Currency Wars: Rickards On Gold, QE, and the Economy

"Jim Rickards is interviewed by FutureMoneyTrends.com. 


Part 1 is focused on Gold manipulation and why gold plays such an important role in the world, even if conventional wisdom doesn't believe so, gold is not only being watched by central bankers, as Mr. Rickards put, "the gold price is being managed."

Part 2 expands into the economy and probability of more quantitative easing (QE). According to Mr. Rickards, QE will come in the next few months because it can't be done this fall since it will look political, and if the FED tries to wait until December, it will be too late..."


at http://jessescrossroadscafe.blogspot.com/2012/04/jim-rickards-is-interviewed-by.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

Guest Post: There Will Never Be A Failed US Treasury Auction... Until There Is

"And there's your trade. Everyone is betting on this one idea - that the Fed will never lose control of interest rates and the US Treasury will never have a failed auction. The same way nearly every major financial player on the planet was willing to bet that US real estate could never fall for an extended period of time.

And we all know how that trade worked out.

Timing, please?

Of course, the big question for most Zero Hege readers is not if this will happen, but when.

Who knows? Not me. Not Paul McCulley. Not the Bernank. Not Timmy G. Not any financial pundit or TBTF economist. No one knows..."

at http://www.zerohedge.com/news/guest-post-there-will-never-be-failed-us-treasury-auction-until-there

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London Trader - Fed’s Global War Against Gold Escalating

"With many global investors still rattled by the price action of gold and silver, today King World News interviewed the “London Trader” to get his take on these markets. Here is what the source had to say: “Gold was trashed on Monday, while the Fed minutes essentially said nothing. When a central bank coordinates that kind of attack, it’s war, of course it’s war. This type of action is coordinated by Bernanke and the Fed and executed by the bullion banks. It’s actually laughable if anyone thinks that was a legitimate selloff, on what was, in reality, no news.”

The London Trader continues:

“No legitimate market participants were really selling. Sure there were some stops that were taken out, but it was the bullion banks that came in with their selling and this was what suddenly created the air pockets.

There is massive sovereign physical buying going on right now. Interestingly, the sovereign buying is being swamped by paper selling. Sovereign buyers are aggressively buying tonnage every day at these levels. You have to remember their goal is to pick up physical and get rid of dollars. Nothing has changed. 

Interestingly, the Asian buyers have figured out the algorithms, like breaking an enemy’s code in war, and they are using the algorithmic trading to get the best prices each day for physical gold at these levels. The trading is just taking place at lower levels because these bullion banks and the Fed, which manage the price of gold, get overzealous in their price fixing.

But there will be a huge price to pay for their activity..."

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/5_London_Trader_-_Feds_Global_War_Against_Gold_Escalating.html

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Peter Schiff - Reaction to Fed Minutes Wrong, QE3 is Coming

"With the release of the Fed minutes creating havoc in key markets, today King World News interviewed Peter Schiff, CEO of Europacific Capital. Schiff told KWN the knee-jerk reaction in markets which took place as a result of the release of the Fed minutes is off base. He said the Fed is going to come in with QE3 and noted the Fed even stated in their own minutes they stand ready to come in with more QE if the economy needs it. Here is what Schiff had to say: “People that are assuming it (QE) is off the table based on these minutes are wrong. I would really fade this trade. I don’t see why gold would be getting crushed based on these minutes. I looked at the minutes and yes, the Fed didn’t come right out and say QE3 is coming. They are not going to do that. They are never going to do that.”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/3_Peter_Schiff_-_Reaction_to_Fed_Minutes_Wrong,_QE3_is_Coming.html

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Jim Sinclair - Fed Minutes, Gold Manipulation & Fool’s Play

"On the heels of the release of the Fed minutes, today legendary trader and investor Jim Sinclair told King World News the release of the Fed minutes and subsequent market reaction in gold was orchestrated. Sinclair also said this is government manipulation against the tide of the bull market and it will be overrun. Here is what Sinclair had to say about what transpired today in the gold market: “The tactic is always the same. The gold banks enter the COMEX and offer more gold for sale at the market than has been mined in the last five years. Immediately, the locals (pit traders) try to run in front and hit any bids they happen to have on their book or are out there in order to get the price down.”

