Nomi Prins: The World Is In Play

Lars Schall talks with bestselling author Nomi Prins about current developments in finance and geopolitics, such as: the strength of the US dollar; the Chinese-lead Asian Infrastructure Investment Bank; the relationship between Wall Street and the City of London; and the planned free-trade zones in Asia and Europe with the United State

The interview was originally posted here.

34.53 Tonnes of Gold Withdrawn from the Shanghai Gold Exchange In Latest Week

The Comex is a rounding error compared to the global physical market for precious metals.

Shanghai saw 34 tonnes of gold withdrawn last week. 

There are less than 18 tonnes of registered (for sale at these prices) gold in all the Comex warehouses, and very little of it sees even a changing of hands, much less withdrawn.

This is why I call it a bucket shop. It has stopped being a major price setting mechanism for actual buyers and sellers of the physical metals, devolving into a speculative pricing platform.

This mispricing of risk and investment will have the usual consequences.

Gold and silver are natural currencies. And it is their physical nature that makes them resistant to long term manipulation.

Gold Daily and Silver Weekly Charts - The New York - London Gold Pool

Gold and silver ended the week pretty much revolving around the same trading ranges.

I might say that gold is coiling for a move, but I really don't quite feel it in the charts or the action on the tape.

The pricing on the Comex is being run like a bucket shop, so using finely tuned technical indicators is probably fruitless.

At some point this gold pool will break down. When that will be I cannot say.

Next week will be light for US macro news, so we will probably see more influence from China and their wrestling with their financial asset bubble, and Greece.

Have a pleasant weekend.

 

 

SP 500 and NDX Futures Daily Charts - China Bubble and the Canard That Is 'Say's Law'

Stocks gave up about half of the drifting higher advance of the prior nine days.

China took actions to dampen the very obvious equity bubble in their markets. Their dilemma is the same as most areas: they wish to stimulate growth, without creating dangerous asset bubbles.

Almost everyone is failing at this, because the plutocrats and oligarchs keep stimulating through the top down financial sectors, which are still fairly corrupt and predatory, and then cannot understand why growth isn't feed through to the masses in order to create more aggregate demand.

You might have heard of something called Say's Law from classical economics. It states that increased production is the source of growth in demand. According to Say's Law, when an individual produces a product or service, he or she gets paid for that work, and is then able to use that pay to demand other goods and services.

A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value.

As each of us can only purchase the productions of others with his own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase.

This is the typical kind of theoretically compact, model bound, hair-splitting nonsense that economists like to put forward, and is related to memes like the wealthy few are the job creators. This a more elegant way of saying 'build it and they will come to buy.' And they will buy because you have paid them equitable wages, and they will want what you happen to build.

It makes no allowance for fraud, theft, financial oppression, slavery, and all the panoply of human vagaries that do not fit into perfectly rational models that propellers heads can dream up.

I don't suppose Monsieur Say every considered labor arbitrage, predatory management, and global arbitrage in his fantasy, or the propensity of producers to pay as little as they dare by some fairly untoward means and methods.  I don't want to bet much on the rational benevolence of those who are motivated primarily by greed.

Given the stagnation of real wages for the past thirty years, I would suggest that anyone who still puts this forward should be shamed out of the room. See the utopian assumption in there? Whoever builds things will pay a living wage and increase those wages as productivity increases.

It had its latest incarnation as 'supply side economics.' Which is a load of rubbish especially in a global economy.

Economics is so often such a carney game.

Here is Jesse's Law.

Unregulated greed will rise to exceed and overwhelm all rational expectations of theoretical market behavior over time, always and everywhere, because men are no angels.   And since money is power, the greater the concentration of money in a society, the less free it will become, and the less reliable all decision based market-based models of it will be.  Rational expectations, and therefore market forces, will fail when undermined by the unbridled greed for money and power.  Passion and obsession will trump reason, unless reason arms itself against the excesses of human nature.   History proves this.

Have a pleasant evening.

 

 

 

Elizabeth Warren: The Unfinished Business of Financial Reform

If Elizabeth Warren were running for President, serious financial reform would be a key part of the national debate and her agenda.  The same can be said of Bernie Sanders.

Hillary may talk the talk but I am afraid that she, like the Republicans, are bought and paid for by the moneyed interests.   They are creatures of the system, caught in a credibility trap of deep capture by financial corruption.

 

Matt Taibbi:  Hillary's Fake Populism

 

We could be surprised. There is always that possibility.  We were certainly surprised by hope and change, in the wrong way. 

