Gold Price Hammered As USA Heads Towards Financial Doomsday

Didn't the CME lower margins on Gold and Silver last week?

CME lowers gold, silver, copper, natgas margins | Reuters

• Nov 15, 2012 · Nov 15 (Reuters) - The CME Group on Thursday lowered margins for natural gas, gold, silver, copper, lean hog and live cattle futures, effective after …

ANY COMEX margin change, higher or lower, always manages to favor the shorts.

December is the NUMBER ONE month for Gold and Silver deliveries annually.  The "December" Gold and Silver contracts trade on the notably criminal COMEX in New York during the month of "November".  November is "seasonally", on average, the first or second most bullish month for these two Precious Metals EVERY year.

This year, from it's close on October 28, 2012 up to it's November high, the price of Gold was up 4.5%.  On one 100 ounce NY COMEX Gold contract, a trader held a $7694 unrealized profit at the November high price, if he had purchased his contract at the close in October.  The November high in Gold occurred at 11AM the morning of November 23, 2012.  The November high price for Gold at that time was $1754 per ounce.

This year, from it's close on October 28, 2012 up to it's November high, the price of Silver was up 11%.  On one 5000 ounce NY COMEX Silver contract, a trader held a $16,950 unrealized profit at the November high price, if he had purchased his contract at the close in October.  The November high in Silver occurred at 7PM October 26, 2012.  The November high price for Silver at that time was $34.28 per ounce.

With unrealized profits in the Precious Metals of this magnitude going into options expiration, it was imperative that the bullion banks do everything in their power to prevent delivery demands at great financial loss to the banks.

Nov. 27 Comex December gold options expiry

Nov. 27 Comex December silver options expiry

Let the games begin!
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CME Declares Force Majeure Due To “Operational Limitations” On NYC Gold Depository

Published in Market Update Precious Metals on 27 November 2012 

CME Group declared a force majeure at one of its New York precious metals depositories yesterday, run by bullion dealer and major coin dealer Manfra, Tordella and Brooks (MTB), due to “operational limitations” posed by Hurricane Sandy.

MTB has “operational limitations” following Hurricane Sandy and can’t load gold bullion, platinum bullion or palladium bullion, CME Group Inc., the parent of the Comex and New York Mercantile Exchange, said today in a statement.

MTB must provide holders with metal at Brinks Inc. in New York to meet current outstanding warrants in relevant delivery periods with compensation for costs, Chicago-based CME said.

The CME said that MTB will not be able to deliver metal as the lower Manhattan company deals with "operational limitations" almost a month after the arrival of Hurricane Sandy.

MTB is one of five depositories licensed to deliver gold against CME's benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex.

In a notice to customers on Monday, CME declared force majeure for the facility, a contract clause that frees parties from liability due to an event outside of their control.

CME said that individuals holding MTB warrants or certificates for a specific lot of metal stored in the depository, may receive gold delivered from Brinks Co. (BCO) in New York. MTB is responsible for any additional costs incurred by customers receiving metal from Brinks, CME said.

"This shouldn't have a material impact on the way market participants are doing business," a CME spokesman said. "They'll still contact MTB if they want to take delivery on contracts," and MTB will arrange for delivery through Brinks according to Dow Jones Newswires.

In a notice posted to its website dated Nov. 12, MTB said the firm "sustained substantial damages" following Hurricane Sandy's arrival in New York City on Oct. 29, and had curtailed its operations.

The force majeure will remain in effect until further notice from the exchange, the CME said. The delivery period for CME's December-delivery precious metals futures begins on Friday.
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Doesn't ANYBODY find it the least bit alarming that MTB has conveniently used a natural disaster to hide the fact [assumed] that it DOES NOT HAVE THE METAL AVAILABLE to meet December Gold delivery demands?  Seriously, this storm hit New York almost one month ago, and now with just two days before "first notice delivery" they have encountered “operational limitations” preventing them from making good on delivery demand of Gold via December Gold contracts sold through their depository?  Seriously?  This is OUTRAGEOUS!

Jim’s Mail Box

November 28, 2012, at 3:17 pm
by Daniel Duval in the category General Editorial | Print This Post | Email This Post

Jim
Richard outdoes himself in this report. Now they are calling it a roll over that was executed not as a spread but as an outright sale. That was such a bold manipulation that even they have to come up with an excuse.
Richard is right. That is what is called “an operation.”
Those watching the precious metals markets (this excludes the CFTC) are well aware of yesterday’s options expiry for Gold and Silver on the COMEX, and the Friday “first day notice” just ahead…and some violent ‘games’ by the Cartel in the paper markets were duly expected.
This morning Blythe apparently unleashed her heavily-caffeinated flying monkeys to ‘game’ the markets. Completely incredible paper volume in view of existing physical supply. In seconds. Good morning!
Oh, did I say ‘physical?’
– Yesterday’s Manfra ‘force majeure’ excuse (one of COMEX’s five bullion stores) for non-delivery of physical bullion should (in a regulated, unmanipulated market) have sent the spot price of Gold several hundred dollars higher, but it looks like the Banksters have discovered Bennie’s secret CTRL+P trick of creating binary electronic digits out of thin air…beats mining with a pick and shovel, eh?
These are no longer markets as price-discovery vehicles, but more resemble playing naked-twister with sociopaths and crooks.
– The MF Global and LIeBOR frauds were just a small ‘taste’ of what’s coming when it is discovered that the paper masters of the universe have hypothecated and rehypothecated physical bullion (both private and sovereign) many times over. [For CFTC regulators read: it's long gone and many are not going to get it back, ever.]

