I love this girl! If 12-year old Victoria Grant can explain how banks that print our nation’s currency and their puppet global banks are the most immoral criminal institutions on our planet responsible for oppression, mass suffering, and misery, shame on anyone else that is too lazy and/or too misanthropic to take the time or effort to watch this six minute video to understand this essential truth that is probably the most important misunderstood truth in the entire world. No humanitarian efforts will ever make a sustainable impact in this world if we first don’t tackle the fact that our modern banking system is criminal and must be destroyed, the truth of which 12-year old Victoria already understands. Trying to implement measures to solve poverty, hunger or war without first correcting the great injustice that we call “modern banking” is akin to never letting your children out of the house as the solution to the presence of an insatiable child rapist that lives in your neighborhood. It is absolutely the wrong approach and one that is destined for failure.

I will always have loads more respect for men like Pablo Escobar, “El Chapo” Guzman and “El Señor de los Cielos” Fuentes than any banking executive like Jamie Dimon, Lloyd Blankfein, Ben Bernanke, Mervyn King, Evelyn Rothschild, David Rockefeller, Vikram Pandit et al. For the feeble-minded that will seek to twist these words into an unintended meaning, no, I do not admire or believe that Escobar, Guzman or Fuentes are or were good people. However, I absolutely hold more respect for criminals that are honest enough to be 100% aboveboard about their criminality so that we never mistake or misunderstand their intent versus criminals that deliberately seek to deceive us so that they can utilize our misinformed and ill-gotten trust to enslave us. Even among criminals, a hierarchy of respect exists, as rapists, serial killers, and child molesters are the least respected of criminals within the penitentiary system and the most likely to receive a brutal beating for their sins while incarcerated.

Lords of brutal drug cartels, when they despise someone, will spit in the face of the person they despise or simply tell that person that he or she will be executed. There is never any doubt about their evil intentions. On the flipside of this coin are the lords of our banking system. Despite being misanthropes, lords of our banking system will smile in our faces, perpetually lie to us about how banking really works, and tell us that they want to help us. However, the second we turn our backs, they will stab us six inches deep in the middle of our backs or deliberately create massive inflation that silently and secretly sentences people to death from starvation. As John Maynard Keynes stated, “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.” Keynes went on to explain, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic laws on the side of destruction, and does it in a manner which not one in a million is able to diagnose.” For those that have internalized banker-cartel propaganda and still fail to grasp the unquestionable and indisputable immorality of our current banking system, simply put, bankers are the equivalent of modern day slave owners and we are the slaves. We will never have freedom, but only the illusion of freedom sold to us by politicians and bankers, as long as our current fractional reserve banking system persists. This is an indisputable fact that even Central Bankers have admitted from time to time. Remember that the notorious Federal Reserve Chairman Alan Greenspan once stated, “gold and economic freedom are inseparable.”

In conclusion, some may say that the title of this article is slightly misleading because the most important truth in life is love. For those that believe this to be the most important truth, remember that multiplying actions of love and generosity in this world is an exponentially more difficult proposition under our current immoral banking system than under a sound honest one. And for those that don’t believe that we can disable our current banking system, remember that there are nearly 7 billion of us that would benefit enormously from the destruction of our current banking system while there are only a few thousand in the entire world that reap tremendous ill-gotten gains from this morally reprehensible system. Our power is in numbers and it is a power that those of us on the right side of this fence have yet to fully utilize.

Can 7 billion people defeat a few thousand morally bankrupt people? Without hesitation, the answer is yes. Thus, I urge everyone to forward the below video not to anyone you know that fails to grasp the evils of our debt-based monetary system, but to everyone you know that fails to grasp the evils of our debt-based monetary system. Even those that have been brainwashed by the banking cartel into believing that our banking system is not the reason for failing economies worldwide today will likely suspend their skepticism for a New York minute and grant 12-year old Victoria Grant the benefit of the doubt in that her plea to return to sound, interest-free money as the mechanism to restoring freedom in our world has nothing to do with “selling her book”. Furthermore, who can possibly resist listening to an adorable 12-year old child dropping enlightenment in a concise, articulate six minute speech?

http://www.youtube.com/watch?v=JHQOX8EVNmE

Zero Hedge

Flash off the rumor mill, unconfirmed — it appears the Greek banks were just cut off by the ECB.

