Xi’s Tinkering Risks China Hard Landing

There’s been a lot of over-hyped talk of China tightening and deleveraging over the past few weeks. Sure, inter-bank rates and corporate bond yields have significantly increased over the past year. But if you include things such as central bank injections into the inter-bank market and unsterilised foreign exchange purchases – where the central bank buys foreign currency to maintain the partial dollar peg – it’s clear there’s been no net tightening at all.

As for deleveraging, figures released on China lending over the weekend should be enough to put that to bed. January lending was the highest in four years. More worryingly, total societal financing – a broad measure of credit including shadow financing – increased to 2.58 trillion yuan, smashing analyst estimates of 1.9 trillion yuan. China remains addicted to credit despite the racheting up of rates. 

The fact is that China’s President, Xi Jinping, hasn’t done nearly enough to deflate the country’s credit bubble. He needs to do three things, and fast: 1) allow defaults of wealth management products so risk can be properly priced 2) accelerate structural reforms laid out late last year 3) lower Beijing’s bottom line for GDP growth from 7% to a more realistic 6%. Without these initiatives, Xi risks a much larger economic blow-up in the not-too-distant future.

For investors, the question isn’t whether China’s economy will slow down from here, but to what degree. And more importantly, how much of it is priced into markets. In Asia Confidential’s view, China’s stock market, down two-thirds from the 2007 peak, is already reflecting a lot of (not all) of the bad news. But key China proxies, including the Hong Kong and Australian stock markets as well as large iron ore miners, aren’t and remain most at risk from the coming China downturn.  

No deleveraging here
The Telegraph columnist Ambrose Evans-Pritchard wrote a recent piece on China which garnered much attention. Headlined, “World asleep while China tightens deflationary vice”, he stated:

“China’s Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.

The balance of evidence is that the most powerful Chinese leader since Mao Zedong aims to prick China’s $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.”

Great prose but the evidence that Evan-Pritchard provides to support his case is thin, at best. He acknowledges that China blinked in January when it stepped in to cover liabilities of $500 million for the trust fund, “China Equals Gold No. 1” (an unfortunate name, to say the least).

But Evans-Pritchard goes on to suggest that the evidence for Xi getting serious about deflating China’s credit bubble can be found with the tightening of rates. He cites the central bank lifting of the 7-day repo rate, a gauge of inter-bank liquidity, by 200 basis points to 5.21% (since then, it’s dropped to 4.4%). 

The columnist also cites the jump in corporate bond yields. Thus, the yield of corporate AA 1-year bonds has increased 272 basis points to 7.15% since June.

Evans-Pritchard then quotes several stock brokers about how China intends to raise interest rates right across the spectrum and this means that Xi is intent on popping the credit bubble.

In our view, the thesis is vastly overstated. Yes, repo rates and corporate bond yields have risen markedly. But both are coming off abnormally low bases and have only just began to normalise. 

Also, if you count net repo injections – central bank injections into the inter-bank market in order to provide liquidity – and unsterilised foreign exchange purchases, there is no net tightening in the system. China is still pumping money into the economy in an unsustainable manner.

Evans-Pritchard is on firmer ground when he talks about how the world is asleep to the potential fall-out from a China slowdown. Foreign loans to Chinese companies now total $1.1 trillion, posing a large risk to banking systems with exposure, particularly those in the UK, Hong Kong and Australia. We won’t go into the details here but it’s worth a read.

During the week, The Financial Times took Evans-Prtichard’s lead and ran with it in an article called “Chinese-style tapering eclipses US tapering in scale”. The article suggests the unwinding of monetary stimulus in China is greater in numerical terms than that of the U.S.. 

So, total societal financing in China fell to 7.1 trillion yuan in the second half of last year, from 10.2 trillion yuan in the first half. In other words, a net reduction of just over 3 trillion yuan.

The article then cites an analyst who suggests that China may now be entering a period of deleveraging.

Well, no. While the reduction in Chinese credit growth may be tapering, it certainly doesn’t fit the definition of deleveraging. The latter means reducing debt, particularly versus GDP.

And as the figures over the weekend on lending show, Chinese credit is still growing strongly, well above nominal GDP growth rates. In other words, debt to GDP is still rapidly increasing, not decreasing.

Thus, the January figures show Chinese banks lent 1.32 trillion yuan, beating a 1.1 trillion yuan forecast and more than 3x December’s level. It isn’t unusual for January lending to spike but this was the strongest month in four years.

More concerning was the total societal financing number. This figure increased to 2.58 trillion, way above analyst estimates of 1.9 trillion. 

China total financing - Jan2014

In sum, there’s no net tightening in China nor deleveraging at present, despite claims to the contrary. It doesn’t mean that there won’t be tightening or deleveraging in future, but that’s pure speculation at this stage.  

What Xi needs to do
What the weight of evidence indicates instead is that China’s President Xi Jinping has tinkered with policies to reduce the country’s credit dependency, but hasn’t done enough to make substantial inroads.

Let’s be clear: Xi inherited a credit bubble of gargantuan proportions. Chinese credit grew some $12 trillion, or 2x total GDP, in the four years prior to him coming to power. To put that into perspective, US bank credit grew around $1.5 trillion over the same period.

Given what he inherited, Xi had no good choices. He could choose to deflate the credit bubble and endure short-term pain. Or delay deflating until later and risk an even larger bubble developing and larger subsequent pop.

It’s not yet clear whether he’s chosen the former option but if he has, he certainly hasn’t acted decisively enough. And without hard choices, Xi risks a bigger economic fall-out later on.

So, what does Xi have to do to properly address the issue? There are three key things:

  1. He needs to allow defaults of wealth management products. Remember, these products are private loan management vehicles, which will often promise 12% returns or higher on assets. People have bought these products because they think the government stands behind these instruments. Xi needs to send a clear message that the government won’t stand behind these products. Only in this way can risk again be properly priced.
  2. He needs to speed up implementation of last year’s proposed reforms. There’s much talk that there are fiscal reforms coming soon. And deposit interest rate liberalisation will also happen quicker than expected. Bring them on. Reform is needed to re-balance China’s economy and propel the next phase of growth.
  3. It’s widely known that Beijing sees 7% GDP growth as the bottom line for growth, without risking social stability. We believe this needs to change to 6%. And in my view, if GDP growth fell to that level, it wouldn’t risk social stability. The key reasons are: i) China’s tight labor market means unemployment won’t be a major issue even at those lower levels ii) Xi has consolidated power and has a strong mandate for change. The government is paranoid about social stability but 7% GDP growth ain’t going to effect change; 6% will. 

These ideas will undoubtedly receive some push back. For instance, allowing defaults of trust fund products and the like may risk widespread defaults. My retort to this is that this is a possibility, but further government bail-outs will just delay and inflate the problem.

Structural reforms also have the potential to be a sharp drag on economic growth. Particularly if implemented at the same time as deflating credit. This is true. You could choose to deflate credit first, then roll out reforms. Doing both at once though makes some sense as it will take some time for reforms to filter through to real economy.

Lastly, some will see 6% GDP growth as a disaster scenario for China. Many government officials will see it as such. I’d suggest it isn’t though and it’s a realistic appraisal of the short-term pain needed to decrease China’s credit dependency and to put the economy on a more sustainable footing. And it’s not even close to a worst case scenario, where the credit bubble is inflated for a further year to two and then bursts. Under that scenario, 6% growth would be wildly optimistic.

What it means for investors
For investors, the key message is this: a China downturn is coming, one way or another. And the more that Xi Jinping tinkers with policy and fails to make hard decisions, the greater the probabilities of a sharp economic downturn.

Let’s assess the potential fall-out for China first. French bank, Societe Generale, says an economic hard landing would entail GDP growth troughing at 2%, with two quarters of contraction. That would result in a decline in China stocks of 30%. 

