The End Of All Crossroads

Where the TAXI makes a stop, to ponder upon which road mayhap be true

Tag: central banks

Our Collapsing Economy and Currency

“Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.”

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December 1, 2012

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries–wars that have benefitted only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

The hoax is the propaganda that the fiscal cliff can be avoided by reneging on promised Social Security and Medicare benefits that people have paid for with the payroll tax and by cutting back all aspects of the social safety net from food stamps to unemployment benefits to Medicaid, to housing subsidies. The right-wing has been trying to get rid of the social safety net ever since Franklin D. Roosevelt constructed it, out of fear or compassion or both, during the Great Depression.

Washington’s response to the fiscal cliff is austerity: spending cuts and tax increases. The Republicans say they will vote for the Democrats’ tax increases if the Democrats vote for the Republican’s assault on the social safety net. What bipartisan compromise means is a double-barreled dose of austerity.

Ever since John Maynard Keynes, economists have understood that tax increases and spending cuts suppress, not stimulate, economic activity. This is especially the case in an economy such as the American one, which is driven by consumer spending. When spending declines, so does the economy. When the economy declines, the budget deficit rises.

This is especially the case when an economy is weak and already in decline. A declining economy means less sales, less employment, less tax revenues. This works against the effort to close the federal budget deficit with austerity measures. Instead of strengthening the economy, the austerity measures weaken it further. To cut unemployment benefits and food stamps when unemployment is high or rising would be to provoke social and political instability.

America: The Food Stamp Nation

Bread Lines of the Modern Era– The Great Recession
IF all EBT recipients shopped at only Walmart Super Centers for ALL their SNAP benefits, then this is how the Bread Line would look each month– 14,588 people.
There are 3051 Walmart Super Centers in USA and 44,510,598 participants in SNAP (2011), making the average SNAP line at each Walmart at 14,588 people.
The Modern Era’s Bread Lines are not visible because the business is handled discreetly through EBT Cards.
According to this Food Stamps report pg 16-17, Walmart receives half of all SNAP dollars in Oklahoma.
Walmart is the largest retailer in America.
Short Facts:
47% of Food Stamp participants are children.
78.6% of all SNAP participants are in metropolitan areas.
93.2% of all SNAP benefits go to US citizens.
Only 4% are self-employed.
(CLICK IMAGE FOR SOURCEPAGE)

Some economists, such as Robert Barro at Harvard University, claim that stimulative measures, the opposite of austerity, don’t work, because consumers anticipate the higher taxes that will be needed to cover the budget deficit and, therefore, reduce their spending and increase their saving in order to be able to pay the anticipated higher taxes.

In other words, the Keynesian effort to stimulate spending causes consumers to reduce their spending. I don’t know of any empirical evidence for this claim.

Regardless, the situation on the ground at the present time is that for the majority of people, incomes are stretched to the limit and beyond. Many cannot pay their bills, their mortgages, their car payments, their student loans. They are drowning in debt, and there is nothing that they can cut back in order to save money with which to pay higher taxes.

Many commentators are complaining that Congress will refuse to face the difficult issues and kick the can down the road, leaving the fiscal cliff looming. This would probably be the best outcome. As the fiscal cliff is a result, not a cause, to focus on the fiscal cliff is to focus on the symptoms rather than the disease.

The US economy has two serious diseases, and neither one is too much welfare spending.

One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

The Federal Reserve’s policy is focused on saving the banks, not on saving the economy. The Federal Reserve is purchasing not only new Treasury bonds issued to finance the more than one trillion dollar annual federal deficit but also the banks’ underwater financial instruments, taking them off the banks’ books and putting them on the Federal Reserve’s books.

Normally, debt monetization of this amount results in rising inflation, but the money that the Federal Reserve is creating in its attempt to manage the public debt and the banks’ private debt is hung up in the banking system as excess reserves and is not finding its way into the economy. The banks are too busted to lend, and consumers are too indebted to borrow.

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However, the debt monetization poses a second threat that is capable of biting the US economy and consumer living standards very hard. Foreign central banks, foreign investors in US stocks and financial instruments, and Americans themselves observing the Federal Reserve’s continuous monetization of US debt cannot avoid concern about the dollar’s value as the supply of ever more dollars continues to pour out of the Federal Reserve.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money. According to John Williams of Shadowstats.com, the US dollar as a percentage of global holdings of reserve assets has declined from 36.6% in 2006 to 28.7% in 2012. Gold has increased from 10.5% to 12.8% and other foreign currencies except the euro increased from 38.4% to 44.4%.

Russia, China, Brazil, India, and South Africa intend to conduct trade among themselves in their own currencies without use of the dollar as reserve currency. The EU countries conduct their trade with one another in euros, and although not reported in the US media, Asian countries are discussing a new common currency for trade among themselves.

The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars.

This means that the price of the dollar is threatened.

Concern over the dollar means concern over dollar-denominated financial instruments such as stocks and bonds. The Chinese hold some $2 trillion in US financial instruments. The Japanese hold about $1 trillion in US Treasuries. The Saudis and the oil emirates also hold large quantities of US dollar financial instruments. At some point the move away from the dollar also means a move away from US financial instruments. The dumping of US stocks and bonds would destabilize US financial markets and wipe out the remainder of US wealth.

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As I have previously written, the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

The onset of hyperinflation can be as sudden as the collapse of a currency’s exchange value.

The real crisis facing the US is the impending collapse of the US dollar’s foreign exchange value. The US dollar’s value in relation to silver and gold has already collapsed. In the past ten years, gold’s price in US dollars has increased from $250 per ounce to $1,750 per ounce, an increase of $1,500. Silver’s price has risen from $4 per ounce to $34 per ounce. These price rises are not due to a sudden scarcity of gold and silver, but to a flight from the dollar into the two forms of historical money that cannot be created with the printing press.

The price of oil has risen from $20 a barrel ten years ago to as high as $120 per barrel earlier this year and currently $90 a barrel. This price rise has come about despite a weak world economy and without any supply restrictions other than those caused by the attempted US occupation of Iraq, the Western assault on Libya, and the self-harming Western sanctions on Iran, impacts most likely offset by the Saudis, still Washington’s faithful puppet, a country that pumps out its precious life fluid in order to save the West from its own mistakes. The moronic neoconservatives wish to overthrow the Saudi Arabian government, but what more faithful servant has Washington ever had than the Saudi royal house?

What can be done? For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US. This can be done, as Ralph Gomory has made clear, by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate. The difference in tax rates can be calculated to offset the benefit of the lower cost of foreign labor.

As all offshored production that is brought to the US to be marketed to Americans counts as imports, relocating the production in the US would decrease the trade deficit, thus strengthening belief in the dollar. The increase in US consumer incomes would raise tax revenues, thus lowering the budget deficit. It is a win-win solution.

