17 Sep 2012

Lars Schall Interviews Sandeep Jaitly: Gold is the Constant

By : On the end of a seminar of Professor Antal E. Fekete's "New Austrian School of Economics" that was held recently in Munich, the financial journalist Lars Schall talked for Matterhorn Asset MGMT with Sandeep Jaitly, the editor of the Gold Basis Service, about:
- permanent and rising backwardation in precious metals
- different forms of the gold standard
- the controversy related to his resignation from the Gold Standard Institute
- gold as the universally acceptable ultimate extinguisher of any debt. Source

Banks Are Setting Us Up Again, This Time The Fall Could Be $2.6 Trillion or More

Only this go-round the costs will be far higher and the damage much worse. This time the fall could be $2.6 trillion or more.

Let me explain.

It started back in the mid-2000s. Wall Street was busy packaging low-rated subprime loans into securitized offerings that were somehow worth more than the sum of their parts.

In reality, what they were doing was little more than laundering toxic debt while raking in obscene profits along the way.

You know the rest of the story as well as I do. Not long after, the stuff hit the proverbial fan and it was not evenly distributed.

Well here we go again...

Both JPMorgan and Bank of America are quietly marketing a new scheme designed to "transform" sub-par assets into quality holdings that will serve as treasury-quality collateral needed to meet the new capital requirements that come into effect in 2013 as part of the Dodd-Frank Act.


Is it just me, or are the signs of consumer collapse as clear as a Lowes parking lot on a Saturday afternoon? Sometimes I wonder if I’m just seeing the world through my pessimistic lens, skewing my point of view. My daily commute through West Philadelphia is not very enlightening, as the squalor, filth and lack of legal commerce remain consistent from year to year. This community is sustained by taxpayer subsidized low income housing, taxpayer subsidized food stamps, welfare payments, and illegal drug dealing. The dependency attitude, lifestyles of slothfulness and total lack of commerce has remained constant for decades in West Philly. It is on the weekends, cruising around a once thriving suburbia, where you perceive the persistent deterioration and decay of our debt fixated consumer spending based society.
The last two weekends I’ve needed to travel the highways of Montgomery County, PA going to a family party and purchasing a garbage disposal for my sink at my local Lowes store. Montgomery County is the typical white upper middle class suburb, with tracts of McMansions dotting the landscape. The population of 800,000 is spread over a 500 square mile area. Over 81% of the population is white, with the 9% black population confined to the urban enclaves of Norristown and Pottstown.
The median age is 38 and the median household income is $75,000, 50% above the national average. The employers are well diversified with an even distribution between education, health care, manufacturing, retail, professional services, finance and real estate. The median home price is $300,000, also 50% above the national average. The county leans Democrat, with Obama winning 60% of the vote in 2008. The 300,000 households were occupied by college educated white collar professionals. From a strictly demographic standpoint, Montgomery County appears to be a prosperous flourishing community where the residents are living lives of relative affluence. But, if you look closer and connect the dots, you see fissures in this façade of affluence that spread more expansively by the day. The cheap oil based, automobile dependent, mall centric, suburban sprawl, sanctuary of consumerism lifestyle is showing distinct signs of erosion. The clues are there for all to see and portend a bleak future for those mentally trapped in the delusions of a debt dependent suburban oasis of retail outlets, chain restaurants, office parks and enclaves of cookie cutter McMansions. An unsustainable paradigm can’t be sustained.

Libya - Doomed from Day One

By Jen Alic: People often ask me why the West doesn’t attempt a Libya-style intervention in Syria. After all, things are going so well in Libya. Oil production is up. But oil production is merely a mirage, as is security in Libya, which was doomed from the day one PG (post-Gaddafi) because of the way it was “liberated”.

On Wednesday, US envoy to Libya Christopher Stevens was killed along with three other American diplomats in a rocket attack on the US consulate in Benghazi.

What about the oil, that global elixir? Well, the violence will not bode well for Libya’s production ambitions, coming at a time when the country looked prepared for a boost in output and was banking on this for economic growth.

Security was already dubious at best, and now international oil companies will be more reluctant than ever. Those that are already there—Germany’s Wintershall AG, Italy’s Eni and France’s Total—will be seeking to beef up security and have already started sending some of their workers home.

If the picture was not clear from the onset of the post-Gaddafi atmosphere, it certainly came into focus earlier this summer when protests over parliamentary elections forced the temporary closure of the el-Sider oil terminal, the country’s biggest.  

Anyone who thinks that Libya will be a secure oil frontier after the formation of a new government next summer is mistaken. The road to destruction runs from Afghanistan to Benghazi (incidentally, the oil-producing region), branching off to southern Iraq and Pakistan’s tribal regions.

So, you ask, what about the controversial anti-Islamic movie apparently put together by an Israeli-American real estate developer with too much time on his hands?