If this is true then this is the latest “Gun up the nose” game by the Germans and ECB, and is almost-certain, in this political climate, to blow up their face (and quite possibly with shooting involved on the part of the Greeks too.)

This instantly hit the Euro and US stock market, which had been having a reasonably decent day.

If true and confirmed then Greece has been effectively orphaned.  This appears to be a facial attempt to stick a tourniquet on Greece’s neck, as with elections due next month cutting off Greek banks now will basically guarantee they all detonate.

Expect the incipient bank runs to resume en-masse within hours if not minutes.

Time to critical mass is now measured in days if not hours, and if acceleration occurs the weekend is the perfect time for Greek authorities to drop the hammer in the form of a bank holiday and capital controls as they will have no choice irrespective of the critical damage that will result from them doing so.

More as I’m able to learn and/or confirm it.

Update: Just repeated on CNBC – ECB stopping monetary policy operations with “some” Greek banks.  Hmmm…. what’s “some” gents?

But remember folks, Nobody committed any crimes (according to Gary Johnson, Obama and, I suspect, Mitt(ens) Romney.)

Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.

For the un-initiated in this issue, Overstock went after virtually everyone in the big banking world, particularly Goldman, when their stock was shorted into the dirt.  Their allegation was that the firm (and others) were counterfeiting their shares by selling short shares they never owned and couldn’t locate for a borrow.  In effect they were representing more shares in the market than existed, which is exactly identical to counterfeiting them in terms of economic impact, exactly as if you ran off some extra $100 bills on your office copier.

But what shows up here?  Hubris and utter contempt for the law.

“Fuck the compliance area – procedures, schmecedures,” chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.

Uh huh.

And against this backdrop we’re supposed to expect that these very same banksters give a damn about the effective counterfeiting of United States currency that takes place when they emit unbacked credit, especially when the latter isn’t considered an offense (but ought to be) while the former is and they thumb their noses at the regulations?

I repeat:

None — absolutely none — of the contenders in our Presidential contest will talk about this.  Yet this issue — the counterfeiting of financial assets, some unlawfully and some “legal”, are how they fleece you, the common man, intentionally disadvantaging you as an individual and enriching themselves.

I will not support and in fact will and do actively oppose and will attempt to insure the defeat of any and all political candidates for a federal office who refuse to address this issue head on and deal with it, irrespective of party affiliation.  I take this position because as a Libertarian I have signed the Libertarian oath which states:

I do not believe in the initiation of force to achieve political or social goals.

That includes fraud, and counterfeiting in all of its forms, whether recognized as felonious or not, is fraud.

Period.

We will not find solutions to our economic mess until we face what has been done and what is being done today, honestly examining the procedures and actions of these individuals and firms, stopping the abuses and holding the malefactors to account.

Medicare is an example of an unsustainable system that will go away in the decade ahead.
Here are the sobering facts about the number of workers and those drawing Social Security, Medicare and Medicaid entitlements in the U.S.While the government claims to have a “trust fund” to pay for Social Security and Medicare, this is illusory propaganda. There are no funds set aside to pay these entitlements–they are “pay as you go” programs funded by current tax revenues.  If the tax revenues don’t cover the programs’ expenses, the Treasury sells bonds, i.e. issues debt to pay the entitlements.

Social Security (SSA) has 61 million beneficiariesas of March 2012.

Medicare has 49 million beneficiariesas of November 2011.

Medicaid has over 50 million beneficiaries; another source puts the current number at 58 million.

Kaiser Family Foundation says roughly 7 million “dual-eligibles” who receive both Medicaid and Medicare, so let’s use the data point of 50 million Medicaid-only recipients.

