I have long stated that one of the ways our current party might end is by an “Event.” The most likely suspect here has long been in Europe. An uprising, a change in the democratic political climate, a refusal to accept more funding with onerous terms, a refusal to fund as cash runs out. There are a host of possibilities here.
It is more than likely that Portugal will be back at the trough soon and then there is Slovenia and more money for Greece and there is quite a list of upcoming traumas. It is also likely that Italy and Spain may be forced to the window and then the calls on capital will be enormous.
Leaving some “Event” aside however we are surely facing an economic decline both in Europe and in America. The reason is simple enough; it is the consequence of what the central banks are doing. The lowering of interest rates to miniscule levels has a cost and while the cost is not immediately paid or apparent; it is there and now, after some time has passed, right in front of our noses.
Consumers and investors and the people with money are what keep any economy growing. As each month passes and as months turn into years since the central banks began their actions; disposable income has been declining. If you got 5.00% on a ten year Treasury and now you are getting less than 2.00% then possible purchasing power has declined by 60%. This is true for all classes of fixed income assets. While bond compression has helped with portfolios; maturities and calls are causing havoc with available funds that can be spent. Those with money have significantly less to spend.
The other side of this coin, no doubt, is the equity markets but with the bond market approximately five times larger than the stock markets the decline in yields has the same leverage factor of five times for disposable income. Those with money are growing poorer.
We are a scant thirty basis points off the low yield for the 10 year Treasury. As the Fed buys, with calls and maturities, some $100 billion a month of securities it is now quite likely, with no inflation, that absolute yields will keep declining. Also as people and institutions stretch for yield they are also taking on increasingly more credit risk and at yield levels that do not adequately reflect the risk that is being assumed. Consequently the demand for goods and services is being impaired and, at some point, we will cross the line where consumers can no longer provide growth for the economy and the American economy will begin to shrink just exactly like what is happening in Europe. The wealth effect created in the equity markets will eventually get overrun by the bond markets and then even equities will begin to decline as revenues begin to fall off. This is also why I believe that the possibilities of Deflation are much greater than for Inflation.
Europe has already entered a Japanese sort of existence and America will be coming next in my opinion. We are caught in a trap of our own making and this will be the price for the printing of all of this money. As China has reached its apex and begun a gradual grinding down in their economy, as Japan wrestles with insolvency, as Europe falls further into its sinkhole; America will follow.
Make hay while you can but you may also wish to notice that the fields are shrinking and that less hay may be forthcoming. Borrowers have reaped the benefits. Those with money have paid the price. Wealth that can be redeployed is evaporating. Buying power is in decline. There is always a price.
Let me note up front that this is not an argument for or against welfare or helping the poor and needy. I am just noting the large cash economy and offering another reason why it might be as large as it is: misaligned incentives.
In the last few months, conservative news outlets cited a Republican Congressional survey that shows that welfare is about $1 trillion of the US budget, or $168 per day for those below the poverty line. When you dig into the data, you find that a very loose definition of "welfare" was employed, one that most Americans would not use for many of the programs the survey lists. It might argued that the money in question should not be spent, but the survey does not pass the smell test in identifying actual welfare.
According to the Center for Budget and Policy Priorities, even when one uses a very expansive definition of "welfare," only "13 percent of the federal budget in 2011, or $466 billion, went to support programs that provide aid (other than health insurance or Social Security benefits) to individuals and families facing hardship." (Informationclearinghouse.info)
The St. Louis Federal Reserve database shows an even smaller welfare number, at $273 billion (chart below), but you can add about $140 billion at the state level and that gets you closer to the $466 billion mentioned above. That is still a large number per day per family below the poverty line. But let me hasten to add that is NOT what an actual recipient gets; it is just the budgeted cost, which includes what it takes to run the government offices and pay welfare workers.
Let’s look at a few quick statistics, which taken out of context can be misleading, so don’t be misled or assume that I am. The total number of people on welfare is about 4,300,000. The total number of people getting food stamps (the SNAP program) is 46,700,000. We just saw a new high for the number of families on food stamps:
In Texas if, as a single mother of two or three kids, you can figure out how to qualify for every type of assistance available, you can amass get the princely sum of about $980 a month (plus some healthcare). Other states are more generous. The popular meme is that 40 states pay more than $8 an hour to those on welfare, with seven paying more than $12 an hour. But if you work and make more than $1,000 a month (more or less, depending on the state) you will not likely qualify for welfare. The more you make the less you can get, until at some point you do not qualify at all. The theory is that benefits should decrease as your work income increases. (Source for some data: http://www.statisticbrain.com/welfare-statistics/)
Of course, there is the earned income tax credit (EITC), which is phased out once income reaches certain levels. To qualify for that, of course, you need to actually earn income. And WIC, housing subsidies, Medicaid, and other programs exist. (And we will not even get into disability payments. We have recently seen the number of people on disability rise faster than the number of people going back to work. Can a child or other member of a family get disability and another get welfare? Yes, the system can be gamed. Different letter.)
The following chart is from the generally liberal Urban Institute. Note that the maximum amount of total benefits is received by those who have the lowest levels of income, which makes a certain sort of sense. This chart is for a single parent in Colorado, a state that is middle of the road as far as benefits go. Benefits are considerably lower in Mississippi and far higher in Massachusetts and Alaska.
I am not arguing either for or against the level of payments or costs or the rationale for any particular program here. Different issue, different day.
No matter where you live, with few exceptions, being on welfare is not a pleasant lifestyle. Neither is living on $10 an hour, much less on minimum wage.
The point is that people on welfare have a clear need for more money than they get from whatever government check they receive. For most people, welfare is a temporary assistance program to help them out between jobs. But in the last decade, and especially in the five years since the beginning of the Great Recession, the welfare and disability rolls have simply exploded.
The clear incentive, it seems to me, is to work for extra cash in the unreported economy. If as a single working parent you make $10 an hour in the reported economy, you are going to lose most if not all of your welfare benefits (depending on the state); while if you work in the unreported economy, you keep your benefits.
You can view this situation several ways. For instance, perhaps the EITC should be higher, as in, the more you make the more you keep.
If you have a skill that pays you $20-30 an hour (closer to the median family income pay level) you are better off keeping the job and staying off welfare. But if you are minimum-wage labor or not far above it, the equation works out better if you work off the books for that extra income.
Is everyone on welfare working in the unreported economy? I would not suggest that for a minute. Obviously, they aren't.
While acknowledging that correlation is not causation, the parallel growth of the underground economy and the welfare rolls seem to me to be not entirely unrelated. The natural incentives are clearly there. What worries me most is that we are creating a generation of people who are getting used to working off the books, whether or not they are on welfare. They are outside the system and will come to see themselves as not being part of it. It becomes something "other" – except when they want medical care, which, with the advent of Obamacare, will now be available them even if they work in the unreported economy.
None of our kids, yours or mine, believe Social Security will be there for them when they retire. No need to be in the system for that.
There is a lot of controversial work in the economics profession, but I think pretty much everyone agrees that people respond to incentives. I wonder what message we are sending?
CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES
TIMOTHY GEITHNER - The Next Fed Chairman? Not Yellen?
"Volume Triage" Excerpt from QB Asset Management's April 2013 Letter
A couple of days after the Fed announced Ben Bernanke would not attend the Jackson Hole summit, for the first time in twenty five years, the New York Times (on the first page, no less) ran an in-depth profile of Janet Yellen, the heir apparent to run the Fed. Beneath her profile there were three other candidates "being discussed": Roger Ferguson, Tim Geithner, and Larry Summers.
We normally do not spend time handicapping presidential appointments. In this case, however, we think the choice for next Fed Chair may have profound economic implications, and that it would not require expertise in econometric modeling, credit policy management, and maintaining the public perception of economic stability. As we wrote last week, we think the next Fed Chairman will oversee a conversion of the global monetary regime. A thick skin, diplomatic skills, and strong relationships with global banks and monetary policy makers will be the skill set most needed. We think Tim Geithner (with Bill Dudley as an alternative) will take over the Fed when Ben Bernanke steps down next January, and it seems by all indications that the table is already being set.
We attended a small dinner party a few years ago at which an iconic financier (and major Obama supporter) let it slip that he questioned one of Obama's most senior aides just prior to the 2008 Democratic convention about taking over the economy when it was imploding. The aide waived it off and exclaimed, "Oh, don't worry, Bobby has it covered!" Most of the table was relieved that Bob Rubin still had their backs and that banks would keep priority. Such was, and remains, US economic policy.
Neither growth nor austerity nor gloom of night will stay these currencies from their appointed devaluations. Bank balance sheets must be preserved; ergo sufficient inflation must be manufactured. We think the dull but persistent economic malaise amid increasingly aggressive monetary intervention policies will soon engender fear among the not-so-great washed – net savers. This happier band of brothers cannot maintain an edge when the real economy contracts and interest rates are already at zero. Base money is already being manufactured in the form of bank reserves, and the total money stock is not growing because there is very little natural economic incentive among the rest of us to consume (much) or take risk. Something and someone new is needed.
Ben Bernanke seems like a brilliant political economist and a decent guy, the top of his field in terms of comportment, academic credentials, and specific competence in understanding historical monetary policies during a countercyclical (i.e., deleveraging) period. Perhaps Janet Yellen is too? But such qualities are not what we think will be preferred by the powers that be now that global resource producers are openly questioning US, British, Euro, and Japanese monetary policies, and reserve holders are realizing their stash is being methodically turned to trash.
Meanwhile, aggregate leverage is growing and real economies are withering. Does anyone believe that Ben or any other monetary authority has been proactive, or that any fiscal authority has enacted legislation that promises to help achieve "escape velocity?" Can't we all agree that the rationale for economic policy may be boiled down to the counterfactual: "Yes, but imagine if they withdrew liquidity or enforced true austerity – it would be worse!"? Is there a serious analyst who still believes economies can grow their ways out of being overlevered without leveraging further?
Whether or not contraction has to come a-knocking prior to a monetary reset is anyone's guess, but it would be difficult to imagine monetary system change without a generally recognized economic tragedy that precedes it. This implies disappointing GDP prints, declining corporate revenues, and maybe even a swoon in stock and real estate markets. We have already begun to experience the first two. Now that we read global central banks have begun buying equities, perhaps equity prices may be controlled too (as are the level of interest rates via large scale asset purchases like QE and relative currency exchange rates via timed interventions)? Negative output growth and asset price busts would certainly open the door for our hero to enter.
The role of a central banker in the late stages of deleveraging seems to be volume triage, as they say in intelligence circles – reacting to an increasing barrage of events as they occur, wherever they may occur. In economics as in policing, the bad guys always get to take the first shot. From the central banker's perspective, the bad guy in the current regime is the real economy. If it continues to shrink, as we think it must, then TPTB must change the way they do business.
We think the box we drew in our last write-up, contrasting inflation/deflation with leveraging/deleveraging (they are not the same thing), is the key metric in understanding the forces behind economic growth and market pricing. An inflationary leveraging perpetuates imbalances, while deflationary deleveraging threatens the survival of the banking system at large. Hopes for organic credit growth, which would promote the former, are now fleeting. This, in turn, engenders the threat of the latter. Continued ZIRP, increasing asset purchases, and a steep decline in the universal efficacy of it all suggests the time to press the reset button is quickly approaching. May to December 2013 may turn out to be the darkness before the dawn: a time we look back upon and choose to forget.
All in all, we think the most efficient Fed Chair in advance of a reset would be Paul Krugman. He seems willing to destroy the current global monetary system with swift dispatch, without consultation, declaration (or second drafts). Alas, capitalist economies in liberal democracies require level-headed responses to market forces. There is no place for rogue pro-actionists. Institutions like the Fed are meant to appear as first responders working on behalf of the societies their banks serve.
And so we think that circa 2070, our children will write and read (140-word) biographies about how Timothy Geithner saved the world from economic darkness. Geithner will save the day and bring glory to the Obama presidency by reducing the burden of debt repayment while maintaining the nominal integrity of debt covenants and bank balance sheets. The only way to accomplish this would be by destroying the currencies in which those debts are owed. Net debtors will rejoice and net savers (all 1% of them?) will suffer, finally realizing their unreserved currencies and levered financial assets were never sustainable wealth in the first place.
