Financial Regulation

Moody's Refuses To Junk Spain Ahead Of US Election, Raffirms Baa3 Rating - Full Text

For those who are curious why Tim Geithner has been invisible in the past 2 months, the answer is he has been manning the phones like a true patriot, and making sure nobody dares to rock the European boat ahead of the US election (as was already disclosed), in this case exemplified by Moody's just released announcement that the rating agency will not downgrade Spain to junk, soaring debt, collapsing GDP and laughable unemployment rate notwithstanding (unless of course the ECB fails in its mission to scare all shorts from approaching within 10 miles of an SPGB, and Spain loses private market access again, in which case Moody's would proceed with a "multiple notch downgrade"). At least not until the US election that is. After that... well, with the fiscal cliff, debt ceiling, Greece vs Troika, etc, etc, buy VIX.

Bloomberg FOIA Documents How Wall Street Made A Muppet Of The SEC, Mary Schapiro And Dodd Frank

That the SEC is the most incompetent, corrupt, irrelevant and captured organization "serving" the US public is known by everyone. And while the details of the SEC's glaring lack of capacity to do anything to restore investor confidence in the capital markets, which has become a casino used exclusively by Wall Street to defraud any retail investor still stupid enough to play (which lately a moot point as there have been no material retail inflows into mutual funds in over three years), are scattered, courtesy of Bloomberg we now have the best summary of just how the utterly clueless SEC is a muppet plaything of Wall Street, and together with it, the "grand regulation" that was supposed to keep Wall Street in check, is nothing but what Wall Street demand it to be, and forced the SEC, way over its head on regulation, to accept every change, that the very banks that are supposed to be regulated, demands as part of Dodd-Frank reforms. In short: everything we know about Wall Street 'regulation' has been a farce, and a lie, exclusively thanks to corruption rampant at the now documentedly incompetent Securities And Exchange Commission.

Did The Great Financial Crisis Start With The End Of The Gold Standard?

It’s perhaps no co-incidence that the trend towards persistent deficits started around the final collapse of the last link to a quasi-Gold standard back in August 1971. As Deutsche Bank's Jim Reid notes, in a world of the Gold Standard or equivalent, those countries loosening policy too much would have seen a rush to convert their currencies into Gold thus destabilising their economic policy framework. Multi-year (let alone multi-decade) deficits and the GFC could not have occurred under a gold standard. So with the shackles off and with nothing backing paper money, the post-1971 period has seen a uniquely long period of fiat currencies globally with a beggar-thy-neighbour rolling period of credit creation. Never before in observable history have so many countries been off a precious metal type currency system for so long. So after 41 years of global fiat currencies and an unparalleled amount of debt that is proving very difficult to shift, we really are venturing into the unknown.

Aaaand It's Gone: This Is Why You Always Demand Physical

We have said it over and over, we'll say it again. For all those who for one reason or another would like to boycott the broken markets, yet trade gold in paper form, please understand that all the invested capital is at risk of total loss and can and will be lost, commingled and rehypothecated, not necessarily in that order, with little to zero recourse and the residual claim on liquidating assets pushed to the very end of the queue. Because if Lehman, MF Global, Peregrine, and countless other examples were not enough, here comes Amber Gold: a gold-based investment ponzi scheme out of Poland, in which it is likely needless to say that the gullible investors never had actual possession of the gold. And when they tried, it was gone. All gone.

Your Complete, One-Stop Presidential Election Guide

With less than three months to go, the outcome of the November election remains highly uncertain. SocGen notes that, as always, economic performance over the coming months will be a key determinant of who wins and who loses. If the elections were held today, the most likely outcome would be a Republican win in both Congressional races and a Democratic win in the race for the White House. This means that any new significant legislation will almost certainly have to be a product of compromise. In this sense, we may very well be looking at a status quo in terms of bipartisanship and gridlock which have dominated Washington politics over the past few years. This would be bad news at a time when the country faces a number of serious challenges with significant long-term implications. From the economy to long-term fiscal health, and from the debt-ceiling to Housing, Healthcare, and Energy policy differences, the following provides a succinct review.

