Posted at 11:25 AM (CST) by & filed under In The News.

Ottawa, Beijing strike deal on yuan trading hub
Steven Chase
Published Tuesday, Nov. 04 2014, 11:00 AM EST
Last updated Tuesday, Nov. 04 2014, 5:44 PM EST

Ottawa and Beijing have struck a deal that will see this country designated as a trading hub for China’s yuan currency, a benefit that will lower the cost of doing business for Canadian companies seeking Chinese markets.

The hub, a financial centre sanctioned by China to clear and settle transactions in the Chinese currency, would likely be based in Toronto, sources say.

Some details remain to be worked out but sources say this is expected to be announced during Prime Minister Stephen Harper’s trip to China that begins this week.

It’s a sign that efforts to repair relations between Canada and China are bearing fruit.

This hub would mean a great deal in particular to small or medium-sized businesses looking for competitive advantages in dealing with China.

It’s been estimated by the Canadian Chamber of Commerce that this hub could generate as much as $32-billion in additional exports over 10 years.

It also gives Canada the first yuan hub in the Americas, which will result in a significant advantage in trade finance – one that could prompt multinationals to move treasury operations to Canada.

Ontario Premier Kathleen Wynne welcomed the news Tuesday morning.

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*Breaking Alert: US Mint SOLD OUT of Silver Eagles! 2 Million Coin Surplus Sold in Under 2 Hours!
Posted on November 5, 2014 by The Doc

The US Mint has just issued an alert to Primary Dealers across the US that Silver Eagle inventories, which according to the Mint began today at over 2 million ounces, are now SOLD OUT as of 12:30pm EST.

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American Financial Markets Have No Relationship To Reality
Paul Craig Roberts and Dave Kranzler
As we have demonstrated in previous articles, the bullion banks (primarily JP Morgan, HSBC, ScotiaMocatta, Barclays, UBS, and Deutsche Bank), most likely acting as agents for the Federal Reserve, have been systematically forcing down the price of gold since September 2011. Suppression of the gold price protects the US dollar against the extraordinary explosion in the growth of dollars and dollar-denominated debt.

It is possible to suppress the price of gold despite rising demand, because the price is not determined in the physical market in which gold is actually purchased and carried away. Instead, the price of gold is determined in a speculative futures market in which bets are placed on the direction of the gold price. Practically all of the bets made in the futures market are settled in cash, not in gold. Cash settlement of the contracts serves to remove price determination from the physical market.

Cash settlement makes it possible for enormous amounts of uncovered or “naked” futures contracts — paper gold — to be printed and dumped all at once for sale in the futures market at times when trading is thin. By increasing the supply of paper gold, the enormous sales drive down the futures price, and it is the futures price that determines the price at which physical quantities of bullion can be purchased.

The fact that the price of gold is determined in a paper market, in which there is no limit to the supply of paper contracts that can be created, produces the strange result that the demand for physical bullion is at an all time high, outstripping world production, but the price continues to fall! Asian demand is heavy, especially from China, and silver and gold eagles are flying off the shelves of the US Mint in record quantities. Bullion stocks are being depleted; yet the prices of gold and silver fall day after day.

The only way that this makes sense is that the price of bullion is not determined in a real market, but in a rigged paper market in which there is no limit to the ability to print paper gold.
The Chinese, Russians, and Indians are delighted that the corrupt American authorities make it possible for them to purchase ever larger quantities of gold at ever lower prices. The rigged market is perfectly acceptable to purchasers of bullion, just as it is to US authorities who are committed to protecting the dollar from a rising price of gold.

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Saudi Stocks, Currency Tumble As Aramco Pipeline Explodes; ISIS Sabotage Concerns
Submitted by Tyler Durden on 11/05/2014 10:33 -0500

It appears Saudi markets are back in play. As Bloomberg’s Richard Breslow noted this morning, Riyal forwards have jerked notably higher (implying weakness expected) and the Tadawul All Share Index has dropped 7% in the last 2 days after the killing of Shi’ites by unknown parties and now news that a pipeline has exploded. As Breslow warns, "if that indeed signifies the spread of Islamic State into Saudi Arabia, it would be the first time they crossed Saudi borders. That would be a big deal and a major escalation of problems over in that part of the world, far beyond what it would do to capital markets."

Yesterday there were attacks on Shi’ites (as Reuters reported)

Saudi security forces on Tuesday shot dead a member of an armed group that killed five people in an overnight attack on Shi’ite Muslims marking an important religious anniversary, al-Arabiya television reported.

The late Monday assault on a Shi’ite gathering in al-Ahsa district is likely to test already strained relations between Sunnis and Shi’ites across the Middle East because it coincided with the annual Ashoura commemoration of Shi’ite Islam.

The Dubai-based al-Arabiya said security forces who had been hunting suspects in the al-Ahsa attack clashed with and killed "a wanted man" at a rest area in the al-Qassim province, north-west of the capital Riyadh.

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Despite "The People’s Vote", ADP Private Payrolls ‘Prove’ Employment Situation Is Great
Submitted by Tyler Durden on 11/05/2014 08:21 -0500

Isn’t it odd that ‘they threw the bums out’ last night and yet, economic confidence is high, stocks are high, and now, according to ADP, private payrolls are great too? Something doesn’t add up. ADP printed 230k against expectations of 220k, modestly up from a revised 225k in September. Small and Medium-sized businesses added jobs while the largest firms (over 1000 people) slashed jobs (which is great for the stock, right?).

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The breakdown:

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Mark Zandi may not have gotten the memo, but his eagerness to please the Obama administration will no longer bear any fruit. Also, the "folks" no longer believe what he says:

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is steadily picking up pace. Job growth is strong and broad-based across industries and company sizes. At this pace of job growth unemployment and underemployment is quickly declining. The job market will soon be tight enough to support a meaningful acceleration in wage growth.”

Uhm, no. More from the report:

"Employment continues to trend upward as we begin the last quarter of 2014, driven mostly by small to mid-sized companies,” said Carlos Rodriguez, president and chief executive officer of ADP. “October’s job growth is the highest since June and the second highest gain of 2014.”

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US midterm elections: wave of defeats leave Democrats reeling
‘This is ugly,’ says Democrat party strategist, as Republicans sweep to control of Senate 
Paul Lewis in Denver, Colorado
Wednesday 5 November 2014 11.31 EST

The scale of the Democrats’ defeat in the US midterm elections became apparent on Wednesday, with the party losing control of the US Senate by a wider margin than predicted and their Republican opponents on the verge of securing their largest majority in the House of Representatives since the 1940s.

President Obama’s party awoke on Wednesday to the political equivalent of a pounding hangover; a wave of defeats more numerous and deeper than many Democrats had feared, while Republicans rode a wave of victories that gave them significant momentum going into the 2016 presidential elections.

