The article of July 22nd on "Smoking Guns of USTreasury Monetization" hit more desks, raised more dust, and brought more attention than expected to the grand fraud in progress using USGovt debt securities. The glaring actions continue without any hint of legal prosecution but deep foreign resentment among creditors as publicity mounts. Nobody appreciates counterfeit of the instruments held in great volume as supposed savings. The only counterfeit of honorable origin is of Microsoft products, since mostly stolen and surely not the output of in-house innovation.
The problem is more diverse than just a JPMorgan bond fraud issue. Sure, the venerable colossus and syndicate titan sold more than $2 trillion in USTreasurys than were issued in the 1990 decade. Records used to be found in the penthouse business offices at Cantor Fitzgerald in South Manhattan. A database migration to New Jersey surely involves a great deal of deletions. The problem goes far beyond the giant bank, which gobbled numerous other banks in the course of its cancerous reign, to become an appendage of the USGovt today. See Chase Manhattan, Chemical Bank, Manufacturers Hanover, and Bank One. Any competent student of financial economics can see that such merger is part & parcel of the Fascist Business Model, with climax merged union with the state, and side effect of criminal impunity that permits deep fraud in numerous markets like silver. JPMorgan cannot be fixed by the process any more realistically than an angry man with a vengeful heart can carve out his own cardiac pump in order to enjoy a better day. Thus no solution exists.
The problem in very recent history traces back to the September and October months of 2008, when Wall Street investment banks and the US banking system died. These banks have not and will not recover, since they died. Some deaths were obvious, but others remain well hidden. The big banks do not lend money since they are dead, the dirty little secret. Their insolvency is easy to prove, but obscured by altered accounting rules put in place on April 1st 2009. They include generous rules that permit a dead entity to declare itself alive by filing a false accounting report, valuing their own assets at whatever suits their needs. Generally, insolvency plus illiquidity will force bankruptcy. But Wall Street and the Big US Banks use naked shorting of USGovt-backed bonds to produce urgently needed liquidity. All the extreme efforts to revive the US banks are futile. Imagine numerous transfusions of a dead man in the Emergency Room of a hospital, as more blood does not guarantee a resuscitation. More wires and tubes don't mean squat, since the guy has croaked and his corpse is rotting with a stench spreading into the corridors. The dirty secret, protected from the US public, is that the man died. So Wall Street and the Big US Banks are dead. By withholding the reality, a storm of funding programs has been approved by the USGovt, mostly directed at Wall Street and the Big US Banks. They urgently need liquidity, and are creative how they obtain it.
A near total shun of the crooked investment banks Main Street and the states has taken place. The private sector investment community does not float new bonds when lawsuits cases are in progress! Sure, the last Stimulus Plan sent many billion$ to the states to plug budget shortfalls. And sure, another $26 billion pittance was approved today for states in a second plug. Somehow the thought of tossing a $1 bill into a tin cup for a street beggar comes to mind, except the beggar is a former well-placed skilled industry employee, now painfully displaced. The states need several hundred billion$, or better yet, they need to redirect the vast funds sent to WashingtonDC and keep them at home, where they would not be wasted or pilfered or sent to battle overseas.
So Wall Street and the Big US Banks are dead. No amount of Financial Accounting Standards Board rule changes can overrule the fact that they are grossly insolvent, and worsening by the month. The housing bust and mortgage debacle killed them. Many new profit or basic elite welfare programs are channeled into executive bonuses and excess cash reserves held at the US Federal Reserve, which is also insolvent, yet another major iconic zombie. Check their balance sheet for mortgage bonds worth half their value listed on the books. The lead dogs in the financial sector cannot have access to their cash, desperately needed and absconded by the USFed. They must lean heavily on devices that provide cash. Their bond issuance business has dried up, amidst deep fraud allegations. Their stock initial public offering business has dried up, in collateral damage to integrity. Their credit derivative business is thriving, not coincidentally since it is unregulated. Even their hedge fund business is shriveling up, a strange byproduct of Wall Street targeting and leverage backlash. Their flash trading business is intriguing, hardly a sign of free market efficiency, with bizarre outcome of a grand incestuous poker game limited to those holding Wall Street business cards. So Wall Street and the Big US Banks are dead. Do not count them out just yet! They have found a clever way to provide vast sums of liquidity, aided by the blind eye of USFed Chairman Bernanke. They sell that which they do not own, relying upon collusion at the top.
