Gold World News Flash

Gold & Silver vs. Hope & Change. Place your Bets!
More on bullion bank reserves, delta hedging and coat checking
Claims Per Ounce of Deliverable Gold Rises to Record High 61
Hedging and smart buying seen if gold falls to $1,000
Keith Weiner: Why Gold Is The Best Money Of Them All, And Nothing Comes Close
Investigating Shanghai's Gold Futures
Why Has Nobody Gone To Jail For The Financial Crisis? Judge Rakoff Says: "Blame The Government"
Gold & silver prices will eventually explode! Phil Baker Interview
Big Ideas on Gold and Resources in the Big Easy
Plunging Euro, Rising Dollar and Their Impact on Gold's Future Moves
China Opens Largest Private Gold Vault With Capacity For $82 Billion Worth Of Precious Metal
Venezuela's Hyperinflation Anatomy; Army Storms Caracas Electronics Stores; Total Economic Collapse Underway; Could This Happen in US?
Today the Gold Price Lost $9.90 to Close at $1,271.10
Today the Gold Price Lost $9.90 to Close at $1,271.10
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Even More Credit & Paper
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Claims Per Ounce of Deliverable Gold Rises to Record High 61

Gold & Silver vs. Hope & Change. Place your Bets!

Posted: 12 Nov 2013 11:05 PM PST

Read the Latest News About: Gold Silver Economy Central Banking The BIG Perspective: Examine the following "Point & Figure"...

{This is a content summary only. Click on the blog title to continue reading this post, share your comments, browse the website, and more!}

More on bullion bank reserves, delta hedging and coat checking

Posted: 12 Nov 2013 11:00 PM PST

Perth Mint

Claims Per Ounce of Deliverable Gold Rises to Record High 61

Posted: 12 Nov 2013 10:00 PM PST

from Jesse’s Café Américain:

“So you are lean and mean and resourceful, and you continue to walk on the edge of the precipice, because over the years you have become fascinated by how close you can walk without losing your balance.”

Richard Nixon

The point of this ‘claims per ounce’ measure is not ‘how high is too high.’

The real significance is how out of bounds is the market, so that when the market turns, how high must prices go to clear supply against demand, to revert to the mean.

Read More @ Jesse’s Café Américain:

Hedging and smart buying seen if gold falls to $1,000

Posted: 12 Nov 2013 08:00 PM PST

by Adrian Ash, MineWeb.com

WHOLESALE GOLD bumped up to $1285 Tuesday lunchtime in London, reversing an overnight drop to fresh 3-week lows at $1277 as European stock markets slipped with government bond prices.

“A slip through the six-month support line at $1270.16 will confirm our bearish outlook,” says Commerzbank’s Axel Rudolph.

“We could potentially,” says French bank Natixis’ precious metals analyst Bernard Dahdah, “see gold prices reach levels of $850 to $1,000. But this is our very low-case scenario.”

Read More @ MineWeb.com

Keith Weiner: Why Gold Is The Best Money Of Them All, And Nothing Comes Close

Posted: 12 Nov 2013 07:00 PM PST

by Jan Skoyles, TheRealAsset.co.uk

A slightly different Best of the Web today, one with perhaps a more relaxed feel with a storytelling element to it. Very often here at The Real Asset Company we focus on the role of gold in today's economy, we refer to it as an investment and we look at how it is traded around the world in its various forms. Ultimately though, the reason why we have this underlying interest in it, and of course why people buy it in their frenzies (as we see in China) or why it is compared to currencies, is because it is money.

How did it come into being money? This is something Keith Weiner, president of the Gold Standard Institute, addresses below. Unlike what we call 'money' today, gold is money because it was chosen through a process of trial, error and elimination over many years by individuals, groups and nations who found a requirement for a medium of exchange.

Read More @ TheRealAsset.co.uk

Investigating Shanghai's Gold Futures

Posted: 12 Nov 2013 06:51 PM PST

In part three of their collaboration focussing on the Chinese Gold market, Jan Skoyles and Koos Jansen delve into the key elements of the gold contract on the Shanghai Futures Exchange and present what they believe is a ... Read More...

Why Has Nobody Gone To Jail For The Financial Crisis? Judge Rakoff Says: "Blame The Government"

Posted: 12 Nov 2013 06:27 PM PST

By US District Judge Jed S. Rakoff (pdf)

Why Have No High Level Executives Been Prosecuted In Connection With The Financial Crisis?

Five years have passed since the onset of what is sometimes called the Great Recession. While the economy has slowly improved, there are still millions of Americans leading lives of quiet desperation: without jobs, without resources, without hope. Who was to blame? Was it simply a result of negligence, of the kind of inordinate risk-taking commonly called a "bubble," of an imprudent but innocent failure to maintain adequate reserves for a rainy day? Or was it the result, at least in part, of fraudulent practices, of dubious mortgages portrayed as sound risks and packaged into ever-more-esoteric financial instruments, the fundamental weaknesses of which were intentionally obscured?

If it was the former – if the recession was due, at worst, to a lack of caution – then the criminal law has no role to play in the aftermath. For, in all but a few circumstances (not here relevant), the fierce and fiery weapon called criminal prosecution is directed at intentional misconduct, and nothing less. If the Great Recession was in no part the handiwork of intentionally fraudulent practices by high-level executives, then to prosecute such executives criminally would be "scapegoating" of the most shallow and despicable kind.

