Editor Note: Apologies but the Jackass in the last week or more has suffered a severe influenza illness. The bout resulted in being bedridden for at least five consecutive days. Symptoms of fever, nasty chills, deep muscle body aches, cough, and more were endured. On three occasions, after a daytime nap, the pillow case was totally soaked, no exaggeration, quite remarkable. Each time, some hope that the fever had broken turned out to be false hope. Energy levels have been extremely low, forcing frequent naps by day, especially after eating home-made chicken soup. Some fear of very dangerous flu virus was a Jackass concern, but the San Jose Costa Rica area has been hit by a nasty distinct respiratory flu virus strain. Certain friends or wives had identical symptoms, as described on major news channels. Unfortunately, the work has not been done for the August Gold Report. It will not be completed. However, the notes will be shared. They are unfinished but organized, and of some uncertain value. A benefit can be derived from the prepared notes which never made it to a completed report. The final steps of research were not done, nor the final analysis. It is my fervent hope and plan to bounce back for next month. Your understanding is appreciated, for accepting the report in the current form as compromise.
QUOTES ON GOLD
"We are on the cusp of the precious metals making an historic moonshot in terms of dollars. I believe that over the next 3-5 years, gold and silver will make moves both in dollars and percentage terms as big or bigger than what they did back in 1978-1980. I also believe that the shares will not only participate but will be the biggest movers of all. In terms of dollars, I believe it is possible that gold reaches a range between $10,000 and $30,000 with silver well above $200 per ounce over the next several years! I will also say that if these numbers turn out to be wrong, they will most likely be far too low and conservative in nature. I also believe that this move will begin shortly (the next 2-3 months?) and maybe even come out of nowhere. The move could be kicked off with fundamental news such as Saudi Arabia accepting non-dollars for oil. It could occur based on some sort of financial news or because of war." ~ Bill Holter
"If Russia accepts payment for oil and gas in any currency other than the dollar, whether it is gold, the Euro, the Ruble, the Rupee, or anything else, then the US Petro-Dollar system will collapse." ~ Jim Sinclair
"The Fed has not made the world a better place with its interventions. It has created moral hazard, encouraged the formation of asset bubbles that eventually pop (leaving economic messes), widened the wealth inequality gap to record levels, discouraged savings and investment, severely penalized retirees on fixed incomes, encouraged spending, funded massive government deficit spending by monetizing the debts, lengthened the recession and likely reduced the number of jobs that would have been created if the economy had been allowed to take its normal course. Eventually the Fed's policy interventions will also have created debilitating, widespread consumer inflation, the cruelest tax against the poor and middle classes." ~ Fred Hickey (aka the High-Tech Strategist)
"The Voice claims the crypto currencies might someday act like a main element in the gold-backed retail level platform, as integral part of the global barter system. Right now from my perspective, BitCoin seems a closed end fund pyramid scheme, with internal accounting devices that attempt to dispel such notion. It needs better management in order to prevent huge appreciation, if it ever expects to become a mainstream tool. But admittedly, I am no expert of BitCoin or the other cryptos." ~ Jackass
## INTRO GOLDEN NUGGETS
???◄$$$ NICARAGUAN CANAL UPDATE APPEARS TO BE MOVING FORWARD... ALMOST $50 BILLION FOR PROJECT COST, AND AT LEAST SIX YEARS TO COMPLETE... EXPECT COST OVERRUN AND TIME OVERRUN.
Jackass concerns from the start, actually a year ago:
- long distance to dredge and build canal, over 80 miles (longer than Panama)
- no rain forest natural supply of water
- extreme unprotected heat (without pestilence)
- Ortega Regime obstacles, with demands for graft in payola.
Very interesting conversation last night with former residence building guard, nice Nicaraguan guy (all in spanish). I love such challenges, and this time the guy had a little bit of info on the proposed Nicaraguan Canal not found in the press reports. He said it is all SYSTEMS GO, with Chinese to serve as architects, engineers, managers. Nicas will serve as grunt workers and supply truckers. He did not anticipate serious health problems from the heat. He did not expect the Chinese to ship in 1000 workers to dominate the entire set of work sites. He and I shared a potential that the Ortega Sandinistas might be given a huge bribe to cooperate, and maybe even a path for retirement to get out of the way in a couple years with pockets filled with cash, since Ortega is a gigantic impediment to economic development. Poverty is astonishing in Nicaragua, the worst the Jackass has ever seen in my life.
The guard was told that China would retain 30 years of canal profit rights, which he called exploitation (no negative connotation in spanish). He fully comprehended the angle for Russia & China to create a major passageway that would anger the USGovt and challenge it, even while effectively strangling the US lower 48 states. He did not perceive any role for Russia in the entire project, except maybe shared project funding and promise of ship usage later. He thought the Nicas could do the heavy lifting physical work. Pedro is my buddy, and a fellow bicycle enthusiast.
The Nicas have an earned reputation of excellent hard working dedicated reliable men, well recognized in Costa Rica. The guard did not foresee a long 15-year project, but rather a 6-8 year project timeline if properly funded and equipped and supplied. He did not foresee any big health risks like yellow fever (no jungle at site in Nicaragua), with unshaded heat no big deal to rugged Nicas. The one item we could not figure out or assess was drainage of giant Lake Nicaragua to fill the lock systems. Surely the drainage is accounted for, since fresh water Lake Nicaragua. The proposed canal 80-100 miles in two segments, one short on Pacific side, one long on Atlantic side. Now I learn that the proposed path is along Las Lajas River, on a total 280 kilometer long course, equal to 170 miles. So the project pathway is much longer than my envisioned perception. No doubt, Russia and China are carving up opportunities accordingly. See a chart produced last year, but still relevant.
<<< NICARAGUA SETS SIGHTS ON BUILDING RIVAL TO PANAMA CANAL WITH CHINESE BACKING
August 7, 2014
A Chinese telecom billionaire has joined forces with Nicaragua's famously anti-American president to construct a waterway between the Caribbean Sea and the Pacific Ocean to rival the Panama Canal. The massive engineering undertaking would literally slice through Nicaragua and be large enough to accommodate the supertankers that are the hallmark of fleets around the world today. The proposed channel in what is virtually America's backyard would dwarf the Panama Canal built a century ago under U.S. entrepreneurship. The supporters in the project are 41-year-old Wang Jing, who heads the Hong Kong Nicaragua Canal Development Investment Co. (HKND), and Nicaraguan President Daniel Ortega. Total construction costs are estimated at $49 billion, which is about five times the Nicaragua's gross domestic product. Ortega views the project as offering one of the best chances to reduce poverty in his nation, as it will provide jobs to many workers. The unspoken concern is to provide enough jobs to keep the population on less hostile footing.
Earlier this year, a group of Chinese individuals was spotted inspecting the area around Las Lajas River, considered a candidate site for the canal. The group traveled in military vehicles and helicopters as they photographed and surveyed the site. The members were guarded by more than 10 Nicaraguan military personnel. And yet, there are doubts as to whether huge tankers could pass through any canal in the area. Outside of the rainy season, some parts of the riverbed are exposed. Also, horses graze along some of the shallow parts of the river. At nearly 280 kilometers, the waterway would be about three times the length of the Panama Canal. Extensive construction work will be required for dredging and expanding the width of the river. Viewed from the Pacific side, the Nicaragua canal plan would first cross an isthmus some 20 km in length before cutting through Lake Nicaragua. The lake is about 80 km wide in an east-west direction. The canal would then connect to the Caribbean Sea, some 180 km away.
<<< RUSSIA JOINS CHINA IN BUILDING CANAL TO RIVAL PANAMA'S
June 6, 2014 (older article but still relevant, encroachment onto US turf)
As Russia continues to take strategic initiatives that put the United States on the defensive, Russian President Vladimir Putin is teaming up with China to help construct a trans-oceanic canal in Nicaragua that gives Moscow an even greater foothold in Washington's area of influence. The prospect comes as Moscow not only intends more massive arms sales in Latin America but, as WND recently reported, moves to establish a base in Nicaragua besides using existing facilities for refueling for aircraft and port calls for Russian warships. In addition to Nicaragua, Moscow also is looking to establish bases in Cuba and Venezuela. The establishment of permanent Russian bases and a major Russian presence in the Western Hemisphere will challenge U.S. policies and threaten to diminish Washington's influence in the region. And like a repeat of events leading up to the 1962 Cuban missile crisis, it will give Moscow a basis to stage offensive weapons in the Western Hemisphere, placing another formidable challenge to US homeland defenses from potential missile threats.
In addition, potentially large deposits of natural gas in the Caribbean Sea near Nicaragua also have peaked Russian interest. The underlying concern is that Nicaraguan President Daniel Ortega, who is close to the Russians, could turn Nicaragua into a Russian base of operations. Blank said, "This combination of arms sales, military installations and large-scale economic, infrastructural and energy projects is a hallmark of Russian policy. They are well-tested instruments by which Moscow seeks to permanently leverage friendly states into partners or, more bluntly, clients." The Nicaragua Grand Canal is but one of many projects to which the Russians are linking up with the Chinese to economically penetrate the Western Hemisphere. Blank continued, "This phenomenon combined with Russia's unremitting efforts to wage asymmetric war against the United States globally and in its neighborhood, should at least disturb the dogmatic slumbers of those in Washington who have hitherto neglected to ponder Moscow's goals in Nicaragua and across Latin America."
???◄$$$ LAWSUIT STUNNER: HALF OF FUTURES TRADES IN CHICAGO ARE ILLEGAL WASH TRADES
The gold rig comes from wash trades. This lawsuit alleges that half of all trade are the same buyer/seller, and thus constitute rigging price. The extent of fraud throughout the entire US financial system is astonishing.
???◄$$$ UNIVERSAL BUBBLE IS VISIBLE... HUSSMAN CALLS IT BUBBLES BUBBLES TOIL AND TROUBLE
Witness the stock bubble, the bond bubble, the economic bubble, the FOREX bubble, the LIBOR bubble, the derivatives bubble, as all are bubbles. The West offers little valid wealth and no true financial markets anymore. The Eastern nations are gradually speaking of the Western nations are being insolvent with corrupted markets.
???◄$$$ VANCOUVER YUAN SWAP FACILITY COMING
from HTLetter client....
I dug this out (not mainstream news) which sort gives the up-to date version of the Yuan swap facility you have been talking about. No one I have talked to here in Vancouver knows anything about it, least of all the local banks. One thing I have noticed though, the biggest casino in the Vancouver area has been accepting Yuan Currency for conversion for chips for approximately half a year now.
THE VOICE: "The Chinese Triads are coming out of hiding and are obviously starting to operate in the open." Big wow!! (Triad is the HK-based Chinese criminal mafia)
<<< VANCOUVER BUILDING SEVERAL MULTI-$BN CONDO COMPLEXES
???◄$$$ CHINA DEVELOPMENT BANK OPENS OFFICE IN VENEZUELA
The China Development Bank (CDB) opened an office, a move that indicates the two countries will further strengthen their economic relations. Venezuela is in total chaos economically. Hence any Chinese presence could help to stabilize the situation.
???◄$$$ RUSSIA EXPLAINS WHY IT RUSHED ENTRY OF HUMANITARIAN CONVOY... THE KREMLIN DEFIED THE KIEV FASCIST REGIME, WHICH HAS EXPOSED ITSELF AS CRUEL, AND BENT ON GENOCIDE.
CMC from San Francisco: The Russian humanitarian action puts a big turd in the Junta/NATO/US punch bowl just ahead of the Ukraine Independence celebration on Sunday in Kiev and as well as the upcoming peace conference in Belarus next week. Any Ukraine attempt to interfere with this convoy will likely bring a very strong military response by Russia. So, all of the negotiating cards for the meeting next week have gone back into Putin's hand. The West must be steamed, but nothing they can do. Obama & Kerry will probably call for more sanctions and the EU will revolt since their economies are collapsing from Russia's counter-sanctions. And to think this US president won a peace prize.
