The Permian Pitfall: A Race To The Bottom For Tight Oil

Submitted by Arthur Berman via,

Remember the shale gale and Saudi America? The scale of those outlandish delusions has now dwindled to plays in a few counties in West Texas and southeastern New Mexico. Saudi Permian.

It’s a race to the bottom as investors double down on the tight oil companies that can still tell a growth story. Permian-weighted E&P companies are the temporary darlings of Wall Street as other tight oil plays have lost their luster.

A Silly Price Rally: Catch-22

We are in the middle of a truly silly price rally. Other rallies of 2015 and 2016 took place despite substantial production surpluses and too much inventory. Then, there was some hope that higher prices might result if over-production could be brought under control. Now, the world’s production and consumption are near balance but oil prices remain mired in the $40 to $50 per barrel range.

This current rally will end badly because there is something more fundamental keeping prices low. Despite repeated assurances from IEA and EIA that demand growth is strong, it is not strong enough to draw down outsized global inventories.

Hope for an OPEC production freeze at next month’s meeting in Algiers is the main factor driving this rally. The problem is that the world liquids market is as close to balance as it ever gets—over-supply has been less than 0.5 million barrels per day for the last two months (Figure 1). Oil prices were more than $100 per barrel at similar or greater production surpluses in 2013 and 2014.

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Figure 1. World liquids production minus consumption shows that the present market is as close to balance as it ever gets. Source: EIA and Labyrinth Consulting Services, Inc.

In 2015, when the average production surplus was 2 million barrels per day, it was a different story. Over-production is not the problem now as it was then. If OPEC freezes production, it won’t make any difference.

Inventories exceed all historical levels. The world remains over-supplied because there is too much oil in inventory.

As long as oil prices are range-bound between about $40 and $50 per barrel, it makes more sense to store oil than to sell it. The carrying cost of storage is less than what can be made by rolling futures contracts over each month. Inventories will stay high until prices break out of their current range but outsized inventories make that impossible. Catch-22.

Four Oil-Price Cycles in 2015 and 2016

There have been four oil-price cycles in 2015 and 2016–the first three each lasted approximately 6 months (Figure 2). Each new cycle began with high price volatility that fell as price peaked. We are currently in the upward arc of Cycle 4.

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Figure 2. Oil-price and oil-price volatility cycles since 2014. Source: EIA, CBOE, Bloomberg and Labyrinth Consulting Services, Inc.

The oil-price volatility index has fallen to levels similar to when prices peaked during the last cycle suggesting that current WTI futures prices just above $48 per barrel may already be near the peak for this cycle. Prices may increase into the low-$50 per barrel range as they did in June before falling again.

The latest cycle began when NYMEX futures prices fell below $40 per barrel in early August. In the succeeding two weeks, they have climbed to more than $48 (Figure 3).

A factor beyond a possible OPEC freeze is the weakened U.S. dollar because of expectations that the Federal Reserve Bank will not raise interest rates at least until December. The value of the dollar against other major currencies has fallen 3 percent over the last month (36 percent annualized). WTI futures prices have increased 22 percent since August 1.

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Figure 3. 2016 U.S. dollar index and WTI NYMEX futures prices. Source: EIA, Wall Street Journal and Labyrinth Consulting Services, Inc.

A third factor driving the current price rally is long-term concern about supply because of under-investment in oil development projects and exploration since the oil-price collapse. Recent statements by the International Energy Agency that demand may outpace supply in the next few years underscored that anxiety.

Figure 3 shows that oil prices appear to be range-bound between about $40 support and $51 per barrel resistance levels. The upper boundary is largely controlled by record-breaking volumes of U.S. and world crude oil inventories and the fact that producers add rigs and production with each upward swing in oil prices.

The 200-day moving average of NYMEX futures prices suggests similar range boundaries of about $38 and $52 per barrel (Figure 4).

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Figure 4. Two-hundred day moving average of WTI NYMEX futures prices. Source: EIA, Bloomberg and Labyrinth Consulting Services, Inc.

Staggering Inventories

This market looks for any excuse to raise prices. Every price upswing is seen by some as the beginning of a return to oil prices above $70 per barrel. We seem to selectively forget that the staggering inventory levels of crude oil make this impossible until those volumes are drawn down substantially. Oops.

U.S. crude oil inventories fell 2.5 million barrels this week but have increased a net 1.6 million barrels over the last month during what is supposed to be de-stocking season (Figure 5).

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Figure 5. U.S. crude oil inventories and comparison with 2015 levels and the four years preceding. Source: EIA and Labyrinth Consulting Services, Inc.

Storage volumes are 57 million barrels more than at this time in 2015 and are 143 million barrels higher than the 5-year average. This is definitely not a basis for a sustainable oil-price rally. Until inventories are drawn down by at least another 125 million barrels, a recovery to somewhere approaching mid-cycle 2014 levels of about $80 per barrel is technically impossible.

The Permian Basin Dominates Rig Count Increases

Five new horizontal rigs were added last week to drill tight oil objectives in the Permian basin and 12 rigs were added the previous week. Only 1 rig was added in the Bakken play after losing 2 rigs a week ago. No rigs were added in the Eagle Ford after losing 1 rig the previous week. More capital is being spent in the Permian basin than in all the other plays put together.

Overall, 67 tight oil rigs have been added since early June. Forty eight of those are in the Permian basin, 5 in the Bakken and 6 in the Eagle Ford play (Figure 6). Four rigs were added in the Niobrara, 3 in the Granite Wash and 1 in “Other.” Rig count increases began as oil prices peaked above $50 per barrel in early June and continued through the slump toward $40 prices before the latest upward swing to $48 per barrel.

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Figure 6. Permian basin, Bakken and Eagle Ford tight oil horizontal rig count, NYMEX WTI prices and oil-price volatility index. Source: Baker Hughes, EIA, Bloomberg and Labyrinth Consulting Services, Inc.

Weekly changes in the Permian basin rig count are the leading indicator of capital flows and expenditures. Permian rig count is more responsive to capital flows than the other tight oil plays because there is more money available for Permian-weighted companies.

In late July, I wrote, When prices fall and oil-price volatility increases, the floodgates of capital open. Every genius-investor wants to buy low and sell high. Rig count rises with fresh capital, production increases and oil prices fall.”

In fact, the Permian basin accounts for 64 percent of the total U.S. horizontal tight oil rig count (Figure 7).

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Figure 7. The Permian basin rig count represents more than 60 percent of the U.S. horizontal tight oil rig count. Source: Baker Hughes and Labyrinth Consulting Services, Inc.

This is curious because Permian production from the Bone Spring, Wolfcamp and Trend-Spraberry horizontal plays represents only 21 percent of total tight oil production (Figure 8).

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Figure 8. Permian basin daily production from the Bone Spring, Wolfcamp and Trend Area-Spraberry plays is only 21 percent of total U.S. horizontal oil production. Source: EIA, Drilling Info, North Dakota Department of Natural Resources and Labyrinth Consulting Services, Inc.

It is even more curious because Permian basin tight oil proven reserves rank 42nd in the world just behind Denmark and Trinidad and Tobago based on the latest EIA data (Figure 9).

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Figure 9. Permian basin tight oil proven reserves compared with world crude oil reserves. Source: EIA and Labyrinth Consulting Services, Inc.

