The Space Race Has Been Replaced
With A Fraud Race
Max Keiser, Stacy Herbert,
and Rob Kirby
(Original page here)
[transcript starts at time=13:00]
MAX KEISER: Time now to go to Rob Kirby of Kirby Analytics. Rob Kirby has been way out ahead of everybody
looking at the price dislocation, the rigging of markets the failure of price
signals and looking at the failure of price signals to understand that there's
institutionalized fraud going on all over the world! Rob Kirby, welcome to the Keiser Report.
ROB KIRBY: Nice to be with you, Max.
MAX KEISER: All right. Rob Kirby, the latest post on your newsletter is called "Libor Rigging: The Tip of the Iceberg" Tell us about the Libor crime, how did it happen, and what's underneath the tip of the iceberg?
ROB KIRBY: Well, bit of a mouthful, Max, but what's underneath the Libor scandal, let's start with the Exchange Stabilization Fund. Lawrence Summers, Robert Rubin, Hank Paulsen, crude oil, Ben Bernanke, Timothy Geithner, the price of gold, the price of silver, Goldman Sachs, and, uh, Alan Greenspan.
MAX KEISER: OK, so, Barclay's — is Barclay's really the tip of the spear, or is it — talk about that a little bit.
ROB KIRBY: Well, no, actually Barclay's being a London-based bank, and US dollar Libor being — it's an American-centric rate — reference rate — it is officially posted, or set in London, but US dollar Libor is an American-centric — and when I say American-centric I'm talking about the US treasury, I'm talking about the US Federal Reserve, and specifically I'm talking about J. P. Morgan. So it's American-centric. It's not Barclay-centric at all. And that's a misnomer and a fallacy to say that Barclay's is at the heart of any US dollar-Libor scandal.
MAX KEISER: Right. Well, uh, let me put this into another, uh, another issue. Because clearly the incentive[s] to manipulate interest rates are a way to keep the bankers in business and their fractional reserve banking, their Ponzi schemes, their non-reserve banking — none of these banks have any collateral — J. P. Morgan has no collateral, Deutsche Bank has no tier-1 collateral whatsoever [Rob Kirby smirks agreement as he hears this] — concurrently with this massive global fraud, they have to also attack the one market that has a tendency to expose the fraud, and that, of course, is the gold market. So can we say without any doubt now, that the gold-paper market and silver-paper market along with Libor has been unabashedly manipulated?
ROB KIRBY: Max, I'm gonna take it a little step further. The — the — understand, Libor — Libor reference rates deal with the cost of — the cost of money one year and less. You see, I've written a great deal about interest rate swaps controlling the long end of the interest rate curve; the Libor side of it is the control of the short end of the interest rate curve. So the two go hand in hand: Libor is the control mechanism for the short end, the interest rate swaps are the control mechanism for the long end, and effectively it gives the puppet masters total control of the entire interest rate curve. So you've got to break it down into its components. You've got the short end, the long end, and then you've got the metals prices are the proverbial canary in the coal mine, that typically, when we used to have free markets, y'know, sudden or big movements in precious metals would alert people, historically, to shenanigans going on in the interest rate markets, or if malfeasance was occurring in the interest rate markets.
But what the derivatives complex serves as, a lot of people
try to characterize it as debt. The
derivatives complex is not debt. What
the interest — er, derivatives complex is, it's a price control mechanism. It's a price control grid. And it gives the
people who regulate, and the people who have purview over the interest — or,
the derivatives complex, excuse me — it gives them control of all the strategic
pricing. The price of capital. The price of energy. The price or the cost of capital itself. And these are the things where you see the
control is instituted, and is most pronounced — all these strategic things.
MAX KEISER: OK, so we're in this post-capitalist world where these coterie of bankers, they control the prices. It's not a price discovery mechanism anymore. There's no market functionality anymore. There's a grid, as you call it, it's a global grid, Libor is part of that grid, and these guys decide at what price interest rates should be, what price gold should be, to satisfy an objective. Now, concurrently, there's massive unemployment, social unrest, revolutions around the world, huge wealth and income gaps, and revolution in the air. So, what is their end? Is their end to foster revolution? Is that what they're trying to do, because it seems like that's what's happening.
ROB KIRBY: It may sound a little bit lofty to say it, Max, maybe to some but not to me anymore, their goal in my view is One World Government, One World Bank, One World Currency. And I really do believe that there's a coterie of clowns in the world, who are that full of hubris that they actually believe that they can pull this off.
MAX KEISER: If you look — you're talking about energy manipulation, gold manipulation, municipal bond manipulation, Libor manipulation, one bank stands tall — J. P. Morgan. Tell us about this, uh [laughs] so-called bank.
