Showing posts with label German Gold. Show all posts
Showing posts with label German Gold. Show all posts

18 April 2024

Stocks and Precious Metals Charts - Currency War, What Is It Good For? - Crimea River

 

"Another amusing incident arose from the fact that the Reichsbank maintained a not inconsiderable gold deposit in the Federal Reserve Bank in New York. Strong was proud to be able to show us the vaults which were situated in the deepest cellar of the building and remarked:

'Now, Herr Schacht, you shall see where the Reichsbank gold is kept.'

While the staff looked for the hiding place of the Reichsbank gold we went through the vaults.We waited several minutes: at length we were told:

'Mr. Strong, we can't find the Reichsbank gold.'

Strong was flabbergasted but I comforted him. 'Never mind: I believe you when you say the gold is there. Even if it weren't you are good for its replacement.'"

Hjalmar Schacht, Autobiography: Confessions of 'The Old Wizard', 1956, p.245

“Currency warfare is the most destructive form of economic warfare."

Harry Dexter White, US Representative to Bretton Woods, 1944

"This is a story based on a report out of the Ukraine.  Obviously I do not know yet if it is accurate.  The information coming out of the Ukraine and Crimea should be sifted carefully, no matter what the source. I find this one hard to believe.  I am informed by highly reliable people that no one cares about gold anymore.  And very important analysts claim that transporting many tonnes of gold is very difficult, and so unwieldy and fraught with peril that it must be a multiyear project... Just ask Germany."

Jesse, Ukraine Gold Reserves Said To Be Put On Plane For Safekeeping in the US, 9 March 2014

"Like quite a few people I found myself asking, 'Why the Ukraine?  Why the sudden push there, risking conflict with Russia on their own doorstep?  Why are we suddenly risking all to support what was clearly an extra-legal coup d'état?

It is telling perhaps that one of the first things that happened after the coup d'état is that the Ukraine's gold was on a flight to New York.

Follow the money.

Jesse, Ukraine: The Global Corporate Annexation, 21 April 2014
"As per the report of a source from the Ukrainian Government, the Ukrainian gold reserves were confirmed to be moved on an aircraft from the Bristol Airport at Kiev to the United States. The report says that about 40 tons of gold was flown from Ukraine to US. However, according to the World Gold Council, Ukraine has in store 36 tons of gold reserves."

Ploumis, Ukraine Gold Reserves Reported To Be Hastily Aircrafted To U.S, Shanghai Metals Market, 12 Mar 2014
YIV, July 17 (Reuters) - Ukraine's central bank has sold $12.4 billion of gold reserves since the beginning of Russia's invasion on Feb. 24, the bank's deputy head said on Sunday. "We are selling (this gold) so that our importers are able to buy necessary goods for the country," Deputy Governor Kateryna Rozhkova told national television. She said the gold was not being sold to shore up Ukraine's hryvnia currency."

Reuters, Ukraine central bank has sold over $12 billion of its gold reserves, July 17,2022
"Gold Reserves in Ukraine remained unchanged at 27.06 tonnes in the fourth quarter of 2023 from 27.06 tonnes in the third quarter of 2023.  Gold Reserves in Ukraine averaged 25.29 tonnes from 2000 until 2023, reaching an all time high of 42.61 tonnes in the first quarter of 2014 and a record low of 13.40 Tonnes in the first quarter of 2000."  source: World Gold Council

Trading Economics, Ukraine Gold Reserves, 2024

 

I have not been able lately to find out exactly where the gold of the Ukraine is, and any encumbrances and claims there may be placed on it.  Although there does seem to be less of it, and the Ukraine minister knows what it was not used for.  

The World Bank and the World Gold Council have been reporting that nation's reserves including FX and gold, but the details seem to be a bit hard for me to find in the fog of war.  But I am sure it is safe somewhere, and being put to good use on behalf of the people. 

But I seem to recall when the people of Germany asked for the return of their gold in 2012, that request presented a mountain of practical difficulties.  

I am sure this will all be sorted out in time, as Herr Schacht had said, so many years ago.

Stocks slid down to their next support levels again today.  

There seems to be a disturbance in the force.

Stock option expiration tomorrow.

Gold bounced, while silver lost a bit more of its recent gains.

The Dollar bounced back up to the 106 handle.

The VIX is waffling around at a slightly highest level.

The geopolitical environment is simmering on several fronts of proximate interest to the US.

Uncle Joe the peacemaker.

Have a pleasant evening.

 


28 November 2014

Fed Earmarked Gold Holdings Continued to Decline In October


Nemo debet esse judex in propria causa.

Earmarked gold at the Federal Reserve dropped 42 tonnes for the month of October as foreign countries repatriate their gold.

Despite these declines the Fed's earmarked holdings are quite substantial to say the least.  

One has to wonder why the German people are not able to get back their gold for seven years. 

Why would the US raise such a fuss about returning it, if they still have over 6,000 tonnes of other people's gold in their accounts?

Are they 'managing' this gold held in custody?  Are they receiving and sharing returns from it? Or is it just idly sitting their in storage?

Is it all still physically there, and unemcumbered by multiple claims?

Something does not quite add up.   Let's check the latest audit.  The Fed does not allow itself to be subject to independent audits.   They demand our trust.

"Justice must not only be done, but must be seen to be done."

They are independent of the law, and beyond good and evil.



21 November 2014

Dutch Quietly Repatriate 120 Tonnes of Gold From New York


It looks like the Dutch brought back 120 tonnes of their gold from New York while no one was looking.

From the Ukraine, with love?  Perhaps they contributed their 30 tonnes which was last seen headed West on a night flight in April.

Meanwhile Germany obediently waits, for years, and the Swiss dither.

The Wall Street Banks thank you for your patience.   Have a nice day.

Dutch bring 120 tonnes of gold back to Amsterdam from New York
November 21, 2014

The Dutch central bank has secretly brought a large part of the national gold reserves being held in a secure depot in New York back to Amsterdam. In total, 120 tonnes of gold valued at €4bn has been brought back to the Netherlands by ship, Nos television said.

The high security reparations for the move took months. The central bank decided to bring some of its gold reserves back to the Netherlands to ensure a better spread, the bank said in a statement. In addition, the bank hopes to boost consumer confidence by showing there is enough gold in the Netherlands to take the country through a new economic crisis.

