Wednesday, November 2, 2016

Gold World News Flash

Gold World News Flash

Is ECB 'Omnipotence' "Too Powerful For Any Democracy To Abide"?

Posted: 02 Nov 2016 01:00 AM PDT

Authored by Otmar Issing, originally posted via Project Syndicate,

The reputation of central banks has always had its ups and downs. For years, central banks’ prestige has been almost unprecedentedly high. But a correction now seems inevitable, with central-bank independence becoming a key casualty.

Central banks’ reputation reached a peak before and at the turn of the century, thanks to the so-called Great Moderation. Low and stable inflation, sustained growth, and high employment led many to view central banks as a kind of master of the universe, able – and expected – to manage the economy for the benefit of all. The depiction of US Federal Reserve Chair Alan Greenspan as “Maestro” exemplified this perception.

The 2008 global financial crisis initially bolstered central banks’ reputation further. With resolute action, monetary authorities made a major contribution to preventing a repeat of the Great Depression. They were, yet again, lauded as saviors of the world economy.

But central banks’ successes fueled excessively high expectations, which encouraged most policymakers to leave their monetary counterparts largely responsible for macroeconomic management. Such “expectational” and, in turn, “operational” overburdening has exposed monetary policy’s true limitations.

In other words, central banks’ good reputation now seems to be backfiring. And “personality overburdening” – when trust in the success of monetary policy is concentrated on the person at the helm of the institution – means that individual leaders’ reputations are likely to suffer as well.

Yet central banks cannot simply abandon their new operational burdens, particularly with regard to financial stability, which, as the 2008 crisis starkly demonstrated, cannot be maintained by price stability alone. On the contrary, a period of low and stable interest rates may even foster financial fragility, leading to a “Minsky moment,” when asset values suddenly collapse, bringing down the whole system. The limits of inflation targeting are now clear, and the strategy should be discarded.

Central banks now have to reconcile the need to maintain price stability with the responsibility – regardless of whether it is legally mandated – to reduce financial vulnerability. This will not be easy, not least because of another new operational burden that has been placed on many central banks: macro-prudential and micro-prudential supervision.

Micro-prudential supervision, in particular, implies the risk of political pressure, interference with central banks’ independence, and policy conflicts, all of which could influence the behavior of financial intermediaries, by encouraging them to assume greater risk. They know that their supervisor has powerful tools at its disposal – for example, it can lower borrowing costs, thereby protecting banks (at least for a while) – and a strong interest in protecting its reputation. But, given the overburdening of central banks, reputational defense may be beyond their capacity.

While this is a global phenomenon, the European Central Bank is exceptionally weighed down. As the central bank of the 19 member states of the European Monetary Union (EMU), the ECB also faces “extra-institutional overburdening.” This became apparent in May 2010, when the ECB assumed the responsibility of purchasing the government bonds of countries that otherwise would have experienced substantial increases in long-term interest rates.

That intervention was a lose-lose proposition for the ECB. It was essentially driven by politics: the ECB was picking up the slack for policymakers who were unwilling to fulfill their obligations. But if the ECB had refused to intervene, financial markets could have faced substantial turmoil, for which, rightly or wrongly, it would have been blamed.

From that moment on, however, the ECB took on the political role of guaranteeing not only the survival of the euro, but also the continued inclusion of every EMU member country. In 2012, ECB President Mario Draghi cemented this responsibility, pledging to do “whatever it takes” to preserve the euro. “And believe me,” he asserted, “it will be enough.”

This stance led many to accuse the ECB of exceeding its mandate and violating European treaties. But the European Court of Justice and the German Constitutional Court have, all in all, rejected that view. Nonetheless, further litigation regarding the ECB’s unconventional monetary-policy measures is underway.

Against this background, it is perhaps unsurprising that central-bank independence – de jure or de facto – is once again up for debate. The purpose of central-bank independence has always been to enable monetary policy to focus on maintaining price stability, without being subject to political pressure. While this approach has always been controversial, given that it implies handing substantial control over the economy to unelected technocrats, past inflationary episodes have fostered broad acceptance of central-bank independence.

When central-bank mandates exceed price stability, however, their independence may seem increasingly out of place in a democratic society. This is particularly true for the ECB: the stronger the perceived link between the extension of the ECB’s mandate and politics becomes, the more criticism its independent status will confront.

The failure of elected politicians to act appropriately – particularly in some eurozone countries – has turned central banks into the “only game in town.” And this is turning out to be less a boon to their prestige than a threat to their independence. The ECB, especially, is set to face growing pushback against its independent status, regardless of whether it manages to “save” the EMU. After all, it would have to be quite powerful to succeed – too powerful for any democracy to abide.