But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years. Indeed, it would stand in striking contrast to the increased success that federal prosecutors have had over the past 50 years or so in bringing to justice even the highest level figures who orchestrated mammoth frauds. Thus, in the 1970's, in the aftermath of the "junk bond" bubble that, in many ways, was a precursor of the more recent bubble in mortgage-backed securities, the progenitors of the fraud were all successfully prosecuted, right up to Michael Milken. Again, in the 1980's, the so-called savings-and-loan crisis, which again had some eerie parallels to more recent events, resulted in the successful criminal prosecution of more than 800 individuals, right up to Charles Keating. And, again, the widespread accounting frauds of the 1990's, most vividly represented by Enron and WorldCom, led directly to the successful prosecution of such previously respected C.E.O.'s as Jeffrey Skilling and Bernie Ebbers.

In striking contrast with these past prosecutions, not a single high level executive has been successfully prosecuted in connection with the recent financial crisis, and given the fact that most of the relevant criminal provisions are governed by a five-year statute of limitations, it appears very likely that none will be. It may not be too soon, therefore, to ask why.

One possibility, already mentioned, is that no fraud was committed. This possibility should not be discounted. Every case is different, and I, for one, have no opinion as to whether criminal fraud was committed in any given instance.

But the stated opinion of those government entities asked to examine the financial crisis overall is not that no fraud was committed. Quite the contrary. For example, the Financial Crisis Inquiry Commission, in its final report, uses variants of the word "fraud" no fewer than 157 times in describing what led to the crisis, concluding that there was a "systemic breakdown," not just in accountability, but also in ethical behavior. As the Commission found, the signs of fraud were everywhere to be seen, with the number of reports of suspected mortgage fraud rising 20-fold between 1998 and 2005 and then doubling again in the next four years. As early as 2004, FBI Assistant Director Chris Swecker, was publicly warning of the "pervasive problem" of mortgage fraud, driven by the voracious demand for mortgagebacked securities. Similar warnings, many from within the financial community, were disregarded, not because they were viewed as inaccurate, but because, as one high level banker put it, "A decision was made that 'We're going to have to hold our nose and start buying the product if we want to stay in business.'"

Without multiplying examples, the point is that, in the aftermath of the financial crisis, the prevailing view of many government officials (as well as others) was that the crisis was in material respects the product of intentional fraud. In a nutshell, the fraud, they argued, was a simple one. Subprime mortgages, i.e., mortgages of dubious creditworthiness, increasingly provided the sole collateral for highly-leveraged securities that were marketed as triple-A, i.e., of very low risk. How could this transformation of a sow's ear into a silk purse be accomplished unless someone dissembled along the way?

While officials of the Department of Justice have been more circumspect in describing the roots of the financial crisis than have the various commissions of inquiry and other government agencies, I have seen nothing to indicate their disagreement with the widespread conclusion that fraud at every level permeated the bubble in mortgage-backed securities. Rather, their position has been to excuse their failure to prosecute high level individuals for fraud in connection with the financial crisis on one or more of three grounds:

First, they have argued that proving fraudulent intent on the part of the high level management of the banks and companies involved has proved difficult. It is undoubtedly true that the ranks of top management were several levels removed from those who were putting together the collateralized debt obligations and other securities offerings that were based on dubious mortgages; and the people generating the mortgages themselves were often at other companies and thus even further removed. And I want to stress again that I have no opinion as to whether any given top executive had knowledge of the dubious nature of the underlying mortgages, let alone fraudulent intent. But what I do find surprising is that the Department of Justice should view the proving of intent as so difficult in this context. Who, for example, were generating the so-called "suspicious activity" reports of mortgage fraud that, as mentioned, increased so hugely in the years leading up to the crisis? Why, the banks themselves. A top level banker, one might argue, confronted with increasing evidence from his own and other banks that mortgage fraud was increasing, might have inquired as to why his bank's mortgage-based securities continued to receive triple-A ratings? And if, despite these and other reports of suspicious activity, the executive failed to make such inquiries, might it be because he did not want to know what such inquiries would reveal?

This, of course, is what is known in the law as "willful blindness" or "conscious disregard." It is a well-established basis on which federal prosecutors have asked juries to infer intent, in cases involving complexities, such as accounting treatments, at least as esoteric as those involved in the events leading up to the financial crisis. And while some federal courts have occasionally expressed qualifications about the use of the willful blindness approach to prove intent, the Supreme Court has consistently approved it. As that Court stated most recently in Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2068 (2011), "The doctrine of willful blindness is well established in criminal law. Many criminal statutes require proof that a defendant acted knowingly or willfully, and courts applying the doctrine of willful blindness hold that defendants cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances." Thus, the Department's claim that proving intent in the financial crisis context is particularly difficult may strike some as doubtful.

Second, and even weaker, the Department of Justice has sometimes argued that, because the institutions to whom mortgage-backed securities were sold were themselves sophisticated investors, it might be difficult to prove reliance. Thus, in defending the failure to prosecute high level executives for frauds arising from the sale of mortgage-backed securities, the then head of the Department of Justice's Criminal Division, told PBS that "in a criminal case ... I have to prove not only that you made a false statement but that you intended to commit a crime, and also that the other side of the transaction relied on what you were saying. And frankly, in many of the securitizations and the kinds of transactions we're talking about, in reality you had very sophisticated counterparties on both sides. And so even though one side may have said something was dark blue when really we can say it was sky blue, the other side of the transaction, the other sophisticated party, wasn't relying at all on the description of the color."

Actually, given the fact that these securities were bought and sold at lightning speed, it is by no means obvious that even a sophisticated counterparty would have detected the problems with the arcane, convoluted mortgage-backed derivatives they were being asked to purchase. But there is a more fundamental problem with the above-quoted statement from the former head of the Criminal Division, which is that it totally misstates the law. In actuality, in a criminal fraud case the Government is never required to prove reliance, ever. The reason, of course, is that would give a crooked seller a license to lie whenever he was dealing with a sophisticated counterparty. The law, however, says that society is harmed when a seller purposely lies about a material fact, even if the immediate purchaser does not rely on that particular fact, because such misrepresentations create problems for the market as a whole. And surely there never was a situation in which the sale of dubious mortgage-backed securities created more of a huge problem for the marketplace, and society as a whole, than in the recent financial crisis.