Republicans gained at least seven Senate seats from Democrats, cementing the GOP’s power base on Capitol Hill.

On a night of few positives for Democrats, Republicans also outperformed them in most of the 36 governors’ races, clinching stunning victories in Democratic strongholds including Massachusetts, Maryland and Illinois.

“This is ugly,” one top Democrat involved in the party’s election strategy told the Guardian in the early hours of Wednesday morning. “It is so much worse than we expected.”

The defeat is a major blow to the president, whose low approval ratings contributed heavily to his party’s electoral drubbing. Obama, an already isolated and unpopular president, must now see out his remaining two years in the White House with his Republican opponents controlling both branches of Congress. The White House said he would speak at a news conference on Wednesday afternoon.

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Jim Sinclair’s Commentary

Be careful of what you wish for as you might get it. The US will have to commit troops in time. Today ISIS hit the house of Saud where it really hurts.

Iraq War II: UK to send new batch of troops to fight ISIS
Published time: November 05, 2014 12:47  
Edited time: November 05, 2014 14:47

As British troops leave Afghanistan, the UK government has said it will dispatch a number of army officers back to Iraq. The officers will assist in a US-led effort to train Iraqi security forces in their ongoing battle against Islamic State jihadists.

Speaking in Baghdad on Wednesday, UK Defence Secretary Michael Fallon said that the UK would be sending an ‘advisory panel’ to Baghdad as well as provide additional training to Peshmerga fighters.

"The UK, as part of the international coalition, is already taking part in airstrikes across Iraq and carrying out training for Kurdish forces in the north of the country" Fallon said.

"It is right that we do more to help Iraqi forces take the fight to ISILon the ground which is why the UK is offering the further training, support and assistance I have outlined today".

Fallon also said that Britain would increase the number of reaper drones to the region in order to provide intelligence,surveillance and reconnaissance to the Iraqi army.

The decision to send troops to the region to fight Islamic State, also known as ISIS or ISIL, follows statements earlier this year by Prime Minister David Cameron, who said he would not put “boots on the ground”after his decision to assist in US-led airstrikes on Islamic State targets.

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Is the CRA creeping your Facebook page?
Fabio Campanella, Special to Financial Post | October 25, 2014 6:30 AM ET

Got a fancy new car? Doing a major renovation to your home? Eating at a lavish new restaurant? Why not let all your friends know what you’re doing by posting this to your social media accounts?

It’s second nature to so many Canadians nowadays to post pics and updates of their daily lives to social media. Generally you’re hoping your friends are following you; secretly you’re hoping they’re envious of the exquisite lifestyle you’re trying to portray. But your friends and followers may not be the only ones peering into your life, the Canada Revenue Agency (CRA) may be checking you out as well.

It’s called: Indirect Verification of Income and it’s an audit technique employed by the CRA. If your lifestyle and reported income don’t match up the CRA may decide to look into your affairs to see what’s actually going on.

So, for example, if you’re driving a luxury car, living in a high-income neighbourhood, sending your kids to private schools, and vacationing in Hawaii’s finest beachfront hotels but only reporting $45,000 of income on your tax return per year then you’re probably a great target for an audit by the CRA.

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Posted at 11:16 AM (CST) by & filed under Jim's Mailbox.

Jim,

As I see it…

Russia and China have a 3 prong game plan for global economic dominance. It must be done “under the radar” and is being duly executed so.

1. Cornering the market on physical gold and silver, thereby denying the Western Powers access to these backstop support vehicles when the time comes to halt any currency crisis.

2. Eliminating the US Dollar as the world’s reserve currency, putting the Dollar and Western nations in the crosshairs of a massive inflationary spiral.

3. Establishing themselves as a dominant global force in the resource arena. Russia developing massive oil and nat. gas resources, China developing mineral and gold resources, and China establishing a foothold in Africa to develop the abundance of resources prevalent on that continent.

This is why you hear so little of gold and silver holdings, changes in dollar holdings, and natural resource accumulation by these 2 powerhouse nations.

He who holds physical (gold, silver, resources, etc.) dominates.

Just my opinion,
CIGA Wolfgang

Dear Wolfgang,

Your opinion is profoundly correct. It is right in front of those that are called experts, yet they are blind to it.

What is left of our military command, many having been forced into retirement, are blind to it. Wall Street would call it heresy.

It is truth!

Regards,
Jim

 

Jim,

German populace is now getting on board. Buying gold coins and creating a shortage. The scent of Weimar is getting stronger.

CIGA Wolfgang Rech

German Euro Sceptic Party Sells €1.6 Million of Gold Bullion In Two Weeks
By Mark O’Byrne

Disillusionment with Europe’s single currency continues to grow with the cracks beginning to show in it’s heartland, Germany, where the third largest political party is now selling gold coins and bars to raise funds.

In a poll in September Alternative for Germany (AfD) were found to be Germany’s third most popular party. The rise of the Alternative for Germany (AfD) party saw it receive 10.6% of the vote in Thuringia and 12.2% in Brandenburg on 14 September. Two weeks earlier it secured its first regional government seats in Saxony.

AfD are not anti-EU per se and have distanced themselves from other eurosceptic parties. They see a future for Germany in the EU and embrace common markets but wish to see the European Monetary Union (EMU) and the euro itself wound up and a return to the Deutschmark.

In the past two weeks, in a bid to gain as much state funding as possible they have entered the gold bullion market with quite a degree of success. In Germany, the federal government will match, up to a value of €5 million, any funds raised privately by a political party. In a bid to get the full allocation of state funding, AfD have started to sell gold bullion online.

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Posted at 1:31 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

John Williams shares his latest.

- The Happy News Begins to Falter 
- Third-Quarter GDP Growth Faces Downside Revision, Given Deteriorating September Trade and Construction Reporting 
- Trade Deficit Widened Sharply 
- Quarterly Construction Spending Growth Turned Negative from Positive 
- Risk of Unexpectedly Weak October Payrolls 
- Craziness in the Financial Markets Cannot Prevail, Assumed Underlying Reality Is Not There or Will Prove Fleeting

"No. 671: September Trade Deficit and Construction Spending " 
Web-page: http://www.shadowstats.com

How The BEA Goosed 3rd Quarter GDP——With A Phony 74% Leap In Defense Spending
by Contributor • November 3, 2014
By James Pethokoukis

And from this a thousand conspiracy-themed blog posts will be born. Here is Capital Economics on the surprisingly strong (3.5% vs. 3.0% forecast) third-quarter US GDP report:

– The reported leap in third-quarter defence spending, which added 0.7 percentage points to annualised  GDP growth was, as far as we can tell, largely due to a failure of the BEA’s seasonal adjustment  process. As a result, we expect defence spending to plunge this quarter, subtracting a similar amount  from fourth-quarter GDP growth.

