Sunday, November 30, 2014

OPEC decision a shot in oil price war

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Yesterday’s decision by the international oil cartel OPEC, led by Saudi Arabia, not to cut production in the face of plummeting oil prices will have a major impact on the energy industry, with possible significant ramifications for the global financial system as well.
Immediately on the news that OPEC will maintain production levels at 30 million barrels a day, the price of oil fell a further 8 percent to around $70 per barrel, bringing the total decline to almost 40 percent since June.
The tumbling oil price is a product of two factors: increased US production from the exploitation of shale oil, and falling growth and stagnation in much of the world economy, which has led to a decline in demand. The falling price will be compounded by the Saudi-led move, which is clearly directed at undercutting the US shale oil industry.
The decision’s most immediate consequences will be felt in Venezuela, Algeria and Iran, all OPEC members, where government revenues depend on oil prices remaining at around the level of $100 per barrel, where they sat from 2011 until the slide began in June.
Venezuela and Algeria were pushing for production cuts by OPEC of around 2 million barrels per day.
Russia, which is not an OPEC member, is also likely to be severely affected. With sanctions on its economy having a significant effect, Russia needs an oil price of between $80 and $100 per barrel to balance its budget.
The Saudi reaction to the slump is in marked contrast to its actions in response to the global financial crisis of 2008, when there was a downturn in the oil price. Then it led the way in carrying out production cuts, resulting in the price rising to $100 a barrel in 2011.
A significant change has come over energy markets since then. The extraction of shale oil and gas in the US has largely taken it out of the market as an energy importer. Imports are predicted to provide only 21 percent of US liquid fuel consumption next year, compared to 60 percent in 2005.
But the expansion of the costly shale oil extraction industry was predicated on oil prices remaining above around $80 per barrel. Once the price starts to fall below that level, marginal producers are seriously impacted.
According to many market observers, the Saudis decided not to curb production in the belief that elevating the price would only further increase production from the United States, causing OPEC to lose more of its share of global markets.
In fact, the decision may have been taken with the express purpose of further lowering prices in order to hit the US industry. This is a tactic being pursued in the iron ore market where low-cost producers, such as BHP-Billiton and Rio Tinto, are increasing production levels, even in the face of a declining market, in the hope of forcing higher-cost producers to the wall.
The aggressive intent of the Saudi actions was the theme of a number of comments on the decision. Kuwaiti Oil Minister Ali Saleh al-Omair said OPEC would have to accept any market price, even if it were as low as $60.
Others were even more blunt. “We interpret this as Saudi Arabia selling the idea that oil prices in the short term need to go lower, with a floor set at $60 per barrel in order to have more stability in the years ahead at $80 plus,” Oliver Jakob from Petromax consultancy told Reuters. “In other words, it should be in the interests of OPEC to live with lower prices for a little while in order to slow down development projects in the United States.”
Russian oil tycoon Leonid Fedun, the vice president of OAO Lukoil, said the OPEC policy would ensure a crash in the US shale industry. At today’s prices of around $70 per barrel drilling was close to unprofitable for many producers, he said, adding that OPEC’s objective was “cleaning up the American market” where the shale boom was on a par with the bubble.
Research by JP Morgan Asset Management concluded that of the 12 largest shale oil basins in the US, some 80 percent are barely profitable at prices lower that $80 per barrel.
However, the drive to wipe out higher-cost US shale producers could have far-reaching consequences for global financial markets. Energy projects in the United States have been heavily financed through the issuing of high-risk or junk bonds. In 2010, energy and materials companies made up 18 percent of the US high-index yield, a measure of so-called sub-investment grade borrowers. Today they account for 29 percent, as a result of massive borrowing by drilling companies.
Research carried out by Deutsche Bank showed that should the price fall to $60 per barrel, which is eminently possible, there could be a default rate as high as 30 percent among some US borrowers.
A report published earlier this month in the British Telegraph warned that the “rush to pump more oil in the US has created a dangerous debt bubble in a notoriously volatile segment of corporate credit markets, which could pose a wider systemic risk in the world’s biggest economy.”
Evidence of the oil price slide’s impact on major banks came to light in an article published in yesterday’s Financial Times. It reported that two major banks, Barclays and Wells Fargo, faced “potentially heavy losses on an $850 million loan made to two oil and gas companies, in a sign of how the dramatic slide in the price of oil is beginning to reverberate through the wider economy.”
The report also noted that of the 180 distressed bonds in the Bank of America Merrill Lynch high-yield index, some 52, or nearly 29 percent, were issued by energy companies.
The shale oil boom in the US has been hailed as demonstrating how the American economy, through ingenuity and innovation, is powering ahead, even as the rest of the world experiences stagnation or recession. But it could well turn out to be the source of another major financial crisis in the US and globally.