## BONDS, DERIVATIVES & MONETARY
???◄$$$ THE FED TURNED A FLOOD OF TREASURY DEBT INTO A SCARCITY OF REPO COLLATERAL... WITNESS EVIDENCE OF INTEREST RATE DERIVATIVE ABUSES, WHICH CREATE ARTIFICIAL DEMAND
Here's a shocking tidbit. The Fed's financial repression policies have so contorted the government bond market that repo on 5-year treasuries has recently been trading at a negative 25 basis points. That is right. The hunger for good collateral is so great on Wall Street that some players are willing to lend short-term cash at a negative rate in order to get their hands on Uncle Sam's debt paper.
Now that is some kind of financial deformation. For the past 14 years, in fact, Washington has been spewing red ink at unprecedented rates. Since the year 2000, publicly held treasury debt has soared from $3.5 trillion to about $12.6 trillion at present. And its first cousin, the defacto government debt issued by GSE's such as Fannie and Freddie, has exploded from $2 trillion to more than $6 trillion. So in theory, the markets should be floating on a sea of good collateral. In their lunatic quest to stimulate jobs and growth through ultra-low interest rates, the central banks have absorbed massive amounts on government debt through their QE operations. The US central bank alone has expanded its balance sheet from $500 billion to nearly $4.5 trillion since the time of the dotcom bust in 2000. That means that enormous amounts of otherwise available collateral has been stuffed in the vaults of the state's monetary central planning agency. Having wrecked the USTreasury market proper, the Fed is now flummoxed by the growing distress in the repo market, a place where it has managed to turn a tsunami of government debt into a severe shortage of good collateral.
Comment added. This is direct evidence of over-used Interest Rate Swap devices. They force the big banks to buy up Treasurys that are no longer in abundant supply. Failures to Deliver are evidence of IRSwap excesses. Negative Interest Rate is also parallel evidence. (Jackass learned this from Kirby)
???◄$$$ FED VICE CHAIR FISCHER SAYS PREPARING A PROPOSAL FOR BAIL-INS... HE EXPECTS ULTRA-LOOSE MONETARY POLICY TO BE FAVORABLE FOR GOLD PRICE.
Federal Reserve Vice Chairman Stanley Fischer delivered his first speech on the U.S. and global economy in Stockholm, Sweden yesterday. Fischer headed Israel's central bank from 2005 through 2013 and is now number two at the Federal Reserve in the U.S. after Janet Yellen. In a speech entitled, "The Great Recession: Moving Ahead" given at an event sponsored by the Swedish Ministry of Finance, Fischer said that the economic recovery has been and remains disappointing. "The recession that began in the United States in December 2007 ended in June 2009. But the Great Recession is a near-worldwide phenomenon, with the consequences of which many advanced economies (among them Sweden) continue to struggle. Its depth and breadth appear to have changed the economic environment in many ways and to have left the road ahead unclear."
Speaking about the steps that have been taken internationally in order to strengthen the financial system and to reduce the probability of future financial crisis, Fischer said that the U.S. was preparing proposals for bank bail-ins for "systemically important banks. Additional steps have been taken in some countries. For example, in the United States, capital ratios and liquidity buffers at the largest banks are up considerably, and their reliance on short-term wholesale funding has declined considerably. Work on the use of the resolution mechanisms set out in the Dodd-Frank Act, based on the principle of a single point of entry, though less advanced than the work on capital and liquidity ratios, holds the promise of making it possible to resolve banks in difficulty at no direct cost to the taxpayer."
As part of this approach, the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding. This cushion is known as a gone concern buffer. Fischer's comments that the U.S. is preparing a proposal for bail-ins is at odds with Federal Deposit Insurance Corporation (FDIC) and Bank of England officials who have said that bail-in legislation could be used today. The U.S. already has in place plans for bail-ins in the event of banks failing. Indeed, the U.S. has conducted simulation exercises with the U.K. in 2013 and again this year.
On October 12 2013, Art Murton, the FDIC official in charge of planning for resolutions, and the Bank of England's Deputy Governor Paul Tucker, both confirmed that the U.S. system is ready to handle a big bank collapse. The Bank of England's Tucker, who has worked with U.S. regulators on the cross-border hurdles to taking down an international bank said that "U.S. authorities could do it today, and I mean today." There is speculation that were Yellen to retire early Fischer would be anointed as the new Federal Reserve Chairman. Fischer who previously was chief economist at the World Bank, also makes it clear that he expects ultra loose monetary policies to continue in the U.S. which will be bullish for gold and silver.
In order to make whole the entire cache of global derivatives it would require 20 earths equivalent for the same $60 trillion per year gross GDP for the entire global economy. The bail-ins will provide 1% to 5% of what is needed in capital. Therefore the motive appears to be a national program to instill powerful poverty at the national level. Wealth is to be eradicated by imposition. The Jackass claim of criminal status for holding wealth will come into view soon. Better question: why is an Israeli citizen constructing monetary policy for confiscation of US citizen accounts?? This nation appears to be the lord over the United States without full proper authority.
<<< URGENT QUESTION WHY IS AN ISRAELI CITIZEN SECOND IN COMMAND AT THE FEDERAL RESERVE ON UNITED STATES SOIL !!! A BIGGER SUSPICION OVER APPARENT QUIET TAKEOVER OF THE USGOVT. No Constitutional precedent for another nation to assume ministry roles in volume. Witness a hidden coup d'etat with roots in that controversial event back in early September 2001.
Consider a long list Members in US politics (outside USCongress) who hold dual US/Israeli citizenship, Past and Present:
1. Attorney General: Michael Mukasey
2. Head of Homeland Security: Michael Chertoff
3. Chairman Pentagon's Defense Policy Board: Richard Perle
4. Deputy Defense Secretary (Former): Paul Wolfowitz
5. Under Secretary of Defense: Douglas Feith
6. National Security Council Advisor: Elliott Abrams
7. Vice President Dick Cheney's Chief of Staff (Former): Scooter Libby
8. White House Deputy Chief of Staff: Joshua Bolten
9. Under Secretary of State for Political Affairs: Marc Grossman
10. Director of Policy Planning at the State Department: Richard Haass
11. U.S. Trade Representative (Cabinet-level Position): Robert Zoellick
12. Pentagon's Defense Policy Board: James Schlesinger
13. UN Representative (Former): John Bolton
14. Under Secretary for Arms Control: David Wurmser
15. Pentagon's Defense Policy Board: Eliot Cohen
16. Senior Advisor to the President: Steve Goldsmith
17. Principal Deputy Assistant Secretary: Christopher Gersten
18. Assistant Secretary of State: Lincoln Bloomfield
19. Deputy Assistant to the President: Jay Lefkowitz
20. White House Political Director: Ken Melman
21. National Security Study Group: Edward Luttwak
22. Pentagon's Defense Policy Board: Kenneth Adelman
23. Defense Intelligence Agency Analyst (Former): Lawrence (Larry) Franklin
24. National Security Council Advisor: Robert Satloff
25. President Export-Import Bank U.S.: Mel Sembler
26. Deputy Assistant Secretary, Admin for Children & Families: Christopher Gersten
27. Assistant Secretary of Housing & Urban Development: Mark Weinberger
28. White House Speechwriter: David Frum
29. White House Spokesman (Former): Ari Fleischer
30. Pentagon's Defense Policy Board: Henry Kissinger
31. Deputy Secretary of Commerce: Samuel Bodman
32. Under Secretary of State for Management: Bonnie Cohen
33. Director of Foreign Service Institute: Ruth Davis
???◄$$$ DERIVATIVES HAVE NOT REDUCED IN OVERALL VOLUME
A request by Jackass colleague to Andy Hoffman for clarification of the chart resulted in a comment given. Apparently no further explanation could be provided on the key legend. None was available from an old chart taken long ago. Guesses and readings: Orange = Futures & ??, Red = Swaps ??, Green = Options ??, Blue = Other Derivatives ??
???◄$$$ US-BASED JUNK BOND FUNDS POST RECORD $7.1 BILLION OUTFLOWS... JUNK BONDS SERVE AS A WEAK LINK IN OVERALL BOND ARENA... SIGNAL OF CRISIS GROWING OUT OF CONTROL.
Investors pulled a record $7.1 billion from US-based junk bond funds in the latest week and bailed out of equity exchange-traded funds at the most frantic pace in six months, Lipper data released on Thursday showed, offering one of the biggest signals yet of a growing wariness over risk assets. The outflows from junk bond funds, which were the biggest since Lipper records began in 1992, underscore growing investor concerns of stretched valuations in the securities after the sector's multi-year rally. Stock funds, whose flows tend to move in tandem with those of high-yield bond funds, posted $16.4 billion in outflows, the most since February. Investors pulled $15.8 billion from US-based stock ETFs, funds often used by institutional investors. "The junk bond market is the very market that went up farther than others, so this isn't too surprising. The market is now for sale, but we are still watching the high-yield market and will be adding opportunistically," said Dan Fuss, vice chairman of Loomis Sayles.
The outflow coincided with one of the roughest weeks for the junk bond market in years, according to Bank of America/Merrill Lynch Fixed Income Index data. High-yield bonds delivered a negative total return of 1.42 percent in the week ended August 1st, their worst weekly performance in more than two years. Meanwhile, the yield premium investors demand for holding these low-rated bonds shot up by 0.50 percentage point to more than 4.2 percentage points above comparable U.S. Treasury debt. Just over a month ago, that spread had been as low as 3.35 percentage points, the smallest since 2007. The average yield-to-maturity on junk debt is 6.24 percent, more than a full standard deviation below the historic average of around 9.45 percent, the BofA/Merrill data shows. The unusually low yields and high prices for junk bonds had prompted many observers to speculate that a bubble was forming, in no small part because of U.S. Federal Reserve policies that kept interest rates on bonds of all stripes at historic lows.
<<< JUNK BOND FUNDS JUST EXPERIENCED A 6-SIGMA EVENT
High-yield bond mutual funds saw outflows total an eye-popping $7.1 billion last week. HY flowmageddon! said Goldman Sachs Charles Himmelberg in a research note we saw via @lebullmarche. "This is the largest HY outflow on record, a 6-sigma event when flows are scaled by mutual fund assets under management!" Sigma is another way of saying standard deviation. And the greater the number of standard deviations, the more unlikely the event. A 6-sigma event is extremely rare. If you want to put a number to it, think 1 in 500 million. According to Business Insider quant reporter Andy Kiersz, it is like flipping a coin 29 times in a row and getting heads each time. It is like rolling a die 11 times in a row and getting 6 each time. "High-yield is less overvalued," said Doubleline Funds' Jeffrey Gundlach in a phone call with Business Insider on Friday.
Gundlach stopped short of saying high-yield looked attractive. Himmelberg did not. "Our confidence in the buying opportunity in the face of retail selling stems from our belief that credit fundamentals remain supportive, while valuations are now more attractive," Himmelberg said. "Unlike the muni market (where institutional liquidity providers are few), the corporate market has a deep bench of investors who are responsive to value. This is one reason we have long argued that dislocations caused by retail selling present more opportunity than risk."
"[T]he U.S. high yield house is not burning down," said UBS's Matthew Mish. "The real panic will come with a more severe downturn in credit and economic fundamentals, which will likely trigger an exodus from non-institutional and crossover/tourists from U.S. high yield. That moment is unlikely to be a 2014 event." This is not to say the outflows and price declines will end anytime soon. Mish went on, "Given the outstanding concerns around rate, credit, and liquidity risks, some will simply choose to exit early, the tack some investors are clearly embracing. How far it extends is anyone's guess, but the run continues and the negative headlines seem unlikely to abate over the near term."