Some will argue about potential and possible Permian resources and reserves preferring Pioneer CEO Scott Sheffield’s view of things to reality. I won’t debate them but the point is that Saudi Permian is a stretch based on any reality-based interpretation of existing data.

It’s A Stock Play, Not An Oil Play

Eleven companies now operate 3 or more rigs in the Permian basin (Figure 10). These represent a mix of independents and major oil companies. Concho operates the most rigs with 15 and Pioneer is second with 13. Energen, Anadarko, Chevron and Apache all operate 5 rigs or more. Companies that operate at least 3 rigs include Cimarex, Diamondback, Oxy, Parsley and Callon.

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Figure 10. Companies that operate three or more rigs in the Permian basin. Source: Drilling Info and Labyrinth Consulting Services, Inc.

The stock performance of all oil companies correlates strongly with oil prices but many Permian basin-weighted stocks have significantly out-performed ETFs (exchange-traded funds) by 2-to-1 to as much as 4-to-1 since the current price rally began in early August (Figure 11).

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Figure 11. Stock performance of many Permian-weighted independent stocks out-perform ETFs by 2:1 to 4:1 since the current oil-price rally began. Source: Source: Google Finance, EIA, Bloomberg & Labyrinth Consulting Services, Inc.

Callon’s stock price has increased 34 percent since August 1, 2016. Parsley’s and Energen’s have increased 22 percent, Pioneer’s has risen 18 percent and EOG’s, 17 percent. These companies have all beaten the 16 percent increase in WTI futures prices over the same period and have substantially out-performed oil ETFs (Energy Select XLE and Vanguard Energy VDE) whose returns averaged only 8 percent in August.

Most of the Permian companies with strong stock performance also have sizable debt loads and high debt-to-cash from operations (EBITDA) ratios. The average debt-to-cash flow ratio is 5.4:1, and 4:1 is considered the current threshold for bank loan risk (Figure 12). Among the independent companies with high stock performance, only Diamondback and Energen have ratios less than 4:1. Parsley, Cimarex and Concho all exceed 7:1.

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Figure 12. Most Permian operators have debt-to-cash flow (EBITDA) ratios that exceed bank-risk threshold of 4:1. Source: Google Finance and Labyrinth Consulting Services, Inc.

Another reason for the highly volatile stock prices of most Permian companies is in their stock valuations. On average, the ratio of current to mid-2014 stock valuations is double the ratio of first half 2014-first half 2016 NYMEX WTI oil prices (Figure 13).

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Figure 13. The average ratio of 2016-2014 stock valuations is double the ratio of 2016-2014 WTI futures prices for Permian-weighted companies. Source Google Finance, EIA and Labyrinth Consulting Services, Inc.

Stock prices of shale companies with good positions in the Bakken and Eagle Ford have also increased but those companies have a harder growth story to tell. Average well density in the Permian horizontal plays is about 1 well per 860 acres. That is less than half of the 1 well per 382 acres per well in the Bakken and one-fifth of the 1 well per 172 acres per well in the Eagle Ford play (Table 1).

Table 1. Current well densities for the Bakken, Eagle Ford and Permian horizontal plays. Source: Drilling Info and Labyinth Consulting Services, Inc.

Among the high stock performers, both EOG and Pioneer also have positions in the Eagle Ford and EOG is also represented in the Bakken play.

A Race To The Bottom

The main cause of the collapse of global oil prices in 2014 was a production surplus. That continued to be the key factor throughout 2015. Now, over-production is still a concern but the market has been close to balance for the last 6 months.

For most of 2016, however, liquids consumption growth has declined. It increased with falling oil prices and peaked at the end of 2015 when monthly average oil prices were near $30 per barrel (Figure 14). As prices recovered into the $40 to $50 range, consumption growth dropped. The global economy is apparently too weak for prices in this range.

Figure 14. World liquids consumption growth is decreasing with increasing oil prices. Source: EIA and Labyrinth Consulting Services, Inc.

Growth occurred only when oil prices were below disturbingly low thresholds. Declining consumption growth is the likely cause of persistent high inventory levels and range-bounded prices.

The dream of Saudi America has fallen on hard times since oil prices collapsed. Persistent and often misleading claims about technology, efficiency and lower cost have kept hope alive for true believers. The truth is that production costs are more than oil prices. The present situation cannot be sustained without even more carnage in the oil industry.

Investors have identified the plays and companies that are in the best position to survive and they are in the Permian basin. As the field of attractive companies dwindles, more short-term investment is directed toward the perceived winners. These favored companies can go to the capital markets more or less at will with new stock or bond offerings and easily raise hundreds of millions to billions of dollars. This allows them to continue drilling and spending, and accounts for the upsurge in Permian rig counts at the beginning of every new price cycle.

Those who bought stock in Permian-weighted companies made a good profit this month. Those companies are attractive to investors not because of their underlying financial strength. It is because they satisfy the reach for yield that is no longer met by Treasury bonds or other conventional investments in a low-interest rate and low-growth economy.

Like the companies, the Permian plays are attractive mostly because they don’t lose as much money as the other tight oil plays and have a better growth story. They are the best of a bad lot. But they still lose money at oil prices less than $50 to $60 dollars per barrel at the wellhead. There is about a $5 differential between Permian wellhead and benchmark price so $55 to $65 per barrel WTI prices are needed for Permian tight oil plays to break even.

Permian basin tight oil production will peak around 1 million barrels per day and begin to decline in the mid-2020s based on our models. Those models assume a return to $75 to $80 oil prices in the next 3 to 5 years and that capital will be readily available to fund ongoing drilling. If either assumption is too optimistic, the plays will peak later but will not produce any more oil. The Permian basin has good, prolific plays but it is no Saudi Arabia.

The Bakken and the Eagle Ford were all the rage for investors until lower-for-longer oil prices were accepted as the new reality during the second half of 2015. Now, investors believe that the Permian basin is the only place with profitable plays at low oil prices. Eventually, they will tire of the Permian also and may be lured back to the Eagle Ford or Bakken by some new tall tale about technology or efficiency.

Investors will provide capital as long as the stock plays earn them the yield that they need. Companies will dress themselves and their plays up in order to compete for the capital offered.

Meanwhile companies continue to produce about 3.5 million barrels per day of tight oil that loses money on each barrel.

With every new price rally, investors and companies think that this time oil prices will finally recover to a level where the companies can make money again. But with every price rally, rig counts and production increase, demand falters, inventory rises and prices fall back.

It is Einstein’s definition of insanity–doing the same thing over and over again and expecting a different result.

It is race to the bottom.

via Tyler Durden

This Couple Isn’t Charged with a Crime. The State of Michigan Is Taking Their House, Anyway

MarijuanaKenneth and Mary Murray operate a medical marijuana dispensary in Traverse City, Michigan. The state is currently trying to take their home under civil asset forfeiture laws—even though the couple hasn’t been charged with any crime.

Kenneth Murray has been accused of selling marijuana to people who weren’t his patients—these people were licensed to consume marijuana, but were obligated to purchase it through a different vendor, according to state law. Murray was previously convicted of manufacturing an imitation controlled substance, but a slew of other charges against him—including “maintain a drug house”—were dismissed, according to The Traverse City Record-Eagle. The paper notes, “No criminal charges are pending against him in Grand Traverse County, where he has been convicted of no drug-related crimes.”

