I hope to have a special report for you next week. I having a call with the chairman of Seabridge Gold today. I want to hear his explanation behind the recent decline. I can't believe he actually responded to my request.
Here are a few articles for your weekend reading.
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Here is another way the Fed is bailing out the world under the radar. You know, I'm not bearish on America because I still think we are the strongest nation in the world. However, we have to change our way of operation. The current path is unsustainable.
When is a loan between central banks not a loan? When it is a dollars-for-euros currency swap.
By GERALD P. O'DRISCOLL JR.
America's central bank, the Federal Reserve, is engaged in a bailout of European banks. Surprisingly, its operation is largely unnoticed here.
The Fed is using what is termed a "temporary U.S. dollar liquidity swap arrangement" with the European Central Bank (ECB). There are similar arrangements with the central banks of Canada, England, Switzerland and Japan. Simply put, the Fed trades or "swaps" dollars for euros. The Fed is compensated by payment of an interest rate (currently 50 basis points, or one-half of 1%) above the overnight index swap rate. The ECB, which guarantees to return the dollars at an exchange rate fixed at the time the original swap is made, then lends the dollars to European banks of its choosing.
Why are the Fed and the ECB doing this? The Fed could, after all, lend directly to U.S. branches of foreign banks. It did a great deal of lending to foreign banks under various special credit facilities in the aftermath of Lehman's collapse in the fall of 2008. Or, the ECB could lend euros to banks and they could purchase dollars in foreign-exchange markets. The world is, after all, awash in dollars.
The two central banks are engaging in this roundabout procedure because each needs a fig leaf. The Fed was embarrassed by the revelations of its prior largess with foreign banks. It does not want the debt of foreign banks on its books. A currency swap with the ECB is not technically a loan.
The ECB is entangled in an even bigger legal and political mess. What the heads of many European governments want is for the ECB to bail them out. The central bank and some European governments say that it cannot constitutionally do that. The ECB would also prefer not to create boatloads of new euros, since it wants to keep its reputation as an inflation-fighter intact. To mitigate its euro lending, it borrows dollars to lend them to its banks. That keeps the supply of new euros down. This lending replaces dollar funding from U.S. banks and money-market institutions that are curtailing their lending to European banks—which need the dollars to finance trade, among other activities. Meanwhile, European governments pressure the banks to purchase still more sovereign debt.
The Fed's support is in addition to the ECB's €489 billion ($638 billion) low-interest loans to 523 euro-zone banks last week. And if 2008 is any guide, the dollar swaps will again balloon to supplement the ECB's euro lending.
This Byzantine financial arrangement could hardly be better designed to confuse observers, and it has largely succeeded on this side of the Atlantic, where press coverage has been light. Reporting in Europe is on the mark. On Dec. 21 the Frankfurter Allgemeine Zeitung noted on its website that European banks took three-month credits worth $33 billion, which was financed by a swap between the ECB and the Fed. When it first came out in 2009 that the Greek government was much more heavily indebted than previously known, currency swaps reportedly arranged by Goldman Sachs were one subterfuge employed to hide its debts.
The Fed had more than $600 billion of currency swaps on its books in the fall of 2008. Those draws were largely paid down by January 2010. As recently as a few weeks ago, the amount under the swap renewal agreement announced last summer was $2.4 billion. For the week ending Dec. 14, however, the amount jumped to $54 billion. For the week ending Dec. 21, the total went up by a little more than $8 billion. The aforementioned $33 billion three-month loan was not picked up because it was only booked by the ECB on Dec. 22, falling outside the Fed's reporting week. Notably, the Bank of Japan drew almost $5 billion in the most recent week. Could a bailout of Japanese banks be afoot? (All data come from the Federal Reserve Board H.4.1. release, the New York Fed's Swap Operations report, and the ECB website.)
No matter the legalistic interpretation, the Fed is, working through the ECB, bailing out European banks and, indirectly, spendthrift European governments. It is difficult to count the number of things wrong with this arrangement.
First, the Fed has no authority for a bailout of Europe. My source for that judgment? Fed Chairman Ben Bernanke met with Republican senators on Dec. 14 to brief them on the European situation. After the meeting, Sen. Lindsey Graham told reporters that Mr. Bernanke himself said the Fed did not have "the intention or the authority" to bail out Europe. The week Mr. Bernanke promised no bailout, however, the size of the swap lines to the ECB ballooned by around $52 billion.
