Gold Market Update – Nov 7, 2011
by David Levenstein
Gold, a Hedge Against the Financial Predators of Our Society.
As far as I am concerned, corrupt governments that engage in reckless spending, banks and financial institutions that defraud, lie and deceive their own customers are all financial predators. Governments and politicians are meant to serve the people and not themselves so when they spend money on their own personal indulgences, or in futile wars and aid programed which only enrich the leaders of impoverished nations, in effect they are squandering tax payer’s money. And, when governments debase their own currencies reducing the purchasing power of their national currency, they are impoverishing their middle-class who rely on their savings for retirement.
Yet, these very governments use all sorts of media tactics to take the blame from themselves and instead blame individuals.
Sometimes I wonder if what I see and hear on TV is for real. The amount of fraud going on with US banks is unbelievable, and now governments can’t even afford to service their own debts without having to resort to trickery such as suspending “mark-to-market” accounting rules and printing more money to buy their own bonds (effectively a Ponzi scheme). Frankly, all they are doing is perpetuating the chaos that is already occurring in the currency markets. Yet, the regulators simply make it more difficult and more frustrating for the average person to go about his daily banking business.
Prior to September 11, 2001, banking was so much easier and not everyone was regarded as a money launderer, drug dealer, arms dealer, or terrorist. But, thanks to the US government a new legislation introduced post 9/11, beguiled individuals around the world into believing that in an attempt to curtail the flow of funds to terrorist organizations, a new law “know your customer,” was necessary. Suddenly, individuals around the world were harassed by their banks. Even though they may have held accounts at their banks for many years, they were forced to provide all sorts of meaningless documentation. And, new account holders were given an even more difficult time.
Suddenly, all your hard earned cash was not wanted. And, heaven help you if you wanted to deposit a little more than a few thousand dollars in cash. Now you have to give an explanation as to why you have some money. This egregious act has little to do with money laundering and financing terrorism, and has more to do with governments expanding their network of tax payers who they can then pillage. Money launderers, criminals and terrorists can all provide proof or residence. And, someone depositing a few thousand dollars is hardly going to be a threat to world stability. Sure, I would understand if some red lights flashed if someone walked into a bank with several hundred million in cash, but not a paltry sum of say ten thousand dollars.
At a recent forum, OECD Secretary-General Angel Gurria congratulated the delegates and said. “At a time of stalled economies and a crisis of politics, your collective tax work is a tangible example of countries moving together in a mutually beneficial direction that will help those trying to extricate themselves from the crisis. Governments have signed more than 700 agreements to exchange tax information. We know that 20 countries have taken advantage of this more transparent environment, putting in compliance initiatives which have already yielded €14 billion in additional revenues from more than 100 000 wealthy tax payers who had hidden assets offshore and that there’s more in the pipeline.”
In a frightening contrast, the US federal government’s debt increased by $203,368,715,583.63 in the month of October. This is more than 16 times the amount recovered from 100,000 tax payers and it happened in one month! At the end of September, the total national debt stood at $14,790,340,328,557.15 and by the end of October, it had risen to $14,993,709,044,140.78.
With so much effort and time Gurria proudly stated how much they had recovered from more than 100, 000 individuals. Yet, with less effort and time, a handful of governments, banks and financial institutions could save hundreds of billions never mind a few billion by simply stop squandering tax payer’s money. How many billions have been wasted in futile wars and how many billion in foreign aid have merely enriched the political leaders of those countries. But, if we add the billions governments have squandered in reckless spending; the amount recovered from 100,000 wealthy tax payers is miniscule. And, instead of threatening hard working individuals, organizations such as the OECD should be spending more time monitoring the activities of their own members’ governments.
Although the mission of the Organization for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world, all it has done is make sure that world governments have unfettered access to financial transactions. Many governments even want to ban cash transactions over a certain amount. The OECD is funded by its member countries. National contributions are based on a formula which takes account of the size of each member’s economy. The largest contributor is the United States, which provides nearly 24% of the budget, followed by Japan. Is it any wonder why they do what they are told by the US government?
As this organization tries to cripple offshore banking and as individuals right to privacy is invaded by banks and financial institutions, theses very same companies, are the ones lying, cheating and deceiving customers. It is the retail customer that should be doing due diligence on these companies and not the other way around.
In recent years, the amount of bank fraud going on, particularly in the USA, is unbelievable. Well-known banks are being sued for securities fraud, mortgage backed securities fraud, insider dealing, and lying to clients… the list of claims is endless.
In June of 2007, Morgan Stanley agreed to pay $4.4 million to settle a class-action lawsuit with brokerage clients who bought precious metals and paid storage fees, when in fact it was alleged that Morgan Stanley wasn’t physically storing their gold and silver at all.
Last April, the Securities and Exchange Commission (SEC) targeted Goldman Sachs in a civil fraud case. The lawsuit alleged Goldman sold investors a synthetic collateralized debt obligation (CDO) linked to the performance of certain mortgages without disclosing that John Paulson’s hedge fund, Paulson & Co., helped design the CDO (named Abacus) and was shorting it. As mortgage prices collapsed, the buyers of Abacus – including ACA Financial and German bank IKB – lost nearly $1 billion.
On July 15, 2010, Goldman settled with the SEC for $500 million. The bank neither admitted nor denied the allegations. It said the marketing materials for Abacus contained “incomplete” information.
