Economic commentary May 4th 2013

[Aeneas]

The economic commentary by Donald Hunt was one of the things that helped me understand more of the economic world of corruption and manipulation and I must admit that I was one of those who missed them when they stopped appearing. I thought to compare a couple of things from the last report and add a couple of other items of interest. The last report was done almost 4 years and 7 months ago.

Here is the weekly summary from then:

Signs Economic Commentary for 6 October 2008
Donald Hunt
SOTT.net
Summary: The big financial bailout plan finally passed in the U.S. Congress Friday over the strong objections of the public. Will the bailout prevent the coming depression? Probably not. Mortgage securities are only a part of the problem.
The bailout plan is more than just a giveaway to the rich as represented by the big banks (although it is that). It probably is a panicked attempt to forestall the real potential crisis: a collapse of the huge, unregulated hedge funds based on derivatives and Credit Default Swaps (CDS).
Gold closed at 840.80 dollars an ounce Friday, down 5.6% from $887.90 for the week. The dollar closed at 0.7255 euros Friday, up 6.0% from 0.6845 at the close of the previous week. That put the euro at 1.3783 dollars compared to 1.4609 the week before. Gold in euros would be 610.03 euros an ounce, up 0.4% from 607.78 at the close of the previous week. Oil closed at 93.10 dollars a barrel Friday, down 15.2% from 107.26 at the end of the week before. Oil in euros would be 67.55 euros a barrel, down 8.7% from 73.42 for the week. The gold/oil ratio closed at 9.03 Friday, up 9.1% from 8.28 at the close of the previous week. In U.S. stocks, the Dow closed at 10,325.38 Friday, down 7.9% from 11,140.26 at the close of the previous Friday. The NASDAQ closed at 1,947.39 Friday, down 12.1% from 2,183.34 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 3.60%, down 24 basis points from 3.84 at the close of the week before.

To compare here are the numbers for the week ending May 4th 2013:
Gold closed at 1470.70 dollars an ounce Friday, up 74.9% from $840.80 since last report. The dollar closed at 0.7622 euros Friday, down 5.1% from 0.7255 in 2008. That put the euro at $1.3121 compared to 1.3783 (in 2008). Gold in euros would be € 1120.89 an ounce up 83.7% from €610.03 (2008). Oil closed at $95.61 a barrel Friday, up 2.7% from $93.10 (in 2008). Oil in euros would be €72.86 a barrel, up 7.8% from €67.55 in 2008. The gold/oil ratio closed at 15.28, up 70.3% from 9.03 in 2008. In U.S. stocks, the Dow closed at 14,973.96 Friday, up 45.0% from 10,325.38 from the last report in 2008. The NASDAQ closed at 3,378.63 Friday, up 73.5% from 1,947.39 in 2008. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 1.74% down, down 186 basis points from 3.60 at the close of the week ending October 4th 2008.

The attempt to desperately suppress the price of gold seems to have failed and could well backfire. The dumping of 1100 tons of gold on to the market did have a short term effect of decreasing the price of gold. 1100 tons of gold is more than half of the annual world production, so it was a big player who wanted to dump the price. Here is what marketwatch had to say at the time:

“It’s a slaughter,” said Carsten Fritsch, senior commodity analyst at Commerzbank AG. “It all comes via the futures market. On Friday, more than 1,100 tons of paper gold had been traded. That is more than annual gold demand from China or India. I can’t see a fundamental reason for this, to be honest."

Speaking on CNBC’s “Squawk Box” on Monday, Dennis Gartman, editor of the Gartman Letter, had this to say: “There are a lot of people throwing up their hands. Throwing positions overboard. Panic is everywhere. I’ve never seen anything like this. I mean it.”

And the blog Pragmatic Capitalism bluntly told its readers that commodities have almost no place in their portfolios: “If one actually takes a look at the long-term real returns of commodities you realize they’re actually quite dreadful,” wrote Cullen Roche. “Over the last 20 years commodities have returned just 1.6% per year over the last 20 years. That’s a real return of about MINUS 1%.”

Lots of reasons have been bandied around for gold’s recent slide: fears of central-bank selling triggered by Cyprus; downgrades from investment banks; and Monday’s downbeat China economic data.

All the financial experts came out of the woodwork and were almost falling over each other in proclaiming that this was the end of gold, that gold was going to go further down and how it was just a bubble waiting to burst. This action in the mass-media was the psychological attempt to suppress gold after the dumping of the 1100 tons of gold on the market.

The reasons propagated about why gold was falling were nothing short of ridiculous. One of the allgeged reasons were that the American economy was improving. Wishful thinking. Another that Cyprus has to sell its gold, all 10 tons of it. That is less than what the Chinese Central bank will buy up in a bad week! Then there was the reason given that the Chinese economy would only be growing with 7.7% instead of the expected 8.0%. Yes that is of course shocking but hardly what brought the price of gold down. Any Western country can dream for a long time yet about having such growth rates.

