...as suggested by Dr. John on 29th August...now, confirmed by the Economic Cycle Research Institute's Lakshman Achuthan...as reported here...
http://red-pill-blue-pill.blogspot.com/2011/08/from-dr-john_29.html
now, confirmed - plan accordingly
Friday, September 30, 2011
Gary Shilling Says U.S. Faces Deflation
Sept. 28 (Bloomberg) -- Gary Shilling, president of A. Gary Shilling & Co., talks about the outlook for the U.S. economy and Treasuries. Shilling, speaking with Erik Schatzker and Deirdre Bolton on Bloomberg Television's "InsideTrack," also discusses investment strategy. (Source: Bloomberg)
Thursday, September 29, 2011
Gold Price to Rise in Downturn, Standard Bank Says
Sept. 27 (Bloomberg) -- Walter de Wet, head of commodities research at Standard Bank Plc, talks about the outlook for precious and industrial metals amid a weaker global economic outlook. He speaks with Francine Lacqua on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Tuesday, September 27, 2011
In a First, SEC Warns Rating Agency It May Bring Financial Crisis Lawsuit
Though they’ve been faulted for their central role in the financial crisis, the major credit-ratings agencies have thus far weathered the fallout of the crisis with no sanctions from federal regulators and little more than a bruised reputation.
But that could change soon.
In a formal warning known as a Wells notice, the Securities and Exchange Commission informed credit-ratings firm Standard & Poor’s that it’s considering civil charges tied to the firm’s ratings of a 2007 mortgage-backed securities deal. It’s the first such warning to be given to a credit-ratings agency over matters directly related to the financial crisis.
The deal, known as Delphinus, was one of more than two-dozen collateralized debt obligations linked to the hedge fund Magnetar, whose role in creating and betting against risky CDOs was detailed in a ProPublica investigation last year. Completed in the summer of 2007, Delphinus was one of the last deals done by Magnetar and was underwritten by the Japanese bank Mizuho.
Details on S&P’s potential violations are still unclear. But last year’s Senate investigation of the financial crisis may contain some hints.
Details on S&P’s potential violations are still unclear. But last year’s Senate investigation of the financial crisis may contain some hints.
The report, which blamed inaccurate ratings as “a key cause” of the financial crisis, said agencies failed to do due diligence in grading securities and too often bent to the wishes of the banks that paid them. The report also flagged Delphinus as a “striking example” of the failures of ratings agencies, noting that the CDO was downgraded “a few months after its rating was issued.” Moody’s and Fitch, S&P’s main rivals in the United States, had also rated Delphinus and had to downgrade or withdraw those ratings after it went into default in 2008.
Senate investigators also released an internal S&P email chain in which analysts discussed whether to address the fact that about two-dozen “dummy assets” in the Delphinus portfolio were swapped out at the last minute for assets that “made the portfolio worse.” (Asked during Congressional testimony about the use of dummy assets, two S&P execs told lawmakers they were unfamiliar with the practice in the CDO business.)
In a statement disclosing the SEC’s Wells notice, S&P’s parent company, McGraw-Hill, noted that the letter was “neither a formal allegation nor a finding of wrongdoing,” and that “S&P has been cooperating with the Commission in this matter and intends to continue to do so.” A S&P spokeswoman declined further comment.
The SEC also declined comment.
Three big banks — Goldman Sachs, JPMorgan Chase and Wells Fargo — have already settled fraud charges related to specific CDO deals, and more banks are under investigation. Mizuho, which marketed and sold Delphinus to investors, is also under investigation for a separate CDO deal involving Magnetar, as we noted last week.
Monday, September 26, 2011
Sunday, September 25, 2011
Race against the tide, risking death under huge blocks of ice – Human Planet: Arctic – BBC One
The people of Kangiqsujuaq in Canada go to great lengths to add variety to their diet of seal meat, venturing under the sea ice during the extreme low tides of the spring equinox to gather mussels.
It’s a race against time. They have less than half an hour to search these temporary caverns before the tide rushes back in. A look-out keeps watch for the returning tide, but warning shouts can’t be too loud in case the echoes bring down the ice.
...from http://lifeinthekeyofc.waterforlife.ws/index.php/archives/1779 via The BBC
Friday, September 23, 2011
From UBS Art Cashin via Zero Hedge
Panic And Perspective On Wall Street - We’re going to adjust our usual format a bit to try and put yesterday in a little bit of perspective. Having done this over 50 years, I’ve seen a good deal of market history - the Cuban Missile Crisis, the Kennedy Assassination, the ’87 Crash, various wars, and much more - and perspective is essential to survival - at least financial survival.
