John Cage - Water Walk (1960) "I've Got a Secret"

The Euro Crisis Explained - by Michael Lewis...

"The curious thing about the eruption of cheap and indiscriminate lending of money during the past decade was the different effects it had from country to country. Every developed country was subjected to more or less the same temptation, but no two countries responded in precisely the same way. The rest of Europe, in effect, used Germany’s credit rating to indulge its material desires. They borrowed as cheaply as Germans could to buy stuff they couldn’t afford. Given the chance to take something for nothing, the German people alone simply ignored the offer. “There was no credit boom in Germany,” says Asmussen. “Real-estate prices were completely flat. There was no borrowing for consumption. Because this behavior is rather alien to Germans. Germans save whenever possible. This is deeply in German genes. Perhaps a leftover of the collective memory of the Great Depression and the hyperinflation of the 1920s.” The German government was equally prudent because, he went on, “there is a consensus among the different parties about this: if you’re not adhering to fiscal responsibility, you have no chance in elections, because the people are that way.” It's the Economy Dummkopf!

A Photograph Decontextualizes Everything

Before the Law

a parable...from Orson Welles', 1962 "The Trial" based on Franz Kafka's last novel.

Destino - Dali and Disney

http://www.brainpickings.org/index.php/2011/11/22/destnio-dali-disney/

Mish interviewed by Max Keiser

Have Yourself a Merry Little Christmas

Cycling - Life - Live

Steve Jobs - BBC Documentary

El-Erian on Euro Crisis

Thatcher's Last Stand Against Socialism

Jim Rickards - Currency Wars explained

Dennis Gartman Sells Gold

Michael Platt

Pendulum Waves

For more details see Harvard Natural Sciences Lecture Demonstrations

Our apparatus was built from a design published by Richard Berg [Am J Phys 59(2), 186-187 (1991)] at the University of Maryland.

http://www.ritholtz.com/blog/2011/12/pendulum-waves/?utm_source=dlvr.it&utm_medium=twitter

Gerald Celente Interview - Civil Unrest

WTF...read the last two lines..!

"The CFTC had ordered MF Global to overhaul its internal control structure with the assistance of an outside consultant," said Baxter. "New York Fed staff decided to wait for the CFTC's assessment before taking a view on the firm's suitability as a primary dealer."

In January of 2011, a New York Fed official circulated a memo that concluded MF Global "demonstrated a clear ability" to meet primary dealer standards. The New York Fed announced that it had designated MF Global as a primary dealer on February 2.

Baxter also said that in MF Global's final days the New York Fed took a series of actions to limit its exposure to the firm, including margin calls.

He said the New York Fed had not sustained any losses as a result of MF Global's collapse on October 31.

Kyle Bass Interview

The European Union Is No Different Than Russia and China?

...from Jesse's CAFÉ AMÉRICAIN

I was astonished, when I started to read what promised to be an interesting piece about the Fed swap lines, that Chris Whalen thinks that with regard to political and economic freedom there is no distinction to be made among Europe, Russia and China. Perhaps he is writing from the perspective of the banks, who are quite unhappy with some proposed European restraints.

"Many readers of The IRA have asked us in the past several months if we despair for the future of the United States and the economic system built upon the much abused dollar. The short answer is no; we at IRA are bullish on the United States, in part because the very democratic freedom that allows Americans to commit acts of libertine stupidity is also our greatest strength.

No matter how much gold is stored in the central banks of the nations of the old world such as China, Russia and the European Union, these nations are not democratic. No amount of monetary rectitude will offset the fact that the peoples of the old world are not free to act, either in political or economic terms."

Chris Whalen, The Fed as the New Global Aristocracy

Contrast that expression of American financial triumphalism with this blistering comparison of the Arab protests and the Occupy Wall Street Movement.