The $100 billion gold mine and the West Papuans who say they count the cost

Posted: 01 Nov 2016 09:35 PM PDT

By Susan Schulman
The Guardian, London
Tuesday, November 1, 2016

TIMIKA, West Papua, Indonesia -- In 1936 Dutch geologist Jean Jacques Dozy climbed the world's highest island peak: the forbidding Mount Carstensz, a snow-covered silver crag on what was then known as Dutch New Guinea. During the 4,800-metre ascent, Dozy noticed an unusual rock outcrop veined with green streaks. Samples he brought back confirmed exceptionally rich gold and copper deposits.

Today these remote, sharp-edged mountains are part of West Papua, Indonesia's largest province, and home to the Grasberg mine, one of the biggest gold mines -- and third-largest copper mine -- in the world. Majority-owned by the American mining firm Freeport McMoRan, Grasberg is now Indonesia's biggest taxpayer, with reserves worth an estimated $100 billion.

... Dispatch continues below ...


Ron Paul Endorses the Only Congressional Candidate
Who Is Campaigning on Returning to the Gold Standard

Former U.S. representative, presidential candidate, and chairman of the House Subcommittee on Monetary Policy, fiat money's fiercest foe, Ron Paul, has endorsed Daria Novak, the Republican candidate for the U.S. House of Representatives in Connecticut's 2nd District.

Paul said: "Daria Novak will be a forceful advocate for limited, constitutional government, individual liberty, and sound money on Capitol Hill. I am pleased to endorse her candidacy."

Novak also has been endorsed by former presidential candidate and gold standard proponent Steve Forbes and by the New York Sun, among other friends of sound money. Novak also been endorsed by gold standard and sound-money advocates George Gilder, Lawrence Kudlow, Jimmy Kemp (Jack's son), and Jeffrey Bell. Forbes called Novak a "prosperity heroine."

Contribute to Novak's campaign $500, $250, $100, $50, or whatever you can afford of the fiat money that is eroding in your checkbook. As the Sun wrote, "She vows to crusade" on the gold standard "as key to getting job creation, economic security, and upward mobility back at a sizzling rate."

To donate to Novak's campaign, please visit:

Novak will personally thank all contributors.

Give Daria your generous backing to put a voice for gold in Congress.

This message was authorized by Daria Novak for Congress.

But a recent fact-finding mission by the Brisbane (Australia) Archdiocese's Catholic Justice and Peace Commission described a "slow-motion genocide" taking place in West Papua, warning that its indigenous population is at risk of becoming "an anthropological museum exhibit of a bygone culture."

Since the Suharto dictatorship annexed the region in a 1969 United Nations referendum largely seen as a fixed land grab, an estimated 500,000 West Papuans have been killed in their fight for self-rule. Decades of military and police oppression, kidnapping, and torture have created a longstanding culture of fear. Local and foreign journalists are routinely banned, detained, beaten and forced to face trial on trumped-up charges. Undercover police regularly trail indigenous religious, social, and political leaders. And children still in primary school have been jailed for taking part in demonstrations calling for independence from Indonesia.

"There is no justice in this country," whispered one indigenous villager on condition of anonymity, looking over his shoulder fearfully. "It is an island without law." ...

... For the remainder of the report:

* * *

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Gold Price leapt $14.90 (1.2%) to $1,286.40. Silver Price pole vaulted 3.5% or 62.3¢ to $18.385

Posted: 01 Nov 2016 05:38 PM PDT

1-Nov-16PriceChange% Change
Gold Price, $/oz1,286.4014.991.18%
Silver Price, $/oz18.390.623.51%
Gold/Silver Ratio69.970-1.610-2.25%
Silver/Gold Ratio0.01430.00032.30%
Platinum Price995.1019.301.98%
Palladium Price633.5515.902.57%
S&P 5002,111.72-14.43-0.68%
Dow in GOLD $s289.85-5.13-1.74%
Dow in GOLD oz14.02-0.25-1.74%
Dow in SILVER oz981.08-40.34-3.95%
US Dollar Index97.62-0.66-0.67%
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD:1,287.50

American Eagle1.001,323.551,330.631,330.63
1/2 AE0.50656.12679.161,358.31
1/4 AE0.25331.27346.021,384.06
1/10 AE0.10135.08140.981,409.81
Aust. 100 corona0.981,255.701,264.701,290.24
British sovereign0.24305.35318.351,352.38
French 20 franc0.19237.97241.971,296.05
Maple Leaf1.001,297.501,311.501,311.50
1/2 Maple Leaf0.50740.31675.941,351.88
1/4 Maple Leaf0.25328.31344.411,377.63
1/10 Maple Leaf0.10136.48140.341,403.38
Mexican 50 peso1.211,544.451,555.451,290.08
.9999 bar1.001,292.011,299.501,299.50

