News of the finance

The French BNP and the Barclays’ have definitely come out on top post-crisis and given parochial attitudes in both nations, their governments are likely to plan making heavy weather on the bad financial markets industry..but I wouldn’t say these repayments signify any better practices on the part of these wannabe practitioners on the global horizon, but rather the fact that they were bystanders during the banking explosion of the last decade.

They do maintain a continued conservative stance which will come in useful, but given the history of the markets..they are much more likely to be the source of the next big black hole in a few days (years) maybe. However, with Citi planning to get out of government stakes as well, this could really absorb the prior decades’ sentiments some more and yet faster..leaving us with a blank slate in which to regulate our childrens’ future.

Coming back to the French, they do not have the depth in their markets to fund expansion and their global diaspora in terms of expansion by SocGen and BNP hardly enough to give them currency to support their non US pro Iran , pro Russia stance. They could however be the closest Euro member state for the new nations in East Europe that have been trying to get a piece of the global economics in this last decade as also they could substantially support some African nations. Being pragmatic however, they are likely to discover faster that they really do not want significant exposure in these markets

BNP recently paid $19.8 billion for Fortis (October 2008) and has therefore significantly completed its footprint in West Europe while SocGen has been active in Asia ( Offshore from Singapore, JVs with SBI in India)

China has had a long history with European Banks with the Deutsche Asiatique Bank, British Belgian Industrial Bank of China and the Sino Belgian Bank which issued Taels (North Asian currency) during Siberian-Japanese-Chinese trade ‘wars’ of the late 19th century but has never been remunerative for Foreign bank ( Comparitively with India, Chinese have very few branches and investment assets in Foreign banks)

However, as of March 2009 Bank of china had already purchased 20% in the Paris based Banque de Rothschild and with BNP out of government indebtedness, its reasons for going into China would be more mercantile than ever.

BNP Paribas, the largest French bank, said on Tuesday that it would raise €4.3 billion from investors to repay government bailout funds, The New York Times’s David Jolly and Chris V. Nicholson reported.

BNP Paribas, based in Paris, said its board had decided to repay, within the next month, the €5.1 billion, or $7.5 billion, it borrowed from the state March 31. The government would also receive a payout of €226 million on the nonvoting preferred shares it purchased.

Baudouin Prot, BNP Paribas’s chief executive, said in a conference call that the G20 meeting in last week in Pittsburgh, where world leaders agreed in principle that banks should raise more capital, had influenced the timing of BNP’s decision to issue shares, as had the lender’s share price, which is up more than 92 percent this year.

Christophe Nijdem, a banking analyst at Alphavalue in Paris, called the stock issue’s timing “judicious.”

“They had a window of opportunity,” he said. “A lot of banks will turn to the market in the months to come, and it’s first come, first serve.”

Mr. Nijdem added that, compared to American banks, European banks were more leveraged, and had to play catch up. Major Western banks are forecast to post losses of almost $2.5 trillion for the period 2007-2010, according to the International Monetary Fund.

via BNP Paribas to Raise $6.27 Billion to Repay Bailout – DealBook Blog – NYTimes.com.

By Patrick A. Heller, Market Update
September 29, 2009

Five months ago, the Gold Anti-Trust Action Committee (GATA), filed a second Freedom of Information Act (FOIA) request with the Federal Reserve System for documents from 1990 to date having to do with gold swaps, gold swapped, or proposed gold swaps.

On Aug. 5, The Federal Reserve responded to this FOIA request by adding two more documents to those disclosed to GATA in April 2008 from the earlier FOIA request. These documents totaled 173 pages, many parts of which were redacted (covered up to omit sections of text). The Fed’s response also noted that there were 137 pages of documents not disclosed that were alleged to be exempt from disclosure.

GATA appealed this determination on Aug. 20. The appeal asked for more information to substantiate the legitimacy of the claimed exemptions from disclosure and an explanation on why some documents, such as one posted on the Federal Reserve Web site that discusses gold swaps, were not included in the Aug. 5 document release.

In a Sept. 17, 2009, letter on Federal Reserve System letterhead, Federal Reserve governor Kevin M. Warsh completely denied GATA’s appeal. The entire text of this letter can be examined at http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf.

The first paragraph on the third page is the most revealing. Warsh wrote, “In connection with your appeal, I have confirmed that the information withheld under exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”

This paragraph will likely be one of the most important news stories of the year.

