QUOTES ON GOLD
"We are possibly faced with is something that has never happened before. Normally when you have unemployment, you get a deflation. But what we could be in for is an inflationary depression in which prices rise as unemployment rises. So the jobs would be disappearing while prices rise. This kind of economic malaise has no economic solution. In that type of environment the price of gold and silver could go anywhere on the upside. What we are really seeing is the transformation of the United States into a Third World country. Ten years ago at a nationally televised conference in Washington, I predicted that the United States would be a Third World country in 20 years. We are certainly on track. I am not worried about my forecast." ~ Paul Craig Roberts (described inflationary depression)
"I was in Singapore last week. Nothing too earth shattering, but what I found was total confirmation in all you have been saying about the East being fed up with US monetary policy. From the ex-pats who were there to the taxi drivers (who are only Singapore citizens and are very educated on money and finance), they all said that see a BRICs currency coming in the near future and a Gold-backed one or some form of Gold-backed one. One taxi driver summed it all up the best when he said, 'HERE IN THE EAST WE KNOW WE HAVE TO WORK HARD AND IT WILL PAY OFF....THE EUROPEANS DON'T WANT TO WORK AND EXPECT TO HAVE A FIRST WORLD COUNTRY STILL.' I told him that they are on the road the Third World and he agreed." ~ Hat Trick Letter
"Do the Saudis really want cheap oil? No, no more than Russia or any other producer. Will the Saudis stand with the Petro-Dollar when derivatives are blowing up and taking the financial system with them? Again, no. It is clear the financial power of the United States is waning. Will Saudi Arabia hang on, or will they trade their allegiance toward the rising Chinese? I still personally believe the Saudis will not only switch sides, but it will be this particular announcement that historians will look back upon as the watershed event of the decline of American hegemony." ~ Bill Holter (of Miles Franklin)
"The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions. The exits tend to get jammed unexpectedly and rapidly. [An amplified sell-off] is a point we have not started from before. There are undoubtedly positions out there which are dependent on (close to) zero funding costs. When funding costs are no longer close to zero, these positions will blow up. I find it somewhat surprising that the market is willing to accept the central banks at their word, and not think so much for themselves. [A violent response this time with a] fair chance that volatility will feed on itself." ~ Guy Debelle (head of the BIS's market committee at Bank For Intl Settlements in Basel Switzerland, who commented upon the inherent risk since nominal interest rates are already zero across most of the industrial world.)
"The financial markets are being slammed to satisfy Soros et al who have a giant option put to gain from a big decline. The financial markets are being slammed to reinforce the USDollar which is being abandoned globally. The financial markets are being slammed to give USFed more political permission to continue QE to Infinity. The financial markets are being slammed, giving evidence of desperation by the banker cabal. They are losing their grip. The massive selloff is for a variety of reasons, to be sure." ~ the Jackass
"You are absolutely correct about Venezuela [on widespread shortages]. I met my wife there 20 years ago and the country is an absolute mess. Newspaper publishers with the money cannot get [feedstock] paper from Canada. One of our nieces who works at a motorcycle/moped shop that makes and sells both was recently laid off because they cannot get parts for manufacture and repair. Again this company has capital to pay for the materials. We recently paid more than $4200 for an airline ticket, so that she can make one final visit to her dying mother. American Airlines, Delta, and United are no longer flying into Caracas. There is no aspirin and ibuprofen, no toilet paper, and coffee is scarce. Chavistas (Hugo Chavez supporters) are even killing each other. I warned all my relatives there 2-1/2 years ago that this would happen. I have warned my family that the same will happen here [in the United States] in the not so distant future." ~ RobertM (Hat Trick Letter follower, who sees the effect of currency devaluation manifested as supply shortages)
"The US Dept Defense (DoD) is funding Ebola trials on humans, trials which started just weeks before the Ebola outbreak in Guinea and Sierra Leone. The reports continue and state that the DoD gave a contract worth $140 million dollars to Tekmira, a Canadian pharmaceutical company, to conduct Ebola research. This research work involved injecting and infusing healthy humans with the deadly Ebola virus. Hence, the DoD is listed as a collaborator in a First in Human Ebola clinical trial (NCT02041715), which started in January 2014 shortly before an Ebola epidemic was declared in West Africa in March." ~ Dr Cyril Broderick (Liberian scientist and former professor of Plant Pathology at the University of Liberia's College of Agriculture & Forestry, the Tekmira firm having been cited by HTLetter in previous report on virus delivery)
"The situation in Ukraine is very bad. New government is not better than the previous. Economic on the brink of collapse. There is no money, no work." ~ Friend of HTLetter client (the friend lives in Donetsk in Eastern Ukraine)
"The house of delusions is cheap to build, but drafty to live in, and ready at any instant to fall." ~ A.E.Housman
## INTRO GOLDEN NUGGETS
◄$$$ THE JACKASS TEAM HAS OUTLINED MANY FACTORS POINTING TO NOVEMBER AS CATALYSTS FOR EXTREME DISRUPTIONS... THEY ARE ALL POWERFUL AND LETHAL IN THEIR POTENTIAL EFFECT... MANY ARE THE LOCATIONS FOR BREAKDOWN AND COLLAPSE. $$$
The Jackass colleagues have come up with ten powerful factors, agents of change and disruption, during an extremely unstable global and national climate. As preface in backdrop, financial markets are at risk to give way. They cannot be supported, even with hyper monetary inflation and constant interventions.
- Something is likely to happen after the US mid-term elections in November, which could lead to calls by Republicans for Obama's impeachment. The charges could center upon Benghazi, Mexican gun running, Mexican border, staged US violent incidents, Ebola virus fabrication outbreak, ISIS creation, and Ukraine War.
- A big election is to take place in Brazil, where a Rousseff win is huge for BRICS and all Latin America, while a big loss for Europe and United States. Maybe her plane will hit a coconut tree on the airport tarmac with a drunk pilot.
- The USCongress must approve the US member funding for IMF, a near certain failure. The US refusal to fund the IMF has dragged on for two years.
- The digestion of another USGovt $1 trillion deficit will be in play again, which could lead to another debt rating downgrade.
- The Swiss national referendum could put significant pressure on their national bank to both withhold its gold from sale and accumulate more gold in reserves.
- European problems escalate beyond control. Merkel resigns under corporaet pressure, French Economy collapses, Italian banks fail, Greece threatens to leave the union. The EuroCB goes whole hog with QE asset purchases beyond just sovereign bonds, which enrages Germany to the point of open discussion on leaving the Euro.
- Ukraine, Europe, US still play hardball with Russian sanctions, while no deal for Ukraine natgas supply, and obstructions are presented for the Gazprom South Stream pipeline. Russia finally cuts off supply for non-payment to Ukraine, along with a couple other nations that plot against the Kremlin. The Ukraine harvest failure is felt in acute manner, and the Kiev Regime begins to topple.
- Saudi Arabia starts unraveling from internal tribal competition for the crown, from Chinese deals in alliance against the Petro-Dollar, and from Langley wild card violence.
- Barrick enters a death spiral, as its chart looks horrible. The giant mining firm could suffer a production reality based death event. Suddenly they cannot support the debt burden, as Pascua Lama buried them in a debt mudslide.
- Russia and China give further indications of their vast gold reserves, which earn estimates by the slow dull biased Western analysts as being near 10,000 tons for each nation. Suspicions build like a gathering storm for a return to the Gold Standard in some form. Bingo!
◄$$$ THE TRAGEDY OF NATO IS EXPLAINED WELL BY TYLER DURDEN (click here), THE EDITOR OF ZERO HEDGE... THE ALLIANCE BECAME OBSOLETE, THEN BECAME AN ANTAGONISTIC TOOL, AND LATELY THREATENS THE SECURITY OF EUROPE... THE FULL TURN HAS PROVED ITS FAILURE OF DESIGN, SINCE IT NEVER BUILT IN A SUNSET TO DISBAND ITSELF... IT SEEKS AN ENEMY LIKE MOST FASCIST OFFICES, AND PROVOKES THE NEXT GEOPOLITICAL CRISIS. $$$
"Today we see the above destructive economic forces at work in NATO expansion. When the Soviet Union disintegrated in 1990, the reason for NATO's existence vanished. But rather than declare NATO to have been a success in deterring war in Europe, possibly disbanding the alliance and building a new Concert of Europe that would include Russia, NATO bureaucrats set about to expand the alliance to the East. Whereas the Concert of Europe after the Napoleonic Wars had quickly embraced France as an important member, NATO expanded to isolate Russia by absorbing its former satellite nations.
The last NATO expansion prior to the disintegration of the Soviet Union had occurred in 1982 when Spain joined the alliance. At that point in time NATO was composed of sixteen nations. Starting in 1999 twelve countries have joined NATO, ten of them former members of the Warsaw Pact. The other two, Slovenia and Croatia, were previously part of Yugoslavia, officially a non-aligned nation, but a communist dictatorship all the same. With the possible exception of Poland, none of these new members contribute much to the alliance's military capability, meaning that the older members are shouldering their security burden. Naturally expanding NATO to the East has resulted in isolating and antagonizing Russia, who feels its security threatened. So NATO has succumbed to the socialist phenomenon by adding new members who demand security without much of an obligation and to the moral hazard phenomenon by adding new members whose territories could be used to house American nuclear weapons, a situation that may yet provoke a major world crisis with Russia, which is precisely what NATO was formed to avoid." In the last two decades, NATO has been converted from a peace security alliance to a belligerent autocratic fascist war seeking junta, under the direction of the USMilitary.
◄$$$ BEIJING WARNS FOREIGN COUNTRIES NOT TO MEDDLE IN HONG KONG... THE USGOVT BOYZ FROM LANGLEY ARE STIRRING UP TROUBLE, MORE DESTABILIZATION, WHICH JOINS NATIVE MOVEMENTS FOR REFORM... ISLAND DISPUTES ARE A MINOR THORN, BUT HONG KONG IS A JEWEL APPENDAGE NOT TO BE TAMPERED WITH... SERIOUS TACTICAL BLUNDER BY THE UNITED STATES... CONSEQUENCES FOR A SMACKDOWN OR PULLED RUG IN THE WEST ARE AT HIGH LIKELIHOOD. $$$
The entire Hong Kong situation is more political than economic or financial, outside the Hat Trick Letter mission. Yet it could erupt into an exercise of vengeance by China, which has long memories of the opium chapter. The impact could be loaded with financial events. They have no more patience for interference in their southern territory. The USGovt has stated its call for Beijing to grant Hong Kong the highest possible degree of autonomy. The USGovt has made its presence known in the region, stirring up island disputes and inflaming tensions between China and Japan. But Hong Kong is a much higher risk locale. The US never respects other nations for their sovereignty, believing in its own arrogance and exceptionalism. The US often engages in over-reach, and Hong Kong is just one more example. Yet it is a highly charged dangerous locale to mess with, to tinker with, to disrupt. The Russia bear can claw its enemy with energy and mineral cutoffs, but the China dragon can blow flames to burn down the fragile US house built of debt paper.
Details of the Hong Kong demonstrations will not be reviewed. The people want a greater role in political leader selection. Beijing wants to maintain control through conformity. The fragile tolerance of independence with embedded control strings at the top is being tested. The Chinese Govt loudly declares that the US has no right to interfere in HongKong. They will defend their right. See the Russia Today article (CLICK HERE) and the BRICS Post article (CLICK HERE). For a higher level review of the Grand Strategy for Eurasia, consider the excellent thesis on events unfolding in Hong Kong. It is a very enlightening read. See the Global Research article (CLICK HERE). In the United States, the Occupy Wall Street did not succeed. So the USGovt took the concept and brought it to Hong Kong in a certain sense, sponsored in clandestine manner by Langley. The Chinese Govt vengeance could be to hasten the removal of the USDollar in trade settlement and the diversification of the USTBond in banking reserves, even giving a push to the Obama Admin for its topple.
◄$$$ TRANS-PACIFIC PARTNERSHIP TRADE TALKS UNLIKELY TO CONCLUDE IN 2014... DISPUTES IN JAPAN OVER FOOD PRODUCTS ARE SEEN AS THE PROXIMAL STUMBLING BLOCK... THE TRADE PACT IS DOOMED, WHICH ATTEMPTS TO PLACE MOST OF THE PACIFIC REGION UNDER CORPORATE CONTROLS (EXCLUDING CHINA)... PROVISIONS OF INTELLECTUAL PROPERTY RIGHTS WOULD BE HEAVILY TILTED IN FAVOR OF CORPORATIONS, WITH BIG PHARMA A PRIME BENEFICIARY. $$$
The US-led trade talks of the Trans-Pacific Partnership (TPP) agreement are unlikely to conclude this year, as the United States and Japan battle over differences on the market access of agricultural products. The Asian giant refuses to reduce agriculture tariffs. The nation is very protective of this sector. At present, Japanese households spend nearly 14% of their income on food, compared with 9% in the United Kingdom and 7% in the United States. The USGovt is preaching huge multi-$billion savings to Japan, but veiled inside are nasty pernicious corporate patent features in the TPP pact. Also veiled is the open channel the USGovt wants on genetically modified food. The TPP talks were initiated by Singapore, New Zealand, Chile, and Brunei in 2005, but dominated by the United States after it joined the talks in 2008. Since then, the USGovt has reframed, revised, and contaminated the entire trade pact. It attempts to build an Asian trade zone which excludes China, in one of the most moronic moves amidst a vicious corporate power grabs in modern history. The TTP trade pact would grant both patent and internet control to corporations, thus advancing the fascist business model to one third of the world. President Barack Obama had hoped to conclude TPP trade negotiations by the end of this year, but he plays too much golf, sleeps through meetings, and must manage over the Ebola virus outbreak that his Langley handlers have launched. See the Xinhua Net article (CLICK HERE). In simple terms, the TPP is a backroom deal to keep the Elite 1% in power and control as toll takers.
The TPP Pact is truly insidious. A recently leaked chapter of its many provisions exposed sweet deals for Big Pharma firms, and other large corporations set up to benefit from the USGovt influence, basic bully tactics. WikiLeaks released a second updated version of the Trans-Pacific Partnership (TPP) chapter on Intellectual Property rights. The intrepid outfit charges that the pact will hinder affordable access to medicines globally, increase online surveillance, and impinge on civil liberties while benefiting Big Pharma and other corporate interests. James Love of Knowledge Ecology International stated, "Our first impression in reading the document is the extent to which the United States has sought hundreds of changes in Intellectual Property norms, some small and subtle, others blunt and aggressive, nearly of all of which favor big corporate right holders, and undermine the public's freedom to use knowledge."
The trade pact has been negotiated in secret, a big red flag. Only select officials and corporations have been granted the privilege to see the text. The Elite schemes are clear, thus the movement for WikiLeaks to release several draft chapters. A previous draft of the IP chapter was leaked in November 2013. Wikileaks wrote, "Since that point, some controversial and damaging areas have had little change, as issues surrounding digital rights have moved little. However, there are significant industry favoring additions within the areas of pharmaceuticals and patents. These additions are likely to affect access to important medicines such as cancer drugs and will also weaken the requirements needed to patent genes in plants, which will impact small farmers and boost the dominance of large agricultural corporations like Monsanto." Always the insidious Monsanto, client to Agenda 21 within the global genocide plot.
WikiLeaks co-founder Julian Assange and editor Sarah Harrison conclude that the United States is pushing essentially for automatic monopolies in the drug industry. The revised TPP chapter includes expansions and extensions of patent protections. It endorses a technique known as EverGreening, which grants new patents for slightly altered drugs from previous patented versions, used (abused) by the pharmaceutical industry to prolong market monopoly. See the RINF Alternative News article (CLICK HERE). The TPP is one sick treaty. See the Reuters article (CLICK HERE). As the USDollar faces imminent demise, expect over-reach in many ways. The trade pact is one. Sanctions are another. New wars are another. QE is another. The USDollar is on the verge to inflict carnage all around the planet. It has turned cancerous and toxic, supported by hyper inflation, just like a Third World nation. See the Automatic Earth article (CLICK HERE).
◄$$$ S&P 500 COMPANIES SPEND 95% OF THEIR PROFITS ON BUYBACKS AND EXECUTIVE PAYOUTS... THE FASCIST BUSINESS MODEL IS HARD AT WORK, NOT ECONOMIC DEVELOPMENT, AS FIRMS ARE BEING SLOWLY SACKED. $$$
The S&P500 firms coddle shareholders and executives, at the expense of developing the companies. The large US corporations are on track to spend $914 billion on share buybacks and dividends this year, equal to 95% of earnings. Money returned to stock owners exceeded profits in 1Q2014 and may again in Q3. The proportion of cash flow used for share repurchase has almost doubled over the last decade. At the same time, the proportion has slipped for capital investments, according to equity research at Barclays. To be sure, the equity gains are substantial, some over 300% since March 2009. Some investors are not fully impressed. They argue that executives risk future business potential and viability unless they start investing money into their many product lines and business segments. If a garden is ravaged for its minerals, it stops producing vegetables. The twisted priorities of financial engineering have put at risk the main business lines. The executives have turned the companies into a casino side show, while neglecting the garden for fertilizer, water, and proper seeding. The future harvest seasons await. The American corporate sector is truly lost, as they raid their treasuries, and leave the firms at grave risk. See the Bloomberg article (CLICK HERE).
◄$$$ USGOVT SETTLED WITH NAVAJO NATION FOR $554 MILLION, AFTER ADMITTING GROSS MISMANAGEMENT OF TRIBAL FUNDS... THINK SWEET DEALS TO EXPLOIT THE TRIBES BY MAJOR CORPORATIONS... DISPUTES OVER OLD URANIUM MINES REMAIN. $$$
The USGovt has agreed to pay the Navajo Nation more than half a $billion for mismanaging reservation resources and leaving the largest Native American tribe in the country at incredible disadvantages for decades. The $554 million agreement negotiated earlier this year is the largest payout to a tribe in US history. Spread across Arizona, New Mexico and Utah, the Navajo Nation has more than 300,000 members, and once featured the fierce Geronimo. The region is rich with natural resources like oil, gas, and coal, but other resources like water and arable land for farming are scarce. A Navajo lawsuit claimed from 1946 to 2012, the US uber-lords did not negotiate the best deals from companies toward natural resources mining from the region. In other words, the USGovt gave sweetheart deals to its big corporate friends. The Navajos were inadequately compensated properly. The poverty among the tribe is shocking. Areas remain in dispute. Two areas tribal leaders stressed the settlement has yet still failed to cover were water rights and health impact from uranium mining. A CCTV investigation in 2012 found that more than 40% of the tribal members lived without running water or electricity. The Navajo Nation has battled antiquated government practices from a system dating back to the 1800s. See the AOL article (CLICK HERE).