Things did not work out for the gold bears as nobody on the street bought the idea that gold was finished and hence nobody sold any physical gold. People instead flocked to the mints and jewellery shops the world over to buy physical gold. This was especially true in Asia. China has Bangkok, Perth Mint to mention a couple recorded the most buying since 2008 and the president for the HongKong gold and silver exchange society recorded it as being the strongest buying in 50 years. (from Max Keiser interview with John ‘J.S.’ Kim of SmartknowledgeU.com in episode 439) It was mentioned on the Keiser report that the buyer to seller ratio was 50:1, so people realised that this was a historic opportunity to buy gold and silver too for that matter. There were needless to say also central banks using the opportunity to buy up. As a consequence the price of gold for the week that finished this Friday was just 5.6% lower than 30 days earlier, before the dumping of (paper) gold.

Chinese housewives buy 300 tons of gold
May 2, 2013, 10:45 AM
They are numerous and thumbing their noses at Wall Street, evidently. And perhaps they offer some explanation for the turnaround in gold lately.

On Thursday, the Shanghai Daily reported on a “Voice of China” radio program that claimed Chinese housewives are propping up gold prices. The program said those women reportedly spent 100 billion yuan ($16 billion) over the past two weeks, buying up 300 tons of gold and helping keep prices steady at around $1,468 an ounce.

Putting it all in perspective nicely, blogger Max Keiser notes that while Chinese housewives were out scooping up gold, Americans sold $16.6 billion worth in the first four months of the year. (Read: Gold ETF loses No. 2 spot to emerging markets)

In other words the Chinese have gobbled up an amount equivalent to Cyprus 10 tons of gold before lunch on any given day in the last two weeks, as 300 tons in two weeks translates to 21 tons a day. And that was only in China.


Here is an article from April 30th

Premiums paid by wholesalers and bulk buyers in Dubai to secure a 1 kilogram bar of bullion are being quoted between $6 an ounce and $9 an ounce over the London cash price, said Frederic Panizzutti, global head of marketing and sales at the Swiss-based bullion refiner. That compares with about 50 cents before the rout, Panizzutti, also chief executive officer of MKS Precious Metals DMCC, said in an interview from Dubai.

Gold fell to the lowest in more than two years this month on speculation that the global economy is recovering, unleashing a purchasing frenzy among coin and jewelry buyers from China to the U.S. Consumer demand for jewelry, bars and coins in Turkey and the Middle East represented about 9.4 percent of the global total last year, according to the World Gold Council. Bars have been cleared from display in the souks, according to Gerry Schubert, head of precious metals at Emirates NBD PJSC.

“Physical demand has been tremendous in a way I haven’t seen for a number of years,” said Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc., who’s worked in the industry for more than three decades. “The price collapse prompted a physical gold rush and the evidence of the extent of that is the prolonged period of high premiums that we’ve seen. Reports from the gold souks are that business is good,” Rhodes said from Dubai.
…
In Turkey, the fourth-biggest gold consumer last year, bullion on the Istanbul Gold Exchange traded at premiums of as much as $25 an ounce over the London spot price, something that hasn’t happened in “a very long time, we’re talking years,” said MKS’s Panizzutti.

“In the gold souk, you see some coins left over, but the investment bars are all gone from the windows,” said Schubert at Dubai-based Emirates NBD, the United Arab Emirates’ second- biggest bank by assets. Domestic retail prices moved to a premium of about $5 an ounce from a small discount before the rout, said Schubert, who has traded the metal since 1979.
…
Gold jumped 4.2 percent last week, the most in 15 months, as coin demand from mints in the U.S. and Australia to the U.K. soared. The volume for the benchmark contract on the Shanghai Gold Exchange surged to a record last week, while premiums to secure supplies in India jumped to five times the level before the slump. China and India are the world’s largest buyers.
…
“Physical metal is still not available,” Ng said by phone from Singapore. “The Chinese are on holiday these few days and at this level, the market might slow down a bit on the demand side. People are a little bit more patient now compared with two weeks ago, where everybody was rushing for physical metal.”

Chow Sang Sang Holdings International Ltd. said that jewelry sales at its 44 shops in Hong Kong more than doubled in the two weeks ended April 27 from a year ago. In China, financial markets are closed through May 1.
“It’s not just a Middle East story, it’s all across the globe,” said Panizzutti. “The fact that premiums are so high, it means that no one is making enough. We are producing 24 hours a day.”

The continual suppression of the gold price is needed by the PTB, so as to keep the illusion going that all is well and that there is no inflation. The money printing presses the world over are working non stop to flood the market with easy money. Normally printing more money would mean more inflation which would mean higher interest rates. But nothing is normal and those printing the notes are the same ones that decides the interest rates. So the interest rates are at a historic low, thus facilitating cheap money for the banksters, and at the same time Government bonds in the UK are at a 300 year high while in the US they are at a 240 year high. Talk about a bubble waiting to burst!