And yet the state of Michigan has filed a complaint against the Murrays, which would allow the cops to take $3,863—and their house.

The state’s anti-drug task force argues that the Murrays’ funds are “ill-gotten gains” from the drug trade. But even if that’s true, the government should have the burden of proving it in a court of law. It shouldn’t have the authority to confiscate property from citizens before they are found guilty (or even accused) of a crime.

The Mackinac Center for Public Policy’s Jarrett Skorup says the Murrays’ situation is an indictment of the asset forfeiture system:

“We don’t know if this couple is guilty of profiting from crimes in order to make money and buy a house,” Skorup told Reason. “And that is precisely the problem with the way forfeiture works in Michigan and too many other states—law enforcement is able to seize and forfeit assets without proving someone’s guilt. If this couple was locked up without due process, people would be outraged—we should also be outraged that the government can take ownership of someone’s property despite never convicting them of a crime.”

from Hit & Run

The First Victims Of The Libor Surge Have Emerged… In Japan

When we last looked at the blowout in US short-term funding rates, most notably Libor, which has been broadly attributed to regulatory reasons ahead of the October 14 money fund reform deadline, we pointed out that with trillions in debt tracking Libor, it was only a matter of time before something snapped.

Since then Libor has slowed down its dramatic ascent, so far plateauing in the low 0.8% range, however, the materially “tighter financial conditions” have remained.


Yet while many have been looking for clues in the US banking sector about financial stress, they have been so far unsuccessful. The reason for that, as IFR reports, is that they were looking in the wrong place.

Instead, it is not US but Japanese megabanks who have emerged as the biggest victims of a worsening squeeze in the US $1 trillion commercial paper market, “as high swap costs leave them with few satisfactory alternatives for dollar funding.”

As we reported a month ago, investors have pulled billions out of prime money-market funds ahead of new Securities and Exchange Commission (SEC) regulations aimed at preventing a repeat of the liquidity crisis following the collapse of Lehman Brothers in 2008. In anticipation, investors have slashed their allocations to prime funds, the main buyers of commercial paper and certificates of deposit from corporations, including Japanese lenders.

So far US banks have escaped largely unscathed, but the higher funding costs and shrunken market are hitting Japanese banks particularly hard, IFR reports, as they have been sourcing as much as a third of their U.S. dollar liquidity in the short-term U.S. market. Citigroup estimates Japanese banks have about $125 billion to $150 billion of CP and CDs maturing before the end of September.

Adding Libor surging insult, to profit-draining NIRP injury (recall that Japanese banks have seen their profits shrink as a result of the BOJ’s recent implementation of negative rates), rising U.S. dollar funding rates pose a further threat to profitability at Japanese banks. Corporate clients are also at risk, as lenders look to pass on the higher costs.

To be sure, some Japanese lenders have been trying to pre-empt the blow from reforms and the Libor blow out. Sumitomo Mitsui Financial Group cut its global CP and CD funding by $7 billion in the year to June, while a $28 billion jump in deposits outpaced a $19 billion increase in lending globally, according to Deutsche Bank. As a result, its loan-to-deposit ratio shrank from 149.6 percent in March 2015 to 135.5 percent at end-June. Mitsubishi UFJ also saw its ratio fall to 115.1 percent from 117.8 percent in March 2015 on the back of a rise in deposits.

In the short term, however, Japanese lenders will be unable to raise enough from deposits to replace the U.S. money markets. Prime money-market funds slashed their holdings of Japanese securities to $115 billion at the end of July, down 25% from $153 billion two months ago, according to ICI. Previously second to only the U.S. by country of issuer, Japan has now fallen to third behind France.

Being increasingly locked out of money markets means that beyond paying up subsantially for U.S. dollars, Japanese banks have few options. Leverage requirements mean global banks are reluctant to provide repos, while foreign-exchange swaps would be a more expensive way to access U.S. dollar funding, said Koichi Sugisaki, a rates strategist at Morgan Stanley MUFG Securities. Three-month CP and CDs now cost roughly 80bp-90bp on an annual basis, but three-month FX forwards have also become more expensive at around 1.5 percent per year, he said.

The surge in Libor, which has also resulted in a spike in the cross-currency basis, has also meant that Japanese buyers are increasingly shying away from US Treasuries which when fully FX hedged no longer generate a notably yield pick up as we reported earlier.

FX hedging costs are at their highest since the financial crisis. The three-month JPY/USD forward is now at -39 pips, the lowest since December 2008. The more negative the reading, the more expensive it is for Japanese issuers to swap yen to U.S. dollars. It also means that the shortage of dollars, from a Japanese perspective, has never been greater.

Rising Libor rates could push FX swap rates out further by the end of this year, Sugisaki estimated. “An increase of the cost of funding in CP and CDs would be definitely negative for the banks,” he said. “For the Japanese banks, it’s going to be very tough.”

One option for Japanese banks is to access US dollar bond funding, by directly selling short-dated, US-denominated bonds, which could provide Japanese banks with some respite from short-term dollar funding pressure. “Japanese banks could consider issuing short-end bonds from the operating bank level in the future to meet short-term liquidity needs as an alternative to CP/CDs,” said Masanori Kato, head of debt capital markets for J.P. Morgan in Tokyo. “Short-term notes would be a possible alternative avenue, and demand would be there for it as Japanese banks are seen as a safer haven due to Brexit concerns.”

He suggested that, although it was difficult to say whether issuing U.S. dollar bonds could be cheaper than using FX forwards, the possibility remained that U.S. dollar bond funding might become more  competitive. Some high-rated European banks have already taken this approach, finding that two-year or three-year bonds offer similar funding costs to CP. 

However, as IFR notes, this option will have to be tested first, as Japanese banks have rarely issued U.S. dollar bonds at tenors of less than three years. 

The strain on short-term funding is not expected to end soon, with Citigroup estimating that three-month Libor could rise another 5bp-10bp before October 14.

In the absence of cost-effective alternatives, Japanese banks will have to continue issuing CPs at a higher cost, pressuring their profit margins, leading to an even greater shortage of US dollars, higher Libor rates, and so on, until the Libor spike spills over across the Pacific and claims its first US and European banking victims.

via Tyler Durden

New Poll in Shockingly Competitive Utah: Trump 39%, Clinton 24%, Johnson 12%, McMullin 9%

It's happening!!! By which I mean he is in 4th place in his home state, which is one of the only ballots on which he'll appear. ||| The Evan McMullin campaignPublic Policy Polling has just come out with new numbers from the most safely Republican state in modern presidential politics: Utah. In a six-name contest, Republican Donald Trump beats Democrat Hillary Clinton 39 percent to 24 percent, with the also-rans headed up by Libertarian Gary Johnson (12 percent), independent candidate Evan McMullin (9 percent), the Constitution Party’s Darrel Castle (2), and Green Jill Stein (1). Fourteen percent of poll respondents remain undecided, which is high by national standards.

