Gold Daily and Silver Weekly Charts - Currency Wars and the Gathering Darkness

“We first crush people to the earth, and then claim the right of trampling on them forever, because they are prostrate.”

Lydia Maria Child

Gold and silver were under pressure most of the day, starting with a trend to weakness yesterday evening in the globex market.

 

A brief rally this morning back above 1200 in gold was shoved back down fairly hard.  Again, this is just the tyranny of round numbers and perception management.

 

There was negligible activity in the Bucket Shop on the Hudson, although they were certainly moving silver bullion around the plate in the warehouses, with little net affect.

 

There was intraday commentary on the currency war here.   I think it is fairly important to read this and understand it, even if you don't agree with all of it.   The issue is that quite a few people in the rest of the world see things this way, and are acting on it.  So the effect is there, even if your particular domestic media choose to ignore it for whatever reasons.

 

Personally I think it is spot on, and the greatest macro financial trend of my generation, ie the resolution of the settlement and basis for global trade, both in terms of rules and valuations.  Its ramifications are being manifested ever more strongly across all three levels of international relations:  diplomatic, economic, and military.

 

I think it is not too much to say that the currency war is the Rosetta stone for understanding what is happening in our world today.   The most surprising thing is how such great events can be taking place, affecting so many lives around the world, while so few non-specialists are even aware of it.  And I suspect that quite a bit of that is by design. 

 

First by inflation, and then by deflation.  More income producing assets end up in fewer and fewer hands.  Policy and law are bent to the service of greed and injustice, until the lands are impoverished.  And our house will be made desolate, not by fantastical beasts and beings, but by our own hardened, wicked hearts. 

 

Have a pleasant evening.

 

 

 

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SP 500 and NDX Futures Daily Charts - Late Day Lift, Futures Driven

Sold!

 

 

 

 

Notes on the Currency War - 'Old as Babylon and Evil as Hell'

Below is an excerpt from a much longer article which you can read in its entirety here.

It is an interpretation told from a certain perspective, but overall does a fairly decent job of laying out the general boundaries for the currency war that has been brewing in the background since 1971 with the collapse of Bretton Woods.

It is more visible to us now because it started manifesting more overtly in the 1990's and since then has slowly been gaining momentum.

If an analyst does not understand this, is not aware of it even if they do not agree with this particular interpretation, then they have a poor grasp of the major trends that are driving so much financial and political activity in the world today.

And fortunately or unfortunately, gold and silver are deeply involved as the traditional supra-national world currencies.

To put the entire thing in a nutshell, in 1971 the US arbitrarily ended the Bretton Woods Agreement by closing the 'gold window,' and placed the world on an entirely fiat reserve currency which the US controlled. Since the US is making monetary policy to suit its own domestic agenda, and increasingly so over the past twenty years, the stresses that this creates in the world have become unacceptable to many other countries, some of which are in a position to push back against this.

This tension between the dollar and the rest of the world is either going to end in an acceptable and workable compromise, or will result in a split of the world into regions of power and financial influence, most likely three or four. This will be accompanied by conflict on all the usual levels: diplomatic, economic, and military. We are seeing this today.

Compromise is being thwarted by a neo-conservative, militaristic and nationalistic group in the States, with clients in other countries, that view an American hegemony as the natural and highly desirable outcome of the end of the Cold War.  However, this is a patriotic cover story for what is essentially a bid for more money and power for a privileged few who have no patriotism and little decency, who serve only themselves and their patrons.  To quote Edward Abbey, their motives are 'old as Babylon and evil as hell.'

Signorelli, Sermons and Deeds of the Antichrist

Whether you agree with this or not does not matter so much, because it is painfully obvious to those thought leaders in countries like the BRICs that this is the situation.   And they are acting on this, and the US is reacting in response. But from reading the literature of the neoliberal economists and neoconservative politicians, it seems hard to come to any other conclusion based on facts and specific actions which have been taken by the US, the UK, Canada, Germany and Japan.

 

In some ways the situation in Europe, with Germany and a few northern countries driving the ECB and its monetary policy, is a microcosm of the type of tyranny of monetary policy which is held globally by the US Dollar.  This does not even have to be purposeful, but is the natural outcome of a fiat currency held as the major exchange mechanism over a region without political and fiscal unity.  It is inevitable by its very construction, and manifests in other economic problems such as those described in Triffin's Dilemma.  

 

So why do some people keep promoting these types of unsustainable mechanisms?  As always, money and power.  Controlling the reserve currency enables a form of financial neo-colonialism in securing and controlling the payments and politics of the indebted nations.  We are seeing a fine example of this now in Greece, but the US set the pattern for this, particularly in South America, long ago.