We can assume that most people drawing Medicare benefits also draw Social Security, while the 8+ million drawing disability from Social Security are also covered by Medicaid.

However you slice it, there are roughly 60 million people drawing Social Security and Medicare/Medicaid and another 50 million Medicaid recipients for a total of 110 million people drawing significant entitlements.

As I have noted here many times, there are only 115 million full-time jobs in the U.S.

That means the ratio of workers to recipients of  significant “pay as you go” entitlements is roughly 1-to-1: 115 million full-time workers and 110 million people drawing Social Security and Medicare/Medicaid.

These programs consume the majority of the Federal budget.  The Federal government spends around $3.7 trillion and collects around $2.6 trillion in taxes, so the basic deficit is $1.1 trillion. Off-balance sheet “supplemental appropriations” mean the real deficit is actually considerably higher.

Social Security costs $817 billion, Medicare and Medicaid costs total about $800 billion  annually, and program outlays rise every year. The Pentagon/National Security budget is around $690 billion.

As I detailed in The Fraud at the Heart of Social Security   (January 17, 2011), the program paid out $707 billion in 2010 and collected $631 billion in taxes, a $76 billion shortfall for 2010. The current program (2012) cost is $817 billion, a leap of $100 billion in a few short years as Baby Boomers flood into the program.

Of the roughly 150 million workers in the U.S., 38 million earn less than $10,000 per year, 50 million earn less that $15,000 a year and 61 million earn less than $20,000 annually. All these numbers are drawn directly from Social Security Administration payroll data.

100 million wage earners, or 2/3 the entire workforce, earn less than $40,000 per year.

Median pay in the U.S. is about $26,360 annually, while the average pay is about $40,000. Since the average American household takes in $63,091 per year, it seems the typical wage is roughly $30,000 a year.

The Medicare tax is 2.9% of wages, 1.45% each for employer and employee.If the typical worker makes $30,000 a year for 35 years, then lifetime earnings are about $1 million. If we take the $40,000/year average, then that rises to around $1.4 million in lifetime earnings. The 2.9% Medicare tax thus totals about $30,000 to $40,000 in lifetime contributions for the average worker.

The average benefits extracted from the system run from $393,000 to $525,000  (due to the benefits extended to non-working spouses, benefits for never-married people may be somewhat lower). Average annual costs per beneficiary run as high as $18,000, though expenses typically rise significantly in the last year of life.

As I have reported here earlier, a friend’s father was in the hospital a few years ago for less than a week for “observation” and a non-invasive gall-stone procedure. Medicare was billed $120,000, or roughly the lifetime contributions of three workers for this modest procedure and a few days in a hospital. My Mom had an office procedure performed on one of her toes and Medicare was billed $12,000.  An office procedure (not in surgery) that took a few minutes absorbed 1/3 of my entire lifetime contributions to Medicare.

What we have is a system where the full-time worker to beneficiary is already 1-to-1 and the system pays out 10 times more per person than it collects in taxes.  The Medicare system would need about 10 workers for every beneficiary to be sustainable. Right now the ratio is just above 2-to-1. That simply is not sustainable.

Tweaking the payouts doesn’t change the basic math: “pay as you go” entitlements are not sustainable when the number of recipients equals the number of full-time workers. Programs that pay out $400,000 per person (many of whom did not work a lifetime) and collect $40,000 per lifetime of full-time work are not sustainable.

Wishing the math were different does not make it different.

For more on this topic, please see:

America’s Hidden 8%  VAT: Sickcare(May 10, 2012)

How We Do Harm: A Doctor Breaks Ranks About Being Sick in America (print)     (Kindle)

Charles Hugh Smith – Of Two Minds

At about 13:00 minutes in, a familiar face makes an appearance.   

http://www.youtube.com/watch?v=ZESqQOctsXA

In this episode, Max Keiser and co-host, Stacy Herbert discuss the alleged meritocracy of old Etonians running the world (into the ground) while the rest of us remain wards of the state – from the President of France to PhDs on foodstamps. In the second half of the show Max talks to John Titus, producer of the new documentary, Bailout.

