Golden Oxen's First Amendment Forum
Gold & All That Glitters => All Items Gold Related => Topic started by: Golden Oxen on April 22, 2014, 11:06:34 am
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A place to chew the fat about gold, silver, precious metals and the numerous items that affect them. Currency movements, interest rates, oil prices, industrial uses, the entire gamut of influences that affect this topic.
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Recent weakness in silver prices would seem to contradict the idea that we are in recovery mode for the world economy. Poor man's gold has so many industrial applications as well as it's monetary history, that the price weaknes and strong economic rebound are difficult to reconcile.
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Hey GO,
Could I get your opinion on buying gold and silver coins from a coin (or pawn) shop? If you think it's OK to do this, does a person need to be very "coin educated" to walk into one of these places with the intention of making a purchase? BTW - this is a coin shop that is a fairly short driving distance from my residence.
Golden Isles Coin Shop (http://goldenislescoin.com/)
Thanks,
Joe
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Hi JoeP, In no way is this an insult to the firm you mentioned, they may in fact be quite reputable, but buying from a local coin store or pawn shop is not the way to go in my opinion. You have a greater risk of buying something counterfeit, revealing your identity and address to someone local, getting followed and robbed on the way home, buying items that may have been stolen merchandise.
These establishments, even if tiny, usually have high overhead, rent being the largest, as well as security, and the cost of having someone always present during business hours. Again, no finger pointed at the firm you mentioned, but the reason a great many of these stores, especially pawn shops exist, is to buy items on the cheap from people in need of some cash and who are clueless as to the real value of the item, or need cash quickly, so they take a beating. The proprietors of these stores know when they have bought something of high value on the cheap and either keep those items for themselves, sell them to a professional major coin dealer that they usually do business with regularly, or list them on E-Bay where collectors will bid for them and they will realize a much higher price than what was paid. The items of lesser value, those they feel are tainted buy being in poor condition, scratched, cleaned, toned, rim nicks etc, are placed for resale in their store to folks who are unaware or not knowledgeable about these minor items which effect a coins value. especially a numismatic coin, less so a bullion coin, significantly.
In short Joe my answer would be No, I would not advise it. The venue I would suggest to you to get your feet wet with some purchases are the LARGEST MAJOR sellers of bullion and bullion coins on EBay. Let me list the reasons why.
You are buying from an established dealer whose credentials are laid out before you.
You will get secure delivery by registered mail to your home, no threat of being followed out of the store by a would be robber.
You will be using Paypal for payment which does not disclose your credit card info to the seller and is a pretty secure site.
if you do not receive the items ordered, the seller is required to obtain your signature on delivery, or to provide tracking service on the items, Paypal will review the situation and refund your money in full if the seller cannot show proof of delivery.
This Ebay dealer will be dealing in an intensely competitive environment, forcing him to keep prices in ine with other large dealers offering essentially the same products.
Most offer free shipping the competition is so great, and special sale items when business is slow for the smart shopper who know how to wait for a deal and compare prices. Quantity purchases are usually discounted a bit as well, 20 coins say purchased at once rather than two.
Many of these dealers are so large that the items they sell are direct from the US Mint and are sold in their original packaging.
Besides a Buy It Now feature, many offer items on a auction basis as well so you can see what others are willing to pay as a way to better determine fair price. Another words if 76 people are bidding around 25 dollars for a 1 oz silver coin, you may assume that area is a fair market price.
Hopefully your inquiry has been answered. I shall close this posting with an illustration of a recent purchase from a dealer I have used with satisfactory results often. In no way am I affiliated with this dealer, norcan vouch for you getting the same results I did, or to his character, past business practices, etc. I am referring him to you with a few reason why under the illustration, there are others like him, I chose him for a variety of reasons, his size, excellent customer feedback responses, variety of offerings, huge volume of transactions, competitive prices, free shipping on all items, no matter the size or price. When satisfied I have a habit of not going elsewhere.
Let me also make perfectly clear that this person sells coins from his own establishment by mail as well as EBay. My recommendation to you is to deal ONLY on EBay through PayPal for the previous reasons listed.
(http://www.ngccoin.com/images/certified_roll_lg.jpg)
This is the route I go.
Direct from the US Mint.
I pay a premium for a respected authenticator to attest that the package has not been tampered with and who seals it with codes and serial numbers listed.
I have no fear of counterfeit coins
No fear of unsatisfactory handling
Free shipping from a dealer with 200,000 transactions with near perfect customer satisfaction.
PayPal customer satisfaction guarantee.
Credit card Privacy and home delivery.
Sure you get the idea Joe P, Any further questions just ask. Shop carefully and become familiar with all the offerings in your area of interest as well. Link to dealer below, there are others on EBay as well
ROLL OF 20 - 2014 1 Oz Silver Eagle NGC GEM UNC ER DIRECT FROM MINT BOX
www.ebay.com/itm/ROLL-OF-20-2014-1-Oz-Silver-Eagle-NGC-GEM-UNC-ER-DIRECT-FROM-MINT-BOX-SKU30849-/131155497629?pt=US_Bullion_Coins&hash=item1e897a129d
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Hey GO,
Could I get your opinion on buying gold and silver coins from a coin (or pawn) shop? If you think it's OK to do this, does a person need to be very "coin educated" to walk into one of these places with the intention of making a purchase? BTW - this is a coin shop that is a fairly short driving distance from my residence.
Golden Isles Coin Shop (http://goldenislescoin.com/)
Thanks,
Joe
NGC Certified Rolls
Collecting coins in roll format has long been very popular. Many denominations of circulating coins are traditionally dispersed in bank-wrapped rolls, which consist of a standard number of coins within a tight paper wrapping. Similarly, many bullion coins are issued in hard plastic rolls. For example, US Mint-issued American Silver Eagles are released from the Mint in rigid plastic rolls of 20 coins that are unchanged since the late 1980s.
For those who prefer to own coins in roll format, NGC offers Certified Rolls. These provide the advantages of an independent guaranty of condition and authenticity. NGC Certified Rolls are made from exceptionally high-quality inert materials and are designed with long-term storage in mind. Additionally, they are fully transparent, making it easy to see what’s inside.
An NGC certification label appears in each holder, describing its contents. Where applicable, an adjectival grade is also provided. Security of the roll has also been elevated to the highest levels. Each holder is sonically sealed and tamper-evident. Holographic security tape and a counterfeit-resistant hologram are affixed to each holder.
Most significantly, and unique to NGC, each Certified Roll has been assigned an NGC certification number that can also be parsed to correspond to each individual coin within the roll. Tracking, managing and storing bullion coins has never been easier.
Currently, NGC Certified Rolls are available only for American Silver Eagles. More denominations will be available soon.
www.ngccoin.com/coin-grading/holders/certified-coin-rolls.aspx
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Thanks for the very informative replies. Here's a dimwit question - do I have to expliciitly request delivery only with signature? Or is this an option in the ordering process?
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It is the seller who decides, you have nothing to do with it. Your PayPal guarantee will be in force no matter what.
Information described in full on E-bay, read the policies and how they apply.
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Currently, NGC Certified Rolls are available only for American Silver Eagles. More denominations will be available soon.
www.ngccoin.com/coin-grading/holders/certified-coin-rolls.aspx
I really like the advantages of the NGC certified rolls. I trust you will keep the readership updated when other denominations are available?
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Currently, NGC Certified Rolls are available only for American Silver Eagles. More denominations will be available soon.
www.ngccoin.com/coin-grading/holders/certified-coin-rolls.aspx
I really like the advantages of the NGC certified rolls. I trust you will keep the readership updated when other denominations are available?
They are available now JoeP, in other denominations single coins of both gold and silver as well as numismatic items. That was only an example of my usual approach when purchasing silver coins.
They do not do Gold rolls yet, probably due to their very high cost. Most folks buy Gold a 1/2 oz or 1 oz at a time.
Keep in mind a single coin will usually have a higer premium than a roll.
(http://www.ngccoin.com/images/holder-overview/ngc-retro-coin-holder.jpg)
(http://i.ebayimg.com/00/s/MTUwMFgxNTAw/z/OL8AAOxygPtSzFbF/$_12.JPG?set_id=880000500F)
(http://i.ebayimg.com/00/s/NzIwWDUwMg==/z/JWUAAOxylpNTT~4Y/$_57.JPG)
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GO, it is my understanding that PM purchases of less than $10K are not reported to the Feds. Is this accurate? Let me know if you're getting tired of answering my rookie questions. ;D
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GO, it is my understanding that PM purchases of less than $10K are not reported to the Feds. Is this accurate? Let me know if you're getting tired of answering my rookie questions. ;D
Think sales only are reported not purchases , but that Patriot act and constant new legislation has more garbage in it than can be kept up with.
Different states have different rules to on reporting. You are usually better off making small purchases of gold on a regular basis than jumping in at one price. Dollar cost averaging and staying under reportable limits.
Keep the questions coming JoeP, that's what this forum is about. Taxes are not an area I can offer much advice in however. You can also purchase certain US Gold coins in an IRA.
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GO, it is my understanding that PM purchases of less than $10K are not reported to the Feds. Is this accurate? Let me know if you're getting tired of answering my rookie questions. ;D
Think sales only are reported not purchases , but that Patriot act and constant new legislation has more garbage in it than can be kept up with.
Different states have different rules to on reporting. You are usually better off making small purchases of gold on a regular basis than jumping in at one price. Dollar cost averaging and staying under reportable limits.
Keep the questions coming JoeP, that's what this forum is about. Taxes are not an area I can offer much advice in however. You can also purchase certain US Gold coins in an IRA.
I don't know about gold specifically, but the magic number for the IRS generally is $600 in a year; if I were to sell gold to a single dealer over that amount, I would expect it to be reported on a 1099 form.
The $10,000 limit is against money-laundering and is generally per-transaction; however, multiple transactions used to get around that limit also raise a red flag.
On the other hand, I have heard that some states do not charge sales tax if precious metal transactions are over a certain amount, like $1500.
In all these cases, you should do more research for your own particular situation. Circular 230 disclaimer: you should not rely on this general advice to avoid tax penalties.
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GO, it is my understanding that PM purchases of less than $10K are not reported to the Feds. Is this accurate? Let me know if you're getting tired of answering my rookie questions. ;D
Think sales only are reported not purchases , but that Patriot act and constant new legislation has more garbage in it than can be kept up with.
Different states have different rules to on reporting. You are usually better off making small purchases of gold on a regular basis than jumping in at one price. Dollar cost averaging and staying under reportable limits.
Keep the questions coming JoeP, that's what this forum is about. Taxes are not an area I can offer much advice in however. You can also purchase certain US Gold coins in an IRA.
I don't know about gold specifically, but the magic number for the IRS generally is $600 in a year; if I were to sell gold to a single dealer over that amount, I would expect it to be reported on a 1099 form.
The $10,000 limit is against money-laundering and is generally per-transaction; however, multiple transactions used to get around that limit also raise a red flag.
On the other hand, I have heard that some states do not charge sales tax if precious metal transactions are over a certain amount, like $1500.
In all these cases, you should do more research for your own particular situation. Circular 230 disclaimer: you should not rely on this general advice to avoid tax penalties.
Thanks JD.
(http://www.runemasterstudios.com/graemlins/images/2thumbs.gif) Very good info. It's possible the reason I grabbed the 10K figure out of the sky is because I was involved in a software solution that had/has "Anti-Money Laundering" as the name of the product.
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GO, saw this today and though immediately of you--
Putin Silver 1 Kilo Coins Minted In Russia (http://www.zerohedge.com/contributed/2014-04-24/putin-silver-1-kilo-coins-minted-russia)
Gold fell $0.60 or 0.05% yesterday to $1,284.40/oz. Silver fell $0.02 or 0.1% yesterday to $19.43/oz.
(http://dzswc0o8s13dx.cloudfront.net/goldcore_bloomberg_chart1_24-04-14.png)
The Mint Refers To The New Coin As "1 KG Of Nobility"
Russia: Putin Silver One Kilo Coins Launched
Silver coins with the face of Russian President Vladimir Putin are being minted in Russia. The coins weigh one kilogram (1kg - 2.2lb) and are being launched by the Art Grani foundry to mark Crimea’s reincorporation into Russia.
The private mint that produces the coins said it is planning to present some of them to the Russian leadership. The coins are commemorative in nature and are a limited edition of 500 silver coins initially. The factory states that some of the coins may be sold, but they won’t be used as currency.
Putin's face is on one side of the coin while the other shows a map of the Crimean Peninsula, Moscow daily Komsomolskaya Pravda reports. Factory director Vladimir Vasyuhin explains that by bringing the Crimean peninsula "back home", Putin had "demonstrated the qualities of a wise strategist and politician".
"Crimea's reunification with Russia was a historic event which we decided to embody in a souvenir collection of coins," Vasyukhin told the Itar-Tass news agency.
The peninsula that has hosted Russia's Black Sea fleet throughout its history was part of Russia for centuries before Ukrainian-born Soviet leader Nikita S. Khrushchev transferred it to the Ukrainian Soviet Socialist Republic in 1954.
It made little difference to which republic the peninsula belonged when all 15 were united within the Soviet Union. But after the Soviet breakup in 1991, Russia was forced to lease back its military bases from Ukraine and lost governing authority over the predominantly ethnic Russian population of 2 million.
The first issue of 25 of the commemorative coins, which are the size of a hockey puck and weigh 1 kilo each, will be given to Kremlin officials, Itar-Tass said.
Neither the foundry nor the Russian news sources that wrote about the special "Crimea 2014 Collection" said how much the coins will cost or when a broader quantity will be available to collectors and the general public.
Each coin has 120 millimeters in diameter and is 11 millimeters thick. The embossed images are 4 millimeters high. Each coin will have its own number and will be made of 925 grade silver or 92.5% purity.
