A blog dedicated to commentary, technical analysis, and the general machinations of the global gold and silver bullion markets with additional commentary on the global economy and related commodity markets.
Telling it like it is...
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"Filling the hole"
To all; Jim Sinclair posted this on his site yesterday. It is brilliant
because it is so simple! In the most simple nutshell in history, he is 100%
CORRECT!
"Gold goes as high as the debt hole goes low."
This concept is so easy to understand by anyone no matter how their mind
works, whether they are mathematically, artistic, musically, medically,
capitalistic, socialistic or WHATEVER inclined or oriented. If you understand
that all currencies on the planet are "debt based" and backed by the full faith
and "credit" of whomever the issuer is, Gold, pure and simple will "grow" in
value equal to however much debt is issued by each currency divided by how much
(collectively) Gold that central bank has (or says they have). When all is said
and done, Gold does not "grow", it does not "go up", the only thing it does (and
has to do in a fiat system) is "fill the hole!".
Think of it this way, if you "owe", someday you must "pay". You must pay with
something real, it can be Gold, or oil, or wheat or Cracker Jacks or whatever.
This is in a real world, the world we live in today is simply not "real". I say
this because in today's global fiat system, "debts" are paid by issuing more of
the same currency (created by issuing more debt). "Settlement", never occurs!
When this episode is over, Gold will "fill these holes" that are being created
(and applauded) on a daily basis. QE this or LTRO that, debt, and more debt, is
being created every day. Nevermind that no economy can grow fast enough to pay
existing debts, more debt gets created every single day and digs "the hole"
deeper and deeper. Said simply, each and every day, the world's paper currencies
are "worth" less and less because they are being created faster and faster
(surely faster than their economies are or even CAN grow). Simple math or logic
then tells you that each day, the "worth" or "value" of Gold priced in these
currencies goes higher and higher. The reality is, because even the existing
debt cannot be paid back (without creating more debt through monetizing), the
debt will ultimately (because it intrinsically already is) be valued at "zero",
...and the opposite of "zero" is?
Recently Ben Bernanke and other "really smart people" have been on a Gold
bashing campaign which they are terming "transparency". Why now? Well, because
they have to. They have to because as "the debt hole" gets deeper and deeper,
more and more people understand that it can never be paid back and their minds
begin to "wander". The central banks of the world just don't want these
"wandering minds" to end up coming to the conclusion that their "money" really
isn't money at all. So Gold gets bashed with untruths and a smear campaign (not
to mention the millions of fake paper contracts) so as to divert the wandering
minds (as many as possible) from the truth.
We have heard forever (at least my entire lifetime) that there isn't enough
Gold in the world to sustain economies much less grow them. THIS is total
bullshit! Let us assume that over 5,000 years that only one single ounce had
been mined and only 1/2,500th of an ounce is mined per year (2% increase), if
this ounce was priced at whatever number (maybe $500 Gazillion Bazillion), there
would be enough. The truth is, they are correct, there is not enough Gold in the
world to support a banking and currency system ...AT THESE PRICES! At some price
(I do not profess to know), the current Gold in existence (and purported to be
held by central banks), the entire system could be 100% backed, this is a fact.
"Filling the hole" is exactly what Gold WILL eventually do. "Filling the
hole" is exactly the same concept that I have probably bored you to death with
over the years, it is "revaluation" in simpler terms. After what we have been
through since 2007, you should probably now understand "why" ..."they" don't
want Gold in the system. Gold, takes actual effort, machinery, (real capital) to
produce, it is rare. Politiciians and central bankers would be precluded from
handing out "free money" to friends, cronies etc. at a whim. Bankruptcies
would...well...be bankruptcies and "bailouts" wouldn't exist. They couldn't!
Think about it, who would be stupid enough to give away something that is real,
rare and valuable to save someone else? Surely not any of the greedy scum who
run the show now, no, failures should simply fail and capital would be "cared
for" and risk actually avoided. In this manner, capital would "efficiently" find
it's way to investment and the AIG's, Fannies and Freddies, Solyndra's, GM's,
and "bridges to nowhere" would not exist, be built or even contemplated.
Please, if you do not understand this concept that Gold must fill the global
debt hole, spend some quiet time and think about it until it makes some sense to
you. This is the most important concept in finance, and I might add, it has
ALWAYS been the most important concept. Commerce, and thus society...requires
real "settlement", without "real" settlement, everything is false and fraud
becomes the new norm. How can anyone think that a banking system that is based
on fraud could breed anything other than...fraud? Yes folks, we have certainly
arrived and already entered frauds front door! Regards, Bill H.
Now, as the anti-Fed outcry continues to grow, the embattled central bank has another dubious public-relations ploy in the works: reaching out to high-school students. As part of the new scheme, functionaries at the St. Louis Fed branch recently developed a curriculum for what they call an “economic education.”
The course, posted online at a Fed-run “education” website, is designed to convince young Americans of the controversial institution’s supposed necessity and its alleged constitutionality. Of course, the lesson plan makes no mention of the fact that the privately owned Fed is actually nothing more than a banking cartel — let alone that all of the fiat currency it creates is issued as debt with impossible-to-pay interest attached.