???◄$$$ DERIVATIVES LESSONS BY JACKASS AND OTHER ANALYSTS
Jim Willie radio interview entitled "Derivatives Casino Is Wobbling Tower" with host Jason Burack. The show was Wall Street For Main Street. See the interview, which received a surprising number of very complimentary messages to the Jackass. A few comments came back like "this was the best derivative explanation I ever heard."
<<< OTHER DERIVATIVE DIDACTIC LESSONS FROM OTHER VIDEOS
Rob Kirby on Wall Street For Main Street, the derivatives market will collapse soon
PressTV about Wall Street casino: the derivatives crisis
Scott Wilhelmsen on OTC derivatives meltdown
Derivative Meltdown and Dollar Collapse
Omens of a derivative meltdown
Webster Tarpley discussed the derivative crisis on Wall Street
Understanding Derivatives with Vipin Mandyam
???◄$$$ STEVE FORBES ACCUSED A HERETICAL FEDERAL RESERVE IS UNDERMINING THE USDOLLAR... FORBES HAS BEEN AN OUTSPOKEN CRITIC ON DESTRUCTIVE AND ERRANT MONETARY POLICY FOR A FEW YEARS.
Posted on August 4, 2014
Steve Forbes has had enough of the Federal Reserve and its policies to undermine the dollar. In this no-holds-barred interview, only with Birch Gold Group, the legendary publisher and CEO of Forbes, Inc. reveals the damage that our central bank has created. Plus, find out why he believes so strongly in the Gold Standard, and the one single scenario under which he would ever sell his gold. Rachel Mills for Birch Gold Group (BGG): I am so glad to be talking with Steve Forbes, here at FreedomFest. My name is Rachel with Birch Gold Group. Can you talk a little bit about the Federal Reserve printing money these days. And the Federal Reserve recently announced that they have decided to stop printing money by October. Do you think that will actually happen, the Quantitative Easing, anyway?
Steve Forbes: The Fed will stop the Quantitative Easing, but what is disturbing is that they are going to still keep all the bonds that they bought. They are not going to let them run down, which is now going to be about, when October rolls around, four and a half trillion dollars. So the Fed is still sinning, and those excess reserves are still an overhang and they are still working to undermine the dollar, openly. The overhang is so huge, it is unprecedented. They do not have to do anything, it is already there. And they just have to hope that the flood does not sweep away the town. (Sorry Mr Forbes, but the USFed will NOT stop QE bond buying. They will just lie better!!)
BGG: Right, you also said that you believe in gold and owning gold, not as an investment but as insurance against economic malpractice. Tell me more about your thoughts on gold these days.
Steve Forbes: Well Gold maintains its intrinsic value better than anything else on Earth, and that is for 4000 years. And when you see the dollar price fluctuate around gold, that means the dollar is either weakening or people's perceptions about the dollar are changing. So for 180 years this country, the United States, had the dollar fixed to gold, worked pretty well. Certainly has worked better than the floundering we have had since. And in the 1980s and 1990s, we had a semi-stable monetary policy, so instead of an F, we would give it a C, maybe a C+. But we had a terrible decade in the 1970s and we have had a terrible time since the early part of the last decade. And this is all unnecessary.
Bernanke was a disaster. He put in Quantitative Easing, he put in Operation Twist. He suppressed interest rates across the board, which has totally mucked up the credit markets. He hurt the economic recovery, this is the first time we have had a recovery that did not have a sharp snapback, at least initially. And before he became the head of the Fed, he bought into weakening the dollar and bought into the idea that there are excess savings around the world. So he has a pretty bad record. Janet Yellen has shown that she needs to go to re-education camp. She has learned nothing and will not because she has a PhD, spare her a lot of years in the system. So she is a devotee of the Kool-Aid.
BGG: I would agree. You said something really interesting about the Gold Standard that I wanted to ask you about. You said that a way to sort of peg the dollar back to gold would be to peg it to the price of gold. We would print more dollars based on the price of gold, we would print or stop printing. Can you elaborate?
Steve Forbes: Yes, let's say we fix the ratio at $1300 to an ounce of gold. So if it went above $1300, the Fed would stop the printing. If it goes below $1300, it would print to keep it, keep it within range. That is what the high priests of funny money do not want you to know. The gold standard is very simple to do. One is the economics profession knows less about money than it did a hundred years ago. And they and others have a vested interest in currency instability. Currency trading, now the volume on a daily basis, is over three trillion dollars. Gold would put FOREX out of business. They could do something useful, like medical research.
The Fed is determined to suppress interest rates, which means you will not get good functioning credit markets. So that is another example of Janet Yellen, she is misbehaving like Mr. Bernanke. The central bankers buy into the notion that saving money is putting it in a black hole instead of realizing that is capital to create a more prosperous economy. They think people buying stuff is the way to wealth. Well, people produce to buy. But they believe in counterfeiting. When we are on a Gold Standard, then you would not need the insurance.
???◄$$$ USFED IS STUCK SUPPORTING THE US-STOCK MARKET, SINCE HALF THE PENSION FUNDS NATIONALLY ARE LOCKED IN STOCKS... NOTICE GERMANY REDUCED THEIR STOCK EXPOSURE, BUT THE UNITED STATES DID NOT... THE TWO NATIONS HAVE DIFFERENT PRIORITIES.
The USFed cannot permit the stock market to crash. When it comes to the stock market, while the biggest, and according to many only, beneficiary of the Fed's ZIRP/QE policies of the past 6 years has been the wealthiest 1%, the reality is that said top crust of US society no longer needs the S&P to continue its relentless, manipulated and centrally-planned levitation. Between a third Hamptons residence, a 5th Ferrari, and a 7th French villa, not to mention a few tons of gold, the super wealthy have long since booked their paper profits, and transferred their wealth out of the intangible and into actual, physical assets. Therefore it is not the 1% that would suffer the most should the S&P have a post-Lehman like 50%+ wipe out, which also means that the Federal Reserve's only mandate of pushing asset prices to ever higher levels while pretending it does so to boost employment and keep inflation at 2% is no longer for the benefit of the uber-wealthy.
So why cannot, or rather will n ot, the Fed let the bubble market collapse once again? Simple, as the following chart shows, the illusion of wealth is now most critical when preserving the myth of the welfare state: some 50% of all US pension fund assets are invested in stocks and only 20% in Treasurys. This compares to less than 10% for Japan which also explains why for Abe, the only lifeline left is pushing pension funds out of their existing asset allocation sweet spot and forcing them to buy stocks. Whether this gambit will work is unknown.
What, however, is known is that in a country like Germany between 2005 and 2012 the Pension funds asset rotation out of stocks and into bonds has been truly unprecedented, with stocks plummeting from 30%+ of total exposure to less than 5%! It also explains why Germany was, is and always will be leery of allowing the ECB to pursue asset bubble-inflating policies which would barely benefit pension funds on the equity side, while any rising inflation would crush the mark-to-market value of bond holdings.
Comment added. Notice the huge disparity between the United States and Germany. The Americans remain committed to stocks in pension funds. The Germans are much smarter, having reduced commitment. Therefore, conclude huge mindset difference. Expect a break by Germans on monetary policy, leading to Gold Standard to be installed from joining the BRICS nations. This chart is one more bit of evidence of Germany turning East and working with Russia & China on a legitimate global gold currency for trade settlement purposes.
???◄$$$ MONEY VELOCITY CONTINUES DOWN, DESPITE MONETARY POLICY BEING HYPER INFLATION... EVIDENCE OF FAILURE... EXPECT FURTHER VELOCITY DECLNE FROM DEEP CAPITAL DESTRUCTION, DIRECTLY EXTENDED FROM QE BOND MONETIZATION
Prices must be delineated into the cost side or the product side. Costs will rise. The product prices will remain soft and not rise fast. Liquidation will keep a lid on prices. The result has been and will continue to be profound capital destruction from shuttered businesses. Money Velocity will continue down as long as QE in force. It is that simple, which exposes the blind spots of US-based economists. QE is not stimulus, but rather banker welfare. Witness systemic failure, the proof right here.
???◄$$$ CHINA BUYING USTBONDS IN HIGH VOLUME... SOMETHING STRANGE GOING ON... KIRBY HAS THE RIGHT THEORY, SO IT SEEMS.
ROB KIRBY: For this thesis to be valid, there would necessarily have to be countries showing significant reductions in US Treasury holdings. As per the latest TIC report, the biggest reducing nations in the latest TIC report were Ireland, UK, Russia, Belgium, and the Netherlands. These countries apart from Russia are not logical suspects to be working hand-in-glove with China. Having trouble validating this thesis.
Transactional cash is typically not risked in the Securities Market and would not be picked up in the TIC report which measures securities holdings by nationality. No nation buys 10 year USTreasurys with their grocery money, period. In my view more likely the US Treasury, via the New York Fed trading desk, called a Chinese entity who participates in the interest rate derivatives complex and showed them a price on a derivatives trade which they simply could not refuse (in the name of lay-up fiat gains). The restult was the Chinese party having to purchase US govt securities to lock in a fiat balance sheet profit. Remember that wages, bonuses, and the niceties of life are denominated and paid in fiat dollars.
THE VOICE: RobK's view is correct. After close examination, I believe this is correct. Cant really make out why have they turned around, however small. Seems there is some arrangement between US and China at a high level. The USGovt must keep the mill turning. However, do note that China reached more than USD 1.2 trillion last year and despite the recent rise is still around $1.1 trillion. This report will give you some more perspective.
Comment added. Clearly something weird is going on. I believe it is a fake-out, like maybe they need more of recent vintage for a huge purchase. Furthermore, CHINA IS ACTING AS THE GARBAGE COLLECTOR. All nations that want to dump the USDollar must do so with a Swap to China, which works as the designated Dump Truck Driver. China has a different plan to execute that involves several simultaneous projects. Possibly C must give the US a few more months time before some grand hammer is set to fall. Possibly C made a trade to US Devils, a reprieve for a bigger painful concession later. Possibly old 1930 Legacy USTBonds are to be matched for permitted sale. Possibly a truly huge acquisition is in progress, like a raft of S&P100 firms. Possibly C will convert USTBonds for an acquisition of THE ENTIRE STATE OF HAWAII (Naval Port too). Maybe C must have a certain proportion of external USTBonds in order to assume a certain senior role. Perhaps the BRICS central bank must have a single major purchase agent to source the Gold. Just tossing out items.
George, you make great points on foreign side to absorb USTBonds. Rob, you make great points on possible movements to capture some profits or continue even the Operation Twist. This could be OpTwist final cleanup.
GEORGE (WITH CONSIDERABLE COMEX LOGISTICS EXPERIENCE): Other countries converting to Yuan for international trade. If RMB becomes a global international trade unit, then numerous nations must have a huge pool in which to deal with in China with their USTreasury Bonds sitting ready. Ready for the Dollar to Yuan swap, with a gigantic pool of USTBonds, the RMB can handle the volume. There is a great deal of transactional cash, not in USTreasurys, or electronic zeros if you will that are no longer used in the normal friction of international trade. Couldn't this be collected in China? Where then are the dollars that were used in international trade, and increasingly not continuing in international trade going? Obviously no evidence of anything at this point. But that big slush fund of dollars for trade has to go somewhere, and Belgium Bulge account aint big enough (LOL). My point was you would have transaction dollars, now parked in china, and replaced by Yuan. China would then park the money in USTreasurys. But I am just speculating. As countries move away from the dollar for trade, where do the go? Who absorbs them? And if people do not want to trade in dollars, they sure as hell do not want to buy USTreasurys. They cannot necessarily afford to finance trade and buy UST even if they wanted to. Short-term blips mean nothing anyway. Just a thought. Not some great line in the sand.
## BANKS INSOLVENT IN DISARRAY
???◄$$$ PORTUGAL ANNOUNCES $6.6 BILLION BANCO ESPIRITO SANTO RESCUE... NO GUTS TO ENFORCE TOUGHER CAPITAL RULES, AS EUROPEAN BANK AID ARRIVES... CAVE-IN ON COURAGE FOR TOUGH RULES.