"And that is the true parallel in the West. The protest movements are indeed against Big Business – a perfectly justified cause – and against "governments". What they have really divined, however, albeit a bit late in the day, is that they have for decades bought into a fraudulent democracy: they dutifully vote for political parties – which then hand their democratic mandate and people's power to the banks and the derivative traders and the rating agencies, all three backed up by the slovenly and dishonest coterie of "experts" from America's top universities and "think tanks", who maintain the fiction that this is a crisis of globalisation rather than a massive financial con trick foisted on the voters.

The banks and the rating agencies have become the dictators of the West. Like the Mubaraks and Ben Alis, the banks believed – and still believe – they are owners of their countries. The elections which give them power have – through the gutlessness and collusion of governments – become as false as the polls to which the Arabs were forced to troop decade after decade to anoint their own national property owners. Goldman Sachs and the Royal Bank of Scotland became the Mubaraks and Ben Alis of the US and the UK, each gobbling up the people's wealth in bogus rewards and bonuses for their vicious bosses on a scale infinitely more rapacious than their greedy Arab dictator-brothers could imagine."

Robert Fisk, Bankers are the Dictators of the West

According to Janet Tavakoli in this account, even the well-heeled and highly educated are beginning to show their puzzlement and disgust for the blatant cover up of fraud as demonstrated in this instance of the credibility trap.

"Afterwards, several people came to me and to the other questioners. Much of the audience complained to CCGA's conference organizers. All were disappointed in Professor Shiller. A male CPA in the audience later contacted me via my website and wrote that he was glad I had put the question to Shiller: "though I have a great deal of respect for him, I was disappointed in his 'response' (if you could call it that)."

One woman who earned a Ph.D. in history found Shiller's response to me "incoherent:"

I was with my husband, brother, and his wife. I chatted with the stranger next to me and at least two people escaping at the same time [leaving after the speech]. No one could believe what a huge "fail" the evening had been...the failure of our political and expert classes to address the core issues...have alienated even those working in the financial industry--right up into the rung below the top of the food chain...this feels like the Ancien Régime's last days.

Alumni of the Federal Reserve, corrupt politicians, and willfully blind academics would be correct to say that evening was a case of "class warfare." Well-heeled U.S. patriots declared war on the lack of class demonstrated by their financial peers."

Perhaps Americans can revel in their unique freedom of action when they step to the voting booths next fall, and vote for one of the two choices offered to them by their corporate oligarchs, while their elected representatives continue to ignore massive bank frauds and the gaming of the system by the monied interests, now colloquially called the 'one percent.'

And don't step out of line or speak up because you may be pepper sprayed at will.

But more interestingly, it seems likely from my read of the demimonde that the States are going to diverge from Europe once again in some greater policy matter, probably involving the handling of the financial crisis, a shock like nationalizing the banks, or even a military solution to a nagging problem. And this may just be an advance serving of 'freedom fries' with extra ketchup and a side of jingoism.

By the way, I am watching this stock market decline somewhat sceptically this morning. There is the Zynga IPO coming out this week, and the markets will welcome it with open hearts and hopefully, your open pocketbooks.

The Fed as the New Global Aristocracy: Walker Todd

December 12, 2011
Institutional Risk Analytics


In this issue of The Institutional Risk Analyst, we ask a question that ought to be top of mind for all Americans - namely whether the US government and particularly the Federal Reserve System should be bailing out the Old Man of Europe once again. And to help us answer that question, we went to the nation's leading expert on the constitutionality of the role currently being played by the Fed, Walker Todd.



A resident of Cleveland, OH, Walker served as counsel to the discount window at the Federal Reserve Bank of New York in the 1980s when IRA co-founder Chris Whalen worked as an applications analyst in the same institution. Todd later fled the moral vacuum created inside the central bank by then NY Fed President E. Gerald Corrigan to work at the Cleveland Fed. He was eventually driven out of the central bank entirely by the forces of relativism that have controlled the Fed ever since. Todd now works as a scholar at the American Institute for Economic Research (AIER).


