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Sunday, March 13, 2016

Gold World News Flash

Gold World News Flash

Inflation is Already Here... Gold Knows It... So Does the Fed

Posted: 13 Mar 2016 01:00 AM PST

Gains Pains & Capital

Current Economic Collapse News Brief

Posted: 13 Mar 2016 12:00 AM PST

Deutsche Bank: Negative Rates Confirm The Failure Of Globalization

Posted: 12 Mar 2016 04:39 PM PST

Negative interest rates may or may not be a thing of the past (many thought that the ECB had learned its lesson, and then Vitor Constancio wrote a blog post showing that the ECB hasn't learned a damn thing), but the confusion about their significance remains. Here is Deutsche Bank's Dominic Konstam explaining how, among many other things including why Europe will need to "tax" cash before this final Keynesian experiment is finally over, negative rates are merely the logical failure of globalization.

Misconceptions about negative rates

Understanding how negative rates may or may not help economic growth is much more complex than most central bankers and investors probably appreciate. Ultimately the confusion resides around differences in view on the theory of money. In a classical world, money supply multiplied by a constant velocity of circulation equates to nominal growth. In a Keynesian world, velocity is not necessarily constant – specifically for Keynes, there is a money demand function (liquidity preference) and therefore a theory of interest that allows for a liquidity trap whereby increasing money supply does not lead to higher nominal growth as the increase in money is hoarded. The interest rate (or inverse of the price of bonds) becomes sticky because at low rates, for infinitesimal expectations of any further rise in bond prices and a further fall in interest rates, demand for money tends to infinity. In Gesell’s world money supply itself becomes inversely correlated with velocity of circulation due to money characteristics being superior to goods (or commodities). There are costs to storage that money does not have and so interest on money capital sets a bar to interest on real capital that produces goods. This is similar to Keynes’ concept of the marginal efficiency of capital schedule being separate from the interest rate. For Gesell the product of money and velocity is effective demand (nominal growth) but because of money capital’s superiority to real capital, if money supply expands it comes at the expense of velocity. The new money supply is hoarded because as interest rates fall, expected returns on capital also fall through oversupply – for economic agents goods remain unattractive to money. The demand for money thus rises as velocity slows. This is simply a deflation spiral, consumers delaying purchases of goods, hoarding money, expecting further falls in goods prices before they are willing to part with their money.

For an economy that suffers from deficient demand, lowering interest rates doesn’t work if it simply lowers expected returns on real capital through oversupply. The shale boom in the US is blamed on cheap money. As Gesell also argued, where Marx was wrong but Proudhon was right, is that to destroy capitalism you don’t need workers to strike and close the capitalists’ factories; instead the workers should organize and build another factory next to the capitalists. The means of the production are nothing more than capitalized labor. Oversupply destroys capitalism in a natural way. In this way the demise of positive interest rates may be nothing more than the global economy reacting to a chronic oversupply of goods through the impact of globalization including the opening up of formerly closed economies as well as ongoing technological progress.

Of course raising rates isn’t a solution. If effective demand is deficient due to money hoarding of new money supply and a decline in velocity when goods supply is expanding, in a rising rate environment, demand is deficient with money supply itself falling regardless of any change in velocity. Interest on real capital may rise, even with goods prices stable eventually recovering but at the cost of huge unemployment and social distress. The difference can be thought of as the aggregate demand curve shifting inwards relative to supply and supply still exceeding demand when monetary conditions are too tight versus a falling interest environment whereby the aggregate supply curve moves out relative to demand such that the curves don’t intersect at prices above zero – the latter reflecting an implied rising real money interest rate.

In a Keynesian world of deficient demand, the burden is on fiscal policy to restore demand. Monetary policy simply won’t work if there is a liquidity trap and demand for cash is infinite. Interest rates cannot be reduced any further to stimulate demand. (In Gesell’s terminology the product of velocity and money supply i.e. effective demand keeps falling). In Gesell’s world money itself needs to be taxed to prevent hoarding and to equalize the worth of money to goods. If cash is taxed (and he suggested at the annual tax rate might be 5.2 percent, according to Keynes) then velocity is stabilized, demand for money falls and goods demand recovers. The tendency to oversupply however in an economy unfettered by “privilege” effectively implies that interest rates in equilibrium may converge to zero. Taxing of money specifically is to deal with an ex ante effective demand deficiency.

Europe’s long time obsession with negative rates, to quote our present day Fischer, is fair but misleading in the context of how negative interest rates are being applied. The combination of penalty rates on banks’ excess reserves and QE is designed at one level to expand private sector credit. This if anything will promote supply of goods. If supply creates its own demand and/or if Keynesian investment accelerator models are valid, then they may well be successful in restoring a Keynesian deficient demand problem.

This is essentially the same as saying there is no liquidity trap. (If we think of the inverse bond price on the vertical axis as being a private sector asset price, then a large price rise can be achieved for a relatively small amount of money expansion). But it presupposes that there is deficient loan demand due to high money capital interest rates rather than due to too low real capital expected returns. The risk is that QE itself is simply new money being hoarded on the demand side so that money velocity falls and effective demand remains weak. Falling interest rates may well promote new loan demand and increase supply but only in a deflationary spiral of further falls in expected capital returns and the perceived need for still lower money interest rates. If Gesell is correct, it is essential to tax money itself which means not just retail deposits but cash in circulation. Then velocity would stabilize with effective demand as households would be willing to own goods rather than money. It is conceivable that the Europeans are heading in this direction and maybe it will be worse before it gets better. Or maybe there is still time for the Keynesian mechanism to prove that we are not in a liquidity trap.

