Yugoslavia 1993-94

Under Tito Yugoslavia ran a budget deficit that was financed by printing money. This led to rates of inflation of 15 to 25 percent per year. After Tito the Communist Party pursued progressively more irrational economic policies. These irrational policies and the breakup of Yugoslavia (Yugoslavia now consists of only Serbia and Montenegro) led to heavier reliance upon printing or otherwise creating money to finance the operation of the government and the socialist economy. This created the worst hyperinflation in history up to this time.

By the early 1990s the government used up all of its own hard currency reserves and proceded to loot the hard currency savings of private citizens. It did this by imposing more and more difficult restrictions on private citizens access to their hard currency savings in government banks.

The government operated a network of stores at which goods were supposed to be available at artificially low prices. In practice these store seldom had anything to sell and goods were only available at free markets where the prices were far above the official prices that goods were supposed to sell at in government stores. In particular, all of the government gasoline stations eventually were closed and gasoline was available only from roadside dealers whose operation consisted of a parked car with a plastic can of gasoline sitting on the hood. The market price was the equivalent of $8 per gallon.

The combination of the shortage of gasoline and the government confiscation of German Deutsche mark deposits created a bizaar episode. A man after repeated attempts to get the government to let him withdraw his Deutsche mark deposits as Deutsche marks announced the was going to commit suicide in front of a government building by dousing himself with gasoline and igniting it. On the appointed day he showed up with a canister of gasoline. The media was there to film his protest. The police were also there and arrested the man. Afterwards the television station got numerous phone calls asking what had happened to the canister of gasoline.

Most car owners gave up driving and tried to rely upon public transportation. But the Belgrade transit authority (GSP) did not have the funds necessary for keeping its fleet of 1200 buses operating. Instead it ran fewer than 500 buses. These buses were overcrowded and the ticket collectors could not get aboard to collect fares. Thus GSP could not collect fares even though it was desperately short of funds.

Delivery trucks, ambulances, fire trucks and garbage trucks were also short of fuel. The government announced that gasoline would not be sold to farmers for fall harvests and planting.

Despite the government desperate printing of money it still did not have the funds to keep the infrastructure in operation. Pot holes developed in the streets, elevators stopped functioning, and construction projects were closed down. The unemployment rate exceeded 30 percent.

The government tried to counter the inflation by imposing price controls. But when inflation continued the government price controls made the price producers were getting ridiculous low they stopped producing. In October of 1993 the bakers stopped making bread and Belgrade was without bread for a week. The slaughter houses refused to sell meat to the state stores and this meant meat became unvailable for many sectors of the population. Other stores closed down for inventory rather than sell their goods at the government mandated prices. When farmers refused to sell to the government at the artificially low prices the government dictated, government irrationally used hard currency to buy food from foreign sources rather than remove the price controls. The Ministry of Agriculture also risked creating a famine by selling farmers only 30 percent of the fuel they needed for planting and harvesting.

Later the government tried to curb inflation by requiring stores to file paper work every time they raised a price. This meant that many of the stores employees had to devote their time to filling out these government forms. Instead of curbing inflation this policy actually increased inflation because the stores tended increase prices by a bigger jump so that they would not have file forms for another price increase so soon.

In October of 1993 the created a new currency unit. One new dinar was worth one million of the old dinars. In effect, the government simply removed six zeroes from the paper money. This of course did not stop the inflation and between October 1, 1993 and January 24, 1995 prices increased by 5 quadrillion percent. This number is a 5 with 15 zeroes after it.

In November of 1993 the government postponed turning on the heat in the state apartment buildings in which most of the population lived. The residents reacted to this withholding of heat by using electrical space heaters which were inefficient and overloaded the electrical system. The government power company then had to order blackouts to conserve electricity.

The social structure began to collapse. Thieves robbed hospitals and clinics of scarce pharmaceuticals and then sold them in front of the same places they robbed. The railway workers went on strike and closed down Yugoslavia's rail system.

In a large psychiatric hospital 87 patients died in November of 1994. The hospital had no heat, there was no food or medicine and the patients were wandering around naked.

The government set the level of pensions. The pensions were to be paid at the post office but the government did not give the post offices enough funds to pay these pensions. The pensioners lined up in long lines outside the post office. When the post office ran out of state funds to pay the pensions the employees would pay the next pensioner in line whatever money they received when someone came in to mail a letter or package. With inflation being what it was the value of the pension would decrease drastically if the pensioners went home and came back the next day. So they waited in line knowing that the value of their pension payment was decreasing with each minute they had to wait in line.

Many Yugoslavian businesses refused to take the Yugoslavian currency at all and the German Deutsche Mark effectively became the currency of Yugoslavia. But government organizations, government employees and pensioners still got paid in Yugoslavian dinars so there was still an active exchange in dinars. On November 12, 1993 the exchange rate was 1 DM = 1 million new dinars. By November 23 the exchange rate was 1 DM = 6.5 million new dinars and at the end of November it was 1 DM = 37 million new dinars. At the beginning of December the bus workers went on strike because their pay for two weeks was equivalent to only 4 DM when it cost a family of four 230 DM per month to live. By December 11th the exchange rate was 1 DM = 800 million and on December 15th it was 1 DM = 3.7 billion new dinars. The average daily rate of inflation was nearly 100 percent. When farmers selling in the free markets refused to sell food for Yugoslavian dinars the government closed down the free markets. On December 29 the exchange rate was 1 DM = 950 billion new dinars.

About this time there occurred a tragic incident. As usual pensioners were waiting in line. Someone passed by their line carrying bags of groceries from the free market. Two pensioners got so upset at their situation and the sight of someone else with groceries that they had heart attacks and died right there.

At the end of December the exchange rate was 1 DM = 3 trillion dinars and on January 4, 1994 it was 1 DM = 6 trillion dinars. On January 6th the government declared that the German Deutsche was an official currency of Yugoslavia. About this time the government announced a new new dinar which was equal to 1 billion of the old new dinars. This meant that the exchange rate was 1 DM = 6,000 new new dinars. By January 11 the exchange rate had reached a level of 1 DM = 80,000 new new dinars. On January 13th the rate was 1 DM = 700,000 new new dinars and six days later it was 1 DM = 10 million new new dinars.

The telephone bills for the government operated phone system were collected by the postmen. People postponed paying these bills as much as possible and inflation reduced there real value to next to nothing. One postman found that after trying to collect on 780 phone bills he got nothing so the next day he stayed home and paid all of the phone bills himself for the equivalent of a few American pennies.

Here is another illustration of the irrationality of the government's policies. James Lyon, a journalist, made twenty hours of international telephone calls from Belgrade in December of 1993. The bill for these calls was 1000 new new dinars and it arrived on January 11th. At the exchange rate for January 11th of 1 DM = 150,000 dinars it would have cost less than one German pfennig to pay the bill. But the bill was not due until January 17th and by that time the exchange rate reached 1 DM = 30 million dinars. Yet the free market value of those twenty hours of international telephone calls was about $5,000. So the government despite being strapped for hard currency gave James Lyon $5,000 worth of phone calls essentially for nothing.

It was against the law to refuse to accept personal checks. Some people wrote personal checks knowing that in the few days it took for the checks to clear inflation would wipe out as much as 90 percent of the cost of covering those checks.

On January 24, 1994 the government introduced the super dinar equal to 10 million of the new new dinars. The Yugoslav government's official position was that the hyperinflation occurred "because of the unjustly implemented sanctions against the Serbian people and state."

Source: James Lyon, "Yugoslavia's Hyperinflation, 1993-1994: A Social History," East European Politics and Societies vol. 10, no. 2 (Spring 1996), pp. 293-327.


Inflation in the Roman Empire

The episodes of extreme inflation took a standard form. First the government started building up the army and undertaking public works projects. These projects increased expenditures drastically and the government raised tax rates. But the higher tax rates encouraged tax evasion and discouraged economic activity. The tax base diminished and soon the tax needs exceeded the tax capacity of the government. The government then resorted to debasing the coins of the realm. This took the form of replacing the gold and silver in coins with copper and other cheaper metals. Over the period 218 to 268 A.D. the silver content of Roman coins dropped to one five thousandth of its original level. Sometimes the size and weight of coins were reduced. It also meant vastly increasing the amount of coins in circulation. There was a corresponding increase in prices. The emperors usually blamed the price increases on the greed of merchants.

One famous episode occurred during the reign of the Emperor Diocletian in last part of the third century AD. Diocletian's predecessors had been issuing tin-plated copper coins for what had once been a silver coin. Diocletian tried to bring back some honesty to the coinage by issuing copper coins that were not purporting to be something they were not.

Diocletian ordered a vast increase in the armed forces to guard against further attacks by the barbarians. Taxes were increased to pay for defenses but much of the funds raised went to pay for public monuments as well as rebuilding his new capital of Nicomedia in western Anatolia. When he ran out of funds Diocletian resorted to the use of forced labor for his projects. But Diocletian had issued vast amounts of copper coins. This led to price increases. When prices rose Diocletian attributed the inflation to the greed of merchants. In 301 AD Diocletian issued an edict declaring fixed prices; i.e., price controls. His edict provided for the death penalty for anyone selling above the control prices. There was also penalties (less severe) for anyone paying more than the control price. Irate consumers sometimes destroyed the businesses of those who sold higher than the control prices.

