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Silver Premiums Going Through The Roof
Nov. 13, 2013
Katchum's Macro-Economic Blog
Just an update on something very interesting in the silver market. We already know the U.S. Mint is selling a lot of silver, but this is also visible in the premiums.
It occurred to me that we are seeing rising premiums again in some miners.
And we see the same thing at some bullion dealers, we are approaching new highs.
Not so much in junk silver.
But take a look at this. I first thought it was a miscalculation, but I checked it thoroughly. It was reality. In Shanghai
we saw a major jump in silver premiums.
It will be interesting to see what the future will bring.
Geplaatst door Albert Sung op 19:22
http://katchum.blogspot.com/
Silver Premiums Going Through The Roof
Nov. 13, 2013
Katchum's Macro-Economic Blog
Just an update on something very interesting in the silver market. We already know the U.S. Mint is selling a lot of silver, but this is also visible in the premiums.
It occurred to me that we are seeing rising premiums again in some miners.
And we see the same thing at some bullion dealers, we are approaching new highs.
Not so much in junk silver.
But take a look at this. I first thought it was a miscalculation, but I checked it thoroughly. It was reality. In Shanghai
we saw a major jump in silver premiums.
It will be interesting to see what the future will bring.
Geplaatst door Albert Sung op 19:22
http://katchum.blogspot.com/
Bill Written by Citibank Lobbyists Gets Banksters Back in High-Risk Derivatives Business – American Taxpayer to Pay for Losses
By Kurt Nimmo
Global Research, November 13, 2013
In late October, the House passed a “bipartisan tweak” to the Dodd-Frank bill Congress earlier passed off as “reform” after the banksters nearly crashed the financial system in 2008.
H.R. 992, the Swaps Regulatory Improvement Act, authored primarily by Citibank lobbyists, will allow predatory Wall Street financial institutions to once again engage in high-risk derivatives trading. Losses will be socialized and paid for by the American taxpayer through the Federal Deposit Insurance Corporation or FDIC.
“Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill,” Eric Lipton and Ben Protess wrote for the New York Times. “Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word.”
Co-sponsors of the bill are on the Citibank payroll. They received nearly 17 times more money from the bank than have members of the House who have not signed on as co-sponsors, according to Forbes. “Citigroup has given $503,150 to current members of the House of Representatives,” writes Tom Groenfeldt. “Representative Jim Himes, D-Conn., has received $66,450 from Citigroup, more than any other member of the House of Representatives. Himes is a co-sponsor of the bill.”
Wall Street lobbyists targeted House Democrats. 70 of them came out in support of the bill. Only two Republicans voted thumbs down. They were washed away by overwhelming support for bankster criminality.
According to the chairman of the House Financial Services Committee, Representative Jeb Hensarling, a Republican from Texas, the Dodd-Frank bill revamp will fix the economy. “America’s economy remains stuck in the slowest, weakest nonrecovery recovery of all times,” he said on October 30. “Those who create jobs for America are drowning in a sea of red tape preventing them.”
Hensarling didn’t explain how allowing large banks to play high-stakes blackjack and then force a beleaguered American taxpayer pick up billions in losses will create jobs.
Left to their own devices, banksters will create new “unusual or exigent circumstances” Frank-Dodd was supposedly passed to address. Bank lobbyists have successfully rolled back sections of Frank-Dodd and are now working feverishly to institute a return of the heyday of unencumbered derivatives criminality.
Congress is a wholly owned subsidiary of the bankers and the global elite. The so-called Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law by Obama in 2010 was largely devised as a propaganda device to placate Americans outraged by the “too big to fail” bail-out swindle.
Not surprisingly, Dodd-Frank has been left to twist in the wind. As of June, 175 of 279 passed Dodd-Frank deadlines have been missed. Government regulators have neglected 70.1 percent of rulemaking deadlines and 99.6 percent of 280 rules with specified deadlines, according to Bank Credit News.
Frank-Dodd was never a serious attempt to “reform” bankster financial institutions. Citibank and the money mobsters have paid off Congress. In turn Congress has given the Mafia dens up and down Wall Street a wink and a nod. No significant reform will be forthcoming.
http://www.globalresearch.ca/bill-written-by-citibank-lobbyists-gets-banksters-back-in-high-risk-derivatives-business-american-taxpayer-to-pay-for-losses/5357973
Bankrupting America When Leverage Fails - The Policies of Insolvency Stock-Markets
Nov 13, 2013 - 01:36 PM GMT
By: Ty_Andros
Rarely, if ever, have I seen this level of INSANITY UNFOLDING in over 30 years watching and analyzing GLOBAL macroeconomics, politics and markets. To say it is frightening is to understate the combustible nature of the world economy and its ability to generate future growth and prosperity.
It can't and won't grow without massive reform of governments and their policies, which contrary to public opinion are deepening this MAN-MADE disaster. Conversely, times of great danger and risk offer the most outstanding investment opportunities if you can SEE IT and prepare yourself properly.
"There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently." ~ Ben Graham
The battle lines are clear; on one side of the BATTLE are the most powerful people and elites in the world, led by the Federal Reserve (Bernanke, Yellen and Co.), Bank of England (Mark Carney), and ECB (Mario Draghi). Combined with their partners in the public sectors in the capitals of the developed world: Washington DC (Barack Obama and congress), London (David Cameron and the city), Brussells (European commission) and let's not leave out Beijing, Tokyo and Germany. On the other side of the fight are Mother Nature and Darwin: the apostles of history.
In the long run, Mama Nature and Darwin have never lost this war ever, but in the short run men can appear to be IN CHARGE. In charge of the titanic that is. It is quite clear that the powers that be think they can EXTRACT any amount of blood, treasure and toil and the world will continue to grow. Nothing could be further from the truth and we await the societal & economic collapse for which they are laying the foundations.
Foundations which will be extremely hard to remove and undo as they are embedded in law and the people who must undo them are the same people that CREATED them. Only a crushing blow will roll back the insanity and the future that is coming at us like a freight train.
The socialists in disguise in the developed world's capitals have put their constituents on a modern version of the RACK and are turning the wheels VIGOROUSLY. These elites are Blind ideologues and will INFLICT any AMOUNT of MISERY on their constituents at the point of their regulatory and tax guns to achieve their ambitions of control over others.
A lot of ink has been spilled on the Healthcare.gov failures but the impact that is unfolding is far DEEPER for the future of the world's greatest economy and its private sector. The affordable care act (ACA) is the antithesis of its title: it is wholesale destruction of the healthcare industry and the lives of those who rely upon it. It is everything that socialism is: misery spread widely and less HEALTH care for (crony capitalism) much more money, it is very large doses of poison into people's lives and futures.
You must understand that control of people's lives through control of their healthcare has been a progressive goal (both from the left and the right) for many, many decades. Our system of checks and balances between the various branches of governments and congress has prohibited this dream from being realized.
UNTIL the 2008 election that is, when in a stroke of coincidence gave veto proof majority's and progressives captured complete and total power of the US government. The acceleration of central planned economies and theft of private property through printing press and RUNAWAY regulation was multiplied EXPONENTIALLY, now those balls which began rolling then are hitting the economy like a tip of an iceberg.
"A crisis is a terrible thing to waste" ~ Rahm Emanuel
They didn't let it go to waste as they justified their legislative and executive branch actions as necessary to SAVE you. Unfortunately for us, all they inserted political solutions which served their lust for power over others, the money and themselves rather than practical solutions which serve all the public at large.
The moral and fiscal INSOLVENCY of the financial system was on plain display at that time. Now we are seeing the moral and fiscal insolvency of the system that allowed it to unfold.
As thinly disguised Socialists and Marxists ascended to unbridled power, the total remaking of our institutions was PUT in PLACE. Illinois is one of the epicenters of democratic/socialist corruption and it is on plain display to its residents and onlookers from around the nation, and they rose to power on a national scale 2008. That political corruption took the driver's seat of the national government at that time.
In Illinois, laws are routinely ignored and political foes are destroyed from the misuse of government power. Crony capitalists are generally the only groups which are allowed to thrive and POLITICIANS GUIDE IT ALL as divided government has gone the way of the DO DO bird (extinct), thus corruption is unrestrained. The results are predictable: an economy in free fall with those in charge PREYING upon those who aren't, at the point of a government gun. California and New York are in the SAME BOAT.
These are the places which will be at the vanguard of economic failure in the United States. It is why I recently left Chicago for Florida: to escape the unfolding destruction of my families' future. Most every country in the OECD is in secular decline as centrally planned socialist economies FAIL under their redistributionist policies.
No matter where you look, socialist states are in various stages succumbing to their moral and fiscal insolvency. Argentina, Brazil, Italy, Greece, Portugal, France, Spain each have implemented the same policies, some are further down the path to their demise/chaos and others a just a few steps behind in the SAME process.
Some still have the ability to print money and other don't. It is why the EURO is doomed as those countries which can't print must regain the ability to do so or, quite simply, the elites will be destroyed. Above all else, the euro is a device to transfer power from local governments to Brussels in exchange for the printing press which they NEVER REACH. Sooner or later, the local socialists will break away, recover seignoriege or experience an "off with their head" moment.
We all live in something for nothing societies where the majority of the people think they can live at the expense of the PRODUCTIVE minority and they have firm grips on our elected offices. The governments of the developed world are good reflections of the MAJORITY of their constituents: lazy, thieving, dumbed down, non-self-reliant, unproductive, unable to produce more than they consume, unable to do critical thinking and ignorant of history. USEFUL idiots as Lenin called them. But very dangerous as they are ripe for manipulation and can VOTE!
"A Nation of sheep breeds a government of wolves!" ~ Anonymous
"Any man who thinks he can be happy and prosperous by letting the government take care of him had better take a closer look at the American Indian." ~ Henry Ford
As government dependency caroms exponentially higher, the productive minority is ground under the demands of the majority. They believe they are ENTITLED to the fruits of others labor and VOTE to extract it under the point of a government gun.
They normally NEVER feel the cost of their impossible beliefs that they can live at the expense of others, but this time is DIFFERENT. The affordable care act is hitting them right where it hurts: their incomes and well-being. It now sets up the mother of all showdowns as the victim to victor ratio is enormous.
What is the victim to victor ratio you ask? There are probably ten people who are badly damaged by the law compared to one person whose life is improved. The victims are the very people the President got to vote for him to support the ACA.
Quoting Peggy Noonan -
"They said if you liked your insurance you could keep your insurance - but that's not true. It was never true! They said if you liked your doctor you could keep your doctor - but that's not true. It was never true! They said they would cover everyone who needed it, and instead people who had coverage are losing it - millions of them! They said they would make insurance less expensive - but it's more expensive! Premium shock, deductible shock.
They said don't worry, your health information will be secure, but instead the whole setup looks like a hacker's holiday. Bad guys are apparently already going for your private information. And now there are reports the insurance companies are taking advantage of the chaos of the program, and its many dislocations, to hike premiums. Meaning the law was written in such a way that insurance companies profit on it."
Now the president and progressives in congress are saying to everyone: who do you believe? Me or you're lying eyes. He is going to have a hard time pulling that over on the 4.6 million people who have received insurance pinks slips with millions more to come. Do you really think it is a coincidence that millions are being forced out and into the ACA? The very insurance companies who canceled them await them inside the exchanges with huge premium increases and deductibles. This is intentional folks...
It is clear that as we learn what was in the ACA the more monstrous and pernicious it becomes. It is a regulatory and freedom destructive morass of Washington progressive and special interest WEASEL words. It can be interpreted any way the Washington bureaucrats wish. Regulations and sales of business to crony capitalists who wait in line to buy them through K street lobbyists. Look at the volume of goods sold:
The ACA - whose intent is nothing what it has been presented as. In something for nothing societies, the true impact of policies can never DIRECTLY impact the useful idiots who supported it or the truth becomes SELF apparent. They can only touch them indirectly, so they cannot pin the tails of the donkeys who are preying on them: their leaders.
Now let's cover recent history and put an impact statement for you to consider concerning the national debt and paying for the something for nothing society we inhabit.
Less than 1 month ago (distant memory now) a debt ceiling showdown and government shutdown (God forbid the something for nothings may have had to do something to supplement themselves) was in full bloom and the world was on the brink of disaster (those on the dole cut off from their benefactors within the beltway, and the government unable to print money thru QE), which when resolved supposedly everything was FINE. Quoting the commander in chief:
"Now, this debt ceiling -- I just want to remind people in case you haven't been keeping up -- raising the debt ceiling, which has been done over a hundred times, does not increase our debt; it does not somehow promote profligacy. All it does is it says you got to pay the bills that you've already racked up, Congress. It's a basic function of making sure that the full faith and credit of the United States is preserved." ~ Barrack Obama
Actually, the trouble was obscured from the public who is mostly dependents of government through a variety of programs too numerous to mention. On the day of the debt ceiling resolution, the US debt mushroomed by approximately $329 billion dollars (329,000 million) or $1,061 dollars for every man woman and child in the U.S. The administration has racked up $8 trillion dollars of debt since his inauguration not counting UNFUNDED entitlements.
For your information that is $25,806 dollars for every man woman and child in the U.S. That goes with the $25,000+ dollars borrowed before the current administration in was elected and must be added to obligations which are off balance sheet of 5 times more (approximately $300,000 for every man woman and child in the country). Do the math.
Not one media source informed the public of this insidious fact. Do you think 90 days of big government is worth this price to the public? Why weren't they informed? Main stream Media blackout of the facts? Say it ain't so...
Now on to the stock market where it's become a party like 1999. Insanity is the norm as it was then. Tech companies with valuations in the tens of BILLIONS of dollars on companies with NO EARNINGS. Nothing for sale but hot air, hype and the HOPE of monetizing future growth.
The public and huge money managers are piling in with no fear, with record inflows happening as we speak. Today's Twitter IPO is valuing the company at roughly $30+ Billion dollars, more than the market value of over 337 S&P 500 companies, worth more than GM, John Deere and many more.
Stocks are floating higher with a direct correlation to the Federal Reserve's EXPLODING balance sheet and the debasement of the currency the S&P is denominated in. It doesn't take a genius to buy this chart until it doesn't work. Take a look at the world's most ugly and widely known chart courtesy of the chart store and Ron Griess;
Do you think today's stock markets are moving higher on fundamentals? The ONLY fundamental driving this chart is $4.1 billion dollars and yen ($4,100 million) printed out of thin air on a daily basis and nothing else. And a mania is in full swing (chart courtesy of www.cross-currents.net). Too many dollars chasing too few destinations.
Dollar Trading Volue vs. GDP
Margin use is at record highs which have preceded every market crash in the past 15 years (courtesy www.cross-currents.net):
And bullish newsletter sentiment is at extremes seen at previous market tops:
And professional managers are holding extreme levels of long exposure:
People have short memories, and today's troubles obscure the recent past and why REAL economic growth CANNOT RESUME under current government policies IMPLEMENTED since the global financial crisis exploded at that time. And the public is piling in, in a manner not seen since 2007:
[img]www.marketoracle.co.uk/images/2013/Nov/image9.1.png
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And the retail investor cash levels are now at extreme lows so buying power is now a Fed affair:
With hedge funds approaching record net longs in the tech sector:
[img]www.marketoracle.co.uk/images/2013/Nov/image11.1.png
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Of course the main stream media tells the public "this time it's different". HA HA... All I can say is someday soon it will be BOMBS away. For these maniacal daredevils, the operative words at this point is "Don't FIGHT the FED" and pray they keep it up. Make no mistake: there will never be a taper, just ask Janet.
In conclusion, as I said several weeks ago: the smell of napalm is in the air. The only thing preventing an explosion is FIREHOSES of NEW money being poured on the fires of insolvency to keep them under control. The purpose of this commentary is not doom and gloom, it is a fire alarm. So you can better prepare yourself to avoid the fires and prepare yourself to benefit from them.
Authors Note: In my opinion, this is NOT Doom and GLOOM, it is one of the greatest opportunities in HISTORY. Invest properly for this outcome and Prosper, invest looking in the REARVIEW mirror and your wealth will be irreparably DAMAGED. Volatility is opportunity for the prepared investor. As it is priced in and markets ZOOM higher or LOWER to price in collapsing economies and money printing huge opportunities are created. Is your portfolio structured to thrive? For a personal consultation with me CLICK HERE!
The crises are now never ending and broad credit growth to the private sector flat to down. But, as I said, this is Mother Nature and Darwin versus the most powerful people on the planet. This is a battle royal to see who determines the face of reality. The Keynesian illusionists or Mother Nature.
Don't miss the next edition of Tedbits, subscriptions are free: CLICK HERE
Tedbits subscribers also get video roundtables with Gordon T. Long, Charles Hugh Smith, John Rubino of www.Dollarcollapse.com, Catherine Austin Fitts, Bert Dohmen and many more, keeping you right in front of breaking news and global macroeconomic analysis.
You do not want to miss the next edition of TedBits. Why not subscribe? Subscriptions are free!
CLICK HERE.
By Ty Andros
TraderView
Copyright © 2013 Ty Andros
http://www.marketoracle.co.uk/Article43099.html
Society is ripe for collapse!” Vanessa Collette interviews Greg McCoach at the 11th Annual Silver Summit
Vanessa Collette | November 12, 2013 - 1:36am
Ronald Reagan Predicted The Obamacare Disaster Back In 1961
Steve Hayward
11/5/2013
Forbes
Ronald Reagan had an uncanny way of predicting the future and offering ideas that were way ahead of their time. In the 1960s he proposed privatizing the Tennessee Valley Authority, an idea the Obama Administration now embraces. In the 1970s he discussed private retirement accounts as an alternative to Social Security, a reform idea that has become popular today. And of course he predicted the end of the Soviet Union, which seemed laughable to liberals when he said it in 1982, but came true just a few years later.
Reagan also predicted the disaster of Obamacare, and for the specific reasons we see unfolding right now. But if Reagan’s analysis is correct, the worst is still to come.
In his famous speech for Barry Goldwater in 1964, Reagan observed that “the doctor’s fight against socialized medicine is your fight. We can’t socialize the doctors without socializing the patients.”
The second half of this is rapidly coming true, in the form of the millions who are having their health insurance policies canceled despite Obama’s false promise that if you like your health insurance you can keep your health insurance. It is necessary to the redistributionist logic of Obamacare that millions be required to cross-subsidize the health insurance of others. Hence, free choice between consumers and insurers has to be regulated out of existence.
But patients are already finding that they aren’t just losing their current health insurance; many are losing their doctors, too. And predictably Obamacare’s desperate defenders are openly embracing government coercion to solve this problem. In other words, we’re going to socialize the doctors, too. This problem is not brand new. Many doctors and medical practice groups have limited the number of Medicaid and Medicare patients they will treat because low (and slow) government reimbursement rates make them unprofitable. This problem is likely to grow worse under Obamacare.