Our little narrative could certainly turn out to be wrong, but we discuss it here (against all political wisdom) because we cannot find another one that better fits current macro and market pricing trends. If we are wrong about Mr. Geithner, we think it would imply that TPTB (raise your hand if you think the Fed's shareholders do not choose/approve the Fed Chairman) believe a clear-headed and decent academic political economist can figure out what all past ones could not: how to support asset prices beyond ZIRP and central bank asset purchases. (Ben is gone, long reign Janet!) That is not our projection.
When and if it becomes clear that Tim Geithner will ascend the steps at Eccles, we think it would already be too late to buy physical gold and resources. The only play remaining for financial asset investors looking to get full value after the reset would be shares in precious-metal miners and natural resource producers holding reserves in nature's vault. Properly held bullion and shares in precious-metal miners would act as the most efficient store of purchasing power over the course of the devaluation and conversion. (Worst to first? Get 'em while they're cold!) Futures, ETFs, unallocated bullion holdings, and other fractionally reserved claims on physical reserves easily replaced with cash would not participate.
If our scenario comes to pass, then bank, government, and consumer balance sheets would be quite healthy following the reset and would be ready to expand. We would think consumable commodities and shares in their producers would lead equity markets higher and that interest rates would remain low, as further inflation would be mitigated by the discipline of a full or partial peg to precious metals. We think all should question whether we are 100% wrong. If not, then prudence dictates some allocation to properly held precious metals. (Presently, it is less than 1% of all global pensions.)
Paul Brodsky is a founding member of QB Asset Management Company, a New York investment manager.
With the Fed now openly warning that there may actually come a time when the 'flow' stops; the most recent Treasury Borrowing Advisory Committee (TBAC) report has some concerning statistics for those change-ridden hopers who see a smooth Fed exit, deficit-reduction, and blue skies ahead. While they are careful not shout 'sell' in a crowded bond market; hidden deep in the 126 page presentation are two charts that bear significant attention. The first shows what TBAC expects (given the market's expectations) to happen to interest rates in the US as the Fed 'exits' its QE program (taper, unwind, hold) - the result, the weighted-average cost of financing for the US government will almost triple from around 1.6% to around 4.3% over the next ten years. But more problematic is that even with CBO's rather conservative estimates of the growth in US debt over the next decade the USD cost of financing will explode from around $205bn (based on TBAC data) to over $855bn. Still convinced the Fed can exit smoothly?
As TBAC warns:
Treasury yields could reprice notably when the market is convinced that policy tightening is imminent
There is a risk that markets may overshoot to higher-than-fair yield levels due to:
Concerns about Fed portfolio unwind
Inadequate interest hedging in certain asset classes
Portfolio rebalancing by retail investors
Annual interest cost on public debt to increase more than 400% (from $205 bn in 2013 to $855 bn in 2023)
Main driver : Increase in WAC from 1.7% to 4.3%
Secondary factor : ~ 65% increase in stock of debt
Given the market's expectations for Fed tapering (or gradual tightening)...
The marginal cost of financing will rise significantly...
but with the sheer size of debt now (and growing), that will balloon the absolute cost of servicing US debt to over $850bn per year...
And just what happens to all those retirees - who need yield - who are being herded into stocks when Treasuries pay over 4.5%? Would seem bullish for bond flows... think Japan...
“I think we – as the authorities, central banks, regulators, those involved today – are the inheritors of a 50-year-long, large intellectual and policy mistake.” – Lord Adair Turner
We finally found time to finish viewing the keynote presentation of Lord Adair Turner at the recent INET conference in Hong Kong. In our opinion, it is a must-see. Mr. Adair’s speech validated a new policy frontier for central bank chicanery and sleight-of-hand. He called it Overt Permanent Money Finance or OPMF. Moreover, he laid out its theorems visible for all to see. While there have been veiled references and discussions on this topic in the past, this was out in the open … all taboos to the wind. We would consider Mr. Adair’s recent speech as the “coming out” of OPMF.
We’ll here briefly explain why you should know about OPMF, what it is contemplated to achieve, and why it will possibly lead to a new boom-bust cycle like perhaps never before. First, we’ll express it in “formal” language and then we’ll tell you what it really means.
INET, for those who don’t know, stands for Institute for New Economic Thinking. It was founded and funded in large part by George Soros in 2009. Its stated objective, according to the INET website, is to “accelerate the development of new economic thinking that can lead to solutions for the great challenges of the 21st century.” While still relatively new, it is gaining much influence and is attracting high-profile economists such as Lord Adair Turner and others to its ranks.
George Soros, in an interview at the recent INET conference, expressed enthusiasm for OPMF. In fact, much more than that. He said something to the effect that, in his consideration, he believed Lord Adair Turner (advocate of OPMF) to be one of the most brilliant economists alive today. Whatever you think about Mr. Soros, an endorsement by such a man of vigor, intellect and unconscionably huge wealth, urges that you find out why Mr. Turner is considered so brilliant supposedly.
Just what is OPMF? It is this: To have central banks directly finance the budget deficits of governments. In other words, central banks would buy new issue bonds directly from a government’s treasury in exchange for newly issued money. The central banks gets the bonds; the government gets the money in its bank account to spend. Disappointed? Well, hold on, this is considered genius (even if you don’t think so). Here’s the claimed reasoning:
Firstly, lack of demand is the easiest economic problem to fix according to today’s macroeconomists. Since there is a lack of demand today (so it is reasoned), it is therefore elementary and imperative that something must be done about it. In fact, to not do so would be irresponsible. (Please note, these are “their” views, not necessarily that of us raconteurs.)
But, how to raise demand (to get people buying and selling more stuff) when the household (and entire private sector in some countries) is deleveraging and pressured to spend less? No problem. Policymakers must continue to move indebtedness over to the public sector. Get governments to take on the debts in one way or another. We can deal with government debt more easily than we can household mortgages and other private debt.
We know that elected governments will never have a shortage of spending needs. As an economist might put it, governments’ proclivity to spend is bottomless. There is conceivably unlimited opportunity for spending whether “pork barrel,” transfers to the private sector, new and improved bridges … maybe even settlements on the moon. In short, you are sure to get a bang for the buck if you give governments free money. (We can hardly recall that we used to be told that governments were inefficient and wasted money!)
Once the demand boost is underway, economies can now grow faster … corporate profits can soar to even higher shares of national income. Such stimulus can be created for as long as needed. And, not to worry, OPMF “speedball” injections directly to the spending aorta can be withdrawn at any time necessary. “Please believe us, we promise that we will withdraw.”
But what about the copious government debt that will fund all this spending? That’s where the “P” in OPMF comes in — namely, the word “permanent.” Actually, slipping this “P” into the acronym is somewhat disingenuous because what is really meant is that the debt will never ever be paid back by the government. Never.
All of the above is brilliant because, among reasons: 1. Giving government money directly in this way doesn’t crowd out other private borrowing; 2. It provides direct spending stimulus to the economy (as opposed to trying to generate demand through indirect means … after all the QE programs are increasingly losing traction); and 3. It circumvents the demand-retarding effects of deleveraging in the private sector.
The worst consequence that can be imagined by the OPMF advocates is that it might unleash some price inflation. But again, not to worry. This is well controllable by central banks, though we know that this has not been reliably demonstrated over the “past 50 years.” Besides, aren’t gold bullion markets signalling that inflation is not a problem?
In short, brilliant.
We see some deathly theoretical flaws with OPMF. In fact, we potentially see them to be “society killers.” But before that happens, OPMF could trigger quite a ride in financial markets. It may already be unfolding.
Before we explain further, we’ll stop right here for a moment and get something off our chest. We don’t like OPMF. It does not agree with our moral sensibilities. Yes, we realize that the arenas of Political Economy and Geopolitics are best engaged with a cold cup of amorality (i.e. no hindrances from any do-right notions of morality.) After all, the ultimate aim of these two crafts is to serve the materialistic interests of sovereign nations and their constituents. We get that.
Nonetheless, we still don’t endorse OPMF and for that matter, we will not apologize for markets nor the reckless policy prescriptions (past and present) of policymakers. We don’t control them. Our job is to manage our clients’ assets and therefore we must remain focused on “what is” rather than “what should be.”
On that note, let’s next focus further on a few “what is” factors:
If it is only the government that will get free money (in all of its senses) under OPMF, then we need to follow what they will be doing with the money. Upon what will this money be spent? To the extent that government spending ends up in the private business sector (i.e. buying goods and services or transferring money to households who then turn around and buy goods and services,) corporate profits will be boosted. This will be sure to get stock markets enthused.
If government debt is never contemplated to be paid back to the central bank, wouldn’t it be more correct to say that the central bank gave a free gift of money to the Treasury Department? We would say yes. This opens the door to abuse … and much more malinvestment and economic distortions.
Real wealth cannot be created out of thin air. What these new OPMF policies must therefore produce is large shifts in relative wealth between different economic agents and households. Wealth distribution skews will continue to widen … the 1% amassing even more relative wealth. (Wealth distribution is already at its most imbalanced in at least 8 decades in the U.S. not to mention similar trends in other countries.) This is one of the structural problems to begin with.
While Mr. Adair and other erstwhile and mutually-congratulatory money alchemists will no doubt continue to reinforce the notion that their ideas are new and brilliant, they are in fact not. The underlying premise — buried under mile-high sedimentary layers of academic-speak, theoretical obfuscation, references to dead economists and so on — is a fascist wealth transfer. That’s harsh language. Even harsher (and more accurate still), is the word theft. When massive amounts of wealth are being transferred by effect of the policies of an unelected central bank (not by way of labour or savings nor a properly empowered congress) what would you call it, dear reader?
We also have to consider the impact of OPMF upon currencies. All of the above theories of the “new thinking” magisterium, assumes that impacts upon currencies will be quite orderly because all major central banks will be nicely cooperating together. This is hardly sure and the potential impact upon individual country stock and bond markets of any dissonance will be sure to be quite marked. This will mean both opportunity and risk.
What also is not sure is the actual long-run impact of OPMF. Beyond an initial financial euphoria, the long-term impact could be directly opposite to what policymakers may believe. Besides a further concentration of wealth, we could make a case that a continuing low-interest environment will push the corporate sector even further into dividend-paying mode, cutting capital spending, even as the household sector suffers a much further contraction in real income. All of this could actually be deflationary. In short, there are plenty of reasons to expect that the “50 year policy mistakes” by ambitious central bankers could continue.
Were we pushed to the wall, we would say that the world of Overt Permanent Money Finance is already upon us. Clandestinely, thanks to the Bernanke Fed, it may already have been in force for two years or more. The U.S. Fed has already bought a lot of U.S. treasury bonds (at last count, $1.86 trillion worth). If you believe that these bonds will never be sold back to the public sector or paid back by the government, then you are asserting that OPMF is already underway. The stock market, by all appearances, seems to already know that.
If you’ve been puzzled by the inexplicable strength of stock markets in recent months, despite a clearly decelerating economic ebb and wilting earnings, then the growing expectation of OPMF could be your answer. Stock markets may already be “looking through” the current economic slowdown to the halcyon promises of the dawn of the age of OPMF.
Of course, we recognize that no future scenario will have a 100% probability. However, the one that we have outlined here just happens to be one of the current eight that have been part of our strategy set for a number of years. Its probability of occurrence is rising fast.
Looking ahead, having been given the stewardship of our client’s assets, we must strive to stay ahead of the monetary machinations and competitive unorthodoxies of the major central banks. The “new economic thinking” being applied, therefore, also requires new portfolio strategies.
As such, many economic theories and financial market response have been entirely turned upon their head. Today’s financial markets are far more theoretically treacherous and non-intuitive. The obvious may not be what it seems; and opportunity may lie right in the mouth of the lion. In a sense, the latter is the situation we see possibly playing out. OPMF, while at first appearing as a gift in the mouth, will turn out to be a hominus-eating carnivore.
