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Banks Win Watered Down Basel Rules
Global central bank chiefs agreed to water down and delay a planned bank liquidity rule to counter warnings that the proposal would strangle lending and stifle the economic recovery.
(Video 3 min)
http://www.bloomberg.com/news/2013-01-06/banks-win-watered-down-liquidity-rule-after-basel-group-deal.html
Banks Win 4-Year Delay as Basel Liquidity Rule Loosened
By Jim Brunsden, Giles Broom & Ben Moshinsky - Jan 7, 2013 ET
Global central bank chiefs gave lenders four more years to meet international liquidity requirements and watered down the measures in a bid to stave off another credit crunch.
Banks won the delay to fully meet the so-called liquidity coverage ratio, or LCR, following a deal struck by regulatory chiefs meeting yesterday in Basel, Switzerland. They’ll be able to pick from a longer list of approved assets including equities and securitized mortgage debt as they seek to build up buffers of liquidity for use in a financial crisis.
“This was a compromise between competing views from around the world,” Bank of England Governor Mervyn King said at a briefing following yesterday’s meeting. King chairs the Group of Governors and Heads of Supervision, or GHOS, which decides on global bank rules. “For the first time in regulatory history we have a truly global minimum standard for bank liquidity.”
Banks and top officials such as European Central Bank President Mario Draghi pushed for changes to the LCR, arguing that it would choke interbank lending and make it harder for authorities to implement monetary policies. Lenders have warned that the measure might force them to cut back loans to businesses and households.
“The new liquidity standard will in no way hinder the ability of the global banking system to finance a global recovery,” King said. “It’s a realistic approach. It certainly did not emanate from an attempt to weaken the standard.”
Shares Rise
The Bloomberg Europe Banks and Financial Services Index rose as much as 2.1 percent with Italy’s Banca Monte dei Paschi di Siena SpA leading gains at 19 percent. Deutsche Bank AG (DBK) added as much as 5 percent and both BNP Paribas SA (BNP) and Barclays Plc (BARC) were up 4 percent.
“The loosening of liquidity rules has been long-signalled, and thus we wouldn’t expect a huge rally, but we have been badly wrong-footed in the past,” Sandy Chen, bank analyst at Cenkos Securities in London, wrote in a note to clients.
The decision to relax liquidity rules for banks may boost pre-tax profit at Barclays by around 4 percent, according to Andrew Lim, an analyst at Banco Espirito Santo SA.
U.K. banks such as Barclays, which have built up large reserves of high-quality liquid assets, will be among the biggest beneficiaries of global regulators’ decision to implement a watered-down version of the LCR, Lim said in a note to clients.
Credit Squeeze
Regulators at the Basel Committee on Banking Supervision struggled throughout 2012 to revise the LCR. After failing to reach a final deal last month, it was left to central bank and regulatory chiefs on the GHOS to make a final decision.
The LCR would force banks to hold enough easy-to-sell assets to survive a 30-day credit squeeze. It’s a key component of a package of capital and liquidity measures, known as Basel III, drawn up to avoid a repeat of the 2008 financial crisis.
Basel III has been subject to mounting criticism for its complexity, amid delays to its implementation in the European Union and U.S.
The liquidity rule sets out a stress test that banks should apply to their books, assessing whether they would be able to generate enough cash from asset sales to meet their regulatory obligations.
A draft version of the measure was published by regulators in 2010, on the basis that it would take effect on Jan. 1, 2015.
Sixty Percent
Under yesterday’s deal, banks would only have to meet 60 percent of the LCR obligations by 2015, and the full rule would be phased in annually through 2019, according to an e-mailed statement from the GHOS.
A sample of 209 banks assessed by the Basel committee had a collective shortfall of 1.8 trillion euros ($2.4 trillion) at the end of 2011 in the assets needed to meet the 2010 version of the LCR, according to figures published by the Basel group.
Banks had warned that the initial LCR proposal would force them to buy additional sovereign debt, more closely tying their fate to governments’ solvency. The 2010 rule was drafted before the EU was fully confronted by a sovereign debt crisis that challenged traditional assumptions about the creditworthiness of government bonds.
“GHOS has rescued the concept of a global liquidity rule, but its reality remains up in the air,” Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics Inc., said in an e-mail. “Commitments were made by eurozone nations to comply with this agreement, but turning word into deed isn’t going to be easy.”
Sovereign Bonds
The latest LCR Rule retains the principal that allows banks to use sovereign debt to meet all of their LCR obligations, if the bonds are considered essentially risk free under international bank capital rules. The EU and U.S. have been criticized by international regulators for misapplying parts of the capital rules, allowing lenders to count more of the sovereign debt they hold as risk free.
Under the 2010 plan, banks would have been allowed to use cash and government bonds to meet the LCR, subject to some rules on the quality of the sovereign debt. Lenders could also have used highly-rated corporate debt or covered bonds to meet 40 percent of their LCR requirements.
The deal expands the range of corporate debt that banks can use, allowing some lower rated securities to count. Banks would also be allowed to use some equities and highly rated residential mortgage-backed securities.
“I suspect that some central banks will be greatly relieved that they will have more time to assess the impact of the new rules,” Richard Reid, a research fellow for finance and regulation at the University of Dundee in Scotland, said in an e-mail.
‘Very Happy’
“I’m also sure that many banks will also be happy to have gained some very significant concessions,” Reid said. “No doubt we will see flexibility in the implementation of other regulatory measures as we go through 2013.”
“The committee and the regulatory community more generally felt it was appropriate to broaden the class of liquid assets,” King said. “That doesn’t mean to say it’s a loosening of the whole regime.”
The additional securities will get bigger writedowns to their value than those that would have been eligible under the 2010 LCR. They also won’t be allowed to count for more than 15 percent of a bank’s LCR buffer.
Supervisors will have discretion to decide whether the reserves lenders keep with central banks will count toward the LCR. Regulators will also continue to assess how the LCR will interact with liquidity support measures provided by national central banks, the GHOS said.
Covered Bonds
“It became clear during the process of discussing all this that it didn’t make sense really to think about an LCR without having a clear view about what to make of access to central bank facilities,” King said.
Central banks and regulators left the treatment of covered bonds in the LCR unchanged from 2010. Covered bonds are secured by assets such as mortgages or public-sector loans and are guaranteed by the issuer.
Authorities also agreed to water down parts of the stress scenario that banks will be pitted against to calculate whether they hold enough LCR assets. Still, they expanded the range of risks on derivatives trades that will be taken into account.
Regulatory chiefs said they will give additional guidance on when banks will be allowed to use their LCR buffers.
The GHOS brings together top officials from central banks and regulators in 27 nations including the U.S., U.K., China and Japan. It is the governing body of the Basel committee.
The Basel committee will also press ahead with reviewing another draft liquidity rule included in Basel III. This measure, known as a net-stable funding ratio, requires banks to back long-term lending with funding that won’t dry up in a crisis.
To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net
http://www.bloomberg.com/news/2013-01-06/banks-win-watered-down-liquidity-rule-after-basel-group-deal.html
The New Year's First Heist
By Douglas French | 01/03/13
The high priests of the civic religion are very worried that people no longer seem to trust government. The law stands discredited. Once-hallowed institutions are under fire and losing status. People are openly loathing public officials. Movies, television, and best-selling books urge revolt. Most people don’t bother to vote.
And these priests wonder why.
Here’s an example of why. As the year opened, the House, Senate, and president all collaborated to enact the largest tax increase in human history — under the cover of night on the first day of the year, on the 100-year anniversary of the income tax. They did it in the name of saving us from some mythical beast called the “fiscal cliff.”
It’s going to take an extra $20-40 or more out of your paycheck per week. If your son or daughter or a thief did that without your permission, you would be mighty upset. But this is what our elected leaders are doing to us, and we have no choice about it.
The tax increase is sly in other ways. It occurred in an area of federal finance that had not even been part of the debate, an area of taxation that many people don’t even believe constitutes taxation: the payroll tax. The 2% add-on that everyone will pay hammers the middle class in a way that all politicians, left and right, have sworn they would never do.
But they did it anyway, even though it will seriously harm job creation, rob people blind every day for years, and do injury to that paltry economic growth that barely seems to exist. In short, from an economic point of view, it is the stupidest policy one could impose, given the fragile state of things.
Why would they do this? Because you have money and they want it. They have deemed their priorities to be more important than your need to save, go out to eat, go to the movies, rent movies, join the Laissez Faire Club, or whatever.
In all the stimulus efforts since 2008, only one measure truly made sense. In 2010, the administration and Congress cut the payroll tax. The idea was to leave more money in workers’ hands and lowering the cost of hiring. It was a rare moment of good sense. It wasn’t enough, but it was step in that direction.
The frenzied deal to avoid the “fiscal cliff” — a phony, D.C.-generated crisis designed to frighten and intimidate the public — included a repeal of this tax break. Incredible. All that talk about taxing the rich only, about broadening the base, etc., and this is what it comes down to: a massive fleecing of the entire workforce, combined with no spending cuts at all. And get this: The bill is called the “American Taxpayer Relief Act of 2012.”
Unspeakable.
You can be forgiven for not knowing about this. You have to read deep into The New York Times article on the tax deal to find it. I listened to an hour of Morning Edition on NPR and didn’t hear a word about it. Instead, all we hear about is what a glorious moment this is for the cause of political compromise and how the new tax will affect only incomes over $400,000. This is sheer nonsense.
As for 2%, that’s no small shakes. It was the whole of the tax as it existed from 1943-49, and then it was effective only up to $3,000 in income. Over time, it increased more and more. Today, two-thirds of taxpayers pay more in payroll tax than they do in income tax. For the vast majority of Americans, the payroll tax is the main means by which they are looted every day. It is hardly irrelevant.
Why is it that we hardly ever hear about this tax? Long ago, when FDR first put in place the Social Security program that the payroll tax funds, he fobbed it off as a form of insurance. Insurance is a market institution. You pay a premium to guard against risks you can’t control. It makes no sense to apply this term to a guaranteed payout that appears at a set date in the future, one funded not by premiums, but by direct transfer payments.
Still, the term stuck. All these years later, and despite the obvious insolvency of the “insurance” aspect of the Social Security program, people inside and outside government still treat the payroll tax as some kind of market-based program. This is rot. The payroll tax as currently constituted brings in enough revenue to fund the whole of the federal government as it existed in 1982. Yet the elites are still not calling it what it is.
The little scam to raising this tax in cloak-and-dagger conditions is an old one. This is precisely what Ronald Reagan did after 1983. He was able to use his reputation as a tax cutter to enact what was then the largest-ever tax increase in the guise of “saving” Social Security. Much to the delight of the entire political class, the trick worked. Taxes went up and up, and somehow, Reagan still maintained his reputation as a tax cutter.
So this recent racket is a redux of the 1980s. In retrospect, we all should have seen this coming. This is why Washington ginned up this phony hysteria about the “fiscal cliff.” Reporters never stopped talking about it. Every day, we were told about the coming disaster. This way, we were supposed to be grateful to our elected leaders for saving us from falling.
The news is also slowly leaking out that the tax deal doesn’t cut a dime of spending; on the contrary, it guarantees spending increases far into the future. Irresponsible? Absolutely. But think hard about this. What incentive does anyone have to cut spending so long as there is a money printing machine down the street — it’s called the Federal Reserve — that can cover the liabilities as quickly as Congress can rack them up?
The Fed was founded 100 years ago this year. It’s the best thing that ever happened to government. It took a few decades for the presidents and Congresses to warm up to the wonderful reality, but finally, after 1973, when the dollar became nothing but paper and all gold was removed as a limit, it became clear: No one in Washington would ever again have to curb their appetite for spending other people’s money.
Thenceforth, they would take what they could through every possible means, and print what they could not steal directly. This is the business of government
Most people are clueless about the specifics. But most everyone knows that something has really gone wrong in Washington. Most everyone gets the core truth: These people are living at our expense. All the pseudoscience in the world can’t cover up for that core fact.
This is why so few really trust the system anymore. It’s a system of robbery. It’s always why so many people have realized that if they intend to retain any of their liberty and property, they are going to have get extremely creative about doing so. After all, if government can use this amount of trickery to rob us, the rest of us are surely justified in using any clever means possible to put a lid on it.
Yours,
Douglas French
Original article posted on Laissez-Faire Today
Read more: The New Year's First Heist http://dailyreckoning.com/the-new-years-first-heist/#ixzz2H78WfCsg
U.S. Gold Bullion Reserve, the 14 Carrot Rabbit
Commodities / Gold and Silver 2013
Jan 04, 2013 - 04:12 PM
By: Richard_Mills
“14 Carrot Rabbit” is an animated cartoon featuring Bugs Bunny and Yosemite Sam.
The story begins with an old man named Louie successfully gold panning on his claim. Chilkoot Sam (Yosemite Sam) of nasty reputation and carrying a gun, scares Louie away and claims his gold.
Chilkoot Sam gets ten bucks for the gold from Pierre at the “Next To Last Chance Saloon.”
Sam is extremely unhappy to receive only $10 for ‘his’ gold. However something happens right in the middle of his violent tirade that makes him forget about his poor payday - Bugs Bunny staggers in with a huge gold nugget he trades for a few measly carrots.
After Bugs takes his leave, Sam asks Pierre where the carrot cruncher got his gold. All Pierre can tell him is that the bunny gets a ‘funny feeling’ when he's near gold.
Executive Order 6102
On April 5, 1933, President Roosevelt signed Executive Order 6102 making the hoarding of gold certificates, coins and bullion illegal by American citizens, forcing them to sell their gold to the Federal Reserve. The value of the gold held by the Federal Reserve increased from $4 billion to $12 billion between 1933 and 1937.
“On March 6, 1933, Executive Order (EO) 6073 was passed by Franklin Delano Roosevelt (FDR), the 32nd President of the United States in an attempt to solve the dire banking crisis. Executive orders have been around since 1789, allowing Presidents to issue legally binding orders unilaterally, without the consent of Congress. During his Presidential tenure, from 1933 to 1945, Roosevelt would issue 3,728 Executive Orders. This was his third and it was a doozy.
Just two days after Roosevelt was inaugurated as President, he proclaimed a “banking holiday”. From and including Monday, March 6, 1933 to Thursday, March 9, 1933 no bank “would pay out, export, earmark, or permit the withdrawal or transfer in any manner or by any device whatsoever of any gold or silver coin or bullion or take any other action which might facilitate the hoarding thereof…” Sold to the American people as an attempt to control speculation and regulate interest rates, he closed America’s banks, thwarting customers from withdrawing their paper money holdings or converting their holdings to gold.” Kal Kotecha, juniorgoldreport.com
United States Bullion Depository
In 1936, the U.S. Treasury Department began construction of the United States Bullion Depository at Fort Knox, Kentucky.
Today the fortress is guarded by the U.S. Mint Police and protected by layers of physical security; alarms, video cameras, mine fields, barbed razor wire, a bombproof roof, poison-gas booby traps, an emergency flooding system and electric fences.
The Depository premises are within Fort Knox, a United States Army post. A total of 30,000 soldiers with their associated tanks, armored personnel carriers, attack helicopters, and artillery are all stationed nearby.
Below the fortress lies the gold vault lined with granite walls and protected by a blast-proof door weighing 22 tons. No one person knows the complete combinations required to unlock the vault, members of the Depository staff must dial separate combinations known only to them.
The fortress includes a separate emergency power plant, water system, and other necessary facilities.
The Depository is under the supervision of the US Treasury Department's Director of the Mint. It’s a classified facility and access is restricted. For security reasons no visitors are allowed inside the depository grounds - a Presidential order is required to gain access.
The Unites States government says: “The United States Bullion Depository holds 4,578 metric tons (5,046.3 short tons) of gold bullion (147.2 million oz. troy).”
Chris Weber, author of “The Great American Disaster: How Much Gold Remains In Fort Knox?” says:
“The only audit that has ever been done of the gold inside Ft Knox was done days after Dwight Eisenhower became President in January of 1953. After 20 years of Democratic presidents, the American public wanted to be sure that the gold confiscated from them was still there. Thus, the new President ordered an audit within hours after taking office.
The central problem was that it wasn't much of an audit. To sum it up:
1. Representatives of the audited group were allowed to make the rules governing the audit. No outside private experts were allowed.
2. Those government bureaucrats involved were inexperienced in their tasks, by their own admission.
3. The entire audit of the largest gold hoard ever concentrated in history lasted only seven days.
4. Only a fraction of the gold was actually tested. Later, the officials put this fraction at just 5%.
5. Based on that fraction, the official committee reported that, in their opinion, all the holdings would have matched their records if they'd all been tested.
6. If the audit was accurate, the fact remains that almost 80% of it went overseas in the coming years. If the audit was not accurate, the amount of gold lost could have been even more. "
The US Mint reported its Schedule of Custodial Deep Storage Gold and Silver Reserves as of September 30, 2010 and 2009.
Gold Reserve Transparency Act of 2011
The truth is that annual reviews of the facility are conducted by the Office of the Inspector General of the Treasury. Eric M. Thorson, inspector general of the Department of Treasury, is the first outsider to be granted full access to the U.S. Bullion Depository and he is responsible for keeping track of the U.S. Mint's deep storage gold and silver reserves.
Thorson insists the gold reserves exist and in exactly the amounts reported.
Status Report of U.S. Treasury-Owned Gold
Department of the Treasury Financial Management Service November 30th, 2012
Deep Storage: Deep-Storage gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint secures in sealed vaults, which are examined annually by the Department of Treasury's Office of the Inspector General. Deep-Storage gold comprises the vast majority of the Reserve and consists primarily of gold bars. This portion was formerly called "Bullion Reserve" or "Custodial Gold Bullion Reserve."
Working Stock: Working-Stock gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins. Working-Stock gold comprises only about one percent of the Reserve and consists of bars, blanks, unsold coins, and condemned coins. This portion was formerly listed as individual coins and blanks or called "PEF Gold."
Conclusion
In the cartoon “14 Carrot Rabbit” Bugs Bunny gets a ‘funny feeling’ when he's near gold. I suspect if Bugs got near Ft. Knox today he’d get that funny feeling - like he did in 1952 when the cartoon was released - and more.
Perhaps, for a New Year’s resolution we should all have on our radar screens the truth in regards to the many conspiracy theories floating around the internet in regards to gold. The truth is certainly on mine, is it on yours?
If not, maybe they should be.
By Richard (Rick) Mills
www.aheadoftheherd.com
rick@aheadoftheherd.com
http://www.marketoracle.co.uk/Article38352.html
U.S. Gold Bullion Reserve, the 14 Carrot Rabbit
Commodities / Gold and Silver 2013
Jan 04, 2013 - 04:12 PM
By: Richard_Mills
“14 Carrot Rabbit” is an animated cartoon featuring Bugs Bunny and Yosemite Sam.
The story begins with an old man named Louie successfully gold panning on his claim. Chilkoot Sam (Yosemite Sam) of nasty reputation and carrying a gun, scares Louie away and claims his gold.
Chilkoot Sam gets ten bucks for the gold from Pierre at the “Next To Last Chance Saloon.”
Sam is extremely unhappy to receive only $10 for ‘his’ gold. However something happens right in the middle of his violent tirade that makes him forget about his poor payday - Bugs Bunny staggers in with a huge gold nugget he trades for a few measly carrots.
After Bugs takes his leave, Sam asks Pierre where the carrot cruncher got his gold. All Pierre can tell him is that the bunny gets a ‘funny feeling’ when he's near gold.
Executive Order 6102
On April 5, 1933, President Roosevelt signed Executive Order 6102 making the hoarding of gold certificates, coins and bullion illegal by American citizens, forcing them to sell their gold to the Federal Reserve. The value of the gold held by the Federal Reserve increased from $4 billion to $12 billion between 1933 and 1937.
“On March 6, 1933, Executive Order (EO) 6073 was passed by Franklin Delano Roosevelt (FDR), the 32nd President of the United States in an attempt to solve the dire banking crisis. Executive orders have been around since 1789, allowing Presidents to issue legally binding orders unilaterally, without the consent of Congress. During his Presidential tenure, from 1933 to 1945, Roosevelt would issue 3,728 Executive Orders. This was his third and it was a doozy.
Just two days after Roosevelt was inaugurated as President, he proclaimed a “banking holiday”. From and including Monday, March 6, 1933 to Thursday, March 9, 1933 no bank “would pay out, export, earmark, or permit the withdrawal or transfer in any manner or by any device whatsoever of any gold or silver coin or bullion or take any other action which might facilitate the hoarding thereof…” Sold to the American people as an attempt to control speculation and regulate interest rates, he closed America’s banks, thwarting customers from withdrawing their paper money holdings or converting their holdings to gold.” Kal Kotecha, juniorgoldreport.com
United States Bullion Depository
In 1936, the U.S. Treasury Department began construction of the United States Bullion Depository at Fort Knox, Kentucky.
Today the fortress is guarded by the U.S. Mint Police and protected by layers of physical security; alarms, video cameras, mine fields, barbed razor wire, a bombproof roof, poison-gas booby traps, an emergency flooding system and electric fences.
The Depository premises are within Fort Knox, a United States Army post. A total of 30,000 soldiers with their associated tanks, armored personnel carriers, attack helicopters, and artillery are all stationed nearby.
Below the fortress lies the gold vault lined with granite walls and protected by a blast-proof door weighing 22 tons. No one person knows the complete combinations required to unlock the vault, members of the Depository staff must dial separate combinations known only to them.
The fortress includes a separate emergency power plant, water system, and other necessary facilities.
The Depository is under the supervision of the US Treasury Department's Director of the Mint. It’s a classified facility and access is restricted. For security reasons no visitors are allowed inside the depository grounds - a Presidential order is required to gain access.
The Unites States government says: “The United States Bullion Depository holds 4,578 metric tons (5,046.3 short tons) of gold bullion (147.2 million oz. troy).”
Chris Weber, author of “The Great American Disaster: How Much Gold Remains In Fort Knox?” says:
“The only audit that has ever been done of the gold inside Ft Knox was done days after Dwight Eisenhower became President in January of 1953. After 20 years of Democratic presidents, the American public wanted to be sure that the gold confiscated from them was still there. Thus, the new President ordered an audit within hours after taking office.
The central problem was that it wasn't much of an audit. To sum it up:
1. Representatives of the audited group were allowed to make the rules governing the audit. No outside private experts were allowed.
2. Those government bureaucrats involved were inexperienced in their tasks, by their own admission.
3. The entire audit of the largest gold hoard ever concentrated in history lasted only seven days.
4. Only a fraction of the gold was actually tested. Later, the officials put this fraction at just 5%.
5. Based on that fraction, the official committee reported that, in their opinion, all the holdings would have matched their records if they'd all been tested.
6. If the audit was accurate, the fact remains that almost 80% of it went overseas in the coming years. If the audit was not accurate, the amount of gold lost could have been even more. "
The US Mint reported its Schedule of Custodial Deep Storage Gold and Silver Reserves as of September 30, 2010 and 2009.
Gold Reserve Transparency Act of 2011
The truth is that annual reviews of the facility are conducted by the Office of the Inspector General of the Treasury. Eric M. Thorson, inspector general of the Department of Treasury, is the first outsider to be granted full access to the U.S. Bullion Depository and he is responsible for keeping track of the U.S. Mint's deep storage gold and silver reserves.
Thorson insists the gold reserves exist and in exactly the amounts reported.
Status Report of U.S. Treasury-Owned Gold
Department of the Treasury Financial Management Service November 30th, 2012
Deep Storage: Deep-Storage gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint secures in sealed vaults, which are examined annually by the Department of Treasury's Office of the Inspector General. Deep-Storage gold comprises the vast majority of the Reserve and consists primarily of gold bars. This portion was formerly called "Bullion Reserve" or "Custodial Gold Bullion Reserve."
Working Stock: Working-Stock gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins. Working-Stock gold comprises only about one percent of the Reserve and consists of bars, blanks, unsold coins, and condemned coins. This portion was formerly listed as individual coins and blanks or called "PEF Gold."
