XIAM007

Making Unique Observations in a Very Cluttered World

Tuesday 14 December 2010

Ron Paul: Audit the Fed in 2011 -

Ron Paul: Audit the Fed in 2011 - 


Since the announcement last week that I will chair the congressional subcommittee that oversees the Federal Reserve, the media response has been overwhelming.  The groundswell of opposition to Fed actions among ordinary citizens is reflected not only in the rhetoric coming out of Capitol Hill, but also in the tremendous interest shown by the financial press.  The demand for transparency is growing, whether the political and financial establishment likes it or not.  The Fed is losing its vaunted status as an institution that somehow is above politics and public scrutiny.  Fed transparency will be the cornerstone of my efforts as subcommittee chairman.
Thanks to public pressure earlier this year, Congress did pass legislation that requires the Fed to disclose some information about its bailout of select industries and companies following the 2008 financial crisis.  So two weeks ago the Fed released data concerning more than $3 trillion of assistance it offered to banks through its bailout facilities.  After reviewing this data, however, we are left with many more questions about the Fed’s “lending”.
In the “Term Securities Lending Facility”, the Fed was supposed to have loaned against AAA-rated securities– yet over half of the collateral put up by banks to obtain loans had no listed credit rating. Should we assume that the Fed accepted absolute junk rated securities as collateral for loans?  Presumably these securities were so bad that they wouldn’t even publicize their credit rating.  So why should our central bank, backed up by your taxes, accept such collateral?
On another note, of the $1.25 trillion purchased under the Fed’s “Mortgage-Backed Securities Purchase Program,” only $877 billion in purchases have been publicized. What happened to the remaining $400 billion?
These kinds of limited disclosures by the Fed only underscore the need for a full and complete audit of the Fed’s financial books.  This audit should be done by an independent third party, in the same manner that public companies are audited.  The Fed should make public its balance sheet, income statement, and perhaps most importantly its cash flow statement.  It also should publicize the notes explaining those financial statements.
We seem to forget sometimes that Congress created the Fed– it is a government-created banking monopoly, and its top decision-makers are appointed by the President and confirmed by the Senate. If the Fed does not perform satisfactorily in the eyes of these politicians and their constituents, the Chairman and Governors may not be re-nominated.
In theory, Congress could even repeal the Federal Reserve Act altogether since it has the authority to do so.  Obviously Congress is within its authority to audit an organization it created by statute, and it is time to assume that responsibility.
With 320 Members of Congress cosponsoring my legislation to fully audit the Fed in the 111th Congress, my hope is that we can build on our broad bipartisan coalition in 2011 and continue the push for greater Fed transparency going forward.

Halliburton reportedly agrees to pay Nigeria $250 million to drop bribery charges against Cheney, and their firm -

Halliburton reportedly agrees to pay Nigeria $250 million to drop bribery charges against Cheney, and their firm - 