Banco Espirito Santo SA's junior bonds tumbled to a record after the lender's EUR 4.9 billion (=US$6.6 bn) bailout left holders facing losses they are struggling to quantify. The Bank of Portugal will take control of Banco Espirito Santo's assets and deposit taking operations by transferring them to a new company, Novo Banco, into which it will inject money from its Resolution Fund (BRAEAIA), the regulator said in a statement late yesterday. The fund will finance the rescue with a Treasury loan to be repaid by Novo Banco's eventual sale.
While senior bondholders and depositors were left unscathed, subordinated bondholders face losses as European regulators try to avoid leaving taxpayers on the hook for losses caused by failed lenders. Shareholders and owners of the bank's junior debt will be left with Banco Espirito Santo's most problematic assets, including loans to other parts of the Espirito Santo Group and the lender's stake in its Angolan unit, according to the Bank of Portugal. "Who knows what the recovery will be on the subordinated bonds?" said John Raymond, an analyst at CreditSights in London. "You need to see what is left on the asset side of the balance sheet of Banco Espirito Santo, which is where they will be stranded, but given all you have got is loans to other members of the group and the shareholding in BES Angola, it is likely to be quite small."
Banco Espirito Santo has been forced to take public money after regulators uncovered potential losses on loans to other companies tied to the Espirito Santo group and ordered the lender to raise capital. Bank of Portugal Governor Carlos Costa had sought to find private investors to inject the cash, and said government funds would only be availably as a last resort. That plan faltered as Banco Espirito Santo plunged 73 percent in Lisbon trading last week before trading was suspended on Aug. 1. The bank had a market value of just 675 million Euros. "I was very surprised that they went down the route of a state bailout so quickly," said Lutz Roehmeyer, who helps manage 10 billion Euros including senior bonds of Banco Espirito Santo at Landesbank Berlin Investment. "That suggests that the bank's situation was much worse than described." Instead, it suggests all the political talk is empty, since rescues will never end. Hypocrisy is everywhere, and bank welfare is part of the political framework.
The Portuguese government has about 6.4 billion Euros remaining from its European Union-led bailout in 2011 to fund the recapitalization of Banco Espirito Santo. Banco Novo's managers will seek to find private investors to buy significant stakes in an adequate time horizon, according to the central bank.
<<< EUROPE'S TOUGH NEW REGIME FOR BANKS FAILS FIRST TEST IN PORTUGAL
Portugal's rescue of Banco Santo Espirito has left taxpayers on the hook for large potential losses, sparing senior bondholders in the first serious test of the EU's tougher rules for bank failures. The controversial EUR 4.9bn bailout over the weekend set off a relief rally on the Lisbon bourse, with bank stocks soaring. It also set off a political furore as opposition parties accused premier Pedro Passos Coelho of bending to the banking elites. "We live in a democracy, not a bankocracy. It is unacceptable for the prime minister to take money from the salaries of workers and pensions, and funnel it to a private bank," said Catarina Martins, leader of the Left Bloc. Opposition will be trampled, as bank welfare is the engrained norm.
European officials pledged last year that taxpayers will never again face losses from a bank failure until all creditors and unsecured depositors have been wiped out first. They seem to have backed away at the first sign of trouble, opting for soft terms rather than the draconian measures imposed on Cyprus. (Worse, they are congenital liars.) The EU's new bail-in rules do not come into force until 2016, but it was assumed the broad principle would be followed. Portugal's decision to protect senior bondholders is incendiary in a country already near austerity fatigue.
???◄$$$ BANK OF AMERICA NEARS $17 BILLION SETTLEMENT OVER MORTGAGES
Bank of America and the Justice Department have reached a tentative deal that would cost the bank nearly $17 billion to settle an investigation into its sale of toxic mortgage securities in the run-up to the financial crisis, according to people briefed on the matter, the latest eye-popping rebuke of a giant bank. The agreement, which is not final and could still fall apart, would represent a record for the government. It would be the largest sum the Justice Department has ever extracted from a single company. The bank has agreed to pay a roughly $9 billion cash penalty to the United States Treasury. Last month, Citigroup agreed to pay a $4 billion penalty, while providing the remaining money in the form of relief to struggling homeowners. Just a few weeks ago, the bank was offering only $3 billion in cash, a figure that temporarily caused talks to break down. Despite the huge penalty, critics contend that the government crackdown has amounted to little more than a slap on the wrist. No Bank of America employee will face charges, and the case against the bank is civil, rather than criminal.
The settlement ends months of on-again, off-again negotiations between the Justice Department and Bank of America, which has already paid more than $50 billion to settle lawsuits by private investors and regulators largely related to its Countrywide Financial and Merrill Lynch units. The deal will bring a measure of closure to the bank as it concludes the largest remaining legal issue from the financial crisis. During the talks, the bank had argued with federal prosecutors that it should not be penalized for mortgages that Countrywide and Merrill had sold before it agreed to buy those firms in 2008. In the case of Merrill, the bank argued that federal regulators pressured it to go through with the acquisition. But that argument was significantly weakened last Wednesday when Judge Jed Rakoff, of the Federal District Court in Manhattan, ordered Bank of America to pay $1.3 billion for the sale of defective Countrywide mortgages, calling the scheme a brazen fraud.
???◄$$$ THE CASE OF THE VANISHING CITIGROUP SUBSIDIARIES... STRANGELY OVER 2000 OF THE BANK'S SUBSIDIARIES HAVE GONE MISSING, WITH NO RECORD OF THEIR SALE... GIGANTIC COVER-UP IN PROGRESS. $$$
An astonishing development, as 2061 of Citigroup's subsidiaries go missing. Figuring out what Citigroup owns and what it has sold is getting harder by the day as a vast number of its subsidiaries in the 160 countries in which it operates have up and vanished from its public filings but do not actually appear to have been sold in many cases.
???◄$$$ G-20 REVOLT COULD BE IN THE MAKING, AS FRANCE SAW A POSITIVE RECEPTION TO THEIR CHALLENGE OF US BANK FINES
USGovt made a gigantic error attacking the big French BNP Paribas bank. Retaliation will come, in small medium large variety. Retaliation will come, in present and future events. France is extremely angry and bitter, calling the United States a bunch of hypocrits and worse. France will eventually join Germany in BRICS Alliance. The nation France will push for the Gold Standard, a process already begun.
???◄$$$ JPMORGAN HAS SPENT $18 BILLION BUYING BACK ITS OWN STOCK IN FOUR YEARS... THIS IS NOT A FINANCIAL FIRM, BUT RATHER A CRIME SCENE AND CASINO.
According to JPMorgan's most recent quarterly report filed with the Securities and Exchange Commission, the Firm's Board of Directors has authorized the Firm to repurchase $6.5 billion of common equity between April 1, 2014, and March 31, 2015.
If the full authorization of $6.5 billion is spent by the first quarter of next year, JPMorgan will have tapped its capital to the tune of $24.5 billion – not to lend to deserving businesses or home buyers or consumers, but to binge on its own stock buybacks. Having a steady pool of billions of dollars to prop up a stock's share price might seem like a neat trick to top corporate executives whose compensation is tied, in part, to the performance of the company's stock, but it does little to help a nation struggling from the aftermath of the economic ravages unleashed by the big bank financial crash in 2008. Corporations are now the single largest buying source for U.S. stocks, authorizing buybacks of their own stocks to the tune of $754.8 billion in 2013 alone. For calendar years 2006 through 2013, corporations authorized $4.14 trillion in buybacks of their own publicly traded stock in the United States, raising the question, just what kind of a bull market is this? Comment added. The US stock market is a gigantic fraud and Ponzi, using Weimar Press money and USGovt funds to support bank stocks.
???◄$$$ MAGUIRE CLAIMS CRIMINAL CME COLLUDED TO SAVE BANKS SHORT GOLD
Today London metals trader Andrew Maguire accused the CME of being a criminal organization and for working in collusion with the bullion banks, who were dangerously offside recently on their massive short positions
???◄$$$ CANADIANS FILED LAWSUITS AGAINST THE USGOVT ON THE ENTIRE FATCA LAW... THE GLOVES ARE OFF, THE FUR MIGHT FLY.
???◄$$$ NYFED SLAMS DEUTSCHE BANK (AND ITS ROUGHLY $55 TRILLION IN DERIVATIVES). ACCUSES IT OF SIGNIFICANT OPERATIONAL RISK
The shortcomings amount to a systemic breakdown and expose the firm to significant operational risk and misstated regulatory reports, said the letter from Daniel Muccia, a New York Fed senior vice president responsible for supervising Deutsche Bank. The external auditor KPMG LLP also identified deficiencies in the way the bank's U.S. entities were reporting financial data in 2013, according to a Deutsche Bank email reviewed by the Journal.
Before long expect the criminal USGovt to significantly increase the fines on Deutsche Bank in the same manner as BNP Paribas. Any organized attack against Deutsche Bank by the USGovt will represent a major turning point and grave error. The attack would see a counter-measure of Germany abandoning the US camp and working with Russia more directly on a new USDollar alternative, as in within the BRICS Alliance.
ROB KIRBY: If any of the largest derivatives players were subject to real accounting, they would be toast. If they want to bury or blackmail one of them, all they need to do is selectively enforce the rules. The US Treasury's Exch Stabilization Fund is the other side of the bulk of the OTC swap trades. They left out how DBank acquired Bankers Trust to keep the derivative cloud puffed up back in the late 1990 decade.
## ARGENTINA MESS
???◄$$$ ARGENTINA'S DEFAULT: A DEVASTATING LESSON IN UNFUNDED GOVERNMENT LIABILITIES
Punishing the citizenry who never saw a dime. The fraud inside Argentina and the exploitation by the United States together will go down in history books and annals.
<<< US JUDGE THREATENS CONTEMPT RULING IN ARGENTINA CASE
This has got to be the ultimate imperial arrogance. A judge threatening a sovereign nation. Only done by the United States, the exceptional (corrupt) nation.
<<< USGOVT REFUSES TO RECOGNIZE UN COURT JURISDICTION ON ARGENTINA'S DEBT
Washington has refused to allow the UN International Court of Justice (IJC) to hear Argentina's claims that US court decisions on the country's debt have violated Argentina's sovereignty. The US withdrew from compulsory jurisdiction back in 1986 after the UN court ruled that America's covert war against Nicaragua was in violation of international law. Comment added. The days for the US to be able to pick and choose which international laws/courts to obey or not are coming to a close.
???◄$$$ ARGENTINA DEFAULTS, AND COULD MEAN ARGENTINA LIGHTS THE FUSE FOR WESTERN DEBT DERIVATIVES... THE RISK RISES.
Just as suspected, with BRICS waiting in the wings to establish development, it is a perfect time to default and rid the country of all interest bearing debt, once and for all. Argentinians can be free for once in their lives. Let's not forget that the people never saw any of that money to begin with. All funds went to the dictators.
???◄$$$ THE BIRTH OF A NEW FINANCIAL AND ECONOMIC SYSTEM, THE EXAMPLE OF RUSSIA AND ARGENTINA
It shows how Russia and Argentina have been literally pushed by the USA into working with each other and the kind of results this collaboration is achieving. Though this report focuses on Argentina, to be sure the same phenomenon is taking place elsewhere, especially amongst the BRICS countries. It is very hard to change a system which works, a system upon which people depend for their salaries, a system which has been stable for years and which, while not perfect, at least is understood by all parties. This is why for all its imperfections, sometimes bordering on dysfunctions, what I would call the "Western financial-economic system" was so important and, frankly, so attractive: it was there and it worked. But then the USA did something extremely dangerous: they began to use and abuse this system for their very narrow political goals: MasterCard, Visa and the rest of them suddenly dropped Wikileaks, Iran was excluded from SWIFT, the French were told to be billions to Uncle Sam because of the Mistral sales to Russia, the Russians were told to compensate Khodorkovsky, the Swiss were blackmailed into given up their traditional banking secrecy, etc.