The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years as well as future budgets due to the cost of veterans’ hospital care and benefits. According to ABC World News, “In the decade since the Sept. 11, 2001 terrorist attacks on the World Trade Center, 2,333,972 American military personnel have been deployed to Iraq, Afghanistan or both, as of Aug. 30, 2011 [more than a year ago].” These 2.3 million veterans have rights to various unfunded benefits including life-long health care. Already, according to ABC, 711,986 have used Veterans Administration health care between fiscal year 2002 and the third-quarter of fiscal year 2011. http://abcnews.go.com/Politics/us-veterans-numbers/story?id=14928136#1

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.

The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing can be done. America is going to crash big time.

And the rest of the world will be thankful. America along with Israel is the world’s most hated country. Don’t expect any foreign bailouts of the failed “superpower.”

 

SOURCE:
http://www.paulcraigroberts.org/2012/12/01/our-collapsing-economy-and-currency/

Our Broken World: The Toxic Nexus of Power and Money

“In our global society, only money gives a few people access to power which in return allows the very same people the possibility to accumulate even more wealth.”

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By Gilbert Mercier
NEWS JUNKIE POST
Jan 19, 2012 at 8:41 pm

A Crisis of Ontology

The deadly disease of our global capitalist system is rather easy to understand from a philosophical standpoint. The crisis is ontological, a profound existential turmoil. Human beings are currently defined and valued by what they have, not by what they are. The quantitative aspect of our lives is in the forefront of all human interactions-either between groups or individuals within a group-while the qualitative aspect has been pushed aside, not even on the back burner of our collective consciousness, but literally into the trash of our social interactions. Usually, people are gauged by their assets, incomes, and cars they drive not by evaluating what contributions they make to the common good. We live in a world where a person is defined by quantity not quality, and it is probably our biggest systemic problem.

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This is reflected by countless examples in the popular culture with expressions such as “show me the money”, “money talks” or the famous line in Brian De Palma’s “Scarface”: “First you get the money, than you get the power”. Poor kids, dreaming of a better future, are constantly bombarded by the spectacle of the “bling, the cool cribs, the fancy rides and the sexy babes” which are the trademarks of most Hip Hop music videos. Money is always center stage in this out of reach universe of “players” which regardless of any tangible cultural meaning serve as heroes and role models for the disenfranchised. It is the deadly equation of money= success + happiness + self respect =power. The same toxic component motivates some of the brightest and best educated young people in the United States to opt for a career on Wall Street instead of becoming doctors, engineers or scientists.

In our global society, only money gives a few people access to power which in return allows the very same people the possibility to accumulate even more wealth. A typical example of this vicious cycle is the constant revolving door between investment banks, such as Goldman Sachs and the highest jobs at the US Treasury Department. Top finance executives with a taste for power- such as Hank Paulson or Larry Summers- under the premises of an interest in “public service”, work for governmental branches for a few years, then go back to their extremely lucrative jobs in finance, and so on.

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Anxiety Rising: Occupy Versus Fear and Paradigm Paralysis

Some people are still living under the pretense that “things” in our broken global system will eventually fix themselves up spontaneously by some kind of miracle. Of course it will not happen, and this model is, by essence, the definition of magical thinking. Recently, a Haitian woman, interviewed for the occasion of the second anniversary of the earthquake, said that she was “putting her trust in god not in people” to rebuild Haiti from the horrific disaster. With a rising uncertainty and global anxiety building up like a pressure cooker, most people are scared and either try to escape reality by putting their heads in the sand or are convinced that the global system can be salvaged by making changes from within.

But, what they refuse to see is that following this model of a “business as usual” mentality impair their judgments and lock them into the box of paradigm paralysis. Even so most people feel that we have already entered an extraordinary period of global paradigm shift, the fear of the unknown makes them want to hang on to a system in advance state of decay. More people worldwide are getting aware of the fact that it is not a question of if the system will collapse but rather when.

The global Occupy movement has two functions in this process: firstly, to be the main catalyst for systemic change, secondly, as one of the architects setting up the foundations for a new global system where quality not quantity shall finally prevail in human relationships. Turning what seems to be Utopian into a reality is the challenge, and it is what this brave new world is all about. It is only a question of reaching a certain critical mass, and of developing the psychological ability to welcome the unknown, without fear, and to enter into uncharted territories.

Editor’s Note: All photographs by Magalie L’Abbe.

SOURCE:
http://newsjunkiepost.com/2012/01/19/our-broken-world-the-toxic-nexus-of-power-and-money/

UK banks face £60bn black hole

“Britain’s banks face a financial black hole of up to £60bn from regulatory demands, hidden losses, and potential mis-selling costs that threaten to jeopardise future growth, the Bank of England has warned.”

By Philip Aldrick, Economics Editor
6:46PM GMT 29 Nov 2012

In its Financial Stability Report (FSR), the Bank revealed that the big four lenders – RBS, Lloyds, Barclays and HSBC – may need to take £15bn of extra provisions on consumer loans and European debt, “a further £4bn-£10bn” to cover fines and customer compensation, and “between £5bn and £35bn” to meet regulatory risk standards.

https://i1.wp.com/blogs.telegraph.co.uk/finance/files/2012/11/20100119_bank-of-england-getty_w.jpg

The Bank of England has just crossed the line into straight government financing (Click for Article)

 

Sir Mervyn King, the Bank’s Governor, said the potential losses distorted the “picture of banks’ health” and that lenders may have to “raise capital or take steps to restructure”. He added: “The danger to be avoided is that of inadequately capitalised banks holding back our recovery.”

However, he stressed that no more taxpayer money would be put on the line. “It was made very clear that the Treasury did not want to put more into the state-owned banks,” he said.

Markets have lost confidence in the banks due to their “complex and opaque” numbers and, to recover investors’ trust, lenders need to set aside capital for “expected losses” and for potential compensation and fines over customer mis-selling and Libor rigging, the Bank said. Risk levels also need to be calculated more prudently.

The decision was taken after last week’s meeting of the Financial Policy Committee. In the most dramatic intervention since the £67bn bail-out of lenders from RBS to Lloyds, the proposal will see regulators from the Financial Services Authority sent into banks and building societies to ensures losses are properly declared by March next year.

However, the Bank declined to put a single number on the scale of potential recapitalisations, stressing that it would depend on the FSA judgement on each individual bank. Sir Mervyn added: “The problem is manageable, and is already understood at least in part by markets.”

Bank shares reacted favourably as fears of a worse outcome proved unfounded. Barclays shares closed up 1pc at 244.6p, RBS was 1.5pc higher at 299p, and Lloyds rose 1.5pc to 46.64p. Jason Napier, an analyst at Deutsche Bank, said: “Overall, the FSR is in line with our expectation, and in areas the report is better than we had feared.”