The film premiers in Chicago on May 16th.  A must-see when it comes to your area.

http://usabailout.com/about

Our markets have a recent history of missing important warnings. It’s no different now as investors deny the obvious and the economy stumbles along.

I have been in the investment business for more than 30 years now, so I have grown accustomed to seeing lunacy, naiveté and just plain stupidity more often than one would think possible, given that investing is supposed to be about being smart.

It seems extraordinarily obvious to me that the economy is, in essence, broken because of the stock and housing bubbles we have experienced, and that the Federal Reserve is trapped. It also seems clear that at some point we will have a funding crisis (bond yields will leap and/or the dollar will tank) due to excessive government borrowing. (Click here for more on this funding crisis.)

However, that’s not going to occur until certain attitudes shift, so I can see why this is taking some time to unfold. What I cannot understand is how folks don’t recognize the fact that, since the economy has been unable to create jobs for three years now, it isn’t going to start magically generating them now.

Nor do I understand why there is such denial about inflation. The everyday cost of living has been increasing steadily, and at an increasing rate. Just because house prices have collapsed and certain products that folks buy, especially those heavily laden with technology, are cheaper does not change the fact that we are experiencing inflation, and that the environment is really one of stagflation. It is obvious, as are the consequences.

Nevertheless, to a large degree in the investment community, Goldilocks rules.

Déjà eww

The mindset seemed familiar to me, and about a week ago I was thinking of past moments in time where the obvious was there for all to see but maddeningly few seemed to see it. What popped into my head was the spike in first payment defaults leading up to the housing crisis. When that started occurring, as early as August 2006, it spelled the end of the housing bubble (while at the same time proving it was bubble behavior, since people were missing their firstpayments).

I actually decided to search my subscription site, www.fleckensteincapi​tal.com, for references to “first payment.” Lo and behold, one of the headlines that popped up was “Goldilocksters see oil prices as bullish, up or down,” which ran on Jan. 11, 2007 (that is, more than a year before Bear Stearns’ liquidity problems came to light). Here are some key excerpts:

“I wanted to share an email from my insider friend in the subprime arena, whom I’ve quoted so liberally. It’s sort of incongruous to read his thoughts on a day when subprime and other financials were going wild, but this (first payment defaults) is a problem that I guess won’t matter until the day it matters — and then boy is it going to matter.

“He wrote: ‘We had a loan that was FPD (first-payment default) on a home in So Cal. It is a very nice high-end town that had a section of new homes built, but it was in the low end of town. Normal homes sold for $1 million in value. In this new seven-home development, (homes) sold for $1.3 million to $1.5 million each. The homes you had to drive through to get to this place were worth $400,000 to $500,000. The market topped out, and now most of the seven homes are vacant — worth no more than $900,000. Thus, all the lenders are sitting on losses of $400,000 to $600,000. This is just one of many that are happening daily.’

“‘The commentary I am getting from field and legit brokers is that fraud is an out-of-control locomotive. Stated-income loans are now finished for all the unemployed people around. We will quickly see cash-out loans curtailed. This vicious cycle has yet to play out. We are in the second inning of the unwinding.’”

Note that I received that email on a day when subprime and other financial stock prices were rallying big time, the market completely oblivious to what lay ahead.

Selling yesterday’s news

Just as folks were late in figuring out the severity of the housing crisis, I think they still tend to be late in facing current realities. Case in point: For most of this week, it was as if markets in Europe and the U.S. had suddenly realized that the government in Greece was in disarray; that we were about to have a socialist running France; and that Spain, Portugal and Italy are each a teetering financial house of cards, even though none of that should be “news,” especially to supposedly sophisticated market participants.

In the old days, markets tended to discount events (that is, they reflected expected negative outcomes through lower asset prices, or vice versa). If that were still the case, markets should have declined into last weekend’s European elections as they anticipated the results, as well as other problems. But what we saw were markets that appeared notto have discounted the seemingly obvious news.

