Gold Daily and Silver Weekly Charts - Life Is a Cabaret

"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K."

Edward 'Eddie' George, Governor Bank of England 1993-2003

Yesterday I said,

"The capping in the metals is obvious.

There is no economic news or theory that is needed otherwise to explain it.

The question is how long it can last."

Someone asked 'why then is it happening?" I am sorry I had thought it was also obvious based on any number of recent posts.

The Anglo-American Gold Pool, and their coterie of client Banks, have made a policy decision to hold the price of gold and silver below 1300 and 20.

Why those particular levels?   Because any lower, and the miners would start going out of business, and the flow of physical bullion to the East might become unmanageable.   They are nice round numbers, with the obvious appeal to the bureaucratic mind.   Anything higher, or rather, with a more aggressive rate of ascent, and some of the natives might become restless, and the positions of some Banks might become untenable.

Their reasons are of course theirs, but I would imagine it is something along the lines of ZIRP, the TARP, selective justice, and the rigging of LIBOR and any other number of markets.  

The preservation of the status quo becomes paramount to those caught in a credibility trap, and especially among those who have risen to great wealth and power through 'extraordinary means.' 

L'etat, c'est moi.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Complacency 'R Us

"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage."

John Kenneth Galbraith

But not everyone gets in on it. 

Have a pleasant evening.

Elizabeth Warren On the Colbert Report

For non-US readers, and those unfamiliar with him, Stephen Colbert's persona on this show is a parody of a corporatist talk show host.

In times of general deceit, the truths are told in cabarets and comedy.

Gold Daily and Silver Weekly Charts - The Usual

The capping in the metals is obvious.

There is no economic news or theory that is needed otherwise to explain it.

The question is how long it can last.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Complacency Rules

This is a light week on the economic calendar.

Stocks resumed their upward drift today led by the momentum stocks and speculative plays.

Have a pleasant evening.

Dean LeBaron: an Adventure Capitalist's View From Switzerland

Gold Daily and Silver Weekly Charts - How Long Can Phase II of the Gold Pool Be Sustained

"The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London gold market.

The central banks coordinated concerted methods of gold sales to balance spikes in the market price of gold as determined by the London morning gold fixing while buying gold on price weaknesses. The United States provided 50% of the required gold supply for sale. The price controls were successful for six years until the system became no longer workable. The pegged price of gold was too low and runs on gold, the British pound, and the US dollar occurred and France decided to withdraw from the pool. The London Gold Pool collapsed in March 1968.

The London Gold Pool controls were followed with an effort to suppress the gold price with a two-tier system of official exchange and open market transactions, but this gold window collapsed in 1971 with the Nixon Shock, and resulted in the onset of the gold bull market which saw the price of gold appreciate rapidly to US$850 in 1980."

Wikipedia, The London Gold Pool

The first chart below this evening compares the year to date performance of the SP 500, the NDX, the Russell 2000, and Gold.

If you have not noticed, gold and silver have been 'pegged' just below 1300 and 20 respectively. Someone asked me 'why these particular levels' the other day. I would hope the reason why they are capping the metals in the first place would be fairly self explanatory by now.  

Who are 'they?'  Some of the Western central banks have obviously formed a 'gold pool' through which they are attempting to manage the relationships of a number of currencies and economic factors affecting global trade, including the natural money of gold and silver.  This is not my opinion.  Central Banks hold gold in their reserves, despite what some monetary theorists might otherwise say.  The Banks understand the long history of money, in its ebb and flow.

As you may recall, Phase I of the current Gold Pool ended with the collapse of the Washington Agreement,  which was an attempt to prop up a failing arrangement often called Bretton Woods II.  This failure became unmistakable with the change in the central bank behavior towards gold, from net sellers to net buyers, with the revolt of the BRICs. 

We are in Phase II now, which is a loose confederation of Western banks being led by the Fed and the Bank of England who are attempting to maintain the status quo and US Dollar hegemony.

