The Cancer Which Started In The US Financial System Has Spread Globally

"The US Dollar payment system is essentially a system for looting. This, Globalization and Neo-liberal economics are tools of American economic imperialism. Countries are beginning to realize this. The looting of countries by American imperialism has now reached the point where it is turning on itself - Greece for example."

- Source, Gold Silver

The Key Currency Will Be Gold - Peter Spina

If There Ever Was A Time To Hold Gold This Is It

Axel Merk - Why Asset Prices Must Return To Lower Levels

Saying it's been a busy week and half of the central bank front is perhaps a sizeable understatement.

First, the Swiss National Bank stunned the world (and its brethren central banks) by removing its peg to the Euro. This was quickly followed by Mario Draghi finally making good on his longtime threat of firing QE bazooka, announcing that the ECB will pursue a 60 billion Euro per month easing program for the next 16 months. And amidst all the smoke, the Canadian central bank snuck in a surprise rate cut to its interest rate.

To make sense of both the "Why?" behind these extreme moves, as well as the "What?" in terms of their implications, Axel Merk, founder and Chief Investment Officer of Merk Funds joins us this week.

In his opinion, recent events are exactly the kind the symptoms he's been expecting as the prime strategy pursued by central banks since 2008 -- to force capital into speculative assets -- approaches its natural and inevitable denouement. Indeed, he projects the surprises in store for us and the systemic instability we're beginning to see are just getting started.

- Source, Peak Prosperity

Michael Pento - Flocking Back Into Hard Money, Gold

Financial analyst Michael Pento says, “Gold is going up in all currencies because investors are coming to this realization, or epiphany, that you cannot trust central banks. In 2008, we had the Great Recession. We had the bursting of asset bubbles. We had the bursting of the housing bubble. We had the bursting of the stock bubble. The Federal Reserve came in, and it was not only the Fed, we had central banks from across the world increase debt by 40%. 40% since 2008 on a global basis, and they took interest rates, which were already low, down to 0% and negative % and left them there for going on almost seven years. People had the audacity to believe that this was going to be a success story. They are slowly learning we have solved nothing. We have just made all the problems associated with the great recession much, much worse. As that realization unfolds, people will be flocking back into hard money, and that means gold.”

What will trigger the next financial meltdown? Pento says keep your eye on the land of the rising sun, heavily leveraged Japan. Pento predicts, “I think the Japanese central bank is absolutely going to destroy that currency. . . . When that unwinds, you are going to see a massive wipeout of equity prices. That just metastasizes across the globe.”

- Source, USA Watchdog

Gold Price Will Reset Over Night - Bill Murphy, GATA

Boomers, Millennials & Stunning 74% Collapse In Stocks

In the popular perception of economics, some things are taken to be self-evident. Like the truism that investors should just buy and hold stocks for the long term. Or that prosperity is attainable through hard work, saving and home ownership. Or that a college education is the path to personal empowerment.

But the truth is, our history is limited. The Baby Boomer generation — the 76 million Americans born between 1946 and 1964 — was the first to really live a full lifecycle in the economy as currently structured. Members of the Greatest Generation were paying their mortgages when the value of the U.S. dollar was still tied to gold. Before that, folks remembered what it was like when there was no Federal Reserve — or federal income taxes, for that matter.

- Source, King World News, Read more here.

Bad News Is Bad News, Stocks & Bond Yields Tumble After Data Triple Whammy

Well this is not supposed to happen. 2015 appears to have started with the "bad news is bad news" meme engaged as the standard USDJPY-driven opening ramp has collapsed on the back of a triple whammy of terrible data (US PMI, Construction Spending, and ISM). The Santa Rally (theoretically due to finish at the close on Monday) is in danger of not being a no-brainer... Treasury yields are plunging (10Y -6.5bps at 2.10%) Stocks only hope now is a 120.00 bounce in USDJPY....

- Source, Zero Hedge, read more here.

These 19 States Just Hiked The Minimum Wage: Here Come The "Unintended Consequences"

Starting on January 1, 2015, a one year-delayed component of Obamacare kicks in: according to the health care law, businesses that employ at least 100 full-time workers — or full-time equivalents, including part-time workers — must offer health benefits to at least 70% of those working at least 30 hours a week by Thursday, or pay a penalty. This will expand to by next year, when companies will have to provide insurance to 95% of their workers, and firms with 50 to 99 employees must offer coverage as well. As a result, and as even the USA Today reports, "many businesses in low-wage industries have hired more part-time workers and cut the hours of full-timers recently to soften the impact of new health law requirements that take effect Thursday."

