Thursday, February 3, 2011

Their revolt failed, too.

Molten gold down your throat

A very clear message

Thank God they're only after the gold and silver. They don't know about jade.

-Montezuma upon first encountering the Spanish.

The Spaniards appeared to be much delighted, they seized upon the gold like monkeys, their faces flushed. For clearly their thirst for gold was insatiable; they starved for it; they lusted for it; they wanted to stuff themselves with it as if they were pigs. They went about fingering, handling the streamers of gold, passing them back and forth, grabbing them one to the other babbling, talking gibberish among themselves.

— Fray Bernardino de Sahagún, General History of the Things of New Spain


Like unstamp'd Gold, I weigh each grace,
So that you may collect
Th'intrinsique value of your face
Safely from my respect.

And this respect would merit love,
Were not so faire a sight
Payment enough; for, who dare move
Reward for his delight?

-Ben Jonson


The original Black Friday

James Fisk's testimony:

"An ever fixed mark"

Tuesday, February 1, 2011

Acute Cranial Rectitis...

Fed passes China in Treasury holdings

...or insanity?

By Michael Mackenzie in New York
Published: February 2 2011 00:01 | Last updated: February 2 2011 00:01

The Federal Reserve has surpassed China as the leading holder of US Treasury securities even though it has yet to reach the halfway mark in its latest round of quantitative easing, according to official figures.

Based on weekly data released on Thursday, the New York Fed’s holdings of Treasuries in its System Open Market Account, known as Soma, total $1,108bn, made up of bills, notes, bonds and Treasury Inflation Protected Securities, or Tips.

According to the most recent US Treasury data on foreign holders of US government paper, China holds $896bn and Japan owns $877bn.

“By June [the Fed] will have accumulated some $1,600bn of Treasury securities, likely to be in the vicinity of China and Japan’s combined holdings,” said Richard Gilhooly, a strategist at TD Securities. “The New York Fed surpassed China in the past month as the largest holder of US Treasury securities,” he noted.

The Fed is buying Treasury debt under two programmes. The largest is QE2, which began in November and is scheduled to involve $600bn of purchases by June.

It is also buying $30bn of Treasuries a month as it reinvests principal payments from its large holdings of mortgage debt and debt issued by government housing agencies – a programme dubbed QE lite.

By the end of June, the Fed plans to buy $800bn in Treasury debt under both programmes. Since November, the Fed has purchased $284bn of Treasuries.

The Fed has devoted 67 per cent of its QE2 purchases to Treasuries with a maturity of four-and-a-half to 10 years. That has helped pull back yields in that part of the yield curve from their highs of December.

By contrast, just 5 per cent of the Fed’s buying has been for Treasury debt longer than 17 years. Last Friday, the yield on 30-year bonds briefly rose to its highest level since last April.

“The end of QE2 will be a big test as rates are likely to rise once the Fed stops buying large amounts of Treasuries,” said David Ader, a strategist at CRT Capital. “We don’t know if that means a rise of 20, 30 or even 50 basis points for key yields.”

In total, foreign central banks hold $2,604bn of Treasuries, according to the Fed. After rising from $2,250bn at the end of last June, foreign central banks have stayed at about $2,600bn since mid-November, when the Fed began QE2. This indicates the Fed has stepped up as other central banks have scaled back their Treasuries purchases....

Monday, January 31, 2011

Mrs. Boyer

On July 4th, 1974, Louise Auchincloss Boyer's dead body was found beneath the window of her 10th floor apartment. Three days prior, a newspaper published a story in which legal counsel for the American Gold Association accused the Rockefellers of looting Fort Knox of most or all of its gold. The anonymous source of the story had been Mrs. Boyer, executive assistant to Nelson Rockefeller.

Thursday, January 27, 2011

Selling the family cow for a few magic beans

The swap rate is the difference between the forward price and spot price. The inverse of the swap rate is sometimes called basis. Spot price is sometimes called the cash price. When the swap rate is less than the cost of carry, then a market may turn from contango to backwardation. Cost of carry is basically the cost of holding a position. A market may begin to experience backwardation when no arbitrage can be made from delivery due to supply shortages or risk of a delivery failure. Contango occurs when the forward price is higher than the spot price, i.e., when the forward price is at a premium. Backwardation occurs when the forward price is lower than the spot price, i.e., when the forward price is at a discount. When there is a supply shortage, delivery arbitrage disappears because no supply is available.

Tuesday, January 25, 2011



For all of silver's virtues, which are many and profound, the general populace is less inclined towards silver than the ruling class is inclined against it.

View from the top

New Orleans slaves were the Brent Crude of early 19th Century America.

U.S. Savings Rates

Monday, January 24, 2011

Valence of Value

Gold is an excellent conductor of heat, electricity, and value.
Wealth can easily flow through gold–––and without tarnish or corrosion.
Output is comparable to input.

