City of London, the plutocracy that run the world

The medieval, unaccountable Corporation of London is ripe for protest

Working beyond the authority of parliament, the Corporation of London undermines all attempts to curb the excesses of finance

• 
• • George Monbiot
  • The Guardian, Monday 31 October 2011 21.00 GMT
  • 
    

Illustration by Daniel Pudles

It's the dark heart of Britain, the place where democracy goes to die, immensely powerful, equally unaccountable. But I doubt that one in 10 British people has any idea of what the Corporation of the City of London is and how it works. This could be about to change. Alongside the Church of England, the Corporation is seeking to evict the protesters camped outside St Paul's cathedral. The protesters, in turn, have demanded that it submit to national oversight and control.

What is this thing? Ostensibly it's the equivalent of a local council, responsible for a small area of London known as the Square Mile. But, as its website boasts, "among local authorities the City of London is unique". You bet it is. There are 25 electoral wards in the Square Mile. In four of them, the 9,000 people who live within its boundaries are permitted to vote. In the remaining 21, the votes are controlled by corporations, mostly banks and other financial companies. The bigger the business, the bigger the vote: a company with 10 workers gets two votes, the biggest employers, 79. It's not the workers who decide how the votes are cast, but the bosses, who "appoint" the voters. Plutocracy, pure and simple.

There are four layers of elected representatives in the Corporation: common councilmen, aldermen, sheriffs and the Lord Mayor. To qualify for any of these offices, you must be a freeman of the City of London. Tobecome a freeman you must be approved by the aldermen. You're most likely to qualify if you belong to one of the City livery companies: medieval guilds such as the worshipful company of costermongers, cutpurses and safecrackers. To become a sheriff, you must be elected from among the aldermen by the Livery. How do you join a livery company? Don't even ask.

To become Lord Mayor you must first have served as an alderman and sheriff, and you "must command the support of, and have the endorsement of, the Court of Aldermen and the Livery". You should also be stinking rich, as the Lord Mayor is expected to make a "contribution from his/her private resources towards the costs of the mayoral year." This is, in other words, an official old boys' network. Think of all that Tory huffing and puffing about democratic failings within the trade unions. Then think of their resounding silence about democracy within the City of London.

The current Lord Mayor, Michael Bear, came to prominence within the City as chief executive of the Spitalfields development group, which oversaw a controversial business venture in which the Corporation had a major stake, even though the project lies outside the boundaries of its authority. This illustrates another of the Corporation's unique features. It possesses a vast pool of cash, which it can spend as it wishes, without democratic oversight. As well as expanding its enormous property portfolio, it uses this money to lobby on behalf of the banks.

The Lord Mayor's role, the Corporation's website tells us, is to "open doors at the highest levels" for business, in the course of which he "expounds the values of liberalisation". Liberalisation is what bankers call deregulation: the process that caused the financial crash. The Corporation boasts that it "handle[s] issues in Parliament of specific interest to the City", such as banking reform and financial services regulation. It also conducts "extensive partnership work with think tanks … vigorously promoting the views and needs of financial services." But this isn't the half of it.

As Nicholas Shaxson explains in his fascinating book Treasure Islands, the Corporation exists outside many of the laws and democratic controls which govern the rest of the United Kingdom. The City of London is the only part of Britain over which parliament has no authority. In one respect at least the Corporation acts as the superior body: it imposes on the House of Commons a figure called the remembrancer: an official lobbyist who sits behind the Speaker's chair and ensures that, whatever our elected representatives might think, the City's rights and privileges are protected. The mayor of London's mandate stops at the boundaries of the Square Mile. There are, as if in a novel by China Miéville, two cities, one of which must unsee the other.

Several governments have tried to democratise the City of London but all, threatened by its financial might, have failed. As Clement Attlee lamented, "over and over again we have seen that there is in this country another power than that which has its seat at Westminster." The City has exploited this remarkable position to establish itself as a kind of offshore state, a secrecy jurisdiction which controls the network of tax havens housed in the UK's crown dependencies and overseas territories. This autonomous state within our borders is in a position to launder the ill-gotten cash of oligarchs, kleptocrats, gangsters and drug barons. As the French investigating magistrate Eva Joly remarked, it "has never transmitted even the smallest piece of usable evidence to a foreign magistrate". It deprives the United Kingdom and other nations of their rightful tax receipts.

It has also made the effective regulation of global finance almost impossible. Shaxson shows how the absence of proper regulation in London allowed American banks to evade the rules set by their own government. AIG's wild trading might have taken place in the US, but the unit responsible was regulated in the City. Lehman Brothers couldn't get legal approval for its off-balance sheet transactions in Wall Street, so it used a London law firm instead. No wonder priests are resigning over the plans to evict the campers. The Church of England is not just working with Mammon; it's colluding with Babylon.

If you've ever dithered over the question of whether the UK needs a written constitution, dither no longer. Imagine the clauses required to preserve the status of the Corporation. "The City of London will remain outside the authority of parliament. Domestic and foreign banks will be permitted to vote as if they were human beings, and their votes will outnumber those cast by real people. Its elected officials will be chosen from people deemed acceptable by a group of medieval guilds …".

The Corporation's privileges could not withstand such public scrutiny. This, perhaps, is one of the reasons why a written constitution in the United Kingdom remains a distant dream. Its power also helps to explain why regulation of the banks is scarcely better than it was before the crash, why there are no effective curbs on executive pay and bonuses and why successive governments fail to act against the UK's dependent tax havens.