Let’s face it, Soc Gen’s scenario is guesswork. No-one really knows what a GDP trough would be in the event of a hard landing, or the ultimate impact on Chinese equities.

It’s important to recognise that China’s stock market is already down two-thirds from the peaks reached in 2007. At 8x this year earnings, it’s the second cheapest major market in Asia behind South Korea. A lot of the bad news is already priced into Chinese stocks.

In my experience though, the Chinese stock market doesn’t move on economic data or fundamentals, but policy change. This means that if the President gets serious in reducing credit, then the stock market should decline. Ironically, that would be a positive sign for the economy.

Conversely, if Chinese equities were to rise from here, that would indicate that the President is choosing to further inflate the credit bubble. That would be a bad sign for the economy.

Put simply, you should expect further pain in Chinese stocks from already low levels. But it could soon turn into a fabulous buying opportunity for long-term investors. I’d focus on sectors which will benefit in the “new” consumption-driven China, including consumer discretionary and staples, telecommunications and internet companies. Cheap ways to play the future of China, in other words. I like retailer, Giordano, telecoms giant, China Mobile, China Mengniu Dairy as well as internet play, Tencent, though expect to pick them all up at cheaper prices.

While Chinese stocks may have partially priced in a sharp downturn, many markets and sectors outside of China certainly haven’t. Take mining. There’s no doubt commodities and commodity-producing countries have started to feel the pain from declining demand growth from China. But the impact is likely far from finished.

Soc Gen suggests a China economic hard landing would lead to a 50% crash in copper prices. Again, that’s guesswork. But it’s undoubtedly right that China is the largest and most important consumer of most commodities.

In my view, iron ore is even more vulnerable than copper given the limited price correction thus far and the fact China is the key driver, accounting for around 50% of global consumption. If correct, Australian iron ore miner, Fortescue Metals, is an easy short.

Australia’s economy is particularly susceptible to a fall in metals. Mining is 9% of GDP, up from close to 1% in the late 1990s. If mining reverts back to below 3% of GDP over the next two years, that spells big trouble for Australia’s economy. It isn’t hard to foresee a deep recession starting next year. The Aussie dollar and Australian banks are both expensive and vulnerable to sharp corrections.

australian resources construction

Lastly, banks with direct Chinese exposure may be vulnerable. Hong Kong banks would have to be near the top of the list. China accounts for close to 30% of Hong Kong bank loans. Moreover, bank assets are now an astonishing 7x the size of Hong Kong GDP.

It’s a scary number that equates to the size of Iceland’s prior to its 2008 crisis. The circumstances are very different but Hong Kong banks are susceptible due to their exposure to China as well as a gigantic local property bubble (which the Chinese have helped inflate).

Incidentally, commentary on the fall-out from a China downturn to date has failed to make mention of the potential impact on global property markets. In Hong Kong, Australia, Canada and, to a lesser extent, Singapore, Chinese have been key investors over the past three years. 

It’s difficult to get any hard numbers on the extent of Chinese investment in the residential property (and other property segments) of these countries. But it’s substantial and any reduced Chinese investment would be keenly felt by residential developers and banks in these countries.

AC Speed Read

– There’s a lot of talk of China tightening and deleveraging, when neither has occurred.

– China’s President, Xi Jinping, hasn’t done nearly enough to deflate the country’s credit bubble. 

– If he doesn’t soon act to deflate credit, Xi risks a much larger economic blow-up in the not-too-distant future.

– To a large degree, China’s stock market has priced in a steeper economic downturn. But key China proxies, including Hong Kong and Australia, haven’t and remain most at risk from the coming China downturn.

This post was originally published at Asia Confidential:
http://ift.tt/1dXp26n


    



via Zero Hedge http://ift.tt/1gIX1UO Asia Confidential

Xi's Tinkering Risks China Hard Landing

There’s been a lot of over-hyped talk of China tightening and deleveraging over the past few weeks. Sure, inter-bank rates and corporate bond yields have significantly increased over the past year. But if you include things such as central bank injections into the inter-bank market and unsterilised foreign exchange purchases – where the central bank buys foreign currency to maintain the partial dollar peg – it’s clear there’s been no net tightening at all.

As for deleveraging, figures released on China lending over the weekend should be enough to put that to bed. January lending was the highest in four years. More worryingly, total societal financing – a broad measure of credit including shadow financing – increased to 2.58 trillion yuan, smashing analyst estimates of 1.9 trillion yuan. China remains addicted to credit despite the racheting up of rates. 

The fact is that China’s President, Xi Jinping, hasn’t done nearly enough to deflate the country’s credit bubble. He needs to do three things, and fast: 1) allow defaults of wealth management products so risk can be properly priced 2) accelerate structural reforms laid out late last year 3) lower Beijing’s bottom line for GDP growth from 7% to a more realistic 6%. Without these initiatives, Xi risks a much larger economic blow-up in the not-too-distant future.

For investors, the question isn’t whether China’s economy will slow down from here, but to what degree. And more importantly, how much of it is priced into markets. In Asia Confidential’s view, China’s stock market, down two-thirds from the 2007 peak, is already reflecting a lot of (not all) of the bad news. But key China proxies, including the Hong Kong and Australian stock markets as well as large iron ore miners, aren’t and remain most at risk from the coming China downturn.  

No deleveraging here
The Telegraph columnist Ambrose Evans-Pritchard wrote a recent piece on China which garnered much attention. Headlined, “World asleep while China tightens deflationary vice”, he stated:

“China’s Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.

The balance of evidence is that the most powerful Chinese leader since Mao Zedong aims to prick China’s $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.”

Great prose but the evidence that Evan-Pritchard provides to support his case is thin, at best. He acknowledges that China blinked in January when it stepped in to cover liabilities of $500 million for the trust fund, “China Equals Gold No. 1” (an unfortunate name, to say the least).

But Evans-Pritchard goes on to suggest that the evidence for Xi getting serious about deflating China’s credit bubble can be found with the tightening of rates. He cites the central bank lifting of the 7-day repo rate, a gauge of inter-bank liquidity, by 200 basis points to 5.21% (since then, it’s dropped to 4.4%). 

The columnist also cites the jump in corporate bond yields. Thus, the yield of corporate AA 1-year bonds has increased 272 basis points to 7.15% since June.

Evans-Pritchard then quotes several stock brokers about how China intends to raise interest rates right across the spectrum and this means that Xi is intent on popping the credit bubble.

In our view, the thesis is vastly overstated. Yes, repo rates and corporate bond yields have risen markedly. But both are coming off abnormally low bases and have only just began to normalise. 

Also, if you count net repo injections – central bank injections into the inter-bank market in order to provide liquidity – and unsterilised foreign exchange purchases, there is no net tightening in the system. China is still pumping money into the economy in an unsustainable manner.

Evans-Pritchard is on firmer ground when he talks about how the world is asleep to the potential fall-out from a China slowdown. Foreign loans to Chinese companies now total $1.1 trillion, posing a large risk to banking systems with exposure, particularly those in the UK, Hong Kong and Australia. We won’t go into the details here but it’s worth a read.

During the week, The Financial Times&nbs
p;
took Evans-Prtichard’s lead and ran with it in an article called “Chinese-style tapering eclipses US tapering in scale”. The article suggests the unwinding of monetary stimulus in China is greater in numerical terms than that of the U.S.. 

So, total societal financing in China fell to 7.1 trillion yuan in the second half of last year, from 10.2 trillion yuan in the first half. In other words, a net reduction of just over 3 trillion yuan.

The article then cites an analyst who suggests that China may now be entering a period of deleveraging.

