Where Is All The Gold Going?

Author

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Changing Attitudes

With the help of a set of excellent charts on gold imports vs exports by Nick Laird (www.sharelynx.com), I would like to give you a brief overview of where gold is going. We have heard for some time that gold is moving to the Far East but is it really only moving there?

a522a6005d1cb428ea34ef1769cd7452_MRoman historian Gaius Plinius Secundus (Pliny the Elder, AD23-AD79) complained that India drained Rome of its gold

1-world-gold-reserveOfficial gold reserves held by central banks – in the official sector, there has certainly been a noticeable shift, with emerging market central banks increasing their buying to such an extent that total central bank holdings have been rising since 2008, for the first time since the mid 1960s – click to enlarge.

Well if we start with the US, it certainly is going out. In the first chart, we can observe that gold has been leaving the US without exception at least since 1996. Even at the top of the gold bull market when the price crossed briefly $1,900, gold exports exceeded gold imports for the US. However, according to Nick Laird, if one adds US gold mine production to this, it puts the US in a net neutral position. So US imports plus production equals exports; this has been the case over the last 18 years. Continue reading

Why A Russian Default is a Very Real Scenario in 2016

Submitted by Guest Contributor – Genevieve LeFranc

Debt.

Everyone understands it pretty well when it comes to their personal finances. You borrow money, you have to pay it back. If you can’t, your creditor hounds you until you either come up with the cash or restructure your repayment schedule. Or, worst case, you eventually file for bankruptcy, thereby defaulting on your debt. Simple.

Yet people, especially in the West, seem blithely unaware that the same basic principles apply to countries, as well. Most of us tend to think that nations can’t or won’t default on their debt. Well … maybe Greece will. But surely not a big country.

Why we believe this is partly due to an ignorance of history, which features literally countless defaults, among nations great and small. Even the US has done it. More than once. It happened right at the beginning, in 1779, when the fledgling US nation defaulted on its first currency, the Continental (which led to widespread use of an early American pejorative phrase: “not worth a Continental.”) And a very recent example was when Nixon severed the tie between gold and the dollar in 1971; that was a default on the precious metal debt the country owed to France and others.

It’s also partly due to the current financial behavior of the American government, which acts as if the cure for a debt problem is more debt (do not try this at home, by the way).  As Congress raises the federal debt ceiling, and the Federal Reserve creates ever more currency units out of thin air, it creates the illusion of stability. All it’s really doing, though, is just kicking the can down the road.  The US has placed itself firmly on this path. But that doesn’t ensure that the rest of the world’s nations can or will follow the same one.

Particularly Russia.

In 2014, I published The Colder War, which became a New York TimesBestseller.  Vladimir Putin, Russia, oil and energy were all dissected in my book, which today is every bit as timely as it was when I wrote it in 2013.  Because of the decade I spent researching the book, I have a very unique Westerner’s perspective on Russia.

Here’s one of the things I learned: Russia is completely unafraid of a default on its debt. Continue reading

The Central Bankers’ Death Wish

This is getting just plain ridiculous. The robo-traders were raging to the tune of 300 Dow points Thursday after Mario Draghi confirmed that he actually is a complete monetary lunatic. And now that the People Printing Press of China has followed suit overnight, they are piling on for more.

In fact, Europe is stranded in economic stagnation because statist dirigisme and the massive crush of welfare state taxation and finance have ground enterprise and productivity to a halt. But Draghi says it’s all China’s fault, and that he will fix their dereliction with even more monetary madness:

In a news conference, Mr. Draghi stressed the “downside risks” to both economic growth and inflation arising from slowing growth in China and other large developing economies, as well as weak commodity prices.

These are the words of a slow-witted man who was born yesterday. That is, they evince an economic model that says every single year, month and day of prior history is irrelevant; and that regardless of how we got to the present moment the answer is always more heavy-handed central bank intrusion in the financial system in order to achieve an utterly bogus 2% inflation target.

In fact, the so-called slowdown in China is the best thing that ever happened to Europe, as is the present spot of unusually low consumer inflation. And there is no mystery as to why these things are happening.