NAKED SHORTING WITH FAILURE TO DELIVER
In the Smoking Gun article, the main accusation was cited as widespread counterfeit and hiding vast funds. The sale of USTreasury Bonds in the last two years has exceeded the USGovt debt issuance by $1.5 trillion. It was asked "Where did the money go?" But the more important questions are:
- What telltale evidence exists to shed light on the counterfeit? (Failures to Deliver)
- Where else is excessive sale of USGovt sponsored securities? (USAgency Bonds)
The answers are easy. The implications are great. The impunity is disturbing. The signs of systemic breakdown are diverse. The road to perdition is clear. The path to a USTreasury default is far more obvious with each passing month. The denial is thick. The mortgage bond fraud, whose climax failure in 2008 was quite visible, went unprosecuted. So Wall Street and the Big US Banks are dead. The kings are dead, but the theft has not ended. A new blatant form of fraud has entered the room. Silence is deafening from the entire cast of enforcers, who have one element in common, a Goldman Sachs pedigree. The impish clowns sitting on the helm at the USFed oversee the fraud. They have often stated their primary objective to aid in the promotion of liquidity to the big banks. Naked short sales of USTreasurys and USAgency Mortgage Bonds accomplishes the mission. Yet another Mission Accomplished on a sordid trail in recent US financial snakepit and cesspool run by a den of thieves.
Failures to Deliver on both types of USGovt-backed bonds are staggering. When a trade takes place, usually two to three days are permitted before the stock or bond must be delivered, so as to complete the trade, and to settle the funds transfer among parties. A year ago, vast sums of USTreasury Bonds were the subject of debate and dispute as the volume of Failures to Deliver was staggering in the months following the autumn 2008. Blame was given to the disorder that ensued from the Lehman Brothers failure, the AIG breakdown, and the Fannie Mae nationalization. No such convenient event can be blamed on the present-day Failures to Deliver. They continue for USTreasurys, and explain well the superfluous $1.5 trillion. They precede the return launch of the QE2, the Quantitative Easing. Suddenly, delivery of bonds might be made easier as the USGovt floods the bond market with new issuance covered in cost by the Printing Pre$$, which USFed Chairman Bernanke claims can be operated at zero cost. The actual cost is the ruin of the USDollar image and the ruin of the USTreasury prestige.
What would be the motive for naked short selling of USTreasurys in such volume? Sure, simple greed is always in the mix. Worse, Wall Street lacks legitimate business volume from which to earn profits. So Wall Street and the Big US Banks are dead. Imagine a dark storefront that used to have a bustle of business and constant flow of customers. Not Wall Street, no more. The dark storefront conceals a vast counterfeit operation inside. They sell debt securities under the cover of darkness, out the back door, and rake in great sums of money. When demanded to produce the USTreasurys, they refuse, they delay, or they defy, since they cannot deliver. Thus, the Failures to Deliver. This explains the ready cash flow of liquidity to the Wall Street banks without much investment banking business. This explains the 90 consecutive days without trading loss for the lead dogs in the corrupt sled. This explains how dead zombie banks continue to operate. So Wall Street and the Big US Banks are dead.
DEBT MATURITY & RESALE, NOT THE EXPLANATION
Word is getting out. The excess is NOT explained by USTreasury maturity, expiration, and re-sale, as some analysts claim without doing proper research. Many people offer this simplistic explanation, but it is not correct. Mature rollover of debt is clearly labeled as such, not to be confused with utter counterfeit from naked short sales.The excess USTreasury sale (over and above USGovt deficits) is largely from naked shorting, marked by known Failure to Deliver. This explains how Wall Street and Big US Banks keep their liquidity flowing. These big banks are dead zombies bereft of income, so they counterfeit a source of income. The big banks (including investment banks) have seen a huge decline in IPOs, Bond issuance, and their lending business is way down also, seen in the credit data. They have a big source of income in the USTreasury Carry Trade, buying long, selling short. They have been parking those profits in the USFed, earning interest as Excess Reserves. These points require repeating so as to sink in. Legitimate income is not available.
