"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."
- Thomas Jefferson
Gold and Silver remained capped by not for profit sellers. Gold at 1217, and Silver at 18.50. It would appear that this capping is related to options expiration on shares of the Gold ETF, GLD and the mining shares tomorrow, Friday July 17.
No matter how how look at the prices Of Gold and Silver...the markets are blantantly rigged. Consider today's drop in the US Dollar and one must vigorously scratch their head to try and understand the lack of reaction in the prices of Gold and Silver.
Consider that since June 6th, the Dollar has dropped 7%, from 88.70 to 82.48 as I type this this evening. Over the exact same period in time, Gold has fallen 1%. The US Dollar has dropped 7% in six weeks and Gold has not only not risen a dime, but has actually fallen 1%? Go figure...
Look for Gold to close the week below 1220, with Silver below 18.50. Expect a powerful rally in the Precious Metals and their mining stocks next week.
BIS swaps seem meant to stretch out paper gold
Submitted by CHRIS POWELL, Secretary/TreasurerGold Anti-Trust Action Committee Inc.
Reginald H. Howe of GoldenSextant.com, plaintiff in the 2000 federal lawsuit against the Bank for International Settlements for gold market manipulation, analyzes the recent massive gold swaps undertaken by the BIS and figures that they are likely "the latest technique for giving official support to an increasingly shaky gold banking business," a way of "increasing the ratio of paper claims on gold to the underlying amount of available real metal." Howe concludes: "The growing reluctance of central banks to part with whatever gold they have left can only be a positive development for committed gold investors."
Howe's analysis is headlined "Gold Derivatives Update: BIS Swaps" and you can find it at the Golden Sextant here:
http://www.goldensextant.com/commentary37.html#anchor5208
Gold Price Swings on Swap News
By Patrick A. Heller
The publicity over the existence of this gold swap, for which it appears that the Wall Street Journal’s article deserves a lot of the credit, led the BIS to take an unusual step of issuing a news release with supplemental information about the swap. The BIS news release provided a few more details, all of which the BIS obviously had preferred to not reveal to the public.
Normally, the BIS only deals with central banks and monetary authorities. Upon the initial discovery of the existence of this gold swap, some analysts thought that this swap was done on behalf of some the central banks from troubled nations participating in the euro (such as Greece, Spain, or Portugal). When further examination showed that such a swap would not practically facilitate any easing of financial problems for such central banks, suspicion next fell on the International Monetary Fund. It is known that the IMF is trying to improve its cash flow, which is why it has been selling part of its gold holdings. The IMF theoretically has enough gold to have offered as collateral to the BIS and apparently could have used the cash flow from the swap, which would not force the IMF to sell this additional amount of gold.
However, the BIS announcement destroyed all of these analysts’ theories. The news release stated that the gold swaps were being done on behalf of commercial banks. Further, the BIS disclosed that the size of the swap had grown larger since the March 31, 2010, financial statements were released. Former central banker and market analyst James Turk stated that the details of these transactions will probably never be made public.
In order for any commercial banks to conduct such transactions, they would have to be able to produce the more than 11 million ounces of gold for collateral. For all practical purposes, the only commercial banks that could mobilize that amount of gold are the so-called bullion banks. These banks, which act as wholesale market makers for gold, include Goldman Sachs, HSBC, Bank of Nova Scotia, JPMorgan Chase, Deutsche Bank, Barclays, UBS, Societe Generale, Mitsui, and others. However, it is highly unlikely that any of these banks would use a gold swap for the purposes of raising up to $14 billion of cash flow. There are less cumbersome ways to acquire these funds, mostly by dealing with central banks. Adrian Douglas, an analyst whose work I have previously cited, suspects that the use of commercial banks was really a means of hiding the identity of one or more central banks that ultimately ended up with the cash realized from this gold swap. He said, “So the BIS swaps look like a tripartite transaction. The commercial bank or banks made a swap with a central bank or banks and then the commercial bank or banks made a swap with the BIS.” For the BIS to be willing to conduct such transactions with a commercial bank would almost require a guarantee from one or more central banks or monetary authorities, which makes Douglas’s theory all the more plausible.
Since this news has come out, there has been a lot of uncertainty in the gold market about what effect this gold swap may have. As I see it, the three most likely scenarios all would be bullish for the price of gold. First, I suspect that much of the gold involved in these swaps (now totaling more than 12 million ounces) has already been delivered against orders on the physical market. If this is true, then existing demand for physical gold is much higher than generally perceived. If the public were to find out that much of this gold were already sold onto the market, this news would boost future demand.
Second, the cash received in the gold swap and the gold could be returned to the original parties without the gold being sold onto the market. That would be an indication that there is no quantity of physical gold hanging over the market, which is currently perceived as a risk that has held down prices in the past week.
Third, one or the other parties could end up selling some or all of this gold in the market in the future. It may seem counterintuitive, but I expect that such a sale would actually increase demand for gold. The reason for this (beyond the mere indication that this swap shows that one or more parties involved in this swap is in dire financial straits) is that there are several central banks and sovereign funds that would jump at the opportunity to acquire $14 billion worth of physical gold. The speed with which such a modest quantity of gold would be snapped up would spur others to jump on the gold bandwagon.
While all this turmoil is going on in the gold market, the COMEX silver inventories are continuing to be depleted. At the close on June 16, the COMEX had a total of 119.5 million ounces of silver in bonded warehouses. By the close on July 12, inventories had dropped to 112.78 million ounces, a decline of 6.72 million ounces (5.6 percent) despite extraordinary efforts to try to beef up COMEX inventories. On July 12 alone, about 1.3 million ounces were withdrawn from just two depositories – HSBC and Scotia Mocatta (a subsidiary of Bank of Nova Scotia). These are the two depositories strongly suspected of not having enough physical silver on hand to cover their legal obligations to the COMEX and other customers. The run on the COMEX is obviously serious enough that a massive effort seems to be going on behind the scenes not only to scrounge up whatever physical supplies that can be located, but also to keep the news of the run from being widely reported.
http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=12230
Gold Options Surge by More Than 1,000% in 10 Weeks
Data from the gold options market shows that smart money believes that gold will go higher in the coming months and that the recent fall in prices may be another correction and consolidation prior to another move up in prices. Open interest in options which allow holders to buy gold at $2,000 an ounce by December 2011 has surged a massive 11-fold on the Comex since May 11. Open interest to buy at $1,500/oz by the end of the year has fallen by 33 percent which suggests that gold market participants remain unsure of gold's short and medium-term prospects but confident of higher prices in the long-term.
http://seekingalpha.com/article/214469-gold-options-surge-by-more-than-1-000-in-10-weeks?source=email
Trade Deficit Gets Even Worse
By Dirk van Dijk, CFA
In May, the trade deficit expanded to $42.27 billion from $40.32 billion in April. Relative to a year ago, the trade deficit is up 70.0%, but May of a year ago marked the low point in the trade deficit after world trade collapsed following the 2008 financial meltdown. The May trade deficit was also significantly worse than the $39.5 billion that was expected.
The trade deficit is like a cancer on the economy. We don’t feel it acutely at any given time, but slowly but surely it is going to kill the economy. Not just put it into a recession for a few quarters (although each dollar increase in the trade deficit translates to a dollar decline in GDP) but a real tangible and permanent decline in the standard of living for the country.
The trade deficit is a far bigger problem than the budget deficit. Right now a budget deficit is needed to fill a huge gap in aggregate demand as the consumer is trying to deleverage and repair his balance sheet. There is no such temporary need for a trade deficit -- it is simply harmful to the economy, both short-term and long-term.
http://finance.yahoo.com/news/Trade-Deficit-Gets-Even-zacks-1427147838.html?x=0
Fed eyes steps to bolster sputtering recovery
WASHINGTON (AP) -- Federal Reserve officials cut their forecasts for growth this year and signaled they stood ready to take new steps to keep the recovery alive if the economy worsens.
A new document, released Wednesday, revealed a more cautious mood among the Fed policymakers in light of Europe's debt crisis, a volatile Wall Street, a stalled housing market and high unemployment.
With risks growing, Fed officials at their June 22-23 meeting saw the need to explore new options for bolstering the economy. That's a turnaround from earlier this year when they were moving to wind down crisis-era supports.
No new specific steps were disclosed or agreed upon at that time.
However, if the recovery were to deteriorate, Fed policymakers have options. They could revive programs to buy mortgage securities or government debt. They could lower the rates banks pay for emergency Fed loans. The Fed also could create a new program to spark more lending to businesses and consumers in a bid to lure them to ratchet up spending and grow the economy.
http://finance.yahoo.com/news/Fed-eyes-steps-to-bolster-apf-1768963457.html?x=0&sec=topStories&pos=6&asset=&ccode
In short, the Fed is planning to print money to infinity to revive the economy. This revelation by the Fed this week should have sent the price of Gold soaring, yet nothing happened. The caps on Gold and Silver can not last forever. The news this month of the Gold swaps at the BIS are proof of that. Toss in the pending defaults at the CRIMEX in Silver, and the caps on the prices of the Precious Metals begin to look pretty thin here.
Be right and sit tight.
Thursday, July 15, 2010
Tuesday, July 13, 2010
Be Right And Sit Tight
BIS gold swap signifies a threat to Europe, not to gold
By Michael J. Kosares
A swap agreement is nothing more than a sophisticated version of a pawn ticket. The owner of the property leaves his valuable with the pawnbroker. In turn the pawnbroker offers cash against the item's perceived value. If, in time, the owner fails to reclaim the property, ownership transfers to the pawnbroker.
In the case of the BIS and our subject pawner, the gold is left with the pawnbroker, who issues cash -- in this case, probably in the form of euros.
The real question with respect to the pawn is not as the mainstream press has posited it, a threat to the gold market. It has more to do with what this swap portends for Europe.
It did not come from nowhere. It is not some inexplicable event that simply happened. Something else is going on, the full portent of which we do not yet fully understand.
No one throws gold around like an old suit of clothes, and we need to keep that in mind.
http://gata.org/node/8825
BIS swap operation signals wider use of gold
By Jan Harvey and Jane Grieve
LONDON, July 13 (Reuters) - The 346 tonnes of gold swap operations conducted by the Bank of International Settlements (BIS) in recent months highlight gold's central role in the financial system and are unlikely to lead to dumping of the metal on the market, GFMS chairman Philip Klapwijk said.
The operations, detailed in the bank's latest annual report, show the bank was holding 346 tonnes of gold as part of swap operations in exchange for currencies.
"Here we have gold being used quite creatively," Klapwijk told Reuters Insider television. "That is in a sense a validation again of gold's centrality to the financial system."
http://af.reuters.com/article/metalsNews/idAFLDE66C1SP20100713?sp=true
Federal budget gap tops $1 trillion through June- AP
Trade gap widens as imports and exports both rise- AP
The Double Life of Wall Street
by David Weidner
Fairy tale season is about to begin.
Wall Street banks and brokerages are readying second-quarter numbers for mass digestion. They'll show healthy balance sheets, tolerable risk levels and have all the trappings of well-run companies.
Don't believe a word of it.
http://finance.yahoo.com/banking-budgeting/article/110056/the-double-life-of-wall-street?mod=bb-budgeting&sec=topStories&pos=7&asset=&ccode
Monday, July 12, 2010
Never Make Promises You Can't Keep
"Deflation is not real, although we are seeing some symptoms of it now. In the inflationary eras I’ve studied they are presaged by what at the time appears to be deflation. That is where we are today."
-Warren Bevan
This BIS gold swap story has legs! And whenever central banks and their nefarious Gold market activity finds it's way into the news, sentiment in the Gold sector plummets. Given the information gathered so far regarding this "Gold swap" featuring the BIS as a the major counter party, one can only come to the conclusion that this "revelation" is purely bullish for Gold. One might, looking back historically, see this "transaction" as a watershed moment in the destruction of the global Gold Cartel's manipulation of the price of Gold.
As each day passes now, Gold is becoming recognized for what it is: REAL MONEY. The Gold Cartel and its bullion banks are on the ropes, a run on the bank's Gold is now reaching full throttle. In order to meet rising physical demand for Gold promised for delivery by contract, the bullion banks are turning over every seat cushion in the office to find a few more ounces to meet overwhelming demand for physical delivery. Moral of the story: Never make promises you can't keep.
Mysterious BIS gold swaps are likely a bullion bank bailout
By Adrian Douglas
As always, news of anything to do with the gold market is cloaked in secrecy, misinformation, and innuendo.
What we can be sure of is that the BIS news is gold-friendly.
Why?