Well, no. While the reduction in Chinese credit growth may be tapering, it certainly doesn’t fit the definition of deleveraging. The latter means reducing debt, particularly versus GDP.

And as the figures over the weekend on lending show, Chinese credit is still growing strongly, well above nominal GDP growth rates. In other words, debt to GDP is still rapidly increasing, not decreasing.

Thus, the January figures show Chinese banks lent 1.32 trillion yuan, beating a 1.1 trillion yuan forecast and more than 3x December’s level. It isn’t unusual for January lending to spike but this was the strongest month in four years.

More concerning was the total societal financing number. This figure increased to 2.58 trillion, way above analyst estimates of 1.9 trillion. 

China total financing - Jan2014

In sum, there’s no net tightening in China nor deleveraging at present, despite claims to the contrary. It doesn’t mean that there won’t be tightening or deleveraging in future, but that’s pure speculation at this stage.  

What Xi needs to do
What the weight of evidence indicates instead is that China’s President Xi Jinping has tinkered with policies to reduce the country’s credit dependency, but hasn’t done enough to make substantial inroads.

Let’s be clear: Xi inherited a credit bubble of gargantuan proportions. Chinese credit grew some $12 trillion, or 2x total GDP, in the four years prior to him coming to power. To put that into perspective, US bank credit grew around $1.5 trillion over the same period.

Given what he inherited, Xi had no good choices. He could choose to deflate the credit bubble and endure short-term pain. Or delay deflating until later and risk an even larger bubble developing and larger subsequent pop.

It’s not yet clear whether he’s chosen the former option but if he has, he certainly hasn’t acted decisively enough. And without hard choices, Xi risks a bigger economic fall-out later on.

So, what does Xi have to do to properly address the issue? There are three key things:

  1. He needs to allow defaults of wealth management products. Remember, these products are private loan management vehicles, which will often promise 12% returns or higher on assets. People have bought these products because they think the government stands behind these instruments. Xi needs to send a clear message that the government won’t stand behind these products. Only in this way can risk again be properly priced.
  2. He needs to speed up implementation of last year’s proposed reforms. There’s much talk that there are fiscal reforms coming soon. And deposit interest rate liberalisation will also happen quicker than expected. Bring them on. Reform is needed to re-balance China’s economy and propel the next phase of growth.
  3. It’s widely known that Beijing sees 7% GDP growth as the bottom line for growth, without risking social stability. We believe this needs to change to 6%. And in my view, if GDP growth fell to that level, it wouldn’t risk social stability. The key reasons are: i) China’s tight labor market means unemployment won’t be a major issue even at those lower levels ii) Xi has consolidated power and has a strong mandate for change. The government is paranoid about social stability but 7% GDP growth ain’t going to effect change; 6% will. 

These ideas will undoubtedly receive some push back. For instance, allowing defaults of trust fund products and the like may risk widespread defaults. My retort to this is that this is a pos
sibility, but further government bail-outs will just delay and inflate the problem.

Structural reforms also have the potential to be a sharp drag on economic growth. Particularly if implemented at the same time as deflating credit. This is true. You could choose to deflate credit first, then roll out reforms. Doing both at once though makes some sense as it will take some time for reforms to filter through to real economy.

Lastly, some will see 6% GDP growth as a disaster scenario for China. Many government officials will see it as such. I’d suggest it isn’t though and it’s a realistic appraisal of the short-term pain needed to decrease China’s credit dependency and to put the economy on a more sustainable footing. And it’s not even close to a worst case scenario, where the credit bubble is inflated for a further year to two and then bursts. Under that scenario, 6% growth would be wildly optimistic.

What it means for investors
For investors, the key message is this: a China downturn is coming, one way or another. And the more that Xi Jinping tinkers with policy and fails to make hard decisions, the greater the probabilities of a sharp economic downturn.

Let’s assess the potential fall-out for China first. French bank, Societe Generale, says an economic hard landing would entail GDP growth troughing at 2%, with two quarters of contraction. That would result in a decline in China stocks of 30%. 

Let’s face it, Soc Gen’s scenario is guesswork. No-one really knows what a GDP trough would be in the event of a hard landing, or the ultimate impact on Chinese equities.

It’s important to recognise that China’s stock market is already down two-thirds from the peaks reached in 2007. At 8x this year earnings, it’s the second cheapest major market in Asia behind South Korea. A lot of the bad news is already priced into Chinese stocks.

In my experience though, the Chinese stock market doesn’t move on economic data or fundamentals, but policy change. This means that if the President gets serious in reducing credit, then the stock market should decline. Ironically, that would be a positive sign for the economy.

Conversely, if Chinese equities were to rise from here, that would indicate that the President is choosing to further inflate the credit bubble. That would be a bad sign for the economy.

Put simply, you should expect further pain in Chinese stocks from already low levels. But it could soon turn into a fabulous buying opportunity for long-term investors. I’d focus on sectors which will benefit in the “new” consumption-driven China, including consumer discretionary and staples, telecommunications and internet companies. Cheap ways to play the future of China, in other words. I like retailer, Giordano, telecoms giant, China Mobile, China Mengniu Dairy as well as internet play, Tencent, though expect to pick them all up at cheaper prices.

While Chinese stocks may have partially priced in a sharp downturn, many markets and sectors outside of China certainly haven’t. Take mining. There’s no doubt commodities and commodity-producing countries have started to feel the pain from declining demand growth from China. But the impact is likely far from finished.

Soc Gen suggests a China economic hard landing would lead to a 50% crash in copper prices. Again, that’s guesswork. But it’s undoubtedly right that China is the largest and most important consumer of most commodities.

In my view, iron ore is even more vulnerable than copper given the limited price correction thus far and the fact China is the key driver, accounting for around 50% of global consumption. If correct, Australian iron ore miner, Fortescue Metals, is an easy short.

Australia’s economy is particularly susceptible to a fall in metals. Mining is 9% of GDP, up from close to 1% in the late 1990s. If mining reverts back to below 3% of GDP over the next two years, that spells big trouble for Australia’s economy. It isn’t hard to foresee a deep recession starting next year. The Aussie dollar and Australian banks are both expensive and vulnerable to sharp corrections.

australian resources construction

Lastly, banks with direct Chinese exposure may be vulnerable. Hong Kong banks would have to be near the top of the lis
t. China accounts for close to 30% of Hong Kong bank loans. Moreover, bank assets are now an astonishing 7x the size of Hong Kong GDP.

It’s a scary number that equates to the size of Iceland’s prior to its 2008 crisis. The circumstances are very different but Hong Kong banks are susceptible due to their exposure to China as well as a gigantic local property bubble (which the Chinese have helped inflate).

Incidentally, commentary on the fall-out from a China downturn to date has failed to make mention of the potential impact on global property markets. In Hong Kong, Australia, Canada and, to a lesser extent, Singapore, Chinese have been key investors over the past three years. 

It’s difficult to get any hard numbers on the extent of Chinese investment in the residential property (and other property segments) of these countries. But it’s substantial and any reduced Chinese investment would be keenly felt by residential developers and banks in these countries.

AC Speed Read

– There’s a lot of talk of China tightening and deleveraging, when neither has occurred.

– China’s President, Xi Jinping, hasn’t done nearly enough to deflate the country’s credit bubble. 

– If he doesn’t soon act to deflate credit, Xi risks a much larger economic blow-up in the not-too-distant future.

– To a large degree, China’s stock market has priced in a steeper economic downturn. But key China proxies, including Hong Kong and Australia, haven’t and remain most at risk from the coming China downturn.