Now 31% of the Dutch gold reserves are in Amsterdam, the same percentage as in New York. The rest is in Ottowa and London. The Netherlands has 612 tonnes of gold – worth €19bn at current gold prices, Nos said.




23 June 2014

Germany's Gold: Auf Wiedersehen


"Finally he makes a decision, it is time to go, and he uses a gambling metaphor: he says 'Roll the dice', 'Alea jacta esto'. Once the dice start rolling they cannot be controlled, even though we do not know what it is as the dice roll and tumble.

Julius [Caesar] and his men swiftly cross the river [Rubicon] and they march double time toward Rome, where they almost beat the messengers sent to inform the Senate of their arrival.

Frances Titchener, To Rule Mankind and Make the World Obey

"Germany has decided its gold is safe in American hands."

That is one response, when you ask for the return of your gold, and your request is refused.

Just when you thought the spin could not become any more blatant or ridiculous.

Do you have any doubts?  It is not patriotic to have doubts.  You must do your duty, and believe.

This saga of Germany's national gold reserves being held by the Fed in New York is one of the most incredible stories in some time.   I believe it is related to what will become the scandal of the century.

Those reserves are largely gone, or encumbered with multiple claims, having been given to the Banks for their profit. 

How are a people fallen, and their spirit extinguished.
 
Addendum:  This appeared in the comments to this story as it ran in BusinessWeek:
From Peter_Boehringer

Just to set the record straight re this article in which my name is mentioned and in which I am quoted out of context:

a) BusinessWeek/Bloomberg uncritically cites statements of politicians and BuBa-bankers who have or give no proof whatsoever re the untouched whereabouts of the german Gold.

b) Re our campaign "Repatriate our Gold" www.gold-action.de/campaign.ht... : "On hold" does of course NOT mean that we are in any way satisfied with the current status of BuBa´s ongoing repatriation (far too slow and too little - only 5 tons came from NY in 2013! Not exactly a proof for the untouched existence of 1500 tons in a NY vault unaudited since 1950...). Our public campaign will therefore have to continue.

c) Almost no info in the article can be considered in any way "news". Simply because there has not been any material news in this context since early 2013.

d) Especially the headline is plainly false, because there has not been any change in BuBa´s (too slow) repatriation plans: at least 300+ tonnes will come from NY by end 2020. It is not much - but contrary to the headline, BuBa has NOT stopped the ongoing partial repatriation - enforced solely by public pressure!  (I would check your pressure readings mein herr.  Buba seems to be a bit less concerned than one might imagine.  Never underestimate the official indifference of a German bureaucrat to popular opinion.)

e) The political party "Alternative for Germany" has never been part of our campaign - they can therefore not have been "rebuffed" as the article suggests.

f) The political party "FDP" has (with the exception of one (1) MP ) never demanded a repatriation - yet another false info in the article.

g) Some politicians cited in the article can not in any way claim to be "in charge" of the german gold hoard (abroad or not). This holds true for both Mr Barthle and for Mr Hardt: BuBa alone is in charge - and officially, BuBa is independent from political influence... (But apparently not to 'public pressure' whatever that may be.)

Summary: a "non-news" article with a wrong headline, strange interviewees, old news, and with a clearly apologetic ideological approach: the main purpose seems to be NOT to give space to the myriad of unanswered and extremely relevant questions BuBa and the Fed have been refusing to answer for decades. Pls read more at "Repatriate our Gold" http://www.gold-action.de/camp...


German Gold Stays in New York in Rebuff to Euro Doubters
By Birgit Jennen
Jun 23, 2014

Germany has decided its gold is safe in American hands.

Surging mistrust of the euro during Europe’s debt crisis fed a campaign to bring Germany’s entire $141 billion gold reserve home from New York and London. Now, after politics shifted in Chancellor Angela Merkel’s coalition, the government has concluded that stashing half its bullion abroad is prudent after all.
The Americans are taking good care of our gold,” Norbert Barthle, the budget spokesman for Merkel’s Christian Democratic bloc in parliament, said in an interview. “Objectively, there’s absolutely no reason for mistrust.”

Ending talk of repatriating the world’s second-biggest gold reserves removes a potential irritant in U.S.-German relations. It’s also a rebuff to critics including the anti-euro Alternative for Germany party, which says all the gold should return to Frankfurt so it can’t be impounded to blackmail Germany into keeping the currency union together...

“The Bundesbank never doubted the integrity of the foreign gold-storage sites,” Carl-Ludwig Thiele, the bank’s council member for payments and settlements, said in an interview on May 23. “We were able to see everything we wanted to see in New York. As far as we’re concerned, there are no more open issues...”

Read the entire article here.

08 April 2014

Gold Daily and Silver Weekly Charts - Metals Take Back Their Levels, But Germany Can't Get Their Gold


There was no movement reported in the Comex gold warehouses yesterday.

A few more contracts stood for delivery yesterday bringing the total to 427,000 for the month.

Let's see how those contracts are resolved and what shows up in the warehouse reports.

The junior miners had a bit of a pop today.

We have a potential right shoulder forming up on the gold chart and on the silver chart as well.  In this case follow through is everything as it is not yet a confirmed formation.

The shameless shills and trashtalk trolls keep putting the worst possible interpretation they can find on even positive developments in the metals, while supposedly interjecting 'objectivity' into our expectations.  They are hardly objective and have missed every metals rally since 2000.

And on the other hand the legendary legends of legendarianism keep touting their sky high target valuations for gold and silver. 

I would settle at this point for a solid breakout from this clamp that has been placed on the precious metals for the past fourteen months, ever since the Fed had to de facto default on the return of the German gold as requested, in case you have forgotten. That must have been a real come-to-Jesus moment for the pinstripes and soft lies over elegant luncheons crowd.  

One step at a time.  Let's allow the market to have its say.  Talk is cheap, and at the end of the day performance is everything.  The fundamentals are highly positive, and remain so.

Have a pleasant evening.







14 March 2014

Gold Daily and Silver Weekly Charts - Gold Continues Higher as Miners Outperform


Gold continued punching higher after its breakout, but the less talked about story might be the performance of the mining stocks this year, which has been fairly impressive. I have intraday commentary and some relative performance charts on that here.


