Posts tagged Gold

Dr. Paul Craig Roberts-U.S. Markets Rigged by its Own Authorities

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Source: http://usawatchdog.com

By Greg Hunter

Dr. Paul Craig Roberts-U.S. Markets Rigged by its Own Authorities

 

1-11-2014 5-13-42 PM

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Economist Dr. Paul Craig Roberts says, “We have a situation where all the markets are rigged.  All the markets are manipulated.”  As an example, Dr. Roberts points to the stock market.  Dr. Roberts contends, “We have a stock market at all-time highs, and where is the economy?  There’s not one.  There’s no recovery.”  Dr. Roberts goes on to say, “53% of Americans earn less than $30,000 per year.  Well, the poverty rate for a family of four is something like $24,000. . . . If there is no income to drive the economy and there is no credit expansion to drive the economy, then how does it go anywhere?  You can’t possibly have a recovery.”

FULL STORY

 

The Case of the Missing Recovery

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Source: http://www.paulcraigroberts.org

By Dr. Paul Craig Roberts

The Case of the Missing Recovery

 

Have you seen the economic recovery? I haven’t either. But it is bound to be around here somewhere, because the National Bureau of Economic Research spotted it in June 2009, four and one-half years ago.

It is a shy and reclusive recovery, like the “New Economy” and all those promised new economy jobs. I haven’t seen them either, but we know they are here, somewhere, because the economists said so.

Congress must have seen all those jobs before they went home for Christmas, because our representatives let extended unemployment benefits expire for 1.3 million unemployed Americans, who have not yet met up with those new economy jobs, or even with an old economy job for that matter.

By letting extended unemployment benefits expire, Congress figures that they saved 1.3 million Americans from becoming lifelong bums of the nanny state and living off the public purse. After all, who do those unemployed Americans think they are? A bank too big to fail? The military-security complex? Israel?

What the unemployed need to do is to form a lobby organization and make campaign contributions.

Just as economists don’t recognize facts that are inconsistent with corporate grants, career ambitions, and being on the speaking circuit, our representatives don’t recognize facts inconsistent with campaign contributions.

For example, our representative in the White House tells us that ObamaCare is a worthy program even though those who are supposed to be helped by it aren’t because of large deductibles, copays, and Medicaid estate recovery. The cost of this non-help is a doubling of the policy premiums on those insured Americans who did not need ObamaCare and the reclassification by employers of workers’ jobs from full-time to part-time in order to avoid medical insurance costs. All it took was campaign contributions from the insurance industry to turn a policy that hurts most and helps none into a worthy program. Worthy, of course, for the insurance companies.

Keep in mind that it is the people who could not afford medical insurance who have to come up with their part of the premium or pay a penalty. How do people who have no discretionary income come up with what are to them large sums of money? Are they going to eat less, drive less, dress less? If so, what happens to people employed in those industries when demand falls? Apparently, this was too big a thought for the White House occupant, his economists, and our representatives in Congress.

According to the official wage statistics for 2012 http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2012 , forty percent of the US work force earned less than $20,000, fifty-three percent earned less than $30,000, and seventy-three percent earned less than $50,000. The median wage or salary was $27,519. The amounts are in current dollars and they are compensation amounts subject to state and federal income taxes and to Social Security and Medicare payroll taxes. In other words, the take home pay is less.

To put these incomes into some perspective, the poverty threshold for a family of four in 2013 was $23,550.

In recent years, the only incomes that have been growing in real terms are those few at the top of the income distribution. Those at the top have benefited from “performance bonuses,” often acquired by laying off workers or by replacing US workers with cheaper foreign labor, and from the rise in stock and bond prices caused by the Federal Reserve’s policy of quantitative easing. Everyone else has experienced a decline in real income and wealth.

As only slightly more than one percent of Americans make more than $200,000 annually and less than four-tenths of one percent make $1,000,000 or more annually, there are not enough people with discretionary income to drive the economy with consumer spending. When real median family income and real per capita income ceased to grow and began falling, Federal Reserve chairman Alan Greenspan substituted a credit expansion to take the place of the missing growth in income. However, as consumers became loaded with debt, it was no longer possible to expand consumer spending with credit expansion.

