Friday, November 30, 2012

Of Bubbles

"Eye of newt, and toe of frog,
Wool of bat, and tongue of dog,
Adder's fork, and blind-worm's sting,
Lizard's leg, and howlet's wing,--
For a charm of powerful trouble,
Like a hell-broth boil and bubble"

Second Witch, Macbeth

The following is the classic timeline of all financial bubbles. I have added where I currently think Gold and Silver are placed. Whilst some might point out the lack of a dip in the silver price in the 2008 and 2011 period I believe that come the mania phase the drop in those periods will be seen as a slight dents when plotted on a axis with considerably larger numbers than silver charts currently possess. Of course these are just my opinions and no one can compute the myriad of variables and unknowns of the future but if you believe we are in for a bubble in Gold and Silver one day then this a good a guide as any to the possible price action.

Julian Assange - Entire nations intercepted in total web surveillance

Nov 30, 2012 by

UN triumph for Palestine

Nov 30, 2012 by

The UN General Assembly has voted to upgrade Palestinians' diplomatic status to a "non-member observer state," thus implicitly recognizing a Palestinian state. This comes despite strong opposition from the US and Israel - FULL STORY

USA Watch Dog - Weekly News Wrap-Up

Nov 29, 2012 by usawatchdog

Weekend Chillout - Turkish Gold

With all the breathless news in the Gold press and on CNN about Turkey daring to pay for Iranian gas with gold, instead of showering in cold water and freezing in cold homes over winter, chillout goes all things gold and Turkish.

Clinton: UN Palestine Vote "Counterproductive"

Note the "Avoid Trivia" logo behind Clinton, how right they are.

Nov 29, 2012 by AssociatedPress

The United Nations has voted overwhelmingly to recognize a Palestinian state. Secretary of State Hillary Rodham Clinton called the recognition "unfortunate and counterproductive."

Friday Afternoon Silliness - Purple Telestubbie Arrested

Asia Week Ahead: Australia's growth set to sputter

Nov 29, 2012 by ReutersVideo

Australia's Q3 GDP growth is likely to have slowed on weaker commodity prices, while Japan's economic gloom plays into upcoming elections.

Brother JohnF - Silver Questions

Nov 29, 2012 by BrotherJohnF

Alex Jones on NWO

Nov 29, 2012 by TheAlexJonesChannel

On this Thursday, November 29 edition of the Alex Jones Show, Alex covers the impending fiscal cliff, continued thuggish behavior by the TSA, and schools locking students up in solitary confinement.

Japan injects billions to revive ailing tech industry

Nov 29, 2012 by AlJazeeraEnglish

The Japanese government has approved a $10.7bn stimulus package to help boost the ailing economy. Many of the country's major industries are struggling to stay profitable. The country's once strong technology industry in particular is suffering - with well-known electronics brands posting major annual losses and announcing job cuts. Al Jazeera's Harry Fawcett reports from Tokyo.

Bank of Japan at a turning point?

Nov 29, 2012 by ReutersVideo

Nov. 30 - Big changes are expected at Japan's central bank next year--which given its questionable track record isn't a bad thing, says Bank of Singapore chief economist Richard Jerram. Tara Joseph reports.

UN Vote Recognizes State of Palestine

Nov 29, 2012 by AssociatedPress

The United Nations has voted overwhelmingly to recognize a Palestinian state. The resolution was approved by a more than two-thirds majority of the 193-member world body.

US approaches fiscal cliff

Silver Spoon Nation

From The Brisbane Times

Original source

Australia will be the second-best country in the world to be born in next year, a study says.

The "lucky country" scored 8.12 out of a possible 10 points, just 0.1 behind Switzerland, The Economist's Intelligence Unit said in their 2013 where-to-be-born index released last week.

Indicators used include geography, demography, social and cultural characteristics, government policies and the state of the world economy.

The list was dominated by smaller economies, with larger European economics such as Great Britain (27th), France (26th) and Germany (16th) languishing further down the list. The US, which topped the 1998 list, came in 16th.

Read more:

Fed's Economic Stimulus Plan to Continue in 2013

Federal Reserve officials are nearing a decision to continue stimulus efforts into 2013 as the U.S. faces the fiscal cliff and fragile economies elsewhere in the world. WSJ's Chief Economics Correspondent Jon Hilsenrath reports.

Iran Importing Gold to Evade Sanctions

Breaking The Set with President Jimmy Carter

Nov 29, 2012 by breakingtheset

Abby Martin Breaks the Set on US Foreign Policy, Palestinian Statehood, Jimmy Carter and the erosion of the rule of law.

