Despite harsh words and threats of tough sanctions against tax dodgers, EU-funded development projects in the third world are run by companies registered in tax havens. This costs developing countries millions in much needed tax revenues and leads to capital flight and lack of transparency, a study by bank-monitoring NGOs says. The EU wants to clamp down on tax dodgers, but the union's development monies end up in the pockets of dodgiest ones, say NGOs The study, "Flying in the face of development- How European Investment Bank loans enable tax havens", released on Wednesday (15 July), says projects and beneficiaries funded by the European Investment Bank (EIB), the EU's house bank, involve tax havens, and multinational companies that use them for tax purposes. According to the group "Counter Balance", composed of seven European NGOs that track the EIB's activities, the bank is particularly unconvincing when handing out so-called global loans - loans provided on trust to Europe's biggest banks, the largest users of tax havens. "The EIB does not have much overview of what they [the banks] then do with the money, and several of the banks have earlier been in the spotlight for conducting business through tax havens," Marta Ruiz, a policy officer from the European Network for Debt and Development (EURODAD) and author of the study, told this website.
Despite harsh words and threats of tough sanctions against tax dodgers, EU-funded development projects in the third world are run by companies registered in tax havens. This costs developing countries millions in much needed tax revenues and leads to capital flight and lack of transparency, a study by bank-monitoring NGOs says.
The EU wants to clamp down on tax dodgers, but the union's development monies end up in the pockets of dodgiest ones, say NGOs
The study, "Flying in the face of development- How European Investment Bank loans enable tax havens", released on Wednesday (15 July), says projects and beneficiaries funded by the European Investment Bank (EIB), the EU's house bank, involve tax havens, and multinational companies that use them for tax purposes.
According to the group "Counter Balance", composed of seven European NGOs that track the EIB's activities, the bank is particularly unconvincing when handing out so-called global loans - loans provided on trust to Europe's biggest banks, the largest users of tax havens.
"The EIB does not have much overview of what they [the banks] then do with the money, and several of the banks have earlier been in the spotlight for conducting business through tax havens," Marta Ruiz, a policy officer from the European Network for Debt and Development (EURODAD) and author of the study, told this website.
Sir David Walker's recommendations that British banks should publish the pay and bonuses of all their top earners, not just board members, has been welcomed by the Gordon Brown. His far-reaching review on corporate governance in the British financial sector, which was commissioned by the Prime Minister in February, recommends a public and regulatory scrutiny of pay practices across financial institutions in order to curb the excesses that brought the financial system to close to collapse. The Prime Minister told MPs on the House of Commons Liaison Committe that he welcomed Sir David's call for tougher non-executive directors to crack down on boardroom excesses.
His far-reaching review on corporate governance in the British financial sector, which was commissioned by the Prime Minister in February, recommends a public and regulatory scrutiny of pay practices across financial institutions in order to curb the excesses that brought the financial system to close to collapse.
The Prime Minister told MPs on the House of Commons Liaison Committe that he welcomed Sir David's call for tougher non-executive directors to crack down on boardroom excesses.
French consumer prices fell by 0.5 percent in June, according to official data released Thursday. This marks a deflationary step for the second month running, but shows a monthly rise of 0.1 percent for the past year. AFP - French consumer prices over 12 months fell by 0.5 percent in June, official data showed on Thursday, marking a deflationary step for the second month running but showing a monthly rise of 0.1 percent. In May, prices over 12 months had shown a fall, of 0.3 percent, for the first time since 1957, owing mainy to a fall in the price of oil from a high point in the middle of 2008. An extended period of falling prices amounts to deflation, a serious threat to an economy since it can set in hand a vicious spiral of falling demand, falling investment and employment, and a further fall in prices.
AFP - French consumer prices over 12 months fell by 0.5 percent in June, official data showed on Thursday, marking a deflationary step for the second month running but showing a monthly rise of 0.1 percent. In May, prices over 12 months had shown a fall, of 0.3 percent, for the first time since 1957, owing mainy to a fall in the price of oil from a high point in the middle of 2008. An extended period of falling prices amounts to deflation, a serious threat to an economy since it can set in hand a vicious spiral of falling demand, falling investment and employment, and a further fall in prices.
