SP 500 and NDX Futures Daily Charts - Winner Steal All Economics

Stocks took a bit of a dive today. That must mean that Obama did well in the debates last night.

FOMC tomorrow at 2:15.

Perhaps the wiseguys were just freeing up some cash to front run the Fed for the Treasury auctions this week.

Advance GDP for Q3 on Friday.

Currency Wars Part II

"All war is based on deception. Of all those close to the commander, none is more intimate than the secret agent; of all rewards none more liberal than those given to secret agents; of all matters none is more confidential than those relating to secret operations."

Sun Tzu


"Let Hercules himself do what he may,
The cat will mew, and dog will have his day."

William Shakespeare, Hamlet

There is a currency war underway.

The international trade clearing mechanisms are tottering. Countries are using their economic power, their banks and currencies, as a part of overall foreign as well as domestic policy.

This is a huge source of the tensions and problems which are are seeing both economically and militarily in the world today.

The current trade system based on the US dollar reserve currency is not sustainable. It has had a good long run, but like the euro it has reached the end of its rope. The US cannot continue to print enough money and increase its debt balance through trade any further. See Triffin Dilemma. Yes I am familiar with Eichengreen's counter argument.

And I am also aware of the already written and vetted proposals for a 'single world currency' with independent local governments,  an arrangement which is even more fallacious and ill founded than the euro.  Yes I know that there could be a series of agreements that could kick this down the road five or ten years.   But something has got to give.  The charade is getting a bit thin but the deception must go on.

I still think the only tenable solution, if one still wishes to cling to the notion of 'free trade' internationally, is an SDR based on a wider basket of currencies with a gold and silver component.  And I am of the opinion as you know that much of these international theatrics and sword hammering is just the 'negotiations' phase with regard to the composition of the new SDR, and the ownership of its maintenance.

There are some who would treat the dollar as an arm of the military strategy, but that becomes a bit dramatic, in the Dr. Strangelove sense, but is nevertheless a good source of Defense Department consulting fees for those who promote the idea.

And I would hope that it goes without saying that the currency war is intimately tied in with the oil/energy situation, via the petrodollar. If you are going to send your country into multiple preemptive wars, one might take the time to understand the reasons why they are doing it. It is about the oil, and the positioning for it.

The problem is that there is no mechanism in place to bring the disputing parties together for an expedient resolution, given their conflicting interests. And those interests run deep, particularly for the Anglo-American banking cartel in NY and London. The dollar is the basis of their power.

And so we are locked in a 'currency war,' a resolution of differences in interest by other, less destructive, means than war itself. After all, nine-tenths of diplomacy is economic, if money is power.

If this notion is alien to you, then one can sympathize, because it is like watching an opera in a foreign tongue without a libretto to help you to understand the action on the stage. To have such knowledge of the basic plotline might not only help your understanding, it could be good for your investment portfolio.  For in this currency war, your accounts and your savings are cannon fodder.

If you wish to read one pivotal post on the subject read the first part of this: Currency Wars.

If you click on the label 'currency wars' at the bottom of this post, it will bring up all the other posts here that touch on that subject, some admittedly only tangentially.

I think the currency war will intensify quite a bit before it resolves.  I have been tracking this since 1999.  It is the reason I first became interested in gold.  I went looking for something like it, and only gold really fit, and to a lesser extent silver.

Gold and silver are intimately involved in the unfolding currency war, because they take no sides, and have no counterparty risk.  No one can print them.  And this is why I think GATA is right, not because of the evidence they have, which is more substantial than one might suspect given obsessive secrecy and the disinformation campaigns, but because it is exactly what one would do if there was to be a currency war, and such things as gold and silver existed.   It is basic strategy of war:  seek to control the high ground.  And along with oil, gold and silver are strategic high ground in a currency war.  And the first victim in a war is the truth.

If one does not understand these things, and the scope of what is happening with the dollar and the euro, then the significance of the important things that are happening will be missed and dismissed.  People will connect the dots that they see and draw their pictures accordingly and they will be wrong. And what is particularly Machiavellian is that some of that is being done by intent.

And even with all sorts of technical trading knowledge, one will be in the dark, literally be fighting 'the last war,' in their understanding of what is happening in the world as it is today.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

GTU must be a difficult borrow, since it maintains a robust premium during an obviously calculated raid on the metals.  It is thinly floated as these things go, and there are no options on it that I can find.

Subsequently I am told there are no shares available for borrow by several brokers.  Whether this is a general condition everywhere I do not know.

The financial firms obtain a number of Sprott shares from the underwritings. This can be used for the borrow game, and are probably subject to leverage and naked shorting at that given the condition of the shorting and clearing in these equity markets.

More On the German Gold Reserves Controversy - Where Is the Gold?

