Sunday, February 19, 2017

Gold World News Flash

Gold World News Flash

"There's Something Weird Going On": Jeff Snider On The Global Dollar Shortage

Posted: 18 Feb 2017 06:18 PM PST

The first time we explained that one of the biggest risks facing a world in which the dollar is the reserve currency is a global USD shortage, was in mid-2009, when we wrote "How The Federal Reserve Bailed Out The World."

At the time, the IMF calculated that just ahead of the financial crisis, "major European banks' US dollar funding gap had reached $1.0–1.2 trillion by mid-2007. Until the onset of the crisis, European banks had met this need by tapping the interbank market ($432 billion) and by borrowing from central banks ($386 billion), and used FX swaps ($315 billion) to convert (primarily) domestic currency funding into dollars." The IMF then extrapolated that "were all liabilities to non-banks treated as short-term funding, the upper-bound estimate would be $6.5 trillion."

Since then the shortage, which some have dubbed a potential multi-trillion dollar margin call, has only grown and became a prominent issue back in March of 2015, when this phenomenon was used to explain why the cross-currency swap had plunged to multi-year lows. As JPM explained at the time, "the fx basis reflects the relative supply and demand for dollar vs. foreign currency funds and a very negative basis currently points to relative shortage of USD funding or relative abundance of funding in other currencies. Such supply and demand imbalances can create big shifts in the fx basis away from its actuarial value of zero."

Fast forward a year and a half later, when none other than the Bank of International Settlements, or the "Central canks' central bank", warned last November that it was no longer the VIX that was the widely accepted barometer of market "fear", it was now the dollar's turn to become the global fear gauge: "just as the VIX index was a good summary measure of the price of balance sheet before the crisis, so the dollar has become a good measure of the price of balance sheet after the crisis. The mantle of the barometer of risk appetite and leverage has slipped from the VIX, and has passed to the dollar."

Shortly thereafter we once recapped the main risks emerging from this increasingly more prominent threat to global financial stability, and wondered at what point would the Fed finally address this risk pointed out not only by this website for nearly 8 years, but also by the BIS, in a post which piggybacked on the recent work by ADM ISI's Paul Mylchreest, who has made tracking the global dollar shortage one of his primary objectives.

* * *

Now, in an exhaustive, 70 minute interview, submitted by Patrick Ceresna at, another prominent analyst who has been closely tracking the global dollar shortage, Alhambra Partners' Jeffrey Snider sat down with Erik Townsend to explain - once again - why this is such a critical topic, even if it comes at a time of unprecedented global complacency (it's amazing what record high stock prices will do to concerns about the future, or lack thereof).

As Snider puts it, while most other risk indicators imply smooth sailing, "there is 'something' weird going on" when it comes to dollar funding and global imbalances of the world's reserve currency, i.e., dollar shortage.

  • In the interview, among the many topics covered, are
  • Understanding the Eurodollar Money Market
  • Swap Spreads and Interbank Hierarchy
  • Dimensions in the Eurodollar Futures and Eurodollar Money Supply
  • Why does the World Need So Many Dollars?
  • How the Eurodollar market supplanted the Bretton Woods System
  • U.S. Dollar and the Dollar Funding Gap
  • Reflation Trade Debunked
  • Interest Rates Trapped
  • Failing Global Currency System

While we urge readers to listen to the full interview below, here are some of the highlights, starting with "why the Dollar shortage a symptom of an inherently unstable system."

As Snider explains, "the dollar shortage isn't so much the shortage per se, it's the fact that it's a symptom of what is an inherently unstable system." He notes that "the reason banks are withdrawing from the system is that it's just is no longer tenable" and "so there has to be some kind of – whether you want to look at it like another Bretton Woods – conference, a global monetary system, a global monetary get together where people start to analyze solutions to the problem as they are rather than keep trying to apply band aids that are not going to work. "

But, he concludes, "step one of that task is to actually recognize the problem as it is and so doing more stimulus or doing more QE isn't going to solve anything it isn't do anything just like prior QEs and prior stimulus haven't done anything either because the problem is an unstable system."