The third reason the Department has sometimes given for not bringing these prosecutions is that to do so would itself harm the economy. Thus, Attorney General Holder himself told Congress that "it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute - if we do bring a criminal charge - it will have a negative impact on the national economy, perhaps even the world economy." To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse -- sometimes labeled the "too big to jail" excuse – is disturbing, frankly, in what it says about the Department's apparent disregard for equality under the law.

In fairness, however, Mr. Holder was referring to the prosecution of financial institutions, rather than their C.E.O.'s. But if we are talking about prosecuting individuals, the excuse becomes entirely irrelevant; for no one that I know of has ever contended that a big financial institution would collapse if one or more of its high level executives were prosecuted, as opposed to the institution itself.

Without multiplying examples further, my point is that the Department of Justice has never taken the position that all the top executives involved in the events leading up to the financial crisis were innocent, but rather has offered one or another excuse for not criminally prosecuting them – excuses that, on inspection, appear unconvincing. So, you might ask, what's really going on here? I don't claim to have any inside information about the real reasons why no such prosecutions have been brought, but I take the liberty of offering some speculations, for your consideration or amusement as the case may be.

At the outset, however, let me say that I totally discount the argument sometimes made that no such prosecutions have been brought because the top prosecutors were often people who previously represented the financial institutions in question and/or were people who expected to be representing such institutions in the future: the so-called "revolving door." In my experience, every federal prosecutor, at every level, is seeking to make a name for him-or-herself, and the best way to do that is by prosecuting some high level person. While companies that are indicted almost always settle, individual defendants whose careers are at stake will often go to trial. And if the Government wins such a trial, as it usually does, the prosecutor's reputation is made. My point is that whatever small influence the "revolving door" may have in discouraging certain white-collar prosecutions is more than offset, at least in the case of prosecuting high-level individuals, by the career-making benefits such prosecutions confer on the successful prosecutor.

So, one asks again, why haven't we seen such prosecutions growing out of the financial crisis? I offer, by way of speculation, three influences that I think, along with others, have had the effect of limiting such prosecutions.

First, the prosecutors had other priorities. Some of these were completely understandable. For example, prior to 2001, the FBI had more than 1,000 agents assigned to investigating financial frauds, but after 9/11 many of these agents were shifted to anti-terrorism work. Who can argue with that? Eventually, it is true, new agents were hired for some of the vacated spots in fraud detection; but this is not a form of detection easily learned and recent budget limitations have only exacerbated the problem.

Of course, the FBI is not the primary investigator of fraud in the sale of mortgage-backed securities; that responsibility lies mostly with the S.E.C. But at the very time the financial crisis was breaking, the S.E.C. was trying to deflect criticism from its failure to detect the Madoff fraud, and this led it to concentrate on other Ponzi-like schemes, which for awhile were, along with accounting frauds, its chief focus. More recently, the S.E.C. has been hard hit by budget limitations, and this has not only made it more difficult to assign the kind of manpower the kinds of frauds we are talking about require, but also has led S.E.C. enforcement to focus on the smaller, easily resolved cases that will beef up their statistics when they go to Congress begging for money.

As for the Department of Justice proper, a decision was made around 2009 to spread the investigation of these financial fraud cases among numerous U.S. Attorney's Offices, many of which had little or no prior experience in investigating and prosecuting sophisticated financial frauds. At the same time, the U.S. Attorney's Office with the greatest expertise in these kinds of cases, the Southern District of New York, was just embarking on its prosecution of insider trading cases arising from the Rajaratnam tapes, which soon proved a gold mine of good cases that absorbed a huge amount of the attention of the securities fraud unit of that office. While I want to stress again that I have no inside information, as a former chief of that unit I would venture to guess that the cases involving the financial crisis were parceled out to Assistants who also had insider trading cases. Which do you think an Assistant would devote most of her attention to: an insider trading case that was already nearly ready to go to indictment and that might lead to a high-visibility trial, or a financial crisis case that was just getting started, would take years to complete, and had no guarantee of even leading to an indictment? Of course, she would put her energy into the insider trading case, and if she was lucky, it would go to trial, she would win, and she would then take a job with a large law firm. And in the process, the financial fraud case would get lost in the shuffle.

Alternative priorities, in short, is, I submit, one of the reasons the financial fraud cases were not brought, especially cases against high level individuals that would take many years, many investigators, and a great deal of expertise to investigate. But a second, and less salutary, reason for not bringing such cases is the Government's own involvement in the underlying circumstances that led to the financial crisis.

On the one hand, the government, writ large, had a hand in creating the conditions that encouraged the approval of dubious mortgages. It was the government, in the form of Congress, that repealed Glass-Steagall, thus allowing certain banks that had previously viewed mortgages as a source of interest income to become instead deeply involved in securitizing pools of mortgages in order to obtain the much greater profits available from trading. It was the government, in the form of both the executive and the legislature, that encouraged deregulation, thus weakening the power and oversight not only of the S.E.C. but also of such diverse banking overseers as the O.T.S. and the O.C.C. It was the government, in the form of the Fed, that kept interest rates low in part to encourage mortgages. It was the government, in the form of the executive, that strongly encouraged banks to make loans to low-income persons who might have previously been regarded as too risky to warrant a mortgage. It was the government, in the form of the government-sponsored entities known as Fannie Mae and Freddie Mac, that helped create the for-a-time insatiable market for mortgage-backed securities. And it was the government, pretty much across the board, that acquiesced in the ever greater tendency not to require meaningful documentation as a condition of obtaining a mortgage, often preempting in this regard state regulations designed to assure greater mortgage quality and a borrower's ability to repay.

