UC Davis Economics Professor: There Is No American Dream

DAVIS (CBS13) — A UC Davis economics professorhas determined there is no American Dream.
Gregory Clark is sharing his research as a hard truth with no hope—whether or not you can get ahead in America is as predictable as any formula.
In fact, he says, the formulas for social mobility in the United States show there’s nothing to dream about.
“America has no higher rate of social mobility than medieval England, Or pre-industrial Sweden,” he said. “That’s the most difficult part of talking about social mobility is because it is shattering people s dreams.”
Clark crunched the numbers in the U.S. from the past 100 years. His data shows the so-called American Dream—where hard work leads to more opportunities—is an illusion in the United States, and that social mobility here is no different than in the rest of the world.
“The status of your children, your grandchildren, your great grandchildren your great-great grandchildren will be quite closely related to your average status now,” he said.
UC Davis students CBS13 spoke to dismissed the findings.
“The parents’ wealth has an effect on ones life but it’s not the ultimate deciding factor,” Andy Kim said.
Clark has heard the naysayers before.
“My students always argue with me, but I think the thing they find very hard to accept, is the idea that much of their lives can be predicted from their lineage and their ancestry,” he said.
Stuck in a social status is no American Dream—Clark says it’s the American reality.
“The good news is that this is coming from an economist, because economists are used to being unpopular, and so we are the right people to bear this message that the world is a limiting place,” he said.
There’s one caveat to the study, and that is for any one of us, there is always an exception to the rule.
Clarks’ study was published by the Council on Foreign Relations.

http://sacramento.cbslocal.com/2014/11/26/uc-davis-economics-professor-there-is-no-american-dream/

Regin, new computer spying bug, discovered by Symantec

A leading computer security company says it has discovered one of the most sophisticated pieces of malicious software ever seen.

Symantec says the bug, named Regin, was probably created by a government and has been used for six years against a range of targets around the world.

Once installed on a computer, it can do things like capture screenshots, steal passwords or recover deleted files.

Experts say computers in Russia, Saudi Arabia and Ireland have been hit most.

It has been used to spy on government organisations, businesses and private individuals, they say.

Researchers say the sophistication of the software indicates that it is a cyber-espionage tool developed by a nation state.

They also said it likely took months, if not years, to develop and its creators have gone to great lengths to cover its tracks.

Sian John, a security strategist at Symantec, said: "It looks like it comes from a Western organisation. It's the level of skill and expertise, the length of time over which it was developed."

Symantec has drawn parallels with Stuxnet, a computer worm thought to have been developed by the US and Israel to target Iran's nuclear program.

That was designed to damage equipment, whereas Regin's purpose appears to be to collect information.

http://www.bbc.com/news/technology-30171614

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Russia-China trading settlements in yuan increases 800%

Settlements in yuan between China and Russia have increased ninefold in annual terms between January and September 2014, says the Chinese Ministry of Economic Development.

"The settlement in national currencies between China and Russia in bilateral trade amounted to about 2 percent in 2013. There has been a significant growth in 2014. In particular, the use of the yuan in mutual settlements increased nine times in the first nine months of 2014." TASS quotes Lin Zhi, head of the Europe and Central Asia Department of the Chinese Ministry of Economic Development.

READ MORE: Ruble-yuan settlements will cut energy sales in US dollars – Putin

"About 100 Russian commercial banks are now opening corresponding accounts for settlements in yuan. The list of commercial banks where ordinary depositors can open an account in yuan is also growing."the official said.

On November 18 Russia’s Sberbank became the first Russian bank to begin financing letters of credit in Chinese yuan.

READ MORE: Russia’s biggest bank launches financing in Chinese yuan

Half of the trade between Russia and China could be carried out in yuan and rubles provided China removes restrictions on currency transactions for Russian banks, said Deputy Finance Minister Aleksey Moiseyev in September. The restrictions don’t allow Russian banks to keep yuan received from exporters for a long time.

Russia and China have been boosting cooperation primarily in the financial and energy sectors and are planning to have a trade turnover of $200 billion by 2020.

