Precious Metals: Fake-Rally Ends, Hostage Markets Return

Written by Jeff Nielson

 

 

Back at the beginning of 2009, we had a real rally in the precious metals sector. The price of gold increased by roughly 2 ½ times. Silver led the way, rising more than double that amount. And the precious metals miners soared much higher, leveraging the gains in metals prices – as they must do, in any legitimate rally.

The rally occurred immediately after the Crash of ’08, the manufactured crash at the end of the Big Banks’ previous bubble-and-crash cycle. It occurred after a sharp, ruthless take-down of precious metals prices had established a clear “bottom” in those markets. That rally was terminated in 2011, by the Big Banks, in one of the most-obvious price-capping operations in the history of markets.

What has followed is 5+ years of what has previously been referred to as “Hostage Markets”: markets which were kept in a permanent choke-hold since that date, with prices grinding steadily lower and lower. This brings us to the beginning of 2016.

At the beginning of this year; the price of gold did something which we had not seen for several years: it went up. At the beginning of this year; the mainstream media did something which we had not seen for several years: it began praising gold as an asset class – and announced that “a new rally” had begun. The talking heads proclaimed that the “fundamentals” for gold were now bullish, and thus the price should start to steadily rise.

There was never any reason to consider this to be a real, spontaneous rally, and several strong arguments to conclude that this was an upward price-fixing operation of precious metals prices, to set the stage for a larger, general crash, at the end of the current eight-year, bubble-and-crash cycle from the Big Bank crime syndicate.

1) Nothing at all has changed in precious metals markets (except the rhetoric of the mainstream media) versus the last 5+ years.

2) Silver has failed to “lead the way”, as it must in any/all legitimate rallies.

3) The Big Banks remain in complete control of all markets.

Taking these reasons in order, mainstream propagandists have proclaimed that precious metals markets are now supported by bullish fundamentals. However, the “fundamentals” for gold and silver have remained equally bullish throughout the 5+ years where we were forced to endure Hostage Markets. In other words, any “reason” that could be made for gold and silver prices to rise now was equally valid, at all times over the past 5+ years.

“Technical analysis” (a pseudo-science with little statistical validity) would argue that the reason we are supposedly seeing a rally in 2016 is because gold and silver have “built a base” over the past 5+ years, and thus are now “ready” for the next leg higher, in their long-term bull market. However, this argument only applies to asset classes which have already risen to fair-market value.

In 2011, even after the large 2+ year rally in these sectors, neither gold nor silver was even close to any fair-market price . As “monetary metals” the primary fundamental of gold and silver is that their prices mustreflect any/all increases in the supply of money (i.e. “inflation”).

When B.S. Bernanke perpetrated his infamous “helicopter drop”, printing U.S. funny-money at an astronomical rate, never before seen in any large economy in modern history, he ultimately quintupled the U.S. monetary base. The price of gold would have had to duplicate this quintupling, as a starting point, before one could even begin to consider this a fair-market price.

At the beginning of the Bernanke helicopter-drop, gold was priced at roughly $800/oz. This meant that the price of gold would have had to rise to at least $4,000/oz (at a minimum) before it would/could be necessary for the market to “build a base” (to support even higher prices).

While the price of silver did rise roughly proportionately in comparison to Federal Reserve funny-money creation, this was only because silver started the rally priced at roughly $8/oz – at a 100:1 price ratio versus gold. As educated readers are aware, the legitimate, long-term price ratio for gold and silver is 15:1, reflecting the natural occurrence of these metals in the Earth’s crust. Thus the price of silver would have had to rise to over $50/oz (higher than its 2011 peak) just to be priced rationally versus gold at the start of 2009.

In other words, in order for silver to (rationally) reflect Federal Reserve money-printing and the long-term price ratio versus gold, first the price of silver would have had to rise by a factor of roughly seven (just to be rationally aligned versus the price of gold), and then it would have had to increase by an additional factor of five – to mirror the Federal Reserve’s monetary insanity .

This means that the price of silver would have had to rise somewhere above $200/oz (in 2011), before there could be any rational argument that it was priced at fair-market value at that time. Thus, in 2011, when the prices of gold and silver were first capped, and then taken down, there was never any reason for that rally to have ended. The 5+ years of Hostage Markets which we saw with precious metals should have never occurred.

Similarly, at the start of this fake rally, the gold/silver price ratio was at an ultra-absurd level of roughly 80:1, with silver priced at roughly $13/oz (USD). Even if already priced at a correct price ratio, the price of silver would have to lead the price of gold in any legitimate rally because the silver market is much, much smaller. However, at the ultra-compressed price ratio which existed at the beginning of 2016, if a legitimate rally had begun in precious metals markets, the price of silver would have exploded out of the starting blocks – leaving gold well behind in its wake.

Instead, we saw the price of gold “rally” for the first two months of this year, while the price of silver lagged. Understand the arithmetic here. At an 80:1 price ratio, if only 1.5% of the money entering this sector went into silver, the price of silver would have had to rise at a faster rate than gold .

In the real world, the quantity of investment dollars going into silver is roughly parallel to the quantity of dollars going into gold. Had a similar ratio of investor dollars entered the bankers “paper bullion” markets the price of silver would have had to rise roughly 20 times faster/higher than the price of gold during this supposed rally.

The notion, in this “precious metals rally”, that no one was buying silver is patently absurd. The price of silver during most of this fake-rally wasn’t merely improbable, it was impossible.

Lastly, the Big Bank crime syndicate remains totally in control of what we call our “markets” (for lack of a better word). Currency prices remain fixed (rigged). Equity market prices remain fixed (rigged). Bond market prices remain fixed (rigged). Are we to believe that the banksters simply ‘forgot’ to continue their precious metals price-fixing – even as the mainstream media was shouting the word “rally” at the top of its lungs?

Simply, the rise in the price of gold (and muted rise in silver) which has taken place this year could have only occurred with the tacit support – if not overt assistance – of the Big Bank crime syndicate. At the same time, it is common knowledge that the banksters are firmly committed to suppressing precious metals prices, at all times.

…central banks stand ready to lease gold in increasing quantities should the price rise. 

– Testimony of Federal Reserve Chairman Alan Greenspan, July 24th 1998

The bankers “stand ready” to suppress the price of gold. Always. Eternally. Thus when we saw precious metals prices start to rise steadily/modestly at the beginning of this year, while the bankers remain in complete control of our markets, it could only have been because they wanted prices to rise.

