Archive for March, 2012
How to Undermine a Nation

Some interesting videos which offer an explanation for the path much of Western education has taken.  This in turn has influenced our culture. The interview is between Norman Dodd and G. Edward Griffin in 1982. A transcript  is available here. It states the interview is with:

Mr. Norman Dodd who, in the year 1954, was the staff director of the Congressional Special Committee to investigate tax-exempt foundations — sometimes referred to as the Reece committee, in recognition of its chairman, Congressman Carroll Reece. I conducted the interview we are about to hear, in 1982. I had no immediate use for the material at that time, but I realized that Mr. Dodd’s story was of great importance.

As chief investigator for the U.S. Congressional Special Committee on Tax Exempt Foundations he discovered that several prominent tax exempt foundations including the Rockefeller, Carnegie and Guggenheim colluded to:

Influence American educational institutions and to control foreign policy agencies of the Federal government. The purpose of the control has been to condition Americans to accept the creation of world government. That government is to be based on the principle of collectivism, which is another way of saying socialism; and, it is to be ruled from behind the scenes by those same interests which control the tax-exempt foundations.

The videos are available:

I’d be skeptical, but it fits in with comment from 1930:

If you will read the interesting testimony before the Senate Committee about the middle of January that showed up all these pacifists and peace-makers as German sympathizers, Socialists, and Bolsheviks, you will see that a majority of the college professors in the United States are teaching socialism and Bolshevism and that fifty-two college professors were on so-called peace committees in 1914. President Eliot of Harvard is teaching Bolshevism. The worst Bolshevists in the United States are not only college professors, of whom President Wilson is one, but capitalists and the wives of capitalists and neither seem to know what they are talking about. William Boyce Thompson is teaching Bolshevism and he may yet convert Lamont of J.P. Morgan & Company. Vanderlip is a Bolshevist, so is Charles R. Crane. Many women are joining the movement and neither they, nor their husbands, know what it is, or what it leads to. Henry Ford is another and so are most of those one hundred historians Wilson took abroad with him in the foolish idea that history can teach youth proper demarcations of races, peoples, and nations geographically.(See Footnote 3)

Anthony Sutton makes some other interesting points in these videos:

He claims that US State Department aided the Bolshevik (Red Army) forces against the White Russian during the Russian Civil War. Apparently the French and British gave up saying the Americans are helping the Bolsheviks. At the 7.30 minute mark in part 1 he cites a New York Times report of the local Commissar addressing the US army and thanking them for aiding the revolution.

It also accords with my understanding of the likes of Ford’s early  support for the National Socialists. Although I still think the national socialists were basically a bunch of looters. They looted segments of their own society to bribe voters. They then looted their neighboring countries.  It’s an example of what happens when psychopaths gain control of a powerful centralized state. The inevitability of nasty people on occasion rising to power ought to stop people from removing checks on the power of the centralised State. But alas, the wisdom behind many of our constitutions has been forgotten. Again, possibly not by accident. Such an outcome would fit with the Dodd testimony and also videos by:

I do not know if Yuri’s claimed connection with the Soviets is true, but it is a brilliant description of reality. I’d be surprised if you do not listen to it all and then some of the other ones by him on youtube. It explains much about the climate and other “culture” wars. Of course, the technique works because it also plays to human cognitive failings.

Much of what many people believe beggars belief. Seemingly intelligent and well educated people can believe the utmost drivel. Some of my cherished views are no doubt wrong. They certainly have been in the past, when this becomes clear I will change my views. Would that our socialist elites were similarly willing to change their views when reality proves them wrong. But no. Socialism seems to have a special appeal. In one form or another it always returns to haunt us. If it is discredited under the name socialism or communism, it re-emerges as the third way. When that too is discredited it reappears as being green. Once that goes it will no doubt adopt a new name.  I guess like sick individuals, sick ideologies will always be with us.

The comments by Dodd on the subversion of charitable trusts when they change their purpose after the handover to trustees is spot on. It is also something for the Cato institute to consider, as well as the likes of the CIS, IPA and Quadrant in Australia.

 
Cultural corruption in finance

A couple of videos in which Bill Moyes interviews spotted by Jesse’s Cafe:

Watch them, they hit the nail on the head.

 More information on some of those your taxes were used to bail out:

‘We ripped out the eyeballs of our muppet clients’ – Goldman Sachs director’s blistering attack on bank’s ‘toxic’ greed: A SENIOR executive at Goldman Sachs executive has exposed the bank’s “toxic” greed and “immoral” culture in a scathing resignation letter.

JPMorgan Chase also copping flack:

Oh, It’s Not Just Goldman? (JP Morgan Allegations: With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well. I have seen the disruptive behavior of superiors and no longer can say that I look up to employees at the ED/MD level here at JPM. Their smug exuberance and arrogance permeates the air just as pungently as rotting vegetables. They all know too well of the backdoor crony connections they share intimately with elected officials and with other institutions. It is apparent in everything they do, from the meager attempts to manipulate LIBOR, therefore controlling how almost all derivatives are priced to the inherit and fraudulent commodities manipulation. They too may have one day stood for something in the past in the client-employee relationship. Does anyone in today’s market really care about the protection of their client? From the ruthless and scandalous treatment of MF Global client asset funds to the excessive bonuses paid by companies with burgeoning liabilities. Yes, we at JPMorgan that are in the know are fearful of a cascading credit event being triggered in Greece as they have hidden derivatives in excess of $1 Trillion USD. We at JPMorgan own enough of these through counterparty risk and outright prop trading that our entire IB EDG space could be annihilated within a few short days.