A Major International Monetary Crisis is Looming: The Suppression of Gold and Silver? Is COMEX being Cornered?

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It is with a deep sense of gratitude that I have had all of you as friends and associates during what has been a long war, not a good war, but a very long “financial war”.  As you know from these writings; this has been a war conducted by the Federal Reserve against the entire world, aided and abetted by major international banks via the manipulation of most every market on the planet.  The ethics and morals our country was originally built on …be damned!
The events mentioned herein relative to the suppression of gold and silver using dollar hegemony as the tool indicate a major international monetary crisis is dead ahead, this is obvious.  Power in the hands of the few have made massive gains for those at the top of the economic ladder while the average man has become a debt slave to the few.  There are of course the laws of Mother Nature and “unintended consequences”.  Those at the top who intend to “rule the world” are being challenged from the East in what I believe to be almost a winner take all “war”.  It did not have to be this way but the “West” has forced this.
I have never written “this is my most important writing ever!” but that day has now come.  So many events have all aligned at once which point to something very bad happening, very soon.  In fact, “very soon” could be as soon as the Monday following this Thanksgiving.  We saw many different events unfold over this past week which I believe are all connected in one way or another, I will try to connect them for you.  That said, please understand that we are and have been in a financial war for many years now.  This “war” is one between the East and West where the West’s paper financial system which has been in control for so many years is seeing its power wane.  It is this “wane” of the West versus the rise of the East that I believe is now, finally, coming to head.
If you recall, we had two Fridays in a row where gold and silver prices were smashed early in the overnight hours and into the morning, only to turn around violently and close very strongly for the day and the week.  This action is called an “outside reversal day” which over the years has been an extremely rare event in the precious metals.  It has been rare in precious metals because it was not “allowed”.  When I say “allowed”, please remember that COMEX is a paper exchange where possessing metal is not necessary to sell gold or silver.  All you have to have is “money” to post as margin and you are allowed to sell as many contracts as you have margin for.  There are “limits” to how many contracts one can buy or hold, these limits do not seem to have been enforced on the sell side …JP Morgan’s short position in silver as an example.
 So we had two outside reversal Fridays in a row, this was followed by the action this past Wednesday.  80 tons of gold was sold over a 15 minute timespan which knocked gold down $20 in the blink of an eye.  Please see the chart below courtesy of Dave Kranzler of IRD.
December Comex Gold
80 tons!  Let me put this in perspective.  80 tons is equal to two weeks worth of global gold production …sold in just 15 minutes!  This is nearly 2.8 million ounces. The interesting thing is, COMEX only claims to have 865,000 ounces of gold available for delivery so more than 3 times the amount of ounces were sold in 15 minutes than is even claimed as available for delivery! What followed however was the real stunner, very shortly afterward gold dug in its heels and started to recover …recover to unchanged in price!  Do you see the importance here?  Though this was not another outside reversal day, it may have been even more important.  The “paper” market absorbed two weeks worth of production in just 15 minutes without breaking!  I’ll get back to this shortly and tie it in to the rest.
If you recall, I wrote a piece back in August entitled “Kill Switch” where I put forth a hypothesis that the high and rising open interest in silver was actually the Chinese via proxies cornering the silver market.  The huge open interest in the nearby contract rolled out to the December contract.  At that point, the open interest in gold was at multi year lows as one would expect with prices down.  This has changed, just over the last 4-6 weeks, the open interest has steadily built in gold …while continuous pressure still on the price.  Before going any further, I have never seen the open interest rise to multiyear highs while the price was pushed to multi year lows in ANY commodity.  This is truly an anomaly and one that looks like it could be resolved very shortly.
This coming Friday is the 1st notice day for both Dec. COMEX gold and silver contracts.  COMEX in my opinion has a potentially huge problem where a default in both contracts is a distinct possibility!  As of this past Friday, 61,763 contracts still open, this represents 308 million ounces of silver.  The COMEX claims a registered (deliverable) inventory of just under 65 million ounces.  With only four days left there are roughly 5 silver ounces contracted for every one ounce available!
The situation in gold has quietly become much worse than silver, there were 162,509 Dec. gold contracts open which represent over 16 million ounces of gold.  The “registered” (deliverable) category at the COMEX inventory shows only 868,910 available to deliver!  Do you see the problem here?  There are only 4 days left until this contract goes into the delivery process, yet there are 20 ounces contracted for each ounce available!  I have one other amusing thought for you, remember the 80 tons sold in 15 minutes last Wednesday?  This was almost 2.8 million ounces compared to a deliverable inventory of just 869,000 ounces, in my opinion,  ”FRAUDULENT” in capital letters!
Yes I understand, there are still four days left for the open interest to bleed down and roll out to the next contract month but we now stand in totally uncharted territory.  Never in the past has this much open interest been still outstanding with deliverable inventory as low as it is.  It is also astounding that total open interest could have risen to these levels while the price dropped.  For open interest to increase and the price to drop, the “initiation” to the opening of contracts has obviously been done by sellers.  This is exactly what I have been saying all along, the dropping price has been dictated by paper sales of COMEX contracts …but now there is a problem.  So much paper has been sold to dictate the price that the contracts outstanding simply dwarf the available metal to deliver.  Put another way, COMEX gold and silver look like they have been cornered!  Let me rephrase this, COMEX gold and silver are now “very cornerable”.  We will know shortly if this is true and “who” did the cornering.  I suspect we will find out that this has been a Chinese/Russian hand holding consortium and one that was carefully planned and done within legal bounds.  I think we will find out they in fact did play by the West’s rules and it was the “sellers” of nonexistent metal who fell into their own price fixing trap.  It has been a financial war, one that was declared by the West and looks to have been possibly won by the East.