The result of all this was the mortgages that later became known as "liars' loans." They were increasingly risky; but what did the banks care, since they were making their money from the securitizations; and what did the government care, since they were helping to boom the economy and helping voters to realize their dream of owning a home.

Moreover, the government was also deeply enmeshed in the aftermath of the financial crisis. It was the government that proposed the shotgun marriages of Bank of America with Merrill Lynch, of J.P. Morgan with Bear Stearns, etc. If, in the process, mistakes were made and liabilities not disclosed, was it not partly the government's fault?

Please do not misunderstand me. I am not alleging that the Government knowingly participated in any of the fraudulent practices alleged by the Financial Inquiry Crisis Commission and others. But what I am suggesting is that the Government was deeply involved, from beginning to end, in helping create the conditions that could lead to such fraud, and that this would give a prudent prosecutor pause in deciding whether to indict a C.E.O. who might, with some justice, claim that he was only doing what he fairly believed the Government wanted him to do.

The final factor I would mention is both the most subtle and the most systemic of the three, and arguably the most important, and it is the shift that has occurred over the past 30 years or more from focusing on prosecuting high-level individuals to focusing on prosecuting companies and other institutions. It is true that prosecutors have brought criminal charges against companies for well over a hundred years, but, until relatively recently, such prosecutions were the exception, and prosecutions of companies without simultaneous prosecutions of their managerial agents were even rarer. The reasons were obvious. Companies do not commit crimes; only their agents do. And while a company might get the benefit of some such crimes, prosecuting the company would inevitably punish, directly or indirectly, the many employees and shareholders who were totally innocent. Moreover, under the law of most U.S. jurisdictions, a company cannot be criminally liable unless at least one managerial agent has committed the crime in question; so why not prosecute the agent who actually committed the crime?

In recent decades, however, prosecutors have been increasingly attracted to prosecuting companies, often even without indicting a single individual. This shift has often been rationalized as part of an attempt to transform "corporate cultures," so as to prevent future such crimes; and, as a result, it has taken the form of "deferred prosecution agreements" or even "non-prosecution agreements," in which the company, under threat of criminal prosecution, agrees to take various prophylactic measures to prevent future wrongdoing. But in practice, I suggest, it has led to some lax and dubious behavior on the part of prosecutors, with deleterious results.

If you are a prosecutor attempting to discover the individuals responsible for an apparent financial fraud, you go ab

Gold & silver prices will eventually explode! Phil Baker Interview

Posted: 12 Nov 2013 06:20 PM PST

from cambridgehouseintl:

Big Ideas on Gold and Resources in the Big Easy

Posted: 12 Nov 2013 06:00 PM PST

For nearly four decades, curious investors have made their way to the Big Easy for a taste of New Orleans and several helpings of advice and perspective at the New Orleans Investment Conference. Read More...

Plunging Euro, Rising Dollar and Their Impact on Gold's Future Moves

Posted: 12 Nov 2013 04:41 PM PST

At the end of October, in our essay on dollar and the general stock market we discussed the USD and S&P 500's implications for the precious metals market. After that, in our essay on gold price in November we examined the long ... Read More...

China Opens Largest Private Gold Vault With Capacity For $82 Billion Worth Of Precious Metal

Posted: 12 Nov 2013 03:56 PM PST

It was not enough for China to buy JPM's landmark former downtown Manhattan headquarters, once the stomping grounds of David Rockefeller and the current location of the firm's massive, and arguably largest in the world, gold vault (which, as Zero Hedge first demonstrated, is located just next to gold vault of none other than the NY Fed). It seems that for the nation that has unleashed the world's biggest ever buying spree of physical gold -oblivious what the price of paper gold does on a daily basis - having purchased over 2000 tons of gold in the past two years as we showed recently...

... now the question is just where to store it.

Not surprisingly, in the Chinese bastion of capitalism, where there is demand, there will be supply. And in this case, the supply of gold storage is to be found in the Shanghai Free Trade Zone, where the physical gold ends up in custodial limbo as it is not considered "imported" by China. In fact, the gold is theoretically in no man's land and as such can be reexported out of China, or sent deeper into the mainland, to China's banks or private buyers, on a whim. Of course, all that is on paper. If and when the Communist Party says "enough" all the gold in the FTZ would be "reappropriated."

Bloomberg reports, that a gold vault that can store 2,000 metric tons, double China's projected consumption this year, opened in Shanghai this month as owner Malca-Amit Global Ltd. seeks to benefit from rising demand in Asia's largest economy.

The facility is the biggest for the Hong Kong-based company, and it can also store diamonds, jewelry and art, Joshua Rotbart, precious metals general manager, said in an interview. The site could hold bullion worth about $82.5 billion at today's price, Bloomberg calculations show. China's total demand may reach 1,000 tons in 2013, the World Gold Council forecasts.

Someone should tell China that just because the price of gold is sliding, it should stop buying the inflation-protecting metal. Then again, perhaps China knows all about the gold price and is reacting accordingly:

Consumption in China may increase 29 percent to a record this year, overtaking India as biggest user as lower prices and higher incomes spur demand, according to the WGC. The investment in Shanghai's new free-trade zone reflects a shift in world demand away from the U.S. and Europe toward Asia. Demand for gold jewelry, bars and coins in Greater China, India, Indonesia and Vietnam is now about 60 percent of the global total, up from 35 percent in 2004, according to HSBC Holdings Plc.

"Such a facility is a massive vote of confidence for the Chinese gold market," said Philip Klapwijk, managing director of Hong Kong-based Precious Metals Insights Ltd. "The trend for demand has been very strongly positive," said Klapwijk, who's monitored precious metals since 1988.

