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Within the world of central bank and government gold reserves, there is often an assumption that these gold holdings consist entirely of gold bullion bars. While this is true in some cases, it is not the fully story because many central banks and governments, such as the US, France, Italy, Switzerland, the UK and Venezuela, all hold an element of gold bullion coins as part of their official monetary gold reserves.

These gold coin holdings are a legitimate part of gold reserves since under International Monetary Fund (IMF) definitions, “monetary gold consists of gold coins, ingots, and bars”. In central banking parlance, monetary gold is simply gold that is held by a central bank or government as a reserve asset. Other central bank reserve assets include foreign exchange holdings and holdings of IMF Special Drawing rights.

Elsewhere in IMF definitions, it is stated that “monetary gold is generally construed to be at least 995/1000 pure.” Many government and central bank gold coin holdings consist of previously circulated gold coinage. Since gold coins often had  – and still have – a purity of less than 99.5% gold due to the addition of metals for added durability, this ‘generally construed’ leeway in the IMF definition is undoubtedly a practical consideration that allows gold coins to be classified as monetary gold.

Central banks and governments hold gold for the same reasons that private citizens hold gold. Gold is real money with no counterparty risk, gold is a store of value, and gold is a safe haven asset. In general, central banks and governments are as happy holding bullion in gold bar form as in gold coin form. This is because physical gold is physical gold, and a gold coin and a gold bar will both provide their holders with the same benefits and protections. Only the physical form differs. In practice, the types and quantities of gold coins held by central banks and governments are extensive and varied as a quick tour d’horizon reveals.

Starting with the largest official sector gold holders, 3 of the top 5 gold holding countries have substantial gold coin holdings in their claimed reserves. The Banque de France, the guardian of France’s gold reserves, holds 2435.4 tonnes of gold consisting of a massive 100 tonnes of gold coins, and 2,335 tonnes of gold bars. Of these gold coins, 45% are French gold coins (probably Napoleans) and 55% are foreign gold coins, some of which are from the US.

Banca d’Italia stores approximately half of Italy’s 2451.8 tonnes of gold under its headquarters in Rome, with most of the other half stored at the Federal Reserve in New York. Of the 1199.4 tonnes of Italian gold in Rome, Banca d’Italia states that it holds 4.1 tonnes of gold coins, in the form of 871,713 coins. This would give each gold coin an average gold content of 0.151 troy ounces. This hoard most likely includes historic gold Italian 10 Lira and 20 Lira coins.

The US Treasury, the official holder of the US gold reserves, claims to hold gold coins containing 73,829.5 fine ounces of gold (2.3 tonnes) in the custody of the Federal Reserve Bank of New York. While a small subset of these coins weighing 377.4 ounces is on display in New York, the remaining coins, containing 73,451 ounces, are held in The New York Fed’s vault compartment K in 384 bags weighing a gross 80,855.70 ounces. These coins are all either 0.9 fine or 0.9167 fine gold. For details see page 132 here. These US Treasury held gold coins at the Fed are in addition to the 2,783,218.6 (86.5 tonnes) of gold coins that the US Treasury claims to hold within the US Mint’s working stock.

Venezuela’s gold holdings, which have practically all been sold off or swapped for foreign exchange recently, also contain gold coin holdings in the form of historic gold US Eagles, as well as gold US Liberty and ‘Indian Head” coins (see page 17 here). Notably, the Venezuelan central bank says that these coins would have a numismatic premium valuation depending on their scarcity, design and condition. Given the ongoing and deteriorating economic situation in Venezeula, expect these gold coins to be either sold on the market or else melted down and shipped out of the country, probably to Switzerland.

Speaking of Switzerland, the Swiss National Bank (SNB) in its publications, says that its “gold holdings are mainly in the form of gold bars, with the remainder in gold coins". The SNB doesn’t elaborate on what type of gold coins it holds, and when asked recently, in the spirit of central bank secrecy, it not surprisingly declined to elaborate. Most likely this Swiss hoard includes historic Swiss Franc gold coins, and even old Latin Monetary Union gold coins.

The United Kingdom, through HM Treasury’s Exchange Equalisation Account (EEA), claims to hold 310.3 tonnes of gold in its reserves, all of which is held in custody at the Bank of England. The EEA 2014/2015 accounts states that “The gold bars and gold coin in the reserves were stored physically at the Bank’s premises". As to what type of gold coins the UK holds, HM Treasury didn’t repond to a recent query, but undoubtedly, the Treasury holds gold Sovereigns as HM Treasury archives reveal.

Among other central banks, Romania holds 14% of its monetary gold in the form of gold coins, amounting to approximately 14.43 tonnes. The Central Bank of Peru includes 552,191 troy ounces (17.7 tonnes) of gold in its monetary gold holdings. These coins are described as “commemorative coins” and are held domestically “in the vault of the Central Bank”. Even Canada, made headlines with its gold coin holdings recently when the Bank of Canada sold off the last of that country’s eventually tiny gold holdings which had been exclusively in the form of gold coins since the early 2000s. These gold coins were King George $5 and $10 coins, the best examples of which were sold to collectors with the rest melted down into gold bars by the Royal Canadian Mint on the wholesale gold market, yet again highlighting gold's high liquidity.