A Democratic candidate for the Virginia state legislature in this week’s election advocates making it mandatory for doctors and medical practices to accept all Medicare and Medicaid patients, despite what this might do to the financial health of the doctors and their practice groups. This is only a short step from wholesale regulation of the way medicine is practiced, which will also prove necessary to fulfill the redistributionist design of Obamacare.
Reagan was on to this in his famous 1961 recording criticizing the original Medicare scheme:
Today, the relationship between patient and doctor in this country is something to be envied any place. The privacy, the care that is given to a person, the right to choose a doctor, the right to go from one doctor to the other.
But let’s also look from the other side, at the freedom the doctor loses. A doctor would be reluctant to say this. Well, like you, I am only a patient, so I can say it in his behalf. The doctor begins to lose freedoms; it’s like telling a lie, and one leads to another. First you decide that the doctor can have so many patients. They are equally divided among the various doctors by the government. But then the doctors aren’t equally divided geographically, so a doctor decides he wants to practice in one town and the government has to say to him you can’t live in that town, they already have enough doctors. You have to go someplace else. And from here it is only a short step to dictating where he will go.
One of the reasons Hillarycare collapsed back in 1994 was its proposal to regulate the number, kind, and location of medical specialities throughout the entire country. When people realized that Hillarycare meant that they might not be able to choose their doctor or specialist, public support for Hillrycare, initially very strong, collapsed. This was the reason Obama felt it necessary to offer the promise that we could keep our insurance and doctors if we liked them. But it was never going to work out this way, as Obama’s technocrats knew early on. Even when you begin only by targeting the uninsured, socialized medicine, as Reagan understood, requires “indefinite expansion in every direction until it includes the entire population.”
And as Reagan said in 1961, one lie leads to another. In modern times we’re supposed to be cynical about government deceptions, but Obama’s promise is arguably the greatest single lie in the history of American politics. Reagan also said at the time, “Well, we can’t say we haven’t been warned.”
http://www.forbes.com/sites/stevenhayward/2013/11/05/ronald-reagan-predicted-the-obamacare-disaster-back-in-1961/
What A Confidential 1974 Memo To Paul Volcker Reveals About America's True Views On Gold, Reserve Currency And "PetroGold"
Tyler Durden on 11/11/2013 22:09 -0500
Zero Hedge
Just over four years ago, we highlighted a recently declassified top secret 1968 telegram to the Secretary of State from the American Embassy in Paris, in which the big picture thinking behind the creation of the IMF's Special Drawing Right (rolled out shortly thereafter in 1969), or SDRs, was laid out. In that memo it was revealed that despite what some may think, the fundamental driver behind the promotion of a supranational reserve paper currency had one goal in mind: allowing the US to "remain masters of gold."
Specifically, this is among the top secret paragraphs said on a cold night in March 1968:
If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.'s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years.
This then puts into question just what the true purpose of the IMF is. Because while its stated role of preserving the stability in developing, and increasingly more so, developed, countries is a noble one, what appears to have been the real motive behind the monetary fund's creation, was to promote and encourage the development of a substitute reserve currency, the SDR, and to ultimately use it as the de facto buffer and intermediary, for conversion of all the outstanding "barbarous relic" hard currency, namely gold, into the fiat of the future: the soon to be newly created SDR. All the while, and increasingly more so as more countries converted their gold into SDR, such remaining hard currency would be almost exclusively under the control of the United States.
Well, in the intervening 44 years, the SDR never managed to take off, the reason being that the dollar's reserve currency status was exponentially cemented courtesy of both the great moderation of the 1980s and the derivative explosion of the 1990s and post Glass Steagall repeal 2000s, when the world was literally flooded with roughly $1 quadrillion in USD-denominated derivatives, inextricably tying the fate of the world to that of the dollar.
However, back in 1974, shortly after Nixon ended the Bretton Woods system, and cemented the dollar's fate as a fiat currency, no longer convertible into gold, the future of the SDR was still bright, especially at a time when the US seemed set to suffer a very unpleasant date with inflationary reality following the 1973 oil crisis, leading to a potential loss of faith in the US dollar.
Which brings us to the topic of today's article: the international monetary system, reserve currency status, SDRs, and, of course, gold... again.
Below is a memo written in 1974 by Sidney Weintraub, Deputy Assistant Secretary of State for International Finance and Development, to Paul Volcker, when he was still just Under Secretary of the Treasury for Monetary Affairs and not yet head of the Federal Reserve. The source of the memo was found in the National Archives, RG 56, Office of the Under Secretary of the Treasury, Files of Under Secretary Volcker, 1969–1974, Accession 56–79–15, Box 1, Gold—8/15/71–2/9/72. No classification marking. A stamped notation on the note reads: "Noted by Mr. Volcker." Another notation, dated March 8, indicates that copies were sent to Bennett and Cross. It currently resides in declassified form in Document 61, Foreign Relations Of The United States, 1973–1976, Volume XXXI Foreign Economic Policy, and is found at the Office of the Historian website.
The memo is a continuation of the US thinking on the issue of the then brand new SDR, the fate of paper currencies, and the preservation of US control over reserve currency status. Most importantly, it addresses several approaches to dominating gold as well as the US' interest of banning gold from monetary system and capping the free market price, contrasted by the opposing demands of various European deficit countries (sound familiar?) on what the fate of gold should be at a time when the common European currency did not exist, and some European countries were willing to fund their deficits with gold: something the US naturally was not happy about.
While we urge readers to read the full memo on their own, here the two punchlines.
First, here is what the S intentions vis-a-vis gold truly are when stripped away of all rhetoric:
U.S. objectives for world monetary system—a durable, stable system, with the SDR [ZH: or USD] as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.... It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR [ZH: or USD].
In other words: gold can not be allowed to dominated a "durable, stable system", and a rising gold price would cripple the reserve currency du jour: well known by most, but always better to see it admitted in official Top Secret correspondence.
We continue:
To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price and encourage the gradual disposition of monetary gold through sales in the private market. An alternative route to demonetization could involve a substitution of SDRs for gold with the IMF, with the latter selling the gold gradually on the private market, and allocating the profits on such sales either to the original gold holders, or by other agreement.... Any redefinition of the role of gold must be based on the principle stated above: that SDR must become the center of the system and that there can be no question of introducing a new form of gold– paper and gold–metal bimetallism, in which the SDR and gold would be in competition.
And there, in three sentences, you have all the deep thinking behind the IMF's SDR: simply to use it as a vehicle through which a select few can accumulate gold (namely those who can create fiat SDRs d novo), while handing out paper "profits" to the happy sellers.
And just in case it was not quite clear, here it is again, point blank:
Option 3: Complete short-term demonetization of gold through an IMF substitution facility. Countries could give up their gold holdings to the IMF in exchange for SDRs. The gold could then be sold gradually, over time, by the IMF to the private market. Profits from the gold sales could be distributed in part to the original holders of the gold, allowing them to realize at least part of the capital gains, while part of the profits could be utilized for other purposes, such as aid to LDCs. Advantages: This would achieve our goal of demonetization and relieve the problem of gold immobility, since the SDRs received in exchange could be used for settlement with no fear of foregoing capital gains. Disadvantages: This might be a more rapid demonetization than several countries would accept. There would be no benefit from the viewpoint of financing oil imports with gold sales to Arabs (although it is not necessarily incompatible with such an arrangement).
One wonders just who in the "private market" would be stupid enough to convert their invaluable paper money into worthless, barbaric relics?
And finally, was there the tiniest hint of a proposed alternative system to the PetroDollar. Namely, PetroGold?
There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports... Although mobilization of gold for intra-EC settlement would help in the financing of imbalances among EC countries, it would not, of itself, provide resources for the financing of the anticipated deficit with the oil producers. For this purpose, it would be useful if the oil producers would invest some of their excess revenues in gold purchases from deficit EC countries at close to a market price. This would be an attractive proposal for European countries, and for the U.S., in that it would not involve future interest burdens and would avoid immediate problems arising from increased Arab ownership of European and American industry. (The Arabs could both sell the gold and use the proceeds for direct investment, so that the industry ownership problem would not be completely solved.) From the Arab point of view such an asset would have the advantages of being protected from exchange-rate changes and inflation, and subject to absolute national control.
One wonders if the price of gold is "high enough" now for Arab purposes, and just where the Arabs are now in their thinking of converting oil into gold... or alternatively into a gold-backed renminbi. And if not now, soon, once the pent up inflation in the Fed's $4 trillion, and rising, balance sheet inevitably start to leak out?
The full Volcker memo can be found here.
h/t Koos Jansen
http://www.zerohedge.com/news/2013-11-11/what-confidential-1974-memo-paul-volcker-reveals-about-americas-true-views-gold-rese
What A Confidential 1974 Memo To Paul Volcker Reveals About America's True Views On Gold, Reserve Currency And "PetroGold"
Tyler Durden on 11/11/2013 22:09 -0500
Zero Hedge
Just over four years ago, we highlighted a recently declassified top secret 1968 telegram to the Secretary of State from the American Embassy in Paris, in which the big picture thinking behind the creation of the IMF's Special Drawing Right (rolled out shortly thereafter in 1969), or SDRs, was laid out. In that memo it was revealed that despite what some may think, the fundamental driver behind the promotion of a supranational reserve paper currency had one goal in mind: allowing the US to "remain masters of gold."
Specifically, this is among the top secret paragraphs said on a cold night in March 1968:
If we want to have a chance to remain the masters of gold an international agreement on the rules of the game as outlined above seems to be a matter of urgency. We would fool ourselves in thinking that we have time enough to wait and see how the S.D.R.'s will develop. In fact, the challenge really seems to be to achieve by international agreement within a very short period of time what otherwise could only have been the outcome of a gradual development of many years.
This then puts into question just what the true purpose of the IMF is. Because while its stated role of preserving the stability in developing, and increasingly more so, developed, countries is a noble one, what appears to have been the real motive behind the monetary fund's creation, was to promote and encourage the development of a substitute reserve currency, the SDR, and to ultimately use it as the de facto buffer and intermediary, for conversion of all the outstanding "barbarous relic" hard currency, namely gold, into the fiat of the future: the soon to be newly created SDR. All the while, and increasingly more so as more countries converted their gold into SDR, such remaining hard currency would be almost exclusively under the control of the United States.
Well, in the intervening 44 years, the SDR never managed to take off, the reason being that the dollar's reserve currency status was exponentially cemented courtesy of both the great moderation of the 1980s and the derivative explosion of the 1990s and post Glass Steagall repeal 2000s, when the world was literally flooded with roughly $1 quadrillion in USD-denominated derivatives, inextricably tying the fate of the world to that of the dollar.
However, back in 1974, shortly after Nixon ended the Bretton Woods system, and cemented the dollar's fate as a fiat currency, no longer convertible into gold, the future of the SDR was still bright, especially at a time when the US seemed set to suffer a very unpleasant date with inflationary reality following the 1973 oil crisis, leading to a potential loss of faith in the US dollar.
Which brings us to the topic of today's article: the international monetary system, reserve currency status, SDRs, and, of course, gold... again.
Below is a memo written in 1974 by Sidney Weintraub, Deputy Assistant Secretary of State for International Finance and Development, to Paul Volcker, when he was still just Under Secretary of the Treasury for Monetary Affairs and not yet head of the Federal Reserve. The source of the memo was found in the National Archives, RG 56, Office of the Under Secretary of the Treasury, Files of Under Secretary Volcker, 1969–1974, Accession 56–79–15, Box 1, Gold—8/15/71–2/9/72. No classification marking. A stamped notation on the note reads: "Noted by Mr. Volcker." Another notation, dated March 8, indicates that copies were sent to Bennett and Cross. It currently resides in declassified form in Document 61, Foreign Relations Of The United States, 1973–1976, Volume XXXI Foreign Economic Policy, and is found at the Office of the Historian website.
The memo is a continuation of the US thinking on the issue of the then brand new SDR, the fate of paper currencies, and the preservation of US control over reserve currency status. Most importantly, it addresses several approaches to dominating gold as well as the US' interest of banning gold from monetary system and capping the free market price, contrasted by the opposing demands of various European deficit countries (sound familiar?) on what the fate of gold should be at a time when the common European currency did not exist, and some European countries were willing to fund their deficits with gold: something the US naturally was not happy about.
While we urge readers to read the full memo on their own, here the two punchlines.
First, here is what the S intentions vis-a-vis gold truly are when stripped away of all rhetoric:
U.S. objectives for world monetary system—a durable, stable system, with the SDR [ZH: or USD] as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.... It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR [ZH: or USD].
In other words: gold can not be allowed to dominated a "durable, stable system", and a rising gold price would cripple the reserve currency du jour: well known by most, but always better to see it admitted in official Top Secret correspondence.
We continue:
To encourage and facilitate the eventual demonetization of gold, our position is to keep the present gold price, maintain the present Bretton Woods agreement ban against official gold purchases at above the official price and encourage the gradual disposition of monetary gold through sales in the private market. An alternative route to demonetization could involve a substitution of SDRs for gold with the IMF, with the latter selling the gold gradually on the private market, and allocating the profits on such sales either to the original gold holders, or by other agreement.... Any redefinition of the role of gold must be based on the principle stated above: that SDR must become the center of the system and that there can be no question of introducing a new form of gold– paper and gold–metal bimetallism, in which the SDR and gold would be in competition.
And there, in three sentences, you have all the deep thinking behind the IMF's SDR: simply to use it as a vehicle through which a select few can accumulate gold (namely those who can create fiat SDRs d novo), while handing out paper "profits" to the happy sellers.
And just in case it was not quite clear, here it is again, point blank:
Option 3: Complete short-term demonetization of gold through an IMF substitution facility. Countries could give up their gold holdings to the IMF in exchange for SDRs. The gold could then be sold gradually, over time, by the IMF to the private market. Profits from the gold sales could be distributed in part to the original holders of the gold, allowing them to realize at least part of the capital gains, while part of the profits could be utilized for other purposes, such as aid to LDCs. Advantages: This would achieve our goal of demonetization and relieve the problem of gold immobility, since the SDRs received in exchange could be used for settlement with no fear of foregoing capital gains. Disadvantages: This might be a more rapid demonetization than several countries would accept. There would be no benefit from the viewpoint of financing oil imports with gold sales to Arabs (although it is not necessarily incompatible with such an arrangement).
One wonders just who in the "private market" would be stupid enough to convert their invaluable paper money into worthless, barbaric relics?
And finally, was there the tiniest hint of a proposed alternative system to the PetroDollar. Namely, PetroGold?
There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports... Although mobilization of gold for intra-EC settlement would help in the financing of imbalances among EC countries, it would not, of itself, provide resources for the financing of the anticipated deficit with the oil producers. For this purpose, it would be useful if the oil producers would invest some of their excess revenues in gold purchases from deficit EC countries at close to a market price. This would be an attractive proposal for European countries, and for the U.S., in that it would not involve future interest burdens and would avoid immediate problems arising from increased Arab ownership of European and American industry. (The Arabs could both sell the gold and use the proceeds for direct investment, so that the industry ownership problem would not be completely solved.) From the Arab point of view such an asset would have the advantages of being protected from exchange-rate changes and inflation, and subject to absolute national control.
One wonders if the price of gold is "high enough" now for Arab purposes, and just where the Arabs are now in their thinking of converting oil into gold... or alternatively into a gold-backed renminbi. And if not now, soon, once the pent up inflation in the Fed's $4 trillion, and rising, balance sheet inevitably start to leak out?
The full Volcker memo can be found here.
h/t Koos Jansen
http://www.zerohedge.com/news/2013-11-11/what-confidential-1974-memo-paul-volcker-reveals-about-americas-true-views-gold-rese
Shadow banks reap Fed rate reward
Published: Monday, 11 Nov 2013 | 3:06 PM ET
By: Sam Fleming
Financial Times
Jasper James | Stone | Getty Images
Loosely regulated non-bank lenders have emerged as among the biggest beneficiaries of the Federal Reserve's ultra-low interest rates with three specialist categories increasing their assets by almost 60 percent since the height of the financial crisis.
Such lenders, widely considered part of the "shadow banking" system, have expanded rapidly on the back of investors who are clamoring for the higher returns on offer from financing riskier types of lending.
Shadow banking has been steadily climbing the regulatory agenda, with the Financial Stability Board this summer proposing a package of measures aimed at curbing excessive risk-taking in the sector. The regulators' concern is that many of these lenders could over-borrow or make increasingly dicey loans as they rush to take advantage of historically low rates, exuberant markets and the retreat of traditional banks from certain businesses in response to tougher regulation.
"Think of it like a pipeline," says Dan Zwirn, managing partner of Arena Investors, a hedge fund focused on lending to companies that most banks will not lend to. "When you can connect the pipe between a type of asset and yield-hungry investors, then what happens is that issuance grows."
(Read More: Ronald Coase and the nature of shadow banking)
The amount of assets held by US business development companies (BDCs), specialist finance companies and real estate investment trusts (Reits) has jumped from $779 billion in 2008 to $1.22 trillion in the second quarter of 2013, according to data compiled by SNL Financial for the Financial Times.
The rapid growth of Reits, which borrow in the short term financial markets to make tax-favorable investments in longer-term assets like mortgage bonds, has drawn the attention of US regulators.
The New York Fed probed US banks' exposure to the investment vehicles earlier this year, amid concern that a rapid rise in rates could trigger a sell-off that would affect larger banking institutions. Last week, researchers at the Richmond Fed said that while Reits had "mushroomed" since the crisis, it remained unclear what risk they might pose to the financial system.
Regulators are attempting to strengthen oversight of the lightly-regulated sector while avoiding measures that would stifle its ability to contribute to the recovery.
Last month, Mark Carney, the FSB's chair and Bank of England governor, floated the option of opening up access to the BoE's liquidity facilities to non-banks, while adding that this would mean extending the reach of regulation.
Paul Tucker, the former Bank of England deputy governor, warned the same month that regulators need to "up their game" in overseeing hedge funds and shadow banks. He said it would be "disastrous" if the fragility of mainstream banks gets recreated beyond the mainstream banking sector, calling for securities regulators to improve the quality of data they are collecting on non-banks.
BDCs provide capital and loans for middle-market companies, using a tax-favorable structure that is similar to Reits. While the leverage of BDCs is capped under law, they too have experienced rapid growth in recent years, leading to heightened competition.
"Underwriting standards go lower, interest rate risk goes higher," said Mr Zwirn, adding that many BDCs have sought to boost returns by purchasing the riskiest pieces of collateralized loan obligations or the equity of specialist finance companies that are allowed higher leverage rates than BDCs.
Some such companies which proliferated before the financial crisis are still reducing the troubled assets they collected before 2008, while others have been expanding in fields such as lending to people with flawed credit histories to fill a gap left by retreating banks.
