In late 1996, Marcy Engel, then a lawyer for Wall Street heavyweight Salomon Brothers Inc., fired off a warning letter to U.S. regulators: If they approved a Chicago Mercantile Exchange plan to change how a popular futures contract was priced, they would put at risk the integrity of a key interest rate in the global financial system.

The CME was already doing big business in its Eurodollar futures contract -- a derivative product that lets traders bet on the direction of short-term interest rates -- and it had long set the price for these contracts using a benchmark rate it tabulated itself. Now it wanted to adopt a more commonly used rate published by the British Bankers' Association, known as the London interbank offered rate, or Libor. Using this benchmark, the CME said at the time, "will make our Eurodollar futures an even more attractive risk management tool."

The problem with the CME's plan, as Engel saw it: The banks that set the rates in London daily were also able to take positions in the CME's Eurodollar contract. In her letter to the U.S. Commodity Futures Trading Commission, she said tethering the futures contract to Libor "might provide an opportunity for manipulation" of the interest rate. A "bank might be tempted to adjust its bids and offers ... to benefit its own positions."

I hate to make my first story of the day a must read...but that's what it is. It's a Reuters piece that I plucked from a GATA release yesterday. The headline reads "How Gaming LIBOR Became Business as Usual". The link is here.

U.S. Federal Reserve Chairman Ben Bernanke on Tuesday urged Congress and the Obama administration to strike a budget deal to avert tax increases and spending cuts that could trigger a recession next year.

Without a deal, the measures known as the "fiscal cliff" will take effect in January. Bernanke also said Congress must raise the federal debt limit to prevent the government from defaulting on Treasury debt.

Failure to do so would impose heavy costs on the economy, he said. Bernanke said Congress also needs to reduce the federal debt over the long run to ensure economic growth and stability.

Uncertainty about all these issues is likely holding back spending and investment and troubling investors, the Fed chairman said in a speech to the Economic Club of New York.

This AP story showed up on the cbc.ca Internet site during the New York lunch hour yesterday...and I thank Donald Sinclair for sending it along. The link is here.

Move over, adulterous generals. It might be time to make way for a new sexual rat's nest – at America's top financial police agency, the SEC.

In a salacious 77-page complaint that reads like Penthouse Forum meets The Insider meets the Keystone Kops, one David Weber, the former chief investigator for the SEC Inspector General's office, accuses the SEC of retaliating against Weber for coming forward as a whistleblower. According to this lawsuit, Weber was made a target of intramural intrigues at the agency (which has a history of such retaliation) after he came forward with concerns that his bosses may have been spending more time copulating than they were investigating the SEC.

Weber claims that in recent years, while the SEC Inspector General's office has been attempting to investigate the agency's seemingly-negligent responses in such matters as the Bernie Madoff case and the less-well-known (but nearly as disturbing) Stanford Financial Ponzi scandal, two of the IG office's senior officials – former Inspector General David Kotz and his successor, Noelle Maloney – were sleeping together.

You can't make this stuff up. The Adults Only warning flag is flying...as Matt uses rather 'pithy prose' at times. It was posted over at the rollingstone.com Internet site yesterday...and it's Roy Stephens first offering of the day. The link is here.

A Senate proposal touted as protecting Americans' e-mail privacy has been quietly rewritten, giving government agencies more surveillance power than they possess under current law, CNET has learned.

Patrick Leahy, the influential Democratic chairman of the Senate Judiciary Committee, has dramatically reshaped his legislation in response to law enforcement concerns, according to three individuals who have been negotiating with Leahy's staff over the changes. A vote on his bill, which now authorizes warrantless access to Americans' e-mail, is scheduled for next week.

Leahy's rewritten bill would allow more than 22 agencies -- including the Securities and Exchange Commission and the Federal Communications Commission -- to access Americans' e-mail, Google Docs files, Facebook wall posts, and Twitter direct messages without a search warrant. It also would give the FBI and Homeland Security more authority, in some circumstances, to gain full access to Internet accounts without notifying either the owner or a judge.

This story was posted on the news.cnet.com Internet site very early yesterday morning Pacific time...and I thank Casey Research's own David Galland for bringing it to my attention...and now to yours. The link is here.

If I had to pick one book that changed my life forever, it would be Ed Griffin's classic tome..."The Creature From Jekyll Island: A Second Look at the Federal Reserve". And if you haven't read it, you must consider yourself under-educated.

Here's the Sunday interview with Ed posted over at all-talk radio station WAAM-1600 out of Ann Arbor, Michigan. It's well worth your time...and the link is here. I found the link a tad slow to load.

