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Sunday, December 30, 2012

Happy New Year to the 1 percent

  • “The money power preys upon the nation in times of peace and conspires against it in times of adversity. I see in the near future a crisis approaching that causes me to tremble for the safety of my country. The money power of the country will endeavor to work upon the people, until the wealth is aggregated in a few hands, and the republic is destroyed.”
    Abraham Lincoln

  • On average, the richest 400 Americans saw their wealth go up by an astounding $500 million each in only one year (2012) -- a bad year, no less, for the economy.  
  • Just this one year's increase in wealth for the richest 400 is enough to hire approximately 5 million entry level teachers!
  • All totaled, the 400 richest Americans have the same amount of wealth as approximately 25.5 million middle class families in the center of the wealth distribution.
  • This is the new math of plutocracy: 400 super-rich = 25.5 million middle class.      
  • The median family -- that family exactly at the mid-point of the wealth ladder  --- saw its net worth collapse. In 2005, the median family's wealth was valued at $102,844 (in inflation adjusted dollars.)  By 2011, the latest Census figures showed a drop of 35 percent to $66,740.  

The CEO of an S&P 500 Index company made, on average, 380 times the average wages of U.S. workers in 2011.

McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap

Tyree Johnson scrubs himself with a bar of soap in a McDonald’s (MCD) bathroom and puts on fresh deodorant. He stashes his toiletries in a Kenneth Cole bag, a gift from his mother who works the counter at Macy’s, and hops on an El train. His destination: another McDonald’s.
Burger Flipper’s Double Duty Reveals Hidden Cost of Dollar Menu Johnson isn’t one of Chicago’s many homeless people who seek shelter in fast-food joints. He’s a McDonald’s employee, at both stores -- one in the Loop, the other about a mile away in the shadow of Holy Name Cathedral.
 He needs the makeshift baths because hygiene and appearance are part of his annual compensation reviews. Even with frequent scrubbings, he said before a recent shift, it’s hard to remove the essence of the greasy food he works around. “I hate when my boss tells me she won’t give me a raise because she can smell me,” he said.
Johnson, 44, needs the two paychecks to pay rent for his apartment at a single-room occupancy hotel on the city’s north side. While he’s worked at McDonald’s stores for two decades, he still doesn’t get 40 hours a week and makes $8.25 an hour, minimum wage in Illinois.
This is life in one of America’s premier growth industries. Fast-food restaurants have added positions more than twice as fast as the U.S. average during the recovery that began in June 2009. The jobs created by companies including Burger King Worldwide Inc. and Yum (YUM)! Brands Inc., which owns the Pizza Hut, Taco Bell and KFC brands, are among the lowest-paid in the U.S. -- except in the C suite.

Pay Disparity

The pay gap separating fast-food workers from their chief executive officers is growing at each of those companies. The disparity has doubled at McDonald’s Corp. in the last 10 years, according to data compiled by Bloomberg. At the same time, the company helped pay for lobbying against minimum-wage increases and sought to quash the kind of unionization efforts that erupted recently on the streets of Chicago and New York.
Older workers like Johnson are staffing fast-food grills and fryers more often, according to data from the U.S. Census Bureau’s Current Population Survey. In 2010, 16- to 19-year-olds made up 17 percent of food preparation and serving workers, down from almost a quarter in 2000, as older, underemployed Americans took those jobs.
“The sheer number of adults in the industry has just exploded” because fast-food restaurants “not only survived, but thrived during the economic recession,” said Saru Jayaraman, director of the Food Labor Research Center at the University of California at Berkeley.

Million Hours

Johnson would need about a million hours of work -- or more than a century on the clock -- to earn the $8.75 million that McDonald’s, based in the Chicago suburb of Oak Brook, paid then- CEO Jim Skinner last year. Johnson’s work flipping burgers and hoisting boxes of french fries, like millions of other jobs in low-wage industries, helps explain why income inequality grew after the 2007-2009 recession ended.

Thursday, December 27, 2012

Idiocy - or arbitrage?

Henry VII (1485-1509) gold Angel ND, S-2187, Pheon (arrow) mm, struck 1505-09, MS65 PCGS

Great Britain, Great Britain: Henry VII (1485-1509) gold Angel ND,... Image #1

This coin is selling in the current Heritage Auction with a reserve of $17,625 including the buyer's feeIt is the single most common gold angel in "As Struck" condition - unfortunately the strike is absolutely atrocious. The surfaces are granular and unpleasant, the devices barely visible.  Altogether this is a coin that in a British Auction like Spink of DNW could be expected to realize somewhere around $3000.  

However, it is very shiny and sports a very high Slabbed Grade.  US Collectors like that.  And it will certainly be interesting to see if some US Collector buys the holder.

If so it will be the classic Greater Fool's game Henry VII Angels are quite common, and the Mint Mark Pheon is the most common mint mark.  Most every British Auction will have a few specimens far nicer than this.  And even very rare angels in AS struck condition - for example a Henry VI - might not be expected to quite bring the listed reserve for this coin.

It is intersting that NGC in its Ancients Dept has nagivated this problem by listing grades for the strike and surface as well as the state of preservation.  At NGC ancients this might be an MS Strike 2/5 Surface 2/5 - which would not be considered a premium coin.

Why hammered coins from other eras are not treated similarly by the grading companies is a mystery.

This is a wonderful example of the dangers of simply buying a grade in a market you might not be very familiar with.  

Know your markets.  Buy what you know.

Wednesday, December 26, 2012

5 reasons why the gold bull is alive and healthy:

1 Bloomberg: Gold, [enjoying] its longest winning streak in at least nine decades, is poised to enter a bear market..."

2) Interactive Investor: "Is gold's bull market over? Market commentators [are] citing a tumultuous economic environment. Others say it has simply been over-bought, and as with each bull market, inevitably reach[ed] a point of resistance..."

3) MARKETWATCH: "Gold bugs are finally throwing in the towel. Over the last two weeks [they] have become even more discouraged than they were at the end of November. And that’s saying something..."

 4) CNBC : Even Gold Bull Jim Rogers Is Turning Cautious  Published: Wednesday, 19 Dec 2012 | 2:16 AM ET  

 (PS Jim Rogers is very bullish on gold.)

