“The U.S. Justice Department is investigating whether financial firms made improper payments to secure investments from sovereign wealth funds, according to two people familiar with the matter.

The probe, which grew out of a Securities and Exchange Commission inquiry, looks at firms including Goldman Sachs Group Inc. that sought business from Libya’s sovereign wealth fund before Muammar Qaddafi’s regime was toppled in 2011, said one of the people, who asked not to be identified because the investigation isn’t public.

The SEC put banks, hedge funds and private-equity firms on notice three years ago when it began scrutinizing how investment companies were competing to manage large pools of government-owned cash. Providing kickbacks or lavish gifts to employees of a sovereign wealth fund may violate U.S. anti-bribery law, which prohibits compensating government officials to win or keep business.

Investigators are focusing on whether firms used so-called placement agents to funnel improper payments, according to the people. The use of middlemen has drawn greater scrutiny in the wake of U.S. corruption cases in which money managers used kickbacks and campaign contributions to win contracts from public pension funds. The SEC adopted rules to curb so-called pay-to-play practices in 2010.

‘Undue Influence’

Practices at JPMorgan Chase & Co., Credit Suisse Group AG, Societe Generale SA, Blackstone Group LP, and Och-Ziff Capital Management Group have also come under scrutiny, according to the Wall Street Journal, which reported the Justice Department’s investigation earlier Monday…”

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“This week will go a long way to determining whether the uncertainty hanging over the world economy and markets fades after a rocky January or lasts further into the year.

A raft of global business surveys, jobs data from the United States and central bank meetings in Europe should offer a clearer view on how well the global economy is faring at the start of 2014.

Most economists have been expecting a better 12 months after three years of slowing global growth, but the recent turmoil in emerging markets has given them pause for thought.

MSCI’s global index posted its largest monthly decline since May 2012 in January, sliding 4 percent.

Emerging markets were down 6.6 percent for the month — their worst January since 2009 — after another turbulent day on Friday, when the Russian ruble slid and bond yields rose sharply across the board.

“Markets in the major economies will continue to be subject to trends in emerging markets (this) week, both in terms of overall currency and stock market sentiment,” said Philip Shaw, chief economist at Investec.

First up are purchasing managers’ indexes (PMIs), which survey thousands of businesses worldwide. While the PMIs from Europe and the United States are expected to show more growth, particular attention will be paid to those from China.

“There are  potential flashpoints in the form of various Chinese PMI indices – signs of a slowdown in the pace of economic activity in China would result in the risk-off lights starting to flash again.”

The other key data will be Friday’s jobs report from the United States.

The world’s No.1 economy added the fewest workers in nearly three years in December – just 74,000 non-farm jobs – although the consensus of economists polled by Reuters points to a rebound in January.

Still, there could be potential for another nasty surprise.

“As if forecasting the monthly change in non-farm payrolls were not hard enough, the outlook for January payrolls is clouded by poor weather, difficult seasonal adjustment, annual benchmark revisions, and methodology changes,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

CENTRAL BANKS IN FOCUS…”

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“The European Banking Authority presented the outlines of this year’s stress test for the European Union’s biggest banks, but said it would be for national supervisory authorities to guarantee the reliability and credibility of the exercise.

Although the stress test is an EU-wide exercise, it will be most notable for its place in the European Central Bank’s preparations to take over responsibility for supervising the euro zone’s largest banks. The ECB is conducting an in-depth Asset Quality Review across the euro zone to check that banks have properly reported any weaknesses they may have on their balance sheet. It aims to start supervising in November this year, on the assumption that the stress test’s results will show in October how much capital banks still need to raise.

The ECB is due to announce more details regarding its work in the exercise next week.

As in previous years, the stress test will be designed to show whether banks can keep an adequate level of capital in the event of a sharp economic downturn and market shock.

The test will consist of two scenarios running through three years, 2014-2016: the baseline scenario will be drawn from the European Commission’s forecasts, while the adverse scenario will be designed by the European Systemic Risk Board, the EU’s “macroprudential” supervisor.

