Wednesday, September 7, 2016

Gold World News Flash

Gold World News Flash

Despite Downturn, Silver Market Looks Positive

Posted: 07 Sep 2016 12:26 AM PDT

Technical analyst Clive Maund charts the recent downturn in silver, but also sees reason to be optimistic about the market going forward.

Central Bank Interest Rate Policies To Benefit Precious Metals Yet Again

Posted: 06 Sep 2016 11:00 PM PDT

from GoldAndLiberty:

45 years ago, almost to the day, Richard Nixon rocked the global financial system by abandoning the fixed exchange convertibility of gold and the United States dollar. The president justified his 1971 action by telling the world he had been "converted" to Keynesian economics. In reality, quick action was required on his part to protect existing U.S. gold reserves and continue the fiscal policy expansion designed by previous government technocrats to concurrently fund a war and social spending. The price of gold quadrupled over the next 3 years.

Today, global regulations and negative interest rate policies, designed by a younger group of policy makers and implemented by monetary authorities at the Swiss National Bank, Nordic Central Banks, and the European Central Bank have "converted" traditionally safety-seeking European investors into market timing speculators.

Life insurance companies and pension funds no longer invest in European government bonds for safety and yield. They invest in these guaranteed to loose (when held to maturity) securities either due to regulatory requirements or in the hope of selling them at a higher price to central bankers unconstrained by the formalities of profit and loss calculations.

The markets functioned in a different fashion not that long ago. Bonds were the safest investment. They promised full return of principal plus interest. Next down the risk spectrum came commercial real estate, offering rental yield, like a bond, but were subject to an indeterminate sale price in the future with the potential for capital appreciation. Equities offered the potential for capital appreciation with a reduced dividend yield, or none at all, and an indeterminate terminal price. Lastly, commodities and precious metals, viewed, as the riskiest investments of all offered no yield, an indeterminate terminal price, only the potential for speculative price appreciation.

Read More @

BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017

Posted: 06 Sep 2016 10:57 PM PDT

Its now two months on from when the establishment elite prophesied a post BrExit economic collapse apocalypse, however subsequently a stream of economic data on the UK economy continues to paint a picture that is a the exact extreme opposite to that which the establishment and their vested interests had propagandised both before and immediately after the EU referendum vote, a message literally warning of economic collapse as the following warnings of doom from David Cameron, George Osborne and Mark Carney illustrate and that which many still blindly cling onto to this very day despite reality starting to dawn of a UK economy that is literally soaring into the stratosphere by recording unprecedented gains across several economic measures into and during the month of August.

A Fed Rate Hike Is An Extreme Positive For Gold & Silver

Posted: 06 Sep 2016 10:30 PM PDT

Deutsche Bank Refuses To Deliver Physical Gold – The Run For Physical Metals Begins?

Posted: 06 Sep 2016 09:30 PM PDT

Gold Price Closed up 2.06% Silver Price Closed up 4.01%

Posted: 06 Sep 2016 08:40 PM PDT

6-Sep-16PriceChange% Change
Gold Price, $/oz1,349.4027.302.06%
Silver Price, $/oz20.050.774.01%
Gold/Silver Ratio67.305-1.283-1.87%
Silver/Gold Ratio0.01490.00031.91%
S&P 5002,186.486.500.30%
Dow in GOLD $s283.99-5.14-1.78%
Dow in GOLD oz13.74-0.25-1.78%
Dow in SILVER oz924.64-34.68-3.62%
US Dollar Index94.82-1.02-1.06%

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40,000 Students In Limbo, 8,000 Employees Fired As ITT Suddenly Shuts Down

Posted: 06 Sep 2016 07:26 PM PDT

The long-running tragic saga of ITT Education Services, which was established nearly 50 ago and operates the ITT Technical Institutes for-profit college chain, finally came to a end this morning with both a bang and a whimper, when it announced that it is shutting down effective immediately, leaving the fate of 40,000 students currently enrolled in limbo, and some 8,000 workers without a job.

The company said the closure is due to an investigation and sanctions by the U.S. Department of Education.

"It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service," the company stated Tuesday. "Effective today, the company has eliminated the positions of the overwhelming majority of our more than 8,000 employees."