Because the BIS was intending to keep the matter secret.
The BIS gold swaps were not announced but instead "discovered" by an analyst snooping around the BIS accounts.
Similarly the International Monetary Fund has been quietly selling gold each month since February even though for years every possibility of a gold sale by the IMF was announced X to the power N times, where X is the number of tonnes to be sold and N is the gold price.
The BIS typically transacts with central banks but not exclusively; the BIS' own profile also mentions a "number of international institutions" with which it does business, which includes undoubtedly commercial banks and bullion banks, which are also commercial banks.
The BIS is always active in the gold market, so it cannot just transact with central banks, as the central banks need someone to make trades for them:
http://www.bis.org/about/profile.pdf
"The BIS offers a wide range of financial services specifically designed to assist central banks and other monetary authorities in the management of their foreign exchange reserves. As of 31 March 2010 some 130 such authorities, as well as a number of international institutions, made use of BIS financial services. Total currency deposits amounted to SDR 196 billion, representing around 3 percent of world foreign exchange reserves."
If the BIS were to trade directly with a central bank in a gold swap, the gold would act as collateral and probably would not change its physical location and cash would be given to the central bank.
But the BIS corrected The Wall Street Journal's first story, saying its swap was with commercial banks, not central banks.
While a central bank theoretically and practically could hold 380 tonnes of unencumbered gold, there is no way that a commercial bank is sitting on 380 tonnes of unencumbered gold. So the gold in the BIS swaps came from somewhere else.
The only possibility is a central bank or several central banks. (Portugal holds 380 tonnes. Just coincidence? Spain holds 280 tonnes and Greece 112 tonnes.)
So the BIS swaps look like a tripartite transaction. The commercial bank or banks made a swap with a central bank or banks and then the commercial bank or banks made a swap with the BIS.
Why would this be done?
This is not about currency liquidity, as the $14 billion reported raised is not liquidity; it is pocket change.
On the other hand, 380 tonnes of gold is liquidity in the gold market, where mines produce only about 2,200 tonnes per year.
If the BIS made the swap directly with a central bank, the gold would not be provided to anyone for liquidity.
If the swap was made between a commercial bank and a central bank, the commercial bank would get its hands on the gold and the gold would change location to the vaults of the commercial bank, a bullion bank.
This would require the bullion bank to hand over $14 billion of its own money.
But by doing another swap with the BIS, the commercial bank would get the money from the BIS and technically the gold would now belong to the BIS, even as it most likely would not change location and 380 tonnes of gold would be digitally credited to the BIS' unallocated gold account at the bullion bank.
In this way the central bank or banks would get cash and the BIS would get the unallocated gold as collateral and as if by magic the bullion bank or banks would get 380 tonnes of gold to bail them out for a few more weeks as massive physical demand for metal eats their lunch.
And the bullion banks would manage this without paying a dime of their own money.
Why would the BIS be a willing player in this scheme?
Because it would fall into the type of operations BIS official William S. White described in a speech in 2005 when he said that among the five objectives of central bank cooperation is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." You can find White's speech here:
http://www.gata.org/node/4279
With gold reaching record high prices and a run on the banks of the gold cartel gaining pace, this must be an occasion where such an asset price-influencing operation would be thought "useful" by those who are beneficiaries of the longevity of the paper currency game.
The surreptitious monthly gold sales by the IMF and this record gold swap by the BIS are reminiscent of the London Gold Pool that ended so badly in 1968. The Western central banks have rigged the gold market for so long that they can no longer think straight. The only thing they can think of is to do more of the same, hoping that this will reverse the growing mistrust of all things paper and the entire banking system.
In the words of the great philosopher Aerosmith, "Dream on!"
http://gata.org/node/8803
Gold is back as money! The BIS 382 tonne Gold Swap - Good or Bad for Gold and Why?
By: Julian D. W. Phillips
Swaps are financial instruments that allow for the exchange of one asset for another, in this case, gold for currency. They are not gold leasing, futures or options [which the 1999 and 2004 Central Bank Gold Agreement states would not be increased – The 2009 did not contain the statement]. Swaps could be undertaken by the signatories of the CBGA. as these were not included in any of the three Agreements.
Gold swaps are usually undertaken between central banks: One central bank exchanges foreign exchange deposits (or other reserve assets) for gold with an agreement that the transaction be unwound at an agreed future date, at an agreed price.
The monetary authority acquiring the foreign exchange will pay interest on the foreign exchange received, the rate of which is currently very low. Gold swaps are usually undertaken when the cash-taking central bank may want foreign exchange but does not wish to sell outright its gold holdings.
The Wall Street Journal informs us that the B.I.S. did these swaps with commercial banks. We know of no commercial bank that has 382 tonnes of gold on their books. It is likely then that should these commercial banks have been in the deal, they would have been acting for a central bank [or several over time] who wished to remain anonymous.
The B.I.S. received the gold into its safekeeping for the nation that required the foreign exchange for the swap period. Swaps of this nature are renewable once the time runs out, so it is impossible to say how long the swap will last for. The central bank that undertook the swap would have to be certain that it could return the currencies to get the gold back at some point in the future. If that country defaulted, then and only then could the B.I.S. go ahead and sell this gold. Any sale in the open market would be trumpeted loudly to all as well as reported in the Press or by the World Gold Council, B.I.S. or I.M.F.
The financial crisis has led to a decline in the number of credit-worthy counterparties and a reduction in credit lines these counterparties can offer. This is significant in a world where credit risk and debt problems have been the subject of banker’s fears since the appearance of the Greek debt crisis. For someone in the trouble Greece is, gold swaps allow a central bank’s reserves to be lent in a credit-secure fashion. In other words, a gold swap allows the lender of currency to benefit from greatly reduced credit risk, as the gold can be held in an allocated account, usually at the Bank of England. The currency deposit is secured with gold throughout the life of the deposit.
Any country such as Ireland, Portugal, Spain, Italy, the U.K. and the U.S.A. can follow this route. Yes, sales may not be permitted for fiscal reasons under Eurosystem rules, but these are not sales, but swaps. So, of the utmost importance is just who swapped this gold? Could it be one of the countries we just mentioned? If so, their situation is far graver than previously thought. The implication is that the collateral they offered just wasn’t good enough, so they had to use their gold. This is major news for the monetary system.
What is significant about this or these transactions is that gold is being used in international settlements after so many decades of being sidelined in the monetary system! The transaction itself confirms that gold is being used in international settlements, which is a dynamic confirmation of gold's return to the monetary system. A "Swap" might be the first desperate step in such a transaction with the swapping bank hoping to repay the foreign exchange, but should it fail, the B.I.S . would have to decide either to keep the gold on its books or to sell it. Again, keeping it on its books is part confirmation that gold is active again on the monetary system, a big boost by itself! Gold is back and alive in the monetary system!
What appears to have really happened is that one nation or more needed foreign exchange to counter some shortfall in its accounts and raised these funds as a short-term liquidity measure, believing that it would be able to return the currency and receive its gold back. The gold would then be returned at the conclusion of the swap period in return for the currencies swapped. If it fails to return these funds to the BIS, then the BIS could discreetly place the gold with another central bank, should it not want to keep the gold. If it did so, the BIS would simply report its disposal of the gold, the originating central bank would report the drop in its gold reserves and the gold buying bank would report its increase in the reserves.
This puts the transaction into an entirely different category. It seems that one or more of the developed world’s central bank’s credit is not good enough for other governmental institutions. If word got out as to which this country is, then the financial markets would go into quite a spin, shaking the global financial system to its core. No wonder the B.I.S. is keeping such a low profile!
http://news.goldseek.com/GoldForecaster/1278723600.php
In other words, the cat is out of the bag. The international monetary system, with the US Dollar at it's core and reserve currency, is teetering on disillusion. Accelerating at a pace far faster than thought imaginable, the international monetary system is on the brink of destruction. Gold stands at the ready to be it's savior.
U.S. dollar's collapse inevitable [MUST READ]
By: John Embry, chief investment strategist at Sprott Asset Management
"Only a heroic optimist would be prepared to ascribe any long-term value at all to the U.S. dollar."
http://www.sprott.com/Docs/InvestorsDigest/2010/MPLID_062510_pg204Emb.pdf
The threat to the US dollar is hyperinflation, not deflation
by James Turk, Founder of GoldMoney.com
In the early 1930’s, the US dollar money supply as measured by M3 dropped by approximately 30%. This deflation, i.e., drop in the quantity of money, was one of the steepest in history. The purchasing power of the dollar – until 1933 redeemable into gold and thereafter redeemable into silver – rose dramatically because less money was in circulation compared to the quantity of goods and services available in commerce.
Today, the Federal Reserve no longer reports M3, which is unfortunate because it eliminates the possibility of accurate historical comparisons. M3 is estimated by economists by modeling historic trends. However, these models become less reliable as we move further from February 2006, the date the Federal Reserve stopped reporting M3. Eurodollars, a major M3 component, is particularly difficult to model.
In any case, much attention is being given to these private estimates, even though the decline in M3 they are reporting stands in marked contrast to M1 and M2. The Federal Reserve reports that these two money supply measures have grown 7.1% and 1.7% respectively over the past twelve months. Thus, by these two measures, the dollar is inflating, i.e., the quantity of dollars is expanding – particularly so for M1 – relative to the available stock of goods and services being produced in today’s depressed economy.
This inflation is also apparent from market prices. For example, crude oil prices have more than doubled since their post-Lehman crash low. More broadly, the price index of 19 commodities compiled by the Commodity Research Bureau is up 46% during this same period, which makes clear there is no deflation.
The ongoing erosion of the purchasing power of the dollar has been masked by wealth destruction as over-priced assets like houses fall back to realistic levels. This wealth destruction from declining prices feels like deflation, but it is not. In fact, it is forceful distraction taking our eyes off the real problem, which is that the dollar is approaching hyperinflation
This point is insightfully explained by Murray Rothbard in his excellent book, “The Mystery of Banking”. In explaining the consequences of the inflation-adjusted money supply, he notes:
“When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price.”
These circumstances prevail today. While crude oil prices have doubled and commodity prices have risen 46% since September 2008 as noted above, M1 and M2 during this period have increased only 16.9% and 8.5%. So the prices of goods and services are rising more rapidly than the increase in the quantity of dollars in circulation. The resulting “shortage of money” is being widely misinterpreted as deflation, which is exactly what happened in Weimar Germany shortly before the Reichsmark was swooped up in a hyperinflationary whirlwind. Let’s call it a ‘Havenstein moment’, named after the ill-fated president of the Reichsbank who presided over the destructive hyperinflation that devastated Weimar Germany.
With his usual brilliant insight, Rothbard explains what happens once the “Havenstein moment’ is reached. There are two alternatives. “If the government tightens its own belt and stops printing (or otherwise creating) new money, then inflationary expectations will eventually be reversed, and prices will fall once more – thus relieving the money shortage by lowering prices. But if government follows its own inherent inclination to counterfeit and appeases the clamor by printing more money so as to allow the public’s cash balances to ‘catch up’ to prices, then the country is off to the races. Money and prices will follow each other upward in an ever-accelerating spiral, until finally prices ‘run away’…[i.e., hyperinflate]” Weimar Germany took the second alternative.
The dollar is at a ‘Havenstein moment’. Will policymakers follow the prudent advice of Murray Rothbard and tighten the federal government’s belt? Or like Herr Havenstein, will Mr. Bernanke continue to ‘print’?
Sadly, the Federal Reserve will ‘print’, for one reason. Despite the noble goals assigned to it in textbooks and offered in Congressional hearings, the Federal Reserve exists for only one reason – to make sure the federal government gets all the dollars it wants to spend. This reality puts the dollar on a hyperinflationary course.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/7/8_James_Turk_-_Threat_To_The_US_Dollar.html
Regardless of whether this BIS Gold Swap story is to blame for the recent take down in Precious Metals prices, or just an excuse used as cover for the Gold Cartel's now legendary manipulative practices, the CFTC is blatantly derelict in it's duty to police this sector of the commodities markets in New York. Once again, what we have witnessed over the past two weeks is a crime in progress where the intended purpose of the futures market for price "discovery" is buried under an avalanche of paper determined to "manipulate" the prices of Precious Metals lower.
The CFTC mandate is to protect investors from sharks that might roam in the futures markets, instead the CFTC has chosen to swim with the sharks and join them in giving the one finger salute to investors being robbed by the sharks representing the Gold Cartel.