VG+ Morgan $B4 19050.7725.0027.0035.29
VG+ Peace dollar0.7720.0022.0028.76
90% silver coin bags0.7213,645.7813,931.7819.49
US 40% silver 1/2s0.305,217.085,367.0818.19
100 oz .999 bar100.001,813.501,848.5018.49
10 oz .999 bar10.00184.85189.8518.99
1 oz .999 round1.0018.1418.6418.64
Am Eagle, 200 oz Min1.0019.8421.3421.34

Plat. Platypus1.001,010.101,040.101,040.10

Mercy! When I told y'all yesterday to "be patient" waiting for silver & gold to rise, I didn't really think y'all would only have to wait 12 hours. Makes me look sharper than a marble.
News headlines today maintained that Trump's better poll numbers drove gold higher, and, I reckon, the dollar & stocks lower. That's plausible: everybody's looking over their shoulder at the Brexit aftermath, expecting Trump to win. Whether they elect the evil teenager or the blustering teenager in fact won't make much difference economically, as both are communists & believe that government spending actually can help an economy instead of bleeding it dry. But markets don't see that yet.

US dollar index chart can be found here,

Unless you are TERRIBLY far sighted, you will not first the large drop today to 97.62, down 0.67% or 66 basis points after yesterday's one basis point gain. Those unchanged days are unusual, & can produce momentous progeny. Mark also the dollar closed below its 20 day moving average, and right on lateral support about 97.76. Fed meets tomorrow, but can say little to stop this avalanche.

Competing scrofulous, scabby, scurvy fiat currencies profited from the dollar's woe. Euro rose 0.65% to $1.1056 while the yen rose 0.68% to 96.04. Do any of y'all think those two mouse burp currencies really became 0.66% more valuable overnight? None of 'em, dollar included, is backed by anything but confidence. Right, your "money" is a confidence game.
Stocks dropped to new intraday lows and new low closes for the downmove that began in August. When the Dow industrials break 18,000 & the S&P500 punctures 2,100, the rats will STAMPEDE down the ropes for shore, even jump into the waves for safety. Dow today lost 105.32 (0.6%) to 18,037.10 & the S&P500 fell 14.43 (0.68%) to 2,111.72. Weeping, wailing, gnashing of teeth and sweating bullets lie in the near future.

Here's the S&P500 chart, See for yourself. Note also volume rising as price declines. As they used to say in the old Tarzan movies, "Bad juju, bwana!"
Dow in gold and Dow in silver have reversed their upward corrections which were occasioned by their correction. That's over now, and stocks are becoming daily cheaper measured by silver & gold.

Gold leapt $14.90 (1.2%) to $1,286.40. Not to be outdone, silver pole vaulted 3.5% or 62.3¢ to 1838.5¢. Platinum jumped 25 or $19.30 to $995.10, & palladium 2.6% ($15.90) to $633.55.

Res ipse loquitur -- the thing speaketh for itself, but let's look closer & see how close I can come to gloating without o'erstepping the line.

Look at the gold chart here,

Gold jumped to a high of $1,292, the bottom of a support/resistance zone that reaches from there to $1,300 - $1,305. Great first step. Next, gold, if you please, punch through that bottom channel line and back into your old trading channel. You've already topped the 20 day and 200 day moving averages, now top $1,300 & the 50 DMA. Look for it tomorrow. Fear is a powerful driver. Mark rising volume confirming rising price.
Silver is depicted here,

Silver did not leap it LAUNCHED through 1800¢. Poked through 1800¢ about 6:00 a.m. Eastern time, and never looked back. High today touched 1851¢. This is not anything like spent, but will run much further.

Must look also at the gold/silver ratio chart here,
Remember yesterday I was fretting because the ratio had been moving sideways while ti needed to fall. Today it gapped down from the 20 DAM (71.76) to well below the 50 DMA (69.93) where it ended the day.

Now let's add it all up: dollar tanks taking stocks with it while silver, gold, platinum, & palladium all rise strongly after posting a bottom to a correction. Folks, it's don't get better than this unless Santa Claus is your friend giving you an all-expenses-paid paid American Express card for Christmas.

Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger
Learn what most investors—including credentialed financial experts—don't know.

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Jim Sinclair-Silver Will Be Gold On Steroids In Coming Rally [2015 VIDEO]

Posted: 01 Nov 2016 05:35 PM PDT

Dear CIGAS, Please check out and share this 2015 interview with Jim and Greg Hunter of

The post Jim Sinclair-Silver Will Be Gold On Steroids In Coming Rally [2015 VIDEO] appeared first on Jim Sinclair's Mineset.