"When you let the politicians run monetary policy, well, that is how it [ends]... All of the ingredients are there [for Japan now] for this vicious cocktail to fall apart" is how Kyle Bass concludes this broad and succinct recent interview. With total credit market debt-to-GDP globally around 350% (or ~$200 trillion), his thesis remains that many countries will reach their profligate endpoint soon (if not already in Greece's case - where investors have already lost 90c on the dollar); but that managing around this current evolution is the single-hardest period for investing of the last few decades.

The modest Texan notes it is naive to think he can call the end of a 70-year debt-super-cycle with any precision (as in mid-December's Japan fiscal data and Abe's election) but when you look at all of the inputs, he believes that Japan has crossed the proverbial Rubicon in the last two months and describes in this rather breathtaking clip how the end of twenty years of conjecture on what will happen to Japan will come to pass.

This Zero Hedge posting from yesterday evening contains a must watch 7:35 minute video interview where he talks about "all of the above". Further down is a 32-page letter to investors that is a must read. This will keep you off the streets for a bit. I thank Australian reader Wesley Legrand for sending this our way...and the link is here.

Goodbye Britain?

For the European Union, a once-unthinkable question is looking more like a real possibility with each new grinding week of economic crisis. The reason is that bad times are forcing the 17 EU nations that use the euro currency to move ever closer toward some kind of United States of Europe — one that could make decisions about how much member countries spend and how much tax they collect.

If ever Britain had a nightmare, that's it.

The British public shows no interest in moving closer to the rest of Europe, and most can't even seem to stomach the status quo. The real question these days appears to be whether to drift away or break away abruptly.

This AP story was posted on The New York Times website early yesterday morning...and I thank Phil Barlett for sending it our way. The link is here.

The much vaunted EU financial transaction tax (FTT) is set to be hard-wired into the EU budget, with most of its revenue going directly to the EU.

A paper prepared by EU Council President Herman Van Rompuy and sent to European capitals ahead of next week's EU budget summit, where leaders aim to agree a mandate on the budget framework for 2014-2020, would deduct FTT revenues from national contributions to the annual EU pot.

Van Rompuy put forward his ideas after private talks with EU countries' budget sherpas over the past 10 days.

This story, filed from Brussels, was posted on the euobserver.com Internet site...and it's almost a week old. I thank Roy Stephens for his second offering in today's column. The link is here.

UBS trader Kweku Adoboli was jailed for seven years on Tuesday for the biggest fraud in British history, which cost the Swiss bank $2.3 billion.

The 32-year-old had admitted trading far in excess of authorized risk limits and booking fictitious trades to hide his true positions, but said everything he did was to make profits for UBS and was in line with the bank's culture.

He wept in the dock as his lawyer asked the judge to show clemency, describing his Ghanaian-born client as a sensitive, hard-working young man who had tried too hard to do well.

"The tragedy for you is that you had everything going for you," judge Brian Keith told Adoboli, citing his English private school education, his intelligence and natural charm.

"Your fall from grace as a result of these convictions is spectacular," said the judge. "You were arrogant enough to think that the bank's rules for traders didn't apply to you."

This is what Jon Corzine deserves as well. But, as we already know, there are two sets of laws...one for the rich and connected...and the other for the rest of us. This Reuters story was filed from London early yesterday afternoon Eastern time...and it's courtesy of Donald Sinclair. The link is here.

After 11 hours of talks, euro area finance ministers ended their meeting with no debt-reduction package for Greece, reports Bloomberg.

However, they "made progress in identifying a consistent package of credible initiatives aimed at making a further substantial contribution to the sustainability of Greek government debt," said Jean-Claude Juncker in a statement.

They'll meet again on November 26.

This is all there is to this businessinsider.com story that was posted on their website very late last night. I thank Roy Stephens once again...and the link to the hard copy is here.

Turkey wants its NATO partners to provide Patriot missiles after mortar rounds were fired onto its territory from Syria. The request has triggered a political row in Germany, with the opposition concerned about being dragged into the Syrian conflict. Media commentators say Germany must help.

Military deployments are always a political minefield in Germany, for obvious and good reasons, given its history. So it's no surprise that Turkey's request for Patriot missiles from its NATO partners to help secure its 900-kilometer border with Syria led to a political row in Berlin, where opposition politicians have warned that a deployment could end up pushing Germany into the Syrian civil war.

"The deployment of hundreds of German soldiers with Patriot missiles would put us onto a very slippery slope into a Syrian mission." Omid Nouripour, security expert for the opposition Greens, said on Saturday.

This very interesting story showed up on the German website spiegel.de yesterday...and I thank Donald Sinclair for sharing it with us. The link is here.

