Thursday, January 17, 2013

Today's links

1--Why It’s a “Fake” Housing Market Recovery, profit confidential

2---The foreclosure game, oc housing

The tsunami of foreclosures never materialized. What was little noticed at the time was the federal governments relaxation of mark-to-market accounting rules in early 2009. This allowed the banks to hold bad loans on their books without harming their regulator capital ratios. This launched the amend-extend-pretend policy banks have been relying on every since. Sean had the foresight to see that this change would create the foreclosure limbo known as shadow inventory we still have today....

Governments accomplished this by borrowing trillions, effectively putting a floor under housing prices via low interest rates and tax credits. All that borrowing, along with forcing banks to jump through hoops and issuing foreclosure moratoriums, represented a government policy we called “extend and pretend.” Foreclosures were allowed to trickle into the marketplace at a rate that kept housing prices from reaching a natural market-clearing level and made bank losses manageable....

The banking cartel won. I didn’t think they could pull it off, but through massive intervention by the government on their behalf and endless amend-extend-pretend policies, they have managed to to an artificial floor under prices that appears to be durable....

At first, we suspected banks chose their foreclosure targets at random. Then we realized that there may be a method to the banks madness. We found that banks were taking longer to foreclose on jumbo and second mortgages that were more likely held as portfolio loans rather than ones they serviced for others. Perversely, this resulted in borrowers who took out the biggest loans, on the nicest houses, with the largest lines of credit to live rent-free for the longest amount of time, in some cases years.

3--The CIA and Other Government Agencies Dominate Movies and Television, washingtons blog

4--Germany's Gold Repatriation Unlikely To Assuage Public Concerns, zero hedge

The Bundesbank announced yesterday that they will repatriate 674 metric tons of their total 3,391 metric ton gold reserves from vaults in Paris and New York to restore public confidence in the safety of Germany’s gold reserves....

Whether the repatriation of only some 20% of Germany's gold reserves from the Federal Reserve Bank of New York and the Banque of Paris back to Frankfurt manages to allay German concerns remains in question.

Especially given that the transfer from the Federal Reserve is set to take place slowly over a seven year period and will only be completed in 2020..

The German Precious Metals Association and Germany's ‘Repatriate Our Gold’ campaign said that the move by the Bundesbank did not negate the need for a full audit of Germany's gold.

They want this to take place in order to protect against impairment of the gold reserves through leases and swaps. Indeed, they have called for independent, full, neutral and physical audits of the gold reserves of the world's central banks and the repatriation of all central bank gold - the physical transport of gold reserves back into the respective sovereign ownership countries.

It seems likely that we may only have seen another important milestone in the debate about German and global gold reserves.

Mohamed El_Erian of PIMCO in an op-ed piece in the Financial Times said that the German gold move should have “minimum systemic impact”.

But he acknowledged the risk that this could be wrong and the decision could “fuel greater suspicion” which could result in a “hit to what remains in multilateral policy cooperation would be problematic for virtually everybody.”

He warned that “growing mutual mistrusts” could “translate into larger multilateral tensions, then the world would find itself facing even greater difficulties resolving payments imbalances and resisting beggar-thy-neighbor national policies
Certainly not. The serious design faults of the Eurozone remain intact. The promised decoupling of the banking crisis from the debt crisis has been ditched. All moves toward debt mutualisation or for a central Eurozone budget have been suspended. The ECB’s bond purchasing program (OMT) remains in the sphere of the imagination, a purely phantom program whose announcement-effect cannot continue forever. Meanwhile, recession in the Eurozone’s centre and depression in the periphery is eating away at the heart of Europe’s social economy.

6---Doomsday, gold and the Bundesbank, antonio fatas  

Interestingly, his blog post comes the same day that all business media report on the announcement of the Bundesbank that they are moving some of the gold reserves back to Germany. The move of these gold reserves is partly seen as a response to an earlier report by the German court of auditors that was concerned with the lack of checks on the gold reserves held abroad.

The story not only made up the headlines but it also came with a quote from Mr Thiele, Bundesbank board member who commented on the purpose of the reserves and the move by saying

"To hold gold as a central bank creates confidence. We build trust at home and have the possibility to exchange gold at short notice into foreign currency abroad."

I am really curious about what (doomsday) scenarios he has in mind where the gold reserves of the Bundesbank would become crucial to restore confidence. By the way, the gold reserves of the Bundesbank which at 130 Billion Euros are large compared to other central banks seem small compared to many other magnitudes that matter in financial markets, more so during crisis time. And I am assuming that these scenarios are catastrophic, otherwise why would gold be needed to buy foreign currency. And given that they are thinking that those scenarios are likely, is there anything that they are planning to deal with them?

7---US Incarceration Rates Are Out of Control,

I admit the graph is a tiny bit misleading — it uses absolute numbers rather than percentages of population, which would be better. But even making that correction doesn’t change much: US population grew from 226.5 million in 1980 to 308.7 million in 2010, a 73% increase. Meanwhile, however, the number of persons incarcerated almost quadrupled.
Our incarceration rate is by far the highest in the world. The United States has less than 5 percent of the world’s population. But it has almost a quarter of the world’s prisoners.

8---Frenzy in the gold market , global research

The decision of Germany’s Bundesbank to repatriate part of its Gold Reserves held at the New York Federal Reserve bank has triggered a frenzy in the gold market.
German news sources suggest that a large portion of the German gold stored in the vaults of the New York Fed and the Banque de France is to be moved back to Germany.
According to analysts, this move could potentially “trigger a chain reaction, prompting other countries to start repatriating the gold stored in London, New York or Paris…. “

If gold repatriation becomes a worldwide trend, it will be obvious that both the US and UK have lost their credibility as gold custodians. For gold markets worldwide, this move may mark a switch from “financial gold” to “physical gold”, but the process is definitely in its early stages.
The decision to repatriate the German gold is a big victory for a part of the German press that first forced the Bundesbank to admit that 69% of its gold is stored outside Germany. Almost certainly both the German press and at least several German lawmakers will demand a verification procedure for the gold bars returned from New York, just to make sure that Germany doesn’t receive gold-plated tungsten instead of gold. It seems that German decision makers no longer trust their American partners. (Voice of Russia, January 15, 2013, emphasis added)
9--- Frontline: Why have Wall Street leaders escaped prosecution?, PBS

10---Europe slides deeper into recession, wsws

The economic and social catastrophe enveloping Europe is being intensified and exploited by the European ruling class to slash the wages and social conditions of the continent's workers to a level approaching those in the special economic zones of China and the Far East.
Fully aware of the dire social implications, European leaders are determined to intensify austerity measures. In his discussions Monday with Alexis Tsipras, leader of the Greek SYRIZA movement, German Finance Minister Wolfgang Schäuble declared once again that there is no alternative to austerity in Europe.

The lack of profitable returns in European industry combined with the readiness of the world's leading central banks to make virtually interest-free credit available to the banks is fueling a new junk bond bubble. The Financial Times on Monday noted that the year 2012 was characterized by a “dash for trash in global markets,” and, in a reference to the financial crash of 2008, evoked a “sense of déjà vu.”

11--World Bank cuts forecast for global economic growth, wsws

12---Kyle Bass interview, "We're going to kill the dollar" you tube

"How do you solve a problem when you're running a 10% fiscal budget deficit? You are not going to get growth without private sector credit demand. The govs idea right now is that we're going to export our way out of this. And when I asked a senior member of the O admiistration last week how are we going to grow exports if we will not allow nominal wage deflation?And, he said, we 're going to kill the dollar.

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