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Gold Tumbles Most in Three Weeks on Fiscal-Cliff Concerns

By Debarati Roy & Joe Richter - Nov 28, 2012 2:42 PM ET Bloomberg

Gold futures fell the most in three weeks as pessimism on a U.S. budget resolution eroded demand for commodities.

On the Comex in New York, gold futures for February delivery tumbled 1.5 percent to settle at $1,718.80 an ounce at 1:38 p.m., the biggest drop for a most-active contract since Nov. 2. In the first 30 seconds of floor trading, 7,700 contracts traded, according to PVM Futures Inc.
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In the FIRST 30 SECONDS of floor trading, 7,700 contracts traded!!!  That equates to a 770,000 ounce dump of Gold onto the market.  But was it real Gold, or merely "paper Gold"?  770,000 ounces represents 1% of global annual Gold production.  

Gold was trading at $1735.59 an ounce prior to the NY Open of the COMEX.  770,000 ounces x $1735.59 =  $1,351,034,300 !!!!!!!

What moron would SELL $1.3 BILLION of Gold in 30 SECONDS, let alone sell it in the face of "Fiscal-Cliff Concerns"?  Selling Gold in this environment seems hugely counter-intuitive, does it not?

Dealer inventory [the MTBs of the COMEX world] is 2.528 million ounces.  770,000 equals 30% of ALL the Gold available to meet delivery demand held by the COMEX depositories.  How can 30% of all the available COMEX Gold be sold in 30 SECONDS not raise a single red flag at the CFTC?  

The question that begs to be asked is...who bought 770,000 ounces of Gold in 30 SECONDS.  There is a buyer for every seller don'tcha know?  And what if the person[s] that bought that Gold decides to demand delivery of it next month?  Mere speculation...  If I had to guess, JP Morgan's left had bought the 770,000 ounces of Gold it's right hand sold...all in the name of 1. bailing out the bullion banks that were underwater at the end of a bullish month for the price of Gold, and 2. Suppressing the price of Gold when it should obviously be rising as the USA heads for financial doomsday.

28 November 2012

Comex Open Saw 24 Tonnes of Paper Gold Dumped at Market - Sharks, with Laser Beams

I am open to more data and other possibilities, but it certainly looks like the infamous Dr. Evil strategy being employed for the Comex post-option expiration in which a large number of call options are turned into active December futures contracts, and then hit hard with a manipulative price effort the next day. I suggested that this might happen given the way in which the option market closed on Tuesday. Such phenomena are like old friends now in these markets.

Funny too how roughly the same thing happened in the Silver futures about the same time. Silver is also post option expiration today.

As you know I used to track the big price drops around key option expiration dates on the precious metal charts.

That is not the only possibility. It could also be some 'tape painting' as the big shorts knock the price down before they close the books on their losing positions for the month. But I am inclined to think it was a special post-expiration event.

And it *could have been* just an unfortunate accident that happened in two different and important global markets simultaneously. Maybe it just 'vaporized.'

Not to worry, I am sure Bart Chilton and the stalwarts at the CFTC, who are closely watching the gold and silver markets, have already identified the seller(s), and examined their selling motivations, and the size and placement of their 'fat finger.' I am sure they will let us know about it, four or five years from now.

"Gold saw a massive 24 tonne sell order (7,800 contracts) at 08:20 a.m. New York time - bang on the opening of the world's largest gold exchange - which [saw] a fall of 2.25% in the market price.

If the selling was year-end profit-taking then it was inept. Dealers try and finesse big sell orders into the market to get the best (highest) price for the biggest volume they can and thereby optimize profit - that requires stealth. If on the other hand it was a "fat finger" episode as has been suggested with a broker said to be looking to roll his December gold futures contract then it was even more inept.

More likely this could be a short play, with the seller looking to trigger stops below the market at $1730 and thus extend the move significantly lower and thus increase his profits. If so, he certainly caught the market on the hop as the move is counter-intuitive with everything else that is going on in the economy.

Rising concerns about whether Democrats and Republicans can find common ground between tax increases and entitlement spend reduction remains to be seen. More importantly, the US reaches its law-enshrined debt ceiling of $16.4 trillion early to mid February 2012. That promises fireworks again as it did in August 2011 when gold hit an all time high of $1922 as the market stares into the abyss of a possible US debt default.

Against the current economic backdrop, a short seller would have to be quite brave. In short, we will not know the identity or the reason for the sale for a while. Longer term gold investors should not however be deterred - the rationale for buying gold is as favorable as ever and a degree of patience required.

Ross Norman, CEO, Sharps Pixley, London, Flash Crash in Gold - Whodunnit?

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If the bullion bank cartel was covering their grossly underwater shorts today, it would be a MAJOR signal that prices are going higher very soon!  Only time will tell, but a clear signal that prices may be back on the rise as early as tonight's Asian market open is the simple fact that the HUI Gold Bugs Index closed up almost 1% today in spite of the beat down of the Precious Metals bullion prices over at the notoriously nefarious NY COMEX this morning.

A move and close back above $1723.25 in Gold should put this contrived sell off in the rear view mirror.  That Gold's price closed above $1713.77, the 50% Fib retracement of the November rally, today should be considered a "buy the dip" opportunity.  Take advantage of it, and reconsider ONLY if price closes below $1713.77 in New York.

The fact that Silver BOUNCED HARD at $32.90, the 38% Fib retracement of the November rally, should be considered HUGELY BULLISH.  In fact I would not question the bullishness of Silver at this time unless price closes below $32.46 in New York.  Congratulations if you bought today's dip.  Reconsider ONLY if price should fall below $32.90.

Only a fool would believe that the US Government is going to fix, resolve, improve the nation's and/or the World's burgeoning economic morass.  And only a bigger fool would unload his Precious Metals on the cusp of Global Financial Armageddon.

