Gold World News Flash

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• Collapse of Bernanke’s Credit Bubble Will Destroy the Global Financial System
• Interest and Prices Part VI (The End)
• This Chaos Is All Part Of The Move To A New Financial System
• Bank of America Closes Silver Short, Says Bearish Precious Metal View Was “Incorrect”
• What’s the Indian Gov’t doing to Gold?
• GOLD Elliott Wave Technical Analysis
• Party Like It's 1999
• In The News Today
• Guest Post: The Magnificent Fed
• The System Of The World - An Infographic
• BNP Warns Only 10% Chance That Abenomics "Ends Well"
• Gold Market Update
• The Gold Price Rose 4.7 Percent Closing at $1,369.40 — Silver Price Up 8 Percent Closing at $23.24
• The Gold Price Rose 4.7 Percent Closing at $1,369.40 — Silver Price Up 8 Percent Closing at $23.24
• About Last Week's "Busted" Treasury Auction
• JP Morgan, Goldman, Bank of America Turn Bullish On Precious Metals
• Marc Faber About Fed’s Money Printing: It Benefits A Handful Of People
• Gold Daily and Silver Weekly Charts - Assis sur le Rebord du Monde
• Gold Daily and Silver Weekly Charts - Assis sur le Rebord du Monde
• Gold Market Update
• Silver Market Update
• Why the Feds Really Hate Sound Money
• Goldman vs. China on Gold Prices
• Goldman vs. China on Gold Prices
• What is India Doing to Gold?
• What is India Doing to Gold?
• Gold will be only beneficiary of Fed's retreat, Grant Williams tells KWN
• What?s the Indian Gov?t doing to Gold?
• The Most Frightening Takeaway From The Historic Fed Decision
• Brain Damage - And, Uh, QE Is Working (I'll Explain)
• 10 Simple Steps to a Billion Dollar Business
• Gold rejoices as Bernanke does nothing
• Bullied Into Believing the Taper Talk
• The Daily Market Report
• Financial Armageddon Looting Machine: Looming Mass Destruction from Derivatives
• The Smell of Collapse is in the Air
• What's The Indian Government Doing to Gold?
• Top 20 TSX mining shorts – Gold positions shrink
• Gold, global financial markets stunned by Fed announcement
• Gold soars on Fed’s acceptance that all is far from well with U.S. economy
• Irrational Survival
• What's The Indian Gov't Doing to Gold?
• The Real Chinese Housewives Of Gold Buying, Treasury Tricks And More!
• The Smell of Financial Collapse is in the Air
• Gold Holds US Fed Surge, Silver Jumps 9.5% on "QE Unlimited"
• Gold surges most since 2009
• Alasdair Macleod: No tapering!
• Gold, silver surge on strong global cues
• Gold better at 1369.90 (+2.20). Silver 23.09 (+0.12). Dollar weak. Euro higher. Stocks called higher. US 10yr 2.70% (+1 bp).
• Thursday Morning Links

Collapse of Bernanke’s Credit Bubble Will Destroy the Global Financial System Posted: 20 Sep 2013 12:05 AM PDT By: GE Christenson The U.S. stock market is near all-time highs, while politicians and economists are blathering about recovery, low inflation, and good times, but instability and danger are clearly visible in our debt based monetary system. To the extent we rely upon the fantasies of ever-increasing debt, money printing, and credit bubbles, we are [...]

Interest and Prices Part VI (The End) Posted: 19 Sep 2013 11:38 PM PDT Theory of Interest and Prices in Paper Currency Part VI (The End) In Part I, we looked at the concepts of nonlinearity, dynamics, multivariate, state, and contiguity. We showed that whatever the relationship may be between prices and the money supply in irredeemable paper currency, it is not a simple matter of rising money supply --> rising prices. In Part II, we discussed the mechanics of the formation of the bid price and ask price, the concepts of stocks and flows, and the central concept of arbitrage. We showed how arbitrage is the key to the money supply in the gold standard; miners add to the aboveground stocks of gold when the cost of producing an ounce of gold is less than the value of one ounce. In Part III, we looked at how credit comes into existence via arbitrage with legitimate entrepreneur borrowers. We also looked at the counterfeit credit of the central banks, which is not arbitrage. We introduced the concept of speculation in markets for government promises, compared to legitimate trading of commodities. We also discussed the prerequisite concepts of Marginal time preference and marginal productivity, and resonance. In Part IV, we discussed the rising cycle. The central planners push the rate of interest down, below the marginal time preference and unleash a storm whose ferocious dynamics are more than they bargained for. The hapless subjects of the regime have little recourse but they do have one seeming way out. They can buy commodities. The cycle is a positive feedback loop of rising prices and rising interest rates. Ironically, their clumsy attempt to get lower interest results in rising interest. Alas, the cycle eventually ends. The interest rate and inventory hoards have reached the point where no one can issue more bonds or increase their hoards. In Part V, we discussed the end of the rising cycle. There was a conflict between commodity speculation and leverage. Leverage won.  Liquidations impaired bank balance sheets, and the result was a spike in the interest rate. It finally rose over marginal time preference. Unfortunately, it rose over marginal productivity as well. Slowly at first, the bond market entered a new bull phase. It becomes ferocious, as it pushes down the interest rate which bleeds borrowers of their capital. Companies find it harder to make money and easier to borrow. They are obliged to borrow to get a decent return on equity. In short, they become brittle. In this Part VI, we look at The End. At the beginning of Part I, I noted in passing that we now have a positive feedback loop that is causing us to spiral into the black hole of zero interest. In astrophysics, the theory says that a black hole is a singularity with infinite gravity at the center. There is a radius called the event horizon, and everything including light that gets inside this radius is doomed to crash into the singularity.               Black Hole For years, I have been thinking that this is a perfect analogy to the falling rate of interest. At zero interest on long-term debt, the net present value is infinite. There is a positive feedback loop that tends to pull the rate ever downward, and the closer we get to zero the stronger the pull. But an analogy is not a mechanism for causality. In the fall of 2012, I attended the Cato Institute Monetary Conference. Many of the presenters were central bankers past or present, or academics who specialize in monetary policy. It was fascinating to hear speaker after speaker discuss the rate of interest. They all share the same playbook, they all follow the Taylor Rule (and indeed John Taylor himself presented), and they were all puzzled or disappointed by Fed Chairman Bernanke not raising interest rates. Their playbook called for this to begin quite a while ago now, based on GDP and unemployment and the other variables that are the focus of the Monetarists. Then it clicked for me. The Chairman is like the Wizard of Oz. He creates a grand illusion that he is all-powerful. When he bellows, markets jump. But when the curtain is pulled back, it turns out that he has no magical powers. At that conference, after hearing so many speakers, including some of Bernanke's subordinates, discuss when and why and how much the rate should be higher, I became certain that it is not under his control. It is falling, falling.[1] One cannot go from analogy to theory. It has to be the other way around. And yet, the black hole analogy corresponds to the falling rate in several ways. First, zero interest is like a singularity. I have repeatedly emphasized the fact that debt cannot be paid off; it cannot go out of existence. It is only shifted around. Therefore, regardless of whatever nominal duration is attributed to any bond or loan, it is in effect perpetual. At zero interest, a perpetual debt has an infinite net present value. The next part of the analogy is the strong gravitational pull from a very far distance. The rate of interest has indeed been falling since the high of 16% in 1981, and it was pulled in to a perigee of 1.6% before making an apogee (so far) of 2.9%. The analogy still holds, objects spiral around and into black holes; they do not fall in directly. There is also a causal mechanism for the falling interest rate. As discussed in Part V, the interest rate is above marginal productivity. So long as it remains there, the dynamic is given motive power. In Part V, we discussed the fact that due to the arbitrage between interest and profit, at a lower interest rate one will see lower profit margins. This is what puts the squeeze on the marginal business, who borrowed previously at a higher rate. The marginal business is unable to make a profit when competing against the next competitor who borrowed more cheaply. It is worth saying, as an aside, that this process of each new competitor borrowing money to buy capital that puts older competitors out of business who borrowed too expensively is a process of capital churn. It may look a lot like the beneficial process of creative destruction[2], but it is quite different. Churn replaces good capital with new capital, at great cost and waste. In falling rates, no one has pricing power, and generally one must borrow to get a decent return on equity. The combination of soft consumer demand, shrinking margins, and rising debt makes businesses brittle. Consumer demand is softened by the soft labor market. The labor market is soft because there is always a tradeoff between labor and capital invested. For example, in India Wal-Mart does not use automation like it does in the US. Labor is preferred over capital, because it is cheaper. With falling interest rates, capital equipment upgrades become a more and more attractive relative to labor. Many attribute the high unemployment to high minimum wages and generous welfare schemes. This is part of it, but it does not explain unemployment of skilled workers and professionals. As the interest rate falls, the marginal productivity of labor rises. This may sound good, and people may read it as "productivity rises" or "average productivity rises". No, it means that the bar rises. Each worker must get over a threshold to be employed; he must produce more than a minimum. This threshold is rising, and it makes more and more people sub-marginal. Unemployed people do not make a robust bid on consumer goods. The next-to-final element of the analogy is the event horizon. In the case of the black hole, astrophysicists will give their reasons for why everything inside this radius, including light, must continue down into the singularity. What could force the interest rate to zero, once it falls below an arbitrary threshold? Through a gradual process (which occurs when the rate is well above the event horizon), the central bank evolves. The Fed began as the liquidity provider of last resort, but incrementally over decades becomes the only provider of credit of any resort (see my separate article on Rising Interest Rates Spoil the Party). Savers have been totally demoralized, discouraged, and punished. Borrowers have become more brazen in borrowing for unproductive purposes. And total debt continues to rise exponentially. With lower and lower rates offered, and higher and higher risk, no one would willingly lend. The Fed is obliged to be the source of all lending. A proper system is one in which people produce more than they consume, and lend the surplus, which is called "savings". The current system is one in which institutions borrow from the government or the Fed and lend at a higher rate. Today, one can even borrow in order to buy bonds. Most in the financial industry shrug when I jump up and down and wave my arms about this practice. Other than a bank borrowing from depositors (with scrupulously matched duration!) there should not be borrowing to buy bonds. A free market would not offer a positive spread to engage in this practice, and rational savers would withdraw their savings if they got wind of such a scheme. Thus, the system devolves. Sound credit extended by savers drives a proper system. Now, the Fed becomes the ultimate issuer of all credit, and this credit is taken from unwilling savers (those who hold dollars, thinking it is "money") and is increasingly extended to parties (such as the US government) who haven't got the means or the intent to ever repay it. The actual event horizon is when the debt passes the point where it can no longer be amortized. Debtors, especially the ultimate debtors that are the sovereign governments, and most especially the US government, depend on deficits. They borrow more than their tax revenues not only to fund welfare programs, but also to pay the interest on the total accumulated debt. That singularity at the center beckons. Every big player wants lower rates. The government can only keep the game going so long as it can refinance its old debts at ever-lower rates. The Fed can only pretend to be solvent so long as its bond portfolio is at least flat, if not rising. The banks' balance sheets are similarly stuffed with bonds. Businesses, long since made brittle by three decades of falling rates, likewise depend on the bond market to roll their old bonds by selling new ones. No debt is ever repaid, because there is no mechanism for it. An ever-greater total debt burden must be refinanced periodically. Lower rates are the enabler. Recall from Part IV that the dollar system is a closed loop. Dollars can circulate at whatever velocity, and they can circulate to and from any parties. For interest rates, what matters is whether net credit is being created to finance net increases of commodities and inventories, or whether net sales of commodities are used to finance net purchases of bonds. The spreads of interest to time preference, and productivity to interest determine the direction of this flow. So long as the interest rate is higher than marginal productivity and marginal time preference, the system is latched up. So long as the consumer bid is soft and getting softer, marginal productivity is falling. So long as debtors are under a rising burden of debt, and creditors have the upper hand, then time preference is falling. The final element of our analogy to the black hole is that, according to newer theories that may be controversial (I don't know, I am not a physicist, please bear with me even if the science isn't quite right) if enough matter and energy crash into the singularity quickly enough, then it can cause an enormous explosion.               Black Hole Ejecting Matter and Energy Here is my prediction of the end: permanent gold backwardation[3]. The lower the rate of interest falls, the more it destabilizes the system because it makes the debtors more brittle. The dollar system has, to borrow a phrase from Ayn Rand, blackmailed people not by their vices, but by their virtues. People want to participate in the economy and benefit from the division of labor. Subsisting on one's own efforts alone provides a very low quality of life. The government forces people to choose between using bogus Fed paper vs. dropping out of the economy. People naturally choose the lesser of these two evils. But, as the rate of interest falls, as the nominal quantity of debt rises, as the burden of each dollar of debt rises, and as the debtors incur ever-greater risks, the marginal saver reaches the point where he prefers gold without a yield and with price risk too, over bonds even with a yield. We are in the early stages of this process now. A small proportion of the population of Western countries is buying a little gold, typically a small proportion of their savings. What happens when this process accelerates, as it must inevitably do? What happens when people will borrow dollars to buy gold, as they had borrowed dollars to buy commodities in the postwar period? By then, the bond markets may be so volatile that this could cause a spike in interest rates. Or it may not. It will pull all the remaining gold out of the bullion market and into private hoards. At that point, gold will begin to plunge deeper and deeper into backwardation. As I explained in my dissertation[4], a persistent and significant backwardation in gold will pull all liquid commodities into the same degree of backwardation. Desperate, panicky people will buy commodities not to hoard them or consume them, but as a last resort to get through the side window into gold after the front door is closed. When they cannot trade dollars for gold, they can trade dollars for crude oil and then trade crude oil for gold. Of course, this will very quickly the drive prices of all commodities in dollars to rapidly skyrocket to arbitrary levels. At that point, there could even be a short-lived rising cycle where people sell bonds to buy commodities, or this may not occur (it may be over and done too quickly). In any case, this is the final death rattle of the dollar. People will no longer be able to use the dollar in trade, even if they are willing (which is quite a stretch). Then the interest rate in dollars will not matter to anyone. My description of this process should not be taken as a prediction that this is imminent. I think this process will play out within weeks once it gets underway, but that the starting point is still years away. The interest rate on the 10-year Japanese government bond fell to 80 basis points. I think that the rate on the US Treasury can and will likely go below that. We must continue to watch the gold basis for the earliest possible advance warning.   This completes the series on interest and prices. There is obviously a lot more to discuss, including the yield curve and what makes it abruptly flip between normal and inverted, and of course mini rising cycles within the major falling cycle such as the one that is occurring as I write this. I would welcome anyone interested in doing work in this area to contact me at keith (at) goldstandardinstitute (dot) us. [1] To briefly address the 80% increase in the 10-year interest rate over the past few months: it is a correction, nothing more. The rate will resume its ferocious descent soon enough. [2] Joseph Schumpeter coined this term in 1942 in his book Capitalism, Socialism and Democracy (1942) [3] When Gold Backwardation Becomes Permanent [4] A Free Market for Goods, Services, and Money

This Chaos Is All Part Of The Move To A New Financial System Posted: 19 Sep 2013 09:01 PM PDT On the heels of a wild week of trading in global markets, today one of the legends in the business spoke with King World News about key events and the chaotic movements we are seeing in markets such as gold. Keith Barron, who consults with major companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, also spoke about how all of the historic events we are witnessing are part of a much larger journey to a new financial system. This posting includes an audio/video/photo media file: Download Now

Bank of America Closes Silver Short, Says Bearish Precious Metal View Was “Incorrect” Posted: 19 Sep 2013 08:58 PM PDT from Zero Hedge: Yesterday it was Goldman capitulating on their near-term gold, er, capitulation reco (expectedly so after gold ripped over $75 in the span of 24 hours). Now, it is Bank of America’s turn to close their silver short. To wit: “The Wednesday Bullish Candlestick formations (Bullish Engulfing Candles) in gold and silver say that our bearish view on precious metals now incorrect. Indeed, this is supported by the US $ breakdown and the increasingly constructive environment for risk assets generally. As such, we are cutting our Silver Short and moving to the sidelines. Silver should see a test of long term resistance at 24.24/26.23, in the sessions and weeks ahead while gold should re-test its 1433, August highs. In both cases, watch trendlines at 23.20 & 1375. A close above confirms the bullish candles and upside trajectories.” Read More @ ZeroHedge.com

What’s the Indian Gov’t doing to Gold? Posted: 19 Sep 2013 08:40 PM PDT by Julian D. W. Phillips, Gold Seek: Difference between India & China While both nations have been touted as the fasted growing nations in Asia, there are stark differences between the two nations that are coming to the fore now. The first is that in China, the population has a fear of gov't and the dangers of disobeying it. After nearly 48 years of intense pressure and 're-modeling' of the thinking of the Chinese people, the Chinese are now a highly regimented people who appear to enjoy hard work, have a tacit obedience of gov't and appreciate the lift in their standard of living. They appear to be fully supportive of the extraordinary urbanization of the country and the present reality that nearly three quarters of the country have a much higher standard of living than they have ever experienced. The nation is headed towards becoming the economic powerhouse of the world before 2020. Read More @ GoldSeek.com

GOLD Elliott Wave Technical Analysis Posted: 19 Sep 2013 08:11 PM PDT Movement above 1,374.17 invalidated the main wave count and confirmed the alternate. Yesterday I judged the two wave counts to have a close to even probability. It is time to review the bigger picture. I will review my main and alternate ... Read More...