CFTC Hearing and the Wall of Silence
By: Bix Weir
OPEN LETTER TO THE CFTC
Re: CFTC Hearing and the Wall of Silence
Dear Commissioners :
Over the past few years I have engaged in correspondence with staff at the CFTC to learn about how your organization does its job in enforcing commodity trading rules as well as provide you with feedback as to why 99% of metal market participants believe that the CFTC is not doing its job. Since the public hearings on metal concentration limits on March 25, 2010, I have been truly astounded by the LACK of acknowledgment, LACK of follow up and LACK of action from the CFTC and Commissioners given what was openly discussed and revealed during the course of this historic meeting.
Here is what your takeaway SHOULD have been from the meeting on metal concentration limits:
http://www.roadtoroota.com/public/315.cfm
Bix nails it...
Wholesale inventories rise in May, sales fall
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- Inventories held by wholesalers rose for a fifth consecutive month in May but sales fell for the first time in more than a year, sending a cautionary signal about the strength of the recovery.
Wholesale inventories increased 0.5 percent while sales dropped 0.3 percent, the Commerce Department said Friday. It was the first decline for sales since March of 2009.
The May sales decline is the latest sign that the economic recovery could be losing momentum in the second half of the year. Weakness in sales could discourage businesses from boosting their orders. That would translate into a slowdown in factory production.
Businesses helped spur the recovery by rebuilding their inventories after slashing them during the recession. The gross domestic product expanded at a 5.6 percent rate in the final three months of last year, largely because of the swing in inventories.
The trend in inventory rebuilding continued in the first quarter of this year, but at a more modest pace. That was among the reasons growth slowed to 2.7 percent.
Mike England, an economist with Action Economics, said Friday's wholesale inventories report has persuaded him to lower his growth estimate for the April-June quarter, to 2.8 percent from 3.3 percent. England noted that the report lowered April's inventory growth to a 0.2 percent increase -- half the initial estimate of 0.4 percent.
http://finance.yahoo.com/news/Wholesale-inventories-rise-in-apf-3675495278.html?x=0&sec=topStories&pos=8&asset=&ccode
Rising inventories and falling sales are NOT indicative of a strengthening economy. Do not be buffaloed by the financial talking heads, or the blantant lies of an inept US President.
And with consumer borrowing floundering, if not in free-fall, how can an economy built on debt be categorized as rising when spending [ie. debt accumulation] is falling?
Credit-Card Debt: It's Worse Than It Looks
by Brett Arends
Don't be fooled by the latest news on credit-card debt. The true picture is worse than many people realize. And unless Congress renews extended unemployment benefits, you can expect it to get even worse.
Let's start with the headlines. They sound reassuring. The Federal Reserve said Thursday that Americans slashed their revolving consumer credit—mainly card balances—by about $7.4 billion in May. That's an annualized rate of 10.5%. And that's not a one-off. Since the end of 2008, they've cut those balances by about $127 billion, or 13%, says the Fed.
As people pay off their debts, you would expect the delinquency rates to fall. No wonder the American Bankers Association said this week that the percentage of cards with payments more than 30 days late fell in the first quarter to the lowest levels since 2002, and even below 15-year averages. "It's clear that consumer balance sheets are improving," says James Chessen, the ABA's chief economist. "People are borrowing less, saving more and building wealth. These are all positive signs."
So that's good news, right?
Ahem.
The biggest reason credit-card balances are declining isn't that people are paying them off with their spare cash and extra earnings. It's because the banks have been writing them off as the borrowers default. Sure, that reduces the balances. But it tells a somewhat different story.
During the first quarter of this year, says the Fed, credit-card balances fell by about $19.5 billion. How much of that was written off? About $18.7 billion, according to data from the Federal Deposit Insurance Corp.
http://finance.yahoo.com/banking-budgeting/article/110020/credit-card-debt-its-worse-than-it-looks?mod=bb-budgeting
Reminds me of the "falling" unemployment rate the government is so quick to boast about. It's falling because an ever increasing number of the unemployed are running out of benefits and are no longer "statistics" that meet the measure of "unemployed"...even though they REMAIN UNEMPLOYED.
I doubt this latest revelation on consumer credit will prove to be a positive for the phantom recovery we hear so much about from our President and the munchkins on his staff:
More Americans' credit scores sink to new lows
NEW YORK (AP) -- The credit scores of millions more Americans are sinking to new lows.
Figures provided by FICO Inc. show that 25.5 percent of consumers -- nearly 43.4 million people -- now have a credit score of 599 or below, marking them as poor risks for lenders. It's unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.
Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.
FICO's latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO's 300-to-850 scale weren't as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.
More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual's score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.
http://finance.yahoo.com/news/More-Americans-credit-scores-apf-490198280.html?x=0&sec=topStories&pos=5&asset=&ccode=
It should be abundantly clear that the recent drop in the prices of Precious Metals is an opportunity, and NOT a warning. Gold remains the proverbial "canary in the coal mine". The longer the Gold Cartel can hold the rising price of Gold in check, the further down the road western governments can kick their debt bomb. Kick a bomb one to many times, and eventually it will explode...as will the prices of Precious Metals.
Sit tight and be right. Buy physical bullion while it remains available at discount prices.
-Warren Bevan
This BIS gold swap story has legs! And whenever central banks and their nefarious Gold market activity finds it's way into the news, sentiment in the Gold sector plummets. Given the information gathered so far regarding this "Gold swap" featuring the BIS as a the major counter party, one can only come to the conclusion that this "revelation" is purely bullish for Gold. One might, looking back historically, see this "transaction" as a watershed moment in the destruction of the global Gold Cartel's manipulation of the price of Gold.
As each day passes now, Gold is becoming recognized for what it is: REAL MONEY. The Gold Cartel and its bullion banks are on the ropes, a run on the bank's Gold is now reaching full throttle. In order to meet rising physical demand for Gold promised for delivery by contract, the bullion banks are turning over every seat cushion in the office to find a few more ounces to meet overwhelming demand for physical delivery. Moral of the story: Never make promises you can't keep.
Mysterious BIS gold swaps are likely a bullion bank bailout
By Adrian Douglas
As always, news of anything to do with the gold market is cloaked in secrecy, misinformation, and innuendo.
What we can be sure of is that the BIS news is gold-friendly.
Why?
Because the BIS was intending to keep the matter secret.
The BIS gold swaps were not announced but instead "discovered" by an analyst snooping around the BIS accounts.
Similarly the International Monetary Fund has been quietly selling gold each month since February even though for years every possibility of a gold sale by the IMF was announced X to the power N times, where X is the number of tonnes to be sold and N is the gold price.
The BIS typically transacts with central banks but not exclusively; the BIS' own profile also mentions a "number of international institutions" with which it does business, which includes undoubtedly commercial banks and bullion banks, which are also commercial banks.
The BIS is always active in the gold market, so it cannot just transact with central banks, as the central banks need someone to make trades for them:
http://www.bis.org/about/profile.pdf
"The BIS offers a wide range of financial services specifically designed to assist central banks and other monetary authorities in the management of their foreign exchange reserves. As of 31 March 2010 some 130 such authorities, as well as a number of international institutions, made use of BIS financial services. Total currency deposits amounted to SDR 196 billion, representing around 3 percent of world foreign exchange reserves."
If the BIS were to trade directly with a central bank in a gold swap, the gold would act as collateral and probably would not change its physical location and cash would be given to the central bank.
But the BIS corrected The Wall Street Journal's first story, saying its swap was with commercial banks, not central banks.
While a central bank theoretically and practically could hold 380 tonnes of unencumbered gold, there is no way that a commercial bank is sitting on 380 tonnes of unencumbered gold. So the gold in the BIS swaps came from somewhere else.
The only possibility is a central bank or several central banks. (Portugal holds 380 tonnes. Just coincidence? Spain holds 280 tonnes and Greece 112 tonnes.)
So the BIS swaps look like a tripartite transaction. The commercial bank or banks made a swap with a central bank or banks and then the commercial bank or banks made a swap with the BIS.
Why would this be done?
This is not about currency liquidity, as the $14 billion reported raised is not liquidity; it is pocket change.
On the other hand, 380 tonnes of gold is liquidity in the gold market, where mines produce only about 2,200 tonnes per year.
If the BIS made the swap directly with a central bank, the gold would not be provided to anyone for liquidity.
If the swap was made between a commercial bank and a central bank, the commercial bank would get its hands on the gold and the gold would change location to the vaults of the commercial bank, a bullion bank.
This would require the bullion bank to hand over $14 billion of its own money.
But by doing another swap with the BIS, the commercial bank would get the money from the BIS and technically the gold would now belong to the BIS, even as it most likely would not change location and 380 tonnes of gold would be digitally credited to the BIS' unallocated gold account at the bullion bank.
In this way the central bank or banks would get cash and the BIS would get the unallocated gold as collateral and as if by magic the bullion bank or banks would get 380 tonnes of gold to bail them out for a few more weeks as massive physical demand for metal eats their lunch.
And the bullion banks would manage this without paying a dime of their own money.
Why would the BIS be a willing player in this scheme?
Because it would fall into the type of operations BIS official William S. White described in a speech in 2005 when he said that among the five objectives of central bank cooperation is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful." You can find White's speech here:
http://www.gata.org/node/4279
With gold reaching record high prices and a run on the banks of the gold cartel gaining pace, this must be an occasion where such an asset price-influencing operation would be thought "useful" by those who are beneficiaries of the longevity of the paper currency game.
The surreptitious monthly gold sales by the IMF and this record gold swap by the BIS are reminiscent of the London Gold Pool that ended so badly in 1968. The Western central banks have rigged the gold market for so long that they can no longer think straight. The only thing they can think of is to do more of the same, hoping that this will reverse the growing mistrust of all things paper and the entire banking system.
In the words of the great philosopher Aerosmith, "Dream on!"
http://gata.org/node/8803
Gold is back as money! The BIS 382 tonne Gold Swap - Good or Bad for Gold and Why?
By: Julian D. W. Phillips
Swaps are financial instruments that allow for the exchange of one asset for another, in this case, gold for currency. They are not gold leasing, futures or options [which the 1999 and 2004 Central Bank Gold Agreement states would not be increased – The 2009 did not contain the statement]. Swaps could be undertaken by the signatories of the CBGA. as these were not included in any of the three Agreements.
Gold swaps are usually undertaken between central banks: One central bank exchanges foreign exchange deposits (or other reserve assets) for gold with an agreement that the transaction be unwound at an agreed future date, at an agreed price.
The monetary authority acquiring the foreign exchange will pay interest on the foreign exchange received, the rate of which is currently very low. Gold swaps are usually undertaken when the cash-taking central bank may want foreign exchange but does not wish to sell outright its gold holdings.
The Wall Street Journal informs us that the B.I.S. did these swaps with commercial banks. We know of no commercial bank that has 382 tonnes of gold on their books. It is likely then that should these commercial banks have been in the deal, they would have been acting for a central bank [or several over time] who wished to remain anonymous.
The B.I.S. received the gold into its safekeeping for the nation that required the foreign exchange for the swap period. Swaps of this nature are renewable once the time runs out, so it is impossible to say how long the swap will last for. The central bank that undertook the swap would have to be certain that it could return the currencies to get the gold back at some point in the future. If that country defaulted, then and only then could the B.I.S. go ahead and sell this gold. Any sale in the open market would be trumpeted loudly to all as well as reported in the Press or by the World Gold Council, B.I.S. or I.M.F.
The financial crisis has led to a decline in the number of credit-worthy counterparties and a reduction in credit lines these counterparties can offer. This is significant in a world where credit risk and debt problems have been the subject of banker’s fears since the appearance of the Greek debt crisis. For someone in the trouble Greece is, gold swaps allow a central bank’s reserves to be lent in a credit-secure fashion. In other words, a gold swap allows the lender of currency to benefit from greatly reduced credit risk, as the gold can be held in an allocated account, usually at the Bank of England. The currency deposit is secured with gold throughout the life of the deposit.
Any country such as Ireland, Portugal, Spain, Italy, the U.K. and the U.S.A. can follow this route. Yes, sales may not be permitted for fiscal reasons under Eurosystem rules, but these are not sales, but swaps. So, of the utmost importance is just who swapped this gold? Could it be one of the countries we just mentioned? If so, their situation is far graver than previously thought. The implication is that the collateral they offered just wasn’t good enough, so they had to use their gold. This is major news for the monetary system.
What is significant about this or these transactions is that gold is being used in international settlements after so many decades of being sidelined in the monetary system! The transaction itself confirms that gold is being used in international settlements, which is a dynamic confirmation of gold's return to the monetary system. A "Swap" might be the first desperate step in such a transaction with the swapping bank hoping to repay the foreign exchange, but should it fail, the B.I.S . would have to decide either to keep the gold on its books or to sell it. Again, keeping it on its books is part confirmation that gold is active again on the monetary system, a big boost by itself! Gold is back and alive in the monetary system!