Springleaf, the former subprime consumer lending arm of the bailed-out mega-insurer AIG, has been able to take advantage of a turnaround in securitization markets to repackage its loans into asset-backed securities and expand its business.
"The combination of increased capital requirements and regulatory focus will make it harder for banks to serve non-prime customers," said Steven Moffitt, who leads the consumer structured finance team at Goldman Sachs.
He estimates that 25 to 40 per cent of bank customers will need to source credit from non-bank entities, potentially leading to further growth for specialty lenders.
http://www.cnbc.com/id/101188282
Obamashock! Hits Employees of Sodexo, "World's Largest Quality of Life" Service Company
Nov. 10, 2013
Mish's Global Ecnomic TrendAnalysis
Some employees of Sodexo, the "World's largest quality of life services company" have been hit with a massive case of "Obamashock!" because of the way Obamacare identifies part-time employment.
An email from reader "Mark" will explain.
Hello Mish
I thought you would be interested in another new angle regarding fallout from the ACA.
Yesterday we received a notice of cancellation of our eligibility in the large group health plan through my wife's employer. They state that this is due to the Affordable Care Act.
My wife has worked for Sodexo, USA for about 3 years.Sodexo is a contract food service provider at literally thousands of institutions around the world. Her job is at a small private college in Iowa.
The notice we received states that, "Sodexo has aligned how we define full-time employees eligible for benefits with the Affordable Care Act". As such, she no longer qualifies as a full time employee, and can no longer be part of the benefit plan, as of January 1, 2014.
The new definition is that a full time employee must average 30 hours a week over the past 12 months. The cafeteria at a private college is not open 12 months of the year, and does not operate an average of 30 hours per week over 12 months. It is impossible to attain this number of hours when they are not available.
I am self employed. We will not qualify for any 'exchange subsidies'. She worked this just over minimum wage job solely for access to the health plan.
Now our options seem to be either to pay $19,600.52 per year for the COBRA plan, or $12,636 for an individual family plan with a deductible that is 3 times our current plan.
We are definitely in Obamashock!
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Read more at http://globaleconomicanalysis.blogspot.com/2013/11/obamashock-hits-employees-of-sodexo.html#tBtm6vQdDwawjzwe.99
Federal Reserve Economist On Bitcoin: 'Small Phenomenon But Growing'
11/7/2013
Kashmir Hill
Forbes
The price of Bitcoin reaches a new high this week, nearing and passing $300 on major exchanges
(image via Zero Block)
It’s a big moment for Bitcoin. The digital currency has gotten an official nod from the overseer of U.S. currency in the form of a primer out of the Federal Reserve Bank of Chicago. Senior economist François R. Velde wrote an elegant critique of the four-year-old currency, explaining its mechanics, limitations, and prospects for success, ultimately deeming it a “remarkable conceptual and technical achievement, which may well be used by existing financial institutions.” If this were Economic Mean Girls, this is the part of the movie where Lindsay ‘Bitcoin’ Lohan gets friended by the powerful, popular crowd.
Velde starts out by laying out the numbers. Producing a bitcoin “at current levels of difficulty requires a machine worth about $3,000 and about a dollar’s worth of electricity per day,” meaning the cost of producing one bitcoin, taking into account the machine’s depreciation over five years, is about $2.50. While the estimate seems to discount the steadily rising cost of higher-powered machines that are necessary for more complex hashing — and the pools of machines necessary for mining — with Bitcoins currently valued at 100 times that, you can see why companies offering ‘mining’ equipment are doing such good business.
Velde points out that there is $1,200 billion circulating in U.S. currency compared to $1 billion in Bitcoin (when he authored the December 2013 paper). Thanks to a recent price surge to over $250, the market cap for the nearly 12 million Bitcoin in existence is now well over $3 billion, but even given that, Bitcoin is a “relatively small phenomenon,” as Velde puts it. “But it has been growing,” he writes. “[T]he value of a bitcoin has increased tenfold since early 2013.”
To further put it into the context of the larger economy, he writes that “there are on average about 30 bitcoin transactions per minute” vs. 200,000 Visa transactions per minute, and that the average bitcoin transaction size is “about 16, i.e., on the order of $2,000? while “the average Visa transaction is about $80.” At that level of spending, it’s fairly obvious that most of the activity happening in Bitcoin is not actually buying things (as I did in May), but rather trading. (Of course, every once in a while someone might drop a cool mil on mining gear.)
“So far, the uses of bitcoin as a medium of exchange appear limited, particularly if one excludes illegal activities,” notes Velde. “It has been used as a means to transfer funds outside of traditional and regulated channels and, presumably, as a speculative investment opportunity.”
(And occasionally to circumvent trade sanctions for a pair of Persian sneaks.)
For those who have pondered what bitcoin actually is — currency vs. stock vs. money — Velde has an answer. It’s a fiduciary currency, he writes, explaining it has no intrinsic value meaning it’s “inherently fragile,” deriving value only from “exchange either from government fiat or from the belief that they may be accepted by someone else.” That’s much like the no-longer-gold-backed U.S. dollar, say many Bitcoin believers.
So is it viable as a currency people would actually want to use for anything beyond Silk Road 2.0, asks Velde. While Bitcoin attempts to act like cash online, there are “costs.”
“One prominent cost is the loss of anonymity,” he writes. One of the biggest myths around bitcoin is that it is “anonymous.” While it is has been useful for getting your fix online because a purchase with it entails far less personal information than using a credit card or Paypal account, the currency’s security is predicated on the fact that everything is traceable. So you only remain anonymous if you never tie a purchase to your identity.
“Possession of the virtual currency must be linked to the unique identifier of the wallet,” writes Velde. “Admittedly, there is no limit on the number of wallets one can own and there are ways to make the wallet hard to trace back to its owner, but these require additional efforts.”
The other cost is speed. While small transactions with Bitcoin are usually processed immediately, larger ones take longer because they must be confirmed by miners and that only happens when the transactions are included in the block chain which happens about every ten minutes. “For large amounts it is customary to wait for six blocks, or one hour,” writes Velde. That is long but for those of us who have had Paypal freeze a transaction for five days (as it did when I tried to send a large amount to a new person as a security deposit on my apartment) or when a bank refuses to send a wire transfer at all, it does not seem like that long a delay.
“Why this delay to complete bitcoin transactions?” writes Velde. “It is rooted in the decentralized nature of the bitcoin network (and its reliance on a sort of majority voting), which is both its most ambitious feature and its main vulnerability.”
Chicago Fed senior economist François Velde, a specialist in monetary history and monetary theory, tackles Bitcoin
Velde is most critical of the governance structure of Bitcoin. The code is deployed by a group of five core developers — who are loosely empowered with the responsibility for deciding when Bitcoin is “broken” — with a larger body of Bitcoin users and miners deciding on changes to be made.
“Although some of the enthusiasm for bitcoin is driven by a distrust of state-issued currency,” writes Velde, “it is hard to imagine a world where the main currency is based on an extremely complex code understood by only a few and controlled by even fewer, without accountability, arbitration, or recourse.”
It works for the governance of the Internet — Hi, ICANN! — so perhaps it can work for Bitcoin too.
Velde also dispels the notion that Bitcoin fulfills the Hayekian concept of denationalization of money. While Bitcoin is indeed stateless, it “is not issued by a private enterprise operating in a competitive environment, disciplined by the market to maintain the stable value of its currency,” as economist Friedrich Hayek imagined, but is instead issued automatically at a predictable rate. Austrian economists everywhere will surely collectively issue a sigh of relief at having that straightened out.
“Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place,” writes Velde.
In other words, if you’re not trying to evade trade sanctions or the DEA and you’re not a philosophical convert, what’s the point?
If it does catch on, Velde predicts it’s unlikely to remain free of government intervention, “if only because the governance of the bitcoin code and network is opaque and vulnerable.” Beyond the Fed, Bitcoin is already getting scrutiny from lawmakers and regulators with some, like New York’s state financial regulator hinting at intervention plans. The Senate Homeland Security Committee, meanwhile, plans on holding hearings on Bitcoin within the month, according to Time.
Velde ultimately gives Bitcoin a thumbs up: “[I]t represents a remarkable conceptual and technical achievement, which may well be used by existing financial institutions (which could issue their own bitcoins) or even by governments themselves.”
No ‘burn book‘ for Bitcoin.
Bitcoin: A primer [Chicago Fed Reserve]
Disclosure: Author owns Bitcoin that remain from her week of living on them
http://www.forbes.com/sites/kashmirhill/2013/11/07/federal-reserve-economist-on-bitcoin-small-phenomenon-but-growing/
As BitCoin Touches $400 The Senate Starts Seeking Answers... As Does The Fed
by Tyler Durden on 11/09/2013 12:38 -0500
Zerohedge
Moments ago BitCoin hit $395, and will likely cross $400 in the immediate future (the chart looks a little less scary in log scale).
So as more and more pile into the electronic currency, some due to ideological reasons, some simply to chase momentum, some out of disappointment with the manipulated gold price looking to park their savings in an alternative, non-fiat based currency, which a year ago traded 40 times lower, the attention of the government is finally starting to shift to what has been the best performing asset class in the past year, outperforming even the infamous Caracas stock market.
Which means one thing: Congressional hearings.
From Bloomberg:
The U.S. Senate Committee on Homeland Security and Governmental Affairs will meet on Nov. 18 “to explore potential promises and risks related to virtual currency for the federal government and society at large,” it said in a statement today.
The hearing, titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” will invite witnesses to testify about the challenges facing law enforcement and regulatory agencies, and include views from “non-governmental entities who can discuss the promises of virtual currency for the American and global economies.”
“Bitcoin is obviously getting a lot of attention from the federal
government on the regulatory side,” Nicholas Colas, an analyst at ConvergEx Group, said in an interview. “Given the involvement of the currency in illegal activities, that is entirely warranted. I expect these hearings to be largely informational, which is good for Bitcoin.”
“The architecture of the system is elegant from a computer-science perspective, but hard for a non-tech person to understand,” Colas said. “Getting industry professionals to close this gap will be very helpful.”
Or not. Because the only thing the government does when its interest is piqued by something, anything, especially things that have to be looked in log-scale, is to promptly regulate it and then tax it, not necessarily in that order. Just how it will achieve this with Bitcoin remains unclear but one thing is certain: it will try.
Especially, now that even the Fed is looking at BitCoin when a few days ago the Chicago Fed issued 'Bitcoin: A primer" in which the Fed states quite simply:
So far, the uses of bitcoin as a medium of exchange appear limited, particularly if one excludes illegal activities. It has been used as a means to transfer funds outside of traditional and regulated channels and, presumably, as a speculative investment opportunity. People bet on bitcoin because it may develop into a full-fledged currency. Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place. Nor does it truly embody what Hayek and others in the “Austrian School of Economics” proposed. Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable.
Finally, while the Fed may be late to the game, the ECB has already made its feelings on BitCoin well-known long ago: recall from over a year ago: "The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows" in which the European central banks didn't mince its words: BitCoin is nothing but a ponzi scheme to the central bank tasked with preserving the viability of an entire insolvent continent, and a a currency which unlike BitCoin would never survive absent regulatory intervention.
So while the electronic currency is soaring exponentially as it goes through its appreciation golden age, will the one thing that can finally end the dream of BitCoin holders arrive soon: when the government, and existing monetary authorities, start taking it seriously.
Full Chicago Fed paper on BitCoin
http://www.zerohedge.com/news/2013-11-09/bitcoin-touches-400-senate-starts-asking-questions-does-fed
ICE's takeover of NYSE to close on November 13
BY JOHN MCCRANK
Fri Nov 8, 2013 6:23pm EST
Specialist traders work at the booth that trades the stock for
IntercontinentalExchange, on the floor at the New York Stock Exchange, May 1, 2013. REUTERS/Brendan McDermid
(Reuters) - IntercontinentalExchange Inc (ICE.N) said its takeover of NYSE Euronext (NYX.N) would close on November 13, after clearing final regulatory hurdles on Friday.
The derivatives exchange and clearing house operator said in December it would buy the owner of the New York Stock Exchange in a deal that also gives ICE control of Liffe, Europe's No. 2 derivatives market.
The transaction had been expected to close on Monday, November 4, but ICE said on Wednesday that while there were no substantive issues remaining, certain European regulators needed more time to review the takeover.
The deal, which consists of around 75 percent shares and 25 percent cash, was worth 10.9 billion as of November 1.
Shares of ICE and NYSE will cease to trade after Tuesday, November 12, and the shares of the merged company will begin trading the next day under the ticker symbol "ICE" on the New York Stock Exchange.
ICE Chief Executive Jeff Sprecher, who helped start the company in 2000 and built it up through a series of deals, said on a call with analysts on Tuesday that ICE would move quickly to integrate the parts of NYSE it plans to keep, while unloading other parts of the business.
Sprecher has had a history of eliminating the trading floors of the exchanges his company has bought, but has vowed to keep open the floor of the New York Stock Exchange, which traces its origins back to an agreement signed under a buttonwood tree on Wall Street in 1792.
ICE said in December it expects to cut the majority of $450 million of run-rate expenses from the combined company by the second full year after the deal closes.
NYSE's website says the company has 2,993 employees, while ICE had 1,121 employees as of September 30, according to a recent regulatory filing.
ICE also plans to spin off Euronext, which includes the Paris, Amsterdam, Brussels and Lisbon stock exchanges, in an IPO likely some time next year.
(Reporting by John McCrank and Anil D'Silva; editing by G Crosse
http://www.reuters.com/article/2013/11/08/us-nyse-ice-idUSBRE9A712420131108
Second Canadian Telecom Evaluating Valdor Splitter
November 6, 2013 - Hayward, California
Valdor Technology International Inc. ("Valdor") (TSX: VTI-V) is pleased to report that Valdor’s operating subsidiary, Valdor Fiber Optics, Inc., has delivered a Valdor harsh environment fibre optic splitter to a second Canadian telecom company. This sample device will be evaluated by this telecom to determine if it is a solution for their on-going splitter problems.
Mr. Ron Boyce, VP Sales & Marketing/Director, states: "Our confidence in our technology is now beginning to bear fruit with a second Canadian telecom now evaluating our harsh environment splitters. Reliability and quality are the most important pre-requisites for the Canadian telecoms and Valdor’s harsh environment products have proven that they can meet and exceed their technical requirements."
There are ten regional and national telecoms in Canada; ranging from the government owned SaskTel to the national and publically owned Bell Canada. Currently, the telecom FTTx market accounts for about 80% of global fibre optic expenditures. In North America fibre-to-the-home is at only 5% penetration. For the vendor, the telecom market is a difficult one to penetrate due to its extensive requirements for high quality products and services. It is estimated that the telecom market for passive and active FTTx products, for Canada only, will be in excess of $300 million/year, for at least the next five years. The telecom FTTx market is much larger in the USA.
For medical reasons, Mr. Ralph Kettell has resigned as a Director and Officer of Valdor. The Valdor Board and Management thank him for his many years of support and assistance and wish him the best of health in the near future. He will continue to provide services and support.
About the Fiber Optics Industry
Fiber optics is the future of communications. The signal transmission business is in the early stages of a fiber optics bull market. All signal transmission, in their many and various forms, are being converted from electrical to fiber optics. A comprehensive global report on the fiber optics components market projects that it will reach US$42 billion by the year 2017.
About Valdor Technology International Inc. (www.valdortech.com)
Valdor is a high technology fiber optic components company specializing in the design and manufacture of fiber optic connectors, laser pigtails, splitters, and other optical and optoelectronic components, including some that use the Valdor proprietary and patented Impact Mount™ technology. Valdor's Impact Mount™ technology is all-mechanical with no epoxy or matching gel. Valdor specializes in harsh environment products and in particular splitters and connectors.
On Behalf Of the Board of Directors of
VALDOR TECHNOLOGY INTERNATIONAL INC.
Operations Office: 3116 Diablo Avenue, Hayward CA U.S.A. 94545 ph. (510) 293-1212
Corporate Office: Suite 480 - 789 West Pender Street, Vancouver B.C. Canada V6C 1H2 ph. (604) 682-3117
Disclaimer:
The TSX-Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. This news release may contain certain "Forward-Looking Statements" within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed in the Company's documents filed from time to time with the TSX-Venture Exchange, the British Columbia Securities Commission and the US Securities and Exchange Commission.
http://www.valdor.com/media/releases/valdor-news-release.php?year=2013&seq=6&sign=0
This one chart shows you who’s really in control
November 7, 2013
Simon Black
Bangkok, Thailand
Check out this chart below. It’s a graph of total US tax revenue as a percentage of the money supply, since 1900.
For example, in 1928, at the peak of the Roaring 20s, US money supply (M2) was $46.4 billion. That same year, the US government took in $3.9 billion in tax revenue.
So in 1928, tax revenue was 8.4% of the money supply.
In contrast, at the height of World War II in 1944, US tax revenue had increased to $42.4 billion. But money supply had also grown substantially, to $106.8 billion.
So in 1944, tax revenue was 39.74% of money supply.
You can see from this chart that over the last 113 years, tax revenue as a percentage of the nation’s money supply has swung wildly, from as little as 3.65% to over 40%.
But something interesting happened in the 1970s.
1971 was a bifurcation point, and this model went from chaotic to stable. Since 1971, in fact, US tax revenue as a percentage of money supply has been almost a constant, steady 20%.
You can see this graphically below as we zoom in on the period from 1971 through 2013– the trend line is very flat.
What does this mean? Remember– 1971 was the year that Richard Nixon severed the dollar’s convertibility to gold once and for all.
And in doing so, he handed unchecked, unrestrained, total control of the money supply to the Federal Reserve.
That’s what makes this data so interesting.
Prior to 1971, there was ZERO correlation between US tax revenue and money supply. Yet almost immediately after they handed the last bit of monetary control to the Federal Reserve, suddenly a very tight correlation emerged.
Furthermore, since 1971, marginal tax rates and tax brackets have been all over the board.
In the 70s, for example, the highest marginal tax was a whopping 70%. In the 80s it dropped to 28%.
And yet, the entire time, total US tax revenue has remained very tightly correlated to the money supply.
The conclusion is simple: People think they’re living in some kind of democratic republic. But the politicians they elect have zero control.
It doesn’t matter who you elect, what the politicians do, or how high/low they set tax rates. They could tax the rich. They could destroy the middle class. It doesn’t matter.