Yesterday's opinion section of the Wall Street Journal offered convincing proof that those who want a progressive financial policy and those who simply want to save capitalism are in agreement about the madness of the administration's Wall Street policies. There, on the editorial page of the capitalist Bible, was a piece taking repeated shots at Wall Street darling Goldman Sachs. And, over on the opposite page, a two-fisted op-ed by former hedge-fund manager Andy Kessler in which he labels the government bailout of Wall Street "a dumb move" and "a bust." -Skip- Let's start with the editorial, "A Tale of Two Bailouts," which decries the fact that, thanks to the policies of Tim Geithner and Larry Summers, Goldman "enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong." The piece is spiked with disdainful references to "the Goldmans of the world" and "the likes of Goldman, which apparently needs no help printing money," and takes issue with the way "we changed when we stepped in to save certain banks in the name of saving the system." It also dubs Goldman "Goldie Mac," saying: "Goldman will surely deny that its risk taking is subsidized by the taxpayer -- but then so did Fannie Mae and Freddie Mac, right up to the bitter end."
There, on the editorial page of the capitalist Bible, was a piece taking repeated shots at Wall Street darling Goldman Sachs. And, over on the opposite page, a two-fisted op-ed by former hedge-fund manager Andy Kessler in which he labels the government bailout of Wall Street "a dumb move" and "a bust."
-Skip-
Let's start with the editorial, "A Tale of Two Bailouts," which decries the fact that, thanks to the policies of Tim Geithner and Larry Summers, Goldman "enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong."
The piece is spiked with disdainful references to "the Goldmans of the world" and "the likes of Goldman, which apparently needs no help printing money," and takes issue with the way "we changed when we stepped in to save certain banks in the name of saving the system." It also dubs Goldman "Goldie Mac," saying: "Goldman will surely deny that its risk taking is subsidized by the taxpayer -- but then so did Fannie Mae and Freddie Mac, right up to the bitter end."
But then an effective response would take a lot more than "agreement" between "those who want a progressive financial policy and those who simply want to save capitalism." It would take more like a broad but resolute coalition of everyone but GS to break the grip GS seems to have on US regulatory policy towards Wall Street, and even that would be a very long shot, absent dramatic new developments.
Arianna may be grasping at straws, but then, at this point, aren't all who want to see real change? As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Op-Ed Columnist - The Joy of Sachs - NYTimes.com
... Goldman's role in the financialization of America was similar to that of other players, except for one thing: Goldman didn't believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages -- then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.And Wall Streeters have every incentive to keep playing that kind of game. <...> This time, new regulations are still in the drawing-board stage -- and the finance lobby is already fighting against even the most basic protections for consumers. If these lobbying efforts succeed, we'll have set the stage for an even bigger financial disaster a few years down the road. The next crisis could look something like the savings-and-loan mess of the 1980s, in which deregulated banks gambled with, or in some cases stole, taxpayers' money -- except that it would involve the financial industry as a whole. The bottom line is that Goldman's blowout quarter is good news for Goldman and the people who work there. It's good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it's bad news for almost everyone else.
... Goldman's role in the financialization of America was similar to that of other players, except for one thing: Goldman didn't believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages -- then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.
And Wall Streeters have every incentive to keep playing that kind of game. <...>
This time, new regulations are still in the drawing-board stage -- and the finance lobby is already fighting against even the most basic protections for consumers.
If these lobbying efforts succeed, we'll have set the stage for an even bigger financial disaster a few years down the road. The next crisis could look something like the savings-and-loan mess of the 1980s, in which deregulated banks gambled with, or in some cases stole, taxpayers' money -- except that it would involve the financial industry as a whole.
The bottom line is that Goldman's blowout quarter is good news for Goldman and the people who work there. It's good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it's bad news for almost everyone else.
And Obama is too right wing to believe anything radical needs to be done unless he's dragged kicking and screaming to that point. keep to the Fen Causeway
Median sales price is down year-over-year but has more than doubled since bottoming out in March. San Francisco Bay Area home sales were up 20% in June over the same month last year, while the median sales price was down 27%, MDA DataQuick reported Thursday. The median price for the Bay Area was $352,000, down from $485,000 in June 2008 and 47% below the peak median of $665,000, reached in June 2007. Last month's median was up 3% from May's, however. The Bay Area's median appears to have hit its floor in March at $290,000. As in Southern California, the rising Bay Area median reflects the changing mix of homes sold. The market is being driven less by low-priced foreclosures, and higher-end sellers are coming down in price, which is attracting buyers. So the median rises due to sales of more expensive homes, but those homes are moving because they are dropping in price. Foreclosed homes accounted for 37% of Bay Area sales, down from a peak of 52% in February.
