Posted at 11:45 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The latest from John Williams’ www.ShadowStats.com.

- Retail Sales Collapse Continued, Both Monthly and Quarterly, Before and After Inflation
- Unusual Monthly Shifts in Seasonal Adjustments Have Masked Headline Monthly Sales Contractions Exceeding 1% (-1%)
- Underlying Economic Data Closing in on Setting a First-Quarter 2015 GDP Contraction
- U.S. Economy Cannot Support Current Dollar and Stock-Market Strength; Political and Market Positioning of Fed Policy Increasingly Is Untenable

"No. 703: February Nominal Retail Sales and U.S. Dollar, Fed and Markets "
Web-page: http://www.shadowstats.com

 

China Completes SWIFT Alternative, May Launch "De-Dollarization Axis" As Soon As September
Submitted by Tyler Durden on 03/09/2015 23:16 -0400

One of the recurring threats used by the western nations in their cold (and increasingly more hot) war with Russia, is that Putin’s regime may be locked out of all international monetary transactions when Moscow is disconnected from the EU-based global currency messaging and interchange service known as SWIFT (a move, incidentally, which SWIFT lamented as was revealed in October when we reported that it announces it "regrets the pressure" to disconnect Russia).

Of course, in the aftermath of revelations that back in 2013, none other than the NSA was exposed for secretly ‘monitoring’ the SWIFT payments flows, one could wonder if being kicked out of SWIFT is a curse or a blessing, however Russia did not need any further warnings and as we reported less than a month ago, Russia launched its own ‘SWIFT’-alternative, linking 91 credit institutions initially. This in turn suggested that de-dollarization is considerably further along than many had expected, which coupled with Russia’s record dumping of TSYs, demonstrated just how seriously Putin is taking the threat to be isolated from the western payment system. It was only logical that he would come up with his own.

There were two clear implications from this use of money as a means of waging covert war: i) unless someone else followed Russia out of SWIFT, its action, while notable and valiant, would be pointless – after all, if everyone else is still using SWIFT by default, then anything Russia implements for processing foreign payments is irrelevant and ii) if indeed the Russian example of exiting a western-mediated payment system was successful and copied, it would accelerate the demise of the Dollar’s status as reserve currency, which is thus by default since there are no alternatives. Provide alternatives, and the entire reserve system begins to crack.

Today, we got proof that it is the second outcome that is about to prevail following a Reuters report that China’s international payment system, known simply enough as China International Payment System (CIPS), which serves to process cross-border yuan transactions is ready, and may be launched as early as September or October.

According to Reuters, the launch of the will remove one of the biggest hurdles to internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.

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Jim Sinclair’s Commentary

Now the algos are going nuts in the currency market.

FX Volatility Spikes As More Countries Enter Currency Wars; Euro Surges On Furious Squeeze After Touching 1.04
Tyler Durden on 03/12/2015 06:57 -0400

The global currency wars are getting ever more violent, following yesterday’s unexpected entry of Thailand and South Korea, whose central banks were #23 and #24 to ease monetary conditions in 2015, confirming the threat of a global USD margin call is clear and present (see "The Global Dollar Funding Shortage Is Back With A Vengeance And "This Time It’s Different"). But the one currency everyone continues to watch is the Euro, which the closer it gets to parity with the USD, the more volatile it becomes, and moments after touching a 1.04-handle coupled with the DXY rising above 100 for the first time in 12 years, the EURUSD saw a huge short squeeze which sent it nearly 150 pips higher to 1.0643, before the selling resumed.

Indeed, FX markets have been the main source of focus so far with once again the USD-index being the main source of price action. Overnight, the USD posted a fresh 12yr high after briefly breaking above the key 100.00 level, sending EUR/USD below 1.0500 for the first time since Jan’03. However, heading into the European open and a failed sustained break of 100.00 for the USD-index, the USD saw a bout of weakness which subsequently provided a lift to its major counterparts with EUR/USD and GBP/USD temporarily breaking back above 1.0600 and 1.5000 respectively, with RANsquawk sources noting Asian buyers in EUR/USD. One wonders if the BOJ is now also intervening on behalf of the ECB when things gets serious. However, this momentum for EUR/USD failed to sustain at the USD-index pared some of its initial losses, while GBP remained at its highs after the latest UK trade balance report showed a narrower deficit than expected. Elsewhere, NZD has held onto its gains after the RBNZ struck a less-dovish than expected tone, after leaving rates unchanged at 3.5%, as expected.

And since the ECB is all anyone can talk about these days, it is worth noting that the central bank bought €9.8 billion in eurozone bonds in the first according to Benoit Coeure. "We have already bought 9.8 billion euros in bonds in three days” Coeure said at a symposium in Paris. He said the ECB was on “precisely the right path” to attain its objective of buying 60 billion euros of eurozone government and corporate bonds a month. Coeure said the average maturity of the debt was close to nine years, which he called “very long” and which he said should “reinforce the economic effect of the intervention” by the central bank as the ECB’s injection of funds into the eurozone economy would last longer.

So if under €9 billion in ECB purchases brought the 10Y Bund to a record low 0.20%, one wonders where another €993 or so billion will take it?

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Jim Sinclair’s Commentary

To our Canadian friends, welcome to the new normal.

Canadian Man Arrested For Refusing to Unlock His Smart Phone During Airport Check

A few days ago, a 38-year old Canadian man was topped while passing through routine security at Halifax Airport, Nova Scotia.

During the check, the guard demanded to know the “passcode” for his Blackberry smart phone.

The man refused, insisting that the contents of his phone was “personal”.

Thus began a very “bad day at the office” for him.

Let’s just say that he will have had better days.

It turns out, that Alain Philippon from Ste-Anne-des-Plaines, Quebec, in refusing to unlock his smart phone for officers of the Canada Border Services Agency (CBSA), when they insisted on carrying out an “in-depth security screening”, was committing a crime, under Canada’s new, draconian “Custom Act”.

Philippon was apparently “obstructing officers in the course of their duties”.

He was formally charged, had his smart phone confiscated, and was summonsed to appear in court in May.