◄$$$ CALIFORNIA AQUIFERS ARE CONTAMINATED WITH BILLIONS OF GALLONS OF FRACKING WASTE WATER... THE USGOVT STRATEGY SPONSORED BY HALLIBURTON IS YET ANOTHER MISSION ACCOMPLISHED, AS POISON EVERYWHERE... THE GOLDEN STATE IS BEING SLAMMED BY HAARP (DROUGHT) AND HALLIBURTON (FRACKING). $$$
Much of California water supply is in the process of being ruined. The state is responsible for suppling half the world's food supply, primarily vegetables. That is about to change, another goal met by the banker cabal and their Agenda 21. Another mission accomplished for the Luciferians in control of the USGovt and Wall Street. Few realize that Halliburton owns a monopoly on fracking chemicals, with legal protection never to have revealed their true ingredients. Suspicions are rampant that the evil firm is dumping chemical waste and even radioactive waste into the US ground water systems. The foreign nations are often in resistance, but not in Eastern Europe where the fracking is at full speed. See the DeSmogBlog article (CLICK HERE).
The heavy usage of HAARP devices has steered rainfall away from California while fracking in energy projects has affected the water supply detrimentally. The NASA satellites put the California drought into shocking perspective. As client DonaldS of Florida said, "The real effect of this drought is the destruction of farming, food supplies, which will contribute to economic ruin along with civil disorder. This is not a long-term event. It is coming within months. Nobody really understands it. The mainstream media portrays it as a passing occurrence just until the rain arrives. You are right about HAARP being a contributor. This is blatant propaganda since the news networks are knowledgeable about the device and its effects." See the Mashable article (CLICK HERE). The Gulf of Mexico is another mission accomplished by the same vile crew at Halliburton, the evidence overwhelming.
## MEGA-BATTLE OVER METALS
◄$$$ LOWER GOLD PRICES PROMPTED LARGE BRICS PURCHASES OF GOLD BULLION, BUT EARN RUSSIA A DEBT DOWNGRADE... THE IRONY IS THICK, AS THE FOCUS IS ALL WRONG ON MONEY AND RESERVES... GOLD IS LIKE JUNK. $$$
The Western comedy show continues. Russia has converted Western reserves in a steady move. Russia saw its largest monthly purchase of gold in 15 years, with 1.2 million ounces of shiny gold bars taken into vaults. Consider it sanctions blowback in FOREX reserves conversion. The prudent action prompted Western monkey analysts to downgrade the Ruble currency to near junk. They ignore vast energy and mineral riches in Russia as financial foundation. The USGovt debt retains its sterling ratings with $17 trillion in debt, and chronic annual $1 trillion deficits. The Western rating systems consider gold as reserves to be worthless junk therefore. The comprehension of sound money or prudent reserves management is totally lost. The US financial hegemony marches on to the war tunes. See the Cafe Americain article (CLICK HERE).
◄$$$ THE WEST IS IMPLICITLY DECLARING WAR AGAINST CHINESE STEELMAKERS... THE AUSTRALIANS ARE ATTEMPTING TO CUT THE IRON ORE PRICE IN AN EFFORT OF EFFICIENCY, BUT IT IS RECOGNIZED AS A VEILED ATTACK ON CHINA... AFRICA SUCCEEDS AUSTRALIA, BRAZIL, RUSSIA FOR BECOMING THE NEW LOW-COST GLOBAL SUPPLIERS OF IRON ORE, EVEN INDUSTRIAL METALS... THE TRADE WAR ENTERS NEW GROUND. $$$
The advent of African iron ore supply is near, sufficient to cause disruptions. The African firm Sundance is prominent. Its CEO Giulio Casello calculates a minehead cost of $25 per iron ton, and shipping cost of less than $25 per ton. In five years, Sundance believes its total such costs will be equal or less than the Australian and Brazilian sources. The Sundance iron ore fields are located in Cameroon and Congo. The Mbalam-Nabeba iron ore project is the most advanced project in the region, and is a keystone for further developments of the iron ore corridor in central Africa. The CEO stressed independence and high grade ore as two drivers of future global iron ore shipments. He anticipates independent pricing practices will work in his African firm's favor. The current iron ore price makes domestic Chinese supply uneconomic.
BHP announced a new plan to increase the volume of its Australian shipments by 29% to 290 million tons per annum. Support for African iron source has come. They will allow the sales price to continue falling but preserve its profit margin, by virtue of cutting the cost by 25% below the current level to under US$20 per ton. The iron content in the ore is estimated at about 61%, which is huge. According to a BHP officials, they aim to be the lowest cost supplier to China. A nameless source close to BHP stated, "There is no doubt that the expansions currently happening will further marginalize and cause high-cost [Chinese] producers to disappear as their production becomes uncommercial and their losses grow to the point of leading to their extinction. There is no doubt that fewer players in the market, even in a free market, can exercise greater leverage in terms of price outcomes by virtue of their ability to withhold supply." Chinese iron ore consumption will continue to grow for the next several years. Global iron demand is expected to exceed existing operating capacity in five years time.
A Russian steel industry source interpreted the BHP move as "a declaration of war against the rest of the iron ore producers, especially the Chinese. If BHP is hoping thereby to dominate the future global price, it is going to be surprised by the reaction. The Chinese understand the risk of concentration very well. The Australians, or the Americans behind them, will try to dictate terms to China's steelmakers." More trade friction is to come, raising Chinese ire. See the Dances With Bears article (CLICK HERE).
◄$$$ COPPER INVENTORIES HAVE REACHED HISTORIC LOWS... THE PRICE IS FALLING DESPITE LOW INVENTORIES... THE ENTIRE COMMODITY INDEX IS BEING SUPPRESSED, TAKING COPPER DOWN WITH CRUDE OIL... NO GLUT EXISTS, JUST CORRUPT MARKETS... THE WORLD HAS LESS THAN FIVE DAYS WORTH OF COPPER INVENTORIES. $$$
King Copper, the King of base metals, is not suffering a supply glut. Far from it, the main industrial metal is in deep dire shortage. Yet in the copper market the price continues to decline, along with the level of global copper inventories. In the new Financial Paradigm, which the Jackass prefers to call Reich Economics, paper assets such as Derivatives, Stocks, and Bonds rule the markets, while Gold, Silver, and Commodities are discarded garbage. Notice in the chart below, a very interesting decline trend taking place in global copper inventories. They are near record lows, down to a mere five days worth of copper inventories.
Recent high peaks were seen in global copper inventories at end September 2011 at 658,851 mt and at end September 2013 at 717,232 mt. Here at end September this year, copper inventories in 2014 are the lowest in six years, at a miniscule 4.6 day supply, signaling great risk and contradiction of market prices. SRS Rocco believes the Asian, Chinese, and other Emerging Market nations should consider spending $1.8 billion to purchase the rest of the 263,000 metric tons of global copper inventories, rather than spend another $1 million on USTreasurys that will become worthless in the future, either suddenly from debt default or gradually from the monetary press excess. See the SRSrocco Report article (CLICK HERE).
## EUROPEAN TOXIC TIDBITS
◄$$$ CEO OF FRENCH ENERGY GIANT TOTAL WAS KILLED IN FREAK PLANE CRASH IN MOSCOW... HE HAD ADVOCATED ABANDONMENT OF THE USDOLLAR IN OIL TRANSACTIONS, AND IN WIDER TRADE PAYMENTS... HE HAD OFTEN MET WITH IRAN LEADERS FOR DEVELOPMENT OF ENERGY PROJECTS... HIS LAST ACTION WAS TO CUT A DEAL WITH RUSSIANS FOR NON-USDOLLAR OIL STRUCTURES. $$$
The murder of Total Oil CEO Christophe de Margerie will galvanize anti-USDollar movement among Western European nations. Any member sitting on the fence will no longer be ambivalent. The key players might not talk openly about the murder, but they will react to it. This is a major turning point in psychology, since the victim was a corporate leader within the European Union of nations. This time the murder was behind enemy lines inside Russia, an added message to heads of state. Total Oil is the world's 13th biggest oil producer and Europe's 2nd largest. The Jackass suspects one of three fascist nation security agencies at work, Langley, MI-6, and the Masswipes, with no proof offered, just suspicion after observing two decades of ploys, plots, and pranks. Private aircraft are easy prey. Just ask former Governor Paul Wellstone of Minnesota, or Senator John Tower, or Senator John Heinz, or John Kennedy Jr whose "George" magazine had a planned feature article about the murder of his father and the actors behind it. See the Zero Hedge article (CLICK HERE).
De Margerie is attributed with two key quotes, which should serve well on his tombstone or mausoleum portal. "There is no need to trade oil for the Dollar," was stated in July 2014. It made headline news, since Russian sanctions were all the rage. At an French economist conference in Aix-en-Provence, he went further. "Nothing prevents anyone from paying for oil in Euros. The price of a barrel of oil is quoted in Dollars. A refinery can take that price and using the Euro-Dollar exchange rate on any given day, agree to make the payment in Euros." A meeting had just concluded with Prime Minister Dmitry Medvedev wherein Total and its partner, Russia's largest independent oil and gas producer Novatek, would begin selling oil and liquefied natural gas (LNG) in either Euros or Rubles, and not US Dollars. Total and Novatek have a US$27 billion project to develop a LNG project in the Yamal region of the Russian Arctic that should start producing in 2017. The field's proven reserves are estimated at 800 million barrels of oil equivalent, likely to yield 15 million tons LNG per year. Such USDollar opposition plus his dedication to develop Iran energy sources rendered De Margerie a target to the Western banker energy titans who have resorted in recent years to defend the Petro-Dollar to war, genocide, and murder.
The details as usual at the murder scene do not add up, are not consistent with reality, typical of security agency activity. The dull public masses will not delve deeply into the crime scene data like with actual forensics when propaganda will do. The story is that a trainee air traffic controller in Moscow caused the Dassault Falcon 50 plane to hit a snow plow being operated by a drunk driver. The reality is that the snow plow driver had a heart condition and never consumed alcohol, and besides, trainees are not allowed in the control tower. The reality is plain. De Margerie was the CEO of French oil giant Total Oil, who was set to take off from Moscow to return to France after negotiating a huge oil deal with Russia outside the USDollar Sphere. The oil deal would have planted a root system within the EU nations against the flow of Russian sanctions. Certain powerful people wanted an obstrucion put in place, because the deal did not involve the USDollar. An intentional storyline scenario was set up where De Margerie's plane, under poor visibility, was directly told to take off and crash into a snow plow, despite the fact that at least one of the air traffic controllers knew was there. The USDollar is defended by war, genocide, and murder. The objective was likely to prevent oil from being traded in currencies other than the USDollar, just like with Iraq's Saddam Hussein, just like with Iran. See the UK Daily Mail article (CLICK HERE) and the Jim Stone article (CLICK HERE).
As remote footnote, the case seems to parallel the murder of comedian fashion host Joanne Rivers, who made public comments about the male duo occupying the White House under pretense of marriage under homosexual clouds. The White House has been disgraced sexually for decades. John Kennedy had a parade of over 200 women for national service in the bedroom, with Marilyn Monroe rubbed out for threats of exposure. Bill Clinton enjoyed many tunnel visits like JFK. But he also enjoyed his partner's usage of strap-ons for back door delight, once discovered by secret service men with their own drawn weapons. Now the male duo emerges with many reports of third partners in the bedroom. The commander in chief even once referred to his partner as Michael before staff and secret service after suffering from jet lag on a worldwide trip. The Jackass is often accused of a vivid fertile imagination until facts surface.
◄$$$ THE EURO CENTRAL BANK IS MAKING PREPARATION FOR BUYING RMB-BASED CHINESE BONDS FOR FOREIGN RESERVES... THE CHINESE YUAN IS GAINING GROUND AS A GLOBAL RESERVE CURRENCY, IN COMPETITION WITH THE USDOLLAR... WIDER USAGE OF SWAP FACILITIES FOR TRADE AND EMERGENCY SWAP FACILITES IN BANK FUNCTIONS HAS PAVED THE WAY FOR WIDER RESERVE ACCEPTANCE. $$$
The European Central Bank will discuss in mid-October whether to begin laying the groundwork to add the Chinese Yuan to its FOREX reserves. Governing Council members gathering in Frankfurt for their October 15th meetings will consider the change, a significant move in adding credibility via usage to the Yuan. Initial purchases would be small and might start in about ten to twelve months. Despite China being the world's second largest national economy, its currency is not ranked among the most widely held foreign reserve assets, partly since its convertibility is not yet a feature. The USDollar leads at 61% of holdings among global banking reserves. Apparently the agenda of the Governing Council is confidential, like with all criminal organizations. The criminal banking cabal prefers secrecy. They might also vote to grant a few more zero cost $trillion loans to their owners and friends.
A big plug was made by former Bundesbank President Axel Weber. The highly respected Weber predicted a greater international role for the Yuan. "The emergence of the Renminbi will be a big factor. You will have an appreciation of the Renminbi." The Euro Central Bank is late to the game of recognition. Global central bank diplomacy is slow in responding to the tremendous dispersal of outposts having sprung up, even in the Western world. The Chinese currency is used in trade settlement with over 23 countries, taking avail of the many swap facilities and even swap agreements on emergency liquidity. Countries with swap payment trade and liquidity injections tend to favor the same currency in bank reserves. See the Bloomberg article (CLICK HERE).
A story went under the radar. Germany canceled a large Boeing aircraft order for 33 commercial planes. The $5 billion contract will be rescinded without penalty paid to the US firm. AirBerlin will concentrate on harmonizing its narrowbody fleet. The firm made a statement to the effect that the nixed deal will significantly reduce future capital expenditure for the firm and improve their balance sheet. To be sure, the harsh endless economic recession is a factor. See the ATW Online article (CLICK HERE). The the counter sanctions effect continues to hurt US business interests, the unspoken undercurrent running negative. Momentum will gather for all Western Europe against the United States.
◄$$$ ECONOMICS NOBEL LAUREATE HAS URGED FRANCE TO DOWNSIZE THE STATE, SINCE IT CRIPPLES THE FINANCIAL CONDITION OF THE NATION... HIS WORK FOCUSED ON OPTIMAL PAYMENT STRATEGIES IN BUSINESSES WITH DOMINANT PLAYERS UNDER CONDITIONS WITH LESS NATURAL COMPETITION. $$$
Speaking on FRANCE 24, French economist Jean Tirole advocated Scandinavian-style labor market policies and more sweeping government reform as a way of preserving the nation's social network model. Hours after winning the economics Nobel Prize, the saddened Tirole stated how the French Economy was experiencing difficulties despite having significant assets. He decried the nation for not undertaking significant labor market reforms similar to those in Germany and Scandinavian countires. France is plagued by record unemployment and Tirole described the French job market as catastrophic, arguing that the excessive protection for employees had frozen its labor market. He pointed out how even a respectable social model cannot be sustainable if the size of the state is too big. He is concerned that France's oversized state threatens its social policies because there will not be enough money to pay for the costs in the long run. Brilliant conclusion, obvious to the average mental capacity.
The Royal Swedish Academy of Sciences awarded Tirole the Nobel Prize for his economic research on market power and regulation, related to Game Theory. It focused to optimal ways to regulate industries which are not naturally competitive. Using game theory to predict the behavior of the few dominant companies, the award winning economist designed rules to help governments regulate those sectors in a way that offsets their inherent lack of competition. He said, "Because of large fixed costs or network externalities, there are some industries that tend to be monopolized or at least served by a few firms. You would not expect a huge amount of competition because of the huge fixed costs of establishing the [telephone] networks. What I did was develop rules for access charges" to determine how better telecomm companies could pay to access each other's networks in a fair way. See the France24 article (CLICK HERE).
◄$$$ GREECE'S FINANCE MINISTRY MUST NEXT ADDRESS NON-PERFORMING LOANS... HOUSEHOLD DEBT IS THE CRUX OF DEBATE... NOTHING FIXED, NOTHING REFORMED IN GREECE, THE DEBT VASSAL CONTINUED, BUT FOUR BIG BANKS HAVE RAISED A SIZEABLE AMOUNT OF NEW CAPITAL. $$$
Greece has been kept in a propped position in order to sack more of its assets, and to assure a working corridor for the natgas pipelines that supply Europe. Inspectors from the Intl Monetary Fund, the Euro Central Bank, and the European Commission have been given the task of assessing Greece's progress in structural reforms. They have concluded that a comprehensive approach to non-performing loans (NPL) is required, which incorporates measures for settling both corporate and household debt. The three groups are precisely what is wrong with the situation and why no resolution has come in five long years. The Elite want no definitive reform, period. Patches enable more asset seizure through bankruptcy. The troika rejected a Greek Govt Finance Ministry proposal limited to corporate NPLs, pushing for inclusion of household debt in a new settlement plan. Some progress has come on raising capital, but no progress has come in liquidating dead bank structures while forgiving debt. The top four Greek banks (Alpha Bank, Eurobank Ergasias, National Bank of Greece, Piraeus Bank) have raised a combined EUR 8 billion of equity capital this year to strengthen balance sheets. Concerns remain over the need to raise more capital unless measures are introduced to facilitate repayment. See the Ekathimerini article (CLICK HERE).
◄$$$ ARGENTINA WILL DERIVE BENEFIT FROM COOPERATIVE DEVELOPMENT BY RUSSIA AND CHINA ON DIFFERENT FRONTS... THE AGREEMENTS BEGAN LAST JULY DURING STATE LEVEL VISITS... ARGENTINA HAS FOUND A LIFE LINE OUTSIDE THE US & WESTERN SHADOW, WHICH HAS CUT OFF THE NATION AMIDST DEBT DEFAULT... THE BRICS NATIONS MIGHT OFFER THE NATION A TOW LINE, FOR ASSOCIATE STATUS, AND COULD POSSIBLY MAKE ARGENTINA A SHOWCASE OF REVIVAL. $$$
Argentina is the world's fifth largest food product exporter, supplying food to 400 million people. They have announced a food export deal to supply Russia, which must find second sources besides Europe after the Western sanctions. See The Fox News Latino article (CLICK HERE). The Russian atomic energy firm Rosatom signed an agreement with Argentina in a set of bilateral agreements in July. The contract replaces an agreement that expired in December 2012. It expands areas of cooperation, which include design, construction, operation, and decommissioning of nuclear power plants and research reactors, including water desalination facilities. They also include support of the nuclear fuel cycle, radioactive waste management, and isotope production. See the World Nuclear News article (CLICK HERE).
