Monday, October 14, 2013

Gold World News Flash

Gold World News Flash


Ron Paul- Dollar Collapse by 2015?

Posted: 14 Oct 2013 12:30 AM PDT

Deepcaster: Preparing for The Big One

Posted: 14 Oct 2013 12:00 AM PDT

from Silver Doctors:

Global markets are already revolting against the $US. The End Game for the $US is THE BIG ONE for which we aim to help Investors prepare.

The really BIG ONE announced October 10, 2013 was not the Republican Proposal to lift The Debt Ceiling for six weeks, though that was an important constructive step to attempt to resolve the Administration's partial Government Shutdown.

THE BIG ONE was the European Central Bank's agreement with the People's Bank of China to establish bilateral Euro-Yuan Currency Swap arrangements, thus freezing the U.S. Dollar out of yet another Bilateral Sovereign Currency Swap Deal.

This will, sooner rather than later, have catastrophic impact on the International Financial System.

Read More @ SilverDoctors.com

The U.S. Has REPEATEDLY Defaulted

Posted: 13 Oct 2013 10:49 PM PDT

Some people argue that countries can’t default.  But that’s false.

It is widely stated that the U.S. government has never defaulted.  However, that is also a myth.

Catherine Rampbell reported in the New York Times in 2011:

The United States has actually defaulted on its debt obligations before.

 

The first time was in 1790, the only episode Professor Reinhart unearthed in which the United States defaulted on its external debt obligations. It also defaulted on its domestic debt obligations then, too.

 

Then in 1933, in the midst of the Great Depression, the United States had another domestic debt default related to the repayment of gold-based obligations.

(Update.)

Donald Marron writes at Forbes:

The United States defaulted on some Treasury bills in 1979 (ht: Jason Zweig). And it paid a steep price for stiffing bondholders.

 

Terry Zivney and Richard Marcus describe the default in The Financial Review (sorry, I can’t find an ungated version):

Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.

The United States thus defaulted because Treasury’s back office was on the fritz in the wake of a debt limit showdown.

 

This default was temporary. Treasury did pay these T-bills after a short delay. But it balked at paying additional interest to cover the period of delay. According to Zivney and Marcus, it required both legal arm twisting and new legislation before Treasury made all investors whole for that additional interest.

Many consider Nixon’s decision to refuse to redeem dollars for gold to constitute a default.  For example, University of Massachusetts at Amherst economics professor Gerald Epstein writes:

Forty years ago this month, on August 15, 1971, President Nixon “closed the gold window”, refusing to let foreign central banks redeem their dollars for gold, facilitating  the devaluation of the U.S dollar which had been fixed relative to gold for almost thirty years. While not strictly a default on a US debt obligation, by closing the gold window the US government abrogated a financial commitment it had made to the rest of the world  at the Bretton Woods Conference in 1944  that set up the post-war monetary system. At Bretton Woods, the United States had promised to redeem any and all U.S. dollars held by foreigners – later limited to just foreign central banks — for $35 dollars an ounce. This promise explains why the Bretton Woods monetary system was called a “gold exchange standard” and why many believed the US dollar to be “as good as gold”.  When Nixon refused to let foreign central banks turn in their dollars for gold, and encouraged the devaluation of the dollar which reduced the value of foreign central bank holdings of dollars, the Nixon administration effectively “defaulted” on the United States’ long-standing obligations ending once and for all the Bretton Woods System.

James Grant writes in the Washington Post:

The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter. Moreover, on the authority of the chairman of the Federal Reserve Board, the government means to keep right on shirking, dodging or trimming, if not legally defaulting.

 

Default means to not pay as promised, and politics may interrupt the timely service of the government’s debts.

 

***

 

Things were very different when America owed the kind of dollars that couldn’t just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.

 

***

 

But in the whirlwind of the “first hundred days” of the New Deal, the dollar came in for redefinition. The country needed a cheaper and more abundant currency, FDR said. By and by, the dollar’s value was reduced to 1/35 of an ounce of gold.

 

By any fair definition, this was another default. Creditors both domestic and foreign had lent dollars weighing just what the Founders had said they should weigh. They expected to be repaid in identical money.

 

Language to this effect — a “gold clause” — was standard in debt contracts of the time, including instruments binding the Treasury. But Congress resolved to abrogate those contracts, and in 1935 the Supreme Court upheld Congress.

 

The “American default,” as this piece of domestic stimulus was known in foreign parts , provoked condemnation in the City of London. “One of the most egregious defaults in history,” judged the London Financial News. “For repudiation of the gold clause is nothing less than that. The plea that recent developments have created abnormal circumstances is wholly irrelevant. It was precisely against such circumstances that the gold clause was designed to safeguard bondholders.”

 

The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.

John Chamberlain notes at the Mises Institute that the U.S. defaulted:

  • On its Continental Currency in 1779
  • On domestic debt between 1782 through 1790
  • On greenbacks in 1862
  • On Liberty Bonds in 1934

States Have Defaulted Also

States have also defaulted.  The Wall Street Journal noted in 2011:

Land values soared. States splurged on new programs. Then it all went bust, bringing down banks and state governments with them. This wasn’t America [today], it was America in 1841, when a now-forgotten depression pushed eight states and a desolate territory called Florida into the unthinkable: They defaulted on debts.