Silver And Gresham’s Law - Dave Kranzler

Posted: 01 Nov 2016 05:00 PM PDT

Sprott Money

LIVE STREAM: InfoWars Coverage U.S Presidential Election 2016 - Donald Trump VS Hillary Clinton

Posted: 01 Nov 2016 03:30 PM PDT

LIVE STREAM: InfoWars Coverage U.S Presidential Election 2016 - Donald Trump VS Hillary Clinton The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free investigative journalists , researchers , Whistelblowers , truthers and many more

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BREAKING: Barack Obama Just OUTTED Hillary! Said She Lied About This…

Posted: 01 Nov 2016 03:00 PM PDT

BREAKING: Barack Obama Just OUTTED Hillary! Said She Lied About This… The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free investigative journalists , researchers , Whistelblowers , truthers and many more

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Precious Metals Stocks May Be Poised for a Major Upswing

Posted: 01 Nov 2016 02:36 PM PDT

Technical analyst Clive Maund outlines why he believes the correction in gold and precious metals stocks is coming to an end. It now looks like gold's correction is done and its intermediate base pattern is completing. If so, then we are at an excellent entry point for many better precious metals (PM) stocks, which have been savagely beaten down over the past several months—a necessary correction following their outsized run-up earlier in the year.

BREAKING: FBI Just Turned On Obama! Look at SICK Way he Was Protecting Hillary…

Posted: 01 Nov 2016 02:30 PM PDT

 BREAKING: FBI Just Turned On Obama! Look at SICK Way he Was Protecting Hillary… The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free investigative journalists , researchers , Whistelblowers , truthers and many more

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BREAKING: "Revelation Is Being Revealed Now"

Posted: 01 Nov 2016 02:00 PM PDT

Pastor Paul Begley "LIVE" : Bible Code reveals Trump will win BREAKING: "Revelation Is Being Revealed Now" The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free investigative journalists , researchers , Whistelblowers , truthers...

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The Establishment’s Been Unmasked

Posted: 01 Nov 2016 01:50 PM PDT

This post The Establishment's Been Unmasked appeared first on Daily Reckoning.

Harvard windbag and former Treasury Secretary Larry Summers recently floated the idea that the Fed should start buying common stocks to buoy the markets. What does that say about the state of the casino?

It means the end is probably near.

That is an act of desperation. That is an idea that no economist worth his salt even 20 years ago would have contemplated for one moment. What in the world would buying stocks do except inflate the value of stocks?

This is about as far from the Keynesian catechism as you can get. As bad as Keynes himself was about so many things, he never imagined half the things that are seriously being discussed today.

So our monetary rulers have pursued policies that have led to a dead end and the looming crackup of bubble finance. It started with the Maestro, Alan Greenspan, in the 1990s. But it's become a runaway freight train since the Panic of 2008.

Now our monetary masters are flailing about desperately trying to explain why they weren't wrong and why their policies will work if only another bold extension of that policy were to be embraced at the present moment. They won't. It's all desperate nonsense. And that's the main reason I believe we're going to have a crackup.

The word that comes to mind to describe all this is "madness." Today's policy is the very opposite of what monetary policy attempted to do in the early '80s when the Reagan era began. Granted, the circumstances were different then, for different reasons. Inflation was the bugaboo then. Today, Yellen and her fellow dunces in Europe and Japan can't even generate the 2% inflation they falsely think holds the key to economic prosperity.

But in those days we had people like Paul Volcker, who didn't think the central bank was the crucial agent of capitalist prosperity. Nor did he believe he had to supervise and control every aspect of the market economy. He had a far more modest conception of his role. That is to say, a far more realistic conception of his role.

Volcker jacked rates to a peak of 20% in June 1981 because inflation had gotten way out of control due to the excess monetary stimulus of the '70s. The monetary machinery had gone into overdrive after Nixon closed the gold window in 1971 and Imperial City discovered the unlimited freedom of a printing press unshackled to gold.

Volcker sought to correct that error. So doing, he paved the way for conventional capitalism to heal itself and restart the process of growth, investment and wealth creation.

But the mentality we're saddled with today is altogether different. Janet Yellen and her merry band on the Federal Open Market Committee (FOMC) think they're the indispensable twelve. Without them at the dials constantly watching the incoming data and taking appropriate action, the whole economy will go to seed. Rubbish!

That is a foreign conception to the original purpose of central banking. But it's a measure of how far we've waded into the monetary swamps. And none is deeper than the swamp located at the Eccles Building. As I say in my book, Trumped!, it's created a "mutant capitalism" that really has no historical precedent. Nor does it have any grounding in traditional economic theory. It's the stuff of cranks.

As I've said before, they're just making it up as they go along. And it's getting crazier by the day. Larry Summers' jabberwocky about the Fed buying stocks is just the latest example.