* * *

Snider focuses on the Eurodollar system, which he defines as a problem of "decay and dysfunction" and explains that "nothing ever happens in a straight line even the Eurodollar problem has not been a singular event. It's not been a decade long straight line of decay and dysfunction." 

He goes on to say that the fact that after enough time these markets have adjusted to the fact that the economy's going to be bad for a very long time until something actually changes and so true reflation is predicated on something actually changing rather than the hope that something might change.

Looking at history, Snider observes that "what happened in July 2008 obviously was the fact that everyone decided almost all at once that wasn't the right interpretation of what the Fed was doing nor was it the right interpretation of the dollar system overall. So, that reflation ended in reality which was the dollar system was eroding and it was eroding in a very dangerous way and that's why oil prices essentially crashed from July till I think January 2009."

An implication of the ongoing reserve currency funding shortage is that, according to Snider, despite the occasional blip (arguably funded by massive Chinese credit creation), "reflation is going to fail and there's nothing the Fed can do about it." He goes on to state that "until they fix the global dollar problem we're not going to fix the global economy and so we're kind of stuck gyrating between various levels of really bad. We go from the lack of recovery to what looks like a global recession to the lack of recovery and back again" as a result he thinks that "reflation is going to fail."

Snider also said that "because of how they've defined the last ten years" even the Fed "no longer believes that it's in its interest to do anything." He agrees and sais that "there's nothing that the Fed can do about it."

"In other words, we want them to start considering the global currency system and how it actually is operating and failing rather than their stylized academic approach which doesn't apply. And until they're actually convinced that there is a role for the central bank in that condition output gap or not, we're kind of stuck."

The failure to stimulate benign inflation is captured on the next two charts which show "why this version of 'reflation' is so far less than even 2013's version."

His troubling assessment: "I hate to think of what the next decade might look like because history is not very kind in these kinds of situations where you have prolonged periods of stagnation."

* * *

Putting it all together, Snider goes on to say that the Eurodollar futures market in particular is saying is that "if the Fed is going to raise rates it's not to raise rates for a long or it's not going to be able to raise rates for long." Echoing a warning we - and many others have made on many occasions - Snider says that if the yield curve happens to invert again "if they ever get that far" then it will "immediately be like in 2005 or 2006 all over again it won't stay that way for very long either the market will force the Feds' hand or the Fed will realize the error and correct it. What's important about this is that "in each of these reflation episodes you can clearly see the market's faith in that reflation diminishes each time for these very reasons that we're talking about because these markets have become attuned to the fact the Fed isn't exactly what everybody thought it was, monetary policy isn't what everybody thought it was."

Snider summarizes by saying that "the fact that these markets realize that there's a problem in Eurodollar system, there's no banking to be had, no additional marginal banking capacity being added and without it none of these stuff really matters, none of these other stuff really matters. That's the only thing that truly matters" and concludes gloomily that "the probability scenarios for economic and financial future are much darker now than they were three years ago."

* * *

Snider's full interview can be heard below (Here is a link to the entire podcast transcript):

The embed code for this episode can be found here.

We also urge listeners to follow along using Snider's prepared slides presented below.

World Gold Council fails to ask Greenspan about central bank intervention against gold

Posted: 18 Feb 2017 05:51 PM PST

8:54p ET Saturday, February 18, 2017

Dear Friend of GATA and Gold:

With the February edition of its newsletter, Gold Investor, the World Gold Council inadvertently proclaims its uselessness by interviewing former Federal Reserve Chairman Alan Greenspan about gold without ever asking him about the largely surreptitious involvement of central banks in the gold market and the objectives of that involvement.

This is an especially spectacular failure in light of Greenspan's admission of that involvement in his testimony to Congress in July 1998, wherein he acknowledged that central banks are prepared to lease gold in "increasing quantities" to suppress its price:

Of course the World Gold Council isn't alone in avoiding these crucial questions. These questions are prohibited throughout the mainstream financial news media. Indeed, it has begun to seem that Greenspan conditions interviews on pledges not to ask him about the surreptitious intervention of central banks in the gold market, though such interventions have been extensively documented by GATA for many years, as here:

But mainstream financial news organizations don't purport to be representing gold producers and investors as the World Gold Council does. Once again the World Gold Council has indicated that it exists primarily to ensure that there never is a world gold council.