A spokesperson for the CBSA later told Associated Free Press, that :

“Philippon refused to divulge the passcode for his cell phone, preventing border services officers from performing their duties”

Also adding, that under Section 153.1 (b) of the Customs Act, officials were authorized to search …

“all goods and conveyances, including electronic devices such as cell phones and laptops.”

In a subsequent written statement, which the CBSA emailed to CBC television.

In part it read as follows:

“Officers are trained in examination, investigative and questioning techniques … To divulge our approach, may render our techniques ineffective. Officers are trained to look for indicators of deception, and use a risk management approach in determining which goods may warrant a closer look.”

So it would appear, that in the wake of the Custom Act, the mere “suspicion” on the part of any officer, is now deemed as sufficient grounds to warrant such invasion of privacy.

The term “on what grounds”, now no longer carries any weight it would seem. There need be no “grounds” at all.

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Jim Sinclair’s Commentary

This might serve as a warning to the hoard of Terrorist Internet Trolls who populate the chat site and bulletin boards of our new computer age for the singular purpose of stock manipulation.

Bill Ackman Faces FBI Probe Over Possible Herbalife Stock Manipulation
Submitted by Tyler Durden on 03/12/2015 18:05 -0400

Herbalife stock is up over 5% after hours after WSJ reports Bill Ackman (among others) made false statement about Herbalife’s business models to regulators – in order to spur investigations into the company and lower its stock price. This comes just months after Ackman kinda-sorta-didn’t-really insider-trade in the Allergan ‘scam’ that we detailed here. We suspect Whitney Tilson (and his Lumber Liquidators positions) is getting a little nervous now.

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As The Wall Street Journal reports,

Federal prosecutors and the Federal Bureau of Investigation are probing potential manipulation of Herbalife Ltd. stock and have interviewed people hired by hedge-fund billionaire William Ackman, who has led a long-running campaign against the nutritional-products company, people familiar with the matter said.

Prosecutors in the Manhattan U.S. attorney’s office and New York field office of the FBI have conducted interviews and sent document requests in recent months in connection with the investigation, which is looking into whether people, including some hired by Mr. Ackman, made false statements about Herbalife’s business model to regulators and others in order to spur investigations into the company and lower its stock price, the people said. Mr. Ackman’s firm, Pershing Square Capital Management LP, has made a huge bet on Herbalife shares declining.

One of the people familiar with the matter said investigators are scrutinizing public statements and allegations relayed to regulators by the array of consultants and activists who have lobbied against Herbalife as well as any connections or potential collaboration between those people and Pershing Square.

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Why The Dollar Is Rising As The Global Monetary Bubble Craters
by David Stockman • March 12, 2015

Contra Corner is not about investment advice, but its unstinting critique of the current malignant monetary regime does not merely imply that the Wall Street casino is a dangerous place for your money. No, it screams get out of harms’ way. Now!

Yet I am constantly braced with questions about the US dollar and its impending demise. The reasoning seems to be that if America is a debt addicted dystopia—-and it surely is—- won’t the US dollar sooner or later go down in flames as the day of reckoning materializes? Won’t you make money shorting the doomed dollar?

Heavens no!  At least not any time soon. The reason is simply that the other three big economies of the world—Japan, China and Europe—are in even more disastrous condition. Worse still, their governments and central banks are actually more clueless than Washington, and are conducting policies that are flat out lunatic—–meaning that their faltering economies will be facing even more destructive punishment from policy makers in the days ahead.

Indeed, Draghi, Kuroda and the commissars of red capitalism in Beijing make Janet Yellen and Stanley Fischer (Fed Vice-Chairman) appear to be slightly sober. So as trite as it sounds, the US dollar is the cleanest dirty shirt in the laundry. And on a relative basis, its is going to look even cleaner as two decades of monetary madness around the world finally hit the shoals.

You have to start with a stark assessment of the other three major economies.To hear the Wall Street analysts and economists tell it, Japan, China and Europe are just variants of the US economy with different mixes of pluses and minuses, experiencing somewhat different stages of the economic cycle and obviously shaped by their own diverse brands of domestic politics and economic governance. Yet despite these surface difference, the non-US big three economies are held to be just part of a global economic convoy heading for continued economic growth, rising living standards and higher stock market prices.

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Jim Sinclair’s Commentary

GOTS.

Greece Passes Law To Plunder Pension Funds
Submitted by Tyler Durden on 03/12/2015 13:47 -0400

Having previously hinted that they might ‘dip’ into public pensions funds for some short-term cash to payback The IMF, and then confirming that the plan is to repo that cash from pension cash reserves (raising concerns about how they will unwind the repo – i.e. pay it back); the Greek government finally signed the bill today that enables them to plunder the Greek people’s pension funds (for their own good).The massive irony of this bill is the bill enables greek deposits to be fully invested in Greek sovereign bonds… which Tsipras and Varoufakis both admitted today is "unsustainable" and "will never be repaid."

*GREEK GOVT SUBMITS BILL, ALLOWING USE OF PENSION FUND RESERVES

As Bloomberg reports,

Cash reserves of pension funds and other public entities kept in Bank of Greece deposit accounts can be fully invested in Greek sovereign notes, according to amendment to be submitted in parliament, country’s finance ministry says in e-mailed statement.

Cash reserves can be used for repos, reverse repos, buy and sell-back, sell and buy-back transactions

Pension funds, public entities will be able to claim damages from Greek state in case of overdue repayment, partial repayment

Pension funds are not obliged to transfer their reserves to the Bank of Greece, according to finance ministry statement

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Jim Sinclair’s Commentary

Darn that weather again.

Sales Fall as Record Cold in Parts of U.S. Hurts Retailers
byBloomberg News
March 12, 2015

(Bloomberg) — Record cold in parts of the U.S. chilled retail sales in February as the world’s largest economy began the year on weak footing.

Purchases unexpectedly dropped 0.6 percent, a third consecutive decline, Commerce Department figures showed Thursday in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 0.3 percent gain. The decrease was broad-based, with 9 of 13 major categories retreating.

Frigid temperatures and snow probably contributed to slumping demand at auto dealers, building-material merchants and department stores, opening the possibility for a rebound this month. Still, sluggish wage increases may also be playing a role by prompting Americans to use the windfall from cheaper gasoline to build up savings or pay down debt.