According to Jellyfish Operations - a private intelligence and analysis boutique that has spent much time dissecting the intervention in Libya and the conflict in Syria—the anti-Islamic movie is a red herring in all of this.

China has big plans but Government running out of money - Ambrose Evans-Pritchard

THE more we learn about China’s vast stimulus plans, the more far-fetched they seem.
Caixin magazine reports - with disbelief - that the wish-list for industrial parks and mega-projects unveiled by all echelons of the Chinese system has reached 15 trillion yuan by some estimates.
This is over $2.3 trillion or nearly four times the blitz of extra spending after the Lehman crisis in 2008, a policy that pushed investment to a world record 49pc of GDP and is now deemed to have been a mistake.
But as Caixin also reports, the authorities are running out of easy money.
Land transfer fees for the 300 largest cities have fallen 38pc over the last year.
The central government’s tax revenues have grown 8pc, but spending has risen 37pc. "The good days of overflowing government coffers are over," it said.
Mark Williams from Capital Economics said the fiscal blitz is a mirage. Most of the road and urban rail plans were already in the pipeline. Spending will be spread over years. "We can see no sign of a fresh stimulus. The project approvals are interesting solely because the government chose to publicise them," he said.
China may have to muddle through the downturn after all with less extra juice than hoped. This will be sobering. The country’s cost advantage over America - and others - has vanished.
A new report by PricewaterhouseCoopers entitled "A Homecoming for US Manufacturing" claims it is now cheaper for whole clusters of US industry to produce at home, close to their markets. Firms are "re-shoring" -- to use the vogue term -- to cut transport and inventory costs and take advantage of cheap shale gas. The weaker dollar has iced the cake.
PwC said the US has clawed back a cost advantage of 2pc in steel output against China, at least for the North American market. Its "heat map" gives the US the edge in chemicals, primary metals, electrical products, machinery, paper, transport equipment, and wood, in that order.

Blasphemous anti-Islam film excuse for new secret UK courts - George Galloway

An American amateur anti-Islam film has triggered an attack on the US consulate in the Libyan city of Benghazi, which killed US Ambassador Chris Stevens, two former Navy SEALs and a State Department worker. US President Barack Obama said the killing of the US ambassador, the first such incident since 1979, was outrageous and shocking and vowed to track down the killers. US Republican Presidential candidate, Mitt Romney, described the US administration's initial response to the attack as appeasement. Two weeks ago, the British broadcaster, Channel 4 screened a documentary film questioning the origins of Islam. Islam, the Untold Story claimed that there was little written contemporary evidence about the origins of the religion. This sparked more than a thousand complaints since the original broadcast of the documentary. Meanwhile, the British government has outlined plans to set up secret courts to deal with security issues. It claims the secrecy is needed to protect intelligence sharing relationships with the US and other governments. Critics however say that the tribunals are intended to conceal evidence of crimes committed by the British government. Source

Bernanke And Draghi Are Not Trying To Save Our Economies

Raul Ilargi Meijer - The Automatic Earth: Obviously, after a week of big-time announcements, the German Supreme Court, Mario Draghi's bond buying scheme and Ben Bernanke's QE3 (both virtually unlimited - or presented as such), it's tempting to think the western world is well on its way to tackling its financial crises. Looking at the stock markets one might even presume all's fine out there already.
Still, that is - or indeed, seems - only true if you focus solely - blinders and all - on the world of finance. If, on the other hand, you would like to know where the world at large is going, that focus is simply too narrow. As central banks increase their balance sheets ever more, it would already take a huge leap of faith to have real confidence in the idea that what various previous European financial operations, as well as the entire alphabet soup of US bail-outs, could not achieve, now will be accomplished by what is basically more of the same, just more.
You only need to recall where all of those previous schemes ended up after the initial market exhilaration: that's right, they necessitated subsequent bail-outs. The narrow focus also tends to blind everybody to who's supposed to be paying for the bail-outs. Which is everybody. In essence, all that has been achieved, and that to a far lesser degree than ostensibly intended, is that banks haven't yet been toppled by their debts, and stock exchange numbers look - sort of - presentable.
The question then becomes: is it worth it? The answer to that is a resounding YES if you're a banker or a stock investor or an incumbent politician (Bernanke announced QE3 a comfortable 7 weeks before the US presidential elections). The answer is an equally resounding, if not outright debilitating, NO if you're not part of that small world where politics and money meet and live in relative splendor. Those who are not invited to that party will be called upon to foot the bill, without having anything to show for it.

Faber: Own Gold – “Don’t Store It In The U.S., The Fed Will Take It Away From You One Day”

Tyler Durden's picture From GoldCore Gold Buillion
Faber: Own Gold – “Don’t Store It In The U.S., The Fed Will Take It Away From You One Day”
Today’s AM fix was USD 1,767.25, EUR 1,349.36 and GBP 1,089.42 per ounce.
Friday’s AM fix was USD 1,772.50, EUR 1,359.70 and GBP 1,093.53 per ounce.