As previously reported,  ITT Tech stopped enrolling new students on August 29, just a few days after it was cut off from a significant amount of federal funding by the government. ITT's collapse was catalyzed when the Department of Education effectively killed the company two weeks ago, when it told the company on August 25 that it couldn't enroll new students who use federal financial aid. The school accused federal officials of forcing the closure and denying it due process. The company has been the subject of state and federal probes for various reasons, including its recruitment tactics, lending practices and job placement figures.

Among the measures imposed, ITT was been ordered to pay $152 million to the department within 30 days to cover student refunds and other liabilities in case the company closes. The chain, based in Indiana, is still paying another $44 million demanded by the department in June for the same reason.

In order to have access to federal student loans, schools need to be accredited by a government-recognized accrediting agency. ITT Educational Services was found to be out of compliance with its accreditor's standards twice this year, according to the Department of Education. Needless to say, for-profit schools tend to rely heavily on federal student aid.

The Accrediting Council for Independent Colleges and Schools recently asked the company for proof of why its accreditation should not be withdrawn or suspended.

ITT's death, while sudden, should not come as a surprise: enrollment has been slipping for a while. In July, the company reported its new student enrollment dropped almost 22% from the same period the year before.

Meanwhile, the roughly 40,000 students currently enrolled now find themselves in limbo: when a school closes its doors, it can leave its students stuck without a degree and massive student loans. ITT"s collapse is reminiscent of Corinthian Colleges, which filed for Chapter 11 bankruptcy protection in May of 2015 in the wake of alleged predatory lending practices and accusations of inflated job placement numbers, leaving about 16,000 students stuck without a degree, and thousands more with huge debts. Some students were eventually able to receive debt relief.

Cited by PIX11, the Department of Education has said that ITT Educational Services' students could be eligible for a closed school loan discharge, however that process may take years to complete, meanwhile the prospect of earning a college diploma, even if from a novelty school, has evaporated. 

Enrollment in for-profit schools increased in the years following the recession when job growth was weak and people were looking to hone their skills or switch to more in-demand careers.

* * *

The full statement released by ITT is below:

ITT Educational Services, Inc. to Cease Operations at all ITT Technical Institutes Following Federal Actions

"It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service. With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected.

The actions of and sanctions from the U.S. Department of Education have forced us to cease operations of the ITT Technical Institutes, and we will not be offering our September quarter. We reached this decision only after having exhausted the exploration of alternatives, including transfer of the schools to a non-profit or public institution.

Effective today, the company has eliminated the positions of the overwhelming majority of our more than 8,000 employees. Our focus and priority with our remaining staff is on helping the tens of thousands of unexpectedly displaced students with their records and future educational options.

This action of our federal regulator to increase our surety requirement to 40 percent of our Title IV federal funding and place our schools under "Heightened Cash Monitoring Level 2," forced us to conclude that we can no longer continue to operate our ITT Tech campuses and provide our students with the quality education they expect and deserve. 

For more than half a century, ITT Tech has helped hundreds of thousands of non-traditional and underserved students improve their lives through career-focused technical education. Thousands of employers have relied on our institutions for skilled workers in high-demand fields. We have been a mainstay in more than 130 communities that we served nationwide, as well as an engine of economic activity and a positive innovator in the higher-education sector.

This federal action will also disrupt the lives of thousands of hardworking ITT Tech employees and their families. More than 8,000 ITT Tech employees are now without a job – employees who exhibited the utmost dedication in serving our students. 

We have always carefully managed expenses to align with our enrollments. We had no intention prior to the receipt of the most recent sanctions of closing down despite the challenging regulatory environment that now threatens all proprietary higher education. We have also always worked tirelessly to ensure compliance with all applicable laws and regulations, and to uphold our ethic of continuous improvement. When we have received inquiries from regulators, we have always been responsive and cooperative. Despite our ongoing service to this nation's employers, local communities and underserved students, these federal actions will result in the closure of the ITT Technical Institutes without any opportunity to pursue our right to due process.

These unwarranted actions, taken without proving a single allegation, are a "lawless execution," as noted by a recent editorial in The Wall Street Journal. We were not provided with a hearing or an appeal. Alternatives that we strongly believe would have better served students, employees, and taxpayers were rejected. The damage done to our students and employees, as well as to our shareholders and the American taxpayers, is irrevocable.

We believe the government's action was inappropriate and unconstitutional, however, with the ITT Technical Institutes ceasing operations, it will now likely rest on other parties to understand these reprehensible actions and to take action to attempt to prevent this from happening again."

