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Avery Goodman

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  • The Last Great Opportunity in Silver and Platinum? [View article]
    There is absolutely nothing wrong with requiring 100% performance bonds, but more than 100%, as has been done by NYMEX before, is fraud that should be and will be criminally prosecuted if it happens in the silver market.

    If and when futures market performance bonds are set at 100% PERMANENTLY the game is over. Silver would slowly but surely return to its fair value which is much higher than current prices. The game is to manipulate the prices for private profit and to reduce the viability of silver and gold as alternatives to paper currencies.

    First, lure in innocent people with the low performance bonds, then get them to over-leverage with dreams of big profits, and then flush them out by suddenly changing the amount of the bond. The result is, essentially, "stealing" candy from investment "babies". The issue is about moving the bonds up and down, opportunistically though what has the appearance of impropriety in controling the mechanisms of the exchange. The idea is to mislead and defraud gullible futures market investors and, by doing so, create unnatural volatility in silver prices. This, in turn, chases away conservative investors who would otherwise buy gold and silver if not for the unnatural volatility.

    Take away corrupted derivatives markets and the apparent games by those who control them, and 99% of the volatility in gold, silver, and platinum prices will disappear overnight. Gold and silver would return to being the most stable long term stores of value, as they were for 10,000 years before the opening of corrupt futures markets and quasi-governmental sponsored fraud.
    May 5, 2011. 04:24 AM | 14 Likes Like |Link to Comment
  • Short Sellers Now Screaming About a Buy Side Silver Conspiracy [View article]
    They are not incompetent unless all the casino-bankers are incompetent. The big mistake, which is the cause of the current Financial Crisis is for banks to get into highly leveraged and unstable positions. The extent of potential instability caused by interest rate swaps is astronomical, even now, for example.

    In all other markets, for the most part, leverage is paper based, and the corrupt system of central banking can be used to steal money from savers and taxpayers and to give it to the casino-banking industry, using the printing press as Bernanke has done. But, in precious metals markets, other than gold, where friends at the central banks may be able to save them for a little while longer, at 100 to 1 leverage, the bankers illustrated a high level of innate stupidity.

    The extreme level of greed and foolishness, combined with market knowledge of the scheme, is allowing the vigilante movement to vanquish them. The smartest thing they could do would be to simply give up, and do what some of the Asian members of the gang were doing on Monday, which is simply to buy back short positions as quickly as possible, at any price.
    Apr 27, 2011. 12:31 AM | 14 Likes Like |Link to Comment
  • Short Sellers Now Screaming About a Buy Side Silver Conspiracy [View article]
    If that were so, the exchanges would simply create a rule providing that margins float up and down, with increasing and decreasing prices automatically triggering margin changes. Thus, as the price of a commodity rose, margin requirements would rise, and as it fell, margins requirements would fall, in each case buffering the magnitude of the price change, and creating a more stable economy. Instead, performance bond levels are gamed for the benefit of maximizing price movements. They are decided on a capricious basis, by committees which have many members associated with various political interests within the exchange.

    In addition, if leverage were the reason for changes, the amount of a performance bond for long buyers should only change on new contracts that are written at higher prices, and NOT on existing contracts for which the probability of buyer default does NOT change. The probability of default ONLY changes, with higher prices, with respect to the short seller delivering the commodity. A long buyer is not placing the exchange at any greater probability of default simply because the price rises.

    Indeed, we have been informed by reliable sources (though we were not trading anything at that time) that performance bonds were raised to 100% of the purchase price of silver for long buyers in 1980, prior to a declaration of "liquidation only" as the probability of short-seller default rose back then. We have also been informed that in 2000 (although we cannot verify it because the exchange does not freely publish performance bond history), that performance bonds on palladium were once raised to more than 100% of the spot price of palladium again, at a time when short seller default, and not long buyer default, was in question. Of course, it is impossible for a long buyer to default, if he deposits 100% of the total price at which he acquired his position. Frankly speaking, the only thing we cannot understand is why the exchange, and individual performance bond committee members, at the time of the alleged palladium incident, were not. AT MINIMUM, sued under the RICO statutes for fraud.