As a result of the double collapse of the appeal of the Western financial-economic system and of the deterrence of the US military power the rest of the planet began to realize that one could openly defy Uncle Sam and get away with it. Surely, Bolivia alone could not do it. Neither could Malaysia. But, lead by the BRICS themselves probably inspired by the ALBA [formerly known as the Bolivia Alliance and consists of Bolivia, Cuba, Ecuador, Nicaragua, Venezuela and others] countries, more and more countries came to realize this basic truth: to be an ally of the USA might well be even worse then to openly defy them.
???◄$$$ ARGENTINE DEFAULT LOOMS AS TIME RUNS OUT FOR DEBT DEAL
CRAIG: The Cabal is using the US courts to imposed financial repression on Argentina. Looks like Argentina's response is to default on its USD-denominated loans. Wonder if Argentina might be first borrower from BRICS bank. Will the loans from this new bank be in CNYuan or the equally weighted basket of the BRICS currencies?
THE VOICE: The unmitigated arrogance demonstrated by the US is already causing huge problems. The court should have passed judgment that the two parties have a clearly defined time window to reach an amicable decision. The is no more prudence in any of the US courts judgments. Justice is all bought by special interest groups.
## DOLLAR DYING DAYS
???◄$$$ KERRY HIT STONE WALL IN INDIA AFTER DELHI VETOES TRADE PACT, ENDANGERING THE WORLD TRADE ORG FUTURE... EVERYWHERE KERRY STEPS BECOMES SINKING GROUND.
Whatever problems John Kerry encountered in the Middle East, they were almost simplistic compared to the obstructions and barriers blockading him in India on his way back to home base in Washington. After failing to win agreement to a ceasefire between Israel and the Hamas, the secretary of state when he got to New Delhi ran into a stone wall on a wide range of issues. The problems seem about as intractable as those in the Middle East and as worrisome considering India's ties to Russia and the widespread view that India under the conservative Narendra Modi, however business-minded he may be, will resist U.S. pressure as much as his predecessors.
No sooner had Kerry arrived in India than he had to absorb the disillusionment of India's refusal to sign a trade and facilitation agreement under the aegis of the World Trade Organization that would, as a minimum, have standardized customs rules. That was a special shock considering that India, in ministerial-level meetings in Bali last December, had totally endorsed the agreement. India's sudden reversal at the vote in Geneva last week meant not only that the agreement was dead but that the WTO might as well be dead too.
???◄$$$ ECUADOR WEIGHS ESCAPE FROM DOLLAR STRAITJACKET
THE VOICE: We need to see what the impact will be in the next week or two. Since year 2000, the USD has been the official currency in Ecuador. Bitcoin has been banned and a new currency shall be established, probably over the weekend after the law is signed. Ecuador President met the Chinese counterpart last week, and China has put $billions in the oil sector over the last year. So do not be surprised if some China angle or backing of Yuan is there!
Comment added. A BRIC landed on their conference table after going through the window. It sure would be good to know the other hidden story on their gold swap with Goldman Sachs a few months ago. So perhaps Ecuador skips the Panama-led Central American Dollar (gold-copper backed) and move directly to the Chinese Yuan as caretaker currency until the gold-backed BRICS currency arrives. It seemed clear for the last two years that the RMB would be a temporary caretaker currency until Russia & China were ready. A bandwagon could form soon, the big missing piece being the Saudis.
???◄$$$ ECUADOR WILL CREATE ITS OWN VIRTUAL CURRENCY, CRIPPLED BY THE USDOLLAR
Chris Powell of GATA: Bloomberg's headline on the report appended here about Ecuador's plan to create Bitcoin-like money is misleading, insofar as Bitcoin's virtue as money, like gold's virtue, is its supposed finiteness, while any money created by government is far more likely to become infinite in supply. The report itself seems worthwhile mainly for indicating another government's inability to accept that other than perhaps sunshine, wind, rain, and tides, no real resource is infinite and that, as a result, human affairs require choices. Indeed, maybe Ecuador should name its virtual currency the infinito, if the name is not grafted onto the Dollar, Euro, Yen, and Yuan first.
After mortgaging most of Ecuador's oil and gold to finance spending, President Rafael Correa is planning to create virtual money to pay the nation's bills. Congress last month approved legislation to start a digital currency for use alongside the USDollar, the official tender in Ecuador. Once signed into law, the country will begin using the as-yet-unnamed currency as soon as October. A monetary authority will be established to regulate the money, which will be backed by liquid assets.
Less than six years after repudiating $3.2 billion of its USD denominated debt, Ecuador has dwindling oil reserves, with current-account deficits that are draining dollars from the economy and financing needs at a record. While using virtual money to pay government workers and contractors would help conserve hard cash, the currency may prompt Correa to boost spending even more and undermine the nation's ability to repay long-term bonds, according to Landesbank Berlin Investments. "This is usually the start of debasement, inflation, and depreciation," Lutz Roehmeyer, who helps manage about $1.1 billion of emerging-market assets at Landesbank Berlin, including Ecuadorean debt, said in an interview.
Roehmeyer, who has been investing in Ecuador for more than 15 years and correctly predicted its last two defaults, plans to reduce his holdings of the nation's debt. The firm holds some of the $2 billion of bonds that Ecuador sold in June.
The Economic Policy Ministry declined to comment on the new currency and referred questions to the central bank. The bank's press office also declined to comment and referred to a June resolution signed by the bank's general manager, Mateo Villalba. The resolution says electronic dollars will be backed by liquid assets and can't be swapped for government bonds. Ecuador is developing its own electronic tender as digital currencies led by Bitcoin have gained acceptance as a means of payment that have been promoted as a replacement for traditional money. Unlike Ecuador's plan, most virtual currencies were developed as an alternative to government-backed tender. Ecuador has posted Current Account Deficits for each of the past four years, draining dollars from an economy that adopted the greenback as its sole currency in 2000. The government expects a $4.5 billion budget gap this year after public spending more than tripled since Correa took power in 2007.
To prevent a dollar shortage crimping public spending, the government used more than half its gold reserves as collateral to obtain a $400 million loan from Goldman Sachs Group Inc. in May. The same month, it reached an accord with China to borrow $2 billion in return for future oil output. Then in June, the government sold $2 billion in debt, in part by offering the second-highest interest on a similarly rated dollar bond sold this year, data compiled by Bloomberg show. Correa still sought help from the Latin American Reserve Fund, known as Flar, a month later to prop up the country's balance of payments with a record $618 million loan. With Correa boosting spending on public-works projects and social programs to reduce poverty, the Finance Ministry forecast in November that Ecuador would need to borrow about $35 billion through 2017.
???◄$$$ DE-DOLLARIZATION ACCELERATES AS CHINA & RUSSIA COMPLETE CURRENCY SWAP AGREEMENT
The last three months have seen Russia's de-dollarization plans accelerate. First Gazprom clients shift to Euros and Renminbi, then the UK signs currency swap agreements with China, then NATO ally Turkey cuts ties and mulls de-dollarization, Switzerland jumps in the currency swap agreements, and BRICS create their own non-US-based funding vehicle, and then finally this week,Russia's oligarchs have shifted cash holdings to Hong Kong. But this week, as RT reports, Russian and Chinese central banks have agreed a draft currency swap agreement, which will allow them to increase trade in domestic currencies and cut the dependence on the US dollar in bilateral payments. "The agreement will stimulate further development of direct trade in yuan and rubles on the domestic foreign exchange markets of Russia and China," the Russian regulator said.
As RT reports: In early July, the Central Bank's chairwoman Elvira Nabiullina said Moscow and Beijing were close to reaching an agreement on conducting swap operations in national currencies to boost trade. The deal was later discussed during her trip to China. President Vladimir Putin, during his visit to Shanghai in May, said cooperation between Russian and Chinese banks was growing, and the two sides were set to continue developing the financial infrastructure. "Work is underway to increase the amount of mutual payments in national currencies, and we intend to consider new financial instruments," Putin said after talks with President Xi Jinping.
The Russian and Chinese central banks have agreed a draft currency swap agreement, which will allow them to increase trade in domestic currencies and cut the dependence on the US dollar in bilateral payments. "The draft document between the Central Bank of Russia and the Peoples Bank of China on national currency swaps has been agreed by the parties," and is at the stage of formal approval procedures, ITAR-TASS quotes the Russian regulator's office on Thursday. The Russian Central Bank is not giving precise details on the size of the currency swaps, nor when it will be launched. It says this will depend on demand. According to the bank, the agreement will serve as an additional instrument forensuring international financial stability. Also, it will offer the possibility to obtain liquidity in critical situations. "The agreement will stimulate further development of direct trade in yuan and rubles on the domestic foreign exchange markets of Russia and China," the Russian regulator said. Currently, over 75 percent of payments in Russia-China trade settlements are made in US dollars, according to Rossiyskaya Gazeta newspaper.
Comment added. The further the West antagonizes Russia, and the more economic sanctions it lobs at it, the more Russia will be forced away from a USD-denominated trading system and into one which faces China and India. At the United States pushes more and more to impose sanctions on Russia and to isolate the giant nation, the US finds itself retreating into a spot that is best described as a USD caldera pit, into which it will fall and enter the Third World suddenly.
<<< RUSSIA, CHINA AGREE ON MORE TRADE CURRENCY SWAPS TO BYPASS DOLLAR, IN MORE LOCAL CURRENCY TRADE.
<<< RUSSIA PUSHES FOR MORE CHINESE CURRENCY SWAPS TO ESCAPE USDOLLAR DEPENDENCY, AS MORE MOMENTUM IS GAINING STEADILY.
???◄$$$ VENEZUELAN OIL COMPANY PDVSA SWITCHES TO CHINA CITIC BANK FROM PORTUGAL'S BANCO ESPIRITO SANTO... THE PDVSA TOLD BUYERS THIS WEEK THAT PAYMENTS CAN STILL BE MADE IN DOLLARS OR EUROS
San Antonio: Venezuela's state-run oil company PDVSA has started using China Citic Bank to collect money from crude and fuel sales instead of Portugal's Banco Espirito Santo, according to a company document seen by Reuters on Friday. PDVSA told buyers this week that payments can still be made in dollars or euros, but every transfer must go to China Citic Bank and use Deutsche Bank as intermediary. Previously, payments to PDVSA from sales made on the open market and through supply contracts were deposited at its accounts with Banco Espirito Santo, which Portugal said this month it would rescue because of financial woes. The China Development Bank also holds some Venezuelan money through accounts created by both countries to pay debt service. PDVSA reported sales of some $114 billion in 2013, mostly from exports of crude oil and refined products. The money is received in hard currency at its accounts and a portion of it is later sold to Venezuela's central bank to manage a currency exchange control program adopted in 2003.
???◄$$$ THE RISE OF THE PETRO-YUAN AND THE SLOW EROSION OF DOLLAR HEGEMONY
???◄$$$ RESET DELAYED BY WAR, THE USUAL USGOVT TACTIC.
Notice that the RESET was set for February, but then Ukraine War hit. Cause and effect are delicate to establish. The statistical analyst establishes coincidental events and their potential causality. The next RESET was resisted for July also, when Ukraine hit again. My best guess is the BRICS will push forward a new gold-backed currency in the next year or two, with ample delays. Witness the total disintegration of the United States as a nation. This is death of nation, nazi nation, gutted nation. The US must be quarantined and liquidated. Unfortunately to do that, it must be euthanized.