If you were writing a textbook on the mechanics of finance and markets, you might have a chapter on volatility. If so, you might list a history on the normal volatility of each asset class.
Most volatile would likely be the stock market. Valuations are based on imperfect information and individual assumptions.
Next down the volatility scale might be commodities where conditions tend, overall, to change slowly with the occasional sudden surprise from weather or other natural events.
Next down the volatility scale, would likely be the bond market - much better information and a very large, very liquid marketplace.
In your textbook, the least volatile asset should be currencies. While they historically have had wide swings, as other assets have, but they tend to move incrementally - normally small intra-day moves.
Yesterday, the textbook was thrown out the window. All asset classes saw sudden and sharp moves far in excess of normal volatility patterns. To an old timer, that points to one conclusion. Liquidation. Wide-spread liquidation across asset classes. Currencies, bonds, commodities and stocks all moved swiftly and sharply in a direction that screamed - Seek safety! Raise cash! Get liquid!
I have been lucky enough to build a mildly successful career by seeing and relating the various causes and effects that move markets. Yesterday had many contributors. European banks tottered amid more rumors and, there was a sense that in the U.S. solutions were slipping away as political acrimony grows. Even the old reliable China growth story got dinged. Chinese manufacturing numbers hinted a slowdown if not recession. FedEx added to the China worries by noting a sharp drop-off in Asian technology shipments. There were also reports that folks were having a tough time getting paid by Chinese counterparties.
All of that had a quick and discernible negative impact on markets. But, the selling was far more pervasive and dramatic than simply a conscious adjustment of positions based upon new data. Thursday’s action screamed liquidation - and not all of it voluntary.
That, in turn, brought echoes of 2008. Who were today’s counterparties? Was there an AIG type in the new European crisis? Those are the kinds of unknowns that fuel liquidations. Everyone begins asking everyone else to put up more collateral. It becomes a feeding frenzy for the rumormongers. They can make anyone a victim. With counterparties unidentified, there is almost no way to counter wild rumors. We need a time out here.
Those Honest Norwegians
...you would have to spend time in Norway to understand how hilarious this statement from the Norges Bank - totally Norwegian...I love it, the most honest Central Bank in the world...
FREQUEBTLY ASKED QUESTIONS FAQ -
Gold reserves How large are the gold reserves in Norges Bank?
Norges Bank has sold the gold bars in the central bank's gold reserves, with the exception of seven gold bars reserved for exhibition purposes and 3 ½ tons of gold coins that were part of the "gold transport" to England in 1940. Gold is no longer included in Norges Bank's international reserves.
When was Norges Bank's gold sold?
Norges Bank sold 33.5 tons of gold bars in the first quarter of 2004. See press release
How much did Norges Bank receive for the gold?
Revenues from the sale of gold totalled USD 447.4m, which is equivalent to approximately NOK 3.1bn.
Can I buy gold in Norges Bank?
No, if you want to buy gold coins you must contact a coin dealer. If you want to invest in gold, you may contact one of the larger banks.
What is the price of one kilo of gold?
The price varies. If you visit Statistics Norway's website, you will find the price of gold under "Spot prices metals".
Gold transport in 1940: How large were the gold reserves that were taken to England?
The gold shipment from Oslo on the morning of 9 April 1940 consisted of 818 cases weighing 40 kilos each, 685 cases weighing 25 kilos each and 39 kegs weighing 80 kilos each. The total shipment weighed 53 tonnes whereas the gold bars weighed about 48.8 tonnes. The value of the shipment in 1940-kroner was NOK 120 million. The assets were revalued and recorded at NOK 240 million in July 1940.
http://www.norges-bank.no/
FREQUEBTLY ASKED QUESTIONS FAQ -
Gold reserves How large are the gold reserves in Norges Bank?
Norges Bank has sold the gold bars in the central bank's gold reserves, with the exception of seven gold bars reserved for exhibition purposes and 3 ½ tons of gold coins that were part of the "gold transport" to England in 1940. Gold is no longer included in Norges Bank's international reserves.
When was Norges Bank's gold sold?
Norges Bank sold 33.5 tons of gold bars in the first quarter of 2004. See press release
How much did Norges Bank receive for the gold?
Revenues from the sale of gold totalled USD 447.4m, which is equivalent to approximately NOK 3.1bn.
Can I buy gold in Norges Bank?
No, if you want to buy gold coins you must contact a coin dealer. If you want to invest in gold, you may contact one of the larger banks.
What is the price of one kilo of gold?
The price varies. If you visit Statistics Norway's website, you will find the price of gold under "Spot prices metals".
Gold transport in 1940: How large were the gold reserves that were taken to England?