In the short-run these draconian measures may have curbed inflation but in the long-run the results were disaster. Merchants stopped selling goods but this led to penalties against hoarding. People went out of business but Diocletian countered with laws saying that every man had to pursue the occupation of their father. The penalty for not doing so was death. This was justified on the basis that leaving the occupation of ones father was like a soldier deserting in time of war. The effect of this was to turn free men into serfs.


John Law and the Hyperinflation and Speculative Bubble in France c. 1719

The public and private extravagances of Louis XIV left France with a debt of 3 billion livres when the Regime of Louis XV came to power. Even with an excellent system of centralized administration and finance created by Colbert the new regime was finding it hard to meet the interest payments on the debt. John Law, a Scottish adventurer, was promoting policies which might help the Regime.

John Law was the son of a banker from Scotland. In London John Law was a gambler and playboy who killed a man in a duel. Law was arrested and convicted of murder but he escaped from prison and fled to the Continent. In Amsterdam he studied financial institutions and in 1705 he published a treatise entitled Money and Trade Considered in which he argued that the more money in circulation the greater the prosperity of a country. In his words,

Domestic trade depends upon money. A greater quantity employs more people than a lesser quantity. An addition to the money adds to the value of the country.
Law tried to interest the governments of several countries in his monetary schemes, but only the financially strapped regime of Louis XV gave him an opportunity to implement them. In 1716 Law was granted authority to create the Banque Generale with a capital of 6 million livres. Law raised only 25 percent of the capital in cash and covered the other 4.5 million livres with government debt (billets d'etat) which was worth only one fourth of its face value. So Law capitalization of the Banque Generale really only amounted to about 2.6 million livres.

Law's Banque Generale was authorized to issue interest-paying bank notes payable in silver on demand. It soon had 60 million livres in notes outstanding. The Regime required regional tax payments to be in the form of Banque Generale banknotes so there was a ready market for Law's banknotes. Because these banknotes paid interest and were convenient they sold at a premium over their face value.

The Regime also wanted to develop the territories of Louisiana in North America. Law was granted a charter for the Compagnie de la d'Occident and it was given a 25 year lease on the French holdings of Louisiana. In return the Compagnie was required to settle at least 6,000 French citizens and 3,000 slaves. The Compagnie was also granted a monopoly on the growing and sale of tobacco.

The Compagnie acquired the Compagnie de Senegal, which operated in West Africa, as a source of slaves. It then merged with the French East India Company and the French China Company to form Compagnie de Indes. This company had a virtual monopoly on French foreign trade.

Law's Banque Generale, under the new name of Banque Royale, was added to the combination which Law called his "System."

The Compagnie de Indes issued 200,000 shares at a price of 500 livres each. By 1718 the share price had fallen to 250 livres. In 1719 the Banque pumped up the supply of notes by 30 percent. It also acquired the right to act as the national tax collector for nine years. The Compagnie stock then doubled and redoubled in price.

Law then came with a plan to pay off the troublesome state debt. The Regime would issue notes paying 3 percent interest to its debtors. These debts could then be used to buy stock in Law's Compagnie de Indes. The Compagnie share price rose to 5,000 livres in August 1719 and 8,000 livres in October. People flooded into Paris to buy stock in Law's Compagnie. Speculation in Compagnie stock went wild. Stock was being purchased with only 10 percent downpayment. Fortunes were being made right and left. One beggar made 70 million livres.

John Law became an international celebrity. The Pope sent an envoy to the birthday party of Law's daughter. Law converted to Catholicism and was appointed Controlleur des Finances by the Regime.

Compagnie de Indes shares peaked at a price of 20,000 livres at the end of 1719. In January 1720 two royal princes decided to cash in their shares of the Compagnie. Others decided to follow their example. Law had to print 1.5 million livres in paper money. As Controlleur of Finances, John Law tried to stem the tide by making it illegal to hold more than 500 livres in gold or silver. He devalued banknotes relative to foreign currency to encourage exports and discourage imports. Nevertheless Compagnie de Indes stock fell from 9,000 livres to 5,000 livres. Law was denounced and stripped of his office of Controlleur. As head of the Compagnie de Indes and the Banque Royale he bought up stock and banknotes to try to raise their price, but by June 1720 he had to suspend payments.

John Law fled to Holland in 1720 and his properties in France were seized by the Regime. He lamented,

Last year I was the richest individual who ever lived, today I have nothing, not even enough to keep alive.

Hyperinflation in France After the Revolution

In the spring of 1789 the French Assemblee decreed the issuance of 400 million livres of notes, called assignats, secured by the properties which had been confiscated from the Church during the revolution. By the fall of 1789 the Assemblee approved the issuance of 800 million of noninterest-bearing notes and decreed that the limit on such notes was to be 1.2 billion livres. Despite this stated limit, nine months later another 600 million livres was approved and in September 1791 another 300 million. In April of 1791 another 300 million was approved.

Prices rose, but wages didn't keep up and in 1793 a mob plundered 200 stores in Paris. Price controls were imposed (Law of the Maximum). Output decreased and rationing had to be implemented. To force acceptance of its money the French government imposed a 20 year prison sentence on anyone selling its notes at a discount and dictated a death sentence for anyone differentiating between paper livres and gold or silver livres in setting prices.

By 1794 there were 7 billion livres (assignats) in circulation. In May 1795 this total reached 10 billion livres and by July 1795 it had gone up to 14 billion livres.

When the total reached 40 billion livres the printing plates for assignats were publically destroyed. A new type of note, called a mandat, was issued, but within two years these also lost 97 percent of their value. The printing plates for mandats were also publically destroyed. In 1797 both assignats and mandats were repudiated and a new monetary system based upon gold was instituted.


The Inflation in the Confederate States of America 1861-1865

From October of 1861 to March of 1864 the commodity price index rose an average rate of 10 percent per month. When the Civil War ended in April 1865 the cost of living in the South was 92 times what it was before the war started. This inflation was obviously caused by the expansion of the money supply. The role of the money supply in establishing the price level is confirmed even more strongly by the results of an attempt to curb the growth of the money supply in 1864.

In February the Confederate Congress decreed a currency reform. All bills greater than five dollars were to be converted into bonds paying 4 percent interest. All bills not converted by April 1 would be exchanged for a new issue at a ratio of 2 for 3. Prior to the reform people spent wildly and drove prices up 23 percent in one month. But, by May 1864, the reform had been completed and the stock of money was reduced by one third. The general price index declined. Eugene Lerner, an economist who studied this inflation, commented on this result:

This price decline took place in spite of invading Union armies, the impending military defeat, the reduction of foreign trade, the disorganized government, and the low morale of the Confederate army. Reducing the stocks of money had a more significant effect on prices than these powerful forces.
The increase in the money supply came as a result of the Confederacy inability to collect funds through taxes. Only 5 percent of its expenditures were covered by taxes. Initially the Confederate government tried to borrow extensively. This failed because the planters had funds only after the fall harvest, but the war started in April. The war interferred with the harvest and export of the cotton crop so the planters were asking the government for help instead of loaning it funds. Consequently less than 30 percent of the funds for the Confederacy came from bonds. Thus, the Confederate government saw printing money as an unavoidable method for financing the war. The Confederate Congress was reluctant to use this measure and stated in the act which authorized the printing of money that it was "not to exceed at any one time one million of dollars." Actually 1500 times this amount was printed.

The printing of such large sums created a major problem. Paper, engravers and printers were hard to find. In desperation, the Secretary of the Treasury recommended that counterfeit money be utilized. Anyone holding a counterfeit bill was supposed to exchange it for a government bond and the government would stamp it "valid" and spend it.

When the Union army captured sections of the Confederacy people took or sent their Confederate money to the areas where it still could be used. Thus the effect of the capture of Confederate territory was like an increase in the money stock in the remaining Confederate territory. The disruptions of the war also decreased production so it was a matter of more and more money chasing fewer and fewer goods.


The German Hyperinflation of the Early 1920's

Some say the German hyperinflation started when Germany entered World War I in 1914. At that time Germany opted to finance the war by borrowing rather than increasing taxes. The German policy makers chose borrowing because they expected to win the war and intended to force the losers to pay for the cost of the war. It was thus logical to the policy makers to use borrowing rather than taxation.

But Germany lost the war and the victors imposed heavy reparation payments upon her. The reparation payments were perceived as unfair in Germany and the social democratic government was reluctant to impose the burden of their payment upon the German population. In retaliation for the nonpayment France and the other allies occupied the industrial area of the Ruhr on the western border of Germany. Germany was forced to buy more using foreign currencies, while at the same time the occupation of the Ruhr area made it impossible to collect tariff on imported goods. The government, strapped for funds, resorted to printing money. The value of the mark relative to other currencies fell thereby increasing the cost of imported goods. Prices rose increasing the cost of running the government. This necessitated the printing of even more money. Prices rose further and the exchange rates for the mark dropped even more. The result was hyperinflation.