The survey represents the first blip on the polling radar for McMullin, and surely comes as a blow to Johnson, despite showing him only a tick down from his previous polling in the state. The Libertarian’s campaign is headquartered in Utah, and much of his regional strategy centers around the Beehive State (on which more below). The pollsters had further sport by asking voters to assess a Clinton/Trump-free ballot, only this time with Deez Nuts and Harambe added. Results: Johnson 18%, McMullin 14%, Stein 5%, Deez Nuts 4%, Darrell Castle and Harambe tied at 3%, and “not sure” taking the cake with 54%.

But the forehead-smacking headline, even on a poll which features a 15-point advantage for Trump, remains that Utah has been even remotely competitive this cycle. Of the five statewide presidential polls taken since the end of May, Trump has yet to top today’s 39 percent, while Clinton was tied in one survey and down just three percentage points in another. Johnson has remained in double digits each time, perhaps soon to be joined by McMullin.

Here’s how crazy that is. Take the 2016 candidates’ average percentages across those five polls—Trump 35.2, Clinton 27.4, Johnson 13.4—and compare them to the last 10 presidential results in Utah (Libertarians in bold):

2012: MR 72.6 BO 24.7 GJ 1.2

2008: JM 62.2 BO 34.2 CB 1.3

2004: GB 71.5 JK 26.0 RN 1.2

2000: GB 66.8 AG 26.3 RN 4.7 PB 1.2

1996: BD 54.4 BC 33.3 RP 10.0

1992: GB 43.4 RP 27.3 BC 24.7 BG 3.8

1988: GB 66.2 MD 32.1 RP 1.2

1984: RR 74.5 WM 24.7

1980: RR 72.8 JC 20.6 JA 5.0 EC 1.2

1976: GF 62.4 JC 33.7 PG 2.5

(Bonus points if you can name ’92’s “BG” and ’76’s “PG” without looking.)

As you can see, Mitt Romney’s massive 48-point win in 2012 was not some kind of freaky Mormon outlier—Utahns went by similar margins for George W. Bush in 2004, and even bigger ones for Ronald Reagan twice. And unlike, say, Alaska, there’s no demonstrable third-party kink, with the lone exception of Ross Perot beating his national spread by nine percentage points in 1992. Libertarians only cracked the 1.0 percent threshold in 2012, 1988, and 1980.

Utah is key to Gary Johnson’s aspirations. The campaign has held rallies there, focused its regional media strategy on the Salt Lake City market, and has been endorsed by a Utah state senator. Mitt Romney in June said he would consider voting Libertarian, and Johnson tried to lubricate that decision on Friday by guaranteeing Romney a slot in his prospective Cabinet (as well as saying that Utah Gov. Mike Leavitt would be “an ideal secretary of state”). The Utah delegation was among the most mutinous at the Republican National Convention, with delegates telling Anthony Fisher they were thinking about voting Libertarian, and Sen. Mike Lee telling me that he has “never anticipated voting for anyone who is not a Republican, particularly in a presidential contest,” but that Trump “has yet to win me over.” McMullin’s success, too, underlies that the Republican nominee, even while maintaining his lead, has a miserable 31%/61% favorability/unfavorability rating in the state.

So what’s the matter with Utah? The simplest explanation is probably the best: As The New York Times recently headlined it, “Mormons’ Distaste for Donald Trump Puts Utah Up for Grabs.” A state dominated by a long-persecuted religious minority is a bit tetchy about a candidate who has singled out Muslims for policy discrimination and attempted to build a Silent Majority-style campaign. Mormons value modesty, restraint, and thrift; Trump values ostentatious flourishes and relentless self-branding atop an empire fueled by debt. It’s no surprise, for a number of reasons (including ideological principle) that prominent Senate Mormon Jeff Flake (R-Arizona) is not supporting Trump.

So how is Trumpworld handling this? Earlier this month, the candidate himself acknowledged he has a “tremendous problem in Utah,” which he attempted to chip away at with an op-ed last week for the Deseret News, where he stressed restoring “conservative values” and accused Democrats of trying “to undermine our religious liberties.” But there have been less diplomatic statements emanating from his camp.

Over the weekend,, the house organ for Trumpism, ran a piece by former marginal GOP presidential candidate and longtime anti-immigration activist Tom Tancredo titled “Will the Mormon Church’s Support for Muslim Immigration Block Trump’s Victory?” Excerpt:

The truth is more simple, as is often the case in politics, and it has nothing to do with religious freedom as practiced by Americans under the First Amendment of the U.S. Constitution.

It is an open secret in Washington, D.C. that the Mormon church supports open borders and lax enforcement of immigration laws. Many Mormon politicians have been supporting amnesty and open borders for decades. […]

ISIS leaders must be rolling in the mosque’s aisles in uncontrolled laughter over the Mormon concern over Muslim immigration, considering that religious liberty is the first casualty wherever radical Islam and Sharia are enforced. […]

Why is it suddenly an affront to religious liberty to say with Supreme Court Justice Robert H. Jackson, “The Constitution is not a suicide pact”?

Will that kind of Trumpian belligerence make Utah competitive? Don’t bet on it: FiveThirtyEight currently puts Trump’s odds of winning the state at 97.4 percent. But with Johnson and McMullin both focusing their energies there, and with at least the remote possibility of forthcoming third-party endorsements by respected Utahns, there’s still a Jim Carrey-like chance. Which is borderline astonishing.

from Hit & Run

Gary Johnson on Climate Change and a Carbon Tax

GaryJohnsonJimThompsonZUMAPressNewscomFirst, my claim is anything that you may think of as an environmental problem is the result of a defect in property rights. Basically, environmental problems occur in open-access commons where the incentive is to plunder a resource before anyone else can beat you to it. This includes unowned fisheries, wild game, rivers, estauries, forests, and the atmosphere. There are two ways to handle problems of overuse and abuse in open access commons: Recognize or assign property rights to the resource or regulate the resource. Some resources are more easily enclosed than others, e.g., fisheries, rivers, and forests.

It is arguably much more difficult to assign property rights to the global atmosphere. As a consequence, the nations of the world agreed in 1987 to regulate and ban the substances that where eroding the stratospheric ozone layer that protects the earth’s surface from dangerous UV sunlight.

So what about climate change? It is a fact that all temperature data sets agree that the globe was been warming in recent decades ranging from a low rate of 0.12 to a higher rate of 0.17 degrees Celsius per decade. In addition, all data sets agree that this past July was the hottest month ever recorded. For a review of the debate over man-made climate change, see my article, “What Evidence Would Persuade You that Man-Made Climate Change Is Real?“, as well as refutations of my arguments.

In any case, Libertarian presidential candidate Gary Johnson agrees with me that man-made climate change is happening. Furthermore, Johnson in a CNBC interview also suggested that a carbon tax might be a “very libertarian proposal” to address the open access commons problem of climate change. Johnson is tentative, saying that he is “open” to considering a carbon tax. He specifically notes that a carbon tax would be a simple comprehensive way to replace all sorts of clunky expensive top-down centralized regulations and subsidies that aim to limit carbon dioxide emissions. Johnson’s thinking that a carbon tax might be a useful way to handle the open access problem of climate change is in line with that of some groups who are part of the larger free market intellectual movement.