To “pass” the test, banks will have to show a ratio of 8% in core Tier 1 capital relative to their risk-adjusted assets in the baseline scenario, and 5.5% in the adverse scenario. The exercise will take as its definition of capital the EU’s latest Capital Requirements Directive, which came into force at the start of this year. That directive is the EU’s implementation of the globally agreed “Basel III” accords on banking capital and liquidity. One of its characteristics is that some capital instruments common to European banks are being phased out in a transitional period that runs through 2018. As such, banks will have to show in the test that they are migrating to newer, more recognized forms of capital at the desired speed.

The test will examine 124 banks across the EU, covering at least 50% of banking assets in each country. For banks operating in multiple countries, only the parent bank will be scrutinized.

If they desire, supervisors won’t only be able to add other banks in their jurisdictions to the list, but also to add completely different test metrics. The U.K.’s Prudential Regulatory Authority, for example, has said it is likely that it will also test banks on their leverage ratios, a measure of capital adequacy that doesn’t allow banks to adjust the value of their assets for riskiness. Leverage ratios have come into vogue in recent years due to suspicions that banks are using the benchmark risk-adjusted metrics to overstate their financial strength….”

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” “Epic in scale, unprecedented in world history.” That is how William K. Black, professor of law and economics and former bank fraud investigator, describes the frauds in which JPMorgan Chase (JPM) has now been implicated. They involve more than a dozen felonies, including bid-rigging on municipal bond debt; colluding to rig interest rates on hundreds of trillions of dollars in mortgages, derivatives and other contracts; exposing investors to excessive risk; failing to disclose known risks, including those in the Bernie Madoff scandal; and engaging in multiple forms of mortgage fraud.

 

So why, asks Chicago Alderwoman Leslie Hairston, are we still doing business with them? She plans to introduce a city council ordinance deleting JPM from the city’s list of designated municipal depositories. As quoted in the January 14th Chicago Sun-Times:

 

The bank has violated the city code by making admissions of dishonesty and deceit in the way they dealt with their investors in the mortgage securities and Bernie Madoff Ponzi scandals. . . . We use this code against city contractors and all the small companies, why wouldn’t we use this against one of the largest banks in the world?

 

A similar move has been recommended for the City of Los Angeles by L.A. City Councilman Gil Cedillo. But in a January 19th editorial titled “There’s No Profit in L A. Bashing JPMorgan Chase,” the L.A. Times editorial board warned against pulling the city’s money out of JPM and other mega-banks – even though the city attorney is suing them for allegedly causing an epidemic of foreclosures in minority neighborhoods.

 “L.A. relies on these banks,” says The Times, “for long-term financing to build bridges and restore lakes, and for short-term financing to pay the bills.” The editorial noted that a similar proposal brought in the fall of 2011 by then-Councilman Richard Alarcon, backed by Occupy L.A., was abandoned because it would have resulted in termination fees and higher interest payments by the city.

It seems we must bow to our oppressors because we have no viable alternative – or do we? What if there is an alternative that would not only save the city money but would be a safer place to deposit its funds than in Wall Street banks?

There is a place where they don’t bow. Where they don’t park their assets on Wall Street and play the mega-bank game, and haven’t for almost 100 years. Where they escaped the 2008 banking crisis and have no government debt, the lowest foreclosure rate in the country, the lowest default rate on credit card debt, and the lowest unemployment rate. They also have the only publicly-owned bank…..”

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“In the past we have discussed at length the inevitable demise of the USD as the world’s reserve currency noting that nothing lasts forever.However, when former World Bank chief economist Justin Yifu Lin warns that “the dominance of the greenback is the root cause of global financial and economic crises,” we suspect the world will begin to listen (especially the Chinese. Lin, now – notably – an adviser to the Chinese government, concludes that internationalizing the Chinese currency is not the answer (preferring a basket approach) but ominously concludes, “the solution to this is to replace the national currency with a global currency,” as it will create more stable global financial system.

