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Caesars Report's Second Most Important Factor in Picking a Winning Mining Investment: Jurisdiction
Source: Brian Sylvester of The Gold Report (5/17/13)
Jurisdiction risk continues to grow as a result of countries attempting to capitalize on higher commodity prices. In this interview for The Gold Report,Thibaut Lepouttre, editor of Caesars Report, a newsletter and mining portal in Belgium, discusses which jurisdictions offer better value to investors and which countries to avoid. He also offers suggestions on where to look outside of North America for compelling values in junior mining.
Section of article;
TGR: What are some examples of countries where the risk is perceived to be much higher than it actually is?
TL: Argentina because President Cristina Kirchner actually nationalized the company Yacimientos Petrolíferos Fiscales (YPF) from Repsol SA. A lot of people got scared and thought that the mining business might be next. That was 15 months ago and nothing has happened. The risk of nationalization or government involvement in mining projects is limited, especially because mining licenses are distributed by the state. The federal government is not making the decision on the mining project. As an example of a company there, Golden Arrow Resources Corp. (GRG:TSX.V; GAC:FSE; GARWF:OTCPK) has an exciting high-grade silver discovery in the Jujuy province in the northern part of Argentina next to Bolivia. The metallurgical tests were out recently and averaging in the 90s. The company has just released an NI-43-101-compliant resource estimate with 105 Moz silver equivalent, which is much better than what I was expecting.
TGR: Golden Arrow is also part of The Grosso Group, a group of mining companies based out of Vancouver. How important is that in a climate where financing is increasingly difficult?
TL: It is a good thing because it can share several resources, such as office and investor relations personnel. Being part of an umbrella group could actually reduce the overhead costs.
Continued...
http://www.theaureport.com/pub/na/caesars-reports-second-most-important-factor-in-picking-a-winning-mining-investment-jurisdiction
Golden Arrow's Joseph Grosso Talks Silver in Argentina
Published on Jun 18, 2013
http://silverinvestingnews.com/17572/...
At the recent World Resource Investment Conference, held in Vancouver, INN Senior Editor Andrew Topf spoke with Joseph Grosso, president of Golden Arrow Resources (TSXV:GRG). Golden Arrow holds almost 30 exploration properties in Argentina and is concentrating on advancing its flagship Chinchillas silver project, located in Jujuy.
Changing The Guard At Golden Arrow Resources
Kitco News
Published on Mar 18, 2013
New Golden Arrow Resources (TSX-V:GRG) CEO Carlos Fernandez Mazzi and Executive Chairman Joseph Grosso caught up w/ Kitco News' Daniela Cambone at PDAC 2013 to discuss the company's new direction and what's in store for 2013. Kitco News, March 13, 2013.
Golden Arrow Resources (TSXV;GRG) GARWF Video News Alert
Jay Taylor, editor of "J Taylor's Gold, Energy & Tech Stocks", has given a new buy recommendation to Golden Arrow Resources, which trades on the TSX Venture Exchange under the symbol GRG.
July 6, 2012
Golden Arrow Resources - Chinchilla Silver Project, Argentina
Crowdfunding to take a leap by seeking investors
SEC considers rules that would allow startup companies to "crowdfund" capital online
Associated PressBy Marcy Gordon, AP Business Writer
Wed, Oct 23, 2013 8:03 PM EDT
Reuters - The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst
WASHINGTON (AP) -- Crowdfunding is about to go big time.
For years, filmmakers, artists and charities have used the power of the Internet to generate money for projects. But in the coming year, with the blessing of Congress, startups will be allowed to raise money this way by selling stock to small-time investors.
For those investors, it's a chance to make a small profit and possibly get in early on the next Twitter or Facebook. But it's also extremely risky, given that a majority of startups fail. And critics warn that investment crowdfunding is ripe for fraud.
The Securities and Exchange Commission on Wednesday took a step toward implementing the law by proposing how much people could invest and how much companies must divulge. The SEC voted 5-0 to send the proposal out for public comment. Final rules could be approved next year.
Under the proposal, people with annual income and net worth of less than $100,000 could invest a maximum of 5 percent of their yearly income. Those with higher incomes could invest up to 10 percent. Companies also would be required to provide information to prospective investors about their business plan and financial condition, as well as a list of their officers, directors and those who own at least 20 percent of the company.
"There is a great deal of excitement in the marketplace" over crowdfunding, SEC Chairman Mary Jo White said before the vote. "We want this market to thrive, in a safe manner for investors."
Crowdfunding is hardly new. Sites like Kickstarter and Indiegogo have for years helped fund projects through donations raised online. Through those sites and others, supporters can pledge $10 — or tens of thousands of dollars — to help start a project, be it a business, a charity or the arts. In return, supporters can receive a gift, such as a T-shirt or a song named after them. Others simply feel satisfied knowing that they helped a good cause.
Or some get to join Spike Lee courtside at a New York Knicks basketball game. That's how Lee rewarded donors who gave the maximum of $10,000 to his latest film project, which he funded through a Kickstarter campaign in July that raised $1.4 million.
And soon, businesses will be able to offer investors a piece of their company. The 2012 law, known as the JOBS Act, made it legal for small companies to sell stock over the Internet. They could raise a maximum of $1 million a year from individual investors without registering with the SEC. The SEC was given some discretion to request company information and limits on investment, which they did with Wednesday's proposed rule.
The goal of the law was to help startups raise money quickly when they couldn't attract attention from venture capitalists or traditional investors. At the same time, the law eased the SEC's regulatory reach by giving the startups an exemption from filing rules. The rationale was that new businesses in a hurry to raise money would be hampered by having to submit paperwork. That's a change for Congress, which only two years earlier gave the SEC regulatory powers in response to the 2008 crisis.
Supporters say investment crowdfunding could be a boon to the economy. More businesses create more jobs and that boosts economic growth. And many of the companies that would benefit are in overlooked areas of the country, such as the Midwest or Southeast, according to Robert Hoskins, who does public relations and marketing for crowdfunding ventures.
"It's going to save America's butt," he said.
Mat Dellorso runs WealthForge, a company that will serve as an exchange for startup companies to sell their stock online. He's already heard from more than 500 firms in a broad range of fields, including technology, medicine, energy and consumer products.
But investor advocates and other critics express concerns that this new arena of investing could be a breeding ground for fraud.
While many companies are started by entrepreneurs with good intentions, "there could be some sharks out there as well," said
William Beatty, the director of securities in Washington state. "I hope a lot of people don't get hurt," he said in a telephone interview.
SEC Commissioner Luis Aguilar said unscrupulous operators could use investment crowdfunding to prey on "vulnerable segments of society." The system could enable "affinity fraud," he said, with promoters appealing to members of ethnic or religious groups to which they portray themselves as belonging.
http://finance.yahoo.com/news/crowdfunding-leap-seeking-investors-174753784.html
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Congressional oversight of the NSA is a joke. I should know, I'm in Congress
I've learned far more about government spying on citizens from the media than I have from official intelligence briefings
Alan Grayson
theguardian.com
Oct. 25, 2013
US National Security Agency Director General Keith Alexander (L), Director of National Intelligence James Clapper and Deputy Attorney General James Cole (R) are sworn in to testify at a Senate Intelligence Committee hearing the Foreign Intelligence Surveillance Act legislation on Capitol Hill in Washington, 26 September 2013. Photograph: JASON REED/REUTERS
In the 1970s, Congressman Otis Pike of New York chaired a special congressional committee to investigate abuses by the American so-called "intelligence community" – the spies. After the investigation, Pike commented:
It took this investigation to convince me that I had always been told lies, to make me realize that I was tired of being told lies.
I'm tired of the spies telling lies, too.
Pike's investigation initiated one of the first congressional oversight debates for the vast and hidden collective of espionage agencies, including the Central Intelligence Agency (CIA), the Federal Bureau of Investigation (FBI), and the National Security Agency (NSA). Before the Pike Commission, Congress was kept in the dark about them – a tactic designed to thwart congressional deterrence of the sometimes illegal and often shocking activities carried out by the "intelligence community". Today, we are seeing a repeat of this professional voyeurism by our nation's spies, on an unprecedented and pervasive scale.
Recently, the US House of Representatives voted on an amendment – offered by Representatives Justin Amash and John Conyers – that would have curbed the NSA's omnipresent and inescapable tactics. Despite furious lobbying by the intelligence industrial complex and its allies, and four hours of frantic and overwrought briefings by the NSA's General Keith Alexander, 205 of 422 Representatives voted for the amendment.
Though the amendment barely failed, the vote signaled a clear message to the NSA: we do not trust you. The vote also conveyed another, more subtle message: members of Congress do not trust that the House Intelligence Committee is providing the necessary oversight. On the contrary, "oversight" has become "overlook".
Despite being a member of Congress possessing security clearance, I've learned far more about government spying on me and my fellow citizens from reading media reports than I have from "intelligence" briefings. If the vote on the Amash-Conyers amendment is any indication, my colleagues feel the same way. In fact, one long-serving conservative Republican told me that he doesn't attend such briefings anymore, because, "they always lie".
Many of us worry that Congressional Intelligence Committees are more loyal to the "intelligence community" that they are tasked with policing, than to the Constitution. And the House Intelligence Committee isn't doing anything to assuage our concerns.
I've requested classified information, and further meetings with NSA officials. The House Intelligence Committee has refused to provide either. Supporters of the NSA's vast ubiquitous domestic spying operation assure the public that members of Congress can be briefed on these activities whenever they want. Senator Saxby Chambliss says all a member of Congress needs to do is ask for information, and he'll get it. Well I did ask, and the House Intelligence Committee said "no", repeatedly. And virtually every other member not on the Intelligence Committee gets the same treatment.
Recently, a member of the House Intelligence Committee was asked at a town hall meeting, by his constituents, why my requests for more information about these programs were being denied. This member argued that I don't have the necessary level of clearance to obtain access for classified information. That doesn't make any sense; every member is given the same level of clearance.
There is no legal justification for imparting secret knowledge about the NSA's domestic surveillance activities only to the 20 members of the House Intelligence Committee. Moreover, how can the remaining 415 of us do our job properly, when we're kept in the dark – or worse, misinformed?
Edward Snowden's revelations demonstrate that the members of Congress, who are asked to authorize these programs, are not privy to the same information provided to junior analysts at the NSA, and even private contractors who sell services to foreign governments. The only time that these intelligence committees disclose classified information to us, your elected representatives, is when it serves the purposes of the "intelligence community".
As the country continues to debate the supposed benefits of wall-to-wall spying programs on each and every American, without probable cause, the spies, "intelligence community" and Congressional Intelligence Committees have a choice: will they begin sharing comprehensive information about these activities, so that elected public officials have the opportunity to make informed decisions about whether such universal snooping is necessary, or constitutional?
Or will they continue to obstruct our efforts to understand these programs, and force us to rely on information provided by whistleblowers who undertake substantial risks to disseminate this information about violations of our freedom in an increasingly hostile environment? And why do Generals Alexander and Clapper remain in office, when all the evidence points to them committing the felony of lying to Congress and the American people?
Representative Pike would probably say that rank-and-file representatives will never get the information we need from the House Intelligence Committee, because the spying industrial complex answers only to itself. After all, Pike, and many of the members of his special congressional committee, voted against forming it. As it is now constituted, the House Intelligence Committee will never decry, deny, or defy any spy. They see eye-to-eye, so they turn a blind eye. Which means that if we rely on them, we can kiss our liberty good-bye.
http://www.theguardian.com/commentisfree/2013/oct/25/nsa-no-congress-oversight
How To Own Physical Gold in Singapore - A Low Cost Strategy
Oct. 23, 2013
By Nick Giambruno
International Man
The ultimate way to diversify your savings internationally is to transfer your stored purchasing power out of the immediate reach of your home government and into something tangible. Something that cannot be easily confiscated, nationalized, frozen, or devalued at the drop of a hat or with a couple of taps on the keyboard—while retaining as much privacy as legally possible.
The two assets that fit the bill here are physical gold stored abroad in a private vault (or safe deposit box) and foreign real estate—neither of which are currently reportable to the US government so long as they are held in your name and not with an LLC, trust, or other structure.
Although I believe owning foreign real estate offers excellent internationalization benefits (see more here), it can be an expensive option.
Fortunately owning physical gold stored in a private vault that is outside of the banking system and located in a safe jurisdiction (such as Singapore) is a low cost solution that is within reach for people of modest means.
Taking this critical step to owning something tangible outside of your home country will go a long way in diversifying the political risk to your savings. You will have preempted capital controls, confiscation, nationalization, or any other dirty tricks your desperate home government may have up its sleeve.
When you are dealing with a desperate government, it is always better to be proactive than reactive.
It's like the saying from an old Quentin Tarantino movie, "It's better to have a gun and not need it than to need a gun and not have it."
There are a couple of steps to converting your savings stored in a domestic financial account—denominated in an intangible fiat currency abstraction that exists only as digits inside a bank's computer—into physical gold bullion held in a private vault in Singapore, that you can go visit and hold in your own hand.
Step #1: Get Set Up
The first step in the process is to open an account with the Hard Assets Alliance (HAA), which is a very convenient platform for buying, selling, and storing precious metals at various locations around the world.
Casey Research is one of the founding members of HAA and counts it as one of our highly-coveted top picks for precious metals.
It is true that HAA is a US institution and thus susceptible to the edicts of the US government. This should not cause significant concern since HAA is not the final destination of your savings. Rather, HAA acts as a bridge to Singapore, an intermediate step in transforming your domestic savings into physical gold held in a private vault in Singapore.
As you will see below, the ultimate destination of your savings is, however, completely disconnected from the US.
Also, since your HAA account is a US account, you don't have to worry about reporting it to the US government as you would if it were a foreign institution—even if your HAA account itself holds gold offshore.
Recently, we had a chance to directly question the managers at HAA from our top reader questions. You can catch that video here. I’d highly recommend that you view it in case you are unfamiliar with HAA or have some questions about it.
Step #2: Accumulate
The next step is to start accumulating gold (or silver) in a foreign country through your HAA account, which allows you to own gold in Singapore, Switzerland, Australia, the UK, and the US.
Let's continue with Singapore as our example. HAA uses Malca Amit as its vaulting partner in Singapore.
A handy way to build your precious metals position in Singapore is through HAA's MetalStream program. This program allows you to automatically buy a little bit each month (minimum $250) and is a great low-cost tool to build up a precious metals position stored in a safe jurisdiction. Also, it helps average the cost of your position as it builds over time.
Once you've accumulated the equivalent of one ounce of gold (or 100 ounces of silver) you can convert it into a whole bar that sits in storage solely on your behalf. At this point you are able to take delivery of the physical bullion.
Another benefit of HAA that is worth mentioning is its competitive premiums. A colleague of mine was recently in Singapore and reports spot premiums there for one ounce gold coins to be roughly 5.5% to 7.6%, depending on the coin or bar. Compared to the premium that HAA offers for bullion in Singapore (you can check the latest figures here), it's clear that HAA is a good deal.
The reason for this discrepancy is that HAA has direct access to refiners, bullion banks, and institutional level dealers, which helps drive its relatively lower global premiums. Your order is bid out to this pool of institutions that then compete for the business, ensuring the best available price.
Step #3: Take Delivery
The next step in the process is to take delivery abroad of the bullion that you have accumulated with your HAA account.
A key benefit of using the Hard Assets Alliance to accumulate and store gold abroad—before you totally disconnect it from the US—is that you are relieved of the major burden of having to transport it yourself.
Personally transporting more than a couple ounces of gold bullion across international borders can be very risky, and I strongly advise against it. It is simply a very bad idea, and you are asking for trouble if you attempt it.
In addition to the risks of uninsured losses from theft and misplacement, the biggest risk that you will face comes from the armed fellows wearing the government-issued costumes. Each country has different, often complex, and ill-defined regulations on importing/exporting gold bullion. It is very possible that customs agents in whatever country you are travelling through will not fully understand the regulations and may decide to confiscate your metals and let the courts sort it out… if you are lucky.
In extreme cases, they might even detain you—simply for carrying gold, as what happened to an American on his way from the US to Panama via Mexico. (Read that story here.)
If you have built up a position in Singapore through HAA, you don't have to worry about transportation, insurance, import duties, declarations, confusing regulations, the TSA, or a customs officer who has probably never seen a gold coin in his life, much less understands the regulations surrounding it.
However in order to take delivery of your gold that has been built up in storage in Singapore, you actually have to go to Singapore, sign for it, and make arrangements in advance with HAA to verify your identity.
As a side note, for those interested in purchasing a significant amount of bullion (over $200,000), HAA can make special arrangements on an individual basis to facilitate delivery to a private vault in Singapore without you having to actually be there.
Step #4: Move to a Private Vaulting Facility
The final step is to take the physical gold bullion that you have taken delivery from your HAA account and store it in a private vault abroad.
Once you have completed this step you will have completely disconnected your physical gold from any connections to the US. And as long as you are not using an LLC, trust, or other structure, the gold you directly hold in a private vault abroad is not reportable to the US government.
At International Man and Casey Research, we have done due diligence and on-the-ground research on a number of private vaults and storage facilities around the world. We outline our preferred jurisdictions (Singapore is one of them, of course) and private vaulting companies here.
Speaking of our preferred solution in Singapore, their smallest safe deposit box (which will hold about 128 one ounce gold coins) will set you back only around $80/year. Plus you have the option to prepay in cash for multiple years in advance.
Be Proactive, Not Reactive
I believe physical gold stored abroad is a superior form of savings.
It sure beats the alternative of keeping it within the grasp of a desperate government, inside an unsound banking system, and denominated in a fiat currency whose value is ultimately a floating abstraction tied to a bankrupt government's promise.
Following these four steps—and using the Hard Assets Alliance as a bridge to the final offshore destination—is a low-cost strategy to internationalize your savings that most people should be able to implement if they really want to.
Achieving the diversification benefits of this strategy goes a long way to protecting yourself from capital controls, confiscation, nationalization, seizures, currency devaluations, and any type of shenanigan a desperate government might try to pull.
(This is not intended, nor should it be construed, as tax reporting advice. Please consult a tax specialist or accountant.)
http://www.internationalman.com/78-global-perspectives/1028-how-to-own-physical-gold-in-singapore%E2%80%94a-low-cost-strategy#
10 Strategies for Success in a Flat Commodity Price Market: John Kaiser
Source: JT Long of The Mining Report (10/22/13)
John Kaiser It could be 2017 before the commodity supercycle is evident again, but stormy weather in the mining space has a silver lining: It is encouraging miners to develop new, innovative approaches to their business. In this interview for the first edition of The Mining Report, John Kaiser of Kaiser Research Online outlines 10 strategies that are setting certain companies apart. Discover the companies that are redefining their business, as well as miners with the goods in the ground to continue come rain or shine.
Section of article:
TMR: So look for a company with a higher-grade deposit. What's another strategy?
JK: I like the strategy of a discovery within a discovery that could completely eclipse the original low-grade resource. Looking for higher grade zones within the system is a way a gold junior can revitalize an existing deposit that doesn't work at current low metal prices. One of the companies that I'm very enthusiastic about that's doing just that is Probe Mines Limited (PRB:TSX.V). It made a grassroots discovery several years ago, which was one of these 4 or 5 Moz deposits of 1 g/t. Unfortunately, that deposit is not very valuable at $1,200–1,300/oz gold. However, the company continued to explore this system and found a higher grade zone. We're talking about 5 to 10 g/t. The zone so far is very continuous.
Probe has also just finished some infill drilling and one step-out hole on the high-grade zone. We will get a resource estimate in early 2014. I'm estimating we will see ~1–1.5 Moz of about 5 g/t gold.
This finding is a surprise that has the company and many investors wondering, are we dealing with something a lot bigger? That's the kind of blue sky that you want exposure to in this sort of market that we have now.
Continued below:
http://www.theaureport.com/pub/na/10-strategies-for-success-in-a-flat-commodity-price-market-john-kaiser
The Majority of Public School Students in the Southern United States are Poor
By Global Research News
Global Research, October 24, 2013
colorlines.com
by Julianne Hing,
In 17 U.S. states, the majority of public school students are low-income. But the poverty isn’t distributed evenly across the country, according to a new report from Southern Education Foundation. Thirteen of the states are in the South, and the other four are in the West.
The situation is dire.
Researchers measure the landscape by the numbers of students who qualify for free or reduced lunch, a rough proxy for gauging poverty. Students are eligible for free or reduced meals if their family household income is 185 percent beneath the poverty threshold.
In 2011, a student from a single-parent home with an annual income of $26,956 or less would qualify for free or reduced lunch. In Mississippi, 71 percent of public school students qualify for free and reduced lunch. In New Mexico it’s 68 percent; in California 54; in Texas it’s 50 percent.
Percentages of low-income students in U.S. states Illustration: Southern Education Foundation
The recession that began in 2008 certainly exacerbated trends, but childhood poverty is a problem much older than the recession. Between 2001 and 2011, the numbers of children in public schools who classified as low-income grew 32 percent, or by some 5.7 million kids. As a result, by 2011 low-income students made up nearly half of all public school students.
While 30 percent of white students attend schools where the majority of students are low-income, 68 percent of Latino students attend schools classified as such. And 72 percent of black public school students go to schools where the majority of students are low-income.
The situation has serious implications for the educational futures of the nation’s youth, especially as budget-crisis-stricken cities and states are cutting first and deepest from their public schools.
Read the report in full here. Southern Education Foundation (SEF) report:
A New Majority: Low Income Students in the South and the Nation, finds that low income children are a majority of students in the public schools of 17 states across the nation – and 13 of those states are in the South. Without fundamental improvements in how the South and the nation educate low income students, the trends that this report documents will ricochet across all aspects of American society for generations to come.
Click to see percent of low income students by location within states
http://www.globalresearch.ca/the-majority-of-public-school-students-in-the-west-south-are-poor/5355456
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Additional Information
Failing Currencies, Failing Economies And The Role Of Silver And Gold
Oct 23 2013
Biz Bluetree
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Most of the major economies of the world are insolvent. Banged up badly and on life support. The sovereign stewards of these troubled economies feel their only option is to create more money in an attempt to resuscitate a patient that's on the verge of crossing over to the other side. After all, it's not their money. The citizens are the ones strapped with paying it back.
Anyone who manages a household budget knows that handling family debt by creating more debt on top of it is a sure recipe for financial suicide. This is why people who manage successful home budgets recognize that they have a debt limit. They control discretionary spending through difficult times, though sometimes it hurts, prudence pays off.
Why then do elected officials and their appointed central planners ignore debt?
When you look at the United States, the Eurozone and Japan for instance, what do you see all of them having in common? For one, they are all three major world economies in a world of trouble. Each use easy monetary policies and fancy dance steps to create and not inflate (too much), and each of them employs twisted rhetoric to convey a message to their masses that everything is going to be fine. The recovery is underway.
One of the above three is different though. One stands alone and sets the tone for the others. That is of course the nation in control of the world's reserve currency. The U.S. President even said, when introducing Janet Yellen to the media, all nations' central banks follow the Fed.
The U.S. Federal Reserve who now, because of the recent soap opera in Washington, dare not even entertain a tapering of quantitative easing. In fact QE will likely increase to keep the economy on track and the stock market buzzing like it's on drugs. Now, many nations around the world are having second thoughts as to the soundness of U.S. monetary policy and its reserve currency.
Don't you question the exponential increasing of the federal debt, the Fed balance sheet and the enormous money supply that keeps growing and growing, and growing?
Am I seeing this correctly?
The Euro has gained on USD 11% since the summer? The Euro is far and away not the model of sound money, nor does the Eurozone enjoy a booming economy - quite the opposite. So what's at play here? Has the race to the bottom already begun?
All of the apparent calamity involving USD, the Euro, yen and so many other currencies - as well the fragile nature of world economies, and the lack of faith in those with control begs the question - where is the safe haven?
It has always been common thinking that safety from the storm was found in gold and silver, so why then haven't those metals responded with sustained rallies? And, given that fact, is it any wonder why all the hushed talk of manipulation of gold and silver prices is becoming louder?
None of us know how any of this is going to play out. But, I for one will put my money on the metals. Now, before you start thinking my tin foil hat may not be on straight, let's read what some have had to say who posses a clearer understanding of the macro economic view than I.
Egon von Greyerz, founder of Matterhorn Asset Management of Switzerland, told King World News on October 19, 2013:
"In my view the real move in the metals is now starting. The collapsing of many major currencies, including the dollar, euro, and the yen, will be directly reflected in the value of the precious metals over the coming year."
"The [U.S.] debt ceiling uncertainties have only delayed the autumn rally in gold and silver, but I now believe the metals are off to the races. 2014 will be a very good year for gold and silver and that's just the beginning. But 2014 won't be a good year for the world, and that's why it's so important to preserve wealth by holding physical gold and silver and storing it outside of the banking system. This will help people survive the coming financial chaos."
That is a powerful statement by a highly respected person in the know. Should we dismiss him?
And what of the remarks made by Dr. Philippa Malmgren, President and Founder of Principalis Asset Management and former Special Assistant to the President of the United States for Economic Policy, who was quoted in an earlier writing saying: "major investors know that manipulation of the gold market is a fact of life."
Dr. Malmgren furthered with, the magnitude of sovereign debt is so great it cannot be paid down. It "will have to be defaulted on."
And is it a coincidence that China is piling huge amounts of gold into its vaults? Do the Chinese know something we don't? Or see something we choose not to see?