I have commented on this phenomenon a number of times over the past 10 years: that only after an important event happens (which was usually pretty obvious) does Mr. Market have a heart attack. I don’t really know why that is, although I think a lot of it has to do with how the government’s money printing has warped the markets by causing people to expect to be bailed out.

You can see a million trees and still not recognize the forest

Where our current path is taking us has been predictable for quite some time, and I think that continues to be the case. Unfortunately, we have elected officials who are completely incompetent, if not criminal, and the Fed is even worse. None of that is going to change until change is forced upon us (i.e., them) by a crisis. So while events seem to play out at a glacial pace, where we are headed couldn’t be clearer.

On the air

I participated in a rather timely interview with Eric King this week. Those who are interested can listen to it here.

Bill Fleckenstein for MSN Money

In an admittedly strange twist of timing JP Morgan, the same JP Morgan that just announced a surprise $2 billion loss caused by the “London Whale,” became the first and only of 26 banks disclosing subprime investor data to flip me the digital bird, refusing access to the public loan-level performance data for their Washington Mutual loans. WaMu, one of the most reckless subprime lenders, was swallowed whole by JPM and they’re having serious indigestion.

Nelson D. Schwartz and Jessica Silver-Greenberg of the New York Times verify that the purpose of the Chief Investment Office — the London Whale — is to offset risk caused by the Washington Mutual loans:

Under Mr. Dimon’s leadership, the chief investment office — which was responsible for the outsize credit bet — was retooled to make larger bets with the bank’s money, a former employee said. Bank executives said the chief investment office expanded after JPMorgan Chase’s 2008 acquisition of Washington Mutual, which added riskier securities to the company’s portfolio. The idea behind the strategy was to offset that risk.

It isn’t hard to figure out why JP Morgan doesn’t want anybody looking into and through their garbage.  I have not been able to ascertain whether these reports are required under disclosure requirement Regulation AB (the law itself seems to say yes, but the experts I spoke to gave divergent readings). Whether they are or aren’t, JPM’s refusal — when everybody else cooperated speaks for itself.

As those loans sour, and they continue to rot like a dead skunk on a hot July day, the bets needed to offset the losses are increasing.  It looks like the bank, peering into that  portfolio they refuse to share, is becoming more than a little bit desperate.  Like a compulsive gambler after a multi-day bender resulting in crippling losses they decided to double down rather than walk away, leading to their current whale of a surprise and likely a mirror-image follow-up for the WaMu losses this was supposed to offset.

For anybody who believes that JPM’s position is normal .. it isn’t.  Twenty-six other banks quickly popped open the doors to their repositories, as they’re required to do.  Perennial bad-boy Aurora Loan Services  is the only other one that’s ignored my requests, though since it looks like they’ve sold their servicing operations the jury’s out whether their silence is purposeful or whether there’s nobody home on the other side of those requests.

Like I said, I’m not sure whether these disclosures are exempt.  There are certainly many marked private, but they seem to be overwhelmingly CDOs and similar more exotic or clearly closely held instruments.  I’ve never seen an entire series of MBS from an issuer that is exempt: even a few stray WaMu deals that ended up in other repositories are open to the public.

JP Morgan’s insistence that “[t]he site is maintained for JPMorgan Chase RMBS clients,” only, demanding that I include my JP Morgan Chase contact, may be legal but it is unprecedented.  In context of their recent trading losses, the knowledge that those losses were to hedge against the WaMu losses, Dimon’s prior comments downplaying both losses, and strong analysis that the WaMu loans are some of the most impaired MBS it’s fair to conclude that JPM is hiding something in the basin of their loan outhouse.

