Tuesday, January 28, 2014

Stephen Roach Warns "Anyone Trumpeting A Faster US Recovery Is Playing The Wrong Tune"

"Financial markets and the so-called Davos consensus are in broad agreement that something close to a classic cyclical revival may finally be at hand for the US. But is it?
At first blush, the celebration seems warranted. Growth in real GDP appears to have averaged close to 4% in the second half of 2013, nearly double the 2.2% pace of the preceding four years. The unemployment rate has finally fallen below the 7% threshold. And the Federal Reserve has validated this seemingly uplifting scenario by starting to taper its purchases of long-term assets.
But my advice is to keep the champagne on ice. Two quarters of strengthening GDP growth hardly indicates a breakout from an anemic recovery. The same thing has happened twice since the end of the Great Recession in mid-2009 – a 3.4% average annualized gain in the second and third quarters of 2010 and a 4.3% average increase in the fourth quarter of 2011 and the first quarter of 2012. In both cases, the uptick proved to be short-lived.
A similar outcome this time would not be surprising. Indeed, much of the acceleration in GDP growth has been bloated by an unsustainable surge of restocking. Over the first three quarters of 2013, rising inventory investment accounted for fully 38% of the 2.6% increase in total GDP. Excluding this inventory swing, annualized growth in “final sales” to consumers, businesses, and the government averaged a tepid 1.6%. With inventory investment unlikely to keep accelerating at anything close to its recent rate, overall GDP growth can be expected to converge on this more subdued pace of final demand.
That gets to the toughest issue of all – the ongoing balance-sheet recession that continues to stifle the American consumer. Accounting for 69% of the economy, consumer demand holds the key to America’s post-crisis malaise. In the 17 quarters since “recovery” began, annualized growth in real personal consumption expenditures has averaged just 2.2%, compared to a pre-crisis trend of 3.6% from 1996 to 2007.
To be sure, there were indications of a temporary pick-up in annual consumption growth to nearly 4% in the fourth quarter of 2013. Yet that is reminiscent of a comparable 4.3% spurt in the fourth quarter of 2010, an upturn that quickly faded.
The lackluster trend in consumption is all the more pronounced when judged against the unprecedented decline that occurred in the depths of the Great Recession. From the first quarter of 2008 through the second quarter of 2009, real consumer spending plunged at a 1.8% average annual rate. In the past, when discretionary spending on items such as motor vehicles, furniture, appliances, and travel was deferred, a surge of “pent-up demand” quickly followed.
Not this time. The record plunge in consumer demand during the Great Recession has been followed by persistently subpar consumption growth..."

at http://www.zerohedge.com/news/2014-01-28/stephen-roach-warns-anyone-trumpeting-faster-us-recovery-playing-wrong-tune

Gold Flows East as Bars Recast for Chinese Defying Slump - See more at: http://ausbullion.blogspot.com.tr/2014/01/gold-flows-east-as-bars-recast-for.html#sthash.erAYCvOq.dpuf

"Gold’s biggest slump in three decades has been a boon for MKS (Switzerland) SA’s PAMP refinery near the Italian border in Castel San Pietro, whose bullion sales to China surged to a record as demand rose for coins, bars and jewelry. As prices plunged 28 percent in 2013, investors dumped a record 869.1 metric tons from gold-backed funds traded mostly in the U.S. and Europe. Much of that metal is ending up in Asia, where companies such as The Brink’s (BCO) Co., UBS AG and Deutsche Bank AG are opening new vaults. China’s expanding wealth has made the country the world’s largest buyer, surpassing India, as imports reached an all-time high. PAMP Managing Director Mehdi Barkhordar, who credited China’s “insatiable” appetite for a sales boost of as much as 20 percent last year, remains optimistic even as growth in the world’s second-largest economy slows. “The demand in China is off its peak, but still respectable,” he said last week. To keep up with orders, MKS added shifts at the PAMP refinery, located about 4 miles (6.4 kilometers) from the Italian border, Barkhordar said in November as he showed off a 1-gram gold piece the size of a fingernail. Furnaces that can process more than 450 tons a year were at full capacity from April to June, melting mined metal, scrap jewelry and ingots at 1,000 degrees Celsius (1,832 degrees Fahrenheit) into the higher purities and smaller sizes favored by Asian buyers."