Everyone knows, and for the most part respects, Canadian Billionaire and Chairman of Sprott Asset Management, the custodian of Sprott Physical Gold Trust (PHYS) and Sprott Physical Silver Trust (PSLV), Eric Sprott. Here's what he had to say also on October 19, 2013, at the end of a week the US Dollar index closed below the key psychological level of 80:
"Most of the things I think are going to happen are all based on facts. […] look at the facts on physical demand for gold and silver. […] look at the facts on government deficits, and you have to take yourself to where it's going (the end game). And whether it happens in a year or two, it's going to happen".
"We've had so many false starts and promises. 'The economy is going to be great in 2010,' and it's not. 'It's going to be great in 2011, 2012, 2013,' and it's not. […] we are actually regressing, even though they (central planners) don't want to admit it, because the numbers are all manipulated in one way or another. […] gold will be accepted as the asset to back a (major) currency. And the currency with the most gold behind it, which I suspect is already the Chinese yuan, and growing rapidly, will be the dominant currency going forward. How can somebody […] buy an extra 25% of the (entire global) market at that same time the price falls by 30% or 40%? It's just totally ridiculous that it would ever manifest itself that way. If they bought 25% of the oil, wheat, or the corn markets, the price would not be going down."
Ouch! Did anyone read between those lines?
We really don't know who is to blame for the suspected gaming of the PM markets, but it would seem pretty clear they are not alone.
And I know most everyone is tired of reading "this and that" ad nauseum about a certain very large commercial bank that finds itself in the eye of so many storms, and fined so many times by the CFTC. Please pick one of hundreds of headlines currently circulating in the media and read for yourself - they've admitted to "wrong doing."
Sound advice remains: buy and hold silver and gold outside the banking system. It's priced very inexpensively right now.
In conclusion: What do you think of the people quoted above; Gruyerz, Sprott and Malmgren? Do you think they are conspiratorial crackpots? I think not. What I do think, with deep conviction, is that they see what many among us choose not to see or are unable to see.
Is it time we open our eyes and open our minds? Or are we willing to pay an ultimate price?
http://seekingalpha.com/article/1764722-failing-currencies-failing-economies-and-the-role-of-silver-and-gold
Chump change could do it.
(courtesy Bill Holter/Miles Franklin)
(special thanks to the cork)
Bill Holter tackles what it would take to bring down the comex in silver; JPMorgan continues to add exact tonnage in its customer account; and the big news that Saudi Arabia are cutting diplomatic ties to the USA and what that means
a very important commentary...
I was going to write a comical piece about Mr. Magoo (Alan Greenspan) because he was on both CNBC and Bloomberg yesterday but other more important news regarding Saudi Arabiahttp://www.washingtonpost.com/blogs/post-partisan/wp/2013/10/23/the-u-s-saudi-crackup-hits-a-dramatic-tipping-point/ has come forward.
Before getting to that, I will poke a little fun at our be-speckled past maestro who never saw a bubble he didn't like. Actually according to his testimony to Congress he never ever saw a bubble until after the fact because as he says "no one can recognize a bubble until after it bursts"... to which I say a giant HOGWASH !
There were many who saw his internet bubble, his real estate bubble and ultimately his Dollar based debt bubble before they all burst. The prudent got out of the way while the adventurous made $ billions on the collapses.
He says he will not "apologize because I'm not omniscient, I'm just a man".
In reality Alan Greenspan is an outright sellout.
He was a disciple of Ayn Rand in the 1960's and wrote a piece in 1966 regarding Gold and its permanent monetary properties. He knew then, he knew while Chairman of the Federal Reserve and he still knows...
Gold is money, everything else is credit. Even though he refuses to apologize, I will say it for him...he IS "sorry". If history gets written correctly he deserves a very large portion of the blame for where we are and where it is that we are ultimately going.
Before I get to the Saudi news, JP Morgan is on a roll. If you recall, I wrote earlier this week regarding their "exact" 6 ton and 3 ton deposits to their eligible (customer) holdings. They had another 32,150.000 ounce (1 ton exactly) deposit yesterday.
If you understand that a ".000" deposit or withdrawal statistically can only happen once in 1,000 times then here is a little math for you so you'll understand what "extraordinary times" we are living in.
Assuming (for ease of math) a 250 "workday year" then a deposit weighing exactly .000 should happen only once every 4 years. A second ".000" deposit would then statically happen only once in every 4,000 years and yesterday's deposit would bring the probability of a third consecutive ".000" deposit out to once in every 40,000 years! As I said, "extraordinary"!!!
Saudi Arabia has now cut diplomatic ties with the U.S. http://www.telegraph.co.uk/news/worldnews/middleeast/saudiarabia/10398057/Saudi-Arabia-in-diplomatic-shift-away-from-old-ally-US.html . This is said to have happened because of our "handling" of the Syria and Iran situation a few weeks back (we did not attack them and thus start WW III). Rather than address the obvious dangers such as crude oil imports being curtailed or cut, Saudi Arabia moving closer to China and the U.S. losing a key foothold in the Middle East, I will take another angle. If you remember the movie "Rollover"
The Growing Rift With Saudi Arabia Threatens To Severely Damage The Petrodollar
October 23rd, 2013
By: Michael Snyder
The number one American export is U.S. dollars. It is paper currency that is backed up by absolutely nothing, but the rest of the world has been using it to trade with one another and so there is tremendous global demand for our dollars. The linchpin of this system is the petrodollar. For decades, if you have wanted to buy oil virtually anywhere in the world you have had to do so with U.S. dollars. But if one of the biggest oil exporters on the planet, such as Saudi Arabia, decided to start accepting other currencies as payment for oil, the petrodollar monopoly would disintegrate very rapidly. For years, everyone assumed that nothing like that would happen any time soon, but now Saudi officials are warning of a “major shift” in relations with the United States. In fact, the Saudis are so upset at the Obama administration that “all options” are reportedly “on the table”. If it gets to the point where the Saudis decide to make a major move away from the petrodollar monopoly, it will be absolutely catastrophic for the U.S. economy.
The biggest reason why having good relations with Saudi Arabia is so important to the United States is because the petrodollar monopoly will not work without them. For decades, Washington D.C. has gone to extraordinary lengths to keep the Saudis happy. But now the Saudis are becoming increasingly frustrated that the U.S. military is not being used to fight their wars for them. The following is from a recent Daily Mail report…
Upset at President Barack Obama’s policies on Iran and Syria, members of Saudi Arabia’s ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.
Saudi Arabia’s intelligence chief is vowing that the kingdom will make a ‘major shift’ in relations with the United States to protest perceived American inaction over Syria’s civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday.
Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad and the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.
Saudi Arabia desperately wants the U.S. military to intervene in the Syrian civil war on the side of the “rebels”. This has not happened yet, and the Saudis are very upset about that.
Of course the Saudis could always go and fight their own war, but that is not the way that the Saudis do things.
So since the Saudis are not getting their way, they are threatening to punish the U.S. for their inaction. According to Reuters, the Saudis are saying that “all options are on the table now”…
Saudi Arabia, the world’s biggest oil exporter, ploughs much of its earnings back into U.S. assets. Most of the Saudi central bank’s net foreign assets of $690 billion are thought to be denominated in dollars, much of them in U.S. Treasury bonds.
“All options are on the table now, and for sure there will be some impact,” the Saudi source said.
Sadly, most Americans have absolutely no idea how important all of this is. If the Saudis break the petrodollar monopoly, it would severely damage the U.S. economy. For those that do not fully understand the importance of the petrodollar, the following is a good summary of how the petrodollar works from an article by Christopher Doran…
In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars. The major exception at present is, of course, Iran.
This means that every country in the world that imports oil—which is the vast majority of the world’s nations—has to have immense quantities of dollars in reserve. These dollars of course are not hidden under the proverbial national mattress. They are invested. And because they are U.S. dollars, they are invested in U.S. Treasury bills and other interest bearing securities that can be easily converted to purchase dollar-priced commodities like oil. This is what has allowed the U.S. to run up trillions of dollars of debt: the rest of the world simply buys up that debt in the form of U.S. interest bearing securities.
This arrangement works out very well for the United States because we can wildly print money and run up gigantic amounts of debt and the rest of the world gobbles it all up.
In 2012, the United States ran a trade deficit of about $540,000,000,000 with the rest of the planet. In other words, about half a trillion more dollars left the country than came into the country. These dollars represent the number one “product” that the U.S. exports. We make dollars and exchange them for the things that we need. Major exporting countries (such as Saudi Arabia) take many of those dollars and “invest” them in our debt at ultra-low interest rates. It is this system that makes our massively inflated standard of living possible.
When this system ends, the era of cheap imports and super low interest rates will be over and the “adjustment” to our standard of living will be excruciatingly painful.
And without a doubt, the day is rapidly approaching when the petrodollar monopoly will end.
Today, Russia is the number one exporter of oil in the world.
China is now the number one importer of oil in the world, and at this point they are actually importing more oil from Saudi Arabia than the United States is.
So why should Russia, China and virtually everyone else continue to be forced to use U.S. dollars to trade oil?
That is a very good question.
In fact, China has been making a whole lot of noise recently about the fact that it is time to start becoming less dependent on the U.S. dollar. The following comes from a recent CNBC article authored by Michael Pento…
Our addictions to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a “de-Americanized” world.
China, the largest U.S. creditor with $1.28 trillion in Treasury bonds, recently put out a commentary through the state-run Xinhua news agency stating that, “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated.”
For much more on all of this, please see my previous article entitled “9 Signs That China Is Making A Move Against The U.S. Dollar“.
But you very rarely hear anything about this on the evening news, and most Americans do not understand these things at all. The fact that the U.S. produces the de facto reserve currency of the planet is an absolutely massive advantage for us. According to John Mauldin, this advantage allows us to consume far more wealth than we actually produce…
What that means in practical terms is that the United States can purchase more with its currency than it produces and sells. In theory those accounts should balance. But the world’s reserve currency, for all intent and purposes, becomes a product. The world needs dollars in order to conduct its trade. Today, if someone in Peru wants to buy something from Thailand, they first convert their local currency into US dollars and then purchase the product with those dollars. Those dollars eventually wind up at the Central Bank of Thailand, which includes them in its reserve balance. When someone in Thailand wants to purchase an imported product, their bank accesses those dollars, which may go anywhere in the world that will take the US dollar, which is to say pretty much anywhere.
And as Mauldin went on to explain in that same article, a significant amount of the money that we ship out to the rest of the globe ends up getting reinvested in U.S. government debt…
That privilege allows US citizens to purchase goods and services at prices somewhat lower than those people in the rest of the world must pay. We can produce electronic fiat dollars, and the rest of the world accepts them because they need them to in order to trade with each other. And they do so because they trust the dollar more than they do any other currency that is readily available. You can take those dollars and come to the United States and purchase all manner of goods, including real estate and stocks. Just this week a Chinese company spent $600 million to buy a building in New York City. Such transactions happen all the time.
And there is one other item those dollars are used to pay for: US Treasury bonds. We buy oil and all manner of goods with our electronic dollars, and those dollars typically end up on the reserve balance sheets of other central banks, which buy our government bonds. It’s hard to quantify the exact amount, but these transactions significantly lower the cost of borrowing for the US government. On a $16 trillion debt, every basis point (1/10 of 1%) means a saving of $16 billion annually. So 5 basis points would be $80 billion a year. There are credible estimates that the savings are well in excess of $100 billion a year. Thus, as the debt grows, the savings also grow! That also means the total debt compounds at a lower rate.
Unfortunately, this system only works if the rest of the planet has faith in it, and right now the United States is systematically destroying the faith that the rest of the world has in our financial system.
One way that this is being done is by our reckless accumulation of debt. The U.S. national debt is now 37 times larger than it was 40 years ago, and we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in U.S. history combined. The rest of the world is watching this and they are beginning to wonder if we are going to be able to pay them back the money that we owe them.
Quantitative easing is another factor that is severely damaging worldwide faith in the U.S. financial system. The rest of the globe is watching as the Federal Reserve wildly prints up money and monetizes our debt. They are beginning to wonder why they should continue to loan us gobs of money at super low interest rates when we are beginning to resemble the Weimar Republic.
The long-term damage that we are doing to the “U.S. brand” far, far outweighs any short-term benefits of quantitative easing.
And as Richard Koo has brilliantly demonstrated, quantitative easing is going to cause long-term interest rates to eventually rise much higher than they normally should have.
What all of this means is that the U.S. government and the Federal Reserve are systematically destroying the financial system that has enabled us to enjoy such a high standard of living for the past several decades.
Yes, the U.S. economy is not doing well at the moment, but we haven’t seen anything yet. When the monopoly of the petrodollar is broken, it is going to be absolutely devastating.
And as I wrote about the other day, when the next great economic crisis strikes it is going to pull back the curtain and reveal the rot and decay that have been eating away at the social fabric of America for a very long time.
Just check out what happened in Detroit recently. The new police chief was almost carjacked while he was sitting in a clearly marked police vehicle…
Just four months on the job, Detroit’s new police chief got an early taste of the city’s hardscrabble streets.
While in his patrol car at an intersection on Jefferson two weeks ago, Police Chief James Craig was nearly carjacked, police spokeswoman Kelly Miner confirmed today.
Craig said he was in a marked police car with mounted lights when a man quickly tried to approach the side of his car. Craig, who became police chief in June, retold the story Monday during a program designed to crack down on carjackings.
Isn’t that crazy?
These days, the criminals are not even afraid to go after the police while they are sitting in their own vehicles.
And this is just the beginning. Things are going to get much, much worse than this.
So let us hope that this period of relative stability that we are enjoying right now will last for as long as possible.
The times ahead are going to be extremely challenging, and I hope that you are getting ready for them.
Read more at http://investmentwatchblog.com/the-growing-rift-with-saudi-arabia-threatens-to-severely-damage-the-petrodollar/#GxRotSAhIMxyMgPz.99
The Growing Rift With Saudi Arabia Threatens To Severely Damage The Petrodollar
October 23rd, 2013
By: Michael Snyder
The number one American export is U.S. dollars. It is paper currency that is backed up by absolutely nothing, but the rest of the world has been using it to trade with one another and so there is tremendous global demand for our dollars. The linchpin of this system is the petrodollar. For decades, if you have wanted to buy oil virtually anywhere in the world you have had to do so with U.S. dollars. But if one of the biggest oil exporters on the planet, such as Saudi Arabia, decided to start accepting other currencies as payment for oil, the petrodollar monopoly would disintegrate very rapidly. For years, everyone assumed that nothing like that would happen any time soon, but now Saudi officials are warning of a “major shift” in relations with the United States. In fact, the Saudis are so upset at the Obama administration that “all options” are reportedly “on the table”. If it gets to the point where the Saudis decide to make a major move away from the petrodollar monopoly, it will be absolutely catastrophic for the U.S. economy.
The biggest reason why having good relations with Saudi Arabia is so important to the United States is because the petrodollar monopoly will not work without them. For decades, Washington D.C. has gone to extraordinary lengths to keep the Saudis happy. But now the Saudis are becoming increasingly frustrated that the U.S. military is not being used to fight their wars for them. The following is from a recent Daily Mail report…
Upset at President Barack Obama’s policies on Iran and Syria, members of Saudi Arabia’s ruling family are threatening a rift with the United States that could take the alliance between Washington and the kingdom to its lowest point in years.
Saudi Arabia’s intelligence chief is vowing that the kingdom will make a ‘major shift’ in relations with the United States to protest perceived American inaction over Syria’s civil war as well as recent U.S. overtures to Iran, a source close to Saudi policy said on Tuesday.
Prince Bandar bin Sultan told European diplomats that the United States had failed to act effectively against Syrian President Bashar al-Assad and the Israeli-Palestinian conflict, was growing closer to Tehran, and had failed to back Saudi support for Bahrain when it crushed an anti-government revolt in 2011, the source said.
Saudi Arabia desperately wants the U.S. military to intervene in the Syrian civil war on the side of the “rebels”. This has not happened yet, and the Saudis are very upset about that.
Of course the Saudis could always go and fight their own war, but that is not the way that the Saudis do things.
So since the Saudis are not getting their way, they are threatening to punish the U.S. for their inaction. According to Reuters, the Saudis are saying that “all options are on the table now”…
Saudi Arabia, the world’s biggest oil exporter, ploughs much of its earnings back into U.S. assets. Most of the Saudi central bank’s net foreign assets of $690 billion are thought to be denominated in dollars, much of them in U.S. Treasury bonds.
“All options are on the table now, and for sure there will be some impact,” the Saudi source said.
Sadly, most Americans have absolutely no idea how important all of this is. If the Saudis break the petrodollar monopoly, it would severely damage the U.S. economy. For those that do not fully understand the importance of the petrodollar, the following is a good summary of how the petrodollar works from an article by Christopher Doran…
In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars. The major exception at present is, of course, Iran.
This means that every country in the world that imports oil—which is the vast majority of the world’s nations—has to have immense quantities of dollars in reserve. These dollars of course are not hidden under the proverbial national mattress. They are invested. And because they are U.S. dollars, they are invested in U.S. Treasury bills and other interest bearing securities that can be easily converted to purchase dollar-priced commodities like oil. This is what has allowed the U.S. to run up trillions of dollars of debt: the rest of the world simply buys up that debt in the form of U.S. interest bearing securities.
This arrangement works out very well for the United States because we can wildly print money and run up gigantic amounts of debt and the rest of the world gobbles it all up.
In 2012, the United States ran a trade deficit of about $540,000,000,000 with the rest of the planet. In other words, about half a trillion more dollars left the country than came into the country. These dollars represent the number one “product” that the U.S. exports. We make dollars and exchange them for the things that we need. Major exporting countries (such as Saudi Arabia) take many of those dollars and “invest” them in our debt at ultra-low interest rates. It is this system that makes our massively inflated standard of living possible.
When this system ends, the era of cheap imports and super low interest rates will be over and the “adjustment” to our standard of living will be excruciatingly painful.
And without a doubt, the day is rapidly approaching when the petrodollar monopoly will end.
Today, Russia is the number one exporter of oil in the world.
China is now the number one importer of oil in the world, and at this point they are actually importing more oil from Saudi Arabia than the United States is.
So why should Russia, China and virtually everyone else continue to be forced to use U.S. dollars to trade oil?
That is a very good question.
In fact, China has been making a whole lot of noise recently about the fact that it is time to start becoming less dependent on the U.S. dollar. The following comes from a recent CNBC article authored by Michael Pento…
Our addictions to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a “de-Americanized” world.
China, the largest U.S. creditor with $1.28 trillion in Treasury bonds, recently put out a commentary through the state-run Xinhua news agency stating that, “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated.”
For much more on all of this, please see my previous article entitled “9 Signs That China Is Making A Move Against The U.S. Dollar“.
But you very rarely hear anything about this on the evening news, and most Americans do not understand these things at all. The fact that the U.S. produces the de facto reserve currency of the planet is an absolutely massive advantage for us. According to John Mauldin, this advantage allows us to consume far more wealth than we actually produce…
What that means in practical terms is that the United States can purchase more with its currency than it produces and sells. In theory those accounts should balance. But the world’s reserve currency, for all intent and purposes, becomes a product. The world needs dollars in order to conduct its trade. Today, if someone in Peru wants to buy something from Thailand, they first convert their local currency into US dollars and then purchase the product with those dollars. Those dollars eventually wind up at the Central Bank of Thailand, which includes them in its reserve balance. When someone in Thailand wants to purchase an imported product, their bank accesses those dollars, which may go anywhere in the world that will take the US dollar, which is to say pretty much anywhere.
And as Mauldin went on to explain in that same article, a significant amount of the money that we ship out to the rest of the globe ends up getting reinvested in U.S. government debt…
That privilege allows US citizens to purchase goods and services at prices somewhat lower than those people in the rest of the world must pay. We can produce electronic fiat dollars, and the rest of the world accepts them because they need them to in order to trade with each other. And they do so because they trust the dollar more than they do any other currency that is readily available. You can take those dollars and come to the United States and purchase all manner of goods, including real estate and stocks. Just this week a Chinese company spent $600 million to buy a building in New York City. Such transactions happen all the time.
And there is one other item those dollars are used to pay for: US Treasury bonds. We buy oil and all manner of goods with our electronic dollars, and those dollars typically end up on the reserve balance sheets of other central banks, which buy our government bonds. It’s hard to quantify the exact amount, but these transactions significantly lower the cost of borrowing for the US government. On a $16 trillion debt, every basis point (1/10 of 1%) means a saving of $16 billion annually. So 5 basis points would be $80 billion a year. There are credible estimates that the savings are well in excess of $100 billion a year. Thus, as the debt grows, the savings also grow! That also means the total debt compounds at a lower rate.
Unfortunately, this system only works if the rest of the planet has faith in it, and right now the United States is systematically destroying the faith that the rest of the world has in our financial system.
One way that this is being done is by our reckless accumulation of debt. The U.S. national debt is now 37 times larger than it was 40 years ago, and we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in U.S. history combined. The rest of the world is watching this and they are beginning to wonder if we are going to be able to pay them back the money that we owe them.
Quantitative easing is another factor that is severely damaging worldwide faith in the U.S. financial system. The rest of the globe is watching as the Federal Reserve wildly prints up money and monetizes our debt. They are beginning to wonder why they should continue to loan us gobs of money at super low interest rates when we are beginning to resemble the Weimar Republic.
The long-term damage that we are doing to the “U.S. brand” far, far outweighs any short-term benefits of quantitative easing.
And as Richard Koo has brilliantly demonstrated, quantitative easing is going to cause long-term interest rates to eventually rise much higher than they normally should have.
What all of this means is that the U.S. government and the Federal Reserve are systematically destroying the financial system that has enabled us to enjoy such a high standard of living for the past several decades.
Yes, the U.S. economy is not doing well at the moment, but we haven’t seen anything yet. When the monopoly of the petrodollar is broken, it is going to be absolutely devastating.
And as I wrote about the other day, when the next great economic crisis strikes it is going to pull back the curtain and reveal the rot and decay that have been eating away at the social fabric of America for a very long time.
Just check out what happened in Detroit recently. The new police chief was almost carjacked while he was sitting in a clearly marked police vehicle…
Just four months on the job, Detroit’s new police chief got an early taste of the city’s hardscrabble streets.
While in his patrol car at an intersection on Jefferson two weeks ago, Police Chief James Craig was nearly carjacked, police spokeswoman Kelly Miner confirmed today.
Craig said he was in a marked police car with mounted lights when a man quickly tried to approach the side of his car. Craig, who became police chief in June, retold the story Monday during a program designed to crack down on carjackings.
Isn’t that crazy?
These days, the criminals are not even afraid to go after the police while they are sitting in their own vehicles.
And this is just the beginning. Things are going to get much, much worse than this.
So let us hope that this period of relative stability that we are enjoying right now will last for as long as possible.
The times ahead are going to be extremely challenging, and I hope that you are getting ready for them.
Read more at http://investmentwatchblog.com/the-growing-rift-with-saudi-arabia-threatens-to-severely-damage-the-petrodollar/#GxRotSAhIMxyMgPz.99
Hidden Secrets: Is $40,000 Gold Ridiculous?
October 22, 2013
Hosted by Jay Taylor
[Download MP3s: Hour 1: Hidden Secrets: Is $40,000 Gold Ridiculous? Hour 2: Hidden Secrets: Is $40,000 Gold Ridiculous? ] [itunes] [Bookmark Episode]
Michael Maloney visits for the first time to explain that what is touted as economic reality is largely a mirage. He explains why, since Nixon took us off the international gold standard, the detachment from the real economy to Wall Street and government theft is growing at an exponential rate of speed. But with the growth of fiat currency (currency forced on the population through the barrel of the government’s gun), the current gold price has become extremely cheap. Historically, when confidence has been lost in monetary system (1980 being the latest event), the price of gold has risen to twice its intrinsic value, measured relative to the post 2008-09 fiat currency growth explosion. If gold were to simply rise to its present intrinsic value. it would rocket to over $40,000! He is not predicting gold will rise to such a lofty level but he provides sound logic for it doing so and safe ways to own gold that may allow you turn hard economic times into good times.
http://www.voiceamerica.com/episode/73606/hidden-secrets-is-40000-gold-ridiculous/55187
As Ye Sow, So Shall Ye Reap
Paul Craig Roberts
October 23, 2013
Dear readers: This is not the quarterly request for donations. It is a reminder that this is your site, and it will stay up as long as you support it.
The year 2014 could be shaping up as the year that the chickens come home to roost.
Americans, even well-informed ones, don’t know all of the mistakes made by neoconized and corrupted Washington in the past two decades. However, enough is known to see that the US has lost economic and political power, and that the loss is irreversible.
The economic cost of this lost will be born by what remains of the middle class and the increasingly poverty-stricken lower class. The one percent will have offshore gold holdings and large sums of money in foreign currencies and other foreign assets to see them through.
In the political arena, the collapse of the Soviet Union presented Washington with the grand opportunity to reallocate the Pentagon budget to other uses. Part of the reduction could have been returned to taxpayers for their own use. Another part could have been used to improve worn out infrastructure. And another part could have been used to repair and improve the social safety net, thus insuring domestic tranquility. A final, but perhaps most important part, could have been used to begin repaying the Treasury IOUs in the Social Security Trust Fund from which Washington has borrowed and spent $2 trillion, leaving non-marketable IOUs in the place of the Social Security payroll tax revenues that Washington raided in order to fund its wars and current operations.
