Archive for April, 2012

Rebuild The Spring

Friday, April 20th, 2012

Whether you are springing forward or slinking back take care not to twist your slinky. 

If you’ve been waiting out the winter in Mom’s basement in anticipation of the spring poncho season with plans to head out to the nearest Occupy Wall Street encampment, you may need to bone up on your fifth grade math if percentages aren’t your thing. 

You can join the 99% who with the help of the White House is being divided in half which I guess would make it the 49.5%.  To do this you would want to follow the group known as Adbusters and plan on heading out to Chicago for the May 1 activities.  Here’s their website: 

Before you start making noise in Illinois, it may be a good idea to practice answering the rhetorical question;  “What is our one demand?”  Allowing each individual to have a different answer to that question would seem to be the basis of the movement.  It’s no easy task to sustain the lack of focus for of a movement that’s been baking like a bun in the oven for over nine months.

If you would rather camp out with the Obama Campaign as your hope for change, then you would want to join a group known as The 99% Spring ( Dave guesses this is a take-off on the Arab Spring, but don’t forget to bring some Irish Spring deodorant soap because it can be a long hot summer in the back of your Chevy Van while you rebuild the dream. Here’s Van Jones explaining what the better half of the movement has planned for training folks on going from “outside” to “inside” to “outside” and finally to “inside the jailhouse.”

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If percentages aren’t your game and you’re finding yourself a bit confused about which group to join, here’s a video from Aljazeera that attempts to explain the finer points of the 49.5%

 If all this occupation makes you wonder how you’re going to rebuild the dream while maintaining the American dream you already built by keeping the occupation you already have, never fear there’s a group for you.  You can simply join the 1% and you don’t have to hold up a sign in the window of your office because you can work from home as a day trader taking on the high frequency algos while you eat Jello.  Interactive Brokers has launched an advertising campaign that simply says “Join the 1%.” Take the red pill… it’s that easy when you sign up today.


If your as confused about whether or not to head West to Chicago or East to Chicago depending on which way the wind blows, then you may want to break bad with Professor Cornel West who takes a swing at Adam Smith’s invisible hand using a Karl Marx hammer and sickle in a sick rap.  At the 1:45 second mark, Cornel unwraps his thesis when he busts the rhyme Free Market Fundamentalism Run Amuk.  Where Dave and Cornell disagree on occupations such as University Professorships and entrepreneurialism is simply this.  It’s not the market that’s run amuk so much as the players have lost their center.  Adam Smith knew that if the invisble hand lost touch with its Creator, then the market is nothing more than Macchiavelli himself.  A democratic government may derive its power from the people, but where do the people derive their power from?  As Cornel explains the power came from trust, but he stops short of where the trust came from.  Maybe the direct deposit of his paycheck from Princeton has blurred his view of where the buck stops for In God We Trust.   


Just Bright Enough To Hold Hands With Most Swap Dealers

Thursday, April 19th, 2012

File:Kyle Plante mullet 5th grade.jpg

It’s no secret to anyone in the service of President Obama or any other government agency that going to great lengths to maintain the appearance of integrity by being strictly business up front while there’s a party going on in the back, is not as easy as changing from Hannah Montana to Miley Cyrus.  For those of you who believe that the rating agencies could be replaced with an online version of the consumer protection financial bureau with a simple app from the app store, hold your horses.  Before you get your pony tail all in a knot, listen to what the regulators had to say about the Holiday Inn Express version of expert rule making when it only took a year and nine months to define the two words “swaps dealer” in terms of billions rather than points.     

The Commodity Futures Trading Commission and the Securities and Exchange Commission vaguely defined the meaning of what constitutes a “Swaps Dealer” yesterday.  Here’s what the folks who wrote the definition and those who are trained observers had to say about the actions and their impact on the integrity of the regulators.  Dave has taken the liberty of taking their comments out of context.  The regulators have taken the liberty of making the definition out of context.  You could describe that as a swap.  Whenever you see the word “commissioner” remember it’s you that are paying their commission.   

On the relationship between government regulators and Cirque de Soleil…

“I am unable to support this rule not because it fails to make positive policy choices, but because it undertakes several unnecessary and astonishing contortions to achieve those results.”  Scott O’Malia, Commissioner

On how austerity measures can led to regulators that don’t have a pen to write with…

“Are these the rules I would have drafted if I held the pen from the beginning of this process? No.” Jill Sommers, Commissioner

On holding hands with greasy palms…

“We developed this entities rule so that the structure would allow us to have appropriate regulatory handholds on them.”  Bart Chilton, Commissioner

On being just bright enough to keep your job…

“It is not possible to come up with a bright-line test… But the line we draw must be bright enough.”  Mark Wetjen, Commissioner

 On the psychic congressional network and channeling true intent for the majority…

“True to congressional intent, end-users… won’t be required to register as swap dealers.”  “I believe that the final swap dealer definition will encompass the vast majority of swap dealing activity.”  Gary Gensler, CFTC Commissioner & Chairman

From Mary and the mythbusters of moral hazard, see if you can follow this one…

“Congress gave us the task of identifying those entities that specifically engage in (swap) dealing activity in this market.”  “…Congress did not intend for… most market participants who… engage in… swap transactions… to be regulated as…  swap dealers.”  Mary Schapiro, Commissioner & SEC Chairman

From the side of the milk carton to the Halls of Monetezuma’s revenge, we will fight our client’s battles on Pennsylvania Ave and K Street… 

“This rule is an indefensible retreat from financial reform. … a poster child for the pernicious effect… of lobbyists at the regulatory agencies…  Given that… every swap dealer decides for itsself what is or is not a hedge… abuse and evasion… could be rampant.”  Dennis Kelleher, Better Markets

What seems to be the problem is that there never was a problem with the good intentions asphalt and paving company that street sweepers can’t clean up.

“The intention of Dodd-Frank was not to cause problems…”   “The very, very large might still be swept in, but that is just a few.”  Andrea Kramer, McDermot Will & Emery

An inside the beltway distinction of what only seems to be unseemly. 

“A broader hedge… is what the… companies wanted to see.  It seems that it is an improvement…”  Deana Dow Ogilvy Govt. Relations

Size matters.  It does.  Close matters to.  This is horseshoes, not hand grenades.   

