NAV Premiums of Certain Precious Metal Trusts and Funds - The Day Money Dies?

"Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it."

Mark Twain

Russell Napier of ERIC has apparently disclosed that the G20 will be announcing a 'bail in' structure for bank deposits.  His source seems to be from the UK Treasury.

This is from a story carried by ZeroHedge. I do not know if this is an accurate prediction, an informed leak, or what not. 

I have been hearing warnings here and there anecdotally about a market correction.  A very large investment firm was warning some large clients of a correction in equities.    But not much else.

I thought perhaps some brokers were chasing bonuses on what might be interest sensitive products carrying bounties from the firms that manage them.  Believe me, this does happen.  I had a broker disclose to me that if he persuaded me to make a large transfer into a well known investment fund that he would receive a $20,000 bonus for it.

Perhaps this is just a pervasive rumour. And trading desks and hedge funds have been known to start even destructive rumours that might favour their trading books. Some announcement may be forthcoming but we do not know what its implications might be.  

I have absolutely no 'inside knowledge' on this one.  If I did I would let you know.  I have told you everything I have heard, which I have filed under 'interesting' but not well understood.

Let's see what actually comes out this weekend. As you may recall I wrote yesterday that 'I have the sense that now is not a bad time to start positioning portfolios for a market downturn. We may not get it until after the first of the year, but stocks overall look to be fully valued.'  That was based on the action on the tape and the charts, and not anything more intense.  Some people like to claim inside knowledge and it certainly sells clicks.  But it most often is not the whole or real story.

It seems a little on the edgy, screaming headline vein of reporting information.  I like cash and gold as well as the next guy, but I doubt the governments of the West will so overtly throw their public to the wolves.  But then again I cannot rule it out.  And therein lies the dilemma with a non-transparent system in which justice and the public interest have been loosely honored.

This is from ZeroHedge.

"It is with regret and sadness we announce the death of money on November 16th 2014 in Brisbane, Australia...

On Sunday in Brisbane the G20 will announce that bank deposits are just part of commercial banks’ capital structure, and also that they are far from the most senior portion of that structure. With deposits then subjected to a decline in nominal value following a bank failure, it is self-evident that a bank deposit is no longer money in the way a banknote is.

If a banknote cannot be subjected to a decline in nominal value, we need to ask whether banknotes can act as a superior store of value than bank deposits? If that is the case, will some investors prefer banknotes to bank deposits as a form of savings? Such a change in preference is known as a "bank run."

Russell Napier Declares November 16, 2014 The Day Money Dies

It does make sense IF the central banks declare for deflation and intend to give up or weaken insured deposits for savers, which is foolish.  I don't think the one percent keeps a high percentage in passbook accounts yielding almost nothing.

This would be the time for the Fed and the government to come forward and do something useful for the public.

Gold Daily and Silver Weekly Charts - Volatility and G20 - Go Go Godzilla

There is a G20 meeting coming up this weekend in Brisbane.

 Some readers (h/t Jeff in particular) are following the developments on that front in case there is an overt move to dethrone the US dollar. 

I have watched the meetings closely for the past two years.  As you know, there is a movement internationally to begin to construct alternatives to the dollar reserve currency regime.

Gold is surprisingly volatile, with sweeps up and down this week. This is even more marked because this is an inactive month on the Comex with little actual delivery and warehouse movement.

Let's see what happens.

SP 500 and NDX Futures Daily Charts - Quiet Trade

Today's trading was quiet as the Banks were closed for Veteran's Day.

Stocks ended with an upside bias on light volumes.

There was little economic news to drive trading.

I have the sense that now is not a bad time to start positioning portfolios for a market downturn.  We may not get it until after the first of the year, but stocks overall look to be fully valued.

Have a pleasant evening.

 

Yra Harris On Official Swiss Objections To the Gold Referendum

Yra Harris cuts to the heart of the matter in addressing the objections, more like rationales, of the Swiss National Bank to the gold referendum coming before a vote of the Swiss people.

I like it because it more generally addresses some of the objections to gold as a reserve asset.

"In a Bloomberg article from Nov. 5 by Nicholas Larkin and Catherine Bosley, it is noted that the Swiss National Bank is very opposed to the Swiss voters passing the referendum calling on the SNB to retrieve all its gold from foreign depositories and also to be an active buyer to replenish previously sold gold reserves. Larkin and Bosley noted the referendum specifies that at least 20 percent of the SNB‘s total assets be held in gold from a present level of 8 percent.

The problem is magnified by the present policy that is holding the Swiss Franc at a floor of 1.20 to the euro. Since the 1.20 EUR/CHF policy was announced, the SNB‘s assets have expanded by more than one-third as the SNB has intervened in FX markets by selling Swiss francs and buying euros and other foreign currencies. If the SNB wishes to maintain this absurd policy it will have to buy much more gold if the referendum passes.

The SNB is presently selling a hard currency, the Swiss franc, and buying massive amounts of a problem plagued asset, the euro. The Swiss policy of holding the EUR/CHF at 1.20 will be proven a foolish endeavor if the ECB moves to a significant QE program. The Bloomberg article concludes with a concern of the Swiss Government that:

“…. the initiative’s [referendum] ban on gold sales would deprive the SNB of an asset should it find itself in dire straits. Several analysts share that view.” In putting forth more nonsense about the SNB having to purchase gold, Georgette Boele of ABN AMRO in Amsterdam says: “You hold gold in terms of an emergency that you can liquidate if you really need to.”