5) FORBES: Gold's Decade-Long Bull Run Is Dead, Gartman Says

French torero Marco Leal performs a pass to a ...
(Image credit: AFP via @daylife)
Bernanke delivered the fatal blow to gold’s ten year bull market, according to Dennis Gartman.   Gold has been in bear territory since the summer of 2011, when it topped out above $1,900 an ounce, with the latest post-FOMC sell-off inflicting irreparable technical damage, he says.  UBS’ Edel Tully adds that markets’ no-QE-for-now realization will push gold even lower, probably down to $1,550 an ounce over the next month.

Monday, December 24, 2012

Gold Coins: Patterns, Essais, Medals

A "pattern" or "essai" is a coin that was submitted to the official state mint whose images were to be considered for general release as coins.

A Medal comes from the old Italian word "medalia" which means "Metal" or "coin"  Originally - in the early Renaissance - it was a coin produced by a mint other than the official state mint.  And it generally glorified Individuals of Means - while coins glorified images of Christ or Christ's representative on earth: the King.

As such Medals were the first Modern Artform - or the first Modern Coins - if we take Modern to mean "A conception of Individual Achievement as remarkable" - as opposed to the Medieval Conception of Man and his Achievement  as simply element and reflection of God's Collective.

It was not long (17th century) before top engravers (and families of engravers such were the Roettiers) were hired by official state mints where they produced both coins for general distribution and medals to commemorate individual and state achievement.

There are virtually no "patterns" or "essais" from this period.  And gold strike medals from this period are so very rare that they command prices easily comparable to the most valuable coins of the period.

But by the late 18th century the explosion of populations and world trade and the introduction of the steam engine had it made the use and quantity of coinage such that mints sprung up to produce coinage and medals in support of the Central Mint.

For example the Soho Mint of Mathew Boulton was founded in 1797 with a contract from the Central Mint to mint pennies and two-pennies.  But it soon began to mint Medals and tokens, and it produced a plethora of trial pieces, off metal strikes, and restrikes for collectors that have come to be called "patterns."  And many of these were created for export to British colonies such as India, Ceylon, Honduras, Australia etc.

At the time, of course, a Medal in Gold from the Royal Mint was far more expensive than a "pattern in gold" from a regional mint.

But as the sale of "Patterns, off metal strikes, restrikes" became lucrative for these regional mints the Royal mints followed suit and produced many such "Pattern strikes" that were never meant to be considered for general release coinage but simply used to raise money for the mints.  Some were commemorative - like the French essais of 1848, some were promotional like the various private mint "Pattern Shillings" and "Gold Strike Thalers" while some were simply minted to sate collector demand - like many of the British Indian restrikes.

As such, most of these non - circulating coins were functionally identical in purpose and nature to Medals. 

Now, because of the wiles of some very clever coin dealers there is a tremendous premium placed on "Off metal strikes, presentation pieces etc" that can be termed as "Patterns" instead of "Medals."  The word pattern or essai has lost all meaning other than to indicate a piece that "Should Command a tremendous premium."

And, like sheep, many collectors will shell out fantastic sums for these "Patterns" though they are often of little or no historical relevance and not nearly as rare or beautiful medals from the same mints and periods.

Of course true "patterns" that were submitted for consideration as general circulation pieces do exist.  Sometimes they are quite rare.  But these are certainly but a tiny percentage of all that has now come to be classified by wily dealers as such.

Wednesday, December 19, 2012

How to buy gold: winter auction preview

During the tenth year of a massive bull market, gold is still the object of ridicule and scorn.  To gold bulls this is the most reassuring sign that the bull market is alive and well.

Nowhere is this scorn so intense as with the gold numismatic market.  Even the main stream analysts who recommend gold vehemently warn their clients against numismatic gold.

And with good reason.  It is a market that takes considerable expertise.  If you don't know what you're doing you'll get skinned - almost as badly as you will in the stock market, the futures market, and the insurance markets - not to mention the education markets, the health care market, and at your own garage.

The sad fact of modern US economic life is that where ever you rely on the advise of brokers, experts, managers, you'll get skinned.  Because skinning people is viewed in modern US economic life as a sign of virility and intelligence.

There's a sucker born every minute, and if you're not out there taking advantage of them - then you're the sucker.

And that's precisely why our economic system is collapsing.

But for those with some vision and expertise the Gold Numismatic market is a vibrant treasure trove.  And the winter auctions are filled with exciting offerings.

To help out, here is a short stater of the market summary of the various numismatic markets.

The market to steer clear of at all costs are those you hear about in radio and tv.  Morgan dollars, state quarters, stuff just found in caches in European vaults - stuff issued by shills like the New York Mint etc etc.  (there is not New York Mint - it's just a private company.)

Real numismatics are issued by the Central Mint of a particular country.  And they are issued - or now exist - in true limited supply (let's say 2000 pieces or less.)  And they are issued once - or at a single point in history.

Hot markets:

China.  Chinese gold is still hot.  However, those modern China Mint issues that are so limited do appeal to Chinese and World collectors - and they are often truly limited - however - they are issued yearly.  So every year there are new limited Chinese gold issues.  Every year.  You figure out what that means.

Greek and Roman.  Ancient Greek gold in high grade is now nearly on par with ancient Roman gold in high grade - which is to say it has become the provenance of the very wealthy.  Get help when approaching these areas.  There are many fakes and doctored coins.  But real ones - untouched - in high grade will appreciate forever - as they are true treasures of antiquity.  And very very rare.  Be careful with middle to lower end items.  They are still expensive, but wealthy collectors won't touch them.  They'll wait patiently for high end items.  Still, there are bargains if you know what you're looking for as everyone tends to chase the same things at the same time.

Byzantine.  The byzantine market is byzantine.  Be careful with the expensive Irene issues and "rarities" from the period.  Very pricey and a large hoard has hit the market so prices will suffer over time

Medieval.  Medieval gold is very very rare in high grade.  Graded specimens of more common issues in high grade have been steadily moving up in price.  But rarer issues are still very cheap compared to other periods - because, frankly,  very little is known about the period, as there is not much contemporary writing.  But be careful about grading - for example there is an MS example of a Double D'or of Philip VI in the Bowers, and they're asking  $15-20,000.  It has a horrible crease in the flan.  Someone will get stuck with a clunker.  Don't just buy the grade.

