June 28, 2012

By Kevin Michael Grace

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Gold was down (at press time) $12.40 (-0.8%) for the week to $1,552.10, and silver was down $0.65 (-2.4%) to $26.29. According to Reuters, gold is “acting more like a risk asset than a safe-haven investment…influenced by pessimistic expectations for a European Union summit that is unlikely to yield the magnitude of measures needed to tackle its debt crisis.”

Good old Reuters. At the Globe and Mail, Tim Kiladze mocks, “Here’s a simple question for the goldbugs: if their precious metal is such a safe haven, why hasn’t it shot up as the European debt crisis unravels?”

He continues, “Over the past few years, investors have been pitched the same old story: with global financial markets in turmoil, there was no safer place to park your money than gold. Equity markets could plummet, but gold would be safe. Anyone who questioned this theory was apparently some sort of apostate. But now the dissenters are smirking…. Since its 2012 peak in February, the metal is down 12%. Quite strange, wouldn’t you say? If there was any time for gold to shoot up, it would be now. Fear is spreading like a global virus, for good reason.”

Barclays branch: Certainly looks boring, cozy and reassuring.

Is this the same Tim Kiladze who lamented four days earlier, “When will investors learn that fear is toxic?” Sure, things look grim, but we are best advised to seek the good counsel of Dr Pangloss: “What investors keep forgetting is that somehow, we keep making it work…. I’d argue that we aren’t really in a full-blown crisis. It’s simply a crisis of confidence.”

The only thing we have to fear is… how does that go again? Oh yeah, fear itself. Never mind that FDR was absolute rubbish at reversing or even ameliorating the Great Depression. It took a World War to do that. God save us from that economic remedy.

What’s Kiladze’s remedy? Angela Merkel must loot Germany to appease the bankers. God knows their integrity and disinterested dedication to the commonweal are without question. Of course there will always be dissenters and apostates. Like Chris Powell of GATA, who “told Bernie Lo on CNBC Asia…that central banks are continuing to manipulate the gold market as they are interested in supporting government bonds and the dollar and keeping interest rates low.” Powell says that “75% to 80% of the gold that the world thinks it owns does not exist and is just a claim on a bullion bank that is underwritten basically by the central banks.”

There’s an explanation for why gold hasn’t been safe havenish of late. But Powell is just a crank, right? Bankers engaging in such behaviour? Unthinkable. What’s that you say? “Barclays has agreed to pay US$453 million in fines to UK and US regulators to settle its part of an investigation into whether banks manipulated the London Interbank Lending Rate, known as Libor.” One rogue bank, right? Not so fast. “Most of the world’s biggest banks are under investigation as regulators from Europe, North America and Japan attempt to prove banks rigged rates.”

And what’s this? “Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates [of $2 billion]…. ‘Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank,’ said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner.” Gosh, Jaime Dimon couldn’t have gambled with public accounts and then withheld reporting the full extent of his losses, could he?

Let’s have one more, shall we? Barclays’ chief Bob Diamond (2011 compensation: £23 million), says he won’t resign and blames the scandal on a “small number” of employees. This would be the same Bob Diamond the Independent called “the most dangerous man in Britain,” referring to his “gargantuan ambition and his miniscule judgment.” As evidenced by his desperate efforts to buy both ABN Amro and Lehman Brothers shortly before the 2008 crash. The Independent asked, “What happens when Diamond’s luck runs out?” We may soon find out.

A British columnist writes, “[Bankers] have become today’s hotshot heist artists. They collect swag on a scale beyond the Great Train Robbers’ dreams, and none of them goes to prison even when the figures show that they are pocketing millions for delivering disaster…. I cannot think why anyone would voluntarily sit down at a table with the likes of Bob Diamond. These people should be social pariahs. The phrase ‘High Street banks’ once suggested something boring, cozy and reassuring…. Nowadays, of course, it is all different. Diamond and his ilk see their businesses as giant shark tanks in which they themselves are the only occupants that matter, the rest of us mere prey.”

Some Guardianista venting his envy, right? No, this is Sir Max Hastings, pillar of the Establishment, prominent military historian, former editor of the Daily Telegraph and Evening Standard, writing in the Daily Mail, the most right-wing of British papers. If Hastings is representative of emerging opinion, the likes of Bob Diamond might end up begging for prison, if only to prevent their collection in tumbrels.

Stock Tips and the Joke of the Week

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