Conclusion
In the cartoon “14 Carrot Rabbit” Bugs Bunny gets a ‘funny feeling’ when he's near gold. I suspect if Bugs got near Ft. Knox today he’d get that funny feeling - like he did in 1952 when the cartoon was released - and more.
Perhaps, for a New Year’s resolution we should all have on our radar screens the truth in regards to the many conspiracy theories floating around the internet in regards to gold. The truth is certainly on mine, is it on yours?
If not, maybe they should be.
By Richard (Rick) Mills
www.aheadoftheherd.com
rick@aheadoftheherd.com
http://www.marketoracle.co.uk/Article38352.html
Jobs Lost Hit 5 Million With Rigged Currencies: Cutting Research
By Simon Kennedy - Jan 3, 2013 7:00 PM ET
Exchange-rate manipulation by countries from China to Denmark has cost the U.S. as many as five million jobs in recent years, according to the Peterson Institute for International Economics.
More than 20 nations have increased reserves of currencies such as the dollar by an average of almost $1 trillion a year, economists C. Fred Bergsten and Joseph E. Gagnon said in a report published last month.
By buying foreign currencies, countries reduce the value of their own and make their products cheaper on international markets. That squeezes out foreign competitors and pushes up trade deficits elsewhere, prompting job losses. The biggest loser is the U.S., where the trade and current account deficits have been $200 billion to $500 billion larger each year as a result, costing between one million and five million jobs, the economists’ calculations show.
“Half or more of excess U.S. unemployment -- the extent to which current joblessness exceeds the full employment level -- is attributable to currency manipulation by foreign governments,” Bergsten and Gagnon wrote.
Among the 22 nations Bergsten and Gagnon deem currency manipulators, which they say account for almost a third of global output, are China, Denmark, Japan, Norway, Russia, Israel and Switzerland. Of these, China is the biggest intervener, amassing about $3.3 trillion of reserves by the end of 2011.
Bergsten and Gagnon asked Federal Reserve staff to simulate the effects of a 10 percent decline in the trade-weighted value of the U.S. dollar beginning in the first quarter of this year. Their calculations suggest that would boost gross domestic product by 1.5 percent in two to three years and raise employment by nearly 2 million jobs as the current account deficit declines by almost 1 percent of GDP.
* * *
The central banks of Norway and Sweden proved to be more successful than New Zealand’s in shaping investor expectations of short-term interest rates.
That’s according a study published in December by the Federal Reserve Bank of St. Louis, which studied the effectiveness of central banks giving guidance to financial markets about the likely path of borrowing costs.
Such a practice, introduced by New Zealand as early as 1997, is in vogue at the moment. The Fed last month tied the bank’s rate outlook to unemployment and inflation goals. The central bank had previously said it would keep rates “exceptionally low” through the middle of 2015.
The report, by Daniel L. Thornton of the St. Louis Fed and Utrecht University’s Clemens J.M. Kool, found evidence that official rate outlooks improved market participants’ ability to predict short-term rates. There was no sign long-term yields were easier to forecast.
The writers also found a reduction in the variation of private economists’ rate forecasts after a central bank begins providing guidance. The economists said their evidence suggested Norway and Sweden were more successful than New Zealand in improving forecasting ability.
* * *
Governments face the risk of more sophisticated forms of protectionism that move beyond traditional trade barriers.
Foreign direct investment and offshore sourcing are among the international business activities that may be subjected to what Oxford Analytica, a U.K.-based research group, called “global protectionism” in a Dec. 14 report.
The U.S., Canada and Germany are among those to have begun restricting foreign takeovers and introducing powers to probe foreign state-owned investors. Brazil has reviewed eligibility criteria for investing in agriculture and there have been calls in Europe to evaluate overseas investment on strategic grounds.
The result is greater corporate uncertainty, particularly with regard to entering new markets, the report said.
“Its geographical incidence is broader than that of trade protectionism and its targets are increasingly business from large emerging markets,” said the report. “National governments will become increasingly assertive in their dealings with business.”
* * *
The euro area may be poised to benefit from a quantitative easing in the form of bond purchases. The twist is it could be Japan’s government doing the buying.
“What the market does not seem to be pricing at present are Japanese foreign bond buying plans to weaken the yen, which could exert a significant downward impact on Bund yields,” Christoph Rieger, head of fixed-rate strategy at Commerzbank AG (CBK) in Frankfurt, said in a Dec. 6 report.
The Liberal Democratic Party led by Shinzo Abe secured a landslide victory in last month’s lower-house election on a platform that included establishing a fund to buy sovereign debt. Takatoshi Ito, a former finance ministry official and a possible contender to become central-bank governor, said in a Dec. 6 interview that the Bank of Japan (8301) “can and should buy foreign bonds.”
Rieger says the bonds of Germany and Europe’s rescue funds could be “prime targets” for the buying given their high ratings, although he warned that Japan could face criticism from other governments.
* * *
The more technology you have, the less it makes you happy.
So say fellows at the Brookings Institution in Washington, who found technology is positive for well-being in general yet gives diminishing marginal returns to those who have a lot of access to it.
“We also find some signs of increased stress and anger, including among cohorts for whom access to the new technologies is relatively new and for those who gain new access to financial services via mobile banking,” Carol Graham and Milena Nikolova said in their report, published last month.
That meshes with previous studies of so-called frustrated achievers, who sometimes resent economic change and development even as they benefit from them.
To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
http://www.bloomberg.com/news/2013-01-04/jobs-lost-hit-5-million-with-rigged-currencies-cutting-research.html
The Financial War Against the Economy at Large
America’s Deceptive Fiscal Cliff
12/31/2012
by MICHAEL HUDSON
Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers. Finance has moved to capture the economy at large, industry and mining, public infrastructure (via privatization) and now even the educational system. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no longer military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And Indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers.
Workers have become so deeply indebted on their home mortgages, credit cards and other bank debt that they fear to strike or even to complain about working conditions. Losing work means missing payments on their monthly bills, enabling banks to jack up interest rates to levels that used to be deemed usurious. So debt peonage and unemployment loom on top of the wage slavery that was the main focus of class warfare a century ago. And to cap matters, credit-card bank lobbyists have rewritten the bankruptcy laws to curtail debtor rights, and the referees appointed to adjudicate disputes brought by debtors and consumers are subject to veto from the banks and businesses that are mainly responsible for inflicting injury.
The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society. In contrast to the promise of democratic reform nurturing a middle class a century ago, we are witnessing a regression to a world of special privilege in which one must inherit wealth in order to avoid debt and job dependency.
The emerging financial oligarchy seeks to shift taxes off banks and their major customers (real estate, natural resources and monopolies) onto labor. Given the need to win voter acquiescence, this aim is best achieved by rolling back everyone’s taxes. The easiest way to do this is to shrink government spending, headed by Social Security, Medicare and Medicaid. Yet these are the programs that enjoy the strongest voter support. This fact has inspired what may be called the Big Lie of our epoch: the pretense that governments can only create money to pay the financial sector, and that the beneficiaries of social programs should be entirely responsible for paying for Social Security, Medicare and Medicaid, not the wealthy. This Big Lie is used to reverse the concept of progressive taxation, turning the tax system into a ploy of the financial sector to levy tribute on the economy at large.
Financial lobbyists quickly discovered that the easiest ploy to shift the cost of social programs onto labor is to conceal new taxes as user fees, using the proceeds to cut taxes for the elite 1%. This fiscal sleight-of-hand was the aim of the 1983 Greenspan Commission. It confused people into thinking that government budgets are like family budgets, concealing the fact that governments can finance their spending by creating their own money. They do not have to borrow, or even to tax (at least, not tax mainly the 99%).
The Greenspan tax shift played on the fact that most people see the need to save for their own retirement. The carefully crafted and well-subsidized deception at work is that Social Security requires a similar pre-funding – by raising wage withholding. The trick is to convince wage earners it is fair to tax them more to pay for government social spending, yet not also to ask the banking sector to pay similar a user fee to pre-save for the next time it itself will need bailouts to cover its losses. Also asymmetrical is the fact that nobody suggests that the government set up a fund to pay for future wars, so that future adventures such as Iraq or Afghanistan will not “run a deficit” to burden the budget. So the first deception is to treat only Social Security and medical care as user fees. The second is to aggravate matters by insisting that such fees be paid long in advance, by pre-saving.
There is no inherent need to single out any particular area of public spending as causing a budget deficit if it is not pre-funded. It is a travesty of progressive tax policy to only oblige workers whose wages are less than (at present) $105,000 to pay this FICA wage withholding, exempting higher earnings, capital gains, rental income and profits. The raison d’être for taxing the 99% for Social Security and Medicare is simply to avoid taxing wealth, by falling on low wage income at a much higher rate than that of the wealthy. This is not how the original U.S. income tax was created at its inception in 1913. During its early years only the wealthiest 1% of the population had to file a return. There were few loopholes, and capital gains were taxed at the same rate as earned income.
The government’s seashore insurance program, for instance, recently incurred a $1 trillion liability to rebuild the private beaches and homes that Hurricane Sandy washed out. Why should this insurance subsidy at below-commercial rates for the wealthy minority who live in this scenic high-risk property be treated as normal spending, but not Social Security? Why save in advance by a special wage tax to pay for these programs that benefit the general population, but not levy a similar “user fee” tax to pay for flood insurance for beachfront homes or war? And while we are at it, why not save another $13 trillion in advance to pay for the next bailout of Wall Street when debt deflation causes another crisis to drain the budget?
But on whom should we levy these taxes? To impose user fees for the beachfront reconstruction would require a tax falling mainly on the wealthy owners of such properties. Their dominant role in funding the election campaigns of the Congressmen and Senators who draw up the tax code suggests why they are able to avoid prepaying for the cost of rebuilding their seashore property. Such taxation is only for wage earners on their retirement income, not the 1% on their own vacation and retirement homes.
By not raising taxes on the wealthy or using the central bank to monetize spending on anything except bailing out the banks and subsidizing the financial sector, the government follows a pro-creditor policy. Tax favoritism for the wealthy deepens the budget deficit, forcing governments to borrow more. Paying interest on this debt diverts revenue from being spent on goods and services. This fiscal austerity shrinks markets, reducing tax revenue to the brink of default. This enables bondholders to treat the government in the same way that banks treat a bankrupt family, forcing the debtor to sell off assets – in this case the public domain as if it were the family silver, as Britain’s Prime Minister Harold MacMillan characterized Margaret Thatcher’s privatization sell-offs.
In an Orwellian doublethink twist this privatization is done in the name of free markets, despite being imposed by global financial institutions whose administrators are not democratically elected. The International Monetary Fund (IMF), European Central Bank (ECB) and EU bureaucracy treat governments like banks treat homeowners unable to pay their mortgage: by foreclosing. Greece, for example, has been told to start selling off prime tourist sites, ports, islands, offshore gas rights, water and sewer systems, roads and other property.
Sovereign governments are, in principle, free of such pressure. That is what makes them sovereign. They are not obliged to settle public debts and budget deficits by asset selloffs. They do not need to borrow more domestic currency; they can create it. This self-financing keeps the national patrimony in public hands rather than turning assets over to private buyers, or having to borrow from banks and bondholders.
To be continued.
This is the second installment of Michael Hudson’s ground-breaking report on the state of the economy. Click here to read Part One.
Michael Hudson’s book summarizing his economic theories, “The Bubble and Beyond,” is available on Amazon. His latest book is Finance Capitalism and Its Discontents. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He can be reached via his website, mh@michael-hudson.com
http://www.counterpunch.org/2012/12/31/the-financial-war-against-the-economy-at-large/
Debased currencies, growing populations and rising food prices investing in farmland indeed is a smart move. I had my eye on Agrifirma Brazil (formerly Genagro Ltd) for a while. Jim Rogers was appointed to the board in 2011. They are a farmland development group backed by Jacob Rothschild and were planning to become the first Brazilian company to list on the Hong Kong stock exchange. IPO was expected in 2012 but they remained private instead. Anyhow I tend to favor Brazil when in comes to agricultural investments.
Here is a link with a couple of financially and geo-politically sound companies for farmland investments;
Resilient Recessionary Hedge: 18 Companies With Large Farmland Holdings
http://seekingalpha.com/article/540891-resilient-recessionary-hedge-18-companies-with-large-farmland-holdings
I like these 3 companies in no particular order;
Cresud (CRESY) is an Argentinean agricultural company that invests in land, cattle and technology. Cresud generates profits through the acquisition, transformation and sale of farmland. The main crops of the company are wheat, corn, soybean and sunflower. The company is rapidly expanding, and currently has 625,000 hectares under control in Argentina. It also owns land in Brazil (through Brasilagro), Bolivia, Paraguay and Uruguay.
Cosan (CZZ) is one of the largest sugar and ethanol manufacturer in Brazil. It is one of the biggest private landowners in Brazil, with a portfolio of approximately 204,000 acres, as of March 31, 2011. In 2008, it formed a venture with a U.S. company to purchase farmlands in Brazil.
Brasilagro (BRCPF.PK) is owned by the Argentinean Cresud, that produces sugarcane and grain products comprising soybean, sorghum, and corn. The company currently has a land area of 174,840 ha and revealed its aim to accelerate the growth in its planting to 40%, taking 2010-11 sowings to 65,000 ha.
Btw when Marc Faber recommended farmland he literally meant buying farmland. He suggests living on the farm and getting the heck away from major cities. Due to the upcoming riots and civil unrests he forsees once the global financial markets melt down.
Basel Turns Babel as Vying Rules Undercut Bank Safety
By Yalman Onaran on January 02, 2013
businessweek
The first Basel agreement on global banking regulation, adopted in 1988, was 30 pages long and relied on simple arithmetic. The latest update, known as Basel III, runs to 509 pages and includes 78 calculus equations.
The complexity is emblematic of what happened over the past four years as governments that injected $600 billion to rescue failing banks during the worst financial crisis since the Great Depression devised ways to make the global banking system safer. Those efforts have been stymied by conflicting laws, divergent accounting standards and clashing rules adopted by nations to protect their interests, all of which have created new risks.
“They’re like a bunch of bumper cars,” Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc., said of revamped banking regulations. “On their own, each might do some good things, but they bump into each other over and over. That could render them useless, or worse perhaps harmful.”
While higher capital requirements, curbs on banks trading with their own money and other rules have reduced risk, they have magnified the complexity of supervision, according to two dozen regulators, bankers and analysts interviewed by Bloomberg News. Even if the new regulations can be enforced, they don’t go far enough to ensure safety, said Robert Jenkins, a member of the Bank of England’s financial policy committee.
‘Catastrophic Mishaps’
“Imagine that until 2007, the rules of the road permitted heavily laden fuel trucks to barrel through urban streets at 100 miles per hour,” Jenkins said in an interview. “After a number of catastrophic mishaps, the establishment decides to reduce the speed limit to 75 mph in school zones. Have we tightened the rules? Yes. Have we tightened them enough? No.”
One reason the trucks have slowed is that the 27 nations represented on the Basel Committee on Banking Supervision agreed in 2010 to require banks to hold more capital, or shareholders’ money, to absorb losses. Dozens of countries including the U.S. have issued other regulations or passed laws to curtail risk, and lenders on both continents have boosted capital and improved its quality since the crisis.
Trading of most derivatives, an opaque $639 trillion market, is being forced onto central clearinghouses, where transactions are backed by collateral. The Volcker rule, part of the 2010 Dodd-Frank Act, the U.K.’s proposed Vickers rule and a European Union version named for Bank of Finland Governor Erkki Liikanen seek to separate riskier trading from other businesses. Seven nations have created resolution mechanisms for an orderly shutdown of their biggest lenders if they fail, according to the Basel, Switzerland-based Financial Stability Board.
System Vulnerable
Still, the global financial system remains vulnerable. Only 11 of the more than 100 nations that vowed to adopt the latest Basel rules met a Jan. 1 deadline to start implementation. The U.S. and the EU, each of which drafted 700-page proposals, are still debating them.
The new capital rules are based on the same principal as the old ones: allowing the largest lenders to use their own mathematical models to determine how much capital they need. The calculations, which assume the banks can predict what’s risky, can involve millions of variables, making them difficult for examiners to review, according to an August report by the Bank of England.
Volcker, Vickers
Moving derivatives trading to clearinghouses may concentrate risk and make those marketplaces too big to fail, requiring government rescues. Rules named after former Federal Reserve Chairman Paul A. Volcker and former Bank of England Chief Economist John Vickers may not succeed in curbing risk. U.S. regulators are still debating where to draw the hard-to-see line between trading and making markets for clients as required by the Volcker rule. Volcker himself has questioned the effectiveness of Vickers’s proposal to insulate trading units.
A cross-border mechanism for winding down failed banks with operations in multiple countries remains elusive, as does the universal adoption of a liquidity requirement that would force the companies to have enough easy-to-sell assets on hand if panic hits and funds flee.
Meanwhile, banks considered too big to fail have gotten even bigger since the financial crisis, increasing the cost to taxpayers if they need to be bailed out. The 22 largest lenders in the U.S. and Europe have increased assets by 26 percent since 2007, according to data compiled by Bloomberg.
“We’ve accomplished a lot since the crisis, such as rules separating risky activities from simple banking or resolution mechanisms for the biggest firms,” Sheila Bair, a former chairman of the U.S. Federal Deposit Insurance Corp., said in an interview. “But many of the old problems remain, like Basel letting banks model their own risk. And it’s all gotten much more complicated.”
It’s ‘Ridiculous’
Banks agree that the complexity has been compounded.
“It has gotten ridiculous, far too complicated,” said Wayne Abernathy, executive vice president of the American Bankers Association, the largest industry lobbying group. “The costs and efforts of complying with all these rules no longer are worth the safety and soundness dividend they provide.”
The Securities Industry and Financial Markets Association, another lobbying group, estimates that regulators will end up writing 29,000 pages of directives once Dodd-Frank is completely in place.
Basel III was the culmination of an effort among nations to overhaul the global financial system after the 2008 crisis. Now, while leaders of the Group of 20 nations continue to talk about cooperation, governments from the U.S. to Switzerland are acting unilaterally to protect their taxpayers from future bank losses.
Fed Rules
The Fed last month proposed that foreign lenders organize their U.S. units as subsidiaries and hold capital independently from their parent firms to make it easier for U.S. regulators to seize local assets in a crisis.
Switzerland, where the banking system is five times the size of the nation’s economy, moved in 2010 to give priority to the resolution of the domestic units of its two largest banks, UBS AG (UBSN) and Credit Suisse Group AG (CSGN), in the event of a failure. That means the Swiss operations could be propped up with government support, while international businesses are left to fend for themselves. Regulators in Switzerland also imposed tougher capital standards on the two firms than Basel requires.
The U.K. has taken similar steps to protect its interests. When the country rushed ahead of other nations in 2009 to impose liquidity requirements on its lenders, foreign banks operating there were forced to comply regardless of their legal structure. The U.K. also has tried to insulate itself from the losses of its financial firms overseas by requiring the British units of those companies to abide by separate capital rules.
Watering Down
Bickering among nations during 2010 negotiations led to a watering down of proposed Basel III standards. While the ratio of capital to assets weighted by risk doubled from the previous requirement to 7 percent, it fell short of the 10 percent initially sought by the U.S. and Switzerland. Germany and France led the opposition, seeking to protect the interests of their biggest lenders, which would have needed to raise more capital than foreign competitors.
Even as the definition of what counts as capital was narrowed, U.S. banks were allowed to continue counting some mortgage-linked assets as equity, those in Europe their minority stakes in other financial firms and Japanese lenders their deferred tax benefits. The last crisis showed that such assets failed to provide a buffer against losses.
‘Window Dressing’
Countries made further changes as they translated the non- binding Basel rules into regulations and laws. The European Commission has sought to soften the definition of capital even more, allowing banks to count as capital some hybrid securities Basel had eliminated. The commission, the 27-nation EU’s executive arm, also omitted from its rules a simpler version of the leverage limit agreed to in Basel. That constraint ignores the risk-weightings used in calculating capital and is based instead on total assets, a tougher standard.
The U.S. rewrote sections to satisfy Dodd-Frank, which barred the use of credit ratings in determining risk.
While previous Basel rounds led to local variations, this time they’re greater, according to Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, a Washington-based consulting firm.
“Number and types of divergences are growing by the day,” said Matthews, a former bank lobbyist and policy maker. “We’ve seen over and over that Basel doesn’t prevent the financial system from blowing up anyway. But do we give up? No. It’s somewhat for window dressing.”
‘A Disgrace’
Matthews points to the lack of a global agreement on cross- border resolution of failed lenders as the reason why countries with the biggest financial systems have decided to go it alone. Karel Lannoo, chief executive officer of the Centre for European Policy Studies in Brussels, blames Europe.
“If you water down Basel III too much, this is what you get,” Lannoo said. “We need to have simple and direct rules, not rules that allow banks and regulators to hide. The current Byzantine Basel III rules and loopholes in the European plan to implement them are a disgrace.”
When rules diverge, lenders can take advantage of what they call regulatory arbitrage -- shifting operations to countries with the loosest rules. That historically has been the case among more developed nations, according to a paper published in the October issue of the Journal of Finance by Joel Houston, a professor of finance at the University of Florida in Gainesville, and two colleagues.
Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) are telling foreign customers they can avoid new U.S. derivatives rules by routing orders through the banks’ overseas units, Reuters reported Dec. 3, citing company presentations and unidentified sources. The New York-based firms declined to comment.
National Interests
“Banks will always find loopholes to get around these rules, especially if they’re so complicated,” said Mark Adelson, chief strategy officer at BondFactor Co., a municipal bond-insurance firm, and a former Standard & Poor’s chief credit officer. “With all those formulas, they’re like physics books. How can anyone monitor compliance with such complexity?”
The three-decade effort to create global capital standards, while heralded as a triumph of international cooperation, has been driven by national considerations from the start.
Basel I came about because the U.S. and Europe were alarmed by the expansion of Japan’s financial firms, Fed Governor Daniel Tarullo wrote in his 2008 book, “Banking on Basel.” When the rules were adopted a quarter century ago, nine of the 10 largest banks in the world were Japanese. Three years later a real- estate crash led to an economic collapse in Japan, eliminating the perceived threat.
Risk Calculations
Basel II, approved in 2004, was pushed by U.S. lenders that had taken the lead from Japan and wanted to expand further without having to worry about capital restrictions, according to bankers, lawyers, lobbyists and regulators involved in the discussions. They persuaded the Fed that their own risk- management systems had become so sophisticated they could better determine themselves how much capital was needed.
The U.S. never fully implemented the rules because thousands of community banks lobbied Congress to block them, saying they would be at a disadvantage because they couldn’t afford in-house modeling. Still, the biggest lenders began deploying proprietary formulas to come up with risk-weightings for their loans, securities and derivatives -- calculations that underestimated the risk of products tied to mortgages before the 2008 crisis.
Accounting Differences
Today, those formulas allow JPMorgan Chase & Co. (JPM), the biggest U.S. bank, to say that only half of its balance sheet is risky, regulatory filings show. Deutsche Bank AG (DBK), Germany’s largest lender, calculates its risk to be 17 percent of assets.
Conflicting accounting standards further complicate risk- weightings. Basel’s treatment of derivatives is based on Generally Accepted Accounting Principles, known as GAAP, which are used in the U.S. and are more generous in their netting of positions than international standards.
Netting allows firms to offset contracts that appear to go in opposite directions, reducing the risk of loss to zero. In the U.S., it also cancels out winning and losing positions of any kind with the same counterparty. Under GAAP rules, JPMorgan’s $72 trillion (JPM) derivatives book is whittled down to $80 billion of assets. European banks, which aren’t allowed to net as much of the value of derivatives in financial statements, use the same netting as U.S. firms when calculating risk for Basel capital requirements.
London Whale
That netting doesn’t always work in real life, as demonstrated by JPMorgan’s loss last year of at least $6.2 billion on wrong-way bets on corporate debt made by a trader known as the London Whale. Derivatives that were supposed to offset certain trades ended up going in the same direction as those they were supposed to hedge, increasing losses for the New York-based firm.