With a properly functioning media, folks like Summers would have been laughed out of town years ago. But unfortunately, the mainstream media is simply the financial establishment's broadcasting arm.

Make no mistake, the mainstream financial press is Wall Street's bullhorn. Nothing else matters as long as stocks rise, come hell or high water. And it's fully on board with the idea that there's nothing wrong with eight years of "unconventional monetary policy."

Of course, Washington and the Beltway politicians love that same unconventional monetary policy since it's kept the yield on the massive debt that they've created so low they can pretend it's practically free.

So you have the worst of both worlds in what I call the Acela corridor. Wall Street and its media toadies applaud this policy because it keeps stocks artificially elevated. And Washington applauds it because it lets them off the hook for the massive fiscal crisis they've generated.

And let's face it, folks: Nowhere is the anti-Trump more evident than the establishment media. The fact is, it's attacked the Trump candidacy in a way I've never seen before.

It's nothing short of a media jihad, or an assassination campaign. Nothing is too trivial to use as an indictment of Trump's character, his temperament or his inexperience. This is extraordinary in its intensity, and I don't think we've seen the end of it yet.

In its war on Trump, the so-called liberal press has become downright McCarthyite in its baiting of Putin and its griping about supposed Russian hacking. They're trying to divert the American people's attention away from the substance of the leaks. They're shooting the messenger. Of course, there's no real proof Russia is the messenger at all. The press is simply parroting the hysteria wafting out of Imperial City's national security catacombs.

Imperial City and its media errand boys are trying to make Putin out to be another Hitler. Come on! The threat from Russia is thoroughly exaggerated, if it exists at all. But the national security racket needs an enemy to justify its steep price tag.

As I said, all this diversionary talk about Russia is to simply defend the bipartisan status quo against the threat of outsiders and disruptors and people who haven't been schooled in the fundamental rules of Washington.

Needless to say, the Republican establishment is a major voice in the anti-Trump chorus.

When it comes to the political establishment, there's only one real party — the Washington party. Its sole purpose is to enrich itself and aggrandize its power. It's about the establishment squeezing the system for every dime, holding power and perpetuating the regime. I don't know any other way to explain it.

But the laws of economics will not remain silent forever. It's only a matter of time before the fantasies of the Welfare/Warfare state ends in a harsh and unfortunate way.

And the "deplorables" in Flyover America can sense it coming. That's why we have a Donald Trump. The American people have completely and utterly lost faith in the establishment and its media.

Now, it's not so much that the program Trump put forth is compelling. In fact, his program is hard to discern. It's more sound-bytes and slogans that seem to change from day to day.

And Trump's no ideological conservative. He's not going to start rattling off passages from the Federalist Papers or quoting William F. Buckley.

The reason the public is responding is because he's saying, "I'm not part of that establishment. I've not been there for 30 years drinking the Kool-Aid. I'm not part of the rigged game. No one has paid me off and I'm not part of this pay-to-play syndrome that has enveloped Washington."

That message, if inarticulately delivered at times, is why there's an insurrection unfolding and Trump has become the vehicle for its expression.

But let's not forget, Bernie Sanders was also a vehicle for its expression. If it weren't for behind-the-scenes scheming within the Democratic National Committee, Bernie Sanders probably would have gotten the Democratic nomination.

The rise of the anti-establishment candidates is the American people's way of saying, "we've had enough." It's possible a percentage of Bernie Sanders voters, sick of Hillary, could respond to Trump's message at the polls next week. That, of course, shouldn't happen in a rational political universe because Sanders is about as left as you can get. Trump is a far-right zealot in comparison.

Whatever happens, and even if Hillary wins the election, the jig is up for the party establishments and their enablers in the mainstream press. The mask has finally been ripped off, and the American people are seeing the monstrous face beneath.

And there's no putting it back on.


David Stockman
for The Daily Reckoning

P.S. I've been raising a real ruckus about the election lately, but this is just so important for the future of America. As I said yesterday, TRUMPED! A Nation on the Brink of Ruin… And How to Bring It Back wasn't a book I was intending to write. But I had to. America faces impending dangers that every voter should know about before the presidential election just one week from today.

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Whether you love or hate Donald Trump or Hillary Clinton, every American deserves to know the truth about the imminent dangers facing their wealth.

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The post The Establishment's Been Unmasked appeared first on Daily Reckoning.

Happening Now -- Donald Trump Criticizes Hillary Clinton Over FBI Email Investigation

Posted: 01 Nov 2016 01:30 PM PDT

0:04 / 6:42 Donald Trump Criticizes Hillary Clinton Over FBI Email Investigation - Happening Now The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free investigative journalists , researchers , Whistelblowers , truthers and many...

