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Fed Has No Plan B

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According to Kevin Warsh,( former member of the Board of Governors of the Federal Reserve from from 2006 to 2011), the Fed has no “plan B” and Washington has no strategies for growth. Well one thing is for sure, whatever they are trying, it ain’t working.

At the very crux of the financial crisis, former Fed governor Kevin Warsh notes, “experimental extreme monetary policy,” had the “right risk-reward”, but, he warns, in this excellent (and somewhat chilling) discussion at the Milken Institute, “we left a financial crisis more than for years ago.” While the politicians may ‘prefer’ to think of this as a crisis – and indeed “for them it is a crisis as they preside over an economy that refuses to grow,” which has tended to lead to loss of office, but, Warsh condemns, “they have run out of excuses.” Over the last several years, “[the Fed] has over-promised and under-delivered,” and the bank’s most important asset – credibility – is under attack.

The Fed has “enabled” Washington to do nothing, since the politicians expect the same “rabbit out of the hat” rescue that occurred in the darkest days of the financial crisis. This means no growth strategies (“the mix of policies has to be right”) will occur. Since the financial crisis, Washington has done its level best to focus on GDP in the next quarter, or perhaps the election, and precious little beyond that short-term horizon. Warsh concludes, “There Is No Plan B.”

The Fed has fewer degrees of freedom and the rest of Washington is not coming to the rescue; and furthermore “the ability of a central bank, exclusively, without the rest of Washington doing any bit of the task, to turn an economy from a modest recovery to a robust one is an experiment that is untested – and will not prove to be successful.

Click for full story.

Source: ZeroHedge

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US: Bank Deposit Boxes And Property Being Seized By The State

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Beware, the State will do whatever is required to balance the budget. This report from ABC looks to what levels the States are going to, including seizing owners  owned “unowned” safety deposit boxes while pretending to look for the owner.

Investors Unable To Access Assets In Coming Collapse

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Egon von Greyerz has issued a few warnings on this topic and again during an interview with King World News issues another warning to investors that their assets are not safe during the coming collapse. His points below make for common sense reading.

“I’m seeing how massive amounts of money are within the system, and people think they are safe, but they are not.”  Greyerz, who is founder and managing partner at Matterhorn Asset Management out of Switzerland, also warned, “This is the illusion that people are living under, and it’s very sad.  That’s not going to be the case.  The banks are going to close if there is a problem, and people are not going to get access to their assets.” 

 Here is what Greyerz had to say:  “Right now the markets are in a waiting game.  They are waiting for Bernanke’s Jackson Hole speech tomorrow.  They are (also) waiting for the German court decision which is on the 12th of September.  This is to decide if they are going to approve the ESM (European Stability Mechanism), which replaces the EFSF.”

“Now, the EFSF is running out of money, they’ve only got about $200 billion left.  Spain and Italy, only, will need about $700 billion.  We know for a fact that the eurozone and Southern countries are in desperate need of additional funds.

 The US is (also) running a deficit of almost $1.5 trillion a year, plus they are increasing the unfunded liabilities by more than $10 trillion a year….

“So the US is running major deficits and money printing today.  Will they announce official QE at Jackson Hole or not?  It’s totally irrelevant.  It’s going to make no difference whatsoever.  The world economy will need massive amounts of money to survive.  Whatever these guys say or decide in the next few weeks won’t make any difference.  It (money printing) is going to come anyway.

Central banks are massively over leveraged.

These central banks are now leveraged to the hilt.  The Bank of England is leveraged 100 times.  So if they lose 1% (on their bets), they will lose everything.  The Fed is leveraged 55 times.  So a 2% loss, they’ve lost their capital.  The ECB is leveraged 40 times.

 So every central bank is massively exposed.  On top of that, governments are borrowing massive amounts of money.  So worldwide money is being created on a daily basis.”

100 years of creating debt and it will end in the system collapsing.

“What is interesting here is in the last 100 years we have created so much debt.  For the first approximately 50 years of the last century, every additional $1 of debt in the US created $4.60 of (additional) GDP.  In the last 10 years, every new dollar of debt has created 6 cents of GDP. 

 And for the last few years we are getting negative returns.  It will still end in the same way, sadly, which is a collapse of the system.  All of the assets that were financed by the credit bubble will collapse, in real terms, in the next few years.  In real terms, that is against gold, they will collapse.

Note in the chart below from ZeroHedge, how the dollar has lost so much of its purchasing power over the last 100 years since the Fed took charge. In the previous 100 years it remained stable. The dotted line shows the periods when gold convertibility was suspended.

What is so remarkable about this chart is that the dollar’s purchasing power was still the same on the eve of the founding of the Fed as it was at the beginning of the 19th century. Clearly the decision to abandon the gold standard has hastened the collapse of the dollar’s value – at the point where the chart ends, 7 cents of the purchasing power of the gold-backed dollar of yore were left. Since then we have actually arrived at a paltry 4 cents.