This is just the beginning of the great physical gold warehousing:

"There's going to be more gold coming to China," Rotbart said on Nov. 5. "This place can be used as a trade hub basically, so foreign banks can trade with domestic banks within this facility, saving costs and time."

Bullion has been flowing into mainland China even as local output increased. Net imports from Hong Kong more than doubled to 826 tons in the first nine months of the year, according to Bloomberg calculations based on government figures. Local output rose 8.2 percent to 270.2 tons from January to August.

Shanghai is home to the country's biggest physical gold exchange, founded by the People's Bank of China. Gold volume on the Shanghai Gold Exchange rose to a five-month high of 22,703 kilograms on Oct. 8.

So how is it possible that with all the massive Chinese demand, gold is sliding? Simple: levered paper positions via ETFs are being unwound, and the resulting gold ends up in China as physical.

"There's been a lot of gold being sold out of ETFs, all of that is outside of China," Victor Thianpiriya, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd., said by phone today. "A lot of that has found its way to China via Hong Kong, attracted by demand for bullion bars."

Which means that as levered paper trades are unwound, the underlying physical finds its way in China. For now, since the developed market has convinced itself there is no need for truly safe collateral, the premium on, and demand for, paper gold has tumbled, as has the associated rehypothecation velocity on the underlying. However, when demand for gold collateral surges once more, due to any of the types of events witnessed in 2010, 2011, or 2012, or inflation in China once again surges like it did in 2011, the story will change very quickly. Only this time, it will be China holding the apex of the "High quality collateral" pyramid.

And should the same level of demand for gold return as was seen in any of the prior years, then one will have to pay substantially more in fiat for the privilege of holding a truly safe asset. Especially since that actual physical asset will ultimately be located behind a massive safe door some 80 meters below the ground in Shanghai, which in turn will allow China to demand whatever fiat price it wishes for those once again scrambling into the safety of the yellow metal.

More on the Shanghai gold vault in the clip below:

Venezuela's Hyperinflation Anatomy; Army Storms Caracas Electronics Stores; Total Economic Collapse Underway; Could This Happen in US?

Posted: 12 Nov 2013 03:50 PM PST

A total economic collapse in Venezuela is now underway. In a futile battle against high prices, President Nicolás Maduro ordered the military to enforce an order that the Daka electronics chain reduce its prices to October levels. Read More...

Today the Gold Price Lost $9.90 to Close at $1,271.10

Posted: 12 Nov 2013 03:33 PM PST

Gold Price Close Today : 1271.10
Change : -9.90 or -0.77%

Silver Price Close Today : 20.768
Change : -0.504 or -2.37%

Gold Silver Ratio Today : 61.205
Change : 0.985 or 1.64%

Silver Gold Ratio Today : 0.01634
Change : -0.000267 or -1.61%

Platinum Price Close Today : 1437.80
Change : 7.20 or 0.50%

Palladium Price Close Today : 741.85
Change : -12.20 or -1.62%

S&P 500 : 1,767.69
Change : -4.20 or -0.24%

Dow In GOLD$ : $256.15
Change : $ 1.46 or 0.57%

Dow in GOLD oz : 12.391
Change : 0.070 or 0.57%

Dow in SILVER oz : 758.41
Change : 16.44 or 2.22%

Dow Industrial : 15,750.67
Change : -32.43 or -0.21%

US Dollar Index : 81.090
Change : 0.016 or 0.02%

What do we know? Both silver and GOLD PRICES have been trending down since mid-August. They made a break for the old highs in November, and failed wretchedly. Not enough buyers.

I've been watching the uptrend on both the silver and gold price charts. Today the GOLD PRICE lost $9.90 (0.8%) to close at $1,271.10, smack on that uptrend line. The SILVER PRICE pierced the line and closed below it. About the only thing that might create optimism is that both have been falling four days, and today was the largest fall for silver. That argues for at least a small bounce.

I've thought over this some much I feel like I've got steel ball-bearings bouncing around in my empty skull. Here's what it boils down to: if simply printing new money can really float the stock market up forever and hold together an economy riddled with debt-induced mal-investment WHILE the dollar RISES and interest rates are kept near zero, then the Elite and their central bankers have repealed the economic law of gravity, and I don't know sic 'em from come here. In fact, I'm even stupider than I thought I was.

Something in my nature screams and wails like a banshee at the thought that Our Masters have repealed, nay, co-opted reality to their will -- call it my unshakeable, foundational conviction that sooner or later justice will be done, that reality will have its revenge. If that's not so, then I'll just lie down here in this ditch by the side of the road and let y'all cover me up. I'll go quietly.

In the meantime, I'm gonna stay in the boat I came in. I'll keep taking this beating a little longer, because I know (if any history teaches anything) that this bubble will blow up, and that silver and gold prices will begin rallying again.

I'm Scotch-Irish. We put up with the English for 100s of years, then Indians, then yankees, hookworm, pellagra, boll weevils, and sharecropping landlords, and we're still here. If we can't beat Our Masters any other way, we'lll outlast 'em.

Stocks stumbled today. Dow lost 32.43 (0.21% to 15,750.67. S&P500 lost 0.24% (4.2) to 1,767.69. If they can go higher from here, they'll go a lot higher. However, it seems more likely from the charts that a correction lies before them.

The Dow in Silver is literally at the upper limit of its downtrend line, Dow in Gold slightly above the same. If they don't turn down soon, they will be signaling more pain for silver and gold investors.

US dollar index gained a huge 1.6 basis points today and ended at 81.09. Stalled here below 81.50. Whole world it seems, is expecting a dollar rally. Maybe so.

Yen is flat lining just above 100 cents. Closed today down 0.47% to 100.34. Euro rose today to fill a gap, up 0.21% to $1.3435.