What appears to have really happened is that one nation or more needed foreign exchange to counter some shortfall in its accounts and raised these funds as a short-term liquidity measure, believing that it would be able to return the currency and receive its gold back. The gold would then be returned at the conclusion of the swap period in return for the currencies swapped. If it fails to return these funds to the BIS, then the BIS could discreetly place the gold with another central bank, should it not want to keep the gold. If it did so, the BIS would simply report its disposal of the gold, the originating central bank would report the drop in its gold reserves and the gold buying bank would report its increase in the reserves.
This puts the transaction into an entirely different category. It seems that one or more of the developed world’s central bank’s credit is not good enough for other governmental institutions. If word got out as to which this country is, then the financial markets would go into quite a spin, shaking the global financial system to its core. No wonder the B.I.S. is keeping such a low profile!
http://news.goldseek.com/GoldForecaster/1278723600.php
In other words, the cat is out of the bag. The international monetary system, with the US Dollar at it's core and reserve currency, is teetering on disillusion. Accelerating at a pace far faster than thought imaginable, the international monetary system is on the brink of destruction. Gold stands at the ready to be it's savior.
U.S. dollar's collapse inevitable [MUST READ]
By: John Embry, chief investment strategist at Sprott Asset Management
"Only a heroic optimist would be prepared to ascribe any long-term value at all to the U.S. dollar."
http://www.sprott.com/Docs/InvestorsDigest/2010/MPLID_062510_pg204Emb.pdf
The threat to the US dollar is hyperinflation, not deflation
by James Turk, Founder of GoldMoney.com
In the early 1930’s, the US dollar money supply as measured by M3 dropped by approximately 30%. This deflation, i.e., drop in the quantity of money, was one of the steepest in history. The purchasing power of the dollar – until 1933 redeemable into gold and thereafter redeemable into silver – rose dramatically because less money was in circulation compared to the quantity of goods and services available in commerce.
Today, the Federal Reserve no longer reports M3, which is unfortunate because it eliminates the possibility of accurate historical comparisons. M3 is estimated by economists by modeling historic trends. However, these models become less reliable as we move further from February 2006, the date the Federal Reserve stopped reporting M3. Eurodollars, a major M3 component, is particularly difficult to model.
In any case, much attention is being given to these private estimates, even though the decline in M3 they are reporting stands in marked contrast to M1 and M2. The Federal Reserve reports that these two money supply measures have grown 7.1% and 1.7% respectively over the past twelve months. Thus, by these two measures, the dollar is inflating, i.e., the quantity of dollars is expanding – particularly so for M1 – relative to the available stock of goods and services being produced in today’s depressed economy.
This inflation is also apparent from market prices. For example, crude oil prices have more than doubled since their post-Lehman crash low. More broadly, the price index of 19 commodities compiled by the Commodity Research Bureau is up 46% during this same period, which makes clear there is no deflation.
The ongoing erosion of the purchasing power of the dollar has been masked by wealth destruction as over-priced assets like houses fall back to realistic levels. This wealth destruction from declining prices feels like deflation, but it is not. In fact, it is forceful distraction taking our eyes off the real problem, which is that the dollar is approaching hyperinflation
This point is insightfully explained by Murray Rothbard in his excellent book, “The Mystery of Banking”. In explaining the consequences of the inflation-adjusted money supply, he notes:
“When prices are going up faster than the money supply, the people begin to experience a severe shortage of money, for they now face a shortage of cash balances relative to the much higher price levels. Total cash balances are no longer sufficient to carry transactions at the higher price.”
These circumstances prevail today. While crude oil prices have doubled and commodity prices have risen 46% since September 2008 as noted above, M1 and M2 during this period have increased only 16.9% and 8.5%. So the prices of goods and services are rising more rapidly than the increase in the quantity of dollars in circulation. The resulting “shortage of money” is being widely misinterpreted as deflation, which is exactly what happened in Weimar Germany shortly before the Reichsmark was swooped up in a hyperinflationary whirlwind. Let’s call it a ‘Havenstein moment’, named after the ill-fated president of the Reichsbank who presided over the destructive hyperinflation that devastated Weimar Germany.
With his usual brilliant insight, Rothbard explains what happens once the “Havenstein moment’ is reached. There are two alternatives. “If the government tightens its own belt and stops printing (or otherwise creating) new money, then inflationary expectations will eventually be reversed, and prices will fall once more – thus relieving the money shortage by lowering prices. But if government follows its own inherent inclination to counterfeit and appeases the clamor by printing more money so as to allow the public’s cash balances to ‘catch up’ to prices, then the country is off to the races. Money and prices will follow each other upward in an ever-accelerating spiral, until finally prices ‘run away’…[i.e., hyperinflate]” Weimar Germany took the second alternative.
The dollar is at a ‘Havenstein moment’. Will policymakers follow the prudent advice of Murray Rothbard and tighten the federal government’s belt? Or like Herr Havenstein, will Mr. Bernanke continue to ‘print’?
Sadly, the Federal Reserve will ‘print’, for one reason. Despite the noble goals assigned to it in textbooks and offered in Congressional hearings, the Federal Reserve exists for only one reason – to make sure the federal government gets all the dollars it wants to spend. This reality puts the dollar on a hyperinflationary course.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/7/8_James_Turk_-_Threat_To_The_US_Dollar.html
Regardless of whether this BIS Gold Swap story is to blame for the recent take down in Precious Metals prices, or just an excuse used as cover for the Gold Cartel's now legendary manipulative practices, the CFTC is blatantly derelict in it's duty to police this sector of the commodities markets in New York. Once again, what we have witnessed over the past two weeks is a crime in progress where the intended purpose of the futures market for price "discovery" is buried under an avalanche of paper determined to "manipulate" the prices of Precious Metals lower.
The CFTC mandate is to protect investors from sharks that might roam in the futures markets, instead the CFTC has chosen to swim with the sharks and join them in giving the one finger salute to investors being robbed by the sharks representing the Gold Cartel.
CFTC Hearing and the Wall of Silence
By: Bix Weir
OPEN LETTER TO THE CFTC
Re: CFTC Hearing and the Wall of Silence
Dear Commissioners :
Over the past few years I have engaged in correspondence with staff at the CFTC to learn about how your organization does its job in enforcing commodity trading rules as well as provide you with feedback as to why 99% of metal market participants believe that the CFTC is not doing its job. Since the public hearings on metal concentration limits on March 25, 2010, I have been truly astounded by the LACK of acknowledgment, LACK of follow up and LACK of action from the CFTC and Commissioners given what was openly discussed and revealed during the course of this historic meeting.
Here is what your takeaway SHOULD have been from the meeting on metal concentration limits:
http://www.roadtoroota.com/public/315.cfm
Bix nails it...
Wholesale inventories rise in May, sales fall
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- Inventories held by wholesalers rose for a fifth consecutive month in May but sales fell for the first time in more than a year, sending a cautionary signal about the strength of the recovery.
Wholesale inventories increased 0.5 percent while sales dropped 0.3 percent, the Commerce Department said Friday. It was the first decline for sales since March of 2009.
The May sales decline is the latest sign that the economic recovery could be losing momentum in the second half of the year. Weakness in sales could discourage businesses from boosting their orders. That would translate into a slowdown in factory production.
Businesses helped spur the recovery by rebuilding their inventories after slashing them during the recession. The gross domestic product expanded at a 5.6 percent rate in the final three months of last year, largely because of the swing in inventories.
The trend in inventory rebuilding continued in the first quarter of this year, but at a more modest pace. That was among the reasons growth slowed to 2.7 percent.
Mike England, an economist with Action Economics, said Friday's wholesale inventories report has persuaded him to lower his growth estimate for the April-June quarter, to 2.8 percent from 3.3 percent. England noted that the report lowered April's inventory growth to a 0.2 percent increase -- half the initial estimate of 0.4 percent.
http://finance.yahoo.com/news/Wholesale-inventories-rise-in-apf-3675495278.html?x=0&sec=topStories&pos=8&asset=&ccode
Rising inventories and falling sales are NOT indicative of a strengthening economy. Do not be buffaloed by the financial talking heads, or the blantant lies of an inept US President.
And with consumer borrowing floundering, if not in free-fall, how can an economy built on debt be categorized as rising when spending [ie. debt accumulation] is falling?
Credit-Card Debt: It's Worse Than It Looks
by Brett Arends
Don't be fooled by the latest news on credit-card debt. The true picture is worse than many people realize. And unless Congress renews extended unemployment benefits, you can expect it to get even worse.
Let's start with the headlines. They sound reassuring. The Federal Reserve said Thursday that Americans slashed their revolving consumer credit—mainly card balances—by about $7.4 billion in May. That's an annualized rate of 10.5%. And that's not a one-off. Since the end of 2008, they've cut those balances by about $127 billion, or 13%, says the Fed.
As people pay off their debts, you would expect the delinquency rates to fall. No wonder the American Bankers Association said this week that the percentage of cards with payments more than 30 days late fell in the first quarter to the lowest levels since 2002, and even below 15-year averages. "It's clear that consumer balance sheets are improving," says James Chessen, the ABA's chief economist. "People are borrowing less, saving more and building wealth. These are all positive signs."
So that's good news, right?
Ahem.
The biggest reason credit-card balances are declining isn't that people are paying them off with their spare cash and extra earnings. It's because the banks have been writing them off as the borrowers default. Sure, that reduces the balances. But it tells a somewhat different story.
During the first quarter of this year, says the Fed, credit-card balances fell by about $19.5 billion. How much of that was written off? About $18.7 billion, according to data from the Federal Deposit Insurance Corp.
http://finance.yahoo.com/banking-budgeting/article/110020/credit-card-debt-its-worse-than-it-looks?mod=bb-budgeting
Reminds me of the "falling" unemployment rate the government is so quick to boast about. It's falling because an ever increasing number of the unemployed are running out of benefits and are no longer "statistics" that meet the measure of "unemployed"...even though they REMAIN UNEMPLOYED.
I doubt this latest revelation on consumer credit will prove to be a positive for the phantom recovery we hear so much about from our President and the munchkins on his staff:
More Americans' credit scores sink to new lows
NEW YORK (AP) -- The credit scores of millions more Americans are sinking to new lows.
Figures provided by FICO Inc. show that 25.5 percent of consumers -- nearly 43.4 million people -- now have a credit score of 599 or below, marking them as poor risks for lenders. It's unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.
Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.
FICO's latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO's 300-to-850 scale weren't as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.
More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual's score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.
http://finance.yahoo.com/news/More-Americans-credit-scores-apf-490198280.html?x=0&sec=topStories&pos=5&asset=&ccode=
It should be abundantly clear that the recent drop in the prices of Precious Metals is an opportunity, and NOT a warning. Gold remains the proverbial "canary in the coal mine". The longer the Gold Cartel can hold the rising price of Gold in check, the further down the road western governments can kick their debt bomb. Kick a bomb one to many times, and eventually it will explode...as will the prices of Precious Metals.
Sit tight and be right. Buy physical bullion while it remains available at discount prices.
Friday, July 9, 2010
Mystery Dance
Gold appears to be attempting a break of the recent downtrend at 8:50AM est. this morning at 1203. Having been caught in the tug-of-war between the unwinding of Euro shorts and Dollar longs, Gold has been left spinning it's wheels. To be certain, to see Gold falling with the Dollar is most unusual.
Immediate resistance in Gold lies at the downtrend line off the recent 1265 high. A break of 1200 here should give the Gold shorts pause. Should Gold clear and close above 1213, a short squeeze in Gold will be the result. Support rests at recent lows near 1185.
In the Big Picture, recent Gold dyslexia relative to the Euro or Dollar is irrelevant. Proving even less relevant is this weeks whirlwind news story regarding Gold swaps with the Bank Of International Settlements [BIS].
Further review of this story is beginning to show it to be a lot of blah-blah. Consider that the Gold swapped is valued at ONLY $14 BILLION, and one wonders what all the fuss has been about. The US debt rose $166 BILLION recently in just a single day!
One must also question the condition of European banks if they had to resort to pawning Gold to raise cash. These Gold swaps are no threat to the rising price of Gold regardless of the speculation. These swaps only enhance and strengthen the fundamental reasons why the price of Gold should be rising. If anything is being suppressed, it's the global banking crisis. The banks are in far, far worse shape than we are being lead to believe. Keeping a lid on the "price" of Gold only allows the TRUTH about the banking crisis to be kept hidden.