In connection to this: The European Central Bank (ECB) cut its refinancing interest rate to 0.50 per cent on Thursday, in a bid to kick-start the bloc’s sluggish economy. Not that it has helped up until now with all the previous interest rate cuts.

The Dow Jones stock index also briefly reached a new high on Friday of 15009,yet another indicator that inflation is rife. This was allegedly because of better than expected jobs data, data that are so manipulated that they have little relevance with the real world.

If one takes the gold price as a benchmark measure of the true currency then the picture becomes clearer that there is inflation. The gold price increased 74% since the last report by Donald Hunt, which is close to the increase in the NASDAQ (73.5%) and close to double the increase in the Dow Jones industrial average index (45%).
Another way of saying it is that the dollar has fallen against the the gold price with 42.8% to a value of just 0.57 cent compared to the dollar value of October 2008. So if you had $100 in your pocket in October 2008 then you now just have $57. The oil has actually fallen considerably and is almost the same in dollar terms as in 2008, but the gold to oil ratio shows that oil has fallen 41.3%. As wages have changed very little in dollar tems in the last few years since the last update, then it is obvious that wages in real terms have been gutted.
On top of the above the fact should be added that the gold price has been and still is massively suppressed.


So the race to the bottom is on, with perhaps Japan in a slight lead position. Their aim is to double the money supply in the pursuit of spurring inflation . In the old days when Japan was exporting a lot and importing little that could possibly have helped the economy, but these days a lot of the Japanese manufacturing has been outsourced, which means that having a cheaper currency will only make imports a lot more expensive, something that will not be outweighed by a diminished export sector.
The record low interest rates and the massive amounts of money printing or quantitative easing as it is called in newspeak, has consequences for everyone who don't belong to the financial elite.

Neil Macdonald writes about this:

Stock markets have risen on this tide of cheap money. So has real estate. So, arguably, has everything else.
But there are two big concerns with what this new central banker elite has done.
One is that no one really understands the consequences of pumping such vast amounts of money into the world economy. It's already distorted the prices of certain assets, and some fear hyperinflation or market crashes are inevitable (the subject of tomorrow's column).
The other is that it's caused a massive shift in wealth, from savers to borrowers, and is taking money out of the pockets of almost everyone approaching or at retirement age.

A war on savings

Probably the most painful of the consequences of quantitative easing has been borne by the elderly.
Most of that generation grew up believing that if you save and exercise prudence that you will earn at least a modest return on your hard-earned money to keep you comfortable in your old age, perhaps along with a pension.
But the money-printing orgy of the last five years looks to have shot that notion to smithereens.

Very deliberately, the central bankers have punished savers, pushing interest rates so low that any truly safe investment - and older people are always advised to play it safe - yields a negative return when inflation is factored in.
The policy has savaged pension and savings returns worldwide, but particularly in Britain, a nation of savers and pensioners.
There is more money in British pension funds than in the rest of Europe combined, and now that money is just sitting, "dead," as some call it, not working for its owners.

Ask Judy White, a retiree in her late 60s who lives in Teddington, south of London, with her husband, Alan.
This year, the Bank of England shattered her retirement. Her pension benefit was effectively slashed by half.
"I don't understand what quantitative easing is, except that it's printing money," she says. "But I do understand that I now have 50 per cent less.
"What they have done is take money from people who have been really careful all their lives."

On the backs of the virtuous

Actually, by the Bank of England's own reckoning, the £375 billion of quantitative easing it has carried out since 2008 has cost British savers and pensioners about £70 billion, roughly $100 billion. (At the same time, the richest 10 per cent of British households saw the value of their assets increase over the same period, the bank reported.)
That cost to the elderly is largely because pension payouts in the U.K. are pegged to the yields on government bonds, and quantitative easing has forced those yields down to almost nothing.

Speaking for the Bank of England, Paul Fisher acknowledges that the bank has created a paradox: It does want people to save and be prudent - just not right now.
"We try," he says, "to get people to do things now to get out of this mess, which in the long run we prefer not to do."
In other words, might we please have some more of the wild consumer spending and borrowing that helped get us all into this situation, at least for a while?

The plain fact, though, is that central bank- and government-imposed solutions to disasters caused by irresponsible, greedy, foolish behaviour are almost always carried out on the backs of the virtuous.
So it was with the bank rescues in 2008, and so it is with quantitative easing.

As Ros Altmann, a longtime pension manager and director of the London School of Economics, puts it, quantitative easing has amounted to a "monumental social experiment" - a large-scale transfer of wealth from older people to younger people.
"Anybody who was a saver and has got some accumulated savings will have had a reduction in their income," she says.
While "anyone who had a big debt, particularly mortgage debts, would have had improvement in their income because their interest payments have gone down."