Instead, influenced by neoconservative warmongers who advocated America using its “sole superpower” status to establish hegemony over the world, Washington let hubris and arrogance run away with it. The consequence was that Washington destroyed its soft power with lies and war crimes, only to find that its military power was insufficient to support its occupation of Iraq, its conquest of Afghanistan, and its financial imperialism.
Now seen universally as a lawless warmonger and a nuisance, Washington’s soft power has been squandered. With its influence on the wane, Washington has become more of a bully. In response, the rest of the world is isolating Washington.
The prime minister of India, Manmohan Singh, recently declared China and Russia to be India’s “most important partners” with whom India shares “common strategic interests.” Prime Minister Singh said: “ India and Russia have always had a convergence of views on global and regional issues, and we value Russia’s perspective on international developments of mutual interest.”
India joined China in expressing concerns about the Federal Reserve’s practice of printing money in order to cover Washington’s vast red ink. The BRICS (Brazil, Russia, India, China, South Africa) are taking steps to create their own method of settling trade accounts in order to protect themselves from the looming dollar implosion,
China has forcefully called for a “de-Americanized world.” After watching the “superpower” offshore a large part of its GDP to China and then add to the diminished tax base the burden of $6 trillion in wars that brought no booty and served no US interest, China has concluded that American power is spent. The London Telegraph thinks “it is only a matter of time before the renminbi replaces the dollar as the primary currency for trading commodities and resources.”
The Obama regime attempted to attack Syria based on the sort of lies that the Bush regime used to invade Iraq, only to be slapped down by the British Parliament and Russian government. This rebuke was followed by the childishness of the government shutdown and threat of default. Consequently, the Washington morons have lost their monopoly on economic and political leadership. A few days ago the British government announced a historic agreement that permits British investors direct access to China’s markets and allows Chinese banks to expand their operations in Great Britain.
In Australia, the US dollar will no longer be used as the currency in which to settle the Australian trade accounts with China. Instead of dollars, trade will be settled in the Chinese currency.
Washington served as cheerleader, as did most economists and libertarians, while US corporations, greedy for short-term profits and executive bonuses, offshored US industry and manufacturing, calling it free trade. The obvious and predicted result is that China’s demand for resources needed to fuel its industrial and manufacturing power now dominates markets. This means that the US dollar is being displaced as world currency. The only market that America dominates is the market for financial fraud.
When industrial, manufacturing, and tradeable professional service jobs are offshored, they take US GDP and tax base with them. The foreign country gets the benefit of the relocated economic activity. Due to the revenues lost from jobs offshoring, there is a large gap between federal revenues and federal expenditures. As Washington’s irresponsible behavior has raised so many doubts about the dollar’s value and the government’s commitment to stand behind its massive debt, foreign countries with trade surpluses with the US are less and less willing to recycle those surpluses into the purchase of US Treasury debt.
Today the two largest holders of US Treasury debt are not investors or even foreign central banks. The two largest holders are the Federal Reserve and the Social Security Trust Fund.
As for those $6 trillion wars, that’s to pay for national defense to protect us from women, children, and village elders in far away countries devoid of air forces and navies, and to provide those recycled taxpayer monies from the military/security complex that find their way into political contributions.
The Wall Street gangsters sighed for relief over the last minute debt ceiling agreement. This shows how short-term Wall Street’s outlook is. All the October agreement did was to push off the crisis to January and February. The “debt ceiling agreement” did not produce a new debt ceiling that would last beyond February, and it did not resolve the large difference between federal revenues and expenditures. In other words, the can was again kicked down the road. A repeat of the October fiasco won’t play well.
Obamacare is causing the premiums on private insurance polices to rise substantially, almost doubling in some situations unless people move to the uncertain exchanges, and Obamacare’s raid on Medicare payroll tax revenues has resulted in a cut in Medicare payments to health care providers. The result is a further reduction in consumer discretionary income and a further drop in the economy.
This in turn means a larger federal budget deficit and the need for the Federal Reserve to purchase more debt.
Another reason the Federal Reserve is faced with increasing, not tapering, quantitative easing (money printing) is the decline in foreign purchases of US Treasury bills, notes, and bonds. As the instruments pay interest that is less than the rate of inflation, holding Treasury debt makes no sense when the dollar’s value and the potential of default are open questions.
According to reports, not only are foreign governments, such as China, ceasing to buy US Treasury debt, China has started to sell off its holdings, substituting gold in the place of US Treasury debt.
This means that the bonds must be purchased by the Fed or interest rates will rise as the increased supply of bonds on the market drives down bond prices. The only way the Fed can purchase a larger supply of bonds is by printing more money, that is, by more quantitative easing.
With the world moving away from using the dollar to settle international accounts, as the Fed prints more dollars the rate at which foreign holders of dollar assets sell off their holdings will rise.
To get out of dollars requires that the dollar proceeds from selling Treasuries, US stocks and US real estate be sold in the currency markets. The selling of dollars drives down the exchange value of the US dollar and results in rising US inflation. The Fed can print money with which to purchase Treasury debt, but it cannot print foreign currencies with which to purchase dollars.
The decline in the dollar’s exchange value and the domestic inflation that results will force the Fed to stop printing. What then covers the gap between revenues and expenditures? The likely answer is private pensions and any other asset that Washington can get its hands on.
Initially, private pensions will be taxed at a rate to recover the tax-free accumulation in the pensions. The second year a national emergency will be used to confiscate some share of pensions. Those relying on the pensions will find themselves with less income. Consumer spending will decline. The economy will worsen. The deficit will widen.
You can see where this is going, and there seems to be no way out. Policymakers, economists, and corporation executives are in denial about the adverse effects of offshoring, which they still, despite all the evidence, maintain is good for the economy. So nothing will be done about offshoring. Republicans will blame the budget deficit on welfare and entitlements, and if those are cut consumer spending will decline further, widening the budget deficit. Inflation will rise as incomes fall, and social cohesion will break down.
Now you know why Homeland Security purchased 1.6 billion rounds of ammunition, enough ammunition to fight the Iraq war for 12 years, has its own para-military force and 2,700 tanks. If you think the “terrorist threat” in America warrants a domestic armed force of this size, you are out of your mind. This force has been assembled to deal with starving and homeless people in the streets of America.
September employment report: According to the Bureau of Labor Statistics (BLS), September brought 148,000 new jobs, enough to keep up with population growth but not reduce the unemployment rate. Moreover, John Williams (shadowstats.com) says that one-third of these jobs, or 50,000 per month on average, are phantom jobs produced by the birth-death model that during difficult economic times overestimates the number of new jobs from business startups and underestimates job losses from business failures.
The BLS reports that 22,000 of September’s jobs were new hires by state governments, which seems odd in view of the ongoing state budgetary difficulties.
In the private sector, wholesale and retail trade produced 36,900 new jobs, which seems odd in light of the absence of growth in real median family income and real retail sales.
Transportation and warehousing produced 23,400 new jobs, concentrated in transit and ground passenger transportation. This also seems odd unless the price of gasoline and pinched budgets are forcing people onto public transportation.
Professional and business services accounted for 32,000 jobs of which 63% are temporary help jobs.
So here you have the job picture that the presstitutes, hyping “the jobs gain,” don’t tell you. The scary part of the September job report is that the usual standby, the category of waitresses and bartenders, which has accounted for a large part of every reported jobs gain since I began reporting the monthly statistics, shows job loss. Seven thousand one hundred waitresses and bartenders lost their jobs in September. If this figure is not a fluke, it is bad news. It signals that fewer Americans can afford to eat and drink out.
The unemployment rate that is reported is the rate that does not count as unemployed discouraged workers who are unable to find jobs and cease to look. This favored rate, the darling of the regime in power, the presstitutes, and Wall Street, also is not adjusted for the category of “involuntary part-time workers,” those whose hours have been cut back or because they are unable to find a full-time job. Obamacare, as is widely reported, is causing employers to shift their work forces from full time to part time in order to avoid costs associated with Obamacare. The BLS places the number of involuntary part-time workers at 7,900,000.
The announced 7.2% unemployment rate is a meaningless number. The rate can decline for no other reason than people unable to find jobs drop out of the work force. You are not counted in the work force if you are discouraged about finding a job and no longer look for a job.
The phenomena of discouraged workers shows up in the measure of the labor force participation rate, which has declined in the 21st century. The opportunities for American labor are so restricted that a rising percentage of the working age population have given up looking for jobs.
Yet, the Obama regime, the Wall Street gangsters, and the pressitute media tell us how much better the economic situation is becoming as more small businesses close, as memberships decline in golf clubs, as more university graduates return home to live with their parents, who are drawing down their savings to live, as Fed Chairman Bernanke has made it impossible for them to live on interest payments on their savings.
According to the US census bureau, real median household income in 2012 was $51,017, down 9% from $56,080 in 1999, 13 years ago. In contrast, annual compensation in 2012 for US CEOs broke all records. Two CEOs were paid more than $1 billion, and the worst paid among the top ten took home $100 million. When the presstitutes speak of economic recovery, they mean recovery for the one percent.
America is in the toilet, and the rest of the world knows it. But the neocons who rule in Washington and their Israeli ally are determined that Washington start yet more wars to create lebensraum for Israel.
Early in the 21st century the liberal Democrat Senator from New York, Chuck Schumer, and I coauthored an article in the New York Times about the adverse effects on the US economy of jobs offshoring. The article caused a sensation. The Brookings Institution in Washington quickly convened a conference which was covered by C-SPAN. C-SPAN rebroadcast the conference several times. During the conference I said that if jobs offshoring continued, the US would be a third world economy in 20 years.
Wall Street quickly shut up Senator Schumer, but I am sticking by my forecast. Indeed, I think we are already there.
About Dr. Paul Craig Roberts
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.
http://paulcraigroberts.org/2013/10/23/ye-sow-shall-ye-reap-paul-craig-roberts/
Averting The Dollar Crash With Historically Discounted Gold And Silver Junior Miners
Oct 22 2013, 15:36
Jeb Handwerger
Seeking Alpha
U.S. stocks are rallying on hopes of the recent budget deal coming out of Washington. Just like we have witnessed over the past several years, lawmakers came to some sort of last minute deal to kick the debt can down the road. I expected this sort of move to avert a default.
The markets could rally short term on such a deal, but over the longer term the equity (SPY) and housing markets (XHB) appear to be ready for a major correction after rallying for two years. We are witnessing bubbles in certain areas of the market which I encourage investors to steer clear from especially banks (XLF), housing, social media and biotech (IBB) as these are very crowded trades filled with promoters, snake oil salesman, charlatans and day traders. PE ratios are hitting sky-high levels like Facebook (FB) at a PE of 245. Some of the high quality mid tier and junior miners are selling at a fraction of that PE with much higher returns. Take a look at the ones acquiring high quality gold mines as they may be in a position of strength to use their cash flow to build growth at pennies on the dollar.
I'm keeping a close eye on the increasing acquisitions from gold growth players flush with cash such as New Gold (NGD) which bought out Rainy River and Alamos Gold (AGI) who recently bought out Esperanza in Mexico. New Gold has a PE of 14 and Alamos has a PE of 18, just a fraction of Facebook and Amazon. Both companies are flush with cash with strong returns on equity and are looking to boost growth plans. The move to acquire these assets may indicate some of the smartest minds in the world believe we have hit a bottom.
Learn from history, overbought bubbles end up in devastating losses. Stay away from high flying stocks and instead focus on value. The great bargains are found in the mining sector trading at historical lows. Stay away from the marginal junior miners struggling to advance. That may be more risky than the acquirers that have increasing cash flow and are positioned for strength. The mining assets are a buyer's market, not a seller's.
Meanwhile, the U.S. government shut down may trigger a credit downgrade. The gridlock is over Obamacare which will cost the U.S billions of dollars of debt over the next few years.
This will force Bernanke's successor Yellen to continue monetizing the debt through quantitative easing which may be increased over the next few months as unemployment is rising to the highest levels in 2013.
[img]static.cdn-seekingalpha.com/uploads/2013/10/22/saupload_Untitled-3_thumb1.jpg
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In my opinion, investors should steer clear of real estate as home sales fueled by record low interest rates and hedge funds could slow down. Interest rates are beginning to rise rapidly despite $85 billion a month of QE.
Unless we see a significant increase of quantitative easing be prepared for a major exodus out of bond funds into real assets in the form of gold (GDX) and silver (SIL) junior miners (GDXJ)
For over two years, pundits in the media have claimed that the Fed will taper or exit from QE. This has been wrong. The Federal Reserve has only increased QE and may consider doing so shortly.
Rising rate environments usually predicts higher commodity prices and inflation. Historically, it is wise to position oneself into precious metals and commodities when interest and inflationary rate risk are great, yet the masses are still chasing the latest high flying biotech or social media stocks. The miners haven't been this cheap since the 2008 credit crisis and the 30-year low in 2000.
I think we could be on the brink of a major spike in interest rates that were manipulated lower for many years. This could cause a correction in equities and bonds (TLT). Investors may race into precious metals, commodities and mining stocks which are being completely ignored by the public.
A catalyst for this rotation could be caused by a large sovereign nation selling U.S. debt and not finding willing buyers. We could see increased volatility in the foreign exchange markets, interest rates and commodities due to capital seeking inflationary havens.
The real estate and banking sectors could turn lower quickly with interest rate spikes forcing the Fed to stop all taper talk and possibly increase QE. The housing numbers and high unemployment shows the economy is still on shaky legs.
Home sales are a huge part of this recent recovery in equities. Yields are reaching two-year highs and may soon start putting a damper on the sector. QE is losing its effect on bond yields and we must all prepare for a major move in interest rates.
Be careful if you hold adjustable debt. Stick to companies with no debt or at least paying down debt with positive cash flows and strong treasuries and shareholder base.
Remember the S&P 500 has made a 150%+ move since early 2009. When stocks are high and commodities are cheap I favor junior mining equities as historically high commodity prices follow equity bubbles.
I believe we may be entering a very strong cycle for our wealth in the earth sectors as more savvy investors may capture profits in U.S. equities and housing and begin hedging against inflationary risks by buying the deeply discounted mining equities trading at historic lows.
Disclosure: I own NGD shares. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
http://seekingalpha.com/article/1761422-averting-the-dollar-crash-with-historically-discounted-gold-and-silver-junior-miners?source=email_portfolio&ifp=0
Blackstone Funding Largest U.S. Single-Family Rentals
By John Gittelsohn & Heather Perlberg
Oct 23, 2013
Bloomberg
Steve Schwarzman’s Blackstone Group LP (BX) has spent $7.5 billion acquiring 40,000 houses in the past two years to create the largest single-family rental business in the U.S. The private-equity firm is now planning to sell bonds backed by lease payments, the latest step in turning a small business into a mature industry.
Deutsche Bank AG (DBK) may start marketing almost $500 million of the securities as soon as this week, according to a person with knowledge of the transaction. The debt will include a portion with an investment grade from at least one ratings company, according to two separate people, who asked not to be identified because the deal isn’t public.
Rising home values combined with higher mortgage rates are making it more expensive for homebuyers to compete for a tight supply of properties on the market. Photographer: Andrew Harrer/Bloomberg
Blackstone has led hedge funds, private-equity firms and real estate investment trusts raising about $20 billion to purchase as many as 200,000 homes to rent after prices plunged 35 percent from the 2006 peak. The largest investors, seeking to profit from rebounding prices and rising demand for rentals among millions of Americans who went through foreclosure or can’t qualify for a mortgage, are looking to the bond market for capital to buy more properties and increase returns with borrowed money.
“Securitization is the next step in the evolution of the single-family rental business,” said Rob Bloemker, chief executive officer of investment firm Five Ten Capital LLC, which got a $100 million credit facility from Deutsche Bank in April to buy homes. “It brings consistent and conforming standards to lending, which will help bring larger pools of capital in and get comfortable investing in these types of loans.”
Debt Underwriters
JPMorgan Chase & Co. and Credit Suisse Group AG also are arranging the debt, which will be tied to properties in most of the 14 markets where Blackstone owns homes, said one of the people. Moody’s Investors Service, Kroll Bond Rating Agency and Morningstar Inc. are grading the debt.
Amanda Williams, a Deutsche Bank spokeswoman, declined to comment as did Oriane Schwartzman for New York-based Blackstone, JPMorgan spokesman Justin Perras and Credit Suisse spokesman Jack Grone.
Blackstone, which started its Invitation Homes division in April 2012 to buy and renovate properties to lease, is double the size of American Homes 4 Rent (AMH), the second-largest single-family home landlord.
The world’s largest private-equity firm has been spending about $100 million a week on properties in states such as California, Arizona, Florida and Nevada since the start of this year, when Wall Street increased lending to the sector. Deutsche Bank, based in Frankfurt, has arranged at least $3.6 billion of credit lines for Blackstone’s home-buying unit.
What’s This?
“We were the first people who actually could borrow against these because people said, ‘Well, what’s going on here? What is this?’” Schwarzman said last week during an earnings conference call with investors and analysts.
The firm has bought most of the properties individually, including through foreclosure auctions and short sales.
“You know how hard it is for you to buy a house?” the Blackstone chairman said. “I mean, you’ve got to negotiate with somebody, you’ve got all kinds of stuff, you’ve got the title. We did it for 40,000 houses.”
Investment firms have been buying amid the biggest home price gains in seven years. The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent in July from a year earlier, the biggest advance since February 2006. While real estate values nationally are still 21 percent below their peak, investors’ mass purchases are helping push up values in cities hardest hit by the property crash, with a 27.5 percent surge in Las Vegas and gains of 18.5 percent in Atlanta in July from a year earlier.
Mortgage Rates
Rising home values combined with higher mortgage rates are making it more expensive for homebuyers to compete for a tight supply of properties on the market. The average rate on 30-year home loans reached 4.58 percent in late August, a two-year high, according to McLean, Virginia-based Freddie Mac, as Federal Reserve policy makers signaled they may begin to curb bond purchases.
The Federal Housing Administration has also put in place stricter guidelines reducing credit availability and increasing costs for first-time buyers. That could also work to the advantage of institutional landlords, said Jack Micenko, an analyst at Susquehanna International Group LLP.
“Renters could stay renters longer than in prior economic recoveries,” he said in a report yesterday.
Homeownership Rate
The homeownership rate declined to 65 percent in the first half of this year from a peak of 69.2 percent in June 2004. The level is expected to stabilize at about 63 percent, adding more than 2 million households to the rental population, according to Morgan Stanley analyst Haendel St. Juste.
Securitizing rental cash flow will be “the most innovative” new mortgage-related product since the 2008 financial crisis, which was fueled by creative financing of home loans, according to Laurie Goodman, director of the housing finance policy center at the Urban Institute in Washington.
Wall Street created $1.2 trillion in non-agency mortgage securities in both 2005 and 2006, helping funnel risky loans to borrowers that inflated the housing bubble. Issuance collapsed as defaults soared and real-estate values plunged.
The new bonds would provide a low-risk opportunity for investors seeking higher yields than the government-backed mortgages that account for about 90 percent of the home-loan market, Goodman said.
“The investor appetite is certainly there for new products,” she said in a telephone interview.
Financing Options
“Having these bonds come out into the public capital markets could buoy the industry for more financing options going forward and potentially for lower cost of capital for operators,” said Dennis Cisterna, co-head of the opportunistic-finance division at Irvine, California-based Johnson Capital, which arranges loans to rental investors.
The rental securities would require a higher yield than other types of asset-backed securities with a longer history, according to Bryan Whalen, managing director of the U.S. fixed-income group at TCW Group Inc. in Los Angeles, which has about $85 billion under management, more than half of which is mortgage-related securities.
“Financing this asset class through securitization is untested,” Whalen said in a telephone interview. “When you take into account the operational risks, the property management risks, the liquidity risks -- which are huge -- you’re requiring more coupon or income than you might normally have.”
Blackstone plans to hold onto its rental homes for years to take advantage of rising prices amid an expected shortage of housing following years of underproduction of new residences after the financial crisis, according to Schwarzman.
“We took a strategy of wanting to be as patient as possible for what will be a very long-cycle investment,” Schwarzman said during last week’s earnings call. “There’s a real dislocation and we think that this is a very sensible, long-term way to develop our business.”
To contact the reporters on this story: John Gittelsohn in New York at johngitt@bloomberg.net; Heather Perlberg in New York at hperlberg@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net
To contact the editors responsible for this story: Rob Urban at robprag@bloomberg.net;
China, gold prices & US default threats
Oct. 21, 2013
William Engdahl
William Engdahl is an award-winning geopolitical analyst and strategic risk consultant whose internationally best-selling books have been translated into thirteen foreign languages.
In the very days when a deep split in the US Congress threatened a US government debt default, the gold price should normally jump through the roof, yet the opposite was the case. It is worth a closer look why.
Since August 1971, when US President Richard Nixon unilaterally tore up the Bretton Woods Treaty of 1944 and told the world that the Federal Reserve ‘gold window’ was permanently closed, Wall Street banks and US and City of London financial powers have done everything imaginable to prevent gold from again becoming the basis of trust in a currency.
On Friday, October 11, when there was no sign of any deal between US Congress members and the Obama White House that would end the government shutdown, the Chicago CME Group, which operates Comex - the Chicago Commodity Exchange, where contracts in gold derivatives are traded - announced that at 8:42am Eastern time the trading was halted for 10 seconds after a safety mechanism was triggered because a 2-million-ounce (56.7 million grams) gold futures sell order was executed.
Something rotten in gold market
The result of that huge paper gold sale was that at just the time when a possible US government debt default would send investors in a panic rush to the safety of buying gold, instead, the price plunged $30 an ounce to a three-month low of $1,259.60 an ounce. Market insiders believe the reason was direct market manipulation.
David Govett, head of precious metals at bullion broker Marex Spectron, calls the sudden huge futures sale suspicious.
"These moves are becoming more and more prevalent and to my mind have to either be the work of someone attempting to manipulate the market or someone who really shouldn’t be trusted with the sums of money they are throwing around. There are ways of entering and exiting a market so that minimum damage is caused and whoever is entering these orders has no intention of doing that," Govett said.
UBS gold trader Art Cashin echoed the suspicion.
“…if that happens once it could be an accident of technology, or it could be a simple error. But when it happens five times over a period of months, it does raise questions. Is it being done purposefully? Is somebody trying to influence the market?”
That ‘someone’ market sources believe is the Obama White House, in league with the Federal Reserve and key Wall Street banks that would be ruined were gold to really rise.
In March 1988, five months after the worst one-day stock market plunge in history, President Ronald Reagan signed Executive Order 12631. Order 12631 created the Working Group on Financial Markets, known on Wall Street as the ‘Plunge Protection Team’ because its job was to prevent any future unexpected financial market panic selloff or ‘plunge’.
The group is headed by the US Treasury Secretary and includes the chairman of the Federal Reserve, the head of the Securities & Exchange Commission, and the head of the Commodity Futures Trading Commission (CFTC) which is responsible for monitoring derivatives trading on exchanges.
Numerous times since 1988, reports have surfaced of secret interventions by the Plunge Protection Team to prevent a market panic selloff that could threaten the role of the US dollar. Former Clinton White House staff chief George Stephanopoulos admitted in 2006 that it was used to support the markets in the 1998 Russia/LTCM crisis under Bill Clinton, and again after the 9/11 terrorist attacks in 2001.
One ounce 24 karat gold proof blanks are seen at the United States West Point Mint facility in West Point, New York June 5, 2013. (Reuters/Shannon Stapleton)
He said, "They have an informal agreement among major banks to come in and start to buy stock if there appears to be a problem."
Clearly stocks are not the only thing the government manipulates. Gold these days is a prime focus. The price of gold in recent years—since the eruption of the US dot.com IT stock bubble in 2000—has exploded from around $300 an ounce to a recent record high above $1,900 in August, 2011. Gold rose an impressive 70 percent from December 2008 to June 2011, after the Lehman Brothers collapse and the start of the Greek crisis in the eurozone.
Since then, with no clear reason, gold has reversed and lost more than 31 percent, despite the fact that talk of a unilateral Israeli military strike on Iran and the US financial debacle combined with a euro crisis, and now, threat of US government default, created overall huge demand for investment in gold.
This past April 10, the heads of the five largest US banks, the Wall Street ‘Gods of Money’ — JPMorgan Chase, Goldman Sachs, Bank of America and Citigroup — requested a closed door meeting with Obama at the White House. Fifteen days later, on April 25, the largest one-day fall in history in gold took place. Later investigation of trading records at Comex revealed that one bank, JP Morgan Securities, was behind the huge selloff of gold derivatives. Derivatives are pieces of paper or bets on future gold or other commodity prices. To buy gold futures is very inexpensive compared with gold but influence the real physical gold price, largely because the US Congress, under lobby influence from Wall Street, since 2000 and the Commodity Trading Modernization Act, has left gold derivatives unregulated. The President’s Plunge Protection Team was at work now as well, clearly.
China smiles & buys
In effect a war, a financial war, is underway between the Wall Street giant banks and their close allies, including the major City of London banks and banks like Deutsche Bank on the one side, using paper gold derivatives trading in the unregulated COMEX, with covert support of the US Treasury and Fed. On the other side are real investors and Central Banks who believe that the world financial system, especially the dollar system, is teetering on the brink of disaster and that physical gold is the historical best safe haven in such a crisis.