Let me reiterate the nonsense of this statement: 1. If the SNB had to liquidate in an emergency then gold, in fact, would be the most sought after asset of haven status in the world and its price would be at extremely elevated levels; and 2. You don’t have to sell your gold but rather create an asset-backed security using gold to borrow on a leveraged basis in the very liquid capital markets.

The SNB and Swiss authorities are evidently very nervous about the upcoming referendum because of the effect it will have on the EUR/CHF policy of the SNB. Buying gold would be the best policy for the entire Swiss nation for presently the policy of printing Swiss francs to purchase euros is patently absurd."

Yra Harris, Notes From Underground

It's a Dark Day In Our Nation

"It's a dark day in our nation when high-level authorities will seek to use every method to silence dissent.  But something is happening, and people are not going to be silenced."

Martin Luther King, Ebenezer Baptist Church, 30 April 1967

I wonder what Martin Luther King would have said about America's decision to dedicate itself to perpetual war.

Gold Daily and Silver Weekly Charts - Audacious Oligarchy

"The problem of the last three decades is not the 'vicissitudes of the marketplace,' but rather deliberate actions by the government to redistribute income from the rest of us to the one percent. This pattern of government action shows up in all areas of government policy."

Dean Baker

"Most of them became wealthy by being well connected and crooked.  And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me."

Charles Ferguson, Predator Nation

"No lie can live forever."

Thomas Carlyle

There is a currency war ongoing.  It's objective is the subjugation of whole peoples, including the domestic public.  In a very real sense it is nationless.

There is an 'audacious oligarchy' of self-defined rulers who move freely between private industry and government, whose primary objective is preserving and furthering their own power and self-interest.

Sheldon Wolin called this 'inverted totalitarianism.' Economist Robert Johnson has called it an 'audacious oligarchy.'  And so have many other responsible economists from Simon Johnson to Jeffrey Sachs.

I do not think that warnings or lessons from history will be sufficient to provoke change. Hubris makes people deaf and blind to consequences.  They will not learn, nor be informed by anything outside their own small circles.

This implies that there will be another financial crisis,  a 'hard stop' in the Western markets. How and when that will occur I do not yet know.

Have a pleasant evening.

BILL MOYERS: And you say that these this oligarchy consists of six megabanks. What are the six banks?

JAMES KWAK: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.

BILL MOYERS: And you write that they control 60 percent of our gross national product?

JAMES KWAK: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

BILL MOYERS: And what's the threat from an oligarchy of this size and scale?

SIMON JOHNSON: They can distort the system, Bill. They can change the rules of the game to favor themselves. And unfortunately, the way it works in modern finance is when the rules favor you, you go out and you take a lot of risk. And you blow up from time to time, because it's not your problem. When it blows up, it's the taxpayer and it's the government that has to sort it out.

BILL MOYERS: So, you're not kidding when you say it's an oligarchy?

JAMES KWAK: Exactly. I think that in particular, we can see how the oligarchy has actually become more powerful in the last since the financial crisis. If we look at the way they've behaved in Washington. For example, they've been spending more than $1 million per day lobbying Congress and fighting financial reform. I think that's for some time, the financial sector got its way in Washington through the power of ideology, through the power of persuasion. And in the last year and a half, we've seen the gloves come off. They are fighting as hard as they can to stop reform.

The Financial Oligarcy in the US - Bill Moyer's Journal

SP 500 and NDX Futures Daily Price - Audit or End the Fed

"Politics is the loom that weaves and spins the fabric of our democratic social cohesion. The politics of democracy is the social blanket that we all willingly come together under, huddled awkwardly, for our national identity. The interwoven threads of multi-media, technology, financial, and shared social myths bind this political blanket into our national identity as a democratic republic.

When the democratic political process has been stealthy co-opted over many years by financialization, which seamlessly connects the financial industry and the government, we become members of a fascist form of state (inverted totalitarianism), without collectively knowing it yet."

Joe, the Angry Hawaiian

The financial system in its existing form is excessively arbitrary and non-transparent.

An external standard provides a flywheel, which prevents the expansion of the money supply at the discretion of a central authority that also has the power to monetize debt and set interest rates, within some longer term limitations.

In its worst form, short of an overt tyranny, the central banking power has the ability to create money at will, and distribute as they see fit, to their cronies, for whom they are also a powerful friend and regulator governed by a self-defined class that moves freely between government and the financial industry.

This is the precise reason why President Andrew Jackson vetoed the Second Bank of the United States.  The Banks speculated in the goods of the nation, keeping the profits, but using the power of their Central Bank to shift the losses to the public.

And this is the story of the serial bubbles we have been seeing since the 1990s.

Would it be 'better' to merely shift the power to create money at will from the Fed to the Treasury, and eliminate the issuance of debt?  Hardly.  There are other ways to accomplish this that do not count upon men being as selfless and wise as angels, which may exist as a theory, but has proven to be a terrible folly in all real world situations in which it has been tried.

Have a pleasant evening.