Fraudonomics

April 30, 2010

The economic reality is that nobody in the upper tier of finance and gummint (“your betters” as they like to call themselves) wants you to know just how bad things really are (they doctor the gummint stats so you don’t have to know, and the MSM press hacks dutifully reports their lies unblinkingly and without question). Corruption is the new normal. The scale is tipped in their favor (picture in your mind the last visible bit of the Titanic sticking out of the ocean just before its gone), because they write all the laws, and even if they break them (which they do every single minute of every single day) they can get away without “admitting guilt” and doing time in the big house, or even so much as a black mark on their permanent record. The Fed, Inc. just prints more money to cover their losses (but not yours. Never yours).

“The Big Secret, of course, is that every living creature within a 100-mile radius of Cooper Union would fail ‘this scrutiny’—or that scrutiny, or any scrutiny, period. Not just in a 100-mile radius, but wherever there are still signs of economic life beating in these 50 United States, the mere whiff of scrutiny would work like nerve gas on what’s left of the economy. Because in the 21st century, fraud is as American as baseball, apple pie and Chevrolet Volts—fraud’s all we got left, Doc. Scare off the fraud with Obama’s ‘scrutiny,’ and the entire pyramid scheme collapses in a heap of smoldering savings accounts.” That’s how an acquaintance of mine, a partner in a private equity firm, put it: ‘Whoever pops this fraud bubble is going to have to escape on the next flight out, faster than the Bin Laden Bunch fled Kentucky in their chartered jets after 9/11.'”And that’s why this SEC suit accusing Goldman Sachs of fraud is really just a negotiating bluff to give Obama’s people some leverage—or it’s supposed to be, anyway—according to the PE guy. He dismissed all the speculation that the fraud investigations would turn on other obvious villains like Deutsche, Merrill, Paulson & Co., the Rahm Emmanuel-linked Magnetar and so on.

“’You don’t get it, Ames. Even Khuzami, the SEC guy in charge of the Goldman case, is a fraud; the fucker was Deutsche’s general counsel when they pulled the same CDO scam as Goldman. You have no idea how deep this goes.’”

[ Fraudonomics, NYPress ]

Where is the outrage? Here and here.

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Political prisoners in USA – first in a series

April 27, 2010

Richard I. Fine

“We’ve exposed the most massive judicial corruption scheme in the history of the United States and it’s right here in Los Angeles,” said Fine, a former U.S. Department of Justice antitrust division attorney who holds a doctorate in international law from the University of London. “It’s encompassed a $300 million bribery scheme involving the county supervisors and judges. It’s been going on for 23 years and during this time nobody has received a fair trial in Los Angeles Superior Courts.”

The U.S. Supreme Court denied a bid Monday, April 26 by Tarzana attorney Richard I. Fine to be released from jail where he has spent more than a year. Fine has been held in solitary confinement at Men’s Central Jail since early 2009.

“Mr. Fine has probably done more time than most dope dealers, burglars and robbers. I think it’s unjust,”  said Sterling E. Norris, the counsel for Judicial Watch in San Marino.

“The fact the Supreme Court is involved in any way is a big deal,” said Brooklyn Law School Professor Jayne Ressler, an expert in coercive confinement cases.

“It certainly speaks volumes to the importance of this case, and it’s quite intriguing.”

Fine, a 70-year-old Tarzana resident and former U.S. Department of Justice attorney, has spent more than a year in Men’s Central Jail for contempt after refusing to divulge financial information. Fine was placed under “coercive confinement” following a series of cases in which he alleged judges received an extra $57,000 in pay from the county on top of their $179,000 annual state salaries. Fine alleged that these “undeclared bonuses” render judges biased in cases where the county is a defendant.

While the main issue before the high court is whether a person can be held in coercive confinement for such a long time, Fine remains hopeful the justices will also consider the issue of judges’ pay.

If Fine succeeds, potentially thousands of cases involving Los Angeles County could be thrown into question, because attorneys could claim the judges were biased in favor of a party in the case that was paying some of their salaries.

“That would mean we would finally after 23 years be cleaning up the California court system,” Fine said in a telephone interview from his jail cell.

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Next up: Martin Armstrong

“American politics as a system has ceased to function, because the system has gone from representing people to representing money.” -Ilargi


Econned

April 22, 2010

Humans have two ears, one mouth for a reason

April 20, 2010

They only work as intended if we use them as directed.

In “Treme,” HBO’s new series about New Orleans, a college professor played by John Goodman railed against the needless tragedy of Hurricane Katrina. The storm was a natural disaster, he says, but the flooding that followed was a man-made catastrophe, decades in the making. Many people knew about the threat, but no one did anything about it.