THERE IS STILL TIME TO ACCUMULATE PHYSICAL GOLD AND SILVER...BUT ONLY WHILE SUPPLIES LAST.

Gold and Silver At A Crossroads, But Solid Fundamentals Support A Move To New All-time Highs In 2013

Gold and Silver have performed "constructively" since the late September highs in both markets.  A 50% correction in both Precious Metals markets thru the annually weak month of October was less about manipulation, and more about "necessary", following both Precious Metals strong rallies that commenced in early August.

No market moves straight up, or straight down.  Corrections should be welcomed, and looked at as opportunities to add to positions in the direction you believe the market is moving within the "big picture".

The "correction zone" for any strong rally is between 38% and 50% of the rally [or decline].  If a market finds support within the correction zone, it is likely to soon retest its recent high, and/or extend the recent rally to new highs [or lows].

Understanding this technical aspect of any market makes it much easier to understand and take advantage of "opportunities" a market presents to ALL traders.

With that being said, please note that since I suggested "buying the dip" in my November 2nd post, both Gold and Silver have rallied and regained 50% of their respective October declines.

Gold and Silver are at a crossroads now.  Take out the respective 50% Fibonacci retracements of their October declines, and we can expect to see a retest of the late September highs in both Precious Metals going into the Christmas holidays.

[click on image to enlarge]

It can not be emphasized enough that the "fundamentals" of the Precious Metals offer MAJOR support to both these markets.  The results of the Presidential Election [as incorrect as my prediction was ;-) ] have not changed a thing in Washington.  The Status Quo survived intact, and only adds support to the bullish case for both Gold and Silver.

Consider that the "Fiscal Cliff" the mainstream financial press has suddenly "discovered" was caused by dealing with the Debt Ceiling debate in September 2011, and that its hoped for "resolution" will only conflict with yet ANOTHER Debt Ceiling debate in early 2013...how can anyone be anything but bullish on the prices of the Precious Metals?  Seriously, the President and the Congress have their backs firmly against the Fiscal Cliff's edge.  Damned if they do, double damned if they don't.  

The American public [the tax payers] are about to be sold the notion that the Debt Ceiling must be raised by $2.5 TRILLION to "prevent" the US Government for defaulting on their debt obligations.  What could be more LUDICROUS escapes me.

Look at the reaction to mere photo opps as the President and Congress try to provide confidence to the World that America will avoid the Fiscal Cliff and remain "solvent".  The recent equity rallies are little more than short squeezes.  The "business climate" going forward in America and Europe is hardly encouraging.  Hope and Hot Air are not fundamentally sound pillars of global business and equity strength.

The single biggest deterrent to a race higher in the Precious Metals would be a false strengthening in the US Dollar should the US Equity markets implode as the reality of the Fiscal Cliff and the impending Debt Ceiling debate becomes all too obvious to even the bumbling mainstream financial news media.  This deterrent will be fleeting at best as the entire World comes to the realization that the US Dollar is DOOMED.

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Foreign Buying of U.S. Assets Plunges on Europe Optimism
By Kasia Klimasinska and Meera Louis – Nov 16, 2012 11:53 AM ET

International purchases of U.S. financial assets plunged 96 percent in September as confidence grew that Europe was beginning to solve its debt crisis and investors sold Treasuries following the Federal Reserve’s quantitative easing announcement.

Net buying of long-term equities, notes and bonds totaled $3.3 billion during the month, down from net purchases of $90.3 billion in August, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $50 billion of long-term assets, according to the median estimate.

ECB President Mario Draghi has called the euro “irreversible” and said the new government bond purchasing program will have effective conditionality attached. Photographer: Andrew Harrer/Bloomberg

The Federal Open Market Committee said Sept. 13 that it would undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets improve substantially.

“QE3 certainly played its role in basically encouraging people to take risk and to some extent to short the dollar,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, said. “The risk appetite was pretty strong overall, there were better places to park your money than the dollar,” and “there was a big rise in optimism regarding the euro zone.”

More…

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Asian economies turn to yuan
Updated: 2012-10-24 00:57
By Gao Changxin ( China Daily)

A “renminbi bloc” has been formed in East Asia, as nations in the region abandon the US dollar and peg their currency to the Chinese yuan — a major signal of China’s successful bid to internationalize its currency, a research report has said.

The Peterson Institute for International Economics, or PIIE, said in its latest research that China has moved closer to its long-term goal for the renminbi to become a global reserve currency.

Since the global financial crisis, the report said, more and more nations, especially emerging economies, see the yuan as the main reference currency when setting their exchange rate.

And now seven out of 10 economies in the region — including South Korea, Indonesia, Malaysia, Singapore and Thailand — track the renminbi more closely than they do the US dollar. Only three economies in the group — Hong Kong, Vietnam, and Mongolia — still have currencies following the dollar more closely than the renminbi, said the report, posted on the institute’s website.

The South Korean won, for example, has appreciated in sync with the renminbi against the dollar since mid-2010.

China has long vowed to raise its currency’s global sway, along with the rise of its economy, which became the world’s second-biggest last year.

More…

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U.S. Companies Cut Spending Plans Amid Fiscal and Economic Uncertainty
By SUDEEP REDDY and SCOTT THURM

U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.

Half of the nation’s 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.

Nationwide, business investment in equipment and software—a measure of economic vitality in the corporate sector—stalled in the third quarter for the first time since early 2009. Corporate investment in new buildings has declined.

At the same time, exports are slowing or falling to such critical markets as China and the euro zone as the global economy downshifts, creating another drag on firms’ expansion plans.