Many readers of The IRA have asked us in the past several months if we despair for the future of the United States and the economic system built upon the much abused dollar. The short answer is no; we at IRA are bullish on the United States, in part because the very democratic freedom that allows Americans to commit acts of libertine stupidity is also our greatest strength.

No matter how much gold is stored in the central banks of the nations of the old world such as China, Russia and the European Union, these nations are not democratic.  No amount of monetary rectitude will offset the fact that the peoples of the old world are not free to act, either in political or economic terms. In this regard, see the critical review of the new book by Jim Rickards, "Currency Wars: The Making of the Next Global Crisis," written by Chris Whalen on The Big Picture.

The key point to be made about the Fed swaps lines to EU central banks is not financial but rather political. Phil Izzo of The Wall Street Journal noted on November 30, 2011 that "since the Fed isn't lending to banks directly, the risk is essentially nonexistent," a point that is only true if the central banks on the other side of the swap still exist a year from now. But hold that thought.

The US government has bailed out Old Man Europe three times in the past century and more. Prior to the start of WWI in 1913, the allied nations led by the UK borrowed heavily from the US, both directly from banks and through commercial credits underwritten by the new federal reserve system. At the end of the conflict, the victorious European nations defaulted on their debts to the US government even as they extracted unfair financial reparations from defeated Germany, extortionate outflows that would eventually create the macabre path for the political rise of Adolph Hitler.

In WWII the allied nations of Europe again led by the UK borrowed heavily from the US government. And again the victorious nations of western Europe defaulted on their financial obligations to the people of the US. This avoidance of the financial obligations by the nations of Europe to the US is on top of the vast human sacrifice made by American soldiers and their families in that conflict.

After WWII, the allied nations of Europe were broke and the US once again subsidized them via the 


Marshall Plan and various related mechanisms intended to rebuild Europe and, later, engage in a Cold War against the Soviet Union. One of the key points that needs to be made is that in neither WWI nor WWII were the entrenched economic and political elites in Western Europe disturbed. After WWII the leadership of the US military actively organized the very same corporations and business leaders that had financed and supplied Hitler's blitzkrieg to fight the war against godless communism.

With no turning of the economic soil in Europe after the two great wars and Cold War, it should be no surprise that growth and employment in what is today the Eurozone has slowly ebbed. Keep in mind that while the US required the nations of Europe to undertake the experiment we now call the EU as a condition of financial support under the Marshall Plan, the Americans did not require significant restructuring nor the breakup of the old industrial groups. There are still numbers tattooed into the leather seats of every Mercedes Benz that rolls off the assembly line.

Thus our earlier comment about the chief effect of the Fed's generosity via the swap lines being political. By providing financing to the bankrupt nations of Europe, the Fed is interfering in the internal political affairs of foreign nations. Whether the Fed is repaid or not is a minor issue compared to the political and social damage done to the people of Europe by depriving them of the democratic opportunity to "throw the rascals out," to use the well-worn American phrase.

Like most economists, the people who run the Fed today have no more sense about the political impact of foreign intervention than they do about the domestic political impact of bailing out large banks. In each case, the Fed's economic decision to leave existing corporate and political structures in place has tremendously damaging effects on the political life of all the nations concerned.

In the case of the US, does anyone think that Barack Obama would be seeking a second term as POTUS had the largest banks been restructured by free market forces? The US housing sector would already be recovering, in part because the political shock wave of restructuring would have forced Congress to act long ago. Bank America and Citigroup would have been broken up and sold to new investors, and the US economy would be growing again without fiscal stimulus.

Likewise without the Fed's swap lines, Angela Merkel in Germany and Nicholas Sarkozy in France would have preceded Italian premier Silvio Berlusconi out the political door more than a year ago. Instead the very same entrenched corporate elites that have led Europe down the road to economic hell for the past half century are now clients of Ben Bernanke and the Federal Reserve Board.