at http://ausbullion.blogspot.com.tr/2014/01/gold-flows-east-as-bars-recast-for.html#sthash.erAYCvOq.dpuf

Art Cashin: Is Something Strange Brewing In The Gold Market?

"...Is Something Brewing In The Gold Market? – In his weekend note, my friend and fellow market veteran, Jim Brown, over at Option Investor posed the following puzzle:
Don't look now but the physical gold shortage is growing. Everyone knows that JP Morgan is one of the biggest gold holders on the planet. They store gold for themselves and others. On Thursday JPM reported the single largest withdrawal in history at -321,500 ounces. Actually that was a tie with December 13th, 2012 when exactly 321,500 ounces were also withdrawn. Registered gold in JPM vaults has fallen to the lowest level in history at 87,000 ounces. Registered gold at all Comex warehouses has hit a new low at 400,000 ounces. Comex claims there is a huge 92 owners per registered ounce today. Registered ounces are available for delivery to settle futures contracts. In other words the registered ounces are all that is backing up the existing futures contracts. Since the majority of futures contracts are never held until the delivery date there are tens of thousands more contracts then actual gold. If everyone suddenly began demanding delivery of the gold referenced by the futures contracts we would be in serious trouble.
On January 17th there were roughly 500,000 registered ounces. At that time there were 111.6 owners per ounce. There are currently 41.309 million ounces being traded through futures contracts. This is "paper gold" not real gold. Where else but America could we be trading 41 million ounces of futures against 500,000 registered ounces? Obviously if only a fraction of the holders of those futures contracts began demanding delivery the price of gold would be much higher.
We are currently seeing all time lows in registered gold and all time highs in claims against that gold. What is wrong with this picture?
The drawdown in physical gold isn't the only puzzle in the world of the yellow metal.
Bloomberg reports Austria has put its mint on a 24 hour schedule, trying to meet heavy demand for gold coins.  The U.K. mint announced that it already run out of 2014 sovereign gold coins.  There are tales of high demand at several other nations around the globe.
Then there are the strange stories around the Bundesbank's request to repatriate some of its gold horde (distributed for "safety" during the Cold War).  That's a story for another day."

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/1/28_Art_Cashin__Is_Something_Strange_Brewing_In_The_Gold_Market.html

Monday, January 27, 2014

This Will Create A Massive Spike In The Price Of Gold

"A 42-year market veteran who predicted the recent spike in gold ahead of time spoke with King World News about the a catalyst that is going to create a massive spike in the price of gold.  John Hathaway, who is one of the most respected institutional minds in the world today when it comes to gold, and whose fund was awarded a coveted 5-star rating, also included a fantastic chart.

Eric King:  “John, I know you’ve seen the chart that shows the expansion of paper claims vs available physical gold.  Just when you think chart can’t go any more parabolic, it does.  It has now hit a staggering 112 to 1.  When does that matter, John?”

Hathaway:  “It doesn’t matter until it does matter.  Look, these bullion banks are extending credit to trading entities -- probably high-frequency traders, hedge funds, and the other usual suspects -- that don’t have any physical gold at all....

“These entities are just using the price of physical gold as an index -- it’s just like LIBOR.  As far as I’m concerned, the more leveraged these entities are when things turn around, and then they realize they are obviously on the wrong side of the trade, the more explosive the upside will be.

Some are asking, ‘How far can they stretch the rubber band?’  We thought 90 to 1 was pretty stretched, and yet here we are at 112 to 1.