The World Gold Council's February newsletter is posted in PDF format here --

-- with the Greenspan interview beginning on Page 11.

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


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Friday, February 24, 2017
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* * *

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Arizona bill would remove state tax on profit from sale of gold coins

Posted: 18 Feb 2017 05:21 PM PST

By Howard Fischer
Arizona Daily Star, Tucson
Sunday, February 12, 2017

PHOENIX, Arizona -- Arguing that federal policies have made paper money "virtually worthless," Arizona lawmakers are moving to allow residents to invest in gold coins and not have to pay state taxes on any profits they make when they sell them.

Legislation awaiting a final House vote would carve an exemption in existing laws that require people to report -- and pay taxes -- on capital gains. So, if you buy art, jewelry, or an antique car for $10,000 and sell if for $12,000, you owe the state tax on that $2,000 profit.

But Rep. Mark Finchem, R-Oro Valley, argues that's not true if you're buying U.S. gold coins. He said it's simply exchanging one form of U.S. currency for another.

"If you were to exchange four quarters for a dollar bill, that's not a taxable event," Finchem explained during House debate last week on his HB 2014. ...

... For the remainder of the report:


At 3 Aces Project, Golden Predator Finds 7.5 Meters of 33 Grams-Per-Tonne Gold

Company Announcement
Thursday, January 19, 2017

VANCOUVER, British Columbia, Canada -- Golden Predator Mining Corp. (TSX.V: GPY; OTCQX: NTGSF) is pleased to report assay results for the first 13 holes of a total of 54 holes completed in the winter 2016 drill program at the 3 Aces Project in southeastern Yukon Territory.

Drilling has demonstrated an extension of high-grade gold at the Ace of Spades zone, as well as the exciting discovery of a blind vein and the occurrence of significant assay values in stockwork zones.

Significant results reported at true width include:

-- Hole 3A16-RC-032 intersected 7.54 meters of 32.86 grams per tonne gold from a depth of 16.76 meters, including 0.54 meters of 252 grams per tonne gold; and a new blind vein at a depth of 71.63 meters returned 3.23 meters of 10.04 grams per tonne gold. (The hole ended in mineralization. ...

For the remainder of the announcement:

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Friday, February 24, 2017
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Mining Investment Asia
Tuesday-Friday, March 28-31, 2017
Marina Bay Sands, Singapore

Mines and Money Asia
Wednesday-Friday, April 5-7, 2017
Hong Kong Convention and Exhibition Centre

* * *

Help keep GATA going:

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Investors worldwide could become plaintiffs in class-action suit in UK against bullion banks

Posted: 18 Feb 2017 04:56 PM PST

7:57p ET Saturday, February 18, 2017

Dear Friend of GATA and Gold:

Investors in nine countries have responded to the announcement two weeks ago that a British law firm, Leon Kaye Solicitors, is contemplating bringing a class-action lawsuit in the United Kingdom under that country's Competition Act against bullion banks suspected of manipulating the gold and silver markets:

The firm wishes to remind investors that they could become plaintiffs in such a lawsuit even if they live outside the United Kingdom.

Information about the potential lawsuit is posted at the Leon Kaye Solicitors internet site here:

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


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Tuesday-Friday, March 28-31, 2017
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Wednesday-Friday, April 5-7, 2017
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* * *

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Trump Left Saudi Arabia Off His Immigration Ban... Here's Why

Posted: 18 Feb 2017 04:30 PM PST

Submitted by Nick Giambruno via,

On August 15, 1971, President Nixon killed the last remnants of the gold standard.

It was one of the most significant events in US history—on par with the 1929 stock market crash, JFK’s assassination, or the 9/11 attacks. Yet most people know nothing about it.

Here’s what happened…

After World War 2, the US had the largest gold reserves in the world, by far. Along with winning the war, this let the US reconstruct the global monetary system around the dollar.

The new system, created at the Bretton Woods Conference in 1944, tied the currencies of virtually every country in the world to the US dollar through a fixed exchange rate. It also tied the US dollar to gold at a fixed rate of $35 an ounce.

The Bretton Woods system made the US dollar the world’s premier reserve currency. It effectively forced other countries to store dollars for international trade, or to exchange with the US government for gold.

