Why $100 Brent Will Not Last Through 2013 [View article]
So far YTD WTI is still chasing Brent higher more than Brent is being impacted by WTI.
In 2012 China took away ~$112 billion in US treasury legacy higher yielding debt. US refined petroleum and Petro chemicals continue in strong demand globally. Some of these currency devaluations vs the perniciousness of US QEs are making the demand for US value added WTI products continue to rise. Some of that $112 Billion went into and continues into China's SPR.
We are to believe over the next several years the US currency is to strengthen enough to suppress these demand metrics form the hard currency economies?
The author is now hedging his assertion of "not last(ing) through (the other 2/3rds of) 2013"? Now it is a question as to when Brent will decline in the future?
In about 2 years the massive global exports from North America of LNG will commence. The North American shale gas fracking technologies will soon be put to work globally so it would seem that Gas and NGLs will be gaining market shares as per fuels globally in general. Cummins(nice chart,Eh?) already in production for many months with their new 12 Ltr Nat gas fuel heavy duty truck engine. It can be adapted to either CNG or LNG. These fueling stations are already being constructed along the TransCanada HWY mostly by RDS/A&"B".
It's always too good to believe until time takes it's toll. So what is the remaining reserve left to the Cook inlet Gas basin after +25 years of exporting LNG to Japan sourced there? The export terminal is being mothballed now as the gas resource is so severely depleted that the greater Anchoarge/Warsilla region is starting to worry about where they are going to get gas to heat the place in the winter months in just a few short years. Maybe they will have to switch to heating oil or maybe that export terminal will be converted to an import terminal?
It seems clear that the technologies adapting natural gas to a transportation fuel are going to advance world wide. The pollutions in China could be dramatically reduced using NG fueled trucks, buses and eventually to some other adaptations to autos as well.
So maybe global demand for oil will ease a bit later in the decade. For now Europe remains in a severe DEPRESSION and Brent still remains over US$100/BBL. RDS/B and BP putting in strong rallies over the last 3 weeks. If there is so much easy play onshore oil we have to wonder how SDRL keeps it going? Drilling in deep and ultra deep water is very expensive. The latest benefits of global warming the increasing drilling activities in the Barents Sea, now mostly ice free year round. If oil prices do fall that activity gets shelved and some wells may be capped as so many Nat Gas wells are also still currently capped supporting the move from <$3 on the 2 yr chart to over $4 now. BG Group and Idemitsu-Kosan already buying North American sourced LNG for which they plan to take deliveries of. So the demand metric for gas is rising and we can expect to see $5.15/MM~BTU before the end of 2013.
North American Gas rising in price will some how support lower Brent pricing?
American Capital Agency Corp. Reports A Nightmare Quarter [View article]
The tapering is coming.."eventually". These are LT securities continuing to go out to market at unsustainably low rates of interest. This company's stock will get a big bump up when this unprecedented buying stampede in stocks driven by the central banks Blitzkrieg of liquidity finally gets the next correction applied. The decline in 2011 from May to the undercut OCT low was a 20% decline.
When the thirty year breaks towards 2.49% in a stock market swoon it will be time to dump this company's stock. Eventually ZIRP everlasting and the binary access to credit will be rejected at the ballot box. Once that occurs anyone holding excessive exposures to LT debt will get eaten alive.
The Music in MBS.s stops again and we have the same result as in 2008-09.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
In 2012 China reduced it's exposures to US Gov't debt by ~$112 billion, taking their maturities in legacy debt. That debt still had reasonable rates of return. China took that cash off to soybeans, corn, filling their SPR, buying near 100 tons of gold , purchasing refined petroleum products & petrochems, buying MET and Therm coal, metallurgical ores and fertilizers. The Renimbi despite all the D Trump and Romney political rhetoric is rising against the US $ at a rate of ~4% annually.
The Yen however is dropping precipitously and the Japanese are desperate to buy even the lowest yielding US debt. But eventually Japan's currency collapses and that source of funding will dry up even as they will then be our largest foreign creditor.
As with the Wall Street over leveraging game there will not be enough chairs when the music stops in the war of international currency debasement race.
Those like China who did not participate in the race will end dictating to the rest of the global economy what constitutes money. Packs of cigarettes, bottles of whisky, Tide, bars of soap, ammunition and toilet paper will still be commonly accepted currencies in most of the world, as they are now.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
The lights go out? The pumps at the gas stations stop pumping? Even the Chunk Light Cat food type cans of tuna disappear off the shelves? The ships on their way to Puerto Rico, Hawaii and Alaska to supply the Pueblos and Safeways stop in the middle of the ocean and turn back to the mainland? Conan and Colbert are cancelled. All the networks turn into CNBC and Fox News for a week? Even the change in the Seasons is suspended? The last Raisin Bran muffin gives way to the proliferation of Crispy Cremes still cranking on their own standby bio-diesel power plants?
OR
We have already likely seen the generational low in the Stock market as of March '09. The stock market retrenches and then has another buying stampede and then retrenches and then we eventually end near a S&P 1100 level where the half of stocks that represent something with intrinsic value begin to perform as against their traditional metrics, fear subsides once more and greed reasserts. The Fed stops paying interest on bank reserves on deposit with them?
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
Well I also use cordwood in lieu of coconuts. What ever happened to the Cedars of Lebanon? What about the cost of insurance especially homeowners insurance? How can these insurance companies keep the lights on and pay dividends if they can only earn less than 1/2% on their reserves held for paying claims?
Look at the bounce in HIG since they got rid of most of the life insurance and annuity products last year. Not a bad looking 3 year chart for MRH either.
Check out that PHO chart. The first Clean Water Act of 1972 spawned 100s of billions in Federal Gov't spending on wastewater and and potable water treatment facilities over the next ten years. Here we are 40 to 30 years later and the whole infrastructure of it is blowing up at the seams. Who is not facing a doubling of their water or sewer over the next few years and not gotten some of that increase already?
Same story as illustrated by CUT. Who does not need some construction materials for maintaining a house. Siding, decks, window moldings etc. US lumber now closing in on $4/K~BD:ft. Up from the $1.75 lows of a few years ago. Most of us still buy toilet paper but not so cheaply these days.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
Do you have any clue as to what the population of India is? These Asian and Muslim cultures do not buy one ounce coins, they buy links of chain very near 1 gram or 1/2 gram. The link is weighed on a digital scale to determine it's exact actual weight and the buyer pays at the prevailing rate for the KT quality. The wealthier also buy 1, 5 & 10 gram bars as stamped with recognized symbols of quality assurance ie Swiss Pamp.
It did not take a country of 250 million very long to exhaust it's supply of US mint issued 1/10th ounce coins as gold dipped to $1325. What happens in a country of 1,250,000 when gold goes on sale? Something different than what occurred here?
The "You Lie" cliche.... So many using it and so many of them winning their Darwin awards.
It must also be a lie that the US is only 25% of the global GDP. We may be the biggest on the block but the others combined are three times what we are. Maybe it will be them determining the prices for gold. Lately "they" seem to have deemed $1325/OZ as a bit too low.
In a strong US stock market sell off as triggered by any Black Swan event the US ten year treasury rate could fall to 1.25 %. That will be very good for gold prices. If "eventually" happens and the FED begins "tapering" it would be possible for interest rates to return to real rates of return and gold could test $1000. A little tapering in moderation may be thought by the Fed to be prudent at some point and predicted not to have a contagion effect. The Fed unfortunately does not have a record of having a very clear crystal ball.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
That is nonsense! Coins of course trade as asked and sell over spot for their being what they are. But to get over spot on such you have to sell to a bullion dealer. Very few jewelers will pay over spot for US gold eagles or other such. There are probably many that will, but they are also operating as coin dealers as well as jewelers. Money changing has not changed that much in 2000 years. Scrap gold is typically bought in the neighborhood for near 30% discounts to spot and then sold wholesale at 15 to 20 percent below spot to the actual refiners who then turn around and sell the refined product back to jewelry makers for 25% over spot. Then plus the craftsmanship that goes into a new piece of jewelry we typically see that same train of gold trading 35 to 50% over spot, sometimes even more.