As OPMF gains further influence in policy circles, we speculate that financial markets (both bonds and stocks … the latter certainly so) will initially be (perhaps already is) in a celebratory mode. In fact, it may yet be a full-blown punch bowl party. Intoxicants such as free money and free government funding will do that. But only for a time. The flaws that we have cited will, in time, come to the fore.
In conclusion, we think it is a significantly high probability that OPMF will be implemented in time by all of the major central banks of the world (with the possible exception of a few … the Bundesbank?). Why? Because the major economic hindrances that the western world is experiencing are not entirely the result of high indebtedness alone, but, also some serious structural issues (i.e. demographics, uneven wealth distribution as mentioned, massive malinvestment overhang … etc.). The economic growth disappointments borne of such factors will prompt greater calls for OPMF. As such, along the way, we must expect sharp slumps in stock markets from time to time, creating the crisis environments that break the policy inertias that may stand in the way of OPMF. These will also likely be stock buying opportunities.
Should OPMF possibly play out as we theorize, it will be a market environment that few can afford to miss … most crucially so for future retirees. Equity markets are likely to the greatest beneficiary. More than ever, macro tactical strategies are called for. We will be sure to keep our “new thinking” hats on tight; stay wary of erudite sophistries; and above all, keep our hands on our pockets.
Macroeconomic Policy and Economic Stability - Adair Turner Keynote at INET Hong Kong
INET Senior Fellow Adair Lord Turner delivers the day 1 keynote address at the Institute for New Economic Thinking's "Changing of the Guard? Conference in Hong Kong, with an introduction by George Soros.
Speaking during a session titled "Macroeconomic Policy and Economic Stability: Lessons of the Historical Experience with Fiat Money and the Implications for the Future," Turner lays out the case for Overt Monetary Finance.
His conference paper and presentation slides are attached below.
Physical Gold Vs Paper Gold: Waiting For The Dam To Break 04-27-13 Alasdair Macleod, via GoldMoney.com, via ZH
In this article I will argue that the recent slide in the gold price has generated substantial demand for bullion that will likely bring forward a financial and systemic disaster for both central and bullion banks that has been brewing for a long time. To understand why, we must examine their role and motivations in precious metals markets and assess current ownership of physical gold, while putting investor emotion into its proper context.
In the West (by which in this article I broadly mean North America and Europe) the financial community treats gold as an investment. However, of the global pool of gold, which GoldMoney estimates to be about 160,000 tonnes, the amount actually held by western investors in portfolios is a very small fraction of this amount. Furthermore investor behaviour, which in itself accounts for just part of the West’s bullion demand, is sharply at odds with the hoarders’ objectives, which is behind underlying tensions in bullion markets. To compound the problem, analysts, whose focus incorporates portfolio investment theories and assumptions, have very little understanding of the economic case for precious metals, being schooled in modern neo-classical economic theories.
These economic theories, coupled with modern investment analysis when applied to bullion pricing, have failed to understand the growing human desire for protection from monetary instability. The result has for a considerable time been the suppression of bullion prices in capital markets below their natural level of balance set by supply and demand. Furthermore, the value put on precious metals by hoarders in the West has been less than the value to hoarders in other countries, particularly the growing numbers of savers in Asia.
These tensions, if they persist, are bound to contribute to the eventual destruction of paper currencies.
The ownership of gold
The amount of gold bullion that backs investor-driven markets is not statistically recorded, but we can illustrate its significance relative to total stocks by referring back to the time of the oil crisis of the mid-1970s. In 1974 the global stock of gold was estimated to be half that of today, at about 80,000 tonnes. Monetary gold was about 37,000 tonnes, leaving 43,000 tonnes in the form of non-monetary bullion, coins and jewellery. Let us arbitrarily assume, on the basis of global wealth distribution, that two thirds of this was held by the minority population in the West, amounting to about 30,000 tonnes.
This figure probably grew somewhat before the early 1980s, spurred by the bull market and growing fear of inflation, which saw investors buy mainly coins and mining shares. Demand for gold bars was driven by the rapid accumulation of dollars in the oil-exporting nations, as well as some hoarding by wealthy investors from all over the world through Switzerland and London.
The sharp rise in global interest rates in the Volcker era, the subsequent decline of the inflation threat and the resulting bear market for gold inevitably led to a reduction of bullion holdings by wealthy investors in the West. Swiss and other private banks, employing a new generation of fund managers and investment advisors trained in modern portfolio theories, started selling their customers’ bullion positions in the 1980s, leaving very little by 2000. In the latter stages of the bear market, jewellery sales in the West became a replacement source of bullion supply, but this was insufficient to compensate for massive portfolio liquidation.
So by the year 2000, Western ownership of non-monetary gold suffered the severe attrition of a twenty-year bear market and the reduction of inflation expectations. Portfolios, which routinely had 10-15% exposure to gold 40 years ago even today have virtually no exposure at all. Given that jewellery consumption in Europe and North America was only 400-750 tonnes per annum over the period, by the year 2000 overall gold ownership in the West must have declined significantly from the 1974 guesstimate of 30,000 tonnes. While the total gold stock in 2000 stood at 128,000 tonnes, the virtual elimination of portfolio holdings will have left Western holders with little more than perhaps an accumulation of jewellery, coins and not much else: bar ownership would have been at a very low ebb.
Since 2000, demand from countries such as India and more recently China is known to have increased sharply, supporting the thesis that gold has continued to accumulate at an accelerating pace in non-Western hands.
Western bullion markets have therefore been on the edge of a physical stock crisis for some time. Much of the West’s physical gold ownership since 2000 has been satisfied by recycling scrap originating in the West, suggesting that total gold ownership in the West today barely rose before the banking crisis despite a tripling of prices. Meanwhile the disparity between demand for gold in the West compared with the rest of the world has continued, while the West’s investment management community has been actively discouraging investment.
The result has been that nearly all new mine production and Western central bank supply has been absorbed by non-Western hoarders and their central banks. While post-banking crisis there has presumably been a pick-up in Western hoarding, as evidenced by ETF and coin sales and some institutional involvement, it is dwarfed by demand from other countries. So it is reasonable to conclude that of the total stock of non-monetary gold, very little of it is left in Western hands. And so long as the pressure for migration out of the West’s ownership continues,
there will come a point where there is so little gold left that futures and forwards markets cease to operate effectively. That point might have actually arrived, signalled by attempts to smash the price this month.
This admittedly broad-brush assessment has important implications for the price stability essential to bullion banks operating in paper markets as well as for central banks attempting to maintain confidence in their paper currencies.
Precious metals in capital markets
In the West itself, the attitudes of the investment community are fundamentally different from even those of the majority of Western hoarders, who are looking for protection from systemic and currency risks as opposed to investment returns. Western investors are generally oblivious to the implications, the most fundamental of which is that falling prices actually stimulate physical demand. Before the recent dramatic slide in prices the investment community undervalued precious metals compared with Western hoarders, let alone those in Asia, encouraging physical bullion to migrate from financial markets both to firmer hands in the West as well as the bulk of it to non-West ownership. There is now irrefutable evidence that these flows have accelerated significantly on lower prices in recent weeks, as rational price theory would lead one to expect.
Pricing bullion is therefore not as simple as the investment community generally believes. It is being put about, mostly on grounds of technical analysis, that the bull markets in gold and silver have ended, and precious metals have entered a new downtrend. The evidence cited is that
medium and longer-term moving averages have been violated and are now falling; furthermore
important support levels have been breached.
These developments, which arise out of the futures and forward markets, have rattled Western investors who thought they were in for an easy ride. However, a close examination of futures trading shows the bearish case even on investment grounds is flawed, as the following two charts of official statistics provided by weakly Commitment of Traders data clearly show.
The Money Managers category is the clearest reflection in the official data of investor portfolio positions, representing sizeable mutual and hedge funds. In both cases, the number of long contracts is at historically low levels, and shorts, arguably the better reflection of money-manager sentiment, remain close to high extremes. On this basis, investor sentiment is clearly very bearish already, with the investment management community already committed to falling prices. Put very simplistically there are now more buyers than sellers.
Money Managers are in stark opposition to the Commercials, who seek to transfer entrepreneurial risk to Money Managers and other investor and speculator categories. The official statistics break
Commercials down into two categories:
Both categories include the activities of bullion banks, which in practice supply liquidity to the market. Because investors and speculators tend to run bull positions, bullion banks acting as market-makers will in aggregate always be short. A successful bullion bank trader will seek to make trading profits large enough to compensate for any losses on his net short position that arise from rising prices.
A bullion bank trader must avoid carrying large short positions if in his judgement prices are likely to rise. He will be more relaxed about maintaining a bear position in falling markets. Crucially, he must keep these opinions private, and the release of market statistics are designed to accommodate these dealers’ need for secrecy.
Bullion banks’ position details are disclosed at the beginning of every month in the Bank Participation Reports, again official statistics. They are broken down into two categories, based on the individual bank’s self-description on the CFTC’s Form 40, into US and Non-US Banks. Their positions are shown in the next two charts (note the time scale is monthly).
In both gold and silver, the bullion banks have managed to reduce their exposure from extreme net short over the last four months. The reduction of their market exposure suggests that they have been deliberately transferring this risk to other parties, and is consistent with an anticipation that bullion prices will rise. It is the other side of the high level of bearishness reflected in the Money Manager category shown in the first two charts.
The bullion banks control the market; the Money Managers are merely tools of their trade.
There has been little reduction in open interest in gold and it has remained strong in silver, because risk has been transferred rather than extinguished. Daily official statistics on open interest are provided by the exchange and summarised in the next two charts (note that data is daily).
From these charts it can be seen that recent declines in the gold price are failing to reduce open interest further, and in silver open interest remains stubbornly high. Therefore,
attempts by bullion banks to reduce their net short exposure by marking prices down are showing signs of failure.
We can therefore conclude that
Investor sentiment is at bearish extremes and the bullion banks have reduced their net short exposure to levels where it risks rising again. Therefore the downside for precious metals prices appears to be severely limited, contrary to sentiments expressed by technical analysts and in the media.
This market position is against a background of a growing shortage of physical bullion, which is our next topic.
Casual observers of precious metal prices are generally unaware that the headline writers focus on activity in the futures markets and generally ignore developments in physical bullion. This is consistent with the fact that market data is available in the former, while dealing in the latter is secretive. However, as with icebergs, it is not what you see above the water that matters so much as that which is out of sight below.
Future Market - AVAILBALE
Physical MARKET - SECRETIVE
It is not often understood in investment circles that
gold and silver are commodities for which the laws of supply and demand are not overridden by investor psychology.
Therefore, if the price falls, demand increases. Indeed, the increase in demand has far outweighed selling by nervous investors; even before the price-drop, demand for both silver and gold significantly exceeded supply. Evidence ranges from readily available statistics on record demand for newly-minted gold and silver coins and the net accumulation of gold by non-Western central banks, to trade-based information such as imports and exports of non-monetary gold as well as reports from trade associations reporting demand in diverse countries such as India, China, the UK, US, Japan and even Australia.
All this evidence points in the same direction: that physical demand is increasing on every price drop. There is therefore a growing pricing conflict between
futures and forward markets, which do not generally involve settlement but the rolling-over of speculative positions, and of
the underlying physical metal.
Furthermore, analysts make the mistake of looking at gold purely in terms of mining and scrap supply, when nearly all gold ever mined is theoretically available to the market, in the right conditions and at the right price.
The other side of this larger coin is that if the price of gold is suppressed by activity in paper markets to below what it would otherwise be, the stimulus for physical demand, being based on a 160,000 tonne market, is likely to be considerably greater on a given price drop than analysts who are myopic beyond 2,750 tonnes of annual mine production might expect. The numbers that are available confirm this to have been the case, particularly over the last few weeks, with reports from all over the world of an unprecedented surge in demand.
This is at the root of a developing crisis of which few commentators are as yet aware.
Demand for physical has accelerated the transfer of bullion from capital markets to hoarders everywhere and from the West’s capital markets to other countries, which has been the trend since the oil crisis in the mid-Seventies.
This is what’s behind an acute shortage of physical gold in capital markets, explaining perhaps why bullion banks feel the need to reduce their short positions.
