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A primer to India's coming gold-buying season
Purchasing power of dollar is falling: why still use it?
Banking Union Time Bomb: Eurocrats Authorize Bailouts AND Bail-Ins
The Currency War Enters Stage 2: Bank Runs!
It Could Be A Nasty Spring For Precious Metals
Weekly COMEX Gold Inventories: Slowest March On Record As Registered Gold Inventories Haven't Moved In A Month
Gold bugs and fiat currency advocates each have their own economic myths
Why I Think Coke And PepsiCo Have Bright Futures
Jeff Killeen: A Picky Player's Guide To A Cautiously Optimistic Mining Market
You Can’t Eat Gold And Silver!
CMRE spring dinner is likely to hear plenty about gold
Japanese consumers rush to buy gold as Abenomics money printing surges out of control
The Jesuit Gold of the Sierra Madre
Gold coins: The Vienna Philharmonic
COMMODITIES: ANOTHER LEG UP/GOLD SET UP FOR A FINAL TAKEDOWN
The Doc: Loss of Reserve Currency Status Will Be The Death of The Dollar

A primer to India's coming gold-buying season

Posted: 30 Mar 2014 04:56 PM PDT

Let the frenzy begin: As India's gold buying season revs up, retailers and jewellers get into gear.

Purchasing power of dollar is falling: why still use it?

Posted: 30 Mar 2014 12:54 PM PDT

With each great innovation comes change, a new way of doing things. We don’t use telephone booths, because we don’t need them. We don’t use horses, because we have automobiles. We don’t have typewriters, because we have computers and hard drives. Why still use dollars if we have maxcoins? >>>

Banking Union Time Bomb: Eurocrats Authorize Bailouts AND Bail-Ins

Posted: 30 Mar 2014 09:14 AM PDT

"As things stand, the banks are the permanent government of the country, whichever party is in power."

– Lord Skidelsky, House of Lords, UK Parliament, 31 March 2011)

On March 20, 2014, European Union officials reached an historic agreement to create a single agency to handle failing banks. Media attention has focused on the agreement involving the single resolution mechanism (SRM), a uniform system for closing failed banks. But the real story for taxpayers and depositors is the heightened threat to their pocketbooks of a deal that now authorizes both bailouts and "bail-ins" – the confiscation of depositor funds. The deal involves multiple concessions to different countries and may be illegal under the rules of the EU Parliament; but it is being rushed through to lock taxpayer and depositor liability into place before the dire state of Eurozone banks is exposed.

The bail-in provisions were agreed to last summer. According to Bruno Waterfield, writing in the UK Telegraph in June 2013:

Under the deal, after 2018 bank shareholders will be first in line for assuming the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) are exempt and, with specific exemptions, uninsured deposits of individuals and small companies are given preferred status in the bail-in pecking order for taking losses . . . Under the deal all unsecured bondholders must be hit for losses before a bank can be eligible to receive capital injections directly from the ESM, with no retrospective use of the fund before 2018.

As noted in my earlier articles, the ESM (European Stability Mechanism) imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the Eurocrats (EU officials) demand. And it's not just the EU that has bail-in plans for their troubled too-big-to-fail banks. It is also the US, UK, Canada, Australia, New Zealand and other G20 nations. Recall that a depositor is an unsecured creditor of a bank. When you deposit money in a bank, the bank “owns” the money and you have an IOU or promise to pay.

Under the new EU banking union, before the taxpayer-financed single resolution fund can be deployed, shareholders and depositors will be “bailed in” for a significant portion of the losses. The bankers thus win both ways: they can tap up the taxpayers' money and the depositors' money.

The Unsettled Question of Deposit Insurance

But at least, you may say, it's only the uninsured deposits that are at risk (those over €100,000—about $137,000). Right?

Not necessarily. According to ABC News, "Thursday’s result is a compromise that differs from the original banking union idea put forward in 2012. The original proposals had a third pillar, Europe-wide deposit insurance. But that idea has stalled."

European Central Bank President Mario Draghi, speaking before the March 20th meeting in the Belgian capital, hailed the compromise plan as "great progress for a better banking union. Two pillars are now in place" – two but not the third. And two are not enough to protect the public. As observed in The Economist in June 2013, without Europe-wide deposit insurance, the banking union is a failure:

[T]he third pillar, sadly ignored, [is] a joint deposit-guarantee scheme in which the costs of making insured depositors whole are shared among euro-zone members. Annual contributions from banks should cover depositors in normal years, but they cannot credibly protect the system in meltdown (America's prefunded scheme would cover a mere 1.35% of insured deposits). Any deposit-insurance scheme must have recourse to government backing. . . . [T]he banking union—and thus the euro—will make little sense without it.