– All of the upside surprise in third-quarter GDP growth (the 3.5% outturn was well above the consensus  forecast of 3.0%) can be explained by the 4.6% increase in government spending, which added 0.8  percentage points (ppts) to overall growth. Moreover, nearly all of that boost was due to a 21% leap in Federal defence consumption. That’s the largest increase since the second Iraq war in  early 2003. Drilling down further, more than two-thirds of the rise was due to a 74% annualised leap in  defence spending on support services for installation, weapons and personnel. This is unusual given that  spending on such services typically makes up just 25% of total defence spending.

– Some of the rise in the third quarter could be due to the escalation in military action in the Middle  East, but most of it appears to be due to a failure of the seasonal adjustment process. Looking at the  averages over the past five years, defence support services spending has increased by 38% annualised in  the third quarter only to fall by an average of 34% annualised in the fourth quarter. (See Chart 2.) The BEA all-but confirmed this problem when in an email it told us that it is “trying to determine if any  methodology changes are necessary”.

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German Precious Metal Dealers Report Huge Run on Silver Coins
Montag, 3. November 2014, 10:31 Uhr | Eingetragen von Goldreporter

Brisk sales not only on silver coins (subject to differential taxation in Germany), but increased demand also for higher taxed silver bullion.

Precious metal dealers in Germany have literally been run down after the latest slump in gold and silver. Wholesalers already expect deferred deliveries.

The latest plunge in gold and silver late last week has led to a sharp increase in demand by German precious metals investors, which also continued on Saturday. There was a particularly strong demand for silver coins. “On Thursday and Friday people had to draw numbers in order for us to control the run”, reports Andreas Heubach, CEO of Heubach Edelmetalle in Nuremberg. “On both days we sold each around 40,000 silver ounces – incredible”, he said. “Demand is back – and hysteria as well”, he evaluated.

Tremendous Run
“The run is tremendous, even today on a Saturday”, Christian Brenner, CEO of Philoro Edelmetalle GmbH in Leipzig and Berlin reports. Despite the high counter trade level in September, demand has increased by 100 percent, online-trade even soared by 300 percent.

“Run is not the right expression“, says René Lehmann of Münzland in Dresden. “We’ve seen up to 80 percent of our regular customers taking advantage of the slide to build up more positions. On those two days, on Thursday and Friday, we made approximately 50 percent of our monthly revenue”, he reports toGoldreporter. Maple Leaf (1 oz.), 1 kg Lunar and ½ oz. Great White Shark were particularly in demand, since Münzland had a special offer on them. In gold especially 1 oz. Maple Leaf and 1 oz. bars have been purchased. The ratio of buyers to sellers has generally been at 50 to 1.

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US Mint Bullion Coin Sales Rally in October
by Mike Unser on November 4, 2014

American Eagle bullion coin sales scored multi-month highs in October

Demand for United States Mint bullion products again soared in October — even as gold and silver prices tumbled — with silver coin sales the strongest since January 2013 and gold coin sales the highest since January 2014.

A sales summary across U.S. Mint bullion products for last month and for the first ten months of this year follows.

American Eagle Silver Bullion Coins

American Silver Eagles surged by 5,790,000 coins last month, advancing 39.9% over September sales of 4,140,000 coins and hurdling the year ago level of 3,087,000 coins by 87.6%. October sales were the strongest since January 2013 when U.S. Mint authorized purchasers ordered 7,498,000. Overall, the month ranks fourth highest in the 99.9% pure silver coin’s 29-year history.

Year-to-date sales stand at 38,041,000 coins for the second quickest pace ever, and are down just 2.9% from the January to October 2013 period when sales reached 39,175,000 coins. Last year, American Silver Eagles hit an all-time record at 42,675,000 coins. This year’s Silver Eagle sales total is already higher than annual sales of all but 2 years since the coins debuted in 1986.

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Factory Orders Slide 2nd Month In A Row (Did It Snow In September?)
Tyler Durden on 11/04/2014 10:11 -0500

Factory orders in September printed a drop of 0.6% MoM following August’s 10.0% revised tumble off the spurious spending in July. This is the first 2-month-in-a-row drop in factory orders since January – amid the economy-crushing polar vortex.

Did it snow in September?

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Jim Sinclair’s Commentary

Some are waking up to reality.

Singer’s Elliott Says U.S. Growth Optimism Unwarranted as Data ‘Cooked’
By Kelly Bit  Nov 4, 2014 10:43 AM ET 

Paul Singer’s Elliott Management Corp. said optimism on U.S. growth is misguided as economic data understate inflation and overstate growth, and central bank policies of the past six years aren’t sustainable.

The market turmoil in the first half of October may be a “coming attractions” for the next real crash that could turn into a “deep financial crisis” if investors lose confidence in the effectiveness of monetary stimulus, Elliott wrote in a third-quarter letter to investors, a copy of which was obtained by Bloomberg News.

“Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth,” New York-based Elliott wrote. “When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.”

Better-than-forecast economic data and improving earnings reports have helped the Standard & Poor’s 500 Index rebound 8 percent from a six-month low on Oct. 15. U.S. stocks have more than tripled from their 2009 low when including dividends, and government bonds as measured by the Bank of America Merrill Lynch Treasury Index have rallied 26 percent in the past six years.

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Jim Sinclair’s Commentary

Could happen.

GOP Senate Takeover Would Put Fed Under Microscope
By Dow Jones Business News,  November 04, 2014, 07:52:00 AM EDT
By Victoria McGrane

WASHINGTON–A Republican takeover of the U.S. Senate on Election Day would promise increased political turbulence for the Federal Reserve.

Financial executives say a GOP-led Senate would ratchet up congressional scrutiny of the central bank’s interest- rate policies as well as its regulatory duties as overseer of the nation’s largest financial firms. Republicans haven’t controlled the Senate since before the 2008 financial crisis and recession, which put a spotlight on the Fed and its powers.

"If the Republicans take control of the Senate and thus have control of both the House and the Senate–two words for the Federal Reserve: Watch out," said Camden Fine, president of the Independent Community Bankers of America.

Leading the GOP wish list in dealing with the Fed would be legislation to open the central bank to more scrutiny of its interest-rate decisions, using congressional audits of monetary-policy matters that Fed officials strongly oppose. Many Republican lawmakers also want to require the Fed to use a mathematical rule to guide interest-rate decisions or shift its focus more directly to inflation rather than inflation together with unemployment. All of that would come on top of heightened bipartisan scrutiny of the Fed’s regulatory moves.