This post was originally published at Asia Confidential:
http://ift.tt/1dXp26n


    



via Zero Hedge http://ift.tt/1gIX1UO Asia Confidential

Foreigners Bought Half Of All London Homes Selling For Over £1 Million

Actually, according to the first detailed estimate of international purchase activity in London by Knight Frank, the percentage of all central London homes that sold for more than 1 million pounds to foreigners in the 12 months through June 2013, was 49% to be exact. And as we showed yesterday when we put China’s loan creation in the context of US and Japanese QE, keeping in mind the use of proceeds of all this newly created inside money has to ultimately go somewhere – that somewhere in this case being London and other global luxury real estate, said percentage is only going to get higher. Especially when one adds Russian, the middle east and other various regions whose oligarchs are desperate to park their money in “safe” havens.

Some other findings from the Knight Frank report:

  • Over the 12 months to June 2013, 49% of all £1m+ sales in prime central London went to foreign buyers by nationality…
  • …however only 28% of buyers were non-resident in the UK
  • Over the two years to June 2013 51% of new-build purchases in the prime central London market were by UK residents…
  • …across the remainder of inner London the portion was 80%…
  • …and across outer London 93% of sales were to UK residents
  • Our estimate is that over the past two years 85% to 90% of all new-build purchases in Greater London have been to UK residents

Just as notable – foreigners love new construction: in the two years to June 2013, 69% of prime central London new-build purchases were to foreign buyers by nationality.

And here, a tangent: those two main instances of Emerging Market tremors that we have seen over the past year as a result of QE – well, let’s just say that they better normalize soon, and funds resume flowing toward the EMs rather than out of them or else, the London (first) and soon after all other luxury residential markets get it…

Source: Knight Frank


    



via Zero Hedge http://ift.tt/1dXmC7R Tyler Durden

STaND CLeaR GiaNT MoRoN…


.

 

Did you know a single cross country flight in a 747 by a Nimitz Class blowhard and his entourage consumes energy at the same rate as an actual Nimitz Class aircraft carrier and/or 100,000 homes?

In fact, one cross country 747 trip consumes enough energy to power your home for 60 years, unless your home happens to be the home currently occupied by the other Nimitz Class blow hard…

.


    



via Zero Hedge http://ift.tt/1dXmC7J williambanzai7

If America Continues To Go Down This Path, This Is What Life Will Be Like…

Submitted by Michael Snyder of The American Dream blog,

Becoming more like Europe is not a good thing.  But that is the path that we are currently on.  For the most part, Europeans live in a socialist “Big Brother” system in which the government completely dominates your life from the cradle to the grave.  Of course there are differences from country to country, but generally speaking the lives of most Europeans are very tightly regulated.  You see, the truth is that high levels of individual liberty and freedom are considered to be “dangerous” by the European elite.  They believe that if we are all allowed to just do whatever we want that it would result in utter chaos.  They are convinced that life is better when those that are smarter (them) control the lives of everyone else. 

In essence, Europe is like a giant religious cult in many ways (minus the religion).  With each passing year, the number of rules and regulations governing the daily lives of Europeans steadily grows, as does the level of control.  If you try to live outside of that control, you could very well find yourself in a direct confrontation with the authorities very rapidly.

Just consider what is happening in Germany.  Authorities there have stated repeatedly that they do not believe in having any “parallel societies”, and therefore everyone must participate in the system that the government has established.

That includes all children.  In Germany today, almost all forms of homeschooling are illegal.  In fact, one judge shockingly ruled that one set of parents could not have custody of their children because they might move them to another country and homeschool them there

A judge has issued a stunning verdict in a homeschooling case in Germany, ordering that the parents cannot have custody of their children because the family might move to another country and homeschool, posing a “concrete endangerment” to the children.

 

Dirk and Petra Wunderlich’s case made international headlines in August when 20 armed police arrived with a battering ram and forcibly took their four children from their home in Darmstadt, Germany, and enrolled them in public school.

 

As WND reported at the time, the children, ages 7 to 14, were taken into police custody. They were allowed to return home three weeks later when their father and mother, given no choice by the federal bureaucracy in Germany, agreed to allow their kids to attend public schools despite their objection to the social and religious instruction there.

Are you starting to see what I meant when I compared Europe to a cult?

In Europe, government is god, and everyone and everything belongs to the government.

Apparently, that even includes the life savings of their own citizens.  The following is from a Reuters article that was just posted this week…

The savings of the European Union’s 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says.

Did you catch that?  The EU apparently believes that they could use the private savings of their own citizens “to fund long-term investments” any time that they want.

But what if you don’t want your life savings to be invested in that way?

Too bad for you.

In fact, according to that Reuters article the EU wants to find ways to “mobilize more personal pension savings” so that there will be a larger pool with which to potentially fund long-term projects…

The Commission will ask the bloc’s insurance watchdog in the second half of this year for advice on a possible draft law “to mobilize more personal pension savings for long-term financing”, the document said.

In Europe, they also tend to love any “Big Brother” technologies that will allow them to watch, track, monitor and record the activities of their citizens.

For example, it has been reported that in the UK there are 1.85 million video cameras watching the population, and London has been called “the most watched city in the world“.

The control freaks in the UK are so paranoid that it is even illegal to carry a knife in public, but despite all of their crazy laws the rate of violent crime in the UK is still far higher than it is in the United States.

Now, the UK has decided that all of the medical records for the entire population will be gathered into a single database.  The following is from a recent TechDirt article

The UK government is currently building a database called care.data that will contain all of England’s medical records. It’s being promoted as providing valuable information for healthcare management and medical researchers that will lead to improved treatment.

But this database will not be private.  In fact, it is being reported that information from this database will be sold to drug companies and insurance companies

Drug and insurance companies will from later this year be able to buy information on patients – including mental health conditions and diseases such as cancer, as well as smoking and drinking habits – once a single English database of medical data has been created.

 

Harvested from GP and hospital records, medical data covering the entire population will be uploaded to the repository controlled by a new arms-length NHS information centre, starting in March. Never before has the entire medical history of the nation been digitised and stored in one place.

How would you feel if that was being done to your private medical information?

Not that the U.S. is a bastion of freedom and liberty these days either.

For example, Infowars is reporting that the Department of Homeland Security plans to launch a “national license plate tracking system”…

The Department of Homeland Security is set to activate a national license plate tracking system that will be shared with law enforcement, allowing DHS officers to take photos of any license plate using their smartphone and upload it to a database which will include a “hot list” of “target vehicles”.

 

The details are included in a PDF attachment uploaded yesterday to the Federal Business Opportunities website under a solicitation entitled “National License Plate Recognition Database.”

 

The system will “track vehicle license plate numbers that pass through cameras or are voluntarily entered into the system from a variety of sources (access control systems, asset recovery specialists, etc.) and uploaded to share with law enforcement” in order to help locate “criminal aliens and absconders.”

And for many more ways that the U.S. is becoming a “Big Brother society”, please see my previous article entitled “32 Privacy Destroying Technologies That Are Systematically Transforming America Into A Giant Prison“.

Another way that America is becoming more like Europe is in the area of religious behavior.

At one time, Europe was a hotbed for religious faith.  Of course those days are long gone.  And the United States is now heading down the exact same path, although Europe is still way ahead of us.  The following is from a Pew Research survey conducted a few years ago…

Half of Americans deem religion very important in their lives; fewer than a quarter in Spain (22%), Germany (21%), Britain (17%) and France (13%) share this view.

So why has religion become so unimportant?

Well, it is because that is what the government system tells them to believe from the time that they are little children.

As I mentioned earlier, the government dominates your life from the beginning to the end in Europe.  This even includes decisions about ending your life.

In fact, in Belgium they actually want to extend the euthanasia law to children

Making the argument that everybody has the right to die, Karine Lalieux, a Socialist member of the Belgian House, is pushing legislation that would extend the country’s 2002 euthanasia law to minors under 18.

 

“Our responsibility is to allow everybody to live, but also to die, in dignity,’’ said Lalieux.