Switching to settlements in domestic currencies can largely contribute to balancing the global economy by reducing the impact of the dollar on the world financial and energy markets, President Vladimir Putin said at the APEC Summit last week.

http://rt.com/business/207703-ruble-yuan-trade-turnover/

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The Real Reason Why Germany Halted Its Gold Repatriation From The NY Fed

Following the stunning announcement in January 2013 that the Bundesbank would repatriate 674 tons of gold from the NY Fed and the French Central Bank, a year later the Bundesbank followed up with a just as stunning revelation that of the 84 tons the bank was supposed to bring back home, it had managed to obtain just a paltry 37 tons, with only 5 tons originating from the NY Fed.
The reason given for this disappointing amount was as follows:

The Bundesbank explained [the low amount of US gold] by saying that the transports from Paris are simpler and therefore were able to start quickly." Additionally, the Bundesbank had the "support" of the BIS "which has organized more gold shifts already for other central banks and has appropriate experience - only after months of preparation and safety could transports start with truck and plane." That would be the same BIS that in 2011 lent out a record 632 tons of gold...

Going back to the main explanation, we wonder: how exactly is a gold transport "simpler" because it originates in Paris and not in New York? Or does the NY Fed gold travel by car along the bottom of the Atlantic, and is French gold transported by a Vespa scooter out of the country?

Supposedly, there was another reason: "The bullion stored in Paris already has the elongated shape with beveled edges of the "London Good Delivery" standard. The bars in the basement of the Fed on the other hand have a previously common form. They will need to be remelted [to LGD standard]. And the capacity of smelters are just limited."

Or, simply said, generic pretexts for a failure to follow through with the Bundesbank's original intention of redomiciling physical gold, especially after Zero Hedge posted in November 2012 proof of collusion between the 1968 Bank of England and the Fed seeking to defraud Deutsche Bank: 'Bank Of England To The Fed: "No Indication Should, Of Course, Be Given To The Bundesbank..."
The charade ended with a thud in June of this year, when instead of continuing the farce, Germany simply gave up, providing an even more laughable reason why it can no longer even pretend to collect its physical gold located at New York's 9 Liberty Street.

Germany has decided its gold is safe in American hands. “The Americans are taking good care of our gold,” Norbert Barthle, the budget spokesman for Merkel’s Christian Democratic bloc in parliament, said in an interview. “Objectively, there’s absolutely no reason for mistrust.”

And that was it: not a single word more from Germany on the topic of its failed gold repatriation initiative. Until this week, when Deutsche Bank - the bank which is Germany's equivalent to America' Goldman Sachs in terms of policy decision-making - once again revealed just what the true reason behind the failure of Germany's attempt to bring its gold back. From Robin Winkler's special report:

... the gold community paid great attention to the decision of the German Bundesbank to “bring German gold home”. At the beginning of 2013, the Bundesbank announced it would repatriate 300 tonnes of gold stored in the US by 2020. It is well behind schedule, citing logistical difficulties. Yet diplomatic difficulties are more likely to be the chief cause of the delay, especially seeing as the Bundesbank has proven its capacity to organise large-scale gold transports. In the early 2000s, the Bundesbank incrementally repatriated 930 tonnes of German gold held by the Bank of England.

Because if anyone knows what really happened behind the scenes in Germany, and inside closed doors at the Bundesbank, it is Deutsche Bank.
And there you have it: it wasn't transportation, or "good delivery standards" concerns, or anything remotely related to Germany "decididng its gold is safe in American hands", but just the opposite: Germany was pressured to keep its gold in the US after a "diplomatic" line of communication was opened, most likely the result of the Fed making it all too clear clear to the Bundesbank not only who runs the show, but what the assured failure to repatriate Germany's gold would mean for "price stability."
Which has, for now at least, ended Germany's gold repatriation demands.
Now the question is, just how will the US pressure the Swiss "diplomatically" to make sure its own gold repatriation referendum does not succeed. Because if Germany failed miserably to obtain 674 tons of gold in 2013, it is assured that Switzerland will find absolutely nothing in its quest to obtain more than double, or 1,500 tons, of gold as a successful November 30 referendum outcome would require.
Then again, considering it was Obama's action that destroyed the Swiss banking sector after the US crushed the centuries-long tradition of "Swiss banking anonymity", this could be just the right action with which "neutral" Switzerland could finally take its revenge on the regime that cost it what was for centuries the primary source of capital inflow into the small and so very prosperous (until then) central-European nation.
http://www.zerohedge.com/news/2014-11-16/real-reason-why-germany-halted-its-gold-repatriation-ny-fed

Lira looks set for comeback

Italy is heading for the exit. While it might seem fanciful for one of the founding members to consider leaving the euro, there is a growing sense that no more than a couple of years from now, Rome will once again be administering its own currency.