As for Physical gold it may be of more enjoyment to split that between some nice jewelry for the wife and daughters and some coins. I find Provident Metals most competitive on their buy and sell quotes for coins. E-bay can be OK but the fees of E-bay and the paypal tend to drive prices higher than at the others like Bullion Direct, NWT mint, a few others.
What does it mean as when in Europe when all these little neighborhood "WE BUY GOLD" shops start to close up? It means the people are getting even beyond desperate because they have already sold all the gold they had to sell.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
WOW! A May 2nd article and look at the amount of feedback already.
There is then the deconstructing of Mr Williams postulations as well.
Gold is not a currency because of the volatility in the price. In the last 45 years gold has always doubled against the last peak it made from every retrenchment. The currencies of country's like Cuba, Argentina, Zimbabwe, and Turkey have not fared as well. We are now employed in the great devaluation/slide in the YEN. So Mazda borrows from the Bank of Tokyo Mitsubishi for 5 years at 1.7% and loans it out to the US consumer to buy Mazdas at 0%. The Yen declining +5% annually against the US $ and +9% against the Chinese Renmimbi. Mazda earns 3.5% in the currency leverages on 0% financings. So other currencies are more stable than the currency of gold? Ok if Mr Williams says so. But that ~$1885 mark set recently in gold was still twice the value made in May of '06 of almost $800. Let's see what the Yen will be worth in 7 more years....So gold is indeed as a currency more volatile than most other currencies it is just that that volatility exists in both directions to the mean which continues to strengthen against a medium and longer term time line.. Almost every one is a millionaire in Zolties these days.
The expansion of the monetary base is a convoluted one as most of that money has not made it into the US economy but been dedicated to building bank reserves. Gold has of late been responding directly to this issue as Mr Sprott asserts. The fall off in gold commenced on the intuition by the markets that Global QE's are starting to reach the unsustainable level. So maybe the US QE's may for awhile be contained and not leaking into the US economy that is not so much the case in the other 75% of the Global GDP. Gold is a global currency. The coining of the concept and word "TAPERING" has signaled something. We have heard for 4 years that rates are going to rise "eventually". markets lok ahead to read the tea leaves. Bernanke is gone in 6 months . Janet Yellen is the only credible replacement. Obama would endorse Hope and Change by seeking to appoint Lacker, Fisher or Hoenig, as Ben's replacement? Rates will start rising when the tapering starts. No one knows by how much. the opportunity cost to own gold isgoing up from here not further down. So gold has corected against that. But the profligacy of the Fed with a +4$trillion balance sheet an approaching $20 trillion national debt & another $4 trilion in unfunded State pension obligations is not going away. The last election showed how you can not convince the electorate that you can perpetrate the big lie on Obamascare being evil and Mediscam RX-D being a very popular program. No matter how much was spent on color glossy post cards bombarding the electorate with the message that America hates and fears Obamascare they were not duped into NOT voting themselves increased largesse. These are financial fiascos that are not going to be repaired by balancing spending and revenues. The Seventeenth Amendment marked the end of our country being defined as a Republic. What's in the best interest of a State no longer matters in the American Gov't. If you try and wise up the electorate to what the limitations are facing us you end up like Carter and Bush I. As a democracy the US will continue to see the voting of largess to the people. the gross inherent unfairness in our society of the ever increasing concentration of wealth will quell any reasonable argument to return to capitalism and scrap the Planned interest rate economy that punishes savings and the formation of capital.
While gold will suffer under a period of rising interest rates that scenario eventually reaches for a Great Inflation II. So then gold once again reverses against that out look and heads for ? $3700 ? While that is still a few years away Mr Williams can declare his outlook for now triumphant. No one will remember this article 5-6 years from now.
On the other hand as gold was being crushed I personally went to work as Gold was making the $1325 handle on 4/15 and started with 250 SCPZF AKA SCP.TO. Just in time to catch the ex date and capture the monthly distribution. Let's see that order filled at US$4.01. So far Mr Sprott's oversight of my investment with him seems to be working. Sprott Resources then an O&G E&P and Ags industries participant and not a gold PRODUCER. The company does though HOLD 73 million ounces of gold. I also recently started GGN-A @ a $25.41 total cost basis. Of course the monthly distribution for SCPZF is not as rich now as it was 3 weeks ago when I bought it as it is now sporting a $4.29 handle. If you do not go all in you do not make a killing but making a little 7% here and there in the reign of terror or financial repression isn't all that bad either. I'll take that no Cand with holding $9.40 a month in my tax sheltered account. Sprott, Jim Rodgers, and Flatt the Bruce are just full of BS? How 'bout those CUT, PHO, VEGI, PALL, and FSCHX one year charts? Eh? How 'bout that 6 month chart for SCPZF? How 'bout that 3 weeks in CERGF/CRP.TO? The commodities are just getting killed out there. Or are they ALL really getting killed?
Globally gov't mints are running out of supplies of bullion coins against the physical demand that asserted when the hedge funds, ETPs and institutions sold off their gold. Countries like Korea, China, Russia, and Brazil which individually added near 80 tons each to their physical gold monetary reserves in 2012, all stepped up to buy. The quick as two shakes of a lamb's tail +$100/oz recovery in gold. Generally lows like the mid April low are re-tested. If that happens then adding another 500 shares to SCPZF might be my reaction. Not a producer but as a holder is it possible with that, to out do the current 4.3% yield in NEM?
The fiat currency money printing is massive on a global scale. Japan is by most measures excluding the Euro zone as a single country, the world's 3rd largest economy. They are money printing on a scale that is 3 times what the US is doing. The Maastritch Treaty has yet to be amended to allow for the ECB to stay with the competition in global currency debasements. Remember the Draghi remark. "What ever it takes." The ECB needs to print near 4Trillion Euros to recapitalize the 30 largest Euro Zone banks which all hold some levels of Euro zone sovereign debt which is insolvent making those banks insolvent. The Revisions to Maastritch are going to happen because the only alternative is for some of these larger countries like Italy which are locked in a depression to leave the Euro and re-establish their own central bank to do that printing to not just recapitalize their banks but to buy their own country's debt for a period of 3-4 years as well.
While that goes on Gold will stand behind the curtain and pay no notice or attention.
Stagflation: Coming Soon To A Market Near You [View article]
March 11, 2013 / Violation of the Securities Act of 1933
SEC In the Matter of the State of Illinois Admin Proceeding File No. 3-15237....
"In conjunction with multiple bond offerings raising over $2.2 billion...2005 through early 2009, the State of Illinois MISLED bond investors about the adequacy of it's statutory plan to fund it's pension obligations and the RISKs created by the State's underfunding of it's pension systems."
"Rather than controlling the State's growing pension burden, the Statutory Funding Plan's (RE: the flour paste patch enacted in 1994, effective in 1995 to create a 50 year funding plan for the State Pensions) contribution schedule increased the underfunded liability, underfunded the State's pension obligations, and deferred pension funding. This resulting underfunding of the pension systems ("Structural Underfunding") enabled the State to shift the burden associated with it's pension costs TO THE FUTURE and, as a result, created significant FINANCIAL STRESS and RISKS for the State.