Party Like It's 1999 Posted: 19 Sep 2013 07:45 PM PDT The cardinal rule of investing – and life, frankly – is, according to ConvergEx's Nick Colas, "When the facts change, you have to change your point of view."  The Fed's decision to maintain its current pace of bond buying at yesterday's FOMC meeting is one of those fact-changing events.  Markets were primed for a reduction, and along with a host of other flashing yellow lights that was enough to make plenty of market watchers cautious.  Yes, the Fed will eventually cut the QE tow rope if/when labor markets improve, but for now, Colas notes, they seem content to keep toting the barge and lifting the bale.  That leaves markets free to head to the bar, hopefully avoiding incarceration along the way.  Remember 1999 though, he warns, when markets ripped through Q4 because so many investors had bided their time waiting for the dot-com bubble to collapse earlier in the year?  Cue the music, because this is beginning to look like the same market setup. Via ConvergEx's Nick Colas, Forget financial assets – the most startling bull market since the 1990s has been demographic: the birth rate for twins has increased by over 50% since 1990.  At the start of the 90s, according to US government statistics, there were about 23 twins born for every 1,000 live births.  As of 2011, the last year for which data is currently available, that number had jumped to almost 34 per 1,000.  Every ethnic background the government tracks for this data – white, African American and Hispanic – shows similar increase. The reasons for this boom in double baby carriages are easy to understand, even if the outcomes are surprisingly successful.  American women are waiting longer to start families and sometimes require fertility treatments, some types of which increase the likelihood of twin births.  The technology behind these treatments has become more effective as well, adding to the overall trend.  But from friends within this age cohort (I left it some time ago myself) comes this surprising anecdote: couples are specifically "Going for" twins with fertility treatments.  Questions of medical ethics aside, this makes some sense.  If you can safely start and complete your family of four with only one pregnancy, some portion of the population will take that path. Moving over the distinctly less adorable but still timely world of central bank policy, the Federal Reserve today showed downside of actually tending to twins once you have them.  Theirs aren't called Jacob and Sophia (2012's most popular baby names, by the way), but "Employment" and "price stability".  Central banks aren't generally in business of surprising capital markets, but the announcement that the Federal Open Market Committee would continue the current $85 billion pace of bond purchases has to count as the most unexpected policy decision since the Financial Crisis and round #1 of QE. The other commonly referenced set of policy twins – Wall Street and Main Street – tells part of the story behind this decision.  They are the Jason and Emma (second most popular names last year) of the story.  Listening to Chairman Bernanke's press conference this afternoon, I was struck by his frank and honest portrayal of U.S. labor markets.  Discouraged workers exiting the labor force.  Unemployment rates which dramatically underrepresent the "True" social stress of unemployment trends got some air time.  It was more like reading Zerohedge than listening to a typical central banker/economist two-handed conversation.  Which is to say it felt refreshingly honest. At the same time, Wall Street has done very well indeed under the QE umbrella.  Stocks have more than doubled since the March 2009 lows, corporate profits are at record levels, and there have been some very large corporate transactions (think the Verizon bond deal) which feel more like a capital markets peak than a trough.  The disparity between these outcomes and those in the prior paragraph are stark, and "Income inequality" is a trending topic again, if only in economic and political policy circles. By keeping the QE bond buying program in place, the Fed is acknowledging that one of its twins (Wall Street) may be killing it, but the other (Main Street) isn't keeping pace.  Given all the chatter about 'Tapering' (the word I would most like to strike from the dictionary) after the last Fed press conference, everyone who tuned into CNBC or picked up a newspaper in the last three months believed the Fed would reduce the program.   What did the Fed see as it filtered through all its data at this last meeting?  That the Main Street twin was actually falling further behind in school, even as the Wall Street sibling was being named valedictorian, president of the debate team, and captain of the soccer squad.  Higher interest rate put the housing recovery in a lurch, and the jobs data continues to be weak. So now investors have a pretty stark decision to make, because time is running out on 2013.  We have been quite cautious on stocks over the past month, given not only the news from this Fed meeting but a host of other concerns.  These included spotty ETF money flows (our proxy for investor engagement), valuations which did not incorporate declining earnings expectations, and worries over increasingly volatile interest rates.  All valid concerns, and all now likely back-burnered for the 74 remaining trading days of the year. This is beginning to feel like 1999, although you don't have to cue Prince if you don't want to.  Just consider the following: In 1999, we had a Federal Reserve which pushed liquidity into the system ahead of Y2K concerns.  Now, we have a Fed newly recommitted to liquidity operations to spark a better economic recovery.   In 1999, many investors – including some the Street's best and brightest – openly mocked the ridiculous valuations afforded to tech stocks in the dot-com bubble.  Now, we have many very smart people voicing similar opinions about U.S. equities generally.   In Q4 1999, those smart hedgies ended up buying the market with both hands to play catch up for three quarters of underperformance.  History doesn't repeat itself, of course, but it isn't hard to see the AABBA rhyme scheme of the bawdy limerick here.  It may well be retail investors who finally capitulate and start buying, or hedge funds, or still cautious long-only managers.  After all, who has really caught the whole move since March 2009? Make no mistake – there is more than enough to be worried about as we get ready to hit the 2013 home stretch.  Everything we listed as concerns, plus a host of other issues, wait in the wings.  They will have their turn. But in the meantime, we have a newly dovish (in the eyes of the market, anyway) Federal Reserve, a winning stock market year-to-date, and a raft of investors surprised by the central bank's move yesterday.  All that feels like a recipe for a melt-up.  It may not rival a cute set of twins, but it won't take 9 months to deliver either.

In The News Today Posted: 19 Sep 2013 07:29 PM PDT   Jim Sinclair’s Commentary The latest from John Williams’ www.ShadowStats.com. - Fed Is Trapped In the End Game for the U.S. Dollar - Panic of 2008 Still Is Playing Out - Hyperinflation Forecast Remains in Place "No. 559: Hyperinflation Update, FOMC" Web-page: http://www.shadowstats.com Jim Sinclair’s Commentary "The Great Leveling" August 2014 through 2015.   Jim... Read more » The post In The News Today appeared first on Jim Sinclair's Mineset.

Guest Post: The Magnificent Fed Posted: 19 Sep 2013 06:17 PM PDT Originally posted at Monty Pelerin's World blog, The Fed's decision not to taper surprised the financial world. Markets drove higher as a result. This writer believed some token amount of tapering would have been announced. Recent declines in Federal deficits afforded the Fed discretionary room. For the first time in several years it was possible to taper without infringing on the government's ability to pay its bills. Perhaps Bernanke wanted to leave his post without markets crashing on his watch. Perhaps the economy is worse than the Administration wants to let on (and it certainly is). The Fed may have felt it necessary to come out of the closet regarding this latter charade, trying to prevent another economic downturn.  Likely both were considerations, although Bernanke wanting to get out of Dodge before the fecal matter hits the big air-moving contraption was likely more important. The Aleph Blog provides a series of interesting charts tracking Fed member expectations over time. The charts show consistently declining optimism regarding recovery. As stated: After almost two years of giving guidance, they are no closer to tightening than when they started.  Tightening is 27 months away, if their estimates are right, same as they thought in January 2012.   Tightening seemed further away when more aggressive QE was introduced, but that quickly abated, like a drug addict adjusting to higher doses. How much are markets overvalued? There is really no way of knowing. Participants will eventually face up to the fact that Fed levitation cannot go on forever. Then a flight to the sidelines will commence with values overreacting on the downside. All market adjustments overshoot, especially those on the downside. An interesting aspect of yesterday's decision is the potential risk of a currency war. All developed economies are weak and looking for improvement. Currency depreciation alters the terms of trade among nations and can provide short-term advantages. That happened yesterday. As a result of the Fed's announced continuation of liquidity injections, the dollar weakened against competing currencies. Trade terms shifted to the advantage of the US at the expense of other nations. A "beggar thy neighbor" card was played by the US. Who, when and how many may follow in an attempt to offset this US move will be known over the next several months. Risk of a currency war raises the risk of world-wide inflation. Pressures on the Fed to fund continuing government deficits eased recently as a result of deficits shrinking.  For the first time in almost two years, the Fed had room to move. They chose not to. If Bernanke's legacy was the motivation for yesterday's decision, it will likely fail. His legacy will not be good. It will be revised downward, just as Greenspan's was. Both are apt to go lower when the extent of the Fed involvement in the economic crisis is fully understood. Regardless, Bernanke did not want to go out as the Herbert Hoover of the Fed, although history may ultimately judge him and his predecessor in such fashion. The Fed chose the inflationary policies of the last several years. Moving further down this path makes it more difficult to reverse such policies. Like heroin, the habit becomes harder to break the further into the habit one gets. Politically the pressures to continue mount as the costs of abandoning them increase. There is no Paul Volcker on the horizon. Nor is there a Ronald Reagan. Both these gentlemen were required to stop the economic debacle of the 1970s. Neither would have succeeded without the other. The likelihood of seeing two men duplicate their feat seems quite unlikely at this juncture. For that reason, I believe that politics eventually leads to high inflation, perhaps hyperinflation. Just as the economy no longer responds to Fed stimulus, financial markets will eventually reach this point. Whether that occurs sooner or later is anyone's guess, but the fraud of overvalued financial assets becomes more apparent with each injection of liquidity. Market participants should be aware of the game that is being played.

The System Of The World - An Infographic Posted: 19 Sep 2013 05:43 PM PDT This is The System Of The World. It lays out in logical frankness how the various layers of the facade we call “democracy” and “free markets” interoperate and together create a grotesque caricature of the ideals they purport to serve and keep us all enslaved. Join us on a trip through The System.     Authored by Mark Jeftovic of Wealth.net, The System of the World The Trinity The top Trinity is comprised of The State, The Military and The Kleptocracy (or Corptocracy) These are what C. Wright Mills called “The Power Elite” The State The State provides the veneer of authority and perpetuates the myth of a “Social Contract” wherein citizens (more accurately called “Subjects”) will be ostensibly protected as long as they don’t try to look after their own welfare. As The Privateer’s William Buckler documented exhaustively over his career: The ultimate goal of the State is to cultivate absolute dependency on it by it’s subjects. This is because until this happens there is a real danger that those governed will one day wake up and realize that the State is not only entirely unnecessary but actually malignant; a malevolent force actively impoverishing society to the benefit of it’s elites: The Military The “Big Stick” of the power structure. In the early stages of an Imperial culture the military is mostly used to project power externally and carve out territory. As the Empire atrophies, the illusion of external enemies is maintained in order to justify an inordinate share of the economic wealth apportioned to the military. The military must be maintained because eventually the State/Corpotracy power structure will rely on it to protect it from its own populace. In the final precursors to collapse, the military is turned largely against its own citizens. History shows this inevitably happens but with varying degrees of success. The outcome can be a multi-generational dark age of totalitarianism or a violent bloody revolution. (Also see Mike Swanson’s The War State – The Cold War Origins Of The Military-Industrial Complex And The Power Elite) The Kleptocracy This is the economic and financial engine of The System. It stands behind the State and guides policy. It’s elites freely circulate from various boardrooms through corridors of State power and back. These are closed institutions which harvest privatized profits (most of them plundered from the wealth of the Outer-class). Although they extol the virtues of free markets and the miracle of capitalism, they are largely protected from competition and will endorse policies and laws that enable them to externalize any losses.   The Veil The Veil is a magical spell cast on the masses to quite simply obfuscate the true fundamental questions facing society and shape public opinion into seemingly disparate schools of thought that taken together produce a simulacrum  of democracy, free will and choice. In reality people are being channeled into one of several “acceptable” opinions. Anybody who has ever been a parent or caregiver to a child has learned this trick from experience, “Would you like to eat your vegetables with the blue spoon or the red fork? Good choice!” Robert Greene, in his seminal work “The 48 Laws of Power” identified this as Law 31: Control the Options – Get Others to Play With the Cards You Deal “The best deceptions are the ones that seem to give the other person a choice; Your victims feel they are in control, but are actually your puppets. Give people options that come out in your favor whichever one they choose. Force them to make choices between the lesser of two evils, both of which serve your purpose. Put them on the horns of a dilemma: They are gored wherever they turn.” On a societal level this is executed via mass media, pop culture and what passes for “news”. Rather than inform the public, or even more outlandishly, telling them the facts – mass media indoctrinates, molds and conditions the public consciousness. It is in a word: Propaganda. Alternative history aficionados and sci-fi geeks often like to posit narratives wherein a present-day dystopia is averted by some selfless  time traveller going back and strategically assassinating some single figure who set it all in motion (usually Hitler). They always miss the point. They should really have had their sights set on Edward Bernays – the nephew of Sigmund Freud and the father of propaganda as we know and experience it today. You go girl! His methods were used for simple commercial gain in the early parts of the 20th century (like convincing women that it was fashionable to start smoking “Victory Sticks”, ideally those manufactured and sold by the fine folks at Phillip Morris) – it wasn’t taken to a population-wide industrial level until Joseph Goebbels read all his books and realized therein lay the keys to elevating the Nazis to power. He owed a particular debt to Bernays’ Crystallizing Public Opinion from which he derived his basis for creating public opinion against the Jews of Germany. (Bernays was reportedly startled by this “[it] shocked me. … Obviously the attack on the Jews of Germany was no emotional outburst of the Nazis, but a deliberate, planned campaign.”) Nobody aspring to political power has ever forgotten or disputed the practical lessons learned by the Nazis. Every political campaign and policy initiative since has been run around the principles invented by Bernays. In fact Bernays himself directly participated in early public / political opinion shaping exercises that set the trend for future US Imperialism when United Fruit hired him to convince the American public that Guatemala’s democratic and legally elected president (Arbenz Guzman) was a dangerous communist and thus justified the CIA led coup to overthrow him. (This chapter in our history is where the phrase “Banana Republic” originated”). In Bernays’ own words: “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. …In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” - Propaganda The delivery mechanisms for propaganda to the public today are the major media outlets. Television, radio, newspapers crystallize into an inverse-Pareto structure (80% of the media outlets are owned by a very few number of conglomerates who are firmly entrenched within the Corptocratic wing of the The System.) The challenging entity to the apparatus of The Veil is the internet, which we’ll discuss a little later.   The Yoke The Yoke is a subtle, ever present method of control over every member of the populace. The best possible Yoke is one the wearer doesn’t realize he’s wearing or one that the pack animal mistakes for being a natural characteristic of its habitat or environment. Because of the level of sophistication attained by The System, it need not be physical carrots and sticks. The System employs monetary policy because it works even more effectively than brute force coercion. These are: Debt, Inflation and Taxes. Debt is the super elixir of The System. With debt you can consume before you produce, you can consume more than you produce, and you can live beyond your means … for awhile. The distinction between productive debt (money borrowed to invest or build something that can then self-liquidate the debt) and destructive debt (going on vacations, benders or sprees on your credit cards) has been abandoned; in fact the emphasis is now on the latter as it it “stimulates consumption“. Governments use debt to live beyond their means and they encourage the populace to do the same. For governments debt is to finance entitlement programs, empire building and for the public it is so that they can continually consume. When everybody is in debt, they are trapped because the populace must service their debt, but government and the banks get to cheat, because they control the monetary system, they can create: Inflation. Most people think that prices slowly, naturally, inexorably rise over time just as sure aging and erosion. They also think that that is “inflation”. It’s not, inflation is an expansion in the supply of money, but only when the government or it’s bankers do it. When you or I expand the supply of money it’s called counterfeiting. We are led to believe that inflation is “natural”, so much so that most governments speak pretty openly about having a “targeted inflation rate”. The most recent example of this is called “Abenomics” in Japan, with their “2/2/2″ campaign to: double the money supply, target inflation at 2%, grow GDP by 2%, within 2 years. Abenomics has gone on long enough (or unfolded fast enough) to illustrate exactly how this works: If you want more pizza, just cut a slice in two! The perceived “wealth” effect of asset prices going up is driven entirely by the value of the currency these assets are priced in going down. It doesn’t stop there: Borrowers prosper because they can service their debt in “cheaper” currency. It is not only asset prices that rise, everything else does too: commodities and staples. Thus, the “cost of living” increases. This has the effect of pushing assets “up the chain” toward the elites at the top, because those with less wealth have to spend more of their income on just staying alive, while the elite amass more assets which appreciate in price. That’s still not all because: The government under-reports price inflation. Official government statistics of inflation are inaccurate and low, because if the “true” rate of inflation were admitted, the populace would realize that the cost of living is rising faster than their wages, or for those lucky or foolish enough to have savings: the inflation rate would be seen to be higher than meager interest earned on their savings (this is the one/two punch of rampant money creation combined with artificially suppressing interest rates) – See http://www.shadowstats.com Finally, after the government uniformly steals from everybody via targeted inflation, after they lie to everybody by under-reporting and skewing the actual price inflation and then make it nearly impossible to earn an actual return on what money can actually be saved, there is: Taxation Where we all have a portion of our income confiscated by the government where it is used to finance the perpetuation of The System. We are taught in school that taxation is unavoidable and that inflation is normal and natural. Deflation is written up in our conventional textbooks as an unthinkable harbinger of horrific malaise. In reality, deflation is only devastating when your money is based on debt and your entire economy depends on perpetually expanding credit a.k.a borrowed money. Prior to 1913 there was no personal income tax (that is also the year the Federal Reserve was ushered into existence in what can only be described as a backroom deal and a midnight vote on Christmas Eve – See The Creature From Jeckyll Island) Under the Classical Gold Standard, mild deflation was not uncommon and instead of it being a virulent period of Great Depression, it instead unfolded during the Industrial Revolution: one of the most explosive periods of human advancement in history. (This is why crypto-currencies like Bitcoin are emerging as an evolutionary monetary response to incessant centrally planned interventionism and inflationary policies.)   The Treadmill The lubricant for The System is consumption. When debt is used for money and saving is actively discouraged (either by suppressing interest rates or making credit irresistible) then The System will keep working fine provided consumption not only continues, but rises. It isn’t enough to just keep consuming – if everybody did that the economy would not “grow” (as measured using politically acceptable government heuristics) and it would skid into a “recession” (although it would never be acknowledged to have done so until long after it purportedly ended). No, what has to happen is that everybody has to keep consuming more. By ever increasing consumption, debt can be serviced and expanded. It is considered “out-of-scope” to ask how consumption can keep rising indefinitely against a backdrop of finite resources. Those who are interested in knowing how (hint: it can’t) are encouraged to read Chris Martenson’s Crash Course. The Soma For our purposes, Soma is analogous to the happy-joy-joy drug posited in Aldous Huxley’s Brave New World, wherein: To maintain the World State’s Command Economy for the indefinite future, all citizens are conditioned from birth to value consumption with such platitudes as “ending is better than mending,” “more stitches less riches”, i.e., buy a new item instead of fixing the old one, because constant consumption, and near-universal employment to meet society’s material demands, is the bedrock of economic and social stability for the World State. Beyond providing social engagement and distraction in the material realm of work or play, the need for transcendence, solitude and spiritual communion is addressed with the ubiquitous availability and universally endorsed consumption of the drug soma. … In the book, soma is a hallucinogen that takes users on enjoyable, hangover-free “holidays”. It was developed by the World State … as a self-medicating comfort mechanism in the face of stress or discomfort, thereby eliminates the need for religion or other personal allegiances outside or beyond the World State. Within the context of The System, anything that serves the purpose of keeping everybody distracted from the fact they are enslaved by an utterly corrupt power structure  that has lost all credibility can be referred to as “Soma”. Soma can exist on both sides of legality – if it is legal it can be promoted within society as an acceptable distraction. If it is illegal it comes with the added bonus of criminalizing large tranches of addicts who can then be employed as slave labourers within the prison-industrial complex. Soma need not be purely addictive substance abuse, it can also encourage compulsive behaviors such as gambling, gaming, shopping, watching TV, sex or eating. The main goal is that it saps the energy of as many serfs as possible and prevents them from self-actualizing.   A Compliant Populace Don’t misunderstand, The System isn’t a shadowy conspiracy of hooded villains plotting everything. There is a certain amount of wisdom behind the old adage “Never blame on conspiracy what can be explained by stupidity”. The System is the result of certain logical outcomes of human nature which has been iteratively exploited by certain predator-type personalities. Expediency, short-term thinking and a desire to externalize responsibility for one’s actions creates an operating logic all its own and creates conditions conducive to these forces. [The System], you see, operates in a way that is similar to computer operating shells. While the shell does not directly dictate activities within its subsystems, it does impose a system logic and operational route map. The system logic either reserves and then conventionalizes design decisions – from the most conventional level right through to primary concepts – or it prevents specific decisions from being made. – The Public Eye (An Investigation Into The Disappearance of the World, Brian Fawcett 1990) Those with sociopathic  proclivities gravitate toward the top-end of The System, those more docile and pliable fill out the lower tiers of the ponzi. A small but growing minority of sovereign individuals stand apart from The System. Your mission, should you choose to accept it, is to become one of them. To do so, stop being a sheep. The most revolutionary act you can commit internally is to take personal responsibility for every aspect of your own life and to live consciously as much as possible. Shed your addictions, swear off soma and start self-actualizing. The most revolutionary act you can commit externally is to start your own business (even one on the side) and to become financially unleveraged, literate and independent. Put a price on your fealty. A price not in monetary terms, but ethical ones. From now on loyalty is not something you unquestioningly surrender as an accident of birth, skin color or creed. Patriotism is now obsolete. You will no longer pledge into a corrupt system – if somebody or some thing wants your loyalty, they’ll have to earn it. From there you help others do the same and one by one, cell by cell, larger groups of the sheep go into self-imposed exile from the herd. If enough people can do this, (and can resist the temptations of being co-opted), then The System will eventually lose all relevancy and implode. This will probably take about 20 to 40 years to unfold and in the meantime there will be a strong, counter-evolutionary trend toward autho

