NY Times article on how Wall Street uses paid academics to defend commodities manipulations

CaptHenway

Did not mention gold, but shows how the entire commodity market is corrupt.

linky

Edited to add: Comes up in an ad. Click "Skip Ad" in upper right corner.

mariner67

Is this a surprise to anyone?

VanHalen

The best from the comments section:

<< <i>"In-con-theivable." >>

derryb

Much of our economy has been engineered by "academics."

And lets not forget crony journalism.

It all began with "in bed with," I mean "embedded" reporters. Washington learned that making them part of the team would make them team players.

Academics and journalism - control the information that gets to the public and you just might control the thinking.

roadrunner

What do you call a University or corporate economist that does not support the Wall Street or Govt's party line with respect to finances and economics?

An unemployed economist. ......(ie no plum jobs, no govt or corporate grants, no gravy train, etc.).

bidask

<< <i>Did not mention gold, but shows how the entire commodity market is corrupt.

linky

Edited to add: Comes up in an ad. Click "Skip Ad" in upper right corner. >>

How does this article show that the entire commodity market is corrupt??

bidask

<< <i>What do you call a University or corporate economist that does not support the Wall Street or Govt's party line with respect to finances and economics?

An unemployed economist. >>

A University or corporate economist that does not support the Wall Street or Govt's party line with respect to finances and economics may not receive what the 2 professors quoted in the article receive but Im thinking there are plenty of employed economists with different views.

derryb

<< <i>

<< <i>What do you call a University or corporate economist that does not support the Wall Street or Govt's party line with respect to finances and economics?

An unemployed economist. >>

A University or corporate economist that does not support the Wall Street or Govt's party line with respect to finances and economics may not receive what the 2 professors quoted in the article receive but Im thinking there are plenty of employed economists with different views. >>


Unfortunately, many of them, like government insiders, keep it to themselves out of fear.

bidask

<< <i>

<< <i>

<< <i>What do you call a University or corporate economist that does not support the Wall Street or Govt's party line with respect to finances and economics?

An unemployed economist. >>

A University or corporate economist that does not support the Wall Street or Govt's party line with respect to finances and economics may not receive what the 2 professors quoted in the article receive but Im thinking there are plenty of employed economists with different views. >>


Unfortunately, many of them, like government insiders, keep it to themselves out of fear. >>

When it comes to Wall Street opinions fly everywhere.

roadrunner

This guy, a former derivative's trader doesn't think there are any free markets due to otc derivatives - in particular IR swaps

30 min video you can listen to when doing some chores around the house or before you leave for work.

Interesting that when the taper was announced the otc IR swaps from the 2nd and 3rd qtr increased by $12 TRILL notional. Even assuming the 30-1 leverage in these....that's $360 BILL....or 3 years of tapering at the
current $10 BILL/month level (ie JPM, GS, MS).

MGLICKER

<< <i>They have paid lobbyists, paid bashers and pumpers in various capacities, as well as many other professionals to protect their economic interests and an almost supernatural sense of how things affect their bottom line. Meanwhile most people are kept in the dark about how they operate. >>



The light bulb. The 60 cent bulb has been replaced by the $5 bulb. The new Green bulbs contain mercury. But this is somehow better for us schmucks.

jmski52

The light bulb. The 60 cent bulb has been replaced by the $5 bulb. The new Green bulbs contain mercury. But this is somehow better for us schmucks.

Well, at least we know it's better for former jobs czar and job-exporting Jeff Immelt and tax-dodging GE Corp. At least there's that.

C0INB0Y

<< <i>This guy, a former derivative's trader doesn't think there are any free markets due to otc derivatives - in particular IR swaps

30 min video you can listen to when doing some chores around the house or before you leave for work.

Interesting that when the taper was announced the otc IR swaps from the 2nd and 3rd qtr increased by $12 TRILL notional. Even assuming the 30-1 leverage in these....that's $360 BILL....or 3 years of tapering at the
current $10 BILL/month level (ie JPM, GS, MS). >>



Don't you love the "tell" they send out:

When they lowered the margin requirements at the CME about a month or so, ago?

jmski52

I've never thought much about what an interest rate swap really is. Is it simply something like, "I'll give you 1 gazillion of my 7 year private obligations yielding 2% for 2 gazillion of your 30 year private obligations yielding 4%, or something like that? Is that how the individual banks create their own cash flow?

IR Swaps have nothing to do with the Fed - yes or no? What about the Treasury, is it involved? rr's link indicates that the Treasury "oversees" the interest rate trading. Does Treasury issue these things at a discount, like they issue Treasury Bonds? If so, it's a house of cards on top of a house of cards. Yikes.

It's all somewhat confusing to consider, if you really decide that it needs to be understood. Money for nothing and the chicks are free?

roadrunner

<< <i>I've never thought much about what an interest rate swap really is. Is it simply something like, "I'll give you 1 gazillion of my 7 year private obligations yielding 2% for 2 gazillion of your 30 year private obligations yielding 4%, or something like that? Is that how the individual banks create their own cash flow?

