Friday, October 31, 2014

Maguire: This Triggered Today’s Massive Selloff In Gold & Silver

"Today London metals trader Andrew Maguire spoke with King World News about exactly what triggered today’s stunning and massive selloff in gold and silver.  Below is what Maguire had to say in Part II of an extraordinary series of interviews being released today on KWN.

Eric King:  “Andrew, we are seeing a continuation of the smash in gold and silver.  What are your thoughts here as you are watching this?”

Maguire:  “First thing this morning, after the Bank of Japan decision, things got a bit roiled.  But what I did see was a fully-timed algorithm kick off at exactly 7 AM U.K. time.  There is only one seller that can come up with 50 tons of paper gold in a matter of 3 or 4 minutes and that is the Bank for International Settlements....

“We saw this come through and it attacked the entire (massive) bid stack (defending the previous low of $1,180) in a matter of seconds.  Obviously there were visible stops.  They (the Bank for International Settlements) knew exactly what they were attacking there.  It was purely paper gold.  We are talking about 50 tons, Eric.  That’s an awful big position for somebody to put on (as) a risk position in a single shot.

People ask, ‘How do you know?’  We know that it has to be an official (entity).  It cannot possibly be somebody  with a compliance department with a risk position they have to look at.  And the other thing is this (trade) was enacted in the foreign exchange markets, as opposed to the Comex.

In other words, the short seller suddenly sold gold against the dollar in the foreign exchange market, and that had a huge effect and was able to trip off (an additional) 50 tons of Comex supply in a matter of minutes.” 


Maguire - We’re Seeing Stunning Amounts Of Euro Gold Buying

"Today London metals trader Andrew Maguire told King World News that there is currently stunning amounts of euro gold physical buying taking place in London.  Maguire also spoke about the staggering demand for physical gold elsewhere around the world.  Below is what Maguire had to say in Part I of a series of interviews.

Maguire:  “There is solid evidence of continued investment bar demand coming out of China, large Indian demand related to Diwali last week, and fully unreported, off-the-scale large euro gold buying that you don’t see reported anywhere.  But it’s absolutely evident in the wholesale markets...."


From This Day Forward, We Will Watch How The Stock Market Performs Without The Fed’s Monetary Heroin

"Mark this day on your calendars.  The Dow is at 16974, the S&P 500 is at 1982 and the NASDAQ is at 4549.  From this day forward, we will be looking to see how the stock market performs without the monetary heroin that the Federal Reserve has been providing to it.  Since November 2008, the Fed has created about 3.5 trillion dollars and pumped it into the financial system.  An excellent chart illustrating this in graphic format can be found right here.  Pretty much everyone agrees that this has been a tremendous boon for the financial markets.  As you will see below, even former Fed chairman Alan Greenspan says that quantitative easing was "a terrific success" as far as boosting stock prices.  But he also says that QE has not been very helpful to the real economy at all.  In essence, the entire quantitative easing program was a massive 3.5 trillion dollar gift to Wall Street.  If that sounds unfair to you, that is because it is unfair.
So why is the Federal Reserve finally ending quantitative easing?
Well, officially the Fed says that it is because there has been so much improvement in the labor market...
The Fed's language, however, did suggest that they were getting more comfortable with the economy's improvement. It cited "solid job gains," citing a "substantial improvement in the outlook for the labor market," as well as pointing out that "underutilization" of labor resources is "gradually diminishing."
But that is not true at all.
The percentage of Americans that are working right now is about the same as it was during the depths of the last recession.  Just check out this chart...
Employment Population Ratio 2014
So there has been no "employment recovery" to speak of at all.
And as I wrote about yesterday, the percentage of Americans that are homeowners has been steadily falling throughout the quantitative easing era...
Homeownership Rate 2014
So let's put the lie that quantitative easing helped the "real economy" to rest.  It did no such thing.
Instead, what QE did do was massively inflate stock prices.
The following is an excerpt from a Wall Street Journal report about a speech that former Fed chairman Alan Greenspan made to the Council on Foreign Relations on Wednesday...
Mr. Greenspan’s comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.
He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy.
Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.”
Moving forward, what did Greenspan tell the members of the Council on Foreign Relations that they should do with their money?
This might surprise you...
Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.
It almost sounds like Greenspan has been reading the Economic Collapse Blog..."