The gold shipment from Oslo on the morning of 9 April 1940 consisted of 818 cases weighing 40 kilos each, 685 cases weighing 25 kilos each and 39 kegs weighing 80 kilos each. The total shipment weighed 53 tonnes whereas the gold bars weighed about 48.8 tonnes. The value of the shipment in 1940-kroner was NOK 120 million. The assets were revalued and recorded at NOK 240 million in July 1940.
http://www.norges-bank.no/
Euroland Now as Latin America of the 80s' and 90's
by brasilianista on TBP...
Also, from Miriam Leitão on the website of O Globo (the Brazilian national daily), on the eurozone crisis and its parallels with the Latin American crisis of the 1980s.
Ring of Fire
Europe should look to Latin America in the 1980s and 90s. There are no miracle solutions when countries can’t pay their bills. There are no quick fixes … There’s no sticking the costs to one party. Everyone is going to lose a little: banks, governments, the people….
Europe will stumble from crisis to crisis until it finds what works. Everything it’s done so far has been too little too late. … Those who’ve already lived through a crisis of this type, as Latin Americans have, know that a moment comes when the only way out is for everyone to sit down at the table to divvy up the losses.
Several countries in Europe will only escape this crisis by way of a Brady-style Plan. But remember this: the generalized bankruptcy in Latin America started in September of 1982 and the solution for the Brazilian debt was only put in place early in the 1990s when the economist Pedro Malan began negotiating with the foreign banks and they exchanged the old debt for new at a deep discount….
The big unknown in Europe is that this is a sovereign debt crisis in a large region with a single currency. Here, [in Latin America] with our crisis, at least each country had its own currency, it’s own debt, and the economies weren’t as interconnected as they are now.
Original blog column in Portuguese:
Thursday, September 22, 2011
As gold price suppression grows more brazen, maybe Asia will defeat it
Submitted by cpowell on 12:53AM ET Wednesday, September 21, 2011. Section: Daily Dispatches
Remarks By Chris Powell
Secretary/Treasurer, Gold Anti-Trust Action Committee
18th CLSA Investors' Forum
Grand Hyatt Hotel, Hong Kong
Wednesday, September 21, 2011
Secretary/Treasurer, Gold Anti-Trust Action Committee
18th CLSA Investors' Forum
Grand Hyatt Hotel, Hong Kong
Wednesday, September 21, 2011
The speaker following me, George Clooney, will be able to tell you what it's like to be handsome, talented, rich, and famous. I could tell you what it's like not to be. But instead the conference has asked me to talk about gold, which at least might make you rich, or help you preserve some of whatever you've got.
This opportunity is full of risk, because the gold market long has been manipulated by Western central banks to restrain the gold price. The Western central banks are slowly losing control of the market but they are not giving up easily.
Why do Western central banks manipulate the gold market?
The gold market is manipulated because, despite Federal Reserve Chairman Ben Bernanke's insistence to Congress a few weeks ago that gold is not money, just "tradition," gold is indeed a currency that competes brutally with government-issued currencies and helps determine not only the value of those currencies but also interest rates and the value of government bonds.
Gold's competition with currencies was documented in an academic study published in June 1988 in the Journal of Political Economy written by Harvard economics professor Lawrence Summers and University of Michigan economics professor Robert Barsky. Summers and Barsky found that, in a free market, there is an inverse relationship between the price of gold and the real rate of interest:
The Summers and Barsky study implied that if governments could get control of the gold price, they could also get control of interest rates. Of course Summers went on to become deputy U.S. treasury secretary and then treasury secretary, positions in which skill in rigging markets is a great asset.
Exactly how is the gold price rigged, and by whom?
It has been rigged openly through outright sales of gold by central banks, as it was rigged openly in the 1960s by the group of Western central banks that operated what became known as the London gold pool, and, following the gold pool's collapse in 1968, rigged both openly and surreptitiously through central bank sales and lending of gold and by bullion bank short positions and derivatives that are supported by access to Western central bank gold.
The Gold Anti-Trust Action Committee has documented this rigging from official sources whose admissions are compiled in the "Documentation" section of our Internet site:
That is, the gold price suppression scheme is not what it is sometimes disparaged as being, "conspiracy theory." Rather it is a matter of the most extensive public record -- at least for those who want to look at the record.
These records include:
-- Public statements by Federal Reserve officials, officials of other Western central banks, and the International Monetary Fund.
-- Declassified Central Intelligence Agency memoranda.
-- The minutes of the Federal Reserve’s Federal Open Market Committee.
-- Filings and statements in three gold price suppression lawsuits in the United States; one brought by my committee’s consultant, Reginald H. Howe, against central banks and bullion banks in U.S. District Court in Boston in 2001; another brought by Blanchard Coin and Bullion against Barrick Gold Corp. in U.S. District Court in New Orleans in 2003; and the third brought two years ago by my organization against the Federal Reserve in U.S. District Court for the District of Columbia.