And in the Netherlands they actually have mobile euthanasia teams that go door to door helping elderly people end their lives in the comfort of their own homes.

Europe is not a model for the rest of us to follow.

Instead, Europe should serve as a stark warning to the rest of the world about what can happen when you let the control freaks get too much control.

EUSSR Flag - Photo by Finn Skovgaard


    



via Zero Hedge http://ift.tt/1kLWZ26 Tyler Durden

The Manipulators Will Lose Their Gold War: GATA’s Bill Murphy (Exclusive Interview)

THE MANIPULATORS WILL LOSE THEIR GOLD WAR: GATA’S BILL MURPHY (EXCLUSIVE INTERVIEW)

Bill Murphy

The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.


Thanks Bill for accepting this interview.

-Maybe most of people in the gold world know about you and GATA. Nevertheless, for those who don’t know: Who is Bill Murphy? Where do you come from a financial point of view and what did motivate you to found the Gold Anti- Trust Action Committee (GATA)?

Hello Memo.

Thanks so much for your interest in what GATA has to say. I have a Wall Street background and worked for Shearson Hayden Stone and Drexel Burnham Lambert in Manhattan in the late 1970’s and early 80’s. At one point I became a limit position trader in the copper market after forming my own company, so I am very versed in how the futures market works in the US. In 1998 I realized the Internet was going to be a big deal and opened up http://ift.tt/XYQ5f4 as a subscription website which would focus on the gold/silver markets, as well as provide coverage of the US and world economies. Soon after opening up for business, the famed hedge fund Long Term Capital Management blew up. They were known to be short hundreds of tonnes of gold and that would have to be covered. However, it was clear that bullion banks such as Goldman Sachs, JP Morgan, and Deutsche Bank were capping the price around $300 in a collusive manner. My future colleague Chris Powell had anti-trust experience via his newspaper business. He suggested we try and stop it, so GATA was formed.

-In our last interview, Hugo Salinas Price told us that only a blind or a Harvard economist with a doctorate would not see the gold market is being manipulated. Do you agree? As I understand it, one of the main purposes of GATA is to communicate this fact to as many people as possible,  and end this manipulation, but, Bill, isn´t it a lost war? Aren’t the manipulators “too strong to be stopped”?

Yes, Hugo is right on the money. It could not be more obvious. So much so that James McShirley, a speaker at GATA’s London conference in 2011, has written in advance at times what the gold will do on a given day. From a bigger picture someone only need to appreciate what the price of gold did last year compared to the DOW on the same quantitative easing news. The DOW went up 3,000 points and the gold price went down $600. That would have made no sense to anyone ahead of time. Gold went lower as it did because “The Gold Cartel” forced the price down with massive raids in the derivatives paper market, often when few traders were around.

Yes, this Gold Cartel is extremely powerful. But, they have an Achilles heel, and that is the physical gold market. The Chinese demand for physical gold is so massive, it is eating up the available central bank gold supply needed to suppress the price. The Gold Cartel’s raids haven’t gained any traction on the downside this year. Thus, the manipulators are being forced to retreat again as they did for 12 years in a row. They won the battle for 2013, but will lose their Gold War in the years ahead.

-As you know, many pundits like CPM Group’s Jeff Christian and famous investors like Jim Rogers say that they ignore allegations on gold market manipulation because those are mere “conspiracy theories”, what would you answer to them?
Hugo already said it best. Those who deny the manipulation are either working for the other side, suffer from cognitive dissonance, or have a “not invented here syndrome complex.”  Three points to make:

*The Gold price was rigged for many years in times past, in the open, as in the London Gold Pool in the 1960’s. Why should now be any different? It is just surreptitious intervention this time around.

*It is recognized these days that most financial markets are manipulated. What, so gold and silver are two of the only markets not manipulated these days. JP Morgan alone was just fined some $20 billion dollars for rigging, or interfering, in eight different markets.

*As my colleague Chris Powell says, “GATA is a fact finding organization,” and we have 15 years worth of documentation to back that up. Here is just one of them which confirms what GATA has known all along: Secret IMF report: Hide gold loans and swaps for market manipulation (http://ift.tt/XUaAt2) 

-Bill, could you explain who does this manipulation? Why and more important how do they do it?  What’s the ultimate purpose of the manipulators?

The Gold Cartel, as we call it, has the BIS, The Fed, The US Treasury, The Exchange Stabilization Fund, and various bullion banks such as JP Morgan Chase, as its main operators. Other central banks are called upon to supply physical gold into the marketplace from time to time. They conduct their operations by feeding central bank gold into the market in surreptitious fashion and using derivatives to bomb the paper price. For the time being the paper price greatly influences the physical market and the PM Fix in London, the price at which 90% of the physical deals of any given day is used to conduct business. The good news is Chinese demand is so immense, the physical market is beginning to take over in terms of determining the physical price. This is a main reason The Gold Cartel has been so ineffective this year … and they have tried to keep the price down, believe me.

They do what they do because gold is viewed as a barometer of US financial market health. Think of what the media says whenever the gold price is screaming higher. This Gold Cartel wants the gold price as subdued as possible so that it does not effect the US dollar and our interest rates negatively.


-By the way, China is now the largest consumer of gold by any measure. Do you think China has any interest on ending the dollar supremacy anytime soon? Or, do you think China and Asia in general would prefer to wait more time to keep buying bullion at today’s depressed prices?

The Chinese know what GATA knows about gold being suppressed. We know this because of communiqués made public and I have had three conference calls with the Chinese Investment Corporation, one of their Sovereign Wealth Funds. They are buying all they can at these artificially low prices. There are reports they have bought most of the gold mined over the last year. This gold is being bought by their public and the government.

The Chinese know gold ownership is going to be a big deal in the years ahead, as many of the world’s currencies come under pressure. Everyone knows the Chinese are exposed to a serious dollar devaluation because of all the US Treasuries they own. It makes sense they would be buying so much gold at these incredibly low prices. They know the gold price won’t be staying down here too much longer.

-Bill, Banco de México (Bank of Mexico or Banxico) claims to have 120 tons of gold stored at the Bank of England (BoE). Nevertheless, on December last year Banxico told me that the BIS said a physical inspection of its gold at the BoE was “not possible”. Should this be seen as an alert sign for investors and other central banks? In your opinion should Mexico repatriate its gold and buy more?

On the other hand, Comex registered gold inventories are at historic lows; the Germans got only five tones from the Fed last year and most of gold reserves at the Bank of England seem to be an illusion. It looks that most of the gold is gone. Bill, is there any real risk of a default on the gold market in the coming years? If so, what would be the consequences for the common people?

Let me answer both of those questions at the same time, if I may. The fact that Germany only received 5 tonnes of gold last year out of the 300 tonnes of gold they are supposed to get back by 2020 is most telling and is lighting up the scoreboard regarding GATA’s claims that much of the central bank gold has been used up to suppress the price and is no longer there. It is ludicrous that Germany couldn’t get all its gold back in a year, much less a pitiful five tonnes. They are not getting their gold back because it is not there. It is GONE, at least much of it.

There is a strong likelihood there will be gold defaults in the years ahead … whether that be an inability of central banks to get back what they have “swapped” or “lent out,” or from unallocated accounts … the same gold sold by institutions to numerous owners who think it is theirs. All of this is going to lead to the greatest financial market scandal in US history. So yes, Mexico should get its gold back as soon as possible and follow the Chinese example … and buy more.

-Is the silver market manipulated too or only the gold market is? Is there a risk of default on silver too?

When the gold price suppression scheme went into high gear under Treasury Secretary Robert Rubin, a decision was made that the price of silver had to be manipulated also because a dichotomy of a gold price going one way and silver going the other might make the suppression of the gold price too obvious. Thus, they have traded in tandem over the years … ridiculously so at times. 

