saveyourassetsfirst3 |
- Bill Gross: Inflation Coming Soon To A Developed Country Near You
- Asian Gold Demand Key Price Determinant
- Bankers Stealing Our Wealth And Our Sovereignty
- Corvus Gold JV Partner to Commence Test Production at High-Grade Gold Deposit, Terra Project, Alaska
- Deflation: As Good As Gold?
- Jason Hommel's Bimbo: "Vote for Silver" Wow
- Get Ready for the Gold Rebound Before It Is Too Late: Marshall Auerback
- Butler on The CFTC Silver Investigation
- Gold Production Down Another 4% In South Africa - Total Mineral Production Up 4.2%
- Keynesianism vs. the Gold Coin Standard
- Gold Production Down Another 4% in South Africa
- China Stimulus 'Likely to be Positive for Gold'
- GATA's Chris Powell on the Silver Manipulation Probe & the Fed Gold Audit!
- Germany Industrial Production Lower / Spain’s GDP Lowers / Italian Banks Continue With High Bad Loans / European Bourses Fall in Price
- Gold Daily and Silver Weekly Charts – Cap and Coil, Cap and Coil
- There Is More to Gold than Mere Capital Appreciation: John Hathaway
- Got Physical Gold?
- Links 8/9/12
- Marshall Auerback: Get Ready For the Gold Rebound Before it is Too Late
- Small change sparks fights in coin-starved Zimbabwe
- Gold Producers in the Catbird Seat: Jay Taylor
- Standard Chartered Makes Empty Threat to Sue New York Regulator Over Iran Money Laundering
- Links for 2012-08-08 [del.icio.us]
- Gold Close to Confirming New Breakout to Highs
- Iron Ore Inspiring…
- What Central Planners Can Never Know
| Bill Gross: Inflation Coming Soon To A Developed Country Near You Posted: 09 Aug 2012 10:59 AM PDT By CommodityHQ: By Jared Cummans In a recent, rather grim article, bond king Bill Gross stated that investors can expect inflation to cut significantly into their returns in the coming years. In fact, he went as far to say that he believes the average return on a nominal basis will fall to around 0%. His argument looks at a long history of both stocks and bonds and compares the past to the present to arrive at his final figure. First and foremost, Gross dispels the Siegel constant in today's environment, stating that 6.6% per year may have once been a possibility, but today's markets and money printing environment has taken that figure off the table. "If labor and indeed government must demand some recompense for the four decade's long downward tilting teeter-totter of wealth creation, and if GDP growth itself is slowing significantly due to deleveraging in a New Normal economy, then Complete Story » | |||||
| Asian Gold Demand Key Price Determinant Posted: 09 Aug 2012 08:57 AM PDT The American and European gold investor should always remember that the East – primarily India and China – exerts a massive influence on the gold market. India's gold market alone is almost four-times bigger than the US gold market. | |||||
| Bankers Stealing Our Wealth And Our Sovereignty Posted: 09 Aug 2012 08:52 AM PDT One of the difficulties in attempting to cover developments in the global economy is that often there are flurries of news items which emerge at any one time, making it impossible to deal with all these events as they occur. So it is with respect to an announcement by the European Central Bank on July 20th that Greek government bonds would no longer be "eligible as collateral." There are many interesting points for analysis here. To begin with, we see yet another example of these con-men using a slippery euphemism to hide the fact that that their paper Empire of Fraud is collapsing all around us. But there are also many nuances to this announcement, and as we know, when it comes to the mainstream media "nuance" is a non sequitur. To place this announcement into some context, it's first worth noting that this is the second time this year that the bankers have "suspended eligibility" of Greece's bonds, with the last time being literally days before it defaulted on 75% of that debt. With that additional background, we now can fully understand what the ECB actually meant with its euphemism: Greek bonds are worthless. In turn, this directly implies an even more dire reality: Greece has been declared bankrupt (for the second time in six months). Understand that there is only one small-but-significant step which separates an "insolvent debtor" from a "bankrupt debtor". While bankruptcy is often inevitable for insolvent debtors, what makes such debtors merely insolvent is that creditors will still continue to extend them additional credit. Conversely, once the debtor is cut off credit (and unable to pay its bills) then bankruptcy is instantaneous/automatic. Thus we have a cabal of private bankers simply decreeing that all Greek bonds are worthless and (as an inevitable consequence) Greece as a nation is bankrupt. Am I the only person who sees a problem with this? Once upon a time, Western nations (and their peoples) enjoyed a concept called "sovereignty." By no coincidence, we enjoyed our sovereignty during a period of history when we practiced a concept known as "the gold standard." With any nation practicing a gold standard, no cabal of foreign bankers can simply decree that a nation's bonds were worthless – because they would be backed by gold – and thus no cabal of foreign bankers could decree that your nation was bankrupt. In other words, yet another of the many benefits provided by a gold standard is economic sovereignty. With it, economic sovereignty is assured. Without it, we are at the mercy of a crooked Banking Oligarchy which has committed more fraud (by dollar value) just in the last decade than all the fraud by all the rest of humanity throughout all of human history, combined. But this is merely a tangent to an even more interesting aspect to this story. At the same time that Western bankers are in the process of re-elevating gold to its rightful status as the ultimate monetary asset, they have been forced to steadily demote and devalue various forms of their own (fraudulent) paper. Obviously with any con-men running a scam, maintaining confidence in the scam is of supreme importance – hence the original term: "confidence men." Thus the absolute last thing which the banking crime syndicate wants to do is to erode confidence in the very paper instruments which they use to commit their serial acts of mega-fraud, such as the $350 trillion LIBOR-fraud. So why are they doing this? The phrase "rats deserting a sinking ship" captures this dynamic quite nicely. The banksters are decreeing that some of their paper is already worthless/near-worthless as an act of final desperation: acknowledging the worthlessness of some of this paper in order to avoid having the Sheep collectively realize that all of their paper is totally worthless. | |||||
| Corvus Gold JV Partner to Commence Test Production at High-Grade Gold Deposit, Terra Project, Alaska Posted: 09 Aug 2012 08:43 AM PDT Vancouver, B.C., Corvus Gold Inc. ("Corvus" or the "Company") – (TSX: KOR, OTCQX: CORVF) is pleased to announce that the Company's joint venture partner WestMountain (OTCBB: WMTN) has indicated they will complete on-site installation of the bulk sample gold mill and will commence test production this summer. Under the Company's existing joint venture agreement, Corvus will receive 49% of the gold production plus a net smelter royalty (NSR) of 0.5% to 5% at no cost until WestMountain completes the required work commitments by the end of 2013. The 2012 partner funded exploration and development program should significantly advance the Terra Project where the current inferred resource totals 168,000 ounces gold at an average grade of 12.2 g/t gold (Summary Report on the Terra Gold Project, McGrath District, Alaska, June 15, 2010). Planned work for the 2012 season as indicated by the Company's JV partner includes:
Jeff Pontius, Corvus CEO, stated: "The potential to see initial gold production from the Terra Project is an exciting step for Corvus Gold in leveraging its non-core assets to support the development of our 100% wholly owned North Bullfrog, Nevada Project toward anticipated production. Corvus' Alaskan projects represent significant downstream growth potential for both major new gold discoveries and to augment our future anticipated production profile." About the Terra Project Terra Gold Corp. ("Terra Alaska"), a subsidiary of WestMountain, is Corvus' joint venture partner on the Terra project. Terra Alaska has the right to earn a 51% interest in the Terra Gold Project from Corvus by spending a total of USD 6.0M. Terra Alaska can further increase its ownership to 80% with an additional USD 3.05M investment bringing to a total of USD 9.05M capital investment over a four-year period until the end of 2013 with their 2012 work commitment being approximately USD 1M. Raven Gold is entitled to an NSR of between 0.5% and 5% on all precious metal production and a 1% NSR royalty on all base metal production. The Terra Gold Project is a high-grade gold vein system with a current NI 43-101 Inferred resource of 428,000 tonnes at 12.2 g/t gold (using a cutoff grade of 5.0 g/t gold) for contained metal content of 168,000 ounces. The project's primary focus is the Ben Vein, where 28 drill holes completed to date have returned 111 vein intersections of over 3 g/t gold. Initial metallurgical work has indicated a high recovery rate via gravity circuit, illustrating potential for near-term production. Given the high-grade nature of the gold veins, coupled with the favourable mining configuration and gravity recovery characteristics, the deposit may be amenable to near-term gold production. Further information on the Terra Project can be found athttp://www.corvusgold.com/projects/alaska/terra/. Qualified Person and Quality Control/Quality Assurance WestMountain has advised the Company that all exploration work on the Terra property has been carried out under their direct control and supervision. All sample shipments are sent to ALS Chemex in Anchorage, Alaska, for preparation and then on to ALS Chemex in Reno, Nevada, or Vancouver, B.C., for assay. ALS Chemex's quality system complies with requirements for the International Standards ISO 9001:2000 and ISO 17025:1999. WestMountain has its own quality assurance/quality control programs in place. WestMountain has advised that the technical information provided by WestMountain and contained in this news release was reviewed by Greg Schifrin, CEO, a Qualified Person as defined in NI 43-101. All of the foregoing information has been provided by WestMountain, the parent company of the operator, Terra Gold. Jeffrey A. Pontius (CPG 11044), a qualified person as defined by National Instrument 43-101, has reviewed, but not independently verified, the WestMountain information that forms the basis for this news release and has approved the disclosure herein. Mr. Pontius is not independent of the Company, as he is the CEO and holds common shares and incentive stock options in Corvus. About Corvus Gold Inc. Corvus Gold Inc. is a North American focused gold exploration and development company with projects in Nevada, Alaska and Quebec. The Company's projects represent a spectrum of early-stage to advanced exploration and development gold opportunities. Corvus is committed to building shareholder value through a rapidly advancing gold project in Nevada and new growth discoveries on its other assets. The Company looks to advance its earlier and more risky discoveries via partner funded exploration work into carried and or royalty interests that provide shareholders with exposure to low financial risk potential gold production. On behalf of (signed) Jeffrey A. Pontius Contact Information: Ryan Ko Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable Canadian and US securities legislation. All statements, other than statements of historical fact, included herein including, without limitation, statements regarding the anticipated content, commencement and cost of exploration programs, anticipated exploration program results, the discovery and delineation of mineral deposits/resources/reserves, the potential for the identification of a higher grade zone or zones at North Bullfrog, the potential for any mining or production at North Bullfrog or Terra, the potential for the identification of multiple deposits at North Bullfrog, the potential for the existence or location of additional high-grade veins, the potential for additional resources to be located between certain of the existing deposits, the potential for the Company to secure or receive any royalties in the future, business and financing plans and business trends, are forward-looking statements. Although