Does This Look Like A Housing Recovery To You?

Homeownership Rate 2014"We just learned that the homeownership rate in the United States has fallen to the lowest level in 19 years.  But of course this is not a new trend.  As you will see in this article, the homeownership rate in the United States has been in a continual decline for more than 7 years.  Obviously this is not a sign of a healthy economy.  Traditionally, homeownership has been one of the key indicators that you belong to the middle class.  When people define "the American Dream", it is usually one of the first things mentioned.  So if the percentage of Americans that own a home has been steadily going down for 7 years in a row, what does that tell us about the health of the middle class in this country?
The chart that you are about to view is clear evidence that we are in the midst of a long-term economic decline.  It shows what has happened to the homeownership rate in the U.S. since the year 2000, and as you can see it has been collapsing since the peak of the housing market back in 2007.  Does this look like a housing recovery to you?...
Homeownership Rate 2014
So many people get caught up in what is happening on Wall Street, but this is the "real economy" that affects people on a day to day basis..."


The Dollar Decline Continues: China Starts Direct Convertibility With Asia's #1 Financial Hub

"Earlier this week some of the biggest financial news of the year made huge waves all over Asia.
Yet in the Western press, this hugely important information has barely even been mentioned.
Singapore dollar news The dollar decline continues: China begins direct convertibility to Asias #1 financial center
While this is ignored in the US so far, it’s front page news in Asia
So what’s the news?
The Chinese government announced that the renminbi will become directly convertible with the Singapore dollar... effective immediately..."


Shadow Banking Assets Increase By $5 Trillion To Record $75 Trillion, 120% Of Global GDP

"Call it Monitoring Universe of Non-Bank Financial Intermediation (MUNFI), Other Financial Intermediaries (OFI), non-bank financial intermediation or, easiest of all, by its widely accepted name, Shadow banking. Whatever you want to call it, the latest just released estimate by the Financial Stability Board of how many assets current exist outside of the regular banking system (and are thus in the shadows) around the globe should explain why these day the one thing central bankers are most worried about is the uncontrolled proliferation of shadow assets (technically it is liabilities, but that is a different discussion). The reason: according to the broadest measure of shadow banking, it grew by $5 trillion in 2013 to reach $75 trillion. This represents some 25% of total financial assets and when expressed in terms of global GDP, it amounts some 120% of global GDP.
We are not exactly sure which is scarier: that total financial assets amount to about 500% of world GDP or that about $75 trillion in financial leverage is just sitting there, completely unregulated and designed with one purpose in mind: to make billionaires into trillionaires (with taxpayers footing the bill of their failure)..."


Alan Greenspan: QE Failed To Help The Economy, The Unwind Will Be Painful, "Buy Gold"

"It appears it is time for some Hillary-Clinton-esque backtracking and Liesman-esque translation of just what the former Federal Reserve Chief really meant. As The Wall Street Journal reports, the Fed chief from 1987 to 2006 says the Fed's bond-buying program fell short of its goals, and had a lot more to add.
Mr. Greenspan’s comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.

He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs.But it didn’t do much for the real economy.

“Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.”


He observed that history shows central banks can only prick bubbles at great economic cost. “It’s only by bringing the economy down can you burst the bubble,” and that was a step he wasn't willing to take while helming the Fed, he said.


The question of when officials should begin raising interest rates is “one of those questions I cannot answer,” Mr. Greenspan said.

He also said, “I don’t think it’s possible” for the Fed to end its easy-money policies in a trouble-free manner....

"Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different, Mr. Greenspan said.