A Failure to Deliver occurs when the selling party cannot locate the bond, cannot find the bond, or it does not exist. More USTreasurys have been sold than float in existence. Worse, more USAgency Mortgage Bonds have been sold than float in existence. The Wall Street and Big US Banks are engaged in basic counterfeit, sale of that which they do not own, much like selling the Brooklyn Bridge. Some prefer to think the best, that debt is maturing and re-sold. No so! That is naive! The same goes on with the USAgency Mortgage Bonds.
New Issuance of USTreasurys, as the label implies, is new and not old. Many people have some confusion over what New means, which means fresh new securitizations. Rollover of old expiring maturing debt is totally different. The USGovt finance ministry calls it Rollover of Mature Debt Securities, or some such. Anyone who follows the auctions can easily comprehend the names of auctioned securities. In a typical auction, the USDept Treasury might say "$12 billion in New Issuance plus $4 billion in Rollover of Mature Debt securities." There are dozens of examples to detect with a minimum of research. These types of USTreasury products are utterly basic and the names are plain so that common folk can comprehend.
My friend and colleague, and partner in comic relief via telephone, is Rob Kirby. He is a former professional bond broker and credit derivative trader in Toronto. He knows that which he speaks. His opinion was sought, which appears liberally on his website (www.KirbyAnalytics.com). His analysis is thorough and highly reliable. Mr Kirby agreed with me and my claims of naked bond shorting, as he provided a thorough response that should settle any dispute. He wrote:
"When bond issues are announced they are all referred to as New Issuance in that they immediately (before they are auctioned) begin trading on a WI (when issued basis). But when the Government / Treasury states they issued $1.25 Trillion in New Debt securities, they are talking about an increase to aggregate outstanding, which would not include a boatload of expired debt that Rolled or replaced newly issued bonds or T-Bills. To perhaps make that a bit clearer. When the government announces they are going to issue $1.25 billion in new 5-year bonds, even if they are reopening an existing 5-year issue with a known coupon, they immediately begin trading on yield as opposed to existing bonds which trade on PRICE, as in discount or premium to par. / Rob"
SECOND SMOKING GUN WITH FANNIE MAE BONDS
They are known by many names. They are called Govt Sponsored Enterprise Bonds (GSE Bonds), or Fannie Mae Bonds, or Agency Bonds. My preference is to call them USAgency Mortgage Bonds, since they are backed by the full deceit, dishonesty, corruption, collusion, and cloud cover of the United States Government. My claim has been consistent, that Fannie Mae is the crime scene for trillion$ in past theft, with probable dirty hands on past presidents, and that Fannie Mae is the principal clearinghouse for numerous fraud schemes in progress under the USGovt roof. Naked shorting has gone out of control with Mortgage Bonds. A fresh Bloomberg article has brought the counterfeit events to the fore, maybe even painted on a billboard. But the billboard has few lights, and might have been pushed onto a backstreet instead of a main avenue.
Naked shorting explains well the extremely high volume of mortgage bonds, including the Failures to Deliver. Wall Street and the Big US Banks are staying afloat from naked shorting, a form of counterfeit, in order to survive. They lack liquidity. The must sell something. Corporations, municipalities, and other entities observe the Wall Street criminal behavior, their conflict of interest, their trades positioned in opposition to clients, and have lost trust. The Wall Street community activity centered upon naked short sales of USAgency Mortgage Bonds complements their naked shorting of USTreasurys. So Wall Street and the Big US Banks are dead. The USTreasurys are the prima facie in the case to be brought for large scale fraud, sufficient for indictment. The USAgency Mortgage Bonds are the second part to the story, worthy of important support toward conviction. The difficulty of executing transactions tarnishes, pollutes, and contaminates the image of the $5.2 trillion mortgage bond securities market, which is the most liquid behind USTreasurys. That is precisely why the Fannie Mae bonds can be counterfeited so easily. With heavy volume comes heavy cover for fraud. The same is true of $100 bills counterfeited by the Central Intelligence Agency, to keep America strong.
