'Among Major Economies, Only the Chinese Numbers Are More Suspect'

On the surface this report shows solid economic growth for the US economy during the second quarter of 2015. Unfortunately, all of the usual caveats merit restatement: 

-- A significant portion of the "solid growth" in this headline number could be the result of understated BEA inflation data. Using deflators from the BLS results in a more modest 2.33% growth rate. And using deflators from the Billion Prices Project puts the growth rate even lower, at 1.28%. 

-- Per capita real GDP (the number we generally use to evaluate other economies) comes in at about 1.6% using BLS deflators and about 0.6% using the BPP deflators. Keep in mind that population growth alone (not brilliant central bank maneuvers) contributes a 0.72% positive bias to the headline number. 

-- Once again we wonder how much we should trust numbers that bounce all over the place from revision to revision. One might expect better from a huge (and expensive) bureaucracy operating in the 21st century.

Among major economies, only the Chinese numbers are more suspect. 

All that said, we have -- on the official record -- solid economic growth and 5.3% unemployment.

What more could Ms. Yellen want? 

Consumer Metrics Institute, BEA Revises 2nd Quarter 2015 GDP Growth Upward to 3.70%

Thanks to Wall Street On Parade for pointing the way to this commentary above.

The campaign to smother the true state of the US economy with paper, both in terms of paper money and manufactured statistics, is an outgrowth of the credibility trap.

Having crippled the real economy with incompetent and corrupt policy decisions, the status quo of pampered privilege is going full out to try and save the day– for themselves.

Meanwhile, underneath the public relations campaign to persuade people that all is calm, the pressures of a decade or so of malinvestment and crony capitalism continue to build.   The persuasion of the official numbers is becoming more and more ineffective, as people hear one thing but see another in their daily lives.

Yes, there are more jobs.  And they are of an inferior quality with low pay and often little or no benefits such as basic healthcare, which despite assurances otherwise is becoming increasingly expensive, and as in the clear case of Big Pharma, unnecessarily so but supported by government policies.

And the urge is to spread this malicious monopolistic drug policy globally through secret trade deals such as the TPP and TTIP.

The public is rejecting the 'establishment' in increasing numbers, such that such voices of the privileged are now recognizing them, but dismissing them as a sociological phenomenon,  expressive individualism.

The political and economic establishment has failed, again and again and consciously so, because it was to their short term benefit to do it.   It is the failure of an oath, of personal morality, and of office.

But now that the consequences of their actions are becoming apparent, they cannot possibly admit to them because, after all, it was they who are responsible.  And there is still plenty of money left on the table.

And so they must deny the problems, cover them and distract attention away from them, and continue to press on with what has been working all along, for them and their friends. The oligarchy has indeed become audacious. both in its lust for looting the system, and its bravura in the attempts to cover up the consequences of their decisions.

"Some appear to believe that 'confidence in the banks' can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit."

James K. Galbraith, Testimony to Congress, May 2010

Related:   LBMA Apparently Restated Its 2013 Gold Refining Number 2,200 Tonnes Lower

The Unrestrained Rule of the Will To Power and the Death of Justice

"What is good? All that heightens the feeling of power in man, the will to power, power itself. What is bad? All that is born of weakness. What is happiness? The feeling that power is growing, that resistance is overcome.

Not contentment, but more power, not peace at all, but war; not virtue, but proficiency. The weak and poorly formed shall perish: first principle of our philanthropy. And one shall help them to do so. What is more harmful than any vice?  Active sympathy for poorly formed and the weak— Christianity."

Friedrich Nietzsche,  Der Antichrist, 1895


"He who makes a beast of himself gets rid of the pain of being a man."

Samuel Johnson

The Malicious Practices Act of 1933 was introduced to rid the German state of its ‘oppressors’ and ‘enemies’. In particular, the German state imposed new legislation that made it illegal to speak wrongly of, or criticise the regime and its leaders.

Coupled with the 1934 act against 'treachery,' a law sufficiently broad and vague, and carried out by a special set of courts with their own processes and procedures outside of the national court system, became a powerful tool for state fascism in the form of terrorism directed against their own people and any form of dissent, freedom of speech, of those guilty of social differences, no matter how fundamental or how trivial those differences might be.

LBMA Apparently Altered Its Gold Refining Flow Statistics By 2,200 Tonnes

Ronan Manly has published a fascinating analysis of the LBMA gold refining statistics today.