"The State's pension contributions were calculated in accordance with STATE LAW and NOT in accordance with ARC (Actuarially Required Contributions), and therefore the Statutory Funding Plan deferred funding of the State's pension obligations and COMPOUNDED it's pension burden."
"The resulting Systematic underfunding imposed significant STRESS on the pension systems and ON THE STATE'S ABILITY TO MEET IT'S ``COMPETING `` OBLIGATIONS."
It is a very long Cease and Desist order from the SEC citing Illinois for not, that is by omission a violation of the law, stating that the potential bond purchaser may have greater risk to their capital and interest payments due to some very huge and undefined liabilities the State has for funding statutory obligations of pensions.
Purchasers of bonds during the period cited may now almost certainly have legal recourse for claw backs on price for bonds sold to them by the State of Illinois. Illinois admits no wrong doing and yet the SEC cites them for violating the law.
The SEC pointing out a plan that was enacted into law by the State Legislature to purposefully undermine the funding of the State's pension systems NOT over a more reasonable 20 to 30 year span but over 50 years instead. A plan that purposefully legislated into law a funding plan that was grossly below accepted general accounting standards, the Actuarially Required Contributions standards.
So Illinois now has to amend the prospectuses for future bond sales to include the information that the purchasers are COMPETING for the service of their debt with something near $25 Billion in underfunding liabilities for grossly underfunded pensions. They will only be able to provide estimates and will be required to say that the underfunding liabilities the potential bond buyer may have to compete with are by most measures partially undefined, and that the actual stated estimates are only estimates.
The 1994 Illinois State legislature did a marvelous job of saving the taxpayers money by pretending they would never have to pay for these under fundings. They borrowed prosperity from the future to fund the first 10 years of the economy we all expect to be the measure of what will be when we get back to "normal", and now we have the last 10 years of paying back that portion previously borrowed from us 10 to 20 years ago. And we are not happy with 1.5 to 2.5% GDP GROWTH now? What about the unpaid balances we still owe on that borrowing '95 to '05?
Most who bought these bonds over this period knew IL debt smelled bad. They knew of these pension under fundings. But according to the Law you are supposed to disclose this kind of thing to ALL.
If Congress is not going to soon amend ERISA 1974 then they should get right to work amending the SEC act of 1933. Incredibly back then the lawmakers thought you should be able to see and interview the man behind the curtain. Can an individual apply for a mortgage if they are including a spouse's income to apply & qualify, while omitting the fact that that spouse died 2 months ago?
There is no incentive to melt down the copper and other composite post 1964 "sandwich" US coins. The materials contained there in are still well below the face values of the coins.
There is no prohibition on melting down pre '64 (90%) silver coins nor is there any incentive to do so. Those coins carry their intrinsic values plus the minting premium irregardless of US debt and monetary policies. So one of those dimes at a flea market or in any other such barter situations are Two dollar coins no different than two US President dollar coins in value, except for their slight 8 to 15 cent premium as silver hovers from $28 to $35. The only other difference is that the party accepting them slightly below par will still have the more or less same purchasing power with those silver coins in 5 years as today.
You can find US minted junk silver coins for sale in lots as low as a couple dollars face, on Craig's list and E-bay all the time. The lots go all the way up to $1000 face value generally sold in canvas or durable synthetic fiber bags. They sell for the silver content @ spot plus the mint premium. So they have near the same % premium to spot as a 1 ounce gold coin for the easily recognized authenticity that makes them very liquid.
To buy a Gold Buffalo or Eagle one ounce coin there is a near $70 premium to spot. The dealer that sells it will generally buy it back at a premium of ~$55 to spot. This is called liquidity. So US junk silver coins for preppers and such other hard money aficionados are a natural base to their hoarding of more valuable gold coins as savings.
The wise guy with his inquiry as to how after the collapse of paper fiat money you are going to be able to buy $50 of groceries with a $1700 coin?
The same way they did before fiat currency when there were bits and Pieces of eight. So a piece of eight of a 1 ounce US gold eagle is approximately worth two hundred dollars. Change can be made in 27 silver quarters and if there is a rounding as is now used with the elimination of pennies in Canada and on US military bases overseas, any small difference can be offset by an additional can of corn or some other such high end per ounce item as black pepper corns = ~.60 cents an ounce. Black pepper corns highly prized in the time of Marco Polo have not lost much of their appeal. Ditto coffee, cigarettes, bars of soap, Whiskey, Tide and toilet paper in the modern world. All now commonly seen being used as currency globally.
Of course most states to promote better commerce would begin to mint $5 to $20 silver or gold content coins to make this type of money easier to exchange. We can imagine the ridiculous premiums on US minted fractional ounce gold coins would collapse to the same premiums to spot as the rest of the hard money currency that would be circulating.
Necessity is the mother of invention.
So US copper pennies & nickels with copper and nickel content are shipped to Mexico to be melted down. While the investment in "MOST" precious metals coins for numismatic value insane mark ups is a fools game we can see how the pre-'82 US copper penny for the deprecations by melt downs will increasingly gain some better numismatic valuations.
I really think gold is in a short term bear market that should be DCA into. I really think there is a US Currency and Debt crisis that is "eventually" going to lead to the next economic panic either in the US, some where else on the globe or all simultaneously. I think gold will find a $4500 to $5200 peak on that, before some one like Paul Volker or Abe Lincoln comes along who will commit to fixing what is broken, wrong, and immoral. Some leader whose primary concern will be for what is right and not for getting re-elected to his/her particular office.
If the correct repairs are initiated and get some positive outcomes then gold could come back down to $3200.
Including China? China took $110 billion in legacy rate US Treasury maturities in US $s off the table in 2012. In 2013 the failing Yen & Japan will become our largest foreign creditor. The Japan current fiasco is even worse than our own and Yen is fleeing currency devaluations more severe than our own.
The Renmimbi is appreciating at ~4% annually as a against a US Pe$o. They are not in that equation going to be buying less than 4% yielding US gov't debt so they can take a loss on their money.
China is reputed to now be the worlds largest gold producer, but none of that production is exported . In 2012 it is estimated the Central Bank of China diversified their foreign currency reserves by adding 80 TONs of gold to their gold reserves. It has been legal now for near 10 years for any Chinese to own gold and they of course mostly do, buying in little 1 gm lots or in links of chain. Sums that they can redeem anytime for the domestic Renmimbi to purchase items. 1.1 billion x a couple gms = ?
The myth that China owns so much of our debt as to make them bend to our fiscal and monetary policy will, is as mis-informed as the accusation that China is a currency manipulator.
US Treasury TIC reports are delayed by 3 months to gather and confirm the data. According to other US Treasury reports as of Dec '12, China had reduced it's US Treasury holdings to $1.202 trillion. followed closely by Japan at 1.120 trillion. China shaving it off from a record high of $ 1.31 trillion in July of 2011. So China owns less than 6% of the US national debt. They are not panic selling, just taking those legacy higher yielding maturities away and redeeming the US pe$0s paid out on them , for Soybeans, corn, Fertilizers, refined petroleum products, petro-chemicals, forest products, LNG, metallurgical ores and Met & Therm Coal, Crude Oil to fill their SPR, and 80 tons of gold from foreign markets; Etc. They are leaving it to the Fed to print moneyand participate in the refi auctions.
China is a lot less than fully vested in making the US existing financial system work , and is beating a path for it's exits.
Who wins when major currencies fail? Canadians descending this last NOV & Dec to buy cheap US retail stuff : US$38 bottles of Johnny Walker Blue,$55 cartons of Marlboros, and Tide. . Any country and it's citizens in a commodities currency country even if they have a more socialist system than that of the failing currencies. Those countries like a Sweden do not deny what they are and have enough taxes to pay for their socialism. It does not make for a very good foundation though for ever greater concentrations of wealth among their wealthiest citizenry.
