Wall Street’s Power Grab

By Michael Hudson for Global Research

You almost could hear the bankers heave a sigh of relief when Haiti’s earthquake knocked the Financial Crisis Inquiry Commission hearings off the front pages and evening news broadcasts last week. At stake, after all, is Wall Street’s power grab seeking to centralize policy control firmly in its own hands by neutralizing the government’s regulatory agencies. The first day – Wednesday, January 15 – went innocuously enough. Four emperors of finance were called on to voice ceremonial platitudes and pro forma apologies without explaining what they might be apologizing for. Typical was the statement by Goldman Sachs chairman Lloyd C. Blankfein: “Whatever we did, it didn’t work out well. We regret the consequence that people have lost money.”

Their strategy certainly made money for themselves – and they made it off those for whom the financial crisis “didn’t work out well,” whose bad bets ended up paying Wall Street’s bonuses. So when Paul Krugman poked fun at the four leading “Bankers without a clue” in his New York Times column, he was giving credibility to their pretense at innocent gullibility.

Recipients of such enormous bonuses cannot be deemed all that clueless. They blamed the problem on natural cycles – what Mr. Blankfein called a “100-year storm.” Jamie Dimon of JPMorgan Chase trivialized the crisis as a normal and even unsurprising event that “happens every five to seven years.” It was as if the crash is just another business cycle downturn, not aggravated by any systemic financial flaws, but, if anything, by liberal government planners being too nice to poor people, by providing cheap mortgage credit to the uninitiated who could not quite handle the responsibility.

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Exposé: Bill Gross Caught "Red Handed" Talking His Book

One of the travesties of financial reporting in the U.S. is that fund managers are allowed to go on national television and discuss individual stocks/bonds that they have positions in. Instead of providing an honest and unbiased opinion, most fund managers use the opportunity to "talk their book" in other words - talk up a stock/bond so that gullible investors rush in, while the fund manager off loads his/her portfolio at a good price. Countless investors suffer as a result, but the regulatory bodies do nothing. If insider trading is illegal, talking your book should be too. Unfortunately the whole game on Wall Street is geared towards transfering wealth from the small guy to the big guns running multi-billion dollar empires. Below we reveal red hot evidence that none other than the mighty Bill Gross of the $1 trillion bond fund PIMCO, has been talking his book and shafting investors in the process.

Back in October 2009, we had reported that much to our surprise, Bill Gross was out advocating that folks BUY US Treasuries. In our October 27, 2009 report titled, Is a Stock Market Correction and a Dollar Rally on the Horizon?, we had questioned his call to buy U.S. Treasuries, writing:

We find it extremely curious that Bill Gross of PIMCO, the world's biggest bond fund has been going around urging people to buy U.S. Treasuries (USTs) since late September. His call to buy USTs certainly flies in the face of all financial logic, given that the Fed is soon to end its quantitative easing (QE) program to buyback $300bn of USTs in October. A removal of Fed support from under the USTs, coupled with an economic recovery (as Bernanke would like us to believe) should logically cause UST prices to fall (yields to increase).

Then why is Gross pushing to buy USTs especially the long end of the curve, which according to Gross will flatten further (yields will fall, prices will rise)? Is he merely talking up his book? Why would Bill Gross a very smart man, who is most definitely a Fed “insider” (Bernanke's ex-boss Greenspan works for PIMCO), risk his reputation and go out and urge folks to buy Treasuries?

At that time, we had concluded that perhaps Gross was acting at the behest of the Fed:

Our thesis is that he is probably acting at the Fed's urging. The Fed is aware that once QE stops in October, there is a huge risk that UST prices will fall and rates will go up choking a nascent economic recovery.

Well turns out, not quite. Bill Gross was indeed talking up his U.S. Treasury holdings, while he worked furiously behind the scenes and spent much of 4Q 2009 (October - December 2009) off-loading his U.S. Treasury holdings onto gullible investors. Zero Hedge reports that Gross sold $20bn of U.S. Treasuries in November alone. And after he has off loaded much of his position, Bill Gross is NOW advocating that people sell U.S. Treasuries! According to a January 7, 2010, WSJ report:

Bill Gross, one of the most influential investors in the global bond markets, said Wednesday the trade in 2010 should be to buy German government debt and sell U.S. Treasuries and their peers in the U.K.