All Time Highs and Lows … and the Great Collapse

Posted: 06 Sep 2016 07:20 PM PDT

by Gary Christenson, Deviant Investor:

Stocks and Bonds:

Dow Jones Industrial Index – high 18,636 on August 15, 2016

S&P 500 Index – high 2,190 on August 15, 2016

NASDAQ Index – high 5,262 on August 15, 2016

T-Bonds – the 30 year bond high was 176.94 on July 8, 2016

Dow Transportation Average – high on December 29, 2014 – Oops! Dow Theory says we should be worried about an unconfirmed market top.



  • National Debt (US – official only) exceeds $19.4 trillion in August 2016. Unfunded liabilities are much larger.
  • Student loan debt is over $1.4 trillion in August 2016.
  • Debt to GDP ratio – all time high in August 2016.
  • Central bank balance sheets – globally around $25 trillion in August 2016, and rising rapidly.
  • Sub-prime auto loans – about $1 trillion (US) in August 2016.

How many times in the past 1,000 years has "too much debt" been a precursor of future prosperity and social stability?


Other Highs

  • Total tons of gold hoarded by China, India, and Russia continue to rise. Why would Asian countries hoard gold while western nations actively suppress gold prices and awareness of gold's importance?
  • The cost of buying a Presidential election, including media advertising, payoffs, focused disinformation, "dirty tricks," programming voting machines, and so much more.

Read More @

Keiser Report: Will the Dollar Live to Die Another Day?

Posted: 06 Sep 2016 06:20 PM PDT

from RT:

Japan Invests in $320 Million ‘Ice Wall’ in an Attempt to Prevent Disastrous Escalation of Radiation Release

Posted: 06 Sep 2016 06:00 PM PDT

by Daniel Barker, Natural News:

The Japanese government has invested 35 billion yen – roughly $320 million – in the construction of a massive underground “ice wall” at the Fukushima power plant, in a desperate effort to prevent groundwater from seeping into its damaged reactors.

More than five years after the Fukushima incident occurred – an accident caused by an earthquake and resultant 45-foot tsunami that triggered a triple-meltdown at the plant – the government is still desperately trying to find a solution to an ongoing water contamination crisis at the ruined facility.

The three damaged Fukushima reactors contain highly radioactive uranium fuel rods that have continued to contaminate groundwater flooding into the site (at the rate of nearly 40,000 gallons per day) through the highly porous rock and soil bed upon which the plant was built.

The groundwater flow has also prevented the recovery of the uranium fuel from the reactor cores, which may have melted through the steel floors that supported them. In fact, no one knows exactly where the fuel now is. To date, five search robots sent into the reactors have been lost due to high levels of radiation and debris blocking their path.

The underground ice wall, officially named “The Land-Side Impermeable Wall,” consists of a nearly mile-long, 100-foot deep barrier of “man-made permafrost,” that – in theory – should block the flow of groundwater into the reactors, while also preventing contaminated water from seeping into the Pacific Ocean.

But the ambitious and complex plan has been met with skepticism by many experts.

Recent typhoons have already melted parts of the ‘impermeable’ ice wall

Some believe that the government’s desperate “Hail Mary play” will prove to be an expensive and ineffective stopgap measure, and already – just weeks after the ice wall was more or less completed and activated – typhoons have apparently caused parts of the wall to fail.

Read More @

As Class 8 Truck Orders Continue Collapse, VW Has A "Fix" For Navistar's Diesel Emission Issues

Posted: 06 Sep 2016 05:15 PM PDT

Truck-related stocks have massively outperformed the broader markets this year up over 30% while the S&P 500 is up only around 7%. This outperformance has come despite abysmal Class 8 net orders which seem to just get worse each month with August 2016 net orders down over 25% compared to last yearIn fact, the level of trailing 12-month net orders is the lowest since January 2011 with YoY changes now in negative territory for 18 consecutive months.

July Class 8 Truck Orders

Class 8 YoY Change


This news comes as Volkwagen just announced a $256mm investment in Navistar International and agreed to collaborate on "strategic technology" and to establish a procurement joint venture.  The news pushed Navistar stock up over 40% on the day alleviating near-term investor concerns over an aggressively levered balance sheet and massive pension under-funding. 