I discuss the pros and cons of a carbon tax in my article, “Can a Carbon Tax Solve Man-Made Global Warming?” Over at Scientific American I explore how speeding up economic growth can solve climate change. I argue:

[F]aster economic growth provides the wherewithal to spur innovation and create cheaper and more efficient technologies. Swanson’s Law is an example of increasing economies of scale: Every time global solar panel production capacity doubles, the price drops 20 percent. At the current rate of growth, electricity from solar panels will be cheaper than that produced by burning natural gas in less than a decade. Similarly, climate scientist James Hansen and his colleagues have urgently argued that there is “no credible path to climate stabilization that does not include a substantial role for nuclear power.” A recent study published in PLoS ONE by Swedish and Australian researchers estimates that replacing all fossil fuel energy generation with nuclear power could be done in 25 to 34 years. Economic growth supplies the capital needed to fund the global no-carbon energy transformation, not mandates to deploy current, expensive, clunky versions of renewable energy and nuclear technologies.

A Johnson/Weld administration is far more likely than either a Trump or Clinton adminstration to adopt just the sort of free market policies that would speed up economic growth and technological progress. As a second-best proposal for handling the open access commons problem of climate change, a revenue neutral carbon tax makes considerably more sense than the current mess of federal and state regulations and subsidies and taxes.

from Hit & Run

Seattle Considers Safe Space for Heroin Use

HeroinSo what is the line between allowing people to do what they want with their bodies—including addictive and/or dangerous drugs—and using public policies and funds to facilitate it? And what’s the line between policies that help protect public health and reduce public harms and those that fund behavior many believe to be self-destructive?

Seattle is considering where those lines might be drawn in a proposed program to create a safe space for the consumption of heroin. A special task force created by the city to focus on heroin addiction is recommending something even more accommodating than a needle exchange program. They propose a supervised facility where heroin addicts could get clean needles, shoot up, and access medication to prevent overdoses. They’d also be able to use the facility to get treatment.

The goal is to figure out what to do with the addicts among Seattle’s homeless population. Seattle is trying to reduce the size and scope of its version of Skid Row, known as The Jungle. The city has reduced the population of people living there, but of those who remain, The Seattle Times reports, many are addicts:

[Seattle Mayor Ed] Murray has proposed a dormitory-style homeless shelter modeled after San Francisco’s Navigation Center that would allow pets, partners, storage for personal belongings, and intoxicated residents — unlike some shelters — as a way to coax residents out of encampments.

The model is helpful, said Kris Nyrop of the Public Defender Association (PDA), which also supports safe-consumption sites. “But you need to allow people to use on-site, so they don’t in an alley or back in The Jungle,” said Nyrop, an outreach worker and drug-policy researcher in Seattle for two decades.

As an example of how this could all work out, they point to a facility that houses alcoholics that allows them to seek treatment on-site but also allows them to consume alcohol in their rooms. That’s a model that runs at odds to most rehab or treatment facilities.

Some tend to resist the idea because it has a very strong whiff of taxpayer-subsidized vice. The libertarian ideal is to get the government out of looking at drugs and addiction as an excuse for punitive responses. That doesn’t necessarily mean we want to bankroll the opposite instead.

But supporters point to a study by the Journal of the American Medical Association (JAMA) that calculates this alcohol-friendly facility ultimately saved the taxpayers $4 million annually in “housing and crisis services.” And it has reduced alcohol consumption among participants.

It still ultimately sounds like it could be better than what some folks are presenting as an alternative to incarceration, coercing them into mandatory drug treatment programs that are punitive in their own ways. And as a story from Missouri shows, court-mandated programs can actually put clients in a position where they can be coerced and abused by police officers looking for people to bust.

from Hit & Run

Media Worried Too Many Americans Will Question Legitimacy Of 2016 Election, Blame Trump

Submitted by Nick Bernabe via,

2016 is the year many, many Americans began to question whether or not our elections, and to a lesser extent, our democracy (insert “it’s a constitutional republic, big difference!” here) are rigged. As I’ve argued many times in the past year, there is plenty of evidence suggesting these skeptical Americans are, indeed, onto something with their suspicions.

But the corporate media has come out in defense of America’s “democracy” – and political elites are defending the system, too. In the wake of Trump’s recent rhetoric regarding the “rigged” system, the ruling class of the United States is peddling the fiction that somehow Trump’s irresponsible sensationalism is solely to blame for the newfound feelings of illegitimacy plaguing our elections.

Take, for example, Monday’s POLITICO piece entitled “What if Trump won’t accept defeat?”:

“Trump’s [rigged election] words are having an effect. Just 38 percent of Trump supporters believe their votes will be counted accurately, and only 49 percent of all registered voters are ‘very confident’ their votes will be tabulated without error, according to a Pew Research survey last week.”

You see, according to the corporate media, the only reason Americans think their elections are rigged in one way or another is because Trump said so. It has nothing to do with the explosive DNC email leaks that showed the Democrats manipulated the corporate media in favor of Hillary Clinton. It has nothing to do with superdelegates who get to override the voters. It has nothing to do with the Republican establishment choosing to shut down Colorado’s primary, handing all the delegates to Ted Cruz. It has nothing to do with now-former DNC chairwoman Debbie Wasserman Schultz admitting the role of superdelegates is to fend off grassroots political challengers. It also must have nothing to do with an RNC committee member openly wondering why the Republican Party has primary elections to begin with since the party chooses the nominee anyway — not the voters. That makes sense, right?

And while Bernie Sanders fades into the matrix with his endorsement of Hillary Clinton and recent decision to hit the campaign trail for her, many of his supporters feel the same way Trump supporters feel. The Democratic primary was rife with inconsistencies, voter suppression, and suspect voting machines — all of which have culminated into several high-profile lawsuits alleging wrongdoing by the DNC. Coincidentally, Shawn Lucas, the man who was spearheading one of the lawsuits, was recently found dead on his bathroom floor. But this is all Trump’s fault, right? Or maybe Russia’s?

But rest assured, as POLITICO notes, even though voting inconsistencies became famous in the 2000 Bush v. Gore presidential election, Gore was a good boy and didn’t bother questioning the findings. He did the right thing and conceded defeat despite vocal cries from his ardent supporters that he contest the election.

What’s interesting is that according to the Emmy-nominated HBO documentary Hacking Democracy, which followed the trail of investigators in Florida in an attempt to get to the bottom of the voter inconsistencies, the Gore campaign was made aware of verifiable issues with the vote counts but still encouraged the investigators to drop their cause and shut up. They were silenced by the candidate they were trying to help. This is what Trump should do if there are any questionable results in November, POLITICO suggests.

And boy, does Trump hate the media. He says it all the time. So much so that POLITICO thinks Trump could single-handedly do irreparable damage to the institution of mainstream media this election. This is yet another fiction being peddled by the self-serving corporate media. Instead of owning up to its waning trust among the general public, they would rather play the blame game. You see, long before Trump hit the 2016 political circuit, Americans had already started to lose trust in the corporate media. In September of 2014, Anti-Media reported, Americans’ trust in the media had reached an all-time low. As of October of 2015, only 7 percent of the country had a “great deal” of trust in the mainstream media — but this must be Trump’s fault. Or maybe we can pin this on Russia, too.