San Francisco Bay Area home sales were up 20% in June over the same month last year, while the median sales price was down 27%, MDA DataQuick reported Thursday.
The median price for the Bay Area was $352,000, down from $485,000 in June 2008 and 47% below the peak median of $665,000, reached in June 2007. Last month's median was up 3% from May's, however. The Bay Area's median appears to have hit its floor in March at $290,000.
As in Southern California, the rising Bay Area median reflects the changing mix of homes sold. The market is being driven less by low-priced foreclosures, and higher-end sellers are coming down in price, which is attracting buyers. So the median rises due to sales of more expensive homes, but those homes are moving because they are dropping in price.
Foreclosed homes accounted for 37% of Bay Area sales, down from a peak of 52% in February.
Washington is bluffing that it will not bail out California, and every other state suffering from collapsed revenues and massive job losses. If cuts in police and schools don't force DC off from its current position, then the math will. Because in many states the aggregate revenue losses and looming cuts to state payrolls will largely render the intended effects of federal stimulus as moot. Frankly, unless Washington prints money and bails out every state that needs capital, including California, federal power will decline amidst this severe economic recession, and the process of a soft American devolution will begin. If you think this idea is outrageous, then you've still not come to terms with a core reality of our current situation: the structure of this financial crisis is wholly different than any in our post-war era. This isn't a recession. This is collapse. -Skip- The internal composition of the US economic and financial system when it hit 2007/8 was very different than in previous recessions, even the severe recession of 1980/82. It's this internal composition that's now determinative, to the outcome. The sawdust of debt, and the monetization of assets rather than the production of goods, continually came to define the internal composition of the system. The economy cannot, therefore, express the same kind of resilience it has done so often, since WW2. This is the core problem of this collapse and why the prospect for recovery is dim. Americans can't actually rebuild the savings that the banking system needs to escape from the current mess. Individually, Americans are trapped by debt and cannot spend. In The Seigniorage Curse, I explain that one of the primary mechanisms for the hollowing out of the American economy over many years was the dollar advantage, which at first was earned. And then, came to be un-earned. By the time the US reached the 21st century, our primary manufactured product was debt, and dollars. Is it any wonder that once that system collapsed, that we quickly gave up 100% of the phantom job growth that had been sitting on top of the debt bubble? The current level of employment in the United States has now returned to the levels of June 2000. Enough said. -Skip- In Washington today the annual budget deficit crossed the one trillion mark. In Sacramento, there is a 26 billion dollar shotgun hole in their budget. (One hopes that CALPERS is marking to market, because if they're not, that would be a new liability for Sacramento to deal with). Meanwhile, Autumn approaches and whole range of rather nasty choices looms over the school system. Imagine living in a prime area of California and watching your house decline by 40%, your household income knocked for an initial 30%, and the after-school programs and town services get cut. Now throw some fees and tax hikes on top of that mess. For the coup de grace, imagine California voters sitting down each night to another wave of bailouts from Washington to financial corporations. Under those circumstances it seems quite unlikely Washington can say no, to the States.
The internal composition of the US economic and financial system when it hit 2007/8 was very different than in previous recessions, even the severe recession of 1980/82. It's this internal composition that's now determinative, to the outcome. The sawdust of debt, and the monetization of assets rather than the production of goods, continually came to define the internal composition of the system. The economy cannot, therefore, express the same kind of resilience it has done so often, since WW2.
This is the core problem of this collapse and why the prospect for recovery is dim. Americans can't actually rebuild the savings that the banking system needs to escape from the current mess. Individually, Americans are trapped by debt and cannot spend. In The Seigniorage Curse, I explain that one of the primary mechanisms for the hollowing out of the American economy over many years was the dollar advantage, which at first was earned. And then, came to be un-earned. By the time the US reached the 21st century, our primary manufactured product was debt, and dollars. Is it any wonder that once that system collapsed, that we quickly gave up 100% of the phantom job growth that had been sitting on top of the debt bubble? The current level of employment in the United States has now returned to the levels of June 2000. Enough said.
In Washington today the annual budget deficit crossed the one trillion mark. In Sacramento, there is a 26 billion dollar shotgun hole in their budget. (One hopes that CALPERS is marking to market, because if they're not, that would be a new liability for Sacramento to deal with). Meanwhile, Autumn approaches and whole range of rather nasty choices looms over the school system. Imagine living in a prime area of California and watching your house decline by 40%, your household income knocked for an initial 30%, and the after-school programs and town services get cut. Now throw some fees and tax hikes on top of that mess. For the coup de grace, imagine California voters sitting down each night to another wave of bailouts from Washington to financial corporations. Under those circumstances it seems quite unlikely Washington can say no, to the States.