Just hang on to your gold and silver. Be calm. Keep your eyes on the horizon, not on the shell game right in front of you. The end of this correction is near.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 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 or 18 ounces of silver. or 18 ounces of silver. US $ and 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.

Today the Gold Price Lost $9.90 to Close at $1,271.10

Posted: 12 Nov 2013 03:33 PM PST

Even More Credit & Paper

Posted: 12 Nov 2013 03:20 PM PST

Marc Faber on the big difference between real and financial economies...

I WOULD LIKE readers to consider carefully the fundamental difference between a 'real economy' and a 'financial economy', writes Dr.Marc Faber, money manager and author, at Addison Wiggins' Agora Financial.

In a real economy, the debt and equity markets as a percentage of GDP are small and are principally designed to channel savings into investments.

In a financial economy or 'monetary-driven economy', the capital market is far larger than GDP and channels savings not only into investments, but also continuously into colossal speculative bubbles. This isn't to say that bubbles don't occur in the real economy, but they are infrequent and are usually small compared with the size of the economy. So when these bubbles burst, they tend to inflict only limited damage on the economy.

In a financial economy, however, investment manias and stock market bubbles are so large that when they burst, considerable economic damage follows. I should like to stress that every investment bubble brings with it some major economic benefits, because a bubble leads either to a quantum jump in the rate of progress or to rising production capacities, which, once the bubble bursts, drive down prices and allow more consumers to benefit from the increased supplies.

In the 19th century, for example, the canal and railroad booms led to far lower transportation costs, from which the economy greatly benefited. The 1920s' and 1990s' innovation-driven booms led to significant capacity expansions and productivity improvements, which in the latter boom drove down the prices of new products such as PCs, cellular phones, servers and so on, and made them affordable to millions of additional consumers.

The energy boom of the late 1970s led to the application of new oil extracting and drilling technologies and to more efficient methods of energy usage, as well as to energy conservation, which, after 1980, drove down the price of oil in real terms to around the level of the early 1970s.

Even the silly real estate bubbles we experienced in Asia in the 1990s had their benefits. Huge overbuilding led to a collapse in real estate prices, which, after 1998, led to very affordable residential and commercial property prices.

So my view is that capital spending booms, which inevitably lead to minor or major investment manias, are a necessary and integral part of the capitalistic system. They drive progress and development, lower production costs and increase productivity, even if there is inevitably some pain in the bust that follows every boom.

The point is, however, that in the real economy (a small capital market), bubbles tend to be contained by the availability of savings and credit, whereas in the financial economy (a disproportionately large capital market compared with the economy), the unlimited availability of credit leads to speculative bubbles, which get totally out of hand.

In other words, whereas every bubble will create some 'white elephant' investments (investments that don't make any economic sense under any circumstances), in financial economies' bubbles, the quantity and aggregate size of 'white elephant' investments is of such a colossal magnitude that the economic benefits that arise from every investment boom, which I alluded to above, can be more than offset by the money and wealth destruction that arises during the bust.

This is so because in a financial economy, far too much speculative and leveraged capital becomes immobilized in totally unproductive 'white elephant' investments.

In this respect, I should like to point out that as late as the early 1980s, the US resembled far more a 'real economy' than at present, which I would definitely characterize as a 'financial economy'. In 1981, stock market capitalization as a percentage of GDP was less than 40% and total credit market debt as a percentage of GDP was 130%. By contrast, at present, the stock market capitalization and total credit market debt have risen to more than 100% and 300% of GDP, respectively.

As I explained above, the rate of inflation accelerated in the 1970s, partly because of easy monetary policies, which led to negative real interest rates; partly because of genuine shortages in a number of commodity markets; and partly because OPEC successfully managed to squeeze up oil prices.

But by the late 1970s, the rise in commodity prices led to additional supplies, and several commodities began to decline in price even before Paul Volcker tightened monetary conditions. Similarly, soaring energy prices in the late 1970s led to an investment boom in the oil- and gas-producing industry, which increased oil production, while at the same time the world learned how to use energy more efficiently. As a result, oil shortages gave way to an oil glut, which sent oil prices tumbling after 1985.

At the same time, the US consumption boom that had been engineered by Ronald Reagan in the early 1980s (driven by exploding budget deficits) began to attract a growing volume of cheap Asian imports, first from Japan, Taiwan and South Korea and then, in the late 1980s, also from China.

I would therefore argue that even if Paul Volcker hadn't pursued an active monetary policy that was designed to curb inflation by pushing up interest rates dramatically in 1980/81, the rate of inflation around the world would have slowed down very considerably in the course of the 1980s, as commodity markets became glutted and highly competitive imports from Asia and Mexico began to put pressure on consumer product prices in the US. So with or without Paul Volcker's tight monetary policies, disinflation in the 1980s would have followed the highly inflationary 1970s.

In fact, one could argue that without any tight monetary policies (just keeping money supply growth at a steady rate) in the early 1980s, disinflation would have been even more pronounced. Why?

The energy investment boom and conservation efforts would probably have lasted somewhat longer and may have led to even more overcapacities and to further reduction in demand. This eventually would have driven energy prices even lower. I may also remind our readers that the Kondratieff long price wave, which had turned up in the 1940s, was due to turn down sometime in the late 1970s.

It is certainly not my intention here to criticize Paul Volcker or to question his achievements at the Fed, since I think that, in addition to being a man of impeccable personal and intellectual integrity (a rare commodity at today's Fed), he was the best and most courageous Fed chairman ever.

However, the fact remains that the investment community to this day perceives Volcker's tight monetary policies at the time as having been responsible for choking off inflation in 1981, when, in fact, the rate of inflation would have declined anyway in the 1980s for the reasons I just outlined.

