As we reported earlier, while on the surface the headline revised Q3 GDP number was a stunner coming at 3.6%, the reality is that more than 100% of the growth from the initial estimate came from a revised estimate of how many private Inventories were stockpiled in the quarter. The reality was that of the $230 billion in total increase in SAAR GDP, $146 billion of this, or over 63%, was due to inventory stockpiling.
But where the scramble to accumulate inventory in hopes that it will be sold, profitably, sooner or later to buyers either domestic or foreign, is seen most vividly, is in the data from the past 4 quarters, or the trailing year starting in Q3 2012 and ending with the just released revised Q3 2013 number. The result is that of the $534 billion rise in nominal GDP in the past year, a whopping 56% of this is due to nothing else but inventory hoarding.
The problem with inventory hoarding, however, is that at some point it will have to be "un-hoarded." Which is why I expect many downward revisions to future GDP as this inventory overhang has to be de-stocked.
That's about all there is to this Zero Hedge story from yesterday, but the embedded charts are definitely worth your time...and I thank Manitoba reader Ulrike Marx for today's first news item.
Treasury Secretary Jacob J. Lew will assert on Thursday that the Obama administration’s vast overhaul of the financial system is close to accomplishing its goal of shielding society from the dangers posed by giant banks.
In a broad policy speech intended to signal the administration’s views on financial regulations, Mr. Lew will also make it clear that more measures may be needed to strengthen the global system. In comments that will most likely upset foreign governments, he will call on overseas regulators to make their rules tougher.
Earlier this year, I said if we could not with a straight face say we ended ‘too big to fail,’ we would have to look at other options,” he says. “Based on the totality of reforms we are putting in place, I believe we will meet that test, but to be clear, there is no precise point at which you can prove with certainty that we have done enough.”
Mr. Lew’s comments come as regulators are scheduled to meet next week to finally approve the Volcker Rule, a cornerstone of the overhaul that tries to stop banks from speculatively trading with depositors’ money and other funds. In recent months, the Treasury Department has pressed the five agencies that worked on the rule to finish it before the end of the year.
This article was posted on The New York Times website two minutes after midnight on Thursday morning in New York...and I thank Phil Barlett for finding it for us. It's worth reading.
As we have been covering for the past year and a half, most explicitly in "A Record $2 Trillion In Deposits Over Loans - The Fed's Indirect Market Propping Pathway Exposed", when it comes to the pathway of the Fed's excess deposits propping up risk levels, it has nothing to do with reserves sitting on bank balance sheets as assets, and everything to do with excess deposits (of which there are now $2.4 trillion thanks to the Fed) which are used as Initial collateral by banks such as JPM and then funding such derivatives as IG9 in a failed attempt to cover a segment of the corporate bond market. These deposits originate at the Fed as a liability at the commercial banking sector to the excess reserve asset.
That much is clear and undisputed, and was admitted by none other than JPM itself.
Which is why the news overnight from the WSJ that the Volcker Rule (if and when it is implemented) will do away with such "portfolio hedging" trades may have truly major, and potentially very risk adverse, consequences.
The WSJ reports: "In a defeat for Wall Street, the "Volcker rule" won't allow banks to enter trades designed to protect against losses held in a broad portfolio of assets, according to people familiar with the rule. The practice, known as portfolio hedging, has become a focal point of regulators drafting the rule, a controversial plank of the 2010 Dodd-Frank financial law that seeks to prevent banks from putting their own capital at risk in pursuit of trading profits.
But it won't contain language permitting portfolio hedging, which has been "expunged" from earlier drafts of the rule, according to a person familiar with the matter. Regulators decided to remove portfolio hedging from the rule after J.P. Morgan Chase disclosed billions of dollars in losses from its so-called London whale trades in 2012."
This Zero Hedge piece from yesterday is a bit of heavy reading, but is definitely worth your time if you have it. It's the second offering of the day from Ulrike Marx.
Three Wall Street trade groups sued the U.S. Commodity Futures Trading Commission on Wednesday to stop tough overseas trading guidelines that they fear could hurt markets and reduce their profits.
The groups accused the CFTC in their lawsuit of circumventing a more rigorous rule making process by issuing its cross-border regulations as "guidance.'
They also said they filed the lawsuit to stop the CFTC from what they described as an "unceasing effort'' to regulate the global swaps market through unpredictable advisory documents instead of formal rules.
This short article, along with an embedded 43 second video clip was posted on the cnbc.com Internet site on Wednesday shortly after the markets closed...and I thank West Virginia reader Elliot Simon for sending it our way.
It wasn't long after three former General Electric Co. executives were convicted of rigging auctions for municipal-bond investment contracts that they received the ultimate sendoff: A 7,400-word torching in Rolling Stone magazine by Matt Taibbi, the writer who branded Goldman Sachs Group Inc. with the nickname "vampire squid."
"Someday, it will go down in history as the first trial of the modern American mafia," Taibbi began his June 2012 opus about Dominick Carollo, Steven Goldberg and Peter Grimm. "Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street."
Then came a surprise last week, right before Thanksgiving. A federal judge ordered the men released from prison. An appeals court had reversed their convictions the day before, without explanation. An opinion would be issued "in due course," it said. Bloomberg News ran a short story this week. The rest of the news media barely noticed.
This rather short op-ed piece by Jonathan was posted on the Bloomberg website yesterday morning...and is definitely worth skimming. I thank Washington state reader S.A. for sending it along.
"There are going to be consequences to central bank balance sheet expansion all over the world," Kyle Bass tells Steven Drobny in his new book, The New House of Money, adding "It’s a beggar-thy-neighbor policy, but everyone is beggaring thy neighbor." The Texan remains concerned at QE's effects on wealth inequality and worries that "at some point this is going to ignite and set cost pressures off." While Gold-in-JPY is his recommended trade for non-clients, his hugely convex trades on Japan's eventual collapse remain as he explains the endgame for his thesis, "won't buy back until JPY is at 350," and fears "the logical conclusion is war."
This commentary by Kyle is embedded in another Zero Hedge story...and this one was filed on their website late yesterday afternoon EST. I thank Ulrike Marx for sending this one our way as well.
The National Security Agency and its allies face a long, painful drip of classified documents relating to their intelligence operations.
The quantity and range of leaks facilitated by Edward Snowden have become clear in recent news stories.
First, The Australian reports that Edward Snowden stole as many as 20,000 Aussie signals intelligence files from the NSA's systems. Australia's attorney general called the disclosures the most damaging in the country's history.
This news item was posted on the businessinsider.com Internet site yesterday morning EST...and I thank Roy Stephens for his first offering of the day.
The Channel is getting ever wider. While George Osborne plans to push Britain's retirement age to 70, Europe's big two are going the other way.
The German coalition deal has pencilled in a cut in the retirement age from 65 to 63, for those who have put in 45 years of contributions. (The overall plan to push the pension age gradually up to 67 remains in place.)
President François Hollande has cut the reversed Nicolas Sarkozy's rise in the retirement age to 62 in France. Workers with 41 years of contributions can now retire at 60.
This Ambrose Evans-Pritchard blog was posted on the telegraph.co.uk Internet site yesterday sometime...and it's the second contribution in a row from Roy Stephens.
France's unemployment rate rose to a 16-year high of 10.9 percent in the three months to September, the INSEE national statistics agency said Thursday, adding to pressure on President Francois Hollande in his battle to tackle France’s unemployment.
The jobless rate rose 0.1 percentage points from the previous three months, the new data showed.
The unemployment rate for metropolitan France, which excludes overseas territories and is more closely watched domestically, also rose by 0.1 percentage point in the same period to 10.5 percent.
This story appeared on the france24.com Internet site yesterday sometime...and I thank Roy Stephens for sliding this into my in-box in the wee hours of this morning.
Europe is one shock away from a deflation trap. A surprise anywhere in the world is all that it needs: an upset in China as the credit bubble pops, or a global bond shock as the US Federal Reserve winds down monetary stimulus.
Producer price inflation (PPI) fell to -1.4pc in the eurozone in October. This is how deflation becomes lodged in the price chain.
"Prices are sticky for a while as you approach zero inflation, but once you break through the ice into deflation things can move fast, as we've seen in Greece," said Julian Callow, global strategist at Barclays. "The European Central Bank needs to act before the horse has already bolted."
This longish commentary is also by Ambrose Evans-Pritchard...and it's definitely worth reading. It was posted on The Telegraph website late Wednesday evening GMT...and it's another offering from Roy Stephens.
From Mario Drahgi's perspective, the euro zone has already been split for some time. When the head of the powerful European Central Bank looks at the credit markets within the currency union, he sees two worlds. In one of those worlds, the one in which Germany primarily resides, companies and consumers are able to get credit more cheaply and easily than ever before. In the other, mainly Southern European world, it is extremely difficult for small and medium-sized businesses to get affordable loans. Fears are too high among banks that the debtors will default.
For Draghi and many of his colleagues on the ECB Governing Council, this dichotomy is a nightmare. They want to do everything in their power to make sure that companies in the debt-plagued countries also have access to affordable loans -- and thus can bring new growth to the ailing economies.