Why? This question has already been answered . The current eight-year, bubble-and-crash cycle manufactured by the Big Banks is nearing its end. When this Next Crash is detonated, this crime syndicate obviously doesn’t want precious metals to stand out as “safe havens” — as all of their corrupt, paper assets are plunging in value.

The problem: with gold and silver already at rock-bottom prices at the beginning of 2016, it would have been very difficult to crash those markets (along with everything else). Thus the banksters need to march gold and silver prices higher, to some modest level, before they were set up to be crashed along with all other asset classes.

Now, the fake-rally appears to be at its end. This headline has been repeated again and again and again and again in the mainstream media over the past several days.

Gold in Longest Slump since November as Fed Signals Higher Rates

 Translation: a Fed-head talked about raising interest rates, and the price of gold fell. It is a headline which could have been copied-and-pasted out of any mainstream publication, any week, during the 5+ years of Hostage Markets.

Now here is the important point. When precious metals began their real rally at the beginning of 2009, the Fed-heads were already promising to raise interest rates then, as well. In fact they were promising much more. The Federal Reserve solemnly promised to fully “normalize” interest rates – quickly and immediately – at the beginning of 2009. Not some token, 0.25% rate increase. Fully normalized interest rates: meaning a benchmark rate of at least 2 – 3%.

Precious metals markets ignored that talk. All through 2009; the Fed-heads “promised” to raise interest rates, and gold and silver prices rose. All through 2010; the Fed-heads “promised” to raise interest rates, and gold and silver prices rose. All through the first 4 months of 2011; the Fed-heads “promised” to raise interest rates, and gold and silver prices rose.

Then, suddenly, after 28 months of the Fed-heads “promising” to raise interest rates, never keeping their promises , and precious metals prices continuing to rise, we had this paradigm suddenly reverse, for no reason. After 28 months of consecutively telling the same lie; suddenly precious metals prices began falling steadily, via nothing more than the same Compulsive Liars telling the same lie – which had previously been completely ignored.

The precedent, over the past eight years, is unequivocal. In a real rally, precious metals prices are not deterred from rising via Compulsive Liars simply repeating the same lie, over and over and over. It is only in the realm of Hostage Markets where (supposedly) these markets “react” to the same lie (and same Liars) which they had previously ignored, for several years.

A Fed-head talks, and precious metals markets fall. Readers are invited to call this paradigm of fraud anything that they want. But the one thing they can’t call this is “a rally”.

 

 

Please email with any questions about this article or precious metals HERE

 

 

Precious Metals: Fake-Rally Ends, Hostage Markets Return

Written by Jeff Nielson

 

 

via http://ift.tt/1NM31QH Sprott Money

By now we are accustomed to hearing about US spy planes flying recon missions that are either infringing or extremely close to infringing on the borders of other countries – especially Russian borders.

A US defense attache has been summoned by Russia's Defense Ministry to explain why a US spy plane was not only flying close to Russia's border on Sunday, but dangerously close to civilian aircraft as well. The US crew had not provided any information regarding its flight to air traffic controllers in the region, despite flying at the same altitude as scheduled civil aviation flights, and at least two passenger jets belonging to major European airlines were endangered by the then unknown aircraft according to Interfax. Planes headed to Switzerland from Japan even even reported visual contact with the US plane.

It's also important to note that the spy plane had its transponders turned off, something that Russia explicitly said not to do if the US is going to be sniffing around Russia's borders.

As RT reports

“As the result of the unprofessional actions of the American plane crew, the hazard of a collision with civil aviation planes was created," Russia's Defense Ministry said, adding that it asked the US official to take measures to prevent such incidents from happening near Russia's borders in the future.

 

At least two passenger jets belonging to major European airlines were endangered by the then-unknown aircraft over the neutral waters of the Sea of Japan on Sunday, Interfax reported.

 

The "unknown aircraft" was flying at the altitude of some 11,000 meters (36,000 feet) and did not respond to air traffic control, the agency said citing its source. Russian air controllers had to immediately change the flight path of a KLM Boeing-777, which was in the same region en route from Japan to Holland.

 

Pilots from another airplane, operated by Swiss airlines, heading to Switzerland from Japan, even reported "visual contact with a large four-engine aircraft, which was in direct proximity to their plane" and sent no recognition signals, the source said. The flying altitude for the Swiss jet also had to be changed by the air traffic control.

* * *

Clearly the US needs to stop with these missions before someone gets hurt and an international incident is triggered, however knowing that will never happen, might we suggest that the US at least get to the point where its spying isn't detected every single time.

via http://ift.tt/1UcTFN8 Tyler Durden

Submitted by Claudio Gras via Acting-Man.com,

Will the Swiss Guarantee CHF 75,000 for Every Family?

In early June the Swiss will be called upon to make a historic decision. Switzerland is the first country worldwide to put the idea of an Unconditional Basic Income (of $2,500 per month for every man, woman, and child for doing absolutely nothing) to a vote and the outcome of this referendum will set a strong precedent and establish a landmark in the evolution of this debate.

 

The Swiss Basic Income Initiative in a demonstration in front of parliament. As we have previously reported (see “Swiss Parliament Shoots Down Socialist Utopia” for details), Switzerland’s parliament has already rejected the idea, with even the socialists voting against it (proving that they are still in possession of most of their marbles and quite likely in possession of an abacus as well).

 

The Swiss public will have to approve or reject a change in the constitution that would allow for the introduction of an Unconditional Basic Income (UBI), or a preset, monthly minimum income to be paid out by the government to every adult and child in the country if their income falls below a specific threshold. Even though details of this proposal have been few and far between, the most commonly cited amount of this guaranteed income would be 2,500 Swiss Francs for adults and 625 francs for children. The architects of the proposal stress that this government-guaranteed payment, unlike the current benefit programs, will be entirely “no questions asked”, i.e., it will not be means-tested and will apply to every person legally living in Switzerland.

Currently, these are all the details that the Swiss have at their disposal to make their decision. No plan has so far been put forward to specify how such a proposal would be financed, whether an increase in income tax or VAT will have to be enforced, which specific existing welfare programs it would replace or how the glaringly obvious exploitation possibilities of such a plan would be avoided, without any kind of means test – or without “asking any questions”, according to one of the campaign’s catchphrases.