Debt-money is an insulator.
Wealth can flow through it–––but only with effort and loss.
Output is less than input.

Wealth preservation versus wealth destruction.

Insulators have valid and necessary functions as much as conductors do, but should one's lifetime of labor be measured by currency units borrowed into existence?


Which one would J.P. Morgan hire, the Miser or the Monkey?


...the Ichimoku storm clouds forming in the distance.

Sunday, August 30, 2009

Friday, August 7, 2009

Understand this chart and you understand value

Yet each man kills the thing he loves,
By each let this be heard, 
Some do it with a bitter look,   
Some with a flattering word, 
The coward does it with a kiss,   
The brave man with a sword!

Addendum: FOFOA, I am honored you found the chart helpful. 

Tuesday, August 4, 2009

It cannot be undone. It cannot be untangled.

The Gordian Knot of Debt will be cut.

And the collapse will be swift.

Sunday, July 12, 2009

John Law Lives


If you don't know what this word means, don't worry. You will very soon. 

Dig Your Own Financial Grave

How much longer until you lie down to rest in your own financial grave?

Saturday, May 16, 2009

Wednesday, April 8, 2009

The End

Implosion is inevitable. 

Little genuine money exists in the global economy, only debt parading as money. The amount of planetary debt is unserviceable in its present form. 

Sunday, February 22, 2009

Extraordinary Popular Delusions and the Madness of Crowds

Fiat tulip bulbs anyone? Ask the groundskeepers of Keukenhof how well those would grow.

Privatize Profits, Socialize Risk

Tough Times for the Old Lady of Threadneedle Street

Interest rates for the Bank of England are at an all-time, 315-year low.

Note the stability in interest rates before The Family overtook The City.

According to conservative inflation-adjusted data...

*Does not include the current and all future stimulus/spending programs.

Thursday, February 19, 2009

Cold Iron

Gold is for the mistress -- silver for the maid --
Copper for the craftsman cunning at his trade."
"Good!" said the Baron, sitting in his hall,
"But Iron -- Cold Iron -- is master of them all."


Monday, February 16, 2009

The Definition of Insanity Revisited

When central banks can no longer control the price of money, they sometimes resort to quantitative easing, a policy whereby they may attempt to control the quantity of money.

Quant easing was attempted during the French Revolution.

Quant easing was attempted during the American Civil War.

Quant easing was attempted during the Russian Revolution.

In each instance it failed and led those respective economies into hyper-inflationary depressions, further exacerbating their turmoil.

Wednesday, February 11, 2009

Thawing of credit

Enjoy it while it lasts.

Sunday, February 8, 2009

Liberté, Egalité, Usuré!

Did the Maximum Price Act of 1793 save the Assignat?

Let's shake on it.

Anyone remember Willis C. Hawley and Reed Smoot?

The Medicis made the leap

And so have many other families.

These are the times in which leaps of wealth are made.

How many realize the United States dollar has, at best, but a few years remaining?

A conservative estimation of Tulip Prices

Clearly, there is nothing we can learn from Tulip Mania.

Anonymous wrote:

"Why 355%?"

I'll let Niall Ferguson field this one.

This is all about debt right now. This is the end of the age of leverage. We managed to juice the economy, particularly in North America, with debt---household debt, debt on bank balance sheets, as well, of course, with government debt---and we've reached the point of no return. There's a sort of ceiling, which turns out to be 355% of gross domestic product, in the case of the United States. Once your total debt level gets that high there has to be some kind of de-leveraging. The big question is how do we unwind these enormously burdensome debts? In the past, big debt crises were mainly crises of public debt, and they usually ended one of two ways: either the government defaulted on the debt, or it was inflated away, because the currency simply depreciated. I don't think it's going to be so easy this time, because this isn't just a crisis of public debt. It's a crisis of private debt, and it's quite hard for there to be a general default on, let's say, half the mortgages in the United States...That is where we're heading at the moment.....

355% is an approximation.

It's impossible to tell precisely when the event horizon is reached. We may have already crossed it.

Aren't trained seals supposed to be entertaining?

Gibson's Paradox and the Gold Standard by debt apologists Lawrence Summers and Robert Barsky is one of the most tortuous justifications for paper promises ever written. It errs in fundamental ways, primary of which is failing to recognize gold's role as a monetary numéraire. Summers, now in the limelight, has an opportunity to atone for his willful and shameful ignorance. He won't, for his current position is a reward for servicing his masters.

M1 + Demand Deposits

It's debt as currency and currency as debt. 

Friday, February 6, 2009

Arnold Rothstein

"Who is he anyhow--an actor?"


"A dentist?"

