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Avery Goodman

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  • China: Understanding The Nature Of The Bubble [View article]
    The author is well aware of the fact that empty apartments do not generate rent. He doesn't buy "concrete cave" empty apartments without any intention of building them out sufficiently to rent them. But, Chinese people, Russians, Ukrainians, and many other emerging market folks do it all the time. It is their cultural habit.

    Yes. It seems stupid. But, it isn't any less stupid when western investors buy long-term CDs and soon-to-be deeply depreciated bonds, paying virtually no interest, denominated in a currency whose buying-power value is fast depreciating (ie: the US dollar and British pound). It isn't any more stupid than buying non-dividend paying so-called "growth" stocks. It is called speculation.

    One thing is certain. Empty apartments, paid for with cash, in a nation with little to no real estate tax, don't get foreclosed on. If the price goes dramatically down, people just hold onto them. They produce nothing, but neither do most of the investments that westerners buy. You can't judge economic conditions in a foreign land, by the same cultural norms you are accustomed to, and the way of thinking your culture propagates. You must judge them as they are.
    Oct 21 04:21 PM | 5 Likes Like |Link to Comment
  • Why Did Foreign Central Banks Dump $32 Billion Worth Of U.S. Treasuries Last Week? [View article]
    Quite true, but you are not looking at the long term. For now, there are enough buyers. Plenty of folks are afraid of Euro-zone collapse, and we've got takers for US debt paying nearly zero interest.

    What happens when Europe calms down? Treasury buyers dry up. Yet, if commodity prices remain down, emerging market central banks continue to sell.

    Emerging market treasury selling will stop only when their currencies are supported by higher commodities prices, or when they've sold all their treasury holdings, which would take a very long time.

    Yet, if commodity prices rise, we travel back in a circle.
    Companies end up strapped either way, with consumer spending power down, price inputs up, and earnings down.
    Oct 4 08:59 AM | 5 Likes Like |Link to Comment
  • Are Gold Prices In A Bubble? [View article]
    The Chavez gold demand would ordinarily wildly drive up the price of gold over the next few weeks, because it is almost certain that the commercial gold banks do not have sufficient gold to satisfy Venezuela's contracts. I assume, when I say this, that Venezuela stored its gold under a typical London style contract.

    However, central bankers will almost certainly release gold from national gold hoards to satisfy the demand. A combination of them will probably deliver gold to the gold banks sufficient to avoid a default on the delivery to Chavez. If they didn't, the default and chilling of inter-bank loans in other realms, could cause some major players to enter bankruptcy, and potentially collapse world financial markets.

    Gold delivered by central banks will take the form of "loans" that will need to be paid back over the next 12 -24 months. The net effect could be to propel gold to, perhaps, $2,500 or significantly higher, by mid to late 2012, all other things being equal. All things, of course, are never quite equal, so we may see much more appreciation if the Fed, ECB, and/or Bank of England start to heavily print money again.

    Contemplate a slow steady rise from now until then, subject to occasional trading bot raids and margin hikes.
    Aug 26 01:43 PM | 5 Likes Like |Link to Comment
  • People's Bank of China Looking to Diversify Into Precious Metals? [View article]
    Aside from a desire to increase exports by debasing the yuan, the Chinese linked their money to the U.S. dollar because of their fear of currency instability, generally, both up and down. Gold, silver and platinum can stabilize the currencies by bringing confidence, as precious metal backing always does, because it cannot be printed. Do you think the U.S. dollar would be a reserve currency if the world didn't know that about 8,700 tons of gold is stored safely in the U.S.A., regardless of the irredeemable nature of the current Federal Reserve Note? We think not. That huge stock of gold is one element that stabilizes the dollar in spite of the fact that it is no longer used to overtly back the currency.

    Aside from their value as money, silver and platinum are both critical commodities in industrial use, without which modern life, as we know it, would come to an end. The Chinese know that also. It pays to have strategic stockpiles of metals like that, which are both in short supply, and of which the world's total resource is close to being exhausted within our lifetime.

    In any case, the Chinese want to be big players on the world stage. They want to be at the center of world finance, not a low-cost manufacturing center for others, in the long run. China is NOT happy to be the low-paid factory in a world economy run by others. They have accepted the role only because they knew that the greed-oriented economies of the West would transfer all their know-how and technology if they did.

    Remember, unlike America and Europe, who think mostly for today, the Chinese follow Confucian ideas and think very long term. Even so, it is a frightening thing, even for the Chinese, to strike out on their own. This is especially true because it is unlikely that they expected to be forced to do so at this juncture. They probably expected another decade worth of time in which to make the changes more gradually. But, the Chinese now seem intent on meeting the challenge, and investors had better get prepared.
    Apr 29 01:49 AM | 5 Likes Like |Link to Comment
  • Will JPMorgan Now Make and Take 'Delivery' of Its Own Silver Shorts? [View article]
    We do not advocate "excessive" government regulation. In fact, just the opposite. However, we advocate punishing entities that break the law. We advocate letting people stay bankrupt when they have played so hard that they burn down the jungle they created.