Disagreements over how much netting to allow is one reason accounting standards remain far apart after six years of meetings by U.S. and European officials.
“Having such differences makes comparison between banks’ balance sheets in Europe and the U.S. impossible,” said Esther Mills, president of Accounting Policy Plus, a New York-based consulting firm.
If international standards were applied on both sides of the Atlantic, the six biggest U.S. lenders by assets would look almost twice as big on paper as they do now, according to estimates on the FDIC website. That would reduce their simplest capital ratio -- a measure of risk looking at tangible equity as a percent of tangible assets -- to 3.3 percent from 6.3 percent, still better than European banks, which average 2.9 percent.
Former FDIC Chairman Bair has said that ratio should be 8 percent. Thomas Hoenig, the agency’s current vice chairman, has called for 10 percent.
‘Still Dangerous’
More capital can never make the system safe because it doesn’t prevent banks from taking risk, according to BCM’s Matthews. Having a cross-border mechanism for shuttering failed global banks in a way that doesn’t jeopardize other firms is the only way to safety, she said. Such a plan will work only if the countries with the biggest financial markets pledge to share costs of a blowup, not just pay lip service to cooperation.
Others, such as U.S. Senator Sherrod Brown, an Ohio Democrat, say the biggest banks should be broken up and subjected to size limits to reduce their risk to the system and taxpayers. While his proposal hasn’t garnered enough support to become law, four years after the crisis it’s hard to find anyone who believes the financial system is truly safe.
“Banks are still leveraged too much, and the regulatory system is still too easy for them to game,” said Anat Admati, a finance professor at Stanford University and co-author of “The Bankers’ New Clothes,” which will be published next month. “The global financial system is still dangerous, and the banks can still bring down the global economy.”
To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net or @yalman_bn on Twitter
To contact the editor responsible for this story: David Scheer in New York at dscheer@bloomberg.net
http://www.businessweek.com/news/2013-01-02/basel-becomes-babel-as-conflicting-rules-undermine-safety#p1
Basel Turns Babel as Vying Rules Undercut Bank Safety
By Yalman Onaran on January 02, 2013
businessweek
The first Basel agreement on global banking regulation, adopted in 1988, was 30 pages long and relied on simple arithmetic. The latest update, known as Basel III, runs to 509 pages and includes 78 calculus equations.
The complexity is emblematic of what happened over the past four years as governments that injected $600 billion to rescue failing banks during the worst financial crisis since the Great Depression devised ways to make the global banking system safer. Those efforts have been stymied by conflicting laws, divergent accounting standards and clashing rules adopted by nations to protect their interests, all of which have created new risks.
“They’re like a bunch of bumper cars,” Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc., said of revamped banking regulations. “On their own, each might do some good things, but they bump into each other over and over. That could render them useless, or worse perhaps harmful.”
While higher capital requirements, curbs on banks trading with their own money and other rules have reduced risk, they have magnified the complexity of supervision, according to two dozen regulators, bankers and analysts interviewed by Bloomberg News. Even if the new regulations can be enforced, they don’t go far enough to ensure safety, said Robert Jenkins, a member of the Bank of England’s financial policy committee.
‘Catastrophic Mishaps’
“Imagine that until 2007, the rules of the road permitted heavily laden fuel trucks to barrel through urban streets at 100 miles per hour,” Jenkins said in an interview. “After a number of catastrophic mishaps, the establishment decides to reduce the speed limit to 75 mph in school zones. Have we tightened the rules? Yes. Have we tightened them enough? No.”
One reason the trucks have slowed is that the 27 nations represented on the Basel Committee on Banking Supervision agreed in 2010 to require banks to hold more capital, or shareholders’ money, to absorb losses. Dozens of countries including the U.S. have issued other regulations or passed laws to curtail risk, and lenders on both continents have boosted capital and improved its quality since the crisis.
Trading of most derivatives, an opaque $639 trillion market, is being forced onto central clearinghouses, where transactions are backed by collateral. The Volcker rule, part of the 2010 Dodd-Frank Act, the U.K.’s proposed Vickers rule and a European Union version named for Bank of Finland Governor Erkki Liikanen seek to separate riskier trading from other businesses. Seven nations have created resolution mechanisms for an orderly shutdown of their biggest lenders if they fail, according to the Basel, Switzerland-based Financial Stability Board.
System Vulnerable
Still, the global financial system remains vulnerable. Only 11 of the more than 100 nations that vowed to adopt the latest Basel rules met a Jan. 1 deadline to start implementation. The U.S. and the EU, each of which drafted 700-page proposals, are still debating them.
The new capital rules are based on the same principal as the old ones: allowing the largest lenders to use their own mathematical models to determine how much capital they need. The calculations, which assume the banks can predict what’s risky, can involve millions of variables, making them difficult for examiners to review, according to an August report by the Bank of England.
Volcker, Vickers
Moving derivatives trading to clearinghouses may concentrate risk and make those marketplaces too big to fail, requiring government rescues. Rules named after former Federal Reserve Chairman Paul A. Volcker and former Bank of England Chief Economist John Vickers may not succeed in curbing risk. U.S. regulators are still debating where to draw the hard-to-see line between trading and making markets for clients as required by the Volcker rule. Volcker himself has questioned the effectiveness of Vickers’s proposal to insulate trading units.
A cross-border mechanism for winding down failed banks with operations in multiple countries remains elusive, as does the universal adoption of a liquidity requirement that would force the companies to have enough easy-to-sell assets on hand if panic hits and funds flee.
Meanwhile, banks considered too big to fail have gotten even bigger since the financial crisis, increasing the cost to taxpayers if they need to be bailed out. The 22 largest lenders in the U.S. and Europe have increased assets by 26 percent since 2007, according to data compiled by Bloomberg.
“We’ve accomplished a lot since the crisis, such as rules separating risky activities from simple banking or resolution mechanisms for the biggest firms,” Sheila Bair, a former chairman of the U.S. Federal Deposit Insurance Corp., said in an interview. “But many of the old problems remain, like Basel letting banks model their own risk. And it’s all gotten much more complicated.”
It’s ‘Ridiculous’
Banks agree that the complexity has been compounded.
“It has gotten ridiculous, far too complicated,” said Wayne Abernathy, executive vice president of the American Bankers Association, the largest industry lobbying group. “The costs and efforts of complying with all these rules no longer are worth the safety and soundness dividend they provide.”
The Securities Industry and Financial Markets Association, another lobbying group, estimates that regulators will end up writing 29,000 pages of directives once Dodd-Frank is completely in place.
Basel III was the culmination of an effort among nations to overhaul the global financial system after the 2008 crisis. Now, while leaders of the Group of 20 nations continue to talk about cooperation, governments from the U.S. to Switzerland are acting unilaterally to protect their taxpayers from future bank losses.
Fed Rules
The Fed last month proposed that foreign lenders organize their U.S. units as subsidiaries and hold capital independently from their parent firms to make it easier for U.S. regulators to seize local assets in a crisis.
Switzerland, where the banking system is five times the size of the nation’s economy, moved in 2010 to give priority to the resolution of the domestic units of its two largest banks, UBS AG (UBSN) and Credit Suisse Group AG (CSGN), in the event of a failure. That means the Swiss operations could be propped up with government support, while international businesses are left to fend for themselves. Regulators in Switzerland also imposed tougher capital standards on the two firms than Basel requires.
The U.K. has taken similar steps to protect its interests. When the country rushed ahead of other nations in 2009 to impose liquidity requirements on its lenders, foreign banks operating there were forced to comply regardless of their legal structure. The U.K. also has tried to insulate itself from the losses of its financial firms overseas by requiring the British units of those companies to abide by separate capital rules.
Watering Down
Bickering among nations during 2010 negotiations led to a watering down of proposed Basel III standards. While the ratio of capital to assets weighted by risk doubled from the previous requirement to 7 percent, it fell short of the 10 percent initially sought by the U.S. and Switzerland. Germany and France led the opposition, seeking to protect the interests of their biggest lenders, which would have needed to raise more capital than foreign competitors.
Even as the definition of what counts as capital was narrowed, U.S. banks were allowed to continue counting some mortgage-linked assets as equity, those in Europe their minority stakes in other financial firms and Japanese lenders their deferred tax benefits. The last crisis showed that such assets failed to provide a buffer against losses.
‘Window Dressing’
Countries made further changes as they translated the non- binding Basel rules into regulations and laws. The European Commission has sought to soften the definition of capital even more, allowing banks to count as capital some hybrid securities Basel had eliminated. The commission, the 27-nation EU’s executive arm, also omitted from its rules a simpler version of the leverage limit agreed to in Basel. That constraint ignores the risk-weightings used in calculating capital and is based instead on total assets, a tougher standard.
The U.S. rewrote sections to satisfy Dodd-Frank, which barred the use of credit ratings in determining risk.
While previous Basel rounds led to local variations, this time they’re greater, according to Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, a Washington-based consulting firm.
“Number and types of divergences are growing by the day,” said Matthews, a former bank lobbyist and policy maker. “We’ve seen over and over that Basel doesn’t prevent the financial system from blowing up anyway. But do we give up? No. It’s somewhat for window dressing.”
‘A Disgrace’
Matthews points to the lack of a global agreement on cross- border resolution of failed lenders as the reason why countries with the biggest financial systems have decided to go it alone. Karel Lannoo, chief executive officer of the Centre for European Policy Studies in Brussels, blames Europe.
“If you water down Basel III too much, this is what you get,” Lannoo said. “We need to have simple and direct rules, not rules that allow banks and regulators to hide. The current Byzantine Basel III rules and loopholes in the European plan to implement them are a disgrace.”
When rules diverge, lenders can take advantage of what they call regulatory arbitrage -- shifting operations to countries with the loosest rules. That historically has been the case among more developed nations, according to a paper published in the October issue of the Journal of Finance by Joel Houston, a professor of finance at the University of Florida in Gainesville, and two colleagues.
Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) are telling foreign customers they can avoid new U.S. derivatives rules by routing orders through the banks’ overseas units, Reuters reported Dec. 3, citing company presentations and unidentified sources. The New York-based firms declined to comment.
National Interests
“Banks will always find loopholes to get around these rules, especially if they’re so complicated,” said Mark Adelson, chief strategy officer at BondFactor Co., a municipal bond-insurance firm, and a former Standard & Poor’s chief credit officer. “With all those formulas, they’re like physics books. How can anyone monitor compliance with such complexity?”
The three-decade effort to create global capital standards, while heralded as a triumph of international cooperation, has been driven by national considerations from the start.
Basel I came about because the U.S. and Europe were alarmed by the expansion of Japan’s financial firms, Fed Governor Daniel Tarullo wrote in his 2008 book, “Banking on Basel.” When the rules were adopted a quarter century ago, nine of the 10 largest banks in the world were Japanese. Three years later a real- estate crash led to an economic collapse in Japan, eliminating the perceived threat.
Risk Calculations
Basel II, approved in 2004, was pushed by U.S. lenders that had taken the lead from Japan and wanted to expand further without having to worry about capital restrictions, according to bankers, lawyers, lobbyists and regulators involved in the discussions. They persuaded the Fed that their own risk- management systems had become so sophisticated they could better determine themselves how much capital was needed.
The U.S. never fully implemented the rules because thousands of community banks lobbied Congress to block them, saying they would be at a disadvantage because they couldn’t afford in-house modeling. Still, the biggest lenders began deploying proprietary formulas to come up with risk-weightings for their loans, securities and derivatives -- calculations that underestimated the risk of products tied to mortgages before the 2008 crisis.
Accounting Differences
Today, those formulas allow JPMorgan Chase & Co. (JPM), the biggest U.S. bank, to say that only half of its balance sheet is risky, regulatory filings show. Deutsche Bank AG (DBK), Germany’s largest lender, calculates its risk to be 17 percent of assets.
Conflicting accounting standards further complicate risk- weightings. Basel’s treatment of derivatives is based on Generally Accepted Accounting Principles, known as GAAP, which are used in the U.S. and are more generous in their netting of positions than international standards.
Netting allows firms to offset contracts that appear to go in opposite directions, reducing the risk of loss to zero. In the U.S., it also cancels out winning and losing positions of any kind with the same counterparty. Under GAAP rules, JPMorgan’s $72 trillion (JPM) derivatives book is whittled down to $80 billion of assets. European banks, which aren’t allowed to net as much of the value of derivatives in financial statements, use the same netting as U.S. firms when calculating risk for Basel capital requirements.
London Whale
That netting doesn’t always work in real life, as demonstrated by JPMorgan’s loss last year of at least $6.2 billion on wrong-way bets on corporate debt made by a trader known as the London Whale. Derivatives that were supposed to offset certain trades ended up going in the same direction as those they were supposed to hedge, increasing losses for the New York-based firm.
Disagreements over how much netting to allow is one reason accounting standards remain far apart after six years of meetings by U.S. and European officials.
“Having such differences makes comparison between banks’ balance sheets in Europe and the U.S. impossible,” said Esther Mills, president of Accounting Policy Plus, a New York-based consulting firm.
If international standards were applied on both sides of the Atlantic, the six biggest U.S. lenders by assets would look almost twice as big on paper as they do now, according to estimates on the FDIC website. That would reduce their simplest capital ratio -- a measure of risk looking at tangible equity as a percent of tangible assets -- to 3.3 percent from 6.3 percent, still better than European banks, which average 2.9 percent.
Former FDIC Chairman Bair has said that ratio should be 8 percent. Thomas Hoenig, the agency’s current vice chairman, has called for 10 percent.
‘Still Dangerous’
More capital can never make the system safe because it doesn’t prevent banks from taking risk, according to BCM’s Matthews. Having a cross-border mechanism for shuttering failed global banks in a way that doesn’t jeopardize other firms is the only way to safety, she said. Such a plan will work only if the countries with the biggest financial markets pledge to share costs of a blowup, not just pay lip service to cooperation.
Others, such as U.S. Senator Sherrod Brown, an Ohio Democrat, say the biggest banks should be broken up and subjected to size limits to reduce their risk to the system and taxpayers. While his proposal hasn’t garnered enough support to become law, four years after the crisis it’s hard to find anyone who believes the financial system is truly safe.
“Banks are still leveraged too much, and the regulatory system is still too easy for them to game,” said Anat Admati, a finance professor at Stanford University and co-author of “The Bankers’ New Clothes,” which will be published next month. “The global financial system is still dangerous, and the banks can still bring down the global economy.”
To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net or @yalman_bn on Twitter
To contact the editor responsible for this story: David Scheer in New York at dscheer@bloomberg.net
http://www.businessweek.com/news/2013-01-02/basel-becomes-babel-as-conflicting-rules-undermine-safety#p1
Gold’s Outlook in 2013 After Rising In All Fiat Currencies In 2012
Submitted by GoldCore on 01/03/2013
• Introduction – Gold’s Gains In All Fiat Currencies in 2012
• Much of Gold’s Gains in 2012 On 11% Price Gain in January 2012
• Japanese Yen Shows How Gold Protects From FX Devaluations
• Food Inflation Risk As Wheat and Soybeans Surge in Price
• Currency Wars and Competitive Currency Devaluations
• Gold Remains Historically and Academically Proven Safe Haven
• Conclusion – Gold in 2013
Happy New Year
Introduction – Gold’s Gains In All Fiat Currencies in 2012
Gold saw gains against all fiat currencies again in 2012 (see charts and tables).
Gold rose 7% in US dollars and was 4.9% higher in euro terms and 2.2% higher in sterling terms or to put it more correctly the major fiat currencies fell these amounts in 2012 against immutable gold.
The gains were the smallest annual gains since 2008 but built on the steady gains of the last 12 years.
Silver also had a stellar year with all fiat currencies falling against silver in 2012. Silver was 8% higher in US dollar terms and 6.6% in euro terms, 3.9% in sterling pound terms and by 22.6% in Japanese yen terms.
Platinum and palladium also saw gains and returned 9% and 7.5% respectively.
Global shares rallied in 2012 with the help of central banks flooding the world with money and a tentative global economic recovery.
The MSCI All-Country World Index of equities increased 16.9%.
23 out of 24 benchmark indexes in advanced countries rose, with Greece, Germany and Denmark in the lead. Spain was the loser.
The UK's FTSE 100 rose 5.8%; Germany's Dax jumped 29.2%; France's CAC 40 added 15.2%; Italy's FTSE MIB gained 7.8% while Spain's IBEX 35 dipped 4.7%.
Much of Gold’s Gains in 2012 On 11% Price Gain in January 2012
Gold fell in seven months of the year and rose in five (January and June to Sept). Interestingly, gold’s biggest monthly rise was in January when gold returned 11.1%.
Thus, speculative buyers not allocated to gold at the start of the year and attempting to time the market may have not enjoyed the gains of 2012.
Japanese Yen Shows How Gold Protects From FX Devaluations
Gold’s importance as a safe haven asset and currency that protects against currency devaluations was again seen – especially in Japan.
Japanese investors and savers who owned gold had a return of 20.7% as the Japanese yen fell sharply on international markets. The ‘safe haven’ yen had already fallen 8.8% in 2011.
Sterling was one of the strongest fiat currencies in the world in 2012 – along with the Norwegian Krone and New Zealand Dollar – but it too fell against gold.
The appalling fiscal situation in the UK means that sterling could in 2013 see falls on a par with that seen in the yen in 2012.
The UK is one of the most indebted countries in the industrialised world - the national debt now stands at more than £1.1 trillion pounds (more than $1.7 trillion) and total debt to GDP in the UK remains over 500%.
The Japanese yen, as we saw, experienced marked weakness and was the weakest currency in the world in 2012 – as Japan speeds towards the 1 Quadrillion yen national debt mark early in 2013.
Food Inflation Risk As Wheat and Soybeans Surge in Price
The Standard & Poor’s GSCI Total Return Index of 24 commodities rose 0.1% last year however the benchmark disguises some important trends that are important to keep an eye on.
Growing food inflation can clearly be seen in the 2012 food commodity returns.
A theme we have long written about is inflation in what is rare and in necessities such as food and energy, and deflation in non-essential discretionary items and luxury goods .
Essential foodstuffs used to feed the growing global population such as wheat, soybeans and corn rose quiet sharply in price – corn by 7.3%, soybeans by 18% and wheat by 19%.
While non essential food stuffs with little or no nutritional value and commodities more associated with our modern affluent societies such as coffee and sugar fell in price.
Oil was mixed with NYMEX crude down 7.6% while Brent rose 3%.
An indicator showing the very fragile nature of the recent global economic recovery is the Baltic dry index which was down nearly 60%. The gauge of dry-bulk shipping costs, averaged the lowest since 1986 last year, according to the Baltic Exchange, which publishes rates on 61 maritime routes.
Currency Wars and Competitive Currency Devaluations
While the risk in periphery European nations of reversion to their national currencies and currency devaluations have diminished – the risk remains.
The risk is not that the individual national governments will elect to take this route rather it could happen through contagion or a systemic event that leads to a domino effect jettisoning a member state, such as Greece, out of the monetary union.
t could also come about should German politicians decide that the European monetary project is not worth saving or they decide that it cannot be saved and elect to return to the Deutsche mark.
All significantly indebted nations, so called PIIGS and non PIIGS such as Japan, the UK and the U.S. are at risk of currency devaluations.
Competitive currency devaluations or the debasement of currencies for competitive advantage and currency wars poses real risks to the long term stability and prosperity of all democracies in the world and to the finances and savings of people in all countries.
Gold Remains An Historically and Academically Proven Safe Haven
It remains very important that investors and savers understand gold’s importance as a safe haven asset and form of financial insurance.
There remains a significant lack of understanding regarding gold and gold’s role as a diversification, a store of wealth and a wealth preservation asset.
Some continue to focus solely on gold’s price and not its value as a diversification for investors and savers. Many have been suggesting that gold is a bubble for a number of years and few have ever admitted how wrong they were with regard to predictions that gold prices would fall sharply.
The facts, the data and the charts that we present on a daily basis show that gold is not a bubble.
Whether gold is a bubble or not is not the fundamental question. What is far more important is that there is now a large body of academic and independent research showing gold is a safe haven asset.
Numerous academic studies have proved gold’s importance in investment and pension portfolios – for both enhancing returns but more importantly reducing risk.
Conclusion – Gold in 2013
Some market participants and non gold experts tend to focus on the daily fluctuations and “noise” of the market and not see the “big picture” major change in the fundamental supply and demand situation in the gold markets.
This is particularly due to investment demand from high net worth individuals, from hedge funds, from China, the rest of an increasingly wealthy Asia and of course creditor nation central banks.
Macroeconomic, systemic, geopolitical and monetary risks have abated somewhat but remain and could intensify rapidly in 2013.
The eurozone debt crisis is far from over and will become an issue again in the coming months as will debt crisis’ in Japan, the UK and the U.S.
Support for the price of gold should also come from the rising global money supply coupled with increasing investor and central bank purchases which have been driven by falling real interest rates and concerns about the euro, the dollar and other fiat currencies as stores of value.
Tighter monetary policies, as seen in the late 1970s, would likely help alleviate fears of further currency debasement but it is extremely unlikely that this will be seen in 2013.
Indeed, ultra loose monetary policies, negative real interest rates, debt monetization, competitive currency devaluations and global currency wars look set to continue – if not intensify.
Geopolitical risk remains very underestimated. Geopolitical tensions are particularly evident in the Middle East between Iran and Israel and many western powers.
There are also tensions between western powers and Russia and indeed China and these could intensify in 2013.
These macroeconomic, systemic, geopolitical and monetary risks are leading to increasing investment and store of value demand from the smart money such as Bill Gross, Jim Rogers, George Soros, Marc Faber and hedge fund managers such as David Einhorn and Kyle Bass.
Prudent pension funds and central banks will continue to diversify into gold.
Less informed people continue to call gold a bubble and not understand gold's importance as a safe haven asset and essential diversification.
The precious metals of gold and silver will again be essential diversifications for anyone wishing to protect and grow wealth in what will be a volatile 2013 and in the coming uncertain years.
Owning physical bullion will likely reward in 2013 and in the coming years as it has done in recent years.
For breaking news and commentary on financial markets and gold, follow us on Twitter.
http://www.zerohedge.com/contributed/2013-01-03/gold%E2%80%99s-outlook-2013-after-rising-all-fiat-currencies-2012
Gold’s Outlook in 2013 After Rising In All Fiat Currencies In 2012
Submitted by GoldCore on 01/03/2013
• Introduction – Gold’s Gains In All Fiat Currencies in 2012
• Much of Gold’s Gains in 2012 On 11% Price Gain in January 2012
• Japanese Yen Shows How Gold Protects From FX Devaluations
• Food Inflation Risk As Wheat and Soybeans Surge in Price
• Currency Wars and Competitive Currency Devaluations
• Gold Remains Historically and Academically Proven Safe Haven
• Conclusion – Gold in 2013
Happy New Year
Introduction – Gold’s Gains In All Fiat Currencies in 2012
Gold saw gains against all fiat currencies again in 2012 (see charts and tables).
Gold rose 7% in US dollars and was 4.9% higher in euro terms and 2.2% higher in sterling terms or to put it more correctly the major fiat currencies fell these amounts in 2012 against immutable gold.
The gains were the smallest annual gains since 2008 but built on the steady gains of the last 12 years.
Silver also had a stellar year with all fiat currencies falling against silver in 2012. Silver was 8% higher in US dollar terms and 6.6% in euro terms, 3.9% in sterling pound terms and by 22.6% in Japanese yen terms.
Platinum and palladium also saw gains and returned 9% and 7.5% respectively.
Global shares rallied in 2012 with the help of central banks flooding the world with money and a tentative global economic recovery.
The MSCI All-Country World Index of equities increased 16.9%.
23 out of 24 benchmark indexes in advanced countries rose, with Greece, Germany and Denmark in the lead. Spain was the loser.
The UK's FTSE 100 rose 5.8%; Germany's Dax jumped 29.2%; France's CAC 40 added 15.2%; Italy's FTSE MIB gained 7.8% while Spain's IBEX 35 dipped 4.7%.