    It seems to us, therefore, through the use of the same logic, reason and common sense that a finder of fact or law must use in a courtroom, to arrive at an opinion, that performance bond changes can be made, and often are made, solely for political reasons, including, but not limited to, either restraining non-favored speculators, rewarding favored speculators, artificially holding down the price of a commodity, intentionally increasing the price of a commodity, and/or supporting silver short seller's financial interests. It is an opinion, of course, but one that we feel is strongly supported by the behavior we have observed.
    Apr 26, 2011. 11:30 PM | 13 Likes Like |Link to Comment
  • Morgan Stanley's Failure To Segregate Client Assets Creates Default Risk [View article]
    I do not make a value-judgment. But, people buy gold in fear of a discredited Federal Reserve. Their purpose is defeated by counter-party risk. Whether they will profit or lose money from buying gold, as opposed to keeping money in the form of cash Federal Reserve Notes, is another related, but separate question.

    But, it is an interesting question. So, let us consider the total breakdown situation. I believe that holders of gold will be in a much better position than holders of Federal Reserve Note dollars, when the end comes. If and when the Federal Reserve is discredited, a cascade of dollar selling will occur. This is especially true at the point when the Fed is on the verge of being closed down by Congress. At any rate, it will no longer be able to prop up "too-big-to-fail" banks. Those banks, being very dependent upon the Fed, will fail.

    The nation, being bankrupt itself by that time (except for its gold hoard) will behave much as Rome once did during the Italic civil war in 146 BC. It will concentrate on survival. Congress will not be in the mood to, nor will it have the financial resources to backstop bank obligations. Nor, will anyone really care if they do, because credibility, which is the single most important driving force behind the monetary system, will have been lost. So, the TBTF banks will default, most significantly on their tens of trillions worth of net derivatives.

    LBMA, COMEX and NYMEX, in the absence of their most powerful clearing members, will all go down with the banks. The derivatives market for gold will end. It is significant to note that, even as massive gold and silver selling was happening in late 2008, on derivatives markets all over the world, sales of physical gold in the real market were booming like never before. But, after the futures and OTC markets close, the only gold market left is the physical market. Remember, the TBTF banks have finally failed, and no one is going to trust derivatives after that.

    It is always a mistake for a driver to concentrate attention too much on the rear view mirror. He must be aware of what is ahead of the car, or he will crash. So, it is with money. The upcoming implosion that the Fed, ECB, et. al. are leading us to will be very different than the failure of Lehman Brothers. To heighten that difference, of course, will be the 100 to 1 ratio between derivatives and physical collateral in the precious metals.

    The derivatives to collateral ratio implodes after the exchanges, and the OTC market, are no longer viewed as credible places to trade. During the failure of Lehman, American TBTF banks were owed tens of billions by hapless fools around the world who had bought derivatives and other assets, and didn't have enough dollars to service those assets anymore. They went around scrounging the world for dollars, lifting demand, and causing the exchange value of the currency to temporarily rise a large amount.

    But, in the theoretical final implosion of the Fed Ponzi scheme, the entire structure of the derivatives market will fail, not just one bank. Meanwhile, China, Russia, the oil exporters, etc. will continue on their current path, trying to deal in either gold, their own currencies, or claims upon US gold (ie: the US Note dollars) rather than in the Federal Reserve Note dollar. Several years will probably pass between now and the implosion least late 2014 or later, and as the years pass, these nations are going to wean themselves more and more off the dollar.

    When Lehman went down, the Fed had extremely high levels of credibility, and didn't go down with it. But, when the Fed itself goes down, the Federal Reserve Note dollar, its obligation, goes down with it. The price of physical precious metals will soar exponentially, in terms of Federal Reserve Notes and all other old currencies, because no one will trust those currencies. In this scenario, gold soars into the stratosphere even if everything else is wracked by deflation. But, since the dollar has become non-credible, deflation in the dollar-world cannot happen no matter how much debt destruction occurs.

    Destruction is normally deflationary, but just like many things in nature, when a chemical phase change occurs, a thing can change its fundamental properties. If debt destruction is partial, and people scramble to try to pay back their bills, the value of whatever they are scrambling for goes up, and prices denominated in that currency go down. That is deflation. But, when debt destruction is complete and utter, the entire system becomes non-credible. No one scrambles to find money to repay bills anymore. They simply don't pay. And, no one wants their money anymore for any new things that are sold, because the money is viewed as non-credible, and, therefore, worthless.

    Financial institutions and people will not desperately try to find FRN dollars to pay their bills, in a total breakdown situation in which the Fed failed. This is very unlike the situation that occurred during the implosion of Lehman Brothers. No one will be propping up the value of the FRN dollar. Real money is going to be demanded for real goods and services, not Federal Reserve Note dollars, Euros, or other discredited currencies.