The massive industrial conglomerate Halliburton has reportedly offered to pay $250 million to settle charges against its former chief executive, ex-Vice President Dick Cheney, in a multi-million dollar bribery case.
Nigeria filed charges against Cheney last week in an investigation of alleged bribery estimated at $180 million. Prosecutors named both Halliburton and KBR in the charges, as well as three European oil and engineering companies -- Technip SA, EniSpa, and Saipem Construction. Eleven Halliburton officials were arrested last month and freed on bail Nov. 29.
The charges allege that engineering contractor KBR, until 2007 a subsidiary of Halliburton, was among companies that paid bribes to secure a $6 billion contract for a natural gas plant. KBR pleaded guilty to the same bribes in a US court in 2009, and agreed to pay a $382 million fine. The Nigerian charges appear to stem from the US case -- though, in that trial, Cheney was never directly charged.
The $250 million figure would include a direct $130 million fine by the company and an agreement to repatriate another $120 million from Switzerland.
Representatives for Cheney and Halliburton met with Nigerian officials in London over the weekend.
Nigeria's Economic and Financial Crimes Commission spokesman Femi Babafemi told Reuters the company had offered to pay up to $250 million.In the United States, KBR has already admitted bribing Nigerian officials. In February 2009, the company agreed to pay a $402 million fine. Halliburton itself paid $177 million to settle allegations paid to the US Securities and Exchange Commission (SEC), but didn't admit wrongdoing. Still, despite the settlements, Halliburton's spokeswoman said “there is no legal basis for the charges” in a statement Dec. 8.
"They have made offers of fines to be paid in penalties. They offered to pay $120 million in addition to the repatriation of $130 million trapped in Switzerland," Babafemi said.
"It will need to be ratified by the government and we expect a decision by the end of the week," he added.
Earlier this month, Halliburton said they hadn't seen the new charges, but still denied their involvement.
"Halliburton's oil-field services operations in Nigeria have never in any way been part of the LNG project and none of the Halliburton employees have ever had any connection to or participation in that project," Tara Mullee Agard, a spokeswoman for the Houston-based company, said in an e-mailed response to Bloomberg.
Cheney led Halliburton as CEO and Chairman of the Board from 1995 to 2000.
Halliburton split from KBR in 2007. It has said that its current operations in Nigeria -- raided by the EFCC last month -- were not involved in the Bonny project and that there is no legal basis for the charges.
Those charged in Nigeria include KBR Chief Executive Officer William Utt and former KBR CEO Albert "Jack" Stanley, who worked under Cheney when he headed Halliburton and pleaded guilty in 2008 to U.S. charges related to the case.
KBR said Utt had only joined the firm in February 2006 and that the rest of its executive team was appointed thereafter. It has accused Nigeria of "wildly and wrongly asserting blame".
Notes Bloomberg, "An aide of former Nigerian President Olusegun Obasanjo was charged with six counts of money-laundering in Abuja on Oct. 13 in connection with the alleged payment of bribes."
"The case is Federal Republic of Nigeria v. Halliburton and others, CV/435/10, High Court of Justice, Abuja Judicial Division (Abuja)."

The world's five biggest airlines now hail from Asia and Latin America -

The world's five biggest airlines now hail from Asia and Latin America - 




The world's five biggest airlines now hail from Asia and Latin America, highlighting the industry's shift away from the U.S. and Europe to higher-growth countries, the International Air Transport Association said Tuesday.
Air China is twice the size of either Delta in the U.S. or Germany's Lufthansa. But despite emerging markets' strength and a broad earnings rebound this year, weak economic conditions in Europe and low margins are acting as a drag on profits, the group warned.
"The world is changing in aviation, and it's changing very, very quickly," IATA Chief Executive Giovanni Bisignani told a news conference in Geneva. "Rapidly developing markets are shifting the industry's center of gravity to the East."
Air China has a market capitalization of $20 billion, followed by Singapore airlines with $14 billion and Hong Kong-based Cathay Pacific with $12 billion.
China Southern has a market cap of $11 billion, as does LATAM, the Latin American airline recently created from the merger of Chile's LAN and TAM of Brazil. U.S. carrier Delta and Germany's Lufthansa follow with market capitalizations of $10 billion each.
IATA said strong growth in developing countries and a rebound in North America are largely responsible for the industry's recovery this year.
Airlines will see net profits of $15.1 billion in 2010, IATA said. This marks a massive turnaround from the $10 billion industry loss in 2009 and $16 billion loss in 2008.
Asian carriers will contribute $7.7 billion to the global total, while North American airlines will earn $5.1 billion. Europe, with estimated net profits of $400 million, lags behind the Middle East ($700 million) and Latin America ($1.2 billion). African carriers will earn $100 million this year, IATA said.
The full-year estimate is a significant jump from IATA's prediction in September for an $8.9 billion industry profit in 2010.
"2011 is going to be a much more challenging period," said IATA chief economist Brian Pearce, noting that heavy debts and new taxes will weigh on consumer travel spending in Europe and North America.
IATA forecasts net profits of $9.1 billion for the industry next year.
Bisignani warned that profit margins remain "pathetically low" and pose a threat to the industry in case of another economic shock.
Recently introduced air travel taxes in Britain, Germany and Austria, and efforts to introduce a regional carbon emissions trading market harm Europe's competitiveness, he said, noting that these further squeeze profit margins for the continent's carriers.
Fuel price rises are also expected to hurt profits in 2011, further driving the industry to reduce aircraft fuel consumption and find viable renewable alternatives.
Still, the Geneva-based group representing some 230 carriers and 93 percent of scheduled air traffic said the outlook is bright for Asia.
A rapidly expanding middle class in Asia and growing demand for air links between the continent's 15 mega-cities, with over 10 million inhabitants each, promise strong industry profits in the region, Bisignani said.
If "archaic ownership rules" in the United States were changed the industry might soon see the first takeover of a U.S. carrier by an Asian airline, he added.
The Italian, who has been at the helm of IATA for nine years, will be succeeded by Cathay Pacific CEO Tony Tyler next year. 