“I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves,” Mr. Greenspan he said.
And finally - while CNBC's audience is told what a terrible thing gold is, "The Maestro", having personally created the financial cataclysm the world finds itself in following a lifetime of belief in fiat, Keynesian ideology and "fixing" one bubble with an even greater and more destructive asset bubble, has suddenly had an epiphany and now has a very different message from the one he preached during his decades as the head of the Fed.
Mr. Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments.
What Greenspan failed to add is that it is thanks to his disastrous policies (subsequently adopted by Bernanke and Yellen) that gold is the "place to put money."


Thursday, October 30, 2014

If You Want To Know How Wild Things Can Get - Look At This

"Yesterday afternoon, my pal, Bob Pisani, passed along a paper from the NY Fed.  Here's the opening of the paper:
For many years, economists have struggled to explain the “equity premium puzzle”—the fact that the average return on stocks is larger than what would be expected to compensate for their riskiness. In this post, which draws on our recent New York Fed staff report, we deepen the puzzle further. We show that since 1994, more than 80 percent of the equity premium on U.S. stocks has been earned over the twenty-four hours preceding scheduled Federal Open Market Committee (FOMC) announcements (which occur only eight times a year)—a phenomenon we call the pre-FOMC announcement “drift.”

The equity premium is usually measured as the difference between the average return on the stock market and the yield on short-term government bonds. Previous research on the size of the premium finds that it is too large for plausible levels of risk aversion.
"….. 80% of the equity premium"?  That's stunning.  The Fed researchers say they don't know what causes the phenomenon.  I think the explanation is rather simple, but we'll lay it out at another time when we have sufficient space."


Man Who Ran QE1 Warns Of Major Plunge In Global Markets

"In the aftermath of the Fed announcement that they are officially ending the asset-backed purchase program know as QE, today King World News spoke with the man the Fed called on to execute QE1 and who also set up the Fed’s massive trading room, former Fed member and former Managing Director at Morgan Stanley, Andrew Huszar.  What he had to say will surprise KWN readers around the world.  Below is what Huszar had to say in this powerful interview.

Andrew Huszar:  “What happened today with the Fed was expected.  The Fed has been angling for the end of QE for quite some time.  The reality is that they are not entirely ending QE.  As I mentioned to you previously, the Fed is committed to maintaining the current size of its portfolio.  As some of their bonds mature, the Fed will be going out and buying bonds to replace them.  So we will still see the Fed buying hundreds of billions of dollars of bonds each year...."


The World Is About To Fall Into A Terrifying Deflationary Crater

"With gold, silver, oil, and other commodities getting hit, today Michael Pento warned King World News that the world is about to fall into a terrifying deflationary crater.  Pento also discussed what he is doing with his firm’s money ahead of the coming chaos..."


Monday, October 27, 2014

Shanghai Posts 51.5 Tonnes of Gold For the Week: How Long Can the Gold Pool Be Sustained

"The Shanghai Gold Exchange, where investors actually take their bullion rather than just play liar's poker with multiple paper claims for the same ounces, saw 51.5 tonnes of gold bullion taken in the latest week.

The trend of physical deliveries has been rising the last 12 weeks.
To put this in perspective, if there are 32,150.75 troy ounces of gold in a metric tonne, then the Comex has a total of just under 28 tonnes of registered (deliverable) gold in all of its warehouses.  

What is that, about three days supply in Shanghai?  Not to mention the other gold bullion markets around the world.
Sounds more symbolic, than practical.  Well, there can be great power in symbols— until long abused belief begins to falter, and confidence frays.  And then one risks the danger of using too much force one too many times, and losing the faithful obedience of the public.  And with it everything that allows a minority to govern.
There are another 239 tonnes in storage in all the Comex vaults, in the proper bullion eligible format, but not listed as deliverable at these prices.  Sometimes owners feel comfortable keeping the bullion there for storage, eliminating the need to have the bullion assayed if they ever wish to sell it.