Figures last week revealed a country in deep crisis. With GDP still almost 10% smaller than before the financial crisis, it is stuck in a deep depression.

All efforts to revive the economy have failed, such is the sclerotic nature of its tax rules, business markets and labour laws. Combined, they have prevented progress to a more effective economy unencumbered by traditional subsidies and benefits.

Meanwhile, Spain and Ireland have contrived to push through reforms, bolster their banks, and move ahead. Even Greece’s economy is growing, according to the most recent official figures.

There was a time when Italy’s middle-income earners would dismiss talk of a euro exit. Their savings were held in euros and all their other assets, especially their property, enjoyed a secure value in the common currency. To leave the euro would be to court a huge drop in wealth.

That fear appears to be evaporating. Beppe Grillo’s Five Star Movement has moved its position to one of outright opposition to the euro. The comedian-turned-politician is promoting a petition to pull out. More broadly, promise after broken promise of growth has undermined support for Brussels and the European Central Bank.

Italians have waited three years for ECB boss Mario Draghi to copy the money-printing exercises at the Bank of England and US Federal Reserve. Draghi talks endlessly of pumping funds into the eurozone’s ailing economies, only to pull back. Last week he was at it again.

But even when a Draghi boost comes, it is unlikely to be effective. Italians know themselves. They need a currency devaluation. It is the only saviour. The Japanese have done it. And as the other major country funding a massive public sector debt, it looks like a good role model.

Make no mistake, a return to the lira will be painful. Yet it looks like something voters are willing to contemplate to stop the economy forever sliding backwards.

http://www.theguardian.com/world/2014/nov/16/lira-looks-set-for-comeback

Apple Now Worth More Than Entire Russian Stock Market

With Apple at record highs, its market capitalization is now bigger than Russia's entire stock market (the 20th largest market in the world). What's more,as Bloomberg notes, there would be enough money left over after selling Apple and buying Russia to purchase over 190 million contract-free 64Gb iPhone6 Pluses (enough for every Russian).

As Bloomberg adds,

If you owned Apple Inc., and sold it, you could purchase the entire stock market of Russia, and still have enough change to buy every Russian an iPhone 6 Plus.

...

Russia, the 20th largest among the world’s major markets, is not the only one Apple has surpassed. The company, which forecasts a record holiday-sales quarter and has $155 billion in cash, is also bigger than 17th-ranked Singapore and 18th-ranked Italy.

*  *  *

http://www.zerohedge.com/news/2014-11-14/apple-now-worth-more-entire-russian-stock-market 

Putin "Prepares For Economic War", Buys Whopping 55 Tonnes Of Gold In Q3

Just as China is buying 'cheap' oil with both hands and feet, so Russia, according to the latest data from The World Gold Council (WGC) has been buying gold in huge size. Dwarfing the rest of the world's buying in Q3, Russia added a stunning 55 tonnes to its reserves, as The Telegraph reports,Putin is taking advantage of lower gold prices to pack the vaults of Russia's central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West.

Russia bought more gold in Q3 then all other countries combined...

*  *  *

*  *  *

As The Telegraph reports,

Vladimir Putin's government is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 tonnes in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the rouble.

Russia's currency has come under intense pressure since US and European sanctions and falling oil prices started to hurt the economy. Revenues from the sale of oil and gas account for about 45pc of the Russian government's budget receipts.

In total, central banks around the world bought 93 tonnes of the precious metal in the third quarter, marking it the 15th consecutive quarter of net purchases. In its report, the World Gold Council said this was down to a combination of geopolitical tensions and attempts by countries to diversify their reserves away from the US dollar.

By the end of the year, central banks will have acquired up to 500 tonnes of gold during the latest buying spell, according to Alistair Hewitt, head of market intelligence at the World Gold Council.

"Central banks have been consistently adding to their gold holdings since 2009," Mr Hewitt told the Telegraph.