And Catherine Rampbell notes:

There were two episodes when a spate of American states defaulted on their debts, in 1841-42 (nine states) and 1873-84 (10 states). The havoc wreaked by these state-level defaults is part of the reason that so many states now have constitutional balanced-budget requirements.

China Alleges that the U.S. Has Already Defaulted By Weakening the Dollar

Grant argues:

If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.

 

***

 

This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.”

(Indeed, the average life expectancy for a fiat currency is less than 40 years.)

And our creditor – China – has said that America has defaulted by printing too many dollars. For example:

A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.

 

“In our opinion, the United States has already been defaulting,” Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.

 

Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies – eroding the wealth of creditors including China, Guan said.

That might be Chinese propaganda. But the point remains that the U.S. might not be able to print money forever without facing consequences from its creditors.

Shanghai Gold Exchange VS. Obamacare: REAL DEMAND VS. TYRANNY

Posted: 13 Oct 2013 09:54 PM PDT

Don’t miss this one. Koos Jansen from KoosJansen.Blogspot.com and Jan Skoyles, writer and researcher for TheRealAsset.co.uk join us to compare the REAL DEMAND for PHYSICAL GOLD at the Shanghai Gold Exchange VS. the manufactured (or non-existent) demand for paper gold on the COMEX and for the fascist monstrosity known as ‘Obamacare’ — the REAL reason behind the current US Federal government “shutdown”. Oh, we talk about the smoke & mirrors of this pathetic shutdown too.

Capitulation by the Gold Bulls?

Posted: 13 Oct 2013 09:30 PM PDT

from Armstrong Economics:

QUESTION: Why is it that the gold press now refuse to ever interview you? It really seems to show that what they say is totally untrustworthy when they refuse to interview anyone who disagrees with them. You are the only analyst who said gold would drop to $1,000 when it was at least $1,800. They ignore you now like you never existed. Just so dishonest.

ANSWER: Of course, whenever someone has only one product to sell or tout, be it gold or bonds like the bankers, you will NEVER get an objective analysis and you can bet you will lose your shirt in the end. The one thing I learned at an early age that inspired me to begin analysis, was that NO investment was immune from the Business Cycle, I saw the rare coin market collapse in 1966. The stock market crashed then as well. I tried real estate and watched that collapse going into 1970. I soon discovered that nothing but nothing was immune.

Read More @ ArmstrongEconomics.org

Power Mad Obama Offers Two Choices: Unconditional Surrender Or Default

Posted: 13 Oct 2013 09:02 PM PDT

by Michael Snyder, Economic Collapse Blog:

Barack Obama is warning that if he does not get everything that he wants that he will force the U.S. government into a devastating debt default which will cripple the entire global economy.  In essence, Obama has become so power mad that he is actually willing to take the entire planet hostage in order to achieve his goals.  A lot of people are blaming the government shutdown on the Republicans, but they have already voted to fund the entire government except for Obamacare.  The U.S. Constitution requires that all spending bills originate in the House of Representatives, and the House did their duty by passing a spending bill.  If the Senate or the President do not like the bill that the House has passed, then negotiations need to take place.  That is how our system works.  And the weak-kneed Republicans have already indicated that they are willing to give up virtually all of their prior demands.  In fact, if Obama offered all of them 20 dollar gift certificates to Denny’s to end this crisis they would probably jump at that deal.  But that is not good enough for Obama.  He has made it clear that he will settle for nothing less than the complete and unconditional surrender of the Republican Party.

Read More @ EconomicCollapseBlog.com

Guest Post: How Much Longer Will the Dollar Be The Reserve Currency?

Posted: 13 Oct 2013 04:02 PM PDT

Nothing lasts forever... (especially in light of China's earlier comments)

 

Submitted by Patrick Barron via The Ludwig von Mises Institute,

We use the term “reserve currency” when referring to the common use of the dollar by other countries when settling their international trade accounts. For example, if Canada buys goods from China, it may pay China in US dollars rather than Canadian dollars, and vice versa. However, the foundation from which the term originated no longer exists, and today the dollar is called a “reserve currency” simply because foreign countries hold it in great quantity to facilitate trade.

The first reserve currency was the British pound sterling. Because the pound was “good as gold,” many countries found it more convenient to hold pounds rather than gold itself during the age of the gold standard. The world’s great trading nations settled their trade in gold, but they might hold pounds rather than gold, with the confidence that the Bank of England would hand over the gold at a fixed exchange rate upon presentment. Toward the end of World War II the US dollar was given this status by international treaty following the Bretton Woods Agreement. The International Monetary Fund (IMF) was formed with the express purpose of monitoring the Federal Reserve’s commitment to Bretton Woods by ensuring that the Fed did not inflate the dollar and stood ready to exchange dollars for gold at $35 per ounce. Thusly, countries had confidence that their dollars held for trading purposes were as “good as gold,” as had been the Pound Sterling at one time.