???◄$$$ END OF EMPIRE IS NEAR
Hugo Salinas Price wonders if the new BRICS empire will stumble along the old path of paper money self-destruction. He is not sold on the idea that they will resurrect a global Gold Standard. This one statement is clearly true, however: "If the Dollar loses prestige in the world and declines in value against other currencies, the Military loses force. If the Military loses force, the Dollar loses acceptance. If they go, the American Empire is over." He feels China will keep the dollar afloat since China holds so many USTs. But he does not ask himself what will China do after they have spent their $4 trillion on all the real assets they can find. China has far less USD-based assets than we think. Methinks 30% to 60% less. However, the last thing the USGovt will tell you is of massive conversions to US-based property with Washington DC and Wall Street assistance.
???◄$$$ HONG KONG-USDOLLAR LINK MIGHT BE NEAR AN END, AS THE HKMA BUYS $715 MILLION TO SUPPORT PEG... THE ADVANTAGE OF DRAWING IN CHINESE MONEY TO HONG KONG HAS HAD A NEGATIVE RUB OF RISING ASSET PRICES AND EVEN HIGHER FOOD PRICES.
???◄$$$ TURKISH PM CUTS TIES WITH UNITED STATES, MULLS DE-DOLLARIZATION WITH RUSSIA... TURKEY IS A MAJOR FLIP EASTWARD, WHICH WILL UPSET THE BALANCE OF EAST-WEST POWER.
AP reports that Recep Tayyip Erdogan has said he no longer holds direct telephone conversations with US President Barack Obama, suggesting a rift between the leaders who were once close. What is perhaps even more concerning is Turkey's recent de-dollarization discussions with Russia to move to settlement in local currencies. It appears allies are falling by the way-side quicker than many thought. Grand changes are coming, in progress. The USGovt operates the ISIS mercenary campaign from the US Embassy in Ankara Turkey in a very dangerous practice. The US Embassy in Libya was used in a similar manner. It was totally destroyed. The USGovt cannot continue to have serious embassy violations, using them as war pillboxes and munitions logistics centers.
Comment added. Perhaps some deep conflicts over ISIS have struck between the US and Ankara. Perhaps conflicts over narco profit sharing on NATO bases. Perhaps conflicts over Obama being a backstabber. Clearly Turkey has begun to ditch the USDollar, the global cancer currency.
<<< TURKEY CUTS OFF COMMUNICATION WITH OBAMA AND SEEKS NEW TRADE OUTSIDE DOLLAR
On July 21, Turkish Prime Minister Tayyip Erdogan spoke in an interview with Turkey's ATV television, and confirmed that his office had cut off direct communications with President Obama, and in fact, were no longer even answering calls received from the White House. In addition to this startling announcement regarding a long standing U.S. ally, the Russian Ministry of Economic Development followed this up with a press release that stated that Turkey was quickly moving away from their reliance on the dollar as the global reserve currency, and is seeking increased trade with Russia in a mutually beneficial exchange of self-contained sovereign currencies.
Turkey's cold shoulder against President Obama and the U.S. began shortly after the Syrian crisis failure by the United States back in September of 2013. And since that time, Turkey has begun to move away from its U.S. alliance and has started seeking increased trade agreements with America's primary adversary Russia. Already the eighth ranked trading partner for Russia, Turkey is proposing an even greater share of this pie, and is willing to accede to Russia and China's agenda for a de-dollarized trade system that cuts out the reserve currency from most or all transactions.
???◄$$$ ALLIANCE OF THE THREATENED IS A GLOBAL GEOPOLITICAL BATTLE REALITY... ALLIANCES ARE FORMING TO DEFEND AGAINST THE USDOLLAR COLLAPSE AND THE SPREAD OF MORE US-SPONSORED WARS.
Going after Russia, the world's 9th largest economy, may represent the kind of overreach in economic coercion that the Iraq War demonstrated in the military arena. Expect some acceleration of efforts by an Alliance of the Threatened to develop circumvention options (bank and payment systems, reserve currencies) to insulate themselves from the US Treasury's Office of Foreign Assets Control. This will have implications for the Middle East and far beyond. For example, Japanese Prime Minister Shinzo Abe has opened up to Russia because he is seeking a territorial settlement over the four islands that both Tokyo and Beijing claim, and wants to keep Russia from joining China's side. Similarly, South Korea is engaging to get Moscow's cooperation with North Korea. By comparison, Europeans do not have in Asia the leverage that would allow them to enlist Asian countries full cooperation on issues such as Crimea and Ukraine.
Asian countries are competing to woo Putin. As tensions increase in Asia, many countries in the region are trying to strengthen their strategic relationships with external powers, and despite its actions in Ukraine, even Western allies in Asia have continued to woo Putin's Russia. Asia hates Western intervention even more than self-determination. Given that many Asian countries worry about their own secessionist regions, you would think that they would oppose Russia's annexation of Crimea. But the Ukraine crisis illustrates how they worry even more about Western intervention.
## BRICS ALLIANCE
???◄$$$ CENTRAL BANK OF RUSSIA CALLS ON BANKS TO ESTABLISH ALTERNATIVE TO SWIFT AMID SANCTIONS
This could be the setup for the Gold Trade Note which nobody outside of our Hat Trick corral knows anything about. Numerous platforms and channels must be constructed in an extremely complicated development for making a USDollar alternative a reality.
???◄$$$ REFUSAL IF EU ASKS TO STOP TRADE WITH RUSSIA, SAYS BRAZIL... SPAIN ERUPTS IN PROTEST.
Latin America is solidly behind Russia at Europe's expense. Brazil will come to Russian aid in food supply support, as the BRICS show unity. The European Union is in the process of being wrecked from a credibility standpoint. Recently, the Spanish farmers burned the EU flag in protest. It was a formal peach protest, as Spanish farmers burn EU flag in anger over Russia sanctions in the conjured war.
???◄$$$ NATO-MEMBER TURKEY THREATENS WESTERN-OWNED BANKS, COZIES UP TO RUSSIA
This is very important defiance by a NATO member. Turkey is making more and bigger contracts with Russia, especially in electricity. The nation of Turkey is always for hire. But in this chapter, they will clearly tilt East.
???◄$$$ BRICS SEEK TO DE-THRONE RESERVE CURRENCY OF THE WORLD... THE MAIN BRICS OBJECTIVE IS TO CREATE A USDOLLAR ALTERNATIVE
???◄$$$ STIGLITZ HAILS THE BRICS BANK, WHICH CHALLENGES THE US DOMINATION
Joseph Stiglitz is one of very few Nobel Economics Prize winners with any integrity. Too many are clown puppets. He said: As my Chinese friend said about buying US Treasures, "It is like buying beef, putting it in the refrigerator, and then pulling the plug." The guy has had class all through the global financial crsis (aka systemic Western failure) over the last six months. See the two parts of the videos.
???◄$$$ BRICS BANK CAPITAL MIGHT NOT BE HELD IN USDOLLARS... PERCEPTIONS WILL CHANGE RAPIDLY, THAT THE PURPOSE OF BRICS ALLIANCE IS TO MOVE AWAY FROM THE USD
They are finally starting to reveal the underlying motives from the start. Total USD avoidance is the true purpose of BRICS. They intend to avoid the USD cancer.
???◄$$$ BRICS AND CHINESE SWAPS
Since none of the five currencies are global reserve tender, the respective central banks will have to make their currencies available to the group. Article 24 of the BRICS bank does provide for financing of projects in local currencies. However, for enabling trade, the bank will have to enable currency swaps between the central banks or activate the Multilateral Agreement on Extending Credit in Local Currencies signed at the 4th BRICS Summit in New Delhi in 2012. "China has been experimenting with such swaps bilaterally to push for greater use of the renminbi. It has swaps with 21 countries including Russia and Brazil, denominated in renminbi worth up to RMB 2,600 billion ($420 billion) and is encouraging partner countries to pay for their imports from China in renminbi. Brazil has been experimenting with conducting trade with Argentina in rial and pesos through an agreement inked in 2008."
???◄$$$ BRICS BANK CAPITAL MIGHT NOT BE HELD IN US DOLLARS... LISTEN CLOSELY TO A CONVERSION OFFICE ABOUT READING TO FIRE THE ENGINES UP... AS IN USTBONDS TO GOLD BULLION
???◄$$$ NEXT IS A BRICS FOOD BANK TO COMPLEMENT THE DEVELOPMENT BANK AND THE EMERGENCY RESCUE FUND... BRICS ARE COMING OF AGE.
<<< CHINA TO START DIRECT SALES OF FRUIT AND VEGETABLES TO RUSSIA, BRICS AGAIN TO THE RESCUE.
<<< POLAND ASKS US TO BUY APPLES BANNED BY RUSSIA. Food is a zero sum game. The apple growers in Washington state are going to be angry too.
<<< BRAZIL BEEF EXPORTS TO RUSSIA SOAR
Brazilian beef exports soared last month, due mainly to a doubling in purchases by Russia, which has responded to international sanctions over Ukraine by banning imports from Europe and the United States. Brazil's Association of Meat Exporters said Tuesday that beef exports rose 19 percent in July to $692 million over the same period last year
???◄$$$ RUSSIA TO BUILD A MOBILE SEA PORT, ATTRACTS BRICS INVESTMENT... WITNESS ANOTHER BRICS DEVELOPMENT BANK PROJECT PERHAPS
## GOLD STORIES
???◄$$$ CHINESE GOLD DEMAND
By Koos Jansen: Year to date Chinese wholesale gold demand is 1094 tonnes. By taking SGE withdrawals as a reference China has net imported 688 tonnes year to date. To demonstrate this way of estimating gold import is quite accurate please watch the video below. It is a segment of an interview with me by Lars Schall, published on March 20, 2014. I estimated Chinese non-government net gold import for 2013 was 1500 tons. When the interview was conducted the mainstream media predominantly used Hong Kong net export to the mainland, which in 2013 was 1158 tonnes, as Chinese net import. I estimated total net import by using SGE withdrawals as a reference. It was on May 15, 2014, when SGE chairman Xu Luode spoke at the Fourth Commercial Bank Gold Investment Forum and disclosed the exact number of net gold import in 2103, it was 1540 tonnes.
???◄$$$ SPOT GOLD MARKET CLOSER TO REALITY, AS ANOTHER GOLD EXCHANGE SOON WILL SPRING TO LIFE IN THE EAST, THIS ONE IN THAILAND.
Seven gold futures dealers have agreed in principle on the format of a physical gold exchange, moving a step closer to establishing the country's first spot gold market. The dealers, which have a combined 90% market share of trade in paper and physical gold, have unanimously agreed on the make-up of the spot gold exchange, said Gold Traders Association chairman Jitti Tangsithpakdi without providing details. The plan will be proposed to the Thailand Futures Exchange (TFEX) on August 18th. The seven dealers are Globlex Holding Management, Classic Gold Futures, GT Gold Bullion, YLG Group, Ausiris, MTS Gold, and Hua Seng Heng Commoditrust. Gold dealers are supporting the Stock Exchange of Thailand's efforts to set up the exchange after a decline in trading volume due to the gold price slump and the soft launch of Singapore Exchange's spot gold market. Without the spot gold market's formation, trading volume in Thailand is likely to decline further, Jitti said. Singapore's gold exchange is slated to launch officially early next month. The latest move of the gold dealers came after they visited the Chinese Gold and Silver Exchange, Hong Kong's century-old bullion exchange.
The idea to set up a spot gold exchange in Thailand was floated last year by the Bank of Thailand to regulate physical gold trading after it found discrepancies between spot market trades and the US-dollar value of transactions. In the first six months of last year, net gold imports amounted to UScopy0 billion and were responsible for leading the country into a trade deficit. MTS Gold president Kritcharat Hirunyasiri said physical gold trading in Thailand had halved from its peak, while Hong Kong's spot gold market's trading volume was 500 times higher than that of the Thai market, with 90% of gold ordered by Chinese investors. He said gold dealers would meet with TFEX executives on August 18th for a discussion that would centre on the establishment of the spot gold bourse. Gold dealers plan to visit Shanghai Gold Exchange on Sept 2 to study its trading practices, Mr Kritcharat said.