The past many months the silver open interest on the Comex has surged, up nearly 50% off its lows of last year, while the gold open interest remains very low. We don’t know why but it surely has to do with JP Morgan (the major futures short) and The Gold Cartel. Silver completed a major base on Friday and exploded to the upside. The odds are that these massive short positions are in trouble and will have to be covered in the near future. If not, it could lead to some kind of default down the road.

-Much people invest on physical gold and silver as safe havens. Do you think it is a good idea to keep accumulating those metals? Why?

The answer is yes and never more so. Just think of what has transpired in the US over the last years regarding QE and putting money into our financial system.  And yet, our economy remains on very shaky ground. The odds are decent we are going to do more of the same for some time to come, with talk of tapering taking a back seat for a while. This money is eventually going to make its way into our economy and put upward pressure on prices. Artificially cheap gold and silver are going to the moon as this all kicks in. They will be the “GO TO” investments over the next few years and provide great financial comfort for those who own them.

-Is the gold bull market over, Bill?

Just the opposite. The prices of gold and silver have just broken out of massive bases. They were forced down to artificially low levels by The Gold Cartel … levels which cannot be sustained.  How cheap is gold? A couple of years ago a number of folks said that if the gold price had kept up with inflation, the price would be $2500 an ounce. That is how cheap gold is today and it is all due to the price suppression scheme, which is in the process of unravelling. As far as silver goes, I am a big Eric Sprott fan of Sprott Asset Management in Toronto. He has been pounding the table that silver is going to $100 an ounce, or more. He has made a fortune by being so right with calls like this over his career. He will be right again.

-What’s your forecast for the price of gold in 2014? And what would be gold’s “fair value”?

GATA held a conference in August of 2005 in the Yukon’s Dawson City. The price of gold then was $436. My take back then was that a gold price of $3,000 to $5,000 an ounce would be needed to clear the market. I will stay with that one, with gold making all-time highs above $1900 an ounce within a year. Interesting enough, one of President Putin’s top economic advisors, Andrey Bykov, attended our conference. A quite gold price shot up $12 two days after the conference and hundreds of dollars in the ensuing nine months. Russia has been increasing its gold reserves ever since.

-Bill, is gold money?

Sure it is. It has been that way for 5,000 years or so. Silver is money too. They have been regarded as true stores of value for a very long time, and will only be more so in the years ahead.


Thank you very much again for your time, Bill. We look forward to having you again soon on this blog


    



via Zero Hedge http://ift.tt/1dX74B2 lemetropole

The Manipulators Will Lose Their Gold War: GATA's Bill Murphy (Exclusive Interview)

THE MANIPULATORS WILL LOSE THEIR GOLD WAR: GATA’S BILL MURPHY (EXCLUSIVE INTERVIEW)

Bill Murphy

The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.


Thanks Bill for accepting this interview.

-Maybe most of people in the gold world know about you and GATA. Nevertheless, for those who don’t know: Who is Bill Murphy? Where do you come from a financial point of view and what did motivate you to found the Gold Anti- Trust Action Committee (GATA)?

Hello Memo.

Thanks so much for your interest in what GATA has to say. I have a Wall Street background and worked for Shearson Hayden Stone and Drexel Burnham Lambert in Manhattan in the late 1970’s and early 80’s. At one point I became a limit position trader in the copper market after forming my own company, so I am very versed in how the futures market works in the US. In 1998 I realized the Internet was going to be a big deal and opened up http://ift.tt/XYQ5f4 as a subscription website which would focus on the gold/silver markets, as well as provide coverage of the US and world economies. Soon after opening up for business, the famed hedge fund Long Term Capital Management blew up. They were known to be short hundreds of tonnes of gold and that would have to be covered. However, it was clear that bullion banks such as Goldman Sachs, JP Morgan, and Deutsche Bank were capping the price around $300 in a collusive manner. My future colleague Chris Powell had anti-trust experience via his newspaper business. He suggested we try and stop it, so GATA was formed.

-In our last interview, Hugo Salinas Price told us that only a blind or a Harvard economist with a doctorate would not see the gold market is being manipulated. Do you agree? As I understand it, one of the main purposes of GATA is to communicate this fact to as many people as possible,  and end this manipulation, but, Bill, isn´t it a lost war? Aren’t the manipulators “too strong to be stopped”?

Yes, Hugo is right on the money. It could not be more obvious. So much so that James McShirley, a speaker at GATA’s London conference in 2011, has written in advance at times what the gold will do on a given day. From a bigger picture someone only need to appreciate what the price of gold did last year compared to the DOW on the same quantitative easing news. The DOW went up 3,000 points and the gold price went down $600. That would have made no sense to anyone ahead of time. Gold went lower as it did because “The Gold Cartel” forced the price down with massive raids in the derivatives paper market, often when few traders were around.

Yes, this Gold Cartel is extremely powerful. But, they have an Achilles heel, and that is the physical gold market. The Chinese demand for physical gold is so massive, it is eating up the available central bank gold supply needed to suppress the price. The Gold Cartel’s raids haven’t gained any traction on the downside this year. Thus, the manipulators are being forced to retreat again as they did for 12 years in a row. They won the battle for 2013, but will lose their Gold War in the years ahead.

-As you know, many pundits like CPM Group’s Jeff Christian and famous investors like Jim Rogers say that they ignore allegations on gold market manipulation because those are mere “conspiracy theories”, what would you answer to them?
Hugo already said it best. Those who deny the manipulation are either working for the other side, suffer from cognitive dissonance, or have a “not invented here syndrome complex.”  Three points to make:

*The Gold price was rigged for many years in times past, in the open, as in the London Gold Pool in the 1960’s. Why should now be any different? It is just surreptitious intervention this time around.

*It is recognized these days that most financial markets are manipulated. What, so gold and silver are two of the only markets not manipulated these days. JP Morgan alone was just fined some $20 billion dollars for rigging, or interfering, in eight different markets.

*As my colleague Chris Powell says, “GATA is a fact finding organization,” and we have 15 years worth of documentation to back that up. Here is just one of them which confirms what GATA has known all along: Secret IMF report: Hide gold loans and swaps for market manipulation (http://ift.tt/XUaAt2) 

-Bill, could you explain who does this manipulation? Why and more important how do they do it?  What’s the ultimate purpose of the manipulators?

The Gold Cartel, as we call it, has the BIS, The Fed, The US Treasury, The Exchange Stabilization Fund, and various bullion banks such as JP Morgan Chase, as its main operators. Other central banks are called upon to supply physical gold into the marketplace from time to time. They conduct their operations by feeding central bank gold into the market in surreptitious fashion and using derivatives to bomb the paper price. For the time being the paper price greatly influences the physical market and the PM Fix in London, the price at which 90% of the physical deals of any given day is used to conduct business. The good news is Chinese demand is so immense, the physical market is beginning to take over in terms of determining the physical price. This is a main reason The Gold Cartel has been so ineffective this year … and they have tried to keep the price down, believe me.

They do what they do because gold is viewed as a barometer of US financial market health. Think of what the media says whenever the gold price is screaming higher. This Gold Cartel wants the gold price as subdued as possible so that it does not effect the US dollar and our interest rates negatively.


-By the way, China is now the largest consumer of gold by any measure. Do you think China has any interest on ending the dollar supremacy anytime soon? Or, do you think China and Asia in general would prefer to wait more time to keep buying bullion at today’s depressed prices?

The Chinese know what GATA knows about gold being suppressed. We know this because of communiqués made public and I have had three conference calls with the Chinese Investment Corporation, one of their Sovereign Wealth Funds. They are buying all they can at these artificially low prices. There are reports they have bought most of the gold mined over the last year. This gold is being bought by their public and the government.