Another recent development that in my opinion doesn’t prove the elections are rigged per se — but rather, that they are illegitimate — is the overwhelmingly small turnout of voters who nominated both Donald Trump and Hillary Clinton. The two of them combined only attracted nine percent of the general public to vote for them in the primaries, meaning less than a tenth of the U.S. population anointed the nominees, one of whom will eventually be ruling over all Americans. Americans are hardly excited to get out and vote in elections nowadays — possibly because after years of believing unrepresentative politicians’ empty promises, they think the whole process has become futile.

But none of this really matters, anyway, since the U.S. is no longer a democracy or  constitutional republic. It’s an oligarchy. In short, as a 2014 Princeton University study concluded, “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.”

But again, as POLITICO notes, it’s not the actions of the oligarchy or the corporate media that have led voters to question the legitimacy of the system — it’s Trump’s words.

“…[M]any Republicans [elites] fear that Trump’s efforts to diminish people’s confidence in mainstream media, fair elections and politics itself will have a lasting impact,” POLITICO observes.


“‘The damage this is going to do to various institutions is going to be long term,’ said Charlie Sykes, a prominent conservative radio host in Milwaukee who has been one of the country’s most outspoken and consistent anti-Trump voices. ‘How do you restore civil discourse after all of this? He is a postmodern authoritarian who’s in the process of delegitimizing every institution – the media, the ballot box – that can be a check on him.’”

But what if it’s the oligarchic political system and the corporate media that have delegitimized themselves, and not some manufactured Trump conspiracy that has suddenly turned half the country into skeptical anti-establishment rebels? Maybe the corporate media’s collusion with the corporate government is the real conspiracy. Or maybe we should stop complaining and just blame Russia and Julian Assange — that seems a lot more convenient to the New York Times.

via Tyler Durden

Song Xin: Increase Gold Reserves And Join SDR.

The Chairman of the China Gold Association and General Manager and Party Committee Secretary of China National Gold Group Corporation, the latter being China’s largest gold mining enterprise, is Song Xin and happens to be one of my favorite commentators in China. This gentleman made waves in July 2014 when he candidly wrote on Sina Finance that the People’ Bank Of China (PBOC) should slowly raise its official gold reserves to 8,500 tonnes, more than what the US Treasury claims to hold. The article was published in Chinese but translated by BullionStar to share the views by Song Xin with the English speaking world:

For China, gold’s strategic mission lies in the support of renminbi internationalization, and so let China become a world economic power and make sure that the China Dream is realized. … gold forms the very material basis for modern fiat currencies.  Gold is the world’s only monetary asset that has no counter party risk… That is why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US.

In the next translation further below you will read more on how Song Xin views gold’s role in China’s financial strategy. The bullet points from the article:

  • China continuously accumulates gold reserves to support and accelerate renminbi internationalization.
  • Renminbi confidence and gold are closely related. Gold reserves are the cornerstone for renminbi internationalization.
  • In modern times gold plays an important role in managing economic risk and maintaining China’s financial safety.
  • China is continuously increasing its official gold reserves in conjunction to joining the SDR.
  • The ratio of China’s official gold reserves to its GDP should be more in line with the US and other developed countries. At this moment China’s official gold reserves are still relatively low.
  • The Silk Road economic project, also called “One Belt and One Road” (OBOR), has huge development opportunities for the Chinese gold industry. Song Xin mentions that the in ground gold reserves of countries along OBOR reach 21,000 tonnes. In 2015, witnessed by Chairman Xi Jinping and President Putin, China National Gold Group Corporation and Russia’s largest gold mine Polyus have signed a strategic cooperative agreement and they are promoting detailed relevant cooperative issues at present.

What he didn’t mention is that China is striving to boost gold trade along OBOR to be settled in renminbi through the Shanghai International Gold Exchange.

Is The SDR A Means Or And End For China? 

In the mainstream media we often read China wants the SDR to replace the US dollar as the world reserve currency, based on statements from PBOC Governor Zhou Xiaochuan – among others:

Special consideration should be given to giving the SDR a greater role. The SDR has the features and potential to act as a super-sovereign reserve currency.

Since 2009 China has vigorously pressured the IMF for renminbi inclusion into the SDR. Finally, in 2015 the IMF decided the renminbi would be added to its currency basket in October 2016.

Zhou and other prominent economists at the PBOC are clearly pushing the SDR, but what’s China’s exact strategy?

In advance of the official inclusion of the renminbi into the SDR, which will take place on October 1, 2016, developments regarding the International Monetary Fund's synthetic reserve currency are unfolding rapidly.

Author of the Big Reset, Willem Middelkoop, reported this August a “Substitution Fund” is being discussed in the higher echelons of the monetary elites, to facilitate dollar exchange for SDRs outside the market, and thus creating an escape from dollar reserves without putting downward pressure on the dollar.

Also in August, The PBOC allowed a division of the World Bank (the IBRD) to issue bonds denominated in SDRs in the Chinese market. The bonds worth $2.79 billion dollars can be created “soon” – presumably within a month. In addition, the Chinese government-linked China Development Bank will issue SDR notes worth somewhere in between $300 million to $800 million dollars. Both issues are “SDR-denominated financial market instruments” called M-SDRs by the IMF. Though experts think the M-SDRs will encounter many practical challenges when implemented and demand will be tepid, nevertheless the intention by the PBOC to launch these instruments is clear.

On the surface we can observe China has a vast interest in the SDR, but is the SDR a means or an end for China? What if China is simply using the SDR as a vehicle to achieve other objectives? For example:

  1. Dethroning the dollar. The SDR can be an excellent tool to unwind the dollar hegemony. In addition the Substitution Fund could help an orderly exit from China’s lob-sided dollar reserves.
  2. Internationalize the renminbi. Inclusion of the renminbi into the SDR boosts global renminbi acceptance as a reserve currency.
  3. Reduce capital outflows from China. With respect to M-SDRs, David Marsh of financial think tank the Official Monetary and Financial Institutions Forum (OMFIF) wrote:

Beijing’s SDR capital market initiative will allow domestic Chinese investors to subscribe to domestic bond issues with a significant foreign currency component, which will help dampen capital outflows… 

I think for China the SDR is just a means to an end. The end being to internationalize the renminbi, which of course is connected to the dollars retreat. And as Song Xin clearly states, “gold forms the very material basis for modern fiat currencies” and, “gold reserves should become the cornerstone … for renminbi internationalization”.

In my humble opinion the financial crisis has shown (once again) the inherent flaws of all fiat currencies. A bundle of some of these currencies will not solve the problems ahead of us; at best provide tools or a next level printing press. I still prefer gold as a store of value.

I find it interesting that Song Xin mentions the importance of the ratio between China’s official gold reserves and GDP. This concept was also brought forward by Jim Rickards. If the PBOC would have 5,000 tonnes of official gold reserves their “gold to GDP ratio” would be roughly on par with to the US, Europe and Russia.  One of the theories about our current international monetary system – that was detached from gold in 1971 – is that it can shift to a new gold anchored system when the power blocks have equalized the chips (Jim Rickards). In other words, if the US, Europe, Russia and China all have a roughly equal ratio of official gold reserves to their GDP, the international monetary system could make a transition towards gold.

Global gold vs GDP

According to my estimates the PBOC has roughly 4,000 tonnes in official gold reserves, in contrast to what is publicly disclosed at 1,800 tonnes. Perhaps the PBOC is "nearly there".