Argentina has agreed to host Russian Military bases on the South American continent. Argentina and Venezuela have maintained amiable terms with Iran. Their latest military gesture opens the door to another political foe of the United States. While the US, EU, and West have been fixated on the slimy duplicitous events in Ukraine, the Russian President Putin has been inking deals with leaders in Latin America. First discussed in February, the Kremlin intends to set up arm forces units and increase munitions sales in the Latin American realm. The Russians are encircling the American Hemisphere, while the US conducts exploitative over-reach in energy rich lands. See the Guardian Liberty Voice article (CLICK HERE).
Argentina's largest energy company YPF and giant Russian Gazprom are in talks to sign a memorandum of understanding (MOU) to develop natural gas in Argentina. The deal would be worth at least $1 billion. The Gazprom officials will close the deal with further clauses in November. The MOU could include Germany's BASF subsidiary Wintershall as well. YPF partners have ambition to develop a Chubut provincial shale deposit and the Vaca Muerta (translated: dead cow) shale formation the size of Belgium in the Neuquen basin. The region contains at least 23 billion barrels of oil. US giant Chevron is currently producing shale oil in a YPF joint venture that may expand to $16 billion. Partners are being pursued. The emphasis would be on exploration and production of gas from Argentine gas fields. Gazprom also expects to supply liquefied natural gas (LNG) to the country. Wintershall produces 9% of Argentine gas output at this time. See the Bloomberg article (CLICK HERE).
Argentina has been in discussions about the currency swap mechanism with China. The central bank heads from the two nations will pursue a currency swap facility to handle $billions in trade. The swap will allow Argentina to bolster its foreign reserves or pay for Chinese imports with the Yuan currency at a time weak export revenues. Its ailing currency has put the Latin American nation's foreign reserves under intense pressure. The Kirchner Admin has been forced to impose numerous harsh strictures in USDollar usage and accumulation. La Nacion in Buenos Aires reported the first tranche would be part of a loan worth a total of $11 billion, in a deal signed by Argentina's President Cristina Fernandez and her Chinese President Xi Jinping in July. See the UK Reuters article (CLICK HERE).
Argentina signed deals in July to borrow $7.5 billion from China, the funds coming from the China Development Bank and other Beijing sources. Among the deals signed, the construction of two hydroelectric dams in Patagonia are prominent. China Gezhouba Group Corp and Argentina's Electroingenieria SA won contracts last year to build the two dams, which will have a combined generating capacity of 1.74 gigawatts. The Chinese bank financed a loan for a delayed railway project that would enable more efficient transport of grain output from Argentina's agricultural plains to its distant ports. The financial credit line is of key importance, since the distressed Latin American country cannot tap global capital markets, due to disputes over unpaid debt. The nation chose socialism three decades ago, and encountered a national wreck of its own making. See the UK Reuters article (CLICK HERE). Thanks to DonaldS in Florida for extensive reseach assistance on Argentina.
## PETRO-DOLLAR FINAL BATTLES
◄$$$ CITIGROUP SEES $1.1 TRILLION STIMULUS FROM OIL PLUNGE, IN A STRONG ECONOMIC FACTOR BENEFIT... CONVERSELY, THE SURGING USDOLLAR COULD BE SUBJECT TO A TRIPLE THREAT FOR US-CORPORATE EARNINGS FROM FOREIGN OPERATIONS. $$$
The lowest oil price in four years will provide stimulus of up to $1.1 trillion to global economies by lowering the cost of fuels and other commodities, according to Citigroup. The USEconomy will directly benefit in ratio to the crude oil price. The Brent crude oil price is at least 20% below its average for the past three years. Their analysts estimate savings of about $1.8 billion per day based on today's data. The benefit is very real. However, the economic participants are extremely weak, and the bank function is in a ruined condition, even as the consumer is crippled. It is much like giving a free car to a guy who cannot drive. Foreign economies experience a watered down energy cost benfit, since their currencies have weakened. The biggest beneficiary to lower energy costs is the United States. See the Bloomberg article (CLICK HERE).
The sudden relentless rise of the USDollar poses a triple threat to American companies with respect to foreign profits. 1) It drives up the costs of doing business overseas, 2) it suppressing the value of non-US sales with profits brought home, and 3) perhaps most worrisome it signals weak international demand. The USDollar has been on a rabid rise. The US-DX index tracking it against six major currencies has notched an 8% gain in the last three months or more. Some wayward myopic analysts expect its breakout not to stall anytime soon since they see (through Mr Magoo rose colored glasses) the USEconomy stronger than most nations, in particular Europe. However, Central Europe is strong, but Southern Europe is totally broken in tatters. The British Economy is as weak as the US. For the multi-national companies in the benchmark S&P 500, the triple threat serves as big headwind because their foreign results will translate poorly back to the reporting US home. As a group they derive almost half of their revenue from international markets. See the Yahoo News article (CLICK HERE). The Jackass believes the USEconomy is as pathetically weak as Southern Europe PIGS with the exception of Greece. The US is in a nasty depression, with great strength in doctored accounting. The USDollar is a function of financial engineering, far more than actual fundamental performance. Think Interest Rate Swap by JPMorgan pushing artificial demand for USTBonds. Think Wall Street pushing down crude oil synthetic paper contracts, thus lifting the USDollar. Same old tools, just more abuse prior to climax.
◄$$$ THE UNITED STATES HAS MADE A BID FOR OIL SUPREMACY AS THE CRUDE MARKET IS SHAKEN UP SEVERELY... THE CONCEPT IS PREDATORY PRICING... BUT THE UNITED STATES IS THE LIKELY VICTIM IN THE PRICE WAR... THE NEW MARGINAL OUTPUT IS MOST VULNERABLE TO LOWER OIL PRICE... THE SHALE NICHE IS ENERGY INTENSIVE, AND EXPOSES THE REFINERY IMBALANCE, WHICH REMAINS OUT OF SYNCH. $$$
Additional marginal oil output from shale sources and fracking methods has contributed to pushing down the crude oil price against a backdrop of a vicious economic recession. The result is lower price to put extreme negative pressures on the very source of the new marginal output. The shale and fracking businesses are suddenly put in danger. Let's follow a article out of France, home of the Intl Energy Agency (EIA), and rebutt the analysis which seems on its face to be cheerleading by the Western team.
Propelled by surging shale output, the United States is fighting for supremacy in the global oil market, even as a pullback in crude prices threatens to challenge the boom. Years ago the US was caught in a chronic quagmire, having to deal with an inexorable decline in domestic petroleum production. The US might soon be in a position to overtake other petroleum giants. In terms of crude alone, the US pumped 8.8 million barrels per day in September, still a distance from Russia's 10.6 million barrels and Saudi Arabia's 9.7 million, according to official sources. But when natural gas liquids are included, the US extracted 11.5 million barrels per day in August, according to EIA data. In response, the USGovt is undergoing reform of its ban on oil exports that has spanned decades, in light of the energy field boom. The leadership senses some relief to the chronically horrendous trade deficit. The sector has emerged as an increasingly important foundation of the USEconomy. The US surge has put pressure on OPEC. The pace of US-based growth has been staggering, with US energy output rising nearly 60% since its low in 2008, in a six year move. Francisco Blanch is head of commodity research at Bank of America Merrill Lynch. He concluded, "Today we are growing supplies by one million barrels every year. This is by far the biggest and fastest expansion in US oil production in history." During previous booms, the US added one million barrels per day of output over the course of an entire decade. See the France24 article (CLICK HERE).
Some points of contention. First of all, the US energy sector is stuck in a mismatch of output type and refinery capacity to handle the lighter viscosity oil produced. The US has grossly inadequate light oil processing plants and light oil refineries to handle the surge in lighter oils that come from shale and gas sources. All output is clearly not treated equal, but retooling is being done fast. It is kind of like suddenly American chickens produce much smaller eggs and different colored eggs, which the established machinery cannot handle to package into cardboard crates in the standard white and brown types. The USGovt is forced to give relief to oil exports in order to exploit foreign refinery capacity. The only trouble is that almost no nations have capability for ultra-light oils. Even Venezuela is caught in an oil processor mismatch, a serious problem. The US must make major industry alterations. Second of all, the energy demands to produce the shale and fracked oil are intense. So intense that it is between 3 times and 4 times the conventional oil production techniques. The so-called Energy Return on Investment (EROI) is very unfavorable for the new marginal alternative methods.
Great debate has entered the arena on the future viability of an energy niche that is so energy intense. The gains to energy independence are in fact mostly nullified, costing the nation energy elsewhere in the supply chain. This point has been raised in some past Hat Trick Letters. Lastly, and to further pound home the point made in preface. If the shale and fracking alternative energy production methods are the most vulnerable to a crude oil price decline, then many sites will be put on hold, shut down, or otherwise be put at risk. The feedback loop is obvious, to reduce output from the very source of the new marginal output.
◄$$$ STEPHEN LEEB BELIEVES THE SAUDI EFFORT TO PUSH DOWN OIL PRICES IS TO SABOTAGE THE US-LED SHALE OIL BUSINESS, WHICH CANNOT TOLERATE LOWER OIL PRICES... IF SO, THEN THE SAUDIS ARE DOING THE CHINESE BIDDING... HE EXPECTS THE CRUDE OIL PRICE TO DOUBLE FROM ITS DEPRESSED LOW... THE CHINESE WILL RELEASE GOLD TO SCREAM UPWARD, WHEN THEY ARE FINISHED ACCUMULATION. $$$
The crude oil battles might be due to China exerting its influence on the Saudis, more so than the USGovt. The new team of China and Saudi have come together to forge some new trade ties, and some important projects in development. The following are summary points by Leeb, an independent financial analyst. Many comments are taken verbatim, with occasion Jackass comments interjected in parentheses. Saudi Arabia is flooding a weakened world economy with crude oil. The demand cycle is between heating season and driving season. Usually the Saudis and OPEC cut back on production during this time of year. The Saudis might be targeting the newborn US shale industry with some good old fashioned predatory pricing, to reduce its size, to damage the US so-called advantage. (Leeb does not see the Saudi action as direct attack of a competitor's new marginal output.) One of Saudi's biggest trading partners is China. They not only buy Saudi oil, but Saudi Arabia takes in massive amounts of materials from China. Among the most important materials China sends to Saudi Arabia are for alternative energy. The Saudis want to run on alternative energies within the next 15 to 20 years. Refer to solar and wind power, and desalination for safe water consumption. China is the new expert on the block. (The Jackass believes the Saudis are already world leaders in water desalination.)
The Saudis have grown closer to China, during a time while relations with the United States have fallen off notably. Leeb foresees the bottom of the crude oil pullback to be $75 per barrel, at the worst case. The upcoming oil price lows will be enough to crush a lot of the US-based fracking companies. For example, Continental Resources has debt level at 1.5 times their revenues. Such companies as these will run into serious trouble. The sharply lower crude oil prices are hurting the United States fracking industry the most. This will hurt US GDP from damage to the niche. (The Jackass expects a more broadbased benefit from the lower energy costs of a substantial size, a bigger factor.)
China is being helped by these low oil prices, since it allows them to inexpensively build out its energy infrastructure. It helps the Chinese to develop their solar, wind, hydroelectric, and other alternative energy infrastructures. (The Jackass contradicts this point, since lower oil costs cause less interest in green energy alternatives, not more.) Leeb believes these low oil prices are also hurting Russia. While under distress, the damage done to Russia forces them to turn to China and away from the West. Thus all these historic deals with China. These Holy Grail deals with Russia are being forced to take place on China's terms. The Saudis claim to bring down the oil price in order to preserve market share in the East. This excuse and concept for keeping oil production so high is preposterous. China has clear specified long-term plans with the Saudis. We are witnessing is an element of the global resource wars, as China puts pressure on the West and secures historic deals with Russia.
Back to the US marginal oil segment. If some fracking companies are forced to halt production, they will be in a difficult position later, when the price of oil rises. Most of the low-hanging fruit has already been consumed. The United States would be shoved back into a position where it is dependent upon other countries for its oil. The result will be more negative USDollar pressure from ramped up huge imports again. Disruptions could come (if QE is still firmly in place) with massive price inflation and the price of Gold spiking upward. Leeb expects the crude oil price to double from its next established depressed low level. Therefore a train wreck is coming for the United States because the Chinese are calling the shots. When the Chinese have accumulated enough physical Gold (or the West can no longer supply China), they are going to take the lid off of the Gold price and let the Gold market scream to the upside. In the end, China (and Russia too) will benefit the most from massively higher Gold prices. So investors need to own physical Gold & Silver ahead of that coming move, in order to exploit the next part of China's plan. See the King World News article (CLICK HERE).
◄$$$ A LATE STAGE HAS BEEN ENTERED... THE USD-OIL LOCK IS BROKEN, THE BASIS OF THE PETRO-DOLLAR... A TRANSITION PERIOD HAS BEGUN. $$$
Jaroslav from St.Pete Russia offered a simple but profound point. The main reason that the crude oil price is down is easy to explain. The Anglo-American banker axis cannot any longer support Petro-Dollar. They do not have the resources to sustain the oil price at a high level by means of futures contracts. The underlying link to the oil supply chain is missing. The link has been severed and cut by the Saudis and big Gulf nation oil producers. This is an excellent point, reinforced several months ago by virtue of the convergence by the Brent oil price with the West Texas oil price. Indeed, the USD-Oil lock has been broken. The Jackass adds that a cross-current exists with North Sea output in decline, which affects both the British and Norway. Conclude that European oil demand is way down, due to harsh recession that touches the United Kingdom as well.
The Saudis might appear to be currying favor with the USGovt in ramping up oil output, maybe in North Sea offset, but they might instead be doing the Chinese bidding. The Saudi output capacity is very uncertain, and experts have for years believed they lie on spare capacity to produce additional oil. Either way, Saudi Arabia has broken ranks with OPEC and is pumping more oil than before. It is doubtful they can maintain high output for a long period.
◄$$$ AN OPEC PRICE WAR IS SIGNALED BY SAUDI ARABIA, WHICH PUTS THE OPEC CARTEL IN TURMOIL... THE RISK IS FOR LOWER MOVES IN THE CRUDE OIL PRICE... THE SAUDIS REMAIN SOMEWHAT A MYSTERY WITH LITTLE OR NO SPARE CAPACITY, MANY NEW SMALL FIELDS, BUT WITH MAJOR FIELDS IN BIG DECLINE... THE SAUDIS ARE AMONG THE TRUE, LOWEST COST GLOBAL PRODUCER (LOWEST BEING QATAR, UAE, KUWAIT). $$$
Crude oil is poised to extend the price decline after Saudi Arabia signaled it is prepared for a price war with other OPEC members, according to Commerzbank and Citigroup. The Saudis are not the world's lowest cost producer. That distinction goes to its three Gulf neighbor emirates, plus Libya. They might wish to preserve the income and revenue stream. Saudi Aramco, the state-run oil producer of the world's largest exporter, cut prices on October 1st for all its exports, reducing those for Asia to the lowest level since 2008. The move suggests that the biggest member of the Organization of Petroleum Exporting Countries (OPEC) is prepared to let prices fall rather. Other OPEC nations might object loudly. The Gulf nations are already split with respect to Russian and Iran alliances. Thus the Saudis refuse to give up market share by paring output to clear a supply surplus, concludes the analyst crew at the two big banks. Prices are close to a level that would make production unprofitable for some companies in higher cost locations, which ironically includes the United States shale and fracking marginal producers. See the Bloomberg article (CLICK HERE).
◄$$$ A SECRET SAUDI DEAL ON OIL OUTPUT TO MAINTAIN LOWER PRICE COMES INTO VIEW... THE SAUDIS ARE BARGAINING FOR GREATER INFLUENCE ON USGOVT POLICY IN THE REGION... THE US-SAUDI RELATIONSHIP IS IN THE DIVORCE STAGE, ATTORNEYS IN THE ROOM... THE SAUDIS ARE ANGERING RUSSIA AND IRAN TO CURRY USGOVT FAVOR, WHICH WILL LATER BE REGRETTED... TRANSITION AWAY FROM THE DYING PETRO-DOLLAR WILL BE VERY BUMPY. $$$
Whether propaganda by the USGovt or hidden chess moves by players with few pieces, the events in Saudi Arabia are filled with debate. Some like the brilliant Zero Hedge editor believe a secret deal between the US and Saudi Arabia has taken place. US Secy State John Kerry is the latest in a shrinking series of state figures. He brought to the table elements of a grand alliance for Middle East unity. It showed Saudi Arabia to be aligned with the United States against ISIS, at a time when the Saudis are in diametric opposition to the US on all matters pertaining to the Petro-Dollar higher level activity, namely its demise. The Saudis are interested in using their leverage to extract a fresh US commitment to bolster training for rebels fighting against the Assad regime in Syria, backed by Russia. The Riyadh Royals continue to see the regime removal as a top priority. In return, the Saudis would compensate the US by means of its general oil policy. They have apparently used the oil weapon, in a new way to wage war. Actually it is not new, having been used in past decades. The weapons use the oil price as leverage to force aggregate income lower for Russia, an oil rival, and an economic rival to the US. Russia might be the US crosshair target for sighting in a primary sense, but so is Iran, the longstanding Saudi rival. It should be noted that Iran has a 50% higher cost of oil production than Saudi Arabia, at $140 versus $93.
The Anadolu Agency attempted to settle the complex table. They explain the big picture involving Saudi Arabia and its major oil asset, but also the latest fracturing of OPEC at the command of Saudi Arabia. The sand kingdom of Saudi Arabia wishes to force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the Saudi Arabia Oil Policies & Strategic Expectations Center. The cheap oil sales are done for political reasons, such as to pressure Iran to limit its nuclear program, and to alter the firm Russian position on Syria. In fact, the Saudis are making clear gestures to sell crude oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy, the center's president. He believes the marked oil price decline in the last three months to the $90 level from $115 per barrel was caused by Saudi Arabia almost exclusively. The usual motive to reduce price in order to attract new customers does not carry weight. The motive is political. Both Russia and Iran depend heavily on petroleum exports for revenue. The Gulf states will be much less affected by the price drop. The OPEC nations will not be in a position to prevent the unilateral action by the Saudis. Although the cartel is the the technical arbiter of the oil price, the other eleven nations cannot affect the Saudi Arabian decision. The cartel can only make recommendations on the oil price, in a non-binding manner. See the Zero Hedge article (CLICK HERE) and the Anadolu Agency report (CLICK HERE) and the Moon of Alabama article (CLICK HERE).