However, the Fed did not maintain its commitment to the Bretton Woods Agreement and the IMF did not attempt to force it to hold enough gold to honor all its outstanding currency in gold at $35 per ounce. The Fed was called to account in the late 1960s, first by France and then by others, until its gold reserves were so low that it had no choice but to revalue the dollar at some higher exchange rate or abrogate its responsibilities to honor dollars for gold entirely. To it everlasting shame, the US chose the latter and “went off the gold standard” in September 1971.

Nevertheless, the dollar was still held by the great trading nations, because it still performed the useful function of settling international trading accounts. There was no other currency that could match the dollar, despite the fact that it was “delinked” from gold.

There are two characteristics of a currency that make it useful in international trade: one, it is issued by a large trading nation itself, and, two, the currency holds its value vis-à-vis other commodities over time. These two factors create a demand for holding a currency in reserve. Although the dollar was being inflated by the Fed, thusly losing its value vis-à-vis other commodities over time, there was no real competition. The German Deutsche mark held its value better, but German trade was a fraction of US trade, meaning that holders of marks would find less to buy in Germany than holders of dollars would find in the US. So demand for the mark was lower than demand for the dollar. Of course, psychological factors entered the demand for dollars, too, since the US was seen as the military protector of all the Western nations against the communist countries for much of the post-war period.

Today we are seeing the beginnings of a change. The Fed has been inflating the dollar massively, reducing its purchasing power in relation to other commodities, causing many of the world’s great trading nations to use other monies upon occasion. I have it on good authority, for example, that DuPont settles many of its international accounts in Chinese yuan and European euros. There may be other currencies that are in demand for trade settlement by other international companies as well. In spite of all this, one factor that has helped the dollar retain its reserve currency demand is that the other currencies have been inflated, too. For example, Japan has inflated the yen to a greater extent than the dollar in its foolish attempt to revive its stagnant economy by cheapening its currency. So the monetary destruction disease is not limited to the US alone.

The dollar is very susceptible to losing its vaunted reserve currency position by the first major trading country that stops inflating its currency. There is evidence that China understands what is at stake; it has increased its gold holdings and has instituted controls to prevent gold from leaving China. Should the world’s second largest economy and one of the world’s greatest trading nations tie its currency to gold, demand for the yuan would increase and demand for the dollar would decrease. In practical terms this means that the world’s great trading nations would reduce their holdings of dollars, and dollars held overseas would flow back into the US economy, causing prices to increase. How much would they increase? It is hard to say, but keep in mind that there is an equal amount of dollars held outside the US as inside the US.

President Obama’s imminent appointment of career bureaucrat Janet Yellen as Chairman of the Federal Reserve Board is evidence that the US policy of continuing to cheapen the dollar via Quantitative Easing will continue. Her appointment increases the likelihood that demand for dollars will decline even further, raising the likelihood of much higher prices in America as demand by trading nations to hold other currencies as reserves for trade settlement increase. Perhaps only such non-coercive pressure from a sovereign country like China can wake up the Fed to the consequences of its actions and force it to end its Quantitative Easing policy.

Long Gold, Short Silver And Exponential Demand

Posted: 13 Oct 2013 04:00 PM PDT

Jeffrey Lewis

Goldman Sachs Strikes Again

Posted: 13 Oct 2013 03:41 PM PDT

Call it the revenge of the gold bears. Jeffrey Currie, the Goldman Sachs chief commodity analyst whose name inspires dread on all gold bugs who hear it, has made yet another bearish prediction for the gold price. Read More...

DE-AMERICANIZED WORLD

Posted: 13 Oct 2013 03:23 PM PDT

Do you have faith in the U.S. government? Do you think other countries have faith in the U.S. government? Do you have faith in the Federal Reserve? Faith is a funny thing. It can dissipate in an instant. Do you think you’ll have a warning? The collapse of faith in the government and USD will be the driver […]

China Has Some Pointedly Hard Words For the US and the Dollar

Posted: 13 Oct 2013 02:12 PM PDT

China Has Some Pointedly Hard Words For the US and the Dollar

Posted: 13 Oct 2013 02:12 PM PDT

Visualizing The Slow Death Of The Listed Equity Market

Posted: 13 Oct 2013 02:01 PM PDT

Stock markets worldwide are faced with the same issue of declines in listings that surfaced in the U.S. a decade and a half ago. The reasons for the contagious collapse in publicly listed entities is unclear (increasing acquisitions, LBOs, filing for bankruptcy, and declines in IPO volumes) but as Bloomberg reports, "the decline in public equities is unquestionable and should be of grave concern to both investors and policy makers alike," CFA Institutes' Jason Voss noted adding - crucially, "having fewer listings may hamper asset allocation, make stocks too expensive and send improper signals to companies looking to go public."

 

 

European markets listed the most stocks in 2007, when a bull market ended. The total fell 23 percent during the next five years.

Asia-Pacific listings peaked in 2010, and last year's figure was 4.7 percent lower.