At first, Germans reacted to the higher prices by economizing and reducing their consumption. But when they realized that it was not just a matter of some things being more expensive but instead that the mark was losing value they reacted by spending their marks as fast as possible. This meant that there was little constraint on prices.

There were winners as well as losers in this hyperinflation. Those on fixed incomes and who were owed a specific amount of money found that the real value of their holdings reduced to zero. But those who owed money found their debt effectively wiped out.


Inflation in China 1939-1950

A state bank for China, called the Hu-pu (Board of Revenue) Bank, was established in 1905. By 1907 two other government banks, the Bank of China and the Bank of Communications, were established and authorized to issue bank notes. The imperial government and all subsequent governments looked upon these banks as vehicles for creating money for the government to use to cover its deficits or for any other reason. There were severe penalties imposed for anyone discounting provincial government banknotes.

Despite attempts on the part of governments to abuse their control of the banking system, the banks were able to resist these attempts until the 1930's and the war with Japan.

by Thomas Graham

IF YOU are a first-home buyer who does not like the idea of spending $500,000 for an undistinguished, two-bedroom house in a middle-ring suburb of Sydney, perhaps you should look further afield.

While Sydney real estate prices have dropped, they have not been ravaged by the economic crisis as they have in many European countries. And the price crash is attracting overseas investors.

The managing director of Marsh and Parsons real estate agency in London, Peter Rollings, said prices had fallen massively. "[They] are down between 20-35 per cent since August 2007 and, on top of that, sterling also weakened dramatically … last year. As a result, we saw large numbers of overseas buyers coming to London buying blue-chip property at knock-down prices."

France seemed to have escaped the real estate woes of Britain, but its luck has run out, with house prices tumbling.

Charles Gillooley, a director of an agency in the Dordogne region in south-western France, said the crash meant good deals for foreign investors.

"The reality of the economic crisis is sinking in to most French vendors, who have adjusted their prices downwards.

"One of our houses with beautiful views, a swimming pool and a large garden was on the market for €278,000 [$490,000] and has been reduced for €214,000 [$377,000]. That's a huge drop."

In recent years, French real estate in areas such as the Dordogne and the south has relied on the British buying second homes. But with economic uncertainty, prices have been reduced to attract buyers.

For the extravagant type wanting to buy big, there are properties such as the 176-bedroom Chateau de Nainville-les-Roches, 45 kilometres south of Paris. The 19th-century chateau on 40 hectares was sold for $6.1 million last November. Real estate agents in the area said that before the crash it could have fetched $20 million.

If France isn't your thing, then you may want to look at the olive groves of Italy. Calabria, in the south, offers cheaper property than in the more popular areas of Tuscany and Umbria, and a seaside villa can be bought for a fraction of the price of a similar property in the south of France. But if Europe doesn't appeal, there could soon be more property bargains closer to home.

Professor Steve Keen of the University of Western Sydney said he expected the Australian housing market to crash spectacularly. "We are going to see huge levels of unemployment, people will be forced to sell their houses and this will bring prices crashing down.

"I'm expecting a depression out of this economic crisis and house prices will simply not hold up when a depression is occurring."

By John Browne

This week, based on indicators of improving Chinese manufacturing activity, commodity and stock markets surged in the Pacific Rim. It appears that China's recession-fighting policies are being judged successful. The 41% rally in Chinese stocks in 2009 from the 2008 lows dwarfs the single-digit rallies in the US and Europe. With Western economies still sluggish, eyes are turning eastward for solutions to the global economic riddle. As such, recent hints at the direction of Chinese monetary policy should be closely regarded.

At the recent Group of 20 London meetings, China called for a new international monetary order with a gold link. This was followed by the sudden disclosure that China had used part of its huge gold output to boost its own reserves by some 600 metric tons, a 75% increase in total holdings since 2003. In his first 100

days in office, President Barack Obama's administration has injected nearly US$40 billion each day into US economy. Given the inflationary impact that such a torrent of new cash will spark, it is logical that the Chinese hedge its $1 trillion position with a more reliable store of value.

International money continues to flood towards the Chinese economic sphere, leaving the "old" industrial economies of America and Europe out in the cold. The cause is quite simple: the economies of America and China are mirror images of each other. The China-centric countries are producer-dominated and America is consumer-dominated. Over time, this dichotomy is producing massive shifts in global wealth.

For a century, American administrations have relied on the inflationary powers of paper money to finance consumer growth. The fact that the US dollar is the world's reserve currency enabled this scheme to persist for longer than would have been tolerated otherwise. The "stimulus and bailout agenda of George W Bush and Obama is the same practice on overdrive. While driving the country further into debt, it also ensures that it will be progressively less competitive in the global economy.

China, on the other hand, is the world's largest producer and one of the top three exporters, piling up vast current account surpluses, especially in US dollars. In order not to boost its currency to levels that would make its exports less competitive, China maintained its US dollar surpluses in dollars, investing the bulk, almost $1 trillion, of them in US Treasuries. This acted as "vendor financing" for its exports to America. The technique is similar to television commercials that promise "make no payments for four years", except in this case the deal is pushing 40 years.

To combat the global recession, China spent some $700 billion on a stimulus package, primarily focused on infrastructure. As such spending adds more value to the economy than government make-work programs, it now appears that China's stimulus package is having positive results.

Increased economic activity in China will benefit American companies with China-sourced sales. But the majority of the American economy remains oriented toward the American consumer, and his ever-increasing ability to take on debt. This is obviously not sustainable.

The outlook for America is for hyper-stagflation, or continued economic recession accompanied by rapidly rising prices. This calls into question the continued role of the US dollar as the world's reserve. Surplus nations, particularly China, are voicing their growing concern. They are exploring other, less volatile arrangements. They may be considering a return to the bulwark of monetary stability: gold.

Now the world's largest gold producer, China would benefit tremendously from a shift away from the US dollar and toward gold. She is clearly interested in world leadership, but would never dream of challenging the US militarily. However, in the 21st century, the weight of economics renders martial might largely irrelevant. Still, she can't afford to act irresponsibly.

There are a few considerations that should temper her ambitions. Even with the 600 metric ton increase over the past five years, China's gold holdings amount to only 1.6% of its total monetary reserves. Also, at 1,050 metric tons total, China's holdings are still dwarfed by the 8,132 metric tons held by the US.

Nevertheless, the Chinese call for a new, gold-linked reserve currency, combined with the near doubling of their own gold reserves, points to a major strategic trend that can be expected to spread to other surplus nations. The biggest winners, personal or governmental, will trade their dollars for gold before there's a rush for the door.

Private investors can ride the wave created by China's strategic shift by continuing to add to their gold positions.

The New York Fed is the most powerful financial institution you've never heard of. Look who's running it.

By Eliot Spitzer former New York Governor

The kerfuffle about current New York Federal Reserve Bank Chairman Stephen Friedman's purchase of some Goldman stock while the Fed was involved in reviewing major decisions about Goldman's future—well-covered by the Wall Street Journal here and here—raises a fundamental question about Wall Street's corruption. Just as the millions in AIG bonuses obscured the much more significant issue of the $70 billion-plus in conduit payments authorized by the N.Y. Fed to AIG's counterparties, the small issue of Friedman's stock purchase raises very serious issues about the competence and composition of the Federal Reserve of New York, which is the most powerful financial institution most Americans know nothing about.

A quasi-independent, public-private body, the New York Fed is the first among equals of the 12 regional Fed branches. Unlike the Washington Federal Reserve Board of Governors, or the other regional fed branches, the N.Y. Fed is active in the markets virtually every day, changing the critical interest rates that determine the liquidity of the markets and the profitability of banks. And, like the other regional branches, it has boundless power to examine, at will, the books of virtually any banking institution and require that wide-ranging actions be taken—from raising capital to stopping lending—to ensure the stability and soundness of the bank. Over the past year, the New York Fed has been responsible for committing trillions of dollars of taxpayer money to resuscitate the coffers of the banks it oversees.

Given the power of the N.Y. Fed, it is time to ask some very hard questions about its recent performance. The first question to ask is: Who is the New York Fed? Who exactly has been running the show? Yes, we all know that Tim Geithner was the president and CEO of the N.Y. Fed from 2003 until his ascension as treasury secretary. But who chose him for that position, and to whom did he report? The N.Y. Fed president reports to, and is chosen by, the Fed board of directors.

So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for—but did not receive—harsh examination from the N.Y. Fed.

The composition of the New York Fed's board, which supervises the organization and current Chairman Friedman, is equally troubling. The board consists of nine individuals, three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public. In theory this sounds great: Six board members are "public" representatives.

So whom have the banks chosen to be the public representatives on the board during the past decade, as the crisis developed and unfolded? Dick Fuld, the former chairman of Lehman; Jeff Immelt, the chairman of GE; Gene McGrath, the chairman of Con Edison; Ronay Menschel, the chairwoman of Phipps Houses and also, not insignificantly, the wife of Richard Menschel, a former senior partner at Goldman. Whom did the Board of Governors choose as its public representatives? Steve Friedman, the former chairman of Goldman; Pete Peterson; Jerry Speyer, CEO of real estate giant Tishman Speyer; and Jerry Levin, the former chairman of Time Warner. These were the people who were supposedly representing our interests!

