Bank Manipulations Coming to an End?

ECM Banking Proprietary Trading

Why I Left Goldman SachsI have stated for years that the banks are NOT great traders – they are manipulators. You can tell the bias and untrustworthiness of mainstream press for just about every organization criticized Greg Smith’s book – Why I Left Goldman Sachs. Any journalist who dared to support Goldman and diminish what Smith wrote about is not worth reading and may be even a paid propagandist. What Smith wrote about was by ABSOLUTELY NO means limited to Goldman Sachs. As a major hedge fund manager, you simply cannot for one second let your guard down and think that ANY bank dealing desk is there to provide a service. They are all proprietary traders and they ALL trade against clients to make money. Those who create these grand conspiracies of all-powerful groups that seek to control the world are most likely disinformation that has provided these proprietary schemes with cover. The best way to hide such activity is exaggerate it so at the end of the day it sounds absurd and then anyone who writes a book about the truth gets thrown into the same vat and ignored.

I get all sorts of absurd emails on conspiracies insisting they have to exist and it is some grand plot to rule the world. That may be fit for a James Bond movie, but in reality, such schemes have been to manipulate markets for brief periods to make a quick buck. These schemes will goose the metals up and whenever I have said this is a manipulation, the hate mail starts for ALL UP-MOVES are always REAL and declines are only MANIPULATIONS. This seems to be deliberate misinformation. The banks are not stupid. Every manipulation I have EVER watched them do the precious metals has been ALWAYS, and without exception, to the upside. That gets everyone buying where you cannot get that type of widespread action on the downside.

The LIBOR scandal unleashed a firestorm right on time with our model.  Our Model of when the Bank Manipulations would begin to turn against them was February 2013. The issue that demonstrated that what Smith wrote about, and was ignored by most of the US media, was proven correct in that London scandal. In June 2012, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the interest rate submissions that lead to the scandal of manipulation. The banks are supposed to submit the ACTUAL interest rates they are paying, or would expect to pay, for borrowing from other banks. Therefore, LIBOR is supposed to be the total assessment of the health of the financial system on a wholesale level. Since the banks being polled set rates based upon the level of their confidence about the state of the economy, they would report a lower number as confidence increased. If the member banks felt that caution was warranted, then they would report a higher interest rate number.

LIBOR could therefore be manipulated to increase their profits by altering the spreads. LIBOR was used in US derivatives markets and therefore any attempt to manipulate LIBOR amounted to an attempt to manipulate US derivatives markets. This would include the forward rates in futures that some called BACKWARDATION and touted this manipulation as reason to buy gold when the banks played with this spread as well.

Additionally, mortgages, student loans, financial derivatives, and other financial products often rely on LIBOR as a reference rate, the manipulation of submissions used to calculate those rates can have significant negative effects on consumers and financial markets worldwide. Since this rate is set in London, it was for centuries a Gentlemen’s Market. Once the banks got involved in proprietary trading after 1981 as their main profit center, ethics went out the window.

It was on July 27th, 2012, when the London Financial Times published an article by a former trader which stating that LIBOR manipulation had been common since at least 1991. Further reports on this have since come from the BBC and Reuters. This coincides with what I wrote about in Behind the Curtain that once PhiBro bought Solomon Brothers and inspired Goldman Sachs to buy J.Aaron, the manipulating culture of the commodity world took over financial world and Wall Street. By November 28th, 2012, the Finance Committee of the Bundestag held a hearing to learn more about the issue.

Proprietary Trading among the money center banks has been devastating to the global economy. It would have been nice if there was some conspiracy to rule the world for at least then the world might have been stable. But these people are in it for the quick buck and as a result, there is no long-term plan and that is why everything is going nuts. They have been totally irresponsible and only look at how much can be made on a deal to deal basis. They fail to grasp the consequences of their actions. Those who believe their wild all-powerful conspiracy theories are providing shelter for the real manipulation. They are not interested in long-term goal – this is all about show me the money NOW!

mf-global-logoThe whole MF Global collapse was serious. They take clients funds from the states and post them to their London office. In London, they cannot sell money in REPO without the client signature. So the US office takes the client accounts and posts them in London pretending they are their funds and that meets and the US branch signs meeting the London regulation. The US simply allowed the banks and brokers to take client funds looking the other way. This is why the Mortgage scandal centered around AIG, but that was their London office – not USA. We have to understand that the US media will NEVER print the truth. This is why Snowden turned to the Guardian in London. What US major newspaper would have EVER broke that story?

These people are hell-bent on profits SHORT-TERM. There is no long-term plan for had there been, they would have prevented their own demise. The game is over. Expect volatility to rise sharply after 2015.75. The day of the Money Center Proprietary Trading Banks is on the path to becoming extinct. Now investigations have moved into foreign exchange and Europe is considering outlawing short-selling. Keep in mind, the NY banks still control the US press. They will NEVER expose the truth until it is obvious. They are part of the ESTABLISHMENT and know their place in the game.