BNP Warns Only 10% Chance That Abenomics "Ends Well" Posted: 19 Sep 2013 05:15 PM PDT Japan's core CPI (which excludes perishables) surged 0.7% y/y in July, but the upturn is largely due to higher prices for energy that reflect rising import prices due the yen's weakness. Despite global exuberance at Abe's "progress", BNP notes that there are still no signs of price growth for rent and service prices, factors behind Japan's protracted deflation. Crucially, BNP believes that Abenomics could lead to four possible medium-term outcomes: (1) Continued deflation (35% probability), (2) Financial repression (40%), (3) High inflation (15%), and (4) Happy end to deflation via revived trend growth (10%). Via BNP Paribas, Scenario 1: Continued deflation (35% probability) Currently, prices are rising largely because of imported inflation, though improvements in the output gap on the back of Abe's fiscal spending also play a small part. Although we noted above that monetary easing alone cannot generate inflation, the job can, theoretically, be done via deliberate yen depreciation and continued fiscal spending. History shows that when deflation gives way to inflation, substantial currency depreciation is observed. But to deliberately debase the yen further would be very hard as other countries would certainly object strongly. More fiscal spending, meanwhile, is also a big problem given the fact that Japan's public debt is already 200% of GDP. So if deliberate yen depreciation and additional fiscal spending are off the table as being taboo, deflationary pressures will likely reassert themselves once the effects wear off from the current fiscal stimulus and yen depreciation, as there are no other factors fostering price growth. Japan's condition of deflation, low interest rates and a strong yen would remain unchanged. And because the effects of Abe's growth strategies will also be limited (as indicated later), the trend growth rate would remain low. This scenario of continued deflation has a probability of 35%. Under this scenario, the economic euphoria, yen depreciation and stock market rally triggered by the BOJ's new dimension in monetary easing (QQE) will be found to be just momentary things based essentially on placebo-like effects. On this score, ever since stock market corrections began from late May, various sentiment indicators have peaked out and started trending lower. Of course, placebo-like effects are not the only reason for resurgent share prices and yen depreciation, as there have been changes in economic fundamentals, like the sharp drop in Japan's current account surplus and the subsiding of the EU crisis. Consequently, both the Nikkei and the yen rate are unlikely to revert to their levels of last autumn. The BOJ's Kuroda has declared that open-ended easing will remain in effect until 2% inflation is achieved. Because of this, many might feel that this scenario should not have a very high probability. But, as pointed out above, because the long-term interest rate is already very low, no matter how much the BOJ inflates its balance sheet with aggressive purchases of long-term JGBs, the effects will be meager. The asset balances of private financial institutions do not change, as JGB holdings are only exchanged for BOJ current account deposits. Taking the balance sheets of the BOJ and private financial institutions collectively, nothing really has changed. Additionally, it is likely that the long-term interest rate has declined to a low level because the BOJ has to buy long-term JGBs from the private sector at high prices in order to expand the BOJ balance sheet. Nevertheless, because the long-term interest rate has little room to decline, so long as the BOJ only purchases long-term JGBs from the private sector, expanding its balance sheet will some juncture become hard (this would not be the case if the BOJ bankrolls government spending, as will be pointed out later). Scenario 2: Financial repression (40% probability) Even if monetary easing has reached its limits, it is still possible to escape from deflation if the government's expansionary spending, financed by the BOJ, were to continue. Following the huge stimulus package that was Abe's extra budget for FY 2012, it is virtually certain that, as we long feared would happen, another round of similarly massive spending will be adopted this year to cushion the economy against fallout from next April's consumption tax hike (5% to 8%). And this whole process is sure to be repeated in the year after that for the same reason, as the second stage of the consumption tax hike (8% to 10%) is slated for October 2015. What this means is that the economy should continue expanding well above its trend growth rate (roughly 0.3%), fostering improvements in the output gap that bring about full employment at which point both wages and inflation will start rising. Even if it is impossible to achieve 2% inflation within two years (i.e., by early 2015), the end of deflation could come in sight from around the middle of 2015, when the economy's continued outperformance could push the jobless rate below 3.5%, which is deemed full employment. Even with Japan's deeply engrained deflationary expectations, the end of deflation should come into sight if, after passing the critical point of full employment, the economy continues to outperform on the back of expansionary fiscal spending bankrolled by the BOJ. Meanwhile, the stoking of aggregate demand here is not due to monetary easing but the increased spending from fiscal expansion. What is more, this fiscal spending is responsible for expanding not only base money but also the more broadly defined money stock, and the BOJ's role is only that of financing. Thus, in creating money and inflation, monetary policy is strictly an accessory to fiscal policy. But when deflation is overcome, the long-term interest rate will become the next big problem. Since Japan's equilibrium real interest rate is estimated to be about 1%, the long-term rate, after 2% inflation is realized, should climb to at least 3%, or 4-5% if risk premia is added. Given the fact that Japan's public debt has swollen to 200% of GDP, a jump in the long-term rate could dramatically increase Japan's odds of fiscal collapse. Thus, after successfully defeating deflation, the BOJ and government will have to shift their main focus to stabilizing the long-term rate in order to stave off a fiscal crisis. What this means is that, even after deflation ends, the BOJ will probably have to maintain its zero-rate stance and aggressive JGB-buying. It is also possible that the BOJ could impose a tacit ceiling on interest rates by adopting policies to stabilize bond yields like the Fed's "pegging operations" of the 1940s. If the BOJ were to opt for such interest rate caps, it would probably do so when the long-term rate climbs over 2%, as an interest rate in the 3% range could trigger a vicious cycle of financial system turmoil and fiscal chaos. This scenario of financial repression has a probability of 40% and is our main scenario. It goes without saying that policies to hold the long-term rate down despite rising inflation essentially create negative real interest rates, allowing the public debt to be shrunk via a stealthy inflation tax on depositors. According to our estimates, if the long-term interest rate is kept at 2%, stoking inflation to 4% — creating a negative real interest rate of ?2% — would make it possible to reduce the public debt (as share of GDP). Meanwhile, we do not see financial repression as being part of some grand design adopted wholesale by policymakers to tackle Japan's belt problem. Rather, it will come about unintentionally from a series of firefighting policies adopted in response to problems created by rising interest rates. Scenario 3: High inflation (probability 15%) Historically, if we exclude default, there are three ways to theoretically reduce a nation's public debt: (1) fiscal adjustments/austerity plans (tax hikes, spending cuts); (2) elevating trend growth (via structural reforms) to increase tax receipts; and (3) monetization (financial repression is a type of monetization). Normally, the proper method ought to be (1), but politicians in parliamentary democracies are loath to take this approach owing to the pain imposed on voters. Given the ruckus over hiking Japan's consumption tax to 8%, the 20% level necessary to secure the primary balance surplus needed to prevent the public debt from snowballing is a nonstarter. Most politicians favor method (2), as they hope to grow their way out of problems. But elevating trend growth is not easy. Even with effective growth strategies, dramatic results do not come quickly. Ultimately, policymakers resort to monetization to reduce the public debt. Now the problem is whether inflation can stay in the relatively moderate range of 4~5%, as envisaged in our main scenario. It is very uncertain if inflation can be managed, as the BOJ will be powerless to act because fiscal dominance will prevail once inflation revives. When the long-term interest rate starts surging, the BOJ will cope with this crisis by essentially abandoning its inflation target, though this will be cloaked under the guise of "flexible" inflation targeting. If funds start shifting overseas on abhorrence of the negative real interest rates at home, a vicious cycle of yen depreciation and accelerating inflation could continue. As a result, inflation could approach double-digit proportions. Confidence in the BOJ could collapse and long-term rate could skyrocket without strong controls on interest rates. Japan's precarious fiscal condition would be a constant reality. This high inflation scenario has a probability of 15%. Meanwhile, trend growth can be depressed by distorted resource allocations even under the moderate 4~5% inflation envisaged in our main scenario. And if inflation were to approach double digits, households and corporations would be all the more hard-pressed to know what to expect regarding future income and future returns on capital. Owing to such increased uncertainties, the allocation of income and resources could be even more distorted and trend growth could even more depressed. Seeing how growth these past 30 years has averaged only 0.6%, one wonders if Japanese society can tolerate even moderate inflation (though it would preferable to higher taxes). Double-digit inflation, however, could greatly destabilize both the economy and society. There would be complete coordination failure. And crisis conditions could engulf not only state finances but also the whole of society. Scenario 4: Happy end to deflation (probability 10%) We have repeatedly pointed out that monetary/fiscal stimulus do not create any lasting value added. Even when such stimulus has an impact, it only does so by cannibalizing future demand (monetary stimulus) and consuming future income (fiscal stimulus). Until recently, households and businesses curbed spending because prospects for growth were diminishing alongside the floundering trend growth rate from a shrinking work force. As a result, the output gap also deteriorated and trend growth weakened alongside falling prices. Some contend that trend growth has not declined and that aggregate demand is insufficient because of chronic deflation, arguing that if trend growth had weakened then inflation should result from the insufficient supply capacity. But such a view is mistaken, as it lacks dynamic sense. When an economy is saddled with structural problems and trend growth falls, it is entirely possible that deflationary pressures could mount on deteriorating aggregate demand because spending by households and businesses turned lackluster first. Now If Abenomics' growth strategies were to show dramatic success, allowing the trend growth to significantly revive, the resulting improved growth expectations could encourage households and businesses to increase spending, thereby fostering improvements in the output gap that bring an end to deflation. While ending deflation via revived trend growth would be a happy ending, the probability of this optimal scenario is just 10%. We cannot assign a higher probability because growth strategies, even if successful, do not bring dramatic changes. Currently, the government hopes to achieve trend growth of 2% over the coming decade, but that means the per capita trend growth rate will have to climb to 2.7%. Over the past 30 years, the only time per capita trend growth ever approached 3% was during the bubble in the latter half of the 1980s. If we assume that the workforce will continue shrinking almost 0.7% annually (and this figure prices in higher employment rates for women), increasing the per capita trend growth rate from the current 1% to 1.5% will still put overall trend growth at just 0.8%. Seeing how the per capita trend growth rate in America is slightly over 1% and that of the EU about 0.5%, hoping for 1.5% would be very optimistic. The government, however, aims for an even higher target (2.7%) and there is no magic wand to achieve it. Now even if this happy ending scenario were to unfold, that does not mean that structural problems, like the swelling public debt and insolvent social welfare, will be headed for resolution. Of course, enhanced trend growth and positive inflation will provide big support for undertaking needed fiscal and social welfare reforms. But the happy ending alone cannot resolve Japan's problems. The biggest reason for Japan's ballooning public debt is that social welfare is chronically in the red because elderly on the receiving end continuing to swell in number (graying of society), while the productive population on the paying end steadily shrinks. What is more, with the debt having reached 200% of GDP, Japan's fiscal health is very vulnerable to a rise in interest rates whatever the cause. As a result, even if the happy ending scenario unfolds, the government must still produce a credible plan for fiscal restructuring (including social welfare reform) and the BOJ will still have to maintain its zero-rate stance and aggressive JGB buying with an eye to curbing the government's interest payment burdens. In Conclusion: Nominal wages in Japan lost downward rigidity after Japan's 1997 financial crisis. In the years since then, wages have become downwardly flexible and upwardly rigid. As a result, even during corporate earnings recoveries, like today, labor might enjoy increased discretionary pay like bonuses but basic wages (scheduled cash earnings) have been held to very limited gains. Additionally, even when there are modest increases in the salaries paid to regular employees it does not easily translate into improved wages on a macro basis because the share of regular employees in the workforce continues to steadily trend lower. Without a revival in wages and service prices, inflation might momentarily rise on the back of yen depreciation but there will be no escape from deflation.