Critics promptly lambasted the idea. “It now appears that the propaganda masters at the Office of Central Planning have decided to go for young American minds while they are still pliable,” noted a recent article about the new scheme on the financial analysis site ZeroHedge. The piece, entitled “Fed to Take Propaganda to the Schoolroom: Will Teach Grade 8-12 Students about Constitutionality Of... The Fed,” blasted the curriculum as an effort to fill the minds of children with “dogmatic propaganda.”
“It appears that as part of its reenactment of Goebbels ‘economic education’ curriculum, the Fed will now directly appeal to 8-12 grade students, in which it will elucidate on the premise of ‘Constitutionality of a Central Bank,’” the blistering report observed, adding, “You know — just in case said young (and soon to be very unemployed) minds get ideas that heaven forbid, the master bank running the US is not exactly constitutional.”
WASHINGTON (Dow Jones)--Federal Reserve Chairman Ben Bernanke, addressing
calls from some politicians to have the U.S. return to the gold standard,
defended the country's break with the policy Tuesday at the first of his four
lectures at George Washington University.
Bernanke explained to a packed lecture hall why a gold standard harmed the
global economy during the Great Depression. Some recent critics of the Fed, most
notably GOP presidential candidate Rep. Ron Paul of Texas, have pushed to return
to the gold standard, in which paper money is backed by gold. The U.S. was on
the gold standard between the Civil War until the 1930s, and the tie was fully
severed by President Richard Nixon in 1971.
The gold standard poses both practical and policy problems, Bernanke said. On
the practical side, it can be a waste of resources to secure all the gold needed
to back currency, moving it from South Africa to the Federal Reserve Bank of New
York's basement, for example, or as he put it, "all this gold is being dug up
and being put back into another hole."
More significantly, a country on a gold standard will see more short-term
volatility, Bernanke said.
"Since the gold standard determines the money supply, there's not much scope
for the central bank to use monetary policy to stabilize the economy," he said.
Bernanke noted the gold standard did not prevent frequent financial panics.
During the Great Depression, "policy errors" in the United States spread to
other countries that were also on the gold standard, Bernanke said. Countries on
the gold standard must maintain fixed exchange rates, making it easy for bad
policies in one country to spread to another on the gold standard, he noted.
One modern example of the inherent problems of the gold standard is China's
fixed currency, Bernanke said. Because China ties its currency to that of the
U.S., China could be impacted by changes the Fed makes to short-term interest
rates.
"If the Fed lowers interest rates and stimulates the U.S. economy, that means
also that essentially monetary policy becomes easier in China as well," Bernanke
said. "China may experience inflation because it's tied to U.S. monetary
policy." The central banker did say that China's currency has become "more
flexible lately."
While Bernanke acknowledged that over decades, prices are very stable in
countries using the gold standard, they can experience both periods of deflation
and inflation in the medium run. And if not "perfectly credible," the gold
standard can be subject to speculative attack and ultimately collapse as people
try to exchange paper money for gold.
Part of why the Fed failed in its managing of the Great Depression was its
attempts to stay on the gold standard, he noted. One of Franklin Delano
Roosevelt's most successful moves as president was to begin to take the country
off the gold standard, he said.
One reason that critics push to return to the gold standard is they want to
remove some "discretion" from the Fed, Bernanke said in response to a question
from Noah Wiviott, a senior at George Washington.
A country with a gold standard "doesn't allow the central bank to respond
with monetary policy," he said.___________________________
Ben, you bumbling idiot, have you ever stopped to think, for even a brief moment, that America would be better off today without your Federal Reserve's repressive monetary policy?
Does it make ANY sense that a nation with the CONSTITUTIONAL AUTHORITY to coin money, borrows money [with interest] from a private for profit banking cartel to fund it's government?
In the almost 100 years since it's inception, the CONSTITUTIONALLY ILLEGAL Federal Reserve's "monetary policy" has only succeeded in destroying this once great nations wealth. It has done NOTHING to enrich America in any way, shape, or form. Only a fool would believe otherwise.
You can take you monetary police Mr. Bernanke and put it deeply "where the sun don't shine."
Try as you might to brainwash the youth of this nation, it is they who will see clearly through your BS and inevitably call for your useless institutions destruction and the salvation of this once proud and wealthy nation.
The clear and blatant theft of the wealth of America by your banking cartel will "soon enough" be stopped, and the Federal Reserve will be felled by a "silver bullet" shot at the Achilles Heel of your sick and twisted institution.
The Silver Bullet, a shot heard round the world that shall be by the people, for the people and of the people, and destroy your crony monetary policy once and forever.
The great Ron Paul has fired the first "Silver Bullet" at Bernanke and Co.:
Lost in all the "hoo-haa" eminating from "the great equity rally" we have been forced to witness this week, is the observation that the US Treasury debt appears to be be sagging. I always thought rising interest rates were bad for the equity markets...
That is...unless they are rigged I suppose.
Obviously, the Gold market finds fear in the rising interest rates we have seen this week...but should it? The Fed would love for the Gold market to go running off into the hills suqealing in fear of rising interest rates. Fact is though, REAL interest rates are not rising. And the Fed CANNOT allow interest rates to rise in any way shape or form.
"Nominal" interest rates may be rising on the edge here this week, but adjusted for inflation, REAL interest rates rermain negative. And if negative Real interest rates are bullish for stocks, they should be uber bullish for the Precious Metals and commodities in general.
