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

Auguries The Circle Game

jay

January 19, 2013

gold, banks, US dollar

The Mark of the Chief: Round and round and round.

Gold was up (at press time) $11.80 (+0.7%) for the week to $1,684.60, and silver was up $1.11 (+3.6%) to $31.90. According to GoldCore, “Some investors see the recent selloff as overdone and are buying gold on the dip in anticipation of further gains in 2013…. The…higher weekly close today may embolden bulls who are expected to come back into the market.”

The big news in gold this week was the announcement that Germany is to begin repatriating its gold from Paris and New York. Ambrose Evans-Pritchard calls it a “watershed moment,” explaining that “The move marks an extraordinary breakdown in trust between leading central banks and has set off ferment among gold enthusiasts.”

For all the ferment, Germany plans to retrieve only 674 tons, with 50% of its hoard remaining in New York and London. At Seeking Alpha January 17, Tom Luongo asks why there is to be “so little” from New York and answers, “Most of the gold in the Fed’s vaults has been rehypothecated, and everyone knows it.”

Jim Sinclair writes January 16, “What occurred as I am told is an act in Germany in reaction to a parting shot from the retiring Secretary of the US Treasury via the Exchange Stabilization Fund.” Short explanation: The Europeans want higher gold prices to bolster the Euro, while Tim Geithner tried to “break gold’s back.” Conclusion: “A major central bank will not insult another major central bank unless it is an act of financial war. It has not come to that yet, but it is not that far away. It is 2015 to 2017 and not 2020.”

Geithner is soon to be replaced as Treasury Secretary by Jacob “Jack” Lew, presently President Obama’s Chief of Staff. And what do we know of this fellow? Why, he’s a genius. He knows everything. He’d beat Ken Jennings at Jeopardy! Hell, he’d beat Watson.

What else do we know? Well, he’s a bit economical with the actualité when it comes to budget deficits. But that’s to be expected. How do we know when a government official’s lying? When he’s breathing. More interesting is this, from David Goldman January 14:

Jack Lew should be unemployable on the strength of his resume…. Citigroup was not merely a facilitator of bubbly hedge funds through the Alternative Investments division for which Lew was chief operating officer…. When Lew was a COO at Citigroup, I was strategist for a credit derivatives hedge fund that did a great deal of business with Citigroup. We created collateralized debt obligations out of credit default swaps written on junk-quality debt, and through the magic of structuring, turned the junk debt into AAA-rated bonds. Citigroup not only underwrote these bonds, but bought virtually all of them through its so-called structured investment vehicles (SIVs). These are off-balance-sheet devices sanctioned by the deaf-dumb-and-blind monkeys at the regulatory agencies that allowed banks to lever up AAA-rated paper at a ratio of 70 to 1. That is, Citibank bought $70 of these phony AAAs with $1 of actual shareholders’ capital… When the crisis hit, the price of these supposed AAA-rated bonds collapsed, leaving Citi with losses multiplied by the 70:1 leverage factor. That’s why Citigroup went bankrupt (or would have except for repeated federal bailouts).

Old-school lefty Senator Bernie Sanders laments, “As a supporter of the President, I remain extremely concerned that virtually all of his key economic advisers have come from Wall Street. In my view, we need a Treasury Secretary who is prepared to stand up to corporate America and their powerful lobbyists and fight for policies that protect the working families in our country. I do not believe Mr Lew is that person. We don’t need a Treasury Secretary who thinks that Wall Street deregulation was not responsible for the financial crisis. We need a Treasury Secretary who will work hard to break up too-big-to-fail financial institutions.”

Senator Sanders’ heart is in the right place, but how well does he know his President? Here’s what Obama told Lew in “many meetings”: “You know my values. I trust your values.” This really shouldn’t come as a surprise. Who did Obama call “our Wall Street guy”? Why, the infamous (and as yet unapprehended) Jon Corzine.

Jon Stewart had some fun with Lew’s John Hancock January 10: “That’s your signature? Or are you just testing to see if the pen works?” But perhaps there’s more to it. Perhaps Lew’s eternal recursive is the perfect symbolic expression of our economic-political complex.

As Joni Mitchell sings, “And the seasons, they go round and round/And the painted ponies go up and down/We’re captive on the carousel of time/We can’t return, we can only look behind/From where we came/And go round and round and round/In the circle game.”

And the banksters go from the Ivy League to Wall Street to “public service” and round and round and round. The banksters get richer, and America gets bankrupter.

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