The plan could lead to a shake-up of the industry with rights issues, asset sales, and disposals – so long as they “do not hinder lending to the real economy”.

Barclays has already raised $3bn (£1.8bn) in contingent capital, Royal Bank of Scotland has previously been asked by the regulators to consider selling its US operation Citizens, and Lloyds Banking Group is rumoured to be looking at the disposal of its stake in wealth manager St James’s Place.

Sir Mervyn said: “The recommendation we have made will soon get the banks back to a position where they can support our economic recovery.”

The Bank also released separate data yesterday showing that write-offs by UK banks fell to £3.5bn in the third quarter from £4bn in the previous three months – well below the peak of £6.3bn in 2011 and the lowest since 2009. Citi’s economist Michael Saunders said: “The drop may be a symptom of increased banking forbearance and reluctance to face losses .”

 

SOURCE:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9712722/UK-banks-face-60bn-black-hole.html

Gold could be the panacea for global banking woes: Sprott

SPOILER: DO-NOT-FALL-FOR-THAT!! This all-coming ‘goldrush’ is artificially supported in order to actually KEEP the US Dollar’s status-quo in tradings – that is, until it finally collapses.

I repeat: BEWARE. Do not fall for that trick, as it’s what banks would like the most. That’s exactly why they pay people like this to write essays like these.

I warned ye.

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Marc Howe | November 30, 2012

On the eve of the implementation of the Basel III capital rules governing the world’s largest financial institutions veteran investor Eric Sprott points to gold as the most convenient and over-looked solution to the global banking system’s woes.

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The Basel Committee on Banking Supervision, responsible for devising guidelines for the world’s leading financial institutions, has spent the past four years since the Great Financial Crisis drafting a new set of international banking regulations to prevent the recurrence of similar catastrophes.

The new rules are slated to take effect on 1 January 2013, yet only months prior to their scheduled implementation they have already triggered refractory responses – particularly in the United States, due to their complexity and adverse impact on profits.

In a trenchant essay on the new regulations Sprott highlights what he believes to be one of their chief defects – their treatment of gold as an asset class.

Sprott notes that Basel III regulators cling to the notion that AAA-government securities should comprise the preponderance of high quality liquid assets which banks are required to hold.

Such securities are no longer esteemed by the financial community as safe harbor holdings due to the sovereign risk issues blighting a number of indebted nation-states, as well as the propensity of governments to issue blithely issue debt.

According to Sprott, precious metals such as gold could be the solution to the instability of the global banking system were they conferred with a heightened liquidity profile under the new Basel III framework.

Sprott writes that this would “open the door for gold to compete with cash and government bonds on bank balance sheets – and provide banks with an asset that actually has the chance to appreciate.”

Non-Western central banks have already cottoned on to this and included gold as a key component of their foreign exchange reserves, while two banking jurisdictions in particular – Turkey and China – “have openly incorporated gold into their capital structures.”

The People’s Bank of China recently made remarks which would imply that the government wishes to capitalize on their growing gold stockpile by integrating the domestic market with the international market, and Sprott speculates that China “may have already cornered most of the world’s physical gold supply” in anticipation of the day that Western banks realize that the precious metal is preferable to Treasuries.

 

SOURCE:
http://www.mining.com/gold-is-the-panacea-for-global-banking-woes-sprott-53227/

Brazil Boosts Gold Reserves to the Highest in More Than 11 Years

SPOILER:

Some of ye might have already heard a bit about this ‘buy-gold’ advicing that some grid & offgrid sources have been preaching.

Now, ponder with me. ‘Tis been a while that BRICs countries have been realigning their axis of international support – by buying gold and expanding spheres of influence abroad. For these tophat people all around the globe, remember, the world is a mere diorama – weren’t it true, there wouldn’t be unfairness and iniquity worldwide.

But why, you do ask, would they stockpile in such a moment of Time?…

…’tis easy. The dollar is really, REALLY about to collapse. And that be nay just me saying – ’tis been said by both in- and offgrid economists. Check this:

Governments worldwide are for long well-aware that there would be the day that the dollar will eventually collapse – that’s due to several factors:

1. Dollar, as SEVERAL other currencies, is ‘fiat money’ – made out of nothing.

2. Dollar’s value is NOT based upon what grid economists and pundits barf to ye – it is solelly based on OIL. You can’t perceive it so easily because of the many layers that hide this truth, but come to think with me: what is the most sold and bought commodity worldwide? ‘Tis PETROIL, crude oil. If ye still believe nay, look around ye and reason that, be the product nay composed, ’tis but either refined and/or transported by using one (or SOME) of crude oil’s derivates. Again, ’tis so dilluted into yer life that it becomes unnoticed.

3. Nations are swapping their assets from dollars to other solid, steady currencies/commodities – and EVERY country that tried to sell oil for other than dollar was either stormed by drones or troops, or destabilised by coups and turmoils.

…and why are the BRICs increasing gold reserves, while the US APPARENTLY does nothing? That’s something I think I’m better comprehending day by day – but let us talk about it at another Time.

EVERYTHING you consume makes this wheel spin faster and faster. Think about it.

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“The IMF figures showed continued strong buying by central banks,” said Dan Smith, a commodities analyst at Standard Chartered Plc in London. “This continues the trend of recent months and we expect this to support gold prices.”

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By Nicholas Larkin – Nov 21, 2012 9:51 AM GMT-0200

Brazil raised its gold reserves for a second month in October to the highest level in more than 11 years as emerging nations from Kazakhstan to Russia boosted holdings by more than 40 metric tons.

Brazil’s holdings expanded 17.2 tons last month to 52.5 tons, the most since January 2001, according to data on the International Monetary Fund’s website. The country’s 1.7-ton purchase in September was the first since December 2008. Kazakhstan’s holdings increased 7.5 tons, Russia added 0.4 ton and Turkey’s reserves rose 17.5 tons, the data show. Germany, the second-biggest holder, after the U.S., cut gold holdings by 4.2 tons, the first reduction since June.

Brazil
Brazil has in recent years become an Economic
power-house and is now included in the G7 (Group of 7)
nations meetings. The economy is rated @ 2517 Billion USD.
With a 4.7% unemployment in 2011 and an export surplus it
it is doing rather well. (CLICK EACH IMAGE FOR ITS SOURCE)

Central banks have been expanding reserves as the metal heads for a 12th straight annual gain and investors hold a record amount in bullion-backed exchange-traded products, data compiled by Bloomberg show. Nations bought 373.9 tons in the first nine months of the year and full-year additions will probably be in the “bottom end” of 450 to 500 tons, the London-based World Gold Council estimates.

“This is a chunky purchase by a central bank, and the gold market will likely sit up and pay attention,” Edel Tully, an analyst at UBS AG in London, wrote today in a report, referring to Brazil’s addition. “Today’s news confirms much of the market chatter at the time that official sector buying was taking place and was one of the key factors that gave prices a reasonable floor last month.”