The investment in Navistar comes after its market share in heavy-duty trucks has been cut in half over the past five years on the back of a diesel emissions scandal.  The scandal ultimately resulted in Navistar paying the SEC $7.5mm to settle allegations it misled investors over its ability to comply with new diesel emission standards that went into effect in 2010.  Navistar had attempted to develop a proprietary solution to comply with the new 2010 regulations, rather than using the same technology as the rest of the truck and engine industry...a bet that obviously didn't work out as planned.  Per Bloomberg:

Navistar sought to comply with federal engine emission rules that took effect in 2010 by using an exhaust gas recirculation (EGR) technology that funnels emissions back into the engine’s cylinders as a way of lowering the nitrogen oxide that is released. The trouble for Navistar is that the technique did not reduce the emissions sufficiently to meet the U.S. rules, which led to the company paying a penalty of nearly $2,000 per engine. Rival engine makers, such as Cummins, Paccar, and Daimler, use a system called selective catalytic reduction that applies a urea-water fluid to the exhaust gases to convert the harmful nitrogen oxide to water and nitrogen.


In July 2012, the Lisle (Ill.) company reversed its decade-long course and said it would abandon the technology in its engines. The board soon ousted CEO Dan Ustian, and two months later the company reached a deal with Cummins to supply its widely used ISX15 diesel engines for Navistar’s largest truck models. That engine also meets emissions requirements that take effect in 2014.

Luckily for Navistar, if they ever want to revive that EGR technology we hear that VW has an excellent "fix" to help meet diesel emission standards. 

In KWN interview, Embry scoffs at prospect of interest rate hike

Posted: 06 Sep 2016 03:10 PM PDT

6:10p ET Tuesday, September 6, 2016

Dear Friend of GATA and Gold:

Sprott Asset Management's John Embry tells King World News today that an interest rate increase is unlikely in the United States as the national economy weakens, and he expects a good fall season for gold and silver. An excerpt from the interview is posted at KWN here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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The Fed Feedback Loop

Posted: 06 Sep 2016 03:03 PM PDT

This post The Fed Feedback Loop appeared first on Daily Reckoning.

In a word, the Fed has failed in its mission to restore robust growth to the U.S. economy. That failure has laid the foundation for the next global monetary crisis.

This failure was inevitable. The reason is that the problems in the economy are structural. They have to do with taxation, regulation, demographics and other factors beyond the Fed's mandate. The Fed's solutions are monetary. A policymaker cannot solve structural problems with monetary tools.

Since structural solutions are not on the horizon due to political gridlock, the U.S. economy will remain stuck in a low-growth, Japanese style pattern indefinitely. Without structural change, this pattern will persist for decades as it has in Japan already. This weak growth scenario will be punctuated with occasional technical recessions, and exhibit persistent deflationary tendencies.

That's the best case, and not the most likely one. The likely outcome is a financial panic and global liquidity crisis caused by the Fed's failed monetary policies. To understand why, it is necessary to understand the futile feedback loop in which the Fed, and all major central banks now find themselves.

The Federal Open Market Committee (FOMC) has gone down an unprecedented path with its quantitative easing programs, "QE." The FOMC consists of members from the Feds Washington board and the regional reserve banks. It was established to appropriately determine monetary policy.

The first program, QE1, started in late 2008. It was understood at the time as an appropriate response to the liquidity crisis stemming from the Lehman Brothers and AIG failures that fall. Providing cash during a liquidity crisis is exactly what central banks are supposed to do; it's why they were created. We'll give the Fed a pass on that.

QE1 ended in June 2010. It may have saved the economy from a more severe recession in 2009, but it did nothing to stimulate long-term growth. No sooner had QE1 ended than U.S. growth stalled out. By late 2010, the Fed was ready to launch QE2.

QE2 was different. It started in November 2010, at a time when there was no liquidity crisis. QE2 was an experiment dreamed up by Ben Bernanke. The Fed pledged to purchase $600 billion of intermediate-term Treasury securities before June 2011.

The idea was to lower long-term interest rates so that investors would be forced into other assets such as stocks and real estate. The resulting asset price increases would create a wealth effect that would result in higher spending and higher collateral values for borrowing. This new lending and spending would stimulate the economy toward self-sustained trend growth.

In fact, the wealth effect was always a mirage. QE did not create sustained trend growth. What it did create were asset bubbles that are still around and still waiting to pop.