With silver lagging a bit it looks like a 'safe haven' trade so far, and some of it has to be a relief rally from the incredibly pounding that the metals have taken since the Germans asked for the return of their gold bullion in late 2012.  That apparently tipped over someone's punchbowl, and they unleashed the dogs of currency war. 

Speaking of the dogs of the financiers, I see where the FDIC is suing many of the large banks for their manipulation of LIBOR, based on the premise that in distorting the markets they caused other banks to suffer losses.

So what next. We have an FOMC two day meeting next week, with their announcement on Wednesday. I would expect to see the usual taper talk and mild jawboning, with a 'steady as she goes' stance.

There will be a triple witch stock option expiration on Friday. The next Comex metals option expiration will be on the following week, on the 26th of March. These are for the April contracts.

Have a pleasant weekend.







09 March 2014

Ukraine Gold Reserves Said To Be Put On Plane For Safekeeping in the US

 
Depiction on the Arch of Titus of the gold Menorah being
taken from the Temple to Rome after the sack of Jerusalem
This is a story based on a report out of the Ukraine. Obviously I do not know yet if it is accurate. The information coming out of the Ukraine and Crimea should be sifted carefully, no matter what the source. 

I find this one hard to believe.  I am informed by highly reliable people that no one cares about gold anymore. And very important analysts claim that transporting many tonnes of gold (Ukraine is said to have about 33 tonnes) is very difficult, and so unwieldy and fraught with peril that it must be a multiyear project.

But if the Ukraine's gold was taken away for safekeeping, it may be so safe that they will never see it again for a long time.  Just ask Germany.

Newswire 24
Ukrainian gold reserves loaded on an unidentified transport aircraft in Kiev
By Marcus Brooks

According to the iskra-news.info last night ,Ukrainian gold reserves (40 sealed boxes) were loaded on an unidentified transport aircraft in Kiev’s Borispol airport. The board took off immediately.

A source in the Ukrainian government confirmed that the transfer of the gold reserves of Ukraine to the United States was ordered by the acting PM Arseny Yatsenyuk.

So my guess is, that is if indeed this report is true it either means the new ruling elite have stolen the gold bullion or perhaps their is a legitimate fear of the Russians taking possession of this bullion, whatever the facts, it still looks very shady indeed.

Conclusion

Official narrative: gold bullion is going to USA (maybe to reassure the Germans their gold is in safe hands, after all the despite numerous requests from the German Govt The Feds have not given access for them to even view their Gold Bullion) . Real narrative: probably to Switzerland where it is divided between Yulia Tymoshenko and her cronies.

Here is a machine translation of the story in Russian from Iskra News:

Tonight from Borispol in the U.S. strartoval plane with gold reserves of Ukraine

As our site workers airport "Borispol", this night in 2-00, with the designated airport runway started unregistered transport plane ...

According to the staff "Boryspil", before it came to the airport four collector car and two cargo minibus Volkswagen, while , all arriving truck license plate missing. Car pulled out of about fifteen people in black uniforms, masks and body armor. Some of them were armed with machine guns. These people have downloaded the plane more than forty heavy boxes ... After that, some mysterious men arrived too entered the plane.

All loading was carried out in a huge hurry. After unloading the car without license plates immediately left the runway, and the plane took off on an emergency basis ... Those who saw all this mysterious "special operation" airport officials immediately notified the administration of "Boryspil", from which received a strong recommendation "not to meddle in other people's affairs ..."

Later, in received call back one of the senior officials of the former Ministry of income and fees, which reported that, according to him, tonight, on the orders of one of the "new leaders" of Ukraine in the United States has been taken all the gold reserves in Ukraine ...

16 January 2014

China Claims To Already Have the Third Largest Gold Reserves in the World


It should be noted that this report is sourced from 'ScrapMonster.' I have found it on the webpage for the Shanghai Metals Market. The numbers in this article do not agree with the latest reported number for China from the World Gold Council, which by the way is hopelessly out of date. 

More importantly, there is no IMF report that I have been independently been able to find that discloses this information.   If this story below is true, then it is quite the news piece, since details on China's gold holdings are of great interest to many. The number in the story below is credible, which first sparked my interest in it.

Let's see if the Chinese confirm or deny this, or more likely, continue to say nothing and buy.


Here is a recent news item about this controversy from Bloomberg:
"After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons [central bank holdings plus private gold holdings]. When taking away gold uses for jewelry, industrial and other categories and adding implied bar demand to central bank holdings, the figure is likely closer to 2,710 mt.

"China would need 10 years for its gold holdings to catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions. Based on run rates during 2013, China may have added 622 metric tons of bars to its central bank holdings, after adding 380 mt in 2012."

This news item below is purportedly what China is willing to 'officially report,'` that they have expanded their official gold reserves by 76%, to 2,710 tonnes.   If this is accurate then China is now just behind the US and Germany, which say that they hold 8,133.5 and 3,391.3 tonness respectively.  China has already surpassed Italy and France. 

Given the 2,710 tonne figure I have to wonder if the author of the Scrapmonster piece picked it up from Bloomberg and then ran with it.  It would make some sense, although Bloomberg does not mention anything about the IMF.

There is some controversy regarding the disposition of Germany's gold, much of which is held outside that country, as you would know if you frequent this café.  More on that later.

 Privately there is a great deal of speculation that the heavy flows of gold through Shanghai are not merely going to the public market in China, but are also helping to fill their central bank reserve vaults even further than they will admit. 

As you may recall, China is encouraging its people to place some portion of their personal wealth in precious metals.

It is easy to sneer at goldbugs, those who find a refuge from abusive monetary policy in the traditional safe haven of precious metals, but it quite another thing to tell the 800 pound gorillas in the global market, China and Russia among them, that they do not understand anything about risk and money. 

Agree with them or not, they are making their case for what they think will happen in the future of global money, and are putting some of their own sizable wealth down on the table to back it up.  And if the models of a few academic economists do not agree with them, they really do not care.  They have their own economists, and their own interpretations of history, and their own needs and agendas.

And there are other countries who are now desperately seeking to bring their gold home from the custodial storage in New York, which is an artifact of World War II and the Cold War.  And some of them, like Germany are finding that it is not so easy to persuade the New York Fed to return it.  We can only wonder why.

