Dark Skinny

I’ve been saying for some time now that Fort Knox has no gold, probably hasn’t had any of the yellow shiny stuff for some decades now. Don’t believe me? Well, here is an exposé by Jeff Neilsen from Benzinga, having a quiet rant about the US Gold Reserves. I find his arguments fairly logical, irresistible and  irrefutable.

There are many who — like me — believe that gold is the only answer to global monetary stability. And there are many who would also assume that the American govt actually has some gold, and simply refuse to believe that the dollar will fall — due to its importance as a reserve currency — and if it does fall, then the dollar is bound to rise from the ashes a winner. Of course, for this to happen and be true, the US govt would have to own some gold.

Reasonable?

Article from Benzinga

In discussing the “gold reserves” of the U.S. government, the first point to make is that the only way in which this topic can be discussed is from a retrospective viewpoint. The reason for this is that while the U.S. government claims to have the largest reserves of gold in the world (supposedly over 8,000 tons) it has not allowed anyone to see this ‘gold’ in over 50 years.

Would anyone believe the balance-sheet claims of a Wall Street bank, if it had not been audited in over 50 years? If not, how could we put any credence in the gold reserve numbers of a government which is totally subservient to its Wall Street puppet-masters?

The next, most-important point to make is that the U.S. government defaulted on its gold obligations in 1971, roughly a decade after the last time any U.S. gold was actually seen. At this point, I think it would be helpful to view Wikipedia’s definition of “default”:

failure to satisfy the terms of a loan obligation or to pay back a loan.

The U.S. owed the world ten’s of thousands of tons of gold – obligations it racked-up during the Vietnam Decade, and it failed to satisfy those obligations.

Here’s a question to test readers. How often does the party defaulting on a loan end up with more money than its creditors? Answer: never. Thus, an obvious observation (yet one which is never made) is that the claims of the U.S. government to still have any gold at all after its gold-default are absurd on their surface – and the only way to rebut that absurdity would be to prove that it still held the gold, by showing it to someone.

Many times and in many articles, I have scribbled  my concern with the dominance of special interests over the workings of the Democratic Process in America. For this reason, both Capitalism and Democracy are most definitely not alive and well.

In the article below, we now have confirmation of the successful, wider spread of this corrupt influence into the major decisions of the US Justices of America. The article below claims that these Justices have made a bad decision because they are “out of touch” with the America. Well now, how convenient is that?

In the article below, the political media’s game of bluff, smoke and mirrors — such a worthwhile and convenient distraction for all, don’t you think ? — still goes on. The fault was Bush vs. Gore !! No, no…The fault was because of Bush/Cheney !! Hell, even Obama was well “flummoxed” at the Supreme Court result !! Really?….Well go figure!! And not one mention of the real culprits who are so bravely but vaguely  described as “…money flowing into Washington” within that right-tilted and poorly-written article below.  Who’s money for Chrissake ? Who are these unmentionable Shadow Gods?

As seems to pervade all political media opinion these days, no one dares question another very possible root cause for this Supreme Court ruling, even though another completely viable explanation for this decision in favour of special interests is simple bribery and corruption within the American Supreme Court system.

Since both Houses and The President are bought, paid for, and continually influenced by special interests, isn’t it therefore logical that their insidious influence should also somehow extend so easily to the purchasing of “preferred outcomes” from High Court Justices ?

Here, the political status quo or that peculiar outside quasi-power that rules the US government with such a corrupt iron hand has been maintained, it’s power completely safe and undisturbed and, as exampled with this Supreme Ruling, now at the very pinnacle of its success.

And so, dear reader, why should we be so surprised and shocked with this Supreme Court  ruling?

Article by John Dean from Truthdig

The conservative majority of the U.S. Supreme Court has given a monumental victory to special interests—i.e., the big money corporations, the folks who already dominate Washington politics—with its ruling in Citizens United v. Federal Election Commission. Chief Justice John Roberts, along with Justices Antonin Scalia, Clarence Thomas, Samuel Alito and Anthony Kennedy (who wrote the court’s opinion), have gone out of their way to further obliterate serious efforts to reform out-of-control campaign spending—spending that conspicuously distorts democracy in favor of those who can buy political influence. This ruling is of the same judical activism ilk that produced Bush v. Gore, not to mention the ensuing eight years of a disastrous Bush/Cheney presidency from which the nation has yet to recover. Understandably, President Obama is flummoxed.