Another huge event this past week was the surprise announcement by Holland of their repatriation of 122.5 tons of gold from the FRBNY.
I have many questions about this transaction and very few answers.  We may or may not ever get some of the answers but here is what I’d like to know.  Was the gold which was delivered the “original” gold that was deposited?  Same serial numbers and hallmarks?  If not, where did it come from, who refined and processed it?  And when?  One must also wonder why the Germans did not get their promised gold?  Did Holland work out a deal prior to the German request?  Or is this a case of the Dutch “smelling smoke” and quietly exiting the theatre before anyone else?  Other questions might include whether or not any of this gold was of Ukrainian origin and now what might happen in the derivatives markets?   Remember, derivatives outstanding are probably in the range of 100-1 versus the real metal, taking 122 tons of “collateral” away could affect 12,200 “tons” of paper derivatives.  With the leverage factor, this is equal to better than 4 years worth of global production and could affect close to $1/2 trillion worth of paper contracts!  While on this subject, prior to the Dutch news, GOFO rates were at almost record backward levels.  Has this come about because 122 tons of “collateral” was withdrawn from the pool?  Just thinking out loud here…
Other notable events this past week were many.  First, Congress began questioning the banks on “manipulating the commodities markets,” and the Federal Reserve leaking inside information to Goldman Sachs, is the timing of this a coincidence?  Also, president Obama unilaterally has now thrown our borders open, is it possible that the long spoken of “Amero” is really in the works?  One necessity to a North American currency unit would be open borders right?  Again, just thinking out loud.  We also heard Russia announce a decline to import ANY GMO food products from the West for at least 10 years.  They also announced the import of another 55 tons of gold for the quarter for good measure while ISIS announced their intent to use gold and silver as money.
To tie all of this up, let me say that I believe the very long anticipated “market corner” of precious metals may possibly and finally be at hand.  Contrary to what happened back in the late 1970′s with the Hunt brothers in silver, the current “corner” was actually facilitated by the sellers.  The Hunt’s in fact did set out to corner silver, I don’t believe the Chinese/Russian/Indian alliance initially set out to do this …they were “forced to.”
You see, we have been in a “financial war” for years, the U.S. has trod heavily on the rest of the world financially.  We settled our grotesque annual trade deficits by sending freely created dollars as payment.  In order to support the dollar and keep interest rates low, we have suppressed the prices of gold and silver.  Without low metals prices, none of the other markets could ever make any sense.  PE ratios could never be at the current levels without low interest rates, interest rates could never be at these low levels if gold and silver were shooting upward …so the rest of the world has played the only card they could to prevent a World War, a financial card.
They “carried” us and let the game go on and on as they accumulated bigger and bigger stacks of gold.  Much of this gold “was once” Western gold.  They have legally purchased it and in many cases sent our own dollars back to us as payment.  Now, we will sit with lots and lots of dollars while they have lots and lots of gold.  I believe they have now cornered both COMEX gold and silver if they choose to stand for delivery.  They will say “hey, we did not make up the rules, you did.  You sold us contracts, we bought and paid for them.  Now we would like the contract settled, please send us our metal”.  This was all legal and they did not step up with the intent of busting the market, they simply “bought what we were selling”.  If they do stand for delivery, can they be faulted if they ask for the contract they paid for to perform?
Let me finish by saying this, we very well may wake up after Thanksgiving “fat and happy” only to find out the entire financial system was a fraud.  The East, by asking for delivery may in a “polite” way expose the entire game.  This would accomplish much, first and most importantly, this will go almost all the way in ending the dollar as the world’s reserve currency.  The U.S. will no longer be able to trade “something for nothing”.  It will also hamper our ability to financially and militarily put our thumb on the rest of the world.  If we became hampered financially, this would also make military operation much more difficult to fund or pay for.  In essence, if I am correct and we do see failure to deliver and a COMEX default …the world may be a safer place!  This past week for example, president Obama secretly extended our stay in Afghanistan, how will this operation be funded by a bankrupt Treasury and a central bank that issues unwanted currency?  The Chinese/Russians in my opinion may be on the verge of winning a war without ever firing a shot and playing the game by our own rules!  We clearly have been the aggressors in both Syria and then in funding a coup in Ukraine.  Could crashing our financial markets be a way to put us on a financial leash and thus lessen our abilities at aggression?  I am sure this thought process has already been discussed.
Please do not call or write me Monday morning and say “see, nothing happened …again”.  All I am saying here it that the COMEX is now “cornerable” and in a very vulnerable position.  Maybe it will not be now, maybe it will?  All I can say is history is rife with “bank runs”, sooner or later the longs will stand for the delivery of an inventory too small to satisfy them, this will be nothing different than a bank run when it happens.