 

The infamous chart that shows nothing lasts forever…

Nothing lasts forever… (especially in light of China’s earlier comments [21])

 

Via China Daily,

The World Bank’s former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

“The dominance of the greenback is the root cause of global financial and economic crises,” Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. “The solution to this is to replace the national currency with a global currency.”

 

Lin, now a professor at Peking University and a leading adviser to the Chinese government, said expanding the basket of major reserve currencies — the dollar, the euro, the Japanese yen and pound sterling — will not address the consequences of a financial crisis. Internationalizing the Chinese currency is not the answer, either, he said…..”

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“The Federal Reserve will trim its monthly bond buying by $10 billion to $65 billion, sticking to its plan for a gradual withdrawal from departing Chairman Ben S. Bernanke’s unprecedented easing policy.

“Labor market indicators were mixed but on balance showed further improvement,” theFederal Open Market Committee said today in a statement following a two-day meeting in Washington that was the last for Bernanke, who will be succeeded by Vice Chairman Janet Yellen on Feb. 1. “The unemployment rate declined but remains elevated.”

Policy makers pressed on with a reduction in the purchases intended to speed a recovery from the worst recession since the Great Depression, even after payroll growth slowed in December and amid a rout in emerging-market currencies. Some officials have expressed concern that the Fed’s record $4.1 trillion balance sheet could help create asset-price bubbles.

The Fed left unchanged its statement that it will probably hold its target interest rate near zero “well past the time” that unemployment falls below 6.5 percent, “especially if projected inflation” remains below the committee’s longer-run goal of 2 percent.

The Fed repeated the inflation “persistently below its 2 percent objective could pose risks to economic performance and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.”

The central bank’s preferred gauge of consumer prices climbed 0.9 percent in the year through November and hasn’t exceeded the Fed’s goal since March 2012.

Bonds, MBS

Bond purchases will be divided between $35 billion in Treasuries and $3o billion in mortgage debt beginning in February, the Fed said. It repeated that purchases are not “on a preset course.”

It was the first meeting with no dissent since June 2011, showing Fed officials coalescing around the central bank’s tapering strategy as Yellen, 67, prepares to take over the chairmanship from Bernanke…..”

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[youtube://http://youtube.com/watch?v=CO2mLIs__xo 450 300]

Source

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Futures

More on Turkey raising rates 

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“The CEO of BitInstant, a Bitcoin exchange, has been arrested at JFK airport and charged with money laundering.

Charlie Shrem, along with a co-conspirator, is accused of selling over $1 million in bitcoins to Silk Road users, who would then use them to buy drugs and other illicit items.

According to the criminal complaint, Shrem himself bought drugs on Silk Road.

“Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way,” DEA agent James Hunt said in a release.

Shrem is a vice chairman at the Bitcoin Foundation. He is listed as a speaker at a Bitcoin conference in Miami that ended Sunday.

Shrem is believed to own a substantial amount of bitcoins.

BitInstant, which is backed by the Winklevoss twins, is currently offline. It was recently the subject of a class-action suit alleging misrepresentation of its services.

The arrest comes on the eve of a two-day state hearing about the future of Bitcoin in New York….”

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“In what is sure to be met with cries of derision across the European Union, in line with what the IMF had previously recommended (and we had previously warned as inevitable), the Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help. As Reuters reports, the Bundesbank states, “(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government’s obligations before solidarity of other states is required.” However, they note that they will not support an implementation of a recurrent wealth tax in Germany, saying it would harm growth. We await the refutation (or Draghi’s jawbone solution to this line in the sand.)

 

Via Reuters,

Germany’s Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.

 

The Bundesbank’s tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households’ average net wealth is higher than in Germany.

 

“(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government’s obligations before solidarity of other states is required,” the Bundesbank said in its monthly report.

 

It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency…..”

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“If you bank at HSBC in England, don’t plan on making any large cash withdrawals. At least not without a good explanation. Or, maybe even a permission slip.

