Wednesday, May 9, 2012

Capital Account -Jim Rogers on the need for orderly defaults in Europe

May 8, 2012 by

China Uses Yuan, Gold To Pay For Some Iran Crude


Looks like the old South African days of Gold for Oil are alive and well again.

Original source

By Benoit Faucon

LONDON (Dow Jones) China is using its currency, the yuan, and gold to pay for some of its imports of Iranian crude oil, according to Iran trade professionals.

The news underscores how the Islamic Republic is able to alleviate the effect of mounting sanctions, which in turn could ease global oil supply concerns and push oil prices further down.

One Iran trade professional said last week that Chinese oil companies have for many months been using the yuan to pay for some Iranian oil, after many banks refused to handle payments in dollars.

"In return, Iran is using the currency to pay for infrastructure such as roads," the person told Dow Jones Newswires.

According to a person in the shipping industry, China now represents one-third of Iran's oil sales.

European refiners have cut purchases of the Islamic Republic's crude ahead of a planned embargo coming into force this summer; Asian buyers have also reduced imports to avoid being banned from the U.S. financial system.

Iran is also using a local currency, the rupee, to sell some of its crude to India. However, such a payment mechanism tends to be unfavorable for Iran, locking Tehran into captive trade relations with its oil buyers. In addition, there is only so much the Islamic Republic can buy in goods from China and India.

So in addition to the yuan, Iran has also agreed to be paid in gold for some of its oil, the trade professionals say. In one recent case, two Iranian oil tankers heading for China were bartered at sea with their equivalent in the precious metal, one Iran trade professional said.

Crisis escalates as insurrection breaks German control of Europe

The political dam has broken in Europe. German Chancellor Angela Merkel no longer has enough allies in the club of EU prime ministers to impose her hairshirt agenda. Her methodical plans are disintegrating on every front.

The immediate fate of Greece - and the euro - is in the hands of a boyish motorcycle Marxist. Syriza leader deal Alexis Tsipras has vowed to tear up the hated Memorandum, as the EU-IMF "troika" loan package is known.

He showed no sign of backing off as he met his country's president and began talks on the formation of an implausible Left front. "The popular verdict clearly renders the bailout null and void," he said.

To those who warn that such defiance means an unstoppable lurch towards full default, a banking crash and EMU expulsion, he retorts that Greece has the "ultimate weapon". It can bring down the whole European system if EU leaders refuse to soften the terms.

This bluff may be called. "Patience among the creditor countries is running out," said Blanka Kolenikova from IHS Global Insight. Germany's media says finance minister Wolfgang Schauble is itching to force Greece out of the euro as a salutary example, sure that Europe is strong enough to withstand the shock. This, in turn, is an illusion waiting to be punctured.

Arnaud Mares from Morgan Stanley said a Greek exit would set off "massive deposit flight" from all the vulnerable EMU states. "It could unravel the single currency altogether."

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Photos of life in the British Raj in India

Photos from the time of The British Raj in India from 100 year old negatives found untouched in a shoe box.

click on the image to see all 16 amazing photos

Economic Alert: If You’re Not Worried Yet…You Should Be

By Brandon Smith from Alt-Market

For the past four years I have been covering the progression of the global economic crisis with an emphasis on the debilitating effects it has had on the American financial system. Only once before have I ever issued an economic alert, and this was at the onset of the very first credit downgrade in U.S. history by S&P. I do not take the word “alert” lightly. Since 2008 we have seen a cycle of events that have severely weakened our country’s foundation, but each event has then been followed by a lull, sometimes 4 to 6 months at a stretch, which seems to disarm the public, drawing them back into apathy and complacency. The calm moments before each passing storm give Americans a false sense of hope that our capsized fiscal vessel will somehow right itself if we just hold on a little longer...

I don’t have to tell most people within the Liberty Movement that this is not going to happen. Unfortunately, there are many out there who do not share our awareness of the situation. Debt implosions and currency devaluation NEVER simply “fade away”; they are always followed by extreme social and political strife that tends to sully the doorsteps of almost every individual and family. The notion that we can coast through such a tempest unscathed is an insane idea, filled with a dangerous potential for sour regrets.

There are some people who also believe that the private Federal Reserve with the Treasury in tow has the ability to prolong the worst symptoms of the collapse indefinitely, or at least, until they have long since kicked the bucket and don’t have to worry about it anymore (the ‘pay-it forward to our grandkids’ crowd) . I can say with 100% certainty that most of us will live to see the climax of the breakdown, and that this breakdown is about to enter a more precarious state before the end of this year. You can only stretch a sun-boiled rubber band so far before it snaps completely, and America’s financial elasticity has long been melted away.