Central banks will always downplay the existence of gold on their balance sheets since gold competes against national fiat paper currencies. However, the actual actions of central banks and governments in holding vast amounts of gold bars, and not instabstantial quantities of gold coins, demonstrate that they continue to view gold as a strategic reserve asset and as the ultimate money. Private individuals can also acquire and accumulate gold bars and gold coins for the same reasons as sovereign entities and monetary authorities do. In today's uncertain financial climate, doing as central banks do, not as they say, is a strategy worth considering.

via http://ift.tt/1VTQJaP BullionStar

Submitted by John Rubino via DollarCollapse.com,

The list of heavy hitters who are saying bad things about this world and its financial markets – while acting aggressively on their pessimism – is growing to alarming proportions. A few examples:

Stan Druckenmiller: The bull market is exhausted; move to gold

(MineWeb) – Legendary investor Stan Druckenmiller, founder of Duquesne Capital Management LLC, told the Sohn Investment Conference in New York last week that he is bullish on gold and bearish on the stock market. Gold, he told the conference, “is our largest currency allocation.”

 

Druckenmiller recommended that investors sell their equity holdings. “The bull market is exhausting itself,” he told the conference. A major factor has been the Federal Reserve’s easy money policy, which has resulted in “reckless” corporate behavior.

 

Growing corporate debt is increasingly used for financial engineering, rather than in R&D that could lead to productivity improvements, Druckenmiller said. According to him, from 2012 to 2015, use of debt for U.S. nonfinancial firms for stock buybacks and M&A increased from $1.25 trillion to $2 trillion, while debt for R&D and office equipment grew from $1.55 trillion to only $1.8 trillion.

 

“The corporate sector today is stuck in a vicious cycle of earnings management, questionable allocation of capital, low productivity, declining margins and growing indebtedness,” Druckenmiller added.

 

The slowing Chinese economy as another reason to sell equities, according to Druckenmiller. He believes that stimulus measures by China have “aggravated the overcapacity in the economy.” While he had hope two years ago that the Chinese were willing to accept the tradeoff of a slowdown to gain reform, the Chinese “have opted for another investment-focused fiscal stimulus, which may buy them some time but will exacerbate their problem. They do not need more debt and more houses.”

 

Instead, Druckenmiller has made a move to gold. “It has traded for 5,000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates,” he said. “Some regard it as a metal, we regard it as a currency, and it remains our largest currency allocation,” he added. Among his investments are holdings in the SPDR Gold Trust.

 

————————————-

 

A Bearish George Soros Is Trading Again

(Fox Business) – Worried about the outlook for the global economy and concerned that large market shifts may be at hand, the billionaire hedge-fund founder and philanthropist recently directed a series of big, bearish investments, according to people close to the matter.

Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold miners, anticipating weakness in various markets. Investors view gold as a haven during times of turmoil.

 

Mr. Soros’s recent hands-on approach reflects a gloomier outlook than many. His worldview darkened over the past six months as economic and political issues in China, Europe and elsewhere have become more intractable. While the U.S. stock market has inched back toward records after troubles early this year and Chinese markets have stabilized, Mr. Soros said he remains skeptical of the Chinese economy, which is slowing.

 

The fallout from any unwinding of Chinese investments likely will have global implications, Mr. Soros said.

 

“China continues to suffer from capital flight and has been depleting its foreign currency reserves while other Asian countries have been accumulating foreign currency,” Mr. Soros said in an email. “China is facing internal conflict within its political leadership, and over the coming year this will complicate its ability to deal with financial issues.”

 

Mr. Soros also argues that there remains a good chance the European Union will collapse under the weight of the migration crisis, continuing challenges in Greece and a potential exit by the United Kingdom from the EU.

 

“If Britain leaves, it could unleash a general exodus, and the disintegration of the European Union will become practically unavoidable, ” he said. Still, Mr. Soros said recent strength in the British pound is a sign that a vote to exit the EU is less likely.

 

Mr. Soros’s bearish firm bought over 19 million shares of Barrick Gold Corp. in the first quarter, according to securities filings, making it the firm’s largest stockholding at the end of the quarter. That position has gained more than $90 million since the end of the first quarter. Soros Fund Management also bought a million shares of miner Silver Wheaton Corp. in the first quarter, a position that has increased 28% so far in the second quarter.

 

The last time Mr. Soros became closely involved in his firm’s trading: 2007, when he became worried about housing and placed bearish wagers over two years that netted more than $1 billion of gains.

————————————-

 

If the Markets Crash Then Carl Icahn Could Win Big

(Barrons) – If financial markets crash, one of the biggest beneficiaries could be billionaire investor Carl Icahn.