IR Swaps have nothing to do with the Fed - yes or no? What about the Treasury, is it involved? rr's link indicates that the Treasury "oversees" the interest rate trading. Does Treasury issue these things at a discount, like they issue Treasury Bonds? If so, it's a house of cards on top of a house of cards. Yikes.

It's all somewhat confusing to consider, if you really decide that it needs to be understood. Money for nothing and the chicks are free? >>



It is a confusing topic and I still don't understand a lot of it. But from my meager readings, IR swaps are generally where one party (usually the big bank) takes the fixed part of an interest rate contract on X amount of something while the counter-party pays a monthly or annual premium for this "protection" from unexpected rate changes. A municipality might need protection from the risk of rising interest rates in the next 1-5 years and might enter into a
contract with JPM to mitigate that risk. They would pay JPM a steady premium such that if rates were to climb quickly, JPM would take the hit, not them. Thing is, JPM & Co. have been playing a game where their massive
purchasing of these swaps has enabled them to control the interest rate curve....at least well enough where they usually don't lose. With $50 TRILL in IR swaps, I suspect that generates plenty of monthly premiums (cash flow) for
JPM. They aren't required to ever value these contracts to market. They can simply decide themselves what they are worth. And odd choice since their entire business probably rides on these things.

The FED doesn't appear to be involved in the creation of these contracts. But, they might be able to end up with them. The 5 or 6 largest US banks create the derivatives. I'm not sure if they are all their own counterparties or
there are others outside the system. I think it's a circular house of cards. If you look on the OOC website you will see a graph of dealer demand and end users for these things. The dealer demand is >95% from the banks
themselves. Rob Kirby has stated that there is no end "retail" user of these. It's the big banks that have nearly all of them....and it's their house of cards. The FED and Treasury can certainly "suggest" to the big banks that they
buy or sell IR swaps as need to "help the cause." In early 2011 Morgan Stanley increased their otc derivatives holdings by about $12 TRILL over 6 months. A huge amount for one bank. 80% of those were IR swaps. It was
probably more than coincidence that in the first half of 2011 the price of bonds flew while interest rates crashed. The next OOC derivative's report showed that the 5 big US banks increased their positions by $100 TRILL in the
first half of 2011! The FED and Treasury decide what "work" needs to be done...then has the big banks do that. The important thing about these IR swaps is that they are linked to a very real USTreasury Note/Bond. So those
IR swaps have created an artificial, though very real demand for US Bonds over the past 12 years. At a typical 30-1 leverage, that's approx $8 TRILL in settlement value for those contracts (3% of the $250 TRILL notional). It's
this linkage with real USBond purchases that makes just "netting" all these out to zero quite difficult. It's more than just paper entries sitting in a big black book.

derryb

think of interest rate swaps as insurance policies against rising interest rates.

What would happen to MetLife if 20 million death claims came in tomorrow?

ZIRP forever (or at least until the Reset button gets pushed)!

roadrunner

<< <i>think of interest rate swaps as insurance policies against rising interest rates.

What would happen to MetLife if 20 million death claims came in tomorrow? >>




Good analogy. JPM, BoA, Citi, MS, and GS have those "20 million death claims" already posted against them. But, by valuing their otc derivative's much higher than market demand says they are worth, they have basically told those 20 million dead people (ie Interest rate swaps) that they are really "alive." And until those 20 MILL rotting corpses start to stink up the joint, things can go on as they are. For now, the bodies are stacked on ice in a secure vault. You can't make the contents come back alive. But, you can tell the shareholders, auditors and American people that everyone is alive and well back in vault C. No life insurance payouts can be made because everyone is
still "officially" alive. The banks remain solvent as the books show no payouts are due. All is well.

derryb

<< <i>

<< <i>think of interest rate swaps as insurance policies against rising interest rates.

What would happen to MetLife if 20 million death claims came in tomorrow? >>




Good analogy. JPM, BoA, Citi, MS, and GS have those "20 million death claims" already posted against them. But, by valuing their otc derivative's much higher than market demand says they are worth, they have basically told those 20 million dead people (ie Interest rate swaps) that they are really "alive." And until those 20 MILL rotting corpses start to stink up the joint, things can go on as they are. For now, the bodies are stacked on ice in a secure vault. You can't make the contents come back alive. But, you can tell the shareholders, auditors and American people that everyone is alive and well back in vault C. No life insurance payouts can be made because everyone is
still "officially" alive. The banks remain solvent as the books show no payouts are due. All is well. >>


I think the corpses are begining to stink. Those with the best nose will be best prepared.

cohodk

20 million dead people saves $500,000 per in last few months of life costs. Thats $10 trillion. Not bad.