But now at last we begin to see it. It happens that the Lord Mayor's Show, in which the Corporation flaunts its ancient wealth and power, takes place on 12 November. If ever there were a pageant that cries out for peaceful protest and dissent, here it is. Expect fireworks – and not just those laid on by the Lord Mayor.

Who Owns The Federal Reserve?

By Ellen Brown

Global Research, January 29, 2013

Url of this article:
http://www.globalresearch.ca/who-owns-the-federal-reserve/10489

“Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”

– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s

The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JPMorgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JPMorgan, sits on the board of the New York Fed and participated in the secret weekend negotiations.1 In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a “government takeover,” but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency. Also unprecedented was the way the deal was funded. The Associated Press reported:

“The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs.”2

This is extraordinary. Why is the Treasury issuing U.S. government bonds (or debt) to fund the Fed, which is itself supposedly “the lender of last resort” created to fund the banks and the federal government? Yahoo Finance reported on September 17:

“The Treasury is setting up a temporary financing program at the Fed’s request. The program will auction Treasury bills to raise cash for the Fed’s use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.”

Normally, the Fed swaps green pieces of paper called Federal Reserve Notes for pink pieces of paper called U.S. bonds (the federal government’s I.O.U.s), in order to provide Congress with the dollars it cannot raise through taxes. Now, it seems, the government is issuing bonds, not for its own use, but for the use of the Fed! Perhaps the plan is to swap them with the banks’ dodgy derivatives collateral directly, without actually putting them up for sale to outside buyers. According to Wikipedia (which translates Fedspeak into somewhat clearer terms than the Fed’s own website):

“The Term Securities Lending Facility is a 28-day facility that will offer Treasury general collateral to the Federal Reserve Bank of New York’s primary dealers in exchange for other program-eligible collateral. It is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. . . . The resource allows dealers to switch debt that is less liquid for U.S. government securities that are easily tradable.”

“To switch debt that is less liquid for U.S. government securities that are easily tradable” means that the government gets the banks’ toxic derivative debt, and the banks get the government’s triple-A securities. Unlike the risky derivative debt, federal securities are considered “risk-free” for purposes of determining capital requirements, allowing the banks to improve their capital position so they can make new loans. (See E. Brown, “Bailout Bedlam,” webofdebt.com/articles, October 2, 2008.)

In its latest power play, on October 3, 2008, the Fed acquired the ability to pay interest to its member banks on the reserves the banks maintain at the Fed. Reuters reported on October 3:

“The U.S. Federal Reserve gained a key tactical tool from the $700 billion financial rescue package signed into law on Friday that will help it channel funds into parched credit markets. Tucked into the 451-page bill is a provision that lets the Fed pay interest on the reserves banks are required to hold at the central bank.”3

If the Fed’s money comes ultimately from the taxpayers, that means we the taxpayers are paying interest to the banks on the banks’ own reserves – reserves maintained for their own private profit. These increasingly controversial encroachments on the public purse warrant a closer look at the central banking scheme itself. Who owns the Federal Reserve, who actually controls it, where does it get its money, and whose interests is it serving?

Not Private and Not for Profit?

The Fed’s website insists that it is not a private corporation, is not operated for profit, and is not funded by Congress. But is that true? The Federal Reserve was set up in 1913 as a “lender of last resort” to backstop bank runs, following a particularly bad bank panic in 1907. The Fed’s mandate was then and continues to be to keep the private banking system intact; and that means keeping intact the system’s most valuable asset, a monopoly on creating the national money supply. Except for coins, every dollar in circulation is now created privately as a debt to the Federal Reserve or the banking system it heads.4 The Fed’s website attempts to gloss over its role as chief defender and protector of this private banking club, but let’s take a closer look. The website states:

* “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations – possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.”

* “[The Federal Reserve] is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.”

* “The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. . . . After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.”5

So let’s review:

1. The Fed is privately owned.

Its shareholders are private banks. In fact, 100% of its shareholders are private banks. None of its stock is owned by the government.

2. The fact that the Fed does not get “appropriations” from Congress basically means that it gets its money from Congress without congressional approval, by engaging in “open market operations.”

Here is how it works: When the government is short of funds, the Treasury issues bonds and delivers them to bond dealers, which auction them off. When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. These maneuvers are called “open market operations” because the Fed buys the bonds on the “open market” from the bond dealers. The bonds then become the “reserves” that the banking establishment uses to back its loans. In another bit of sleight of hand known as “fractional reserve” lending, the same reserves are lent many times over, further expanding the money supply, generating interest for the banks with each loan. It was this money-creating process that prompted Wright Patman, Chairman of the House Banking and Currency Committee in the 1960s, to call the Federal Reserve “a total money-making machine.” He wrote:

“When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check.”

3. The Fed generates profits for its shareholders.

The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.

In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in “reserve” can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total “loans and leases in bank credit” as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.

The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ — for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks.

Time to Change the Statute?

According to the Fed’s website, the control Congress has over the Federal Reserve is limited to this:

“[T]he Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute.”

As we know from watching the business news, “oversight” basically means that Congress gets to see the results when it’s over. The Fed periodically reports to Congress, but the Fed doesn’t ask; it tells. The only real leverage Congress has over the Fed is that it “can alter its responsibilities by statute.” It is time for Congress to exercise that leverage and make the Federal Reserve a truly federal agency, acting by and for the people through their elected representatives. If the Fed can demand AIG’s stock in return for an $85 billion loan to the mega-insurer, we can demand the Fed’s stock in return for the trillion-or-so dollars we’ll be advancing to bail out the private banking system from its follies.