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Russia: Putin Silver One Kilo Coins Launched
Silver coins with the face of Russian President Vladimir Putin are being minted in Russia. The coins weigh one kilogram (1kg - 2.2lb) and are being launched by the Art Grani foundry to mark Crimea’s reincorporation into Russia.
Thanks Surly, A most interesting coin. The Kilo silver coins have become popular of late as have the new 5 0z silver coins from the US Mint.
My preference is for the smaller 1 oz in case I have to use them for barter some day. The big coins are gorgeous ans most impressive, but containing 32 oz of silver makes them a poor choice for monetary transactions in my view.
(http://ts2.mm.bing.net/th?id=HN.608026047635655013&pid=1.7)
(http://galleryplus.ebayimg.com/ws/web/141110605365_1_6_1.jpg)
1 kilo silver coin of Australia
5 oz Silver coin of US ( One called the Mount Rushmore, part of a beautiful new series for collectors).
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In all these cases, you should do more research for your own particular situation. Circular 230 disclaimer: you should not rely on this general advice to avoid tax penalties.
Thanks for your expert advice JD. It is a pleasure to have aboard.
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Why, pray, are gold and silver good for you?
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Why, pray, are gold and silver good for you?
Hi Walter, too broad a question. Lot's of reasons ownership should be considered.
My favorites are to hedge against inflation or deflation. Inflation followed by deflation being my favorite scenario, but of course just an educated guess. There are many other reasons of course, depending on individuals, their differing status, outlook, a myriad of reasons.
Perhaps if you could be more specific, I could be as well.
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But of course I speak of health benefits, and not in paying our doctors fees.
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But of course I speak of health benefits, and not in paying our doctors fees.
Well, to start with, the reason why gold is so valued is because it does not corrode, and that is because it is chemically inert. Healthwise, that means that anything pure gold touching your body will not cause a reaction, most notably rings and teeth fillings. Conversely, if you do get a reaction from jewelry, you can be pretty sure it is not pure gold. Gold nanoparticles are also being investigated for delivering drugs.
Many health benefits are claimed for when you take silver and make it "colloidal", which means breaking it up into particles between 1 nanometer and 1 micrometer and suspending it in another substance, but they are of questionable value. One well-documented and long-practiced use for silver is to inactivate bacteria in water, making it safer to drink. This is why people started putting coins in fountains.
You can find more info at http://en.wikipedia.org/wiki/Medical_uses_of_silver and http://en.wikipedia.org/wiki/Colloidal_gold#Medical_research .
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Hey GO, could I get your expert opinion on this coin (http://www.ebay.com/itm/2014-Tokelau-1-Oz-Silver-Gilt-Proof-Pegasus-Creatures-of-Myth-Legend-SKU31309-/131168786128?pt=US_Bullion_Coins&hash=item1e8a44d6d0#ht_2642wt_1133)? Looks pretty cool to me.
(http://i.ebayimg.com/00/s/NTAwWDUwMA==/z/MEoAAOxy0x1TTulA/$_1.JPG)
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But of course I speak of health benefits, and not in paying our doctors fees.
Hi Walter, now I get it, look mostly to silver for health benefits.
I think JD covered the question quite well, the uses for silver in the medical profession are too numerous to mention, and every day I read something about it's powers of killing bacteria. Read an article a while back, sorry I cannot remember where, that the giant Japanese manufacturers are coating washing machines, dryers, air conditioners etc with it. Seems it prevents Legionnaires Disease, and is powerful enough to kill the super Bug that has arisen in India. Some places are considering legislation that would require dentists to use silver dental tools only. Hospitals are installing special air purifiers with silver to prevent bacteria outbreaks as well. Water purification seen as very important as well, now and in the future.
My interest in silver stems from it's monetary history, rather than it's medical, but I thank you for bringing this important aspect of silver to the forum.
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Hey GO, could I get your expert opinion on this coin (http://www.ebay.com/itm/2014-Tokelau-1-Oz-Silver-Gilt-Proof-Pegasus-Creatures-of-Myth-Legend-SKU31309-/131168786128?pt=US_Bullion_Coins&hash=item1e8a44d6d0#ht_2642wt_1133)? Looks pretty cool to me.
(http://i.ebayimg.com/00/s/NTAwWDUwMA==/z/MEoAAOxy0x1TTulA/$_1.JPG)
It is a beautiful coin but an art object not a silver bullion item. I would only recommend it JoeP if i wanted to own it for it's good looks.
Silver is trading around twenty bucks and the premium of 500 % to it bullion value is quite excessive in my view.
I would prefer five of these to one of those for approximately the same price. Beautiful coins as well but much more value for the money, five times as much silver.
(http://www.moderncoinmart.com/images/D/lot_of_5_web-01.jpg)
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Thanks for the lesson GO. Sounds like if you're going to make a purchase based on beauty alone, there isn't much point in buying more than a single coin.
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Hi GO--
Quote
Russia: Putin Silver One Kilo Coins Launched
Silver coins with the face of Russian President Vladimir Putin are being minted in Russia. The coins weigh one kilogram (1kg - 2.2lb) and are being launched by the Art Grani foundry to mark Crimea’s reincorporation into Russia.
Thanks Surly, A most interesting coin. The Kilo silver coins have become popular of late as have the new 5 0z silver coins from the US Mint.
My preference is for the smaller 1 oz in case I have to use them for barter some day. The big coins are gorgeous ans most impressive, but containing 32 oz of silver makes them a poor choice for monetary transactions in my view.
Understood. I guess I don't understand the purpose of creating a coin the size of a hockey puck? Clearly impractical for trade.
Just primate dispel behavior? Because we can? Or "mine is bigger than yours?"
I remain mystified.
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Understood. I guess I don't understand the purpose of creating a coin the size of a hockey puck? Clearly impractical for trade.
Just primate dispel behavior? Because we can? Or "mine is bigger than yours?"
I remain mystified.
Agreed Surly, 5 or 10oz coins I can understand, but 32 oz makes no sense to me either. That puts them in the sculpture or small statue department in my view, beautiful but impractical.
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Thanks for the lesson GO. Sounds like if you're going to make a purchase based on beauty alone, there isn't much point in buying more than a single coin.
Yes JoeP, One purchase only, treat it as a souvenir item in my opinion.
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Go, I'd like to sincerely thank you for your patience in answering my questions about PMs. I compare it to Jack Nicklaus (back in the eighties) answering a younger golfer that has asked questions about his tournament strategy. My situation is that my investment portfolio is currently underweight in PMs and I suppose I have just grown tired of the intangible options. Thanks again.
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I suppose I have just grown tired of the intangible options. Thanks again.
Any time JoeP.
GO'S me name, Gold me Game. :D :D
(http://4.bp.blogspot.com/-wfTB7LXkQjE/Tr7VR0C7F1I/AAAAAAAAV_4/KMU1xDfhVfw/s640/Goldfinger_018Pyxurz.jpg)
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Hi Walter, now I get it, look mostly to silver for health benefits.
I think JD covered the question quite well, the uses for silver in the medical profession are too numerous to mention, and every day I read something about it's powers of killing bacteria. Read an article a while back, sorry I cannot remember where, that the giant Japanese manufacturers are coating washing machines, dryers, air conditioners etc with it. Seems it prevents Legionnaires Disease, and is powerful enough to kill the super Bug that has arisen in India. Some places are considering legislation that would require dentists to use silver dental tools only. Hospitals are installing special air purifiers with silver to prevent bacteria outbreaks as well. Water purification seen as very important as well, now and in the future.
My interest in silver stems from it's monetary history, rather than it's medical, but I thank you for bringing this important aspect of silver to the forum.
I believe also the folklore is that gold fillings are not just not bad for you but are actually good for you, we are composed of minor quantities of many trace elements, not always found in our diet after all. This is what was meant by the bible saying Adam was formed from the dust of the earth.
Congratulations, you passed the first fitness to pontificate test, next comes codification: kindly complete the following.
Rosster gona roost
Hamster gon hamst
Silver
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Rosster gona roost
Hamster gon hamst
Silver gonna rise and shine ;)
(http://goldsilverworlds.com/wp-content/uploads/2012/07/silver_price_chart_200_years_1800-2012.gif)
Two Hundred Year Silver Chart
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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
–Ludwig von Mises
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Rosster gona roost
Hamster gon hamst
Silver gonna rise and shine ;)
(http://goldsilverworlds.com/wp-content/uploads/2012/07/silver_price_chart_200_years_1800-2012.gif)
Two Hundred Year Silver Chart
After conferring with my colleagues, this unorthodox answer shall stand, I think they know better than oppose WJ the 4th yuk yuk.
But the final trial, can you solve the conundrum; When is a silver bar worth more than a gold bar and how much can a grizzly bear?
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After conferring with my colleagues, this unorthodox answer shall stand, I think they know better than oppose WJ the 4th yuk yuk.
But the final trial, can you solve the conundrum; When is a silver bar worth more than a gold bar and how much can a grizzly bear?
When the silver bar is 100oz and the Gold bar is 1oz ;)
A Grizzly can bear four at most, usually two.
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www.youtube.com/watch?v=QrHpcigR_xg
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(http://www.publisher-jm.ch/img/cartoons/cartoon_20130918_en.jpg)
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The Meat Crisis Is Here: Price Of Shrimp Up 61% – 7 Million Pigs Dead – Beef At All-Time High
By Michael Snyder, on May 15th, 2014
(http://theeconomiccollapseblog.com/wp-content/uploads/2014/05/California-Drought-2014.png)
As the price of meat continues to skyrocket, will it soon be considered a "luxury item" for most American families? This week we learned that the price of meat in the United States rose at the fastest pace in more than 10 years last month. Leading the way is the price of shrimp. According to the U.S. Bureau of Labor Statistics, the price of shrimp has jumped an astounding 61 percent compared to a year ago. The price of pork is also moving upward aggressively thanks to a disease which has already killed about 10 percent of all of the pigs in the entire country. And the endless drought in the western half of the country has caused the size of the U.S. cattle herd to shrink to a 63 year low and has pushed the price of beef to an all-time high. This is really bad news if you like to eat meat. The truth is that the coming "meat crisis" is already here, and it looks like it is going to get a lot worse in the months ahead.
A devastating bacterial disease called "early mortality syndrome" is crippling the shrimping industry all over Asia right now. According to Bloomberg, this has pushed the price of shrimp up 61 percent over the past 12 months...
In March, shrimp prices jumped 61 percent from a year earlier, according to the U.S. Bureau of Labor Statistics. The climb is mainly due to a bacterial disease known as early mortality syndrome. While the ailment has no effect on humans, it’s wreaking havoc on young shrimp farmed in Southeast Asia, shrinking supplies.
This disease has an extremely high mortality rate. In fact, according to the article that I just quoted, it kills approximately nine out of every ten shrimp that it infects...
Cases of early mortality syndrome, which destroys the digestive systems of young shrimp, were first reported in China in 2009, said Donald Lightner, a professor of animal and comparative biomedical sciences at University of Arizona in Tucson.
The disease, which kills about 90 percent of the shrimp it infects, traveled from China to Vietnam to Malaysia and then to Thailand, he said. Cases also were reported in Mexico last year, Lightner said.
A different disease is driving up the price of pork in the United States. It is known as the porcine epidemic diarrhea virus, and in less than a year it has spread to 30 states and has killed approximately 7 million pigs.
The price of bacon is already up 13.1 percent over the past year, but this is just the beginning.
It is being projected that U.S. pork production could be down by as much as 10 percent this year, and Americans could end up paying up to 20 percent more for pork by the end of 2014.
The price of beef has also moved to unprecedented heights. Thanks to the crippling drought that never seems to end in the western half of the nation, the size of the U.S. cattle herd has been declining for seven years in a row, and it is now the smallest that is has been since 1951.
Over the past year, the price of ground chuck beef is up 5.9 percent. It would have been worse, but ranchers have been slaughtering lots of cattle in order to thin their herds in a desperate attempt to get through this drought. If this drought does not end soon, the price of beef is going to go much, much higher.
As prices for shrimp, pork and beef have risen, many consumers have been eating more chicken. But the price of chicken is rising rapidly as well.
In fact, the price of chicken breast is up 12.4 percent over the past 12 months.
Unfortunately, this could just be the very beginning of this meat crisis. As I wrote about recently, some scientists are warning that we could potentially be facing "a century-long megadrought".
And right now, there are no signs that the drought out west is letting up. Just check out the map posted below. It comes from the U.S. Drought Monitor, and it shows how the drought in California has significantly intensified since the beginning of the year...
And considering how much the rest of the nation relies on the agricultural production coming out of California, it is very alarming to see that the drought is getting even worse.
Right now, things are so bone dry in most of the state that it is easy for wildfires to get out of control. In fact, Governor Jerry Brown has just declared a state of emergency in San Diego County because of the vicious wildfires that are raging there...
Officials ordered another round of evacuations early Thursday north of San Diego as gusty winds and near 100-degree temperatures offer little relief from at least nine fires that have consumed a 14-square mile area of Southern California.
Gov. Jerry Brown declared a state of emergency for San Diego County, which frees up special resources and funding for the firefight.
The fires, coming earlier than normal in the wildfire season, are being fed by brush and trees left brittle by prolonged drought. They are also being whipped by a Santa Ana wind system that reverses the normal flow of wind from the Pacific Ocean and creates tinderbox fire conditions.
For the first time in its 14-year-history, the U.S. Drought Monitor, a federal website that tracks drought, designated the entire state of California as in a severe (or worse) drought.
If you do not live out west, you may have no idea how very serious this all really is.
For years, I have been warning about the potential for dust bowl conditions to return to the western half of the country.
Now it is actually starting to happen.