“We were close to the $3 billion range. At $8 billion, we should not be classified as a swap dealer.” Sam Henry, Intl. Power

I was country when country wasn’t cool, Bart Chilton’s mullet still was and farmers weren’t vaporized by MF Global.

“From what I can tell… the final rule that will reduce the negative impact on end-users out in the countryside.”  Rep. Frank Lucas

When asked about integrity when it comes to regulators and what will he blog about when Bart Chilton resigns…

“I can’t say anything more than Billy Ray Cyrus and Alexis de Tocqueville have already said about the fashion of fascist governments.  I want my mullet back:  Dave Harrison of Trade With

For the complete uncompromised verion of the quotebox article from Reuters:

Since you probably sent in your taxes and the paid the commish, you may want to know what other amazing efforts have been undertaken by those who get paid by you regardless of performance.  Here’s an in-depth piece from Bob English for Economic Policy Journal where Bob does his best Bernanke comb-over to straighten out the curls in the email correspondence regarding Jon Corzine/Gary Gensler meetings and The Corzine Trade.   If you’ve been wondering just exactly how vaporizing $1.2 billion in customer cash via repo transactions  pursuant to 1.25 “could be beneficial,” then check out your CFTC at work.  Here’s the full report:

This isn’t Dave’s first CFTC rodeo.  For more blog posts on do it yourself haircuts and price discovery, click here:

Make A Move And The Bunny Gets It

Wednesday, April 18th, 2012

Jailbird, the plane used in Con Air later operating as a freighter crashed on August 2, 2010 in Alaska and three crew members perished.

There was a line from the movie Con Air, where John Malkovich says “Make a move and the bunny gets it.”  That’s why it is so important to understand context.  It’s not so much that Malkovich’s character Cyrus Grissom was threatening the life of a stuffed bunny rabbit.  It’s the context of having the only gun on an airplane.  You kill the bunny, you kill everybody including yourself. 

The concept of “Nobody move or I’ll kill myself” is one that is similar to a hostage-taking situation but it has one key distinction.  First of all, are other people going to die if the person blows themselves up, as in the case of a terrorist walking into a market in the Middle East with explosives strapped to their chest?  Then again, if no one is within shrapnel receiving distance to the bomb, it’s just a regular suicide albeit much messier than say a drug overdose. 

It’s a common comparison to say that what Hank Paulson did during the Lehman Brothers meltdown and the TARP $700 billion (that arguably rose to $7.77 trillion) was the equivalent of suicide banking.  Basically the concept is “Give me what I want, or we blow up the banking system and everyone connected to it.”  That’s suicide banking.  Three-and-a-half years later, the landing is scheduled for that fateful fascist financial flight that was piloted by Secretary Paulson, air traffic controlled by President Bush and fueled by Congress. 

Dave woke up wondering if this was the day, so instead of heading over to Radio Shack at five o’clock on the morning, he simply goes to Google and types in the following question.  “Is Bruno Iksil trading JP Morgan credit defaul swaps?”  Dave wasn’t expecting to get much of an answer.  Dave was wrong.  Seems like a bunch of folks had this idea ten days ago.  The most telling fact seems to be a divergence within the credit defaul swap graphs of Goldman Sachs, Morgan Stanley and Bank of America.  You can read about the idea here:

Dave wasn’t really approaching his research from the same angle as these folks, but it sure helps to get a confirmation that there is a distinction between JPM and three of the other too big to fail institutions.  My instincts were that rather than try to defend their actions as some type of violation of the Volcker Rule, the Jamie Dimon team was helping to usher in the Volcker Rule and even promoting a new and improved version of Glass-Steagall that has been referred to here on the blog as Glass-Jiabao in head-bowing homage to the new Occidental/Oriental paradigm.

What really got me thinking that I was on to something was when Chris Whalen went on CNBC a few days ago (link here: ) and started talking about the “unintended consequences of the Volcker Rule.”  Chris more than insinuated, he came right out and said that Paul Volcker failed to understand the market implications of his own rule.  At that point, Dave was down right certain that he was on to something.  What is it that Dave is onto?  It’s simple – a planned demolition. 

Dave’s going out on a limb here and he has no particular reason to do it and Dave’s going to issue a clear warning that coming out on the limb with Dave may lead to a long and rapidly accelerating fall with a sudden and painful impact at the bottom.  In other words, do NOT trade with Dave.  Talk to your advisor and if he works for any of the institutions mentioned so far in this post, you may want to keep two grains of salt handy; one for taking and the other for throwing over your shoulder because the devil is in the details and Dave’s not a detail guy.

Dave believes the fix is in.  The split is coming and the divorce decree that is written into the living wills of the banks is going to be imposed soon. 

I.  The currency is going to be divorced.  One half is going to be for the double coincidence of wants and the other half for wealth accumulation.  There’s dozens of posts on this site on this topic.  The coin currency is going to be turned into an electronic form of media and it’s going to be used to satisfy the double coincidence of wants while the currency side is going to be the half that is used for the accumulation of wealth.  Suffice it to say, you’ll be issued a card.  Everyone will be issued a card.  This will require new legal tender laws and these laws will be implemented as part of an emergency orders such as the

II.  The TBTF banks are going to be divorced.  The side of the banks that deals in the double coincidence of wants (think tellers, ATM machines, car loans, etc.) are going to be separated from the invesment/wealth side of the banks.  It’s like the Volcker Rule and it’s like Glass-Steagall, but the line is not going to be drawn where folks expect it to be drawn and this is why JP Morgan is trading its own CDS.  This is why it’s building up its treasury rather than its investment bankign side.  It’s the one bank that knows the coordinates for the crash.  The big banks, from a consumer perspective, will be nothing more than big global information networks which will co-exist with socialist model credit unions in your community.  You won’t need an FDIC anymore because the bank networks and credit unions will no longer be based on a fractional reserve model.  The money will actually be there and what isn’t (say the car loans) will be provided for in a shared reserves model amongst the member institutions.  The asset side of the big banks balance sheets (JP Morgan partially excluded) will be rolled up into the new and improved Fed hedge fund. 