    We vehemently oppose stealing money from civilized people like grandma and grandpa, and handing it over to the arsonists to assist them in rebuilding their jungle.

    We do advocate the idea that regulatory bodies should do their job. All the CFTC needs to do, for example, is enforce the Commodities Futures Exchange Act in the manner in which it was meant to be enforced. Nothing more.

    For that to ever happen, the revolving door between the big players and the gaming commission will need to be closed. Another possibility is to end CFTC's exclusive jurisdiction over civil and criminal prosecution. As soon as either event occurs, the most egregious misconduct will abruptly end.

    Rick Flair's comment is an excellent one. The problem we are now having is that the lions have become so skilled at catching and eating antelope that they are putting themselves at risk of extinction. That's why the game warden needs to control the lion population before it wipes out the entire game preserve. But, since the warden is also a lion he is so tempted to catch and eat antelope that can't do his job.
    Mar 25 01:47 PM | 5 Likes Like |Link to Comment
  • Time to Get Precious Metals Out of Storage in London? [View article]
    One can argue about history for a long time, but, when it all comes down to it humans are inherently greedy. Some are much more greedy than others, and many of the greediest people end up in the financial industry, which is a natural place for them to gravitate. Governments, from England to Germany to the United States and beyond, which have attempted to engage in the fractional banking of precious metals, have all defaulted. In the end, none were able to fulfill delivery promises. There is no likelihood that London bankers will fare any better. When we think about the alleged ratio of 100 to 1 air to metal, we must remember that the Federal Reserve defaulted in 1933 because it was vaulting metal at a 2.5 to 1 ratio. That is the bottom line.
    Mar 13 12:47 AM | 5 Likes Like |Link to Comment
  • Time to Get Precious Metals Out of Storage in London? [View article]
    You are incorrect.

    The pure gold standard prior to 1914, to which I referred, was created by the Gold Standard Act of 1873. That act was the subject of much political debate between the gold supporters and silver supporters. Prior to that, the United States and most other nations were all on the bimetallic standard, which included gold and silver at fixed rates of conversion one to the other.

    Silver was the dominant monetary metal prior to 1873, in the U.S.A., although other nations had already moved mostly to gold, and gold was also very important as backing for the U.S. dollar as well. In most of the years prior to 1873, the United States maintained a one for one combination of both metals in the form of gold and silver coin, sufficient for backing every single paper dollar EVER issued by the Treasury. The weight of the coins were set by law.

    To be exact, Sec.11 of the Coinage Act of 1792 established: "That the proportional value of gold to silver in all coins which shall by law be current as money within the United States, shall be as fifteen to one, proportional value of gold to silver. according to quantity in weight, of pure gold or pure silver;"

    Later, the ratio was changed to 16 to 1. This relationship was suspended for the duration of the Civil War, during which "greenbacks" with limited or no precious metal backing were issued. The issuance of paper money not supported by gold or silver coin, was the subject such a hue and cry that the issue of whether the federal government was allowed to issue it ended up in the U.S. Supreme Court by 1869. The greenbacks were eventually exchanged for gold and silver coin after the war, or U.S Notes backed by gold or silver coin.

    While it is true that many European nations had converted to a pseudo-gold exchange standard very early, the U.S. did not do so until 1914. With respect to the above, I am not considering the corrupt private banks that were allowed to issue dollars in the early 1800s, who often did not keep sufficient gold reserves to back the paper that was issued. That led to instability and a lack of faith by the general population in private banknotes, and is a matter that is documented in the media of the time. But, those failures were the reason the right of private banks to issue currency was eventually ended. Then, in 1914, a private bank that chooses to corrupt our currency was once again chartered. It is called the Federal Reserve.
    Mar 10 02:24 PM | 5 Likes Like |Link to Comment
  • Trading the Big Dips in Silver [View article]
    Yes. I agree. COMEX may well be supplying silver to users, fabricators and speculators, which is what futures exchanges are supposed to do. Let them do more of that, become less of a casino, and more of a real place to buy and sell commodities..

    But, the point is simply that the nexus of backwardation cannot be delivery pressure by bullion bank divisions that are COMEX clearing members. They are running down their warehouse stocks, rather than buying new metal, indicating that the market is tight as a drum.

    However, COMEX deliveries are not big enough to create the current market situation. The nexus, therefore, is in London, at the British divisions which are "clearing members" (for want of a better word) of the so-called "LBMA".
    Mar 7 05:13 PM | 5 Likes Like |Link to Comment
  • Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923 [View article]
    Some of you have expressed a preference for "housing" over gold, as your theoretical means of escaping from the stealth tax of heavy inflation. Let me quote from the famous former Fed Chairman, Alan Greenspan who, before being seduced by the "dark side" wrote, in 1966, in a paper, titled "Gold and Economic Freedom":

    "...Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights..."
    Apr 13 04:05 AM | 5 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    Jake,

    I agree that it is impossible to know how deep the devaluation is going to be, or when the "critical" mass of money printing will happen such that the "chain reaction" and melt down will occur. But, it really isn't a matter of "if" but rather of "when", and I think we agree on that also.