the Company believes that such statements are reasonable, it can give no assurance that such expectations will prove to be correct. In addition, information with respect to the proposed activities of Ocean Park on the Chisna property, the proposed activities of Alix on the West Pogo property and the proposed activities of WIA on the Terra property, have been provided by the respective joint venture partners, who are each the operator of the respective joint ventures and, as such activities are not within the control of the Company, the Company takes no responsibility for the accuracy of such statements. Forward-looking statements are typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events. The Company cautions investors that any forward-looking statements by the Company or any of its joint venture partners are not guarantees of future results or performance, and that actual results may differ materially from those in forward looking statements as a result of various factors, including, but not limited to, variations in the nature, quality and quantity of any mineral deposits that may be located, variations in the market price of any mineral products the Company or its joint venture partners may produce or plan to produce, the inability of the Company or any of its joint venture partners to obtain any necessary permits, consents or authorizations required for its or their activities, the inability of the Company or any of its joint venture partners to produce minerals from their properties successfully or profitably, to continue its projected growth, to raise the necessary capital or to be fully able to implement their respective business strategies, and other risks and uncertainties disclosed in the Company's latest Annual Information Form filed with certain securities commissions in Canada. All of the Company's Canadian public disclosure filings may be accessed via www.sedar.comand readers are urged to review these materials, including the technical reports filed with respect to the Company's mineral properties. Cautionary Note Regarding References to Resources and Reserves National Instrument 43 101 – Standards of Disclosure for Mineral Projects ("NI 43-101") is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Unless otherwise indicated, all resource estimates contained in or incorporated by reference in this press release have been prepared in accordance with NI 43-101 and the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resource and Mineral Reserves, adopted by the CIM Council on November 14, 2004 (the "CIM Standards") as they may be amended from time to time by the CIM. United States shareholders are cautioned that the requirements and terminology of NI 43-101 and the CIM Standards differ significantly from the requirements and terminology of the SEC set forth in the SEC's Industry Guide 7 ("SEC Industry Guide 7"). Accordingly, the Company's disclosures regarding mineralization may not be comparable to similar information disclosed by companies subject to SEC Industry Guide 7. Without limiting the foregoing, while the terms "mineral resources", "inferred mineral resources", "indicated mineral resources" and "measured mineral resources" are recognized and required by NI 43-101 and the CIM Standards, they are not recognized by the SEC and are not permitted to be used in documents filed with the SEC by companies subject to SEC Industry Guide 7. Mineral resources which are not mineral reserves do not have demonstrated economic viability, and US investors are cautioned not to assume that all or any part of a mineral resource will ever be converted into reserves. Further, inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of the inferred resources will ever be upgraded to a higher resource category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of a feasibility study or prefeasibility study, except in rare cases. The SEC normally only permits issuers to report mineralization that does not constitute SEC Industry Guide 7 compliant "reserves" as in-place tonnage and grade without reference to unit amounts. The term "contained ounces" is not permitted under the rules of SEC Industry Guide 7. In addition, the NI 43-101 and CIM Standards definition of a "reserve" differs from the definition in SEC Industry Guide 7. In SEC Industry Guide 7, a mineral reserve is defined as a part of a mineral deposit which could be economically and legally extracted or produced at the time the mineral reserve determination is made, and a "final" or "bankable" feasibility study is required to report reserves, the three-year historical price is used in any reserve or cash flow analysis of designated reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. Caution Regarding Adjacent or Similar Mineral Properties This news release contains information with respect to adjacent or similar mineral properties in respect of which the Company has no interest or rights to explore or mine. The Company advises US investors that the mining guidelines of the US Securities and Exchange Commission (the "SEC") set forth in the SEC's Industry Guide 7 ("SEC Industry Guide 7") strictly prohibit information of this type in documents filed with the SEC. Readers are cautioned that the Company has no interest in or right to acquire any interest in any such properties, and that mineral deposits on adjacent or similar properties are not indicative of mineral deposits on the Company's properties. This press release is not, and is not to be construed in any way as, an offer to buy or sell securities in the United States.
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| Posted: 09 Aug 2012 08:41 AM PDT It has been a year since gold began its downward biased consolidation out of the acute phase of the Euro meltdown and resulting hysteria. In that time, the deflation case was released from the jail that had been a heightened public fear of inflation (the pinnacle of which was in spring of 2011, a time when bond king Bill Gross was very famously short long-term US Treasury bonds).  The most recent red arrow on the chart above came during this time when inflation expectations were threatening to break down the barn door. Gross was short the bond, people were upset about gas (and general commodity) prices and an austerity-focused mob with pitchforks was assembling for a march on the Fed, with Ben Bernanke's head its main goal. Gold has now done enough time in the out house that its promoters can begin to beat the drum on its price again as its consolidation/correction does technically look like it is completing. Personally, I am much more comfortable with it now than I was last summer amid the euro hysterics and ridiculous upside targets. It is not to say some of these targets (3500 on up) will not be realized one day, but it is to say that people obsessed with inflation – and in particular, hyper inflation – are barking up the wrong tree. The upward bias of the 'continuum' (the long-term uptrend in the long bond and/or the long-term downtrend in the yield) shown above tells us that deflation is the big picture condition. Inflation is what the managers of the Keynesian global economy periodically try to do to this natural economic condition that would cleanse the system (or clean its clock) if left to its own devices. Since I began writing eight years ago, the big theme has been a deflationary need to correct vs. man-made policy trying to inflate. We use the continuum above to try to establish points at which the various adherents (inflationist and deflationist) will be tragically wrong. The most recent confirmed point was spring of 2011 when commodity crazed inflationists raised their dogma to a fever pitch just as the bond was about to ping off the lower limit and rise into the current deflationary backdrop. Today, in part using the same chart, we have anticipated this summer's bullish reversal moving against the huddled masses in T bonds, against precious metal, commodity and stock market bears and against the deflation case. But it is that very same deflation case that must be respected at all times because the natural forces of the market will likely one day overwhelm the will and egos of mere mortal policy makers, QE3 or no QE3. While I respect the Austrian viewpoint and the idea of von Mises' 'Crackup Boom' into an inflationary death spiral, I think a deflationary unwinding – intrinsically worthless US dollars and all – is at least as likely and probably more so. Promoters of various and supposed 'inflation hedge' products like precious metals, commodities and in some cases stocks root for the Austrian view (at least up until the 'crack up' phase of the boom), as they would continue to be enriched by the process as the public seeks 'safety' from inflation. But most commodities (and many stocks) will see price erosion during economic contraction, which of course goes hand in hand with the deflationary impulse. No matter whether the end game is an inflationary spiral or a deflationary one, businesses and economies are going to suffer eventually. In the event of deflation, economies will suffer from the withholding of expenditures as people build and save cash. If the event is intensely inflationary, people will spend cash and drive up speculations of all kinds – including and especially the prices of necessary things – making bottom line costs for most companies untenable. The result would be continued grinding economic deceleration and in my opinion, an eventual deflationary end. After more than a decade of the inflationary play, which began with Alan Greenspan's willful decision to preempt deflation out of the 2000 bursting of the technology bubble the public has become very aware of inflation and policy makers have become very sensitive about perceptions. These are dangerous times because policy makers from Mario Draghi to Ben Bernanke are like wounded animals. The wounds would be inflicted on their reputations and their legacies. Aside from the recent 'Huey, Dooey and Louie' (we need QE3 now!) stuff coming out of some Fed members seemingly playing the market expectations game, there is a growing theme from the more rational and well-spoken members like Richard Fisher. More inflation is going to get us in bigger trouble down the road. Policy makers know it; they are not stupid. Yet sadly, it is not as if deflation can be a positive solution now. Before the system was perverted – first by Greenspan and then by the Wall Street and financial services industry machine pitching all manner of leveraged and worthless garbage – modern, developed financial systems are too far out on a ledge for the fallout to be anything but complete, and utterly destructive. This is THE case for 'QE to infinity' as it is called by some. But it is no done deal; not by a long shot. As often happens when I get on this subject, I rambled away from the intended theme. Is deflation as good as gold? The answer is that for someone who prepares for it by always managing risk, deflation can be better than gold. While I have maintained from day one that gold is about value and capital preservation over the long run, it should not be a 'play' on inflation and people certainly should not be buying up the 'gold is silver is copper is oil is hogs is tin' inflation promotion the next time the 'continuum' chart above approaches a red arrow. Gold is gold; a tool for monetary survival. It may go down in a deflation, but then again all those deflated dollars would not suddenly gain intrinsic value simply because more of them are being horded. The rush for cash that would result from a deflationary unwinding would provide an opportunity for properly positioned people to buy all kinds of things, on the cheap. Property, resources, equity in quality companies… you name it… if you like it now, you would absolutely love it if it goes on sale as a result of a final unwinding of the current system. My opinion is that gold was a big time buy early last decade and that the general inflation play is only that, a play to be gamed when the chart above says the probabilities are in line. This can go on as long as the current system goes on. Meanwhile, whatever combination of cash and gold works for one's individual situation is the only recommendation I could make beyond the intermediate 'trades' that the continuum presents. Meanwhile, dialing in to the here and now we remain on the most recent turning point as implied by the continuum. So it is back to swing trader mode and the various 'plays' that are being presented. Just remember that cash and gold are the long term plays until the system is resolved. I would absolutely love it if you would sign up for biiwii.com's free (and spam free) eLetter that will help you get to know my work in finer detail. http://www.biiwii.blogspot.com
