Gold Futures Market Used For Fraud

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Guest Column by Dave Kranzler

The Comex is a complete fraud.

It’s one of the biggest Ponzi schemes in history.

With China and Viet Nam (the latter being a major gold importing country) now closed until next Wednesday in observance of their Lunar New Year, the bullion banks have engaged in a major attempt to drive the price of gold lower.    Yesterday (Tuesday) 99,000 gold contracts  – 9.9 million ounces or 287 tonnes – were sold into the market between 9 a.m and 11 a.m. EST, which had the effect of driving the price of gold down over $26.  To put this into context, a total of 179,833 contracts traded between 6 p.m. Monday and 5 p.m. Tues. The entire daily trading period is 23 hours. But 55% of yesterday’s total trading volume – the volume used to slam gold – was traded in a two-hour window of NY trading.

Think about it this way:  in that two-hour window, 35 days worth of daily global gold mine production traded in the form of paper gold.  The open interest expanded by 5,290 contracts, which translates into just over 15 tonnes of gold.  The total amount of gold available for delivery – the “registered” account gold – is 804.9k ounces, or 23 tonnes.  In just one day, the bullion banks (JP Morgan, HSBC and Scotia) sold forward 65% of the entire stock of deliverable gold on the Comex. And that’s if you really believe the unaudited bank reports which produce the gold warehouse stock reports.  I do not.

Gold was raided again today (Wednesday, Feb 18) – again at 11:00 a.m. EST. This time gold was slammed another $9 in the space of 30 minutes, most of it in the first seven minutes. Today 18,000 April gold contracts traded in the 30 minute space, representing 24% of the total volume in the April gold contract up to that point since 6:00 p.m EST the previous evening. This is 52 tonnes of paper gold – more than twice the amount of gold in Comex vaults available for delivery. Continue reading

Japan’s Positive GDP

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Japan’s GDP grew by 2.2% in Q4 but that was far less than the 3.7% expected by economists. As a whole, consumer spending and business investment remained quite weak, “unexpectedly” so, confounding interpretations that Japan was heading in the right direction after its brief, sharp slump.

Japan’s economy pulled out of recession more slowly than expected last quarter, with soft spending by businesses and consumers underscoring the challenges facing Prime Minister Shinzo Abe as he tries to steer the nation to a robust recovery…
“I was surprised by how weak household spending was,” said Shotaro Kuga, an economist at Daiwa Institute of Research, said of the fourth quarter results. “The economy is recovering—it’s just the pace of the recovery is less than forecast.”

In other words, there is supposed to be a recovery in Japan just one that does not include consumers or business investment? If that construal seems more than a little curious that is because the only means by which GDP figured out as a positive number were inventory and exports. As if to almost perfectly illustrate why GDP is a flawed statistic in “non-normal” times, the biggest contributor to GDP was exports – the very sector that is perhaps best demonstrating the destruction of the core Japanese economy somehow added 1.9% of that 2.2% growth.

ABOOK Feb 2015 Japan GDP QQ SAAR

In raw terms, exports were estimated to have grown by 11.4% after adjusting for “inflation.” That doesn’t make any sense given the history of the yen in Q4. For comparison purposes, the export deflator was just 4.56% (Y/Y), while the import deflator was only 3.07%. In other words, GDP benefited strongly from the yen’s devaluation while the actual economy, the one in which the Japanese have to live with, decidedly did not.

ABOOK Feb 2015 Japan GDP Private Demand

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Misconceptions About Gold

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Gold is Money (Sort Of)

Few markets are as widely misunderstood and subject to as many misconceptions as the gold market. Many of these misconceptions stem from gold’s dual characteristics as a commodity and money. Is it actually correct to claim that “gold is money”? After all, it is not used as official money anywhere and barring isolated instances of payments made from digital gold accounts, it is unlikely that one will ever make payments in gold these days.

In addition to this, central banks have been intent on “demonetizing” gold, and many of the biggest central bank holders of gold (except the US) have unloaded their gold reserves for years, ostensibly in order to earn the higher returns provided by bonds. It has always struck us as odd that they would be selling gold for this reason. The primary purpose of central bank reserves should not be to produce a return, but to enhance confidence in the currency. However, central banks are remitting their profits to governments, which seems likely to have been a major reason for this repurposing of reserves.

liberty-gold

In spite of all this, we still know that gold is money in a sense, because it trades in the market as if it were money. This is to say, it is not really money at the present time, since we cannot use it to effect payments for goods and services in the normal course of business, but it nevertheless retains its monetary character. Surely the markets are implying as much: If gold’s price were determined by fabrication demand alone (jewelry and industrial demand), it could not possibly trade at a price of $1,250/ oz.