This decision is long, at 183 pages. It includes a powerful dissent by the four centrist justices (there are no liberals on this court). And the ruling is chock full of nuanced information that spells out what Congress can and cannot do to reform our dysfunctional and money-hungry election system. This is not a ruling that lends itself to instant analysis. Those who follow this subject far closer than I do will be figuring it out for days, if not months. However, I would recommend the following sites for a quick take on the ruling: Slate (good overview), SCOTUSBLOG (which has followed the case closely), and, in particular, The Brennan Center (which filed an amicus brief in the case and will be leading the way in sorting out the full meaning). To understand what the court majority did, scroll down to about Page 88 of your .pdf reader and read the dissent written by Justice John Paul Stevens, and joined by Justices Ruth Ginsburg, Steven Breyer and Sonia Sotomayor. It is an eye-opener.

Aside from the fact that the majority ruling reeks of conservative politics, what I find most striking about conservative judicial activism typified by this ruling is the fact that the justices involved are totally out of touch with reality. None of the men involved in this historic decision have been elected to anything, ever. They have no idea how difficult it is for elected officials to deal in the contemporary money-flooded milieu of Washington. The work experience of those who have further opened the floodgates for money in politics is restricted to the executive branch, high-priced law firms, or the chambers of the lower federal appellate courts. Not since the late Justice Hugo Black, a former U.S. senator who retired in 1971, has the court had a member of Congress on its bench, someone who can explain the real world to the other justices. These conservative justices live in a bubble, and they have little true understanding of what they have done, other than, of course, to know that they have taken care of conservatives, the so-called Citizens United who filed this lawsuit. (Yes, David N. Bossie, the president of Citizens United, is the same fellow who worked overtime to impeach President Bill Clinton.)

After I fully digest this decision and speak with friends in Washington who have long been concerned that the Bush/Cheney legacy that now controls the high court might do as they have in fact done, I will share further thoughts about the damage this ruling will bring, and what can and will be done. For this ruling has the potential of being even more pernicious than Bush v. Gore, since it reaches not merely the presidency but every elective office in the United States. Conservatives may not know how to govern when they are in power, but they sure know how to make certain that centrists, progressives and liberals are not given a sustained opportunity to work their will.

Article from the WallStreetPit

“A dollar reserve system that might have made sense for the 20th century no longer makes sense for 21st century,” Joseph Stiglitz, 2001 Nobel Laureate and Professor in Economics at Columbia University, said at a conference in Paris. According to Mr. Stiglitz, France’s President Nicholas Sarkozy is right in his assessment that the disorder in currency markets has become unacceptable, and that the economic reality of a multipolar world will have to find sooner or later a translation on the monetary level. Stiglitz also pointed out during his presentation that France has articulated a much clearer vision of what needs to be done to fix the global financial system than the United States.

CNBC: “On both a national and international level, President Sarkozy has explained very well some of the economic, social and political reasons why something has to be done about bonuses whereas in the United States there has been no real discussion about that. Unfortunately too many people in the United States on the right have their heads buried in the sand,” said Stiglitz. “They try to pretend that we should go back to the kind of market economy that we had before the crisis. The reality is that we had a storm that the market created and it’s a storm that has happened over and over again.”

Stiglitz, who has become a leading critic of the global market economy, also said that it is only through state intervention that the global economy was saved.

Here is an accurate  assessment of the recently passed financial regulations bill and  for all of The President’s much-lauded glorious verbal bashings of the Wall Street Oligarchy, this drive-by bill is simply a package that allows Wall Street to continue to “regulate” themselves as before. Therefore,  from its outcome as compared to his rhetoric, Obama is thoroughly and equally  guilty of both two-faced hypocrisy and weak leadership. Glass-Steagall still lies hopelessly  decaying and rotting in its broken political coffin, there has been no resurrection here. In other words there has been no change, no  urgent transfer of power or regulation to the  government and thereby to the people — all is smoke, mirrors and BS from The Administration as well as from the well-leashed and subservient media — ah yes, the despicable financial status quo has been very successfully and stealthily restored,  their power safely undiluted and undiminished once again for the sole benefit of certain cherry-picked and much-favoured Wall Street financial houses.