While we can detail their exposure in futures markets, meaningful statistics are not available in over-the-counter forward markets, particularly for London, which dominates this form of trading. Forwards are considerably more flexible than futures as a trading medium, generating trading profits, commissions, fees and collateralised banking business. The ability to run unallocated client accounts, whereby a client’s gold is taken onto a bank’s balance sheet, is in stable market conditions an extremely profitable activity, made more profitable by high operational gearing. The result is that paper forward positions are many multiples of the physical bullion available. The extent of this relationship between physical bullion and paper is not recorded, but judging by the daily turnover in London there is an enormous synthetic short physical position. For this reason a sharply rising price would be catastrophic and any drain on bullion supplies rapidly escalates the risk.
Overseeing this market is the Bank of England co-operating with other Western central banks and the Bank for International Settlements, whose combined interest obviously favours price stability. They have been quick to supply the market if needed, confirmed by freely-admitted leasing operations in the past, and by secretive supply into the market, which has been detected by independent supply and demand analysis over the last 15 years. Furthermore,
as currency-issuing banks, central banks are unlikely to take kindly to market signals that suggest gold is a better store of value than their own paper money.
We can only speculate about day-to-day interventions by Western central banks in gold markets. In this regard it seems that the slide in prices on the 12th and 15th April was triggered by a very large seller of paper gold; if this market story and the amount mentioned are correct,
it can only be central bank intervention, acting to deliberately drive prices lower.
Given the market position, with Money Managers in the futures markets already short and highly vulnerable to a bear squeeze, the story seems credible.
The objective would be to persuade holders of physical ETFs and allocated gold accounts to sell and supply the market, on the assumption that they would behave as investors convinced the bull market is over.
For the last 40 years gold bullion ownership has been migrating from West to elsewhere, mostly the Middle East and Asia, where it is more valued. The buyers are not investors, but hoarders less complacent about the future for paper currencies than the West’s banking and investment community. There was a shortage of physical metal in the major centres before the recent price fall, which has only become more acute, fully absorbing ETF and other liquidation, which is small in comparison to the demand created by lower prices. If the fall was engineered with the collusion of central banks it has backfired spectacularly.
The time when central banks will be unable to continue to manage bullion markets by intervention has probably been brought closer.
They will face having to rescue the bullion banks from the crisis of rising gold and silver prices by other means, if only to maintain confidence in paper currencies.
Any gold held by struggling eurozone nations, theoretically available to supply markets as a stop-gap, will not last long and may have been already sold.
This will likely develop into another financial crisis at the worst possible moment, when central banks are already being forced to flood markets with paper currency to keep interest rates down, banks solvent, and to finance governments’ day-to-day spending. Its importance is that it threatens more than any other of the various crises to destabilise confidence in government-backed currencies, bringing an early end to all attempts to manage the others systemic problems.
History might judge April 2013 as the month when through precipitate action in bullion markets Western central banks and the banking community finally began to lose control over all financial markets.
Downward revisions to previously 'hopeful' levels for Goldman's Global Leading Indicator (GLI) suggest a significantly softer patch for global activity consistent with subdued growth in the near-term. The GLI has now been in 'slowdown' phase for four consecutive months and while it has not reached the 'contraction' phase yet, empirical results show this phase far less supportive of risk-assets than the current exuberance suggests. With
Global PMIs, and
Industrial Metals all disappointing,
the most concerning aspect is Goldman's three-key-risks
With macro data becoming worse and worse (more and more bullish for Fed free money) and stocks off to the races (despite earnings that are abysmal), we thought a litle reminder of just what is driving this un-reality in nominal price moves. As the following chart, inspired by UBS, shows, each time the S&P 500 shows any sign of weakness, US money grows dramatically (money defined as the sum of M2 and foreign custody repo-able holdings at the Fed). Simply put, this is the reaction function of the Bernanke Put and explains why any weakness in Europe causes problems for the US - as the foreign banks repatriate and impact this 'growth' support. Correlation is not causation, but it is a strong hint.
The growth in money (M2 plus the NY Fed's foreign offocal institution's custody holdings of Treasury and Agency debt - i.e. repoable 'stuff') surges (red green arrows on inverted axis) each time the S&P 500 shows any sign of stalling (red arrows)...
Which is the exact opposite of the relationship pre-Lehman...
Which is why this doesn't matter... (and yes Macro dropped today as the terrible ISM Services and Factory Orders misses trumped the NFP beat)
Until it does...
But then again we know exactly what will happen should the 'market' overwhelm the money briefly... or more permanently... (and FYI - the break point in mid 2006 between macro reality and the markets coincided with Magnetar selling CDOs guaranteed to fail, Merrill's CDO department's dificulties in getting super senior CDO tranches off their books, and AIG and the monolines begin to stop selling CDO protection)
EARNINGS - Elevated Valuations Even Based on Unachievable Hockeystick In Earnings
According to the media hype, stocks are never expensive; but if you care a little about the actual price you are paying for stocks, perhaps the following two charts will at least raise a doubt about chasing this fun-and-games.
The prospective P/E on both US and non-US equities are now at the top of the post crash range.
Multiple-expansion has driven the rally in large part on the basis that central banks have removed the downside tail to investing but at these valuations (and with the expectations that are still priced in for H2 2013 earnings - up 14% vs up 4% in H1) surely caution is warranted.
Here are EPS growth consensus expectations for the S&P 500 for the rest of the year...
and based on this hockey stick, here is the forward P/E for US (and non-US) equities...
Charts: Goldman Sachs and Morgan Stanley
JP MORGAN - Dramatic Reduction in 'Eligible' Physical Gold
We know that back in early October 2010, when gold closed at a then record high of $1,320, JPM decided to reopen its previously mothballed precious metal vault due to soaring demand for metal vaulting, thus becoming only the fifth official Comex private gold depository in New York in addition to HSBC, Bank of Nova Scotia, Brinks and MTB (and of course the New York Fed).
We also know, courtesy of a Zero Hedge exclusive, that the JPM vault - the largest private gold vault in the world - is located at 1 Chase Manhattan Plaza, and is literally adjacent to the vault of the New York Fed 80 feet, and 5 sublevels, below street level.
We know that for a long time the vault held around 2.5 million ounces of eligible (commercial) gold, a number which declined only gradually until very recently.
Finally, everyone knows that in the past month gold has experienced a very severe move lower which is still largely unexplained.
What many may not know, is that while registered Comex gold has been flat, the amount of eligible gold in Comex warehouses (the distinction between eligible and registered gold can be found here) in the past several weeks has plunged from nearly 9 million ounces, to just 6.1 million ounces as of today- the lowest since mid-2009.
What nobody knows, is why virtually the entire move in warehoused eligible gold is driven exclusively by one firm: JPMorgan, whose eligible gold has collapse from just under 2 million ounces as of the end of 2012 to a nearly record low 402,374 ounces as of today, a drop of 20% in one day, though slightly higher compared to the recent record low hit on April 5 when JPM warehoused commercial gold touched a post-vault reopening low of just over 4 tons, or 142,700 ounces.
This happened just days ahead of the biggest ever one-day gold slam down in history.
Some questions we would like answers to:
What happened to the commercial gold vaulted with JPM, and what was the reason for the historic drawdown?
Gold, unlike fiat, is not created out of thin air, nor can it be shred or deleted. Where did the gold leaving the JPM warehouse end up (especially since registered JPM and total Comex gold has been relatively flat over the same period)?
Did any of this gold make its way across the street, and end up at the vault of the building located at 33 Liberty street?
What happens if and/or when the JPM vault is empty of commercial gold, and JPM receives a delivery notice?
Inquiring minds want to know...
THE GOLD SMASH - The Likely Story Minus the Conspiracy Angel
Just not yet — and certainly not anywhere close to this price.
One day, long into the future, it will be time to sell gold — or, more likely, to exchange it for something you want more; but it just ain't time yet, folks — no matter what you've been reading.
However, the past week has seen some truly amazing action in the gold (and silver) market, the kind of action that marks a shift in the status quo on a level so profound that it's hard to understand it at the time. But, as the years pass, these moments get viewed through the glorious prism of hindsight, and then they take on their full technicolour hues.
Friday, April 11th, 2013, began like so many other days, with gold at $1561, about $5 above its opening price on the previous Monday, having traded as high as $1590 and as low as $1550. In short, it had been an uneventful week.
However, there were a few things that had been bubbling away under the surface, each of which individually seemed to have relevance to the gold market but none of which apparently had any immediate effect.
Firstly, there was a report by Société Générale with the snappy title 'The End of The Gold Era', which hit the inboxes of the bank's clients on April 2. With the report forecasting the imminent demise of everybody's favourite immutable object, it obviously received a lot of coverage, as such viewpoints are apt to do. In fairness, the report was detailed, with a wealth of interesting charts, and I would recommend those amongst you interested in gold read through it in its entirety — whether you agree with SocGen's thesis or not.
Patrick Legland and his team of analysts declared that gold's day in the sun had come and gone and that the yellow metal was 'in bubble territory'. The front cover of their report pulled no punches:
(Société Générale): Our expectations for rising interest rates, driven in part by a positive view of the US economy with an associated improvement in the dollar, could be the perfect storm to start a longer-term bear market. Professional sentiment, as evidenced by heavy redemptions in ETFs and the increasing willingness of managed money investors to trade from the short side, confirms our view that gold may have had its “last hurrah”.
Fair enough, but what did that mean for the price?
Our base case 2013 forecast for gold is for $1500/oz on average, and $1375/oz by year’s end.
Clear as a bell.
Then they explained what other purpose the report served:
This report outlines the bear case for gold and explores what it would take for a dramatic decline in gold prices beyond our forecast.
The extreme conditions that would be required for SocGen's bear-case scenario to play out were, in their own words, a 'perfect macro storm', and they put a 20% probability on that situation playing out and gold 'crashing' 20%.
“Among all forms of mistake, prophecy is the most gratuitous.”
— George Eliot
Three days later, stung into action, none other than two of Sprott's finest, the Davids Franklin and Baker, took it upon themselves to offer a 'A Retort To SocGen's Latest Gold Report', in which they carefully deconstructed the French bank's bear case in measured tones:
(Sprott): Société Générale (“SocGen”) recently published a special report entitled “The end of the gold era” that garnered far more attention than we think it deserved. The majority of the report focused on SocGen’s “crash scenario” for gold wherein they suggest that gold could fall well below their 2013 target of US$1,375/oz. It also included a classic criticism that we’ve heard so many times before: that the gold price is in “bubble territory”. We have problems with both suggestions.
Addressing each of SocGen's points in turn, 'The Davids' eloquently and convincingly laid out the case for continuing strength in the gold market, with a particular focus on gold as a currency.
Their conclusion summed things up nicely:
(Sprott): We believe gold is nowhere close to ‘bubble territory’ today. It is acting exactly as a currency should. Under its current stewardship, we expect the Federal Reserve’s balance sheet to continue to expand along with Japan’s. SocGen’s “crash” scenario would require a complete reversal of this trend, which we do not believe is even remotely possible at this point.
Gold is the base currency with which to compare the value of all government-sponsored money. Investors can incorporate it into their portfolios as ‘central bank insurance’, or ignore it entirely. Either way, we believe gold will continue to track the total aggregate of the central bank balance sheets of the US, UK, Eurozone and Japan. If SocGen believes the aggregate central bank balance sheet will continue to shrink as it did in Q1, then gold should continue its decline. We strongly suspect that shrinkage is over, however. Given Japan’s recent QE decision, we would expect the aggregate to grow a lot bigger, and fast. If there was ever a time for gold to be a relevant currency alternative — it’s now.
The next negative influence on gold was an extraordinary report from Goldman Sachs which (coincidentally) was published the same day that we discovered there had been an early leak of FOMC meeting minutes to a 'select' email list that consisted largely of lobbyists from the financial industry (yes, including Goldman Sachs).
In this report, Goldman made a call that is startling at best and at worst (in my humble opinion, at least) reckless in the extreme: they recommended their clients short gold.
Now, I can understand advising a 'sell' in gold from people who refuse to believe it is going higher, but to call it a 'short' within the context of the macro environment surrounding it I thought extraordinary.