It ultimately comes down to the willingness of bullion banks to extend credit with very little connection to gold, other than using it as a reference point for profit and loss, to people with a huge amount of money so they can speculate.  Let’s face it - the high-frequency guys who have been bashing gold for the last two years, if they decide to turn their trade around, they can drive gold to the moon.

These entities are just looking for profit.  They are a bigger part of the market today than they were back in 2011.  They don’t think in macro-terms -- they just look at charts.  If they are running more money today, and if they are caught wrong-footed on the gold trade, that can be extremely explosive for the price of gold.

If we end up with the added fuel of various entities having the desire to own the physical gold instead of the paper contracts, that’s a double-barreled scenario  that would guarantee an explosion in the price of gold.”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/1/27_This_Will_Create_A_Massive_Spike_In_The_Price_Of_Gold.html

Inside London: 'Demand Delivery For the True Price of Gold'

"Buba is the nickname for Deutsche Bundesbank, the central bank of Germany.

I nearly fell out of my chair when I read a description of the divergence between the paper and physical gold markets from the Inside London column of the Financial Times.
"But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today’s depressed price, learn from Buba and demand delivery."
And this in the prince of mainstream financial publications.   Quick, alert the spinmeisters for Davos man that the natives are growing restless.   

As the fellow says, one day the ties that bind the actual and the traded commodity will snap. So if you fancy gold at today's depressed price,  take delivery.

"In June last year the average volume of gold cleared in London hit 29m ounces per day. The world’s mines are producing 90m ounces per year. The traded volume was many times the cleared volume.

The paper gold in the London Bullion Market takes the familiar forms that bankers have turned into profit machines: futures, options, leveraged trades, collateralised obligations, ETFs . . . a storm of exotic instruments, each of which is carefully logged, cross-checked and audited.

Or perhaps not. High-flying traders find such backroom work tedious, and prefer to let some drone do it, just as they did with those money-market instruments that fuelled the banking crisis. The drones will have full control of the paper trail, won’t they?

There’s surely no chance that the Fed’s little delivery difficulty has anything to do with the cat’s-cradle of pledges based on the gold in its vaults?
...But one day the ties that bind this pixelated gold may break, with potentially catastrophic results. So if you fancy gold at today’s depressed price, learn from Buba and demand delivery."

Read the entire article in the Financial Times here..."

at  http://jessescrossroadscafe.blogspot.com.tr/2014/01/demand-delivery-for-true-price-of-gold.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+JessesCafeAmericain+(Jesse%27s+Caf%C3%A9+Am%C3%A9ricain)

Global Dollar-Based Financial Fragility in the 2000s (Part I)

"Yves here. It’s been frustrating to see orthodox economists continue to invoke the Bernanke “saving glut hypothesis” as a significant driver of the crisis. That view was rebutted in gory detail in a 2010 paper by Claudio Borio and Piti Disyatat of the BIS, “Global imbalances and the financial crisis: Link or no link?” (see Andrew Dittmer’s summary here). Not surprisingly, the orthodoxy has chosen to ignore this paper (which also includes an important discussion about another bit of wrong-headed thinking, the failure to distinguish between the “natural” rate of interest and market rates of interest). The “savings glut” is still routinely mentioned in op-eds and papers by Serious Economists.
A new working paper by Junji Tokunaga and Gerald Epstein, “The Endogenous Finance of Global Dollar-Based Financial Fragility in the 2000s: A Minskian Approach,” builds on the perspective of the Borio/Disyatat paper and they are recapping it in a four-part series. Readers should find this to be a straightforward, persuasive discussion of an important topic.
By Junji Tokunaga, Associate Professor in the Department of Economics and Management, Wako University, Tokyo and Gerald Epstein, Professor in the Department of Economics, University of Massachusetts-Amherst, and Co-Director of the Political Economy Research Institute (PERI)
Global financing patterns have been at the center of debates on the global financial crisis in recent years. The global imbalance view, a prominent hypothesis, attributes the financial crisis to excess saving over investment in emerging market countries which have run current account surplus since the end of the 1990s. The excess saving flowed into advanced countries running current account deficits, particularly the U.S., thus depressing long-term interest rates and fueling a credit boom there in the 2000s.
According to this view, the financial crisis was triggered by an external and exogenous shock that resulted from excess saving in emerging market countries, not the shadow banking system in advanced countries which was the epicenter of the financial crisis. Instead, we argue that a key cause of the global financial crisis was the dynamic expansion of balance sheets at large complex financial institutions (LCFIs) (Borio and Disyatat [2011] and Shin [2012]), driven by the endogenously elastic finance of global dollar funding in the global shadow banking system.
The endogenously elastic finance of the global dollar contributed to the buildup of global financial fragility that led to the global financial crisis. Importantly, the supreme position of U.S. dollar as debt-financing currency, underpinned by the dominant role of the dollar in the development of new financial innovations and instruments, and was a driving force in this endogenously dynamic and ultimately destructive process..."

