Jim Sinclair’s Commentary
The Krugman article is worth a read. I guess we can take out tin hat off and distrust of government is not mental disease as it is as some now want it classified.
Errors and Lies
Surprise! It turns out that there’s something to be said for having the brother of a failed president make his own run for the White House. Thanks to Jeb Bush, we may finally have the frank discussion of the Iraq invasion we should have had a decade ago.
But many influential people — not just Mr. Bush — would prefer that we not have that discussion. There’s a palpable sense right now of the political and media elite trying to draw a line under the subject. Yes, the narrative goes, we now know that invading Iraq was a terrible mistake, and it’s about time that everyone admits it. Now let’s move on.
Well, let’s not — because that’s a false narrative, and everyone who was involved in the debate over the war knows that it’s false. The Iraq war wasn’t an innocent mistake, a venture undertaken on the basis of intelligence that turned out to be wrong. America invaded Iraq because the Bush administration wanted a war. The public justifications for the invasion were nothing but pretexts, and falsified pretexts at that. We were, in a fundamental sense, lied into war.
The fraudulence of the case for war was actually obvious even at the time: the ever-shifting arguments for an unchanging goal were a dead giveaway.
So were the word games — the talk about W.M.D that conflated chemical weapons (which many people did think Saddam had) with nukes, the constant insinuations that Iraq was somehow behind 9/11.
And at this point we have plenty of evidence to confirm everything the war’s opponents were saying. We now know, for example, that on 9/11 itself — literally before the dust had settled — Donald Rumsfeld, the secretary of defense, was already plotting war against a regime that had nothing to do with the terrorist attack. “Judge whether good enough [to] hit S.H. [Saddam Hussein] …sweep it all up things related and not”; so read notes taken by Mr. Rumsfeld’s aide.
This was, in short, a war the White House wanted, and all of the supposed mistakes that, as Jeb puts it, “were made” by someone unnamed actually flowed from this underlying desire. Did the intelligence agencies wrongly conclude that Iraq had chemical weapons and a nuclear program? That’s because they were under intense pressure to justify the war. Did prewar assessments vastly understate the difficulty and cost of occupation? That’s because the war party didn’t want to hear anything that might raise doubts about the rush to invade. Indeed, the Army’s chief of staff was effectively fired for questioning claims that the occupation phase would be cheap and easy.
Why did they want a war? That’s a harder question to answer. Some of the warmongers believed that deploying shock and awe in Iraq would enhance American power and influence around the world. Some saw Iraq as a sort of pilot project, preparation for a series of regime changes. And it’s hard to avoid the suspicion that there was a strong element of wagging the dog, of using military triumph to strengthen the Republican brand at home.
Today’s CPI Lesson: The Fed’s 2% Inflation Target Is Completely Stupid
by David Stockman • May 22, 2015
The madness of the Fed’s pending 81 month run of zero interest rates comes down to an inflation subterfuge that has no logical or empirical grounding in real world economics. Essentially, the Keynesians who currently inhabit the Eccles Building have turned all of central banking’s anti-inflation history on its head, saying, instead, that there is not enough of it to create optimum economic growth and wealth; and, besides, the CPI is running below the 2% target—so prolonging the free money gravy train can’t do much harm.
Every part of that proposition is dead wrong. To wit, free money does immense harm by fueling rampant carry trade speculation; there is zero evidence that 2% inflation results in any more growth than 1% or even 0% inflation; and, as an empirical matter, there is plenty of inflation in the US economy and has been during the entire past 15 years of rampant money printing designed to stimulate more growth.
Still, real final sales in the US economy have grown at only a 1.8% rate since the year 2000, or by just half of the 3.5% rate recorded for the prior 46 years. But that downshift is not in any way attributable to inflation missing the allegedly optimum 2% target. In fact, during the last 15 years the CPI has increased at an average rate of exactly 2.18%.
So where’s the beef or rather the allegedly missing beef? Well, the monetary high priests hold that the PCE deflator, not the CPI, is the correct measure of inflation because it takes better account of changing consumer preferences or weighting shifts in the market basket of what people buy. That is, it captures their shifting to chicken, tuna or spam when they can’t afford steak.
Yet its hard to believe that the scant daylight shown in the chart below accounts for the drastic deterioration of economic growth during the last 15 years. In other words, we have had 2% inflation on the most commonly used measuring stick—-so what’s wrong with the ruler?
After all, even the Fed’s own preferred inflation ruler has clocked in at 1.84% per year since the year 2000. Presumably no adult would argue that a shortfall of 16bps per year from the magic 2.0% target would account for the 50% plunge in real economic growth during the last decade and one-half.
And this gets us to today’s report on the April CPI. Normally, Fed heads prefer the PCE deflator less food and energy on the grounds that the later elements are too volatile to properly measure the actual inflation trend. Alrighty then. The April index for people who prefer to starve and shiver in the dark came in at a 3.6% rate for the month and was 1.8% higher than last April.
Unless you are some kind of monetary monk counting bps of inflation on the head of a pin, therefore, you might say “mission accomplished”. Inflation is running close enough to the magic 2.0% threshold for government work.