Here, the recent buying of gold reserves by several central banks including Russia, Turkey and especially China, are notable. The short-term derivative gold price manipulations by JP Morgan and Goldman Sachs are creating smiles at the Peoples’ Bank of China and the Russian Central Bank among other buyers of physical gold. Since 2006 Russia’s central bank has increased its gold reserves by 300 percent.
Now, the Chinese central bank has just revealed data showing that China imported 131 gross tons of gold in the month of August, a 146 percent increase compared to a year prior. August was the second highest gold importing month in its history. More impressively, China has imported more than 2,000 tons of gold in the past two years. According to a 2011 cable made public by WikiLeaks, the Peoples’ Bank of China is quietly seeking to make the renminbi (the yuan) the new gold-backed reserve currency.
Hmmmm.
According to unofficial calculations, the Peoples’ Bank of China today holds about 3,500 tons of monetary gold, surpassing Germany, to make it number two in the world after the Federal Reserve.
24 karat gold bars are seen at the United States West Point Mint facility in West Point, New York June 5, 2013. (Reuters/Shannon Stapleton)
And there are grave doubts whether the Federal Reserve actually holds the 8,044 tons of gold it claims it does. The former International Monetary Fund director, France’s Dominique Straus-Kahn, demanded an independent audit of the Federal Reserve gold after the US refused to deliver to the IMF 191 tons of gold agreed to under the IMF Articles of Agreement signed by the Executive Board in April 1978 to back Special Drawing Rights issuance. Immediately before he could rush back to Paris, he was hit by a bizarre hotel sex scandal and abruptly forced to resign. Straus-Kahn had been shown a secret Russian intelligence report prepared for President Vladimir Putin in which ‘rogue’ CIA agents revealed that the US Federal Reserve had no gold reserves and only lied that it did.
The stakes for Washington and Wall Street in depressing the gold price are staggering. Were gold to soar to $10,000 or more, where many believe current demand-supply pressures would find it, there would be a panic selloff of the dollar and of US Treasury bonds. China now holds a record $3.7 trillion of foreign currency reserves and the US Treasury bonds and bills are about half that.
That selloff would send US interest rates sky-high, forcing a chain-reaction of corporate and personal bankruptcies that have been avoided since the financial crisis broke in 2007 only owing to record near-zero Federal Reserve interest rates. That selloff, in turn, would be the end of the US as the world’s sole superpower. Little wonder the Obama Administration is manipulating gold. It cannot last very long at this pace, however.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.
http://rt.com/op-edge/us-debt-gold-price-threats-481/
China, gold prices & US default threats
Oct. 21, 2013
William Engdahl
William Engdahl is an award-winning geopolitical analyst and strategic risk consultant whose internationally best-selling books have been translated into thirteen foreign languages.
In the very days when a deep split in the US Congress threatened a US government debt default, the gold price should normally jump through the roof, yet the opposite was the case. It is worth a closer look why.
Since August 1971, when US President Richard Nixon unilaterally tore up the Bretton Woods Treaty of 1944 and told the world that the Federal Reserve ‘gold window’ was permanently closed, Wall Street banks and US and City of London financial powers have done everything imaginable to prevent gold from again becoming the basis of trust in a currency.
On Friday, October 11, when there was no sign of any deal between US Congress members and the Obama White House that would end the government shutdown, the Chicago CME Group, which operates Comex - the Chicago Commodity Exchange, where contracts in gold derivatives are traded - announced that at 8:42am Eastern time the trading was halted for 10 seconds after a safety mechanism was triggered because a 2-million-ounce (56.7 million grams) gold futures sell order was executed.
Something rotten in gold market
The result of that huge paper gold sale was that at just the time when a possible US government debt default would send investors in a panic rush to the safety of buying gold, instead, the price plunged $30 an ounce to a three-month low of $1,259.60 an ounce. Market insiders believe the reason was direct market manipulation.
David Govett, head of precious metals at bullion broker Marex Spectron, calls the sudden huge futures sale suspicious.
"These moves are becoming more and more prevalent and to my mind have to either be the work of someone attempting to manipulate the market or someone who really shouldn’t be trusted with the sums of money they are throwing around. There are ways of entering and exiting a market so that minimum damage is caused and whoever is entering these orders has no intention of doing that," Govett said.
UBS gold trader Art Cashin echoed the suspicion.
“…if that happens once it could be an accident of technology, or it could be a simple error. But when it happens five times over a period of months, it does raise questions. Is it being done purposefully? Is somebody trying to influence the market?”
That ‘someone’ market sources believe is the Obama White House, in league with the Federal Reserve and key Wall Street banks that would be ruined were gold to really rise.
In March 1988, five months after the worst one-day stock market plunge in history, President Ronald Reagan signed Executive Order 12631. Order 12631 created the Working Group on Financial Markets, known on Wall Street as the ‘Plunge Protection Team’ because its job was to prevent any future unexpected financial market panic selloff or ‘plunge’.
The group is headed by the US Treasury Secretary and includes the chairman of the Federal Reserve, the head of the Securities & Exchange Commission, and the head of the Commodity Futures Trading Commission (CFTC) which is responsible for monitoring derivatives trading on exchanges.
Numerous times since 1988, reports have surfaced of secret interventions by the Plunge Protection Team to prevent a market panic selloff that could threaten the role of the US dollar. Former Clinton White House staff chief George Stephanopoulos admitted in 2006 that it was used to support the markets in the 1998 Russia/LTCM crisis under Bill Clinton, and again after the 9/11 terrorist attacks in 2001.
One ounce 24 karat gold proof blanks are seen at the United States West Point Mint facility in West Point, New York June 5, 2013. (Reuters/Shannon Stapleton)
He said, "They have an informal agreement among major banks to come in and start to buy stock if there appears to be a problem."
Clearly stocks are not the only thing the government manipulates. Gold these days is a prime focus. The price of gold in recent years—since the eruption of the US dot.com IT stock bubble in 2000—has exploded from around $300 an ounce to a recent record high above $1,900 in August, 2011. Gold rose an impressive 70 percent from December 2008 to June 2011, after the Lehman Brothers collapse and the start of the Greek crisis in the eurozone.
Since then, with no clear reason, gold has reversed and lost more than 31 percent, despite the fact that talk of a unilateral Israeli military strike on Iran and the US financial debacle combined with a euro crisis, and now, threat of US government default, created overall huge demand for investment in gold.
This past April 10, the heads of the five largest US banks, the Wall Street ‘Gods of Money’ — JPMorgan Chase, Goldman Sachs, Bank of America and Citigroup — requested a closed door meeting with Obama at the White House. Fifteen days later, on April 25, the largest one-day fall in history in gold took place. Later investigation of trading records at Comex revealed that one bank, JP Morgan Securities, was behind the huge selloff of gold derivatives. Derivatives are pieces of paper or bets on future gold or other commodity prices. To buy gold futures is very inexpensive compared with gold but influence the real physical gold price, largely because the US Congress, under lobby influence from Wall Street, since 2000 and the Commodity Trading Modernization Act, has left gold derivatives unregulated. The President’s Plunge Protection Team was at work now as well, clearly.
China smiles & buys
In effect a war, a financial war, is underway between the Wall Street giant banks and their close allies, including the major City of London banks and banks like Deutsche Bank on the one side, using paper gold derivatives trading in the unregulated COMEX, with covert support of the US Treasury and Fed. On the other side are real investors and Central Banks who believe that the world financial system, especially the dollar system, is teetering on the brink of disaster and that physical gold is the historical best safe haven in such a crisis.
Here, the recent buying of gold reserves by several central banks including Russia, Turkey and especially China, are notable. The short-term derivative gold price manipulations by JP Morgan and Goldman Sachs are creating smiles at the Peoples’ Bank of China and the Russian Central Bank among other buyers of physical gold. Since 2006 Russia’s central bank has increased its gold reserves by 300 percent.
Now, the Chinese central bank has just revealed data showing that China imported 131 gross tons of gold in the month of August, a 146 percent increase compared to a year prior. August was the second highest gold importing month in its history. More impressively, China has imported more than 2,000 tons of gold in the past two years. According to a 2011 cable made public by WikiLeaks, the Peoples’ Bank of China is quietly seeking to make the renminbi (the yuan) the new gold-backed reserve currency.
Hmmmm.
According to unofficial calculations, the Peoples’ Bank of China today holds about 3,500 tons of monetary gold, surpassing Germany, to make it number two in the world after the Federal Reserve.
24 karat gold bars are seen at the United States West Point Mint facility in West Point, New York June 5, 2013. (Reuters/Shannon Stapleton)
And there are grave doubts whether the Federal Reserve actually holds the 8,044 tons of gold it claims it does. The former International Monetary Fund director, France’s Dominique Straus-Kahn, demanded an independent audit of the Federal Reserve gold after the US refused to deliver to the IMF 191 tons of gold agreed to under the IMF Articles of Agreement signed by the Executive Board in April 1978 to back Special Drawing Rights issuance. Immediately before he could rush back to Paris, he was hit by a bizarre hotel sex scandal and abruptly forced to resign. Straus-Kahn had been shown a secret Russian intelligence report prepared for President Vladimir Putin in which ‘rogue’ CIA agents revealed that the US Federal Reserve had no gold reserves and only lied that it did.
The stakes for Washington and Wall Street in depressing the gold price are staggering. Were gold to soar to $10,000 or more, where many believe current demand-supply pressures would find it, there would be a panic selloff of the dollar and of US Treasury bonds. China now holds a record $3.7 trillion of foreign currency reserves and the US Treasury bonds and bills are about half that.
That selloff would send US interest rates sky-high, forcing a chain-reaction of corporate and personal bankruptcies that have been avoided since the financial crisis broke in 2007 only owing to record near-zero Federal Reserve interest rates. That selloff, in turn, would be the end of the US as the world’s sole superpower. Little wonder the Obama Administration is manipulating gold. It cannot last very long at this pace, however.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.
http://rt.com/op-edge/us-debt-gold-price-threats-481/
How Leadership PACs Turned into "Slush Funds" for Congress
By DAVID ZEILER, Associate Editor
Money Morning October 22, 2013
Apparently an annual salary of $174,500 and a vast array of taxpayer-funded perks is not enough for most members of Congress.
Otherwise, why would they need "Leadership PACs" - personal political action committees that supposedly raise money for political activities but in practice provide a pipeline of cash to subsidize their already-elite lifestyle.
Now remember, in addition to official salaries more than triple what the average American household earns, members of Congress have an average net worth of about $966,000, according to OpenSecrets.org.
And yet these greedy elitists still feel the need to siphon off some political donations to pay for luxuries they could easily afford anyway.
As Trevor Potter, a former chairman of the Federal Election Commission (FEC), told "60 Minutes," Leadership PAC money "can be used for literally anything."
By law - a law Congress wrote and passed - Leadership PAC money has but a single limitation: It cannot be spent directly on the PAC owner's own election campaign.
How convenient...
"You can use [Leadership PACs] for babysitting..., you can use them for paying for car service. You can use them for travel," Peter Schweizer, a fellow at the Hoover Institution, told CBS News "60 Minutes" in a segment broadcast on Sunday. Schweizer's book on the topic, Extortion: How Politicians Extract Your Money, Buy Votes and Line Their Own Pockets, comes out today (Tuesday).
Some lawmakers have used their Leadership PAC money to entertain friends on elite golf courses or to treat them to NFL games.
"It's a political slush fund," Potter told "60 Minutes." "Over time, we've had them. They've been outlawed. They spring back in new guises, and this is the latest guise."
And that's not all. When members of Congress leave office, they can keep their Leadership PAC money and use it for their second career as a lobbyist, or in retirement to finance the maintenance of old political connections.
As long as they can dream up a political pretext for spending the money, no matter how vague or stretched, it's a "legitimate" Leadership PAC expense.
Where Leadership PACs Came From
According to the "60 Minutes" segment, Leadership PACs were invented specifically to bypass the Ethics Reform Act of 1989, which stated that campaign funds could not be converted for personal use.
At first only the most senior members of Congress had Leadership PACS, which originally were set up to raise money that could be distributed to other members of their party to secure political alliances and ensure the election of those allies.
But now nearly every U.S. senator - and about two-thirds of the House of Representatives - has a Leadership PAC.
Leadership PACs have become so de rigueur, in fact, that incoming members of Congress now create them before they're even sworn into office.
Some don't even wait to get elected.
Newark Mayor Cory Booker, who just last week won the open seat left by the death of Sen. Frank Lautenberg, D-NJ, created his Leadership PAC in June - of 2011.
And because Leadership PACs are so handy, they enjoy full bipartisan support. While their political brinksmanship forced a government shutdown earlier this month, Republicans and Democrats hold identical positions on political slush funds: They love them.
And it's easy to see why. In addition to providing supplemental income, Leadership PACs allow members of Congress to double-dip from donors who had already given the legal maximum to their regular campaign fund.
The few legislative attempts to restrict the personal use of Leadership PAC funds have been routinely ignored.
What Leadership PAC Money Gets Spent On
Let's have a look at some of the frills our elected officials have spent their Leadership PAC donations on:
Rep. Ander Crenshaw, R-FL, spent $32,000 in Leadership PAC money to take some defense industry donors on a tour of some California wineries.
Rep. Robert Andrews, D-NJ, spent $16,000 to fly his family to Scotland for the wedding of a friend that he was considering hiring as a political consultant.
Sen. Saxby Chambliss, R-GA, spent $100,000 over the past two years treating his political cronies to some of world's top golf courses.
Rep. George Meeks, D-NY, dropped $35,000 on tickets to NFL games for his friends' football watching pleasure.
Disgraced presidential candidate Sen. John Edwards, D-NC, used $114,000 to pay mistress Reille Hunter to make a campaign video.
In one case, the misuse of funds extended beyond even the lawmaker's death. In 2007, after Rep. Paul Gillmor, R-OH, died suddenly from a heart attack, his staff spent his Leadership PAC money on dinners and pizza parties.
And there are other abuses.
"60 Minutes" noted that many members of Congress also use Leadership PAC money to hire relatives to work on their campaigns.
And the Citizens for Responsibility and Ethics in Washington (CREW) found that at least 15 members of Congress have loaned their campaign funds money, then charged ridiculously high interest rates.
Such schemes can yield serious money, but the profits come directly out of the pockets of their unsuspecting contributors.
One enterprising congresswoman, Rep. Grace Napolitano, D-CA, loaned her campaign $150,000 at 18% interest. Over 12 years, she collected a tidy $228,000.
"Congress has created this domain that allows them to decide whether something is ethical or whether something is good," Schweizer said. "And it's another example, unfortunately, where the rules that apply to the rest of us don't really apply to members of Congress."
http://moneymorning.com/2013/10/22/how-leadership-pacs-turned-into-slush-funds-for-congress/
The Only Number You Need to Time – and Beat – the Market
By ROBERT HSU, Global Investing & Income Strategist
Money Morning
October 23, 2013
It certainly seems as though the political gamesmanship that rules Washington, D.C., also rules the markets. But this isn't really the case.
In fact, there's one single "magic" number that far outweighs everything else when it comes to long-term influence.
This number's predictive power has saved me from some of the steepest market drops of the century, and it's given me everything I need to position myself for maximum gains in bull markets.
And the best part is, it's widely available - access to it costs nothing.
It's how you use this simple number that counts...
Add This Link to Your "Favorites" Tab
Earnings season is the key to it all. That's when over half of all public companies report the revenue and earnings results for the previous three-month period.
Here's where the number comes in. You can track these earnings with a metric called the trailing 12-month earnings per share (EPS).
You can always find it right here, over at Barron's.
At a single glance, it tells you whether earnings are trending higher or lower. Staying ahead of that trend is the key to beating the markets.
The number, the current aggregate EPS of the S&P 500, is $90.95.
This metric is incredibly accurate, and historically speaking, when earnings increase in the aggregate, stocks tend to go up in the aggregate. Of course, you might see an individual stock sell off after it reports rising earnings, and conversely, you might see an individual stock rise on downbeat earnings. Yet, by and large, when corporate earnings are rising, stock values also rise. The reverse is also true: When earnings are in decline, stock prices also decline.
But when you have the aggregate EPS in hand, you can prepare for these declines.
Get Ahead of Bear Markets
This happens rarely, but when the aggregate measure of earnings on the S&P 500 declines for two consecutive quarters, the market is telling us to sell. This has only happened twice this century - so far - once in January 2001 and again in October 2007.
In 2007, earnings began to decline in the second quarter, as many companies - primarily financial - began booking losses due to the subprime loan crisis. By the end of October 2007, S&P 500 earnings had once again declined sharply because of the huge third-quarter losses booked by many of those same financial firms.
Given that the S&P 500 was trading near its all-time highs midway through 2007, it was easy to see that earnings were not keeping up with stock prices and that this situation was about to right itself via a sharp market correction. As we all know, that's precisely what happened in the fall of that year, after earnings showed they had declined for the second consecutive quarter.
Like an "all-clear" siren, the aggregate EPS will also tell you when the worst is over... and when it's time to go pick up shares.
When to Go Shopping
This "two consecutive quarters" of directional earnings signal also works as a buy signal, particularly after a big downturn.
For example, two consecutive quarters of positive earnings on the S&P 500 in 2009 served as the green light I had been waiting for to get back into stocks after the 2007 meltdown. And that is precisely what happened in July 2009, after I saw that the S&P 500 had logged its second consecutive quarter of earnings growth.
I know this may seem relatively simple, but if you would have followed this "two consecutive quarters" metric, you would have been on the right side of the market during two of the largest market declines in this century.
This indicator got me out of U.S. stocks in October 2007, and I stayed that way until July 2009.
It saved me from the near-40% plunge in the U.S. stock market during the crisis years. The same indicator also kept me out of stocks between January of 2001 and July of 2002, avoiding the worst declines of the tech stock bust.
So, it really is as easy as this: When earnings decline for two quarters, that's your signal to exit stocks. And when earnings rebound for two quarters, it's time to get back in.
http://moneymorning.com/2013/10/23/the-only-number-you-need-to-time-and-beat-the-market/
The Globalization Trap Part II: Credit Freeze II
by Gordon Long - Market Research and Analytics
Published : October 20th, 2013
Special Guest: Michael Snyder
18 Minutes, 29 Slides
We are marching steadily towards the first Global Liquidity Trap. The evidence is clear when the facts are thoughtfully analyzed.
With the clear thinking of a trained lawyer, Michael Snyder in four articles in Part I points out the startling realities of what is shaping our world. In Part II Michael ties these together with his views and interpretations. His conclusions fit very well within the Globalization Trap Model developed by GordonTLong.com.
Time For Prudent Preparation & Economic Insurance
The framework outlined allowed both participants to draw important conclusions on what investors should be doing to prepare for this high probability eventuality.
Video: The Globalization Trap Part II: Credit Freeze II
Justice and Financial Fraud: The Blanket Settlement with JPMorgan: A $13 Billion Cover-up
By Barry Grey
Global Research, October 21, 2013
US newspapers on Sunday led with reports of a tentative settlement between JPMorgan Chase and the Obama Justice Department of numerous investigations into the bank’s fraudulent sale of toxic mortgage-backed securities in the lead-up to the 2008 Wall Street crash.
The reports presented the deal, under which the nation’s largest bank will pay $9 billion in fines and provide relief to consumers worth $4 billion, as a victory for the Justice Department and a major step in holding the banks responsible for the economic catastrophe they inflicted on the country and the world.
This is nonsense. JPMorgan and its CEO, Jamie Dimon, have pressed for such a blanket deal to allow the bank to pay a fine and obtain in return the equivalent of a general amnesty for illegal actions that have led to the impoverishment of countless millions of people. The systematic marketing of worthless securities enabled the bank to pocket tens of billions of dollars and further enrich top executives such as Dimon.
When the Ponzi scheme collapsed, the government used trillions of dollars in taxpayer money to bail out the banks and financial firms. Since 2009, it—along with governments all over the world—has been engaged in a savage offensive to recoup the debts taken on by the state by destroying social programs and the living standards of the working class.
The $9 billion fine, the largest penalty ever imposed on a US corporation, is less than half the $21 billion profit JPMorgan recorded in 2012. The bank is pulling in enormous profits despite having set aside $28 billion since 2010 to cover legal costs.
It is necessary to place the size of the fine in the context of the economic damage resulting from the bank’s practices. Reportedly, $4 billion will go to settle a suit by the Federal Housing Finance Agency (FHFA) charging JPMorgan with knowingly making false statements and omitting material facts in selling $33 billion in worthless mortgage bonds to the government-sponsored mortgage finance companies Fannie Mae and Freddie Mac at the height of the subprime mortgage bubble (2005-2007). That is about 2 percent of the $188 billion in taxpayer money the government has spent thus far to prop up the firms.
In setting the fine, the Obama administration calculated that the bank could absorb the loss with minimal damage. At the same time, the size of the penalty indicates that the Justice Department has abundant evidence of illegality—on a massive scale.
Yet it has refrained from indicting Dimon, any other high-ranking JPMorgan executive, or the bank itself. Instead, Attorney General Eric Holder, the country’s top law enforcement official, has been spending much of his time in secret negotiations with Dimon over the precise wording of any eventual admission of wrongdoing, so as to minimize the criminal liability of the bank and its leading officers.
As the New York Times wrote on Sunday, “The government also prefers to settle with big companies rather than indict them, fearing that criminal charges could unnerve the broader economy.” Last March, in testimony before the Senate Judiciary Committee, Holder acknowledged that the failure of the Obama administration to prosecute a single major Wall Street banker was part of a calculated policy.
He told the committee that the big banks are so large and powerful that “if we do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”
What does this astonishing admission signify? First, that the financial elite is above the law. It, like the aristocracies of old, is immune from the laws that apply to the lower orders. In America, people are routinely sentenced to long prison terms for petty crimes that involve hundreds of dollars. The speculators and swindlers who steal millions and billions, however, do so with impunity. They control the government and both political parties.
Second, it shows that criminality is so pervasive within the corporate-financial establishment that to attack it threatens to undermine the foundations of the financial system.
JPMorgan is a case in point. Just last month, it agreed to pay close to $1 billion to settle charges that it lied to investors and government regulators and committed accounting fraud to conceal $6.2 billion in losses in derivatives bets last year. A 300-page report on the so-called “London Whale” scandal issued last March by the Senate Permanent Subcommittee on Investigations concluded that the bank used accounting dodges “to hide hundreds of millions of dollars of losses,” and “misinformed investors, regulators, and the public about the nature of its risky derivatives trading.”
The report also concluded that Dimon lied when he downplayed the losses. At the time when he called the matter “a complete tempest in a teapot,” he “was already in possession of information about…sustained losses for three straight months” and “the exponential increase in those losses during March [2012],” the Senate committee wrote.
Yet Dimon and other top executives were exonerated of any intentional wrongdoing in the carefully drafted “admission” that accompanied the fine. Instead, the government claimed they were misled by subordinates and culpable only for insufficient oversight.
The London Whale and subprime mortgage probes are only two among a host of investigations into the bank’s operations, concerning such offenses as credit card fraud, illegal debt collection practices, rigging of energy markets, complicity in the Bernard Madoff Ponzi scheme, illegal home foreclosures, bribing Chinese officials, and involvement in the Libor rate-rigging scandal.
JPMorgan is the rule, not the exception. Every major US bank is the subject of multiple investigations and lawsuits. In 2011, the Senate Permanent Subcommittee on Investigations issued a 630-page report on the financial crash detailing illegal activities by Washington Mutual, Deutsche Bank and Goldman Sachs that contributed to the global crisis. The report also documented the collusion of the credit rating firms and government regulatory agencies.
The committee chairman, Senator Carl Levin, said at the time that the investigation had found “a financial snake pit rife with greed, conflicts of interest and wrongdoing.”
The Obama administration, both political parties, Congress and the courts have worked assiduously to cover up the snake pit and shield the snakes from prosecution. The role of the government in running interference for the banks and protecting the financial aristocracy is illuminated by one little-noted detail of the negotiations between Dimon and Holder.
While the press has reported that Dimon was joined by his bank’s chief counsel, Stephen Cutler, in the Friday night conference call where the agreement was reached, the media has failed to note that Cutler headed the enforcement division of the Securities and Exchange Commission between 2001 and 2005.
http://www.globalresearch.ca/justice-and-financial-fraud-the-blanket-settlement-with-jpmorgan-a-13-billion-cover-up/5354959
America’s Economic Dark Side. Widening Social Inequality, Rising Poverty and Joblessness
By Stephen Lendman
Global Research, October 21, 2013
Former Clinton administration Labor Secretary Robert Reich explained, saying:
“Of all developed nations, the United States has the most unequal distribution of income, and we’re surging towards every greater inequality.”
America’s 400 richest elites have more wealth than half the population. Jacob Kornbluth’s new documentary film “Inequality for All” examines disturbing truths.
US inequality is at historic highs. Since 1970, America’s economy doubled. The top 1% benefited hugely. They earn more than 20% of national income. It’s triple their 1970 percentage.
The gap between rich and all others keeps widening. Inequality hurts everyone, says Reich. Since economic recovery began in 2009, America’s top 1% got 95% of the gains.
Adjusted for inflation, median household income keeps declining. Where will most people “get the money they need to keep the economy going,” asked Reich?
“We’re the richest economy in the history of the world. For the majority of Americans not to get the benefits of this extraordinarily prosperous economy, you know, there’s something fundamentally wrong.”
America has less upward mobility than any other developed country. If you’re poor, you’ll stay that way.