In the aftermath of the USFed's $1.25 trillion of mortgage bond purchases over the last 18 months, they have exposed the market as broken. After acquiring about one quarter of home loan bonds with USGovt-backed guarantees to buttress the housing prices against the threat of freefall, to save the mortgage bond market from outright freefall, and to build a vast queer safety net for the USEconomy, the USFed made some securities too hard to find. In essence, the USFed exposed the vast fraud by Wall Street and the Big US Banks by scooping up the objects of their counterfeit.
Caroline Salas and Jody Shenn started off in their Bloomberg article with a powerful salvo. They wrote, "For all the good the Federal Reserve's $1.25 trillion of mortgage bond purchases have done, they have also left part of the market broken. By acquiring about a quarter of home loan bonds with government backed guarantees to bolster housing prices and the US economy, the Fed helped make some securities so hard to find that Wall Street has been unable to complete an unprecedented amount of trades. Failures to deliver or receive mortgage debt totaled $1.34 trillion in the week ended July 21, compared with a weekly average of $150 billion in the five years through 2009." The last sentence should be read two or three times. It is a smoking gun of USAgency Mortgage Bond fraud, not so much of monetization. In fact, the fraud is the obverse side of the coin whose face features blatant bond monetization. The US financial coin has monetization on its face and bond fraud on the obverse, the rotten output of a fiat currency system in its final phase.
Thomas Wipf chairs an industry group that is trying to address the problem, which is hardly a secret. The fraud is in the open, but not discussed EVER in the financial press or on the air of financial networks. Wipf is chairman of the Treasury Market Practices Group and the head of a bond group at Morgan Stanley. He is concerned about exacerbated damage caused by the collapse of a bank or fund. Translate that concern, as Wipf is worried about exposure of massive bond fraud by Wall Street and Big US Banks during a routine bank failure.Wipf said, "You are adding systemic risk into the market. Investors are taking on counter-party risk in trades they did not intend to take on." In other words, investors are being defrauded and could retaliate if powerful enough. Numerous other bank and bond analysts are hot on this story, but they either refuse to state the obvious or they are not permitted to state the obvious. Maybe after years of operating within the snake pit, they cannot perceive the obvious. Wall Street and the Big US Banks are dead, and are using magnificent naked shorting of USGovt-backed bond securities to remain alive. They know well that the USDept Treasury, the Securities & Exchange Commission, and the Office of the Comptroller of Currency will do nothing. They are dominated and controlled by Goldman Sachs, each head holding a GSax pedigree, and thus no prosecution for grand bond fraud will ever happen. In fact, some research might expose that Goldman Sachs could be the greatest offender of them all in this grotesque naked shorting game. They were a primary player in the last bond fraud scheme, the packaging and sale of mortgage backed securities. This is a natural extension within their field of expertise, their realm of dominance.
The Bloomberg authors Salas and Shenn point out the ripple effect, the daisy chain of unsettled trades that occurs when a broker dealer acting as a buyer in one transaction fails to deliver those bonds as a seller in another. Even Moodys Investors Service is on the crime scene, but not likely to speak truthfully, accurately, or boldly. Senior analyst Alexander Yavorsky at Moodys is concerned about the drag on the mortgage bond business, when he should be more concerned about massive fraud within the business.Obviously, if reduced liquidity in the mortgage bond market persists and causes investors to seek other assets, the consequent effect would run counter to the USFed's goal of buoying demand for the securities. The official program (dubbed QE1) began in January 2009 and officially ended in March. Fraud usually undermines, hinders, and ruins securities markets. But in the Untied States of America, such bond fraud is sanctioned and protected by the regulators, by the central bankers, and by the finance ministries. If truth be known, Wall Street and the Big US Banks are dead. Authors Salas and Shenn had better be careful, or they will lose their jobs for the horrible exposure. Their editorial managers probably have told them to shut the hell up already, after receiving a phone call from the Wall Street control tower. See the Bloomberg article before it is pulled by order of the USGovt (CLICKHERE). It is entitled "Fed Finding No Good Deed Goes Unpunished With Mortgage Bond Trades Failing" and is an eye-popper.