But the Western banks are running a bit of a failing game with the Dollar, as it has already lasted well beyond its prime. You really cannot base global transactions for real goods on a piece of paper that one country creates at will for its own domestic and foreign policy conveniences.

Not unless you are willing to sacrifice your own autonomy. Its a similar to why the euro must eventually fail, because it is a single currency across a non-cohesive political union. 

It is clear that China and Russia and parts of the Mideast are not on board with the NY London Gold Pool, and India is struggling against its own people.  The US is flexing its muscles, but that sort of thing tends to become unsustainably expensive, even for those who own a printing press, but do not own the printing press.

The Fed and its crony central banks are in a bit of a panic, and they are attempting to hold the line in the metals, while they try and manage the unfolding set of economic crises which they have created, and which are hardly yet resolved.  They have sold out the middle class for their Banks, and now must now sit down to a banquet of consequences, which they are loathe to do.  They will throw institution after institution to the wolves before that if they are given the latitude.

The Gold Pool would like to strike a lower level, but as we have seen that is a bit problematic, because the vaults of the West were being emptied fairly steadily, and the miners will be having even more trouble staying in business at lower prices.  And there remains a stubborn demand for the metals from the peoples of the Mideast and Asia, despite the efforts of the neo-liberals to bring them to heel with colour revolutions and sanctions.

I cannot predict exactly when this current cartel will fail, as the London Gold Pool fell when France withdrew for example.  It is hard to predict an exogenous decision or shock.   But there are no lack of guesses.  Guessing is not a practical investment strategy, but it works in selling advice.

We will most likely see quite a cat fight amongst Zurich, Frankfurt, Shanghai and London for the next phase of the gold trading market.  The foundations for Phase III, in which gold starts to trade more freely, have already been laid.  And of course New York may attempt to rule the new gold trade, on the basis that possession is nine-tenths of the law.  That ought to go over like a lead balloon with those nations whose sovereign metals are held hostage.

"As a reaction to the temporary closure of the London gold market in March 1968 and the resulting instability of the gold markets and the financial systems in general, Swiss banks acted immediately to minimize effects on the Swiss banking system and its currency by establishing a gold trading organization, the Zürich Gold Pool, which helped in establishing Zürich as a major trading location for gold."

When did the NY Fed say that they might be inclined to return Germany's gold?  That bit of whimsy may provide us with an outer bound for a resolution of phase II of the currency war. Although the Fed is most likely being unrealistic as usual in their forecasting.

Perhaps we may see some better hints of it through the fog of deception as the time approaches.   But it seems likely that when the new gold pool starts to crumble, the price levels may move with a bit of a bang.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Complacency

"Recorded history is largely an account of the crimes and disasters committed by banal little men at the levers of imperial machines."

Edward Abbey

And among the moderns, bankers are perhaps the least useful, and certainly the most self-delusionally banal.

At least the politicians know a few good jokes, often quotes from their own bios and lists of accomplishments.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - What If?

There was intraday commentary on the dollar and gold/silver here.

This being the inactive month of May, nothing of note occurred on the Comex metals or the gold warehouses.

I had a few questions about 'confiscation' of precious metals again today, in response to the intraday comment.

It is one thing to recall your own currency, which in the 1930s was based directly on gold, and to a lesser extent silver, in order to devalue it.  And it is another thing to just go out and start confiscating purely private property en masse from a citizenry that is notoriously well-armed, and not favorably disposed to tyranny.

In the 1930s, how many people were actually prosecuted for refusing to hand over their gold?  Answer, one.  And this was a man who took the government to court in order to fight the constitutionality of the executive order.  Most of the gold was in the banks, and in circulation, and it was taken overnight, voila.   People were glad to cooperate because they were desperate, and they viewed these actions as equitable.

What if the government decided to give the weak and disabled a trip to the hospital for sterilization or a mercy death, and the ethnically disfavored train tickets to Nevada for resettlement? And tried to take away your children for re-education by the State?  What would you do then? What do you think would happen? 

