Liberty Newswire – 11/21/2011

[The Liberty Insight Newswire is an aggregation of what we consider to be important financial and political news and commentary from across the web.]

This week’s newswire sheds light on shady (to put it nicely) dealings at MF Global, a grand failure of the budget “super committee”, the rapidly unravelling European sovereign debt crisis, corrupt politicians (ok maybe that isn’t news), and more.

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MF Global Trustee Says Shortfall Could Exceed $1.2 Billion
New York Times, November 21, 2011

Brokerage firm, MF Global, recently filed for Chapter 11 bankruptcy after the firm’s highly leveraged bets on European debt went bust. Normally this wouldn’t be a big deal, as the firm’s owners (stockholders) would lose money, the clients’ accounts would be transferred to another broker, and life would go on. But in today’s world of high finance, the rabbit hole is often deeper than it first appears.

The latest audits of MF Global’s books show that $1.2B (originally reported as $600M) of client funds is “missing.” Apparently, client funds were co-mingled (i.e. stolen) with company funds to support those leveraged sucker bets in Europe. As it all gets sorted out, the accounts of MF Global clients with trades in place have been frozen, effectively locking up their funds which may or may not be returned.

But it goes deeper than that. The apparent fraud and theft at MF Global casts even more doubt on an already suspect derivatives market. As they say, you never have just one cockroach. Barnhardt Capital Management, a commodity futures and options broker has decided to voluntarily cease operations because, “I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not.”  Gerald Celente didn’t even have an account with MF Global but had a futures account transferred to a trust without his consent or knowledge, and then received a margin call on his futures trading account. (Watch his rant about it below.) Perhaps this futures contract chicanery explains the recent beat down in the gold and silver spot prices.

For a good (albeit sadistic) laugh, check out the marketing material on MF Global’s website.

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Lawmakers Trade Blame as Deficit Talks Crumble
New York Times, November 20, 2011

Remember the debt ceiling debacle debate a few months ago? Congress vowed to cut a paltry $1.2T out of the rise in the budget deficit over the next ten years in exchange for raising the debt ceiling. But since they couldn’t come to an agreement on where to cut, they created a “super committee” to hash out the details. As the deadline for a decision looms tonight, it appears the committee is nowhere near an agreement. As a result, $1.2T of automatic spending cuts over the next ten years will be enacted beginning in 2013.

Already, though, there are rumblings in Congress that they could repeal the automatic cuts. After all, they passed the law so they can repeal it. I can already hear the cries, “these cuts are needed when the economy improves, but in these difficult times the cuts would destroy an already weak economy.”

It should be crystal clear by now to anyone paying attention that there is zero political will to make any cuts to government. They follow the same extend and pretend script that Americans keep falling for- 1) Engage in fake partisan “debate” and demagoguery that appeals to the voter bases and promises to make vague cuts far off in the future. 2) Create a bi-partisan committee to make recommendations after several months of study and deliberation. 3) Ignore those recommendations if they include anything that may jeopardize reelection. 4) Print money to pay for it.

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Rising Chinese Redback Could Overtake Debased Greenback – Part 2
FinancialSense.com, November 17, 2011

Since the end of World War II, the U.S. dollar has served as the world’s reserve currency. Conversely, the Chinese Renminbi has been restricted from trading freely in world currency markets. This article points out how the monetary balance may be poised for a shift in the next few years. The consequence of such a shift away from the dollar is that the U.S. will no longer be able to print up money and send it to other countries in exchange for real goods. In other words, things will get a lot more expensive for those holding dollars.

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Kyle Bass: “Buying Gold Is Just Buying A Put Against The Idiocy Of The Political Cycle. It’s That Simple!”
Zerohedge.com, November 16, 2011

Kyle Bass has few rivals when it comes to understanding and explaining the world economy. In this excellent interview on BBC’s Hardtalk, he breaks down the situation in Europe and explains why his next big bet is against Japanese sovereign debt. (I linked to the Zerohedge repost because they always have the best comments.) He summarizes the “profligate idiots” in Europe playfully noting, “they have a German Pope and an Italian central banker.” In regards to the demonization of credit default swaps: “You can’t hate the mirror because you’re ugly.”

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Congress: Trading stock on inside information?
60 Minutes, November 13, 2011

This must-watch report from 60 Minutes exposes the double standards, loose morals, and greed of our politicians. While they claim to “serve the public” many politicians are getting rich, not through productive work, but through special favors and trading on market moving insider information, often in areas where they impact the legislation. For the 11% of Americans who still approve of Congress, maybe this will wake them up.

http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf

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