China and the rest of the world have just come through a mind-pending credit binge which took global debt from $40 trillion in 1994 to $225 trillion at present. China was in the forefront of that binge, sporting a 56X gain in outstanding credit during the same two decade period (from $500 billion in 1995 to $28 trillion at present).

Global Debt and GDP- 1994 and 2014

The effect of that freakish $185 trillion debt eruption was a worldwide crack-up boom. It was initially manifested in a massive expansion of unsustainable debt financed consumption in the US and other DM economies and runaway fixed investment in China and the other EM economies which supply it. Continue reading

Growing Sense of the Inevitable

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

With the ECB openly admitting worries about its own QE trying to justify more of it and then China on Friday adding its own mix, the third consecutive “double shot” just since June 27, you can be forgiven for considering the idea that all this talk about a global economic downside is finally starting to be taken seriously. A little less than a year ago, everything was “transitory” and unimportant, but then smaller and peripheral central banks began to act contrary to that assessment. Beyond that, there were liquidity breakouts infecting in more systemic fashion, including the franc “event” that foretold of greater “dollar” issues further on.

You could appreciate all that in real time, the intensification from smaller to large, but in hindsight it is unmistakable. All that is left is for the Fed to throw in the towel on the recovery, even more so than it already has, and just declare either QE5 or coalesce further the whispers of negative nominal rates. Whatever the response, the trajectory and scope is clearly widening and deepening; central banks are still acting what they think appropriate for a large-scale defensive nature.

In China, for now, it is the “double shot” that is perhaps more relevant and concerning. That is simply the PBOC acting upon both the interest rate mechanisms (deposit and lending rates) as well as the bank reserve requirement. Last week, the Chinese central bank cut the lending and deposit rates by 25 bps but also opened the required reserve by a further 50 bps, for a total “easing” of 300 bps since February 4. Unlike the US, China still has a significant depository system that actually contributes meaningfully within the wholesale mess. Easing required reserves is supposed to have a meaningful impact upon money markets as banks are freed to utilize more of that excess. Continue reading

50% of the world’s wealth in the hands of 1% of the population

Submitted by Beppe Grillo  – The Beppe Grillo Blog

piramidericchezza.jpg

“The global inequality is growing, with half the world’s wealth is now in the hands of 1% of the population, according to a new report. The middle classes were crushed at the expense of the richest, according to research by Credit Suisse , which reveals Also for the first time, there are more middle class people in China – 109 million – compared with 92 million in the United States.

Tidjane Thiam, the chief executive of Credit Suisse, said: ” the wealth of the middle class has grown at a slower pace compared to the wealth at the top end. This has reversed the trend before the crisis that saw the share of wealth middle class remain relatively stable over time . ” About 3.4 billion people – just over 70% of the world’s adult population – have less than $ 10,000. An additional one billion – one fifth of the world population – is located in the range between 10,000 and 100,000 dollars. Each of the remaining 383 million adults, 8% of the population, has a wealth greater than $ 100,000. This number includes about 34 million millionaires in dollars. Among these, about 123,800 individuals have more than $ 50 million, and almost 45,000 have more than 100 million. Continue reading

Professor Bernanke’s Bogus Contra-factual, Part 1: The Myth Of Great Depression 2.0

It took no “courage” whatsoever to inflate the Fed’s balance sheet from $900 billion to $2.3 trillion during just 17 weeks in September-December 2008. What it actually took was an epochal con job by a naïve Keynesian academic whose single idea about economics was primitive, self-serving, borrowed and wrong.

The claim that the Great Depression was caused by the Fed’s failure to go on a bond buying spree in 1930-1933 was Milton Friedman’s monumental error. Professor Bernanke’s scholarship amounted to little more than xeroxing Friedman’s flawed work, and then shouting loudly in the Eccles Building boardroom at the time of the Lehman bankruptcy that Great Depression 2.0 was lurking just around the corner.

That was just plain hysterical malarkey. But at the time, it served the interests of the Wall Street/Washington Corridor perfectly.