III.  The ratio between gold, silver and platinum is going to be divorced.  When the U. S. Mint stamps a silver eagle it say $1 on it.  When it stamps a gold eagle it says $50 on it.  When it stamps a platinum eagle it says $100 on the face.  This is going to be reset and it is going to happen through a coordinated effort of the Federal Reserve and will involve a revaluation of the books of the Fed which currently carries gold at $42 per ounce.  The Fed’s gold will be shipped out to its rightful owners in exchange for the implementation of a new global pricing standard (aka the Occidental/Oriental version of Bretton Woods).  Keep in mind that the NY Fed is a private enterprise, so moving its gold around is simply a private accounting entry among private investors.     

IV.  The fourth corner in this squaring up of the global financial markets will be the mortgage jubilee.  Every American family will get some outrageous amount of money (their share of the hedge fund).  Think of it as Cash for Clunkers for underwater mortgageholders where if you have a mortgage or a student loan, the money will have to be applied to the mortgage.  Fannie Mae, Freddie Mac and the bank’s portfolio of mortgage backed securities will be turned over to the American people in a debt-for-equity swap for the ages. 

How many people have to go on the financial networks and say “We’re setting ourselves up for another systemic collapse” before you’re going to be convinced that “We’re setting ourselves up for another systemic collapse”?    The difference this time around is that the surveillance functions intraday rather than interday.  This time around there won’t be any memos from JP Morgan to Barclays’ saying their transfers are being DK’d in the middle of the day.  That’s old school.  The Depository Trust and Clearing Corporation is the one that is reporting on the JP Morgan credit default swaps and its the organization that controls all the marbles, including your stock accounts held in the street name of Cede & Co. 

Reuters wrote about the Iksil trades being JP Morgan betting against itself a week ago.  Dave must have been sleeping:

Shelia Bair wrote about the need for a separate Volcker Rule for banks back in December:

To launch the beginning of the end, the CFTC has their meeting scheduled for today to discuss the “final rule” not to be confused with making the “final rule” as required by law.  The agenda calls for further definition of “Swap Dealer”, “Security-Based Swap Dealer”, “Major Swap Participant” and “Eligible Conract Participant.”  Watch the presentation live:

What is all this in essence.  It’s the end of Wall Street as we know it. Simply replaced by BlackRock’s proprietary trading platform:

What is it exactly that Dave suggests will be crashing.  Well, it won’t be the stock market because it serves as an alternative to the continued debasement of the dollar through continued quantitative easing.  In other words, why hold dollars when you can hold stocks in multi-nationals that don’t depreciate as quickly.  Will corporations cease operations and will the commercial paper market dry up?  Not hardly.  Corporations are flush with cash and rates continue to be very low.  There’s no shortage of cash sloshing around an no chance of dying of thirst. 

Will the bond market crash?  Well if it does you certainly won’t be able to see it on your Bloomberg terminal because BlackRock’s bond black box won’t be available for viewing by the public.  It will be the proverbial tree falling in the woods with no one left to hear it but Larry Fink.  To say the bond market will crash would be the equivalent of saying companies and countries will quit borrowing money… not likely. 

Then what is it that’s going to crash?  Your sovereignty and that of your country.  Add to that the too big to fail institutions which will lose their sovereignty too.  So how will it be?  You’ll hardly feel a thing.  Which way will gold move?  That depends.  Will the historical ratio for gold be reset to silver or silver reset to gold?  You see the firewalls are in place and are sufficiently strong to let the risk half of the TBTF banks to be burned up in the roll-up. 

For anyone who believes that Dave may be exaggerating, take a look at page 17 of the International Monetary Fund’s World Economic Outlook just released.  Under the paragraph marked “Tail Risk” you will find the words “full blown panic.”

Brian Sacajawea

Tuesday, April 17th, 2012

You may ask yourself; “What has Dave been smoking?”  Just don’t ask plunge protector Brian Sack between June 29 until September 14th.  Dave is seeing an increasing build-up of events scheduled for this summer in what Dave would describe as the Wheel of Fortune Before and After phrase game.  Before being the Democratic National Convention in Charlotte, NC in September and After being the Queen’s jubilee and four day bank holiday.  In between we have the debt ceiling debate, the definining moment for the definition of credit default swaps, the implementation of the too big to fail bank “living wills” and the implementation of Volcker rule.  Throw in a Euro crisis and JP Morgan’s draw down of investment banking and build up of their Treasury and you may need to call in a soldier of fortune to guard your wheels. 

Way back on February 10, 2011 Dave mentioned something called the Coincinet ™ for the first time.  Dave mentioned the concept again on February 13th and then on May 25th  Dave uses conjecture.  It wouldn’t be an exaggeration to say that most everything Dave does is based on conjecture.  Some people would say that’s a bad thing.  Columbo on the other hand used conjecture too.  You see conjecture allows you to start working on the puzzle even though you may not have all the pieces yet. 

The problem with conjecture is when you take it too far.  Taking it too far, in the case of the coincinet, would be for Dave to come out and make a claim such as “George Soros is behind bitcoin.”  Dave isn’t saying that.  Do you remember Columbo?  He was a detective and he did investigations and he wore a wrinkled trench coat.  The part was played by actor Peter Falk.  If Peter Falk had a suspicion that George Soros was behind Bitcoin, he would stop by George’s office to ask a few questions about the death (say of the Bank of England in 1992 ). 

The fictional conversation might go something like this.  “I don’t want to bother you and really it’s none of my business, but do you have a credit card?”, asks Columbo.  “Of course, nearly everyone does,” says George.  “Has your bank ever made a mistake on your account?”, asks Columbo.  “Possibly, but not one that I recall in particular,” says George.  “Do you ever go to a restaurant and write in the tip and wonder how they can tell exactly how much the tip is especially if your handwriting is sloppy like mine?”, asks Columbo.  “As a matter of fact, I have wondered about that and no doubt they have made mistakes, but what’s your point Mr. Columbo?… I’m a very busy man,” says George. 