Much of Gold’s Gains in 2012 On 11% Price Gain in January 2012
Gold fell in seven months of the year and rose in five (January and June to Sept). Interestingly, gold’s biggest monthly rise was in January when gold returned 11.1%.
Thus, speculative buyers not allocated to gold at the start of the year and attempting to time the market may have not enjoyed the gains of 2012.
Japanese Yen Shows How Gold Protects From FX Devaluations
Gold’s importance as a safe haven asset and currency that protects against currency devaluations was again seen – especially in Japan.
Japanese investors and savers who owned gold had a return of 20.7% as the Japanese yen fell sharply on international markets. The ‘safe haven’ yen had already fallen 8.8% in 2011.
Sterling was one of the strongest fiat currencies in the world in 2012 – along with the Norwegian Krone and New Zealand Dollar – but it too fell against gold.
The appalling fiscal situation in the UK means that sterling could in 2013 see falls on a par with that seen in the yen in 2012.
The UK is one of the most indebted countries in the industrialised world - the national debt now stands at more than £1.1 trillion pounds (more than $1.7 trillion) and total debt to GDP in the UK remains over 500%.
The Japanese yen, as we saw, experienced marked weakness and was the weakest currency in the world in 2012 – as Japan speeds towards the 1 Quadrillion yen national debt mark early in 2013.
Food Inflation Risk As Wheat and Soybeans Surge in Price
The Standard & Poor’s GSCI Total Return Index of 24 commodities rose 0.1% last year however the benchmark disguises some important trends that are important to keep an eye on.
Growing food inflation can clearly be seen in the 2012 food commodity returns.
A theme we have long written about is inflation in what is rare and in necessities such as food and energy, and deflation in non-essential discretionary items and luxury goods .
Essential foodstuffs used to feed the growing global population such as wheat, soybeans and corn rose quiet sharply in price – corn by 7.3%, soybeans by 18% and wheat by 19%.
While non essential food stuffs with little or no nutritional value and commodities more associated with our modern affluent societies such as coffee and sugar fell in price.
Oil was mixed with NYMEX crude down 7.6% while Brent rose 3%.
An indicator showing the very fragile nature of the recent global economic recovery is the Baltic dry index which was down nearly 60%. The gauge of dry-bulk shipping costs, averaged the lowest since 1986 last year, according to the Baltic Exchange, which publishes rates on 61 maritime routes.
Currency Wars and Competitive Currency Devaluations
While the risk in periphery European nations of reversion to their national currencies and currency devaluations have diminished – the risk remains.
The risk is not that the individual national governments will elect to take this route rather it could happen through contagion or a systemic event that leads to a domino effect jettisoning a member state, such as Greece, out of the monetary union.
t could also come about should German politicians decide that the European monetary project is not worth saving or they decide that it cannot be saved and elect to return to the Deutsche mark.
All significantly indebted nations, so called PIIGS and non PIIGS such as Japan, the UK and the U.S. are at risk of currency devaluations.
Competitive currency devaluations or the debasement of currencies for competitive advantage and currency wars poses real risks to the long term stability and prosperity of all democracies in the world and to the finances and savings of people in all countries.
Gold Remains An Historically and Academically Proven Safe Haven
It remains very important that investors and savers understand gold’s importance as a safe haven asset and form of financial insurance.
There remains a significant lack of understanding regarding gold and gold’s role as a diversification, a store of wealth and a wealth preservation asset.
Some continue to focus solely on gold’s price and not its value as a diversification for investors and savers. Many have been suggesting that gold is a bubble for a number of years and few have ever admitted how wrong they were with regard to predictions that gold prices would fall sharply.
The facts, the data and the charts that we present on a daily basis show that gold is not a bubble.
Whether gold is a bubble or not is not the fundamental question. What is far more important is that there is now a large body of academic and independent research showing gold is a safe haven asset.
Numerous academic studies have proved gold’s importance in investment and pension portfolios – for both enhancing returns but more importantly reducing risk.
Conclusion – Gold in 2013
Some market participants and non gold experts tend to focus on the daily fluctuations and “noise” of the market and not see the “big picture” major change in the fundamental supply and demand situation in the gold markets.
This is particularly due to investment demand from high net worth individuals, from hedge funds, from China, the rest of an increasingly wealthy Asia and of course creditor nation central banks.
Macroeconomic, systemic, geopolitical and monetary risks have abated somewhat but remain and could intensify rapidly in 2013.
The eurozone debt crisis is far from over and will become an issue again in the coming months as will debt crisis’ in Japan, the UK and the U.S.
Support for the price of gold should also come from the rising global money supply coupled with increasing investor and central bank purchases which have been driven by falling real interest rates and concerns about the euro, the dollar and other fiat currencies as stores of value.
Tighter monetary policies, as seen in the late 1970s, would likely help alleviate fears of further currency debasement but it is extremely unlikely that this will be seen in 2013.
Indeed, ultra loose monetary policies, negative real interest rates, debt monetization, competitive currency devaluations and global currency wars look set to continue – if not intensify.
Geopolitical risk remains very underestimated. Geopolitical tensions are particularly evident in the Middle East between Iran and Israel and many western powers.
There are also tensions between western powers and Russia and indeed China and these could intensify in 2013.
These macroeconomic, systemic, geopolitical and monetary risks are leading to increasing investment and store of value demand from the smart money such as Bill Gross, Jim Rogers, George Soros, Marc Faber and hedge fund managers such as David Einhorn and Kyle Bass.
Prudent pension funds and central banks will continue to diversify into gold.
Less informed people continue to call gold a bubble and not understand gold's importance as a safe haven asset and essential diversification.
The precious metals of gold and silver will again be essential diversifications for anyone wishing to protect and grow wealth in what will be a volatile 2013 and in the coming uncertain years.
Owning physical bullion will likely reward in 2013 and in the coming years as it has done in recent years.
For breaking news and commentary on financial markets and gold, follow us on Twitter.
http://www.zerohedge.com/contributed/2013-01-03/gold%E2%80%99s-outlook-2013-after-rising-all-fiat-currencies-2012
What Happened The Last Time Gold And Central Banks Were So Far Apart?
Submitted by Tyler Durden on 01/01/2013
Central Banks Reality
From 9/11 on, Gold and the world's central bank balance sheets were as correlated as over-consumption and a hangover (and linked just as causally we suggest). Then a funny thing happened in 2008 - gold slid as the central banks went extreme. Of course, as this divergence occurred, the world's stock markets imploded almost as if the central banks knew their status quo was about to go entirely pear-shaped. From 2008 until November of 2011 (when the world's central banks began their coordinated ease-fest) the correlation went limit up once again. Since then, Gold and CB largesse once again decoupled as liquidity is flushed around the world's markets to suspend reality just a little longer. While this divergence is not as extreme as in 2008, something is afoot.
Then... (2002-2008) Fed+ECB+Boj+PBoC
And Now...(2008-2012)
http://www.zerohedge.com/news/2013-01-01/what-happened-last-time-gold-and-central-banks-were-so-far-apart
Nice post basserdan.
What really bothers me (and I have been unsuccessfully trying to get an answer from the CFTC) is that every single deposit, withdrawal, and adjustment in the CNT vault is done at three decimals at .000.
The COMEX is a physical market! It’s strictly physical! You should see oddball numbers! I could understand one or two bars adding up to .000, but when I start seeing everything, I start getting suspicious! I have a strange feeling that they’re settling in paper. The owners don’t know it, they think they’re getting the real thing.
from article:
The story went uncovered by the lapdog inept US press. The late November Asian summit meeting held in Phnom Penh included 15 Asian nations, which represent half the world's population. They decided to form a Regional Comprehensive Economic Partnership that excludes the United States.
Jim Willie: The Coming Isolation of USDollar
By: Jim Willie CB, GoldenJackass.com
Posted Thursday, 27 December 2012 |Source: GoldSeek.com
(special thanks to the Cork)
The typical human reaction to any infection, vermin, danger, or toxicity is to stand back, to isolate the agent, to trap it, to prevent its further spread or release, then to remove it in a safe secure way if possible using trained professionals. Eventually decisions must be made on the level of acceptable risk on the removal, like what is willing to be lost or damaged or killed in the process. Risk analysis, cost trade-offs, and minimization decisions must be evaluated and executed. The toxic agent in global trade, global banking, and global bond market is the USDollar. In 2009, the Jackass began making a certain firm point. Those nations that depart from the entire USDollar system early will be the leading nations in the next chapter, with stronger foundations, richer solvency, emerging economies, healthier financial markets, efficient credit engines, growing wealth, stronger political helm activity, and better functioning systems generally. Imagine a contaminated blood system that infects, corrupts, and destroys all interior organs from the spread of the toxin. Those nations that stick with the crumbling USDollar system stubbornly will find a horrible fate with devastating effects, rampant economic damage, broken financial markets, sputtering credit engines, tremendous loss of wealth, wrecked supply lines, poverty spreading like wildfire, ruined political structures, social disorder, isolation from the rest of the world, and a fast ticket to the Third World. That is EXACTLY what is happening in the last several months. A division has begun, as the East has been busily installing the next generation platforms, as related to trade, banking, and commercial integration.
NEW ASIAN TRADE ZONE
The division between East and West actually accelerated when the extremely ill-advised decision for Iran sanctions was made by an increasingly desperate United States Govt and its handler on the Southern Med. The division continues, matures, and develops with each passing month. It has become a story, as the Eurasia trade zone concept has been born. It has a long way to go, but Asia however has made great strides lately in unifying commerce. The climax event of the Asian trade zone conference held in Vietnam could not have been more important, as they rejected the US-led plan. The Asians partners and players even rejected the United States from the entire Asian trade zone, but did include Australia and New Zealand. The incredibly stupid naive US-led plan, the Trans-Pacific Partnership, attempted to create a trade zone with Asia which would have blocked China. Imagine the incredibly obtuse blockheaded maneuver of trying to have all of Asia not conduct facilitated trade with China, its leading trade partner. Talk about shooting both legs and genital region with a double barreled shotgun! This is the signal flare of US political stupidity that has turned highly destructive for the USEconomy and its people. Such failed leadership and counter-productive initiatives will push the US into the Third World even faster than previously thought possible. The isolation is firming quickly. Most of Asia does not wish for strong trade ties with the United States, most likely since they do not see mutual benefit. They see a ravaging appetite to grab capital.
A Paradigm Shift is taking place, and the ASEAN-China summit gave proof positive in a seminal event of the vast changes in progress. The United States just suffered its worst humiliation ever as a nation on the Eastern global stage. It was exceeded only by the humiliation for a US president personally. The story went uncovered by the lapdog inept US press. The late November Asian summit meeting held in Phnom Penh included 15 Asian nations, which represent half the world's population. They decided to form a Regional Comprehensive Economic Partnership that excludes the United States. The Asians are pushing to isolate the United States. Regard it as punishment for hegemony, or a reaction to prevent further capital drainage, or to protect from central bank abuse, or to wall off continued bond fraud export, or to defend against military aggression. Regard it as confirmation that China is the regional leader in Asia, even for military security. Regard it as a response to banker criminality, or simply for being totally full to the brim of American corruption and arrogance and abuse of position, led by creation of the USDollar as an elaborate weapon and credit card whose balance is never to be repaid. Abuse of power and sponsored financial corruption will have extreme consequences in the reshaping of global commerce and banking. The US will be isolated, so as to protect the rest of the world from its fascist exhibitions and deep manifestations.
FLUSHED NATION
The shift is in progress, and the American people have no idea what is happening. They are too pre-occupied by the agency torture of the population, urgently needed to remove guns and to create the police state. Current events are heinous and genocide on large scale and small scale. Any comments will be limited on the orchestrated travesty, travails, and tragedy. They all have one traceable element, which connects to a certain Virginia suburb where an intelligent pillbox operates in the shadows with puppet strings to the press networks and maybe Hollywood. The security agencies turned to the dark side years ago, with full devotion to narcotics, money laundering, and collusion with the castle dwellers. When the Praetorian Guard plots to bring about a police state, the only words that come to mind are disaster, disorder, mayhem, betrayal, degradation, death. Their tools are psychotropic drugs, violent training, weather altering devices, and basic sabotage. Treason is the calling card unfortunately for much of the US leadership class, whether banking, politics, economics, pharmaceuticals, or news networks. Think Syndicate, as my work has described for several years. The United States with its harsh new visa policies, molestation at airports, heavily defended borders, sponsored gun running, has shown a vicious visible visceral fascist streak that has begun to bring memories of the national socialists of Central Europe 70 and 80 years ago. They are back, stronger than ever, not having been eliminated. They were instead assimilated within the banking and security organizations, able to plant seeds which germinated with the sons in offspring. Two sons became presidents.
DEUTSCHE MARK GONE
In the 1960 and 1970 and even 1980 decades, the favorite currencies off the standardized tables of commerce were the USDollar and DeutscheMark. At one time in the Soviet Union and the Soviet Bloc of Eastern Europe, more USDollars and DMarks were in circulation than official Russian Rubles or Polish Zlotys or Hungarian Forints or whatever. Those years are long gone, as in long gone, all paper alternatives lousy. Under a strange bizarre compromise arranged to assimilate East Germany and to conceal the French sovereign debt, the Euro Monetary Union and the common Euro currency was born. It is now in the process of disintegrating. So the powerfully strong and stable German DMark went away. Back in those decades, only limited travel was done by the Jackass, confined to a honeymoon in France and Switzerland with a cold woman no longer inflicting her plague-like touch in my life. The Jackass deals exclusively in Latin currency of paper and human variety. No exposure to alternative currency held under the table was discovered in beach locations to the south or modest hotels in the green hills to the north. But friends reported stories. My older brother spent two months in Germany and Czechoslavakia, with ample stories of hoarded USDollars and DMarks. Store owners and wise families were eager to obtain USD and DM currency, even young kids. He and some ambitious friends heard stories of vast black market activity in Russia, where the US$100 bill was a favorite. In that era, Gold was not an item of pursuit or stored wealth. Times have changed radically, and Gold is the new store of value.
Times have changed with the sunset of the DMark and the toxicity of the USDollar. The people, the shop keepers, the business men, the small financial firms, they all have been turned upside down in recent years as they struggle to find a safe place to store wealth. Money has been corrupted. The purveyors of money have lost control by accelerating its supply by central banks, lost control of bank solvency, lost control of anything remotely acting like an honest tether to money itself. As a result, all those people, the shop keepers, the business men, the small financial firms, have been discovering Gold & Silver bars and coins. Their combined actions have resulted in an implicit isolation of the USDollar, even an isolation of the Southern European sovereign debt. Swiss havens have grown, in parallel with Gold havens. The toxic monetary plague has been identified, and its toxic sources too. They are the US Federal Reserve and the Euro Central Bank. They are ruining money, undermining wealth, and destabilizing the entire world related to wealth, banking, commerce, and economies. The armies of people, the shop keepers, the business men, the small financial firms, are working to isolate the USDollar as toxic agent in a demonstration of survival.
FREEDOM FROM DELUSION
Many bright people within the gold community cling to hope, harbor delusions, and maintain expectations, none of which have much value in the fast changing world of fascist entanglement and full integration. The Jackass has operated without delusions, firmly in belief that the corrupt systems would flourish. That viewpoint and operating principle has proved to be correct since 2004 when the Hat Trick Letter began to spout deeply disturbing forecasts. One after the other, most of the forecasts have indeed occurred, to the detriment of the nation and its systems and its society at large. No pleasure has come from forecasting a wrecked housing market (burdened by lax underwriting and bond fraud) or a broken insolvent banking system (from bond losses and dependent upon money laundering) or a desperate chronically USGovt budget (dragged down by adopted socialism and sacred war costs) or a spreading Southern European bond crisis (addressed only by higher subordinated toxic paper).
No pleasure is taken from seeing vast legions of struggling Americans, including a few close friends, who have lost jobs, lost homes, lost savings, lost pensions, and lost a valuable sense of security, as they continue to hang on. Many might actually find the warmth of the official camps, only to disappear later on. Argentina and Chile had their desaparecidos, and so will the United States. My ugly expectation is that before their bodies are incinerated, vital organs will be extracted for black market gains. Inoculations upon entry will assure them of good health and fully functioning organs. Later, vaccines will infect them, just like with the swine flu vaccine. By the way, in Costa Rica a brief story to enlighten on vaccines. In early 2008, the Jackass advised a couple families with numerous children and cousins in school to reject the swine flu vaccine that was promoted by the school authorities at the urging of US officials. They took my advice after their confidence was won on several other matters. Only one of about 20 children took the vaccine. She has been sick with a mysterious cerebral disease for over two years. My mention of searching for Guillain Barre symptoms has not helped. The mothers are grateful, as they did not understand at first my emotional outburst to discourage following the school advice. The official US camps will involve forced vaccines. Later on, false stories will be promulgated that the dead bodies were the result of already sick people entering the camps for quarantine purposes. In reality, the people would only have suffered from hunger and exposure and despair.
Hope is not part of my forecasts, but rather the reality of the corrupt human power game mindset. The US banking, economic, and political leaders can easily be expected to continue their corrupt games, with easy forward calls. No expectation of USGovt regulatory agencies is part of my forecasts, but rather the reality of their nearly perfect track record of big bank loyalty and fraud protection. The US regulators can easily be expected to continue their corrupt games, with easy forward calls. Clinging to precious metals mining stocks is not part of my forecasts, a decision made back in early 2008. They are bound in paper wealth, subject to inflation in share dilution just like the USDollar, vulnerable to jurisdictional confiscations, and at the mercy of labor unions whose production is increasingly halted. Unfortunately, too many fine people within the gold community, including GATA, hold firm on hope, regulators, and mining stocks. Not here! The major financial networks rely upon advertisement revenue from Wall Street, fund managers, an market exchanges. GATA has a business model that has one key vulnerability, with strong links to the mining firms. It has tainted their viewpoint sadly. My support of GATA is firm on challenge of USDollar legitimacy before the Supreme Court, on challenge of US regulators to enforce the law, on challenge of the big banks to prove their solvency, on challenge of the central bank to reveal their activity. But the Jackass does not expect the Supreme Court to ever rule the USDollar as illegal, nor the US regulators to ever enforce the law, nor the big banks to ever remove themselves from corruption, nor the central bank to ever conduct business in opposition to the biggest banks under supranational orders.
My personal background has taught me well that a corrupt system never corrects itself. Instead, it spins out of control with broken platforms, layered mechanisms to impose its servitude and influence, complete with side projects to illicitly support itself. See the theft of Iraq gold and theft of Libyan gold. Their people will never again see that wealth. The US system will remain broken until it collapses, never to be corrected until after its collapse.
The Jackass does not align with the expectation of mining stock rise. The stocks are paper wealth in a new era of paper wealth implosion, during which inflation of shares through dilution is rampant. My full expectation is for physical metal prices for Gold & Silver to rise, while mining stocks continue to fall in value from dilution and reduced metal output. The leverage is a mirage when large deposits are seized by desperate foreign governments in need of income. What on earth is complicated about understanding this point?? The leverage is a mirage when workers are the focal breakdown point for a higher cost of living. If workers cannot afford to feed their families and survive, mine output will suffer. What on earth is complicated about understanding this point?? The leverage is a mirage when rising mine operation costs must be handled, by the simple practice of share dilution. Combine with regular executive stock options, and the dilution on stock shares is huge. What on earth is complicated about understanding this point??
POWERFUL CORRUPTION INERTIA
Corruption Inertia is a principle firmly believed in when Jackass forecasts must be made. The corruption will continue with firm immutable momentum, without an external force acting as agent of change. At times, this is simple science. When colleagues introduce hope and what must be, the OFF button is engaged quickly here in my office. Their views are out of touch with reality. Corruption will persist as long as the Syndicate continues to hold power. It will remain the constant while the USDept Justice remains, while the USDept Treasury remains, while the US Regulators remain, even while the US debt rating agencies remain. They all support the current system. They are all subject to momentum pressures. Only an external force will result in change. When the USDollar is further isolated, that change will come. To expect change from the inside due to internal forces is lunatic, kind of like expecting an alcoholic to change on his own from an awakening. Al Capone was removed not from inside the Chicago crime boss conference of dons. He was brought down by external forces related to income tax. The world will similarly reject the USDollar for its tax on the system, unwanted, discarded as a toxic agent.
PROTECTION FROM THREAT TO WEALTH
Again, delusion works well when fashioning a creepy little shell of existence to protect oneself from the psychological damage of a predatory government syndicate or security agency apparatus. The Jackass mocks such defense mechanisms, since a guarantee for poverty and misery. The vast legions of Americans will soon awaken to find their jobs are hanging by threads, their wealth either vanished or converted to USTreasury Bonds by force, their liberties long gone, and their ability to seek out foreign lands for residence curtailed. In fact, one nation after another is actually banning acceptance of Americans for bank accounts. See Switzerland, Panama, and Hong Kong. The US subjects are seen as persona non grata not for their own characteristics, but for the passport they hold from the United States. The USGovt as lord acts like syndicate bullies, agents to abuse embassy privileges, with imposed extra legal paperwork like an extra burden. The isolation is not only of the United States, but of its citizens, whose business is not desired. Hence the Americans will increasingly be trapped in the US along with their money. The Jackass response to threat is not to embrace delusion, and not to seek a blanket to cover my head in the basement quarters. Instead, the response has been to head for the hills with pockets filled.
People, both clients and colleague, inquire when the Gold price will rise with vigor, when the mining stocks will rise with gusto. They remind that with all the central bank debasement of currency from Zero Interest Rate Policy and Quantitative Easing, the ultra-cheap, artificially cheap, desperate cheap money to finance USGovt debt should make the Gold price zoom upwards with each QE official announcement. My answer is quite simple. Each new QE program gives the dark forces more motivation to slam the gold price with naked shorts in sale of paper gold and paper silver. To be sure, the true value of Gold and the true value of Silver is higher, but it is not reflected in the COMEX price. That market is the epitome of corruption. If they were in charge of measuring fevers, they would place the thermometers on ice. Instead, a vast divergence comes between the paper Gold price and metal Gold price. Unless and until the Gold market is freed from corruption and freed from the shackles of Wall Street and London and Swiss influence, it will continue to be suppressed. My full expectation is not for the system to correct itself from within. Instead, the COMEX seeks out new sources of supply, like the GLD Exchange Traded Fund. It is probably far more gutted than publicly stated. It has been converted into a bullion bank central repository for easy raided inventory. The Gold price will not rise from internal forces to push up value, in response to central bank monetary policy or shortage of COMEX inventory. The Gold price will rise from external forces in USDollar isolation, along with isolation of the big banks in the US and London. Their gold inventory will be removed, returned, and drained. In time, the USDollar will widely be rejected in trade.
THE NEW ISOLATION HAS BEGUN
The process of isolation is not just now beginning. It is a process well along. In fact, it has been told that immediately following the Lehman Brothers death (a deliberate exploited execution) and the adoption of toxic vats by the USGovt in the form of Fannie Mae and AIG, the major foreign players located primarily in the East began to feverishly prepare for new platforms on trade and banking. They sought to develop an alternative. For the last 20 to 25 years, a backwards principal has been at work. It dictated that the USDollar would prevail in reserves management, actually the USTBond as vehicle. The rules for trade surplus recycle were constructed to lean toward usage of the USTBonds. Therefore, the global trade would be dominated by USDollars. In other words, banking would dictate trade settlement. That is backwards, and keenly exhibits the brute force of the USDollar hegemony. Also the crude oil payments have been standardized in USDollars, ever since the Saudis cut a major deal with the USGovt and UKGovt in the mid-1970 decade after the famous embargo. Protection came to the Saudi regime and Persian Gulf emirates, in return for exclusive USDollar payment on trade for oil. The Petro-Dollar defacto standard is the primary plank behind the USDollar global trade patterns shown for over three decades. It is coming to an end, a sunset.