Economies like Texas NOT taxes may find that when it is time to finally raise some taxes the tax base is made up from a population that is in the bottom 5 states of per capita household income.
When you ain't got nothin' you got nothin' to tax!
All I can smell is a worsening currency and debt crisis that eventually leads to the kind of panic we saw when WAMU, Lehman and the subordinated debt of the GSEs Freddie and Fannie were all allowed to fail. While some others as Merrill Lynch, Citigrp, AIG etc were bailed out. Panic as no one was sure of what was safe and what was about to become dust.
The same kind of loss of confidence that set in when after 9-11 people could not get access to their funds for days or weeks.
The odor of 12% interest rates and pernicious inflation that did not subside until rates got to 17 or 18%.
History does not often repeat but it does tend to rhyme...
1971, Nixon closes the Gold window after a run by foreign banks on the US gold reserves to redeem weakening US $s as against the continued profligacy of a huge debt piling up to fight a war of Foreign mis-adventure and his predecessor creating the Great Society and greatly increasing entitlements spending and future obligations. Gold is still below $100/Oz. Profligacy in US monetary and fiscal policies continue. 11/ '73, In order to instill confidence the Gum-"mint", decides to legalize the holding of Gold bullion by private owners/citizens. There is not much confidence instilled and gold climbs to and peaks at $200/OZ in 1975. From 1971 at $35 it doubled to $70 and then doubled again to not just $140 but to $200. As in every gold rally it was a peak and gold fell back to near the double double of $140. The Great Inflation I is in bloom off the large deficits racked up on the Vietnam war and the Great Society. Gold can not stave off higher interest rates. But it bottoms near $140 in 1976. From there the higher interest rates and Paul Volker an adult took control of the US $ situation. But gold began to respond to the 2nd half of the Great Inflation I. At first Volker's efforts are not working but he is a tough guy and he just keeps at it to slay the Great Inflation I. Gold does not believe he is serious at first and climbs to just less than $900/OZ. So the previous peak of $200 is smashed. 200 X 2 = 400....400 X 2 = 800. So gold does another doubler double.
It's an end to an era. In the early eighties Ronald Reagan spends a lot of money building up defense but it is all intimidation and no profligacy as would be the case if the US took on someone their own size in a real war. The US tunes up like so many teams early in the footballl season as on a Central Michigan etc. Invasions of such evil empires as Grenada and Panama. Reagan and Tip O'neil get together and patch up entitlements. The Real Estate recession of 89 90 and then a shot in the arm for the economy by a short foray into the Persian Gulf to free and then occupy Kuwait. 10 months of profligate spending on war instead of the recent 10 years. Bush I decides the responsible thing to do is to pay for some of that war. Preaching a bit of austerity he gets fired as did the last President who suggested such nonsense. By now Easy Al is on watch and borrowing from future prosperity to finance current stronger than normal GDP growth, that unsustainable growth begins . We enter into the era of the goldilocks economy. Reagan had defeated the evil empire of the Soviet Union and China had turned to a market economy. The dot com bubble hits and Easy Al fixes it in two shakes of a lambs tail. By 2000 just as the Dumya was almost and then Fl was tipped, and he did come on watch we were a very prosperous society indeed. Now having occupied Kuwait for 10 years, already... Gold can not find a break and "FINISHES" it's decline from near $900 to $300 just as the Dumya is being sworn in.
Gold falls to $300 but still 50% over it's previous peak to the pre~$900 peak. 9/11... and the economy tanks Easy Al back at it again with another two shakes of the lambs tail. But 9/11 causes the aimed for disruptions to the financial and other markets. People find they can not get access to some of their funds for many days if not weeks. Confidence is shaken and Gold starts it's next rally.
Easy Al continues to borrow from the future and continues to lower rates, he identifies a housing bubble as early as 2005 but then asserts it will be the private capital markets that will eventually deal with that . This results eventually in the US government owning 95% of all US mortgage loans. By now we have been in a retaliatory mode against the muslim world for 3 years and we are spending God awful amounts of "money" to fight these heathen scourges. It is the Johnson-Nixon fiasco all over again with 3 more zeros added on. FL was not too sure in 2000 so the Dumya creates Mediscam Rx-D. He becomes very popular in Florida. $65 billion annually for that with no taxes or offsets to pay for it. War rages on and thousands make their fortune serving in the time of greed. Just as all hell is about to break loose Easy Al takes a powder smugly leaving having created some aura about himself and joking it up that if anyone understood what he was up to they were misunderstanding him. His protege Bernanke takes over and keeps to the same course. Only too late realizing rates should have been raised immediately but now forced to lower them and create ZIRP/QE everlasting to rescue and dampen the effects of the Subprime Mortgage blow up that his predecessor had spoken of in speeches several years before. Helicopter Ben's helicopter went to the shop for a new engine and so could not fly after the Bear Stearns debacle. Ben, Paulson and Paulson's successor the NY Fed President, had nearly two months to prepare for the next coming fiascos after Bear, but they did nothing. Instead of using a fiat currency as an effective tool they quadrupled the eventual cost of the Subprime Mtge fallout. They started picking winners and losers instead of bailing them all out. WAMU, Lehman, the subordinated debt of Fannie and Freddie all had to be wiped out to teach someone a lesson? This created the panic that made Gold shoot to $1800.
It also created the current fiasco of immeasurable debt. A planned interest rate economy not dissimilar to what the Soviet Union had attempted in the '50s and '60s with a planned market economy. While all this was happening we ended in a sychrocicity where the boomers began to retire on the promises of the previous 40 years. With as much as 60% of the equity in their homes wiped out that they had planned on to partially fund their retirements, their entitlements obligations became of paramount importance. Every time they had seen another hike in their FICA taxes they were assured "it" would be there for them. But the trust funds turned out to be imaginary, their taxes had been co-mingled with the general revenue streams and all they had left was the Gov't promise to raise taxes to redeem some of the $10 to $20 trillion in debt the Dumya, Easy Al and the Bernacke had racked up.
The Dumya and the Dumbo both had learned that you don't preach austerity if you expect to great re-elected but instead pledge your support to the plebicite's ability to vote themselves largess. The members of Congress are also now keenly aware of this. Strangely the ones still left in Congress that created Mediscam Rx-D protest to any critic that it is a very popular program, but insist that EVERYBODY hates "ObamScare".
After 5 years of ZIRP and Q-Eternity some of the consequences are becoming apparent. There is a current scare in the markets. The equities have hit the triple top and may be nearing full valuation. The last recession is now years behind us ending with the beginning of a growth "recession". A period of very slow GDP growth. The bond vigilantes have begun to assault the LT rate market. Private capital would not and never will loan long term at these manipulated phony LT insanely low interest rates against the interest rate risk of what is "EVENTUALLY" unsustainable.
The ten year bounces back above 2.02% after having just recently been at 1.6%. There are rumblings of a tapering off of QEs.
Gold is getting slammed? Gold @ $1600/oz is still double what it was at it's peak previous to the most recent peak. We do not know how long it will take this time for gold to bottom but it will and it will bottom above that near $900 peak of 1979.
