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Welcome to the Keiser Report, I'm Max Keiser,
You know in 2003 according to Buckingham palace officials,
the royal household cost each tax payer in the UK about 1 loaf of bread,
in 2004 that cost was just under 2 pints of milk
and in 2009 a mere mp3 download.
That certainly sounds much better than telling the tax payer
the queen cost'em 41 million pounds annualy to maintain,
meanwhile across the pond, Goldman sachs role in the aluminum market
has cost the consumer 5 billion $ over the past 3 years.
Or if as the royal Goldman household would have you believe
that's a mere 0.002 cents per can of soda pop or just 12$ per automobile.
Not much when you look at it that way. Besides !
Think of all the tourist money, the royal families of Wall Street bring in.
Now to explain all this in greater detail we turn to Stacy Herbert.
First of all Max, this is going to be a controversial episode
because we're going to talk about Goldman Sachs and the aluminium market.
The British ppl of course call it aluminium so
there's going to be 100s of comments saying "they pronounce it wrong" !
I thought you were gonna say Goldman Sachs and the illuminati,
no no it's the aluminum or as British people say, aluminium.
Yes, the British say aluminium but it's aluminum, anyway.
So, as of 2003 you know all the banks on Wall Street looked at what happened to Enron,
they were able to coin it basically rigging energy markets and as of 2003,
the federal reserve and congress allowed banks to get into that,
basically into the commodities market the physical commodities market, delivering energy,
we saw it JP Morgan just this past week being fined 500 million dollar for rigging
the energy markets exactly in the same way that Enron did by the way.
And now we have this New York Times piece covering the aluminum market.
So in 2010 GS bought Metro International which has 27 warehouses in Detroit,
and here's their story: "A shuffle of aluminum, but to banks, pure gold".
The story of how this works, how they're able to add 5 billion $ to the cost over 3 years to aluminum Max,
begins in "27 industrial warehouses in the Detroit area where a Goldman subsidiary stores
customer's aluminum. Each day a fleet of trucks shuffles 1500 pound bars of metal among the warehouses.
Two or three times a day, sometimes more, the drivers make the same circuits.
They load in one warehouse. They unload in another. And then they do it again."
So since buying this, that the average delivery time for your aluminum
has gone from 6 weeks to now 18 months because of Goldman Sachs adding the cost.
Before you speak Max, Goldman Sachs has replied to this NY Times piece
And they say... They're just being... ?
Market makers !? How would I ever guess that ?
Well this is fantastic because it's low frequency trading as opposed to high frequency trading,
you know High Frequency Trading, Goldman would put a computer next to the NY stock exchange they'll
front run and they syphon off cash and they leech out money and
they're destroying the american economy that way.
Here in Detroit it's low frequency trading they put a warehouse next to the city of Detroit,
they leech out all the money from Detroit now that the entire city is
in receivership now the entire city of Detroit is going bankerupt because
folks like Goldman have set up shop next door in these huge warehouses to leech money out
every single day a penny a fraction of a penny at the time they leech it out
like a cancer cell is leeching that money out there's a Loyd Blankfein leeching the enormous leech.
He's the pox in the american soul that's leeching all that money out.
Of course he claims market making which is false. Anytime Loyd Blankfein uses the phrase
"market making“, substitute "fraud". F R A U D fraud, it's fraud. it's not market making,
I know because I invented market making technologies that could have been used to create markets that
did not have predatory cancer cells that Loyd Blankfein but unfortunately that technology is
being warehoused by another Wall Street firm but this is not market making, that is false.
So the Metro officials, subsidiary of Goldman Sachs, are saying they're responding to
market forces and that's why it now takes 18 months to get delivery.
Now the price of aluminum is now reflecting the 18 months it takes to deliver your aluminum.
These facilitie in Detroit that Goldman owns, represent 25% of the aluminum storage market
and there's 1.5 million tons of aluminum there.
Now it's the London metals exchange which regulates it
and the London metals exchange collects 1% of all of Goldman Sachs rent that they're able to
charge their clients, so these are the costs, this whole charade,
this whole dance of lifting these huge bars of aluminum which you can see in
the photo from the NY Times and moving it from warehouse to warehouse and this is
the height of capitalism, this is what capitalism has become, this is just moving for nothing.
It's exactly what Soviet Union did.
Yeah ! No ! There's a parallel to the Soviet Union times for sure that the state would
demand certain deliveries being made regardless of the market conditions and
of course the american will collapse just like the Soviet Union did
but when Loyd Blankfein talks about market making, what he really means is financialization.
What financialization means is that you take a market that's working fine,
and you add another market on top of it, and then another market on top of that,
some would call that derivative, you put an option on top of an option contract,
or you put a warehouse next to an aluminum delivery facility to make
a "market" according to Loyd Blankfein but to add another layer,
you get the CNE taking their cut, the Goldman takes their cut, everyone in between takes their cut.
Inflation ends up in the prices for the day to day of the average person but
that's offset to some degree as we're getting some stuff made by slaves in China for garments etc...
so you don't see it showing up in the CPI right away but financialization is creating
the wealth and income gap in America which is causing social unrest
and is causing pre-revolutionnary kind of unrest in America.
Loyd Blankfein is the guy or Jamie Dimon the .2 who are creating this unnecessary financialization.
So now remember, Enron used to be an energy services company and what they decided to do is that...
There was no money in that they are the 1st ones to financialize the energy market, they just...