The question of why Treasuries are sagging would be salient. Is this a downtrend developing, or just a "one time event"? Is this just a simple mark down in price by the Treasury and Fed to bump yields up in the hopes of attracting foreign buyers back into the market? Or is the US Treasury BUBBLE about to burst?
The Golden Truth's, Dave in Denver, has some observations regarding the recent weakness in the USTreaury market:
...here's a chart that should scare the crap out everyone who has faith in the U.S. dollar:
The price of the 30-yr Treasury bond looks like it could go into a freefall. Yesterday's 30-yr Treasury auction was very ugly. The primary dealers had to swallow 56% of the all the bonds issued. With current Fed QE policy still in place - i.e. operation twist - we can assume that in some slick accounting maneuver, the Fed is ultimately the back-stop on the bonds taken down by the PD's. I spot-checked the last 10 long bond auctions and there was only 1 in which the PD's took down more than 56%. In most them, the PD's were taking down less than 50%. Why is this significant? Because China, Russian, and now Japan are starting to reduce their participation in U.S. Government bond auctions. In fact, Russia has outright reduced its holding by over 50% in the last year. Japan announced the other day that, in a move to diversify their dollar reserves - they bought $11 billion in yuan-denominated Chinese Government bonds.
This is not a one-time event. This is becoming a systemic trend with large holders of U.S. dollar reserves. This is a very ominous sign for the massive U.S. Government budget deficit spending program. Either the Fed has to figure out a way to induce our large foreign financiers back into Treasuries/dollars or the Fed is going to have to print even more money to make sure the Government gets its spending heroin without sending bond yields into outer space.
On that note, since mid-December the yield on the 30-yr bond has gone from 2.80% to over 3.40%. This is a 22% increase, signifying a 22% increase in the cost to the Taxpayers of funding spending deficits with 30-yr. bonds. This is a very bad trend. Even worse, the flagship mortgage finance index, the 10-yr Treasury, has shot up from 1.85% to 2.30% - a 23% increase in the cost of 10-yr paper. At some point this higher rate will funnel through to the mortgage market. It's probably why mortgage refi applications took a nose-dive over the past couple weeks. It will place further stress on an already fragile housing market.
What the hell happened to the intended interest rate of Bernanke's "Operation Twist?" like ALL Government intervention programs it is starting to fail badly, perhaps tragically... ________________________
Clearly the Treasury [read Tax Payers} cannot afford for interest rates to rise if we are going to attempt to finance $1 TRILLION [plus] spending deficits as far into the future as we dare look. The Fed of course, will never allow interest rates to rise. But what guarantee do we have that interest rates won't continue to rise inspite of every effort by the Fed to prevent them from rising? And if interest rates do continue to rise should Precious Metals investors be alarmed?
If the Fed continues to print money to buy bonds in a effort to subdue interest rates, Precious Metals investors could not be more gratified. Fed money printing is inflationary, no matter how you spin it. Should the Fed increase money printing to chase rising Treasury yields, REAL interest rates will continue to drop, and be even more negative than the ones "supporting" the Precious Metals markets today.
I will let Steve Saville, – The Speculative Investor, counsel us on the relationship between Gold and interest rates...and lay to rest some of the myths and misinformation the financial news media maybe spewing to "explain" the fall in the prices of Precious Metals this week.
This week’s downside breakout in the T-Bond futures market and the associated rise in the T-Bond yield has prompted us to re-visit the relationship between gold and interest rates. In the process of doing so we’ll address the question: are rising interest rates bullish or bearish for gold?
We’ll begin by noting what happened to nominal interest rates during the long-term gold bull markets of the past 100 years. Interest rates generally trended downward during the gold bull market of the 1930s, upward during the gold bull market of the 1960s and 1970s, and downward during the first 10 years of the current bull market. Therefore, history’s message is that the trend in the nominal interest rate does NOT determine gold’s long-term price trend.
History tells us that gold bull markets can unfold in parallel with rising or falling nominal interest rates, but this shouldn’t be interpreted as meaning that interest rates don’t affect whether gold is in a bullish or bearish trend. The long-term trend in the nominal interest rate is not critical; but what is of great importance, as far as the gold market is concerned, is the REAL interest rate. Specifically, low/falling real interest rates are bullish for gold and high/rising real interest rates are bearish. For example, when gold was making huge gains during the 1970s in parallel with high/rising nominal interest rates, real interest rates were generally low. This is because gains in inflation expectations were matching, or exceeding, gains in nominal interest rates (the real interest rate is the nominal interest rate minus the EXPECTED rate of currency depreciation). Also, the first decade in gold’s current bull market occurred in parallel with generally low real interest rates.
The Fed and the Treasury would appear to be trapped. TheTreasury is damned if interest rates rise, and the Fed are damned if they print money in an attempt to buy Tresury debt to keep interest rates low. Precious Metals investors find themselves in the very enviable "win-win situation". No matter what happens from here forward, the prices of Precious Metals are guaranteed to rise.
The Federal Reserve ran another “stress test” on major financial institutions and has determined that 15 of the 19 tested are safe, even in the most extreme circumstances: an unemployment rate of 13%, a 50% decline in stock prices, and a further 21% decline in housing prices. The problem is that the most important factor that will determine these banks’ long-term viability was purposefully overlooked – interest rates.