at http://www.nakedcapitalism.com/2014/01/global-dollar-based-financial-fragility-2000s-part.html

Thursday, January 16, 2014

Comex Warehouse Potential Claims Per Deliverable Ounce Rises to Historical High 112 to 1

"An almost shocking decline in deliverable (registered) gold has taken the ratio of open interest to deliverable gold to 112 to 1. 

This is not a default scenario since the supply of eligible gold in the warehouses remains adequate and at historically manageable levels as shown in the last chart below. 

Rather, it suggests that higher prices will be required to persuade more bullion owners to place their inventory up for delivery. 

That higher price, of course depends on who those owners are, and how motivated they might be by profits from their metals trades.  For some interested parties it is enough to be the very close friends of the Central Banks, with benefits that make them incredibly rich, self-satisfied, and occasionally audacious to the point of over-reaching.

But of course, it is well to remember that the Comex has become the tail wagging the dog, as the gold bullion markets have shifted to the East. 

February may be an interesting month, in an interesting year.

Weighed, and found wanting.

Stand and deliver."

at http://jessescrossroadscafe.blogspot.com/2014/01/comex-warehouse-potential-claims-per.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

Half of Every Mortgaged Home in America Still Completely Underwater-Fabian Calvo

"Forget what you are hearing about stiffer mortgage lending requirements.  It’s not true.  Real estate expert Fabian Calvo says, “If you can fog up a mirror or you have a pulse, they will give you a home loan.  That’s what they have done with the car loans, and that’s what they are doing with housing loans.”  The so-called new rules do not have any down payment credit score requirement.  Zero percent down loans are going to make a very big comeback.  According to Calvo, “After the mid-term election, you’re going to see no-money-down loans just really roar back.  It’s all part of the pump and dump I’ve been telling you about for well over a year.”  So, are the housing market problems behind us?  Calvo, whose company buys and sells $100 million in distressed real estate debt annually, says, “Bottom line is we are still in a situation where half of every mortgaged home in America is completely underwater, and the Fed is going to have to print money for a very long time before those values return.  It’s just a matter of fact.” Calvo goes on to say, “Now, worst of all, they are beginning to securitize so they can bring in even more capital.  A third of all real estate in America is rental properties.  You are going to have Wall Street being the biggest landlord in America.  It’s subprime 2.0.” 

at http://usawatchdog.com/half-of-every-mortgaged-home-in-america-still-completely-underwater-fabian-calvo/

Hathaway - Gold Price To Super-Spike As Physical Flees West

"...The bullion market has been pressured all year by an artificial supply of paper gold with little or no connection to the underlying physical.  We wrote about this more extensively in our website article "Let's Get Physical."
We believe that the resolution of the disconnect between paper and physical gold will be a dramatic upside repricing of the real thing.  Most important is the steady migration of physical gold bars held in Western vaults to China and other parts of Asia, where they seem unlikely to be returned, other than for exorbitant ransom.
The timing of a resolution so potentially cataclysmic is elusive.  It would be like counting the snowflakes necessary to trigger an avalanche.  The buildup of systemic risk is there for anyone to see, but to the investment consensus, it is preferable, and perhaps more profitable in the short run, to ignore.  A commitment to precious metals and related mining shares is an investment in the almost certain failure of the PhD-standard in central banking, as stated so eloquently by Jim Grant.
Based on our perception of markets, it seems to us that the downside risk is limited.  Based on our perception of fundamentals, it seems to us that the upside potential is substantial.