And we already have tens of millions of people in this country that are struggling to feed themselves. If you doubt this, please see my previous article entitled "Epidemic Of Hunger: New Report Says 49 Million Americans Are Dealing With Food Insecurity".
So what happens if drought, diseases and plagues continue to cause food production in this country to plummet?
Those that have studied these things tell us that there is a clear correlation between food prices and civil unrest. For example, the following is a short excerpt from a recent Scientific American article...
Since the beginning of 2014, riots have occurred in countries including Thailand and Venezuela. Although they’re different cultures on different continents, these mass protests movements may all have one commonality; increasing food prices may have contributed to their occurrence. The cost of food has been steadily increasing in both Thailand and Venezuela; last month demonstrators in Caracas took to the streets marching with empty pots to protest food shortages. According to Dr. Yaneer Bar-Yam and fellow researchers at the New England Complex Systems Institute (NECSI), events such as these may be anticipated by a mathematical model that examines rising food costs.
The events of 2014 aren’t without precedent; the price of food has provoked (and placated) throughout history, beginning in Imperial Rome when Augustus introduced grain subsidies. In recent years, the Middle East has been particularly affected by the cost of grain. Centuries after Egypt developed bread as we recognize it, the nation experienced a bread intifada – the country rioted for two days in January 1977 following Anwar Sadat’s decision to drastically decrease food subsidies. More recently, under the rule of Hosni Mubarak, the price of grain rose 30 percent between 2010 and 2011. Then, on January 25, 2011 a new revolution began in Egypt.
Could rapidly rising food prices cause civil unrest in the United States eventually?
It won't happen today, and it won't happen tomorrow, but some day it might.
Meanwhile, you might want to start carving out a significantly larger portion of the family budget for food for the foreseeable future.
theeconomiccollapseblog.com/archives/the-meat-crisis-is-here-price-of-shrimp-up-61-7-million-pigs-dead-beef-at-all-time-high
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Demand for Gold in China & India Collapses by 55%
(http://i0.wp.com/armstrongeconomics.com/wp-content/uploads/2013/08/India-Gold.jpg)
The latest tracking of gold being consumed in China and India has revealed a declining demand. Mainland China’s demand for gold fell 18% in the first quarter of the year as investors bought fewer bars and coins, offsetting record demand for jewelry, according to the latest trend report from the World Gold Council based in London.
The World Gold Council reported that Chinese purchases declined to 263.2 tonnes, despite a 10% rise in jewelry consumption to a new record levels. The decline in investment demand for bars and coins was a staggering drop of 55% to 60 tonnes.
Meanwhile, there remains the insistent forecasts of some who still argue that Gold, and nothing else, is going to $50,000 while retaining its full purchasing power, based on arguments on the Central banks balance sheets how they are accumulating Gold and SDR in their assets holdings. This of course is just insane. It does not even grasp that government is going in the opposite direction raising taxes, hunting money, and by no means would ever adopt a gold standard for then politicians would have to stop rolling out unfunded programs. This nonsense will continue to cause massive losses among the naive and once they lose their shirt, they do not return so easily.
http://armstrongeconomics.com/2014/05/21/demand-for-gold-in-china-india-collapses-by-55/
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Meanwhile, there remains the insistent forecasts of some who still argue that Gold, and nothing else, is going to $50,000 while retaining its full purchasing power, based on arguments on the Central banks balance sheets how they are accumulating Gold and SDR in their assets holdings.
Is this true, GO, or is this just a strawman argument? It's not the claim of $50,000, I've heard that before, but only in the context of the dollar becoming so devalued that a candy bar would be $40 and gasoline would be $150 a gallon.
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Meanwhile, there remains the insistent forecasts of some who still argue that Gold, and nothing else, is going to $50,000 while retaining its full purchasing power, based on arguments on the Central banks balance sheets how they are accumulating Gold and SDR in their assets holdings.
Is this true, GO, or is this just a strawman argument? It's not the claim of $50,000, I've heard that before, but only in the context of the dollar becoming so devalued that a candy bar would be $40 and gasoline would be $150 a gallon.
HI JD, Just strawman stuff. The sane and sober in the Gold bug group talk 3500 to 5000 max. I like to keep an open mind on such matters but 50,000 seems like a stretch, one has to wonder of the state of affairs under such a scenario, or 150 dollar a gallon gas as well. Not a world where many would be living in is my take on it.
Of course such madness did occur in many hyperinflations throughout history, so it is hard to rule out anything completely. My sincere hope is that we return to sound gold and silver based money before such insanity destroys our country and way of life.
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Down with the dollar, Petro-Ruble is on the rise! - Max Keiser
Published on May 21, 2014
A huge gas deal between Russia and China has finally been signed after a decade of haggling and negotiating. Max Keiser says this means a historic change.
www.youtube.com/watch?v=XFHT68-nAM4
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Barclays Fined For Manipulating Price Of Gold For A Decade; Sending "Bursts" Of Sell Orders
It was almost inevitable: a week after we wrote "From Rothschild To Koch Industries: Meet The People Who "Fix" The Price Of Gold [12]" and days after "Barclays' Head Of Gold Trading, And Gold "Fixer", Is Leaving The Bank [13]", earlier today the UK Financial Conduct Authority finally formalized what most in the "tin-foil" hat community had known for years, when it announced that it fined Barclays Ł26 million for manipulating "the setting of the price of gold in order to avoid paying out on a client order." Furthermore, the FCA confirmed that those inexplicable gold raids which come as if out of nowhere, and slam gold with a vicious force so strong sometime they halt the entire market, had a very specific source: Barclays, whose trader Daniel James Plunkett, born 1976 [14], "sent out a burst of orders aimed at moving the price of the yellow metal."
This took place for a decade. As the FT reports [15]:
The FCA said Barclays had failed to “adequately manage conflicts of interest between itself and its customers as well as systems and controls failings, in relation to the gold fixing” between 2004 and 2013.
Some further details on Plunkett's preferred means of manipulating the gold price.
The FCA said Mr Plunkett had manipulated the market by placing, withdrawing and re-placing a large sell order for between 40,000 oz and 60,000 oz of gold bars.
He did this in an attempt to pull off a “mini puke”, which the FCA took to mean a sharp fall in the price of gold. As a result, the bank was not obliged to make a $3.9m payment to the customer under an option contract.
Which is precisely what we have shown many times here for example in "Vicious Gold Slamdown Breaks Gold Market For 20 Seconds [16]", when a sell order so aggressive comes in it not only takes out the entire bid stack with an intent not for "best execution" but solely to reprice the market lower. Recall from September:
There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as "banging the close." It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night's slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!
To summarize: a humble block of 2000 gold futs (GC) taking out the bid stack, and slamming the price of gold, managed to halt the gold market: one of the largest "asset" markets in the world in terms of total notional, for 20 seconds.
And Mr. Plunkett in action:
(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/05/20130912.GC_.Z13_0.gif)
To be sure Barclays was truly sorry, and pinky swears that having been caught manipulating the gold market for ten years it will never do it again: ;D ;D
The news is also a fresh blow to Barclays’ chief executive Antony Jenkins as he tries to overhaul the culture of the London-based lender. Mr Jenkins took over 18 months ago after his predecessor, Bob Diamond, stepped down amid the Libor scandal.
Analysts said the fine reflected badly on the industry – as well as the hard-charging, revenue-focused business model that Barclays had previously been operating.
Mr Jenkins said in a statement on Friday: “We very much regret the situation that led to this settlement . . . These situations strengthen our resolve to improve.” The bank discovered the misconduct after the client complained. It then reported the incident to the regulator, for which it received a 30 per cent discount on its fine for co-operation.
Ian Gordon, analyst at Investec, said that in pure financial terms, the fine was “utterly inconsequential, both in a group context, and in relation to the quantum of other conduct costs”. He was referring specifically to the bank’s provisions for the mis-selling of payment protection insurance and interest rate hedging products
So a wrist slap, we get that. One wouldn't expect more - after all the banks run the show. And yet, one wonders: is this just a case of "Fab Tourre-ing" the scandal, and redirecting all attention to just one (preferably junior) person? To be sure, this one trader made handsome profits from gold manipulation...
Mr Plunkett boosted his trading book by $1.8m at the expense of a customer, who was later compensated. He has now been banned from “performing any function in relation to any regulated activity” and fined Ł95,600. At the time, Barclays was one of five banks that set the price of the precious metal twice a day. Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “A firm’s lack of controls and a trader’s disregard for a customer’s interests have allowed the financial services industry’s reputation to be sullied again.”
... but is this just an attempt by the FCA to pass this off as the proverbial "only cockroach", especially when as we reported earlier this week, none other than Barclays head of trading Marc Booker quietly left dodge [13]?
The speculation is further heightened when one considers that Plunkett had left Barclays nearly two years ago in October 2012! According to his FCA record [18]:
(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/05/Plunkett.jpg)
Prior to Barclays Plunkett worked as a lowly junior trader at Dresdner and RBC - and this is the a manipulation mastermind? Further, considering the FCA found failures at Barclays starting in 2004 and Plunkett only joined in 2006, can the FCA please disclose who else was the frontman for gold manipulation at Barclays in the 2004-2006 period?
This is what the FCA had to say on the matter of young master Plunkett:
Plunkett was a Director on the Precious Metals Desk at Barclays and was responsible for pricing products linked to the price of precious metals and managing Barclays' risk exposure to those products.
Plunkett was responsible for pricing and managing Barclays' risk on a digital exotic options contract (the Digital) that referenced the price of gold during the 3:00 p.m. Gold Fixing on 28 June 2012. If the price fixed above US$1,558.96 (the Barrier) during the 3:00 p.m. Gold Fixing on 28 June 2012, then Barclays would be required to make a payment to its customer. But if the price fixed below the Barrier, Barclays would not have to make that payment.
During the 3:00 p.m. Gold Fixing on 28 June 2012, Plunkett placed certain orders with the intent of increasing the likelihood that the price of gold would fix below the Barrier, which it eventually did. As a result, Barclays was not obligated to make the US$3.9m payment to its customer, and Plunkett’s book profited by US$1.75m (excluding hedging), which was in addition to an initial profit that his book had received upon the sale of the Digital.
Very shortly after the conclusion of the 3:00 p.m. Gold Fixing on 28 June 2012, the customer became aware that the price had fixed just below the Barrier and sought an explanation from Barclays as to what happened in the Gold Fixing. When Barclays relayed the customer’s concerns to Plunkett on 28 and 29 June 2012, he failed to disclose that he had placed orders and traded during the Gold Fixing. Further, Plunkett misled both Barclays and the FCA by providing an account of events that was untruthful.
Plunkett’s misconduct is particularly serious because he preferred his interests over those of a customer and his actions had the potential to have an adverse effect on the Gold Fixing and the UK and international financial markets.
It would appear that Plunkett is indeed nothing more than another instance of "Kerviel" or "Tourre" - an irrelevant mid-level trader thrown at the wolves of public consumption just so the attention can be redirected from the real manipulation elsewhere, and much higher up.
This is hardly surprising, as we noted three days ago when we wrote about the Barclays head gold trader termination:
"Bottom line: just like the Silver Fixing which last week announced its winddown, the days of the 117-year-old Gold fix are numbered. But to preserve continuity of riggedness and manipulation, perhaps they can just outsource their job duties to the biggest manipulators of all: Bank of England, the Fed and, of course, the BIS."
So yes: it is now a fact that gold is manipulated by various commercial banks, and that those gold "raids" one sees every morning usually around the time of the London fix aren't accidental at all but are entirely designed to reprice the market, but how deeper does the rabbit hole go?
[FCA Director Tracy] McDermott added: “Firms should be in no doubt that the spotlight will remain on wholesale conduct and we will hold them to account if they fail to meet our standards.”
Alas, this is a lie - by handing Plunkett to the public on a silver platter, it simply means that the far bigger and more important players in the gold manipulation market - stretching all the way to central bank and, of course, bank of central bank level [20], will simply be allowed to continue business "as usual."
So for those who want the real people behind the real manipulation before they all scatter into the dust, we urge you to reread "From Rothschild To Koch Industries: Meet The People Who "Fix" The Price Of Gold [12]." Because the gold manipulation rabbit hole goes far, far deeper than just one single, solitary trader...[/i[/glow]
www.zerohedge.com/news/2014-05-23/barclays-fined-manipulating-price-gold-decade-sending-bursts-sell-orders >:(
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(http://tinyurl.com/mj4e8fg)
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(http://www.cmgwealth.com/wp-content/uploads/2014/05/5.9-chart-2-877x1024.png)
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(http://www.kitco.com/ind/Mills/images/rick_20140606_1.jpg)
Commodity Food Price Index Monthly Price, indexmundi.com
The Food and Agriculture Organization (FAO) of the United Nations publishes the FAO Food Price Index, a measure of the monthly change in international prices of a basket of food commodities.
In 2002 FAO’s Food Price Index stood at 89.6, in May of 2014 it’s at 207.8. In 2002 meat was 89.9, dairy 80.9 and cereals 93.7. In May 2014 the three individual index’s stood at:
Meat 189.1
Dairy 238.9
Cereals 204.4
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The reality is food has been soaring in price for decades. Look at this eye popping chart from the St. Louis Fed.
