Economic Stories of Relevance in Today's World -- July 8, 2012

The Biggest Financial Scandal In History? - The Economic Collapse Blog - We always knew that the financial markets were rigged, but this is getting ridiculous. It is now being alleged that 20 major banks have been systematically fixing global interest rates for years. Barclays has already been fined hundreds of millions of dollars for manipulating Libor (the London Inter Bank Offered Rate). But Barclays says that a whole bunch of other banks were doing this too. This is shaping up to be the biggest financial scandal in history, and criminal investigations have been launched on both sides of the Atlantic. What those investigations are likely to uncover could shake the financial markets to their very core. In the end, this scandal could absolutely devastate confidence in the global financial system and it could potentially bring down a number of major global banks. We have never seen anything quite like this before.                    What Is Libor?    As mentioned before, Libor is the London Inter Bank Offered Rate. A recent Washington Post article contained a pretty good explanation of what that means....




The Many Ways Banks Commit Criminal Fraud - Washington's Blog - July 4, 2012 - The Libor scandal seems to be waking people up to manipulation and fraud by the big banks. There are many other types of fraud they’ve engaged in as well …
Here is a partial list:

• Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)

• Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this

• Cheating homeowners by gaming laws meant to protect people from unfair foreclosure

• Charging veterans unlawful mortgage fees

• Engaging in mafia-style big-rigging fraud against local governments. See this, this and this

• Cooking their books (and see this)

• Bribing and bullying ratings agencies to inflate ratings on their risky investments

• Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this

• Engaging in unlawful “frontrunning” to manipulate markets. See this, this, this, this, this and this

• Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this

• Otherwise manipulating markets. And see this

• Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here andhere

• Participating in various Ponzi schemes. See this, this and this

• Charging “storage fees” to store gold bullion … without even buying or storing any gold . And raiding allocated gold accounts

• Laundering money for drug cartels. See this, this and this (indeed, drug dealers kept the banking system afloat during the depths of the 2008 financial crisis)

• Owning and largely running the Federal Reserve … which is itself arguably a Ponzi scheme

Gloomy jobs report raises pressure on the Fed - Economy Watch - MSNBC - Roland Jones - July 6, 2012 - Friday’s disappointing June jobs report confirms observers’ worst fears about the economic recovery: The employment market is still struggling and failing to put enough Americans back to work. The dour employment data are also likely to raise pressure on the Federal Reserve to do more to bolster the economy, and have negative implications for President Barack Obama's chances of re-election in November. The Labor Department said non-farm payrolls expanded by just 80,000 jobs in June, falling just short of forecasts for 90,000 jobs, but improving slightly on a revised reading of 77,000 jobs in May. The private sector expanded by only 84,000, while government jobs declined by 4,000......                          June’s 80,000-jobs number is well below the levels seen at the start of the year, and a monthly gain of between 125,000 and 150,000 jobs is needed just to keep up with the growth in the number of new people entering the workforce each month before even starting to whittle down the backlog of nearly 12.7 million unemployed Americans.  A pace of job creation that’s not strong enough to keep up with population growth is likely to raise pressure on President Obama, endangering his chances of reelection in November....                    Coupled with recent data that show a sharp decline in manufacturing, the dour payrolls report paints a gloomy picture of the U.S. economy that analysts say is likely to raise expectations that the Federal Reserve will initiate another massive bond-buying program known as “quantitative easing,” or QE, in which the Fed essentially prints money to buy long-term mortgage or Treasury bonds. The Fed next meets to decide on monetary policy July 31-Aug. 1.....

No Jobs: The Result of Wizard of Oz Economics - Zero Hedge - Econophile - July 7, 2012 - If there is one thing we should have learned from recent data is that you can "juice" the economy by inserting more money into it because when the money works its way through the economy, certain economic data will become more positive.             This is not a difficult concept to grasp. For example, if in a hypothetical economy there is a $1 trillion money supply and then it is increased by, say, 10%, assuming that new money is spent in economic activities, GDP will ultimately rise more or less by 10% because GDP measures spending. More money equals more spending, thus higher GDP.
During this phase one might see manufacturing and consumption increase and even employment grow. This happened with QE1 and 2. However, one might ask, if money stimulus actually revives real economic growth, why did we need QE2? Of course this is the flaw in the above argument. It doesn't work.                    These naive monetary theories don't work to create real growth, they just make the numbers go up ... temporarily. QE 1 or 2 did nothing to cure underlying economic problems or create lasting real growth. If QE had worked the economists at the Fed wouldn't be scratching their heads over the current negative economic data that has been pouring out recently. Today's unemployment report is a good example of this.

State panel wants to know if Duke misled it on merger - Duke CEO’s testimony on Tuesday could spur new merger conditions - Charlotte Observer - July 7, 2012 - State law gives the seven-member commission (one seat is vacant) authority to “rescind, alter or amend any order or decision” it has made. The commission approved the $32 billion merger on June 29.                    It also decides whether to grant rate increases – both of Duke’s operating companies in the Carolinas plan to seek one this year – and at some point will be asked to let the two companies become one.
While it’s unlikely to try to dismantle a merger that took 18 months across a half-dozen jurisdictions to approve, observers say the commission could use its leverage to extract new conditions if it doesn’t like Rogers’ explanation...                               Rogers could testify that he’s the wrong man to ask – it was the board’s decision, not his. He could say that any company reserves the right to change management.                           Johnson’s severance agreement says neither he nor Duke can publicly go beyond a Tuesday press release that said the two parted ways under “mutual agreement.” That doesn’t prevent either from “providing truthful disclosures as required by applicable law or legal process,” it adds.                              Duke also faces a demand from N.C. Attorney General Roy Cooper to turn over by July 31 board minutes and other documents from the time the merger was announced. Cooper made the demand after Standard & Poor’s placed Duke on a credit watch last week, after Johnson’s resignation. Moody’s, another rating service, affirmed its outlook for Duke.
On Friday Duke’s stock price fell 3.4 percent, its biggest decline since Aug. 10, Bloomberg News reported.....                        Speculation abounds about why Johnson resigned, or was pushed out, at 58. He left with up to $44.7 million in severance, pension and other benefits, according to securities filings and Duke’s calculations.                         Among the reasons floated is that Progress’ crippled Crystal River nuclear plant in Florida will cost much more to fix than the $1.3 billion Progress has estimated. Its outlook has dimmed since the merger was announced, and it’s still not known how much insurers will cover.

Debt Jubilee (Quantitative Easing ) for the Public