“It looks like a big weather effect here,” said Carl Riccadonna, Bloomberg Intelligence chief U.S. economist, noting the declines in weather-sensitive categories including apparel, restaurants, building materials and vehicles. “A lot of February data is going to look muddy. This is just a blip. The consumer is just fine.”

Other reports Thursday showed fewer Americans than forecast filed claims for jobless benefits last week, and the cost of imported goods rose in February as fuel prices rebounded.

Stock-index futures climbed, after equities had their biggest two-day selloff in six weeks, as financial companies rose and investors weighed the retail sales data. The contract on the Standard & Poor’s 500 Index maturing this month increased 0.5 percent to 2,050.4 at 9:09 a.m. in New York.

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Jim Sinclair’s Commentary

You think the EU is waking up to being had? They certainly benefitted the US Dollar by crushing the Euro.

Spain: Russia sanctions ‘beneficial for no one’
By ANDREW RETTMAN
BRUSSELS, 10. MAR, 14:59

Spain on Tuesday (10 March) joined a list of EU countries which are publicly critical of Russia sanctions and keen to mend ties.

The Spanish foreign minister, Jose Manuel Garcia-Margallo, told press in Moscow after meeting his Russian counterpart, Sergei Lavrov, that “keeping or lifting sanctions depends on whether the agreements on Ukraine are being implemented or not. They [sanctions] are beneficial for no one”.

Referring to the recent “Minsk” ceasefire accord, he added: "The Minsk agreements are [being] observed, there’s good news, [heavy] weaponry is being withdrawn … so, I don’t see [any reason for] expanding sanctions”.

He also noted that Russia’s counter-ban on EU food imports is hurting the Spanish economy and said the EU must take Russia’s interests into account in its relations with Ukraine.

“Sanctions are inflicting great damage to the Spanish economy … We have big losses, especially in the agriculture sector”, he said.

“I think that we need to somehow include Russia’s interests in the association agreement between Ukraine and the European Union – this agreement needs to be complemented by co-operation with Russia.”

For his part, Lavrov told media: “We did not discuss sanctions, they were not our choice. We are not going to persuade or ask our European friends about anything. Life will arrange everything back to order.”

He added, however: “I would appreciate and prefer a situation where each EU member country would be guided by its national interests.”

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Jim Sinclair’s Commentary

Yes, but are you sure they want it?

Could Europe lose Greece to Russia?
By Giorgos Christides

Deepening ties between Greece’s new government and Russia have set off alarm bells across Europe, as the leaders in Athens wrangle with international creditors over reforms needed to avoid bankruptcy.

While Greece may be eyeing Moscow as a bargaining chip, some fear it is inexorably moving away from the West, towards a more benevolent ally, a potential investor and a creditor.

Europe is not pleased. Should it also be worried?

Worst kept secret

A drove of Greek cabinet members will be heading to Moscow.

Prime Minister Alexis Tsipras will be hosted by Russian President Vladimir Putin in May, accompanied by coalition partner Panos Kammenos, defence minister and leader of the populist right-wing Independent Greeks party.

The timing has not escaped analysts.

Greece’s bailout extension expires at the end of June and the worst kept secret in Brussels is that Athens will need new loans to stay afloat.

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TOO MANY DOLLARS AND YET NOT ENOUGH…AT THE SAME TIME?
Author : Bill Holter
Published: March 12th, 2015

We have watched, even marveled at how the U.S. dollar has strengthened since last September.  All sorts of theories have been put forth as to "why".  Some have proffered the dollar is the cleanest dirty shirt of the bunch.  Others believe the interest rate differential is kicking in where dollars at least have a positive interest rate versus negative rates elsewhere.  Another theory and one which I have written about in the past and believe to be the main reason for dollar strength is the "margin call" aspect.  In other words, the "carry trade" which was used to leverage all sorts of trades is unwinding and dollars are needed to pay back the loans.  A synthetic dollar short being covered in other words.

  Looking back to my writing yesterday regarding the impossibility in my mind of the Fed actually raising rates, the strong dollar also supports this argument.  If the Fed were to raise rates, wouldn’t this exacerbate an already immense currency cross problem with (for) the rest of the world?  Wouldn’t higher U.S. rates explode the dollar higher (short term) versus foreign currencies?  The answer of course is yes, but with a stronger dollar comes other obvious problems.

  The two biggest problems are A.  we still have a trade deficit of close to $500 billion per year, a stronger dollar will only exacerbate this AND destroy what little manufacturing we have left.  And B.  the very problems we just saw with a soaring Swiss franc will be seen in many multiples throughout the dollar lending market.  I might add, as the dollar moves higher and foreign currencies drop, more and much stronger inflation gets exported to foreign soil.  High and rising inflation and its effects on living standards and the human psyche will create massive unrest across Europe and elsewhere.

  This last point is an important one, foreigners who have borrowed in dollars have already seen their "loan balance" expand because the dollars cost more to pay back.  Higher U.S. interest rates will only make matters worse.  The strong dollar has had the effect of slowing the global economy as companies (and individuals) are cutting back (employment and consumption) to make ends meet.

  The above is only half of the equation, the other half is described by Alan Greenspan himself.  I personally watched Mr. Greenspan speak in New Orleans last October.  He used the word "tinder" http://www.zerohedge.com/news/2015-03-09/alan-greenspan-warns-explosive-inflation-tinderbox-looking-spark  for a coming inflation several times and spoke of the money supply and reserves of dollars that have been created and parked away on bank balance sheets.  I could only think back to the Texas wildfire as he spoke of "tinder".  The amount of dollars created is like some nutcase piling dry leaves, branches and dead trees in a huge pile, then pouring gasoline on it …and thinking to himself, "this will keep me warm in winter".  In other words, the "fuel" is there and has already been created for a bonfire of inflation and the financial system blowing up on itself.  But don’t worry, it will never catch fire?

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Posted at 11:55 AM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

Do you think that some people in high places are becoming concerned about war in Europe?

Ukraine’s NATO Membership Should Be Off the Table – Brzezinski
02:51 10.03.2015

WASHINGTON (Sputnik) — The United States should make an arrangement with Russia ensuring that even if Ukraine becomes a member of the European Union, it will not become a member of NATO, former US National Security Advisor Zbigniew Brzezinski said at a Monday conference at the Center for Strategic and International Studies

“We [the United States] should also indicate to Russia that we favor… and expect that Ukraine’s eventual place as a genuine European country, democracy, member of the EU, will not entail membership in NATO,” Brzezinski said.