Gold Market Update Posted: 19 Sep 2013 05:00 PM PDT Clive Maund

The Gold Price Rose 4.7 Percent Closing at $1,369.40 — Silver Price Up 8 Percent Closing at $23.24 Posted: 19 Sep 2013 04:51 PM PDT Gold Price Close Today : 1369.40 Change : 61.60 or 4.71% Silver Price Close Today : 23.242 Change : 1.728 or 8.03% Gold Silver Ratio Today : 58.919 Change : -1.869 or -3.07% Silver Gold Ratio Today : 0.01697 Change : 0.000522 or 3.17% Platinum Price Close Today : 1472.40 Change : 47.80 or 3.36% Palladium Price Close Today : 736.55 Change : 35.10 or 5.00% S&P 500 : 1,722.34 Change : -3.18 or -0.18% Dow In GOLD$ : $236.04 Change : $ (11.76) or -4.74% Dow in GOLD oz : 11.419 Change : -0.569 or -4.74% Dow in SILVER oz : 672.77 Change : -55.91 or -7.67% Dow Industrial : 15,636.55 Change : -40.39 or -0.26% US Dollar Index : 80.345 Change : 0.075 or 0.09% Today the GOLD PRICE rose $61.60 (4.7%) to $1,369.40 and silver gained an eye-popping 172.8 cents (8%) to 2324.2c. Remember, those are the gains from yesterday's low Comex closes, not the gains from the end-of-day prices. Clearly, this demands we act, and I'll tell you how below. Final proof of the silver and GOLD PRICE reversal will come tomorrow or next day when gold closes above $1,385 and SILVER above 2400c. Still needed after that is silver above 2500c and gold above $1,434. Should you wait for the confirmations to buy? I don't think so, after a powerful reversal like we saw yesterday and today. I think it's time to load up the wagon, but then I am a plunger and a risk taker, as well y'all know. Past that, Bernanke has proven once again -- did y'all really NEED for it to be proven again? -- that the only answer Our Masters have to economic crisis and depression is "print more money." That makes silver and gold as near a sure thing as y'all are ever likely to see. I'm sorry I missed sending y'all a commentary yesterday, but I was tied up with a crew filming a documentary about people who leave the city for an agrarian life in the country, "Beyond Off the Grid." Y'all go check it out at http://beyondoffgrid.com, and if you like the idea, you can help them out. I have already. Y'all already know what my commentary for yesterday would have sounded like, pennants of sarcasm floating with streamers of cynicism and "I-told-y'all-sos." Alas, I didn't get to send forth those streamers and pennants yesterday, so will compensate today. I will drink in great draughts of daily news and government lies and Fed propaganda to stimulate my sarcasm gland. I really want to say, "I told y'all they wouldn't taper,' but I will forego that pleasure for the sake of humility. Bernanke and the other criminals at the Fed sucked in the world's wise ones (and economists) on Wall Street and the media with tales of tapering. Alas, the victims learned yesterday 'twas only 'twaddle, idle jawboning to deceive the gullible. 'Tis easy to lie. Lenin gave Felix Dzherzhinsky, his secret police chief, the key to getting lies believed: "Tell them what they want to hear." Seems Bernanke and the FOMC read Lenin's book. Yea, the almighty Fed even backed off its claims of prescience (claims upon which its raison d'être is pyramided) and lowered its economic growth forecasts for 2013 and 2014. Wait, wait -- you mean we're NOT better off having "experts" running things? You mean "Ph.D" actually does stand for "Piled Higher and Deeper"? You mean academics who have never run a business or met a payroll in their lives don't really know how to run the world's biggest economy? Well, shucks. I am well and truly disillusioned. Now, on to markets. Remember that Comex closes at 1:30 Eastern, BEFORE the FOMC bloviation takes place. So yesterday silver closed at 2151.4c, down 22.1 cents and gold at $1,307.80, down $1.70 (yet above that critical $1,300). Lo, and Behold! Ben mumbled, and the net was "We ain't gonna taper until 2014, if ever." Markets went wild. Stocks soared and in fifteen minutes gold gained $50 (3.8%) and silver 100 cents (4.6%). Blew right thru resistance levels. And closed higher today, along with breaking into new low territory yesterday and closing higher today. Bingo! Complete key reversal, confirmed. Stocks jubilated yesterday. Dow hit a new all time high at 15676.94, and a new intraday high at 15,709.58. S&P500 also struck a new high at 1,725.52. Today stocks sang not quite so sweetly. Dow gave back 40.39 (0.26%) to 15,636.55 while the S&P500 lost 3.18 (0.18%) at 1,722.34. We have no way of knowing yet, but this third peak in a series of slightly higher peaks would paint a perfect top on this counter-cyclical rally in the on-going stock bear market. Ahh, but the self-satisfied chortling really becomes shameless when I cast my eye on the Dow in Gold and Dow in Silver. Yea, Validation, thou art sweet! Dow in gold closed sharply down today, 4.74% at 11.419 oz (G$236.04 gold dollars), confirming yet again that the June high was THE high. Dow in silver was turned back by its 50 DMA (711.87) and lost 7.67% or 55.91 oz today, ending at 672.77 oz. They won't pass these heights again. Yesterday the US dollar index lost 106 basis points or 1.30% and ended at 80.23. Think about what happens when you are leaning over the rail of the ferry looking at the water, lean too far and your glasses fall out of your pocket. That's what the dollar index chart looks like. Fell plumb through support at 81, past the August low at 80.77 and the June low at 80.50. It will not pass this way again. All that remains for the dollar to turn down without recall is a close below 79.50. The Nice Japanese Government Men must have stayed up all night selling yen against that falling dollar tide cause today the yen closed 100.57, down 1.43%. That strikes me as against nature, if not a crime against nature. Scrofulous, nasty euro was the big gainer from the dollar's plunge. Shot up yesterday and rose another 0.13% today to end at $1,3531, above $1.3500 resistance and apparently headed much higher. In the country of the blind, the one-eyed currency is king. Bond yields fell yesterday (bond prices rose), but that won't last. Interest rates will have to rise to compensate bond holders for the certainty of dollar depreciation. Bernanke's zero interest rate policy is doomed, and so is the bubble in bonds it blew up. FOMC's announcement might have bought it a little time, but its doom is sealed. I don't ask y'all for much or ask often, but I would like to ask a favor. I have a beloved friend, Fiona, who has been diagnosed with several tumors, including one in her brain. She has a husband and a little boy six. I would deeply appreciate your prayers on her behalf. For this I need y'all's help. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com 1-888-218-9226 10:00am-5:00pm CST, Monday-Friday © 2013, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. No, I don't.

The Gold Price Rose 4.7 Percent Closing at $1,369.40 — Silver Price Up 8 Percent Closing at $23.24 Posted: 19 Sep 2013 04:48 PM PDT Gold Price Close Today : 1369.40 Change : 61.60 or 4.71% Silver Price Close Today : 23.242 Change : 1.728 or 8.03% Gold Silver Ratio Today : 58.919 Change : -1.869 or -3.07% Silver Gold Ratio Today : 0.01697 Change : 0.000522 or 3.17% Platinum Price Close Today : 1472.40 Change : 47.80 or 3.36% Palladium Price Close Today : 736.55 Change : 35.10 or 5.00% S&P 500 : 1,722.34 Change : -3.18 or -0.18% Dow In GOLD$ : $236.04 Change : $ (11.76) or -4.74% Dow in GOLD oz : 11.419 Change : -0.569 or -4.74% Dow in SILVER oz : 672.77 Change : -55.91 or -7.67% Dow Industrial : 15,636.55 Change : -40.39 or -0.26% US Dollar Index : 80.345 Change : 0.075 or 0.09% Today the GOLD PRICE rose $61.60 (4.7%) to $1,369.40 and silver gained an eye-popping 172.8 cents (8%) to 2324.2c. Remember, those are the gains from yesterday's low Comex closes, not the gains from the end-of-day prices. Clearly, this demands we act, and I'll tell you how below. Final proof of the silver and GOLD PRICE reversal will come tomorrow or next day when gold closes above $1,385 and SILVER above 2400c. Still needed after that is silver above 2500c and gold above $1,434. Should you wait for the confirmations to buy? I don't think so, after a powerful reversal like we saw yesterday and today. I think it's time to load up the wagon, but then I am a plunger and a risk taker, as well y'all know. Past that, Bernanke has proven once again -- did y'all really NEED for it to be proven again? -- that the only answer Our Masters have to economic crisis and depression is "print more money." That makes silver and gold as near a sure thing as y'all are ever likely to see. I'm sorry I missed sending y'all a commentary yesterday, but I was tied up with a crew filming a documentary about people who leave the city for an agrarian life in the country, "Beyond Off the Grid." Y'all go check it out at http://beyondoffgrid.com, and if you like the idea, you can help them out. I have already. Y'all already know what my commentary for yesterday would have sounded like, pennants of sarcasm floating with streamers of cynicism and "I-told-y'all-sos." Alas, I didn't get to send forth those streamers and pennants yesterday, so will compensate today. I will drink in great draughts of daily news and government lies and Fed propaganda to stimulate my sarcasm gland. I really want to say, "I told y'all they wouldn't taper,' but I will forego that pleasure for the sake of humility. Bernanke and the other criminals at the Fed sucked in the world's wise ones (and economists) on Wall Street and the media with tales of tapering. Alas, the victims learned yesterday 'twas only 'twaddle, idle jawboning to deceive the gullible. 'Tis easy to lie. Lenin gave Felix Dzherzhinsky, his secret police chief, the key to getting lies believed: "Tell them what they want to hear." Seems Bernanke and the FOMC read Lenin's book. Yea, the almighty Fed even backed off its claims of prescience (claims upon which its raison d'être is pyramided) and lowered its economic growth forecasts for 2013 and 2014. Wait, wait -- you mean we're NOT better off having "experts" running things? You mean "Ph.D" actually does stand for "Piled Higher and Deeper"? You mean academics who have never run a business or met a payroll in their lives don't really know how to run the world's biggest economy? Well, shucks. I am well and truly disillusioned. Now, on to markets. Remember that Comex closes at 1:30 Eastern, BEFORE the FOMC bloviation takes place. So yesterday silver closed at 2151.4c, down 22.1 cents and gold at $1,307.80, down $1.70 (yet above that critical $1,300). Lo, and Behold! Ben mumbled, and the net was "We ain't gonna taper until 2014, if ever." Markets went wild. Stocks soared and in fifteen minutes gold gained $50 (3.8%) and silver 100 cents (4.6%). Blew right thru resistance levels. And closed higher today, along with breaking into new low territory yesterday and closing higher today. Bingo! Complete key reversal, confirmed. Stocks jubilated yesterday. Dow hit a new all time high at 15676.94, and a new intraday high at 15,709.58. S&P500 also struck a new high at 1,725.52. Today stocks sang not quite so sweetly. Dow gave back 40.39 (0.26%) to 15,636.55 while the S&P500 lost 3.18 (0.18%) at 1,722.34. We have no way of knowing yet, but this third peak in a series of slightly higher peaks would paint a perfect top on this counter-cyclical rally in the on-going stock bear market. Ahh, but the self-satisfied chortling really becomes shameless when I cast my eye on the Dow in Gold and Dow in Silver. Yea, Validation, thou art sweet! Dow in gold closed sharply down today, 4.74% at 11.419 oz (G$236.04 gold dollars), confirming yet again that the June high was THE high. Dow in silver was turned back by its 50 DMA (711.87) and lost 7.67% or 55.91 oz today, ending at 672.77 oz. They won't pass these heights again. Yesterday the US dollar index lost 106 basis points or 1.30% and ended at 80.23. Think about what happens when you are leaning over the rail of the ferry looking at the water, lean too far and your glasses fall out of your pocket. That's what the dollar index chart looks like. Fell plumb through support at 81, past the August low at 80.77 and the June low at 80.50. It will not pass this way again. All that remains for the dollar to turn down without recall is a close below 79.50. The Nice Japanese Government Men must have stayed up all night selling yen against that falling dollar tide cause today the yen closed 100.57, down 1.43%. That strikes me as against nature, if not a crime against nature. Scrofulous, nasty euro was the big gainer from the dollar's plunge. Shot up yesterday and rose another 0.13% today to end at $1,3531, above $1.3500 resistance and apparently headed much higher. In the country of the blind, the one-eyed currency is king. Bond yields fell yesterday (bond prices rose), but that won't last. Interest rates will have to rise to compensate bond holders for the certainty of dollar depreciation. Bernanke's zero interest rate policy is doomed, and so is the bubble in bonds it blew up. FOMC's announcement might have bought it a little time, but its doom is sealed. I don't ask y'all for much or ask often, but I would like to ask a favor. I have a beloved friend, Fiona, who has been diagnosed with several tumors, including one in her brain. She has a husband and a little boy six. I would deeply appreciate your prayers on her behalf. For this I need y'all's help. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com 1-888-218-9226 10:00am-5:00pm CST, Monday-Friday © 2013, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. No, I don't.

About Last Week's "Busted" Treasury Auction Posted: 19 Sep 2013 04:40 PM PDT When people think failed or busted Treasury bond auction, they usually imagine something out of Brazil or Russia where the government was selling obligations and nobody showed up. Of course, in the US, courtesy of the Primary Dealer system and more importantly, of a multi-trillion shadow banking system, where bonds are cash equivalent following rehypothecation and pledging for cash-equivalents with virtually no haircut, there is no risk of an auction failing in the conventional sense, at least not until Bernanke finally manages to irrevocably erode the Dollar's reserve currency status. However, that does not mean that auction's can't "fail" in a purely technical sense. Which is exactly what happened during last week's sale of 3 month Bills, when due to a "glitch" in the system not only was a key Primary Dealer locked out of the auction, forcing the US Treasury to arbitrarily reassign allotment in the parallel 6 month auction, but leading to a wild intraday mispricing in the already collateral-scarce, short term maturity market. The dealer in question is Wall Street's biggest pure-play hedge fund (excluding JPM's CIO office, and the Federal Reserve of course) Goldman Sachs, whose order at the September 9 3-Month bill auction did not come through, making it seem that there was far less demand for the paper, and resulting in a brief spike in the yield of 3 Month bills, which priced at a 0.02% yield, or about 50% higher than the 0.013% yield for the complex before the auction. The Treasury, meanwhile, scrambling to remedy the situation, had no choice but to boost allocation to Goldman in the concurrent 6 Month Bill auction. As WSJ reports, "The Treasury made the decision to give Goldman more six-month T-bills than it had bid for in the two-minute span between the auction ending and the results being disseminated to the market. In making this decision, the Treasury chose to break one of its own rules for its debt auctions. The Treasury limits the amount of debt any one buyer can obtain in an auction to 35 %.... [as a result] the six-month bill auction appeared to have more demand and the bills sold at a lower rate than expected, at 0.035%. That is a tumble from comparable bills yielding 0.048% before the auction. Six-month bill yields fell to as low as 0.02% after the results were released. " Sadly, the Treasury has no problem with allowing the Fed to monetize up to 70% of any one CUSIP, albeit it happens in the secondary market from the same Primary Dealers who buy paper outright. So it is not technically "monetization." This is the announcement that the Treasury posted on the day after the auction: During yesterday's auctions of 3- and 6-month Treasury bills, the Bureau of the Public Debt (BPD) discovered a technical issue within the TAAPS system, a web-based portal for bidders to participate in Treasury auctions, which resulted in one bidder being unable to access the 3-month auction. Our manual attempts to address the issue ultimately resulted in the bidder being awarded a larger sum of 6-month bills than originally intended, in excess of the '35 percent rule' for competitive bidders in Treasury auctions. In this instance, we have determined that it is in the best interest of market participants to waive the 35 percent limitation and for yesterday's auctions to stand. Today's scheduled auctions occurred without issue and BPD continues to test its systems to maintain the smooth functioning of Treasury auctions. The WSJ correctly observes that the, "incident rattled the short-term debt market at a time when investors in U.S. government debt are adjusting their portfolios amid concern about the path of interest rates." Luckily this time it was just a Bill auction, which is not as closely scrutinized by the broader public, although the vast majority of money-markets, banks and corporations are very active participants in the cash-equivalent space. However, what if the TAAPS system encountered a "Taps" moment, and shut off not just Goldman but the majority of Primary Dealers (we hope the Syrian Electronic Army isn't getting any ideas here), in a much more important benchmark security, say the 10 Year? How would the already jittery market react if instead of pricing just around the When Issued, the 10 Year were to price some 50% higher for some unknown reason? One can only imagine the cross asset cataclysm that would ensue as the panic gripped the kneejerky, HFT-dominated bond markets, who, unclear what had just happened, decided to follow suit and dump it all...