World War II left the US economy the only undamaged industrial and manufacturing center. Prosperity ensued. But by the 1970s the Keynesian demand management economic policy had produced stagflation. Reagan’s supply-side policy was able to give the US economy another 20 years. But the collapse of the Soviet Union brought an era of jobs offshoring to large Asian economies that formerly were closed to Western capital. Once corporate executives realized that they could earn multi-million dollar performance bonuses by moving US jobs abroad and once they were threatened by Wall Street and shareholder advocates with takeovers if they did not, American capitalism began giving the US economy to other countries, mainly located in Asia. As high productivity manufacturing and professional service jobs (such as software engineering) moved offshore, US incomes stagnated and fell.

As real income growth stagnated, wives entered the work force to compensate. Children were educated by refinancing the home mortgage and using the equity in the family home or with student loans that they do not earn enough to repay. Since the December 2007 downturn, Americans have used up their coping mechanisms. Homes have been refinanced. IRAs raided. Savings drawn down. Grown children, now adults, are back home with parents. The falling labor force participation rate signals that the economy can no longer provide jobs for the workforce. In such a situation, economic recovery is impossible.

What the Treasury and Federal Reserve have done, with the complicity of the White House, Congress, economists, and the media, is to focus on rescuing a half dozen banks “too big to fail.” The consequence of focusing economic policy on saving the banks is rigged financial markets and massive stock and bond market bubbles. To protect the dollar’s exchange value from quantitative easing, the price of gold has been forced down in the paper futures market, with the consequence that physical gold is shipped to Asia where it is unavailable as a refuge for Americans faced with currency depreciation.

At a time when most Americans are running out of coping mechanisms, the US faces a possible financial collapse and a high rate of inflation from dollar depreciation as the Fed pours out newly created money in an effort to support the rigged financial markets.

It remains to be seen whether the chickens can be kept from coming home to roost for another year.

Reprinted with permission from www.paulcraigroberts.org


 

About Dr. Paul Craig Roberts

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

 

The Media Is Trying To Bury Gold

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Source: http://lionsofliberty.com

By

The Media Is Trying To Bury Gold

 

Ezra Klein once wrote:

Good economists are great storytellers. They sculpt narratives with squiggly graphs and crowded charts.

That’s actually the polar opposite of a good economist, as anyone familiar with Austrian Economics understands. But that’s how mainstream economists operate.

Let’s take a look at how Bloomberg writer, Nicholas Larkin, is “sculpting” gold with “squiggly graphs” and “crowded charts”:

gold-year-feverline2

How does one “sculpt” a gold narrative to make it look unattractive?

Well first, you declare that a “Bust” has occurred. And then you make sure that the “squiggly graph” makes it seem like that is the case. You do that by adjusting the time frame of the graph to fit the “narrative”. In other words, the above chart only shows the years 2008-2013.

But what happens when you to expand the chart out:

prix-or-depuis-19701

Aha!

That changes the narrative…doesn’t it?

Instead of a “Bust”, what we’re actually dealing with is a “Normal Pullback”. Anyone who pays attention to markets has an awareness of the push and pull that occurs at all times. The gold price ran virtually straight up for a good decade!! It would be naive to think that a pullback would never occur.

The media’s constant portrayal of gold’s pullback as a “Bust” is purposefully done. The government (and it’s media) hate anything that challenges their paper money empire. Gold is always the main threat. They know it, they hate it, and will always try to paint gold as some loser metal that you should never consider owning.

There has been no “Bust” in gold.

If you want to see what a real bust looks like, take a look at the old Lehman Brothers chart:

leh

It’s important never to fall victim to the establishment’s “narratives”.


Chris Rossini on TwitterFacebook & Google+

Credit for “squiggly graphs” and “crowded charts”: http://lionsofliberty.com :)

Manipulations Rule The Markets

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Source: http://www.paulcraigroberts.org

By Dr. Paul Craig Roberts

Manipulations Rule The Markets

 

The Federal Reserve’s announcement on December 18 that beginning in January its monthly purchases of mortgage-backed financial instruments and US Treasury bonds would each be cut by $5 billion is puzzling, as is the financial press’s account of the market’s response.

The Federal Reserve conveys a contradictory message. The Fed says that improvements in employment and the economy justify cutting back on bond purchases. Yet the Fed emphasizes that it is maintaining its commitment to record low interest rates “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below the [Open Market] Committee’s 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”

The last sentence in the quote states that the Fed does not regard its announced reduction in bond purchases as less accommodation or as a move toward tightening. In other words, the Fed is saying that tapering does not mean less accommodation.