The only problem is that all those low interest rates have so far barely been put to use. Lending to companies in the euro zone is still in decline. In October, banks granted 2.1 percent less credit to companies and households than in the same period last year.
In addition to a further cut in interest rates to zero percent, the central bankers are considering new, drastic measures to combat the negative trend. Some of them are likely to be hotly debated when the Governing Council meets this Thursday in Frankfurt.
This must read article was posted on the German website spiegel.de early yesterday afternoon Europe time...and it's courtesy of Roy Stephens once again.
Mario Draghi said the ECB is studying what happened in Japan at the onset of its Lost Decade in the 1990s, insisting that Europe is unlikely to go the same way.
The European Central Bank has cut its inflation forecast for the next two years and promised “powerful artillery” to boost the eurozone economy if necessary, but offered no concrete measures to halt the drift towards deflation.
The euro punched to a five-week high of nearly $1.37 against the dollar and £0.84 against the pound as traders bet that the ECB’s governing council is too divided to take decisive action. Yields on 10-year Italian and Spanish bonds jumped seven basis points as credit tightened across the board.
This is another offering from Ambrose Evans-Pritchard. This story was posted on the telegraph.co.uk Internet site very late yesterday afternoon GMT...and is the final contribution of the day from Roy Stephens.
Russia voiced outrage Friday at charges in the United States against 49 current and former Russian diplomats and their wives over a $1.5 million fraud, saying it could not understand why the US had gone public with the allegations.
Deputy Foreign Minister Sergei Ryabkov said in a statement to Russian news agencies that Moscow had many claims against the behaviour of US diplomats in Moscow but had preferred not to bring them into the public sphere.
"We categorically reject the charges against the staff of Russian diplomatic institutions in the United States," he was quoted as saying by the ITAR-TASS news agency, saying it was "illegal" for diplomats to have been watched by the authorities in this way.
This AFP news item was posted on the france24.com Internet site early this morning Paris time...and I thank South African reader B.V. for sending it our way earlier this morning. It's certainly a must read for all students of the New Great Game.
1. Pierre Lassonde: "This Will Trigger Next Leg of the Gold Bull Market". 2. Dr. Stephen Leeb: "China Mining Some Gold for a Staggering $2,500 an Ounce". 3. John Ing: "Shanghai Exchange Has Delivered More Gold Than Fort Knox!".
[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]
The London Metal Exchange (LME) faces a tough job as it gears up to provide more data about long and short positions, including delivering what many investors crave - information on flows of speculative money that move markets.
The LME, the world's biggest and oldest marketplace for industrial metals, has launched consultations after last month promising to boost transparency at the same time it announced new proposals to cut backlogs at warehouses.
The exchange, owned by Hong Kong Exchanges and Clearing Ltd, is in a two-track process to provide detailed reports on positioning in metals futures as well as more data on warehouse inventories.
This Reuters story found a home over at the mineweb.com Internet site yesterday...and it's another contribution from Ulrike Marx.
Deutsche Bank AG pulled the plug on its global commodities trading business on Thursday, cutting 200 jobs as it becomes the first major bank to exit the once lucrative sector due to toughening regulations and diminished profits.
Germany's largest bank, which was one of the top-five financial players in commodities, said in a statement it will cease trading in energy, agriculture, base metals, coal and iron ore, retaining only precious metals and a limited number of financial derivatives traders.
The cuts are expected to largely fall on its main commodity desks in London and New York.
One has to wonder whether the Dodd-Frank regulations will still allow precious metal trading by the big U.S. banks once its passed next week. It sure wouldn't surprise me if JPMorgan Chase, HSBC USA and Citigroup were allowed to keep trading the monetary metals. We'll find out soon enough, I suppose. I found this Reuters story in a GATA release yesterday.
This 22-minute audio interview with Marc was done by Patrick MonesDeOca...and was posted over at the Equity Management Academy website about ten days ago. I haven't had the time to listen to the whole thing, but the parts I did hear were mostly precious metals related...and is the reason that this interview is posted in the precious metals section of the Critical Reads. I thank reader Ken Hurt for digging it up for us.
Is gold still in a bull market or a bear market? Opinions differ but in reality the answer to both questions could well be yes. It all depends where you start from! Over 12 years gold has risen from $250 to around $1,230 at the time of writing – definitely a bull market then? Over the past two and a bit years gold has fallen from around $1,900 to $1,220. That looks as though it may be a bear market then? Well yes – or is this just a major correction in a secular bull market? To an extent it depends on whether you are a gold bull or a gold bear as to which viewpoint you take.
It was thus interesting to listen to some of the views expressed at the Mines & Money conference in London which has just ended. Speakers were perhaps more biased to the major correction in an ongoing bull market angle and they certainly had some strong historical evidence to support their viewpoints. Whether history will again repeat itself is obviously the major question here, but it does have the uncanny ability to repeat itself and one suspects it will do so yet again with the markets and gold – the only real question being how much further will gold fall before the market turns, and then how far and fast it will rise when it does.
The question of "how far and fast" should be directed to JPMorgan Chase and two other U.S. bullion banks, as they are totally in command of the precious metal pricing structure in the Comex futures market...and until they say so, or are instructed to step aside, this price management scheme will continue unless the physical market dictates otherwise. This commentary by Lawrence was posted on the mineweb.com Internet site yesterday...and once again I thank Ulrike Marx for bringing this article to our attention. It's worth the read.
The world's most valuable jewellery retailer Chow Tai Fook, which counts Cartier and Tiffany & Co as competitors, is on a quest to conquer the hearts of China's future big spenders. Its weapons of choice: Hello Kitty and Winnie the Pooh.
Superman and the Angry Birds team also feature in Chow Tai Fook Jewellery Group's range of fashionable, and affordable, pieces which the company hopes will win over the millions of Chinese who live outside major cities but who are reaping the benefits of a rapidly growing economy and who remain enamoured by the gleam of gold.
Chow Tai Fook's fashion jewellery, which costs between HK$200 and HK$2,000 ($26 and $260), is a far cry from the luxury offerings that have traditionally accounted for over 80 percent of sales, and which on average cost about 10 times as much.
But the shift to expand mass-market retail is already paying off. Chow Tai Fook saw its net profit rise by a forecast-beating 92.3 percent in the six months ended September, with same-store sales growing 33.2 percent.
Between the time I read this Reuters story yesterday afternoon...and then got around to posting in today's column at 3:02 a.m. EST this morning, the original link had become inactive. I did a Google search of the headline, and it's obviously had a "Page 1 rewrite" in the interim. That's what you're seeing here, and I have no idea what changes were made between the two stories. I thank Ulrike Marx for her final contribution to today's column.
It has been a difficult year for silver investors with the metal falling by 36% year-to-date. While the Federal Reserve balance sheet continues to expand, ‘taper’ discussions by the Federal Open Market Committee have weighed heavily on the price performance of all the precious metals this year. By our calculations, over the last five years silver has a beta to the gold price of 1.5. This implies that price changes in gold are magnified in silver. Combine this with an 80% correlation in the price action between gold and silver over the same time frame and it’s easy to see that where the price of gold goes, the price of silver goes faster. As we break down the fundamentals for silver, market developments this year give rise to a curious conundrum – how can the case for silver be stronger while the price continues to languish?
Sprott's David Franklin, the author of this report, concludes his comments with this sentence..."The most curious part of this fundamental case for silver is why the price isn’t higher." David knows perfectly well why, as does everyone at Sprott, and that's because JPMorgan et al are sitting on the price. This commentary was posted on the sprottglobal.com Internet site yesterday...and it's definitely worth reading.
Interviewed by GATA consultant Koos Jansen, Anglo Far-East Bullion Co.'s Alex Stanczyk discusses his recent trip to a Swiss gold refinery whose managing director told of an unprecedented shortage of metal as China consumes it all.
The interview is headlined "Alex Stanczyk: Physical Supply Has Never Been Tighter" and it's posted on the Swiss Internet site ingoldwetrust.ch...and it's an absolute must read and today's most important story. I found it posted on the gata.org Internet site early yesterday morning.
"Eventually, the whole world is going to collapse," Jim Rogers chides a disquieted CBC anchor as he explains the reality that, "we in the West have staggering debts. The United States is the largest debtor nation in the history of the world," adding that "this is going to end badly."
However, the co-founder of Soros' Quantum fund is convinced that the commodity super-cycle is far from over, but driven by supply constraints (and cost increases) as opposed to demand from higher growth. The following interview provides more color on his commodity view as he re-iterates his bullish stance on Ag (with sugar a focus) and Natural Gas (some harsh natural realities coming), warning "don't get too excited about fracking," when he talks energy products.
Rogers, in his inimitable way, sums up the state of euphoria that many markets find themselves in thus, "we are all floating around on a sea of artificial liquidity right now. This is not going to last."
The 7:23 minute CBC News video clip is embedded at the end of this Zero Hedge article...and my thanks go out to Manitoba reader Ulrike Marx for today's first story.
Anyone in a public-sector job looking forward to retiring in comfort should look carefully at what is going on in Detroit and Springfield, Ill. Sherlock Holmes would call it the case of the missing pension money.