Senate hearings on Wall Street crimes: The bankers rule

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Hearings held last week by two different Senate committees demonstrated the subordination of US regulators and Congress to the Wall Street banks. The hearings were held in the midst of fresh revelations of insider trading, the manipulation of markets and general lawlessness on the part of the largest American financial firms.
On Thursday and Friday, the Senate Permanent Subcommittee on Investigations held hearings on a report it released Wednesday documenting massive holdings of physical commodities by Goldman Sachs, JPMorgan Chase and Morgan Stanley, in some cases above legally prescribed limits. The report gave a detailed account of the banks’ leveraging of these assets to manipulate the prices of aluminum, coal, oil and other basic goods.
On Friday, the Senate Banking Subcommittee on Financial Institutions and Consumer Protection questioned William C. Dudley, the president of the Federal Reserve Bank of New York, the chief federal regulator of the major US banks, on new evidence of the politically incestuous relations between the Fed and the financial firms it is supposed to police.
Both panels were exercises in political theater, with politicians lamely posturing as critics of Wall Street and defenders of “Main Street” and bank executives and the Fed’s Dudley making little effort to conceal their contempt and indifference.
The subcommittee on investigations copiously documented in its 400-page report the near-stranglehold of major banks on key materials and their manipulation of prices to boost their speculative activities on commodities futures markets. It noted that the unprecedented holdings of the banks in physical commodities were the result of the lifting of prohibitions on such activities in the late 1990s and early 2000s, as part of the general lifting of regulations on banking and commodity trading. Its report mildly criticized the New York Fed for failing to rein in the banks’ price-fixing and other conflicts of interest.
At the same time, the panel, headed by its Democratic chairman, Carl Levin, and the ranking Republican, John McCain, signaled that Wall Street had nothing to fear by not even calling the banks’ top officials to testify.
The hearing held Friday by the subcommittee on financial institutions was, if anything, an even more stage-managed exercise. The Republicans on the subcommittee boycotted the event, and only five Democrats attended. The chairman of the subcommittee, Senator Sherrod Brown of Ohio, evidently felt he could make some political hay by posing as a critic of Dudley and the Fed.
The most demagogic performance at the hearing was turned in by Senator Elizabeth Warren of Massachusetts, who is generally described by the media as a “fierce critic” of Wall Street. The former head of a congressional panel set up to oversee the Troubled Asset Relief Program (TARP), the $700 billion taxpayer bailout of the banks put in place after the financial crash of September 2008, Warren has made a career of combining verbal rebukes of the banks with full support for the Obama administration’s expansion of the bailout that was launched under President George W. Bush.
Brown and his fellow Democrats decided to call the hearing after ProPublica and the public radio program “This American Life” carried reports last September based on 46 hours of audio recordings made in early 2012 by Carmen Segarra, then an examiner on the New York Fed’s monitoring team at Goldman Sachs. The tapes of internal discussions involving Segarra and her supervisors documented the efforts of the New York Fed to suppress criticisms of Goldman’s practices.
Segarra was fired after she raised objections to a deal reached by Goldman with Spain’s Banco Santander that even her supervisor called “legal but shady.” In return for $40 million in fees, Goldman agreed to a transfer of shares Banco Santander held in its Brazilian subsidiary. Goldman would hold onto the shares for a few years and then return them.
The deal was designed to create the impression that Banco Santander’s financial situation was more secure than it actually was. At the height of the banking crisis that had gripped Greece, Spain, Portugal, Italy and other euro zone member states, the European Banking Authority demanded that banks hold more capital to offset potential losses. As the ProPublica piece put it: “The [Goldman] deal would help Santander announce that it had reached its proper capital ratio six months ahead of the deadline.”