*  *  *

http://www.zerohedge.com/news/2014-11-13/putin-prepares-economic-war-buys-stunning-55-tonnes-gold-q3

SocGen Warns: "Now May Be The Time To Focus On The Short Side"

As US QE has come to an end, depriving the world of US$1 trillion printed dollars a year, SocGen's Andrew Lapthorne warns, there are stillplenty of things for investors to be concerned about. Indeed with asset prices where they are, investment returns look paltry from here on, as not only is there a long list of macroeconomic issues to worry about, but bottom-up firm level indicators are also flashing red. Valuations, as measured by median price to cash flow ratios, are near historical highs...

and the spread of company valuations within the market is near historical lows...

The implication is that downside risks are mispriced.

Throw in concerns over deteriorating earnings momentum, lacklustre earnings growth and poor earnings quality, and you have a set of variables that suggest it may be worthwhile to now focus on the short-side as much as on the long side.

*  *  *
So short strategies should be back on the menu

Steven Drobny of Drobny Capital is in the process of putting together his book "New House of Money" and Chapter 2, an interview with legendary short investor Jim Chanos of Kynikos Capital, is in this context chapters 1 and 2 are well worth a read.

The New House of Money - Chapter 2 - Jim Chanos

http://www.zerohedge.com/news/2014-11-12/socgen-warns-now-may-be-time-focus-short-side

Brazil Builds Its Own Fiber-Optic Network... To Avoid The NSA

Submitted by Simon Black via Sovereign Man blog,

This past week Brazil announced that it will be building a 3,500-mile fiber-optic cable to Portugal in order to avoid the grip of the NSA.

What’s more, they announced that not a penny of the $185 million expected to be spent on the project will go to American firms, simply because they don’t want to take any chances that the US government will tap the system.

It’s incredible how far now individuals, corporations, and even governments are willing to go to protect themselves from the government of the Land of the Free.

The German government, especially upset by the discovery of US spying within its borders, has come up with a range of unique methods to block out prying ears.

They have even gone so far as to play classical music loudly over official meetings so as to obfuscate the conversation for any outside listeners.

They’ve also seriously contemplated the idea of returning back to typewriters to eliminate the possibilities of computer surveillance.

More practically, the government of Brazil has banned the use of Microsoft technologies in all government offices, something that was also done in China earlier this year.

The Red, White, and Blue Scare has now replaced the Red Scare of the Cold War era. And it comes at serious cost.

From Brazil’s rejection of American IT products alone, it is estimated that American firms will lose out on over $35 billion in revenue over the next two years.

Thus, as the foundation of the country’s moral high-ground begins to falter, so does its economic strength.

The irony should not be lost on anyone; on a day when Americans celebrate their veterans’ courage in fighting against the forces of tyranny in the world, we find yet another example of where the rest of the world sees the source of tyranny today.

It’s amazing how much things have changed.

In the past, the world trusted America with so much responsibility.

The US dollar was the world’s reserve currency. The US banking system formed the foundation of the global banking system. US technology became the backbone of the global Internet.

But the US government has been abusing this trust for decades.

Today the rest of the world realizes they no longer need to rely on the US as they once did.

And in light of so much abuse and mistrust, they’re eagerly creating their own solutions.

Just imagine—if Brazil is building its own fiber optic cable to avoid the NSA, it stands to reason that they would create their own alternatives in the financial system to directly compete with the IMF and the US dollar.

Oh wait, they’re already doing that too. Fool me twice, shame on me.

http://www.zerohedge.com/news/2014-11-12/brazil-builds-its-own-fiber-optic-network-avoid-nsa

Russia To Have SWIFT Alternative By May

As the West (US and its pressured allies) attempt to 'isolate' Russia more and more, the inevitable cornering further and further incentivizes Putin to develop alternatives to the status quo. In the past, western sanctioners have sabre-rattled cutting off Russian from SWIFT - the international inter-bank payment system - as a next step in squeezing the oligarchs into submission (though 'independent' SWIFT distanced itself from those calls). Now however, as RT reports, Russia intends to have its own international inter-bank system up and running by May 2015. The Central of Russia says it needs to speed up preparations for its version of SWIFT in case of possible ”challenges” from the West. If successful, this would pose a further challenge to the USD's reign as sanction blowback reverberates once again.

As RT reports,

Russia intends to have its own international inter-bank system up and running by May 2015. The Central of Russia says it needs to speed up preparations for its version of SWIFT in case of possible ”challenges” from the West.

