Friday, August 17, 2012

Quote of the Week

“All truth passes through three stages.

First, it is ridiculed.
Second, it is violently opposed.
Third, it is accepted as being self-evident.”

– Arthur Schopenhauer

Weekend Chillout - Nowhere to run to

This blog congratulates Ecuador for granting Julian Assange diplomatic asylum this week, but as usual the Brits think they are still relevant in this world and are not allowing Julian safe passage out the UK. So it seems for the moment that he still does not have anywhere to run to.

Run away screaming!!

Take away quote:

"It's obvious that he had an operational snafu at MFGlobal, and so chances are that there will be more people that won't be willing to invest with him, but Karen, you and I both know as contrarians sometimes in the markets, you bet on the people that you know for a long period of time. I've known Jon for over 20 years. I think he's an honourable guy"

Swiss Banks throw staff under the bus

The DOJ & IRS have achieved what the Nazi's could never do, turn Swiss bankers into Collabos

China's trade outlook worsens

Aug 16, 2012 by Euronews China's trade outlook for this year is worsening, the country's Commerce Ministry says.

Beijing singled out problems in the European Union - China's biggest overseas market - as the core difficulty for exporters. China's exports to the EU slumped 16.2 percent in July from the same month last year. Overall export growth virtually stalled last month it was up just one percent on a year ago.

Libor investigation grows

Aug 16, 2012 by Euronews US prosecutors have more banks in their sights over the Libor international interest rate fixing scandal.

Reportedly JPMorgan Chase, Deutsche Bank, Royal Bank of Scotland and HSBC Holdings are among those ordered to hand over information as part of a joint investigation by the attorneys general of New York and Connecticut.

Looking for evidence of collusion they want records of communications between the banks. UBS and Citigroup were reportedly earlier asked for similar data. Barclays is also part of the probe. In June it was fined the equivalent of 366 million euros by British and US authorities for manipulating the rate.

Capital Account - Barry Ritholtz on the Ghosts Haunting the Zombified US Housing Market