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| Jason Hommel's Bimbo: "Vote for Silver" Wow Posted: 09 Aug 2012 07:46 AM PDT     | |||||
| Get Ready for the Gold Rebound Before It Is Too Late: Marshall Auerback Posted: 09 Aug 2012 07:36 AM PDT | |||||
| Butler on The CFTC Silver Investigation Posted: 09 Aug 2012 07:27 AM PDT  The CFTC Silver Investigation Theodore Butler |August 9, 2012 - 9:30am There has been an explosion of interest and commentary these past few days as a result of a front page story in Monday's edition of the influential Financial Times (of London). The story stated that the CFTC was set to drop its four year investigation into alleged silver price manipulation due to insufficient evidence to bring charges, according to three unnamed sources. I went to sleep Sunday evening when the story first appeared prepared to wake up to similar and confirming stories in other publications. Instead, there were no other stories confirming the case was set to be dropped; only strong statements that the FT was story was "premature" and "inaccurate in many respects" by a named source, Commissioner Bart Chilton of the agency. The CFTC's silver investigation is a hot button issue and the FT story, as well as Commissioner Chilton's response to it, set off an outpouring of emotion and conjecture in the precious metals world. And for good reason, as this is an extremely important issue. There can be no greater concern than whether a market is manipulated in price. The issue of a silver manipulation is also a divisive matter, even within the CFTC itself; otherwise there likely wouldn't have been leaks that the investigation was over and the immediate response of not so fast. As is usually the case with extremely divisive issues (like politics and elections), emotions take hold and the real issues can get distorted. Let me try to frame the picture in an unemotional manner. Admittedly, that's no easy task since I was the prime initiator behind this silver investigation and the two prior CFTC silver investigations in 2004 and 2008. (Too bad there's no Olympic event for initiating government investigations). However, the truth is that four years ago I was not trying to get the Commission to investigate, as they had just completed a few months earlier, in May 2008, their second silver investigation in four years. By then, I knew where the Commission stood on whether silver was manipulated and it was pointless to ask them to investigate again. I had a different motive in mind when I urged readers to write to the CFTC about the now-infamous Bank Participation Report of August 2008. That was the report that showed that one or two US banks held an obscenely large and concentrated short position in COMEX silver futures that amounted to 20% of world production and 30% of the entire COMEX silver market. No major market had ever been that concentrated. I knew that this short position was so concentrated that, in and of itself, it proved silver was manipulated because the price would be radically higher in its absence. That is always the litmus test for manipulation, namely, what would the price most likely be if a concentrated position did not exist? As a result of the August 2008 Bank Participation Report and subsequent CFTC correspondence to US lawmakers, I also learned at that time that JPMorgan was the big silver short, as I speculated on in this article. http://www.investmentrarities.com/te.../09-02-08.html This is when and where the precious metals world came to learn that the big silver short was JPMorgan. I asked readers to write to the CFTC not to investigate silver anew, but for the agency to simply explain how a big bank holding such a large percentage of the market would not be manipulation. This is a question that the Commission should have answered immediately since it was so basic to commodity law. The last thing I intended was for the agency to embark on a multi-year phony investigation as a delaying tactic for not being able to answer a basic regulatory question. Because the Commission could not explain the legitimacy of JPMorgan's concentrated short position, they continued to drag out resolution by pretending to investigate. But four years is an extraordinarily long time for any government investigation, phony or otherwise, and it appears that the CFTC has to confront the issue soon; hence the FT article. While the FT article was disappointing (at least it mentioned my name in a non-derogatory manner) and Chilton's response was encouraging, the reality is that it is unlikely that the investigation will be resolved much differently than the version leaked to the paper. For one thing, nobody likes admitting they had royally screwed up and if the Commission were to bring manipulation charges now in silver, it would be admitting that it missed the wrongdoing for the previous two decades, despite continuous and documented warnings from 1986. How likely is that? More importantly, were the agency to charge JPMorgan with manipulation of the silver price (as it should) that could set off a series of events that could easily grow out of control. One thing that makes the silver manipulation so potentially profound is that the core allegation is of a crime in progress. The CFTC has never busted up a manipulation that was in force; like most government agencies, it only reacts after the fact. Don't take that solely as a complaint, but more as an observation that governments are more reactive than proactive. Because the silver manipulation is very much in force, were it to be terminated by CFTC actions against JPMorgan and/or others, it would be a "live" event for the first time. History shows that all manipulations end violently. In the case of silver, since it has been depressed in price by a downward manipulation, its termination would necessarily cause prices to explode higher. Any charge brought by the CFTC would send a clear signal to the world that silver had been depressed in price and was undervalued and, therefore, should be purchased. This would cause a flood of buying and discourage new selling, causing the price to truly explode, most likely in disorderly market conditions. Do you find it likely that the CFTC would wish to cause that disorderly pricing that could lead to further unsettled conditions in other markets? If JPMorgan (and perhaps the CME Group) were found to be the main culprits in the silver manipulation and the CFTC brought charges against them, the repercussions to JPM and the CME could be a threat to them as going concerns. It was never a case that JPMorgan couldn't financially afford to buy back its concentrated silver short position; it was always a case that should JPM ever move to buy back aggressively to the upside that would prove conclusively that it had been manipulating the price of silver all along. That would set JPMorgan (and the CME) up for a legal holocaust, both civil and criminal. There has been talk of a civil litigation nightmare for those banks deemed guilty in the developing Libor manipulation; but determining damages will be difficult because the Libor rates were allegedly manipulated both up and down, making the damages unclear and hard to prove. Were there to be findings of a downward manipulation in silver, those damaged, from investors to producing companies and countries could easily demonstrate the damage. Back in the Hunt Bros silver manipulation of 1980, one of the successful litigants was Minpeco, the government producer organization from Peru, who I remember collected more than $100 million. That would be chicken feed compared to the consequences of the much longer downward silver manipulation of today by JPMorgan. And this says nothing of potential criminal liability. JPMorgan is perhaps the most important and influential US bank and for the CFTC to move against them in a matter as important as basic market manipulation could lead to unintended consequences that could threaten the world's financial system. Do you think the CFTC would dare challenge the supremacy of JPMorgan considering that potential financial fall-out? Besides, as I have written previously, JPMorgan is too big to sue, at least matched up against the CFTC. The matter of the bank manipulating any market is something that JPMorgan would defend against to the death, as for it to be found guilty could possibly end the bank in its current form. JPMorgan would certainly spend $5 billion (only one quarter's net profits) to fight any charges in connection with a silver manipulation and, at a minimum, delay a legal resolution for decades. On the other hand, the CFTC is struggling to fund the whole agency on $200 to $300 million annually. This is most likely the reason behind the leak to the FT about the silver investigation being dropped, namely, the CFTC is no match for JPMorgan and the agency knows it. This has nothing to do with law, or justice, or doing what is right; it is simply a case that the crooks at JPMorgan (and the CME) can bully anyone they chose, including the US Government. The most plausible alternative explanation, of course, is that the Treasury Dept ordered the CFTC to keep its hands off JPMorgan. Either way, it stinks. The truth is that the silver investigation was a ruse from the start in that the CFTC could never have moved against JPMorgan or the CME in any circumstance. The proof of that is evident in the many other specific instances of price manipulation in silver that have occurred after the soon to be dropped investigation began. The most obvious instances were the two separate 30% and 35% price smashes in a matter of days that occurred in silver in 2011. There never were such blatant price declines in such a short time in any world commodity in history, to say nothing about there being no obvious supply/demand changes to account for the declines. In other words, the CFTC started their third silver investigation four years ago as a way of avoiding having to explain how JPMorgan could be allowed to hold a clearly manipulative concentrated short position and then ignored the two greatest manipulative price events in commodity market history while the phony silver investigation was under way. Think of how devious and dishonest the CFTC has been; it announces a formal silver investigation to avoid having to answer bedrock regulatory questions, then ignores the two most manipulative prices events in history claiming it can't comment on them because there is an active investigation under way. If government officials could ever be horse-whipped for malfeasance and for failing to protect the public interest, surely the CFTC's performance in silver would permit it. I realize that what I have written to this point paints a picture that is not optimistic for the resolution of the silver investigation that most would favor. I am sorry about that, but I try to be an analyst and not an entertainer. That said I'd like to spend some time explaining why the outcome of a dropped case may not matter much and that the net result is good for silver. More than anything, this FT leak was likely a trial balloon for the CFTC to gauge public reaction to it dropping the case. If so, the reaction couldn't be clearer; even I was taken aback by the near universal condemnation of the agency for proposing to drop the case. I think what got to people the most was the suggestion that the agency would walk away without bothering to explain the concentration and the two historic price drops of 2011, to say nothing of the almost daily beatings in silver as a result of crooked High Frequency Trading. If anything, the FT article may have given legs to the silver manipulation allegations. While it was a mainstream media publication that leaked the story, the silver manipulation is surely not a mainstream media issue. The silver story is an Internet and private publication issue that grew despite being ignored in the mainstream media. As such, any declaration that the matter is now closed will not close it anywhere outside the MSM, where it was never accepted to begin with. It's not just that the silver manipulation was never accepted by the MSM, it was more a case of it never being allowed to be openly discussed. But legitimate questions of undue market concentration and historic and unjustified silver price movements are matters worthy of transparent examination that MSM censorship has been unable to