The Jackass believes firmly that the Saudis are caught in a powerful large vise. The United States is stealing their gold in Swiss banks, the big big untold story except on Hat Trick Letter. The Saudis are threatened regularly with Langley violence inside their borders, given cover by the many native camps in opposition to the royals in power. King Abdullah is surely currying favor to the US, which probably threatens the Royals with internal disruptions, even some ISIS redirection to Riyadh locations. The Langley clan have the ISIS weapon, which they can turn on Saudis at any time. Therefore the Saudis do as they are told, while they quietly build a new relationship with the Chinese partner on the eastern front. Their action to suppress the oil price does damage to the Russian income stream, earning approval by Washington. But Russia is motivated to respond, perhaps through their Chinese partners. The Saudis dump oil to increase leverage over US policies in the Middle East. The Saudi policy is to retain market share and slow down the feared US embrace of a reforming Iran. They are at mixed motives, since they do not wish to accumulate any more USTreasurys with their surpluses. They established an independent sovereign wealth fund in Riyadh for the hidden purpose of converting USTBonds to Gold bullion. Their US relationship is long past fixable. No trust exists anymore.
The Chinese have considerable sway and influence among the Saudis and other emirate nations. In addition, the Russians are encroaching on the entire Gulf region within the natgas sector. Despite the conflict over the oil price, the Jackass expects Russia to soon work more closely in setting the oil price in Yuan terms but with Russia influence. All in time, when the Saudis remove more daggers in their backs placed by the American Fascists. The Saudis can no longer support the Petro-Dollar from a payment method standpoint. When they permit non-USD payments for oil by Europe and Asia, the US-Saudi divorce will be in the open. That day comes soon. From a financial angle, the US is dying and the Petro-Dollar is being kept alive in the Intensive Care Ward. The Saudis are on the ropes, with a regime change in the works. Rival tribes for the last 30 years are vying for power. Major changes are coming to Saudi Arabia. They are trying to manage the Petro-Dollar demise in a transition with Chinese pricing but with significant Russian role in the supply & demand equilibrium. In the process, the Abdullah family will be removed from power. Their position is made extremely vulnerable, since in the backdraft of the Petro Surplus Recycle era, the Saudis other Emirates sit on at least $1 trillion of USGovt debt toxic debt paper. It seems clear that the Saudi Royals in power are making strange desperate actions, and cutting deals with the devil, later to regret.
◄$$$ CANADA HAS FOUND AN OIL ROUTE AROUND THE OBAMA ADMIN OBSTALES FOR THE KEYSTONE PIPELINE... THEY WILL GO STRAIGHT TO THE MARITIME PROVINCES ON THE ATLANTIC... THE USGOVT HAS BETRAYED CANADA, AND NO LONGER WANTS ITS ALBERTA SANDS OIL... CANADA MUST WORK AROUND THE OBSTACLES, AND BRING THE OIL TO REFINERIES IN THE EAST COAST. $$$
The Canadians have an ambitious plan to bring an oil sands pipeline to the Atlantic Ocean. The Energy East pipeline will carry 1.1 million barrels of crude oil per day over a distance of 4600 kilometers (=2860 miles) from Alberta's oil sands region to Eastern Canadian refineries and marine terminals for export. Spanning six Canadian provinces, the C$12 billion (=US$11 bn) Energy East project would include the conversion of an existing natural gas pipelines from the 1950 era to an oil conduit, as well as new construction. It will start carrying crude oil in 2018, if completed. The Canadian oil industry is feeling betrayed. The original plan to transport a mother lode of heavy crude in Northern Alberta all the way to refineries on the US Gulf Coast via a pipeline called Keystone XL, that has all changed. The US once desperately wanted that oil, but not after the Bakken and Shale revolution, despite its very high costs and pollution risk. The US-based environments got in the way (often a tool used by Rockefellers behind the scenes). The US oil interests blocked progress. From the Canadian perspective, Keystone has become a tractor mired in a permanently muddy field. To be sure, Canada's own environmental and aboriginal politics are holding up a shorter and cheaper pipeline to the Pacific coast that would supply a shipping portal to Asia. Instead, it will go east, all the way to the Atlantic.
Thus was born Energy East, an improbable pipeline that its backers say has a high probability of being built. It will cost C$12 billion (=US$10.7 bn) and could be up and running in four short years. The new pipeline could be Keystone on steroids, more than twice as long and carrying a third more crude. Most important is the total control by Canada. Its end point is a refinery in Saint John New Brunswick, operated by a reclusive Canadian billionaire family. The port offers the high volume of oil sands crude as the ultimate goal, supertanker access to the same Louisiana and Texas refineries which Keystone was intended to supply. The obstreperous capricious indignant arrogant Obama Admin cannot stop it, since out of their control and beyond their jurisdiction. So confident of success is TransCanada Corp, the chief backer of both Keystone and Energy East, that Alex Pourbaix, the executive in charge, spoke of the cross-Canada pipeline as virtually a done deal. "With one project, [the new pipeline will give an outlet not only to] Eastern Canadian markets but to global markets. We have done so at scale, with a 1.1 million barrel per day pipeline, which will go a long way to removing the specter of those big differentials for many years to come." The project still faces political hurdles. In Quebec, where most new construction will occur, a native environmental movement is already asking tough questions. They will demand transit fees as compromise. See the Bloomberg article (CLICK HERE).
◄$$$ THE NEW JAPANESE YEN THREAT IS REAL AND DANGEROUS... THE FALLING YEN COULD PUSH DOWNWARD PRESSURE ON THE CHINESE YUAN, WHICH BY THE TRADE FLOW FACTOR SHOULD RISE... JAPAN HAS LOST ITS TRADE SURPLUS, DEPENDS UPON QE FOR BOND SUPPORT, AND IS IN BIG TROUBLE... GREAT DISRUPTION COMES TO THE EAST PACIFIC, FOR INDUSTRY AND EXPORT TRADE, AS WELL AS BOND MARKET CONTROL. $$$
Albert Edwards is plain when describing the current turmoil in East Asia. "The Yen will take down the Yuan and other Asian currencies with it." The Japanese Yen has lost all its post-Fukushima gains, once stable at the 125 level, but no more. The higher electric costs, higher tax imposition, greater Chinese competition, and lost trade surplus have worked to produce a new nightmare for Japan. Their entire industrial model has been adversely altered. Turmoil has come to Japan in particular. It has gone totally haywire in supporting its sovereign debt, the JapGovtBonds girded completely by printed money. One year ago, the Jackass warned that the Japanese bond and currency market would go topsy turvey in a very unstable situation, as a direct result of the lost trade surplus. For two decades, Tokyo abused the trade surplus to suppress the JYen currency, thus supporting their vast export trade. In recent months, their own version of QE to Infinity (23 years and still running) has brought havoc to the bond market, and finally to their national currency. To go below the closely watched 100 exchange rate level means calls of free fall.
The cheaper Yen suddenly makes Japanese exports more competitive with the low-cost Chinese labor output. That is exactly what floating currencies should to, address the imbalance. The Japanese Economy is in deep trouble, very deep trouble. Its Gross Domestic Product fell a staggering 7.1% in 2Q2014. The nation carries overall staggering 400% debt to GDP, still rapidly rising. The nightmare in the land of the rising sun only began with the Langley project at Fukushima. Expect the JYen to test the 90 level. If the FOREX is permitted to do its work, the China-Japan imbalance will force the JYen exchange rate to below 90, until the two nations are on more equitable competitive footing. The JYen must discount its higher labor costs. Tokyo had begun work with China and SKorea on a regional currency. The Boyz kicked over their table. See the Bloomberg article (CLICK HERE).
◄$$$ FACTORS ON THE RAPID DESCENT OF RUSSIAN RUBLE ARE NOT COMPLICATED... PUTIN HAS LET IT BE KNOWN THAT CAPITAL CONTROLS ARE NOT TO BE IMPOSED ON THE RUSSIAN BANKS... SOME ADVANTAGES HAVE COME SINCE ENERGY FIRMS OPERATE WITH RUBLE (LOWER) COSTS AND SALES (HIGHER) REVENUE IN USDOLLARS... TO BE SURE, THE RUSSIAN CENTRAL BANK HAS VERY LIMITED TOOLS IN MANAGING THE INFLATION RISK. $$$
The backdrop is risk filled and harsh. The Russian Ruble has fallen over 20% against the USDollar since the beginning of the year, hitting new lows. The implications and consequences are vast, in the war brought to the Russian Economy and its society by the masters of the bank cabal. So far the victims have been Russia, but the whiplash from a fast Ruble rebound due to energy resource and vast mineral payments could be impressive. The Russians must pay more for Western goods of all type, an imported price inflation. They receive a bonus for all the commodities paid in USD terms, since it is lofty in value and their Ruble is down hard. The bigger issue is access to Western capital, the return of capital home, and credit access from banks, even foreign direct investment funds. The Wall Street and London bankers believe they are invincible, but they have built a trap for themselves. The nation of Russia is rich in commodities, and has begun to link with China on payment systems. The United States is overloaded with debt, and is fully dependent upon hyper inflation and war. The odds favor Russia, which has no external debt. Neither does China, but the nitwits running the USGovt believe they are dominant.
Russia Today interviewed Ben Aris, editor in chief of Business New Europe, to learn of effects on Russia, its people, and economy. The result is enlightening and somewhat unexpected. Russia has decided on no capital controls. The nation is unique among emerging markets, the only one with a total open current account free of restrictions for money transfers. They would impose capital controls only as a last resort during a severe crisis at home. Russia is far from the position of running out of hard currency reserves, unable to pay for required imports. The nation has $450 billion, the third largest FOREX reserves in the world, serving as a large cash cushion. They are far more prepared for a full blown financial meltdown. Making the Ruble currency free floating among other majors would help the nation, providing even more liquidity cushion. Many facilities must be readied quickly.
The direct effects of a weak Ruble are many. A difficult balance between high inflation and slow economic growth must be achieved. Aris summarized, "It makes Russian products cheaper, makes it easier to export, and adds more revenue. The oil companies in particular benefit. They do extremely well because their costs are in Rubles, but revenue in Dollars. Inflation is being driven by non-monetary factors. The usual things done to bring inflation down is to attach to monetary policy (how many Rubles you print), and none of these things are actually pushing inflation up. Things like food prices are outside of the central bank. So she [Central Bank Chief Nabiullina] has a very hard job of trying to manage inflation, because she does not actually have any tools to deal with it. This is a wider problem of structural reform, lifting the sanctions and ending sanctions on European food, investing into agriculture. But these things will really only start to kick in and make a difference a couple years down the road. In the meantime, they will have to muddle through the best they can." Aris makes the point well, that Russia does not have an inflation problem due to monetary excess, printing too much money from lost discipline. The cause is external and in fact very vicious in its manipulation. See the RT Business article (CLICK HERE).
## BANK WRECKAGE & RUINS
◄$$$ BIG ANGLO-AMERICAN BANKS FACE MORE PENALTIES AND LEGAL CHARGES... THESE ARE BASIC COST OF DOING CRIMINAL BUSINESS... JOB CUTS CONTINUE... MID-SIZED GERMAN BANKS ARE TEETERING ALSO. $$$
In the most recent settlement, the Bank of America paid $16.65 billion to resolve charges from the USDept Justice that it misled investors in mortgage bond sales. The bank posted a huge net loss, with a $5.6 billion charge in Q3 to cover the loss. Since 2010, the second largest US bank (and favorite of Papa Bush for narco money laundering) has agreed to pay at least $70 billion to resolve a wide range of disputes and violations. See the Reuters article (CLICK HERE). The criminal activity is integrated into the business. Between 4Q2011 and 3Q2014, Bank of America produced net income of $15.9 billion, balanced against a long series of one-time, non-recurring charges for penalties and legal expenses that total a stunning $28.9 billion. After six or eight of them, they should no longer be called one-time. See the Zero Hedge article (CLICK HERE).
JPMorgan set aside $1 billion for a FOREX rigging penalty, paid from its legal reserves, depressing the Q3 results. The bank has paid $billions in penalties over regulatory violations and lawsuits in the past two years, ranging from the London Whale trading fiasco to mis-representing mortgage backed securities. See the Financial Times article (CLICK HERE). Barclays has agreed to pay nearly $20 million (=12.43 mn British Pounds) to resolve a US class action lawsuit accusing the British bank of manipulating the LIBOR benchmark interest rate. The deal follows earlier agreements by Barclays in 2012 to pay $453 million to settle investigations by US and British authorities also related to LIBOR. See the UK Reuters article (CLICK HERE). Lucky for Barclays that the real damage of a few $trillion in rigged LIBOR losses was not the size of the penalty.
Lloyds Banking Group, the largest British mortgage provider, is ready to eliminate thousands of jobs in what may be the biggest round of cuts since 2011. The bank has eliminated more than 37,000 jobs in the aftermath of its government bailout in 2008. Its new so-called digital strategy is part of a three-year plan and will be presented alongside Q3 results at month's end. See the Bloomberg article (CLICK HERE).
Handelsblatt reported that four German banks are on the brink, of which three are known, HSH Nordbank, IKB, and MunchenerHyp. They are expected to fail the EuroCB oddball stress test, whose results are due soon. Financial industry sources have named the state-backed regional lender HSH Nordbank, as well as the Dusseldorf-based IKB, which supports small and mid-sized businesses. The southern regional bank MunchenerHyp is also teetering insolvent. The fourth bank's identity is still unknown. Commerzbank is Germany's second largest bank, still 17% owned by the German Govt. It seems to have been successfully replenished or propped. In utter amazement, Deutsche Bank is not being treated as a problem bank. In bizarre calculus, their future legal costs are not being considered in the stress test. Its capital increase last spring had a positive bearing on the stress test. A little sprinkle of narco money never hurt either. See the Zero Hedge article (CLICK HERE).
◄$$$ BIG BANKS FACE ANOTHER ROUND OF USGOVT CHARGES... HYPOCRISY RUNS THICK, AS WALL STREET BANKS ARE NOT THE TARGET... DURING THE SCRUTINY, THE TOO-BIG-TO-FAIL BANKS FACE UP TO $870 BILLION CAPITAL GAP. $$$
The USDept Justice continues its dishonorable pursuit of bank violations, sparing the main culprits of $trillion crimes, choosing instead to give hand slaps. While cases stemming from the financial crisis were aimed at institutions, prosecutors are planning to eventually indict individual bank employees over currency manipulation, using their instant messages as incriminating evidence. Traders, not executives, will be the target as the ever-vigilant and highly partial USGovt cleans up the FOREX market rigging in the usual biased manner. See the New York Times article (CLICK HERE) and the Bloomberg article (CLICK HERE). If the USGovt has directed an attack primarily against Deutsche Bank, then the German Govt might have had enough. The time is coming when the WashingtonDC Boyz push too hard, show too much hypocrisy, which results in German announcemounts of more open alignment with the East. The DBank attack might be sufficient in my view.
The capital shortfall facing lenders from JPMorgan Chase to HSBC Holdings could be as much as $870 billion, according to estimates from Alliance Bernstein Ltd, or as little as $237 billion from a Barclays forecast. The range is so wide because proposals from the Basel-based Financial Stability Board outline various possibilities for the amount lenders need to have available as a portion of risk weighted assets. With those holdings in excess of $21 trillion at the lenders most directly affected, small changes to assumptions translate into big numbers. The FSB wants to limit the damage the collapse of a major bank would inflict on the world economy. See the Bloomberg article (CLICK HERE).
Fines and penalties over FOREX currency market rigging could reach $41 billion on a global basis, according to Citibank analysts. Deutsche Bank is seen as probably the most in focus, with a fine of potentially EUR 5.1 billion (=US$6.5 bn). The bank's settlements could reach 10% of its tangible book value, or its asset worth, unsure of whether mark to market. Using similar calculations, Barclays could face fines of perhaps GBP 3 billion (=US$4.8 bn) and UBS perhaps SWF 4.3 billion (=US$4.6 bn). See the Bloomberg article (CLICK HERE).
◄$$$ LUXEMBOURG COURT HAS DECLARED THE PORTUGUESE ESPIRITO SANTO HOLDINGS BANKRUPT, DESPITE ALL THE HEROIC EFFORTS TO PATCH OVER ITS GAPING BALANCE SHEET HOLES WITH PAPER MACHE. $$$
Two holding companies of Portugal's bailed out Espirito Santo banking group have been declared bankrupt by a Luxembourg court. The widely expected ruling of Espirito Santo Financial Group and Espirito Santo Financiere came after creditor protection for the entities was refused. The collapse of Banco Espirito Santo came just months after Portugal successfully emerged from a EUR 78 billion (=US$99 bn), bailout financed by the EU and IMF over three years. At issue was multi-national accounting fraud, through holding companies based in Luxembourg. See the Money Web article (CLICK HERE).
◄$$$ BANKS PLAN TO WRITE OFF DERIVATIVES WHEN A COUNTER-PARTY FAILS, AND TO LIMIT UNWANTED PULLING OF SYSTEM PLUGS... THE REFORM WILL ALLOW THE IMPORTANT NICHE MARKET TO BE FURTHER CORRUPTED WITH NO ACCOUNTABILITY. $$$
The world's biggest banks have agreed to tear up the rulebook on derivatives and thus to make it easier to resolve a future failing institution like Lehman Brothers. Details involve 18 bank dealers ranging from Credit Suisse to Goldman Sachs. They have agreed to yield certain rights to pull the plug on derivatives contracts. The reform (ass covering) was led by dealers under the Intl Swaps & Derivatives Assn aegis. The idea is to make it more difficult to stop their counter-parties from terminating derivatives contracts in the event of a crisis. The ISDA is due to announce the reformed protocols which govern the $700 trillion market soon, to take effect as of January 2015. See the Financial Times article (CLICK HERE).