Stock listings in the U.S. reached their highest total in 1997, in the midst of a bull market fueled by demand for shares of Internet companies. Last year's figure was 47 percent lower than the record.

 

Source: Bloomberg

Commodity Gold Hit by Debt Ceiling Fix

Posted: 13 Oct 2013 01:38 PM PDT

Gold can look like just another commodity as the debt-ceiling finds a fix...
 
The CIRCUS from Washington has arrived on Wall Street, writes Greg Canavan in the Australian edition of The Daily Reckoning.
 
Stocks put in a big rally on the hope that politicians would achieve some sort of debt ceiling agreement. Both the S&P500 and the Dow Jones Industrials finished up a big 2.2% Thursday.
 
But after the market closed the New York Times came out with a story saying Obama had rejected the Republican proposal to extend the US' ability to pay its debt for six weeks, because it did not allow for the re-opening of many government services. Consequently US equity futures fall again.
 
Whatever...
 
Of course gold fell on the news of the supposed debt resolution and also fell on the news of the un-resolution. It's firmly in the hands of the hedge fund speculators right now, and they're having a pretty good time with it.
 
Gold has performed exactly the same as copper and oil since the start of the commodities bull market back in 2000. Our mate Dan Denning, author of The Denning Report, sends over a few charts showing the actual returns achieved.
 
It turns out that holding gold over copper would have only resulted in a few percent of advantage over the length of the bull market. As of yesterday, gold delivered a return of 315% versus copper's 308%.
 
 
And oil beat gold easily, returning 352% over the 14 year time-frame.
 
 
So gold is really just a rank and file commodity. Or at least it's performed like one for the duration of the commodities bull market.
 
But just because gold no longer plays the role of money (it's been 'de-monetised) since 1971, doesn't mean it's been commoditised for good. The derivative market may have done a pretty good job at 'commoditising' gold during the bull market, but it cannot change the inherent differences between gold and all other commodities.
 
That is, we humans don't consume gold like copper or oil or tin or wheat. Nearly all the gold ever mined is still in existence. It's out there somewhere. Consequently, gold has the highest stock-to-flow ratio of any commodity.
 
What we mean by that is the 'stock' of outstanding gold (somewhere around 175,000 tonnes) is huge compared to the annual 'flow' of the metal (around 2,500 tonnes). No other commodity could possibly have that characteristic. If copper had a similar stock-to-flow ratio to gold the copper production industry would be dead for decades while everyone waited for inventories to run down.
 
Given the performance of the gold miners, you could argue that the gold production industry is on its deathbed right now. And it could well be, but not for the reasons of 'oversupply'.
 
Theoretically, gold is always in oversupply because we don't consume it. The reason we don't consume gold is because in the mind of humans it's too valuable. Over many centuries, gold evolved as a store of wealth to protect people's savings from war, revolutions, inflation, currency blow-ups, poor governance...you name it.
 
For example, if you had a few excess Francs in the mid-1780s in France and you swapped those excess Francs for some gold, you would have managed to preserve your wealth throughout the revolution and the disastrous hyperinflation that followed it.
 
Or if you lived in the eastern part of Berlin as the Soviets advanced in 1945, the best you could do to preserve what wealth you might have had left would be to pocket some gold and head west.
 
You get the point. Gold is a wealth preserver through all sorts of crises...especially monetary. And we're in the throes of a monetary crisis right now. It may not seem like it, but it's brewing into something big.
 
You don't get politically induced debt arguments like we're seeing now in the US unless there are some major concerns with the way things are heading.
 
As we pointed out yesterday, the Chinese saw the writing on the wall years ago. They are now accumulating gold big time. A reader sent us this clip from CNBC last week which explains that there is rising anger amongst the Chinese people directed towards the government for putting all their eggs in the US Treasury basket. The correspondent said there were 'signs' emerging in China that the view towards the Treasury market was beginning to change.
 
We would argue that it began to change a few years ago. As much as we've been a critic of recent Chinese economic development, they do recognise (unlike most in the US it seems) that the current driver of global economic growth is not sustainable.
 
The US Congress will at some point raise the debt ceiling again. The question is, will the US' economic partners agree to easily absorb the increase in debt? China's actions over the past few years basically say no to that question. Japan has stepped up once again and helped the US out.
 
But its changing economic structure also indicates it may not be able to do so for much longer. In August, Japan's current account surplus fell to one of its lowest levels in years. It came in at just US$1.6 billion.
 
A current account surplus reflects a nation's excess production as well as income on accumulated savings. Japan has traditionally invested a large portion of its savings in US Treasuries. But if you stop accumulating savings and start to run down your wealth pile, that removes an important source of demand for the US Treasury market.
 
And Japan is now very close to becoming a 'dis-saver'. Which means the two largest creditors to the US, China and Japan, are lukewarm at best in support of the Treasury market. Against this back-drop, you have the political circus in the US doing even more damage to US credibility. Like they really need that right now...
 