Of course, there have been the occasional nonfinance representatives from academia and labor. But they have been so outnumbered that their presence has done little to alter the direction of the board.

So is it any wonder that the N.Y. Fed has been complicit in the single greatest bailout of poorly managed banks in history? Any wonder that it has given—with virtually no strings attached—practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees? Any wonder that not a single CEO or senior executive of a major bank has been removed as a condition of hundreds of billions of direct cash and guarantees? Any wonder that, despite its fundamental responsibility to preserve the integrity of the banking system, it sat quietly on the sidelines as the leverage beneath the banks exploded and the capital underlying their investments shrank?

I do not mean to suggest that any of these board members intentionally discharged their duties with the specific goal of benefitting themselves. Rather, what we have seen is disastrous groupthink, a way of looking at the world from the perspective of Wall Street and Wall Street alone. That failure has brought the world economy to the edge of unraveling. And some of Geithner's early missteps betrayed an inability to get beyond this tunnel vision, such as the idea that the banks need to be first in line to be paid and to be paid in full. We can only hope that Geithner, who, to his credit, did try to raise some of the regulatory issues that mattered while he was at the Fed, is no longer in the mental prison of Lower Manhattan and will have more success now that he has a board of one—President Obama.

Perhaps it is time to calculate what these board members have been paid by their banks in salary and bonuses over the years and seek to have them return it to the public as small compensation for their failed oversight of the N.Y. Fed. And more fundamentally, perhaps it is time to take a hard look at the governing structure and supposed independence of this institution that actually controls the use of our tax dollars and, heaven help us, the fate of our economy.

Eliot Spitzer is the former governor of the state of New York

As the integrity of the US banking system is compromised, private citizens should consider becoming their own central banks. The days of irredeemable paper fiat currencies may be approaching its end, and there is a reason why the central banks hold gold - it is their default insurance.

Do not be fooled, the gold reserves of central banks are their actual Money. Debt-based paper dollars, yen, pounds are all just ridiculous currencies, sad shadowy mirrors of their former selves, which is gold and silver coin. Gold's manipulated volatility cannot mask its >16% annualized returns versus the USD over the past 8 years. Remember - in actuality, it is the depreciation of the world's fiat currencies we are seeing, not the appreciation of gold itself which is itself both money and a currency.

by James Turk

This week Bill Murphy and Chris Powell, co-founders of the Gold Anti-Trust Action Committee (www.gata.org), will be in London, England. Their trip is part of GATA’s ongoing effort to raise awareness of the gold cartel and its surreptitious intervention in the gold market.

Bill and Chris will meet with the British media to explain GATA’s findings. They will also attend an important fund raising event being held in support of GATA’s work. Their trip is another important step by GATA aimed at creating a free market in gold, one which is unfettered by government intervention.

Governments want a low gold price to make national currencies look good. Gold is recognizable the world over as the ‘canary in the coalmine’ when it comes to money. A rising gold price blurts the unpleasant truth that a national currency is being poorly managed and that its purchasing power is being inflated.

This reality is made clear by former Federal Reserve chairman Paul Volcker. Commenting in his memoirs about the soaring gold price in the years immediately following the end of the gold standard in 1971, he notes: “Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.” It was a mistake because a rising gold price undermines the thin reed upon which all fiat currency rests – confidence. But it was a mistake only from the perspective of a central banker, which is of course at odds with anyone who believes in free markets.

The US government has learned from experience and taken Volcker’s advice. Given the US dollar’s role as the world’s reserve currency, the US government has the most to lose if the market chooses gold over fiat currency and erodes the government’s stranglehold on the monopolistic privilege that it has awarded to itself of creating ‘money’.

So the US government intervenes in the gold market to make the dollar look worthy of being the world’s reserve currency when of course it is not equal to the demands of that esteemed role. The US government does this by trying to keep the gold price low, but this aim is an impossible task. In the end, gold always wins, i.e., its price inevitably climbs higher as fiat currency is debased, which is a reality understood and recognized by government policymakers. So recognizing the futility of capping the gold price, they instead compromise by letting the gold price rise somewhat, say, 15% per annum. In fact, against the dollar, gold is actually up 16.3% p.a. on average for the last eight years. In battlefield terms, the US government is conducting a managed retreat for fiat currency in an attempt to control gold’s advance.

Though it has let the gold price rise, gold has risen by less than it would in a free market because the purchasing power of the dollar continues to be inflated and also because gold remains so undervalued notwithstanding its annual appreciation this decade. These gains started from gold’s historic low valuation in 1999. Gold may not be as good a value as it was in 1999, but it nevertheless remains extremely undervalued.

For example, until the end of the 19th century, approximately 40% of the world’s money supply consisted of gold, and the remaining 60% was national currency. As governments began to usurp the money issuing privilege and intentionally diminish gold’s role, fiat currency’s role expanded by the mid-20th century to approximately 90%. The inflationary policies of the 1960s, particularly in the US, further eroded gold’s role to 2% by the time the last remnants of the gold standard were abandoned in 1971. Gold’s importance rebounded in the 1970s, which caused Volcker to lament the so-called mistakes of policymakers. Its percentage rose to nearly 10% by 1980. But gold’s percent of the world money supply thereafter declined, reaching about 1% in 1999. Today it still remains below 2%.

From this analysis it is reasonable to conclude that gold should comprise at least 10% of the world’s money supply. Because it is nowhere near that level, gold is undervalued.

So given the ongoing dollar debasement being pursued by US policymakers, keeping gold from exploding upward to a true free-market price is the first thing they gain from their interventions in the gold market. The other thing they gain is time. The time they gain enables them to keep their fiat scheme afloat so they can benefit from it, delaying until some future administration the scheme's inevitable collapse.

So how does the US government manage the gold price? They recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank to do it, by executing trades to pursue the US government’s aims. These banks are the gold cartel. I don't believe that there are any other members of the cartel, with the possible exception of Citibank as a junior member. The cartel acts with the implicit backing of the US government to absorb all losses that may be taken by the cartel members as they manage the gold price and further, to provide whatever physical metal is required to execute the cartel's trading strategy. How did the gold cartel come about?

There was an abrupt change in government policy circa 1990. It was introduced by then Federal Reserve chairman Alan Greenspan in order to bail out the banks back then, which like now were insolvent. Taxpayers were already on the hook for hundreds of billions to bail out the collapsed ‘savings & loan’ industry, so adding to this tax burden was untenable. He therefore came up with an alternative.

Greenspan saw the free market as a golden goose with essentially unlimited deep pockets, and more to the point, that these pockets could be picked by the US government using its tremendous weight, namely, its financial resources for timed interventions in the free market combined with its propaganda power by using the media. In short, it was easier to bail out the insolvent banks back then by gouging ill-gained profits from the free markets instead of raising taxes.

Banks generated these profits by the Federal Reserve’s steepening of the yield curve, which kept long-term interest rates relatively high while lowering short-term rates. To earn this wide spread, banks leveraged themselves to borrow short-term and use the proceeds to buy long-term paper. This mismatch of assets and liabilities became known as the carry-trade.

The Japanese yen was a particular favorite to borrow. The Japanese stock market had crashed in 1990, and the Bank of Japan was pursuing a zero interest rate policy to try reviving the Japanese economy. A US bank could borrow Japanese yen for 0.2% and buy US T-notes yielding more than 8%, pocketing the spread, which did wonders for bank profits and rebuilding their capital base.

Gold also became a favorite vehicle to borrow because of its low interest rate. This gold came from central bank coffers, but they refused to disclose how much gold they were lending, making the gold market opaque and ripe for intervention by central bankers making decisions behind closed doors. The amount lent by central banks has been reliably estimated in various analyses published by GATA to be 12,000 to 15,000 tonnes, nearly one-half of central banks total holdings and 4-to-6 times annual new mine production of 2500 tonnes. The banks clearly jumped feet first into the gold carry-trade.

The carry-trade was a gift to the banks from the Federal Reserve, and all was well provided the yen and gold did not rise against the dollar because this mismatch of dollar assets and yen or gold liabilities was not hedged. Alas, both gold and the yen began to strengthen, which if allowed to rise high enough would force marked-to-market losses on those carry-trade positions in the banks. It was a major problem because the losses of the banks could be considerable, given the magnitude of the carry-trade.

So the gold cartel was created to manage the gold price, and all went well at first, given the help it received from the Bank of England in 1999 to sell one-half of its gold holdings. Gold was driven to historic lows, as noted above, but this low gold price created its own problem. Gold became so unbelievably cheap that value hunters around the world recognized the exceptional opportunity it offered, and demand for physical gold began to climb. As demand rose, another more intractable and unforeseen problem arose for the gold cartel.

The gold borrowed from the central banks had been melted down and turned into coins, small bars and monetary jewelry that were acquired by countless individuals around the world. This gold was now in ‘strong hands’, and these gold owners would only part with it at a much higher price. Therefore, where would the gold come from to repay the central banks?