Capital Account with Bob English

Nov 29, 2012 by CapitalAccount

Gold - Solution to the Banking Crisis

BIS Tower, Basel Switzerland
By: Eric Sprott & David Baker

Original source

The Basel Committee on Banking Supervision is an exclusive and somewhat mysterious entity that issues banking guidelines for the world’s largest financial institutions. It is part of the Bank of International Settlements (BIS) and is often referred to as the Central Banks’ central bank. Ever since the financial meltdown four years ago, the Basel Committee has been hard at work devising new international regulatory rules designed to minimize the potential for another large-scale financial meltdown. The Committee’s latest ‘framework’, as they call it, is referred to as “Basel III”, and involves tougher capital rules that will force all banks to more than triple the amount of core capital they hold from 2% to 7% in order to avoid future taxpayer bailouts. It doesn’t sound like much of an increase, and according to the Basel group’s own survey, the 100 largest global banks will only require approximately €370 billion in additional reserves to comply with the new regulations by 2019.1 Given that the Spanish banks alone are believed to need well over €100 billion today simply to keep their capital ratios in check, it is hard to believe €370 billion will be enough protect the world’s “too-big-to-fail” banks from future crises, but it is indeed a step in the right direction.2

Initial implementation of Basel III’s capital rules was expected to come into effect on January 1, 2013, but US banking regulators issued a press release on November 9th stating that they wouldn’t meet the deadline, citing a large volume of letters (ie. complaints) received from bank participants and a “wide range of views expressed during the comment period”.3 It has also been revealed that smaller US regional banks are loath to adopt the new rules, which they view as overly complicated and potentially devastating to their bottom lines. The Independent Community Bankers of America has even requested a Basel III exemption for all banks with less than $50 billion in assets,“in order to avoid large-scale industry concentration that would curtail credit for consumers and business borrowers, especially in small communities.”4 The long-term implementation period for all Basel III measures actually extends to 2019, so the delays are not necessarily meaningful news, but they do illustrate the growing rift between the US banking cartel and its European counterpart regarding the Basel III framework. JP Morgan’s CEO Jamie Dimon is on record having referred to Basel III regulations as “un-American” for their favourable treatment of European covered bonds over US mortgage-backed securities.5 Readers may also remember when Dimon was caught yelling at Mark Carney, Canada’s (soon to be former) Central Bank Governor and head of the Financial Stability Board, during a meeting in Washington to discuss the same topic.6 More recently, Deutsche Bank’s co-chief executive Juergen Fitschen suggested that the US regulators’ delay was “hurting trans-Atlantic relations” and creating distrust... stating, “when the whole thing is called un-American, I can only say in disbelief, who can still believe in this day and age that there can be purely European or American rules.”7Suffice it to say that Basel III implementation has not gone as smoothly as planned.

One of the more relevant aspects of Basel III for our portfolios is its treatment of gold as an asset class. Documents posted by the Bank of International Settlements (which houses the Basel Committee) and the United States FDIC have both referenced gold as a “zero percent risk-weighted item” in their proposed frameworks, which has launched spirited rumours within the gold community that Basel III may define gold as a “Tier 1” asset, along with cash and AAA-government securities.8,9 We have discovered in delving further that gold’s treatment in Basel III is far more complicated than the rumours suggest, and is still, for all intents and purposes, very much undecided. Without burdening our readers with the turgid details, it turns out that the reference to gold as a “zero-percent risk-weighted item” only relates to its treatment in specific Basel III regulation related to the liquidity of bank assets vs. its liabilities. (For a more comprehensive explanation of Basel III’s treatment of gold, please see the Appendix). But what the Basel III proposals do confirm is the regulators’ desire for banks to improve their liquidity position by holding a larger amount of “high-quality”, liquid assets in order to improve their overall solvency in the event of another crisis.