An investment fund run by the 80-year-old Icahn had a net short position of 149% at the end of the first quarter. Icahn is considerably more bearish than he was at the end of 2015, when the fund’s net short position was 25%. A year ago, the fund had a net long position of 4%. It’s rare to see a fund outside a dedicated short fund with such a large bearish stance.

 

Asked about the big bearish stance, Icahn Enterprises CEO Keith Cozza said on the conference call that “Carl has been very vocal in recent weeks in the media” about his negative views. “We’re much more concerned about the market going down 20% than we are it going up 20%. And so the significant weighting to the short side reflects that.” Icahn was not on the call.

————————————-

 

The Sam Zell Indicator – Time to Get Out of Real Estate?

(Value Walk) – Talk about exquisite timing.

Even today, a decade after the fact, the leveraged buyout of Equity Office Properties Trust remains one of the largest of all time: $36 billion for nearly 600 office buildings in New York, Washington D.C. and dozens of the nation’s largest cities.

 

But in late 2006, some wondered if the billionaire who sold the REIT was being a little rash. After all, the real estate boom was in full swing, and the S&P 500 was primed to hit new all-time highs. “Is he cashing out too early?” asked a Bloomberg headline when the deal was announced.

We all know the answer, of course.

 

Billionaire Sam Zell deftly sidestepped the coming real estate carnage. Then, with prices at generational lows a few years later, Zell bought hundreds of apartment complexes at dirt-cheap prices.

 

And today? Well, that’s the ominous part…

 

Once again, Zell is selling his real estate holdings. Last fall, he unloaded a quarter of his portfolio, buildings totaling about 23,000 rental apartments, to Starwood Capital Group for more than $5 billion.

 

Zell next sold off apartment buildings in South Florida and Denver, with complexes in Phoenix, Boston and other metro areas expected to be sold before the year is out.

 

“No one has ever accused me of not being a realist,” Zell told CNBC’s talking heads recently.

Of course for every seller there has to be a buyer, so to the extent that these guys are bearish, an equal amount of optimistic capital disagrees with their assessment. Still, between Soros, Druckenmiller, Icahn and Zell there’s about a thousand years of successful, audacious experience, so at a minimum their sudden bearishness should be a comfort to smaller players who have reached the same conclusion.

The fact that they see gold as the antidote to crashing financial markets is also reassuring for long-suffering gold bugs.

If these and the several other big names now saying scary things (see Bill Gross’s supernova comments) are right, the short stocks/long gold trade is finally about to pay off.

via http://ift.tt/1ZJkKcD Tyler Durden

When it comes to Donald Trump and his bid for the presidency, what has become a recurring theme is that at every step along the way, people have underestimated him.

Nobody gave The Donald a real shot at lasting very long in the Republican primaries, let alone outlasting the establishment favorite Jeb Bush – that alone sent everyone's head on a swivel. After that, nobody gave Donald a real chance to finish off the race against Ted Cruz and John Kasich, everyone kept waiting for Trump to trip over his own comments or tweets, but that time never came. The establishment got so concerned that an alliance was even brokered between Cruz and Kasich in order to make one last effort to stop Trump, and once again that effort failed miserably.

Now that Trump is presumably going to be the GOP candidate that faces off against Hillary (assuming Clinton doesn't somehow lose superdelegates to Sanders during the convention or get indicted first) for the presidency, the media once again is framing Trump as the significant underdog.

The latest narrative as reported by The Hill is that Trump will struggle to find anyone to campaign for him, or anyone with a "name for themselves" at least. It is pointed out that Clinton plans to send all of the heavy hitters out to campaign, a literal establishment All-Star team. With the likes of Michelle Obama, President Obama, Bill Clinton, and Elizabeth Warren out there advocating to the masses for Hillary, how could it be humanly possible for Trump to prevail in November.

After all, no big name Republicans have signed on to back Trump, at least not in earnest. The war hero comments about John McCain have pissed him off to the point where Trump can't rely on that support, Mitt "trickle down racism" Romney has already made it known where he stands on the matter of supporting Trump, and former hopefuls Ted Cruz and Marco Rubio have been lukewarm on Trump at best, and likely won't sign up to truly be a friend to the Trump campaign during the summer and fall.

So who is left to help Trump? The Hill brings up New Jersey governor Chris Christie as one option, although Christie's approval has been down in his own home state recently. Other options may be Alabama Senator Jeff Sessions or Newt Gingrich, but those aren't the heavy hitters that Trump would necessarily look at and gain confidence that they're out there campaigning, and even Gingrich recently took some shots at Trump for the Judge Curiel comments. 

Trump's family of course will be out advocating, daughter Ivanka seems to have some appeal to voters, but not likely to move the needle much as everyone heads to the polls.

In an email to The Hill Trump spokeswoman Hope Hicks said that Trump will have a host of campaign surrogates.

