May 1 (Gold Investing News) — Earlier this month, Switzerland was in the spotlight when it became the first country to sell 10-year government bonds with a negative yield.
Many investors wondered what the news would mean for the gold space, and Resource Investing News took a stab at answering that question, ultimately determining that it’s tough to say what the impact might be. Indeed, HSBC’s Stephen Major likely summed it up best with the statement, “[w]e have unconventional central bank policies at work so you have to expect unconventional outcomes.”
A similar topic came to the fore this week, and while it’s just as complicated, its impact for precious metals investors is a little more clear. Here’s a breakdown of that topic and what its impact could be. ...
The US economy has suddenly stalled. A blizzard of shockingly weak figures raise the awful possibility that America's six-year growth cycle since the Great Recession has already rolled over, with unsettling implications for the world. Worse yet, this apparent exhaustion is taking hold even before the Federal Reserve has begun to raise interest rates or to drain any of its $3.7 trillion of quantitative easing and balance-sheet expansion. Former US Treasury Secretary Larry Summers warned in Davos earlier this year that the Fed typically needs to cut rates by three or four percentage points to combat each cyclical downturn. It is currently at zero. "Are we anywhere near the point when we have 3pc or 4pc running room to cut rates? This is why I am worried," he said.
Japan continues to provide the best refutation of monetary policy as anything other than destructive. With its economy stripped bare of dynamic essentials after thirty years of the Bank of Japan’s “lead”, marginal changes are left as remnants of nothing more than monetary transmission. In the space of QQE, that has used up and destroyed what was left of Japan’s once-dominant trade position, leaving the economy to hollow out from the inside as Japan Inc transfers to Offshore Inc.
Even the press toward the 2% inflation target has been pushed back, as if 2 years and a quadrillion (give or take a few trillions) yen were not enough to begin with. Back in April 2013, BoJ Governor Haruhiko Kuroda mentioned that his policy would be “flexible” (using that exact term) with regard to reaching the target and the manner in doing so, but it was clear then that he was talking about the exact opposite case ...
Click through for the rest. But this is how QE works. Benefiting the upper echelon.
April 28 (WSJ) — China’s gold consumption showed signs of recovering in the first three months this year after plunging in 2014, as relatively low bullion prices attract Asian interest, especially in gold jewelry. Demand in the first quarter rose 1.1% compared with a year earlier to 326.68 metric tons, China Gold Association president Song Xin said Tuesday. China is likely to maintain this trend in demand growth for the rest of this year, Mr. Song said at an industry conference.
The Federal Reserve Bank of Atlanta has already calculated that the first-quarter GDP will be 0.1 percent on an annualized basis. Put in plain English, this means that the economy grew a barely noticeable 0.025 percent during 2015’s first three months. Let me paint you a picture another way: If someone hadn’t purchased two packs of bubble gum in Peoria, the GDP might have been negative. The excitement will come if Commerce manages to come up with a number that’s substantially different than that of the Atlanta Fed, which just started keeping regular tabs on GDP.
The country’s total gold production during the previous fiscal year from April 2014 to March 2015 dropped nearly 8% when compared with the previous fiscal year. India gold output dropped 8% to 1.43 tonne in FY 2015
Just like in the world of fashion, economic terminologies come in and out of vogue. One such economic term trending recently is Secular Stagnation. First proposed by Keynesian economist Alvin Hansen back in the 1930s, Secular Stagnation was coined to explain America's dismal economic performance -- in which sluggish growth and employment levels were well below potential. The term is now back in style thanks to the likes of the contemporary heroes of Keynesian economics, like Larry Summers and Paul Krugman; and is based on the notion that a chronic savings glut has resulted in the economy operating well below potential. The notion that the developed world is trapped in some type of stagnation is something I can agree with. However, the reasoning offered for this stagnation completely dismisses the role of central banks and assumes low growth and interest rates are instead being driven by those pesky savers.
by Lawrie Williams I have just published an article on Mineweb which looks a little more deeply at the possible impacts of the Chinese yuan becoming part of the IMF’s Special Drawing Right basket en route to it being acceptable as a global reserve currency. This seems to be China’s aim, but we don’t see how it can happen without some major currency structural changes, and these could have a very significant impact on the future of global trade and on gold and it could force China to announce the long awaited uprating of its gold reserve this year – as many have speculated it will.
We see any move to bring the yuan into the SDR basket as necessitating China decoupling the yuan from the US Dollar. The SDR basket is made up of a mix of currencies – the dollar, euro, pound sterling and yen, the idea being that between them this provides broad stability in the SDR’s value over time and that bringing in a currency which is tied to one of the others already in the basket would defeat the overall objective! Thus to participate in the SDR we suggest that China will have to drop the currency peg to the dollar and allow it to float freely. ...