Right, they used special purpose entity accounts, 700 or more with comical names
like Chuco to hide massive debt off the balance sheet.
Where is JP Morgan and Jamie Dimon in all this ? Oh ? they have 90 trillion $
off the balance sheet in derivatives, so they are Enron times 100 that's why I would say
Enron and JP Morgan are going in the same direction they're going to 0.
JP Morgan stock will be 0 at some point. I'm willing to bet anything on that happening within the next 5 years.
Well clearly, Enron just determined that trading derivatives was actually
more profitable cause they can just clearly their scam everybody...
Financialization !
Yeah, so here we have: the banks saw that and they didn't do anything to help stop it.
They said we want in on that business so in 2003, "using special exemptions granted by
the federal reserve bank and relaxed regulations approved by congress,
the banks have bought huge swaths of infrastructures used to
store commodities and deliver them to consumers.
From pipelines and refineries in Oklahoma, Louisiana and Texas".
And by the way, how many problems have we had with WTI because of exactly these guys ?
the pipes don't work the pipelines don't work, things aren't delivered, nobody knows how to
trust WTI anymore... "to fleet of more than 100 double hulled oil tankers at sea around the globe
to companies that control operations at major ports like Oakland, California and Seattle.
Right, well the main purpose of the crash of 2008 was to get rid of a lot of competition
for Goldman and Jamie Dimon and JP Morgan so they got rid of Bear Sterns, they got rid of
Lehmann brothers, they absorbed Wachovia, the too big to fail banks got even bigger.
That's one of the points that that whole financial engineered collapse occured in 2008
So now what we're describing here is that Morgan Stanley Goldman and Jamie Dimon and JP Morgan have
an oligopoly position, they collude, meaning they engage in open price fixing there's no competition.
There's no way for someone to come in there and say
"You know what we're gonna offer a cheaper service and do this competitively" because
they would all be forced out of the market because the regulators are in the pockets of the bankers.
Well you know that there's a case going on against Fabrice Tourre, former Goldman Sachs
About these suprime mortgages that were dumped into collateralized debt obligations and
sold to pension funds around the world and we know that Goldman Sachs and their preferred clients
were able to profit knowing that these things would blow up, knowing that Greece would blow up,
the same thing here is they control 25% of the storage market so because the price of storage is
baked into the aluminum cake they're able to know whether the prices are going to rise or fall
and they could easily make a faster delivery so that they know that the price will collapse
but now the article then goes on to note that "by controlling warehouses, pipelines and ports,
banks gain valuable market intelligence, investment analysts say.
That, in turn can give them an edge when trading commodities. In the stock market,
such an arrangement might be seen as a conflict of interest or even insider trading.
But in the commoditie market, it is perfectly legal".
It is insider trading, it is overtly insider trading and of course they also have the ability
to create indexes around this inside information and data that they then manipulate with
another layer of financialization so all the commodities would.. They could go create 5 or 10 or 15 new indexes
based on the components of these commodity markets that they're manipulating and then
they introduce contracts that are based on these indexes that they are manipulating and of course
all that ends up being thrown into pension accounts.
One reason why Detroit has to go bankrupt is because Goldman and JP Morgan have dumped
hundreds of billions of $ worth of toxic securities that they've been trading in
into the pension accounts of the people of Detroit.
And then, instead of saying "we have to write down those assets cause we committed fraud,
instead they're gonna put that entire city into receivership and hope nobody ever digs into the
pension accounts and say "wait a minute JP Morgan committed fraud, Goldman Sachs commited fraud,
Morgan Stanley committed fraud", it's like America's policy in Vietnam, just kill everybody,
just kill everybody and hope nobody looks for the dead bodies.
Well back to the story because the Federal Reserve Bank is looking into this because they are
the ones that approved it and one of the reasons why they said for giving the banks the ability to
do this is that they would provide efficiency and market making and liquidity but here
we see that before, whoever owned this, before or without Goldman Sachs involvment,
was able to deliver their aluminum in 6 weeks now it takes 18 months.
Now... put this into context of what's about to happen, the 2 primary things in the world of metals
copper and agricultural world: wheat. Those are the 2 things that even the US doesn't allow to
be tampered with because those are so basic to the fundamentals of everything about the
fabric of our lives, well "after a sustained lobbying effort,
the Securities and Exchange Commission late last year approved a plan that will
allow JPMorgan Chase, Goldman and BlackRock to buy up to 80 percent of the copper available on the market".
So they're already in plans to expand this sort of model where they're able to be a bank
that on the one hand can trade on insider information, gain from their warehouse which
they alone control how fast or slow they are delivered.
Well if Teddy Roosevelt were alive today, he would break these trusts up
that's the problem with American economy today, it's that you got these trusts
vertically integrated markets manipulating inside colluding bankers and politicians
who are creating this enormous wealth gap.
America's now the 27th in terms of where that middle class is to other countries around the world,
it was number 1, the richest middle class in the world now it's number 27
And it's dropping like a stone. And that can only lead to one outcome.
Max, just to be clear, Goldman Sachs just said they are market making.
Oh yeah they're just market making. Ok well Stacy Herbert thanks so much again
for explaining this all here on the Keiser Report.
Thank you Max.
Stay tuned for the second half, a whole lot more
Welcome back to the Keiser Report I'm Max Keiser
Time now to turn to Mitch Firestein, author of "Planet Ponzy"