So much for ‘stable prices’ under the fiat money regime – it has produced a 96% decline in the currency’s purchasing power over the past century, in contrast with the perfect preservation of purchasing power during the century preceding the founding of the Fed.

Gold may not protect you unless you have possession of it.

But even if you have gold you’ve got to worry about the counterparty risk.  I was recently speaking to an American investment bank.  They buy gold for their very high net worth clients, and they store it with major bullion banks.  I asked (them), ‘Well, what about the counterparty risk?’  They responded, ‘There is no problem whatsoever because the gold is segregated, and creditors are totally protected.’

 This is the illusion that people are living under, and it’s very sad.  That’s not going to be the case.  The banks are going to close if there is a problem, and people are not going to get access to their assets.  We have seen the cases of Lehman, MF Global and Sentinel.

Sentinel was a company that went bust.  There, like in MF Global, segregated assets were used by the bank, or the financial institution, as security for trading with other major banks.  So the segregated funds were not segregated at all.  Recently there was a court decision saying that the banks have the right to use the assets, i.e. the stocks or the bonds or whatever other assets (customers) have, as security for their credit lines they are granting to these firms. 

 What I am saying to investors is protect your counterparty risk.  You are not safe within the financial system, even if you are told you are.  There is only one way to protect yourself, and that is to store your assets, what we are talking about is mainly gold and silver, outside of the banking system. 

 You have to have direct control of it.  I’m seeing how massive amounts of money are within the system, and people think they are safe, but they are not.”

Source: King World News

Related Posts: Client Finds Gold Allocated Account Gone In Swiss Bank,    Dude, wheres my gold

US: Why It Always Ends In War

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After an extraordinary expansion of US debt, war is inevitable. Below will outline a few reasons why? Of course the politicians do what they are told as always by the banking elites. What better way to deal with a broken monetary system than introduce chaos.

ZeroHedge have outlined the reasons why the US would welcome a war right now.

The old war against terror propaganda is losing ground to alternative news and opinion now available because of the Internet Reformation. Frankly, few people believe anything from either the American government or its establishment propaganda outlets and this is a frightening situation to the power elite that rules America.

Due to the growing economic crisis, the government needs to take strong actions that could be violently resisted by large segments of the US population unless a major financial or military crisis can be used as an excuse and cover for coming dictatorial actions. Simply stated, there are not enough police and military in the US to control the population should an insurrection take place. A major war in the Middle East can provide a casus belli for a direct assault against US private wealth, liberties, benefit programs and opposition by the power elite.

For example, the imposition of a military draft will dramatically cut unemployment rates as well as limit inner-city crime and outrage over cuts in domestic spending and welfare. Remember, austerity is needed and a draconian cut in Social Security and benefit programs must be engineered against the 50 percent of the population who receive some type of government benefits.

In addition, gold will need to be confiscated. Forced retirement investment into collapsing dollar denominated Treasury obligations must be required when foreign investors stop buying US debt. Stronger TSA authority, drones and harsh domestic controls will need to be implemented for the duration of the conflict in order to squelch domestic opposition. Taxes must be raised, penalties and fines must be doubled and tripled at the federal, state and municipal levels and finally, severe limitations on freedom of speech and freedom of assembly will be forced on the American people, along with gun control and limited access to Internet news and communications.

Finally, a major, long-term war in the Middle East will provide an excuse for the deferment and rescheduling of US debt obligations owed to nations and governments that oppose the US/Israel war in the Middle East. For the $1 trillion owed to China and many Middle East nations, this is effectively debt repudiation.

China too would benefit from the US going to war.

China wants to see the US weakened long-term as a world power and a major war in the Middle East will do this. They also need a reason to dump US Treasury debt and an excuse to avoid the blame of the coming broader repudiation of US debt. The Chinese people will be justifiably outraged that the Chinese government and central bank accumulated $1 trillion in US debt, although there were legitimate global trading reasons and domestic economic justification for this over-concentration in US debt and dollar obligations.

A Middle East war would avoid direct military action between the US and China while protecting both US and Chinese politicians from the coming Treasury debt repudiation, Chinese dump and global run on the dollar and Treasuries.

Who is going to be the ultimate winner?

Who is guaranteed to win regardless of the outcome of the war and whether it can be contained? The Anglo-American financial elites and the bankers always win every conflict regardless of the military outcome. This is the history of the 20th century and I see no reason that will change now.

Source: ZeroHedge

Wall St Rumor: Major Financial Institution To Crash. Could It Be Morgan Stanley?