News leaking out this week from the Motor City tells how the enormous gap between the pensions workers earned and the money set aside to pay for them will be closed. By stealing from the workers.
Courts, legislatures, and corporations are all working in concert not to pay the full benefits owed. For decades, political and business leaders failed to set aside the right amount of money each payday to cover the pensions workers earned and, in some cases, covered up the mismanagement of pension fund investments.
This short Newsweek essay was posted on their website sometime yesterday...and I thank Washington state reader S.A. for sending it our way.
Protecting investors and ensuring proper corporate governance are the essence of the mission of the Securities and Exchange Commission. But you wouldn’t know that from the recent actions of the agency and its chairwoman, Mary Jo White.
Last week, the S.E.C. unwisely removed from its regulatory agenda a plan to consider a rule to require public companies to disclose their political spending — even though the case for disclosure is undeniable. Basic investor protection requires that shareholders know how corporate executives are spending shareholder money. Good corporate governance requires that companies are transparent about their use of corporate resources. Shareholders know this and have demanded disclosure.
Even before 2010, when the Supreme Court’s ruling in Citizens United opened the floodgates for corporate political spending, shareholder proposals requesting information on such spending were growing. Since the ruling, those requests have increased along with the political spending. Trade associations and politically active tax-exempt groups are not required to disclose their donors, but there is mounting evidence that much of the money they spend is from companies that want to influence elections in secret, without fear of alienating shareholders, customers or legislators they target for defeat.
This short editorial was posted on The New York Times website on Tuesday...and thanks go out to Phil Barlett for sharing it with us.
At least 130 people were injured and one killed following mass looting and vandalism by gangs of youths, who took over several parts of Cordoba City in Argentina. The lawlessness was a result of the police going on strike over low pay.
A young man around 20 years old has died from a gunshot wound to his chest, imneuquen.com.ar reports. More than 50 people who took part in the looting have been detained. Twelve of the 130 who were wounded sustained their injuries from firearms.
After the news of the strike broke Tuesday, looters quickly appeared in the streets, going primarily for the supermarkets and small stores, which rapidly shut their doors. Targets included clothing stores, sporting goods, toy stores, bike shops, and branches of cell phone companies. Local media termed the city 'virtually paralyzed'.
This news item was posted on the Russia Today website early yesterday afternoon Moscow time, which was 6 a.m. in New York. It's the first contribution of the day from Roy Stephens.
Demonstrating a new resolve to punish bank misconduct, the European Union fined a group of global financial institutions a combined €1.7 billion (US$2.3 billion) on Wednesday to settle charges that they colluded to fix benchmark interest rates.
The settlement was the largest combined penalty ever levied by the European competition authorities and is the first time that American banks have been fined in a set of interest rate scandals that have also drawn scrutiny from regulators in Britain and United States. Those regulators still have their own investigations underway.
“By European standards, it’s a large fine,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. “It signals that the time when only the U.S. can impose big fines is probably over.”
This New York Times news item was posted on their Internet site early yesterday morning EST...and I found it embedded in a GATA release.
Subprime mortgages, currency tricks, interest rate fixing: Wherever supervisory authorities have probed crooked deals of the past, Deutsche Bank comes up. Now Germany's biggest bank has had to pay its first big fine. It won't be the last.
The statement had already been prepared: "We are attaching the highest institutional importance to ensuring that this type of misconduct does not happen again," the chief executives of Deutsche Bank, Anshu Jain and Jürgen Fitschen, said in a statement shortly before midday on Wednesday. Minutes earlier, the European Commission in Brussels had slapped record fines totaling €1.7 billion ($2.3 billion) on six international banks. Deutsche Bank's share was the biggest by far at €725 million.
It's the first major fine Deutsche Bank has has to pay for its past sins, and it's unlikely to be the last. The bank is embroiled in many lawsuits around the world, most of them related to the time before the 2008 financial crisis.
Several US authorities are targeting the perpetrators of the financial crisis -- banks that bundled and sold the controversial mortgage-backed securities from home loans. JP Morgan Chase alone has to pay $13 billion. Deutsche Bank faces possible claims running into billions of dollars.
It certainly sounds like Deutsche Bank is the German equivalent of JPMorgan Chase. This story was posted on the German website spiegel.de early yesterday evening Europe time...and it's worth reading. It's the second offering of the day from Roy Stephens.
The top editor of the British newspaper The Guardian told Parliament on Tuesday that since it obtained documents on government surveillance from a former National Security Agency contractor, Edward J. Snowden, it has met with government agencies in Britain and the United States more than 100 times and has been subjected to measures “designed to intimidate.”
The testimony by the editor, Alan Rusbridger, gave a public airing to the debate over how to balance press freedom against national security concerns, an issue that became more acute once The Guardian began publishing material leaked by Mr. Snowden in June.
The American and British governments have said the disclosures, which detail how the National Security Agency and its equivalent in Britain, Government Communication Headquarters, gather vast amounts of data, damage national security and help hostile governments. Journalists and transparency advocates have countered that the leak spurred a vital debate on privacy and the role of spy agencies in the Internet age.
This news item from The New York Times on Tuesday is definitely worth reading...and is another contribution from Roy Stephens.
One day after he spoke with leaders in embattled neighbor Japan, Vice President Joe Biden met with officials in China on Wednesday amid an escalating argument between Asian nations that has attracted the attention of the United States.
A meeting between Biden and China’s President Xi Jinping scheduled for only 45 minutes this week turned into a two hour ordeal and ended with the US senator-turned-second-in-command offering brief remarks but answering no questions before a press scrum in Beijing.
When Biden finally emerged from his marathon meeting with President Xi on Wednesday, he appeared “solemn” and “weary-sounding,” according to the New York Times’ Mark Lander, and the Associated Press equated the meeting between men as an “awkward kickoff” for the vice president’s tour of China.
Instead of directly acknowledging the disagreement between China and Japan during the press conference that followed his meeting, Biden said both nations need to make use of "crisis management mechanisms and effective channels of communication” and spoke of a "new model of major country cooperation” that rests on trust.
This article appeared on the Russia Today website late yesterday afternoon Moscow time...and I thank Roy Stephens once again for sending it our way.
Japan’s salaries extended the longest tumble since 2010, increasing pressure on household finances as inflation begins to take root.
Regular wages excluding overtime and bonuses fell 0.4 percent in October from a year earlier, a 17th straight monthly decline, according to labor ministry data released today. Total cash earnings rose 0.1 percent.
The slide in wages threatens living standards as consumers face the prospect of sustained inflation on top of a sales-tax increase in April next year. As a weaker yen helps boost company profits, the focus is turning to salary talks early next year that may determine the success of Prime Minister Shinzo Abe’s bid to reflate the world’s third-largest economy.
This Bloomberg story, filed from Tokyo, was posted on their website just before midnight on Monday evening Denver time. I found it embedded in yesterday's edition of the King Report.
Australia will dive further ‘Down Under’ into debt, as lawmakers reached a deal to do away with a limit. The government can now borrow as much as it wants, and will avoid a shutdown when it reaches the AU$300 billion debt limit on December 12.
In the first nine months of 2013, Australia’s economy expanded slower than forecast, growing only 0.6 percent from the first six months. Growth in 2012 was 2.3 percent, below the anticipated 2.5 percent benchmark set out by economists.
The forecast is gloomy, as unemployment isn’t expected to drop until 2015, a budget deficit over $30 billion is expected for the 2013 fiscal year, and free trade talks with neighbors are breaking down over spy revelations.
This is a Russia Today story that was posted on their Internet site early yesterday afternoon Moscow time, which was very early in the morning in New York. It's the last contribution of the day from Roy Stephens.
1. Investors Intelligence Report: "Stock Market Bears Plunge to Lowest Level in Over 25 Years". 2. Ronald-Peter Stoferle: "This is Why the Price of Gold is Going Ballistic Today". 3. Pierre Lassonde: "This Can Radically Change the Gold Price Overnight". 4. Ron Rosen: "History is About to Repeat...and it Will Shock the World". 5. The audio interview is with Grant Williams.
[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]
Nick Giambruno: Jim, can you give us a summary of the health of the petrodollar in the past, what it looks like now, and what you think it will look like going forward? What is the significance of all this for the dollar's role as the world's premier reserve currency, the international monetary system in general, and the nominal price of gold?
Jim Rickards: The term "petrodollar" is shorthand for an understanding between Saudi Arabia and the United States that the US will guarantee the security of the House of Saud in return for the Saudis agreeing to price oil in dollars, to manage the dollar price of oil, and to redeposit those dollars in the banking system where they can be used to support international lending by major banks.
This lending, in turn, supports purchases of US and Western manufactured goods and agricultural exports by developing economies. From this deal, the US got cheap energy, exports, banking profits, and the ability to operate a fiat currency system. The Saudis got rich and survived. This system has existed implicitly since 1945 and explicitly since 1974 when it was negotiated by Henry Kissinger on behalf of the Nixon administration.