Gold is up $6 in the last 15 minutes as I type this, to 1209. Oddly enough, the Dollar is up off it's lows of the day as well.
Gold swap mystery deepens as BIS gets correction from Wall Street Journal
Submitted by Chris Powell, Secretary/TreasurerGold Anti-Trust Action Committee Inc.
The Wall Street Journal this evening updated and corrected its report about the gold swaps undertaken by the Bank for International Settlements, disclosing an e-mailed statement from the BIS stating that the swaps were with commercial banks, not central banks as the newspaper first reported.
The updated story suggests that some puzzlement continues about the swaps:
"The enormous amount of gold involved, nearly tripling what the BIS itself owns, left many market participants wondering about the nature of the deals. The BIS declined to identify the commercial banks involved. ... It isn't clear what prompted the banks to borrow from the BIS instead of their central banks."
Further, without citing authority the paper says "the gold hasn't entered the open market," but "if the banks that loaned the gold are for some reason unable to make good on the loan, the BIS could opt to sell the gold in order to get its money back, which could amount to flooding the market with an unexpected boost to the global supply."
But gold being money that for years has been appreciating against nearly all currencies, as noted for you a few minutes ago here --
http://www.gata.org/node/8798
-- why would any institution want to sell gold "to get its money back?" -- unless, of course, "flooding the market" and suppressing the gold price wasn't the real objective?
Another unanswered question is where the European commercial banks got all that gold, "349 metric tons ... nearly tripling what the BIS itself owns." The European commercial banks aren't known for holding that much metal on their own account. (If you rent a safe-deposit box at a European commercial bank, you might want to check its contents in the morning.)
While the story has changed in an important way, the first principle of journalism hasn't, and journalists here haven't yet demanded information from the primary sources, the BIS and the commercial banks themselves. Nor has there been any change in the conclusion that must be drawn from the story so far. That is, the secrecy and the involvement of the BIS, an admitted gold market rigger, impugn the transaction as part of another gold market rigging scheme.
The Wall Street Journal's updated and corrected story is here:
http://online.wsj.com/article/SB10001424052748704545004575353403943560776.html
Commercial bank ‘gold swap’ intrigue continues
by Izabella Kaminska
As the WSJ noted:
The Bank for International Settlements said it loaned billions of dollars backed by gold to commercial banks in recent months. Most of the loans—known as gold swaps—were conducted with European banks in exchange for foreign currencies, mainly U.S. dollars, according to data released last week in the BIS’s annual report.
“The operations concerned were purely market operations with commercial banks,” the BIS said in an email statement. The statement came in response to a Wall Street Journal article on Wednesday that said the BIS swaps were with central banks.
The sheer size of the recent swaps—involving 349 metric tons of gold, valued at about $14 billion currently—indicates the stress that the international banking system is under, particularly in European countries facing investor concerns about sovereign-debt woes.
As the report explains, while the BIS — known as the “central bankers’ central bank” — is only allowed to take deposits from said central institutions, it can lend to a broader spectrum of financial institutions, including commercial banks and corporations.
(Although we can’t actually find the relevant bit in the BIS mandates that says as much — and would welcome a link if anyone has it.)
The continuing mystery, though, is how European commercial banks managed to get hold of as much as 342 tonnes worth of gold.
Lex speculated on Thursday:
Traders theorised that one or more of the bloc’s central banks pawned gold to prop up their groaning banking systems. Spain’s regional savings banks, or cajas, and Greek lenders, for example, have sucked in copious liquidity in recent months and are likely to need more. These transactions bore all the hallmarks of a furtive operation to assist a peripheral eurozone central bank unwilling to be seen pawning its reserves.
But the swaps raised only $14bn – surely not enough for any such sweeping operations. Another tale was that the central banks used swaps for bridging finance pending drawdown of the eurozone rescue package; but again, the numbers fail to stack up. An even more far-fetched explanation has the International Monetary Fund selling reserves to boost its own finances ahead of a bail-out.
Which seems to suggest the mystery remains unsolved.
Nevertheless, there is one thing of which we can be sure: the bulk of gold-swapping did take place in January, and that coincides with the expiry of the Federal Reserve’s dollar swap-line facility on February 1.
And as we know, the ECB and the Fed were very quick to reinstate those swap lines as soon as Eurozone strife did break out.
http://ftalphaville.ft.com/blog/2010/07/08/281356/commercial-bank-gold-swap-intrigue-continues/
The one question that begs to be asked: Why would any bank need to pawn it's Gold to raise cash? Central banks AND commercial banks create money out of thin air everyday. Regardless of whether these swaps were with central banks or commercial banks seems insignificant when one asks the simple question, why? And therein lies our mystery.
Was central bank Gold funneled through a European commercial bank, or group of European commercial banks to disguise central bank efforts to block Gold's impending blast off at $1250?
Is revelation of these Gold swaps, no matter the parties involved, a sign of a further loss of control of the price of Gold by the Gold Cartel?
GATA's Chris Powell speculates:
"...while news reports describe the BIS gold swaps as a means for central banks to "raise cash," central banks are able to create money out of nothing; they don't have to sell or lend anything to create money, or at least not to create their own money. They might have to sell or lend something to obtain the currency of some other nation. For example, other nations might have to sell or lend gold to obtain U.S. dollars.
But, third, the U.S. Federal Reserve lately has made all sorts of currency swap arrangements with other central banks so that they all can have plenty of dollars to use for market intervention. Other central banks have been able to obtain plenty of dollars just by creating more of their own currency and exchanging it with the Fed. In effect all the major Western central banks now are able to create dollars at will.
So why did any central bank have to lend or pawn its gold to get dollars?
Was there some agreement among central banks, or some insistence by the United States, that more gold had to be put into the market to defend currencies, government bonds, and low interest rates, to augment the quiet gold sales recently undertaken in London every month by the International Monetary Fund? The IMF too is supposedly selling gold to "raise cash," even as it is part of the central banking system that can "raise cash" just by creating it. Have the Western central banks more or less re-established the price-suppressing London Gold Pool of the 1960s, only this time surreptitiously?
Given the BIS' traditional interest in "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful," the BIS-arranged gold swaps must be suspected as part of a scheme to manipulate the gold market."
http://gata.org/node/8795
Harvey Organ, a GATA member, on his blog last night had this commentary regarding these BIS Gold swaps. He may be very close to solving the "mystery":
I am having great difficulty in believing the email from the Wall Street Journal.
The BIS does not do transactions with commercial banks, only central banks.
No commercial bank has gold of that size.
What is even stranger is that the operation of supplying gold to this unknown entity is still ongoing.
I may be wrong but it looks to me that a central bank got collared i.e. sold a gold call on gold it does not have.
The gold was leased years earlier and the entity that owned the call wanted physical and not cash.
The central bank in question was probably a captive bank of the ECB.
The ECB did not have the authority to lend gold to the captive bank to bail it out.
It was a metal crisis.
In the email it stated that the gold is held and not liquidated. Why then was the deal with a commercial bank and not a central bank, and then let that central bank deal with its problem child?
They are lying!
I must check, but this would be the first time that the BIS entered into an agreement by-passing a central bank authority.
Strange indeed.
and now the real story:
I have just finished talking with Reg Howe on the matter and he feels that I am close as to what actually happened.
It is his opinion that the bank in trouble is in reality a big commercial bank within a captive central bank's jurisdiction that got caught with a collar or a call on gold that gold contracted could not be delivered. The captive central bank did not wish to part with any of its gold so the commercial bank called on the BIS for help and they arranged this crazy bail out swaps.
The bailout may have been cash settled or maybe gold and cash together as there may have been some arm twisting to get this affair settled.
The BIS does not accept deposits of cash or gold from a commercial bank but lately, it can do gold loans to commercial entities. What probably happened here was a commercial bank got in trouble and its central bank refused to help. The ECB also did not want to bail out this bank so the problem bank went to the BIS for help.
This is hugely positive because it was hidden from public view and the last thing that the world wants to hear is that a central authority did not want to help one of its commercial banks.
Reg thus believes that it was not a liquidity problem, it was a shortage of metal problem. and the problem was solved with swaps and the shifting of collateral to take sure that the BIS which is loaning money is repaid. The collateral is the gold swapped. The amount of tonnage in this problem transaction was the entire 380 tonnes of gold.
I was close. I thought it was the captive central bank in trouble. In reality it was the commercial bank inside the captive bank's country that became the troubled zone and had to be bailed out.
Reg Howe is certainly the authority on the BIS.
In essence we got a run on a bank but the bank was a commercial entity and not a central bank. The central bank urged the BIS to make a statement less the world thinks that it is void of gold.
The central bank originally urged that the BIS keep this quiet so it was put as a footnote hoping nobody would see it. Somebody did and thus we have the story.
http://harveyorgan.blogspot.com/2010/07/july-82010-commentary.html
One fact remains clear. No matter the who, what, why, or where of these BIS Gold swaps, this story is all noise in the long bull run of the price of Gold. ALL efforts to stop the rise of Gold over the past ten years have failed. The Gold Cartel's success in "slowing" the rise in the price of gold is acknowledged, but the effort has and will continue to be proved fleeting.
U.S. marks 3rd-largest, single-day debt increase
By Stephen Dinan
The nation's debt leapt $166 billion in a single day last week, the third-largest increase in U.S. history, and it comes at a time when Congress is balking over higher spending and debt has become a key policy battleground.
The one-day increase for June 30 totaled $165,931,038,264.30 - bigger than the entire annual deficit for fiscal year 2007 and larger than the $140 billion in savings the new health care bill will produce over its first 10 years. The figure works out to nearly $1,500 for every U.S. household, or more than 10 times the median daily household income.
Daily debt calculations jump and fall, and big shifts are common. But all three of the biggest one-day debt increases have occurred under the tenure of President Obama, and all of the top six have been in the past two years - an indication of just how quickly the pace of deficit spending has risen under Mr. Obama and President George W. Bush.
http://www.washingtontimes.com/news/2010/jul/7/us-marks-3rd-largest-single-day-debt-boost/?page=1
IMF calls for deficit cuts in US
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- The International Monetary Fund is calling for the United States to make a stronger effort to curb its budget deficits.
The IMF said Thursday that in addition to cutting government spending, the Obama administration will have to consider raising taxes to get the U.S. deficit down to a manageable level.
The IMF proposed a range of possible tax increases that would be certain to generate huge political opposition, from reducing the popular tax deduction for home mortgages to instituting a national sales tax.
The IMF report said that the U.S. economic recovery was becoming "increasingly well established" but it warned that the risks remained on the downside.
Among the threats, the IMF said, were the possibility of a double-dip recession in housing, continued deterioration in commercial real estate and the threats posed to the U.S. economy from the European debt crisis.
But the IMF said so far the U.S. rebound "has proved stronger than we had earlier expected" thanks in large part to what it called a "powerful and effective policy response" on the part of the government, including the efforts of the Federal Reserve.
But the 185-nation international lending agency was less positive about the outlook for the U.S. government deficits going forward.
It noted that because of the recession and the government's spending to battle the downturn, the amount of U.S. government debt held by the public has almost doubled since 2007 and now stands at 64 percent of the economy as measured by the gross domestic product, the highest level since 1950.
http://finance.yahoo.com/news/IMF-calls-for-deficit-cuts-in-apf-2908150880.html?x=0&sec=topStories&pos=6&asset=&ccode
Three reasons oil is up this week...ALL OF THEM WRONG. Oil is up because the US Dollar is DOWN...end of story.
Oil Poised for Biggest Weekly Gain Since May as Equities Rise
BusinessWeek - Rachel Graham - 1 hour ago
July 9 (Bloomberg) -- Crude oil advanced in New York, heading for its biggest weekly gain since May, as equities rose in Asia and Europe, bolstering optimism that fuel demand may increase.
Oil Poised for Biggest Weekly Gain in Six as Supplies Decline San Francisco Chronicle
OIL FUTURES: Crude Up As Australia Jobs Data Revives Risk Appetite Wall Street Journal
Consumer borrowing down sharply in May
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- Consumer borrowing fell again in May, more evidence that Americans remain jittery over their finances and the durability of the economic recovery.
The Federal Reserve said Thursday that borrowing dropped by $9.1 billion in May. It also said borrowing declined by $14.9 billion in April, revising an initial estimate that showed a gain of $995 million for the month.
Consumer borrowing has fallen in 15 of the past 16 months as households have struggled with uncertain job prospects and battered finances following a deep recession.
