The rise in grain prices has inspired comparisons with 2007-08, when a price surge triggered a wave of food riots in more than 30 countries from Bangladesh to Haiti, and 2010, when Russia banned grain exports, setting off a price jump that some have argued helped to cause unrest across the Arab world last year.
Drought stretches across America, threatens crops - CNN - Moni Basu - July 13, 2012 - As of Tuesday, 61% of land in the lower 48 states was experiencing drought conditions -- stretching from Nevada to South Carolina -- the highest percentage in the 12-year record of the U.S. Drought Monitor. The parched conditions come after some areas of the United States suffered record-setting heat waves, killer storms and blazing wildfires. In America's Corn Belt, the prognosis for farmers is grim as fields and pastures become drier by the day.... He says 30% of the corn crop in the 18 primary corn-growing states is now in poor or very poor condition, up from 22% the previous week. Half of America's pastures and ranges are in poor or very poor condition, up from 28% in mid-June, he says........ Consumers will be hurting as well down the line when they feel the drought in their pocketbooks, says Miller, who is also the director of research and commodity services at the Iowa Farm Bureau.
Corn prices have climbed 45% already, Miller says; soybeans, 22%. "In the short run, that doesn't show up in the grocery store," he said, since most of this corn is used as livestock feed.
In fact, he said, meat prices could fall at first if farmers slaughter more animals to decrease the cost of buying feed. But eventually, Americans will pay more at the checkout counter. "It's likely that in three to six months from now, you will start seeing an increase in prices in the meat case," Miller said. "There will be a quicker impact on eggs and poultry because the production cycle is shorter." And even milk could see 4% to 6% price hikes if there are reductions in dairy herds.
The Real Libor Scandal ~Paul Craig Roberts and Nomi Prins - PaulCraig Roberts.org - Paul Craig Roberts and Nomi Prins - July 14, 2012 - ...Banks are not the only beneficiaries of lower Libor rates. Debtors (and investors) whose floating or variable rate loans are pegged in some way to Libor also benefit. One could argue that by fixing the rate low, the banks were cheating themselves out of interest income, because the effect of the low Libor rate is to lower the interest rate on
customer loans, such as variable rate mortgages that banks possess in their portfolios. But the banks did not fix the Libor rate with their customers in mind. Instead, the fixed Libor rate enabled them to improve their balance sheets, as well as help to perpetuate the regime of low interest rates. The last thing the banks want is a rise in interest rates that would drive down the values of their holdings and reveal large losses masked by rigged interest rates. Indicative of greater deceit and a larger scandal than simply borrowing from one another at lower rates, banks gained far more from the rise in the prices, or higher evaluations of floating rate financial instruments (such as CDOs), that resulted from lower Libor rates. As prices of debt instruments all tend to move in the same direction, and in the opposite direction from interest rates (low interest rates mean high bond prices, and vice versa), the effect of lower Libor rates is to prop up the prices of bonds, asset-backed financial instruments, and other "securities." The end result is that the banks' balance sheets look healthier than they really are... In other words, we would argue that the bailed-out banks in the US and UK are returning the favor that they received from the bailouts and from the Fed and Bank of England’s low rate policy by rigging government bond prices, thus propping up a government bond market that would otherwise, one would think, be driven down by the abundance of new debt and monetization of this debt, or some part of it. How long can the government bond bubble be sustained? How negative can interest rates be driven? Can a declining economy offset the impact on inflation of debt creation and its monetization, with the result that inflation falls to zero, thus making the low interest rates on government bonds positive? According to his public statements, zero inflation is not the goal of the Federal Reserve chairman. He believes that some inflation is a spur to economic growth, and he has said that his target is 2% inflation. At current bond prices, that means a continuation of negative interest rates. The latest news completes the picture of banks and central banks manipulating interest rates in order to prop up the prices of bonds and other debt instruments. We have learned that the Fed has been aware of Libor manipulation (and thus apparently supportive of it) since 2008. Thus, the circle of complicity is closed. The motives of the Fed, Bank of England, US and UK banks are aligned, their policies mutually reinforcing and beneficial. The Libor fixing is another indication of this collusion. Unless bond prices can continue to rise as new debt is issued, the era of rigged bond prices might be drawing to an end. It would seem to be only a matter of time before the bond bubble bursts.