So now we are at the point where the Govt is supposed to be bailing out States that refuse to help themselves. I know in my mind what should be happening, but I'm liberal left european and I know that such ideas as I have are meaningless that side of the pond. So it's gonna be "interesting" to see where this goes, but I bet an awful lot of people will suffer who really don't deserve it. keep to the Fen Causeway
As well, let's not forget also that from Reagan on, in order to keep from bankrupting the national government with their war budgets, the republican presidents kept passing more and more expenses and mandates onto the states. Then the republican governors piled on with prison expenses and their own interstate graft. That there was a problem with getting tax money for their scams was just a subtle twist of the knife.
Corporate Socialism is the problem. That there is graft, and aggravating minor players pretending to be Congress-critters who cater around the edges to their thumb-sucking constituents, is just an inconsequential cost of doing business...but it is not what pushes the cycle of cultural bust and more cultural bust. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
From direct democracy to direct federal financial rule in California
The obvious penalty to discourage recidivism is to impose direct financial rule by Washington over the state of California in exchange for fiscal financial support for the state of California from the federal government. That is what happens with municipalities and counties that go or are about to go belly up financially and that turn to the state government for financial support. It is what happens in other federal systems when a state government knocks, cap-in-hand on the back door of the federal Treasury, begging to be rescued. Direct financial rule would mean that neither California's state executive nor the its state legislature would have any financial decision making powers until financial normalcy is restored. California's `proposition mechanism' would also be suspended for any proposition that would have financial implications for the state. A federally appointed Board of Overseers would have full powers to cut public spending, raise existing taxes or introduce new taxes or charges until the budget deficit has been eliminated in a sustainable manner. Such direct financial rule reduces the state of California to a legally and financially incompetent minor. Because that is exactly the way the state has acted and continues to act, this is both efficient and fair. The only irony is that this direct financial rule rule would be excised by an entity appointed by a federal government that itself is structurally incapable of putting its fiscal house in order. But that is an irony Californians will have to learn to live with. Beggars can't be choosers.
Direct financial rule would mean that neither California's state executive nor the its state legislature would have any financial decision making powers until financial normalcy is restored. California's `proposition mechanism' would also be suspended for any proposition that would have financial implications for the state. A federally appointed Board of Overseers would have full powers to cut public spending, raise existing taxes or introduce new taxes or charges until the budget deficit has been eliminated in a sustainable manner.
Such direct financial rule reduces the state of California to a legally and financially incompetent minor. Because that is exactly the way the state has acted and continues to act, this is both efficient and fair. The only irony is that this direct financial rule rule would be excised by an entity appointed by a federal government that itself is structurally incapable of putting its fiscal house in order. But that is an irony Californians will have to learn to live with. Beggars can't be choosers.
ChrisCook:Frankly, unless Washington prints money and bails out every state that needs capital, including California, federal power will decline amidst this severe economic recession, and the process of a soft American devolution will begin. If you think this idea is outrageous, then you've still not come to terms with a core reality of our current situation: the structure of this financial crisis is wholly different than any in our post-war era. This isn't a recession. This is collapse.FT.com: From direct democracy to direct federal financial rule in California (Willem Buiter's Maverecon, July 13, 2009)The state still services its outstanding stock of official debt with cash, which is why no formal event of default has been called yet, but de-facto California has already defaulted on its financial obligations and commitments by paying suppliers and employees with funny money rather than with cash. When the banks stop accepting the IOUs except possibly at massive discounts, which will happen soon unless an early resolution of the budgetary stalemate is achieved, the state of California will close down for business. Municipalities and counties dependent on state funds will follow suit. Before long the teachers won't teach, the fire fighters won't fight fires, the police won't maintain law and order and neither garbage nor taxes will get collected. It will be a grand Hobbesian experiment.Energy Bulletin: Closing the 'Collapse Gap': the USSR was better prepared for collapse than the US (Dmitry Orlov, December 4 2006)My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the "Collapse Gap" - to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War....The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.And this next one certainly has me intrigued. From what I've seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won't be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.
Frankly, unless Washington prints money and bails out every state that needs capital, including California, federal power will decline amidst this severe economic recession, and the process of a soft American devolution will begin. If you think this idea is outrageous, then you've still not come to terms with a core reality of our current situation: the structure of this financial crisis is wholly different than any in our post-war era. This isn't a recession. This is collapse.
