Archive - Jan 15, 2011 - Story

Two years ago when the US bailed out UBS and Switzerland from a brief but potentially terminal liquidity crisis, it succeeded in extracting a historic pound of flesh: it forced UBS to declassify thousands of bank accounts of US tax evaders which was the first nail in the centuries-old concept of Swiss bank secrecy. Today, Rudolf Elmer, a former COO of one of the biggest Swiss banks, Julius Baer, may have just nailed the last, and with that set off a chain reaction that will force a huge outcry against pervasive global tax fraud (but likely achieve nothing ultimatel). According to the Guardian, tomorrow Elmer will hand over details of 2,000 "high net worth individuals and corporations" to WikiLeaks which will make him "the most important and boldest whistleblower in Swiss banking history." And since among those exposed will be "approximately 40 politicians" expect all hell to break loose as photos of Assange having a underage orgy with Al Qaeda members are suddenly made public to diffuse what is bound to be another huge (if brief - after all human kind cannot bear very much reality).

When bipartisanship breaks out in Washington DC, check to make sure your wallet is still in your pocket. Every time you fill up your car this winter you are participating in the biggest taxpayer swindle in history. Forcing consumers to use domestically produced ethanol is one of the single biggest boondoggles ever committed by the corrupt brainless twits in Washington DC. Ethanol prices have soared 30% in the last year as the supplies of corn have plunged. Only a policy created in Washington DC could drive up the prices of gasoline and food, with the added benefits of costing the American taxpayer billions in tax subsidies and killing people in 3rd world countries.

We have a bone to pick with Goldman's John Noyce. Last week Goldman's (quite respected) strategist, when discussing his specialty, the EURUSD, said that "selling a bounce toward the middle of the consolidation at 1.3250 would seem attractive." Well, in typical Goldman fashion it didn't take his colleagues in the tactical division even one full week before pulling the rug from under all who listened to John, and putting out their own EURUSD target of 1.37. Either way, for those who enjoy decoding dodecatuple reverse psychology, here are John's latest charts that matter next week.

The WSJ has an adorable article titled "The Fed's Laugh Track" in which it has done a word search for "laughter" and come up with some amusing results. Of course it would be far funnier if the WSJ had an article disclosing all the conversation transcripts between Jon Hilsenrath and the various Fed's presidents and executives. We won't hold our breath on that on. We would, however, like to present one of tha laugh tracks that the WSJ conveniently decided to drop. Not surprisingly, the topic of that particular transcript disclosure is, well, gold.

If you still have any doubts of Fed's bias towards sustaining bubbles and being late on fighting inflation, the latest release of 2005 Fed meeting minutes should help you see it more clearly. There's some good humor and cynicism there, which certainly deserves respect. It's also obvious that many Fed officials and economists, including Greenspan and Geithner, had by 2005 at the latest realized the bubble in housing and the systemic risks posed by big banks (and Lehman and Bear Stearns in particular). Impressive foresight. But the good news stops there. Were the bubble and risks just a goddamned joke to them? They saw it quite well, made some smartass jokes and had some good laughs, and did NOTHING. When Bernanke said it takes 15 minutes to raise rates, he was being too modest. The final tally to vote on the decision, I'm sure, takes at most one minute. But this is an insult to the questioner and the audience, isn't it? The real question is how long it would take from rising inflation to them seeing it, then making the decision to act on it, then to inflation being tamed.

About the time that the Federal Reserve was created, H.G. Wells proposed a conspiracy theory.   It wasn’t a cabal of small and secretive group of people. His goal was to drive the progress of mankind:  the Open Conspiracy.  Anyone could join, in the words of Nancy Zimmerman, if they:

• Endorse the aim of the Open Conspiracy—the betterment of the human race.
• Strive to understand the world, to determine the institutions and practices that work and those that don't—what things contribute to human progress, and what things did not.
• Communicate what they learn to others.
• Listen to what others have to say independent of who they are:  “no one has a monopoly on truth or on insight, and good judgments can only be arrived at by close and open-minded scrutiny of evidence and opinions.”

The point of this Open Conspiracy is to understand and maybe domesticate risk; to turn the future into something we don’t fear.  The very attempt is itself the stuff that contests all the change and adversity that feed fear and insecurity. Even in an unpredictable, always morphing universe there is value in problem solving.  And one can find the human instinct for problem solving in virtually all institutions, even the dreaded credit default swap.