Segarra filed suit against the New York Fed over her firing. The suit was recently dismissed by a judge, but she is appealing the decision. Segarra was in the audience at the Senate hearing with New York Fed President Dudley, but she was not invited to testify by the Democrats on the subcommittee. She released a statement saying she was “disappointed” at being snubbed.
On November 20, one day before the hearing with Dudley, the New York Times published a front-page article providing yet another example of the corrupt relationship between federal regulators, beginning with the New York Fed, and the major banks.
The article illustrated the notorious “revolving door” between the banks and government regulatory agencies, with regulators routinely parlaying their experience overseeing banks to land lucrative jobs on Wall Street advising the same banks on how to evade the law. The door also swings in the other direction, with bankers becoming top enforcement officers at the New York Fed, the Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC) and other US agencies.
The Times article dealt with a former New York Fed regulator who recently took a job at Goldman advising the bank and its clients how to circumvent what remains of federal banking regulations. The ex-Fed employee was recently provided confidential internal Federal Reserve documents by a former colleague who was still working at the New York Fed.
After the revelations surrounding the case of Segarra emerged in September, the Goldman employee was fired along with his supervisor, as was his former colleague at the New York Fed.
The Goldman supervisor, the Times reports, was once an adviser to Sheila Bair, the former head of the FDIC.
The total domination of government regulatory agencies by the banks—and the absurdity of all talk of reforming the financial system within the framework of capitalism—are underscored by New York Fed President Dudley himself. Prior to heading up the most important Federal Reserve branch, he worked for 21 years at Goldman Sachs, becoming a partner and the bank’s chief economist.
His predecessor as president of the New York Fed played a key role in enabling Wall Street to organize the subprime mortgage Ponzi scheme that collapsed in 2007-2008, and then engineering, along with Fed Chairman Ben Bernanke and Treasury Secretary (and former Goldman CEO) Henry Paulson, the government bailout of the banks. President Obama appointed this individual, Timothy Geithner, as treasury secretary when he took office in 2009, sending the financial elite as clear a signal as possible that its interests would be protected by the new administration.
Geithner spent the next four years, until his retirement at the end of Obama’s first term to become president of a Wall Street private equity firm, expanding the bailout to the tune of trillions of dollars and opposing any serious restrictions on the banks’ speculative activities or the pay awarded to leading executives.
He was succeeded as treasury secretary by another banker, Jacob Lew, who made his fortune at Citigroup. Last year, Obama chose Mary Jo White as the new head of the SEC. White made millions as an attorney at the corporate law firm Debevoise & Pimpleton, where she defended Wall Street executives, often against investigations by the SEC.
The record makes clear that Warren, Brown and other Democrats who occasionally posture as opponents of Wall Street are themselves complicit in the plundering of American society by the financial mafia.

Opening the Gates to World War III

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“The US wants to subdue Russia, to solve US problems at Russia’s expense. No one in history ever managed to do this to Russia, and no one ever will.” Vladimir Putin, November 17, 2014.

According to news reports, Washington has decided to arm Ukraine for renewed military assault on Russian ethnics in Donetsk and Luhansk.

A Russian foreign ministry official condemned Washington’s reckless decision to supply weapons to Kiev as a violation of agreements that would make a political resolution of the conflict less likely. This statement is perplexing. It implies that the Russian government has not yet figured out that Washington has no interest in resolving the conflict. Washington’s purpose is to use the hapless Ukrainians against Russia. The worse the conflict becomes, the happier Washington is.

The Russian government made a bet that Europe would come to its senses and the conflict would be peacefully resolved. The Russian government has lost that bet and must immediately move to preempt a worsening crisis by uniting the separatists provinces with Russia or by reading the riot act to Europe.