LBMA Smoke Signals Smell Fishy

From Cheviot Asset Management:
Click to enlarge

The Silver Saga

By Antal E. Fekete

Antal E. Fekete
An Address Delivered at the Conference Held at the University of Padova
on November 30, 2012
“Coin Finds and Historical-Economic Processes in the Ancient World:
Ten Years of Research 2002-2012”
The silver standard did not die a natural death. It was deliberately killed. A proper search for the assassins was never carried out. There was never a post-mortem. In this paper we focus on the conspiracy as it might have unfolded between the two dates: April 9, 1865 (the day General Lee of the Confederacy surrendered at Appomattox to General Grant of the Union marking the end of the War Between the States) and January 1, 1879 (Resumption Day, when payment of the victorious Union’s currency, the greenback was resumed in gold specie ̶ but not in silver).
China has been on the silver standard since time immemorial. The Chinese did not use coins for monetary purposes such as bank reserves until the end of the 19th century; they used the sycee, a shoe-shaped ingot of approximate size 533 inches, weighing approximately 50 taels or about 5 pounds (avoirdupois). No one can pretend to know, however approximately, how much monetary silver has gone into hiding in China and in India, these two most populous countries also known as the world’s sink for silver, over the millennia. In comparison estimates of monetary gold having gone into hiding over the same period of time are far more reliable. Be that as it may, the amount of monetary silver unaccounted for is probably greater than any estimate ever made.
In the 19th century silver coins did most of the money-work in the world. The turnoverof silver coinage (the value of silver coins times their velocity) was at an all-time high, eclipsing the turnover of gold coinage by far. Inept governments did not follow the lead of Isaac Newton, and they tried to enforce a rigid exchange rate between the two monetary metals (called the Mint ratio). This system was called bimetallism ̶ a stillborn idea.
Bimetallism did not stabilize the exchange rate. On the contrary, it has destabilized it. The natural monetary system is based on silver and gold valued at a variable rate, as Newton’s monetary system in Britain did. Bimetallism was the disease, the demise of the silver standard was the unfortunate consequence. In the Western countries by 1879, in India by 1893, in China, the last stronghold of silver, by 1935, silver was demonetized. Between the two dates 1879 and 1935 the world witnessed a most spectacular event: the collapse of the value of silver by more than 80% in a little over half of a century. Silver fell from $1.29/oz in 1873 to 25¢/oz in 1935. Putting it differently, the gold/silver price ratio rose from 15:1 to more than 80:1. Never in history, ancient or modern, have markets put such fancy values on gold in terms of silver.
Who killed the silver standard?
All this can be neatly explained in terms of the Quantity Theory of Money. The richest silver vein ever, called the Comstock Lode was discovered in Nevada in 1858. Surplus silver inundated the economy and lost most of its value due to the oversupply and the lack of matching demand.
But this explanation will not satisfy those of us who consider the Quantity Theory of Money as a mere mechanical metaphor. As a theory it is bound to fail because it is trying to give a linear explanation of highly non-linear phenomena. January 1, 1879, Resumption Day, when the payment of the greenback in gold (but not in silver) specie was resumed, coincided with the date when the Latin Monetary Union in Europe closed its last Mint to silver ̶ marking the end of the silver standard in the Western countries. The coincidence is ominous.
No satisfactory explanation has been offered in the literature for the fact that the closing of the Mints to the free coinage of silver was the starting point of an unprecedented destruction of wealth world-wide, due to the relentless fall in the price of silver during the following 55 years. To make matters worse, it was destruction ofliquid wealth. Not only did silver lose more than 80 percent of its purchasing power; it also ceased to be a monetary metal. As a consequence, silver became so much harder to sell. Worse still, the steadily falling price caused panic-mining of silver. Miners were anxious to sell before the price fell even more. As a result, almost all silver mines were mined out prematurely. Thereafter all silver output came as a byproduct of mining other minerals. These effects compounded and made the destruction of monetary values, that is deflation by another name, so much worse.
The collapse of the silver price was a major historical event affecting the entire globe and all trading nations of the world. It caused the impoverishment of the indigent classes in India, China, and elsewhere in Asia. But it also wiped out the credit-worthiness of the middle classes in Europe that lost their landed wealth as a consequence. Monetary historians failed to treat this aspect of the demise of the silver standard with the seriousness it deserved. They also misdiagnosed the deflationary bias that the monetary system showed in the first half of the 20th century. The gold standard that arose on the ashes of the old monetary order in the wake of the destruction of the silver standard was less than satisfactory. Silver demonetization has made all hoarding demand fall upon gold. This imparted a deflationary bias to the international gold standard that enemies of sound money were able to exploit with all consummate skill. Following a vicious campaign of anti-gold agitation gold was also demonetized by the governments exactly one hundred years later, in 1973. The demonetization of gold was no less unconstitutional than that of silver a hundred years earlier. It was also based on chicanery for good measure.
It should be noted that hoarding gold and silver is not an aberration. It is, in fact, part of the essential mechanism regulating the rate of interest. It will bar the banks from suppressing interest. When depositors realize what the banks are up to, they withdraw their deposits in the form of gold coin. The banks lose reserves and are forced to call in loans. It will also act as a deterrent against government profligacy. Ordinary citizens become disturbed by the government’s overspending and serial budget deficits. In response they show a preference for holding their liquid wealth in gold coins instead of short-term government paper. Such hoarding demand previously fell upon gold as well as silver. Now it was falling upon gold exclusively. The deflationary consequences are obvious.
One instinctively feels that there is no way self-destruction of liquid wealth of so great a magnitude could occur spontaneously in such a short space of time. The event could not be explained on the strength of causality. We must invoke teleology if we really want to understand it. Such an analysis was never carried out. Furthermore, speaking of destruction of wealth is not quite accurate. Value was not destroyed in the same sense of a house burning to the ground.

Nuke 'em for Peace!

Nov 28, 2012 by

British ex-Defense Minister, Lord Gilbert, has threatened militants in Afghanistan and Pakistan with a neutron bomb. The UK could create "cordons sanitaire along various borders where people are causing trouble", he said.

Keiser Report: Hermaphrodite Banking

Nov 29, 2012 by

In this episode, Max Keiser and Stacy Herbert welcome Mark Carney to the City of London freak show at which Max predicts that Carney will play the bearded hermaphrodite who devalues the pound by 25 percent and yet only manages to introduce an ice age of economic growth. Max and Stacy also compare the rebels robbing the central bank in Goma to the Goldman Sachs takeover of central banks in Europe. In the second half, Max Keiser talks to professor and author, Andrew Ross, about the 'angel capitalists' striking debt across America and about the historic Black Friday strike at Walmart.