-- These records also include declassified or leaked U.S. State Department cables.
-- Statistical studies done by market researchers like Adrian Douglas in the United States and Dimitri Speck in Germany.
-- And testimony at the hearing about the precious metals markets that was held on March 25, 2010, by the U.S. Commodity Futures Trading Commission. That hearing produced testimony that led to the filing of a massive silver price rigging lawsuit against J.P. Morgan Chase. The revised complaint against J.P. Morgan Chase, filed last week in U.S. District Court for the Southern District of New York, contains pages and pages of extraordinarily specific detail, identifying trades, traders, and dates:
An especially incriminating document remains on the Internet site of the Federal Reserve Bank of St. Louis. It is a detailed plan from April 1961, discovered in the archive of the Fed’s longest-serving chairman, William McChesney Martin, for surreptitiously rigging the currency and gold markets worldwide, a plan that went so far as to propose the alteration, falsification, or withdrawal from publication of U.S. government financial reports that otherwise would be incriminating:
And:
My organization possesses and has posted these records on the Internet, and I would welcome an opportunity to examine and discuss them in detail, document by document, with any doubters in a public forum.
But the official record of gold price suppression is not merely historical. Thanks to my organization's work, it is very contemporary as well.
Two years ago, using the federal Freedom of Information Act, the Gold Anti-Trust Action Committee asked the Federal Reserve to provide access to its gold records, particularly its records involving gold swaps. Gold swaps are trades of gold between central banks, enabling one central bank to intervene in the gold market at the behest of another, keeping the other central bank's fingerprints off the intervention. Gold swaps are a primary mechanism of the gold price suppression scheme.
While the Fed refused to give us access to its gold records, in adjudicating our request internally the Fed did make, perhaps inadvertently, a sensational disclosure. On September 17, 2009, the member of the Fed's Board of Governors who was acting as the judge of our request, Kevin M. Warsh, wrote a letter to GATA's lawyer, William Olson of Vienna, Virginia, confirming the Fed's denial of access. Among the records being withheld from us, Warsh disclosed, were records about the Fed's gold swap arrangements with foreign banks, which, he wrote, "is not the type of information that is customarily disclosed to the public”:
This admission that the Fed has gold swap arrangements with foreign banks plainly contradicted previous statements by the Fed that it was not involved in the gold market in any way.
As GATA was not willing to let Fed Governor Warsh's letter be the last word on access to the Fed's gold records, on December 31, 2009, we sued the Fed in U.S. District Court for the District of Columbia under the Freedom of Information Act. The Fed told the court that the Fed really couldn't find many records involving gold. Implausible as this was, the judge, Ellen Segal Huvelle, denied GATA's request to interrogate Fed officials under oath about what seemed to us to be their wholly inadequate search. Whereupon the judge reviewed, privately in her chambers, the few documents the Fed had submitted, and on February 3 this year she ruled that the Fed indeed could keep secret all but one of those documents. She ordered the Fed to disclose that one document to GATA within two weeks.
On February 18 this year, heeding the court's order, the Fed released the document -- the minutes of the April 1997 meeting of the G-10 Gold and Foreign Exchange Committee as compiled by an official of the New York Federal Reserve Bank. The minutes showed government and central bank officials from around the world conspiring in secret to coordinate their gold market policies:
Perhaps of equal importance, the Fed claimed not to be able to find minutes of any other meeting of the G-10 Gold and Foreign Exchange Committee. Either the the G-10 Gold and Foreign Exchange Committee has met only that once, in April 1997, or the Fed was not represented at any other such meetings, or such minutes were conveniently misplaced to keep them away from GATA's lawsuit.
Thus GATA's lawsuit established that, despite its public denials, the Fed has many gold secrets after all. Our lawsuit also managed to pry a couple of those secrets loose and publicize them -- first, that the Fed has gold swap arrangements, and second, that at a secret meeting in 1997 the Fed was conspiring with other central banks to coordinate their gold market policies and that there was never any announcement of this undertaking.
Almost as gratifying to us was that, since the court found that the Fed illegally withheld from us the minutes of the secret G-10 Gold and Foreign Exchange Committee meeting, the Fed was ordered to pay court costs to GATA, which the Fed did in May, sending us a check for $2,870.
But the Fed is far from the only central bank that has been proven to be involved in suppressing the price of gold.
In August 2009, while GATA was pressing its freedom-of-information claim against the Fed, our consultant, Rob Kirby of Kirby Analytics in Toronto, wrote to the German central bank, the Bundesbank, to confirm a news report that most of the German national gold was being kept outside Germany, particularly in New York, presumably at the New York Fed.