In the meantime, YLG Bullion and Futures chief executive Tipa Nawawattanasub said the company had set up YLG Gold Co to provide a physical gold exchange service to gold futures investors, starting from this month. The TFEX recently allowed paper gold investors to settle their maturing contracts in physical gold rather than cash at the seven gold futures dealers. Ms Tipa said physical gold settlements were available for both 10-baht weight of gold contracts and 50-baht contracts.
???◄$$$ CHINESE CENTRAL BANKER DECLARES THAT GOLD IS THE ONLY SAFE HAVEN LEFT
???◄$$$ GLOBAL GOLD TRADE DECLINES IN FIRST HALF OF 2014
Comment added. Huge imbalances getting worse on Supply vs Demand. The buyout stage is soon coming, where viable properties are acquired. Enter the Chinese and the Giant gold miners. Strong Jackass suspicion that Barrick will be in there, using hidden narco money.
???◄$$$ GOLD GOING TO $5000 PER OUNCE, ACCORDING TO MINING EXECUTIVE
???◄$$$ PRECIOUS METALS WILL RISE WITH USOLLAR DEMISE, JUST NOT SOON.
A clear warning of an overnight adjustment. No signal to come beforehand. Could be weeks, months, maybe a year but, it is coming.
???◄$$$ PHYSICAL SUPPLY PROBLEMS COMING TO THE SILVER MARKET
Andrew Schectman joins Jason Burack of Wall Street for Main Street to discuss real Supply & Demand for gold and silver, manipulation of the markets, why China is manipulating gold, silver and other commodities markets and the USDollar collapsing. To listen to the interview, please click below:
<<< THE COMING SILVER SHORTAGE
???◄$$$ UPCOMING SILVER SHORTAGE AND EXTREME RALLY TO A PRICE THAT IS MULTIPLES HIGHER
Crush The Street explains why a severe physical silver shortage is brewing, as the 2013 physical demand/production shortfall was an astonishing 262 million ounces (moz). With solar panel demand estimated at 100 million ounces a year by 2015, silver recycling plunging 24%, ore grades down 95%, and production falling off a cliff at nearly every primary silver producer in 2013, the stage is set for a dramatic and brutal physical shortage of silver. When the coming silver shortage finally arrives, the shorts will be squeezed so severely that all hell will break loose in both the paper and the physical markets.
Some collected data items. There were 819 moz produced by global mines in 2013
1081 moz demand in 2013, making a 262 moz shortfall in 2013. They made up for the shortfall by recycled silver and govt stockpiles (believed gone since 2007). Then there was a 24% decline in recycled silver. And 7 of 10 primary silver mines had reduced output in 2013. Nevada is known as the silver state. Nevada produced 7.4 moz silver in 2013, but 25.0 moz in 1997, making a 70.4% decline. The mine industry has seen a 95% decline in silver ore grades. The chronic recession has hit byproduct silver output, which arrives from targeted copper, zinc, lead mining projects.
Solar power panels consumed under 1 moz silver in 2005. Solar demand accounted for 35 moz demand in 2013. Solar demand is projected to be 100 moz by 2019. Of all the silver demand, 62% is from industrial applications. Also 21% jewelry, 12% coin, with 95% expected never to have recycle potential. The paper silver price suppresssion is powerful. An estimated 100 oz silver from paper claims per 1 oz in physical. The lower silver price has crushed the mine sector. A powerful snapback rally is coming in the next couple years
From David in Los Angeles: I have always believed what some of these gold and silver producers numbers of production are not the real number, as in they are higher. The extra is what is diverted to the Bankers, who sit on the boards and do the significant financing. It could be that small and medium sized mines owned by Langley are scattered across the North American landscape, especially Nevada and California. Also, insiders report that both India and the Vatican are significant hidden silver suppliers, who help to avert defaults. These stories help explain the costs having skyrocketed so fast. For all their rising costs in mine operations, for the small output in ounces they report, there is almost no other explanation.
???◄$$$ SINGAPORE'S DRIVE CONTINUES TOWARD BECOMING GOLD HUB
???◄$$$ MISSING GOLD AT RAND REFINERY IN SOUTH AFRICA... BLAMED ON ACCOUNTING PROBLEM, BUT MORE LIKELY INTERNAL THEFTS BY THEIR OWNERS (POSSIBLY BY ANGRY MINE WORKER UNION).
A cool 1.2 billion Rand worth of gold has gone missing at the big refinery, called the Johannesburg-Rand Refinery, a processor of about a third of the world's gold since 1920. It found $113 million (R1.2 billion) less physical metal than the company had booked in its accounts after adopting a new computer system. The refinery in Germiston, a town 20 km east of Johannesburg, has 87,000 ounces of physical gold less than the amount present in its accounting records after implementation difficulties with the new system, the company said in a statement today. That is worth about $113 million at today's price of $1296 an ounce. Rand Refinery's shareholders, including AngloGold Ashanti, Sibanye Gold and Harmony Gold Mining, agreed to lend the company 1.2 billion rand to help make up the difference. Howard Craig resigned as chief executive officer in May and has been replaced by Mark Lynam, who is being assisted by management consultant Accenture in sorting out the issue.
Gold miners send bullion at about 80 percent purity to the refinery, which then treats it and boosts this to close to 100 percent. Rand, Africa's biggest processing facility for the metal, has refined almost 50,000 metric tons of gold since 1920, according to its website. The miners, customers of the refinery, have received the prices they were expecting, leading them to conclude it is most likely an accounting problem rather than theft, James Wellsted, a spokesman for Sibanye Gold, said by phone. AngloGold, Sibanye and Harmony made loss provisions of about $92 million between them as a result of the lost ounces. Rand Refinery has been unable to finalise its results for the year ended September 2013 because of the issue, it said.
THE VOICE: I have been saying for some years that the Rand Refinery is a criminal organization. Someone even threatened to sue me over the statement. Current events are called turning the tables. The claim of an accounting problem is thin.
???◄$$$ DEUTSCHE BANK, HSBC ACCUSED OF SILVER FIX MANIPULATION
Deutsche Bank, HSBC Holdings, and Bank of Nova Scotia were accused in a lawsuit of rigging the price of billions of dollars in silver, an allegation similar to earlier suits involving the London gold fix. J. Scott Nicholson, a Washington state resident who filed the case, is seeking to represent a class of investors who have bought silver future contracts since Jan. 1, 2007.
???◄$$$ RUSSIA ADDS 500,000 OUNCES GOLD TO RESERVES IN JUNE 2014... REALITY MIGHT BE 10 TIMES THAT AMOUNT.
## MINES FACE EXTINCTION
???◄$$$ AUSTRALIAN GOLD MINERS NOTE CRASH IN EXPLORATION... THE SECTOR IS BEING WRECKED.
If there is one key message from this week's presentations at the gold dominated Diggers and Dealers conference, it is that increasing exploration is essential to the sustainability of the gold sector. Gold exploration expenditure dropped off 30 per cent or A$34.8 million during the March quarter, in line with a 25.5% fall in total exploration expenditure. Evolution Mining chairman Jake Klein told the conference that the last 12 to 18 months have been the toughest he has experienced during his more than 20 years in the industry. Klein stated, "Gold discoveries have become increasingly rare and in fact over the last couple of years increasingly bleak. One thing that is definitely insane is deleting exploration from your budget in order to save cash because you are fundamentally destroying your business if you are not investing in exploration."
Evolution is investing A$20 million a year for exploration, with a current focus on exploration at three of its projects and a new joint venture. Exploration plans were detailed by the majority of the gold companies presenting at Diggers, with Northern Star Resources $50 million exploration budget for the financial year one of the most substantial discovery budgets for the local sector. Northern Star managing director Bill Beament said the company looks to grow its resource base further through the extensive drilling program. "There is a large amount of high-grade highly profitable gold to be found in and around our projects," Beament told the conference.
Junior gold miner Doray Minerals, which poured its first gold this time last year, earned the crown of Prospector of the Year at the Association of Mining and Exploration Companies convention in June for the exploration efforts that discovered its Andy Well gold mine. Doray's managing director Allan Kelly said that the company is now looking forwards to returning its focus to exploration after working to get Andy Well into production. Drilling on deposits surrounding its key Wilbur Lode deposit has been underway to increase the mine's 3.7 year mine life, with Doray announcing Wednesday that it had increased the ore reserve for an adjacent deposit, the Judy Lode. Kelly said, "The discovery replaces ore mined during our first year of underground, maintaining Andy Well's mine life." Kelly said that a decline in exploration has forced prices down, making now a good time to get rigs in the dirt if a company has the cash. "If you have money to do work you get really good value for money. Now is the time that you can actually set yourself up for the next boom if you have the resources to do that, so that is what you have got to try and make the most of." Optimism is improving, according to Kelly, who said he has noticed a bit more momentum at this year's mining conferences.
Australian Financial Review
???◄$$$ GOLD MINE OUTPUT TO FALTER BADLY, PERHAPS BY 50%... FOR YEARS THE SUPPLY & DEMAND FACTORS HAVE NOT MATTERED IN THE PRICE EQUATION... GOLD PRODUCTION TO DROP BY 50%, AS TOO FEW NEW DISCOVERIES WILL EXACERBATE PROBLEM
???◄$$$ THE GOLD MINING INDUSTRY OBITUARY IS BEING WRITTEN... MASSIVE PRESSURE OF ENVIRONMENTAL REGULATION AND CAPEX / OPEX COST ESCALATIONS ARE A KILLER.
???◄$$$ US-BASED GOLD PRODUCTION CONTINUED ITS DECLINE IN MAY... TIGHTENING THE SCREWS ON SUPPLY... ONE MORE FACTOR TO CONTRIBUTE TOWARD A GOLD PRICE GOING INTO ORBIT LATER ON.
???◄$$$ DRASTIC FALL IN NEW GOLD DISCOVERIES
Comment added. Rather than concept being no replacement, prefer perception of no exploration at suppressed price. Finally my too early call in 2012 for 20% reduction in gold mine output is happening. Right call, wrong timing. But it will not be 20% down, only instead about 8% to 12% down. We will know later how much 2014 gold output drops.
???◄$$$ WALL STREET'S SHALE FRAUD EXPOSED
???◄$$$ EROI AND SUSTAINABLE SOCIETY (TO CORRECT A JACKASS ERROR).
From SRS Rocco: The reason for my reply is to clarify an issue about the EROI of shale oil. I heard you say in the interview that it takes three barrels of oil to produce one barrel of new output. I don't know if I mislead you with the information, but I wanted to clear it up now. I have attached a chart showing the different EROI ratios for energy. You can see that biodiesel ranks at the bottom at 1.5/1. Which means, one barrel of energy provides 1.5 barrels of bio-diesel. It is still positive, but it does not pay the EROI bills. I will get into that in a minute.
Shale oil, is further up the scale and ranks about an EROI of 5/1. The EROI ratio equation reads = Energy Returned / Energy Invested. So, the US shale oil provides about five barrels of oil for every barrel consumed in the process. Even at a 5/1 EROI ratio, shale oil is quite pathetic when we compare it to the 100/1 EROI ratio of United States oil and gas during the 1930's and 30/1 EROI ratio in 1970. According to one of the leading experts on the EROI, Charles Hall, our modern society needs at least a 9 or 10/1 EROI to be sustainable. Shale at 5/1 and Tar Sands between 2/1 and 5/1 ratio. We can see that both do not pay the minimum EROI bills for a sustainable modern society.
Lastly, if you look at the chart, you will notice that the IMPORTED OIL EROI ratios fall considerably from 1990 to 2007. Unfortunately, the chart does not provide the actual figures, but you get the idea.
Comment added. Nuclear at 10/1 ratio has other hidden costs not evident on the graphic. Its insurance cost and/or devastation effect cost. Little Costa Rica has huge payback with hydro-electric. The CR problem is that they refuse to do any oil/gas/coal for new electric plants. So the economy languishes, with little or no job growth. A young population needs the hope that comes with economic growth. Big thanks to SRS Rocco for his explanation.
