DSK is Tom Wolfe’s “Great White Defendant” from Bonfire of the Vanities

We are talking about the proper handling of guns and human cages, so any less than a presumption of innocence is reckless.

Regular readers know that I despise everything that DSK stands for politically – he’s a member of the French Socialist Party and has orchestrated a series of sovereign bailouts while head of the IMF. I am nonetheless disgusted with the public discourse around his case.

There is no presumption of innocence, as if accusers of sex crimes never turn out to be liars. Typical of this attitude is mayor Bloomberg’s quip, “if you don’t want to do the ‘perp walk’, don’t do the crime.”

There are any number of possibilities for what really happened in that hotel suite, but only one seems to be seriously considered in the US press: that this plump, 5’7″, 62-year-old overpowered a 5’11”, 32-year-old African woman with such force or martial efficiency as to not leave either of them significantly bruised and scratched. The story seems to be that she was so intimidated by his strength that she went along and performed oral sex without harming him. Maybe I just lack DSK’s skill, but my wife is 5’10”, and I’m a young and fit 6′, and I’d end up in the emergency room if I tried something like this! I bet Diallo could have beaten DSK to a pulp if she’d wanted. How can feminists have such a low regard for women that they assume they would all just comply with demands from random, unarmed old men?

The above is a possibility, but without evidence it is no more, if not less probable than that he offered her money or favors in exchange for sex but she found him to be a “rutting chimpanzee” and abusive jerk, spurring her to cry rape in revenge. He had stayed in the hotel at least 6 times in the last year, so maybe this wasn’t even their first encounter but a spat – we just don’t know. Of course, we can’t discount conspiracy, as if such things never happen in politics. Such a set-up would of course be likely to take advantage of the man’s known vices. All she would have to do is flirt with him, and the old horndog would come on to her. Easy to cry rape in exchange for a few hundred grand, and easy to keep silent when sufficiently intimidated.

In my perusal of the French discourse on this subject (via the Google Translate Chrome plugin), I find it much more deliberative than the US take on the affair. Is it possible that Americans are even more politically correct than the French, at least when it comes to sex? It also may be that the French are cooly cynical about the workings of power, having tossed out several governments in the last two centuries. A poll on Wednesday showed that 57% thought DSK is the victim of some kind of set-up. It is perfectly respectable to question such things as the official versions of current and historical events (certain German activities in WWII notwithstanding – that may land you in prison). They are also much better dinner companions and conversationalists than most Americans, and don’t observe the same taboos.

The Great White Defendant refers to these rare cases where prosecutors get to target a member of the privileged class, and as a consequence of their guilt from having put away so many poor people, they pursue him like Ahab after the white whale. Of course, journalists love these cases because they fit their own preconceptions of oppressors and oppressed, and the media attention makes prosecutors stars and helps their political careers. The last such major case was the prosecution of several white Duke lacrosse players on the word of a black stripper who turned out to have made the whole thing up. The lead prosecutor in that case ended up being convicted of contempt and disbarred for his criminal disregard of the truth. Nifong served one day in jail, and neither the accuser nor the currupt police have been prosecuted for their actions. BTW, the accuser, Crystal Mangum, is facing a first degree murder charge for the stabbing of her boyfriend last month, but the New York Times is strangely silent on that story.

I hope Tom Wolfe is watching this case closely (and I suspect he is, as he lives in NYC) and gives us a write-up or two by the time it’s over. No matter what actually happened and what verdict is reached (jurors are selected for gullibility, so the verdict will not necessarily reflect the truth), the affair may refect poorly on journalism and the court system.

The rigor with which journalists and prosecutors pursue the truth is critical for a civilized society, since the legal system has a monopoly on the use of force. The burden of proof is on the accuser, whether a policeman or alleged victim. We are talking about the proper handling of guns and iron cages, so any less than a presumption of innocence is reckless.

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Here’s the Bonfire of the Vanities on Amazon
I strongly recommend it (and not the movie with Hanks & Willis), along with everything Wolfe has written – he’s the best novelist/journalist of our time.