These are central banks, who seem to be managing their national affairs with quite an informed and determined outlook towards the future. To completely ignore the implications of this, which to me seem quite clear, is nothing short of willful blindness.  If we just shut our eyes and say no, then the change will not affect us.  Except that the smart money is already on the move behind the scenes.

There is an ongoing debate happening now among the nations' bankers about the suitable replacement for the de facto Bretton Woods II arrangement which bases global trade settlements on the fiat dollar, no longer tied to gold since Nixon made a unilateral decision to shut the gold window.   They have made public statements about what they would prefer to see adopted, and Russia made this discussion a formal topic during its G20 chairmanship last year.

It has been a long time coming. But change is going to come. It always does.  And it may wash over those who stubbornly refuse to even admit that it is happening.

Shanghai Metals Market
China Expands Gold Reserves, Surged Past Italy & France in Ranking
By Paul Ploumis
Jan 15, 2014 08:36 GMT

BEIJING (Scrap Monster) : Claiming to have vaulted France and Italy in terms of gold reserves, China has announced that they have expanded their gold reserves by 76 %, thus becoming 3rd largest gold reserves in the world. According to the voluntary reporting system of IMF which monitors international gold reserves, China’s gold reserve have increased from the last reported holdings of 1,054 Tons in 2009, April to 2,710 metric tons currently.

China claims to have surged past Italy which has current holdings of 2,451.8 tons of gold reserves followed by France having 2,435.4 tons. The accurate reports released by the World Gold Council Data has placed US at the first position of world ranking for holding largest gold reserves which is 8,133.5 tons. The percentage of foreign reserve in gold in US is 75.1 %. Germany holds the second position with 3,391.3 tons of gold reserves.

In order to acquire the position, the Central Bank of China had added 622 tons of gold last year which was a massive boosting from the 380 tons of 2012 estimate. China had surged several nations to become the largest producer of gold. It has boosted its gold reserve without purchasing gold from global bullion market. While most of the major gold producing nations are reporting the decline of production, China remains to increase the production.

23 December 2013

Paul Krugman On Money: Why Economics Has Become a Disgraced Profession


"I write to you from a disgraced profession. Economic theory, as widely taught since the 1980s, failed miserably to understand the forces behind the financial crisis.

Concepts including “rational expectations,” “market discipline,” and the “efficient markets hypothesis” led economists to argue that speculation would stabilize prices, that sellers would act to protect their reputations, that caveat emptor could be relied on, and that widespread fraud therefore could not occur."

James K. Galbraith

There are several somewhat surprising assertions in this piece below from Paul Krugman, which left me almost speechless. But not quite.

I might be unfair in taking it seriously, or more seriously than one should do with what could be just a politically motivated puff piece. The Western central banks seem to be 'in a jam' as it were, and now is the time for all their men to come to the aid of the financial status quo.

First, Krugman is touting the fiat petro-dollar as somehow humanitarian, as compared to apparently the worst mine he could find, in order to throw stones at the gold industry. Or presumably anything real that comes out of or off of the ground for that matter, including natural resources and agricultural products, because one can find abuse of labour in all of them.

This is so off handed hypocritical as to be mind-boggling.

I think we can stipulate that abuses of capital and power can and do exist in any human endeavor, and the proper but occasionally underutilized role of government is to mitigate them. 

Considering the carnage that the financial industry and the Banks have wreaked on the real economies of the world, I hope the hypocrisy here is obvious to anyone with any sense of current events whatsoever.  Certainly we have no excuse to blind ourselves to the all too recent and terrible role of crony capitalism in destroying lives around the world in the endless pursuit of power, and the supremacy of greed.  And that power is based largely on the dollar.

This is the great failing in Modern Monetary Theory. It assumes that if we make the creation of money easy enough, it will make the people who hold that power naturally virtuous, because it takes less effort to be good and so they will choose to be good.  

This is the Zimbabwe school of public policy, and the John Law Institute of Economic Thought.  The 'scholar-gentry' somehow imagine themselves as nature's virtuous wise men, operating for the objective good, but the serial bubbles and crises in the West over the past twenty years show how this assumption is part of the efficient market hypothesis:  a romantic canard.

Then Paul Krugman takes on Bitcoin. He posits it as based on a great mine located in Iceland that creates bit coins because it is cold there and electricity is cheap. I thought he might be speaking sardonically, but I'm not so sure. 

Engineering students I know and their college friends mine bitcoins and litecoins from their dorm rooms, which are not particularly cold, but where electricity is essentially free.  However the amount of electricity used is so minimal that it really doesn't matter.  But this is besides the real point.

What threw me for a loop was his snarky punch line designed to put the whole idea of Bitcoin to bed.
"we’re burning up resources to create “virtual gold” that consists of nothing but strings of digits..."
If this is not the very description of the modern dollar, except for the burning up resources line, used by Ben Bernanke in his famous speech in which he says that deflation is not a problem for a Fed that 'owns a printing press,' I don't know what is.  I might say misallocating resources to the financial sector rather than burning up resources, but that may be a nicety.

Krugman derides Bitcoin as 'virtual gold' but in reality it is much closer to 'virtual dollars' because both are created out of essentially nothing but a few key strokes and cycles on a computing machine. 

Bitcoin has a limiting factor built in to it.  Gold has a limiting factor in its natural scarcity.

The primary difference is that the dollar is backed by the power of the state, and bitcoins are relatively stateless, which is their weakness.   Gold's power is that the state cannot create it, merely abuse it.

This whole 'progress' concept is just a canard, as is the localizing of the view of gold to a few eccentric gold bugs.  

If China and a few other central banks were not buying gold, and in size, there would be no issue here, and the status quo based on the Western dollar would not feel so threatened.    Are China and these others merely ignorant gold bugs?  Or are they reacting to a situation in a way that people have done throughout history? 

They are seeking a refuge from the abuse of power by a status quo.

There is a classic policy disagreement about the international monetary system underway, which some have taken to calling a currency war, and most establishment economists are ignoring it, or talking it down.  And this is why the next financial crisis is going to hit them smack in the face, like the last two crises which they aided and abetted, if nothing else than by their silent acquiescence.