 India.  India is hot.  British India is especially hot: mintage numbers are known and most of it has been thoroughly cataloged so you know what you're getting .  Older issues are hot, but the islamic issues are the provenance of true experts because the coins have no images - only writing which is very hard to read.  Ancient India is hot - but be careful.  NGC won't grade it - because of authenticity concerns.  A lot of this stuff is coming out, and the provenance is very sketchy.  Be careful with it.  Just because it appears in a major auction doesn't mean it's real.

England.  Hammered gold is still very hot - at the high end.  Be very careful though with graded issues.  NGC is lousy with hammered gold.  High end buyers care about strike and the flan - as well as state of preservation.  Graders care only how shiny a coin looks.  You can buy an NGC MS 65 Angel for a lot of money - and find out later that no high end collector's will touch it - because the strike is lousy.  You can also buy an NGC MS 65 with a great strike and find it is worth every penny that you paid.  Know what you're doing.

EUROPE.  There are obviously many European gold markets - as many as there are countries - throughout history.  And at the high end they're all still hot - despite the problems in Europe.  High end Hammered is hot.  And Europeans and English are avidly collecting Historical Medals of their countries - and certain medals have been fetching very high prices.  At the recent Maison Palombo Auction in Geneva a very rare Loos medal of Louis XVI sold for $20,000 though it was only 13 grams.  And at NAC a very rare Napoleonic Medal of 60 grams sold for $55,000.  Another rare Napoleonic medal of 60 grams sold at Kuenker for $45,000. 

South America.  Rare 8 escudo pieces and patterns are always hot.  Heritage has a few in January.  They will bring good money.  Brazil has been especially hot.  Those heavy Minas Gerai gold pieces have been selling in high grade for as much as $20,000 dollars.  And smaller pieces in very high grade have been going crazy.  Stacks sold a 1733 12,800 Reis in MS 65 for 47,000.

The picture of economic health

Tuesday, December 18, 2012

Stocks soar, gold stalls

Yes, stocks soar, gold stalls out at 1700.


Well, in a market economy it would have to be because the crisis is over, and world economies are on their way back to productive  efficiency, and therefor paper currencies are strong, and consumer confidence his high.

After all, Europe is holding together; the US economy is still growing at over 2 percent, unemployment figures are coming down, and the US government is hammering out a deal on the fiscal cliff.

All of the above is what everyone hears day after day on all the financial television channels.

So it must be true.

Then there are those crazy gold bugs out there - like the WWII Japanese fighters up the in the palm trees after the armistice - clutching pathetically to their gold bars and their guns and insisting that things are still deteriorating.

And what are those crazy gold bugs saying - in case anybody still cares?

Well, the same things that lunatics like George Soros, John Paulsen, David Stockman, George Shulz, Nassim Taleb, Robert Shiller, Marc Faber, Richard Duncan, Axel Merk, Kyle Bass, Hugh Hendry, Nouriel Roubini, David Walker etc etc etc are saying.

All these crazies claim that the markets are managed by the Fed to give the appearance that their zero interest rate policy is stabilizing the world economy.

All the crazies claim that the debt crisis is worsening here and in Europe, and the China's growth is not nearly sufficient to prevent a global debt implosion.

All the crazies are warning everyone who will listen that Crisis is being very temporarily deferred by a lunatic Fed that is flooding the world with dollars.

So somebody's crazy here.  That's for sure.

Thursday, December 13, 2012

Former Reagan Officials all agree: The Fed has rigged all the markets

David Alan Stockman: former director of the Office of Budget and Management in the Reagan administration:

The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

 The budget deficit isn't going to be addressed, and we have not had a two-way market of supply and demand. We now have what I call a "monetary roach motel," where the bonds come in and never come out.  I think we're at the last days of the artificial interlude and we're going to be entering the real days.

We're basically following the same path as the Greeks and the rest of Europe, and there's going to be a great day of reckoning, of reawakening. Once that starts, there could be a rapid, severe and even violent adjustment.

Dr. Paul Craig Roberts, former assistant U.S. treasury secretary in the Reagan administration

All markets, not only bonds, but also equity and bullion markets, are rigged in order to maintain the Fed’s low interest policy.   

Consider, for example, the bullion market. If gold and silver prices had been permitted to continue their 2011 rise, the corresponding decline in the value of the dollar would have affected the price of debt instruments, and the Fed would not have been able to keep bond prices high in the face of dollar decline. All indications of moves away from the dollar, whether stock market declines or rise in gold and silver prices, are offset by purchases of stock index futures or by shorts of bullion.
  George Shultz, former secretary of the Treasury in the Reagan Administration:
The next Treasury secretary will confront problems so daunting that even Alexander Hamilton would have trouble preserving the full faith and credit of the United States.
The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself. It determines the interest rate by declaring what it will pay on reserve balances at the Fed without regard for the supply and demand of money. By replacing large decentralized markets with centralized control by a few government officials, the Fed is distorting incentives and interfering with price discovery with unintended economic consequences.
Did you know that the Federal Reserve is now giving money to banks, effectively circumventing the appropriations process? To pay for quantitative easing—the purchase of government debt, mortgage-backed securities, etc.—the Fed credits banks with electronic deposits that are reserve balances at the Federal Reserve. These reserve balances have exploded to $1.5 trillion from $8 billion in September 2008.
The Fed now pays 0.25% interest on reserves it holds. So the Fed is paying the banks almost $4 billion a year. If interest rates rise to 2%, and the Federal Reserve raises the rate it pays on reserves correspondingly, the payment rises to $30 billion a year. Would Congress appropriate that kind of money to give—not lend—to banks?
The Fed's policy of keeping interest rates so low for so long means that the real rate (after accounting for inflation) is negative, thereby cutting significantly the real income of those who have saved for retirement over their lifetime.