Corporate executives say they are slowing or delaying big projects to protect profits amid easing demand and rising uncertainty. Uncertainty around the U.S. elections and federal budget policies also appear among the factors driving the investment pullback since midyear. It is unclear whether Washington will avert the so-called fiscal cliff, tax increases and spending cuts scheduled to begin Jan. 2.

More…

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Treasury Secretary Geithner: Lift Debt Limit to Infinity

(CNSNews.com) – Treasury Secretary Timothy Geithner said Friday that Congress should stop placing legal limits on the amount of money the government can borrow and effectively lift the debt limit to infinity.

On Bloomberg TV, “Political Capital” host Al Hunt asked Geithner if he believes “we ought to just eliminate the debt ceiling.”

“Oh, absolutely,” Geithner said.

“You do? Will you propose that?” Hunt asked.

More…

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Central Banks’ Gold Likely Gone-Eric Sprott

By Greg Hunter’s USAWatchdog.com

Money manager Eric Sprott says, “The central banks’ gold is likely gone with no realistic chance of getting it back.” Don’t expect this revelation to get any coverage by the mainstream media. In an interview last week, Sprott’s analysis was met with words such as “gold bug” and “conspiracy theory.” Sprott answers that sort of disrespect by saying, “We’ve had so many conspiracies, I don’t know why anyone would think this was unusual.” To back up his point, he named “LIBOR, electricity markets in California and the Madoff” scandals. Sprott’s analysis shows a “flat supply” and at least a “2,500 ton net increase in gold demand” since 2000. “Where’s all the gold coming from?” asks Sprott. He says Western central banks “. . . keep supplying this market with product in order to keep the price down so nobody knows how vulnerable the situation is.” Sprott, who manages nearly $10 billion in assets, boldly proclaims, “We have a shortage of gold.” Join Greg Hunter as he goes One-on-One with Eric Sprott of Sprott Asset Management.

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Jeff Clark: So How Many Ounces of Gold (or Silver) Should You Own?

by Adam Taggart

Saturday, November 17, 2012, 2:00 PM

You want to focus on how many ounces you own, not necessarily looking at whether the price is $5 higher today than it was yesterday. How many ounces do you own? That is really the question you want to ask yourself, so you can focus on how much you are really going to need, and the amount really comes down to this.

For me, I am probably going to use some of this gold if we get high inflation. How are you going to protect your standard of living if we get some kind of runaway inflation? And let’s say it's not runaway hyperinflation; let’s just say it's high inflation, 10%, 15%. Remember it was 14% in 1980, so the odds of us getting high inflation are realistic. So if I am going to use that gold to cover my standard of living, you are going to need about two thirds of an ounce of gold for every thousand dollars of monthly expenses. If you want to protect your standard of living and not have your house be ravaged by inflation, so to speak, so that is a good guideline to follow.

So if inflation lasts a couple years, well, you are going to need 15 ounces of gold for every thousand dollars of monthly expenses. That is a good guideline to think about. And if your expenses are more per month, you are going to need more gold than that. If inflation lasts longer than two years, you are going to need more than that, but you can actually use the sales of gold and silver to protect your standard of living. You sell some gold and silver, you are going to get U.S. dollars or Canadian dollars with it and you can use the increase in the gold and silver price to offset the increase in the goods and services you are buying.
So I think that is the way to view it, to look at how you are going to use it. And so the focus again comes back to how many ounces do you own? So if you do not have any, you need to obviously start buying. 

More...

Gold's October Slump Is NO SURPRISE - Buy The Dip!

A number of "things" have kept me away from my blog posts.  Not the least of which were fears that I would turn this site into a biased political rant during the height of this election cycle.

 For what it is worth, I would like to go on the record here and predict the outcome of next week's Presidential election...Despite what our clueless mainstream media would like you to believe...the outcome will not even be close.  I promise that more than once you will here references to the 1980 Reagan vs Carter throw down as the election results come in next Tuesday evening.  The White House will get cleaned out soon...

But I'm here to talk about Gold!

This headline today caught my attention and drew me back to my beloved blog.

Gold Falls 2% After Strong U.S. Nonfarm Payrolls Reuters
Gold slid 2% in heavy trade on Friday, breaking below $1,690 an ounce for the first time in about two months on lowered expectations for economic stimulus provided by global central banks.

This is absolute BULLSHIT!!!  Lowered expectations for economic stimulus provided by global central banks?  Yeah right...if central banks lowered their present "economic stimulus expectations" the global economy would implode immediately!  Who writes this garbage?

Gold is down today for ONE SIMPLE REASON...the US Dollar was up strongly today as the US Equity markets collapsed on the back of what was genuinely a VERY POOR jobs report...despite what the mainstream liberal loving media would have you believe. [I'm sorry.  See what I mean about politicizing my blog.]

In fact, much of Gold's "recent" weakness could be directly related to the "strong dollar" we have seen since October 16, 2012.

Observe the chart below.  The price of the US Dollar is overlayed on the price of Gold.  It's pretty clear from this snapshot of Gold that the value of the US Dollar is a major factor in the "ups and downs" of the Gold price.  [click to enlarge]

Much of Gold's recent weakness has been attributed to "manipulation" in the futures markets.  And though I will ALWAYS believe that Gold, and Silver, are not allowed to trade freely...I can not lay a lot of blame on this "excuse" here and now.

There are many legitimate "technical" reasons for Gold's recent fall from $1725 to today's lows.  As well as Gold's failure at $1800 in early October.

Do you know that "seasonally" October is one of the weakest months of the entire year for the price of Gold?  [click to enlarge]

The fall in today's price of Gold therefore has NOTHING to do with today's jobs report signalling ANY lowered expectations for economic stimulus provided by global central banks.  The notion that the central banks are going to stop printing money is LUDICROUS!  No matter the outcome of any election anywhere, the banks will continue to print money.  And because ALL MONEY IS DEBT, the only way to pay for today's debt is to print more money...It's called a circle jerk people!