If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves. Among other benefits to the taxpayers. a truly “federal” Federal Reserve could lend the full faith and credit of the United States to state and local governments interest-free, cutting the cost of infrastructure in half, restoring the thriving local economies of earlier decades.

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine. Her websites are www.webofdebt.com and www.ellenbrown.com .

The Disappearing Gold

The Disappearing Gold

By Jeff Thomas

January 28, 2013

http://www.internationalman.com/global-perspectives/the-disappearing-gold

During the Cold War, Germany moved much of its gold to New York in case the USSR invaded Germany. It was assumed at that time that the US would be a safer storage location, and of course, they could always ask to have it returned if they wished.

But German citizens have become increasingly worried about the security of the 1,536 tonnes of German gold reputedly held at the Federal Reserve in New York. This has resulted in the Bundesbank pursuing repatriation of the gold, beginning with a request to view it in the basement of the Federal Reserve Building, where it is claimed to reside.

Of course, the German government had received periodic assurances from the Fed that the gold is there; however, the issue began to get a bit sticky recently, when the Fed refused a request for inspection.

The world then raised a collective eyebrow, and, whilst not panicking over this development just yet, closer attention has come to bear, not only on the Fed, but on any institution that is entrusted with the storage of gold for other parties.

Concern spread to Austria, where a question arose in Parliament as to where Austria’s gold is stored. The answer provided was that 80% of it (224.4 tonnes) is in the UK. (It was claimed that the reason for this is that, if a crisis of some kind were to occur, it could be more easily traded from London than from Vienna.)

Seems reasonable enough, except that the return of the gold to Austria, if it were requested, may be a bit difficult, as the gold seems to have been leased out by the UK.

To many, a second eyebrow might go up at this point. Lease out the wealth of another nation? Isn’t this a bit… irresponsible?

The New Gold Shuffle

Not to worry, it’s done all the time. In fact, the practice has been endorsed by none other than Alan Greenspan, former Chairman of the Fed. The gold is leased to a bullion bank, which typically pays one percent interest to the Fed, with a promise to return it on a specified date. The bullion bank then sells the gold on the open market and uses the proceeds to buy Treasury bonds, which will net a three to four percent return.

The nicest thing about such an arrangement is that the lessor continues to claim it on his balance sheet as a line item: “gold and gold receivables.” After all, an asset that we have leased out is still an asset, even if it has now been sold by the lessee.

In effect, this means that, if you bought a gold bar today, it is possible that it is a bar that was shipped from the Bundesbank to the Federal Reserve decades ago and is presently listed by the Fed on its balance sheet as “gold and gold receivables.”

Both you and the Fed are claiming to possess the same gold bar. The fly in the ointment, of course, is that only one bar can be the actual bar. The other is a receivable and therefore is an asset on paper only. This, of course, means that there is less gold in the world than has been claimed. How much less? That’s anyone’s guess.

The New Risks

But even if it became generally known that the Fed (and others) are holding paper, rather than physical gold, couldn’t we carry on as before? What could go wrong? Here are some immediate possibilities:

• If there were a dramatic rise in the price of gold and the lessor were to call in the return of the gold by the bullion bank, the bullion bank could easily lose far more than the small two to three percent margin it had been enjoying.

• If there were a crash in the bond market and hyperinflation set in, the bonds that the bullion bank had purchased could become worthless.

• If the nations who shipped their gold to London and New York for safekeeping were to request their return, the storage banks could only deliver if they were to purchase gold at the current rate. If that rate were significantly above the rate at which the gold had been leased to the bullion banks, the storage banks would sustain a significant, possibly unsustainable, loss.

That’s quite a bit of risk.

In the present market, there are any number of possible triggers that could cause the people of Germany, Austria, or a host of other nations to demand that their gold be returned home. Indeed, pressure is on the increase. The governments who have shipped out their gold for “safekeeping” would have a lot of explaining to do to their constituents, if the storage banks are not forthcoming.

So, is it time for the odiferous effluvium to hit the fan? Not quite yet. Before that occurs, there will still be some dancing around by the Fed and others.

The Fed has already stated, in so many words, “We’re sorry, but we can’t let you have all your gold at one time, but we’d be prepared to send it to you over a period of years.”

For many observers, the present situation should be well beyond the point of the raised eyebrow. It should be glaringly apparent that the amount of gold presently claimed to be in storage in the world’s banks is, to a greater or lesser extent, overstated.

Continuing the Charade

The Bundesbank should, of course, now say, “I’m afraid that’s not good enough. It’s our gold. We’ve advised you how much of it we want back now, and we must insist that you produce it immediately.”

If they were to take this perfectly logical step and the Fed refused, there could be a run on the banks, and, very possibly, within as short a period as twenty-four hours, a worldwide bank holiday might be declared with regard to gold.

However, this is not what will transpire. Neither logic nor sound banking practices are the object here. The object is to maintain the charade that exists within the banking community. The Bundesbank is just as fearful of a run as the Fed and will be only too willing to accept the Fed’s terms.

What must be borne in mind is the root cause of the request. It was not the Bundesbank itself that originally wanted the transfer to take place; it was the German people who, quite rightly, have become distrustful of the fact that their gold has been in New York for so long and want to see it repatriated. It is not the banks who wish to correct the situation. Not one bank wishes to expose the inappropriate practices of any other bank. Their loyalty is to each other and not to their depositors.

So, is that it? Have we heard the last of this issue? I think not. The cat is out of the bag at this point, and the depositors’ distrust and uncertainty will not be quelled by the counter-offer. Tension will continue to mount amongst depositors, and, at some point, the situation will reach an impasse.