Though not stated in plain English, this paragraph is an admission that the Fed has in the past and may now be engaged in trading gold swaps. Warsh’s letter contradicts previous Fed statements to GATA denying that it ever engaged in gold swaps during the time period between Jan. 1, 1990 and the present.

If the Fed had no such gold swaps during this period, their initial response or Warsh’s letter would simply have said so. Although this damning paragraph does not specifically state that it refers to gold swaps, both of GATA’s FOIA requests, the appeal and Warsh’s letter are explicit that the only swaps under discussion are for gold.

In theory, gold swaps should have no effect on the long-term price of gold. Gold swaps merely refer to the exchange of matching amounts of gold that are delivered in different locations or at different times. For instance, central bank A could swap a ton of gold with central bank B. In this scenario, central bank A may deliver this ton of gold to central bank B or to another party to fulfill an obligation of central bank B. Central bank B would at some point deliver a ton of gold to central bank A.

Central bank gold swaps could easily be used to surreptitiously hide gold dumped on the physical market to suppress the price of gold. Here’s how. In the previous example, when central banks A and B agree to deliver one ton of gold on behalf of the other bank, both of these central banks are allowed (and were required, until recently) by the International Monetary Fund to continue to report the gold they have delivered as if it were still in their respective vaults. While this is being done, each central bank would be free to sell onto the physical market the gold received in the swap from the other bank. That could increase the amount of physical gold available on the market, with neither central bank reporting any sale.

In most instances, swaps are short term, which is why the net impact should be negligible. If the swapped gold were replaced in a few weeks or months, the replacement of the gold would have the effect of decreasing the supply of physical gold to cancel out the earlier increase in supply.

But what if the swaps do not mature for a very long time?

Over the past 10 years, GATA has accumulated a significant amount of circumstantial evidence that the U.S. government, in conjunction with the Federal Reserve System, has secretly arranged to sell or lease central bank gold onto the physical market. Although there have been some attempts at refutation of particular words in the compilation, there has been no evidence produced to disprove GATA’s contentions. Despite the lack of contrary evidence, there are a number of so-called gold market experts who refuse to acknowledge that any central banks are involved in activities such as gold swaps undertaken to suppress the price of gold. Now that Federal Reserve governor Warsh has admitted that the Fed has lied in the past about engaging in gold swaps, what excuse will these “experts” now use to ignore GATA’s research?

Warsh’s letter may end up being the evidence needed to overcome the U.S. government’s efforts to avoid clearly and accurately reporting on its gold holdings. If so, there is a significant likelihood that the public would be stunned to learn how much of the U.S. gold stockpile is gone. Any such news would lead the price of gold to explode upward (and for the value of the U.S. dollar to fall sharply). Stay tuned for developments.

Go to Article

In 1776, a group of revolutionary minded people, many of whom were Freemasons, created the United States of America.  This new country was to be a break from the past. The leaders of the movement: George Washington, Thomas Jefferson, Benjamin Franklin, John Hancock, and many more were Freemasons.  They were informed and inspired by some of the tenets of the Freemasons, tenets that were at odds with the established manner of world governments at that time.  Many of the governments of various European countries had a long established and close relationship with one branch or another of the Christian church.  Most of the governments had kings or queens, whose right to rule was based upon their ancestry.  The American revolutionaries had a different concept in mind – a democratic, elected  government that had no association with any religion.  It was a daring concept, and a complete break from the European view of government.  These Freemasons even documented this break from traditional government when they made the Great Seal of the United States and when they printed the one dollar bills that we have today. One each of these bills are printed the words: Novus Ordo Seclorum, i.e. A New Order of (0r for) the Ages.

The New order that was founded by these Freemasons created a Republic where the principal ideas and visions were centered on individual liberty.  A key concept was that the government was not made up of the elite or the wealthy or the influential or the religious leaders. The government was changed regularly, based upon a schedule of elections, and anyone could become a member of the government – as long as they could convince their friends and neighbors to vote for them.  This concept of a republic also implied something else, there would be a distance, a division, between the will of the wealthy and the will of the government, i.e. the will of the people.