    Now, let us assume that Congress is smart enough to quickly replace the discredited FRN with a new type of dollar, as I am sure it will be. Once the old "US Note" is reincarnated, it will replace the Federal Reserve Note. To gain credibility, the US gold reserve must come into play as some sort of backing for the new currency. So, the US Notes will replace the old dollar at the ratio equal to the amount of the US gold reserve divided by the number of physical Federal Reserve Notes then in circulation. And, the FRN will be taken out of circulation.

    In terms of Federal Reserve Notes, in this scenario, gold must rise to a minimum of the $12,000 range, although the fear factor means that it will probably rise to several times that, and this is assuming no more printing between now and then. This would, perhaps, happen even if, at the same time, gold sells for $35 per ounce, when paid for in US Notes. So, you can have theoretical "deflation" in the nominal value of US Note dollars, while having incredible levels of inflation in the by then discredited former money.

    We can only deal in terms of federal reserve notes, right now. Or, Euros, pounds, etc. which are all currencies that are doomed to deep devaluation. Remember that, in 1538, a British pound was actually worth a pound of sterling silver. And, the measuring pound unit was comprised of more troy ounces than it is today. The US dollar has been debased to the point of retaining only about 1.7% of its 1913 gold value.

    The US Note dollar has not been reincarnated yet. If it was in existence, maybe it would be wise to buy them. But, now, people can only turn to metals with monetary tendencies, like gold, silver, platinum, etc. to preserve assets if they believe that the final implosion of the American centric world financial system is going to be accompanied by the closure of the Federal Reserve.

    Whether this future does unfold, or does not, the expectation that it will unfold is one of the driving forces behind gold buying. Thus, when a firm fails to segregate assets, thereby depriving its clients of the legal right to recover their physical gold, it defeats the essential purpose for which they are doing business with that company.
    Mar 18, 2012. 11:30 AM | 12 Likes Like |Link to Comment
  • The Empire Strikes Back Against the Silver Price Rebellion [View article]
    What you say is only true in a market that is aware of the manipulation, as is true now. A manipulation can be successful in darkness but not in the light. We believe that years of long term downward price manipulation is now unwinding all at once. That is why the price of silver has gone from $18 to close to $50 per ounce in such a short time, and why the process by which silver is returning to its fair market value is still accelerating.
    May 1, 2011. 01:31 PM | 12 Likes Like |Link to Comment
  • Why We See Gold Going Lower Long-Term [View article]
    This article lacks insight into the gold market. It attributes, for example, gold's big rise in large part ot the creation of gold ETFs and miner de-hedging activity. But, the first ETF, GLD was created in 2004, and gold had already been rising fast for 3 years at that point. Miner de-hedging also started long after the rise in price started, and is a result of rising gold prices, not the cause of them.

    Morningstar also fails to note Federal Reserve reports from 1997/98, recently made public, which note very strong demand for gold even then (before the big rise in price). Large sales of sovereign gold stocks made a rise in price, in response to increased demand, impossible. Probably, we needed to wait until the central bankers started to run lower on gold than they were comfortable with, before the price was allowed to rise.

    The main reason gold has risen in price since 2001 is increased dollar, Euro, pound and yen liquidity, combined with yuan, rupee, dong, etc. printing. People are losing faith, all over the world, in irredeemable fiat currencies husbanded by persons of questionable ability who happen to have impressive sounding degrees in what many are increasingly convinced are nothing more than fantasy based economics. As America, Europe and the Far East prints money, people turn to gold as the natural alternative.

    Since the debasement of fiat currencies is unlikely to stop during this decade, except for short periods needed to build up more political support for quantitative easing (money printing), gold will continue to go up in the long run. Another huge factor left without any consideration is the debt crisis. The alternative to gold, for safety-oriented investors has always been government bonds. We are now seeing sovereign debtors, all over the world, including North America, faced with insolvency. Nations, like the USA, which controls its own currency, will almost certainly default by using the stealth tactic of money debasement and inflation. In such an environment, gold can only go one way...which is up.
    Apr 23, 2011. 04:24 PM | 12 Likes Like |Link to Comment
  • Short Sellers Now Screaming About a Buy Side Silver Conspiracy [View article]
    Yes. The Empire is striking back. But, I wouldn't count out that idea that the "rebels" and Luke Silverwalker will use the Market "force" to take out the Deathstar, before it becomes operational! If they do, it might be impossible for him to sell his silver short positions without severe losses.
    Apr 26, 2011. 12:31 PM | 11 Likes Like |Link to Comment
  • Time to Get Precious Metals Out of Storage in London? [View article]
    You are incorrect. This article is not about ETFs. That is another issue, although it is an important one. This article is about unallocated storage in London, which many individual investors, even other financial institutions, sovereign wealth funds etc. have foolishly gotten themselves involved in.