Second, these Federal Reserve swap arrangements foster the moral hazards and distortions that government credit allocation entails. Allowing the ECB to do the initial credit allocation—to favored banks and then, some hope, through further lending to spendthrift EU governments—does not make the problem better.
Third, the nontransparency of the swap arrangements is troublesome in a democracy. To his credit, Mr. Bernanke has promised more openness and better communication of the Fed's monetary policy goals. The swap arrangements are at odds with his promise. It is time for the Fed chairman to provide an honest accounting to Congress of what is going on.
Mr. O'Driscoll, a senior fellow at the Cato Institute, was vice president at the Federal Reserve Bank of Dallas and later at Citigroup.
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This article talks about how Ivy League grads are deciding to do something other than go to Wall Street. I believe my generation and the one after are finally waking up to what's happening.
By Michael Lewis
Dec. 29 (Bloomberg) --
To: The Upper Ones
From: The Strategy Committee
Re: The Alarming Behavior of College Students
The committee has been reconvened in haste to respond to a
disturbing new trend: the uprisings by students on elite college
campuses.
Across the Ivy League the young people whom our Wall Street
division once subjugated with ease are becoming troublesome. Our
good friends at Goldman Sachs, to cite one example, have been
forced to cancel their recruiting trips to Harvard and Brown. At
Princeton, 30 students masquerading as job applicants entered a
pair of Wall Street informational sessions, asked many obnoxious
questions (“How do I get a job lobbying the U.S. government to
protect Wall Street interests?”), rose and chanted a list of
charges at bankers from JPMorgan and Goldman Sachs, and,
finally, posted videos of their outrageous behavior on YouTube.
The committee views this latter incident as a sure sign of
trouble to come. The whole point of going to Princeton for the
past several decades has been to get a job at Goldman Sachs or,
failing that, JPMorgan. That Princeton students are now
identifying their interests with the Lower 99 percenters is, in
its way, as ominous as the return of the Jews to Jerusalem.
Having fully investigated the incidents in question, we are
now prepared to offer strategic recommendations. Going forward
all big Wall Street banks, when visiting college campuses,
should adopt the following tactics.
No. 1. Send only women. You may not have fully understood
why you hired them in the first place, but now is their moment
to shine. For some time now the standard recruiting mission has
included at least one woman and one person of color, to
“season” the sauce. But typically, in the interests of keeping
it “real,” there has been on the scene at least one white male
recruiter.
Anyone who studies the Princeton-JPMorgan video will see
that we can no longer afford to keep it real. The camera passes
forgivingly over the JPMorgan women -- the viewer feels sorry
for them, for some reason -- and comes to rest on the lone white
Morgan man. The viewer doesn’t feel sorry for him. Get him out
of there. Now.
No. 2. Having identified your female employees, gather them
together to explain that they have no obligation to justify your
behavior, even to themselves. They shouldn’t give college
students the satisfaction of thinking that you have devoted so
much as a passing thought to the following subjects: Why it is
OK for Wall Street banks to create securities designed to fail;
why it is OK for them to game the ratings companies; why it is
OK to get paid huge sums of money while working for companies
rescued, and still implicitly backed, by the U.S. government;
why it is OK to subvert attempts by politicians to reform the
financial system?
Avoid taking questions from college students. For that
matter, avoid engaging them in substantive conversation of any
sort. Your women need to shift the conversation from content to
form. They must say things like, “I don’t mind what you are
saying, I just mind how you are saying it.” And “I don’t
understand why you can’t treat other people with respect.”
They must cast themselves not as extensions of a global
financial empire but as guests. Everyone at Princeton can agree
that it is wrong to be rude to ladies on a visit.
Happily, many Princeton students, hiding behind aliases,
have already taken up this cry on campus websites. Encourage
those who still want to work for big Wall Street banks to blog
and post our new defense. Don’t offer jobs to these students who
agree to help, however. They are better suited to being Wall
Street customers than Wall Street bankers.