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Gold Daily and Silver Weekly Charts - Gold and Silver Rally on Uncertainty, Worries For the Status Quo

Posted: 01 Nov 2016 01:30 PM PDT

Election 2016: Too Big To Fail

Posted: 01 Nov 2016 12:04 PM PDT

This post Election 2016: Too Big To Fail appeared first on Daily Reckoning.

We don't like it, but certain big banks won't be allowed to fail.

When I was working on Wall Street, I saw the inner behavior of how bankers react in a crisis. Here's the most important lesson that I can pass on to you from my time there: Bankers don't care about how their actions impact you.

At Bear Stearns and Goldman Sachs, we never worried about how our practices might affect the world at large. The game was to do whatever was possible to make money, as quickly as possible, and stay within the legal confines.

Of course that has changed dramatically since I left the industry in 2002. Many bankers don't worry about "legal confines" today. Why would they? Those goalposts are flimsy at best.

These banksters break the law, get fined, and repeat, again and again. Yet, the rigged political-financial system continues to turn a bipartisan blind eye to those crimes. Politicians try to convince the public that supporting these banks, at any cost, is necessary to maintain the financial system we operate under.

Elite bankers always try to truncate a collapse at the earliest stage possible. This is for their benefit — not yours.

These bankers lean on politicians and line up with central bankers' dubious policy. This has been particularly true in the wake of the 2008 financial crisis. In addition, this system promotes the creation of more risk, predicated on the deposits and other bank accounts of everyday people.

Truncation of bank problems runs up to the White House. The results of this election may bring about minor differences in how each administration would handle financial distress, but not many.

Here's a look at how bankers and politicians enable crises — in their attempt to prevent the escalation of global financial distress.

The Consequences of Cheap Money

In the wake of the 2008 financial crisis, the trio of U.S. bailout architects acted in concert. This trio consisted of Treasury Secretary Hank Paulson, New York Federal Reserve President (and then Treasury Secretary) Tim Geithner, and Federal Reserve Chairman Ben Bernanke.

The bailout boys did not save the economy as they advertised. Rather, they bolstered the biggest U.S. banks from an insolvency crisis of their own creation. Those banks were, and remain, too big to fail. Their CEOs are too connected to jail.

But as in Fight Club, the first rule of big bank survival is not to talk about it publicly. All federal and central bank support are downplayed. The byproduct of 8 years of zero to near-zero interest rates has benefitted banks, but it's not meant to be talked about. Meanwhile banks get to overvalue any securities on their books (because when rates are low, prices on bonds are higher).

This is an implicit aid to these government-subsidized financial institutions. Bank chiefs like Deutsche Bank head, John Cryan, might publicly disparage the European Central Bank (ECB) for its QE policy, but the bank has been a beneficiary of it.

In 2008, banks like Bear Stearns and Lehman Brothers were allowed to die. (I can tell you from working at these two, they had nowhere near the political and power connections that the surviving banks did). Meanwhile, politicians and central bankers enabled the Big Six banks to thrive.

The leaders of the major U.S. banks oversaw multi-trillion dollar enterprises that committed fraud, lost other peoples' money, harassed public service members, and fired thousands of low-level employees. Worst of all, they have put the entire financial system and markets at the edge of ruin again.

Today, the mentality remains the same. Big banks know they will have political and Federal Reserve support. They have taken this as a license to gamble large.

By rescuing and supporting the big banks' dangerous behavior, such crimes have been not only condoned but encouraged. Every instance that a central bank (or government using taxpayer money) has to bail out, bail in, or act in an emergency capacity has put us at greater risk.

By supporting actions that threaten the FDIC insurance pool backing our deposits, our ability to withdraw cash, and overall confidence in markets, these bankers have ultimately harmed those savers who "play by the rules."

The Fed and ECB policies of lavishing cheap money on the banking system through bond purchases have floated the biggest financial players. We're seeing the consequences now with Wells Fargo and Deutsche Bank. These are two of the Global Systemically Important Banks (G-SIBs). You've probably seen both in the news recently.

Wells Fargo is the second largest U.S. bank in terms of assets. Wells Fargo Global Financial Institutions (GFI) is "one of the world's largest providers of foreign exchange (FX), treasury management, and trade-processing services." It ranks among the top 20 largest firms by market capitalization globally.

Deutsche Bank is Germany's largest bank and the 4th largest bank in Europe. Its stock plummeted 7.5% percent following German Chancellor Angela Merkel announcement that she is ruling out a bailout before the election next year.

Hedge and investment funds began dumping Deutsche Bank precipitously due to many ailments, including lack of transparency, onerous derivatives positions and its entanglement with the U.S. Department of Justice over mortgage-related frauds. Shares of Deutsche Bank got bashed 7.6% on October 12th alone. Shares are down 67% since April 2015 and over 40% during 2016.