In the wake of the Credit Crunch, the Fed solved the problem of resetting adjustable-rate mortgages by essentially putting the entire country on an teaser rate. Just like those homeowners who really couldn’t afford their houses, our balance sheet looks fine unless you factor in higher rates. The recent stress tests assume market interest rates stay low, the federal funds rate remains near-zero, and 10-year Treasuries keep below 2%. Why are those safe assumptions? Historic rates have averaged around 6%, a level that would cause every major US bank to fail!
The truth is that higher rates are the biggest threat to the banking system and the Fed knows it. These institutions remain leveraged to the hilt and dependent upon short-term financing to stay afloat. While American families have had to stop paying off one credit card by moving the balance to another one, this behavior continues on Wall Street.
In fact, this gets to the heart of why the Fed is keeping interest rates so low. Despite endorsing phony economic data that shows the US is in recovery, the Fed knows full well that the American economy cannot move forward without its low interest-rate crutches. Ben Bernanke is trying desperately to pretend that he can keep rates low forever, which is why that variable was deliberately left out of the stress tests.
Unfortunately, rates are kept low with money-printing, and those funds are starting to bubble over into consumer prices. Bernanke acknowledged that the price of oil is rising, but said without justification the he expects the price to subside. This shows that Bernanke either doesn’t know or doesn’t care that the real culprit behind rising oil prices is inflation. McDonald’s, meanwhile, is eliminating items from its increasingly unprofitable Dollar Menu. A dollar apparently can’t even buy you a small order of fries anymore.
Unfortunately for our brilliant Fed Chairman Pinnochio...oops, I mean Bernanke...the Fed has evn bigger hole to fill that the money pit over at the US Treasury Department:
As we have repeatedly said in the past, the quarterly Flow of Funds (or Z.1) statement is most interesting not for the already public household net worth and leverage data which serves to make pretty charts and largely irrelevant articles, but due to its insight into the stock and flow of both the traditional financial system but far more importantly – into shadow banking. And this is where things get hairy. Because while equities may have returned to 2008 valuations, the credit shortfall across combined US liabilities – traditional and shadow – still has a $3.6 trillion hole to plug to get to the level from March 2008 (see first chart). It is this hole that is giving equities, which have already surpassed 2008 levels, nightmares. Because while the Fed is pumping traditional commercial banks balance sheets via reserve expansion (read: fungible money that manifests itself most directly in $5 gas at the pump) resulting in a $2.3 trillion rise in traditional liabilities from Q3 2008 through Q4 2011, what it is not accounting for is the now 15 consecutive quarters of shadow banking system contraction, which peaked at $21 trillion in Q1 2008, and in Q4 2011 declined to $15.1 trillion… and dropping. It is this differential that will be the source of the needed “Outside” money, discussed yesterday, and that is only to get equity valuations to a fair level! But considering the Fed’s propensity to print at any downtick, this is very much a given, much to the horror of Dick Fisher. Any additional increase in stock prices will require not only the already priced in $3.6 trillion, but far more direct Outside money injections.
While we have explained the methodology of approaching consolidated credit money in modern finance before (much more here), here is a quick rerun. In the chart below, conventional wisdom only focuses on the red line, which represents traditional commercial bank liabilities (L.110, L.111, L.112 and L.113 from the Z.1), where Fed reserves and other monetary expansion mechanisms manifest themselves. As can be seen this line is rising rapidly, as is to be expected – in tune with the US deficit spending and Fed reserve growth. That both the US debt chart and the consolidated global balance sheet have now entered an exponential phase is a topic for another discussion.
What, however, is always forgotten is the blue line, which represents the liabilities in the shadow banking system – all the credit money that has been used by various unregulated institutions to perform the traditional transformations of maturity, credit and liquidity that define a “bank.” And this line is for lack of a better word, collapsing. It is this collapse that the Fed has yet to tackle, and it is the offset of this collapse which the equity market has somehow already priced in!
OK...so why are the Precious Metals being beaten to death if rising interest rates are not a threat to them? Great question, been asking it myself all week. Perhaps this Zero Hedge post below is why...perhaps this same explanation might apply to the recent sell off in US Treasuries...the need for quality collateral to cover bad bank margin calls at the ECB.
In an update of our post from a week ago, the ECB has increased its margin calls on European banks by EUR162 million this week to another record high of over EUR17.3 billion. While our pointing out of this huge jump from 'average' historical margin calls last week was met with - it's temporary/transitory due to temporary/transitory ineligibility of defaulted (and since undefaulted) Greek bonds (which given the rise this week has now been proven incorrect) or the more prosaic "don't worry, be happy", we remain concerned at both the velocity and now sustained size of these margin calls (as clearly collateral quality has dropped rapidly and remained weak). This is concerning since it would appear we had a good week for collateral (risk assets) in general, so we can only imagine what garbage is clogging the ECB's balance sheet. The side-effect of this appears to be (as we pointed out here) that Gold (the banks' remaining quality collateral) is being sold to cover these margin calls just as it was in September 2011 (though lease rates have not squeezed as much this time). We can only imagine the size of these margin calls should we happen to have a week where AAPL stock drops or BTPs don't rally (broad collateral actually loses value), but that seems impossible anyway.
ECB Margin Calls to European Banks rose once again to record highs...
And Gold remains offered as the need to fund these margin calls means finding money under every mattress and selling whatever banks have to meet the central banks demands...
Interesting that gold lease rates did not drop (soar from the other side) in a squeeze this time - as they did in September 2011.