To put it another way, the Fed is saying that the economy is doing well enough not to require the same amount of monthly bond purchases, but is not doing well enough to stand any change in the near zero nominal federal funds rate. The implication is that the Fed either does not think that a reduction in purchases will result in a rise in long-term interest rates or that such a rise will not derail the economy as long as the Fed keeps short-term rates at or near zero. If the $10 billion decrease in monthly bond demand results in higher long-term interest rates, what good does it do to keep the federal funds rate at zero? If the $10 billion monthly bond purchases were not needed as part of the accommodation policy, why was the Fed purchasing them?

Possibly the Fed thinks that Congress has taken steps to reduce the federal deficit, which would result in a reduced supply of bonds to match the Fed’s reduced demand for bonds, but the Fed’s statement makes no reference to federal deficit reduction, which is probably a smoke and mirrors change instead of a real one.

Moreover, the Fed’s outlook for the economy is mixed. The Fed says that “recovery in the housing sector slowed somewhat in recent months,” so why reduce purchases of mortgage-backed financial instruments? And surely the Fed is aware that the U3 unemployment rate has declined because discouraged workers who cannot find a job are not counted among the unemployed. As all measures show, real median family income and real per capita income are lower today than in 2007, and real consumer credit is not growing except for student loans. Without rising aggregate demand to drive the economy, why does the Fed see a recovery instead of faulty statistical measures that do not accurately portray economic reality?

The financial media’s reporting on the stock market’s response to the Fed’s announcement has its own puzzles. I have not seen the entirety of the news reports, but what I have seen says that the equity market rose because investors interpreted the reduction in bond purchases as signaling the Fed’s vote of confidence in the economy.

Previously when the Fed announced that it might cut back its bond purchases, the markets dropped sharply, and the Fed quickly back-tracked. Everyone knows that the high prices in the bond and equity markets are the result of the liquidity pouring out of the Fed and that a curtailment of this liquidity will adversely affect prices. So why this time did prices go up instead of down?

Pam Martens points out that there is evidence of manipulation. http://wallstreetonparade.com

As market data indicates, the initial response to the Fed’s announcement was a sharp move down as market participants sold stocks on the Fed’s announcement (see the chart of the Dow Jones Industrial Average in Pam Martens’ article). But within a few minutes the market changed course and rose on panic short-covering just as sharply as it had fallen.

The question is: who provided the upward push that panicked the shorts and sent the market up 292 points? Was it the plunge protection team and the NY Fed’s trading floor? Was it the large banks acting in concert with the Fed? It is hard to avoid the conclusion that this was an orchestrated event that forestalled a market decline.

Short selling in the paper gold futures market has been used to protect the US dollar’s value from being knocked down by the Fed’s Quantitative Easing. Following the Fed’s December 18 announcement, another big takedown of gold was launched.

William Kaye had predicted the takedown in advance. He noticed that the ETF gold trust GLD experienced a sudden loss in gold holdings as shares were redeemed for gold. Only the large Fed-dependent bullion banks can redeem shares for gold. Possession of physical gold allows the short-selling that drives down the gold price to be covered.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/17_Absolutely_Shocking_Developments_In_The_War_On_Gold.html

Bloomberg reports that gold is exiting the West. It has been shipped out to Asia. You explain, dear reader, how the price of gold can fall so much in the West while the supply of gold dries up. http://www.bloomberg.com/video/what-s-happening-to-all-the-gold-d33u1c23SDqA0p0e~9_INw.html

In a few days prior to the Fed’s tapering announcement, GLD was drained of 25 tonnes of gold by primary bullion banks, JP MorganChase, HSBC, Deutsche Bank, Goldman Sachs, and Citicorp. As Dave Kranzler pointed out to me, these banks happen to be the biggest players in the OTC derivatives market for precious metals. HSBC is the custodian of the GLD gold and JPM is the custodian of SLV silver. HSBC and JPM are two of the three primary custodial and market-making banks for Comex gold and silver.

The conclusion is obvious. QE helps the big banks, and manipulation of the gold price downward protects the US dollar from its dilution by QE.