Many Republicans oppose the unconventional efforts the central bank has taken to bolster the U.S. economy over the past several years. The Fed last week announced the end of its long-running bond-buying stimulus program, known as quantitative easing. But that won’t quell GOP criticism, since many Republicans want Fed officials to move quickly now to raise interest rates from near zero and shrink the central bank’s balance sheet, which has climbed to near $4.5 trillion.

The GOP is widely expected to retain control of the House, where the Fed has already been the focus of legislation it sees as hostile. Under a Republican-led Senate, Alabama Sen. Richard Shelby would likely become the next chairman of the Senate Banking Committee, which oversees the Fed.

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Posted at 7:19 PM (CST) by & filed under In The News.

Silver Fraud?
Author : Bill Holter
Published: November 3rd, 2014

Thursday and Friday were very bad days for gold, silver and the shares.  The explanation on Wednesday afternoon and Thursday was because the Fed discontinued QE 3.  Along came Friday and guess what, the QE baton was passed to Japan as they announced an increase in their QE operation to roughly the round number of $1 trillion per year.  With this amount of QE, the Bank of Japan will now be purchasing every single bond issued and then some.  Outright monetization has arrived in Japan!

  This was seen all around the world as "good" for stock markets as they rallied to new highs (Japan rallied to 7 year highs)!  …but bad for precious metals?  Yes I understand, this is "good" for the dollar on a relative basis to other fiat currencies (especially the yen) but how is the news of outright and full on monetization in the 3rd largest (and Western) economy bad for "stuff"?  The answer to this question is "it’s not …but it has to be seen this way".

  THE worst performing market (excluding the ruble) was silver, down some 7% or so after the Fed announcement from Wednesday afternoon to Friday’s close.  We have seen this before in late 2008, April of 2011 and 2013.  Maybe someone can rationally explain to me "why" silver would do this with the current backdrop?

  We know the cost of production for silver is north of $20 per ounce, one big producer, First Majestic even announced they are withholding nearly 1 million ounces of production due to current prices ($19 when they made the announcement).  I bring this point up because it is not like all of a sudden the supply increased and a producer or producers had "extra" millions of ounces to unload.

  Over just the last two weeks, the physical silver market has clearly tightened.  As the price was dropping, our suppliers went from no "wait" to a waiting period of 1-2 weeks on many products from generics to Maple Leafs… and this was as of Friday morning, let’s see what happens this week with the further push down in prices, will the delivery periods extend further?  I would also add that premiums demanded for physical silver product had been rising slightly prior to Wednesday and jumped markedly on Friday, will we again see a $9 COMEX price yet none to be had physically at $15? 

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How The BEA Goosed 3rd Quarter GDP——With A Phony 74% Leap In Defense Spending
by Contributor • November 3, 2014
By James Pethokoukis

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And from this a thousand conspiracy-themed blog posts will be born. Here is Capital Economics on the surprisingly strong (3.5% vs. 3.0% forecast) third-quarter US GDP report:

– The reported leap in third-quarter defence spending, which added 0.7 percentage points to annualised  GDP growth was, as far as we can tell, largely due to a failure of the BEA’s seasonal adjustment  process. As a result, we expect defence spending to plunge this quarter, subtracting a similar amount  from fourth-quarter GDP growth.

– All of the upside surprise in third-quarter GDP growth (the 3.5% outturn was well above the consensus  forecast of 3.0%) can be explained by the 4.6% increase in government spending, which added 0.8  percentage points (ppts) to overall growth. Moreover, nearly all of that boost was due to a 21% leap in Federal defence consumption. That’s the largest increase since the second Iraq war in  early 2003. Drilling down further, more than two-thirds of the rise was due to a 74% annualised leap in  defence spending on support services for installation, weapons and personnel. This is unusual given that  spending on such services typically makes up just 25% of total defence spending.

– Some of the rise in the third quarter could be due to the escalation in military action in the Middle  East, but most of it appears to be due to a failure of the seasonal adjustment process. Looking at the  averages over the past five years, defence support services spending has increased by 38% annualised in  the third quarter only to fall by an average of 34% annualised in the fourth quarter. (See Chart 2.) The BEA all-but confirmed this problem when in an email it told us that it is “trying to determine if any  methodology changes are necessary”.

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Jim Sinclair’s Commentary

Never mind the bad news according the majority.

ISM Manufacturing Surges To 3 Year Highs; Ignores PMI, Construction Spending Plunge
Tyler Durden on 11/03/2014 10:12 -0500

US manufacturing both declined (PMI) and rose (ISM) in October as the divergence  between the two soft-survey-based data streams is as ridiculous as it was in the second half of last year. ISM printed a cycle high 59.0 (highest since March 2011) smashing the 56.1 expectations (the biggest beat since July 2013). While the headline print was exuberant, New orders fell, as did new export orders. Construction spending fell for the 2nd month in a row, dropping 0.4% against expectations of a 0.7% rise.

Doesn’t seem like the US decoupling is taking hold domestically… 4th miss in a row for Construction spending and 2nd monthly drop.

*CONSTRUCTION SPENDING IN U.S. DECLINES TO WEAKEST SINCE MARCH

*U.S. SEPT. PUBLIC CONSTRUCTION SPENDING FALLS 1.3% FROM AUGUST

*U.S. SEPT. PRIVATE NON-RESIDENTIAL CONSTRUCTION FALLS 0.6%

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Islamic State advances on Homs in serious threat to Assad
As the world focuses on Kobane, jihadists have pressed deep inside Syria – advancing on both Idlib and Homs
By Ruth Sherlock, Gaziantep and Magdy Samaan
3:32PM GMT 03 Nov 2014

Islamic State of Iraq and the Levant has capitalised on the jihadist domination of northern Syria, seizing two gas fields and pressing a major assault on an air force base close to the central city of Homs.

While US-led air strikes have focused on defending the border town of Kobane from a few hundred Isil fighters, the extremist group has pushed south, expanding its grip on terrain that is strategically vital in the battle for control of the country.

On Monday, Isil posted photographs on social media showing the group’s flag flying over Jahar gas field, alongside images of seized vehicles, weaponry and corpses of the Syrian regime soldiers who had controlled the field.

The group captured the Sha’ar gas plant last week.

"So after the Sha’ar company and the positions surrounding it became part of the land of the Caliphate, the soldiers advanced, conquering new areas, and all praise is due to Allah," Isil said in the message.

Even more concerning for the regime, the jihadists have now moved to assault Tayfur military airbase – perhaps the biggest and most valuable military stronghold still in the possession of the government in Damascus.

The advances by Isil follow gains made in north-west Syria in recent days by Jabhat al-Nusra, the other main jihadist group, which unlike Isil remains affiliated to Al-Qaeda. It has obliterated large parts of the remaining “moderate” rebel forces backed by the United States in an advance across Idlib province, leaving most of northern Syria in the hands of one or other of the two groups. Isil’s advance on the Tayfur base would represent a major push south.