So what does this all mean?    It means that the unsustainable will not be sustained. 
Some day the price of gold will likely be whatever China, Russia and like minded bullion markets say it is, the paper pushers in New York and London notwithstanding.   The tangled web of free trade and globalization, ain't it a bitch? 
It would already be so, except for the tired efforts of Wall Street's central banking friends and their access to leasing other people's bullion in a misguided effort to influence markets and rig their prices.
China and the rest of the world are apparently not yet tired of buying gold on the cheap. 
But make no mistake: Shanghai talks, and Wall Street walks.
This chart from the data wrangler Nick Laird at

Copper Surges After Report Mysterious London Buyer Has Cornered Up To 90% Of Market

"Copper prices are surging this morning (in the face of Goldman's recent warnings of a plunge), jumping 4 handles apparently on the heels of a WSJ story in which LME admits that a single buyer has snapped up more than half the copper held in London Metal Exchange warehouses, giving it control over a crucial source of supply and raising concerns among traders about the potential for higher prices. What is more remarkable is, as WSJ reports, on several occasions in the last month, this buyer held as much as 90% of the world’s copper stored in LME-licensed warehouses. Though no confirmation has been given traders suggest the firm cornering the copper market is Red Kite Group, a London hedge-fund manager that focuses on metals trading..."


We are all going to pay a terrible Price for all this Money-Printing and Debt

"We are all going to pay a terrible price for all this money-printing ...

They are doing this at the expense of people who save and invest.

They are doing it to bail out the people who borrowed huge amounts of money. The consequences are already being felt..."


Shocking Truth About Recent Plunge Protection Team Activity

"...This is why we are seeing this massive volatility.  As soon as markets go down, the central banks support them because central banks can’t afford for the markets to crash.  That would lead to a loss of confidence and crash the whole financial system, which is a house of cards.  But as we know, any intervention or artificial support will always have a limited effect.  So this enormous credit bubble that the world is experiencing will implode in the near future.

Coming back to Switzerland, at least here the people have the power to stop the government and the central bank from doing crazy things, and the Swiss Gold Initiative is an example of that.  If the referendum passes it will become part of the Constitution.  The government cannot delay, amend, or abolish it.  This is real people power that is unique to Switzerland.

What is happening in the gold market right now is fascinating.  The flow of gold from West to East is continuing.  Exports from Switzerland to the East last month were 172 tons.  That’s the highest since February.  And shipments to China tripled compared to previous months.  Shipments were also the highest to Hong Kong since April.

And gold demand in India is massive right now.  Imports into Switzerland were also very high at almost 200 tons.  Part of that was 63 tons from the UK.  This was compared to 8 tons in August.  So Switzerland is continuing to buy the gold that the central banks are selling or leasing into the market, and all this gold is heading to the East.

Russia also had its largest purchase ever last month at 37 tons.  That’s about $1.5 billion worth of gold.  The Russians know that gold means power.  We are also hearing from very reliable sources that countries are secretly repatriating gold from the United States.  But I’m sure they are getting back only a fraction of what they are asking for."


Wednesday, October 22, 2014

Financial Warfare & Market Volatility Exploding

"Jason Burack and Mo Dawoud did a market wrap and discussed market volatility, a potential market crash and the wealth effect. Jason and Mo think after 2008 the rules changed and now asset prices will not be allowed to drop an enormous amount and if they do drop say 15-20% they may not be allowed to stay that low for more than 6-12 months due to the amount of leverage holding assets like stocks, bonds and real estate..."


Today Something Shocked The Establishment & The World

"Today a 42-year market veteran spoke with King World News about something that happened earlier today which has frightened the establishment and shocked many people around the world.  Below is what Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this extraordinary interview.

Greyerz:  “Eric, as you know, I have been working with the committee who is behind the Swiss Gold Initiative.  Something was released today that has shocked the establishment.  But first, the Yes campaign is for repatriating all the gold that is held abroad.  They want to bring this gold, which is currently held in the U.K. and Canada, back to Switzerland.  This represents 30 percent of the Swiss gold.  We are talking about more than 300 tons...."