Today, as our economy lurches towards a dubious recovery from a worldwide economic meltdown, we can observe that there has been a key change in the Novus Ordo that was created by the Freemasons.  There is no longer a distance between the government and the wealthy. Indeed, it was the closeness of the wealthy to the government that directly led to the meltdown.  It was the money in the pockets of the our governmental representatives that led to the relaxation or the complete annulment of laws that had protected us from nefarious economic practices by the banking industry.  It was the government’s Securities and Exchange Commission that looked the other way when Bernie Madoff ran his gigantic Ponzi scheme.  Over the years, the wealthy had established a cozy relationship with the representatives of our Republic – all for the purpose of gaining more money for themselves and less for the average citizen.

Today, the wealthy have almost a stranglehold on our government.  Some would say it is more than that.  They say we have an oligarchy – a situation where hidden, wealthy people rule through a puppet government and all laws are made to benefit the small, wealthy elite.  All you need to do is look.  Our American companies have become multinational. Our once good paying jobs have been moved to other countries where the cost of labor is much less.  Our government has “reformed” our tax laws allowing millionaires and billionaires to pass on their fortunes from one generation to the next while not a cent of tax is imposed on this transfer of wealth.  The wealthy have used the government to create income tax cuts for themselves and income tax increases for the middle and lower class.

The New Order created by the Freemasons is fast dying.  Today, our multinational companies, owned by the wealthy, fabricate our goods in China- creating no jobs for American workers – except those who work for Wal-Mart.  Our multinational companies pay little or no tax to our country, because they are officially located in the Bahamas or some other idiotic legal location.  And our government just winks and says, “OK”.  Our country has been transformed without our even realizing it.  We have a new world order that we never saw coming.  In this new world order, it is the wealthy who rule and it is the poor who pay taxes.  In this new world order everyone can vote, but it hardly matters who you vote for. Money flows like water from the mighty Mississippi into the pockets of our Congressional representatives who pretend to ask for our opinions but then vote the way they are told.

The Novus Ordo Seclorum of the Freemasons has gone, and we didn’t even see it go.  We can only sit and watch, dazed, as the government tires to stimulate a dying economy, knowing in our hearts that we are only surviving on financial life support.   How can our economy ever rise again when the wealthy have sent all our jobs to China?  How can our children ever compete again when our schools can’t compete with those in Malaysia or Norway?  How can we lead and inspire the world when so much of our television and radio news is now filled with the lies of the wealthy media owners, propaganda, and gross distortions of truth?

The new order of the world is here.  It is the multinational companies of the world who now make the economic rules. It is China that will be the world’s supplier of almost everything anyone needs.  We are to be the consumers, borrowing money from banks in order to live – while living forever in debt.  Meanwhile the people of the wealthy class return to their rightful place: Rulers of the World.  And the elected leaders of our Republic grovel before them and do their bidding – all for a pocketful of change.

Lately, an old argument has been making the rounds.  I see it pop up in books, blogs, magazine articles, powerpoint decks, and manifestos.  It usually goes something like this:

Consumers don’t believe advertising anymore.

AND:

Consumers are in charge now.

THEREFORE:

Advertising is dead/doesn’t work anymore.

I want to devote this post to the premise—consumers don’t believe advertising anymore.

The premise assumes that we humans actually understand what we believe and why.  We don’t.  The drivers of our beliefs lie far below our conscious mind.  In fact, they’re inaccessible to us.

It also assumes that belief is a prerequisite to advertising having its desired effect.  But advertising does most of its work in the inaccessible unconscious mentioned above.  To paraphrase T.S. Elliot, while the “message” occupies the conscious mind, the advertising does its real work.

Finally, the qualifier “anymore” implies that we used to believe advertising, and now we don’t.  The reasoning is that today’s consumers—especially digital natives—are more media savvy and can see right through traditional advertising.

In his book, Buying In, Rob Walker responds:

“Everybody sees right through traditional advertising.  You’d have to be an idiot not to recognize that you’re being pitched to, when watching a thirty-second spot.  But recognition is not the same as immunity.”

In Strangers to Ourselves, Timothy White makes a similar observation:

“People cannot discover through simple introspection the extent to which seeing an ad for Tylenol influences their purchases the next time they go to the grocery store.”

He goes on:

“The failure to recognize the power of advertising makes us more susceptible to it.  Consequently, we can be influenced in ways with out being aware that we are influenced.”