All deposits could be at risk in a meltdown. But how likely is that?

Pretty likely, it seems . . . .

What the Eurocrats Don't Want You to Know

Mario Draghi was vice president of Goldman Sachs Europe before he became president of the ECB. He had a major hand in shaping the banking union. And according to Wolf Richter, writing in October 2013, the goal of Draghi and other Eurocrats is to lock taxpayer and depositor liability in place before the panic button is hit over the extreme vulnerability of Eurozone banks:

European banks, like all banks, have long been hermetically sealed black boxes. . . . The only thing known about the holes in the balance sheets of these black boxes, left behind by assets that have quietly decomposed, is that they're deep. But no one knows how deep. And no one is allowed to know – not until Eurocrats decide who is going to pay for bailing out these banks.

When the ECB becomes the regulator of the 130 largest ECB banks, says Richter, it intends to subject them to more realistic evaluations than the earlier "stress tests" that were nothing but "banking agitprop." But these realistic evaluations won't happen until the banking union is in place. How does Richter know? Draghi himself said so. Draghi said:

"The effectiveness of this exercise will depend on the availability of necessary arrangements for recapitalizing banks … including through the provision of a public backstop. . . . These arrangements must be in place before we conclude our assessment."

Richter translates that to mean:

The truth shall not be known until after the Eurocrats decided who would have to pay for the bailouts. And the bank examinations won't be completed until then, because if any of it seeped out – Draghi forbid – the whole house of cards would collapse, with no taxpayers willing to pick up the tab as its magnificent size would finally be out in the open!

Only after the taxpayers – and the depositors – are stuck with the tab will the curtain be lifted and the crippling insolvency of the banks be revealed. Predictably, panic will then set in, credit will freeze, and the banks will collapse, leaving the unsuspecting public to foot the bill.

What Happened to Nationalizing Failed Banks?

Underlying all this frantic wheeling and dealing is the presumption that the "zombie banks" must be kept alive at all costs – alive and in the hands of private bankers, who can then continue to speculate and reap outsized bonuses while the people bear the losses.

But that's not the only alternative. In the 1990s, the expectation even in the United States was that failed megabanks would be nationalized. That route was pursued quite successfully not only in Sweden and Finland but in the US in the case of Continental Illinois, then the fourth-largest bank in the country and the largest-ever bankruptcy. According to William Engdahl, writing in September 2008:

[I]n almost every case of recent banking crises in which emergency action was needed to save the financial system, the most economical (to taxpayers) method was to have the Government, as in Sweden or Finland in the early 1990's, nationalize the troubled banks [and] take over their management and assets … In the Swedish case the end cost to taxpayers was estimated to have been almost nil.

Typically, nationalization involves taking on the insolvent bank's bad debts, getting the bank back on its feet, and returning it to private owners, who are then free to put depositors' money at risk again. But better would be to keep the nationalized mega-bank as a public utility, serving the needs of the people because it is owned by the people.

As argued by George Irvin in Social Europe Journal in October 2011:

[T]he financial sector needs more than just regulation; it needs a large measure of public sector control—that's right, the n-word: nationalisation. Finance is a public good, far too important to be run entirely for private bankers. At the very least, we need a large public investment bank tasked with modernising and greening our infrastructure . . . . [I]nstead of trashing the Eurozone and going back to a dozen minor currencies fluctuating daily, let's have a Eurozone Ministry of Finance (Treasury) with the necessary fiscal muscle to deliver European public goods like more jobs, better wages and pensions and a sustainable environment.

A Third Alternative – Turn the Government Money Tap Back On

A giant flaw in the current banking scheme is that private banks, not governments, now create virtually the entire money supply; and they do it by creating interest-bearing debt. The debt inevitably grows faster than the money supply, because the interest is not created along with the principal in the original loan.

For a clever explanation of how all this works in graphic cartoon form, see the short French video "Government Debt Explained," linked here.