This is why silver margins were hiked

Since the futures opened on Sunday, silver has fallen $13. For a standard 5,000 ounce contract this is $65,000, more than three times the COMEX margin. Today alone silver is off $15,000 per contract. It is just plain silly to claim a conspiracy against silver, and even sillier to claim that margins were hiked for nefarious reasons. Margin had to be hiked to keep up with the price of silver and its volatility, to protect the exchanges and winning traders (and to protect losers from themselves).

Like I said a two weeks ago at $45 when I discussed buying near-term puts on silver in anticipation of the bubble popping, I think the metal’s run is over. I suspect that it may establish a new normal in the $10-20 range for the coming decade or so, until the next secular inflation cycle is upon us.

What bankers’ plot? Greenberg, Fuld, Cayne, Blankfein among biggest losers.

Those crowing about sinister machinations by the banking cartel to topple world finance, buy up the scraps on the cheap, and set up a dictatorship while they’re at it are overestimating today’s financial honchos. Morgan and Rockefeller were the real deal, but these guys are just amateurs. Do these look like the spoils of a successful machination?

• Dick Fuld’s Lehman shareholdings went from $1.2 billion to under $500k (Bloomberg). He was paid a total of $168.5 million from 2005 to 2007 for destroying the company, but after NYC and federal taxes, his real take-home pay was under 100M. Cool-Aid drinker that he was, how much of that has since been spent or lost in bad investments?

• Jimmy Cayne’s stake in Bear Stearns, once a cool $1 billion, sold for $61 million in March.

• Lloyd Blankfein’s 1.64 million Goldman shares have gone from $410 million to $164 million (and falling) within the last 12 months, but at least he has been taking home $50 million bonuses lately.

• Last but certainly not least, the venerable Hank Greenberg has gone from mega-wealthy to just plain rich. Yahoo! Finance reports that he holds roughly 12.8 million in AIG stock, which would have gone for over $900 million last year, but today would fetch under $30 million. Bloomberg has a higher figure, counting controlled entities that collectively seem to have lost nearly $24 billion since AIG peaked at over $70 per share. My last quote was $2.25, putting the present total at well under $1 billion.

The US financial system is indeed corrupt and anything but a free market. Bankers do have politicians and regulators (such as Fed chairmen) in their pockets, but the boom-bust cycle is not intentional. It is the inevitable but unintended result of very narrow, short-term interests run wild. Bankers have bought from the government a license to inflate (most inflation is due to credit), and the fraud of fractional reserve lending with socialized risk always ends badly.

Most people used to understand that only gold and silver were money, and that paper promises (aka ‘notes’) could only create phoney wealth and depressions. Maybe parts of this latest lesson will take, but I’m not holding my breath.

Just an Ordinary Crash: No Conspiracy to Manipulate the Silver or Gold Markets

Source: kitco.com

It amazes me how many of the same people who clearly saw the manifestation of the credit bubble in stocks and real estate are incapable of conceiving that the same cocktail of easy money and bull-market sentiment found its way into their own favorite markets. Many hold it as a matter of faith that the precious metals bull market will end in a manic top of 1980 proportions ($2500 gold, $150 silver in today’s dollars), and are therefore blinded to the possibility that we have had our top for now. Maybe we should be grateful for a pretty darn good run, with gains of 425% for silver and 300% for gold, topping out with a spike and 98% bullishness.

With deflation setting in, the foundations of this market are being shaken, and it is a different game now – – it’s not over, but the rules have changed. Those small-timers doubling down on physical right now could be in for a world of hurt in a few months or years and decide to bail at exactly the wrong time (according to the principal of maximum pain for the maximum number).

I get tired of seeing the rants of precious metals newsletter writers about the dark forces behind every downtick in the markets. I am extremely skeptical of the feasibility of any successful long-term market manipulation, whether it is in the stock, currency or futures markets. The dollar volumes of these markets are so large that even governmental bodies find it futile to try to influence price trends by strategic buying or selling.

If such forces were able to move a market in the desired direction, that would create a golden arbitrage opportunity for sharp-eyed speculators, inducing them to step in and buy or sell at the “artificial” price and thereby push the clearing price back to its proper level. To hold a market at an “artificial” level indefinitely would require infinite resources, which not even governmental bodies posess. And according to the natural laws of markets, if one venue (such as the COMEX) became so hopelessly encumbered, participants would figure out another way to contract with one another (such as Dubai).