Brzezinski argued that the United States should make the arrangement with Moscow in order to “cool down the crisis and return to some degree of normalcy.”

Such an arrangement would serve the interests of the Ukrainian people and would represent a step forward in the evolution of Europe “without war,” he added.

Brzezinski explained that “one cannot expect the Russians to be altogether indifferent to the notion” of Ukraine joining the alliance. Noting similarities in the proximity of Ukraine and Russia to Canada and the United States, he said it is “It’s almost identical.”

Ukraine’s leadership proposed that the country join NATO in recent months, and drop its non-aligned status. Accession to NATO requires unanimous approval by all 28 members of the Alliance.

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Jim Sinclair’s Commentary

Did anyone actually think otherwise?

Varoufakis unsettles Germans with admission Greece won’t repay debts

BERLIN (Reuters) – Greek Finance Minister Yanis Varoufakis has described his country as the most bankrupt in the world and said European leaders knew all along that Athens would never repay its debts, in blunt comments that sparked a backlash in the German media on Tuesday.

A documentary about the Greek debt crisis on German public broadcaster ARD was aired on the same day euro zone finance ministers met in Brussels to discuss whether to provide Athens with further funding in exchange for delivering reforms.

"Clever people in Brussels, in Frankfurt and in Berlin knew back in May 2010 that Greece would never pay back its debts. But they acted as if Greece wasn’t bankrupt, as if it just didn’t have enough liquid funds," Varoufakis told the documentary.

"In this position, to give the most bankrupt of any state the biggest credit in history, like third class corrupt bankers, was a crime against humanity," said Varoufakis, according to a German translation of his comments.

It was unclear when the program was recorded.

Although strident criticism of the way Greece has been treated is typical for Varoufakis, a Marxist economist, the remarks caused a stir in Germany where voters and politicians are increasingly reluctant to lend Greece money.

Bild daily splashed the comments on the front page and ran an editorial comment urging European leaders to stop providing Greece with ever more financial support.

"The Greek government is behaving as if everyone must dance to its tune. But there must be an end to this madness. Europe must not be made to look stupid," wrote a commentator.

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Former SEC Director Admits The Truth: The Market Is Rigged
Tyler Durden on 03/10/2015 23:03 -0400

For more than a decade, John Ramsay kept his mouth shut about how rigged the US equity market was.

As SEC Director of Trading & Markets, Ramsay tells Bloomberg he "had red tape over his mouth," but now he is "uncorked."

“I’ve been able to find my voice on these issues in a way I couldn’t have done when I was in the government, because you’re always limited by internal politics and not wanting to get too far out in front of the agency,” he said. “I feel like I’ve been a little bit uncorked.”

Having joined Brad Katayama’s IEX Group (infamous for the Flash Boys’ exposure), Ramsay  is calling out the “convoluted” and "illogical" pricing rules of major stock exchanges and compared the $25 trillion U.S. stock market’s structure to the Death Star of "Star Wars."

It will be hard for current regulators to shrug off Ramsay’s comments,

“He’s a guy who accomplished a lot and doesn’t have anything to prove,”said James Burns, who worked with Ramsay at the SEC and is now a partner at the law firm Willkie Farr & Gallagher LLP.

Ramsay helped the SEC hammer out the post-crisis Volcker Rule, which bans government-insured banks from gambling with depositors’ money. The rule has an exemption — it allows banks to continue “making markets,” or standing ready to buy or sell stocks and bonds from customers. Financial regulators initially clashed over that exemption, with banking agencies fretting that the language would open loopholes for Wall Street to exploit.

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Jim Sinclair’s Commentary

An audit is no better than the independence of the auditing firm. If the government audits the Fed, the effect is net zero.

The Fed Under Fire
Barry Eichengreen
Wednesday 11 March 2015 06.57 EDTLast modified on Wednesday 11 March 2015 08.43 EDT

The Federal Reserve is under attack. Bills subjecting the United States’ central bank to “auditing” by the government accountability office are likely to be passed by both houses of Congress. Legislation that would tie how the Fed sets interest rates to a predetermined formula is also being considered.

Anyone unaware of the incoming fire only had to listen to the grilling Fed Chair Janet Yellen received recently on Capitol Hill. Members of Congress criticized Yellen for meeting privately with the president and treasury secretary, and denounced her for weighing in on issues tangential to monetary policy.

Still others, like Richard Fisher, the outgoing president of the Dallas Fed, have inveighed against the special role of the Federal Reserve Bank of New York. Reflecting the New York Fed’s heavy regulatory responsibilities, owing to its proximity to the seat of finance, its president has a permanent seat on the Federal Open Market Committee, the body that sets the Fed’s benchmark interest rate. This, its detractors warn, privileges Wall Street in the operation of the Federal Reserve System.

Finally, some object that bankers dominate the boards of directors of the regional Reserve Banks, making it seem that the foxes are guarding the henhouse.

This criticism reflects the fact that the United States has just been through a major financial crisis, in the course of which the Fed took a series of extraordinary steps. It helped bail out Bear Stearns, the government-backed mortgage lenders Freddie Mac and Fannie Mae, and the insurance giant AIG. It extended dollar swap lines not just to the Bank of England and the European Central Bank but also to the central banks of Mexico, Brazil, Korea, and Singapore. And it embarked on an unprecedented expansion of its balance sheet under the guise of quantitative easing.

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Posted at 6:06 PM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

I would add to this it is a perfect time if you are sadistic, Chair Yellen.

Recession Alarm: Wholesale Sales Plunge Alongside Factory Orders, Worst Since Lehman
Submitted by Tyler Durden on 03/10/2015 10:13 -0400

For the first time since Lehman, Wholesale Trade Sales dropped for a 3rd month in a row in January. Plunging 3.1% MoM (against -0.5% expectations), this is the biggest drop since March 2009. Excluding auto sales, wholesale sales fell 3.5%. Wholesale inventories rose 0.3% (beating expectations) with only a very modest -0.1% drag from oil.