stifle. Not only is the matter not going away, the leak to drop the case may bring greater attention to it. Such attention could prove to be the death knell for the silver manipulation, as the last thing the silver manipulators want or need is a fully transparent examination of the facts. One of my longest held beliefs has been that as time rolls on more would become aware of the real silver story and once they did, more investment demand in silver would result. That has occurred and any new attention brought to silver as a result of a dropped investigation will likely accelerate the process. The truly amazing thing is in how slowly the real silver story has spread in the ranks of super big investors. Aside from Eric Sprott, very large investors have overlooked the silver story completely. I am as certain as I can be that these very large investors just haven't taken the time to look objectively at silver. I think it's a case of silver being such a universally known item that most people assume they already know all the facts because they know what silver is. This includes very large investors who, in addition, may actually be turned off that so many smaller investors have invested in silver. It's a common human failing to dismiss something because others thought to be less knowledgeable got there first. In the long run, however, very large investors are more concerned with superior returns, so the key is getting them to look at silver objectively. The dropping of the silver manipulation may be that key. Perhaps the most amazing thing of all, at least to me, is the glaring fact that even after four years of non-stop public allegations about involvement in the silver manipulation, JPMorgan still remains the big short. It is hard for me to comprehend how such a large and powerful financial organization (as well as the CME) could silently tolerate the obvious reputational damage which is accruing. While JPMorgan's short COMEX silver position is in the lower range of what it has been since the Bear Stearns takeover of March 2008, it remains shockingly large and concentrated. After last week's big increase of 3000 contracts, JPM's short position, at 18,000 contracts (90 million oz), is still more than three and a half times the proposed position limit in silver. The most plausible explanation for why JPMorgan has not rid itself completely of this manipulative short position is because it can't do so easily. This is particularly true if JPMorgan tried to buy back its silver short position on rising prices. It would be a shock to the silver market system if the biggest short seller of last resort suddenly turned buyer. In essence, this is the root problem with concentrated positions in general – they cannot be unwound without market upheaval. For JPMorgan to turn to the silver buy side would beg the question – who would sell to them and at what price? The problem with the sharply higher silver prices that JPMorgan would cause if it turned silver buyer is that it would confirm that the bank was, in fact, manipulating the price of silver all along. To my mind, this means JPMorgan is trapped. They can't run and they can't hide. This is precisely the conclusion that any large investor would reach if that investor took the time to study silver closely. I can't see how that won't happen in time and a more bullish set up is hard to imagine. Of course, I would be the happiest guy in the world to be proven wrong about what the CFTC will do with the ongoing silver investigation. But the potential of the likely greater exposure of the real issues in silver that a dropped investigation would bring is plenty good. With silver, it's always been about getting people to learn the real facts. Ted Butler August 8, 2012 http://www.silverseek.com/commentary...-investigation | |||||
| Gold Production Down Another 4% In South Africa - Total Mineral Production Up 4.2% Posted: 09 Aug 2012 07:27 AM PDT gold.ie | |||||
| Keynesianism vs. the Gold Coin Standard Posted: 09 Aug 2012 07:01 AM PDT Keynesianism vs. the Gold Coin Standard Mr. Weldon has not written a book, so it is difficult for me to know exactly what his monetary theory is. He was the unknown Keynesian in the 2011 BBC debate between two teams of economists at the London School of Economics: The Keynes vs. Hayek debate. I assume that Robert Skidelsky, his partner, thought he was an up-and-coming economist. Skidelsky is the author of a multi-volume biography of Keynes. I think it would be a useful exercise to go through Mr. Weldon's case against gold. Clearly, he expects people to take it seriously. While I cannot bring myself to do this, having actually read it, I do think some editor at The Guardian took it seriously, even though he also read it. GOLD BUGS UNDER EVERY BED He begins with an historical statement. Ever since Richard Nixon ended the convertibility of the US dollar into gold in 1971, there have been calls for a return to some form of gold standard. Proponents of this view, often known as "gold bugs", want to see an end to paper money guaranteed by promises and for currencies to once more be backed by precious metal. In the last few years as central banks around the world have engaged in quantitative easing to try and support their economies these voices have become louder. This is surely comforting to any gold bug who is old enough to remember Nixon's announcement, made when Mr. Weldon's parents were teenagers. At the time, the number of gold bugs was limited to a handful of Austrian School economists and a few elderly souls who could actually remember the pre-1933 American gold coin standard. Over the next decade, the "hard money" newsletter industry blossomed in the United States, but the number of gold bugs who had access to the mainstream media was still not much larger than a few dozen people. I may be exaggerating these numbers. I cannot think of any gold bug in a professorial position in Great Britain. THE RHETORIC OF CONTEMPT Having misled the readers regarding the size and influence of the gold standard's acolytes, he gets rolling. The specific appeal of gold can be hard to rationalise: it might be aesthetically pleasing, but does that make it a sound basis for a monetary system? I see. Aesthetically pleasing. It's a matter of taste. Nothing substantive, you understand.Note: as a debater for over 50 years, I recognize this tactic. When a debater indulges in the rhetoric of contempt in his opening arguments, we can be sure of three things: (1) he thinks he has the judges on his side; (2) he has not got a strong substantive case; (3) he thinks his opponent has only recently fallen off the proverbial turnip truck. Sometimes I wonder if gold bugs just listened to too much Spandau Ballet in the 1980s. I cannot say that I am familiar with the Spandau Ballet. Wikipedia informs us that it was a popular rock band in Great Britain. What it has to do with gold eludes me. The phrase "too clever by half" comes to mind.Robert Skidelsky argued that supporters of the gold standard have an almost atavistic belief in its powers, rooted in the age-old worship of sun gods. I am quite familiar with Skidelsky's work. He is an economist-turned hagiographer. Of his eleven books listed in his Wikipedia entry, five are on Keynes. None is on any aspect of economic theory, including monetary theory.So far, in his first two paragraphs, Mr. Weldon has used three examples of rhetorical contempt, but no substance. This strategy plays well in the debate societies at Oxford and Cambridge, but it does not play well across the English Channel, let alone across the Atlantic. Mr. Weldon is clearly uninterested in any audience beyond Oxbridge and the Labor Party. THE "DISASTER" OF FALLING PRICES Here, he identifies the enemy position of all Keynesians. What they tend to ignore is that the world has tried the gold standard before and it was, in most respects, a disaster. Here is a statement. It is a conclusion. It is not an argument.The world tried the international gold standard from 1815 until the outbreak of World War I 1914, which was the greatest period of economic growth in recorded history. The world of 1900 would have been unrecognizable in its wealth for the masses by someone getting out of a time machine activated in 1800. At present, as the economy grows and produces more goods the central bank can expand the money supply to keep up with output. Under the gold standard, as output increases, the money supply will be fixed and with more goods but the same amount of money, prices will tend to fall. So, prices tend to fall under the gold standard. The horror! Why, the whole consumer price index would begin to resemble the cost of computing: ever less expensive. We must understand Mr. Weldon's argument in the light of economic theory and economic history since 1800. Economic theory teaches that economic growth reduces the effects of scarcity. A world without scarcity would be a world where demand and supply balance at zero price. Therefore, when there is economic growth, we should expect to see a world in which consumer prices are falling in the direction of zero prices. The gold standard fostered a world which conforms to the traditional call of economists, who preach the doctrine of salvation by economic growth. Mr Weldon is appalled by such a conclusion. Why? Because it points to a very great advantage of the traditional gold standard: reduced consumer prices. So, he invokes falling prices as evidence of the gold coin standard's disaster. He therefore implicitly invokes the good old days: greater scarcity, greater poverty, and the all-round economic misery, a la 1800. I am not using the rhetoric of contempt . . . yet. This really is the logic of his position. He continues. Falling prices might sound like a good thing, and in individual cases they often are, but a falling general price level is usually associated with severe economic strains. Why buy anything today if it will be cheaper next week? The end result tends to be falling output, rising unemployment, falling wages and a large increase in the real burden of debt. When he says "usually," he means usually since the end of World War I, in which the gold coin standard was abandoned in the West, except in the United States and the United Kingdom, 1925 to 1911, when Winston Churchill unwisely re-established the gold standard at the pre-War price, ignoring a decade of mass inflation. He did this for political reasons. The fake exchange rate maintained the convenient illusion: the fact that the men -- he and his colleagues -- who had taken the nation into that disastrous war and then had destroyed the pre-War pound sterling as an effect of their financing of the War through currency expansion had not in fact ruined the pound.Most economists now accept that both the Long Depression of 1873 to 1896 and the Great Depression of the 1930s were aggravated by the gold standard. In the 1930s the sooner countries came off gold, the faster they recovered. The period of 1873 to 1896 was the single most productive economic period of comparable length in mankind's history. In the section of Friedman and Schwartz's book, A Monetary History of the United States (1963), which the Keynesian economics guild never cites, they proved this with respect to the economic statistics of the United States.TWO KINDS OF DEMOCRACY Here, he raises the issue of democracy. A gold standard means that monetary policy and interest rates are set to defend the value of a currency against a metal rather than to reflect economic conditions in the country. As professor Dani Rodrik argued last night, this is fundamentally undemocratic. Here, we get to the political heart of the debate. The traditional gold coin standard transfers power over monetary policy to the broad mass of citizens, who can start a run on the banks at any time if they suspect that the central bank -- highly undemocratic -- is turning to inflation as a way to fund the government's debt. It is the democracy of the free market, and the democrats of the ballot box despise this aspect of the free market. They want monetary policy controlled by an alliance of central bankers, commercial bankers, and politicians, who all want to run larger national government deficits without raising interest rates.The opponents of the gold standard are always defenders of the autonomy of central banks from politics. This argument is correct. These banks are indeed autonomous, or close to it. The central bank is the most undemocratic official government institution in every nation. Calling for the insulation of the central bank from