The main argument of the supporters of this initiative is that it would support the people that will, or already do, lose their jobs to automation and technological progress; a defensive move against “the rise of the robots” as they put it. They also claim that such a measure will give people the opportunity to grow, to learn and to pursue skills or professional goals that are now rendered prohibitive by their current meaningless and mundane jobs, that they are forced into in order to simply pay their bills. “What would you do if your income were taken care of?” asked the pro-UBI campaign in Geneva, with a poster that officially made it into the Guinness Book of Records as the world’s largest.

 

Meet the world’s largest poster ever. As to the answer to the question, a number of people would  likely immediately proceed to party. The poster unfortunately fails to ask “who is going to pay for it?” – or better said, who will be robbed at gunpoint to pay for it.

 

 

The Free Lunch – A Fantasy as Old as Methuselah

The promise of a free lunch is by no means a new thing in politics. Getting “something for nothing” is an age-old shiny trinket that has been dangled before the eyes of the public since time immemorial. In fact, it has appeared so excruciatingly often in our political history, for centuries on end, that one would think that it wouldn’t work anymore; not in 2016, surely. And yet it does. UBI is the proof that there are still people who choose to believe that “no strings attached” freebies and gifts are promises one can rely on and build an economy on, especially when they are coming from their government and rulers.

However, there are always some strings attached to such gifts and if history has taught us anything on this matter, it is the distinction between a gift and a bribe. Unsavory political ideologies and catastrophic cultural philosophies often tend to make their debut in front of the public hidden inside a Trojan gift horse. Unrealistic yet enchanting promises have always been a reliable political tool and it has never been a big strategic challenge to corrupt the people by granting the majority something that was stolen from minorities.

 

Another recent demonstration by UBI supporters in Switzerland – this one suggests that “robots” will actually pay for it all. This is based on a combination of the popular Luddite error that  “machines will make us all jobless” (an idea proven consistently wrong since the early 19^th century when the original Luddites went around to break machines, but who cares about evidence when changing the world is at stake!) and the fantasy that the world of Star Trek has already arrived, and machines will simply produce everything we need and want “for free” at the push of a button, in a kind of economic perpetuum mobile. Thus, we can now get serious about erecting the long dreamed of socialist Utopia – and this time, we’re going to get it right, you just wait and see!

 

We can easily spot the parallel in the promotion of Basic Income: Even though the architects of UBI in Switzerland, quite wisely, omit any reference to the realistic and structural aspects of their scheme, at the end of day, someone will have to pay for it. “Tax the 1%!”, argue their international fellow travelers, which, rather predictably, makes UBI even more attractive to a large portion of the public. This whole discussion about UBI reminds us of the following quote by Thomas Jefferson:

“A government big enough to give you everything you want, is a government big enough to take away everything that you have.”

 

Thomas Jefferson knew a thing or two about the true nature of government. By accepting a “free lunch” offered by the government, one is no longer free, but becomes dependent on the whims of the ruling elite – which is of course precisely what the ruling elite wants. In other words, what happens in reality is the exact opposite of what the UBI supporters imagine will happen. They assert that a basic income distributed by the State will “free people”, as they will no longer be forced to deal with the drudgery of having to earn a living. Thus, in a quite Orwellian twist, dependency is marketed as “freedom”.

 

 

The Cultural Argument for Collectivism

Key figures of the pro-UBI camp take pride in claiming that the main motivation behind the campaign is not economic but cultural. They say this proposal aims to make people think about the nature of life and work, it is a way to liberate them from the jobs they don’t like but need, a status which the scheme’s advocates, quite unhistorically, equate to the indignity of slavery. On top of this, they claim, UBI will help society survive the imminent unemployment apocalypse: they believe that with the help of automation and artificial intelligence 50% of all the existing jobs will be taken over within the coming decade by computers and machines.

 

The original Luddites were slightly less imaginative: instead of demanding a basic income, they simply went and smashed the machines they thought would take away their jobs. The underlying notion was simply anti-economic: it asserted that the very goal of economic activity, namely producing more with less, was somehow “evil”. Taken to its logical conclusion, this means one would have to reject civilization altogether and return to the “noble savage” life of cavemen and jungle dwellers bereft of tools (a life that would be nasty, brutish, very short and marked by a distinct lack of iPhones).

 

Such an argument might sound superficially rational, but it goes deeper than that: It presupposes that we as human beings see ourselves downgraded and equated to a machine, like just another cog that can be replaced at any time, in a system where man is literally defined as a human resource.

The truth is that it is indeed a cultural debate, far more than it is an economic one. The only conceivable aim of such a factually unhinged and unfounded proposal can be to gauge the mind-set of the Swiss people in this moment in time. The outcome of this referendum can provide a valuable insight into the Swiss mentality, and whether the Swiss  actually prefer collectivism over individualism. Such a signal could serve as cue for a further escalation of government empowerment: After all, the collapsing centralized system is bound to show symptoms of desperation by “doubling down” and accelerating and maximizing its centralization efforts. Thus focusing on the symptoms and secondary effects is futile; a real difference can only be made by addressing the root cause, the system itself.

 

Since the collapse of the Soviet system (of which many prominent Western economists asserted as late as the 1980s that it would eventually overtake capitalism and free markets – which goes to show how utterly blinded by ideology and statolatry the profession has become), most socialists have stopped making economic arguments in favor of socialism, realizing they are no longer credible. Instead they are now making moral and cultural arguments in favor of collectivism. Allegedly, although it will make us poorer, socialism is “morally superior” to the free market system. One might want to ponder the victims of the Chinese Cultural Revolution in this context – when the protection of individual rights is abandoned in favor of vague and pious notions of the “collective good”, things often tend to get real ugly very quickly.

 

Despite the economic non-sequiturs and the plain Utopianism that lie at the core of the idea of a Universal Basic Income, the concept seems to be gaining popularity worldwide. Canada is set to conduct an experiment with this idea later this year. The city of Utrecht in the Netherlands is launching a pilot program, Finland is planning a two-year trial and a British proposal is gathering interest, while the nonprofit group Give Directly will start providing a guaranteed income to 6,000 Kenyans this month in a decade-long scheduled program and track the results. The idea seems to be gaining traction due to the Western Left’s efforts, however the polls in Switzerland are painting a dramatically different picture: the UBI initiative is projected to suffer a crushing defeat.