"We have many such surrogates, such as Governor Chris Christie, Senator Jeff Sessions, Former Speaker Newt Gingrich and many more" said Hicks.

Even Republican strategists are confused. Kevin Madden, a strategist who served as an adviser to Romney during his bid (so you know Madden knows precisely what he's doing…) called Trump's surrogates "the Trump Green Room brigade", and said that too many of Trump's supporters rely on Trump's twitter feed to figure out what to say. "They're like independent contractors. And it's not a seamless and coordinated response. It's a mishmash of comments." said Madden.

However it is that "mishmash" of comments, and "uncoordinated response" by Trump's followers that has defeated any and all challenges thus far in the race for the White House. Trump has been counted out from the moment he announced that he was running, and it would be wise to understand that like it or not, politics as usual is not how Trump is conducting himself or his campaign.

The point is this, it may not matter what kind of establishment All-Star team Clinton assembles to go give speeches on her behalf, the country is fed up with the establishment, and so far, Trump has been the answer to that frustration.

via http://ift.tt/1tqAQhv Tyler Durden

 

.

 

They can blather on and on that there is no such thing as radical Islamic extremism, gun control is a pancea (anybody looked at Frances gun control laws?) and the LGBT culture is embraced by Islam…yadda yadda yadda

In the end the bottom line is this: This whole “junior varsity” ISIS phenomena is something that emerged on their watch.

They droned them, they own them.

 

.

via http://ift.tt/1S1wnpo williambanzai7

This won't end well…

Source: Contra Corner blog

As Credit Bubble Bulletin's Doug Noland concludes today after a deep dive in the Flow Of Funds data…

Credit Bubbles survive only so long as ample new Credit is forthcoming.

 

Asset Bubbles persevere only so long as new “money” flows readily into the asset class and prices continue to inflate. I have argued that the current Bubble is deeply systemic, impacting virtually all asset classes. Undoubtedly, however, the most spectacular Bubble excesses continue to unfold throughout global bonds and fixed-income.

 

I can appreciate Bill Gross discussing a $10 TN “supernova” that’s going to explode catastrophically “one day”. I can also respect legendary speculator George Soros’ decision to return to active trading with a host of bearish views and bets he expects to pay off one day soon.

 

Gross and Soros are examining the same world as we are and must be in similar utter disbelief at what has transpired. Things turn notoriously Crazy near the end. We have witnessed Historic Crazy.

And even central bankers are getting anxious (as The FT reports)…

"A small change in central bank interest rates risks triggering an abrupt reversal in global markets, in echoes of the last financial crisis, the head of the German Bundesbank has warned.

 

In his latest warning on the unwanted side effects of persistently low interest rates, Jens Weidmann said investors and asset managers could become ‘increasingly nervous’ in a world stuck with near negative rates as it raised the possibility ‘of a sudden hike in risk premiums’.

 

He said monetary policymakers’ attempts to issue forward guidance hinting that rates will stay lower for longer, and lengthy aggressive bond-buying, had ignored consequences for financial stability…"

via http://ift.tt/1UKprBw Tyler Durden

As the man who perhaps best rode the coat-tails of an ever-increasing wave of American credit expansion exceptionalism (only to come undone in recent times as that game ends), it is no surprise that Warren Buffett explained in February that "for 240 years it’s been a terrible mistake to bet against America, and now is no time to start." We don't mean to rain on his parade too much, but the following charts suggest "nothing lasts forever" and time is ticking…

Source: The Burning Platform

As we noted previously, history did not end with the Cold War and, as Mark Twain put it, whilst history doesn’t repeat it often rhymes. As Alexander, Rome and Britain fell from their positions of absolute global dominance, so too has the US begun to slip. America’s global economic dominance has been declining since 1998, well before the Global Financial Crisis. A large part of this decline has actually had little to do with the actions of the US but rather with the unraveling of a century’s long economic anomaly. China has begun to return to the position in the global economy it occupied for millenia before the industrial revolution. Just as the dollar emerged to global reserve currency status as its economic might grew, so the chart below suggests the increasing push for de-dollarization across the 'rest of the isolated world' may be a smart bet…

 

The World Bank's former chief economist wants to replace the US dollar with a single global super-currency, saying it will create a more stable global financial system.

"The dominance of the greenback is the root cause of global financial and economic crises," Justin Yifu Lin told Bruegel, a Brussels-based policy-research think tank. "The solution to this is to replace the national currency with a global currency."

via http://ift.tt/1XhDlyt Tyler Durden

Submitted by David Stockman via Contra Corner blog,

There is a deep irony embedded in the Fed’s savage assault on savers and its delusional doctrine of interest rate repression. While this actually results in monumental windfalls to speculators and the one percent, it’s all justified in the name of boosting the labor market and the wage bill.