In the late 1960s and early 1970s, many mainstream economists advocated the repudiation of the gold exchange standard and applauded Nixon’s decision to default on the US government’s gold obligations (“temporarily”, as he stressed at the time). It was a widely held view among them that following the official “demonetization” of gold, its price would decline from the then official fixed exchange rate between $35 and $42/oz. (the $35/oz. price was decreed by FDR way back in the 1930s on a whim) to about $5 to $6, as its price would begin to solely reflect its use value.

They turned out to be mistaken, as gold did pretty much the opposite. Instead of declining to $5, it eventually soared to $850 by early 1980. The worldview of supporters of central economic planning naively presupposes that government can magically suspend economic laws. Given that Keynesians and monetarists alike advocate positivism (empiricism) in economic science, one must actually wonder if they even admit to the existence of economic laws. If asked, they will certainly reply that they do believe in economic laws, but this seems to be at odds with their positivist approach, which is not suitable to discovering and proving the validity of such laws (the situation is different in the natural sciences). However, we digress. The important point with regard to gold is only this: It turned out that it was actually not possible to truly “demonetize” gold by government decree. The markets decided otherwise.

1-total gold stockThe world’s estimated total stock of gold and its annual rate of growth – click to enlarge. Continue reading

Development Goals Of The New World Order

Submitted by JC Collins  –  philosophyofmetrics

Pillars of HerculesFor lack of a better term, the European banking structure is about to be gutted and the direct management of the system will be given to the European Stability Mechanism. This statement is not made flippantly or without regard to the facts and macroprudential policies which are being implemented globally.

As an extension of the post titled BRICS SDR to Bailout Eurozone, this installment will provide more detail on why the European Monetary Union is in the cross hairs for 2015 and how all paths towards the multilateral framework have now arrived at the systemic bottleneck called the Pillars of Hercules.

In addition, we will explore how the International Monetary Fund will move past the 2010 Quota and Governance Reforms and evolve into a Supra-Fund with the help of the BRICS Development Bank and other Multilateral Development Banks, or MDB’s. But not before discussing how American interests will be sidestepped, not just on IMF Reform, but also to ensure the Chinese yuan is included in the SDR basket by January, 2016.

While Europe will be the first mover in the transition to the multilateral financial system it will be soon followed by America in 2016.  The American resistance to the 2010 Reforms which had been previously agreed upon has lead the other members of the fund and the G20 to prepare alternative measures in order to bring a more balanced structure to the international monetary architecture.

In January of 2015 the Peterson Institute for International Economics published a policy brief titled What Next for the IMF?  The paper was authored by Edwin M. Truman and contains some enlightening concepts on how the quota and governance reforms could continue without the consent of the United States.

In brief, the paper discusses how the other members of the IMF could put in place an alternative reform package which not only would bypass American participation, but also eliminate the veto held since the funds inception. I find the best way to view this alternative is to imagine that the existing framework and governance structure of the IMF is copied and pasted. The original version stays the same and the copied and pasted version is adjusted to not just reflect the initial 2010 reforms, but will include additional measures to reduce the American influence.

This “new” version of the fund would establish a sort of Supra-Fund which operates separately from the source fund but is still fundamentally linked to the mechanics of the original.  The Supra-Fund would be regulated under the same systemic procedures and governance obligations as the source fund, but would see majority voting reduced from the current 85% to 70%, which would reflect the  economic realities of the emerging economies.

Eventually the new fund would expand larger than the source fund, making the original fund redundant.  The full transformation would be complete by March, 2016, when the NAB, or New Arrangements to Borrow, is replaced by the updated quota amounts of the Supra-Fund. Continue reading

Aggregate Demand’s Shocking Lack of ‘Demand’

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

I have to hand it to the good work done by Gallup, as their tracking polls have “previewed” the “official” retail sales reports these past few months. Gallup found another Polar Vortex-like hole in consumer spending and sure enough the Census Bureau confirmed as much. It is decidedly ugly and can do nothing but put a major dent in the euphoria over the payroll reports of late. If there are jobs, they don’t pay and people don’t spend (except on cars).