And the money masters rationalize this, as Polyani noted, "by indulging in prejudice and sentimentalism. The improvidence of the poor is a law of nature, for servile, sordid, and ignoble work would otherwise not be done.  Also what would become of the fatherland unless we could rely on the poor? 'For what is it but distress and poverty which can prevail upon the lower classes of the people to encounter all the horrors which await them on the tempestuous ocean or on the field of battle?'"

 

The role of the many is to suffer, labor, and die for the select few, however they may choose to define themselves, and assert and maintain their dominance.   This is nothing new, but again, a theory 'old as Babylon and evil as hell.'  Exceptionalism is the very rationale for evil, and pride,  the father of sin.

 

I do not think it is too much to say that we are experiencing a type of 'world war.' This seems to be the settling of differences and adjustments that tends to follow major economics shifts, as we had seen in the first half of the 20th century.  The gilded age, the great financial bubble, interspersed by almost twenty years of horrific carnage.  And the sociopathic few, those black holes of the human spirit, are unleashing the madness once again.

 

"The Fed effectively acts as the world’s central bank, but sets monetary policy only in its own interest. Under the pressure and the orders of financial oligopolies, it fixes interest rates and prints money to suit itself, sending economies across the globe into tailspins...

These policies aren’t enacted with the express goal of kicking the global South in the stomach, but this outcome is a necessary and predictable result of the domination of the global financial order by a sole country whose interest is to keep its hegemonic status. Other measures are taken precisely toward this end. This latest round of financial warfare has to be seen in the context of financial imperialism in general. Countries struggling for sovereignty are also being hit by sanctions, speculative currency attacks, commodity price manipulation, biased evaluations from US ratings agencies, massive fines on some banks for what the US has deemed inappropriate practices, and the prohibition of certain banks from participating in the international banking system...

Not only does the dollar enable the US empire, but also protecting the dollar’s status is a major reason for US imperial wars. American financial and military strength is based upon the fact that the dollar is the world’s reserve and international trade currency, creating a global demand for dollars which allows the US to print as many greenbacks as it likes. It then pumps them into the overbloated finance capital system and uses them to fund its criminal wars...

Without this international demand for dollars, the dollar would “correct,” and US hegemony would eventually, inevitably, come to an end. Therefore the US pressures and attacks countries that attempt to free themselves from the dollar’s yoke, not only because they’re guilty of lèse-majesté, but in order to force the world to maintain the status of the dollar and thus preserve US domination...

Although it has so far been unsuccessful, the idea of rebalancing the world monetary system is extremely threatening to the US, and goes a long way toward explaining recent US wars and warmongering, which may otherwise seem irrational...

The dollar is rallying less because of any supposed US recovery than because of higher global demand for dollars due to investors’ risk aversion, in the wake of the Fed pulling the plug on QE. Parenthetically, the US economy is definitely not recovering..."

Michèle Brand and Rémy Herrera, Dollar Imperialism 2015

"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas. The wealth of another region excites their greed; and if it is weak, their lust for power as well.

Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

Tacitus, Agricola

Not exceptional, except in its delusions. It is a story of an otherwise decent people made capable of doing monstrous things, drunk on rhetoric and power, led on by the madness of the few and their visions of empire.   It is a story old as Babylon, and evil as hell.

Gold Daily and Silver Weekly Charts - Profiles In Hypocrisy, In the Garden of Beasts

"The only vice that cannot be forgiven is hypocrisy. The repentance of a hypocrite is itself hypocrisy."

William Hazlitt

"The U.S. went off the gold standard in August 1971. With no benchmark, central banks could print money and debase currencies. That opened the door for huge bailouts after big banks screwed up in a big way. Taxpayers—not incompetent bankers—paid the price.

By [the late 1980’s], the Federal Reserve Bank and large U.S. banks had established a pattern to control the public relations damage each time banks had a major screw-up: accountants and regulators let banks lie about the size of the problem to stall for time; the Federal Reserve blew smoke at the media; finally, the Fed would bail out the banks in a way that most taxpayers would not understand.

Banks didn’t have to get smarter or more competent. The Fed trained the banks that uninformed taxpayers would eat the losses, and fake accounting would let bank officers keep their positions and their money."

Janet Tavakoli, Decisions: Life and Death on Wall Street

Gold and silver were pushed back to their assigned round numbers, with gold barely holding above 1200 and silver pushed well below the 17 handle.

Ted Butler has a rather striking piece about the rigging in the silver market which you can read here.