 

A Bastion of Liberty

The Swiss have been voting counter-intuitively for years: When they held a referendum for or against six weeks of vacation, or when they were called upon to vote for an initiative advocating fewer working hours, or even when they made their choice on the issue of the minimum wage, they always delivered outcomes that seemed surprising to the rest of the West, especially the rest of Europe. Up to now, the Swiss have consistently rejected interference by the state when it came to such topics and have refused to grant more powers to their government. Even in recent years, when the trend in favor of aggressive state expansionism seems to be stronger than ever, Switzerland appears to still hold the line as the last bastion of liberty that remains standing.

So what is so different about the Swiss then? Switzerland is indeed very different, because it became a nation by its peoples’ own will, based on limited government, strong private property rights and a direct democracy founded on the principles of subsidiarity. This has always required open dialogue and being exposed to different ideas and values: Vigorous debate itself leads to an enlightened society. Thus, the essential difference lies in the nation’s culture, mentality and philosophy.

 

High up in the Swiss Alps, where they are playing strange instruments. The Swiss have always stood up for the rights of the individual against the State. They successfully defended themselves against the Hapsburg dynasty and other would-be conquerors, and attempts to introduce collectivist decay from within have been consistently rejected as well.

 

The Swiss have grown up in an environment in which the people were always able to decide for themselves, but they also have a long tradition of doubt and of dissent. Every critical issue is discussed and decided by the people, the actions of government are subject to the judgment of and limited by the citizenry. All viewpoints are heard, even anti-establishment voices have their say, and critical thinking provides the basis for society’s future. However, this is only possible when people rely on their own mind to think about the issues individually and independently.

Switzerland is therefore quite a hostile terrain for those who wish to promote “free lunches” and “no strings attached” gifts. A long history of independent thinking, of consequential analysis and of government limitation, makes it very easy for the Swiss to see past the populism-fueled empty promises and the associated publicity stunts. The upcoming rejection of the UBI proposal on June the 5th will and should serve as a reminder that the Swiss still remain the exception to the rule.

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

Last month we discussed the fact that officials had approved the latest Five Year Plan for China's economy. The ultimate goal of the plan is to overtake Germany, Japan, and the United States in terms of manufacturing sophistication by 2049, the 100th anniversary of the founding of the People's Republic of China.

To make that happen, the government needs Chinese manufacturers to adopt robots by the millions. It also wants Chinese companies to start producing more of these robots, , and to enable that there is an initiative making billions of yuan available for manufacturers to upgrade to technologies including advanced machinery and robots.

The manufacturing hub for the electronics industry, Kunshan, in Jiangsu province is proving that that initiative is well underway. As the South China Morning Post reports, thirty five companies, including Apple's key supplier Foxconn, spent a total of 4 billion yuan on artificial intelligence last year, and more companies are going to follow suit.

 

Spurred by the initiative and a desire to cut down on labor costs, Foxconn has reduced its workforce by a whopping 60,000 people thanks to the introduction of robots. Foxconn's headcount went from 110,000 down to 50,000 (adding to the mass layoffs that we have warned will cause further social unrest in China).

 

We're not sure how all of this will play out in the grand scheme of the Five Year Plan that was put together, but what is clear is that China is wasting no time in executing the early stages of the plan.

That is just the beginning.

The transition from human to robot workers may upend Chinese society. Some displaced factory workers could find employment in the service sector, but not all of the 100 million now employed in factories will find such jobs a good match. So a sudden shift toward robots and automation could cause economic hardship and social unrest. “You can make the argument that robotic technology is the way to save manufacturing in China,” says Yasheng Huang, a professor at MIT’s Sloan School of Management. “But China also has a huge labor force. What are you going to do with them?”

For now, that question remains unanswered, but that won't stop from unleashing the biggest robotic revolution seen in recent years.

In an effort to minimize the social unrest that is already taking place, the country has said that as much as $23 billion will be set aside to cover the layoffs in the coal and steel sectors as it tries to cut down on overcapacity – we're eager to find out how much will be set aside for workers that are being displaced by these robots.

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Authored by Paul Brodsky via Macro-Allocation.com,

We have argued the inevitability of Fed-administered hyperinflation, prompted by a global slowdown and its negative impact on the ability to service and repay systemic debt. One of the most politically expedient avenues policy makers could take would be to inflate the debt away in real terms through coordinated currency devaluations against gold, the only monetize-able asset on most central bank balance sheets. To do so they would create new base money with which to purchase gold at pre-arranged fixed exchange prices, which would raise the general price levels in their currencies and across the world to levels that diminish the relative burden of debt repayment (while not sacrificing debt covenants).

The odds of this occurring seem to have risen, judging by the gold prices. Table 1 looks at gold performance over one, five and ten years in terms of the fifteen currencies representing the fifteen largest economies (about 77% of global GDP). The bold figures at the bottom show gold’s performance weighted for GDP.

Gold is mostly quoted in US dollars, but it is also implicitly valued at each point in time in all currencies (as is everything that may be bought or sold across the world), simply by applying cross exchange rates to its USD price. Table 1 shows the experience of gold holders around the world has been quite different. A Russian would have had the currency he receives his wages in devalued to gold by almost 370% over the last ten years. Or, he could have generated a 370% gain by converting his ruble savings into gold. Anyone else in the world would also show a 370% gain by having owned gold and having been short the ruble.

Meanwhile, gold in dollar terms, as it is quoted for capital market participants given London and US exchange dominance over fungible gold trading, is up far less – about 94%. (This performance also represents gold performance for currencies pegged to the dollar, like the Saudi Arabian riyal.) Gold in Chinese yuan terms and Swiss franc terms are only about 57% higher over the last ten years.

The wide gap in gold’s performance is due to sharp differences in ongoing currency exchange rates. Gold is a currency hedge – the stable fulcrum around which fiat currencies fluctuate. Gold is not consumed and has no internal rate of return. Changing market quotes for gold – whether for spot gold, gold futures or gold bullion – merely represent currency exchange rates. The performance of gold in Table 1 is not the performance of gold at all, but rather the performance of the currencies in which it is quoted.

The last line of Table 1 shows gold price changes adjusted for the relative importance of currencies, as determined by GDP. It implies that the global monetary system has been devalued against gold by 46.88% over the last ten years (1/1.8824), which was in line with the MSCI ACWI World equity index over this time.) One who produced a good or service anywhere in the world over the last ten years would have been wise to save the fruit of his labor in gold terms.