Song Xin who was also a speaker at the “Renminbi Internationalization and China’s Gold Strategy Seminar” in Beijing on 18 September 2015.

Original source of the article below is the China Gold Association website. [Brackets added by Koos Jansen]

Song Xin, Chairman of the China Gold Association, General Manager and Party Committee Secretary of the China National Gold Group Corporation: Stick to the gold mission and boost innovative development

March 14, 2016

As the sole central enterprise in the gold industry, China National Gold Group Corporation is a firm defender of renminbi internationalization, pioneering demonstrator of the country’s “One Belt and One Road”, and faithful guardian of a happy life for people. It’s the direction that we should strive for.

On March 10 during the two assemblies, Song Xin, Chairman of the China Gold Association, General Manager and Party Committee Secretary of the China National Gold Group Corporation, was the guest in Xinhuanet’s 2016 two assemblies special Interview. In the program Dialogue with New State-owned Enterprises and Cheer up in the “13th Five-Year Plan”, he proposed the conclusions above. Besides, in the in-depth dialogue, Song Xin systematically illustrated topics including the functions of renminbi internationalization, effectively enhancing gold supply, realizing improved quality and efficiency of enterprises, practicing the central party’s “Five Development Theories”, and fulfilling the responsibilities of central enterprises.

About Gold’s Functions: Increase Gold Reserves And Accelerate Renminbi Internationalization. A Close Relationship between Increasing Gold Reserves And Joining The SDR

When the credit lines of paper currency declines and there are enough gold reserves, people can be less worried about the existing credit system and enhance their confidence in the currency.

Last year, China joined the IMF (International Monetary Fund) Special Drawing Rights (SDR), signifying the renminbi's march towards internationalization.

Song Xin pointed out that the renminbi is closely related to gold. Gold is priced in US dollars throughout the world and in renminbi in China. There is a special relation between the renminbi and gold. We have continuously increased gold reserves since China strove to join the SDR basket of currencies. By the end of February this year, our gold reserves have increased to 1788.45 tonnes. In other words, China has continuously increased its official gold reserves and publicized the amount to the world, keeping a close relation with renminbi internationalization and joining the SDR.

Song Xin 2016:07:26

Further increase gold reserves to adapt to economic strength

China’s existing gold reserves are only about 1/5 of America’s. With the acceleration of renminbi internationalization, the renminbi should further increase its gold reserves in order to reach a level matching the national economic aggregate [GDP], especially if the renminbi wants to become a global currency.

Song Xin mentioned that China’s gold reserves once maintained around 1,054 tons. In the second half of last year, it started to increase these reserves substantially. Now, it has been increased by 70%. The increase range is big, but small compared to that of developed countries. At present, our economic aggregate [GDP] reaches second place in the world, but our gold reserves only reach the sixth place in the world. If the IMF’s reserves are excluded, China’s reserves rank in fifth place according to national rankings.

Possessing sufficient gold can strengthen confidence in a currency

Song Xin said, “There is a remarkable distance between China’s gold reserves and America’s gold reserves. America’s gold reserves are 8,133 tons and it even reached over 20,000 tons before. In those days, America controlled most of the gold in the world, which laid an important foundation for the US dollars to become a global currency.”

Before the Bretton Woods system was disintegrated in the 1970s, gold was directly connected with the US dollar. After the Bretton Woods system was corrupted, gold was disconnected from the US dollar, but America still kept sufficient gold reserves.

Song Xin believes that it has a relation with the global governing system. When the global economic aggregate was not so big, the gold standard had a certain advantage. With the expansion of the economic aggregate, the Bretton Woods system was disintegrated, and gold was disconnected from the US dollar. America announced that gold was unimportant then under this circumstance. However, in fact, when a financial crisis happens in America, its gold reserves don't reduce at all. Americans firmed up people’s confidence in the US dollar by sufficient gold reserves.

Talk about supply reform: increase the effective supply of gold to boost quality and efficiency of enterprises rather than excess capacity, the gold industry needs to increase supply

In 2015, our domestic gold mine output reached about 450 tons, ranking the top in the world for nine consecutive years. Meanwhile, gold [retail] consumption reached almost 986 tons, surpassing India for three consecutive years and becoming the largest gold consumption country in the world.

Song Xin mentioned that our gold production can’t satisfy consumption demand and it doesn’t include the central bank’s reserves. Therefore, for the gold industry, increasing gold production and rapidly supplementing the gap above are the important missions for the gold industry.

Regarding how to increase the effective supply of gold, Song Xin believes that enterprises in the gold industry should offer more suitable marketing paths, especially customers’ favorite gold jewelries and gold investments with cultural connotation and innovation.

Maintain national financial safety and fulfill political responsibility 

“The political responsibility of the China National Gold Group Corporation is to make enterprises strong, excellent and big. Besides that, it is also to allow staff to enjoy the achievement of enterprise development. More importantly, it is to increase the effective supply of gold, to satisfy the demands of people and country for gold products, and to maintain the healthy and harmonious development of the industry”, said Song Xin.

Song Xin introduced that gold played a very important role in different historical periods. In the revolutionary war period, the underground party delivered abundant gold to Yan’an from the Jiaodong base area in order to get medicine and materials, playing a positive role for the Communist Party to gain victory. In the beginning of reform and opening up, the country’s foreign exchange was in a shortage and our country vigorously increased gold productivity, once amounting to 70% of the whole country’s foreign exchange reserve which is mainly for gold swap transactions and purchasing devices, etc. and guaranteeing foreign exchange demand of economic development. In the new era, gold has played an important role in resisting economic risk, maintaining the country’s financial safety and assisting with renminbi internationalization.

Song Xin thinks that the China National Gold Group Corporation shoulders the important mission of increasing gold reserves and production and adding trust for renminbi internationalization for the country. He said, “Gold reserves should become the cornerstone or ballasting stone for renminbi internationalization, which can improve the gold content of renminbi. In these aspects, the China National Gold Group Corporation is obligated to fulfill its own political duty.”

Chinese historic gold mining 1949 - 2015

Talk about “Five Major Development Concepts”: Explore Profound Meaning Based on Practical Conditions for Enterprise.

Make achievement in the “One Belt and One Road” With the implementation of “One Belt and One Road”, the China National Gold Group Corporation can accomplish a lot in “going out” and “going out” is an important constituent of our reform and opening up in the new era. “One Belt and One Road” has brought huge development opportunity for Chinese gold industry and enterprises. Song Xin mentioned that the gold [in ground] resources of countries along the “One Belt and One Road” reached 21,000 tons, taking up 41.5% in the world. The gold production of countries along the line reached 1,116 tons, occupying 1/3 in the world. In addition, 6 gold mines are located here among top 20 gold mines in the world.

“The consumption amount of gold jewelry in the area accounts for 82.4% of the global consumption amount. Physical gold item demand including gold bars takes up 77% of the global demand. Gold resource development potential and gold market consumption potential in the area are quite huge, bringing important strategic opportunities for Chinese gold enterprises”, he said.