It would be a costly humiliation for the Russian government to abandon the ethnic Russians to a military assault. If Russia stands aside while Donetsk and Luhansk are destroyed, the next attack will be on Crimea. By the time Russia is forced to fight Russia will face a better armed, better prepared, and more formidable foe.

By its inaction the Russian government is aiding and abetting Washington’s onslaught against Russia. The Russian government could tell Europe to call this off or go without natural gas. The Russian government could declare a no-fly zone over the separatist provinces and deliver an ultimatum to Kiev. The Russian government could accept the requests from Donetsk and Luhansk for unification or reunification with Russia. Any one of these actions would suffice to resolve the conflict before it spins out of control and opens the gates to World War III.

The American people are clueless that Washington is on the brink of starting a dangerous war. Even informed commentators become sidetracked in refuting propaganda that Russia has invaded Ukraine and is supplying weapons to the separatists. These commentators are mistaken if they think establishing the facts will do any good.

Washington intends to remove Russia as a constraint on Washington’s power. Washington’s arrogance is forcing a stark choice on Russia: vassalage or war.

US Environmental Protection Agency (EPA) Barred From Getting Advice From Independent Scientists

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Under a bill that has passed the US House, the people best qualified to say whether a chemical is dangerous will not be allowed to do so.
A bill passed through the US House of Representatives is designed to prevent qualified, independent scientists from advising the Environmental Protection Agency (EPA). They will be replaced with industry affiliated choices, who may or may not have relevant scientific expertise, but whose paychecks benefit from telling the EPA what their employers want to hear.
The EPA’s Science Advisory Board (SAB) was established in 1978 to ensure the EPA uses the most up to date and relevant scientific research for its decision making and that the EPA’s programs reflect this advice. It has served in this role, most often uncontroversially, through 36 years and six presidents. If the new bill passes the Senate and wins presidential approval, however, that is about to change.
It’s hard to be against “balance”, which no doubt helped Rep Chris Stewart (R-Utah) gather 229-191 support for his bill H.R. 1422 to overhaul the way appointments to the SAB are made. Of the 51 members of the SAB, three come from the industries the EPA is regulating. Stewart wants more, saying, “All we’re asking is that there be some balance to those experts…We’re losing valuable insight and valuable guidance because we don’t include them in the process.”
However, deeper investigation suggests the agenda involves more than getting input from a wider range of backgrounds. For one thing, the vote was largely on party lines with four Democrats supporting and one brave Republican opposed. Moreover, Stewart doesn’t have much of a record for listening to genuine scientific expertise, considering 98% of qualified scientists’ assessments irrelevant.
Moreover, Stewart has made clear he doesn’t believe the EPA should exist at all, calling for its scrapping because it “thwarts energy development”. Axing a body that ensures water is drinkable and air doesn’t kill you is politically hard, but nobbling is easier.
The legislation has been under consideration since 2013. At an early hearing on the bill Dr Francesca Grifo, previously director of the Center for Biodiversity and Conservation at the American Museum of Natural History testified, “Conflicts of interest threaten the integrity of science. Specifically, the objectivity of the members of an advisory committee and the public’s trust in the advice rendered by that committee are damaged when a member of an advisory committee has a secondary interest that creates a risk of undue influence on decisions or actions affecting the matters in front of the committee.”
The bill would prevent scientists from voting on the release into the environment of a chemical by their employers. Nevertheless, they would be allowed to vote to release a nearly identical chemical, Grifo notes, including some that would set a precedent that would be very useful to the company in future decisions.
More insidiously, research scientists are barred under the act from advising on any topic that might “directly or indirectly involve review and evaluation of their own work”. In other words, the only people barred from advising the EPA on a particular chemical are those who have actually studied its toxicity or effect on the environment.