"Given the challenges, Bank of Russia is creating its own system for transmitting financial messaging... It’s time to hurry up, so in the next few months we will have certain work done. The entire project for transmitting financial messages will be completed in May 2015," said Ramilya Kanafina, deputy head of the national payment system department at the Central Bank of Russia (CBR).

Calls not to use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system in Russian banks began to grow as relations between Russia and the West deteriorated over sanctions. So far, SWIFT says despite pressure from some Western countries to join the anti-Russian sanctions, it has no intention of doing so.

Ramilya Kanafina says the system will meet all the market requirements due to its security. A center for processing messages in SWIFT format is in the process of development. It is expected that all messaging options will be operating by December 2014, she added.

The National Payments Council, a non-profit partnership comprising members of the Russian national payment system, proposed establishing a Russian version of SWIFT 100 percent owned by Bank of Russia in September.

SWIFT, is currently one of Russia’s main connections to the international banking system, and if turned off, could hurt the Russian economy, in the short-term. Globally it transmits orders for transactions worth more than $6 trillion, and involves more than 10,000 financial institutions in 210 countries. According to SWIFT’s statute, the system has national groups of members and users in each country. In Russia it’s ROSSWIFT - the second biggest worldwide SWIFT association after the US.

http://www.zerohedge.com/news/2014-11-12/russia-have-swift-alternative-may 

Regulators fine banks $3.1bn+ for FX rates manipulation

The UK’s Financial Conduct Authority (FCA) and the US Commodity Futures Trading Commission (CFTC), in a concerted action have imposed fines totalling $3.1bn on five banks for failing to control business practices in their G10 spot foreign exchange (FX) trading operations.Citibank, fined £225,575,000 ($358m), HSBC Bank Plc £216,363,000 ($343m), JPMorgan Chase Bank £222,166,000 ($352m), The Royal Bank of Scotland Plc £217,000,000 ($344m) and UBS AG £233,814,000 ($371m) by the FCA are in the spotlight as “failings at these banks undermine confidence in the UK financial system and put its integrity at risk,” charges the regulator. In the United States, the orders from the CFTC collectively impose over $1.4bn in civil monetary penalties, specifically: $310m each for Citibank and JPMorgan, $290m each for RBS and UBS, and $275m for HSBC.

The fines follow a year-long investigation by the FCA into claims that the foreign exchange market - in which banks and other financial firms buy and sell currencies between one another, was being rigged. In April this year the FCA said it was particularly looking into the way that firms reduce the risk of traders manipulating benchmarks; ensure confidentiality and control conflicts of interest. It also reviewed compliance with new regulations on the London Interbank Offer Rate (Libor), which were introduced in April 2013 following a number of enforcement actions for attempted manipulation of the benchmark.
The FCA found that between January 1st 2008 and October 15th 2013, ineffective controls at the banks allowed G10 spot FX traders to put their banks’ interests ahead of their clients, “other market participants and the wider UK financial system. The banks failed to manage obvious risks around confidentiality, conflicts of interest and trading conduct. These failings allowed traders at those banks to behave unacceptably. They shared information about clients’ activities which they had been trusted to keep confidential and attempted to manipulate G10 spot FX currency rates, including in collusion with traders at other firms, in a way that could disadvantage those clients and the market”.

- See more at: http://www.ftseglobalmarkets.com/news/regulators-fine-banks-$31bn-for-fx-rates-manipulation.html#sthash.ERGYGCRH.dpuf

Regulators fine banks $3.1bn+ for FX rates manipulation - See more at: http://www.ftseglobalmarkets.com/news/regulators-fine-banks-$31bn-for-fx-rates-manipulation.html#sthash.ERGYGCRH.dpuf

China's Latest Ghost Town: A $50 Billion Fake Replica Of Manhattan

"They are building stuff that nobody really wants or needs... and there will be a day of reckoning" sums up yet another mega ghost city project under development in China. As NBC News reports, China's $50-billion knock-off of the Big Apple - near the port city of Tianjin, some 120 miles from Beijing - complete with its own Rockefeller Center and Twin Towers has been billed as the world's largest financial center in the making. But this Manhattan still has a long way to go...

Ian Williams explains nothing has improved in China since we last highlighted the ghost city phenomenon [6]...