Finally, a few words from Social Psychologist Elliot Aronson in The Social Animal:

“People who are skeptical believe their skepticism makes them immune to persuasion.   This is not true.  Simply because we think we are immune to persuasion does not necessarily mean we are immune.”

To sum up, the premise is not only wrong, it’s irrelevant.

In my next post, I’ll address the inference: consumers are in charge now.

Chuck Butler…

Yesterday, I read a story in the Wall Street Journal (WSJ) regarding the World Bank President (Robert Zoellick) and his thoughts on the dollar… I thought it would be appropriate to include them in this award winning newsletter! Snicker!

“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency, looking forward, there will increasingly be other options to the dollar.” And then… While the European Union faces similar challenges, Zoellick said he views the euro as a “respectable alternative if the dollar is weak.”

Hmmm… I would guess that he would only talk about this stuff, if the dollar was weak! Right? Why would he talk about this stuff if the dollar was the king of the hill like back in 1999 during the Tech Bubble?  The dollar index was around 120 then… It’s 77, and been as low as 76 in recent trading sessions…

Speaking of respectable alternatives for the dollar… The Chinese renminbi continues its baby steps toward full liquidity, and widespread use. Recall I told you a few weeks ago, how China issued a sovereign bond in Hong Kong denominated in renminbi. The issue was 6 Billion renminbi in size, and was the first such issue ever done by the Chinese.

These baby steps, like the currency swap agreements with other countries to take dollars out of the trade between the two countries, and this bond issuance, is just what the Chinese need to do to get their currency to go “international”… And most important, “Convertible”… It will take years, folks… But eventually, you’ll see this happening more and more…

I suggest to you a simple things… To keep a journal… Folks, we are living in historic times… The U.S. probably having to default on debt at sometime in the future, the dollar devaluation, the dollar being replaced as the reserve currency of the world, our move to socialism, and collectivism… It’s all there… You’ll want your grandkids to know what was happening, because, I’m sure it won’t be taught to them in the schools as it should!

The Federal Reserve is discussing the possibility of using “reverse repo” transactions with money market funds that would be aimed at draining liquidity from the financial system.  The transaction would involve swapping the toxic assets on the Fed’s balance sheet for part of the $3 trillion sitting in investor money market funds.  Typically a repo transaction is a policy tool used by the Fed and executed with the Fed’s primary dealers in order the “fine tune” systemic liquidity and regulate the Fed Funds rate.   They are short term in nature and involve swapping short term Treasuries in exchange for cash, with the Treasuries being the collateral in order to “guarantee” that the short term trade can be unwound with little or no risk.

Here’s the link to the article that revealed this proposal:  Fed Wants To Drain Money Market Funds

The current Fed proposal is based on the fact that the primary dealer system only has enough cash to drain $100 billion from the system.  Here’s what is really going on with this proposal (without getting into the technical details of how repos work):  

The Fed has purchased trillions of dollars of toxic assets from banks.  We don’t know what price the Fed paid and we don’t know how corrupted the underlying collateral is (the Fed refuses to disclose both pieces of valuable information).  Most of the securities involve severely distressed underlying collateral like credit card receivables, subprime mortgages, auto loans and now commercial real estate mortgages.  Most of these assets will eventually be worth less than 10 cents on the dollar.  If the Fed were to hold onto these assets, the Fed, and the banks that ultimately are the shareholders of the Fed, stand to lose trillions. 

What the Fed proposal would do would move these toxic nuclear waste assets from the Fed’s balance sheet and into money market funds, in exchange for cash sitting in the money market funds.  The biggest problem is the Fed has no basis for valuing these assets other than the price it paid the banks for them, so at what price will the Fed value these securities in order to establish the market value basis for the repo transaction?   In other words, the Fed can stick a random price on these assets and swap them for the cash in the money market funds and say “trust us, we’re Fed – we’ll make you whole.”  

Without going in-depth into the problems that could occur which might make the Fed’s promise wothless, this proposal, if made effective, would expose money market funds to a significant, if not catastrophic level of risk.  To be sure, each fund individually has charter limits which would put a cap on the amount of cash the Fed could “repo” out of the individual fund and replace it with garbage assets.  However, these assets were fraudulently rated AAA in the first place and have no business being put into money market funds.  Money market funds are supposed to be basically risk-free funds in which investors “park” cash and earn a small amount of interest.