The DEVELOPING US currency and debt crises will continue to play out. Just as Easy Al knew something was up that smelled bad in housing 3 years before the melt down, we know something smells bad. If Easy Al and his protege were unwilling to take steps then why would we presume that the Congress would undertake any effective measures other than flour paste patches to head off the next severe crisis that is surely coming? You just don't preach austerity if you want to get re-elected. The boomers now have a heightened sense of entitlement. Their parent's estates are being wiped out by the Bernank. Obama confiscated two of their SS COLAs so far... Mom and Dad are reverse mortgaging their homes to replace with annuity income the CD incomes that have been wiped out. Mediscam Rx-D is helping them live longer and they are outliving their assets. The inherited wealth of the Boomer's parents that the Boomers also expected to fund a portion of their own retirements is being wiped out. Instead of inheriting increasing numbers of boomers have had to spend their savings to help Mom & Dad get through. Boomers are increasingly aware of beng in a sense cheated on what they have invested in; their children's educations. Not only are they stuck with the Education loans for five year degrees that qualified Lindsay and Joshua for burger flipping jobs, they now have the added cost of those children's health care. Boomers are in no mood for any nonsense about shared sacrifice on entitlements. Not after what they paid in and after all the non-feasance of the Federal Government that has created this current economic malaise.
The US $ is in deep trouble and there is not going to any way out of the debt crisis but to restructure; that is provide haircuts to the holders of US Gov't "risk free" debt. That is just as easily done by a currency devaluation as by a tender for 70 cents on the What ? a ? dollar?
Where ever gold bottoms this time it will be heading next for another double double somewhere between $4200 and $5000 an ounce as measured in todays value of a dollar; notwithstanding what ever a US dollar is defined as by then. The currency/debt crisis is real. The political will and prospects for an EFFECTIVE resolution of it are near non-existent.
So you buy some gold near $1600? as you did at $500 before it went back to less than $400 where you bought a little more and now it is down off +1800 and you buy a little more. Maybe it drops to $950 and you buy a little more. What does your total cost basis become? Why did you not sell at $1800? Or maybe you did sell ...SOME. What is that 14 or 18 Kt 35gm necklace that you bought for the wife or daughter 10 years ago, worth on E-Bay today even with the E-bay and Paypal commissions?
Why $100 Brent Will Not Last Through 2013 [View article]
In 2012 China took away ~$112 billion in US treasury legacy higher yielding debt. US refined petroleum and Petro chemicals continue in strong demand globally. Some of these currency devaluations vs the perniciousness of US QEs are making the demand for US value added WTI products continue to rise. Some of that $112 Billion went into and continues into China's SPR.
We are to believe over the next several years the US currency is to strengthen enough to suppress these demand metrics form the hard currency economies?
The author is now hedging his assertion of "not last(ing) through (the other 2/3rds of) 2013"? Now it is a question as to when Brent will decline in the future?
In about 2 years the massive global exports from North America of LNG will commence. The North American shale gas fracking technologies will soon be put to work globally so it would seem that Gas and NGLs will be gaining market shares as per fuels globally in general. Cummins(nice chart,Eh?) already in production for many months with their new 12 Ltr Nat gas fuel heavy duty truck engine. It can be adapted to either CNG or LNG. These fueling stations are already being constructed along the TransCanada HWY mostly by RDS/A&"B".
It's always too good to believe until time takes it's toll. So what is the remaining reserve left to the Cook inlet Gas basin after +25 years of exporting LNG to Japan sourced there? The export terminal is being mothballed now as the gas resource is so severely depleted that the greater Anchoarge/Warsilla region is starting to worry about where they are going to get gas to heat the place in the winter months in just a few short years. Maybe they will have to switch to heating oil or maybe that export terminal will be converted to an import terminal?
It seems clear that the technologies adapting natural gas to a transportation fuel are going to advance world wide. The pollutions in China could be dramatically reduced using NG fueled trucks, buses and eventually to some other adaptations to autos as well.
So maybe global demand for oil will ease a bit later in the decade. For now Europe remains in a severe DEPRESSION and Brent still remains over US$100/BBL. RDS/B and BP putting in strong rallies over the last 3 weeks. If there is so much easy play onshore oil we have to wonder how SDRL keeps it going? Drilling in deep and ultra deep water is very expensive. The latest benefits of global warming the increasing drilling activities in the Barents Sea, now mostly ice free year round. If oil prices do fall that activity gets shelved and some wells may be capped as so many Nat Gas wells are also still currently capped supporting the move from <$3 on the 2 yr chart to over $4 now. BG Group and Idemitsu-Kosan already buying North American sourced LNG for which they plan to take deliveries of. So the demand metric for gas is rising and we can expect to see $5.15/MM~BTU before the end of 2013.
North American Gas rising in price will some how support lower Brent pricing?
American Capital Agency Corp. Reports A Nightmare Quarter [View article]
When the thirty year breaks towards 2.49% in a stock market swoon it will be time to dump this company's stock. Eventually ZIRP everlasting and the binary access to credit will be rejected at the ballot box. Once that occurs anyone holding excessive exposures to LT debt will get eaten alive.
The Music in MBS.s stops again and we have the same result as in 2008-09.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
The Yen however is dropping precipitously and the Japanese are desperate to buy even the lowest yielding US debt. But eventually Japan's currency collapses and that source of funding will dry up even as they will then be our largest foreign creditor.
As with the Wall Street over leveraging game there will not be enough chairs when the music stops in the war of international currency debasement race.
Those like China who did not participate in the race will end dictating to the rest of the global economy what constitutes money. Packs of cigarettes, bottles of whisky, Tide, bars of soap, ammunition and toilet paper will still be commonly accepted currencies in most of the world, as they are now.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
Charts is charts my friend.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
OR
We have already likely seen the generational low in the Stock market as of March '09. The stock market retrenches and then has another buying stampede and then retrenches and then we eventually end near a S&P 1100 level where the half of stocks that represent something with intrinsic value begin to perform as against their traditional metrics, fear subsides once more and greed reasserts. The Fed stops paying interest on bank reserves on deposit with them?
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
What about the cost of insurance especially homeowners insurance? How can these insurance companies keep the lights on and pay dividends if they can only earn less than 1/2% on their reserves held for paying claims?
Look at the bounce in HIG since they got rid of most of the life insurance and annuity products last year. Not a bad looking 3 year chart for MRH either.
Check out that PHO chart. The first Clean Water Act of 1972 spawned 100s of billions in Federal Gov't spending on wastewater and and potable water treatment facilities over the next ten years. Here we are 40 to 30 years later and the whole infrastructure of it is blowing up at the seams. Who is not facing a doubling of their water or sewer over the next few years and not gotten some of that increase already?
Same story as illustrated by CUT. Who does not need some construction materials for maintaining a house. Siding, decks, window moldings etc. US lumber now closing in on $4/K~BD:ft. Up from the $1.75 lows of a few years ago. Most of us still buy toilet paper but not so cheaply these days.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
It did not take a country of 250 million very long to exhaust it's supply of US mint issued 1/10th ounce coins as gold dipped to $1325. What happens in a country of 1,250,000 when gold goes on sale? Something different than what occurred here?
The "You Lie" cliche.... So many using it and so many of them winning their Darwin awards.
It must also be a lie that the US is only 25% of the global GDP. We may be the biggest on the block but the others combined are three times what we are. Maybe it will be them determining the prices for gold. Lately "they" seem to have deemed $1325/OZ as a bit too low.
In a strong US stock market sell off as triggered by any Black Swan event the US ten year treasury rate could fall to 1.25 %. That will be very good for gold prices. If "eventually" happens and the FED begins "tapering" it would be possible for interest rates to return to real rates of return and gold could test $1000. A little tapering in moderation may be thought by the Fed to be prudent at some point and predicted not to have a contagion effect. The Fed unfortunately does not have a record of having a very clear crystal ball.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
Coins of course trade as asked and sell over spot for their being what they are. But to get over spot on such you have to sell to a bullion dealer. Very few jewelers will pay over spot for US gold eagles or other such. There are probably many that will, but they are also operating as coin dealers as well as jewelers. Money changing has not changed that much in 2000 years. Scrap gold is typically bought in the neighborhood for near 30% discounts to spot and then sold wholesale at 15 to 20 percent below spot to the actual refiners who then turn around and sell the refined product back to jewelry makers for 25% over spot. Then plus the craftsmanship that goes into a new piece of jewelry we typically see that same train of gold trading 35 to 50% over spot, sometimes even more.