JP Morgan, Goldman, Bank of America Turn Bullish On Precious Metals Posted: 19 Sep 2013 02:59 PM PDT What a difference one day and one person makes. It was only a week ago that Goldman Sachs’ head of commodities research appeared on Bloomberg TV with his bearish outlook on the commodities sector. Specifically for gold, his outlook appeared to be below $1,000 per ounce. The interview was here Goldman sees risk of gold below $1,000 as economy gains. Now that Mr. Bernanke announced not to slow down his asset purchases which runs at the rhythm of roughly 1 trillion US dollar per year, the bearish outlook of several major banks has turned bullish, at least in the short and mid-term. Below are three examples. It is no coincidence that these are among the largest banks globally and that they have huge derivatives positions. However, don’t take this as financial advice, as it wouldn’t be the first time that these statements have proven to be pitfalls for investors. Also, understand that these banks are in the game of trading; they don’t have any interest in the monetary protection of the metals. Bank of America says bearish view was incorrect “The Wednesday Bullish Candlestick formations (Bullish Engulfing Candles) in gold and silver say that our bearish view on precious metals now incorrect. Indeed, this is supported by the US $ breakdown and the increasingly constructive environment for risk assets generally. As such, we are cutting our Silver Short and moving to the sidelines. Silver should see a test of long term resistance at 24.24/26.23, in the sessions and weeks ahead while gold should re-test its 1433, August highs. In both cases, watch trendlines at 23.20 & 1375. A close above confirms the bullish candles and upside trajectories.” JP Morgan turned tactically long commodites “The strong rebound in J.P. Morgan's global manufacturing PMI, improving physical demand and our economists' first upgrade of Chinese growth expectations since February make us turn tactically overweight. This is especially important for base metals and copper in particular given China's very large share of global metal demand and thus, we go overweight base metals and copper in addition to our longstanding energy overweight. We also close our underweight in precious metals given positive momentum, cleaner positions and the impending start to the debt ceiling negotiations. In our commodities portfolio, this leaves us OW energy and base metals, neutral precious metals and UW agriculture, where high prices coupled with better weather conditions compared to last year have led to a large increase in supply expectations.” Goldman Sachs sees near term upside but still bearish into 2014 “The FOMC unexpectedly decided not to taper the rate of its asset purchases, preferring to wait for further confirmation of improvement in the US economic outlook. This announcement, as well as Bernanke's press conference, was more dovish than most had expected, pushing gold prices to $1,365/toz. The decision, combined with the upcoming debt ceiling debate, leaves risks to gold prices as skewed to the upside in the near-term.” “However, with gold prices already back near their pre-June FOMC level, COMEX net speculative positioning already back at its April level as well as growing pressures on EM gold demand, we believe that this upside will ultimately prove limited. We believe this is well illustrated by today's more muted rally in gold prices when compared to the significant rally in 10-year TIPS yields, helping close the significant valuation gap that had occurred between both assets over the past month. As a result, we re-iterate our neutral stance on gold prices and continue to expect that gold prices will resume their decline heading into 2014 when we expect economic data to solidly confirm a reacceleration in US growth and warrant a less accommodative monetary policy stance.” Courtesy: Zerohedge

Marc Faber About Fed’s Money Printing: It Benefits A Handful Of People Posted: 19 Sep 2013 02:33 PM PDT After the press communication of the US Fed to delay the tapering of their asset purchases, Marc Faber was asked by Bloomberg to comment on the decision and announcement of Mr. Bernanke. This is the link to the interview. We provide the highlights of Faber’s thoughts in this article. Apart from the fact that Mr. Faber did expect a formal confirmation of tapering, he said he was not surprised because “we ar in QE unlimited.” He points out that the Fed is run by academics who never worked a single day of their life in a business. They don’t understand that if you print money, it benefits basically a handful of people maybe 3% or 5% of the population. The markets moved higher on the news with stocks up 1%, silver up more than 6%, gold up more than 4%, copper 2.9%, crude oil 2.68%. So the Fed pushes the prices of items that people need in their daily lifes; asset prices go up. Mind that the majority of people do not own stocks; only 11% of Americans own directly shares. Are interest rates held down when the Fed continues this type of policy? Marc Faber: ”On September 14, 2012, when the Fed announced QE3, that was then extended into QE4, and now basically QE unlimited, the bond markets had peaked out. Interest rates had bottomed out on July 25, 2012–a year ago–at 1.43% on the 10-year Treasury note. Mr. Bernanke said at that time at a press conference, the objective of the Fed is to lower interest rates. Since then, they have doubled. Thank you very much. Great success.” What are unintended consequences of money printing (or, what is the endgame)? Marc Faber: ”Well, the endgame is a total collapse, but from a higher diving board. The Fed will continue to print and if the stock market goes down 10%, they will print even more. And they don’t know anything else to do. And quite frankly, they have boxed themselves into a corner where they are now kind of desperate.” Where is gold heading? Marc Faber: ”When I look at the market action today, I would like to see the next few days, because it may be a one-day event. The markets are overbought. The Feds have already lost control of the bond market. The question is when will it lose control of the stock market. So, I’m a little bit apprehensive. I would like to wait a few days to see how the markets react after the initial reaction.” Will the 10-year yield float back up to where it was before the Fed’s speech? Marc Faber: ”I will confess to you, longer-term, I am of course, negative about government bonds and i think that yields will go up and that eventually there will be sovereign default. But in the last few days, when yields went to 2.9% and 3% on the 10-year for the first time in years i bought some treasuries because I have the view that they overshot and that they could ease down to around 2.2% to 2.5% because the economy is much weaker than people think…I think in the next three months or so.” What is the gold price forecast? Marc Faber: “I always buy gold and I own gold. I don’t even value it. I regard it as an insurance policy. I think responsible citizens should own gold, period.”

Gold Daily and Silver Weekly Charts - Assis sur le Rebord du Monde Posted: 19 Sep 2013 01:07 PM PDT

Gold Daily and Silver Weekly Charts - Assis sur le Rebord du Monde Posted: 19 Sep 2013 01:07 PM PDT

Gold Market Update Posted: 19 Sep 2013 12:02 PM PDT That was a huge announcement by the Fed yesterday (18th) to keep monetary policy the same and the effect on the markets was immediate and dramatic. To say that this announcement was gold friendly would have to be one of the understatements ... Read More...

Silver Market Update Posted: 19 Sep 2013 11:58 AM PDT Much of what is written in the parallel Gold Market update applies equally to silver and that will not be repeated here. Silver's major reversal pattern, which, like gold's, is a Head-and-Shoulders bottom, is different to gold's in ... Read More...

Why the Feds Really Hate Sound Money Posted: 19 Sep 2013 11:49 AM PDT One of the most pressing issues of our time is the push for monetary freedom. The only sound monetary system is one which protects sound money and allows consumers, businesses, and investors the freedom to transact in the currency of their choice. The importance of sound money is summed up nicely by Ludwig von Mises: "It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments." It is no wonder that governments fight tooth and nail against sound money, as sound money protects the well-being of the middle class and the poor while preventing the expansion of government. Most people understand the risks inherent in stock or bond investment, but the risk of holding savings accounts or cash is still drastically under-appreciated. Governments throughout history have sought to monopolize the issuance of money, either directly or through the creation of central banks. The growth of central banking in the 20th century allowed governments to monetize their debt in an indirect manner while still ensuring a ready market for government debt. And central banks’ slow but sure debasement of the currency allowed governments to repay their debts in devalued money. What debtor would not want such a sweetheart deal? Indeed, the 20th century witnessed a revolt by governments against the strictures of sound money. In some countries such as Weimar Germany the revolution came quickly and the results were both immediately apparent and instantaneously disastrous. In other countries such as the United States, the revolt came more gradually, with the destructive effects of money printing only recently becoming apparent to more and more Americans. Over the past 100 years, the Federal Reserve has continually pumped new money into the economy, resulting in a 96 percent devaluation of the dollar. This devaluation does not affect everyone equally, as the banks who receive this new money first benefit from using it before prices rise, while average Americans suffer the price rises first and receive only a trickle of money well afterward. In this way the Fed enriches Wall Street while impoverishing Main Street, leading to a growing disparity of wealth. The wealthy are always able to protect the value of their assets against inflation to an extent that the middle class and poor cannot. Anyone with enough money and resources can set up a foreign bank account denominated in euros or Hong Kong dollars, or purchase gold and silver that will be safely stored in London or Singapore. The rich are best able to purchase precious metals, the only ones able to invest in high-yielding hedge funds, and the ones most able to shelter their assets from punitive taxation. All the legislation and regulation that ostensibly protects the average American from losing money in fact does exactly the opposite. It keeps the average American from being able to defend against inflation by investing in precious metals, forces him into mediocre investment opportunities that do not even keep up with inflation, and leaves him at the mercy of the taxman. Compared to their counterparts in other countries, the average American has far fewer financial options available to them. Mexican workers can set up accounts that are denominated in ounces of silver, and can take delivery of that silver whenever they want, tax-free. In Singapore and some other Asian countries, individuals can set up bank accounts denominated in gold and silver. Debit cards can be linked to gold and silver accounts so that customers can use their gold and silver to make point of sale transactions, a service which is only available to non-Americans. In short, Americans have far fewer options to protect their wealth than citizens of many foreign countries do. The solution to this problem is to legalize monetary freedom and allow the circulation of parallel and competing currencies. There is no reason why Americans should not be able to transact, save, and invest in the currency of their choosing. Unfortunately, decades of government restrictions and regulations have hampered and prevented the circulation of parallel currencies and destroyed the familiarity of Americans with any sort of money aside from Federal Reserve Notes or bank deposits denominated in U.S. dollars. The thought of introducing parallel currencies undoubtedly scares many people who understandably wish to minimize their financial risk. All financial activity is fraught with risk. Most people understand the risks inherent in stock or bond investment, but the risk of holding savings accounts or cash is still drastically under-appreciated. Everyone is familiar with the maxim "Don’t put all your eggs in one basket" and investors and savers are constantly urged to diversify their portfolios, yet the U.S. government continues to set roadblocks that force Americans to transact and save in dollars that continue to depreciate. According to the government’s official figures, price inflation runs around two percent per year which means that, since interest rates on savings accounts are near zero, the real rate of return on savings accounts is negative. Anyone holding a savings account or cash is losing nearly two percent of the value of his savings per year with this relatively mild inflation. Some private economists estimate that actual price inflation is running closer to nine percent per year, which would make the loss from holding dollars enormous. It is horribly unjust to force the American people to do business with a dollar that is continuously debased by the Federal Reserve. Even greater danger comes during bouts of hyperinflation, such as during Weimar Germany and more recently in Zimbabwe. But when Zimbabwe’s dollar became worthless, people began to use U.S. dollars, South African rand, and Zambian kwacha to conduct transactions. Similarly in Weimar Germany, many individuals resorted to using dollars, pounds, and precious metals. So despite the economic hardship wrought by hyperinflation, not all economic activity ground to a halt, largely due to the circulation of parallel currencies. Should the United States ever face a hyperinflationary crisis, which due to the Fed’s quantitative easing is very possible, the only means of survival would be through the use of parallel currencies. It is horribly unjust to force the American people to do business with a dollar that is continuously debased by the Federal Reserve. Forcing a monopoly currency with legal tender status onto the people benefits the issuer (government) while harming consumers, investors, and savers. The American people should be free to use the currency of their choice, whether gold, silver, or other currencies, with no legal restrictions or punitive taxation standing in the way. Restoring the monetary system envisioned by the Constitution is the only way to ensure the economic security of the American people. Regards, Ron Paul for The Daily Reckoning This essay was edited from the Congressional Record Ed. Note: The decline of paper currencies is no secret to anyone who’s paid attention to history. Eventually they all go the way of the dodo. That’s why it’s so important to find ways around it… something The Daily Reckoning email edition offers its readers every single day… FREE. Sign up for The Daily Reckoning, for free, right here, and start learning the best ways to safeguard and even grow your wealth no matter what happens to untrustworthy paper currencis.

Goldman vs. China on Gold Prices Posted: 19 Sep 2013 11:31 AM PDT Housewives in Shanghai don't buy Goldman Sachs $1000 gold call...   LAST WEEK, writes Byron King of Addison Wiggins' Agora Financial in The Daily Reckoning, while tensions ramped up in the Middle East (and despite the Russia-Syria-US ballet of oddball diplomacy, tensions remain high), the price of gold plummeted.   Week over week, the price of gold was off nearly 5% – or about $50 an ounce. Much of that downward action happened in one day, too.   What happened? Well, a representative from Goldman Sachs (the share-price of which is about to become part of the Dow Jones Index, by the way) stated that the price of gold might drop to below $1000 per ounce. That lowered the boom on gold.   When Goldman speaks, people listen. Then they sell or buy accordingly. Goldman moves markets as was the case last Thursday. I'll refrain from saying more on that specific point.   Aside from Goldman, much of the mainstream media is already working against gold and other precious metals like silver, platinum and palladium. Precious metals are no longer the flavor of the month, at least like they used to be.   After a great, decade-long run, precious metals have pulled back in the past year. Is it a temporary issue for long-term investors? Or is something fundamental really changing for shiny stuff? It matters with respect to the value of physical metal that you own, and definitely for the prospects of mining companies in which you might invest.   The gold price has been on a downward slide year over year – for example, the price per ounce is down over $400. The redeeming thing is that, for much of 2013, we've had strong support for gold, silver, etc. in the form of physical buying on pullbacks.   Stories are now legendary about "Chinese housewives" mobbing gold selling counters in Shanghai. Or great accounts of clever smugglers bringing gold bars into India in defiance of government controls. With the latest price tumble, are new stories like these – anecdotal evidence for the "love trade" in gold – about to dry up?   Or consider news stories about how emerging, hot-running markets of the past few years are on the ropes. The bloom is distinctly off the rose for prospects in, say, China, India, Brazil, Turkey and many more former go-go lands. Their government-administered, goosed-up economies have outrun the kind of fundamentals – household savings and company profits – that make for long-term economic strength. Bad for gold, right?   Meanwhile, developed economies appear to be improving by many metrics. Just look close to home in the US, where housing had a good summer and autos are rolling off the lots at rates not seen since before the Crash of 2008.   Also in the US, the Dollar has been strong relative to other world currencies. I contend that much of the latest "Dollar strength" is due to increased domestic oil output, courtesy of our ongoing energy revolution, aka fracking. With fracking, the US has displaced about 2.5 million barrels-per-day of imported oil.   Now instead of imports, the US economy uses domestic crude, much to the benefit of the overall economy, tax receipts, the national current account and more. Indeed, the large increase in domestic oil is one development for which Pres. Obama never seems to "blame Bush."   Overseas, European economies are improving. Look at Germany, Britain and others. There's less and less bad news from the southern rim (Italy in particular), which could be a sign that things have stopped getting worse and have found a bottom. Is there a rebound coming?   Japan is looking up too, despite lingering effects of the 2011 nuclear plant disaster at Fukushima. One Japanese highlight is that the International Olympics Committee just awarded the 2020 event to Tokyo. We can look forward to seven strong years of people in Japan pouring concrete for new stadiums, roads, rail, airports, etc. And you just know that the Japanese will want to outdo their rivals in China, who hosted the 2008 Olympics in Beijing.   With all this good news for "conventional" economics, and bad news for the gold-demand side, is the gold run over? Are we waiting for a golden Godot or something?   Well, not so fast. At least, don't rush for the exits. All is not what it seems. Let's look at one item – just one! – that could cause precious metal prices to rebound sharply.   You may know that for many months the US Treasury Department has been cooking the books on national accounts. Well, that's what I call it when the US national debt has not budged by one Dollar, while the debt level remains leveled-off at $16.7 trillion – which just so happens to be the current, congressionally-mandated debt ceiling.   Throughout 2013, the Treasury has used accounting gimmicks, tricks, fund transfers, restatements and other legerdemain to juggle the books. But in a month or so – or as soon as the debt ceiling is raised after Congress and Pres. Obama go through their Kabuki Theater – the US national debt will quickly revert upwards.   That is, national debt will soon land on some much higher number, as Treasury's accounting tricks unwind and the debt magically appears on the federal balance sheet.   So why does Goldman Sachs believe that gold is due for another pullback to under $1000? Do investors no longer need gold as a risk hedge? Is the modern economy past the point where savers and investors need to convert currency into something that central banks can't create out of nothing?   You should keep these questions in mind as you watch the gyrations of gold prices. We may have a rough patch in front of us, with painful down-swings in gold prices and related mining shares. But beware trying to "market-time" this.   Just keep in mind that over the long haul, gold and other precious metals are a key part of preserving your wealth. Don't panic out. Goldman Sachs does things that are good for Goldman, not you.

Goldman vs. China on Gold Prices Posted: 19 Sep 2013 11:31 AM PDT Housewives in Shanghai don't buy Goldman Sachs $1000 gold call...   LAST WEEK, writes Byron King of Addison Wiggins' Agora Financial in The Daily Reckoning, while tensions ramped up in the Middle East (and despite the Russia-Syria-US ballet of oddball diplomacy, tensions remain high), the price of gold plummeted.   Week over week, the price of gold was off nearly 5% – or about $50 an ounce. Much of that downward action happened in one day, too.   What happened? Well, a representative from Goldman Sachs (the share-price of which is about to become part of the Dow Jones Index, by the way) stated that the price of gold might drop to below $1000 per ounce. That lowered the boom on gold.   When Goldman speaks, people listen. Then they sell or buy accordingly. Goldman moves markets as was the case last Thursday. I'll refrain from saying more on that specific point.   Aside from Goldman, much of the mainstream media is already working against gold and other precious metals like silver, platinum and palladium. Precious metals are no longer the flavor of the month, at least like they used to be.   After a great, decade-long run, precious metals have pulled back in the past year. Is it a temporary issue for long-term investors? Or is something fundamental really changing for shiny stuff? It matters with respect to the value of physical metal that you own, and definitely for the prospects of mining companies in which you might invest.   The gold price has been on a downward slide year over year – for example, the price per ounce is down over $400. The redeeming thing is that, for much of 2013, we've had strong support for gold, silver, etc. in the form of physical buying on pullbacks.   Stories are now legendary about "Chinese housewives" mobbing gold selling counters in Shanghai. Or great accounts of clever smugglers bringing gold bars into India in defiance of government controls. With the latest price tumble, are new stories like these – anecdotal evidence for the "love trade" in gold – about to dry up?   Or consider news stories about how emerging, hot-running markets of the past few years are on the ropes. The bloom is distinctly off the rose for prospects in, say, China, India, Brazil, Turkey and many more former go-go lands. Their government-administered, goosed-up economies have outrun the kind of fundamentals – household savings and company profits – that make for long-term economic strength. Bad for gold, right?   Meanwhile, developed economies appear to be improving by many metrics. Just look close to home in the US, where housing had a good summer and autos are rolling off the lots at rates not seen since before the Crash of 2008.   Also in the US, the Dollar has been strong relative to other world currencies. I contend that much of the latest "Dollar strength" is due to increased domestic oil output, courtesy of our ongoing energy revolution, aka fracking. With fracking, the US has displaced about 2.5 million barrels-per-day of imported oil.   Now instead of imports, the US economy uses domestic crude, much to the benefit of the overall economy, tax receipts, the national current account and more. Indeed, the large increase in domestic oil is one development for which Pres. Obama never seems to "blame Bush."   Overseas, European economies are improving. Look at Germany, Britain and others. There's less and less bad news from the southern rim (Italy in particular), which could be a sign that things have stopped getting worse and have found a bottom. Is there a rebound coming?   Japan is looking up too, despite lingering effects of the 2011 nuclear plant disaster at Fukushima. One Japanese highlight is that the International Olympics Committee just awarded the 2020 event to Tokyo. We can look forward to seven strong years of people in Japan pouring concrete for new stadiums, roads, rail, airports, etc. And you just know that the Japanese will want to outdo their rivals in China, who hosted the 2008 Olympics in Beijing.   With all this good news for "conventional" economics, and bad news for the gold-demand side, is the gold run over? Are we waiting for a golden Godot or something?   Well, not so fast. At least, don't rush for the exits. All is not what it seems. Let's look at one item – just one! – that could cause precious metal prices to rebound sharply.   You may know that for many months the US Treasury Department has been cooking the books on national accounts. Well, that's what I call it when the US national debt has not budged by one Dollar, while the debt level remains leveled-off at $16.7 trillion – which just so happens to be the current, congressionally-mandated debt ceiling.   Throughout 2013, the Treasury has used accounting gimmicks, tricks, fund transfers, restatements and other legerdemain to juggle the books. But in a month or so – or as soon as the debt ceiling is raised after Congress and Pres. Obama go through their Kabuki Theater – the US national debt will quickly revert upwards.   That is, national debt will soon land on some much higher number, as Treasury's accounting tricks unwind and the debt magically appears on the federal balance sheet.   So why does Goldman Sachs believe that gold is due for another pullback to under $1000? Do investors no longer need gold as a risk hedge? Is the modern economy past the point where savers and investors need to convert currency into something that central banks can't create out of nothing?   You should keep these questions in mind as you watch the gyrations of gold prices. We may have a rough patch in front of us, with painful down-swings in gold prices and related mining shares. But beware trying to "market-time" this.   Just keep in mind that over the long haul, gold and other precious metals are a key part of preserving your wealth. Don't panic out. Goldman Sachs does things that are good for Goldman, not you.