Mr. Goodman’s blustery tirade about warnings not heeded channeled a national anger that extends well beyond Katrina. We are living in an age of Cassandra, in which experts and ordinary people are regularly grabbing the appropriate authorities by the lapels and warning them of impending disasters — almost invariably to no avail.

Harry Markopolos, a Boston financial analyst, has been out promoting his new book, “No One Would Listen.” It is an account of the eight years he spent trying to persuade the Securities and Exchange Commission that Bernard Madoff was running a multibillion-dollar Ponzi scheme. Mr. Markopolos recounts his tireless efforts to wave red flags in front of government watchdogs. In the spring of 2000, Mr. Markopolos says he tried to explain to a senior S.E.C. official why Mr. Madoff’s numbers did not add up, but “it very quickly became clear he didn’t understand a single word I said after hello.” In the end, perhaps $65 billion disappeared, much of it belonging to charities and retirees.

There have been decades of urgent reports about sexual abuse in the Catholic Church, including a 1963 letter that recently surfaced in which the head of a New Mexico Catholic order recommended to the pope that pedophile priests be removed. Cases of abuse in the United States have been drawing attention at least as far back as 1985, when a Louisiana priest admitted to abusing 37 children. A 1992 meeting of bishops in South Bend, Ind., admitted that some bishops had hidden abuse cases. Still, just last year, the Diocese of Memphis and the Dominicans agreed to pay $2 million to a man who reported being abused as a teenager in 2000.

There were plenty of warning before the financial crisis of 2008. In 2000, Edward Gramlich, a Federal Reserve governor, cautioned that new subprime lending practices were making risky mortgages available to people who could not afford them. He urged the Fed to send examiners to investigate, but as a Times headline later reported, the “Fed Shrugged as Subprime Crisis Spread.”

Critical warnings about the attacks of Sept. 11, 2001, were also ignored. Harry Samit, a Minnesota F.B.I. agent, warned in an August 2001 memo to higher-ups that Zacarias Moussaoui, the so-called 20th hijacker, was a terrorist intent on hijacking an airplane. Mr. Samit said that he sent 70 separate warnings.

The complaint by Mr. Goodman’s character is based in fact. The Times-Picayune of New Orleans did a prescient series on the city’s vulnerability to a major hurricane, and the dangers were known nationally. In 2002, an article that I wrote on this page warned that if a bad hurricane hit, New Orleans “could fill up like a cereal bowl” and might even disappear.

In Greek drama, Cassandra, daughter of King Priam of Troy, was given the gift of prophesy by Apollo, but when she spurned his advances, he ordained that her prophecies would not be believed. There is no such simple answer today for why so many warnings are ignored.

Incompetence often plays a role. So does ideology: one reason Mr. Gramlich, a Democratic nominee, was ignored was that his warnings clashed with the antiregulatory convictions of the Bush administration. In other cases, to borrow Al Gore’s phrase, an “inconvenient truth” imposes burdens that people don’t want or threatens powerful interests. And a key reason Louisiana and the nation did not rally to better protect New Orleans was simply inertia.

Predictions of disaster have always been ignored — that is why there is a Cassandra myth — but it is hard to think of a time when so many major warned-against calamities have occurred in such quick succession. The next time someone is inclined to hold hearings on a disaster, they should go beyond asking why particular warnings were ignored and ask why well-founded warnings are so often ignored.

[ By ADAM COHEN, NYT ]

Partisanship and personal greed could be near all time highs. At least since 1929.

In America everybody wants to be rich. Since nobody listens, they don’t realize there is so much competition out there. The likelihood of their being the ‘one that makes it’  diminishes logarithmically.


Of bespoke picnic blankets and artisan chocolates

April 12, 2010

The two “home businesses” mentioned in the title are running in first and second place in the all-time list of bubble business, according to me.

On the first you might tut, but indeed it does exist, mostly as a UK enterprise/phenomenon (Google it if you don’t believe me, don’t take my word for it).

In other bubble news, the condo project that for the past few years has given Tempe, AZ it’s Beruit-like look and feel (without the pleasant Mediterranean breezes) failed to stir up any interest and went back to the lender at auction.

Housing Doom informs us that there were bidders present, but apparently no greater fool stepped forward.

(In any lineup, the greater fool is the one that stays put when the others step back.)

Now if you’ll excuse me, I have a some mortgage equity to withdraw, a Hummer to lease, and many a Starbuck’s bull-shit-acino to buy. Charge!


Of Human Bondage, and you

April 7, 2010

Over at The Automatic Earth the quality of the posts is pretty consistent, as is the commentary. A guest post by “VK” sort of sums up why I’ve been sort of feeling desperate these days. I believe I am being perceived as a bit of a Chicken Little. Nobody wants to listen or even initiate contact with me because I can’t help but bring our over-indebtedness- and its repercussions- up. Maybe they already know, and they want me to just STFU because I keep reminding them how fucked we are.