When Bernanke, Treasury Secretary Tim Geithner and their trained puppet Mitt Romney talk about how the Fed just had to save the financial system via bailouts for zombie banks, they never admit that the chief beneficiaries of these actions were American politicians. This all brings us to our discussion with Walker Todd.

The IRA: A House committee is planning hearings this week on the legality of the Fed swap lines. What is your view of this issue?

Todd: First you should see my Superior Court brief in the Four Farmers' Case (2001).

The IRA: This was an interesting case that of course the media ignored. The petitioners, a group of four farmers residing in Colorado, New Mexico, and Kansas, brought an action against the United States for an injunction against farm foreclosures until parity pricing principles, declared to be the underlying law of U.S. agriculture in 1933 and never repealed or suspended, were enforced in the United States.

Todd: Precisely. Similar issues are at stake in the case of the Fed swap lines to the EU. The Constitution clearly and squarely prohibits a congressional delegation of the power to create monetary claims against the United States. What else is a swap agreement, after all? The Congress cannot allow claims to be created permanently to an entity not subject to congressional (a) appropriations or (b) review. Now tell me about the ECB and other central banks.

The IRA: No, you tell us. Are the Fed swap lines a violation of the US Constitution?

Todd: Yes. The Fed, whose liabilities have the explicit full faith and credit of the United States and thus should be subject to congressional review, currently is letting the ECB create "unlimited amount" claims against the Fed. What happened to the long-established principle of 50-50 sharing of swap liabilities between the Fed and the Treasury/ESF?

The IRA: Once upon the time, the Treasury did pretend to care about the distinction between fiscal expenditures and monetary emissions from the central bank.

Todd: The term of the loans at least is limited, although the Fed now is extending the stuff out a little more than a year.

The IRA: So what is the basic issue? Accountability?

Todd: Yes. When you report back to me that Congress is willing to haul a European banker, let alone a senior Fed or Treasury official, before a hearing and to ask him or her reaming-out questions about how the swap line credits were used, then and only then will I believe that Congress is serious about getting on top of this issue.

The IRA: Has Congress or the Supreme Court ever addressed this issue?

Todd: The Supreme Court case that should be reviewed is Hampton v. US (1928). Beyond that, I currently have no reason to believe that anyone in Congress is serious about taking on or reforming the Federal Reserve Board. Why should anyone volunteer to be guillotined in defense of a principle that no one in Congress will defend?

The IRA: Why indeed. But we do suspect that there is a rising tide of Americans who do care about such issues. The success of Newt Gingrich in attacking the better financed and organized Romney campaign certainly suggests that Americans do care about such distinctions. How should Congress impeach Bernanke and the other Fed governors for their reckless foreign intervention?

Todd: The principle is roughly as follows and it's all constitutional; the contrary is not. Claims against the full faith and credit of the United States have to be approved by Congress. Otherwise, the people are subjected to whatever noble class Congress deigns to enshrine. Tocqueville wrote, in his "Old Regime and the Revolution" (1851), that the fatal wound to the French constitutional body politic was administered when Charles VII (15th century) agreed with the nobles that he would have the right to impose direct taxation on the people unilaterally as long as he did not tax the nobles.

The IRA: So Bernanke and company are the new nobility, imposing a tax on US taxpayers via an illegal expenditure and, indirectly via inflation?

Todd: Don't unlimited Fed swap lines for Europe and general favoritism toward corporations (especially banks, and foreign banks at that) smack mightily of that tone and flavor?

The IRA: Yes they do.

Todd: Bankers and corporations generally, constitutionally are supposed to have no better standing before Congress, the Supreme Court, or God Almighty than the average Joe taxpayer from Peoria, Illinois. A clause in the Constitution explicitly prohibits the creation of a noble class.

The IRA: So by bailing out the large banks and foreign governments of the EU, Bernanke is elevating these corporate entities to the level of "too big to fail" and thus above that of the US citizens?