Jim Sinclair’s Commentary
It is all happening now if you have eyes to see.
Austria Confirms Faith In Fiat Fading: Repatriates 110 Tons Of Gold From BOE
Submitted by Tyler Durden on 05/22/2015 11:43 -0400
Six months ago we warned that Austria was considering it, and now, as Kronen-Zeitung reports, with no rigged Swiss-like referendum required, Austrian Central Bank Governor, and the person many claim is in Mario Draghi’s inner circle of trust (soon to be revised) Edwald Nowotny has committed to repatriating 110 tonnes of gold. This is part of Nowotny’s new "gold strategy" and with his position (on paper) as one of Draghi’s foremost lieutenants, appears to be a big stab in the back for super money printing Mario.
While gold withdrawals from the NY Fed have been incessant over the past year…
… this time it appears the Bank of England faces the trust-fall as 80% of Vienna’s gold is held there.
CENTRAL BANK TO BRING MOST GOLD RESERVES BACK TO AUSTRIA: KRONE
KRONEN-ZEITUNG REPORTS ON AUSTRIAN CENTRAL BANK’S GOLD PLANS
AUSTRIA TO TRANSPORT 110 TONNES GOLD BACK TO AUSTRIA: KRONE
Austrian central bank plans to keep 50% of its gold reserves in Austria vs 17% now, Kronen-Zeitung reports, citing governor Ewald Nowotny’s unpublished new “gold strategy.” Bloomberg adds,
Jim Sinclair’s Commentary
This research company sure has the right name.
Negative Views of New Congress Cross Party Lines
Republicans Want GOP Leaders to Challenge Obama More Often
The new Republican-led Congress is drawing harsh reviews from the public – including most Republicans. Just 23% of Americans say congressional Republicans are keeping the promises they made during last fall’s campaign, while 65% say they are not.
Nearly four-in-ten (37%) say the new Congress has accomplished less than they expected, while 4% say it has accomplished more than expected. About half (53%) say its accomplishments are in line with what they expected.
On both measures, the public’s views are far more negative than they were of the Democratic-led Congress in March 2007, after the Democrats regained control of both chambers following several years of Republican control. Views are also much more negative than they were in April 1995, shortly after the GOP had gained control of the House and Senate for the first time in four decades.
The new national survey by the Pew Research Center, conducted May 12-18 among 2,002 adults, finds that just 22% approve of the job performance of Republican congressional leaders, little changed since the summer of 2011. Ratings for Democratic congressional leaders are somewhat better (33% approve).
Unlike after some previous partisan turnovers on Capitol Hill, negative assessments of the new Congress now cross party lines. Today, just 41% of Republicans approve of the job their party’s leaders in Congress are doing. By comparison, in April 2011, 60% of Republicans approved of GOP leaders’ job performance and in April 1995, 78% approved of GOP leadership’s policies and proposals.
JPMorgan Officially Apologizes For Being A Criminal Market Manipulator
Tyler Durden on 05/22/2015 13:40 -0400
Presented with little comment, aside to ask – how many ‘people’ went to jail for this?
MAY 20, 2015 DISCLOSURE NOTICE
The purpose of this notice is to disclose certain practices of JPMorgan Chase & Co. and its affiliates (together, “JPMorgan Chase” or the “Firm”) when it acted as a dealer, on a principal basis, in the spot foreign exchange (“FX”) markets. We want to ensure that there are no ambiguities or misunderstandings regarding those practices.
To begin, conduct by certain individuals has fallen short of the Firm’s expectations.The conduct underlying the criminal antitrust charge by the Department of Justice is unacceptable. Moreover, as described in our November 2014 settlement with the U.K. Financial Conduct Authority relating to our spot FX business, in certain instances during the period 2008 to 2013, certain employees intentionally disclosed information relating to the identity of clients or the nature of clients’ activities to third parties in order to generate revenue for the Firm. This also was contrary to the Firm’s policies, unacceptable, and wrong. The Firm does not tolerate such conduct and already has committed significant resources in strengthening its controls surrounding our FX business.
The Firm has engaged in other practices on occasion, including:
We added markup to price quotes using hand signals and/or other internal arrangements or communications. Specifically, when obtaining price quotes for bids or offers from the Firm, certain clients requested to be placed on open telephone lines, meaning the client could hear pricing not only from a salesperson, but also from the trader who would be executing the client’s order. In certain instances, certain of our salespeople used hand signals to indicate to the trader to add markup to the price being quoted to the client on the open telephone line, so as to avoid informing the client listening on the phone of the markup and/or the amount of the markup. For example, prior to agreement between the client and the Firm to transact for the purchase of €100, a salesperson would, in certain instances, indicate with hand signals that the trader should add two pips of markup in providing a specific price to the client (e.g., a EURUSD rate of 1.1202, rather than 1.1200) in order to earn the Firm markup in connection with the prospective transaction.