Central Banks

If we were a central banker overseeing the fiat global monetary regime we would want to treat gold as a market-based indicator of inflation, not as a potential competitor to the currencies we established and promote. We would build econometric models in which we would define the relationships linking credit growth to demand growth, demand growth to production growth, and production growth to inflation and employment. We would establish economic mandates, like stable prices and full employment, and then we would model conditional scenarios and reaction functions in which to proceed.

We would be very transparent in our communications policies, sharing assumptions and data from our models and our economic projections based on them. It would appear to all the world that we would be applying thoughtful, best efforts science to the vagaries of irrational human animal spirits – the irrationality of mass consumption and investment or the irrationality of short term decision making over what would be more sustainable. We would blanket our science in pedantic academic rhetoric and debate nuance with others interested in the same discipline.

We would not question the moral nature of our pursuits because science is amoral. Nor would we question whether our models and actions might be unduly harmful because our position is clearly defined and its roadmap conditional and usually marked with precedent. We would not question our reason for being because we would be the very foundation upon which economies sit. We would not separate economics from finance because, well, because it would not reconcile with everything else we do.

When asked about gold, we would testify before our congresses and parliaments that we hold it on our balance sheets merely as tradition, and that its relevance in our scientifically managed domestic economies and coordinated, financial-centric global economies is de minimus. Gold would be an afterthought to us, and most serious economists, politicians, policy makers and market observers.

Those clinging to the relevancy of the barbarous relic would be generally perceived as sour pessimists, economic losers unwilling to change with the times, malcontents clinging to regressive social mores, Chicken Littles seeking to undermine centrist politics and policy in the face of contrary economic indicators, druids unwilling or incapable of using leveraged financial assets to save, provincial patriots unwilling to strive to live in a peaceful and prosperous international community.

Ironically, it is this last point that holds the key to gold’s relevancy in modern times. The fact that gold remains on the balance sheets of central banks and is being aggressively bought by them suggests it is gaining, not losing, relevancy as a monetary asset. The fact that it can be used as the fulcrum against which to devalue currencies gives it purpose. The fact that allocations to gold and gold-related assets remains less than 3% of investment portfolios makes it a superior risk-adjusted portfolio allocation.

 

Expectations

Graph 1, shows the relationship of US real yields and the USD gold price. Real (inflation adjusted) yields and gold have been tightly correlated. Non-income producing gold ebbs and flows inversely with yields available on financial assets. This is understandable, but ask yourself this: what happens now that global sovereign interest rates must go negative to give the impression that credit is becoming easier?

The sound reasoning behind the tight correlation should break down if/when no amount of central bank stimulus, other than QE, produces inflation, and that inflation is limited to asset inflation. Then, the system would break and global monetary authorities would have to re-work it.

Our view is that there will not be a switch to a fully-reserved banking system or even a reversion to a fixed exchange rate; however, there will be a significant increase in global currency devaluations against gold, and that it will be coordinated by monetary authorities.

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

Authored by Paul Craig Roberts,

As readers know, I have seen some optimism in voters support for Trump and Sanders as neither are members of the corrupt Republican and Democratic political establishments. Members of both political establishments enrich themselves by betraying the American people and serving only the interest of the One Percent. The American people are being driven into the ground purely for the sake of more mega-billions for a handful of super-rich people.

Neither political party is capable of doing anything whatsoever about it, and neither will.

The optimism that I see is that the public’s support of outsiders is an indication that the insouciant public is waking up. But Americans will have to do more than wake up, as they cannot rescue themselves via the voting booth. In my opinion, the American people will remain serfs until they wake up to Revolution.

Today Americans exist as a conquered people. They have lost the Bill of Rights, the amendments to the Constitution that protect their liberty. Anyone, other than the One Percent and their political and legal servants, can be picked up without charges and detained indefinitely as during the Dark Ages, when government was unaccountable and no one had any rights. Only those with power were safe. In America today anyone not politically protected can be declared “associated with terrorism” and taken out by a Hellfire missile from a drone on the basis of a list of human targets drawn up by the president’s advisers. Due process, guaranteed by the US Constitution, no longer exists in the United States of America. Neither does the constitutional prohibition against the government spying on citizens without just cause and a court warrant. The First Amendment itself, whose importance was emphasized by our Founding Fathers by making it the First Amendment, is no longer protected by the corrupt Supreme Court. The Nine who comprise the Supreme Court, like the rest of the bought-and-paid-for-government, serve only the One Percent. Truth-tellers have become “an enemy of the state.” Whistleblowers are imprisoned despite their legal protection in US law.

The United States government has unaccountable power. Its power is not accountable to US statutory law, to international law, to the Congress, to the judiciary, to the American people, or to moral conscience. In the 21st century the war criminal US government has murdered, maimed, and dislocated millions of people based on lies and propaganda. Washington has destroyed seven countries in whole or part in order to enrich the American elite and comply with the neoconservative drive for US world hegemony.

Americans live in a propaganda-fabricated world in which a brutal police state is cloaked in nice words like “freedom and democracy.” “Freedom and democracy” is what Washington’s war machine brings with sanctions, bombs, no-fly zones, troops, and drones to countries that dare to cling to their independence from Washington’s hegemony.

Only two countries armed with strong military capability and nuclear weapons—Russia and China—stand between Washington and Washington’s goal of hegemony over the entire world.

If Russia or China falter, the evil ensconced in Washington will rule the world. America will be the Anti-Christ. The predictions of the Christian Evangelicals preaching “end times” will take on new meaning.

Russia is vulnerable to becoming a vassal state of Washington. Despite a legion of betrayals by Washington, the Russian government has just proposed a joint US/Russia cooperation against terrorists.

One wonders if the Russian government will ever learn from experience. Has Washington cooperated with the agreement concerning Ukraine? Of course not. Has Washington cooperated in the investigation of MH-17? Of course not. Has Washington ceased its propaganda about a Russian invasion of Crimera and Ukraine? Of course not. Has Washington kept any agreement previous US governments made with Russia? Of course not.

So why does the Russian government think Washington would keep any agreement about a joint effort against terrorism?

The Russian government and the Russian people are so unaware of the danger that they face from Washington that they let foreigners control 20 percent of their media! Is Russia unaware that Washington has Russia slated for vassalage or destruction?

China is even more absurd. According to the Chinese government itself, China has 7,000 foreign-financed NGOs operating in China! Foreign financed NGOs are what Washington used to destabilize Ukraine and overthrow the elected government.