If you’re lower middle class, “the cards are going to be stacked against you. You will probably never get anywhere,” says Reich.
“Who is actually looking out for the American worker? The answer is nobody.”
The nation is headed toward becoming a “100 percent plutocracy.” Inequality this extreme fuels public anger. It hurts economic growth. Force-fed austerity assures worse ahead.
Reich teaches a popular Wealth and Poverty course at UC Berkeley. His book “Beyond Outrage” explains what’s wrong with America’s economy.
It doesn’t work. It benefits the privileged few. It harms most others. Doing so undermines America. Expect worse ahead unless people react, he says.
He’s never been more concerned about things than now. He cites “the corrupting effects of big money in politics,” regressive hard right policies, and unprecedented “wealth and power at the very top.”
Things are “perilously close” to falling apart altogether. People are right to be outraged. It’s a “prerequisite for social change.” It’s vital to “move beyond outrage and take action.”
The stakes are too high to be ignored. Nothing good happens in Washington unless people mobilize, organize and demand it.
“Nothing worth changing in America will actually change unless you and others like you are committed to achieving that change,” he stresses.
So-called US economic recovery is fake. Main Street poverty, unemployment, underemployment, hunger and homelessness are at Depression era levels.
Half of all US households are impoverished or bordering it. Recovery benefited only America’s most well off. Most others endure deepening deprivation.
According to economist Emmanuel Saez:
”For the first time in nearly 100 years, the percentage of income taken by the top 10 percent of Americans topped 50 percent.”
From 2009 to 2012, “(t)op 1% incomes grew by 31.4% while bottom 99% incomes grew by only 0.4%.” Adjusted for inflation, they declined considerably.
From 2007 – 2009, average real family income declined 17.4%. It’s more than any period since the Great Depression. Wealthy Americans recovered and then some. Conditions for most others went from bad to worse.
According to Saez:
“We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional and tax reforms should be developed to counter it.”
Russell Sage Foundation president Sheldon Danziger said:
“The continued high rate of poverty is no surprise, given ongoing high unemployment, stagnant wages and government spending cuts.”
”Poverty is higher today than it was in 2000, and household incomes are lower. The ‘lost decade’ is likely to turn into ‘two lost decades.’ “
According to Marx:
“Accumulation of wealth at one pole is at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, and mental degradation at the opposite pole.”
America’s wealth distribution is extreme. It keeps shifting disproportionately upward. Most people are more than ever on their own.
Financial elites run America. Whatever they want they get. Popular needs go begging. Things go from bad to worse.
In 1962, Michael Harrington’s “The Other America: Poverty in the United States” exposed the nation’s dark side, saying:
”In morality and in justice, every citizen should be committed to abolishing the other America, for it is intolerable that the richest nation in human history should allow such needless suffering.”
“But more than that, if we solve the problem of the other America we will have learned how to solve the problems of all of America.”
Jack Kennedy addressed the issue. In his January 8, 1964 State of the Union address, Lyndon Johnson declared war on poverty.
He barely scratched it. Inequality was severe. Today, it’s unprecedented and growing. It bears repeating. Census data show around half of US households impoverished or bordering it.
Government data most often over-estimate good news and understate what’s bad. Unprecedented numbers of US households are impoverished under protracted Main Street Depression conditions.
Bipartisan harshness assures greater pain and suffering. Over 20% of US households haven’t enough money for food and other essentials.
On November 1, Supplemental Nutrition Assistance Program (SNAP) benefit cuts are coming. One-person households will get $11 per month less.
For 2 people, it’s $20. For three it’s $29. For four it’s $36. Expect more cuts ahead. Food costs are rising. Family incomes are falling. More help is needed. Congress and Obama intend less.
America’s most needy will be harmed most. So will tens of millions of children. They may end up without enough to eat.
America’s great divide is greater than ever. In 2009, around half of US households had no assets. Today it’s more than half.
Most Americans don’t earn enough to live on. Things go from bad to worse. Hardwired inequality is deepening. Casino capitalism takes precedence.
America’s criminal class alone benefits. Ordinary people are swindled. Venal politicians serve wealth, power and privilege. Democrats and Republicans are in lockstep. Few benefit at the expense of most others.
On July 28, AP headlined “Exclusive: Signs of Declining Economic Security,” saying:
“Four out of 5 US adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives.”
It’s a disturbing “sign of deteriorating economic security and an elusive American dream.”
“Survey data exclusive to The Associated Press points to an increasingly globalized US economy, the widening gap between rich and poor, and loss of good-paying manufacturing jobs as reasons for the trend.”
Hardship for white Americans is rising. AP-GfK poll numbers show “63 percent of whites called the economy ‘poor.’ ”
Fifty-two-year-old Irene Salyers perhaps spoke for others, saying:
“I think it’s going to get worse. If you do try to go apply for a job, they’re not hiring people, and they’re not paying that much to even go to work.”
Economic insecurity is much worse than government data show. It affects over three-fourths of white Americans.
It’s defined as experiencing unemployment some time during working years or needing government aid to survive.
According to Professor William Julius Wilson:
”It’s time that America comes to understand that many of the nation’s biggest disparities, from education and life expectancy to poverty, are increasingly due to economic class position.”
Government data fall short of explaining things. Conditions are much worse than official reports. Most Americans struggle to get by. Impoverishment or close to it affect them.
It’s harder than ever for millions of disadvantaged households to survive. Their numbers keep growing exponentially. Vital social protections are eroding. It’s happening when they’re most needed.
“By race, nonwhites still have a higher risk of being economically insecure, at 90 percent.”
”But compared with the official poverty rate, some of the biggest jumps under the newer measure are among whites, with more than 76 percent enduring periods of joblessness, life on welfare or near-poverty.”
”By 2030, based on the current trend of widening income inequality, close to 85 percent of all working-age adults in the US will experience bouts of economic insecurity.”
According to Professor Mark Rank:
“Poverty is no longer an issue of ‘them.’ It’s an issue of ‘us.’ Only when poverty is thought of as a mainstream event, rather than a fringe experience that just affects blacks and Hispanics, can we really begin to build broader support for programs that lift people in need.”
Data Professors Tom Hirschl and John Iceland compiled provide more context. They show:
for the first time in nearly three decades, impoverished single-mother households surpassed or equaled black ones; they exceeded numbers of Hispanic single mother families; and
numbers of children living in high-poverty neighborhoods increased.
According to a University of Chicago General Social Survey, whites are more pessimistic about their futures than since the depths of the early 1980s.
“Just 45 percent say their family will have a good chance of improving their economic position based on the way things are in America,” said AP.
Polls show over 80% of Americans mostly don’t trust government. Congress’ approval rating is 11%.
It’s barely above its all-time February and August 2012 10% low. Given the margin of error, they’re’s virtually no difference between then and now.
Americans are suffering. Things go from bad to worse. Republicans and Democrats are in lockstep. They’re cutting social protections when they’re most needed.
Stephen Lendman lives in Chicago. He can be reached at lendmanstephen@sbcglobal.net.
His new book is titled “Banker Occupation: Waging Financial War on Humanity.”
http://www.claritypress.com/LendmanII.html
Visit his blog site at sjlendman.blogspot.com.
Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.
It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.
http://www.progressiveradionetwork.com/the-progressive-news-hour
http://www.dailycensored.com/americas-economic-dark-side/
The Ongoing Depression Could Force A Return To The Gold Standard
Gold Silver Worlds | October 19, 2013
This is an excellent interview with Jim Rickards. He explains that we are in a depression currently. The answers to that problem from the US government and central bank will likely force them to impose monetary discipline through the return to a gold standard. The longer the dollar based monetary system is suppressed, the more likely that market forces will induce a dollar collapse.
This piece provides deep insights in a complex matter, brought in an easy to understand way. Courtesy: Jim Rickards and FutureMoneyTrends.
We are in a depression although it does not “look” or “feel” as such.
First of all I’d say this depression started in 2007. 2008 was the panic and it was an emergency liquidity response to that, but the roots of this really go back to 2007. That’s when the sub-prime crisis erupted, that’s when the Bear Stearns hedge funds melted down. That’s when the Fed first started in to cut the discount rate and respond a little bit, even though they were way behind the curve and didn’t see it coming.
So the depression started in 2007. It could be over tomorrow if we had the right policies, but we don’t have the right policies. It will continue indefinitely.
We look like Japan. Japan has said, people talk about the lost decade, we’re in the third lost decade; it’s been over 20 years of depression, depressionary symptoms or depressionary economy in Japan.
The U.S. is now in the same mode, it’s kind of ironic because for decades Bernanke and other scholars criticized the Japanese, saying, “What’s the matter with you guys, don’t you know how to run monetary policy, don’t you know how to get out of a depression?” Then they said, you know, in 2007, “We are going to avoid the mistakes of Japan.” But we’ve made every single mistake that Japan made.
We should have shut down banks in 2008. We didn’t. We propped them up instead of shutting them down, which is exactly what the Japanese did. They locked the problems into place and financed them instead of writing them off, shutting them down, putting bankers in jail, closing the banks, breaking the mob, stripping out the bad assets, putting them under a rock in trust for the American people, sell them over 20 years or however long it takes. Then re-IPO the clean banks.
They didn’t do that. Instead they did what the Japanese did, which is they propped up the system, they kept their buddies in place. There was no real prosecutorial effort, and so we shouldn’t be surprised that we have the same result as Japan, because we went down the same path structurally. Now we printed more money than the Japanese did, but that’s not the solution, so it’s not going to work.
So having said all that, I just think that you will have this hyper-inflationary response at some point. Not right away, because it’s behavioral. The Fed needs to change behavior first. But when they change it, they may find it spins out of control, as it did in the ’70s. At that point the price of gold will soar or, if we go into a depression, the Fed may raise the price of gold as a way to create deflation. Either way, gold goes up in the end.
The return to the gold standard – a deliberate choice by today’s political leaders or an imposed event driven by market forces?
One is that we get to a gold standard by design. In other words, people look at the system and they say that it really is not sustainable, it really is based on confidence, but we’re in the process of eroding confidence. There is no exit from quantitative easing. We should say there’s no good exit. You can back away from it, but then you’ll implode the economy in a deflationary crash.
Or you can keep going and eventually cause a loss of confidence in the dollar and then have a hyper-inflationary crash, so you have a crash either way. One looks like the Great Depression, one looks like the late ’70s but worse. Those are the only two paths, but there’s no other path. There’s no way we can just sort of taper, reduce it, finesse it, try to get growth on a self-sustaining path.
The reason for that is we’re in a depression. And depressions are structural problems; they require structural solutions. You cannot use a liquidity solution for a structural problem. You need a structural solution. So there’s nothing the Fed can do to solve the depression or to change the structural problems in the U.S. economy. I mean, they’re assuming, they’re saying, “We’re gonna print money until unemployment gets to 6 and a half percent.” Who says there’s any relationship between printing money and unemployment? There’s no necessary relationship there. One’s monetary, one’s structural, so you need to do other things. So therefore they’re gonna keep going, but they think they’re right.
I may be a critic and I may be able to point out why they’re wrong, why their models are wrong and why this says “No Good Exit,” but they think they’re right and they’re gonna keep going and kind of drive the bus over the cliff.
Now, at that point, when the crisis emerges, they may have to go to a gold standard. They don’t want to, but they may have to, to restore confidence. But I’m very doubtful that they’ll do it as a matter of choice and say, “Look, we need to do this, let’s just do it now, let’s be honest, let’s be transparent, let’s be thoughtful.” You could do that but I think that’s very unlikely.
Financial repression is here …. interest rates are suppressed by the Fed each time they want to move higher (signaling unrest)
That’s what financial repression is. That’s what quantitative easing is. Every time the rates want to go up, the Fed can just buy more bonds. Of course, they buy bonds with printed money, but it just keeps the lid on rates.
I’ve spoken to people in the primary dealer community. They’re completely relaxed because they’re just middle-men; they’re intermediaries between the Fed and the banks; the institutional investors. They buy bonds from the Treasury, they can finance them or sell them to the Fed or they can sell them to institutions.
Now, the risk there is that they’ll get caught out. They’ve got long maturities, so they’ve got five-year notes or ten-year notes and they’re financing them overnight in the repo market. Well, what if the repo rate went up? All of a sudden the trade is profitable, it goes upside down, if the short-term rate gets above the long-term rate. Or if long-term rates go up they have capital losses on the bonds. It’s a very risky trade, but the Fed has told them, “We’ve got your back.” That’s what forward guidance is. When the Fed says “We’re not going to raise rates for two years or three years, etc., then you can do the overnight financing for three years and know that you’re going to be paying zero rates.”
They’ve taken the risks out of the trade. So the primary dealers are relaxed, the Fed is going to keep the lid on the interest rates.
If we follow the Japan scenario, and I expect we will, I can see ten-year no-rates coming down to 80 basis points. If they go from 250 to 80, that’s the greatest bond market rally in history.
So everyone is worried about the bond bubble, but they’re focused on nominal rates. They’re not looking at real rates. Nominal rates could come down a lot more as a way of getting real rates lower, because inflation is low it may even dip into deflation. So we could be set up. But in the long run rates would go way up and the country would go bankrupt and we’ll all have hyper-inflation. That could be two or three or four years away. Over the course of the next year you can see a very strong bond market rally.
Gold and silver are weak given the monetary context – how is that possible?
There are a number of reasons. There’s certainly some Central Bank manipulation. There’s some fundamental reasons having to do with what we’ve been talking about, which is deflation.
Gold should go down in a deflation environment initially. But if deflation gets bad enough, the government will make the price of gold go up because they get desperate to create inflation.
If you’ve tried everything, if you want inflation, and you’ve tried everything to create it, so you tried money printing, cutting rates, currency wars, Operation Twist, QE, forward guidance, nominal GDP targeting, you’ve tried everything, you still didn’t get the inflation. There’s one thing that always works, which is devaluing your currency against gold.
There could come a time when deflation gets so bad that the Fed and the treasury actually raise the price of gold, not to enrich gold investors, but to get close to generalized inflation. Because if gold goes up, silver and oil will go up along with it. It’s exactly what happened in 1933.
That’s one path. But the other, perhaps more likely path, is that the Fed just keeps printing money and finally succeeds in changing behavior, velocity of the turnover money picks up and inflation goes up on its own. Then gold will race way ahead of that. That’ll just change the psychology.
My advice for gold investors today is to kind of do what the Chinese do: just buy the dips. The Chinese bought a tonne, hundreds of tonnes of gold at the lows in July, July 2013.
Now, again, we had that smash in April and gold went down over 20 percent between April and June. Well, right there at the end of June, the Chinese were buyers, so my advice to investors: don’t use leverage. Buy physical bullion. Don’t buy paper gold. Do what the Chinese do, which is buy the dips, put it away and don’t read the papers.
So gold is volatile. You just have to get used to it. And if gold is down a lot, it’s because deflation has the upper hand.
But nothing moves in isolation. If gold traders down to, let’s say, $800 an ounce, that is a highly deflationary world. That probably means the stock market’s crashing, other commodities are going down, so you might actually like your gold better in that environment, because even though it went down a nominal space, it can outperform these other asset classes and still preserve wealth.
Of course, in the opposite case, if inflation takes off, we all know what’s going to happen: gold is going to go way up.
China is one of the most important owner of US dollars (through US Treasuries). How can they exit those huge positions and de-Americanize the monetary system?
China is actually reducing its purchases. They’re not dumping them. This idea that suddenly they’re going to dump two trillion dollars of treasury. That’s not going to happen. Because it would be too disruptive; they would shoot themselves in the foot. They would crash the market, the U.S. could actually freeze their treasury accounts.
People don’t realize that, but the president has the legal authority to freeze the Chinese accounts. We wouldn’t have to steal their money, just say, “Hey, we’re freezing it. We’ll get back to you later about when you can collect.”
You have to get back to them and make good behaviors, so to speak. And the Chinese know that, so they’re not gonna go there because the U.S. has very powerful tools to preserve its interests and preserve its markets.
But at the margin, as they get more reserves, as they run a continuing current accounts surplus, they get direct foreign investments. They get their hands on more dollars. They don’t have to invest new dollars in treasuries. What they’re doing is swapping it for Euros, they’re investing very heavily in Europe, they’re buying direct assets, they’re buying mines, they’re buying companies, buying stocks, etc.
So they’re not dumping what they have, but they’ve slowed down the purchases. They’re selling a little, and most importantly, at the margin they’re diversifying into other assets.
That’s going to put a lot of pressure on U.S. interest rates, because in the past the Chinese have been buyers, so the question is: Who’s going to step in and fill the void, so to speak, as what’s called “the buyer of last resort” of treasury? Well, the answer, of course, is the Fed.
The London - China Gold Conduit — A Major Financial Coup D’etat
Oct 19, 2013 - 12:21 PM GMT
By: Michael_J_Kosares
The United Kingdom’s gold exports to Switzerland jumped from 85 tonnes to 1,016 tonnes in the first eight months of 2013 — a twelve times increase. Some bullion market watchers attribute the huge increase to withdraws or sales from ETFs — an explanation that covers only half the story…….if that.
Switzerland, according to the Koos Jansen website, has exported nearly 500 tonnes of gold to Hong Kong through July, 2013. Hong Kong, in turn, has exported over 1200 tonnes of gold to the Chinese mainland over the same period. Now, with this report of ramped-up exports from the United Kingdom, another piece of the puzzle falls into place and we begin to get a fairly clear picture what these gold mobilizations entail. Switzerland and Hong Kong are acting as a conduit of western gold on its way to China — and probably Chinese central bank reserves.
To what extent this gold mobilization is the result of some yet-to-be-identified external pressure on London’s bullion banks, or simply business as usual, remains to be determined, but gold movements of this size usually do not occur in a vacuum. Hedge funds have been in the gold ETF liquidation mode since April, at the behest, it seems, of certain bullion banks that have issued generalized ETF sell recommendations to their clientele (which includes the funds). The ETF selling has been blamed repeatedly for the rapid drop in the price. If all of this has been a ploy to drive down the price on paper and channel substantial amounts of physical gold to China, who is the winner in this game and who is the loser? And why is it being done?
The gold market is incurably opaque (no matter how diligent or persistent the arguments to the contrary that it isn’t or that it should not be), and that is probably why so many are intrigued by it. Yet, at the same time, those who innocently own gold for asset preservation purposes can rest assured that they will never become collateral damage in these affairs as long as they do not allow themselves to lose patience or forget the reasons why they purchased gold in the first place.
Gold is never sought by those who think all is well with the world. It is sought by those who believe that things could go wrong, or indeed, that things have already gone very badly. That true believer might be someone of incredible private wealth, as was the case with Bernard Baruch in the 1930s, or it might be a great nation-state like Germany or China today. When the sitting Secretary of the Treasury asked Bernard Baruch why he was buying so much gold, the reply came quickly that he “was commencing to have doubts about the currency.” China and Germany, no doubt, are acting on doubts of their own. Up until today, we were unaware of the degree to which those doubts had manifested themselves in the hidden corridors of the world gold market. . . .Now we know. In the first eight months of 2013 China produced 270 tonnes of gold from its mines, and theoretically almost four times that amount through its London – Zurich – Hong Kong gold conduit. In future years, this will likely be considered a major financial coup d’etat.
By Michael J. Kosares
Michael J. Kosares , founder and president
USAGOLD - Centennial Precious Metals, Denver
Michael J. Kosares is the founder of USAGOLD and the author of "The ABCs of Gold Investing - How To Protect and Build Your Wealth With Gold." He has over forty years experience in the physical gold business. He is also the editor of Review & Outlook, the firm's newsletter which is offered free of charge and specializes in issues and opinion of importance to owners of gold coins and bullion. If you would like to register for an e-mail alert when the next issue is published, please visit this link.
http://www.marketoracle.co.uk/Article42754.html
The Ongoing Depression Could Force A Return To The Gold Standard
Gold Silver Worlds | October 19, 2013
This is an excellent interview with Jim Rickards. He explains that we are in a depression currently. The answers to that problem from the US government and central bank will likely force them to impose monetary discipline through the return to a gold standard. The longer the dollar based monetary system is suppressed, the more likely that market forces will induce a dollar collapse.
This piece provides deep insights in a complex matter, brought in an easy to understand way. Courtesy: Jim Rickards and FutureMoneyTrends.
We are in a depression although it does not “look” or “feel” as such.
First of all I’d say this depression started in 2007. 2008 was the panic and it was an emergency liquidity response to that, but the roots of this really go back to 2007. That’s when the sub-prime crisis erupted, that’s when the Bear Stearns hedge funds melted down. That’s when the Fed first started in to cut the discount rate and respond a little bit, even though they were way behind the curve and didn’t see it coming.
So the depression started in 2007. It could be over tomorrow if we had the right policies, but we don’t have the right policies. It will continue indefinitely.
We look like Japan. Japan has said, people talk about the lost decade, we’re in the third lost decade; it’s been over 20 years of depression, depressionary symptoms or depressionary economy in Japan.
The U.S. is now in the same mode, it’s kind of ironic because for decades Bernanke and other scholars criticized the Japanese, saying, “What’s the matter with you guys, don’t you know how to run monetary policy, don’t you know how to get out of a depression?” Then they said, you know, in 2007, “We are going to avoid the mistakes of Japan.” But we’ve made every single mistake that Japan made.
We should have shut down banks in 2008. We didn’t. We propped them up instead of shutting them down, which is exactly what the Japanese did. They locked the problems into place and financed them instead of writing them off, shutting them down, putting bankers in jail, closing the banks, breaking the mob, stripping out the bad assets, putting them under a rock in trust for the American people, sell them over 20 years or however long it takes. Then re-IPO the clean banks.
They didn’t do that. Instead they did what the Japanese did, which is they propped up the system, they kept their buddies in place. There was no real prosecutorial effort, and so we shouldn’t be surprised that we have the same result as Japan, because we went down the same path structurally. Now we printed more money than the Japanese did, but that’s not the solution, so it’s not going to work.
So having said all that, I just think that you will have this hyper-inflationary response at some point. Not right away, because it’s behavioral. The Fed needs to change behavior first. But when they change it, they may find it spins out of control, as it did in the ’70s. At that point the price of gold will soar or, if we go into a depression, the Fed may raise the price of gold as a way to create deflation. Either way, gold goes up in the end.
The return to the gold standard – a deliberate choice by today’s political leaders or an imposed event driven by market forces?
One is that we get to a gold standard by design. In other words, people look at the system and they say that it really is not sustainable, it really is based on confidence, but we’re in the process of eroding confidence. There is no exit from quantitative easing. We should say there’s no good exit. You can back away from it, but then you’ll implode the economy in a deflationary crash.
Or you can keep going and eventually cause a loss of confidence in the dollar and then have a hyper-inflationary crash, so you have a crash either way. One looks like the Great Depression, one looks like the late ’70s but worse. Those are the only two paths, but there’s no other path. There’s no way we can just sort of taper, reduce it, finesse it, try to get growth on a self-sustaining path.
The reason for that is we’re in a depression. And depressions are structural problems; they require structural solutions. You cannot use a liquidity solution for a structural problem. You need a structural solution. So there’s nothing the Fed can do to solve the depression or to change the structural problems in the U.S. economy. I mean, they’re assuming, they’re saying, “We’re gonna print money until unemployment gets to 6 and a half percent.” Who says there’s any relationship between printing money and unemployment? There’s no necessary relationship there. One’s monetary, one’s structural, so you need to do other things. So therefore they’re gonna keep going, but they think they’re right.
I may be a critic and I may be able to point out why they’re wrong, why their models are wrong and why this says “No Good Exit,” but they think they’re right and they’re gonna keep going and kind of drive the bus over the cliff.
Now, at that point, when the crisis emerges, they may have to go to a gold standard. They don’t want to, but they may have to, to restore confidence. But I’m very doubtful that they’ll do it as a matter of choice and say, “Look, we need to do this, let’s just do it now, let’s be honest, let’s be transparent, let’s be thoughtful.” You could do that but I think that’s very unlikely.
Financial repression is here …. interest rates are suppressed by the Fed each time they want to move higher (signaling unrest)
That’s what financial repression is. That’s what quantitative easing is. Every time the rates want to go up, the Fed can just buy more bonds. Of course, they buy bonds with printed money, but it just keeps the lid on rates.
I’ve spoken to people in the primary dealer community. They’re completely relaxed because they’re just middle-men; they’re intermediaries between the Fed and the banks; the institutional investors. They buy bonds from the Treasury, they can finance them or sell them to the Fed or they can sell them to institutions.
Now, the risk there is that they’ll get caught out. They’ve got long maturities, so they’ve got five-year notes or ten-year notes and they’re financing them overnight in the repo market. Well, what if the repo rate went up? All of a sudden the trade is profitable, it goes upside down, if the short-term rate gets above the long-term rate. Or if long-term rates go up they have capital losses on the bonds. It’s a very risky trade, but the Fed has told them, “We’ve got your back.” That’s what forward guidance is. When the Fed says “We’re not going to raise rates for two years or three years, etc., then you can do the overnight financing for three years and know that you’re going to be paying zero rates.”
They’ve taken the risks out of the trade. So the primary dealers are relaxed, the Fed is going to keep the lid on the interest rates.
If we follow the Japan scenario, and I expect we will, I can see ten-year no-rates coming down to 80 basis points. If they go from 250 to 80, that’s the greatest bond market rally in history.