An earlier propaganda video about the base on Syrian State television showed SU-22M4, SU-22M2 and MiG-29 fighter planes, as well as air defence radars. It is also said to house surface-to-air missile systems.

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Monetary Fallacy? Deep Divisions Emerge over ECB Quantitative Easing Plans
By Anne Seith

To prevent dangerous deflation, the ECB is discussing a massive program to purchase government bonds. Monetary watchdogs are divided over the measure, with some alleging that central bankers are being held hostage by politicians.

At first glance, there’s little evidence of the sensitive deals being hammered out in the Market Operations department of Germany’s central bank, the Bundesbank. The open-plan office on the fifth floor of its headquarters building, where about a dozen employees are staring at their computer screens, is reminiscent of the simple set for the TV series "The Office". There are white file cabinets and desks with wooden edges, there is a poster on the wall of football team Bayern Munich, and some prankster has attached a pink rubber pig to the ceiling by its feet.

The only hint that these employees are sometimes moving billions of euros with the click of a mouse is the security door that restricts access to the room. They trade in foreign currencies and bonds, an activity they used to perform primarily for the German government or public pension funds. Now they also often do it for the European Central Bank (ECB) and its so-called "unconventional measures."

Those measures seem to be coming on an almost monthly basis these days. First, there were the ultra low-interest rates, followed by new four-year loans for banks and the ECB’s buying program for bonds and asset backed securities — measures that are intended to make it easier for banks to lend money. As one Bundesbank trader puts it, they now have "a lot more to do."

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Posted at 1:46 PM (CST) by & filed under In The News.

Canada halts visas for residents of Ebola-hit nations
October 31, 2014 5:04 PM

Ottawa (AFP) – Canada on Friday announced it was suspending visa applications for residents of Ebola-hit nations in a bid to prevent the deadly virus from crossing its borders.

Immigration Canada said authorities would not process any visa applications from individuals who had been in an Ebola-affected nation "within three months prior to the date of the application."

"Canada has been a leader in the international efforts to respond to the Ebola outbreak in West Africa," said Chris Alexander, Canada’s immigration minister.

"The precautionary measures announced today build on actions we have taken to protect the health and safety of Canadians here at home."

A statement said immigration authorities would also not issue new visa applications or process existing applications from foreign nationals intending to travel to an Ebola-affected nation.

The rule did not affect applications for visa renewals of foreign nationals who are already in Canada, the statement said.

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Jim Sinclair’s Commentary

This is the Blackest of Swans.

Japan defence ministry makes largest-ever budget request
29 August 2014 Last updated at 06:45 ET

Japan’s defence ministry has made its biggest ever budget request, amid severe tensions with China over a maritime dispute in the East China Sea.

The ministry is seeking 5.05 trillion yen (£29.4bn; $48.7bn) for the year – a 3.5% rise.

If approved, it would mark the third year the defence budget had been increased, after a decade of cuts.

Earlier this month, the ministry described the security environment around Japan as "increasingly severe".

Beijing and Tokyo are engaged in a bitter dispute over islands known as Senkaku in Japan and Diaoyu in China.

In its annual white paper, the ministry spoke of "great concern" over China’s activities in the East China Sea and also cited North Korea as a security threat.

According to its budget request, the ministry wants to purchase 20 maritime patrol aircraft.

It also wants to buy five crossover aircraft, which have both airplane and helicopter functionalities, three drones and six stealth fighters.

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The BOJ Jumps The Monetary Shark—–Now The Machines, Madmen And Morons Are Raging
by David Stockman • October 31, 2014

This is just plain sick. Hardly a day after the greatest central bank fraudster of all time, Maestro Greenspan, confessed that QE has not helped the main street economy and jobs, the lunatics at the BOJ flat-out jumped the monetary shark. Even then, the madman Kuroda pulled off his incendiary maneuver by a bare 5-4 vote. Apparently the dissenters——Messrs. Morimoto, Ishida, Sato and Kiuchi—-are only semi-mad.

Never mind that the BOJ will now escalate its bond purchase rate to $750 billion per year—-a figure so astonishingly large that it would amount to nearly $3 trillion per year if applied to a US scale GDP. And that comes on top of a central bank balance sheet which had previously exploded to nearly 50% of Japan’s national income or more than double the already mind-boggling US ratio of 25%.

In fact, this was just the beginning of a Ponzi scheme so vast that in a matter of seconds its ignited the Japanese stock averages by 5%. And here’s the reason: Japan Inc. is fixing to inject a massive bid into the stock market based on a monumental emission of central bank credit created out of thin air. So doing, it has generated the greatest front-running frenzy ever recorded.

The scheme is so insane that the surge of markets around the world in response to the BOJ’s announcement is proof positive that the mother of all central bank bubbles now envelopes the entire globe. Specifically, in order to go on a stock buying spree, Japan’s state pension fund (the GPIF) intends to dump massive amounts of Japanese government bonds (JCB’s). This will enable it to reduce its government bond holdings—built up over decades—– from about 60% to only 35% of its portfolio.

Needless to say, in an even quasi-honest capital market, the GPIF’s announced plan would unleash a relentless wave of selling and price decline. Yet, instead, the Japanese bond market soared on this dumping announcement because the JCBs are intended to tumble right into the maws of the BOJ’s endless bid. Charles Ponzi would have been truly envious!

Accordingly, the 10-year JGB is now trading at a microscopic 43 bps and the 5-year at a hardly recordable 11 bps. So, say again. The purpose of all this massive money printing is to drive the inflation rate to 2%. Nevertheless, Japanese government debt is heading deeper into the land of negative real returns because there are no rational buyers left in the market—-just the BOJ and some robots trading for a few bps of spread on the carry.

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Posted at 10:33 AM (CST) by & filed under In The News.

My Dear Extended Family,

The Japanese central bank has stepped in to replace the US Federal Reserve’s QE.

The US Federal Reserve will step into MA (Monetary Accommodation) to maintain low interest rates after the end of QE.

The dollar is up in a mirror image to low yen as a result of their QE. Gold is down because the dollar is up and because an important Swiss vote is pending that could go quite pro gold.

Nothing has changed. This will make the gold internet Trolls wild.

Sincerely,
Jim

 

Jim Sinclair’s Commentary

Bankers then and Bankers today have not changed that much. They just have computers and algorithms.

The South Sea Bubble
By Jesse Colombo (This article was written on May 18th, 2012)

The South Sea Bubble was a speculative bubble in the early 18th century involving the shares of the South Sea Company, a British international trading company that was granted a monopoly in trade with Spain’s colonies in South America and the West Indies as part of a treaty made after the War of the Spanish Succession. In return for these exclusive trading rights, the company assumed England’s war debt. When investors recognized the potential profits to be made from trade with the gold and silver-rich South American colonies, they bid the South Sea Company’s shares and the shares of similar trading companies to incredible heights in a typical speculative bubble fashion. Not long after virtually all classes of British society were thoroughly engaged in wild stock speculation, the South Sea Bubble popped and stock prices violently collapsed, financially ruining their investors.