What does the Chinese government think these NGOs are doing other than destabilizing China?

Both Russia and China are infected with Western worship that creates a vulnerability that Washington can exploit. Delusions can result in inadequate response to threat.

All of Europe, both western, eastern and southern, the British Pacific such as Australia and New Zealand, Japan and other parts of Asia are vassal states of Washington’s Empire. None of these allegedly “sovereign” countries have an independent voice or an independent foreign or economic policy. All of Latin America is subject to Washington’s control. No reformist government in Latin America has ever survived Washington’s disapproval of putting the interests of the domestic populations ahead of American corporate and financial profits. Already this year Washington has overthrown the female presidents of Argentina and Brazil. Washington is currently in the process of overthrowing the government in Venezuela, with Ecuador and Bolivia waiting in the wings. In 2009 Killary Clinton and Obama overthrew the government of Honduras, an old Washington habit.

As Washington pays the UN’s bills, the UN is compliant. No hand is ever raised against Washington. So why does anyone on the face of the earth think that an American election can change anything or mean anything?

We know that Killary is a liar, a crook, an agent for the One Percent, and a warmonger. Let’s now look at Trump.

Are there grounds for optimism about Trump? In the West “news reporting” is propaganda, so it is difficult to know. Moreover, we do know that, at least initially, the response of the Republican Establishment to Trump is to demonize him, so we do not know the veracity of the news reports about Trump.

Without belaboring the issue, two news reports struck me. One is the Washington Post report that the Zionist multi-billionaire US casino owner Sheldon Adelson has endorsed Donald Trump for President.

Other reports say that Adelson has mentioned as much as $100 million as his political campaign contribution to Trump.

Anyone who gives a political campaign $100 million dollars expect something in exchange, and the recipient is obligated to provide whatever is desired. So are we witnessing the purchase of Donald Trump? The initial Republican response to Trump, encouraged by the crazed neoconservatives, was to abandon the Republican candidate and to vote for Killary.

Is Adelson’s endorsement a signal that Trump can be bought and brought into the establishment?

Additional evidence that Trump has sold out his naive supporters is his latest statement that Wall Street should be deregulated. 

It is extraordinary that Trump’s advisers have not told him that Wall Street was deregulated back in the 20th century during the Clinton regime. The repeal of Glass-Steagall deregulated Wall Street. One source of the 2008 financial crisis is the deregulated derivative market. When Brooksley Born attempted to fulfill the responsibility of the Commodity Futures Trading Commission and regulate over-the-counter derivatives, she was blocked by the Federal Reserve, the US Treasury, the SEC, and the US Congress.

Nothing has been done to correct the massive mistake of financial deregulation. The Dodd-Frank legislation did not correct the massive financial concentration that produced banks too big to fail, and the legislation did not stop Wall Street’s reckless casino gambling with the US economy. Yet Trump says he will dismantle even the weak Dodd-Frank restrictions.

The American print and TV media are so corrupt that these reports could be false stories, the purpose of which is to demoralize Trump’s supporters. On the other hand, should we be surprised if a billionaire aligns with the One Percent?

Elections are an unlikely means of restoring government that is accountable to the people rather than to the One Percent. Even if Trump is legitimate, he does not have the experience in foreign and economic affairs to know who to appoint to his government in order to implement change. Moreover, even if he knew, unless Trump candidates also replace the Senate, Trump could not get his choices confirmed by a Senate accountable only to the One Percent.

Americans are a conquered people. We see this in the appeal from RootsAction to the rest of the world to come to the aid of the American people. Unable to stop the lawlessness of their own “democratic” government, Americans plea for help from abroad. 

The plea from RootsAction indicates that committed activists now acknowledge that change in America cannot be produced by elections or be achieved internally through peaceful means.

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After a brief hiatus from the ongoing currency wars, China fired another salvo at The Fed tonight by devaluing the Yuan fix to 6.5693 – its weakest against the USD since March 2011. After eight days higher in a row for The USD Index, it seems PBOC has turned its currency liberalization plan off, stabilizing the broad Renminbi basket (which has been steadily devalued) and turning its attention to devaluing against the USD. Having unleashed turmoil in August (pre-Sept FOMC) and January (post Dec rate-hike), it appears the rising rate-hike probabilities jawboned by The Fed are decidedly disagreeable to "authoritative persons" in China.

 

The Yuan Fix was driven down to March 2011 lows…

Front-running?

“It could be because the authorities want to alleviate some of the depreciation pressure before the Fed interest rate decision in June," said Christy Tan, head of markets strategy at National Australia Bank Ltd. in Hong Kong. "If there are signs of panic dollar buying, the PBOC will step in."

As it seems maintaining some 'stability' against the USD has lost its appeal as the USD surges once again…

 

What the chart above shows is that the Chinese currency (red) has been devaluing in an orderly and quiet manner for much of the year while maintaining the appearance of stability against the USD (blue). That appears to have changed now and the last time turmoil started to ripple through the CNHUSD markets – it didn't stop until Tom Cook lied to Jim Cramer and The PPT rescued the world.

The irony of the apparent stability in the broad-based Renminbi basket (while devaluing against the USD) is that it comes after a desperate China has reportedly given up on its liberalization goals. As The Wall Street Journal notes,

Behind closed doors in March, some of China’s most prominent economists and bankers bluntly asked the People’s Bank of China to stop fighting the financial markets and let the value of the nation’s currency fall.

 

They got nowhere. “The primary task is to maintain stability,” said one central-bank official, according to previously undisclosed minutes of the meeting reviewed by The Wall Street Journal.

 

The meeting left little doubt China’s top leaders have lost interest in a major policy shift announced in a surprise move just nine months ago. In August 2015, the PBOC said it would make the yuan’s value more market-based, an important step in liberalizing the world’s second-largest economy.

In reality, though, the yuan’s daily exchange rate is now back under tight government control, according to meeting minutes that detail private deliberations and interviews with Chinese officials and advisers who spoke with The Wall Street Journal about the country’s currency policy.

On Jan. 4, the central bank behind closed doors ditched the market-based mechanism, according to people close to the PBOC. The central bank hasn’t announced the reversal, but officials have essentially returned to the old way of adjusting the yuan’s daily value higher or lower based on whatever suits Beijing best.