As stupid as it might sound, older people everywhere would probably be better off if they'd abandoned prudence and borrowed more.

So the manipulation and corruption in the world economy to the benefit of a tiny elite at the expense of the common man is just another symptom of a malaise that is planetary. As Laura writes in Comets and the Horns of Moses:

It is said that power corrupts, and that absolute power corrupts absolutely. What this view does not convey is that power attracts deviants and the corruption of everything else is then a result of pathological persons – who are innately attracted to gaining power over others – spreading their corruption and making it easy for other corrupt persons to join them ‘at the top’. This is the primary driver of all the so-called ‘cycles of history’ (page 379).

 

[LQB]

In connection to this: The European Central Bank (ECB) cut its refinancing interest rate to 0.50 per cent on Thursday, in a bid to kick-start the bloc’s sluggish economy. Not that it has helped up until now with all the previous interest rate cuts.

One thing to note about the Euro with regard to the coming world financial "reset" (transfer of wealth) is that the ECB balance sheet - published quarterly - lists 10,000+ tons of gold marked to market (currently paper spot) on the very first line. Eventually this gold will be marked to physical market when it separates from paper.

 

[Gwenllian]

In connection to this: The European Central Bank (ECB) cut its refinancing interest rate to 0.50 per cent on Thursday, in a bid to kick-start the bloc’s sluggish economy. Not that it has helped up until now with all the previous interest rate cuts.

One thing to note about the Euro with regard to the coming world financial "reset" (transfer of wealth) is that the ECB balance sheet - published quarterly - lists 10,000+ tons of gold marked to market (currently paper spot) on the very first line. Eventually this gold will be marked to physical market when it separates from paper.

Maybe a dumb question :D, but what will happen, do you think, when that gold will be marked to physical market when it separates from the paper one? Will it have an impact of some sort? I really have no idea.

 

[LQB]

In connection to this: The European Central Bank (ECB) cut its refinancing interest rate to 0.50 per cent on Thursday, in a bid to kick-start the bloc’s sluggish economy. Not that it has helped up until now with all the previous interest rate cuts.

One thing to note about the Euro with regard to the coming world financial "reset" (transfer of wealth) is that the ECB balance sheet - published quarterly - lists 10,000+ tons of gold marked to market (currently paper spot) on the very first line. Eventually this gold will be marked to physical market when it separates from paper.

Maybe a dumb question :D, but what will happen, do you think, when that gold will be marked to physical market when it separates from the paper one? Will it have an impact of some sort? I really have no idea.

Not dumb at all considering what it takes to understand this transition (and I'm not saying I do). I can only repeat what I have read from what I consider very credible sources. At some point when the paper price separates significantly from physical price, the ECB will modify the asset side of its balance sheet to reflect the physical price. This will greatly stabilize the Euro and allow for much more printing of Euros to satisfy world demand as the rest of the world abandons the US$ reserve in favor of the Euro. This will transition the Euro to a world reserve currency, while at the same time, gold floats freely to truly represent world wealth (paper not included). Apparently this is one of the reasons for the creation of the Euro in the first place.

Added: In the transition/reset the functional "store of value" moves from currency/fiat to gold - and "all paper will burn".

 

[Aeneas]

In connection to this: The European Central Bank (ECB) cut its refinancing interest rate to 0.50 per cent on Thursday, in a bid to kick-start the bloc’s sluggish economy. Not that it has helped up until now with all the previous interest rate cuts.

One thing to note about the Euro with regard to the coming world financial "reset" (transfer of wealth) is that the ECB balance sheet - published quarterly - lists 10,000+ tons of gold marked to market (currently paper spot) on the very first line. Eventually this gold will be marked to physical market when it separates from paper.

Maybe a dumb question :D, but what will happen, do you think, when that gold will be marked to physical market when it separates from the paper one? Will it have an impact of some sort? I really have no idea.

Not dumb at all considering what it takes to understand this transition (and I'm not saying I do). I can only repeat what I have read from what I consider very credible sources. At some point when the paper price separates significantly from physical price, the ECB will modify the asset side of its balance sheet to reflect the physical price. This will greatly stabilize the Euro and allow for much more printing of Euros to satisfy world demand as the rest of the world abandons the US$ reserve in favor of the Euro. This will transition the Euro to a world reserve currency, while at the same time, gold floats freely to truly represent world wealth (paper not included). Apparently this is one of the reasons for the creation of the Euro in the first place.

Added: In the transition/reset the functional "store of value" moves from currency/fiat to gold - and "all paper will burn".