While yen is a fiat currency and can be created out of thin air by the Bank of Japan, gold in contrast is a tangible asset. How could the banks repay all the gold they borrowed without causing the gold price to soar, further worsening the marked-to-market losses on their remaining positions?

In short, the banks were in a predicament. The Federal Reserve’s policies were debasing the dollar, and the ‘canary in the coalmine’ was warning of the loss of purchasing power. So Greenspan's policy of using interventions in the market to bail-out banks morphed yet again.

The gold borrowed from central banks would not be repaid because obtaining the physical gold to repay these loans would cause the gold price to soar. So beginning this decade, the gold cartel would conduct the government’s managed retreat, allowing the gold price to move generally higher in the hope that, basically, people wouldn’t notice. Given its ‘canary in a coalmine’ function, a rising gold price creates demand for gold, and a rapidly rising gold price would worsen the marked-to-market losses of the gold cartel.

So the objective is to allow the gold price to rise around 15% p.a., while at the same time enable the cartel members to intervene in the gold market with implicit government backing in order to earn profits to offset the growing losses on its gold liabilities. Its trading strategy to accomplish this task is clear. The gold cartel reverse engineers the black-box trend-following trading models.

Just look at the losses taken by some of the major commodity trading managers on their gold trading over the last decade. It is hundreds of millions of dollars of client money lost, and gained for the gold cartel to help offset their losses from the gold carry-trade. All to make the dollar look good by keeping the gold price lower than it should be and would be if it were allowed to trade in a market unfettered by government intervention.

There are only two outcomes as I see it. Either the gold cartel will fail in the end, or the US government will have destroyed what remains of the free market in America. I hope it is the former, but the continuing flow of events from Washington, D.C. and the actions of policymakers suggest it could be the latter.

By Rob Kirby

Most widely accepted and reported accounts of our current global financial difficulties place its beginnings in the August 2007 timeframe, when sub-prime [mortgage] credit markets “seized up”.

The precarious state of our financial system was echoed some time before August 2007, when none other than Dallas Fed President, Richard Fisher, espoused [in a rare moment of clarity and candor] back on April 16, 2007,

“I have spoken in previous speeches of our “faith-based currency,” a term I use only slightly tongue in cheek. The dollar—like the euro, the yen, the British pound and other currencies—is what economists call a fiat currency. It is backed only by the federal government’s power to raise the revenues needed to meet its obligations and by the rectitude of the U.S. central bank. If the market were to lose faith in either assumption, the dollar would be debased.”

Fisher’s [then] words elicit connotations of “a sales job” – to make believers out of skeptics. After all, instilling faith in skeptics “IS” fundamentally what any religion is all about anyway, ehhh?

Why We Should All Be Skeptical

Generally speaking, Central Bankers are paid to lie. We know this because former Federal Reserve Vice Chairman, Alan Blinder, “slipped” back in the 1990’s when, on national television, he uttered the words,

"The last duty of a central banker is to tell the public the truth."

When one stops and connects the thoughts of these two esteemed Federal Reserve officers one can easily arrive at the conclusion that lies [or omissions of truth, if you prefer] are in all likelihood, tied to “keeping the faith”.

Recent changes in accounting procedures of FASB [Financial Accounting Standards Board] at the behest of the assemblage of Central Bankers at the latest G–20 meeting in London will serve to obfuscate the true financial condition of financial institutions. As Trace Mayer recently articulated, FASB Changes Perpetuate Fair Value Lying;

THE SPINELESS GELATINOUS FASB

Financial companies [read: the privately owned Federal Reserve] have used their agents, U.S. lawmakers, to pressure the FASB to relax fair-value accounting rules. Yahoo! Finance reports,

“The changes will allow the assets to be valued at what they would go for in an “orderly” sale, as opposed to a forced or distressed sale. The new guidelines will apply to the second quarter that began this month.”


You see folks, the real reason behind the lies of the bankers and their owned, puppet politicians through ACCOUNTING CHICANERY is, yet-again, to “keep the faith” in a dying, irredeemable fiat currency regime that has long past its due date.

This same mob would like us all to believe that they are doing their level-best to “unfreeze credit markets” and get the banks lending again.


If this were truly so, we must ask why the Obama Administration last week chose to villain-ize hedge funds and make spurious claims that they “stood” with ‘reasonable banks’ and the Chrysler employees.

The reality, folks, is that this issue has been severely [and purposely, perhaps?] mischaracterized:

You see, the hedge funds that were cast in the role of “villains” in this case just happened to be the most senior, secured debt holders of Chrysler.

When one contemplates what debt is, as an asset class [as opposed to common equity] and why an investor chooses secured / unsecured debt over equity, one must consider where each of these assets stands in a receivership. Secured debt or fixed income, by virtue of its FIXED coupon, limits the upside return of investor in favor of SECURITY – that of being first in line for repayment of principal should a company fail. Investors in equity [common stock] of a company have consciously and willfully chosen more risk and the prospect of greater, unbridled returns, but assume that risk at the expense of knowing – in the case of receivership – they stand BEHIND the secured lenders of said company. A recap of President Obama's remarks,


He [Obama] lauded the company's management and the United Automobile Workers, for making concessions. He even praised J.P. Morgan and other financial firms that "agreed to reduce their debt to less than one-third of its face value to help free Chrysler from its crushing obligations" and German automaker, Daimler, for agreeing to give up its stake.


Then he slammed unnamed hedge funds that rejected the government’s settlement offer in hopes of getting a taxpayer-funded bailout. "They were hoping that everybody else would make sacrifices, and they would have to make none," he said. "Some demanded twice the return that other lenders were getting."


Then, with pointed anger, the president added:


I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices.

President Obama’s proposed solution to the Chrysler crisis would see secured debt holders recoup the same amount [percentage] of their investments as unsecured debt holders and equity holders.

Because secured debt holders would not agree to this proposal, the Obama Administration has forced Chrysler into bankruptcy, where they hope to use the power of the courts to “stuff” secured debt holders with their prescribed outcome.

If the Obama Administration is successful in enforcing this solution on the secured debt holders of Chrysler, this might constitute a “wooden stake through the heart” of global debt markets – effectively shuttering them forever.

Remember folks, President Obama is being counseled in this regard by an esteemed list of current, as well as former, Central Bankers. Should this action end up irreparably shuttering the debt markets forever, it would run contrary to the stated goals of Fed and Treasury officials that they are doing their level best to “unfreeze” credit markets and get banks lending again, wouldn’t it?

But then again, if Alan Blinder was telling the truth when he said that “the last duty of a Central Banker is to tell the public the truth”, should any of us really be surprised?

Got physical gold yet?

By James West

The irony of the emergence of a Swine Flu pandemic amidst an economic contraction brought on by glutinous gorging on credit and real estate in the United Casinos of America is surely not lost on barbed minds. The insistence by the World Health Organization that it be termed the far less ominous sounding H1N1 is evidence of our collective predisposition to avoid calling a spade a spade if it has negative implications. That predisposition will be viewed by posterity, should there be any, as a terminal flaw in the human character of our era.

The manifestation of a Swine Flu pandemic in the midst of a global economic meltdown does not bode well for the ‘recovery’, which, depending on who you listen to, is either well under way or years away. Our insistence on ignoring the simple solutions to both problems may yet herald the biggest historic instance of mass delusion and subsequent extinction of our kind.

Close the airports, and unwind the global entanglement of trade temporarily pending a recalibration of its mechanisms, and enjoy the inevitable return to mental and physical health, albeit amidst diminished financial circumstances.

Such simplistic yet idealistic pontificating sounds feasible superficially, but we’ve devised and installed such a pervasive metaphysical infrastructure of mis-information, that its only on our death beds that we catch a brief glimpse of the reality behind our fabulous global amusement park.

Economists, (the academic variety, I mean – not the “one who acts economically” of archaic definition) are the copywriters for the tanned and coifed anchormen who translate economic data from mathematical complexity into street form.

“Stocks Rise on Renewed Optimism.”

“Gold Down as U.S. dollar rallies.”

“Green Shoots of Economic Growth Seen”.

Its as if the real driving forces of economic fluctuation are too menacing to identify plainly. Instead they must broadcast in the language of kindergarten students.

More realistic headlines are conceivable.

“Swine Flu Pandemic Caused by Too Many Pigs”

“Stocks and Gold’s Daily Price Fluctuation Irrelevant to Bigger Picture”

“Economy Won’t Recover Until Transparency Across Derivatives, Commodities and Credit Implemented”.

Its not so hard.

The Swine Flu outbreak is being compared in the press to the Spanish Influenza outbreak of 1918-19. That outbreak was caused by “an unusually virulent and deadly Influenza A virus strain of subtype H1N1”, according to Wikipedia.

The Swine Flu outbreak of 2009 has been described as a virus “that was produced by reassortment from one strain of human influenza virus, one strain of avian influenza virus, and two separate strains of swine influenza virus.

The Spanish Flu outbreak was not Swine Flu. At least, that’s what the Center for Disease Control in Atlanta says. The question is, then “why are they being labeled identically?” The same question could be asked of currency and gold. Gold is money, and currency is merely paper printed with a value that fluctuates according to its perceived value. Gold takes gargantuan effort to produce from mines, which explains its cost and value, whereas paper money is fabricated with a minute fraction of the effort.