So everyone is worried about the bond bubble, but they’re focused on nominal rates. They’re not looking at real rates. Nominal rates could come down a lot more as a way of getting real rates lower, because inflation is low it may even dip into deflation. So we could be set up. But in the long run rates would go way up and the country would go bankrupt and we’ll all have hyper-inflation. That could be two or three or four years away. Over the course of the next year you can see a very strong bond market rally.
Gold and silver are weak given the monetary context – how is that possible?
There are a number of reasons. There’s certainly some Central Bank manipulation. There’s some fundamental reasons having to do with what we’ve been talking about, which is deflation.
Gold should go down in a deflation environment initially. But if deflation gets bad enough, the government will make the price of gold go up because they get desperate to create inflation.
If you’ve tried everything, if you want inflation, and you’ve tried everything to create it, so you tried money printing, cutting rates, currency wars, Operation Twist, QE, forward guidance, nominal GDP targeting, you’ve tried everything, you still didn’t get the inflation. There’s one thing that always works, which is devaluing your currency against gold.
There could come a time when deflation gets so bad that the Fed and the treasury actually raise the price of gold, not to enrich gold investors, but to get close to generalized inflation. Because if gold goes up, silver and oil will go up along with it. It’s exactly what happened in 1933.
That’s one path. But the other, perhaps more likely path, is that the Fed just keeps printing money and finally succeeds in changing behavior, velocity of the turnover money picks up and inflation goes up on its own. Then gold will race way ahead of that. That’ll just change the psychology.
My advice for gold investors today is to kind of do what the Chinese do: just buy the dips. The Chinese bought a tonne, hundreds of tonnes of gold at the lows in July, July 2013.
Now, again, we had that smash in April and gold went down over 20 percent between April and June. Well, right there at the end of June, the Chinese were buyers, so my advice to investors: don’t use leverage. Buy physical bullion. Don’t buy paper gold. Do what the Chinese do, which is buy the dips, put it away and don’t read the papers.
So gold is volatile. You just have to get used to it. And if gold is down a lot, it’s because deflation has the upper hand.
But nothing moves in isolation. If gold traders down to, let’s say, $800 an ounce, that is a highly deflationary world. That probably means the stock market’s crashing, other commodities are going down, so you might actually like your gold better in that environment, because even though it went down a nominal space, it can outperform these other asset classes and still preserve wealth.
Of course, in the opposite case, if inflation takes off, we all know what’s going to happen: gold is going to go way up.
China is one of the most important owner of US dollars (through US Treasuries). How can they exit those huge positions and de-Americanize the monetary system?
China is actually reducing its purchases. They’re not dumping them. This idea that suddenly they’re going to dump two trillion dollars of treasury. That’s not going to happen. Because it would be too disruptive; they would shoot themselves in the foot. They would crash the market, the U.S. could actually freeze their treasury accounts.
People don’t realize that, but the president has the legal authority to freeze the Chinese accounts. We wouldn’t have to steal their money, just say, “Hey, we’re freezing it. We’ll get back to you later about when you can collect.”
You have to get back to them and make good behaviors, so to speak. And the Chinese know that, so they’re not gonna go there because the U.S. has very powerful tools to preserve its interests and preserve its markets.
But at the margin, as they get more reserves, as they run a continuing current accounts surplus, they get direct foreign investments. They get their hands on more dollars. They don’t have to invest new dollars in treasuries. What they’re doing is swapping it for Euros, they’re investing very heavily in Europe, they’re buying direct assets, they’re buying mines, they’re buying companies, buying stocks, etc.
So they’re not dumping what they have, but they’ve slowed down the purchases. They’re selling a little, and most importantly, at the margin they’re diversifying into other assets.
That’s going to put a lot of pressure on U.S. interest rates, because in the past the Chinese have been buyers, so the question is: Who’s going to step in and fill the void, so to speak, as what’s called “the buyer of last resort” of treasury? Well, the answer, of course, is the Fed.
Videolink;
http://goldsilverworlds.com/economy/the-ongoing-depression-will-force-a-return-to-the-gold-standard/
Short Selling Banks Covering on Gold?
October 18, 2013
Gene Arensberg
Gotgoldreport
HOUSTON – Editor’s note: I have been traveling and distracted on other, very important “business,” such as the scene below at the ranch. I actually began the piece below on October 15, and finally got around to finishing it this morning. That will explain the apparently odd syntax in places. Staff did not want to scrap the piece. Anyway, below is the scene from the ranch that holds my attention better than Washington D.C. political knuckleheads.
The original piece began: Judging by our mail a good many of you have been discouraged by recent news events such as the Goldman Sachs call by Jeffrey Currie that gold is a “slam dunk sell;” by the on-again/off again threat by the Fed that they might reduce monetary stimulus; by the debt limit rhubarb in Washington, among other distractions.
The action in gold, silver and mining shares hasn’t helped very much, including the strange, blatant market selling action on Tuesday, October 1 (gold down $40 in a couple hours) and again on Friday, October 11 right after the COMEX open in New York when a reported single 5,000-lot sell “at market” took December gold down $25 in a few minutes, with a 10-second circuit breaking halt in the middle of the trade. Below is an hourly gold chart for quick reference.
ust a side point here. Should we even bother to mention that no single trader should be able to dump 5,000 COMEX futures contracts into the market in a single trade? The supposed limit for all traders in the spot month is no more than 3,000 contracts, as we noted before after the April 12 smash of gold then. Of course the Commodities Futures Trading Commission (CFTC) grants exemptions to some elite traders of futures – the ones who can claim they are doing “bona fide hedging.” There is supposed to be paperwork involved when a trader goes over-limit and the CFTC says they scrutinize hedging exemptions, but it’s all kept perfectly opaque to the public and therefore invisible to ordinary market watchers.
Further into this tangential discussion on the October 11 sell-down, 5,000 lots is the equivalent of 500,000 ounces of gold with a notional value of more than half a billion U.S. dollars (about $635 million at $1270 gold). A 5,000 lot trade requires at minimum enough capital to meet an initial bond requirement of roughly $30 million, so the selling player was no small fry.
Someone tried to send a message in the gold market and, by definition, that someone was “big”. ‘That someone’ has a big bank account and is capable of exceeding the CFTC (often ignored) position limits. ‘That someone’ had little or no fear that their oversized sell raid might be mistaken as “trading for effect,” which is also supposed to be illegal. (Pause for laughter.) It was the kind of trade where the number of participants capable of throwing that much weight around is low. They could be counted on both hands.
GartmanImageAs our friend Dennis Gartman (who loves to ridicule a consistent unnamed strawman he calls "gold bugs" or more derisively, just "bugs," but is nevertheless long gold in yen terms), pointed out the open interest on the COMEX actually rose slightly concurrent with that sale on October 11, so chances are it was not a liquidation of a long position, either by choice, force liquidated or otherwise. It was someone putting on new paper shorts – betting on the downside in a big way. (Edit: Recall that gold was around $1290 when that trade hit the COMEX.)
(Edit again: We reason that yesterday’s sharp rally, taking gold back up to above $1300 very quickly in a 4:00 am bull rush, was in part an unwinding of the shorts put on October 11, by the way.)
Now, which large trader can we think of that might have had reason to “send a message” in the gold market on October 11? It’s all opaque anyway and no trader is going to own up to it, but if we had to guess who the miscreant short seller of gold futures was then, we would point an accusing finger Currie Jeff Goldman raiderat Goldman Sachs, whose head of commodities research (the guy who feeds the traders, like a head trader), Jeffrey Currie, had arrogantly called gold a “slam dunk sell” at a conference in London. He was joined by other gold trading banks around the same time of that call at the London conference in one way or another (including Morgan Stanley and Credit Suisse analysts). It was a kind of bear full court press, in other words, coinciding with a budget impasse in Congress and a looming fight over the U.S. “debt limit.”
But are there too many bears on the same side of the boat?
Rule Rick small smileNow, if we may be permitted a side bar off this tangent, we cannot help but add here that Sprott Global’s Rick Rule recently told Henry Bonner that: “I suspect the call on the part of Goldman Sachs and Morgan Stanley will resemble their disastrous calls about collateralized mortgage bonds and real-estate heading into the 2007 and 2008 collapse. I think this call on gold is just as ill-timed and ill-advised.”
(Edit: Good call so far, Rick.) We’re all pulling for Rule in this argument, to no one’s surprise, and I said as much in a Dow Jones MarketWatch comment October 16. Quoting from that article, it read:
“Conventional wisdom is that gold will sell off on the announcement of a final debt-limit increase,” said Gene Arensberg, editor of the Got Gold Report. But prices having dropped to lows in the $1,250s suggest that “conventional wisdom may get its head handed to it with so many leaning in one direction” — toward a gold selloff, he said. “In other words, with so many people leaning toward the idea that gold will sell off on a debt-limit deal, it has me looking for the exact opposite,” said Arensberg. “I think gold would have already broken much lower if that view was ‘real’.” Given all that, he said he would not be surprised by an initial spike lower in gold prices, followed by “an outside reversal and rally with so much buying coming in from Asia.”
So far so good, on that notion also. It does look like a short covering rally has begun, but the sheer number of bearish analysts from gold trading banks all going public at the same time at the beginning of the month suggests there are sure a lot of big money bearish bets out there. Why else would all these very highly paid and influential market gurus all be out there talking their books at the same time, if not to influence the market just a bit and if they can?
Goldman’s, or more accurately, Curries' call could ultimately be “right” of course, but for the record, and in answer to those of you who have written in with anxious comments recently, Goldman, Morgan Stanley and Credit Suisse are merely talking their book. Sure, they have reputations to protect and they are often right, but they could be spectacularly wrong too as my buddy Rick already pointed out.
The gold selling banks rely on public and institutional reaction to follow their bearish lead. They do indeed wield a big stick, especially when they act in unison on the selling side of things, but as big as they are, the global gold market dwarfs them.
The banks might be able to move the market their way for a short while (no pun), but the gold market will only stay knocked down to irrationally low levels for brief periods. That’s because abnormally low prices have consequences. Producers hold up on selling. Investors with a long term view take advantage. Arbitrageurs take advantage of higher premiums in other markets to lock in riskless profits and so on. The effect is that, as Rule so often says, the cure for low prices is low prices.
So far, the people of India are apparently not buying into the gold selling banks call for lower gold – not if premiums are any guide. According to an October 15 story in the Times of India gold has become so scarce in country that people had to pay $100 an ounce over the London Fix recently, a record high premium according to some sources. (A stunning number.)
The rumor mill is buzzing about ‘enormous buying of physical gold’ in Singapore, Hong Kong and in mainland China. We noted the stories in recent weeks regarding heavy, consistent buying of physical gold, highlighted in the work done recently by Jan Skoyles of the Real Asset Co. along with Koos Jansen.
Traders and analysts we respect suggest that China alone accounts for perhaps 1,000 tonnes of gold being bought per year now or a pace of 83 tonnes per month. Some analysts believe that China now has acquired in excess of 3,000 tonnes of gold quietly, more than triple their last update of gold holdings in 2009.
(Pause for effect.) We could go on and on, but as my favorite uncle might have put it: Here’s the deal. On the one hand we have short term bullion trading banks trying to knock gold down to make their paper shorts more profitable while most of Asia is taking advantage to score as much of the physical metal as they can on any price dips.
Memo to the banks: The Asians are buying, big time.
All of this short term angst; the short term bearish full court press being put on by already short bullion trading banks (who either actually believe the central planners have saved everyone's economic bacon or ... OR, willfully ignore that central banks are printing oceans of new currency, which has to have unintended consequences sooner or later); ... is a distraction.
My long term view has not changed. Global debasement of fiat currencies is almost certainly going to lead to a confidence crisis in most, if not all fiat currencies and the governments that print them. We cannot know when, in advance, but some pretty smart people I respect say that once some unknown threshold is crossed and the behavior of the market participants changes, the world will see “The Big One” start to unfold.
“The Big One” is our term for a coming economic storm; a genuine 1970's style global collapse in confidence for all fiat currencies. Just below is a chart of the U.S. Dollar Index in daily terms for reference.
(Edit: That zone near 79 is beginning to look important, is it not? Is the gold market beginning to discount something a bit farther out in time?)
Those experts say that once the confidence powder keg detonates it can happen with lightening speed. And, when it does we are all likely to be glad for the real deal physical gold and silver we have managed to squirrel away.
Until then the attempts to manhandle the market by the likes of Jeffrey Currie and some of the other net short bullion trading banks are giving us (and apparently a large number of Asian investors) a second chance to buy some "metal insurance" at more reasonable prices.
Arensberg Gene CaptainAs my favorite uncle used to say: Some gifts come unnoticed and unwrapped.
Rig for heavy weather. A ‘storm’ is coming.
Postscript: As of this writing, still no schedule for CFTC commitments of traders data to resume, but we will keep an eye out for it.
Yesterday the CFTC put out a press release which read: "The U.S. Commodity Futures Trading Commission’s (CFTC) announced today that the Commitments of Traders and Cotton on Call reports previously scheduled for release on October 17th and October 18th respectively, will not be published this week. The CFTC is performing the work necessary to resume publishing these and other reports and will announce a revised schedule once more information becomes available."
While we wait for the precious metals markets to return to a more normal state, you'll find us here (below at the ranch) more and more! That will explain if we seem scarce from time to time. Hold down the fort.
- See more at: http://www.gotgoldreport.com/2013/10/short-selling-banks-covering-on-gold.html#sthash.bhOoA0n4.dpuf
Want Cheaper Healthcare? Just Make Less Money
By GARRETT BALDWIN, Economist
Money Morning
October 15, 2013
Over the weekend, the San Francisco Chronicle delivered a stunning message that discourages and demotivates American workers from earning more income and promotes greater government dependency.
It's all thanks to sloppy incentives created by the Affordable Healthcare Act.
The Chronicle reported that Karen Pollitz, a senior fellow at the Kaiser Family Foundation, said last week that workers in California should consider reducing their 2014 income and work hours in order to qualify for Obamacare subsidies.
"If they can adjust (their income), they should," said Pollitz. "It's not cheating, it's allowed."
For a California family to fall under the 400% of poverty-level ceiling (the threshold to qualify for government assistance), the family's net income must be at or below $62,040. However, if they make just $1 more than this amount, they will not qualify for thousands of dollars in public assistance to purchase healthcare.
Earning $62,041 would trigger a massive increase in taxes and cost of healthcare premiums for the family.
In progressive terms, that amounts to a loss of a subsidy worth more than $10,000 each year for a family of four.
This is all part of a perverse welfare system that has for decades discouraged economic advancement.
As these Obamacare incentives now begin to creep into the lives of the middle class, the government is playing an extremely dangerous game with state dependence. This will have a staggering impact on the economic health of the middle class.
Incremental Income Displacement
For decades now, a debate has swelled on the influence of welfare on the motivations of Americans to find work or advance their careers to the next level. Some critics have argued that welfare discourages work and enables some to live off the production of their neighbors.
Meanwhile, supporters of the system believe it is a vital safety net that prevents Americans from living in squalor and limits economic inequality.
While the welfare system may have the best intentions, it is poorly designed. It's a flawed system that creates disincentives for workers to climb the ladder of economic development.
Then individuals decide to stay at lower-paying jobs to maintain welfare benefits instead of taking better pay, more responsibility, and freeing themselves of government dependence - a line known as the "welfare cliff."
Just take this example from Pennsylvania...
Gary Alexander (the state's secretary of Public Welfare) explained in 2012 that a single mother is better off making $29,000 than she is making $69,000 thanks to the massive influx of public programs available to support her and two children.
At $29,000 in gross income, she will end up with $57,327 in pay and social benefits. But as she begins to increase her gross income (or take-home pay), those benefits erode, and her net income and benefits begin to shrink.
She would not make the same amount of money to pay her own way until she adds another $40,000 in gross pay. In fact, her net income at $69,000 is still lower than the benefit-laden salary above since she would only have $57,045 after taxes.
The welfare-related benefits remove the incentive for her to take a new, better-paying job - even if the new position offers greater career-building skills and development. That's how the flawed welfare system gets people hooked to government programs.
Now Obamacare will allow this problem to slowly creep into the economic decisions of the middle class. This will trigger a serious impact on entrepreneurialism, the public debt, and growth in the economy.
Obamacare's Creeping Terror on the Middle Class
Pollitz encouraged any family thinking of getting subsidized health insurance from Covered California in 2014 to cut their incomes down to qualify. But Pollitz failed to understand the consequences of her suggestion...
When Americans make less money, they contribute less to the public treasury. However, these same Americans will be pulling thousands of dollars out of the pool and placing a greater strain on available resources.
Over time, this will create a perpetual downward spiral where more is being consumed than being produced. The only way to stop-gap the problem is to borrow more, tax more, and spend more, while politicians pretend that the collective drain on society isn't a problem.
Americans will have to make the irrational economic decision to pay more and attempt to earn more money through extra work if the nation wishes to survive the consequences of this law. It is all part of an ongoing trend that continues to plague society as we move from a productive class to a privileged class, where people expect more money and benefits for less work.
In the United States, we used to have the world's greatest entrepreneurial class in the world. We built bridges and buildings and businesses.
Now, we just reach into one another's pocket.
And Obamacare is a shining example of the perverse incentives Congress continues to peddle.
Go here to find out what Obamacare will do to your wallet - and how to protect your money today.
http://moneymorning.com/2013/10/15/want-cheaper-healthcare-just-make-less-money/
Structured Finance: Sovereign Debt, Banks, and Gold
Oct 18, 2013 - 01:50 PM GMT
By: Janet_Tavakoli
Global Research
The U.S never really minded if a Latin American oil minister took a kickback here or a bribe there to grease the wheels for a foreign oil company or an importer of hard liquor. Latin American taxpayers wouldn’t notice. The money was really just an upfront golden parachute. No U.S. executive ever went to jail just because he voted himself a huge separation bonus as a corporate raider took over a company. Shareholders didn’t complain. The only difference between an executive and a Latin American honcho was the executive got his money after he lost power. But the U.S. minded a lot after Alan Garcia won Peru’s presidential election in 1985. Garcia announced to the world that Peru couldn’t pay back its debt. Garcia was going to mess with U.S. banks, and that was definitely not okay.
Peru’s $14 billion in foreign debt was equivalent to Peru’s entire annual national income. Peru hadn’t made principal payments on its commercial debt in more than a year and was $475 million in arrears on interest payments, 36% of which was owed to U.S. banks. All the foreign bankers that had lent money to Peru knew it couldn’t pay them back. But Peru’s new leader committed the cardinal sin of saying it out loud. Garcia said Peru was honest and would repay, but Peru’s expected $3.1 billion in exports wouldn’t cover principal and interest payments of $3.7 billion due in 1985.
U.S. Banks Balk at Write-Downs
Six months into Garcia’s presidency, U.S. bank regulators decided not to declare Peru’s debts as impaired, since Garcia hadn’t yet clarified his new policies. In other words, they stalled. If the loans were “value impaired,” U.S. banks would have to build up reserves and report lower earnings.
Garcia advocated a Peru-first strategy. Lowered debt payments meant he’d have more money to invest towards economic growth for Peru. But in the process tiny Peru would draw attention to the Latin American debt problem and jeopardize bonuses for U.S. banking executives. Who did this Garcia guy think he was anyway?
In March 1986, the week after Peru’s central bank announced it withdrew all of Peru’s deposits of gold and silver from European and U.S. banks, Garcia kicked out the International Monetary Fund (IMF) and declared:
“All successful revolutions require a foreign enemy. The [IMF] is my enemy.”
Garcia proposed to pay only 10 percent of Peru’s export earnings each year to service Peru’s foreign debt. At that rate, Peru wouldn’t ever pay back all of its interest much less its principal.
U.S. banks had to reserve 15% against their exposure to Peru. It was chump change, but it drove U.S. banks nuts. Tiny Peru wasn’t close to being the U.S.’s largest Latin American debtor, and it wasn’t even the worst. But Alan Garcia had decided to restructure Peru’s debt without so much as genuflecting at the Fed’s doorstep. Moreover, Garcia repatriated his gold, and the U.S. had kicked the gold standard to the curb more than a decade earlier. The U.S. dollar was the world’s reserve currency, and king of the petrodollar. Peru was revealing chinks in its armor. They had to teach this guy a lesson.
The Global Gang: Banks, the IMF and the World Bank
The IMF warned Peru that if it didn’t accept IMF-style austerity and debt, it would cut off assistance, and the World Bank would cut Peru off, too. Moreover 200 creditor banks would take action. Then they cut all credit to Peru, even short-term credit needed to finance foreign trade.
A year later, Peru was in economic chaos. Peru relented. It still didn’t have the means to pay all of the interest owed on foreign debt. But now, just like the other Latin American debtors, Peru shut up about it.
Peru got its national credit card back overnight. The economic problems didn’t go away, and by the 1990’s it was in hyperinflation, but the most important objective had been accomplished. Americans weren’t reading about Peru anymore.
Alan Get Your Gang (Next Time)
Alan Garcia wasn’t wrong; he just had a lousy strategy, and he was too early. No single Latin American country could defy U.S. banks and win, much less a tiny country like Peru. Garcia didn’t have enough clout; he didn’t owe the U.S. enough money. The U.S. banks and their allies at the IMF and World Bank ganged up on him. He needed a gang of his own. If he had negotiated a joint strategy with Mexico, Brazil, and Venezuela, their combined debt would have given them real clout.
By the late 1980’s U.S. banks could no longer pretend that loans to Latin America weren’t seriously “value impaired,” a regulatory term that in this case meant banks better find money they don’t have fast to add to reserves. But that would mean revealing banks’ problems, unseating CEOs, and cutting bonuses.
Most of Citibank’s equity would have been wiped out. Losses at Bank of America and Manufacturers Hanover (now part of JPMorgan Chase) would have wiped out all of their equity and then some.
Tavakoli’s Law of Sovereign Bailouts
Structured finance in the form of Brady Bonds, named for U.S. Treasury Secretary Nicolas Brady, mitigated what otherwise would have been a horrific write-down for U.S. banks. For example, Mexico owed $20 billion. Half was forgiven. A zero coupon U.S. Treasury bond trading at around $2 billion secured a bond’s $10 billion face value, and Mexico agreed to service the interest payments.
None of this required banks to get any smarter or better disciplined. Ongoing taxpayer subsidies and fantasy accounting keep the U.S. banking system alive. Remember Tavakoli’s Law of Sovereign Bailouts:
“Never call bad debt bad debt—at least not in public. “Restructure” bad loans to good loans by lending bad debtors more money. Then bad debtors can pay interest on bad loans, and banks won’t have to admit loans are impaired and increase reserves. [When substantial haircuts are involved, the party/s with the most clout will determine the size of the haircut and they will decide when that occurs.] This type of restructuring is a bailout that protects the egos, status, and bonuses of banking executives and their cronies. Done properly you will transfer wealth from lower classes to the upper classes, preferably executives in the global banking industry.”
If you’re a sovereign debtor, you may want to do something more prudent for your country, and you might be some sort of crazy idealist who thinks the truth actually matters. But remember. If you break Tavakoli’s Law of Sovereign Bailouts, banks and their water-carriers at the IMF and World Bank will cut all your credit lines. They’ll cut you until you stop screaming and shut up. All bailouts will be done on their schedule and in their own way to minimize the impact on banks in countries with the most clout.
The Eurozone: Inherently Unstable
If you have a common fiat currency union with a central authority setting policy based on economic conditions in a diverse geographic area, you must have a political and fiscal union. If you don’t, you won’t have a fiscal policy and ability to make transfer payments to rebalance the effects of the monetary policy. The European Union is a monetary union without the political policy and fiscal union, and it is inherently unsustainable.
That’s an elegant way of saying that small countries like Greece will always get the short end of the stick in this kind of system.
The five countries with the largest economies by gross domestic product (GDP) in the European Union (EU) are Germany (€2.666 trillion), France (€2.032 trillion), the UK (€1.927), Italy (€1.566), and Spain (€1.029). Greece is one of the smaller countries with a GDP of only €194 billion. Unlike the UK which uses British pounds as currency, Greece doesn’t have an independent sovereign currency. Greece is part of the Eurozone, and its former currency, the drachma, was replaced with the Euro.
The Eurozone’s so-called troika is comprised of the IMF, the European Commission, and the European Central Bank. The troika has already arranged two bailouts for Greece totaling €246 billion.
Greece has been trying to clean up its economy and reform its pension and tax collection structure, but it doesn’t have the industry, energy independence, alternative income sources, or assets to pay-off its debt.
The IMF’s False Narrative on Greece
The IMF, Greece’s “friend,” was embarrassed in June when the Wall Street Journal’s Martina Stevis reported that a “strictly confidential” internal IMF document revealed the IMF lied when it said it thought Greece’s debt levels were “sustainable,” meaning the debt could be completely repaid in a timely manner. The document revealed Greece failed three out of four of the IMF’s assistance criteria. [Note: The IMF released the report, "Ex Post Evaluation of Exceptional Access under the 2010 Stand-By Arrangement," to the public in June 2013, after the WSJ reported on its contents. You can scroll down to read the document online for free.]
The IMF forecast a 5.5 percent decline in Greek economic output for 2009 to 2012. But Greece lost 17 percent in real gross domestic output. The forecast also called for only 15 percent unemployment in 2012; actual unemployment was 25 percent. The IMF fabricated a rosier forecast to build consensus to pressure Greece into compliance with the bailouts.