The fiscal revenues in the Land of the Free rest exclusively in the hands of a tiny banking elite. Everything else is just an illusion to conceal the truth… and make people think that they’re in control.
by Simon Black
Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.
http://www.sovereignman.com/expat/this-one-chart-shows-you-whos-really-in-control-13119/
Confusion in Beijing's gold shops on price manipulation
Tom Chatham
Nov. 8, 2013
I received an email from someone who is Chinese with investments in Australia giving a view from the average person in China:
"Gold community in China is much different from western world. The customers are mostly old people (not discribed Chinese Dama [Bron - means middle aged married women]). Their only purpose is to preserve their savings (to against inflation) which earned by hard working of their whole life. When we go to Beijing's biggest gold shop and see some old couples sitting there, looking at gold price chart monitor with hopeless eyes (someone even have heart attack), we are filled with anger. Those good natured and hard working people, they don't chase equities or any kind of riskier investment, they buy gold for safety only. But now, the community is mostly hurted.
As for me, I only have a little gold less than 1% of my assets, but my very old father have a lot. He exchanged 25% of his savings to gold. When every week he met and ask me about gold's "cliff drop" and "volatility" and depressed several months, I can't explain to him exactly what happened. Chinese mainstream media are full of copies of wall streets comments and suggestions, I can't explain to my father clearly what is bullion bank's manipulation and I don't know how to make him happier. Such cases are numerous in China.
Bullion banks are not only making people suffer loss, but also destroying good faith and human logic. CMEgroup says Bullion banks' participation in gold/silver market is to "provide liquidity", but most of end buyers don't need such "liquidity" in the market. Bullion bank's trading is only for their own profit. Those "value-add" profit should belong to customer, miners and even you and your mint.
The problem come from huge naked short in thin time with no news in mid night electronic trading session or London fix, but sadly mid-night electronic session is afternoon in China, that triggers heard attack and depression of old people.
SGE already delivered 1782.997 metric ton in 2013 till October 25, about 15-20 times than Comex, we can't imagine why world price is controlled by a few of US banks."
Unfortnately it seems the average Chinese is no better informed than the average Westerner that we operate in a FIRE economy these days. That is why SGE's larger physical deliveries don't matter, as the ZIRP free money drives leveraged speculation in all markets, gold included. Simply the weight of this money in the gold market overwhelms the non-leverage money from the "good natured and hard working" just looking for safety.
So even if you got rid of fractional reserve banking, futures markets and manipulative trading tatics (which would help), you would still have this volatility as large investors could still borrow money at little cost and leverage up the little bit of their own money to buy a lot more gold. The consequence of that leverage is that it only takes a small change in price to threaten to wipe their capital out, resulting in quick and rushed liquidations back out.
And don't think that "China" is somehow not part of the problem. The same FIRE dynamic is in play in China as well, see this article or this on arbitrages using gold.
There was a great article out a few months ago called On the Phenomenon of Bullshit Jobs where he asks why predictions of a 15-hour work week never eventuated even though productivity increases could allow for it. He proposes that "rather than allowing a massive reduction of working hours to free the world’s population to pursue their own projects, pleasures, visions, and ideas, we have seen the ballooning" of bullshit jobs "as if someone were out there making up pointless jobs just for the sake of keeping us all working".
I propose a related phenonenom - that we are in a bullshit economy.
I am not confident that this is sustainable, which is why I have some gold insurance in my retirement savings account. All I can say to investors is to realise the bullshit FIRE dynamic that drives markets these days, be aware that this will result in large price swings, don't get all excited if we have a quick price rise as it could just be hot money that will flow out again, and remember gold is insurance to protect your wealth, not grow it.
I started reading commentary on the net about precious metals in 1998, when the The Perth Mint transferred me from Sydney to Perth to take up the position of Depository Administrator. In that time I have seen some intelligent writing but also a lot of stuff that could be described as emotional, misinformed, misguided, driven by hidden agendas or all of the above, and a fair bit by people who have never worked in the industry.
I hope to contribute some reasoned and reasonable commentary without the hype; expose anonymous agendas, factual faults and logic lapses; provide information on how the market actually works; give an insight into what goes on on the other side (of the trading desk); and most importantly, have a bit of fun (although I'll have to make sure my humour isn't too dry). This blog is really written for those Depository clients I got to know when I was Depository Administrator (you know who you are), which means it will only appeal to intelligent people, so if you are one of those, welcome. If your looking for sensationalism or personal attacks, look elsewhere.
I think it is important to disclose any potential "agendas" or commercial interests because while in theory one should be able to assess the validity of an argument independent of the writer, full disclosure helps the reader to be vigilant. That's why I mentioned The Perth Mint first up. I have worked there since 1994, except for one year with Australia's version of Wal-Mart – BigW – until gold's siren call drew me back (OK maybe it was the pay packet). In that time I've held a number of roles across all levels and I'm currently working on the redevelopment of the Mint's retail and exhibition business.
Having said that, this blog is not a Perth Mint mouthpiece and I will always strive for objectivity. All comments here are my personal opinion and not endorsed by the Mint in any way. And I'm not going to be answering specific question about the Mint's business - if you have a problem with them or a question for them, ask them directly yourself. However, I am happy to answer general questions readers may have. If you think that is a cop out, well I don't want to test the confidentiality provisions of my employment contract or be a test case on what Section 74 of the Gold Corporation Act 1987 covers. As I work at the Mint no one is probably going to believe what I say about it anyway. This is a blog, not a newsletter, and I'm doing it on my time, not the Mint's time, so I'm not taking any risks.
Finally, while this blog is not about giving you my opinion about where the gold price is going (there are plenty of those out there), I probably won't be able to stop myself from commenting on the market from time to time. In that case, note the following disclaimer - this blog is not giving investment advice and should not be relied upon at all! I mean, if what I had to say on the gold price was worthwhile, why would I be here writing this blog instead of sunning myself in some exotic location from all my trading profits?
Legal: of course I claim/retain copyright on any material published in this blog (as if it is worth much) but am happy for it to be quoted or republished as long as it is credited/linked back to this blog.
goldchat.blogspot.com
http://www.silverbearcafe.com/private/11.13/confusion.html
You're right Ayock Vancouver and the West Coast of the US are attracting tons of Asian buyers. The majority of New York cash real estate purchases are Asians. Canadians, Europeans and Brazilians on the other hand tend to buy high end and rental properties in Florida.
Financial Repression Starts Showing Its Ugly Head
Taki T | November 7, 2013
Goldsilverworlds.com
2013 is proving to be a hallmark year in the ongoing saga which is called “economic recovery.” If anything has started to become blatant, it is undoubtedly the distortion in money, markets and metals.
During the first years after the financial crisis of 2008, the markets reacted in line with what one would expect from additional liquidity: stocks recovered from the crash, interest rates were pushed down, most commodities have gone up, and precious metals were the best performers. Most currencies have been whipsawing.
Although a range of interventions with exotic names have been invented by the creative directors of Western central banks, our belief is that the full effects of those measures have only started to manifest themselves in 2013. With the end of the year in sight, this year will go into history marked by a historic crash in precious metals, an epic surge in interest rates, US equities all time highs and European and Japanese stock markets surging the wall of worry. Courtesy of the central banking liquidity injections, interest rate manipulations, and, most likely, repeated efforts by the Protection Plunge Team (PPT).
We would like to draw the attention to the importance of interest rate distortion. Not only is the length of the suppression out of proportion, to such an extent that Jim Rickards is totally convinced it is the proof of an economic depression. Besides, there is also a big risk on destructive effects on the economy. During a recent presentation at the Casey Summit in October, Don Coxe compared the interest rate suppression with a wounded soldier. In the army, in the early days, dying soldiers were given heroin. It was the only solution to ignore the pain. However, the crucial part was the timing of withdrawing the heroin. Withdrawing either too fast or too late could have catastrophic results. Knowing when exactly to switch to pain stilling morphine was crucial.
Similarly, zero percent interest rates could be considered financial heroin. The US Fed Chairman experienced it the hard way when his announcement of a potential withdrawal had immediate and destructive effects in June.
Financial repression in 2013
Given the track record of central planners in forecasting (or lack thereof), one could expect that the world is about to experience the destructive effects of financial heroin withdrawal. But what is at risk if things do not work out as engineered by central planners? The short answer, in our view, is financial repression. The following examples provide sufficiently evidence.
Financial repression has truly shown its face in 2013. The year started with an epic event: a bail-in of major banks in Cyprus which laid the foundation of a bail-in template (recently released by the BIS).
Poland saw a major restructuring of its private pension funds; the funds were nationalized overnight. One could call it “pension fund confiscation.”
The Detroit bankruptcy was another major development. Recently, it became clear that pensioners, retirees and other unsecured creditors would undergo a 84% haircut on each dollar (source).
One of the newest inventions in the financial world in 2013 was “bank bail-ins.” The term achieved the status of a commonly accepted buzz word in a very short period of time. In its latest update, Taki Tsaklanos from Gold Silver Worlds discussed several recent cases which provided proof of the bank bail-in rumble growing louder. He also explained that bank bail-ins are the result of extreme banking leverage; excess liquidity provided by the central banking corporations do not prevent bank bail-ins, they feed them.
The 10% savings cut proposal by the IMF for European households has luckily not been implemented [yet?], but the fact it is openly being discussed as an idea is worrisome to say the least. In our view, it deserves adding it to our list as it is an indication of coming major unexpected measures. From the IMF paper (page 49):
“The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). … The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away. … The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth.”
Capital controls
And then there is the other category within the financial repression cloud: capital controls.
A couple of weeks ago, Chase Bank sent out a letter to some of their small business accounts telling them their cash and wire transfer activity would be limited (source). The letter circulated on the internet, and was initially considered a measure of capital control applicable to all Chase Bank customers. We reached out to the communications department of Chase Bank, who replied that the measure was wrongly interpreted. From the answer, it appeared that the decision was affecting only a small group of customers; the impacted clients would have alternatives for international wires. Interestingly, those alternatives were not mentioned in the letter. In line with this reply, a US based law firm in our network concluded, after investigation, as follows: “Although there was initial cause for concern, Chase is still allowing its clients to send international wires – albeit with more restrictions than in the past.” Be it as it may, there is a smell to this.
Coincidence or not, some days later, Texas Western Union announced that, due to new regulations, effective October 1, 2013, “the international Western Union wire transfer service will no longer be available. The domestic service will remain unaffected. The credit union’s outgoing international wire transfer fee will be $60.00/transaction.” (source)
Historic evidence
Hm. One could rightfully ask if this is a trend. In our view, the short answer to that question is “yes, very very likely.”
Another way to look at the question whether we are in a trend, is to check what we can learn from history when it comes to financial repression and capital controls. Ronald Stoeferle points out in his latest “In Gold We Trust” report that the post-war period in the US was the standard example of financial repression. “With so-called ‘Regulation Q’, interest payments on demand deposits were prohibited, international capital movements strictly regulated. Moreover, liquid short term bonds were exchanged for illiquid longer term ones.” There are several parallels to present times.
Stoeferle continues by laying out the differences between the post-war period of financial repression and the current situation. Although public debt was far higher in the post-war period, private households, banks and corporations were barely indebted at the time. Today, a “twin deleveraging” would be hyper-deflationary. Moreover, the real economy at the time profited from the enormous investment activity in the course of reconstruction, urbanization, trade liberalization and demographic conditions.
One should realistically expect that financial repression in all its different facets is going to gain increasing importance in the coming years, no matter if it is not a constructive long term strategy. The truth of the matter is that it will only achieve redistribution and a temporal delay, but no solution to the problem.
Seeking protection
Going forward, how can one protect against these terrible measures? There are a couple of actionable solutions next to being hopeful. First, converting part of one’s assets into physical precious metals is a wise thing to do given that they are outside the banking system. Paper gold and silver investments like ETF’s, certificates, options, futures, and mining stocks, are risky investments, not matter if they are considered “gold investments.” The real “gold investment” is one that overcomes counterparty risk. Global Gold, part of the BFI group, is offering such protection with ultra safe storage in jurisdictions like Switzerland, Hong Kong and Singapore.
Furthermore, when it comes to banking, one could consider opening up an offshore bank account, provided it is with a reserve bank (meaning that the bank is making no loans at all). Europac Bank, founded by Peter Schiff, was designed to provide an answer to the leveraged banking industry. The bank account can be used as savings and checking account; hence it is suitable for every type of financial transaction. Optionally, the bank account comes with a debit card in gold or silver: account owners can opt to convert their money into gold to preserve the purchasing power of their currency.
Lastly, international diversification of assets is a recommended tactic. Specifically for high net worth individuals, BFI Wealth provides custom advice and wealth management solutions. Ask an advisor how the company could serve you.
http://goldsilverworlds.com/economy/financial-repression-starts-showing-its-ugly-head/
Financial Repression Starts Showing Its Ugly Head
Taki T | November 7, 2013
Goldsilverworlds.com
2013 is proving to be a hallmark year in the ongoing saga which is called “economic recovery.” If anything has started to become blatant, it is undoubtedly the distortion in money, markets and metals.
During the first years after the financial crisis of 2008, the markets reacted in line with what one would expect from additional liquidity: stocks recovered from the crash, interest rates were pushed down, most commodities have gone up, and precious metals were the best performers. Most currencies have been whipsawing.
Although a range of interventions with exotic names have been invented by the creative directors of Western central banks, our belief is that the full effects of those measures have only started to manifest themselves in 2013. With the end of the year in sight, this year will go into history marked by a historic crash in precious metals, an epic surge in interest rates, US equities all time highs and European and Japanese stock markets surging the wall of worry. Courtesy of the central banking liquidity injections, interest rate manipulations, and, most likely, repeated efforts by the Protection Plunge Team (PPT).
We would like to draw the attention to the importance of interest rate distortion. Not only is the length of the suppression out of proportion, to such an extent that Jim Rickards is totally convinced it is the proof of an economic depression. Besides, there is also a big risk on destructive effects on the economy. During a recent presentation at the Casey Summit in October, Don Coxe compared the interest rate suppression with a wounded soldier. In the army, in the early days, dying soldiers were given heroin. It was the only solution to ignore the pain. However, the crucial part was the timing of withdrawing the heroin. Withdrawing either too fast or too late could have catastrophic results. Knowing when exactly to switch to pain stilling morphine was crucial.
Similarly, zero percent interest rates could be considered financial heroin. The US Fed Chairman experienced it the hard way when his announcement of a potential withdrawal had immediate and destructive effects in June.
Financial repression in 2013
Given the track record of central planners in forecasting (or lack thereof), one could expect that the world is about to experience the destructive effects of financial heroin withdrawal. But what is at risk if things do not work out as engineered by central planners? The short answer, in our view, is financial repression. The following examples provide sufficiently evidence.
Financial repression has truly shown its face in 2013. The year started with an epic event: a bail-in of major banks in Cyprus which laid the foundation of a bail-in template (recently released by the BIS).
Poland saw a major restructuring of its private pension funds; the funds were nationalized overnight. One could call it “pension fund confiscation.”
The Detroit bankruptcy was another major development. Recently, it became clear that pensioners, retirees and other unsecured creditors would undergo a 84% haircut on each dollar (source).
One of the newest inventions in the financial world in 2013 was “bank bail-ins.” The term achieved the status of a commonly accepted buzz word in a very short period of time. In its latest update, Taki Tsaklanos from Gold Silver Worlds discussed several recent cases which provided proof of the bank bail-in rumble growing louder. He also explained that bank bail-ins are the result of extreme banking leverage; excess liquidity provided by the central banking corporations do not prevent bank bail-ins, they feed them.
The 10% savings cut proposal by the IMF for European households has luckily not been implemented [yet?], but the fact it is openly being discussed as an idea is worrisome to say the least. In our view, it deserves adding it to our list as it is an indication of coming major unexpected measures. From the IMF paper (page 49):
“The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). … The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away. … The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth.”
Capital controls
And then there is the other category within the financial repression cloud: capital controls.
A couple of weeks ago, Chase Bank sent out a letter to some of their small business accounts telling them their cash and wire transfer activity would be limited (source). The letter circulated on the internet, and was initially considered a measure of capital control applicable to all Chase Bank customers. We reached out to the communications department of Chase Bank, who replied that the measure was wrongly interpreted. From the answer, it appeared that the decision was affecting only a small group of customers; the impacted clients would have alternatives for international wires. Interestingly, those alternatives were not mentioned in the letter. In line with this reply, a US based law firm in our network concluded, after investigation, as follows: “Although there was initial cause for concern, Chase is still allowing its clients to send international wires – albeit with more restrictions than in the past.” Be it as it may, there is a smell to this.
Coincidence or not, some days later, Texas Western Union announced that, due to new regulations, effective October 1, 2013, “the international Western Union wire transfer service will no longer be available. The domestic service will remain unaffected. The credit union’s outgoing international wire transfer fee will be $60.00/transaction.” (source)
Historic evidence
Hm. One could rightfully ask if this is a trend. In our view, the short answer to that question is “yes, very very likely.”
Another way to look at the question whether we are in a trend, is to check what we can learn from history when it comes to financial repression and capital controls. Ronald Stoeferle points out in his latest “In Gold We Trust” report that the post-war period in the US was the standard example of financial repression. “With so-called ‘Regulation Q’, interest payments on demand deposits were prohibited, international capital movements strictly regulated. Moreover, liquid short term bonds were exchanged for illiquid longer term ones.” There are several parallels to present times.
Stoeferle continues by laying out the differences between the post-war period of financial repression and the current situation. Although public debt was far higher in the post-war period, private households, banks and corporations were barely indebted at the time. Today, a “twin deleveraging” would be hyper-deflationary. Moreover, the real economy at the time profited from the enormous investment activity in the course of reconstruction, urbanization, trade liberalization and demographic conditions.
One should realistically expect that financial repression in all its different facets is going to gain increasing importance in the coming years, no matter if it is not a constructive long term strategy. The truth of the matter is that it will only achieve redistribution and a temporal delay, but no solution to the problem.
Seeking protection
Going forward, how can one protect against these terrible measures? There are a couple of actionable solutions next to being hopeful. First, converting part of one’s assets into physical precious metals is a wise thing to do given that they are outside the banking system. Paper gold and silver investments like ETF’s, certificates, options, futures, and mining stocks, are risky investments, not matter if they are considered “gold investments.” The real “gold investment” is one that overcomes counterparty risk. Global Gold, part of the BFI group, is offering such protection with ultra safe storage in jurisdictions like Switzerland, Hong Kong and Singapore.
Furthermore, when it comes to banking, one could consider opening up an offshore bank account, provided it is with a reserve bank (meaning that the bank is making no loans at all). Europac Bank, founded by Peter Schiff, was designed to provide an answer to the leveraged banking industry. The bank account can be used as savings and checking account; hence it is suitable for every type of financial transaction. Optionally, the bank account comes with a debit card in gold or silver: account owners can opt to convert their money into gold to preserve the purchasing power of their currency.