The Fed’s reduced bond purchasing announced for the New Year still leaves the Fed purchasing $900 billion worth of bonds annually, so obviously the Fed does not think that everything is OK. Moreover, the Fed has other ways to make up for the $120 billion annual reduction, assuming the reduction actually occurs. The prospect for tapering is dependent on the US economy not sinking deeper into depression. Massaged “success indicators” such as the unemployment rate, which is understated by not counting discouraged workers, and the GDP growth rate, which is overstated with an understated measure of inflation, do not a recovery make. No other economic indicator shows recovery.

Until a whistleblower speaks, we cannot know for certain, but my conclusion is that the Fed understands that it must protect the dollar from being driven down by QE and that the orchestrated takedowns of gold are part of protecting the dollar’s value, and perhaps also the cutback in QE is a part of the protection by signaling an end of money creation. The Fed also understands that it cannot forever drive down the gold price and that it cannot forever pour liquidity into stock and bond markets. To retreat from this policy without crashing the edifice requires successful orchestrations. Therefore, we are likely to experience more of them in the days to come.

Allegedly, the US has free capital markets, and globalism is bringing free capital markets to the world. In actual fact, US capital markets are so manipulated–and now by the authorities themselves–that manipulation cannot stop without a crash.

What American “democratic capitalism” has brought to the world is manipulated financial markets and the absence of democracy. How long this game can play depends on the outside world.

Reprinted with permission from www.paulcraigroberts.org


 

About Dr. Paul Craig Roberts

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. His latest book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is now available.

 

 

China Is On A Debt Binge And A Buying Spree Unlike Anything The World Has Ever Seen Before

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Source: http://theeconomiccollapseblog.com

By Michael Snyder

China Is On A Debt Binge And A Buying Spree Unlike Anything The World Has Ever Seen Before

 

Chinese-Black-Dragon-Photo-by-Angelus-300x300When it comes to reckless money creation, it turns out that China is the king.  Over the past five years, Chinese bank assets have grown from about 9 trillion dollars to more than 24 trillion dollars.  This has been fueled by the greatest private debt binge that the world has ever seen.  According to a recent World Bank report, the level of private domestic debt in China has grown from about 9 trillion dollars in 2008 to more than 23 trillion dollars today.  In other words, in just five years the amount of money that has been loaned out by banks in China is roughly equivalent to the amount of debt that the U.S. government has accumulated since the end of the Reagan administration.  And Chinese bank assets now absolutely dwarf the assets of the U.S. Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England combined.  You can see an amazing chart which shows this right here.  A lot of this “hot money” has been flowing out of China and into U.S. companies, U.S. stocks and U.S. real estate.  Unfortunately for China (and for the rest of us), there are lots of signs that the gigantic debt bubble in China is about to burst, and when that does happen the entire world is going to feel the pain.

It was Zero Hedge that initially broke this story.  Over the past several years, most of the focus has been on the reckless money printing that the Federal Reserve has been doing, but the truth is that China has been far more reckless

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China!
 
 Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!

I was curious to see what all of this debt creation was doing to the money supply in China.  So I looked it up, and I discovered that M2 in China has grown by about 1000% since 1999…

M2-Money-Supply-China-425x255

So what has China been doing with all of that money?

Well, they have been on a buying spree unlike anything the world has ever seen before.  For example, according to Reuters China has essentially bought the entire oil industry of Ecuador…

China’s aggressive quest for foreign oil has reached a new milestone, according to records reviewed by Reuters: near monopoly control of crude exports from an OPEC nation, Ecuador.
 
Last November, Marco Calvopiña, the general manager of Ecuador’s state oil company PetroEcuador, was dispatched to China to help secure $2 billion in financing for his government. Negotiations, which included committing to sell millions of barrels of Ecuador’s oil to Chinese state-run firms through 2020, dragged on for days.

And the Chinese have been doing lots of shopping in the United States as well.  The following is an excerpt from a recent CNBC article entitled “Chinese buying up California housing“…

At a brand new housing development in Irvine, Calif., some of America’s largest home builders are back at work after a crippling housing crash. Lennar, Pulte, K Hovnanian, Ryland to name a few. It’s a rebirth for U.S. construction, but the customers are largely Chinese.
 
“They see the market here still has room for appreciation,” said Irvine-area real estate agent Kinney Yong, of RE/MAX Premier Realty. “What’s driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere.”

Apparently a lot of these buyers have so much cash that they are willing to outbid anyone if they like the house…

The homes range from the mid-$700,000s to well over $1 million. Cash is king, and there is a seemingly limitless amount.
 