politics is politically comparable to calling for the secret police to be independent from politics, except that the secret police only threaten a few thousand people. The central bank's policies threaten the nation. Indeed the real reason that the gold standard could not be resurrected in a sustainable manner after its suspension the first world war was the extension of the franchise to incorporate the working class. Once workers had the vote they were unlikely to support politicians who continually put defending the value of money against gold over defending the number of people in work. The working class, through its ownership of gold coins, and its ability to cause a run on the banks by withdrawing their money in small gold coins, was in fact disenfranchised economically after World War I began. They refused to return to the pre-War gold coin standard in 1918. Politicians and bankers did not want to transfer this power back to the masses. Once the central banks in every nation stole the gold from commercial banks, who had stolen the gold coins of the depositors by breaking the contracts of full gold coin redemption on demand, the political elite never again let the masses have their coins.THE HIRED HELP The central bankers have long hired bright young economics graduates of Cambridge and Oxford to persuade the middle classes that fiat money creation by a politically independent central bank was just what the nation needed. The central bankers did the same in every Western nation. Of course the gold standard had its beneficiaries, most notably in the financial sector. Stable international prices and a very open global capital market in the era of the classical gold standard created a great environment for international bankers. Here, he reverses historical causation. It was the banking establishment that opposed the re-establishment of a gold coin standard. Why? Because it reduces the ability of the financial community to make massive profits through fractional reserves. Fractional reserves provide the leverage that makes large commercial bankers rich. This is why there is no such thing as a commercial bank that has publicly promoted the gold standard. The last major economist to be employed by a large commercial bank to write in favor of the gold standard was Benjamin Anderson. Chase let him write its newsletter. He left Chase and returned to teaching before the outbreak of World War II.Economically, the case for the gold standard simply does not stack up and yet it still finds very vocal supporters. Fundamentally the case is political rather than financial. Gold bugs want to see golden handcuffs restraining the ability of central banks to intervene and states to spend, they want to remove any vestige of political control of the monetary system and fix it an arbitrarily chosen shiny metal in order to let free market forces take over. It is therefore no surprise that most gold bugs are to be found on the libertarian right. Here, he finally gets to the truth. The issue is indeed deeply political. Gold bugs do indeed want to see golden handcuffs that restrain the ability of central banks to inflate. They want to substitute economic control by the masses who own gold coins for political control by an elite. So, gold bugs are usually found on the libertarian Right. CONCLUSION Mr. Weldon is part of a long and distinguished tradition of economists who spend their lives at the feet of central bankers, doing their ideological work for the bankers in exchange for a few scraps that fall from the table. If you detect the rhetoric of contempt creeping in, you are pretty observant. These men have baptized the state and the power of monetary debasement as the way of wealth. Every political class needs its court prophets. Every banking establishment needs politicians who do their bidding. Young men who are not good in physics or chemistry or engineering see their career opportunities at Oxford and Cambridge. They major in economics. The smart ones become bankers. The less smart ones become economists. The ones who are not smart enough to major in economics major in politics and become politicians. The bankers hire the economists to tell the politicians what to think. The economics graduates who are not good enough to get hired by the big banks go into financial journalism. August 9, 2012 http://lewrockwell.com/north/north1183.html | |||||
| Gold Production Down Another 4% in South Africa Posted: 09 Aug 2012 05:36 AM PDT Gold edged up on Thursday after China's CPI slowed to a 30 month low of 1.8% in July, factory output plummeted to a three year low and these clues signal more QE from China in the near future. China replaced India as the world's top gold consumer at the end... | |||||
| China Stimulus 'Likely to be Positive for Gold' Posted: 09 Aug 2012 05:13 AM PDT Wholesale market prices to buy gold bullion hovered in a tight range around $1,615 an ounce for much of Thursday morning in London – marginally above where they started the week – before dipping slightly around lunchtime. | |||||
| GATA's Chris Powell on the Silver Manipulation Probe & the Fed Gold Audit! Posted: 09 Aug 2012 04:34 AM PDT Pretty good interview with Lauren Lyster. | |||||
| Posted: 09 Aug 2012 04:31 AM PDT
from harveyorgan.blogspot.ca: Good evening Ladies and Gentlemen: Gold closed: today up to the tune of $3.20 to $1612.90. Silver was down one cent at $28.07. Today we got news from Germany with a lower industrial production number coupled with their lower factory orders. This is extremely dangerous to this high exporting nation. All of Europe is counting on Germany bailing out Italy and Spain. However with Germany's exports floundering, the odds of them bailing out any of the PIIGS nations is slight to zero. In Spain we saw Industrial Output down a huge 6.3%. It expects its GDP to fall this year by 4.5%. Many are thinking in terms of a negative 8%. Italian banks showed a huge increase in bad loans of 15.8%. All in all a bad day for Europe and their bourses fell on average by 1/2%. We will go into all of these stories but first: Let us now head over to the comex and assess trading today. Keep on reading @ harveyorgan.blogspot.ca | |||||
| Gold Daily and Silver Weekly Charts – Cap and Coil, Cap and Coil Posted: 09 Aug 2012 04:22 AM PDT
from jessescrossroadscafe.blogspot.ca: The Chris Powell interview which I posted the other day is quite good, and I suggest you watch it if you have not done so already. Someone is leaning all over the precious metals market. It is hard to tell who and why and when it might stop, but history suggests that if these fellows lose control of it, the result could be impressive. That might make for a fairly straightforward trading strategy, except that Europe is tilting on a knife's edge of insolvency, and that induces quite a bit of event risk in the cash markets. The real economy is faltering, the international money exchange system is broken, the financial system is crooked, and the politicians are in the grip of the monied interests and a nasty credibility trap. Other than that, everything is fine. Keep on reading @ jessescrossroadscafe.blogspot.ca | |||||
| There Is More to Gold than Mere Capital Appreciation: John Hathaway Posted: 09 Aug 2012 04:13 AM PDT
from theaureport.com: John Hathaway, senior managing director of Tocqueville Asset Management, does not particularly trust banks to keep stores of physical gold safe and segregated. Indeed, he considers his black lab Jake a better watchdog than the SEC. That is why he favors the SmartMetals program from Hard Assets Alliance, a new service launched in July. Hard Assets Alliance has partnered with Gold Bullion International (GBI) to offer precious metal purchasing and storage solutions to retail investors. With more investors realizing that safety of capital is the real reason to own gold, safe storage is more important than ever. Read more in this exclusive Gold Report interview. The Gold Report: John, you predicted $2,000/ounce (oz) gold prices. After rising to $1,900/oz last fall, the price has hovered at $1,500–1,600/oz much of 2012. What will cause it to take the next leg up? John Hathaway: There are several factors that I think will drive gold higher. On the monetary side, central bankers and treasury secretaries are bobbing and weaving, making it up as they go. They lack a comprehensive solution to the sovereign debt crisis in Europe, to the forces that are pulling the Eurozone apart or to the stagnation in the world's key economies. Ultimately, all of this will further debase the value of paper currency. Keep on reading @ theaureport.com | |||||
| Posted: 09 Aug 2012 04:12 AM PDT
from whiskeyandgunpowder.com: As you can figure out, especially if you're a longtime reader, you had better have your stash of physical gold and silver. Furthermore, if you haven't noticed lately gold is on sale. The shiny stuff trades at a 17% discount to last year's highs. Today, with gold prices heading higher — $2,000, 3,000 or even $5,000 — holding the physical metal is more important than ever. That's why I want to make sure you know the ins and outs of the physical gold market. Consider this your entry level "101" college course on gold. Before we get to the specifics of holding physical gold, let's take a look at the reasoning behind this trend with a brief overview of gold's legacy… Keep on reading @ whiskeyandgunpowder.com | |||||
| Posted: 09 Aug 2012 03:55 AM PDT July hottest US month on record BBC Fossils point to a big family for human ancestors Nature (skippy) Stress makes men appreciate heavier women: study PhysOrg (Chuck L), I don't know if the problem is the study or PhysOrg, but based on my experience, it's PhysOrg. The summary says stressed men also appreciated NORMAL women more AND a broader range of body types. This just means 1. Stressed men want/need sex more than normal men and 2. They are therefore less fussy. Facebook wants court to rule 'Like' button is protected speech Associated Press (Lambert) How to Spot the Next Big Banking Scandal MIT Technology Review (Chuck L). The flaw is in the assumption that senior management wants to stop fraud. Chinese telecoms giants are taking over the world. Should we be scared? Maeve McClenaghan (Chuck L) Special Report – China's answer to subprime bets: the "Golden Elephant" Reuters (Scott via FT Alphaville) China's July disappoints MacroBusiness Economic growth in eurozone impossible without break-up – Wolfson Prize winner RT (furzy mouse) Greek Government Could Collapse In These Times (Matt Stoller) Greece's Power Generator Tests Euro Fitness Amid Blackout Threat Bloomberg Southern White Democrats Face End of Era in Congress Wall Street Journal (Joe Costello) Study: Pretending Everything's Okay Works Onion. Obama commissioned this study. The Liar Mitt Romney and a Legacy of 'Welfare Reform' Charles Pierce, Esquire Moment of truth for US grain Financial Times Median Wages Have PLUMMETED Since 1969 George Washington Upper-Middle-Income Households See Biggest Jumps in Student Loan Burden Wall Street Journal. So maybe we'll have to do something about it? Chase CEO: Placing blame hurts economy Columbus Dispatch. More Dimon principle. Economies are like children, you don't dare hurt their self esteem. And saying bad things about prominent people, especially big bank CEOs, is very hurtful. * * * D – 30 and counting* "I willingly allow that money does not guarantee happiness; but it must also be allowed that it makes happiness a great deal easier to achieve." –Pierre Choderlos de Laclos, Les Liaisons Dangereuses Montreal. Law and order: "Now that demonstrations against his government are back and louder than ever, Jean Charest has challenged other party leaders to condemn any violent act on the part of protesters." Stinks of a set-up for the Sept. 4 election. … Law and order: "Students marched to Hydro-Quebec Wednesday, seeing it as a symbol of provincial government power, but then police moved in claiming somebody had thrown a projectile. There were no arrests." … Corruption: "According to [McGill's Daniel] Weinstock, though, the Liberals are going to get the brunt of the public's anger for two reasons — first, [Charbonneau Commission star witness] Duchesneau has pointed his finger squarely at the Charest government as a font of malfeasance. Second, since the PQ has been out of power for nine years, 'its slate has been wiped clean.'" CA. Extractive economy: "The question asked most often [at a Richmond town hall on the Chevron refinery fire] was, 'What are we breathing?'" CT. Ballot access: "It appears that the only presidential petition likely to succeed in CT is the Libertarian Party petition. The state requires 7,500 valid signatures. The Green Party made a valiant attempt, but seems to only have 7,000 signatures in hand." FL. Class warfare: "Pressler [here] draws a picture of [FL D hedgie Jeff] Greene, 57, worth an estimated $2.1 billion, as a man who lives in fear of a populist revolt, a plundering uprising of America's 'poor people.' As a member of the country's richest 1 percent, Greene claims the nation's wealthiest people, people like himself, should pay more in taxes willingly — 'buy a little democracy insurance' – because one day, 'if you have 50,000 angry people coming across the river, you think you're safe?'" … RNCon: "Demonstrators, rather than politicians and media members, will generate the most foot traffic for downtown and Ybor City bars and restaurants not directly involved with the conventio, observers say." LA. Transparency: "Louisiana's education chief has refused to provide records from the deliberations over how schools were chosen to participate in Gov. Bobby Jindal's new statewide voucher program, which is using tax dollars to send students to private and parochial schools." NC. DNCon: "Michael Zytkow, 26, and a veteran of Occupy Charlotte, said he would like 'to normalize protest culture in Charlotte.' He looks back as well as ahead, to 'the long history of protest culture in the South,' including the sit-in movement during the civil rights struggle. 