IF...as our "fearless leader that couldn't lead a horse to water" President, AND our "I've never told the truth about a damn thing" Federal Reserve Chairman would have you "believe", the US Economy is growing and in "recovery", then:
Why has the Fed injected $16 TRILLIONinto the banking system since 2008?
Why Is Gasoline Consumption Tanking? Gasoline deliveries reflect recession and growth. The recent drop in retail
gasoline deliveries is signalling a sharp contraction ahead.
Why are tax revenues continuing to fall? ...through last Friday, and net of tax refunds, total US tax revenues were actually
lower in the fiscal 2012 year to date period than compared to 2011, by just
under $2 billion, at $625.5 billion. Which is the weakest link for any argument
that the US is actually growing: what is growing is America's
debt (now almost exponentially), while its revenues are at best unchanged.
-ZeroHedge
Why are the Non-Farm Payrolls numbers NOT supported by reported income tax collections? ...the BLS refuses to use the data embedded in income tax collections to be able to
report real time jobs and wages. Why does it refuse? Could the reason it refuses
to use real time data on jobs and incomes be because perhaps this jobs number is
politically motivated? The entire world is looking at U.S. job creation as a
proxy on how well Obama is doing? Could the Obama Administration be pressuring
its economist employees to create the best possible new jobs number?
How can the stock markets keep rising when individuals have been net sellers for the past several years? "Individuals are net sellers of US equities and have been for years, probably
because they need to pay bills and stuff. So how are they able to do that and
get decent prices without the stock market cracking. Well simple the Federal
Reserve has been printing huge amounts of money and that ultimately has been
boosting the value of US equities, and therefore the sellers can sell."
-TrimTabs Charles Biderman
THERE IS NO RECOVERY, AND THERE IS NO GROWTH.
An illusion of both has been, and is being, painted by those with a sound bite voice. The President is a liar, the Fed Chairman is a liar, and Americans are fools to believe their lies. There is only one thing, and one thing only that is growing rapidly in America, and that one thing is DEBT.
The government has an exploding debt problem as well:
"...final February deficit was just released and the actual print is $231.7 billion.
It also means that in the first 5 months of the fiscal year, the US has raked up
$580 billion in deficits, oddly matched by $727 billion in new debt
issuance, 25% more new debt issued than needed to fund deficits..."
-Zero Hedge
And yet the prices of Gold and Silver remain under pressure? Funny thing about the take downs of the price of Gold and Silver over the past 10 years...they ALWAYS precede or coincide with massive money injections into the World Financial System by the US Federal Reserve and the European Central Bank.
The chart below plots the Federal Reserve System's total assets, the European
Central Bank's total assets and the price of gold over time. There are many who
argue that gold is in a bubble and they could well be right but looking at this
chart it seems that the real bubble is in the recklessness and irresponsibility
of Messrs Bernanke's and Draghi's policy of creating money out of thin air to
buy assets!
Is it "just a coincidence" that the price of Gold was smashed in the Spring of 2008 prior the Fed and ECB money printing in the Fall of 2008? The Fall of 2009? The Fall of 2010? The September 2011 hit on the Precious Metals as the ECB went hog wild printing money? This is NO COINCIDENCE people! This is a blatant effort by those that too many trust to deceive us into believing "nothing is wrong, the government will fix everything".
BULLSHIT!!!
Deceive though they may, and rig as they might, the Fed, the ECB and western governments are POWERLESS to "stop" the rise in Gold and Silver prices...
THE CHART SPEAKS FOR ITSELF
Despite every effort, the price of Gold has continued to rise as the Fed and ECB print money to delude the world into believing that an economic recovery is occuring "right before our eyes"!
Is it a safe bet that the price of Gold will triple at a minimum over the next two years? Look at the chart above again. Following the take down in Gold in the Spring of 2008 and the subsequent ramp in assets of the Fed and ECB [money printing], what did the price of Gold do? That's right, IT TRIPLED! Do not doubt for a day that it will not at least TRIPLE again from current prices by the end of next year.
America is NOT in a recovery. America is in a DEPRESSION masked by US Federal Reserve money printing, and the lies of the Obama Administration.
Wall Street and mainstream economists are abuzz with chatter that we’re seeing a recovery in the US due to the latest jobs data. These folks are not only missing the big picture, but they’re not even reading the fine print (more on this in a moment).
The reality is that what’s happening in the US today is not a cyclical recession, but a one in 100 year, secular economic shift.
See for yourself. Here’s duration of unemployment. Official recessions are marked with gray columns. While the chart only goes back to 1967 I want to note that we are in fact at an all-time high with your average unemployed person needing more than 40 weeks to find work (or simply falling off the statistics).
Here’s the labor participation rate with recessions again market by gray columns:
Another way to look at this chart is to say that since the Tech Crash, a smaller and smaller percentage of the US population has been working. Today, the same percentage of the US population are working as in 1980.
Here’s industrial production. I want to point out that during EVERY recovery since 1919 industrial production has quickly topped its former peak. Not this time. We’ve spent literally trillions of US Dollars on Stimulus and bailouts and production is well below the pre-Crisis highs.
Here’s a close up of the last 10 years.
Again, what’s happening in the US is NOT a garden-variety cyclical recession. It is STRUCTURAL SECULAR DEPRESSION.