“The price doesn’t matter, 800,000, 1 million, 1.5. If they like it they will purchase it,” said Helen Zhang of Tarbell Realtors.

So when you hear that housing prices are “going up”, you might want to double check the numbers.  Much of this is being caused by foreign buyers that are gobbling up properties in certain “hot” markets.

We see this happening on the east coast as well.  In fact, a Chinese firm recently purchased one of the most important landmarks in New York City

Chinese conglomerate Fosun International Ltd. (0656.HK) will buy office building One Chase Manhattan Plaza for $725 million, adding to a growing list of property purchases by Chinese buyers in New York city.
 
 

The Hong Kong-listed firm said it will buy the property from JP Morgan Chase Bank, according to a release on the Hong Kong Stock Exchange website.

 
 

Chinese firms, in particular local developers, have looked overseas to diversify their property holdings as the economy at home slows. Chinese individuals also have been investing in property abroad amid tight policy measures in the mainland residential market.

 
 
Earlier this month, Chinese state-owned developer Greenland Holdings Group agreed to buy a 70% stake in an apartment project next to the Barclays Center in Brooklyn, N.Y., in what is the largest commercial-real-estate development in the U.S. to get direct backing from a Chinese firm.

And in a previous article, I discussed how the Chinese have just bought up the largest pork producer in the entire country…

Just think about what the Smithfield Foods acquisition alone will mean.  Smithfield Foods is the largest pork producer and processor in the world.  It has facilities in 26 U.S. states and it employs tens of thousands of Americans.  It directly owns 460 farms and has contracts with approximately 2,100 others.  But now a Chinese company has bought it for $4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural communities all over America.

For many more examples of how the Chinese are gobbling up companies, real estate and natural resources all over the United States, please see my previous article entitled “Meet Your New Boss: Buying Large Employers Will Enable China To Dominate 1000s Of U.S. Communities“.

But more than anything else, the Chinese seem particularly interested in acquiring real money.

And by that, I mean gold and silver.

In recent years, the Chinese have been buying up thousands of tons of gold at very depressed prices.  Meanwhile, the western world has been unloading gold at a staggering pace.  By the time this is all over, the western world is going to end up bitterly regretting this massive transfer of real wealth.

Unfortunately for the Chinese, it appears that the unsustainable credit bubble that they have created is starting to burst.  According to Bloomberg, the amount of bad loans that the five largest banks in China wrote off during the first half of this year was three times larger than last year…

China’s biggest banks are already affected, tripling the amount of bad loans they wrote off in the first half of this year and cleaning up their books ahead of what may be a fresh wave of defaults. Industrial & Commercial Bank of China Ltd. and its four largest competitors expunged 22.1 billion yuan of debt that couldn’t be collected through June, up from 7.65 billion yuan a year earlier, regulatory filings show.

And Goldman Sachs is projecting that China may be facing 3 trillion dollars in credit losses as this bubble implodes…

Interest owed by borrowers rose to an estimated 12.5 percent of China’s economy from 7 percent in 2008, Fitch Ratings estimated in September. By the end of 2017, it may climb to as much as 22 percent and “ultimately overwhelm borrowers.”
 
Meanwhile, China’s total credit will be pushed to almost 250 percent of gross domestic product by then, almost double the 130 percent of 2008, according to Fitch.
 
The nation might face credit losses of as much as $3 trillion as defaults ensue from the expansion of the past four years, particularly by non-bank lenders such as trusts, exceeding that seen prior to other credit crises, Goldman Sachs Group Inc. estimated in August.

The Chinese are trying to get this debt spiral under control by tightening the money supply.  That may sound wise, but the truth is that it is going to create a substantial credit crunch and the entire globe will end up sharing in the pain…

Yields on Chinese government debt have soared to their highest levels in nearly nine years amid Beijing’s relentless drive to tighten the monetary spigots in the world’s second-largest economy.
 
 

The higher yields on government debt have pushed up borrowing costs broadly, creating obstacles for companies and government agencies looking to tap bond markets. Several Chinese development banks, which have mandates to encourage growth through targeted investments, have had to either scale back borrowing plans or postpone bond sales.

This could ultimately be a much bigger story than whether or not the Fed decides to “taper” or not.

It has been the Chinese that have been the greatest source of fresh liquidity since the last financial crisis, and now it appears that source of liquidity is tightening up.

So as the flow of “hot money” out of China starts to slow down, what is that going to mean for the rest of the planet?