Both of these banks are being propped up by governments and central banks to truncate financial distress. As Jim points out, this is the standard elite response. But the problem with this plan is that it just creates more distress at a later date (or as I like to think of it, kicking the can down the road.)

Because bank behavior hasn't changed, the problems aren't going away.

Deutsche Bank: Europe's Ticking Bomb

In 2008, the U.S. bailout boys helped German giant, Deutsche Bank (DB) stay alive. Why? Because it was entangled in the same mess as the big U.S. banks who had bought insurance for their toxic assets from AIG.

As it faced collapse, DB received $12 billion from the bailout given to AIG. It was a recipient of the same kind of help that Goldman Sachs, Merrill Lynch, and Morgan Stanley received.

The simple reason is that all of their positions were co-dependent financial dominos. If one went down, they'd all go down. Between 2007–10, DB ranked 9th in total emergency loans received from the Fed.

Today, DB's total derivatives figure is around $47 trillion. This is down from $55 trillion in 2013, but at more than 12 times the size of the German economy, it's still too high. Rather than chopping derivative positions — which are entangled with other global mega banks — DB plans to cut thousands of jobs to compensate for the shortfall.

This is also how Germany's second largest bank, Commerzbank, is reacting. (DB's derivatives are caught up with, among others, Bank of America's, which has cut more than 70,000 jobs since 2010.)

The argument these big banks make about their mega derivatives positions is that they are "hedged." In other words, though the total (or "notional") figure is large, most of the long and short positions net out against each other.

The problem with that assessment is that the big banks take long and short positions against each other. They have set themselves up again in domino fashion. If there's too much stress on one side, as we saw in the financial crisis of 2008, then liquidity dries up and crisis occurs. That's when central banks and governments step in to contain — rather than fix — the core of the mess.

The recent trouble for DB was stirred up on September 15. The DOJ announced it was considering fining DB $14 billion. This is for civil claims regarding DB's shady activity related to residential mortgages during the 2005-07 pre-crisis period. (Its market value is about $18 billion.)

The problem is that DB only set aside $6.2 billion to cover legal ramifications. That doesn't account for reserves required to cover a major failure or emergency situation—and both are real possibilities as we face the next recession.

In addition, DB failed the past two stress tests of the Federal Reserve. It has not done much between them to improve its capital shortfall.

Draghi allowed DB to cheat on its stress tests. According to the Financial Times, ECB regulators allowed DB to consider a pending sale as counting towards its capital for stress tests purposes in 2015. DB was still able to raise $4.5 billion from investors. But $3 billion of that is senior debt issued at junk bond interest rates during just the past two weeks.

Cheating enabling aside, ECB head Mario Draghi claimed he wouldn't give DB special treatment. While in Washington, D.C. for an IMF-World Bank conference Oct. 7, Draghi also denied that low rates enable such big banks to remain liquid despite faulty positions.

As he said, "If a bank represents a systemic threat for the euro zone, this cannot be because of low interest rates — it has to do with other reasons." That's simply not true. Low or negative rates provide banks access to cheap capital if they need it, which encourages greater recklessness than if they had to "pay" more for it.

The ECB is truncating this threat of financial distress. While there's no way that DB would be allowed to fail, the stock could still get battered further from where it is now. The only way DB will be able to raise enough capital to regain solvency will be if the ECB and German government oversee a "bail in" that dilutes the claims of today's DB shareholders into oblivion.

We're seeing a similar situation in America with Wells Fargo.

Wells Fargo

Wells Fargo CEO and Chairman John Stump recently addressed both the U.S. House and the Senate. After his address, Massachusetts Senator Elizabeth Warren told him he should resign.

This occurred after the disclosure that 5,300 Wells Fargo employees had created about 2 million fake credit card and deposit accounts, scamming about $2.4 million off existing customers in fees for those accounts. Wells was fined $185 million for those crimes.

Stumpf admitted responsibility for the crimes of his employees. They were fired. He's been asked to give up about $41 million out of his $247 million in stock awards. However, it's stock he doesn't own yet, so he can't use it anyway.

This type of slap on the wrist is a sign of truncating financial distress.

Since the 2008 crisis, Wells Fargo (like other big U.S. banks) has copped to multiple crimes that took place under Stumpf's leadership, totaling $10 billion in fines and settlements. They range from defrauding the U.S. government (for which we, as taxpayers, foot the bill), to pillaging minority customers and misleading shareholders.

If these crimes were committed by a bank without Wells' expansive size and connections, it would be toast by now.

Though Wells Fargo's stock lost value during the hearings, the majority of investors don't care — most notably Warren Buffett. The "Oracle of Omaha" lost around $1.5 billion in personal wealth in one day due to the Wells Fargo scandal, but recovered $1.7 billion after the heat died down.