I'd be buying Gold and Silver here with every extra filthy US Dollar I had in my possession.  As soon as this election is over, and the looming US Debt limit returns to the headlines, Gold and Silver are going to lift-off all over again.

I hope to return to regular blog posts soon.

Thanks!

-greg

Global Financial Fraud Is WIN-WIN For Gold And Silver

The Special Inspector General for Tarp Issues a Wakeup Call … Lambasts the Government and the Banks

By George Washington on 07/23/2012, via Zero Hedge

The government’s special inspector general in charge of oversight of the Troubled Asset Relief Program (the “TARP” bank bailouts) – Neil M. Barofsky – wrote a stunning editorial for Bloomberg yesterday, concluding:

Americans should lose faith in their government. They should deplore the captured politicians and regulators who distributed tax dollars to the banks without insisting that they be accountable. The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again.

Only with this appropriate and justified rage can we hope for the type of reform that will one day break our system free from the corrupting grasp of the megabanks.

See this for background.

This is not the statement of a raving blogger (although some of the best reporters write blogs) or a conspiracy theorist living in his mom’s basement (even though some conspiracies are real).

This is the former government official who oversaw the bailouts.

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And just where did all that TARP money go?

Interest Or No Interest On Excess Reserves, That Is The Question

by Dave in Denver, The Golden Truth

For what it’s worth, there is an enormous amount of interference in the gold and silver share market. I think that will end as soon as gold and silver break their highs. When that happens, I think it’s going to unleash a rally in these stocks that is absolutely going to stun people. People will be shocked that don’t understand the full extent of the manipulation and how cheap these stocks have become as a result of it. - John Embry on King World News LINK

Before I delve into "excess reserves" held at the Fed by banks, I wanted to post two more indicators that confirm my thesis that our economy is pretty much in "plunge" mode. First, the Richmond Fed released its regional manufacturing index, considered a good proxy for the national economy. It plunged from -3 last month to a reading of -17 for July. The incompetent economists on Wall Street were expecting a reading of -1. Every sub-component of the index was horrific. You can read the details here: LINK


Second, Cisco released its Q2 guidance yesterday. It significantly lowered its expectations, said the outlook for the global economy looks grim and announced it will cut 1,300 jobs: LINK Cisco's stock price is down 6% as I write this. With regions in Italy and Spain now in insolvency and 3 large California cities in bankruptcy, with more to follow there and across the U.S., if Bernanke does not open up the liquidity floodgate again, he is going to be tagged as making the same mistake the Fed made in the early 1930's - a decision of which he claims to be an expert - in causing the Depression. Even more profound, he'll hand the Presidency to Romney. Note: Bernanke is a Democrat and, given his background, he likely despises hardcore Christian sects.


Now for the debate on cutting the interest rate on the excess reserves held by banks at the Fed. I will try to be concise as possible. First, bank excess reserves held at the Fed are bank funds - in excess of Fed capital ratio requirements - which banks keep on "reserve" at the Fed for lack of something better to do with them. Currently the Fed is paying banks .25% in interest on these reserves (IOER - interest on excess reserves). A big debate has erupted over this policy, as critics contend it's keeping banks from lending out that money into the financial/economic system. Defenders of the IOER policy say that because the Fed/bank money system is "a closed system," whether or not the Fed pays IOER is irrelevant other than as a monetary tool to regulate the Fed funds rate.


This article, if you are interested, does a good job of explaining why it is said that the Fed/banking system is "a closed system:" LINK, but you can ignore the part where Stella defends the current IOER policy. And my friend and colleague wrote an excellent piece yesterday that explains why the argument being served up in the media both for and against IOER is disingenuous and flawed: LINK In fact, I didn't really care about the whole issue until Jesse and I started emailing back and forth in depth about the topic.


Let's strip away the Orwellian gobbledygook being served up by lousy economists and retarded financial TV show hosts and commentators. As Jesse wrote in his piece linked above, the IOER is nothing but a direct means of pumping liquidity into the banks. And where did the ER come from? The excess reserves were created by the massive TARP and QE programs. TARP is directly from the Government and the assets purchased by the Fed under QE are guaranteed in value by the Treasury. In other words, the $1.46 trillion in bank excess reserves sitting at the Fed is YOUR money. So the banks are being given a nice liquidity injection from IOER using YOUR capital. Thank you Bernanke, Geithner and Obama (and Paulson and Bush).


Now to the issue of whether manipulating IOER will stimulate bank lending. The answer is yes, but not to the private sector economy. Think about it this way: given what we know about the economic prospects of this country, would you lend money to a new Mercedes Benz dealership, a new shopping mall development or to build a new Cisco manufacturing plant? No. So why would we expect the banks to do that? Taking the IOER to zero or negative will absolutely not stimulate lending to the private sector UNLESS there are loan opportunities that make sense from a risk/return standpoint. On this basis, the .25% IOER is irrelevant because a bank can make several percentage points more in interest if it could find risk/return worthy lending projects. Banks are still lending to homebuyers, but that's because ultimately that loan is being guaranteed by the Government/YOU. It's also not relevant as a tool to manage the Fed funds rate - the argument against cutting the IOER. As Jesse points out, IOER is irrelevant other than as a liquidity subsidy to the big banks. To that I add: using YOUR capital.


Now, if the Fed were to cut the IOER to zero or take it negative, it will increase bank lending to the Government via Treasury auctions. If the IOER goes to zero, the Fed will "force" a lot of that $1.46 trillion from the excess reserve account at the Fed and into the longer-maturity Treasury auctions. The Government will be funded through the election and beyond without the Fed having to increase the size of its balance sheet - that is, print money.