Germany’s Reserves

Germany holds 3,391.4 tons, the IMF data show. The Bundesbank declined to comment on the past month’s gold reserves, spokeswoman Susanne Kreutzer said, adding that the central bank reserves 7 tons a year to sell to the Finance Ministry for minting. The year started on Sept. 27, she said. The Bundesbank sold about 0.7 ton to the finance ministry in June and 4.7 tons in October 2011 to mint commemorative coins.

Germany
Germany is considered the flag-ship of European economies.
Germany holds a 78.8% debt ratio to economy, above the 60% limit standard set by EU for stability, while being mad at Greece and PIIGS for doing the same.
Germany faces a $285 Billion USD repayment/refinance of debt in 2012 but sees no problem of finding lenders, since Germany’s economy
looks great compared to the rest of the industrialized world.

Gold for immediate delivery was little changed at $1,726.99 an ounce by 10:57 a.m. in London. It’s gained 10 percent this year. Holdings in gold-backed ETPs reached a record 2,604.9 tons yesterday, data compiled by Bloomberg show.

“The IMF figures showed continued strong buying by central banks,” said Dan Smith, a commodities analyst at Standard Chartered Plc in London. “This continues the trend of recent months and we expect this to support gold prices.”

Turkey’s bullion holdings have increased due to it accepting gold in its reserve requirements from commercial banks. Belarus expanded holdings by 0.1 ton in October and Mexico reduced them by 0.2 ton, the IMF data show.

Gold accounts for about 0.5 percent of Brazil’s total reserves and 20 percent of Kazakhstan’s, according to the World Gold Council. That compares with more than 70 percent for the U.S. and Germany, the biggest bullion holders, the data show.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

SOURCE:
http://www.bloomberg.com/news/2012-11-21/brazil-boosts-gold-reserves-to-the-highest-in-more-than-11-years.html

2012: The Tipping Point – The Results are in – The Bankers Lost

“There are only two possibilities left in the bankers’ end game. Either deflation’s growing momentum will pull today’s faltering economies into the ever-growing maw of a deflationary collapse or the continued printing of money to stave off such a collapse will end with the complete debasement of paper currencies in a hyperinflationary blowoff.”

SPOILER: I personally have my own thoughts about the ‘urging necessity of buying gold’. But that, I comment some other time.

soundtrack suggested:

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Darryl Robert Schoon
Posted Nov 22, 2012
The bankers’ bet that sufficient credit can reverse an economic contraction is no longer on the table. This does not mean central bank credit will tighten. Just the opposite will happen. Monetary easing will continue until the very end. Central bankers are trapped. The end game is now underway.

It is highly unlikely the Mayan predictions of the end of the world referred to the bankers’ world of credit and debt. Nonetheless, with only one month remaining until December 21, 2012 – the end date of the Mayan 5,125 year Mesoamerican calendar – the concomitant end of the bankers’ 300 year ponzi-scheme of credit and debt should not be dismissed as mere coincidence.

The world has entered a paradigm shift of immense proportions; and the collapse of the bankers’ economic world is a part of that shift. The bankers’ credit fueled a 300-year global expansion which transformed the world. The bankers’ credit, however, has now become debt which increasingly cannot be repaid.

Economics is not rocket science although the arcane algorithms used by Wall Street banks to predict capital markets imply that intended conclusion. Modern economics, i.e. capitalism, is merely the current iteration of the supply and demand dynamic distorted by 300 years of credit and debt – a distortion that’s now about to end.

CAPITALISM FOR DUMMIES
Prior to capitalism, the underlying economic dynamic was supply and demand. However, in economies fueled by the bankers’ debt-based banknotes, the relationship between credit and debt becomes equally, if not more, important than supply and demand.

GOLD, MONEY AND CREDIT
After gold was removed from the global monetary system in 1971 and after initial inflationary concerns were addressed in 1980, embedded constraints on monetary and credit growth no longer existed. The attendant rise in debt is noteworthy – as will be the consequences.

(click for sourcepage)

What central bankers did not anticipate from the explosive growth of credit was the resultant levels of massive debt. Fixated on growth, central bankers miscalculated the inevitable effects of the unrestrained increase in monetary and credit aggregates on their heretofore successful ponzi-scheme of credit and debt.

Credit is the zygote of debt; and since debts constantly compound in capitalist economies, unless controlled, credit will inevitably lead to fatal levels of debt. This is not rocket science. This is common sense.

Prior to the 1980s, central bankers controlled credit growth with central bank credit. After the 1980s, however, the markets, not central bankers, controlled the growth of credit – and markets love credit.

After 1980, credit growth was similar to pouring sugar into petri-dishes where glucose conversion had been previously carefully observed and stabilized. Now, three decades later, the alcoholic fumes from the petri-dishes are obvious to all, even to the central bankers who realized too late what the investment bankers had done with their credit.

The subtext to all central bank maneuverings since 2008 has been the attempts of central bankers to avoid the now inevitable deflationary collapse in demand that will bring their 300-year economic fraud to an end.

In the first edition of my book, Time of the Vulture; How to Survive the Crisis and Profit in the Process (2007), I predicted a deflationary collapse was going to happen. Six years later, that predicted depression is about to make its appearance on the world stage; and, it will be an economic collapse, a depression so deep, that another completely new economic paradigm will take its place.

CAPITALISM FOR DUMMIES
EUPHORIC BUBBLES AND DEPRESSING DEPRESSIONS
Depression, an economically moribund state where credit can no longer induce growth

Depressions are caused when uncontrolled credit growth results in speculative bubbles and runaway markets, e.g. stocks, real estate, etc. When this happens, capitalism’s usual cycles of expansion and contraction are replaced by deflationary depressions where collapsing bubbles result in excessive levels of supply and crippling levels of defaulting debt.

RICHARD KOO’S BALANCE SHEET RECESSION, aka THE LAST WALTZ

Richard Koo, currently chief economist at Nomura Research Institute, has deservedly carved out a reputation analyzing the current economic malaise. Koo’s term for the downturn is a ‘balance sheet recession’; a term drawing attention to the fact that monetary solutions, i.e. lower interest rates, will not solve the problem; that the problem and solution are found, instead, in the balance sheets of affected nations.

A presentation Koo gave at a gathering of The Institute for New Economic Thinking showed that although Australia, the UK, the EU, the US and Japan have all significantly cut interest rates, the global economy still has not recovered.

 

Koo’s solution, the substitution of borrowing-based government spending to make up for the loss of private demand, is drawn from the considerable experience of Japan after the spectacular collapse of the Nikkei in 1990.