(http://www.kitco.com/ind/Mills/images/rick_20140606_3.jpg)
The next time you are in the supermarket play this game - compare today’s prices for the following items to 1970’s prices:
Apples - .15lb
Ham - $2.29lb
Campbells Tomato Soup - .10
Crest Toothpaste - .77
Folgers Coffee - $1.90lb
Turkey - .43lb
Ground Round - .79lb
Potatoes - .98 for 10lb
Large Eggs - .59 dozen
Pork Chops - .59lb
Sliced bread - .16 loaf
Sugar - .39 5lb
Rump Roast - $1.69lb
Bacon - $1.29lb
Where is the inflation GO? Yes, that's what they say to me as I stare at them dumbfounded. :o :-\
Do you think we are going to have inflation GO, is that why you buy Gold? ::)
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Oklahoma Affirms Gold and Silver as Legal Tender
(http://www.thenewamerican.com/media/k2/items/cache/5aacc8d511e80aa87c66fe3234bda85b_XL.jpg)
On June 4, Oklahoma joined Utah, Texas, and Louisiana in affirming that gold and silver coins are (as they always have been under the Constitution) legal tender in the payment of debts in the state. On the surface this seems almost nonsensical: affirming a right that already exists in Article I, Section 10 of the U.S. Constitution. But it is much more than that.
Senate Bill 862, which Oklahoma Governor Mary Fallin signed into law this week, says,
Gold and silver coins issued by the United States government are legal tender in the State of Oklahoma.
(http://www.thenewamerican.com/media/k2/items/cache/5aacc8d511e80aa87c66fe3234bda85b_XL.jpg)
No person may compel another person to tender or accept gold or silver coins that are issued by the United States government, except as agreed upon by contract.
The new law also exempts all state-level taxes that Oklahoma residents would otherwise have to pay when exchanging gold or silver back into paper money:
For taxable years beginning on or after January 1, 2015, there shall be exempt from Oklahoma taxable income, or in the case of an individual, the Oklahoma adjusted gross income, any amount of net capital gains ... which result from the sale or exchange of gold or silver for another form of legal tender.
All this appears to do is affirm the language from the U.S. Constitution: "No state shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts."
But it does much more. Sean Fieler, Chairman of American Principles in Action, one of the bill’s primary supporters and promoters, came close to explaining why:
I commend the people of Oklahoma, particularly Senator Clarke Jolley and Governor Mary Fallin, for asserting their state’s constitutional right to declare gold and silver legal tender.
With the Federal Reserve actively suppressing interest rates and eroding the purchasing power of the U.S. dollar, it is welcome news to see one more state give its citizens free access to money that holds its value over time.
It’s about options. When citizens become comfortable with using money that retains its value over time, it will mark the beginning of the end of paper currency backed by nothing. This would be the inevitable end point of the process that began on August 15, 1971 when then-President Richard Nixon unilaterally ended the dollar’s convertibility into gold. For the past 43 years the world has been subjected to floating currencies pegged to nothing other than future promises to pay in more paper money. As Ron Paul noted in his book The Case for Gold, first published in 1982,
Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But [today’s] government bonds are not backed by tangible wealth [but] only by the government’s promise to pay out of future tax revenues....
In the absence of a gold standard, there is no way to protect savings from confiscation through inflation....
This is the shabby secret of the welfare states’ tirades against gold. [Unlimited] deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process.
Paul was referring to the "shabby secret" revealed by former Federal Reserve Chairman Alan Greenspan before he was assimilated by the monetary Borg of the Federal Reserve. In July of 1966, Greenspan wrote in Gold and Monetary Freedom about that secret:
In the absence of a gold standard there is no way to protect savings from confiscation through inflation. There is no safe store of value....
If everyone decided, for example, to convert all his [paper] bank deposits to silver [or gold] ... bank deposits would lose their purchasing power and government-created bank credit would be worthless....
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process....
If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
That confiscation has been accelerating exponentially since 1971, as seen by clicking here to view price levels in the United States from 1965 through 2013. Once the gold standard was abandoned by Nixon in 1971, the price level in the United States has risen by a factor of six! Put another way, citizens’ paper money has lost almost 80 percent of its value in just 43 years.
That Oklahoma has joined with other states in its affirmation of gold and silver (with still others considering similar measures) could mark the beginning of the end of the paper machine itself — the Federal Reserve. William H. Greene is an economics professor at New York University’s Stern School of Business. While a seemingly unlikely spokesman for the abolition of the Fed, his view of the coming inevitable end of the Fed is remarkable:
Over time, as residents of the state use both Federal Reserve Notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve Notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve Notes). As this happens, a cascade of events can begin to occur, including ... an influx of banking business from outside the state ... and an eventual outcry against the use of Federal Reserve Notes for any transactions. [Emphasis added.]
This is most encouraging to the Tenth Amendment Center, which noted, "Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people. Nullifying the Fed on a state-by-state level is what will get us there."
That’s what makes Oklahoma’s affirmation of a right so important. If every state would affirm their rights under Article I, Section 10, the end of the Fed would merely be a matter of time. Federal Reserve Notes would become irrelevant — a relic of a failed statist experiment in organized, sophisticated theft.
(http://www.jbs.org/images/action_projects/Restore-Constitutional-banner-wf.jpg)
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www.youtube.com/watch?v=s_I4vx7gHPQ
Anat Admati is the George G.C. Parker Professor of Finance and Economics at
the Graduate School of Business, Stanford University. She has written extensively
on information dissemination in financial markets, trading mechanisms, portfolio
management, financial contracting, and, most recently, on corporate governance and
banking. Since 2010, she has been active in the policy debate on financial regulation,
particularly capital regulation, writing research and policy papers and commentary. She is a coauthor of the book, “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It,” forthcoming in early 2013.
Professor Admati received her BS from the Hebrew University in Jerusalem and her
MA, MPhil and PhD from Yale University. She is the recipient of a Sloan Research
Fellowship, a Batterymarch Fellowship, and multiple research grants. She is a fellow of the Econometric Society, and has served as a board member of the American Finance Association and on multiple editorial boards. She also serves on the FDIC Systemic Resolution Advisory Committee.
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"Cluster Of Central Banks" Have Secretly Invested $29 Trillion In The Market
By Tyler Durden
Another conspiracy "theory" becomes conspiracy "fact" as The FT reports [9]"a cluster of central banking investors has become major players on world equity markets." The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF) [10], confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which "could potentially contribute to overheated asset prices." China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world's banks try to diversify themselves and "counters the monopoly power of the dollar." Which leaves us wondering where are the central bank 13Fs?
While most have assumed that this is likely, the recent exuberance in stocks has largely been laid at the foot of another irrational un-economic actor - the corporate buyback machine. However, as The FT reports [9], what we have speculated as fact for many years now (given the death cross of irrationality [11], plunging volumes, lack of engagement, and of course dwindling credibility of central planners)... is now fact...
Central banks around the world, including China’s, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions.
“A cluster of central banking investors has become major players on world equity markets,” says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif), a central bank research and advisory group. The trend “could potentially contribute to overheated asset prices”, it warns.
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The report, seen by the Financial Times, identifies $29.1tn in market investments, including gold, held by 400 public sector institutions in 162 countries.
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China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, as the report argues is “partly strategic” because it “counters the monopoly power of the dollar” and reflects Beijing’s global financial ambitions.
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In Europe, the Swiss and Danish central banks are among those investing in equities. The Swiss National Bank has an equity quota of about 15 per cent. Omfif quotes Thomas Jordan, SNB’s chairman, as saying: “We are now invested in large, mid- and small-cap stocks in developed markets worldwide.” The Danish central bank’s equity portfolio was worth about $500m at the end of last year.
Read more here [9]
So there it is... conspiracy fact - Central Banks around the world are buying stocks in increasing size.
To summarize, the global equity market is now one massive Ponzi scheme in which the dumb money are central banks themselves, the same banks who inject the liquidity to begin with.
That would explain this.
(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/06/20140611_death.jpg)
That said, good luck with "exiting" the unconventional monetary policy. You'll need it.
(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140615_smoke.jpg?1402877726)
www.zerohedge.com/news/2014-06-15/cluster-central-banks-have-secretly-invested-29-trillion-market :o ::) :o ::)
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(http://www.jsmineset.com/wp-content/uploads/2014/06/clip_image0025.jpg)
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For my final article for SmartPlanet, which is closing down as an independent publication, I take an in-depth look at the research to date on stranded carbon assets, and offer my own thoughts on the subject. I believe that the risks of stranded assets are far larger than has been contemplated thus far.
(Note: The title at SmartPlanet wasn’t mine. As my article details, estimates of the size of the “carbon bubble” vary from $1.1 trillion to $28 trillion, and I think even the latter estimate is too low.)
(http://sp1.cbsistatic.com/hub/i/r/2014/05/26/a4efb21b-89a6-4378-b94c-62861edfddbb/thumbnail/1170x658/d4fa82009e0ff5ae35ad07ee6b664a22/electoral-campaign-isaac-cordal-lg.jpg)
By Chris Nelder Posting in Technology | From Issue 20 June 16 & 23, 2014
Energy analyst Chris Nelder argues why the risks associated with investing in fossil fuels companies are considerably larger than researchers think.
The topic of stranded assets in the fossil fuel sector is all the rage in climate policy circles, as well it should be. Even so, the discussion has really only scratched the surface of the subject, which deserves much broader attention. But first, a brief history is in order.
The concept of stranded assets was born in July 2011 when the UK-based non-profit Carbon Tracker published its initial report, "Unburnable Carbon - Are the world's financial markets carrying a carbon bubble?" It offered some straightforward math for us to consider: To limit planetary warming to 2°C, the world cannot exceed 886 Gt (gigatons) of CO2 emissions from 2000 to 2050. Subtracting the emissions from 2000 through 2010 left a budget of 565 Gt. But the reserves of the world's private and public companies and governments amount to 2795 Gt of potential emissions. Therefore, only 20 percent of the remaining reserves can be burned through 2050 to achieve the desired result.
After allowing state entities (nationally owned fossil fuel producers) to maintain a normal share of global production, the 20 percent rule would also apply to the world's top 100 listed coal companies and the top 100 listed oil and gas companies; only 149 of the 745 Gt on their balance sheets could be consumed. That puts the combined market value of those 200 companies -- $7.42 trillion in February 2011 -- at risk of "impairment" should the world enact policies to stay under the safe warming limit.
(http://sp1.cbsistatic.com/hub/i/r/2014/05/26/1e6553bf-72e0-487f-aff2-8879c762cd7c/resize/620x485/bb2504a7bf0b9069335f552de29c61d7/unburnable-carbon-coal-oil-gas.jpg)
The investment community heard this warning loud and clear, and began considering its exposure. A high-profile coalition of investors, politicians and scientists warned the Bank of England "to investigate how Britain's exposure to polluting and environmentally damaging investments might pose a systemic risk to the UK financial system and prospects for long term economic growth."
Carbon Tracker followed up with an April 2013 report, "Unburnable carbon 2013: Wasted capital and stranded assets," calling on regulators, investors and governments to prevent a $6 trillion "carbon bubble" from developing over the next decade, and to reconsider the risk of a fossil fuel industry that spends $674 billion a year "to find and develop new potentially stranded assets." The report mapped the exposure to carbon reserves held on each of the world's major stock exchanges.
Even if carbon capture and sequestration (CCS) technology were deployed under a best-case scenario in which nearly 3,800 CCS projects were running by 2050, it would only begin to take a bite out of emissions after 2030, and so would have little effect, extending the carbon budget by only 125 Gt.
The findings reverberated around the world, and investors began taking action. The ethical investment group Ceres began facilitating conversations between investors and fossil fuel companies about how to manage $3 trillion in potentially at-risk assets. Large funds started ditching investments in companies with coal and tar sands assets. The $800 billion Norwegian Petroleum Fund halved its coal investments. Activists began pushing universities and other large investors to divest their fossil fuel interests, following the model that succeeded in helping end apartheid in South Africa. Reports on stranded asset risk were issued by the UK government's Environmental Audit Committee, the Australia Institute, and the EU Parliament Greens-European Free Alliance Group. Ratings agencies like Standard and Poor's and Moody's began worrying aloud that stranded asset risk could lead to credit downgrades. The International Energy Agency (IEA) admitted that a significant fraction of fossil fuel reserves are unburnable, while banks like HSBC and Citi got on board with the thesis.
The Stranded Assets Programme at the Smith School of Enterprise and the Environment, headed by Ben Caldecott, also began publishing research papers to quantify the stranded asset risk in various markets and under various scenarios. It also established a research network and launched a series of workshops.
A third report from Carbon Tracker, "Carbon Supply Cost Curves: Evaluating Financial Risk to Oil Capital Expenditures," was released May 8, along with a handy video summary by former Deutsche Bank Climate Change Advisors head of research Mark Fulton, an advisor to Carbon Tracker. That analysis put the stranded asset risk of oil into sharp focus, and encouraged investors to look specifically at the risks associated with $1.1 trillion of capital expenditures planned over the next decade to develop unconventional oil projects which need $95/bbl or more to break even, such as deepwater oil, tar sands, and oil from the Arctic. Through 2050, nearly $13 trillion are expected to be invested in this high-cost, high-risk group, which then would constitute one-third of potential global oil production. Private sector companies would be responsible for three-quarters of it. All told, an estimated $21 trillion of capital expenditures in high-cost production "poses substantial financial risks for investors in oil companies," wrote Fulton and Reid Capalino, a Senior Energy Analyst with Carbon Tracker, on May 21.
Source: "Carbon Supply Cost Curves: Evaluating Financial Risk to Oil Capital Expenditures"
The report also quantified how much exposure each of the world's major oil companies have to each type of oil. The Brazilian national oil company Petrobras, ExxonMobil, the Russian oil company Rosneft, and Shell topped that list for having the greatest exposure to high cost and high risk oil projects.
ExxonMobil finally bowed to shareholder pressure on March 31, releasing its first-ever report on the risk that climate change poses to its portfolio. On May 16, Shell issued a similar letter to investors. Predictably, both companies dismissed stranded asset risks because they expect oil demand to override climate concerns for decades into the future, with neither climate policy nor a transition to renewables posing a significant threat to their businesses.