“It’s nothing sir.  I’m sorry to bother you.  I’ll be on my way,” says Columbo as he walks towards the door only to hesitate and then turn back.  “Mr. Soros.  You know a lot about banks and money creation.  I don’t really understand it, but I’ve heard that money isn’t really created until we borrow it from the banks such as when you, or I for that matter, go out to dinner and borrow the money by putting it on our credit card.  You’ve heard of that, right?” asks Columbo.  “You could say that.  Money is created as a form of debt when it’s issued by the Federal Reserve, but what is your point Mr. Columbo you’re trying my patience,” says George. 

“Well, it goes like this sir.  If money is created as debt by the Federal Reserve when we borrow it from the bank and it’s issued when we fill out our receipt at the restaurant and write in our tip, then the Federal Reserve Notes are issued in electronic form.  That would be right wouldn’t it sir?  That’s when the money would be issued?”, asks Columbo to an increasingly impatient Soros who simply crosses his arms and furrows his brow frustratingly.  Columbo responds by asking one final question; “I know sir, I’m sorry.  There’s just one thing I don’t understand.  Let’s say your meal is $20.25 and you add a tip of $3.00.  In that instance the total is $23.25.  I know the 23 dollars gets issued in Federal Reserve Notes by the Fed, but the 25 cents is not a Federal Reserve Note.  It’s coinage and coinage is issued by the U. S. Mint and it is not issued as debt.  When coinage is issued, the seignorage accrues to the U. S. Treasury.  Am I right sir?”  “Not exactly Mr. Columbo, but it’s an interesting question I must say.  The banks would not issue singular transactions for say $20.25 but rather would aggregate their total transactions for any given day and I guess you could say if that day’s total transactions for MasterCard for example were $500 million dollars and 25 cents, that the 25 cents would be issued by the U. S. Mint while the $500 million would be issued by the Fed.  So, no Mr. Columbo you’re theory would not apply because the MasterCard system is an interbank system.  Your idea would only apply if each person were their own bank, so no Mr. Columbo you are incorrect.  If that’s all Mr. Columbo please have a good day” says George. 

What is Dave digging at here?  Senior Soros comments on the impending collapse of the Euro nations and his suggestion of a special purpose vehicle that separates the European Central Bank from its seignoirage really got Dave’s attention within the context of Bitcoin.  You see, if Bitcoin is used to solve the double coincidence of wants for convenience items (let’s say the money you spend purchasing gas and a Starbucks and a bit-o-honey candy bar) then it could be established within the realm of “coinage” rather than as a Federal Reserve Note (or dollars).  Why would this matter?  It would matter big time when you’re talking about Seignoirage because since coins are issued by the U. S. Mint rather than by the Federal Reserve the seignoirage accrues to all the people which has great political appeal.

The late economist Herb Stein put it this way.  “The government is no one; there is nobody here but us people.”  Mr. Stein viewed the government as a public trust rather than simply the people on the Treasury’s payroll.  Within such an understanding, when we realize seigniorage through the creation of coins the benefit accrue to the citizenry as a whole.  If it’s electronic in form, then the seignoirage (in a quantitative easing environment) is of essentially unlimited value (one sweet “pimp my special purpose vehicle” while you pimp my sovereignty for sure). 

If you compare the seignorage of say a buffalo $50 gold coin with a Sacajawea $1 “golden” coin, you see that there’s quite a difference but there may be more similarities than you realize.  There’s inverse seignoirage on the $50 buffalo because it cost say $1,500 for the gold while on the Sacajawea, it may cost 4 cents to make a $1 coin where the 96 cent difference accrues as seignoirage.  Then on top of that if you take a good look at Bitcoin and its near frictionless operation, you may be intrigued.  At least Larry Summers, former Secretary of the Treasury was intrigued enough to talk about it in a recent interview (covered by Dave of course – see below).  What connects all these dots?  The revision of legal tender laws ala Ron Paul combined with the unexpected effect of a full reversal of Gresham’s Law.  You see Dave understands that in Gresham’s law bad money drives out good money but for that to happen you need two things; friction and legal tender laws.

In a bitcoin/coincinet/vector gold scenario you reduce friction to a negligible level.  At least one that is low enough to be paid for by the value of eyeballs looking at a screen on a mobile device.  In other words, if there is friction (i.e. Jack Dorsey’s Square fee schedule) to be mitigated in the form of cost reconciliation, it can be paid for by advertising.  What does all this mean?  It means that bad money (our sovereign fiat type) could and would be driven out by good money (say gold in this instance – but a global SDR fractionally gold modeled currency).  Is Dave saying that we’ll have a gold coin currency?  Actually just the opposite.  Dave is saying that in the new divorced system, not only are we divorcing the double coincidence of needs from the creation of wealth, but we’re dividing it along the lines of dollar bills as Federal Reserve Notes and coins as some new form of electronic currency in this Soros scenario.  Wouldn’t that be a convenient place for the overlords of global finance to get their start; getting rid of coins before we get rid of dollars? 

So you don’t accuse Dave of merely blowing smoke, let’s take this conversation to a highler level.  Take the idea of a near frictionless Bitcoin scenario and add to it Dave’s concept called Vector Gold ™ and you really have a public benefit that is an easy sale for the political class.  Imagine that every sovereign individual has a sovereign right to their fair share of the in-ground gold reserves on the globe.  What do you think of that? 

As Dave’s grandpa used to say, “I’ll bet my bottom dollar.”  For some reason, Dave always thought Grandpa was talking about betting his “bottom.”  You know, like the one we wear pants to cover.  I didn’t realize he was talking about his last dollar.  I wonder what Grandpa would think of an electronic sack of Sacajawea “golden” dollars backed up by the new fractionally reserved vector gold as a convenience tool for purchasing his Starbucks.  You can bet your “bottom” (in this instance, the actual one covered by your pants) that he wouldn’t fall for that.  Then again, he didn’t pay $5 for a coffee of $50 for a tank of gas. 

Here’s Dave’s previous takes on the reversability of Gresham’s law:

Here’s Forbe’s take on Bitcoin:

Canada takes a swing at electronic coinage:

Former Treasury Secretary Summers on Bitcoin:

Si Senior Soros. Coin Seigniorage Not Inflationary.

Monday, April 16th, 2012

New Soros-inspired Special Purpose Vehicle Available In Green or Gold.  How many kilos fit in a Smart Car?