    First, you can hold precious metals at a recognized independent facility, like Brinks or Via Mat, and trade your gold on COMEX, NYSE-Liffe and a number of other venues around the world. It is titled in your name, unlike the unallocated storage accounts in London.

    Second, there is a very active spot market for all precious metals, and they can be sold, at any time, especially between financial institutions.

    Third, your "good old bank account" IS backed up. If the bank goes under, and the depositor has distributed his money appropriately so as not to exceed the limits, U.S. depositors will get their money back from the FDIC, even if it requires printing new ones. The same is true in almost all other nations, to one extent or another. Not an ideal solution, as the value of each one might be reduced, but, at least, during the time the bank holds your money it pays you interest. Even on the old "gold bonds" that were once sold, people were subject to counter-party risk but received interest, usually in the form of additional gold.

    Most important, however, is that the banks do not need to collapse entirely in order for people to never get back the metal they've deposited into these unallocated accounts. The bank need only have miscalculated the conversion demand. If too many people demand redemption at the same time, the bank just says "sorry, here's the value in fiat money at this moment". By the time, the recipient gets a chance to buy metal for replacement, of course, the word is out, and the price skyrockets far beyond the compensation paid. After all, if the bank holding the unallocated account could have bought the metal, it would have.

    At the bottom of this article, just above the comments section, there is a link to the form unallocated storage contract. If you read it, you'll be shocked as I was. You'll find that the British divisions of these banks have taken great pains to insulate themselves from all lawsuits for "negligence" and even for "fraud". The signor of the contract agree contractually that, even if the bank intentionally misleads you or defrauds you, you cannot sue them!

    There are a lot of nice people who work for other divisions of these banks. But, it seems to me that the actions of the storage divisions, in London, cannot be defended. We should not hold the actions of a few bad apples against all people who work for those same banks. Many other divisions are filled with good people who are blameless for the actions of their co-employees.

    However, if you are holding metals with the banks in London, beware! We conclude that your best solution is getting the metal out before it is too late.
    Mar 10, 2011. 09:11 AM | 11 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    I am an amateur economist. But, one doesn't need years of schooling to be a better "economist" than Ben Bernanke. One merely need take off the blinders, and release the common sense inside. A broad background in law, economics and history helps, but is not absolutely necessary, but doesn't hurt. It is precisely the narrow education that professional "specialists" get, here in America, that may be blinding people like Bernanke from reality. That is probably why the man has been wrong on virtually all his economic predictions so far.

    That's right...Mr. Bernanke has been wrong about almost all his predictions concerning the course of this crisis since the beginning. Where, then, can anyone obtain confidence that he knows more than we do, now? Should we throw away our common sense, when we have been correct consistently, over the past 4 years, and he has been consistently wrong?

    What confidence can the American people have in this man, or others in Washington, in light of what has happened? What assurance do we have that they know much, when they first failed to regulate, and, then ended up completely wrong on almost all economic projections, one after another?

    I submit that neither Bernanke, nor his comrades, such as Timothy Geithner, know what they are doing. He and the others in that crowd in Washington DC, are convinced that if they throw money around, it will land somewhere, and help things. To this goal, they have now pressed the accounting standards board to legalize what is essentially accounting misrepresentations by removing of "mark to market" accounting. That, of course, was inevitable.

    So, millions of Americans are better economists than Bernanke.
    The mass "throwing of money" has resulted in what will eventually be a stealth transfer of wealth from those who earned it, to those who have political clout. It is the same process that occured in post World War I Germany. It is done through heavy inflation, which is a stealth tax upon the people.

    Indeed, transfers of wealth are the key to understanding why this crisis mirrors the German hyperinflation, and not the Great Depression experienced by 1930s America. To fixate on the Great Depression is to ignore the true problem we face.