Fiat money has been tried many, many times in the past, especially over the last few centuries. It has ended in the same manner every time.  

As Bernard Baruch observed, '“Gold has worked down from Alexander's time... When something holds good for two thousand years, I do not believe it can be so because of prejudice or mistaken theory.”'  Baruch the financier understood money and markets.  He was no servile economist, caught in a credibility trap.

Rather than dealing with reality, and understanding why people throughout history seems to be 'voting' in certain ways when there is a choice, and why China and other Asian and Mideastern nations and their central banks are buying gold in sizable quantities, Mr. Krugman just writes this off as some eccentricity, because it does not fit his model of how things should be. 

And this is the stance of a statist, and it requires increasing use of force as people reject its falsity.  It appears to be mere sophistry in the service of power, and it is unworthy.   But this is economics today, cheerleaders for their favorite brand of political power.  It is after all a social science more often used to rationalize rather then explain, except in its most basic elements and in its practical microeconomic applications.

Arguing for stimulus without acknowledging and addressing the flaws and obvious policy mistakes in the system that have led to multiple and increasingly destructive asset bubbles is beyond reckless, and almost wanton.  But it is politically advantageous.

If Mr. Krugman were to honestly study what money is, rather than what he wishes it to be, things might be clearer and his thinking might be richer.  Alan Greenspan has done this, but then he subordinated his knowledge to his careerist aspirations. 

And perhaps this is what exercised me to write this more than anything else.  As an academic economist and 'very serious person,' Krugman is arguing like a Fox news anchor, assaulting knowledge to score his political points.  He is cloaking his policy advocacy in the trappings of his profession, and he thereby cheapens it.  And this is why it has become disgraced.

Let me be clear on this.  I am not proposing that gold become a new monetary standard.  I think that a new international monetary regime will evolve, and that gold will play some part.

But I am saying that the public policy proposals put forward by economists are too often stuff and nonsense, merely rationales used to promote whatever ideology or power group they believe in, or seek to curry favour with, in the first place.   And that the power to create money and distribute it is a deadly power, and has led to failures repeatedly over and over again.  So safeguards must be taken with it.

And if gold is such a dead issue, then why does Krugman need to argue so bitterly against it, resorting to sophistry and ridicule and appeals to authority?    It is because he is trying to force an argument against the will of a sizeable portion of the world's people.  It is a policy battle, with good points and bad points.  But he chooses not to argue it honestly, exposing the good and the bad, but politically and cheaply. 

These economic 'laws' are almost always arguments, but not proofs.  But cloaked as proofs they help to overturn common sense all too often, and this has proven to be a tragedy as is so common with all quack scientific theories.

As I noted a few weeks ago:
"Economics is a profession that succumbed almost en masse, whether by individual actions or the complicit silence of careerism, to the pervasive corruption of financial fraud, and of the persuasive power of Wall Street, the Banks, and big money. The only group that approaches their failure is the national political and financial class, including the accountants and the regulators.

For the most part this has not yet changed because of the unreformed state of the financial system, combined with the snare of the credibility trap. And they cover their shame by calling themselves the 'scholar-gentry' and tut tutting about the failure of the public in much the same tones that the plutocrats of past colonial empires would agonize over the plight of the victims of their perfidy in terms of the white man's burden."
I strongly suspect that some of the Western central banks, led on by the bullion banks, have made some awful policy errors in the disposition of their nation's resources over the past ten years. They have committed resources to what they considered a just cause without sufficient diligence, things that do not rightly belong to them, thinking that they could retrieve them at some future date without too much effort. 

And like any other client of the banks, they have been taken. With the inability to return the national gold to Germany as their people had requested, the bankers were staring into the abyss. So they have sought to cover this up, and thereby keep digging themselves into an ever deeper hole. And this will prove to be worse than the original deed once it is resolved. It will destroy careers.

The would-be ruling class envisions a relatively unconstrained money supply as a tool amenable to the beneficent use of themselves as philosopher-kings.  And it is another romantic falsehood like the efficient market theory.  Whose fiat, who decides?

Such a monetary authority gives the power to determine and distribute value and worth to a relatively small group of people who act on their own authority, and too often in secrecy.   Well, we essentially have had that for some time, and as Dr. Phil might say, 'And how's that been working for you?

The implementation of romantic ideals in pursuit of an ideal paradise would quite likely result in a hell on earth.  The resort to force will become increasingly necessary, predatory, self-serving, and relentless.

Addendum:  I have addressed Paul Krugman's 'quote' from Adam Smith in more detail here.

NYT Times Op-Ed Columnist
Bits and Barbarism
By Paul Krugman
December 22, 2013

This is a tale of three money pits. It’s also a tale of monetary regress — of the strange determination of many people to turn the clock back on centuries of progress.

The first money pit is an actual pit — the Porgera open-pit gold mine in Papua New Guinea, one of the world’s top producers. The mine has a terrible reputation for both human rights abuses (rapes, beatings and killings by security personnel) and environmental damage (vast quantities of potentially toxic tailings dumped into a nearby river). But gold prices, while down from their recent peak, are still three times what they were a decade ago, so dig they must.

The second money pit is a lot stranger: the Bitcoin mine in Reykjanesbaer, Iceland. Bitcoin is a digital currency that has value because ... well, it’s hard to say exactly why, but for the time being at least people are willing to buy it because they believe other people will be willing to buy it. It is, by design, a kind of virtual gold. And like gold, it can be mined: you can create new bitcoins, but only by solving very complex mathematical problems that require both a lot of computing power and a lot of electricity to run the computers.

Hence the location in Iceland, which has cheap electricity from hydropower and an abundance of cold air to cool those furiously churning machines. Even so, a lot of real resources are being used to create virtual objects with no clear use.  (Paul K. does not understand how Bitcoin works. 

The third money pit is hypothetical. Back in 1936 the economist John Maynard Keynes argued that increased government spending was needed to restore full employment. But then, as now, there was strong political resistance to any such proposal.

Clever stuff — but Keynes wasn’t finished. He went on to point out that the real-life activity of gold mining was a lot like his thought experiment. Gold miners were, after all, going to great lengths to dig cash out of the ground, even though unlimited amounts of cash could be created at essentially no cost with the printing press. And no sooner was gold dug up than much of it was buried again, in places like the gold vault of the Federal Reserve Bank of New York, where hundreds of thousands of gold bars sit, doing nothing in particular.