You have two choices. You either believe that the world will continue to fund the US for years to come and that the system will go on working as it's always done...in which case you should buy stocks and sell gold.
 
Or you believe that the system is at its limits and it's no longer going to work as smoothly as it once did...in which case you should take out insurance with some physical gold and set it aside for a few years. Because if you're right, the wealth preserver throughout the ages will do its job again.

Commodity Gold Hit by Debt Ceiling Fix

Posted: 13 Oct 2013 01:38 PM PDT

Gold can look like just another commodity as the debt-ceiling finds a fix...
 
The CIRCUS from Washington has arrived on Wall Street, writes Greg Canavan in the Australian edition of The Daily Reckoning.
 
Stocks put in a big rally on the hope that politicians would achieve some sort of debt ceiling agreement. Both the S&P500 and the Dow Jones Industrials finished up a big 2.2% Thursday.
 
But after the market closed the New York Times came out with a story saying Obama had rejected the Republican proposal to extend the US' ability to pay its debt for six weeks, because it did not allow for the re-opening of many government services. Consequently US equity futures fall again.
 
Whatever...
 
Of course gold fell on the news of the supposed debt resolution and also fell on the news of the un-resolution. It's firmly in the hands of the hedge fund speculators right now, and they're having a pretty good time with it.
 
Gold has performed exactly the same as copper and oil since the start of the commodities bull market back in 2000. Our mate Dan Denning, author of The Denning Report, sends over a few charts showing the actual returns achieved.
 
It turns out that holding gold over copper would have only resulted in a few percent of advantage over the length of the bull market. As of yesterday, gold delivered a return of 315% versus copper's 308%.
 
 
And oil beat gold easily, returning 352% over the 14 year time-frame.
 
 
So gold is really just a rank and file commodity. Or at least it's performed like one for the duration of the commodities bull market.
 
But just because gold no longer plays the role of money (it's been 'de-monetised) since 1971, doesn't mean it's been commoditised for good. The derivative market may have done a pretty good job at 'commoditising' gold during the bull market, but it cannot change the inherent differences between gold and all other commodities.
 
That is, we humans don't consume gold like copper or oil or tin or wheat. Nearly all the gold ever mined is still in existence. It's out there somewhere. Consequently, gold has the highest stock-to-flow ratio of any commodity.
 
What we mean by that is the 'stock' of outstanding gold (somewhere around 175,000 tonnes) is huge compared to the annual 'flow' of the metal (around 2,500 tonnes). No other commodity could possibly have that characteristic. If copper had a similar stock-to-flow ratio to gold the copper production industry would be dead for decades while everyone waited for inventories to run down.
 
Given the performance of the gold miners, you could argue that the gold production industry is on its deathbed right now. And it could well be, but not for the reasons of 'oversupply'.
 
Theoretically, gold is always in oversupply because we don't consume it. The reason we don't consume gold is because in the mind of humans it's too valuable. Over many centuries, gold evolved as a store of wealth to protect people's savings from war, revolutions, inflation, currency blow-ups, poor governance...you name it.
 
For example, if you had a few excess Francs in the mid-1780s in France and you swapped those excess Francs for some gold, you would have managed to preserve your wealth throughout the revolution and the disastrous hyperinflation that followed it.
 
Or if you lived in the eastern part of Berlin as the Soviets advanced in 1945, the best you could do to preserve what wealth you might have had left would be to pocket some gold and head west.
 
You get the point. Gold is a wealth preserver through all sorts of crises...especially monetary. And we're in the throes of a monetary crisis right now. It may not seem like it, but it's brewing into something big.
 
You don't get politically induced debt arguments like we're seeing now in the US unless there are some major concerns with the way things are heading.
 
As we pointed out yesterday, the Chinese saw the writing on the wall years ago. They are now accumulating gold big time. A reader sent us this clip from CNBC last week which explains that there is rising anger amongst the Chinese people directed towards the government for putting all their eggs in the US Treasury basket. The correspondent said there were 'signs' emerging in China that the view towards the Treasury market was beginning to change.
 
We would argue that it began to change a few years ago. As much as we've been a critic of recent Chinese economic development, they do recognise (unlike most in the US it seems) that the current driver of global economic growth is not sustainable.
 
The US Congress will at some point raise the debt ceiling again. The question is, will the US' economic partners agree to easily absorb the increase in debt? China's actions over the past few years basically say no to that question. Japan has stepped up once again and helped the US out.
 
But its changing economic structure also indicates it may not be able to do so for much longer. In August, Japan's current account surplus fell to one of its lowest levels in years. It came in at just US$1.6 billion.
 
A current account surplus reflects a nation's excess production as well as income on accumulated savings. Japan has traditionally invested a large portion of its savings in US Treasuries. But if you stop accumulating savings and start to run down your wealth pile, that removes an important source of demand for the US Treasury market.
 
And Japan is now very close to becoming a 'dis-saver'. Which means the two largest creditors to the US, China and Japan, are lukewarm at best in support of the Treasury market. Against this back-drop, you have the political circus in the US doing even more damage to US credibility. Like they really need that right now...
 