I found this from the World Gold Council regarding this issue

The Eurozone’s gold reserves stand at over 10,000 tonnes, and it is well known that some of the countries worst affected by the crisis, including Portugal and Italy, are responsible for a significant proportion of these assets. These reserves have served those countries well over the years, not least over the last decade, thanks in part to gold’s unique wealth preservation characteristics. Nevertheless, the question is rightly being asked as to the role that these gold reserves can, and should, play to help alleviate the problems now facing the Eurozone and the individual member states within it.

Most agree that outright sales of gold are not the answer. Aside from the obvious problem that the outstanding debt level of the struggling European countries far surpasses the value of their gold reserves, existing EU laws prohibit such a move to finance governments, as do the provisions of the Central Bank Gold Agreement, which limits gold sales in order to protect the collective value of Western Europe’s reserves. To illustrate this point, the gold holdings of the crisis-hit Eurozone countries (Portugal, Spain, Greece, Ireland and Italy) represent only 3.3% of the combined outstanding debt of their central governments. A one-time sale of all of their gold reserves would probably not cover even one year’s worth of their debt service costs. This would be akin to an individual selling everything they owned in order to make one month’s mortgage payment.

If we exclude gold sales therefore, what contribution can gold make to a comprehensive and robust solution? We believe that gold could be leveraged in the short term to allow Europe the much needed time to arrive at longer term corrective measures. In particular, this could be done by partly collateralising new government debt, which we estimate could be issued at substantially lower yields than existing debt.

...

Finally, it would not affect the ECB’s balance sheet, as the gold that still remains with national central banks would, we estimate, be more than sufficient to collateralise the bonds.

In the Eurozone, gold is held and managed by the European System of Central Banks and decisions on its use are made by the Governing Council regardless of whether or not it has been transferred to the ECB. The Governing Council could, we believe, direct a national central bank to use its gold reserves in such a manner under its secondary objective of supporting the general economic policies of the European Union. Or indeed, justify it in the same manner as it did the SMP.

Europe faces an exceptionally challenging period and unconventional policy responses are called for. A gold-backed bond would seem to offer at least a partial solution to Europe’s woes.

Bear in mind that the 10000 tons quoted above includes the gold that is held overseas. Germany for one has about 2000 tons stored in the US, France and in Britain. I don't know if the other Euro countries have their gold at home or on trust somewhere else. Germany would like to repatriate 300 tons of gold from the US and 374 tons from Paris by 2020. It is another sign that what the central banks say they have is likely very far from the truth. We only have their word for it that it is so, as they reject an independent audit of their gold holdings.

Another comment that I didn't include was from Andrew McGuire and is interesting as it highlights the increasing separation between the physical gold market and the paper gold market:

Whistle-blower and gold trader Andrew Maguire was on the latest Keiser Report, discussing last week’s gold and silver cartel take-down with Max Keiser. Maguire, who CPM Group’s Jeffrey Christian once claimed was a figment of Bill Murphy’s imagination, states that a gold default is underway & states that The straw that broke the camel’s back was the Cyprus issue.

On physical gold vs. paper promised Maguire stated:
If you think you are a holder of bullion, and you happen to turn up and ask for that bullion and you’re told, I’m sorry, we don’t have that bullion, you will have to take cash instead. Technically, that’s a default. If you read through the LBMA’s fine print, technically you can be settled for cash, however, that’s not what most people think.
You’ve either got something in your hand that you can klunk, or it’s paper. I don’t trust the latter.

So when it is said that a gold default is underway, then as I understand it, it means that paper gold is collapsing. Andrew McGuire mentions in the Keiser report (437) that some of his clients who had invested in paper gold (EFT-gold) were told when they turned up to claim possession of their gold that they didn't have it and that they would have to settle for cash. This is another likely cause for why the EFT funds have been emptied of gold in the last few weeks, namely that people have lost trust in paper gold and have wanted to claim their "gold" and if they could only be paid in cash then to invest that cash in real gold afterwards. So what the massive dumping of gold has caused is likely a hastening of the separation between paper and physical gold. This will lead to much higher gold prices, which could be preceded by a period where physical gold market is off-line so to speak as no physical gold is available and then when it comes online again, it will be at a markedly higher price. The latest Max Keiser episode is 440 and in it he has an interesting interview with Alastair MacLeod.

 

[LQB]

So when it is said that a gold default is underway, then as I understand it, it means that paper gold is collapsing. Andrew McGuire mentions in the Keiser report (437) that some of his clients who had invested in paper gold (EFT-gold) were told when they turned up to claim possession of their gold that they didn't have it and that they would have to settle for cash. This is another likely cause for why the EFT funds have been emptied of gold in the last few weeks, namely that people have lost trust in paper gold and have wanted to claim their "gold" and if they could only be paid in cash then to invest that cash in real gold afterwards. So what the massive dumping of gold has caused is likely a hastening of the separation between paper and physical gold. This will lead to much higher gold prices, which could be preceded by a period where physical gold market is off-line so to speak as no physical gold is available and then when it comes online again, it will be at a markedly higher price. The latest Max Keiser episode is 440 and in it he has an interesting interview with Alastair MacLeod.