Jim Sinclair continues:

“Gold tanks down to the $1,640 level and now the brokers for the gold banks begin to enter the market to cover shorts to reduce the short position taken, and most likely to completely flatten it on the day. This has been going on from 1968 to 1980 and it’s also been going on from 2001 to today.

The net effect is absolutely nothing. The idea that there is a significant, improving economy directly in front of us is absolutely, completely and utterly a fabrication. The only reason car sales are firm is because they are giving away easy credit out there, so much so that even my dogs could buy a Cadillac Escalade...."

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/4_Jim_Sinclair_-_Fed_Minutes,_Gold_Manipulation_%26_Fools_Play.html

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The Illusion of an Economic Recovery: The Backlash of Higher Gasoline Prices...

"The housing recovery seems to have been a temporary affair. Preliminary data frames March as weak as last October. It looks like lower interest rates boasted sales. Those rates are up from 4.72% to 5.02%.

Worse yet, Operation Twist is over. That is where the Fed sold the short end of the bond market and bought notes and bonds of 5, 7, 10 and 30 years. Even though the BIS, The Bank for International Settlements, said the program was a resounding success, it was not. American friends knew the Fed was a buyer, so they proceeded in selling long dated paper destroying what the Fed policy was trying to accomplish. Now we expect QE 3, which we have expected for sometime. Lest we not forget the slight easing of credit and the government’s FHA low down payment programs.

A large negative we did not face several months ago was higher gasoline prices, which the public believes are going to stay at current levels for the next few years.

If a new house is purchased it has to be close to work and that often is not an easy task.

Making plans more difficult is that only half of the homes being sold will be lived in by the owners - the rest are owned by speculators, who for the past 5 years have been eminently unsuccessful in picking a bottom in the housing market.

We wonder if these buyers are aware that the administration, which we reported on a few weeks ago, have proposed to have Fannie Mae and Freddie Mac dump 560,000 under water defaulted properties on the hedge funds and others in blocks of $1 billion or more to be eventually rented and put into REITS. Buyers also have to contend with builders building 513,000 new homes a year when 6.8 million homes are already on sale.

Now that banks have cleaned up most of the defaults at the low end of the market they’ll now concentrate on the smaller middle sector and the top of the market. This lender policy will add many more homes to defaulted inventory and could take that number to 9.8 million defaulted homes for sale. Those looking for a let up will have to wait beyond 2014. That means you should continue to rent over that timeframe. That means depending on type and area, homes over that period should fall another 10% to 20%. What is disconcerting is the perpetual buying by lenders (banks), Wall Street, government statistics, the National Association of homebuilders and the National Association of Realtors - all produce bogus figures to trick the public into buying. There is also a shrinking number of people eligible to be buyers. These facts at our disposal tell us that there is no housing recovery in progress and that the economy needs QE 3 ASAP. The Fed is trapped and has to print more money just to keep the game going sideways. That, of course, pushes inflation higher, which pushes gold and silver higher.

You have to ask yourself how can there possibility be a recovery?
The stock market may be approaching old highs due to the Fed manipulating money, but there is no recovery on Main Street, nor will there be..."

at http://www.globalresearch.ca/index.php?context=va&aid=30060

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Demand for U.S. Debt Is Not Limitless: In 2011, the Fed purchased a stunning 61% of Treasury issuance. That can't last.

"The conventional wisdom that nearly infinite demand exists for U.S. Treasury debt is flawed and especially dangerous at a time of record U.S. sovereign debt issuance.
The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis. This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce ..."

at http://online.wsj.com/article/SB10001424052702304450004577279754275393064.html?KEYWORDS=us%20debt%20federal%20reserve