IRAN SEMINAL EVENT
The Iranian sanctions put forth by the USGovt and adopted by the EuroZone nations have contributed more to unwinding the USDollar trade system than any event in decades. It sounded the death knell for the USDollar. It hastened numerous nations to seek a US$ alternative. It provided a fertile environment to fashion new trade settlement mechanisms. It pushed Turkey into acting as a gold bullion intermediary role in the provision of gold for usage in trade settlement. See their role with India and Iran, fully described in the December Hat Trick Letter. When an independent highly reliable gold trader source was asked to confirm the role of Turkey as a test case in developing gold based trade settlement, he gave a tacit confirmation. He has mentioned Turkey in past conversations over the last couple years frequently. Just as Turkey was a swing nation in the NATO alliance against the Soviet Union, Turkey will serve in my view as a critical swing nation in the movement to create a non-US$ trade settlement system. The new system will be decentralized, meaning not funneled through the major banks, not passing through the USFed as clearing house. Turkey will be essential in the formation of the Eurasia trade zone. First comes the Asian trade zone (the US excluded), and next comes the hand shake between the Asians and Europeans to create Eurasia. Some folks have expressed doubt toward the arrival of a vast trans-continental trade region. They seem painfully unaware of an incredible network of railway lines connecting Russia to Germany and China, and of a incredible network of liquified natural gas lines connecting Russia with all of Europe and Central Asia. Across the new trade zone and its diverse commerce, the USDollar will not be at the center. It is in fact being isolated, since it is a toxic agent. Everything US$-based is crumbling, from currencies to bonds to banks to credit lines to economies.
CHINESE YUAN BILATERAL CURRENCY SWAPS
The advent of barter has come. It has not been noticed by the incredibly distracted, misled, deceived, poorly trained, mentally challenged, and myopic American public. They read about a currency swap accord, give it no emphasis or importance, and then turn to the fund manager opinions on rotating stocks from one sector to the next. They read about a workaround to the Iran sanctions, express some puppet-like response of anger or disgust, and then turn to IPOs and stories on Google, Apple, and Facebook shares. They do not even read about the failed Trans Pacific Partnership, since it did not make it onto the financial pages. Sadly, the Jackass is slowly adopting a cold view that vast swaths of the US populace will suffer from a Darwinian event. Their home equity has vanished. Their job security has vanished, unless they work for defense contractors. Their pension funds have been damaged. Their wealth has been over 90% dedicated to paper securities in very obedient fashion. The great majority has dismissed the arguments for sound money or gold investments. Some have a pitifully small portion devoted to hard assets like perhaps some energy companies. Only those who adopt a Gold strategy will survive the powerful storm underway, as it intensifies. Great wealth is being destroyed, and only Gold & Silver will enable that survival by the construction of lifeboats. Paper wealth is being blown away, as only hard metal assets will prevail. Add energy and farmlands.
When people ask about the best allocation, my standard response is at least 90% precious metals, the rest to energy deposits, but not actually stocks, perhaps farmland if possible. The best diversification in my view is for laddering of silver purchases, starting at $10/oz and moving to $15/oz then $20/oz and finally to $25/oz with continued accumulation at $30/oz and above. Gold will win the monetary war, but Silver will take the greatest gains. Gold is fine for a more stable long-term protection against toxic paper wealth, but my ongoing objection is that the New York, London, and Swiss syndicate centers play too many games. Silver is subject to global shortages, vast industrial demand, non-replaceable usage, and a much more dangerous situation that the powerful dark forces cannot manage. Silver coins will be widely used in commerce, while Gold bars will thrive in banking transactions. Besides, killing werewolves is the zinger factor with silver bullets.
China has made numerous bilateral swap accords with other nations. As the label indicates, they are deals cut between China and another nation to freely use Chinese Yuan from a credited account that will retain equilibrium. So far many nations have signed up and even renewed deals. The list of nations includes Brazil, Russia, Japan, and India. One might be correct to include all of Asia on the list, as nations like South Korea and Taiwan and Vietnam freely trade in Yuan transactions. The first major signal that the bilateral swaps have taken hold sufficiently to undermine the USDollar through a new trade foundation will be the complete arena of Asian trade being conducted in Yuan transactions. They have no need for USDollars in trade. They see their USTBonds held in reserves under management as vulnerable to serious loss. They see their USTBonds held as subject to grand debasement from USFed central bank monetary policy itself. They see their USTBonds held as supported by Weimar machinery in hyper-drive. They see their USTBonds held as part of a corrupted Wall Street arena and its vast trappings. They see their USTBonds held as prisoner to the USGovt debt battles and a potential crush victim on a fall from the fiscal cliff.
The Chinese bilateral swap accords are actually barter deals. They often represent rather balanced trade, unlike with what the nations have set up with the United States. Unless nations purchase enormous lots of military hardware, they have little need for US products. Hence the end result is a bigger batch of toxic USTBonds to purchase in order to balance the accounts and to avoid the local foreign currency exchange rate from rising enough to damage their export trade. The bilateral swap accords work to create numerous two-way ties as part of a latticework that eventually will form a transnational fabric without the USDollar as nuclear cores in each connection weld. The bilateral swaps are barter without the name in a direct confrontation against the USDollar and its catbird seat. That seat, once a throne, is being dismantled. The latticework of bilateral swaps has created the critical mass of a global blanket with no centralized control room, no choke points with bank transactions, no SWIFT code ticket taker. The bilateral swap accords work to build a critical mass that isolates the USDollar from an entirely new foundation for trade. The USDollar is being isolated.
COMEX PRESSURE POINT
The COMEX is under constant unrelenting pressure. They must shift around ill-gotten precious metal inventory in order to avoid a default. That would be embarrassing. The main device for maintaining order at the COMEX continues to be naked shorting of futures contracts, a blatantly corrupt practice. The naked short ambushes occur with greater frequency in recent months. The arrival of Scotia Mocatta as a provider of gold supply and naked short commitments will kill them eventually, as they have made a deal with the devils. The overnight dispatch of silver from the US to London has grown enormous. One can only suspect that the raids of GLD gold inventory and SLV silver inventory is much greater than is estimated even by its most ardent critics. The illicit sources for COMEX precious metal are fast drying up.
The new wrinkle to render damage to the COMEX is the arrival of the Shanghai Gold Exchange. The graphic displays the differential, a basis for potential arbitrage. Complex arrangements can be constructed that take advantage of the differential, basically buying the gold metal in New York, finding a way to make it available in Shanghai, where it is sold at a $20 to $30 higher price. The end result of the arbitrage is high volume drainage of gold in New York. The snapshot below is taken from December 7th. Several other snapshots are available, with similar price spreads. Finally COMEX based in New York, a major nucleus of corrupt financial markets, has some competition. Expect the spread to widen, the opportunity for arbitrage to grow, and pressure to build for a breakdown.
Sadly for the evil camp, they are fast running out of sources. They stole the entire MF Global private accounts, denied the clients their legal right to receive silver in delivery, and received legal protection by the USGovt and Appellate courts, after changing the law applied to financial firm liquidation instead of brokerage firm liquidation. It was a blatant maneuver that has depleted the COMEX of a major slice of legitimate business. The subsequent similar raid on PFG-Best had an echo effect, adding to the removal of COMEX clientele. The end result is that the risk hedge trade is finding ways to conduct their business without use of the indescribably corrupt COMEX. So the COMEX is being isolated in risk hedging just like the USDollar in global trade.
PETRO-DOLLAR SUNSET
The upcoming Petro-Dollar sunset has very uncertain timing indications. The assassination of Prince Bandar in Saudi Arabia, followed by the potential incapacitation of King Abdullah could work to weaken the foundation of the Petro-Dollar itself. Back in April 2010, the Saudis and other main Persian Gulf nations struck a deal with Russia and China for protection in the gulf region. That accord was not given much emphasis anywhere, nor publicity. But to the Jackass, who had a source at the meeting, the event signaled the sunset of the Petro-Dollar defacto standard. The Saudis would turn to Asia for protection and security, at a time when their crude oil trade was growing with Eastern nations, and when the North American production was made more available for the US demand in markets. The day is nigh where the Saudis accept non-US$ payments for crude oil. They might first accept Chinese Yuan, then Japanese Yen, then Korean won, then Gold itself through big Turkish bazaars. The Petro-Dollar is being isolated for sunset, and will be a key event is the removal of the USDollar as center for global trade settlement. Also, the Saudi regime in my view does not have much longer to survive. Numerous companies and financial firms and export facilitators have exited from the United Arab Emirates in preparation for the fall of the House of Saud. The Saudi Arabian royals have unstable neighbors in every border, especially Bahrain, Iraq, and Yemen.
WILD CARD FACTORS
Numerous wild cards float on the global trade table. Bank strictures head the list, with imposed rules on account reporting abroad, with tax information requirements, and with capital controls. It is harder each month to move large amounts of funds. The forms to complete have become onerous and imposing, acting like implicit restrictions. It is harder each month to use simple bank cards at ATM machines. With a simple rule change, the banks cannot complete these transactions. The organized and patterned restrictions work to trap USDollars within the local US borders. Consider it an internal mechanism to assist the global isolation of the USDollar.
LOST GLOBAL RESERVE STATUS
The described isolation on numerous fronts, whether trade or COMEX or banks, all work toward the elimination of the toxic agent in the USDollar. The world wants a more just, more functional, more efficient, more equitable global trade system. The United States has abused its global reserve custodian position too long. The world is fighting vigorously to remove it. The usage of the USDollar as a credit card to finance its consumption binge without ability to pay will come to an end. The usage of the USDollar as a device to enable powerful aggression in war to advance syndicate interests like vertically integrated narcotics will come to an end. The usage of the USDollar as a banking monopoly device will come to an end. The usage of the USDollar as an instrument for bond fraud will come to an end. The usage of the USDollar as a free lunch device to finance the USGovt deficit will come to an end. When the USDollar is no longer the global reserve currency, the door to the Third World will be opened wide. When the USDollar is no longer the global reserve currency, the supply lines will be interrupted to the USEconomy, giving off a prominent Third World stench. When the USDollar is no longer the global reserve currency, the price inflation effect will become a national topic of grand debate and extreme anger. When the USDollar is no longer the global reserve currency, the United States as a nation will experience tremendous additional isolation and hardship, as most Third World nations do. The level of corruption within the USGovt and US banking corner offices is already far more entrenched than any Third World nation. The vote fraud for US national elections is equally prevalent, but more sophisticated.
When the USDollar is no longer the global reserve currency, the Gold Standard will be right around the corner, if not already in the implementation stage. The Gold price will react quickly to the removal of the USDollar from its prized perch of abuse. The center of the new trade settlement system will be GOLD, which is not even being discussed by the enlightened denizens of the gold community. It will be the basis of the Letters of Credit, in the form of gold trade notes. The short-term credit that facilitates trade will have a truly magnificent grand Gold core. The common agreement will be to make the Gold price at least $5000 per ounce, probably closer to $7000 per ounce. They will in the process dismiss, overrun, and put into oblivion the COMEX and the LBMA, rendering them to the scrap heap of irrelevance.
THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
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Jim Willie CB, editor of the “HAT TRICK LETTER”
from article:
When people ask about the best allocation, my standard response is at least 90% precious metals, the rest to energy deposits, but not actually stocks, perhaps farmland if possible. The best diversification in my view is for laddering of silver purchases, starting at $10/oz and moving to $15/oz then $20/oz and finally to $25/oz with continued accumulation at $30/oz and above. Gold will win the monetary war, but Silver will take the greatest gains. Gold is fine for a more stable long-term protection against toxic paper wealth, but my ongoing objection is that the New York, London, and Swiss syndicate centers play too many games. Silver is subject to global shortages, vast industrial demand, non-replaceable usage, and a much more dangerous situation that the powerful dark forces cannot manage. Silver coins will be widely used in commerce, while Gold bars will thrive in banking transactions.
CME Lowers Gold Margin By 9%
Submitted by Tyler Durden on 12/28/2012
Adding to the confusion, for some, that is today's trading session, here comes the CME which in a post-closing announcement, proceeds to hike outright margins on a variety of petroleum and freight products, but more importantly just cut the margins on gold by 9%. Is it that time when the establishment is clearing the path for everyone to rotate out of equities (and/or bonds) into gold, just to set the trap and pull the trapdoor once everyone is once again left holding paper gold? We shall see, but following tonight's selloff, gold is now less than 5% less than stocks YTD. It may well be up to the last trading session of the year to determine who wins in 2012: rock or paper.
Metals- Outright Rates:
(Link below)
Source: CME
http://www.zerohedge.com/news/2012-12-28/cme-lowers-gold-margin-9
Sorry guys this was posted on Silverdoctors as dated Dec. 26 but it's just a repost of the November one. Anyhow the Dec. Jim Willie just came out.
JIM WILLIE: THE GOLD WAR
DECEMBER 26, 2012
By Jim Willie, GoldenJackass.com
The global financial crisis is better described as a global monetary war to defend the toxic USDollar, whose sunset can be seen.In the last 12 to 18 months, the monetary war has again morphed, this time into a far more serious and financially violent global Gold War. Nations are fast realizing that their only true liquid assets of value are their gold reserves, and even they have been tampered with or stolen in a vast re-hypothecation scheme.
The Gold War is on, having moved to a higher gear, but nowhere near a climax gear. The true value of gold is being realized. The strength of gold during insolvency crisis is being observed. The resistance and rescue from the plague of insolvency is being made clear on a global stage. The new important part of the Gold War comes with the Allocated Gold Account scandal which will dwarf the LIBOR and MFGlobal scandals. The demands for repatriated gold accounts, primarily from the criminal bank sectors in London and New York, have amplified. Germany has finally joined with demands for gold repatriation. The demands will continue to grow even as tampered gold bars add to the motivation to repatriate. If only Chavez of Venezuela knew that he was to start a global trend to call gold home, in a Gran Aletazo de Mariposas. The grand butterfly flapping has caused a whirlwind that will turn into a tornado to wreck the central banks in a final death blow.
Several immutable Gold Rules appear to be self-evident and powerfully manifested in the modern world of banker corruption, financial market intervention, currency debasement, phony accounting, and economic deterioration, all amidst powerful incessant media propaganda, against a backdrop of endless war. The global fascism movement has taken deepest root in what during the 1960 through 1980 decade was the capitalism regions steeped in democracy. Since the Lehman Brother scuttle and the Fannie Mae adoption and the AIG black hole admission, the financial crisis that began with the housing bubble and subprime mortgage bust has turned virulent. The global financial crisis is better described as a global monetary war to defend the toxic USDollar, whose sunset can be seen. In the last 12 to 18 months, the monetary war has again morphed, this time into a far more serious and financially violent global Gold War. Nations are fast realizing that their only true liquid assets of value are their gold reserves, and even they have been tampered with or stolen in a vast re-hypothecation scheme.
The Gold War is on, having moved to a higher gear, but nowhere near a climax gear. The true value of gold is being realized. The strength of gold during insolvency crisis is being observed. The resistance and rescue from the plague of insolvency is being made clear on a global stage. The new important part of the Gold War comes with the Allocated Gold Account scandal which will dwarf the LIBOR and MFGlobal scandals. The demands for repatriated gold accounts, primarily from the criminal bank sectors in London and New York, have amplified. Germany has finally joined with demands for gold repatriation. The demands will continue to grow even as tampered gold bars add to the motivation to repatriate. If only Chavez of Venezuela knew that he was to start a global trend to call gold home, in a Gran Aletazo de Mariposas. The grand butterfly flapping has caused a whirlwind that will turn into a tornado to wreck the central banks in a final death blow.
GOLD STANDARD RECALL
The law can be stated: [b]The Gold Standard will return from a sheer standpoint of value, stability, and resistance to storms based in failed bond auctions, debt writedowns, and insolvency consequences. Only a hard asset backed new currency can replace a fiat paper currency reserve[/].
The law is self-evident and being manifested, with alarm if not deep trepidation by the financial leadership among the Western nations. While the central banks and the finance ministers stumble around seeking solutions, applying patches, making money free, redeeming toxic bonds, and otherwise bumbling in the midst of their own balance sheet and fiscal ruin, the emergence of Gold has become clear. It is the only asset rising of recognized value during the grand debasement of money committed by the central banks. It is the only asset whose value is being demonstrated as strong during the fiscal cliffs that so many major industrial nations have already gone over. They are not approaching fiscal cliffs. Four consecutive years of USGovt deficits over $1.3 trillion amply demonstrate to anyone with an uncorrupted view and unaltered pulse that the crash into the canyon floor is next, not the plunge over the cliff. Downward acceleration and speed have already been achieved.
As nations and continents come to realize their new debt compositions are nothing more than a series of shots of tequila for the patient suffering delirious tremens from alcohol poisoning, they are coming to the painful conclusion (for them) that a Gold Standard is the only solution. Applications of more paper mache accomplish nothing when the base of paper is rotten. The Gold Standard will be imposed upon them by the global rebellion against the USDollar, which will emanate from the trade sector. The Gold Standard will return, in the form of trade settlement as its payment core, as in the short-term trade notes. The bank cartel will be brought into the standard from which they broke away in 1971 with the abandoned Bretton Woods Accord. They will be brought in kicking and screaming, since only Gold can and will properly bring the nations out of the wilderness from the chaos. Once more, the banking systems will follow the trade system, rather than the corrupt banks dictating terms on reserves management in fiat paper currencies which disseminate toxic bonds. It has been backwards for 30 years.
CENTRAL BANK EXTREMES
The law can be stated: [u]The Gold Bull continues unbounded with the Zero Percent Interest Policy (ZIRP) as its primary cylinder, while the artificial 0% distorts all financial markets, all assets, and all value. The Gold Bull will continue until the USGovt debt default, and until the USDollar retirement.
The 0% official rate has been declared as permanent, if the words of USFed Chairman Bernanke are properly interpreted. A sliding forward promise, first told as end 2013, later revised to end 2014, later to be end 2015, is a clear signal to those with an active brain stem. It is permanent. The 0% rate, however maintained like with Interest Rate Swap contracts, renders all financial markets as grossly distorted, since most assets have a value that extends from the cost of money. But practically, the USGovt debt cannot manage a rate hike, or else the borrowing costs approach the size of major social programs, even approach the size of the USMilitary offense budget. A rate hike would break the entire debt structure and result in a quick default and wreckage of the entire USTreasury Bond complex. Worse, a rate hike would cause a sudden collapse of the support structures bound within the vast derivative complex. This complex has enabled the US financial structure from a collapse that should have occurred around the 1998 to 2001 timeframe. Also, a rate hike would bring ruin to the big US banks heavily committed to the USTBond carry trade, for easy risk-free profits. Recall the Jackass forecast of a USGovt debt default, the position stated in the last months of 2008. The event is coming true.
The Gold Bull is powered by the negative real rate of interest. Its calculation is made simple by the 0% official rate. But take the prevailing consumer price inflation rate of about 8% to 10%, subtract it from the rate earned, tied to long-term USTBonds. The result is a negative real rate at minus 6% or minus 7%, sufficient to power the Gold Bull Market. Given the permanent ZIRP policy, the Gold Bull is in permanent mode. All talk about the Gold Bull Market having run its course is based on vacant arguments and nonexistent logic. It is the propaganda of fools, even desperate people. Calls that the bull in gold has run its course since it hit the $1000 level were laughed at by the Jackass a few years ago. Calls from the same scummy deceptive corners that the bull in gold has run its course since it almost reached the $2000 level are also ridiculed. No solutions have been installed, and the grand debasement of money persists without end. Many doubters and critics of the Gold Bull Market will be humbled when it vaults past that level. The justification, numerous as they are, are gaining attention. The Jackass is glad to help the process along, and to silence the corrupt corners.
The law can be stated: [b]The bond monetization known as Quantitative Easing (QE) powers the upward move in the cost structure for the global economy. The result is a shrinking profit margins imposed on the entire economies, felt in job cuts and reduced budgets for expansion, even maintenance[/b].
The expanded bond monetization has been declared as permanent, if the words of USFed Chairman Bernanke are properly interpreted. A sequence of bond purchase commitments, including both USTBonds and Mortgage Bonds, to meet urgent calls to address the quagmire, is a clear signal to those with an active brain stem. It is permanent. In fact, the QE3 has some rather obvious motive to cover the multi-$trillion mortgage bond fraud, thus permitting a possible housing market recovery. Not gonna happen. The foreign bond creditors have vanished, with only a scattering of Japanese and Chinese investors serving as the bulk of foreign demand. In order to prevent the short-term USTBill yields from shooting up to 5% suddenly, in order to prevent the long-term USTBond yields from shooting up to 10% suddenly, the USFed has made a series of commitments to buy the USGovt debt. Nobody seems to want it, nobody seems to afford it (savings vanishing act), nobody seems to find it as holding value anymore. Besides, deep criminal banker fraud is becoming recognized in story after story. Without the vast QE, despite all its deception and chicanery like Operation Twist, and without the vast apparatus of interest rate derivatives to maintain the 0% artificial rate, the USTBond structure would collapse. If these words seems absurd, then the reader is probably ignorant, uneducated, or wearing red white & blue jockey shorts.
The law can be stated, as a profound consequence: The combination of ZIRP & QE lead to capital destruction and systemic breakdown. Observe the fast falling Money Velocity while money supply grows at a staggering pace.
The telltale signals are the capital destruction, the retirement of equipment, the shutdown of unprofitable businesses and business segments. The USEconomy is not in recovery, but rather in a grand deterioration process. The evidence is overwhelming, shown on a regular basis within the Hat Trick Letter reports. Whether reduced rail shipments, or fast rising Food Stamp participation, or significant declines in payroll tax withholdings, or still growing state budget deficits, or the stunning fall in Money Velocity, those among the aware crowd can see the pathogenesis. The principal cause is the Zero Percent Interest Rate matched by Quantitative Easing, which kill capital as they lift costs. This is the glaring shocking blind spot among hack US economists, most of whom are compromised by either Wall Street or university grants. Hardly any have my respect, since abject apologists for the failed system with few if any valued lucid perceptions. They are the corrupt harlots of Wall Street. They are the vapid academic talking heads. The path paved by fiat paper currency has led to insolvent systems.
The current monetary policy coordinated by the major central banks of the United States, Europe, United Kingdom, Switzerland, and Japan assure no deviation from the path driven by momentum of the grand sovereign debt defaults and ultimate systemic breakdown. In fact, no solution is even attempted, a consistent Jackass point, since the policies and actions are directed toward preservation of power and away from big bank liquidation. The commitment to the failed system increases every year, assuring the impact of the systemic breakdown to be greater as well.
ENTRENCHED DISORDER
The law can be stated: The anti-Gold system continues to attempt to reinforce itself until its final implosion. Criminal means and false accounting backed by media propaganda are their tools that reinforce the current power structure. It will yield to foreign designed trade settlement systems, to the forced Gold Standard return, and to vast liquidation.
For the US and UK and Europe and Japan, the 0% official rate will continue until the debt defaults occur, which are in progress. The government deficits will not come down. They will instead escalate, as the economies produce fewer tax receipts and the calls for socialist relief programs expand. The political apparatus is being recognized as broken, a travesty in full view. The economies are experiencing a permanence in the shock from the ZIRP & QE in tandem. Households feel the higher cost of food, energy, utilities, town services, and even property taxes. Businesses feel the higher costs of everything from energy to materials to shipping. Lately they will react to the Obama Care as the health care tax is imposed, against their will. The financial firms have been guilty of doctored gimmicked financial statements ever since April 2009, when the USCongress blessed the decision by the Financial Accounting Standards Board. The FASB decided to permit the financial firms to declare any value they wish for rotten assets, the collection of impaired assets not to face the grim reaper of reality. The parade of Zombie Banks has reeked havoc ever since upon the economies.