'We want to make sure we don't squander this time.'" …DNCon: "Trucks delivering food, including caterers and food and beverage suppliers, must first go to a remote delivery site at 900 N. Davidson St. for screening. They will then be escorted to their destinations." NJ. Emergent parties: "When the Democratic party gets serious again about representing its base, they will let me know in a significant way.Now, you have two viable alternatives: Anderson or Jill Stein." NY. Fracking, Cuomo plan: "Home Rule: The rights of local governments to ban shale gas development has been recently recognized by the New York State Supreme Court, which upheld local drilling bans in the towns of Dryden and Middlefield. New York State Environmental Conservation Law, however, states that local governments do not have jurisdiction over gas well development. It will likely take legislation to resolve this key inconsistency." Good detail…. Fracking, Cuomo plan: "'[G]reen completions' would be required [where] feeder pipelines are in place prior to the fracking of a well, so that no methane is vented or 'flared.'[M]any gas wells end up being dry holes, even after fracking. If the industry must build pipelines to wells in advance of knowing whether or not those wells would produce, it will have costs in NYS far above the costs it would have in, say, OH or PA." (IOW, no "flowback.") More good detail. OH. Demographics: "A new Ohio State University study released Monday shows that the North American Amish numbers are doubling every 22 years, a staggering growth that even researchers didn't expect." PA. Ballot access: "On August 8, two attorneys working for various R officials filed challenges to the validity of the Libertarian Party statewide petition and the Constitution Party statewide petition. No challenge was filed against the statewide Green Party petition." TX. Class warfare: "San Antonio, Houston, and Dallas-Fort Worth are apparently the nation's most economically segregated metropolitan areas, according to a new Pew Research Center study." … Transparency: "A proposal to give Houston City Council the ability to meet behind closed doors is dead." VA. Food: "Bringing healthy fruits and vegetables to Richmond's "food desert" is the easy part of the job at Tricycle Gardens. The nonprofit environmental group grew 40,000 pounds of fresh, organic produce on its ½-acre urban farm last year – basil and sage; berries and melons; beans and squash – and distributed most of it locally through local farmers markets and food banks." Grand Bargain™-brand Catfood watch. Media critique: "[Obama] particularly believes that Ds do not receive enough credit for their willingness to accept cuts in Medicare and Social Security." Oh, there are "niche online outlets" that give Obama plenty of credit. … Student loans: "[T]he federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans." "The economy." Why it sucks: "[JAMIE DIMON:] It's because of us. We scapegoat each other. We point fingers.'" Outside Baseball. Happiness: "'We should seek better and more-direct measurements of economic well-being,' Bernanke said Monday in a video-taped speech shown to a conference of economists and statisticians in Cambridge, Mass. After all, promoting well-being is 'the ultimate objective of our policy decisions.'" Oh? …. Big Oil: "The dirty oil from [Keystone XL] would displace three-quarters of all the carbon-emission gains we're getting from CA's auto-emissions standards, a battle that took 25 years to win." … Census: "To keep pace with rapidly changing notions of race, the Census Bureau wants to make broad changes to its surveys that would treat 'Hispanic' as a distinct category regardless of race, end use of the term "Negro" and offer new ways to identify Middle Easterners. census data are used to distribute more than $400 billion in federal aid and draw political districts" The trail. Polls: "A new Reuters/Ipsos poll finds Obama has expanded his lead over Mitt Romney, 49% to 42%, even though nearly two-thirds of Americans think the country is moving in the wrong direction. " … Polls: "40% of Americans overall view Romney favorably, 49% unfavorably – leaving him underwater, at least numerically, in 10 straight ABC News/ Washington Post polls this year." …. Polls: "in every state except FL, the polls show that a significant gender gap has opened among working-class whites, with Obama performing much better among white women without a college education than blue-collar white men." … Supreme Court: "When we've reached a point where a Supreme Court Justice [Scalia] floats the idea that the right to bear arms just might include 'handheld rocket launchers' it's definitely time to make the Court a talking point in this campaign." Green Party. NY: "'How long are we going to vote based on our fears and not for what we want?' [House candidate Ursula Rozum] said." Romney. Charisma?! "A family abandoned the bride and groom of an Orthodox Jewish wedding party mid-photo shoot to chase the [Romney] car. 'At least 10 members of the wedding party' tried to reach Romney, with one man going so far as to attempt to scale a wood fence." … Class warfare: "Romney could also have thanked investors from two other wealthy and powerful Central American clans — the de Sola and Salaverria families, who the Los Angeles Times and Boston Globe have reported were founding investors in Bain Capital. While they were on the lookout for investments in the United States, members of some of these prominent families — including the Salaverria, Poma, de Sola and Dueñas clans — were also at the time financing, either directly or through political parties, death squads in El Salvador." … Losing the political class: "Dan Ackroyd: '[Romney] wears a girdle, I think.'" Earth tones! … Veepstakes: "We [First Read] can say with a high degree of confidence that Romney's vice-presidential pick has largely come down to three men: former MN Gov. Tim Pawlenty, U.S. Sen. Rob Portman, and House Budget Committee Chairman Paul Ryan. And it's more than possible that Romney has already made up his mind." … Veepstakes: "[M]y gut instinct and contrarian nature make me think we could be in for a preconvention surprise. Why not New Hampshire Sen. Kelly Ayotte, whose down-to-earth sensibility would offer a useful complement to Romney's patrician persona?" … Veepstakes: "Still, the election is close enough that these marginal effects could matter — and an extra point for Romney in OH [Portman] or VA [McDonnell] would be awfully nice for him right now." … Veepstakes: "Last night, Stephen Colbert played a snippet of a Fox News report noting the jump in last-minute edits to Sarah Palin's page four years ago. '[COLBERT:] We could be looking at Vice President Season Six of Buffy-the-Vampire Slayer. So, Nation, let your voice be heard in this history decision. Go on Wikipedia, and make as many edits as possible to your favorite VP contender.'" (see). Obama. War on women: "Obama on Wednesday accused Rs of wanting to take the nation 'back to policies more suited to the 1950s than the 21st century' during a campaign stop aimed at securing support from women." … Money: "President Obama's reelection campaign is launching another contest, where entrants can have the chance to play in the "Obama Classic" and shoot hoops with 'some of the best basketball players alive.' Listed in support are Michael Jordan, Patrick Ewing, Sheryl Swoopes, Carmelo Anthony, with others to be announced." … Oopsie: "Obama's re-election campaign washed its hands Wednesday of an independent group's vicious (and misleading) ad effectively blaming Mitt Romney for the death of a laid-off steelworker's wife from cancer." … Oopsie: "But a new radio ad the Obama campaign is running in OH might be a new low, dinging Mitt Romney for remarking that coal 'kills people.' Here's the thing: the plant Romney was talking about actually does kill people." … September reach-around: "Speculation is rising that the Fed will take action in September, and that's led to a rise in stock prices, with the S&P closing above 1,400 for a time on Tuesday. This wouldn't be an October surprise, but it could seal the deal for Obama despite the bad economic times. Few presidents lose reelection when markets rise in the three months prior to Election" (and see Nate Silver). * 30 days until the Democratic National Convention ends with vats of iced tea for everybody on the floor of the * * * Antidote du jour:
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| Marshall Auerback: Get Ready For the Gold Rebound Before it is Too Late Posted: 09 Aug 2012 03:00 AM PDT ¤ Yesterday in Gold and SilverThe gold price was under light selling pressure during most of the Far East trading day on Wednesday...and this pressure intensified shortly before 10:00 a.m. in London...and the low of the day...$1,603.40 spot...came about 1:15 p.m. BST...or about five minutes before the 8:20 a.m. Eastern time Comex open. From that low, the gold price tacked on a quick fifteen bucks by 9:40 a.m. Eastern time, which may or may not have been an early London p.m. gold fix. But from that high tick...which was $1,617.90 spot...either the price got capped, or the buyer disappeared...and the gold price chopped lower into the 5:15 p.m. close of electronic trading in New York. Net gold volume was ultra-light once again...around 91,000 contracts...and gold closed up 30 cents from Tuesday...and an even dollar from Monday's close. You have to wonder if a trader for JPMorgan et al is winning some sort of prize for getting those three days of closes so close together.
Silver's price pattern was virtually the same as gold's, but with more 'volatility'. The only major difference being the timing of the high tick of the day...which was $28.37 spot. That came around 11:35 a.m. Eastern...almost two hours after gold's high. From that high, silver got sold off more than a percent going into the close. The low tick in New York came right at the New York open...and that was $27.67 spot, so silver had quite a trading range...2.5% to be exact. Net volume was very light once again...around 23,000 contracts...and silver closed at $28.04 spot, down a nickel from Tuesday.
The dollar index chopped higher in a fairly narrow range...with the high tick of the day [82.77], such as it was, coming at 9:00 a.m. Eastern time right on the button. From that high, the index rolled over...and hit its New York low [82.52] shortly after 11:00 a.m...which was silver's low tick of the day. From there it rallied a bit until precisely 2:00 p.m. Eastern...and then slid lower in the close, finishing Wednesday just about where it closed on Tuesday...and Monday as well....around the 82.30 mark.
The stocks rose about a percent...and then traded sideways in a narrow range right up until 2:00 p.m. in New York. Then a sell-off began...and the stocks got sold down and the HUI closed the trading day almost on its low...down 0.68%.
With the odd exception, the silver stocks finished down across the board, but not by a whole lot. Bu the stocks that mattered finished higher on the day...and Nick Laird's Silver Sentiment Index close up 0.55%.