    1) Post WW I Germany was the biggest debtor nation in the world, at that time. Debtor nations are dependent upon foreign cash flows. In contrast, in the 1930s, like Japan in 1990, the U.S. was the biggest creditor nation in the world. That is why Germany had hyperinflation when it printed money, while 1990s Japan and 1930's America had deflation as they did the same thing. Because we are the biggest debtor nation in the world, the current money printing will result in hyperinflation, NOT deflation.

    2) Post WW I Germany had just finished fighting a major war on borrowed money, without properly budgeting or taxing. The USA has just fought, and continues to fight, multiple wars on multiple fronts that, while not quite as "big" as WW I, have been extraordinarily costly. We use a professional army, and its pay and equipment add huge costs. We have failed to budget these wars, and have borrowed money, instead, in order to fight them. By contrast, from an economic point of view, late 1920s and early 1930s America was a net "beneficiary" of WW I, which resulted in huge debts being owed to the USA, and the first stage of the rise of the U.S. dollar to replace the British pound as an international medium of exchange.

    3) Post WW I Germany was heavily dependent upon the import of foreign raw materials. Indeed, the USA was one of its biggest creditors. The USA is no longer a creditor. It is now very dependent upon the import of foreign raw materials and finished goods. The temporary improvement in trade figures will disappear as the fake recovery gets under way. By contrast, in the 1930s, the U.S.A. was one of the biggest exporters of raw materials.

    4) Post WW I Germany was heavily dependent upon foreign cash flows to plug holes in its budget after the War was over. Sales of bundesbonds to foreign buyers, including the American financier, J.P. Morgan, were critical. The USA is now even more dependent upon foreign cash flows. Sales of huge numbers of Treasury bills, notes and bonds are critical, especially to China, who, unlike America to Germany in 1918, is currently a strategic competitor.

    5) Germany was not the only nation affected by the post-War depression and the so-called 1918 "credit crunch." All of Europe experienced it. Not all countries, however, followed the same path to ruin. Similarly, the whole world is now experiencing the so-called "credit crunch".

    6) Germany led Europe in the effort to spend its way out of the post-war depression. The USA is now leading the world in an effort to spend its way out of this depression. At first, Germany seemed to "recover" from the depression. Soon, America will seem to "recover" from this depression, in a similar manner. In 1919, many admired the Reichsbank. Employment rose, unemployment fell...economic output exploded -- or seemed to, at first. No doubt, that will be the case, again, this time as America leads the way into a fake recovery. Most of Germany's recovery amounted to irrational production of relatively useless goods and services. The industrial bailouts were improperly allocated and colored by the illicit transfer of wealth that is inherent when a nation chooses to print up new money. The same will be the case now, with America.

    7) Like America, now, in post WW I Germany, money flows continued for quite a while, in spite of the flawed policies of the Reichsbank. American trade interests, for example, supported the German spending on U.S. raw material products, because Germany was one of their biggest markets. The USA played a similar role with respect to the Weimar Republic as China plays now to the USA. It was Germany's biggest creditor. It is quite likely that money flows to America may continue for an even longer time. However, eventually, they will be cut off.

    8) Like the foolish foreigners who now buy U.S. bonds, even the otherwise savvy American financier, J.P. Morgan, were generally convinced by officials of the Reichsbank, that the problems were temporary, and that the mark would regain its value with time, just as buyers of Treasury debt are now convinced that the dollar will retain value. The U.S. has a distinct advantage in this, because it is able to pump up its currency with credit default events that must be settled in dollars. This results in a direct benefit to the dollar in terms of exchange value, and allowed the Fed to obtain foreign currency swap lines. The swap lines were obtained because foreign central banks temporarily needed to supply dollars to financial firms who needed to settle CDS events. So, the temporary party will go on longer in America, until the world's patience is finally exhausted.

    9) The Reichsbank claimed that it could control the events it created, just as the Federal Reserve does now. Questionable statistics were regularly published, just as is now the case in the USA. German authorities believed, just as American authorities now believe, that the perception is more important than economic reality. Eventually, however, when the foreign cash flows dried up, reality reasserted itself, and the German economy entered hyperinflation.

    10) Finally, most tellingly, the German "professional" economists called the 1918 post war depression, prior to the hyperinflation, "the credit crunch", and the prevailing complaint was that banks were hesitant to lend money. Unwittingly, American professional economists, including Mr. Bernanke, have dubbed the present crisis with the same name. A frightening coincidence...