So the chart in Jeff Snider’s nearby post is especially salient. It shows that all this money printing has been for naught. Notwithstanding the 9X eruption of the Fed’s balance sheet from $500 billion at the turn of the century to $4.5 trillion today, growth in the most basic measure of labor input—-total hours worked——has come to a grinding halt.

Compared to labor hours growth of nearly 3% annualized during the Reagan expansion of the 1980s and nearly 2% during the start-and-stop stagflationary economy of the 1970s, labor hours growth over the two boom-and-bust cycles since the Fed went full frontal on money printing in December 2000 has averaged just 0.15% per annum.

Stated in aggregate terms, during the 10-year expansion between 1980 and 1990, labor hours employed in the US economy grew by 23.5%. By contrast, during the last 15 years combined, labor hours employed have risen by only 2.3%.

Needless to say, this dismal outcome is not for want of potential labor supply. At the turn of the century, the civilian population aged 16 to 65 years was 177 million. That number has since grown to 205 million, meaning that the potential labor pool grew by 16% or nearly 7X faster than hours employed.

These figures also stick a fork in the Fed’s  blind fixation on the U-3 unemployment rate and the nonfarm payroll numbers. Both are a relic of a half-century ago world of mines, factories, warehouses and retail shops based on a 40+ hour workweek on a year round basis.

By contrast, in today’s world of flexible just-in-time production, hours-based labor scheduling and gig-based employment patterns, there is really no such standardized labor unit as a “job”.

Likewise, the BLS conventions for counting as “employed” anyone on a payroll for even a few hours per week, and omitting from the labor force denominator tens of millions of potential workers not actively looking for jobs at the moment of the surveys, mean that its headline series are essentially noise.

Most certainly they do not validly measure economic “slack” in the labor force and therefore the degree to which the Keynesian bathtub of “potential GDP” is less than filled to the brim.

The silliness of the Fed’s targets is underscored by the graph below, which shows that the nonfarm economy is now employing only 15 billion more labor hours than it did in the year 2000. By contrast, assuming a standard work year of 2000 hours, the 28 million increase of the population 16-65 years old theoretically was capable of producing 56 billion more labor hours.

So only 27% of those potential hours were actually absorbed by the nonfarm economy.

Likewise, as the jobs mix in the payroll report has shifted increasingly to what we have called the Part-Time economy of jobs in bars, restaurants, hotels, recreational venues, retail stores, temp agencies and household services, it has become self evident that the job count of 40 million workers in these categories has nothing to do with economic “slack” in the work force.

That’s because “jobs” in these categories average only about 27 hours per week of paid employment. On an annualized basis that’s a 1400 hour work year, meaning the Part-Time Economy depicted below generates about  56 billion labor hours annually. Yet a standard work year for these workers would amount to 80 billion labor hours.

The point is that without any change in the BLS headline numbers with respect to the U-3 unemployment rate or any increase in the nonfarm payroll total, there is 24 billion unutilized labor hours in this segment alone that could supplied to the US economy.

Now that’s “slack” and then some. It is virtually inconceivable that the tens of millions of hand-to-mouth workers in these jobs would not take an additional 5 hour or even 10 hours per week if offered at current wage rates. And that represents 10 to 20 billion additional labor hours.

So the headcount-based metrics of the BLS are useless for establishing monetary policy targets; and the occupants of the Eccles Building couldn’t do much about achieving a better, more modern hours-based target, anyway.

That’s because the true labor utilization rate and the actual amount of “slack” in the US economy  is due to dozens of structural factors that the Fed has no ability to impact. Many of these are supply-side factors such as the doubling of the disability rolls during that period and the explosion of student loans and grants, which took billions of potential labor hours out of the economy.

Needless to say, these forces had nothing to do with that imaginary ether called “aggregate demand” by the Keynesians, nor could they be reversed by ultra-low interest rates.

At the same time, the off-shoring of manufacturing labor due to the China Price and back office service labor due to the India Price did reduce the demand for domestic labor by tens of billions of hours. But that was due to high US costs and labor rates, not high interest rates or anything else the Fed could impact.

Likewise, the decision of some spouses to work in the unmonetized economy rearing children and maintaining households is a function of culture and demographics, not interest rates. And it varies over time in ways that the central bank cannot anticipate, measure or impact.

In all, less than 60% of the 410 billion potentially available labor hours among the 16-65 year old population is employed in the monetary economy. And when you adjust for more than 14 billion hours supplied by the over 65 populations, which is included in the graph above, only 56% of available labor hours among the working age population are employed.

The point is that whether the hours based “employment rate” of the non-retired adult population should be 50% or 70% rather than the current 56% level is dependent on a plentitude of factors which totally overwhelm monetary policy.

For instance, shifting the current $1 trillion of annual payroll tax levies to a consumption tax would bring billions of additional labor hours into the US economy by changing the incentives of employers and employees alike.

By sharply reducing employment costs in sectors which compete with off-shored goods and services, it would increase the demand for domestic labor hours; and on the supply side it would improve the trade-off between work and welfare for low wages workers.