In May, consumers borrowed less on their credit cards and took out fewer auto loans. Credit card borrowing has fallen for 20 straight months.
Many consumers, confronted by a deep recession and a weak job market, have tried to get their household finances in better shape by reducing their debt levels. In addition, banks during the recession have imposed tighter lending standards in an effort to cope with their rising levels of bad loans.
Analysts said the significant downward revision to April borrowing and May's decline show that consumers remain leery about taking on new debt.
"There is simply no way to spin this data, nor the past few months, as anything other than a confirmation that the consumer has not come roaring back," said Dan Greenhaus, chief economic strategist at Miller Tabak in New York. "The consumer remains quite stressed ... with income growth relatively muted and labor improvements few and far between."
For years, economists worried about a low personal savings rate. But now they fear that sustained declines in borrowing could hamper overall economic growth because it will mean less consumer demand. Consumer spending accounts for 70 percent of total economic activity. http://finance.yahoo.com/news/Consumer-borrowing-down-apf-369803114.html?x=0&sec=topStories&pos=6&asset=&ccode=
Financial news of this nature is further proof that THERE IS NO RECOVERY. What little signs of a recovery that the government and financial news talking heads can point to are purely the result of government spending.
Further, understanding that ALL money is debt, it is no coincidence that the M3 money supply is falling like a rock in the ocean. With no new debt, the money supply has to fall. This is why a falling money supply always signals a recession is imminent. The government may dismiss the possibility of a double-dip recession out of hand, but the evidence is clear: no priate spending, no recovery. Any boast that the current administration has taken action to avert a depression and put the country on the road to recovery is 100% illusion.
All currencies have depreciated against gold and silver this year
Submitted by cpowell
GoldSilver.com has posted wonderful charts of the gains scored by gold and silver against world currencies so far this year. It appears that not one currency has even kept even with the precious metals. GoldSilver.com calls this "the race to debase." You can find the charts here: http://goldsilver.com/newsletters/newsID/8580/ref/1
Our Treasury Secretary [and tax cheat] Timmy Geithner has carefully avoided calling China a currency manipultor in his delayed report, the Semi-Annual Report on International Economic and Exchange Rate Policies, given to Congress yesterday.
Full Text of Treasury Report on China’s Economic Policies
http://blogs.wsj.com/chinarealtime/2010/07/09/full-text-of-treasury-report-on-chinas-economic-policies/
At 9:25AM est Gold sits at $1212.90, threatening a squeeze of those foolish enough to be short Gold here.
Stay cool this weekend.
...I just feel an urge to comment on the media's obsession with LaBron James and Lindsay Lohan this week:
"Who really gives a sh*t?"
Immediate resistance in Gold lies at the downtrend line off the recent 1265 high. A break of 1200 here should give the Gold shorts pause. Should Gold clear and close above 1213, a short squeeze in Gold will be the result. Support rests at recent lows near 1185.
In the Big Picture, recent Gold dyslexia relative to the Euro or Dollar is irrelevant. Proving even less relevant is this weeks whirlwind news story regarding Gold swaps with the Bank Of International Settlements [BIS].
Further review of this story is beginning to show it to be a lot of blah-blah. Consider that the Gold swapped is valued at ONLY $14 BILLION, and one wonders what all the fuss has been about. The US debt rose $166 BILLION recently in just a single day!
One must also question the condition of European banks if they had to resort to pawning Gold to raise cash. These Gold swaps are no threat to the rising price of Gold regardless of the speculation. These swaps only enhance and strengthen the fundamental reasons why the price of Gold should be rising. If anything is being suppressed, it's the global banking crisis. The banks are in far, far worse shape than we are being lead to believe. Keeping a lid on the "price" of Gold only allows the TRUTH about the banking crisis to be kept hidden.
Gold is up $6 in the last 15 minutes as I type this, to 1209. Oddly enough, the Dollar is up off it's lows of the day as well.
Gold swap mystery deepens as BIS gets correction from Wall Street Journal
Submitted by Chris Powell, Secretary/TreasurerGold Anti-Trust Action Committee Inc.
The Wall Street Journal this evening updated and corrected its report about the gold swaps undertaken by the Bank for International Settlements, disclosing an e-mailed statement from the BIS stating that the swaps were with commercial banks, not central banks as the newspaper first reported.
The updated story suggests that some puzzlement continues about the swaps:
"The enormous amount of gold involved, nearly tripling what the BIS itself owns, left many market participants wondering about the nature of the deals. The BIS declined to identify the commercial banks involved. ... It isn't clear what prompted the banks to borrow from the BIS instead of their central banks."
Further, without citing authority the paper says "the gold hasn't entered the open market," but "if the banks that loaned the gold are for some reason unable to make good on the loan, the BIS could opt to sell the gold in order to get its money back, which could amount to flooding the market with an unexpected boost to the global supply."
But gold being money that for years has been appreciating against nearly all currencies, as noted for you a few minutes ago here --
http://www.gata.org/node/8798
-- why would any institution want to sell gold "to get its money back?" -- unless, of course, "flooding the market" and suppressing the gold price wasn't the real objective?
Another unanswered question is where the European commercial banks got all that gold, "349 metric tons ... nearly tripling what the BIS itself owns." The European commercial banks aren't known for holding that much metal on their own account. (If you rent a safe-deposit box at a European commercial bank, you might want to check its contents in the morning.)
While the story has changed in an important way, the first principle of journalism hasn't, and journalists here haven't yet demanded information from the primary sources, the BIS and the commercial banks themselves. Nor has there been any change in the conclusion that must be drawn from the story so far. That is, the secrecy and the involvement of the BIS, an admitted gold market rigger, impugn the transaction as part of another gold market rigging scheme.
The Wall Street Journal's updated and corrected story is here:
http://online.wsj.com/article/SB10001424052748704545004575353403943560776.html
Commercial bank ‘gold swap’ intrigue continues
by Izabella Kaminska
As the WSJ noted:
The Bank for International Settlements said it loaned billions of dollars backed by gold to commercial banks in recent months. Most of the loans—known as gold swaps—were conducted with European banks in exchange for foreign currencies, mainly U.S. dollars, according to data released last week in the BIS’s annual report.
“The operations concerned were purely market operations with commercial banks,” the BIS said in an email statement. The statement came in response to a Wall Street Journal article on Wednesday that said the BIS swaps were with central banks.
The sheer size of the recent swaps—involving 349 metric tons of gold, valued at about $14 billion currently—indicates the stress that the international banking system is under, particularly in European countries facing investor concerns about sovereign-debt woes.
As the report explains, while the BIS — known as the “central bankers’ central bank” — is only allowed to take deposits from said central institutions, it can lend to a broader spectrum of financial institutions, including commercial banks and corporations.
(Although we can’t actually find the relevant bit in the BIS mandates that says as much — and would welcome a link if anyone has it.)
The continuing mystery, though, is how European commercial banks managed to get hold of as much as 342 tonnes worth of gold.
Lex speculated on Thursday:
Traders theorised that one or more of the bloc’s central banks pawned gold to prop up their groaning banking systems. Spain’s regional savings banks, or cajas, and Greek lenders, for example, have sucked in copious liquidity in recent months and are likely to need more. These transactions bore all the hallmarks of a furtive operation to assist a peripheral eurozone central bank unwilling to be seen pawning its reserves.
But the swaps raised only $14bn – surely not enough for any such sweeping operations. Another tale was that the central banks used swaps for bridging finance pending drawdown of the eurozone rescue package; but again, the numbers fail to stack up. An even more far-fetched explanation has the International Monetary Fund selling reserves to boost its own finances ahead of a bail-out.
Which seems to suggest the mystery remains unsolved.
Nevertheless, there is one thing of which we can be sure: the bulk of gold-swapping did take place in January, and that coincides with the expiry of the Federal Reserve’s dollar swap-line facility on February 1.
And as we know, the ECB and the Fed were very quick to reinstate those swap lines as soon as Eurozone strife did break out.
http://ftalphaville.ft.com/blog/2010/07/08/281356/commercial-bank-gold-swap-intrigue-continues/
The one question that begs to be asked: Why would any bank need to pawn it's Gold to raise cash? Central banks AND commercial banks create money out of thin air everyday. Regardless of whether these swaps were with central banks or commercial banks seems insignificant when one asks the simple question, why? And therein lies our mystery.
Was central bank Gold funneled through a European commercial bank, or group of European commercial banks to disguise central bank efforts to block Gold's impending blast off at $1250?
Is revelation of these Gold swaps, no matter the parties involved, a sign of a further loss of control of the price of Gold by the Gold Cartel?
GATA's Chris Powell speculates:
"...while news reports describe the BIS gold swaps as a means for central banks to "raise cash," central banks are able to create money out of nothing; they don't have to sell or lend anything to create money, or at least not to create their own money. They might have to sell or lend something to obtain the currency of some other nation. For example, other nations might have to sell or lend gold to obtain U.S. dollars.
But, third, the U.S. Federal Reserve lately has made all sorts of currency swap arrangements with other central banks so that they all can have plenty of dollars to use for market intervention. Other central banks have been able to obtain plenty of dollars just by creating more of their own currency and exchanging it with the Fed. In effect all the major Western central banks now are able to create dollars at will.
So why did any central bank have to lend or pawn its gold to get dollars?
Was there some agreement among central banks, or some insistence by the United States, that more gold had to be put into the market to defend currencies, government bonds, and low interest rates, to augment the quiet gold sales recently undertaken in London every month by the International Monetary Fund? The IMF too is supposedly selling gold to "raise cash," even as it is part of the central banking system that can "raise cash" just by creating it. Have the Western central banks more or less re-established the price-suppressing London Gold Pool of the 1960s, only this time surreptitiously?
Given the BIS' traditional interest in "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful," the BIS-arranged gold swaps must be suspected as part of a scheme to manipulate the gold market."
http://gata.org/node/8795
Harvey Organ, a GATA member, on his blog last night had this commentary regarding these BIS Gold swaps. He may be very close to solving the "mystery":
I am having great difficulty in believing the email from the Wall Street Journal.
The BIS does not do transactions with commercial banks, only central banks.
No commercial bank has gold of that size.
What is even stranger is that the operation of supplying gold to this unknown entity is still ongoing.
I may be wrong but it looks to me that a central bank got collared i.e. sold a gold call on gold it does not have.
The gold was leased years earlier and the entity that owned the call wanted physical and not cash.
The central bank in question was probably a captive bank of the ECB.
The ECB did not have the authority to lend gold to the captive bank to bail it out.
It was a metal crisis.
In the email it stated that the gold is held and not liquidated. Why then was the deal with a commercial bank and not a central bank, and then let that central bank deal with its problem child?
They are lying!
I must check, but this would be the first time that the BIS entered into an agreement by-passing a central bank authority.
Strange indeed.
and now the real story:
I have just finished talking with Reg Howe on the matter and he feels that I am close as to what actually happened.
It is his opinion that the bank in trouble is in reality a big commercial bank within a captive central bank's jurisdiction that got caught with a collar or a call on gold that gold contracted could not be delivered. The captive central bank did not wish to part with any of its gold so the commercial bank called on the BIS for help and they arranged this crazy bail out swaps.
The bailout may have been cash settled or maybe gold and cash together as there may have been some arm twisting to get this affair settled.
The BIS does not accept deposits of cash or gold from a commercial bank but lately, it can do gold loans to commercial entities. What probably happened here was a commercial bank got in trouble and its central bank refused to help. The ECB also did not want to bail out this bank so the problem bank went to the BIS for help.
This is hugely positive because it was hidden from public view and the last thing that the world wants to hear is that a central authority did not want to help one of its commercial banks.
Reg thus believes that it was not a liquidity problem, it was a shortage of metal problem. and the problem was solved with swaps and the shifting of collateral to take sure that the BIS which is loaning money is repaid. The collateral is the gold swapped. The amount of tonnage in this problem transaction was the entire 380 tonnes of gold.
I was close. I thought it was the captive central bank in trouble. In reality it was the commercial bank inside the captive bank's country that became the troubled zone and had to be bailed out.
Reg Howe is certainly the authority on the BIS.
In essence we got a run on a bank but the bank was a commercial entity and not a central bank. The central bank urged the BIS to make a statement less the world thinks that it is void of gold.
The central bank originally urged that the BIS keep this quiet so it was put as a footnote hoping nobody would see it. Somebody did and thus we have the story.
http://harveyorgan.blogspot.com/2010/07/july-82010-commentary.html
One fact remains clear. No matter the who, what, why, or where of these BIS Gold swaps, this story is all noise in the long bull run of the price of Gold. ALL efforts to stop the rise of Gold over the past ten years have failed. The Gold Cartel's success in "slowing" the rise in the price of gold is acknowledged, but the effort has and will continue to be proved fleeting.