"Meyer Wolfshiem? No, he's a gambler." Gatsby hesitated, then added
coolly: "He's the man who fixed the World's Series back in 1919."

"Fixed the World's Series?" I repeated.

The idea staggered me. I remembered of course that the World's Series
had been fixed in 1919 but if I had thought of it at all I would have
thought of it as a thing that merely HAPPENED, the end of some
inevitable chain. It never occurred to me that one man could start to
play with the faith of fifty million people--with the single-mindedness
of a burglar blowing a safe.

"How did he happen to do that?" I asked after a minute.

"He just saw the opportunity."

"Why isn't he in jail?"

"They can't get him, old sport. He's a smart man."

-The Great Gatsby, 1925
F. Scott Fitzgerald

Where to look....

....the previously mentioned 355% and also Pakistan.

Thursday, February 5, 2009

Ouroboric Financing

It's getting more difficult for the United States to export its debt.

China and other countries are now buying fewer treasuries, of shorter maturities, and at lower rates.

So the Fed is now buying what China and others no longer want: US debt. 

Your debt.

The snake is now eating its tail.

The Miser and the Monkey

A man amass’d. The thing, we know,
Doth often to a frenzy grow.
No thought had he but of his minted gold–
Stuff void of worth when unemploy’d, I hold.
Now, that this treasure might the safer be,
Our miser’s dwelling had the sea
As guard on every side from every thief.
With pleasure, very small in my belief,
But very great in his, he there
Upon his hoard bestow’d his care.
No respite came of everlasting
Recounting, calculating, casting;
For some mistake would always come
To mar and spoil the total sum.
A monkey there, of goodly size,–
And than his lord, I think, more wise,–
Some doubloons from the window threw,
And render’d thus the count untrue.
The padlock’d room permitted
Its owner, when he quitted,
To leave his money on the table.
One day, bethought this monkey wise
To make the whole a sacrifice
To Neptune on his throne unstable.
I could not well award the prize
Between the monkey’s and the miser’s pleasure
Derived from that devoted treasure.
With some, Don Bertrand, would the honour gain,
For reasons it were tedious to explain.
One day, then, left alone,
That animal, to mischief prone,
Coin after coin detach’d,
A gold jacobus snatch’d,
Or Portuguese doubloon,
Or silver ducatoon,
Or noble, of the English rose,
And flung with all his might
Those discs, which oft excite
The strongest wishes mortal ever knows.
Had he not heard, at last,
The turning of his master’s key,
The money all had pass’d
The same short road to sea;
And not a single coin but had been pitch’d
Into the gulf by many a wreck enrich’d.

Now, God preserve full many a financier
Whose use of wealth may find its likeness here!

The Fables of La Fontaine
by Jean de La Fontaine, 1875
Translation by Elizur Wrigh

So which one are you, the monkey or the miser?

Tranching the Future

Proposed legislation to regulate the derivates markets is not actually about regulation. It's about appeasement and control.

Can derivatives exist with transparency and accountability? No.

Iniquity and derivatives are mutually contingent.

There's nothing transparent about a Black Hole of Debt.

It will implode on its own. No amount of regulation can change that fact.

You're not supposed to understand it.

But you can try if you wish. Good luck

It's only worth what someone is willing to pay for it.

Pop Quiz. The International Bank of Derivatives and Paper Promises just went broke. You're now left with the counter-party risk. What happens when notional value must be reconciled with real value? Can there be genuine price exploration? Can you rely upon mark-to-market accounting?

And what if, per the BIS, the notional value is approximately $1.144 quadrillion dollars in outstanding derivatives, a total greater than the entire wealth of the planet?

Default or devalue.

The latter is a more respectable way of accomplishing the former. Both options are merely two sides of the same clipped and debased coin.

98% of derivatives are owned by the largest seven banks. Assuming these banks are financially sound and will be forever, then we have nothing to worry about.

I'm dreaming dreams...
I'm scheming schemes.....

I'm forever blowing bubbles,
Pretty bubbles in the air.
They fly so high,
Nearly reach the sky,
Then like my dreams,
They fade and die.
Fortune's always hiding,
I've looked everywhere,
I'm forever blowing bubbles,
Pretty bubbles in the air.

Putting the Fun Back in Money Fund

Do you believe JPMorgan and others actually apportion their balance sheets to allow for losses in money-market funds?

They've already found their mark.

And it's you.

How many thieves can steal from you at one time? Thirty? 

Of course it's for a good cause. Everything is for a good cause. For the greater good. Your own good. It's all good. 

Wednesday, February 4, 2009

Total Credit Market Debt as a % of GDP

You're approaching the event horizon of the Black Hole of Debt. 

What's the magic number?

Deleveraging is inevitable.

Trade wars will unleash the dogs of war.