Keynes would, I think, have been sardonically amused to learn how little has changed in the past three generations. Public spending to fight unemployment is still anathema; miners are still spoiling the landscape to add to idle hoards of gold. (Keynes dubbed the gold standard a “barbarous relic.”) Bitcoin just adds to the joke. Gold, after all, has at least some real uses, e.g., to fill cavities; but now we’re burning up resources to create “virtual gold” that consists of nothing but strings of digits...

Read the entire op-ed here.

04 November 2013

The Massive Drawdown of Gold From the West Continues - Silver Comparison - the Abyss


"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.  

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."

Sir Eddie George, Bank of England, September 1999


“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.”

Eric Hoffer

Here is the change, in tonnes, in the inventory of major exchanges and ETFs for gold and silver since the beginning of the year.  Nick Laird of Sharelynx.com was kind enough to share the data which he has collected with me.  He does a remarkable job in maintaining an enormous amount of data at his site.

As you may recall, both silver and gold have seen price declines since the beginning of the year. As a reminder, silver is down 28.7% and gold is down 21.5%.  I show this in the last chart. So they have both seen comparably stiff price declines this year.

Since the beginning of the year, the major exchanges and ETFs for silver have added about 1,494 tonnes of bullion. 

But what is absolutely remarkable is that since the beginning of the year the Comex and some of the major ETFs have LOST about 856 tonnes of gold bullion.  And I suspect much of that bullion has gone to the non-reporting vaults in Asia and the Mideast. And there is import/export data that corroborates that hypothesis.

Now, some might say that they don't see what this means, that they don't see the significance. Or that the significance is that people like silver but don't like gold, even though both have seen price declines, and even though demand for physical gold in Asia and the Mideast has been explosive this year according to trade records.

I will tell you what the significance is.  The significance is that you are, figuratively speaking, watching water running uphill and out of sight.  And some look at this and say, nothing to see here.

That gold which is disappearing from the reporting grid will not be coming back to these largely western vaults anytime soon.   And it certainly will not be coming back at these prices.  It is going into some fairly strong hands with an eye to the long term.

Silver is still acting like a precious metal, similar to platinum, which added 21 tonnes, and palladium which added about 1.5 tonnes.

Here is what is happening, as shown in the three charts below.  Draw your own conclusions.   But keep in the mind the negative gold forward rates and record leverage in potential paper claims for physical gold that we are seeing and hearing reported.

And this chart does not include the leased gold that is being occasionally disclosed by Western central banks, which seems to be going to satisfy the appetite of Asia.

It seems pretty darn obvious to me that there are some big buyers outside this reporting system that are taking down supply, and at a fairly aggressive rate, especially in the last twelve months. 

You know that I think this exercise was triggered by the revelation that Germany's gold was missing, and a reflexive price manipulation that was intended to dampen demand, but instead set off an avalanche of physical buying.  

Given that genuinely new gold supply is only added slowly from mining, once the West realizes what is happening the turnaround could take on the character of a short squeeze, and perhaps even a panic and market dislocation to the upside.

And if you are one of those who are holding receipts for gold held in this system, you may find that you have been rehypothecated with extreme prejudice, and given a forced cash settlement at another's discretion. When the time comes your assets may be found to have been used as cannon fodder in the currency war.  Thank you for your support.

The German people asked for their national gold back, and were told by the Fed to go sit down in the lobby for seven years and wait for it. Are you kidding me? What is it going to take to wake people up that something has gone seriously wrong in these markets?  

What kind of new fraud or disclosure of fiduciary misbehavior will it take to bring the dawn?  And what will happen when the dawn finally comes?  Do you wish to be standing in a very long line holding a warehouse receipt or brokerage statement?  Good luck with that.

You may be a financier, fearing the abyss and hanging on, obsessively doing what worked in the past.  But here is some news.  You don't have to fall into the abyss,  the abyss is coming for you.   And the longer this nonsense continues, the worse the drawdowns will become, and the more painful the final reckoning will be. 

Weighed, and found wanting.

Stand and deliver.



22 October 2013

Tremors and Warnings in the Gold Market


"Here and there an individual or group dares to love, and rises to the majestic heights of moral maturity. So in a real sense this is a great time to be alive. Therefore, I am not yet discouraged about the future.

Granted that the easygoing optimism of yesterday is impossible.

Granted that those who pioneer in the struggle for peace and freedom will still face uncomfortable jail terms, painful threats of death; they will still be battered by the storms of persecution, leading them to the nagging feeling that they can no longer bear such a heavy burden, and the temptation of wanting to retreat to a more quiet and serene life.

Granted that we face a world crisis which leaves us standing so often amid the surging murmur of life's restless sea. But every crisis has both its dangers and its opportunities. It can spell either salvation or doom. In a dark confused world the kingdom of God may yet reign in the hearts of men."

Martin Luther King


"However, I have learned that in times of crisis, the dodos always charge in to make matters worse."

Andrew Greeley

Here are three charts that capture the somewhat uniquely dangerous situation in the gold futures market on the Comex.  It reminds me of watching a child playing with a chemistry set, or a drunk getting behind the wheel of a car.  Disaster is not assured, but the situation cries out for adult supervision and intervention.

The first chart shows all gold in storage at Comex certified private warehouses. The major bullion banks control the vast majority of this storage. Among these are JPM, HSBC, Scotia Mocatta. Storage and delivery services are also provided by Brinks and Manfra, Tordella, and Brookes, a large NYC coin and bar dealer.

The year long decline in open interest on the Comex is a phenomenon worth noting. It is marked on the third chart.   Even as gold bullion purchasing is soaring, gold futures interest in the US is in a secular decline.   But even with this decline, the 'claims' of ownership as represented by futures contracts over ALL gold in the warehouses is a bit high.

Not to say that futures contract owners can have any claim on gold merely held in storage.  But they can try.   I include this because some people consider it to be important.  If the price is allowed to rise high enough, that customer gold might be tempted into the deliverable category and offered for sale.  The key question is 'how high.'

