BIS

We previously showed hard evidence of the Bank of England's complicit hiding of the truth about the quality of Bundesbank gold stored in the Fed's vaults. A few weeks later in a "completely unrelated" action, the Bundesbank dramatically shifted its recent stance, and demanded that its gold be repatriated into its own vaults (and we now know the impact that has had on the paper-physical paper markets). However, in yet another one of the 'darkest episodes in central banking history' the FT reports, the Bank of England facilitated the sale of gold that was looted by the Nazis after their invasion of Czechoslovakia in 1938. Of course, judging today's central bankers by this ethical (and potentially criminal) behavior of over 70 years ago is unfair but it is notable that the pattern of whatever-it-takes and at-all-costs decisions, coupled with pervasive opacity and stark unaccountability, appear to have been formed a long time ago.

The secret is the world is more indebted now than it was at the height of the financial bubble in 2007. And big changes are needed to avoid further trouble.

"Perhaps the success that central bankers had in preventing the collapse of the financial system after the crisis secured them the public's trust to go further into the deeper waters of quantitative easing. Could success at rescuing the banks have also mislead some central bankers into thinking they had the Midas touch? So a combination of public confidence, tinged with central-banker hubris could explain the foray into quantitative easing. Yet this too seems only a partial explanation. For few amongst the lay public were happy that the bankers were rescued, and many on Main Street did not understand why the financial system had to be saved when their own employers were laying off workers or closing down." - Raghuram Rajan

Fear not US: with a Q2 GDP of under 1% now all but assured, and with all economic data reporting now a global bizarro day farce, you will have a chance to take the torch from Europe in the ugliest girl category, and push the S&P to a new record intraday high today following what should be assured epic misses in the Industrial Production print (exp. +0.3%), Cap Utilization and the NAHB housing market index which is set to tumble now that any retail demand for housing was promptly killed following the recent spike in rates. In addition to a relatively lite economic docket, we get the all systematically important hedge fund, Goldman Sachs, reporting which is expected to announce a 21% q/q drop in revenues, led by lower gains in Investment Lending (i.e. prop), offset by 12% drop in operating expenses. Of course, nothing fundamental actually matters as markets continue to be on ultra low-volume, "drift higher" autopilot until tomorrow's Ben Bernanke semi-annual muppet show  in Congress, when he is expected to refill the hopium trough once more and finally send the S&P above 1700 on central planning.

Most Americans Still Don’t Know that Federal Reserve Banks Are PRIVATE Corporations

CFTC whistleblowers, JP Morgan silver short, Andrew McGuire, Gold Leasing, Robert Rubin, Larry Summers, Gibson's paradox and that sink in your kitchen

"If central banks keep tacking and trimming as they edge away from accommodation, it may come to pass that none of their statements will carry much credibility. They could then lose control of long rates or, at best, stability in long rates might call for ever greater market intervention on their part. The end-result would be to render monetary measures largely useless as instruments of policy because central banks, with their controls jammed open, could never be sure of effecting any intended plan. Mr Bernanke and his co-thinkers may soon discover that, in taking a different line in coping with the current depression from that followed in the 1930s, they have fallen unsuspectingly into a trap from which escape will be painful."

The U.S. economy weakened appreciably in the first quarter of 2013. But what if this weakness persists into the second quarter just completed, and worsens still in the second half of this year? Q1 GDP, as reported on June 26th, was revised lower to just 1.8%. And various indications suggest that Q2 could come in slightly lower still, at 1.6%. Might the U.S. economy be guiding to a long-term GDP of 1.5%? That’s the rate identified by such observers as Jeremy Grantham – the rate at which we combine aging demographics, lower fertility rates, high resource costs, and the burdensome legacy of debt. After a four-year reflationary rally in just about everything, and now with an emerging interest rate shock, the second half of 2013 appears to have more downside risk than upside. Have global stock markets started to discount this possibility?