This has sent the inventory-to-sales ratio soaring as the "Field Of Dreams" economy is back – but as one wise trader noted, we are now 10bps higher in inventory/sales than when we entered the recession in Dec 2007.

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But the punchline is the following chart showing the annual change of Wholesale Trade Sales. It does not need much explanation:

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It certainly puts the chart of the Factory Orders in much better context:

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China Completes SWIFT Alternative, May Launch "De-Dollarization Axis" As Soon As September
Tyler Durden on 03/09/2015 23:16 -0400

One of the recurring threats used by the western nations in their cold (and increasingly more hot) war with Russia, is that Putin’s regime may be locked out of all international monetary transactions when Moscow is disconnected from the EU-based global currency messaging and interchange service known as SWIFT (a move, incidentally, which SWIFT lamented as was revealed in October when we reported that it announces it "regrets the pressure" to disconnect Russia).

Of course, in the aftermath of revelations that back in 2013, none other than the NSA was exposed for secretly ‘monitoring’ the SWIFT payments flows, one could wonder if being kicked out of SWIFT is a curse or a blessing, however Russia did not need any further warnings and as we reported less than a month ago, Russia launched its own ‘SWIFT’-alternative, linking 91 credit institutions initially. This in turn suggested that de-dollarization is considerably further along than many had expected, which coupled with Russia’s record dumping of TSYs, demonstrated just how seriously Putin is taking the threat to be isolated from the western payment system. It was only logical that he would come up with his own.

There were two clear implications from this use of money as a means of waging covert war: i) unless someone else followed Russia out of SWIFT, its action, while notable and valiant, would be pointless – after all, if everyone else is still using SWIFT by default, then anything Russia implements for processing foreign payments is irrelevant and ii) if indeed the Russian example of exiting a western-mediated payment system was successful and copied, it would accelerate the demise of the Dollar’s status as reserve currency, which is thus by default since there are no alternatives. Provide alternatives, and the entire reserve system begins to crack.

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“TRUST” and JOHN EXTER’S PYRAMID
Author : Bill Holter
Published: March 10th, 2015

I hesitated yesterday to write about HSBC allegedly deciding to close their London Gold vaults because as of yet, we still do not have public confirmation.  As you know by now, Andrew Maguire made the allegation and Ned Naylor-Leyland tweeted several times over the weekend.  Gerald Celente followed with King World News and also made comments.  It is not my intention to be long winded on this subject because even if true, it is only a small chapter in John Exter’s debt pyramid theory which is what I would like to talk about today.  Specifically, the role of gold and “why”.  If true, it would however be a very important clue signaling something has changed in the London gold market.

Briefly, if Andrew’s HSBC news is true, more questions are raised than are answered.  As for the several theories I have heard, some believe the short notice of only two months would be a way for HSBC to cash settle some customers and obtain some gold.  It is believed in this manner, HSBC might be able to cover some of a short gold position.  I find several problems with this whole thing.  First, wouldn’t some of the customers have paid storage (in advance) for positions being held?  Could HSBC just break a contract on their own?  Could HSBC really tell GLD they have only two months to move their metal?  If I were a director of GLD, my fiduciary responsibility would point me toward engaging lawyers to put a retraining order to buy enough time to ensure an orderly and safe transfer.  My next thought would certainly be that of a complete audit!

Another thought of mine is this, why is there no other information on this anywhere to be found?  So Andrew Maguire and some of his clients received letters, are they real?  The shorts would love nothing better than to discredit Andrew and any other bloggers who write about the alleged HSBC move if it turns out to be false.  Is it possible Andrew is being set up?  …Along with the rest of the gold blogging world?  I believe Andrew to be very thorough in what he does and give him the benefit of the doubt in my own mind.  Maybe I am just paranoid but I hate to hear things like this without any other confirmation and particularly nothing from HSBC itself.  I will say this, the more time passes without some sort of confirmation of Andrew’s allegations, the more I am inclined not to believe them.  Enough said for now and until we have some hard data to look at.

  Our topic for today is John Exter’s inverted pyramid which is displayed below.

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As you can see, John Exter believed the “foundation” of all things financial rested upon a small foundation of gold.  I say “small” because of gold’s rarity in relation to everything else financial and freely created by man’s mechanism.  I don’t want to make this an exercise in explaining the pyramid in a primer form.  Let me just say I agree with it and believe as you go further up the pyramid (and further away from gold), the asset classes have more and more risk.  The further up the pyramid you go, there is more “leverage” involved as each product is “derived” from something which is ultimately derived from “money” itself.

Since 1971, The U.S., followed by governments of most of the rest of the world have wanted us to believe that gold is not money.  They have “taught us” that what they print (currency) is money.  This is not so and I won’t spend the time here as I’ve covered this many times before.  Suffice it to say, the BRICS nations led by China fully understand and believe gold in fact is money as proven by their massive imports of gold.

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Posted at 5:52 PM (CST) by & filed under Jim's Mailbox.

Jim,

I know exactly what the spark will be. Equities.

We are all aware of the Fed’s propensity to support the markets and thereby the big financial institutions.

Q.E. was symbolic of that. Bailing out the banks of the irresponsible real estate loans and the accompanying derivatives market (cmo’s, credit default swaps, etc) was simply the beginning. Since then, we’ve had the Fed supporting an overpriced bond market.

Now, thru that same support, we have a massive, 6 year bull market in equities.

Should the equity market begin to collapse, you’ll have all the financial institutions running for the exits at the same time. Trillions will have to be minted for the ensuing bailout. Our debt could easily double to $35 trillion. Apple stock alone has a market cap of about $ ¾ trillion.

And the bailout will happen, for the stock market is the most visible and perceived showcase for consumer confidence. Without that confidence, we run the risk of economic and financial collapse.

Thus, the trillions printed will put us on the path to spiraling inflation.  Without the printing, the demise of consumer confidence will decimate the dollar, bringing us also into spiraling inflation.

It’s called "between a rock and a hard place." Just make sure your “rock” is made of solid gold!