By the same token, on the margin, the current trend toward sharp increases in state and city minimum wages is reducing the demand for labor hours, and accelerating the substitution of automation and robots for low wage labor.

At the end of the day, there is no accurate way to measure full employment in an hours based economy, nor is it an especially appropriate target for public policy.

In fact, the labor hours utilization rate is an outcome. It is the happenstance result of the unfathomable interactions of taxes, welfare, trade, economic regulation, cultural preferences, demographics and the underlying efficiency and entrepreneurial dynamics (or lack thereof) of the market economy.

Even then, the Fed’s claim that the Humphrey-Hawkins Act makes them do it is nonsense. The statute is purely aspirational and content free on the matter of “maximum employment”.

The fact that the Fed even bothers with a U-3 target in the range of 5% is purely ritualistic and vestigial. It is self-evidently meaningless as a measure of economic “slack” in today’s globalized and sliced and diced labor markets. And the matter of whether the instruments of the state should be used to encourage citizens to study or travel rather than work, or to take disability payments rather than supply productive labor, is a matter for Congress to decide, not our unelected monetary politburo.

Forget JM Keynes, Paul Samuelson and James Tobin. The fact that the U-3 unemployment rate was in fashion among the Keynesian economists of the day when Humphrey-Hawkins was enacted in 1977 is little more than a historical curiosity.

That their primitive and outmoded economic model supplied the narrative and authority for the Act’s so-called “dual mandate” simply proves a variation of Keynes’ famous observation. Namely, that the purportedly practical men and women who run the Fed “are merely slaves of some defunct economist”.

In fact, today’s Fed could easily jettison its mechanical, misleading and obsolete U-3 based unemployment target and most of the other jobs series of the BLS. It could even be truthful and admit that 95% of what drives the real labor metric——-the labor hours utilization rate——— is beyond the reach of monetary policy; and that much of what forms how much “slack” we have—-like early retirement, late retirement, homemaking and child care, college enrollment—— is not even the business of government.

Needless to say, that would essentially put it out of the macroeconic management business and dramatically reduce its reason for massive intrusion on the money and capital markets. Indeed, it would imply that its real job is to provide back-up liquidity to the banking system at a penalty spread above market determined interest rates and yield curves.

It just so happens that this was the original mission assigned to it by its author, Congressman Carter Glass, in the 1913 Act which created the Fed.

The Fed that Carter Glass envisioned only needed to recognize good collateral when posted by member banks seeking liquidity loans. It did not need to know what “full employment” is in the context of 410 billion potential labor hours or whether there was too much or too little “slack” or whether the bathtub of potential GDP was filled to the brim or not.

via http://ift.tt/1UM5bfY Tyler Durden

Over the past month, between Stan Druckenmiller, Carl Icahn and most recently George Soros, it has become positively cool to be a billionaire who has turned their back on the rigged market, and has decided to either get out of stocks or go outright net short (Soros and Icahn), while concurrently buying gold.  Over the weekend, yet another billionaire made waves, when Paul Singer told Institutional Investor in an interview that not only has the Fed’s “monetary extremism” hindered economic expansion, blasting monetary policy as adding to not only the world’s debt but its social problems (including lack of wage growth), warns that “at the moment we’re either in a stage of stagnation or rollover, possibly in the early stages of a global recession”, predicts that “it’s a very dangerous time in the financial markets” and concludes that “we’re very bullish on gold, which is the anti–paper money, of course, and is underowned by investors around the world.“

As Institutional Investor writes, one of the
keys to Elliott’s success has been Singer’s ability
to avoid losing money during market dislocations. “If you
break even in a bear market or crash or financial crisis,
you’re way ahead of the game,” he says. The legendary
investor, who will be receiving an IInvestor Lifetime Achievement Award at the firm’s annual Hedge Fund Industry Awards dinner on June 23 at the
Mandarin Oriental in New York, recently spoke with
Michael Peltz about the
challenges he sees in the current global macroeconomic
environment.

He was very, very bearish.

Why have developed economies been unable to achieve
the growth they had prior to the global financial
crisis?

I believe the reason is a bad policy mix due to an
unwillingness on the part of all of the governments of the
developed world to take the normal and obvious fiscal steps to
increase growth. Instead, in the absence of pro-growth policies
on the fiscal side, the sole support in the developed world has
been monetary policy. There’s been a more or less
universally practiced set of monetary policies consisting of
zero and now negative interest rates and so-called quantitative
easing — various forms of asset buying. It started out as
all bond buying, but now it’s leaked into equities. The
result of all that — I call it monetary extremism —
is that the economies have held up and had some growth, but
that growth has been tepid, with the biggest gains going to
those who own financial assets while wage growth has been
stagnant.

What has been the biggest impact of monetary
extremism?