However, Richard Koo is wrong that Japan’s strategy will also work for the US, the UK, and the EU, etc. Japan’s remarkable record in holding a deflationary depression at bay for over 20 years is not just because of record levels of government borrowing (Japan’s ratio of public debt to GDP is now 204%, the highest among industrialized nations); but, more importantly, Japan’s struggle against deflation occurred as the largest surge of credit-driven consumer demand in history was in progress.

Japan’s struggle against deflation began when the US credit-driven 25-year consumer bubble was just getting underway. Japan’s now prolonged 22-year survival is as much the result of bubble-driven US and global demand which directly benefited Japan as it is due to the ability and tenacity of Japan to draw down and deplete its record levels of domestic savings.

Koo’s solution to survive today’s deflationary crisis will neither work for the US, the UK, or the EU in the future as it did for Japan in the past – and it won’t work for Japan in the future as well; for, today, there is no bubble of excessive global demand to prolong Japan’s now record survival.

The opposite is, in fact, true. Aggregate global demand today is falling and for the first time in decades, Japan’s exports are exceeded by its imports. Today, Japan, as well as the rest of the industrialized, i.e. over-indebted, world stands naked and exposed to deflation’s now imminent assault.

As 2012 ends, all major economic zones are drinking deeply at the well of Richard Koo’s solution, i.e. central bank-based government borrowing. But, in the end, Richard Koo’s proffered well water will be little different than the cyanide-laced kool-aid that Jim Jones offered his ill-fated followers in Jonestown in 1978.

DRINKING POISON TO QUENCH THIRST

Drinking poison to quench thirst is a Chinese saying that describes the eventual consequences of the continued monetary easing of central banks and historic levels of government spending; and, although continued government borrowing and spending may hold deflation at bay, as Koo maintains, it will only do so temporarily and at the potential cost of a someday fatal monetary debasement.

There are only two possibilities left in the bankers’ end game. Either deflation’s growing momentum will pull today’s faltering economies into the ever-growing maw of a deflationary collapse or the continued printing of money to stave off such a collapse will end with the complete debasement of paper currencies in a hyperinflationary blowoff.

I advanced the deflationary scenario in Time of the Vulture; and believe both scenarios are not mutually exclusive. It is indeed possible that a more extreme version of 1970s stagflation is coming; that, in the end game, a deflationary depression and a hyperinflationary crisis could occur simultaneously.

We are in uncharted territory; and, unlike most, I view the collapse of the current economic paradigm as a necessary and ultimately beneficial rite of passage, a prerequisite for the better and more highly evolved paradigm that will follow.

Richard Koo presented his ‘balance sheet recession’ findings at a gathering of the Institute for New Economic Thinking; and while there has been some discussion at the Institute about paradigm change, most of its ‘new economic thinking’ still focuses on the current paradigm, what ails it and what can be done to save it.

As 2012 began, there was still hope that the worst of the 2008/2009 downturn had been averted; that a slow but protracted recovery was underway. There is no such hope today. All central banks are printing money and easing credit; but are no longer doing so in the certainty that such actions will reverse what previous actions did not.

As 2012 ends, there is an underlying acceptance, a resignation that what is being done is being done in the abeyance of any real solution; and that although today’s actions may not be a viable answer, in the end such actions are better than no action at all.

Maybe so, maybe not.

SOURCE: http://www.321gold.com/editorials/schoon/schoon112212.html

 

 

Swiss Study Shows 147 Technocratic “Super Entities” Rule the World

Swiss Study Shows 147 Technocratic “Super Entities” Rule the World
October 10, 2012

By Susanne Posel – Occupy Corporatism
(click images to see their sourcepages – ’tis disturbing)

The Swiss Federal Institute (SFI) in Zurich released a study entitled “The Network of Global Corporate Control” that proves a small consortiums of corporations – mainly banks – run the world. A mere 147 corporations which form a “super entity” have control 40% of the world’s wealth; which is the real economy. These mega-corporations are at the center of the global economy. The banks found to be most influential include:

• Barclays
• Goldman Sachs
• JPMorgan Chase & Co
• Vanguard Group
• UBS
• Deutsche Bank
• Bank of New York Melon Corp
• Morgan Stanley
• Bank of America Corp
• Société Générale

9 Biggest Banks’ Derivative Exposure – $228.72 Trillion
Note the little man standing in front of white house. The little worm next to lastfootball field is a truck with $2 billion dollars.
There is no government in the world that has this kind of money. This is roughly 3 times the entire world economy. The unregulated market presents a massive financial risk. The corruption and immorality of the banks makes the situation worse.
If you don’t want to bank with these banks, but want to have access to free ATM’s anywhere– most Credit Unions in USA are in the CO-OP ATM network, where all ATM’s are free to any COOP CU member and most support depositing checks. The Credit Unions are like banks, but invest all their profits to give members lower rates and better service. They don’t have shareholders to worry about or have derivatives to purchase and sell.
Keep an eye out in the news for “derivative crisis”, as the crisis is inevitable with current falling value of most real assets.
Derivative Data Source: ZeroHedge

However as the connections to the controlling groups are networked throughout the world, they become the catalyst for global financial collapse.

James Glattfelder, complex systems theorist at the SFI explains: “In effect, less than one per cent of the companies were able to control 40 per cent of the entire network.”

Using mathematic models normally applied to natural systems, the researchers analyzed the world’s economy. Their data was taken from Orbis 2007, a database which lists 37 million corporations and investors. The evidence showed that the world’s largest corporations are interconnected to all other companies and their professional decisions affect all markets across the globe.

George Sudihara, complex systems expert for SFI claims that this phenomenon is a common structure that could be found in nature. Comparing the manufactured reality of the financial markets to the ecosystems of the planet, Sudihara says that although the 147 corporations that rule the world through influence and interconnectedness are no more harmful than the natural cycles of our weather or animal kingdoms.

€828.6 Billion – Amount 2x large banks loaned to people of bankrupt countries
€828,600,000,000 – Intesa SanPaolo & Banco Santander lent a total of €828.6 billion to GIIPS in loans to institutions, corporations, retail business, mortgages, commercial real estate, etc, also called private debt. Intesa SanPaolo’s convoy is 3.8 kilometers long and Banco Santander’s is 3.5 kilometers long.
In technical terms this is called “Credit risk exposures (EAD – exposure at default)”.
The info is sourced from European Banking Authority’s website – 2011 Bank Stress Tests.

 

Yet because of the facts presented in the study, the financial crash of 2008 can be traced back to these tightly-knit networks. Future disasters can also be projected based on this analysis because of the “connectedness” of these influential entities which are only 147 corporations.

It is suggested the global capitalism could be a useful tool to make the markets more stable by simply acquiescing to control by the technocrats. The world’s transitional corporations (TNCs) guide the flow of all economies through influence and manipulation which created a structure of economic power. Most corporations are guided by the shareholders who use the companies to wield incredible power over the shift of economic consciousness. And the behavior of the system reflects the direction taken by those who fund the super entities.

