With the Bank of England recently denying any collusion with dealers to manipulate FX rates and exclaiming "it was not our job to go hunting for the rigging of markets," the WSJ reports that none other than that bastion of trust The Federal Reserve examined key FX benchmarks months before global regulators sounded alarms over the manipulations... but took no action.
Bank Of England Restructures After FX Probe But Not Responsible "For Hunting For Rigging Of Markets"Submitted by Tyler Durden on 03/11/2014 11:39 -0500
"We can't come out of this with a shadow of doubt about the integrity of the Bank of England," Governor Mark Carney told MPs this morning on the heels of the report, as we noted here, that found no collusion by the bank to manipulate FX rates. A senior BoE employee was told of "attempts to move the market" but "did not convey to [Monetary Policy Committee member Paul Fisher] that markets were being rigged," and therefore was suspended. While many have called this "as bad as Libor" the BoE remains adamant of its lack of involvement but is still restructuring itself - adding that "it isn't our job to go out hunting for rigging of markets." Nope, just to ignore it, we presume. MPs were not impressed.
Prepare for more...
Gold declined from $1,900 in September 2011 to $1,188 on December, 19, 2013. Silver declined from $48.50 to $18.50 over approximately the same time frame. Precious metal equities declined by approximately 70% over this period. This move down played out exactly as was scripted. However, let us review the causes of this decline. We start out with the most important words ever written by a regulator: BaFin, the German equivalent of the SEC, said that precious metals prices were manipulated worse than LIBOR. What are we to read into this, particularly the word “worse”? Obviously, worse than LIBOR could not mean that more money was fraudulently earned since the LIBOR markets are many orders of magnitude larger than the precious metals markets. Then it must mean that the egregiousness of the pricing dysfunction was materially larger in precious metals.
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Global gold prices may have been manipulated on 50% of occasions between January 2010 and December 2013, according to analysis by Fideres, a consultancy. Pension funds, hedge funds, commodity trading advisers, futures traders and ordinary investors are likely to have suffered losses as a result. Many of these groups were "definitely ready" to file lawsuits.
Perhaps the most important line in today's FOMC minutes:
... Several participants suggested that risks to financial stability should appear more explicitly in the list of factors that would guide decisions about the federal funds rate once the unemployment rate threshold is crossed...
What this means is that since the Fed's legacy forward guidance of a 6.5% unemployment threshold is dead and buried (and will become a non-factor as soon as next month when unemployment could fall well below this red line), what the Fed is now suggesting is that the Fed will "qualitatively" guide to more intangible factors: like "risks to financial stability" better known as the prevailing level of the S&P 500. In short, is the Fed about to admit that screw inflation and screw unemployment, it was all about the S&P 500 and making the rich richer all along?
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The key event overnight was the monetary policy announcement by the BOJ in which its kept it QE unchanged while the Board decided by unanimous vote to double the scale of two funding facilities, namely the Stimulating Bank Lending Facility and Growth-Supporting Funding Facility and to extend the application period for these facilities by a year. Both facilities are designed to stimulate the provision of funding to Japanese banks, allowing them to borrow from the BoJ at a fixed rate of 0.1%pa, for a period 4 years now, instead of 1-3 years previous. Some are arguing that by expanding its funding programmes but not changing its asset purchase targets, the BoJ has signalled its intention to ease policy whilst preserving firepower for extra stimulus in coming months when a sales-tax hike is due to kick-in. The result was a surge in both the Nikkei and USDJPY. The problem, and confirmation that once again the market is now a bunch of cluless automatons unable to analyze even one sentence below the headline level, is that as Goldman explained overnight, the "surprise" announcement was already fully factored in.
We all knew that cultures were different and that we all had a unique way of doing things that run our daily lives. In Europe they tell the banks that they will die if they are weak (apparently, after the statement issued by Danièle Nouy, overseer of the Singe Supervisory Mechanism).
Raise your hands if you are surprised that, as has emerged, virtually every major bank was manipulating currencies (and everything else) whether as part of the "Bandits' Club", the "Cartel" or some other - until recently- secret message room. That's what we thought. Now raise your hand if you thought the manipulation could be so pervasive, so glaring and so in your face, that even the oldest central bank - the Bank of England - and who knows how many other monetary authorities, were openly encouraging traders from these private banks to do more of the illegal activity they had been engaging in - namely manipulating currencies - with their explicit blessing knowing very well such behavior is undisputedly illegal. We hope at least one or two hands went up, because which it is one thing to be cynical about what is going on behind the scenes, it is something else to see the edifice of global corruption and criminality, whose only purpose was to preserve the status quo, unwinding before your very eyes substantiated by actual facts.
When Reuters reported earlier today that Anil Prasad, the global head of foreign exchange at Citigroup, the world's second largest currency trader, is leaving the bank, our ears perked up. The reason is the news overnight that according to the British financial watchdog, Martin Wheatley, the allegations for FX manipulation, "are every bit as bad as they have been with Libor" which supposedly means they are taking them seriously. Could this departure have anything to do with a probe that has already snared head FX trades at JPM, Deutsche and countless other banks? Well, Reuters promptly clarified that Prasad's departure is not related to the global investigation into allegations of currency market manipulation, a source familiar with the matter said. "Anil's decision is his own and entirely unrelated to the on-going FX investigations," the source said. So we had little reason to believe that Prasad's departure is tied to the probe... Until we read this: GOLDMAN SACHS HEAD OF FX TRADING STEVEN CHO TO LEAVE, DJ SAYS
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In this part, we look at the question: Is gold a currency? Professor Tom Fischer answers, “Yes, gold is a currency with the symbol XAU”.