Gold before transition (now) and gold after transition (soon) are two entirely different things. Who knows where all the gold actually is right now? We will find out post-transition. It is likely that whoever has possession at transition will be the new owner. It is also likely that large amounts of gold move through channels that are invisible to us. If the ECB ends up with far less, then it may be a basket of currencies that make up the new reserve currency (Jim Sinclair's position) - but the transition will happen regardless of who has what gold.

The paper and physical gold markets are already beginning to separate. It will become more obvious as the premiums for physical rise large over the paper spot price. Eventually the paper spot price will play no role in the physical price determination - then at some point transition will take place and gold goes into hiding until full revaluation. How long this takes or when - I have no idea. But the revaluation price has been estimated in several different ways to be around $55,000 per ounce in today's dollars.

The current financial powers in the debt camp need to be careful not to smackdown gold to the point that they set off the bomb that they are trying to defuse temporarily.

 

[Aeneas]

Gold before transition (now) and gold after transition (soon) are two entirely different things. Who knows where all the gold actually is right now? We will find out post-transition. It is likely that whoever has possession at transition will be the new owner. It is also likely that large amounts of gold move through channels that are invisible to us. If the ECB ends up with far less, then it may be a basket of currencies that make up the new reserve currency (Jim Sinclair's position) - but the transition will happen regardless of who has what gold.

The paper and physical gold markets are already beginning to separate. It will become more obvious as the premiums for physical rise large over the paper spot price. Eventually the paper spot price will play no role in the physical price determination - then at some point transition will take place and gold goes into hiding until full revaluation. How long this takes or when - I have no idea. But the revaluation price has been estimated in several different ways to be around $55,000 per ounce in today's dollars.

The current financial powers in the debt camp need to be careful not to smackdown gold to the point that they set off the bomb that they are trying to defuse temporarily.

I agree, LQB and I think that the current financial powers in the debt camp had their little game ruined a bit, when they tried to dump the gold price a few weeks ago. It was a sign that they were disconnected to reality and believed in wishful thinking. They had underestimated the power of the people and especially the Asian population.

What I didn't put in the summary was the price of silver and the gold silver ratio, which I find interesting to follow. At the end of last week the price of silver was $ 24.13 an ounce and the gold/silver ratio was 60.95. The USD index was 82.09.

Silver is said to be the poor man's gold and is not to be underestimated. OSIT.

 

[LQB]

Gold before transition (now) and gold after transition (soon) are two entirely different things. Who knows where all the gold actually is right now? We will find out post-transition. It is likely that whoever has possession at transition will be the new owner. It is also likely that large amounts of gold move through channels that are invisible to us. If the ECB ends up with far less, then it may be a basket of currencies that make up the new reserve currency (Jim Sinclair's position) - but the transition will happen regardless of who has what gold.

The paper and physical gold markets are already beginning to separate. It will become more obvious as the premiums for physical rise large over the paper spot price. Eventually the paper spot price will play no role in the physical price determination - then at some point transition will take place and gold goes into hiding until full revaluation. How long this takes or when - I have no idea. But the revaluation price has been estimated in several different ways to be around $55,000 per ounce in today's dollars.

The current financial powers in the debt camp need to be careful not to smackdown gold to the point that they set off the bomb that they are trying to defuse temporarily.

I agree, LQB and I think that the current financial powers in the debt camp had their little game ruined a bit, when they tried to dump the gold price a few weeks ago. It was a sign that they were disconnected to reality and believed in wishful thinking. They had underestimated the power of the people and especially the Asian population.

What I didn't put in the summary was the price of silver and the gold silver ratio, which I find interesting to follow. At the end of last week the price of silver was $ 24.13 an ounce and the gold/silver ratio was 60.95. The USD index was 82.09.

Silver is said to be the poor man's gold and is not to be underestimated. OSIT.

Yes, the latest smackdown has really opened a lot of eyes and opened up massive buying in China/India - not so much in the US. Apparently US dealers are reporting much buying by past customers that are adding massively to their own positions. The US folks "on the street" have yet to jump in - maybe a measure of monetary programming effectiveness in the US. Refineries around the world (including Perth Mint) are working weekends to meet dealer demand, but afaik, they are not reporting a lack of raw metal.

I'm sure silver has a bright future - but not as a store of value (SOV) alongside gold. Silver does not meet one of the important criteria for a SOV - it is subject to depletion from industrial use. Central Banks are not buying silver - they are buying gold. Silver will remain a commodity post-transition. From a preparedness standpoint, it may be a good idea to have some on hand since it will do well in a hyperinflation environment (that is surely coming). But ultimately, it is not likely to revalue like gold.