And when you consider this in conjunction with the fact that China has just announced that it is going to stop stockpiling U.S. dollars, it becomes clear that we have reached a major turning point in the financial world.

2014 is shaping up to be a very interesting year, and nobody is quite sure what is going to happen next.

This article first appeared here at the Economic Collapse Blog.  Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here


Image credit: http://theeconomiccollapseblog.com

 

Jim Rogers Says “Abolish the Fed and Resign”

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Jim Rogers Says “Abolish the Fed and Resign”

 

It was an historic day on Wall Street with the Dow topping 16,000 on Monday. We’ll tell you why-and-what caused the run.

And the revolving door of Washington-to-Wall-Street takes another spin! This time it’s Timothy Geithner in the turnstile. We’ll tell you where he’s going.

Also, “What Would Jim Rogers Do”? We follow up with the legendary investor, and bow-tie aficionado, to get his take on what he would do if put charge of the Fed.

Finally, foreclosures are up from September. In some cities one in every 300 homes received a foreclosure filing last month. Is yours on the list? Rachel Kurzius and Erin discuss in today’s Big Deal.

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Central Banks: The True Centers of Political Power

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Source: https://mises.org

By

Central Banks: The True Centers of Political Power

 

6578Thorsten Polleit of the Frankfurt School of Finance, and an Associated Scholar of the Mises Institute, recently spoke with the Mises Institute about central banks and fiat money.

 

Mises Institute: Central banks keep increasing the money supply, and yet it looks like there’s still confidence in those fiat currencies.

Thorsten Polleit: Indeed. Policymakers obviously succeeded in taking panic out of the markets and, at the same time, creating the impression that their actions would “rescue” the economies without causing inflation. Their propaganda turns out to be rather successful.

MI: The strategy that the central banks have been using in recent years appears to be working so far.

Polleit: It clearly shows how far central banks’ manipulations can go to uphold the fiat money regime, which is actually a “monetary Ponzi game.” However, one should be aware of the fact that without severe market manipulations such as the suppressing of interest rates to basically zero, and the printing of new money for propping up ailing banks and governments, the fiat money system would presumably have collapsed already.

MI: So if the current strategy fails, what will happen?

Polleit: The critical issue is the demand for fiat money. If people are no longer willing to demand the rising supply of currency, the fiat money system starts unraveling. Treating devalued currency like a hot potato, people would try to exchange their fiat currency against non-fiat money assets. In this process, commodity prices would go up and the purchasing power of money go down. The extreme outcome of this process is hyperinflation: the heavy debasement or even an outright destruction of fiat money.

MI: Back in 2008 and 2009, there were fears of a wider collapse, but that never materialized. Why is this?

Polleit: I could imagine that back then many investors had ignored the fact that in an unfettered fiat money regime, central banks can provide governments and commercial banks with any amount of newly created fiat money, putting them in a position to service their debt in full. This is exactly what they did: “Default panic” was printed away by central banks. This was also the reason why the gold price fell from its all-time high of 1,900 US$ per ounce to currently around 1,300 US$ per ounce.

MI: So you still expect serious inflation?

Polleit: I sure do. Inflation will be one among other measures through which governments will try to get rid of excessive debt. You see, the fiat money regime has brought about a situation in which many borrowers — in particular governments and banks — are no longer in a position to pay down their debt. In other words: The damage has been done, the only question is: who is going to pay for it?

MI: So who is going to pay?

Polleit: Governments and banks will presumably employ higher taxation, confiscation, suspending payments on outstanding debt and, of course, inflation through money printing. One thing should be certain: holders of government and bank debt will be on the losing end. Either they will suffer from not getting back their money or from getting back just inflated money.

MI: The economies — be it the US, China, or even the Euro Zone — appear to be recovering at the moment and we’re told this means the crisis is over.

Polleit: The latest set of improving data is at best indicative of an artificial and eventually unsustainable economic process. It has actually been set into motion by highly distorted interest rates and a new round of fiat money injection. Malinvestment is on the rise again. It is just a question of time until this so-called “upswing” will turn into yet another “bust.” Fiat money creation has caused the malaise. Creating even more fiat money won’t solve the problems. It will make them even worse.

MI: What do you expect central banks to do going forward?

Polleit: Central banks have been captured by commercial and investment banking interests. I would assume that they will do more of the same: manipulating markets first and foremost by suppressing interest rates and printing new money to keep banks and the financial industry afloat.