The better metric to watch is the number of claims per registered, or deliverable ounces of bullion on the Comex.  This gives us a current 'temperature reading.'   And that measure remains near all time highs at 52.62 claims per ounce at these prices.   My friend Nick Laird at Sharelynx, who does a wonderful job of charting and data gathering, prefers to call it 'owners per ounce.'   But since a single ounce of gold cannot have 53 owners if the music stops, I prefer to call them 'claims' or virtual ownership.

Every prior deep decline in registered gold bullion during this bull market has marked an intermediate price trend change.   I do not think this time will be different, all other things being equal.

What exacerbates this situation is the absolutely remarkable drawdown in gold bullion from the ETFs around the world, but most heavily in GLD and on the Comex.   We have not seen anything like this in silver, platinum, or palladium.  It is significant.  See The Amazing Disappearing Gold Bullion

As you know, I am persuaded that the request from the Bundesbank for the return of Germany's gold, and the deferral of this by the Fed for seven years, set off a chain of overreactions and market maneuvers that in retrospect will be viewed as foolhardy.

If the price of gold is allowed to rise closer to the $1650 to $1750 trading range by the end of January, preferably the end of December,  I think the Comex might avert what for them could become a potentially disastrous situation.   And they need to get started on this fairly quickly so that the rise is gradual and controllable. The higher it riser this year, the less pressure there will be on physical gold early next year.

If the bullion banks continue to game the system, and scalp profits with other peoples' money,  my forecast is for a market break and dislocation in the gold market that will imperil quite a few smaller trading houses, and greatly impact confidence and global trade.  I would not be surprised to see a halt called to the paper and physical gold trade, a forced cash settlement on futures and derivatives, and a price adjustment higher, perhaps in multiples of triple digits.   Such price jumps can be unsettling well beyond their immediate circles of interest.

And we could see a TBTF bullion bank or two shaken to their foundations.  If the governments overreact in trying to get them out of their own mess again without loss or reform, then I think it is time to keep your heads down and watch for big changes.  I doubt they could be that clumsy, but most politicians know less about money than most economists, and that is pretty bad.  And they are certainly as craven and pliable, so it is possible.

I have a couple of other forecasts about changing politics in the US, which involves major changes in the current two parties.  People forget that the lifeline of the Republicans and the Democrats as they are now is more current than old in terms of human history.  And a major party change with some splintering and interesting alliances is becoming more probable.

Although it is just a forecast, it looks like the die will be cast in December.  If they try the annual price hit in early December, they might set off a series of unfortunate events as the new year unfolds.

So you might consider this a sort of warning to be watchful, just based on the market mechanics.  It does not have to happen.  But it has been hard to overestimate the reckless stupidity of unbridled greed.

Again, the most likely outcome is the infamous muddle through and the kick of the can down the road, with a rising price in gold as part of an intermediate trend change.  But we are now in a period of high risk, and I don't yet see the right steps being taken to avert it.   Some of that rests on the shoulders of the CFTC, and quite a bit on the exchange, the politicians, and the regulators of the banks.  They need to take the keys away from the drunks and reckless children in their own organizations and in the ones that they oversee.

I do not want to join the doomsayers, those who troll for clicks with ever more dire headlines of impending doom.  It almost gets to be like watching the supermarket tabloids.

All of our problems are soluble, and things are no worse now than they have been many times in the past.  Our parents and grandparents faced much worse, and I personally have seen harder times by far.  But it is getting pretty bad on a secular level, mostly from self-inflicted wounds and corruption.

I wanted to state this unequivocally now because I can see another financial crisis brewing, and if it does come it undoubtedly will be followed by a bunch of hand-wavers running around saying that 'no one could have seen it coming.'  Just like the last two or three financial crises.  Maybe this time the powerful will act with caution and good sense.  I have the impulse to hedge that though, and certainly not to count on it. In their self-centered blindness they are becoming mere players and pawns in the great tide of history.

"The long memory is the most radical idea in America. That long memory has been taken away from us. You haven't gotten it in your schools. You're not getting it on your television. You're being leapfrogged from one crisis to the next. Mass media contributed to that by taking the great movements that we've been through and trivializing important events.

No, our people's history is like one long river. It flows down from way over there. And everything that those people did and everything they lived flows down to me, and I can reach down and take out what I need, if I have the courage to go out and ask questions."

Utah Phillips


"You will study the wisdom of the past, for in a wilderness of conflicting counsels, a trail has there been blazed. You will study the life of mankind, for this is the life you must order, and, to order with wisdom, must know. You will study the precepts of justice, for these are the truths that through you shall come to their hour of triumph. Here is the high emprise, the fine endeavor, the splendid possibility of achievement, to which I summon you and bid you welcome."

Benjamin N. Cardozo






04 October 2013

Currency Wars and the Ghost of Bear Stearns - The Mass Exodus of Gold Bullion


Here is one take on the gold inventory conundrum that I posted about last night.  I am not entirely comfortable with the full extent of this analogy.  Perhaps it is because I had always imagined that coat check rooms were for the most part honestly run with no leverage, lol.
“Quoted gold prices are like a coat check room at a nice hotel. Imagine that over time things develop so that there are 60-100 coat check tickets for every coat in the coat room.

If the insiders that ran the coat room suddenly realized that the value of coats was much greater than the quoted price, what should happen?   The supply of physical coats should fall & the “price” of coat check tickets should fall as well as insiders realize that with 60-100x leverage, 59-99% of the coat check tickets are actually worthless because there aren’t coats to back them.

Think about the bank run on George Bailey’s bank in ‘It’s a Wonderful Life.’ How many people get 100% of their deposit claim checks? Only one, right? Everyone else that wants immediate access to their claim check takes a BIG haircut to the ‘face value’ of that claim. What you are watching in gold markets is a slow-motion version of a classic bank run on a highly-levered depository.”
That makes some sense.  There is an informal market in coat checks where the market sets the price.  But those with asymmetric information on the true risks and valuations move the price where they wish it to be for their own advantage.

If you know that there is going to be a dislocation of inventory in the cloakroom, the first thing the average person would do is get their own coats out. And the less scrupulous might buy up all the tickets they could to redeem for other people's coats, and then sell what unfilled tickets that remain at whatever price they might get.  Those doing God's work might even short sell tickets, if such thing was possible, and take side bets against them.