Recently, Pimco has started to cut its Treasury holdings again and has parked the proceeds in cash or cash-equivalent assets to prepare for the withdraw of monetary stimulus. With major central banks this year set to start withdrawing the past two years' huge monetary stimulus to rescue banks and the broader economy, Mr. Gross warned that interest rates are likely to be pushed up in the major economies, particularly in the U.S., U.K. and Japan.

Can Bill Gross a seasoned professional bond investor, seriously convince us with a straight face that he changed his view point, going from advocating that folks BUY Treasuries to advocating folks SELL Treasuries, all in a span of under 3 months? In addition within 3 short months he has gone from pushing a flat yield curve to a rapidly steepening one. And all this false advocacy in light of the most OBVIOUS fact, which we at the Firecracker Report have pointed out as far back as October 2009: Once the U.S. Government ends its $1.7 trillion quantitative easing in Treasuries (in October 2009) and Mortgage Backed Securities (in March 2010), long term U.S. Treasury interest rates are bound to go up and prices will fall.

Here is the graphic evidence of Bill Gross' investment advice displayed on the 30-year Treasury bond futures price. The graph says it all - No sooner did Gross (one of the biggest US Treasury holder) offload his Treasuries in Oct - Dec at a good price of 118-123, the Treasury market collapses and you ordinary folks out there are now being asked to sell at 114-117:

Note:

In our October 27, 2009 report titled Is a Stock Market Correction and a Dollar Rally on the Horizon?, we had linked to a CNBC video where Gross had advocated Buying U.S. Treasuries. In a curious development that video has been removed by CNBC. So enclosed below are links to other articles that quote Bill Gross' bullish U.S. Treasury position in September-October of 2009.

1. Sept 29, 2009: Pimco’s Gross Buys Treasuries Amid Deflation Concern

2. Sept 16, 2009: Pimco’s Gross Boosts Government Debt to 5-Year High

Please Sir, Take My Liberties But Keep Me SAFE

A new McClatchy-Ipsos poll, finds that a majority of Americans are o.k. giving up their civil liberties so that the government can keep them SAFE from terrorists. According the report in McClatchy.com:

51% - Agree that it is necessary to give up civil liberties in order to make the country SAFE from terrorism.

74% - Agree that body scans/full body scans at airports are an effective way to stop terrorism.

This is a really, really sad state of affairs on many fronts:

1. Three terrorist strikes (9/11, shoe bomber and underwear bomber) is all it takes for Americans to give up their freedom and precious civil liberties, which generations of men and women have fought and sacrificed their lives to attain. What makes this trend even more unfortunate is the fact that the civil liberties crisis is not restricted to America alone - this psychosis of fearfulness and lack of courage has thoroughly permeated the global population. In less than a decade, we have set into motion the unwinding of a lifetime's work of the world's greatest freedom fighters from America's founding fathers, Martin Luther King, Mahatma Gandhi and Nelson Mandela.
2. As we have seen with the Patriot Act, which was imposed after 9/11 and which has yet to be repealed, it is really EASY to give up your liberty, but nearly impossible to get them back.
3. People forget that the Terrorism is an amorphous moving target. Recall that it all started with the 9/11 Saudi born hijackers, then moved to Afghanistan, then North Korea, Iran and Iraq were declared the axis of evil, then Saddam Hussein had weapons of mass destruction, after that it was AfPak (Afghanistan and Pakistan), then the Fort Hood Shooter Maj. Nadal Hassan was labeled a terrorist. Now we have the Detroit bomber following which, Yemen and Nigeria have become the new terrorist hotbeds. Can anyone see an end to this? We most certainly can't. America can give up ALL its civil liberties, but the crisis of terrorism is not going to go away.
4. At the present time, the problem of Terrorism is foreign in nature, but what happens if it turns into a domestic one? What if the government begins to labels internal acts of civil disobedience as Terrorism? Will giving up our ALL our civil liberties keep us SAFE from government corruption? Power corrupts, and the more power we transfer over the greater the probability that it is misused against us. The line between democracy and dictatorship is really a very thin one. If we keep giving up our rights so easily then we will soon be left with no checks and balances.
5. What we need to realize is the fact that one can never be 100% SAFE. There is a greater probability of dying in a car crash, from cancer or heart disease than from terrorism. The best way to protect against foreign acts of terror is to beef up border security and intelligence. Instead of spending trillions of dollars fighting illogical wars to "keep terrorists from attacking us here", a fraction of that money spent on border security would have gone a long way in keeping the nation safe. In the entire Detroit bombing discussion, attention seems to be obsessively focused on full body scanners, rather than trying to understand how this man could have slipped through the State Departments hands. Any legal immigrant/visitor to the U.S. will attest to the fact that getting a visa to work, study or even visit the U.S. is an extremely painful and exacting process. Visitors/immigrants are subject to extensive background and police checks in their home countries, financial disclosures and interviews. So the real question folks should be asking is that given the already exacting visa process in place, how did the State Department fail to identify the threat? How is it that this young man got a visa in the first place, and why was more not done to stop him from boarding the plane since his father had already alerted the U.S. embassy? Hilliary Clinton should be doing a better job explaining how such a massive security lapse could even happen and why the State Department failed to revoke his visa. Ordinary citizens being asked to give up their civil liberties, while the State Department and border security apparatus twiddles its thumbs. Today we are being asked to get naked, to get into an airplane, but what happens when terrorists choose another target like a bus, train, shopping mall or subway?