With central banks running wild, we’ll be moving toward even more severe “boom-and-bust” cycles, even bigger government, less freedom and liberty, a distribution of income and wealth which is increasingly at odds with true market forces.

Central banks will become the real centers of political power. You could even say they are on the way to assuming the role of a “Politburo.” Central banks will effectively decide who is going to get credit at what conditions. They will decide which governments, which banks, and which kind of business sectors and companies will flourish or go under. The truth is that if the fiat money regime is not brought to an end — either by political will or by economic collapse — the economies will end up in a kind of socialist-totalitarian dead-end. But I tend to be optimistic: namely, that the fiat money scheme will break down before such a situation is reached.

MI: If not fiat money, then what?

Polleit: Gold is the ultimate means of payment. Everybody should own some gold. Under current conditions the gold price should be trading between $1,600 and $1,800 right now. At the same time, one would still need to earn an income stream, and by owning productive capital the investor may also protect himself to some extent from government interference: Even cold-blooded socialists know that the nationalization of the means of production means “killing the cow you would like to milk.” That said, owners of productive capital may suffer from higher profit taxation, but not outright expropriation.


About the Author:

polleit_thorstenThorsten Polleit is chief economist of the precious-metals firm Degussa Goldhandel GmbH. He is also an honorary professor at the Frankfurt School of Finance & Management. He is an adjunct scholar of the Ludwig von Mises Institute and was awarded the 2012 O.P. Alford III Prize in Libertarian Scholarship. His website is www.Thorsten-Polleit.com. Send him mail.

 

Image credit: https://mises.org

 

Michael Krieger Talk at the Liberty Mastermind Conference

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I enjoy Mike’s blog,  titled A Lightning War for Liberty, with his perspective and opinion on the various events that evolve around us on a daily basis.  For me it is a daily read and I found the video below interesting as Mike explains his transition from Wall Street suit to blogger and activist.  More information can also be found by following Mike on Twitter here.

 

Source: http://libertyblitzkrieg.com

By Michael Krieger

My 20 Minute Talk at the Liberty Mastermind Conference

 

Back in late June, I traveled to Dallas to speak at a wonderful event called the Liberty Mastermind Conference and my 20 minute talk has now been uploaded to youtube.This was my first experience speaking in such a setting and I decided to use the opportunity to discuss my journey from a “‘respectable’ guy in a suit on Wall Street, to a guy with a blog in Colorado.” Many of the stories and experiences I go into here are things I have never written about or discussed before, so I am sure this will be a fun watch for longtime readers and new ones alike. Enjoy!

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Video capture added to Mike’s original post.

 

Prof. Sabrin on Gold Market Manipulation

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Prof. Sabrin on Gold Market Manipulation

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Published by   NextNewsNetwork    NextNewsNetwork

About the video:

When the Federal Government came shut down this month, many economists predicted the price of gold would rise.

When it did not do so, many analysts began to question if the value of gold was being artificially manipulated.

Many investors believe the price of gold is being held low through manipulation of the markets, in order to keep investors away from the precious metal. How this affects the economy is yet to be seen.

Gold has traditionally been a hedge against uncertainty for investors. When the market is left untouched, investors flock toward buying gold to protect them from market fluctuations.

Doctor Murray Sabrin is a professor of finance and has a doctorate in economic geography. He is also a forecaster, making predictions about the economy and politics. Over the years, many of these predictions have come true.

Sabrin has been interviewed by several television shows and newspapers.

Murray Sabrin is our guest on the show today. He is here to talk to us about the possible manipulation of gold prices, as well as the future of the economy.

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9 Signs That China Is Making A Move Against The U.S. Dollar

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Source: http://theeconomiccollapseblog.com

By Michael Snyder

9 Signs That China Is Making A Move Against The U.S. Dollar

 

The-U.S.-Dollar-300x300On the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar.  You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely.  Right now, China is the number one exporter on the globe and China will have the largest economy on the planet at some point in the coming years.  The Chinese would like to see global currency usage reflect this shift in global economic power.  At the moment, most global trade is conducted in U.S. dollars and more than 60 percent of all global foreign exchange reserves are held in U.S. dollars.  This gives the United States an enormous built-in advantage, but thanks to decades of incredibly bad decisions this advantage is starting to erode.  And due to the recent political instability in Washington D.C., the Chinese sense vulnerability.  China has begun to publicly mock the level of U.S. debt, Chinese officials have publicly threatened to stop buying any more U.S. debt, the Chinese have started to aggressively make currency swap agreements with other major global powers, and China has been accumulating unprecedented amounts of gold.  All of these moves are setting up the moment in the future when China will completely pull the rug out from under the U.S. dollar.