As for Physical gold it may be of more enjoyment to split that between some nice jewelry for the wife and daughters and some coins. I find Provident Metals most competitive on their buy and sell quotes for coins. E-bay can be OK but the fees of E-bay and the paypal tend to drive prices higher than at the others like Bullion Direct, NWT mint, a few others.
What does it mean as when in Europe when all these little neighborhood "WE BUY GOLD" shops start to close up? It means the people are getting even beyond desperate because they have already sold all the gold they had to sell.
Eric Sprott's Gold Analysis Deconstructed: What The Gold Bulls Still Don't Get [View article]
There is then the deconstructing of Mr Williams postulations as well.
Gold is not a currency because of the volatility in the price. In the last 45 years gold has always doubled against the last peak it made from every retrenchment. The currencies of country's like Cuba, Argentina, Zimbabwe, and Turkey have not fared as well. We are now employed in the great devaluation/slide in the YEN. So Mazda borrows from the Bank of Tokyo Mitsubishi for 5 years at 1.7% and loans it out to the US consumer to buy Mazdas at 0%. The Yen declining +5% annually against the US $ and +9% against the Chinese Renmimbi. Mazda earns 3.5% in the currency leverages on 0% financings. So other currencies are more stable than the currency of gold? Ok if Mr Williams says so. But that ~$1885 mark set recently in gold was still twice the value made in May of '06 of almost $800. Let's see what the Yen will be worth in 7 more years....So gold is indeed as a currency more volatile than most other currencies it is just that that volatility exists in both directions to the mean which continues to strengthen against a medium and longer term time line.. Almost every one is a millionaire in Zolties these days.
The expansion of the monetary base is a convoluted one as most of that money has not made it into the US economy but been dedicated to building bank reserves. Gold has of late been responding directly to this issue as Mr Sprott asserts. The fall off in gold commenced on the intuition by the markets that Global QE's are starting to reach the unsustainable level. So maybe the US QE's may for awhile be contained and not leaking into the US economy that is not so much the case in the other 75% of the Global GDP. Gold is a global currency. The coining of the concept and word "TAPERING" has signaled something. We have heard for 4 years that rates are going to rise "eventually". markets lok ahead to read the tea leaves. Bernanke is gone in 6 months . Janet Yellen is the only credible replacement. Obama would endorse Hope and Change by seeking to appoint Lacker, Fisher or Hoenig, as Ben's replacement? Rates will start rising when the tapering starts. No one knows by how much. the opportunity cost to own gold isgoing up from here not further down. So gold has corected against that. But the profligacy of the Fed with a +4$trillion balance sheet an approaching $20 trillion national debt & another $4 trilion in unfunded State pension obligations is not going away. The last election showed how you can not convince the electorate that you can perpetrate the big lie on Obamascare being evil and Mediscam RX-D being a very popular program. No matter how much was spent on color glossy post cards bombarding the electorate with the message that America hates and fears Obamascare they were not duped into NOT voting themselves increased largesse.
These are financial fiascos that are not going to be repaired by balancing spending and revenues. The Seventeenth Amendment marked the end of our country being defined as a Republic. What's in the best interest of a State no longer matters in the American Gov't. If you try and wise up the electorate to what the limitations are facing us you end up like Carter and Bush I. As a democracy the US will continue to see the voting of largess to the people. the gross inherent unfairness in our society of the ever increasing concentration of wealth will quell any reasonable argument to return to capitalism and scrap the Planned interest rate economy that punishes savings and the formation of capital.
While gold will suffer under a period of rising interest rates that scenario eventually reaches for a Great Inflation II. So then gold once again reverses against that out look and heads for ? $3700 ?
While that is still a few years away Mr Williams can declare his outlook for now triumphant. No one will remember this article 5-6 years from now.
On the other hand as gold was being crushed I personally went to work as Gold was making the $1325 handle on 4/15 and started with 250 SCPZF AKA SCP.TO. Just in time to catch the ex date and capture the monthly distribution. Let's see that order filled at US$4.01. So far Mr Sprott's oversight of my investment with him seems to be working. Sprott Resources then an O&G E&P and Ags industries participant and not a gold PRODUCER. The company does though HOLD 73 million ounces of gold. I also recently started GGN-A @ a $25.41 total cost basis. Of course the monthly distribution for SCPZF is not as rich now as it was 3 weeks ago when I bought it as it is now sporting a $4.29 handle. If you do not go all in you do not make a killing but making a little 7% here and there in the reign of terror or financial repression isn't all that bad either. I'll take that no Cand with holding $9.40 a month in my tax sheltered account. Sprott, Jim Rodgers, and Flatt the Bruce are just full of BS? How 'bout those CUT, PHO, VEGI, PALL, and FSCHX one year charts? Eh? How 'bout that 6 month chart for SCPZF? How 'bout that 3 weeks in CERGF/CRP.TO? The commodities are just getting killed out there. Or are they ALL really getting killed?
Globally gov't mints are running out of supplies of bullion coins against the physical demand that asserted when the hedge funds, ETPs and institutions sold off their gold. Countries like Korea, China, Russia, and Brazil which individually added near 80 tons each to their physical gold monetary reserves in 2012, all stepped up to buy. The quick as two shakes of a lamb's tail +$100/oz recovery in gold. Generally lows like the mid April low are re-tested. If that happens then adding another 500 shares to SCPZF might be my reaction. Not a producer but as a holder is it possible with that, to out do the current 4.3% yield in NEM?
The fiat currency money printing is massive on a global scale. Japan is by most measures excluding the Euro zone as a single country, the world's 3rd largest economy. They are money printing on a scale that is 3 times what the US is doing. The Maastritch Treaty has yet to be amended to allow for the ECB to stay with the competition in global currency debasements. Remember the Draghi remark. "What ever it takes." The ECB needs to print near 4Trillion Euros to recapitalize the 30 largest Euro Zone banks which all hold some levels of Euro zone sovereign debt which is insolvent making those banks insolvent. The Revisions to Maastritch are going to happen because the only alternative is for some of these larger countries like Italy which are locked in a depression to leave the Euro and re-establish their own central bank to do that printing to not just recapitalize their banks but to buy their own country's debt for a period of 3-4 years as well.
While that goes on Gold will stand behind the curtain and pay no notice or attention.
Stagflation: Coming Soon To A Market Near You [View article]
SEC In the Matter of the State of Illinois Admin Proceeding File No. 3-15237....
"In conjunction with multiple bond offerings raising over $2.2 billion...2005 through early 2009, the State of Illinois MISLED bond investors about the adequacy of it's statutory plan to fund it's pension obligations and the RISKs created by the State's underfunding of it's pension systems."
"Rather than controlling the State's growing pension burden, the Statutory Funding Plan's (RE: the flour paste patch enacted in 1994, effective in 1995 to create a 50 year funding plan for the State Pensions) contribution schedule increased the underfunded liability, underfunded the State's pension obligations, and deferred pension funding. This resulting underfunding of the pension systems ("Structural Underfunding") enabled the State to shift the burden associated with it's pension costs TO THE FUTURE and, as a result, created significant FINANCIAL STRESS and RISKS for the State.
