24 January 2015

European 'QE' In a Nutshell - Propagating the Western Trickle Down Policy Errors

This is about it in a nutshell.   'Stimulus' American style comes to Europe.

Printing money and giving it to your cronies inflates asset prices, lines the pockets of the well-heeled heels, but does little for the real economy.
But it doesn't produce broad inflation (or aggregate demand) so we can do it many times!    Success!
"At last the euro’s lords and masters have accepted that something must be done about their zone’s lamentable growth. They will unleash a massive bond-buying programme totalling a reported €1tn. The former BBC economic pundit Stephanie Flanders told the world it was “Santa Claus time”; the European Central Bank (ECB) has ridden to the rescue.

No it has not. Europe’s great and good, partying on the slopes of Davos, are like courtiers at the Congress of Vienna. They are blinded by snow and celebrities. Santa Claus gives presents to people; the ECB gives presents to its banks. It is merely tipping large sums of money into the vaults of precisely the institutions whose crazy lending caused the crash of 2008, and which have been failing Europe’s economy ever since.

Quantitative easing is a gigantic confidence trick. It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves.

Money in circulation matters. The whole of Europe, including Britain, is chronically short of demand, which is why deflation is such a menace. If no one can afford to buy anything, no one will sell anything or invest money in making anything..."

23 January 2015

China Withdraws 70 Tonnes From Shanghai Exchange For Week Ending 16th January - Third Highest Ever

"It is the Soviet Union that runs against the tide of history by denying human freedom and human dignity to its citizens."

Ronald Reagan, Speech to the British House of Commons,  8 June 1982

"The center of world power is the unchallenged superpower, the United States, attended by its Western allies...For a small but growing chorus of Americans this vision of a unipolar world led by a dynamic America is a nightmare...Our best hope...is in American strength and will-- the strength and will to lead a unipolar world, unashamedly laying down the rules of world order and being prepared to enforce them."

Charles Krauthammer, The Unipolar Moment, 1990

"The enormous gap between what US leaders do in the world and what Americans think their leaders are doing is one of the great propaganda accomplishments of the dominant political mythology."

Michael Parenti

"The genius of American power is expressed in the movie The Godfather II, where, like Hyman Roth [Meyer Lansky!], the United States has always made money for its partners.   America has not turned countries in which it intervened into deserts; it enriched them.  Even the Russians knew they could surrender after the Cold War without being subjected to occupation."

Robert Kagan, July 17, 2003

Robert Kagan is a famous neo-con figure in US government circles.  He is the husband of Victoria Nuland.  Nuland, as Assistant Secretary of State for Europe, is famed for her partnering skills and diplomatic insights, summed up concerns for collateral damage from the crisis in the Ukraine with 'f*uck the EU.'
China withdraw around 70 tonnes of gold bullion from the Shanghai Gold Exchange for the week ending 16th January.

This is the third highest amount of gold offtake from Shanghai ever.

As a result of price rigging, gold is flowing steadily from West to East.  Because, whether the public realizes it or not, the world is very actively engaged in the evolution of the monetary basis of world trade, which has been referred to here and other places as the currency wars.
I have little doubt that the Western central banks think that their triumph is unstoppable, an inevitability.   And so they firmly stand against all evolution and change, preferring to fight tooth and nail to maintain the US dollar supremacy.
I believe that this currency war has its genesis in the grandiose schemes of the highly influential neo-cons and financiers in the Clinton, Bush, and Obama administrations, together with their attendant counterparts overseas.
I suspect that they may be in for a surprise.  Events have a way of rising to an occasion of hubris.
Now, putting aside any moral or practical political discussions about this, let us just consider one thing.  Let us assume for a moment that all this circumstantial evidence is correct, and there is a currency war underway.  And that the Banks have been engaged, for many years, in the systematic rigging of the price of gold?  
This is not impossible, conspiracy fantasy, or even all that improbable for that matter, since we know that many of these same actors did a similar thing for much the same motives in the famous London Gold Pool.
Assuming that this is true:  what is likely to happen if this gold currency rig fails again?
Chart courtesy of data wranger Nick Laird at goldchartsrus.com.
History shows again and again, how nature points out the folly of men.

Have a pleasant weekend.

The Creature from Jekyll Island - lolz

Gold Daily and Silver Weekly Charts - Next Week Is the Real Test For This Rally

"One of the privileges of the great is to witness catastrophes from a terrace."

Jean Giraudoux
Perhaps this quote above ought to have been the theme for the World Economic Forum at Davos.
The view from the top is quite exhilarating.  Not so much, when an arrogant disregard for the limitations of power and the inevitable banquet of consequences of being out of touch and unrealistic brings it down around the ears of the elite, in ruins. 
Overreach of pride blinded by greed is an old theme, but a recurrent malady.
We had the usual antics this morning, the quick down or up in the prices of the precious metals, designed to make some quick profits for the underregulated trading desks, many of whom are complicit in the price rigging led by the Western central banks.

But it didn't really stick, fading into the afternoon. And we really ought not to complain about the rally in the metals this week, thanks in great part to the clear signal from the ECB that the Banks will be devaluing their currencies for the foreseeable future, in large part to make up for their horrific policy errors ongoing since the mid 1990's at least.