All those who presently have gold in a banking institution would be prudent to keep an eye on the present situation. We might consider taking delivery of any gold we have in a bank, wherever it may be. Regardless of what form it is in, from ETFs to allocated gold, we would do well to assess the degree to which we feel our gold is at risk. In doing so, we may determine that a gold account is more at risk in, say, a New York or London bank than a Swiss bank. (Not all banks will be equal in terms of risk.)

If we do resolve to divest ourselves of bank-related precious metal holdings, it would be prudent to take action soon. (Clearly, those who attempt to remove their wealth the day aftera run has occurred tend to do less well than those who attempt to remove their wealth the day before the run.)

We might also consider whether a possible run may become systemic, causing a bank holiday on all the bank’s activities, thus freezing any currency that we may have on deposit. We may conclude that it is prudent to only retain in our bank enough money to allow cheques to clear – an amount sufficient to cover a few months’ expenses.

In the near future, we may well find that a significant amount of gold that is claimed to exist in the world will “disappear.” Whilst we cannot control this eventuality, we may be able to save the gold that is being held in our names from disappearing.

Two chess moves away from capital controls

Jeff Clark: Two chess moves away from capital controls

Submitted by cpowell on Tue, 2013-01-29 21:35. Section: Daily Dispatches

4:34p ET Tuesday, January 29, 2013

Dear Friend of GATA and Gold:

Casey Research's Jeff Clark today offers a reason that might have motivated the Bundesbank to repatriate some of Germany's gold reserves: that the currency crisis the Bundesbank mused about the other day could bring with it capital controls that would impair repatriation of anyfinancial assets. Clark concludes that the prospect of capital controls invites gold investors to get some of their metal out of their home countries. His commentary is headlined "Two Chess Moves Away from Capital Controls" and it's posted at Casey Research's Internet site here:

http://www.caseyresearch.com/cdd/two-chess-moves-away-capital-controls

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

BuBa's New Era of Openness on its Gold

Yikes! Financial Times makes GATA's case comprehensively

Submitted by cpowell on Tue, 2013-01-29 13:18. Section: Daily Dispatches

Time to let gold go and move on to flying saucers or Bigfoot?

* * *

BuBa's New Era of Openness on its Gold

Other Countries Should Follow Germany's Lead

By Jack Farchy
Financial Times, London
Tuesday, January 29, 2013

http://www.ft.com/intl/cms/s/0/ba11a6d4-692f-11e2-9246-00144feab49a.html

The gold market barely shrugged when the Bundesbank announced it would move 674 tonnes of the stuff from Paris and New York to Frankfurt.

But the move is important: not for what it says about Germany's faith in French or American vaults; nor for the cost of shifting 674 tonnes of gold; but because it is a major victory for transparency in the gold market.

Central banks are notoriously secretive about their gold-trading activities.

Most report, on a monthly basis, their gold reserves to the International Monetary Fund. But these data fall a long way short of full transparency. They tell us nothing about derivative positions in the gold market -- for example, gold loans, agreements for future sales, or options transactions.

And they are open to the whims of whether individual countries decide to classify a chunk of gold as belonging to their "international reserves" or being held by some other state entity (a sovereign wealth fund, for example). Thus Saudi Arabia announced abruptly in 2010 that its reserves had more than doubled as the result of an accounting shift. And China a year earlier revealed a 550-tonne increase in its gold reserves -- a buying programme that traders believe was carried out over several years, and has continued since.

In that context, it is not the Bundesbank's decision to move its gold, but its decision to be more open about where it is located and how it has traded it in the past, that is most welcome.

In one document published on its website earlier this month, the Bundesbank lists, for example, each one of its gold transactions since 1951:

http://www.bundesbank.de/Redaktion/DE/Standardartikel/Bundesbank/Wissens...

In another, it details how much gold it has held in each of New York, London, Ottawa, Paris, Bern, Frankfurt, and Basel since 1951, and how much it was lending to the market at any one time.

This reveals the interesting titbit that the Bundesbank moved almost 1,000 tonnes from London in 2000 and 2001. It also shows that the German central bank halted all gold lending activity in 2008 when the financial crisis began -- presumably because of concerns about the credit risk of the banks it was lending to.

The historical lack of transparency among central banks is somewhat understandable.

With 29,500 tonnes between them (a decade of global mine supply) they have the ability to disrupt the market significantly if their trades are too public. See, for example, the reaction to the UK's announcement that it would sell a large part of its reserves in 1999.

But there is a difference between revealing your trading strategies to the world and disclosing simple facts about your reserves -- such as their quantity, where they are held, whether they have been lent or swapped, and so forth -- with a delay if need be.

That the Bundesbank has been nudged into this new-found transparency must be chalked up as a victory for the groups of investors -- most prominent among them, the Gold Anti-Trust Action Committee, or GATA -- that have for years been asking central banks to reveal their activities in the gold market.

If central banks wish to refute suggestions from such groups that their gold does not exist or that they are scheming to manipulate prices, they could do worse than to follow the Bundesbank's lead.