Friend and colleague Aaron Krowne is the owner and editor of the Mortgage Lender Implode website (CLICKHERE). He is an astute bank analyst with a keen alternative viewpoint. He wrote in an email, "Looks like a side effect of the USFed's massive mortgage buying is causing the 'tide to go out' on this market, revealing massive manipulation, or at least, incredibly unsound synthetic derivatives trading on these major fixed income bonds."Wall Street built countless leveraged and artificial bonded securities, mostly atop shifting sands. A great unraveling is in progress, and so is a great awakening in progress.
EFFECT ON GOLD
The leverage and the makeup of the structured finance schemes devised by Wall Street and the Big US Banks is unraveling. As it does so, the deep fraud is exposed. As it does so, the ruinous construction of finance engineers is exposed. As it does, the vulnerable heart & soul of fiat currency systems is exposed. As it does, the uncontrollable growth of debt originating from the Untied States is exposed. As it does, the path to the USTreasury default is exposed. As it does, the only legitimate financial asset in a paper-driven world is exposed, GOLD. As the Wall Street and Big US Banks are recognized as dead defunct charred ruins of financial firms, whose main source of liquidity funds is naked shorting, the blatant unprosecuted counterfeit of both USTreasurys and USAgency Mortgage Bonds, the ruined condition of bonds is exposed. They are the primary instruments for the fiat currency system. As it does, the only legitimate financial asset is exposed, GOLD. Money today is no different from denominated debt coupons. GOLD IS MONEY AND ALWAYS HAS BEEN MONEY, AS JOHN PIERPOINT MORGAN ONCE SAID.
The USGovt backs with guarantees the USTreasurys. If such debt securities are the exposed object of extreme multi-trillion$ naked shorting in order to avert a death experience by Wall Street and the Big US Banks, then the faith, confidence, and prestige of the USDollar will be harmed irreparably. The alternative is clearly GOLD. The USGovt backs with guarantees the USAgency Mortgage Bonds. If such debt securities are the exposed object of extreme multi-trillion$ naked shorting in order to avert a death experience by Wall Street and the Big US Banks, then the faith, confidence, and prestige of the USDollar will be harmed irreparably. The alternative is clearly GOLD. Bear in mind that the European and British government bond markets are suffering deep damage. Confidence is fast disappearing. Weaker nations are seeing a vanishing act from bidders and buyers of their bonds. Sovereign bond supply is growing during the crisis without respite. Austerity measures imposed upon government budgets is a ruse, a mirage, a smokescreen. Deficit reduction will be minimal, if at all. If such debt securities are exposed object of unfixable impairment, then the faith, confidence, and prestige of the all major currencies will be harmed irreparably.
The alternative to defrauded and counterfeited bonds is clearly GOLD. The badly deceived and ill-informed US public will figure it out, only when the GOLD price penetrates the $2000 level, or when the SILVER price penetrates the $50 level. Until then, GOLD shines with an insufficient crowd of advocates, afficionados, and lovers. The next big upleg will occur when the number of people on the GOLD/SILVER train is reduced to a minimum, using every crooked game and every false information possible. That day might be in the coming few weeks.
Misconceptions About Physical and Paper Gold
Risks to owning paper gold, such as the GLD ETF, are just as present as any other investment you can make.
Minyan Jessica writes:
Jess,
Unfortunately, I think Hinde Capital doesn't understand how physical gold is stored, or how GLD operates.
I’ve been debunking these GLD jabs for two years now. Allocated gold -- which is what the ETF owns -- is completely unencumbered, end of story. What the ETF’s spokesman said in the article is 100% correct. If you buy a gold bar from a dealer who has bought it from another dealer who has bought it from a bank that leased it from the ECB or Fed, do you think the ECB or Fed can then track you down and claim your bar as theirs? Of course not!