They say the devil's greatest trick is to make you think it doesn't exist. The second greatest trick - ironically by a surrogate devil, the Fed - is to finance the U.S. Government using your money and likely against your desires. Welcome to this country's transition to totalitarianism. Orwell smiles, Atlas shrugs.

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If this smells like a FRAUD to you, maybe that's because it is!  And of course we are to believe that this FRAUD is in our best interests as taxpayers and citizens of the USA...

Paul Craig Roberts: World financial system now can be sustained only by fraud

The Libor Scandal In Full Perspective

By Paul Craig Roberts
Institute for Political Economy
Thursday, July 19, 2012

The article about the Libor scandal, coauthored with Nomi Prins, received much attention, with Internet repostings, foreign translation, and video interviews. To further clarify the situation, this article brings to the forefront implications that might not be obvious to those without insider experience and knowledge.

The price of Treasury bonds is supported by the Federal Reserve’s large purchases. The Federal Reserve’s purchases are often misread as demand arising from a “flight to quality” due to concern about the EU sovereign debt problem and possible failure of the euro.

Another rationale used to explain the demand for Treasuries despite their negative yield is the “flight to safety.” A 2% yield on a Treasury bond is less of a negative interest rate than the yield of a few basis points on a bank CD, and the US government, unlike banks, can use its central bank to print the money to pay off its debts.

It is possible that some investors purchase Treasuries for these reasons. However, the “safety” and “flight to quality” explanations could not exist if interest rates were rising or were expected to rise. The Federal Reserve prevents the rise in interest rates and decline in bond prices, which normally result from continually issuing new debt in enormous quantities at negative interest rates, by announcing that it has a low interest rate policy and will purchase bonds to keep bond prices high. Without this Fed policy, there could be no flight to safety or quality.

It is the prospect of ever lower interest rates that causes investors to purchase bonds that do not pay a real rate of interest. Bond purchasers make up for the negative interest rate by the rise in price in the bonds caused by the next round of low interest rates. As the Federal Reserve and the banks drive down the interest rate, the issued bonds rise in value, and their purchasers enjoy capital gains.

As the Federal Reserve and the Bank of England are themselves fixing interest rates at historic lows in order to mask the insolvency of their respective banking systems, they naturally do not object that the banks themselves contribute to the success of this policy by fixing the LIbor rate and by selling massive amounts of interest rate swaps, a way of shorting interest rates and driving them down or preventing them from rising.

The lower is Libor, the higher is the price or evaluations of floating-rate debt instruments, such as CDOs, and thus the stronger the banks’ balance sheets appear.

Does this mean that the US and UK financial systems can only be kept afloat by fraud that harms purchasers of interest rate swaps, which include municipalities advised by sellers of interest rate swaps, and those with saving accounts?

The answer is yes, but the Libor scandal is only a small part of the interest rate rigging scandal. The Federal Reserve itself has been rigging interest rates. How else could debt issued in profusion be bearing negative interest rates?

As villainous as they might be, Barclays bank chief executive Bob Diamond, Jamie Dimon of JP Morgan, and Lloyd Blankfein of Goldman Sachs are not the main villains. The main villains are former Treasury Secretary and Goldman Sachs chairman Robert Rubin, who pushed Congress for the repeal of the Glass-Steagall Act, and the sponsors of the Gramm-Leach-Bliley bill, which repealed the Glass-Steagall Act. Glass-Steagall was put in place in 1933 in order to prevent the kind of financial excesses that produced the current ongoing financial crisis.

President Clinton’s Treasury Secretary, Robert Rubin, presented the removal of all constraints on financial chicanery as “financial modernization.” Taking restraints off of banks was part of the hubristic response to “the end of history.” Capitalism had won the struggle with socialism and communism. Vindicated capitalism no longer needed its concessions to social welfare and regulation that capitalism used in order to compete with socialism.

The constraints on capitalism could now be thrown off, because markets were self-regulating as Federal Reserve chairman Alan Greenspan, among many, declared. It was financial deregulation–the repeal of Glass-Steagall, the removal of limits on debt leverage, the absence of regulation of OTC derivatives, the removal of limits on speculative positions in future markets–that caused the ongoing financial crisis. No doubt but that JP Morgan, Goldman Sachs and others were after maximum profits by hook or crook, but their opportunity came from the neoconservative triumphalism of “democratic capitalism’s” historical victory over alternative socio-politico-economic systems.

The ongoing crisis cannot be addressed without restoring the laws and regulations that were repealed and discarded. But putting Humpty-Dumpty back together again is an enormous task full of its own perils.

The financial concentration that deregulation fostered has left us with broken financial institutions that are too big to fail. To understand the fullness of the problem, consider the law suits that are expected to be filed against the banks that fixed the Libor rate by those who were harmed by the fraud. Some are saying that as the fraud was known by the central banks and not reported, that the Federal Reserve and the Bank of England should be indicted for their participation in the fraud.

What follows is not an apology for fraud. It merely describes consequences of holding those responsible accountable.

Imagine the Federal reserve called before Congress or the Department of Justice to answer why it did not report on the fraud perpetrated by private banks, fraud that was supporting the Federal Reserve’s own rigging of interest rates (and the same in the UK.)

The Federal reserve will reply: “So, you want us to let interest rates go up? Are you prepared to come up with the money to bail out the FDIC-insured depositors of JPMorganChase, Bank of America, Citibank, Wells Fargo, etc.? Are you prepared for US Treasury prices to collapse, wiping out bond funds and the remaining wealth in the US and driving up interest rates, making the interest rate on new federal debt necessary to finance the huge budget deficits impossible to pay, and finishing off what is left of the real estate market? Are you prepared to take responsibility, you who deregulated the financial system, for this economic armageddon?