People should be thoroughly questioning President Obama’s ineffective, unconvincing and contradicting hot-air rhetoric — in a single speech, his  hard-working lungs could surely fill and lift a good twenty hot-air balloons with such inspiring but empty blab. But what has Obama actually achieved so far during his presidential term? A leader — particularly a major western leader — should lead from the front and keep his word, but as time creeps on the pattern of continual citizen disappointment is always the same –  Obama, for all his sizzling oratory, prefers leading discreetly from the tainted lobbyist’s bleechers, his amazingly unaccomplished political and geopolitical record so far is simple testament to the fact that he is a very ordinary and unremarkable leader, and one who has little imagination, with no real thought or ability to make any significant difference to the ordinary American’s plight.

Health Bill next. More disappointment coming….

Article by Robert Scheer

Maybe I got it wrong. During the presidential campaign I wrote columns blasting Sen. John McCain for siding with the big bankers on deregulation, citing his choosing ex-Sen. Phil Gramm, currently a vice chairman of the Swiss-owned banking giant UBS, as his presidential campaign chair. Barack Obama, on the other hand, repeatedly blasted Gramm and the Gramm-Leach-Bliley Act, which the Texas Republican had pushed through Congress, with President Bill Clinton’s support—legislation that repealed the Glass-Steagall Act and radically deregulated the financial industry.

But now the roles are reversed, and it is McCain who, along with Sen. Maria Cantwell, D-Wash., has sponsored a bill to repeal Gramm’s legislation, while Obama seeks to preserve it.

The Gramm legislation, which permitted the merger of investment and commercial banks into too-big-to-fail corporations (including Citigroup and AIG, two financial giants that had to be bailed out by taxpayers), was thought by Obama the candidate to be a key cause of the meltdown. But as president he reappointed the Clinton-era officials who had sided with Gramm in ending sensible banking regulations that had protected the public for 70 years and made the U.S. banking system the envy of the world.

Rather than restore Glass-Steagall, the Obama-backed banking regulation bill passed last month by the Democratic majority in the House went along with the desire of Wall Street lobbyists to prevent the breakup of the big conglomerates and to block control of their massive trading in the derivatives that proved to be so toxic.

The result, with some deceptive reformist window dressing, is a pro-Wall Street business-as-usual cop-out, and the Senate version is likely to be more of the same. Fortunately, there is a better way, and thanks to the McCain-Cantwell bill and a companion one authored by Rep. Maurice Hinchey, D-N.Y., in the House, there is still a chance at serious financial regulation through the restoration of the key provisions of Glass-Steagall.

How odd that it now remains for McCain to stand up to the oversize banks.

“… I want to ensure that we never stick the American taxpayer with another $700 billion—or even larger—tab to bail out the financial industry,” McCain proclaimed in introducing his legislation. “… This country would be better served if we limit the activities of these financial institutions.”

But just the opposite happened under the great bailout. The big investment houses of Goldman Sachs and Morgan Stanley were allowed to suddenly attain the status of commercial banks in order to qualify for federal bailouts, and the once staid commercial Bank of America was encouraged by the Fed to buy out the investment house Merrill Lynch. As a result, banking has never before been concentrated in so few hands. As Rep. Hinchey put it:

“Today, just four huge financial institutions hold half the mortgages in America, issue nearly two-thirds of credit cards, and control about 40 percent of all bank deposits in the U.S. In addition, the face value of over-the-counter derivatives at commercial banks has grown to $290 trillion, 95 percent of which are held at just five financial institutions. We cannot allow the security of the American economy to rest in the hands of so few institutions.”

Those derivatives, that hodgepodge collection of securitized debt—including mortgages of most American homes—are at the heart of the problem, and they are not regulated in any significant way by the legislation supported by the administration. It’s no wonder, since Lawrence Summers, the president’s top economic adviser, was not only a key proponent of reversing Glass-Steagall in the Clinton White House but also supported the Financial Services Modernization Act, passed a year later, that summarily exempted those suspect derivatives from any regulation.