No matter. A few days later, the author of the report, Jeffrey Currie, would be seen as some kind of human Magic 8 Ball, as his prescience was hailed far and wide.
The next negative news item for gold was Cyprus and the yes-they-will/no-they-won't argument about whether the country would be forced to sell their 'excess gold' (a contradiction in terms of epic proportions, given the state of the world today, but we'll go with it). Initially denied by the Cypriot government, rumours of the sale were, of course, later confirmed, and the sum of €400mn was mooted as the total of their 'excess'.
According to the World Gold Council, Cyprus' holdings of 13.9 tons (which represent 58.3% of their reserves) place them at #59 on the list of the world's largest official holdings.
Any sale by Cyprus would equate to roughly 2% of daily turnover on the LBMA, and so it can hardly have been that which spooked holders. Rather, it was the inference that Cyprus would be the first domino to topple, which would lead to other, more sizeable sales — specifically by Portugal (382.5 tons/92% of reserves) and the big dog, Italy (2,451 tons/72%).
This idea that Italy should sell had originally been proposed by, of course, a German lawmaker in November 2011:
(Bloomberg): Italy could lower its debt by selling gold reserves, Gunther Krichbaum, a lawmaker in German Chancellor Angela Merkel’s governing coalition, was quoted as saying by the Rheinische Post.
Italy’s gold reserves are relatively high, Krichbaum, who chairs the German parliament’s European affairs committee, was quoted as saying in an e-mailed summary of an article to appear in the newspaper today.
I'll let you be the judge as to whether you think Italy is about to sell any of its 'excess gold':
That sets the scene that was swirling around the gold market going into last Friday, so now let's get to the good stuff and see what happened, what happened next, what happened after that, what was alleged, what was kinda strange and, hopefully, what might happen now.
But first, before we get to the market action, let's take a look at a couple of charts from my good friend Nick Laird of Sharelynx.com, which show what was going on in the physical metal warehouses in the lead-up to 'Gold Fryday'.
First up is the level of eligible and registered gold stocks at the COMEX warehouse:
(I've said it before and I'll say it again, if you have any interest in precious metals markets whatsoever, you need to know about Nick and his fantastic site. It's far and away the best resource for data on gold and silver anywhere on the internet. Check it out at www.sharelynx.com.)
The difference between the two classifications in the COMEX warehouse is important to understand.
Registered: This is gold (or silver) that is sitting in the COMEX warehouse and that can be used to settle a futures contract.
Eligible: This is gold (or silver) that has been purchased (and paid for) by a long at some point in the past (and for which they are currently paying storage fees) and which is eligible for delivery to the client at any point that the client specifies. It has been assigned to the client, who has the serial numbers of its bars, and cannot be used for delivery.
Essentially, if it's 'eligible' then hands off, and if it's 'registered' it can be sold and delivered.
Often, we see gold or silver move from registered to eligible and vice versa, but to see both registered and eligible drawn down so sharply means that gold was being taken out of the warehouse to be stored privately — notably, in the wake of the Cypriot deposit confiscation.
Another way to see how severe the move was is to take a look at this chart of total COMEX gold inventories:
As you can see, gold has been pouring out of the COMEX warehouse since January 2013, and the slide accelerated both just before and immediately after the Cyprus bail-in was announced. Somebody sure got nervous right before the announcement, and a lot of people did after the event. All of them seemed to want their gold where they have direct access to it.
So, with that as background, let's get to the events of last week.
The chart below is a look at trading in the COMEX June futures contract on Friday, April 12.
As you can see, there were a series of sharp sell-downs on very large volume that flowed one after the other.
To put what happened into perspective, somebody (or bodies) sold pieces of paper with a notional value of $28,000,000,000 into the gold futures market (that's roughly 25% of the market cap of Bank of America).
Not gold. Paper.
'the gold price' that collapsed, not 'the price of gold'
— an incredibly important distinction to make and one that we will be coming to shortly, but for now let's get back to last week and see how the Paper Smash proceeded.
Those concerted sell orders tripped a group of stop-loss and technical sell orders that were clustered around that level, but what happened next was so bizarre that even the most dyed-in-the-wool conspiracy debunkers would have a hard time coming up with a 'that's just coincidence, happens all the time' defence.
Bill Downey takes up the story (in capital letters in places, so you KNOW he's angry):
(Gold Trends): Now comes the part that is pure genius or a total coincidental thing that just so happens to be a gift to those who are short the market and those who would be responsible to deliver gold should the inventory deplete.
ALL OF A SUDDEN THE LONDON PHYSICAL PLATFORM THAT BUYS AND SELLS PHYSICAL GOLD GETS LOCKED UP. THE SYSTEM FREEZES.
The screens all freeze.
What does that mean?
No one can get to the physical market to buy at these low prices, but at the same time they can’t sell or protect their positions either. The system is frozen. Yes, just like at Bit-coin. The system locks up. And of course the results are going to be the same, just on a lower percentage level.
What can the physical holders do?
Meanwhile the futures market continues to drop.
So what happens? The physical market holders begin to panic. How can they protect themselves, as they can’t sell either?
What would you do if you were in that situation?
There is only one solution, especially during a panic. Short and ask questions later.
Now, say what you want, but for this to happen when it did most definitely caused two very specific problems, as Bill points out. Buyers were unable to take advantage of paper weakness to buy physical bullion, and holders were forced to sell yet more paper contracts in order to properly hedge themselves.
Their choice was either this solution, or wait until Monday and be subject to potentially heavy losses should margin calls go out over the weekend. With no time to think and survival instinct kicking in, the physical holders most likely did what they could to protect themselves. They went in and shorted the futures market.
At this point the market goes into a free fall as the physical market can’t buy at these low prices because the computer system is down; they can only sell futures to hedge their long physical holdings, and so they do what they have to and begin selling futures.
Now it gets worse. As the price drops even more, underfunded players are getting wiped out, and now they begin to liquidate. The market goes into a total collapse as all the stops below $1,500 get tripped up and the market tanks to $1,490.
The market finally closes in New York and returns to the $1,500 area.
But it’s not over. There's another situation going on. The weekend is arriving and players begin wondering about margin calls. How are holders going to get money to their brokers over the weekend for the Monday trade session?
But there is not enough liquidity, as the COMEX has closed and only the aftermarket GLOBEX is there to execute trades.
Without a doubt, the shorts know exactly what is about to transpire.
The banks and brokers are open all weekend and as long as it takes to go through all the accounts and issue all the MARGIN calls.
If they get the margin calls out by Saturday, the customers have 24 hours to get more money to their brokers. If the money is not received by Sunday night or Monday morning, the positions will have to be liquidated, just when the market is at its lowest liquidity, and the longs have had all weekend to think about it and the media has had time to tell everyone that the bull market in gold is over.
As Bill predicted Saturday morning, Monday came and the margin calls caused a cascade of liquidation selling that saw the gold price tumble to the low $1300s at one point on even larger volume than had flooded the exchange the previous Friday (chart below).
Source: Nick Laird
Naturally, the gold-haters were out in force, while headlines trumpeted 'the bursting of the bubble' and the notion that gold had 'officially entered a bear market':
'Gold Bubble Finds Its Pin' — Fox News
'The Gold Bubble Pops, Others Will Follow' — Forbes
'Can Gold Plummet To $400/Ounce?' — Seeking Alpha
Wait ... WHAT?
Somebody out there on the internet coined a phrase that I wish I could claim as my own for this strange phenomenon of giddy delight that so many commentators seem to feel whenever gold wobbles: 'Goldenfreude'.
Fortunately, amidst the wreckage, calmer heads prevailed, and some widely respected market minds less prone to hyperbole weighed in, beginning with SocGen alum and all-around champion Scottish bloke Dylan Grice:
(Dylan Grice): The collapse does not necessarily mean that the gold bull market is over. It could indeed be over, but I think not. And in view of the greater whole, such a collapse is not important, even if it has a violent and unpleasant course. There are good reasons to own gold. And to buy gold, there is now a reason which did not exist a week ago: It's 30% cheaper.
Dylan then reminded readers of the macro picture surrounding gold:
States and financial systems are deeply in debt, interest rates can not fall further, real interest rates are negative, we live in a world of financial repression. The best possible outcome would be a gentle rise in interest rates in the coming years. This would be accompanied by negative real interest rates, because that is the only way for governments to gradually reduce their debt burden. In this scenario, long-term interest rates remain extremely low and imply overvalued stocks and bonds. That's not a bad environment for gold.
I was never bullish for gold, because I assumed higher inflation is imminent. Inflation is a slow and a long-term problem. You will not see it suddenly. Those who acquired gold for the wrong reasons are selling. Those who maintain it now belong to a more stable investor base.
Gold was up for twelve years in a straight line, which is extremely unusual, and a downsizing and a correction was overdue. While the largest price drop in the past thirty years is unusual, on the other hand, these unusual incidents occur quite often in financial markets. The gold market has now become healthier.
Dylan even went to the trouble of including a reminder of a similar fall in the 1970s:
Source: Grice/Bloomberg/US Funds
Backing up Dylan's sober assessment was that of another long-time market watcher of great repute, CLSA's Chris Wood (of GREED & fear fame), who had this to say about the remarkable move in gold:
(Chris Wood): Rather than viewing this as confirmation of the end of the gold bull market, investors should see this as a massive buying opportunity while also being aware, based on the technicals, that gold could trade down to the US$1,200/oz level....
This bear case makes sense for those who believe the American economy is “normalising” and that Bernanke will be ending QE and resuming monetary tightening earlier than the market currently expects.
Still, GREED & fear does not believe in such “normalisation”, nor should investors.
And even David Kotok of Cumberland Advisors thought enough was enough:
... we would recommend gold acquisition, for those who are inclined to pursue it, on a very modest level, utilizing a dollar-cost averaging method. Buy a little gold and put it away. Forget the price. Come back again, buy a little more, add to your hoard, and forget the price. Look at gold as an insurance policy that you hope you never need to use. We do believe that abandoning gold completely and disparaging it as a barbarous relic is too extreme.
... gold should form a part (not more than 5-10%) of a well-diversified investment portfolio to protect against open-ended QE programs undertaken by central banks around the world. Additionally, the cost of holding gold is negative in an environment of negative real interest rates and widespread financial repression. Therefore the recent extreme move in gold presents an attractive initial buying opportunity for those who have been looking to enter the market ...
"An attractive entry point for those who have been looking to enter the market." How very true.
Across the world, retail investors were of like mind as they stampeded gold bullion dealers in a frenzied rush to buy physical gold.
Anecdotally, I asked friends across Asia to go see what was happening at bullion dealers where they live, and the responses I received were truly staggering.
In Beijing and Shanghai, gold dealers were sold out of coins and small bars. In Macau, police had been called in to divert traffic around the scores of people lining the streets outside the dealers, and in Bangkok buyers stood eight deep at the counter trying to buy physical metal.
Mumbai was no different, and here in Singapore Mustafa's Department Store in Little India was awash with buyers of gold. I received similar reports from Sydney, Zurich, and Toronto, and then saw Nigel Moffat of the Perth Mint, interviewed on Bloomberg TV, paint a graphic picture of the activity in Western Australia:
Monday morning when we opened the gates of the Perth Mint at 9 o'clock, there was a large crowd of people waiting outside and as the gates were opened people ran across the courtyard to get into the retail operation. And we have seen enormous numbers of people in there and they're all buying.
Let's face it, when you find the price of something $200 cheaper than it was the previous business day, it's like the Christmas sale at your favourite department store.
But all that paled into insignificance when an email hit my inbox from a good friend in Hong Kong. This one made my chin hit the floor:
I've been taking this opportunity to stock up on some yellow metal. Went to Hang Seng bullion counter yesterday.
The line was out the door. It took an hour wait to see a teller. When I asked if people were buying in the dip or selling in panic, she told me that they haven't had one ounce of gold sold back to them all day. She told me they have sold more gold in 24 hrs than they normally do in 3 months. Yes, there was a lot of extra security. The guy in front of me bought over $1 million USD in gold. He paid in cash and walked out of the door with the bullion in a Nike bag. Amazing."
So this is what a crash looks like? This is the panic associated with the bursting of a bubble?