Todd: Yes. Until and unless Congress and/or the Supreme Court manage to behave accordingly, I have no reason to gainsay Robert Heilbroner's great summary of the US economy: "Imagine a series of tribute trains moving slowly from the Heartland toward Washington and New York." In the question you have posed, I would add, "And toward Frankfurt."

The IRA: Thanks Walker



http://us1.institutionalriskanalytics.com/pub/IRAMain.asp

ECRI - sticks by call on the economy...

Marc Faber - Doom, Boom, Gloom

Jim Sinclair's MineSet ...Thursday, 8th Dec 2011

My Dear Extended Family:

The ECB has reasonable funds available to it that, if used in the Euro bond market, would have some impact on containing rates.

Gold rises to $1762.50 , just below the $1764 angel. The new President of the European Central Bank says yes we have the money, but no we are not going to use it. Gold goes straight down into the first area of support at $1709- $1710 where it battles all afternoon.

Bloomberg releases an article saying that concerted central bank activity to control the price of gold was utilized today. Long scalpers barf out their positions based on the above jawboning MOPE. Gold ranges $100 so far today.

1. Now with a clear head, the ECB has the money and will be forced to use it or watch their best bond markets look like "Day After," and "Mad Max."
2. Central banks have been throwing blocks at the gold price ever since $248 without much success.
3. The Federal Reserve has made dollars available at cheap swap rates to the ECB. To think that is not a step in monetization because it will be used to buy non-dollar bonds is so glib that it communicated ignorance, not understanding. Systemic monetization has the same impact an insular monetization; it just uses other hands to do it.

Gold is headed in the $2000s. The low in the accordion chop has been established in the drop toward $1530. It does not matter if gold launches from $1710 or $1650, what matter is that it will.

Regards,

Jim

http://www.jsmineset.com/

Weimer Republic Hyperinflation

By Jeffrey Fear Dec 6, 2011 11:01 AM CT 3 Comments

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In February, Axel Weber surprised much of Europe when he resigned as Bundesbank president. Weber said that he felt isolated for his “clear positions” in opposition to the European Central Bank’s policy of purchasing distressed euro-area sovereign debt on secondary markets.

In September, Jurgen Stark, the Bundesbank representative on the ECB's board, also resigned. He was concerned that further ECB bond purchases would destabilize the euro and undermine the central bank's independence.Monetary policy, he feared, was propping up profligate national fiscal policies.

In November, the new Bundesbank president, Jens Weidmann, said that the ECB could not act as a lender of last resort for countries; it would be a direct violation of the European Union treaty. Only adherence to treaty rules and to fiscal discipline could create long-term financial credibility and price stability.

The Germans' strict opposition to the monetary financing of governments isn't just petty legalism -- it's a bedrock principle, based in history, which was purposefully built into EU treaties and Bundesbank policies.

It's worth revisiting why the memory of hyperinflation has seared itself into the minds of many Germans, and how it's shaping their thinking and the future of the euro itself.

Imagine yourself among the wealthiest people in the world in 1914, holding 4.2 billion marks (then about $1 billion) in safe government bonds. Those bonds would have been nearly worthless 9 years later -- easily payable with, say, a 50 billion-mark banknote signed by Reichsbank President Rudolf Havenstein. Of course, you would need 45.8 billion marks in change, which illustrates one of the great ironies of hyperinflation: Everyone was always short of cash in the midst of a blizzard of paper.

Havenstein justified the continuous purchasing of government debt on the grounds that there was little choice given the national emergency. Havenstein thought the real sources of inflation were the legislature’s inability to balance its budget and the burden of reparations placed onGermany by the Allies at the end of World War I.

Despite millions starving, the demobilization of millions of soldiers, and a near civil war in the Ruhr, inflation creeped till 1919, then “galloped” until mid-1922. Then, in late 1922, it spiraled into hyperinflation as Germany refused to continue payments on the 132 billion gold marks levied on it at the London Ultimatum of May 1921.