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Coverage of the midterm elections has, understandably, focused on the shift in political power from Democrats toward Republicans. But behind the scenes, another major story has been playing out. Wall Street spent upwards of $300M to influence the election results. And a key part of its agenda has been a plan to move more and more of the $3 trillion dollars in unguarded government pension funds into privately managed, high-fee investments — a shift that may well constitute the biggest financial story of our generation that you’ve never heard of.
Illinois, Massachusetts, and Rhode Island all recently elected governors who were previously executives and directors at firms which managed investments on behalf of state pension funds. These firms are now, consequently, in position to obtain even more of these public funds. This alone represents a huge payoff on that $300M investment made by the financial industry, and is likely to result in more pension money going into investments which offer great benefits for Wall Street but do little for the broader economy.
But Wall Street’s agenda goes beyond any one election cycle. It has been fighting to turn public pensions into private profits for quite some time, steering retirement nest eggs into investments that are complex, charge hefty fees, and that generate big profits for management firms. And it has been succeeding. Of the $3 trillion in public assets currently in pension funds throughout the country, almost a quarter of that has already found its way into so-called “alternative investments” like hedge funds, private equity and real estate. That translates to roughly $660 billion of public money now under private management, invested in assets that are often arcane and opaque but that offer high management and placement fees to Wall Street financiers.
Our recent financial crisis demonstrated just how risky and potentially destructive these types of assets can be — so the question becomes, why is so much money going into them?
David Sirota has been one of the few journalists to cover this story in depth, and to expose the widespread political corruption that’s gone along with it. “It’s one of the biggest economic stories in the world because the amounts of money are so huge” says Sirota. “It is happening in every state and every city in the country.”
In 2011 the Wall Street Journal reported that the Blackstone Group — one of the largest private equity firms in the world, with an investment pool of $111 billion dollars — saw “about $37 of every $100” of its funds come from investments from state and local pension plans. That’s a huge sum, and it’s therefore unsurprising that Blackstone lobbies state governments to help steer more pension money its way.
In many cases, the decision to invest state pension money in alternative investments of questionable value seems to have been driven less by concern for the welfare of future pensioners (gasp!) than by political considerations and the concerted efforts of financial industry lobbyists. The simple fact is that these investments are not very good. While they offer lucrative fees for Wall Street middlemen, they have been shown to oftensignificantly underperform against the market.
You’d think that, given the importance of keeping American citizens pensions safe and prosperous, the political representatives overseeing them would hew to safe and stable investments. Unfortunately, however, that presumption would be wrong.
A document obtained by Sirota and published at his previous employer,Pando Daily, reveals that the contract language for a Blackstone hedge fund invested in by the Kentucky pension system contains language such as: “the possibility of partial or total loss of capital will exist” , “there can be no assurance that any (investor) will receive any distribution”; and “the [fund] should only be considered by persons who can afford a loss of their entire investment.” That certainly sounds safe and conservative.
Despite the above warnings, over $80 million of Kentucky pension money went into this and another opaque Blackstone fund. And again, all this was been with almost no public knowledge or debate.
If all this wasn’t egregious enough, a huge preponderance of evidence suggests that this massive transfer of wealth from public to private management is having a corrupting effect on the political process. Sirota’s reporting seems to have particularly touched a nerve with New Jersey Governor Chris Christie, who has described Sirota as “a hack” and “not a journalist”. It’s not difficult to see why Christie isn’t a fan. Earlier this year,Sirota wrote that
43 financial firms managing New Jersey pension money have spent a total of $11.6 million on contributions to New Jersey politicians…
Many of those donations have gone directly to Gov. Christie’s election campaign … Additionally, many of the contributions came either just before or just after the Christie administration awarded the firms multi-million-dollar pension management contracts.
Those 43 firms ended up managing around $14 billion dollars of state pension money, a take that serves as a timeless reminder of the great rewards that can derive from catering to the needs of receptive politicians.
Christie’s tenure as New Jersey governor has been particularly emblematic of the extent of Wall Street’s reach into the public sphere. Among other things, he installed a private equity investor as the state’s pension overseer and publicly lied about the manner in which pension fund investment decisions are made. Ironically enough, he’s defended these practices in his own state while criticizing Democrats for utilizing themthrough his position as chair of the Republican Governor’s Association.
The flow of public money into Wall Street coffers has greater ramifications than simply putting pension funds at risk and corrupting our political system. It also fundamentally alters the future shape of American society by changing how public funds will get spent. Consider what might happen if pension money were steered into the communities where pension beneficiaries live. Michael McCarthy, an assistant professor of sociology at Marquette University, has highlighted how the Quebec government’s pension investment fund boosts the regional economy:
The fund invests in small and medium enterprises that operate within the province. According to their calculations, by 2012, the Solidarity Fund’s investments created 86,624 new jobs and kept 81,993 more from moving overseas.
Pension funds could play a similar role in America, but they don’t. Instead, U.S. pension funds mimic Wall Street investment practices.
Simply put, outsourcing investment decisions to Wall Street instead of giving them to accountable public servants adversely affects where pension investment money goes. When the money is not managed publicly there is no incentive to invest in local infrastructure, and there is nothing to dissuade investors from putting public money into investments that harm the local community, for example by outsourcing local jobs abroad.
“There is a massive transfer of power and wealth happening from the public to Wall Street, through pensions,” says a former Congressional staffer, who asked to remain anonymous because he has ties to the industry.“The more that money goes into private hands as opposed to public hands, the less that it gets invested into projects which are socially constructive.”
“It’s a policy justified entirely on people’s ignorance of what’s going on