During my 30-odd years in finance, I have somehow weaved my way through many crashes, beginning with the 1987 stock market crash and including LTCM, NASDAQ, the Asian Currency Crisis, the Mexican Tequila Crisis, 9/11, and everything in between; and I can promise you that not a single one of those crashes, collapses, or crises ended up with retail investors stampeding to buy the asset that was supposedly cratering.
Something different and, I believe, incredibly significant is happening here, and it goes back to that important distinction I made and promised to get back to: 'the gold price' vs 'the price of gold'.
'The gold price', as it is understood by most people, is nothing more than the quoted price of a gold futures contract on the COMEX exchange in the US. When you read that 'gold fell in overnight trading', what actually happened is that the price of a paper futures contract fell — not the metal itself.
'The price of gold', on the other hand, is what you will have to pay to get your hands on the physical metal itself, and that is a different thing altogether.
Despite the plunge in paper prices, 'the price of gold' remained remarkably robust. Here in Singapore I was quoted a 25% premium for a 1-oz. Canadian Maple Leaf, while on eBay premiums were substantial: Silver Eagles were up as much as 50%, 10-oz. silver bars never dropped below $30/oz., and Gold Eagles never dropped below about $1630 (a premium of around 21%).
My good friend Mike, who lives in Bangkok, sent me an article from the Bangkok Post that highlighted just how feverish the demand for gold was in Thailand's capital:
Shops were jammed, particularly the large gold shops in Yaowarat. Managers asked customers to line up and take queue numbers. Similar scenes took place in Phuket, Phitsanulok, Nakhon Ratchasima and other provinces. Gold shops in some provinces reportedly closed up rather than face the jam. A Chanthaburi resident told the Bangkok Post her gold shop in the gem-dealing town was closed for the day....
Lastly, and at the risk of labouring the point, this article by the Chinese Xinhua agency makes clear how seriously the bursting of the gold bubble and the crash in the price was regarded in China:
(China News): Gold bars have sold out and gold accessories are going fast at the Caishikou Department Store, the largest gold dealer in downtown Beijing.
"No gold bars are available. Customers who have paid can pick up their bars in one week," said a notice posted at the store's gold sales counter.
Gold had almost exclusively been purchased by wealthy Chinese before the prices plummeted. But with prices dropping significantly, those with lesser means have seen an opportunity to invest in the metal themselves.
"I couldn't wait to buy gold. Many of my colleagues and friends have already made their purchases," said Zhang Jiang, a Beijinger who bought two gold necklaces and a five-ounce gold bar.
Whatever happened last week in the paper market, the retail response has been unprecedented and, I suspect, will have caught many by surprise.
Plenty of suggestions have been made as to who crashed the market and why; and depending on the level of your thirst for conspiracy theories, you can have some real fun with it, but the cold hard facts are these:
1) 'The gold price' saw its biggest fall in 30 years — a 7.5 standard deviation event. To put that into the proper perspective, I'll hand things over to Howard Simons of Bianco Research:
(Bianco): As the odds against such a move are on the order of 20 trillion to 1, it had a lower probability of occurrence than randomly selecting a specific $1 bill out of a pile of singles representing the US National Debt. (See image, left.)
Oh, by the way, the bills stacked in the image are $100 bills, so the pile from which you'd have to randomly pull that single $1 bill would be 100x higher — just sayin'.
2) 'The price of gold' is significantly higher than 'the gold price', and the real demand for bullion is enormous. Not only that, but buyers are waiting for any weakness in the former as an opportunity to accumulate the latter.
3) Anybody who is short COMEX contracts will have seen the amazing response to this engineered fall in 'the gold price' and will be recalibrating their rationale for being short an obligation to deliver a physical commodity that is clearly in heavy demand amongst retail investors.
4) Leaving retail investors aside, central banks (particularly in Asia) see any such weakness in 'the gold price' as an opportunity to increase their holdings at bargain prices:
(Bloomberg): Sri Lanka’s central bank governor said falling prices are an opportunity for nations to raise gold reserves and that the island will “favorably” examine buying more. The Bank of Korea said the plunge isn’t a “big concern” because holding the metal is part of a long-term strategy for diversifying currency reserves....
“Overall, gold prices coming down is giving an opportunity to various central banks across the world to improve on their holdings,” Central Bank of Sri Lanka Governor Ajith Nivard Cabraal said today in an interview with Rishaad Salamat on Bloomberg Television. “An opportunity that provides us with space to purchase a little more quantities and hold in our own reserves would be an interesting one.”
Meanwhile, to demonstrate just how differently the 'Western' central bankers look at gold, RBA Assistant Governor Guy Debelle (which, if I'm not mistaken, is coincidentally French for 'The Bell'. No, wait, that would be 'DuCloche'. Wouldn't it?) made an extraordinary statement in the face of gold's correction:
(Bloomberg): “If you think about the intrinsic value of gold, there’s not a lot,” Guy Debelle, assistant governor at Australia’s central bank, which owns 79.9 tons, said at a business lunch in Canberra today. “Gold often has a high price because people believe that other people believe that it’s worth a lot. When you describe other markets like that, the word ‘bubble’ gets thrown about.”
"... but, I'm not going to say that here but ... you can draw your own conclusions".
Hey, Guy, you know that 79.9 tons of useless metal you own? Give those muppets at the Sri Lankan Central Bank a call (Tel : +94 11 247 7000) — maybe you can dump it on them at these vastly inflated prices and have a good laugh over it? DuBelle indeed.
But, as always when looking at extraordinary events and trying to figure out what the root cause is behind any such move, we find it always pays to ask one question first: qui bono?
(Bloomberg): The slump in gold may hand activist central bankers more reasons to pursue the easy monetary policy that helped drive up the metal’s price in the first place....
The combination of growth jitters and reduced inflation anxiety boosts the case of Federal Reserve Chairman Ben S. Bernanke and counterparts elsewhere to keep pump-priming their economies in the hope they will finally secure traction. It also may help them beat back critics, including some U.S. Republican lawmakers.
“Central banks can be opportunistic and proceed with quantitative easing now the gold market is surrendering with regards to its hyperinflation fears,” said Edward Yardeni, president and chief investment strategist at Yardeni Research Inc. in New York. “They could also argue the weakness in commodity prices suggests a growth concern and so all the more reason to keep QE going.”
Now, far be it from me to suggest the central bankers of the world had any sort of hand in crashing the gold price — I mean they are all such fine, upstanding servants of the public good and are probably definitely NOT short physical gold — but said crash certainly doesn't hurt their desire to amp up the printing presses; and, even in the age of unlimited QE, $28,000,000,000 is still an awful lot of money ... at least for now.
So, after a tumultuous week, I have a real sense that the sands have shifted somewhere, somehow, even though I can't quite put my finger on where or what it means.
I can't help but think this has something to do with the continuing fallout from Hugo Chavez's repatriation of Venezuelan gold in 2011 and the weakness of the fractional-reserve gold leasing system (see my recent presentation on this subject), and that an attempt was made to try to cover some significant short positions via COMEX futures, a move that looks doomed to fail thanks to the voracious demand for physical metal.
The next time somebody thinks about casually shorting COMEX futures for a trade that obligates them to deliver physical metal at a given price, I'm sure they'll remember this week and think twice.
Those who are in a bind and need the gold price to be lower in order to cover short positions? Well, let's just say they may end up getting not what they want but what they deserve.
So, yes, I am a seller of gold — as, I suspect, are the likes of Dylan Grice and Chris Wood.
I dare say Eric Sprott, Jim Sinclair, Ben Davies, and Jim Rogers (to name but a few) are likely also sellers of gold, but none of them will be selling at this level, either. In fact, without wishing to put words in anybody's mouth, I'll go out on a limb and suggest that not only are we all not sellers today, we are all strong buyers and, as the events of this week have proven, we are most definitely not alone.
EARNINGS - Lack of Investment Resulting in Revenues Being a Problem
First the good news: so far of the 252 companies reporting Q1 earnings, 74% have beat expectations on the bottom line (in Europe it's a different story with 44% beating and 56% missing). The reason: progressively lowering of estimates for the past 3 months heading into earnings as we showed over the weekend. On the top line, it's a different matter entirely with just 45% of companies beating and 55% missing (indicatively European revenue numbers are just jarring, with only 34% of companies beating top line estimates - that's what happens when you have a depression). None of this should come as a surprise to our readers. Over a year ago we wrote "How The Fed's Visible Hand Is Forcing Corporate Cash Mismanagement" which explained that instead of investing in CapEx and hiring, due to the Fed's imbecilic "endless ZIRP" policy, companies have scrambled to generate immediate returns for shareholders in the form of dividends, buybacks, and in rare instances, M&A. Investing in long-term growth is the last thing on anyone's mind and sure enough revenues are deteriorating the world over.
All of the above summarized in the table below courtesy of Deutsche Bank:
Now, the bad news: while one can easily game expectations and quiet cut forecasts the night before earnings just to "allow" the company to beat them easier, one thing that can not be fudged are trends in time, in either revenue or EPS. And for the best table showing just how ugly corporate America's profitability and revenue have become when stripped of all the noise, we go to the Wall Street Journal and the following summary of Y/Y changes in sales and EPS.
With earnings reports in from more than half the companies in the Standard & Poor's 500-stock index, first-quarter revenue for the group is expected to shrink 0.3% from a year earlier, according to Thomson Reuters. That would cut short the sales improvement reported at the end of last year and mark the third quarter out of the past four in which revenues have failed to grow by 1% or more.
The sales figures are a troubling sign that business and consumer demand remain weak nearly four years after the recession. They are also evidence that a soft patch is developing in the U.S. economy, as optimism earlier in the year gives way to more sobering data on growth in gross domestic product, retail sales and manufacturing. In response, many companies are cutting jobs and curbing investments in an effort to prop up profits, moves that could make it harder for demand to recover.
No further commentary necessary (all of it has been said in the past on numerous occasions already).
The markets are holding up based on hope for more stimulus from the Fed and ECB this week (Fed FOMC is Tuesday and Wednesday, the ECB meeting is on Thursday).
This is a very dangerous environment. We are entering the seasonal period in which stocks typically do poorly (May-November). Earnings guidance is falling. And even the massaged GDP number for 1Q13 was lower than expected.
In simple terms, we are getting multiple signs that the economy is slowing and heading towards recessionary territory. This is happening at the precise time that stocks are holding up on hopes of more stimulus.
The rising bearish wedge pattern in the S&P 500 that we noted last week remains in play. It should be resolved this week. However, multiple economic bellweathers are already warning DANGER DANGER!
Below is a price performance chart for the S&P 500 against Fed EX (postage and shipping), Arcelor Mittal (steel), and Caterpillar (machinery). As you can see, the real economy is falling. But stocks keep holding up.
We’ve seen this kind of divergence between stocks and the economy before in 2008. We all know how that ended.
LONG CYCLES - Ending a Grand Supercycle Degree
It is Important to recognize from LONG Wave Cycle Perspectives we are ending Century Long Cycles
Both the levels and the growth rates of S&P 500 revenues and US nominal exports are highly correlated. Nominal exports remained in a volatile flat trend during the first two months of the first quarter. This might be one reason why revenues have been lower than expected during the first quarter’s earnings season. Of the 270 S&P 500 companies that have reported, 56% had negative revenue surprises. Nevertheless, analysts’ consensus revenue estimates are holding up surprisingly well for this year and next year with gains of 3.0% and 4.6%, respectively.
S&P 500 profit margin estimates are also holding up, with 9.8% expected this year and 10.5% expected next year. I expect margins to remain flat in 2013 and 2014. So earnings should grow at the same pace as revenues. For earnings, I am still predicting $110 per share this year, up 5.9% y/y, and $118 next year, up 7.3%. Obviously, I am more optimistic about the prospects for revenues than the analysts. However, because they are more optimistic on margins, they are currently predicting that earnings will be $111 and $124 this year and next year.
EARNINGS - Still Squeezing Costs but Revenue Growth a Problem
From Goldman's Weekly Kickstart note, a great breakdown of S&P 500 earnings (so far) categorized by sector, showing which have been beating on earnings and revenue and which have come up short.