That’s because a previously unannounced change in banking policy is blocking some customers from making large withdrawals without “evidence” explaining why they need the money from their accounts .

The policy affects customers attempting withdrawals for amounts as little as £5,000 ($8,253).

HSBC says it’s all done in the name of customer protection.

“The reason being we have an obligation to protect our customers, and to minimize the opportunity for financial crime,” HSBC said in a statement. “However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologize to any customer who has been given incorrect information and inconvenienced.”

The change in approach comes after the BBC aired reports from multiple HSBC customers who said they were denied in their recent attempts to make cash withdrawals.

Banking customer Stephen Cotton says he attempted to withdraw approximately $11,000 to repay a loan from his mother but was blocked from doing so.

“When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for,” he told the BBC. “They wanted a letter from the person involved.”

Cotton says the bank wouldn’t even tell him how much he was allowed to withdraw under the new policy, which was not announced to customers when taking affect last November.

“So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ ” ….”

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[youtube://http://www.youtube.com/watch?v=5hDvHcBKvuo 450 300]

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“Users of Google’s Chrome browser are vulnerable to attacks that allow malicious websites to use a computer microphone to surreptitiously eavesdrop on private conversations for extended periods of time, an expert in speech recognition said.

The attack requires an end user to click on a button giving the website permission to access the microphone. Most of the time, Chrome will respond by placing a blinking red light in the corresponding browser tab and putting a camera icon in the address bar—both indicating that the website is receiving a live audio feed from the visitor. The privacy risk, according to a blog post published Tuesday, stems from what happens once a user leaves the site. The red light and camera icon disappear even though the website has the ability to continue listening in…..”

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“Despite a number of laws forbidding them from accepting gifts from lobbyists, congressional leaders regularly exploit legal loopholes to jet-set throughout the country on lobbyists’ expense, according to a new report.

Members of Congress have taken trips to California’s Napa Wine Valley, Colorado ski country, and other hotspots around the US and Puerto Rico – all paid for by companies and corporate representatives hoping to cozy up and hopefully influence politicians.

A law was signed in 2007 aiming to curb such abuse after lawmakers were busted taking paid golf trips to Europe, but some creative scheming has made it possible for politicians to enjoy their weekends outside of Washington.

The New York Times has revealed that political action committee (PACs) and political campaigns controlled by politicians on both sides of the aisle collect money from wealthy donors and corporate executives, and then use that money to fund catering and lodging expenses at swanky resort locations. There, at five star hotels in Las Vegas, Florida, and Bermuda, Democrats and Republicans mingle with executives from an array of businesses.

“It has become kind of the norm,” Vic Fazio, a California congressman-turned-lobbyist, told the Times. “To the average citizen, it might seem like there is a disconnect between the reality of life in America and these getaways.”

Between 50 and 100 lobbyists make generally accompany lawmakers on the trips, donating anywhere from $1,000 to $5,000 to the lawmaker’s PAC for the privilege. Such activity is perfectly legal under current campaign law, a contentious topic that legislators have sought to eliminate, amend, and completely overhaul in recent years…..”

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“The latest Index of Economic Freedom released by the Heritage Foundation and the Wall Street Journal shows just how successful the Bush and Obama administrations have been in their seeming attempts to turn the United States into a Third World economy. The index shows America’s economic freedom declining for the seventh year in a row, pushing it out of the top 10 freest economies in the world, just behind Estonia and just ahead of Bahrain.

Said Nathaniel Ward, writing at My Heritage:

The United States, with an economic score of 75.5, is [now] the 12th freest economy.… Its score is half a point lower than last year, primarily due to deteriorations in property rights, fiscal freedom, and business freedom….

Substantial expansion in the size and scope of government, including through new and costly regulations in areas like finance and health care, has contributed significantly to the erosion of U.S. economic freedom.

The growth of government has been accompanied by increasing cronyism that has undermined the rule of law and perceptions of fairness.