The major impact has been this exacerbating effect on
inequality. The large rise in asset prices in conjunction with
continued sluggish growth is a terrible mixture, and it is part
of the equation of why you have this bubbling-up edginess in
society among the middle and working class in the developed
world because of underemployment. The cure for the crisis
— for the debt crisis, the financial crisis — has
been deemed by the developed world governments to be more debt.
There has not been a deleveraging. And after seven and a half
years and counting of this mix of policies, at the moment
we’re either in a stage of stagnation or rollover,
possibly in the early stages of a global recession. So I think
it’s a very dangerous time in the financial markets.

Have policymakers relied too much on central banks
to fix the global economy post-GFC?

Well, that’s a great question, because I’d go
further. The lack of humility among central bankers —
which is proven by the combination of no apology and no
understanding of the financial system precrisis, and by
continuously, significantly erroneous projections postcrisis
— is incredible. At the same time, presidents and prime
ministers have been perfectly willing, desirous even, of
letting the central bankers continue their emergency
policies. They are grateful to the
central banks for holding up the world, which gives them
— the presidents and prime ministers — the excuse
not to engage in pro-growth policies. So they can stand there
and bash capitalists or bankers and get votes that way,
because it distracts attention from their own failures. But
bashing capitalism is ultimately dangerous. The reason
policymakers think it works is because seven and a half years
and counting, the world hasn’t fallen apart and they
haven’t been called to task.

What can policymakers do to avoid another
crisis?

Policymakers can transition the financial system into
being sounder and more transparent, and transition macro
policy away from quantitative easing. Stop the bond buying,
stop the equity buying, but only while simultaneously
implementing pro-growth policies in the tax, regulatory and
structural areas. If not actually cutting taxes, making
business formation easier and making their regulatory
environments attractive to business location and expansion
— including improvements in trade policy, education
policy and job training and retraining. Raising interest
rates and stopping QE without structural, pro-growth reforms
would be negative, creating an instant recession. So you have
to do both, together.

What can investors do?

We’re very bullish on
gold, which is the anti–paper money, of course, and
is underowned by investors around the world. And we are very
skeptical about markets. We hedge every equity position.
We’re not in the mood to be surprised — surprised
in the sense of losing large amounts of money — ever,
but in particular now with this extraordinary and
unprecedented situation where the stability of financial
markets is so dependent on confidence in policy makers and
central bankers.

I believe the reason is a bad policy mix due to an
unwillingness on the part of all of the governments of the
developed world to take the normal and obvious fiscal steps to
increase growth. Instead, in the absence of pro-growth policies
on the fiscal side, the sole support in the developed world has
been monetary policy. There’s been a more or less
universally practiced set of monetary policies consisting of
zero and now negative interest rates and so-called quantitative
easing — various forms of asset buying. It started out as
all bond buying, but now it’s leaked into equities. The
result of all that — I call it monetary extremism —
is that the economies have held up and had some growth, but
that growth has been tepid, with the biggest gains going to
those who own financial assets while wage growth has been
stagnant.

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Last month we reported that citizens in Venezuela had finally become so desperate for food that angry mobs flooded the streets and looted all of the supermarkets that were rumored to still have anything left on their shelves.

Not long after, tired and hungry protesters took to the streets of Caracas once again, this time marching toward the presidential palace as they chanted "No more talk – we want food!." The mob was able to get within about six blocks of the palace before police in riot gear blocked the way, and began to shoot tear gas into the crowd to disperse the protest.

And now, as president Maduro remains defiant on allowing a referendum to take place to vote on his ouster, food riots and violent looting are taking place every day in a stark reminder of just how far the socialist utopia has fallen.

More than a quarter of the estimated 641 protests in Venezuela last month were over food, a figure that has risen every month this year, and the enormous social unrest in the country is something that should keep Maduro awake at night much more than the politics of it all. Despite hours in lines, Venezuelans increasingly find that coveted supplies of subsidized flour and rice run out before they can buy them. Many people are skipping meals, getting by on mangoes stripped from trees – or taking matters into their own hands and doing things such as rushing stopped food trucks and stealing whatever food is available as we showed last week.

"We're not eating. People are desperate for a looting." said Miza Colmenares, a mother of three who had spent the night in line at a supermarket and had not eaten since the previous day when she had eggs for breakfast.

From Reuters

Supermarkets have become flashpoints across Venezuela, one of the world's most violent countries.

 

More than 10 lootings occur every day now, according to the Venezuelan Observatory of Violence, and are increasing in the usually more insulated capital.

 

More than a quarter of the 641 protests last month were for food, according to a tally by the Venezuelan Observatory of Social Conflict, a figure that has risen every month this year.

 

Venezuela's angry streets are arguably a bigger threat for Maduro than the political opposition, which is pushing to remove him via a recall referendum this year. One recent food protest came within blocks of the Miraflores presidential palace.

 

It is a remarkable turnaround for a government which prided itself on social welfare programs such as Cuban-staffed medical posts and subsidized supermarkets. It won elections time-and-time again thanks to devoted support from Venezuela's poor.