The Bundesbank replied to Kirby as follows:
"The Deutsche Bundesbank keeps a large part of its gold holdings in its own vaults in Germany, while some of its gold is also stored with the central banks located at major gold trading centres. This has historical and market-related reasons, the gold having been transferred to the Bundesbank at these trading centers. Moreover, the Bundesbank needs to hold gold at the various trading centres in order to conduct its gold activities."
So the Bundesbank says it keeps much of its gold at "trading centers" so that it may conduct its "gold activities."
Exactly what are those activities?
In late 2010 the German journalist Lars Schall sought to follow up with the Bundesbank, posing 13 questions about those "gold activities," particularly as to whether the Bundesbank has any gold swap arrangements with the United States. The Bundesbank replied to Schall as follows:
"In managing foreign reserves, the Bundesbank fulfils one of its mandated tasks as an integral part of the European System of Central Banks. We trust you will understand that we are not able to divulge any further information regarding this activity. Particularly with respect to the confidential nature of information about where gold holdings are kept, we are unable to go into any greater detail concerning exact locations and the quantities stored at each of these. Likewise, owing to the strategic nature of the activity, we are not at liberty to provide you with more detailed information about gold transactions."
That seems like a pretty good confession that the Bundesbank has undertaken gold swaps as part of what it considers "strategic activity."
Another confession of the secret maneuvers being played with gold by central banks came at the hearing held by U.S. Rep. Ron Paul's House Subcommittee on Domestic Monetary Policy and Technology on June 23 this year, a hearing I attended. The Treasury Department's inspector general, Eric M. Thorson, testified that he had been told that no part of the U.S. gold reserve was encumbered or compromised. But he did not say exactly who told him this, so his comment was only hearsay. And when Thorson was asked just where the gold pledged by the United States to the International Monetary Fund is kept and how it is accounted for, Thorson couldn't say:
Three years ago when GATA put similar questions to the IMF -- "Exactly where is your gold, and do you possess it directly or is it just a claim on the gold reserves of your member nations?" -- the IMF was at first evasive and then abruptly cut off the correspondence without answering:
But then most official gold data is actually disinformation.
For the six years prior to 2009 China reported to the IMF that it held 600 tonnes of gold. But in April 2009 China reported that its gold reserves had increased by 76 percent, from 600 tonnes to 1,054 tonnes. Had China obtained the new 454 tonnes only in the past year? Of course not; China had been accumulating gold steadily, through its foreign exchange agency, without reporting it for six years. Only in April 2009 was the gold transferred from China's foreign exchange agency to its central bank and reported to the IMF:
There is more confirmation of the false reporting of gold reserves. In June 2010 the World Gold Council reported that Saudi Arabia had increased its gold reserves by 126 percent since 2008, from 143 tonnes to 323 tonnes. But a few weeks later the governor of the Saudi Arabia Monetary Authority said Saudi Arabia had not been purchasing gold lately and that the 143 tonnes in question had been held all along in what he called "other accounts" -- exactly what China had done, holding gold in accounts not reported officially:
Thanks to diplomatic cables from the U.S. embassy in Beijing to the State Department in Washington, cables obtained by the Wikileaks organization and published this month, we now know that the Chinese government agrees with GATA that Western central banks suppress the price of gold to support their own currencies.
One U.S. Beijing embassy cable, dated April 28, 2009, summarizes a commentary attributed to the Chinese newspaper Shijie Xinwenbao (World News Journal), which is published by the Chinese government's foreign radio service, China Radio International. The cable's summary reads:
"According to China's National Foreign Exchanges Administration, China's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the United States and European countries. The United States and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the renminbi."
Two other U.S. Beijing embassy cables from the same period quote other semi-official Chinese commentaries to the same effect.
These cables also are posted in the "Documentation" section of GATA's Internet site:
Because central banks know that gold, far from being a quaint antique, is actually the determinant of the value of all other currencies, the true disposition of national gold reserves has become a secret more sensitive than the disposition of nuclear weapons. For gold is a weapon just as powerful -- a weapon crucial to the currency wars that flare up every few years, like the currency war that is raging now.
That is, gold is the secret knowledge of the financial universe. And while nuclear weapons can be used for blackmail, currency market rigging is a far more effective mechanism for looting the world.
Many of you have heard about the looting of Europe undertaken by the Nazi German occupation during World War II. But most of that looting did not take place as it is imagined, at the point of a gun. No, it took place throughthe currency markets.