Wednesday, December 12, 2012

Waiting for Godot:

DIY: construct your own rosy scenario:

 At some point these deficits, one way or another, will be reduced.
At some point the Fed will have to reverse course and sell "assets" off its balance sheet.

At some point The Fed will have to  remove some of the excess liquidity from the economy.

At some point the world economies will start to organically expand and grow their way out of the current slowdown.

At some point new technologies will be developed that will lead to a boom in employment and investment.

At some point  the US will develope its shale oil fields - or alternative energy industries - and become energy independent, thus giving the US economy a tremendous boost.

At some point the ingenuity of the American Entrepreneur will spark this economy.

At some point the genius of the free market will prevail and market forces will reassert themselves.

If only the Democrats...

If only the Republicans...

If only the Politicians in Washington...

If only the wealthy....

If only the unions....

If only the environmentalists....

If only the banking cartel...

If only the World Bank....

If only the Liberals...

If only the Conservatives...

If only the Socialists...

Sunday, December 9, 2012

Get this

Treasury Scarcity to Grow as Fed Buys 90% of New Bonds

Even as U.S. government debt swells to more than $16 trillion, Treasuries and other dollar fixed- income securities will be in short supply next year as the Federal Reserve soaks up almost all the net new bonds. 


The government will reduce net sales by $250 billion from the $1.2 trillion of bills, notes and bonds issued in fiscal 2012 ended Sept. 30, a survey of 18 primary dealers found.


At the same time, the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co. 


What does this mean?  


It means that as the US steadily increases its QE program to 85 Billion Dollars of New Debt Per month - thus adding to the pace of the unsustainable Debt Load - it is buying nearly all of its own new debt.


 Bernanke explained that this would actually shrink the debt as the debt interest payments we pay ourselves can be used to retire the debt.


 I'm not kidding. 


Get it?  


I don't.


I don't get this either: How does the paper currency survive this over time?

Friday, December 7, 2012

Institutionalized stupidity

As we approach the "fiscal cliff" - which is shorthand for enforced austerity - you are hearing a chorus of institutionalized stupidity in regards to the effect that Taxes and Spending have on the broad economy.  Every argument is one that claims: "If you do X  then Y will ensue."  Every single argument confuses Correlation with Causation.

Q.  If we know that when we did X at some point in the past, Y ensued - what do we know about the effect of X on Y?

A.  Nothing.  All we know is the correlation between X and Y at that time.

Q.  If you flush the toilet and the phone rings what do you know about the effect that flushing the toilet has on making the pone ring?

A.  Nothing.

But wait - what if you flushed the toilet 5 times in a row, and each time the phone rang?  Sorry, even then that tells you nothing about causation between the toilet and phone.

The same is true with the effect of raising taxes or lowering taxes on GDP and Tax Receipts, Debt levels etc.

The same is true with the effect of Increasing Spending or Decreasing spending on GDP, Tax Receipts,  Debt levels etc.

This does not mean these things do not have effects.  It means you can not accurately measure them without taking 1000 other variables into account.  And these variables change from day to day, and year to year, and decade to decade.

What do we know?

We know roughly the size of the Debt Levels - and we know roughly the size of GDP.

We know that the Debt is now so large it will never be repaid.

We know that because of Compounding  - which is to say the Interest Levels of Debt - that the Debt grows ever larger, while GDP does not.

We know that Debt is now denominated in Paper that can be printed at will by Governments.

We know that this Paper must be printed in large and larger quantities to service this debt and to fund the institutions that control the debt.

We know that this destroys the notional value of the paper.

This is the situation.  No amount of Austerity or Taxation will solve this problem.  It is a problem that is endemic to the institutions of Centrally Planned Paper Money creation and distribution, Fractional Reserve Banking, and Deficit Spending.

The Institutions must be reformed to change the output which results from the institutions.  No amount of tinkering with the output levels will have any real effect on the institutions.

Tuesday, December 4, 2012

China passes US

IMPACT: China passes US as top trade partner for much of world, changing lives globally

TRADING TITANS: In just five years, China has surpassed the United States as a trading partner for much of the world, including U.S. allies such as South Korea and Australia, according to an Associated Press analysis of trade data.

As recently as 2006, the U.S. was the larger trading partner for 127 countries, versus just 70 for China. By last year the two had clearly traded places: 124 countries for China, 76 for the U.S.

CULTURAL SHIFT: In the most abrupt global shift of its kind since World War II, the trend is changing the way people live and do business from Africa to Arizona, as farmers plant more soybeans to sell to China and students sign up to learn Mandarin. AP findings show how fast China has ascended to challenge America’s century-old status as the globe’s dominant trader, a change that is gradually translating into political influence. They highlight how pervasive China’s impact has been, spreading from neighboring Asia to Africa and now emerging in Latin America, the traditional U.S. backyard.

Monday, December 3, 2012

Precious Metal Abroad Why Germany Wants to See its US Gold

Photo Gallery: Gold Rush
For decades, almost half of Germany's gold has been stored deep below the Federal Reserve Bank of New York. Now, with the euro crisis swirling, German politicians are asking their central bankers to take stock of the reserves. Some even say that the gold should be shipped home.
Bundesbank President Jens Weidmann wanted to personally convince Peter Gauweiler that the German gold was still where it should be. Early this summer, the head of Germany's central bank took the obstinate politician from the conservative Christian Social Union (CSU), a party that is a member of the government coalition in Berlin, and a number of his colleagues into the Bundesbank's inner sanctum: the gold vault.
There, 6,000 gold bars are stacked on industrial-strength shelves in a purpose-built building in Frankfurt. An additional 76,000 bars of bullion are stored in four safe boxes, in sealed containers. But even this personal inspection wasn't enough to reassure the visiting member of parliament -- on the contrary: "The Bundesbank monitors its domestic gold in an exemplary fashion," Gauweiler says, "and this makes it all the more incomprehensible that the bank doesn't look after its reserves abroad."

'Grotesque Debate'
For decades, German central bankers have contented themselves with written affirmations from their American colleagues that the gold still remains where it is said to be stored. According to the report, the bar list from New York stems from "1979/1980." The report also noted that the Federal Reserve Bank of New York refuses to allow the gold's owners to view their own reserves.