As Wall Street’s decade long spree of leveraged speculation was being liquidated in September 2008, Goldman Sachs, Morgan Stanley and their posse of hedge fund speculators desperately needed rescue from their own reckless gambles——especially their funding of giant balance sheets swollen by long-dated, illiquid, risky assets with cheap hot funds in the wholesale money market. So what better excuse to override every principle of free market economics, financial discipline and public policy fairness than stopping a reenactment of the 1930s—–putative soup-lines and all?

At the same time, beltway politicians and fiscal authorities were tickled pink. They would be able to unleash a monumental $800 billion potpourri of K-street pork and tax and entitlement giveaways to “fight” the recession, knowing that Bernanke & Co would finance it with an eruption of public debt monetization that was theretofore unimaginable.

In short, no public official has ever committed an economic folly greater than the horrific misdeed of Ben S. Bernanke when he provided the Great Depression 2.0 cover story for the lunatic outbreak of central bank money printing shown below. It destroyed the last vestige of Wall Street discipline in a financialized economy that had already been bloated and deformed by two decades of Greenspan era Bubble Finance.

Continue reading

Something Happened

Submitted by James Howard Kunstler  –  www.kunstler.com

Ben Bernanke’s memoir is out and the chatter about it inevitably turns to the sickening moments in September 2008 when “the world economy came very close to collapse.” Easy to say, but how many people know what that means? It’s every bit as opaque as the operations of the Federal Reserve itself.

There were many ugly facets to the problem but they all boiled down to global insolvency — too many promises to pay that could not be met. The promises, of course, were quite hollow. They accumulated over the decades-long process, largely self-organized and emergent, of the so-called global economy arranging itself. All the financial arrangements depended on trust and good faith, especially of the authorities who managed the world’s “reserve currency,” the US dollar.

By the fall of 2008, it was clear that these authorities, in particular the US Federal Reserve, had failed spectacularly in regulating the operations of capital markets. With events such as the collapse of Lehman and the rescue of Fannie Mae and Freddie Mac, it also became clear that much of the collateral ostensibly backing up the US banking system was worthless, especially instruments based on mortgages. Hence, the trust and good faith vested in the issuer of the world’s reserve currency was revealed as worthless.

The great triumph of Ben Bernanke was to engineer a fix that rendered trust and good faith irrelevant. That was largely accomplished, in concert with the executive branch of the government, by failing to prosecute banking crime, in particular the issuance of fraudulent securities built out of worthless mortgages. In effect, Mr. Bernanke (and Barack Obama’s Department of Justice), decided that the rule of law was no longer needed for the system to operate. In fact, the rule of law only hampered it. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• US Economic Data Has Never Been This Weak For This Long (Zero Hedge) 
• US Companies Warn of Pending Recession (WSJ) 
• EU Agrees To Tighten Border Controls And Slow Migrant Arrival (AP) 
• Tensions Rise Between European Nations Over Refugee Crisis (Bloomberg) 
• Greece Says Refugees Are Not Enemies, Refuses to Protect Borders From Them (WSJ) 
• European Trust: The Perfect Storm (Mungiu-Pippidi) 
• China Containerized Freight Index Collapses to Worst Level Ever (WolfStreet) 
• A China Twist: Why Are Malls Closing If Consumption Is Rising? (Reuters) 
• China’s Leaders Shift From Short-Term Stimulus to Five-Year Plan (Bloomberg) 
• China Banks Turn To Investors For More Capital As Bad Loans Pile Up (Reuters) 
• ‘Deflationary Boom’ In Prospect As China Slows (FT) 
• Why China’s Interest Rate Cut May Be Bad News For The World Economy (Guardian) 
• Emerging Currencies’ Fate Looms Large In Rich World Rates Policy (Reuters) 
• Africa Is In Grave Danger From The Global Economic Slowdown (Telegraph) 
• Japan’s Struggling Economy Finds ‘Abenomics’ Is Not an Easy Fix (NY Times) 
• Reality Keeps Catching Up With BOJ’s Inflation Forecasts (Bloomberg) 
• When Greeks Fled To Syria (Kath.)