Lastly, international diversification of assets is a recommended tactic. Specifically for high net worth individuals, BFI Wealth provides custom advice and wealth management solutions. Ask an advisor how the company could serve you.
http://goldsilverworlds.com/economy/financial-repression-starts-showing-its-ugly-head/
Time to Buy These "Out of Print" Assets
By PETER KRAUTH, Resource Specialist
Money Morning November 4, 2013
From the Editor: We've been tracking this threat for years, ever since Keith Fitz-Gerald brought it to your attention back in January 2010. Today, Resources Specialist Peter Krauth weighs in on some recent developments in this story, because three of the commodities he covers can protect you. The Fed can't print these things... Here's Peter.
Central banks may have foolish policies, but central bankers are no dummies.
They know exactly what they're doing. They even comprehend a few of the implications, too.
Which is why it's interesting that some American central bankers have suggested doing away with the debt ceiling altogether.
Famed investor Marc Faber recently said, "The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion], $200 [billion], a trillion dollars a month."
Faber expects the Fed's current QE4 to become "QE4-ever."
That could mean years of money printing and ultra-low rates.
Even bond king Bill Gross recently chimed in his latest monthly outlook that "The United States (and global economy) may have to get used to financially repressive - and therefore low policy rates - for decades to come."
Either way, don't depend on the Fed to save you. You can save yourself.
And now you'll need to...
Your Retirement Account Is "Fair Game"
It's already happening elsewhere...
Cyprus got the ball rolling earlier this year. In the wake of its banking crisis, some depositors lost more than 60% of their bank deposits in a European Union-enforced "bail-in."
In conjunction, capital controls were set up to stem a possible stampede of outflowing funds, originally said to last a few months. Then that was extended until January 2014. Even now, Cypriot Central Bank Governor Panicos Demetriades thinks it could still be a year from now before capital can flow freely.
And these days, Poland is getting in on the expropriation game, too.
In a sudden move, Poland's federal government has "transferred" bonds held by privately managed pension funds.The idea is to turn these into pension liabilities of the state-run social security system.
Those private pensions originated in 1999, when a hybrid national pension system sent half of worker's social security tax into a private plan. Since then, the plans have grown to $86 billion, $37 billion of which is in government bonds.
In one swift move, the Polish government declared the nation's debt as being reduced by $37 billion. They euphemistically called this a "pension overhaul," since "pension theft" would have been decidedly less popular.
Even the balance of those pensions, invested in equities, will eventually be stolen. The government plans to begin transferring the equity holdings to their own coffers 10 years before the individual reaches retirement age.
It would be easy for the U.S. government to attempt the same thing.
Your Assets Are Their Target
It's not just possible for the U.S. to begin expropriations, it's likely.
Obama's April budget proposal suggested putting a limit on lifetime 401(k)contributions. Not only would it be complicated to police, it would keep contributors from adding further to their retirement accounts, thereby forcing them to pay more tax on unsheltered funds.
Back in January 2010, Bloomberg BusinessWeek reported, "The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged."
Then in February this year, the Washington Times reported: "Consumer Financial Protection Bureau director Richard Cordray recently mentioned these [401(k)] accounts in a recent interview, stating "That's one of the things we've been exploring and are interested in, in terms of whether and what authority we have."
The idea, apparently, is to "protect" accountholders from financial scams and risky investments.
Of course, they'd gladly convert those holdings into U.S. bonds for you. I guess Uncle Sam is having a harder time unloading the same "quality stuff" to the China these days. The Chinese have already plowed trillions into U.S. Treasuries, and recently indicated (again) that they're looking for ways to diversify out of the greenback.
You can, too.
Become Your Own Central Bank
Governments with the foresight - and means - to do it are buying gold.
Official gold purchases have been on a tear, with the World Gold Council forecasting central banks to remain net buyers again in 2013, as they have for past three years.
So, don't be fooled when Bernanke says he "doesn't pretend to understand gold prices," and that gold is "not money, but a precious metal," and that central banks hold it because it's "tradition."
Bernanke is no fool. And neither is Mario Draghi, his European Union counterpart.
In a recent speech at the Harvard University Kennedy School of Business, Draghi said that when he was governor of the Bank of Italy - owner of the fourth largest gold reserve in the world - he "...never thought it wise to sell it."
He also told the audience that gold reserves provide protection against U.S. dollar fluctuation and that risk diversification is why nations have essentially stopped selling reserves.
All of this points to one solution...
You need to become your own central bank. And you need to be proactive while you have the luxury of time and the clarity of thought, without duress.
Above all, you need to own things the Fed can't simply print. You want tangible, "out of print" assets.
Here are three things you need to do:
* Own and invest in hard assets like gold, silver, energy, and real estate. You can buy physical precious metals; you can buy physically backed ETFs; you can own quality resource equities, including your own home; and you can own income-producing properties and land. Assets in non-retirement accounts are more difficult to expropriate. Consider that owning gold was made illegal in 1933.
* Hold plenty of cash. Cash is king, despite the risks of inflation. Hold it as a bank balance, but watch FDIC deposit insurance limits, and consider diversifying into other currencies. Be sure, however, to hold some physical cash as well, as this could be crucial during a "bank holiday." Thanks to the Dodd-Frank Act and the Foreign Account Tax Compliance Act (FATCA), Chase Bank is already limiting "cash activity," deposits and withdrawals, to $50,000 per month.
* Hold assets internationally. This is largely the same as in owning hard assets, as above, but in another country. Consider opening a foreign bank account. It's not easy for Americans - thanks to FATCA - but holding something outside your country of residence makes it tougher for a desperate government to grab. There are reports that JPMorgan Chase, Wells Fargo, and others are making it excruciatingly difficult for individuals and business to conduct international wire transfers, but it's still possible... for now.
It's time to learn from the squirrel's instinct. We've all observed that, as winter approaches, the squirrel accumulates and stores its "assets" to survive the winter.
You'd be well-advised to do the same thing.
Accumulate physical assets... and not all in one place.
http://moneymorning.com/2013/11/04/time-to-buy-these-out-of-print-assets/
Time to Buy These "Out of Print" Assets
By PETER KRAUTH, Resource Specialist
Money Morning November 4, 2013
From the Editor: We've been tracking this threat for years, ever since Keith Fitz-Gerald brought it to your attention back in January 2010. Today, Resources Specialist Peter Krauth weighs in on some recent developments in this story, because three of the commodities he covers can protect you. The Fed can't print these things... Here's Peter.
Central banks may have foolish policies, but central bankers are no dummies.
They know exactly what they're doing. They even comprehend a few of the implications, too.
Which is why it's interesting that some American central bankers have suggested doing away with the debt ceiling altogether.
Famed investor Marc Faber recently said, "The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion], $200 [billion], a trillion dollars a month."
Faber expects the Fed's current QE4 to become "QE4-ever."
That could mean years of money printing and ultra-low rates.
Even bond king Bill Gross recently chimed in his latest monthly outlook that "The United States (and global economy) may have to get used to financially repressive - and therefore low policy rates - for decades to come."
Either way, don't depend on the Fed to save you. You can save yourself.
And now you'll need to...
Your Retirement Account Is "Fair Game"
It's already happening elsewhere...
Cyprus got the ball rolling earlier this year. In the wake of its banking crisis, some depositors lost more than 60% of their bank deposits in a European Union-enforced "bail-in."
In conjunction, capital controls were set up to stem a possible stampede of outflowing funds, originally said to last a few months. Then that was extended until January 2014. Even now, Cypriot Central Bank Governor Panicos Demetriades thinks it could still be a year from now before capital can flow freely.
And these days, Poland is getting in on the expropriation game, too.
In a sudden move, Poland's federal government has "transferred" bonds held by privately managed pension funds.The idea is to turn these into pension liabilities of the state-run social security system.
Those private pensions originated in 1999, when a hybrid national pension system sent half of worker's social security tax into a private plan. Since then, the plans have grown to $86 billion, $37 billion of which is in government bonds.
In one swift move, the Polish government declared the nation's debt as being reduced by $37 billion. They euphemistically called this a "pension overhaul," since "pension theft" would have been decidedly less popular.
Even the balance of those pensions, invested in equities, will eventually be stolen. The government plans to begin transferring the equity holdings to their own coffers 10 years before the individual reaches retirement age.
It would be easy for the U.S. government to attempt the same thing.
Your Assets Are Their Target
It's not just possible for the U.S. to begin expropriations, it's likely.
Obama's April budget proposal suggested putting a limit on lifetime 401(k)contributions. Not only would it be complicated to police, it would keep contributors from adding further to their retirement accounts, thereby forcing them to pay more tax on unsheltered funds.
Back in January 2010, Bloomberg BusinessWeek reported, "The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged."
Then in February this year, the Washington Times reported: "Consumer Financial Protection Bureau director Richard Cordray recently mentioned these [401(k)] accounts in a recent interview, stating "That's one of the things we've been exploring and are interested in, in terms of whether and what authority we have."
The idea, apparently, is to "protect" accountholders from financial scams and risky investments.
Of course, they'd gladly convert those holdings into U.S. bonds for you. I guess Uncle Sam is having a harder time unloading the same "quality stuff" to the China these days. The Chinese have already plowed trillions into U.S. Treasuries, and recently indicated (again) that they're looking for ways to diversify out of the greenback.
You can, too.
Become Your Own Central Bank
Governments with the foresight - and means - to do it are buying gold.
Official gold purchases have been on a tear, with the World Gold Council forecasting central banks to remain net buyers again in 2013, as they have for past three years.
So, don't be fooled when Bernanke says he "doesn't pretend to understand gold prices," and that gold is "not money, but a precious metal," and that central banks hold it because it's "tradition."
Bernanke is no fool. And neither is Mario Draghi, his European Union counterpart.
In a recent speech at the Harvard University Kennedy School of Business, Draghi said that when he was governor of the Bank of Italy - owner of the fourth largest gold reserve in the world - he "...never thought it wise to sell it."
He also told the audience that gold reserves provide protection against U.S. dollar fluctuation and that risk diversification is why nations have essentially stopped selling reserves.
All of this points to one solution...
You need to become your own central bank. And you need to be proactive while you have the luxury of time and the clarity of thought, without duress.
Above all, you need to own things the Fed can't simply print. You want tangible, "out of print" assets.
Here are three things you need to do:
* Own and invest in hard assets like gold, silver, energy, and real estate. You can buy physical precious metals; you can buy physically backed ETFs; you can own quality resource equities, including your own home; and you can own income-producing properties and land. Assets in non-retirement accounts are more difficult to expropriate. Consider that owning gold was made illegal in 1933.
* Hold plenty of cash. Cash is king, despite the risks of inflation. Hold it as a bank balance, but watch FDIC deposit insurance limits, and consider diversifying into other currencies. Be sure, however, to hold some physical cash as well, as this could be crucial during a "bank holiday." Thanks to the Dodd-Frank Act and the Foreign Account Tax Compliance Act (FATCA), Chase Bank is already limiting "cash activity," deposits and withdrawals, to $50,000 per month.
* Hold assets internationally. This is largely the same as in owning hard assets, as above, but in another country. Consider opening a foreign bank account. It's not easy for Americans - thanks to FATCA - but holding something outside your country of residence makes it tougher for a desperate government to grab. There are reports that JPMorgan Chase, Wells Fargo, and others are making it excruciatingly difficult for individuals and business to conduct international wire transfers, but it's still possible... for now.
It's time to learn from the squirrel's instinct. We've all observed that, as winter approaches, the squirrel accumulates and stores its "assets" to survive the winter.
You'd be well-advised to do the same thing.
Accumulate physical assets... and not all in one place.
http://moneymorning.com/2013/11/04/time-to-buy-these-out-of-print-assets/
Canadian Province Issues Offshore Yuan-Denominated Bonds
British Columbia officials says plan was to sell 500 million yuan worth, but oversubscribing pushed the amount raised up five times
Nov.6, 2013
By staff reporter Wang Liwei
Beijing) – Canada's western province of British Columbia said on November 5 it had completed the issuance of one-year offshore yuan-denominated bonds and raised 2.5 billion yuan.
This is the first time a foreign government has issued offshore yuan bonds. Mike de Jong, finance minister of Canada's westernmost province, said officials had intended to raise only 500 million yuan but the bonds were largely oversubscribed.
Central banks and foreign institutions snapped up 62 percent of the bonds. Fund asset managers bought 18 percent. Investors in Hong Kong took 46 percent of the bonds, and 40 percent went to U.S. investors.
The bonds carry a yield of 2.25 percent. This is 10 to 15 basis points lower than bonds sold by the Chinese government, said HSBC, the sole book runner of the issuance. The bonds will be listed in Luxembourg.
Jim Hopkins, assistant deputy minister of British Columbia's finance ministry, said earlier that the province wanted to be an early entrant in the offshore yuan market, which is expected to grow rapidly and benefit participants in terms of lower trading cost with China and more diversified financing and investment channels.
An official with the ministry said the offshore yuan bond market was weighted down a bit in the second and third quarters of this year because of the anticipated impact of the U.S. Fed slowing its so-called quantitative easing policy. He expected the market to improve as investors change their opinions.
Meanwhile, China's Ministry of Finance said on November 5 that it will sell dim sum bonds worth 10 billion yuan in Hong Kong on November 21. This will be the second issuance this year. This first was in June, when 13 billion yuan worth of the bonds were sold.
Hong Kong residents will be able to buy up to 3 billion yuan worth of those bonds through banks and, for the first time, through the former British colony's bourse, the ministry said. Institutional investors will get the rest.
http://english.caixin.com/2013-11-06/100600037.html
Insight: Value of Stress Field Detection technology in early-stage exploration
Friday, September 06, 2013
Findingpetroleum.com
Overview of Stress Field Detection (SFD®)
The SFD® system utilizes quantum-scale sensors to detect gravity field perturbations which are induced by terrestrial stress energy variations, primarily in the horizontal plane. Significant subsurface discontinuities or anomalies are inherently associated with, and dependent on, subsurface principal stresses. As a consequence, the discontinuities will distort stress fields, resulting in a unique in-situ stress pattern.
SFD® has been used by oil and gas companies to identify subsurface stress-field anomalies related to trapped fluids. This technology offers a leap in cost-effective rapid reconnaissance for early-stage exploration from an airborne platform.
Heuristic Explanation
The subsurface geological condition required for SFD® to detect gravity field perturbations which arise due to stress variations in the horizontal direction is the occurrence of a structural and/or stratigraphic change discontinuity with sufficient difference in elastic properties. An important source of elastic variations is the presence of trapped fluids (oil, gas, or water). Other sources include faulting / fracturing, over-pressure, major lithological changes and basin boundaries. In general, all major discontinuities will evoke a distinct SFD® response. The variation of the shear component around and in reservoirs will result in the redistribution and orientation change of the stress fields (Figure 1).
Figure 1. Plan view of principal horizontal stress components (SHmax and SHmin) illustrating the distortion of stress fields associated with fluids trapped in a structural thrust-fault scenario. Stresses are redistributed due to a variety of sources including porosity, trapped fluids, fracturing, faulting and reservoir pressure.
Differences with Conventional Gravity and FTG
Conventional gravity surveys measure the vertical component of the gravitational field. Full tensor gravity (FTG) gradiometry measures the rate of change of all components of the gravity tensor. Two major advantages of FTG over conventional gravity are the increased resolution and the reduced noise contamination of the signal. Both methods rely on a large test mass to increase the sensitivity in measuring subsurface density variations.
Both conventional gravity and FTG provide a static, point to point measurement. However, SFD® differs from both in that it employs particle scale sensor elements for dynamic detection, which enables selective sensitivity to directional changes in subsurface stress induced by poro-elastic anomalies.
Case Studies
Gulf of Mexico: Integration of Regional Geophysical Data with SFD®
The Gulf of Mexico has been an area of evolving exploration: from the continental shelf to salt-controlled basins to sub-salt and ultra-deep water plays. Covering vast areas in a cost-effective manner to identify prospective acreage is an ongoing challenge. Conventional wisdom has been to conduct regional 2D seismic surveys followed-up with 3D seismic, both sparse and detailed. Although seismic data provide high-resolution subsurface images the cost is significant. Airborne SFD® can provide a cost-effective rapid reconnaissance solution that identifies prospective areas for more focused follow-up seismic efforts.
In the Fall of 2012, PEMEX conducted an initial SFD® survey in onshore and offshore areas of the Gulf of Mexico region. Figure 2a shows a 2D seismic section from the Gulf of Mexico. The sub-salt structure appears to be encased in a sealing salt (purple) but there may be a breaching potential due to the marked faults.
The anomaly identified on seismic is verified by the SFD® anomaly (Figure 2b). This may be indicative of the presence of both trapped fluids and an effective sealing mechanism.The correlation of SFD® with seismic poses that in areas without seismic coverage, an SFD® survey could help propose where to put in a capital-intensive high-resolution seismic program.
Figure 2. Correlation of regional 2D seismic data with SFD®: a) Seismic anomaly PMX-2.16 and b) corresponding SFD® signal.
Furthermore SFD® is effective irrespective of the presence of salt or bathymetry. As such, SFD® can serve as an important complementary method to be used in conjunction with other exploration technologies.
While seismic surveys offer excellent resolution and structural definition, they do not always easily lend themselves to identifying fluid properties in the absence of additional information. New methods, such as controlled-source electromagnetics (CSEM), are becoming more accepted tools to investigate fluid indicators on qualified prospects. Figure 3 illustrates another Gulf of Mexico example correlating SFD® with CSEM high-resistivity anomalies associated with hydrocarbons. Figure 3a is a map of CSEM resistivity overlain by an SFD® survey line. There are two high-resistivity anomalies (dashed red ovals) identified as PMX-2.44 and PMX-2.15 which have corresponding SFD anomalies (solid red bars). The SFD® profile for PMX-2.44 is shown in Figure 3b. In this example, both CSEM and SFD® have identified potential fluid anomalies.
Figure 3. Correlation of regional CSEM data with SFD®: a) CSEM resistivity anomaly map with dashed red ovals Indicating high-resistivity anomalies at PMX-2.44 and PMX-2.15 and b) corresponding SFD® signal over PMX-2.44.
Colombia: Optimizing Lease Relinquishments with SFD
A common exploration challenge is to determine the best acreage to retain within a large lease. In 2010 NXT Energy Solutions conducted an airborne SFD® survey covering 7,500km2over the Tacacho and Terecay Blocks in Colombia for Pacific Rubiales.Figure 4a shows the approximately 7,000 line km of SFD®data (red lines) which were acquired, processed and interpreted to provide an evaluation in less than two months time. As a result of this rapid turnaround, the leaseholder was able to identify the areas to be relinquished. Figure 4b shows the retained areas in red outline. The SFD® anomalies are indicated in the blue boxes and the green outlines represent the client’s assessment of anomaly areas using other technical data acquired subsequent to the SFD® survey.