In the original posts (around 2000) made by the handles FOA and Another, interesting archeological finds are discussed in connection with populated areas that underwent rapid evacuation (for whatever reason). What they found was much silver coin in the abodes but no gold. This would be like us leaving our change jars in favor of other more valuable assets for future need. Today, the difference being, that silver has a significant industrial value and is in short supply.

 

[Gwenllian]

Very interesting, thank you both. :)

Who would you consider to be a reliable source when it comes to economics, gold and silver? I would think there is also some or a lot of disinformation in this field, but I could be wrong.

Here is some information on the Dutch gold in Dutch ;).

http://www.thesilvermountain.nl/blog/4823/goudkoers/wie-bewaart-het-nederlands-goud.html

According to this article the Dutch gvt possesses 612,5 tonnes of gold of which 90% (!) is abroad. Most of the gold is in the US, although the previous minister of finance couldn't come up with the numbers...
The author also states that 9000 tonnes of (mostly) European gold is stored in the US. :O

 

[Aeneas]

Very interesting, thank you both. :)

Who would you consider to be a reliable source when it comes to economics, gold and silver? I would think there is also some or a lot of disinformation in this field, but I could be wrong.

You are right in thinking that there is a lot of disinformation about. It was mentioned somewhere that 90% of the worlds mass-media in the days before the sell-off had talked about how the gold market was finished and about to burst. The mainstream media never informs the common man about what is about to happen unless it was planned that way. The plan was here to massage peoples minds into believing that the gold price was going to collapse in the hope that people would sell their physical gold and therefore force the gold price down to the benefit of the masters of debt. People didn't react to this and especially not in Asia, which undoubtedly will result in more distrust of the financial experts in the mass-media.

As far as suggesting who to trust as a reliable source, then that is very much a matter of reading from a wide variety of sources and then seeing who is coming up with the goods. Even then, a number of the sites have their own pet-horses and none of them appear to be aware of what is likely coming our way. As Gurdjieff put it:

There are periods in the life of humanity, which generally coincide with the
beginning of the fall of cultures and civilizations, when the masses irretrievably lose
their reason and begin to destroy everything that has been created by centuries and
millenniums of culture. Such periods of mass madness, often coinciding with
geological cataclysms, climatic changes, and similar phenomena of a planetary
character, release a very great quantity of the matter of knowledge. This, in its turn,
necessitates the work of collecting this matter of knowledge which would otherwise
be lost. Thus the work of collecting scattered matter of knowledge frequently
coincides with the beginning of the destruction and fall of cultures and civilizations.

According to this article the Dutch gvt possesses 612,5 tonnes of gold of which 90% (!) is abroad. Most of the gold is in the US, although the previous minister of finance couldn't come up with the numbers...
The author also states that 9000 tonnes of (mostly) European gold is stored in the US. :O

Yes, a lot of gold is not held by its owners and even those who are meant to have it are unlikely to have that much left over after having leased it out to various parties over the years. Then there are other countries who have not submitted new updates as to how much they have and yet they are known to have been strong buyers in the last few years. China and Russia come to mind. So as LQB said:

Who knows where all the gold actually is right now?

 

[LQB]

Very interesting, thank you both. :)

Who would you consider to be a reliable source when it comes to economics, gold and silver? I would think there is also some or a lot of disinformation in this field, but I could be wrong.

Here is some information on the Dutch gold in Dutch ;).

http://www.thesilvermountain.nl/blog/4823/goudkoers/wie-bewaart-het-nederlands-goud.html

According to this article the Dutch gvt possesses 612,5 tonnes of gold of which 90% (!) is abroad. Most of the gold is in the US, although the previous minister of finance couldn't come up with the numbers...
The author also states that 9000 tonnes of (mostly) European gold is stored in the US. :O

One good place to go for gold-related news commentary is Jim Sinclair's site (jsmineset.com - he also puts up great pics of his dogs). Jim has major high level experience in the gold market and is also in the transition/reset camp of FOFOA - in fact he refers to FOFOA's Freegold work often (fofoa.blogspot.com). The reason FOFOA's blogs are so effective is that they help de-program us from the cumulative effects of knowing only a debt system all our lives. This can cause serious distortion in our thinking. But FOFOA's blogs take some serious time and thought - as we know, de-programming is not easy.

When transition/reset occurs, it is likely that gold ownership will be defined by who has the possession. Even fully allocated gold (supposedly) in a bank vault will mean nothing to the account holder except, perhaps, a cash settlement (this has already happened with a bank in Nederland). GLD (and SLV) ETFs will disappear. Even the best of the ETFs like Central Fund of Canada and Sprott's funds may find their gold seized by Canada and investors cashed out in fiat. This is all assuming that transition/reset proceeds roughly as described by FOFOA and Sinclair.

