Taxpayers are paying billions of dollars for a swindle pulled off by the world’s biggest banks, using a form of derivative called interest-rate swaps; and the Federal Deposit Insurance Corporation has now joined a chorus of litigants suing over it. According to an SEIU report:
Derivatives . . . have turned into a windfall for banks and a nightmare for taxpayers. . . . While banks are still collecting fixed rates of 3 to 6 percent, they are now regularly paying public entities as little as a tenth of one percent on the outstanding bonds, with rates expected to remain low in the future. Over the life of the deals, banks are now projected to collect billions more than they pay state and local governments – an outcome which amounts to a second bailout for banks, this one paid directly out of state and local budgets.
It is not just that local governments, universities and pension funds made a bad bet on these swaps. The game itself was rigged, as explained below. The FDIC is now suing in civil court for damages and punitive damages, a lead that other injured local governments and agencies would be well-advised to follow. But they need to hurry, because time on the statute of limitations is running out.
There are shenanigans in silver’s futures price for the Comex front month. The price looks totally fictitious when compared to the spot price of physical metal, but most individual traders of Comex futures are unaware of what is happening in the spot market. The reason for this is because relatively little physical metal actually trades in New York. Consequently most futures traders are unaware of the real relationship between spot, where physical is traded, and front-month futures, which of course is the paper market.
With continued turmoil and uncertainty in global markets, today KWN is publishing another important piece that was written by a 60-year market veteran. The Godfather of newsletter writers, Richard Russell, says that he is buying physical silver because it’s “dirt cheap.” Russell also warned that the gold/silver ratio may plunge from 66/1 down to 16/1. This means the price of silver would more than triple the upside surge he expects for gold.
Russell: “Big debt is deflationary because it takes a lot of needed cash to carry big debt. The US has doubled its total debt over the last seven years, and this in the face of almost zero interest rates. The US is now borrowing just to pay the interest on its debt. We're compounding ourselves into national bankruptcy.
Make no mistake about it -- what we're now experiencing is not a gathering stock market correction. This is the resumption and continuation of the primary bear market that the Fed interrupted at the 2009 low. Once a primary trend gets underway, it will always carry to conclusion. Primary bear markets ...
Click through for the rest. The only caveat I would add and not to disrespect Mr. Russell (frankly, he might agree), is that Silver isn't the cheapest thing on the planet. Given the governments around the globe and other things going on, I would hazard to say the cheapest thing is life. Silver probably comes in at a close second ;-)
On the heels of continued uncertainty around the globe, today an acclaimed money manager spoke with King World News about the gold and silver smash, China’s continued massive accumulation of gold, and the incredible events unfolding in Europe. Below is what Stephen Leeb had to say in this fascinating interview.
Leeb: “Eric, overnight there was some data that was disappointing from China. Gold and silver have been hit, but strangely enough, oil has been firm. The key thing the markets are failing to realize is that the Chinese are getting the job done. They are not going to slow their economy to the point where they have high unemployment and riots in the streets....
I have not seen the scenarios run by Bridgewater Associates, but I do have respect for their name and their work. I would like to know their assumptions.
In an inflation, stocks may do quite well, as their inflated valuations keep pace with inflation. Bonds are likely to get obliterated. In a stagflation not so much. The Fed and the Treasury would like a modest inflation to provide a controllable dilution of debts without opening the door to a debt jubilee for the hoi polloi. The Fed serves the Banks, and therefore the creditor class. But a parasite must also preserve the relationship with their hosts.
The system is broken and the oligarchs do not wish to fix it, because they like things just the way that they are. They have bought the politicians and are running the regulators. What could go wrong? ...
Consumer sentiment toward gold is unwavering – although 40% of jewellery consumption relates to weddings, the appetite for gold in China goes beyond occasions and gift giving. 80% of consumers surveyed for this report planned to maintain or increase their spending on 24-carat gold jewellery over the next 12 months believing that gold will hold its long-term value and because they expect to have a higher level of disposable income.
While western investors remain cool toward gold in 2014, the long-term trends remain solid. Today, Frank Holmes returns from the Asia Mining Club meeting in Hong Kong to give an inside look at China's ongoing "Love Trad" in gold, as well as Fed Chairman Janet Yellen's most likely policy change in the year ahead. Read on...
In short, no it doesn't! We will look at why not, in this article.
The Gold Fix
Despite the furore surrounding the Gold Fix [unfairly, we believe] it is a singularly determined attempt amongst commodities to set a twice daily price that does reflect demand and supply of gold, at those moments. To understand this we have to see what happens at the Fixing sessions.
The five banks involved in fixing the morning and afternoon Fix of the gold price open a conference line to each other at 10.30a.m. and at 3.00p.m. in the afternoon. At the same time each bank opens their lines to contact their main clients, who could include mining companies, refiners of gold, jewellers, gold dealers and all the main professionals in the gold market. In turn these professional open their lines to their main clients which could also include central banks as well as wealthy individuals and other gold markets. These then react to a price put up by the Chairman of the Fix, representing his bank. This price is sent down the lines and each participant states the amount they ...
There is a stark difference between the states of the markets for the monetary metals. The number of open futures contracts in gold is low, while in silver its high. First, lets look at the data and then well discuss what it means. ...
Click through for the charts and rest of the post.
Why an over-indebted government is the #1 threat to your well-being
by Dan Steinhart:
“Raise your hand if you’re scared of flying.” The professor of my Intro to Psychology course made this request of the class on the very first day of college. Of the 30 or so students in the room, six raised their hands.