Today, the U.S. financial system is the core of the global financial system.  Because nearly everybody uses the U.S. dollar to buy oil and to trade with one another, this creates a tremendous demand for U.S. dollars around the planet.  So other nations are generally very happy to take our dollars in exchange for oil, cheap plastic gadgets and other things that U.S. consumers “need”.

Major exporting nations accumulate huge piles of our dollars, but instead of just letting all of that money sit there, they often invest large portions of their currency reserves into U.S. Treasury bonds which can easily be liquidated if needed.

So if the U.S. financial system is the core of the global financial system, then U.S. debt is “the core of the core” as some people put it.  U.S. Treasury bonds fuel the print, borrow, spend cycle that the global economy depends upon.

That is why a U.S. debt default would be such a big deal.  A default would cause interest rates to skyrocket and the entire global economic system to go haywire.

Unfortunately for us, the U.S. debt spiral cannot go on indefinitely.  Our debt is growing far, far more rapidly than our GDP is, and therefore our debt is completely and totally unsustainable.

The Chinese understand what is going on, and when the dust settles they plan to be the last ones standing.  In the aftermath of a U.S. collapse, China anticipates having the largest economy on the planet, more gold than anyone else, and a respected international currency that the rest of the globe will be able to use to conduct international trade.

And China is not just going to sit back and wait for all of this to happen.  In fact, they are already doing lots of things to get the ball moving.  The following are 9 signs that China is making a move against the U.S. dollar…

#1 Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.

#2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency.  This agreement will result in a lot less U.S. dollars being used in trade between China and Europe…

The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
 
“It’s a way of promoting European and Chinese trade, but not doing it with the U.S. dollar,” said Brooks. “It’s a bit like cutting out the middleman, all of a sudden there’s potentially no U.S. dollar risk.”

#3 Back in June, China signed a major currency swap agreement with the United Kingdom.  This was another very important step toward internationalizing the yuan.

#4 China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.

#5 Mei Xinyu, Commerce Minister adviser to the Chinese government, warned this week that if the U.S. government ever does default that China may decide to completely stop buying U.S. Treasury bonds.

#6 According to Yahoo News, China has already been looking for ways to diversify away from the U.S. dollar…

There have been media reports this week that China’s State Administration of Foreign Exchange, the body that handles the country’s $3.66 trillion of foreign exchange reserve, is looking to diversify into real estate investments in Europe.

#7 Xinhua, the official news agency of China, called for a “de-Americanized world” this week, and also made the following statement about the political turmoil in Washington: “The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized.”

#8 Xinhua also said the following about the U.S. debt deal on Thursday: “[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system”.  The commentary in the government-run publication also declared that the debt deal “was no more than prolonging the fuse of the U.S. debt bomb one inch longer.”

#9 China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations.  But instead of slowing down, the Chinese appear to be accelerating their gold buying.  In fact, money manager Stephen Leeb says that his sources are telling him that China plans to buy another 5,000 tons of gold.  There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.

So exactly what would happen if the Chinese announced someday that they were going to back their currency with gold and would no longer be using the U.S. dollar in international trade?

It would change the face of the global economy almost overnight.  In a previous article, I described some of the things that we could expect to see happen…

If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy.  Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar.  At that point you could forget about cheap gasoline or cheap Chinese imports.  Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively.  If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living.  Today, most U.S. currency is actually used outside of the United States.  If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.

The fact that we get to print up giant mountains of money and virtually everyone around the world uses it has been a huge boon for the U.S. economy.

When that changes, the word “catastrophic” is not going to be nearly strong enough to describe what is going to happen.

According to a Rasmussen Reports survey that was released this week, only 13 percent of all Americans believe that the country is on the right track.  But the truth is that these are the good times.  The American people haven’t seen anything yet.

Someday people will look back and desperately wish that they could go back to the “good old days” of 2012 and 2013.  This is about as good as things are going to get, and it is only downhill from here.

Image credit: http://theeconomiccollapseblog.com

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