This looting through the currency markets was spelled out by the November 1943 edition of a military intelligence letter published by the Military Intelligence Division of the U.S. War Department, a letter called Tactical and Technical Trends:
Of course the Nazi occupation seized whatever central bank gold reserves had not been sent out of the occupied countries in time. But then the Nazi occupation either issued special occupation currency that could not be used in Germany itself or, in countries that had strong banking systems, took over the domestic central bank and enforced an exchange rate much more favorable to the reichsmark. Or else the Nazi occupation simply printed for itself and spent huge new amounts of the regular currency of the occupied
country.
country.
It was this control of the currency markets that very efficiently drafted everyone in the occupied countries into the service of the occupation and achieved a one-way flow of production, a flow out of the occupied countries and into Nazi Germany.
For a few years Nazi Germany had a hell of a trade deficit -- and couldn't have cared less about it. For as it controlled the currencies of occupied Europe, Nazi Germany never had to cover that deficit, at least not as long as its military occupation continued.
Since the United States now issues the reserve currency for the world, the dollar, the United States now more or less occupies most countries economically, even those countries that have their own currencies, since even those countries choose to hold most of their foreign exchange reserves in dollars. Thus what we see now, the current one-way flow of production -- out of the rest of the world and into the United States.
This exploitation is not well-publicized but it is no secret.
In the 1960s France's finance minister called it an "exorbitant privilege" for just one country -- the United States -- to be able to issue the world reserve currency.
In 2004 the deputy chairman of the Bank of Russia, Oleg Mozhaiskov, told the London Bullion Market Association conference held in Moscow:
"Although there are several reserve currencies, the blatant lack of discipline is demonstrated by the U.S. dollar. I am leaving aside the main aspects of this problem, such as the social and economic injustice of a world order that allows the richest country in the world to live in debt, undermining the vital interests of other countries and peoples. What is important for us today is another aspect, which is connected with the responsibility of the state issuing the reserve currency and for the international community preserving that currency's buying power."
Mozhaiskov recognized the role of gold price suppression in maintaining the dollar's place as the world reserve currency. For the only words of English spoken by Mozhaiskov in that speech were "Gold Anti-Trust Action Committee." Mozhaiskov said gold price movements were often so "enigmatic" that the laws of market supply and demand did not seem to apply. The Bank of Russia long had been following GATA's work without our knowledge. With his speech in 2004 Mozhaiskov was telling the Western bullion bankers that Russia was on to them:
And just a few weeks ago Russia's prime minister, former president, and perhaps future president, Vladimir Putin, called the United States a "parasite" on account of its huge external debt and the international dominance of the dollar:
The gold price suppression scheme -- a dollar-support scheme -- can be exposed by any serious questioning of central bankers. My organization has found that central bankers refuse to answer the most ordinary specific questions about gold. But who else will ask the questions? The scheme survives in large part because of negligent journalism about gold.
The scheme has lasted so long because, with the assistance of Western central banks, the major Western bullion banks, investment houses that deal in gold, have developed a fractional-reserve gold banking system. They realized that they could sell a lot more gold than they really have, because many major gold buyers -- financial institutions and large investors -- never take delivery of their metal. These investors accept depository receipts instead. The fractional-reserve nature of the bullion banking system was confirmed in detail at last year's hearing of the U.S. Commodity Futures Trading Commission:
But this is changing.
The gold price spike that began just after GATA's Gold Rush 21 conference in Dawson City, Yukon Territory, Canada in August 2005 was probably caused by the withdrawal of the Russian gold reserves that had been on deposit with bullion banks in London.
You may have heard a few weeks ago that Venezuela is demanding the return of its gold reserves from deposit at the Bank of England and various U.S. bullion banks. The Venezuelan action seems to have given much support to the gold price.
Now there is constant public discussion in the most informed circles in China about the need for that country to obtain gold to diversify its foreign exchange reserves and support its currency.
Western gold reserves are being depleted as Eastern and developing-world central banks become gold buyers.
What is necessary to bring the gold fraud to an end is publicity that reaches financial markets around the world generally.
There is a big story here. For the falsity of the data about the gold market practically screams at financial journalists:
-- There is the omission from official gold reserve reports of leased and swapped gold.
-- There are the sudden huge changes in official gold reserve totals.
-- And there are the deception and conflicts of interest built into major gold and silver exchange-traded funds, since the custodians of their metal happen also to be the world's biggest gold and silver shorters:
The valid documentation about the gold market also practically screams at financial journalists:
-- There are the huge and disproportionate gold, silver, and interest rate derivative positions built up at just a few international banks, positions that never could be undertaken without the expressed or implicit underwriting of government, particularly the U.S. government.
-- There are the many official records, collected and publicized by GATA, demonstrating the explicit plans and desire of the U.S. government and its major allies to suppress and control the price of gold.