Swiss Gold Referendum: What It Really Means

In a few days the Swiss people will go to the polls to decide whether the Swiss central bank is to be required to hold 20% of its reserves in the form of gold. Polls show that the gold requirement is favored by the less well off and opposed by wealthy Swiss invested in stocks. [1] These poll results provide new insight into the real reason for Quantitative Easing by the Federal Reserve and European Central Bank.

First, let’s examine the reasons for these class-based poll results. The view in Switzerland is that a gold backed Swiss franc would be more valuable, and a more valuable franc would increase the purchasing power of wage earners, thus reducing their living costs. For the wealthy stock owners, a stronger franc would reduce Swiss exports, and less exports would reduce stock prices and the wealth of the wealthy.

The vote is clearly a vote about income shares between the rich and the poor. The Swiss establishment opposes the gold-backed franc, as does Washington.

A few years ago the Swiss government, after experiencing a strong rise in the exchange value of the Swiss franc as a result of dollar and euro inflows seeking safety in the Swiss franc, decided to expand the Swiss money supply in line with the foreign currency inflows in order to stop the rise of the franc. The liquidity supplied by the central bank creating new francs has stopped the rise of the franc and supports exports and stock prices. As a vote in favor of a gold backed franc is not in the interest of the elite, it is unclear that the vote will be honest.

What does this tell us about the Federal Reserve’s policy of Quantitative Easing, which is an euphemism for printing an enormous amount of new dollars?

The official reason for QE is the Keynesian Phillips Curve claim that economic growth requires mild inflation of 2-3%. This false theory was put to death by the supply-side policy of the Reagan administration, but the misrepresentation of the Reagan administration’s policy by the Establishment has kept the bogus Phillips curve theory alive. [2]

The claim based in disproven Phillips Curve theory that the Fed’s policy is directed at helping the overall economy is another example of the deception practiced by US authorities. The real purpose of QE is to drive up the wealth and income of the one percent by providing the liquidity that flows into financial asset prices such as stocks and bonds.

Since the 2008 US recession, skeptics of the Fed’s explanation of QE as support for the US economy have stressed instead that the purpose of US economic policy has been to support the federal deficit at low interest rate costs and to support the balance sheets of the troubled banks by pushing up the prices of debt-related derivatives on the banks balance sheets.

These have been important purposes, but it now appears that the main purpose has been to make the rich richer. This is why we have a stock market whose high values are not based in fundamentals but, instead, are based on the outpouring of liquidity by the Federal Reserve. As the economic policy of the US is entirely in the hands of the rich, it is not surprising that the rich use it to enrich themselves at the expense of everyone else. The Fed’s monetary policy that enriches the rich by driving up the prices of stocks and bonds also has robbed retirees of hundreds of billions of dollars, perhaps trillions, in lost interest income on their savings. [3]

As Nomi Prins and Pam Martens have made clear, QE is not over. The Fed is rolling over its interest and principal payments on its $4.5 trillion bond inventory into new bond purchases, and the banks now infused with $2.6 trillion in cash from the Fed are purchasing the bonds in place of the Fed’s QE purchases.

According to the latest news reports, Mario Draghi, the head of the European Central Bank will print all the money necessary to support financial asset prices. [4] Draghi, like the Federal Reserve, masks his policy of enriching the rich in Phillips curve terms of driving up inflation in order to support economic growth. Of course, the real purpose is to drive up stock prices.

Like the Fed, the ECB pretends that the money it prints flows into the economy. But given the poor condition of the banks and potential borrowers, loan volume is low. Instead the money created by central banks flows into paper financial asset prices. Thus, the monetary policy of the Western world is directed toward supporting the wealth of the rich and worsening the inequality in the distribution of income and wealth.

The rich are far from finished with their pillage. In exchange for campaign donations, state governors are turning over state pension funds to the management of high-fee, high-risk private pension fund managers who do a better job of maximizing their fee income than protecting the nest eggs of retirees. [5]

Throughout the Western world economic policy is run for the sole benefit of the one percent and at the cost of everyone else. The greed and stupidity of the rich are creating ideal conditions for violent revolution. Karl Marx might yet triumph.