Overall retail sales were up just 2.85% in January, and that is compared to a “bad” January 2014. Auto sales were up just shy of 10% Y/Y, so if you take out credit-driven mania focused there retail sales (ex autos) were an unpleasant 1.41%. If you subtract spending on food and beverage places, “growth” in January 2015 was -0.38%!

And that is why the economy feels recessionary but doesn’t act like it in full. Auto sales aren’t nothing, which keeps a good deal of the economy from falling toward where the rest already resides. That plus food/entertainment highlights the redistribution effects of an economy bifurcated by monetary influence. It proves yet again that spending for the sake of spending does not lead to a broad and sustained advance, only that, in the long run, attrition will take its toll eventually – the “winners” of redistribution don’t bring up the rest of the economy, instead the “losers” ultimately bring everything down.

ABOOK Feb 2015 Retail SalesABOOK Feb 2015 Retail Sales Elongated

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Money Printing Doesn’t Work: More Evidence From Japan, Europe And The US

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

With new figures on Japan’s GDP released, it is becoming increasingly clear the disparity between what is supposed to happen and what has actually taken place. The main operative theory by which everything has been supported takes “aggregate demand” literally; in that all demand is essentially a perfect substitute for itself. In other words, monetary theory posits that demand of any type is the same as demand that might take place organically, thus “creating” demand through any means is preferable to allowing markets their creative destruction.

That redistribution emphasizes the transactional nature of statistics like GDP. As long as a transaction takes place, orthodox theory counts it as a success. The accumulation of transactions is thus believed a full and comprehensive economy. Yet for all the redistribution, by repression no less, Japan is just as far from “recovery” as when the process began.

ABOOK Feb 2015 Japan GDP Real NSA

However, in terms of actual households, the Japanese economy has run backwards by comparison.

ABOOK Feb 2015 Japan GDP Real HH NSA2

ABOOK Feb 2015 Japan GDP HH YY2

The difference between them is redistribution benefiting some parts of the economy at the obvious and direct expense of Japanese households. Again, mainstream monetary theory intends for that, only for that to be a temporarybackward step erased under the “strong economy” (Bernanke’s favored phrasing of this picking “winners”) that they expect will follow. For Japan it has been almost two full years, so the idea of households being “temporary” “losers” is harder to swallow.

Continue reading

Austerity is Now Extinct

Submitted by Michael Pento – Pento Portfolio Strategies

Greece’s newly elected leftist Prime Minister, Alexis Tsipras, is bringing deficit spending back into vogue. The charismatic prime minister laid out plans to dismantle Greece’s “cruel” austerity program, ruling out any extension of its international bailout and setting himself on a collision course with the European Union. Unabashedly candid, he has burst on the scene as the veritable anti-austerity rock star; serenading fans with a return to big spending, including a raise in the minimum wage and pensions.

However, one can argue that the last five years of Greek austerity has started to pay off. The nation has swung from a hefty deficit, which drove the 10-year Note to 40% in 2012, to now displaying a small primary surplus, equal to 2.7% of GDP. The country’s deficit had been a whopping 10.7% of GDP back in 2009. Unfortunately, positive debt metrics have provided little solace to the average Greek voter. They believe austerity has come with too large a price, as the unemployment rate has risen to 26% and half of all young people are out of work. The soaring interest rates of 2012, which manifested from their fiscally irresponsible ways, are now a distant memory. Low growth and high unemployment have caused the well intentioned plans of frugality to go extinct.

This brazen call to end austerity and return to profligate spending is spreading in Europe like wild fire. In Spain, tens of thousands of people protested against welfare cuts in rallies led by the left-wing movement Podemos–which is now leading the polls in Spain’s elections this year.

Meanwhile Italy, which like Greece suffers from a stagnant economy, astronomical youth unemployment, and has a debt load that is 132% of its GDP, is hoping Greece is leading the way towards the exintction of austerity. If Italy were to team up with Greece and other debt-strapped eurozone countries such as Portugal and Spain, it could pressure the E.U. to ease austerity measures and adopt more fiscally expansive policies. These debtor nations could threaten to default and leave the E.U. and the euro; thus creating massive bank runs and economic chaos across Europe.
This anti-austerity sentiment appears to be gaining momentum even in the core nations of Europe. France’s President Francois Holland is suffering under high unemployment and has asked for a time-out on austerity. Even the president of the European Commission recently questioned the usefulness of austerity, noting its results so far have only been shrinking growth and social suffering.

