Monday, September 15, 2014

Gold is an Analog Asset

Wat Phra Kaew Temple, Bangkok

At dinner last night Jim Rickards and I were discussing the merits of gold as an asset class, and I hit on the term "Analog Asset", in that gold unlike almost all other asset classes, even real estate, is not digitally vulnerable to cyber attack and exchange disruptions.

Shares, bonds, CDs are only liquid if they can trade on the exchanges they are listed on being available. Whereas gold (and other precious metals) whilst traded on exchanges can also trade directly without a third party between buyer and seller. In a world heading into a new Cold War with Russia, growing tensions with China and ISIS in the Middle East owning an asset that is impervious to a military cyber attack seems very prudent.

Sydney to Become Renminbi Hub

Sept. 15 (Bloomberg) –- Westpac Head of Institutional Banking Rob Whitfield discusses Sydney possibly becoming the next Renminbi hub by the end of the year and why global markets could be heading for a significant correction. He speaks to Bloomberg’s Stephen Engle from the World Economic Forum in Tianjin, China.

Partying with Jim Rickards

I had the pleasure to have as my birthday party guest over the weekend the legendary Jim Rickards, who was returning to New York, via Sydney after presenting at a conference in Alice Springs.

If you don't already follow Jim on twitter I highly recommend it, you can even check out his holiday snaps of Australia's Red Centre. His twitter account is:


Brother JohnF - Silver Update: Impending Flood

From BrotherJohnF

Obama Plans on "Attacking" the Terrorists that America Fostered

From GlobalResearchTV

Published on Sep 14, 2014

James Corbett appears on Press TV to discuss the new American-led coalition to attack ISIL targets in Syria and Iraq. He discusses the hypocrisy of a country that has actively helped to foster, train, equip and aid these terrorists presuming to then lead a military expedition against them.

Aussie Dollar Flirting with Sub 90 Cents Level adds Support to Gold and Silver Prices

The Aussie dollar has been battered this week with geopolitical events having caused a rise in demand for the US Dollar. This week has also seen a sell off in gold and silver, but in Aussie dollars the fall has been muted, prices in AUD have actually increased since late last week.

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Keiser Report - Global Ponzi Scheme

From RT

Published on Sep 13, 2014

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the ‘sans dents’ as the new ‘sans culottes’ as the bubbles will continue until morale improves. They also discuss inflation without compensation.

In the second half, Max interviews David Smith of the Geneva Business Insider about the Swiss Gold Initiative, the impact of sanctions and the wave of anti-EU sentiment spreading across Europe.

Why The Rigging Of The Gold Market Matters

By Alasdair Macleod via The Cobden Centre

In a radio interview recently I was asked a question to which I could not easily give a satisfactory reply: if the gold market is rigged, why does it matter?

I have no problem delivering a comprehensive answer based on a sound aphoristic analysis of how rigging markets distorts the basis of economic calculation and why a properly functioning gold market is central to all other financial prices. The difficulty is in answering the question in terms the listeners understand, bearing in mind I was told to assume they have very little comprehension of finance or economics.

I did not as they say, want to go there. But it behooves those of us who argue the economics of sound money to try to make the answer as intelligible as possible without sounding like a committed capitalist and a conspiracy theorist to boot, so here goes.

Manipulating the price of gold ultimately destabilizes the financial system because it is the highest form of money. This is why nearly all central banks retain a holding. The fact we don’t use it as money in our daily business does not invalidate its status. Rather, gold is subject to Gresham’s Law, which famously states bad money drives out the good. We would rather pay for things in government-issue paper currency and hang on to gold for a rainy day.

As money, it is on the other side of all asset prices. In other words stocks, bonds and property prices can be expected to rise measured in gold when the gold price falls and vice-versa. This relationship is often muddled by other factors, the most obvious one being changing levels of confidence in paper currencies against which gold is normally priced. However, with bond yields today at record lows and equities at record highs this relationship is apparent today.

Another way to describe this relationship is in terms of risk. Banks which dominate asset markets become complacent about risk because they are greedy for profit. This leads to banks competing with one another until they end up ignoring risk entirely. It happened very obviously with the American banking crisis six years ago until house prices suddenly collapsed, threatening to take the whole financial system down. In common with all financial bubbles everyone ignored risk. History provides many other examples.

Therefore, gold is unlike other assets because a rising gold price reflects an increasing perception of general financial risk, ensuring downward pressure on other financial asset prices. So while the big banks are making easy money ignoring risks in equity and bond markets, they will not want their party spoiled by warning signs from a rising gold price.

This is a long way from proof that the gold market is manipulated. But the big banks, and we must include central banks which are obviously keen to maintain financial confidence, have the motive and the means. And if they have these they can be expected to take the opportunity.

So why does it matter if the gold price is rigged? A freely-determined gold price is central to ensuring that reality and not financial bubbles guides us in our financial and economic activities. Suppressing the gold price is rather like turning off a fire alarm because you can’t stand the noise.