What we face today is a crisis of a lack of "education" - ordinary folks are woefully uneducated about their basic democratic rights and responsibilities. We have become a global population of cowardly people. Courage and fearlessness are attributes in true short supply.

Colbert: Daddy What's a Financial Crisis? Was There an Honor Bubble?

Stephen Colbert outdoes himself. MUST WATCH.

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
The Word - Honor Bound
www.colbertnation.com
Colbert Report Full Episodes Political Humor Economy

John Oliver Remembers the Good Ole' Days of Simpler Times

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Even Better Than the Real Thing
www.thedailyshow.com
Daily Show Full Episodes Political Humor Health Care Crisis

Saluzzi: If California Was a Corporation it Would Go The Lehman Way

Excellent interview of Joe Saluzzi where he explains the absurdity behind the Wall Street analyst projections for the S&P 500 and the prevaling sky high bullish sentiment.

Overspent and Overextended: Why is Washington Spending So Much on the Military?

By Doug Bandow in reason.com

The U.S. dominates the globe militarily. America’s reach exceeds that of the Roman and British Empires at their respective heights. The threats facing the U.S. pale compared to its capabilities. So why is Washington spending so much on the military?

The military budget is the price we pay for the nation’s foreign policy. The U.S. currently is spending nearly as much as the rest of the world. In real terms, Washington is spending more today than at any time during the Cold War, the Korean War, or the Vietnam War.

In 2010 the U.S. will spend roughly $700 billion on the military. The Obama administration’s original non-war defense budget was $534 billion. The latter is an increase of $20 billion, or 4 percent (2 percent after inflation). Yet conservatives attacked Obama for “cutting” military outlays. Robert Kagan of the Carnegie Endowment for International Peace charged that the administration was signaling that “the American retreat has begun.”

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Another Iranian Revolution? Not Likely

By Flynt Leverett, New America Foundation with Hillary Mann Leverett

The Islamic Republic of Iran is not about to implode. Nevertheless, the misguided idea that it may do so is becoming enshrined as conventional wisdom in Washington.

For President Obama, this misconception provides a bit of cover; it helps obscure his failure to follow up on his campaign promises about engaging Iran with any serious, strategically grounded proposals. Meanwhile, those who have never supported diplomatic engagement with Iran are now pushing the idea that the Tehran government might collapse to support their arguments for military strikes against Iranian nuclear targets and adopting “regime change” as the ultimate goal of America’s Iran policy.

Let’s start with the most recent events. On Dec. 27, large crowds poured into the streets of cities across Iran to commemorate the Shiite holy day of Ashura; this coincided with mourning observances for a revered cleric, Grand Ayatollah Hossein Ali Montazeri, who had died a week earlier. Protesters used the occasion to gather in Tehran and elsewhere, setting off clashes with security forces.

Important events, no doubt. But assertions that the Islamic Republic is now imploding in the fashion of the shah’s regime in 1979 do not hold up to even the most minimal scrutiny. Antigovernment Iranian Web sites claim there were “tens of thousands” of Ashura protesters; others in Iran say there were 2,000 to 4,000. Whichever estimate is more accurate, one thing we do know is that much of Iranian society was upset by the protesters using a sacred day to make a political statement.