CIGA Wolfgang

Alan Greenspan Warns Of Explosive Inflation: "Tinderbox Looking For A Spark"
Submitted by Tyler Durden on 03/09/2015 – 21:06

Greenspan believes that in five years gold will be “measurably higher” than current levels because of the excess liquidity that will eventually be released into the open market. Such an event will undoubtedly lead to riots across America as the general public, woefully unprepared for rapidly rising prices when the pin finally pops the dollar bubble, loses access to affordable critical supplies like food, gas and other resources. The collapse of the dollar, an inevitability suggested by Alan Greenspan, will be a game changer that results in the quadrupling of the cost of living for the average American.

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Jim,

And they say Russia is in trouble? You need a magnifying glass to locate their debt requirements!

Standard & Poor’s just released a great infographic, showing just how much fresh long-term government debt is expected to be issued from the world’s major economies in 2015.

CIGA Wolfgang Rech

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Jim,

I have compiled Monthly TIC into year totals and subtracted the Current Account (annually).

CIGA Sabre

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Posted at 7:15 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The truth hurts. Austria is fast becoming Europe’s latest debt nightmare

A mini-Greece is about to go off in Europe’s heartlands, and markets don’t even know it
By Jeremy Warner
8:43PM GMT 07 Mar 2015

Ah Austria, land of schnitzel, lederhosen, Mozart, alpine meadows and beer drinking. Less widely appreciated is its special place in the history of catastrophic banking crises.

It was the failure of Creditanstalt, a Viennese bank founded in 1855 by Anselm von Rothschild, that arguably sparked the Great Depression, setting off an unstoppable chain reaction of bankruptcies throughout Europe and America.

No-one would think that what happened last week at Austria’s failed Hypo Alpe-Adria Bank International falls into quite the same category; we are meant to be in the recovery phase of the latest global banking crisis, so this is more about re-setting the system than again bringing it to its knees, right?

Well, make up your own mind. I suspect neither financial markets nor policymakers have yet caught onto the full significance of the latest turn of events.

In a nutshell, the Austrian government has had enough of funding the bank’s losses, and announced plans to “bail-in” external creditors to the tune of €7.6bn instead.

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Jim Sinclair’s Commentary

Call this what it is. It is International Monetary Stimulation which will have its classical result. Inflation is the relationship to the vigor of the Monetary Stimulation.

ECB Starts Buying German, Italian Government Bonds Under QE Plan
By Max Julius Anchalee Worrachate Lucy Meakin

(Bloomberg) — The European Central Bank started buying government bonds under its expanded quantitative-easing plan designed to boost price growth in the region.

Central banks bought German and Italian debt, according to at least two people with knowledge of the transactions, who asked not to be identified because the information is private. They also purchased Belgian securities, one of the people said, and a separate person said French notes were being acquired.

Draghi added to demand for higher-yielding bonds last week, when he said securities won’t be purchased if their yields are below the ECB’s deposit rate of minus 0.2 percent.

Seventy-seven of the 346 securities in the Bloomberg Eurozone Sovereign Bond Index already have rates below zero, meaning buyers would get less back when the debt matures than they paid to buy them.Germany’s six-year yield was at minus 0.04 percent.

The ECB may have to cut its deposit rate further to ensure enough government bonds are eligible for purchase, according to Standard Bank Plc head of Group-of-10 strategy Steve Barrow.

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A Black Swan Lands In Southern Austria: The Ripple Effects Of “Mini-Greece Going Off In The Heartland Of Europe”
Submitted by Tyler Durden on 03/08/2015 23:48 -0400

By far the most notable news of the past week, which has still gone largely unnoticed by the greater investing community whose focus instead was on whether algos would ramp the Nasdaq to 5000, and keep the S&P above 2100, even before Mario Draghi finally began buying bonds that nobody wants to sell, was the “Spectacular Development” In Austria, whereby the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.

This shocking announcement promptly sent the price of Heta bonds crashing as creditors, no longer enjoying the explicit guarantee of the state, scrambled to get out of “northern Europe’s” first Lehman moment.

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But while the acute pain came and went for Heta bondholders who have seen a nearly 50% loss in just a few short months, the bigger and far more diffuse pain is only just starting, or as Bloomberg put it, “Austria’s decision to wind down Heta Asset Resolution AG sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany.”

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Posted at 2:50 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- Sharply Widening Real Trade Deficit Should Pummel First-Quarter GDP Growth
- Nominal January Trade Deficit Narrowed with Collapsing Oil Prices, but Exploded versus Fourth-Quarter Numbers, after Inflation Adjustment
- Add-Factor Biases Boosting Payroll Growth
- Drop in Unemployment Rate Was Due to Unemployed Giving Up Looking for Work, Instead of Finding Work in Surging Employment
- February 2015 Unemployment: 5.5% (U.3), 11.0% (U.6), 23.1% (ShadowStats)
- Real Construction Spending Remained in Low-Level, Fluctuating Stagnation; Monthly and Annual Changes Holding Flat
- Annual Money Supply M3 Growth Jumped to 5.7% in February, Highest Since June 2009
- 2014 Federal Obligations Approached $100 Trillion at Year-End 2014

“No. 702: Trade, Labor, Construction-Spending, Household Income, M3, U.S. GAAP-Accounting”
Web-page: http://www.shadowstats.com


UK QE has failed, says quantitative easing inventor

When the UK embarked on quantitative easing (QE) in March 2009, in the aftermath of the Lehman Brothers collapse, the Bank of England was expected to administer a monetary stimulus equal to £50bn, writes Liam Halligan.

Over the past four years, such “extraordinary measures” have extended somewhat more, with the Bank’s bond-buying programme now amounting to £375bn – almost eight times the original estimate.

Since the financial crisis began, the Bank of England’s balance sheet has expanded four-fold. But where did the phrase “quantitative easing” come from?

Arguably among the most controversial economic policies of recent years, QE is surely the most unpronounceable. Not many Western analysts are aware that this tongue-challenging name originated in Japan, the modern-day spiritual home of money-printing.

Even fewer know that the man who coined the phrase comes from Germany – which, of all the big Western economies, has probably the most deep-seated aversion to printing money.