10 Signs That Confidence In U.S. Treasuries Is Dying And That Financial Armageddon May Be Approaching -

10 Signs That Confidence In U.S. Treasuries Is Dying And That Financial Armageddon May Be Approaching - 


Selling government debt is a gigantic confidence game.  For decades, investors all over the globe have gobbled up massive amounts of U.S. debt at incredibly low interest rates because they believed that it was a certainly that they would be paid back and be able to make a little bit of profit on top of it.  Unfortunately, things have changed.  Confidence is U.S. Treasuries is dying, and if confidence in U.S. government debt completely collapses at some point we could literally be looking at financial Armageddon.  Why is that so?  Well, when the world totally loses faith in U.S. Treasuries, interest rates on U.S. Treasuries will have to keep going up until enough investors are found to buy them.  But much higher interest rates will mean much higher interest on the national debt and thus much higher federal budget deficits.  That will erode confidence in U.S. Treasuries even further.  In the end, a vicious cycle of eroding confidence and higher interest rates could ultimately lead to hyperinflation as the U.S. government and the Federal Reserve flood the system with endless amounts of paper money to try to keep the system solvent.
Faith in U.S. Treasury bonds is absolutely critical if the world financial system is going to continue to operate in a stable manner.  In the post-World War 2 era, U.S. Treasuries have been largely viewed as the absolutely safest investment out there.  So if there comes a point when the market for U.S. Treasuries completely collapses, it is going to cause unprecedented financial chaos.  The worldwide derivatives market, which is already highly unstable, would almost certainly implode.  Credit markets all over the globe would seize up.  Global trade would quickly grind to a standstill.
This isn’t going to happen overnight (hopefully).  Rather, the loss of confidence in U.S. Treasuries is something that is likely to take months or even years to play out.  But once that confidence is gone, it is not something that will be able to be rebuilt easily.
Think of it this way – once you drive a car off a cliff, is it easy to reconstruct it?
Of course not.
Well, that is where we are headed with U.S. Treasuries.
The Federal Reserve is flooding the system with new dollars, Barack Obama and the U.S. Congress seem poised to pass a new tax deal which does not include corresponding spending cuts which will cause U.S. government budget deficits to become even more bloated, and there is a tremendous lack of faith both in U.S. political leaders and in the Federal Reserve at this point.
The rest of the world is losing faith that the U.S. government is going to be able to handle all of the debt that it has accumulated.  We may be approaching a “tipping point” soon.
The following are 10 signs that confidence in U.S. Treasuries is dying….#1 The financial community is extremely concerned that the tax deal that Barack Obama is pushing is going to dramatically increase U.S. government budget deficits over the next two years.  On Monday, Moody’s warned that if Barack Obama’s tax deal with the Republicans becomes law, it will increase the likelihood that Moody’s could soon be forced to slash the rating of U.S. government debt.
#2 Already there are signs that some bond investors are looking for the exits.  Last week, U.S. Treasuries suffered their largest  two day sell-off since the collapse of Lehman Brothers back in September 2008.
#3 The yield on 10-year Treasury bonds set a six-month high on Monday before pulling back a bit.  Most analysts believe that Treasury yields are going to push significantly higher in coming weeks.
#4 This trend of rising yields has been going on for a while.  In fact, yields on 10-year Treasury bonds have been steadily rising since October 7th.
#5 Even before the recent tax deal was announced there were already troubling signs regarding the growth of U.S. government debt.  The U.S. government budget deficit rose to $150.4 billion in November, which was the largest November budget deficitever recorded.
#6 It is not just the new tax deal that has investors around the globe spooked.  The truth is that the rest of the globe reacted very negatively to the new round of quantitative easing that the Federal Reserve announced back in November.  The Federal Reserve is flooding the system with liquidity and the rest of the world is not amused.