## ECONOMY IN COLLAPSE MODE
???◄$$$ OBAMACARE IS A DISASTER FOR BUSINESSES, PHILLY FED FINDS... ALSO OBAMACARE WAS GUTTED BY LEGAL COURT RULING... IT IS NOT CLEAR THE AMERICAN PUBLIC WILL FULLY AWAKEN TO THE FRAUD.
Slowly the nation will awaken to the sabotage that is this horrendous national program, with two ugly hidden motives. The first is the requirement for an asset declaration. The section is for the eventual placement of RFID chips in the upper left arm. The ObamaCare is an abomination, designed to wreck small business. Then came the court ruling which slammed the obscene national program laced with fraud and crony crapp.
???◄$$$ ALARMING FAILURE OF FRENCH ECONOMY... EXPECT SERIOUS TREMORS IN SEPTEMBER
France is not alone in Europe. The situation is worse in Italy, which has fallen into recession, but that is no consolation to the French executive. Without growth, the entire budget equation becomes insoluble. Especially as the low inflation kills off the anti-deficit plan. Once known growth in the second quarter, the government will have to revise its forecast for 2014 (+1.0%) and 2015 (+1.7%), leading to a greater than 3.8% of GDP deficit in 2014, significantly in excess of the 3% threshold agreement for 2015. Standoff with the European Commission, and also with Germany, will lead to serious tremors in September.
???◄$$$ OFFICE DEPOT STORE SHUTDOWNS INDICATE DEEP PAIN IN THE SMALL BUSINESS SECTOR
Office Depot said Tuesday it would close 165 stores during 2014, up from the 150 estimated earlier this year, but stuck with a total count of 400 store closures through 2016, the company said. The office supply retailer, which merged with OfficeMax last year in a $1.2 billion transaction, said it has completed its analysis of which stores will be closed across the U.S. and Canada. Locally, the retailer has closed two OfficeMax stores, in Coral Springs and Deerfield Beach. The company also announced on a conference call following its second-quarter earnings announcement that it has settled a California lawsuit for $80 million, which it expects to pay in the fourth quarter.
Comment added. The story matches Staples massive store closures (my old employer). The two firms are giant competitors. The negativity rhymes. Clear evidence of no USEconomic recovery to be sure. Office supplies reflect the small business sector very well as indicator, in reliable fashion for many years and many cycles. Further discredit to the Birth-Death Model adjustment as fraud in the employment report, aka Non-Farm Payroll. Expect back to school sales similar to last year, almost non existent in a growing disaster. Watch an absence of any reporting of back to school on television. A Los Angeles based retail operator is colleague. He said retail is taking another hit lower as we speak. Everyone he spoke to about July mentioned it was terrible. August has started off very poorly as well. Also online sales are plunging.
???◄$$$ MCDONALDS FAST SHIT-FOOD JULY SALES FELL MORE THAN EXPECTED
Friday, 8 Aug 2014
The Recovery in One Chart: When Americans Cannot Even Afford to Buy McDonald's for Nine Months in a Row. There is endless propaganda, and then there are McDonald's sales. It is the latter that is by far the best indicator of how the US economy is progressing when stripped of all the bullshit seasonal adjustments, rhetoric and lies from the administration which focus on what is a glowing recovery, for the 1%. As for everyone else, they cannot even afford a dollar meal. Proof comes from McDonald's same store sales for the last month, July, cratered by 2.5%, far worse than the 1.1% expected driven by a 7.3% collapse in Asian sales, but the number we focus on, US comp store sales, was a devastating 3.2%, on par with the worst decline in history, and the ninth consecutive month in which McDonald's has not posted an increase in U.S. same-store sales.
???◄$$$ WALMART WOES
With $469 billion in annual sales, Walmart is not quite going out of business, but the retailer has seen sales slip for five straight quarters. Online shopping is clearly hurting the store, as more customers turn to Amazon and other merchants for everyday items such as hardware and groceries. E-commerce is making Walmart's vast breadth of merchandise less appealing to shoppers. Instead, customers are looking for better deals on a more narrow assortment of goods available at stores like Costco and dollar stores The bank upgraded Costco's stock to Buy. Goldman noted that Amazon's move into grocery sales is the biggest threat facing Walmart and a risk to Costco.
Walmart grew to be the world's largest retailer by promising the lowest prices and getting shoppers to pick up things like screwdrivers or towels on a whim when they came in for cold medicine. Today, though, Walmart's customers are rationing purchases and checking the store's prices against Web-based stores, according to Brian Sozzi, CEO of Belus Capital Advisors. "They are very week-to-week focused because their incomes have not grown. I view Walmart as going to a very, very dark place in the next 5 to 10 years."
The retail giant countered that global online sales grew more than 25% in the last two quarters, and the company is planning to add up to 300 of its Neighborhood Markets in the coming fiscal year, spokesman Randy Hargrove wrote in an email. Those are smaller locations that can compete with dollar stores and drug stores. "We are making investments in technology and our multi-format portfolio that will give our customers the resources to shop with us on their terms," Hargrove wrote. Goldman's note came days after Walmart named a new head for its U.S. division. Also, Dollar Tree (DLTR) announced on Monday that it would buy rival Family Dollar (FDO), potentially creating an even more powerful rival for consumer dollars.
???◄$$$ THE UNITED STATES IS A NATION ON WELFARE, WITH A PRESIDENT AS CHAMPION OF THE WELFARE STATE... THE WELFARE RECIPIENTS IN THE NATION OUTNUMBER THE ENTIRE RUSSIAN POPULATION.
The 35.4 percent of United States make up 109,631,000 on welfare. When those receiving benefits from non-means tested federal programs such as Social Security, Medicare, Unemployment, and Veterans benefits were added to those taking welfare benefits, it turned out that 153,323,000 people are getting federal benefits of some type. Subtract the 3,297,000 who were receiving veterans benefits from the total, and that leaves 150,026,000 people receiving non-veterans benefits. The 153,323,000 total benefit takers, said the Census Bureau, equaled 49.5 percent of the population. The 150,026,000 taking benefits other than veterans benefits equaled about 48.5 percent of the population. US Welfare takers outnumber full-time year-round US workers by 6,544,000.
Footnote: The CIA World Factbook says there are 142,470,272 people in Russia. So, the 150,026,000 people getting non-veterans federal benefits in the United States outnumber all the people in Russia.
???◄$$$ ECONOMIC MISERY IN GRAPHS
Check out an excellent Misery Pictorial of the USEconomic bust, well done by Andy Hoffman. The trend is very disturbing, but nothing new to Hat Trick Letter clients.
???◄$$$ WAGES IN US DOWN 23 PERCENT SINCE 2008, A CONFIRMATION OF SECONDARY JOBS AND LESSER TIER ON THE PRESTIGE LEVEL... THE TOTAL IS $93 BILLION LESS ON AGGREGATE BASIS.
While 8.7 million jobs have been regained since the 2008 recession, they are paying much less, by an average of 23 percent, according to a report released Monday by the United States Conference of Mayors. The report comes as debate continues about income inequality in the United States. "While the economy is picking up steam, income inequality and wage gaps are an alarming trend that must be addressed," said Conference of Mayors President Kevin Johnson, the mayor of Sacramento Calif, in a news release. The annual wage in sectors where jobs were lost, particularly in manufacturing and construction, during the recession was $61,637, but the average wage of new jobs through the second quarter of 2014 is $47,131, the report shows. It represents a loss of $93 billion in wages, according to the report. (This Johnson guy qualifies as a true moron, as he cites economic progress during chronic powerful recession.)
???◄$$$ FARM EXPORT COMBINES WITH DROUGHT TO RAISE US-BASED FOOD AND RANCH COSTS
The Jackass had interview with Dan Schultz recently, an organic farmer in Northern California. He said hayfeed for livestock is up triple in price in single year. No verification is possible. The Chinese are buying up farms and shipping 100% of hayfeed output to China for their livestock. Shortages are starting to show up. Part of the bigger food export project is starting to take hold. Western US and Canadian clients report numerous food items being exported to China, all agricultural output, like carrots, onions, garlic, and many others. Also, the drought in California and the Southwest having a big impact on farmers, particularly the organic dairy and livestock operators.
THE VOICE: You need to understand that revolutions are started when people starve. That is how Marie Antoinette's and Mursi's heads rolled. That is how the Inner Belt Way BOYZ heads will eventually roll also. China does not need the hay. But by taking it out of the market is has a brutal effect on the US food prices. Very clever.
???◄$$$ SOUTH FLORIDA PROPERTY PURCHASES ARE DOMINATED BY FOREIGNERS
My old Boston former roommate Calvin has become a distressed property broker. He is a smart guy, not very educated, but always a willing subject, very inquisitive. We have kept up relations since my departure from Boston in 2000. We have had dozens of long phone conversations, a trusted friend, a good fellow. He works in the Fort Lauderdale area of South Florida. For those not familiar, it is the northern part of Metro Miami. We just talked at length. He said 73% of all property sales are foreigners for the 3 or 4 counties (Miami-Dade, Broward, cannot remember others). He cited Brazil, Russia, Venezuela, and lesser extent France. In the past, the British had been the principal big foreign buyers, but not anymore. Another feature he noted. He said banks are putting huge blocks of residential properties up for sale, but the banks are stubbornly setting the price at recovery cost. They expect (and see) the prices to fall steadily. The prices tend to fall 20% to 30% in the ensuing 8 to 12 months, but the banks do not care. He is doing some good brisk business with the BPO work. It is Broker Price Opinion, a secondary appraisal business line. The banks are overflowing with REO homes taken in foreclosure.
???◄$$$ USECONOMY INFLATION FIRES UP, CALLED GROWTH... HORRENDOUS ECONOMIC RECESSION WILL CONTINUE, BUT THE FALSIFIED DATA WILL INVOLVE GREATER LIES... WATCH HUGE PRICE INFLATION CALLED TAME, ALL RELABELED AS GROWTH FOR A NICE PHONY RECOVERY.
???◄$$$ ECONOMIC BOOM IN CAR SALES BASED ON UGLIEST OF UGLY SUBPRIME CAR LOANS THAT DEFY COMMON SENSE ON THE UNDERWRITING.
Behind those booming auto sales are 7-year loans, 125% LTV ratios, 34% subprime borrowers. Americans fix nothing, learn nothing, and march down the same dead end alleys, as they exhibit zero progress and zero reform. The horrible reckless underwriting has entered the mainstream in car loans. Long duration loans guarantee upside-down loans in the first year. Absurd over 100% loan-to-value ratios means the lenders are broken immediately. The subprime borrowers keep the dance going, but all are losers. Recall the fields of unsold cars in a recent Hat Trick Letter report. This is the other side of that nightmare. All AAA securized debt backed by depreciating assets are a fraud. The merry go round has come full circle. We have a repeat of the 2006 & 2007 subprime mortgage bonds, this time extended to car loans in a big way. The securitized shit bonds sold to pension funds and other managed funds seeking yield will continue, a major fraud underway. Future losses come to pension funds and to American retirees.
???◄$$$ BOX OFFICE MOVIE RECEIPTS WAY DOWN FOR NATIONWIDE US-BASED MOVIE THEATERS... EVIDENCE OF HARSH RECESSION (OR WORSE).
Chart in $millions shows a staggering 45.6% decline in July year over year, a 20.3% June decline, and a 16.3% May decline. The discretionary spending for the USEconomy is under strain. Thanks to an unnamed HTLetter client for the data, who is in the movie concession business, located in California. Too bad Magic Johnson is probably not raking in the cash profits anymore, but he will not miss a meal.
Thanks to the following for charts StockCharts, Financial Times, UK Independent, Wall Street Journal, Zero Hedge, Business Insider, Calculated Risk, Shadow Govt Statistics, Market Watch, and more.