As NBC News reports, [7]

China's $50-billion knock-off of the Big Apple sits on a river bend — much like its namesake — near the port city of Tianjin, some 120 miles from Beijing. Complete with its own Rockefeller Center and Twin Towers, it's been billed as the world's largest financial center in the making. But this Manhattan still has a long way to go.

A recent visit shows that construction that began in 2008 on the back of a massive credit boom unleashed in China after the global financial crisis appears to have ground to a halt. While the stunted version of “Rockefeller Center” and its Twin Towers appeared to be complete — both were empty and fenced off.

"It’s the financial crisis. The impact is big," said one man on the site who preferred not to be identified but said he worked for a transportation company. "I think there are still working on a building over there," he added, pointing down a wide and empty highway, strewn with litter.

...

It was scheduled for completion in 2019, offering 164 million square feet of office space over an area larger than Manhattan's financial district in a bid to stimulate development of vast residential districts nearby.

"They are building stuff that nobody really wants or needs — and there will come a day of reckoning," explained Gillem Tulloch, a Hong Kong-based analyst and managing director of GMT Research who has studied the growth of China's "ghost cities" across the country.

...

"Our leading economists in the West were lauding the Soviet-style system from the 1950s up until the 1980s," he said. "They were all wrong. I think it’s the same with China."

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 [8]

 [9]

http://www.zerohedge.com/print/497636

Former Goldman Banker Reveals The Path To The Next Depression And Stock Market Collapse

Submitted by Nomi Prins, author of "All The Presidents' Bankers", via NomiPrins.com,

A funny thing happened on the way to the ‘end’ of the multi-trillion dollar bond buying program known as QE - the Fed chronicles. Aside from the shift to a globalization of QE via the European Central Bank (ECB) and Bank of Japan (BOJ) as I wrote about earlier, what lingers in the air of “post-taper” time is an absence of absence. For QE is not over. Instead, in the United States, the process has simply morphed from being predominantly executed by the Federal Reserve (Fed) to being executed by its major private bank members. Fed Chair, Janet Yellen, has failed to point this out in any of her speeches about the labor force, inflation, or inequality. 

The financial system has failed and remains a threat to us all. Only cheap money and the artificial inflation of asset values can make it appear temporarily healthy. Yet, the Fed (and the Obama Administration) continue to perpetuate the illusion that making the cost of (printed) money zero by any means has had a positive effect on the population at large, when in fact, all that has occurred is a pass-the-debt-ponzi-scheme co-engineered by the Fed and big US bank beneficiaries. That debt, caught in the crossfires of this central-private bank arrangement, is still doing nothingfor American citizens or the broader national or global economy. 

The Fed is already the largest hedge fund in the world, with a book of $4.5 trillion of assets. These will plummet in value if rates rise.  Cue the banks that are gearing up their own (still small in comparison, but give them time) role in this big bamboozle. By doing so, they too are amassing additional risk with respect to interest rates rising, on top of all their other risk that counts on leveraging cheap money.

Only the super naïve could possibly believe that the Fed and its key banks haven’t been in regular communication about this US Treasury security shell game.  Yet, aside from a few politicians, such as former Congressman Ron Paul, Congressman Sherrod Brown and Senators Bernie Sanders and Elizabeth Warren, the notion that Fed policy has helped bankers, rather than other people, remains largely divorced from bi-partisan political discussion. 

Adding more fuel to the central-private bank collusion fire, is the fact that the Fed is a paying client of the JPM Chase. The banking behemoth is bagging fees for holding and executing transactions on the $1.7 trillion New York Fed’s QE mortgage portfolio, as brilliantly exposed by Pam Martens and Russ Martens.

Wouldn’t it be convenient if JPM Chase was also trading this massive mortgage book for its own profits? Or rather - why wouldn’t they be?  Who’s going to stop them – the Fed? Besides, they hold more trading assets than any other US bank, so why not trade the Fed’s securities ostensibly purchased to help the public - recover?

According to call report data compiled by the extremely thorough website www.BankRegData.com, nearly 97% of all bank trading assets (including US Treasuries) are held by just 10 banks, led by JPM Chase with 43.80% and followed by Citigroup at 24.51% of all bank trading assets.

Last quarter, US Treasuries were the fastest growing form of security bought by banks, increasing by 26.3% or $72 billion over the prior quarter. As the Fed tapered, banks stepped in to do their part in the coordinated Fed-private bank QE game. In the past year, banks have added $185.8 billion of US Treasuries to their books, more than doubling their share of government debt.