Most of the time Dave simply listens to George Soros and expects him to do the opposite of what he says.  George has been making the rounds attempting to convince the curious that the end has come for the Eurozone.  George’s solution to the problem is an SPV or Special Purpose Vehicle driven presumably by Senior Soros.  It would allow the Eurozone to float bonds while allowing for a workaround of the Lisbon Treaty.  What could be better?

Well, unless your the citizens of the Eurozone and you’re planning on loading your gold onto the vehicle designed with the special purpose of driving away with your pseudo-sovereign wealth, I would suggest that you don’t endorse this plan.  If the “This Time Is Different” meme applies to George’s latest plan, then is Dave suggesting that we do the opposite of George?  Not exactly.  Dave is suggesting you bone up on the distinction between Federal Reserve Notes issued by the Fed and coins issued by the U. S. Mint.

You see Senior Soros is suggesting that the Euro license their seigniorage rights over to the SPV.  Who would ever think that there is a distinction between coinage seigniorage and Federal Reserve Note seniorage?  If you were convinced that there was a difference, you would probably run out like Kyle Bass and buy twenty million nickels and not for their precious metal value but rather for their fungible nature.  Dave’s challenge to the INET economists is for them to show me one Smart Car driver who would be willing to deal in coins from a standpoint of convenience and in an effort to actually pay their bills.  Well, that’s the catch senior.

You see the whole idea is to move to a cashless society so that your coinage can zip around the City of London like one of those Smart Cars.  Think of it as a bit of bitcoin honey for the masses.  Instead of dollars or euros in your wallet or on your credit card, you would have virtual silver dollars or a bit of bitcoin to fill your tank.  Is Dave oversimplying this, or was the $16 trillion transfer to the Eurozone banks courtesy of the Fed not as obvious as the Ron Paul silver round?

Here’s how it works.  You sell your coin seniorage rights to those who quantitatively ease your notes.  When the currency is divorced, your lenders are stuck with a literal bill of goods while your coinage contains the wealth.  Worried about carrying all those coins around?  Never fear, your coins are now transformed into electronic currency.  Don’t forget, the Bank of England has to remit its seigniorage to Her Majesty’s treasury and what exactly is the limit to seigniorage when the coins are electronic?  Dave’s point exactly, so everybody wins including Her Majesty.

Here are two explanations on how inflation is managed through very large coin seniorage and its connection to the debt limit:

Here’s the first time Dave wrote on this subject nine month’s ago and Dave’s suspicions that something was up with the Presidential Coin Act and the Gold Buffalo Coin.  It has always bothered Dave that the $50 gold Buffalo coin says “1 oz. gold and $50” both printed on the face of the coin.  Dave has figured that the Fed could be allowed to account for all of its gold as if the gold had been minted into these $50 gold coins.  The seniorage that is created in this model is approximately $1,500 per ounce times 7,000 tons in the New York Fed alone:

Is there a connection between Senior Soros seigniorage plan, the August 2 deadline for the debt ceiling and the emergency $500 billion that the Fed could snap its fingers and produce?  If you take all the gold in the Fed and turn it into those $50 gold buffalo coins, then the seigniorage that you could fund back to the Treasury would be half a trillion dollars.  Here’s where the discussion was last summer:

Don’t believe Dave that Kyle Bass bought 20 million nickels.  Here you go:

Here’s a link to the law on coin seigniorage.  Don’t miss the sections on palladium:

Was this the very issue that took down Dominique Strauss Kahn?  You decide:

Here’s Soros putting your sovereignty into reverse.  Will he do the same for the gold price relative to the dollar?

Here’s the latest in “new and improved” economic thinking from Team Soros and INET. Beware of anyone bearing quantum solutions who sells you a “4 corners” model when everybody knows that a simply connected, closed 3-manifold is homeomorphic to the 3-sphere. You’re the ones who said you want to be inter-disciplinary. Put that in your silo:

What is the connection between Soros “new” economic thinking and Marxism?:

It’s A Street, Not A Wall? No Wait, It’s A Tunnel

Sunday, April 15th, 2012

Photo:  Fabien Dany  (

Then again, it could be called a Wall, but it sure looks like a street to Dave.  I guess you could call it a Wall Street, but Wall Street calls it a Chinese Wall, not a street.  Please allow Chris Whalen to explain.

Dave thinks Chris is smart, but when Jim Rickards calls him the best bank analyst, it gets Dave’s attention because of who Jim Rickards works for, but that’s a subject for another day and another dollar.  What’s important about this blog post is not only that Chris Whalen joins the chorus of singers calling for what Dave is describing as Glass-Jiabao (not to be confused with Max-Giabo – the global insurrection against banker occupation), but that he goes so far as to suggest that even Paul Volcker failed to understand the sequel to Glass-Steagall. 

Listen to the CNBC video for yourself, and take notice of the Andrew Ross reaction, or lack thereof, at the 9:30 mark when Whalen whales on the London Whale by telling a tale of two streets; one street that was a wall and one wall that was a street.  Dave would say that it’s a street and that it connects the East and the West and that it runs right through the HKMex (the new Hong Kong Mercantile Exchange).  Technically, it doesn’t run through downtown Hong Kong like a street, it’s really more of a tunnel.  You see, the HKMex clears through LCH Clearnet which in turn clears through the CLS Bank which in turn tunnels under Dodd-Frank. 

Chris clearly says in the video that it’s “time to separate.”  The key distinction is that the separation that Chris is talking about is a far cry from the one that Lyndon LaRouche harps on or that even Paul Volcker was planning on (at least according to Chris).  This separation is the financial equivalent of the separation of church from state.  You see this separation is designed to separate our money from our sovereignty by divorcing the currency into one half that serves our needs, another half that serves as wealth and neither half that puts its Trust In God. 

You see that’s the one problem that we run into in configuring the new Occidental/Oriental axis of “don’t be evil.”  The Chinese won’t let us bond with their currency (apologies to Pete Peterson and his CNH experiment) and maintain our bond with “One nation under God, indivisible.”  The whole idea is to use the threat of prop desks trading the “yet-to-be-defined” credit default swaps to provide the “cover” to fundamentally change the structure of our union. 