Let Mr. VK tell it, far more eloquently than I:

Certificates of confiscation: Of bonds and bondage

Recently I had a private conversation with Automatix Earth contributor El Gallinazo in which he proceeded to chide me for my shortcomings in viewing the stock markets only, clamoring I should focus my attention more on the debt markets, since, as he so graciously put it, “the stock market is but a pimple on the debt markets ass”.

I went surfing for knowledge as it were and noted the value of the world’s stock markets as of November 2009 was about $44.2 trillion (That’s a pretty big pimple!) while global debt markets were valued at $82.3 trillion.

What does this mean? I got out my notes on the debt market from my days not so long ago in University. And came across many long forgotten concepts: par values, coupon rates, zero coupon bonds, basic bond pricing, duration, convexity, credit risks,inverted price yield relationships etc. Aaaarrgggh!! Enough to make my head spin. Too much jargon is bad for you.

Then I stumbled upon a little line: Indenture: Agreement containing the terms under which money is borrowed.

That’s what they call bond contracts. Indenture. According to the dictionary, or in this case a convenient google search, Indenture refers to a type of contract in the past that forced a servant or apprentice to work for their employer for a particular period of time.

What struck me was how true this is, not referencing past shenanigans, but present day reality. Society as we know it is indentured, we are virtual debt slaves, servants of our corporate and political elites.

Every time a sovereign, municipal or corporate bond is sold somewhere, every time you hear the national debt going up, that’s a piece of you being sold off. There’s nothing more to the bond market, nothing less. Human beings are being lined up on the chopping block, sold to the highest bidder, for a price.The future of their children and their hopes and dreams sold at a price determined by a large market for human debt slaves. A modern day global debt gulag if you ask me.

If you work for a corporation, the private debt issued by them promises to extract everything from you while they can milk you for all that you are worth. If the debt is issued by your country or town, the promise is to extract everything necessary to pay up from your you and your children.

Hence, in today’s world, there are multiple claims on you, your life, your children and your hopes, dreams and ambitions, as well as theirs. The elites through various frauds, machinations, complex algorithms and at its heart plain greed for unbridled power have bundled you into little packages and sold you off many times over to the point that there are claims on your life, your soul and its third derivative.

Which brings me to the monster $1000+ trillion derivatives market (Exchange Traded + Over The Counter), which has been to a large extent built (leveraged) on top of the $44.2 trillion stock markets and $82.3 trillion debt markets.

At least in the pre-derivatives era a human life had been reduced to the value of the cash flow it produced over its lifetime, conveniently called Net Present Value.

In today’s world, a human life has been further reduced to and by bets being played on a global video game network much like Call of Duty/ World of Warcraft, except in this case, you can’t opt out nor can you log off. The consequences are very real, the outcome of suffering is inevitable. There is no reset button.

I can understand cattle not having a complex enough awareness to be able to judge their own imminent demise at the slaughter house, but people? Why, they have no excuse at all, we are a real tragi-comic bunch. Not only do we elect our herders and executioners i.e. politicians, we elect them with cheer, pomp and adulation, we also commend their choice of weapon, in this case being debt to wave away whatever happens to ail us. Debt, the very thing that we are slowly but surely being slashed with. Death by a thousand cuts if you will.

What will you tell your children? What excuse have you prepared? The numbers were too big? Economics is really confusing? I didn’t realize I was selling you off at an auction? You’d almost think we’re all delusional Catholics, sending our children to schools where they can be molested by hordes of conniving predators who, when pressed, won’t shy away from calling themselves the victims. The Vatican and Goldman Sachs have way more in common than just the fact that both swim in luxury.

Next time you read that the National Debt has gone up by $1,600,000,000,000, that total debt owed by the US internally and externally is $54 trillion, that there are $65-100 trillion in unfunded liabilities, one thing I hope you take from this little rant is that you and your family are on the hook for all this debt owed to Kings and psychopaths, bankster mafia elites and drug lords with Caribbean accounts. I hope you also realize that they’ve decided to feast on your children with a sprinkling of shattered futures, dreams and hopes.

I’ll sign off with The Automatic Earth’s Ilargi’s saying, “Tails you lose. Heads you die.” Now that’s a bet you never should have taken.

VK

[ The Automatic Earth ]

Well, it’s not entirely all our own fault. We were sold off before we were born.  They hid it from us well.

Right now, you are free to roam the planet. But like a roulette wheel, will you be standing on the luck piece of real estate when the wheel stops?


A brief musical interlude – John Cale sings Leonard Cohen

April 6, 2010

Goddamn that was beautiful.