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Gold Essential “Safe Haven” Due to Greece … Spain, Italy, Ukraine, Lehman and “Bad Stuff”

Submitted by Mark O’Byrne  –  GoldCore

Newstalk interviewed GoldCore’s Mark O’Byrne this morning about the investment asset that is not well understood – gold.

The interview began with Nick Bullman of Newstalk asking Mark to explain the poor performance of gold in recent years as it has underperformed since 2008.

goldcore_bloomberg_chart1_18-02-15
Click here to listen

Gold prices rose every single year from 2000 to 2013 responded O’Byrne.

It had “massively outperformed” due to many risks and on the expectation of major financial crisis and had as such had priced in the financial crisis of 2008 and protected investors during and after the crisis.

Mark said that it was a matter of a classic bull market which frequently see “two steps forward and one step back” and lengthy periods of correction and consolidation.

Gold in US Dollars - January 2007 to February 2015 (Thomson Reuters)

He pointed out that Goldcore had warned in 2013 that a sharp correction might be due as is normal in all bull markets. He referred to the severe retracement of the gold bull market of the 1970s where gold prices fell over 50% between 1975-76 before rising a further 800% in less than 4 years. Continue reading

Inaccuracy or Misconduct?

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

With new figures on Japan’s GDP released, it is becoming increasingly clear the disparity between what is supposed to happen and what has actually taken place. The main operative theory by which everything has been supported takes “aggregate demand” literally; in that all demand is essentially a perfect substitute for itself. In other words, monetary theory posits that demand of any type is the same as demand that might take place organically, thus “creating” demand through any means is preferable to allowing markets their creative destruction.

That redistribution emphasizes the transactional nature of statistics like GDP. As long as a transaction takes place, orthodox theory counts it as a success. The accumulation of transactions is thus believed a full and comprehensive economy. Yet for all the redistribution, by repression no less, Japan is just as far from “recovery” as when the process began.

ABOOK Feb 2015 Japan GDP Real NSA

However, in terms of actual households, the Japanese economy has run backwards by comparison. Continue reading

Memo To Obama: Butt Out Of The Greek Crisis – You’ve Dispensed Enough Keynesian Poison At Home

At the moment, Europe is struggling to pass an inflamed financial gallstone. The sooner that Greece is permitted to escape the debt clogged financial ducts fashioned by its Brussels paymasters, the sooner the entirety of Europe can begin the cure of debt liquidation and return to honest finance.

In their wooden-headed insistence that Greece remains obligated to 100% of its crushing $350 billion debt load, the Germans are, ironically, doing the work of the financial gods. By making it literally impossible for the new Greek government to abide by its voter mandate,  Berlin is paving the way for “grexit” and is thereby setting-up the catalyst for the Euro’s demise. And with it, of course, the obliteration of the EU’s rotten regime of bank bailouts, central bank money printing and fiscal policy anesthesia.

Hallelujah! Europe and the world desperately need a big, bloody sovereign default, and there is no more worthy case than Greece. As Finance Minister Varoufakis so inconveniently stated last week, Greece is a “bankrupt state” and has been since the crisis first erupted back in 2010.

Accordingly, the Brussels bailout transfer of that impaired debt from the banks and investors, which had so richly earned the right to experience deep losses owing to their lack of prudence, to EU taxpayers was a stupendous act of economic and political folly. It paved the way for the very evil that the fiscally resolute Germans profess to fear the most. Namely, central bank financing of state deficits and the unleashing of politicians to thereby ultimately bankrupt it.

Stated differently, everywhere and always modern politicians and fiscal authorities need to face the naked wrath of an honest bond market—the bond vigilantes of yore—- when they seek to finance voter subventions today by obligating the taxpayers of tomorrow. Especially when government finances start heading south, nothing can be permitted to stand in the way of honest price discovery. Indeed, the instantaneous shock therapy afforded to authorities that comes with soaring interest rates on currently issued debt, and the associated risk that all existing debt will have to be rolled over at prohibitively high rates in the future, is the only thing that can preclude the disease of kick-the-can fiscal drift and profligacy that prevails the world over at present. Continue reading