 

[jonspock]

Very interesting, thank you both. :)

Who would you consider to be a reliable source when it comes to economics, gold and silver? I would think there is also some or a lot of disinformation in this field, but I could be wrong.

In terms of a reliable source for economics & gold, I would suggest reading the blog of Mish Shedlock. He is a level headed (former engineer) fund manager who has been long on gold for several years. However, he also covers a wide range of other economic issues and is by no means a 'crazy gold bug'. He's not right on every prediction but years ago he correctly predicted we'd be in a deflationary environment for some time. This was while many 'gold bugs' were screaming about impending hyperinflation. These 'gold bugs' were basically predicting things that played right into their own hands since as more people bought gold their own net value went up. This is a form of disinformation as far as I'm concerned. I immediately fell for this line as we headed into the crisis of 2008 when fears seemed to be at their peak.
People also say the governments/banks are printing vast amounts of money with Quantitative Easing. Not true (you'll have to do your own research on this), but of course the Fed would like you to believe this, because after all, you should start spending or borrowing more rather than saving in such as case. And that is what they want in order to create some real inflation that they are desperate for.
Please beware of people talking about hyperinflation in the near future. I don't believe the forces are there to back this up. All previous cases (that I'm aware of) have been in economies where the hyperinflation was caused or driven by external forces. Mostly it has been in small and weak economies. Weimer case was driven by printing large amounts of money to pay external debt (WW I) and was basically a looting of that economy by outside forces. We are more in a world economy now than then which makes things are little more difficult to do direct comparisons. My guess would be that hyperinflation is more likely in either China or Japan than Europe or the US.

I would say Mish's commentary is based on solid economics and if we are headed for some time of 'black swan' event due to non-economic forces (such as earth changes, wars, etc), then you probably need to consider that separately. If we do have that kind of event do you think you could go into a store and buy stuff with a gold coin? Or is it more likely that hard cash will still prevail - at least for the short term? I think in that situation we should be thinking about helping each other out, rather than surviving at the cost of everyone else.

 

[Mike]

Very interesting, thank you both. :)

Who would you consider to be a reliable source when it comes to economics, gold and silver? I would think there is also some or a lot of disinformation in this field, but I could be wrong.

Dave from Denver at http://truthingold.blogspot.com/ seems to me a pretty good source, but he focuses more on US when it comes to economics.

Another source that you might consider reading (at least his free stuff) is Jim Willie at The Golden Jack### (his web site). I subscribe to his newsletter and have to say that he has been pretty accurate for a number of years on big topics, yet as warning he misses at times with non-economic stuff like his belief in chemtrails, etc. I'd stick to the free stuff, unless you really have a desire for deep reading, since he publishes his main points regularly.

In terms of gold, Willie contends that all of the US gold was secretly sold and or leased during the Clinton era. Sinclair recently brought up the topic of where has all the gold gone on King World News and his website. Wouldn't surprise me if it hasn't been bought up by TPTB outside of government for the reset that LQB mentions, so that they can remain in control, etc.

edit added: The profanity filter caught Willie's website, so just goggle him if you can't figure it out.

 

[LQB]

Dave from Denver at http://truthingold.blogspot.com/ seems to me a pretty good source, but he focuses more on US when it comes to economics.

Yes, I like Dave too.

The problem with many of our sharp economic commentators is what I mentioned above - it is impossible to use debt-system understanding/terminology alone to see above and beyond that system. Its a programming effect or byproduct of lifelong exposure to it.

 

[jonspock]

Very interesting, thank you both. :)

Who would you consider to be a reliable source when it comes to economics, gold and silver? I would think there is also some or a lot of disinformation in this field, but I could be wrong.

Dave from Denver at http://truthingold.blogspot.com/ seems to me a pretty good source, but he focuses more on US when it comes to economics.

Dave from Denver at http://truthingold.blogspot.com/ seems to me a pretty good source, but he focuses more on US when it comes to economics.

Yes, I like Dave too.

The problem with many of our sharp economic commentators is what I mentioned above - it is impossible to use debt-system understanding/terminology alone to see above and beyond that system. Its a programming effect or byproduct of lifelong exposure to it.

Thanks. Always interesting in checking out new economics blogs and different viewpoints. I just glanced at this page (Dave from Denver). I noticed a graph on the right (The Basic Fundamental problem). It is about 3-4 *years* out of date!!!. This is a bit of a red flag for me. These days showing graphs years out of date is not serving anyone.
I also think gold prices are more dependent on overall money supply - not just US government spending vs revenue.
US Government spending did increase but at the same time that public debt was falling (and probably was increased to counter-act that deflationary effect)

Here are a couple of more recent graphs of (US) consumer spending - although perhaps not apple to apple comparisons.
http://globaleconomicanalysis.blogspot.com/2010/10/gallup-poll-shows-discretionary.html

There is some good info on this blog though