The Rigging Triangle Exposed: The JPMorgan-British Petroleum-Bank Of England Cartel Full Frontal

Courtesy of ZeroHedge:

The name Dick Usher is familiar to regular readers: he was the head of spot foreign exchange for JPMorgan, and the bank’s alleged chief FX market manipulator, who was promptly fired after it was revealed that JPM was the bank coordinating the biggest FX rigging scheme in history, as initially revealed in “Another JPMorganite Busted For “Bandits’ Club” Market Manipulation.” Subsequent revelations – which would have been impossible without the tremendous reporting of Bloomberg’s Liam Vaughan – showed that JPM was not alone: as recent legal actions confirmed, virtually every single bank was also a keen FX rigging participant. However, the undisputed ringleader was always America’s largest bank, which would make sense: having a virtually unlimited balance sheet, JPM could outlast practically any margin call, and make money while its far smaller peers were closed out of trades… and existence.

But while the past year revealed that FX rigging was a just as pervasive, if not even more profitable industry for banks than the great Libor-fixing scandal (for details see “How To Rig FX Like A Pro “Bandit”, And Make Millions In The Process”), the conventional wisdom was that it involved almost exclusively bankers at the largest global banks including JPM, Goldman, Deutsche, Barclays, RBS, HSBC, and UBS.

Now, courtesy of some more brilliant reporting by Vaughan, we can finally link banks with the other two facets of what has emerged to be an unprecedented FX-rigging “triangle” cartel: private sector companies that have no direct banking operations yet who have intimate prop trading exposure, as well as central banks themselves. Continue reading

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HBOS accused of misleading the public over £4bn rescue

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Courtesy of Tom Harper @ The Independent:

A highly questionable deal between a major British bank, the previous Labour government and UK financial regulators resulted in the publication of misleading information that led the public to invest hundreds of millions of pounds in the failing bank.

An investigation by The Independent on Sunday has found the Treasury and the Bank of England were funnelling billions of pounds worth of loans to HBOS (Bank of Scotland) when it raised £4bn – without informing potential investors that it was surviving on life support from the state.

In a desperate attempt to keep its head above water at the height of the financial crash, the bank issued a £4bn rights issue, where new shares were issued to investors, in April 2008. This outlined its financial position in a prospectus signed off by UK financial regulators.

However, HBOS failed to mention anywhere in the 194-page document – which is supposed to detail all possible risks to potential funders – that its balance sheet was so dire it was being propped by billions of pounds in state loans.

Legal experts and MPs expressed astonishment yesterday at the omission, which may have seriously misled the markets and appears to have been approved by Gordon Brown’s government, raising disturbing questions about possible collusion between UK financial regulators and a major British bank. Months after the rights issue, HBOS went bust, forcing taxpayers to cover a £25bn black hole in its finances.

Gordon Brown and Alistair Darling An investigation by The IoS can also reveal that the current Bank of England review of regulators’ historic supervision of HBOS – mysteriously delayed for years – is refusing to investigate the implications of the HBOS rights issue, despite it being central to its terms of reference. Continue reading

BofE’s Haldane Sees Greater Volatility Ahead; Warns Of Too-Big-Too-Fail “Problem From Hell”

Courtesy of Zerohedge:

While the Bank of England’s chief economist, Andrew Haldane, admitted that reviving investors’ appetite for risk was one of the forgotten goals of central banks, he notes there are concerns that risk is not being “removed” but changing shape and migrating to more liquid markets but that should not be a problem as “monetary policy can on occasions have a role to play in ensuring against these financial stability risks…” i.e. the market put. His biggest concern is the aggregation of derivatives clearing which could be a “problem from hell” but he notes the future will not be the same as the past as “volatility in financial-market asset prices will be somewhat greater,” and that interest rates will not ‘normalize’ to the levels of the past.

Some key excerpts from Andy Haldane’s speech today at Camp Alphaville,

We blew the bubbles…

“That’s why we did it. Lower rates and QE were an exercise in, among other things, trying to stimulate risk taking.”

The economic cost of inaction would have been considerable, he argued.

But, as WSJ reports, he appears to be concerned…

Critics say these tools may be ineffective, particularly if risky activity migrates into shadowy parts of the financial system beyond regulators’ reach.

Mr. Haldane acknowledged this was a possibility and said central banks must be prepared to use higher interest rates as part of their defenses.

The future won’t look like the past…

“The level of rates to which we are returning won’t be the numbers we’ve seen in the past”
As “risk” is rising…
Continue reading

Cut Help to Buy to burst housing bubble, OECD urges Bank of England

Courtesy of Ben Chu @ The Independent:

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The Bank of England has been urged by the OECD to dampen the booming UK property market by watering down the Government’s mortgage subsidies.

In its latest report, the multilateral organisation noted yesterday that British house prices look overvalued relative to average earnings and rents and said the time has come for the regulator to take corrective action.

“Monetary policy tightening should be accompanied by timely prudential measures to address the risks of excessive house price inflation,” it said.

The OECD added that this action might include “tighter access” to the Help to Buy scheme, which offers state guarantees for mortgages worth up to £600,000, alongside higher capital requirements for lenders and maximum loan-to-value ratios for mortgages.

Many have called for the £600,000 cap on Help to Buy mortgage eligibility to be significantly reduced.