He's still down around $4.7 billion on Wells in general. His company, Berkshire Hathaway, owns about 10 percent of the shares in Wells and applied in July to buy more. When Jim Rickards and I discussed this, he noted that Buffett has a history of being a "white knight" to financial institutions in distress and turning them around. He did this at Salomon in 1991 and Goldman in 2008.

This is one way that the acceleration of a market collapse can be pulled up short. "Strong hands" step in as buyers to prevent financial distress from gaining more momentum and being transmitted to other markets.

The public scrutiny and the resultant stock price downturn in is a better entry point for the Buffett. Shares of Wells Fargo are down nearly 17% this year and off 10% since the settlement with the Consumer Financial Protection Bureau.

In the wake of the scrutiny, John Stumpf resigned from his post on October 12. His number two, Timothy Sloan, himself a 29-year Wells veteran, became CEO immediately.

The Next President Will Endorse Recklessness

There's no reason for us to expect the pattern of truncation to stop with the next president, no matter who wins the election.

Since the 2008 crisis, the U.S. national debt has skyrocketed from $10.6 trillion to more than $19.5 trillion today. Much of that debt is directly related to the bank-catalyzed crisis and the aftermath of sustaining Wall Street under the guise of helping Main Street.

Add household, corporate and bank debt, and the grand total was a mind-boggling $199 trillion in mid-2014, up 40% since 2007, according to a 2015 study by McKinsey Global Institute.

A dangerous concentration of assets, $10 trillion, sits on the books of the Big Six U.S. banks. These banks have copped to settlements involving upwards of $150 billion worth of fines for a range of criminal behavior, from manipulating public markets to committing fraud against the American public.

That means in the coming months, the Fed will stay vigilant about the capital positions of banks, but keep the cheap money flowing. It might put added pressure on the DOJ to give DB a pass on its settlement amount to avoid contagion to U.S. banks.

Meanwhile, whoever wins, the White House will not promote a modern Glass Steagall to separate our deposits from riskier big bank bets. Trump mentioned it in passing during the Republican Convention to get Bernie Sanders supporters on his side (and it remains on the GOP platform). Since then, he has talked about more deregulation in general, which would give banks a freer rein to commit acts of risk against the public.

Hillary won't do anything to upset the mega-bank applecart or her Wall Street friends, and big donors. Earlier this month, WikiLeaks  released transcript information from Hillary's speeches to Goldman Sachs, including two speeches which netted her an estimated $225K per speech (she bagged over $22 million in total speaking fees from when she was Secretary of State to running for President, nearly $3 million from Wall Street.)

She has repeatedly touted her husband's record on the economy, including in the second presidential debate. That record entailed repealing Glass Steagall in 1999. She's not turning that back.

We can expect more rescuing of the Big Six U.S. banks, while smaller ones take the fall in the next crisis.


Nomi Prins, @nomiprins
for The Daily Reckoning

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Donald Trump Delivers The Most IMPORTANT SPEECH EVER in Valley Forge, Pennsylvania MUST WATCH

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CME Group to start London gold contract in challenge to ICE, LME

Posted: 01 Nov 2016 11:28 AM PDT

Governments and central banks use CME Group exchanges for surreptitious trading of all major futures contracts in the United States:

* * *

By Eddie Van Der Walt
Bloomberg News
Tuesday, November 1, 2016

CME Group Inc. will start London gold and silver contracts in January to offer a spread between spot prices and benchmark U.S. futures, competing with similar planned contracts from Intercontinental Exchange Inc. and the London Metal Exchange.

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BREAKING COVER UP: Michelle Obama just deleted 4 years of tweets!

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BOOM ! WIKILEAKS drops 1 last Nuke on Hillary , it’s over Folks, she can Quit Now – THIS IS IT !

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Gold Bullion Sentiment Hits 3.5-Year High Before US Election

Posted: 01 Nov 2016 03:10 AM PDT

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Breaking News And Best Of The Web

Posted: 01 Nov 2016 02:37 AM PDT

US GDP, consumer spending up strongly, will be revised downward after the election. Deluge of earnings last week, with Apple, Amazon and health care companies disappointing while Google and the big banks did better than expected. The dollar is rising and so is inflation. FBI probing new Clinton emails, polls tightening.   Best Of The […]

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Gold Bullion at 1-Month High as CME Joins London Futures Contract Race

Posted: 31 Oct 2016 05:00 PM PDT

Gold bullion jumped to 1-month highs against a weakening US Dollar in London trade Tuesday, touching $1288 per ounce as Comex futures rose in New York and major Western government bond prices fell, driving yields higher ahead...

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