The flip-flop is a sign of policy makers’ deepening wariness about how much money is fleeing China, a problem driven by its slowing economy. For now, at least, officials believe the benefits of freeing the yuan are outnumbered by the number of threats… though we note that a 3% depreciation of the yuan could add $25.6 billion to Chinese companies’ annual interest payments on dollar debts, according to estimates by analysts at BNP Paribas.

So the question is – will the Yuan turmoil ripple through markets enough to spook The Fed once more and dissolve what little credibility they have left or will Janet and her henchmen stand up to the foreign forces, hike rates to spit their own face, and deal with the aftermath through some more Citadel-driven VIXtermination? With VIX futures near record shorts and S&P futures at their longest in almost 2 years – there's not much easy leveraged money to squeeze there – like there was in August.

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If anyone is still confused about the not so subtle dynamics between markets and monetary policy in China, or the country’s bipolar, and ever more frequent boom and bust cycles, you won’t be after seeing this chart from Socgen.

If still unclear, here is SocGen’s explanation:

Our economists expect China’s structural deceleration to continue over the coming years and it should thus remain a major source of uncertainty for commodity prices and equity markets alike. The recent recovery in Q1 16 was based on a sharp rebound in the property sector and significant credit injections. 

 

This stimulus can only be temporary, as it increases debt in the system, keeps zombie companies alive, and defers reforms, at the cost of higher risk for financial stability in the future. Policymakers are aware of the risks coming from an overheating housing market and excessive debt build-up. As long as the recovery in the property keeps going, the economy could perform more or less in line with market expectations.

 

But, as Chinese authorities will eventually reduce credit easing, we expect the economy to return on its deceleration path in the coming quarters. The economy is thus likely to continue suffering from a series of mini boom-and-bust-cycles that will create repeated periods of volatility.

We just had a 3 months period of stability. Following the latest Yuan fixing released moments ago, which at 6.5693 was the lowest since March 2011, it sounds like we are about to have some volatility.

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Submitted by John Whitehead via The Rutherford Institute,

“The qualifications for president seem to be that one is willing to commit mass murder one minute and hand presidential medals of freedom to other war criminals in the next. One need only apply if one has very loose, flexible, or non-existent morality.”—Author and activist Cindy Sheehan

Long gone are the days when the path to the White House was open to anyone who met the Constitution’s bare minimum requirements of being a natural born citizen, a resident of the United States for 14 years, and 35 years of age or older.

Today’s presidential hopefuls must jump through a series of hoops aimed at selecting the candidates best suited to serve the interests of the American police state. Candidates who are anti-war, anti-militarization, anti-Big Money, pro-Constitution, pro-individual freedom and unabashed advocates for the citizenry need not apply.

The carefully crafted spectacle of the presidential election with its nail-biting primaries, mud-slinging debates, caucuses, super-delegates, popular votes and electoral colleges has become a fool-proof exercise in how to persuade a gullible citizenry into believing that their votes matter.

Yet no matter how many Americans go to the polls on November 8, “we the people” will not be selecting the nation’s next president.

While voters might care about where a candidate stands on healthcare, Social Security, abortion and immigration—hot-button issues that are guaranteed to stir up the masses, secure campaign contributions and turn any election into a circus free-for-all—those aren’t the issues that will decide the outcome of this presidential election.

What decides elections are money and power.

We’ve been hoodwinked into believing that our votes count, that we live in a democracy, that elections make a difference, that it matters whether we vote Republican or Democrat, and that our elected officials are looking out for our best interests. Truth be told, we live in an oligarchy, and politicians represent only the profit motives of the corporate state, whose leaders know all too well that there is no discernible difference between red and blue politics, because there is only one color that matters in politics—green.

As much as the Republicans and Democrats like to act as if there’s a huge difference between them and their policies, they are part of the same big, brawling, noisy, semi-incestuous clan. Watch them interact at social events—hugging and kissing and nudging and joking and hobnobbing with each other—and it quickly becomes clear that they are not sworn enemies but partners in crime, united in a common goal, which is to maintain the status quo.

The powers-that-be will not allow anyone to be elected to the White House who does not answer to them.

Who are the powers-that-be, you might ask?

As I point out in my book Battlefield America: The War on the American People, the powers-that-be are the individuals and corporations who profit from America’s endless wars abroad and make their fortunes many times over by turning America’s homeland into a war zone. They are the agents and employees of the military-industrial complex, the security-industrial complex, and the surveillance-industrial complex. They are the fat cats on Wall Street who view the American citizenry as economic units to be bought, sold and traded on a moment’s notice. They are the monied elite from the defense and technology sectors, Hollywood, and Corporate America who believe their money makes them better suited to decide the nation’s future. They are the foreign nationals to whom America is trillions of dollars in debt.

One thing is for certain: the powers-that-be are not you and me.

In this way, the presidential race is just an exaggerated farce of political theater intended to dazzle, distract and divide us, all the while the police state marches steadily forward.

It’s a straight-forward equation: the candidate who wins the White House will be the one who can do the best job of ensuring that the powers-that-be keep raking in the money and acquiring ever greater powers. In other words, for any viable presidential candidate to get elected today that person must be willing to kill, lie, cheat, steal, be bought and sold and made to dance to the tune of his or her corporate overlords.

The following are just some of the necessary qualifications for anyone hoping to be appointed president of the American police state. Candidates must:

Help grow the military–industrial complex: Fifty-five years after President Dwight D. Eisenhower warned about the growth of the “military-industrial complex” in his farewell address, the partnership between the government, the military and private corporations has resulted in the permanent militarization of America. From militarized police and the explosive growth of SWAT teams to endless wars abroad, the expansion of private sector contractors, and never-ending blowback from our foreign occupations, we have become a nation permanently at war. As the New York Times pointed out, “the military is the true ‘third rail’ of American politics.” The military-industrial complex understands the value of buying the presidency, and has profited from the incessant warmongering of Obama and his predecessors. If money is any indicator of who the defense industry expects to win this November, thus far, Hillary Clinton is winning the money race, having collected more campaign contributions from employees with the 50 largest military contractors.

 

Police the rest of the world using U.S. troops: The U.S. military empire’s determination to police the rest of the world has resulted in more than 1.3 million U.S. troops being stationed at roughly 1000 military bases in over 150 countries around the world, including 48,000 in Japan, 37,000 in Germany, 27,000 in South Korea and 9800 in Afghanistan. That doesn’t include the number of private contractors pulling in hefty salaries at taxpayer expense. In Afghanistan, for example, private contractors outnumber U.S. troops three to one. Now comes the news that the U.S. is preparing to send troops to Libya on a long-term mission to fight ISIS.