    For more information about the German hyperinflation experience, read the following book. It was written long before the current crisis, and even before the full impact of the Great Depression hit the world, back in the 1930s. Thus, it has no bias. It will be an eye-opener for the "doubting Thomas".

    Turroni-Bresciano, Constantino, The Economics of Inflation – A Study of Currency Depreciation in Post-War Germany (George Allen Unwin 1931)
    Apr 9, 2009. 11:40 PM | 11 Likes Like |Link to Comment
  • What Happens To Precious Metals And Bank Stocks In A Post-Euro World? [View article]
    Politics, unfortunately, drive the price of all assets, including precious metals, commodities, and stocks. Political decisions that create public debt, or allow banks to create credit money and create private debt, as well as the choice as to whether or not to print more fiat currency to pay that debt, drives precious metals prices. The price of the product has a more direct and fundamental effect on PM company balance sheets, and stock prices, than anything else.
    Jun 7, 2012. 12:37 AM | 10 Likes Like |Link to Comment
  • The Outlook For Precious Metals Prices [View article]
    I wouldn't worry too much. Be thankful for the current and past fire sales. The manipulators have made such egregious long term errors in handling other parts of the economy, that they will soon lose control over precious metals markets.
    May 8, 2012. 03:36 AM | 10 Likes Like |Link to Comment
  • The Fed Makes Sure U.S. Dollar Collapses With The Eurozone [View article]
    The gold specie standard has never been "discredited". The gold exchange standard, whereby the Federal Reserve backed only 40% of the dollars with gold has been discredited. That system began in 1914, with the opening of the Federal Reserve, and collapsed in 1933 when too many Americans wanted to exchange their dollars for gold. The Fed panicked, because it was running out of gold, and it began withdrawing previously over-printed liquidity from the financial markets, precipitating the Great Depression of the 1930s.

    Had the Fed never been able to over-print dollars, and been forced to obey the discipline of a strict 1 for 1 gold specie standard, the vast credit expansion of the "Roaring 20's" could not have happened, and the subsequent Great Depression could also not have occurred.

    The gold specie standard, when adhered to, and not departed from for the convenience of governments and bankers, insures stability and quality growth, as was seen between 1870 and 1893. There are frequent small upturns and downturns, but people's faith in gold keeps the system running smoothly over the long run.

    The same cannot be said of fiat money systems, like the current regime. Under the current system, money-printing is used to levy stealth taxes, raid the bank deposits and bond holdings of the innocent, and to reward well connected speculators with unjust enrichment at the expense of the productive members of society. Debt-based money is being discredited very quickly, right before our eyes, as the structurally corrupt financial system collapses. But, it has been discredited since 1914, when the Federal Reserve opened its doors, as evidenced by the 98.6% decline in value of the US dollar against the price of gold.
    Dec 3, 2011. 03:41 AM | 10 Likes Like |Link to Comment
  • Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval [View article]
    Wrong, again, klarsolo!

    It is worth noting that there is no precedent for the incredibly unstable situation these banks have put us in. Back in 1995, for example, all American institutions had written a total of $16 trillion in notional value of derivatives. This compares to $209 trillion now being housed in American FDIC insured instituions with a big depository base, and another $100 trillion plus at Morgan Stanley/Goldman Sachs (which are technically FDIC insured but have few depositors). In the 1980s, derivatives basically did not exist. They were not needed then, and are not needed now.

    If institutions who do not suck at the public teat want to issue derivatives, and others want to buy them, let them. When the derivatives implode, let the people who profited from them go bankrupt, but don't steal from savers and taxpayers to subsidize yourselves. If a real capitalist America means that we will have a lot of people in NYC jumping out of tall buildings, during such episodes, then let it be so. All things would be as they should be.

    The issue is foisting the liability for potential losses upon the American people, and it does not actually matter whether the losses are hundreds of billions or trillions. There are those who can give exact, derivative by derivative and counter-party by counter-party answers to your questions. They are the people who seek to privatize gains, and socialize losses. They are the people who have foisted these derivative obligations upon the American people through the auspices of the FDIC.

    A few executives at the 5 biggest banks in America are the only ones who know all the details of the derivatives they have written. They choose to keep the exact information secret. It should be noted that the vast majority of the people working at these institutions are fine people...probably something on the order of well over 99%. But, there is also a hard core of sociopaths, and it doesn't take many sociopaths who happen to possess the nuclear bombs of the financial world, to bring down a nuclear winter upon the entire world population.