Now the petrodollar system is collapsing for two reasons. The US has abused its privileged reserve currency position by printing trillions of dollars in an effort to create inflation. More recently, President Obama has taken steps to anoint Iran as the regional hegemon of the Middle East, and to ease the way, in stages, toward Iran's possession of nuclear weapons capability. This is viewed as a stab-in-the-back by the Saudis and the Israelis and will lead quickly to Saudi Arabia obtaining nuclear weapons from Pakistan.
This first rate interview with Jim was posted on the internationalman.com Internet site yesterday...and it's your first absolute must read commentary of the day...especially if you're a serious student of the New Great Game.
Fat chance, you might say. And you would probably be right. For 11 consecutive years the yellow one was worth more (a lot more in some years) on December 31 than it had been the previous January. On January 1 this year trading closed at $US1,678/oz. To get back to that over four weeks would require a market miracle.
While you can still find analysts who believe the gold price will stage a meaningful recovery, there might be quite a different story to tell. Perhaps we should stop being too fixated on price (a suggestion that will fall on deaf ears with every punter reading this) and look instead at demand for physical metal (and leave aside the $US250 billion -- $274.4 billion -- in daily trading of various gold instruments).
This commentary was posted in the clear over at the gata.org Internet site yesterday...and it's worth reading.
Media reports claim the U.S. Mint is sharply limiting American Silver Eagle coin orders for the remainder of this year in order to conserve coin blanks for next year’s 2014 Silver Eagle bullion coin program.
Meanwhile, year-to-date sales of American Eagle gold bullion coins at the end of November totaled 800,500 gold ounces, surpassing last year’s total sales of 753,000 ounces.
Despite sales this year, which have already shattered all-time records, November American Silver Eagle bullion coins sales actually declined by 787,000 coins from October sales. U.S. Mint figures show 2.3 million Silver Eagle bullion coins were sold in November, down from 3,087,000 coins in October and 3,159,500 coins sold in November 2012.
This short story was posted on the mineweb.com Internet site on Tuesday...and I thank reader M.A. for sending it along.
The Royal Canadian Mint's Silver Maple Leaf will be getting a new look in 2014. A new finish formed of complex radial lines and a micro-engraved laser mark will become permanent additions to the Mint's flagship silver bullion coin.
The traditional bullion finish on previous Silver Maple Leaf coins will be replaced with radial lines which emanate from the center of the coin. These lines have been precisely machined within microns on the master tooling to ensure consistent die production and coin striking. The specific width and pitch of the lines create a light diffracting pattern which is unique the "next generation" Silver Maple Leaf and unmatched by other bullion products.
A micro-engraved security mark has also been added to the reverse of the coin. A textured maple leaf incorporates the numeral "14" to denote the coin's year of issue and represents the cutting edge in bullion coin security. This technology was also added to the Mint's Gold Maple Leaf bullion coins starting in 2013, as well as its $1 and $2 circulation coins starting in 2012.
It's about time the silver maple leaf got a face lift, as it was starting to look tired. This very short story contains some neat photos, and is a quick read. It was posted on the coinupdate.com Internet site yesterday...and my thanks go out to West Virginia reader Elliot Simon for finding it for us. By the way, the 25-year anniversary silver maple leafs arrived in our store on Monday...and they are quite smashing! I suggest you pick up some before they disappear.
Reporting from the Mines and Money conference in London, Mineweb's Lawrence Williams quotes the Tocqueville Gold Fund's John Hathaway as attributing gold's recent price decline to the liquidation of paper gold that has been caused by the scramble for real metal.
Hathaway is quoted as predicting an "implosion of credit structures" related to gold, and as asserting that any U.S. gold reserve remaining at Fort Knox is "encumbered by so many lending agreements to banks and their clients that having it there physically is meaningless."
Williams' report is headlined "Paper Implosion Bullish for Gold, Says Tocqueville's John Hathaway" and it was posted on the mineweb.com Internet site yesterday. It falls into the must read category...and I found it embedded in a GATA release, and I thank Chris Powell for wordsmithing "all of the above".
December's "Things That Make You Go Hmmm..." letter by Grant Williams of Vulpes Investment Management in Singapore compares the current mechanisms used by central banks and bullion banks to suppress the gold price with the mechanisms used by the London Gold Pool of the 1960s, which, Williams observed, worked fine every day for a long time until suddenly it didn't.
Williams draws heavily on the long Bloomberg News report from a week ago that raised suspicion about the daily gold price "fixing" undertaken by bullion banks in London, a report called to your attention by GATA.
Williams writes: "The last time an effort was made to manipulate the price of gold lower than the market wanted it to be, it ended in a quick 25 percent spike in the price, followed over the next decade by the manifestation of those market forces in no uncertain terms and ending in a blow-off top some 2,332 percent higher than the price at which gold had been held for two decades.
This is your second absolute must read commentary of the day...and top up your coffee before you start, as it's a bit of a read. It's embedded in a GATA release from yesterday...and it includes an excellent preamble by Chris Powell. There's also a Zero Hedge spin on this story. It's linked here...and is courtesy of Ulrike Marx.
U.S. stocks fell Tuesday, with the S&P 500 and the Dow Jones Industrial Average falling for a third straight day on uncertainty over when the Federal Reserve will begin to scale back stimulus and self-fulfilling fears the market was overdue for a pullback from record levels.
The Dow Jones Industrial Average dropped more than 100 points during the session before settling at 15,914.62, down 94.15 points, or 0.6%, taking it well below the psychologically important 16,000 level. The drop was the index’s biggest one-day decline since Nov. 7.
The S&P 500 lost 5.75 points, or 0.3%, to 1,795.15 and the Nasdaq Composite declined 8.06 points, or 0.2%, to 4,037.20.
“I hate to use the words, ‘we’re due,’ but we’ve gone straight up,” said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.
This news item was posted on the marketwatch.com Internet site just after the markets closed in New York yesterday afternoon...and I thank Roy Stephens for today's first story.
It seems some among the mainstream media believe "the economy is improving." In the interests of clearing up that little misunderstanding, we hope the following chart will clarify which "economy" is improving...
That's all there is to this tiny story, but the chart in this Zero Hedge article from yesterday afternoon is a must to see...and I thank reader M.A. for bringing it to our attention.
What keeps us up at night? Well I can’t speak for the others, having spoken too much already to please PIMCO’s marketing specialists, but I will give you some thoughts about what keeps Mohamed and me up at night. Mohamed, the creator of the “New Normal” characterization of our post-Lehman global economy, now focuses on the possibility of a” T junction” investment future where markets approach a time-uncertain inflection point, and then head either bubbly right or bubble-popping left due to the negative aspects of fiscal and monetary policies in a highly levered world.
Investors are all playing the same dangerous game that depends on a near perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth. The Fed, the BOJ (certainly), the ECB and the BOE are setting the example for global markets, basically telling investors that they have no alternative than to invest in riskier assets or to lever high quality assets. “You have no other choice,” their policies insinuate. “Get used to negative real interest rates, move out on the risk spectrum and in the process help heal the real economy,” they seem to command.
This commentary was posted on the Zero Hedge website early yesterday morning EST...and my thanks go out to Manitoba reader Ulrike Marx for her first offering in today's column.
Overnight, The Wall Street Journal reported a financial factoid well-known to regular readers: namely that as a result of a broken system that ever since the LTCM bailout has encouraged banks to become take on so much risk they become systematically important (as in their failure would "end capitalism as we know it"), and thus Too Big To Fail, there has been an unprecedented roll-up of existing financial institutions especially among the top, while the smaller, less "relevant", if far more prudent banks have been forced out of business. "The decline in bank numbers, from a peak of more than 18,000, has come almost entirely in the form of exits by banks with less than $100 million in assets, with the bulk occurring between 1984 and 2011. More than 10,000 banks left the industry during that period as a result of mergers, consolidations or failures, FDIC data show. About 17% of the banks collapsed."
The point here is that the number of banks is largely irrelevant: it is obvious that the big will keep on getting bigger, and the Big 5 banks will do all in their power to either acquire their profitable competition or put everyone else out of business. However, the far bigger question is what happens to bank deposits once the Fed start to taper, ends QE or outright unwinds its balance sheet, which ultimately would soak up trillions from bank deposits. Because if there is one thing that is clear is that without the Fed, and without commercial bank loan creation (which has been non-existent in the past 5 years), bank balance sheet would be exactly where they were the day Lehman died.
Finally, one does not need to go any further than the following chart from the OCC [See Table 9, Page 36 for the precious metals. - Ed] showing total bank derivative holdings for all US banks and just the Top 4. The punchline: just the 4 biggest U.S. banks hold $217.5 trillion, or 93% of the total $233.9 trillion in derivatives.
This Zero Hedge piece is worth spending a few minutes on...and I'll have more on the precious metal derivatives in The Wrap. This is the second news item in a row from Ulrike Marx.
As somewhat expected - though hoped against by many Detroit union workers - Judge Steven Rhodes appears to have confirmed Detroit is eligible for bankruptcy protection (after pointing out that the city's accounting was accurate...and it is indeed insolvent) making this the largest ever muni bankruptcy.
The city will now begin working toward its next major move - the submission of a plan to re-adjust its more than $18 billion in debt - including significant haircuts for pension funds and bondholders. With Detroit as precedent, we can only imagine the torrent of other cities in trouble that will be willing to fold.