But this is a moot point, because manipulation just doesn’t work. As Mish points out (click for his graphic), in 2003 and 2004, the Japanese tried overtly to suppress the Yen as it rose from the low 80s to almost 100 per dollar, with a massive series of interventions totaling over $300 billion. Their efforts failed, and the Yen later just fell as the psychology of traders changed according to their own whims, as in every market.

As to why there is a shortage of retail physical gold and silver right now, I have heard from a couple of dealers that it is not an uncommon phenomenon when there is a rapid drop in prices, as it brings out demand. I am in agreement with Mish that this demand by small-timers is likely a contrary indicator. Where were the hordes of new gold bugs when gold was under $300?

I am not usually in agreement with regulatory bodies, but it is good to see that at least one of them employs someone with a grasp of how markets work. The CFTC published an excellent letter to address the conspiracy crowd as far as silver is concerned. Here’s an excerpt.:

During the past 20 to 25 years, the Commodity Futures Trading Commission (CFTC or Commission) has received numerous letters, e-mails and phone calls from silver investors alleging that the price of silver futures on NYMEX has been manipulated downward.

In 2004, Dr. Michael Gorham, Director of the Division of Market Oversight (Division) addressed silver investors’ concerns in an open letter (2004 Silver Letter) that considered the plausibility of a long-term short-side manipulation of the silver futures market and provided an analysis of activity in the silver futures market. That letter concluded that the existence of a long-term manipulation was not plausible and that an analysis of activity in the silver futures market did not support the conclusion that the market was being manipulated.

Recently, silver commentators and a group of investors that rely upon them have reasserted their allegations that the silver futures market is being manipulated downward by a small group of traders on the short side of the market. As a result, DMO staff decided to revisit this issue by taking a fresh look at activity in the silver futures market.

The analysis draws the following conclusions:

• There is no evidence of manipulation in the silver futures market.
• Silver cash and futures prices have risen dramatically between 2005 and 2007, with silver outperforming the gold, platinum and palladium markets, suggesting that silver futures prices are not depressed relative to other metals prices.
• NYMEX silver futures prices tend to track closely the price of physical silver.
• Concentration levels for the top four short futures traders in the silver futures market are comparable to those observed in the gold and copper futures markets, and generally are lower than the levels seen in the platinum and palladium futures markets.
• The composition of the traders comprising the top four short futures traders, in terms of net positions, changes over time. These traders represent a diverse group, and their futures positions are driven by an even more diverse group of customers.
• There is no observable relationship between short-futures-trader concentration levels and silver prices.
• There is a slightly positive relationship between the total net position of the large short futures traders and silver prices; this suggests that larger short futures positions are associated with higher, not lower prices.

Advocates of the short-side manipulation argument contend that silver futures prices have been manipulated downward for close to 25 years. What these advocates fail to indicate, however, is where prices should be, except to argue that prices should be higher than they have been currently or in the recent past.

With respect to the claims of silver commentators that prices are being suppressed, it should be noted that these commentators have never articulated a credible explanation as to why, for more than 25 years, buyers have not entered the market to purchase silver (at the supposedly depressed prices), thereby driving up prices to a level that these commentators believe is reasonable. In this regard, no barrier to entry has been identified that would prevent individuals or firms from buying cash silver or entering into long silver futures positions.

Given the similarities between price movements in these four metals, it appears that general market forces that have contributed to an increase in gold, platinum and palladium prices have also supported an increase in the price of silver. Moreover, the fact that the price of silver outperformed the prices of the other metals during the period, while not definitively answering the question of whether silver prices have been manipulated, calls into question the contention that silver futures prices have been manipulated downward. In short, there is nothing obvious in the silver price series between 2005 and 2007, when compared to other metals’ prices, to suggest that silver prices have been manipulated downward.

Gold and silver bugs believe that central bankers and bureaucrats care as much about precious metals as they do. To government types, the metals are just barbarous relics of ancient monetary history, and I doubt they spend much time worrying about their prices.