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Germany Has Had Enough With US Neocons: Berlin “Stunned” At US Desire For War In Ukraine
Submitted by Tyler Durden on 03/07/2015 17:15 -0500

While Russia’s envoy to NATO notes that statements by the deputy head of NATO testify to the fact that the leaders of the bloc want to intervene in Russia’s internal politics, and are “dreaming of Russian Maidan,” Washington has a bigger problem… Germany. As Der Spiegel reports, while US President Obama ‘supports’ Chancellor Merkel’s efforts at finding a diplomatic solution to the Ukraine crisis, hawks in Washington seem determined to torpedo Berlin’s approach. And NATO’s top commander in Europe hasn’t been helping either with sources in the Chancellery have referred to Breedlove’s comments as “dangerous propaganda.”

This is the view of Russia’s permanent envoy to NATO:

“The speech in Riga demonstrates the concern about Russia’s democracy and internal policy. At last, now we know that NATO has a dream, and this dream is a Maidan in Russia,” Aleksandr Grushko said in comment that was tweeted through the Russian representation office in the alliance.

Grushko referred to the words of NATO’s deputy secretary general, Alexander Vershbow, who had told a conference in the Latvian capital Riga that President Vladimir Putin’s “aim seems to be to turn Ukraine into a failed state and to suppress and discredit alternative voices in Russia, so as to prevent a Russian ‘Maidan.’” Both officials used the Ukrainian word ‘Maidan’ to describe a string of protest actions that eventually turned into mass unrest and the ousting of the legally elected president and parliament.

And as Der Spiegel reports, The Germans are not happy.

Breedlove’s Bellicosity: Berlin Alarmed by Aggressive NATO Stance on Ukraine

US President Obama supports Chancellor Merkel’s efforts at finding a diplomatic solution to the Ukraine crisis. But hawks in Washington seem determined to torpedo Berlin’s approach. And NATO’s top commander in Europe hasn’t been helping either.

It was quiet in eastern Ukraine last Wednesday. Indeed, it was another quiet day in an extended stretch of relative calm. The battles between the Ukrainian army and the pro-Russian separatists had largely stopped and heavy weaponry was being withdrawn. The Minsk cease-fire wasn’t holding perfectly, but it was holding.

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Posted at 2:48 PM (CST) by & filed under Jim's Mailbox.

Jim,

An exploding dollar means declining exports. Hope the Feds are happy with that.

CIGA Miki

US Trade Deficit Worse Than Expected As Auto Exports Tumble
Submitted by Tyler Durden on 03/06/2015 08:48 -0500

As Chinese exports crashed in January (and imports were extremely weak), one could be forgiven for expecting the US trade deficit to be more extreme than the tumble it experienced in December… but no. The US Trade Deficit printed $41.8bn, slightly worse than the $41.1bn expectation but ‘better’ than the adjusted $45.6 billion. Imports dropped 3.9% in January and Exports fell 2.9% but YoY imports fell 0.17% and exports fell 1.75% – the last time both fell YoY was November 2008. This is the 2nd month in a row of worse than expected deficits (and 4th of last 5). The shift is led by big drops in Food & Beverage (-9.1%) and Auto (-7.0%) exports and an 11.3% plunge in Industrial Supplies imports.

4th of last 5 month bigger than expected trade deficit…

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Posted at 1:24 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Maybe we can get the unemployment rate to zero if everyone who wants a job stops looking.

 

Jim Sinclair’s Commentary

No economic problems as long as we have more college graduates flipping hamburgers or in pits changing engine oil.

US Trade Deficit Worse Than Expected As Auto Exports Tumble
Submitted by Tyler Durden on 03/06/2015 08:48 -0500

As Chinese exports crashed in January (and imports were extremely weak), one could be forgiven for expecting the US trade deficit to be more extreme than the tumble it experienced in December… but no. The US Trade Deficit printed $41.8bn, slightly worse than the $41.1bn expectation but ‘better’ than the adjusted $45.6 billion. Imports dropped 3.9% in January and Exports fell 2.9% but YoY imports fell 0.17% and exports fell 1.75% – the last time both fell YoY was November 2008. This is the 2nd month in a row of worse than expected deficits (and 4th of last 5). The shift is led by big drops in Food & Beverage (-9.1%) and Auto (-7.0%) exports and an 11.3% plunge in Industrial Supplies imports.

4th of last 5 month bigger than expected trade deficit…

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As BEA notes:

Exports
Exports of goods and services decreased $1.5 billion in December to $194.9 billion, reflecting a decrease in exports of goods. Exports of services increased.

The decrease in exports of goods was more than accounted for by a decrease in industrial supplies and materials. An increase in capital goods was partly offsetting.

The increase in exports of services reflected increases in transport, which includes freight and port services and passenger fares, in financial services, and in travel (for all purposes including education).

Imports
Imports of goods and services increased $5.3 billion in December to $241.4 billion, mostly reflecting an increase in imports of goods. Imports of services also increased.

The increase in imports of goods mostly reflected increases in industrial supplies and materials and in automotive vehicles, parts, and engines.

The increase in imports of services mostly reflected increases in transport and in travel (for all purposes including education).

More…

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62.8%: Labor Force Participation Has Hovered Near 37-Year-Low for 11 Months
March 6, 2015 – 10:01 AM
By Ali Meyer

(CNSNews.com) – The labor force participation rate hovered between 62.9 percent and 62.7 percent in the eleven months from April 2014 through February, and has been 62.9 percent or lower in 13 of the 17 months since October 2013.

Prior to that, the last time the rate was below 63 percent was 37 years ago, in March 1978 when it was 62.8 percent, the same rate it was in February.

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"The civilian labor force participation rate, at 62.8 percent, changed little in February and has remained within the narrow range of 62.7 to 62.9 percent since April 2014," the BLS said in its release on the February employment data.

92,898,000 Americans were not in the labor force in February, according to data released from the Bureau of Labor Statistics (BLS) on Friday.

The labor force participation rate is the percentage of the civilian noninstitutional population who participated in the labor force by either having a job during the month or actively seeking one.

In February, according to BLS, the nation’s civilian noninstitutional population, consisting of all people 16 or older who were not in the military or an institution, reached 249,899,000. Of those, 157,002,000 participated in the labor force by either holding a job or actively seeking one.

The 157,002,000 who participated in the labor force was 62.8 percent of the 249,899,000 civilian noninsttutional population, which matches the 62.8 percent rate in April, May, June, and October of 2014 as well as the participation rate in March of 1978. The participation rate hit its lowest level since February 1978 (62.7 percent) in September and December of 2014.