BRICS cite obstacles to growth set by debt struck West

"The world’s five largest emerging economies claim the West’s quantitative easing policy is destabilizing their own growth.Should the western cheap cash injection last too long, the developed countries themselves will suffer, experts are warning.
Brazil's President Dilma Roussefftold the fifth annual BRICS summit that while the developed world's monetary policy "brings enormous trade advantages to developed countries, it results in unfair obstacles for others".
The BRICS summit joint statement, signed by the leaders of Brazil, Russia, India, China and South Africa states that the enormous cash slush created by the west to deal with its debt crisis has "been spilling over into emerging economies, fostering excessive volatility in capital flows and commodity prices".
The US Fed, Bank of England and the ECB have injected trillions into their banking systems and cut their key interest rates to boost domestic economies. Lately the ECB alone provided for $1.3 trln in form of the 3-year loans at a very low interest rate, seeking to cool worries around the European money market. The benchmark US Fed rate has been varying within the bottom coring of0-0.25% for more than three years. The ECB rate stands at 1%, while the Bank of England's charges 0.5%.
“Since western countries gets cheap money, they seeks to invest it into the most precious things, which is today commodities,” Tamerlan Khasimikov, a general director at BST Capital Management, told Business RT, “BRICS have real cause for concern, as high demand in commodity driven economies makes them the major destination for foreign investors”

at http://rt.com/business/news/central-banks-monetary-policy-738/

Farage - Western World Collaborated in Giant Ponzi Scheme

“What’s happened and we’ve seen it with the ECB, in America and around the Western world, is the central banks have acted in a very concerted manner and have created a whole new, fresh load of money. 

We call it quantitative easing in the United Kingdom, others might even call it a giant Ponzi scheme. But we’ve created all of this fresh credit, and for the moment we’ve kicked the can down the road.

So we are just getting deeper and deeper into problems. Leaving our children and grandchildren with loans that could well take decades to finish (paying) off. I fear we are now stoking up the conditions, at some point in the future, for serious inflation..."

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/28_Farage_-_Western_World_Collaborated_in_Giant_Ponzi_Scheme.html

Norcini - Trading “Extremely Violent” & Will End in “Disaster”

"Initially you had money rushing into stocks and commodities with almost everything trading higher across the board. But for the last two days traders have looked at the data and jettisoned stocks and commodities. The bottom line is you are seeing these very large swings of say 2% to 3% per day in key commodities such as copper and silver.

We are also seeing big swings across the grain markets as well. Huge upside moves are followed by huge downside moves intraday. These false buy and sell signals and wild swings have been wreaking havoc in these markets and crushing to many traders.

In my opinion, the Fed and the Working Group on Financial Markets have been actively manipulating key markets. The Fed has been doing this manipulation in an attempt to push investors back into the stock market and out of commodities and hard assets.

Bernanke assists in this manipulation by jawboning key markets. As an example, if the commodities are showing too much strength, he or another member of the Fed will come out and sound hawkish. The Working Group on Financial Markets then goes in and starts putting heavy pressure on key commodities, which triggers a cascade of sell orders. 

This is, effectively, a modern day version of price controls...."

at  http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/3/29_Norcini_-_Trading_Extremely_Violent_%26_Will_End_in_Disaster.html

Jim Rogers : when the next blow comes, we have nothing left

"Jim Rogers : "Money was too cheap and too plentiful,He caused the stock market bubble and that led to the real estate bubble and the consumer debt bubble. Now those bubbles have burst and what is Ben Bernanke — the current Fed chairman — doing? He's printing more money. Bernanke couldn't get a job as a banker. He's just a printer. That's all he knows how to do. Print money. There isn't enough trees to print all of the money Bernanke wants." "Sure, when the next blow comes, and it will over the next 18 months, we have nothing left." - in gulfnews"

at http://jimrogers1.blogspot.ca/2012/03/jim-rogers-when-next-blow-comes-we-have.html#.T3Mm6A0AJ74.pingfm

It's Official - The Fed Is Now Buying European Government Bonds

"As if the 'risk-less' dollar-swaps the Fed has extended to any and every major central bank were not enough, William Dudley just unashamedly admitted that the Fed now holds 'a very small amount of European Sovereign Debt'. Explaining this position, as Bloomberg notes:

• *DUDLEY: FED HOLDS OVERSEAS SOVEREIGN DEBT TO MANAGE RESERVES
• *DUDLEY: HIGH BAR FOR ADDITIONAL PURCHASES OF EUROPE DEBT

Dudley, testifying to a House panel, noted that he doesn't see more efforts by the Fed to buffer the US from Europe's tempests and believes European banks are deleveraging in an orderly manner. So not only is the US taxpayer bailing out Europe via the IMF (as we noted here a week ago using Greece as an intermediary) and the Fed is providing limitless USD swap lines but now we join the ECB in monetizing European government bonds - something we warned might happen back in December 2010. As for being a small amount - wasn't MF Global's holding relatively small too? And aren't we getting a little full from all this buying?"