JP Morgan Chase was fined $228 million for a bid-rigging scheme involving municipal bonds. The Chase ruling is the latest to come down in a series of fines involving a number of banks, including Bank of America and UBS. This scam that Chase, Bank of America and UBS were involved with was no different in any way, really, from old-school mafia-style bid-rigging scams.
What these banks did is they got together and carved up territory between them, arranging things so that they wouldn’t be bidding against each other in municipal debt auctions. That means the 18 different states involved in these 93-odd deals all got screwed out of the best prices, leaving the taxpayers in those places severely overcharged for their public borrowing.
A few months ago, the Federal Reserve slapped an $85 million fine on Wells Fargo & Co for allegedly steering borrowers into high-cost subprime mortgage loans even though they qualified for safer loans. The fine is the largest civil monetary penalty the Fed has ever assessed in a consumer-protection enforcement action, the central bank said.
Recently, Harry Markopolis the man who brought down Bernie Madoff’s $65 billion Ponzi scheme told King World News that, “Bank of New York is going to go down, Eric. Between Bank of New York Mellon and State Street, these two institutions have stolen between $6 to $10 billion from tens of millions of Americans retirement savings accounts. It’s been a hell of a crime spree for the bank, but now they are being brought to justice.” Markopolos has led the team that spearheaded this investigation from the beginning. Harry and his team were the first to expose this fraud. Markopolos also told KWN, “The New York Attorney General filed suit on Tuesday (against Bank of New York Mellon) for stealing money from pension funds on currency transactions. This theft has been from tens of millions of Americans, policemen, firemen, librarians, municipal workers, judges and the list goes on and on and they’ve been doing it for decades.
Just more than a week ago, Goldman Sachs Group was hit with a new $1.07 billion lawsuit for having allegedly sold risky debt that it expected would tumble in value to an Australian hedge fund, causing that fund to become insolvent. The lawsuit by the Basis Yield Alpha Fund alleges fraud, breach of contract and negligence, and seeks to recoup $67 million of losses plus $1 billion of punitive damages.
Last week, MF Global, one of the largest Futures Commissions Merchants (FCM) in the world filed for bankruptcy. On Monday, The Federal Reserve Bank of New York said that it has suspended MF Global from conducting business with the bank.
Initially, MF Global couldn’t account for nearly $1 billion. That amount has since dropped to $700 million. Then, in statement released, all of the missing money was being held by JP Morgan. But, JP Morgan Chase denied this and said that like other banks, it has been holding MF funds and awaiting instructions from the bankrupt company’s trustee. The bank said the funds are not the missing client funds and the account has always been “transparent” to MF and its trustee. Regardless, something’s amiss.
A few years ago, MF Global took over the company REFCO, which was at the time the largest FCM in the world. At one time, I was trying to establish an IB for REFCO in South Africa and they hit me with pages and pages of questions, all in the name of this ridiculous law – “know your customer”. They called it compliance. At times I was so agitated at some of the plain dumb questions that I had to answer, I almost gave up with the idea. But here’s the kicker. After I finally passed their due diligence, REFCO filed for bankruptcy after their CEO had allegedly swindled the company of half a billion. That is when MF Global stepped in. Today, both REFCO and MF Global are bankrupt and a small company such as mine is still going strong. I only wish I had done due diligence on both these companies.
In 2008 a client of mine who lives in Indonesia suffered an enormous loss. His dream house burned down. When submitted his claim to his insurance company which was AIG, they refused to pay him. He then took legal action against AIG, and even his attorneys were totally ineffective. He then submitted an article about his ordeal to one of the newspapers in Indonesia. Before publishing his article the newspaper contacted AIG for their side of the story. The article did not go into print because AIG eventually settled 80% of his claim. This ordeal took my client 16 months. But when AIG was in trouble, the US FED bailed them out in a matter of days or was it hours.
I could continue, but suffice to say, the best thing any individual can do is to protect their wealth by investing in precious metals, in particular gold and silver. There is no third-party risk so you never have to worry about being cheated. Provided you have your core holding kept somewhere safe and preferably away from any bank, when the global monetary system collapses, you will be fully protected. Since it seems that governments are not going to change their monetary policy we can expect them to print more money. The consequence of this action will be a decline in value of these respective currencies and your wealth will slowly disintegrate… the purchasing power of your money held on deposit at the bank will become worth less. For centuries, gold and silver have acted as a hedge against the declining values of these fiat currencies, and if history repeats again, the outcome will be the same. We are already seeing, governments imposing more controls on the flows of money, increased currency wars, and unstable currencies. And, it seems that the current state of the global monetary system is not improving but deteriorating. And, as I have been stating for years, this is why everyone should own some gold and silver. It is also important to keep some of your assets away from the main-stream banking system and use the facilities offered by offshore banks.
Act now, before it is too late. Add gold and silver to your investment portfolios.
TECHNICAL ANALYSIS
There are some positive signs developing in the price of gold, mainly good support above $1700 as well as $1750. Also, the price of gold has pushed through the 50 day MA. I expect prices to breach $1800 an ounce shortly.
By David Levenstein
****
About the author: David Levenstein is a leading expert on investing in precious metals. Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.
His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. The largest gold refinery in the world use his daily and weekly commentaries on gold.
David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.
For more information go to: www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.