RISE IN FEDERAL PRISON POPULATION IS "UNPRECEDENTED"

Rise in Federal Prison Population is “Unprecedented,” Says CRS

January 29th, 2013 by Steven Aftergood

“Since the early 1980s, there has been a historically unprecedented increase in the federal prison population,” a new report from the Congressional Research Service observes.
“The number of inmates under the Bureau of Prisons’ (BOP) jurisdiction has increased from approximately 25,000 in FY1980 to nearly 219,000 in FY2012. Since FY1980, the federal prison population has increased, on average, by approximately 6,100 inmates each year. Data show that a growing proportion of inmates are being incarcerated for immigration- and weapons-related offenses, but the largest portion of newly admitted inmates are being incarcerated for drug offenses.”
“Changes in federal sentencing and correctional policy since the early 1980s have contributed to the rapid growth in the federal prison population,” CRS explained. “These changes include increasing the number of federal offenses subject to mandatory minimum sentences; changes to the federal criminal code that have made more crimes federal offenses; and eliminating parole.”
A number of secondary problems are attributable to the rapid growth in incarceration, CRS said, including rising financial costs, overcrowding, and deteriorating prison infrastructure.
“Should Congress choose to consider policy options to address the issues resulting from the growth in the federal prison population, policymakers could choose options such as increasing the capacity of the federal prison system by building more prisons, investing in rehabilitative programming, or placing more inmates in private prisons.”
Alternatively, CRS said, “Policymakers might also consider whether they want to revise some of the policy changes that have been made over the past three decades that have contributed to the steadily increasing number of offenders being incarcerated. For example, Congress could consider options such as (1) modifying mandatory minimum penalties, (2) expanding the use of Residential Reentry Centers, (3) placing more offenders on probation, (4) reinstating parole for federal inmates, (5) expanding the amount of good time credit an inmate can earn, and (6) repealing federal criminal statutes for some offenses.”
A copy of the new report was obtained by Secrecy News. See The Federal Prison Population Buildup: Overview, Policy Changes, Issues, and Options, January 22, 2013.
Some other noteworthy new and updated CRS reports that Congress has not made publicly available include the following.
The Increase in Unemployment Since 2007: Is It Cyclical or Structural?, January 24, 2013
Can Contractionary Fiscal Policy Be Expansionary?, January 11, 2013
First-Term Members of the House of Representatives and Senate, 64th-113th Congresses, January 25, 2013
American Jihadist Terrorism: Combating a Complex Threat, January 23, 2013
Armenia, Azerbaijan, and Georgia: Political Developments and Implications for U.S. Interests, January 24, 2013
The Endangered Species Act and “Sound Science”, January 23, 2013

Transparency for gold swaps and leases

Former Fed and Treasury official endorses transparency for gold swaps and leases

Submitted by cpowell on Mon, 2013-01-28 16:47. Section: Daily Dispatches

11:40a ET Monday, January 28, 2013

Dear Friend of GATA and Gold:

Interviewed today by the German financial journalist Lars Schall, former Federal Reserve and Treasury Department official Edwin M. Truman seems to back away from his assertion to a World Bank and Bank for International Settlements conference last month (http://www.gata.org/node/12084) that the Washington Agreement on Gold was "the modern counterpart" of the gold price-rigging London Gold Pool of the 1960s. But Truman extends his call for greater transparency in central banking to encompass the gold swaps and leases that, according to a March 1999 report of the International Monetary Fund (http://www.gata.org/node/12016), are kept secret to facilitate secret intervention in the gold market.

The interview with Truman is posted at Schall's Internet site here:

http://www.larsschall.com/2013/01/28/is-the-washington-agreement-on-gold...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Central banks pushed into currency war

Bundesbank chief warns that central banks are being pushed into currency war

Submitted by cpowell on Wed, 2013-01-23 07:11. Section: Daily Dispatches

ECB's Weidmann: Pressure on Central Banks Risks FX Competition

From Reuters
Tuesday, January 22, 2013

http://www.reuters.com/article/2013/01/21/ecb-weidmann-currency-idUSL6N0...

FRANKFURT, Germany -- Loading central banks with more tasks and pressing them to pursue more aggressive monetary policies could risk a round of competitive devaluations, European Central Bank policymaker Jens Weidmann said on Monday, citing pressure on the Bank of Japan.

Weidmann is the latest in a string of policymakers worldwide to warn of the threat of a "currency war" as central banks pump out cash to support their economies, reducing their value in the process.

He said the pressure that Japan's new government has put on the Bank of Japan to deliver bolder monetary easing endangered the central bank's independence, as did the actions of Hungary's government.

"Already alarming violations can be observed, for example in Hungary or Japan, where the new government is interfering massively in the business of the central bank with pressure for a more aggressive monetary policy and threatening an end to central bank autonomy."

"A consequence, whether intentional or unintentional, could moreover be an increased politicisation of exchange rates," the Bundesbank chief, who also sits on the ECB's Governing Council, said in a speech at a Deutsche Boerse New Year's event.

"So far the international currency system has come through the crisis without a devaluation competition, and I hope very much that remains the case," Weidmann added in a section of his speech entitled "independence of central banks in danger."

Last Wednesday Russian central banker Alexei Ulyukayev said Japan is acting to weaken its currency and there is a danger that others will follow suit and foster a round of destabilising devaluations.

Russia holds the G20 presidency this year, a forum at which currencies and their relative values is likely to surface.

Plans for the ECB to begin supervising banks were consistent with a trend outside the euro zone for central banks to be given more tasks that lie beyond their core mandate, Weidmann said.

"But the overburdening of central banks with tasks and expectations is definitely not the right way to overcome the crisis in a sustainable way," he added. "Central banks protect their independence best by interpreting their task narrowly. The key to handling the crisis does not lie with the central banks."

Weidmann's comments echo remarks by James Bullard, a senior Federal Reserve official, who said this month the world's top central banks had sacrificed some of their independence to contain the financial crisis, describing the ECB's bond programme as a "fiscalisation" of monetary policy.