◄$$$ DEBRIS FROM SUBPRIME AUTO LOANS LITTER THE LANDSCAPE, SURE TO RICOCHET ACROSS MAIN STREET... MORE BANK LOSSES ARE TO COME... MINOR MEASURES WILL HELP IN STEALING FROM MONEY IN MOTION. $$$
The car loan segment of the asset backed bond market is under scrutiny. The losses are mounting, since car loans typically involve negative equity out of the gate, yet the tainted income stream is sold as bonds to hapless clueless investors. More details on the muddy platform of car loans can be found in the final economics chapter of this report. A sinkhole of debt continues with downward momentum into the drain, with massive losses occurring. See the Wolf Street article (CLICK HERE). Many are the devices for banks to separate clients from their money. Basic oversized monthly bank fees provide some cash relief. But institutionalized bank kiting appears to be gaining speed. The banks force long delays on wire transfers, with claims of verification on transfer sources. In the meantime, the cash earns interest for the banks. Sometimes a security alert form is filed, which can result in confiscation of the entire transfer amount, all done with zero due process. Fees generally are rising for most services in expedited manner. Early departure from bank certificates of deposit calls for penalties, when the investors grow tired of earning a paltry yield, often in the 1% range.
◄$$$ PIMCO'S OUTFLOW HEADACHES INTENSIFY, FOLLOWING THE DEPARTURE OF KINGPIN BILL GROSS... THEN MORNINGSTAR DOCKED THE PRESTIGIOUS FUND FROM GOLD TO BRONZE, ADDING INSULT. $$$
Outflows from PIMCO will become a massive torrent, following the exit of Bill Gross. He left to join Janus Capital on September 26th after 27 years of service in Newport Beach. The PIMCO funds saw $25.5 billion in withdrawals in September across all of its US-based open-ended funds. See the Reuters article (CLICK HERE). As consequence of lesser perceived integrity and shrinking liquidity base, Morningstar has stripped PIMCO Total Return Fund of its tip-top rating. They reduced its analyst rating to bronze from gold, citing uncertainty about outflows and the reshuffling of management duties. Expect perhaps high volume USTBond sales. The Jackass long has believed that Gross was not a true insider, never anticipated the huge volume of fabricated USTreasury demand from derivative output, and was caught wrong footed. He grew tired of the betrayals to the bond market. Gross might have been invaded by a mole named Mohamed El-Erian, after the well spoken man left the Harvard Univ crime center where he contributed toward the Enron fraud. See the Reuters article (CLICK HERE).
◄$$$ GOLDMAN HAS A LONG COZY HISTORY WITH NEW YORK FED, WHICH HAS COME TO LIGHT... NUMEROUS VIOLATIONS ARE CATALOGUED... SECRET GOLDMAN SACHS TAPES PUT PRESSURE ON NEW YORK FED. $$$
Senator Elizabeth Warren wants the USCongress to investigate the Goldman Sachs relationship with the Federal Reserve Bank of New York. A stunning whistleblower event has occurred, which features a great many hours of tape recordings of conversations in which the USFed officials seem to be in discussions with partner Goldman or actually receiving instructions. The entire Congress is loaded with bribery and campaign contributions from Wall Street banks. It will be therefore interesting to watch the politicians squirm while they are still in the banker pockets. One tape in focus shows numerous calls between Goldman Chairman Lloyd Blankfein and Treasury Secretary (and ex-Goldman co-chair) Hank Paulson during the 2008 financial crisis. Recall that GSax has had firm control of the USDept Treasury since the Clinton Admin. A second tape from January 2011 discloses how William Dudley (Head of the New York Fed and a former Goldman executive) had lunch with Goldman Chief Economist Jan Hatzius during a period in which Fed officials were forbidden to have contact with outsiders. The USFed seems impervious to criticism or charges of misconduct. See the New York Post article (CLICK HERE).
Committees in the Senate and House of Representatives are looking at whether to hold hearings or to conduct more extensive investigations into USFed oversight of Goldman and other banks. The renewed interest in the Fed's role came after the release of secret recordings detailing interactions between employees of the New York Fed and Goldman, which were made public by the investigative news organization ProPublica and the radio program "This American Life" in recent weeks. The former Fed employee Carmen Segarra made the recordings, having previously sued the New York Fed. She arguing that she had been fired for being too critical of Goldman. She revealed the hypocrisy of the NYFed. In public Dudley looks weak and dirty with statements to defend his integrity and propriety. Expect a settlement with Segarra out of court, or possibly a fatal car accident. See the New York Times article (CLICK HERE).
◄$$$ HACKERS ATTACKED AND CRACKED 10 US-BASED FINANCIAL FIRMS IN A MAJOR ASSAULT... THE PRIMARY TARGET WAS JPMORGAN... BEFORE ANY INVESTIGATION WAS DONE, RUSSIA WAS GIVEN BLAME... THE CULPRIT USUALLY IS THE LANGLEY CREW, PREPARING FOR AN ACCOUNT THEFT ON A NATIONAL SCALE. $$$
As preface, bear in mind the sheer coincidence that hackers gained entrance into the hallowed JPMorgan cyber chambers a mere one month after an Air Force Colonel specializing in CyberDefense was named Head of Information Security. He is either responsible or else incompetent. To be sure, a coordinated attack on the banking system could set off another financial crisis, with missing accounts from banks, brokerage houses, pension funds, insurance policies, and more. The entire story stinks of propaganda and lies, like all in the past, which often have been blamed on China and Iran. Now add blame to Russia, when the principal player in cyber attack is Langley and the USGovt security agencies. The depth of the intrusion is unclear, as are the identities of the other financial institutions. The attack of the digital networks was not completely halted until the middle of August. The pathway taken was JPMorgan customer data where 76 million households and seven million small-business online accounts were located, but not financial data. So we are told that hackers were apparently able to move around the rock solid JPMorgan computer system and archives undetected for several weeks, grabbing high level administrative privileges within their network. In essence the hackers grabbed schematics to the JPM information system architecture. See the New York Times article (CLICK HERE).
Truly lame and predictable judgment followed the hacking incident. The USGovt proclaimed that Russians were behind the targeted cyber attack, a conclusion made probably before any examination of the facts (like with the downed Ukraine airliner). Thus consider it a Langley internal action. For almost a full decade the Iranians were falsely blamed, then the Chinese. The hacking is done 90% of the time by Langley, to keep the nation safe and free (for the bankers to rape and pillage in financial fields). The story is loaded with fabrications, inconsistencies, and basic nonsense. The Kremlin knows full well the US weak points. If the Russians want to bring JPMorgan to its knees, all they would have to do is take steps in a few directions. They could dump USTreasurys with all their friends in the East, forcing a panic and fast QE bond coverage. They could withdraw their precious metals production from world markets, forcing a capitulation by JPM in the COMEX futures market. They could fry the JPM information systems at the Chief Investment Office, where the illicit derivatives are managed. They could deliver a minor EMP pulse in South Manhattan, and let it go dark. The Russians have nothing against US citizens, only the fascist officials in WashingtonDC. See the Yahoo Finance article (CLICK HERE).
## GOLD AS HEDGE, THE VALID CORE
◄$$$ CHINA WANTS PARTICIPATION IN PRICE DISCOVERY IN ALL MARKETS... THEY MIGHT MAKE THEIR POINT EMPHATICALLY SOON, BY WRESTING CONTROL OF CERTAIN MARKETS, NOT JUST THE GOLD MARKET... SEVERAL MARKET DEVELOPMENT VEHICLES ARE COMING ONLINE IN CHINA, FOR RISK MANAGEMENT AND COMMODITY PRICING METHODS... CHANGES COME FOR GOLD, OIL, METALS PRICING METHODS. $$$
Time has come to give more focus on Chinese derivatives, reaching beyond the Gold market. The nation is attempting to manage its risk, while developing its markets. The saga of opening China's participation in global capital markets has had many fits and starts, progress and frustration. Change has begun. The Xi Jinping Regime has seen more market liberalization, as concrete evidence of development has occurred. The announcement in April by the central government of the Hong Kong Exchanges & Clearing and the Shanghai Stock Exchange Stock Connect reinforce the perception of tangible change. New players in late October are expected to enter, which previously did not have access to China via the qualified foreign institutional investor quota schemes. Some arbitrage is anticipated between the valuation differential between stocks listed in both Hong Kong and Shanghai. While this project is significant, it will be eclipsed in the long term by the scale and scope of other projects. The key policy focus in Beijing is on developing markets that can bolster China in tangible economic development.
The Beijing officials seek better market based pricing in commodities, where China is the major global consumer. The primary emphasis given is for price discovery to take place in Asia and not just in London, New York, and Chicago. China wants more participation in the pricing process, long the victim of Western chicanery and subterfuge. Their state-owned enterprises are poised to be allowed to increase their hedging practices in a wide range of commodity futures and options markets. As a result they are actively seeking to increase the sophistication of their risk management practices both domestically and in international markets. The launch in the past two months of over-the-counter commodities clearing in iron ore and coal by Shanghai Clearing House and the international board of Shanghai Gold Exchange are significant developments and should be more watched closely. Being a spot and forward market, the Shanghai Gold Exchange is particularly relevant. It tends to offer fully fungible access to onshore liquidity in precious metals for international companies. It will also offer access to a highly interesting arbitrage between global and domestic prices, which are subject to demand. The Jackass expects some surprises.
By the end of this year, OTC commodities trading and clearing will be extended to other products, including copper in both spot and forward markets in the Shanghai Free Trade zone. It is interesting to note that both the Shanghai Clearing House and Shanghai Gold Exchange are regulated by the Peoples Bank of China. Their central bank seems to be at the forefront of implementing these important market reforms. There are also expectations that we will finally see the launch of the Shanghai Energy Exchange in the same Shanghai FTZone by the end of the year. This is a huge market development, as the Petro-Dollar is phased out and Russian factors enter the oil price equation. Many industry veterans are cautious about investing in market development initiatives in China. The guiding principle for many Western firms has for years routinely been to put your costs into China but not your revenue line. The market pricing methods for Gold, oil, and metals is about to undergo changes. See the Financial Times article (CLICK HERE). As footnote, the COMEX is regulated not by the USFed, but rather by a separate Commodities Futures Trading Commission (CFTC).
◄$$$ THE GERMAN GOLD REPATRIATION STORY WILL NOT GO AWAY... IT HAS EXPANDED TO COVER THE 2000-2001 PERIOD... A VISIBLE EVENT WAS SEEN IN 2011 WITH A FORMAL REQUEST, WHICH WAS DENIED IN GREAT INSULT... FINALLY GERMANY WANTS ALL ITS GOLD BROUGHT HOME, AS SOMETHING IS AFOOT BESIDES DISTRUST... THEIR PARLIAMENT AND AN AUDIT GROUP HAVE PUT FULL WEIGHT BEHIND THE ISSUE... THE ANGLO-AMERICANS STOLE GERMAN GOLD. $$$
Germany gives all the indications expected of a nation pursuing a gold-backed currency. The battle has escalated over stolen German official gold. Events at the turn of the millennium are under the light, gaining scrutiny. Records show that Germany withdrew two thirds of its vast holdings of gold from Bank of England vaults shortly after the launch of the Euro currency more than a decade ago, according to a confidential report by German auditors. The revelation came as Germany's budget watchdog demanded an on-site probe of the country's remaining gold reserves in London, Paris, and New York. They wish to verify whether the bullion reserves really exists, or were stolen. The word rehypothecated is just a formality for theft and pilferage. Germany is listed as in possession of 3396 tons of gold worth EUR 143 billion, the world's second largest holding after the US. Bear in mind the US owns zero gold, all stolen by Clinton, Bush, Paulsen, Dimon, and Wall Street in the 1990 decade under the motivated watch of Robert Rubin. The Germans stored gold bullion in US vaults for two reasons, security during the Cold War and ease of movement since the trade surpluses originated in part from the USEconomy.
The breakdown is listed as 66% held at the New York Federal Reserve, 21% at the Bank of England, and 8% at the Bank of France. The German Court of Auditors told legislators that the gold had never been verified by inspection, and ordered the Bundesbank to secure access to the storage sites. The order include a test of quality as well, a hint of the fake tungsten bars pushed upon the world during the Clinton-Rubin Admin. Both Germany and Hong Kong are proven victims. The visceral theme has been joined by German legislators. "All the gold must come home. It is precisely in this crisis that we need certainty over our gold reserves," said Heinz-Peter Haustein from the Free Democrats (FDP). The Buba openly states having full trust in the integrity and independence of its custodians, but the truth is the exact opposite. The German central bank has watched the pilferage and improper usage by London and New York for two decades. They suspect theft. The Buba wishes to relocate part of the holdings.
Here is a point of controversy. The report also claimed that the Bundesbank had slashed its holdings in London from 1440 tons to 500 tons in 2000 and 2001, allegedly because storage costs were too high. The metal was flown to Frankfurt by air freight. The revelation has baffled gold veterans. The shift came as the Euro exchange rate was at its weakest, slumping to 84 cents per USD. But it also came as the Bank of England was selling off most of Britain's gold reserves on orders from Gordon Brown, at absurd market lows. Other evidence indicated in the recent past that Brown was alleviating the German Gold return with emergency sales, in order to spare England of some deep embarrassment and shame. Thus the Brown bottom in Gold price. See the UK Telegraph article (CLICK HERE). The Jackass believes Germany is making the case to leave the Euro Monetary Union with its EuroCB battle, and to leave NATO with its New York Fed gold battle. At direct issue is corruption and lost trust between partners.
London Paul added a comment that reaches to a greater scope in Europe. "Germany's patience has clearly run out. You can openly see the hostility between the Euro Central Bank and Bundesbank over for instance QE and bond monetization. Nevermind the small fact about the legal interpretation of its very implementation. With regards to the NATO/US axis, the same disdain is now very obvious too. Rather like the US, the UK is in for some serious payback for what it has done to the world for decades and beyond."
The Voice made reference to many fronts in current conflict. "All the German Gold will be repatriated. The Bundesbank has a clear mission and that does not include kissing the ring on bent knee to the USFederal Reserve and Euro Central Bank (nor ass kissing). That became obvious in Washington a few days ago, where the Kabuki Theater is orchestrated. Furthermore, the USGovt owes US$8 billion in over-payment for Germany's non-participation in the first Bush Gulf War [Kuwait War]. There are a couple of open issues that are being weighing on Washington right now, which seem incredible. However, given the deep lies from the US-led coup in Kiev and related sanctions against Russia, and open hostility between the two nations played out in the corner offices and the press, Putin has upped the ante. The Russians are claiming that Alaska was not sold to the United States, but rather only leased; they want it back. This will surely be an interesting issue to follow. Moreover, Mexico wants its stolen lands back from the US from aggressive wars.
These actions are what happens if a nation conducts itself like a oppressor, bully, intimidator without due respect, treating other superpower nations like Sudan, screwing over other nations all the time, all while operating as a indebted cripple. The powerful nations eventually deliver the same harsh volleys in counter-attack at the right time. The East is also angry at the introduction by the British of fractional reserve banking 300 years ago. Centuries of disgust and anger will come forward, including the Opium Wars by the British against China. It is finally payback time. The Western bankers have never been more vulnerable."
◄$$$ USMINT GOLD & SILVER COIN SALES ARE VERY STRONG... USMINT BULLION COIN SALES MORE THAN DOUBLED IN SEPTEMBER IN RESPONSE TO THE PRICE PLUNGE (DUE TO DEEP MARKET SUPPRESSION). $$$
The graph below shows the USD volume of Gold Eagles and Gold Buffaloes next to the USD amount of Silver Eagles all the way back to the beginning of 2009. Data actually pertains to coins sold during the previous month. Once again the USD value of silver sales came close to the USD value of gold sales. This has become the new norm, evident in the earlier years on this chart. The Wall Street gangsters can play their games with a suppressed paper price, but they actually hasten their own demise due to the accelerated physical demand. The precious metal inventories are being drained fast. There is no favorable end game here for the bank cabal, except for force majeure and dishonored contracts, followed by court cases.
Sales of gold coins more than doubled in September as the price fell, regardless of corruption or not. The market responded with greater demand. Sales rose to 58,000 ounces, the highest since January. That compared with 25,000 ounces in August and 13,000 ounces a year earlier. The sequential gain recorded was a 132% gain from month to month. Investors seized the price decline. The month saw an enormous gain in demand. Pressures have risen to screaming acute levels in the physical market, while investors moan in a depressed state over the paper market. See the Mineweb article (CLICK HERE).
◄$$$ RICKARDS ON HUNTER WATCHDOG SHOW SPOUTED ABOUT MANY TOPICS... HE DOES NOT EXPECT CHINA TO BE IN POSITION FOR YUAN TO ACT AS RESERVE CURRENCY... HE EXPECTS THE INTL MONETARY FUND TO BAIL OUT THE CENTRAL BANKS WITH OVER $4 TRILLION IN SDR BASKETS OFF THE PRINTING PRESS... THE MAN KNOWS NOTHING ABOUT FIRM LASTING REFORM... RICKARDS DOES NOT FORESEE THE CHINESE LAYING THE GROUNDWORK FOR A RETURN TO THE GOLD STANDARD (WITH YUAN IN PRIMARY ROLE), AS HE ONLY SEES A USDOLLAR HEDGE... A JUICY REBUTTAL IS GIVEN BY ROB KIRBY. $$$
Jim Rickards is an interesting figure, author of a new book entitled "Death of Money" that has been well received. He is a culpable system wonk and serves a purpose while appearing as a maverick and friend of gold. The following are his thoughts put to prose, with my rebuttals in bold parentheses. The Islamic State, the emerging caliphate, is not a new concept, but rather an old fixture for centuries, now awakened. The USGovt has been caught off guard (nonsense, the USGovt actively revived it for their destabilization purposes after exiting Iraq, to use the wild card). Their guerrillas have captured equipment, and been supplied possibly by diverted Saudi arms. A risk of spectacular terror attack exists, including a risk from disruption of oil transport. The United States depends little on Gulf oil supply, but China and Europe depend heavily on the Gulf region for their oil, suddenly at risk. The crude oil market has 3 main factors currently working to provoke a price decline. 1) supply & demand equation slowing down, 2) geopolitical wild card not seen yet, 3) monetary policy giving us deflation. Rickards dislikes the black swan metaphor, and prefers the snowflake and avalanche, which signifies the accumulated risk. The Ebola virus presents a pandemic risk, but still is just a snowflake. It could grow to become a pile of snow, or to become an avalanche.
