tsx, tsx-v, goldtsx, silver, junior resource

Auguries By The Throat


December 14, 2012

gold, banks, debt, HSBC, GATA

Diogenes (JHW Tischbein): Searching for an honest banker.

Gold was down (at press time) $2.70 (-0.2%) for the week to $1,697.40, and silver was down $0.48 (-1.5%) to $32.59. GoldCore argued that gold’s decline was curious after “The Fed said that it will maintain ultra-loose monetary policies for the foreseeable future, and the Fed will in effect double the pace of dollar creation.”

“Essentially, the US central bank now IS the market for US government debt,” Ben Mountifield argues at Seeking Alpha December 12. “The US government issues new debt (currently more than $1 trillion a year), and the Federal Reserve buys it, thereby almost entirely bypassing the international bond market. As a result, the Fed can (at least for the time being) keep a lid on interest rates.”

This is all good news for the banks. First, because they make a handsome profit selling dollars to the Treasury Department, and second, because interest rates cannot rise, or the banks will fail, and that doesn’t bear thinking about. So the bankers have us by the throat, and there is nothing the politicians will not let them get away with.

The New York Times reported December 10, “State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.” Instead, HSBC was fined $1.92 billion—“about five weeks of income for the bank.”

What was the nature of HSBC’s crime? According to CNN, “The Department of Justice and US Treasury said…that HSBC allowed the most notorious international drug cartels to launder billions of dollars across borders. In addition, the government said HSBC violated US sanctions for years by illegally conducting transactions on behalf of customers in Iran, Libya, Cuba, Sudan and Burma…. At least $881 million in drug trafficking money—including [from] the Sinaloa Cartel of Mexico and the Norte del Valle Cartel of Colombia—w[as] laundered through HSBC.”

One could say that HSBC has been a conscientious objector in both the War on Drugs (1971-?) and the War on Terror (2001-?). Nevertheless, according to Lanny Breuer, “Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking licence in the US; the future of the institution would have been under threat; and the entire banking system would have been destabilized.”

Who’s Lanny Breuer when he’s at home? He is an Assistant Attorney General and the lead prosecutor in the case. And according to Wikipedia, “As a special White House counsel, he helped represent former President Bill Clinton from 1997 to 1999 during independent-counsel and congressional investigations as well as the impeachment hearings.” So HSBC wasn’t the first time Breuer had argued that criminal actions (ie, perjury) must take a back seat to the higher morality.

As a reward for services on behalf of President Semen Stain, Breuer was made a partner at Covington & Burling, which is the firm God would retain when in need of legal counsel. There he was “co-chairman of its white-collar defense and investigations practice group.” Fox, meet henhouse.

“It is a dark day for the rule of law,” was the Timesverdict on Breuer’s decision. The New Republic was inclined to agree, but, on the other hand, “In some aspects, DOJ’s surrender is understandable. Notwithstanding regulatory reform efforts in the US and the UK, the largest banks are in many ways even more systemically dangerous today than when we bailed them out in 2008. This indirect acknowledgment that we have failed to fix the too-big-to-fail problem has potentially dire consequences.”

Both the Times and TNR call for the banks to be broken up. Hear, hear! Funny thing, though—one doesn’t recall them belabouring President Obama about this during the election campaign. Not that he’d listen; this is, after all, the man who called Jon Corzineour Wall Street guy.” No, Timothy Geithner remains Treasury Secretary, and the universe is unfolding as the bankers think it should. Government of Goldman Sachs, by Goldman Sachs, for Goldman Sachs.

One might take from the above the impression that the HSBC verdict and what it reveals about the officially sanctioned antinomianism of the banks was the biggest news story of the week. On the contrary, for most Americans (and most of their media) it was tl;dr. So it’s not surprising that a certain “conspiracy theory” regarding gold and the banks was substantially proved this week, and the mainstream media had nothing whatsoever to say about that.

Doug Eberhardt writes December 11, “Something doesn’t add up. On the one hand, we have sales of gold American Eagle coins soaring, as well as inflows into the 14 US listed precious-metal ETFs like GLD rising by more than $282 million last week. Yet…we see the price of gold in the last month and year time-frame has actually turned negative.” Not to worry; it’s all good. As Olivia Newton-John sings, “Let’s get physical, physical/I wanna get physical/Let’s get into physical.”

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