The Chinese know gold ownership is going to be a big deal in the years ahead, as many of the world’s currencies come under pressure. Everyone knows the Chinese are exposed to a serious dollar devaluation because of all the US Treasuries they own. It makes sense they would be buying so much gold at these incredibly low prices. They know the gold price won’t be staying down here too much longer.

-Bill, Banco de México (Bank of Mexico or Banxico) claims to have 120 tons of gold stored at the Bank of England (BoE). Nevertheless, on December last year Banxico told me that the BIS said a physical inspection of its gold at the BoE was “not possible”. Should this be seen as an alert sign for investors and other central banks? In your opinion should Mexico repatriate its gold and buy more?

On the other hand, Comex registered gold inventories are at historic lows; the Germans got only five tones from the Fed last year and most of gold reserves at the Bank of England seem to be an illusion. It looks that most of the gold is gone. Bill, is there any real risk of a default on the gold market in the coming years? If so, what would be the consequences for the common people?

Let me answer both of those questions at the same time, if I may. The fact that Germany only received 5 tonnes of gold last year out of the 300 tonnes of gold they are supposed to get back by 2020 is most telling and is lighting up the scoreboard regarding GATA’s claims that much of the central bank gold has been used up to suppress the price and is no longer there. It is ludicrous that Germany couldn’t get all its gold back in a year, much less a pitiful five tonnes. They are not getting their gold back because it is not there. It is GONE, at least much of it.

There is a strong likelihood there will be gold defaults in the years ahead … whether that be an inability of central banks to get back what they have “swapped” or “lent out,” or from unallocated accounts … the same gold sold by institutions to numerous owners who think it is theirs. All of this is going to lead to the greatest financial market scandal in US history. So yes, Mexico should get its gold back as soon as possible and follow the Chinese example … and buy more.

-Is the silver market manipulated too or only the gold market is? Is there a risk of default on silver too?

When the gold price suppression scheme went into high gear under Treasury Secretary Robert Rubin, a decision was made that the price of silver had to be manipulated also because a dichotomy of a gold price going one way and silver going the other might make the suppression of the gold price too obvious. Thus, they have traded in tandem over the years … ridiculously so at times. 

The past many months the silver open interest on the Comex has surged, up nearly 50% off its lows of last year, while the gold open interest remains very low. We don’t know why but it surely has to do with JP Morgan (the major futures short) and The Gold Cartel. Silver completed a major base on Friday and exploded to the upside. The odds are that these massive short positions are in trouble and will have to be covered in the near future. If not, it could lead to some kind of default down the road.

-Much people invest on physical gold and silver as safe havens. Do you think it is a good idea to keep accumulating those metals? Why?

The answer is yes and never more so. Just think of what has transpired in the US over the last years regarding QE and putting money into our financial system.  And yet, our economy remains on very shaky ground. The odds are decent we are going to do more of the same for some time to come, with talk of tapering taking a back seat for a while. This money is eventually going to make its way into our economy and put upward pressure on prices. Artificially cheap gold and silver are going to the moon as this all kicks in. They will be the “GO TO” investments over the next few years and provide great financial comfort for those who own them.

-Is the gold bull market over, Bill?

Just the opposite. The prices of gold and silver have just broken out of massive bases. They were forced down to artificially low levels by The Gold Cartel … levels which cannot be sustained.  How cheap is gold? A couple of years ago a number of folks said that if the gold price had kept up with inflation, the price would be $2500 an ounce. That is how cheap gold is today and it is all due to the price suppression scheme, which is in the process of unravelling. As far as silver goes, I am a big Eric Sprott fan of Sprott Asset Management in Toronto. He has been pounding the table that silver is going to $100 an ounce, or more. He has made a fortune by being so right with calls like this over his career. He will be right again.

-What’s your forecast for the price of gold in 2014? And what would be gold’s “fair value”?

GATA held a conference in August of 2005 in the Yukon’s Dawson City. The price of gold then was $436. My take back then was that a gold price of $3,000 to $5,000 an ounce would be needed to clear the market. I will stay with that one, with gold making all-time highs above $1900 an ounce within a year. Interesting enough, one of President Putin’s top economic advisors, Andrey Bykov, attended our conference. A quite gold price shot up $12 two days after the conference and hundreds of dollars in the ensuing nine months. Russia has been increasing its gold reserves ever since.

-Bill, is gold money?

Sure it is. It has been that way for 5,000 years or so. Silver is money too. They have been regarded as true stores of value for a very long time, and will only be more so in the years ahead.


Thank you very much again for your time, Bill. We look forward to having you again soon on this blog


    



via Zero Hedge http://ift.tt/1dX74B2 lemetropole

“Money Launderer Until Proven Innocent” – Italy Imposes 20% Tax Withholding On All Inbound Money Transfers

While the propaganda surrounding Europe’s “recovery” has reached deafening levels, what is going on behind the scenes is quite the opposite, and in the latest example that Europe is increasingly formalizing a regime of implicit capital controls, we learn that Italy has just ordered banks to withhold a 20% tax on all inbound wire transfers: a decree which on to of everything will apply retroactively to February 1. As Il Sole reports, “the deductions will be automatic (unless prior request for exclusion), and then it will be up to the taxpayer to prove that the money is not in the nature of compensation “income.” In other words, as of this moment, but really starting two weeks ago, all Italians are money launderers unless proven innocent.

Some more details on Italy’s latest decision to limit capital flows into the country, Google translated:

… the collection is the result of the decision to consider any transfer from abroad and directed to an individual Italian, as a component of taxable income, subject to proof to the contrary, which must be date the taxpayer receives the sum on your account. However, the first payments to the Treasury by intermediaries (mainly banks) will be performed July 16, so that the deemed payment accrued from February 1 until June 30 (and therefore set aside and with interest). Next, you will pay the withholding every 16th of the month following the effective perception of the sum. In fact, all taxpayers who receive a transfer from abroad on their personal account – and not professional or business – will be applied to the deduction, as an advance which will then be computed in the annual tax return.

What Italy appears to be focusing on are direct income payments where individuals get compensation via bank transfer. Of course, since the tax is superceding, good luck to any Italian citizen explaining the origin of every inbound money transfer and it is in accordance with the law. `

It is, therefore, a real “held” that will not be applied only in the case where the taxpayer proves that the amount received or quenched and does not have a connotation income but only and exclusively sheet: for example, the transfer incoming could be a return of a loan made in the past, or the return of a deposit, the date for the conduct of a house leased abroad.

Reasoning aside, what Italy just did is enforce a “shotgun” withholding tax on all inbound money:

The mechanism that provides a primary role to the bank official that is to receive the declaration of the taxpayer and evaluate it. In any case, you make the deduction or not, the name of the recipient will be reported by the bank Revenue Agency. And the taxpayer has until February 28 of the year following the year of the deduction to attest to the improper application of withholding tax to the bank and ask for a refund.

Even Il Sole admits that the new tax is so ad hoc that confusion will surely follow:

As is apparent from the wording of the measure, there is not even a standard for the development of self but, certainly, there will be a “balancing” between assets and funds held abroad (the RW of the UNICO) and income flows in entry: in short, it is likely that the intermediary in addition to the self-certification may require a taxable person to the performance of the RW framework from which we must infer what good has originated the incoming cash flow.

Of course, what will end up happening, is that more Italians- especially the wealthiest ones – will open bank accounts either in other Eurozone nations that have not established such a draconian wire transfer regime, or – more realistically – in such New Normal tax havens as Singapore now that Switzerland’s main business model for centuries has been destroyed. The end result will be even less capital inflows into Italy – just the opposite of what the desperate Italian government is trying to achieve. But that is a concern for the next Italian government and the one promptly replacing it. For the time being, let’s all pretend Europe is fixed, even as it prepares for the nuclear option: the confiscation of retirement savings.