New York Fed Knew of False Barclays Reports on Rates - New York Times - By MICHAEL J. DE LA MERCED and BEN PROTESS - July 13, 2012 - The Federal Reserve Bank of New York learned in April 2008, as the financial crisis was brewing, that at least one bank was reporting false interest rates. At the time, a Barclays employee told a New York Fed official that “we know that we’re not posting um, an honest” rate, according to documents released by the regulator on Friday. The employee indicated that other big banks made similarly bogus reports, saying that the British institution wanted to “fit in with the rest of the crowd.” Although the New York Fed conferred with Britain and American regulators about the problems and recommended reforms, it failed to stop the illegal activity, which persisted through 2009. British regulators have said that they did not have explicit proof then of wrongdoing by banks. But the Fed’s documents, which were released at the request of lawmakers, appear to undermine those claims.
The revelations fuel concerns that regulators are ill-equipped to police big banks and that financial institutions can game the system for their own purposes..... Regulators are now expanding their global investigation into the manipulation of key interest rates, a multiyear inquiry that has already examined more than 10 big banks, including UBS, JPMorgan Chase andCitigroup. In June, Barclays agreed to pay $450 million to settle claims that it reported bogus rates to deflect concerns about its health and bolster profits. The Barclays case is the first major action stemming from the inquiry into how big banks set major benchmarks like the London interbank offered rate, known as Libor. The rate is essentially how much interest banks would pay to borrow money on a short-term basis from other financial firms, a process that is overseen by the British Bankers’ Association, an industry trade group. Such benchmarks are used to determine the price of trillions of dollars of financial products, including mortgages and credit cards.
Since the Barclays settlement, lawmakers have focused their attention on regulators’ role in the rate-manipulation controversy. “As much as $800 trillion in financial products are pegged to Libor, so any manipulation of this rate is of serious concern,” said Representative Randy Neugebauer, the chairman of the House Financial Services Subcommittee on Oversight and Investigations, which initially requested the documents from the New York Fed. “We’ll continue looking into this matter to determine who was involved in this practice and whether it could have been prevented by regulators.”
Market Savior? Stocks Might Be 50% Lower Without Fed - CNBC.com - John Melloy - July 12, 2012 - A report from the Federal Reserve Bank of New York suggests that the bulk of equity returns for more than a decade are due to actions by the US central bank. Theoretically, the S&P 500 [.SPX 1356.78 22.02 (+1.65%) ] would be more than 50 percent lower—at the 600 level—if the bullish price action preceding Fed announcements was excluded, the study showed.... What they found was that the Federal Reserve has had an outsized impact on equities relative to other asset classes. For example, the market has a tendency to rise in the 24-hour period before the release of the Fed’s statement on interest rates and the economy, presumably on expectations Chairman Ben Bernanke and his predecessor, Alan Greenspan, would discuss or implement a stimulus measure to lift asset prices. The FOMC has released eight announcements a year at 2:15 ET since 1994. The study took the gains in the S&P 500 from 2 pm the day before the announcement to 2 pm the day of the statement and subtracted that market move from the S&P 500’s total return over that time span. Without the gains in anticipation of a positive Fed action, the S&P 500 would stand at just 600 today, rather than above 1300.
JPMorgan loses $5.8 billion on trades; traders may have hidden losses - Reuters through CNBC - (Reporting by David Henry and Jed Horowitz in New York, additional reporting by Chuck Mikolajczak; Editing by Lisa Von Ahn) - July 13, 2012 - JPMorgan Chase & Co lost $5.8 billion in 2012 from disastrous credit bets, and traders might have tried to conceal the extent of the losses earlier this year, the biggest U.S. bank said on Friday. The bank still managed to earn nearly $5 billion in overall profit in the second quarter and said it had fixed the problems in the Chief Investment Office, which was responsible for the trading losses. In the worst-case scenario, JPMorgan will lose another $1.7 billion on the trades, it said. But JPMorgan's disclosure that traders may have deliberately lied about their positions could bring even more intense regulatory scrutiny to the bank, analysts said. It is already under investigation by everyone from the FBI to the UK's Financial Services Authority. The trading losses and possible deception from traders are a black eye for JPMorgan Chief Executive Officer Jamie Dimon, who was respected for keeping his bank consistently profitable during the financial crisis... A host of international regulators and agencies are probing the trading mishap. Besides the FBI and FSA, they include the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corp, the U.S. Commodity Futures Trading Commission, the U.S. Treasury's Office for the Comptroller of the Currency, and the Federal Reserve Bank of New York.
How Your Bank Account Could Disappear (BAC, C, JPM) - ETF Daily News - Jeff Neilson - July 11, 2012 - ... We are being led to believe by the Corporate Media (another unreliable source) that this problem is only a risk for all individuals with “brokerage” accounts, however as we piece together all the pieces of the puzzle (already revealed) this is what we see before us:
1) Our banking regulators knowingly allow financial institutions to engage in recklessly misleading (if not outright fraudulent) contracts with their clients, through the use of complex “small print” in their account contracts with clients.