Wall Street possibly having a disproportionally large proportion of psychopaths has been flagged before:

One Out Of Every Ten Wall Street Employees Is A Psychopath, Say Researchers

Psychopaths will not be restricted to Wall Street. But civilized society normally has ways to limit the damage they can do. It appears they may have perverted the culture of some of our banks and sections of broader society.

 We should not have been surprised by MF Global or the LIBOR manipulation. Finance is too central to too much of our economy for things to work well while it does not. Regulatory enforcement and culture both act to reduce breaches of trust. Once despicable behavior appears to be socially acceptable it will happen more. Once the rewards for such behavior clearly outweigh the downside it will happen more often.

The lack of criminal prosecution bodes ill for the future. It matters little what laws are on the books if they are not enforced. Crony capitalism is impoverishing us. It’s well past the time to restore integrity to public life and private markets.

Graphic courtesy of Jeremy Grantham’s Letter of October 2010, which makes interesting reading.

 
LIBOR manipulation

It appears the price of money  or interest rates may have been manipulated.  This time not by the Fed and other central banks, but by private banks. Apparently they may have been colluding to manipulate the London Interbank Offered Rate (LIBOR):

LIBOR Manipulation: A Brief Overview of the Debate: LIBOR is a key, central part of the global financial market system. Over $10 trillion in corporate loans, floating rate notes, adjustable rate residential mortgages etc., are pegged to LIBOR. Additionally, LIBOR is the key rate in the $350 trillion market for interest rate swaps. Finally, many other derivatives depend upon LIBOR in some manner or other.

Therefore, if LIBOR rates are being distorted or manipulated in any way, the ramifications extend to nearly every corner of the global money markets and to participants in many sectors of the global economy other than banks and financial institutions.

So how was LIBOR supposedly being manipulated?

Libor Manipulation: Another Black Eye for UBS: According to reports of court documents filed by Canadian regulators, traders at UBS, communicating with traders at other banks using e-mail and instant messaging, colluded on whether they wanted Libor to be set high or low on any given day. They would then pass that desire off to their bank’s representative on the Libor panel.

Why can”t they just use a different measure?:

Libor is so deeply embedded in the financial system it can’t be replaced without potentially voiding existing contracts…  “You might be able to call the new benchmark Libor, but because it’s not exactly the same measure, would that invalidate all these thousands and thousands of contracts?” said Donald Mackenzie, a professor at the University of Edinburgh who specializes in the sociology of financial markets. “It’s difficult to see that you can do much more than what the BBA is already trying to do in terms of trying to improve an estimate- based measure.”

The BBA is reviewing potential changes to the benchmark and met regulators and bank executives last week. The rate is set through a daily survey of firms conducted on behalf of the BBA by Thomson Reuters Corp. in which banks are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year.

Because banks have to submit a rate when no market exists, and their estimates aren’t subject to outside verification, the benchmark is vulnerable to manipulation, investors said.

So it is interesting to read this justification:

In defence of Libor manipulation: The argument is simple. If no more than eight banks ended up submitting quotes for Libor benchmarks because most others had limited or no access to term funding, according to Libor methodology no official Libor benchmark could be produced.

Lacking an official benchmark, distressed banks would then have been able to substitute their own preferred funding rates into loan agreements instead — rates which would have been completely detached from funding realities, exploiting those who were funding them in the process.

Furthermore, if banks had been seen leaving the process altogether, this could have translated into serious reputational issues for the banks in question, heightening bank run fears and accelerating the panic.

So, was collusion by the banks in this instance justified? Did it arguably, in the circumstances, do everyone in the market a favour?

Of course it does not square with reports of their  colluding to set the rate higher or lower. There are also suggestions that pricing of floating rate debt is in need of a re-think:

Insight: Time to rethink floating rate debt: Rates for three-month Libor are the basis for most interest rate futures, swaps and options, and the notional outstanding of these contracts globally is in excess of $300,000bn, according to the International Swaps and Derivatives Association. Interest rates on many corporate loans, floating rate notes and residential mortgages are also tied to them.

Three-month Libor became the basis for the emerging interest rate derivatives and floating rate debt markets in the 1980s. It was seen as a reliable measure of the marginal cost of bank financing and a better anchor for the short-end of the yield curve than unpredictable policy and overnight rates.

But a lot has changed since then and for a couple of reasons three-month Libor may not now be the best measure of short-term interest rates.

First, it is no longer a good proxy for marginal bank financing costs. A Libor-contributing bank submits the rate at which it believes it could borrow funds, were it to do so by asking for and then accepting interbank offers in ‘reasonable market size’’. However, the interbank market for unsecured three-month deposits has been thin for a number of years.

Only unsophisticated banks place deposits with their competitors at maturities beyond one week. Liquidity management and credit limits deter banks from tying up their funds in this way. Rather the interbank deposit market is overwhelmingly overnight.

At longer maturities, banks borrow unsecured primarily by issuing securities to non-bank investors.

There more detailed analysis on the possible manipulation here.