    



via Zero Hedge http://ift.tt/1dX74RE Tyler Durden

"Money Launderer Until Proven Innocent" – Italy Imposes 20% Tax Withholding On All Inbound Money Transfers

While the propaganda surrounding Europe’s “recovery” has reached deafening levels, what is going on behind the scenes is quite the opposite, and in the latest example that Europe is increasingly formalizing a regime of implicit capital controls, we learn that Italy has just ordered banks to withhold a 20% tax on all inbound wire transfers: a decree which on to of everything will apply retroactively to February 1. As Il Sole reports, “the deductions will be automatic (unless prior request for exclusion), and then it will be up to the taxpayer to prove that the money is not in the nature of compensation “income.” In other words, as of this moment, but really starting two weeks ago, all Italians are money launderers unless proven innocent.

Some more details on Italy’s latest decision to limit capital flows into the country, Google translated:

… the collection is the result of the decision to consider any transfer from abroad and directed to an individual Italian, as a component of taxable income, subject to proof to the contrary, which must be date the taxpayer receives the sum on your account. However, the first payments to the Treasury by intermediaries (mainly banks) will be performed July 16, so that the deemed payment accrued from February 1 until June 30 (and therefore set aside and with interest). Next, you will pay the withholding every 16th of the month following the effective perception of the sum. In fact, all taxpayers who receive a transfer from abroad on their personal account – and not professional or business – will be applied to the deduction, as an advance which will then be computed in the annual tax return.

What Italy appears to be focusing on are direct income payments where individuals get compensation via bank transfer. Of course, since the tax is superceding, good luck to any Italian citizen explaining the origin of every inbound money transfer and it is in accordance with the law. `

It is, therefore, a real “held” that will not be applied only in the case where the taxpayer proves that the amount received or quenched and does not have a connotation income but only and exclusively sheet: for example, the transfer incoming could be a return of a loan made in the past, or the return of a deposit, the date for the conduct of a house leased abroad.

Reasoning aside, what Italy just did is enforce a “shotgun” withholding tax on all inbound money:

The mechanism that provides a primary role to the bank official that is to receive the declaration of the taxpayer and evaluate it. In any case, you make the deduction or not, the name of the recipient will be reported by the bank Revenue Agency. And the taxpayer has until February 28 of the year following the year of the deduction to attest to the improper application of withholding tax to the bank and ask for a refund.

Even Il Sole admits that the new tax is so ad hoc that confusion will surely follow:

As is apparent from the wording of the measure, there is not even a standard for the development of self but, certainly, there will be a “balancing” between assets and funds held abroad (the RW of the UNICO) and income flows in entry: in short, it is likely that the intermediary in addition to the self-certification may require a taxable person to the performance of the RW framework from which we must infer what good has originated the incoming cash flow.

Of course, what will end up happening, is that more Italians- especially the wealthiest ones – will open bank accounts either in other Eurozone nations that have not established such a draconian wire transfer regime, or – more realistically – in such New Normal tax havens as Singapore now that Switzerland’s main business model for centuries has been destroyed. The end result will be even less capital inflows into Italy – just the opposite of what the desperate Italian government is trying to achieve. But that is a concern for the next Italian government and the one promptly replacing it. For the time being, let’s all pretend Europe is fixed, even as it prepares for the nuclear option: the confiscation of retirement savings.


    



via Zero Hedge http://ift.tt/1dX74RE Tyler Durden

We Can Be Certain Of This

Submitted by Charles Hugh Smith from Of Two Minds

We Can Be Certain of This  

Just as the addict feels “I can’t live any other way,” so we continue clinging to a way of living that is equally self-destructive because we too see no other way to live.

Yesterday I discussed the intrinsic uncertainties in complex systems. (Certainty, Complex Systems, and Unintended Consequences). Amidst this sea of uncertainty we can be certain of this: humans will continue down an unsustainable path that inevitably leads to a tragic end until they succeed in destroying themselves or they reach a point of no return and abruptly change course.

That process of clinging to the present arrangement “because I can’t live any other way” until that arrangement collapses is the primary narrative of our era. It is truly remarkable how humans will cling to a visibly self-destructive, no-exit arrangement because they see no alternative, and then after the present arrangement crumbles and the wreckage is cleared, we somehow manage to find some other arrangement.

Sadly, we only rouse ourselves to change when there is no other choice, that is, after we’ve destroyed the previous arrangement. Take the seas, for example: we’re losing the oceans. The scale of our destruction of this resource is unprecedented and easily visible to all. The Consequences of Oceanic Destruction (Foreign Affairs) Over the last several decades, human activities have so altered the basic chemistry of the seas that they are now experiencing evolution in reverse: a return to the barren primeval waters of hundreds of millions of years ago.

Every trawler that goes to sea (often subsidized by governments anxious to maintain the employment and protein offered by wild fisheries) stripmines another percentage of a fast-dwindling resource, and as a result fisheries are collapsing around the globe.

This propensity to exploit a resource made a certain kind of sense when humans numbered a few tens of thousands. Find a tree with ripe fruit? Pick every one, and then move on.

Unfortunately there are no other blue-water planets teeming with edible fish within our reach. Once we stripmine and despoil our planet’s oceans, there is no “move on to the next one.” The same is true of fresh-water aquifers, soil, and so on.

We can print IOUs, credit and paper money, but we can’t print fresh water once the aquifers are drained. Yes, we can spend billions of dollars and build desalination plants, but this option is limited to small wealthy populations. It is not a solution, it is simply a work-around that consumes extraordinary quantities of energy and capital.

Those of us who are not addicted to heroin wonder how addicts can continue down such a visibly self-destructive path. But how different are we? Just as the addict feels “I can’t live any other way,” so we continue clinging to a way of living that is equally self-destructive because we too see no other way to live.

Just as the addict feels that the alternative is too frightening and painful to contemplate and shooting smack is by far the easier, more comforting routine than risking the pain and trauma of going clean, so we cling to the present arrangement, as doomed and self-destructive as it is, because we too are afraid of change and want to avoid the pain of adapting to new arrangements.

And so the addict continues to the inevitable fork in the road; he either succeeds in destroying himself, and the arrangement ends that way, or he reaches a point so close to the inevitable end that the recognition awakens his instinct not just for survival but for a better life.

And then a small miracle occurs. An alternative way of living becomes visible in the addict’s mind. His fear and desire to avoid pain (not just the pain of withdrawal but the pain of self-awareness and personal responsibility) are still present, but he finds the pain is bearable and the benefits of pursuing this alternative way of living outweigh his fear of change.

His certainty that there is no other way to live but addiction was false. It was always false, but in the mindset of fear and fierce devotion to the present arrangement, no matter how self-destructive, there was no alternative.

And so we continue clinging to the present arrangement, certain there is no other way and that we are powerless to change our circumstances, until the current arrangement collapses beneath us, and we have no other choice but to make another arrangement.

This is the second great narrative of our era. Our job is to describe and discuss another arrangement, a sustainable, non-addictive one that isn’t doomed to collapse from the start, so all those currently clinging to the path of self-destruction will have an alternative when the Status Quo comes apart and the smack they “need” to continue living is no longer available, or no longer available in sufficient quantity or quality.

There is no point in trying to take the needle from the addict when he is certain there is no other way to live; for him, there is no other way to live. The only point of change lies ahead, when he reaches the cliff edge and must decide to plunge to his death, clinging to the present arrangement to the end, or he stumbles away from the edge and musters the courage to seek some alternative arrangement that doesn’t lead to the abyss.


    



via Zero Hedge http://ift.tt/1dzLl6K Tyler Durden