In other words, after the 1980 monetary experiment, many people, and especially Mr. Greenspan, began to believe that an active monetary policy could steer economic activity on a noninflationary steady growth course and eliminate inflationary pressures through tight monetary policies and through cyclical and structural economic downturns through easing moves!

This belief in the omnipotence of central banks was further enhanced by the easing moves in 1990/91, which were implemented to save the banking system and the savings & loan associations; by similar policy moves in 1994 in order to bail out Mexico and in 1998 to avoid more severe repercussions from the LTCM crisis; by an easing move in 1999, ahead of Y2K, which proved to be totally unnecessary but which led to another 30% rise in the Nasdaq, to its March 2000 peak; and by the most recent aggressive lowering of interest rates, which fueled the housing boom.

Now I would like readers to consider, for a minute, what actually caused the 1990 S&L mess, the 1994 tequila crisis, the Asian crisis, the LTCM problems in 1998 and the current economic stagnation. In each of these cases, the problems arose from loose monetary policies and excessive use of credit.

In other words, the economy – the patient – gets sick because the virus – the downward adjustments that are necessary in the free market – develops an immunity to the medicine, which then prompts the good doctor, who read somewhere in The Wall Street Journal that easy monetary policies and budget deficits stimulate economic activity, to increase the dosage of medication.

The even larger and more potent doses of medicine relieve the temporary symptoms of the patient's illness, but not its fundamental causes, which, in time, inevitably lead to a relapse and a new crisis, which grows in severity since the causes of the sickness were neither identified nor treated.

So it would seem to me that Karl Marx might prove to have been right in his contention that crises become more and more destructive as the capitalistic system matures (and as the 'financial economy' referred to earlier grows like a cancer) and that the ultimate breakdown will occur in a final crisis that will be so disastrous as to set fire to the framework of our capitalistic society.

Not so, Bernanke and Co. argue, since central banks can print an unlimited amount of money and take extraordinary measures, which, by intervening directly in the markets, support asset prices such as bonds, equities and homes, and therefore avoid economic downturns, especially deflationary ones.

There is some truth in this. If a central bank prints a sufficient quantity of money and is prepared to extend an unlimited amount of credit, then deflation in the domestic price level can easily be avoided, but at a considerable cost.

First, it is clear that such policies do lead to depreciation of the currency, either against currencies of other countries that resist following the same policies of massive monetization and state bailouts (policies which are based on, for me at least, incomprehensible sophism among the economic academia) or against gold, commodities and hard assets in general. The rise in domestic prices then leads at some point to a 'scarcity of the circulating medium', which necessitates the creation of even more credit and paper money.

Even More Credit & Paper

Posted: 12 Nov 2013 03:20 PM PST

Marc Faber on the big difference between real and financial economies...

In a real economy, the debt and equity markets as a percentage of GDP are small and are principally designed to channel savings into investments.

This is so because in a financial economy, far too much speculative and leveraged capital becomes immobilized in totally unproductive 'white elephant' investments.

In fact, one could argue that without any tight monetary policies (just keeping money supply growth at a steady rate) in the early 1980s, disinflation would have been even more pronounced. Why?

Crisis Investing: Cyprus Edition

Posted: 12 Nov 2013 03:15 PM PST

Stocks in Cyprus are down 98%. Time to start edging in...?

GOLD INVESTING legend Doug Casey, whose early books include the best-selling Crisis Investing, speaks here with Nick Giambruno of the International Man newsletter, about a project they've been working on in Cyprus...

Nick Giambruno: Doug, before we talk about Crisis Investing in Cyprus, tell us about your background on this topic and the potential for life-changing gains it offers...

Doug Casey: After my second book, Crisis Investing, came out in 1979, I started publishing a newsletter. I used the Chinese symbol for crisis as the logo.

It is actually a combination of two symbols: the symbol for danger and the symbol for opportunity. The danger is what everybody sees; the opportunity is never quite so obvious as the danger, but it's always there.

Speculating in crisis markets is the ultimate way to be a contrarian, which means buying when nobody else wants to buy.

It is true, as a general rule, that you want to "make the trend your friend." But there always comes an inflection point when trends change because a market becomes either greatly overvalued or greatly undervalued. And when any market is down by 90% or more, you've got to reflexively look at it, no matter how bad the news is, and see if it's a place where you want to put some speculative capital.

Nick Giambruno: Massive fortunes have been made throughout history with crisis investing. Was Baron Rothschild right when he said the time to buy is when blood is in the streets?

Doug Casey: That's a very famous aphorism, of course. It was supposedly occasioned by the Battle of Waterloo, when he was buying British securities while the issue was in doubt. He was able to pull off that coup because he made sure that he got the information as to whether Wellington beat Napoleon a day before anybody else did. He recognized that Europe was in a period of tremendous crisis; Napoleon, after all, was actually kind of a proto-Hitler.

But a key point here is that a successful speculator capitalizes on politically caused distortions in the market.

If we lived in a completely free-market world – one without government interventions like taxes, regulations, inflation, war, persecutions, and the like – it would be impossible to speculate, in the sense I'm using the word.

But we don't live in a free-market world, so there are lots of good, speculative opportunities that, in effect, let you turn a lemon into lemonade.

And a good speculative opportunity is both high potential and low risk – not high potential and high risk. Most people don't understand that.

Nick Giambruno: That brings to mind the Russian oligarchs, who became oligarchs in the first place because they did some crisis investing, i.e., they bought when the blood was in the streets and picked up some of the crown jewels of the Russian economy for literally pennies on the Dollar. Are similar opportunities a possibility today in other countries?

Doug Casey: It's interesting with the oligarchs because in the Soviet Union, everybody got certificates, which were traded for shares in businesses that were being privatized. The average person had no idea what they were or how to value them. The people who became oligarchs were able to buy them up for a couple of pennies on the Dollar, taking advantage of the negative public hysteria following the collapse of the Soviet Union.

