| Former Bundesbank Vice-President Recommends Gold, Says Current Economic System is "Pure Fiction" Posted: 24 May 2014 09:43 PM PDT Anyone who is thinking clearly knows the economic system fostered by central banks is totally and completely out of control. Repetitive rounds of QE, competitive currency debasement, interest rates at zero, and sponsorship of the internet bubble followed by the housing bubble, followed by the current stock market bubble is proof enough. So, what I am about to report is really nothing but common sense, except for the fact that it comes from an unusual place, where one does not normally hear such discussions. Jürgen Stark, former vice president of the Bundesbank, and also former chief economist of the ECB (unofficial title) says " The System is Out of Control". Via translation from Libre Mercado, here are a few snips. Stark, until recently one of the big hawks central bank of Germany for his fierce defense of monetary orthodoxy, resigned in late 2011 for his outright rejection to the purchase of government bonds by the ECB launched the president of the institution Jean Claude Trichet. Since then, Stark has used his rare, but valuable public appearances to warn of the risks associated with the current policy of central banks to the crisis.
In a conference organized by the Ludwig von Mises Institute in Germany, recommended to protect the attendees directly against a probable collapse of the global monetary system. Stark spoke openly.
Stark noted that central banks, including the ECB, "have completely lost all ability to control and perspective on the economic situation."
The monetary system was saved in 2011 through concerted action by major central banks worldwide. But, according to Stark, the whole system is "pure fiction". The monetary authorities have been groping since 2008 to avoid a second Lehman Brothers, but if happen, "the system will not survive," he warned.
The problem is the monetary model itself. That is, the printing of paper currency without real backing and the multiplier by which the commercial banks can expand credit-uncontrolled without prior savings. Stark recommended allocating part of this fictional savings to investment in traditional "safe havens" such as gold or silver.
Also, in another lecture delivered last week in Paris, Stark noted that the fragile recovery in Europe is not due to the absence of monetary and fiscal stimuli (low rates, debt purchase, etc..) and (more government spending) but the slow deleveraging and lack of structural reforms.
Far from helping, the loose monetary policy of the ECB is hampering the recovery, as advanced free market on multiple occasions. The key to growth, create jobs and end the crisis on solid foundations, as Stark, is to increase competitiveness. And to do so, "we must continue gaining flexibility. Progress has been made, but still not enough. The situation has improved, but the crisis is not over."
"the probability of default, as is reflected in the markets are too low," he added. The expert was critical of the downside risks caused by the fall in spreads and insurance against default (CDS), as attributes, especially the artificial ECB action.
"Capital appreciation has grown stronger euro. But the crisis markets are distorted. We should not be too happy with what happened," he mused. System is Pure FictionStark is preaching to the choir, but it is appreciated. One does not normally hear such statements from central bankers or even ex-central bankers. That said, his statements would carry more weight if he was still with the Bundesbank. I wish Stark never left. Supposedly Stark Left for Personal Reasons but it's easy to discern he was fed up with being the only member of the ECB with a clue. You can only beat your head against the wall so many times before you lose all sense of hope and finally your mind. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Regulator Fines Barclays for Gold Manipulation: Permanent Price Suppression? Posted: 24 May 2014 09:30 AM PDT A couple of readers asked me to comment on the news Regulator Fines Barclays Over the Pricing of Gold. A British financial regulator has fined Barclays $43.9 million after accusing a former trader at the bank of improperly influencing gold prices at the expense of a customer.
The F.C.A. also fined the former Barclays trader, Daniel James Plunkett, £95,600 and barred him from participating in any regulated financial activity. The authority said Mr. Plunkett, who settled with it, had profited at the expense of a customer, who was later fully compensated by Barclays.
Mr. Plunkett's improper conduct occurred on June 28, 2012, the day after the regulator and United States authorities announced a $450 million fine against Barclays for improperly influencing global benchmark interest rates, including the London interbank offered rate, or Libor, the regulator said.
"A firm's lack of controls and a trader's disregard for a customer's interests have allowed the financial services industry's reputation to be sullied again," Tracey McDermott, the F.C.A. director of enforcement and financial crime, said in a statement. "Traders who might be tempted to exploit their clients for a quick buck should be in no doubt — such behavior will cost you your reputation and your livelihood."
The process of setting the benchmark price for gold in London dates to 1919. It is set twice a day by five banks that serve as market makers, according to the London Bullion Market Association. Those banks are Barclays, Société Générale, Deutsche Bank, Scotiabank and HSBC.
The silver fixing process in London, which has only three participating banks, is set to end in August after Deutsche Bank leaves the panel.
Deutsche Bank said this year that it would withdraw from fixing gold and silver prices as part of its plan to exit some commodities businesses because of regulatory concerns.
On Friday, the F.C.A. accused Mr. Plunkett, a director on the Barclays precious metals desk, of placing orders intended to drive down the price of gold during the 3 p.m. fixing period in London on June 28, 2012. Doing so allowed Barclays to avoid a $3.9 million payment to customer on an options contract that was tied to the price of gold during that period, the regulator said.
As a result, Mr. Plunkett's trading book, excluding hedging, recorded a profit of $1.75 million. Mr. Plunkett was responsible for pricing products linked to the price of precious metals and managing Barclays's exposure to those products. Gold Manipulation DetailsZeroHedge has specific details of what took place in "I Am Hoping For A Mini Puke": Details Of Barclays' Gold ManipulationLIBOR Manipulation, Euribor manipulationBarclays was the first to admit guilt in manipulating LIBOR, but numerous banks were guilty. The BBC has an interesting article on the Timeline of the Libor-Fixing Scandal. The Financial Times notes Euribor manipulation involving HSBC, JPMorgan and Crédit Agricole. For details, please see Brussels Charges Banks for Euribor Fixing. Surprising?No one should be shocked by this. Manipulation occurs all the time, in both directions, by all the big players, in numerous markets. Guess what would have happened if Plunkett's client had $10 million in PUTs betting the price of gold would have declined. Does anyone think Plunkett would not have done what he could to force the price of gold up? Although the recent spikes at illiquid times have been to the downside, details of how that "fixing" occurred, still support my two basic theories. - The Fed is not behind the manipulation
- The motive is profit, not a permanent price-suppression conspiracy
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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