King World News note:  Below are 5 fantastic charts from John Hathaway which take a look at the big picture for gold and the mining shares:


King World News note:  It is quite astonishing that you can see in the chart above (figure 52) the adjusted market cap per ounce of gold resource divided by the gold price is back to levels last seen in the 1990 time frame, which was directly in the middle of the roughly 20 year bear market in the price of gold.  Gold is simply experiencing a mid-cycle correction in a secular bull market, and yet the devastation in the mining shares has reached historic extremes on the downside.  This is why people like John Hathaway, John Embry, Egon von Greyerz, Rick Rule and Eric Sprott talk about the unbelievable opportunity this market represents for patient, long-term investors."

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/1/15_Hathaway_-_Gold_Price_To_Super-Spike_As_Physical_Flees_West.html

Wednesday, January 15, 2014

Bank Of America Just Confirmed The Fed's Fears About The US Mortgage Market

"Bank of America just reported an earnings beat, but its mortgage business — a sector everyone's been watching — was a disappointment.
First-mortgage originations declined 46% from this time last year.
And BAC isn't alone in this. Both JP Morgan and Wells Fargo reported declines in their mortgage businesses yesterday. Wells Fargo managed to crush earnings through cost-cutting measures..."

at http://www.businessinsider.com/bac-beats-but-mortgage-business-suffers-2014-1#ixzz2qUwxEUi4

Faber: We are in a Gigantic Financial Asset Bubble

"Marc Faber, publisher of the Gloom, Boom & Doom Report, appeared on Bloomberg Television’s “Street Smart” yesterday to discuss the impact of Fed policy on the global economy and his predictions for 2014. As you could imagine, he is bearish.
Marc told Trish Regan and Adam Johnson that “we are in a gigantic financial asset bubble.” He has warned before that he believes the bubble could pop in a 1987-style crash.
While I see froth – think Tesla or Twitter or the mania surrounding Bitcoin – I don’t think equities today are anywhere near where they were in 1999, which truly was a bubble. Also see Marshall’s recent post on bubbles, which I think is a good one in terms of understanding the phenomenon.
Faber also spoke about Bitcoin, saying, “I prefer physical gold and silver, platinum to bitcoin. Bitcoin can have a lot of competition. Gold, silver, platinum — they have no competition. How do you value a bitcoin?… How do you value Netflix? Is it overpriced or underpriced? Is Tesla overpriced, underpriced?”
My own definition of a bubble is a two-standard deviation move – meaning that you enter bubble territory when the price moves to a level two standard deviations above the norm on a long-term valuation benchmark metric. I think of a bubble coming from the fact that price movements are never entirely independent of previous price movements. When prices are near long-term norms, the intertemporal dependence is not an overriding variable in price movement. However, as prices move away from trend – either above or below – previous price movements take on increasing importance. That’s why markets overshoot both to the upside and the downside..."

The Eurozone’s Really Bad 2014, In Two Charts

"Headline writers have found some brutal things to say about the eurozone lately. To take just a few of the dozens of possible examples:
It goes on and on, through youth unemployment and political turmoil and every other kind of malaise short of major war. Meanwhile, the news in most of the rest of the world is, if not great, at least not horrendous. Here in the US headlines containing “despair” or “depression” are limited to pharmaceutical ads. And Japan, with its low interest rates and positive growth, seems to think it’s recovering (you have to admire their ability to compartmentalize, what with a nuclear plant melting down right in the middle of the country)..."

