The Daily Reckoning by Bill Bonner
On This Day - 29 April 2013
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The world financial system is rigged A  A  A

Gualfin, Argentina

We came back on Sunday night after a two-day horseback trip up into the mountains.

After 18 hours of riding over the worst terrain you can imagine - and sleeping on the hard stone floor of an unheated refuge at 9,500 ft -- we showed up at the house bruised...worn-out...wind-burned and sun beaten.

It was a great trip, in other words.

But your editor is too tired to think...or write.

In the 6th grade, at Owensville Elementary, our career path was decided for us. The entire class was told to write an essay. Pencils came down onto the paper immediately. Except for our pencil, that is. We sat looking up the ceiling.

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Mrs. Marshall came to our desk.

"What are you doing?" she asked.

"I'm thinking," we replied.

"Well, don't think. Write."

Which is about what we've been doing ever since.

But right now, we can barely sit. Writing will have to wait for tomorrow.

Please bear with us.

In the meantime, consider this from Bloomberg:

    Central banks bought the most gold since 1964 last year just before the collapse in prices into a bear market

    underscored investors' weakening faith in the world's traditional store of value.

    Nations from Colombia to Greece to South Africa bought gold as prices rose for an 11th year in 2011, highlighting the reversal of a three-decade-long bout of selling that diminished the world's biggest bullion hoard by 19 percent. The World Gold Council says they added 534.6 metric tons to reserves in 2012, the most in almost a half century, and expects purchases of 450 to 550 tons this year, valued now at as much as $25.3 billion.
Whoa!

Central banks are printing newfangled money at a record rate. They are also buying the old-fashioned money at a record rate.

Question: what are they using to buy the old-fashioned money?

Answer: directly or indirectly they are using the printing press money they create.

Here's Matt Taibbi in the Rolling Stone:

Politics: Everything is Rigged: The Biggest Financial Scandal Yet
    ...banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history - MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."

    That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

    Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.
Mr. Taibbi is concerned with the way the swaps market is rigged. But that's small potatoes compared to the way the entire world financial system is tricked up.

More on this when we are able to sit down for more than 10 minutes, tomorrow.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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