Song Xin introduced that the China National Gold Group Corporation is constructing mines in Kyrgyzstan and Congo. Last year, witnessed by Chairman Xi Jinping and President Putin, China National Gold Group Corporation and the largest Russian gold enterprise have signed a strategic cooperative agreement and they are promoting detailed relevant cooperative issues at present. Meanwhile, they are preparing to export devices to countries along the “One Belt and One Road” including Russia and Kazakhstan. In the practice of open concept, China National Gold Group Corporation is comprehensive and systematical.

via BullionStar

FBI Probing If “Russian Hackers” Breached The New York Times, News Agencies

It's them Ruskies again! With pressure on Obama over his visit to Louisiana, and Hillary facing an avalanche of headlines over her "email crimes," it is time for a distraction… CNN reports, hackers thought to be working for Russian intelligence have carried out a series of cyber breaches targeting reporters at the New York Times and other US news organizations, according to US officials briefed on the matter.

The intrusions, detected in recent months, are CNN reports, under investigation by the FBI and other US security agencies.

Investigators so far believe that Russian intelligence is likely behind the attacks and that Russian hackers are targeting news organizations as part of a broader series of hacks that also have focused on Democratic Party organizations, the officials said.


The FBI declined to comment and a spokesperson for The New York Times would not confirm the attacks or the investigation.


"Like most news organizations we are vigilant about guarding against attempts to hack into our systems," said New York Times Co. spokeswoman Eileen Murphy. "There are a variety of approaches we take up to and including working with outside investigators and law enforcement. We won't comment on any specific attempt to gain unauthorized access to The Times."

Despite no actual proof, blame is quickly apportioned…

US intelligence officials believe the picture emerging from the series of recent intrusions is that Russian spy agencies are using a wave of cyber attacks, including against think-tanks in Washington, to gather intelligence from a broad array of non-governmental organizations with windows into the US political system.


The Times has brought in private sector security investigators who are working with US national security officials to assess the damage and determine how the hackers got in, according to the US officials.

And quickly the narrative is tilted against Trump…

Attention has grown on the hacks thought to be carried out by Russians since Wikileaks released a trove of emails stolen from the DNC in the weekend before the Democratic Party's convention to nominate Hillary Clinton for president.


US intelligence officials say there is strong evidence showing Russian intelligence behind the DNC hack. The Clinton campaign has claimed the hack as proof that the Russians are trying to aid the election of Donald Trump.

Nancy Pelosi "knows for sure" it's The Russians…

So what more do you need?

via Tyler Durden

8 Of 12 Regional Feds Voted To Hike Discount Rate In July, One Shy Of The 9 Last November

Back in April, when the world was still reeling from the China devaluation inflicted market slump, the Fed’s discount rate minutes for the months of March/April showed that 4 regional Feds wanted a 25 bps rate hike, up from just two  – the Richmond Fed and Kansas City – in the Feb/March meeting. One month ago the Fed released its May/June Discount Rate Minutes which revealed that both the St. Louis and Boston Feds joined four other regional Feds, Cleveland, Richmond, Kansas City and San Francisco, in seeking a quarter point increase in Fed discount rate to 1.25% prior to the June 14-15 FOMC meeting.

Then moments ago the Fed released its latest July 25 Discount Rate Minutes which revealed that two more regional Feds, Dallas and Philadelphia joined the six previously noted, in seeking a quarter point increase in Fed discount rate to 1.25 percent prior to the July meeting.

This means that as of a month ago, two thirds of all regional Feds were urging Yellen to hike the discount rate; they were the following: Boston, Cleveland, Dallas, Kansas City, Philadelphia, Richmond, San Francisco and St. Louis. Those who voted to keep discount rate at 1% cited argument that outlook and below-target inflation supported keeping current accommodation in place; banks were Atlanta, Chicago, Minneapolis, and especially the New York. Clearly they dominated the discussion.

Obviously, there was no rate hike, as the Fed chose to maintain its primary credit rate at 1%.

The regional directors who supported a rate hike increase did so in light of a “strengthening economy and expectations that inflation would move to 2% target.” They also saw saw the “economy continuing to expand at moderate pace, yet reports varied somewhat across sectors and districts.” Other factors listed included:

  • Several cited improvements in housing, on top of steady or increasing levels of consumer spending
  • Many said initial impact of Brexit vote and global financial developments on U.S. economy was limited; even so, some saw increased uncertainty about U.S. outlook
  • Several mentioned continued weakness in export-related industriesd

While labor mkt indicators improved, some directors saw variability in recent job gains; increasing tightness seen for certain positions, such as those in construction

From the minutes:

Subject to review and determination by the Board of Governors, the directors of the Federal Reserve Banks of New York and Minneapolis had voted on July 14, 2016, and the directors of the Federal Reserve Banks of Atlanta and Chicago had voted on July 21, to reestablish the existing rate for discounts and advances (1 percent) under the primary credit program (primary credit rate). The directors of the Federal Reserve Banks of Boston, Cleveland, Richmond, and San Francisco had voted on July 14, and the directors of the Federal Reserve Banks of Philadelphia, St. Louis, Kansas City, and Dallas had voted on July 21, to establish a rate of 1-1/4 percent (an increase from 1 percent). At its meeting on June 13, the Board had taken no action on requests by the Boston, Cleveland, Richmond, St. Louis, Kansas City, and San Francisco Reserve Banks to increase the primary credit rate.


Federal Reserve Bank directors generally indicated that economic activity had continued to expand at a moderate pace, though their reports varied somewhat across different sectors and Districts. Several directors cited improvements in the housing sector, as well as steady or increasing levels of consumer spending. Many directors stated that the initial impact of the recent U.K. referendum and the associated global financial developments on U.S. economic conditions had been limited. However, some directors noted increased uncertainty about the U.S. economic outlook stemming from these developments. Several directors also noted ongoing weakness in export-related industries. Labor market indicators were improving overall, but some directors pointed to variability in recent job gains. Many directors reported increasing tightness in the labor market for certain skilled positions, particularly in the construction sector. Inflation remained below the Federal Reserve’s 2 percent objective.


Against this backdrop, some Federal Reserve Bank directors recommended that the primary credit rate be maintained at its current level of 1 percent. In general, they judged that the economic outlook and below-target inflation supported maintaining the current accommodative stance of monetary policy. Other Federal Reserve Bank directors recommended increasing the primary credit rate to 1-1/4 percent, in light of actual and expected strengthening in economic activity and their expectations for inflation to gradually move toward the 2 percent objective.


Today, Board members considered the primary credit rate and discussed, on a preliminary basis, their individual assessments of the appropriate rate and its communication, which would be discussed at the meeting of the Federal Open Market Committee this week. No sentiment was expressed for changing the primary credit rate before the Committee’s meeting, and the existing rate was maintained. Thereafter, a discussion of economic and financial developments and issues related to possible policy actions took place.

* * *

So will 8 “dissenting” Feds be sufficient to push Yellen to move with a rate hike in September? We’re getting closer, although probably not without Bill Dudley’s New York Fed joining the chorus. Recall that on November 24, one month before the Fed did hike rates by 25 bps, 9 regional Feds requested a Discount Rate hike, or one more than currently. With 8 of 12 regional Feds on the same page as of this moment, it suddenly appears that a “dovish” Yellen may be having a small mutiny on her hands if she again ignores the majority.

via Tyler Durden