Putting an even finer point on the financial risks associated with the fossil fuel industry, Mark Lewis, former Head of Energy Research at Deutsche Bank and an external research advisor to Carbon Tracker, has issued three research notes from his current post at Kepler Cheuvreux, a Paris-based financial services company. The first, on April 24 ("Stranded assets, fossilised revenues: $28trn of revenues at risk for fossil-fuel industry"), examined how much money the fossil fuel industry would stand to lose under the IEA's "450 Scenario." In that scenario, the world takes action to remain under 450 parts per million of CO2, which is thought to be the threshold that would limit the world to 2°C of warming. Lewis calculates that over the next two decades, $19.3 trillion of oil, $4 trillion of gas, and $4.9 trillion of coal revenues would be lost under that scenario, compared to the IEA's vision of business as usual.
On May 21, Lewis went on the attack against Shell and ExxonMobil for their blithe dismissals of stranded asset risk or a possible low-carbon future, calling their approaches "naďvely binary" for focusing only on global climate policy instead of possible regional or national policy, and for failing to recognize the risk that fossil fuels might simply become socially unacceptable and prompt further shareholder revolt. Slamming Shell for its complacency and refusal to engage with investors, Lewis highlighted the obvious hypocrisy in the company's admitting on the one hand that "our scenarios take as predetermined that climate change will rise up the public and political agenda" and that "regulatory priorities could well be relatively sudden," while waving away with the other any possibility that the world would not continue to burn oil and gas at more or less historical rates for decades to come.
For its part, ExxonMobil has been actively engaged in modeling climate policy risk to its business for many years, and has supported the notion of a carbon tax as a risk mitigation strategy, as ably detailed by Steve Coll in his book Private Empire - ExxonMobil and American Power. He cites a January 11, 2007 email from Ken Cohen, vice president of public and government affairs, saying it would be "prudent to develop and implement strategies that address the risks [of climate change], keeping in mind the central importance of energy to the economies of the world. This includes putting policies in place that start us on a path to reduce emissions..." The company currently faces a proposal sponsored by major shareholders that would require it to set emissions-reduction goals, and assumes that CO2 emissions will be priced at $80/tonne by 2040.
A broader notion of stranded asset risk
The primary scenario examined thus far that might strand fossil fuel assets is one in which oil prices fall as a result of climate regulations; they would have to fall quite substantially (below a roughly $80/bbl production cost). Secondarily, slower growth, particularly in China, and the transition to renewables would also curb demand over the longer term.
Only Lewis seems to have recognized another scenario; one in which continued high prices -- even continually rising prices -- might also strand fossil fuel assets. I believe investors should give this scenario equal weight.
There are two factors at work under this scenario. The first, as Lewis explained in his April 24 note, is that "if oil prices rise faster in the future than currently assumed by the IEA in its base-case projections, we think this could lead to an acceleration of the policy incentives for, and deployment of, renewable-energy technologies and energy-efficiency measures." I have already detailed why I believe the clean energy transition is unstoppable, so I agree with this risk, although I think it applies far more to coal than to oil, and might not apply that much to gas, depending on how grid power evolves.
Those who are familiar with my model of oil prices can already guess the second: that prices could rise beyond the pain threshold of consumers, and oil demand could fall off through the mechanism of simple demand destruction and economic contraction -- precisely as it did (to some indeterminate extent) in the aftermath of the 2008 crash.
Although it's an understandable and uncontroversial baseline for analysis, it's also of dubious value to use the IEA's scenarios as reference, because the agency has a long track record of poor forecasting and overly optimistic scenario construction. Without delving into that deep subject, I'll just mention that expecting CCS to become a significant factor in the carbon equation is likely straight out of the question, and the future of nuclear power is dour.
Even if the IEA's 450 Scenario could be achieved (and I don't think it can, for a variety of reasons I won't elaborate on today) I would still project higher, not lower, prices in real terms by 2035, driven by the increasing cost of oil production. IEA's oil price forecasts are far too low. Nor would I assume, as Lewis did, that unconventional oil continues to "sells at a discount in the market to conventional crude for a number of reasons, for example because it is landlocked, or because it does not meet refinery specifications." The global market will sort out those inefficiencies in time. And indeed, it is already the case that some unconventional projects like Suncor's older operations in the Canadian tar sands could remain profitable at prices well below that of some newer conventional projects in geopolitically challenged locations.
I agree conceptually that high-cost projects are the most at risk, and that unconventional projects are generally the highest cost, but it wouldn't be quite correct for investors to assume that the entire unconventional group would be the first to be shut-in under a 450 scenario. However, I do concur that since unconventional projects are dominated by independent, non-state oil companies, the risk is weighted toward them and to investors in publicly listed companies.
Anatomy of an unconventional oil project
Investors must examine closely the full cost of developing new projects -- a task made increasingly difficult by oil and gas companies' increasingly opaque financial statements -- and understand exactly which projects are likely to be at risk.
For example, I conducted a short examination of exactly how ExxonMobil might fare with its investments in the Canadian tar sands if the Keystone XL (KXL) pipeline failed to materialize. Its two main projects in the tar sands appear to be the Kearl and Cold Lake projects, being developed through its majority stake in Imperial Oil Ltd.
What I found is that all sorts of delays and cost increases have already reduced the expectations for Kearl quite substantially.
ExxonMobil Canada submitted the initial public disclosure for the project in 1997. It was approved in 2008 and development began. First production came in April 2013. ExxonMobil's page on Kearl says that initial production was anticipated by the end of 2012 at an initial production level of 160,000 barrels per day (b/d), and that the project would produce almost 500,000 b/d when fully developed. The actual initial production rate doesn't appear to have been reported, but Imperial's page on Kearl says that production should reach 110,000 b/d later in 2013, and that full capacity of 345,000 b/d would be reached by about 2020. But on April 2, Financial Post reported that "Imperial Oil Ltd. is struggling to work out the bugs at its $12.9-billion Kearl oil sands mine nearly one year after production began as the company seeks to bring the project to full capacity...Production at the massive bitumen mine averaged 70,000 barrels a day in the first quarter this year, the company said. That's up from an average 52,000 barrels per day in the fourth quarter last year, but still below the mine's 110,000-barrel capacity."
So from 2008 to 2014, after spending nearly $13 billion and running more than a year over schedule, the Kearl operation achieved a first-quarter production level of 52,000 b/d when 160,000 b/d was expected, is only achieving 70,000 b/d now, and its ultimate capacity has been downgraded from 500,000 b/d to 345,000 b/d.
Importantly, the Kearl project's troubles have nothing to do with the KXL pipeline, nor with carbon policy. They're simply a function of the difficulty of production and rising costs. And they raise some important questions: How are ExxonMobil/Imperial booking the reserves related to Kearl? Have the claimed reserves changed at all since the 2012 projection? What production output level will the project actually achieve, and when? Will it turn out that cost expansion and delays are actually "stranding" some of those assets in the complete absence of any effective carbon policy?
Hard questions
A comprehensive assessment of stranded asset risk would be based on such real-world experiences as the Kearl project, and might point more to a "revenue risk" than "stranded assets" risk, but it could be at least as potent a warning to investors, and a powerful counter-argument to the sunny outlooks on production offered by the oil majors. Current metrics on free cash flow, capital intensity, the crude to natural gas liquid ratios, return on investment, and so on could be even more damning than the unknown risk that as-yet-unformed climate policy might pose at some unknown point in the future.
The IEA offered a simultaneously stark and oblique warning on this point in its World Energy Investment Outlook, released June 3. The world will need to invest $53 trillion in energy supply and efficiency to meet its energy needs and get on a 2°C emissions path through 2035, the agency said. More than half of the $40 trillion investment in energy supply will be needed just to keep production flat -- "to compensate for declining oil and gas fields and to replace power plants and other equipment that reach the end of their productive life" -- including a doubling of investment in upstream oil by the Middle East.
Yet the recent trend in the fossil fuel sector has been one of declining, not increasing, investment, underscored most recently by Total's decision to put its $11 billion Joslyn tar sands project on ice due to cost inflation.
And, as Lewis pointed out in his June 6 note ("The $2 Trillion Question: New IEA Capex Numbers Underline Oil-Price Upside"), IEA has increased its estimate for global upstream oil capital expenditures in this report by 20% over its 2013 World Energy Outlook published just seven months ago but did not raise its oil price forecast. Not only is this "counter-intuitive," as Lewis observes, I would plainly call it a false signal. Oil prices will need to be considerably higher over the next 20 years -- a time in which I expect global oil supply to be declining -- to realize the IEA's investment scenario, even if over 90 percent of the spending on upstream oil were strictly to stem declines, as the agency expects.
More likely is that the world will not invest sufficiently in future oil supply -- a risk IEA acknowledges -- driving prices up far more quickly than the world can adjust to and kicking off a long period of price volatility as oil producers and consumers struggle to maintain a grip on the "narrow ledge." That volatility alone would strand assets and starve upstream projects of investment.
Further useful information might be gleaned from a close examination of the models oil and gas companies use to forecast production, and of the models put forward by agencies like the U.S. Energy Information Administration (EIA) to estimate reserves.
For example, on May 20, EIA slashed its estimate for the recoverable oil in California's Monterey Shale formation by over 95 percent. I believe it did so because David Hughes' careful examination of the formation last year, which I wrote up in December, shamed them into it. Investors in U.S. unconventional oil should note that Hughes' model indicates a tight oil peak around 2016, five years earlier than EIA projects (see "Oil majors are whistling past the graveyard").
Stranded assets on the grid
While the vast majority of the work on stranded assets so far has revolved around oil and gas, in my view the most immediate stranded asset risk is in grid power -- a point underlined by President Obama's new climate plan, which takes clear aim at coal power. Since existing coal and nuclear power plants are being rapidly retired, new nuclear plants in the United States and Europe are expected to generate power at more than twice the cost of new wind and solar plants, and the developing world is increasingly choosing renewables (in India, partly due to a lack of coal), the lack of attention paid to grid power in the stranded assets dialogue seems a curious oversight. Perhaps it owes to the fact that nearly all of the stranded asset research thus far has emanated from the UK, where power generators face a somewhat different set of challenges.
But I suspect that the first trillion dollars' worth of stranded assets will be in the grid power sector, not in oil and gas languishing underground. A quick look at the stock charts of major coal companies tells that story nicely. Note, too, that Barclays just downgraded high-grade corporate bonds across the entire U.S. utility sector, citing the emerging threat of solar power and storage.
The latest Carbon Tracker report, "The Great Coal Cap - China's energy policies and the financial implications for thermal coal" (PDF summary), released June 5, finally takes aim at stranded asset risk in the grid power sector. Up to 127 gigawatts (GW) of existing coal-fired capacity and 310 GW of expected future capacity, equivalent to 40 percent of the total installed coal-fired capacity by the end of this decade, could be stranded in the Asian nation as demand falls due to moderating economic growth, increased competition from cleaner fuels, and carbon policy. But these are not merely future risks; they're in the present. A report from Bloomberg released the previous day said that the economy in Shanxi province, which is "all about coal," is tanking as anti-pollution policies begin to curb coal use.
Understanding grid power stranded asset risk is a difficult undertaking. In the United States alone, it would requiring painstaking research in dozens of different power markets with hundreds (or thousands, depending on the granularity of your research) of generators and a complex web of regulations. But it's an effort worth making if you're running a major pension fund.
In my view, it's far more likely that carbon assets will be stranded by the falling costs and increasing deployment of renewables, somewhat irrespective of carbon policy, and that it will proceed from coal, to gas, and finally oil. And the main risk to oil assets will be consumer price tolerance, not climate policy. I also think natural gas use in the OECD will be greater than is generally assumed, while its use in non-OECD countries will be considerably lower than expected as parts of the world that still lack reliable electricity leapfrog fossil fuels and go straight to renewables.
So while the full stranded assets picture is complex, the take-home message is simple enough: Fossil fuels are on their way out, and renewables are coming on strong. This is irreversible. The entire universe of stranded fossil fuel assets is much, much larger than the research thus far has contemplated.
The only real question is who's going to wind up holding the bag.
Photo: "Electoral Campaign," sculpture by Isaac Cordal. Used by permission of the artist.
Related:https://cms.smartplanet.com/content/article/6ab413cb-63f0-4c58-a7f3-daf2b23d4bf5
Cleantech investments are sexy again, here's why
Why the U.S. should not export oil
Oil and gas price forecast for 2014
(http://sp1.cbsistatic.com/hub/i/r/2013/11/13/5ee5b6da-ef78-4eac-a51f-2fb8c7d34615/thumbnail/370x208/122ff9542730eeefe28fc9f677e47339/cnelder-headshot.JPG)
Chris Nelder is an energy analyst and consultant who has written about energy and investing for more than a decade. He is the author of two books on energy and investing, Profit from the Peak and Investing in Renewable Energy, and has appeared on BBC TV, Fox Business, CNN national radio, Australian Broadcasting Corp., CBS radio and France 24. He is based in California. Follow him on Twitter. Disclosure
www.smartplanet.com/blog/the-take/why-the-potential-for-a-trillion-dollar-carbon-bubble-grows-bigger-every-day/
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Darryl Schoon is a fellow Gold Bug and the gentleman that introduced me to Dr Fekete and his work. They are close friends.
Let me caution my readers that Darrel did some prison time for dealing drugs out of his bar when he was a younger man. I mention it since some use the fact to discredit him. Once you meet Mr Schoon you can decide for yourself if he is a man of character and merit, my decision is obvious.
My readers know I would no present the work of this out of the box, most interesting thinker, unless I felt it was of much merit. Interesting comments here for Illuminati watchers as well.