The real insight here is in the "surprise" columns for both earnings and revenue.
As you can see, 42% of companies have had a positive earnings surprise. Just 19% have had a positive revenue surprise, meaning companies are (once again) doing much better squeezing out productivity and keeping wages down than they are growing the top line (growing the business).
This has been the trend for awhile, leading to record high corporate profit margins (which some view as unsustainable) but for now they're holding on.
Record high corporate profit margins have allowed corporate America to maintain profit growth even as revenue growth has stagnated.
Some, like John Hussman, warn that these margins will inevitably have to revert to a mean.
However, there are many who believe these high profit margins are sustainable and could actually rise further.
In his latest note to clients, Citi's Tobias Levkovich points to one structural aspect of profit margins that often goes overlooked by the bears.
From his note:
A peak in corporate margins has been forecast by several market observers for much of the past two years even as the components of those S&P 500 margins tell a somewhat different tale. Essentially, profitability corrections typically are tied to economic recessions as fixed overhead costs are under-absorbed in the economy (often because companies cannot reduce employment staff as quickly). But the real mistaken view comes from misunderstanding the overall margin environment when removing the Tech sector’s influence (see Figure 6). If one looks at margins ex-Tech, it is easy to recognize that margins were higher elsewhere for years before the 2008-09 downturn, and there is still upside to most other S&P sectors’ profit opportunity.
The bears tend to look at margins more from a top-down, big picture perspective. Of course, corporate America as a whole will not be able to squeeze out profits like this forever. However, the warnings of imminent doom are a bit overstated.
S&P 500 bottom-up consensus EPS estimate for the remainder of 2013 has fallen 1% since the start of earnings season.
Revisions have been most negative in the Materials (-4.1%) and Information Technology (-3.7%) sectors. Managements are guiding well below consensus estimates. Of the companies have provided 2Q guidance, 76% guided with a midpoint below the mean consensus estimate (versus an average of 69% over the past 28 quarters). The median firm guided 4% below consensus (versus 3% historically). However, since the start of earnings season, bottom-up consensus full-year 2013 estimates are down only 40bp; suggesting analysts and serial extrapolators alike have considerable more reality to catch up to yet - but for now, hope is fading a little with EPS, Sales, and Margins expectations for the rest of the year all being marked down.
It seems the hockey stick is starting to droop...
most notably in Materials, Tech and Industrials...
“What manner of men had lived in those days...who had so eagerly surrendered their sovereignty for a lie and a delusion?”
Cyprus is absolutely the template for Europe now. It is just that the template is far worse than what is narrowly imagined.
It is not the small nation of Cyprus nor is it that the specifics of the criminality that was transacted in Cyprus which is any sort of template. This is not the center of the issue. It is what Cyprus means and the horrible implications of what took place.
I cannot issue a stern enough warning here. No words that I write will adequately embrace the transgression that has taken place in Cyprus. Any thought that you have that the Cyprus experience is a lone and isolated event that will not be repeated, in some form in the future, is going to be proven wrong.
Yesterday the Parliament in Cyprus narrowly passed the EU bailout. Part of this package included seizing 90% of the depositors’ money to help pay for the bailout. There was no due process of law, no bankruptcy proceeding, no judicial review of assets and, in fact, no law of any sort applied. Deposits were confiscated as mandated by the European Union and agreed to by the Cyprus Parliament. Europe demanded the seizure and that is what is critically important to understand and appreciate.
In Greece the EU demanded that the bond holders be penalized and to accomplish this they had Greece retroactively change the laws. In Cyprus Europe demanded the confiscation of depositors’ money. One + one still makes two and the template, when properly recognized, is that the European Union will do whatever they like and when they like it and to whom they like with little or no regard for existing laws. This is, quite frankly, the Soviet Union under the control of Stalin. To be more precise, given that all of this is formulated and approved in Berlin; this is Germany making the rules for their vassal states.
There is one set of guidelines for Germany now and Germany still operates under their own laws but when it comes to other nations in the European Union that are in financial difficulty there are no real laws left. All that there is now is the tyrannical demands of Berlin that must be obeyed to receive funds.
“It is more dangerous that even a guilty person should be punished without the forms of law than that he should escape.”
The spirit of a 1930’s government “that must be obeyed” has returned to the Continent. To not recognize this is a mistake. To call it something more polite is inaccurate. To appease those who impose this autocracy does nothing except to slather the truth with falsehoods.
“Some of the cruelest tyrants in history were motivated by noble ideals, or made choices that they would call 'hard but necessary steps' for the good of their nation.”
-Jim Butcher, “Turncoat”
The European Union is controlled by Germany. The European Union no longer operates under the law; their laws or the laws of any singular nation. Europe has, in fact, become a totalitarian State. This is the template. This is the new reality!
“Single acts of tyranny may be ascribed to the accidental opinion of a day; but a series of oppressions, begun at a distinguished period and pursued unalterably through every change of ministers, too plainly prove a deliberate, systematic plan of reducing a people to slavery.”
“Liberty is lost through complacency and a subservient mindset. When we accept or even welcome automobile checkpoints, random searches, mandatory identification cards, and paramilitary police in our streets, we have lost a vital part of our American heritage. America was born of protest, revolution, and mistrust of government. Subservient societies neither maintain nor deserve freedom for long.” – Ron Paul
The most disgraceful example of abnormality that has infected our culture has been the cowardice and docile acquiescence of the citizenry in allowing an ever expanding police state to shred the U.S. Constitution, strip us of our freedoms, and restrict our liberties. Our keepers have not let any crisis go to waste in the last seventeen years.
They have also taken advantage of the
fFnancial illiteracy and
Techno-Narcissism of the populace
to reverse practical legislation and prey upon irrational fears to strip the people of their constitutionally guaranteed liberties and freedoms. If you had told someone in 1996 the security measures, laws, and police agencies that would exist in 2013, they would have laughed you out of the room.
Every crisis, whether government created or just convenient to their agenda, has been utilized by the oligarchs to expand the police state and benefit the crony capitalists that profit from its expansion.
The character of the American people has been found wanting as they obediently cower and beg for protection from unseen evil doers. The propagandist corporate media reinforces their fears and instructs them to submissively tremble and implore the government to do more.
The cosmic obliviousness and limitless sense of complacency of the general population with regards to a blatantly obvious coup by a small cadre of sociopathic financial elite and their
army of bureaucrats,
jackboots is a wonder to behold.
The 1929 stock market crash and ensuing Great Depression was primarily the result of excessively loose Federal Reserve monetary policy during the Roaring 20’s and the unrestrained fraud perpetrated by the Wall Street banks. The 1933 Glass-Steagall Act was a practical 38 page law which kept Wall Street from ravenously raping its customers and the American people for almost seven decades. The Wall Street elite and their bought off political hacks in both parties repealed this law in 1999, while simultaneously squashing any effort to regulate the financial derivatives market. The day trading American public didn’t even look up from their computer screens. Over the next nine years Wall Street went on a fraudulent feeding frenzy rampage which brought the country to its knees and then held the American taxpayer at gunpoint to bail them out. The Federal Reserve arranged rescue of LTCM in 1998 gave the all clear to Wall Street that any risk was acceptable, since the Fed would always bail them out. Just as they did in the 1920’s, the Federal Reserve set the table for financial disaster with excessively low interest rates and non-existent regulatory oversight.
The downward spiral of our empire towards an Orwellian/Huxley merged dystopian nightmare accelerated after the 9/11 attacks.
Within one month those looking to exert hegemony over all domestic malcontents had passed the 366 page, 58,000 words Patriot Act. Did the terrified masses ask how such a comprehensive destruction of our liberties could be written in under one month? It is apparent to anyone with critical thinking skills that the enemy within had this bill written, waiting for the ideal opportunity to implement this unprecedented expansion of federal police power. Electronic surveillance of our emails, phone calls and voice mails, along with warrantless wiretaps, and general loss of civil liberties was passed without question under the guise of protecting us. Next was the invasion of a foreign country based upon lies, propaganda and misinformation without a declaration of war, as required by the Constitution. Our government began torturing suspects in secret foreign prisons. The shallow, self-centered, narcissistic, Facebook fanatic populace has barely looked up from texting on their iPhones to notice that we have been at war in the Middle East for eleven years, because it hasn’t interfered with their weekly viewing of Honey Boo Boo, Dancing With the Stars, or Jersey Shore. They occasionally leave their homes to wave a flag and chant “USA, USA, USA”, as directed by the media, when a terrorist like Bin Laden or Boston bomber is offed by our security services, but for the most part they can live their superficial vacuous lives of triviality unscathed by war.
The creation of the Orwellian Department of Homeland Security ushered in a further encroachment of our everyday freedoms. They attempted to keep the masses frightened through a ridiculous color coded fear index. Little old ladies, people in wheelchairs and little children are subject to molestation by lowlife TSA perverts. Military units conduct “training exercises” in cities across the country to desensitize the sheep-like masses, who fail to acknowledge that the U.S. military cannot constitutionally be used domestically. DHS considers military veterans, Ron Paul supporters, and Christians as potential enemies of the state. The use of predator drones to murder suspected adversaries in foreign countries, while killing innocent men, women and children (also known as collateral damage), has just been a prelude to the domestic surveillance and eventually extermination of dissidents and nonconformists here in the U.S. We are already becoming a 1984 CCTV controlled nation. DHS has been rapidly militarizing local police forces in cities and towns to supplement their jackbooted thugs. Obama’s executive orders have given him the ability to take control of industry. He can imprison citizens without charges for as long as he deems necessary. Attempts to control gun ownership and shutdown the internet is a prologue to further government domination and supremacy over our lives when the wheels come off this unsustainable bus.
The last week has provided a multitude of revelations about our government and the people of this country. The billions “invested” in our police state, along with warnings from a foreign government, and suspicious travel patterns were not enough for our beloved protectors to stop the Boston Marathon bombing. After stumbling upon these amateur terrorists by accident, the 2nd responders, with their Iraq war level firepower, managed to slaughter one of the perpetrators, but somehow allowed a wounded teenager to escape on foot and elude 10,000 donut eaters for almost 24 hours. The horde of heavily armed, testosterone fueled thugs proceeded to bully and intimidate the citizens of Watertown by illegal searches of homes and treating innocent people like criminals. The government completely shut down the 10th largest metropolitan area in the country for an entire day looking for a wounded 19 year old. The people of Boston obeyed their zoo keepers and obediently cowered in their cages.
The entire episode was an epic fail. The gang that couldn’t shoot straight needed an old man to find the bomber in his backyard boat. The people of Boston exhibited the passivity and subservience demanded by their government. Since the capture of the remaining terrorist, the shallow exhibitions of national pride at athletic events and smarmy displays of honoring the police state apparatchiks who screwed up – allowing the attack to occur and looking like the keystone cops during the pursuit of the suspects, has revealed a fatal defect in our civil character. We are living in a profoundly abnormal society, with millions of medicated mindless zombies controlled by a vast propaganda machine, who seemingly enjoy having their liberties taken away. Most have willingly learned to love their servitude. For those who haven’t learned, the boot of our vast security state will just stomp on their face forever. We’re realizing the worst dystopian nightmares of Orwell and Huxley simultaneously. This abnormalcy bias will dissipate over the next ten to fifteen years in torrent of financial collapse, war, bloodshed, and retribution. Sticking your head in the sand will not make reality go away. The existing social, political, and financial order will be swept away. What it is replaced by is up to us. Will this be the final chapter or new chapter in the history of this nation? The choice is ours.
“If you want a vision of the future, imagine a boot stamping on a human face – forever. - George Orwell
“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution” -Aldous Huxley, 1961
STATISM - The Power and Majesty of Dissent Over Statism
Historically, what separated American society from most other countries was a healthy distrust of government and a tradition of civil liberties. The Bill of Rights is a unique safeguard embodied within the constitutional structure of a road map for governmental restraint. One of the most important restrictions placed upon the police powers of the central government is exemplified in Posse Comitias. The militarization of domestic law enforcement is fundamentally in conflict with individual rights and natural law.