A pummeling hailstorm of news items and international developments have made the first half of 2012 almost impossible to track and analyze. The frequency at which negative information has surfaced is almost dizzying. However, a pattern and a recognizable motion are beginning to take shape, and, I believe, a loose timeline is beginning to form.

At the end of January, I covered the incredible nosedive of the Baltic Dry Index (a measure of global shipping rates that signals a fall in global demand) to historic lows. I pointed out the tendency of stocks and the general economy to crash around 8 months (sometimes a little longer) after the BDI makes such a dramatic downturn. Mainstream analysts, of course, attributed the fall to an “overproduction of ships”, which is the same exact excuse they used when the BDI collapsed back in 2008 just before the derivatives bubble burst. It would seem that the cable TV talking heads were wrong yet again, as the international market facade quickly evaporates right in line with the BDI’s almost prophetic knack for calling an economic derailment in advance.

Here are some of the most important reasons why every American should be prepared for much harder days, especially before the end of 2012:

The European Union Is Officially Dead In The Water

Stick a fork in er’, the EU is done! We are talking about full scale dismantlement, likely followed by a reformation of core nations and multiple collapse scenarios of peripheral countries. The writing is all over the wall in the wake of the latest election results in Greece and France, where, as alternative researchers have been predicting for some time, the battle between the government spending crowd and proponents of austerity has reached a fever pitch.

The Greeks and the French are royally pissed over draconian cuts in public programs and the destruction of pensions which have been a mainstay of their economies for quite some time. They are also furious over being sold off like collateral to the IMF and World Bank. Rightly so. Like the American taxpayer, the taxpayers of floundering EU nations are wrongly being held responsible for the financial mismanagement and fraud of their governments and global banks which have remained untouched and unpunished for their trespasses. The problem is, the voters of both countries are signing on to the socialist/quasi-communist bandwagon in response. In Greece, the Left Coalition Party, a splinter group of the traditional communist party, has now taken a primary position of power:

In France, voters have elected socialist Francois Hollande (a Bilderberg attendee), whose latest promise is to spend France into recovery through his “pro-growth agenda”:

I have no doubt that the elections of the EU are as manipulated by elitists as they are here in the U.S., and I’m sure false paradigms abound. Have Europeans forgotten that it was overt government spending that set them on the path to calamity in the first place? Or, are they like Americans; just desperate for any change in the ranks of leadership? One would think that they would take note of the problems here in our country and realize that electing a socialist to replace another socialist is no way out of economic hardship.

Former officials like Nicolas Sarkozy may have claimed to be distanced from the socialist ideal, but, as with all globalist puppets, their actions did not match their rhetoric, and they have always supported policies of centralization and big government. The French and the Greeks have essentially replaced closet collectivists with outspoken collectivists, and will see NO relief from the crisis in the Euro-zone as a result of the political reordering. In fact, the stage has now been set for a volatile chain of dominos. Germany, which is the only economy left holding the EU together, has been unyielding on austerity cuts. A conflict between France and Germany is now inevitable. Neither will compromise their position, and I can see no other eventual result than a reexamination and perhaps abandonment of the EU charter.

How does this affect America? Being that international banks and corporations have forced our countries into interdependency through the engineered chicanery of globalization, any collapse in Europe is going to strike hard around the world, but the worst will hit the U.S. and China. Which is probably why China is disengaging trade away from the U.S. and the EU and focusing on other developing nations:

If you thought the Greek rollercoaster was a pain in the neck for investment markets, just wait until the whole of the EU is in a shambles!

Spain is next in line, with a 25% official unemployment rate and a massive black market economy forming. As I have been saying for years now, when governments disrupt the financial survival of the people, they WILL form their own alternatives, including black markets and barter markets. It is about survival. The Spanish government does not care much for these alternatives, though, and has now banned cash transaction over 2500 euros in a futile attempt to squeeze taxes out of the populace through digitally tracked payment methods:

Another major concern for Americans is the fact that Europeans are inching towards an abandonment of the dollar. Francois Hollande has openly called for an end to the dollar’s world reserve status, and with a majority backing of the French people, he could easily make this happen, at least where France is concerned. All it takes is for a few key countries to publically and completely drop the Greenback and the dollar’s reputation as a safe haven investment will be quashed. This could very well happen before 2012 is over.