Not surprisingly, this prompted strong reactions in Berlin: The relevant Bundesbank board member Carl-Ludwig Thiele was summoned to Berlin to provide an explanation to the parliamentary budget committee. Heinz-Peter Haustein of the business-friendly Free Democratic Party (FDP) was even quoted by Germany's mass-circulation Bild newspaper as saying that "all the gold has to be shipped back."

The Bundesbank's otherwise reserved Thiele said that he found at least "part of the debate" to be "rather grotesque."  Germany's gold reserves are currently worth some €144 billion and are not stored "with dubious business partners," as Thiele stresses, but rather with "highly respected central bankers."

Special Connection

There has been no lack of proposals: Most recently, German Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) shot down an idea by the euro partners to use the reserves as collateral for euro bonds.

Strict Security
In addition to safeguarding the reserves of over 60 countries, the Federal Reserve Bank of New York continues to hold 1,536 metric tons of German gold -- or nearly half of Berlin's reserves. This enormous hoard of gold is stored in the fifth subfloor of the bank's building on Liberty Street, 25 meters (80 feet) below street level, and 15 meters below sea level.

Not even the owners are allowed to view their own gold. According to the Federal Audit Office report, the Fed explained that "in the interest of security and of the control process" no "viewings" are possible.
"I would like more transparency on the issue," says Bundesbank board member Thiele. The Americans are very sensitive, though, when it comes to security procedures in their gold storage facilities. In their second major depository, the legendary Fort Knox, practically no one in recent decades has been allowed to view the gold reserves.

Fuelling Legends
Such intense secrecy fuels legends. Many conspiracy theorists have suspected for decades that the German gold has long since disappeared. Others believe that it has been lent out. They contend that there are only promissory notes of little worth stored in the bank's vaults.

Another myth that has been making the rounds in nationalist-oriented German circles is that the US refused to hand over the treasure and threatened during the Cold War to withdraw its troops from Germany if the Germans demanded their gold back. Former Bundesbank head Karl Blessing, according to the theory, had to provide the US written confirmation that he would never do such a thing.

This letter, as it happens, actually exists, as Blessing confirmed in his last interview with SPIEGEL in 1971 -- except it doesn't concern the German gold, but rather US gold reserves. Until 1971, every dollar could be exchanged for the precious metal. Blessing thus promised the US Federal Reserve that he would no longer convert the colossal German dollar reserves to gold because this would have caused the currency's value to plummet.

Today, this historic document is even available online. But that hasn't silenced those who oppose stockpiling German gold abroad. Instead, the debate over a collapse of strictly paper-based currency is experiencing a renaissance -- as is the dispute over the gold reserves. Even Green Party financial expert Gerhard Schick has joined the fray: "I think the question of how much gold is available in an emergency is a valid concern."

Outlandish Idea
From a purely logistical perspective, though, returning the reserves seems outlandish. One cannot simply pack 1,500 tons of gold into an Airbus A380 super-jumbo jet and fly it back to Germany.
The Bundesbank also objects to this notion for another reason. It says the gold is supposed to act as an emergency buffer. In the extreme situation of a currency collapse, the bankers say that the gold bars could easily and quickly be exchanged on location for pounds or dollars to pay urgent bills.
In a bid to calm the debate, the Bundesbank has pledged to bring back and inspect 150 tons of gold from abroad over the next three years. Furthermore, there are plans to count and weigh the gold bars stored in one of the nine chambers at the Fed in New York -- although no date has been set for this. Bundesbank board member Thiele was also recently in New York where he took a look behind one of the vault doors. He had good news for the members of the parliamentary budget committee: "There was no paper in there, just gold."

But that's not enough for CSU politician Gauweiler. He's only prepared to put the matter to rest when the central bank has thoroughly inspected all the German reserves throughout the entire world. His credo: "The Bundesbank is independent, but it can't do what it wants."

Friday, November 30, 2012

Billionaires Soros, Paulsen, Robertson, Bass, Gross have company:

Bond Investor Gundlach Buys Hard Assets, Sees 'Kaboom' Ahead

Bloomberg Markets Magazine

Joe Pugliese/Bloomberg Markets
Jeffrey Gundlach, who sees bleak financial times ahead, is the co-founder of DoubleLine Capital. He stands by a painting by Piet Mondrian, whose double-line style inspired the firm's name.
It’s mid-October, and Jeffrey Gundlach is giving a stump speech to a luncheon crowd of about 200 financial advisers and investors at Los Angeles’s City Club. The renowned money manager’s theme: the financial catastrophe on the horizon
In the ominous third phase, he predicts another crisis: Deeply indebted countries and companies, which Gundlach doesn’t name, will default sometime after 2013. Central banks may forestall these defaults by pumping even more money into the economy -- at the risk of higher inflation in coming years.
Gundlach, 53, doesn’t know when the third phase will get here, but he tells his audience they need to gradually get ready for it.
“I don’t believe you’re going to get some sort of an early warning,” Gundlach, who’s also chief investment officer at Los Angeles-based DoubleLine, tells his listeners. “You should be moving now.”

Gemstones, Art

He recommends buying hard assets: Gemstones, art and commercial real estate are high on his list. And DoubleLine has been buying the stocks of Chinese companies, U.S. natural gas producers and gold-mining firms because it considers them to be bargains.
Gundlach himself has amassed a contemporary art collection of about 100 pieces, with works by Jasper Johns and Franz Kline. The money manager drew on abstract painter Piet Mondrian’s double-line style for the name of his firm and its geometrical, crosshatched logo.