Because Germany halted reparation payments, France decided to confiscate goods in kind and occupied the Ruhr, the center of German coal and steel might, in January 1923. In response, the Germans began a campaign of "passive resistance" that all but destroyed the mark. Havenstein felt that he had no choice but to continue printing money to support the Reich.

Hyperinflation wreaked havoc on Germans. People on fixed incomes suffered terribly. One poor elderly woman, whose life savings in Deutsche Bank were wiped out, later discovered that the bank didn't inform her because the stamp would have cost too much. The propertied middle class lost their savings after suffering deprivation throughout the war. Many sold possessions to raise cash for increasingly expensive "real goods" such as bread or meat. Housewives stood outside factories to collect their husband’s pay and spend it as quickly as possible. Businesses needed sacks of cash to pay workers. Famous photographs show money being carted in wheelbarrows; one possibly apocryphal story has a robber stealing the wheelbarrow rather than the money.

Eventually, industrialists gave up paying in marks, sometimes creating their own substitute scrip or paying workers in “three breads.” Cities and organizations also created their own monies. Retailers had to continually adjust prices, which gave considerable room for misunderstandings. The response was sometimes violent. In November 1923, mobs attacked Jewish shops around Alexanderplatz in Berlin. Similar attacks occurred across the country.

“Speculators,” bankers, and black-market dealers came in for particular criticism. One small savings bank organized a swap meet for buyers and sellers to eliminate the dishonest profiteers. As one eyewitness, quoted in Gerald D. Feldman's "The Great Disorder," put it:

A walk through the small salesroom with its tables and glass cases is heart-rending. There lie spread out so many lovely things so pleasing to the eye ... everything in short that once decorated a house is assembled here ... There is some old piece, a picture, a porcelain dish, a vase, which appears to the loving but unskilled eye of the owner as a true rarity and who, if she must part with it, wants to receive as much as possible. One now has to tell her that it has neither material nor artistic value, and the sick, embittered souls are always inclined to take this as a personal affront and bad will ... A look out the window -- there slides by the restless life of the metropolis, the fine silk stockings and expensive furs, there sit autos with the fat figures of profiteers, and here inside, in the quiet room, an impoverished Germany quietly and painfully weeps in its silent misery.

The hyperinflation also fomented a new and dangerous activism in German politics. The prime minister of Bavaria declared martial law. In October 1923, federal troops marched into Saxony and Thuringen to depose radical communists from government. Then, in November, Adolf Hitlerand General Erich Ludendorff attempted a Mussolini-like march on Berlin, in what's now known as the Beer Hall Putsch.

The putsch failed miserably, but Hitler continued to seize on the prevalent economic despair. He was briefly sent to prison where he wrote "Mein Kampf." Although he didn't gain power until January 1933, the link between reparations, financial crisis and the destruction of the mark proved ready rhetorical fodder.

Hyperinflation didn't lead to the rise of Hitler, but it undermined the legitimacy of the democraticWeimar Republic.

Millions of disaffected middle-class voters soon drifted to various splinter parties on the right. The center hollowed out, and subsequent coalition governments ruled on a tolerated-minority basis. German politics never really regained its balance in the mid-1920s, a time of relative economic stabilization -- and then came the Great Depression, government austerity packages and, ultimately, the rise of the Nazis.

Never again, the thinking goes today. And rightly so. But the fate of the euro zone depends on which historical lesson one draws from this episode. Are there circumstances in which monetizing government debt is appropriate -- or not?

(Jeffrey Fear is a professor of business administration at the University of Redlands. The opinions expressed are his own.)

To contact the writer of this blog post: Jeffrey Fear at jeff_fear@redlands.edu.

To contact the editor responsible for this blog post: Timothy Lavin at tlavin1@bloomberg.net.