The IMF’s document also revealed that Greece didn’t benefit from the bailout. The wider Eurozone benefited. Banks and investors didn’t have to recognize losses on Greek debt that couldn’t be repaid. If banks marked down all Eurozone debt to realistic levels, many of the banks would fail.
Greece Needs a Gang
Unlike Peru, Greece isn’t squawking about not paying back this bad debt or restructuring the debt on Greece’s terms. Instead, Greece has begun talks with the troika for a third multibillion-euro bailout. What choice does it have? It can’t defy the troika alone. It can cede from the Eurozone and use its own currency, but if it does, it will face the “Peru punishment.”
Thinking in the Eurozone is very far from a balanced solution. Spain and Portugal have engaged in reforms, too, but debt levels have risen for both countries. Alone, Greece doesn’t have bargaining power. But if it worked out a joint strategy with Italy, Spain, and Portugal, it would have a chance. That might include leaving the Eurozone and going through the pain of rebuilding its economy on its own with better terms than the troika will offer.
Since the Eurozone doesn’t have a Central Bank that can issue Eurobonds, a Euro Brady Bond solution isn’t feasible. Even if commingled Eurobonds were possible, Germany balked at the idea that it could inherit 27% of the debt (based on an initial proposal).
German Chancellor Angela Merkel said nein on the grounds that Germany didn’t accumulate the debt. That’s true. Germany was merely a country that glossed over Greece’s ineligibility to enter the Eurozone in the first place. Greece’s economy was too weak, and Greece engaged in derivatives transactions that were essentially a disguised loan. In February 2010, the National Bank of Greece removed the prospectus for Titlos PLC, the financial engineering vehicle arranged for it by Goldman Sachs International, from its web site.
Germany was eager to give Greece a credit card to buy German goods and services. Now Germany is happy to help with “refinancing” at a reasonable interest rate via guarantees. Germany wants aid on its terms, not Greece’s.
Germany’s banking system has its own problems. Deutsche Bank is wildly overleveraged and undercapitalized. The bank persuades doubters at the door.
The U.S. Fed has provided hidden bailouts to European banks. One small example is the tens of billions of dollars of transfer payments from U.S. taxpayers to Societe General and Calyon as part of the bailout of AIG. The Fed’s lending to the global banking system through front and back doors has distorted the value of U.S. dollar. Foreign central banks engage in money printing to keep in step. As a result, we’ve inflated distorted asset bubbles on a scale never before seen in the history of the world. This is the reason many investors have diversified part of their portfolio into gold, a form of money still used in the global banking system.
Endnote: In the next and final segment of this series, I’ll discuss the United States. See also:
Structured Finance: Price Manipulation Includes Silver and Gold (Part One)
Who Says Gold Is Money? (Part Two)
Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold (Part One) – March 6, 2010 and Part Two - March 12, 2010
P.S. It’s unlikely–but not impossible–that anyone in Washington would ever allow the U.S. to experience a technical default just so banking cronies could trigger a technical default on over-the counter (OTC) sovereign credit default swaps referencing the United States. These contracts usually settle in euros, but you can write the terms so that they settle in gold. CDS contracts can have custom language for defaults and restructurings that trigger (or obviate) contract payments. Counterparties of JPMorgan Chase in credit default swaps on Argentine debt found that out the hard way, albeit those contracts didn’t settle in gold.
By Janet Tavakoli
web site: www.tavakolistructuredfinance.com
The S&P's Tragic Rise Will Continue
Oct 17 2013
Emmet Kodesh
Seekingalpha
Equities coughed October 15 on news of further complexity on a debt and spending deal. It was clear, however, indeed it was predictable before the storm began to blow that the House would yield and that Senate leaders would give a green light to more deficit spending and debt service. Exhilarated by a deal that ignited a surge when its tentative shape was released Wednesday, and fueled by QE and eagerness to ride to glory, equities resumed their run to higher highs and higher lows. This rise has a tragic undertone for its substance is damaging the economy. One must make hay while the sun shines.
Let's examine what to expect and how to position yourself for maximum gains and protection in the mid to long-term. Turbulence in the short term will pass for the markets but socio-economic stresses
require that one's holding be placed in the strongest castles.
In the past five years, from 876 on October 20, 2008 till today the S&P is up 95% unadjusted for inflation. Since that autumn of TARP, $7 trillion in debt has been created. The markets have gobbled it up and, in due course, yield suppression kindled a small but welcome housing recovery whose fragility was demonstrated during the four months of taper talk. As I have several times noted, ending QE will crush the major asset classes. This is unlikely before 2015 although a base built on massive debt is unsteady.
From the week of April 25, 2011 till February 20, 2012, for ten months, the S&P failed to make a new high although the lows of July 2011 never fell to that of June 28, 2010. QE 2 began in November 2010 but its impact faded and the indices flattened, surged and again plodded. It was only when the Fed formally announced QE 3 on September 13, 2012 that the markets spiked and took us to the run of consistently higher nominal highs we have been enjoying and whose artificial basis has troubled many observers.
Stephen Roach, a Fellow at Yale's Jackson Institute for Global Affairs pointed out August 26 that many economies are in a "pre-crisis" mode, investing more than they are saving and running enormous account deficits. The failed attempt to cap or limit Federal deficit spending was swimming against markets that banks have addicted to debt while economies flounder. "Asset and credit bubbles," Roach wrote, "have been treated as sources of economic growth" by the current and former Fed chairs. "The QE sugar trap [is] a failed policy" Roach concludes. It is a failure if you want to grow the economy: it is a success if your goal is to addict markets it to artificial stimulus from a Central Bank that thus gains life-or-death power over a nation, indeed, over many nations. That is the macro-context one must accept.
The alternative asset class of PMs (precious metals) has been subjected to repeated short selling episodes that have suppressed prices. This suppression is the inverse of the inflation in equity, bond and reflated real estate prices and has made PMs strong value plays on fundamentals like supply and demand and devalued fiat currencies. However, it is difficult to see an end to suppression of PM prices in a civilization that runs on the manipulation of narratives and devaluation of all values. As lying becomes a universal principle (Kafka, The Trial, chapter 9), wealth protection becomes increasingly difficult.
Let us then consider a three-part investing strategy that should enable most people to ride the rip tides of these markets and crazed policies and anchor themselves to companies adapted to the new America, and world that is taking shape.
1). Identify the best companies in the PM sector, take a position at major lows like late June or the present and at a significant rise, take profits, retaining a stake in companies that continue to show favorable profitability, growth and good management at multiple sites. The price action in First Majestic (AG) and Yamana Gold (AUY) on October 15, holding ground and then rising strongly indicates their intrinsic strength although it was not a turning point in PMs. The apparent basing of Endeavour Silver (EXK) in the $3.75 - 3.95 area suggests the 2013 low already may be in for this outstanding company whose 3Q results were very impressive as noted in my previous pieces.
To take two examples of lack or true pricing in PMs: EXK and AG in the past week reported outstanding 3Q results, growing output, cutting costs, increasing profitability in a very challenging context. One would expect their prices to surge on the news. Instead, they each are basing at depressed levels. By fundamentals, they are among the market's strongest buys but the price action remains erratic.
At current prices, investment in a bullion ETP like Sprott Physical Silver (PSLV) which has had only a thirtieth of the outflow of iShares Silver (SLV) or Spider Gold (GLD) should bring profit and also buying bullion coins. Consider, however, that it is impossible to predict the future conditions for turning the latter assets into liquid exchange.
2). Find the strongest sectors in a political-economy such as we are developing and the best companies in them as measured by profitability, growth and ties to trends in culture and governance. The best sectors are Health, Consumer-related, the sub-industry of big media and aerospace - defense. The Vanguard Health Care Fund and the ETF (VHT) it mirrors is anchored in big pharma (46%), bio-tech (13%), health care providers (12%), supplies, equipment and related consumer goods. The Fidelity Select Bio-Tech fund (FBIOX) is, as its name suggests, all bio-tech and 99% American companies while VHT is 78% American and 22% foreign companies. FBIOX is +57% YTD and 71% in a year. The funds complement each other, sharing only one company, Amgen, in their top ten.
Among the companies I have identified and discussed as meeting criteria noted above for mid to long-term viability in what is going to be a difficult economic period for most people are, in industrials, Boeing (BA), United Tech (UTX), Honeywell (HON) and General Dynamics (GD). In media-entertainment, CBS (CBS), Time Warner (TWX), Disney (DIS) and Comcast (CMCSA) look best to me and most analysts. Consumer-related winners should be Starbucks (SBUX), Whole Food Markets (WFM), TJX (TJX), Home Depot (HD) and Dunkin' Brands (DNKN). The growth, ROE and socio-economic positioning of DNKN set it up for the long haul. All these companies have out-performed since I began recommending them two months ago and should thrive long-term.
3). Under-weighting but not exiting bonds probably is best along with an over-weighting to cash which, hopefully, you began to deploy to some of the above companies as I suggested three weeks ago here. On PMs one must be able to tolerate great volatility and often irrational price action. There is, however, the possibility that as QE-supported assets begin to flag from over-stimulation, PMs will see steadier accretion. The news October 14 on China demanding a "de-Americanized" world monetary system (while their sole aircraft carrier, not yet operational, is in California for training) is a hint that the world reserve system is in a process of transition. Xinhua also called for "a new international reserve currency." Perhaps this is part of what led mainstream market veteran, Art Cashin who does a daily overview with CNBC recently to write an article about the timeliness of recalling the inflation experience of Weimar Germany. The above points suggest that every investor include PMs in their allocation. The USD is being weakened in part to make way for the "inevitable" inclusion of the Yuan in a global reserve currency with substantial gold backing. This is bullish for PMs, if and when it occurs.
The S&P closed Wednesday at 1722 (rounded up), its high for the day. With a deal on the debt ceiling in place, the index, barring a major crisis, is unlikely to see the underside of 1684. The lows of February 25, June 24, August 30 and October make a floor near 1660 but while a lapse from today's jubilee is likely, the September 18 intraday high at 1730 should be passed soon. The closing highs of May 21 and August 2 point to 1750 for the up channel that QE and increasing debt should attain. This surge has an unsteady and tragic undertone but the strategy outlined above should leave your holdings in good shape even if socio-economic basics crumble. That is the set up for the odd optimism of our times of a mature and hollow bull market.
http://seekingalpha.com/article/1749882-the-s-ps-tragic-rise-will-continue
Greg McCoach Says Keep the Best and Dump the Rest
TICKERS: CZN; CZICF, CXO, EXN; EXLLF, REX, SVL; SVLC, TK; TLD; TKRFF
Source: Kevin Michael Grace of
The Gold Report (10/9/13)
Section of article:
GM: SilverCrest Mines Inc. (SVL:TSX.V; SVLC:NYSE.MKT) is probably the top company I'd like to talk about. It has more than $40 million ($40M) in cash and growing. The company is making money whether gold or silver prices go up or down because it is mining higher grade rather than lower grade ounces. SilverCrest keeps finding more ounces as the Santa Elena mine grows, and it has made another discovery that is moving along quite nicely in another area of Mexico.
The market is so bad currently that SilverCrest is not performing as it should. It's holding its own, but is at a great discount to where it will be. This is a great situation to play because at current prices I see at least a four or five multiple when the market fully recovers.
TGR: SilverCrest was down to about $1.50/share in August, and then the price soared to over $2.20/share. But now it is back down to $1.73/share.
GM: And it could go lower. I would say that even the best companies will move lower. Tax-loss selling is going to come up. People need to clean out their portfolios. Everybody's situation is different. I've never experienced losses like this before, and I've been doing this for a long time. But once it's cleaned out, it will have to recover. If the world wants to have iPhones, computers and high-tech cars, it takes base metals, precious metals and rare earths to build these things.
Continued...
http://www.theaureport.com/pub/na/15653
Expert Comments: Pilot Gold.
Theaureport.com
Joe Mazumdar, Canaccord Genuity (10/7/13) "In the Biga District of Turkey, Pilot Gold Inc. has been drilling at the KCD project on the northeastern part of its now 90-sq-km land package, and anticipates more drill results over the next six weeks followed by a December 2013 resource update. KCD is a multiple mineralized system hosted in volcanics and volcano-sediments that appears to be closed off at depth by a low angle, normal fault. . .of interest is the southern part of the district (Karaayi). . .the area centered on potential oxidized, high-sulphidation gold mineralization that present targets amenable to low-strip, open-pit mining and heap-leach processing."
Tara Hassan, Haywood Securities (10/4/13) "Pilot Gold Inc. reported results from its 30,000m 2013 drill program at its TV Tower project in Turkey. . .today's results from TV Tower continue to deliver excellent intersections from the silver and recently discovered oxide gold zones, extending the zones. The new zone of oxide mineralization overlies the silver zone and could have important implications for a future production scenario at KCD as it could provide an early, low-cost cash flow opportunity. . .considering the potential for Pilot's projects and its strong cash position, which will fund exploration through 2014, we continue to expect the company to outperform its peer group."
Tara Hassan, Haywood Securities (10/4/13) "Results from Pilot Gold Inc.'s TV Tower project continue to deliver excellent intersections from the silver and recently discovered oxide gold zones, extending both. The new zone of oxide mineralization overlies the silver zone and could have important implications for a future production scenario at KCD, as it could provide an early, low-cost cash flow opportunity. . .considering the potential for Pilot's projects and its strong cash position that will fund exploration through 2014, we continue to expect the company to outperform its peer group."
Jeff Killeen, CIBC World Markets (10/4/13) "Pilot Gold Inc. has reported drilling results from the KCD target of its TV Tower project located in Turkey. Drilling was successful in expanding the silver zone to approximately 600m by 650m, and extended the recently discovered oxide gold zone down dip over 200m to the northeast, with both zones remaining open to the north. . .Pilot's 2013 drilling program at the KCD Target has shown continuing expansion of mineralization, while defining both a new silver and gold oxide zone. . .we believe that further upside exists at the property and we expect it will be defined during 2014."
The Gold Report Interview with Bob Moriarty (10/2/13) "I went to see a project I first visited 12 years ago called Kinsley Mountain, owned by Pilot Gold Inc. It was first put into production in 1994 and went out of production in 1999. Kinsley Mountain is one of those projects that may be a Long Canyon–type project—which would be 2, 5, even 10 Moz—or not. Even if it's not a Long Canyon, it would still be 500 Koz, and could still sell. It won't cost Pilot Gold anything to drill, because it can recover the money. Pilot's management team is the best in the industry, with most members coming from Fronteer Gold. When Newmont Mining Corp. bought Fronteer out for $2.3B, it was an absolute homerun for shareholders. Pilot is doing the same thing. You're buying at a 60% discount to what it was nine months ago.
"A year ago, I visited Pilot Gold's projects in Turkey. One is a copper-gold porphyry; the other is a gold-silver epithermal system. Both were very attractive and had great technical success and great drill results. It's important for your readers to understand that the decline in shares since January has not been rational. Nor has it been manipulation or shorting. It's been hedge funds and gold mutual funds being forced to sell shares. Often, they sold the best projects just because they could. They needed cash and sold everything they could to raise it. . .the company's joint venture with Teck Resources on the big porphyry project in Turkey is in a holding pattern. It's not attractive at $3/pound copper, but it's very attractive at $4/lb copper. The company is drilling the heck out of the TV Tower project and Kinsley Mountain. It has plenty of cash and an incredible ability to raise money." More >
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http://www.theaureport.com/pub/co/3777#quote
Politicians Continue to Bankrupt Nations and Steal from Individuals
David Levenstein | October 15, 2013
Goldsilverworlds |
After bouncing off three-month lows on Monday, gold prices have dipped today, giving back a small part of the prior session’s gains despite the persistent cloud of uncertainty that has settled over Washington.
Over the weekend, the president of the World Bank, Jim Yong Kim, warned the United States was just “days away” from causing a global economic disaster unless politicians come up with a plan to raise the nation’s debt limit and avoid default.
“We’re now five days away from a very dangerous moment. I urge U.S. policymakers to quickly come to a resolution before they reach the debt ceiling deadline…Inaction could result in interest rates rising, confidence falling and growth slowing,” World Bank President Jim Yong Kim said in a briefing following a meeting of the bank’s Development Committee.
“If this comes to pass, it could be a disastrous event for the developing world, and that will in turn greatly hurt developed economies as well,” he said.
Yet, despite the continuing political wrangling in Washington over the U.S. government shutdown and the debt ceiling, which one would expect to lower the value of the US dollar, the gold price has been under some selling pressure. And, last week the general sentiment toward gold was largely negative, with some investment banks like Goldman Sachs and Morgan Stanley issuing bearish views on gold’s outlook.
According to Jeffrey Currie head of commodities research at Goldman Sachs Group Inc.’s gold, is a “slam dunk” sell for next year because the U.S economy will extend its recovery after lawmakers resolve stalemates over the nation’s budget and debt ceiling.
The bank has a target for gold prices next year at $1,050 an ounce, Currie, Goldman Sachs’s head of commodities research, said last week in London. The precious metal has tumbled 21% this year to $1,322.28 an ounce on speculation that the US Federal Reserve would reduce its $85 billion monthly bond-buying program, known as quantitative easing, as the economy recovers. Lawmakers probably will reach an agreement on raising the debt ceiling before the Oct. 17 deadline, Currie said.
“Once we get past this stalemate in Washington, precious metals are a slam dunk sell at that point,” Currie said. “You have to argue that with significant recovery in the U.S., tapering of QE should put downward pressure on gold prices.”
Currie and Ric Deverell, the head of commodities research at Credit Suisse AG, both said on a panel at the Commodities Week conference in London that selling gold is their top recommendation for trading in raw materials in the next year.
I completely disagree. Even if the issue of the US debt ceiling is resolved, the fact remains that there is simply far too much debt in the global financial system. And, while bankers and politicians may be able to “kick the can down the road,” at some point, something has to give… and it is not going to be the price of gold!
The price of gold lost $25 in two minutes on Friday morning as “someone” decided to dump 800,000 ounces of notional gold into the London Fix (or COMEX open). In the space of 4 minutes, “someone” sold a whopping 2 million ounces of gold in one trade into the gold futures markets sending the price of gold to 3-month lows.
The order was so big, then, that gold was automatically halted in the middle of the order being filled.
The CME Group confirmed the halt. “We had what we call a stop logic event, which is a momentary pause in trading.” CME Group spokesman Chris Grams told CNBC.com. He noted that the halt started at 8:42:26 EDT, and trading resumed at 8:42:36. “All trades stand, and our technology performed as designed,” he said.
Usually, when a seller has a sizable amount to sell, he tries to get the best possible price by off-loading parts of the total quantity during a period of time. But, in an action which we are now fully accustomed to, when it comes to gold the seller is simply determined to manipulate prices by slamming the bid until there are no buyers left. It used to occur just before close of trading, an illegal practice known as “banging the close.” However, now it appears that much of this selling happens soon after the opening of Comex. Yet, the CFTC constantly turns a blind eye to this action.
While the CFTC deny that there is any manipulation of prices in the gold markets, there is enough evidence to the contrary. And, Friday’s action is simply another example of this on-going price suppression of gold prices. It is now becoming more evident that Western central banks and the U.S. government in particular — the Federal Reserve and Treasury Department are involved in this action as they remain determined to support the U.S. dollar and maintain the current global fiat currency system.
While the Fed does not intervene directly in the market, it operates through two primary ‘agent’ banks. These bullion banks in turn time naked short gold sales in the futures market to coordinate what the Fed is doing in the more opaque foreign exchange markets.
This sale of gold futures contracts creates an artificial supply of gold which will never be delivered. However, the quantity sold has the effect of pushing prices lower. This is exactly what the Fed wants especially when the US dollar comes under attack. The Fed then tries to create the illusion that gold prices are falling against a weaker dollar and thereby undermine investors’ confidence in the yellow metal. The reason for this is that gold remains a benchmark for the US dollar. If the dollar were to collapse, the prices of gold would surge. So, these bankers have to trick individuals around the world into believing that everything is just fine. What is even more outrageous is the measures these banks will go to in order to create this illusion. Recently, the Fed’s number one ‘agent bank,’ Goldman Sachs, was up to their old tricks again – advising clients to ‘sell gold.’ But, while they encourage clients to sell, I would not be surprised in the least that in reality what they are doing is probably looking to go long in gold and that they actually need fresh supply to come in to cover their short positions.
Meanwhile, many gold traders have opted to remain on the side-lines to avoid being caught in a volatile price move, while others said they expect this week’s weakness to continue, especially after Friday’s sell-off.
Global finance chiefs have criticised the U.S. for the political gridlock they identified as the biggest threat to the world’s economy and financial markets.
As these policy makers arrived in Washington for the annual meetings of the International Monetary Fund and World Bank, many expressed their concern that failure by U.S. lawmakers to end a government shutdown and raise the nation’s debt ceiling could trigger a default.
The lack of resolution would have “very negative consequences for the U.S. economy and spill-over effects which mean negative consequences for the rest of the world,” IMF Managing Director Christine Lagarde told Bloomberg Television in a recent interview on “Surveillance” with Tome Keene. “It could precipitate another crisis if it was to last longer.”
If the standoff persists “it is probably safe to say that this could cause severe damage to the U.S. economy and the world,” European Central Bank President Mario Draghi said. “The world still does not believe that the United States will not find a way out.
Both Lagarde and U.S. Treasury Secretary Jacob J. Lew warned that the political impasse could sap the safe-haven status of U.S. assets.
“The world actually counts on us being responsible,” Lew told the Senate Finance Committee, as he cautioned that the spat is “beginning to stress the financial markets.”
Lagarde said the U.S. should be wary that it is “not damaged because of what is going on” and also welcomed the proposal to buy more time.
A U.S. debt default in the event that a politically divided Congress fails to raise the federal borrowing limit would imperil the entire global economic recovery, a senior International Monetary Fund official warned Wednesday.
But Jose Vinals, the IMF’s financial counsellor, said he sees the actual risk of such a default as very low.
“It would be a worldwide shock,” Vinals told a Washington news conference, at which the IMF released its Global Financial Stability Report.
“This is something that would have very significant repercussions on financial markets around the world, not just on the United States,” Vinals said. “So let’s hope that we never get there.”
A report was released ahead of the IMF and World Bank’s annual meeting which began last week. The IMF said that the partial U.S. government shutdown, now in its second week, is adding to uncertainty about the still-fragile global economic recovery.
“While the damage to the U.S. economy from a short shutdown is likely to be limited, a longer shutdown could be quite harmful,” the report said. “And even more importantly, a failure to promptly raise the debt ceiling, leading to a U.S. selective default, could seriously damage the global economy and financial system.”
On Saturday, the president of the World Bank warned the United States was just “days away” from causing a global economic disaster unless politicians come up with a plan to raise the nation’s debt limit and avoid default.
“We’re now five days away from a very dangerous moment. I urge U.S. policymakers to quickly come to a resolution before they reach the debt ceiling deadline…Inaction could result in interest rates rising, confidence falling and growth slowing,” World Bank President Jim Yong Kim said in a briefing following a meeting of the bank’s Development Committee.
“If this comes to pass, it could be a disastrous event for the developing world, and that will in turn
Premier Li Keqiang yesterday told Secretary of State John Kerry that China was paying “great attention” to the U.S. debt ceiling, the official Xinhua News Agency reported today. China is the largest foreign owner of U.S. Treasuries, with $1.28 trillion worth of them at the end of July.
“The market doesn’t like uncertainties,” Yi Gang, deputy governor of China’s central bank, said in Washington. “They watch this drama very closely.”
China is “naturally concerned about the developments in the U.S. fiscal cliff,” the Asian country’s vice finance minister Zhu Guangyao said in a statement.
If the U.S. fails to raise the debt ceiling, the government could run out of cash… Meaning China – and the rest of the world – won’t receive its interest payments.
“We hope the United States fully understands the lessons of history,” Zhu said, referring to the last government deadlock in 2011, which led, in part, to the U.S. losing its triple-A credit rating.
China isn’t the only country pressuring the U.S. to get its act together. Japan, the country’s second-largest creditor, is also worried the value of its $1 trillion investment in U.S. Treasuries could plummet if there is no agreement on the debt ceiling.
“The U.S. must avoid a situation where it cannot pay and it’s triple-A ranking plunges all of a sudden,” Japanese finance minister Taro Aso said at a press conference. “The U.S. must be fully aware that if that happens, the U.S. would fall into fiscal crisis.”
The actions of US politicians have bolstered China’s resolve to lessen the world’s reliance on the dollar, according to current and former Chinese government advisers.
“You can’t hijack the global economy through political struggles. It’s not responsible,” says Yu Yongding, a member of the Chinese Academy of Social Sciences, a leading government think-tank.
“We are angry but are not panicked. The consequences are bad for the reputation of the US because the credibility of debt is so important,” says Mr Yu, who is also a former adviser to the central bank’s monetary policy committee.
“We need to continue to diversify. Even without this latest debt debate, it would still be necessary to diversify,” says Zhu Baoliang, an economist in the State Information Center, a research unit of the National Development and Reform Commission, a powerful planning agency.
As the storm clouds gathered over Washington on Thursday, Beijing made another small move to increase the international use of the renminbi, signing a swap agreement with the European Central Bank.
Now that Janet Yellen has been named to lead the Federal Reserve the global financial markets should factor out any possibility that the Fed will diminish their Quantitative easing program anytime soon. In fact, there is a good chance that the QE program is more likely to be perpetuated and expanded.