A Goldman Sachs representative had this to say about Chinese Walls (link here:

“All investment banks have Chinese walls in place to avoid and manage potential conflicts of interest.  We are highly confident of the effectiveness of our Chinese walls.”

Chris Whalen says that the conflicts are real while former Goldmanite Lucas Van Praag said they were “imaginary and real.”  Where is Lucas when we need him and by the way who is paying Chris Whalen to pump up the preferred stocks of community and regional banks?

The bottom line in Dave’s mind isn’t whether or not we’re building walls, streets or tunnels.  All Dave can think about is the question of whether or not Paul Volcker has been “gamed” by President Obama and had his name linked with a rule that is a rule that he never even considered called a Marxist rule. 

Whalen’s whale of a tale begins at the tail of the video 9:30. 

 For more on the background of LCH Clearnet, Treasury Secretary Geithner and the CLS Bank:





Saturday, April 14th, 2012

If you live in a Glass House watch out for Ernest T. Bass.  He throws bricks.

Economists are having a hard time determining if the glass is half-full or half-empty.  Well that would be determined by which half of the currency divorce you end up being on the receiving of in the new and improved Glass-Steagall.

Dave’s pretty sure that the motivation behind the following actions are as scripted as the Andy Griffith Show:

1.  Chinese Premier Wen Jiabo calls his own banks on the carpet.

2.  JP Morgan turns their treasury into a prop trading department and leaves their investment bankers swinging in the wind.

3.  Paul Volcker prepares the media for the onset of the living wills of the Too Big To Fail banks and the implementation of the Volcker Rule.

4.  Paul Krugman shines the spotlight on Steve Keen and his mortgage jubilee plan.

5.  When the decision does finally come down on the definition of credit default swaps, wouldn’t that be the final nail in the coffin and the main reason that JP Morgan has moved the family jewels from the investment bank back into the bank’s treasury department?

6.  We’re well into the spring protest season and there’s barely a whimper from the Occupy Movement.

Why is all this happening now and is there a connection between the upcoming June 4 four-day bank closure holiday for the City of London?  Maybe so.  The way Dave sees this is the timing is perfect for an upcoming election.  You can hit the reset switch on the banks and if it works, then the incumbent is a shoe-in for reelection because the mortgage jubilee is wrapped into the package.  If it fails, you hang the incumbent out to dry with the laundered TBTF banks.

It seems a little bit early to Dave, but then again, there’s no time like the present.  If the powers that be launch the new global currency initiative in June, then you have until the end of the year to wrap things up just in time for the 100 year renewal of the Federal Reserve’s charter.  By then, you can roll-up the TBTF banks into the Fed as a new and improved version of Glass-Steagall and give every citizen their share of the value as you separate their currency into two parts.

To pull this off, the banks would need to be split in half, but not along the traditional lines of a Lyndon Larouche ressurection of Glass-Steagall.  Instead, along the Treasury Lines that are being drawn in the JP Morgan/London Whale public relations campaign.  How does this manifest itself?  Dave is highly suspicious about two things?  Who is holding the bag on the short position of Bear Stearns inherited silver and how much of these liabilities could be buried in one fell swoop collapse of the Comex?

If JP Morgan has managed to resolve their silver exposure and if we saw a reset on silver to a traditional 16 to 1 ratio (rather than the current prima facie U. S. Mint eagle (50 to 1 ratio) would this be all that was needed for the reset switch.  There’s only one problem the way Dave sees it.  Either gold will have to drop to $500 or silver will have to spike to $100.  The way Dave sees this, it doesn’t make much difference which way it rolls when you consider the power that central banks have over the price of gold.

Dave wasn’t really expecting this to happen yet, but too many of the calendar issues are lining up to the point where Dave is nearly convinced that the coordinated plan is rolling out now rather than in the future.  Add the 4 day bank holiday in conjunction with the Queen’s jubliee and some recent announcements from folks inside the Fannie Mae realm that the idea of mortgage-forgiveness was off the table and Dave’s nearly convinced that it’s on the table.

You see the folks inside the government are the last ones to know what’s happening.  Remember the May 6 “Flash Crash.”  It happened during Hank Paulson’s testimony to the Financial Crisis Inquiry Commission.  While Paulson was saying the following words;

“I am proud of thework we in government did to save our nation’s financial system from collapse andchaos, and our economy from disaster.” 

… the stock market was experiencing an unprecedented flash crash on May 6, 2010.

What was the cause of the flash crash.  Here’s the SEC’s explanation:

This Time Sharks Are Different

Friday, April 13th, 2012

Sharks Hug With Their Mouths

Sometimes in a business it felt like a bite, but it was really just a hug.

Dave has written a lot about Carmen Reinhart and Pete Peterson and the Reinhart/Rogoff title This Time Is Different, but this time it IS different.  Dave is writing about the CME Group and their decision to once again lower margin requirements on silver.  You see the last time this issue was in the financial news, the CME Group was raising margin requirements during the price run-up in silver just before the smackdown from nearly $50 at the end of April 2011 to down to $32 in the first part of May.  On Monday, they are lowering margin requirements.  That’s different… right?

When I was reading about this, all I could think about was those deals that my wife hones in on when a company makes the transition from aggressive marketing to self-cannibalization.  It’s like she has a sixth sense for when someone is giving away the ranch, but you have to be very careful with your timing because if you operate under normal expectations you will lose.  Let me give you an example. 

Remember Circuit City?  They were a big box electronics and appliance retailer that collapsed under competition from Best Buy and H. H. Gregg and what had previously been a very successful commissioned salesperson organizational structure.  They went through a few management changes and lost their sales-oriented culture and eventually deteriorated into something like what KMart or Sears feels like now shortly before their bankruptcy filing and liquidation.  Well, my wife smelled blood in the water and started circling Circuit City. 

We have some rental properties and a 100 year old house that has an addition on it with central air conditioning but some of the other parts of the house do not have air conditioning and neither do some of our other properties, so we have numerous window air conditioning units that we have to deal with every summer.  My wife liked those new sleek units, the kind that sit on the floor and have the flexible hose that goes to the window.  They’re kind of a euro-style (if “style” can be applied to hillbilly window a/c units) and the result is a smaller exhaust piece in the window rather than a big heavy unit waiting to fall out the window onto someone’s head.  Now that I’m fully into the “too much information” arena, suffice it to say she wanted some new A/C window units and she wanted them from Circuit City.