- Source, Zero Hedge, read more here.

Do Rich People Deserve To Be Rich? Russell Brand The Trews

Russell Brand The Trews (E223).
I'm joined by writer and activist George Monbiot as we discuss whether wealth really is the inevitable result of hard work.

Get REAL . . . COPPER

Jan Skoyles discusses copper with Simon Hunt of Simon Hunt Strategic Services about the industrial metal known as 'Dr. Copper' for its ability to predict the economic forecast. Due to monopolies and various price fixing schemes, Mr. Hunt reckons that other metals are now better at forecasting the future. He also makes his own predictions for where the future price may take us in the copper market in 2015.

- Source, Keiser Report

Big Kaputski of 2015

Max Keiser and Stacy Herbert celebrate the first day of 2015 with some regular guests who attempt to predict the big themes of the New Year. First, they talk to Dominic Frisby of Moneyweek.com about where it all might kick off this year - perhaps Japan? Next, Professor Steve Keen talks Minsky moments, debt deflation and the Bancor. Last, but not least, they speak to Liam Halligan of BNE.eu for his predictions on Europe, China, Russia and dividend yields in 2015.

- Source, Keiser Report

Marin Katusa: “Russia Back to Superpower Status”

By Marin Katusa, Chief Energy Investment Strategist

Russian President Vladimir Putin has re-established his country as a global superpower. "Not only that, he's got the other emerging markets working in concert against U.S. interests, globally," said Marin Katusa, author of The Colder War, during an interview on the "Steve Malzberg Show" on Newsmax TV. On top of that, Marin added, "Western Europe's become more addicted to Russian sources of oil and natural gas."

Click here to get your copy of Marin's new book and discover how the struggle between Russia and the West to control the world's energy trade will directly affect you and the future of global finance.

The article Marin Katusa: “Russia Back to Superpower Status” was originally published at caseyresearch.com.

“Paper Gold” and Its Effect on the Gold Price

By Bud Conrad, Chief Economist

Gold dropped to new lows of $1,130 per ounce last week. This is surprising because it doesn’t square with the fundamentals. China and India continue to exert strong demand on gold, and interest in bullion coins remains high.

I explained in my October article in The Casey Report that the Comex futures market structure allows a few big banks to supply gold to keep its price contained. I call the gold futures market the “paper gold” market because very little gold actually changes hands. $360 billion of paper gold is traded per month, but only $279 million of physical gold is delivered. That’s a 1,000-to-1 ratio:

Market Statistics for the 100-oz Gold Futures Contract on Comex
	Value ($M)
Monthly volume (Paper Trade)	$360,000
Open Interest All Contracts	$45,600
Warehouse-Registered Gold (oz)	$1,140
Physical Delivery per Month	$279
House Account Net Delivery, monthly	$41

We know that huge orders for paper gold can move the price by $20 in a second. These orders often exceed the CME stated limit of 6,000 contracts. Here’s a close view from October 31, when the sale of 2,365 contracts caused the gold price to plummet and forced the exchange to close for 20 seconds:

Many argue that the net long-term effect of such orders is neutral, because every position taken must be removed before expiration. But that’s actually not true. The big players can hold hundreds of contracts into expiration and deliver the gold instead of unwinding the trade. Net, big banks can drive down the price by delivering relatively small amounts of gold.

A few large banks dominate the delivery process. I grouped the seven biggest players below to show that all the other sources are very small. Those seven banks have the opportunity to manage the gold price:

After gold’s big drop in October, I analyzed the October delivery numbers. The concentration was even more severe than I expected:

This chart shows that an amazing 98.5% of the gold delivered to the Comex in October came from just three banks: Barclays; Bank of Nova Scotia; and HSBC. They delivered this gold from their in-house trading accounts.

The concentration was even worse on the other side of the trade—the side taking delivery. Barclays took 98% of all deliveries for customers. It could be all one customer, but it’s more likely that several customers used Barclays to clear their trades. Either way, notice that Barclays delivered 455 of those contracts from its house account to its own customers.