Weidmann struck a bleak note on the prospects of both the euro zone and the United States overcoming their debt problems, saying there was no quick, simple way to fix them.

"The adjustment process to bring state finances and economic structures back into order is not a matter of months or a few years," he said.

But he was more upbeat on the economic prospects for the German economy, saying that although it would probably be "powerless" in the first quarter it should pick up noticeably later in 2013.

"The German economy remains in good shape," Weidmann added.

He also appeared to warm to an idea put forward by an EU advisory group last October for a legal separation of banks' commercial and investment banking operations in an attempt to shield taxpayers from having to fund further bailouts and to protect savers from any more banking collapses.

"The creation of legally, organisationally, and commercially self-contained trading units can help to protect deposit banks without sacrificing the advantages of Germany's universal banks," Weidmann said in comments that marked a shift from the Bundesbank's earlier position that did not give much credit to the proposal.

Western banking: Parasitism dressed up as expertise

Western Banking: Money For Nothing -- Literally

Written by Jeff NielsonSunday, 20 January 2013 14:08http://www.bullionbullscanada.com/intl-commentary/26045-western-banking-money-for-nothing-literally

Articles & Blogs - International Commentary

For those seeking economic truths (in a world saturated with corporate propaganda), it can often be useful and revealing to follow the work of the Apologists. In attempting to “explain” the transgressions of their Masters; it is nearly inevitable that details will slip out – details which their Masters would have rather remained secret.

A classic example would be when Jeffrey Christian of the CPM Group – an ex-Goldman Sachs banker and noted banking apologist – was testifying before the CFTC regarding the issue of manipulation in bullion markets. In attempting to ‘pooh-pooh’ the glaring/relentless manipulation taking place in these markets, Christian casually mentioned that “the gold market” was about one hundred times larger than the actual amount of bullion being traded.

Let me reiterate this: the actual total of assorted “paper bullion” and “bullion derivative” products in this market has leveraged the amount of real bullion being traded by a factor of approximately 100:1. Two points follow from this slip-of-the-tongue.

First, quite obviously in attempting to cover-up the serial manipulation of bullion markets the Western financial crime syndicate would have preferred that people didn’t know that every ounce of gold and silver being traded was leveraged (in aggregate) by roughly 100:1. It’s not the sort of thing which gives the Chumps “confidence” in the bankers’ paper-bullion “products.”

Secondly, given that this admission came from one of the bankers’ “friends”, and is now several years old; that 100:1 ballpark estimate must now be regarded as a very conservative figure. However, Jeffrey Christian is not the only one of the bankers’ friends to have been damning them with faint praise.

The legendary banking apologists of Bloomberg were recently attempting to stamp-out any fears that an imminent downgrade of the U.S.’s (farcical) Triple-A credit rating would lead to a plunge in U.S. bond prices – and soaring interest rates. They did this by pointing out that the credit ratings (on government bonds) made by the banking analysts at these ratings agencies are totally irrelevant. Said Bloomberg:

…Bond investors needn’t worry that a rating cut will hurt returns. About half the time, government yields move in the opposite direction suggested by new ratings, according to data compiled by Bloomberg on 314 upgrades, downgrades and outlook changes going back to 1974.

Thus according to Bloomberg, investors in government bonds could have gotten equally good “advice” on the direction of bond prices and interest rates for the past 40 years by flipping a coin – meaning that the services provided by these bankers were/are worthless (as a tautology of logic).

Of course here is where it gets interesting: credit ratings (i.e. the creditworthiness of nations)should matter in determining bond prices and interest rates. There are only two possible explanations as to how/why the credit ratings of Western sovereign debt have been totally worthless for (at least) 40 years:

1) The bankers working for the credit ratings agencies are utterly incompetent (or corrupt).

2) Western bond markets are so heavily manipulated that they simply do not respond to economic fundamentals.

Readers can choose the explanation which they find most plausible. Note that (1) and (2) arenot mutually exclusive.

However, such revelations pale in comparison to the recent work of German propaganda-outlet, Der Spiegel. While Bloomberg’s apologist was merely trying to explain/defend the absurdly corrupt U.S. bond market; Der Spiegel was attempting to defend/justify “investment banking” as a whole.

Obviously even the propagandists know it is impossible to defend the psychopathic gamblersgenerally lumped under the category of “traders”; who spend half their time making extremely risky/insanely leveraged bets and the other half of their time scamming clients with the banksters’ notorious fraud scams.

Thus Der Spiegel acknowledges that these people are nothing but psychopath-gamblers, and then presents us with a myopic, tip-of-the-iceberg look at their litany of crime. However, it then attempts to differentiate these bad bankers with the good bankers: the “M&A consultants and IPO specialists”.

Out come the rose-coloured glasses, as Der Spiegel proclaims:

…All of this [insane gambling and scamming clients] has little to do with traditional investment banking, say so-called M&A consultants and IPO specialists. They arrange mergers and acquisitions, plan initial public offerings and embody a completely different kind of banker. They come complete with a broad job profile and multiple foreign languages, and they’ve often had years of training in management consulting firms. In fact, the people working in the trading rooms are about as foreign to them as car salesmen are to professors. [emphasis mine]

However, as frequently takes place with these serial-apologists, the writers were unable to maintain their Grand Illusion through to the end. A little later on, the truth comes out about these “professors”:

…It only gradually emerged that the bankers, with their murky forecasts, were often wrong. In fact studies now show that every other merger was a failure. Nevertheless, the volume of such transactions increased tenfold from 1990 and 2007, to almost $4 trillion worldwide. Investment bankers, it would seem, can be very convincing – especially when they’re banking on high fees. [emphasis mine]

Again, what is presented here is completely unequivocal: half of all the mergers put together by the Western banking cabal were/are failures. As with credit ratings, corporate clients could have obtained equally competent “merger advice” by flipping a coin – meaning that as with credit ratings M&A banking is (in aggregate) a 100% worthless service.