By the late 1960s, the number of dollars circulating had drastically increased relative to the amount of gold backing them. This encouraged foreign countries to exchange their dollars for gold, draining the US gold supply. It dropped from 574 million troy ounces at the end of World War 2 to around 261 million troy ounces in 1971.

To plug the drain, President Nixon “suspended” the dollar’s convertibility into gold on August 15, 1971. This ended the Bretton Woods system and severed the dollar’s last tie to gold.

Since then, the dollar has been a pure fiat currency, allowing the Fed to print as many dollars as it pleases.

Of course, Nixon said the suspension was only temporary. That was lie No. 1. It’s still in place over 40 years later.

And he claimed the move was necessary to protect Americans from international speculators. That was lie No. 2. Money printing to finance out-of-control government spending was the real threat.

Nixon also said the suspension would stabilize the dollar. That was lie No. 3. Even by the government’s own rigged statistics, the US dollar has lost over 80% of its purchasing power since 1971.

The death of the Bretton Woods system—which was really the US government defaulting on its promise to back the dollar with gold—had profound geopolitical consequences.

Most critically, it eliminated the main motivation for foreign countries to store large US dollar reserves and to use the US dollar for international trade.

At this point, demand for dollars was set to fall… along with the dollar’s purchasing power. So the US government concocted a new arrangement to give foreign countries another compelling reason to hold and use the dollar.

The new arrangement, called the petrodollar system, preserved the dollar’s special status as the world’s reserve currency. For President Nixon and Secretary of State Henry Kissinger, it was a geopolitical and financial masterstroke.

From Bretton Woods to the Petrodollar

From 1972 to 1974, the US government made a series of agreements with Saudi Arabia, which created the petrodollar system.

The US handpicked Saudi Arabia because of the kingdom’s vast petroleum reserves and its dominant position in OPEC—and because the Saudi royal family was (and is) easily corruptible.

The US also picked Saudi Arabia for geopolitical reasons. During the Yom Kippur War of 1973, OPEC’s Arab members started an oil embargo to punish the US for supporting Israel. Oil prices quadrupled, inflation soared, and the stock market crashed.

The US was in a vulnerable position. It needed to neutralize the Arabs’ potent Oil Weapon. Turning a hostile Saudi Arabia into an ally was the key. The alliance would also help check Soviet influence in the region.

In essence, the petrodollar system was an agreement that the US would guarantee the House of Saud’s survival. In exchange, Saudi Arabia would:

1. Take the Oil Weapon off the table.

2. Use its dominant position in OPEC to ensure that all oil transactions would only happen in US dollars.

3. Invest billions of US dollars from oil revenue in US Treasuries. This let the US issue more debt and finance previously unimaginable budget deficits.

Oil is the world’s most traded and strategic commodity. If foreign countries need US dollars to trade oil, it creates a very compelling reason to hold large dollar reserves.

For example, if Italy wants to buy oil from Kuwait, it has to purchase US dollars on the foreign exchange market to pay for the oil first.

This creates an artificial market for US dollars. The dollar is just a middleman in countless transactions that have nothing to do with US products or services.

Ultimately, the arrangement boosts the US dollar’s purchasing power. It also creates a deeper, more liquid market for the dollar and US Treasuries.

Plus, the US has the unique privilege of buying imports, including oil, with its own currency… which it can print.

It’s hard to overstate how much the petrodollar system benefits the US dollar. It’s allowed the US government and many Americans to live beyond their means for decades. And it’s the reason the media and political elite give the Saudis special treatment.

It’s the reason why President Trump left the Saudis off of his recent immigration ban.

It was a glaring omission that Saudi Arabia—the country that provided 15 of the 19 hijackers for the 9/11 attacks—was absent from the list.

In short, the petrodollar is the glue that holds the US–Saudi relationship together. But its bind is not permanent.

Bretton Woods lasted 27 years. So far, the petrodollar has lasted over 40 years. However, the glue is already starting to lose its stick.

I think we’re on the cusp of another paradigm shift in the international financial system, a change at least as fundamental as the end of Bretton Woods in 1971.