QE3 Is The End

Here is the bottom line; U.S. growth is a theater of shadows. There has been no progress, no recovery, only the misrepresentation of statistics. Millions of Americans have fallen off unemployment rolls because they have been jobless for too long, which lowers the unemployment rate, but does not change the fact that they are still without work. Durable goods orders are dropping like an avalanche. U.S. credit has been lowered yet again by rating agency Egan-Jones. With China making bilateral trade deals in numerous countries on the condition that the dollar be dropped as the primary purchasing mechanism, and with the EU turning to economic mulch, the currency’s safety is nonexistent. Traditional investors who cling to the idea that a falling Euro spells dollar strength will be sorely disappointed when the currency is suddenly being rejected in international currency markets.

The Federal Reserve has already stated that any signs of “relapse” into recession (the recession that we never left) will be met with all options on the table, including QE3:

I believe that QE3 will probably be announced this year (due in large part to trauma from Europe), and, that this will trigger a mass movement by foreign nations to drop the dollar as the world reserve. QE3 will be the straw that broke the camel. How exactly this will play out socially and politically, I do not know (I could take a good guess though). But, the technical results are predictable. The Fed will respond to the lack of treasury purchases by ramping up fiat printing in order to cover the ever increasing costs of the government machine. The Greenback will immediately lose a large portion of its value, at least in terms of imported goods, causing inflation in prices. Oil and energy prices will skyrocket if OPEC follows suit (which they will, though the Saudis may still honor dollars for a time). Doing any traditional business will become nearly impossible, and price inflation will dominate the lives and the minds of average unprepared citizens.

The amount of time that it will take for these difficulties to unfold is also not clear. We are operating in uncharted territory, and dealing with a collapse scenario on a truly planetary scale. My best advice is to assume that the avalanche will move fast.

While markets in our country have seen only mild disruptions so far this year, their solidity is predicated on a host of props and costume pieces, any one of which could pull the rug out from under America’s suspension of disbelief if it strays but a little from the illusion. As long as the dollar holds, stocks can be infused with bailout juice through major banks. So can major companies and even desperate state governments on the verge of bankruptcy. The Dow will remain relatively friendly, and day traders and the public will remain happy. As soon as the dollar comes into question, all bets are off…

Does This Mean Doom, Or Just Another Bad Day?

The real beginning of today’s collapse is tied to the events of 2008. The pace of it has been deceptive, but also, in a way, it is a gift. Over the past four years, I have personally seen the awakening of thousands of people that may have never had the chance if the system had gone into full spectrum breakdown right away. The question now is, how much longer can the U.S. wobble along on one wheel? In my view, and from the evidence I see in markets at the moment, not much longer.

It is hard to set aside any expectations that the next leg down will be easy to digest for the populace. The reality of our predicament is starting to hit home. All the tax return checks have been spent. The credit cards have been maxed. The new cars have been sold off and traded in for ghetto-mobiles. The good jobs have been replaced with Taco Bell slavery. A trip to see The Avengers is now the family vacation. And, the distractions of reality TV just aren’t buttering our bread anymore. It’s the little things at first that really signal the financial mood of a society, as well as reveal the more vital and looming issues just over the horizon.

All indicators suggest that this year will be unlike any other before. In 2008, we saw the first trigger events for the collapse. In 2008/2009, we saw the creation of the bailout culture, setting the stage for inflation and dollar disintegration. In 2010, we saw the first bilateral trade deal cutting out the dollar between China and Russia, which is now the template for trade deals all over the globe. In 2011, we saw the first downgrade of the U.S. credit rating and the crisis in the EU become epidemic. In 2012, I see not just another difficulty to add to the mountain, but a culmination of all these detriments to produce something entirely new; a vast and subversive realignment forcing many of us to take a more aggressive stance in the fight for an economically and socially free America.

Financial disasters have always been a convenient catalyst for a host of even more frightening obstacles, including civil unrest, and blatant totalitarianism. This is the cusp. It is one of those moments that people of later generations read about in awe, and sometimes horror. The “doom” is not in the event, but in the response. What we make of the days approaching determines the darkness that they cast upon the future. It is a test. It is not something to be dreaded. It is something to be seized upon, and dealt with, as great men and women before us have done. At the very least, we know that it is coming. That, in itself, could well seal our success…

USA Headed For Tremendous Shock - Hugo Salinas Price

May 8, 2012 by whygoldandsilver

The 'Value' of Gold

Another classic hit piece on Gold by the CNBC team. Although they grudgingly had to admit that the S&P500 has just reached the same price as it did in mid 1999 "the stock market and the s&p 500 and closing at 1369. you know the fertile time it closed above that was july 1st, 1999. gold has about quintupled in price. i can't speak for gates, but warren buffett tends not to worry about inflation or thinking like that. he is a long-term investor looking for growth and good management and all those things. none of which you get from investing in gold." but that is the point of gold, it doesn't need "good management" what ever that means, large companies rarely have it. Also I wouldn't worry too much about inflation if had Buffet's pay check, but I don't, so I need to worry about inflation and how to pay for my rising petrol, gas and particularly my electricity bills when the carbon based life form tax kicks in later this year. 