The first is with Dr. Stephen Leeb. It's headlined "Investors Must Know This Lesson From the 1970s Gold Bull". The next one is with billionaire Wilbur Ross. It's entitled "This Will Revolutionize the World". And lastly is this blog with Jeffrey Saut of Raymond James. It bears the title "What Fund Managers All Across Europe Are Thinking".

Is there such a thing as a gold season? Slogans like "Sell in May and go away" are well-known from the equity markets, and often seasonal patterns such as growing stock prices in the winter months or the year-end rally, are subject to statistical studies. Is there also a seasonal behavior in gold?

In order to spot similar patterns on the gold market, we should look at a seasonal chart first. In contrast to normal charts it does not show the price developments for a certain period. On the contrary, it shows the average price development for several years depending on the season. Therefore, an average based on the prices of 30 years is calculated. The chart's x-axis shows the month, the y-axis shows the price. Thus, seasonal patterns can precisely be recognized in the chart.

This short essay, with a most excellent chart embedded, was posted on the 24hgold.com Internet site yesterday...and I consider it a must read. The link is here.

The local gold trade is now almost completely in the hands of black market operators and the country’s central bank—the agency tasked with buying the precious metal from miners—is completely powerless to stop it.

This was disclosed by an official of the Bangko Sentral ng Pilipinas in a recent talk with reporters, who pointed out that the central monetary authority has neither the necessary resources nor the mandate to prevent gold smuggling.

“We can’t stop smuggling,” BSP Assistant Governor Manuel Torres said in a forum in Quezon City. “The BSP has no police powers to stop such illegal activities.”

This interesting story was posted on the business.inquirer.net Internet site on Monday...and I thank Manitoba reader Ulrike Marx for sending it our way. The link is here.

American photographer Adriane Ohanesian has been based in South Sudan since 2010, working for Reuters. Here she documents the unregulated gold-mining industry prior to changes that may see the government selling licences to large-scale investors.

I had an idea in my mind that South Sudan was all rocks, desert and sand. How wrong I was. These twelve photos are well worth your time...and I thank Swiss reader B.G. for finding them for us. They were posted on The Guardian website yesterday afternoon GMT...and the link is here.

Chemical studies of old English coins are helping unravel a centuries-old mystery: What happened to all the silver that Spaniards dug out of the New World?

Silver from Mexican mines started being incorporated into English coins around the mid-1550s, a new study shows. But silver from the legendary Potosí mines, in what is now Bolivia, didn’t show up until nearly a century later, researchers report online November 6 in Geology.

The new study adds hard data to theories linking the transatlantic influx of silver to price inflation across Europe from about 1515 to 1650.

Wow! The things we don't know. This very interesting story showed up on the sciencenews.org Internet site yesterday...and I thank West Virginia reader Elliot Simon for sending it along. The link is here.

Growing demand for silver prompted Chinese Gold and Silver Exchange Society to launch a spot silver trading service in the first half of next year in Hong Kong.

CGSE also said it would consider launching yuan-denominated silver trading later under this new platform. The silver contract will be traded in 10 kilograms as one board lot while physical delivery must be at least 30 kilograms.

The CGSE is the only authorized spot gold exchange in Hong Kong. The CGSE currently offers spot gold trading denominated in both the Hong Kong dollar and yuan.

This story, filed from Hong Kong, was posted on the bullionstreet.com Internet site on Monday...and I thank Matthew Nel for digging it up for us. The embedded photo of silver bars is worth looking at...and the link is here.

GoldMoney's Andy Duncan interviewed retiring U.S. Rep. Ron Paul, recent candidate for the Republican presidential nomination, about his career, prospects for a new gold standard, and prospects for legalization of private, competitive currencies.

In regard to the latter, Paul cites the case of Liberty Dollar founder Bernard von NotHaus. The interview is 15 minutes long and can be heard at GoldMoney's Internet site. I found this story in a GATA release yesterday...and the link is here.

Gold’s 12-year rally, the longest in at least nine decades, is poised to continue in 2013 as central bank stimulus spurs investors from John Paulson to George Soros to accumulate the highest combined bullion holdings ever.

The metal will rise every quarter next year and average $1,925 an ounce in the final three months, or 11 percent more than now, according to the median of 16 analyst estimates compiled by Bloomberg. Paulson & Co. has a $3.66 billion bet through the SPDR Gold Trust, the biggest gold-backed exchange- traded product, and Soros Fund Management LLC increased its holdings by 49 percent in the third quarter, U.S. Securities and Exchange Commission filings show.

This longish Bloomberg story was posted on their website early yesterday afternoon Mountain time...and I thank Washington state reader S.A. for my last story in today's column. It's a must read, of course...and the link is here.