Speaking of silver it appears that Turkey had record imports of silver bullion in March. You can read about that here. I am not sure how significant that is. We can certainly keep an eye on it to see if this is a one time thing or a trend.

 Thoughts of silver drachmas and dirhams come to mind, but it is most likely improbably premature. Still, this is a currency war and things seem to be building to a reckoning of sorts.  Who can say what desperate people might do to end repression?

Nothing really happened at the Bucket Shop on the Hudson.  A few contracts of silver were claimed, and inventory was shoved around the plate in the warehouses.  The real action is taking place in the Mideast and Asia.

We have become a coarse and careless people, smugly confident in our 'Exceptionalism.'   We are no longer shocked about lies, but instead critique the style and performance of the liars, and try to emulate them in our own professions.  

How can we not cringe at some of the more shocking abuses that pass for generally acceptable behavior in public figures these days?  And we encourage it, by both our silence and our acceptance.

Oh yes, we recoil in horror at any kind of sex, at the human form, with great puritanical umbrage, but stealing and cheating, and abusing the poor and the defenseless in even the most petty and vicious ways is looked upon with admiration, because we are in love with power. 

Power is our new golden calf.   Even some so-called 'reformers' are falling all over themselves at a chance to move near the circles of power, to have influence, to be seen as connected.   All we seem to want is to get paid, to get ahead, to 'win.'

Hypocrites!

And the example of our cultural and societal icons are certainly leading to a general corrosion of all morals and civilities.  And that is a shame, which eventually will have significant repercussions and consequences for us as a people and a society. 

Where will we finally draw the line and come to our senses?  How far are we willing to go?  How many crimes and abuses, how much theft and torture are we willing to overlook?   Why do we allow our society to be defined by sociopaths?  

When will we finally look about, and see that we too, despite all our smug superiority, have created our own garden of beasts?

Have a pleasant evening.

"Hobbes had argued the need for a despot because men were like beasts; Townsend insisted that they (people) were actually beasts and that, precisely for that reason, only a minimum of government was required. From this novel point of view, a free society could be regarded as consisting of two races: property owners and laborers. The number of the latter was limited by the amount of food; and as long as property was safe, hunger would drive them to work. No magistrates were necessary, for hunger was a better disciplinarian than the magistrate...

The paradigm of the goats and the dogs seemed to offer an answer. The biological nature of man appeared as the given foundation of a society that was not of a political order. Thus it came to pass that economists presently relinquished Adam Smith's humanistic foundations, and incorporated those of Townsend...Economic society had emerged as distinct from the political state...

To the politician and administrator laissez-faire was simply a principle of the insurance of law and order, with the minimum cost and effort. Let the market be given charge of the poor, and things will look after themselves...

What induced orthodox economics to seek its foundations in naturalism was the otherwise inexplicable misery of the great mass of the producers which, as we know today, could never have been deduced from the laws of the old market. But the facts as they appeared to contemporaries were roughly these: in times past the laboring people had habitually lived on the brink of indigence (at least, if one accounted for changing levels of customary standards); since the coming of the machine they had certainly never risen above subsistence level; and now that the economic society was finally taking shape, it was an indubitable fact that decade after decade the material level of existence of the laboring poor was not improving a jot, if, indeed, it was not becoming worse...

The acceptance of near-indigency of the mass of the citizens as the price to be paid for the highest stage of prosperity was accompanied by very different human attitudes. Townsend righted his emotional balance by indulging in prejudice and sentimentalism. The improvidence (lacking personal responsibility) of the poor was a law of nature, for servile, sordid, and ignoble work would otherwise not be done. (born to be vile?) Also what would become of the fatherland unless we could rely on the poor? "For what is it but distress and poverty which can prevail upon the lower classes of the people to encounter all the horrors which await them on the tempestuous ocean or on the field of battle?"...

Robert Owen, in 1817, described the course on which Western man had entered and his words summed up the problem of the coming century...The organization of the whole of society on the principle of gain and profit must have far-reaching results. He formulated these results in terms of human character. For the most obvious effect of the new institutional system was the destruction of the traditional character of settled populations and their transmutation into a new type of people, migratory, nomadic, lacking in self-respect and discipline—crude, callous beings...  

Karl Polanyi, The Great Transformation

SP 500 and NDX Futures Daily Charts - Buddy Can You Spare a Crime?

"There is felt today very widely the inconsistency in this condition of political democracy and industrial absolutism.

The people are beginning to doubt whether in the long run democracy and absolutism can coexist in the same community; beginning to doubt whether there is a justification for the great inequalities in the distribution of wealth, for the rapid creation of fortunes, more mysterious than the deeds of Aladdin’s lamp...