Most obvious is the question that should follow the common disparagement of gold, a question that somehow is never asked. You well may have heard this disparagement: that even with its recent rise in price, gold has not come close to keeping pace with inflation over the last 30 years. Oil has kept up, food has kept up, other metals have kept up, all the things that are used as measures of inflation have, by definition, kept up with inflation -- but not gold.
So why not? Why hasn't gold kept up with inflation?
It's because Western governments found ways of vastly increasing the supply of gold without having to go through the trouble of mining it -- to dishoard and lease it from central bank reserves and to issue certificates of deposit against gold that never existed in the first place.
"Why" is supposed to be a basic question of journalism. But it has fallen out of financial journalism when it comes to gold.
In recent years, and especially in recent months, I have spent much time explaining the gold price suppression scheme to leading financial journalists in the West. I have given them the documentation. Some of these journalists seemed interested. But none has ever reported anything about the issue. One writer who works for a major news agency in the United States was intrigued enough to call the Federal Reserve and ask about its gold swaps. She got a very telling "no comment." But unfortunately she could not get her editor's permission to write a gold story.
Frustrating as all this is, it is not too surprising. After all, who are the major advertisers in the Western financial news media and the major sources of financial news? The market manipulators and governments themselves. And journalists seem to take for granted that central banks operate in secret, particularly in regard to gold, so there's no point in questioning them -- even though central banking now determines the value of all capital, labor, goods, and services in the world, and does so in secret.
So here I am in Asia, which is a major victim of the gold price suppression scheme. Maybe there will be more curiosity and indignation about it here.
But Asia is not the only victim of this scheme. My own country may be the biggest victim. For this scheme has helped to corrupt the United States, destroying our once-free markets and the accountability of our government.
We in GATA do what we can, even though, from our beginning, we have wondered whether we could really presume to speak for gold. And not just for gold, of course -- we are not idolaters -- but for the economic and political liberty of individuals and the national sovereignty that gold serves and stands for. With gold always under attack precisely for what it represents, and with no others coming forward to defend it for what it represents, with even the gold mining industry’s main trade association refusing to acknowledge the attack, we have hoped that any presumption on our part might be forgiven.
We remain largely amateurs. At the outset we did not half understand what was going on and what we were setting about to do. Our name preserves that imperfect understanding. We thought we had discovered just another anti-trust violation. It was a while before we perceived that we were up against government policy and that most of what we were discovering had been discovered long ago, at least in principle, just not well taught,
publicized, preserved, and made timely again.
publicized, preserved, and made timely again.
Because it can work only through surreptitiousness and deceit, this government policy will be defeated when it is more widely understood -- and every day it is being better understood, because it is getting so brazen. It was more brazen than ever the other day when Switzerland devalued its franc, the world's leading "safe haven" currency, apparently leaving the "safe haven" field exclusively to gold. But just a few minutes before the Swiss franc's devaluation was announced, unidentified sellers dumped thousands of gold futures contracts on markets around the world, causing the gold price to plunge along with the Swiss franc. These sellers plainly did not aim to make a profit from their gold holdings; if they had intended to make a profit, they would have sold gradually into the market. No, they meant to knock the price down hard, and they did.
These sellers almost surely were central banks. But as far as I could tell, no Western journalist has yet put a question to any central banker about that strange and counterintuitive action in the gold market.
I ask for your help in forcing an end to the gold price suppression scheme. I ask in the cause of giving individuals, nations, and all humanity a chance at democracy, liberty, and limited government with a neutral, fair, and impartial international currency that serves not just one government or another or one class or another but rather the whole brotherhood of man.
Wednesday, September 21, 2011
The Swiss National Bank Gives Up
by James Turk
September 19, 2011 – The Swiss National Bank finally gave up. For months it tried standing alone against all of the bad monetary policies being pursued by the ECB, the Federal Reserve, the Bank of England and indeed, nearly all of the central banks of the world, but it was a losing battle. So last week the Swiss National Bank succumbed to these pressures and pegged the Swiss franc to the euro.
Consequently, as the euro is debased, the Swiss franc will head south with it. The world’s last safe-haven national currency has finally disappeared, making the ownership of physical gold and silver all the more important.
One thing is clear in a world of fiat currency that begets hot-money. One country cannot stand alone pursuing prudent monetary policies, at least if it aims to be politically correct and avoid being ostracized from the clubby world of central banking. But this outcome is not a surprise. I wrote about it this past March and illustrated my point with charts showing gold’s hyperbolic trajectory in four currencies, including the Swiss franc.
Here are the same four charts from that March 28th article updated through Friday’s close.