Aug 16, 2012 by CapitalAccount

41 Years After The Death Of The Gold Standard, A Look At "How We Ended Up In This Economic Purgatory"


Original source

Via Kenneth Landon, JPMorgan... Yes, JPMorgan
Landon Lowdown: "Brother, Can You Spare $1.37"?
As we await the latest developments out of the Eurozone and Washington, I take a moment to look back on this very important day in history. If you want to understand current events, then you first have to understand history. How did we get here? More specifically for financial markets, how did we end up in this mess -- this economic purgatory? The answer boils down to a simple proposition on the philosophical level, which I will leave to the reader to identify because my doing so would likely ruffle a few too many feathers. So I will keep the discussion on the concrete-bound level. However, I am willing to say that the political philosophy that drove us to the current state of affairs was responsible for the respective concrete measures implemented over the years. The crisis in confidence that we observe today resulted from cumulative effects of those measures. 
This being August 15, 2012, students of the history of monetary economics no doubt are aware that this is the 41th Anniversary of the breakdown of Bretton Woods. It was on this day 41 years ago that President Nixon defaulted on the promise to exchange gold for paper dollars presented for exchange by foreign central banks. Aug 15th marks the anniversary of the collapse of Bretton Woods and the gold-exchange standard that was established after WW II. (Notice that dollar debasement has been bipartisan over the years: Republicans Nixon and Bush and Democrats Carter and Obama have all presided over major declines in the value of U.S. money.)
The current crisis in the global monetary system pales in magnitude to the sundering of gold from central banks' fiat paper currencies in 1971. That is, we are not witnessing the wholesale dismantling of an entire monetary system. What we are witnessing is a loss of confidence in the current monetary system, which, of course, is equivalent to a loss of confidence in central banks' ability to restore stability. However, the decision to renege on the gold-exchange standard that was made 41 years ago is still reverberating today. In *fact*, many or most of the problems observed today are the direct result of wrong-headed discretionary monetary policies.
What was it that made the current morass inevitable once the paper dollar was severed from gold?
 The answer is simple: fiat paper money that is not grounded in any objective standard can be manipulated at the whim of the issuer. Without the requirement to exchange fiat money for gold or some other commodity, the central bank can issue unlimited amounts, thus making its value subject to extreme volatility and, as we have seen, perpetual debasement.
Chart 1 (above) shows the extent of debasement of the value of U.S. money since 1913 when the Fed was established. To summarize in simple terms, a child with 4 cents in his pocket could buy the same amount of candy in 1913 as his descendant could with $1 in 2012. Today, it takes a quarter to buy what a penny did in 1913. The dollar has lost 96% of its purchasing power since 1913! (using CPI statistics) Once the dollar lost all linkage to gold, its value plummeted at an accelerated rate. Since 1971 when Bretton Woods was intentionally dismantled, the dollar has lost 82% of its purchasing power. 82%! Because Nixon sabotaged the last vestige of honest money, a child in 2012 would need $1 to buy the same amount of candy purchased by children for just 18 cents in 1971.
Monetary debasement has rendered obsolete the expression "brother, can you spare a dime?", which was the title of a 1930's Depression-era song that became a common refrain of panhandlers in those days. In 2012, the equivalent would be "brother, can you spare $1.37?"
 An honestly governed gold standard eliminates "discretionary" monetary policy by centralized authorities (i.e., central banks).
Gold is an honest check on the amount of leverage that can build in the financial system and it limits the amount of money the government can borrow. A government that does not have a captive central bank and fiat paper currency cannot borrow massive amounts of money (think Greece). Fiat paper money managed by complicit central banks remove any discipline of free-spending politicians. Thus, central banking and huge deficit spending go hand in hand.
Let's turn to a former Chairman of the Fed to give some added explanation:
"Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.
They have created paper reserves in the form of government bonds which -- through a complex series of steps -- the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of society lose value in terms of goods.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold [in 1933]. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
Alan Greenspan, 1966
When Greenspan later rose to a position of prominent political power when named Chairman of the Fed, he disavowed his essay about gold. However, that disavowal does not detract from the truth of his written word. His words stand on their own. (What changed since 1966 was Mr. Greenspan and not the truth.)
We are currently witnessing in both Europe and the U.S. a crisis relating to the financing of the modern-day Social Welfare State that goes to the core of the generally-accepted political philosophy upon which they rest. The resolution of the problem is therefore not as simple as coming up with a new policy that is a derivation of previous ones (e.g., using debt to solve debt). The real resolution will come only after a major shift in political power, if seen at all, that results in a significant reduction in spending of the respective governments. Otherwise, it will be more of the same: a continued decline in living standards and individual liberty in countries experiencing this rot. Profligate central banks are a symptom and enabler of the political rot. They are not the cause.
 The chart 2 (above) shows the gold content of one U.S. dollar. Today, one dollar buys a pitiful 0.0006 ounce of gold, which compares to about 0.05 ounce a hundred years ago just before the Fed existed. The deprivations that Mr. Greenspan wrote about are illustrated in the sharp decline in the gold content of the dollar.
 For point of historical reference, Chart 3 (above) shows the silver content of the Roman Danarius between 64A.D. and 270A.D. You can draw your own conclusions.
"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice."

George Washington, in letter to J. Bowen, Rhode Island, Jan. 9, 1787
Sadly, few people understand the process by which paper money leads to "fraud and injustice" as President Washington accurately warned in 1787. If they did, then perhaps days like Aug 15, 1971 would never have happened.
To end with one last quote, this time from a Socialist who knew the importance of gold:

You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.”
George Bernard Shaw
Shaw wanted to end the Capitalist system and knew, like Greenspan, that gold stood in the way of a Socialist government from achieving its objectives.
August 15, 1971: A day that will live in infamy.

Hong Kong’s Largest Bullion Vault Signals Rising Asia Wealth

I missed this story when it was first published, but seeing the opening date vault was reported as this September the story is still relevant.

By Chanyaporn Chanjaroen - Jul 26, 2012  from

Original source

Hong Kong’s largest gold-storage facility, which can hold about 22 percent of the bullion now in Fort Knox, will open in September to meet rising demand from banks and the wealthy, according to owner Malca-Amit Global Ltd. (3271)

The facility, located on the ground floor of a building within the international airport compound, has capacity for 1,000 metric tons, said Joshua Rotbart, general manager for the Hong Kong-based company’s Malca-Amit Precious Metals unit. Two of the vaults may hold assets, including gold, for banks and financial institutions, and others will be used for diamonds, jewelry, fine art and precious metals, said Rotbart.