I was listening to your podcast with the Silver Doctors today and I found it very helpful the way you explained the derivatives problems. I have been reading Zerohedge for several years and even searched youtube on the subject but you cleared up a lot of the confusion for me. – reader response from “Lawrence”
Eric Dubin of The News Doctors and “Doc” of Silver Doctors invited me on to their weekly “Metals & Markets” show this past week. Rather than reinvent a wheel that has already been manufactured, here’s Eric Dubin’s perfectly good wheel that accompanies the podcast:
Dave Kranzler published a grand slam article last week (click here). Doc and I were happy he could join us to discuss what I consider to be smoking gun proof that there is a low grade fire burning in the derivatives market, and it could flare-up into a crisis at any time. You owe it to yourself to read the article, and for more context listen to our discussion. ...
China To Reveal The Size Of Its Gold Hoard This Year
Turning to China, its GDP will soon eclipse the US’s GDP. Personally, I don’t think China wants to surpass the US and be the new leader of the world. I think China wants to be on par with the US. We don’t know how much gold China has, but we do know that China is continually accumulating gold. It’s been a few years since China has told the world the size of its gold hoard. Before this year is out, I believe China will reveal its gold position.
(CNSNews.com) - According to the Daily Treasury Statement for Wednesday, April 22, which was published by the U.S. Treasury on Thursday, April 23, that portion of the federal debt that is subject to a legal limit set by Congress closed the day at $18,112,975,000,000—for the 40th day in a row.
$18,112,975,000,000 is about $25 million below the current legal debt limit of $18,113,000,080,959.35.
Gold has failed to fire in 2015, but its legions of admirers can thank Asia for a more bullish longer-term outlook, according to ANZ Research.
In a recently released report, titled “East to El Dorado: Asia and the Future of Gold,” the Australian bank’s economists said Asia’s growing wealth and love for the yellow metal would see the gold price exceed $2,000 an ounce by 2025, compared to current prices around $1,200.
According to ANZ’s Warren Hogan and Victor Thianpiriya, Asia will represent over half the global economy by 2050, with rising incomes supporting increased demand for gold investments. China and India are already the world’s two biggest gold consumers, with three-quarters of the world’s supplies sent to Asia and the Middle East in recent years.
However, average gold demand in Asia’s emerging economies is currently only half the level of that in developed economies, with demand also boosted by cultural factors such as Indian weddings. “We estimate that total retail and institutional gold demand for the ‘Asia 10’ region could amount to almost 5,000 metric tons per annum by 2030, up from 2,500 tons currently,” the authors said. ...
Only those know to swim parallel to the shore can escape the destructive rip-tide of debt and speculative risk pulling everyone to insecurity and impoverishment.
Longtime correspondent Kevin K. recently shared an extremely insightful analogy of our financial peril. Those of you who swim or body-surf in the ocean are familiar with rip-tides--strong currents shaped by the contours of inlets and bays that pull unwary swimmers rapidly out to sea.
Those with experience of rip-tides know that it is futile to swim against the tide--those who try will only exhaust themselves, and be carried away despite their exertions.
The only way to escape the rip-tide is to swim parallel to the shore. This succeeds because the rip-tide is like a narrow river; once the swimmer moves out of the strong flow, the current's deadly pull quickly subsides. ...
The entire economic and political structure is now dependent in one way or another on the continued expansion of financial markets.
The financial markets don't just dominate the economy--they now control everything. In 1999, the BBC broadcast a 4-part documentary by Adam Curtis, The Mayfair Set ( Episode 1: "Who Pays Wins" 58 minutes), that explored the way financial markets have come to dominate not just the economy but the political process and society.
In effect, politicians now look to the markets for policy guidance, and any market turbulence now causes governments to quickly amend their policies to "rescue" the all-important markets from instability. ...
... It's not just banks that have become too big to fail; the markets themselves are now too influential and big to fail. ...
China intends to ramp up trade with Russia to $100 billion in 2015, the Chinese Ambassador to Russia Li Hui has said. The $4.7 billion increase from last year cements the countries commitment to boosting cooperation in finance and energy.
"We intend to increase bilateral trade to $100 billion this year,” Hui said at a news conference in Moscow Wednesday, as quoted by TASS. In 2014, trade between the two countries was worth $95.3 billion.
In a move to further internationalise the use of its currency in global trade, China appears to be seeking to have the yuan included in the basket of currencies that make up the IMF’s Special Drawing Right. Currently the US Dollar, the Euro, The British Pound Sterling and the Japanese yen in varying percentages form the current SDR basket, but this is due for review this year with initial meetings to be held next month and a final decision on any changes to the basket should be made by October.
Why is all this suddenly seen as so significant? China has already had some considerable success in internationalising the use of the yuan through bilateral deals but the general consensus is that it would like it to be recognised as A global reserve currency. Perhaps not THE global reserve currency – yet – but to rank alongside the dollar in particular given it sees that the...
Western banks are reportedly refusing to transfer foreign currency payments from Crimea via the SWIFT transaction system. In December Visa, MasterCard and PayPal stopped providing services to the peninsula.