Criminal deeds have become the norm. The established norm has been for outsized naked short positions for the Big Four US Banks. They are an everyday fixture. No laws are enforced for selling enormous supply without metal. Why on November 15th, my colleague Turd Ferguson reported the following gold ambush. In the TFMetals Report, he summarized the ambush as he wrote, “Over the course of about 5 minutes, one single order was filled. This massive dump of about 25,000 gold contracts managed to move the price of gold down by nearly $20. To give you an appreciation of the size and scale of this deliberately criminal act, 25,000 contracts is the paper equivalent of 2.5 million ounces of gold, or roughly 77 metric tonnes, the paper equivalent to the alleged physical holdings of Australia or Indonesia.” No end to the naked shorting. The financial press reported not a peep on order by the Syndicate, who act as advertisers on the network channels.
On November 2nd, the Silver Doctor reported a similar silver ambush. NetDania provides a service, to estimate volume from five separate market sources. It is not an exact indicator of volume data, but does shed much accurate light on the deeply corrupted market. According to NetDania, a total volume of 38,400 contracts, equal to 191.99 million ounces of paper silver were dumped on the market in only ten minutes between 8:30am and 8:40am EST. The Boyz chose to execute the raid precisely on the day of the gimmicked Non-Farm Payroll data release. They smelled a potential for a precious metals price uprising, and snuffed it. The volume for those ten minutes corresponds to nearly one quarter of annual global silver production! Not the US output, but global output. No response by market regulators, business as usual.
Criminal deeds have become the norm. Money laundering has kept the entire major US banks afloat, the money laced with narcotics. Overnight satisfaction of loans is sometimes done with heroin paper packets the size of bricks. For the last 20 years, the New York and London bankers have illicitly (nicer word than illegally) leased official gold accounts. Those nations are one by one demanding their gold repatriation. Hot war has been justified in order to win the release of official gold held in accounts. Plenty of Arab despots sit in power, but the Libyan seat was targeted as special for its 144 tons of gold. The London bankers pilfered the Libyan gold account in the Qaddafi name, offering flimsy requirements for its return to their people, demands which will never be met. The stolen private accounts at MFGlobal waiting for silver delivery served as another criminal deed. The crime scene was protected by the US regulators and the courts. Apparently, the wrong interpretation of bankruptcy law matters little. MFGlobal was a brokerage firm, not a financial firm. Therefore, the private accounts should have been held first in line for redemption, not last.
The criminal appellate court upheld the wrong decision. The newest criminal streak involves tungsten lacing in fake gold bars. The story was cited here in early 2010, with Rob Kirby taking the lead. My source informs that two important characteristics are noteworthy. The Hong Kong banks are the biggest among the victims. The distribution routes run through a crucial Central American nation, just like the narcotics. Fort Knox was systematically gutted as its content bars were swapped, whose extent has yet to be determined. Expect some deep consequences for the counterfeit in Tungsten bars. Refer to TRIAD for old fashioned justice, and the Intl Court of the Hague for justice with more procedure involved. Perhaps the unusual story of bankers simply vanishing will be the case.
ALLOCATED GOLD ACCOUNT SCANDAL
The most prominent criminal practice has been challenged, the illicit usage for leasing of official gold accounts in the name of sovereign governments. The challenge will make for the grandest banker scandal in modern history. My source estimates that over 40 thousand metric tons have been vacated from the official accounts over the last two decades. Clearly, the volume indicates a lot of unofficial unaccounted gold, which nonetheless exists. The pressure has finally come to the London bankers largely responsible for the happy fingers. The New York and Swiss banks have been working overtime, often in midnight emergency shipments, to avoid a direct default. That would be both embarrassing and an invitation for prosecution which would be difficult to prevent, given the public outcry. As the London bankers struggle to meet the repatriation demands, the pressure will not relent. They must replace the leased gold or see their crime scene exposed.
Only when the vast Swiss repository is denied to the London banksters, the drain will erupt into a major gold default event with glaring publicity. It is when they are exposed, when the urgent need to replace the improperly leased (stolen) gold is realized, when the public and financial community is made aware of the altered Supply & Demand dynamics, that the Gold Price will shoot upward fast hard and without stopping. Far less gold is held in supply than recognized, while tremendous gold demand occurs. The Allocated Gold Account scandal will force the Gold price to $5000 per ounce, at a minimum. The agreed upon trade settlement gold core will probably permit the gold price to be fixed on a temporary basis. Gold is in increasingly short supply, given the labor problems in both South Africa and South America. Expect important gaping shortages and deficits. So the $5000/oz price is only a target, easily surpassed.
METALS PULLED APART
The law can be stated: Gold Bullion diverges into official voided supply, matched by huge syndicate supply. The visible vault storage with public accounting will eventually show nothing present, while the private syndicate vault storage will be hidden from view.
One private important location is the Carlyle Group, which holds significant counter-party positions to the vast short positions that Wall Street banks are responsible for. The biggest hidden gold hoards, truly magnificent in size, are located in Basel Switzerland, the Roman Catacombs, under the Kremlin, and by the ancient Chinese families, along with Wilbur & Mack who buried a hoard in their Arkansas backyard ready with buddies Smith & Wesson. The divergence will continue until the official gold supply is demonstrated, with shock & awe, to be near zero.
Another important divergence will occur. The official price discovery markets such as the COMEX and LBMA will be exposed as having near zero Gold & Silver in inventory. The prices posted for Gold & Silver will remain artificially low, held down by corrupt methods such as widespread naked shorting (permitted by the US regulators and USDept Justice). The physical price paid for Gold & Silver will continue to rise without bound. Already, no more large gold purchases can be satisfied, since supply is for the most part gone. Premiums for coins are on the fast rise, if coin supply exists at all. The unfortunate aspect of Supply & Demand dynamics is that when price is forced down by intervention and other illegal pressures, the result is vanished supply. That is precisely what is happening. Expect a tremendous divergence to occur, as the COMEX and LBMA tagteam of corruption experience a total depletion, but report some asinine moderate price. Nobody will be able to purchase at their posted price, since they will not have any Gold or Silver metal in inventory. It will be gone. Extraordinary methods are being used right here, right now, to prevent the default. See vast exports of gold from the US to London. See the vast shipments of silver from the US to London. See the rapid decline in the GLD & SLV inventory, which the Wall Street firms have access to. See the MFGlobal and PFG-Best private account thefts.
Coins exhibit the inflation in a highly visible manner. The coins in the Untied States & Canada are going away for 1-cent and 5-cent pieces. A friend in Toronto reports that recent modifications to the looney and tooney (C$1 and C$2 coins) have not only altered their appearance, but have altered their perception. They seem like play money to the public, which has shown derision. The US merchants will soon be permitted to round the transaction costs to the nearest 10 cents. The visible inflation has resulted in the cost of making small denomination coins too expensive, and thus impractical. ZIRP & QE will do that. The cost to make a 1-cent US penny is now 4.8 cents and the cost to make a 5-cent US nickel is now 16.2 cents. How embarrassing, even adding to the USGovt deficit. Due to high zinc and other cheap contents, the 10-cent US dime and 25-cent US quarter are still inexpensive to make. Why not use wooden nickels? Unless subjected to another fabricated hurricane, they will hold a stable appearance, if not value. A quick review of the National Atmospheric Release Advisory Center website will demonstrate easily the evidence of South Atlantic heavy microwave activity during the entire month of September. Angels don’t play this haarp.
GOLD MIGRATION
The law can be stated: With Gold goes the geopolitical power. As huge amounts of Gold are shipped Eastward, with huge tonnage leaving London for points East like China, so goes the important shift in geopolitical power. A Paradigm Shift is in progress, at work.
Since March 2012, a whopping 6000 metric tons of gold bullion has been shipped from London to the East, primarily China. The circumstances behind the shipments are murky, but they indicate private off-market transactions that are intended to avoid publicity. My suspicion is that old wealthy Chinese families had their Allocated Gold Accounts improperly used in leasing practices by London bankers, associated with posted margin on a gaggle of leveraged contracts spanning from sovereign debt to currencies. The trades went sour. Margin calls were enforced with lost gold in a grand forfeit, the London bankers feet put to the fire reportedly. Publicity was avoided, but in the process a tremendous amount of gold was forfeited. With the gold went a transfer of power, to the East. They will dictate terms of the new trade settlement system. They will become the world’s more prominent lenders. They will control the next geopolitical chapter.
ADVENT OF THE GOLD WARS
Since the Lehman bust in September 2008, the global financial crisis has been a fixture, without solution. My preference is to call it the Global Monetary War, whose unspoken main objective by the powers in control is to maintain power, to preserve the big banks as fortresses of power, and to protect the USTBond & USDollar in their primary perches. Two important events have altered the crisis. The first was the breakdown of the Southern European sovereign debt structure. The Greek Govt Bond went into crisis mode in late 2009, which spread to Ireland, Portugal, and lately to Spain, Italy, and France. It will consume the Euro currency, despite all their best efforts NOT to fix anything, despite their best efforts to alter the bond subordination in new bond issuance. The Europeans are guilty of kicking the debt can down the road, just like the Americans. The victims that topple the system will be the big national banks in the affected nations of Europe, even the German banks. Their flagship Deutsche Bank has been dead for years, full of hollowed corridors.
The second important event was the widening demands for repatriation of official gold accounts. It might have begun with Chavez in Venezuela, but it has continued. The Ghana Govt made their gold account repatriation demand, but a mysterious death of their leader halted the process. The Germans are spearheading this revolt. The Dutch will follow. The Austrians are next. Even little Ecuador wants one third of their gold account returned. Others will join.
An extreme wild card has surfaced. It began to be in play when Saudi Prince Bandar was assassinated a couple months ago, at the hands of HezBollah. Of course, the event was kept secret, but the Saudi Minister of Security was killed as revenge for the Saudi role in the high level Syrian assassinations. Phony photographs and other doctored official accounts have been produced by the Riyadh crowd to conceal the damage. The House of Saud, so the Jackass has claimed for two months, is in danger of falling, along with the Petro-Dollar. Well this week, reports have come out that King Abdullah faces death. He underwent a mid-November back surgery but has not recovered, or even come into consciousness. His entire set of organs has shut down, no longer functioning. The risk to the Petro-Dollar was high with the Bandar killing. The risk just went double acute with a succession to the throne imminent. Domestic challenges by an increasingly aware population, beset by higher cost of living, will come. The great Saudi oil surplus is slowly dwindling, what with higher domestic usage in a higher standard of living. The foreign challenge will remain from HezBollah, with roots from the radical and very powerful Shiite sect. Expect the Petro-Dollar defacto standard to fall in the coming months, as only weak successors remain in the line of surviving brothers. Think bottom of the family barrel (of oil). The teetering USTBond and confronted USDollar make for a poor foundation on which to keep the Petro-Dollar in place. Imagine the impact if the Saudis announce that Euros, Pounds, Swiss Francs, and Yen, even Gold are accepted for crude oil transactions. The Petro-Dollar is walking dead.
GOLD BREAKOUT IN ALL CURRENCIES
The process began with a Gold Price breakout in Euro terms. The continent is the site of the most visible systemic bust that has engulfed the sovereign bonds, the big banks, and the economies, even public trust. Soon to follow suit will be the Gold Price breakout in US$ terms, in British Pound terms, and in Japanese Yen terms, an event to occur simultaneously. The central banks from Europe, the US, the UK, and Japan are coordinated and aligned. They are all putting into practice the monetary lethal policies of unlimited hyper monetary inflation with a 0% rate attached. Witness Weimar gone global in a grand currency debasement. The Gold price will surpass the US$2000 mark easily. When it does, the Gold Price breakout will be recognized in all major currencies.
The central bank franchise system is broken. The global monetary system is broken. The big Western banks are broken. The financial markets are broken. The safe savings vehicles are broken. The all-important confidence factor to support fiat paper currencies is fast vanishing. The arrival of the Gold Standard as the solution is being slowly manifested in the form of a gold-core trade settlement system, which will drive a global Gold Standard. The new system will dictate bank reserves practices, and render the USTBond as a rejected toxic paper relic. It should arrive early in 2013. In the process, the Western nations will become impoverished, as they desperately cling to the failed system. Anger will rise. Disorder will prevail. The USDollars inside the United States will be trapped, then devalued as the public watches in shock. The power will shift East inevitably, with the shipment of Gold. A new era will begin.
http://www.silverdoctors.com/jim-willie-immutable-gold-laws/#more-17944
The Takeover of the NYSE Signals The Age of Derivatives Over Stocks
12/23/2012
Robert Lenzner
Forbes Staff
Comes the revolution. The 12 year old Atlanta-based Intercontinental Exchange will pay $8.2 billion to absorb the over 200 year old Big Board, The New York Stock Exchange– once the absolute center of capitalist democracy, the place where your Aunt Sadie bought and sold 100 shares of American Telephone or General Motors or Exxon or Johnson & Johnson.
Rest in peace NYSE. A marketplace in a gated, secluded section of Atlanta– home of “Gone With the Wind”– will be the owners of the citadel at the corner of Broad and Wall Street, just across from the Federal Reserve building where George Washington was sworn in and just across the street from the J.P. Morgan building where radicals set off a bomb so many decades ago.
Today, as individual investors buy and sell common stocks less and less, the transaction symbolizes the rapidly advancing utilization of vehicles that are too esoteric for the general public to comprehend– futures contracts and options on the direction of interest rates, or oil and natural gas prices, or metals and agricultural products like wheat and corn, or precious metals like gold and silver, and especially credit instruments like mortgages and bank loans.
The proposed deal is also a signal that global financial markets in Asia and Europe have become as crucial and ruling as prices in New York and Chicago, where commodity products have been traded.
It means that short term trading, which contributes at times to volatility, and t he process of hedging one’s bets have become essential for the trading practices of multinational corporations, giant financial institutions and hedge funds, which go in and out of the markets at will. It means that with the volume of derivatives replacing stocks, there will be more leverage, larger amounts of risk taken through the short-term borrowing of funds– than existed in the past.
It means a major challenge for the regulators like the CFTC, the Commodities and Futures Commission, as well as British, Swiss and Asian regulators to keep track of the burgeoning volumes of unique contracts.
JP Morgan, Jacob Schiff, Charles Merrill, the Salomons, the Goldmans and the Sachses, Douglas Dillon and Robert Lehman must all be turn in in their graves as the brash newcomers from the deep south take over the throne of finance.
http://www.forbes.com/sites/robertlenzner/2012/12/23/the-takeover-of-the-nyse-signals-the-age-of-derivatives-over-stocks/
Wishing everyone Happy Holidays!
Gold Market Rehypothecation Fraud: Banks Pledge Same Gold to Numerous People
Commodities / Gold and Silver 2012
Dec 23, 2012 - 03:23 PM
By: Washingtons_Blog
Banks Pledge Same Collateral Numerous Times
Big banks pledged the same mortgage to numerous people.
Similarly, big bullion banks borrow gold from central banks, and then rehypothecate it numerous times:
(Interview 2 min)
Dec. 5 (Bloomberg) -- Bob Rice, general managing partner with Tangent Capital Partners LLC, explains “Gold Lease”. He speaks with Bloomberg's Sara Eisen on Bloomberg Television's "Money Moves." (Source: Bloomberg)
(Options contracts on all commodities are similarly over-leveraged.)
A 1999 study by the International Monetary Fund found that 80 central banks lent out 15% of their official gold reserves.
Central banks now appear to have too little gold to meet their commitments.
And private banks are raiding allocated gold accounts.
Washington's Blog
http://www.marketoracle.co.uk/Article38199.html
Gold Market Rehypothecation Fraud: Banks Pledge Same Gold to Numerous People
Commodities / Gold and Silver 2012
Dec 23, 2012 - 03:23 PM
By: Washingtons_Blog
Banks Pledge Same Collateral Numerous Times
Big banks pledged the same mortgage to numerous people.
Similarly, big bullion banks borrow gold from central banks, and then rehypothecate it numerous times:
(Interview 2 min)
(Options contracts on all commodities are similarly over-leveraged.)
A 1999 study by the International Monetary Fund found that 80 central banks lent out 15% of their official gold reserves.
Central banks now appear to have too little gold to meet their commitments.
And private banks are raiding allocated gold accounts.
Washington's Blog
http://www.marketoracle.co.uk/Article38199.html
itsonlymuni the SLV ETF was drained of 2.0 Million oz of silver on Nov.23rd. Sprott claims shorts had to cover 400 million oz of silver.
On Dec. 6th SD Bullion claimed a UK Fund manager was seeking to buy 20 metric tons of gold in bar form which smashed prices.
http://www.silverdoctors.com/gold-silver-regain-1700-33-on-rumor-of-large-physical-gold-order/
Another good article claiming billions of paper selling:
Whistleblower - $3.5 Billion Of Paper Used To Smash Gold Price
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=82668060
Mining Mania Board
Hope the links work been having problems with my browser all morning.
Tokyo Plays Hardball, Weakens Yen, Lifts the Nikkei
Thursday, 20 December 2012
By Gary Dorsch, Editor, Global Money Trends newsletter
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. And not one man in a million will detect the theft,” John Maynard Keynes wrote in 1920.
On Dec 12th, a shadowy group of political lackeys, voted 11-1 to launch what’s popularly dubbed as “Infinity QE-4,” – the Federal Reserve’s most radical scheme ever, that’s designed to enable the US-government to continue borrowing as much as $1-trillion per year, for the next several years, if necessary, in order to finance the burgeoning US-welfare state. US-lawmakers are negotiating over the details of the so-called “fiscal cliff,” but are simply nibbling at the edges of $1-trillion budget deficits. Yet US-politicians from both sides of the isle, believe they can stave off significant tax hikes and spending cuts, without having to pay a penalty of sharply higher interest rates, which normally follows such fiscal recklessness.
In an unprecedented step, the Federal Reserve said on Dec 12th, that it would hold short-term Treasury yields near zero –percent until the US-jobless rate falls to 6.5% as it launched a new round of T-bond purchases to inflate the US-money supply. Fed officials committed to monthly purchases of $45-billion in Treasuries on top of the $40-billion per month in mortgage-backed bonds they started buying in September. The new round of government bond-buying dubbed “Infinity QE-4” will be funded by essentially creating new money, and further expanding the Fed's $2.8 trillion balance sheet today, to as much as $6-trillion by the end of 2015.
“The Fed continues to operate an open bar for the fiscal drunks in Washington,” says economist Ed Yardeni, referring to the Fed’s readiness to finance Washington’s massive budget deficits. And since the Fed returns any interest payments on the T-notes, back to the Treasury, the federal government is able to borrow money at no cost. However, there is a cost to be paid by the American people, - a massive inflation tax, that will eventually take effect, when the cost of living in America begins to accelerate at a frightening pace, and the cost of goods and services far exceeds the current levels of US-household income.
The Fed is trying to cloak its mischievous role as the chief financier of the US-government, by arguing that its objective, according to Fed chief Ben Bernanke, “is to help the American middle class. This is a Main Street policy because what we are about here is trying to get jobs going,” Bernanke said at a press conference, where reporters are only allowed to ask softball type questions. “If people feel that their financial situation is better because their 401(k) looks better, their house is worth more, they are more willing to go out and spend and that’s going to provide the demand that firms need in order to be willing to hire and to invest,” the former Princeton professor said, explaining Bernanke’s theory of “trickle down” Economics.
Yet with 10-year US T-Note yields already suppressed at historic lows, and pegged below the US-inflation rate, it is hard to argue that what’s needed is to make credit even cheaper is another $1-trillion of extra liquidity from the Fed. And with $1.5-trillion of excess reserves in the US-banking system, it is hard to believe that the Wall Street banking Oligarchs need more liquidity to bolster their balance sheets. Instead, what Fed is trying to enforce is what’s called “financial repression,” - defined as the “totalitarian control of credit under which Treasury financing can be arranged cheaply in spite of a massive increase in the size of the national debt, thru a system of combined and interconnected open-market policies.”
The Fed, the chief financier of the US-government is now holding $1.65-trillion of US T-notes. It’s also spinning a well-packaged web of lies that’s being sold to the masses, gradually, and if somebody tries to speak the truth about the coming wave of hyper inflation, about to sweep the US-welfare state, the “Boy who cries Wolf,” is made to seem utterly preposterous and a raving lunatic. The US-public is fed information about the rate of inflation, that’s under the control of the apparatchiks at the US Labor department, - now touting new ideas, such as the chained-CPI, that’s designed to eliminate future cost of living increases for entitlements.
Dallas Fed chief Richard Fisher, among the few token hawks at the Fed, laments that with quantitative easing (QE), “Financiers we have become. The US-Treasury is hooked on the monetary morphine we provided, when we performed massive reconstructive surgery during the 2008-09 panic. We have filled the gas tank and then some,” he said. But more morphine is needed. The Fed has been asked by the ruling political elite to buy $40-billion of US-T-Notes each month in the year ahead. The Fed is stepping its QE injections, because America’s biggest lender, - China, - is no longer willing to bankroll the US-Treasury. Beijing was a net seller of $95-billion of US Treasury notes over the 12-months ending October 31st.
As of October 31st, foreign investors, - mainly central banks, were holders of $5.85-trillion of US-T-Notes, up +11% from a year earlier. However, in October, the pace of foreign buying slowed to a trickle- a tiny $4-billion increase, which was far less than the average $50.7-billion of purchases per month, over the previous 11-months.
Without the support of “Infinity QE-4”, US T-Note prices could sink under the weight of an $965-billion of new US-government debt to be auctioned in fiscal 2013. Without QE-4, US-T-bond yields could rise sharply, and deal a major blow to the US-stock markets, where traders are now treating blue-chip companies that pay higher yielding dividends and arrange stock buybacks, as surrogates for fixed income bonds. “I place economy among the first and most important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt,” Thomas Jefferson warned.
Tokyo Prepares to Launch “Big-Bang” QE,
One of the side-effects of the Fed’s QE schemes is to weaken the US-dollar’s exchange rate against other currencies. And that’s a major threat to the economic health of many Asian economies that depend upon a high level of exports abroad. Perhaps no other Asian country has been as badly damaged from the Fed’s ultra-easy money policies, than Japan. Its economy contracted at an annualized -3.5% rate in the third quarter, the worst contraction since last year’s earthquake as exports slumped and consumer spending fell.
Japan’s exports have fallen for six straight months in a row, compared with a year ago. Shipments to China, Japan’s top export market, were -14.5% lower in November than a year earlier, because of a Chinese consumer boycott of Japanese goods. Exports to Europe plunged -20% from a year ago, and were down for a 14th straight month. As a result, Japan’s trade deficit for the first 11-months of 2012, widened to a record ¥6.2-trillion yen ($76.4-billion). Japan’s economy is expected to contract -0.4% in the fourth quarter, meeting the textbook definition of a recession. Nikkei-225 companies suffered a combined drop of -31% in net income in the third quarter compared with a year ago.
However, in the hours after midnight on Dec 16th, it became clear that Japanese citizens had voted for change. With its coalition partner, New Komeito, the Liberal Democratic Party (LDP) will control at least 323-seats, securing a two-thirds super-majority in the 480-seat lower house. The Democratic Party of Japan (DPJ) is expected to win no more than 77 seats, - a stunning collapse in support, compared with the 308-seat landslide it won in 2009. Its leader, PM Yoshihiko Noda, is stepping down as party chief as a result of the crushing defeat. Instead, (LDP) chief Shinzo Abe is returning as prime-minister, after 3-years in political exile.
Shinzo Abe campaigned as a “currency warrior,” and is anxious to push back against the Fed’s QE-4 scheme, with his own prescription for Japan’s economic recovery. Abe met with Bank of Japan chief Masaaki Shirakawa on Dec 18th and urged the central bank to set an annual inflation target of +2% for the consumer price index. In their chat held a day ahead of a two-day BoJ Policy Board meeting, Abe also told Shirakawa that his incoming government wants the BoJ to keep printing Japanese yen, until the inflation rate hits +2%.
The idea is to weaken the yen and kick-start Japan’s economy. According to some press reports, leaked to the media, the LDP is preparing to detonate “Big-Bang” QE as early as January 22nd, and flood the world money markets with $1.2-trillion worth of Japanese yen. "We need to overcome the crisis Japan is undergoing. We have promised to pull Japan out of deflation and correct a strong yen. The situation is severe, but we need to do this,” Abe said on Dec 16th. “Quantitative easing by the BoJ will help correct a strong yen and push up stock prices. That will help boost investment and lead to rises in wages, jobs and household revenues. We’d like to shorten the time needed for this to happen,” Abe said.