Just seven banks comprised nearly all ($70.5 billion) of this quarterly increase: State Street Bank, Capital One, JPM Chase, Wells Fargo, Bank of America, Bank of NY Mellon and Citigroup. By the end of the third quarter of 2014, Citigroup, with $95 billion, was the largest holder of US Treasuries, followed by Bank of America at $54.8 billion and Wells Fargo at $37.8 billion from nearly zero at the start of 2014. Bank of NY Mellon holds $25.3 billion and JPM Chase holds $15 billion US Treasuries.

This increase in US Treasury holdings reflects another easy money element of our federally subsidized banking system. Banks take deposits from individuals for which they pay close to zero in interest, in fact, charge customers fees for keeping their money  (courtesy of the Fed’s Zero-Interest-Rate policy.) They can turn that around to make a cool risk-free 2.3% by parking the money in 10-year US Treasuries. Why lend to Joe the Plumber, when the US government is providing such a great deal?

But, the recent timing here is key. Banks only started buying US Treasuries in earnest when the Fed announced its tapering plans. Thus, not only are they participants in the ZIRP game as recipients of cheap money, they are complicit in effecting monetary policy. As the data analyzed so expertly by Bill Moreland at www.BankRegData.com makes clear, there has been no taper.  Thus, the publicized reason for tapering – better job and economic growth – is also bogus.

During the third quarter, Wells Fargo and Bank of America matched Fed purchases of US Treasuries, keeping the total amount of US Treasuries in QE land neutral. With such orchestration to keep rates down and the prices of US Treasury securities up, all the talk about whether the labor force is strengthening or inflation exists or not is mere show. Banks haven’t even propped up the labor market in their own industry. They chopped 11,400 jobs last quarter. In the past two years, they cut 57,236 jobs.  

No one in either political party mentioned any of this during the mid-term elections. Yet, our political-financial system has gone from the dysfunctional to the failed to the surreal. Speculation, once left to individuals and investors, is now federally sponsored, subsidized and institutionalized.  When this sham finally buckles and the next shoe falls and rates do eventually rise, the stock market will tank, liquidity will die, and the broader economy will plunge into a worse Depression than before. We are not there yet because of these coordinated moves and the political force behind them. But we are on a precarious path to that inevitability. 

http://www.zerohedge.com/news/2014-11-11/former-goldman-banker-reveals-path-next-depression-and-stock-market-collapse

BofA: "Change Your Thinking On Gold" Friday Marked The End Of A 4 Year Decline

For the week ahead, BofAML's MacNeil Curry is focused on the plight of the USDollar, US Treasuries, and commodities; especially gold and oil. All of these markets, he warns, are showing signs of changes in trend. Most notably, Curry explains, we are switching gears on gold from bearish to bullish, "Friday's gains are just the beginning."

Via BofAML's MacNeil Curry,

Gold: Friday's gains are just the beginning

Change your thinking on Gold.

Friday's Bullish Reversal / Bullish Engulfing Candle marks the end of a 4yr decline and the beginning of a medium term bull trend.

Initial targets are seen to 1241/55 ahead of 1345 and potentially as far as 1433.

Buy dips.

*  *  *

And positioning has shifted to a notable bearish position...

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So far no good as gold and silver are giving back Friday's gains...

http://www.zerohedge.com/news/2014-11-10/bofa-change-your-thinking-gold-friday-marked-end-4-year-decline

Saxobank CIO Warns We're About To See A Full-Scale Currency War

There's increasing risk we'll soon see a "significant paradigm shift" from China in its attitude to the strength of its currency, warns Saxobank CIO and Chief Economist Steen Jakobsen. He says we're about to see a full-scale currency war, notably between China and Japan, two of the world's greatest exporting countries.

There are a number of important world meetings over the coming few weeks and the Chinese will be "very vocal", says Steen, as it's getting increasingly worried about its loss of growth momentum. The yuan has strengthened significantly in recent weeks while the yen has declined substantially. The country's determined, he says, to refocus and maintain its export share of total growth.

Source: Saxo Group's Trading Floor

http://www.zerohedge.com/news/2014-11-10/saxobank-cio-warns-were-about-see-full-scale-currency-war