* * *

Here is our far simpler explanation of what Konstam just said, and why DB would much prefer more QE over NIRP: QE takes away the liquidity preference choice out of the hands of the consumers, and puts it into the hands of central bankers, who through asset purchases push up asset prices even if it does so by explicitly devaluing the currency of price measurement; it also means that the failure of NIRP is - by definition - a failure of central banking, and if and when the central bank backstop of any (make that all) asset class - i.e., Q.E., is pulled away, that asset (make that all) will crash. The only asset that does not have a central bank backstop (in fact, central banks are actively pushing it lower)? Gold.

US National Debt is out of Control, hits $19Trillion (05Mar16)

Posted: 12 Mar 2016 01:30 PM PST

 The United States' national debt is out of control - borrowing and spending on all sorts of shit...... who's going to pay it back? Can it ever be paid back (no)?Recorded from RT HD, News, 05 March 2016. The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists...

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Gerald Celente -- Draghi Injects Monetary Heroin For Money Junkies

Posted: 12 Mar 2016 01:00 PM PST

Gerald Celente- Trends In The News - "Draghi Injects Monetary "Heroin" For Money Junkies" -(3/10/16) "European Central Bank's Mario Draghi unveils additional monetary "heroin" for the money junkies, since January 29th, 2016 gold has increased $160 in value & former FED president says "we...

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The Fall Of The NWO

Posted: 12 Mar 2016 12:30 PM PST

 Secret societies not so secret and are about to collapse from the awakening.Help us spread the word about the liberty movement, we're reaching millions help us reach millions more. The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries ,...

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Andy Basiago, time travel identified US President, releases 100 Proposals, Global Teleportation

Posted: 12 Mar 2016 11:00 AM PST

 Andrew D. Basiago, time-travel pre-identified U.S. President, releases "100 Proposals – A New Agenda for A New America" in Truth, Reform, and Innovation – Proposes Global Teleportation SystemBy Alfred Lambremont Webre The Financial Armageddon Economic Collapse Blog tracks trends...

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The Gold Correction Is Here

Posted: 12 Mar 2016 10:53 AM PST

Ben Morris writes: The price of gold is up 21% since the middle of December... from $1,051 an ounce to $1,270. That's its biggest rally since gold peaked in 2011...   And historically, such big rallies are almost always followed by corrections – periods when prices fall.

US Dollar Strength is a Manifestation of US Dollar Shortage

Posted: 12 Mar 2016 10:41 AM PST

FRA Co-Founder Gordon T.Long and Jeffrey Snider, Head of Global Investment Research at Alhambra Investment Partners discuss a broad array of Global Macro subjects in this 48 minute video discussion with supporting slides. As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process.

Full Speech: Donald Trump EXPLOSIVE Rally in Dayton, OH (3-12-16)

Posted: 12 Mar 2016 10:33 AM PST

Saturday, March 12, 2016: Live Stream of the Donald J. Trump for President rally in Dayton, OH beginning at 10:00 AM EST. LIVE Stream: Donald Trump Rally in Dayton, OH (3-12-16) The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free...

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In The News Today

Posted: 12 Mar 2016 10:28 AM PST

Jim Sinclair’s Commentary Mr. Williams shares the following with us. - Headline Economic Data Should Tumble in the Week Ahead, Along with Weaker Headline Inflation - Domestic Freight Index Continued in Year-to-Year Decline - Slowing Business Activity Should Hit the U.S. Dollar; Central Banks Never Resolved 2008 “No. 791: Some General Observations ” Web-page: http://www.shadowstats.com

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

Protect Your Wealth – Buy Gold Before It Reaches $2,000

Posted: 12 Mar 2016 10:05 AM PST

Matterhorn AM

Gold And Silver – Precious Metals Amid A World Of Lies And Deception

Posted: 12 Mar 2016 07:38 AM PST

Political and financial turmoil reign around the world, by design. It is the classic example of the elites at work working their never-fail formula of Problem-Reaction-Solution. They create havoc of some kind, any kind, wherever they choose, the Problem. It is usually political upheaval fomenting unrest, and the broader the unrest the better. It often takes the form of financial turmoil, disrupting a country’s GDP, currency, whatever, as long as there is disruption. It can be war, a function no other country creates more of than the US. It can be massive immigrant migration, currently underway. Why does the name Soros come to mind?

$67 Crude Oil Price Has All The Majors Converging Here

Posted: 12 Mar 2016 07:25 AM PST

Argentina offers one of the few places on earth where oil companies are not suffering from the full force of the collapse in prices. Argentina regulates oil prices, a policy originally intended to insulate the public from the whims of the market, protecting people from triple-digit crude prices. But with the crash in prices since mid-2014, the effect of the regulation has reversed: motorists are now effectively subsidizing the oil industry.

Gold Commitments of Traders is Worrisome

Posted: 12 Mar 2016 07:18 AM PST

To sum up my view of this week’s COT report in one word…. WORRISOME. I use that word because of what we saw happen to the safe haven trades today on account of that monster rally in the US equity markets. Gold was under pressure for the entirety of the session today but seemed to especially weaken into the late afternoon hours as the US equity markets kept pushing higher and went out near the highs of the day. That more than likely will translate into additional downside followthrough in Asian trade Sunday evening. Where it goes after that will depend on whether or not dip buyers show up.

Can Gold Price Climb to $1400/oz?

Posted: 12 Mar 2016 07:06 AM PST

At the start of 2016, renowned fund manager and bond king Jeff Gundlach predicted Gold would surge to $1400/oz. That was quite the call considering Gold was still in a bear market. He reiterated his target a few days ago in a webcast. Gold closed the week below $1260/oz after reaching as high as $1287/oz following the ECB decision. Corrections in both Gold and gold stocks have been limited to swift declines lasting no more than two days. While we cannot predict the future, we think there is some chance that Gold could reach Gundlach's target before a sustained correction.
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