"The State's pension contributions were calculated in accordance with STATE LAW and NOT in accordance with ARC (Actuarially Required Contributions), and therefore the Statutory Funding Plan deferred funding of the State's pension obligations and COMPOUNDED it's pension burden."
"The resulting Systematic underfunding imposed significant STRESS on the pension systems and ON THE STATE'S ABILITY TO MEET IT'S ``COMPETING `` OBLIGATIONS."
It is a very long Cease and Desist order from the SEC citing Illinois for not, that is by omission a violation of the law, stating that the potential bond purchaser may have greater risk to their capital and interest payments due to some very huge and undefined liabilities the State has for funding statutory obligations of pensions.
Purchasers of bonds during the period cited may now almost certainly have legal recourse for claw backs on price for bonds sold to them by the State of Illinois. Illinois admits no wrong doing and yet the SEC cites them for violating the law.
The SEC pointing out a plan that was enacted into law by the State Legislature to purposefully undermine the funding of the State's pension systems NOT over a more reasonable 20 to 30 year span but over 50 years instead. A plan that purposefully legislated into law a funding plan that was grossly below accepted general accounting standards, the Actuarially Required Contributions standards.
So Illinois now has to amend the prospectuses for future bond sales to include the information that the purchasers are COMPETING for the service of their debt with something near $25 Billion in underfunding liabilities for grossly underfunded pensions. They will only be able to provide estimates and will be required to say that the underfunding liabilities the potential bond buyer may have to compete with are by most measures partially undefined, and that the actual stated estimates are only estimates.
The 1994 Illinois State legislature did a marvelous job of saving the taxpayers money by pretending they would never have to pay for these under fundings. They borrowed prosperity from the future to fund the first 10 years of the economy we all expect to be the measure of what will be when we get back to "normal", and now we have the last 10 years of paying back that portion previously borrowed from us 10 to 20 years ago. And we are not happy with 1.5 to 2.5% GDP GROWTH now? What about the unpaid balances we still owe on that borrowing '95 to '05?
Most who bought these bonds over this period knew IL debt smelled bad. They knew of these pension under fundings. But according to the Law you are supposed to disclose this kind of thing to ALL.
If Congress is not going to soon amend ERISA 1974 then they should get right to work amending the SEC act of 1933. Incredibly back then the lawmakers thought you should be able to see and interview the man behind the curtain. Can an individual apply for a mortgage if they are including a spouse's income to apply & qualify, while omitting the fact that that spouse died 2 months ago?
Got Gold (As In GLD)? [View article]
It is illegal to melt down pennies and nickels.
There is no incentive to melt down the copper and other composite post 1964 "sandwich" US coins. The materials contained there in are still well below the face values of the coins.
There is no prohibition on melting down pre '64 (90%) silver coins nor is there any incentive to do so. Those coins carry their intrinsic values plus the minting premium irregardless of US debt and monetary policies. So one of those dimes at a flea market or in any other such barter situations are Two dollar coins no different than two US President dollar coins in value, except for their slight 8 to 15 cent premium as silver hovers from $28 to $35. The only other difference is that the party accepting them slightly below par will still have the more or less same purchasing power with those silver coins in 5 years as today.
You can find US minted junk silver coins for sale in lots as low as a couple dollars face, on Craig's list and E-bay all the time. The lots go all the way up to $1000 face value generally sold in canvas or durable synthetic fiber bags. They sell for the silver content @ spot plus the mint premium. So they have near the same % premium to spot as a 1 ounce gold coin for the easily recognized authenticity that makes them very liquid.
To buy a Gold Buffalo or Eagle one ounce coin there is a near $70 premium to spot. The dealer that sells it will generally buy it back at a premium of ~$55 to spot. This is called liquidity. So US junk silver coins for preppers and such other hard money aficionados are a natural base to their hoarding of more valuable gold coins as savings.
The wise guy with his inquiry as to how after the collapse of paper fiat money you are going to be able to buy $50 of groceries with a $1700 coin?
The same way they did before fiat currency when there were bits and Pieces of eight. So a piece of eight of a 1 ounce US gold eagle is approximately worth two hundred dollars. Change can be made in 27 silver quarters and if there is a rounding as is now used with the elimination of pennies in Canada and on US military bases overseas, any small difference can be offset by an additional can of corn or some other such high end per ounce item as black pepper corns = ~.60 cents an ounce. Black pepper corns highly prized in the time of Marco Polo have not lost much of their appeal. Ditto coffee, cigarettes, bars of soap, Whiskey, Tide and toilet paper in the modern world. All now commonly seen being used as currency globally.
Of course most states to promote better commerce would begin to mint $5 to $20 silver or gold content coins to make this type of money easier to exchange. We can imagine the ridiculous premiums on US minted fractional ounce gold coins would collapse to the same premiums to spot as the rest of the hard money currency that would be circulating.
Necessity is the mother of invention.
So US copper pennies & nickels with copper and nickel content are shipped to Mexico to be melted down. While the investment in "MOST" precious metals coins for numismatic value insane mark ups is a fools game we can see how the pre-'82 US copper penny for the deprecations by melt downs will increasingly gain some better numismatic valuations.
Got Gold (As In GLD)? [View article]
If the correct repairs are initiated and get some positive outcomes then gold could come back down to $3200.
Got Gold (As In GLD)? [View article]
The Renmimbi is appreciating at ~4% annually as a against a US Pe$o. They are not in that equation going to be buying less than 4% yielding US gov't debt so they can take a loss on their money.
China is reputed to now be the worlds largest gold producer, but none of that production is exported . In 2012 it is estimated the Central Bank of China diversified their foreign currency reserves by adding 80 TONs of gold to their gold reserves. It has been legal now for near 10 years for any Chinese to own gold and they of course mostly do, buying in little 1 gm lots or in links of chain. Sums that they can redeem anytime for the domestic Renmimbi to purchase items. 1.1 billion x a couple gms = ?
The myth that China owns so much of our debt as to make them bend to our fiscal and monetary policy will, is as mis-informed as the accusation that China is a currency manipulator.
US Treasury TIC reports are delayed by 3 months to gather and confirm the data. According to other US Treasury reports as of Dec '12, China had reduced it's US Treasury holdings to $1.202 trillion. followed closely by Japan at 1.120 trillion. China shaving it off from a record high of $ 1.31 trillion in July of 2011. So China owns less than 6% of the US national debt. They are not panic selling, just taking those legacy higher yielding maturities away and redeeming the US pe$0s paid out on them , for Soybeans, corn, Fertilizers, refined petroleum products, petro-chemicals, forest products, LNG, metallurgical ores and Met & Therm Coal, Crude Oil to fill their SPR, and 80 tons of gold from foreign markets; Etc. They are leaving it to the Fed to print moneyand participate in the refi auctions.
China is a lot less than fully vested in making the US existing financial system work , and is beating a path for it's exits.
Who wins when major currencies fail? Canadians descending this last NOV & Dec to buy cheap US retail stuff : US$38 bottles of Johnny Walker Blue,$55 cartons of Marlboros, and Tide. . Any country and it's citizens in a commodities currency country even if they have a more socialist system than that of the failing currencies. Those countries like a Sweden do not deny what they are and have enough taxes to pay for their socialism. It does not make for a very good foundation though for ever greater concentrations of wealth among their wealthiest citizenry.
Economies like Texas NOT taxes may find that when it is time to finally raise some taxes the tax base is made up from a population that is in the bottom 5 states of per capita household income.
When you ain't got nothin' you got nothin' to tax!
All I can smell is a worsening currency and debt crisis that eventually leads to the kind of panic we saw when WAMU, Lehman and the subordinated debt of the GSEs Freddie and Fannie were all allowed to fail. While some others as Merrill Lynch, Citigrp, AIG etc were bailed out. Panic as no one was sure of what was safe and what was about to become dust.