at http://www.zerohedge.com/news/its-official-fed-now-buying-european-government-bonds

An Annotated Paul Brodsky Responds To Bernanke's Latest Attempt To Discredit Gold

"Last week, Bernanke's first (of four) lecture at George Washington University was entirely dedicated to attempting to discredit gold and all that sound money stands for. The propaganda machine was so transparent that it hardly merited a response: those away from the MSM know the truth (which, simply said, is the "creation" of over $100 trillion in derivatives in just the first six months of 2011 to a record $707 trillion - how does one spell stability?), while those who rely on mainstream media for the news would never see an alternative perspective - financial firms are not among the top three sources of advertising dollars for legacy media for nothing. Still, for those who feel like the Chairman's word need to be challenged, the following extensive and annotated reply by QBAMCO's Paul Brodsky makes a mockery of the Fed's full on assault on gold, and any attempts by the subservient media to defend it. To wit: "Has anyone asked why so many powerful people are going out of their way to discredit an inert rock? We think it comes down to maintaining power and control over commercial economies. After professionally watching Fed chairmen cajole, threaten, persuade and manage sentiment in the markets since 1982, we argue this latest permutation is understandable, predictable and, for those willing to bet on the Fed’s ultimate success in saving the banking system (as we are), quite exciting.... Gold is no longer being ignored and gold holders are no longer being laughed at. “The Powers That Be” seem to have begun a campaign to discredit gold."

From QBAMCO

BB Gun

“First they ignore you, then they laugh at you, then they fight you, then you win.”
- Mohandas Karamchand Gandhi

at http://www.zerohedge.com/news/annotated-paul-brodsky-responds-bernankes-latest-attempt-discredit-gold

Despite Gains, This is the ‘Weakest Recovery Ever’: Rosenberg

"Recent economic gains have been primarily illusory, driven by weather-related factors that are not sustainable, economist David Rosenberg told CNBC.

“Is it growing? How could it not be growing,” Rosenberg said. “We’ve got four years of trillion-dollar-plus deficits, we have a Fed balance sheet that’s tripled in size, zero policy rates for three years. Of course you’re going to get some growth.”

“If you want to take a big-picture perspective, this goes down as the weakest economic recovery ever, despite all the ramp up in government stimulus, and that really tells you something,” he said.

“Employment data were affected by the seasonal adjustments,” he said. “It felt like March in February, and if you apply the March seasonal factors to February, employment would have actually declined.”

“As you look at the US economy over the next two years, is the US economy going to improve more or less than other economies around the world?” said Richard Bernstein, head of Richard Bernstein Advisors and a former colleague of Rosenberg’s at Merrill Lynch. “We are in the early stages of a long-term period of US asset outperformance.”

at http://www.valuewalk.com/2012/03/despite-gains-this-is-the-weakest-recovery-ever-rosenberg/

WALL STREET CONFIDENCE TRICK: How "Interest Rate Swaps" Are Bankrupting Local Governments

"Far from reducing risk, derivatives increase risk, often with catastrophic results. — Derivatives expert Satyajit Das, Extreme Money (2011)

The “toxic culture of greed” on Wall Street was highlighted again last week, when Greg Smith went public with his resignation from Goldman Sachs in a scathing oped published in the New York Times. In other recent eyebrow-raisers, LIBOR rates—the benchmark interest rates involved in interest rate swaps—were shown to be manipulated by the banks that would have to pay up; and the objectivity of the ISDA (International Swaps and Derivatives Association) was called into question, when a 50% haircut for creditors was not declared a “default” requiring counterparties to pay on credit default swaps on Greek sovereign debt.

Interest rate swaps are less often in the news than credit default swaps, but they are far more important in terms of revenue, composing fully 82% of the derivatives trade. In February, JP Morgan Chase revealed that it had cleared $1.4 billion in revenue on trading interest rate swaps in 2011, making them one of the bank’s biggest sources of profit. According to the Bank for International Settlements:

[I]nterest rate swaps are the largest component of the global OTC derivative market. The notional amount outstanding as of June 2009 in OTC interest rate swaps was $342 trillion, up from $310 trillion in Dec 2007. The gross market value was $13.9 trillion in June 2009, up from $6.2 trillion in Dec 2007.