It’s PARAMOUNT to OWN some PHYSICAL Gold & Silver – Here’s WHY

"Stop lamenting the current price of gold and silver and questioning the validity of owning PMs because without gold and/or
 silver it will be almost impossible to survive what is to come.  No one knows when, but when it does, and it is a historical certainty, are you really going to care what you paid for your gold and silver?..."

Gold, Silver & Hyperinflation As We Head Into 2014

"No one, except those steeped in Austrian economic theory, fear the consequences of too much money creation, which means that money creation will continue until it is obvious to all that excessive money creation causes still more problems.

Until then, we can expect massive money creation from all central banks, perhaps not all at the same time and perhaps not at the rate that economists outside the central banks want, but it will come, sometimes in spurts, sometimes in massive quantities.

Still, when central banks announce money creation programs, there are economists, columnists and academicians who say it's not enough, regardless of the amount announced.  Paul Krugman, famed New York Times columnist and recipient of the 2008 Nobel Memorial Prize in Economic Sciences, is the most prominent economist who has called for money creation in amounts way beyond what have been created.  At one point in the midst of the World Financial Crisis bailout, Krugman called for the creation of $10 trillion.  Such is the belief that money creation is the answer to financial and economic woes.

Worse, though, is the silence about the dangers of too much money creation.  No one in the mainstream ever registers any opposition.  The word hyperinflation is never used.

Getting specific about money creation, European Central Bank president Mario Draghi recently declared that an interest rate increase in the European Union was “off the agenda.”  Further, rate setters on the governing council in Frankfort, where the real power lines in the EU, declared their “... resolve to keep monetary policy ultra loose far into the future.”  There is even talk of charging banks in the EU a levy for holding “excess reserves” with the ECB.  The reasoning behind “negative interest” to ECB member banks would be to stimulate bank lending, which further increases the money supply.

In Japan, the Bank of Japan and the government are working hand in hand to achieve two percent inflation, with the BoJ doing the printing and the government doing the spending.  Presently, the price inflation rate in Japan is running at 1.61%, which means that still more money creation lies in Japan's future.

In the UK, the Bank of England is keeping interest rates at historic low levels, despite calls outside the BoE for tighter monetary policy.  Bloomberg editorial board member Marc Champion says that a tighter monetary policy would be an act of “madness.”  No fear of too much money creation by Mr. Champion, who notes that in the UK ".  “... real wages have been falling, inflation is decelerating and the country's economy is still smaller than it was in 2008.”  The U.K.’s third quarter growth was only 0.8 percent.  No wonder Keynesians are calling for loose monetary policies..."

Thursday, January 9, 2014

The Recovery™ In One Chart

"Corporatism by any other name, or brand...

h/t for the chart to those wild and crazy guys at GMU."

Household and Non-Financial Credit in Spain Sink, Government Debt Expands; No Recovery in Sight

"Here's an interesting chart regarding credit expansion and contraction in Spain from Guru's Blog. I added translation on the chart in red. 

Between 2009 and 2013 bank credit to government grew at rates between 14% and 36%. Meanwhile, credit to households and businesses has been in clear contraction since 2010..."

If You Are Waiting For An “Economic Collapse”, Just Look At What Is Happening To Europe