Dear members, Darryl Robert Schoon
www.youtube.com/watch?v=HxRC9GaVOyM
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Nothing here an optimist would be interested in. :'( :'(
Egon von Greyerz-Dollar Going to Collapse, Debts Can Never Be Repaid
Published on Jul 15, 2014
http://usawatchdog.com/2008-meltdown-... Egon von Greyerz, who manages the largest gold vault in Europe, says, "We are specialists in wealth preservation. Our task is to analyze the risk and take all the measures possible to protect clients from the risk that we see, and the risks are bigger than ever in the world. . . . We are going to see a major financial disaster and possibly collapse. The world has been living above its means for a hundred years. It has gradually gotten worse as central banks have printed more and more money. . . . Just in the United States, in the last eight years, the debt has increased from $8 trillion to $17 trillion. That is an increase of $9 trillion in just eight years. That is more money than was created in the creation of the United States from over 200 years ago to when Bernanke took over. That is happening everywhere in the world. . . . The dollar is going to collapse, and all the other currencies will follow. It will then be revealed that all these debts can never be repaid.
www.youtube.com/watch?v=ZM_hYgvhHRQ
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www.youtube.com/watch?v=D3MLn2UYw0A&feature=youtu.be
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Moneynews
CNBC: Many Companies Raising Prices, Despite Fed's Lack of Concern
Tuesday, August 5, 2014 09:53 AM
By: Dan Weil
While the Federal Reserve has stated that it considers inflation to be well under control, some companies are raising prices by substantial amounts.
Companies across all industries are increasing their prices, according to CNBC.
Food companies have raised their prices due to climbing commodities prices. For example, Hershey is raising prices by an average of 8 percent for a majority of its products in the United States. "Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year," a Hershey executive said in a statement.
Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now
Hershey competitor Mars is lifting it North American prices by 7 percent, the first increase since 2011.
And Kraft announced last week that it raised prices on cheese between 5 and 12 percent and many Oscar Meyer products by an average of 10 percent. "Beef, turkey and pork prices for our cold cuts have continued to increase and are at record highs as we speak," the company explained.
Fast-food restaurants across the country, including Chipotle and In-N-Out, are hiking prices because of higher meat costs, CNBC stated.
In addition, Starbucks, J.M. Smucker and Kraft are boosting their coffee prices, as they have to pay more for the beans.
Ford is increasing prices for its trucks, and Nike is raising prices for apparel and shoes.
"Inflation is here, regardless of whether it shows up in the Federal Reserve dashboard," CNBC noted. "Consumers are feeling it and will feel it further, whether it's driven by an increase in consumer demand, or simply as a way for companies to keep churning out impressive profits."
Consumer prices rose 2.1 percent in the 12 months through June. The personal consumption expenditures index, the Fed's favored inflation measure, climbed 1.6 percent in the 12 months through June.
The Fed's inflation target is 2 percent.
To be sure, some private economists share the Fed's comfort with recent inflation data. "The economy and the recovery remain on track, neither too hot nor too cold," Laura Rosner, U.S. economist with BNP Paribas, told Bloomberg, commenting on the latest consumer price figures.
The Fed "can continue with accommodative policy," she said.
www.moneynews.com/Personal-Finance/Companies-prices-Fed-inflation/2014/08/05/id/586912/
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Don't Believe Government About Price Inflation
It is an old adage that there are lies, damn lies and then there are statistics. Nowhere is this truer than in the government's monthly Consumer Price Index (CPI) that tracks the prices for a selected "basket" of goods to determine changes in people's cost of living and, therefore, the degree of price inflation in the American economy.
On August 19th, the Bureau of Labor Statistics (BLS) released its Consumer Price Index report for the month of July 2014. The BLS said that prices in general for all urban consumers only rose one-tenth of one percent for the month. And overall, for the last twelve months the CPI has only gone up by 2 percent.
A basket of goods that had cost, say, $100 to buy in June 2014 only cost you $100.10 in July of this year. And for the last twelve months as a whole, what cost you $100 to buy in August 2013, only increased in expense to $102 in July 2014.
By this measure, price inflation seems rather tame. Janet Yellen and most of the other monetary central planners at the Federal Reserve seem to have concluded, therefore, that they have plenty of breathing space to continue their aggressive monetary expansion when looking at the CPI and related price indices as part of the guide in deciding upon their money and interest rate manipulation policies.
Overall vs. "Core" Price Inflation
The government's CPI statisticians distinguish between two numbers: the change in the overall CPI, which rose 2 percent for the last year, and "core" inflation, which is the rate of change in the CPI minus food and energy prices. Leaving these out, "core" price inflation went up even less over the last twelve months, by only 1.9 percent.
The government statisticians make this distinction because they argue that food and energy prices are more "volatile" than many others. Fluctuating more frequently and to a greater degree than most other commonly purchased goods and services, they can create a distorted view, it is said, about the magnitude of price inflation during any period of time.
The problem is that food and energy costs may seem like irritating extraneous "noise" to the government number crunchers. But to most of the rest of us what we have to pay to heat our homes and put gas in our cars, as well as buying groceries to feed our families, is far from being a bothersome distraction from the statistical problem of calculating price inflation's impact on our everyday lives.
Constructing the Consumer Price Index
How do the government statisticians construct the CPI? Month-by-month, the BLS tracks the purchases of 6,100 households across the country, which are taken to be "representative" of the approximately 320 million people living in the United States. The statisticians then construct a representative "basket" of goods reflecting the relative amounts of various consumer items these 6,100 households regularly purchase based on a survey of their buying patterns. They record changes in the prices of these goods in 24,000 retail outlets out of the estimated 3.6 million retail establishments across the whole country.
And this is, then, taken to be a fair and reasonable estimate – to the decimal point! – about the cost of living and the rate of price inflation for all the people of the United States.
Due to the costs of doing detailed consumer surveys and the desire to have an unchanging benchmark for comparison, this consumer basket of goods is only significantly revised about every ten years or so.
This means that over the intervening time it is assumed that consumers continue to buy the same goods and in the same relative amounts, even though in the real world new goods come on the market, other older goods are no longer sold, the quality of many goods are improved over the years and changes in relative prices often result in people modifying their buying patterns.
The CPI vs. the Diversity of Real People's Choices
The fact is there is no "average" American family. The individuals in each household (moms and dads, sons and daughters, and sometimes grandparents or aunts and uncles) all have their own unique tastes and preferences. This means that your household basket of goods is different in various ways from mine, and our respective baskets are different from everyone else's.
Some of us are avid book readers, and others just relax in front of the television. There are those who spend money on regularly going to live sports events, others go out every weekend to the movies and dinner, while some save their money for an exotic vacation.
A sizable minority of Americans still smoke, while others are devoted to health foods and herbal remedies. Some of us are lucky to be "fit-as-a-fiddle," while others unfortunately may have chronic illnesses. There are about 320 million people in the United States, and that's how diverse are our tastes, circumstances and buying patterns.
Looking Inside the Consumer Price Index
This means that when there is price inflation those rising prices impact each of us in different ways. Let's look at a somewhat detailed breakdown of some of the different price categories hidden beneath the CPI aggregate of prices as a whole.
In the twelve-month period ending in July 2014, food prices in general rose 2.5 percent, a seemingly modest amount. However, meat, poultry, fish and egg prices increased, together, by 7.6 percent. But when we break this aggregate down, we find that beef and veal prices increased by 10.4 percent and frankfurters went up 6.9 percent, but lamb rose by only by 1.7 percent. Chicken prices increased more moderately at 2.7 percent, but fresh fish and seafood were 8.8 percent higher than a year earlier.
Milk was up 5.4 percent in price, but ice cream products decreased in price by minus 1.4 percent over the period. Fruits increased by 5.7 percent at the same time that fresh vegetable prices declined by minus 0.5 percent.
Under the general energy commodity heading, prices went up by 1.2 percent, but propane increased by 7.3 percent in price over the twelve-month period, while electricity prices, on the other hand, increased by 4 percent.
So why does the overall average of the Consumer Price Index seem so moderate at a measured 2 percent, given the higher prices of these individual categories of goods? Because furniture and bedding prices decreased by minus 3.1 percent, and major appliances declined in price over the period by minus 6.2. New televisions went down a significant minus 15 percent.
In addition, men's apparel went down a minus 0.2 percent over the twelve months, but women's outerwear rose a dramatic 12.3 percent in the same time frame. And boys' and girls' footwear went up, on average, by 8.2 percent.
Medical care services, in general, rose by 2.5 percent, but inpatient and outpatient hospital services increased, respectively, by 6.8 percent and 5.6 percent.
Smoke and Mirrors of "Core" Inflation
These subcategories of individual price changes highlight the smoke and mirrors of the government statisticians' distinction between overall and "core" inflation. We all occasionally enter the market and purchase a new stove or a new couch or a new bedroom set. And if the prices for these goods happen to be going down we may sense that our dollar is going further than in the past as we make these particular purchases.
But buying goods like these is an infrequent event for virtually all of us. On the other hand, every one of us, each and every day, week or month are in the marketplace buying food for our family, filling our car with gas and paying the heating and electricity bill. The prices of these goods and other regularly purchased commodities and services, in the types and combinations that we as individuals and separate households choose to buy, are what we personally experience as a change in the cost of living and a rate of price inflation (or price deflation).
The Consumer Price Index is an artificial statistical creation from an arithmetic adding, summing and averaging of thousands of individual prices, a statistical composite that only exists in the statisticians' calculations.
Individual Prices Influence Choices, Not the CPI
It is the individual goods in the subcategories of goods that we the buying public actually confront and pay when we shop as individuals in the market place. It is these individual prices for the tens of thousands of actual goods and services we find and decide between when we enter the retail places of business in our daily lives. And these monetary expenses determine for each of us, as individuals and particular households, the discovered change in the cost of living and the degree of price inflation we each experience.
The vegetarian male who is single without children, and never buys any types of meat, has a very different type of consumer basket of goods than the married male-female couple who have meat on the table every night and shop regularly for clothes and shoes for themselves and their growing kids.
The individual or couple who have moved into a new home for which they have had to purchase a lot of new furniture and appliances will feel that their income has gone pretty far this past twelve months compared to the person who lives in a furnished apartment and has no need to buy a new chair or a dishwasher but eats beef or veal three times a week.
If the government were to impose a significant increase in the price of gasoline in the name of "saving the planet" from carbon emissions, it will impact people very differently depending upon whether an individual is a traveling salesman or a truck driver who has to log hundreds or thousands of miles a year, compared to a New Yorker who takes the subway to work each day or walks to his place of business.
It is the diversity of our individual consumer preferences, choices and decisions about which goods and services to buy now and over time under constantly changing market conditions that determines how each of us are influenced by changes in prices, and therefore how and by what degree price inflation or price deflation may affect each of us.
Monetary Expansion Distorts Prices in Different Ways
An additional misunderstanding created by the obsessive focus on the Consumer Price Index is the deceptive impression that increases in the money supply due to central bank monetary expansion tend to bring about a uniform and near simultaneous rise in prices throughout the economy, encapsulated in that single monthly CPI number.
In fact, prices do not all tend to rise at the same time and by the same degree during a period of monetary expansion. Governments and their central banks do not randomly drop newly created money from helicopters, more or less proportionally increasing the amount of spending power in every citizen's pockets at the same time.
Newly created money is "injected" into the economy at some one or few particular points reflecting into whose hands that new money goes first. In the past, governments might simply print up more banknotes to cover their wartime expenditures, and use the money to buy armaments, purchase other military supplies, and pay the salaries of their soldiers.
The new money would pass into the hands of those selling those armaments or military supplies or offering their services as warriors. These people would spend the new money on the particular goods and services they found desirable or profitable to buy, raising the demands and prices for a second group of prices in the economy. The money would now pass to another group of hands, people who in turn would now spend it on the market goods they wanted to demand.
Step-by-step, first some demands and some prices, and then other demands and prices, and then still other demands and prices would be pushed up in a particular time-sequence reflecting who got the money next and spent in on specific goods, until finally more or less all prices of goods in the economy would be impacted and increased, but in a very uneven way over time.
But all of these real and influencing changes on the patterns of market demands and relative prices during the inflationary process are hidden from clear and obvious view when the government focuses the attention of the citizenry and its own policy-makers on the superficial and simplistic Consumer Price Index.
Money Creation and the Boom-Bust Cycle
Today, of course, virtually all governments and central banks inject new money into the economy through the banking system, making more loanable funds available to financial institutions to increase their lending ability to interested borrowers.
The new money first passes into the economy in the form of investment and other loans, with the affect of distorting the demands and prices for resources and labor used in capital projects that might not have been undertaken if not for the false investment signals the monetary expansion generates in the banking and financial sectors of the economy. This process sets in motion the process that eventually leads to the bust that follows the inflationary bubbles.
Thus, the real distortions and imbalances that are the truly destabilizing effects from central banking inflationary monetary policies are hidden from the public's view and understanding by heralding every month the conceptually shallow and mostly superficial Consumer Price Index.
Published by The Daily Bell - www.thedailybell.com - All Rights Reserved. (http://www.thedailybell.com/images/library/Dr.%20Richard%20Ebeling.jpg)
Richard Ebeling
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https://www.youtube.com/watch?v=PrSoJHfGIug
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Kyle Bass Explains Why He Had The U of TX Take Physical Delivery Of $1 Billion in Gold
https://www.youtube.com/watch?v=lgNVNTvlpFY
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https://www.youtube.com/watch?v=87sscLJIJjQ#t=1932
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A couple of weeks ago, a long time subscriber correctly pointed out that I seemed to be speculating more than usual in my conclusion that JPMorgan was the big buyer of Silver Eagles and had accumulated as many as 300 million oz of silver, including Eagles and bullion. The subscriber noted that I usually relied on hard core facts that could be documented and not on speculation. As it turns out, I believe there are sufficient number of hard facts behind my speculation, but I had failed to point them out. So let me present the facts, as I see them, that point to JPMorgan having amassed the largest physical silver position in history.