Events Leading Up to the South Sea Bubble

The South Sea Company was founded in 1711 by the Lord Treasurer Robert Harley and John Blunt, the former director of the Sword Blade Company. During this time, most of the Americas were being colonized and Europeans used the term "South Seas" to refer to South America and other lands located in the surrounding waters. Robert Harley was responsible for creating a mechanism used to fund the British government’s debt that was being incurred during the ongoing War of Spanish Succession of 1701-1713. Due to the fact that the Bank of England’s charter established itself as the only joint stock bank, Harley was unable to establish a bank. Undeterred, Harley established what appeared to be a trading company, but the company’s primary business activity was funding government debt (Melville, 1968).

The British government believed that offering exclusive trading rights with Spain’s colonies would be an effective incentive to convince the private sector to assume the government’s war debts. The South Sea Company’s founders and the government were able to convince shareholders to assume a total of £10 million in short-term government debt in exchange for South Sea Company shares. In return, the government gave shareholders a continual annuity, paying a total of £576,534 each year, or a perpetual loan of £10 million at a 6% yield. This deal resulted in a steady stream of earnings for new shareholders. The government intended to fund interest payments by placing tariffs on goods that were imported from South America (Carruthers, 2005).

When the peace Treaty of Utrecht was signed at the end of the War of Spanish Succession in 1713, the South Sea Company’s trading rights were finally put into writing: the right to supply the Spanish colonies with slaves and to send one trading ship per year. These formalized trading rights were a disappointment to Robert Harley as they were nowhere near as extensive as he had originally expected when he founded the company in 1711 (Harrison, 2001).

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Jim Sinclair’s Commentary

Not the time for Russian sanctions.

Germany’s SA Retail Sales Plunge 3.2% M/M In September

FRANKFURT (MNI) – Germany real seasonally adjusted retail sales plunged 3.2% m/m in September marking the sharpest decline since May 2007, data released by the German statistics office showed Friday.

The stats office revised down real retail sales figures for August to 1.5% m/m from 2.5% m/m initially reported.

On a nominal basis retail sales eased 2.9% m/m.

On the year, sales rose 2.3% in real and 2.9% in nominal terms. Compared to the second quarter, retail sales stagnated in the third after easing 0.4% q/q in the second quarter and rising 1.6% q/q in the first.

The latest Gfk consumer sentiment index for Germany last week showed that confidence is expected to rebound in November sentiment had taken a hit over the summer month amid rising geopolitical tensions.

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Consumer Spending Tumbles At Fastest Rate Since October 2009
Tyler Durden on 10/31/2014 08:36 -0400

Goodbye GDP hopes… Consumer Spending tumbled 0.2% against expectations of growing 0.1%, dropping at the fastest pace since October 2009. This is the biggest miss since Jan 2014 – in the middle of the PolarVortex… did it snow in October?

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Charting Banzainomics: What The BOJ’s Shocking Announcement Really Means
Tyler Durden on 10/31/2014 09:13 -0400

Still confused what the BOJ’s shocking move was about, aside from pushing the US stock market to a new record high of course? This should explains it all: as the chart below show, as a result of the BOJ’s stated intention to buy 8 trillion to 12 trillion yen ($108 billion) of Japanese government bonds per month it means the BOJ will now soak up all of the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month.

In other words. The Bank of Japan’s expansion of record stimulus today may see it buy every new bond the government issues.

This is what full monetization looks like.

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More from Bloomberg:

The central bank is already the largest single holder of Japan’s bonds, and the scale of its buying could fuel concerns it is underwriting deficits of a nation with the heaviest debt burden. The BOJ could end up owning half of the JGB market by as early as in 2018, according to Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo.

“Kuroda knows when to go ALL in,” Okubo wrote in a note. “The BOJ is basically declaring that Japan will need to fix its long-term problems by 2018, or risk becoming a failed nation.”

The unprecedented efforts to stoke inflation could scare bond investors, said Chotaro Morita, the chief rates strategist in Tokyo at SMBC Nikko Securities Inc.

Kuroda said earlier this month that while the BOJ holds only about 20 percent of Japan’s outstanding government bonds, the Bank of England holds approximately 40 percent of U.K. government debt.

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Posted at 6:43 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

John Williams shares the following with us.

- GDP up by 3.5% (+/- 3.5% Range of Reporting-Confidence), Boosted by Guessed-At Trade Numbers and Resurgent Defense Spending 
- Significant Downside Revisions Loom for Third-Quarter Growth 
- End of Declining Velocity of Money Disappointing October Jobs Growth?

"No. 670: Third-Quarter 2014 GDP, Money Velocity "
Web-page: http://www.shadowstats.com

 

Powers That Be Have Frozen Money For Swiss Gold Initiative

Today a 42-year market veteran told King World News that the powers that be have frozen the money intended for the Swiss Gold Initiative. This is a stunning event. Below is what Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this extraordinary interview.

Greyerz:  “Eric, there was a time when central bankers were independent and free thinking individuals.  But now they are all part of the system.  They are more investment bankers than central bankers.  Alan Greenspan wrote in 1966, ‘In the absence of a gold standard there is no way to prevent savings from confiscation through inflation.’.

“Before joining the Fed, Alan Greenspan was totally in favor of owning gold.  But by 1987 he was busy at the Fed.  Later he was manipulating markets and printing money as U.S. debt levels skyrocketed.  But today Greenspan is free from constraints, so he is once again saying that gold is a good place to be because it’s not possible for the Fed to end its easy money policies.

And if we look at Switzerland, before 1999 Switzerland kept 40 percent gold in the Swiss National Bank’s balance sheet.  This was a requirement.  But the central planners snuck something into the Constitution that changed that requirement and the amount of gold plunged from 40 percent in 1999, down to 19 percent in 2009.  But then Switzerland really started printing money and so now there is only 7 percent gold in the Swiss National Bank’s balance sheet, which is one of the lowest of all the European countries.

As you know, Eric, I have been involved in the Swiss Gold Initiative.  The Swiss National Bank is opposing this initiative.  They have admitted that it stops their ability to manipulate markets.  The campaign is going well.  The public has generously donated because of KWN and other sites.  But that came to a stop two days ago when Paypal closed the account for donations and they froze the funds that were in that account without any warning.