The basic character of the American spirit envisioned narrow intrusion into the personal affairs of citizens. The federal government is burdened with thoughtful and precise limitations on its powers for the essential reason to inhibit the aggressive expansion of despotic tendencies. Once upon another era, the people of the Republic understood this vital social construct of control against the destruction of liberty, by the very government entrusted to preserve the essence of the union.
Fifty years ago, the nation entered into a morass of a foreign conflict that altered the very fabric and substance of the post World War II mentality. As the Viet Nam war expanded, the consciousness of a youthful generation exploded into a fundamental counter cultural resistance against the mindset that built the military-industrial-complex and perpetuated an interventionist global foreign policy.
The campuses and streets of America were filled with swarms of dissenters opposing the war and the repression of a burgeoning police state. The gambit of defiant speeches to civil disobedience saw the corridors of power crumple in the wake of a nation galvanized against the Sovietization of our authorities, when the war, was supposedly fought, to stop the spread of Communism.
Even with the incomplete success in ending the Viet Nam hostilities, the political loss of that war, did not prevent the uninterrupted march toward the Orwellian collectivist state, that we now live under and the oppressive compliance that Homeland Security so aptly represents.
Corrosive incrementalism of totalitarian policies developed in an environment of gradual apathy, over the last half century. Dissenting opposition movements, persistently confrontational against the establishment became less organized and vocal. As a result, institutions of influence descended into deeper depths of moral corruption, as the agencies of bureaucratic dominance expanded their reach and scope of tyranny.
The generations of the post Viet Nam period, developed a materialistic career oriented motivation, at the expense of abandoning the search for spiritual and social responsibility, toward their fellow neighbor and their country. The flower power experienced at the opposite end of a National Guard bayonet is now replaced with a corporatist stock option in a company that builds the drone surveillance society.
With the spread of "Politically Correct" urbanity, political debate has become restrictive, sterile and punitive. The primary ingredient out of the corporate news media is a filtered mush that leads to a permanent blockage in the excretion track. These gatekeepers protect careerist criminal politicians, while serving the global interests of their Wall Street masters. The seldom-interrupted path towards government worship homogenization is a main accomplishment of the systematic dismantling of the principles of inherent autonomy.
Woefully, the plastic patriots of Bean Town demonstrated their retardation, from drinking of the dirty water, offered by the storm troopers. Accepting an arbitrary and capricious "Judge Dredd" martial law decree for an area wide lockdown is repulsive and antithetical to the noble tradition of a community, who squared off against the red coats.
The phony war on terror is actually a contrived policy and false flag drill exercises, to strip away the last vestiges of constitutional inhibitions and restraints. The "so called" terrorism that the government would have you believe threatens the nation, is but an elaborate deception to justify the methodical enslavement of unsophisticated and easily fear induced denizens.
As the connection between the patties, blamed for the Boston Marathon panic, with intelligence communities operatives and fronts become known, the official FBI version of the investigation unravels. Deployment of battalions of military vehicles with SWAT assassins poses a far greater danger to the citizenry than a nineteen-year-old "so called" Jihadist recruited into the cause by the very government, who claims to be in charge of keeping us all safe.
With the surrender of our cherished civil liberties to a ruthless DHS internal police force, martial law is now the rule of the land. Many Bostonians deserve the shame of their forbearers. Where are protests with every knock at the door? This precedent does not bode well. It is doubtful that the populace will resist in mass, when it becomes their time for transfer to their designated FEMA concentration camp.
That day is coming, and with the lack of courage in the veins of the mediocre public, the state will face little resistance, when the financial collapse hits the households of all the government dependent. This reincarnated empire of a "King George" assault, is seizing the spirit of the Bunker Hill memorial. Homeland insecurity is designed to eliminate the Gadsden flag so that it has no place to fly.
The hard-learned lessons of Viet Nam are lost to the self-absorbed and dumbed down civil servants, who pledge their loyalty to an illegitimate government, as they sell their souls to an evil empire. The mere hint of reviving a counter-culture resistance against the globalist matrix labels one an enemy of the state. Just maybe, too many people are drinking Sam Adams beer and drunk with lethargy, to heed the call of Paul Revere.
The underground press was alive and vibrant in the 1960’s. Now the internet is being groomed to be clipped with CISPA. During the confrontations with authority in a time long ago, the best within Americans emerged as defenders of core political values, while pushing the envelope of personal freedom discovery. Now the children of that generation are in seats of official authority. Lost in the education process; both in government schools and often in the family home, is a vigorous suspicion of the abuse of power and a duty to resist oppression.
Without a renaissance in traditional revolutionary commitment, the American experiment will end as every other botched and immoral imperium. The colonial civilization that rose up the original Tea Party rebels against the Crown has sunk into docile disciples of obedience to state fascist brutality.
The founding fathers were men of wisdom and courage. The survivors of the Viet Nam campaign grew in understanding over the decades in the knowledge that their battle for national survival just began with their return home. The enemy they fought in the rice paddies were fighting a civil war. Back on home soil, these veterans learned that their true foe became a tyrannical government, bent upon destroying the very civil liberties that every real American pledges upon their allegiance and sacred honor.
Until people develop the guts to face up to the 911, excuse for the terrorism fraud and the false security measures designed to destroy essential legal protections of individual rights, the organized government terror will continue.
The call goes out to rekindle the defiant spirit and resistance to the ever-growing police state. The sincere patriot opposes any bureaucratic and administrative edict that violates your natural rights. The next time belligerent and suspect authorities demand a lockdown on your neighborhood, hold a block party. The enforcement mercenaries have neither the moral mandate nor the practical efficiency to arrest and sequester the minuteman multitude with the willful daring to "just say no" to tyranny.
Where are the Thoreauvian moralists, willing to defend their local Walden Ponds in their own communities? The reason the herds of the timid are so unwilling to challenge the supermax prison that Amerika has become is due to the fact, that so few have the fortitude to join the-strike-the-root inspiration that speaks to the character of a corrupt society.
Soon the infamous disturbed Colonel Kurtz will look like a sane expedient of military violence as the entire nation is transformed into an Apocalypse Now before our eyes. The best way to combat the thugs that violate every universal decency and common law right is to practice civil disobedience at any opportunity. Resisting oppression is a necessary step in the liberation of society from subjugation.
First responders need to stand down, when they are commanded to follow illicit orders. Boston needs to repent from their authoritarian progressive state worship. As a center of creative cutting edge protest during the Viet Nam war, the Bostonian Bluebloods of globalist indoctrination have succeeded into transmuting independent thinkers into lock step zombies.
Liberation from trumped up jingoism has been a difficult task for well over a century. At stake now is the very fabric of our own country. Surrendering our precious heritage, for a delusive and faux sense of security, plays directly into the hands of the fascists. Protest the dictatorship of the establishment. Learn from the majesty of dissent, that when the emperor is exposed as wearing no cloths, he is naked for all to see. The essential issue is whether the American public has any eyesight left, and what actions will they undertake to restore their dignity.
SARTRE – April 28, 2013
2012 - FINANCIAL REPRESSION
FINANCIAL REPRESSION - Monacrhs of Global Financial Power
The world's central banks have printed unimaginable amounts of money in recent years - "these guys are really more powerful than the government." Neil Macdonald explores what this means for the global economy and for your financial well-being - "can you imagine if the American public knew there was this 'club' that met secretly in Switzerland and made decisions that dramatically affected their lives, but we're not going to tell you about it because it's too complicated." This brief documentary should open a few eyes to the reality behind the world's most powerful (and real) cabal.
CORPORATOCRACY - CRONY CAPITALSIM
TBTF: Terminating Bailouts for Taxpayer Fairness Act
“It is a smart, simple and tough piece of work that would protect taxpayers from costly rescues in the future. This means that the bill will come under fierce attack from the big banks that almost wrecked our economy and stand to lose the most if it becomes law.”
-Gretchen Morgenson, NYT
“It’s clear there’s too much Wall Street in this administration.”
This weekend, we saw a flurry of reporting on a new bi-partisan proposal introduced by Senators Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican.
This is a very simple, straight forward piece of legislation that mandates adequate capital reserves, eliminates the opportunity for bankers to hide liabilities off balance sheet or game the various asset classes:
-Stricter capital requirements on megabanks, defined as institutions with over $500 billion in assets.
-Six U.S. banks — JPMorgan Chase., Citigroup, Goldman Sachs, Morgan Stanley, Bank of America and Wells Fargo — meet the TBTF criteria.
-Eliminates risk-weights as part of a capital assessment (less reliance on unreliable ratings).
-Does not rely on ratings agency grades.
-Removes off-balance-sheet assets and liabilities as different class — they are treated as if they were on-balance sheet.
-Requires derivatives positions to be included in a bank’s consolidated assets.
-Requires capital cushion that a bank hold be liquid
-Mandates capital measures be more transparent
-Eliminates Basel III as a regulatory requirement
-Restores competition to industry by removing competitive disadvantages mega banks have over smaller and regional community bankers.
For those people who complain Dodd-Frank is too complex, let’s see how they like “the new simplicity.”
Brown-Vitter faces two large, deeply intertwined opponents: Wall Street banks and the Obama administration. The pushback has already begun. For the banker’s views, we go to the NYT’s Dealbook. It is overseen by Andrew Ross Sorkin, author of Too Big to Fail and now a CNBC morning anchor. As seen in its recent headline, The Seductive Simplicity of a New Banking Bill, Dealbook is a touch skeptical of the legislation, but notes “in a major way, the Brown-Vitter bill effectively sidesteps the need for reliable regulators. It simply says that all big banks would have to set up a buffer for potential losses – called capital in the industry – that is equivalent to 15 percent of their total assets.”
Simon Johnson takes a different tack. He warns that there are two competing narratives about financial-reform efforts, with the financial-sector executives claiming that “all necessary reforms have already been adopted.” Johnson pushes back on this, noting “the world’s largest banks remain too big to manage and have strong incentives to engage in precisely the kind of excessive risk-taking that can bring down economies. Last year’s “London Whale” trading losses at JPMorgan Chase are a case in point.”
The best read of the proposal comes from FDIC Vice-chairman Thomas Hoenig — he is in favor the legislation.
Hoenig is the single best reason you know the TBTF act is the a good step in the proper direction for bank regulation.
“I have been in Washington leading ICBA for 10 years. I have experienced everything from the Wal-Mart bank charter fight, to the Fannie-Freddie accounting scandals, the Great Recession, bailouts, financial reform and Basel III. And I believe that Wall Street and the half dozen large trade groups that represent them in Washington have deployed more lobbyists on the TBTF issue than on any other issue since I came to D.C. … They must really be freaked out. There are more Wall Street lobbyists swarming Capitol Hill than there will be cicadas swarming the Washington metro area this summer — and, worse, the lobbyists make more noise than the cicadas.”
Washington is super muggy in the summer too. Gross.
CRONY CAPITALISM - Corruption Blatantly & Unchecked, Running Out of Control
Everything Is Rigged: The Biggest Price-Fixing Scandal Ever
The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix
Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.
You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."
That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.
It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.
Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-on-manipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.
"It's a double conspiracy," says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. "It's the height of criminality."
The bad news didn't stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. "Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry," CFTC Commissioner Bart Chilton said.
But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants' incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.
"A farce," was one antitrust lawyer's response to the eyebrow-raising dismissal.
"Incredible," says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.
All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation's GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it's increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.
If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it's no secret. You can stare right at it, anytime you want.
Learn more about Gold & Silver-Backed, Absolute Return Alternative Investments
with these complimentary educational materials
Tipping Points Life Cycle - Explained Click on image to enlarge
FAIR USE NOTICEThis site contains
copyrighted material the use of which has not always been specifically
authorized by the copyright owner. We are making such material available in
our efforts to advance understanding of environmental, political, human
rights, economic, democracy, scientific, and social justice issues, etc. We
believe this constitutes a 'fair use' of any such copyrighted material as
provided for in section 107 of the US Copyright Law. In accordance with
Title 17 U.S.C. Section 107, the material on this site is distributed
without profit to those who have expressed a prior interest in receiving the
included information for research and educational purposes.
If you wish to use
copyrighted material from this site for purposes of your own that go beyond
'fair use', you must obtain permission from the copyright owner.
DISCLOSURE Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.