The financial markets can be taken down by unforeseen events. However, the many blunders to date are built into the system, already recognized, having happened, and factored in. Rickards cannot anticipate the timing of calamity, but the magnitude of the collapse can be foreseen. Rickards accuses Russia as having responded asymmetrically with cyber warfare, an example at Nasdaq in 2010. (But Russian virus traces could easily have been planted by Langley software experts. Langley has been improperly painting Iran and China for many years, to take blame for Langley's own extensive work in cyber attacks.) People must realize that securities and assets are not money. People do not know what money is, which is cash or precious metals. If restrictions or market shutdowns occur, then they learn fast what is money and what are stuck assets. Rickards shows wisdom when explaining that being diversified does not mean covering various sectors in the stock market, but rather owning several types of assets including stocks. (Fully agreed.) suggests to have 10% in gold & silver, as one asset class. Gold is not digitalized, has no counter-party, has no limitations like cash limits on withdrawal.
Notice all the Too Big To Fail banks have even greater concentration of assets than in 2008. It is therefore easier to lock down the few big banks if the goal is to limit withdrawals and access. The non-directional volatility in stock market is evident, big up and down moves on successive days. Rickards is certain of no rate hike by the USFed, as he is more afraid of deflation taking fast root. (Total agreement on ZIRP Forever.) Notice how Buffet bought several hard assets and sits on record level of cash (20%). A calamity is coming as certainty, but when it hits, it will be exponentially larger than any collapse in past. A progression is crystal clear. The 1998 LTCM failure was big, the 2008 Wall Street failure bigger, maybe in 2016-2018 the USFed will be in trouble with other major central banks for the biggest calamity. (USFed has been in deep trouble, near catastrophic trouble since the start of QE bond purchases.) Each crash is bigger, and each bailout bigger than the previous. The central banks are set to fail, but some entity must be ready and have huge potential to bail out the central banks.
The Intl Monetary Fund is big enough to bail out central banks, so Rickards believes. (The Jackass believes such a notion is preposterous and delusional, since the IMF is a hollowed out defunct pillar.) The IMF could produce $4 to $5 trillion in SDR basket units in a short period of time. Its offices contain a trading desk. (Huh? The IMF operates on member pledges, and currently is broke. If various high weight nations pledge $trillions, the entire FOREX currency system would quickly collapse, and might force a sudden double or triple in the Gold price, leading to sudden implosion.) All roads lead to hyper-inflation, the clear signal. The USDollar is going to fall versus the SDR basket of currencies, Rickards expects. (Such a notion is again errant, since the USD is the biggest component to the SDR. So the USD cannot fall versus itself in dominant team basket.) The IMF could conduct a rescue based upon a hyper-inflation exercise since it is a faceless edifice that can man the printing press, with offices on 19th Street in Washington DC. (The IMF will be converted into a Chinese tool for its purposes, likely to grease the ramp for a BRICS gold currency launch. Besides, a paper-based solution like with the IMF SDR cannot fix a paper-based currency problem ever, which the Jackass calls the First Axiom of Sound Money. Proof is seen with no Draghi EuroCB paper solutions fixing anything on European sovereign debt or banking insolvency problems.)
China is buying insurance in the form of Gold against USD risk. To be sure, China is buying 1000s of tons of gold. (Finally somebody speaks up about staggering gold accumulation in reserves held by China.) China sees something most people do not in systemic risk. C is not even close to being ready to have a reserve currency in the Yuan. C is making great strides in building a trade currency. But C does not have adequate assets to sit as reserve assets in the global banking system, namely in dozens of major nations. (Notice debt securities are referred to as assets, rather than a credit portfolio.) The only vehicle big enough and liquid enough in its market is the USTreasury market. To win reserve status, the Chinese Yuan would need a much bigger sovereign bond market, with issues in all maturities short and long, bond dealers to distribute them, REPOs to handle the overnight activity, a diverse payment & settlement system, futures & options market to manage risk, in other words a full architecture like available in USTreasury Bonds. (Excellent description of requirements.) China needs 10 years and the establishment of the rule of law to develop such a system.
China wants to have the Yuan within the SDR basket, a back door entry as reserve currency. C does not want a full capital account, but rather to cozy up to the IMF and to jump on the SDR wagon. (China might keep the IMF propped for this purpose.) C has hedged the USD with Gold, but in no way will China launch a gold-backed currency. It is not ready. China has $3 trillion in USD-denominated assets in its reserves. C cannot dump their USTreasurys. (The BRICS will launch a gold-backed currency, and trump the entire Yuan concept of reserve currency. Gold will become the reserve banking currency instead.) Best for investors to be in position, prepared, ready for the calamity that comes. It could hit in 3 minutes or 3 years. See the USA Watchdog interview (CLICK HERE or HERE). The haughty fast speaking (used car salesman) Rickards makes a great error, a lack of foresight in follow through on his analysis. The Chinese are hedging against not only the USDollar risk inherent to their vast reserves, but the entire global USD-based financial structure. If that is their motive in accumulating large quantities of Gold, then it is natural to conclude that China is preparing for the next chapter in the evolution of the monetary system past the fiat paper platforms and central bank franchises. China is preparing for a return of the Gold Standard, begun in trade and evolving into the banking system, due to toxic USTreasurys and the urgent need for a valid bank core. The Chinese Yuan (aka RMB) will be at the center of the global gold system coming into view. This is a gigantic blind spot by Rickards, who is blinded by his enormous ego.
Colleague and friend Rob Kirby chewed up Rickards the shill thoroughly, more than the mine. His was an unsolicited harangue on target. The Jackass has only a modicum of respect for Rickards, for his insights half the time when he is not shilling for the banker syndicate. But Kirby has no patience, since more familiar with the deep corruption of LTCM when the shill was its gold counselor, and RobK was a bond trader in Toronto. Rickards never came clean after its collapse, which threatened the Wall Street world. Calling him a treasonous globalist, RobK wrote the following.
- Monetary policy is not deflationary. What is deflationary is purposefully off-shoring jobs while leaving the southern border wide open to Mexico. [The labor policy is] largely responsible for the collapse of Money Velocity. These deliberate policies have provided the deflation, or at least eliminated wage inflation. Monetary policy has been highly inflationary [with QE, QE2, and Q3 ongoing].
- The IMF is run by the same criminals who now run our failing global financial system. It seems Rickards thinks a do over [Mulligan] is in order, a reward for being total screwups.
- He says China does not have sufficient reserve assets to be a reserve currency. He acknowledges China has 1000s of tons of Gold but he never questions the dubious tonnage within the US reports, always insisting it is there. What he likely means is that China does not have a dubious Yuan denominated derivatives price control grid to enforce its imperialist pricing of strategic goods on the world, like America does.
- Regarding the US bond market, he speaks of it being highly liquid, as in diarrhea perhaps. He does not acknowledge that the US bond market is the biggest hoax ever perpetrated on mankind, a massive asset bubble [supported by hyper monetary inflation by QE support, and by Interest Rate Swap derivative machinery which if both taken away would lead to a sudden catastrophic collapse].
- I am not convinced that China wants anything whatsoever to do with an SDR basket of any kind. (The Jackass calls it a complete fake-out maneuver, or else a caretaker solution to arrive at the Gold Standard on Chinese terms.)
◄$$$ HEIR TO MONTFORD MEATS IS BUYING GOLD. $$$
This is an odd story, but relevant and indicative. A birdie told me, actually a client who prefers anonymity from the US west coast. It is brief. Kaye Montfort is buying Gold & Silver. She recently inherited the Montfort meats fortune with her brothers Richard snd Charlie. She must not find the USTreasury Bond yield to her liking.
## GOLDEN COILED SPRING IN SHANGHAI
◄$$$ GOLD IMPORTS SOAR 450% IN INDIA (84% MONTH TO MONTH), REACHING A 16-MONTH HIGH... A NEW FUTURES CONTRACT WILL ENABLE GOLD DELIVERY IN INDIA... ITS COMMODITY EXCHANGE JUST HAD A 10-FOLD JUMP IN GOLD INVENTORY. $$$
The Indian Govt have refused to lift curbs on gold imports, permitting the trade deficit to widen the most in 18 months. Imports of the precious metal have surged. Gold imports jumped by 450% to a new high of $3.75 billion in September, versus $682.5 million last year in the same month. The rise is sequential at a monthly 84% rise, since in August the gold imports stood at $2.04 billion. The latest data shows 20.8 metric tons of gold were imported in September 2014 compared to 0.153 mt in the same period in 2013. The trade deficit widened to $14.25 billion in September, from $10.84 billion in the previous month. The nation's external account is in deep trouble. Despite the gains, the go-go years were in 2012-2103, when 193 mt of gold were imported, more than double the recent year. See the MineWeb article (CLICK HERE) and the Times of India article (CLICK HERE). Gold delivery in India could receive another bolster. The Multi Commodity Exchange (MCX), India's leading commodity exchange, has launched fresh futures contracts in precious metals, base metals, and farm commodities for the 2015 calendar year. The system went live on October 1st. A big ten-fold rise in warehouse gold inventory was recorded on the MCX from 59 kg on September 27th, to 594 kg on September 29th. See the MineWeb article (CLICK HERE).
◄$$$ SHANGHAI GOLD WITHDRAWALS REMAIN VERY STRONG, ANOTHER YEAR OVER 2000 TONS... THEIR SILVER INVENTORY LIFTED SLIGHTLY FROM EXTREMELY LOW LEVEL... EXPECT SHANGHAI TO BECOME A VERY POWERFUL MAJOR PLAYER IN BOTH GOLD & SILVER IN THE NEAR FUTURE. $$$
Chinese gold demand last year was voracious, twice as high as estimates. This year their gold demand is on track for over 2000 tons again this year. The current estimates are no longer primarily focused on gold flows through Hong Kong. The latest estimates incorporate the demand from the growing middle classes of China from several city outposts. Together with India and other nations of the East, demand continues to grow ever stronger. The chart on Shanghai gold withdrawals indicates that 2014 will challenge 2013, but probably not surpass it. For the week ending September 26, the draw was 46.31 metric tons. Year to date 1427 gold tons have been withdrawn from the SGE vaults. Data reporting will be confused from this point onward, since the launch of the the Shanghai Intl Gold Exchange (SGEI). The Shanghai Gold Exchange discloses withdrawal numbers from the mainland added with those from the SGEI in the Shanghai Free Trade Zone. The SGEI buyers might have opted for withdrawal in the Shanghai FTZ, thus the confusion and possible overlap.
The Chinese silver market is in a threatened situation. The Silver futures contracts on the Shanghai Futures Exchange (SHFE) continues to trade in backwardation, ever since August 6th. That means the spot month trades higher in price than the forward month, with negative carry cost implied in the inverted contango. The SHFE silver inventory increased by 18% week over week to 94.9 tons, as the officials responded to the threat of depletion. Analysts anticipate the silver inventory will remain around current levels, at shortage levels. Inventory will increase if a steep contango curve pays to cash & carry the metal, or if the open interest rises significantly. Notice in the chart how in the last 18-20 months, the silver inventory has fallen from almost 1200 tons to under 100 tons. The threat is present for depletion. It is very unclear what events would occur, what stern actions China would take, if a default occurs. It is the subject of great debate. See the Bullion Star article (CLICK HERE).
◄$$$ THE LEADING AUSTRALIAN GOLD ANALYST EXPECTS A SHANGHAI GOLD SURPRISE IN STORE... THE CHINESE OFFER BROAD HINTS OF FRUSTRATION AND NEED FOR REMEDY IN THE GOLD MARKET PRICING... SHANGHAI WILL MAKE A STAND SOON... IT USED TO BE THE PRIMARY GOLD CENTER FOR CENTURIES. $$$
After observing the corrupted Gold Price fall under the US$1200 level per ounce, much consternation has come. Keith Goode is the leading Australian gold analyst, and he is watching Shanghai developments closely. The errant view is to regard reduced gold imports through Hong Kong as any clear indication at all of Chinese demand. With the arrival already of the new Shanghai Free Trade Zone, China no longer needs to import through the former British colony. China will ramp up in a big way its gold import through Shanghai, at one time the gold trading center of the world. Until the fall of the Qing Dynasty in 1912, Shanghai accounted for about 60% of all gold traded around the world. The Gold trade in Shanghai Gold Exchange is the third largest in the world, after New York and London. Their gold trading is supported by a 1000-ton vault. In the past month, the Shanghai's FTZ had its first anniversary.
Frustration is peaking. A Chinese presenter at the Congress made the point that his country was the world's leading gold producer (428 tons last year), consumed the most (1100 tons), and traded the most Asian gold futures. However, China still has little control over the gold price. This is a great point of frustration, and it will be addressed very soon. Goode believes that China does not intend to allow any further gold price declines. He believes China is still on course to make the Yuan a reserve currency, backed by gold. He believes the true Chinese gold reserves to be around 6000 tons. Goode smells a big event on the nearby horizon, fully indicated. He suspects Russia is adding gold reserves as fast as possible in tandem. Kazakhstan is also buying gold quickly. See the Australian article (CLICK HERE) and the GATA article (CLICK HERE).
◄$$$ THAILAND SCOOP ON GOLD MARKET, MARRED BY SHORTAGES... A NEW PERVERSE RELIANCE UPON GOLD CERTIFICATES HAS ARISEN... DEALERS ARE ESSENTIALLY HOLDING SHORT POSITIONS, AT GREAT RISK. $$$
A scoop came from a contact in Thailand, not a HTLetter client. The Thai gold market has been corrupted and put at great risk. "Today I talked with a gold dealer in Chiang Mai Thailand, where I live at the moment. He said two important things. First, he said that business is not so good in Thailand right now, economy not so good. He did not say anything more than that. I think he was implying that people do not have enough money to buy jewelry, his main item. But the second thing we talked about was gold futures. I told him I never invested that way, too easy to lose a lot of money very fast. I told him about your idea of Shanghai calling the Western Banking cartel's bluff. He then said something very interesting. In Bangkok, the dealers DO NOT HAVE ENOUGH GOLD to meet demand. Customers are buying paper certificates basically, which they could turn in [convert] for gold. So that is essentially a non-callable gold option on real physical gold. Thus, the dealers are betting that the price falls. But we both agreed that if the price of gold goes up, then the dealers would have to buy gold on the spot market in order to redeem their customers paper. That would result in bankruptcy, if they sold gold at current prices and Shanghai doubles the price. Of course, COMEX would go bust too. Except they would make a rule that they do not have to deliver [force majeure]. The COMEX might make the change to settle in cash, if Shanghai does double the price, as you predict."
## GOLD END GAME IS NIGH
◄$$$ ANDY MAGUIRE SEES AN END GAME PLAYING OUT WITH THE GOLD MARKET... PRICE DISCOVERY (DETERMINATION) IS MOVING TO THE EASTERN NATIONS WHERE METAL DELIVERY OCCURS... BULLION BANKS ARE EXITING SYNTHETIC PAPER POSITIONS, WHILE SOVEREIGNS ARE STACKING GOLD BARS... A MAJOR BLOWUP IN THE GOLD & SILVER MARKETS IS COMING AFTER THE NEW YEAR... THE WESTERN GOLD MARKET HAS NO DELIVERY, AND WILL THEREFORE COLLAPSE FROM THE WEIGHT OF FRAUDULENT PAPER... SOON THE GOLD PRICE WILL RESPOND TO THE SUPPLY & DEMAND FACTOR, SEEKING BALANCE. $$$
"We are really at the final stages of what is a historic capitulation point. Of course we are going to see options and news event gaming continue, but it will be inconsequential in the big picture because the true supply/demand fundamentals will actually be determining a real price that is far less influenced by the synthetic dilution that we are seeing in today's markets. Now, price discovery is finally moving to where the physical markets are. As these markets are springing up all over Asia and the Middle East, things are going to change. Here in the West we do not have delivery markets. We have bank run casinos like the CME, COMEX, where the game has been historically rigged by insider member banks. Over time this has created massive dilutive price distortions that do not anywhere near reflect the real supply/demand fundamentals. If one only looks at the evidence, it is right there for us to see right now. The primary bullion banks are definitely exiting their proprietary COMEX positions. This is leaving the remaining open interest to be gamed by robots who are chasing declining open interest amongst themselves. They are just running over any remaining real money.
What sets this historic time apart from others and will insulate investors from another wash and rinse is that price discovery is actually migrating to the physical markets. These large investors are not buying synthetic gold. They are vaulting the real thing, well away from the shark infested COMEX waters. I give it until the first of the year before we see the first signs of a major derivatives blowup. Physical demand has been enormous these last few weeks. Silver has had a very large physical buyer active in the last four weeks. We have seen an enormous 13.715 million ounces, or 426 tons of silver added to the SLV Exchange Traded Fund. Now, Shanghai warehouse stocks have conversely reached an all-time record low at only 80.5 tons of silver. Yesterday we had reliable reports of a 21-ton gold purchase at the London Fix. This is just a fraction of what we have been seeing accumulated since gold broke through the $1300 level on the 19th of August. So sovereigns and central banks are accumulating all the way down, while paper longs throw in the towel." See the King World News interview (CLICK HERE). Extremely encouraging, but timing is difficult to foresee. We are in the End Game.
◄$$$ ERIC KING INTERVIEWED WITH EGON VON GREYERZ, WHO BELIEVES THE GOLD CORRECTION IS OVER AND LONG-TERM USTREASURY BOND YIELDS WILL RISE... THE USFED HAS NO INKLING OF THE DAMAGE IT HAS WROUGHT ON THE FINANCIAL MARKETS AND ECONOMIES... THE USFED WILL CONTINUE WITH ANOTHER ROUND OF QE BOND BUYS, AFTER THE FALSE ECONOMIC DATA IS DIGESTED. $$$
Eric Von Greyerz is founder and managing partner of Matterhorn Asset Mgmt and Gold Switzerland Fund. He is a main cog in the physical gold metal demand machinery of Central Europe. In an interview he made many points. Review his salient points. The USFed minutes indicate the central bank is clueless of the effects caused by the current Fed Fund rates near zero, and the QE bond purchase program. They tend only to take action after an event occurs. Natural supply and demand factors are best regulators of markets. The USFed interventions distort the entire mechanism. They have printed $4 trillion in new money and kept interest rates at 0% for a few years, thus generating euphoria in financial markets. But it is fraught with risk and danger. This has been misinterpreted by some as economic boom, or its harbinger. The central bank will fail in holding interest rates down, as the bond market will sell the longer dated Treasurys first, making long-term rates go up. That will pull up the shorter rates. Expect rates to reach the 1970-80's levels of up to 21%. The government has manipulated unemployment figures. The actual unemployment rate is at 23%. Government false numbers show the jobless rate below 6%, giving the USFed license for QE coming back in a different form with a new fancy name. The Jackass prefers QE to Infinity.