Guest Post: Coming To Terms With A Borderless World Economy

Wealth has become stateless, and as a consequence it is becoming increasingly less accountable to any state’s laws or tax codes. Over the last quarter century it has become increasing easier to transfer large sums of money, what is more, large financial institutions find it far easier today to relocate to a different legal and tax jurisdiction than at any previous time, because it is easier to re-establish the necessary business infrastructure, the cost of relocation has lessened. Recognising this trend over the last quarter century, and being desirous of any slice of revenue they can get their hands on, governments around the world have competed with each other, to provide the ‘best business environment’ for those financial institutions. Let’s not delude ourselves about this, the ‘best business environment’ is the least regulation and the most advantageous tax breaks. And by competing with each other in this way, governments around the world created the regulatory environment which was, in part, responsible for the current financial crisis. And then there are the ‘Tax Havens’

Frontrunning: June 8

  • Obama Seeking Ally on Europe Finds Merkel a Tough Sell (Bloomberg) - but he has an election to win
  • China rate cut sparks fears of grim May data (Reuters)
  • China faces stimulus dilemma  (FT)
  • Papademos warns of Grexit vortex (FT)
  • China’s Shipyards Fail to Win Orders as Greek Owners Shun Loans (Bloomberg)
  • Rajoy Holds Bank Talks With EU Leaders as Fitch Downgrades Spain (Bloomberg)
  • Capital Rule Is One Size Fits All (WSJ)... now the modest question of where to get the $3.9 trillion in capital
  • Merkel Pokes at Cameron With Backing for Two-Speed Europe (Bloomberg)
  • City safeguards set Britain at odds with EU (FT)
  • Bernanke says Fed to act if Europe crisis deepens (Reuters)

The 'Big Reset' Is Coming: Here Is What To Do

A week ago, Zero Hedge first presented the now viral presentation by Raoul Pal titled "The End Game." We dubbed the presentation scary because it was: in very frank terms it laid out the reality of the current absolutely unsustainable situation while pulling no punches. Yet some may have misread the underlying narrative: Pal did not predict armageddon. Far from it: he forecast the end of the current broken economic, monetary, and fiat system... which following its collapse will be replaced with something different, something stable. Which, incidentally, is why the presentation was called a big "reset", not the big "end." But what does that mean, and how does one protect from such an event? Luckily, we have another presentation to share with readers, this time from Eidesis Capital, given at the Grant's April 11 conference, which picks up where Pal left off. Because if the Big Reset told us what is coming, Eidesis tells us how to get from there to the other side...

The Keynesian Emperor, Undressed

The standard Keynesian narrative that "Households and countries are not spending because they can’t borrow the funds to do so, and the best way to revive growth, the argument goes, is to find ways to get the money flowing again." is not working. In fact, former IMF Director Raghuram Rajan points out, today’s economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side as technology and foreign competition means that "advanced economies were losing their ability to grow by making useful things." Detailing his view of the mistakes of the Keynesian dream, Rajan notes "The growth that these countries engineered, with its dependence on borrowing, proved unsustainable.", and critically his conclusion that the industrial countries have a choice. They can act as if all is well except that their consumers are in a funk and so what John Maynard Keynes called “animal spirits” must be revived through stimulus measures. Or they can treat the crisis as a wake-up call and move to fix all that has been papered over in the last few decades and thus put themselves in a better position to take advantage of coming opportunities.

On The Goldman Path To Complete World Domination: Mark Carney On His Way To Head The Bank Of England?

Back in November we penned "The Complete And Annotated Guide To The European Bank Run (Or The Final Phase Of Goldman's World Domination Plan)" in which we described what the long-term reality of Europe, not that interrupted by the occasional transitory LTRO cash injection and other stop-gap central bank measure, would look like. And yet there was one piece missing: after Goldman unceremoniously set up its critical plants in Italy via Mario Monti and the ECB via Mario Draghi, one key target of Goldman domination was still missing. The place? Why the center of the entire modern infinitely rehypothecatable financial system of course: England, which may have 1,000x consolidated debt/GDP, but at least it can repledge any asset in perpetuity thus giving the world the impression it is solvent (no wonder AIG, MF Global, and now the CME are scrambling to operate out of there). Which is why we read with little surprise that none other than former Goldmanite, and current head of the Bank of Canada, is on his way to the final frontier: the Bank of England.