First, let me set out what I am suggesting concerning JPMorgan and silver. I’m not suggesting I knew all the facts as they were developing, but I came to see them only afterward with the benefit of hindsight. The facts show that JPMorgan took over Bear Stearns and its concentrated short position in COMEX silver (and gold) in March 2008 when silver was close to $21, the highest level to that point in 28 years. The price of silver fell from that level in an irregular pattern until late 2010, while JPMorgan both decreased (bought back) much of its concentrated short position on sharp price declines and increased its short COMEX silver short position on rallies, as I publicly chronicled all along. At times, JPMorgan’s COMEX net short position exceeded 40,000 contracts or the equivalent of 200 million oz. Such a large concentrated position necessarily controlled the price of silver and was, in fact, manipulative on its face.
Because it controlled the price of silver, JPMorgan profited handsomely on its COMEX manipulation thru 2010 and not even an ongoing five year CFTC investigation interfered with JPM’s control on silver prices. However, in late 2010, investor demand for physical silver caused silver prices to break above the highs of early 2008 and JPMorgan could no longer control the price of silver through excessive paper short selling on the COMEX. Physical silver conditions tightened so much by the end of April 2011 that the price reached nearly $50 and, quite literally, JPMorgan (along with other collusive CME traders) were staring into a financial catastrophe, the same as undid Bear Stearns three years earlier.
But no bailout of JPMorgan was possible in April 2011 and instead, the bank along with interested parties at the CME Group arranged for a disorderly takedown of silver prices, almost assuredly with the approval of US regulatory officials. The disorderly takedown proved successful and the big shorts, particularly JPMorgan, escaped what would have been an epic financial catastrophe had they been forced to cover their massive silver short positions.
It is said that one learns more from failure, especially near disaster, than from success. It is my belief that at the time of JPMorgan’s near catastrophe in being short silver into April 2011 that the bank realized just how limited and critical the supply of silver in the world was and decided to use their near death experience to their advantage. It was at that time that the bank decided to buy as much physical silver as it could in order to profit even more to the upside than it did previously to the downside. Again, it was not possible for me to know this at that time and it has only come to me with the fullness of time and the developing factual evidence. What evidence?
For starters, there is the matter of extraordinary sales of Silver Eagles from the US Mint. Since April 2011, the US Mint has produced and sold 140 million Silver Eagles, more than in any similar period of time, in a price environment that can only be termed putrid and in which sales of Gold Eagles were notably lower. I would estimate that JPMorgan purchased close to half of the 140 million Silver Eagles sold since April 2011. According to very reliable sources on the retail front, general investment demand has been lower over this time, as retail buyers do not buy strongly into a declining price environment in any investment asset. Yet we know for a fact that there has been extraordinary buying of Silver Eagles, even while Gold Eagle sales cooled off notably, so someone had to be buying Silver Eagles.
If there is one thing that JPMorgan is expert at, given that it commands an army of lobbyists and has more government officials in its back pocket than any other entity on the face of the earth, it is the exploitation of US law and regulations. JPMorgan knew that US law dictated that the Mint must produce enough Silver (and Gold) Eagles to meet demand. That law was never intended to allow a single big buyer to demand the extraordinary amount of Silver Eagles that JPMorgan desired to buy, but that’s the purpose behind the exploitation of the law.
The Mint sells Silver Eagles at the prevailing price of silver on the day of the sale. In essence, the COMEX price of silver is the price of silver. By controlling the price of COMEX silver, JPMorgan sets the price at which it will buy Silver Eagles. It’s the perfect crime – JPMorgan sets the price of COMEX silver and then demands as many coins as the Mint and its suppliers can produce, even if that means producing the coins on a 24/7 basis. Hey, that’s the law. And remember when JPMorgan increased its COMEX short position in the summer, assuring that prices were about to drop and what occurred as a result? Sales of Silver Eagles nosedived temporarily and only resumed after prices were brought lower by this crooked bank. This is old stuff – what about some additional evidence that JPMorgan has amassed a massive quantity of physical silver?
When JPMorgan took over Bear Stearns in 2008, its Manhattan precious metals warehouse was not operating. But in May 2011, after the decision was made to accumulate physical silver, the warehouse was activated as a working COMEX-approved silver facility and guess what – after starting with zero silver inventory that warehouse has grown to nearly 50 million oz, the largest of all six COMEX warehouses. You can decide if this was just a coincidence but the most compelling reason to start a warehouse would be to store silver you owned in your own warehouse rather than to pay some other warehouse to store metal you own. The timeline, in any regard, is remarkable.
In 2012, as the custodian for the metal held in the big silver ETF, SLV, JPMorgan physically transferred 100 million oz of silver it was storing in one of its own London warehouses on behalf of the trust to Brinks as a sub custodian. In hindsight, the most plausible explanation was to make room for silver JPM would come to purchase by using the SLV as a means of acquiring physical silver on an undetected and unreported basis as I have been explaining continuously (avoiding the SEC’s 5% share ownership reporting requirement). I believe much more than 100 million oz of silver, perhaps double or triple that amount have been accumulated by JPMorgan using the SLV to transfer metal to its own London warehouses completely undetected and unreported. The details of the London Warehouse transfer can be found here. http://about.ag/slv/
Then there is the matter of the unprecedented physical turnover in the COMEX warehouses. As I have detailed on these pages, this unusual turnover began in April 2011 and not in 2008 when JPMorgan first became the COMEX kingpin and manipulator by virtue of the Bear Stearns takeover. This timeline further supports the decision of JPMorgan to begin acquiring physical silver after its near death experience in April 2011. With so much physical silver flowing into and out from the COMEX warehouses weekly, it would be easy for a big buyer to regularly skim off a continuous share of that physical flow. And this is in complete harmony with my conclusion that the unprecedented COMEX warehouse turnover is to due to tight conditions in that the tight conditions are mainly due to JPMorgan’s accumulation of physical silver.
Back in the late 1970’s the Hunt Brothers accumulated close to 100 million oz of physical silver (and more in futures contracts) and were found to have manipulated the price of silver higher as a result of that accumulation. What makes the much larger accumulation of physical silver by JPMorgan today different is that it is the perfect crime.
The Hunts were outsiders; JPMorgan is the ultimate insider. The Hunts ran afoul of the regulators; JPMorgan owns the regulators. The Hunts’ purchases were widely known; as far as I know, I’m the only one pointing to JPMorgan accumulating massive amounts of physical silver. The Hunts drove prices higher as they accumulated silver; JPMorgan, by virtue of its price control on the COMEX, has been able to accumulate silver on sharply declining prices. Talk about a stacked deck.
Given that JPMorgan has such control over the US regulators and is able to operate in near total secrecy in matters related to physical silver, it’s hard for me to imagine what could foil their perfect silver crime. All that’s missing is JPM selling out at extremely high silver prices. And considering that big banks, in essence, don’t have to report anything they don’t want to publicly report, I would be surprised if JPMorgan would even have to pay taxes if they made the many billions of dollars they seemed destined to make on silver to the upside.
Yes, it is true that I am speculating about JPMorgan and physical silver and that much of this is based upon analysis after the fact; but it was not possible for anyone to predict this in advance without practicing voodoo or communicating with the spirits. As for the evidence surrounding JPMorgan’s decision to accumulate physical silver, I guess you have to believe that all the circumstances revolving around April 2011 were completely coincidental to avoid making the connection.
As always, I can’t give you the exact timeline for the future. If there is much more additional physical silver for JPMorgan to accumulate at lower prices, I’m sure this crooked bank will arrange for those lower prices. But after no more additional silver is available on the cheap, it should be time for JPM to allow prices to climb. One more point – since JPMorgan has been accumulating silver for more than 3.5 years, its average price is considerably north of current prices. Back of the envelope calculations indicate an average price in the mid-$20’s and any profit to the bank would only accrue above those levels. Yes, it grates on me that JPMorgan has been able to illegally accumulate as much silver as I suspect and, most particularly, the manner in which that silver was accumulated; but at some point the accumulation should prove most beneficial to silver investors. :-[
This article is based on a commentary of Ted Butler’s premium service at www.butlerresearch.com which contains the highest quality of gold and silver market analysis. Ted Butler is specialized in precious metals market analysis for over four decades.
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Jim Willie: Swiss De-peg Triggers Massive Derivative Crisis, Potential END OF THE EURO!
He may sound crazy, but he isn't.
https://www.youtube.com/watch?x-yt-cl=84503534&v=NHanymw3mW8&x-yt-ts=1421914688
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Dear readers of my Gold & Silver thread, this one is must reading. :-\
Submitted by Mac Slavo via SHTFPlan.com [10],
Last month it was revealed that former federal reserve Chairman Alan Greenspan, the architect of U.S. monetary policy under four Presidents, is anticipating a significant market event [11]as a result of the trillions of dollars that have been pumped into the system over the last several years. According to Greenspan, something big is coming.
His comments were shared by well known resource analyst Brien Lundin, who joined Greenspan for private discussions at last year’s New Orleans Investment Conference. In his latest interview [12] Lundin further clarifies Greenspan’s private thoughts on current economic and monetary policy and sheds light on the former Fed Chairman’s suggestion that ‘something big is coming.‘
Greenspan made some good points to me… He was concerned about inflation… He was specifically concerned in relation to the outstanding, or excess, reserves which are close to three trillion dollars being held on the Fed balance sheet now… That money is just hanging over the U.S. economy like a big water balloon of liquidity and it’s just searching for a pin.
In fact, Greenspan referred to it as a tinderbox of explosive inflation looking for a spark.
Watch the full insider interview:
https://www.youtube.com/watch?v=Ohsd0lCYI6Y
Greenspan believes that in five years gold will be “measurably higher” than current levels because of the excess liquidity that will eventually be released into the open market. Such an event will undoubtedly lead to riots across America [13] as the general public, woefully unprepared for rapidly rising prices when the pin finally pops the dollar bubble, loses access to affordable critical supplies like food, gas and other resources.
The collapse of the dollar, an inevitability suggested by Alan Greenspan, will be a game changer that results in the quadrupling of the cost of living [14] for the average American.
All the while, as the United States stands on the brink of the most important event of our lives [15] and in a world of extreme monetary and economic instability, stock markets are at all time highs. What’s more, the very resource sectors that matter – energy, agriculture, gold and the precious metals mining companies [16] that get it out of the ground – have been decimated recently:
Most people [at the investment conference] seem to share my belief that we’re bouncing around the bottom… that we’ve not necessarily seen the absolute lowest prices in metals but that they can’t go much lower than this because we’re right around the all-in cost of production… Your downside risk is may be 20% but the upside risk for really good companies that have good projects is on the order of 300% to 400% once the market gets back into gear.
As noted by Brian Lundin, with the demand from central banks and the global public, coupled with the obvious fundamental problems inherent within the system, the price of gold should have been rising but has been crushed instead. This, of course, bodes well for investors and those who intend to protect themselves from the collapse to come. The reality of the situation is we’re in trouble and Alan Greenspan, arguably one of the most informed insiders on the planet, has implied that it’s more than likely unstoppable:
He [Greenspan] seemed to believe it was somewhat inevitable that the release of those reserves would create much higher inflation… the Fed just hopes they can get out of this alive… a normalized interest rate environment, which is what they say they seek over the longer term, is fiscally impossible for the U.S. at this point in time.
This is a well known fact within Fed circles and those on the inside are positioning themselves with hard assets for what will ultimately end in a collapse of the U.S. dollar and the American way of life.
(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150309_green_0.jpg?1425935172)
http://www.zerohedge.com/news/2015-03-09/alan-greenspan-warns-explosive-inflation-tinderbox-looking-spark (http://www.zerohedge.com/news/2015-03-09/alan-greenspan-warns-explosive-inflation-tinderbox-looking-spark) :icon_study: :icon_study: :icon_study: :-\
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This gent has it RIGHT!
https://www.youtube.com/watch?v=BvNDK5JaTKg
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Richard Duncan, author of The Dollar Crisis [12] and The New Depression: The Breakdown Of The Paper Money Economy [11], isn't mincing words about the risks he sees ahead for the world economy.
Essentially, he sees the past 50 years of economic prosperity fueled by globalization and easy credit in serious danger of being unwound, as the doomed monetary policies currently being pursued by the word's central banks result in a massive multi-decade depression that spans the globe.
I think it’s horribly regrettable that we find ourselves in a position where we are on government life support. We should’ve stayed on the gold standard in 1968. The global economy would be much smaller today than it is, but we wouldn’t now be in this position where we have to rely on money creation on a trillion-dollar scale to keep our global economy from collapsing. But now that we are here, I’m not sure that there are other alternatives other than 1) keeping the thing inflated or 2) allowing a new Great Depression to wipe away globalization. And not just the savings of the American public, but a huge part of the global economy altogether.
This is not going to be a 1921-style two-year recession that we bounce back from after a little bit of pain and unpleasantness. After a 50-year global economic boon involving what is now a $59 trillion expansion of credit in 50 years, this isn’t going to be a one or two-year hard recession. This is going to be a multi-decade global depression and I’m not sure that anyone alive today would live long enough to see the recovery. I mean, it’s like Rome: when Rome fell, there was a recovery, but it was 1,000 years later. This is the kind of depression we're looking at if we allow this $59 trillion credit bubble of ours to implode.
https://www.youtube.com/watch?v=DieONheFQ3U
http://www.peakprosperity.com/podcast/92283/richard-duncan-real-risk-coming-multi-decade-global-depression
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https://www.youtube.com/watch?v=dZc9xgu-baQ&feature=youtu.be
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https://www.youtube.com/watch?v=fnp5ETnKylU
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Thursday, April 23, 2015
The Rehypothecation of Gold, and Why It Matters
Claiming to own X quantity of gold is one thing, and reporting how many times the gold has been pledged as collateral is another.