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Alan Greenspan Warns Stocks Are "Without Doubt Extremely Overvalued"
Tyler Durden on 03/06/2015 08:20 -0500

While America ‘believes’ it is highly productive, former Fed Chair Alan Greenspan instantly dispels that myth in another ominous appearance on CNBC this morning,"American productivity has gone nowhere in the last few years," and that is what is holding back wage growth. Furthermore, reiterating his concerns about the inverse relationship between surging entitlements and weak savings rates, Greenspan noted, "the annual rate of increase in entitlements of 9% per year…and the people that receive it believe they are getting their money back and have a right to it." There simply is no long-term investment as businesses favor short-term actions as the Maestro explains Fed QE lowering the real rate of interest "has been responsible for the rise in P/E multiples… and when rates normalize, that will reverse," adding that "we can’t argue that we are extremely overvalued in the marketplace."

Greenspan explains… Productivity… Savings… Entitlements… Euro Failure… QE…Fed bubble-blowing… stock overvaluation and 1929 looms…

http://youtu.be/Iup05yEKmCI

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Jim Sinclair’s Commentary

Same old stuff! Get a college degree, owe a few hundred thousand and flip burgers.

Trade School may be a much better idea.

Why No Wage Increases: More Than Half Of Jobs Added In February Were Lowest-Quality, Lowest-Paying
Submitted by Tyler Durden on 03/06/2015 10:15 -0500

It has become a running joke: month after month after month, the punditry says wages hikes are coming…  they are coming any second, just be patient. And month after month the punditry refuses to accept the simple reason why not even the BLS’ goalseeked data does not permit this long awaited wage surge to take place – simply said, the quality of jobs (or rather "jobs" as these are all merely 1s and 0s that only exist in some BLS spreadsheet) added every month is absolutely atrocious, so bad that not even the BLS’ actuarial tables allow its goalseek program to attribute higher wages to the "jobs" it creates out of thin statistical air.

Ironically moments ago US labor secretary Thomas Perez said that the "quality of jobs is going up."

No it isn’t, as anyone who spends even two minutes with the BLS report can find out.

Don’t have two minutes? Here is the full breakdown. As the chart below shows, the three biggest single-category jobs added in February (because Professional services includes numerous occupations), were also the three lowest quality, lowest paying ones:

Leisure and Hospitality, added 66K jobs

Education and Health added 54K

Retail trade added 32K

Together these three job categories accounted for 152K jobs, or more than half the total February job gains. They also represent the lowest paid jobs in the US.

And that’s why there is no wage increase.

All this in chart format.

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Source: BLS

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56,023,000: Record Number of Women Not in Labor Force
March 6, 2015 – 10:07 AM
By Ali Meyer

(CNSNews.com) – A record 56,023,000 women, age 16 years and over, were not in the labor force in February.

Not only was that a record high, but it’s also the first time the number has exceeded 56 million, according to data from the Bureau of Labor Statistics (BLS).

To be counted as ‘not in the labor force,’ according to the BLS, one must not have a job or have looked for one in the past four weeks. In January 2015, there were 55,756,000 women not in the labor force, which means that 267,000 women dropped out of the labor force since then.

The labor force participation rate, which is the percentage of those who are participating in the labor force by either having a job or looking for one in the past four weeks, declined in February.

According to the BLS, 56.7 percent of women were participating in the labor force in February, a drop from 56.8 percent in January. In the last year, since February 2014, the labor force participation rate for women has fluctuated within a range of 56.6 percent to 57.2 percent, and February’s percentage of 56.7 falls on the low end of that scale.

The BLS labor force numbers begin with the nation’s civilian noninstitutional population, which consists of all people 16 years or older who were not in the military or an institution. For women, that number was 129,252,000. Of those people, there were 73,230,000 women in the labor force, meaning they participated by either having a job or looking for one. This brings the participation rate to 56.7 percent.

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The new London gold fix and China
By Alasdair Macleod (Reporter)

This month the physical gold market will undergo radical change when the four London fixing banks hand over the twice-daily fix to the International Commodity Exchange’s trading platform on 20th March.

From 1st April the Financial Conduct Authority will extend its powers from regulating the participants to regulating the fix as well. This will transfer price control away from the bullion banks allowing direct access to the fixing process for all direct participants and sponsored clients.

From this flow two important consequences. Firstly, the London market is changing from an unregulated to a partially regulated market, reducing room for price manipulation. And secondly, the major Chinese state-owned banks, assuming they register as direct participants, have the opportunity to dominate the London physical market without having to deal through one of the current fixing banks. No announcement has been made yet as to who the direct participants will be, but it is a racing certainty China will be represented.

Implications of becoming a regulated market

Under the current regime a buyer or seller on the fix has to deal through one of the four fixing bullion banks. The information gained by them from seeing this business is crucial, giving them a quasi-monopolistic trading advantage over all the other dealers. Instead, buyers and sellers will be anonymous during the auction process.

The new platform should, therefore, ensure equal opportunity, eliminating the advantage enjoyed by the fixing banks. Crucially, it will change market domination from the privileged fixing members in favour of the deepest pockets. These are almost certain to be China’s through the state-owned banks which already control the largest physical market in Asia, the Shanghai Gold Exchange (SGE).

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Jim Sinclair’s Commentary

The devil is always in the details. More BS for a recovery that has not recovered.

Americans Not In The Labor Force Rise To Record 92.9 Million As Participation Rate Declines Again
Tyler Durden on 03/06/2015 08:53 -0500

For those (very few now, with even the Fed admitting the unemployment rate has become a meaningless, anachronistic relic) still wondering why the unemployment rate dropped once again, sliding from 5.7% to 5.5%, the reason is that while the number of unemployed Americans dropped by 274K thousand while those employed rose by 96K, the underlying math is that the civilian labor force dropped from 157,180 to 157,002 (following the major revisions posted last month), while the people not in the labor force rose by 354,000 in February, rising to a record 92,898,000 (people who currently want a job rose to 6,538K) matching the all time high number of Americans not in the labor force.

End result: the labor force participation rate dropped once more, declining to only 62.8%, which as the chart below shows is just off the lowest print recorded since 1978.

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Source: BLS

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