The state still services its outstanding stock of official debt with cash, which is why no formal event of default has been called yet, but de-facto California has already defaulted on its financial obligations and commitments by paying suppliers and employees with funny money rather than with cash. When the banks stop accepting the IOUs except possibly at massive discounts, which will happen soon unless an early resolution of the budgetary stalemate is achieved, the state of California will close down for business. Municipalities and counties dependent on state funds will follow suit. Before long the teachers won't teach, the fire fighters won't fight fires, the police won't maintain law and order and neither garbage nor taxes will get collected. It will be a grand Hobbesian experiment.
My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the "Collapse Gap" - to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War....The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.And this next one certainly has me intrigued. From what I've seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won't be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.
...
The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.
And this next one certainly has me intrigued. From what I've seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won't be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.
A lot of its revenue has been earmarked for particular purposes (as a sweetener to get taxes approved by a referendum) so that the general fund available for discretionary expenditures is very small. There is hardly any leeway to shuffle money among budget categories. The peak-to-trough part of the business cycle is an outlier. Carnot would have died laughing.
There are very way too many very way too rich people in the state to allow that to happen. Never underestimate their intelligence, always underestimate their knowledge.
Anything essential is earmarked to prevent the insane political ideologues in Southern California from using the state budget as a social experiment any more than they already have.
This is why it is typically best to ignore the state when they whine yearly about "going broke" and "catastrophic cuts" because they're really only talking about a very small $% of the budget.
The real issue that is coming to head this year is of course the lack of revenue due to not collecting nearly enough taxes on property. This is just the kind of catastrophe necessary to bring "prop 13" back into the discussion.
I linked to that blog recently...
Ever since the launch of the US gold ETF, GLD, in November, 2004 and the launch of the US silver ETF, SLV, April 2006, a debate has raged in analyst circles regarding the legitimacy of these two investment vehicles as a proxy for physical gold and physical silver. Though all evidence against investing in these two trusts has been entirely circumstantial, plenty of red flags exist in both the GLD and SLV prospectuses that should steer any logical, rational human being that wishes to own gold and silver away from these two investment vehicles. Conflicts of Interest Let's begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)? Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV? In fact, how is this situation any different than Goldman Sachs's (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm's own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house. -Skip- Multiple Claims on the Physical Gold and Physical Silver Held on Behalf of GLD and SLV Shareholders? The appointed custodians of the SLV and the GLD, responsible for safekeeping the silver and gold bars owned by the trusts, respectively are JP Morgan and HSBC Bank USA. The GLD prospectus states, "Gold held in the Trust's unallocated gold account and any Authorized Participant's unallocated gold account will not be segregated from the Custodian's assets." Only Authorized Participants, and no shareholders, have the right to redeem shares for actual gold. In my opinion, there are several potential huge problems with this arrangement. Physical gold held by the GLD should be held in allocated accounts specifically for the trust. The fact that physical gold held for the GLD may be held in unallocated gold accounts where gold is not segregated from the Custodian's assets may mean that multiple entities have claims on the same gold bars. In theory, the gold held in the Custodian's vaults may be used for delivery against shorts they hold in the futures markets if necessary even though GLD shareholders have a claim on this gold.
Conflicts of Interest Let's begin with the obvious. Is it not a huge conflict of interest that JP Morgan (JPM), a bank that perpetually ranks among the largest short positions against silver on the COMEX, is the custodian for the iShares Silver Trust (SLV)? According to silver analyst Ted Butler, JP Morgan is consistently among the one or two U.S. banks that hold more than 80% to 90% of the entire commercial net short position in COMEX silver futures. If you have positioned yourself to make huge profits from drops in the price of silver, is it reasonable for you to simultaneously desire investors to buy more physical silver (if indeed the SLV holds the amount of physical silver it claims)?
Is it also not a conflict of interest that HSBC (HBC) bank, a bank that allegedly holds some of the largest short positions against gold on the COMEX, is the custodian for the SPDR Gold Trust (GLD)? If these banks profit when gold and silver drop, and they manage the largest ETFs in the US regarding these respective metals, is it unreasonable to state that these two banks should be barred from acting as custodians of the GLD and SLV? In fact, how is this situation any different than Goldman Sachs's (GS) actions in the past when they originated CDOs and then made a fortune by shorting them, actions that back then, were apparently unknown even to the firm's own traders? On the surface, it certainly appears to be another classic case of the fox guarding the hen house.