QE2 ended as planned in June 2011. Growth stalled again after the money printing ended. Already the Fed was finding itself trapped by the monster it had created. As long as the Fed was easing with QE, the economy muddled through. As soon as the easing ended, the economy stalled out. These experiments in 2010 and 2011 were the beginning of the "risk on," "risk off" see-saw mentality that trapped the FED and the markets.

In September 2012, the Fed launched QE3. Unlike QE2, there were no time or quantity limits in QE3. The Fed would print as much money as they wanted for as long as they wanted in order to create the needed stimulus. The problem was that the Fed was now completely trapped with no way out. When they eased, the economy improved but did not boom. When they tightened, the economy stalled, even if it did not collapse. Policy flip-flopped. The Fed was stuck in a feedback loop.

The term "feedback loop" is a popular expression for what physicists and complexity theorists also call recursive functions. In a recursive function, the output of one equation becomes the input for the next iteration of the same equation.

The complex interaction of human behavior (setting policy rates) and the feedback loop (with a fixed point attractor) is a continual flip-flop in policy. First the Fed talks tough, then markets sink, then the Fed eases up, then markets rally, then the Fed talks tough again, and so on. This is the Fed circle game.

Here's how this has played out since QE3 began in November 2012 under the direction of both Ben Bernanke and later current leader of the Fed, Janet Yellen. The initial state of the system as of April 2013 was one of ease because of QE3 itself:

May 2013 — Bernanke tightens policy with his "taper talk". The dollar rallies and emerging markets sink.

September 2013 — Bernanke eases policy by delaying a planned start of the taper. Stock markets rally.

December 2013 — Bernanke tightens policy by starting the taper. The dollar grows stronger.

September 2014 — Yellen eases policy through forward guidance by telling markets the Fed will be "patient" when it comes to future rate increases.

March 2015 — Yellen tightens policy by ending forward guidance and indicating that the Fed intends to raise interest rates before the end of 2015.

September 2015 — Yellen eases policy by delaying a planned "liftoff" in interest rates. This delay was caused by the collapse in U.S. stock markets from the shock Chinese yuan devaluation in August. U.S. stocks rally following this ease.

December 2015 — Yellen tightens policy by raising interest rates for the first time in nine years. U.S. markets crash with a more than 10% decline in January and early February 2016.

February 2016 — Yellen eases policy with the secret Shanghai Accord. The accord itself is not revealed at the time, but becomes visible in a series of policy actions by the ECB, Bank of Japan and the Fed over the course of March 2016. U.S. markets rally on the news of a weaker dollar.

May 2016 — The Fed tightens policy through a set of hawkish statements by regional reserve bank presidents including James Bullard, Loretta Mester, and Esther George. U.S. job creation stalls out, the dollar rallies and gold weakens.

June 2016 — Yellen eases policy with a dovish speech in Philadelphia and dovish comments at the FOMC meeting on June 15. The dollar falls sharply and gold begins a strong rally, retracing its May losses and reaching new three-year highs.

That's ten flip-flops in just over three years.

This reveals that the Fed has no idea what it is doing and is trapped in the feedback loop.


Jim Rickards
for  The Daily Reckoning

Ed. Note: Sign up for your FREE subscription to The Daily Reckoning, and you'll receive regular insights for specific profit opportunities. By taking advantage now, you're ensuring that you'll be financially secure for the future. Best to start right away – it's FREE.

The post The Fed Feedback Loop appeared first on Daily Reckoning.

David Morgan Emphatically Makes Case for Owning Real Money outside the Banking System

Posted: 06 Sep 2016 01:58 PM PDT

Mike Gleason: It is my privilege now to be joined by our good friend David Morgan of The Morgan Report. David, I hope you've been having a good summer and welcome back. It's always a pleasure to talk to you. David Morgan: Thank you very much, and yes, I have been having a wonderful summer. Thank you. Mike Gleason: Well, as we begin here, David, please give us your thoughts on the recent pullback in the metals. We've maybe been overdue for a correction for a while now. I know in following your work, you've been calling for one, and we're getting it here. And after a fantastic first six or seven months of the year for gold and silver, we're finally starting to see some real selling pressure emerge. What is your take… what have you noticed during this mini-correction, and what are some of the reasons for the pullback?

We’re Reaching Point Zero of Debt Creation

Posted: 06 Sep 2016 01:42 PM PDT

Forty-five years and counting. We’ve been on a debt spree since the early 1970s when we went off the gold standard, covering every possible angle. Trade deficits, government deficits, unfunded entitlements, private debt – you name it! Our total debt has grown 2.5-times GDP since 1971. How could economists not see this as a problem? How is this the least bit sustainable?