The above charts are in essence identical. The rate at which these currencies are being debased varies, but they are all headed in the same direction. This point is clear from the following chart that presents a Base-100 analysis of gold’s appreciation this decade against these four currencies.
That the pattern of the Swiss franc in the above chart is similar to those of the other three currencies may surprise some people. The obvious conclusion though is that the Swiss franc has not been a safe haven for at least a decade. All currencies are being debased against the world’s time-tested and trustworthy numéraire – gold.
As I wrote last March, “the gold price is rising at an accelerating rate” meaning that national currencies are “losing purchasing power at an accelerating rate.” These quotes accurately describe what happens to national currencies moving toward hyperinflation and collapse, which is where the above four currencies are headed.
Tuesday, September 20, 2011
Bizarre Love Triangle
September 18 (King World News) - Along with volatility in stocks and historically low yields in bonds, investor attention has recently been drawn to currencies. This is due to the currency wars that broke out in 2010 and have expanded lately. The recent Brazilian decision to cut interests rates to halt the appreciation of the real and the Swiss decision to peg the franc to the euro are both examples of countries cheapening their currencies against others, or at least halting their appreciation. The world is now in a beggar-thy-neighbor phase, last seen in the 1970’s and before that the 1930’s, where countries steal economic growth from neighbors by currency depreciation to cheapen exports.
Switzerland and Brazil are mere sideshows in this global war. The main event is the three-ring circus of the U.S., Europe and China and their respective currencies, the dollar, euro and the yuan. The dynamic is straightforward – all three would like a cheaper currency, relative to the others, to help exports. China has the least justification for cheapening, so it considers a peg the next best thing – at least their currency doesn’t go up. The U.S. has the most clout – it has the leading reserve currency and a printing press so it can just print its way to devaluation. Europe desperately wants to depreciate but is dependent on China to buy its sovereign bonds and dependent on the U.S. for dollar liquidity in the form of swap lines so it has no leverage over the other two. Besides, Germany has a history of maintaining a strong export sector even with a strong currency because of its efficiency, homogenous culture and labor-management cooperation. This was true in the 1970’s with the strong Deutschemark and it’s largely true today. This dynamic plays out as you might expect. The U.S. devalues against yuan and the euro – it gets all of what it wants. China revalues upward against the dollar, but keeps a peg to the euro – it gets half of what it wants. And the euro remains strong against the dollar and pegged against yuan – so it gets none of what it wants. This has been the prevailing paradigm since June when the Chinese finally let the yuan appreciate against the dollar in a serious way.
There’s only one problem with this neat solution to the currency wars. Germany may be able to survive with a strong currency but the rest of Europe cannot and parts of Europe, especially Greece, are facing insolvency. Up to a point, the Greeks have to accept the fiscal austerity forced on them by the Germans. But beyond a certain point, either the Greeks or the Germans balk, and the crisis goes critical and threatens the stability of the global financial system. At that point, either the euro must weaken significantly or Germany must rescue Greece. German reluctance on the bailout has recently led to a weaker euro as a default or break-up loomed. However, this euro weakening broke the global arrangement with China, which was now faced precisely with its worst case – a weaker euro and a weaker dollar at the same time. China is prepared to accept one or the other but not both.
So it goes in the currency wars where all advantage is temporary and it is always just a matter of time before the strong currency tries to get in on the debasement game that everyone else is playing. Since not everyone can devalue at once, every “winner” with a cheaper currency must produce a “loser” who gets stuck with the strong currency. At first it looked like Europe was the biggest loser but now China is beginning to assume that role. China will not tolerate it and has laid down two markers. It has told Europe that if they expect China to purchase European sovereign bonds to help alleviate the crisis, they must offer more favorable trading terms to China. And there is an implicit threat that if the euro does not strengthen soon, China could re-peg to the dollar, thus undoing what the U.S. had hoped to accomplish with its weak dollar policy.
The entire global system is at a critical juncture with sovereign bonds, currencies, stock markets and the fate of politicians all in play. The hidden purpose of QE and QE2 was always to cheapen the dollar by causing inflation in China and forcing its hand. Critics have said that QE did nothing to help with unemployment and consumption. But that was never the main purpose – the purpose was to weaken the dollar to help exports and get jobs that way, but it takes time. I removed QE3 from my set of expectations late in 2010 when it became clear that Fed rollovers were enough to keep the yield curve tame and, more importantly, China was finally starting to move on the currency. For now, QE3 is still off the table. But if the euro weakens and China re-pegs to the dollar as a result, that is the signal for more QE. It’s hard to know how this will play out, but at least we know what to look for. If you want to see QE3 ahead of the market, watch the euro.
Finally, it is not quite true there are no winners in a currency war. There is always one winner – gold.
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September 23rd, 2011 at 5:19 pm