As for the jobs data… while the headlines claim we’re adding 200K+ jobs per month the sad fact is that without adjustments we’ve lost jobs 1.8 million jobs so far in 2012.
Not only is this data point actually in the JOBS REPORTS THEMSELVES… but it’s supported by the fact that taxes (which are closely tied to actual incomes/ jobs) are in fact below 2005 levels.
Folks, this is a DE-pression. And those who claim we’ve turned a corner are going by “adjusted” AKA “massaged” data. The actual data (which is provided by the Federal Reserve and Federal Government by the way) does not support these claims at all. In fact, if anything they prove we’ve wasted money by not permitted the proper debt restructuring/ cleaning of house needed in the financial system.
It all boils down to the same simple sentence repeated by myself and others: you cannot solve a debt problem by issuing more debt (even if it’s at better rates).
Indeed, take a look at Greece today. The ECB and IMF have spent two years trying to post-pone a real default. Having wasted over €200 billion, they’ve now let Greece stage a pseudo-default (at least in their minds)… which, by the way, has only actually increased Greece’s debt load and crippled its economy.
Just like in the US. And while the topic of a US default is not openly discussed today, it’s evident that what’s happening in Greece will eventually come our way, after first making stop at the other PIIGS countries as well as Japan.
Which is why smart investors are already preparing for a global debt implosion. And they’re doing it by carefully constructing portfolios that will profit from it (while also profiting from Central Bank largesse in the near-term).
Regardless of what you think will happen over the remainder of this decade,
one thing seems virtually certain: the value of paper money will be affected,
perhaps dramatically. Even if the economy slips into deflation, the deflation
wouldn't last long. A panicked Fed would print to the max and set off a wild
rise in prices. This is why we're convinced currency dilution will not only
continue but accelerate.
Let's take a look at what's happened so far with the value of our currency
vs. gold, after accounting for the loss in purchasing power.
_____________________________
Got Gold You Can Hold? Got Silver You Can
Squeeze? It's Not Too Late To Accumulate!
A few days ago in a blog post I asked: Is The Demand For Physical Silver About To Overwhelm Supply? After last weeks OBVIOUS Precious Metals Market manipulation, the only answer to that question has got to be yes. The banks that have sold MILLIONS of ounces of Silver that they do NOT own have been exposed.
Silver's price breakout at $35.00 Wednesday, February 22, and subsequent short squeeze initiated Monday morning ahead of First Notice day to take delivery in the March CRIMEX Silver contract signaled that the criminal bullion bankers were indeed up the creek without a paddle. Action, no matter how criminal, was needed to bail these pathetic bankers out of a situation that bordered on their annihilation.
The buying that the Silver market witnessed as trading opened last Monday was "panic buying"...the Silver train was about to leave the station. As the momentum traders entered the Silver Market following the $35 price breakout, the shorts, already enduring pain, were forced to cover and add fuel to the fire a breakout in Silver had started. The criminal bankers had no one to blame but themselves for the HUGE loses they were experiencing on their naked short positions.
But in true 21st century banking tradition, our bad bet bankers chose to make the honest Silver Market participants pay for the banks loses on their naked short positions by bombing the Gold Market with an outrageous mountain of paper Gold in an effort to chase March Silver Contract holders from their positions as Silver prices fell in sympathy with Gold.
Reported massive 31 tonne sell order triggered gold and silver price collapse
Does the crash in gold and silver prices, reportedly due to a single huge 31 tonne gold sell order, create a window of opportunity for precious metals investors?
Author: Ross Norman
Posted: Thursday , 01 Mar 2012
LONDON A reported 31 tonne sell order on the CME rocked gold which saw prices collapse from a high of $1790 in London hours to $1703 during NY trading, followed by a further dip to the low of $1687 in out of hours electronic trading. A fall of over 6% which erased roughly half of the gains since the beginning of the year.
Much has been placed on the testimony by Fed Head Bernanke but other markets saw less impact leading to suggestions that it simply provided an excuse for a particular "non US" fund to bail and take profits in dramatic fashion. It may be possible that the seller had hoped the 1,000 lot sell order would trigger stops and thereby exaggerate the move lower, allowing the buying to potentially come back in at a much lower price. Like the price, there is much speculation on their motive.
Ordinarily if a seller wanted to get the best price for his metal he would seek to finesse the selling over time, hunting out liquidity (finding people who are the other side of his sell order) and thereby ensure he gets the best possible profit. This seller was clearly simply out for effect…
-END-
You have to be kidding me! A hedge fund was waiting in the lurch waiting for
Bernanke to speak and then dumps 31 tonnes on the market?
A single seller drove gold down as Bernanke testified
Submitted by cpowell on 08:32AM ET Thursday, March 1, 2012. Section: Daily Dispatches
11:35a ET Thursday, March 1, 2012
Dear Friend of GATA and Gold:
Friends have sent the full text of the CIBC gold market note from yesterday that was quoted in part at GoldAlert here:
"Looks like a large seller of gold in the market, as a 10,000 contract traded, down-ticked the price by $40 per ounce, and represents 1 million ounces of gold sold. Roughly 200,000 contracts trade per day, but unusual to see such a large single trade. Not likely due to contract expiry either. Bernanke isn't really helping either, but we haven't seen any either-size transactions post the one big trade, so hopefully will see the price decline settle down. Shortly after the 10,000 order, which was closer to 11,000 contracts, looks like one size seller out there. Sold 1.8 million ounces of gold on the day. Smells like a liquidity squeeze."