No. 3. Focus on what actually angers these angry young
people, rather than what they say angers them. The character of
Princeton students didn’t change overnight; what changed is
their circumstances. They think they are pissed off at us
because of what we did. They are actually pissed off at us
because we can no longer afford to hire them all. To that end
...
No. 4. Engage, quietly, with the ringleaders. Of course,
all variations of the Occupy movement claim to be leaderless. We
on the committee aren’t buying this. With the possible exception
of Bank of America, there is no such thing as a leaderless
organization, only organizations in which the leaders operate in
the shadows.
Sources inside inform us that one of the leaders of the
Princeton-JPMorgan protest -- the young man who led the so-
called “mic check” -- is a comparative literature major named
Derek Gideon. Sources further indicate that for his senior
thesis Mr. Gideon is writing -- get this -- a poem.
This poem of his apparently leaves him with a great deal
of time and energy to stir up trouble.
“My goal is to change the dominant campus culture,” he
has been quoted saying, “the culture that assumes that going to
work for Goldman Sachs and JPMorgan is the most prestigious
thing you can do, without having any critical sense of their
current role in society. We’re very privileged to be here. We’re
getting an incredible education. All just for us to be sending
30 percent, 40 percent of our graduates to the finance sector?”
Unsurprisingly, Mr. Gideon doesn’t know precisely what he
is going to do with his life after he graduates. This young man
strikes the committee as an ideal candidate for a job at Goldman
Sachs. Yes, in our experience, even the Gideons of this world
can be persuaded. After all, what better way for him to improve
our behavior than to become one of us? Put that way, he almost
has an obligation to take his natural resting place among us.
As awkward as it is to find ourselves in a war with
students inside our own trade schools, we cannot simply cease to
deal with them. After all, many are our own children.
Disinheritance is messy. And, anyway, what’s the point of
winning the estate-tax battle if we have no heirs?
More important, the students at Ivy League schools are our
most devastating ammunition in this looming cultural war. They
show the Lower 99 that today’s economic inequality isn’t some
horrible injustice but a financial expression of the natural
order of man. The sort of people who become Upper Ones are
inherently different from the sort of people who become Lower
99s. The clearest sign of this inherent difference is that we
begin our adult life by getting into places like Princeton.
Win the battle at Princeton and we might still win this
war.
(Michael Lewis, most recently author of “Boomerang:
Travels in the New Third World” and a graduate of Princeton,
is a columnist for Bloomberg View. The opinions expressed are
his own.)
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This just pisses me off. I pay my obligations and you know what I get? High taxes!
Millions of Americans are Realizing They Can Default and Live in Their Homes for Years Free
If you're planning on ditching your mortgage payments and letting your home fall into foreclosure, now just may be the time to do it.
Thanks to record long waits for foreclosure reviews this year, 40 percent of homeowners in default have been sitting pretty in their homes for the last two years without paying a dime, CNN Money reports.
And they know exactly what they're doing.
"It is happening and it's happening more frequently," says Chantay Bridges, a senior real estate specialist with Clear Choice Realty & Associates. "They know they have a least a year (for the foreclosure to go through), at minimum, and people are taking advantage of it."
By enlisting a host of tactics to delay the foreclosure process, like filing bankruptcy, pushing back short sale dates and hitting lenders with requests for more documentation, consumers are able to further delay the inevitable.
But in some cases, the system drags on long enough without extra roadblocks.
The loan modification process alone can take a year or longer and often consumers won't bother making mortgage payments in the process. After all, if you show banks you can afford you monthly mortgage, why would they consider modifying your loan?
The key here is to keep in touch with lenders throughout the modification process. Once you're in, they won't contact your creditors about missed payments.
Walking away from a home that costs more than it's worth could be the best option for some consumers desperate to downsize and start fresh.
If you're going that route, be sure to cover all your bases. Sites like YouWalkAway.com hold homeowners' hands as they navigate the strategic default process and are proven to work.
And even though lenders can choose to go after you for missed payments, it's something of a rarity.
"You don't often see (lenders) standing in a court of law taking mom and dad to court," Bridges says. "They're going to try to resell the home or something along those lines."
The real threat to your finances is the beating your credit score will surely take once you let your home fall into foreclosure – a 100-point loss or more.
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This is just hilarious, especially if you don't like standing by a smoker.
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See you next year!!!
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