My correspondent goes on to say that a strong message was contained in the valuation that was given to the Cypriot gold during their recent crisis.
"In the summer of 2007, the BSC subprime mortgage hedge fund basically went to $0, and the message to the markets should have been that 'big chunks of the subprime market are worthless.' But that message at the time was so extreme that very few traded off it.

Similarly, the Cyprus bail-in math (10 tons of Cypriot gold for $10B from ESM, IMF) would suggest that physical gold collateral is worth $31,250/oz in a crisis and that most, but not all, market participants are discounting it because it is such an extreme number.'

It probably is extreme, but some big smart people are buying gold like it is not so extreme, in much the same way that some of those same big smart people turned big sellers of subprime protection right after the BSC mortgage hedge fund blow up.”
That is possible, although one could dismiss the actual valuation as a token gesture to a weakened country. But the international organizations' desire for gold, and the extreme valuation placed to entice it, does suggest that the true valuation of a large quantity of gold in a financial crisis is significantly higher than where it is now.

As you know I tend to mark the realization that there was a serious problem with the request from the Bundesbank for the repatriation of German gold that was refused and deferred for seven years by the Fed. It still amazes me that so few are trading on that event. It was like the earth shifted when I heard about it. How Germany Disrupted the World Gold Market

My correspondent goes on to say:
"I think if something 'breaks' in gold markets, the COMEX futures, and perhaps other futures exchanges, would be settled out at the prior last trade, in cash."
I think quite a few people believe in that outcome.   We would expect a variation in premiums and valuations depending on how great the counterparty risk, and the ease which one might have to obtain any bullion for which they have a claim.  As you have seen from posting here in the chart below, the claims per ounce on some venues are quite high.

And as for what will come of the actual assets, the gold bars, that do exist after the claims may be force settled there might be some precedent for it.

In a crisis possession is nine tenths of the law, as was obvious to many unfortunate account holders in the collapse of the highly leveraged MF Global.  Even when it comes to clear title to assets and the sanctity of customer accounts,  actual physical possession and a good set of lawyers, not to mention political influence, is a powerful argument.

Do we know of any big players that have gone long gold this year, signaling perhaps a well informed change in their sentiment, even if it is not reflected in their own positions?  I suppose we might suggest a few.

Why would anyone force or risk such an outcome that would be damaging to the bullion banks, and risk the Western banking system?   It might be convenient but incorrect to attribute maliciousness to what is more easily explained as simple self-interest in the best capitalist tradition.
"Global physical trading patterns are hitting critical tipping points whereby emerging markets are becoming the lion’s share of some global goods and services demand/production and oil demand. And they have NO interest in maintaining the status quo, because they appear to be acutely aware of the fact that the Anglo-American 'exorbitant privilege' has been funded directly by their sweat equity.

Or to put it more bluntly, why would the BRICs want to settle their trades between themselves in dollars so that they can help to fund their own military encirclement that has consistently acted against their interests?”
This brings to mind the Chinese best seller Currency Wars by Song Hongbing that was the Harry Potter of the Chinese intelligentsia about 2006. I have written about it several times as a phenomenon in Asian thinking, in much the same way that some would point to Ayn Rand's influence on thought in the West.

The rise of the BRICs as an economic force is a meaningful development.
"For the 1st time we have someone big enough, in both economic size and military strength, to break the status quo, the means to do so by moving physical trade settlement amongst themselves away from USD, and the motive of satisfying intense domestic political desires to improve living standards for their people and to obtain more control over the basis for settlement of commodities, which among other things would result in lower oil prices."
It is possible that if this is true, we will see some initial indications of tension in the commodity marketplace in the manner of Lehman Brothers. 

I have the feeling that a resolution for this currency war is being crafted behind the scenes, with Russia attempting to broker a gradual currency compromise using their chairmanship of the G20 this year.  The Anglo-Americans are resisting, but primarily for terms, and for time to allow their favorite banks to square themselves up in the face of this change.

Regardless of the background and motives, the remarkable decline in Western gold inventory and the enormous buying in Asia and the Mideast is something to be considered.  To my mind the inability of the US to return Germany's gold in a reasonable timeframe was a watershed event.

There is always the opportunity to attempt to ignore an impending crisis with a flash of unrealistic bravado.   Let them eat billion dollar platinum coins.

And the difficulty of the US dollar in maintaining its status as the world's reserve currency is highlighted by current events, not only the political deadlock in Washington, but also the many bilateral agreements to settle trade in non-US dollar terms.

In summary, there are a number of odd things going on.  And the unhappiness of the BRICs with the status quo is public. 

My correspondent and I believe that there will be an 'aha' or even a 'holy shit' moment coming.  But predicting when it will and how it will arrive is not possible, at least from my seat in the house.  By the time the retail investor figures out what is happening the wave of the future is already rolling in. 

My correspondent is a little less shy of putting out a forecast but no timeframe.
"The most likely scenario is that physical gold goes up to a really, really big number in some sort of global currency system reset, thereby completely collateralizing most of the sovereign debt out there.

Gold miners go up a lot, but not as much as physical gold because the governments will effectively seize them and turn them into public utilities complete with annual dividends that are probably equal to a big percentage of current miner share prices."
Sounds plausible as anything else I suppose. We both doubt that they will 'confiscate' the gold in private hands for a number of reasons. A windfall profits tax of some sort would not surprise me, if the Democrats are in the driver's seat, although I could see a greater number of states passing gold and silver friendly laws to attract capital.

What snowflake will trigger the next avalanche, or what I call trigger event will set the tipping point in motion?  I could not even begin to say.  I am sure others have more informed opinions on this, and none of them are speaking with the likes of us, at least not in a crony capitalist culture.  They are busy doing for themselves and their friends.

Let's see what happens. China is a powerhouse now, but it may fall from the heights, as did Japan Inc. which seemed unstoppable in 1989.

But all things considered, unless I was considered TBTF at the very least I would not wish to have a significant obligation to deliver gold bullion in this market structure, even if I had hedged the risk. Sometimes risk can be remarkably hard to measure or even define.

Related: The Amazing Disappearing Gold Bullion
             Prepare for a New Gold Standard - Thanong Khanthong