The problem is exacerbated in the Eurozone, because no one has the power to create money ex nihilo as needed to balance the system, not even the central bank itself. This flaw could be remedied either by allowing nations individually to issue money debt-free or, as suggested by George Irvin, by giving a joint Eurozone Treasury that power.

The Bank of England just admitted in its Quarterly Bulletin that banks do not actually lend the money of their depositors. What they lend is bank credit created on their books. In the U.S. today, finance charges on this credit-money amount to between 30 and 40% of the economy, depending on whose numbers you believe. In a monetary system in which money is issued by the government and credit is issued by public banks, this "rentiering" can be avoided. Government money will not come into existence as a debt at interest, and any finance costs incurred by the public banks’ debtors will represent Treasury income that offsets taxation.

New money can be added to the money supply without creating inflation, at least to the extent of the "output gap" – the difference between actual GDP or actual output and potential GDP. In the US, that figure is about $1 trillion annually; and for the EU is roughly €520 billion ($715 billion). A joint Eurozone Treasury could add this sum to the money supply debt-free, creating the euros necessary to create jobs, rebuild infrastructure, protect the environment, and maintain a flourishing economy.

_________________

Ellen Brown is an attorney, founder of the Public Banking Institute, and a candidate for California State Treasurer running on a state bank platform. She is the author of twelve books, including the best-selling Web of Debt and her latest book, The Public Bank Solution, which explores successful public banking models historically and globally.

The Currency War Enters Stage 2: Bank Runs!

Posted: 30 Mar 2014 07:47 AM PDT

The Currency War, Stage 2, is already Manifest in another Way. Consider that the Economic/Financial Crises of the early 1930s were characterized by Bank Runs. We are already seeing such runs this year in Crimea, Ukraine and Rural China. Defaults in China have left Depositors understandably nervous. Deepcaster's Forecast: there will be more Bank Runs and [...]

The post The Currency War Enters Stage 2: Bank Runs! appeared first on Silver Doctors.

It Could Be A Nasty Spring For Precious Metals

Posted: 30 Mar 2014 05:54 AM PDT

With the gold price having moved down almost $100 from its mid-month high just shy of $1,400 an ounce, bearish traders remain firmly in control, as it has become increasingly difficult to be positive about the metal's near-term prospects. Lower prices, however, are expected to spur renewed demand in Asia, and this will be closely watched in the period ahead to see if U.S. investors respond in kind.

Based on ETF flows, U.S. investors appear to be neither bullish nor bearish on the metals, as big price gains earlier in the year were accompanied by only modest ETF buying while the recent reversal has prompted no net selling. With the gold price now below $1,300 an ounce and with silver at less than $20 an ounce, the second quarter is set to begin much differently than precious metals investors would have thought just a few weeks ago.

For the week,

Weekly COMEX Gold Inventories: Slowest March On Record As Registered Gold Inventories Haven't Moved In A Month

Posted: 30 Mar 2014 05:20 AM PDT

The slowdown in COMEX gold inventory action continues as for the first time in our data, we have seen no registered gold movements whatsoever in the COMEX warehouse. We did see a rise in eligible gold stocks over the last two weeks, but the vast majority of this seems to be related to kilobar deposits of one JPMorgan (JPM) client, who has previously done the same thing only to ship out the kilobars a few weeks later.

Keeping track of COMEX inventories is something that is recommended for all serious investors who own physical gold and the gold ETFs (SPDR Gold Shares (GLD), PHYS, and CEF) because any abnormal inventory declines may signify extraordinary events behind the scenes that would ultimately affect the gold price.

Source: ShareLynx

We will take a closer look at these numbers but let us first explain the COMEX a little more for investors who are

Gold bugs and fiat currency advocates each have their own economic myths

Posted: 30 Mar 2014 05:03 AM PDT

GATA

Why I Think Coke And PepsiCo Have Bright Futures

Posted: 30 Mar 2014 04:56 AM PDT

Every now and then I come across a stock or a sector that everybody "knows" is in decline. The company (or group of companies) faces such a dramatic shift in customer trends or regulatory pressures, that its future is no longer in doubt... everyone "knows" it's headed for bankruptcy.

My investing experience has taught me that often "everybody" is wrong. I'm not saying that I am some kind of clairvoyant, but I am saying that investors have a very expensive habit of agreeing with the consensus and making poor decisions. Two huge examples of this were the run-ups to the dot com bubble, and more recently, the real estate collapse. These were not isolated incidents, however. History is full of examples of investors being overly optimistic (or pessimistic) about a particular investment… and that investment working out very poorly for them.