When correspondent Scott A. Batten offered to write an explanation of the rehypothecation of gold and why it matters, I quickly accepted. Like many others, I have breezed over the word rehypothecation with the basic understanding that it means assets pledged by counterparties (such as the infamous copper stored in Chinese warehouses) are reused as collateral/repledged--in effect, the same assets are pledged as collateral multiple times.
But beyond this, I have not had a clear understanding of how the rehypothecation of gold reserves threatens the whole shaky edifice of Infinite Greed, oops, I mean neoliberal capital markets.
Here is Scott's commentary:
When introducing a new concept, it is best to start with the definition of the words to be used. In this case, the discussion of rehypothecation and how it places the world at risk with the fun and games played in the stock market.
Rehypothecation:
Rehypothecation occurs when your broker, to whom you have hypothecated -- or pledged -- securities as collateral for a margin loan, pledges those same securities to a bank or other lender to secure a loan to cover the firm's exposure to potential margin account losses.
When you open a margin account, you typically sign a general account agreement with your broker, in which you authorize your broker to rehypothecate.
Now, let’s put this into easy to understand language. Let’s say that you have ten dollars. You take it to the bank to let them “borrow” it, while paying you interest. What you have done, in reality, is given them your money to use as they see fit, while giving you a small percentage of the gains that they will earn. A bank would loan the money to a home buyer or perhaps a small business. At the very least, they can lend all the money in excess of their requirement to hold some cash as reserves--say 10% for ease of math.
They now have nine dollars to invest. Their last resort is to offer it to another bank for that bank to “hold”, because that bank doesn’t have enough money to meet its required reserves. Seems simple enough, right?
Welcome to the games bankers play to make money. Now that this simple format is in place, let’s move to where the serious dangers lie.
Precious Metals:
During World War II, many foreign countries feared that their gold reserves, which at the time backed their paper money, might be taken by an enemy and in 1939, the good old USA was a very neutral country, like Switzerland, only there was a much better deterrent than the Alps-- the Atlantic Ocean. So, many countries--England, France, and others--sent us their gold bars to be stored alongside ours in Fort Knox. Later, after the war was over, we convinced them that it was fine to leave it there and in fact, with the Cold War starting other countries joined in, including Germany.
Now, what good is a pile of gold sitting in a fort going to do? It costs a lot to protect it, and the US was paying a small sum in interest, while getting a smaller sum back in “protection fees”. So, the Federal Reserve had a wonderful idea, at least in their minds.
Since we have this gold, let’s issue paper on that gold as though it was ours, after all it is sitting in Fort Knox, and earn a bit of money on the side. So long as the Cold War lasted, the gold certainly wasn’t going anywhere. Here is where the trouble began. It was pretty small potatoes for a good while, until we went off the gold standard in 1971 during the Nixon Administration. What good is having a precious metal to back fiat currency, when a promise is just as good? Enter the danger zone.
Now, the gold in Fort Knox isn’t doing anything. So, what to do? Well, each bar of gold has a unique mark on it to say who owns it. The Cold War is still raging, so no one is going to ask for it back anytime soon. Let’s melt down some of that gold, just a small percentage of it, and sell it off as bullion. Gold is high and the foreign countries won’t ask for it all, so let’s skim a bit here and there. No one will know, and we can make money.
Then debts started to accrue, so they got brazen and started melting bars and reselling bars as their own gold, because they don’t want to use their own gold, when German gold is just the same, except for that little mark. Erase the mark and put your own on it and sell it as yours, using your gold as the “backer” in case Germany asks for some of it back.
Well, it wasn’t long until greed set in. Those gold bars that were sold to say, China or Japan, were resold to Austria or Iraq. Much like the bundling and reselling of home loans in the 1990’s, soon the German melted gold was in seven different countries with seven different marks, but no German mark upon them remained. This still wasn’t the breaking point though, after all there is still plenty of Gold in Fort Knox to cover what is owed to them.
I don’t know who’s idea it was, but it was a bad idea. They decided that they could sell paper promises of gold being held in the vaults. The last number I saw was 140%. Which means that if they have 100 pounds of gold, they can sell paper as though they have 140 pounds of gold. Now, they can also sell that gold outright as well. So, it's possible that they could sell 140 pounds of paper gold and sell a portion of the physical gold. too.
Confused yet? Here is where we stand today. No one knows how much gold is really in Fort Knox. We only know what they say is in Fort Knox. The same is likely true for the Federal Reserve and possibly the major banks; after all, if the Fed starts demanding to know what’s in those banks, they might have to show theirs too. So, let’s say that the economy starts to really go south around the world. As you know from the news, Germany asked to see their gold at Fort Knox and were denied, so they asked for their gold back. Smart move on Germany’s part in my mind. Answer from the Fed, we will get it to you sometime in the near future. This wasn’t challenged by Germany.
Why? Rehypothecation. Germany knows that they have been doing the same thing with gold that we have. It’s been sold to multiple people at the same time, under the theory that not everyone will want it at the same time, so we can just move it around as needed.
This game of musical golden chairs works fine, until the musical economy stops. When countries start to rack up debt and desire to sell their own gold to pay the bill, and they can’t get it, they get nervous. Now, if the economy is going south and the price of gold is heading up because of fear, those people holding paper gold in the form of futures or just deposit promises begin to sell off for profit or out of financial need. So long as it’s a trickle, no problem, but if it becomes a torrent....
Remember the 140% rule? Well, what if the Federal Reserve only kept 60% of the 100% that the paper gold was written on? Now there is an 80% shortage. Someone is about to have their musical golden chair pulled out from under them. They will get paid, BUT that payment will come as fiat currency. As the golden parachute deflates, how good is fiat currency? This is why there are so many on the fringe demanding to see the gold reserves and others are saying gold will hit $5,000 an ounce or higher. It is theoretically possible that for each gold promise, that it is backed by 1/5 or less of physical gold. No one knows, because no one can audit the physical gold.
China is getting ready to release their gold reserves. That is, they will do like the Fed and say how much they have. We cannot call them on their real reserves, because then they can do the same to us. Now, if all the gold is still in Fort Knox and the Federal Reserve, then the US can call for a real accounting and show ours as well.
However, if we don’t and China does, and calls for the US to do the same, then a lot of fear enters the market. There is a reason that people say "never own paper metals." This is that reason. You might get the value of that gold, but it will be in fiat currency and if things are crumbling then fiat promises become flat losses.
Thank you, Scott, for the explanation. It's a funny thing about financial games; whatever the Mainstream Financial Media mocks as conspiracy theories often later turn out to be accurate.
I do not claim any expertise in the gold/paper gold markets, but it's clear that claiming to own X quantity of gold is one thing, and reporting how many times the gold has been pledged as collateral is another. In a transparent financial system, the citizens of the U.S. would be invited to tour Fort Knox (in small, secure groups, of course) and count the nation's gold directly. What's the harm in showing off the gold to anyone willing to go through security?
Why keep the nation's gold reserves so mysteriously secret? What's the point in being so cagey about it? Maybe rehypothecation isn't the reason for the secrecy; then what is? Fear of precisely what? Isn't gold supposed to be a foolish relic? What's the danger in letting people look at the foolish relic and count the bars and note the serial numbers on the bars? What's the risk in that?
I propose turning Fort Knox into a profitable tourist attraction. If gold is just a foolish relic, then charge $50 a person to wander around "our" gold. It's not like anyone can slip a heavy bar into their purse or pocket without being detected. Put it behind bulletproof glass if you want. What's the risk?
http://feedproxy.google.com/~r/google/RzFQ/~3/QrV_-lEZkx4/the-rehypothecation-of-gold-and-why-it.html
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All Hail Our Banking Overlords!
You really have to be paying attention to see what’s truly going on these days. The keepers of the system, that is the banking elites, now openly control everything -- though you'd never know that by listening to the media.
Consider this:
Eurozone backs €7bn bridging loan
Jul 16, 2105
Eurozone ministers have agreed to give Greece a €7bn (Ł5bn) bridging loan from an EU-wide fund to keep its finances afloat until a bailout is approved.
The loan is expected to be confirmed on Friday by all EU member states.
In another development, the European Central Bank (ECB) agreed to increase emergency funding to Greece for the first time since it was frozen in June.
The decisions were made after Greek MPs passed tough reforms as part of a eurozone bailout deal.
How generous of the finance ministers of all those EU member states to agree to a “bridge loan” that will help Greece "keep its finances afloat". This should provide the people of Greece with a bit of breathing room, right? Maybe access to their bank accounts (finally!), perhaps?
No, not at all. Here’s what the entirety of the “”loan”” will go towards instead:
The bridging loan means Greece will be able to repay debts to the ECB and IMF on Monday.
Ummmm…that “money” will not ever go anywhere near Greece.
This is all merely electronic window-dressing for entirely esoteric bookkeeping purposes. Servers will blink at one location in Europe as digital 1s and 0s are transmitted to another. The electronic balances at the ECB and the IMF will change, but not much else.
The people of Greece will see none of it. Nor will they see their bank accounts unfrozen.
This act of banker "largess" is, of course, of, by, and entirely for the bankers. It has nothing to do with Greece or its people, about whom the banker class cannot care less.
But, they hide this disdain under and increasingly thin and condescending veneer of graciousness. Take, for example, the recently-announced 'generosity' of the powers that be -- that is, the banking powers that be -- which will permit the long suffering depositors to…*cough*…deposit more money into the banks:
Greece: Banks Can Reopen ... for Deposits :D :D
Jul 17, 2015
Greek banks will reopen Monday after a three-week closure, the country's deputy finance minister says, though withdrawal restrictions will stay in place. Bank customers "can deposit cash, they can transfer money from one account to the other," but they can't withdraw money except at ATMs, the official says, and a withdrawal limit of 60 euros ($67) a day will stay in place, he said, though Greek authorities are working on a plan to allow people to roll over access to their funds so that if they don't make it to a bank machine one day, they can take out 120 euros the next day.
Yeah, depositing more money into the Greek banking system is exactly what all 12 remaining Greek idiots are clamoring to do...everybody else just wants their money back, thank-you-very-much.
Obviously, the only rational response of anybody in Europe watching this charade of theft continue would be to sell gold, right? (which has happened vigorously ever since the Greek crisis began) Because, you know, nothing says “confidence” quite like selling your gold so you can then park that money in a bank that may not let you withdraw it again.
Of course, we here at Peak Prosperity hold to the view that everything, and we mean everything, in our ””markets”” is stage-managed. And that especially includes gold. The central banks are demanding and commanding complete fealty to their story line, no exceptions tolerated. We are at that all-or-nothing moment in history when everything either works out perfectly or it all falls apart.
Savers have to be punished so debtors can be saved.
Why? Because if debtors are rescued, that makes it possible for more debts to be issued in the future..
And why is that important? Because the banking system needs ever more loans in order to survive.
Why do we slavishly feed a banking system that is rapacious, insatiable and always threatening calamity whenever it doesn’t get exactly everything it wants, when it wants it? That is a question nobody in power is willing to address.
Why not? Because there's no good reason to do it -- unless you're a bank, or one of the many proxy agents (like politicians) receiving kick-backs from the banks.
We have a banking system that feeds on the blood, sweat and tears of the public. But the public's collective output is no longer ‘enough’ to subsidize everything that central planners have promised. So with a stagnating/shrinking pie – surprise! – the group that writes the rules, the banks, has decided that they should be the ones to get as much of it as possible.
Naturally, this will not work for very long. History is replete with examples why it can’t. Just consider the root meaning of “bankrupt” which has an interesting history:
The word actually comes from Italian banca rotta, a broken bench (not a rotten one, as the false friend of Italian rotta might suggest — it’s from Latin rumpere, to break). The bench was a literal one, however: it was the usual Italian word for a money dealer’s table. In his dictionary, the great Dr Johnson retold the legend that when an Italian money trader became insolvent, his table was broken.
(Source)
To “break the banker’s table” means to smash the money lender’s physical place of business after they have taken or lost all of your wealth. It’s speaks of an act of anger by the betrayed. And that’s where the banking system finds itself again and again over time, for the exact same reasons all through history -- today being no different in anything but scale and complexity.
Conclusion
You have to read past the headlines today because they quite often say exactly the opposite of what’s actually happening. Like today’s description spinning GE’s 2Q, $1.38 billion earnings loss as a 5% rise in profits.
The bankers and financiers are badly overplaying their hands, again, and people are starting to catch on to the scam.
Real wealth is tangible things produced with tangible effort. Loans made out of thin-air 'money' require no effort and are entirely ephemeral. But if those loans are used to acquire real ownership of real assets, then something has been exchanged for nothing and one party is getting screwed.
That’s what has just happened in Greece. And expect it to happen increasingly elsewhere, as Charles Hughes Smith and I recently discussed in this week's excellent Off The Cuff podcast.
If you had asked me ten years ago if there was any chance of Greece becoming a failed state within a decade, I would have said ‘No, no chance.’ But here we are. In ten years, I suspect, we’ll be marveling over all the other failed states as the rot proceeds from the outside in. Again, Charles does a wonderful job articulating why in his recent report More Sovereign Defaults Are Coming.
There’s simply too much debt and too little cheap oil for there to be any other trajectory to this story. Boneheadedly, our leadership is so out-of-touch that their best response to this set of predicaments is to sacrifice the populace of an entire developed nation (for generations to come) just to keep the status quo stumbling along for a bit longer.
We need to all prepare for the inevitability that, as the rot proceeds, the people of Greece will not be the only casualties of the banks' attempts at self-preservation. They'll try to throw all of us under the bus before taking any losses themselves.
~ Chris Martenson
http://www.peakprosperity.com/blog/93588/all-hail-our-banking-overlords