The same kind of loss of confidence that set in when after 9-11 people could not get access to their funds for days or weeks.
The odor of 12% interest rates and pernicious inflation that did not subside until rates got to 17 or 18%.
History does not often repeat but it does tend to rhyme...
Got Gold (As In GLD)? [View article]
It's an end to an era. In the early eighties Ronald Reagan spends a lot of money building up defense but it is all intimidation and no profligacy as would be the case if the US took on someone their own size in a real war. The US tunes up like so many teams early in the footballl season as on a Central Michigan etc. Invasions of such evil empires as Grenada and Panama. Reagan and Tip O'neil get together and patch up entitlements. The Real Estate recession of 89 90 and then a shot in the arm for the economy by a short foray into the Persian Gulf to free and then occupy Kuwait. 10 months of profligate spending on war instead of the recent 10 years. Bush I decides the responsible thing to do is to pay for some of that war. Preaching a bit of austerity he gets fired as did the last President who suggested such nonsense. By now Easy Al is on watch and borrowing from future prosperity to finance current stronger than normal GDP growth, that unsustainable growth begins . We enter into the era of the goldilocks economy. Reagan had defeated the evil empire of the Soviet Union and China had turned to a market economy. The dot com bubble hits and Easy Al fixes it in two shakes of a lambs tail. By 2000 just as the Dumya was almost and then Fl was tipped, and he did come on watch we were a very prosperous society indeed. Now having occupied Kuwait for 10 years, already... Gold can not find a break and "FINISHES" it's decline from near $900 to $300 just as the Dumya is being sworn in.
Gold falls to $300 but still 50% over it's previous peak to the pre~$900 peak. 9/11... and the economy tanks Easy Al back at it again with another two shakes of the lambs tail. But 9/11 causes the aimed for disruptions to the financial and other markets. People find they can not get access to some of their funds for many days if not weeks. Confidence is shaken and Gold starts it's next rally.
Easy Al continues to borrow from the future and continues to lower rates, he identifies a housing bubble as early as 2005 but then asserts it will be the private capital markets that will eventually deal with that . This results eventually in the US government owning 95% of all US mortgage loans. By now we have been in a retaliatory mode against the muslim world for 3 years and we are spending God awful amounts of "money" to fight these heathen scourges. It is the Johnson-Nixon fiasco all over again with 3 more zeros added on. FL was not too sure in 2000 so the Dumya creates Mediscam Rx-D. He becomes very popular in Florida. $65 billion annually for that with no taxes or offsets to pay for it. War rages on and thousands make their fortune serving in the time of greed. Just as all hell is about to break loose Easy Al takes a powder smugly leaving having created some aura about himself and joking it up that if anyone understood what he was up to they were misunderstanding him. His protege Bernanke takes over and keeps to the same course. Only too late realizing rates should have been raised immediately but now forced to lower them and create ZIRP/QE everlasting to rescue and dampen the effects of the Subprime Mortgage blow up that his predecessor had spoken of in speeches several years before. Helicopter Ben's helicopter went to the shop for a new engine and so could not fly after the Bear Stearns debacle. Ben, Paulson and Paulson's successor the NY Fed President, had nearly two months to prepare for the next coming fiascos after Bear, but they did nothing. Instead of using a fiat currency as an effective tool they quadrupled the eventual cost of the Subprime Mtge fallout. They started picking winners and losers instead of bailing them all out. WAMU, Lehman, the subordinated debt of Fannie and Freddie all had to be wiped out to teach someone a lesson? This created the panic that made Gold shoot to $1800.
It also created the current fiasco of immeasurable debt. A planned interest rate economy not dissimilar to what the Soviet Union had attempted in the '50s and '60s with a planned market economy. While all this was happening we ended in a sychrocicity where the boomers began to retire on the promises of the previous 40 years. With as much as 60% of the equity in their homes wiped out that they had planned on to partially fund their retirements, their entitlements obligations became of paramount importance. Every time they had seen another hike in their FICA taxes they were assured "it" would be there for them. But the trust funds turned out to be imaginary, their taxes had been co-mingled with the general revenue streams and all they had left was the Gov't promise to raise taxes to redeem some of the $10 to $20 trillion in debt the Dumya, Easy Al and the Bernacke had racked up.
The Dumya and the Dumbo both had learned that you don't preach austerity if you expect to great re-elected but instead pledge your support to the plebicite's ability to vote themselves largess. The members of Congress are also now keenly aware of this. Strangely the ones still left in Congress that created Mediscam Rx-D protest to any critic that it is a very popular program, but insist that EVERYBODY hates "ObamScare".
After 5 years of ZIRP and Q-Eternity some of the consequences are becoming apparent. There is a current scare in the markets. The equities have hit the triple top and may be nearing full valuation. The last recession is now years behind us ending with the beginning of a growth "recession". A period of very slow GDP growth. The bond vigilantes have begun to assault the LT rate market. Private capital would not and never will loan long term at these manipulated phony LT insanely low interest rates against the interest rate risk of what is "EVENTUALLY" unsustainable.
The ten year bounces back above 2.02% after having just recently been at 1.6%. There are rumblings of a tapering off of QEs.
Gold is getting slammed? Gold @ $1600/oz is still double what it was at it's peak previous to the most recent peak. We do not know how long it will take this time for gold to bottom but it will and it will bottom above that near $900 peak of 1979.
The DEVELOPING US currency and debt crises will continue to play out. Just as Easy Al knew something was up that smelled bad in housing 3 years before the melt down, we know something smells bad. If Easy Al and his protege were unwilling to take steps then why would we presume that the Congress would undertake any effective measures other than flour paste patches to head off the next severe crisis that is surely coming? You just don't preach austerity if you want to get re-elected. The boomers now have a heightened sense of entitlement. Their parent's estates are being wiped out by the Bernank. Obama confiscated two of their SS COLAs so far... Mom and Dad are reverse mortgaging their homes to replace with annuity income the CD incomes that have been wiped out. Mediscam Rx-D is helping them live longer and they are outliving their assets. The inherited wealth of the Boomer's parents that the Boomers also expected to fund a portion of their own retirements is being wiped out. Instead of inheriting increasing numbers of boomers have had to spend their savings to help Mom & Dad get through. Boomers are increasingly aware of beng in a sense cheated on what they have invested in; their children's educations. Not only are they stuck with the Education loans for five year degrees that qualified Lindsay and Joshua for burger flipping jobs, they now have the added cost of those children's health care. Boomers are in no mood for any nonsense about shared sacrifice on entitlements. Not after what they paid in and after all the non-feasance of the Federal Government that has created this current economic malaise.
The US $ is in deep trouble and there is not going to any way out of the debt crisis but to restructure; that is provide haircuts to the holders of US Gov't "risk free" debt. That is just as easily done by a currency devaluation as by a tender for 70 cents on the What ? a ? dollar?
Where ever gold bottoms this time it will be heading next for another double double somewhere between $4200 and $5000 an ounce as measured in todays value of a dollar; notwithstanding what ever a US dollar is defined as by then. The currency/debt crisis is real. The political will and prospects for an EFFECTIVE resolution of it are near non-existent.
So you buy some gold near $1600? as you did at $500 before it went back to less than $400 where you bought a little more and now it is down off +1800 and you buy a little more. Maybe it drops to $950 and you buy a little more. What does your total cost basis become? Why did you not sell at $1800? Or maybe you did sell ...SOME. What is that 14 or 18 Kt 35gm necklace that you bought for the wife or daughter 10 years ago, worth on E-Bay today even with the E-bay and Paypal commissions?