Although Obama has blasted “fat cat bankers on Wall Street,” it is time for those who elected him to ask for more than rhetoric. And to ask that of the Democratic leaders of the House, who refused to allow a vote on Hinchey’s amendment to include the restoration of Glass-Steagall in their so-called Wall Street Reform Act. Introducing it as a separate bill, Hinchey stated:

“The repeal of the Glass-Steagall Act was done to help large banks become enormous and to line the pockets of banking executives with more money than most Americans could ever dream of earning in their lifetime. … This bill would help right the ship and return our country to the days when banks either participated in commercial lending activities or investment activities, but not both.”

There is much logic in preventing commercial banks, which carry the hard-earned savings of depositors and a federal guarantee of their worth, from engaging in the high-roller risk-taking of investment banks.

If McCain now gets it, why doesn’t Obama?

The little-known Greenspan-Guidotti rule accurately predicts when a government will default. This rule is what all speculators use to predict the health and status of the currency markets. And, according to the rule and Porter’s calculations, the U.S. is toast.

Article By Porter Stansberry

It’s one of those numbers that’s so unbelievable you have to actually think about it for a while… Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that’s not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That’s an amount equal to nearly 30% of our entire GDP. And we’re the world’s biggest economy. Where will the money come from?

How did we end up with so much short-term debt? Like most entities that have far too much debt - whether subprime borrowers, GM, Fannie, or GE - the U.S. Treasury has tried to minimize its interest burden by borrowing for short durations and then “rolling over” the loans when they come due. As they say on Wall Street, “a rolling debt collects no moss.” What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt… at ever shorter durations… at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that’s when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.

When governments go bankrupt it’s called “a default.” Currency speculators figured out how to accurately predict when a country would default. Two well-known economists - Alan Greenspan and Pablo Guidotti - published the secret formula in a 1999 academic paper. That’s why the formula is called the Greenspan-Guidotti rule. The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world’s largest money management firm, PIMCO, explains the rule this way: “The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support.”

The principle behind the rule is simple. If you can’t pay off all of your foreign debts in the next 12 months, you’re a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.

So how does America rank on the Greenspan-Guidotti scale? It’s a guaranteed default. The U.S. holds gold, oil, and foreign currency in reserve. The U.S. has 8,133.5 metric tonnes of gold (it is the world’s largest holder). That’s 16,267,000 pounds. At current dollar values, it’s worth around $300 billion. The U.S. strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that’s roughly $58 billion worth of oil. And according to the IMF, the U.S. has $136 billion in foreign currency reserves. So altogether… that’s around $500 billion of reserves. Our short-term foreign debts are far bigger.

According to the U.S. Treasury, $2 trillion worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2 trillion worth of maturing debt in the next 12 months. That might not cause a crisis if we were still funding our national debt internally. But since 1985, we’ve been a net debtor to the world. Today, foreigners own 44% of all our debts, which means we owe foreign creditors at least $880 billion in the next 12 months - an amount far larger than our reserves.

Keep in mind, this only covers our existing debts. The Office of Management and Budget is predicting a $1.5 trillion budget deficit over the next year. That puts our total funding requirements on the order of $3.5 trillion over the next 12 months.

So… where will the money come from? Total domestic savings in the U.S. are only around $600 billion annually. Even if we all put every penny of our savings into U.S. Treasury debt, we’re still going to come up nearly $3 trillion short. That’s an annual funding requirement equal to roughly 40% of GDP. Where is the money going to come from? From our foreign creditors? Not according to Greenspan-Guidotti. And not according to the Indian or the Russian central bank, which have stopped buying Treasury bills and begun to buy enormous amounts of gold. The Indians bought 200 metric tonnes this month. Sources in Russia say the central bank there will double its gold reserves.

So where will the money come from? The printing press. The Federal Reserve has already monetized nearly $2 trillion worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing Treasury bonds. Sooner or later, our creditors will face a stark choice: Hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their U.S. bonds plummet.

One thing they’re not going to do is buy more of our debt. Which central banks will abandon the dollar next? Brazil, Korea, and Chile. These are the three largest central banks that own the least amount of gold. None own even 1% of their total reserves in gold.

I examined these issues in much greater detail in the most recent issue of my newsletter, Porter Stansberry’s Investment Advisory, which we published last Friday. Coincidentally, the New York Times repeated our warnings - nearly word for word - in its paper today. (They didn’t mention Greenspan-Guidotti, however… It’s a real secret of international speculators.)