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Its beginning to sound like 2008, with Bear Sterns and Lehman Brothers all over again. The signs all there, and a report from Beacon Equity Research suggests that Morgan Stanley could be the one to watch.

Recently we had the following reports.

Big money flows out of financial stocks by key financiers like George Soros and John Paulson were reported just last week and tens of billions of dollars have been withdrawn from the European banking system since Spring. The government for its part, has taken steps to lock down the banking system so that not only can customers no longer withdraw funds from money market accounts in the middle of a panic, but a recent federal court case set a new precedent that has essentially given the go ahead for banks and investment firms to use segregated customer deposit accounts to engage in highly risky trading strategies without the threat of ever being prosecuted.

..but Beacon Equity Research which analyises Wall Street chatter has pointed the figure at Morgan Stanley as possibly being on the verge of pulling a Bear Sterns.

Now, a report from analysis firm Beacon Equity Research suggests that there is an unusually high amount of chatter on Wall Street surrounding the possibility of another major financial collapse in the making. When the Department of Homeland Security or other intelligence services hear chatter they often raise the terror alert level, deploy federal SWAT teams and go on complete lock-down.

Thus, we should consider this latest piece of intel from those with their fingers on the pulse of Wall Street as a potential game changer:

Here is a piece from Beacon’s report:

With the stock price of Morgan Stanley (NYSE: MS) inches from its Armageddon lows of Oct. 2008, whispers of the imminent overnight collapse of this U.S. broker-dealer begin to surface.  Client funds, again, are at risk.

“I’m hearing rumors that another major financial house is going to implode,” says TruNews host Rick Wiles.  In fact, the name I’ve been given is Morgan Stanley . . .

“It’s going to be put on the sacrificial alter by the financial elite.”

Beyond the evidence of a teetering stock price—Morgan Stanley’s troubles may never go away—leading to bankruptcy, if traders can glean anything from the financial activities of front-running insider George Soros, the man who warned in Jun. 2010 that the global financial crisis has entered “act II.”

Adding to the speculation of a Morgan Stanley collapse, Bloomberg coincidentally pens an article on Aug. 23—the following day of the TruNews broadcast—in which the author Bradley Keoun recounts the dark days of Morgan Stanley at the height of act I of the financial crisis in 2008.

“At the peak of Morgan Stanley’s Fed borrowings, on Sept. 29, 2008, the firm reported that liquidity was ‘strong,’ without mentioning how dependent its cash stores had become on the government lifeline. . .” states Keoun.

But here’s where strong advice from Trends Research Institute founder Gerald Celente and former commodities broker Ann Barnhardt should be heeded.  Both consumer-friendly analysts implore investors and savers, alike, to withdraw from the financial system, warning that allocated brokerage accounts are not truly allocated.

Regulators were asleep at the switch in the cases of MF Global and PFG Best, both filing bankruptcy post 2008, taking customer funds with them to the financial grave.  Why not Morgan Stanley?

“They don’t give you the information to be able to decipher whether they have changed anything,” adds Hurwich.

Why an establishment cheerleader such as Michael Bloomberg would allow an article which serves to remind investors of Morgan Stanley’s financial problems at this time may lend some credence to Rick Wile’s sources, who hear chatter about the impending doom of Morgan Stanley.

The timing of the Bloomberg article is no coincidence.  Michael Bloomberg is only doing his part for the global banking cartel by tipping off that Morgan Stanley is ready for the “sacrificial alter.”  Get your money out.

Source: Beacon Equity
Via: Woodpile Report, Steve Quayle 

The following point is well made. Although rumours can be damaging and irresponsible, you also need to protect yourselves as the people you have charged to do this role have constantly disappointed.

We can make predictions or forecasts based on rumors and news, and often times we’ll be berated for acting to protect ourselves based on this information. Often, even rumors and chatter have been responsible for driving a particular stock or market up or down, so the very news itself, whether true or not, may set the ball in motion.

But, the fact of the matter is that neither the SEC nor Ben Bernanke nor Tim Geithner nor the White House nor mainstream financial pundits nor Wall Street insiders will ever tell us ahead of time that billions of dollars of our wealth is about to be wiped out.

We will only find out after the fact.

You’ve now heard the rumor. You’ve been following the news. The decision is in your hands.

Source: shftplan.com

Related Post: Jim Willie – Morgan Stanley Faces IMMINENT FAILURE & RUIN, May See 1st Private Stock Account Thefts

Baltimore to Sue Over Libor

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Probably the first of many case to be taken against the banks for the Libor scandal as Baltimore City looks set to be first up. The difficulty is going to be the burden of proof whereby Baltimore has to show that the allege fixing in London directly affected Baltimore. This could open the floodgates to similar lawsuits from other US cities.