Figure 4. High-grading blocks for exploration: a) Blocks with flight lines (red) and existing seismic lines (black) and b) blocks containing the best SFD® anomalies and retained acreage outlined (red boxes). SFD® anomalies are identified with blue boxes and the clients assessment of anomalies using numerous G&G methods are indicated by green outlines.
Benefits for Early Stage Exploration
Rapid and efficient exploration reconnaissance over large areas of virgin acreage in an environmentally sensitive manner
Identification of prospect areas with potential trap, reservoir quality and seal integrity
Effective in both onshore and offshore environments
Insensitive to both water depth and the presence of salt
Prioritize exploration activity (e.g., seismic programs) on identified leads
Author: George Liszicasz, President & CEO
Company: NXT Energy Solutions Inc.
Read more: http://www.findingpetroleum.com/n/Insight_Value_of_Stress_Field_Detection_technology_in_earlystage_exploration/754fb970.aspx#ixzz2k0UqVC8h
The Biggest Scam In The History Of Mankind
- Hidden Secrets of Money 4 - Mike Maloney
As Bitcoin Soars Over $300, A Question Arises: Could It Become A Global Reserve Currency?
by Tyler Durden on 11/07/2013 11:40 -0500
ZeroHedge
Having now tripled since August, Bitcoin's break above $300 ($324 highs) raises an important thought experiment - can a digital currency act as a global reserve currency?
It seems yesterday's CNBC discussion that Bitcoin is nothing but a beanie-baby fad just served to feed the beast... on heavy volume after Draghi's comments...
Charles Hugh-Smith, from OfTwoMinds blog, attempts an answer of just that question:
Could a non-state issued digital currency like Bitcoin become a global reserve currency? The idea came up in my recent conversation with Max Keiser on the Keiser Report during our discussion of reserve currencies.
The idea is intriguing on a number of levels. In terms of retaining value though thick and thin, the ultimate reserve currency cannot be printed (and thus devalued) with abandon by a government. Gold and silver have served as the ultimate reserve currency, as precious metals can be traded for commodities and services, provide collateral for debt and serve as reliable stores of value.
While many observers believe gold is still the only reliable reserve currency (or if you prefer, the only reliable backing for government-issued paper money), it's a worthy thought experiment to ask if a digital currency could also act as a reserve currency.
Since there is no real-world commodity backing the digital currency, its value must be based on scarcity and its ubiquity as money. The two ideas are self-reinforcing: there must be demand for the digital money to create scarcity, and the source of demand is the digital currency's acceptance as money that can be used to buy commodities, goods, services and (the ultimate test) gold.
It follows that the first step in a non-state issued digital currency becoming a reserve currency is that it isn't created in quantities that dwarf demand. If the digital currency is issued with abandon, it cannot be scarce enough to gain any value. If I own one quatloo (our hypothetical digital currency) and a trillion new quatloos are issued tomorrow, the value of my one quatloo will decline to near-zero.
The second step is its widespread acceptance globally as money, i.e. a store of value and something which can be traded for goods and services.
There is a bit of a built-in conflict in these two requirements. To be useful in the $60 trillion global economy, the quatloo must be issued in size: there must be enough of it around to grease transactions large and small in all sorts of markets. Using the U.S. dollar as a guide (since the USD is the primary reserve currency), we can estimate that a minimum of $1 trillion in quatloos would be needed to become a practical global currency.
To act as a reserve currency, another trillion or two would be needed, as nations would hold these quatloos as reserves. (Nations hold an estimated $7 trillion in USD reserves, about $3 trillion euros and $1 trillion or so in yen, pounds and other currencies.)
But issuing quatloos in these quantities would remove any scarcity value. Thus the issuer of the quatloo would have to carefully issue more quatloos only when demand justified the need for more monetary "grease" for the global economy.
If on the other hand skyrocketing demand/scarcity drove the value to the stratosphere, holders of the quatloo would rejoice, but this volatility would present its own set of risks for those seeking to use the quatloo as a reserve against currency volatility in the home-country currency. If a digital currency can leap ten-fold in a short time, then might it not drop with equal volatility?
Volatility is the enemy of reserves; the holder of reserves needs a liquid (meaning it can easily be sold or traded in size) currency that predictably retains its value. A volatile currency poses risks, as do currencies that cannot be traded in size without drastically influencing the market value of the currency.
These conditions pose a steep challenge for any digital currency, but they are not insurmountable. Even as a niche currency, non-state issued digital currencies could play a role in the global economy, especially if government-issued fiat currencies destabilize/ devalue due to massive money creation by desperate central banks and state treasuries.
Is scarcity enough to back a non-state issued currency? Bitcoin offers a real-world experiment.
* * *
Meanwhile, in Russia if you pay with Bitcoin, you get a 10% discount:
http://www.zerohedge.com/news/2013-11-07/bitcoin-soars-over-300-question-arises-could-it-become-global-reserve-currency
How American Socialism “Works”
Nov 7th, 2013 | By Shah Gilani
WallStreetinsights&indictments.com
America isn’t a socialist country, but don’t tell our President that, or Congress, or the Fed, or the too-big-to-fail (TBTF) banks. Because to them, it is.
That’s because socialism works for them. And Hells Bells, it’s hard to knock what works.
If you can’t feel the yoke around your neck, or the bit in your mouth, trust me…you will.
Sure, there are lots of examples I could give you, and you might argue that some socialist schemes aren’t working, and that free market capitalism will prevail.
Good luck with that.
Here’s the bad news: There is proof positive that socialism is the order of the day.
Of all places, it’s embedded in our free market capital markets.
Front and center this week, Freddie Mac and Fannie Mae are showing off their third-quarter results.
In case you forgot, F&F were saved from collapse (and from pushing America and the world into an abyss deeper than any place ever measured on earth) when taxpayers dressed up as U.S. Treasury saviors ponied up more than $188 billion to keep their doors open.
Treasury took them into their embrace in 2008, just as the crisis was unfolding, through what’s called a “conservatorship.” Whatever that really means legally, in the real world, it means Treasury created a “special preferred” class of stock that forced F&F to pay a 10% dividend to them, and they gave themselves warrants that are now worth $188 billion.
Seems fair, right?
The two giant Government Sponsored Enterprises, which were in private shareholder hands and issued hundreds of billions of dollars of bonds that investors bought because it was assumed that the government implicitly backed their bonds (which they did, so it was explicit). With the money they raised, they bought mortgages from lenders, packaged them into securities, and sold them to investors, and, oh yeah, bought them back to hold in inventory to collect the interest themselves.
When they became insolvent, the government that backed them (that’s socialism) then essentially took them over from private shareholders (that’s also socialism) because, after all, they were government wards all along (yep, that’s socialism, too).
We know what happened next. F&F couldn’t pay the government dividends on money they didn’t have, so, surprise surprise, they had to borrow it. That’s right; F&F borrowed money from the government to pay the government dividends. Why? So the government could say, look what a good deal we made for you taxpayers.
That’s not socialism?
We know what happened next. The Fed quantitatively eased F&F’s pain (which was by then the government’s pain, meaning the taxpayers, because we’re all one in a socialist country) by buying $40 billion a month of the same mortgage-backed securities that F&F-and the big banks-were holding. That put a floor under MBS prices and stabilized the housing market.
We know what happened next. Private equity shops and hedge funds, who handily contribute to the campaign coffers of the members of Congress they employ, were able to borrow-thanks to the Fed’s zero interest rate policy-and buy up houses out of foreclosure to turn into rental homes they will now start securitizing.
We know what happened next. Housing prices bounced dramatically and foreclosures slowed considerably.
And all of that made F&F profitable. Very profitable.
Freddie just made a $30.5 billion profit in the third quarter. Fannie made an $8.6 billion profit. Forget that accounting gimmickry has a lot to do with it, that’s another story.
Last year, Treasury changed the rules on F&F. They said, you slobs don’t have to pay us dividends anymore, we’re just going to take all of your profits. Thanks for making us look like we made you pay for those taxpayer loans we gave you!
Now, Treasury-that would be the government-is taking all the money they can from their babies. That’s socialism.
The question now is, why would the government ever give up this socialist all-you-can-eat trough it’s feeding from?
We should have broken up all the GSEs a long time ago and replaced them with private companies doing the same thing. We would have to keep them reasonably-sized enough so none of them, if they were to fail, would present any systemic risk. Which is what we should have done with the big banks.
Why did all the TBTF banks get bigger after the crisis? Why do we have GSEs in the first place? Because they are socialism’s pets. They are stroked by the powers that own them, the oligarchs and officers that always pretend their brand of socialism is for the good of the people.
For God’s sake, America…WAKE UP!
Shah
Posted in Washington
http://www.wallstreetinsightsandindictments.com/2013/11/how-american-socialism-works/
How American Socialism “Works”
Nov 7th, 2013 | By Shah Gilani
WallStreetinsights&indictments.com
America isn’t a socialist country, but don’t tell our President that, or Congress, or the Fed, or the too-big-to-fail (TBTF) banks. Because to them, it is.
That’s because socialism works for them. And Hells Bells, it’s hard to knock what works.
If you can’t feel the yoke around your neck, or the bit in your mouth, trust me…you will.
Sure, there are lots of examples I could give you, and you might argue that some socialist schemes aren’t working, and that free market capitalism will prevail.
Good luck with that.
Here’s the bad news: There is proof positive that socialism is the order of the day.
Of all places, it’s embedded in our free market capital markets.
Front and center this week, Freddie Mac and Fannie Mae are showing off their third-quarter results.
In case you forgot, F&F were saved from collapse (and from pushing America and the world into an abyss deeper than any place ever measured on earth) when taxpayers dressed up as U.S. Treasury saviors ponied up more than $188 billion to keep their doors open.
Treasury took them into their embrace in 2008, just as the crisis was unfolding, through what’s called a “conservatorship.” Whatever that really means legally, in the real world, it means Treasury created a “special preferred” class of stock that forced F&F to pay a 10% dividend to them, and they gave themselves warrants that are now worth $188 billion.
Seems fair, right?
The two giant Government Sponsored Enterprises, which were in private shareholder hands and issued hundreds of billions of dollars of bonds that investors bought because it was assumed that the government implicitly backed their bonds (which they did, so it was explicit). With the money they raised, they bought mortgages from lenders, packaged them into securities, and sold them to investors, and, oh yeah, bought them back to hold in inventory to collect the interest themselves.
When they became insolvent, the government that backed them (that’s socialism) then essentially took them over from private shareholders (that’s also socialism) because, after all, they were government wards all along (yep, that’s socialism, too).
We know what happened next. F&F couldn’t pay the government dividends on money they didn’t have, so, surprise surprise, they had to borrow it. That’s right; F&F borrowed money from the government to pay the government dividends. Why? So the government could say, look what a good deal we made for you taxpayers.
That’s not socialism?
We know what happened next. The Fed quantitatively eased F&F’s pain (which was by then the government’s pain, meaning the taxpayers, because we’re all one in a socialist country) by buying $40 billion a month of the same mortgage-backed securities that F&F-and the big banks-were holding. That put a floor under MBS prices and stabilized the housing market.
We know what happened next. Private equity shops and hedge funds, who handily contribute to the campaign coffers of the members of Congress they employ, were able to borrow-thanks to the Fed’s zero interest rate policy-and buy up houses out of foreclosure to turn into rental homes they will now start securitizing.
We know what happened next. Housing prices bounced dramatically and foreclosures slowed considerably.
And all of that made F&F profitable. Very profitable.
Freddie just made a $30.5 billion profit in the third quarter. Fannie made an $8.6 billion profit. Forget that accounting gimmickry has a lot to do with it, that’s another story.
Last year, Treasury changed the rules on F&F. They said, you slobs don’t have to pay us dividends anymore, we’re just going to take all of your profits. Thanks for making us look like we made you pay for those taxpayer loans we gave you!
Now, Treasury-that would be the government-is taking all the money they can from their babies. That’s socialism.
The question now is, why would the government ever give up this socialist all-you-can-eat trough it’s feeding from?
We should have broken up all the GSEs a long time ago and replaced them with private companies doing the same thing. We would have to keep them reasonably-sized enough so none of them, if they were to fail, would present any systemic risk. Which is what we should have done with the big banks.
Why did all the TBTF banks get bigger after the crisis? Why do we have GSEs in the first place? Because they are socialism’s pets. They are stroked by the powers that own them, the oligarchs and officers that always pretend their brand of socialism is for the good of the people.
For God’s sake, America…WAKE UP!
Shah
Posted in Washington
http://www.wallstreetinsightsandindictments.com/2013/11/how-american-socialism-works/
Real US Economy Trampled by "White Elephants"
Marc Faber
Nov. 7, 2013
I would like readers to consider carefully the fundamental difference between a "real economy" and a "financial economy." In a real economy, the debt and equity markets as a percentage of GDP are small and are principally designed to channel savings into investments.
In a financial economy or "monetary-driven economy," the capital market is far larger than GDP and channels savings not only into investments, but also continuously into colossal speculative bubbles. This isn't to say that bubbles don't occur in the real economy, but they are infrequent and are usually small compared with the size of the economy. So when these bubbles burst, they tend to inflict only limited damage on the economy.
In a financial economy, however, investment manias and stock market bubbles are so large that when they burst, considerable economic damage follows. I should like to stress that every investment bubble brings with it some major economic benefits, because a bubble leads either to a quantum jump in the rate of progress or to rising production capacities, which, once the bubble bursts, drive down prices and allow more consumers to benefit from the increased supplies.
In the 19th century, for example, the canal and railroad booms led to far lower transportation costs, from which the economy greatly benefited. The 1920s' and 1990s' innovation-driven booms led to significant capacity expansions and productivity improvements, which in the latter boom drove down the prices of new products such as PCs, cellular phones, servers and so on, and made them affordable to millions of additional consumers.
With or without Paul Volcker's tight monetary policies, disinflation in the 1980s would have followed the highly inflationary 1970s.
The energy boom of the late 1970s led to the application of new oil extracting and drilling technologies and to more efficient methods of energy usage, as well as to energy conservation, which, after 1980, drove down the price of oil in real terms to around the level of the early 1970s. Even the silly real estate bubbles we experienced in Asia in the 1990s had their benefits. Huge overbuilding led to a collapse in real estate prices, which, after 1998, led to very affordable residential and commercial property prices.
So my view is that capital spending booms, which inevitably lead to minor or major investment manias, are a necessary and integral part of the capitalistic system. They drive progress and development, lower production costs and increase productivity, even if there is inevitably some pain in the bust that follows every boom.
The point is, however, that in the real economy (a small capital market), bubbles tend to be contained by the availability of savings and credit, whereas in the financial economy (a disproportionately large capital market compared with the economy), the unlimited availability of credit leads to speculative bubbles, which get totally out of hand.
In other words, whereas every bubble will create some "white elephant" investments (investments that don't make any economic sense under any circumstances), in financial economies' bubbles, the quantity and aggregate size of "white elephant" investments is of such a colossal magnitude that the economic benefits that arise from every investment boom, which I alluded to above, can be more than offset by the money and wealth destruction that arises during the bust. This is so because in a financial economy, far too much speculative and leveraged capital becomes immobilized in totally unproductive "white elephant" investments.
In this respect, I should like to point out that as late as the early 1980s, the U.S. resembled far more a "real economy" than at present, which I would definitely characterize as a "financial economy." In 1981, stock market capitalization as a percentage of GDP was less than 40% and total credit market debt as a percentage of GDP was 130%. By contrast, at present, the stock market capitalization and total credit market debt have risen to more than 100% and 300% of GDP, respectively.
As I explained above, the rate of inflation accelerated in the 1970s, partly because of easy monetary policies, which led to negative real interest rates; partly because of genuine shortages in a number of commodity markets; and partly because OPEC successfully managed to squeeze up oil prices. But by the late 1970s, the rise in commodity prices led to additional supplies, and several commodities began to decline in price even before Paul Volcker tightened monetary conditions. Similarly, soaring energy prices in the late 1970s led to an investment boom in the oil- and gas-producing industry, which increased oil production, while at the same time the world learned how to use energy more efficiently. As a result, oil shortages gave way to an oil glut, which sent oil prices tumbling after 1985.
At the same time, the U.S. consumption boom that had been engineered by Ronald Reagan in the early 1980s (driven by exploding budget deficits) began to attract a growing volume of cheap Asian imports, first from Japan, Taiwan and South Korea and then, in the late 1980s, also from China.
I would therefore argue that even if Paul Volcker hadn't pursued an active monetary policy that was designed to curb inflation by pushing up interest rates dramatically in 1980/81, the rate of inflation around the world would have slowed down very considerably in the course of the 1980s, as commodity markets became glutted and highly competitive imports from Asia and Mexico began to put pressure on consumer product prices in the U.S. So with or without Paul Volcker's tight monetary policies, disinflation in the 1980s would have followed the highly inflationary 1970s.
In fact, one could argue that without any tight monetary policies (just keeping money supply growth at a steady rate) in the early 1980s, disinflation would have been even more pronounced. Why? The energy investment boom and conservation efforts would probably have lasted somewhat longer and may have led to even more overcapacities and to further reduction in demand. This eventually would have driven energy prices even lower. I may also remind our readers that the Kondratieff long price wave, which had turned up in the 1940s, was due to turn down sometime in the late 1970s.
It is certainly not my intention here to criticize Paul Volcker or to question his achievements at the Fed, since I think that, in addition to being a man of impeccable personal and intellectual integrity (a rare commodity at today's Fed), he was the best and most courageous Fed chairman ever.
However, the fact remains that the investment community to this day perceives Volcker's tight monetary policies at the time as having been responsible for choking off inflation in 1981, when, in fact, the rate of inflation would have declined anyway in the 1980s for the reasons I just outlined. In other words, after the 1980 monetary experiment, many people, and especially Mr. Greenspan, began to believe that an active monetary policy could steer economic activity on a noninflationary steady growth course and eliminate inflationary pressures through tight monetary policies and through cyclical and structural economic downturns through easing moves!
…the economy — the patient — gets sick because the virus — the downward adjustments that are necessary in the free market — develops an immunity to the medicine…[color=red][/color]
This belief in the omnipotence of central banks was further enhanced by the easing moves in 1990/91, which were implemented to save the banking system and the savings & loan associations; by similar policy moves in 1994 in order to bail out Mexico and in 1998 to avoid more severe repercussions from the LTCM crisis; by an easing move in 1999, ahead of Y2K, which proved to be totally unnecessary but which led to another 30% rise in the Nasdaq, to its March 2000 peak; and by the most recent aggressive lowering of interest rates, which fueled the housing boom.
Now I would like readers to consider, for a minute, what actually caused the 1990 S&L mess, the 1994 tequila crisis, the Asian crisis, the LTCM problems in 1998 and the current economic stagnation. In each of these cases, the problems arose from loose monetary policies and excessive use of credit. In other words, the economy — the patient — gets sick because the virus — the downward adjustments that are necessary in the free market — develops an immunity to the medicine, which then prompts the good doctor, who read somewhere in The Wall Street Journal that easy monetary policies and budget deficits stimulate economic activity, to increase the dosage of medication.