Gold Daily and Silver Weekly Charts - Like a Wrecking Ball For the Real Economy

Posted: 06 Sep 2016 01:24 PM PDT

A Global Milestone at the G-20 China

Posted: 06 Sep 2016 12:45 PM PDT

This post A Global Milestone at the G-20 China appeared first on Daily Reckoning.

Now that the G-20 has emerged as a global economic and political gathering it has evolved into a "committee to run the world." It is also significantly worth paying attention to.

The G-20 was an ad hoc conference at its inception and has no directly supporting internal institutions. Instead it has institutionalized representatives and other organizations. It pushes forward delegates called "Sherpas" who are experts that accompany delegate representatives at the summit and develop agendas in advance to the actual meetings. This allows heads of state to arrive, sign pivotal documents and release public communications at its gatherings.

The G-20 has also shifted to the International Monetary Fund (IMF) as a "central bank of the world."  The G-20 acts as a psudo "board of governors for the IMF. As an intergovernmental organization the IMF that can utilize its own money, execute debt issuance and issue loans. At the forefront of these actions are the special drawing rights (SDR) which exist as world money for the IMF.

The G-20 – China 2016

With the emergence of BRICS and rise of emerging markets, China can no longer be ignored. It is the second largest economy in the world, but had never fully been included with the G-20 because of its rapid ascension. Until now.

The 20 nation group that met in Hangzhou, China this past weekend is, in many rights, running the world. With China playing host, there is significant symbolism. The G-20 operates with a rotating presidency. They have 20 members and alternate annually who directs its agenda and setting.


This year, the president of the G-20 is China. The president of China, Xi Jinping, is the presiding head of state at the summit. As a nation, China puts a considerable weight on the symbolic nature behind the meeting. While the west might not place as great of emphasis on such meetings – these gatherings matter for China both domestically and abroad.  

Building from this symbolism, last November the IMF made a groundbreaking decision to include the Chinese yuan in the "basket" that determines the price of the SDR. The special drawing right, until later this month, had 4 currencies behind it. The dollar, euro, yen and pound sterling. Beginning at the close of business September 30th, there's going to be a 5th currency in the basket. The Chinese yuan.

China has now been admitted into the most exclusive club in the world. This exclusive "club" is smaller than the G-20, the G-7 and will be a "G-5." It also creates support for the SDR on behalf of China.

China and the SDR

With building speculation over the years, the belief existed that China wanted its currency to displace the dollar as the global reserve currency. That was never the case. It is true that China's yuan is emerging as an important global currency. Where China now has its aim is for the SDR to replace the dollar, not the yuan. If the SDR was going to be "world money," the yuan had to be on board. It is now.

This unfolding is totally not by coincidence. The Sherpas and people in power including the head of the IMF, Christine Lagarde and president China, Xi Jinping, U.S Secretary of the Treasury, Jack Lew have given these actions considerable thought. It is not coincidental that the yuan is being included in the SDR at the same time as China is the president and host of the G-20. This is a very carefully orchestrated event to announce that China has now arrived on the world stage. They're no longer the the emerging member on the world scene, they are a full member. They're now in the club.

What does all of this mean? What it could mean is inflation. While we are not going to wake up one day and the dollar is going to be dead. There is significance in these events. The dollar doesn't die overnight. It dies in stages. It occurs in a process it has absolutely started and we're watching them unfold. These are very significant milestones.

We're going down a path where there's no turning back. A path where, by the time all these institutional arrangements are put in place, you are going to wake up, look around and realize the dollar is similar to the Mexican peso. If you are going to Mexico you're going to get some pesos. If you're going to the United States you're going to get some dollars.

The major mechanisms around the world, the balance sheets for the multinational corporations, the funds for major multilateral institutions, global capital markets and even the price of oil will all eventually be denominated in SDRs.

Stay tuned.


Jim Rickards
for The Daily Reckoning

Ed. Note: Sign up for your FREE subscription to The Daily Reckoning, and you'll receive regular insights for specific profit opportunities. By taking advantage now, you're ensuring that you'll be financially secure for the future. Best to start right away – it's FREE.

The post A Global Milestone at the G-20 China appeared first on Daily Reckoning.