Baltimore is lead plaintiff in a class action lawsuit that alleges that banks including Barclays, Bank of America, HSBC, JP Morgan and UBS conspired to fix a set of key interest rates – the London Interbank Offered Rate, or Libor – costing the city millions in the process. So far, the Libor scandal has played out mostly under the radar in the US. But now it is gaining traction in Washington, and Baltimore’s suit is putting a human face on a scandal legal experts predict could end up being the most costly of the credit crisis.

Firefighters, services for the elderly, school programmes – all these and more are being cut as a direct result of the actions of colluding bankers, Rawlings-Blake claims.

According to the court documents, Baltimore bought “tens of millions of dollars worth of interest-rate swaps” during the period when the alleged fixing took place. The suit, filed with top Washington law firm Hausfeld, alleges that between August 2007 and May 2010 the defendants conspired to suppress Libor below the levels at which it would have been set had they accurately reported their borrowing costs. Those manipulations had “severe adverse consequences” for Baltimore and others, according to the suit. Other cities are watching carefully and a raft of litigation is expected in the US.

The city had no choice but to fight, said Rawlings-Blake. “We are faced with closing fire companies, closing recreational centers … We have services that have been cut year after year; services that people depend on. Opportunities for young people, the cleanliness of the city: everything is affected by the budget,” she said.

Ultimately the US may take an Anti-trust case similar to that taken against the tobacco industry.

Stephen Bainbridge, a professor of law at UCLA, said the case was “one of the worst examples of abuse of trust that I can remember in 25 years of following corporate governance”. Given the scale of Libor’s influence, Bainbridge said, this could emerge as “the defining financial scandal of the meltdown”.

Bainbridge believes the justice department may build an anti-trust case against those involved that could ultimately lead to a settlement as large as that agreed in the US’s massive suit against the tobacco industry. Anti-trust laws allow three times the damages for those convicted of collusion.

But he believes a suit like Baltimore’s may prove harder to prove. The city’s lawyers will have to prove direct “loss causation” – in other words, that bankers allegedly fixing rates in London directly hit Baltimore’s bank balance.

“Proving that chain of events can be difficult,” said Bainbridge.

Source: Guardian

90% Of Foreclosed Homes Kept Off The Market To Prop Up Prices

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It comes as no surprise, but about 90% of foreclosed homes in the U.S. are kept off the market, simply to prop up the prices so the banks can fiddle the books and say those houses are worth more than they are.

This home is part of what’s known as the “shadow REO” inventory: repossessed homes across the country that banks or investors often purposely keep off the market. The practice isn’t a secret, and refraining from dumping a large inventory of foreclosures on the market helps to keep home prices from crashing.

But the extent to which lenders keep their stock of REOs — industry parlance for “real estate owned” properties — off the market may be much larger than most people think.

As many as 90 percent of REOs are withheld from sale, according to estimates recently provided to AOL Real Estate by two analytics firms. It’s a testament to lenders’ fears that flooding the market with foreclosed homes could wreak havoc on their balance sheets and present a danger to the housing market as a whole.

….

Analytics firm CoreLogic provided an even lower estimate, suggesting that just 10% of all REOs in the country are listed by their owners, which include mortgage giants Fannie Mae and Freddie Mac as well as the Federal Housing Administration. As of April 2012, 390,000 repossessed homes sat in limbo, while about 39,000 were actually listed for sale, said Sam Khater, senior economist at CoreLogic.

Banks don’t want to have the losses on their books so its in their interest not to sell foreclosed homes.

But Realtors who want more bargain-priced homes to sell may not get their way anytime soon. Foreclosed properties are an extreme liability to lenders, holding the potential not just to dent their profits but to actually bankrupt them altogether.

That’s because when a lender carries an REO on its books, it is allowed to value the home at the price that the foreclosed-on borrower originally paid for it. Once the lender sells the home, it must book a loss: the difference between the original purchase price and the current value. And since home values have fallen by nearly a third since the housing bust, that translates into huge losses for the bank.

…..

Adding insult to injury, REOs typically sell at a 33% discount.

Fears of a Domino Effect

Releasing REOs onto the market also chips away at home prices in general, depressing the value of the homes of other customers — who could already be teetering on the brink of foreclosure — and the additional REOs that lenders hold on their books.

A deluge of sales would have a devastating affect on the economy.

In fact, if lenders turn their REO release valve to full blast, the deluge of foreclosures cascading onto the market could plunge the country into a recession, said Thomas Martin, president of consumer advocacy group Americas Watchdog.

“If they let the dam essentially break. It could be a catastrophic disaster for the U.S. economy,” he said, predicting that some major banks would fail and home prices would nosedive by 20 percent.

Source: http://www.thestreet.com/story/11616596/3/shadow-reo-as-many-as-90-of-foreclosed-properties-held-off-the-market.html

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