She starts her shark circling normally by saying something to me like “Hey, would you like to drive to Timbuktu on Saturday?”  And Dave is like “What?  Drive where?  Why do you want to drive there?  There’s nothing to see there.”  She continues her unnecessary persuasion because Dave will simply go wherever she wants with something like “Well, you always wanted to visit that Civil War battlefield and there’s a Circuit City that has some window air conditioners that I want to look at nearby.”  Dave says “Since when do I like going to Civil War battlefields and we have Circuit City five minutes from our house, so why are driving an hour-and-a-half?”  My wife explains “Well, they’re out of the air conditioners I want at our local store and I talked to the manager and they have five of them at the Timbuktu store… so I want to go get them, but I want you to come with me… please.” 

Dave doesn’t really understand why his wife begs him to go with her on these excursions because he would go anyway.  She will do the same thing on a vacation trip or to buy groceries or tires for her car.  She has a sixth sense for when a company takes that final fatal step that they can never return from in an effort to drum up business and I always find myself warning her by saying something like “Honey, whatever you do don’t give them our money until you have the stuff because if they go broke, we’ll never get the money back or get the stuff you want.” 

Back to the window air conditioners.  We find ourselves an hour from home standing next to the manager in a Circuit City where my wife has rounded up five of those brand new high dollar (and stylish too) window air conditioners (all the inventory they had) with an envelope of cash in her hand.  She’s debating whether or not to try to get some extra frequent flier points by putting the purchase on a credit card or whether or not she’s going to pay cash. 

I’m trying to explain to her that this is a big retailer and they don’t give a flying hoot if we pay cash or credit card as she turns to me and secretly gives me that furrowed-brow/roll her eyes look  that is the signal for me to shut up.  So, I shut up and watch her work because obviously she knows something that Dave doesn’t.  Then I watch her walk over to the cash register with the manager while I guard the inventory and based on the neighborhood where the store was, it needed to be guarded. 

Keep in mind that Dave’s happy to travel with his wife to Timbuktoo whether it’s for a deal on air conditioners or some free trip to Disney World as long as we spend an hour looking at their condo community offer.  Dave enjoys being with her so it doesn’t matter what we’re doing.  On the other hand, Dave wasn’t that happy about buying 5 $900 air conditioners because Dave wasn’t even sure how many we needed and Dave most certainly didn’t want to part with $4,500.  Big picture-wise that’s the part where Dave’s strategy and his wife’s depart.  Dave would probably just use some old units or wait till they break or go withour air conditioning at all.  Dave would probably go without food and water if it wasn’t for his wife. 

Back to the air conditioners.  My wife walks back to me from the cash register with a stock person with a big smile on her face saying “Let’s go… load ’em up.”  This is where Dave takes over and Dave’s wife simply walks to the car and sits down victorious in her purchase leaving Dave to try to figure out how to shove everything into the car wondering how many thousands lighter Dave’s pocket is and what the weight capacity of our vehicle is and whether the offset of cash for compressors is going to effect the braking distance of the car or the breaking of Dave’s wallet. 

As Dave and his bride pull away from Circuit City, Dave’s wife holds her hand up with the victorious “give me some skin/high five/Jerry Maguire Show Me The Money” hand slap.  She says “$500 each brother.  We saved $2,000!”  All Dave can think of is how exactly does 5 times $500 equal $2,000 saved when all Dave can think about is the $2,500 spent.  It’s cold and wet and wintry out and Dave wonders why we even need air conditioners when Dave starts thinking about some two year old’s bedroom in a rental house or Dave’s third floor office that gets to be 100 degrees in the summer.  Dave knows she’s right and once again Dave knows that Dave’s wife just made us money even if she earns by spending. 

Why all this story about window air conditioners?  Literally the next day Circuit City closed their doors and filed a Chapter 7 liquidation bankruptcy.  My wife told me that she negotiated the deal directly with the manager and that he wanted the transaction to be in cash and because it was in cash he gave us an extra discount.  I asked if she got a receipt and she said “Yes” because I knew that the manager wasn’t taking the money, but I also realized that in the Chapter 7 liquidation, there would most likely be a distinction between the net proceeds for the company (and the management team) between a transaction that had clear the credit card company and one that got booked that day as cash.  Who knows for sure? 

What does $2,000 saved on window air conditioners have to do with billion dollar plus collapses like we have seen with MF Global and like Dave has written about relative to the Comex?  Maybe not that much, but then again maybe there is a relationship called money and business.  It’s about the level of promotion, discounting, etc. (in this case a 20% decrease in margin requirements on silver) that a company has to offer to its customers in an effort to attract their business.  Physical silver inventories are approaching historical lows at the Comex while earnings are rising at a key silver counterparty JP Morgan. 

Is this just another attempt to drive prices of silver upwards towards $50 so that JP Morgan can drive the price back down to $30 and pocket the difference while the Comex takes their share of every trade?  If you listened to Blythe Masters last week on CNBC (see Dave’s articles below) then you know that JP Morgan doesn’t manipulate the silver market.  Then why is the Comex offering a better deal to its customers?  Dave believes that “everytime is different” (i.e. history rhymes, it doesn’t repeat) but somethings never change.  The Comex needs business just like Circuit City needed business.  What do you think would have happened to Dave’s wife if instead of driving down there and negotiating her deal “on the loading dock” but instead had gone online, given Circuit City her debit card number then on the next day she had waited patiently for UPS to show up at our house with the air conditioners?  The odds of seeing that brown truck are the same as the odds that Jon Corzine would have been driving it.   

Dave’s guess is that like so many MF Global customers, Dave’s wife would have nothing to show for her purchase except a withdrawal from her bank account with the words Circuit City next to it.  In other words, she would have thrown the money out the window instead of putting new, sleek, quiet air conditioners in the window.  When you deal with any business that has moved from working in their office, to standing on the window ledge, you have to be careful.  You can shake hands with them, just make sure they’re not holding onto you when they jump.  Or as  the folks at Snorg Tee Shirts have managed to convey in a simple t-shirt design, when it comes to understanding the difference between a kiss and a bite, there’s no difference.  Sharks do both with their mouth. 