"When everybody is thinking alike, then somebody is

Jeff Killeen: A Picky Player's Guide To A Cautiously Optimistic Mining Market

Posted: 30 Mar 2014 04:09 AM PDT

The price of gold may be enjoying a double-digit increase so far this year and some equities may even have doubled their value, but Jeff Killeen of CIBC World Markets says it's not time to jump into metals with both feet. Be selective, he says. In this interview with The Gold Report, Killeen shares the higher-quality names that have a prospect for development.

The Gold Report: The price of gold has increased 14% this year. Is that due to gold's safe haven status?

Jeff Killeen: The safe-haven mentality is one element that's supporting the gold price. There is uncertainty in the market about the strength of the U.S. economy. A number of economic indicators reported during the last two months have not met forecasts. The rebound may be slower than expected. Buyers are coming back to bullion.

Unrest in the Ukraine is also helping to support

You Can’t Eat Gold And Silver!

Posted: 30 Mar 2014 04:00 AM PDT

In the event that a major crisis or emergency strikes the United States, you are not going to be able to eat your gold and silver. If we get into a situation where supermarkets get cleaned out and food supplies get very tight, you are going to wish that you had stored some things away [...]

The post You Can't Eat Gold And Silver! appeared first on Silver Doctors.

CMRE spring dinner is likely to hear plenty about gold

Posted: 30 Mar 2014 01:02 AM PDT

GATA

Japanese consumers rush to buy gold as Abenomics money printing surges out of control

Posted: 30 Mar 2014 12:53 AM PDT

Precious metals retailer Tanaka Kikinzoku Jewelry has reported a five-fold surge in sales of gold bars this month, according to the Financial Times.

The FT reported: ‘At the company's flagship store in Ginza on Thursday, people queued for up to three hours to buy 500g bars worth about $22,500. March has been the busiest month in Tanaka's 120-year history.’

Inflation spikes

Japanese prime minister Shinzo Abe is suddenly facing a jump inflation without any increase in local salaries. Consumer spending slumped by 2.5 per cent last month. It was expected to rise ahead of Japan’s infamous sales tax hike in April which will drive up prices in a one-off spike in inflation.

Instead consumers are rushing to buy gold as a hedge against inflation, just as we have seen in China over the past year. This is entirely rational behavoir.

What is perhaps less easy to understand, on the other hand, is why the price of gold is going down. ETF sales of the yellow metal continue to weigh more on its price than physical demand from Asia which is clearly very strong, and central bank manipulation of the spot price still holds the market in its grip.

Half-kilo hedge

The Japanese are followers of fashion. How will the gold price look if 100 million people all want to own a half-kilo of gold as an inflation hedge? And how many more will follow them when they see the price going up?

Japanese consumers are taking the only rational approach to investing with runaway inflation and what else is the more certain impact of a higher sales tax?

Buying gold at current low prices in a country where money printing is running at three times the highest levels of QE3 is also a no-brainer. In yen terms at least, there is only one way for the price of gold to go!

The Jesuit Gold of the Sierra Madre

Posted: 29 Mar 2014 11:00 PM PDT

BC alter

Gold coins: The Vienna Philharmonic

Posted: 29 Mar 2014 07:00 PM PDT

Goldmoney

COMMODITIES: ANOTHER LEG UP/GOLD SET UP FOR A FINAL TAKEDOWN

Posted: 29 Mar 2014 06:42 PM PDT

As most of you know by now I believe we are going to see a big surge in inflation this year. As I've noted in my previous articles the first leg up in the CRB has run it's course and broken the 3 year down trend that's been in place since 2011. I think it's time for the second leg up in that inflation.

The two-week dip in the CRB has cleared the overbought conditions from the initial surge and I think we will now get one more push to test that 2012 high before commodities experience a more significant pullback this summer to set up the big inflationary spike I'm looking for during the second half of the year. And don't forget any move above that 2012 high will turn this three year cycle right translated.

And don't forget, any move above that 2012 high will turn this three year cycle right translated.

The last three year cycle was also right translated. That is confirmation that the secular bull did not expire in 2009 as some analysts suggest. I believe we still have two more big legs up before the commodity bull is done. One should top at the end of 2014/early 2015 and the last leg up should top sometime around late 2017 or 2018.