But I am not very optimistic.   The next President will most likely be from the same lineage of the last five as shown below.   They will most likely preside over the general trend in Western governments that, by distraction and deception, will continue to burn down the poor, the weak, the young, the aged, and eventually the middle class, to make room for the temple of Mammon.   And the love of many will grow cold.

The text of Senator Warren's speech may be downloaded in PDF form here.

Gold Daily and Silver Weekly Charts - Stanley Sees a Rebound Coming, Tax Revenue Is Obsolete

"It [Nixon closing the gold window on a Sunday evening in 1971] was one of the most dramatic economic events ever, a very big deal and I was at the epicentre of it on the floor of the New York Stock Exchange… He [Nixon] was spinning political speak, but what he was saying was that the U.S. has defaulted on its debts. And it got me thinking about what money is. What are dollars if they are not tied to gold?

I saw how the government lied or certainly spun things in a certain way. I had all these philosophical questions, like ‘Whom do you believe? What is actually truthfully going on?’ All of this pulled me into the global macro markets. The currency markets would be important to me for the rest of my life."

Ray Dalio

"Gold has worked down from Alexander's time... When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Bernard Baruch

"The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver.

Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of those conductors can guard them."

Adam Smith, Wealth of Nations, p. 262

Above are the thoughts from three giants in the world of finance, spanning a long period of time. 

 

I tend to deeply discount the mistaken observations of the stock touts and sell side carnies of the day.  But when the economic 'names,'  the very serious pundits such as Willem Buiter, Ben Bernanke, and Paul Krugman start squawking loudly about how they do not 'understand' gold, and how it seems ridiculous to them, I get a clearer perspective by standing on the thoughts of these giants quoted above.  

 

There was intraday commentary about the lack of serious reform in the financial system here.

Stanley Fischer noted today that Q1 was bad, but sees the economy rebounding according to the CNBC headlines, and that the Fed cannot wait forever to raise rates. 

 

As you may recall I think we will get a symbolic raise from the Fed sometime this year, maybe even a second.  And then they will take that back when it finally occurs to everyone that The Recovery™ is more of a public relations event than an economic reality for the general public.

Bonds and the precious metals were immediately slugged.  

Stanley's speech was a trigger for a major market move. Whether he knew about this in advance, or his text had been given out in advance, or the news algos are that much in control now of the markets, it is hard to say.  The financial news certainly spun it the way they wanted.  But there it is.

 

We ought not to be surprised.  After all the precious metals are priced in a bucket shop in the States, so that is no great surprise.  But Treasuries?  Now that is some scary flash crash scenario concern.

 

I do think that his saying that 'rates cannot stay this low forever' is a tautology.  Obviously they cannot stay there, and that is how his remarks were eventually couched by the end of the day.

 

Speaking of bucket shops, we had some deliveries taken on the gold contracts as noted below with nothing happening in silver, except the usual shoving of bullion around the plate in the silver warehouses.

 

The amount of 'delivery' action on the Comex is a rounding error on the Asian exchanges.   That is a phenomenon worth noting.

 

I would like to reiterate what I said last night, that it is highly unlikely that a hedge fund initiative to change the charter of the Central Gold Trust to allow for bullion redeemability is unlikely for the Central Fund, CEF.   CEF's shares that trade are non-voting and the voting shares are closely held by management.  I do not know why the Gold Trust was arranged differently, but there it is.

 

I was interested to see an essay published in American Affairs by the NY Fed Head Beardsley Ruml in 1946 that contended that Taxes For Revenue Are Obsolete.   The author asserts that with a fiat money system a country needs only print the money it requires to support their spending needs, although they must keep the value of the currency in mind.   Taxes are only used for shaping and engineering social and economic goals.

 

Now doesn't that sound like what some are calling Modern Monetary Theory?  As I have said, I find it amusing that this notion is presented as some new discovery, but even moreso, it is something that the obtuse bedfellows of a group of social spending Liberals and Libertarian 'less government' austerians both agree.   Although the libertarians that I have discussed this with think that the notion that the printing can be limitless because sovereign states cannot default is ludicrous. 

 

Apparently the beauty of not having to bother with taxation to raise money to support spending is in the eye of the beholder.  And believe me when I say that the beholders have some very different objectives in mind.

 

I wonder how the von Miserians feel about trillion dollar platinum coins?  

 

The point of this being that before one concocts and begins promoting arrangement that give men enormous discretionary power, you might want to think very, very hard about who will be wielding that power, and the ends to which they may put it.

 

Have a pleasant evening.