Last week, the Bank’s deputy Governor, Sir Jon Cunliffe, said house prices, which are rising at an annual rate of more than 10 per cent, are “the brightest light” on the regulator’s dashboard and said the Bank was “ready to act” if necessary to head off the danger of another damaging property bubble.

Stricter rules on mortgage lending were introduced last month and the Bank’s Financial Policy Committee could take further action to curb the availability of credit at its meeting next month. George Osborne and other ministers have sought to play down suggestions of a housing bubble and also the impact of the Help to Buy scheme on prices. Continue reading

Quantitative Easing – The Final End Game

Courtesy of Sandeep Jaitly @ Fekete Research.com:

What we are currently witnessing with the various ‘quantitative easing’ procedures across the world is the culmination of a process that began many decades ago in the 1920s shortly after the establishment of the Federal Reserve System.

The Federal Reserve System was set up in 1914 to run in a similar fashion to the London gold bill market. The charter informs us that the purpose of the System is to:

“…furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes…”

At its founding, the assets of the system were limited to commercial paper, i.e. self- liquidating gold bills and gold, to the strict exclusion of government securities – i.e. government bonds redeemable in gold (via the fiat ‘dollar’ name intermediary.) This was thrown to the wind during World War I. The ‘Liberty Bond’ series was initiated in April 1917 with a $5bn issue, followed by a $3bn issue in October. In 1918, April and September saw $3bn and $6bn issues respectively. The first four ‘Liberty Bond’ issue amounted to $17bn (approximately 25,000 tonnes gold.) When the repayment of these bonds within the given schedules looked more unlikely, they started appearing on the System’s balance sheet and were thus ‘accommodated.’

Bills being discounted from the Member banks started to dry up in the early 1920s reducing the Reserve banks’ revenue, as the ‘Liberty Bonds’ were rolling off. So in the first half of 1922, they purchased government securities from the open market. This didn’t have the intended effect – as soon as government securities were purchased, any commercial bank paid off their loans to the Reserve banks further – increasing the Reserve banks’ income. But, the commercial banks were in a theoretically more advantageous situation for lending on.

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Continue reading

The truth is out: money is just an IOU, and the banks are rolling in it

It’s good for the Bank of England to admit that the ‘money’ we use, correctly called fiat currency, is just a worthless paper IOU and the only thing that gives it value is your belief that it is worth what you think.

It is debt, not money and this monetary setup is gamed for the few and enslaves the rest of us. Gold and silver are money and have been for 5000 years, a return to sound money and The Real Bills Doctrine is what is required to get this country and the world, back on track.

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Courtesy of David Graeber @ The Guardian:

Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn’t know how banking really works, because if they did, “there’d be a revolution before tomorrow morning”.

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called “Money Creation in the Modern Economy”, co-authored by three economists from the Bank’s Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window.

To get a sense of how radical the Bank’s new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy. People put their money in banks. Banks then lend that money out at interest – either to consumers, or to entrepreneurs willing to invest it in some profitable enterprise. True, the fractional reserve system does allow banks to lend out considerably more than they hold in reserve, and true, if savings don’t suffice, private banks can seek to borrow more from the central bank. Continue reading

THE MANIPULATORS WILL LOSE THEIR #GOLD WAR: GATA’S BILL MURPHY

Courtesy of Inteligencia Financier Global:

Bill Murphy
The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.

Thanks Bill for accepting this interview.

-Maybe most of people in the gold world know about you and GATA. Nevertheless, for those who don’t know: Who is Bill Murphy? Where do you come from a financial point of view and what did motivate you to found the Gold Anti- Trust Action Committee (GATA)?

Hello Memo.

Thanks so much for your interest in what GATA has to say. I have a Wall Street background and worked for Shearson Hayden Stone and Drexel Burnham Lambert in Manhattan in the late 1970’s and early 80’s. At one point I became a limit position trader in the copper market after forming my own company, so I am very versed in how the futures market works in the US. In 1998 I realized the Internet was going to be a big deal and opened up http://www.LeMetropoleCafe.com as a subscription website which would focus on the gold/silver markets, as well as provide coverage of the US and world economies. Soon after opening up for business, the famed hedge fund Long Term Capital Management blew up. They were known to be short hundreds of tonnes of gold and that would have to be covered. However, it was clear that bullion banks such as Goldman Sachs, JP Morgan, and Deutsche Bank were capping the price around $300 in a collusive manner. My future colleague Chris Powell had anti-trust experience via his newspaper business. He suggested we try and stop it, so GATA was formed.

-In our last interview, Hugo Salinas Price told us that only a blind or a Harvard economist with a doctorate would not see the gold market is being manipulated. Do you agree? As I understand it, one of the main purposes of GATA is to communicate this fact to as many people as possible, and end this manipulation, but, Bill, isn´t it a lost war? Aren’t the manipulators “too strong to be stopped”?

Yes, Hugo is right on the money. It could not be more obvious. So much so that James McShirley, a speaker at GATA’s London conference in 2011, has written in advance at times what the gold will do on a given day. From a bigger picture someone only need to appreciate what the price of gold did last year compared to the DOW on the same quantitative easing news. The DOW went up 3,000 points and the gold price went down $600. That would have made no sense to anyone ahead of time. Gold went lower as it did because “The Gold Cartel” forced the price down with massive raids in the derivatives paper market, often when few traders were around. Continue reading