What if the dollar was devalued 1000 to 1, and the $2,000,000 you had put aside for your retirement suddenly became $2,000.  What if the government confiscated your savings and gave them to the banks and gave you an IOU in return?  What if a meteor hit London, or the Yellowstone caldera erupted and took out most of the human activity west of the Mississippi?  What if...?

There are precedents for all of the above that make them possible, but life is a school of probabilities.

There are plenty of things worth worrying about.  And it does not hurt to have some contingency plans.  But it is better to focus on the real problems of the day, rather than to distract yourself with the sick pleasure of worrying about phantoms, and things that could be.  Since you cannot do anything about them, it is a form of escape, a way of avoiding the tasks and the issues of the day.  It is the narcotic of melancholy.

Take care of the day, and the years will take care of themselves.  Have a concern for the state of your soul, because one thing I can absolutely predict, without fear of error, is that all of us will one day leave this world, with nothing but our souls as we are.  Have a mind for that.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Off the Lows

Stocks came off their lows in the afternoon.

Keep your eyes on the Russell 2000 for a better idea of the health of the recovery, and of the equity markets. The DJIA is a joke, a diversion for tourists and the media.

Have a pleasant evening.

High Tide for the Dollar: Revenge of the Sith

I have certainly considered this scenario many times, of how the dollar regime might evolve,  and the one discussed below remains one possible outcome.  

There is an intense international discussion going on about the future of the international currency system, and relations in general.  I have referred to this generally as the 'currency wars' for some time. 

Most Americans have yet to notice this, due in no small part to the silence of the mainstream media.   If the US and the BRICs cannot engage in a rapprochement over the future of the international monetary system, and keep pushing a hard line for a US dollar hegemony, then of course the BRICs may pursue those discussions by other means.

One way to do this would be to revalue gold at let's say $10,000 per ounce, and use it to partially back their own currency, or currencies.  Bill Holter does a good job of outlining that in the article excerpted below.  The details of how that one might play out is certainly open to much debate. 

The counter to this is force, which the US has been employing much more aggressively and pre-emptively of late than it otherwise has done in the post-Cold War era. 

I had assigned this somewhat unilateral devaluation of the Dollar to Gold outcome a low probability, thinking that the US and its allies, Britain, Japan, and parts of the EU, would continue supporting each other's currencies and policies of foreign exchange valuations through non-transparent swaps and buying, in a managed devaluation amongst themselves of course. But I thought they would at least open the door to allowing the SDR to be reconstituted with a broader basket of currencies and metals not under NATO control.

The events of late in Ukraine make me wonder if the negotiations have not broken down because the hard liners in the Anglo-American cartel have prevailed over those who might favor accommodation and compromise. When the coup d'état occurred, with the US involvement becoming known, I had one of those 'WTF' moments many of us had when the US made a hard right turn and attacked Iraq, seemingly out of nowhere as a response to 911.   Wow, where did that come from?

Certainly it must be obvious that the neo-cons are back in force in Washington, although the neo-liberal economists in the Obama cabinet are certainly capable of carrying the financial side of that American Century outlook.

This is not to say that Russia and China are in the right, or are 'good.'  They have positions and the Anglo-American financiers have positions.  One can certainly debate the relative merits, but for my own case I wish to try and understand what is happening, so that we may best adjust to it and understand what is happening and why.  

And it would certainly be difficult to give high marks to the Anglo-American elites for taking care of those at home, and managing the domestic infrastructure and prosperity.  As we see so often throughout history, this appears to be the case of an oligarchy versus another oligarchy, as they grow restless within their domains.

Therefore I continue to believe that we will see change, rather than collapse.  Although if I were writing a book, or selling my site for clicks, the temptation for blaring headlines of doom might be stronger.   Things change, and periods of change always invoke dire predictions and phantoms of doom.  