What is India Doing to Gold? Posted: 19 Sep 2013 11:27 AM PDT Can "Save Gold" work? Or will India's temple gold be raided by government...?   THERE's a key difference between India and China, writes Julian Phillips at the GoldForecaster.   While both nations have been touted as the fasted growing nations in Asia, these stark differences are now coming to the fore.   The first is that in China, the population has a fear of government and the dangers of disobeying it. After nearly 48 years of intense pressure and 're-modeling' the thinking of the Chinese people, the people are now highly regimented who appear to enjoy hard work, have a tacit obedience of government and appreciate the lift in their standard of living.   People also appear to be fully supportive of the extraordinary urbanization of the country and the present reality is that nearly three quarters of the country have a much higher standard of living than they have ever experienced. The nation is headed towards becoming the economic powerhouse of the world before 2020.   India on the other hand has little to no trust of government or the official bodies and bureaucrats below it. They have seen little change in their world overall. The intelligent rising middle class either aims to find their full potential outside the country or working for a company that services the needs of the developed world, particularly on the IT front. They remain a rural thinking economy with a rejection of mass retailing and appear to accept change only when it suits them. Immersed in religion and tradition they are unlikely to continue on the path to anywhere near the development that China is experiencing.   The tradition with heavy religious overtones applies to the buying of gold. Not only is it a religious expression, but a family statement of supplying financial security to the next generation. In that they share a similar attitude to China.   In India there is a marked distance between the ordinary Indian and the wealthy upper classes. In China they share the same way forward as each other, at the moment. The Indian family in general does not share the same objectives as government and so the nation lacks the cohesion that China does.   In China, should the government deem it necessary to take its citizen's gold into their reserves – whether by confiscation or in exchange for dated bonds or simply require some form of access to it once it is held in the banking system – we believe that the Chinese citizen would be happy to support their nation in such a strategic move. On the other hand the average gold-owning Indian would not trust his government or its intentions nor feel inclined to support government with his personal gold.   That is precisely why the developments in India regarding gold should be of such interest to the gold world.   Since the beginning of the year, we've seen the Indian government launch an attack on gold importing by raising duties twice and by permitting imports of gold only if 20% of it were for re-export subsequently. In this way the government has blocked the imports of gold, for the time being. It appears that importers have allowed gold stocks to be run down pending a softening of the regulations. In the meantime, gold smuggling has never been more profitable and is on the meteoric rise; however, amounts coming in by this route are unquantifiable.   We look to the statistics coming out of the Middle East, Pakistan and other peripheral nations for evidence of this in the future.   The Indian government has felt that this set of measures would have the quickest impact on the current account deficit (CAD) and it has had one, but it is not the solution to the problem. The internal growth of demand will continue until there are countrywide objections to these measures, which ahead of elections next year are unlikely to stand for too long. But short-term the damage has been significant to the supply of gold.   India's gold imports plunged in August to just 2.5 tonnes, more than a 90% drop from August 2012. The decline was a result of increased government tariffs and regulations governing gold imports. July saw 47.5 tonnes imported.   The Current Account Deficit touched an all-time high of 4.8% of Gross Domestic Product, or $88.2 billion in 2012-13. The Indian government proposes to bring down the CAD to 3.8% of GDP, or $70 billion, in the current financial year. But it is obvious that the attack on gold imports was a poor substitute for increasing exports. The Economic Affairs Secretary, Commerce Secretary S. R. Rao has asked for a relaxation of the new restrictions.   The fall in the Rupee that took it to nearly Rs.70: $1 has been halted by the use of a 'swap' line of $10 billion with which to intervene in the market place. But this can only be a short-term solution and one we suspect was secured by the promise of gold, should the Reserve Bank of India fail to unwind the swap.   Granted this is the quietest time of the year for Indian exports; however, this drop is exceptional. The 'gold-buying season' has now started in India and stockists are having to let stocks fall before they try to re-stock. When they do, expect the figures to jump sharply.   With the Rupee suffering so much the case for holding gold has been reinforced tremendously, putting the government in an even worse situation.   It appears that the lesson of the weaker Rupee is not lost on the government either. They have embarked on some clandestine moves to see if they can bring some of the between 20,000 and 30,000 tonnes of privately owned gold under their control in an attempt to shore up the int'l respect for the Rupee.   The first of these is a rerun of a scheme that failed in the past but is worth a renewed effort. With the loss of a good proportion of their business in sight, the nation's big jewelers have jumped on the bandwagon in the "Save Gold Campaign".   The scheme involved gold owners bringing their gold to jewelers who will issue them with a "Gold Certificate" valid for three years after which the gold can be returned and on which interest would be paid. The accompanying statement of purpose was that this would negate the need to import gold, drawing on the 'idle' gold in the country.    We cannot see this working because at some point in time there would be a need to return the gold. If it has been sold back into the economy, then the only way this could happen was if gold was imported from overseas, thereby destroying the original purpose of the scheme.   Likely the gold would be held in the banks – who may well pay interest on it in a similar manner. But the banks remain under the control of the government so may well be pressed to 'loan' the gold to the government, who in turn could then use it to secure offshore loans.    The underlying purpose of the scheme would be to get the gold out of the private domain and into the government's. This would not be as brutal as a straightforward confiscation, but essentially is the same. It would place the gold under the control of the government (who could extend its use of the gold for as long as they wanted to and this would be tantamount to confiscation).   It is now obvious that the attempts to get the public to deposit their gold through the "Save Gold" campaign, whereby they hand their gold to jewellers against the issue of a bond (where they will be paid Rupees as interest) for three or so years is part of a general search for an avenue to bring privately owned Indian gold within the control of government. If the government can harness gold for their international credit purposes – via the banks and jewellers – they have access to unlimited credit. But the distance between the gold owning public and the government is a chasm as well for the following reasons: The general population doesn't trust them; They don't see the gold being returned, i.e. confiscation; They don't want depreciating Rupees paid as interest to them, i.e. interest bearing confiscation; They know that any period given before the gold is returned can be extended or extended until the national Balance of Payments crisis is over, i.e. confiscation for an indefinite period; The gold is already held away from the government's eyes (even buried in gardens) and not easily located. This is where the 80-20 rule kicks in. Eighty percent of India's privately-held gold is held in 20% of the nation's hands. So it is easier to target these institutions first for the sake of effectiveness of the operation. So their first port of call, if this is the route the government wishes to follow, is to be found in the most visibly held, large stores of gold.    The most visible of these are selected temples, which in themselves have sufficient gold to ease the need for international loans. The Reserve Bank of India has confirmed that they are exploring this route by the letters they have already sent to the main temples asking for information about their gold ornaments and artifacts.   We would like to stress to you that this is not some odd little event in the distant reaches of the globe. It is important for two reasons: This is about using a nation's gold to support the nation's currency system, when it has lost credibility outside and inside of its borders. The quantity of gold within India is somewhere between 20,000 and 30,000 tonnes. To give this perspective the higher figure equals nearly the entire central bank reserve holding of gold globally. It is not far short of four times the gold holdings of the USA, which comprise around 75% of the US reserves. Individual temples hold more gold than some nations. But with much of this gold already held in banks, it is a small step to "harness it" for the nation's use.   In exploring this avenue, government has set itself up for a serious clash with religion. Some political/religious groups have told the boards of some temples to just ignore the letter. As is usual with such political moves, denial that there is any more than a curious gathering of data has already come from government.    The Reserve Bank of India's senior official, Salim Gangadharan, said the RBI had no plans to actually buy the temple gold, and that the exercise was a statistical one to estimate the gold. Government came into the story saying that they have no designs on temple gold to help fight their current financial crisis. Minister of State for Finance, J.D.Seelam, said there was an inquiry, but "Gods' gold is the very last resort."   So how far is the Indian government away from the last extreme resort? It depends on the decay of the Indian Balance of Payments. At the moment there appears to be little to combat that decay, so it may well be just a matter of time!

What is India Doing to Gold? Posted: 19 Sep 2013 11:27 AM PDT Can "Save Gold" work? Or will India's temple gold be raided by government...?   THERE's a key difference between India and China, writes Julian Phillips at the GoldForecaster.   While both nations have been touted as the fasted growing nations in Asia, these stark differences are now coming to the fore.   The first is that in China, the population has a fear of government and the dangers of disobeying it. After nearly 48 years of intense pressure and 're-modeling' the thinking of the Chinese people, the people are now highly regimented who appear to enjoy hard work, have a tacit obedience of government and appreciate the lift in their standard of living.   People also appear to be fully supportive of the extraordinary urbanization of the country and the present reality is that nearly three quarters of the country have a much higher standard of living than they have ever experienced. The nation is headed towards becoming the economic powerhouse of the world before 2020.   India on the other hand has little to no trust of government or the official bodies and bureaucrats below it. They have seen little change in their world overall. The intelligent rising middle class either aims to find their full potential outside the country or working for a company that services the needs of the developed world, particularly on the IT front. They remain a rural thinking economy with a rejection of mass retailing and appear to accept change only when it suits them. Immersed in religion and tradition they are unlikely to continue on the path to anywhere near the development that China is experiencing.   The tradition with heavy religious overtones applies to the buying of gold. Not only is it a religious expression, but a family statement of supplying financial security to the next generation. In that they share a similar attitude to China.   In India there is a marked distance between the ordinary Indian and the wealthy upper classes. In China they share the same way forward as each other, at the moment. The Indian family in general does not share the same objectives as government and so the nation lacks the cohesion that China does.   In China, should the government deem it necessary to take its citizen's gold into their reserves – whether by confiscation or in exchange for dated bonds or simply require some form of access to it once it is held in the banking system – we believe that the Chinese citizen would be happy to support their nation in such a strategic move. On the other hand the average gold-owning Indian would not trust his government or its intentions nor feel inclined to support government with his personal gold.   That is precisely why the developments in India regarding gold should be of such interest to the gold world.   Since the beginning of the year, we've seen the Indian government launch an attack on gold importing by raising duties twice and by permitting imports of gold only if 20% of it were for re-export subsequently. In this way the government has blocked the imports of gold, for the time being. It appears that importers have allowed gold stocks to be run down pending a softening of the regulations. In the meantime, gold smuggling has never been more profitable and is on the meteoric rise; however, amounts coming in by this route are unquantifiable.   We look to the statistics coming out of the Middle East, Pakistan and other peripheral nations for evidence of this in the future.   The Indian government has felt that this set of measures would have the quickest impact on the current account deficit (CAD) and it has had one, but it is not the solution to the problem. The internal growth of demand will continue until there are countrywide objections to these measures, which ahead of elections next year are unlikely to stand for too long. But short-term the damage has been significant to the supply of gold.   India's gold imports plunged in August to just 2.5 tonnes, more than a 90% drop from August 2012. The decline was a result of increased government tariffs and regulations governing gold imports. July saw 47.5 tonnes imported.   The Current Account Deficit touched an all-time high of 4.8% of Gross Domestic Product, or $88.2 billion in 2012-13. The Indian government proposes to bring down the CAD to 3.8% of GDP, or $70 billion, in the current financial year. But it is obvious that the attack on gold imports was a poor substitute for increasing exports. The Economic Affairs Secretary, Commerce Secretary S. R. Rao has asked for a relaxation of the new restrictions.   The fall in the Rupee that took it to nearly Rs.70: $1 has been halted by the use of a 'swap' line of $10 billion with which to intervene in the market place. But this can only be a short-term solution and one we suspect was secured by the promise of gold, should the Reserve Bank of India fail to unwind the swap.   Granted this is the quietest time of the year for Indian exports; however, this drop is exceptional. The 'gold-buying season' has now started in India and stockists are having to let stocks fall before they try to re-stock. When they do, expect the figures to jump sharply.   With the Rupee suffering so much the case for holding gold has been reinforced tremendously, putting the government in an even worse situation.   It appears that the lesson of the weaker Rupee is not lost on the government either. They have embarked on some clandestine moves to see if they can bring some of the between 20,000 and 30,000 tonnes of privately owned gold under their control in an attempt to shore up the int'l respect for the Rupee.   The first of these is a rerun of a scheme that failed in the past but is worth a renewed effort. With the loss of a good proportion of their business in sight, the nation's big jewelers have jumped on the bandwagon in the "Save Gold Campaign".   The scheme involved gold owners bringing their gold to jewelers who will issue them with a "Gold Certificate" valid for three years after which the gold can be returned and on which interest would be paid. The accompanying statement of purpose was that this would negate the need to import gold, drawing on the 'idle' gold in the country.    We cannot see this working because at some point in time there would be a need to return the gold. If it has been sold back into the economy, then the only way this could happen was if gold was imported from overseas, thereby destroying the original purpose of the scheme.   Likely the gold would be held in the banks – who may well pay interest on it in a similar manner. But the banks remain under the control of the government so may well be pressed to 'loan' the gold to the government, who in turn could then use it to secure offshore loans.    The underlying purpose of the scheme would be to get the gold out of the private domain and into the government's. This would not be as brutal as a straightforward confiscation, but essentially is the same. It would place the gold under the control of the government (who could extend its use of the gold for as long as they wanted to and this would be tantamount to confiscation).   It is now obvious that the attempts to get the public to deposit their gold through the "Save Gold" campaign, whereby they hand their gold to jewellers against the issue of a bond (where they will be paid Rupees as interest) for three or so years is part of a general search for an avenue to bring privately owned Indian gold within the control of government. If the government can harness gold for their international credit purposes – via the banks and jewellers – they have access to unlimited credit. But the distance between the gold owning public and the government is a chasm as well for the following reasons: The general population doesn't trust them; They don't see the gold being returned, i.e. confiscation; They don't want depreciating Rupees paid as interest to them, i.e. interest bearing confiscation; They know that any period given before the gold is returned can be extended or extended until the national Balance of Payments crisis is over, i.e. confiscation for an indefinite period; The gold is already held away from the government's eyes (even buried in gardens) and not easily located. This is where the 80-20 rule kicks in. Eighty percent of India's privately-held gold is held in 20% of the nation's hands. So it is easier to target these institutions first for the sake of effectiveness of the operation. So their first port of call, if this is the route the government wishes to follow, is to be found in the most visibly held, large stores of gold.    The most visible of these are selected temples, which in themselves have sufficient gold to ease the need for international loans. The Reserve Bank of India has confirmed that they are exploring this route by the letters they have already sent to the main temples asking for information about their gold ornaments and artifacts.   We would like to stress to you that this is not some odd little event in the distant reaches of the globe. It is important for two reasons: This is about using a nation's gold to support the nation's currency system, when it has lost credibility outside and inside of its borders. The quantity of gold within India is somewhere between 20,000 and 30,000 tonnes. To give this perspective the higher figure equals nearly the entire central bank reserve holding of gold globally. It is not far short of four times the gold holdings of the USA, which comprise around 75% of the US reserves. Individual temples hold more gold than some nations. But with much of this gold already held in banks, it is a small step to "harness it" for the nation's use.   In exploring this avenue, government has set itself up for a serious clash with religion. Some political/religious groups have told the boards of some temples to just ignore the letter. As is usual with such political moves, denial that there is any more than a curious gathering of data has already come from government.    The Reserve Bank of India's senior official, Salim Gangadharan, said the RBI had no plans to actually buy the temple gold, and that the exercise was a statistical one to estimate the gold. Government came into the story saying that they have no designs on temple gold to help fight their current financial crisis. Minister of State for Finance, J.D.Seelam, said there was an inquiry, but "Gods' gold is the very last resort."   So how far is the Indian government away from the last extreme resort? It depends on the decay of the Indian Balance of Payments. At the moment there appears to be little to combat that decay, so it may well be just a matter of time!