And the “gold equivalents” language in the ETF’s docs, which they are complaining about, only applies to ounces that are less than a bar because the trust holds only 400 oz. bars. It amounts to at most half a million bucks at any given time based on the present gold price, which in a trust worth $50 bln is totally immaterial.
With nearly 1,300 tonnes of fully allocated gold in it, the GLD ETF is probably the best thing that ever happened to gold from an investment demand perspective. How ironic is it that so many long-time conspiracy theorists that masquerade as gold bulls seem to be so intent on killing the golden goose? These people are apparently so used to being on the losing end that they can’t stand winning! (I also think a good number of these complaints about the ETF come from those with competing products, but that’s a whole other story).
Look, there are risks with the GLD ETF, just like any investment. For example, London (where the ETF stores its gold) could get nuked, the UK could go to war with the world and seize the gold in the ETF, etc. These are low probability events though. It’s probably more likely that somebody would come to your house and shoot you for your gold. Perspective is needed.
The GLD and other gold trusts (like Central Gold Trust (GTU)) that hold “allocated gold” are not “paper gold.” Similarly, gold miners are not “paper gold” either. The physical gold exists in the ground. Can a mine or allocated gold stored for a trust in a vault be expropriated? Sure it can. Again, there are risks with all investments. Even gold in your hand has risks. You can lose it. You could have it stolen, etc.
The real “paper” gold is the leased gold that central banks hold. These central banks that have leased their gold out will be the big losers if there ever is a true panic for physical that triggers a squeeze and leaves these leaseholders with empty hands except for the claim on “paper gold” at a bullion bank that may or may not have that gold anymore (or enough assets to be able to buy it back either).
"What do you think of this article in theFinancial Times a few days ago about Hinde Capital attacking the GLD ETF? Is there a trade here long physical/short 'paper gold'?"
Jess,
Unfortunately, I think Hinde Capital doesn't understand how physical gold is stored, or how GLD operates.
I’ve been debunking these GLD jabs for two years now. Allocated gold -- which is what the ETF owns -- is completely unencumbered, end of story. What the ETF’s spokesman said in the article is 100% correct. If you buy a gold bar from a dealer who has bought it from another dealer who has bought it from a bank that leased it from the ECB or Fed, do you think the ECB or Fed can then track you down and claim your bar as theirs? Of course not!
And the “gold equivalents” language in the ETF’s docs, which they are complaining about, only applies to ounces that are less than a bar because the trust holds only 400 oz. bars. It amounts to at most half a million bucks at any given time based on the present gold price, which in a trust worth $50 bln is totally immaterial.
With nearly 1,300 tonnes of fully allocated gold in it, the GLD ETF is probably the best thing that ever happened to gold from an investment demand perspective. How ironic is it that so many long-time conspiracy theorists that masquerade as gold bulls seem to be so intent on killing the golden goose? These people are apparently so used to being on the losing end that they can’t stand winning! (I also think a good number of these complaints about the ETF come from those with competing products, but that’s a whole other story).
Look, there are risks with the GLD ETF, just like any investment. For example, London (where the ETF stores its gold) could get nuked, the UK could go to war with the world and seize the gold in the ETF, etc. These are low probability events though. It’s probably more likely that somebody would come to your house and shoot you for your gold. Perspective is needed.
The GLD and other gold trusts (like Central Gold Trust (GTU)) that hold “allocated gold” are not “paper gold.” Similarly, gold miners are not “paper gold” either. The physical gold exists in the ground. Can a mine or allocated gold stored for a trust in a vault be expropriated? Sure it can. Again, there are risks with all investments. Even gold in your hand has risks. You can lose it. You could have it stolen, etc.
The real “paper” gold is the leased gold that central banks hold. These central banks that have leased their gold out will be the big losers if there ever is a true panic for physical that triggers a squeeze and leaves these leaseholders with empty hands except for the claim on “paper gold” at a bullion bank that may or may not have that gold anymore (or enough assets to be able to buy it back either).
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