Silver is trading at $34.52/oz, €26.44/oz and £21.36/oz. Platinum is trading at $1,699.00/oz, palladium at $685.50/oz and rhodium at $1,050/oz.
Gold rose $5.30 or 0.3% in New York and closed at $1,771.60. Silver climbed to $34.91 then dropped before bouncing back higher, and finished with a loss of 0.06%. Gold was up 2.02% for the week and silver another 3% for the week.
 Currency Table – (Bloomberg)

Gold is slightly weaker today but hovering near a 7 month high, as the US Fed’s announcement of QE3 has led to some investors diversifying into bullion as a hedge against inflation risk.
The yellow metal rose as high as $1,777.51 on Friday, a high not seen since February 2012 when it hit this year’s peak.  Last September 2011, it reached a nominal high of nearly $1,920/oz.
QE3 will allow the Fed to print dollars to buy $40 billion worth of bonds every single month for the foreseeable future. Dollars, euros and pounds are being made to grow on trees – the precious metals do not.
November marks the festival season of Diwali in India, the Hindu festival of lights and demand has picked up as both jewellers and investors scaled up purchases before prices rise any further.
Marc Faber, one of the few analysts, to have predicted the current crisis correctly and to have protected his clients in the process, remains very bullish on gold.

Portuguese escape austerity and find a new El Dorado in Angola + Portugal's 'Million Man March' against the troika

David Smith: The booming, oil-rich African country of Angola has become a refuge for Portugal's jobless, while Luanda's elite take advantage of EU troubles to buy up property in Lisbon
Pungent cigar smoke drifts across the veranda at one of Luanda's upmarket beachside restaurants. It is Saturday afternoon and four Portuguese men are lounging with drinks, savouring the good life and rubbing shoulders with a nascent local elite. "The Angolans have money and we need it," muses José Luis Sousa, 47, who moved here four years ago and co-owns a printing company. "They are buying things in Portugal and around the world. In Portugal people don't like this situation, but they have money and we don't."
The men are among tens of thousands of Portuguese who have emigrated to Angola in recent years. Capital, meanwhile, is flowing in the opposite direction, as Angolan millionaires snap up chunks of Portugal's ailing economy. After five centuries of colonialism, and an era when thousands of Angolans fled to Portugal, the roles are in reverse. "Maybe some day Portugal will be a colony of Angola," Sousa quips.
The economics are simple: Portugal is enduring its worst recession since the 1970s, with austerity measures imposed, unemployment at a record 15% and the economy predicted to shrink by 3% this year. So deep is the malaise that one government minister offered some provocative advice: "If people are unemployed they should leave their comfort zone and look beyond our borders."

Greek symbols - The Slog

Revealed: Tsipras isn’t a mad Commie and 
even Venizelos’s surname is a fraud
Greece is turning steadily to the Left – at all class levels. Partly from a feeling anong most people under 40 that the existing Establishment are a bunch of deadbeats (they’re not wrong, either) and partly because of the plain-speaking charm of Syriza’s leader, Alexis Tsipras (left, in every sense).
A leading centre-right Greek intellectual writes this to me:
‘In both [2012 Greek] elections I found myself incredibly impressed by him, and actually growing to like him….especially his (for me) rather charming voice, which is the exact opposite of an orator’s: naturally broken and rough…the charm being that this rather broken voice says intelligent things [in contrast to the other pols] in a measured way, at most rising to emphatic. He is naturally self-controlled & factual. He’s an engineer and that’s exactly what he sounds like, a conscientious engineer who does the research and opens it to the public. Ergo, a lot of people who were not attracted by Syriza 4 years ago, have come to trust him.
Further, his response to the crisis has been to invite in everyone to shape and find new policies. So the party’s positions have matured considerably, while he opens up Greece’s multiple options – for we DO have options – to public discussion and debate. He educates, even as he is being educated himself. In this ridiculous, terrible reality, this is powerfully attractive.
I did not vote Syriza, because of its blanket support for the unions. I support unions absolutely – but there are good unions and bad….and in our case the government-supported unions are a HUGE part of the problem. Now? I’d probably vote Syriza.’

The Truth about American Teachers (and Education) - Stefan Molyneux

CIA Mormons, Zionists behind anti-Islam film: Analyst Dr. Webster Tarpley

A prominent political analyst says that several groups including American Mormons in the CIA and Zionists are behind the controversial recent anti-Islam film made in the US, Press TV reports.

“I would identify two or perhaps three components, the first is a Mormon mafia inside the CIA, the group of Mormon high officials of the CIA who want Romney to become president and they think that by having the kinds of events that we are seeing, they can make Obama look bad in front of the American public,” Dr. Webster Griffin Tarpley told Press TV during an interview on Saturday.