You have two choices. You either believe that the world will continue to fund the US for years to come and that the system will go on working as it's always done...in which case you should buy stocks and sell gold.
 
Or you believe that the system is at its limits and it's no longer going to work as smoothly as it once did...in which case you should take out insurance with some physical gold and set it aside for a few years. Because if you're right, the wealth preserver throughout the ages will do its job again.

In The News Today

Posted: 13 Oct 2013 01:31 PM PDT

Chart Of The Day: China Imports Over 2,000 Tons Of Gold In Last Two Years Zero Hedge ^ | 10-13-13 | Tyler Durden China has just one thing to say to all those who engage in the now daily slamdowns of gold just around the time of the London fixing, after 8 am Eastern, which... Read more »

The post In The News Today appeared first on Jim Sinclair's Mineset.

What Ron Paul Told Me in Tucson

Posted: 13 Oct 2013 01:30 PM PDT

Ron Paul on the petro-Dollar, inflation, and Nixon closing the gold window...
 
I SPENT last weekend in Tucson for the Casey Research 2013 Summit, writes Nick Giambruno at Casey Research.
 
It was indeed a memorable and information-packed experience, and truly a pleasure to meet with everyone who joined us.
 
Notably, it was extremely encouraging to meet so many intelligent people who had taken concrete steps to internationalize their savings and obtain a second passport – and thus reducing their exposure to whatever happens in their home countries.
 
Doug Casey kicked things off with a look at the striking parallels between the rise and fall of Rome and the rise and fall of the US.
 
In a way, Doug reminded me of this video, which I stumbled across recently and which I highly recommend that you view. It shows, in a little over three minutes, how the borders of Europe have changed over the past 1,000 years.
 
It is an amazing and concise illustration of how, contrary to popular opinion, the borders of political entities are anything but permanent. In a historical perspective, nations and national boundaries tend to have as much permanence as a double cheeseburger placed in front of Chris Christie.
 
It is for this reason (and many others) that I believe you should internationalize various aspects of your life and not totally bind your future to any particular nation-state.
 
At the Summit I also had the chance to do something that I had wanted to do for a long time – sit down with Ron Paul for an informal (but in-depth) discussion on what I believe to be his most important speech.
 
It is a speech that many, even most libertarians, have never heard. This is because it occurred in 2006, before Ron had really broken through on the national level, and during an otherwise dull session of Congress.
 
The speech is titled "The End of Dollar Hegemony" and discussed the breakdown of the Bretton Woods system – which most people know about – and the de facto system that replaced it – which most people do not know about. This speech is an absolute must-view you can watch it or read a transcript of it.
 
The most important part of the speech is when Paul discusses the petro-Dollar system, a primary factor in maintaining the Dollar's role as the world's premier currency after the breakdown of Bretton Woods.
"It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.
 
"Amazingly, a new system was devised which allowed the US to operate the printing presses for the world reserve currency with no restraints placed on it – not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for Dollar hegemony to spread.
 
"Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from US authorities, struck an agreement with Opec to price oil in US Dollars exclusively for all worldwide transactions. This gave the Dollar a special place among world currencies and in essence 'backed' the Dollar with oil.
 
"In return, the US promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement (Al Qaeda) among those who resented our influence in the region. The arrangement gave the Dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as Dollar influence flourished.
 
"This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the Dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo-gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century.
 
"The agreement with OPEC in the 1970s to price oil in Dollars has provided tremendous artificial strength to the Dollar as the preeminent reserve currency. This has created a universal demand for the Dollar, and soaks up the huge number of new Dollars generated each year.
 
"Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.
 
"The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than Dollars or Euros. The sooner the better."
Ron Paul told me that although this speech is relatively unknown in the US, it was widely received around the world. As we discussed the implications of these issues, Paul said that the premise of this speech still applies today.
 
I believe that once the Dollar loses its status as the world's premier reserve, the US will start to implement the destructive measures we frequently discuss: capital controls, people controls, price controls, currency devaluations, confiscations, nationalizing pensions, etc. Such things have happened recently in Poland, Cyprus, Iceland, Argentina, Zimbabwe, Venezuela, and a number of other countries. Take a glance at history and you will quickly notice these measures are the norm when a government gets into serious fiscal trouble. Many nations have made the mistake of thinking they were somehow "exceptional" and that these kinds of things couldn't happen to them.
 
There is no question the US is and will continue to be in serious fiscal trouble unless it implements drastic (and politically impossible) changes. The only saving grace for the US has been its ability to print the world's reserve currency. But once that special privilege is lost, it will revert to the measures all other governments throughout history have taken.
 
You absolutely want to be internationalized before the US Dollar loses its status as the world's premier reserve currency. I truly believe the window opportunity to take protective action will slam shut at that time.
 