What You Should Know About Special Drawing Rights (SDRs)

Posted: 06 Sep 2016 08:53 AM PDT

This post What You Should Know About Special Drawing Rights (SDRs) appeared first on Daily Reckoning.

"When I started talking about SDRs in 2010" said best-selling author Jim Rickards, "most people thought that it stood for 'Strawberry Daiquiri on the Rocks. Now, everybody seems to be talking about Special Drawing Rights…”

"Yet, very few people know what they are… How they work… Or what they mean for everyday Americans."

According to Jim (who, if you don't know – is a three-time best selling author that advises the U.S government on financial threats and was general counsel to one of the most influential hedge funds in history), these SDRs or new “World Money" as we like to call it, are going to affect ordinary people like you sooner than you might realize.

By definition, world money is labeled as "Special Drawing Rights" (SDR) that have vaguely been described by the International Monetary Fund (IMF) as its "international reserve asset."  

World money has been used as a sedative in times of global economic shock.  The IMF turned to the SDR as a "band-aid" in order to support central bank reserves that were under threat during the most recent global financial crisis.  

As the IMF escalates its role as the central bank of the world – here is what you need to know about world money:

SDR World Money

Who has "world money?"

The IMF member states have exclusive membership to this currency club and only four countries are in that group "basket" – for now.  This means that the IMF weighs all of the member currency values into a standard rate which changes daily.  

Currently, the U.S dollar, European Union euro, Japanese yen, and U.K pound sterling make up the SDR.  As of midnight on September 30, China's renminbi will join the elite club.  Membership has only changed once in the past three decades.  

Where can you get world money?     

In short, you can't.  The IMF is the only institution that can print and distribute world money.  Only its member states that are within its elite "basket" can freely exchange SDR as currency.  Typically, SDR's are used to take loans or make repayments made by the IMF.  They are also used by its members central banks to sell in order to help currency reserves during times of economic crisis.

How does world money impact the U.S dollar?

The SDR has the capacity to bring the dollar down to the status of a basic local currency. That means the dollar would no longer be the standard bearer for the world financial system.  

As was the case when the world eventually dropped the gold standard, the U.S dollar faces a similar threat. The possibility that the U.S could lose its crown as the top denominated bond in the global currency market could bring along several nasty side effects.  The most detrimental would be a loss in confidence in the dollar and reactionary hyperinflation – prices for goods and services skyrocket.

What are the current value rates for the world money basket?

The SDR per currency rate is based upon the representative exchange rate for each currency.  This rate changes daily. Out of those currency weights, the U.S holds the greatest weight – and the greatest influence. With the inclusion of the Chinese renminbi to be calculated by the IMF on September 30, 2016 the rates will stand at:

  • U.S. dollar 41.73 percent (compared with 41.9 percent at the 2010 Review)
  • Euro 30.93 percent (compared with 37.4 percent at the 2010 Review)
  • Chinese renminbi 10.92 percent
  • Japanese yen 8.33 percent (compared with 9.4 percent at the 2010 Review)
  • Pound sterling 8.09 percent (compared with 11.3 percent at the 2010 Review)

The IMF is scheduled to publish illustrative currency amounts in the weeks leading up to the official entrance of the Chinese currency (renminbi) on October 1, 2016.

What should you pay attention to with the looming SDR deadline?

The G20 finance ministers and central bank governors convened September 4-5, 2016 in Hangzhou, China.  With less than a month away from the IMF accepting China into the elite currency club, this gathering will has offered leadership signals for what to expect for the future.  

The fact that the world’s leading bankers gathered in China just prior to its grand entrance on the world money scene is not random. As the president of China noted in his official G-20 statement, the gathering must look at "expanding the role of the SDR of IMF." The Chinese president is also the presiding leader of the G-20 for 2016. After a strained series of events between the U.S and China during the G-20 summit, the currency war over world money is just beginning. The SDR could prove to be a pivotal battleground.


Craig Wilson

for The Daily Reckoning

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The post What You Should Know About Special Drawing Rights (SDRs) appeared first on Daily Reckoning.

Keiser Report: Will the dollar live to die another day?

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 Every week Max Keiser and Stacy Herbert look at all the scandal behind the financial news headlines. In this episode of the Keiser Report, Max and Stacy discuss the new m-SDR and ask will the dollar live to die another day? And are SDRs forever? As the G20 in China concludes they ask whether...

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