The relationship between Saudi Arabia and the US is near historic lows. I only expect it to get worse.

The US government has released 28 previously classified pages of the 9/11 Commission Report, which show Saudi government involvement in the attacks. And Congress passed a law allowing 9/11 victims to sue the Saudi government.

These are major, unprecedented, irreparable blows to the petrodollar arrangement.

Even without these radical changes, the petrodollar could still bite the dust…

The Saudis could decide to sell their oil in Chinese renminbi, euros, IMF SDRs, gold, or many other non-dollar currencies. And they could influence most of OPEC to follow suit.

Or the House of Saud could implode. I think that’s inevitable anyway, given the colossal economic and military mistakes it’s made recently.

The geopolitical sands of the Middle East are rapidly shifting.

Saudi Arabia’s regional position is weakening. Iran, which is notably not part of the petrodollar system, is on the rise. US military interventions are failing. And the emerging BRICS countries are creating potential alternatives to US-dominated economic/security arrangements. This all affects the stability of the petrodollar system.

Right now, the stars are aligning against the Saudi kingdom. This is its most vulnerable moment since its 1932 founding.

That’s why I think the death of the petrodollar system is the No. 1 black swan event for 2017.

I expect the dollar price of gold to soar when the petrodollar system crumbles in the not-so-distant future. You don’t want to find yourself on the wrong side of history when that happens.

When Nixon took the dollar off gold in 1971, it skyrocketed over 2,300%, from $35 an ounce to a high of $850 an ounce in 1980. Gold mining stocks did orders of magnitude better.

I expect the returns to be at least this great after the end of the petrodollar.

But that brings up another crucial point. There’s also likely to be severe inflation.

The petrodollar system has allowed the US government and many Americans to live way beyond their means for decades.

The US takes this unique position for granted. But it will disappear once the dollar loses its premier status.

This will likely be the tipping point…

Afterward, the US government will be desperate enough to implement capital controls, people controls, nationalization of retirement savings, and other forms of wealth confiscation.

I urge you to prepare for the economic and sociopolitical fallout while you still can. Expect bigger government, less freedom, shrinking prosperity… and possibly worse.

It’s probably not going to happen tomorrow. But it’s clear where the trend is headed.

It is very possible that one day soon, Americans will wake up to a new reality, just as they did when Nixon severed the dollar’s last link to gold.

Once the petrodollar system kicks the bucket and the dollar loses its status as the world’s premier reserve currency, you will have few, if any, options.

The sad truth is, most people have no idea how bad things could get, let alone how to prepare…

Yet there are straightforward steps you can start taking today to protect your savings and yourself from the financial and sociopolitical effects of the collapse of the petrodollar. This recently released video will show you where to begin. Click here to watch it now.

"Recessionary" Demand Forces New York Harbor To Divert Gasoline Shipments

Posted: 18 Feb 2017 03:53 PM PST

Two weeks ago, Goldman analysts were stunned when they noted that in recent weeks gasoline demand in the US has collapsed to levels that suggest not all is well with the economy. In fact, as the bank's oil expert Damien Courvalin said "to achieve the 5.9% decline suggested by the weekly data, our model requires PCE to contract 6%, in other words, a recession."


Goldman then quickly changed the unpleasant narrative - one which would suggest that the US economy is in far worse shape than official data represent - and provided several alternative explanations why such a "sudden collapse is unlikely" and said that "we view the larger than seasonal ytd builds in US gasoline stocks as driven by transient supply factors rather than persistent demand issues."

Perhaps, but so far those "transient" supply factors are only getting more chronic, and as supply continues to grow in anticipation of a demand bounce that refuses to materialize, leading to ever louder speculation that there is something very wrong with the US consumer...

... gasoline inventories have hit record levels, and nowhere is this more obvious than on the East Coast, where as Bloomberg writes overnight, "the biggest gasoline market in the U.S. is bursting at the seams."

As a result, just like during last year's unprecedented gasoline glut which, too, was supposed to be "transient", but has only gotten worse, traders are now lining up to export gasoline and diesel from New York Harbor, an area that normally relies on fuel imports from Europe and eastern Canada.