Gold will be only beneficiary of Fed's retreat, Grant Williams tells KWN Posted: 19 Sep 2013 10:53 AM PDT 1:50p ET Thursday, September 19, 2013 Dear Friend of GATA and Gold: Singapore fund manager and newsletter editor Grant Williams, interviewed today by King World News, joins those who expect the Federal Reserve to lose control of the bond market even as it keeps up its high level of bond monetization. Eventually, Williams says, investors "will realize that if the Fed doesn't buy the government bonds, then nobody is going to buy them." Gold, Williams thinks, will be the only beneficiary of the Fed's canceling its plan to reduce its bond buying. An excerpt from the interview is posted at the King World News blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/9/19_Th... CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Precious Metals Round Table: Where Do We Go From Here? On Tuesday, September 24, Sprott Asset Management will assemble four experts for a live Internet broadcast about the prospects for the precious metals. Participating will be Sprott's CEO, Eric Sprott; financial letter writer and internationally renowned conference speaker Marc Faber; Sprott's chief investment strategist, John Embry; and Sprott Asset Management President Rick Rule. To participate, please visit: https://event.on24.com/eventRegistration/EventLobbyServlet?target=regist... Join GATA here: Gold Investment Symposium 2013 Luna Park Conference Center, Sydney, Australia Wednesday-Thursday, October 16-17, 2013 http://gold.symposium.net.au/ Mines and Money Australia Melbourne Conference and Exhibition Centre Tuesday, October 29-Friday, November 1, 2013 http://www.minesandmoney.com/ New Orleans Investment Conference Sunday-Wednesday, November 10-13, 2013 Hilton New Orleans Riverside Hotel New Orleans, Louisiana https://jeffersoncompanies.com/landing/speakers?IDPromotion=613011610080... * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16

What?s the Indian Gov?t doing to Gold? Posted: 19 Sep 2013 10:01 AM PDT Gold Forecaster

The Most Frightening Takeaway From The Historic Fed Decision Posted: 19 Sep 2013 09:37 AM PDT Today one of the most highly respected fund managers in Singapore spoke with King World News about the most frightening takeaway from yesterday's historic Fed decision. Grant Williams, who is portfolio manager of the Vulpes Precious Metals Fund, also discussed the impact of the Fed's decision on major markets such as gold. Below is what the the acclaimed fund manager had to say in this fascinating interview. This posting includes an audio/video/photo media file: Download Now

Brain Damage - And, Uh, QE Is Working (I'll Explain) Posted: 19 Sep 2013 09:33 AM PDT The Fed has lost control of the markets and Wall Street economists, media analysts and most blog writers suffer from tragic and terminal mental disabilities. First off, I'd like to say that I'm really quite amazed at the degree of "surprise" over the FOMC policy statement yesterday.  Anyone who understands the nature of QE and why it's being done knew back in May when Helicopter Ben first mumbled the word "taper" that the Fed wouldn't reduce QE.  Given the response reflected by the media and the fact that 100% of Wall Street's brain trust expected a $10-15 billion "taper," I'd say that every single Wall Street economist is brain damaged.  What he hell are they getting paid for when they get their forecasts so egregiously wrong every god damn week?  Seriously. And now I'm seeing articles which are reporting that now the big debate is the timing of an eventual taper.  Einstein is credited with attributing insanity to the act of making the same mistake repetitively.  I guess Wall Street, and the media who regurgitates Wall Street's vomit, must not only be brain damaged, but they all must be insane as well.  Analyze this you brutes:   Ben Bernanke said - almost verbatim - that the Fed will reduce its stimulus policy when the unemployment is below 6.5%.  He specifically said that  "we are tied to the data, we don't have a fixed calendar schedule" and that a low interest rate policy will be in effect until unemployment goes below 6.5%.  The Fed is tied to the data not the calendar.  Bold, italics, underlined.  If you know how to use google you can find the exact quote from Bernanke's mouth.  If Wall Street's overpaid finest - and paid with taxpayer largesse, I might add - wants to figure out when the Fed will "taper," then they should spend their time figuring out what it will take to get unemployment below 6.5%.  Here's my call:  we won't see that number in our lifetime. Now I'll explain for Zerohedge, CNBC, Fox Business, Bloomberg News and ALL the severely mentally challenged Wall Street analysts exactly why the Fed is printing money.   Follow the f#cking money. The Fed is printing money in order to keep the banks - both the domestic too big to fails AND the foreign too big to fails - from failing.  That's the policy.  In fact, I believe that in the whirlwind of wealth transfer in 2008 - led by the Obama Government - that Congress may have even legislated into law the too big to fail idea. If QE is about the economy and jobs, why is more than 50% of the money being printed going to - and sitting in - the Fed bank account held by the U.S. subsidiaries of foreign-owned banks?  Here's the money trail.   Since "QE" began, the Fed has printed up roughly $2.8 trillion dollars.  I've gone through this exercise in past posts, but here's the updated numbers.  Of that $2.8 trillion,  roughly $2.3 trillion is sitting in the banks' "excess reserve" account at the Fed.  Of that $2.3 trillion, $1.193 trillion has gone to U.S. banks charted in this country.  However, $1.225 trillion has gone to the foreign banks with operations in the U.S.  You can find these numbers in the Federal Reserve Board report on Assets and Liabilities in the United States, Table H.8 - here's the pdf for you:  LINK I'm not sure I need to state the obvious here, but if QE is all about trying to stimulate an economic recovery, then how come 82% of everything the Fed has printed up is sitting in the "cash accounts" of the banks at the Fed?  The only explanation is that the Fed is engaging in this money printing in order to prevent the banks from collapsing.  There can be no other explanation.  None.  Not throw salt on the wound but, as I've demonstrated ad nauseum in previous posts, the economy is not recovering. And this is why I never believed that the Fed would "taper."  Especially after that interest rate spike in May.  I think the Fed actually wanted to extend a token taper, which it knew would have to be reversed, but could not even do a meaningless token amount after Helicopter Ben's mid-May faux pas caused the biggest interest rate spike in 50 years of data. The fact that they can't even dish up a token taper really says a lot about how bad things are behind the scenes with bank balance sheets. The banks that have a big exposure to interest rate derivatives got crushed when the interest rates spiked up in May. That spike was the biggest spike in 50 years of data. What that means is that bank hedge models weren't even close to predicting that event AND the banks weren't even close to being properly hedged against this mega-multi-trillion dollar interest rate derivatives exposure.  Think about Long Term Capital. Remember that abortion?  It was "outlier" black swan type market movements that sent LTCM to its grave. That's the kind of market movement we had in May with interest rates in the context of the kind of interest rate derivatives exposure that the banks have when there's an outlier move like that.  There is no other explanation and this is why the Fed kept injecting money into the system that went directly to the banks cash account at the Fed even after Bernanke mumbled something about it being time to pull back on QE. Here's how it works:  the need that $2.3 trillion in cash to put up as collateral against their multi-trillion dollar market-to-market losses on their interest rate (and credit default) swaps.  That keeps them in the game longer and extends the amount of time they have for a divine miracle to come along and save them from completely incinerating from a big nuclear derivatives melt-down.   The fact that the Fed can't even pull back by a token amount tells us that the situation is still unstable and probably getting worse.  You could see that I'm right in the expressions on Bernanke's face and in his eyes when he was giving his post-FOMC press conference.  He's frightened and that's why he's leaving the Fed. Any other analysis of this no more than sound and fury, a tale told by an idiot.  Anyone who thinks that QE is about helping "main street" and the middle class is severely brain damaged. And, by the way, as long as the banks don't collapse, QE is indeed working.  It will probably take a collapse of the dollar for it to fail, but stay tuned on that one because if you pay close attention to what China is doing with the yuan and with gold, on a clear day you can see the dollar's cliff.

10 Simple Steps to a Billion Dollar Business Posted: 19 Sep 2013 09:31 AM PDT How many times do you come up with an idea and think to yourself, ‘Wow, I should really do that.’ People in general have the capacity to come up with great ideas. We are all inherently creative to some extent. But there are a few key factors that separate great ideas from great technologies and from great businesses. "Billion dollar Buy-out" is the catch phrase running around tech hubs like Silicon Valley. But what takes a company from being worth nothing with a great technology to a billion dollar business? In this current global economic environment, a lot of businesses are struggling. There’s a lot of doom and gloom about. Yet it seems every other day there’s a story about successful technology companies making billions of dollars. Recently the ‘Billion dollar Buy-out’ is the catch phrase running around tech hubs like Silicon Valley. But what takes a company from being worth nothing with a great technology to, a billion dollar business? Before we look at the answer first I should point out that, like with the English language there’s an exception to every rule. There are some companies that just have technology so good it sells itself. A good example of that is Atlassian. Atlassian is an Australian private company that has no sales force, just a great software solution. They develop proprietary software that helps companies track information, analyze data, collaborate on documents and develop their own programs. Not quite a billion dollar company yet, Atlassian has gone from start-up to about $200 million in just 10 years. Their clientele includes eBay, Facebook, Twitter and LinkedIn. Also there are some great technology companies worth billions of dollars like photo-sharing website Instagram, and microblogging platform Tumblr. But…that doesn’t make them great businesses either. Mainly because they don’t actually make any money. These two are examples of a great idea that people love, but don’t pay for. But there are a lot of great ideas in the world. A lot of inventions, a lot of smart people coming up with world changing ideas. Some get lucky (like Instagram and Tumblr), some fail and some take years of hard work. For those ideas to become great companies, the pathway to that destination is relatively simple. 1. Have an idea, 2. Turn the idea into an invention, 3. Sell the invention to some people to see if it’s good, 4. Create a business to sell invention to more people, 5. Have plan for business, make it big, 6. Sell invention to many people, 7. Make invention better, 8. Make company bigger, 9. Repeat cycle and add to business model, 10. Sell for a billion dollars. Sounds simple enough? Well unfortunately it’s not. Most people get to step one easy enough. But then most people will fail at step 2. For the very few that make it to step 2. Most of them will fail at step 3. And for those that make it to step 4…they are likely to fail in the first year of business. But some do make it through the other side, and still can’t take great technology to a great business. Here’s a couple of examples of great technology, but not great businesses. 1. Segway. The launch of Segway had hype and fanfare like nothing before. It was the answer to the problems of personal transportation. It was a game changer…well that’s what the owners believed at least. The Segway is actually an amazing piece of technology. With inbuilt gyroscopes it’s a self-balancing battery powered transportation device. It’s got a swathe of computers and motors that work in tandem to make the machine work. But Segway never really took off as a business. Why? Well the technology is great and the sales pitch is outstanding. But the Segway didn’t actually solve a big problem. It was just something new and interesting. It ultimately failed to disrupt the transportation market it was aiming at, personal transport. People couldn’t afford it and didn’t find it particularly helped them in any way. 2. MiniDisc. Cassette tape ended the reign of the record player. The ability to have a compact portable audio device was ground breaking, but then CD’s came along and spoiled the party for cassette tapes. CD’s were the major format at the time, and dominated the music industry for many years. But in 1992 a new technology and format came out that was going to spell the end of CD’s forever. It was great technology, it was the MiniDisc. You could quickly search through discs, and even record and edit on the portable device itself. It was better tech than all other audio formats. But the problem with MiniDisc was hot on its heels was still better technology. Technology that would change the way we listen to music, and change the whole music industry forever. MP3′s and MP3 players. Each of these examples highlights a different problem that stops great technology from being a great business. Segway had tunnel vision and weren’t prepared to accept that as great as their technology was it didn’t really solve a problem for lots of people. And although they are still a business, they certainly aren’t a great technology business. MiniDisc weren’t open and aware to other technologies in the market place. They failed to appreciate the market in which they were trying to build a business. Within a few years a superior technology simply overtook it. But for point of comparison, let’s look at some great business, and see what made them stand out in a competitive world of technology. 1. Apple. You simply can’t go past Apple when it comes to turning great technology into a great business. When Steve Jobs and Steve Wozniak put together the first Apple computer they didn’t know the impact it would have on the world. But what they did have was a great vision to put a Personal Computer in the homes of millions of people. The benefit they had here was that they started a whole new industry. The Personal Computer didn’t exist at that stage. So the two Steve’s had the advantage of being early movers. That’s not to say there weren’t competitors. IBM and Dell became competition, as did Microsoft when it came to operating systems and software. But what Apple did was make their products beautiful and easy to use. And what they were able to do was design, market and sell their products like no one else. 2. Nokia. Although not at the pinnacle it once was, Nokia is an example of taking great technology and turning it into a great business. Mobile phones were all the rage from the late 80′s into he 90′s and of course the smartphone revolution today. But Nokia dominated the mobile phone market through the 2000′s. How? What Nokia did was make a product accessible to the masses using available technology. Mobile phones were expensive devices that only the affluent and rich could afford. Nokia changed all that by putting to market an affordable mobile phone for everyone. This led them to having the top 6 best-selling mobile phone models of all time. They sold almost one billion units worldwide between those top 6 models alone. Nokia phones are still the number one used-phone in developing nations across Africa. There a couple of key factors that made these two companies tech giants of the world. Apple had the combination of a great technical guy in Wozniak, but a great salesman in Jobs. Without the creative and marketing genius of Jobs, Apple would simply be a company for computer hobbyists. If Wozniak had gone it alone he wouldn’t have had a great company. If Jobs had done it himself the company wouldn’t have had great technology. Likewise, Nokia didn’t necessarily have the marketing genius and personality of a Jobs-like leader. But they identified an unmet need in a market that affected millions of people. They created a big solution to a big problem. And that was to put affordable mobile phones in the hands of everyone. They also had the advantage of being the first company to mass market cheap mobile phones. When we look at these basic examples of great technologies, it’s fair to say not one technology is necessarily better than another. They all meet an unmet need, and they all were new technologies of their time. But what companies like Nokia and Apple were able to do was have the leadership and management in place to make great technologies into great businesses. They also met an unmet need that impacted millions of people around the world and were also able to make their technologies simple and accessible to everyone. And that’s the key difference between great technology, and great technology companies. It’s really got nothing to do with the technology at all. It’s about the people that lead the technology and the team that’s involved to take it from good to great. It’s about making it accessible and relevant to lots of people, not just one small segment. These companies also had the foresight to see when something wasn’t working. For them failure was par for the course, just a part of the process. And both Apple and Nokia had their fair share of failures. But they saw the problems, and fixed them the next time around. So here’s the checklist that makes a great business from a great technology. Great Idea. Great Technology. Technical People: Innovators, Programmers, Scientists. Non-Technical People: Visionaries, Marketers, Sales people. A plan to change the world. Humility to know if something isn’t as great as you thought it was. Drive to keep going if the idea and the technology is great enough. With the steps outlined and the checklist above, there’s potential to turn great technology into a great business. It’s hard, takes years and there’s a very good chance it won’t work. But the right tech, the right people, the right plan and the drive to make it happen, gives a fighting chance of making a truly great technology business. Regards, Sam Volkering for The Daily Reckoning Ed. Note: Great tech, great people, great plan… great company! Simple! Of course, it’s not that simple, and lots of companies are missing one or all of these components. That’s why Tomorrow in Review spends countless hours searching for the best of these tech companies… and offers you several chances to get in on the ground floor. It’s a completely free newsletter that is delivered straight to your inbox every day. Sign up for free, right here, and get in on the world’s leading tech companies… before they become “billion-dollar buyouts.”

Gold rejoices as Bernanke does nothing Posted: 19 Sep 2013 09:26 AM PDT 19-Sep (Proactive Investors) — Gold held onto the strong gains seen late Wednesday after Fed chairman Ben Bernanke stunned markets by leaving his monetary stimulus policies unchanged. Bernanke said he needed more evidence that the US economy was improving and that he was no longer committed to tapering the US$85bn per month bond buying programme before the end of 2013. Spot gold leapt 5% on the shock announcement, as most economists had expected at least a US$5bn per month reduction with some predicting as much as a US$30bn cut. Some economists are now predicting tapering may not start before March of next year, which a shift of emphasis from jobs to inflation could see lower and in interest rates carry on for much longer than that. [source]

Bullied Into Believing the Taper Talk Posted: 19 Sep 2013 08:49 AM PDT Was the speculation just too much for you? Were you scared into sitting on the sidelines, waiting for the big, bad taper to blow over before getting back into the game? Here’s the deal: You’re getting jerked around. A ruthless bully is relieving you of your lunch money every day. And he ain’t the Fed… The broad market ripped to new all-time highs immediately after the taper died a public death at the hands of the Fed’s press release. Gold exploded toward $1,375. Rates plummeted. The Dow launched through 15,700. Transports hit new highs, adding a Dow Theory bull market signal to the mix. You’ve been fooled again. But it wasn’t the Fed’s doing. No, you were fooled by the endless, wrongheaded speculation of the financial media noise machine. “Economists, analysts, pundits, commentators do not know…” writes Jon Boorman over at Alpha Capture. “They are paid to give you their best guess, and they have no money on the line. Their opinions are subjective. Don’t follow them, don’t trade on them.” First, you were distracted. Then paralyzed. You wasted your time worrying about the taper. You even ignored the broad market’s huge, flashing buy signal when it bounced off support and began to move higher late last month. The September rally has already generated gains of more than 5%. Here we are—sitting at all-time highs in a raging bull market. Price never lies. It doesn’t speculate. Everyone’s going to try to chase yesterday’s huge thrust higher. That means you can take some gains off the table and wait for the fade that will set up what could potentially turn out to be a huge fourth quarter for stocks… Regards, Greg Guenthner for The Daily Reckoning Ed. Note: Taper… no taper… some other type of Fed meddling… It’s all just noise. And every day Greg Guenthner sifts through it, giving you an honest, unbiased look at the markets at large. Don’t ever let the financial media make a fool of you again. Sign up for your FREE subscription to The Rude Awakening today.