That kind of selling certainly gives the impression of someone with immensely deep pockets trying very hard to drive the price down while a congressional committee was taking testimony from the world's leading central banker, Federal Reserve Chairman Ben Bernanke, who, perhaps not so coincidentally, also has immensely deep pockets.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
"Curiously I was logged into Bullionvault.com [1] at the time Bernank started speaking and huge offers appeared at exactly the same time in silver and then in gold - just as they appeared in the US futures market as described below In my view evidence of a very clearly coordinated intervention across all platforms."
Adam Cleary
One thing for sure though, it was no liquidity squeeze. That part was all wrong the way I see it. You don’t have liquidity squeezes when a market is on its highs, rolling along to the upside, and outside markets are all copacetic. Liquidity issues appear when there are cash crunches, and or, overall fear about losing too much capital is pervasive.
Never in financial market history has a market been so misreported. It is no wonder the general public is so gold/silver clueless. They listen to the likes of Dennis. I can’t recall ONE TIME when he was on CNBC that he was bearish when gold was rising and bullish when it tanked like it did today. It is times like this when investors ought to be taking advantage of the gifts The Gold Cartel is handing them. Actually, a number of them are, the ones who don’t watch CNBC. An email sent to CP and me yesterday:
I thought that you guys would want to know that we had nothing but buyers on this pullback today...all day and into tonight. We had very heavy gold and silver buying.
Best regards,
Dan Ward
Owner
True Metals Group www.silver50.com
Jesse on the case…
01 March 2012
A Single Large Seller Smashed the Gold Market Yesterday: Dr. Evil Strategy?
There are a variety of reasons to liquidate a large position.
But whatever the reason, no experienced trader would take a very large position into a thin market and then just dump it at the market, if they wanted to achieve some sort of reasonable economic benefit from selling that position, unless they were under duress, or had some other motive than profit. Such a trade is called 'selling against yourself.'
Unless of course they have a strategy to lose some in one market while making huge profits and buys in others at cheap prices, as in the case of the mining sector for example. Here is one old hand explaining how funds rig the markets.
A trader who was being paid to obtain the best value for the seller would be fired if they simply dumped a large position in the market, driving the prices realized down almost 10 percent in less than an hour.
The same situation occurred at roughly the same time in the silver market, as hundreds of millions of paper ounces of silver were just dumped in the market in less than an hour, breaking the price down dramatically.
Such unbridled selling triggers other selling, as the complex web of trades and relationships drive other parties to liquidate their positions and trigger stop loss orders.
And this is the story of the economy and the governance of the US markets today. There is little rule of law, only the power of size. And it will get worse as the paper game comes closer and closer to default.
Personally I think there were multiple reasons and beneficiaries from yesterday's market action in the metals. When the word goes out from some powerful party, others in the market find out and craft their own strategies and trades to benefit from this insider information. This is how outsized profits are made.
I believe that some parties who were heavily short silver were staring into the abyss, seeing a first delivery notice going out into a paper market that is many multiples of their ability to deliver silver into it. And a default of a major commodity exchange would have disastrous results for the confidence in the markets, already stretched thin by fraud and scandal.
So let's see what happens. Because when these things happen, these artificial market operations, they only tend to reinforce the primary trend, the shortage of real bullion caused by many years of price manipulation and underinvestment. And when that tide of corruption goes out, 'we will see who was swimming naked,' as someone who some years ago owned a huge amount of silver, and then capitulated under duress and sold it, once said. And he remains bitter about it to this day.
***
Folks a 31 tonne sell order in Gold, an order that hit the market in one fell swoop at 10AM [exactly as Ben Bernanke stepped before Congress to deliver his annual assessment of the economy] is the equivalent of OVER ONE MILLION ounces of Gold. Outrageous!
Even more shocking than this single Gold order was to learn that over 500 MILLION ounces of Silver trade on the CRIMEX last Wednesday. Only 700 MILLION ounces of Silver are mined globally each year, and 500 MILLION traded in ONE session on the CRIMEX?
Today billionaire Eric Sprott told King World News that a staggering 500
million ounces of paper silver traded hands during the takedown in the metals
this week. Eric Sprott, Chairman of Sprott Asset Management, had this to say
about what took place the day of the plunge in gold and silver: “I can only
imagine it’s the same forces that for the last twelve years have been at work in
the gold market, trying to keep the volatility very large on the downside. As
you are aware, we hardly ever get days when you get an intraday $100 rise in
gold. When we look back at what happened (on Wednesday) we saw huge sell orders
in gold and silver.”
Did you buy "physical"Silver today? I did as prices retested last Wednesday's lows just before the CRIMEX closed this afternoon. Could prices continue lower...sure. It just doesn't seem likely though. has a criminal hit in the price of Silver ever resulted in a drop in DEMAND for REAL PHYSICAL SILVER? NO! Demand always increases when prices drop. The hit in both Gold and Silver may have gotten the criminal bankers out of the kettle, but the water is still boiling people.
Gold and silver prices plummet because the U.S. economy is so healthy that the Federal Reserve won’t have to print any more money, and so there won’t be any more inflation. Lol! While it made good fiction for the mainstream pablum-dispensers, it certainly has no connection whatsoever with the real world.