We have, without informing clients, worked limit orders at levels (i.e., prices) better than the limit order price so that we would earn a spread or markup in connection with our execution of such orders. This practice could have impacted clients in the following ways: (1) clients’ limit orders would be filled at a time later than when the Firm could have obtained currency in the market at the limit orders’ prices, and (2) clients’ limit orders would not be filled at all, even though the Firm had or could have obtained currency in the market at the limit orders’ prices. For example, if we accepted an order to purchase €100 at a limit of 1.1200 EURUSD, we might choose to try to purchase the currency at a EURUSD rate of 1.1199 or better so that, when we sought in turn to fill the client’s order at the order price (i.e., 1.1200), we would make a spread or markup of 1 pip or better on the transaction. If the Firm were unable to obtain the currency at the 1.1199 price, the clients’ order may not be filled as a result of our choice to make this spread or markup.
We made decisions not to fill clients’ limit orders at all, or to fill them only in part, in order to profit from a spread or markup in connection with our execution of such orders. For example, if we accepted a limit order to purchase €100 at a EURUSD rate of 1.1200, we would in certain instances only partially fill the order (e.g., €70) even when we had obtained (or might have been able to obtain) the full €100 at a EURUSD rate of 1.1200 or better in the marketplace. We did so because of other anticipated client demand, liquidity, a decision by the Firm to keep inventory at a more advantageous price to the Firm, or for other reasons. In doing so, we did not inform our clients as to our reasons for not filling the entirety of their orders.
ISIS seizes last Syria-Iraq border crossing
DEBKAfile May 22, 2015, 6:39 PM (IDT)
The loss of the al-Tanf (known as al-Waleed in Iraq) crossing to ISIS Thursday night followed the Syrian army’s defeat at the ancient city of Palmyra. DEBKAfile adds: With the capture of the Al-Tanif crossing point, the Islamic State has strengthened its grip on its adjacent holdings – Deir el-Zour in Syria and Anbar region in Iraq. The London-based opposition center says that the Islamic State now controls more than 95,000 sq km of Syria – roughly half of the country’s area.
SEC Commissioner Furious That SEC Has Made A Mockery Of "Recidivist Criminal Behavior" By Banks
Submitted by Tyler Durden on 05/22/2015 07:58 -0400
Yesterday, in the aftermath of the latest settlement by the world’s biggest banks, who finally admitted they have criminally rigged virtually all markets since the Great Financial Crisis (and prior) despite promising repeatedly they would not do that after having been caught time and again and punished with ever "harsher" wristslaps, we wrote that the "Public Is Confused Why World’s Biggest Banks Admitting Criminal Fraud, Leads To Public Yawns."
It appears the public is not the only one who is confused, or yawning, that yet again banks get away with just another penalty (to be paid by their shareholders) and zero jail time for the perpetrators despite what is supposedly "criminal" rigging: none other than a SEC regulator working for the same enforcer who "punished" the Too Big To Prosecute banks only to immediately grant them waivers to continue business as usual, is just as confused.
Here, two weeks after SEC commissioner Cara Stein raged that the SEC would turn a blind eye to Germany’s Deutsche Bank for a "Decade Of Lying, Cheating, And Stealing", is her dissenting opinion with the SEC settlement, this time broadening her anger to include all the banks, not just the German one.
* * *
Dissenting Statement Regarding Certain Waivers Granted by the Commission for Certain Entities Pleading Guilty to Criminal Charges Involving Manipulation of Foreign Exchange Rates
Commissioner Kara M. Stein
May 21, 2015
I dissent from the Commission’s Orders, issued on May 20, 2015, that granted the following waivers from an array of disqualifications required by federal securities regulations:
UBS AG, Barclays Plc, Citigroup Inc., JPMorgan Chase & Co. (“JPMC”), and the Royal Bank of Scotland Group Plc (“RBSG”), waivers from the provisions under Commission rules that automatically make them ineligible for well-known seasoned issuer (“WKSI”) status;
UBS AG, Barclays, and JPMC waivers from automatic disqualification provisions related to the safe harbor for forward-looking statements under Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934; and
UBS AG and three Barclays entities waivers from the automatic Bad Actor disqualification provided under Rule 506.
The disqualifications were triggered for generally the same behavior: a criminal conspiracy to manipulate exchange rates in the foreign currency exchange spot market (“FX Spot Market”), a global market for buying and selling currencies. Traders at these firms “entered into and engaged in a combination and conspiracy to fix, stabilize, maintain, increase or decrease the price of, and rig bids and offers for,” the euro-dollar foreign currency exchange (“FX”). To carry out their scheme, the conspirators communicated and coordinated trading almost daily in an exclusive online chat room that the traders referred to as “The Cartel” or “The Mafia.” Additionally, salespeople and traders lied to customers in order to collect undisclosed markups in certain transactions. This criminal behavior went on for years, unchecked and undeterred.
There are compelling reasons to reject these requests to waive the automatic disqualifications required by statute or rule. Chief among them, however, is the recidivism of these institutions. For example, in the face of the FX criminal action, a majority of the Commission has determined to grant Citigroup yet another WKSI waiver, its fourth since 2006. It is worth noting that Citigroup was automatically disqualified from WKSI status between 2010 and 2013 for unrelated misconduct, meaning that it has effectively now triggered WKSI disqualifications five times in roughly nine years. Further, through this latest round of Orders, the Commission has granted: