Month: November 2014

By: Chris at http://ift.tt/12YmHT5

My son just read me an interesting fact. Did you know that a typical oil tanker will take up to 3km and 45 minutes to complete a 180 degree turn at normal sea speed?

He is busy reading me all the facts about the Titanic. He’s enthralled with it because there is a lot of death involved. He’s at that age where death, mayhem, and grand disaster are AWESOME.

Let’s face it, there are two reasons everybody knows about the Titanic…

The first one is precisely because it was an anomaly. Giant, beastly sized ocean going vessels don’t typically crack up and head for the ocean floor. They are also notoriously incredibly strong, and they are also difficult to turn with any speed, which coincidentally seems to have been one of the problems with the titanic. It didn’t turn fast enough and ploughed into a giant iceberg.

The second reason, in case you’re wondering, is because Leonardo DiCaprio and Kate someone made a song and dance about it. I know this since I tried to watch the film once but I was in Prague and the movie was in Czech with no subtitles. Never made much sense to me.

The reason I have supertankers on my mind, other than nostalgia for Prague or my son sitting reading about them, is that both Singapore and Hong Kong, where I’ve just left, have a decent number of them. You see them dotting the horizon like a silent buffalo herd, when you fly in and out.

When I think of Asia I see the entire region akin to a giant supertanker ploughing full steam ahead.

Individually there are countries running, then walking, then retreating some, but as a whole we’ve got ourselves a giant supertanker moving in one direction. There is no question that the rise of the Asian economies is rapidly changing the structure of world trade and finance.

I’ve heard statements on this particular topic such as, “Asia will dominate the 21st century” and others such as, “As long as the US is the world’s military power nothing will displace them”, to everything in between. I don’t particularly care for either opinion. All too often because it comes from a nationalist approach, and nationalism, like patriotism, is a disease I’ll never fully understand.

I tend to take a slightly different view. I think the future will be more about ideas than one continent or nation. Industrialization meant that assets were largely fixed and therefore could be seized, secured and/or stolen. The technology revolution has drastically changed this dynamic allowing for businesses to categorize and domicile their various business components in jurisdictions favourable for maximum shareholder value.

If you extrapolate on this you’ll realize that much of the value in many businesses is in intellectual property. As such “ideas” will increasingly domicile in favourable jurisdictions. As such, then we need to look at all the factors which may contribute to a favourable climate for “ideas” and monetization of those ideas.

Is it therefore any wonder that so many businesses have been flocking to places such as Hong Kong and Singapore? No, not unless you’re particularly dim.

Sitting on the doorstep of a swelling middle class throughout Southeast Asia, businesses domiciled in both Hong Kong and Singapore are provided with many of the ideal tools for profitable business operations. A robust legal environment for developing IP, a deepening talent pool, increasingly open markets too distribute their products, a number of low cost labour options, and a rising middle class that is hungry for more… all within a short flight.

This swelling middle class, from Jakarta to Shanghai and in between, is causing a number of shifts in people and capital within the region. One such shift is of course a rural to urban migration, resulting in land pressures amongst other things.

Present capital flows are important, too. Both Japan and South Korea, for a number of reasons which I don’t have time to explore in this article, are on a buying spree in the South East Asian region. Understanding these capital flows, why they exist and whether they are in their infancy or near an end is important.

The Japanese and Koreans, however, are not the only ones investing. Chinese investment into Cambodia, for example, has topped $10 billion over the last 15 years with real estate dominating investment. These are big numbers for such a tiny country.

Then from the China Daily we have the following:

In the first half of 2014, there were 16 deals valued at $1 billion or more in Southeast Asia, compared with only six deals in the same period of 2013, according to Thomson Reuters.

In addition, a third of all M&A activity in Asia Pacific in the last six months took place in Southeast Asia.

In the first half of this year there were 16 deals valued at $1 billion or more in Southeast Asia…

This year, for the first time since 2006, the volume of bankruptcy-related M&As from Asia Pacific exceeded Europe, the Middle East and Africa (EMEA) to become the only region in the world with an increase in total volume to $8.5 billion to date, almost double the $4 billion in 2013, according to financial services information provider Dealogic.

Perhaps more telling, the value of M&A deals that were withdrawn this year has reached $24.7 billion — 36 percent less than in the same period in 2013. At the same time, however, the number of withdrawn deals around the world has hit a high not seen since 2008, according to Dealogic.

What do these players see that others do not?

When you think of ASEAN integration this becomes more obvious. Consider the following statement from China Daily:

According to International Monetary Fund estimates, the AEC bloc will have a nominal GDP of $5.6 trillion, trailing only the United States, the European Union, China and Japan.

ASEAN integration in 2015, something that doesn’t even seem to hit the Western media at all, will simply accelerate what has been taking place at an ever increasing pace – growth that is.

According to researchers at the Asian Development Bank:

If Asia, our home continent continues to grow on its trajectory of the past 25 years, it could – by 2050 – account for more than half of global GDP, trade, and investment. Asian individual incomes could rise six-fold; and three billion Asians now mired in poverty and deprivation would become affluent by today’s standards. Asia as a whole would regain global economic position it had held some 250 years ago – before the Industrial Revolution of the 18th century.

Don’t get me wrong. There are a lot of things in Asia that need fixing… a lot. Traffic can be horrendous, and crossing the street in Manila, Saigon, or Jakarta requires balls of steel, several tranquilizers and luck. Traffic lights are decorative, as nobody takes any notice of them. Clean tap water is still a novel idea and logistics are horribly fragmented, but you know what? This is why so much opportunity exists!

Hectic traffic in Saigon, Vietnam

These are all problems which increasingly get resolved. Expecting farmhands from the boonies to understand traffic signs is neither fair nor reasonable. Expecting DHL-like services, air conditioned subways and decent plumbing used to be unreasonable. Not so much anymore. In fact, step into cities such as Kuala Lumpur, Bangkok, Hong Kong and of course Singapore, and you’ll see completely calm, sensible behaviour, together with good infrastructure. It wasn’t always that way.

Now I ask you… where would you think the most attractive growth comes from? An established environment or one busily establishing itself?

– Chris

 

“With a population of more than 600 million people, an emerging middle class that is driving strong consumption, and a robust and resilient economy, Southeast Asia presents a compelling growth opportunity for Starbucks.” – Howard Schultz

via Zero Hedge http://ift.tt/1x4c4PL Capitalist Exploits

Submitted by The Dissident Dad via Liberty Blitzkrieg blog,

Note from Mike Krieger,

Before I get to the Dissident Dad’s latest post, I want to provide my own perspective with regard to this very important debate. While I agree that voting is generally meaningless in our current system, this is because the two choices we are given are 99% of the time captured cronies of the two corrupt political parties.

 

So this begs the question, can we ever get real choices on the ballot? I believe we can, but we need a much larger percentage of the population aware and engaged. While I completely respect the decision to not vote for either false choice (for example, in Colorado both choices for Governor are horrific), I hope people who make this choice don’t altogether give up on grassroots activism and civil disobedience, but rather direct their energy elsewhere.

The Ritual of Voting
by the Dissident Dad

This year, my wife and I will – for the second time in our adult lives – not vote. Previously, I would have seen this stance as many people do: as an irresponsible act. The ritual of voting is very much like taking communion in church for half of this country.

As a father, I want to raise responsible adults, which is why my wife and I will not be heading to the polls this election.

I want to always help my children understand that they are sovereign men and women, and have no obligation to any government.

When it comes to voting, my wife and I are personally opting out of the system. There are a lot of reasons for us not to vote, but at the core it comes down to not wanting to enforce our will on others. I’m fine with making our voices heard, but when the vote has a direct impact on how much money is stolen from another family, I want nothing to do with it.

Both Democrats and Republicans support militarism, taxation, spying on us, inflation, redistribution of wealth, Keynesian economics and corporatism once they get in office.

My children need not to identify with this group of sociopaths, so to vote would be a bad example for them. Plus, as my friend Doug Casey has noted, voting just encourages them – the politicians, that is. Whether you’re voting for or against someone, winning an election gives the politician a sense of a mandate that they are obligated to create new rules, taxes and redistribution of wealth schemes to satisfy their voting bloc. That somehow they are in the right, because no matter how sick their political philosophy is, the majority has demanded they implement it into the minority’s lives.

The current options for voting within the system has conditioned Americans into becoming busybodies. We’re always given the choice of taking away the rights of others, stealing their property through taxation, and creating new laws for minority groups. Or worse, outright murdering people overseas because they consider our tens of thousands of troops, drones and ships off their coastlines a threat to their own national sovereignty.

I believe that intentionally not voting will serve as a positive reinforcement for my kids that you don’t have to comply with society’s expectations and you never have to take part in the lesser of two evils. The lesser of two evils is still evil.

The oligarchs laugh at all us plebs on Election Day because they know that no matter what we do, they’re going get what they want. If you voted for Bush, you got Ben Bernanke as the master of your dollar’s value and chief of banker bailouts. If you voted for Obama, who was supposed to be the anti-Bush, guess what; you still got Ben Bernanke as master of your dollar’s value and chief of banker bailouts.

Raising responsible adults in a world that is completely upside down continues to be my most difficult task as a father. As I’ve mentioned in previous posts, your own personal choice between mainstream and independent thought is the easy part. What becomes far less manageable are your very own loved ones: family, friends, and neighbors who are fully part of the system and who blindly endorse its atrocities against mankind and defend the oligarchs every step of the way.

This is why not voting for my family has to be more than just a political protest, but something I will have to defend and take the time to explain at family gatherings.

For my children, I want them to know that the system is not their friend. It doesn’t mean that people who live within the system are our enemy; it just means that as sovereign people, we have no obligation to it, and it’s not us who should be embarrassed for not embracing it. Instead, it’s the thieves and busybodies who partake in the theft of someone else’s wealth — and even their lives — every time they prop up one these central planners.

Oh, and while we’re on the topic of sham elections and corrupt, insane politicians. Make sure you watch the following:

 

 

via Zero Hedge http://ift.tt/1DWT6g1 Tyler Durden

Submitted by Michael Snyder of The End of the American Dream blog,

There has always been a substantial level of incompetence at federal agencies, but under the Obama administration incompetence has risen to unprecedented levels.  This year the incompetence of the Secret Service, the Veterans Administration, the Department of Homeland Security and the CDC have all made national headlines.  And it is hard to forget how the launch of Obamacare was such a failure that it became a global joke.  We live at a time when our government officials can’t seem to do anything right.  When Americans complain about the government, most of the time they focus on how corrupt and wicked our politicians have become, and that should not be downplayed whatsoever.  But just replacing those politicians is not going to fix what ails our government.  The quality of the workers throughout the government bureaucracy has fallen so dramatically that our federal agencies can no longer be depended upon to perform even the most basic governmental functions competently.  The following are 10 examples of the extreme incompetence that now pervades the federal government…

#1 The Secret Service

Once upon a time, the Secret Service was considered to be one of the finest security organizations in the entire world.  But these days, they seem to be too busy partying and chasing prostitutes around to do their jobs properly.

For instance, multiple intruders have recently been able to cross the White House lawn and walk right into the White House without being stopped by anyone.  Here is just one example…

An intruder made his way across the White House lawn and through the building almost to the Obama living quarters before being stopped by a Secret Service officer who was off duty: This chilling news is more than just a kind of melodramatic movie scenario come true.

 

Next to the military, the Secret Service is probably the most highly regarded institution within the executive branch. Or it was.

 

Now we learn its agents can’t catch a guy running across the White House lawn; can’t stop the guy at the front door; can’t get to him before he gets to the stairs that lead to the rooms where the president’s daughters sleep.

#2 The Obamacare Website

The launch of Obamacare overall has been a complete and total disaster, but the launch of the Obamacare website in particular was such a dramatic failure that it is hard to put into words.  The Obama administration spent more than 2 billion dollars on healthcare.gov and trumpeted it as the future of healthcare in America, but the website was a technical nightmare.  The following is how one news outlet described it…

Healthcare.gov has shutdown, crapped out, stalled, and mis-loaded so consistently that its track record for failure is challenged only by Congress.

#3 Dropping Weapons To ISIS Terrorists

It is well known that ISIS is using captured U.S. vehicles and weapons to take over vast stretches of territory in Iraq and Syria.

So what do we do?  U.S. planes drop even more weapons into the region to aid in “the fight against ISIS”, but ISIS is ending up with many of those weapons too…

At least one bundle of U.S. weapons airdropped in Syria appears to have fallen into the hands of ISIS, a dangerous misfire in the American mission to speed aid to Kurdish forces making their stand in Kobani.

An ISIS-associated YouTube account posted a new video online Tuesday entitled, “Weapons and munitions dropped by American planes and landed in the areas controlled by the Islamic State in Kobani.” The video was also posted on the Twitter account of “a3maq news,” which acts as an unofficial media arm of ISIS. The outfit has previously posted videos of ISIS fighters firing American made Howitzer cannons and seizing marijuana fields in Syria.

 

ISIS had broadly advertised its acquisition of a broad range of U.S.-made weaponsduring its rampage across Iraq. ISIS videos have showed its fighters driving U.S. tanks, MRAPs, Humvees.

 

There are unconfirmed reports ISIS has stolen three fighter planes from Iraqi bases it conquered.

#4 The Immigration Crisis

The Obama administration has refused to secure our borders and has openly encouraged mass illegal immigration from Central and South America.

As a result, our border patrol is absolutely overwhelmed.  Tens of thousands of women and children are turning themselves over to border patrol agents and asking for asylum.  They expect to be taken care of and given a new life in this country.  As a result, “processing centers” along our southern border are packed to the gills with women and children living in absolutely deplorable conditions as the federal government figures out what to do with them.

#5 The VA Scandal

Under the Obama administration, military veterans have been treated like human garbage.   For years they have been denied the care that they need, and many Americans were absolutely shocked when they learned that countless veterans have died waiting to get an appointment at one of our VA facilities.  Needless to say, this scandal has greatly shaken the confidence that the public has in the Veterans Administration…

The Veterans Administration was viewed favorably by 68 percent of those polled last year. But it too has since been swept up in a scandal over long wait times for veterans seeking care and records that were falsified to camouflage the problems. In the CBS poll, just 30 percent rated the VA as doing a good job.

#6 The SEC

Many wonder why the SEC never seems to go after the big Wall Street banks.  Well, perhaps one of the reasons is because many SEC employees have been too busy watching porn all day long…

One senior attorney at SEC headquarters in Washington spent up to eight hours a day accessing Internet porn, according to the report, which has yet to be released. When he filled all the space on his government computer with pornographic images, he downloaded more to CDs and DVDs that accumulated in boxes in his offices.

 

An SEC accountant attempted to access porn websites 1,800 times in a two-week period and had 600 pornographic images on her computer hard drive.

 

Another SEC accountant used his SEC-issued computer to upload his own sexually explicit videos onto porn websites he joined.

 

And another SEC accountant attempted to access porn sites 16,000 times in a single month.

#7 The Environmental Protection Agency

You know that things are bad at your agency when employees have to be told not to poop in the hallways…

It appears, however, that a regional office has reached a new low: Management for Region 8 in Denver, Colo., wrote an email earlier this year to all staff in the area pleading with them to stop inappropriate bathroom behavior, including defecating in the hallway.

 

In the email, obtained by Government Executive, Deputy Regional Administrator Howard Cantor mentioned “several incidents” in the building, including clogging the toilets with paper towels and “an individual placing feces in the hallway” outside the restroom.

 

Confounded by what to make of this occurrence, EPA management “consulted” with workplace violence “national expert” John Nicoletti, who said that hallway feces is in fact a health and safety risk. He added the behavior was “very dangerous” and the individuals responsible would “probably escalate” their actions.

And just like the SEC, there has been a lot of porn watching going on at the EPA too.  The following is from a recent Washington Post article…

In May, the Environmental Protection Agency’s inspector general disclosed that a senior-level employee was caught spending as much as six hours of his day looking at porn. The IG found that the employee had downloaded and viewed more than 7,000 pornographic files. The Justice Department is investigating further for possible prosecution.

 

Four months later, the employee has not been fired and is still collecting government pay, Environment & Energy Publishing reported last week.

 

That prompted Rep. Mark Meadows (R-N.C.) to introduce a bill the day Congress left town to make it a uniform federal government law that employees cannot look at porn at work.

#8 NASA

Generally, NASA has been regarded as one of the more competent government agencies.  That is why it is so alarming that a rocket recently exploded just before liftoff at a NASA facility in Virginia…

An unmanned commercial rocket headed for the International Space Station to deliver supplies exploded just after launching Tuesday, filling the sky with a massive fireball.

 

The Antares rocket supplied by contractor Orbital Sciences blew up moments after liftoff at NASA’s space launch facility on the Eastern Shore of Virginia, the space agency said.

 

The explosion destroyed the rocket and spacecraft and immediately raised questions about the future of NASA’s reliance on private commercial ventures to carry vital payloads into space to supply and support the orbiting space station.

#9 The Federal Reserve

The Federal is NOT a government agency, but it claims such a close relationship with the government that I have added it to this list.

Since the Federal Reserve was initially created, the U.S. dollar has become more than 20 times less valuable, and the U.S. national debt has gotten more than 5000 times larger.

More recently, the Federal Reserve’s quantitative easing program has been an unmitigated failure.  The Federal Reserve created 3.5 trillion dollars out of thin air and pumped it into the financial system, but all of that money has done next to nothing for the real economy.  The percentage of Americans that are employed is about the same as it was during the depths of the last recession, the homeownership rate in this country has been falling for seven years in a row, and half of all Americans now make less than $28,031 a year.

#10 Ebola

This is the one area where the incompetence of the federal government could be the most dangerous.  Originally we were told by the CDC that Ebola could only be spread by “direct contact” with the bodily fluids of someone else.  But now we have learned that the government believes that Ebola is “aerostable“, and we have also learned that researchers have discovered that Ebola can remain on surfaces for up to 50 days.  If Ebola does start spreading widely in this country, giving people bad information could accelerate the spread of the disease.

And Barack Obama continues to refuse to ban all non-essential air travel between the United States and the nations in West Africa where Ebola is raging out of control.

As far as Obama is concerned, incompetence is the best case scenario.  There is absolutely no excuse for not protecting the American people from what could become the greatest health crisis that any of us have ever seen.  If a major Ebola pandemic does erupt in this country, the blood of countless numbers of Americans could potentially be on his hands.

via Zero Hedge http://ift.tt/1xVeRuz Tyler Durden

Spot the free-money, wealth-effect-pumping, inequality-driven difference…

 

 

GM sold 226,819 vehicles in October 2014, just 417 more vehicles than it sold in October 2013 (+0.18%)

“The U.S. economy has steadily improved all year and now we are poised for a stronger expansion backed by an improved job market, higher consumer confidence and lower fuel prices,”

Maserati saw 97 percent sales gain posted in October, compared with same month one year ago

“Reflecting the broader appeal and versatility of the expanded model range and its exceptional performance and style, Maserati has recorded its best October ever,” says Peter Grady, President & CEO of Maserati North America, Inc.

*  *  *

If only those poor people were rich asset-owners…

via Zero Hedge http://ift.tt/1uok4OF Tyler Durden

Marc Faber, editor of "The Gloom, Boom & Doom Report", spoke with Bloomberg TV's Trish Regan today at length on a wide variety of topics. He commented on Bill Gross' remarks about deflation (noting "the concept of inflation and deflation is frequently misunderstood") and explained why he thinks Japan is engaged in a Ponzi Scheme (since "all the government bonds that the Treasury issues are being bought by the Bank of Japan"). He also spoke on oil prices (warning that "if oil prices went lower, it may actually have an adverse impact on the US economy"), gold and Goldman Sachs ("Goldman Sachs is very good at predicting lower prices when they want to buy something") and the midterm elections (adding that "I don’t think it really matters, [both parties] have blown money away.") But it is discussion of the independence of the Fed with Alan Greenspan that will raise the most eyebrows as it seems yet another conspiracy theory dies at the hands of the fact police.

*  *  *

TRISH REGAN: Bond investor Bill Gross is saying deflation is a “growing possibility” as governments worldwide struggle to create inflation and to stimulate growth. In his second investment outlook since joining Janus Capital, Mr. Gross writes, “The real economy needs money printing, yes, but money spending more so. Until then, deflation remains a growing possibility, not the kind that creates prosperity but the kind that’s trouble for prosperity.”  What do you think here about what Bill Gross is saying? Do you think in fact deflation is a real possibility for the United States?
 
MARC FABER: Well, I think the concept of inflation and deflation is frequently misunderstood because in some sectors of the economy you can have inflation and in some sectors deflation. But if the investment implication of Bill Gross is that – and he’s a friend of mine. I have high regard for him. If the implication is that one should be long US treasuries, to some extent I agree. The return on 10-year notes will be miserable, 2.35 percent for the next 10 years if you hold them to maturity in each of the next 10 years. However, if you compare that to French government bonds yielding today 1.21 percent, I think that’s quite a good deal, or Japanese bonds, a country that is engaged in a Ponzi scheme, bankrupt, they have government bond yields yielding 0.43 percent. So –

*  *  *
Faber: Japan Is Engaged in a Ponzi Scheme

 

FABER: Well I think they’re engaged in a Ponzi scheme in the sense that all the government bonds that the Treasury issues are being bought by the Bank of Japan.

 

REGAN: So Japan’s engaged in a Ponzi scheme. What about the US? We’ve done our share of money printing. We’ve had record low interest rates for six years.

 

FABER: I think the good news is – for Japan is that most countries are engaged in a Ponzi scheme and it will not end well. But as Carlo Ponzi proved, it can take a long time until the whole system collapses.

 

REGAN: So all this QE in your view is a form of a Ponzi scheme. It’s going to take some while before it catches up with us, and yet, Marc, you look at the jobs numbers coming out of the US. You look at the GD print (ph). All this has actually been pretty good lately. So isn’t there a case to be made for some economic growth here?

 

FABER: I really have to laugh when I look at the economic statistics because they are published by the Obama administration, and there I would be very careful to take every figure for granted. The fact is simply that first-time home buyers in the US are now at the 30-year low. What does it tell you? That people don’t want to live in homes anymore? No. They can’t afford to live in homes anymore. That is the problem. And the whole exercise with quantitative easing has been to boost asset prices, but the bigger problem is the affordability. A lot of people are being squeezed very badly because the costs of living are rising more than their salaries and wages.

Faber: The US unfunded liabilities are another Ponzi scheme

REGAN: You mentioned the economic numbers out of the US. You said people should take them – to not take them for granted. You also mentioned in the same sentence because they’re coming from the Obama administration. What is your concern there about what they’re telling us?

 

FABER: Well first of all, if we talk about GDP growth, we have to – the figures are adjusted essentially for inflation, the PCE in the case of the US. Now depending on how you weight the basket of goods and services that you take into your inflation measure, you will get completely different results. And if you print money and if you have large budget deficits, and last year up to October 13 of this year the total government debt in the US increased by over a trillion dollars. So I would say that is kind of a deficit figure that makes halfway sense, but it does not include the unfunded liabilities. That’s another Ponzi scheme we’ll have to talk about in a few years’ time.

 

In any event, the point is that (inaudible) improvement in the economy has taken place, there’s no question, from the 2009 lows. The question is more had we had a further decline in home prices, would actually affordability for most people have improved or not? And I would argue why do people rush out when there are sales in department stores? Because they get the bargain. At the present time when young people want to buy something, they buy the stock market at an expensive valuation. They buy bonds at miserable yields.

 

That I didn’t have to do when I started to work in 1970. In the early ‘70 the Dow Jones was yielding 4 to 6 percent. Bonds, they were yielding 6 percent on treasuries and they rose to 15 percent, add (ph) the benefit of a huge compounding effect. Not (inaudible) I’m smart, but $1 invested in 1970 at 100 years at 5 percent grows to $131.

Faber: Doesn't Matter If GOP Gains Control of Senate

 

REGAN: We’ve got midterm elections here in the US tomorrow. Do they matter for the markets? Does the configuration of the US Senate in your view really matter?

 

FABER: Well it will be perceived as positive if the Republicans gain the control, but I don’t think it really matters because on (inaudible) Democrats and Republicans, they’ve blown money away. It’s not that the Democrats – actually under Mr. Obama spending has been relatively muted partly because of the sequester and so forth. But nevertheless, as a percent of the economy it hasn’t grown much. It’s actually contracted.

Faber: Gold has done better than stocks over the last 10 years, Goldman is "very good at predicting lower prices when they want to buy something"

REGAN: I know you have been bullish in gold for – well, pretty much forever, Marc. But now we’re in a situation where gold is at a four-year low. Goldman now predicting 10, 15 down (ph). Soc Gen saying $1,000. Where do you see gold finishing the year?

 

FABER: I would say Goldman Sachs is very good at predicting lower prices when they want to buy something. But that is a (inaudible) I would say, yes, we are down from $1,900 to $1,160 or something like this, and it’s been a miserable performance since 2011. However, from the 1990 lows we’re still up more than four times. So I just looked at performance tables over 10 years and 15 years. Gold hasn’t done that badly, has done actually better than stocks.

 

Now I personally, I think that we may still go lower. It’s possible. I’m not a profit, but I’m telling you I want to own some gold because I don’t trust the financial system anymore. I think the whole thing is going to collapse one day and then I’ll be happy to have some assets. But of course the custody (ph) is important. I wouldn’t hold my gold at the Federal Reserve because they will lend it out. I wouldn’t hold my gold in the US at all.

 

REGAN: Okay. So you want gold even at these levels. Where do you see – you still see it going lower however as we close out the year?

 

FABER: I don’t know whether it will go lower, but I think say – I’m now 68. by the time I die, and I don’t think it will be 100 (inaudible) I’m not that optimistic, but by the time I die it will be meaningfully higher.

Faber: Low Oil Prices May Have Adverse Impact on Economy

 

REGAN: Marc, let’s talk a little bit about crude oil as we talk about some of these commodities here. You just told me you thought gold won’t necessarily be going higher any time soon, but over the long run a good investment. We’ve got crude oil now closing below $80 for the first time since June of 2012. Is there any floor in site here for oil or do you expect the slide to continue?

 

FABER: Well basically if oil falls below $75 to $70, I don’t think it will stay there because a lot of production will be cut and exploration will be cut, and actually some companies will get into serious trouble financially. The oil price decline is not necessarily very good for the United States. It helps the consumer to some extent, but a lot of capital spending has gone into oil and natural gas, and some of these companies are already today cash flow negative. So if oil prices went lower, it may actually have an adverse impact on the US economy.

 

REGAN: Do you think to a certain extent – and I actually wrote about – I wrote about this in – in my column in USA Today this week. I wonder to what extent, Marc, OPEC actually enjoys seeing lower prices right now because of the success of drilling in the US. In other words, it makes it far less attractive for drillers in the US to be investing in that sector.

 

FABER: Except too much of a good thing may not be very good for Saudi Arabia and the other oil producers. You can extract oil in Saudi Arabia at very low cost, but you have to understand the population of Saudi Arabia has now reached I think 25 million. So the social cost is very large. They need an oil price of around $80. If oil prices went down – and let me remind you oil hit a high in July 2008 at $147 and within six months it dropped to $32, but it didn’t stay there. It rebounded. And I think Saudi Arabia and most oil producers would be in trouble if the oil price went below $70 and stayed there.

 

REGAN: But you don’t anticipate that it will stay there. It’s – it’s supply and demand ultimately, and if it goes to $70 you see less investment and drilling and thus less supply here in the US. So $70 is the floor in your view?

 

FABER: Not necessarily the floor, but it won’t stay low for a very long time. I think it’s – at the present time, farmers are by and large losing money because the price of corn, wheat, soybeans has collapsed by around 50 percent from the highs and the costs are up substantially. I don’t think oil would stay down for very long because I live in an emerging economy. I can see one thing. The demand for oil in the regions of the emerging world where 80 perent of the population of the world lives is going up still from very low per capita consumption levels compared to say the European economy or the US.

 

So I think the long-term trend for demand is up, but obviously the decline of oil prices, some people blame it on Saudi Arabia and some other blame it on the US and who knows what, the fact is maybe the decline in oil prices tells you that the global economy is not recovering as all the bullish analysts think, but actually it’s weakening, yes, weakening. But some countries benefit from lower oil prices, particularly India.

 

REGAN: So in fact you see the global recovery as not really happening, that we are in an increasingly weak global environment as you look around. And certainly we see some poor data that indicates that out of Asia and Europe.

 

FABER: Yes. I think that in Europe we have essentially a flat (inaudible) economy. Now maybe a year they will grow at 1 percent and the next year they’ll contract at 1 percent, basically you can’t expect much growth from Europe. In China, we have now obviously – and this is well documented – a meaningful slowdown in economic growth. As a result, China also buys less resources from the resource producers in the world, from Argentina to Brazil, over (inaudible) Asia, central Asia, Russia (inaudible) and so on. And this has all an impact on these countries’ economies, and so they themselves are buying less goods from the Western world and you have the potential of a downside spiral.

Faber: Alan Greenspan told me The Fed is not independent

REGAN: Anything else? A lot of people have made that point that the Fed has been somewhat backed into a corner in terms of having to be aggressive because they haven’t gotten any cooperation from Washington. Is there any truth to that?

 

FABER: Well it’s interesting that you raise this issue because I was on a panel with Alan Greenspan a week ago, and I knew Alan from my days at Y12 in 1970, 1971 when he was the consulting economist. And actually he even recognized me. He said you’re one of the few ones that always came to my presentations. I have to say one thing. I’m critical of him as a Fed chairman, but he’s a highly intelligent man and he’s actually a very nice man. But equally, he’s a diplomat. He’s a politician.

 

And I was allowed to ask him a few questions, so I asked him, Alan, you’ve been Fed chairman since 1987 until 2006. Would you have done anything different if you were again Fed chairman? And then he explained this and that, and then I interrupted him and I said, you mean to say that the Federal Reserve is not independent? He immediately said, Marc, I never said the Fed was independent. That’s what he said. I never said that the Fed was independent. In other words, the Fed and the treasury and the government is basically one and the same.

Faber: Be diversified, Own Gold

REGAN: Okay. Real quick before I let you go, I know you like gold. Anything else you’d be telling investors to buy right now in this uncertain global environment?

 

FABER: Because in this unsettled global environment nobody knows how the world will look like in five years’ time, Alan Greenspan said the same, he doesn’t know, I would be diversified. And my diversification is about a quarter in equities, not in US stocks. I like other equities better. And some bonds and cash and some gold and some real estate.

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One word – seppuku

Not laughing now eh?

Here’s one problem:

• *GPIF PANEL MEMBER SAYS GOVERNANCE LAW REFORM MAY TAKE A YEAR
  

We’re gonna need a biggerer QQE!

• *JAPAN’S 20-YEAR YIELD DROPS TO 1.21%, LOWEST SINCE APRIL 2013

Everyone is greatly rotating into JGBs! 20Y yield collapses 8bps!

 

back to crazy chaos levels from last year

 

And Japanese stocks plunge the most intraday in 10 days 

 

Charts: Bloomberg

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Submitted by Alasdair Macleod via GoldMoney.com,

China first delegated the management of gold policy to the People's Bank by regulations in 1983.

This development was central to China's emergence as a free-market economy following the post-Mao reforms in 1979/82. At that time the west was doing its best to suppress gold to enhance confidence in paper currencies, releasing large quantities of bullion for others to buy. This is why the timing is important: it was an opportunity for China, a one-billion population country in the throes of rapid economic modernisation, to diversify growing trade surpluses from the dollar.

To my knowledge this subject has not been properly addressed by any private-sector analysts, which might explain why it is commonly thought that China's gold policy is a more recent development, and why even industry specialists show so little understanding of the true position. But in the thirty-one years since China's gold regulations were enacted, global mine production has increased above-ground stocks from an estimated 92,000 tonnes to 163,000 tonnes today, or 71,000 tonnes* ; and while the west was also reducing its stocks in a prolonged bear market all that gold was hoarded somewhere.

The period I shall focus on is between 1983 and 2002, when gold ownership in China was finally liberated and the Shanghai Gold Exchange was formed. The fact that the Chinese authorities permitted private ownership of gold suggests that they had by then acquired sufficient gold for monetary and strategic purposes, and were content to add to them from domestic mine production and Chinese scrap thereafter rather than through market purchases. This raises the question as to how much gold China might have secretly accumulated by the end of 2002 for this to be the case.

China's 1983 gold regulations coincided with the start of a western bear market in gold, when Swiss private bankers managing the largest western depositories reduced their clients' holdings over the following fifteen years ultimately to very low levels. In the mid-eighties the London bullion market developed to enable future mine and scrap supplies to be secured and sold for immediate delivery. The bullion delivered was leased or swapped from central banks to be replaced at later dates. A respected American analyst, Frank Veneroso, in a 2002 speech in Lima estimated total central bank leases and swaps to be between 10,000 and 16,000 tonnes at that time. This amount has to be subtracted from official reserves and added to the enormous increase in mine supply, along with western portfolio liquidation. No one actually knows how much gold was supplied through the markets, but this must not stop us making reasonable estimates.