"Another amusing incident arose from the fact that the Reichsbank maintained a not inconsiderable gold deposit in the Federal Reserve Bank in New York.  Strong was proud to be able to show us the vaults which were situated in the deepest cellar of the building and remarked:

'Now, Herr Schacht, you shall see where the Reichsbank gold is kept.'

While the staff looked for the hiding place of the Reichsbank gold we went through the vaults.We waited several minutes: at length we were told:

'Mr. Strong, we can't find the Reichsbank gold.'

Strong was flabbergasted but I comforted him. 'Never mind: I believe you when you say the gold is there. Even if it weren't you are good for its replacement.'"

Hjalmar Schacht, Autobiography: Confessions of 'The Old Wizard',  p.245

Is history rhyming once again?

One can only hope not so fully, as the central banker Schacht later became an integral part of a notoriously despicable regime after the fall of the Weimar Republic.

And if the gold is misplaced or otherwise preoccupied, is the Fed still 'good for it?' Perhaps not, in these times of rather tight and multiply allocated physical supply.

At least the German people are beginning to hold their politicians and bankers accountable, unlike their Western counterparts.

What has been hidden will be revealed, and what has been secret will be brought to light.

The Associated Press
Unease About Germany's Unchecked Gold Reserves
By Juergen Baetz
October 22, 2012

BERLIN (AP) — Germany’s central bank has failed to properly oversee the country’s massive gold reserves, which have been stored abroad since the Cold War in case of a Soviet invasion, independent auditors say.

The central bank must renegotiate its contracts to gain the right to inspect its gold bars, which are worth tens of billions of dollars and are stored in the United States, Britain and France, the Federal Auditors’ Office said in a report to lawmakers obtained by The Associated Press on Monday.

The report says the gold bars ‘‘have never been physically checked by the Bundesbank itself or other independent auditors regarding their authenticity or weight.’’ Instead, it relies on a ‘‘written confirmations by the storage sites.’’

Most of Germany’s gold reserves — some 3,400 tons worth an estimated $190 billion at current rates — have been kept in the vaults of the U.S. Federal Reserve, the Bank of France and the Bank of England since the postwar days, when Berlin worried about a possible land war with the Soviet bloc.

The auditors maintain that the central bank must be able to at least inspect samples of its gold bars in regular intervals to verify their book value.

The report acknowledges that such inspections might be logistically complicated, but it stresses that ‘‘this cannot discharge from the necessity to carry out an inventory.’’

The central bank said in a reaction to the report that was also sent to lawmakers Monday that it sees no reason for a physical inspection of the bars. ‘‘There is no doubt about the integrity of the foreign storage sites in this regard,’’ it stated.

The debate on most of the gold reserves being held by foreign authorities has caused some inevitable conspiracy theories questioning their very existence, but several German politicians have also voiced unease.

Philipp Missfelder, a leading lawmaker from Chancellor Angela Merkel’s center-right party, has asked the Bundesbank for the right to view the gold bars in Paris and London, but the central bank has denied the request, citing the lack of visitor rooms in those facilities, German daily Bild reported.

Given the growing political unease about the issue and the pressure from auditors, the central bank decided last month to repatriate some 50 tons of gold in each of the three coming years from New York to its headquarters in Frankfurt for ‘‘thorough examinations’’ regarding weight and quality, the report revealed.

An initiative backed by some German economists, industry leaders and a few lawmakers dubbed ‘‘bring home our gold’’ launched in May has attracted some 10,000 supporters online so far.

But Finance Minister Wolfgang Schaeuble and others maintain that there is no reason to worry.

‘‘I currently have no doubt about the stock and the storage of the gold reserves,’’ said Priska Hinz, the opposition Greens top lawmaker on the budget committee. ‘‘I do not doubt the reliability of the foreign central banks,’’ she told the AP.

Several passages of the auditors’ report were blackened out in the copy shared with lawmakers, citing the Bundesbank’s concerns that they could compromise secrets involving the central banks storing the gold.

The report said that the gold pile in London has fallen ‘‘below 500 tons’’ due to recent sales and repatriations, but it did not specify how much gold was held in the U.S. and in France. German media have widely reported that some 1,500 tons — almost half of the total reserves — are stored in New York.

GATA had this to day about that last paragraph concerning the decline in the amount of gold held in London for Germany.

"So despite the lack of official announcement, Germany lately has been selling gold from London -- perhaps as part of the secret "strategic activities" grudgingly acknowledged two years ago by the Bundesbank to GATA's friend, the German financial journalist Lars Schall.

The lack of announcement of the sale of the German gold in London suggests that the sale was actually part of a gold swap with another central bank -- like the New York Fed.

That is, the powerful implication here is that German gold in London was sold at the behest of the United States and in exchange Germany took title to United States gold vaulted in the United States -- or title to gold supposedly vaulted in the United States. This way the Bundesbank could continue to claim ownership of the same amount of gold without lying, at least not technically."

Gold Anti-Trust Action Committee, German gold report reveals secret sales that likely were part of swaps