While at least 6 cargoes that were headed to New York from Europe in January and early February were diverted to the Caribbean or the U.S. Gulf Coast, that wasn't enough to stem the oversupply building up in terminals along the Eastern Seaboard. Record-high inventories in the region are now pushing prices low enough to turn the typical trade flow on its head.

Gasoline supplies in PADD1, the Central Atlantic region of the East Coast, the delivery point for New York Mercantile Exchange futures contracts, rose to a record 42.3 million barrels last week. Imports of fuel to the entire East Coast averaged about 350,000 barrels a day in the first 11 months of 2016 while exports averaged 138,000 barrels, EIA data show. The chart below shows just how serious the East Coast inventory glut has become, and why New York harbor is no longer accepting gasoline shipments.

Total U.S. gasoline stocks also touched a record 259 million barrels, even as American refiners produce less fuel during the height of refinery maintenance season. U.S. crude unit outages are expected to average about 1 million barrels a day this month, and peaked last week at 1.29 million.

"We have been exporting out of the New York Harbor, but clearly not
enough, so that's putting pressure on the products," said Robert
Campbell, head of oil products research for Energy Aspects.

As demand fails to rebound, and as product keeps building, the only option is to either divert inbound cargoes or to export more. Both are taking place. According to Bloomberg data, at least two million barrels of clean products like gasoline and diesel are planned to be exported from New York Harbor and Philadelphia in coming days. BP Plc and Glencore Plc are among shippers sending fuels to West Africa and Europe as the U.S. East Coast saw its gasoline stockpiles break a fresh record high for the third consecutive week.

For the time being, there is virtually no hope that this unprecedented product glut will moderate because as the DOE reported last week, crude inventory also hit a new all time high.


While this clearly suggests that the OPEC supply cuts have done nothing to offset record inventories, and that contrary to OPEC pleas the oil market - which are now being boosted by a surge in US shale production which has found a price around $50/barrel to be quite profitable - is far from equilibrium, it also means that both oil and gasoline inventories will only continue to rise, because as refiners begin maintenance shutdowns, crude will accumulate at an even faster pace.

Which brings us to the real question: where is the demand?

While we don't have an answer, we will remind readers that exactly the same situation in which New York Harbor was quietly moving gasoline inventories to other venues as a result of an inventory glut took place last year, and then - just like now - we asked the one question that nobody seems to want answered: why is demand so low? This is what we wrote last August.

Remember that pile up of tankers in NY harbor we wrote about a month ago? Well, they're gone. But not because there is demand for their product - they simply found a different place where to store their excess inventory: gasoline has shifted south amid cargo diversions and deviations. A 330,000-barrel tanker usually on the Houston-to-Jacksonville, Florida, run last month moved two products cargoes to Florida from New York Harbor, according to vessel tracking data compiled by Bloomberg. Since June, at least eight foreign import cargoes originally booked to supply New York were sent instead to the U.S. Gulf Coast and Mexican West Coast.


And just like that, the DOE gets to report a gasoline draw, even though neither supply, nor demand has changed, but was merely a cargo that disappeared from the books as it moved from point A to point B.


Sadly, the problem remains as there is no excess demand for gasoline at either Point A or Point B.  Which means that the bullish catalyst that sent oil surging this week on a modest decline in gasoline, will promptly reverse itself as the tanker glut returns, at either of America's numerous ports.


As PKVerleger summarized, "The situation is extraordinary," and indeed it is, as industry players resort to every last trick in the book to feign incremental demand for either gasoline or oil, when none exists.

And since like in 2016, it all comes down to demand, we wonder at what point will Goldman admit that its "transient factors" explanation is meaningless, and admit that the consumer "recession" it first flagged earlier this month, is the most likely explanation.

In The News Today

Posted: 18 Feb 2017 02:20 PM PST

Bill Holter's Commentary Is Mr. Greenspan trying to save his reputation before the Titanic submerges? Gold Standard Needed Now More Than Ever? – Alan Greenspan Comments February 17, 2017 (Kitco News) – It would be best not to be short-sighted when it comes to gold; at least that is what one former Fed chair says.... Read more »

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

Daniel Estulin: ISIS is an Instrument of Anglo-American Empire (and the Latest on Bilderberg)

Posted: 18 Feb 2017 01:00 PM PST

We speak with Daniel Estulin about ISIS and how it is used as an instrument by the Anglo-American empire. We also discuss his latest thoughts on Syria, Bilderberg, the economy, the media and his new Bilderberg documentary. The Financial Armageddon Economic Collapse Blog tracks...