The move in Hong Kong reflects increased demand for gold in Asia even as the commodity struggles to sustain its rally into a 12th year. Gold-demand growth in China, the world’s second- largest user after India last year, is slowing, according to the World Gold Council. Vault charges will depend on each customer’s operations, according to Rotbart, who declined to give a figure for the venture’s cost beyond millions of dollars.

Hong Kong is a very important center for gold, especially because it acts as a doorway to China,” said Sunil Kashyap, head of Asia-Pacific foreign exchange and precious metals at Scotiabank. “Current international hubs are in New York, Zurich and London. There’s still a need to set up an Asian hub for physical gold. The trend is for more people to look at storage and trading in Asia, when it comes to physical metal.”

Read more

Brother JohnF - Silver Update: Zing Ya

Aug 16, 2012 by BrotherJohnF

Gerald Celente - "All of Society is Rotting Out!"

Aug 16, 2012 by TheAlexJonesChannel

Today on the exciting Thursday, August 16 edition of the Alex Jones Show, Alex is joined by American trend forecaster, business consultant and author Gerald Celente. He joins Alex to discuss the accelerating economic meltdown that could ultimately lead to Martial Law being declared.

World Gold Council - Gold Demand Trends Q2 2012

Executive Summary

Summary of the factors driving gold demand in Q2 2012, together with forward looking views and opinions on the dynamics and trends in the gold market at a regional and sector level.

Click on the bars to access the report.

"Smart Money" in Marketplace Still Wants Gold

Aug 16, 2012 by KitcoNews

Market-makers Soros & Paulson made headlines this week after their Q2 filing revealed they had increased their stake in SPDR GLD shares, buying more of the exchange-traded metal; but what does it signal for the gold market when two billionaires, who have historically been on the "right" side of the market, make such a move?

Cash is King

This is got to be the strangest vlogger that has ever appeared on this blog, and that is saying something.

Aug 16, 2012 by houseofthemoon

Sprott Money News interviews silver guru David Morgan

Aug 16, 2012 by sprottmoneyltd

Central Bank Gold Demand To Hit Highest Level Since 1964


Original source

Demand for gold by central banks and official sector institutions were more than double the level reported a year ago, as emerging market central banks continue to gobble up gold due to concerns about fiat currencies, such as the U.S. dollar and especially the euro, according to World Gold Council data released Thursday.

Gold reserves at central banks increased by 158 metric tons, a rise of more than 130 percent over the corresponding period last year and the largest quarterly net purchase by this sector since it became a net buyer of the yellow metal in the second quarter of 2009. The official sector accounted for 16 percent of the total gold demand of 990 tons in the second quarter.

Should central banks continue to buy gold at the current rate and add roughly another 250 tons between now and December, official sector gold purchases would likely total around 500 tons this year, which will be a record since 1964, said Marcus Grubb, managing director at WGC.

Purchases in the first half of the year totaled 254 tons, up 25 percent from 203 tons in the same period last year.

"You'll see central banks to continue make major contributions on the demand side of the market, though it's mainly emerging country central banks doing the purchasing," Grubb said.

The Faceplant continues

In the last two months of market weakness which 'asset' which you have preferred to hold?

Aug 16, 2012 by

Facebook stock fell below twenty dollars a share Thursday, marking another low point in the continuing feed of bad news since its highly touted stock market debut.

Who wants the head of Julian Assange?

Aug 16, 2012 by RTAmerica

The Wikileaks founder's saga is nearly over: Julian Assange was granted asylum by Ecuador this morning after hiding out in the country's embassy in London for two months while facing extradition to Sweden. But the picture wouldn't be complete without the reaction from the United States, who has accused the whistleblower for revealing some secret information through the website.

Bahrain update

Aug 16, 2012 by

Bahraini Human rights activist Nabeel Rajab has been sentenced to three years in jail for "participation in an illegal assembly" and "calling for a march without prior notification."