U.S. marks 3rd-largest, single-day debt increase
By Stephen Dinan
The nation's debt leapt $166 billion in a single day last week, the third-largest increase in U.S. history, and it comes at a time when Congress is balking over higher spending and debt has become a key policy battleground.
The one-day increase for June 30 totaled $165,931,038,264.30 - bigger than the entire annual deficit for fiscal year 2007 and larger than the $140 billion in savings the new health care bill will produce over its first 10 years. The figure works out to nearly $1,500 for every U.S. household, or more than 10 times the median daily household income.
Daily debt calculations jump and fall, and big shifts are common. But all three of the biggest one-day debt increases have occurred under the tenure of President Obama, and all of the top six have been in the past two years - an indication of just how quickly the pace of deficit spending has risen under Mr. Obama and President George W. Bush.
http://www.washingtontimes.com/news/2010/jul/7/us-marks-3rd-largest-single-day-debt-boost/?page=1
IMF calls for deficit cuts in US
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- The International Monetary Fund is calling for the United States to make a stronger effort to curb its budget deficits.
The IMF said Thursday that in addition to cutting government spending, the Obama administration will have to consider raising taxes to get the U.S. deficit down to a manageable level.
The IMF proposed a range of possible tax increases that would be certain to generate huge political opposition, from reducing the popular tax deduction for home mortgages to instituting a national sales tax.
The IMF report said that the U.S. economic recovery was becoming "increasingly well established" but it warned that the risks remained on the downside.
Among the threats, the IMF said, were the possibility of a double-dip recession in housing, continued deterioration in commercial real estate and the threats posed to the U.S. economy from the European debt crisis.
But the IMF said so far the U.S. rebound "has proved stronger than we had earlier expected" thanks in large part to what it called a "powerful and effective policy response" on the part of the government, including the efforts of the Federal Reserve.
But the 185-nation international lending agency was less positive about the outlook for the U.S. government deficits going forward.
It noted that because of the recession and the government's spending to battle the downturn, the amount of U.S. government debt held by the public has almost doubled since 2007 and now stands at 64 percent of the economy as measured by the gross domestic product, the highest level since 1950.
http://finance.yahoo.com/news/IMF-calls-for-deficit-cuts-in-apf-2908150880.html?x=0&sec=topStories&pos=6&asset=&ccode
Three reasons oil is up this week...ALL OF THEM WRONG. Oil is up because the US Dollar is DOWN...end of story.
Oil Poised for Biggest Weekly Gain Since May as Equities Rise
BusinessWeek - Rachel Graham - 1 hour ago
July 9 (Bloomberg) -- Crude oil advanced in New York, heading for its biggest weekly gain since May, as equities rose in Asia and Europe, bolstering optimism that fuel demand may increase.
Oil Poised for Biggest Weekly Gain in Six as Supplies Decline San Francisco Chronicle
OIL FUTURES: Crude Up As Australia Jobs Data Revives Risk Appetite Wall Street Journal
Consumer borrowing down sharply in May
Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- Consumer borrowing fell again in May, more evidence that Americans remain jittery over their finances and the durability of the economic recovery.
The Federal Reserve said Thursday that borrowing dropped by $9.1 billion in May. It also said borrowing declined by $14.9 billion in April, revising an initial estimate that showed a gain of $995 million for the month.
Consumer borrowing has fallen in 15 of the past 16 months as households have struggled with uncertain job prospects and battered finances following a deep recession.
In May, consumers borrowed less on their credit cards and took out fewer auto loans. Credit card borrowing has fallen for 20 straight months.
Many consumers, confronted by a deep recession and a weak job market, have tried to get their household finances in better shape by reducing their debt levels. In addition, banks during the recession have imposed tighter lending standards in an effort to cope with their rising levels of bad loans.
Analysts said the significant downward revision to April borrowing and May's decline show that consumers remain leery about taking on new debt.
"There is simply no way to spin this data, nor the past few months, as anything other than a confirmation that the consumer has not come roaring back," said Dan Greenhaus, chief economic strategist at Miller Tabak in New York. "The consumer remains quite stressed ... with income growth relatively muted and labor improvements few and far between."
For years, economists worried about a low personal savings rate. But now they fear that sustained declines in borrowing could hamper overall economic growth because it will mean less consumer demand. Consumer spending accounts for 70 percent of total economic activity. http://finance.yahoo.com/news/Consumer-borrowing-down-apf-369803114.html?x=0&sec=topStories&pos=6&asset=&ccode=
Financial news of this nature is further proof that THERE IS NO RECOVERY. What little signs of a recovery that the government and financial news talking heads can point to are purely the result of government spending.
Further, understanding that ALL money is debt, it is no coincidence that the M3 money supply is falling like a rock in the ocean. With no new debt, the money supply has to fall. This is why a falling money supply always signals a recession is imminent. The government may dismiss the possibility of a double-dip recession out of hand, but the evidence is clear: no priate spending, no recovery. Any boast that the current administration has taken action to avert a depression and put the country on the road to recovery is 100% illusion.
All currencies have depreciated against gold and silver this year
Submitted by cpowell
GoldSilver.com has posted wonderful charts of the gains scored by gold and silver against world currencies so far this year. It appears that not one currency has even kept even with the precious metals. GoldSilver.com calls this "the race to debase." You can find the charts here: http://goldsilver.com/newsletters/newsID/8580/ref/1
Our Treasury Secretary [and tax cheat] Timmy Geithner has carefully avoided calling China a currency manipultor in his delayed report, the Semi-Annual Report on International Economic and Exchange Rate Policies, given to Congress yesterday.
Full Text of Treasury Report on China’s Economic Policies
http://blogs.wsj.com/chinarealtime/2010/07/09/full-text-of-treasury-report-on-chinas-economic-policies/
At 9:25AM est Gold sits at $1212.90, threatening a squeeze of those foolish enough to be short Gold here.
Stay cool this weekend.
...I just feel an urge to comment on the media's obsession with LaBron James and Lindsay Lohan this week:
"Who really gives a sh*t?"
Tuesday, July 6, 2010
Gold Bear Trap Set As The Sh*t Hits The Fan
IMF - BIS Engaged in Gold Swaps to About 380 Tonnes; Organized Looting of Sovereign Wealth
These swaps have significance because of the speculation that the public sale of gold by the IMF, which was secretive and selective, was not a legitimate sale to raise funds, but a means of bailing out the bullion banks who had taken gold previously on lease and sold it into the public markets, but were unble to return it because of the tightness of supply in the physical bullion market, increasingly disconnected from the NY based paper market.
Several private bullion buyers, including Eric Sprott, are reported to have made firm and well priced offers to buy large tranches of gold from the IMF, only to be curtly turned away as 'ineligible.' The IMF is selling at the prices they determine ex-market to the people to whom they wish to sell. It appears that they may be managing this through BIS.
Just as Gordon Brown sold England's gold at artificially low prices to bail out the bullion banks in NY and the City, so the IMF and its constituent members are selling the public stores of gold, largely from a few developed western nations, to support what essentially appears to be a crony capitalist banking fraud involving the secretive sale of public assets at artificial prices with the gains pocketed by a few state-sponsored banks.
John Brimelow reports that "The news of the day, of course, was the discovery by the Virtual Metals analyst (Matthew Turner) that the BIS engaged in what appears to have been the biggest gold swap in history prior to the end of their FY end on March 31st.
Thebulliondesk.com (first of the wire services to report) says:
“In its 2010 annual report, the BIS said that "gold, which the bank held in connection with gold swap operations, under which the bank exchanges currencies for physical gold," stands at 8,160.1 million in special drawing rights, equivalent to 346 tonnes this year, up from nil in 2009.
While the data is relevant to the end of BIS’ 2010 financial year in March, data posted to the International Monetary Fund and carried by Bloomberg show the swap still growing in April, analyst Andy Smith of Bache Commodities noted.
To now, this implies a swap of about 380 tonnes from the end of 2009, he said in a report.”
The new Washington Agreement, which started at the end of last September, allowed signatories to engage in gold derivative transactions for the first time in a decade. Very convenient.
Although none of the major bullion banks (actual or potential CB counterparties) will want to discuss this, the high probability is that much of this gold was actually sold into the market. Very likely this accounts for the contra-seasonal slump of gold in December, which it will be recalled was neither preceded by the usual loss of physical premiums nor accompanied by the usual open interest action.
This in effect means the end of the Washington Agreement restraint on CB gold selling, at a time when several signatories are in bad shape. Most likely this is what caused the selling pressure in gold today, especially after the NY open."
As we have most recently seen with the bloated CDS and CDO credit markets, long standing control frauds can cause quite a splash when they inevitably collapse. We need to bear this in mind when the governments start making their excuses, once again, for taking the 'necessary actions' to support the banks for the good of the people, from whom they have once again stolen billions to provide a fat living for their friends and themselves.
http://jessescrossroadscafe.blogspot.com/2010/07/imf-engaged-in-gold-swaps-to-about-380.html
European banks use gold reserves to raise cash
European commercial banks have begun using their holdings of gold to raise cash with the Bank for International Settlements, in a further sign of strains in the money markets on which many rely for funding.
The BIS, the so-called "central banks' central bank," took 346 tonnes of gold in exchange for foreign currency in "swap operations" in the financial year to March 31, according to a note in its latest annual report.
In a gold swap, one counterparty, in this case a bank, sells its gold to the other, in this case the BIS, with an agreement to buy it back at a later date.
In the past the BIS has occasionally engaged in gold swaps.
There has been no mention, though, of any such operation in recent years.
The gold swaps detailed in the annual report began in December last year, according to monthly data from the International Monetary Fund, and have surged since January, when the Greek debt crisis erupted.
The amount raised in the operations, just over $13 billion at current prices, is small compared with the wholesale money markets. But the fact that banks are using their gold holdings to raise capital is a further indication of the stress in the sector.
Euribor, the rate at which eurozone banks lend to each other, has risen for 27 successive days, while markets are nervous about the impending release of bank stress tests in Europe, scheduled to be published at the end of the month.
The BIS annual report says the gold received in the swaps was held "at central banks."
Talk of the swaps caused a stir in the gold market, with some traders citing it as a reason for gold's fall to a five-week low below $1,200 a troy ounce.
In the past the BIS has occasionally engaged in gold swaps.
There has been no mention, though, of any such operation in recent years.
The gold swaps detailed in the annual report began in December last year, according to monthly data from the International Monetary Fund, and have surged since January, when the Greek debt crisis erupted.
The amount raised in the operations, just over $13 billion at current prices, is small compared with the wholesale money markets. But the fact that banks are using their gold holdings to raise capital is a further indication of the stress in the sector.
Euribor, the rate at which eurozone banks lend to each other, has risen for 27 successive days, while markets are nervous about the impending release of bank stress tests in Europe, scheduled to be published at the end of the month.
The BIS annual report says the gold received in the swaps was held "at central banks."
Talk of the swaps caused a stir in the gold market, with some traders citing it as a reason for gold's fall to a five-week low below $1,200 a troy ounce.
http://www.ft.com/cms/s/0/e3ed5836-8949-11df-8ecd-00144feab49a.html
IMF Gold Swaps Misrepresented
By: Jim Sinclair
Reports about a large gold swap done by the IMF are being colored by a glib analysis of what a swap is as compared to a lease.
If the IMF was legally able to and leased this gold, I would agree with the fear of market sales as a means of bailing out euro banks or other entities.
Gold swaps are done with monetary authorities. Gold leases are done with "for profit entities" such as gold banks.
Gold Swaps are usually undertaken by monetary authorities. The gold is exchanged for foreign exchange deposits with an agreement that the transaction be unwound at a future time at an agreed upon price. The IMF will pay interest on the foreign exchange received. Historically swaps occur when entities like the IMF have a need for foreign exchange, but do not wish to sell the gold. In this case gold is a leveraging device for needed currency to meet requirements.
Conclusion:
The many reports today that characterize the large IMF gold swap as a sale of gold into the markets do not understand the difference between a swap and a lease as defined by with whom it is done and why.
All that scary crap written today is just that, crap.
The IMF swap so talked about today is not a threat to the gold price. In retrospect neither was the gold leasing as it was happening $1000 points lower. Certainly the swap is not and the various commentators today are not familiar with the differences.
http://jsmineset.com/2010/07/06/imf-gold-swaps-misrepresented/
With the US trapped in depression, this really is starting to feel like 1932
By Ambrose Evans-Pritchard
"The economy is still in the gravitational pull of the Great Recession," said Robert Reich, former US labour secretary. "All the booster rockets for getting us beyond it are failing."