He did provide an "out" though: Rhodes warns the city that just because pension rights can be impaired, doesn't mean he will approve a plan with steep cuts.
This is another article from Zero Hedge, this one from late yesterday morning EST...and I thank reader M.A. for his second contribution to today's missive. There was also a 2-page story about this in The New York Times yesterday...and it's worth your while as well. It's courtesy of Roy Stephens.
Grant Williams "pulls no punches" in this all-encompassing presentation as the "Things That Make You Go Hmmm" author reflects on what is behind us and looks ahead at the ugly reality that we will face when "the impurities of QE are finally flushed from the system."
Central bankers of today have "changed everything" he chides, "in ways that will ultimately end in disaster." Following extraordinarily easy monetary policies across all of the world's central banks, Williams explains why "we are now near the popping point of the 3rd major bubble of the last 15 years," each bigger than the last.
The only way Janet Yellen avoids being at the helm when this ship goes down is to blow an even bigger bubble than Bernanke's government bond experiment, "which is highly unlikely." From how QE works, why many don't "feel" wealthy anymore, to the fact that "the geniuses that gave this thing life, don't have the guts to kill it," Williams warns, ominously, "the bills have come due on the blissful latest 30 years."
This absolute must watch 32-minute video is another piece from the Zero Hedge website yesterday. Grant's presentation begins at the 2:00 minute mark...and I thank reader Joe Nordgaard for finding it for us.
Households are pulling money out of their savings accounts at the fastest rate in modern record, according to Bank of England figures.
In the past year, families have withdrawn £23bn from their long-term savings accounts to convert into cash and put into current accounts - the equivalent of around £900 for every household in the country.
It is the most dramatic evidence yet that Britons are paying for the rising cost of living by raiding their savings accounts.
No surprises here, as this is happening in just about every country in the Western world at the moment. This SkyNews story was picked up by the uk.news.yahoo.com Internet site early yesterday morning GMT...and my thanks go out to West Virginia reader Elliot Simon.
The cost of insuring British debt against default has fallen below the levels for the US, Switzerland, Japan and every major eurozone state except Germany, marking a dramatic change of view on UK’s economic prospects.
Credit default swaps (CDS), used for insuring and trading sovereign debt, are “pricing” British bonds as if they were top-notch AAA quality. This comes amid growing speculation that rating agencies may soon shift gears and start to upgrade the UK.
The CDS contracts for the UK have been on a downward trend for months as growth picks up, cutting below countries that still have AAA ratings such as Austria, Australia and Canada.
As you already know, dear reader, computer algorithms and high-frequency trading can set a price/value on anything that they choose to...including affecting credit ratings if necessary. This Ambrose Evans-Pritchard article was posted on the telegraph.co.uk Internet site on Monday evening...and my thanks go out to Roy Stephens once again. It's worth reading.
A committee of MPs challenged the existing system of oversight for the security services by asking the head of MI5 to justify his claims that the Guardian has endangered national security by publishing leaks from the former NSA contractor Edward Snowden.
In an unprecedented step, Keith Vaz, the chairman of the home affairs select committee, announced that spy chief Andrew Parker had been summoned to give evidence in public to the Commons committee next week.
The decision was taken at a private session of the select committee on Tuesday before the body heard evidence from Guardian editor Alan Rusbridger seeking to justify the Guardian's decision to publish a string of stories based on US and UK intelligence agency files leaked by Snowden to the media.
This very interesting news item was posted on The Guardian's website late yesterday evening GMT...and it's another offering from Roy Stephens, for which I thank him.
Ukrainian President Viktor Yanukovych prevented a palace coup against his government on Tuesday. His party managed to see off a vote of no confidence initiated by opposition leader Vitali Klitschko. Yanukovych didn't even bother to show up to the turbulent debate.
When they heard that the opposition had lost the vote of no confidence on Tuesday, thousands of anti-government protestors gathered outside Ukraine's parliament in Kiev vented their anger with deafening chants of "Shame, shame!" They had moved as close to the building as police roadblocks let them. Buses blocked the entrances to parliament, while a large contingent of police cordoned off a wider area.
Inside, the plans of the opposition leadership to force Yanukovych's prime minister, Nikolai Azarov, out of office went up in smoke. A total of 187 MPs voted for the motion of no confidence introduced by the alliance led by boxing world champion Vitali Klitschko. That was nine more than the 178 that had been pledged to the opposition before the vote. Even a member of Yanukovych's ruling Party of Regions voted against the government.
This article was posted on the German website spiegel.de very early yesterday evening Europe time...and it's another contribution from Roy Stephens.
the Netherlands, our close cultural kin.
But before we all flagellate ourselves – let alone think of copying the Shanghai success formula – just remember one thing. There is a body of scholarship showing that the collapse of the fertility rate to dangerously low levels across east Asia is the direct consequence of school cramming and "education fever".
This is well-known to demographers and those who follow the Far East closely, but less known in the West. The CIA World FactBook says fertility rates have fallen to: Hong Kong (1.04%), Singapore (1.10), Taiwan (1.15), Japan (1.20), Korea (1.22%). These figures may be a little too low. Japan and Singapore have seen a small bounce lately.
But the picture is clear enough, and Shanghai is thought to be around 1.08 percent at this point, a harbinger of things to come across China's eastern seaboard. They are all far below the stability level of 2.1 percent. The whole of east Asia faces an acute ageing crisis. It has already begun in Japan.
This blog from Ambrose Evans-Pritchard yesterday is a very interesting read and it's the second-last offering of the day from reader Roy Stephens.
United States Vice President Joe Biden said during a tour of Asia on Tuesday that the US is “deeply concerned” about recent efforts by China to re-draw airspace surrounding a series of islands between Taiwan and Japan.
"We, the United States, are deeply concerned by the attempt to unilaterally change the status quo in the East China Sea," Biden said during a Tuesday news conference alongside Japanese Prime Minister Shinzo Abe.
The airspace in that area has traditionally been controlled by Japan, but claimed by the Chinese as well. Late last month China proclaimed a portion of that area in the East China Sea as within their own air defense zone, prompting international tensions to tighten between all those involved in the Pacific Rim.
This Russia Today news item was posted on their Internet site early on Tuesday evening Moscow time, which was late yesterday morning in New York. I thank Roy Stephens for his final offering in today's column.
British Prime Minister David Cameron faced demands for the return of priceless artifacts looted from Beijing in the 19th century on Wednesday, the last day of his visit to China.
"When will Britain return the illegally plundered artifacts?" the organisation asked, referring to 23,000 items in the British Museum which it says were looted by the British Army, part of the Eight-Nation Alliance that put down the Boxer Rebellion at the end of the 19th century, a popular uprising against the incursion of European imperial powers in China.
To the Chinese, the ransacking of the Forbidden City, and the earlier destruction of the Old Summer Palace in Beijing in 1860 -- about which one British officer wrote: "You can scarcely imagine the beauty and magnificence of the places we burnt. It made one?s heart sore to burn them" -- remain key symbols of how the country was once dominated by foreign powers.
Well, dear reader, if you want to know one of the reasons that Britain gave Hong Kong back to China without a whimper, this is one of them...along with the other opium war that occurred earlier in the 19th century. This absolute must read commentary was posted on the france24.com Internet site early this morning...and I thank South African reader B.V. for sliding it into my in-box in the wee hours of this morning. That link to the "opium war" in this paragraph is a must read as well, as it includes China's connection to silver, amongst other things. We haven't heard the last of this, and one has to wonder what new direction China will go from here, as they're obviously turning up the heat on many fronts now.
Huawei Technologies Co., China’s largest maker of phone network equipment, said there is no basis for U.S. scrutiny of its contract to supply broadband equipment for a project in South Korea.
“Our gear is world-proven and trusted, connecting almost one-third of the world’s population,” Scott Sykes, a spokesman for Shenzhen-based Huawei, said in an e-mail today. “The motivations of those that might groundlessly purport otherwise are puzzling.”
U.S. Senator Dianne Feinstein, chairman of the Select Committee on Intelligence, and Senator Robert Menendez, who leads the Committee on Foreign Relations, sent a letter last week to Defense Secretary Chuck Hagel, Secretary of State John Kerry and James Clapper, the director of national intelligence. The lawmakers expressed concern that Huawei’s involvement creates risks for the U.S.-South Korea alliance, including for U.S. troops based on the peninsula.
If this isn't a case of the pot calling the kettle black, I don't know what is. This Bloomberg news item was posted on their website early yesterday evening Mountain Time...and I thank reader 'David in California' for bringing it to my attention, and now to yours.
1. Grant Williams: "Stunning Event is About to Completely Alter the War on Gold". 2. Jean-Marie Eveillard: "There Are Absolutely Terrifying Risks Facing Global Markets". 3. Ron Rosen: "60-Year Market Veteran - This Will Send Gold and Oil Soaring".
[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]
According to World Gold Council, gold is entering the country unofficially through India’s porous borders helped to meet pent-up demand, together with an influx of recycled gold that was drawn out by higher prices and promotions offered by retailers during the third quarter to end-September.