The even larger and more potent doses of medicine relieve the temporary symptoms of the patient's illness, but not its fundamental causes, which, in time, inevitably lead to a relapse and a new crisis, which grows in severity since the causes of the sickness were neither identified nor treated.
So it would seem to me that Karl Marx might prove to have been right in his contention that crises become more and more destructive as the capitalistic system matures (and as the "financial economy" referred to earlier grows like a cancer) and that the ultimate breakdown will occur in a final crisis that will be so disastrous as to set fire to the framework of our capitalistic society.
Not so, Bernanke and co. argue, since central banks can print an unlimited amount of money and take extraordinary measures, which, by intervening directly in the markets, support asset prices such as bonds, equities and homes, and therefore avoid economic downturns, especially deflationary ones. There is some truth in this. If a central bank prints a sufficient quantity of money and is prepared to extend an unlimited amount of credit, then deflation in the domestic price level can easily be avoided, but at a considerable cost.
First, it is clear that such policies do lead to depreciation of the currency, either against currencies of other countries that resist following the same policies of massive monetization and state bailouts (policies which are based on, for me at least, incomprehensible sophism among the economic academia) or against gold, commodities and hard assets in general. The rise in domestic prices then leads at some point to a "scarcity of the circulating medium," which necessitates the creation of even more credit and paper money.
Regards,
Marc Faber
for The Daily Reckoning
Dr. Marc Faber is the editor of The Gloom, Boom and Doom Report. Dr. Faber has been headquartered in Hong Kong for nearly 20 years, during which time he has specialized in Asian markets and advised major clients seeking down-and-out bargains with deep hidden value--unknown to the average investing public--bargains with immense upside potential. A book on Dr Faber, "Riding the Millennial Storm", by Nury Vittachi, was published in 1998. A regular speaker at various investment seminars, Dr Faber is well known for his "contrarian" investment approach.
dailyreckoning.com
http://www.silverbearcafe.com/private/11.13/whiteelephants.html
Matt Taibbi: Chase Isn't the Only Bank in Trouble
Allegations of multiple Wall Street scandals could have major implications
By Matt Taibbi
November 5, 12:55 PM ET
(special thanks to basserdan)
(please note: The underlined words are 'clickable' links when accessed via the link at the bottom of this page)
I've been away for weeks now on a non-financial assignment (we have something unusual coming out in Rolling Stone in a few weeks) so I've fallen behind on some crazy developments on Wall Street. There are multiple scandals blowing up right now, including a whole set of ominous legal cases that could result in punishments so extreme that they might significantly alter the long-term future of the financial services sector.
As one friend of mine put it, "Whatever those morons put aside for settlements, they'd better double it."
Firstly, there's a huge mess involving possible manipulation of the world currency markets. This scandal is already drawing comparisons to the last biggest-financial-scandal-in-history (the Financial Times wondered about a "repeat Libor scandal"), the manipulation of interest rates via the gaming of the London Interbank Offered Rate, or Libor. The foreign exchange or FX market is the largest financial market in the world, with a daily trading volume of nearly $5 trillion.
Regulators on multiple continents are investigating the possibility that at least four (and probably many more) banks may have been involved in widespread, Libor-style manipulation of currencies for years on end. One of the allegations is that traders have been gambling heavily before and after the release of the WM/Reuters rates, which like Libor are benchmark rates calculated privately by a small subset of financial companies that are perfectly positioned to take advantage of their own foreknowledge of pricing information.
A month ago, Bloomberg reported that it had observed a pattern of spikes in trading in certain pairs of currencies at the same time, at 4 p.m. London time on the last trading day of the month, when WM/Reuters rates are released. From the article:
In the space of 20 minutes on the last Friday in June, the value of the U.S. dollar jumped 0.57 percent against its Canadian counterpart, the biggest move in a month. Within an hour, two-thirds of that gain had melted away.
The same pattern – a sudden surge minutes before 4 p.m. in London on the last trading day of the month, followed by a quick reversal – occurred 31 percent of the time across 14 currency pairs over two years, according to data compiled by Bloomberg. For the most frequently traded pairs, such as euro-dollar, it happened about half the time, the data show.
The recurring spikes take place at the same time financial benchmarks known as the WM/Reuters (TRI) rates are set based on those trades…
The Forex story broke at a time when the industry was already coping with price-fixing messes involving oil (the European commission is investigating manipulation of yet another Libor-like price-setting process here) and manipulation cases involving benchmark rates for precious metals and interest rate swaps. As Quartz put it after the FX story broke:
For those keeping score: That means the world's key price benchmarks for interest rates, energy and currencies may now all be compromised.
Perhaps most importantly, however, there's a major drama brewing over legal case in London tied to the Libor scandal.
Guardian Care Homes, a British "residential home care operator," is suing the British bank Barclays for over $100 million for allegedly selling the company interest rate swaps based on Libor, which numerous companies have now admitted to manipulating, in a series of high-profile settlements. The theory of the case is that if Libor was not a real number, and was being manipulated for years as numerous companies have admitted, then the Libor-based swaps banks sold to companies like Guardian Care are inherently unenforceable.
A ruling against the banks in this case, which goes to trial in April of next year in England, could have serious international ramifications. Suddenly, cities like Philadelphia and Houston, or financial companies like Charles Schwab, or a gazillion other buyers of Libor-based financial products might be able to walk away from their Libor-based contracts. Basically, every customer who's ever been sold a rotten swap product by a major financial company might now be able to get up from the table, extend two middle fingers squarely in the direction of Wall Street, and simply walk away from the deals.
Nobody is mincing words about what that might mean globally. From a Reuters article on the Guardian Care case:
"To unwind all Libor-linked derivative contracts would be financial Armageddon," said Abhishek Sachdev, managing director of Vedanta Hedging, which advises companies on interest rate hedging products.
Concern over all of this grew even hotter last week with the latest Libor settlement, in which yet another major bank, the Dutch powerhouse Rabobank, got caught monkeying with the London rate.
Rabobank paid over a billion in fines to American, British, Dutch and Japanese authorities and saw its professorial CEO, Piet Moerland, resign as a result of the probe. The investigation revealed the same disgusting stuff all of the other Libor probes had revealed – traders and various other mid-level bank sociopaths laughing and joking about rigging rates and screwing customers all over the world. From the WSJ:
In a July 2006 electronic chat, an unidentified Rabobank trader was informed about the bank's plans to set Libor "obscenely high" that day, according to an exchange cited by the Justice Department. The trader responded, "oh dear . . . my poor customers . . . . hehehe!!"
Here at home, virtually simultaneous to the Rabobank settlement, Fannie Mae filed a suit against nine banks – including Barclays Plc (BARC), UBS AG (UBSN), Royal Bank of Scotland Plc, Deutsche Bank AG, Credit Suisse Group AG, Bank of America, Citigroup and JPMorgan – for manipulating Libor, claiming that the mortgage-financing behemoth lost over $800 million due to manipulation of the benchmark rate by the banks.
And virtually simultaneous to that, JP Morgan Chase disclosed that it is currently the target of no fewer than eight federal investigations, for activities ranging from possible bribery of foreign officials in Asia to allegations of improper mortgage-bond sales to . . . the Libor mess. "The scope and breadth of risky practices at JPMorgan are mind-boggling," Mark Williams, a former Federal Reserve bank examiner, told Bloomberg.
The point of all of this is that any thought that the potential Chase settlement might begin a period of regulatory healing for it and other Wall Street banks appears to be wildly mistaken. If anything, the scope of potential liability for all the major banks, particularly in these market-rigging furors, appears to be growing in all directions.
A half-year ago, it looked like the chief villains in the Libor mess at least were going to get away with writing relatively small checks. Back in March, a major private class-action suit filed by a gaggle of plaintiffs against the banks for Libor manipulation was tossed by a federal judge here in the southern District of New York on the seemingly preposterous grounds that a bunch of banks getting together to monkey with the value of world interest rates in this biggest-in-history financial collusion case was somehow now an antitrust issue.
The banks in that case humorously implied that the victims might have done better to sue for fraud instead of manipulation ("The plaintiffs, I believe, are confusing a claim of being perhaps deceived," one bank lawyer put it, "with a claim for harm to competition"), and the judge seemed to agree.
Moreover, when the plaintiffs' lawyers tried to make a point about the seemingly key fact that a series of governments had already concluded settlements with the banks for manipulating Libor, the judge – the Hon. Naomi Rice Buchwald – mocked the plaintiffs' lawyers for trying to ride to civil victory on a wave of government settlements:
Wait a second. Your job here, as plaintiffs' counsel, looking for whopping legal fees, is not to piggyback on the government. Indeed, the reason that there are statutes that provide plaintiffs' counsel with attorney's fees is a recognition that the government has limited resources.
The banks must have thought they'd hit the lottery, with this potentially deadly Libor suit suddenly stopped dead in its tracks by a grumpy federal judge with an apparent distaste for plaintiff lawyers who collect "whopping" legal fees. So the victims tried to take a different tack, appealing to a federal panel in an attempt to allow them to file their suits against the banks on a state-by-state level.
But then, in a seemingly fatal blow to the private claims, the U.S. Judicial Panel on Multidistrict Litigation ruled in favor of the banks, sending the case right back into the courtroom of the same judge who'd dumped on the plaintiffs' lawyers and their "whopping fees."
That was just a month ago, at the beginning of October, and back then it seemed like the banks might somehow escape the Libor mess with their necks intact.
Now, a month later, yet another bank has been forced to cough up a billion dollars for Libor manipulation, Fannie Mae has filed a major suit on the same grounds, and the Guardian Care Homes case is not only alive but looking like a threat to cancel billions of dollars' worth of Libor-related contracts. Not only that, many of those same banks are being sucked into what potentially is an even uglier scandal involving currency manipulation.
One gets the feeling that governments in all the major Western democracies would like to sweep these manipulation scandals under the rug. The only problem is that the scale of the misdeeds in these various markets is so enormous that even the most half-assed attempt at regulation will cause a million-car pileup.
There's simply no way to do a damage calculation that won't wipe out the entire finance sector when you're talking about pervasive, ongoing manipulation of $5-trillion-a-day markets. That's the problem – there's no way to do a slap on the wrist in these cases. If they're guilty, they're done.
http://www.rollingstone.com/politics/blogs/taibblog/chase-isnt-the-only-bank-in-trouble-20131105#
China grants U.S. investors indirect access to stocks
By Amy Li
Nov. 6, 2013
Marketwatch.com
SHANGHAI—China has approved two domestic fund managers to offer products in the U.S. that for the first time would give investors there indirect access to shares traded in Shanghai and Shenzhen, a significant move to further open the country’s capital markets and globalize its currency, a person with direct knowledge of the matter said Thursday.
China’s securities and foreign-exchange regulators recently gave joint approval for Bosera Asset Management Co. and Harvest Fund Management Co. to sell exchange-traded funds linked to China’s yuan-denominated A shares in the U.S., said the person, who declined to be named.
Reuters
At present, foreign investors’ access to the domestically traded A-share market is limited to those under the so-called Qualified Foreign Institutional Investors and Renminbi Qualified Foreign Institutional Investors programs with predetermined quotas.
The ETFs offered by Bosera and Harvest will be listed on the New York Stock Exchange, said the person.
It is the first time China has allowed local fund managers to offer mutual funds outside Hong Kong, in a move that could pave the way for Chinese fund managers to offer similar products in the global markets, including the U.S., the person added.
An expanded version of this report appears at WSJ.com.
http://www.marketwatch.com/story/china-grants-us-investors-indirect-access-to-stocks-2013-11-06
Bitcoin approaching new high: virtual currencies and market anarchy
Nov. 5, 2013
financetrens.blogspot.com
Bitcoin has recently zoomed past the $200 mark and is approaching its all-time highs. What better time to update you on the developing virtual currencies trend and to offer you new price data and insight into this growing market?
Here are the latest Bitcoin charts using Mt. Gox data (denominated in US dollars) and BTC China (denominated in Chinese Yuan) via bitcoincharts.com. Note that prices are fast approaching the 2013 "pre-crash" highs.
Bitcoin Mt. Gox USD price chart
Bitcoin BTC China Yuan price chart
Now that Bitcoin and virtual currencies are attracting more mainstream attention and investment (and increased public adoption), it's a great time to put this trend in context. So let's look to the infographs and interviews below to learn what's really feuling this trend.
We've already passed through 2 big waves of media-fueled hype around Bitcoin's boom-bust cycles, each accompanied by a chorus of "bubble" callers. We are now entering the third wave of attention in the last 3 years alone. For a graphical look, see the recent uptick in the Google Trends "Bitcoin" chart below.
Bitcoin interest on Google Trends infograph
By now, you should know that no actual Bitcoin bubble has taken place. We are seeing a (rather volatile) longer-term uptrend unfold. After all, have you ever known a bubble to bust and then recover and move on to new highs within a year's time? Incidentally, the spring 2013 "bubble" peak was almost 10 times the previous 2011 "bubble" price high.
Bitcoin price chart Mt. Gox USD 2011-2013
Although much of the public still views virtual currencies as "worthless" abstractions, the early adopters have come to understand a few things that casual observers have not.
As Jeffrey Tucker points out in this April 2013 interview, Bitcoin is certainly not a Ponzi scheme - it doesn't depend on a charismatic huckster holding back money withdrawals and coaxing investors to add more money. It's not a pyramid scheme, which requires an ever-growing user base to pass virtual coins on to some new group of suckers. In fact, what we're dealing with is an open-source digital currency with tightly defined rules for the expansion of future money supply. Compare that to modern fiat currencies which can be created at will, in huge amounts, by central bankers with just a few computer keystrokes.
In this latest Bitcoin interview, Jeffrey Tucker discusses virtual currencies and their role in bringing about a stateless society and greater liberty in our personal relationships and our trading relationships. At some point, Tucker theorizes, "the main point of government currencies will be just to pay your taxes." Very interesting "big picture" discussion on the growing adoption of virtual currencies and the future of commerce.
US Senate to take a closer look at bitcoin
Anthony Halley | November 6, 2013
Mining.com
Two US Senate committees will conduct hearings over the next few weeks to discuss policy implications of virtual currencies, according to Senate aides.
The hearings of the first committee will be dedicated entirely to bitcoin, whose association with now defunct online black marketplace 'Silk Road' and its skyrocketing value have been raising eyebrows on Capitol Hill.
"Potential points of discussion include how financial-industry regulators will watch over investment in the new currencies and how virtual currencies might impede tax collection or facilitate trade in illegal products out of the sight of law enforcement," writes Ryan Tracy for the Wall Street Journal.
In response to a Texas man's bitcoin-related Ponzi scheme earlier this year, a group of US senators sent a letter to a number of US government bodies, including the Department of Homeland Security, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Department of Justice, the Treasury Department, and the Federal Reserve.
“As with all emerging technologies, the federal government must make sure that potential threats and risks are dealt with swiftly; however, we must also ensure that rash or uninformed actions don’t stifle a potentially valuable technology," part of the letter reads.
Bitcoin, which can now be purchased via ATM, has been on a surge of late, currently trading at just under $250/coin.
http://www.mining.com/us-senate-to-take-a-closer-look-at-bitcoin-82153/
Guest Post: Congress Sells Out To Wall Street, Again
Submitted by Tyler Durden on 11/05/2013 20:00 -0500
Originally posted at Represent.us blog
(special thanks to the cork)
The U.S. House just passed a bill called H.R. 992 - the Swaps Regulatory Improvement Act - that was literally written by mega-bank lobbyists. It repeals the laws passed in 2010 to prevent another meltdown like the one that crashed our economy in 2008. The repeal was co-sponsored by a former Goldman Sachs executive and passed with bipartisan support from some of the House’s largest recipients of Wall Street cash. It’s so appalling... so unbelievable... so blatantly corrupt... that you’ve got to see it to believe it:
In 2010, Congress passed the “Dodd-Frank” law to clamp down on risky “derivatives trading” that led to the financial collapse of 2008. Dodd-Frank was weakened by banking lobbyists from the start and has been under attack by those lobbyists ever since. Now a new law written by Citigroup lobbyists (we couldn’t make this stuff up if we tried) exempts derivatives trading from regulation, and was passed this week by the House of Representatives with broad bipartisan support.
It sounds bad… but don’t worry, it gets much, much worse:
The New York Times reports that 70 of the 85 lines in the new House bill were literally written by Citigroup lobbyists (Citigroup was one of the mega-banks that brought our economy to its knees in 2008 and received billions in taxpayer money.)
The same report also revealed “two crucial paragraphs…were copied nearly word for word.” You can even view the original documents and see how Citigroup’s lobbyists redrafted the House Bill, striking out ideas they didn’t like and replacing them with ones they did
.
The bills are sponsored by Randy Hultgren (R – IL), and co-sponsored by Rep. Jim Himes (D-CT) and others. Himes is a former Goldman Sachs executive, and chief fundraiser for the Democratic Congressional Campaign Committee.
Maplight reports that the financial industry is the top source of campaign funding for 6 of the bills’ 8 cosponsors.
Maplight’s data shows that members of the House received $22,425,740 million from interest groups that support the bill — that’s 5.8 times more than it received from interest groups opposed.
“House aides, when asked why Democrats would vote for this proposal even though the Obama administration opposes it, offered a political explanation. Republicans have enough votes to pass it themselves, so vulnerable House Democrats might as well join them, and collect industry money for their campaigns.” — New York Times
Yep, it’s actually that bad. For the full story, check out this revealing piece by Represent.Us Communications Director Mansur Gidfar. You can also find out if your Rep. voted for H.R.992 here.
We elect Representatives to the House to represent us, the people — but both parties now refuse to do the job we elected them to do. And they won’t until we force them to. The American Anti-Corruption Act would stop this corruption, and Represent.Us is the movement behind the Act. Together, we can make blatant corruption illegal with simple reforms.
It’s common sense that elected officials should be barred from collecting money from the industries they regulate.
http://www.zerohedge.com/news/2013-11-05/guest-post-congress-sells-out-wall-street-again
Silver Miners Analyst Watch: November Edition
Nov 5 2013
Itinerant
includes: AG, CDE, EXK, FSM, GPL, HL, PAAS, SSRI, SVLC, SVM
Disclosure: I am long AG, EXK, SVLC, HL. (More...)
Editors' Note: This article covers one or more micro-cap stocks. Please be aware of the risks associated with these stocks.
As the month of November is slowly gathering some steam we are pleased to provide yet another monthly update of our analyst watch for primary silver mining companies. As in previous installments we are summarizing our observations of analysts' price targets as published on Yahoo.com. In the present November edition comparisons will be made to the data presented roughly a month ago in our October edition.
