The Statue of the Three LiesRob Kirby Canada's Globe and Mail newspaper reporter, Heather Scoffield, interviewed renowned Harvard Economist Niall Ferguson for an article published Feb. 23, 2009 titled, There Will Be Blood. In the interview Ferguson states,
While I concur with this assessment, I'm not so sure about some of Ferguson's remarks on how the U.S. is going to escape this financial tumult much easier than the rest of the world,
Mr. Ferguson's comment that investors wanted to increase their exposure to the U.S. is misleading. This was an outcome engineered by the U.S. monetary elites. Monetary authorities induced highly levered hedge funds, who were long commodities, to liquidate their positions and delever. This forced hedge funds to raise cash U.S. Dollar balances to settle their trades. For example, the engineered collapse in the crude oil complex is chronicled in, Oh Yes They Did! Hedge fund investment in tangibles - in the face of unprecedented monetary debasement on the part of the U.S. Fed - reached such manic proportions by late 2008 that U.S. Dollar hegemony was threatened. One should never mistakenly characterize a "forced and engineered" levered long liquidation as a "want" to accumulate a dying fiat currency. To suggest that 10 yr. bond rates are below 3 % for this "safe haven" reason is misplaced and also false. Sub 3 % ten year interest rates are a product of J.P. Morgan's Interest Rate Derivatives position - 59 Trillion in notional - of their 87 Trillion Overall Derivatives Book: (Click on image to enlarge) source: Comptroller of the Currency Q3/08 The nasty details of how interest rate swaps have been utilized by J.P. Morgan [The Federal Reserve in drag] to neuter usury is documented at Kirbyanalytics.com in a paper titled, The Elephant In the Room. While we're on the topic of J.P. Morgan and their aggregate 87 Trillion Derivatives Book [at Sept. 30, 2008] - we should all remember that our current financial crisis, that slew the likes of AIG, Lehman, Bear Stearns and soon Citi and BofA - these failures were all a direct result of blowups in their OTC derivatives exposure - derivatives exposures which pale in comparison to those held by J.P. Morgan Chase - like their "short" gold position for instance: (Click on image to enlarge) source: Comptroller of the Currency Q3/08 So, how is that toxic financial instruments - which have been lethal to so many financial institutions can be held in even greater concentration at J.P. Morgan without the same deleterious, adverse effects???? Likely Answer: It was back in 2006 when Dawn Kopecki reported in BusinessWeek Online in a piece titled, Intelligence Czar Can Waive SEC Rules,
What this means folks, is if J.P. Morgan is deemed to be integral to U.S. National Security - they could be "legally" excused from reporting their true financial condition. What would you reckon the Vegas odds are on that happening? The Big Question That No One Dares Ask? With the walking dead Citibank and BofA both circling the toilet bowl and eying the drain while facing the prospects of impending Fed mandated "stress tests" - is J.P. Morgan now going to "pick up" the cadavers' collective 41+ Trillion in interest rate derivatives and their additional 5+ Trillion in Foreign exchange contracts? That ought to give ole Niall something to ponder even if he doesn't have the cajones to speak or write about it. Veritas: Plain and Ugly Harvard has been the incubator of other disastrous economic revisionism / chicanery - like Barsky and Summers work / observations on Gibson's Paradox. It was this body of economic work which formed the basis of former Treasury Secretary Robert Rubin's "sham" Strong Dollar Policy and the cornerstone of the U.S. government / Fed gold price rigging scheme:
Understand that the decline in "real rates" was largely accomplished with falsified inflation data and just as J.P. Morgan began building their monolithic interest rate swap derivatives position depicted below. Note the timeframe [1995] cited above with the proliferation of derivatives: source: Comptroller of the Currency Like a Bad Smell That Never Goes Away Before anyone suggests that I'm unjustly berating Harvard, consider the following: Harvard Watch, in case you don't know, is [was] a group of academics who were formed ostensibly to be the conscience of the ultra secretive Harvard Corporation, whose 7 members have included the likes of Lawrence Summers, Robert Rubin and Dyn Corp.'s Mr. Pug Winokur. The Harvard Corporation administers the 'not for profit' [now] 28 billion dollar Harvard Endowment Fund. The largest such pool of capital this side of the Roman Catholic Church. This fund has been intimately linked to such financial fiascos as Bush/Harken Energy and Enron/California energy debacle. When the Harvard Watch did their own investigations back in 2003 / 2004, here are a few snippets of what they found. In addition to giving guidance, such as choosing outside money managers, to Harvard's 21 billion [at the time] dollar Endowment fund, Pug Winokur was the Chairman of Enron's audit committee. At the same time one of the Endowment Fund's biggest outside money managers was Highfields Capital. This is a hedge fund run by John Jacobson - a former member of the seven-man Harvard Corp. He left the Corp. in 1996 with 500 million of Harvard money to start his own financial advisory/absolute return fund. According to Harvard University 1999 tax returns Highfields topped the pay list of advisories at 30 million in management fees for the year. In fact Highfields did so well making money for Harvard, the Harvard Magazine was crowing about the job they did and they were reportedly awarded additional billions of Harvard money to manage. Now, I'll bet none of you will ever guess how Highfields made their astonishing returns for Harvard in 1999? This long/short fund only had 3 equity shorts (put options). Enron just happened to be the biggest - and the Enron short was 47 times the size of the next biggest short. Of course, no guilt was ever found implicating Mr. Winokur or Highfields - because the SEC was on the job!! Highfields' 5000 foot grand salami of a homerun simply got chalked up to "pure brilliance". Now, for those of you who are not aware; Enron funded research centers at Harvard. This allegedly objective research - incubated at Harvard - was instrumental in legitimizing energy deregulation in California and defending energy industry monoliths against assertions of price manipulation. Nothing stinky here, eh? Well, apparently something didn't exactly smell quite right; because it was soon after these facts came to light that Mr. Winokur had sufficiently spread an aroma of his doings about Harvard that his presence was no longer required and he resigned his post to make room for none other than Mr. Robert Rubin. Here's a snippet of the statement the Harvard Watch published at the time regarding the changing of the guard.
Admittedly, the Enron / Gibson's Paradox Harvard guffaws occurred before Niall Ferguson's tenure at Harvard [began in 2004]; but with him being such a sharp economic historian - he probably knew all this stuff anyway. From Harvard Ironies: The Statue of the Three Lies:
Sometimes truth is stranger than fiction. You just can't make this stuff up. Got physical gold yet? Much more precious metals specific content is contained in the same article for subscribers. Subscribers to Kirbyanalytics.com are educating themselves; not only about the merits of ownership of gold and precious metals - but valuable know-how on the merits of different forms of ownership as well as tips and guidance on the acquisition of physical precious metal. Rob Kirby email:
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