“Reports that a good market for 10-tola (100 grams) bars is re-emerging, due to the relative ease with which they can be concealed, reinforce this view,” the WGC said in a report last month.
The WGC report also noted that Thailand is being used as a route to channel gold into other markets, notably India and Vietnam.
“Investigations and seizures by financial intelligence agencies in the recent past have revealed that smugglers are now flying consignments of gold to Bangladesh and Nepal and then using couriers to carry them across the border,” the report said.
No story surprises me regarding gold smuggling into India. This one was posted on the firstpost.com Internet site yesterday...and it's worth reading. My thanks go out to Ulrike Marx once again.
Gold smugglers are adopting the methods of drug couriers to sidestep a government crackdown on imports of the precious metal, stashing gold in imported vehicles and even using mules who swallow nuggets to try to get them past airport security.
"Gold and narcotics operate as two different syndicates but gold smuggling has become more profitable and fashionable," said Kiran Kumar Karlapu, an official at Mumbai's Air Intelligence Unit.
"There has been a several-fold increase in gold smuggling this year after restrictions from the government, which has left narcotics behind."
From travellers laden head-to-toe in jewellery to passengers who conceal carbon-wrapped gold pieces in their bodies - in the mistaken belief that metal detectors will not be set off - Indians are smuggling in more bullion than ever, government officials say, driven by the country's insatiable demand for the metal.
This news item was posted on the Economic Times of India website this morning IST...and it's another contribution from Ulrike Marx.
Korea Exchange Inc. will begin physical gold trading on March 24 as Park Geun Hye’s government seeks to wring tax revenue out of a market that’s dominated by illegal transactions.
The exchange will use 1 gram units of bullion of 99.99 percent purity to spur liquidity and delivery will be in 1 kilogram bars, the bourse said in a statement today. Trading will start on a test basis for two weeks from Feb. 10 before full operations, it said.
South Koreans hold seven times as much gold as the 104.4 metric tons in their central bank’s vaults and the majority of trading is on the black market to evade import duty and value- added tax, according to government estimates. Park, who marks the one-year anniversary of her election as president this month, scaled back welfare pledges in September as her administration forecast the first drop in revenue in four years.
This Bloomberg story found a home over at the mineweb.com Internet site yesterday...and it's the final contribution of the day from Ulrike Marx.
For gold and silver bullion buyers, the question arises of where to take delivery of and safeguard your precious metals.
Taking physical delivery of your gold or silver is often the most rewarding part of the purchasing experience, as it gives you, the bullion investor, a fuller understanding of the real value of tangible monetary assets.
As one of the industry's leading bullion dealers, we at GoldSilver.com pride ourselves on investing and buying bullion right alongside our customers.
Because we are such proponents of taking physical delivery first, we have compiled a few creative storage solutions based on voluntary, anonymous, customer feedback.
This very interesting commentary was posted on the 24hgold.com Internet site on Monday...and it's definitely worth reading. My thanks go out to Elliot Simon for sending it our way.
A GATA supporter wrote the other day to the investor relations officer of a silver mining company in which he is invested to complain about the company's seeming indifference to the manipulation of the monetary metals markets. He soon received this reply:
"Thanks for your email. We share your frustration about the silver price. However, we don't attempt to take action against the bullion bankers for manipulation because 1) it is primarily the responsibility of the U.S. Commodity Futures Trading Commission, not the companies, to regulate these markets, so the companies would have to sue the bullion banks too; 2) manipulation is just too difficult to prove; 3) such a lawsuit would take many years and cost many millions of dollars with no certainty as to the outcome; and 4) every company invests its cash where it thinks it can create the biggest return to shareholders.
"In our case, we think investing shareholder money in things we can control, such as growing our business and our profits, is of greater benefit to our shareholders than investing in things we cannot control, such as suing the bullion bankers and the CFTC, both of which have far more financial and human clout than we companies do. They would just outspend us and stall for time."
This is the biggest bulls hit cop-out I can think of. There are a multitude of ways that the silver/gold mining industry [or a group of its members] can take a stand without a lawsuit of any kind...and it would put enormous pressure on the CFTC and the bullion banks involved. Of course it would be helpful if the World Gold Council and The Silver Institute would get onside on this...but these two organizations are there for precisely the purpose of insuring that this sort of action is never taken. All current and past directors of these organizations sold out to the dark side of The Force long before they were "invited" to serve in them.
I found this story on the gata.org Internet site last evening...and it's a must read for sure.
At least three U.S. regulators will meet on Dec. 10 to adopt the final version of the Volcker rule banning banks from making speculative bets with their own money, according to three people familiar with the planning.
The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are scheduling meetings to act on the rule on that date, said the people, who requested anonymity because the schedule hasn’t been announced.
Two other agencies that need to approve the rule -- the Commodity Futures Trading Commission and the Securities and Exchange Commission -- are trying to arrange Dec. 10 votes as well, three other people familiar with that effort said. The agencies are not required to approve the rule at the same time.
The agencies’ approval would be the final stage in the process of adopting the Volcker rule, a centerpiece of the 2010 Dodd-Frank Act designed to prevent a repeat of the 2008 global credit crisis. The final version is also expected to extend the rule’s compliance dates, which was sought by Wall Street banks and trade groups.
This must read Bloomberg story was posted on their website yesterday afternoon MST...and I found it embedded in a GATA release.
Goldman Sachs and JPMorgan Chase have finally overcome a regulatory rebuke that had been hanging over both banks since the Federal Reserve performed stress tests this year on large financial firms.
In March, Goldman and JPMorgan passed the tests, which are held annually and are intended to assess whether banks have the financial strength to get through sharp downturns in the economy and the markets. But in an unexpected reproach, the Fed said that it had identified significant weaknesses in the plans that JPMorgan and Goldman had submitted to show what might happen to their capital during periods of stress.
The regulator told Goldman and JPMorgan to come up with improved capital plans, and it threatened to stop the banks from paying out dividends and performing stock buybacks if the perceived flaws were not addressed.
On Monday, the two banks effectively put the matter behind them when the Fed announced that it did not object to plans that the firms had resubmitted.
This article was posted on The New York Times website very early yesterday evening EST...and is courtesy of Phil Barlett.
Bernard Madoff's longtime lieutenant testified on Monday that several former colleagues were deeply enmeshed in Madoff's decades-long Ponzi scheme, using everything from fake trades to a refrigerator to hide the truth about the fraud.
Frank DiPascali, Madoff's one-time chief financial officer, told jurors in New York federal court that the scheme stretched back "as far as I can remember," to his earliest days at the firm as a 19-year-old in the mid-1970s.
DiPascali, 57, is the government's star witness in its case against five former Madoff employees charged with abetting Madoff's fraud. It is the first criminal trial stemming from the scheme, which imploded in late 2008 and cost investors an estimated $17 billion.
This Reuters piece was picked up by The New York Times website early yesterday evening as well...and it's also the second offering in a row from reader Phil Barlett.
The most important chart that nobody at the Fed seems to pay any attention to, and certainly none of the economists who urge the Fed to accelerate its monetization of Treasury paper, is shown below: it shows the Fed's total holdings of the entire bond market expressed in 10 Year equivalents (because as a reminder to the Krugmans and Bullards of the world a 3 Year is not the same as a 30 Year).
As we, and the TBAC, have been pounding the table over the past year, the amount of securities that the Fed can absorb without crushing the liquidity in the "deepest" bond market in the world is rapidly declining, and specifically now that the Fed has refused to taper, it is absorbing over 0.3% of all Ten Year Equivalents, also known as "High Quality Collateral", from the private sector every week. The total number as per the most recent weekly update is now a whopping 33.18%, up from 32.85% the week before.
You've already read all the text of the Zero Hedge piece from early yesterday afternoon EST, but it's the chart that makes the story worth the trip...and I thank Manitoba reader Ulrike Marx for her first offering in today's column.
Another week another record high.
“To understand the Great Depression is the Holy Grail of macroeconomics. Not only did the Depression give birth to macroeconomics as a distinct field of study, but also—to an extent that is not always fully appreciated—the experience of the 1930s continues to influence macroeconomists' beliefs, policy recommendations, and research agendas. And, practicalities aside, finding an explanation for the worldwide economic collapse of the 1930s remains a fascinating intellectual challenge.” Ben. S Bernanke, Essays on the Great Depression, 2000
No longer is the understanding of the Great Depression the “Holy Grail” of economics.” It’s been supplanted by understanding today’s extraordinary ongoing global Credit and speculative Bubble cycles.
Dr. Bernanke and others focus primarily on what they believe were policy errors during the Thirties, with surprisingly little attention paid to “Roaring Twenties” policies and excesses. If only the Fed had understood the need to open up the monetary floodgates, they claim. Fed money printing could have been used to recapitalize the banking system, rectify insufficient demand and reflate consumer and asset prices. The Great Depression could have and should have been avoided.
Doug must have posted this on the prudentbear.com Internet site very late on Friday, as I checked for it twice earlier that evening so I could include it in my Saturday missive, but it wasn't there. But here it is now...and it's a must read.