What is unclear from Der Spiegel’s more-realistic characterization of investment banking is whether (like the “traders”) the M&A consultants were deliberately scamming their clients (for their gigantic fees) or whether they were merely recklessly fleecing their clients with their gigantic fees.

Presumably the same also applies to the “IPO specialists” (since Der Spiegel made a point of grouping them closely with the M&A consultants); however we could always seek a second opinion on this topic from Facebook shareholders.

The more general point made here by Der Spiegel – and much, much more damning – is clear. The services of the “good bankers”, the M&A consultants (and IPO specialists?) are totally worthless; in that equally competent “advice” can be obtained from a coin-toss.

By implication, this means the “services” (for lack of a better word) provided by the bad bankers are, on aggregate, worth much less than zero – meaning that the (massive) overt harm committed by these serial criminals makes their work much worse than merely “worthless.”

Even more generally, we have an entire industry (investment banking) which extracts exorbitant fees for its services (the largest in the history of human commerce); but where even the friends of this industry explicitly point out (via long-term data) that these services are absolutely worthless.

There is an identical parallel in nature. Creatures which relentlessly blood-suck other creatures (while providing nothing in return) are known as parasites. Those are the “good” bankers.

For an appropriate analogy for the bad bankers (i.e. the traders) who relentlessly blood-suck their “clients” while simultaneously doing massive/catastrophic harm; we need to look to the supernatural: the Vampire.

The Democratization of Money: The Trillion Dollar Coin

The Trillion Dollar Coin: Joke or Game-changer?

Posted on January 18, 2013 by Ellen Brown

The trillion dollar coin actually represents one of the most important principles of popular prosperity ever conceived: the creation of money by sovereign governments, debt-free. 

Last week on “The Daily Show,” Jon Stewart characterized the proposal that the White House circumvent the debt ceiling by minting a trillion dollar coin as an attempt to “just make shit up.” 

Economist and NY Times columnist Paul Krugman responded with a critical blog post accusing Stuart of a “lack of professionalism” for not taking the trillion dollar coin seriously. However, Krugman himself had called the idea “silly.” He thought it was just less silly — and less dangerous — than playing with the debt ceiling, which was itself an unconstitutional shackle on the Treasury’s ability to pay debts already incurred by Congress.

Stewart responded on January 15 that he stood by his “ignorant conclusion that a trillion dollar coin minted to allow the president to circumvent the debt ceiling, however arbitrary that may be, is a stupid f*cking idea.”

It’s all good fun – or is it? Most commentators have missed the real significance of the trillion dollar coin. It is not just about political gamesmanship. For centuries, a secret battle has raged over who should create the nation’s money supply – governments or banks.  Today, all that is left of the US Treasury’s money-creating power is the ability to mint coins. If we the people want to reclaim that power so that we can pay our obligations when due, the Treasury will need to mint more than nickels and dimes. It will need to create some coins with very large numbers on them.

To bail out the banks, the Federal Reserve, as head of the private banking system, issued over $2 trillion as “quantitative easing,” simply by creating the money on a computer screen. Congress, the White House, and the Treasury all rolled over and acquiesced. When it was proposed that the government bail itself out of its budget woes by minting a $1 trillion coin, the Federal Reserve said it would not accept the Treasury’s legal tender. And the White House again acquiesced, evidently embarrassed to have entertained this “ludicrous” alternative.

Somehow we have come to accept that it is less silly for the central bank to create money out of thin air and lend it at near zero interest to private commercial banks, to be re-lent to the public and the government at market interest rates, than for the government to simply create the money itself, debt- and interest-free.

The banks obviously have the upper hand in this game; and they’ve had it for the last 2-1/2 centuries, making us forget that any other option exists. We have forgotten our historical roots.  The American colonists did not think it was silly when they escaped a grinding debt to British bankers and a chronically short money supply by printing their own paper scrip, an innovative solution that allowed the colonies to thrive.

In fact, the trillion dollar coin represents one of the most important principles of popular prosperity ever conceived: national debt-free money creation.  Some of our greatest leaders, including Benjamin Franklin, Thomas Jefferson, and Abraham Lincoln, promoted the essential strategy behind it: that debt-free money offers a way to break the shackles of debt and free the nation to realize its full potential.

We have lost not only the power to create our own money but the memory that we once had that power. With the help of such campaigns as Occupy Wall Street, Strike Debt, and the Free University, however, we are starting to re-learn the great secret of money: that how it gets created determines who has the power in society — we the people, or they the bankers.

It is no secret who has that power today.  In the great bailout of 2008, banks were rewarded for  making irresponsible and fraudulent gambles in the subprime mortgage scandal, with no one serving time in jail.  Then there was the robosigning scandal, in which banks committed criminal fraud and came away with a slap on the wrist.  Now we are seeing the LIBOR scandal unfold.  While a commoner might get 10-20 years for robbing a bank, bank executives get huge bonuses for robbing us.

We may rail against the banks and demand change, but nothing will change until we grasp their fundamental secret, the foundation of their power: that those who create the nation’s money control the nation.  By mechanisms explained elsewhere, nearly the entire money supply today is created by banks.