I am more concerned about a union amongst the oligarchs and the rise of a global governance that is anti-human, to be frank.   But even that is most likely an outlier I would like to think.  Of more real concern perhaps are the unsuspecting believers and the gullible who may be proudly riding the gospel of prosperity, and a fascination for the trappings but not the substance of devotion, into the maws of hell, with 'Lord, Lord' on their lips.  But that is another matter for a smaller audience, and a preoccupation for some of us here.

So grab something solid and hang on.  I don't know enough to be able to predict how this will turn out, and  anyone who might be able to do so realizes that the fog of war is descending quickly.   Predictions and guesses are cheap, and will become even more plentiful as things progress.  But knowledge is the coin of the realm.

There could be rough waters ahead, mateys. But one can always hope that cooler and wiser and stronger heads will prevail.  This will play out slowly, until something happens, and then events may being to move rather quickly.  Pray for the best, and prepare for the worst.

"Next Tuesday, Vladimir Putin will meet with Chinese President Xi Jinping, I believe that the odds are quite high that an energy deal will be announced where Russia will supply China with oil and gas and that infrastructure (pipelines) will also be built to the express exclusion of the dollar. Please understand that this is not a deal where a few million barrels of oil are sent and then get settled for, no, this will be a very long term partnership which is why the infrastructure will be built.

My intent was to explain that China has imported 1,000′s of tons of gold over the last several years and that they (even though their system is very highly leveraged just as ours) have prepared themselves for what is coming.  'What is coming' is that China will have just as many massive defaults as the U.S. will …but with a “small difference.” I believe that China will mark gold up to an arbitrary number of let’s say $10,000 per ounce which will do a number of things. First, this will make China’s holdings worth much much more which can and will be used as collateral to steady their debt markets. This collateral will serve to re liquefy the banks AND back their currency should they wish to (I believe they do).

Another added 'benefit' is that this will expose the fact that the West no longer has any gold. The dollar will go into a spiral because not just 'one lunatic' like Saddam Hussein is proposing to no longer use dollars. No, we are talking about 2 major oil producers and our largest trading partner who may just be the largest economy in the world having eclipsed us. Another little tidbit is that these 3 taken together were for years the absolute arch enemy of the U.S. and now they are forming a unified triad where Russia and Iran can say, 'Hey, you told us not to use dollars anymore, we’re just doing what you’ve told us to do.'  Talk about forming 'policy' without looking 5 seconds into the future, our sanctions would be the definition of this."

Bill Holter, They Don't Need Us, We Need Them

Read the entire article here.

The Most Destructive Bubbles of All: Corporate Profits Amid Private Poverty

"The money was all appropriated for the top in the hopes that it would trickle down to the needy.

Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.”

Will Rogers, St. Petersburg Times, Nov 26, 1932


“Much like Herbert Hoover, Barack Obama is a man attempting to realize a stirring new vision of his society without cutting himself free from the dogmas of the past, without accepting the inevitable conflict. Like Hoover, his is bound to fail.”

Kevin Baker, Barack Hoover Obama: The Best and the Brightest Blow it Again, Harper's


"In regards to the price of commodities, the rise of wages operates as simple interest does, the rise of profit operates like compound interest.

Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

Adam Smith, The Wealth of Nations


“We Americans are not usually thought to be a submissive people, but of course we are. Why else would we allow our country to be destroyed? Why else would we be rewarding its destroyers? Why else would we all — by proxies we have given to greedy corporations and corrupt politicians — be participating in its destruction?

Most of us are still too sane to piss in our own cistern, but we allow others to do so and we reward them for it. We reward them so well, in fact, that those who piss in our cistern are wealthier than the rest of us."

Wendell Berry


“Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

John Kenneth Galbraith


"Fascism is capitalism plus murder."

Upton Sinclair

 

Tweeting the Decline and Fall of Western Civilisation, One Institution At a Time

“[Edmund] Burke said that there were Three Estates in Parliament; but, in the Reporters' Gallery yonder, there sat a Fourth Estate, more important far than they all.”