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Are Presidents Afraid of the CIA?

By Ray McGovern in Consortiumnews.com

In the past, I have alluded to Panetta and the Seven Dwarfs.The reference is to CIA Director Leon Panetta and seven of his moral-dwarf predecessors — the ones who sent President Barack Obama a letter on Sept. 18 asking him to “reverse Attorney General Holder’s Aug. 24 decision to re-open the criminal investigation of CIA interrogations.” Panetta reportedly was also dead set against reopening the investigation — as he was against release of the Justice Department’s “torture memoranda” of 2002, as he has been against releasing pretty much anything at all — the President’s pledges of a new era of openness, notwithstanding. [See Consortiumnews.com’s “CIA Torturers Running Scared.”]

Panetta is even older than I, and hearing is among the first faculties to fail. Perhaps he heard “error” when the President said “era.” As for the benighted seven, they are more to be pitied than scorned. No longer able to avail themselves of the services of clever Agency lawyers and wordsmiths, they put their names to a letter that reeked of self-interest — not to mention the inappropriateness of asking a President to interfere with an

investigation already ordered by the Attorney General. Three of the seven — George Tenet, Porter Goss and Michael Hayden — were themselves involved, in one way or another, in planning, conducting or covering up all manner of illegal actions, including torture, assassination and illegal eavesdropping.

In this light, the most transparent part of the letter may be the sentence in which they worry: “There is no reason to expect that the re-opened criminal investigation will remain narrowly focused.”

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Ron Paul: The Time For Revolutionary Thinking is Now

The following superb speech was delivered by Ron Paul on the House Floor in May 2009. We feel it is a must read.

Current Conditions or Just a Bad Dream

“Could it all be a bad dream, or a nightmare? Is it my imagination, or have we lost our minds? It's surreal; it's just not believable. A grand absurdity; a great deception, a delusion of momentous proportions; based on preposterous notions; and on ideas whose time should never have come; simplicity grossly distorted and complicated; insanity passed off as logic; grandiose schemes built on falsehoods with the morality of Ponzi and Madoff; evil described as virtue; ignorance pawned off as wisdom; destruction and impoverishment in the name of humanitarianism; violence, the tool of change; preventive wars used as the road to peace; tolerance delivered by government guns; reactionary views in the guise of progress; an empire replacing the Republic; slavery sold as liberty; excellence and virtue traded for mediocracy; socialism to save capitalism; a government out of control, unrestrained by the Constitution, the rule of law, or morality; bickering over petty politics as we collapse into chaos; the philosophy that destroys us is not even defined.

We have broken from reality--a psychotic Nation. Ignorance with a pretense of knowledge replacing wisdom. Money does not grow on trees, nor does prosperity come from a government printing press or escalating deficits.

We're now in the midst of unlimited spending of the people's money, exorbitant taxation, deficits of trillions of dollars--spent on a failed welfare/warfare state; an epidemic of cronyism; unlimited supplies of paper money equated with wealth.

A central bank that deliberately destroys the value of the currency in secrecy, without restraint, without nary a whimper. Yet, cheered on by the pseudo-capitalists of Wall Street, the military industrial complex, and Detroit.

We police our world empire with troops on 700 bases and in 130 countries around the world. A dangerous war now spreads throughout the Middle East and Central Asia. Thousands of innocent people being killed, as we become known as the torturers of the 21st century.

We assume that by keeping the already-known torture pictures from the public's eye, we will be remembered only as a generous and good people. If our enemies want to attack us only because we are free and rich, proof of torture would be irrelevant.

The sad part of all this is that we have forgotten what made America great, good, and prosperous. We need to quickly refresh our memories and once again reinvigorate our love, understanding, and confidence in liberty. The status quo cannot be maintained, considering the current conditions. Violence and lost liberty will result without some revolutionary thinking.

We must escape from the madness of crowds now gathering. The good news is the reversal is achievable through peaceful and intellectual means and, fortunately, the number of those who care are growing exponentially.

Of course, it could all be a bad dream, a nightmare, and that I'm seriously mistaken, overreacting, and that my worries are unfounded. I hope so. But just in case, we ought to prepare ourselves for revolutionary changes in the not-too-distant future.”