Assumed by many that there was a complex architecture to the global economic power that caused financial systems to ebb and flow or crash and burn is not a scientific fact as evidenced in this study.

As the banking cartels force countries in the EuroZone into sovereign debt, there is a weakening of the many multi-national corporations around the world. Wells Fargo and JPMorgan Chase have financially gained while stocks are being unloaded in other markets.

This sovereign land-grab by the central banking cartels across Europe is mirrored in a recent Goldman Sachs report: “The more the Spanish administration indulges domestic political interests … the more explicit conditionality is likely to be demanded.” In other words the technocrats working for the Zionists are acquiring each country in the EuroZone.

The European Central Bankers agreed to give any nation in the Euro-Zone a bailout if they agreed to hand over the country to them under the guise of “new rules and conditions when applying for assistance.”

The Army of Debt
€360 Billion Euro Army of Debt heading towards Greece to infest itself on the government.
“Democracy is when the indigent, and not the men of property, are the rulers.” – Aristotle

As America drifts downstream toward economic implosion, the Federal Reserve headed by Ben Bernanke has chosen a different approach. They unveiled QE3 last week as a pump and dump scheme to prop up the US dollar by printing cash that is backed by nothing, while purchasing the mortgage-backed securities from the same banks that created the scandal and acquiring land in a massive land-grab; the likes of which have never been seen in the US.

Simultaneously, the BRICs nations (Brazil, Russia, India and China) are buying gold to back their fiat currencies to avoid being caught up in the destruction of the technocrats as they march toward one world currency. BRICs have become the anti-thesis to the banking cartels of the Zionist regime.

As these nations pair with Middle Eastern countries like Iran to trade gold for petrol instead of the US dollar as the global reserve currency, the Obama administration has begun a propaganda campaign against China involving a manufactured cyber-threat.

In Iran, the terrorist factions that do the bidding of the Zionists to topple governments by inciting fake revolutions have been deployed to Iran to stir-up trouble and blame the failing Ra-il which is being strategically destroyed by sanctions placed on the nation by the US. The American Israeli Public Affairs Committee (AIPAC) coerced the US Congress to pass HR 1905 which further tighten the economic noose around Iran for the benefit of the Zionist-controlled Israeli government.

In April of this year, the BRICs nations met to agree upon a strategy that would liberate the countries of the world from the grip of the technocrats. The BRICs countries are pushing for peace, but not through force and occupation of other countries to obtain this goal.

Vladimir Putin, President of Russia had this to say about the United Nations and their obvious attempts at global governance through usurpation of powers over countries. “One of the priorities of BRICs for the years to come should be the strengthening and key role of the UN’s Security Council in maintaining international peace and security. And also ensuring that the UN is not used as a cover for regime change and unilateral actions to resolve conflict situations.”

A joint BRICs bank was discussed with vigor. It would serve as an alternative to central banks that abuse their power at the expense of nations worldwide. They hope to replace the International Monetary Fund (IMF) and the World Bank. The IMF and World Bank are alarmed by this move and highly disapprove of it.

This is not shocking, considering that the central banks play a game of printing fiat that has no precious metals backing the paper.

Over 180 countries have signed onto the BRICs agreement as evidenced in their declaration. While the global Elite still hold power over the G5 countries, the rest of the world is standing up, severing their ties and making plans for a new world without them.

 

SOURCE: Blacklisted News
http://www.blacklistednews.com/Swiss_Study_Shows_147_Technocratic_“Super_Entities”_Rule_the_World_/21945/0/0/0/Y/M.html?morestories=obinsite

 

MORE SOURCES:

PDF: Swiss Study “The Network of Global Corporate Control”
http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf

Huffington Post: ‘Super-Entity’ Of 147 Companies At center of World’s Economy, Study Claims
http://www.huffingtonpost.ca/2011/10/24/super-entity-147-global-economy-swiss-researchers_n_1028690.html

Reuters: Wall Street drops as investors wary of weak earnings
http://www.reuters.com/article/2012/10/08/us-markets-stocks-idUSBRE89708R20121008

Forbes: Wells Fargo And The Case Of The Falling Financials
http://www.forbes.com/sites/greatspeculations/2012/10/08/wells-fargo-and-the-case-of-the-falling-financials/

CNBC: Bank Bailout May Be Insufficient for Spain: Goldman Sachs
http://www.cnbc.com/id/48173416/Bank_Bailout_May_Be_Insufficient_for_Spain_Goldman_Sachs

WN: Euro crisis: Europe clears key obstacle; political risks remain in Greece, Spain, Italy (NOTE: the original source DELETED the original article. India’s sources do this more often than ye think)
http://article.wn.com/view/2012/09/12/Euro_crisis_Europe_clears_key_obstacle_political_risks_remai/

Occupy Corporatism: Bernanke’s Stimulus Simply Following Global Elite’s Directives to Implode the US Dollar
http://occupycorporatism.com/bernankes-stimulus-simply-following-global-elites-directives-to-implode-the-us-dollar/

Occupy Corporatism: The Fed’s US Land-Grab Hidden Within Purchase of Mortgage-Backed Securities
http://occupycorporatism.com/the-feds-us-land-grab-hidden-within-purchase-of-mortgage-backed-securities/

Occupy Corporatism: China buys gold before Bernanke implodes the US Dollar
http://occupycorporatism.com/china-buys-gold-before-bernanke-implodes-the-us-dollar/

Occupy Corporatism: The Connection Between White House Cyber Attacks and Global Reserve Currency
http://occupycorporatism.com/the-connection-between-white-house-cyber-attacks-and-global-reserve-currency/

Occupy Corporatism: Manufactured Arab Spring Implemented in Iran Amid Stricter US Sanctions
http://occupycorporatism.com/manufactured-arab-spring-implemented-in-iran-amid-stricter-us-sanctions/

Occupy Corporatism: HR 1905: AIPAC Pressures Congress for Stricter Sanctions Against Iran
http://occupycorporatism.com/hr-1905-aipac-pressures-congress-for-stricter-sanctions-against-iran/

BRICS: http://www.bricsindia.in/

VIDEO: Bye bye Dollar, it was fun – USA dollar NO LONGER world reserve currency

Soros Buying Gold as Record Prices Seen on Stimulus

By Nicholas Larkin and Debarati Roy – Nov 20, 2012 7:39 PM GMT-0200

Gold’s 12-year rally, the longest in at least nine decades, is poised to continue in 2013 as central bank stimulus spurs investors from John Paulson to George Soros to accumulate the highest combined bullion holdings ever.

Bank of England’s glittering stash of £156 BILLION in gold bars stored in former canteen under London. (click image for sourcepage)

The metal will rise every quarter next year and average $1,925 an ounce in the final three months, or 11 percent more than now, according to the median of 16 analyst estimates compiled by Bloomberg. Paulson & Co. has a $3.66 billion bet through the SPDR Gold Trust, the biggest gold-backed exchange- traded product, and Soros Fund Management LLC increased its holdings by 49 percent in the third quarter, U.S. Securities and Exchange Commission filings show.