The U.S. economy is “healthy”? As I have pointed out on previous occasions, 0% interest rates are nothing less than an economic defibrillator – a (temporary) desperation measure to attempt to breathe life into a dying economy. Permanent 0% interest rates simply mean that economy is already dead, as we have seen with Japan. All that remains to be done is to put these zombie-economies out of their misery, through debt-default followed by massive restructuring.
As I have stressed in my recent commentaries, it is also beyond absurd for B.S. Bernanke to pretend that the Federal Reserve has ceased its money-printing orgy. The gravity-defying U.S. Treasuries market provides conclusive, mathematical proof that such a claim is tantamount to an admission of massive fraud.
Maximum bond prices at a time of maximum supply defies every economic principle in the books. Maximum bond prices at a time of maximum supply, when the largest buyer (China) has been selling Treasuries for more than a year, when the “economic surpluses” which financed Treasuries-buying have nearly vanished, when Treasuries auctions have been rigged so that no one knows who the buyers are, and at a time when the U.S. economy is obviously and hopelessly insolvent defies legality.
Someone, somehow is financing the totally opaque purchases of $trillions in U.S. Treasuries, and the list of suspects is rather short: the Federal Reserve. If the Fed is not financing those purchases with its officially/legitimately created funny-money then it must be doing so in some less-than-legitimate manner.
More broadly speaking, it demonstrates the terminal stupidity of the entire mainstream media that they could believe anyone claiming there will be little-to-no-inflation, in a world of deadbeat-debtors – who can only continue to finance their economic Ponzi-schemes through exponentially increasing their money-printing (and thus diluting their currencies, and thus producing inevitable inflation).
The only other mathematically-possible scenario is debt-default: bonds immediately going to zero (or close to it). Otherwise, exponential money-printing takes the underlying currencies to zero, also making the bonds worthless. Either way we are 100% certain to get to the same result. Paying maximum prices for any of these paper time-bombs goes well past idiocy and all the way to deliberate economic suicide.
As I have explained on a number of previous occasions, in either a debt-default or hyperinflation scenario gold and silver prices will explode in an equally exponential manner – again as a function of basic arithmetic (along with supply and demand). Thus the long-term upward revaluation of precious metals is as certain as sunrise following sunset.
With the supposed “reasons” for gold and silver prices going lower being exposed as ridiculously fraudulent propaganda, once again we are left no explanation other than market manipulation to explain the abrupt plunges in the prices of gold and silver – just as they had achieved technical break-outs indicating that prices should move substantially higher.
With both the fundamental factors and the technical factors absolutely and unequivocally bullish, there is no conceivable, legitimate explanation for the price moves seen on Wednesday. While it may frustrate the readers who send me their mail seeking guidance, I have essentially ceased any/all short-term predictions for the precious metals sector. My reasoning is elementary.
Market manipulation is both an exogenous and arbitrary event. As such, the timing of manipulation events can never be predicted – except as a response to any/every potential break-out with gold, silver or the mining stocks. The Catch-22 here, however, is that while we know the banking cabal will attempt to manipulate the market lower any time there is a break-out, sometimes they succeed and sometimes they fail. And when they fail, the train has left the station, and it’s never coming back.
Equally, whenever any “manipulation operation” is underway, both the duration and intensity of the event are also arbitrary, and thus these factors (as a matter of logic) can also never be predicted. Given these parameters, investors have two (and only two) strategies open to them.
They can continue to attempt to play the swings in the markets (knowing those swings are absolutely unpredictable). This is nothing less than pure gambling, and thus (in my own humble opinion) plays directly into the hands of the banksters.
The other alternative is to recognize we cannot predict the unpredictable, and are thus relegated to playing “pure defense”. In this context, this would seem to dictate a strategy as simple and conservative as dollar-cost averaging (or some close proxy). Remember that as long as we are able to exchange (worthless) paper for (valuable) metal at all that ipso facto this means the metal is “cheap”. Ignore the market fraud of the banksters. Ignore the wild gyrations in prices – and just keep buying real, “physical” bullion.
The Achilles Heel of the banksters is that they require significant amounts of real bullion to leverage in their illegitimate paper manipulations, and you cannot leverage zero. When the banksters run out of bullion, their paper-fraud schemes come to an end.
The latest desperation attack on the gold and silver markets is equivalent to pushing down (very hard) on a spring. Ultimately there is always a counter-reaction to such economic force – even if it is delayed. That counter-reaction will inevitably mean an even more violent explosion upward in prices. While we should avoid trying to time these manipulated markets, there would seem to be no more fortuitous time to buy than right after another of the banksters’ fraudulent take-downs.
Bernanke’s little head fake of last week in not mentioning a QE3 can
be taken with a grain of salt. The US has another $1.3 billion
projected deficit to be financed and the fragile US recovery cannot stand a rise
in short rates. A war with Iran would make the US deficit so much worse. The US
unemployment picture is not as pretty as the recent decline in the official U3
rate to 8.3 percent would suggest. For one thing the Labor Force Participation
rate continues to move downward. The broader and less quoted U6 rate which
includes people who have given up looking for work for January is 15.1 percent.
Bernanke knows the numbers. And recent Treasury data show some fall off in
Chinese buying of US Treasury securities. US short rates will not rise and
Treasury auctions will not fail. Not if the Fed can help it. The Fed
will print.