Why, then, is paper currency accorded the same utility as gold?

Historically, paper money evolved from the fact that you stored your gold with a banker, and he issued you pieces of paper acknowledging the fact that there was gold that you owned stored in the banker’s vault. That evolved into governments issuing currency backed by gold in the government’s vault. Through various manifestations the Gold Standard determined the value of the world’s currencies, until Richard Nixon terminated the relationship with the end of the Bretton Woods Agreement, that governed the last albeit bastardized version of the original gold standard.

The motivation for the United States Government in adopting a floating currency backed by nothing but the willingness of a counterparty to accept its face value is obvious enough. Gold takes enormous effort to produce, and is limited in quantity.

Confidence is manufactured comparatively easily, and is limitless under the right conditions. The inherent value of gold undermined the confidence game required to perpetuate the U.S. dollar into the global reserve currency, and so it evolved that it was against the government’s interest to have a global Gold Standard, and very much within its interest to have a global U.S. dollar standard, which is what we have now.

Unfortunately, the same inability of humanity to temper its responsible stewardship of currencies throughout history has once again manifested itself in the virulent fabrication of U.S. dollars, facilitated by the media. No currency has lasted more than a hundred years in history, and it appears that the inflation of the U.S. dollar supply should soon enough lead to a Weimar-esque price hyper-inflation, where the price of a loaf of bread doubled every 15 seconds that will spell its doom.

Unfortunately, or fortunately, depending on your position in the food chain, the information distribution apparatus that has been hijacked by the richest of the rich and the power hungry mob in three piece suits is now so powerful, that even in the face of irrefutable tangible plain-as-the-nose-on-your-face evidence to the contrary, the U.S. dollar continues to appear strong, and gold performs weakly.

For those of you entranced by the information apparatus so described, here are a few basic facts that should help you prepare for the worst.

Gold is money (So is silver). Currency, especially the U.S. dollar, is not.
There is no recovery underway, and won’t be for at least another 2 years, if even then.
Swine Flu, despite its emerging ‘preferred’ name H1N1, is still Swine Flu.

DISCLOSURE: The author owns some gold and some U.S. dollars but no pigs.

April 28 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis lost the support of the largest U.S. pension fund as an analyst said the bank needs as much as $70 billion of capital.

The California Public Employees’ Retirement System said it will vote against Lewis and all 18 directors at the annual meeting tomorrow in the bank’s hometown of Charlotte, North Carolina. The lender needs $60 billion to $70 billion, according to Friedman, Billings, Ramsey Group Inc. analyst Paul Miller, who cited stress tests performed by his firm.

Bank of America should consider converting preferred shares to common stock, including $27 billion in private hands “as soon as possible,” Miller wrote in a note to clients today. Miller said his firm’s versions of the stress tests were “somewhat tougher” than those performed by U.S. regulators...

Comment:

"The recent stock market rally was sparked by encouraging $3 Billion earnings from Citigroup and Bank of America. Less than a month later we learn THEY NOW NEED $70 BILLION???? How long before citizens and the markets wake up and realize what is really going on here. Very soon we will all discover the emperor has no clothes.

Got gold?

The big run up in silver prices yesterday in the thinly traded Asian market and the subsequent Comex session turn around is such a common playbook. With options expiry yesterday JP Morgan et al couldn't let the $13 strike finish in the money so the Comex (sorry CRIMEX) price closed right below that level. Thursday 30th is the first notice day for the May silver futures contract so expect another big take down in price to enable the manipulating investment banks to cover their shorts at the expense of unsuspecting traders who actually believe we have free markets.

Long time silver investors will be well used to this volatility. Newer investors don't be spooked, the price will recover once the notice period has cleared. Silver is technically set up for a big move within 6 months so please hold on.......

For your interest here are the key dates for the next few months. Follow the pump and dump playboook yourself, you will amazed.

April 27 Comex May gold options expiry
April 27 Comex May silver options expiry
April 27 Comex May copper options expiry
April 27 Comex May aluminum options expiry
April 28 Comex April gold futures last trading day
April 28 Comex April silver futures last trading day
April 28 Comex May miNY silver futures last trading day
April 28 Comex April copper futures last trading day
April 28 Comex May miNY copper futures last trading day
April 28 Comex April aluminum futures last trading day
April 28 Nymex April platinum futures last trading day
April 28 Nymex April palladium futures last trading day
April 28 Nymex May Asian gold futures last trading day
April 28 Nymex May Asian platinum futures last trading day
April 28 Nymex May Asian palladium futures last trading day
April 30 Comex May gold futures first notice day
April 30 Comex May silver futures first notice day
April 30 Comex May copper futures first notice day
April 30 Comex May aluminum futures first notice day
April 30 Nymex May platinum futures first notice day
April 30 Nymex May palladium futures first notice day
May 20 Nymex June platinum options expiry
May 26 Comex June gold options expiry
May 26 Comex June silver options expiry
May 26 Comex June copper options expiry
May 26 Comex June aluminum options expiry
May 27 Comex May gold futures last trading day
May 27 Comex June miNY gold futures last trading day
May 27 Comex May silver futures last trading day
May 27 Comex May copper futures last trading day
May 27 Comex June miNY copper futures last trading day
May 27 Comex May aluminum futures last trading day
May 27 Nymex May platinum futures last trading day
May 27 Nymex May palladium futures last trading day
May 27 Nymex June Asian gold futures last trading day
May 27 Nymex June Asian platinum futures last trading day
May 27 Nymex June Asian palladium futures last trading day
May 29 Comex June gold futures first notice day
May 29 Comex June silver futures first notice day
May 29 Comex June copper futures first notice day
May 29 Comex June aluminum futures first notice day
May 29 Nymex June platinum futures first notice day
May 29 Nymex June palladium futures first notice day
June 17 Nymex July platinum options expiry
June 25 Comex July gold options expiry
June 25 Comex July silver options expiry
June 25 Comex July copper options expiry
June 25 Comex July aluminum options expiry
June 26 Comex June gold futures last trading day
June 26 Comex June silver futures last trading day
June 26 Comex July miNY silver futures last trading day
June 26 Comex June copper futures last trading day
June 26 Comex July miNY copper futures last trading day
June 26 Comex June aluminum futures last trading day
June 26 Nymex June platinum futures last trading day
June 26 Nymex June palladium futures last trading day
June 26 Nymex July Asian gold futures last trading day
June 26 Nymex July Asian platinum futures last trading day
June 26 Nymex July Asian palladium futures last trading day
June 30 Comex July gold futures first notice day
June 30 Comex July silver futures first notice day
June 30 Comex July copper futures first notice day
June 30 Comex July aluminum futures first notice day
June 30 Nymex July platinum futures first notice day
June 30 Nymex July palladium futures first notice day
July 15 Nymex August platinum options expiry
July 28 Comex August gold options expiry
July 28 Comex August silver options expiry
July 28 Comex August copper options expiry
July 28 Comex August aluminum options expiry
July 29 Comex July gold futures last trading day
July 29 Comex August miNY gold futures last trading day
July 29 Comex July silver futures last trading day
July 29 Comex July copper futures last trading day
July 29 Comex August miNY copper futures last trading day
July 29 Comex July aluminum futures last trading day
July 29 Nymex July platinum futures last trading day
July 29 Nymex July palladium futures last trading day
July 29 Nymex August Asian gold futures last trading day
July 29 Nymex August Asian platinum futures last trading day
July 29 Nymex August Asian palladium futures last trading day
July 31 Comex August gold futures first notice day
July 31 Comex August silver futures first notice day
July 31 Comex August copper futures first notice day
July 31 Comex August aluminum futures first notice day
July 31 Nymex August platinum futures first notice day
July 31 Nymex August palladium futures first notice day
Aug. 19 Nymex September platinum options expiry
Aug. 26 Comex September gold options expiry
Aug. 26 Comex September silver options expiry
Aug. 26 Comex September copper options expiry
Aug. 26 Comex September aluminum options expiry
Aug. 27 Comex August gold futures last trading day
Aug. 27 Comex August silver futures last trading day
Aug. 27 Comex September miNY silver futures last trading day
Aug. 27 Comex August copper futures last trading day
Aug. 27 Comex September miNY copper futures last trading day
Aug. 27 Comex August aluminum futures last trading day
Aug. 27 Nymex August platinum futures last trading day
Aug. 27 Nymex August palladium futures last trading day
Aug. 27 Nymex September Asian gold futures last trading day
Aug. 27 Nymex September Asian platinum futures last trading day
Aug. 27 Nymex September Asian palladium futures last trading day
Aug. 31 Comex September gold futures first notice day
Aug. 31 Comex September silver futures first notice day
Aug. 31 Comex September copper futures first notice day
Aug. 31 Comex September aluminum futures first notice day
Aug. 31 Nymex September platinum futures first notice day
Aug. 31 Nymex September palladium futures first notice day
Sept. 16 Nymex October platinum options expiry
Sept. 24 Comex October gold options expiry

from LeMetropole

The much touted "stress test" of the U.S. banking system is nothing but a PR sham and in reality, completely meaningless. The "worst case scenario used is a 3+% drop in GDP, and a 10% unemployment rate. If real GDP and unemployment numbers were ever offered up, my guess is that we already have had a minimum 5% contraction in GDP and true unemployment is approaching 13-15%. The stress test only addresses "tier one capital", my question is this, what about all the "off balance sheet" crapola that surely renders these reckless banks insolvent? No, really, I WANT TO KNOW! By trying to control and manipulate ALL markets, these banks have taken $ trillions upon $ trillions worth of fraudulent transactions on (and according to their accounting, off) their books. They are walking corpses that cannot be saved.