Thomas Carlyle

"In the First Amendment, the Founding Fathers gave the free press the protection it must have to fulfill its essential role in our democracy. The press was to serve the governed, not the governors. The Government's power to censor the press was abolished so that the press would remain forever free to censure the Government. The press was protected so that it could bare the secrets of government and inform the people."

Hugo L. Black

"The TV business is uglier than most things. It is normally perceived as some kind of cruel and shallow money trench through the heart of the journalism industry, a long plastic hallway where thieves and pimps run free and good men die like dogs, for no good reason."

Hunter S. Thompson

“We become slaves the moment we hand the keys to the definition of reality entirely over to someone else, whether it is a business, an economic theory, a political party, the White House, Newsworld or CNN.”

B.W. Powe

Quod erat demonstratum. (that which was to be demonstrated)

Gold Daily and Silver Weekly Charts - O Brave New World

Oh, wonder! How many goodly creatures are there here!
How beauteous mankind is! O brave new world,
That has such people in ’t!

William Shakespeare, The Tempest

The capping of gold and silver at these levels continues.

This being an inactive month for the metals, the CME offers even less insight as to what is going on in the real world than it normally does.

Three futures traders have filed a lawsuit alleging a conspiracy of price rigging and deception at the CME. 

The LBMA has decided to give up the silver fix, for a lack of interest in a thoroughly corrupted system of price discovery. Principled resignation is more of a British tradition; the Yanks will hang on, stubbornly to their lies, until the bitter end.   So I don't expect to see any reforms on the CME until it is forced into a de facto default and a conversion to pure paper.

I do not expect to see a real hyperinflation, or a 'proper bankruptcy' in the US.   On this the MMT crowd is most likely correct, at least technically, although all things are possible since the issue is one of human choice, and these jokers are certainly all too human in the worst sense.  If your debt is in dollars, and you can pay it in dollars, and you cant print dollars at will, the internal logic is sound.  But certainly circular and self-referential, and quite likely divergent from practicality.

There will likely be some sort of default on the debt, or a significant change in the system.  But technically it will not be a bankruptcy.   Again, more likely a serious bout of stagflation supported by increasing levels of fraud and force.

When the use of force starts to breaks down, if in fact it does, we will either see a managed devaluation, a consolidation, or a change in management.  We are in a long running Ponzi scheme of a fiat currency that must continue to keep expanding, or begin to collapse.

There is a method in the madness of Washington, and their insatiable desire for more.  But is has little or nothing to do with the public welfare or the health of the republic.  This is the 'me generation' and their watchword is greed. 

We may see Britain falter first.  Or a greater portion of Europe.  Self-love is throwing your own people and then your friends under the bus first, when your schemes begin to fall apart, because they are closest to hand.

We come in peace.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - And the Small Caps Shall Lead Them...

This is a particularly situation here in the equity markets.

Deception is rampant in the accounting for company numbers. The trading is very 'technical' and the underpinnings of the stock market are as sound as a three card monte game.

Forget the fundamentals for now. Unless there is an exogenous shock, I think the market can continue to rise in a very Ponzi-like manner, perhaps to what will in retrospect be viewed as a 'blow off top.'  If a shock comes, or if enough time passes to lower the bar for a 'trigger event' sufficiently, a meltdown is certainly possible.

Watch the Russell, as the SP is the lead sled dog for leveraged manipulation, and the DJIA is strictly for tourists. The broader market for small caps will give you the temperature for things as they are, moreso than the headline indices.

I am not short equities. Not yet. But I am watchful, and am holding a conservative portfolio, holding no US stocks. 

This might be more entertaining to watch, if I were not in such close proximity to it.   Call me Ishmael.

Have a pleasant evening.

Cost of Basic Health Insurance Around the World

You have to pay more for the best, right?

Well, in a crony capitalist society, maybe not so much.

The US ranked 37th in the WHO quality ratings in 2000.