Violent clashes broke out in the Ukrainian capital on Sunday as protesters stormed the Kiev mayor’s office in the biggest display of anger over the president's refusal to sign an agreement with the European Union.
Hundreds of thousands of protesters defied a government ban on public rallies to mass on Kiev’s Independence Square on Sunday, demanding that President Viktor Yanukovich resign.
Police initially allowed the demonstration to rally peacefully, but when a few thousand protesters tried to storm the nearby presidential administration building, riot police used tear gas and truncheons to drive them back. Dozens of people with what appeared to be head injuries were taken away by ambulance.
Reporting from the city hall in Kiev, FRANCE 24’s Eastern Europe correspondent Gulliver Cragg said the storming first appeared to be the work of a small rebel group that had broken away from the main, peaceful march.
This news item was posted on the france24.com Internet site sometime yesterday...and my thanks go out to Roy Stephens for his first contribution to today's column. The New Great Game is still on between Russia and the West, and the people of the Ukraine are paying the price for that.
Around 5,000 opposition protestors gathered in the center of Kiev overnight. The pro-European demonstrators erected tents and barricades on Independence Square. The opposition, centered around boxer Vitali Klitschko, now wants to blockade important administrative buildings.
Mass protests in Ukraine widened further on Monday as confrontations between opposition protestors and government forces intensified. With more than 100 people being injured in clashes over the weekend, German Chancellor Angela Merkel has cautioned against violence at peaceful demonstrations. She urged Ukraine President Viktor Yanukovych and his government to "do everything possible to always protect freedom of expression and the right to peaceful demonstrations."
Government spokesman Steffen Seibert said the pro-European rallies in Ukraine were sending out a "very clear message," and he added: "It is to be hoped that President Yanukovych perceives that message." Seibert added that the protestors also have to take responsibilities for their own responsibilities, "so that there is no escalation."
This article on the situation in the Ukraine was posted on the German website spiegel.de yesterday during the Europe lunch hour...and its also courtesy of Roy Stephens. The original headline read "Opposition Protestors in Ukraine Erect Tent City in Kiev Overnight".
Israeli Prime Minister Benjamin Netanyahu claims that Iran is after the physical destruction of Israel and wants to create a new Holocaust. This is a false claim. The meaning of the statements by Iran's Supreme Leader Ayatollah Ali Khamenei and former President Mahmoud Ahmadinejad is that the Islamic Republic seeks a referendum in which all the Palestinians, as well as Jews and Christians of the historical Palestine, would participate, and through which the "government" of Israel would be de-established.
The reality is that Iran does not present an existential threat to the people of Israel. It is, in fact, Israel that is a serious threat to Iran.
Former Israeli Defence Minister Ehud Barak, anticipated the extent of a retaliatory response by Iran to an Israeli strike on its nuclear facilities to be limited to an estimated "500 death". "I don't think the result would be a world war or even a regional war," Yuval Steinitz, Israeli Minister of International Relations and Minister of Strategic Affairs, said on June 23. "I think Iran's possibilities to retaliate are very limited. It's also not in their interest to start a drawn-out war with the US. After all, their relations in the region are rather sensitive. I suppose there would be a response of two or three days of missile fire, perhaps even on Israel, on American bases in the Gulf. But I don't think it would be more than that - very limited damage."
The message is twofold: Israel is contemplating a military strike on Iran and it is, therefore, Israel, not Iran that is a menace to the security of a sovereign nation. Moreover, in the event of a military strike, Iran would be unable to present a serious threat to the security and the existence of Israel.
This commentary was posted on the aljazeera.com Internet site last Friday...and I thank South African reader B.V. for bringing it to our attention. This is definitely worth reading, especially for students of the New Great Game.
Australia's spy agency offered to share data about citizens with key partners, a 2008 document revealed by U.S. secrets-leaker Edward Snowden indicated.
The document included notes of a discussion among Australia and four partners on whether to share "medical, legal or religious information," and raised concern among rights advocates that the intelligence agency, then-known as the Defense Signals Directorate, may have been operating beyond its legal mandate, the British publication The Guardian reported Sunday.
The Australian intelligence agency, now called the Australian Signals Directorate, indicated it could share material without some of the privacy restraints imposed by other countries, the leaked document indicated.
"DSD can share bulk, unselected, un-minimized [raw] metadata as long as there is no intent to target an Australian national," notes from an intelligence conference said. "Unintentional collection is not viewed as a significant issue."
This UPI story, filed from Canberra, was posted on their Internet site yesterday...and it's the third news item of the day from Roy Stephens.
Protesters took to the streets of the Thai capital Bangkok again on Monday as a campaign to force the country’s Prime Minister Yingluck Shinawatra from power entered its second week.
Riot police fired rounds of teargas at demonstrators as they surged around barricades surrounding Government House, which houses Yingluck’s offices.
A Thai court issued an arrest warrant for protest leader Suthep Thaugsuban on charges of "insurrection" Monday for trying to topple the government, police said in a televised statement. The charges can carry a lifetime prison term or a death sentence, although capital punishment is rarely carried out in Thailand.
The renewed protests come after a weekend of unrest in the capital, which claimed the lives of at least three people and left dozens others injured. The violence is the latest turn in a conflict pitting Bangkok’s urban middle class and royalist elite against the mostly poor, rural supporters of Yingluck and her brother, Thaksin Shinawatra, a populist former prime minister ousted in a 2006 military coup.
This news item was posted on the france24.com Internet site yesterday...and is another offering from Roy Stephens.
In an era when the Obama administration has been focused on new forms of conflict — as countries use cyber-weapons and drones to extend their power — the dangerous contest suddenly erupting over a pile of rocks in the East China Sea seems almost a throwback to the Cold War.
Suddenly, naval assets and air patrols are the currency of a shadow conflict between Washington and Beijing that the Obama administration increasingly fears could escalate and that American officials have said could derail their complex plan to manage China’s rise without overtly trying to contain it. As in the Cold War, the immediate territorial dispute seems to be an excuse for a far larger question of who will exercise influence over a vast region.
The result is that, as the Chinese grow more determined to assert their territorial claims over a string of islands once important mainly to fishermen, America’s allies are also pouring military assets into the region — potentially escalating the once obscure dispute into a broader test of power in the Pacific.
This 2-page essay, co-filed from Beijing and Tokyo, was posted on The New York Times website on Sunday sometime...and I consider it well worth reading. It's another contribution from Roy Stephens, for which I thank him.
Beijing's recent establishment of a new air defense zone in the East China Sea is exacerbating long-running disputes with its neighbors Japan and Taiwan -- and threatens to draw the U.S. military into a larger regional conflict.
If it were only a matter of distance, the solution to a dispute over a small group of hotly contested islands in the East China Sea would be simple. Taiwan, which is just 200 kilometers (125 miles) away from the islands, would take the prize. The Chinese mainland is farther off, at 330 kilometers away, and the Japanese island of Okinawa even more distant, at 400 kilometers. Why then shouldn't small Taiwan take control of the five uninhabited islands and three rock outcroppings, known as the Diaoyu in China and Senkaku in Japan?
While Taiwan does lay claim to the islands, so do its more powerful neighbors, China and Japan. And the dispute is, unfortunately, not about distance. It has to do with influence and natural resources, with hegemony and nationalism, and with bitter historical memories and fresh, global aspirations -- in short, it's a toxic mixture of geopolitics. In fact, a military crisis is brewing in East Asia -- one that is being played out hundreds of thousands of kilometers away from these desolate islands.
Here's another essay on this subject. This one appeared on the spiegel.de Internet site yesterday...and it's the second last contribution of the day from Roy Stephens.
The latest flurry of claims, counterclaims and saber-rattling over the disputed islands between China, Japan and South Korea has been made more serious by the decision of the U.S. government to challenge China's assertion of control with a flight of B-52 bombers.
It has been for some years a commonplace for historically minded commentators to suggest that the rise of China is reminiscent of the rise of the Kaiser's Germany in the years before 1914.
In its different times, each country enjoyed dramatic economic growth, equally dramatic increases in military budgets, an assertive foreign policy and a deep resentment that other countries had and continued to conspire to keep them down.
The sudden crisis that has loomed over the islands that Japan calls the Senkakus and that China calls the Diaoyus (not forgetting the reef Koreans call Ieodo) thus triggers memories of the various diplomatic spats that erupted in the Balkans, Morocco and elsewhere in the years before 1914.
This commentary by UPI editor emeritus Martin Walker, filed from London, was posted on their Internet site just after midnight GMT on Monday...and is the final contribution of the day from Roy Stephens, for which I thank him. It's also worth reading as well.
1. John Embry: "Get Ready For a Worldwide Depression and Historic Social Unrest". 2. James Turk: "Metals War Rages and Today's Plunge in Gold and Silver". 3. Richard Russell: "Gold Smash and Danger For a Major Market". 4. Egon von Greyerz: "The Frightening Black Swan That Will Shock the World". 5. Robert Fitzwilson: "The Central Planners Most Terrifying Nightmare". 6. Michael Pento: "The Most Remarkable Predictions For the Year 2014". 7. Dr. Paul Craig Roberts: "U.S. Corruption and World Interference Failing". 8. KWN Special: "The Most Remarkable News In The Gold & Silver Markets". 9. The first audio interview is with Egon von Greyerz...and the second audio interview is with Dr. Paul Craig Roberts.