Central banks from Europe to China are pledging more steps to boost growth, raising concern about inflation and currency devaluation. Investors bought 247.5 metric tons through ETPs this year, exceeding annual U.S. mine output. While both sides said talks Nov. 16 between President Barack Obama and Congress over the so-called fiscal cliff were “constructive,” the Congressional Budget Office has warned the U.S. risks a recession if spending cuts and tax rises aren’t resolved.

“We see gold as a hedge against the follies of politicians,” said Michael Mullaney, who helps manage $9.5 billion of assets as chief investment officer at Fiduciary Trust in Boston. “It’s a good time to garner some protection in portfolios by having some real asset like gold.”
Longest Streak

Gold advanced 11 percent to $1,728.85 in London this year, headed for a 12th consecutive annual gain, the longest streak in data compiled by Bloomberg going back to 1920. Prices reached a record $1,921.15 in September 2011. The Standard & Poor’s GSCI gauge of 24 commodities slipped 0.3 percent and the MSCI All- Country World Index (MXWD) of equities climbed 8.2 percent. Treasuries returned 2.7 percent, a Bank of America Corp. index shows.

Bullion held through ETPs, the first of which listed in 2003, reached a record 2,604.2 tons yesterday, valued at $144.9 billion. That exceeds the official reserves of every nation except the U.S. and Germany, World Gold Council data show. The SPDR Gold Trust (GLD) alone holds 1,342.2 tons.

 

Global Teutonic Zionists – Working towards that New World Order: 1) Lord Jacob de Rothschild. 2) His spooky son, Nathaniel. 3) Baron John de Rothschild, who recently said they are working towards global governance. 4) Sir Evelyn de Rothschild. His wife Lynn Forrester is a big mover and shaker in the Democratic party. 5) David Rockefeller, Sephardic Crypto-Teutonic, who’s son Nick told film director Aaron Russo about 9/11 in advance. 6) Nathan Warburg. His family was not only instrumental in creating the Federal Reserve, etc. they were also behind the rise of Adolf Hitler. 7) Henry Kissinger, Globalist genocidal schemer. 8 George Soros, another Teutonic schemer and NGO manipulator. 9) Paul Volcker, Crypto-Jew big-time Globalist and economic advisor to Obama. 10) Larry Summers, Crypto-Teutonic economic advisor to Obama. 11) Lloyd Blankfein, CEO to the rapidly growing Goldman Sachs banking behemoth. 12) Ben Shalom Bernanke, current Teutonic master of the Federal Reserve (a private entity, neither “Federal” nor a “Reserve”). What’s the common denominator here? (click image for sourcepage – ’tis a nice political blog, albeit somewhat homophobic, in my opinion. Nothing is perfect, after all…)

Soros increased his investment in the trust to 1.32 million shares in the third quarter, the most since 2010, a Nov. 14 SEC filing showed. The stake, with each share representing about a 10th of an ounce, is valued at $221.4 million. Prices advanced 60 percent since January 2010, when Soros called gold the “ultimate asset bubble.” Michael Vachon, a spokesman for the 82-year-old who made $1 billion breaking the Bank of England’s defense of the pound in 1992, declined to comment.
Official Reserves

Paulson, who became a billionaire in 2007 by wagering against the subprime mortgage market, owns 21.8 million shares in the SPDR Gold Trust, making him the biggest shareholder, a Nov. 15 SEC filing showed. The 56-year-old raised his stake by 26 percent in the second quarter and his holding of about 66 tons exceeds the official reserves of nations from Brazil to Bulgaria to Bolivia.

The New York-based hedge fund company reduced its investments in Anglogold Ashanti Ltd. (ANG) and Gold Fields Ltd., the third- and fourth-biggest producers. Armel Leslie of Walek & Associates, a spokesman for Paulson’s fund, declined to comment.

Paul Touradji’s Touradji Capital Management LP sold all of its 82,000 shares in the SPDR Gold Trust in the third quarter, according to an SEC filing. Lone Pine Capital LLC, the hedge fund run by Stephen Mandel Jr., cut its stake by 31 percent to 2.6 million shares, and Dan Loeb’s Third Point LLC lowered its bet by 10 percent to 130,000 shares, filings showed last week. Officials from all three companies declined to comment.
Nine Strategists

While some investors expect stimulus to devalue currencies, the median of nine strategist estimates compiled by Bloomberg show the U.S. Dollar Index, a measure against six major trading partners, will average 82.8 next year, from 80.9 now. Steven Englander, Citigroup Inc.’s head of G-10 strategy, said in an interview this month that the currency market is signaling it isn’t yet convinced the Federal Reserve will fulfill its pledge to pump record amounts of cash into the economy through 2015.

Third-quarter demand for gold fell 11 percent, the most since 2009, as China’s slowing growth curbed purchases, the London-based World Gold Council said Nov. 15. India, the biggest buyer in the quarter, consumed 24 percent less in the year’s first nine months as bullion priced in rupees reached a record in September. The Washington-based International Monetary Fund cut its 2013 forecast for world growth twice since July, to 3.6 percent.
Inflation Adjusted

While prices rose 25 percent since November 2010, the size of the futures market, based on contracts outstanding, fell 30 percent, bourse data show. The metal, down 3.7 percent from this year’s high, has yet to exceed previous records when adjusted for inflation, with its 1980 record of $850 equal to $2,398 today, data compiled by the Fed Bank of Minneapolis show.

Hedge funds and other large speculators pared bets on a rally in futures traded on the Comex bourse in New York by 29 percent since Oct. 9, U.S. Commodity Futures Trading Commission data show. They’re still holding a net-long position of 140,162 futures and options, about 10 percent more than this year’s average, and increased wagers by 7.7 percent last week.

The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015. The European Central Bank said it’s ready to buy bonds of indebted nations and the Bank of Japan raised its asset-purchase program for the second time in two months on Oct. 30.
Quantitative Easing

Gold rallied 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

Investors buying bullion as a hedge against inflation and a weaker dollar generally earn returns only through price gains, increasing its allure as interest rates decline. It rose sixfold since the end of 2000, beating the 34 percent advance in the S&P 500, with dividends reinvested, and the 91 percent return on Treasuries. The Dollar Index fell 26 percent.

The first face-to-face meeting between Obama and leaders from Congress on the fiscal cliff yielded optimism and few details about how it would be resolved. The $607 billion of automatic spending cuts and tax increases is scheduled to take effect in January. U.S. equities and Treasuries rose Nov. 16 and gold futures were little changed.
Options Trading

Credit Suisse Group AG’s Tom Kendall, the most accurate gold forecaster tracked by Bloomberg over the past two years, sees prices averaging $1,880 in the fourth quarter next year and UniCredit SpA’s Jochen Hitzfeld, ranked second, expects $1,950. Deutsche Bank AG’s Daniel Brebner, the next most accurate, predicts $2,300 in the third quarter.