The index measures performance in 10 categories, including fiscal freedom (a measure of the tax burden imposed by the government on its citizens) and government spending (which measures spending compared to the country’s economic output). In both of those, the United States’ score has fallen precipitously, to 65.8 in fiscal freedom (compared to the world average of 77.3), and to 48.1 in government spending (compared to the world’s 62.7). By way of comparison, Hong Kong, which has been rated first in the index for 20 years, scored 90.1 overall, and had a 93.0 on fiscal freedom and 89.7 on government spending….”

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“For over a decade, under multiple administrations, the U.S. government had a secret agreement with the ruthless Mexican Sinaloa drug cartel that allowed it to operate with impunity, an in-depth investigation by a leading Mexican newspaper confirmed this week. In exchange for information and assistance in quashing competing criminal syndicates, the Bush and Obama administrations let the Sinaloa cartel import tons of drugs into the United States while wiping out Sinaloa competitors and ensuring that its leaders would not be prosecuted for their long list of major crimes. Other revelations also point strongly to massive but clandestine U.S. government involvement in drug trafficking.

Relying on over 100 interviews with current and former government functionaries on both sides of the border, as well as official documents from the U.S. and Mexican governments, Mexico’s El Universal concluded that the U.S. Drug Enforcement Administration (DEA), Immigration and Customs Enforcement (ICE), and the U.S. Justice Department had secretly worked with Mexican drug lords. The controversial conspiring led to increased violence across Mexico, where many tens of thousands have been murdered in recent years, the newspaper found after its year-long probe. The U.S. agents and their shady deals with Mexican drug lords even sparked what the paper called a “secret war” inside Mexico.

The newspaper’s investigation also confirmed long-held suspicions that U.S. authorities were signing secret agreements with Mexican drug cartels — especially Sinaloa, which CIA operatives have said was a favorite for use in achieving geo-political objectives. Supposedly without the knowledge or approval of officials in Mexico, ICE and DEA, with a green light from Washington, D.C., made deals with criminal bosses allowing them to avoid prosecution for a vast crime spree that has included mass murder, corruption, bribery, drug trafficking, extortion, and more. In exchange, cartel leaders simply had to help U.S. officials eliminate their competitors — certainly a win-win scenario for crime bosses who prefer to operate without competition or fear of prosecution…..”

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[youtube://http://www.youtube.com/watch?v=OyaWbPRhJvE 450 300]

 

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“U.S. small business sentiment improved in December, with firms more optimistic about future business conditions and future earnings.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index edged up 1.4 point to 93.9 last month.

The increase was driven by a net increase in the number of firms who expect better business conditions six months from now. Companies also were more optimistic about revenues and profits….”

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[youtube://http://www.youtube.com/watch?v=RsckTBHiFmE#t=137 450 300]

 

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“The number of planned layoffs at U.S. firms plunged by 32 percent in December to the lowest monthly total in more than 13 years, a report on Thursday showed.

Employers announced 30,623 layoffs last month, down from 45,314 in November, according to the report from consultants Challenger, Gray & Christmas, Inc.

The last time employers announced fewer job cuts was June of 2000, when 17,241 planned layoffs were recorded.

The figures come a day ahead of the closely-watched U.S. non-farm payrolls report, which is forecast to show the economy added 196,000 jobs in December

On Wednesday, payrolls processor ADP reported private employers added 238,000 jobs last month. That was well above market forecasts and has fed speculation of stronger overall U.S. growth in 2014….”

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“Is Europe heading towards deflation?

That’s been a hot topic of conversation lately and fresh numbers just out from Eurostat should add to the concern.

Check out the trends of both CPI and core CPI (excluding food, energy, alcohol, and tobacco). The inflation numbers are a steady march downward. Core is actually at its lowest reading yet.

The big fear in Europe used to be that the economy would collapse.

Now the big fear is that Europe is going to become Japan, an economic bloc mired in deflation and horrible growth….”

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