The gold refined by LBMA 'good delivery' refiners is sometimes involved in converting existing gold bars into kilobars which are suitable for export to the Asian Markets.

Ronan Manly offers quite a bit of detail with regard to a very large revision in the LBMA 2013 refining data and suggests that such a large restatement of gold statistics, almost 1/3, without explanation, seems odd.

The supposition is that the LBMA originally counted gold bars that were taken from existing sources, such as their own stores, ETFs, and the Bank of England and re-refined them into kilobars for delivery into Asia.  Later they restated the number much lower, by 2,200 tonnes.   We have not been given the exact reason for this, but one suggestion is that the gold did not come from new mining or traditional recycling.  And the LBMA was reluctant to advertise such a huge spike in gold refining spurred on by Asian demand.

Depending on how the GFMS and the WGC uses the statistics and sources, this could result in a significant (~2,200 tonnes) understatement of the flow of gold from Western sources into Asia in just that one year.  Considering how tight gold supplies have been this might explain quite a bit.

What exactly is the LBMA policy decision here, and what about subsequent years of 2014 and 2015?

What is the source of this gold?  And what is so special about 2013?

The one thing that seems significant about 2013 is that the price of gold was hit rather hard by selling after hitting a peak in 2012, and the total amount of gold held in Western depositories and ETFs dropped considerably concurrent with that hit in price.  A chart is included below for your convenience.

So far we have more questions than answers.  Perhaps more information will be forthcoming.  I am given to understand that the LBMA is not open to discussing the matter.

I have my own hypothesis.   There was a major effort to hold down the price of gold in 2013 after it had run to a new high.  That effort to suppress the price resulted in a huge spike in physical demand from China.

'Stopgap measures' were taken to meet that physical demand, but without allowing the price to increase.

As more and more gold was shaken loose from various sources, a campaign of stifling Western interest in gold was undertaken to permit even more gold to be taken out of ETFs and repositories.

However, the demand from China and India were not passing events, and have continued until even now. And so the stopgap measures of 2013 have turned into an ongoing shuffling around of existing bullion to try and keep the price of gold from running higher, and threatening some of the bullion banks and institutions who cannot possibly replace all that has been loaned out and sold at anything near today's prices.

Or it *could* be something else entirely.  Time will tell I am sure.  But I think that there are now two events that might be remembered as potentially pivotal:  one in 2007 in which the world's central banks became net buyers of gold for the first time in about thirty or more years, and 2013, in which the flow of gold from West to East put the Gold Pool into unsustainable endgame from which it could not recover without allowing prices to eventually run higher.

Ronan Manly suggests that he will have a follow up article explaining his own analysis, and I will most likely defer to his more informed judgement and wait to see what he says.  I do not have all the information and a few things still puzzle me a bit.  But  I do congratulate him on finding this and writing it up so well with so much thought.

For the detailed analysis about what happened read the entire piece Ronan Manly, The LBMA’s shifting stance on gold refinery production statistics

This is a quote from his article:

"There are 2,200 tonnes of 2013 gold refining output in excess of combined mine production and scrap recycling being signalled within the 6,601 tonnes figure that was removed from the LBMA’s reports on 5th August 2015.

Could it be that this 6,601 tonne figure included refinery throughput for the huge number of London Good Delivery gold bars extracted from gold ETFs and LBMA and Bank of England vaults and converted into smaller gold bars in 2013, mainly using LBMA Good Delivery Swiss gold refineries? And that maybe this 6,601 tonne figure stood out as a statistical outlier for 2013 which no one wanted to talk about?

The objectives of HM Treasury’s Fair and Efficient Markets Review (FEMR) include transparency and openness. It would appear that altering already published gold refinery statistics, especially for 2013, seems not to be in the spirit of these FEMR objectives.

Part 2 of this analysis of the LBMA’s 2013 gold refinery statistics looks behind the 6,601 tonne number at the phenomenon of Good Delivery bars being processed through the Swiss gold refineries in 2013, the gold withdrawals from the London-based gold ETFs, and the huge shipments of gold from the UK to Switzerland in 2013. Part 2 also examines the 2013 withdrawal of gold from the Bank of England, and how GFMS and the World Gold Council tried to, or tried not to, explain the non-stop processing of Good Delivery gold bars into smaller finer kilobars during 2013."

Related follow up article from Ronan Manly:  How Many Gold Bars Are In the London Vaults