Gundlach, who correctly predicted the subprime mortgage disaster, has a proven record as a prognosticator -- and the performance numbers to go with it. At his former firm, TCW Group Inc., his Total Return Bond Fund earned an annual average of 7.9 percent in the decade ended in November 2009, according to data compiled by Bloomberg.
His flagship $35.8 billion DoubleLine Total Return Bond Fund (DBLTX) gained an annual average of 13.2 percent from its inception in April 2010 through Nov. 28, topping the performance of Gundlach’s more famous neighbor to the south, Bill Gross (who's also recommending hard assets)

Thursday, November 29, 2012

What happens if people in the US finally get the idea?
  • In China, you can buy gold and silver at the bank. 
  • In China Bullion is also available for purchase at Chinese post offices. 
  • In Hong Kong most of the major banks sell gold coins at a very small mark up - spot plus around 50HKD (divide this by 7.78 for U.S.). They also buy gold coins.
  • In India, every city and town has a gold mall, where local people buy 999 gold jewellery for many occasions and  use it as a store of wealth against hard times. This is sold by spot price plus a small fee for making up. These shops also buy it back.
  • China, Hong Kong, Singapore and Thailand, local residents  have bank accounts denominated in gold - the units used are Chinese (taels and maces).
  •  In Germany, where much of the populace prefers to store its wealth in hard assets, Gold-to-Go has introduced the first gold vending machine with 500 locations throughout the country.
  •  In the US households keep about .01 percent of their assets in gold.
  • What happens to the price of gold if a very small percentage of US households get the idea that gold might be a good store of wealth?

Wednesday, November 28, 2012

Trans Pacific Economic Partnership excludes US

Nov 27, 2012


Post-US world born in Phnom Penh
By Spengler ASIA TIMES

It is symptomatic of the national condition of the United States that the worst humiliation ever suffered by it as a nation, and by a US president personally, passed almost without comment last week. I refer to the November 20 announcement at a summit meeting in Phnom Penh that 15 Asian nations, comprising half the world's population, would form a Regional Comprehensive Economic Partnership excluding the United States.

President Barack Obama attended the summit to sell a US-based Trans-Pacific Partnership excluding China. He didn't. The American led-partnership became a party to which no-one came.

Instead, the Association of Southeast Asian Nations, plus China, India, Japan, South Korea, Australia and New Zealand, will form a club and leave out the United States. As 3 billion Asians become prosperous, interest fades in the prospective contribution of 300  

million Americans - especially when those Americans decline to take risks on new technologies. America's great economic strength, namely its capacity to innovate, exists mainly in memory four years after the 2008 economic crisis.

A minor issue in the election campaign, the Trans-Pacific Partnership initiative was the object of enormous hype on the policy circuit. enthused on October 23,
This agreement is a core part of the "Asia pivot" that has occupied the activities of think tanks and policymakers in Washington but remained hidden by the tinsel and confetti of the election. But more than any other policy, the trends the TPP represents could restructure American foreign relations, and potentially the economy itself.
As it happened, this grand, game-changing vision mattered only to the sad, strange people who concoct policy in the bowels of the Obama administration. America's relative importance is fading.

To put these matters in context: the exports of Asian countries have risen more than 20% from their peak before the 2008 economic crisis, while Europe's exports have fallen by more than 20%. American exports have risen marginally (by about 4%) from their pre-2008 peak.

Exhibit 1: Asian, European and US exports

China's exports to Asia, meanwhile, have jumped 50% since their pre-crisis peak, while exports to the United States have risen by about 15%. At US$90 billion, Chinese exports to Asia are three times the country's exports to the United States.

After months and dire (and entirely wrong) predictions that China's economy faces a hard landing, it is evident that China will have no hard landing, nor indeed any landing at all. Domestic consumption as well as exports to Asia are both running nearly 20% ahead of last year's levels, compensating for weakness in certain export markets and the construction sector. Exports to the moribund American economy are stagnant.

Exhibit 2: China's exports to Asia vs USA

Source: Bloomberg

In 2002, China imported five times as much from Asia as it did from the United States. Now it imports 10 times as much from Asia as from the US.

Exhibit 3: Chinese imports from the US and Asia

Source: Bloomberg

Following the trade patterns, Asian currencies began trading more closely with China's renminbi than with the American dollar. Arvind Subramanian and Martin Kessler wrote in an October 2012 study for the Peterson Institute:
A country's rise to economic dominance tends to be accompanied by its currency becoming a reference point, with other currencies tracking it implicitly or explicitly. For a sample comprising emerging market economies, we show that in the last two years, the renminbi (RMB/yuan) has increasingly become a reference currency which we define as one which exhibits a high degree of co-movement (CMC) with other currencies.

In East Asia, there is already a RMB bloc, because the RMB has become the dominant reference currency, eclipsing the dollar, which is a historic development. In this region, 7 currencies out of 10 co-move more closely with the RMB than with the dollar, with the average value of the CMC relative to the RMB being 40% greater than that for the dollar. We find that co-movements with a reference currency, especially for the RMB, are associated with trade integration.

We draw some lessons for the prospects for the RMB bloc to move beyond Asia based on a comparison of the RMB's situation today and that of the Japanese yen in the early 1990s. If trade were the sole driver, a more global RMB bloc could emerge by the mid-2030s but complementary reforms of the financial and external sector could considerably expedite the process.
All of this is well known and exhaustively discussed. The question is what, if anything, the United States will do about it.

Where does the United States have a competitive advantage? Apart from commercial aircraft, power-generating equipment, and agriculture, it has few areas of real industrial pre-eminence. Cheap natural gas helps low-value-added industries such as fertilizer, but the US is lagging in the industrial space.

Four years ago, when Francesco Sisci and I proposed a Sino-American monetary agreement as an anchor for trade integration, the US still dominated the nuclear power plant industry. With the sale of the Westinghouse nuclear power business to Toshiba, and Toshiba's joint ventures with China to build power plants locally, that advantage has evaporated.

The problem is that Americans have stopped investing in the sort of high-tech, high-value-added industries that produce the manufactures that Asia requires. Manufacturers' capital goods orders are 38% below the 1999 peak after taking inflation into account. And venture capital allocations for high-tech manufacturing have dried up.