China’s Plan For $100 Silver, $2,000 Gold & The Oil Market

"Today an acclaimed money manager spoke with King World News about China’s plan for $100 silver, $2,000 gold, and the oil market.  Stephen Leeb also spoke about the big picture for resource wars, fracking, Russia, the United States, and Saudi Arabia.

Leeb:  “There is no doubt that the Saudis were targeting lower oil prices during a time of year which is seasonally very slow.  The Saudis definitely wanted to send a message by lowering oil prices.  Saudi Arabia has become extremely close in recent years to China.  China is one of Saudi Arabia’s leading trading partners...."


Tuesday, October 21, 2014

Richard Russell - Expect An Avalanche Of Fiat Money Creation

"Russell:  “In the early days of the US, the dollar was trusted. The reason it was trusted was that the dollar was backed by physical gold. Those were the days when the dollar was considered “good as gold.” The obvious reason was that a person could take his dollars into any bank, and exchange his dollars for gold.
This changed in 1933 when Americans were forbidden by law to own gold. As far as Americans were concerned, they were now dealing with paper and could no longer exchange their paper for gold.
So in 1933, Americans were no longer on the gold standard. But foreigners who were creditors of the US would settle their accounts in gold. If the US had a debt with a creditor, the creditor could settle his debt by calling in a quantity of gold.
This changed in 1971 when, in the face of an outpouring of US gold, President Nixon slammed the gold window shut. This took the US, both domestically and internationally, off the gold standard. The dollar was simply a piece of paper, comparable to Monopoly money. Following the US’ example, the rest of the world abandoned the gold standard.
Recently every nation has wanted a cheaper currency to aid in its exports. With almost all world currencies depreciating, money has flowed to the US dollar. This is because the US, alone, appears to have a thriving economy. Of course the strong dollar will retard US exports and make foreign goods appear to be bargains.
The strong dollar puts pressure on gold. So far gold has held up remarkably well in the face of world deflationary pressures and the collapsing price of oil. In the face of these global deflationary pressures, the question is – Will the Federal Reserve fight deflation by calling off its tapering and opening its money spigots wide? 

The Fed and the central banks of the world will not tolerate deflation. For this reason I expect a veritable avalanche of fiat currencies to be created. Mario Draghi, head of the European Central Bank, is facing slumping European economies and deflation. But Draghi will not be able to use QE, as the US has, since Germany, the leader of Europe, is terrified of the potential for inflation. Thus the US stands alone in the fight against deflation. Already several members of the Fed have released feelers to the effect that QE should be extended into the future, and interest rates must be kept at zero..."


Friday, October 17, 2014

International Debt and Financial Crises

"The latest issue of the IMF’s World Economic Outlook has a chapter on global imbalances that discusses the evolution of net foreign assets (also known as the net international investment position) in debtor and creditor nations. The authors warn that increases in the foreign holdings of domestic liabilities can raise the probability of different types of financial crises, including banking, currency, sovereign debt and sudden stops. A closer inspection of the evidence that has been presented elsewhere suggests that it is foreign-held debt that poses a risk.

The role of international debt in increasing the risk of crises was pointed out by Rodrik and Velasco (working paper 1999), who showed that short-term bank debt contributed to the occurrence of capital flow crises in the period of 1988-98. More recently, Joyce (2011) (working paper here) looked at systemic bank crises in a sample of emerging markets, and found that an increase in foreign debt liabilities contributed to an increase in the incidence of these crises, while FDI and portfolio equity liabilities had the opposite effect. Ahrend and Goujard (2014)(working paper here) confirmed that increases in debt liabilities increase the occurrence of systemic banking crises. Catão and Milesi-Ferretti (2014) (working paper here) found that an increase in net foreign assets lowered the probability of external crises. Moreover, they also reported that this effect was due to net debt. FDI had the opposite effect, i.e., an increase in FDI liabilities lowered the risk of a crisis. Al-Saffar, Ridinger and Whitaker (2013) have looked at external balance sheet positions during the global financial crisis and reported that gross external debt contributed to declines in GDP.