"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.
California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. "It is getting worse every single day," said state comptroller Daniel Hynes. "We are not paying bills for absolutely essential services. That is obscene."
Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.
Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.
The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.
The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weniger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.
"Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."
Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Nevada called them "hobos". This really is starting to feel like 1932.
Washington's fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.
The housing market is already crumbling as government props are pulled away. The expiry of homebuyers' tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.
Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.
Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.
On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effective policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.
It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes.
The Fed is already eyeing the printing press again. "It's appropriate to think about what we would do under a deflationary scenario," said Dennis Lockhart for the Atlanta Fed. His colleague Kevin Warsh said the pros and cons of purchasing more bonds should be subject to "strict scrutiny", a comment I took as confirmation that the Fed Board is arguing internally about QE2.
Perhaps naively, I still think central banks have the tools to head off disaster. The question is whether they will do so fast enough, or even whether they wish to resist the chorus of 1930s liquidation taking charge of the debate. Last week the Bank for International Settlements called for combined fiscal and monetary tightening, lending its great authority to the forces of debt-deflation and mass unemployment. If even the BIS has lost the plot, God help us.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7871421/With-the-US-trapped-in-depression-this-really-is-starting-to-feel-like-1932.html
Gold again took it on the chin today as the US Dollar fell further. How bizarre... Do NOT despair. The shakeout in Gold is at or near an end here...I suspect a sudden turnaround may surface by Thursday this week, Friday at the latest.
Price support at 1196 is being severely tested today. This support has now become the first hurdle of resistance should prices turn higher. Gold must clear 1213 to halt the present downward momentum in price.
Gold fell below it's 50 day moving average late last week. This is a common ploy of the Gold Cartel to shake weak longs from the paper market, and enhance downward price manipulation. This also emboldens those short these Precious metals markets, and at the same time sets a trap for them.
Silver has steadied and remained steadfast the past two trading days. There is a very serious supply shortage in the Silver markets. It is unlikely many longs will willingly give up their positions this close to an upward explosion in the price of Silver.
As for the entire Precious Metal complex...the bullion banks in there desperation to extract themselves and the financial system from almost certain destruction have offered the common man an opportunity to purchase Gold, the last vestige of value in the financial system, at sale prices....while supplies last.
These swaps have significance because of the speculation that the public sale of gold by the IMF, which was secretive and selective, was not a legitimate sale to raise funds, but a means of bailing out the bullion banks who had taken gold previously on lease and sold it into the public markets, but were unble to return it because of the tightness of supply in the physical bullion market, increasingly disconnected from the NY based paper market.
Several private bullion buyers, including Eric Sprott, are reported to have made firm and well priced offers to buy large tranches of gold from the IMF, only to be curtly turned away as 'ineligible.' The IMF is selling at the prices they determine ex-market to the people to whom they wish to sell. It appears that they may be managing this through BIS.
Just as Gordon Brown sold England's gold at artificially low prices to bail out the bullion banks in NY and the City, so the IMF and its constituent members are selling the public stores of gold, largely from a few developed western nations, to support what essentially appears to be a crony capitalist banking fraud involving the secretive sale of public assets at artificial prices with the gains pocketed by a few state-sponsored banks.
John Brimelow reports that "The news of the day, of course, was the discovery by the Virtual Metals analyst (Matthew Turner) that the BIS engaged in what appears to have been the biggest gold swap in history prior to the end of their FY end on March 31st.
Thebulliondesk.com (first of the wire services to report) says:
“In its 2010 annual report, the BIS said that "gold, which the bank held in connection with gold swap operations, under which the bank exchanges currencies for physical gold," stands at 8,160.1 million in special drawing rights, equivalent to 346 tonnes this year, up from nil in 2009.
While the data is relevant to the end of BIS’ 2010 financial year in March, data posted to the International Monetary Fund and carried by Bloomberg show the swap still growing in April, analyst Andy Smith of Bache Commodities noted.
To now, this implies a swap of about 380 tonnes from the end of 2009, he said in a report.”
The new Washington Agreement, which started at the end of last September, allowed signatories to engage in gold derivative transactions for the first time in a decade. Very convenient.
Although none of the major bullion banks (actual or potential CB counterparties) will want to discuss this, the high probability is that much of this gold was actually sold into the market. Very likely this accounts for the contra-seasonal slump of gold in December, which it will be recalled was neither preceded by the usual loss of physical premiums nor accompanied by the usual open interest action.
This in effect means the end of the Washington Agreement restraint on CB gold selling, at a time when several signatories are in bad shape. Most likely this is what caused the selling pressure in gold today, especially after the NY open."
As we have most recently seen with the bloated CDS and CDO credit markets, long standing control frauds can cause quite a splash when they inevitably collapse. We need to bear this in mind when the governments start making their excuses, once again, for taking the 'necessary actions' to support the banks for the good of the people, from whom they have once again stolen billions to provide a fat living for their friends and themselves.
http://jessescrossroadscafe.blogspot.com/2010/07/imf-engaged-in-gold-swaps-to-about-380.html
European banks use gold reserves to raise cash
European commercial banks have begun using their holdings of gold to raise cash with the Bank for International Settlements, in a further sign of strains in the money markets on which many rely for funding.
The BIS, the so-called "central banks' central bank," took 346 tonnes of gold in exchange for foreign currency in "swap operations" in the financial year to March 31, according to a note in its latest annual report.
In a gold swap, one counterparty, in this case a bank, sells its gold to the other, in this case the BIS, with an agreement to buy it back at a later date.
In the past the BIS has occasionally engaged in gold swaps.
There has been no mention, though, of any such operation in recent years.
The gold swaps detailed in the annual report began in December last year, according to monthly data from the International Monetary Fund, and have surged since January, when the Greek debt crisis erupted.
The amount raised in the operations, just over $13 billion at current prices, is small compared with the wholesale money markets. But the fact that banks are using their gold holdings to raise capital is a further indication of the stress in the sector.
Euribor, the rate at which eurozone banks lend to each other, has risen for 27 successive days, while markets are nervous about the impending release of bank stress tests in Europe, scheduled to be published at the end of the month.
The BIS annual report says the gold received in the swaps was held "at central banks."
Talk of the swaps caused a stir in the gold market, with some traders citing it as a reason for gold's fall to a five-week low below $1,200 a troy ounce.
In the past the BIS has occasionally engaged in gold swaps.
There has been no mention, though, of any such operation in recent years.
The gold swaps detailed in the annual report began in December last year, according to monthly data from the International Monetary Fund, and have surged since January, when the Greek debt crisis erupted.
The amount raised in the operations, just over $13 billion at current prices, is small compared with the wholesale money markets. But the fact that banks are using their gold holdings to raise capital is a further indication of the stress in the sector.
Euribor, the rate at which eurozone banks lend to each other, has risen for 27 successive days, while markets are nervous about the impending release of bank stress tests in Europe, scheduled to be published at the end of the month.
The BIS annual report says the gold received in the swaps was held "at central banks."
Talk of the swaps caused a stir in the gold market, with some traders citing it as a reason for gold's fall to a five-week low below $1,200 a troy ounce.
http://www.ft.com/cms/s/0/e3ed5836-8949-11df-8ecd-00144feab49a.html
IMF Gold Swaps Misrepresented
By: Jim Sinclair
Reports about a large gold swap done by the IMF are being colored by a glib analysis of what a swap is as compared to a lease.
If the IMF was legally able to and leased this gold, I would agree with the fear of market sales as a means of bailing out euro banks or other entities.
Gold swaps are done with monetary authorities. Gold leases are done with "for profit entities" such as gold banks.
Gold Swaps are usually undertaken by monetary authorities. The gold is exchanged for foreign exchange deposits with an agreement that the transaction be unwound at a future time at an agreed upon price. The IMF will pay interest on the foreign exchange received. Historically swaps occur when entities like the IMF have a need for foreign exchange, but do not wish to sell the gold. In this case gold is a leveraging device for needed currency to meet requirements.
Conclusion:
The many reports today that characterize the large IMF gold swap as a sale of gold into the markets do not understand the difference between a swap and a lease as defined by with whom it is done and why.
All that scary crap written today is just that, crap.
The IMF swap so talked about today is not a threat to the gold price. In retrospect neither was the gold leasing as it was happening $1000 points lower. Certainly the swap is not and the various commentators today are not familiar with the differences.
http://jsmineset.com/2010/07/06/imf-gold-swaps-misrepresented/
With the US trapped in depression, this really is starting to feel like 1932
By Ambrose Evans-Pritchard
"The economy is still in the gravitational pull of the Great Recession," said Robert Reich, former US labour secretary. "All the booster rockets for getting us beyond it are failing."
"Home sales are down. Retail sales are down. Factory orders in May suffered their biggest tumble since March of last year. So what are we doing about it? Less than nothing," he said.
California is tightening faster than Greece. State workers have seen a 14pc fall in earnings this year due to forced furloughs. Governor Arnold Schwarzenegger is cutting pay for 200,000 state workers to the minimum wage of $7.25 an hour to cover his $19bn (£15bn) deficit.
Can Illinois be far behind? The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. "It is getting worse every single day," said state comptroller Daniel Hynes. "We are not paying bills for absolutely essential services. That is obscene."
Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high.
Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.
The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc. This is the real stress indicator. The ratio was 63pc three years ago. Eight million jobs have been lost.
The average time needed to find a job has risen to a record 35.2 weeks. Nothing like this has been seen before in the post-war era. Jeff Weniger, of Harris Private Bank, said this compares with a peak of 21.2 weeks in the Volcker recession of the early 1980s.
"Legions of individuals have been left with stale skills, and little prospect of finding meaningful work, and benefits that are being exhausted. By our math the crop of people who are unemployed but not receiving a check amounts to 9.2m."
Republicans on Capitol Hill are filibustering a bill to extend the dole for up to 1.2m jobless facing an imminent cut-off. Dean Heller from Nevada called them "hobos". This really is starting to feel like 1932.
Washington's fiscal stimulus is draining away. It peaked in the first quarter, yet even then the economy eked out a growth rate of just 2.7pc. This compares with 5.1pc, 9.3pc, 8.1pc and 8.5pc in the four quarters coming off recession in the early 1980s.
The housing market is already crumbling as government props are pulled away. The expiry of homebuyers' tax credit led to a 30pc fall in the number of buyers signing contracts in May. "It is cataclysmic," said David Bloom from HSBC.
Federal tax rises are automatically baked into the pie. The Congressional Budget Office said fiscal policy will swing from
a net +2pc of GDP to -2pc by late 2011. The states and counties may have to cut as much as $180bn.
Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.
On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effective policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.
It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes.
The Fed is already eyeing the printing press again. "It's appropriate to think about what we would do under a deflationary scenario," said Dennis Lockhart for the Atlanta Fed. His colleague Kevin Warsh said the pros and cons of purchasing more bonds should be subject to "strict scrutiny", a comment I took as confirmation that the Fed Board is arguing internally about QE2.
Perhaps naively, I still think central banks have the tools to head off disaster. The question is whether they will do so fast enough, or even whether they wish to resist the chorus of 1930s liquidation taking charge of the debate. Last week the Bank for International Settlements called for combined fiscal and monetary tightening, lending its great authority to the forces of debt-deflation and mass unemployment. If even the BIS has lost the plot, God help us.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7871421/With-the-US-trapped-in-depression-this-really-is-starting-to-feel-like-1932.html
Gold again took it on the chin today as the US Dollar fell further. How bizarre... Do NOT despair. The shakeout in Gold is at or near an end here...I suspect a sudden turnaround may surface by Thursday this week, Friday at the latest.
Price support at 1196 is being severely tested today. This support has now become the first hurdle of resistance should prices turn higher. Gold must clear 1213 to halt the present downward momentum in price.
Gold fell below it's 50 day moving average late last week. This is a common ploy of the Gold Cartel to shake weak longs from the paper market, and enhance downward price manipulation. This also emboldens those short these Precious metals markets, and at the same time sets a trap for them.
Silver has steadied and remained steadfast the past two trading days. There is a very serious supply shortage in the Silver markets. It is unlikely many longs will willingly give up their positions this close to an upward explosion in the price of Silver.
As for the entire Precious Metal complex...the bullion banks in there desperation to extract themselves and the financial system from almost certain destruction have offered the common man an opportunity to purchase Gold, the last vestige of value in the financial system, at sale prices....while supplies last.
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