Monday, November 26, 2012

Some dim analysts still don't get gold is a currency Dept:

Turkey Swaps Gold for Iranian Gas

Loophole in Western Sanctions Allows Iran to Buy Gold in Turkey With Turkish Payments for Gas Imported From Iran

ISTANBUL—Turkey on Friday acknowledged that a surge in its gold exports this year is related to payments for imports of Iranian natural gas, shedding light on Ankara's role in breaching U.S.-led sanctions against Tehran.
The continuing trade deal offers the most striking example of how Iran is using creative ways to sidestep Western sanctions over its disputed nuclear program, which have largely frozen it out of the global banking system.
Iran provides 18% of Turkey's natural gas and 51% of its oil. But since U.S. and European Union sanctions ban Tehran from receiving payments in dollars or euros, Ankara pays Iran for the gas in Turkish liras. The lira is of limited value for buying goods on international markets but ideal for purchasing Turkish gold. The government hasn't specified how it pays for Iranian oil.
"In essence, gold exports [to Iran] end up like payments for our natural gas purchases," Mr. Babacan said. "Turkey is depositing the payment for the gas we purchase from Iran to Iran's account in Turkey…I don't know exactly how they then transfer it," he said.

gold atm uae
The Burj Khalifa has unveiled two gold-dispensing ATMs, the first of several such machines that will begin selling gold bars in Dubai during the next few weeks. One of the ATMs is housed on the 124th floor of the building, the At The Top observation deck; the other is in the souvenir shop on the ground floor. Photo –


Indian household savings used to buy gold: RBI

High inflation and a penchant for gold appears to have impacted household savings behaviour, which is likely to have implications for overall investment and economic growth, says India's apex bank.

India's apex bank, the Reserve Bank of India, has once again turned the spotlight on the citizens craze for gold and, in its inimitable style, has dealt a back-handed compliment to the earning potential of gold. The bank has said there is a need to contain risks in gold prices and housing as they seem to be running way ahead of inflation.
Over the last two years, housing prices have climbed between 16% to 25%, while gold has risen at a faster pace between 14% to 40%. In its Annual Report for 2011-12, released Thursday evening, the bank has said, ``These two markets (housing and gold) have not only provided effective inflation hedges, but also enabled savers to earn good real returns amidst high inflation.''

China to Use Gold to Purchase Oil from Iran

Sources in global news and Iran are reporting that China will bypass the June 2012 Iran oil sanctions by purchasing oil from Iran using gold. So much for gold now being money because this transaction basically says that China and Iran believe gold is money.
Personally, I don’t think gold has it’s best use as a transactional currency and is better served as a wealth reserve, but this recent effort to bypass UN sanctions is more about dollar reserve status and U.S. political control. People need oil and countries can negotiate cheaper prices uses barter and gold. Sanctions will never stop this from occurring.
In the past few years, many of the BRIC countries (Brazil, Russia, India and China) have agreed to bilateral trade agreements that do not use the dollar. The addition of gold for oil deals further decreases dollar usage. In other words, this is another wound for the dollar in its battle to maintain its world currency reserve status.

Saturday, November 24, 2012

Where is Gold Headed?

I can tell the future: Just look what's in your hand.

It may not be true for certain individuals.  Some individuals work hard and are full of brilliant insight, and they change their cicumstances.

It may not always be true for every institution.  Very occasionally an institution will fall into the hands of a few energetic visionaries who are capable of altering its course.

Once in a blue moon it might not be entirely true of a country.  Sure after a total economic collapse, or the deposing of a horrible tyrant, or the devastation of war, there's nothing in your hand, so the future must be written.  Other than that try to think of an instance of a voluntarily adopted dramatic change of course.

But when you're talking about a Global Economy dependent on many countries and countless institutions, the possibility of a true change of direction without the condition of total economic collapse is inconceivable.

Gold is the measure of effectiveness of the Global Economy.   

Gold is going up as Global Economic Debt and Corruption are going up.

Debt naturally compounds because of debt interest - and because of the financial institutions that are dependent on debt for growth.  

Corruption naturally compounds like a virus as it seeps into the consciousness of everyone it touches.

Gold is the only currency that holds no debt and can not be printed and distributed to a favored class.

Now, most pundits will bloviate endlessly about valuation models, relative strength indicators, historic valuations, wave theory, moving averages, sentiment indicators, the psychology of crowds, etc. etc.

Sure, on a nano-second basis these might possibly make some sense to someone.

But the Wheel of History is turning, and nothing will stop it but bottomless chasm.

Monday, November 19, 2012

A concrete poem:

"Our Debt Interest Payment." 




"Today, even at these low interest rates, we're
spending about $230 billion a year on


That's more than we spend at the
Department of Commerce, Department of
Education, Energy, Homeland Security, Interior, Justice, State.... 



And, Maria, if we do nothing, by the year 2020, we'll
be spending over a trillion dollars a year on
interest cost alone. 


That's a trillion dollars we
can't spend in this country to educate our
kids or to rebuild our infrastructure or to do
high value-added research.... 


And, unfortunately, it is a trillion dollars that's
gonna be spent principally in those countries
that we're borrowing from.


You know, that means we’ll be building the infrastructure in


It means we'll be educating those kids
over there. And it means we'll be building
their universities, so the research is done
over there, so the next new thing is created
over there.


So the jobs of the future are there.

Not here."

Sunday, November 18, 2012

Get ready for the fiscal slope

So much talk about the fiscal "cliff."  Very dramatic, like the "ticking clock," in a trite action movie.  Of course, as the second hand ticks towards zero the Hero (Our Government) will close its eyes and pull the green wire, just in time to avert the nuclear meltdown.


Only in real life all that means is no debt will actually be paid down.   No meaningful spending cuts will be made.  And not significant tax reform will be offered.


There is no fiscal cliff.  There is just a fiscal slope, heading slowly downward, toward the depths of gradual global depression.

Along the way, governments will print money like crazy and throw it to the Banks who will gobble it up and use it to buy risk assets.

And as they do, real goods: food, energy, rents, schooling, health care, heat, water (Everything excluded from Government inflation statistics) will get ever more expensive.

And if it's managed properly, the Fiscal Slope will be gradual enough so that nobody really notices - except those who slip below the poverty line and slowly freeze and starve.  But they will be few enough - at first - that nobody else will care.

And then - much much farther down the slope - there will be enough of them. 

And then we will see something much more resembling a cliff.

Until then, protect yourself against the inevitable.  No matter how slowly it creeps.