Obviously, the politicians will say NO, continue with the fraud. The harm to people from collapse far exceeds the harm in lost interest from fixing the low interest rates in order to forestall collapse. The Federal Reserve will say that we are doing our best to create profits for the banks that will permit us eventually to unwind the fraud and return to normal. Congress will see no better alternative to this.

But the question remains: How long can the regime of negative interest rates continue while debt explodes upward? Currently, everyone in the US who counts and most who don’t have an interest in holding off armageddon. No one wants to tip over the boat. If the banks are sued for damages and lack the money to pay, the Federal Reserve can create the money for the banks to pay.

If the collapse of the system does not result from scandals, it will come from outside. The dollar is the world reserve currency. This means that the dollar’s exchange value is boosted, despite the dismal economic outlook in the US, by the fact that, as the currency for settling international accounts, there is international demand for the dollar. Country A settles its trade deficit with country B in dollars; country B settles its account with country C in dollars; and so on throughout the countries of the world.

For whatever the reason–perhaps to curtail their accumulation of suspect dollars or to bring Washington’s power to an end–the BRICS countries, Brazil, Russia, India, China, and South Africa, are agreeing to settle their trade between themselves in their own currencies, thus abandoning the use of the dollar.

According to reports, China and Japan have reached agreement to settle their trade between themselves in their own currencies.

The moves away from the dollar as the currency of international transactions means that the dollar’s exchange value will fall as the demand for dollars falls. Whereas the Federal Reserve can create dollars with which to purchase the Treasury’s debt, thus preventing a fall in bond prices, the Federal Reserve cannot prop up the dollar’s exchange value by creating more dollars with which to purchase dollars. Dollars would have to be taken off the foreign exchange market by purchasing them with other currencies, but in order to have these currencies the US would have to be running a trade surplus, not a long-term trade deficit.

In the short-run, the Federal Reserve could arrange currency swap agreements in which foreign central banks swap their currencies for dollars in order to supply the Federal Reserve with currencies with which to soak up dollars. However, only a limited number of swaps could be negotiated before foreign central banks understood that the dollar’s fall in value was not a temporary event that could be propped up with currency swaps.

As the value of the dollar will fall as countries move away from its use as reserve currency, the values of dollar-denominated assets also will fall. The Federal Reserve, even with full cooperation from the banking system employing every fraud technique known, cannot prevent interest rates from rising on debt instruments denominated in a currency whose value is falling.

Think about it this way. A person, fund, or institution owns bonds or any debt instruments carrying a negative rate of interest, but continues to hold the instruments because interest rates, despite the increase in debt, are creeping down, raising bond prices and producing capital gains in the bonds. What happens when the exchange value of the currency in which the debt instruments are denominated falls? Can the price of the bond stay high even though the value of the currency in which the bond is denominated falls?

The drop in the exchange value of the currency hits the bond price in a second way. The price of imports rise, and this pushes up prices. The inflation measures will show higher inflation. How long will people hold debt instruments paying negative interest rates as inflation rises? Perhaps there are historical cases in which bond prices continue to rise indefinitely (or even hold firm) as inflation rises, but I have never heard of them.

As the Federal Reserve can create money, theoretically the Federal Reserve’s prop-up schemes could continue until the Federal Reserve owns all dollar-denominated financial assets. To cover the holes in its own balance sheet, the Federal Reserve could just print more money.

Some suspect that the Federal Reserve, in order to forestall a declining dollar and thus declining prices of dollar-denominated financial instruments, is behind the sales of naked shorts every time demand for physical bullion drives up the price of gold and silver. The short sales–paper sales–cancel the impact on price of the increased demand for bullion.

Some also believe that they see the Federal Reserve’s hand in the stock market. One day stocks fall 200 points. The next day stocks rise 200 points. This up and down pattern has been ongoing for a long time. One possible explanation is that as wary investors sell their equity holdings, the Federal Reserve, or the “plunge protection team,” steps in and buys.

Just as the “terrorist threat” was used to destroy the laws that protect US civil liberty, the financial crisis has resulted in the Federal Reserve moving far outside its charter and normal operating behavior.

To sum up, what has happened is that irresponsible and thoughtless–in fact, ideological–deregulation of the financial sector has caused a financial crisis that can only be managed by fraud. Civil damages might be paid, but to halt the fraud itself would mean the collapse of the financial system. Those in charge of the system would prefer the collapse to come from outside, such as from a collapse in the value of the dollar that could be blamed on foreigners, because an outside cause gives them something to blame other than themselves.

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Shocking isn't it?  The entire US financial system dances on a pin financed unknowingly by the citizens it serves, and these citizens are held hostage by the banks, which they unknowingly prop up with their taxpayer money, so that these banks can purchase US Government debt to keep interest rates artificially low not to make cheap loans to private citizens and businesses, but to make it affordable for the US Government to keep selling debt?

This is FREAKING brilliant!

Fed official highlights benefits of flexible QE: FT

(Reuters) - An open-ended round of quantitative easing that could be adjusted to suit economic conditions should be considered if the Fed launches a fresh round of monetary stimulus, a top policy official in the Federal Reserve said in an interview with the Financial Times.

There is "pretty significant" downside risks to the U.S. economy from theeuro zone crisis, John Williams, president of the Federal Reserve Bank of San Francisco, said in an interview with the Financial Times on Monday.

"The main benefit from my point of view is it will get the markets to stop focusing on the terminal date and also focusing on, ‘Oh, are they going to do QE3?'" he is quoted as saying.

If the Fed launched another round of quantitative easing, Williams said that buying mortgage-backed securities, rather than Treasuries, would be more advantageous.