#7 The American people have less faith in the Federal Reserve and in the financial system than at any other point in recent memory.  For example, a new Bloomberg National Poll has found that a majority of Americans now want the Federal Reserve to either be held more accountable or to be abolished entirely.
#8 Investors all over the globe are starting to wake up and realize that America’s debt problem is unsolvable.  David Bloom, the currency chief at HSBC, raised eyebrows when he recently stated that “if yields are rising because people think America’s fiscal situation is unsustainable, then its Armaggedon.”
#9 There is also a growing feeling among investors that the Federal Reserve simply does not care about the danger of inflation, and this is making bondholders very nervous.  Stephen Lewis of Monument Securities recently put it this way….
“There is a feeling that the Fed doesn’t care about inflation – in fact, wants more of it – and that is certainly not in the interest of bondholders.“
#10 Over the next 12 months, the U.S. government is going to be rolling over trillions of dollars in debt along with all of the new borrowing that it is going to be doing. In fact, the U.S. government is somehow going to have to find a way to finance debt that is equivalent to 27.8 percent of GDP in 2011.
For years our politicians have told us that “deficits don’t matter”, but the truth is that they do matter.  The national debt of the United States is now the biggest debt in the history of the world by far, and yet most Americans do not seem to grasp the absolute financial horror that we are facing as a nation.
In the end, debt is always painful.  It can be a lot of fun to run out and buy a beautiful new house, a couple of brand new cars and to run your credit cards up to the max, but eventually it catches up with you.  Well, the same thing is now happening to us on a national level.
We are getting to the point where eventually we are not even going to be able to service the debt that we have already piled up.  Once that happens we can either declare national bankruptcy or we can try to hyperinflate our way out of trouble.
Meanwhile, the once great U.S. economic machine is dying as well.  The only reason we have been able to survive with all of this debt as long as we have is because of how powerful our economy has been.
But over the past couple of decades, the big global corporations that now dominate our economy have shipped thousands of factories and millions of jobs overseas.
The mighty economic machine which is supposed to provide funds to pay off all of this debt is being dismantled right in front of our eyes.
There was no way in the world that U.S. government debt was going to be sustainable even if our economy remained vibrant and healthy.  The sad truth is that U.S. government debt is approximately 13 times larger than it was just 30 years ago.
But now that the “real economy” is dying a savage death there is simply no hope that this thing is ever going to turn around.  The only thing left to do is to take bets on when the implosion is going to happen.
All of this “great tax cut debate” nonsense going on in Washington D.C. right now is just a bunch of incompetent politicians running around rearranging the deck chairs on the Titanic.  Perhaps these tax cuts will provide enough of a short-term economic boost to get many of them re-elected in 2012.  Meanwhile, our long-term economic problems continue to get a lot worse.
It has become quite obvious that Barack Obama is completely clueless about the economy, and what is even sadder is that the “highly educated” Chairman of the Federal Reserve, Ben Bernanke, seems almost equally as clueless.
Unfortunately, Americans have become so dumbed-down that they don’t even realize that their leaders are incompetent.  In fact, as sad as it is to say, most Americans you will meet on the street probably cannot even tell you what U.S. Treasuries are.
Let us hope and pray that investors around the globe continue to have at least some confidence in U.S. Treasuries for at least a little while longer.  When “financial Armageddon” finally does happen, it isn’t going to be pleasant for any of us.
So enjoy these happy economic times while you still have them, because at some point things are going to get a whole lot worse.


Read more - http://theeconomiccollapseblog.com/archives/10-signs-that-confidence-in-u-s-treasuries-is-dying-and-that-financial-armageddon-may-be-approaching