For more than a decade, banks and insurance companies convinced local governments, hospitals, universities and other non-profits that interest rate swaps would lower interest rates on bonds sold for public projects such as roads, bridges and schools. The swaps were entered into to insure against a rise in interest rates; but instead, interest rates fell to historically low levels. This was not a flood, earthquake, or other insurable risk due to environmental unknowns or “acts of God.” It was a deliberate, manipulated move by the Fed, acting to save the banks from their own folly in precipitating the credit crisis of 2008. The banks got in trouble, and the Federal Reserve and federal government rushed in to bail them out, rewarding them for their misdeeds at the expense of the taxpayers..."

at   http://www.globalresearch.ca/index.php?context=va&aid=29907

Bernanke's Speech Decrypted

"Bernanke's splendiferous defense of all things holy and Central-Bank-like this afternoon has a little for everyone - if you spent the time to listen/read his entire lecture. For those who did not, perhaps the following word-cloud sums up his perspective - and its odd subliminal messaging. The words Gold and Standard appear more times than Central and Bank; the words Policy and Economy are almost equal in number and very close together in this 'randomized' word-cloud; Collateral and Essential appear infrequently but oddly proximate when the random hand of Worldle is applied; the Dollar got its rightful tiny mention; and the Inflation-Deflation debate will rage on - as Inflation slightly outnumbered Deflation but the randomizer did its job and strangely placed Inflation next to Bad and Deflation next to Great. There was no mention of Oz, The PPT, Unicorns, Beard-Trimmer, Ron Paul, or Those-Bloody-Bears-On-YouTube, though the words Panic and Panics were somewhat surprisingly frequently uttered."



at http://www.zerohedge.com/news/bernankes-speech-decrypted

Presenting The High Cost Of Armageddon Avoidance

Courtesy of Bloomberg's Adam Johnson

at http://www.zerohedge.com/news/presenting-high-cost-armageddon-avoidance

GOLDMAN: 3 Reasons Why QE3 Is Still Coming

"This research note from Goldman’s Jan Hatzius has been making the rounds. In it he provides the three reasons why he believes QE3 is still on the table. He says:

“1. The improvement might not last.

With real GDP growth tracking just 2% in the first quarter and signs that at least some of the recent strength is probably due to the unusual warm weather and perhaps some seasonal adjustment distortions, question marks still surround the true pace of activity growth. In addition, there are still several actual or potential “headwinds” for growth, including a reduced boost from inventory accumulation, the recent increase in oil and gasoline prices, continued risks from the crisis in Europe, and the specter of fiscal retrenchment after the presidential election.

2. Even if the improvement does last, faster growth would be desirable to push down the unemployment rate more quickly.

Fed officials believe that the level of economic activity and employment is still far below potential. This means a large number of individuals are involuntarily unemployed, which not only causes hardship in the near term but may also translate into higher structural unemployment in the long term…This creates an incentive to find policies that speed up the return to full employment.

3. Not easing might be equivalent to tightening.

At a minimum, the bond market currently discounts some probability of QE3. This has kept financial conditions easier than they otherwise would have been, which has presumably supported economic activity. A decision not to ratify expectations of QE3 could therefore result in a tightening of financial conditions.”

at http://www.businessinsider.com/goldman-3-reasons-why-qe3-is-still-coming-2012-3#ixzz1pZlXCqvv

The FED Is Creating New Bubbles

New asset bubbles are being fueled by the FED's cheap money policy. It postpones problems in the short-term, but it is sowing the seeds for a bigger crisis.

James Grant Says Bond Market Is "Bubble of Modern Banking, a Desert of Value; Gold a Reciprocal Faith in Bernanke"; Time for an "Office of Unintended Consequences?"

"...Grant: The price of gold is the reciprocal of the world's faith in the deeds and words of the likes of Ben Bernanke. The world over, central banks are printing money as it has never been printed before. The European Central Bank has increased the size of its balance sheet at the annual rate of 89%. It's amazing. The Fed is far behind at only 15%. The Bank of England 67% over the past few months. These are rates of increases in the production of paper currencies we have never seen in the modern age. It takes no effort at all. They simply tap the computer screen..."

at http://globaleconomicanalysis.blogspot.com/2012/03/james-grant-says-bond-market-is-bubble.html