"There's a lot more you can buy without interfering with market function and you maybe get a little more bang for the buck," he said.

He said the Bank of England's "funding for lending" scheme, which will provide cheap funding for British banks that increase their lending to households and businesses, would not work in the United States.

Williams is regarded as close to the center of gravity on the rate-setting Federal Open Market Committee, of which he is a voting member this year. The FOMC will conclude its next meeting on August 1.

(Reporting by Stephen Mangan; Editing by Stacey Joyce)

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You have got to be kidding!

It should be growing more obvious be the day, THE IS NO SOLUTION to the global financial crisis.

Hit the reset button already...

Sprott - The Frightening Black Swan Nobody Is Talking About

From Eric King, KingWorldNews.com

July 21, 2012

Today billionaire Eric Sprott spoke with King World News about his greatest fear.  Sprott literally shocked KWN by saying, “My biggest black swan, Eric, is that I think I’ll be right one day.  My worry is that one day they just shut everything down.”  Sprott, who is Chairman of Sprott Asset Management, also added, “They (central planners) say, ‘You know what, we just can’t keep this up anymore, the whole Ponzi (scheme), we just can’t do it and we shut it down.’”  

Sprott went on to say that all of the markets would then “freeze.”  But first, here is what he had to say about the ongoing ciris in Europe:  “It’s beyond the ability of governments to deal with all of these weak countries.  There are only one of two answers:  Yes, someone could print as much money as they want.  Maybe they could print $5 trillion and say, ‘We’ll back up all of the banking systems.’”

“And then one could maybe say the problem is solved.  Of course the problem is, if they print $5 trillion, everyone knows they can’t back it up with anything.  Then you will lose confidence in the currency and you will go into hyperinflation because people will realize that real things are safer than paper things, including bonds and stocks and things like that.

So there are only two choices, they’ve got to print or there are going to be some defaults, which is the natural offspring of a Minsky moment.... 

“Sooner or later you have to write off the debt or you have to inflate it away.

Continue reading the Eric Sprott interview here

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Embry - Expect Shortages Of Gold As Soon As Next Month

From Eric King, KingWorldNews.com

July 23, 2012

“We are moving toward a fundamental shortage of gold, and I believe it may start as soon as next month.  I think the bottom is being put in right now.  You see once again with the stock market trading lower, they just turn the algorithms on and grind the price down.

But this action is all just building a massive base in gold.  I think the big issue going forward is this growing shortage of available physical gold.  I strongly believe one of the reasons for the shortage is a lot of it is headed East.  The last four or five months of the year gold should challenge and easily take out its all-time high.  

For what it’s worth, there is an enormous amount of interference in the gold and silver share market.  I think that will end as soon as gold and silver break their highs.  When that happens, I think it’s going to unleash a rally in these stocks that is absolutely going to stun people.  People will be shocked that don’t understand the full extent of the manipulation and how cheap these stocks have become as a result of it.”

Continue reading the John Embry interview here

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London Trader - The LBMA Gold Price Fixing Scheme Is Over

From Eric King, KingWorldNews.com

July 20, 2012

With many global investors still concerned about the recent price action in gold and silver, today King World News interviewed the “London Trader” to get his take on these markets.  The source told KWN that “... the LBMA’s price fixing scheme is coming to an end.”  The source also said that because of this, the eventual “move in gold and silver will literally frighten most people.” 

Here is what the source had to say:  “It is now beginning to be discussed, openly, that the unallocated gold is not at the banks.  This is definitely the case with many of the allocated accounts as well.  The reason I’m pointing this out is you have a more ‘open’ disclosure that’s taking place with regards to this.”

“This tells me there is something major that is happening behind the scenes.  It tells me that the LBMA’s price fixing scheme is coming to an end.  You have these naked short positions, that are incomprehensible to most people, in both gold and silver....

“As this scandal is brought to light, that the unallocated gold and silver are not there, and much of the allocated gold and silver is not at these banks either, and as you see these naked short positions unwound, the world will witness a massive price rise in in both gold and silver.  The move in gold and silver, at that point, will literally frighten most people.  They simply won’t understand what is happening.

When someone goes to a bank and deposits money, if you look at the small print, you don’t actually own that money, you’ve simply loaned it to the bank.  The banks will then turn right around and lend ten to one or whatever leverage they determine to use with your cash.  Well, when there is a run on the banks, as there has been in Europe, the money is printed by governments and given to the customers to calm things down.

The underlying problem here is that when the run on physical gold and silver begins, how will the banks print the gold and silver?  It’s not possible.  So something is brewing here.  There’s no smoke without a fire.  The reason this information is beginning to be discussed more openly is because of legal reasons.  They need to be able to say, ‘We disclosed to people that the gold and silver wasn’t there.’  

Yes, this will include a scandal at the LBMA in those unallocated accounts.  The paper leverage in the LBMA system is off the charts.  Investors believe their gold and silver is sitting in those unallocated accounts, and they will be in shock when they find out it isn’t there.

We are talking here about a run on the bullion bank.  As this unfolds there will be a failure.  These people will only receive the fixed price before trading is halted.  This will not be called a default.  Then there will be a massive gap in the price of gold and silver.  But the bullion banks will not be allowed to go bankrupt during this process.  There is a ring of counterparties here.  If one of them fails, the whole system can fail.  So they will not be allowed to fail.”

Continue reading the London Trader interview here

====================

It should be OBVIOUS now, print money - Precious Metals WIN.  Default on global sovereign debt - Precious Metals WIN.

IT'S WIN WIN FOR GOLD AND SILVER!!!

Got Gold You Can Hold?

Got Silver You Can Squeeze?

It's NOT To Late To Accumulate!!!