Multiple Claims on the Physical Gold and Physical Silver Held on Behalf of GLD and SLV Shareholders? The appointed custodians of the SLV and the GLD, responsible for safekeeping the silver and gold bars owned by the trusts, respectively are JP Morgan and HSBC Bank USA. The GLD prospectus states, "Gold held in the Trust's unallocated gold account and any Authorized Participant's unallocated gold account will not be segregated from the Custodian's assets." Only Authorized Participants, and no shareholders, have the right to redeem shares for actual gold.
In my opinion, there are several potential huge problems with this arrangement. Physical gold held by the GLD should be held in allocated accounts specifically for the trust. The fact that physical gold held for the GLD may be held in unallocated gold accounts where gold is not segregated from the Custodian's assets may mean that multiple entities have claims on the same gold bars. In theory, the gold held in the Custodian's vaults may be used for delivery against shorts they hold in the futures markets if necessary even though GLD shareholders have a claim on this gold.
A persistent message from the government has been the need to promote optimism about the economy, and to persuade people to start consuming once more in the way they did before the economic crisis. Berlusconi has frequently suggested that businesses should not advertise in journals or TV channels that disseminate economic gloom. Yet one could hardly get gloomier than the figures in the government's own recent economic forecasts, which envisage the economy contracting by 5.2% in the course of this year, and essentially stagnating next year (with 2010 growth forecast at just 0.5%, well within the margin of error of economic statistics). Although asserting that "the Italian economy is one of the least exposed to the factors that are specific to the current financial crisis" its own figures make clear that the Italian economy will in fact suffer about the worst of any in Western Europe. With Italian government debt accounting for over a quarter of total Euroland government debt (while Italy accounts for only 17% of Euroland GDP), there is little scope for stimulus. Yields on Italian government bonds indicate the extent to which the Italian government's creditworthiness is at risk: 30-year Italian bonds yield 5 1/4%, while German 30-year bonds yield only just over 4%. Finance Minister Tremonti has said that there are some "non-negative signals" about the economic future - a cautious term, which falls short of claiming that there are any positive ones. Behind the smile on the government's face there is clearly a very worried frown. That is supposed to be the way with clowns.As anticipated, the "fiscal shield", discussed immediately below, forms part of the government's economic package. The money-laundering fee will be a very modest 5%. The government has put only a nominal amount in as its estimate of the revenue yield from providing these services to organised crime and to white-collar criminals (among whom, of course, the prime minister must be numbered). As Di Pietro says, the government is offering to "restore the virginity, and fatten the wallets" of rich criminals.
But the days of innocent obscurity are over. The Department of Justice this week confirmed that it had started an investigation into pricing practices in the credit derivatives markets. It has demanded extensive data from Markit and the dozen-odd banks that own it, a request with which Markit is complying - out of swanky offices in London and New York.What triggered the DoJ probe is - like the credit markets - a touch murky. Some bankers think the DoJ is flexing its muscles in the new political landscape by demonstrating a tough interpretation of the so-called "Sherman" anti-competitive doctrine. Others fear that the exchanges and some hedge funds are leaning on the DoJ as part of a campaign to move credit default swap activity on to exchanges. There may be a simpler explanation. In recent months the DoJ has had reason to look at the credit derivatives world because of a flurry of corporate activity. Most notably, efforts are under way to create clearing platforms and Markit is creating a joint venture. As the DoJ peers into this once-geeky world, it is not surprising if it thinks some of those practices look a touch odd - at least given the mood of the times.
But the days of innocent obscurity are over. The Department of Justice this week confirmed that it had started an investigation into pricing practices in the credit derivatives markets. It has demanded extensive data from Markit and the dozen-odd banks that own it, a request with which Markit is complying - out of swanky offices in London and New York.
What triggered the DoJ probe is - like the credit markets - a touch murky. Some bankers think the DoJ is flexing its muscles in the new political landscape by demonstrating a tough interpretation of the so-called "Sherman" anti-competitive doctrine. Others fear that the exchanges and some hedge funds are leaning on the DoJ as part of a campaign to move credit default swap activity on to exchanges.
There may be a simpler explanation. In recent months the DoJ has had reason to look at the credit derivatives world because of a flurry of corporate activity. Most notably, efforts are under way to create clearing platforms and Markit is creating a joint venture. As the DoJ peers into this once-geeky world, it is not surprising if it thinks some of those practices look a touch odd - at least given the mood of the times.