2) The three largest U.S. “banks” by deposit JP Morgan (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C) have made bets in their own rigged casino, which total well in excess of $100 trillion, an amount which completely dwarfs their total, combined deposits (and assets).
3) A large portion of those bets occur in the $60+ trillion credit default swap market. Pay-outs in these markets can (and do) exceed 300 times the amount of the original bet. It is bets in this market which “blew up” AIG, requiring more than $150 billion in immediate government aid.
4) Following the Crash of ’08; these same banks mooched a package of hand-outs, tax-breaks and “guarantees” (i.e. future hand-outs) from the Bush regime in excess of $15 trillion, the last time their gambling debts went bad on them – and all of these banks have been allowed to dramatically increase the total amount of their gambling since then.
5) It would take only a minor change in the gambling contracts in which these bankers engage to allow their creditors to seize funds out of ordinary bank accounts.
6) The existing language for the bank accounts of these U.S. banks is possibly already so vague (and prejudicial to clients) that it would allow these banks to reinterpret the terms of these bank accounts – and allow rehypothecation to be used to rob the holders of ordinary bank accounts, people who themselves make no “bets” in markets whatsoever. Alternately, customers could be blitzed with an offer for “new and improved” bank accounts, where terms allowing rehypothecation are slipped into the contract, with the banks knowing that the “regulators” will do nothing to warn account-holders of the gigantic risk they are taking.
Producer prices rise despite drop in energy costs - Reuters through CNBC - July 13, 2012 -
Producer prices unexpectedly rose in June despite big drops in energy prices, a sign that some inflation pressures could keep the Federal Reserve on guard. The Labor Department said on Friday its seasonally adjusted producer price index rose 0.1 percent last month. Analysts polled by Reuters expected the index to drop 0.5 percent. The increase was driven by gains in consumer goods like household appliances, light trucks and pet food. That led so-called core inflation, which strips out more volatile food and energy prices, to rise 0.2 percent, in line with expectations. While overall inflation has cooled recently, core inflation has held at higher levels. Some policymakers at the Fed worry that further moves to lower borrowing costs could fuel higher inflation, though the central bank has said it was ready to do more to help the economy if needed. Energy prices dropped 0.9 percent in June, dragged down by a record drop in prices for residential electric power, which fell 2.1 percent. Diesel fuel prices sank 8.8 percent. The fall in energy prices is likely to help the economy as lower costs for fuels and other input prices leave companies more money to spend on other things, such as equipment or even hiring.
Postal Service default appears likely - USA Today - Sean Reilly, Federal Times - July 13, 2012 - The cash-strapped U.S. Postal Service is within weeks of defaulting on a legally required $5.5 billion payment into a health benefits fund for future retirees.... Under a schedule laid out in the 2006 Postal Accountability and Enhancement Act, the Postal Service also is supposed to make a $5.6 billion payment into the retiree health fund at the end of September.... Lawmakers appear likely to let the Postal Service default, representatives of mailing industry groups said Thursday...... Both the House and Senate will be on break Aug. 6 to Sept. 7; after that, the House is scheduled to be in session for only three weeks in September and October, according to a schedule posted on its website. Tony Conway, executive director of the Alliance of Nonprofit Mailers, sees little chance of an intervention from Congress before next month's deadline. Lawmakers have "got all this stuff on their plate, and they're running out of time. And there's no vehicle, so it doesn't appear it's something they're going to get to," he said. The health-care payment originally was due in September 2011, but Congress deferred it until Aug. 1.
In requiring the Postal Service to build up the health benefits fund, lawmakers' stated purpose was to ensure coverage for future retirees without resorting to taxpayer assistance. But Postal Service executives and unions have objected that no other business or government agency faces a similar mandate. Although the agency has struggled to make the payments in recent years, Congress has twice stepped in, either to reduce the legally required amount or to push back the deadline.
Banks Lend Money into existence as Debt - Max Keiser ...most people assume that a Bank takes in a deposit and then they loan that deposit out and this creates liquidity in the system , that's false , in today's banking system Banks first lend money into existence that's where money comes from it is loaned into existence as debt , a small fraction of that ends up in another bank's balance sheet that they then call collateral but it is just debt , there is no hard collateral ...that's why at this time around the world there is a mad scramble to try to reclassify gold as a tier one asset because that's the only intangible collateral that you can have at this point to solve the fact that none of these banks have any collateral that's worth anything in the resale market , they are all technically bankrupt .... this is what they discovered in Island .....