Those that want to trade hard assets should probably stick with general commodities for the next few weeks though and leave the metals portfolio alone for now. As far as I can tell, virtually all of the other commodities are trading naturally and I don't foresee a 5000 contract dump in the middle of the night to knock the sugar market back down.

Precious metals on the other hand are being heavily manipulated right now. When gold was turned back down and lost the breakout above the September FOMC manipulation top, that was a warning flag for me to take profits in our metals portfolio. The pre-market attack last Monday to break the intermediate trend line confirmed, at least for me, that the precious metals were again under attack and the forces at work in this market were going to try to extend the bear market.

Notice how gold is now deviating from the rest of the commodity sector. I don't think this would happen in a natural market.

I believe the metals are being set up to take a massive beating when the CRB drops down into its summer correction. During that correction gold will be moving into its yearly cycle low (YCL's are the most damaging correction of the year for any asset). I fully expect the forces controlling the gold market will try to break that double bottom and take gold down to $1050.

Notice that golds yearly cycle is left translated. Left translated cycles more often than not make a lower low. You have to hand it to these guys, they have played the metals market perfectly over the last year and a half. They managed to manufacture a completely artificial bear market, and now that they have turned golds intermediate cycle back down they have set the stage to take gold down to $1050 this summer which has been their goal all along.

And I think the motivation for this is the same that it has always been. The profit potential after releasing the gold market, is much greater from the $1000 level than it is from the $1800 level. Make no mistake the entire purpose of this year and a half long bear raid has been to manufacture a lower D-wave bottom, thereby increasing long side profit potential. In the process they've managed to also make some good money on the short side. I think they've also intentionally damaged the physical supply side of the metals market knowing that that would exacerbate the rally once the manipulation was released, and the secular trend allowed to resume.

Not only are these guys have the banking cartel manufactured a very lucrative short trade, they have damaged the physical market enough that we will likely see a huge move from $1050 back to $1800-$2000 over a 4-6 month period once the manipulation is removed at the yearly cycle low.

I think over the next three months J.P. Morgan, HSBC, and Goldman Sachs are going to stretch the rubber band so tight in the metals market that when they finally release it it's going to generate a surge comparable to what we just witnessed in the coffee market. Unlike the coffee market though, the metals market is big enough that these players can take large positions and make serious money off of that move.

gold yearly cycle low and snap back rally

On a more short-term time frame, and confirming my big picture outlook, notice that the bearish engulfing weekly candlestick was confirmed by a strong downside push this week.

gold bearish engulfing candle with follow

I'm up in the air as to whether or not gold is ready to bounce out of its daily cycle low on Monday. Now that I am convinced the manipulation is back in control of this market I just can't trust anything to happen naturally. Heck they already broke the natural daily cycle low that occurred last Thursday and have stretched of this cycle way past its normal duration. There's no telling how long they can make this cycle stretch. $1280 is a logical support zone but they may very well break that just to take out all of the buyers that will likely come in at that level. And while the miners did bounce on Thursday and Friday signaling a possible impending cycle bottom, it's also conceivable that the bounce over the last two days is nothing more than an oversold bear flag that will breakdown quickly.

Despite the partial reversal in the GDX weekly candle, the big picture tells us the rest of the story. As you can see any time over the last year and a half that the miners have dropped below their 10 week moving average, especially if it occurs late in an intermediate cycle, it has almost always signaled that an intermediate degree decline has begun. So I wouldn't get my hopes up that the banking cartel is going to release this market and a third daily cycle is going to recover to new highs. I think these guys are intent on pushing gold to $1050, and I think they probably have it set up to accomplish that this summer. Notice how the mining stocks are still making lower intermediate lows, and lower intermediate highs. The sector needed to move above last August's high in order to confirm that the bear market was over, and the cartel aborted that move before it could happen.

The Doc: Loss of Reserve Currency Status Will Be The Death of The Dollar

Posted: 28 Mar 2014 08:30 PM PDT

The Doc joined the Prepper Recon Podcast this week for a discussion on the end game for the US dollar and the Western financial system, and how investors and Americans in general should prepare for what is ahead. Doc discusses his outlook for the remaining lifespan of the US dollar as reserve currency, the risks [...]

The post The Doc: Loss of Reserve Currency Status Will Be The Death of The Dollar appeared first on Silver Doctors.