There are also studies that compare the effect of equity and debt flows. Levchenko and Mauro (2007), for example, investigated the behavior of several types of flows, and found that FDI was stable during periods of “sudden stops,” while portfolio equity played a limited role in propagating the crisis. Portfolio debt, on the other hand, and bank flows were more likely to be reversed. Similarly, Furceri, Guichard and Rusticelli (2012) (working paper here) found that large capital inflows driven by debt increase the probability of banking, currency and balance-of-payment crises, while inflows that are driven by FDI or portfolio equity have a negligible effect.

Why are debt liabilities more risky for countries than equity? Debt is contractual: the holder of the debt expects to be paid regardless of economic conditions. Equity holders, on the other hand, know that their payout is tied to the profitability of the firm that issues the debt. Moreover, during a crisis there are valuation effects on external balance sheets. The value of equity falls, which raises the net foreign asset position of those countries that are net issuers of equity, while lowering it for those that hold equity. In addition, debt may be denominated in a foreign currency to attract foreign investors worried about depreciation. A currency depreciation during a crisis raises the value of the debt on the balance sheet of the issuing country.

These results have consequences for the use of capital controls and the sequence of decontrol. Emerging markets should be careful when issuing debt. However, the evidence to date of trends in the international capital markets shows a rise in the use of debt by these countries.Emerging market governments, for example, issued $69 billion in bonds in the first quarter. In addition, the BIS has drawn attention to the issuance of debt securities by corporations in emerging markets.

The IMF has warned of a slowdown in the emerging market countries, with the Fund’s economists forecasting GDP growth rates below the pre-crisis rates.  Speculation about the impact of changes in the Federal Reserve’s quantitative easing policies has contributed to concerns about these countries. If a slowdown does materialize, the debt that was issued by these countries may become a burden that requires outside intervention."


Why Nations (And Organizations) Fail: Self-Serving Elites

"Submitted by Charles Hugh-Smith of OfTwoMinds blog,
For those who doubt that America is ruled by a narrow elite: three charts.
The book Why Nations Fail: The Origins of Power, Prosperity, and Poverty neatly summarizes why nations fail in a few lines:
(A nation) is poor precisely because it has been ruled by a narrow elite that has organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated, and has been used to create great wealth for those who possess it.
Sound like any countries you know? Perhaps we should flip this question around and ask: how many nations don't fit this profile?
I submit that this dynamic of failure--the concentrated power and wealth of self-serving elites-- is scale-invariant, meaning that it is equally true of communities, towns, cities, states, nations and empires alike: all fail when they're run for the benefit of a narrow elite.
There is a bitter irony in the ease with which American pundits discern this dynamic in developing-world kleptocracies while ignoring the same dynamic in America. One would imagine it would be easier to see the elites-inevitably-cause-failure in one's home country, but the pundits by and large are members of the Clerisy Upper Caste, well-paid functionaries, apparatchiks, lackeys, factotums, toadies, sycophants and apologists for the very elites that are leading America down the path of systemic failure as the ontological consequence of their self-serving consolidation of wealth and power.
For those who doubt that America is ruled by a narrow elite: I don't have charts for standard-issue third-world kleptocracies, but I doubt the concentration of wealth and political power is much more extreme than in America:
In a simulacrum democracy where the highest bidders control the state, who do you think can readily buy political power?
And the policies of the elites have really spread the prosperity around in the past few years (sarcasm-off):
What's truly interesting about the authors' exhaustive survey of the inevitability of failure in elite-dominated nations is how cities dominated by narrow elites fail, states controlled by narrow elites fail, and indeed, any organization that serves the interests of a few at the expense of the many fails for the same reasons."