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Thank You US Taxpayers: Russia-Ukraine Agree Terms On Gas-Supply Through March
Tyler Durden on 10/30/2014 18:04 -0400

Good news for the cold-showering, snow-covered Ukrainians… Russia has reached an interim agreement to supply natural gas to Ukraine through March according to Bloomberg. Of course, this will be paid for by more IMF loans (thank you US Taxpayer), pushing Ukraine further into debt and more dependent upon the West.

*RUSSIA CONFIRMS GAS SUPPLY RESUMPTION TERMS AGREED WITH UKRAINE

*GAZPROM, NAFTOGAZ CEOS SIGN AMENDMENT TO CONTRACT

*RUSSIA, UKRAINE, EU AGREEMENT TO COVER DELIVERY THROUGH MARCH

Terms…

*OETTINGER: RUSSIA TO CHARGE UKRAINE $385/KCM THROUGH MARCH

*UKRAINE READY TO IMMEDIATELY PAY $1.45B OF GAS DEBT: OETTINGER

*NAFTOGAZ TO PAY $1.6B AS 2ND GAS DEBT INSTALLMENT BY YEAR-END

Paid for by US taxpayers…

*UKRAINE TO USE EU, IMF AID TO PAY FOR RUSSIAN GAS: OETTINGER

As Bloomberg reports,

Ukraine and Russia reached an interim natural-gas supply deal in talks brokered by the European Union to secure flows before the heating season, a Russian Energy Ministry spokeswoman said.

The accord agreed by Russian Energy Minister Alexander Novak, his Ukrainian counterpart, Yuri Prodan, and EU Energy Commissioner Guenther Oettinger will enable resumption of deliveries of gas from Russia to Ukraine after they were halted in June in a pricing and debt conflict.

Russian Energy Ministry spokeswoman Olga Golant, speaking by phone, confirmed the agreement.

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Greenspan: Price of Gold Will Rise
Axel Merk, Merk Investments 
October 29, 2014

Any doubts about why I own gold as an investment were dispelled last Saturday when I met the maestro himself: former Fed Chair Alan Greenspan. It’s not because Greenspan said he thinks the price of gold will rise – I don’t need his investment advice; it’s that he shed light on how the Fed works in ways no other former Fed Chair has ever dared to articulate. All investors should pay attention to this. Let me explain. The setting: Greenspan participated on a panel at the New Orleans Investment Conference last Saturday. Below I provide a couple of his quotes and expand on what are the potential implications for investors.

Greenspan: “The Gold standard is not possible in a welfare state”

The U.S. provides more welfare benefits nowadays than a decade ago, or back when a gold standard was in place. Greenspan did not explicitly say that the U.S. is a welfare state. However, it’s my interpretation that the sort of government he described was building up liabilities – “entitlements” – that can be very expensive. Similar challenges can arise when a lot of money is spent on other programs, such as military expenditures. It boils down to the problem that a government in debt has an incentive to debase the value of its debt through currency devaluation or otherwise. As such, it should not be shocking to learn that a gold standard is not compatible with such a world. But during the course of Greenspan’s comments, it became obvious that there was a much more profound implication.

Who finances social programs?

Marc Faber, who was also on the panel, expressed his view, and displeasure, that the Fed has been financing social programs. The comment earned Faber applause from the audience, but Greenspan shrugged off the criticism, saying: “you have it backwards.” Greenspan argued that it’s the fiscal side that’s to blame. The Fed merely reacts. Doubling down on the notion, when asked how a 25-fold increase in the Consumer Price Index or a 60-fold increase in the price of gold since the inception of the Fed can be considered a success, he said the Fed does what Congress requires of it. He lamented that Fed policies are dictated by culture rather than economics. So doesn’t this jeopardize the Fed’s independence? Independence of a central bank is important, for example, so that there isn’t reckless financing of government deficits. Greenspan: “I never said the central bank is independent!” I could not believe my ears. I have had off the record conversations with Fed officials that have made me realize that they don’t touch upon certain subjects in public debate – not because they are wrong – but because they would push the debate in a direction that would make it more difficult to conduct future policy. But I have never, ever, heard a Fed Chair be so blunt. The maestro says the Fed merely does what it is mandated to do, merely playing along. If something doesn’t go right, it’s not the Fed’s fault. That credit bubble? Well, that was due to Fannie and Freddie (the government sponsored entities) disobeying some basic principles, not the Fed.

And what about QE? He made the following comments on the subject:

Greenspan: “The Fed’s balance sheet is a pile of tinder, but it hasn’t been lit … inflation will eventually have to rise.”

But fear not because he assured us:

Greenspan: “They (FOMC members) are very smart”

Trouble is, if no one has noticed, central bankers are always the smart ones. But being smart has not stopped them from making bad decisions in the past. Central bankers in the Weimar Republic were the smartest of their time. The Reichsbank members thought printing money to finance a war was ‘exogenous’ to the economy and wouldn’t be inflationary. Luckily we have learned from our mistakes and are so much smarter these days. Except, of course, as Greenspan points out it’s the politics that ultimately dictate what’s going to happen, not the intelligence of central bankers. And even if some concede central bankers may have above average IQs, not everyone is quite so sanguine about politicians.

Now if they are so smart, the following question were warranted and asked:

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Increase of Russia’s gold reserves in September biggest since 1998 — Bloomberg
October 29, 20:41 UTC+3

LONDON, October 29. /TASS/. Russia’s gold reserves have reached the biggest mark since 1998 when the country defaulted on local debt, Bloomberg said Wednesday. The country’s bullion holdings are now the biggest in almost two decades, the agency said.

The report indicated that “Russian reserves, which overtook China and Switzerland this year, almost tripled since the end of 2005 and are the highest since at least 1993.”

The agency said Russia mined 248.8 tons of gold last year, thus occupying the third position among global producers, with China and Australia being number one and number two. The London-based World Gold Council says gold accounts for 10% of Russia’s total reserves.

Bloomberg says the latter parameter compares with the US and Germany where bullion holdings make up almost 70% of all reserves.

It quoted Daniel Briesemann, an analyst at Germany’s Commerzbank in Frankfurt as saying the ratio of gold holdings compared to foreign-exchange reserves is still relatively low in most countries, “so there’s still room to buy more goal.”

“Buying gold might be a protection against devaluing currencies,” he said.

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U.S. Mint Gold Coin Sales Near 60,000 Ounces In October – Swiss Gold Initiative Leading To Increase In Demand?
29 October 2014
By Mark O’Byrne

The U.S. Mint has sold nearly 60,000 ounces of American Eagle gold coins so far in October due to increased global demand from store of wealth buyers as economic and geopolitical uncertainty increased.

With only three business days left until the end of October, the U.S. Mint has sold 59,500 American Eagle bullion one ounce gold coins. On a year-on-year basis, U.S. gold coin sales in October are up 21% from 48,500 ounces in October 2013. 

