition of such is no longer disputed - particularly in precious metals, as Bill Holter discussed yesterday. Not only that the blatant patronization of the masses being destroyed by such criminality is on full display; for example, Swiss regulator FINMA following last week's statement that it found a "clear attempt to manipulate precious metals" with instructions that UBS's precious metal traders receive bonuses of no more than 200% of salary for the next two years!  

This is why the top "0.1%" are now wealthier than the bottom '90%" combined; and subsequently, why public calls to action are exploding - starting with September's nearly successful Scottish secession referendum, and Sunday's decidedly successful "Catalon-astrophe." And thus, to the hundreds of thousands of "CIGAs" or Comrades in Gold Arms of the Miles Franklin Blog community, we hope you to take heart - as indeed, the people are speaking. Case in point, and extremely ominous for the future of TPTB, was the response to this morning's comments from Swiss National Bank President Thomas Jordan, who claimed a "yes" vote in the upcoming "Save our Swiss Gold" would be a "fatal error of judgment." How did the market respond to this propaganda, you ask? By immediately causing the Swiss Franc to surge to nearly the 1.2 peg rate against the Euro. In other words, a consensus is building that "yes" will prevail, yielding the end of the infamous Euro/Franc peg - and unprecedented open market Central bank gold purchases.

Why did we start today's article with myriad references to money printing, market manipulation and propaganda? Because they has created an unprecedented "chasm of destruction" between the reality of a collapsing global economy and the lie that is the financial markets. Not that we haven't discussed this topic ad nauseum; but when reading this fantastic article of "WTF charts," said chasm couldn't be clearer - particularly in the United States of Market Rigging with its unparalleled manipulation arsenal. Yesterday's comical, 11^th straight "dead ringer" algorithm in the "Dow Jones Propaganda Average," replete with last second "hail mary" rescue; coupled with a 2:00 PM EST "Crybaby Attack" on the surging PMs, following failed raids at the key attack times of "2:15 AM," 8:20 AM and the 12:00 PM "cap of last resort" was just par for the course.

And by the way, this morning's "news" items - you know, the catalysts for U.S. stocks outperforming the entire planet - were 1) an 11% weekly plunge in home refinancing applications 2) a massive "unexpected" decline in retail bellwether Macys' 3Q sales and full year earnings outlook 3) weak wholesale sales data and 4) the below, self-explanatory headline of the state of American retail.   

However, just as the foreign exchange market is "calling" the SNB's lies, the physical PM markets are, too. To wit, the most backwardation gold market conditions in 15 years expanded significantly yesterday, and the U.S. Mint's announcement that on November 17^th, it will have just one million Silver Eagles to sell - compared to the two-plus million sold in 2� hours on November 5^th alone - depicts just how little physical supply exists. And this, as the mining industry sits on the cusp of an historic production collapse with silver sentiment sitting at lows last seen in 2001, when prices were barely $4/oz.!   

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