I’ve spent the past couple months holed away downloading MBS data in bulk to enable investors, analysts, academics, government agencies, or whoever else wants to inspect performance information and project losses for every subprime loan trust.  When finished, this week hopefully, I’ll have a veritable ABS MRI machine that can peer into the true health of the housing and housing finance market.  It’s harder than it sounds: one of those projects where software engineers emerge from their digital caves after months, bleary eyed and long past due for a haircut but holding game-changing technology.

My database, which includes everything except WaMu loans thanks to Jamie, is finally almost finished.  But even in preliminary form it is clear that the AAA-rated senior tranches — the ones that really were never supposed to take losses — are toast that’s burning worse by the day.  Servicers, trustees, government officials have been doing anything to delay the inevitable losses but when people don’t pay their mortgages, and housing has declined by over 50% in many of their markets, there’s only so much accounting chicanery they can do: the money just isn’t there.

My suspicious are more grounded than tin-hat delusions we’ve been hearing from the housing is hot again crowd.  R&R Consulting, a well-regarded structured valuation expert I work closely with conducted a portfolio-wide analysis of undisclosed (“limbo”) losses on RMBS.  In a special in-depth report dated February 2012, long before JPM told me piss-off when asking for access to the more granular WaMu loan-level data, they reported that WAMU had the highest limbo loss level–about $810 million—in just one transaction. Repeat: experienced analysts dug this out even without loan level data. It sounds likely that it won’t be long until Dimon reports another ten-figure surprise that I’m sure he’ll apologetically pawn off on the US taxpayer.

For anybody asking “um — isn’t this over — didn’t all this fall apart back in 2008?” the answer is not really.  That mega-meltdown was really a mini tremor caused by the lower and smaller tiers of these securities; last time junior visited to stir things up but this time papa’s walking down the street carrying a mean look and a big stick.  That’s because the mezzanine level tranches of most bubble-era MBA are either gone or guaranteed to be gone — finally eaten up by current or pending losses — leaving the lower AAA tranches to take their place as the bearer of losses.  This was never supposed to happen.  Everybody knew that CDOs created from the lower tranches were risky, even if the ratings agencies said otherwise, but nobody thought the meltdown would last this long that the actual top tranches would be nicked.  But the data couldn’t be clearer: those bottom level A-class tranches of yesterday are the new bottom level M-class tranches of yesterday.

All this is surprising because these same MBS tranches have been on fire lately.  Hedge funds bought them for very little when nobody wanted them — setting their own price — and now they’re selling them back at steep gains because housing is peachy again, never mind the enormous amount of shadow inventory.  Hopefully the buyers of these same securities aren’t being set up, again, because nobody would be stupid enough to fall for that same trick, again.  Hopefully.

It is these lower tranches and other derivative products, which are by definition exponentially smaller than the more senior securities like the ones JPM is hiding (well, before the banks multiplied them several times over using credit default swaps) that blew up the world economy in 2008.

I’m guessing that it is the inevitable meltdown of what remains of the AAAs (the amount outstanding has been reduced considerably by refis) that has been at the impetus for the housing cheerleaders.  By refusing to move their foreclosures forward, then refusing to take title, then refusing to REO those homes, the trusts don’t have to recognize the losses because, ya’ know, the abandoned and dilapidated properties will magically double in value as long as we hold our breath and wish.

My mountain of data that shows loss severity in excess of 100-percent is not uncommon.  When we look at the loans, compare similar loans from those who report them more honestly, multiply the average severity by pending reported and, um, overlooked foreclosures, then it becomes clear that the lowest rated AAA’s are toast. This reaffirms the report by R&R Consulting report that $175 billion of loan level losses had not been allocated to the trusts. Whoops!

Jamie Dimon admitted his $2 billion loss “plays right into the hands of a bunch of pundits out there” on his conference call explaining his stinky.  Dimon went on to call the losses “egregious” and “self-inflicted.”  In light of the London Whale it is clear that when it comes to sky-high risk, like JPM’s WaMu exposure, the bank has adopted an advanced risk management strategy: telling researchers to piss off then hiding.

By Michael Olenick for Naked Capitalism, creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick or read his blog, Seeing Through Data