We have seen the end of a very long secular bull stock market based on the erratic behavior of the past few days. All currencies have fallen 97% to 99% over the last 100 years. Currently they are caught in a race to the bottom. The Gold market has turned in opposite direction to the stock market. In 2008 gold went down initially with the stock market, but now it seems to be decoupling. Since bottom in June 2013, the Gold market has made a triple bottom with major bullish divergences, which looks positive for a gold recovery. With oversold positions in Gold & Silver and the large short positions in the paper market, we could see a very fast rally between now and the end of the year. The Silver market has incredible potential. It will rise twice as fast as the Gold market in the net 2 to 3 years. We have seen the end of the correction to the precious metals. See the King World News interview (CLICK HERE).
The Jackass concurs with most of Egon's interpretations and viewpoints, especially the lost control and silver price prospects. My firm belief is that the USTreasury Bond yields will remain low, with an incredible rise in volume for the entire Interest Rate Swap machinery. Its over-usage will reveal the QE to be a grand lie. The only way for long USTreasury yields to rise quickly is if the derivative machinery totally breaks down, which does not seem possible unless and until the Chinese double the Gold price and force a series of FOREX fractures. The reliance upon high short positions in precious metals seems to be a steadily feature. But a big change has occurred in the last several months. The banker cabal is exiting the short side, which is recently been defended by the algorithms of Wall Street and London, as in computers and not traders. The big event coming for Gold & Silver is non-linear and discontinuous, a massive doubling or tripling of price. The challenge will be for the Western bankers to defend their paper structure of FOREX derivatives. Then come the bank failures en masse.
◄$$$ AN EX-DEUTSCHE BANK MANAGER ARGUES FOR A NEW MONETARY SYSTEM WITH GOLD AT THE CORE... ALTHOUGH NOT A FIRM AUSTRIAN SCHOOL ADVOCATE, HE ARGUES FOR MORE MONETARY DISCIPLINE AND REMOVAL OF BANKS AND THE SOVEREIGN STATES FROM MONEY CREATION. $$$
Thomas Mayer worked in a hive within the financial system, but he lost faith. His 30-year career involved the Intl Monetary Fund, Goldman Sachs, and Deutsche Bank. When he left his post as chief economist of Deutsche Bank, he wrote a book. In it he calls for a new monetary order where the banks should be disempowered (better to disembowel them). He went from system captain to an important critic. He is convinced that the monetary foundation upon which our entire economic system is based has become doomed to failure. We need a new system, one that places power in the control of a fair arbiter with no corporate loyalty. He once used complex mathematical models and structured economic beliefs which extended from the notion that the market is efficient, people acting rationally, and systems seeking balance. In these tenets he lost confidence.
When at Deutsche Bank as chief economist in 2010, he observed the financial crisis engulf the world with a Lehman nucleus, triggered by a debt inferno and bond market collapse. As Thomas Mayer sat in his Frankfurt office, he began to search for new answers. He concluded that the key problem was in the system itself. He was a maverick on the inside, not appreciated. He argued for a Greek debt haircut to the bond holders, a concept rejected consistently since the elite would suffer losses. Later he suggested that the Greeks should introduce a parallel currency to the Euro, dubbed the Geuro. It was a lead ballon that fell to earth. He was invited to leave after CEO Josef Ackermann left office in 2012, succeeded by the awkward team of Anshu Jain and Jurgen Fitschen. Officially he remained at the fractured firm for two years as consultant, but it served as an exit ramp of irrelevance. A new think tank Investment Manager Flossbach von Storch was assembled in Cologne, with founders being two old friends from his days at Goldman Sachs. They gave him freedom to conduct his research.
Even while at Deutsche Bank, Mayer had begun working on a book, the theme of which was needed monetary reform, and the new order of money. It calls for a society of economists, who would argue toward the construction of a radically new financial order, then defend it. Mayer sees the basis of all financial crises the rapid unchecked expansion of money through credit, whether to fund speculation or business lines. The fast growth of money forms price bubbles which eventually burst, causing crises which lead to quick action in central bank intervention on the monetary side and government support on the fiscal side. They tend to prop up the weak imbalanced system even more with cheap money, in fact phony money. They distort market prices and create new price bubbles for the next round, creating a highly unstable system. The constant throughout the entire sequence of crises is the ongoing policy of cheap money. The Jackass adds that the time between crises is shorter with each cycle, signaling a very big climax.
The markets are not efficient, such is the obvious and tragic conclusion. Mayer produces analysis not new in principle. It is based on a radical rigid sound money concept in economics, the so-called Austrian School of Economics, founded by Ludwig von Mises. His principles were continued by Nobel Laureate Friedrich August von Hayek. The followers of this school of thought criticize in particular the unrestrained credit money creation by banks and central banks, licensed by the state. Instead of constantly uncovering new money to create, the money supply must be limited, they claim and defend vigorously. The money supply must be coupled to the existing gold reserves. All money must always be able to be exchanged for gold. This is part and parcel the Gold Standard from the monetary angle. It must be mentioned that Mayer is not a firm advocate of Gold as Sound Money. For him Gold is still a barbaric commodity, which actually only acts as a substitute for confidence in currency (a very weak intellectual construct viewpoint in Jackass opinion). However, Mayer believes the money supply must be limited. He sternly argues that banks and states must withdraw any access or power toward the creation of new money. He speaks of an active monetary system. Although not firmly in the Von Mises camp, he remains a maverick by pressing forward the notions that not all the markets are efficient and economic models from the textbooks fail. Mayer advocates movement away from the current monetary system. Acceptance of his work, theories, and new structure might gain acceptance after the next crisis arrives. The West has produced a constant state of financial crisis, due to unsound money, insolvent banks, constant patchwork, absent bank liquidation, and exploding money supply. A climax comes soon. See the Spiegel article (CLICK HERE).
◄$$$ TWO-PART CHINESE GOLD PRICING (PRICE RELEVANCE) IS HERE, BUT WILL SOON CONVERGE WITH THE PHYSICAL MARKET IN YUAN TERMS... THE SYNTHETIC WESTERN GOLD DEVICES ARE SOON TO BE PUSHED ASIDE... THE CURRENT DICHOTOMY WITHIN CHINA WILL CHANGE, AND MERGE TOWARD THE VALID LEGITIMATE METHOD OF PRICE METAL BASED UPON PHYSICAL SUPPLY AND DEMAND WITH FULL MARKET MECHANISMS. $$$
The Gold price at the Shanghai Gold Exchange (SGE) is managed in Yuan currency denomination, and responds to supply & demand factors. On the other hand, the Peoples Bank of China (Chinese central bank) purchases its gold in USDollar terms, deploying its USD foreign currency reserves. Therefore, two prices of gold prevail within the Mainland China nation encased within two different currency denominations. The SGE demand is separate from Chinese Govt demand. The USD/RMB cross-pair relationship in a currency reset situation will be a great challenge to manage during the conversion process, during the merger process. The prevailing market will be in Shanghai, which will feature a tremendous normalization process that achieves equilibrium between physical demand and physical supply. The West lacks this basic market mechanism, and thus is corrupt to the core.
The West sells paper gold without limit or valid enforcement, and refuses actual standing futures contracts for metal delivery. The contract fraud has been in evidence since June 2012. It is unclear if the two vast Chinese sovereign wealth funds, State Admin of Foreign Exchange (SAFE) and China Investment Corp (CIC), purchase Gold bullion in secrecy. The Jackass suspects they do in a grand huge powerful manner, as in a thousand tons or more per year. Also, my suspicion is that the SWFund gold purchases are not counted in PBOC central bank gold reserves, since technically they are not central bank assets. They are national savings accounts in SWFund form. These funds contain the 15,000 gold tons referred to by the Jackass in official Chinese gold ownership in less than open manner.
Aaron Krowne of the Implode-Explode website pitched in. He wrote, "I presume China is delaying the convergence, due to finding it hard to mobilize their dollar-based reserves without causing self-defeating distortions. They might also find it to do so faster than they accumulate more reserves. Their development of domestic consumption and abandonment of the current low-cost outsourcing center model has been underwhelming. Certainly they are doing a lot under the table, but we have no way of knowing how much. A few years ago, I ran stories on China moving actively into hedge fund ownership, which was identified as a clever device for them to cash out of dollars without raising nationalist ire such as what overt buyouts would cause. The practice was proven in various episodes in the early 2000s. The story has gone silent on this front for years now." The Chinese hedge funds also own gold bullion.
The Voice settled the issue on convergence, in a brief note. "Eventually the market will set the price for physical metal and consequently the exchange rates will be derived via that mechanism. Hence Gold will be introduced through the back door as the reference point to establish value." Looking forward to this event with great anticipation.
◄$$$ MARK O'BYRNE SEES THE SWISS GOLD REFERENDUM PROPAGANDA WAR HAVING BEGUN, AND TO HEAT UP... IT IS A NON-BINDING VOTE, BUT COULD SWAY THE NATION INTO HONEST GOLD RESERVES MANAGEMENT... THE SWISS CENTRAL BANK OFFERS FLIMSY RESISTANCE (LOST CREDIBILITY), WHILE THE PUBLIC IS SUSPICIOUS OF THEIR GOLD RESERVES HAVING BEEN SHED AND SACRIFICED INTO THE FIAT PAPER BLACK HOLE KNOWN AS THE FOREX. $$$
The referendum for the Swiss Gold Initiative is scheduled for November 30th. The people will vote. The referendum proposes that the SNB should hold 20% of its assets in gold and be prohibited from selling the precious metal in the future. The public suspects large scale gold dumping in support of a corrupt fiat paper currency regime. A battle of ideas has begun to be waged, a propaganda war. It features the Swiss National Bank (SNB) and the Swiss Parliament on one side against honest Gold management, versus the Swiss People's Party (SVP) on the other side in favor of honest Gold reserves disclosure. The battle will surely escalate. The SNB opposes the initiative, arguing nonsensically that a YES vote would severely hinder the central bank for conducting its business (and corruption). The gold referendum was proposed by the SVP and backed by the required 100,000 signatures to put the issue to referendum vote nationwide in Switzerland. The SVP is one of the largest political parties in Switzerland, with the largest membership in the Swiss Federal Assembly.
If the referendum is passed, it would result in the immediate repatriation of Swiss gold reserves currently believed to be in London and Canada. It would result in an increase in gold holdings of the SNB. The current 7.7% allocation would be lifted quickly to 20% of total reserves. It would result in a moratorium on the sale of Swiss gold reserves, suspected to be ongoing. The Jackass believes the Swiss central bank has been supplying the refineries with gold in order to help satisfy COMEX and LBMA gold sales, thus averting a default.
The SNB opposes the repatriation issue on flimsy grounds, claiming that during any national emergency, foreign holdings could be sold off whereas domestic holdings might be tied up. This appears to be deceitful and dishonest, since many international buyers including the Peoples Bank of China and other central banks would likely be willing to buy the Swiss gold reserves in loco Switzerland. Later they could repatriate the gold, taking delivery to their own country. Many among the Swiss citizenry look with alarm at the recent German experience, when the neighbor nation failed to secure their own Allocated Gold Account of 300 tons from the criminally exposed New York Fed. Speculation is ripe among even the more diehard conventional gold analysts that the central banks of the world no longer have the gold they claim, long ago sold off, rehypothecated or leased, all in support of the broken currency regime centered upon the now fully contaminated USDollar. The Swiss pursue verification, which in the United States would be considered an act of terrorism. The central bankers in the West have struggled to maintain faith in the fragile monetary and financial system. Much of their physical bullion is now in the strong hands as store of wealth in India, China, and several other Asian nations. They distrust Western paper money and its many synthetic props. Other strong hands which have been allocating to gold are Asian and other central banks, including the Russian central bank as stealth currency wars continue. See the Zero Hedge article (CLICK HERE).
## MINING RESPONSE TO SUPPRESSED PRICES
◄$$$ SOUTH AFRICA'S GOLD MINING EXECUTIVES READY FOR MERGERS IN THE FACE OF THE GOLD PRICE DECLINE... THEY MUST MANAGE CONTINUED COST REDUCTION MEASURES... WAITING IN THE WINGS ARE THE CHINESE FOR ACQUISITIONS. $$$
The South African gold miners are ready for mergers and acquisitions as the falling price of bullion puts extreme pressures on their entire operations. The firms have been compelled to cut costs while having to repay debt. Sibanye Gold Ltd CEO Neal Froneman explained, "Maybe there is some smart consolidation that can take place on a regional basis. I think there will be. It is the right time. It is necessary. I do not think my counterparts in the industry are on completely different pages either." The company is the SAfrica's largest producer of gold ingots. The country is the world's sixth biggest producer of the metal. By smart consolidation is meant joining projects for management on a regional basis, reducing overhead that overlaps.
The over 25% decline in the Gold Price since the start of last year has prompted officers to consider deals in an effort to cut costs in South Africa's aging mines. They must insulate investors from risks such as labor strikes and environmental halts. AngloGold Ashanti failed in its attempt last month to separate its local mines from international operations, only because investors balked at the associated $2.1 billion share sale. Harmony Gold Mining, South Africa's third largest bullion producer, believes they are a good target right in the current harsh climate. They have a low share price, good cost control, and moderate management fees. See the Bloomberg article (CLICK HERE). Although not mentioned, the Chinese are the most active in gold mining firm acquisitions. They wait in the weeds, in the wings, on the side lines.
◄$$$ THE WORLD'S TOP 15 GOLD PRODUCERS REPORT THAT MINE OUTPUT STILL RISES... IT IS LIKELY TO PEAK THIS YEAR, RESULTING IN A 2% GLOBAL SUPPLY REDUCTION... A RAPID DECLINE IN SCRAP GOLD AVAILABLE TO THE MARKET HAS BECOME A FACTOR. $$$
According to the latest London research, gold output for global mines is still on the increase this year, despite the obstacles presented by the lower gold price. Metals Focus is a journal produced by Lawrence Williams. The counter-intuitive output rise is primarily due to the ramp to full production of a few major new gold mining operations which came online in 2013. Furthermore, the start-ups at Kibali in the Congo, Aykem in Ghana, and Tropicana in Australia added another 21 tons in the first half of 2014. The increase in mine output in 1H2014 was offset by a continuing decline in scrap sales. The respected consultancy is forecasting a fall in global gold supply for the full year due to a predicted double digit drop in scrap supply. Overall Metals Focus is forecasting a global gold supply down 2% to 139 million ounces (4323 tonnes) for the full 2014 year. They stated something stupid though, assessing the market will be in predicted balance with supply and demand in the physical market. Not even close, as shortage is extremely acute while price is set by corrupt paper gold contracts.
Looking ahead to 2015, the analysts forecast a still further fall in scrap sale. They expect fundamentals to improve if mine output enters a decline, from the shutdown of uneconomic mines, the marginal mine projects. The Metals Focus report was released before the latest high monthly demand figures were known by China and India. Their predicted global demand figures might be a under-estimated, which could suggest a big supply deficit for the full year while the recent low prices continue to stimulate purchases in these key markets. See the Mineweb article (CLICK HERE).
◄$$$ US-BASED GOLD OUTPUT DECLINED IN JUNE BY 10% ON THE BACK OF NEWMONT AND BARRICK... FIRST HALF 2014 GOLD OUTPUT FELL BY 8% VERSUS LAST YEAR... EXPORTS TO SWITZERLAND OF GOLD PRODUCTS ARE UP OVER 50% IN COMPARABLE PERIODS ANNUALLY. $$$
Production of gold by US-based mines was 17,700 kg (569,068 troy ounces) in June, down 10% from 19,600 kg (630,154 oz) in June 2013. Domestic gold production for the first six months of this year was down 8%, compared to the first half of last year. The fingers are pointed to lower production from Cortez Mine of Barrick Gold and from Newmont Mining's Nevada operations. For the first half of this year, US mines produced 103,000 kg (3.312 million oz) of gold. Nevada led production with 74,100 kg (2.382 moz), followed by Alaska with 15,100 kg (0.485 moz), and other states combined at 14,000 kg. The Cortez Mine in Northern Nevada was a major disappointment, having produced only 13,800 kg (443,680 oz) of gold during the first half of this year. The Cortez output is down 42% from the first six months of last year, as a result of a drastic decline in ore grade and yield from the Cortez Hill open pit.
The US Geological Survey reported total US gold exports plunged 41% in 1H2014, compared with the similar period last year. Exports of ores and concentrates fell by 29%, exports of dorey bars and precipitates fell by 45%, and exports of refined bullion decreased by 40%. As in the recent past, Hong Kong and Switzerland were the main destinations for US gold materials, accounting for 42% and 34% respectively for gold exports in H1 this year, versus 58% and 20% respectively in H1 last year. So Hong Kong is down slightly but Swiss exports are up over 50%. The leading recipients of US exports of gold dorey bars and precipitates for the first six months of this year were Switzerland (74%), United Arab Emirates (15%), and India (10%). See the Mineweb article (CLICK HERE). The Jackass strongly suggests that Switzerland is the destination for refineries and recasting gold bars, many stolen from Allocated Gold Accounts. But Hong Kong is the destination to resolve massive fake gold bars by the Clinton Admin, which the USGovt vigorously attempts to fix via restitution. Past HTLetter reports cited the repayments hidden in Industrial Metals exports to Hong Kong. As footnote, dorey bars are high concentrate bars of gold with a purity of at least 85% to 90%, ready for refinery processing.
◄$$$ FIGHTING BACK, FIRST MAJESTIC HAS DELAYED SALE OF SILVER IN RESPONSE TO PRICE WEAKNESS... THE FIRM INCREASED OUTPUT BY 5% OVER THE LAST YEAR, BUT HELD BACK IN SELLING 35% OF ITS SILVER PRODUCTION... IT WILL GO INTO INVENTORY... A MESSAGE IS SENT TO THE COMEX AND BULLION BANKS. $$$
First Majestic made a startling announcement. They disclosed a refusal to sell all of its metal output into the recent weakness in the Silver futures markets. In a statement by the company, the headline stated the firm produced 3.523 million Silver equivalent ounces in 3Q2014, but decided to postpone the sale of 934,000 Silver ounces of its inventory. The First Majestic achieved the output from production at its five operating silver mines in Mexico, making a 5% increase compared to the same quarter in 2013. Total silver only output for the quarter consisted of 2.680 million ounces, about equal compared to the same quarter in 2013. In addition, 9.703 million pounds of lead and 3.223 pounds of zinc were produced, increase of 14% and 44% respectively versus Q3 of last year. Also produced were 2781 ounces of gold, representing a 5% decrease compared to 3Q2013.