Remembering Our Roots: A Refresher Course

Benjamin Franklin was called called “the Father of Paper Money.” He argued before the British Parliament that government-issued money had allowed the colonies to escape the yoke of debt, to thrive and grow. The king, urged by the Bank of England, responded by forbidding all new issues of paper scrip. The colonial economy then sank into a depression, and the colonists rebelled.  They won the revolution, but the power to create money was lost to a private banking oligarchy modeled on the one dominated by the Bank of England.

Fourscore and six years later, President Abraham Lincoln boldly took back the money power during the Civil War. To avoid exorbitant interest rates of 24% to 36%, he decided to print money directly from the US Treasury as US Notes or “greenbacks.” The issuance of $450 million in greenbacks was key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system.

Lincoln was assassinated, however and,the greenback program was quickly discontinued. Repeated popular attempts to revive it failed. In 1872, according to  Lynn Wheeler in Triumphant Plutocracy: The Story of American Public Life from 1870 to 1920, New York bankers sent a letter to every bank in the United States, urging them to fund newspapers that opposed government-issued money. The letter read in part:

Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers . . . as will oppose the issuing of greenback paper money, and that you also withhold patronage or favors from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country. . . . [T]o restore to circulation the Government issue of money, will be to provide the people with money, and will therefore seriously affect your individual profit as bankers and lenders.

Bank-created money (which now includes electronic money) could be rented at a profit to the people.  The “people’s money” was limited to coin, which today composes less than one ten-thousandth of M3, the broadest measure of the money supply.

Lincoln’s assassination and the abandonment of debt-free greenbacks effectively marked the exchange of one type of slavery (race-based) for another (wage- and debt-based). As a result, the American government and American people are so heavily mired in debt today that only a radical overhaul of the monetary system can free us.

Gimmick or Game-Changer?

That is the real context and backstory of the trillion dollar coin.  The stakes are much higher today than just fending off the debt ceiling. We the people need to take back the power to issue our own money, and coins are the only means left to us to do it.

The idea of minting large denomination coins to solve economic problems was evidently first suggested by a chairman of the Coinage Subcommittee of the U.S. House of Representatives in the early 1980s. He pointed out that the government could pay off its entire debt with some billion-dollar coins.  The Constitution gives Congress the power to coin money and regulate its value, and no limit is put on the value of the coins it creates. In Web of Debt (2007), I suggested that to solve the government’s debt problems today these would need to be trillion dollar coins.

In legislation initiated in 1982, however, Congress chose to impose limits on the amounts and denominations of most coins. The one exception was the platinum coin, which a special provision allowed to be minted in any amount for commemorative purposes.

An attorney named Carlos Mucha, blogging under the pseudonym Beowulf, proposed issuing a platinum coin to capitalize on this loophole, after hearing me mention the trillion dollar coin in a Thom Hartmann interview. At first it was just an amusing exercise.  But with the endless gridlock in Congress over the debt ceiling, it got picked up by serious economists as a way to checkmate the deficit hawks.

Philip Diehl, former head of the US Mint and co-author of the platinum coin law, confirmed that the coin would be legal tender:

In minting the $1 trillion platinum coin, the Treasury Secretary would be exercising authority which Congress has granted routinely for more than 220 years . . . under power expressly granted to Congress in the Constitution (Article 1, Section 8).

Warren Mosler, one of the founders of Modern Monetary Theory, reviewed the idea and concluded it would work operationally. The funds would simply be new reserve balances at the Fed rather than new Treasury securities.

Joe Firestone pointed out that the trillion dollar coin could solve the government’s debt problems once and for all, putting was in its grasp the power to replace austerity with the abundance enjoyed by our forefathers.

The trillion dollar coin can raise cries of “hyperinflation!” It evokes images of million-mark notes filling wheelbarrows. But as economist Michael Hudson observes:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.

Prof. Randall Wray explains that the coin would not circulate but would be deposited in the government’s account at the Fed, so it could not inflate the circulating money supply. The budget would still need Congressional approval. To keep a lid on spending, Congress would just need to abide by some basic rules of economics. It could spend on goods and services up to full employment without creating price inflation (since supply an d demand would rise together). After that, it would need to tax — not to fund the budget, but to shrink the circulating money supply and avoid driving up prices with excess demand.

Time to Take Back the Money Power

The current economic crisis cannot be solved with the thinking that created it.  There is simply not enough money in the system to fund the services we desperately need, pay down the debt, and keep taxes affordable.  The money supply has shrunk by $4 trillion since 2008, according to the Fed’s own website.  The only solution is to add more money to the real, producing economy; And that means some congressionally-mandated entity needs to create it, either the Fed or the Treasury.

The Fed has declined. In flatly rejecting the Treasury’s legal tender, the Fed as representative of the banks is asserting itself as outranking the elected representatives of the people.  If the Fed won’t acknowledge the coins created by the government, perhaps the government needs to charter a publicly-owned bank that will.

We have a chance today to end the charade of big money gridlock politics, as well as the reign of the big banks. We have the power to choose prosperity over austerity. But to do it, we must first restore the power to create money to the people.

________________

Ellen Brown is an attorney and president of the Public Banking Institute.  In Web of Debt, her latest of eleven books, she shows how a private banking oligarchy has usurped the power to create money from the people themselves, and how we the people can get it back. Her book The Buck Starts Here: Restoring Prosperity with Publicly-owned Banks will be released this spring. Her websites are http://WebofDebt.com, http://EllenBrown.com, and http://PublicBankingInstitute.org.