 

But with their beloved former president, Hugo Chavez, dead for three years and the economy deteriorating rapidly, many former "Chavistas" have turned on Maduro. "Behind all this is the president, the rat in his palace, eating riches while we fight to buy pasta," said homemaker Maria Perez, 31, once a Chavez supporter, at the El Valle supermarket.

As the citizens slowly come to the realization that the socialist government that promised everyone they'd always be taken care of can't possibly follow through on those empty promises, the citizens have gone to a survival of the fittest type attitude toward the situation.

"HOODED AND ARMED" For months now, groups have ransacked delivery trucks that crash or suffer flat tires. But in recent weeks, there has been an increase in frustrated shoppers storming supermarkets after food runs out as well as cases of communities or armed gangs organizing lootings, sometimes reportedly to re-sell the goods.

 

In the small roadside town of Tacuato in the remote Paraguana peninsula late last month, residents and delinquents frustrated after spending the night in line for no food decided to loot the next passing truck.

 

"If you have a son who says, 'Mommy I want my bottle,' and you don't have milk to give him, in a moment like that you don't think of anything else and you grab everything you can for your family," said one woman, asking to remain anonymous to avoid compromising her job.

 

Also in late May, a group stormed a small store in the Andean state of Tachira after the owner declined to sell all the corn flour she had, preferring to keep some for the next day.

 

"They waited for nightfall, watched me get on the bus … and some 70 people came up, hooded and armed," said the store owner, who asked to remain anonymous for fear of retaliation.

 

They stole a TV, cash, and eight bags of flour, said the owner, who has not dared re-open her store.

As we noted the violence isn't just among the looters vying for scraps of food, police also attacked and robbed journalists covering recent protests in Caracas, and as Reuters further reports, a policeman is now being charged in Tachira after a woman was gunned down following a looting attempt earlier this month.

"We're going to tire of this. There will be something like Caracazo for sure" said Yubisai Blanco, as she clutched her two bags of pasta after waiting seven hours in line.

Caracazo references a time when hundreds died during riots and looting sparked by yet another economic crisis in the country.

The swift deterioration of a nation should be a very clear wake up call for everyone, even in places, or perhaps especially in places such as America where the prevailing attitude toward this type of social unrest is "it won't happen here." All it takes is a slight disruption in the supply chain of many supermarkets and millions of Americans will be without food very quickly, it's important to always keep that in mind. Being prepared is always in everyone's best interest.

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As reported earlier, Donald Trump tweeted that since Obama did not mention the words “radical islamic terrorism” in his address to the nation today in the aftermath of the deadliest mass shooting in US history, that he should step down. Moments ago, using perhaps the reaction to the tweet as a trial balloon to shape his official position, he released the following statement on the terrorist attack, in which he openly calls upon Obama to step down because the president “disgracefully refused to even say the words ‘Radical Islam’”, and called on Hillary to “get out of this race for the presidency” if she too can not say those two words.

Trump’s full statement below

Last night, our nation was attacked by a radical Islamic terrorist. It was the worst terrorist attack on our soil since 9/11, and the second of its kind in 6 months. My deepest sympathy and support goes out to the victims, the wounded, and their families.

In his remarks today, President Obama disgracefully refused to even say the words ‘Radical Islam’. For that reason alone, he should step down. If Hillary Clinton, after this attack, still cannot say the two words ‘Radical Islam’ she should get out of this race for the Presidency.

If we do not get tough and smart real fast, we are not going to have a country anymore. Because our leaders are weak, I said this was going to happen – and it is only going to get worse. I am trying to save lives and prevent the next terrorist attack. We can’t afford to be politically correct anymore.

The terrorist, Omar Mir Saddique Mateen, is the son of an immigrant from Afghanistan who openly published his support for the Afghanistani Taliban and even tried to run for President of Afghanistan. According to Pew, 99% of people in Afghanistan support oppressive Sharia Law.

We admit more than 100,000 lifetime migrants from the Middle East each year. Since 9/11, hundreds of migrants and their children have been implicated in terrorism in the United States.

Hillary Clinton wants to dramatically increase admissions from the Middle East, bringing in many hundreds of thousands during a first term – and we will have no way to screen them, pay for them, or prevent the second generation from radicalizing.

We need to protect all Americans, of all backgrounds and all beliefs, from Radical Islamic Terrorism – which has no place in an open and tolerant society. Radical Islam advocates hate for women, gays, Jews, Christians and all Americans. I am going to be a President for all Americans, and I am going to protect and defend all Americans. We are going to make America safe again and great again for everyone.

* * *

And then, moments later, he tweeted the following for additional color:

What has happened in Orlando is just the beginning. Our leadership is weak and ineffective. I called it and asked for the ban. Must be tough

— Donald J. Trump (@realDonaldTrump) June 12, 2016

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