On banks and gold, confidence and crime

With all the coverage of the JPM London Whale hearings today, I’m actually smiling and somewhat hopeful about our country’s future. The most easily disabused lie from the Republican/Democrat Regime that refuses to enforce the law and put these executives and traders who have broken the law in jail is the whole “if we prosecute and break up, then confidence in the system will suffer.”

Simply enforcing the laws on the books, including anti-trust law that is more than a century old, would immediately instill confidence not hurt it. Rule of law is what brings confidence in the long-term and enables real capital investment. (Not to mention what a boost in confidence we’d get by stopping all overt and covert subsidies for the banking industry which by definition misallocates our economy’s resources.)

Speaking of which, here are a couple headlines that are actually just as important as the JPM news, but which isn’t getting nearly the coverage (yet!). I include a couple key outtakes that tie perfectly into my thesis of why we need to keep buying physical precious metal coins and bars and getting ready to short some precious metal ETFs –

‘A cesspit’: Libor scandal may be going on elsewhere –

Mr Tucker said he could not be sure that abuse of the Libor system is not continuing to this day, telling the committee: “I can’t be confident of anything after learning of this cesspit.”

The Libor scandal could be repeated in a number of other “self-certifying” markets where prices are determined, he said.

“Self-certification is clearly open to abuse, so this could occur elsewhere,” he said.

A Financial Services Authority inquiry into Libor should be extended to other self-certifying markets, he said. The Treasury said last night that the review, led by Martin Wheatley, was free to examine markets other than Libor.

An expansion of the FSA review could take in a number of other interest-rate-related data as well as some complex financial instruments measuring the difference between banks’ borrowing costs and that of the US government. Some markets in gold and oil are also based on self-certification.

And

Could gold be the next Libor scandal?

London’s financial sector was last night bracing itself for another official investigation into alleged price-fixing following reports that a US regulator is considering launching an inquiry into the City’s gold and silver markets.

The Commodity Futures Trading Commission is discussing whether the daily setting of gold and silver prices in London is open to manipulation, according to the Wall Street Journal, which stated that the CFTC is examining whether prices are derived sufficiently transparently.

The system of setting gold prices in London is unusual and involves a twice-daily teleconference involving five banks – Barclays, Deutsche Bank, HSBC, Bank of Nova Scotia and Société Générale – while silver is set by the latter three. The price fixings are then used to determine prices worldwide.

No trades yet for me today. I think there are better pitches coming. Get your good bats out and get warmed up. But don’t swing yet.

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