Options traders are also bullish, with the seven most widely held contracts conferring the right to buy at prices from $1,800 to $2,200 between November and March, Comex data show.

Central banks added to reserves for 19 consecutive months through August, the longest streak since 1964, IMF data show. Nations from Russia to South Korea to Mexico bought more to bring combined holdings to 31,461 tons, equal to about 18 percent of all the metal ever mined.

Barrick Gold Corp. (ABX), the world’s largest producer, will report a 41 percent gain in profit to a record $5.04 billion next year, the mean of 10 analyst estimates compiled by Bloomberg shows. The Toronto-based company’s shares fell 25 percent this year and will gain 43 percent in the next 12 months, according to the average of 23 forecasts.
Monetary Stimulus

Analysts predict Newmont Mining Corp. (NEM) and AngloGold Ashanti, the next-biggest, will also report the most profit ever next year.

“It looks as though global monetary stimulus is likely to continue, particularly in the wake of growing fiscal austerity,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion of assets. “That puts pressure on the monetary authorities to stimulate the economy and that will debase the currencies and put a bid under gold.”

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

 

SOURCE: Bloomberg
http://www.bloomberg.com/news/2012-11-20/soros-buying-gold-as-record-prices-seen-on-stimulus-commodities.html

 

The Fed’s Nuclear Balance Sheet. Stand Back: This Baby’s Going to Explode

Mitch Feierstein
Author, ‘Planet Ponzi’

 

Over the coming weeks, we’re going to be hearing a lot about the ‘fiscal cliff’: the threat that some 5% of GDP is going to be ripped out of the economy in a combination of tax hikes and spending cuts. A fiscal slow-down on that scale will almost certainly trigger recession. The CBO thinks so, though their numbers look optimistic to me. (If you cut demand by 5%, more or less overnight, then you shouldn’t expect the economy to grow by more than 1% in the year following.)

Because the process of fiscal compromise acts itself out on the political stage – all big personalities and high drama – the media loves to report it. Loves to imply that vast questions are at stake, that political careers will stand or fall by the outcome.

But they’re not. Not really. This so-called ‘cliff’ is really just the first in a series of steps. The US budget is arguably the most distorted in the Western world. Greece and Japan may have higher debts, Italy and Portugal may have worse growth prospects – but for sheer budgetary insanity, the US is probably the world leader, combining huge current deficits with vast unfunded promises to retirees, and welfare entitlement program recipients. You don’t need to take my word for this. The IMF states, ‘under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly.’

The political ructions of the next few weeks will simply constitute the first scenes in a drama that will run for the next ten or fifteen years. And what’s more, this is a play where we already know the ending. Taxes will have to go up. Spending will have to come down. No other outcome is available: just ask the Greeks.

And meantime, there is a monetary time-bomb charged and ticking. A bomb which is being constantly primed with further explosive, further destructive force. Remember that the economic catastrophe of 2008 was created by loose monetary policy, the indisciplined expansion of credit and a market where increasingly shoddy securities were sold as investment grade assets. You might think that a logical reaction would be the steady tightening of policy and encouraging a climate of credit discipline.

Alas, however, such logic has no place at the Fed. Interest rates are on the floor, and have been for four years now. Because four years of loose money isn’t enough for the ivory-tower academics in charge of monetary policy, the Fed has explicitly committed to keep rates low indefinitely.

Loose money in the past, loose money guaranteed into the future … but that’s still not enough. The Fed has enlarged its balance sheet by $2 trillion since the crisis began to unfold. But that doesn’t even say it. The unelected officials at the Fed handed out an extraordinary $16 trillion in secret loans to bail out banks and businesses in the 2008-10 period. Those loans were not known to, or authorized by, Congress and many of the recipients were firms owned and headquarter abroad. Sen. Bernie Sanders, who has much to call attention to these issues, comments, ‘No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president.’ Well, duh! It’s frankly extraordinary that there should be any question about this.

As Sanders also points out, the actual operation of the bailouts was largely outsourced in large part to investment banking firms on Wall Street who benefitted directly from the bailout. According to the Government Accountability Office, some two-thirds of such outsourcing contracts were awarded on a no-bid basis, an extraordinary failure. And meantime in a ‘money-laundering’ style operation, the Fed is acquiring $40 billion of low-quality mortgage backed securities – in many cases from the firms that created and missold them – thereby cleaning corrupt balance sheets at the risk of the US taxpayer.

The problems created by this unconstitutional misconduct go far beyond the mere trillions of dollars involved. The US Treasury market is being currently manipulated on a heroic scale. At times we’ve seen the Fed buying as much as 70% of US government bond issuance. Worse still, it’s effectively told the market that it intends to continue supporting the market as much as necessary for as long as necessary. In effect, we have a tiny group of unelected officials pursuing a set of radical and experimental policies – QE infinity, money-printing, unlimited bond buying, call it what you will.

And the theory behind this activity is simply crazy. When have price controls and state intervention ever worked? I don’t just mean for the US Treasuries market, but for any major market at any time? State intervention always fails. The Fed is simply setting up what looks set to be the largest Ponzi Scheme in history.

What’s more, because financial markets are interlinked, indiscipline in one market soon ripples through the system and unintended consequences impact many other markets. Wall Street traders, both currently and historically, price junk bonds off the US ten year treasury, which currently trades at an implausible 1.61%. But since the US Treasury market is flawed, every related market is too. As the Economist notes, a bubble is being inflated in government bonds, quality corporate bonds, junk bonds, and (I would add) global equities. As that newspaper comments, ‘When the market does turn everyone will want to head for the exit at once, as was the case with mortgage-related bonds in 2007. That might turn a retreat into a rout.’ I’d agree, except that the word might ought to be will.

And all this wouldn’t be so bad, except for one thing. What’s the exit strategy? Could it be hope-based by any chance? How do you climb down from these heights? Who will buy these bonds when the Fed stops? Who absorbs the losses? What exactly happens to the economy when interest rates normalize and bond prices collapse back to normal levels? Indeed, what happens to the banks when they can no longer sell their lousy assets to the Fed, can’t bump up their profits by selling no-bid services to the dumbest buyer in town? Too big to fail is still getting bigger.

The fiscal cliff is scary, because an abrupt one-off change in fiscal posture is a dumb way to do something that needs doing. But still, it needs doing. If a temporary economic slowdown is the price we pay for that, too bad. We’ll still be in better shape for taking the hit.

The monetary neutron bomb is worse. We’re still building it. No one’s talking about it. And the amounts are colossal.