"If you are anxiously awaiting the arrival of the "economic collapse", just open up your eyes and look at what is happening in Europe.  The entire continent is a giant economic mess right now.  Unemployment and poverty levels are setting record highs, car sales are setting record lows, and there is an ocean of bad loans and red ink everywhere you look.  Over the past several years, most of the attention has been on the economic struggles of Greece, Spain and Portugal and without a doubt things continue to get even worse in those nations.  But in 2014 and 2015, Italy and France will start to take center stage.  France has the 5th largest economy on the planet, and Italy has the 9th largest economy on the planet, and at this point both of those economies are rapidly falling to pieces.  Expect both France and Italy to make major headlines throughout the rest of 2014.  I have always maintained that the next major wave of the economic collapse would begin in Europe, and that is exactly what is happening.  The following are just a few of the statistics that show that an "economic collapse" is happening in Europe right now...
-The unemployment rate in the eurozone as a whole is still sitting at an all-time record high of 12.1 percent.
-It Italy, the unemployment rate has soared to a brand new all-time record high of 12.7 percent.
-The youth unemployment rate in Italy has jumped up to 41.6 percent.
-The level of poverty in Italy is now the highest that has ever been recorded.
-Many analysts expect major economic trouble in Italy over the next couple of years.  The President of Italy is openly warning of "widespread social tension and unrest" in his nation in 2014.
-Citigroup is projecting that Italy's debt to GDP ratio will surpass 140 percent by the year 2016.
-Citigroup is projecting that Greece's debt to GDP ratio will surpass 200 percent by the year 2016.
-Citigroup is projecting that the unemployment rate in Greece will reach32 percent in 2015.
-The unemployment rate in Spain is still sitting at an all-time record high of 26.7 percent.
-The youth unemployment rate in Spain is now up to 57.7 percent - even higher than in Greece.
-The percentage of bad loans in Spain has risen for eight straight months and recently hit a brand new all-time record high of 13 percent.
-The number of mortgage applications in Spain has fallen by 90 percent since the peak of the housing boom.
-The unemployment rate in France has risen for 9 quarters in a row and recently soared to a new 16 year high.
-For 2013, car sales in Europe were on pace to hit the lowest yearly level ever recorded.
-Deutsche Bank, probably the most important bank in Germany, is the most highly leveraged bank in Europe (60 to 1) and it has approximately70 trillion dollars worth of exposure to derivatives.
Europe truly is experiencing an economic nightmare, and it is only going to get worse..."

Noonan: “Gold” War Has Replaced Cold War in China/Russia vs. U.S. Struggle for Economic Dominance

"China [and Russia] represent the East, importing gold at cheaper and cheaper price levels, as the Western central bankers have been conducting a clearance sale…depleting their physical holdings.  In the war for gold, the East and West are still winning, but for vastly different reasons.

China loaned Mao’s gold to the NY central bank, and it would not [could not] return it. The gold was gone, loaned out, sold, we will not likely know the true story, but it was gone.  Paper was the name of the game for the West.  Physical gold, silver, and natural resources was, and still is the name of the game for China and Russia.  Both have been dumping US Treasury bonds in exchange for gold, silver, and any other asset that is not a derivative of paper.  Because of the NY central bank experience, China is out for revenge.
Russia has always been a known adversary and is winning against the US by default, simply waiting for the US to self-implode, which it is doing.  Where China holds the majority of physical gold, Russia holds energy trump cards over the US and its faltering scheme of the petro-dollar.  It is fast being replaced  by sounder forms of collateral and trade outside of the Western fiat scheme.  The US has become isolated.  Russia has vast amounts of natural gas to supply Europe, replacing, in part, oil.
b) The West
How is the West winning in the war for gold supremacy?  By default, which is all it knows how to do.  The entire Western world remains in the financial grip of fiat obligations. Everything is dependent upon the central banking system that is close to collapse.  The fiat Ponzi scheme is being kept afloat by China and Russia not forcing the totally insolvent Western banking system to make good on its debts.  Instead, China is being rewarded by cheap gold prices and cheap New York real estate that comes with the added bonus of the largest commercial gold vault (they bought 1 Chase Plaza for $750 million, about half of its value, from JP Morgan which also happens to house the world’s largest gold vault) located across the street from the Federal Reserve gold vault.
In spite of the fact that there have been:
  • record sales for silver and gold coins by the public,
  • record imports of physical gold by China and other countries to a much lesser degree,
  • disappearing gold reserves by COMEX and LBMA,
  • the highest demand ever for physical ounces of gold by paper holders,
  • etc, etc, etc."