Following Friday's ugliness in bond-land, today saw the Treasury market's best day in around 13 months as UST are starting to look a lot like JGBs in terms of volatility regime - which really won't help collateral. Gold and silver also had a positive day (both up around 1.1%) as the USD leaked 0.3% lower (led by a surging AUD that recovered a lot of Friday's gap-down losses). The Nasdaq underperformed on the day (as AAPL tumbled 3% from pre-open highs) but remains in the green (just) post-FOMC while the Dow, S&P, and Trannies are all holding red post-FOMC. Discretionary and Financials are now in the green post-FOMC as Builders continue their open-high-close-low regime (now down 7% from FOMC). WTI trod water around $103. Credit markets modestly outperformed on the day but remain significantly below pre-FOMC levels as stocks have almost regained it and VIX slid back to its lowest in 6 weeks (under 15%) though slipped higher from the open today.

Whether or not you believe PMs will serve as the ultimate store of wealth as the global fiat monetary system collapses should have absolutely no bearing on making the intelligent decision to remove your financial assets from under the domain and inevitable confiscation of global bankers and their State-run tyrannies.  Independence Day is a fine day to start the process of taking back our freedoms from the tyrants that rule over us.

Given the US holiday, markets are likely to be thin today but there are some big news stories floating around at the moment.  If the fast and furious events from the past few days in a revolutionary Egypt bear a striking resemblance to what happened in the spring of 2011, it is because they are strikingly comparable. Only this time, following the ouster of yet another US-supported "leader" by the US-supported military, the country's CDS has normalized at a level that is roughly double where it was two years ago as the implicit backing of the US looks increasingly shaky, following what was yet another bungled foreign policy venture by the Obama administration. But for now, the people are celebrating, just as they did in 2011. One wonders what happens between now and the next coup, somewhere two years (or less) hence. For now focus merely on who controls the Suez - after all that is really all that matters for the US. The other major story of yesterday, Portugal, continues to be in limbo,

Recent comments by the Federal Reserve Chairman Ben Bernanke have shocked the world financial markets. Since the first allusion to tapering, volatility has been on the rise across the board (stocks, currencies and bonds). The chaotic reaction by market participants and the corresponding increase in yields now risks destabilizing this very fragile equilibrium. It is yet unclear whether or not the damage control from the other Fed Presidents will put a lid on yields and market volatility, or if the damage to the Fed’s (poorly executed) exit strategy is permanent.

Back in 2002 Warren Buffet famously proclaimed that derivatives were ‘financial weapons of mass destruction’ (FWMDs). Time has proven this view to be correct. As The Amphora Report's John Butler notes, it is difficult to imagine that the US housing and general global credit bubble of 2004-07 could have formed without the widespread use of collateralized debt obligations (CDOs) and various other products of early 21st century financial engineering. But to paraphrase those who oppose gun control, "FWMDs don’t cause crises, people do." But then who, exactly, does? And why? And can so-called 'liquidity regulation' prevent the next crisis? To answer these questions, John takes a closer look at proposed liquidity regulation as a response to the growing use of 'collateral transformation' (a topic often discussed here): the latest, greatest FWMD in the arsenal.

“That’s the whole dilemma!” As the G-20 is already getting cold feet....

Overnight newsflow (which nowadays has zero impact on markets which only care what Ben Bernanke had for dinner) started in Japan where factory orders were reported to have risen the most since December 2011, retail sales climbed, the unemployment rate rose modestly, consumer prices stayed flat compared to a year ago, however real spending plunged -1.6% significantly below the market consensus forecast for +1.3% yoy, marking the first yoy decline in five months. This suggests that households are cutting utility costs more so than the level of increase in prices. By contrast, real spending on clothing and footwear grew sharply by 6.9% yoy (+0.6% in April) marking positive growth for a fourth consecutive month. Simply said, the Japanese reflation continues to be limited by the lack of wage growth even as utility and energy prices are exploding and limiting the potential for core inflation across the board.