Wednesday, November 14, 2012

Thank God it Could Never Happen Here Dept:

Europe Hit by Wave of Austerity Protests

World | November 14, 2012, Wednesday| 157 views
Bulgaria: Europe Hit by Wave of Austerity Protests
Students walk in a row on A6 Highway in Madrid, Spain, during the general strike called 14 November 2012 in Europe. Photo by EPA/BGNES
Workers across the European Union are expected to take to the streets on Wednesday in a series of protests and strikes against rising unemployment and austerity measures.

Strikes are expected in Spain, Greece, Portugal and Italy, with other protests planned in Belgium, Germany, France and some eastern EU states.

Greece Protests Turn Violent

Reuters  |  Posted: Updated: 11/08/2012 5:09 am EST

Greece Protests Violence
A protester holds a Greek flag during a demo in front of the parliament in Athens on Wednesday Nov. 7, 2012. (AP Photo/Lefteris Pitarakis)

Watch LIVE footage from the protests here.

By Renee Maltezou and Lefteris Papadimas

ATHENS, Nov 7 (Reuters) - Greek police fired teargas and water cannons to disperse thousands of protesters who flooded into the main square before parliament on Wednesday in a massive show of anger against lawmakers due to narrowly pass an austerity package.

The violence erupted as a handful of protesters tried to break through a barricade to enter parliament, where Prime Minister Antonis Samaras is expected to barely eke out a win for the belt-tightening law despite opposition from a coalition partner.

In all, nearly 100,000 protesters - some chanting "Fight! They're drinking our blood" - packed the square and side streets in one of the largest rallies seen in months, police said.
US preparing for unrest, martial law: Ron Paul
Sun Aug 21, 2011 4:29PM

U.S. Republican presidential candidate Ron Paul says that the federal government is preparing for civil unrest and martial law in the United States.


Ron Paul has recently said that H.R. 645 (The National Emergency Centers Establishment Act) could lead to Americans being incarcerated in detention camps during a time of martial law, Infowars reported on August 20.


“Yeah, that's their goal, they're setting up the stage for violence in this country, no doubt about it,” responded Paul.


The National Emergency Centers Act or HR 645, first introduced in January 2009, mandates the establishment of “national emergency centers” to be located on military installations for the purpose of providing “temporary housing, medical, and humanitarian assistance to individuals and families dislocated due to an emergency or major disaster,” according to the bill.


The legislation also states that the camps will be used to “provide centralized locations to improve the coordination of preparedness, response, and recovery efforts of government, private, and not-for-profit entities and faith-based organizations.”


The bill also states that the camps can be used to “meet other appropriate needs, as determined by the Secretary of Homeland Security,” an open ended mandate which many fear could mean the forced detention of American citizens in the event of widespread rioting after a national emergency or total economic collapse.


The legislation was referred to committee and did not proceed any further, but it was not rejected in a vote and can be re-introduced at any time in a new session of Congress.

Europe Protests Austerity With Strikes in Spain, Italy

Andres Kudacki/AP Photo
Protesters shout as riot police stand guard during a general strike in Madrid, Spain, on Nov. 14, 2012.
Spanish workers staged a second general strike this year as unions across Europe prepared the biggest coordinated protests yet against budget cuts that policy makers say are needed to end the region’s debt crisis.
In Spain, unions said most auto and metal workers joined the strike, even as power demand was just 13 percent below usual. One of Portugal’s two biggest labor groups also called a strike, partial walkouts are planned in Greece and Italy, and French unions are urging workers to join protest marches.
Opposition to Prime Minister Mariano Rajoy’s cuts in health, education and welfare benefits is growing while those measures are failing to rein in the budget deficit or bring down borrowing costs. Demands for less austerity are gaining traction as the International Monetary Fund recommends nations including Spain slow the pace of budget cuts.
“This is a strike against the suicidal economic policies of the government,” Ignacio Fernandez Toxo, head of Spain’s CCOO union, told supporters late yesterday.
Rajoy, who won a landslide election victory a year ago, is wrestling with the second-largest budget deficit in the euro region while trying to revive the economy from a five-year slump that pushed the jobless rate to 26 percent. He is trying to avoid following Portugal, Greece and Ireland into seeking a sovereign bailout as Spaniards resist the measures being implemented as a condition for the 100 billion-euro European bank rescue he agreed to in June.

Bank Outrage

Unions, which staged two general strikes in the decade through 2010, have called as many walkouts since Rajoy took office as they tap into taxpayer anger at shouldering cuts and the cost of rescuing banks at the same time. As outrage also grows over Spaniards losing their homes for failing to keep up with mortgage payments, Rajoy pledged last week to rush through measures to prevent families being evicted.

Tuesday, November 13, 2012

Fall/Winter Auction Update Continued

As the fall to winter coin auction schedule heats up, the biennial NGSA auction will close out November with its usual lineup of rarities and condition rarities from ancient Greek to medieval European to modern Asian.  The Parisii Stater pictured above is perhaps the finest known of this sought after issue.  Bids start at 75,000 CHF (swiss francs) which amounts to close to $100,000 dollars all in.

As is so often the case now with top auctions there is also a selections of beautiful medals like that of Louis XIV celebrating his martial victories by J. Rottiers, pictured below.  This medal starts to 80,000 CHF.

Obviously, an auction like this appeals to - and caters to - collector/investors at the highest end.  Few pieces will be acquired for dealer stock, and fewer still by speculators wishing to flip for a quick profit.  This is an auction for those who wish to acquire pieces of the highest rarity that can be considered hard assets that will certainly appreciate over time - as long as there is no need to liquidate. 

As always, it will be interesting to see how high the high end investors are willing to push the top pieces.   Just as it will be interesting to see which areas will be most benefited by the mass psychology and which areas will present real opportunities.

At anyone can see the entire lineup of fall/winter auctions.  Of course, there are many auctions running coins and medals that are far more accessible to the common collector.  Because of the internet everyone now has access to almost everything being offered for sale at any time.  One might think that would democratize the  process of acquiring these hard assets.  But in practice the magnitude of accessible offerings creates interesting distortions that tend to benefit the same small group of knowledgeable participants.