    Based upon publicly available aggregate information, however, as stated clearly above, the worst case scenario for Bank of America, alone, are losses of about $6.75 trillion, based upon aggregate information available from the Office of the Comptroller of the Currency. That is well above the net capital available to BAC, which is in the $110 billion range, and well in excess of the total assets of the bank.

    In light of the priority given to derivative counter-parties under bankruptcy and insolvency laws, as well as Dodd-Frank, that means few, if any assets, will be available to be sold by the FDIC. Taxpayers will not be reimbursed for hundreds of billions, or even trillions in depositor reimbursements, even with a derivatives failure that is only a tiny fraction of the "Murphy's Law" exposure of $6.75 trillion. Nor, would depositors who happen to have more than $250,000 receive any fraction of their excess deposits because few if any assets would be available to repay them.

    Given that the entire US GDP is less than $15 trillion, taxes would be have to be raised as far as possible, and the excess money needed would have to be printed. The net result will be a massive theft from taxpayers and dollar denominated depositors, all to insure that casino bankers make nice profits and get paid nice bonuses, in the short term future. In short, allowing banks to house derivatives inside FDIC insured units equals irresponsibility bordering on criminality on a massive scale never before experienced in human history.
    Oct 24, 2011. 04:42 AM | 10 Likes Like |Link to Comment
  • Bank Of America Dumps $75 Trillion In Derivatives On U.S. Taxpayers With Federal Approval [View article]
    Of course it is beneficial for BAC and other derivatives-issuing banks to both issue the derivatives and house them in FDIC insured divisions. The article is not intended to attack BAC, but, rather, to address the inability of the Federal Reserve, given its intense conflicts of interest, to act as a bank regulator. The failings of BAC arise out of extreme greed and incompetent management, which is the same issue afflicting all the world's casino bankers.

    People who are making angry comments about this article need to educate themselves about derivatives. Credit default swap exposure for all American banks is about $15 trillion, or about 6% of the total derivatives, and these type of derivatives are the ones that imploded the world financial system in 2008. Interest rate swaps are about 81%. Foreign exchange contracts are about 10-11%. The five banks, which issue the vast majority of all derivatives in America, are JP Morgan Chase, Bank of America, Citibank, Morgan Stanley and Goldman Sachs, in that order. All but Morgan Stanley seem to be housing the derivatives mostly in the commercial banking divisions, just like Bank of America wants to do. But, that doesn't make doing so any less dangerous. None of them should be allowed to house ANY derivatives in FDIC insured divisions.

    With the addition of Merrill Lynch derivatives, Bank of America NA will have about $75 trillion in gross notional exposure, making it the #2 FDIC insured bank on the derivatives hit parade. JPM will remain #1 with about $80 trillion. Bank of America has been #1 in exposure to exchange traded futures, for quite some time, and will remain in that position, after the addition of the Merrill Lynch exposures. JPM is #1 in OTC derivatives.

    It is not true that "all" exposure is "hedged". For example, some of the alleged hedges are with entities that cannot possibly make good on them. But, aside from that, according to the Comptroller of the Currency (OCC) the "netting benefit" is approximately 91% in America, leaving an average "worst case scenario" exposure of about 9% after cancellation of countering notionals. According to the ISDA, the "netting benefit" is the difference between gross mark-to-market value and credit exposure after netting. Nine percent of $75 trillion is a "worst case scenario" $6.75 trillion in the case of Bank of America. Translated, this means that a BAC failure, without the other banks, implodes the world financial system. Add the actions of the other irresponsible big-bank managements, and you have the prospect of a "thermonuclear" economic event analogous to a full exchange of nuclear bombs during the Cold War, if a major contingency, insured by the derivatives, actually happens. In this case, it is the economic system and the faith of the people in their governments that will be destroyed, not the physical buildings or people.

    You can find exact numbers on the BAC derivatives, as well as those issued by the other imprudent banks, at the Office of the Comptroller of the Currency. The URL for the derivatives information is:
    Oct 22, 2011. 03:21 AM | 10 Likes Like |Link to Comment
  • Will JPMorgan Now Make and Take 'Delivery' of Its Own Silver Shorts? [View article]
    I don't have a web link for you. I did read the Brinks application documents, however, when their Manhattan vault was being licensed.
    Mar 22, 2011. 04:06 PM | 10 Likes Like |Link to Comment