In the article below I love the fact that Jeff Cox still refers to Gold investors as "Gold Bugs", but those who love their paper, like Buffett are "value investors".

Also Jeff's key point "Buffett and Gates dislike gold because it is too hard to value"  Would that be because Gold doesn't pay a dividend? Well Buffet's company Berkshire Hathaway hasn't paid a dividend since 1967 yet some how the market in its infinite wisdom has managed to price it at an astounding $123,744 per share. Isn't the market amazing it can come up with a price for everything even, those items that are "hard to value".

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Original source

It's not everyday you can find people to take the opposite side of a trade from Warren Buffett and Bill Gates, but then gold is not your average trade.Gold bugs are known as some of the most passionate investors, so not even high-level slams from the Oracle of Omaha and the founder of Microsoft [MSFT 30.50 -0.15 (-0.49%) ] can cool their fire.

"Absolutely I would take the other side of that trade," says Michael Pento, founder of Pento Portfolio Strategies in Holmdel, N.J. "The stock market has gone nowhere in nominal terms in 12 years. It makes sense as a default under the current conditions of negative real interest rates to own something that keeps you afloat, that preserves your purchasing power."

Pento is the former senior economist at Euro Pacific Capital, the firm run by noted gold enthusiast Peter Schiff. Pento has nailed the trajectory of gold's price for the past three years running.

Key Points:

Buffett and Gates dislike gold because it is too hard to value.
Gold bugs say the investment is a critical safe haven.

Primarily because of the Federal Reserve's weak-dollar policies, Pento expects gold to continue to hold its place as an inflation hedge, as well as a safe-haven asset to buffer against global debt contagion.

For 2012, he thinks gold should be able to hit $1,900 an ounce.

"I would ask Mr. Buffett if he could own a lone share of a representative of the S&P 500, or would he rather have the equivalent of an ounce of gold?" Pento says. "Which investment has done better over the last dozen years? The answer is clear: Gold."

Buffett and Gates primarily don't like gold because of its lack of intrinsic value. It's not the same as holding shares in a company that has a clear revenue stream and business model, which in turn make it comparatively easy to value. (Buffett's right-hand man at Berkshire Hathaway [BRK.B 82.22 -0.25 (-0.3%) ], Charlie Munger, has been less diplomatic, suggesting in an interview Thursday that no "civilized person" should own gold.)

Rather than being cowed by Buffett's legend as a buy-and-hold investor, some gold advocates instead consider him out of touch with present-day conditions.

"His track record since 2008 has not been very good," says Kathy Boyle, president of Chapin Hill Advisors in New York. "He might be the Oracle of Omaha for the long-term, but short-term since 2008 his trades have not been that great."

Buffett on the Golden Trade

MON 07 MAY 12
Billionaire investor, Warren Buffett explains why he doesn't see any value in the gold trade.

click on image to play video

Trade the Close: Trading Gold

TUE 08 MAY 12 | 03:43 PM ET

Turkey Exports “Massive Quantities Of Gold” to Iran and Arab Spring Nations

As is often the case paper gold got burnt at the open of trade in New York overnight, at the lows briefly dipping below the support level of $1,600 before rebounding and limping away....... 

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Original source

Gold edged lower on Tuesday despite the weaker euro and stock markets after furious citizens in Greece and France voted against austerity measures. Gold prices are being supported by bargain hunters who continue to buy dips around the lower end of the metal's recent range between $1,620/oz and $1,680/oz.

The elections in France and Greece create added political uncertainty to an already extremely uncertain financial and political situation and this is likely to weigh on the euro.

Euro gold remains firm around the EUR 1,250/oz level where it has been consolidating since mid March – in a range between €1,228/oz and €1,276/oz.

Gold has been trading between $1,620 and $1,680 for about a month. It is supported by the very uncertain macroeconomic and monetary environment but recent price weakness has made some buyers – especially more speculative buyers in western markets hesitant.

Gold’s long term trend towards higher prices remains intact (see Sharelynx chart below).

Gold’s support is coming from store of wealth buyers including central banks and the increasingly important Middle East and Far East Asian and Chinese buyers.

Mainland China’s gold imports from Hong Kong surged a huge six fold in the first quarter when prices were between $1,550/oz and $1,800/oz and this demand is supportive of prices at these levels.

