Sovereign Default Risk

This chart courtesy of CMA DataVision http://www.cmavision.com/
but excerpted from a BBC News article entitled "Greece crisis: Fears grow that it could spread"

Moral Hazard Expands from Private to Sovereign Bailouts

The Moral Hazard problem which I first wrote about in 2008 (see http://bondbubble.info/ ) is now threatening to expand to Sovereign Debt as Europe worries what kind of precedent a bailout of Greece would have on Portugal, Spain, etc. On the other hand, withholding support to Greece (and Portugal and Spain, etc.) could spell the end of the EU. A good article summarizing the quandary can be found here.

Sovereign Credit Ratings Take a Hit

Sovereign credit problems moved to the forefront of financial concerns today as Standard & Poor's downgraded Portugal's credit down two notches to A- and demoted Greece's debt to junk status (BBB-). The market rushed out of equities across the globe and into the U.S. dollar and into US bonds as a supposed "safe haven". For how long will the $U.S. be a safe haven? It's like jumping from a crumbling building into one that is creaking in preparation for something similar.

Anyway, gold moved up $14, in spite of the $U.S. index being up over 1% on the day. Now that is a more realistic safe haven play.

There appears to be a lot more trouble ahead on the sovereign credit front!

Scotia Mocatta Vault Contents

In Canada, there exists a Bullion Investment entity called Bullion Management Group (BMG)
They sell paper gold but claim that:

"An essential feature of bullion is that it is not someone else’s liability like a bond or promise of performance like a stock. To maintain this essential characteristic of bullion, the Fund only invests in Good Delivery bars and stores them on a fully allocated, segregated basis. The Fund will not use derivatives or invest in securities or certificates of companies that produce gold, silver or platinum bullion. The Fund does not invest in pooled accounts, futures contracts, futures options or precious metals certificates."

Furthermore, BMG publishes bar lists for bullion stored on their behalf by ScotiaMocatta in Toronto. There are two bullion funds. One invests in a diversified manner in several precious metals. The second one just invests in gold.

Here are the links to the purported bar lists for items stored by ScotiaMocatta (a small excerpt appears below):

BMG Bullion Fund (Gold Bar List):         http://www.bmgbullion.com/doc_bin/goldbarlist.pdf
BMG Bullion Fund (Silver Bar List):       http://www.bmgbullion.com/doc_bin/silverbarlist.pdf
BMG Bullion Fund (Platinum Bar List):    http://www.bmgbullion.com/doc_bin/platinumbarlist.pdf

BMG Gold Bullion Fund (Gold Bar List):  http://www.bmgbullion.com/doc_bin/bmg%20gold%20bullion%20fund%20as%20feb%205%202010.pdf

Altogether we see about 107,000 oz of gold and 5.2 million oz. of silver plus about 50,000 oz. of platinum. These statements purport to reflect conditions at March 31, 2010.

Thus, just for one Canadian client fund, the amounts supposedly stored exceed that observed by Lenny Organ on his visit to the vault. In the case of silver, the observed quantity is close to 100 times less than BMG supposedly has stored there on behalf of clients.

While the above is all public information, it may well have escaped the attention of some folks. Maybe someone (Adrian or Harvey or Lenny?) have a view on this.

Gold and Silver Manupulation Hits Mainstream Media

With a delay of several days, the MSM is finally beginning to report the story on the whistle-blowers charging manipulation of the gold and silver markets. See this story published today in the New York Post Business Section.

Wall Street Credibility

Continuing with last week's revelations on creative accounting practices hiding the true position of America' premier banks, many more mainstream media sources are registering their dismay. For example, see here for a MarketWatch article.

Revelations on Banks Fudging Data through Repo 105

Today, even the MSM (Mainstream Media) came down on the banks with a piece in the Wall Street Journal on the usual suspects (Goldman Sachs, Morgan Chase, BofA, etc.) showing how they routinely fudge their figures at reporting times (end of quarters) through mechanisms such as Repo 105 made famous by Lehman.

There is very little that one can trust anymore as far as the major banking and financial institutions are concerned. Dishonesty and, in may cases outright fraud seems to be deeply ingrained in their culture.

Gold and Silver Fraud Revelations continue

rganFurther to the bombshells regarding silver and gold manipulation which were aired at a recent hearing of the CFTC (The U.S.  Commodity Futures Trading Commission), today Adrian Douglas and Harvey and Lenny Organ divulged another bombshell regarding the near absence of physical precious metals in the vaults of ScotiaMocatta (ScotiaBank, Canada). Listen to the King World News interview.

Silver, Gold, Manipulation and GATA and the CFTC

There are some major developments regarding silver and gold manipulation, GATA (Gold Anti-Trust Action Committee) and the CFTC (The U.S.  Commodity Futures Trading Commission).  Here is a YouTube video that summarizes things pretty well. If you haven't followed GATA accusations, now would be a good time to bring yourself up to speed on what could be a history making situation soon. To hear an actual interview on King World News with whistle-blower Andrew McGuire, go here.

Predatory Financing

The signs of predatory financing continue to show up everywhere. Greece and Goldman Sachs is but one example.
To see how deep the tentacles have reached, take a look at this story by Matt Taibbi entitled "Looting Main Street" which takes a look at the shocking financial story of Jefferson County, Alabama.

Predatory bankers notwithstanding, corrupt and short-term oriented politicians and financial administrators need to be actively complicit to make these schemes fly. So, really, I believe that we are looking at a culture of irresponsibility, greed, corruption, complacency and wishful thinking that has crept in over many years. No one wants to face the music and accept the consequences of past errors in judgment - not national governments, not state or provincial governments, not city administrations or individuals in most cases, for that matter. Instead, everyone is looking for ingenious schemes to put off the day of reckoning with even greater long term consequences.