It could take several years for Japan’s consumer price index (CPI) to reach +2%, from a negative -0.4% in October, because LDP Apparatchiks are in charge of calculating Japan’s CPI, of course! Furthermore, every five years, Japan’s government routinely changes the items included in its CPI, preferring to lower of weighting of items that are rising in price, while increasing the weighting of items that are declining in price. This way, Japan’s CPI stays near zero-percent, and provides political cover for the BoJ to monetize the government’s debts.
Likewise, the Fed says it would consider suspending its QE-4 operation, if the US-consumer price inflation rate climbs significantly above its +2.5% target rate. However, Fed chief Bernanke says it’s a mistake to include the prices of globally traded commodities, such as food and energy, when calculating the rate of inflation. “As is often the case, inflation has been pushed up and down in recent years by fluctuations in the price of crude oil and other globally traded commodities, including the increase in farm prices brought on by this summer's drought. But the ebbs and flows in commodity prices have had only transitory effects on inflation,” he told the Economic Club of New York on Nov 20th.
Essentially, the Fed has given itself plenty of leeway to interpret a rise in the inflation rate above +2.5% as transitory and temporary, and thereby not requiring a pause in QE, let alone a tightening in monetary policy, - just like the Bank of England, which has permitted above target inflation for the past three years, in complete disregard of its legal mandate.
Currency War among World’s Top-2 Debtors, The battle over the US$ /yen exchange rate has been raging for the past 4-½ years. Since April 2008, the BoJ has expanded Japan’s monetary base, the most liquid form of cash in the banking system, by +46% to an all-time high of ¥128-trillion. At the same time, Fed has steadily increased the MZM money supply, the most liquid form of cash, to a record $11.3-trillion today. That’s an annual rate of increase of +9.5%, on average. Until recently, Tokyo was losing the battle, even after injecting ¥14-trillion into the foreign exchange market in 2011, through direct intervention that was left unsterilized. As a courtesy to Washington, Tokyo recycled $128-billion of its intervention effort into US Treasuries, - monetizing a big chunk of the US-budget deficit. No wonder US president Barack Obama wants to meet Mr Abe in the White House in January 2013.
Yet Tokyo’s massive intervention effort failed to give the US$ a sustainable lift above ¥82. The US$ was stuck in quicksand, because the Fed continually upped its QE ante, with bigger and bigger dosages of liquidity. Also weighing heavily upon the US-dollar, the Fed stripped the greenback of its interest rate advantage over Japan’s yen, and frequently reminds listeners that the US-fed funds rate would remain locked near zero percent for years to come. In other words, the Fed co-opted the QE and ZIRP blueprints that were originally designed by the BoJ. Both central banks are now using a new scheme - “inflation targeting.”
This tug-of-war, between the world’s top-2 debtor nations, over the US’s exchange rate versus the yen could last for many more years. It’s unlikely that Tokyo would opt for direct intervention in the currency market as its primary weapon of choice for influencing the yen’s exchange rate. It already owns $1.13-trillion of ultra-low yielding US Treasury notes. Instead, a determined LDP could make further progress in pushing the Euro and US$ higher versus the yen in the months ahead, by utilizing the Big-Bang” QE strategy. Tokyo could also push for negative short-term interest rates to achieve its objectives.
Until recently, Japan Inc was getting slammed by a double whammy. The Euro currency had fallen below the psychological ¥100-level, matching a 12-year low. The debt crisis in the Euro-zone, pushed its economy into a double-dip recession, and caused Japanese exports to plummet. The European Central Bank (ECB) slashed its overnight repo loan rate to a historic low of 0.75% in July, adding to selling pressure on the Euro versus the yen. Largely due to the super strong yen, the Nikkei-225 stock index was a laggard, and trapped below the 9,000-level. Some companies were hit harder than others.
Sony traded at less than ¥1,000, for the first time since 1980, the year it introduced the Walkman portable cassette player. Japan’s electronics giants, Sony, Panasonic, and Sharp became less competitive on pricing, and also lost their lead in cutting-edge technologies to their South Korean rivals, Samsung Electronics (005930:KS) and LG Electronics (066570:KS). Sony posted a $5.7-billion loss for the fiscal year, its fourth consecutive year in the red. Sharp lost $4.7-billion, forcing it to sell 10% of its shares to Taiwan’s Hon Hai Group. Panasonic’s losses were even larger totaling -$9.7-billion. Other less well-known Japanese companies such as semiconductor maker Renesas Electronics was also reporting losses.
The Bank of Japan was getting steamrolled, even after dumping ¥14.3-trillion ($178-billion) into the currency market and expanding its QE pipeline to ¥91-trillion in October. However, since November 16th, the US-dollar has jumped to ¥84.50 this week, - up from ¥78 earlier. The US$’s rebound is small in percentage terms, but it’s a big bonus for Japan’s top exporters. For example, every 1-yen increase in the US’s exchange rate leads to a +2.4% increase in Nissan Motor’s (7201.T) operating profit. Likewise, Toyota Motor’s profit increases by +3.3%. The US$’s rebound to ¥84.50 caught Japan’s Canon 7751.T by surprise. On Oct 16th, the camera and printer maker, which generates 80% of its revenue abroad, revised its forecast for the average US-dollar rate for the full year to ¥78, and kept its Euro rate forecast unchanged at ¥100. Since then however, the Euro has surged to ¥111.50.
In turn, the Nikkei-225 stock index surged +1,200-points higher since Nov 16th to above the psychological 10,000-level on Dec 19th. Much of the Nikkei’s rally appears to be spearheaded by Euro-yen “carry traders,” who are also pocketing a currency profit. The Euro is gaining more ground against the yen, because the ECB is sterilizing its bond buying operations. For retail US-investors in Japan, there’s the potential for a currency loss. However, the Wisdom-Tree Japan Hedged Equity Fund (NYSE ticker: DXJ) does a reasonably good job of tracking the performance of the Nikkei-225 index, and its portfolio is hedged against a loss in the yen’s value against the US$, through short selling yen futures and forward-contracts. So if the Japanese yen continues to weaken, holders of DXJ could avoid the currency loss, while reaping the rewards of a stronger Japanese stock market.
On Nov 30th, the fund managers at Wisdom-Tree sought to increase increased DXJ’s exposure to Japanese companies that earn much of their revenue from exports, and can benefit from a weaker yen.Companies that earn more than 80% of their revenues inside Japan will now be excluded from the mix. Bumped from the top are NTT Docomo and Nippon Telegraph & Telephone, two names that generate all of their revenues from within Japan. Alternatively, Takeda and Canon will now be the #2 and #3 holdings, with weighting of 5% and 4.5%, respectively, up from 2.6% and 2.1% previously. In all, DXJ’s top-10 holdings earn 59% of their earnings from overseas, on average%, up from 27% under the previous mix.
Still, the massive US-budget deficit is turning into the biggest source of instability in the world markets today. More debt means more money printing by the Fed, which in turn, could lead to a full blown currency war, joined by many other central banks, all doing battle with each other. Unfortunately, the corruption and incompetence in Washington politics is beyond repair. Traders need to search for global opportunities to preserve their purchasing power.
“The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn’t want to go bankrupt. People must again learn to work, instead of living on public assistance,” – warned Cicero, in 55 BC.
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IntercontinentalExchange buys NYSE Euronext for $8 billion
By John McCrank and Sophie Sassard
NEW YORK/LONDON | Thu Dec 20, 2012 10:59am EST
NEW YORK/LONDON (Reuters) - IntercontinentalExchange agreed an $8 billion deal to buy New York Stock Exchange owner NYSE Euronext on Thursday, propelling the commodities player into European financial futures and helping it to take on arch rival CME Group.
Atlanta-based ICE will look at selling Euronext, NYSE's European stock market businesses, in an initial public offering after the deal closes in the second half of next year.
The deal gives a 12-year old start-up ownership of the New York Stock Exchange, an iconic symbol of U.S. capitalism for over 200 years which has been hit by new technology and the rise of private trading venues run by Wall Street banks and brokers.
"Our transaction is responsive to the evolution of market infrastructure today and offers a range of growth opportunities," ICE Chairman and CEO Jeff Sprecher, who will be chairman and ceo of the combined group, said in a statement.
Under the terms of the deal, ICE will pay $33.12 per NYSE share, a 28 percent premium to their closing price on Wednesday. The $8.2 billion deal will be paid one third in cash with the remainder in ICE shares.
NYSE Euronext stock rose nearly 32 percent after the deal was announced, while ICE's shares fell four percent before clawing back some of the losses to trade down 1.7 percent at 10:10 a.m. ET.
"The Board of NYSE Euronext carefully considered a range of strategic alternatives and concluded that ICE is the ideal partner for NYSE Euronext in an evolving market landscape," said Jan-Michiel Hessels, chairman of NYSE Euronext.
Analysts said the deal will give ICE a strategic boost with control of Liffe, Europe's second-largest derivatives market, helping it compete against U.S.-based CME Group Inc, owner of the Chicago Board of Trade.
"ICE is after Liffe, that is the crown jewel of NYSE Euronext," said Peter Lenardos, analyst at RBC Capital Markets. NYSE bought Euronext, including Liffe, for 8 billion euros in 2007.
"Strategically it makes sense for ICE to enter the European derivatives space in a meaningful way."
Sprecher said the deal had been "well received" by regulators after he and NYSE CEO Duncan Niederaur completed a "whirlwind tour" in the United States and Europe ahead of Thursday's announcement.
SWEET FOR SUGAR
ICE, founded in 2000, has its roots in electronic commodity trading and a tie-up with Liffe will boost trade in soft commodities such as sugar, buoying its profits.
"I would imagine that, having the softs contracts under one roof, would provide for easier arbitrage, financing and development of trading opportunities behind the contracts, via swaps and options," said Jonathan Kingsman, a sugar trade veteran who heads agriculture at information provider Platts.
"If you have clearing membership of ICE, you could trade London contracts under the same membership."
An ICE-NYSE Euronext tie-up would leap-frog Deutsche Boerse to become the world's third-largest exchange group with a combined market value of $15.2 billion. CME Group, ICE's largest U.S.-based rival, has a market value of $17.5 billion, Thomson Reuters data shows.
Hong Kong Exchanges and Clearing is the world's largest exchange group with a market cap of $19.5 billion.
ICE's main operations are in energy futures trading and unlike NYSE Euronext, it has steered clear of stocks and stock-options trading, so there is not much business overlap between the two groups, making it more likely competition authorities would approve a tie-up, analysts said.
Last year, the U.S. Justice Department blocked a $11 billion joint hostile bid by ICE and Nasdaq OMX Group for NYSE Euronext on concerns the tie-up would dominate U.S. stock listings.
A rival $9.3 billion bid by German exchange operator Deutsche Boerse also fell foul of regulators.
"I doubt the competition authorities will have a problem with it, there's only a modest overlap between the businesses," said Richard Perrott, an analyst at Berenberg Bank.
"The rationale for the deal will be the same as that with Deutsche Boerse - migrate the clearing of Liffe derivatives to ICE's services in London and scale up to attract OTC (Over The Counter) derivatives clearing."
ICE said it expected to achieve $450 million in cost savings from the takeover. In the first year after the deal closes, additional earnings of 15 percent are expected.
Before the latest ICE offer emerged, NYSE Euronext's shares had fallen by nearly a third since ICE and Nasdaq launched their thwarted joint bid.
ICE, which started out as an online marketplace for energy trading, is the product of a string of acquisitions from the London-based International Petroleum Exchange in 2001, to the New York Board of Trade and, most recently, a handful of smaller deals, including a climate exchange and a stake in a Brazilian clearing house.
NYSE Euronext shareholders will have the option of either accepting $33.12 in cash per share plus 0.2581 ICE shares or a mix of $11.27 in cash plus 0.1703 ICE shares, subject to a maximum cash consideration of $2.7 billion.
ICE said it would pay an annual dividend of $300 million once the deal closes.
(Additional reporting by Luke Jeffs and David Brough in London; writing by Carmel Crimmins; editing by Philippa Fletcher)
http://www.reuters.com/article/2012/12/20/us-ice-nyse-idUSBRE8BJ0LK20121220
N-ICE N-ICE Baby: ICE Buys NYSE For $33.12 In $8.2 Billion Deal
Submitted by Tyler Durden on 12/20/2012
Just about a year after the failed attemped by the Deutsche Bourse to acquire the NY Stock Exchange, we get a friendly reminder that stock trading is a dying business, and venues that engage in it must consolidate or die. Sure enough, moments ago the Intercontinental Exchange, or ICE, announced it would acquire the NYSE for $33.12 or roughly $8.2 billion in stock and cash.
•ICE TO BUY NYSE EURONEXT FOR $33.12-SHR IN STOCK, CASH
•ICE PACT IS FOR ABOUT 67% SHRS, 33% CASH
•INTERCONTINENTALEXCHANGE TO ACQUIRE NYSE FOR ABOUT $8.2 BLN
•ICE TO FUND CASH IN DEAL WITH CASH ON HAND, EXISTING CREDIT
•NYSE EURONEXT HOLDERS TO OWN ABOUT 36% OF ICE SHRS POST DEAL
•ICE SAYS NIEDERAUER TO BE PRESIDENT COMBINED CO, CEO NYSE GROUP
It is unclear if the combined exchange will be called N-ICE.
That this follows days after yet another mega consolidation, this time one creating a monopolist in the HFT space with the GETCO acquisition of Knight, is also not surprising. Expect more and more forced, unforced, voluntary and otherwise mergers, as trading volume collapse to levels not seen since the mid-1990s. Sadly, there is just not enough money for everyone who continued to expect the 2000s trading volume trendline to continue in perpetuity.
http://www.zerohedge.com/news/2012-12-20/n-ice-n-ice-baby-ice-buys-nyse-3312-82-billion-deal
IntercontinentalExchange buys NYSE Euronext for $8 billion
By John McCrank and Sophie Sassard
NEW YORK/LONDON | Thu Dec 20, 2012 10:59am EST
NEW YORK/LONDON (Reuters) - IntercontinentalExchange agreed an $8 billion deal to buy New York Stock Exchange owner NYSE Euronext on Thursday, propelling the commodities player into European financial futures and helping it to take on arch rival CME Group.
Atlanta-based ICE will look at selling Euronext, NYSE's European stock market businesses, in an initial public offering after the deal closes in the second half of next year.
The deal gives a 12-year old start-up ownership of the New York Stock Exchange, an iconic symbol of U.S. capitalism for over 200 years which has been hit by new technology and the rise of private trading venues run by Wall Street banks and brokers.
"Our transaction is responsive to the evolution of market infrastructure today and offers a range of growth opportunities," ICE Chairman and CEO Jeff Sprecher, who will be chairman and ceo of the combined group, said in a statement.
Under the terms of the deal, ICE will pay $33.12 per NYSE share, a 28 percent premium to their closing price on Wednesday. The $8.2 billion deal will be paid one third in cash with the remainder in ICE shares.
NYSE Euronext stock rose nearly 32 percent after the deal was announced, while ICE's shares fell four percent before clawing back some of the losses to trade down 1.7 percent at 10:10 a.m. ET.
"The Board of NYSE Euronext carefully considered a range of strategic alternatives and concluded that ICE is the ideal partner for NYSE Euronext in an evolving market landscape," said Jan-Michiel Hessels, chairman of NYSE Euronext.
Analysts said the deal will give ICE a strategic boost with control of Liffe, Europe's second-largest derivatives market, helping it compete against U.S.-based CME Group Inc, owner of the Chicago Board of Trade.
"ICE is after Liffe, that is the crown jewel of NYSE Euronext," said Peter Lenardos, analyst at RBC Capital Markets. NYSE bought Euronext, including Liffe, for 8 billion euros in 2007.
"Strategically it makes sense for ICE to enter the European derivatives space in a meaningful way."
Sprecher said the deal had been "well received" by regulators after he and NYSE CEO Duncan Niederaur completed a "whirlwind tour" in the United States and Europe ahead of Thursday's announcement.
SWEET FOR SUGAR
ICE, founded in 2000, has its roots in electronic commodity trading and a tie-up with Liffe will boost trade in soft commodities such as sugar, buoying its profits.
"I would imagine that, having the softs contracts under one roof, would provide for easier arbitrage, financing and development of trading opportunities behind the contracts, via swaps and options," said Jonathan Kingsman, a sugar trade veteran who heads agriculture at information provider Platts.
"If you have clearing membership of ICE, you could trade London contracts under the same membership."
An ICE-NYSE Euronext tie-up would leap-frog Deutsche Boerse to become the world's third-largest exchange group with a combined market value of $15.2 billion. CME Group, ICE's largest U.S.-based rival, has a market value of $17.5 billion, Thomson Reuters data shows.
Hong Kong Exchanges and Clearing is the world's largest exchange group with a market cap of $19.5 billion.
ICE's main operations are in energy futures trading and unlike NYSE Euronext, it has steered clear of stocks and stock-options trading, so there is not much business overlap between the two groups, making it more likely competition authorities would approve a tie-up, analysts said.
Last year, the U.S. Justice Department blocked a $11 billion joint hostile bid by ICE and Nasdaq OMX Group for NYSE Euronext on concerns the tie-up would dominate U.S. stock listings.
A rival $9.3 billion bid by German exchange operator Deutsche Boerse also fell foul of regulators.
"I doubt the competition authorities will have a problem with it, there's only a modest overlap between the businesses," said Richard Perrott, an analyst at Berenberg Bank.
"The rationale for the deal will be the same as that with Deutsche Boerse - migrate the clearing of Liffe derivatives to ICE's services in London and scale up to attract OTC (Over The Counter) derivatives clearing."
ICE said it expected to achieve $450 million in cost savings from the takeover. In the first year after the deal closes, additional earnings of 15 percent are expected.
Before the latest ICE offer emerged, NYSE Euronext's shares had fallen by nearly a third since ICE and Nasdaq launched their thwarted joint bid.
ICE, which started out as an online marketplace for energy trading, is the product of a string of acquisitions from the London-based International Petroleum Exchange in 2001, to the New York Board of Trade and, most recently, a handful of smaller deals, including a climate exchange and a stake in a Brazilian clearing house.
NYSE Euronext shareholders will have the option of either accepting $33.12 in cash per share plus 0.2581 ICE shares or a mix of $11.27 in cash plus 0.1703 ICE shares, subject to a maximum cash consideration of $2.7 billion.
ICE said it would pay an annual dividend of $300 million once the deal closes.
(Additional reporting by Luke Jeffs and David Brough in London; writing by Carmel Crimmins; editing by Philippa Fletcher)
http://www.reuters.com/article/2012/12/20/us-ice-nyse-idUSBRE8BJ0LK20121220
Central Bank of Russia issues gold and silver bullion pieces that ‘must be accepted’ as legal tender
Posted on December 20, 2012 by Julia
On the 17th the bank issued three values of bullion:
¦31.1g silver pieces with a 3RUB face value
¦7.78g gold pieces with 50RUB face
¦15.55g gold pieces with a 100RUB face value
These bullion pieces are legal tender in the Russian Federation.
The announcement on the Central Bank of Russia’s website is, of course, in Russian.
However, if you trust Google Translator, below is an English summary of the announcement.
INFORMATION
On the issue of investment appeal of precious metal coins
Department of External and Public Relations of the Bank of Russia informs that on 17 December 2012 in the framework of the monetary program “Sochi 2014? Bank of Russia issues a bullion coins dedicated to the XXII Olympic Winter Games 2014 in Sochi: 3 Rubles silver, gold nominal 50 and $ 100, with the year of issue “2012?.
Each ‘coin’ is described, but at the end is the important bit…
“??????????? ?????? ???????? ???????? ????????? ????????? ??????? ?? ?????????? ?????????? ????????? ? ??????????? ? ?????? ?? ???????? ?? ??? ???? ???????? ??? ?????? ???????????.”
In English…
The coins are legal tender cash payment in the Russian Federation and must be accepted at face value in all kinds of payments without any restrictions.
http://www.dgcmagazine.com/central-bank-of-russia-issues-gold-and-silver-bullion-pieces-that-must-be-accepted-as-legal-tender/
basserdan so glad you posted that. I was hesitant to post this at first. Posted by; Shermann7 on the The Red Pill board.
Michael Rivero on Drugs and Mass Killings...
Nobody is saying that Asperger's or Autism is the cause of the violence. It is the medications used to treat those conditions that have a long record of triggering suicide and violence.
Eric Harris age 17 (first on Zoloft then Luvox) and Dylan Klebold aged 18 (Colombine school shooting in Littleton, Colorado), killed 12 students and 1 teacher, and wounded 23 others, before killing themselves. Klebold’s medical records have never been made available to the public.
Jeff Weise, age 16, had been prescribed 60 mg/day of Prozac (three times the average starting dose for adults!) when he shot his grandfather, his grandfather’s girlfriend and many fellow students at Red Lake, Minnesota. He then shot himself. 10 dead, 12 wounded.
Cory Baadsgaard, age 16, Wahluke (Washington state) High School, was on Paxil (which caused him to have hallucinations) when he took a rifle to his high school and held 23 classmates hostage. He has no memory of the event.
Chris Fetters, age 13, killed his favorite aunt while taking Prozac.
Christopher Pittman, age 12, murdered both his grandparents while taking Zoloft.
Mathew Miller, age 13, hung himself in his bedroom closet after taking Zoloft for 6 days.
Jarred Viktor, age 15, stabbed his grandmother 61 times after 5 days on Paxil.
Kip Kinkel, age 15, (on Prozac and Ritalin) shot his parents while they slept then went to school and opened fire killing 2 classmates and injuring 22 shortly after beginning Prozac treatment.
Luke Woodham, age 16 (Prozac) killed his mother and then killed two students, wounding six others.
A boy in Pocatello, ID (Zoloft) in 1998 had a Zoloft-induced seizure that caused an armed stand off at his school.
Michael Carneal (Ritalin), age 14, opened fire on students at a high school prayer meeting in West Paducah, Kentucky. Three teenagers were killed, five others were wounded.
A young man in Huntsville, Alabama (Ritalin) went psychotic chopping up his parents with an ax and also killing one sibling and almost murdering another.
Andrew Golden, age 11, (Ritalin) and Mitchell Johnson, aged 14, (Ritalin) shot 15 people, killing four students, one teacher, and wounding 10 others.
TJ Solomon, age 15, (Ritalin) high school student in Conyers, Georgia opened fire on and wounded six of his class mates.
Rod Mathews, age 14, (Ritalin) beat a classmate to death with a bat.
James Wilson, age 19, (various psychiatric drugs) from Breenwood, South Carolina, took a.22 caliber revolver into an elementary school killing two young girls, and wounding seven other children and two teachers.
Elizabeth Bush, age 13, (Paxil) was responsible for a school shooting in Pennsylvania.
Jason Hoffman (Effexor and Celexa) – school shooting in El Cajon, California.
Jarred Viktor, age 15, (Paxil), after five days on Paxil he stabbed his grandmother 61 times.
Chris Shanahan, age 15 (Paxil) in Rigby, ID who out of the blue killed a woman.
Jeff Franklin (Prozac and Ritalin), Huntsville, AL, killed his parents as they came home from work using a sledge hammer, hatchet, butcher knife and mechanic’s file, then attacked his younger brothers and sister.
Neal Furrow (Prozac) in LA Jewish school shooting reported to have been court-ordered to be on Prozac along with several other medications.
Kevin Rider, age 14, was withdrawing from Prozac when he died from a gunshot wound to his head.
Initially it was ruled a suicide, but two years later, the investigation into his death was opened as a possible homicide. The prime suspect, also age 14, had been taking Zoloft and other SSRI antidepressants.
Alex Kim, age 13, hung himself shortly after his Lexapro prescription had been doubled.