[[ This is a content summary only. Visit for full links, other content, and more! ]]

One Sign Germany’s Preparing for Euro’s Collapse?

Posted: 18 Feb 2017 07:00 AM PST

This post One Sign Germany's Preparing for Euro's Collapse? appeared first on Daily Reckoning.

"It's tradition. Long-term tradition."

July 2011. Rep. Ron Paul (R-TX), since retired, had just asked Fed chair Ben Bernanke why central banks own gold.

And old Ben said it all came down to tradition. Tradition. Like that annual Easter egg hunt… Thanksgiving turkey… or Friday night pizza. Nothing more.

We can only conclude then that the German central bank is a highly traditional lot…

The German gold hoard weighs in heavy at 3,378 tonnes — second only to the United States.

For decades, much of that gold has been kept abroad for safekeeping. Then West Germany stored up to 98% of its gold abroad during the Cold War. It was a rough neighborhood with the Soviets a couple doors down.

These days the Soviets are gone but the Germans want their gold zurück in Deutschland…

Since 2013 the Bundesbank has been carrying out plans to repatriate half its foreign gold, mostly from storage in New York and Paris. The transfer was supposed to be complete by 2020.

But due to the efficiency so characteristic of Germans, the Bundesbank just announced recently that it intends to fully repatriate the gold by the end of 2017.

Three years ahead of schedule.

Why the rush?

German efficiency only explains so much. Respect for tradition goes so far and no more. Maybe the Germans want their gold back for more… urgent reasons?

The Bundesbank says the reason is to “build trust and confidence domestically.”

Just so. But trust and confidence in what? Maybe the Germans know something…

Whispers circulate — faintly for now — that Germany might be calling in its gold to back a new deutsche mark. The eurozone's built on sand and many see the sand giving way. Many fear the euro may collapse.

Should the euro collapse, a gold-backed deutsche mark might be the only viable alternative, a pillar of stability on golden foundations.

Brexit shook the European Union, but Britain was never on the euro. France, Italy, Spain and Greece are. It could just take one of them to bring down the entire regime. French presidential candidate Marine Le Pen and Italy’s Five Star Movement yelp of dropping the euro. Spain's raising a squawk. Greece is popping off again.

Is that the reason Germany's calling in its gold three years ahead of schedule? To prepare for the euro's demise? Beats our pair of jacks. We have no agents in the Bundesbank at this time.

But there's a good reason Germans incline to gold…

Cultural memories of the post-World War I hyperinflation hang in the German air, penetrate the German soil. In 1923 alone, prices rocketed a trillion-fold. A wheelbarrow of money could scarcely fetch a loaf of bread. Millions lost their life savings.

From the ruins of hyperinflation rose an Austrian with a funny moustache.

If gold's a tradition like Mr. Bernanke asserts, it's a tradition the Germans might be wise to keep.


Brian Maher
Managing editor, The Daily Reckoning

The post One Sign Germany's Preparing for Euro's Collapse? appeared first on Daily Reckoning.

College Meltdown

Posted: 18 Feb 2017 06:48 AM PST

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Is 50% of Western Central Bank Gold gone?

Posted: 18 Feb 2017 02:38 AM PST

Is 50% of Western Central Bank Gold gone?
By Egon von Greyerz

We have recently had some significant news about the sovereign gold market that makes the unclarity even more unclear. Central banks and the BIS in Basel go to great length to tell the world absolutely nothing about their gold dealings. All transactions are carried out covertly and no … Read the rest

Breaking News And Best Of The Web

Posted: 18 Feb 2017 01:37 AM PST

Inflation is spiking on stronger growth, higher oil. Fed likely to raise interest rates next month. US stocks down from all-time highs, gold and silver near multi-week highs. Trump national security adviser quits under Russian cloud, labor secretary nominee withdraws under pressure. Debate over Putin and fake news intensifies.   Best Of The Web 11 […]

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