Internationalization is just one of several timely topics touched on by the experts who gathered at the 2013 Casey Summit, 3 Days with Casey. Unusually, most speakers stayed after their presentations to mingle with attendees and listen to others' talks – which speaks volumes as to the quality of the conference. If you missed out – or even if you were fortunate enough to be in attendance for Ron Paul's keynote address, plus presentations by Lacy Hunt, Catherine Austin Fitts, Chris Martenson, and many others, not to mention the Casey Brain Trust led by Doug Casey himself – you can still hear it all. Every presentation. Every breakout session. Every Q&A. All of it – including speakers' visual aids, if used – will be available on the 2013 Summit Audio Collection.
 
That's over 27 hours of insight, analysis, speculation, discussion, recommendations... and much more. And you can get a substantial discount by ordering today. Click here to learn more and reserve your CD or MP3 copy of the 2013 Summit Audio Collection.

What Ron Paul Told Me in Tucson

Posted: 13 Oct 2013 01:30 PM PDT

Ron Paul on the petro-Dollar, inflation, and Nixon closing the gold window...
 
I SPENT last weekend in Tucson for the Casey Research 2013 Summit, writes Nick Giambruno at Casey Research.
 
It was indeed a memorable and information-packed experience, and truly a pleasure to meet with everyone who joined us.
 
Notably, it was extremely encouraging to meet so many intelligent people who had taken concrete steps to internationalize their savings and obtain a second passport – and thus reducing their exposure to whatever happens in their home countries.
 
Doug Casey kicked things off with a look at the striking parallels between the rise and fall of Rome and the rise and fall of the US.
 
In a way, Doug reminded me of this video, which I stumbled across recently and which I highly recommend that you view. It shows, in a little over three minutes, how the borders of Europe have changed over the past 1,000 years.
 
It is an amazing and concise illustration of how, contrary to popular opinion, the borders of political entities are anything but permanent. In a historical perspective, nations and national boundaries tend to have as much permanence as a double cheeseburger placed in front of Chris Christie.
 
It is for this reason (and many others) that I believe you should internationalize various aspects of your life and not totally bind your future to any particular nation-state.
 
At the Summit I also had the chance to do something that I had wanted to do for a long time – sit down with Ron Paul for an informal (but in-depth) discussion on what I believe to be his most important speech.
 
It is a speech that many, even most libertarians, have never heard. This is because it occurred in 2006, before Ron had really broken through on the national level, and during an otherwise dull session of Congress.
 
The speech is titled "The End of Dollar Hegemony" and discussed the breakdown of the Bretton Woods system – which most people know about – and the de facto system that replaced it – which most people do not know about. This speech is an absolute must-view you can watch it or read a transcript of it.
 
The most important part of the speech is when Paul discusses the petro-Dollar system, a primary factor in maintaining the Dollar's role as the world's premier currency after the breakdown of Bretton Woods.
"It all ended on August 15, 1971, when Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold. In essence, we declared our insolvency and everyone recognized some other monetary system had to be devised in order to bring stability to the markets.
 
"Amazingly, a new system was devised which allowed the US to operate the printing presses for the world reserve currency with no restraints placed on it – not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for Dollar hegemony to spread.
 
"Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from US authorities, struck an agreement with Opec to price oil in US Dollars exclusively for all worldwide transactions. This gave the Dollar a special place among world currencies and in essence 'backed' the Dollar with oil.
 
"In return, the US promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement (Al Qaeda) among those who resented our influence in the region. The arrangement gave the Dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as Dollar influence flourished.
 
"This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the Dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo-gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century.
 
"The agreement with OPEC in the 1970s to price oil in Dollars has provided tremendous artificial strength to the Dollar as the preeminent reserve currency. This has created a universal demand for the Dollar, and soaks up the huge number of new Dollars generated each year.
 
"Using force to compel people to accept money without real value can only work in the short run. It ultimately leads to economic dislocation, both domestic and international, and always ends with a price to be paid.
 
"The economic law that honest exchange demands only things of real value as currency cannot be repealed. The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than Dollars or Euros. The sooner the better."
Ron Paul told me that although this speech is relatively unknown in the US, it was widely received around the world. As we discussed the implications of these issues, Paul said that the premise of this speech still applies today.
 
I believe that once the Dollar loses its status as the world's premier reserve, the US will start to implement the destructive measures we frequently discuss: capital controls, people controls, price controls, currency devaluations, confiscations, nationalizing pensions, etc. Such things have happened recently in Poland, Cyprus, Iceland, Argentina, Zimbabwe, Venezuela, and a number of other countries. Take a glance at history and you will quickly notice these measures are the norm when a government gets into serious fiscal trouble. Many nations have made the mistake of thinking they were somehow "exceptional" and that these kinds of things couldn't happen to them.
 
There is no question the US is and will continue to be in serious fiscal trouble unless it implements drastic (and politically impossible) changes. The only saving grace for the US has been its ability to print the world's reserve currency. But once that special privilege is lost, it will revert to the measures all other governments throughout history have taken.
 
You absolutely want to be internationalized before the US Dollar loses its status as the world's premier reserve currency. I truly believe the window opportunity to take protective action will slam shut at that time.
 