 

Sow seeds of discord and foment wars among other nations under the guise of democracy: It’s not enough for the commander-in-chief to lead the United States into endless wars abroad. Any successful presidential candidate also needs to be adept at stirring up strife within other nations under the guise of spreading democracy. The real motive, of course, is creating new markets for the nation’s #1 export: weapons. In this way, the U.S. is constantly arming so-called “allies” with deadly weapons, only to later wage war against these same nations for possessing weapons of mass destruction. It happened in Iraq when the U.S. sold Saddam Hussein weapons to build his war machine. It happened in Syria when the U.S. provided rebel fighters with military equipment and munitions, only to have them seized by ISIS and used against us. Now comes the news that President Obama has agreed to sell weapons to Vietnam, lifting a decades-long embargo against the nation whose civil war claimed the lives of more than 90,000 Americans.

 

Speak of peace while slaughtering innocent civilians: Barack Obama’s campaign and subsequent presidency illustrates this principle perfectly. The first black American to become president, Obama was awarded the Nobel Peace Prize long before he had done anything to truly deserve it. He has rewarded the Nobel committee’s faith in him by becoming one of the most hawkish war presidents to lead the nation, overseeing a targeted-killing drone campaign that has resulted in thousands of civilian casualties and deaths. Ironically, while Obama has made no significant effort to de-escalate government-inflicted violence or de-weaponize militarized police, he has gone to great lengths to denounce and derail private gun ownership by American citizens.

 

Prioritize surveillance in the name of security over privacy: Since 9/11, the Surveillance State has undergone a dramatic boom, thanks largely to the passage of the USA Patriot Act and so-called “secret” interpretations of the mammoth law allowing the NSA and other government agencies to spy on Americans’ electronic communications. What began as a government-driven program under George W. Bush has grown under Obama into a mass surveillance private sector that makes its money by spying on American citizens. As Fortune reports, “In response to security concerns after 9/11, Americans witnessed the growth of a massive domestic security apparatus, fueled by federal largesse.” That profit-incentive has opened up a multi-billion dollar video surveillance industry that is blanketing the country with surveillance cameras—both governmental and private—which can be accessed by law enforcement at a moment’s notice.

 

Promote the interests of Corporate America and Big Money over the rights of the citizenry: Almost every major government program hailed as benefiting Americans—affordable healthcare, the war on terror, airport security, police-worn body cameras—has proven to be a Trojan Horse aimed at enriching Corporate America while leaving Americans poorer, less secure and less free. For instance, the so-called “affordable” health care mandated by Congress has become yet another costly line item in already strained household budgets for millions of Americans.

 

Expand the powers of the imperial president while repeatedly undermining the rule of law: George W. Bush assumed near-absolute power soon after the September 11, 2001, attacks. Unfettered by Congress or the Constitution, Bush led the “war on terror” abroad and championed both the USA Patriot Act and Homeland Security Department domestically. This, of course, led to the Bush Administration’s demand that presidential wartime powers permit the President to assume complete control over any and all aspects of an international war on terrorism. Such control included establishing military tribunals and eliminating basic rights long recognized under American law.

 

When Barack Obama ascended to the presidency in 2008, there was a sense, at least among those who voted for him, that the country might change for the better. Those who watched in awe as President Bush chipped away at our civil liberties over the course of his two terms as president thought that perhaps the young, charismatic Senator from Illinois would reverse course and put an end to some of the Bush administration’s worst transgressions—the indefinite detention of suspected terrorists, the torture, the black site prisons, and the never-ending wars that have drained our resources, to name just a few. As we near the end of Obama’s two terms in office, that fantasy has proven to be just that: a fantasy. Indeed, President Obama has not only carried on the Bush legacy, but has taken it to its logical conclusion. Obama has gone beyond Guantanamo Bay, gone beyond spying on Americans’ emails and phone calls, and gone beyond bombing countries without Congressional authorization. As journalist Amy Goodman warned, “the recent excesses of U.S. presidential power are not transient aberrations, but the creation of a frightening new normal, where drone strikes, warrantless surveillance, assassination and indefinite detention are conducted with arrogance and impunity, shielded by secrecy and beyond the reach of law.”

 

Act as if the work of the presidency is a hardship while enjoying all the perks: The race for the White House is an expensive, grueling horse race: candidates must have at a minimum $200 or $300 million or more just to get to the starting line. The total cost for this year’s election is estimated to exceed $5 billion and could go as high as $10 billion. However, for the winner, life in the White House is an endless series of star-studded dinner parties, lavish vacations and perks the likes of which the average American will never enjoy. The grand prize winner will rake in a $400,000 annual salary (not including $100,000 a year for travel expenses, $19,000 for entertaining, $50,000 for “general” expenses and last but not least, $1,000,000 for “unanticipated” expenses), live rent-free in a deluxe, 6-storey, 55,000 square foot mansion that comes complete with its own movie theater and bowling alley, round-the-clock staff, florists, valets and butlers. Upon leaving the White House, presidents are gifted with hefty pensions, paid staff and office space, travel allowances and lifetime medical care. Ex-presidents can also expand upon their largesse by writing books and giving speeches (Bill Clinton was given a $15 million advance for his memoir and routinely makes upwards of $100,000 per speech).

Clearly, it doesn’t matter where a candidate claims to stand on an issue as long as he or she is prepared to obey the dictates of the architects, movers and shakers, and shareholders of the police state once in office.

So here we are once again, preparing to embark upon yet another delusional, reassurance ritual of voting in order to sustain the illusion that we have a democratic republic when, in fact, what we have is a dictatorship without tears. Once again, we are left feeling helpless in the face of a well-funded, heavily armed propaganda machine that is busily spinning political webs with which the candidates can lure voters. And once again we are being urged to vote for the lesser of two evils.

Railing against a political choice that offers no real choice, gonzo journalist Hunter S. Thompson snarled, “How many more of these stinking, double-downer sideshows will we have to go through before we can get ourselves straight enough to put together some kind of national election that will give me and the at least 20 million people I tend to agree with a chance to vote for something, instead of always being faced with that old familiar choice between the lesser of two evils?”

Remember, the lesser of two evils is still evil.

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