“OK, put them down. Now raise your hand if you’re scared of driving.”
Not a hand was raised.
“Statistically, you’re much more likely to die in a car than a plane.”
Thirty blank stares awaited an explanation.
“You see, we humans aren’t as rational as we like to think. Driving is more dangerous than flying, but almost everyone is more scared to fly. That’s why the study of psychology is important: so we can identify and modify irrational thoughts.”
Even as a dumb 18-year-old, I knew my professor’s example was bogus. The mathematical odds of death are just one of several valid reasons to fear something. Another is a lack of control: flying makes me nervous because I’m putting my life in the hands of a stranger. There’s nothing irrational about that.
Debt worries me much more than flying, but for the same reason: I have no control over it. Not personal debt, of course: I have 100% control over my credit card, auto, student loan, and mortgage debt. I’m talking about Uncle Sam’s big, fat federal debt, which today stands at over $17.5 trillion. As one of 115 million taxpayers, my own personal portion of that is $152,000. Add in my wife’s share, and we’re up to $304,000. Do we have to include that in our net-worth calculation when we apply for a mortgage?
Nothing is as destructive as a government drowning in debt ...
Click through. It's a great read. There's video, too.
London (AFP) - China's annual demand for gold could jump around 20 percent by 2017 as more of its increasingly wealthy population seek new ways to make money, the World Gold Council predicted on Tuesday.
“But there’s no inflation!” say those who accept official numbers, whose fund performance requires to look as good as possible and so on. “Au contraire!” say those who actually buy their food energy and don’t get paid to affect blindness, “It’s running at 5-10-15 (pick your percentage) !”
Everyone knows that the sun rises in the East, moves across our skies, and sets in the West. Over the past few years, gold buying has also been rising in the East and moving in an extraordinary migration away from Western banks and out of the hands of Western investors. Central Banks in the Far East, the Middle East and Russia have been stockpiling physical gold … as the West has held onto stakes of paper ETF’s, futures contracts, and the unbacked dollar.
China seized its golden opportunity last year as its gold consumption increased 41%, surpassing an astonishing 1,000 tonnes for the first time ever. A rising Chinese middle class pushed demand for gold jewelry up 43% and gold bullion up 57%.Chinese consumption of gold has quadrupled in the last decade, toppling India to now take the top spot in global consumer demand.
The emerging economy is opening up new ways to reconnect workers to their work and the profits from their work.
One of the most striking blind spots in our collective angst over the lack of jobs is our apparent disinterest in the nature of work and how work creates value. This disinterest is reflected in a number of conventional assumptions.
One is the constant shedding of tears over the loss of mind-numbing manufacturing jobs. I doubt a single one of the innumerable pundits decrying the loss of "good manufacturing jobs" spent even one shift in an actual assembly line. There is a reason Henry Ford had to pay the then-astronomical salary of $5 per day to his assembly-line workers: the work was so physically demanding and boring that workers quit after a single shift. The only incentive that would keep people doing such hellish work day in, day out, was a big paycheck. ...
Very soon, the IMF will cease to be the world’s only organization capable of rendering international financial assistance. The BRICS countries are setting up alternative institutions, including a currency reserve pool and a development bank.
The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said. ...
I had a feeling that gold and silver were being put on the “down” elevator by the bullion banks when I checked prices late in the evening last night and saw that gold had been hit for about $8 right at the open of trading in Australia. A quick drive-by hit when Australia opens has become almost as common an occurrence as the near-daily price take-down at the opening of the Comex floor trading in New York.
Then Bloomberg, Reuters and the Wall Street Journal ...
SGE withdrawals have been in a down trend for five weeks. In these weeks withdrawals have been lower than the year to date weekly average. This is not surprisingly after an unprecedented start of 2014. During four of the first seven weeks of this year SGE withdrawals, which equals Chinese demand, transcended global mining production.
SGE withdrawals are still 23 % up compared to the same period last year. This will most certainly change in the period after April 15, which was the date in 2013 the gold price tumbled more than $100 and Chinese demand for physical gold exploded. The result was that in week 16 (April 15 – 10, 2013) 65 metric tonneswere withdrawn from the SGE vaults and in week 17 (April 22 - 26, 2013) 117 metric tonnes were withdrawn. The following screen shot is from the SGE report of week 17 2013, the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg. ...
The U.S. Comex gold futures jumped 1.12% to $1,320.50 on Thursday after falling 0.24% the day before. Week-to-date, the gold futures have risen 1.30% while the S&P 500 Index and the Euro Stoxx 50 Index have plunged 1.67% and 2.29% respectively. The Dollar Index has also tumbled for five consecutive days by 1.36% to 79.383 on Thursday while the U.S. ten-year government bond yield has rallied 7bp this week to a low of 2.6474%, back to the level at the end of February. ...
Today former US Treasury official, Dr. Paul Craig Roberts, warned King World News that 2014 will be a dangerous year of reckoning for the United States. Dr. Roberts also warned a collapse is coming that will be so powerful it will overrun the Exchange Stabilization Fund and other measures now in place by central planners to protect against such catastrohic market events. Below is what Dr. Roberts had to say in this remarkable interview.
Dr. Roberts: “The people who are saying that the Ukraine crisis will cause a flight to safety and a rise in the dollar’s value are overlooking the main impact of the crisis in the Ukraine which comes from Washington’s threat of sanctions against Russia. And the Russian government replied to this threat by announcing that they were simply leaving the dollar-based payment system....
Click through for the rest of the interview. This is a sentiment that I am getting fro many fronts and many levels of income. That's worrisome.