    I suspect that the devaluation of the U.S. dollar will be many orders of magnitude less than the one in Germany 1919-23, but that is probably because I am fundamentally an optimist. I sound like an optimist in this article, but the pessimism is only because of how very grave the current situation is.

    That being said, even if the devaluation is many orders of magnitude less than Weimar Germany, it could be well beyond anything you and I can now imagine. There is a huge distance between 1/Trillionth and ???, and most of that distance is deeply disturbing.
    Apr 10 09:37 AM | 5 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    g452ooo

    Since I created the earlier response entirely myself, I am gratified that you think it to good enough for you you conclude I must have "snipped it"! Instead of spitting out bile, however, I suggest that you would be better served by reading the book, whose full citation I have already given you.
    Apr 10 05:57 AM | 5 Likes Like |Link to Comment
  • Did the ECB Save Comex from Gold Default? (Part 2) [View article]
    Large scale delivery demand would stop all potential conspiracies in their tracks. The alleged scheme is based upon the premise of not needing to stockpile real supplies of metal. Stockpiling supplies in line with the amounts of metal contracted for, either with vaulted metal or real mining forward contracts, would be extraordinarily expensive, and would make the scheme unprofitable. Since the players are profit motivated, the scheme, if it exists, would surely end.
    Apr 6 10:23 PM | 5 Likes Like |Link to Comment
  • Did the ECB Save COMEX from Gold Default? [View article]
    Indeed, if the dealer cannot cover a short, a message should be delivered to the trading platform saying:

    "Dear Mr. Trader, we're sorry we cannot fulfill your short order, today, as we do not have enough real metal to cover it. Try again tomorrow."

    If that policy were required, I can assure you that COMEX would quickly evolve into a market for real price discovery, instead of an exchange that is perpetually accused of allowing fraud by its clearing members. Indeed, the appearance of impropriety, even if the gold manipulation theory crowd is merely whistling Dixie, is very damaging to the reputation of the United States, and of American markets, in general. We need to get to the bottom of this, once and for all.
    Apr 2 02:30 PM | 5 Likes Like |Link to Comment
  • Did the ECB Save COMEX from Gold Default? [View article]
    Zapf,

    I agree that it is difficult to fight wrong thinking foolishness inside governments. But, as a lawyer, I have seen that the little guy does often, in fact, win, if he is persistent enough against all odds. I believe that the law can be upheld, and truth and justice CAN prevail in the end. Laws can be flouted, and evil can grow, only in darkness. Bring it all into the light, and, if there ever was any conspiracies, they will end, right there and then.

    That is why a full and complete investigation, including extensive vault audits of all paper OTC counter party contracts, used as "cover" by derivatives dealers, by a set of non-conflicted investigators, is critical to resolving the issue of whether the gold and silver markets are honest or corrupted. You can be assured that most Americans, including those in government, are honest hard working folks. The bad apples are just a few, and, if they have concocted a scheme to control precious metals prices, they need to be exposed, and taken out. If there is no such conspiracy, however, we need to get that out in the open, also, and give people the confidence in the markets that is now so lacking.
    Apr 2 01:16 PM | 5 Likes Like |Link to Comment
  • JP Morgan Chase $2 Billion Derivatives Loss Illustrates Toxicity Of Casino-Banking [View article]
    Gold, platinum and silver are getting whacked because we are in the midst of the manipulation event I talked about on March 29th (see, http://bit.ly/KuP2uL). Even though platinum and silver may move even lower from here, we don't know that for sure, just as we didn't know where platinum would go a year ago when it was $1600.. Both metals are excellent value buys right now, even though they may go lower still. They were also value buys then. The reason is that, 5 years from now, both will be several times higher than they were a year ago.

    Gold has not been hit as hard as platinum and silver because central banks are buying. Price manipulators need to be careful not to take the price below big standing buy order levels. I don't like to prognosticate on exact prices, especially in the short term, but I am not at all worried about the current price of platinum. It costs an average of nearly $1,700 to mine and refine a troy ounce of it, and that cost is going up. Many of the newer mines operate at a cost level far above that. If the price continues to be below that level, mines will close, and the price will rise back above it.

    But, the current paper price will not last very long. As you note, S. African production is way down...by about 25% plus, and there has been only a relatively small drop in European demand, which has been compensated by increases elsewhere. Eventually, industrial users will turn to NYMEX to get platinum they can't get anywhere else. Platinum will start flowing out of the manipulators' vaults, unless they allow prices to rise dramatically. Remember also that they need the price to rise above the cost of production in order to take successful short positions, in preparation for their next manipulation event.

    The next few weeks are going to be rough in all markets, as I explained in my March 29th piece. I expect the non-gold precious metals to fall a bit further. Generally speaking, I like to avoid making short term price prognostications. However, I am going to put myself on the firing line with a price projection. At this moment, the following numbers may sound ridiculous, given the battering the metals are now taking. But, my proprietary analysis (the basis of which will never be publicly disclosed) indicates that, by the end of August, gold exceeds $2,300, silver exceeds $55, and platinum exceeds $2,100. Mark your calendar!
    May 11 05:26 PM | 4 Likes Like |Link to Comment
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