On books, off books, what is this crap!? If you enter into a transaction, is it not still a transaction whether you "account" for it or not? Are you not responsible to perform on the contract, no matter how you account for it? I did business my entire life on a handshake, I never had "off balance sheet" business because A DEAL IS A DEAL. Period. Even if it was a bad deal, it was still a deal and I would learn a lesson but still perform.

The "originator", the biggest abuser, the teacher if you will, for off balance sheet shenanigans, IS the U.S. government. They have used fraudulent accounting for nearly 50 years. The have used a fraudulent currency for nearly 40 years, invoking the "never pay" model. And now they are providing a stress test for the banks? How quaint, how brazen of them. I believe that the biggest stress test of all time will be imposed on the U.S. Treasury and Federal Reserve very soon by Mother Nature (the markets). The Dollar has completed it's short covering rally, it has made no headway since last November. The Treasury market has retraced all of it's gains since the "quantitative easing" announced by the Fed in mid March. The 10 year has moved up from sub 2.5% to an even 3% in the span of 6 weeks, a move higher from here should accelerate this move. The equity market is at a moment of truth, in that it's momentum has also stalled but it must continue higher in order to "prove" all the talk of "green shoots" and to spur consumer spending and confidence.

Should ANY of these markets fail, the jig will be up for the other 2. Should the Dollar collapse, it will spur Treasury selling and thus higher interest rates. Should Treasuries collapse, the laughable "bottom" in real estate will be proven to be false, and thus will spur further negative sentiment and consumer retrenchment. Should stocks collapse, well, you will have pension shortfalls, even more consumer retrenchment, in short, a "depressionary environment". But here is the "big enchilada", it is the government who will be most harshly affected by this market imposed stress test. Uncle Sam cannot afford higher rates, the debt service alone will kill him. He cannot afford a lower exchange rate currency because this will spook foreigners into a "bank run", nor can he afford a lower equity market as that will expose the invalid "stimulus plans" and spook the entire world.

The current "remedies" virtually guarantee a lower Dollar and higher interest rates, the correct remedies (necessary almost 10 years ago) will result in the same, a collapsed currency and a debt market with few bids. In short, this credit contraction is now becoming a self fulfilling prophecy. Tax revenue is imploding while at the same time they decided to spend like drunken sailors. This is rapidly becoming a sovereign bankruptcy that will spread faster than swine flu. Upon further thought, the real stress test will be how we, as individuals and family units, cope with the conditions thrust upon us. The past rewarded those who were blatantly reckless, now, even those who were prudent and played by the rules will get swept away by this perfect, man made storm. Only those that understand the difference between real money and fake fiat will stand a chance to survive and thrive as the paper promises get swept away. Quite stressful to say the least.

China called Sunday for reform of the global currency system, dominated by the dollar, which it said is the root cause of the global financial crisis. "We should attach great importance to reform of the international monetary system," Chinese Vice Finance Minister Li Yong told the spring IMF/World Bank Development Committee meeting in Washington. A "flawed international monetary system is the institutional root cause of the crisis and a major defect in the current international economic governance structure," Li said, according to a statement.

"Accordingly, we should improve the regulatory mechanism for reserve currency issuance, maintain the relative stability of exchange rates of major reserve currencies and promote a diverse and sound international currency system." As the world's main reserve currency, US dollars account for most governments' foreign exchange reserves and are used to set international market prices for oil, gold and other currencies. As the issuer of the key reserve currency, the United States also pays less for products and can borrow more easily. Li did not name the dollar but in late March the People's Bank of China Governor Zhou Xiaochuan said he wanted to replace the US unit which has served as the world's reserve currency since World War II. "The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," Zhou said, suggesting the International Monetary Fund could play a greater role. Zhou's remarks sparked uproar and concern since China has the world's largest forex reserves at 1.9 trillion dollars. China became the world's top holder of US Treasury bonds last September, and currently holds around 800 billion dollars, according to official US data. Beijing has voiced increasing concern over its massive exposure to the US dollar as the global crisis has steadily deepened but after some tense exchanges, the issue appears to have eased in recent weeks…

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by Mike Whitney

Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing prices is gaining speed. The moratorium was initiated in January to give Obama's anti-foreclosure program---which is a combination of mortgage modifications and refinancing---a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it's clear now that the program will fall well-short of its objective.

In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before--nearly perpendicular. Housing prices are not falling, they're crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It's a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There's nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

600,000 "DISAPPEARED HOMES?"

Here's a excerpt from the SF Gate explaining the mystery:

"Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory." ("Banks aren't Selling Many Foreclosed Homes" SF Gate)

If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They'd also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 "disappeared" homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.

Here is more on the story from Mr. Mortgage "California Foreclosures About to Soar...Again"

"Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season...Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days....The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium."

JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:

"Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can't meet their loan payments, up from about 1.7 million in 2008." (Ruth Simon, "The housing crisis is about to take center stage once again" Wall Street Journal)

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama's $75 billion mortgage rescue plan is a mere pittance; it won't reduce the principle on mortgages and it won't stop the bleeding. Policymakers have decided they've done enough and are refusing to help. They don't see the tsunami looming in front of them plain as day. The housing market is going under and it's going to drag a good part of the broader economy along with it. Stocks, too.

Insider Selling Jumps to Highest Level Since ‘07 as Stocks Gain

April 24 (Bloomberg) -- Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.

... While the Standard & Poor’s 500 Index climbed 26 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.

“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”

Insiders Sell

Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 mostly institutional clients.

That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992....

The S&P 500 has rallied 26 percent over 32 trading days, the sharpest rally since 1938, as speculation increased that the longest contraction since World War II will soon end....

Bullionmark comment: Pump and dump? Good for CEO's to offload stock before the "big event". Good for the banks as they can raise much needed capital by offloading crappy paper on to newly bullish investors and good for the government as the stock market creates the illusion that all will be well in the economy soon. Don't be fooled this is a suckers rally.

China Added 454 Tons of Gold to Reserves Since 2003 (Update1)

April 24 (Bloomberg) -- China has added 454 metric tons of gold to its reserves since 2003 through domestic purchases and refining scrap, the official Xinhua News reported, citing Hu Xiaolian, head of the State Administration of Foreign Exchange.

Total gold reserves now stand at 1,054 tons, it said. The country has the world’s biggest foreign-exchange reserves at $1.95 trillion as of March 31, according to data compiled by Bloomberg. The foreign exchange reserves were $286 billion at the end of December 2002.

Got gold?

Since the Chinese put a new global reserve currency on the table at the G20 summit which created $250 billion in new IMF Special Drawing Rights, discussion of the new currency has increased, and the logic of putting precious metals into this basket is clear.

Gold and silver have been used as money for several millennium because even the most artful alchemist has failed to find a way to manufacture precious metals. Over recent centuries, fiat or paper money collapses have always been followed by a reversion to gold and silver. Why should it be different this time?

Money supply inflation

Global governments are expanding money supply as though there is no tomorrow. Only yesterday, the British government unveiled plans to borrow more in the next two years than in the previous 300 years of its history, including two world wars and the creation of the welfare state.

It is clear that a day of reckoning is coming for the fiat or paper currencies of the world whose governments have lost all reason in their desperate pursuit of a magic bullet to solve the global financial crisis. Printing money is the last resort of bankrupt governments.

If we go back to the South Sea Bubble of the early 1700s in France, there is the first example of modern times, with paper replacing gold until a mammoth inflation sent the government scurrying back to precious metals. The revolution came later.

Or in ancient times, the Roman emperor Nero debased the currency and so did his successors and with it fell the Roman Empire.

But an orderly exchange of fiat currency for precious metals is perfectly possible, and the Chinese proposals for a new reserve currency have suggested using the commodities model suggested by Keynes in the 30s.

Stiglitz support

Nobel Prize winner Joseph Stiglitz is the latest economist to back a new global reserve currency, although he does not detail a role for gold and silver.

However, precious metals should be at the heart of a new global currency, partly to give it credibility as something really different to combining several paper currencies, and also because of the discipline of a fixed supply of precious metals that will stop governments from devaluing and inflating away people’s money.

Will this happen as a result of informed debate? Probably not. The historical precedent is for a crisis followed by a reversion to gold and silver at prices far higher than those seen before the crisis

WSJ: BofA CEO Lewis testifies to NY AG that Bernanke, Paulson wanted Merrill losses kept quiet
http://finance.yahoo.com/news/WSJ-BofA-CEO-says-was-told-to-apf
-15006709.html?sec=topStories&pos=3&asset=&ccode=

A few comments from LeMetropole provide good insight into this amazing story....