At best, this is a move by the Fed to justify draining a large amount liquidity from the system by using one of its monetary tools to drain cash from money market funds.  This has never been done before and is well outside of the traditional boundaries of repo/reverse repo tool used by the Fed with primary dealers. At worst, I believe this is a veiled attempt by Bernanke to move toxic assets from the Fed’s balance sheet and onto the public, under the false pretenses of using money market funds  to drain liquidity from the system, rather than putting these near-worthless assets back on to the balance sheets of the Fed’s primary dealers.

Hopefully this idea goes away. If it does become reality, I would not, under any circumstances trust this situation and would withdraw all funds from any money market funds you own and either move the cash into gold or into a short term Treasury bond fund.

By Bill Bonner and Addison Wiggin

The world as we have known it is coming to an end. But what do we care? We smile and vow to enjoy it. It took the Roman Empire hundreds of years to fall. During that time, most people did not even know their world was coming to an end. Most must have gone about their business, planting their crops, drinking their wine, and bouncing their children on their knees, as if the empire were eternal. Of course, the mobs in Rome may have reeled and wailed with every news flash: The barbarians had crossed the river Po and were headed South — soon, they would be at the gates!

But others lived quiet lives of desperation and amusement — as if nothing had happened. And what could they have done about it anyway…except get out of harm’s way and tend to their own affairs?

Plenty of people enjoyed the Great Depression. If you had a well- paying job, it must have been paradise — no waiting in lines, no need for a reservation at good restaurants. Keeping up with the Joneses had never been easier — because the Joneses were in reverse. So much of the satisfaction in life comes from feeling superior to other people.

What better time than a depression to enjoy it?

The secret to enjoying all mass movements is to be a spectator, not a participant. How much better it would have been to wave at the passing of the Grande Armée on its way to destruction in Russia than to march along with them. Perhaps you could have sold them earmuffs and mittens!

Likewise, what better way to enjoy the great boom on Wall Street of the 1990s than by tuning in to CNBC from time to time just to see what absurd thing analysts would say next? And now that it is over, how better to enjoy it than from a safe distance, standing well clear of the exits?

Readers are urged to be suspicious of headlines in the news and opinions on the editorial pages. Almost all mass movements that they stir up will one day be regarded with regret and amazement.

But that is the way of the world; one madness leads to the next. A man feels excited and expansive because the economy is said to be in the midst of a New Era . . .and then he feels a little exhausted when he discovers that the New Era has been followed by a New Depression.

And all the while, his life goes on exactly as it had before. His liquor is no better, his wife no prettier or uglier, his work every bit as insipid or inspiring as it was before. We have no complaint about it. Still, “the world is too much with us,” wrote Emerson:

Most men have bound their eyes with one or another handkerchief, and attached themselves to some one of these communities of opinion. This conformity makes them not false in a few particulars, authors of a few lies, but false in all particulars. Their every truth is not quite true. Their two is not the real two, their four not the real four; so that every word they say chagrins us, and we know not where to begin to set them right. Meantime nature is not slow to equip us in the prison-uniform of the party to which we adhere. We come to wear one cut of face and figure, and acquire by degrees the gentles’ asinine expression…

What better time to shut out the world and wipe that silly grin off our face than now — when the world that we have known for at least three decades, the Dollar Standard period, is coming to an end?

U.S. consumer capitalism is doomed, we think. If not, it ought to be. The trends that could not last forever seem to be coming to an end. Consumers cannot continue to go deeper into debt. Consumption cannot continue to take up more and more of the GDP. Capital investment and profits cannot go down much further. Foreigners will not continue to finance Americans’ excess consumption until the Second Coming — at least not at the current dollar price. And fiat paper money will not continue to outperform the real thing — gold — forever.

The United States will have to find a new economic model, for it can no longer hope to spend and borrow its way to prosperity. This is not a cyclical change, but a structural one that will take a long time.

Structural reforms — that is, changing the way an economy functions — do not happen overnight. The machinery of collectivized capitalism resists change of any sort. The Fed tries to buoy the old model with cheaper and cheaper money. Government comes forward with multibillion-dollar spending programs to try to simulate real demand.

And the poor lumpeninvestoriat — bless their greedy little hearts — will never give up the dream of U.S. consumer capitalism; it will have to be crushed out of them.

As Paul Volcker put it, “It will all have to be adjusted someday.”

Why not enjoy it?