Transactions by residents and companies registered in Crimea are not being processed and even blocked, the Russian newspaper Vedomosti said on Tuesday, referring to unnamed official of one of the payment systems.
“If a client is registered in Crimea, foreign banks will block the foreign currency payments made by him,” another official from one of the Russian payment systems was cited as saying to the newspaper.
From Jeff Thomas for Doug Casey’s International Man:
Historically, when a nation’s debt exceeds its ability to repay even the interest, it can be assumed that the currency will collapse. Typically, governments exacerbate the situation by printing large amounts of currency notes in an effort to inflate the problem away, or at least postpone it.
The greater the level of debt, the more dramatic the inflation must be to counter it. The more dramatic the inflation, the greater the danger that hyperinflation will take place. No government has ever been able to control hyperinflation. If it occurs, it does so quickly and always ends with a crash.
Although there are observers (myself included) who frequently discuss what a reserve-currency crash would mean to the world, there is little or no discussion as to how this would impact people on the street level, and perhaps that discussion should begin.
Why in the world has JP Morgan accumulated more than 55 million ounces of physical silver? Since early 2012, JP Morgan’s stockpile has grown from less than 5 million ounces of physical silver to more than 55 million ounces of physical silver. Clearly, someone over at JP Morgan is convinced that physical silver is a great investment. But in recent times, the price of silver has actually fallen quite a bit. As I write this, it is sitting at the ridiculously low price of $15.66 an ounce. So up to this point, JP Morgan’s investment in silver has definitely not paid off. But it will pay off in a big way if we will soon be entering a time of great financial turmoil.
During a time of crisis, investors tend to flood into physical gold and silver. And as I mentioned just recently, JPMorgan Chase chairman and CEO Jamie Dimon recently stated that “there will be another crisis” in a letter to shareholders…
All those angered by the mere question of the viability of this predatory pillaging in the name of capitalism are incapable of even admitting this cultural crisis exists.
Somewhere along the line, we lost the ability to distinguish between earning a profit and maximizing private gain by any means, i.e. Infinite Greed. If you insist on making this distinction now, you anger a lot of people, as it blows the capitalist cover of Infinite Greed.
The distinction between earning a profit and maximizing private gain by any means angers not just the few benefiting from the useful delusion that Infinite Greed is simply profit on overdrive; it seems to anger everyone who believes the Status Quo of burning mountains of coal to power towel warmers, sitting in traffic burning petrol two hours a day and central banks enriching the already wealthy is not just sustainable but gol-darned good. ...
Financial writer Bill Holter says you can forget what the experts says about “containing” the Greek debt crisis. Holter contends, “Contained is famous last words. This cannot be “contained.” Greece is the canary for the entire world. The western world is Greece. The western world is massively in debt. There are derivative losses all over that place that are being hidden, and Greece is what sets off the realization that there are losses and the chain has broken.”
Holter goes on to say, “You have to understand that there are layers to this. The German banks, the French banks, the Greek banks and many of the various European countries’ banks hold Greek debt. They also hold
Claiming to own X quantity of gold is one thing, and reporting how many times the gold has been pledged as collateral is another.
When correspondent Scott A. Batten offered to write an explanation of the rehypothecation of gold and why it matters, I quickly accepted. Like many others, I have breezed over the word rehypothecation with the basic understanding that it means assets pledged by counterparties (such as the infamous copper stored in Chinese warehouses) are reused as collateral/repledged--in effect, the same assets are pledged as collateral multiple times.
But beyond this, I have not had a clear understanding of how the rehypothecation of gold reserves threatens the whole shaky edifice of Infinite Greed, oops, I mean neoliberal capital markets.
If enough people truly believe that things will get better, will that actually cause them to get better? There is certainly something to be said for being positive and thinking that anything is possible. And as Americans, optimism seems to come naturally for us. However, no amount of positive thinking is ever going to turn the sun into a block of wood or turn the moon into a block of cheese. Any good counselor will tell you that one of the first steps toward recovery is to stop being delusional and to come to grips with how bad things really are. When we deny reality and engage in irrational wishful thinking, we are engaging in something called “hopium”. This is a difficult term to define, but the favorite definition of hopium that I have come across so far goes like this: “The irrational belief that, despite all evidence to the contrary, things will turn out for the best.” In hundreds of articles, I have documented how the U.S. economy is mired in a long-term decline which is about to get a lot worse. But most Americans see things very differently. In fact, according to a brand new CNN/ORC poll, 52 percent of Americans describe the U.S. economy as “very” or “somewhat good”, and more than two-thirds of all Americans believe that the U.S. economy will be in “good shape” a year from right now. But if you asked most of those people why they are so optimistic, they would probably mumble something about “Obama” or about how “we’re Americans and we always bounce back” or some other such gibberish. Well, it’s wonderful that so many people are feeling good and looking forward to the future, but are those beliefs rational?
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