Between 1983 and 2002, mine production, scrap supplies, portfolio sales and central bank leasing absorbed by new Asian and Middle Eastern buyers probably exceeded 75,000 tonnes. It is easy to be blasé about such large amounts, but at today's prices this is the equivalent of $3 trillion. The Arabs had surplus dollars and Asia was rapidly industrialising. Both camps were not much influenced by western central bank propaganda aimed at side-lining gold in the new era of floating exchange rates, though Arab enthusiasm will have been diminished somewhat by the severe bear market as the 1980s progressed. The table below summarises the likely distribution of this gold.

Today, many believe that India is the largest private sector market, but in the 12 years following the repeal of the Gold Control Act in 1990, an estimated 5,426 tonnes only were imported (Source: Indian Gold Book 2002), and between 1983 and 1990 perhaps a further 1,500 tonnes were smuggled into India, giving total Indian purchases of about 7,000 tonnes between 1983 and 2002. That leaves the rest of Asia including the Middle East, China, Turkey and South-East Asia. Of the latter two, Turkey probably took in about 4,000 tonnes, and we can pencil in 5,000 tonnes for South-East Asia, bearing in mind the tiger economies' boom-and-bust in the 1990s. This leaves approximately 55,000 tonnes split between the Middle East and China, assuming 4,850 tonnes satisfied other unclassified demand.

The Middle East began to accumulate gold in the mid-1970s, storing much of it in the vaults of the Swiss private banks. Income from oil continued to rise, so despite the severe bear market in gold from 1980 onwards, Middle-Eastern investors continued to buy. In the 1990s, a new generation of Swiss portfolio managers less committed to gold was advising clients, including those in the Middle East, to sell. At the same time, discouraged by gold's bear market, a western-educated generation of Arabs started to diversify into equities, infrastructure spending and other investment media. Gold stocks owned by Arab investors remain a well-kept secret to this day, but probably still represents the largest quantity of vaulted gold, given the scale of petro-dollar surpluses in the 1980s. However, because of the change in the Arabs' financial culture, from the 1990s onwards the pace of their acquisition waned.

By elimination this leaves China as the only other significant buyer during that era. Given that Arab enthusiasm for gold diminished for over half the 1983-2002 period, the Chinese government being price-insensitive to a western-generated bear market could have easily accumulated in excess of 20,000 tonnes by the end of 2002.

China's reasons for accumulating gold

We now know that China had the resources from its trade surpluses as well as the opportunity to buy bullion. Heap-leaching techniques boosted mine output and western investors sold down their bullion, so there was ample supply available; but what was China's motive?

Initially China probably sought to diversify from US dollars, which was the only trade currency it received in the days before the euro. Furthermore, it would have seemed nonsensical to export goods in return for someone else's paper specifically inflated to pay them, which is how it must have appeared to China at the time. It became obvious from European and American attitudes to China's emergence as an economic power that these export markets could not be wholly relied upon in the long term. So following Russia's recovery from its 1998 financial crisis, China set about developing an Asian trading bloc in partnership with Russia as an eventual replacement for western export markets, and in 2001 the Shanghai Cooperation Organisation was born. In the following year, her gold policy also changed radically, when Chinese citizens were allowed for the first time to buy gold and the Shanghai Gold Exchange was set up to satisfy anticipated demand.

The fact that China permitted its citizens to buy physical gold suggests that it had already acquired a satisfactory holding. Since 2002, it will have continued to add to gold through mine and scrap supplies, which is confirmed by the apparent absence of Chinese-refined 1 kilo bars in the global vaulting system. Furthermore China takes in gold doré from Asian and African mines, which it also refines and probably adds to government stockpiles.

Since 2002, the Chinese state has almost certainly acquired by these means a further 5,000 tonnes or more. Allowing the public to buy gold, as well as satisfying the public's desire for owning it, also reduces the need for currency intervention to stop the renminbi rising. Therefore the Chinese state has probably accumulated between 20,000 and 30,000 tonnes since 1983, and has no need to acquire any more through market purchases given her own refineries are supplying over 500 tonnes per annum.

All other members of the Shanghai Cooperation Organisation** are gold-friendly or have increased their gold reserves. So the west having ditched gold for its own paper will now find that gold has a new role as Asia's ultimate money for over 3 billion people, or over 4 billion if you include the South-East Asian and Pacific Rim countries for which the SCO will be the dominant trading partner.

*See GoldMoney’s estimates of the aboveground gold stock by James Turk and Juan Castaneda.
**Tajikistan, Kazakhstan, Kyrgyzstan, Uzbekistan, India, Iran, Pakistan, and Mongolia. Turkey and Afghanistan are to join in due course.

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