Here’s the Comex announcement of new and improved margin requirements on your paper silver account:

Dave Found Missing…

Thursday, April 12th, 2012

File:Chelsea Clinton.jpg

Chelsea Clinton appears fine in this photo, but did she miss watching Fox News?   (source: Wikipedia) 

That’s the thing.  Dave’s not the one missing.  Dave found the thing that was missing.  In other words, Dave found missing.  Please allow me to explain. 

Dave couldn’t sleep because Dave found all this missing stuff and I need your help locating it.  I can’t spend all day searching around the internet for all the missing stuff, so I’m enlisting the help of the fine folks who read TradeWithDave.  I put together a list of the missing items so that we can see what might be found… missing. 

1.  That Goldman Sachs laptop.  The one found missing in the garbage room somewhere in New York.  I had nearly forgotten about it, but I think the folks that found that missing laptop also found the missing emails and after all that, now Lucas Van Praag has gone missing from him job at Goldman Sachs.  Sacked from Sachs… take out the paper and the trash… and don’t talk back.  Here’s the missing link on the missing laptop story:

2.  The hit and run driver who hit and nearly ran over Andrew Maguire (and I think his wife too).  Andrew’s back in the news thtanks to Blythe Master’s mile-high media masteryput on display from Denver.  Technically speaking Andrew’s wife is missing because Dave has never heard hide nor hair from her.  Here’s the story on how whistling will not only blow your horn, it can wreck your car too:  :

3.  Andrew Breitbart’s autopsy (may he rest in peace) is missing.  According to Wikipedia his death was unexpected and as far as a cause of death is concerned, there’s no expectation mentioned.

4.  According to London Whale sighting reporters Stephanie Ruhle, Bradley Keoun and Mary Childs of “The five counterparts at hedge funds and rival banks” are missing, at least when it comes to their identities.  They are counterparts and for those of you who are unfamiliar with the meme “parts is parts” here’s a video explanation from Wendy’s .  Of course, that was back when the focus was on chicken nuggets rather than pink slime.  As far as the “counter” part of the counterpart, you can see that in the Wendy’s video too.  In general a counter is the part that is between two counterparts.  As in they do business with each other OTC (i.e. over the counter) as in OTC derivatives or as in the counter in the Wendy’s commercial.  Dave’s point is that we can see the counter, but we have yet to see the London Whale parts on one side of the counter and the so-called by Bloomberg “counterparts” on the other side of the counter.  If you’re keeping count, that’s four things Dave has found missing so far, and 8 if you count the counterparts. 

5.  The London Whale.  Technically, the London Whale isn’t a “counterpart.”  He’s a whole whale, rather than part of a whale… which would be blubber.  We haven’t seen him yet, but he’s out there… underwater… but eventually he has to surface… come on readers, please help Dave help you save the whale or at least a photograph of the whale for Dave’s missing scrapbook. 

6.  The definition of a credit default swap.  This has been missing ever since Dodd-Frank was signed into law.  Dave’s searched high and low and it looks like high is where it’s going to be found.  Dave thinks the plan was to regulate swaps dealers at $100 million.  Looks like that’s going to be raised to $3 billion.  Dave figures that means that the vast majority of the risk will make its way back in some form or another to an FDIC insured institution or any other words, the taxpayer being the “default” in credit default swap.   The folks at the CFTC said the missing definition will be found soon.  When the clock stops ticking, if a broken clock is correct twice a day, how often is a missing clock correct?  Dave on the CFTC’s integrity found missing, but economic need is plentiful:  Hope was also found missing (but not paychecks) by CFTC commissioner Sommers:

7.  MF Global customer money found missing.  Technically, it was vaporized according to the New York Times.  Normally Dave writes about things that are found missing in an attempt to draw attention to them and the related findings.  In the case of MF Global, the story has been found out, it’s just the regulator that gone missing.  Gary Gensler… where are you?

8.  Blythe Master’s so-called “client.”  The one that allows her to hedge all that silver that was already hedged before she inherited the hedge from Bear Stearns.  The client’s name may be missing, but according to Blythe, the silver isn’t.  It’s in the JP Morgan vaults in New York, London and Singapore.    

9.  President Obama’s birth certificate.  We have a copy, so we’re good to go on that.  Just need that original.  Oh, and some college transcripts would be helpful while you’re at it and a social security number issued in Hawaii rather than Connecticut if it’s not too much trouble.

10.  That complete audit of the Federal Reserve that you thought you got when you found out about the missing $16 trillion that went to overseas banks.  Well, it seems that it’s not complete.  At least that’s what the guy who originally asked for it is saying.  Here’s Ron Paul on what’s been found missing at the Fed, namely accurate inflation reporting.!

11.  Fox News Heather Childer’s resignation.  Dave doesn’t watch Fox News, but is Heather Childers still an anchor for Fox News?  She wrote on Twitter…  ” Thoughts? Did Obama Campaign Threaten Chelsea Clinton’s Life 2 Keep Parents Silent?”  Can you actually say that and keep your job?!/HeatherChilders/statuses/187227025642237952  It appears so as Fox News VP Michael Clemente said “The tweets have been addressed with Heather and she understands there was a mistake.”  Guess that means Heather’s address is still the chair behind the Fox News desk.  Who made the mistake; the Obama campaign, Chelsea Clinton’s parents, Michael or Heather?  Dave’s not sure.  Dave just knows that James Murdoch (son of Fox News owner Rupert Murdoch) is missing from his Chairman’s seat at BSkyB. 


 With all that’s missing around these parts, Dave considers himself lucky you found your way here.

Ben & Jerry’s Ice Cream As A Currency?

Wednesday, April 11th, 2012

If Ben & Jerry’s Ice Cream was a currency, let’s say you could pay your Verizon Wireless bill in frozen mint chocolate chip, then you wouldn’t need money. 

If Bitcoin was money, then you could go to the grocery store and buy your Ben & Jerry’s with Bitcoin.  What would be better?  How about this? 

Hailing from the land where they know a thing or two about all things frozen, including bank accounts…  introducing MintChip: