Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly | zero hedge About a month ago we reported on an inquiry launched into JPM's "anti-competitive" and "monopolistic" practices on the LME which have resulted in artificially high prices for a series of commodities which had been hoarded by the Too Big To Fail bank. Today, the WSJ continues this investigation into a practice that is not insular to JPM but also includes Goldman Sachs and "other owners of large metals warehouses" which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as aluminum, courtesy of warehousing massive excess supply, artificially low market distribution of the final product, while collecting exorbitant rents in the process. Specifically, "Goldman, through its Metro International Trade Services unit, owns the biggest warehouse complex in the LME system, a series of 19 buildings in Detroit that house about a quarter of the aluminum stored in LME facilities. WSJ explains further:
The influence of macroeconomic ideas Polly Toynbee says something very sad in the Guardian today. In talking about the Labour opposition in the UK, she writes They have lost the Keynesian argument (for now): the paradox of thrift is just too paradoxical for the public. I agree that the line that the recession was caused by everyone (public and government) borrowing too much, and that just as consumers are now having to tighten their belts, so should government, plays well because it seems virtuous. On the other hand the idea that if consumers and government start to save more at the same time there will not be enough demand and so output will fall seems fairly intuitive, and certainly not rocket science. However I’m not really in a position to judge how someone unfamiliar with macroeconomics would see this argument, and I guess it is called a paradox for a reason. Obviously Toynbee is not implying that every macroeconomic idea that is incomprehensible to the layperson will be ignored by policymakers. Is this true?
Bastiat's Insight on Government Inaction I've noticed in discussions--in person, on Facebook, and in blogs--how hard it is for most people to see that opposition to having the government subsidize or require activity X does not mean that one opposes activity X. Frederic Bastiat addressed this in his classic article, "What is Seen and What Is Not Seen." He wrote [Paragraph 1.63]: But, by an inference as false as it is unjust, do you know what the economists are now accused of? When we oppose subsidies, we are charged with opposing the very thing that it was proposed to subsidize and of being the enemies of all kinds of activity, because we want these activities to be voluntary and to seek their proper reward in themselves. When I teach this article in class, I ask the students, who are almost all American, how many of them favor having government subsidize religion or requiring that people be religious. Wow! Of course, they tell me what I left out and many of them look at me as if I'm an idiot.
Olivier Blanchard didn't learn anything from the crisis Olivier Blanchard, top economic honcho at the IMF (not the impossible mission force), says things are bleak and here are his four lessons from the crisis (brace yourself): "First, post the 2008-09 crisis, the world economy is pregnant with multiple equilibria—self-fulfilling outcomes of pessimism or optimism, with major macroeconomic implications. Second, incomplete or partial policy measures can make things worse. As you can see it all depends on market mood. No lesson about the problems with fiscal consolidations leading to recessions (no matter what people may think about it).
Prospects for the World Economy in 2012 C.P. Chandrasekhar and Jayati Ghosh There is a palpable sense of gloom and impending doom in most discussions of the world economy today. Even before, several economists had argued that the excessive optimism about ”V shaped recovery” that was being used to describe the economic revival in 2010 was premature and misplaced, especially as none of the fundamental contradictions of global capitalism that led to the previous crisis had been adequately addressed. But they were once again written off as Cassandras by the financial media, which desperately sought sources of ”good news” and future engines of growth particularly among the emerging markets. Now even the most stalwart establishment voices are expressing growing concern and pessimism. This has already created a self-reinforcing cycle of contraction in the eurozone, and as long as European leaders (and incidentally the IMF) continue to press for fiscal austerity, this will continue.
A Moment Among the Minskians A Moment among the Minskians bydan monaco I The events leading up to and following the financial crisis in 2008 led to widespread deployment of the term “Minsky Moment,” used to describe the painful termination of what Hyman Minsky called “runaway expansion.” In boom times, according to Minsky, stable profit growth resulting from speculative (debt-fueled) risk-taking leads to ever greater speculative risk-taking until the bubble finally bursts and a debt-deflation crisis ensues as investors liquidate their assets to cover their debt liabilities. In June I traveled to the Minsky Summer Seminar at the Levy Institute at Bard College. Of course, the Hudson River is also infamous for its having been contaminated by toxic polychlorinated biphenyls (PCBs) from General Electric’s manufacturing plants in Hudson Falls and Fort Edward. Knowing this as one looks out a railcar window at the river leads to an odd and occasionally eerie appreciation of the scenery. “Minsky was in some ways a pioneer.
MF Global Client Attorney Explains In 1 Sentence Why JP Morgan's Involvement In MF Global Is Suspicious James Koutoulas, one of the founders of the Commodity Customer Coalition—which represents the interests of over 8,000 MF Global customers, was just on CNBC to talk about the recent blitz of news on the investigation into MF Global's missing customer money. Koutoulas addressed a bank that's been popping up a lot in the investigation: JP Morgan. Reports this morning addressed emails that were sent between JP Morgan and MF Global in the brokerage firm's last days, and also the legality of a previously reported $200 million transfer from MF Global to JP Morgan. Last week, it was announced that JP Morgan's involvement in the MF Global debacle would be investigated.
Famous Quotations on Banking If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809) “I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson … The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating. -Thomas Jefferson History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance. Despite these warnings, Woodrow Wilson signed the 1913 Federal Reserve Act.
Hawtrey on the Interwar Gold Standard « Uneasy Money Hawtrey on the Interwar Gold Standard I just got a copy of Ralph Hawtrey’s Trade Depression and the Way Out (1933 edition, an expanded version of the first, 1931, edition published three days before England left the gold standard). Just flipping through the pages, I found the following tidbit on p. 9. The banking system of the world, as it was functioning in 1929, was regulated by the gold standard. Thus, for Hawtrey, the key formal difference between the interwar and the prewar gold standards was that gold coins were did not circulate as hand-to-hand money in the interwar gold standard (hence the reference to gold exchange standard), gold coins having been withdrawn almost universally from circulation during World War I to enable the belligerent governments to control the monetary reserves they needed to obtain war supplies. Back to Hawtrey: Gold is a commodity with other uses than as money. Like this: Like Loading...
Adrift in a Sea of Economic Data Yves here. This post from MacroBusiness provides a good point of departure, and I’ll provide some comments further down. By Sell on News, a global macro equities analyst. Cross posted from MacroBusinessA little known fact about John Maynard Keynes, detailed in Jane Gleeson-White’s book “Double Entry” is that he was responsible for the development of national economic statistics and that he expected them to be aggregated only on a temporary basis.It was being done for the war effort, and would, he reasoned, not be necessary afterwards. Yves here. I wrote about some of the problematic behaviors that result from the propensity to give quantitative information, no matter how poor it may actually be, great weight, in an article, “Management’s Great Addiction.” And perhaps the most important habit to adopt is to be aware of the limits of your knowledge.
This Is Where "The Money" Really Is - Be Careful What You Wish For We have long shown that "investors" whatever that term means in the New Normal - those gullible enough to put their money in Bennie Madoff, pardon Bennie Bernanke Asset Management? - have been not only reluctant to put their money into stocks, but despite week after week of artificial, low volume highs, driven entirely by Primary Dealers (and now European banks post the $1.3 trillion in LTROs, not to mention even foreign Central Banks recently buying high beta stocks) spiking the market ever higher courtesy of record reserves, but in fact continue to pull their cash out of the stock market with every thrust higher. Why, just last week another $1.4 billion in cash was pulled from domestic equity funds, nominal Dow 13,000 be damned. Indicatively, this consolidated number was a modest $5.9 trillion the week when Lehman failed. And therein lies the rub. Crude at $200 will then be the least of everyone's concerns.
Recession, Restructuring, and the Ring Fence - October 3, 2011 October 3, 2011 Recession, Restructuring, and the Ring Fence John P. Hussman, Ph.D. All rights reserved and actively enforced. Reprint Policy In recent months, our recession models have forcefully shifted to warning of oncoming recession. On Friday, Lakshman Achuthan of the Economic Cycle Research Institute reviewed the weight of ECRI's research, observing "Now it's a done deal. For us, the ECRI is an important source of analysis to confirm or question our own views, as it is undoubtedly the best private economic research group we know. The way you spot a thoughtful economist, in my view, is to listen for an understanding of both data analysis and equilibrium. "This is a done deal. "A recession is a process, and I think a lot of people don't understand that; they're looking for two negative quarters of GDP. "Failure" and Restructuring Think of restructuring this way. Look at Bank of America's balance sheet, for example. Now take a look at Citigroup's balance sheet. The Ring-Fence
William Lazonick: How High CEO Pay Hurts the 99 Percent By William Lazonick, professor of economics and director of the UMass Center for Industrial Competitiveness. His book, “Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States” (Upjohn Institute, 2009) won the 2010 Schumpeter Prize. Cross posted from Alternet Corporations are not working for the 99 percent. While most Americans struggle to make ends meet, the CEOs of major U.S. business corporations are pulling eight-figure, and sometimes even nine-figure, compensation packages. In effect, U.S. top executives rake in obscene sums by not doing their jobs. The Runaway Compensation Train When all the data from corporate proxy statements are in within the next month or so, they will show that 2011 was another banner year for top executive pay. It might surprise you to learn that in the early 1990s, executive pay was already widely viewed as out of line with what average workers got paid. Unfortunately Clinton chose the wrong pay target.
Is the Near-Trillion-Dollar Student Loan Bubble About to Pop? September 21, 2011 | Like this article? Join our email list: Stay up to date with the latest headlines via email. “If you want to take a relation of violent extortion, sheer power, and turn it into something moral, and most of all, make it seem like the victims are to blame, you turn it into a relation of debt.” -- Economic anthropologist David Graeber, author of Debt: The First 5,000 Years Tarah Toney worked two full-time jobs to put herself through college, at McMurry University in Abilene, Texas, and still has $75,000 in debt. “Right about the time I graduated, Texas severely cut funding to our education system—thanks, Perry--and school districts across the state stopped hiring and started firing. She continued, “In August my post-graduation grace period was up and all of the payments on my student loans amount to $500/month. Max Parker (not his real name) enrolled at Texas A&M in College Station, Texas to get a BA in economics and a BS in physics.