(Click on image to enlarge) The CME's Daily Delivery Report showed that 283 gold and zero silver contracts were posted for delivery in the Comex-approved warehouses on Friday. The biggest short/issuer by far was the Bank of Nova Scotia with 207 contracts...and the two biggest stoppers were HSBC USA and Deutsche Bank with 162 and 92 contracts respectively. The link to yesterday's Issuers and Stoppers Report is here. There were no reported changes in either GLD or SLV...and no sales report from the U.S. Mint. The Comex-approved warehouses had more activity to report on Tuesday. They received 209,675 troy ounces of silver...and shipped 654,826 ounces of the stuff out the door. Happily, I don't have that many stories today...and a lot of the ones I do have are precious metal related, so I hope you at least have time for those. We seem to be in a holding pattern of sorts...losing ground in the London market...and then gaining it all back in New York, or vice versa. Gold will hit new highs in 2013 and beyond - Blanchard. Centennial's Peter Grant: Gold technicals portend impending breakout. Small change sparks fights in coin-starved Zimbabwe. ¤ Critical ReadsSubscribeHigh Frequency Traders Are "Parasites" That Erode Investor Confidence: PolcariIt was inevitable. No sooner had word gotten out that Knight Capital had managed to find a way to survive, and the focus of debate has changed to something more sinister. As stupid or careless as Knight's admitted software glitch or mistake was, it would never have happened had it not been for the legion of computer-assisted, high-speed traders who prowl the markets in search of opportunities exactly like this - then pounce. Knight's blunder was their bounty. Whether you call them high frequency traders, H-F-T's or algos (shorthand for algorithmic or computerized trading programs), by any name they are "parasites" says Kenny Polcari, Managing Director at ICAP. "When you sit down and look at really what is the role that high frequency traders play, it's frustrating," Polcari says in the attached video. "What are they really here for? They're buying and selling 100 share lots, up and down for pennies all day long." This 4:53 video, along with the story itself, was posted on the finance.yahoo.com Internet site early on Tuesday morning...and it's well worth watching. I thank West Virginia reader Elliot Simon for sending it...and the link is here.  From Chicago To New York And Back In 8.5 MillisecondsBack in 2009 when the world wasn't filled with HFT 'experts', we deconstructed the topic of High Frequency Trading on a daily basis, and predicted not only the flash crash, not only debacles such as the Knight trading fiasco, not only the death of capital markets as a fund raising vehicle for companies who wish to go public (i.e. the FaceBook IPO fiasco), but much more. HFT is so embedded in markets that un-rooting it would result in a complete reboot of "fair" stock valuation: imagine what would happen to stock prices if Knight and its "buy everything" algos were no longer present. Mass hysteria as the realization that vacuum tubes are now TBTF. This story was posted on Zero Hedge yesterday...and I thank reader U.D. for sharing it with us. The link is here.  Bernanke's Nightmare Audit Pushed for Romney's PlatformAs they look to their national convention starting in Tampa on Aug. 27, Republicans are considering including a plank in their party platform calling for a full audit of the central bank. Prodded by the failed primary bid of longtime Fed critic Ron Paul -- and the grassroots enthusiasm the Texas congressman's cause inspired among bail-out weary Tea Party activists and small government advocates -- Republicans are entertaining a prospect that has long made them and some of their financial supporters cringe. Paul, in an interview, warned that if Romney's backers resist the effort, it could result in a politically distracting and messy fight in front of the national media. "It's good economics and it's good legislation, but it's also good politics, because 80 percent of the American people agree with it," Paul said. If Republican leaders "exclude it, I would think some of my supporters would be annoyed and feel strongly enough to take it to the floor under the rules." This Bloomberg story was posted on their website early on Tuesday morning...and I thank Washington state reader S.A. for bringing it to our attention. The link is here.  Standard Chartered begins fightback on Iran allegationsCowboy local regulator or the exposer of lax federal bureaucrats? That's the key question being asked about New York banking regulator Benjamin Lawsky after his explosive charge that London's Standard Chartered bank abetted $250 billion of money-laundering transactions with Iran. Standard Chartered won help Wednesday from Britain's central bank governor, who portrayed Lawsky as marching to his own tune, and marching out of step with federal regulators in Washington. "One regulator, but not the others, has gone public while the investigation is still going on," the Bank of England's Mervyn King said at a news conference in London. Meanwhile, the U.S. Treasury Department, in a letter responding to a request for clarification from British authorities, said it takes sanctions violations seriously. Damage control is in full swing. I'll bet that the powers that be make this story disappear very quickly. This Reuters piece was posted on the finance.yahoo.com Internet site early yesterday evening...and I thank Phil Barlett for digging it up on our behalf. It's certainly worth skimming...and the link is here.  Euro founder admits some nations may be forced to leaveOne of the founding fathers of the euro admits that some states may be forced to abandon the single currency, but insists Germany would be better off staying in. Otmar Issing, a former European Central Bank chief economist, warned that the eurozone could be heading towards fracture in a book called How we save the euro and strengthen Europe published this week . "Everything speaks in favour of saving the euro area. How many countries will be able to be part of it in the long term remains to be seen," said Mr Issing in the book, which is written as a conversation between an economist and a journalist. At no point did he explicitly refer to Greece, but the debt-stricken country has been hovering perilously close to default and an exit from the eurozone as it makes harsh spending cuts and tax hikes to appease the EU and ECB after receiving billions in bail-out payments. This story was posted on the telegraph.co.uk Internet site late Wednesday afternoon BST...and I thank Roy Stephens for his first offering of the day. The link is here.  Printing Money The European Central Bank's Discreet Help for GreeceThe European Central Bank is now taking risky measures to help save Athens from its acute financial emergency. Increasingly, euro-zone leaders are pushing the dirty work on the ECB. In the end, though, they will likely have no choice but to pay Greece the next tranche of its bailout package. "There is no time to lose," Jean-Claude Juncker warned just a few days ago. Leaders must use "all means at their disposal" to save the currency union, the head of the Euro Group said. But one thing is becoming clear: Politicians are increasingly pushing the dirty work on to the European Central Bank (ECB). Take Greece, for example, where liquidity is becoming scarce. The government in Athens needs to repay a maturing bond worth €3 billion ($3.7 billion) to the ECB by Aug. 20. The solution to that problem seems paradoxical: The ECB itself is pumping money into Greece, so that the country can in turn repay the ECB. It's a controversial plan, because the central bank is prohibited from financing governments directly. As a result, no one is talking openly about the absurd flows of money. The ECB has only hinted that it will extend a helping hand to Greece. Nigel Farage was right. You couldn't make this stuff up! This story was posted on the German Internet site spiegel.de yesterday...and is Roy Stephens second offering in a row. It's definitely worth reading...and the link is here.  France heading back towards recessionFrance is headed back into recession for the second time in three years, its central bank warned Wednesday in a setback for the recovery prospects of the stricken eurozone. In a downbeat survey of the outlook for Europe's second biggest economy, the Bank of France predicted a 0.1 percent contraction in gross domestic product (GDP) for the third quarter of this year. If that outcome is confirmed it would follow a similar fall in output for the three months to June and zero growth in the first quarter of 2012. France is also grappling with a trade deficit running at close to record highs, despite shrinking in the first half of the year. This AFP story showed up on the france24.com website yesterday...and it's also courtesy of Roy Stephens. The link is here.  John Mauldin: Keep Your Capital IntactIt's a sure sign of economic trouble when even the perma-bulls acknowledge pain is coming down the pike. That is exactly what John Mauldin of Mauldin Economics sees, as he told David Galland in an interview at our Spring Summit, Recovery Reality Check. Watch the video - or read the transcript if that's your preference - to learn why John thinks the period through 2013 is vitally important for the US economy and what he thinks the number-one priority for investors is during that time frame. This 20-minute video interview was imbedded in yesterday's edition of Casey's Daily Dispatch...and is well worth watching. The link is here.  Three King World News BlogsThe first is with market veteran Richard Russell...and it's h | |||||
| Small change sparks fights in coin-starved Zimbabwe Posted: 09 Aug 2012 03:00 AM PDT  Shouting matches and even physical fights break out each time a mini-bus pulls up to drop off passengers at a crowded bus stop in downtown Harare. It's all about not getting short-changed. Hyperinflation forced Zimbabwe to trash its worthless local currency three years ago in a move that brought much needed relief to the crippled economy but created a surprising new headache: a lack of coins. "Change is a big problem, and at the same time passengers are impatient with us. I have been slapped a few times for not having change for them," said a bus conductor Walter Chakawata. The US dollar and the rand from neighbouring South Africa are Zimbabwe's main adopted currencies. The dollar, however, is preferred and all prices are pegged to it. | |||||
| Gold Producers in the Catbird Seat: Jay Taylor Posted: 09 Aug 2012 02:05 AM PDT Calling gold the ultimate money, the editor and publisher of Jay Taylor's Gold, Energy & Tech Stocks, watches the real price of gold with a gimlet eye. These days, he pays particular attention to producers, noting that this is not a good time to be an explorer that needs to... | |||||
| Standard Chartered Makes Empty Threat to Sue New York Regulator Over Iran Money Laundering Posted: 09 Aug 2012 02:02 AM PDT I have to confess I'm really enjoying the dust up between the New York Superintendent of Financial Services, Benjamin Lawsky, and his opponents, namely, his target, Standard Chartered, and the flummoxed Federal regulators that he is showing up as so deeply captured that they genuinely can't tell regulatory theater from the real thing. The amount of consternation directed at Lawsky is telling. It's as if he brought a heavily tattooed and body pierced trannie to a country club. He's flouted the rules in a way that offends his detractors deeply, and yet he also can't be brought to heel. The complaints in the media are a sign of powerlessness. As long as Lawsky has Governor Cuomo's backing, the Feds and the unhappy Brits can't get at him. The lead story in the Financial Times on SCB is so obviously barmy that I'm astonished that the pink paper would give it prominent play. The headline: StanChart seeks advice over countersuit. Even floating this as an course of action reeks either of desperation to create positive news hooks or delusion:
The whole "delicacy" part is code for this having odds of close to zero of happening, so this looks like yet more spin. The damage was done by the threat to yank the license and access to dollar clearing services, not the "rogue institution" label in the order. And as we've written in earlier posts, despite the spinmeister's efforts to contend otherwise, Lawsky has cited violations of New York law that appear to let him get there, in addition to the charge under the Federal laws on transfers to Iran. And this sort of suit would put any other damaging evidence that Lawsky has in the public domain for the media to pour over it. In addition, any suit against Lawsky would be a state law matter, and my sources thought it would be subject to the abuse of discretion standard, which is a very high bar. One reaction via e-mail: "No chance they risk their ticket on a NY state court finding that Lawsky abused his discretion. None. Zero." The astonishing thing is that SCB genuinely seems to not understand that the way its legal and compliance department operated are just damning. Frank Partnoy, former derivatives salesman, now law professor, provides a good discussion in an FT comment today (emphasis ours):
Bear in mind that Lawksy set a hearing date of next Wednesday. An informed source wrote:
Or put it another way: if there is a hearing, this is a sign of a complete breakdown in negotiations, a belief of at least one side that they can't negotiate in good faith. And it might also be a sign that SCB can't get its mind around how the facts simply aren't on its side. But either way, this refusal by Lawsky to act like a proper regulatory lapdog is exposing all sorts of fault lines, which should prove salutary in the long run.