China is set to displace India as the world’s largest consumer of gold in the coming months.

Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) between January and March, from 19,729 kilograms in the year-earlier period. Hong Kong's gold exports to China in March increased about 59% on the month to the 3rd highest level on record, and the gold flow from China surged to its highest in the last 2 years.

The lack of enthusiasm for bullion amongst western buyers in recent weeks may be beginning to change as there has been an increase in demand in recent days due to growing concerns about Spain and the risk of contagion in the Eurozone.

Gold 1 Year Chart – (Bloomberg)

Deepening political uncertainty in the eurozone is also leading to a slight uptick in demand.

U.S. mint gold coin sales show how demand for bullion is picking up. The U.S. Mint’s sales of American Eagle gold coins rose 12% to 22,500 ounces so far in May, compared with 20,000 for all of April.

Gold imports by India could rise again on a backlog of demand from jewellers after the federal government decided to scrap an excise duty on jewellery it imposed in March 2012.

Turkey Exports “Massive Quantities Of Gold” to Iran & Arab Spring Countries

Iranians and Arab Spring countries are buying “massive quantities of gold” in order to protect their wealth from political instability and depreciating currencies.

Iran boosted imports of gold, jewelry and precious metals from Turkey by 3,692% from $13 million in March a year ago to $480 million in March 2012, according to the statistics agency in Ankara April 30 - as reported by Bloomberg.

The gold market was the biggest contributor to a $4.3 billion improvement in Turkey’s trade balance this year. That has aided Turkey and sent Turkish yields on benchmark two year notes 155 basis points lower this year. This is the biggest drop among major developing nations.

While Turkey has assured the U.S. government it will cut purchases of oil from Iran by 20% this year, its total trade with the Islamic Republic increased 47% to $4.8 billion in the first quarter from a year earlier.

Sanctions aimed at isolating Iran because of its nuclear program, combined with revolutions in the Middle East, have spurred a tripling in the region’s purchases of Turkish precious metals and jewels to $942 million in the first three months, from $282 million in the same period last year.

This 30% increase in demand is contributing to gold remaining above $1,600/oz in what has all the hallmarks of another period of consolidation prior to higher prices.

“Turkey is exporting massive quantities of gold to Iran and Arab Spring countries as citizens in those countries switch to portable wealth,” Mert Yildiz, chief economist for Turkey at Renaissance Capital, told Bloomberg on April 30.

The increase in trade with Iran comes as sanctions make it harder for trading partners such as Turkey, India and China to pay in dollars and euros.

Iran said in February it would accept payment in any local currency or gold.

Reuters report today that Iran is accepting payments in yuan for some of the crude oil it supplies to China, the Iranian ambassador to the United Arab Emirates said on Tuesday. "Yes, that is correct," Mohammed Reza Fayyaz told Reuters when asked to comment on an earlier report in The Financial Times.

The newspaper cited unidentified industry executives in Beijing as saying most of the oil that goes from Iran to China is handled by the Unipec trading arm of Sinopec China's second-largest oil company, and through another trading company called Zhuhai Zhenrong.

Fayyaz also confirmed that Iran was spending the currency on goods and services imported from China.

Currency wars recently escalated when Iran’s central bank and more than 20 other Iranian banks were expelled from the Society for Worldwide Interbank Financial Telecommunication, known as Swift, in March.

It is now almost impossible for Iran to complete large international fund transfers and this was regarded as a form of economic warfare.

The Iranian currency has plunged by over 30% in just over 6 months - to 17,300 rials to the dollar from 13,200 on Nov. 2. The central bank said inflation was 21.5% in the Iranian year that ended March 19.

Turkey has been a net exporter of more than $1 billion of gold, jewelry and precious metals so far this year after importing a net $411 million in the same period last year, according to official statistics. Turks give gold as gifts for events from births to weddings, and have traditionally used the metal as a store of value against yearly inflation that was more than 70% as recently as a decade ago.

Turks are believed to have a massive 5,000 tons of gold “stashed under their pillows.” So estimated Ozcan Halac, head of the Istanbul Gold Exchange, in March. That’s about $265 billion, or a third of Turkey’s gross domestic product, based on a gold price today of $1,640.29 an ounce.

In March, The Wall Street Journal reported how this Turkish government, facing a bloated current account deficit is to attempt to persuade Turks to transfer their vast personal holdings of gold into the country's banking system.

Julian Assange's The World Tomorrow: Nabeel Rajab & Alaa Abd El-Fattah (E4)

May 8, 2012 by