SW Richmond

Will the Market Crash?

'Actually, even under the previous "mark to market" rule, commercial banks were allowed to mark assets that they were allegedly keeping "for investment" and "not for sale" to imaginary values.

This was a huge hole in the rules, through which a great deal of mischief was wrought.'


Everyone's gonna hate me for this, but this situation is an inescapable consequence of fractional reserve banking. Leverage is how bubbles are blown. Asset values can only be so grossly inflated over such a short time frame (a few years) where credit is being created out of thin air. Fractional-reserve acolytes say that it's not fraud, since the 'loan' is balanced on the books by the value of the 'asset', yet anyone can clearly see how, when lending stops, asset values fall to more realistic levels. This is the reason for the Fed's obsession to 'reignite lending'. Reinflating asset prices via phony leveraged credit is the only way to make the banks look solvent.

FDIC is out of money, and Sheila Bair is quaking in her panties. I apologize for the visual.

The phrase 'reignite lending' means the same thing as 'reblow the bubble.' Reblow the bubble or bye bye banks. Re-leveraging our way out of a de-leveraging has always worked for the Fed in the past. This time the systemic losses ($4 Trillion) are just too great.

The only way to keep the system inflated is with newly printed FRN's. Now that Bernanke has failed to extend QE, that program will end in September. The markets are already interpreting that as a withdrawal of liquidity, and thus the next leg down.

www.youtube.com/watch?...

Did the ECB Save Comex from Gold Default? (Part 2)

Mr Goodman,

The government and the Federal Reserve now have a direct hand in every aspect of our economy. Though SA is an economics site, it must be obvious to all that any discussion of economic outlook or trends must start and end with politics and likely government actions. That is a horrible and unacceptable reality which we must correct.

The nationalization of the economy is nearly complete. Taxpayer calls to their "elected officials" are either completely ignored or rendered meaningless by illegal Fed circumvention. If Congress won't approve it, the Fed will merely create another lending facility and fund it with new money which ultimately becomes a liability to the taxpayers.

Regarding gold market manipulation: there are a few major possibilities I can see from where I sit. The one that makes the most sense to me is sovereign-backed manipulation for mutual benefit. Anyone who's been paying attention can now plainly see the Leviathan alignment / alliance of big money and big politics (Wall Street and Washington). Big players in the paper / derivative markets could easily push the tiny PM markets around as long as they knew they were backed by the central bank and its printing presses. Potential losses don't matter when TARP money isn't audited, or any other of the monstrous alphabet-facilities. If they win, great for them, and if not, there's always tomorrow and more taxpayer money. This would simply be another example of the same "privatization of profits, socialization of losses" that we have already seen elsewhere.

I think it is unwise to dismiss the manipulation as merely profit-motivated. So many authors and commentators are not well versed in the political motives of central banking and fiat currency. History is replete with examples waiting for the reader to find. Under "normal" circumstances, the most expensive thing any government does is prosecute a war; the second most expensive is placating the masses with bread and circuses (Social Security, Medicare, welfare, AFDC, SSI, NASA, etc etc). These endeavors can be paid for by taxes and/or by inflating the currency. Government borrowing merely means deferring the payment of taxes until "later". A central bank and an inflatable fiat currency play vital and irreplaceable roles in the maintenance of empire and the placation of the masses.

Under crisis conditions such as now central banking makes it possible to foist massive debt upon the backs of the taxpaying producer class against their will and without their consent.

The solution to the gold manipulation is to take delivery and empty the exchanges. This process will of course be met by increasingly difficult delivery terms; as gold supplies dwindle rule changes will be incrementally implemented to make it appear that the exchanges still function without delivering on all contracts held for delivery. Monthly delivery limits, market participant "standing" rules, and of course encumbrances on existing large known gold stocks will all be used to suppress the price. Anything is possible when you can make the rules as you go and you have effectively stifled dissent. This government, central bank and Wall Street have already clearly demonstrated their willingness to lie, cheat and steal, and out in the open for all to see. They know the system is totally co-opted and there's little to nothing we can do about it.

Except complain, and continue to demand delivery. This is at last being done by big private money finally starting to chase gold. It will be a long battle. As far as I am concerned this IS Jim Sinclair's "battle royale at $1,000.00".

I am sending faxes to your list of congresspeople.

Did the ECB Save COMEX from Gold Default?

debt donkey,

Welcome to SA!

Did the ECB Save COMEX from Gold Default?

kohalakid,

"But for it to happen on a large scale continuing basis would require the OTC marketmakers who sell the gold at the "artificially low" price to be getting their nuts handed to them on trade after trade after trade. They realise that they can't base a 50 cent spread quote for 200,000 oz of gold on what the COMEX has done for the last 30 seconds. They'd get picked off all day long and soon be out of business!"


Why do you think there's been no audit of TARP, the Fed, etc? Manipulating the tiny gold market is child's play to someone with a printing press.

Did the ECB Save COMEX from Gold Default?

koholakid,

'The big boys do push markets around. We all know that and accept it.'

We do? Is that fact in any market disclosure anywhere? Can someone show me where I 'accepted' that? I'd really like to get a copy of that please.

Did the ECB Save COMEX from Gold Default?

koholakid,

'Speculators MUST play a part to absorb overproduction of a commodity and encourage a spec to hold it until a users needs the product, or to short oil at $145 if they believe it to be overpriced. That brings markets into balance.'

Only if these 'speculators' and their potential losses are not backed by government and central bank printing presses. You tell only half the story.

Did the ECB Save COMEX from Gold Default?

koholakid,

Your comments address regulations by way of showing that the regulations have well-crafted holes in them that allow manipulation by deep-pocket inside players, perhaps including players with the implicit backing of central bankers and governments. One might wonder why central banks would back such players. Your comments do not address the fact of manipulation.


"If a buyer wants physical delivery there are certainly better ways for a small buyer to get gold than buying a futures contract and taking delivery."

I disagree, depending on your definition of 'small'. What we are in fact witnessing, for what appears to be the first time in decades, is large money starting to chase gold. The 'goldbugs' showed the way starting years ago, buying one-ounce coins; big money buys bigger denominations. The radical dollar bulls have been bashing gold all along and poo-pooing shortages and manipulation. QE has (finally) convinced big private money to get some gold while they can.

You can stand in front of this train if you wish. I suggest you start taking some deliveries yourself, and may I suggest storing them in the Bank of Gaea?