Blackmail?

To all, so today we hear that Ken Lewis, CEO of Bank of America was told by Ben Bernanke and Hank Paulson to shut up about the "material adverse change" that took place at Merrill Lynch before their merger. I would call this "blackmail", but then again, who am I anyway, I think Gold is money so I must be a whacko. Mr. Lewis has testified under oath (whatever that means) that he was told to remain silent about Merrill, otherwise his board of directors would be disbanded and the management team would be fired. Appalling yes, but does this surprise you?

What would you do? Remain silent? Cancel the deal? I know what I would have done, I would announce the piece of crap Merrill had become, cancel the deal so my shareholders didn't get left holding the "bag of pooh", and then simply resign. How could you wake up and go to work in the morning knowing you just shafted your shareholders over a blackmail? How could you remain silent? Was his silence going to save the system? No, it can't be saved because "it is what it is", the debt, derivatives, mal investment, etc., were all already in place, NOTHING could reverse that. If the system was so close to collapsing just a few months ago, how far away can we be now?

So, as for Mr. Bank of America, either he is a spineless buffoon that threw his shareholders under a steamroller, or he lacks the moral values to tell the truth no matter what the consequences, even if they included losing your job. Maybe he was afraid of becoming Mr. "Freddie Mac" and turning up as a suicide. Who knows? The point here is the confidence (lack of) this instills in foreigners with investments in the U.S.

Supposing Mr. Lewis is telling the truth, this means that Paulson and Bernanke are both "blackmailers" and liars. They told us umpteen times that the "banking system is solid", the "system is sound". WHO to believe? I think they are ALL full of $#I+!!! The system is busted, the banks are broke, the Dollar has ZERO intrinsic value, and the Treasury has become the biggest beggar in the history of the world. And now we get the stress test results? Yeah, I can't wait to see these morsels of truth and wisdom!

This can of worms that Mr. Lewis has opened has huge ramifications, most importantly one of CREDIBILITY. I can only guess what my thoughts would have been as a child growing up in the 60's, the Sec. of the Treasury and Fed Chairman lied and blackmailed someone? So what if Merrill went down, they are only one Investment house, you mean the system is THAT fragile? This is the world's biggest debtor trying to hide JUST how weak, debilitated, and fragile the whole situation has become. One can only hope that foreigners go deaf, dumb, and blind for few a weeks since it is they, that Treasury relies on so heavily to fund our debt.

From today forward, it is now clear that ANYTHING can happen at ANYTIME. Everything is not what it seems to be, nothing is real in the financial world, and everything is worth nothing. As it turns out, the economy, real estate, and stock markets were all propped up and "Bulled" by borrowed money and dirty tricks. The entire "fiat" bull run has been bull shit, and to think we EVER questioned Gold ownership. No wonder we have been told on a daily basis that Gold is a "barbarous relic" and has no use. So they lied to us, what's the big deal? They will lie to us again tomorrow, ...and your point is? Clearly, things aren't what they used to be, now I sound like my parents. Sorry for the rant, I do feel much better though!

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Bof A and the DYKE!

The revelation that Bank of America was forced to buy Merrill Lynch is the nail in the coffin, the straw that broke the camels back, the beginning of the end...how many more sayings do you we need??!!

There are no more fingers to stick in the dyke!

This revelation is HUGE on so many fronts I can't even begin. First of all Bank of America will be sued by EVERY SHAREHOLDER for accepting this deal, not disclosing the "material information", falsely promoting the deal to the public and hiding the truth. The Treasury and the Federal Reserve will be investigated for illegally forcing the merger without any congressional approval or ANY PUBLIC DISCLOSURE....

AND THEY HAVE BEEN LYING TO THE PEOPLE FOR MONTHS THAT WE WERE AT THE BOTTOM AND THE BANKS ARE FINE!

Bank of America will likely see a "Run"on the bank" within the next few weeks as the liability from this is incalculable!

It's about to get VERY UGLY out there!

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Andrew Cuomo's Smoking Gun

New York State Attorney General has unleashed a letter today which could well lead to an avalanche of lawsuits against, Bank of America, Ken Lewis and the BAC board, John Thain, Henry Paulson, the U.S. Treasury and Ben Bernanke et al at the Fed.

If you read through Mr. Cuomo's letter, there can no question in anyone's mind that Lewis, Paulson and Bernanke are guilty of committing fraud. This must be a serious issue because when it was being exposed on CNBC, CNBC quickly cut away just as Ken Lewis was telling Erin Burnett that he was told to keep his mouth shut.

At issue is whether or not Henry Paulson and Ben Bernanke, along with staff members wholly and severally at the Treasury Department and the Federal Reserve, forced Ken Lewis and the board at BAC to complete its merger with Merrill Lynch, despite Ken Lewis' decision that the financial condition of MER at the time of the merger agreement had been fraudulently misrepesented, covered up and had materially changed.

It would appear from a close reading of the letter sent from Andrew Cuomo to Government officials listed, that Ken Lewis was going to invoke a Material Adverse Change clause, due to a substantial deterioration in the assets of Merrill Lynch which appear to have been covered up during merger negotiations (i.e. hidden from sight during the due diligence process), in order to either abort or substantially renegotiate the terms of the BAC/MER shotgun wedding. Here is what the MAC clause is all about:

"THE MATERIAL ADVERSE CHANGE CLAUSE (MAC) as a closing condition has achieved permanent status as one of the most highly negotiated parts of acquisition agreements. The basic premise underlying a MAC is that the purchaser should receive the benefit of the bargain. In practice, a MAC included within the closing conditions of an acquisition agreement provides purchasers with an "out" in the event of unforeseen material adverse business or economic changes affecting or involving the target company or assets between the execution of the definitive acquisition agreement and the consummation of the transaction"

Please read the Cuomo letter in its entirety, as it contains statements and accusations from both Lewis and Paulson that are both accusatory of each other and self-incriminating. Here is just one snippet:

"Bank of America's attempt to exit the merger came to a halt on December 21, 2008. That day, Lewis informed Secretary Paulson that Bank of America still wanted to exit the merger agreement. According to Lewis, Secretary Paulson then advised Lewis that, if Bank of America invoked the MAC, its management and board would be replaced" page 2.

There is much more in that letter which can be used to go after every person listed above. Bernanke has denied making any of the statements contained in that letter. My bet would be that Bernanke is now on record lying.

At the very least, all the people listed above will subject to massive lawsuits by Bank of America shareholders. Hopefully Mr. Cuomo will prove to be more forthright than his predecessor, Eliot Spitzer who used his attacks on Wall Street to launch his bid for Governor of New York, and will use this as an opportunity to pursue justice for all the parties involved, not the least of which is the U.S. Taxpayer.

Here is the letter from Mr. Cuomo:

http://zerohedge.blogspot.com/2009/04/cuomo-letter-exposing-paulsons-and.html

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This Cuomo thing is getting gooooood

This is a postcard perfect example of what happens when rats are trapped in a corner - they turn on each other:

Paulson Contradicts Bernanke, Blames Bernanke For Lewis Threat

"Hank Paulson admitted to Andrew Cuomo that he threatened to oust Ken Lewis and the Bank of America board if Bank of America invoked a Material Adverse Change (MAC) clause to block the deal, Cuomo says. Paulson also added, however, that he made this threat at the request of Ben Bernanke"

http://www.businessinsider.com/henry-blodget-paulson-contradicts-bernanke-blames-bernanke-for-lewis-threat-2009-4

Ken Lewis Shafted Bank Of America Shareholders To Save His Job (BAC)

http://www.businessinsider.com/henry-blodget-ken-lewis-shafted-bank-of-america-shareholders-to-save-his-job-2009-4
I think the media is either being told to not report all of this, or they are vastly underestimating the seriousness of what Cuomo has unleashed today. This is going to be epic entertainment watching this unfold.

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The cover of the latest Time magazine includes the headline story -- THE NEW FRUGALITY. The story is about Americans cutting back everywhere and in everything. Personally, I think the frugality trend is just starting. Right now, I don't think most people view the current recession as a major economic phenomenon. I think the public impression is that the government "won't let it happen," and that the government will stabilize the economy by the end of the year. The public reads about the trillions of dollars the Fed and the Treasury are spending, and it believes what we are going through is just a deeper version of the recessions that have plagued the US since WW II.

I've thought all along that the steadily rising rate of unemployment and loss of income will be the surprises of this bear market. Unemployment will produce a downward spiral of negative growth in the US. When an individual or a family leader is laid off, the full impact of a loss of income hits the unit. They will immediately cut back in every area possible -- doctor's visits, dentistry, meds, clothes, automobiles, travel, vacations, expensive colleges, food, entertainment, etc. This sets off a "downward spiral." It's a spiral that only halts with exhaustion.

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Most Americans still cannot fathom what lies ahead … still believing that once the correction is over, life will go back like it has been for so long. Don’t think so. Years ago it was my contention that the standard of living in America would go down by 35%. I am sticking with that notion.