While there are investors stupid enough to believe that debt issued by the world’s largest debtor country (i.e. US Treasuries) should be treated as a risk-free asset they are obviously not concerned about the value of money. Yes, the Fed can expand its balance sheet indefinitely beyond the $3 trillion they have already conjured out of nowhere. The world need not fear a shortage of dollars.
But in real terms, that’s precisely the point. The Fed can control the supply of dollars, but it cannot control their value on the foreign exchanges.
Until, fiscal and monetary discipline and sanity returns to the US and the world, gold will continue to be bought by prudent individuals in order to hedge the continuing debasement of paper currencies.
Personally, I am certain that some type of cosmetic deal will be reached soon and it will be back to business as usual. The U.S. Debt Ceiling will be raised once again. It will be the 18th raise in the debt limit in 20 years. Raising the limit will happen and continuing imprudent fiscal and monetary policies in the U.S. are likely to lead to higher interest rates which will have dire consequences for the U.S. economy and indeed the global economy.
Another increase in the debt ceiling will allow U.S. politicians to continue spending which will lead to a further loss in confidence as well as the value of the U.S. dollar. And, as this happens the price of gold will go much higher. While politicians continue to bankrupt nations and steal from individuals, I recommend that you own some physical gold and silver.
Technical picture
gold price 14 october 2013 economy
Gold’s’ recent upward momentum has been thwarted for now, and I expect to see more sideways but volatile action in the short-term.
http://goldsilverworlds.com/economy/politicians-bankrupt-nations-steal-from-individuals/
About the author: David Levenstein is a leading expert on investing in precious metals . Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients. For more information go to www.lakeshoretrading.co.za
Politicians Continue to Bankrupt Nations and Steal from Individuals
David Levenstein | October 15, 2013
Goldsilverworlds |
After bouncing off three-month lows on Monday, gold prices have dipped today, giving back a small part of the prior session’s gains despite the persistent cloud of uncertainty that has settled over Washington.
Over the weekend, the president of the World Bank, Jim Yong Kim, warned the United States was just “days away” from causing a global economic disaster unless politicians come up with a plan to raise the nation’s debt limit and avoid default.
“We’re now five days away from a very dangerous moment. I urge U.S. policymakers to quickly come to a resolution before they reach the debt ceiling deadline…Inaction could result in interest rates rising, confidence falling and growth slowing,” World Bank President Jim Yong Kim said in a briefing following a meeting of the bank’s Development Committee.
“If this comes to pass, it could be a disastrous event for the developing world, and that will in turn greatly hurt developed economies as well,” he said.
Yet, despite the continuing political wrangling in Washington over the U.S. government shutdown and the debt ceiling, which one would expect to lower the value of the US dollar, the gold price has been under some selling pressure. And, last week the general sentiment toward gold was largely negative, with some investment banks like Goldman Sachs and Morgan Stanley issuing bearish views on gold’s outlook.
According to Jeffrey Currie head of commodities research at Goldman Sachs Group Inc.’s gold, is a “slam dunk” sell for next year because the U.S economy will extend its recovery after lawmakers resolve stalemates over the nation’s budget and debt ceiling.
The bank has a target for gold prices next year at $1,050 an ounce, Currie, Goldman Sachs’s head of commodities research, said last week in London. The precious metal has tumbled 21% this year to $1,322.28 an ounce on speculation that the US Federal Reserve would reduce its $85 billion monthly bond-buying program, known as quantitative easing, as the economy recovers. Lawmakers probably will reach an agreement on raising the debt ceiling before the Oct. 17 deadline, Currie said.
“Once we get past this stalemate in Washington, precious metals are a slam dunk sell at that point,” Currie said. “You have to argue that with significant recovery in the U.S., tapering of QE should put downward pressure on gold prices.”
Currie and Ric Deverell, the head of commodities research at Credit Suisse AG, both said on a panel at the Commodities Week conference in London that selling gold is their top recommendation for trading in raw materials in the next year.
I completely disagree. Even if the issue of the US debt ceiling is resolved, the fact remains that there is simply far too much debt in the global financial system. And, while bankers and politicians may be able to “kick the can down the road,” at some point, something has to give… and it is not going to be the price of gold!
The price of gold lost $25 in two minutes on Friday morning as “someone” decided to dump 800,000 ounces of notional gold into the London Fix (or COMEX open). In the space of 4 minutes, “someone” sold a whopping 2 million ounces of gold in one trade into the gold futures markets sending the price of gold to 3-month lows.
The order was so big, then, that gold was automatically halted in the middle of the order being filled.
The CME Group confirmed the halt. “We had what we call a stop logic event, which is a momentary pause in trading.” CME Group spokesman Chris Grams told CNBC.com. He noted that the halt started at 8:42:26 EDT, and trading resumed at 8:42:36. “All trades stand, and our technology performed as designed,” he said.
Usually, when a seller has a sizable amount to sell, he tries to get the best possible price by off-loading parts of the total quantity during a period of time. But, in an action which we are now fully accustomed to, when it comes to gold the seller is simply determined to manipulate prices by slamming the bid until there are no buyers left. It used to occur just before close of trading, an illegal practice known as “banging the close.” However, now it appears that much of this selling happens soon after the opening of Comex. Yet, the CFTC constantly turns a blind eye to this action.
While the CFTC deny that there is any manipulation of prices in the gold markets, there is enough evidence to the contrary. And, Friday’s action is simply another example of this on-going price suppression of gold prices. It is now becoming more evident that Western central banks and the U.S. government in particular — the Federal Reserve and Treasury Department are involved in this action as they remain determined to support the U.S. dollar and maintain the current global fiat currency system.
While the Fed does not intervene directly in the market, it operates through two primary ‘agent’ banks. These bullion banks in turn time naked short gold sales in the futures market to coordinate what the Fed is doing in the more opaque foreign exchange markets.
This sale of gold futures contracts creates an artificial supply of gold which will never be delivered. However, the quantity sold has the effect of pushing prices lower. This is exactly what the Fed wants especially when the US dollar comes under attack. The Fed then tries to create the illusion that gold prices are falling against a weaker dollar and thereby undermine investors’ confidence in the yellow metal. The reason for this is that gold remains a benchmark for the US dollar. If the dollar were to collapse, the prices of gold would surge. So, these bankers have to trick individuals around the world into believing that everything is just fine. What is even more outrageous is the measures these banks will go to in order to create this illusion. Recently, the Fed’s number one ‘agent bank,’ Goldman Sachs, was up to their old tricks again – advising clients to ‘sell gold.’ But, while they encourage clients to sell, I would not be surprised in the least that in reality what they are doing is probably looking to go long in gold and that they actually need fresh supply to come in to cover their short positions.
Meanwhile, many gold traders have opted to remain on the side-lines to avoid being caught in a volatile price move, while others said they expect this week’s weakness to continue, especially after Friday’s sell-off.
Global finance chiefs have criticised the U.S. for the political gridlock they identified as the biggest threat to the world’s economy and financial markets.
As these policy makers arrived in Washington for the annual meetings of the International Monetary Fund and World Bank, many expressed their concern that failure by U.S. lawmakers to end a government shutdown and raise the nation’s debt ceiling could trigger a default.
The lack of resolution would have “very negative consequences for the U.S. economy and spill-over effects which mean negative consequences for the rest of the world,” IMF Managing Director Christine Lagarde told Bloomberg Television in a recent interview on “Surveillance” with Tome Keene. “It could precipitate another crisis if it was to last longer.”
If the standoff persists “it is probably safe to say that this could cause severe damage to the U.S. economy and the world,” European Central Bank President Mario Draghi said. “The world still does not believe that the United States will not find a way out.
Both Lagarde and U.S. Treasury Secretary Jacob J. Lew warned that the political impasse could sap the safe-haven status of U.S. assets.
“The world actually counts on us being responsible,” Lew told the Senate Finance Committee, as he cautioned that the spat is “beginning to stress the financial markets.”
Lagarde said the U.S. should be wary that it is “not damaged because of what is going on” and also welcomed the proposal to buy more time.
A U.S. debt default in the event that a politically divided Congress fails to raise the federal borrowing limit would imperil the entire global economic recovery, a senior International Monetary Fund official warned Wednesday.
But Jose Vinals, the IMF’s financial counsellor, said he sees the actual risk of such a default as very low.
“It would be a worldwide shock,” Vinals told a Washington news conference, at which the IMF released its Global Financial Stability Report.
“This is something that would have very significant repercussions on financial markets around the world, not just on the United States,” Vinals said. “So let’s hope that we never get there.”
A report was released ahead of the IMF and World Bank’s annual meeting which began last week. The IMF said that the partial U.S. government shutdown, now in its second week, is adding to uncertainty about the still-fragile global economic recovery.
“While the damage to the U.S. economy from a short shutdown is likely to be limited, a longer shutdown could be quite harmful,” the report said. “And even more importantly, a failure to promptly raise the debt ceiling, leading to a U.S. selective default, could seriously damage the global economy and financial system.”
On Saturday, the president of the World Bank warned the United States was just “days away” from causing a global economic disaster unless politicians come up with a plan to raise the nation’s debt limit and avoid default.
“We’re now five days away from a very dangerous moment. I urge U.S. policymakers to quickly come to a resolution before they reach the debt ceiling deadline…Inaction could result in interest rates rising, confidence falling and growth slowing,” World Bank President Jim Yong Kim said in a briefing following a meeting of the bank’s Development Committee.
“If this comes to pass, it could be a disastrous event for the developing world, and that will in turn
Premier Li Keqiang yesterday told Secretary of State John Kerry that China was paying “great attention” to the U.S. debt ceiling, the official Xinhua News Agency reported today. China is the largest foreign owner of U.S. Treasuries, with $1.28 trillion worth of them at the end of July.
“The market doesn’t like uncertainties,” Yi Gang, deputy governor of China’s central bank, said in Washington. “They watch this drama very closely.”
China is “naturally concerned about the developments in the U.S. fiscal cliff,” the Asian country’s vice finance minister Zhu Guangyao said in a statement.
If the U.S. fails to raise the debt ceiling, the government could run out of cash… Meaning China – and the rest of the world – won’t receive its interest payments.
“We hope the United States fully understands the lessons of history,” Zhu said, referring to the last government deadlock in 2011, which led, in part, to the U.S. losing its triple-A credit rating.
China isn’t the only country pressuring the U.S. to get its act together. Japan, the country’s second-largest creditor, is also worried the value of its $1 trillion investment in U.S. Treasuries could plummet if there is no agreement on the debt ceiling.
“The U.S. must avoid a situation where it cannot pay and it’s triple-A ranking plunges all of a sudden,” Japanese finance minister Taro Aso said at a press conference. “The U.S. must be fully aware that if that happens, the U.S. would fall into fiscal crisis.”
The actions of US politicians have bolstered China’s resolve to lessen the world’s reliance on the dollar, according to current and former Chinese government advisers.
“You can’t hijack the global economy through political struggles. It’s not responsible,” says Yu Yongding, a member of the Chinese Academy of Social Sciences, a leading government think-tank.
“We are angry but are not panicked. The consequences are bad for the reputation of the US because the credibility of debt is so important,” says Mr Yu, who is also a former adviser to the central bank’s monetary policy committee.
“We need to continue to diversify. Even without this latest debt debate, it would still be necessary to diversify,” says Zhu Baoliang, an economist in the State Information Center, a research unit of the National Development and Reform Commission, a powerful planning agency.
As the storm clouds gathered over Washington on Thursday, Beijing made another small move to increase the international use of the renminbi, signing a swap agreement with the European Central Bank.
Now that Janet Yellen has been named to lead the Federal Reserve the global financial markets should factor out any possibility that the Fed will diminish their Quantitative easing program anytime soon. In fact, there is a good chance that the QE program is more likely to be perpetuated and expanded.
While there are investors stupid enough to believe that debt issued by the world’s largest debtor country (i.e. US Treasuries) should be treated as a risk-free asset they are obviously not concerned about the value of money. Yes, the Fed can expand its balance sheet indefinitely beyond the $3 trillion they have already conjured out of nowhere. The world need not fear a shortage of dollars.
But in real terms, that’s precisely the point. The Fed can control the supply of dollars, but it cannot control their value on the foreign exchanges.
Until, fiscal and monetary discipline and sanity returns to the US and the world, gold will continue to be bought by prudent individuals in order to hedge the continuing debasement of paper currencies.
Personally, I am certain that some type of cosmetic deal will be reached soon and it will be back to business as usual. The U.S. Debt Ceiling will be raised once again. It will be the 18th raise in the debt limit in 20 years. Raising the limit will happen and continuing imprudent fiscal and monetary policies in the U.S. are likely to lead to higher interest rates which will have dire consequences for the U.S. economy and indeed the global economy.
Another increase in the debt ceiling will allow U.S. politicians to continue spending which will lead to a further loss in confidence as well as the value of the U.S. dollar. And, as this happens the price of gold will go much higher. While politicians continue to bankrupt nations and steal from individuals, I recommend that you own some physical gold and silver.
Technical picture
gold price 14 october 2013 economy
Gold’s’ recent upward momentum has been thwarted for now, and I expect to see more sideways but volatile action in the short-term.
http://goldsilverworlds.com/economy/politicians-bankrupt-nations-steal-from-individuals/
About the author: David Levenstein is a leading expert on investing in precious metals . Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients. For more information go to www.lakeshoretrading.co.za
The Speculative Endgame: The Government “Shutdown” and “Debt Default”, A Multibillion Bonanza for Wall Street
By Prof Michel Chossudovsky
Global Research, October 16, 2013
The “shutdown” of the US government and the financial climax associated with a deadline date, leading to a possible “debt default” of the federal government is a money making undertaking for Wall Street.
A wave of speculative activity is sweeping major markets.
The uncertainty regarding the shutdown and “debt default” constitutes a golden opportunity for “institutional speculators”. Those who have reliable “inside information” regarding the complex outcome of the legislative process are slated to make billions of dollars in windfall gains.
Speculative Bonanza
Several overlapping political and economic agendas are unfolding. In a previous article, we examined the debt default saga in relation to the eventual privatization of important components of the federal State system.
While Wall Street exerts a decisive influence on policy and legislation pertaining to the government shutdown, these same major financial institutions also control the movement of currency markets, commodity and stock markets through large scale operations in derivative trade.
Most of the key actors in the US Congress and the Senate involved in the shutdown debate are controlled by powerful corporate lobby groups acting directly or indirectly on behalf of Wall Street. Major interests on Wall Street are not only in a position to influence the results of the Congressional process, they also have “inside information” or prior knowledge of the chronology and outcome of the government shutdown impasse.
They are slated to make billions of dollars in windfall profits in speculative activities which are “secure” assuming that they are in a position to exert their influence on relevant policy outcomes.
It should be noted, however, that there are important divisions both within the US Congress as well as within the financial establishment. The latter are marked by the confrontation and rivalry of major banking conglomerates.
These divisions will have an impact on speculative movements and counter movements in the stock, money and commodity markets. What we are dealing with is “financial warfare”. The latter is by no means limited to Wall Street, Chinese, Russian and Japanese financial institutions (among others) will also be involved in the speculative endgame.
Speculative movements based on inside information, therefore, could potentially go in different directions. What market outcomes are being sought by rival banking institutions? Having inside information on the actions of major banking competitors is an important element in the waging of major speculative operations.
Derivative Trade
The major instrument of “secure” speculative activity for these financial actors is derivative trade, with carefully formulated bets in the stock markets, major commodities –including gold and oil– as well as foreign exchange markets.
These major actors may know “where the market is going” because they are in a position to influence policies and legislation in the US Congress as well as manipulate market outcomes.
Moreover, Wall Street speculators also influence the broader public’s perception in the media, not to mention the actions of financial brokers of competing or lesser financial institutions which do not have foreknowledge or access to inside information.
These same financial actors are involved in the spread of “financial disinformation”, which often takes the form of media reports which contribute to either misleading the public or building a “consensus” among economists and financial analysts which will push markets in a particular direction.
Pointing to an inevitable decline of the US dollar, the media serves the interests of the institutional speculators in camouflaging what might happen in an environment characterized by financial manipulation and the interplay of speculative activity on a large scale.
Speculative trade routinely involves acts of deception. In recent weeks, the media has been flooded with “predictions” of various catastrophic economic events focusing on the collapse of the dollar, the development of a new reserve currency by the BRICS countries, etc.
At a recent conference hosted by the powerful Institute of International Finance (IIF), a Washington based think tank organization which represents the world’s most powerful banks and financial institutions:
“Three of the world’s most powerful bankers warned of terrible consequences if the United States defaults on its debt, with Deutsche Bank chief executive Anshu Jain claiming default would be “utterly catastrophic.”
This would be a very rapidly spreading, fatal disease, … I have no recommendations for this audience…about putting band aids on a gaping wound,” he said.
“JPMorgan Chase chief executive Jamie Dimon and Baudouin Prot, chairman of BNP Paribas, said a default would have dramatic consequences on the value of U.S. debt and the dollar, and likely would plunge the world into another recession.” (…)
Dimon and other top executives from major U.S. financial firms met with President Barack Obama and with lawmakers last week to urge them to deal with both issues.
On Saturday, Dimon said banks are already spending “huge amounts” of money preparing for the possibility of a default, which he said would threaten the global recovery after the 2007-2009 financial crisis.
Dimon also defended JPMorgan against critics who say the bank has become too big to manage. It has come under scrutiny from numerous regulators and on Friday reported its first quarterly loss since Dimon took over, due to more than $7 billion in legal expenses. (Emily Stephenson and Douwe Miedema, World top bankers warn of dire consequences if U.S. defaults | Reuters, October 12, 2013
What these “authoritative” economic assessments are intended to create is an aura of panic and economic uncertainty, pointing to the possibility of a collapse of the US dollar.
What is portrayed by the Institute of International Finance panelists (who are the leaders of the world’s largest banking conglomerates) is tantamount to an Economics 101 analysis of market adjustment, which casually excludes the known fact that markets are manipulated with the use of sophisticated derivative trading instruments. In a bitter irony, the IIF panelists are themselves involved in routinely twisting market values through derivative trade. Capitalism in the 21st century is no longer based largely on profits resulting from a real economy productive process, windfall financial gains are acquired through large scale speculative operations, without the occurrence of real economy activity. at the touch of a mouse button.
The manipulation of markets is carried out on the orders of major bank executives including the CEOs of JPMorgan Chase, Deutsche Bank and BNP Paribas.
The “too big to fail banks” are portrayed, in the words of JPMorgan Chase’s CEO Jamie Dimon’s, as the “victims” of the debt default crisis, when in fact they are the architects of economic chaos as well as the unspoken recipients of billions of dollars of stolen taxpayers’ money.
These corrupt mega banks are responsible for creating the “gaping wound” referred to by Deutsche Bank’s Anshu Jain in relaiton to the US public debt crisis.
Collapse of the Dollar?
Upward and downward movements of the US dollar in recent years have little do with normal market forces as claimed by the tenets of neoclassical economics.
Both JP Morgan Chase’s CEO Jamie Dimon and Deutsche Bank’s CEO Anshu Jain’s assertions provide a distorted understanding of the functioning of the US dollar market. The speculators want to convince us that the dollar will collapse as part of a normal market mechanism, without acknowledging that the “too big to fail” banks have the ability to trigger a decline in the US dollar which in a sense obviates the functioning of the normal market.
Wall Street has indeed the ability to “short” the greenback with a view to depressing its value. It has also has the ability through derivative trade of pushing the US dollar up. These up and down movements of the greenback are, so to speak, the “cannon feed” of financial warfare. Push the US dollar up and speculate on the upturn, push it down and speculate on the downturn.
It is impossible to assess the future movement of the US dollar by solely focusing on the interplay of “normal market” forces in response to the US public debt crisis.
While an assessment based on “normal market” forces indelibly points to structural weaknesses in the US dollar as a reserve currency, it does not follow that a weakened US dollar will necessarily decline in a forex market which is routinely subject to speculative manipulation.
Moreover, it is worth noting that the national currencies of several heavily indebted developing countries have increased in value in relation to the US dollar, largely as a result of the manipulation of the foreign exchange markets. Why would the national currencies of countries literally crippled by foreign debt go up against the US dollar?
The Institutional Speculator
JPMorgan Chase, Goldman Sachs, Bank America, Citi-Group, Deutsche Bank et al: the strategy of the institutional speculators is to sit on their “inside information” and create uncertainty through heavily biased news reports, which are in turn used by individual stock brokers to advise their individual clients on “secure investments”. And that is how people across America have lost their savings.
It should be emphasized that these major financial actors not only control the media, they also control the debt rating agencies such as Moody’s and Standard and Poor.
According to the mainstay of neoclassical economics, speculative trade reflects the “normal” movement of markets. An absurd proposition.
Since the de facto repeal of the Glass-Steagall Act and the adoption of the Financial Services Modernization Act in 1999, market manipulation tends to completely overshadow the “laws of the market”, leading to a highly unstable multi-trillion dollar derivative debt, which inevitably has a bearing on the current impasse on Capitol Hill. This understanding is now acknowledged by sectors of mainstream financial analysis.
There is no such thing as “normal market movements”. The outcome of the government shutdown on financial markets cannot be narrowly predicted by applying conventional macro-economic analysis, which excludes outright the role of market manipulation and derivative trade.
The outcome of the government shutdown on major markets does not hinge upon “normal market forces” and their impacts on prices, interest rates and exchange rates. What has to be addressed is the complex interplay of “normal market forces” with a gamut of sophisticated instruments of market manipulation. The latter consist of an interplay of large scale speculative operations undertaken by the most powerful and corrupt financial institutions, with the intent to distorting “normal” market forces.
It is worth mentioning that immediately following the adoption of the Financial Services Modernization Act in 1999, the US Congress adopted the Commodity Futures Modernization Act 2000 (CFMA) which essentially “exempted commodity futures trading from regulatory oversight.”
Four major Wall Street financial institutions account for more than 90 percent of the so-called derivative exposure: J.P. Morgan Chase, Citi-Group, Bank America, and Goldman Sachs. These major banks exert a pervasive influence on the conduct of monetary policy, including the debate within the US Congress on the debt ceiling. They are also among the World’s largest speculators.
What is the speculative endgame behind the shutdown and debt default saga?
An aura of uncertainty prevails. People across America are impoverished as a result of the curtailment of “entitlements”, mass protest and civil unrest could erupt. Homeland Security (DHS) is the process of militarizing domestic law enforcement. In a bitter irony, each and all of these economic and social events including political statements and decisions in the US Congress concerning the debt ceiling, the evaluations of the rating agencies, etc. create opportunities for the speculator.
Major speculative operations –feeding on inside information and deception– are likely take place routinely over the next few months as the fiscal and debt default crisis unfolds.
What is diabolical in this process is that major banking conglomerates will not hesitate to destabilize stock, commodity and foreign exchange markets if it serves their interests, namely as a means to appropriate speculative gains resulting from a situation of turmoil and economic crisis, with no concern for the social plight of millions of Americans.
Speculation in Agricultural Commodities: Driving up the Price of Food Worldwide and plunging Millions into HungerOne solution –which is unlikely to be adopted unless there is a major power shift in American politics– would be to cancel the derivative debt altogether and freeze all derivative transactions on major markets. This would certainly help to tame the speculative onslaught.
The manipulation through derivative trade of the markets for basic food staples is particularly pernicious because it potentially creates hunger. It has a direct bearing on the livelihood of millions of people.
As we recall, “the price of food and other commodities began rising precipitately [in 2006], … Millions were cast below the poverty line and food riots erupted across the developing world, from Haiti to Mozambique.”
According to Indian economist Dr. Jayati Ghosh:
“It is now quite widely acknowledged that financial speculation was the major factor behind the sharp price rise of many primary commodities , including agricultural items over the past year [2011]… Even recent research from the World Bank (Bafis and Haniotis 2010) recognizes the role played by the “financialisation of commodities” in the price surges and declines, and notes that price variability has overwhelmed price trends for important commodities.” (Quoted in Speculation in Agricultural Commodities: Driving up the Price of Food Worldwide and plunging Millions into Hunger By Edward Miller, October 05, 2011)
The artificial hikes in the price of crude oil, which are also the result of market manipulation, have a pervasive impact on costs of production and transportation Worldwide, which in turn contribute to spearheading thousands of small and medium sized enterprises into bankruptcy.
Big Oil including BP as well Goldman Sachs exert a pervasive impact on the oil and energy markets.
The global economic crisis is a carefully engineered.
The end result of financial warfare is the appropriation of money wealth through speculative trade including the confiscation of savings, the outright appropriation of real economy assets as well as the destabilization of the institutions of the Federal State through the adoption of sweeping austerity measures.
The speculative onslaught led by Wall Street is not only impoverishing the American people, the entire World population is affected.
http://www.globalresearch.ca/the-speculative-endgame-the-government-shutdown-and-debt-default-a-multibillion-bonanza-for-wall-street/5354420
Michel Chossudovsky is an award-winning author, Professor of Economics (emeritus) at the University of Ottawa, Founder and Director of the Centre for Research on Globalization (CRG), Montreal and Editor of the globalresearch.ca website.
He is the author of The Globalization of Poverty and The New World Order (2003) and America’s “War on Terrorism”(2005).
His most recent book is entitled Towards a World War III Scenario: The Dangers of Nuclear War (2011).
He is also a contributor to the Encyclopaedia Britannica. His writings have been published in more than twenty languages.
He can be reached at crgeditor@yahoo.com