Diane Routhier was prescribed Welbutrin for gallstone problems. Six days later, after suffering many adverse effects of the drug, she shot herself.
Billy Willkomm, an accomplished wrestler and a University of Florida student, was prescribed Prozac at the age of 17. His family found him dead of suicide – hanging from a tall ladder at the family’s Gulf Shore Boulevard home in July 2002.
Kara Jaye Anne Fuller-Otter, age 12, was on Paxil when she hung herself from a hook in her closet.
Kara’s parents said “…. the damn doctor wouldn’t take her off it and I asked him to when we went in on the second visit. I told him I thought she was having some sort of reaction to Paxil…”).
Gareth Christian, Vancouver, age 18, was on Paxil when he committed suicide in 2002, (Gareth’s father could not accept his son’s death and killed himself.)
Julie Woodward, age 17, was on Zoloft when she hung herself in her family’s detached garage.
Matthew Miller was 13 when he saw a psychiatrist because he was having difficulty at school. The psychiatrist gave him samples of Zoloft. Seven days later his mother found him dead, hanging by a belt from a laundry hook in his closet.
Kurt Danysh, age 18, and on Prozac, killed his father with a shotgun. He is now behind prison bars, and writes letters, trying to warn the world that SSRI drugs can kill.
Woody ____, age 37, committed suicide while in his 5th week of taking Zoloft. Shortly before his death his physician suggested doubling the dose of the drug. He had seen his physician only for insomnia. He had never been depressed, nor did he have any history of any mental illness symptoms.
A boy from Houston, age 10, shot and killed his father after his Prozac dosage was increased.
Hammad Memon, age 15, shot and killed a fellow middle school student. He had been diagnosed with ADHD and depression and was taking Zoloft and “other drugs for the conditions.”.
Matti Saari, a 22-year-old culinary student, shot and killed 9 students and a teacher, and wounded another student, before killing himself. Saari was taking an SSRI and a benzodiazapine.
Steven Kazmierczak, age 27, shot and killed five people and wounded 21 others before killing himself in a Northern Illinois University auditorium. According to his girlfriend, he had recently been taking Prozac, Xanax and Ambien. Toxicology results showed that he still had trace amounts of Xanax in his system.
Finnish gunman Pekka-Eric Auvinen, age 18, had been taking antidepressants before he killed eight people and wounded a dozen more at Jokela High School – then he committed suicide.
Asa Coon from Cleveland, age 14, shot and wounded four before taking his own life. Court records show Coon was on Trazodone.
Jon Romano, age 16, on medication for depression, fired a shotgun at a teacher in his New York high school.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=82558300
Japanese Pension Funds Seek Safety in Gold
By KOSAKU NARIOKA
12/18/2012
TOKYO—A small number of pension funds in Japan have started to invest in gold for the first time, largely to mitigate the damage from possible market shocks.
Japanese pension funds invest mainly in domestic stocks and bonds. Until recently, none have looked to gold or other physical assets.
For example, Japan's Government Pension Investment Fund, the world's largest public pension, held 64% of its assets in domestic bonds, 11% in domestic stocks, 9.0% in international bonds, and 12% in international stocks, as of end-September. The remainder were in short-term assets.
This strategy has produced meager returns at a time when bonds offer historically low yields and the stock market has stagnated.
Worse yet, when crises have roiled the markets, big funds such as the GPIF have seen red. The GPIF lost 7.6% in the 2008 fiscal year, when the global financial crisis struck, and a less-painful 0.3% in the 2010 fiscal year, when the euro-zone debt crisis spooked markets.
Gold, whose price movement isn't historically correlated with those of stocks or bonds, can protect portfolios from being damaged too badly in times of market stress, investment managers say. Low interest rates also justify holding non-yielding gold in place of cash.
Among those moving into gold is Okayama Metal & Machinery Pension Fund, which manages pension funds for about 260 small and mid-sized companies in the Okayama area. It started buying gold in March.
"By diversifying currencies, we aim to reduce risks associated with them," said Yoshi Kiguchi, the fund's chief investment officer. "Yields become stable if you put small amounts into as many types of holdings as possible."
Of its 40 billion yen ($477 million) in assets, the fund has invested around ¥500 million-¥600 million in gold, he said.
Mitsubishi UFJ Trust and Banking Corporation said it has secured more than Y2 billion in investments from two pension funds for a gold fund it started in March.
Gold is also used as a hedge against inflation, which is becoming a bigger concern as global central banks buy ever-more bonds, market watchers say.
The Bank of Japan has increased its purchases of Japanese government debt from the market and is under political pressure to do more. Shinzo Abe, Japan's next prime minister, has said he wants the central bank to employ "unlimited easing measures" to achieve a 2% inflation target.
"Responding to inflation is becoming one issue," said Hiroaki Nakaoka, sales manager for SPDR ETF Japan at State Street Global Advisors (Japan) Co.
Higher inflation could drive up interest rates and erode the value of the Japanese government bonds in which pension funds have invested most of their money.
In some ways, Japanese pension funds are merely tracking a trend that has already been seen in other developed markets, industry watchers say. Gold's potential to offset inflation-linked losses has already prompted some U.S. and European pension funds to buy small volumes. The Teacher Retirement System of Texas pension trust fund, for example, held $235 million of SPDR Gold Shares GLD +0.19%out of its total investment net value of $111.1 billion, as of end-August.
Partly because it is seen as a hedge against inflation, the price of gold has more than doubled since the end of 2007, rising 103% to $1,695.75 an ounce Monday, according to the daily London fixing price.
The emergence of gold exchange-traded funds has enabled pension funds to invest in gold without holding the physical product. Some funds restrict themselves from investing in physical assets. The first ETF backed by actual gold was introduced in Japan in June 2008.
ETFs "opened the door" to investment in gold, said Tetsu Emori, chief fund manager at Astmax Investment Management Inc., which manages ¥70 billion in assets. Roughly 60% of its portfolio is invested in commodities, with gold accounting for the largest portion.
In March 2011, Mizuho Trust & Banking Co. started incorporating gold in a package product for pension funds that invests in various assets, including gold ETFs. Gold accounts for about 3% of the package. The product has attracted ¥180 billion in investment from about 200 pension funds.
The vast majority of pension funds continue to shy away from gold, an investment that offers no yield and, in the case of physical gold, actually costs money to store.
But the potential for market turmoil and expectations of inflation could change that, industry experts say.
Write to Kosaku Narioka at kosaku.narioka@wsj.com
http://online.wsj.com/article/SB10001424127887324407504578186710415464652.html?mod=googlenews_wsj
CURRENCY CARTEL: Counterfeiting "Risk Free"
Monday, 17 December 2012
Gordon T Long
http://news.goldseek.com/GoldSeek/1355760000.php
Essays in Fragility: Shadow Banking, Housing Inventory and Liabilities
12/14/2012
http://www.zerohedge.com/news/2012-12-14/essays-fragility-shadow-banking-housing-inventory-and-liabilities
Marc Faber: "Paul Krugman Should Go And Live In North Korea"
Submitted by Tyler Durden on 12/13/2012 -
If there is one thing better than Marc Faber providing a free, must-watch (and listen) 50 minute lecture on virtually everything that has transpired in the end days of modern capitalism, starting with who caused it, adjustable rate mortgages, leverage, why did the Fed let Lehman fail, why was AIG bailed out, quantitative easing, Operation Twist, where the interest on the debt is going, which bubbles he is most concerned about, a discussion of gold and silver, and culminating with his views on a world reserve currency, is him saying the following: "The views of the Keynesians like Mr. Krugman is that the fiscal deficits are far too small. One of the problems of the crisis is that it was caused by government intervention with fiscal and monetary measures. Now they tells us we didn't intervene enough. If they really believe that they should go and live in North Korea where you have a communist system. There the government intervenes into every aspect of the economy. And look at the economic performance of North Korea." Priceless.
50 Minutes of Faberian Bliss
http://www.zerohedge.com/news/2012-12-13/marc-faber-paul-krugman-should-go-and-live-north-korea
We Are Witnessing The Death Of Small Business In America?
December 13th, 2012
Michael Snyder
Michael Snyder: Historically, small businesses have been the primary engine of new job creation in the United States. If the economy was getting healthy, we would expect to see the number of jobs at new businesses rise. Instead, we are witnessing just the opposite. We are told that the economy is supposed to be “recovering”, but the number of “startup jobs” at new businesses has fallen for five years in a row. According to an analysis of U.S. Department of Labor data performed by economist Tim Kane, there were almost 12 startup jobs per 1000 Americans back in the year 2006. By 2011, that figure had fallen to less than 8 startup jobs per 1000 Americans. According to Kane, the number of jobs in the United States at businesses that are less than one year old has fallen from 4.1 million in 1994 to 2.5 million in 2010. Overall, the number of “new entrepreneurs and business owners” has fallen by more than 50 percent as a percentage of the population since 1977. The United States was once known as “the land of opportunity”, but now that is fundamentally changing. At this point we truly do have a “crisis of entrepreneurship” in this country, and that is a huge reason why America is in decline. We are witnessing the slow death of the small business in America, and that is incredibly bad news for all of us.
Unfortunately, the problems that small businesses are experiencing right now have been building up for decades. The economic environment for small businesses in America has become incredibly toxic. Sadly, we can see this in the numbers. According to Kane, the following is how the decline in the number of startup jobs per 1000 Americans breaks down by presidential administration…
Bush Sr.: 11.3
Clinton: 11.2
Bush Jr.: 10.8
Obama: 7.8
Obviously, we are headed very much in the wrong direction. Kane speculates about why this may be happening in his paper…
There is anecdotal evidence that the U.S. policy environment has become inadvertently hostile to entrepreneurial employment. At the federal level, high taxes and higher uncertainty about taxes are undoubtedly inhibiting entrepreneurship, but to what degree is unknown. The dominant factor may be new regulations on labor. The passage of the Affordable Care Act is creating a sweeping alteration of the regulatory environment that directly changes how employers engage their workforces, and it will be some time until those changes are understood by employers or scholars. Separately, there has been a federal crackdown since 2009 by the Internal Revenue Service on U.S. employers that hire U.S. workers as independent contractors rather than employees, raising the question of mandatory benefits. New firms tend to use part-time and contract staffing rather than full-time employees during the startup stage. According to Labor Department data, the typical American today only takes home 70 percent of compensation as pay, while the rest is absorbed by the spiraling cost of benefits (e.g., health insurance). The dilemma for U.S. policy is that an American entrepreneur has zero tax or regulatory burden when hiring a consultant/contractor who resides abroad. But that same employer is subject to paperwork, taxation, and possible IRS harassment if employing U.S.-based contractors. Finally, there has been a steady barrier erected to entrepreneurs at the local policy level. Brink Lindsey points out in his book Human Capitalism that the rise of occupational licensing is destroying startup opportunities for poor and middle class Americans.
Kane raises some very good points in his analysis. Without a doubt, small businesses in the United States are being taxed into oblivion. If you doubt this, just read this article.
And the regulatory environment for small businesses is more suffocating than it has ever been before. Unfortunately, our politicians never seem to learn that lesson. During his first term, Obama piled on mountains of new regulations, and now that he has won a second term he is preparing to unleash another massive wave of new regulations.
But many times the worst offenders are politicians on the state and local level. There are some areas of the country (such as California) that have created absolutely nightmarish conditions for small businesses. California had the worst “small business failure rate” in the country in 2010. It was 69 percent higher than the national average. And in 2011, the state of California ranked 50th out of all 50 states in new business creation.
Yet the politicians in California just continue to pile on even more regulations and even more taxes.
Sadly, this kind of thing is happening from coast to coast and it is killing off hordes of small businesses. Just consider the following statistics…
-According to the U.S. Census Bureau, the U.S. economy lost more than 220,000 small businesses during the last recession.
-As a share of the population, the percentage of Americans that are self-employed fell by more than 20 percent between 1991 and 2010.
-As a share of the population, the percentage of “new entrepreneurs and business owners” dropped by a staggering 53 percent between 1977 and 2010.
-The average pay for self-employed Americans declined by $3,721 between 2006 and 2010.
So what needs to be done?
Well, first of all, the tax burden and the regulatory burden on small businesses both need to be greatly reduced.
Secondly, the balance of power in our nation needs to be dramatically shifted. Conservatives run around talking about the need to reduce the power of government and liberals run around talking about the need to reduce the power of corporations, and actually both of them are right.
Our founding fathers intended to establish a Republic where power would never be concentrated in the hands of just a few. That is why they tried to strictly limit the power of the federal government in the U.S. Constitution, and that is why they greatly restricted the size and scope of corporations in early America. For much more on this, please see this article: “Corporatism Is Not Capitalism: 7 Things About The Monolithic Predator Corporations That Dominate Our Economy That Every American Should Know“.
Our founding fathers wanted to empower individual citizens and small businesses. They never intended for us to have a system where big government and big corporations dominate everything and crush the “little guy” at every opportunity.
Even as we witness the death of the small business in America, corporations are absolutely thriving. The following chart shows how corporate profits after tax have exploded to new record highs in recent years…
So has this been good for workers? No, it has not translated into more jobs and higher wages. In fact, wages and salaries as a percentage of GDP are now at an all-time low…
That is why it is imperative that we change “the rules of the game” so that the balance of power is shifted back in the direction of individual citizens and small businesses. We desperately need to turn back to the principles that this nation was founded upon.
If nothing is done, these trends are going to get even worse. Barack Obama certainly has no plans to reduce the size and the power of the government. Since he was elected, an average of 101 new federal employees have been added to the government payroll every single day…
In the 1,420 days since he took the oath of office, the federal government has daily hired on average 101 new employees. Every day. Seven days a week. All 202 weeks. That makes 143,000 more federal workers than when Obama talked forever on that cold day in January of 2009.
And if nothing is done, the monolithic predator corporations that dominate our economy will just get even larger and even more powerful. Meanwhile, hundreds of thousands more small businesses will close up shop all over the country.
Unfortunately, most Americans seem totally apathetic about these issues. They seem content to wear “meggings“, watch “Honey Boo Boo” on television and let our government and corporate overlords run everything. Most of them have even been brainwashed into believing that this is the American way of doing things.
So where do we go from here?
Well, this nation will probably continue to keep doing the same things that it has been doing, and it will continue to get the same results.
The death of small business in America is happening right in front of our eyes, and everybody can see it happening, but very few people are doing anything to stop it.
Michael has an undergraduate degree in Commerce from the University of Virginia and a law degree from the University of Florida law school. He also has an LLM from the University of Florida law school. Michael has worked for some of the largest law firms in Washington D.C., but now is mostly focused on trying to make a difference in the world.
http://etfdailynews.com/2012/12/13/we-are-witnessing-the-death-of-small-business-in-america/
Jim Rickards: the Fed is Racing to Create Inflation Before the US Economy Implodes!
12/12/2012
Welcome to Capital Account. It’s Federal Reserve Interest Rate Decision day! As expected, the Fed announced it will expand its bond-buying program with 45 billion dollars a month in longer-term treasury securities, after the conclusion of Operation Twist at the end of this year. In a different sort of twist, the Fed also announced it is now tying interest rate guidance to economic guide posts. At the press conference Bernanke announced that the FOMC members would take into consideration a variety of metrics for determining inflation, but how will the Fed use this data to make its long term inflation predictions? We ask Jim Rickards of Tangent Capital Partners if this gives the FOMC more subjective leeway to ignore potential high short term price inflation. He explains that this gives the Fed the room to tell the public “inflation is what we say it is, and that the Fed is attempting to INCREASE THE VELOCITY of the money supply in order to shock the public into spending due to higher than expected inflation!
Interview link below:
http://www.silverdoctors.com/jim-rickards-the-fed-is-racing-to-create-inflation-before-the-us-economy-implodes/
Top central banks renew currency swaps as precaution
WASHINGTON | Thu Dec 13, 2012 9:29am EST
WASHINGTON (Reuters) - Top central banks around the world on Thursday renewed a series of currency swap lines set up during the 2007-2009 financial crisis as a precaution against future market strains.
The Federal Reserve said it had extended for another year the dollar swaps with the European Central Bank, Bank of Canada, Bank of England and Swiss National Bank. The announcement was released at the same time by the other central banks.
These provisions were an important part of the powerful response launched by monetary authorities during the crisis to keep financial markets open and functioning smoothly.
The Fed said the central banks had also renewed until February 1, 2014, bilateral currency swap arrangements that would also provide liquidity "should market conditions so warrant."
The Bank of Japan separately said that it will decide on joining the extension of central bank liquidity swap arrangements at its next policy meeting, on December 19-20.
The Fed's dollar swaps have led some political foes of the U.S. central bank to claim that it was putting taxpayer money at risk. The Fed robustly denied this claim.
(Reporting By Alister Bull; Editing by Andrea Ricci)
http://www.reuters.com/article/2012/12/13/us-usa-fed-swaps-idUSBRE8BC0SD20121213
Why the Gold Standard Can Return the World to Global Economic Prosperity
Submitted by smartknowledgeu on 12/13/2012
With youth unemployment at 56.4% in Greece and 55.9% in Spain, with nearly 1/3 of 25-34 year olds in America living with their parents, with more than 100,000,000 in China still earning $1 or less a day, and with food prices rising by more than 32% since 2007 in the UK, all due to immoral Central Bank monetary policies that deliberately devalue global fiat currencies in a race to the bottom, a gold standard is quite capable of returning the world to global economic prosperity and ushering in one of the most stable economic growth periods in the history of the world.
For example, the Central Banks’ propensity to deliberately destroy wealth is easily illustrated by the current conditions that they have created in global bond markets, where despite the high risk of owning sovereign bonds, Central Banks refuse to offer higher yields for the public assumption of this enormous risk, and in fact, in some countries, have even goaded the public into paying them interest (negative yields) on government bonds issued in Germany, Finland, Denmark, Switzerland, Netherlands, and Austria (with France among other countries likely next in line). Central Banks have successfully sold their propaganda that government bonds are “safe havens” for decades to the public, and the public has gobbled up this heaping mound of rubbish hook, line, and sinker.
For this reason, governments and bankers (because they are two heads of the same monster) can offer public negative yielding bonds and still trick the public into buying them. Furthermore, in the US, the Central Bankers have pledged to buy 90% of all new government bond issues in 2013, the only scenario that will present (and perhaps only delay) a total collapse of the US Treasury bond market. Thus only trickery, deceit and chicanery are necessary tools on behalf of Central Bankers to prop up the illusion that Treasury bonds are “risk-free”. Nothing on the surface is ever what it seems to be. Because we have always dug below the surface and have never accepted the garbage that governments and bankers attempt to repackage as great value and sell to the public, we put everyone on notice in January, 2007 to get rid of USD denominated bonds and reiterated "10 Reasons Why No One Should Own Any Dollar Denominated Bonds, v 2.0", in February of 2008, when we also stated that physical gold and physical silver were much better places to park your money back then. Since then, both gold and silver have already both nearly doubled in price against the USD. Not bad for what bankers were trying to portray as “crazy talk” back then, right?
In any event, those that wish to keep the people hopelessly enslaved in our current, debt-based, Ponzi-ridden, fiat currency system always attack the idea of a gold standard because they say that the use of a gold standard today is impossible because:
(1) The price of gold would have to be “too high” to reimplement a gold standard,
(2) A gold standard would not prevent runaway inflation because there are historical periods of runaway inflation under previous gold standards; and
(3) If the same private interests that run our current global monetary system run a gold-based monetary system, then there is no sense in having a gold-based monetary system.
As I’ve illustrated in the brief excerpt from my book “The Golden Gift” below, all of these above points are fabricated lies that can easily be disproven and thoroughly debunked with a small dose of history and another dose of logic. The only arguments against the implementation of a gold standard come from the banking cartels controlled by the likes of the Rothschilds, the Rockefellers, and their minions and puppets, because the implementation of a true 100% backed gold standard would mean an end to the reign of the private banking families that control today’s money creation and supply over all of humanity. Sound money, versus our current immoral monetary system, would bring about an end to endless wars and perpetually and massively artificially-distorted stock market, commodities, and real estate prices, and currency valuations for the Machiavellian benefit of the private banking families that own the world's Central Banks and no one else.
Lastly, for the sake of an intelligent and valuable discussion, please do ensure that you read the below excerpt in its entirety before posting comments! I believe that following this singular rule will allow for the best debate. Thank you.
The Golden Gift
http://www.zerohedge.com/contributed/2012-12-13/why-gold-standard-can-return-world-global-economic-prosperity
Why the Gold Standard Can Return the World to Global Economic Prosperity
Submitted by smartknowledgeu on 12/13/2012
With youth unemployment at 56.4% in Greece and 55.9% in Spain, with nearly 1/3 of 25-34 year olds in America living with their parents, with more than 100,000,000 in China still earning $1 or less a day, and with food prices rising by more than 32% since 2007 in the UK, all due to immoral Central Bank monetary policies that deliberately devalue global fiat currencies in a race to the bottom, a gold standard is quite capable of returning the world to global economic prosperity and ushering in one of the most stable economic growth periods in the history of the world.
For example, the Central Banks’ propensity to deliberately destroy wealth is easily illustrated by the current conditions that they have created in global bond markets, where despite the high risk of owning sovereign bonds, Central Banks refuse to offer higher yields for the public assumption of this enormous risk, and in fact, in some countries, have even goaded the public into paying them interest (negative yields) on government bonds issued in Germany, Finland, Denmark, Switzerland, Netherlands, and Austria (with France among other countries likely next in line). Central Banks have successfully sold their propaganda that government bonds are “safe havens” for decades to the public, and the public has gobbled up this heaping mound of rubbish hook, line, and sinker.
For this reason, governments and bankers (because they are two heads of the same monster) can offer public negative yielding bonds and still trick the public into buying them. Furthermore, in the US, the Central Bankers have pledged to buy 90% of all new government bond issues in 2013, the only scenario that will present (and perhaps only delay) a total collapse of the US Treasury bond market. Thus only trickery, deceit and chicanery are necessary tools on behalf of Central Bankers to prop up the illusion that Treasury bonds are “risk-free”. Nothing on the surface is ever what it seems to be. Because we have always dug below the surface and have never accepted the garbage that governments and bankers attempt to repackage as great value and sell to the public, we put everyone on notice in January, 2007 to get rid of USD denominated bonds and reiterated "10 Reasons Why No One Should Own Any Dollar Denominated Bonds, v 2.0", in February of 2008, when we also stated that physical gold and physical silver were much better places to park your money back then. Since then, both gold and silver have already both nearly doubled in price against the USD. Not bad for what bankers were trying to portray as “crazy talk” back then, right?
In any event, those that wish to keep the people hopelessly enslaved in our current, debt-based, Ponzi-ridden, fiat currency system always attack the idea of a gold standard because they say that the use of a gold standard today is impossible because:
(1) The price of gold would have to be “too high” to reimplement a gold standard,
(2) A gold standard would not prevent runaway inflation because there are historical periods of runaway inflation under previous gold standards; and
(3) If the same private interests that run our current global monetary system run a gold-based monetary system, then there is no sense in having a gold-based monetary system.
As I’ve illustrated in the brief excerpt from my book “The Golden Gift” below, all of these above points are fabricated lies that can easily be disproven and thoroughly debunked with a small dose of history and another dose of logic. The only arguments against the implementation of a gold standard come from the banking cartels controlled by the likes of the Rothschilds, the Rockefellers, and their minions and puppets, because the implementation of a true 100% backed gold standard would mean an end to the reign of the private banking families that control today’s money creation and supply over all of humanity. Sound money, versus our current immoral monetary system, would bring about an end to endless wars and perpetually and massively artificially-distorted stock market, commodities, and real estate prices, and currency valuations for the Machiavellian benefit of the private banking families that own the world's Central Banks and no one else.
Lastly, for the sake of an intelligent and valuable discussion, please do ensure that you read the below excerpt in its entirety before posting comments! I believe that following this singular rule will allow for the best debate. Thank you.
The Golden Gift
http://www.zerohedge.com/contributed/2012-12-13/why-gold-standard-can-return-world-global-economic-prosperity