The Daily Market Report Posted: 19 Sep 2013 08:22 AM PDT Gold Consolidates Yesterday’s Sharp Gains 19-Sep (USAGOLD) — Gold is consolidating yesterday’s sharp gains. On the heels of Wednesday’s FOMC surprise, the yellow metal surged nearly 6% from an intraday low of 1291.30 to close at 1367.70. Seemingly logic prevailed in the FOMC meeting room. Premised on the oft stated “data dependency” of Fed policy, it made little sense that the Fed would start removing accommodations at this juncture. Today’s generally favorable economic reports notwithstanding, the overall data picture simply didn’t support tapering. Nonetheless, the market was expecting the taper to commence and a pullback of $10 to $15 billion was priced in. That now has to be unwound. Wednesday’s price action was the beginning of that, but I don’t think it’s over. The Fed worried that the “tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market.” The policy statement went on to say, “Taking into account the extend of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.” The jobs market is in fact terrible, and Bernanke said as much yesterday, noting that the recent moderation of the jobless rate was largely the result of a shrinking labor force. With regard to the 6.5% unemployment target, Bernanke said the Fed would have to consider all aspects of the labor market. The implication being, that even if the unemployment rate fell further, that would necessarily warrant tighter policy. The Fed cut it’s own growth forecasts out to 2015, suggesting that the economy will continue limping along at just above stall-speed for some time to come. Bernanke even went so far as to acknowledge that Fed forecasts have been less than accurate. “We’ve been overoptimistic about out-year growth,” said the Fed chairman. Be assured though, the Fed will once again dangle the taper possibility before the market in an effort to keep markets from wholly readopting the QEternity meme. During the presser, a reporter asked how the Fed would escape QE if the data simply remains unsupportive. Bernanke of course assumes the economy will normalize at some point, perhaps in 2016 now, but he sort of tap-danced around truly answering the question. Further speculation about tapering will precedet the next FOMC meeting at the end of October. This may lead to further volatility in the gold market, but I would suggest that you tune out the noise and focus on why you believe you need gold in your portfolio. If you need to clarify that in any way, I encourage you to call the highly experienced staff here at USAGOLD.

Financial Armageddon Looting Machine: Looming Mass Destruction from Derivatives Posted: 19 Sep 2013 08:12 AM PDT Five years after the financial collapse precipitated by the Lehman Brothers bankruptcy on September 15, 2008, the risk of another full-blown financial panic is still looming large, despite the Dodd Frank legislation designed to contain it. As noted in a recent Reuters article, the risk has just moved into the shadows: [B]anks are pulling back their balance sheets from the fringes of the credit markets, with more and more risk being driven to unregulated lenders that comprise the $60 trillion “shadow-banking” sector.

The Smell of Collapse is in the Air Posted: 19 Sep 2013 08:01 AM PDT The U.S. stock market is near all-time highs, while politicians and economists are blathering about recovery, low inflation, and good times, but instability and danger are clearly visible in our debt based monetary system. Read More...

What's The Indian Government Doing to Gold? Posted: 19 Sep 2013 07:57 AM PDT Difference between India & China While both nations have been touted as the fasted growing nations in Asia, there are stark differences between the two nations that are coming to the fore now. The first is that in China, the population has a fear of gov't and the dangers of disobeying it. After nearly 48 years of intense pressure and 're-modeling' of the thinking of the Chinese people, the Chinese are now a highly regimented people who appear to enjoy hard work, have a tacit obedience of gov't and appreciate the lift in their standard of living. They appear to be fully supportive of the extraordinary urbanization of the country and the present reality that nearly three quarters of the country have a much higher standard of living than they have ever experienced. The nation is headed towards becoming the economic powerhouse of the world before 2020.

Top 20 TSX mining shorts – Gold positions shrink Posted: 19 Sep 2013 07:39 AM PDT Ahead of the Fed announcement – a quick if not everlasting dose of adrenaline for gold – gold shorts fell. Read more….

Gold, global financial markets stunned by Fed announcement Posted: 19 Sep 2013 07:39 AM PDT The gold price climbed on news the US Federal Reserve will continue its quantitative easing programme with no changes. Read more….

Gold soars on Fed’s acceptance that all is far from well with U.S. economy Posted: 19 Sep 2013 07:39 AM PDT The U.S. Fed provided a big boost in gold and the stock market in general with its unexpected decision not to start winding down its bond buying programme – at least not yet. Read more….

Irrational Survival Posted: 19 Sep 2013 07:18 AM PDT With one tiny omission to their script - the Fed shot the gorilla in the room, broke the dollar's back and gave credence to our summation that participants this year had reflected a composite character with all the brains and emotions of ... Read More...

What's The Indian Gov't Doing to Gold? Posted: 19 Sep 2013 06:08 AM PDT While both nations have been touted as the fasted growing nations in Asia, there are stark differences between the two nations that are coming to the fore now. Read More...

The Real Chinese Housewives Of Gold Buying, Treasury Tricks And More! Posted: 19 Sep 2013 06:00 AM PDT Last week, while tensions ramped up in the Middle East (and despite the Russia-Syria-U.S. ballet of oddball diplomacy, tensions remain high), the price of gold plummeted. Week over week, the price of gold is off nearly 5% — or about $50 an ounce. Much of that downward action happened in one day, too. What happened? Let’s have a look at that, and more! Well, last week a representative from Goldman Sachs (the share-price of which is about to become part of the Dow Jones Index, by the way) stated that the price of gold might drop to below $1,000 per ounce. That lowered the boom on gold. When Goldman speaks, people listen. Then they sell or buy accordingly. Goldman moves markets as was the case last Thursday. I’ll refrain from saying more on that specific point. Aside from Goldman, much of the mainstream media is already working against gold and other precious metals like silver, platinum and palladium. Precious metals are no longer the flavor of the month, at least like they used to be. After a great, decade-long run, precious metals have pulled back in the past year. Is it a temporary issue for long-term investors? Or is something fundamental really changing for shiny stuff? It matters with respect to the value of physical metal that you own, and definitely for the prospects of mining companies in which you might invest. The “paper price” for gold, etc. has been on a downward slide year over year — for example, the price per ounce is down over $400. The redeeming thing is that, for much of 2013, we’ve had strong support for gold, silver, etc. in the form of physical buying on pullbacks. Stories are now legendary about “Chinese housewives” mobbing gold selling counters of Shanghai. Or great accounts of clever smugglers bringing gold into India in defiance of government controls. With the latest price tumble, are new stories like these — anecdotal evidence for the “love trade” in gold — about to dry up? Or consider news stories about how emerging, hot-running markets of the past few years are on the ropes. The bloom is distinctly off the rose for prospects in, say, China, India, Brazil, Turkey and many more former go-go lands. Their government-administered, goosed-up economies have outrun the kind of fundamentals — household savings and company profits — that make for long-term economic strength. Bad for gold, right? Meanwhile, developed economies appear to be improving by many metrics. Just look close to home in the U.S., where housing had a good summer and autos are rolling off the lots at rates not seen since before the Crash of 2008. Also in the U.S., the dollar is strong relative to other world currencies. I contend that much of the latest “dollar strength” is due to increased domestic oil output, courtesy of our ongoing energy revolution, aka fracking. With fracking, the U.S. has displaced about 2.5 million barrels-per-day of imported oil. Now instead of imports, the U.S. economy uses domestic crude, much to the benefit of the overall economy, tax receipts, the national current account and more. Indeed, the large increase in domestic oil is one development for which Pres. Obama never seems to “blame Bush.” Overseas, European economies are improving. Look at Germany, Britain and others. There’s less and less bad news from the southern rim (Italy in particular), which could be a sign that things have stopped getting worse and have found a bottom. Is there a rebound coming? Japan is looking up too, despite lingering effects of the 2011 nuclear plant disaster at Fukushima. One Japanese highlight is that the International Olympics Committee just awarded the 2020 event to Tokyo. We can look forward to seven strong years of people in Japan pouring concrete for new stadiums, roads, rail, airports, etc. And you just know that the Japanese will want to outdo their rivals in China, who hosted the 2008 Olympics in Beijing. With all this good news for “conventional” economics, and bad news for the gold-demand side, is the gold run over? Are we waiting for a golden Godot or something? Well, not so fast. At least, don’t rush for the exits. All is not what it seems. Let’s look at one item — just one! — that could cause precious metal prices to rebound sharply. You may know that for many months the U.S. Treasury Department has been cooking the books on national accounts. Well, that’s what I call it when the U.S. national debt has not budged by one dollar, while the debt level remains leveled-off at $16.7 trillion — which just so happens to be the current, congressionally-mandated debt ceiling. Throughout 2013, the Treasury has used accounting gimmicks, tricks, fund transfers, restatements and other legerdemain to juggle the books. But in a month or so — or as soon as the debt ceiling is raised after Congress and Pres. Obama go through their Kabuki Theater — the U.S. national debt will quickly revert upwards. That is, national debt will soon land on some much higher number, as Treasury’s accounting tricks unwind and the debt magically appears on the federal balance sheet. So why does Goldman Sachs believe that gold is due for another pullback to under $1,000? Do investors no longer need gold as a risk hedge? Is the modern economy past the point where savers and investors need to convert currency into something that central banks can’t create out of nothing? You should keep these questions in mind as you watch the gyrations of gold prices. We may have a rough patch in front of us, with painful down-swings in gold prices and related mining shares. But beware trying to “market-time” this. Just keep in mind that over the long haul, gold and other precious metals are a key part of preserving your wealth. Don’t panic out. Goldman Sachs does things that are good for Goldman, not you. That’s all for now. Thanks for reading. Byron W. King for The Daily Reckoning Original article posted on Daily Resource Hunter Ed. Note: Gold is a long-term store of wealth… and has been for thousands of years. Long before a Goldman Sachs or a Warren Buffett ever walked the earth. So we'll continue to follow it, and gain exposure when we can. And there's no better way to do that to subscribe to The Daily Resource Hunter. It's a completely free service that gives you a quick rundown on all things resource-related… especially our favorite yellow metal. Sign up for your FREE subscription to The Daily Resource Hunter right here.

The Smell of Financial Collapse is in the Air Posted: 19 Sep 2013 05:41 AM PDT The U.S. stock market is near all-time highs, while politicians and economists are blathering about recovery, low inflation, and good times, but instability and danger are clearly visible in our debt based monetary system. To the extent we rely upon the fantasies of ever-increasing debt, money printing, and credit bubbles, we are vulnerable to financial collapses. Perhaps a collapse is not imminent, but it would be foolish to ignore the possibility. Consider what these insightful writers have to say:

Gold Holds US Fed Surge, Silver Jumps 9.5% on "QE Unlimited" Posted: 19 Sep 2013 05:37 AM PDT GOLD held onto its post-US Fed surge in Asian and London trade Thursday, regaining the $1370 per ounce level as world stock markets, foreign currencies and commodities extended their jump versus the Dollar.   The Fed voted against "tapering" its quantitative easing program, defying the expectations it had built since April and giving what one FX strategist called "a massive green light for a risk-on party."   Silver had hit a new 5-week low shortly before the Fed announcement. It stood 9.5% higher barely an hour later.   "We are in QE unlimited," said money-manager and Gloom, Boom & Doom publisher Marc Faber, speaking to Bloomberg last night and stating that "I always buy gold...I view it as an insurance policy. I think responsible citizens should own gold.   "The Fed don't know anything else to do [but print]. They've boxed themselves into a corner."   Discussing the next likely chair of the US central bank, "Janet Yellen will make Mr.Bernanke look like a hawk," Faber said.   The US stock market yesterday surged to new all-time highs between the Fed statement and Chairman Bernanke's press conference 30 minutes later.   Gold prices gained 6.4% from their earlier low, and silver enjoyed its biggest one-day jump since June 2012.   Bond prices rose to push 10-year Treasury yields to a 3-week low, falling at the fastest pace since 2011.   "The Fed put markets in celebratory mood," says Commerzbank's daily commodities note, adding that "the development of gold ETF holdings over the next few days will give us a clearer picture here.   Because on Wednesday, says the bank, "gold ETFs again saw slight outflows."   Investors in all markets "turned to the buy side with a vengeance," says Edward Meir for brokers INTL FCStone.   But "although the Fed decision is a potential game changer and may give gold a new lease on life," Meir adds, "we would be looking for higher volumes and increased ETF buying to lend further credibility to Wednesday's gain."   "I cannot get overly excited about gold up here," agrees Marex Spectron's David Govett.   "This rally was as much about short covering as it was about fresh buying. Fundamentally nothing has changed. At some point the Fed will taper."   Silver's 7.1% rise from Wednesday to Thursday's London Fix was the 78th largest move in 45 years.   Gold began rising before Wednesday's Fed statement, adding $20 of the $83 per ounce it would gain by this morning's peak in late Asian trade.   Gold rose less quickly for non-US investors, however, as the Fed's action saw the Euro and Sterling both hit their best levels since midwinter on the FX market.   The Dollar also fell in a straight line against emerging-market currencies previously dented by taper expectations, losing 3% against the Indian Rupee, Brazilian Real and Turkish Lira.   "We think it's very important that emerging markets grow and are prosperous," said Fed chairman Ben Bernanke on Wednesday.   "We play close attention to what's happening in those countries. It affects the United States. [But] what we're trying to do with our monetary policy...is to create a stronger US economy."   Away from the US Fed, gold and silver industry group the Bombay Bullion Association said it unanimously backs nationalist BJP candidate Narendra Modi as prime minister in the 2014 election in India – the world's largest consumer market for gold.   "The bullion traders in this country are desperately looking for a change in the Indian political system," said BBA president Mohit Kamboj.   "Narendra Modi is the right choice," he added, repeating how gold and politics in India were seen interacting earlier this week by BBA colleague Mukesh Mehta.   "We wish BJP to come to power and run this country."   Ruling Congress Party economic affairs secretary Arvind Mayaram today said the government's aggressive anti-gold import rules had cut inflows "drastically".   "Because of the measures we have taken we expect imports of only 750 tonnes [in 2013]," he said – a drop of 11% from fiscal-year 2012.

Gold surges most since 2009 Posted: 19 Sep 2013 05:22 AM PDT 19-Sep (Boston Globe) — Gold jumped the most since 2009 on Wednesday after the Federal Reserve unexpectedly refrained from reducing the pace of monthly bond purchases, increasing demand for the metal as a store of value. Earlier, spot gold had touched the lowest in almost six weeks, dropping beneath $1,300 an ounce, on speculation the central bank would start to rein in quantitative easing. ''This is a game-changer, and some of the money that ran away because of tapering fears will be back,'' said Michael Gayed, at New York-based Pension Partners. ''We are seeing the bullish sentiment return.'' [source]

Alasdair Macleod: No tapering! Posted: 19 Sep 2013 05:18 AM PDT 8:15a ET Thursday, September 19, 2013 Dear Friend of GATA and Gold: GoldMoney research director Alasdair Macleod writes today that the Federal Reserve's decision not to reduce its bond buying foreshadows hyperinflation arising from the "debt trap" into which the United States has fallen. Macleod's commentary is headlined "No Tapering!" and it's posted at GoldMoney here: http://www.goldmoney.com/en-gb/news-and-analysis/news-and-analysis-archi... CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. ADVERTISEMENT Buy metals at GoldMoney and enjoy international storage GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, ­taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit: http://www.goldmoney.com/?gmrefcode=gata Join GATA here: Gold Investment Symposium 2013 Luna Park Conference Center, Sydney, Australia Wednesday-Thursday, October 16-17, 2013 http://gold.symposium.net.au/ Mines and Money Australia Melbourne Conference and Exhibition Centre Tuesday, October 29-Friday, November 1, 2013 http://www.minesandmoney.com/ New Orleans Investment Conference Sunday-Wednesday, November 10-13, 2013 Hilton New Orleans Riverside Hotel New Orleans, Louisiana https://jeffersoncompanies.com/landing/speakers?IDPromotion=613011610080... * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: http://gata.org/tshirts Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: http://www.gata.org To contribute to GATA, please visit: http://www.gata.org/node/16 ADVERTISEMENT How to profit with silver -- and which stocks to buy now Future Money Trends is offering a special 16-page silver report with our forecast for 2013 that includes profiles of nine companies and technical analysis of their stock performance. Six of the companies have market capitalizations of less than $800 million and one company has a market cap of only $30 million. The most exciting of these companies will begin production in a few weeks and has a market cap of just $150 million. Half of all proceeds from the sale of this report will be donated to the Gold Anti-Trust Action Committee to support its efforts exposing manipulation and fraud in the gold and silver markets. To learn about this report, please visit: http://www.futuremoneytrends.com/index.php?option=com_content&id=376&tmp...

Gold, silver surge on strong global cues Posted: 19 Sep 2013 05:15 AM PDT 19-Sep (TheHindu) — The prices of both the precious metals, gold and silver, jumped in the national capital on Thursday on frantic buying by stockists triggered by a rally in overseas markets. …Sentiment turned bullish after gold jumped the most in 15 months in overseas markets after the Federal Reserve unexpectedly refrained from reducing the pace of monthly US bond purchases, increasing demand for the metal as a store of value, traders said. [source]

Gold better at 1369.90 (+2.20). Silver 23.09 (+0.12). Dollar weak. Euro higher. Stocks called higher. US 10yr 2.70% (+1 bp). Posted: 19 Sep 2013 05:12 AM PDT

Thursday Morning Links Posted: 19 Sep 2013 05:12 AM PDT MUST READS If not now, when? – Economist What Was Bernanke Thinking? – Bloomberg Gold price rallies $55 after Fed shocker – Mining.com Bernanke Protects U.S. from a Contentious Congress – Fiscal Times Fed recoils from 1937 tightening error as jobs evaporate – Telegraph The Fed takes the country further into uncharted waters – Washington Post Why did the Fed delay tapering [...]

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