The Silver pricesdeclined 19% in Q3 alone, the second largest quarterly decline since 2008. As a result of this weakness, First Majestic took bold action, done by bold management. It is unclear whether the decision to suspend silver sales is due to the basic unprofitability of continued sales, or to the deep corruption in the COMEX market with naked shorting done with full impunity. The two motives are certainly related. The declared suspension of sales will result in lower revenues and earnings for the third quarter. Decisions have not been made on their dispensation. As of September 30th, approximately 934,000 ounces of silver were held in inventory. No other major precious metals mining firm has declared such bold action, essentially a boycott of the COMEX even if partial. The suspended sale volume represents 35% of its 2.680 moz of production for the entire quarter. They may elect to sell the silver bullion when the prices are more favorable. They could possibly receive a much better offer with premium by Chinese stockpilers. The executives at First Majestic are trying to set a precedence by standing up to the manipulated low price of silver. If other companies joined the defiant movement, and held back sales of their hard earned silver output, a clear message to the corrupt bullion banks would be heard, that future physical supply should not be taken for granted. See the SGT Report article (CLICK HERE) and the Chris Duane video (CLICK HERE).
Ed Steer of Casey Research and GATA added some excellent commentary. "CEO Keith Neumeyer and his company First Majestic Silver, not being a member of The Silver Institute, can do what they want, not like the other bought and paid for companies that are listed as members. I am a shareholder in this company, and have been for almost as long as it has been around. I applaud this move, and so should you, as it takes real courage to lead in times like this. I just hope that there is no surprise blowback from left field in the near future. Ninety-nine point nine percent of gold and silver mining companies and their executives are braindead, merely geologists and accountants, unaware of the monetary nature of their product and how their product is priced by surreptitious market intervention by central banks. But here and there certain companies and their executives have a clue. First Majestic Silver Corp today again proclaimed itself to have far more than a clue."
◄$$$ SILVER IN SUPPLY DEFICIT BUT PRICE STUCK LOW... A NEARLY 30 MOZ GLOBAL DEFICIT WILL KEEP THE PRESSURE ON FOR THE MARKET, DUE FOR A FAST NASTY REBOUND. $$$
Silver has been called the Devil's Metal and likened to Gold on Steroids because of its much greater volatility, as a result of central bank non-participation in reserves accumulation. Silver has very different and far more favorable fundamentals. Its industrial supply & demand factors should be the main price drivers, but in reality the official price is set by naked shorting and other deeply corrupted COMEX practices. The price damage is acute but almost amusing, if the investor does not need to sell to the criminal system. It is a boon to investors who wish to purchase, if they can find more than a paltry amount at the artificially low price. Over the past few years, the Gold/Silver Ratio has varied from around 35 to 70, now standing at at the worst level in four years. Industrial usage in all its forms accounts for nearly 75% of global silver demand. Its principal usage include electronics, photography, solar panels, and in the medical and environmental sectors as a biocide, plus jewelry and household silverware.
The latest analysis figures from specialist precious metals consultancy Metals Focus in London is available. It delineates how this year silver will again be in deficit, yet the price has still continued to fall. The evidence of profound market corruption is overwhelming. Their day is coming to be steamrolled and wrecked in a sudden powerful rebound toward $40 and $50. Nothing but turmoil and volatility in powerful upmoves can come from forced price decline during supply deficits, or else market defaults. The estimated 2014 supply including scrap sources is for 1061.0 million ounces silver, versus demand of 1090.5 moz. The global 28.5 million ounce deficit is not large, but it dictates a higher price in the future if any semblance of equilibrium is to come. Some hidden supplies hit the market, one can conclude, the usual suspects being India and the Vatican. See the Mineweb article (CLICK HERE) and the Metals Focus website (CLICK HERE).
## ECONOMY WRECKED & RUINED
◄$$$ AMERICANS MUST CONFRONT POST-FORECLOSURE DISTRESS WITH UNPAID DEBT... GARNISHED WAGES AND SEIZED ASSETS CONTINUE THE NIGHTMARE... CITIZENS CANNOT ESCAPE THEIR PAST DEFAULTS... THE PURSUIT IS LED BY FANNIE MAE & FREDDIE MAC, AS AGENTS FOR THE BROKEN CORRUPTED USGOVT. $$$
Fannie & Freddie have converted from liberal home loan underwriters to vicious rapacious predators. The reformed bankruptcy laws of 2005 made it impossible to walk away from debt entirely, even after defaults and some degree of resolution. Many Americans who lost their homes through default in the housing bust, but who have had the good fortune of rebuilding their finances, suddenly face a new threat. Vengeful banks have hired debt collectors to chase them down for the money they still owe. The result is freezing their bank accounts, garnishing their wages, and seizing their assets. They have not been permitted to escape. Such is not magnanimous capitalism, but rather predatory fascism. Banks have sold many houses linked to foreclosure, but the proceeds of those sales were inadequate in many cases to cover the amount of the loan, plus penalties, legal bills, and bank fees. Bank losses resulted, followed by formal vengeance. The two USGovt housing finance giants are no longer quasi government firms. They are ruined companies operating under the corrupt aegis of the USGovt, which covers their $trillion criminality, but which also prefers to pursue the citizens trying to regain their footing. Both Fannie Mae and Freddie Mac lead the mortgage players in pressuring borrowers to pay whatever they still owe on mortgages defaulted upon years ago.
The legal device is known as a Deficiency Judgment, thus rendering citizens as debt slaves, walking away with a debt ball & chain that yanks them in the future. Despite the capitalist overtone for the nation, no debt relief comes in bankruptcy or default. Lenders ensure that borrowers are haunted by debts for years, just like the IRS ensures the same haunting practice over taxes due. They do not go away. Long ago, banks usually refrained from seeking deficiency judgments, seen as costly but also offering a whiff of bad publicity. Some of the biggest banks still do not pursue this avenue. However, the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses, even catastrophic if one considers they are still permitted to operate while basically insolvent dead structures. Some large lenders (especially the onerous vindictive abusive USGovt) want their money back. The pursuit seems perfect for attacking citizens with new jobs, new lives, new assets to attach. The USGovt has no idea how to rebuild the USEconomy, so they rely upon predation and thefts. See the Reuters article (CLICK HERE).
◄$$$ ONE FIFTH OF ALL US-BASED WORKERS WERE LAID OFF IN PAST FIVE YEARS... LOWER WAGE JOBS AND PART-TIME JOBS ARE THE NORM... THE LABOR PARTICIPATION RATE DROPPED TO 36-YEAR LOW... THE US-LABOR MARKET IS IN TATTERS. $$$
The propaganda stories have been centered on Green Shoots lies, and Sluggish Recovery lies, and other lies of a different color. The US stock market rally has diverted attention from the national calamity. The reality is brutal and exposes deep damage. One in five US workers was laid off in the past five years and about 22% of those who lost their jobs still have yet to find another one. This is the worst labor market since the Great Recession ended. It is the Second Great Depression without full recognition or label, except to the Hat Trick Letter. Many who have found jobs have located temporary posts. Many who landed decent jobs paid dearly in their searches while incurring costs, leaving them in deep debt. The survey was done by the John Heldrich Center for Workforce Development at Rutgers University, focusing upon 30 million furloughed workers. Nearly 40% said they required over seven months to find employment, and about 20% said all they could find was a temporary position. Almost half of the victims (46%) who found new jobs did so at a lower wage. See the LA Times article (CLICK HERE).
The US labor Participation Rate dropped to a 36 -year low, a record 92.6 million Americans are not currently active in the labor force. Most are not counted as jobless by the monkeys at the Bureau of Labor Statistics. For the easily deceived, the mental dullards, and those just awakening to reality, an easy explanation can be given for the official USGovt unemployment to rest at a meager 5.9%, the lowest print since the summer of 2008. The workers are not considered unemployed if they fell off state jobless insurance, since they dont exist anymore having fallen through the cracks. The collapse in the labor force participation rate is the smoking gun. In September it fell from 62.8% (three decade low) to 62.7% (lowest in 36 years). The current rock bottom level matches the February 1978 lows. According to the Household Survey, 232 thousand people found jobs but in far too many cases a part-time post. The people not in the labor force rose to a new record high, increasing by 315,000 to 92.6 million. They comprise the masses living with parents, with friends, or in the street. See the Zero Hedge article (CLICK HERE).
On a side note, the Jackass has only encountered professionally only one USGovt statistical monkey, a decent dull fellow at the Census Bureau. We talked shop for a couple hours. He never would have finished my Masters degree program year. He explained some of their challenges, and hardfast rules to follow. He could not respond well (caught in laughter) to my question about how many of his colleagues and managers were certified morons.
◄$$$ US-BASED CONSUMER DEBT HAS HIT AN ALL-TIME HIGH... HOUSEHOLD DEBT HAS COME DOWN, BUT CONSUMER DEBT HAS RISEN OUT OF CONTROL... CAR DEBT IS AT HISTORICAL HIGH RECORD LEVELS. $$$
According to the latest data on Flow of Funds from the Federal Reserve, Americans are taking on debt once again. The difference is that this time the borrowing is to finance new cars, college tuition, and other consumer goods. The data shows good news on American household debt, which peaked in 2007 and has since fallen 15% since then. Home mortgage debt accounted for much of the decline, having dropped 22% since 2007, usually from foreclosures and defaults. The new culprit is consumer debt. This category has continued to increase and just reached a record high of $3.2 trillion. As part of this, about $100 billion of student debt per year has been added to their balance sheets since 2008. Credit cards and auto loans have also come roaring back, particularly auto loans. The amount of outstanding car debt is the highest ever recorded. The rise in car debt is linked to a surge in financing the purchase of new cars, a tribute to the poor underwriting involved and absent wisdom. The financial crisis showed that consumption financed by debt is not the path to resilient growth and sturdy economic health. The US never learns this lesson, just repeats it. See the Business Week article (CLICK HERE). The graph indicates incremental increases to debt type.
◄$$$ A 14% STUDENT LOAN DEFAULT RATE SIGNALS HARD TIMES FOR THE YOUNG... THEIR DREAM FOLLOWING EDUCATION FADES. $$$
The USDept Education published its latest report on cohort default rates for student loans that entered repayment in 2011. The office actually cheered the so-called good news, since the default rate declined to 13.7% versus 14.7% for the previous year. The calculation only considers those student loans which entered repayment in a particular cohort year. The data released was for the 2011 cohort year. Colleges and universities depend upon this metric being no higher than 30% for three consecutive years or 40% in any one year, so as to assure continued funding. The student loan failure rate is worse than any other common type of consumer borrowing, even the exorbitantly priced payday loans (given collateral by an imminent paycheck). For government backed student loans, they are declared in default when payments are between 270 and 360 days past due. The leniency is part of the student leeway. The majority of students after graduation do not find gainful employment like in past decades. The dream is fading. The debt burdened is carried. See the Credit Blog article (CLICK HERE).
◄$$$ THE USECONOMY HAS ON THE BOOKS A RECORD $924 BILLION IN 65 MILLION AUTO LOANS... A SHOCKING 31% OF ALL NEW LOANS ARE SUBPRIME (POOR UNDERWRITING)... DEALER FINANCING IS THE PROBLEM, MOTIVATED BY MOVING INVENTORY... WORSE, LIAR LOANS PROLIFERATE IN USED CAR MARKET... APPETITE IS BRISK FOR WORTHLESS COLLATERALIZED BONDS BACKED BY CAR LOANS. $$$
Credit agency Equifax compiled data to join Experian auto loan data. The results are shockingly horrendous. Comparisons for growth are from one year ago. Without a doubt, the US manufacturing pop in the late spring and early summer was due to a tremendous surge in subprime credit to enable a national car buying binge. The clowns at Equifax concluded no bubble in car finance, but their mere mention of the word confirms it (the Jackass calls it the Greenspan Principle). The data is truly horrible, and indicates a new bubble, which also happens to appear in collateralized debt securities. Tranches include car loans, almost all worthless since the equity in cars is quickly zero, then rapidly negative. Car dealers do not care, since not lenders on the hook. See the Zero Hedge article (CLICK HERE) and the Equifax report (CLICK HERE). Some detals to ponder in dismay, with annual comparisons.
- The total balance of auto loans outstanding in August is $924.2 billion, an all-time high and a 10.8% increase.
- The total number of auto loans outstanding stands at more than 65 million, a record high and a 6% increase.
- The total number of new loans originated through June is 12.5 million, a 4.9% increase.
- The total balance of new auto loans is $254.2 billion, a 6.9% increase and equal to nearly half of total new credit originated outside the mortgage market.
- The total number of new auto loans originated through June for subprime borrowers is 3.9 million, representing 31.2% of all auto loans originated this year. Subprime is defined as consumers with Equifax Risk Scores of 640 or lower.
- The total balance of newly originated subprime auto loans is $70.7 billion, an eight year high. It represents 27.8% of the total balance of new auto loans.
Liar loans are those where borrowers lie about the strength of their finances during the application, and the inept underwriter does not require verification. This type of loan played a major role in the housing collapse linked to the subprime mortgage market that began to unravel in 2007. Suddently, liar loans are back. They are the new rage in the subprime loan market for used cars. Federal and state authorities, including prosecutors in New York, Alabama, and Texas are looking into the problem in the used car market. The investigators have so far discovered hundreds of bogus loans totaling many $millions. The sources indicated the lies pertained to borrower income as well as employment status on their loan applications. The dealers simply were motivated to sell cars to anyone, regardless of their credit rating. They needed to move inventory, and chose not to verify data. The practice is fraudulent, but very murky. The onus is on the underwriter, related to the funding firm.
Subprime auto loans totaled $20.6 billion for those originated in 2Q2014, almost twice 2Q2010. Not surprisingly, the Experian data reports banks and credit unions logged their largest annual increase in seriously delinquent auto loans in the second quarter in the last five years. The distress with delinquency and defaults, coupled with bad underwriting and fast vanishing car equity extends beyond used car dealers. Many car dealers joke that the sucker who bought the car on a 7-year or 8-year loan schedule bears negative equity as soon as he/she drives into their garage on day one. It leads to more defaults later on from discouragement. Amazingly, the bond market appetite is still huge for the true manure put to car-lined birdcage securitized paper. Demand for collateralized bonds that securitize car loan income streams is brisk, as moron investors chase yield. The USTreasurys do not offer much yield for return on investment. The car loan bonds will not return the investment at all, since worthless. They are often hidden as tranches in larger asset backed bonds. They boast value from income stream, but the collateral basis is more accurately valued at zero, due to depreciation and longer terms of loans (like over 5 years). Lenders plan to issue about $2.3 billion of packaged securities, the majority backed by subprime auto loans and leases. They require a greater fool for purchase, in order to avoid heavy losses. Often the sucker investor is a pension fund seeking higher yields. See the NewsMax article (CLICK HERE).
◄$$$ SEARS MIGHT SERVE AS A BELLWETHER FOR THE NATIONAL RETAIL INDUSTRY... SEARS HAS TUMBLED HARD AS VENDORS REPORTEDLY HALT SHIPMENTS... ITS KMART SUBSIDIARY IS NOT COMPETITIVE, WHOSE PERFORMANCE DRAGS DOWN SEARS HOLDINGS... THE KMART PROPERTIES ARE OFTEN ENCUMBERED BY UNSAVORY LONG-TERM LEASES... WALMART HAS ENDED HEALTHCARE BENEFITS FOR WORKERS UNDER 30 HOURS. $$$
A very ominous signal has been sighted. Euler Hermes Group is a national insurer for suppliers against non-payment, covering nearly $1 trillion of business transactions worldwide. The firm just canceled policyholder coverage on Sears. No data was provided on the volume of Sears inventory covered by the insurer. The risk is to halt shipments of inventory leading into the Christmas sales season. The insurer must believe that vendor goods are likely not to be sold during the fierce recession. Vendors might also fear not being paid, and thus halted shipments. Often, insurance is a factor behind the scenes that eliminates shipments entirely, due to perceived high vendor risk that most vendors refuse to run. See the Wall Street Journal article (CLICK HERE).
Rotten KMart performance has dragged down the already weak Sears Holdings. One key problem is that K-Mart prices are routinely 15% to 20% higher than WalMart prices, and it is much less efficient. A strange but telling metric shows WalMart does over $400 in sales per square foot, while KMart does well under $200 in sales per sqft. Amazingly, Sears Holdings lost nearly $1 billion during the first half of 2014. A strategy by KMart failed. The retail chain pushed promotional pricing that narrowed gross margins, while failing to improve sales. Looking to a possible wind-down for Sears Holdings, analysts point to the value in KMart real estate. However, it is not so simple, since many of its stores were are stuck with 90-year or 100-year costly leases. These are millstone features tied to usually good properties. Bankruptcy appears the more likely path, in a grand national spectacle of ruin. See the Chicago Business article (CLICK HERE).
George of the COMEX pitched in with salient points, his thoughts with my edits. Sears has had only three things going for it for almost two decades: its properties, appliances, and Craftsman tools. The real estate is often encumbered by unfavorable leases. Many competitors now exist in the appliance sector. The tools division has Stanley and other brand competitors like Mikita, as well as bigbox competitors like Home Depot. The executives have badly needed to rebuild and reshape Sears for two decades, but they did very little, and what they did was too late. Next it will die and enter the sunset, dragging its big box real estate image with it. They will create giant holes in a great many malls in America. Like many other firms, Sears has survived on fancy flimsy financial engineering. It will hit the wall very soon, and suffer a death experience. The nation will bury an icon. As footnote, Wal-Mart will end health care benefits for workers under 30 hours per week. The ObamaCare farce of a national program has a hole in it. Leave no worker behind, kid of like Baby Bush in leaving no student behind. Demagogues run wild in US national politics, puppets one and all. See the Zero Hedge article (CLICK HERE).
◄$$$ NO RECOVERY IN THE UNITED KINGDOM, AS THE SYSTEM IS REINFORCED WHILE COLLAPSING... WITNESS THE LONGEST SUSTAINED DEGRADATION IN UK REAL WAGES IN RECORDED HISTORY... THE DEVOTION TO THE ELITE IS DONE AS THE EXPENSE OF THE MASSES... A POWERFUL HISTORICAL CHART WORTH 1000 WORDS, THANKS TO CAFE AMERICAIN (click here). $$$
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.