[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]
Despite the beginning of the wedding season in November, gold imports have remained low. This has resulted in a fall in gold jewellery sales, which have gone down by 25% in comparison with last year. The economic slowdown and barriers imposed on gold imports by the Centre since June 2013 have led to lower imports for the last 3 months.
According to the latest figures, October saw the fifth lowest gold imports for a month in Gujarat in the last five years. Only 203kg was imported in November and 127kg in September. Imports in November this year are less than one percent of imports in the same period last year. In November 2012, 18.998 metric tonnes (MT) of gold was imported in the state.
"These are pre-placed orders, from much before the restrictions came into effect. Imports will continue to remain low in the coming months as bullion traders are being cautious," said Monal Thakkar, president, Amrapali Industries.
Silver imports recorded a 4-month high in 2013. This year, silver imports in November are at 163.849 metric tonnes compared to 0.137 MT of silver imports in November last.
This news item, filed from Ahmedabad, was posted on The Times of India website during their lunch hour today IST...and it's courtesy of Ulrike Marx.
Back in October gold researcher Koos Jansen and Jan Skoyles of The Real Asset Co. in London called attention to commentary by Zhang Jie, deputy editor of the Chinese publication Global Finance and a consultant to the China Gold Association, which cited the Federal Reserve's manipulation of the gold market to protect the U.S. dollar's standing as the world reserve currency.
Jansen has obtained a much better English translation of this Chinese commentary, and it includes this observation about gold leasing by Western central banks: "Through continuous gold leasing the gold in the market can be circulated and produce derivatives, creating more and more paper gold. This is very significant for the United States. Gold leasing is a major tool for the Federal Reserve and other central banks in the West to secretly control and regulate the gold market, creating gold credit derivatives and global credit conflict."
The new translation, headlined "Gold Leasing Is a Tool for the Global Credit Game," is posted at Jansen's Internet site.
There's a lot more in this GATA release than what is mentioned in the above three paragraphs, as Chris Powell has a fair amount to say...and a few other links as well. This is certainly worth your time.
Maintaining grossly disproportionate positions in the gold futures market, JPMorgan Chase is manipulating the market and governments may be part of the manipulation, Casey Research's chief economist, Bud Conrad, tells Dan Ameduri of Future Money Trends in an interview done a few days ago at the Metals and Minerals Investment Conference in San Francisco and posted today.
Conrad adds that a country that is accumulating gold -- presumably China -- might want to smash the futures price down to facilitate its acquisition of real metal, as by liquidation of shares in the gold exchange-traded fund GLD, a speculation recently offered by Eric Sprott of Sprott Asset Management in Toronto and William Kaye of Pacific Group in Hong Kong.
Conrad's interview with Ameduri is 11 minutes long and it was posted at Future Money Trends Internet site last Friday. I thank Chris Powell for wordsmithing 'all of the above'...and this interview is a must watch.
German financial regulator BaFin has started an official investigation of suspected manipulation of benchmark gold and silver prices set by a number of international banks.
The information regarding the investigation was reported by the Wall Street Journal Deutschland. WSJ journalists got an official confirmation from a BaFin spokesman: "Apart from Libor and Euribor, BaFin is also looking into other benchmark setting procedures at individual banks such as for gold and silver prices."
During the last year, the biggest global banks have been found guilty of rigging benchmark lending rates and manipulating the world's interest rates derivatives market, which involves trading in contracts that have a total notional value of tens of trillions of dollars.
This is another story I found embedded in a GATA release yesterday. This one was posted on the voiceofrussia.com Internet site last Friday. The actual headline reads "Germany's Regulators Investigate Manipulation in the Gold Market".
Economist and former banker Alasdair Macleod writes that Middle Eastern oil exporters are likely to turn away from the U.S. dollar and toward Europe and Asia as the United States reduces its purchases of oil from abroad.
Whether those oil exporters put more of their foreign exchange surpluses into gold, Macleod writes, may have as much impact on the gold and currency markets as what China does. His commentary is headlined "Arab Gold" and it's posted at his financeandeconomics.org Internet site. This is another item I found in a GATA release yesterday.
Four Gulf Cooperation Council countries will announce the introduction of a common currency by the end of December, a Bahraini daily reported on Sunday.
The common currency to be announced by Bahrain, Kuwait, Qatar, and Saudi Arabia will be pegged to the dollar, a source told the Akhbar Al Khaleej newspaper.
"The decision to peg the Gulf currency to the dollar is political and is not related to the economy," the source said.
"From an economic point of view, it would have been better to peg the new currency to a basket of currencies because the volume of trade of the Gulf states with the countries of the European Union is much larger than that of their commerce with the United States. Gulf exports of oil to the European Union are estimated to constitute about 70 per cent of European imports," the source said.
This story was posted on the gulfnews.com Internet site on Sunday...and is another article I found over at the gata.org website on Sunday.
How studiously Western journalists strive to miss the crucial point about gold.
One of them, Matthew Hart, who is touring news media outlets to promote his new book about the monetary metal, whose excerption in Vanity Fair magazine was brought to your attention a couple of weeks ago went on National Public Radio in the United States for five minutes on Sunday and lamented the extreme human and environmental costs of getting the metal out of the ground.
NPR's interviewer, Scott Simon, eagerly suggested that the metal isn't worth the trouble: "Hearing what it takes to get gold out of the ground might make people look down at, let's say, a gold wedding band on their finger and wonder if it's really worth it."
Yes, Mr. Simon, let's stop mining gold and continue to allow central banks to set the value of all capital, labor, goods, and services in the world -- and not only to set those values but to set them surreptitiously and undemocratically.
Here is another on-the-money commentary by GATA's secretary/treasurer Chris Powell. There are various links in this GATA dispatch as well...and it's worth reading.
Peter Munk built Barrick Gold Corp. into the world’s largest gold producer by expanding into Africa and South America. Now former Goldman Sachs Group Inc. President John Thornton is betting on China to help revive the beleaguered company’s fortunes.
Thornton, 59, currently co-chairman, already helps to oversee long-term corporate strategy. As part of that remit, he’s trying to establish partnerships with Chinese companies that may include investment in Barrick and future mining projects, said the people, who asked not to be identified discussing a private matter. China Investment Corp., the country’s largest sovereign wealth fund, is among potential partners Barrick has met with, the people said.
The leadership change at Barrick comes at the end of a difficult year for the company. It has lost 45 percent of its market value in 2013 while debt levels have soared after a slump in gold prices, rising operating expenses and a cost blowout at an $8.5 billion mining project in the Andes.
With a Goldman Sachs guy running Barrick, it's a sure thing that whatever he does won't be in the best interests of its shareholder, or the precious metals they dig out of the ground. This Bloomberg news item was posted on their Internet site yesterday afternoon Denver time.
Noting that the price of gold is starting to fall below the cost of production, Zero Hedge observed last night: "Not even Bernanke, Yellen, or all the paper gold exchange-traded funds in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill and when demand, especially by China, is still in the hundreds of tons each year."
The Zero Hedge commentary speculates about the gradual shutdown, company by company, of the gold mining industry as production costs cannot be recovered.
Of course there's no telling when enough of the world outside of a few central banks will wise up to paper gold and when the central banks that have been leasing and swapping their metal surreptitiously for price suppression will run out of metal they're prepared to lose, just as the central banks operating the London Gold Pool reached that threshold in March 1968. The next moment of transition might be many years away, or it could come tomorrow. (Most likely it will be a Sunday night U.S. Eastern time, which is when such things are usually sprung on the world by its unelected rulers.)
What may be most remarkable about the present is the silence of the gold mining industry and its supposed representative, the World Gold Council -- silence that, as the Zero Hedge commentary suggests, soon may be dead silence. [That applies in spades to the members of The Silver Institute as well. - Ed]
This is another excellent commentary by Chris...and the link to the Zero Hedge piece is embedded. It's a must read for sure.
We've focused a great deal on gold over the years, and we've taken a lot of heat in the last two, during which the price of gold has dropped by a third. Are we fanatics refusing to face reality, or are we doing the right thing, staying the course through thick and thin?
BIG GOLD's Jeff Clark has a well-reasoned answer for us below. I hope all our readers take his message to heart.
Given that all the reasons gold rose from 2001 to 2011 are still in force, I am convinced gold's current correction is the setup for a second big surge—and, ultimately, a true gold mania of historic proportions.
Just because gold doesn't seem to be reacting to Fed money-printing at the moment doesn't mean it won't. Sooner or later, reality trumps fantasy. Reason says that you can't quintuple your balance sheet in five years and expect no repercussions. The Fed keeps hinting it will taper its money printing, but it still has not. We've had QE1, QE2, Operation Twist, and now QE3… none of them has worked, and the new Fed chair wants to print even more money.
This commentary by Jeff Clark, with an introduction by Louis James, was contained in yesterday's edition of the Casey Daily Dispatch...and it's definitely worth reading.