Another example of the efficient market hypothesis, shot to hell.  Where big money is involved, profiteering, monopoly, influence peddling, and conflicts of priorities surely follow.

The problem is not government.  The problem is when government is weakened and twisted by powerful and well-heeled special interests, utopian ideologies, and a neo-Darwinian culture of death.

When it comes to healthcare reform as a threat to the status quo, the moneyed interests and their sycophantic followers are quick to declare force manure.  And some day, if the arc of the moral universe does bend towards justice, they may be obliged to eat those words. 

(Chart figures by Deutsche Bank, h/t Zerohedge)

Prayer and the Kingdom of Love

"The great danger in today’s world, pervaded as it is by consumerism, is the desolation and anguish born of a complacent yet covetous heart, the feverish pursuit of frivolous pleasures, and a blunted conscience. Whenever our interior life becomes caught up in its own interests and concerns, there is no longer room for others, no place for the poor. God’s voice is no longer heard, the quiet joy of his love is no longer felt, and the desire to do good fades.

A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules...

The world tells us to seek success, power and money: our God tells us to seek humility, service, and love. Prayer, humility, and charity toward all are essential in the Christian life; they are the way to holiness.”

Jorge Mario Bergoglio, Francis I

But I am just a simple person. I am no great thinker. I am weak, and afraid of failure, to look foolish.  I can do no great things. 

“The splendor of the rose and the whiteness of the lily do not rob the little violet of its scent,  nor the daisy of its simple charm. If every tiny flower wanted to be a rose, Spring would lose its loveliness. And so it is in the world of souls, our Lord's living garden.

A word or a smile is often enough to put fresh life in a despondent soul...

I get tired of the darkness all around me. The darkness itself seems to borrow, from the sinners who live in it, the gift of their speech. I hear its mocking accents: 'It's all a dream, this talk of a heavenly country of a God who made it all, who is to be yours  in eternity. All right, go on longing for death!  But death will make nonsense of your hopes; it will only mean a night darker than ever, the night of mere non-existence!'

This world is a ship, not your home...

Oh! What mysteries will be revealed to us later. How often have I thought that I perhaps owe all the graces showered upon me to the earnest prayers of a little soul whom I shall know only in Heaven.

It is God's will that in this world by means of prayer heavenly treasures should be imparted by souls one to another, so that when they reach their home with the Father they may love one another with a love born of gratitude, with an affection far, far exceeding the most ideal family affection upon earth.

There we shall meet with no indifferent looks, because all the saints will be indebted to each other.

No envious glances will be seen; the happiness of every one of the saved will be the happiness of all. With the Martyrs we shall be like to the Martyrs; with the Doctors we shall be as the Doctors; with the Virgins, as the Virgins; and just as the members of a family are proud of one another, so shall we be of our family, without the least jealousy.

Who knows even if the joy we shall experience in beholding the glory of the great Saints, and knowing that by a secret disposition of Providence we have contributed to it, who knows if this joy will not be as intense and sweeter perhaps, than the happiness they will themselves possess.

And do you not think that on their side the great Saints, seeing what they owe to quite little souls, will love them with an incomparable love? Delightful and surprising will be the friendships found there - I am sure of it. The favored companion of an Apostle or a great Doctor of the Church, will perhaps be a young shepherd lad; and a simple little child may be the intimate friend of a Patriarch. Oh! how I long to dwell in that Kingdom of Love...

Time is but a shadow, a dream; already God sees us in glory and takes joy in our eternal blessings. How this thought helps my soul! I understand then why He lets us suffer... Life is passing, Eternity draws closer: soon shall we live the very life of God. After having drunk deeply at the fountain of bitterness, our thirst will be quenched forever at the very source of all sweetness."

Thérèse de Lisieux

"We are all flowers planted on this earth, which God plucks in His own good time: some a little sooner, some a little later.

As father and child may we meet in Paradise.

I, poor little moth, go first. Adieu."

St. Jean-Théophane Vénard, Letter To His Father