The opportunity for distorting the price of gold in an environment with so few players is obvious. Barclays knows 98% of the buyers and is supplying 35% of the gold. That’s highly concentrated, to say the least. And the amounts of gold we’re talking about are small—a bank could tip the supply by 10% by adding just 100 contracts. That amounts to only 10,000 ounces, which is worth a little over $11 million—a rounding error to any of these banks. These numbers are trivial.
Note that the big banks were delivering gold from their house accounts, meaning they were selling their own gold outright. In other words, they were not acting neutrally. These banks accounted for all but 19 of the contracts sold. That’s a position of complete dominance. Actually, it’s beyond dominance. These banks are the market.

My point is that this market is much too easily rigged , and that the warnings about manipulation are valid. At some point, too many customers will demand physical delivery and there will be a big crash. Long contracts will be liquidated with cash payouts because there won’t be enough gold to deliver. I saw a few squeezes in my 20 years trading futures, including gold. In my opinion, the futures market is not safe.

The tougher question is: for how long will big banks’ dominance continue to pressure gold down? Unfortunately, I don’t know the answer. Vigilant regulators would help, but “futures market regulators” is almost an oxymoron. The actions of the CFTC and the Comex, not to mention how MF Global was handled, suggest that there has been little pressure on regulators to fix this obvious problem.

This quote from a recent Financial Times article does give some reason for optimism, however:

UBS is expected to strike a settlement over alleged trader misbehaviour at its precious metals desks with at least one authority as part of a group deal over forex with multiple regulators this week, two people close to the situation said. … The head of UBS’s gold desk in Zurich, André Flotron, has been on leave since January for reasons unspecified by the lender….

The FCA fined Barclays £26m in May after an options trader was found to have manipulated the London gold fix.

Germany’s financial regulator BaFin has launched a formal investigation into the gold market and is probing Deutsche Bank, one of the former members of a tarnished gold fix panel that will soon be replaced by an electronic fixing.

The latter two banks are involved with the Comex.

Eventually, the physical gold market could overwhelm the smaller but more closely watched US futures delivery market. Traders are already moving to other markets like Shanghai, which could accelerate that process. You might recall that I wrote about JP Morgan (JPM) exiting the commodities business, which I thought might help bring some normalcy back to the gold futures markets. Unfortunately, other banks moved right in to pick up JPM’s slack.

Banks can’t suppress gold forever. They need physical gold bullion to continue the scheme, and there’s just not as much gold around as there used to be. Some big sources, like the Fed’s stash and the London Bullion Market, are not available. The GLD inventory is declining.

If a big player like a central bank started to use the Comex to expand its gold holdings, it could overwhelm the Comex’s relatively small inventories. Warehouse stocks registered for delivery on the Comex exchange have declined to only 870,000 ounces (8,700 contracts). Almost that much can be demanded in one month: 6,281 contracts were delivered in August.

The big banks aren’t stupid. They will see these problems coming and can probably induce some holders to add to the supplies, so I’m not predicting a crisis from too many speculators taking delivery. But a short squeeze could definitely lead to huge price spikes. It could even lead to a collapse in the confidence in the futures system, which would drive gold much higher.
Signs of high physical demand from China, India, and small investors buying coins from the mint indicate that gold prices should be rising. The GOFO rate (London Gold Forward Offered rate) went negative, indicating tightness in the gold market. Concerns about China’s central bank wanting to de-dollarize its holdings should be adding to the interest in gold.

In other words, it doesn’t add up. I fully expect currency debasement to drive gold higher, and I continue to own gold. I’m very confident that the fundamentals will drive gold much higher in the long term. But for now, I don’t know when big banks will lose their ability to manage the futures market.

Oddities in the gold market have been alleged by many for quite some time, but few know where to start looking, and even fewer have the patience to dig out the meaningful bits from the mountain of market data available. Casey Research Chief Economist Bud Conrad is one of those few—and he turns his keen eye to every sector in order to find the smart way to play it. This is the kind of analysis that’s especially important in this period of uncertainty and volatility… and you can put Bud’s expertise—along with the other skilled analysts’ talents—to work for you by taking a risk-free test-drive of The Casey Report right now.

The article “Paper Gold” and Its Effect on the Gold Price was originally published at caseyresearch.com.

Outside the Box: The Return of the Dollar

By John Mauldin

Two years ago, my friend Mohamed El-Erian and I were on the stage at my Strategic Investment Conference. Naturally we were discussing currencies in the global economy, and I asked him about currency wars. He smiled and said to me, “John, we don’t talk about currency wars in polite circles. More like currency disagreements” (or some word to that effect).