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| Links for 2012-08-08 [del.icio.us] Posted: 09 Aug 2012 12:00 AM PDT
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| Gold Close to Confirming New Breakout to Highs Posted: 08 Aug 2012 11:52 PM PDT Crowd behavior is crucial to the next coming movement in gold and it could be a sharp rally that catches many off guard, much like the downdraft last fall did the same to the bulls. Be prepared to go long gold once over $1,630 per ounce and buy dips along... | |||||
| Posted: 08 Aug 2012 10:06 PM PDT We do not usually write cheesy headlines in the Daily Reckoning. But looking over Rio Tinto's half yearly results and presentation yesterday, we couldn't help it. The presentation was all about iron ore. That shouldn't be too surprising. After all, in the six months to 30 June iron ore accounted for nearly 85% of Rio's earnings — and to think it's still called a diversified miner. As if to allay fears that investors might have over its iron ore exposure, Rio dedicated many slides to the all-important sector. CEO Tom Albanese kicked off with the China card. 'China Stimulus supports Q4 demand, but near term risks remain.' In other words, there are some short term issues related to the broken Western consumption model, but China will more than make up for this. He then goes on to list all the plans announced by central and local governments over the past few months, obviously implying that these announcements are good for iron ore demand. Maybe they are. Maybe they're not. Maybe these plans won't all see the light of day. After all, there is a big difference between boldly announcing some mega-project, and financing it. Although all it would take is for the government to direct its state owned banks to hand the money over. The banks, practicing a primitive form of risk management (if we don't hand over the money we'll lose our jobs and seats on the gravy train) do as they are told. Most apologists for central planning would argue that this is exactly what should happen. The economy slows, so the government should spend more to prop up growth. What this reasoning fails to understand is that the government doesn't have any money. It either has to borrow it by issuing bonds, or the banks providing the loans must borrow the money from somewhere too...either from their depositors or through issuing corporate bonds. In a closed capital market where foreign capital inflows are restricted, most of this money comes from the Chinese household sector. In the good old days of burgeoning trade surpluses and rising foreign exchange reserves, the household sector could fund this profligate spending with ease. That's because as the FX reserves flowed in, the People's Bank of China would print yuan to maintain a fixed exchange rate with the US dollar. It was liquidity heaven. But the slowdown in Western consumption, combined with wage increases in China which make exports less competitive, mean the flow of dollars and euros have slowed to a trickle. The fixed exchange rate, pretty much the source of China's epic liquidity and credit boom, no longer has its once powerful effect. So the ability of the household sector to keep funding infrastructure investment is not as strong as it once was. It can still do so, of course...that's what financial repression is for. But calling on the household sector to finance another round of infrastructure spending will delay the desired rebalancing away from investment led growth. Which brings us back to Rio and iron ore. Yes China may have announced all these iron ore hungry measures, but how much extra demand will they really bring about? With weaker overall demand and a big increase in supply hitting the market over the next few years, what will happen to prices? They've already fallen heavily from all-times highs of around US$180 per tonne. But at current levels of around US$116 per tonne, they are still well above historic levels. In its presentation yesterday, Rio pointed out that a 10% fall in the iron ore price would wipe US$1 billion from its bottom line. Ouch. With iron ore being so overwhelmingly important to Rio (and to a lesser extent BHP) we wondered how the divisions' profitability had changed over the years. So we went back through the annual reports from 2005. In 2005, you might remember, the China boom was hitting its straps. Kids not far out of school weren't quite getting paid $150,000 to drive a big truck, and the tattoo revolution was still to take off, but things were warming up nicely. Below we show Rio's iron ore divisions' return on assets. In 2005 and 2006, Rio only provided 'operational earnings' in its annual report, which is earnings before interest and tax. So for those years we adjust for a 30% tax rate and assume no interest payments. From 2007 onwards, we use net profit divided by operating assets, as provided by Rio. Rio Tinto's Iron Ore Division Return on Assets 2005 - 27.8% There are a few things to take into account here. We've included a chart of the Reserve Bank's commodity price index to help out.  Source: RBA The big jump in 2008 profitability was due to a big spike in prices as well as an asset value adjustment in Rio's books that year. The dip in 2009 related to the credit crisis while the incredible rebound in 2010 and 2011 was all about China stimulus. Now in 2012 things look like they have come off the boil. But much of the decline in profitability relates to a big increase in iron ore asset values. This reflects Rio's major expansion projects to increase production over the next few years. Without the increase in asset value, the iron ore division still generated profitability of around 70% in the first half of 2012. For all the talk of gold being in a bubble, we haven't seen any major gold producer managing to generate profitability of 70% or greater...for three years running. Granted, the economics of mining iron ore versus gold are entirely different. One is plentiful and the other is precious. Yet the market, in all its manipulated and coerced wisdom, says the reward for digging up iron ore is many times greater than that for getting gold out of the ground...a much tougher process. In fact, the rewards for shipping iron ore to China are greater than for any other commodity we know of. This could mean a couple of things. That we are in a massive iron ore bubble, inflated by the genuine belief in China's industrialisation process and its ability to maintain investment led growth at all costs. Or it could be that China's economic rise is unprecedented in size and scope, and that very high returns on assets are sustainable given this view. We'll opt for the first option. And as you can see from the chart, the bubble bust has begun. The rest of 2012 will be about China's ability to reinflate this bubble (indirectly) and keep Rio Tinto, and the Aussie economy, humming along. Regards, Greg Canavan From the Archives... As Draghi Drags the European Crisis On China's Economy - How the Devil is in the Detail The Greatest Interest Rate Fix featuring... Mario Draghi and Friends What the Credit Boom Left Behind The Australian Economy: A Case Study in Weirdness
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| What Central Planners Can Never Know Posted: 08 Aug 2012 10:06 PM PDT Dow up again - 51 points. But bond yields rising too... the ten-year now over 1.6%. Perhaps we have seen the bottom of the great bear market in bond yields.
"You know, if you look at a chart of yield over the last 200 years," says Rob Marstrand, our Family Office chief analyst, "you see something remarkable. Yields have been going down almost the entire time. There was a major spike up in the '70s... and then down again. And now, they're at their lowest point in two centuries." That trend may have now come to an end, just in the last few weeks...or not. We don't know. We won't know for months... What we do know is that our leaders' efforts to lift the economy out of its funk have failed. They claim to have 'whatever it takes' to make people better off. Which is what we've been talking about for the last few days. "Maybe they don't", was our point of departure. Today, promise, we reach our destination. First, the world's leading economies are all slowing down. Here's the latest from the New York Times:
The Italian economy shrank again in the second quarter, official data showed Tuesday, and orders for German machinery declined sharply, a reminder that flagging growth continued to complicate European leaders' quest to restore confidence in the euro zone. China, the US, Japan... are all slowing down too. The authorities think they know the way out of this mess. "Counter-cyclical stimulus" they call it. The idea is to give the market what it lacks - demand, by reducing the price and raising the availability of credit. In the simplest version, this means printing money...cash. "That's what's nice about living in Argentina," said Rob, a colleague. "Everything is so obvious. They don't have these LTRO and the Twist programmes... They're much more blatant... and in-your-face about it. It's like a machine with the housing removed. You can see the gears turning. You can see how it really works. "They literally print money. They need money to pay government workers. So they print pieces of paper. That's why the inflation rate in Argentina is already about 35%... and it's why the country is headed for another crisis. You can't have inflation rates that high without destabilising the economy. It should start breaking down soon." Will this money printing by the Argentinians make their economy work better? Will the Argentinians be richer, happier, more prosperous as a result? You don't think so? What's the matter with you? You must not have studied economics! But today, as promised, we're not going to focus on the errors of economists... nor on the mistakes of policymakers... ... nor on all the frauds and scams that make up modern economic policies. Instead, as a public service... as good, earnest and helpful members of the economy of which we are part... we offer some advice on "what it really takes" to get an economy out of a debt-induced slump. First, as we've said many times, instead of fighting the depression, you have to give it a chance. You have to let bankrupts be bankrupts... you have to let defaulters default... you have to let bad debt go bad and bad managers go unemployed and bad banks go belly up. But that should only take a few months. Don't sweat it. It's just nature's way of clearing out the dead wood and the hopeless situations. After all, if you owe more than you can pay you should 'fess up to your mistake as soon as possible and stop the losses there. "Slam on the brakes", was F.A. Hayek's advice to Maggie Thatcher and Ronald Reagan. That was good advice. When you are doing something that is bad for you - such as spending more than you can afford... or inflating the currency - you should stop doing it, ASAP. Adding more credit to a debt-soaked economy is a disastrous mistake. It should be stopped forthwith. Then, nature can take over... and correct your errors. But you can give nature a hand, too. Here again, we turn to Rob. Instead of increasing spending, governments should cut spending... and cut taxes: "I reckon there would be a higher chance of success if a country did three or four things: 1. Slash government spending (eg reduce government payrolls by 20% over three to five years). 2. Cut personal and business taxes (and fund the short-term shortfall with debt). 3. Slash regulation that gets in the way of business and everyday life (employment law, licensing, reporting, tax reporting, health and safety etc etc). Give existing businesses more time to focus on making money. Make it easier for new entrepreneurs to get started. Improve the chances of private sector growth. 4. Keep interest rates low while the debt burden is worked off." Unfortunately steps 2 and 3 are mostly or completely non-existent or even going the other way. And step 1 is non-existent in the US, which gives the illusion of a stronger economy in the short term, but the debt continues to grow at a scary rate. The key to getting out of this global mess is private sector growth, not governments continuing to suck money out of the private domain. Of course, governments could go further. If they wanted to eliminate unemployment they would simply abolish all the impediments between a person and a job. Namely, they would stop all forms of welfare and support for the unemployed, repeal all employment laws... including minimum wage, overtime, anti-discrimination and so forth. Employers and employees would soon come to terms that agreed with them both. And if they wanted to spur even more private sector growth they would cut government spending even further. Government, like everything else you can mention in a family oriented publication, is subject to the law of declining marginal utility. A little of it may be a good thing. A lot of it is a curse. The optimal level of government-directed spending - if there is such a thing - may be as low as 5% of GDP. It is more than six times that now. The deeper insight is that an economy is merely the way in which people go about providing their wants and needs. Central planners never know what anyone wants or needs. So the more they interfere in an economy - by imposing price controls, interest rates, banking rules, pension programmes... or, whatever - the less of what people really get do they really want. In other words, 'whatever it takes' to make people better off, central banks do not have it. Regards, Bill Bonner From the Archives... As Draghi Drags the European Crisis On China's Economy - How the Devil is in the Detail The Greatest Interest Rate Fix featuring... Mario Draghi and Friends What the Credit Boom Left Behind The Australian Economy: A Case Study in Weirdness
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