So this is a recurring theme – buying when the blood is in the streets. It's what speculation is all about: namely, taking advantage of politically caused distortions in the marketplace, or taking advantage of the aberrations of mass psychology.

Nick Giambruno: Exactly – and that was the main reason why you and I were recently in Cyprus. We were there to see if that recent crisis presented a contrarian opportunity.

We all know what happened with the bank deposit confiscations and the capital controls, and most people would think you'd have to be crazy to put money into such an environment. Tell us how Cyprus fits into the theme of crisis investing.

Doug Casey: What drew my attention to it was the fact that the Cyprus stock market is down 98% from its all-time high in October 2007. That's like a bell ringing at the bottom of the market. So I thought it was critical to go and get boots on the ground to see what the story really was.

It's down about as much as any market index has been in history, which makes it a unique opportunity. In any case, it was worth seeing whether or not it's really only worth 2% of what it was at its peak.

I'm not saying that we are absolutely at the bottom. I'm just saying that now is the time to pay close attention because when any market is down 90%, you're obligated to go and investigate.

Whether you buy when it is down 98% or you wait for it to be down 99% – which amounts to another 50% drop – is perhaps like looking a gift horse in the mouth.

Nick Giambruno: Let's talk about the intrinsic value of Cyprus throughout history that comes from its geography – being at the crossroads of Asia, the Middle East, Africa, and Europe. Does the collapse in the paper Ponzi scheme banking system diminish Cyprus's natural value, or do you think it creates some interesting speculative opportunities?

Doug Casey: Cyprus not only presents a tremendous speculative opportunity, but it is also quite instructive.

The banking sector there got quite out of control; it's similar to what has happened to the banking sector in other countries, like Iceland and Ireland in the recent past. But it's also predictive of what's very likely going to happen to larger banking systems in the near future.

Essentially, Cyprus became a favorite place for people of many nationalities – particularly, Russians – to put money that they wanted to diversify offshore.

The banks became overwhelmed with large amounts of money that dwarfed their capital. When a bank takes money in, it's got to find something to do with that money, and when the local economy couldn't absorb much of it, they became quite reckless.

Since most Cypriots are Greek-speakers, they naturally looked to Athens and wound up buying a lot of Greek government bonds, partly for patriotic reasons and partly because the yields were higher than elsewhere.

Once the Greek government bonds went south, it wiped out the capital base of the Cypriot banks that had purchased them. The Cypriot government was not in a financial position to bail them out, so instead they had what is called a bail-in, where large depositors took a haircut.

Nick Giambruno: So, what kinds of speculative opportunities have been created from this crisis?

Doug Casey: In all chaotic situations, in all true crisis situations, the baby gets thrown out with the bathwater. Everybody has decided that they don't want to have anything to do with a stock market whose index is down 98%.

But the fact of the matter is that there are sound, productive, and well-run businesses that are listed on the Cyprus Stock Exchange that got caught up in the maelstrom. There are businesses that will continue to produce earnings and pay dividends.

As Damon Runyon famously said, "The race is not always to the swift, nor the battle to the strong, but that's the way to bet."

The country has some unique advantages going for it. Cyprus is a place where Warren Buffett would be looking if the market weren't so tiny. It's also quite illiquid now because most people who needed to sell have already done so, but almost everybody is still too afraid to buy.

That said, I think it's time to start edging in. We also looked at opportunities the crisis has created in the real estate market.

Nick Giambruno: We should be clear that we are not necessarily talking about investing here. This is a long-term speculation. Can you elaborate on the differences?

Doug Casey: I think it is critical to use words accurately and precisely, so that we know exactly what we are talking about. "Investing" is about allocating capital so that it can be used productively and produce more capital. "Speculating" is different. As I said before, speculating is about capitalizing on politically caused distortions in the marketplace.

One way this is pertinent to Cyprus is the fact that this is the first time the bail-in model was used and a government didn't step in to make depositors whole. That wiped out billions of Euros and depressed the prices of financial assets.

People often confuse speculators with traders, who try to scalp a couple of basis points over a short period of time. What we are doing with Cyprus is not a trade. This is a speculation, and a good speculation can take a considerable amount of time to work itself out.

Nick Giambruno: In order to take advantage of these opportunities and speculate on this market, one realistically needs to have a Cypriot brokerage account.

It's a testament to the chilling effects of FATCA and other US regulations that the vast majority of financial institutions in Cyprus, which are extremely desperate for cash, won't even consider dealing with American citizens.

And if Cypriot financial institutions won't deal with American clients, who will? Do you think the chilling effects of FATCA really amount to de facto capital controls for Americans?

Doug Casey: Yes. US citizens have had draconian reporting requirements on what they do with their money abroad for years. But the new FATCA law has taken it to a new level.

Essentially, what it does is impose severe compliance burdens on foreign financial institutions that take an American client. It really makes the foreign banks, brokers, and other financial institutions unpaid employees of the US government.

This is expensive, legally onerous, and actually ethically questionable as far as their relationship with their clients. So, for this reason, there are very few non-US financial institutions anywhere that are still willing to take US customers. It's increasingly hard, and in some cases impossible, for an American now to get money out of the country, simply because nobody is going to take it.

I think as the global economic crisis that started in 2007 gets worse – and there is every reason to believe it's going to get worse, since we're just in the eye of the storm at the moment – these regulations will become even more onerous, and are likely to spread from the US to other countries.

So the takeaway from this is that your most important form of diversification in the world today is not diversification across investment classes – although that's very important. It's political diversification, so that all of your assets aren't under the control of one political entity, one government.

Go here to learn more about Crisis Investing in Cyprus, analyzed and evaluated by Doug and Nick's on their recent trip...