As always we would like to take note of the fact that most companies considered for this article are covered by more analysts than reported in our data since this article only considers analyst reports available through Yahoo.com.
As in previous reports we included the following silver miners in alphabetical order: Coeur Mining (CDE), Endeavour Silver (EXK), First Majestic Silver (AG), Fortuna Silver Mines (FSM), Hecla Mining (HL), Pan American Silver (PAAS), Silver Standard (SSRI), Silvercorp Metals (SVM) and SilverCrest Mines (SVLC). And we would like to welcome Great Panther Silver (GPL) as a new entry in our watch list.
The table below summarizes our data. The first three columns list the company names, ticker symbols and share prices at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the numbers of analysts providing data to Yahoo.com and the mean recommendations given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data derived from our source data. These data points are given in percentages related to the share price at the time of writing. The column titled "median-price" gives the differences between the share price and the median target prices. The column titled "high-low" gives the differences between the high and the low targets. The last four columns titled "target change" document the changes in price targets since the October report with the last column giving the average change over the low, median and high price targets.
(click to enlarge)
Shares trading significantly below the median price target can be viewed as having a greater potential than shares trading close to this target and therefore values in column "median-price" can give some indication on the potential of a stock. A diagram visualizing this difference for each considered silver mining stock is given below.
We would like to caution that this way of thinking does not apply for companies that have had significant events moving the share price in recent times since analysts will take their time to update their data accordingly.
The three companies leading in this category are Silver Standard, followed by First Majestic Silver and SilverCrest Mines. PanAmerican Silver is bringing up the rear of this ranking.
(click to enlarge)
The difference between the high and the low targets represents a measure for the divergence in analyst opinions. Column "high-low" documents this difference and the diagram below visualizes it. This divergence in analyst targets is greatest for Coeur Mining and Silver Standard. The price target range is smallest for SilverCrest, Great Panther Silver and SilverCorp.
(click to enlarge)
Column "target change average" lists the average changes in price targets during the past month and the diagram below illustrates them.
Most monitored price targets were lifted in the observed period, but the overall average target change still computed as a negative number, -1% to be precise, due to the hefty cut to SilverCorp's price targets. SilverCrest Mines stands out on the up-side of the spectrum with a sizeable increase in price targets, presumably following the presentation of the positive PEA for the La Joya project. Also of note is the increase in price targets for Endeavour Silver breaking a long series of target cuts during past months and rewarding the company's efforts at the El Cubo mine.
(click to enlarge)
[img]static.cdn-seekingalpha.com/uploads/2013/11/5/1125278-13836694603651981-Itinerant.png
[/img]
The final diagram illustrates column "Recommendation" from the table above. The little red bars in this diagram indicate changes in analysts' recommendation from last month.
Fortuna Silver has joined First Majestic Silver in pole position in this ranking, followed by SilverCrest Mines and Great Panther Silver. PanAmerican Silver is apparently the least-liked silver miner by analysts. Also of note is the down-grade of last month's darling SilverCorp Metals.
(click to enlarge)
Our pick of the month
The past month has seen a number of strong showings in the silver space, despite difficult market conditions caused by volatile spot price action. In this context we would like to commend the sector as a whole for adapting to the new normal and finding ways to be profitable despite the mentioned challenges.
http://seekingalpha.com/article/1806432-silver-miners-analyst-watch-november-edition?source=email_portfolio&ifp=0
Abu Dhabi Islamic Bank launches capital-protected silver notes with potentially huge upside
Peter Cooper | November 5, 2013
Abu Dhabi Islamic Bank, a top-tier UAE Islamic financial institution, has launched new capital-protected silver notes to allow customers to invest in a metal that analysts believe may soon see a price rebound.
The Shari’a-compliant notes, which mature in two years, provide 100 per cent capital protection at maturity to minimize risk. The notes are currently open for subscription with a minimum amount of $30,000.
Huge silver upside
Unlike gold, which is regarded as an inflation hedge and a safe haven in an uncertain economic environment, silver is extensively used in industrial production, which accounts for 46 per cent of total demand for the metal.
Improvement in the global economy should bode well for the silver price, which technical analysts believe has reached a strong support level at $19.77 per ounce, following a 33 per cent fall in the last year.
Silver also tends to have a high correlation with gold, which has seen a price rebound recently. The ArabianMoney investment newsletter (subscribe here) is tipping silver as a way to leverage gold this month. New subscribers will get the current edition free and immediately.
ADIB’s structured notes have been well received by investors, particularly three capital-protected gold notes and two capital-protected oil notes that matured at the beginning of this year.
The one-year gold note produced a total return of 15 per cent, while slightly lower-risk notes returned four per cent and six per cent. One of the two-year oil notes gave a 17.9 per cent return, with the other produced a 1.2 per cent return.
Precious metals to rebound
In a world where money printing is the name of the game for global central banks it is only a matter of time, and probably not much at that, before the traditional money that cannot be printed soars in value.
Chinese buyers have been piling into gold and silver this year, taking advantage of the dollar-defensive manipulation of the Federal Reserve to stock up and diversify away from US treasuries at low prices for gold and silver. T-bonds are not wanted in Asia. The Fed is buying up most of them itself while artificially manipulating gold and silver prices to support the dollar.
That suits Asia just fine as the Fed is effectively subsidizing the cost of gold and silver that Asian buyers want to replace their US treasury bonds. This ADIB silver investment instrument is gold dust.
http://www.silverseek.com/commentary/abu-dhabi-islamic-bank-launches-capital-protected-silver-notes-potentially-huge-upside-12
Abu Dhabi Islamic Bank launches capital-protected silver notes with potentially huge upside
Peter Cooper | November 5, 2013
Abu Dhabi Islamic Bank, a top-tier UAE Islamic financial institution, has launched new capital-protected silver notes to allow customers to invest in a metal that analysts believe may soon see a price rebound.
The Shari’a-compliant notes, which mature in two years, provide 100 per cent capital protection at maturity to minimize risk. The notes are currently open for subscription with a minimum amount of $30,000.
Huge silver upside
Unlike gold, which is regarded as an inflation hedge and a safe haven in an uncertain economic environment, silver is extensively used in industrial production, which accounts for 46 per cent of total demand for the metal.
Improvement in the global economy should bode well for the silver price, which technical analysts believe has reached a strong support level at $19.77 per ounce, following a 33 per cent fall in the last year.
Silver also tends to have a high correlation with gold, which has seen a price rebound recently. The ArabianMoney investment newsletter (subscribe here) is tipping silver as a way to leverage gold this month. New subscribers will get the current edition free and immediately.
ADIB’s structured notes have been well received by investors, particularly three capital-protected gold notes and two capital-protected oil notes that matured at the beginning of this year.
The one-year gold note produced a total return of 15 per cent, while slightly lower-risk notes returned four per cent and six per cent. One of the two-year oil notes gave a 17.9 per cent return, with the other produced a 1.2 per cent return.
Precious metals to rebound
In a world where money printing is the name of the game for global central banks it is only a matter of time, and probably not much at that, before the traditional money that cannot be printed soars in value.
Chinese buyers have been piling into gold and silver this year, taking advantage of the dollar-defensive manipulation of the Federal Reserve to stock up and diversify away from US treasuries at low prices for gold and silver. T-bonds are not wanted in Asia. The Fed is buying up most of them itself while artificially manipulating gold and silver prices to support the dollar.
That suits Asia just fine as the Fed is effectively subsidizing the cost of gold and silver that Asian buyers want to replace their US treasury bonds. This ADIB silver investment instrument is gold dust.
http://www.silverseek.com/commentary/abu-dhabi-islamic-bank-launches-capital-protected-silver-notes-potentially-huge-upside-12
Fate of Dollar is the Fate of U.S. Power-Dr. Paul Craig Roberts
4 NOVEMBER 2013
Greg Hunter’s USAWatchdog.com
Former Assistant Treasury Secretary Dr. Paul Craig Roberts says, “The fate of the dollar is the fate of United States Power.” Dr. Roberts goes on to say, “The whole question of the dollar’s longevity depends on the willingness of other countries to continue holding dollars and dollar denominated assets while the Federal Reserve prints a trillion dollars a year to prop up the big banks and to finance the federal budget deficit.” There are many ways countries are currently moving away from the dollar. One of the most startling, says Dr. Roberts, “China is accumulating very large quantities of gold. So, this does show that the dollar may have a limited life as the supreme currency.” With global NSA spying scandals, if the dollar starts coming under attack in the currency markets, Dr. Roberts predicts, “All of this makes it very difficult if there is a run on the dollar for the Treasury and the Federal Reserve to call up these foreign governments and say help us stop this run.” Don’t think the Fed is ever going to stop printing money because Dr. Roberts contends, “They’re trapped because you can’t expect them to say let’s blow up the world right now so we don’t have a crisis in the dollar next year.” Join Greg Hunter as he goes One-on-One with economist Dr. Paul Craig Roberts.
Healthcare In America: Countless Layers Of Grift And Counter-Grift
by Tyler Durden on 11/04/2013
ZeroHedge
Submitted by James H. Kunstler of Kunstler.com,
The ObamaCare website rollout fiasco, joined by the bait-and-switch “You can keep your current insurance (not)” tempest, obscure the fundamental quandary about so-called health-care in America: that it is a gigantic racket structured to allow countless layers of grift and counter-grift. The end product of all that artifice is that medical care costs twice as much in America as any other civilized country, and that it has to be operated by a cruel and despotic matrix of poorly coordinated bureaucracies that commonly leave people more disabled financially than the diseases that brought them into the system.
ObamaCare was designed to work like a giant roll of duct tape that would allow the current cast of characters in charge (Democratic Progressives) to pretend that the system could keep going a few years longer. But it looks like it has already blown out the patch on the manifold and is getting ready to throw a rod — which duct tape will not avail to fix.
I had three major surgeries (hip, open heart, spine) the past year and paid attention to the statements that rolled in from my then-insurer, Blue Shield (the policy was cancelled in October). These documents were always advertised as “this is not a bill” and that was technically true, but it deflected attention from what it really was, a record of negotiated scams between the “providers” (doctors and hospitals) and the insurance company.
There was never any discussion (or offer of discussion) of the cost of care before a procedure. When asked, doctors commonly pretend not to know what their work costs. Why is that? It’s not to spare the patient’s feelings. It’s because sick people are hostages and both the doctors and the hospital management know they will agree to anything that will get them through the crisis of illness. This sets up a situation that allows the “providers” to blindside the patient with charges after the fact.
My hip “revision” operation was necessary because my original implant was a defective (“innovative” circa 2003) metal-on-metal joint that released metal fragments into my system and it had to be removed. The stated charge for replacement part — a simple two piece bearing made of metal and plastic, about the size of tangerine — was $14,000. Blue Shield “negotiated” the price down to about $7,000. If you go to the websites of any of the manufacturers of these things, you will not see any suggested retail or wholesale price. The markup on these things must be out of this world. Cars come with four ball joints that carry roughly the same time warrantee, and they come with a staggering array of “extras”— engines, transmissions, air-conditioning, seats, air-bags, and radios. The pattern was similar for the other surgeries and what they entailed. I ended up paying five-figures out-of-pocket. Lucky for me that I saved some money before this all happened. I don’t have kids so I haven’t been paying extortionate college tuitions during my peak income years.
All the surgeries I had required hospital stays. For the hip op, I was in for a day and a half in a non-special bed (no fancy hookups). The charge was $23,000 per day. For what? They took my blood pressure nine times. I got about six bad meals. The line charge on the Blue Shield statement said “room and board.” It would be a joke if this extortion wasn’t multiplied millions of times a day across the nation. Citizen-hostages obviously don’t know where to begin to unravel this skein of dreadful rackets. If you think it’s possible to have a productive conversation with an insurance company rep at the other end of the phone line, then you’re going to be disappointed. You might as well be talking to a third-sub-deputy under-commissar in the Soviet motor vehicle bureau.
This ghastly matrix of corruption really only has two ways to go. It can completely implode in a fairly short time frame (say, five years, tops), or we can, by some miracle of political will, get our priorities straight and sweep away all the layers of racketeering with a single-payer system. The evidence in other civilized countries is not so encouraging. England’s National Health Service has degenerated into a two layer system of half-assed soviet-style medicine for the proles and concierge service for the rich. France’s system works more democratically, but the nation is going bankrupt and eventually their health care network will fall apart. The Scandinavian countries have relatively tiny populations. I don’t know, frankly, how the Germans are doing.
Here in the USA, you can make arguments for putting a greater share of public money into a single-payer system. For instance, if we redirected the money spent on our stupid military adventures and closed some of the countless redundant bases we run overseas. That would be a biggie. Given the current choke-hold of the military-industrial complex on our politicians, I wouldn’t expect much traction there.
You can argue that nobody complains about government spending on the highway system, so why should “the people” complain about organizing a medical system that really works? Obviously, there’s no consensus to make that happen. Too many doctors want to drive BMWs. Too many insurance executives and hospital administrators want to make multi-million dollar salaries. Too many lobbyist parasites and lawyers are feeding off that revenue stream. Too many politicians with gold-plated health insurance coverage don’t want to change the current distribution of goodies. End-of-story, as the late Tony Soprano used to say.
It’s the old quandary of fire or ice… which way do you want to go? Since I’m interested in reality-based outcomes, my bet would be on implosion. In any case, several of the other systems that currently support the activities of our society are scheduled for near-term implosion, too. That would be the banking-finance system, the energy supply system, and the industrial agriculture system. As those things wind down or crash, you can be sure that everything connected with them will be affected, so the chance that we could mount a real national health care system is, in my opinion, zero.
The ObamaCare duct-taped system will go down. The big hospitals, HMOs, insurers, pharma companies will all starve and shrivel. Like all things in the emergent new paradigm, they will reorganize on a small and much simpler basis. Everyone will make less money and high-tech medicine will probably dwindle for all but a very few… and for them, only for a while. Eventually, we’ll re-set to local clinic style medicine with far fewer resources, specialties, and miracle cures. There will be a whole lot less aggravation, though, and people may die more peacefully.
Finally, there’s the pathetic American lumpen-public of our day itself, steadily committing suicide en masse by corn byproducts, the three-hundred pounders lumbering down the Wal-Mart aisles in search of the latest designer nacho. What can you do about such a people, except let fate take them where it will?
http://www.zerohedge.com/news/2013-11-04/healthcare-america-countless-layers-grift-and-counter-grift
Tracing The Great Chinese Gold Rush
by Tyler Durden on 11/04/2013
ZeroHedge
As we recently noted, China is taking over the world on gold bar at a time. This growing world super-power has, it would appear (by words and deeds) grown tired of being on the receiving end of the USDollar and Fed money printing. The Real Asset Company illustrates how, in the space of a few decades, China has opened up her huge gold market which is now hungrily devouring the world's physical gold.
(click image for large legible version)
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/11/20131104_china4.jpg
Gold Miners Analyst Watch: November Edition
Nov 4 2013
Itinerant
Disclosure: I am long AEM. (More...)
Another month has gone and we find ourselves at the start of November providing our update on analysts' price targets for gold miners. As in previous articles of this series we will be noting price targets and target changes in comparison with results published in our last edition a month ago.
We continue to consider the following stocks (in alphabetical order): Agnico Eagle (AEM), Alamos Gold (AGI), Allied Nevada (ANV), AngloGold Ashanti (AU), AuRico Gold (AUQ), Barrick Gold (ABX), Eldorado Gold (EGO), Gold Fields (GFI), Goldcorp (GG), Harmony Gold (HMY), IAMGOLD (IAG), Kinross Gold (KGC), McEwen Mining (MUX), New Gold (NGD), Newmont Mining (NEM), Primero Mining (PPP), Randgold (GOLD), Sibanye Gold (SBGL), Yamana Gold (AUY).
We have dropped Nevsun Resources (NSU) from our gold miners watch list and will be following this company in the base miners edition from now on. The latest edition to our watch list is B2Gold (BTG[color=blue][/color]) which will be taking Nevsun's place in the table below.
It is important to note that many companies mentioned in this article may have more analysts following their progress than considered in our data base. This difference is due to the fact that not all analysts release their predictions to Yahoo.com which is the sole source of our data. Instead, in many cases analyst data is considered as proprietary information only available to subscribers of the analysts' services.
The table below summarizes our data. The first three columns list the company name, ticker symbol and share price at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the number of analysts providing data to Yahoo.com and the mean recommendation given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data derived from our source data. These data points are given in percentages related to the share price at the time of writing. The column titled "median-price" gives the difference between the share price and the median target price. The column titled "high-low" gives the difference between the high and the low target. The last four columns titled "target change" document the changes in price targets since the October report with the last columns giving the average change over the low, median and high price targets.
(click to enlarge)
We usually keep an eye on the difference between the current share price and the median price target and interpret this difference as a measurement for the potential of a stock in the eyes of analysts. This value is given in column "median-price" and the diagram below.
McEwen Mining leads in this category on paper, but only has one analyst providing data. B2Gold is the only other stock trading more than 50% of the current share price below the median price target, closely followed by Allied Nevada and New Gold. Sibanye Gold continues to trade significantly above the median price target and we are beginning to wonder if analysts should go back to the drawing board on this particular company.
(click to enlarge)
Column "high-low" measures the divergence in analyst opinions. The results from this column in the table at the top of this article are visualized in the next diagram.
Allied Nevada has taken the lead in this category with analysts obviously unsure whether or not recent issues at the leach pads have been overcome once and for all. Interestingly, price targets for GoldCorp differ enough between analysts to put the largest gold miner by market capitalization into second place. Sibanye Gold and B2Gold have the greatest degree of consensus in the price targets calculated by analysts.
(click to enlarge)
Four companies had their price targets lifted on average since our last snap shot: McEwen Mining, Alamos Gold, Primero Mining and Allied Nevada (by a fraction). Most other companies suffered cuts to the price targets. Gold Fields brings up the rear in this ranking with targets cut by 37% of the current share price. On average targets were cut by 4.5% (yet again) for the observed group of gold miners during the past month.
(click to enlarge)
A visualization for column "Recommendation" concludes our report. The little red bars indicate recommendation changes since last month. B2Gold is held in the highest esteem this time around followed by Primero Mining. Agnico Eagle deserves a mention here as well having received the greatest increase in this rating since last time following a convincing third quarter performance.
(click to enlarge)
Our pick of the month
We are giving the honors to two companies this time:
B2Gold for which analysts quite uniformly provide high targets and high recommendations; and
Agnico Eagle after a bumper third quarter which is reflected in a much improved analyst recommendation.
http://seekingalpha.com/article/1802972-gold-miners-analyst-watch-november-edition?source=email_portfolio&ifp=0