Internationalization is just one of several timely topics touched on by the experts who gathered at the 2013 Casey Summit, 3 Days with Casey. Unusually, most speakers stayed after their presentations to mingle with attendees and listen to others' talks – which speaks volumes as to the quality of the conference. If you missed out – or even if you were fortunate enough to be in attendance for Ron Paul's keynote address, plus presentations by Lacy Hunt, Catherine Austin Fitts, Chris Martenson, and many others, not to mention the Casey Brain Trust led by Doug Casey himself – you can still hear it all. Every presentation. Every breakout session. Every Q&A. All of it – including speakers' visual aids, if used – will be available on the 2013 Summit Audio Collection.
 
That's over 27 hours of insight, analysis, speculation, discussion, recommendations... and much more. And you can get a substantial discount by ordering today. Click here to learn more and reserve your CD or MP3 copy of the 2013 Summit Audio Collection.

Gold and the Four Words that Define Western Economic Policy

Posted: 13 Oct 2013 11:23 AM PDT

Midas Letter

Risks Associated With Gold Investing – Keep It Physical Outside A Bank

Posted: 13 Oct 2013 10:50 AM PDT

In this short educational video by GoldBroker.com, the risks associated with gold investing are nicely summarized. Although nothing new, it provides a good recap of the do’s and don’ts that gold investors are supposed to know.

In sum, the video discusses the necessity of holding precious metals in physical form outside the banking system. Why? Because of …

  • the risk of bankruptcy
  • the risk of confiscation
  • ther risk related to price manipulation

Investing in gold is generally done as a security measure to protect oneself against the risks associated with the fragility
of the financial system and to have access to a universally accepted means of payment in case of a bank failure or temporary closing. If you have some gold in the bank’s vault and the bank closes temporarily (or worse, goes bankrupt), you lose the advantage of having close at hand a means of payment for your basic needs in times of trouble when access to traditional means of payment like cash or bank cards is hampered.

The risk of bank failure is a very serious one with the banking system being entirely interconnected.

Even though the risk is small, confiscation as happened in the past. Confiscation could happen following the panic movement in the banking system or just before announcing a new monetary system. In that case, only gold at one’s country of residence is risky because it can be seized legally.

Whether one’s gold is allocated or not, in order to understand the amount of risk associated with storing gold within the banking system, one has to grasp the mechanism of price manipulation occurring through the sale of previously leased physical gold. Traditionally, the central banks have leased this physical gold to the bullion banks that specialize in gold trading which helps make them a profit on their idle gold stock while maintaining the price low. Price manipulation can only happen in these 2 ways: either with the sale of previously leased physical gold on the market, or with the massive sale a virtual paper gold. In both cases, the sheer mass of supply helps keeping the price low.

World Gold Council Reports Significant Error In China’s Gold Holdings

Posted: 13 Oct 2013 10:24 AM PDT

It was only a week ago when we reported the latest official gold imports from Hong Kong to China. We wrote that China continued to hoard gold in an unabated way. Based on a Reuters article, we were able to publish the following data:

  • Net gold flows into China – excluding imports by Hong Kong from China – hit 110.505 tonnes in August, compared with 116.385 tonnes in July, data from the Hong Kong Census and Statistics Department showed.
  • Total imports from Hong Kong rose to 131.374 tonnes from 129.232 tonnes a month ago.
  • China's net gold imports from Hong Kong have totalled 744.818 tonnes for the first eight months of the year, while India's purchases as of August stand at a little less than 600 tonnes.

On Thursday this week, the World Gold Council published their monthly update about official gold holdings per country. As noted by ourselves, and confirmed by Zerohedge, the official holdings from China have not changed despite their massive gold imports in 2013. The first 8 months of this year saw 3/4th imports of the supposedly total holdings, which is significantly incorrect. Zerohedge notes that the World Gold Council data related to Chinese holdings have not been updated since April of 2009.

Is this a coincidence or is there a hidden agenda associated with this? All gold news related to the physical market has been dominated by China since 2012; it’s like the elephant in the room. We assume China does not care about official figures, as they probably gratefully use every price smackdown as an opportunity to add to their unofficial gold holdings.

 

official gold holdings october 2013 physical market

Repo Market Implosion Financial Collapse Nightmare Scenario

Posted: 13 Oct 2013 09:38 AM PDT

October 11, 2013 "Information Clearing House - President Barack Obama is determined to prevail in his battle with GOP congressional leaders on the debt ceiling issue, but not for the reasons stated in the media. Obama is less concerned with the prospect of higher interest rates and frustrated bondholders than he is with the big Wall Street banks who would be thrust back into crisis if there is no resolution before October 17. Absent a debt ceiling deal, the repurchase market–known as repo–would undergo another deep-freeze as it did in 2008 when Lehman Brothers defaulted triggering a run on the Reserve Primary Fund which had been exposed to Lehman’s short-term debt. The frenzied selloff sparked a widespread panic across global financial markets pushing the system to the brink of collapse and forcing the Federal Reserve to backstop regulated and unregulated financial institutions with more than $11 trillion in loans and other obligations. The same tragedy will play out again, if congress fails lift the ceiling and reinforce the present value of US debt.

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