ROB KIRBY: J. P. Morgan, which I refer to as the Fed or the US treasury in drag, the size of their derivatives book, which currently sits around $70 trillion in notional, and, I mean it's been as high I think as $90 trillion, a few years back. But it's the machinations that you see, the shifting of positions [Max Keiser nods]. And you see J. P. Morgan enter. Again, it's always the strategic markets. Like we saw when J. P. Morgan entered natural gas — started trading natural gas. Within 8 months of J. P. Morgan entering the natural gas market they were the biggest player, and Amaranth was dead. You move on to crude oil, you look at the interplay between the Strategic Petroleum Reserve and swaps that they're doing. What it is, it's a shell game. And they move the balls around underneath the shells, at will, specifically using, or utilizing, or in conjunction with using, as I said, the Strategic Petroleum Reserve, and good old fashioned futures, whether it's crude oil or natural gas, and it's the story goes on and on and on, and it's repetitive, Max. It's not just we see it in the energy market: we see it in the precious metals market, we see it in the interest rate market, and it's the same players every time, that have the big positions, and always seem to be on the right side of the trades, up until very recently when you've seen J. P. Morgan first announce a $2 billion trading loss, and now there's talk that the trading loss might be $9 billion. And I will admit it's gotten me a little perplexed bit just what's going on currently at J. P. Morgan regarding their "loss" because I for one don't think J. P. Morgan is subject to accounting of any kind. I don't think they've been subject to accounting probably for the last 10 years. And my reason for making such a statement, is when you've got a derivatives book of $70 trillion in notional, there's variance in terms of P[rofit]&L[oss] in a position that big. So, I mean, to think that a position of $70 trillion when you induce volatility into markets couldn't have a fluctuation of say one or two percent o — of the outstanding notional amount, in a difficult market environment, which we've had plenty of recently, but I mean, 1% of $70 trillion position, or book, gives you swings in P&L that are like 4 and 5 and maybe 10 times the market cap of J. P. Morgan.
MAX KEISER: So, J. P. Morgan's really book — mark-to-market losses, that's $140 billion —
ROB KIRBY: They don't mark to market anything, Max!
MAX KEISER: Right so —
ROB KIRBY: They can't!
MAX KEISER: They've got a book value of $140 billion, but at any given moment they could be sitting on losses between $1.4 and $3 trillion.
ROB KIRBY: That would be my guess.
MAX KEISER: Right. That would — I mean, I worked on Wall Street, and I know that, at the end of the quarter, of course, you keep some profits in unnumbered accounts and some losses in unnumbered accounts and then you sell those to corporations looking for, y'know, if they get a tax loss, you sell them the loss. So you can imagine, OK, it's a $5 billion or $9 billion loss that's gonna offset some taxes possibly, but it's complete manipulation of the balance sheet, complete manipulation of the regulator. Meanwhile what they don't show the regulator is this wild shadow-banking snake that's whipping in the derivatives wind up and down by trillions and trillions of dollars, and meanwhile of course that monster gets fed ultimately in the form of AUSTERITY TO THE PEOPLE who are starving.
ROB KIRBY: There's that, but there's another angle
to it, Max. I view them as a
monster. And everytime they need a
feeding, something must die. And to a
large extent, I view the Bear Stearns debacle back in 2007 — the upshot of Bear
Stearns dying was that J. P. Morgan more or less feasted on the carcass. And through the Lehman debacle, we also saw
how there was some fast and fancy footwork being done to the tune of $138
billion, which J. P. Morgan had transferred $138 billion into Lehman's coffers
so that Lehman could settle or do trades.
This $138 billion that J. P. Morgan advanced to Lehman after Lehman had
collapsed, in my view, there's a direct line from that to J. P. Morgan suddenly having an injection of $8
billion[sic — it would appear he meant to
say trillion, based on the line two sentences down. PP] worth of
less-than-one-year swap derivatives added to their book in the first quarter of
2009. I mean, this is so blatantly
obvious to me, what has occurred there.
I mean, J. P. Morgan was in — er, wanted to be in the market; J. P.
Morgan didn't want the notoriety of being in the market; so J. P. Morgan pre-paid the collateral that Lehman was
gonna need to produce the trades that J. P. Morgan needed to do.
You know what? And I should back off a little bit, because when I talk about J. P. Morgan, J. P. Morgan strapping on $8 trillion worth of less-than-one year swaps isn't J. P. Morgan to begin with, because the orders are coming from the US Treasury, specifically the Exchange Stabilization Fund, which is a secretive arm of the US Treasury, which doesn't answer to anyone, which is beyond any oversight, and these orders are being brokered through the New York Federal Reserve trading desk, and they're being — basically what I'm saying is, US monetary policy is being conducted through the trading desk of J. P. Morgan, Goldman Sachs, Citibank, and Bank of America and Morgan-Stanley. These are the five institutions who hold 98% of $302 trillion worth of notional in derivatives that are held by all American bank holding companies.
MAX KEISER: All right, Rob Kirby, we're out of time. Thanks so much for being on the Keiser Report.
ROB KIRBY: Loved being with you, Max.