Next week is a February option expiration for precious metals on the Comex, and the return to a look at active month contact.

We will also see an FOMC decision. I have included both the economic and the Comex calendars below.

I am sticking to my stagflation forecast for now.  We have the stag, but not yet much inflation, unless you eat or get sick or pay rent, especially relative to the real wage.
There is no doubt in my mind that there is a currency war on a slow boil behind the scenes, and that it is centered around the role of the dollar and international payments/trade.   And there is also little doubt that the parties at odds are the Anglo-Americans, that being the US and its 'attendant allies,' and the Rest of the World.
Like most great changes, it will come at us slowly, so slowly, so that many will deny and ignore it.  And then one day it will come at us, all in a rush.  And people will say, 'who could have seen it coming?'
Have a pleasant weekend.  See you Sunday evening.

Tsar Nicholas II:  I know what will make them happy. They're children, and they need a Tsar! They need tradition. Not this! They're the victims of agitators. A Duma would make them bewildered and discontented  And don't tell me about London and Berlin. God save us from the mess they're in!

Count Witte:  I see. So they talk, pray, march, plead, petition and what do they get? Cossacks, prison, flogging, police, spies, and now, after today, they will be shot. Is this God's will? Are these His methods? Make war on your own people? How long do you think they're going to stand there and let you shoot them? YOU ask ME who's responsible? YOU ask?

SP 500 and NDX Futures Daily Charts - Sixteen Tons - Theme Song For The Recovery™

“Debt is the slavery of the free”

Publilius Syrus

"I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country."

Andrew Jackson

"Debt is a trap, especially student debt, which is enormous, far larger than credit card debt. It's a trap for the rest of your life because the laws are designed so that you can't get out of it. If a business, say, gets in too much debt, it can declare bankruptcy, but individuals can almost never be relieved of student debt through bankruptcy."

Noam Chomsky

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance.

James Madison

Earnings and the ECB dominated the news this week.

Overall the earnings picture seems week, with accounting gimmicks and speculation driving business, and not aggregate demand.

The wage/demand/debt cycle in the US is approaching a critical mass. The only part about this that is shocking is how few policy makers will even condescend to mention it, except in the most cursory and dismissive of terms.

The Fed is proving to be a terrible steward of the real economy. Their defense will be ignorance, while their offensive, in all facets of that term, against the deflationary results of their policy errors is promoted on the merits of claims to 'superior knowledge.'

Next week should be interesting in terms of economic news.

The race to the bottom continues.

Have a pleasant weekend.


22 January 2015

Europe's Reaction To The European Central Bank's QE Program

Every time the rumours and pre-announcements of Europe's 'asset purchase' program swirled, gold took another step higher against the euro.

Like the dollar, of course. 

And it certainly looks like the purveyors of fiatscos are engaged in a 'race to the bottom,' in order to devalue their currencies to promote exports as a means of growth.  
Not the dollar though.  The holders of the reserve currency must make sacrifices, jobs-wise, to achieve banking supremacy.   The US middle class will serve as cannon fodder.

This is what passes for stimulus, where you do not wish to stimulate aggregate demand in your own nation by allowing the broader public to have better paying jobs.  The policy in the West seems to be sending packages of money directly to the overlords, so as not to upset the balance of inequality, where a very few have most of the money and power.

The difference in this 'currency rigging' is that no one owns a gold bullion printing press.

Well, one could make the case that leveraged and rehypothecated gold is one way to devalue it.  And add a significant amount of mispriced counterparty risk along the way as well, which is what they jokers seem best equipped to do.

While the rigging music keeps playing, that is, and people are content to hold claim checks rather than the real thing.

But once the rush to obtain the real thing starts, my, won't that be a sight to see.


Gold Daily and Silver Weekly Charts - Davos Man and High End Looting

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."

John Dalberg Lord Acton

“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

It was all about the ECB today.  And do not think for a minute that this asset purchase program is designed to benefit the broader economy.   It is a subsidy program for those who own financial paper and the Banks

Gold and silver were pushing higher against key resistance and a short term overbought condition on the word from Monsieur Draghi that the ECB will be handing over about a Trillion per year to misprice the risk in financial assets.

This asset purchasing will not have much impact on the real economy, but it will inflate the price of paper assets, especially the kind of debt held with leverage by the wealthiest one percent, delivering profits in tax subsidized forms of income.

Gold is consolidating nicely, and as we showed intraday with the NAV premiums, the gold-silver ratio has dropped back down to 70, which although quite high is not as stratospheric as it has been. Even the premiums of the trusts and funds in precious metals have normalized a bit.

The strong dollar is good for importers and the Banks. And that is why most of the developed world, particularly Japan and Europe, are trying to devalue their currencies. But is hard to imagine how all of fiat price rigging is going to provide a benefit to the real economy.  It starts to look more like high class looting from a distance.

This is going to further taint genuine economic activity with financialisation, and make the task of prompting a recovery that is self-sustaining that much more difficult.

The US financial sector will be benefitting enormously from this European QE, such are things these days with the global multinationals.

And as for the rest of the people, the vast majority? Time to lower your expectations, for you and your children.   At least you will be given the privilege of voting for one of the candidates of their pre-selected choice next year.
Have a pleasant evening.