This week I note that he actually uses the words currency war in an essay he wrote for Project Syndicate:

Yet the benefits of the dollar’s rally are far from guaranteed, for both economic and financial reasons. While the US economy is more resilient and agile than its developed counterparts, it is not yet robust enough to be able to adjust smoothly to a significant shift in external demand to other countries. There is also the risk that, given the role of the ECB and the Bank of Japan in shaping their currencies’ performance, such a shift could be characterized as a “currency war” in the US Congress, prompting a retaliatory policy response.

This is a short treatise, but as usual with Mohamed’s writing, it’s very thought-provoking. Definitely Outside the Box material.

And for a two-part Outside the Box I want to take the unusual step of including an op-ed piece that you might not have seen, from the Wall Street Journal, called “How to Distort Income Inequality,” by Phil Gramm and Michael Solon. They cite research I’ve seen elsewhere which shows that the work by Thomas Piketty cherry-picks data and ignores total income and especially how taxes distort the data. That is not to say that income inequality does not exist and that we should not be cognizant and concerned, but we need to plan policy based on a firm grasp of reality and not overreact because of some fantasy world created by social provocateur academicians.

The calls for income redistribution from socialists and liberals based on Piketty’s work are clearly misguided and will further distort income inequality in ways that will only reduce total global productivity and growth.

I’m in New York today at an institutional fund manager conference where I had the privilege of hearing my good friend Ian Bremmer take us around the world on a geopolitical tour. Ian was refreshingly optimistic, or at least sanguine, about most of the world over the next few years. Lots of potential problems, of course, but he thinks everything should turn out fine – with the notable exception of Russia, where he is quite pessimistic. A shirtless Vladimir Putin was the scariest thing on his geopolitical radar. As he spoke, Russia was clearly putting troops and arms into eastern Ukraine. Why would you do that if you didn’t intend to go further? Ian worried openly about Russia’s extending a land bridge all the way to Crimea and potentially even to Odessa, which is the heart of economic Ukraine, along with the Kiev region. It would basically make Ukraine ungovernable.

I thought Putin’s sadly grim and memorable line that “The United States is prepared to fight Russia to the last Ukrainian” pretty much sums up the potential for a US or NATO response. Putin agreed to a cease-fire and assumed that sanctions would start to be lifted. When there was no movement on sanctions, he pretty much went back to square one. He has clearly turned his economic attention towards China.

Both Ian Bremmer and Mohamed El Erian will be at my Strategic Investment Conference next year, which will again be in San Diego in the spring, April 28-30. Save the dates in your calendar as you do not want to miss what is setting up to be a very special conference. We will get more details to you soon.

It is a very pleasant day here in New York, and I was able to avoid taxis and put in about six miles of pleasant walking. (Sadly, it is supposed to turn cold tomorrow.) I’ve gotten used to getting around in cities and slipping into the flow of things, but there was a time when I felt like the country mouse coming to the city. As I walked past St. Bart’s today I was reminded of an occasion when your humble analyst nearly got himself in serious trouble.

There is a very pleasant little outdoor restaurant at St. Bartholomew’s Episcopal Church, across the street from the side entrance of the Waldorf-Astoria. It was a fabulous day in the spring, and I was having lunch with my good friend Barry Ritholtz. The president (George W.) was in town and staying at the Waldorf. His entourage pulled up and Barry pointed and said, “Look, there’s the president.”

We were at the edge of the restaurant, so I stood up to see if I could see George. The next thing I know, Barry’s hand is on my shoulder roughly pulling me back into my seat. “Sit down!” he barked. I was rather confused – what faux pas I had committed? Barry pointed to two rather menacing, dark-suited figures who were glaring at me from inside the restaurant.

“They were getting ready to shoot you, John! They had their hands inside their coats ready to pull guns. They thought you were going to do something to the president!”
This was New York not too long after 9/11. The memory is fresh even today. Now, I think I would know better than to stand up with the president coming out the side door across the street. But back then I was still just a country boy come to the big city.

Tomorrow night I will have dinner with Barry and Art Cashin and a few other friends at some restaurant which is supposedly famous for a mob shooting back in the day. Art will have stories, I am sure.

It is time to go sing for my supper, and I will try not to keep the guests from enjoying what promises to be a fabulous meal from celebrity chef Cyrille Allannic. After Ian’s speech, I think I will be nothing but sweetness and light, just a harmless economic entertainer. After all, what could possibly go really wrong with the global economy, when you’re being wined and dined at the top of New York? Have a great week.