Our government teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy."

Louis D. Brandeis 

Markets held on to some minor gains on light volumes.

It is interesting how blithely the financiers and their engineers at the Fed and their courtiers in the government are taking us into one of the worst earnings seasons since 2009 with equity and bond valuations at bubble levels.

 

Or just another cynical turn of the screws on the middle class?

 

Is there is a single Western financial asset market left with some level of price discovery and integrity?  

 

Is it that they have no sense, or no shame?  Are they sociopaths?  Have they killed their conscience, and turned their very hearts to stone?

 

Is there anyone in a leadership position who cares about the legacy we are leaving for our grandchildren?

Or at least more than they worry about how much plunder they can pile into their own bunkers before the financial system implodes again?

 

What are they thinking?  Do they think that there will be no reckoning for their crimes?  Ever? 

 

I seriously wonder if there is not a kind of madness sweeping the privileged and the powerful, those who imagine themselves to be exceptional, to be above the law. 

 

Have a pleasant evening.

 

 

 

Butler: J'Accuse - Market Rigging in the Wheat Market, and in Silver

 

"What is truth? said jesting Pilate, and would not stay for an answer."

Francis Bacon

This is an excerpt from a much long article posted by Ted Butler at SilverSeek here.

I read Ted's columns each week at his subscription site.  I am glad that he was kind enough to make this one public.

There was little mention in the media of the case against Kraft, which was caught rigging the wheat market.   The parallels with other instances of market rigging are noted by Ted, and he asks the obvious question, 'Why the selective enforcement of the laws?'

Indeed.  It may have quite a bit to do with the credibility trap.  Once bureaucrats and politicians get involved in dirty dealings, their co-conspirators have often used the threat of disclosure to take them along for a much longer ride.  And it is easy to rationalize official silence in the face of injustice for the sake of careers.  And then leave office and take a high paying sinecure with the very industry that they had been paid to oversee.

 

When the precious metals markets dislocate, or 'blow up' in the vernacular, the economists and other very serious hypocrites will say that no one could have seen it coming.   Or blame it on some unrelated scapegoat.  Or crazy misguided goldbugs.   The same way they tried to blame the financial collapse following the housing bubble on the government and homeowners.  No one can see anything in this kleptocracy.

 

And they are right.  You can't see anything coming when you keep averting your gaze and closing your eyes to it.

 

An Unavoidable Comparison

Theodore Butler

April 7, 2015

"Importantly, the Commission’s case against Kraft most likely came as a result of a complaint from a disgruntled insider who was damaged by Kraft’s futures market activity and not as a result of widespread complaints or damage to the public. To my knowledge, this was not a case publicly discussed prior to the charges being filed. Compare that to silver, where many thousands of market participants and observers have petitioned the agency for years about the manipulation by JPMorgan and where investors and silver producers have been and are being damaged by artificially depressed silver prices.

The unmistakable conclusion is that this agency is bought and paid for or otherwise not acting in the public’s best interest. For a federal agency, I don’t think there is a more serious allegation.

So the real question is why the selective prosecution of the law? Why is the CFTC going after Kraft on a complicated case with an alleged payoff that looks like chump change (around $5 million total profit to Kraft), when public data indicate JPMorgan shorts the silver market whenever prices rise to cap and drive prices lower in order to profit on those short sales and accumulate silver at unfairly low prices; with JPM’s cumulative illicit take running into the hundreds of millions if not billions of dollars?

I can see the agency going after Kraft, but I can’t see any legitimate reason for it not to go after JPMorgan for the far more egregious silver activities the bank is involved in. Worse, why won’t the agency explain why the public data doesn’t point to JPMorgan doing what I allege the bank is doing? Can the Commission refute that JPMorgan has been the big concentrated short seller in COMEX silver futures since acquiring Bear Stearns in early 2008 and has been accumulating physical silver while remaining short COMEX futures for the past four years? That’s the key, no one - not the CFTC, not JPMorgan, not the CME – can offer a reasonable explanation for JPM’s control and manipulation of the silver market and what has transpired these past seven years...

The problem with selective enforcement of the law is that it undermines and makes a mockery of the whole system. It is a betrayal of the highest order. Yes, I’m fairly sure that the free pass to JPMorgan to allow it to continue the silver manipulation was given by Treasury and Federal Reserve officials to preserve market order and was considered to be to the public’s benefit. But look at what it has morphed into seven years later – a market more distorted than ever before and in which JPMorgan has amassed the largest hoard of silver in history."