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U.S. Mint Silver Eagle, 2014 (1 Ounce)

Store of wealth silver bullion buyers continue to stack silver at a steady clip. They bought 4.12 million ounces of American Silver Eagle coins so far this month, versus 4.14 million ounces in September.

This means that nearly 68 times more silver in ounce terms was bought than gold. Silver buyers continue to see silver as severely depressed with silver below $20/oz and the gold silver ratio at 71 or $1,228/oz divided by $17.24/oz.

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Jim Sinclair’s Commentayr

Not good news is the economic driver, home building and sales.

Mortgage Purchase Applications Plunge To 19-Year Lows
Tyler Durden on 10/29/2014 11:03 -0400

Presented with little comment.. because realistically what is there to say about a so-called ‘housing recovery’ when the volume of applications for home purchases is the lowest since August 1995. Keep believing that lower rates will support home prices… keep believing the Fed’s QE worked… or face facts, this is not your mother’s housing market any more…

The Recovery…

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The long-term…

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The transmission channel is officially broken…

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Alan Greenspan: QE Failed To Help The Economy, The Unwind Will Be Painful, "Buy Gold"
Submitted by Tyler Durden on 10/29/2014 – 13:22

It appears it is time for some Hillary-Clinton-esque backtracking and Liesman-esque translation of just what the former Federal Reserve Chief really meant. As The Wall Street Journal reports, the Fed chief from 1987 to 2006 says the Fed’s bond-buying program fell short of its goals, and had a lot more to add.

Mr. Greenspan’s comments to the Council on Foreign Relations came as Fed officials were meeting in Washington, D.C., and expected to announce within hours an end to the bond purchases.

He said the bond-buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy.

“Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” said Mr. Greenspan. Boosting asset prices, however, has been “a terrific success.”

He observed that history shows central banks can only prick bubbles at great economic cost. “It’s only by bringing the economy down can you burst the bubble,” and that was a step he wasn’t willing to take while helming the Fed, he said.

The question of when officials should begin raising interest rates is “one of those questions I cannot answer,” Mr. Greenspan said.

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White House tries to ease flare-up over Netanyahu insults
Published October 29, 2014

The White House on Wednesday sought to tamp down the controversy over a magazine piece that detailed deep tensions between the U.S. and Israel – and quoted an unnamed senior Obama administration official calling the Israeli leader a “chickenshit.”

Administration officials, including White House Press Secretary Josh Earnest, did not deny the quote. They also did not signal there would be any robust effort to find out who said it.

But Alistair Baskey, spokesman for the National Security Council, said the criticism does not reflect how the rest of the administration views Prime Minister Benjamin Netanyahu. 

“Certainly that’s not the administration’s view, and we think such comments are inappropriate and counter-productive,” Baskey said in a statement. “Prime Minister Netanyahu and the president have forged an effective partnership, and consult closely and frequently, including earlier this month when the president hosted the prime minister in the Oval Office.”

At the same time, Baskey acknowledged they “do not agree on every issue,” including on settlement activity that the U.S. considers “illegitimate.”

Officials quoted in The Atlantic magazine article, written by Jeffrey Goldberg, were far more blunt in their characterization of those differences. Goldberg quoted one anonymous senior administration official saying: “The thing about Bibi is, he’s a chickenshit.”

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Alan Greenspan “GATA’s Missed Opportunity” Part 2
Author : Bill Holter
Published: October 30th, 2014

In part one, I recounted Alan Greenspan’s one on one interview with Gary Alexander.  Later in the day Saturday, Alan Greenspan was part of a round table with Porter Stansberry and Dr. Marc Faber, moderated by Mr. Alexander.  While both Stansberry and Faber had a couple of good "zingers" for Mr. Greenspan early on and they both had good points and additions to the discussion, I want to concentrate on what Alan Greenspan had to say.  Before getting to part 2, I do want to make one correction to yesterday’s piece.  I heard Mr. Greenspan’s reply to the question "where will interest rates and gold be five years from now?" as "higher…considerably".  I have been corrected several times, his exact word was "measurably", I apologize for the misquote.

  If you remember, in part one Alan Greenspan told several white lies.  One regarding the leasing of gold by central banks, the Fed never speaks with the Treasury regarding debt/deficit levels, while another was diverting the blame for the housing crisis to Fannie and Freddie amongst other factors…but not the Fed.  The key from GATA and the gold community’s point of view was Greenspan’s denial of gold leasing and the question "do you recall testifying before Congress where you stated central banks stand ready to lease gold in increasing quantities should the price of gold rise?".  This question by Gary Alexander was flubbed miserably and we may never get this opportunity again, I will finish with what and "how" I think it happened but first I’d like to lay out what the former chairman had to say.

  While Mr. Greenspan spoke of many topics, there were too many and some even irrelevant in my opinion to recount them all, the following is what I found important.  The talk began with the topic being "the savings rate".  Alan Greenspan went back to his old spiel of "productivity" and said that the system of entitlements was crowding out savings.  He used an equation of "more benefits=less growth" and there is no way out or around this, we have been eating our seed corn.  I agree as it is the common sense which is so "un"common in Washington but I guess one must leave the beltway before it hits them in the forehead?

  Next, the conversation shifted to government spending.  Greenspan continued his attempt at cleansing his legacy by saying "it’s Congress’s fault for spending, the Fed HAS to buy Treasury debt or else interest rates will explode".  Gary Alexander then asked him "so you are saying the Fed is not independent?" and the reply much to my surprise was "I never said it was independent".  Before going any further, I think this point is important for several reasons.  First, why should interest rates explode if the economy is self sustaining and government is spending within its means?  Was the economy (and Treasury) being bottle fed even all those years ago through the late 80′s and 90′s?  What would have happened if the Fed was not so accommodative?  Higher savings, less debt, a lower standard of living then but a higher one in the future?  Would any of the bubbles have been blown and subsequently popped or would we have had lower yet more sustainable growth?  I think we all know the answers to this.

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Posted at 10:14 AM (CST) by & filed under Jim's Mailbox.

Jim,

Strap on your seat belts: The Federal Reserve ended its controversial quantitative-easing (QE) program at its meeting today.

It also plans to keep interest rates at record lows for a “considerable time,” and that environment will continue to support gold prices.

However, today’s biggest news came not from Fed Chairwoman Janet Yellen but one of her predecessors, none other than Alan Greenspan. In a speech at the Council on Foreign Relations, “The Maestro” said he fears potential “turmoil” in the economy as the Fed halts QE. “I don’t think it’s possible” for a smooth exit, he said, implying that rampant inflation and bursting asset bubbles could result. QE has failed to jump-start the real economy, he said.

“QE has been most effective in inflating asset prices, and both the markets and economy are addicted to the stimulus,” said Peter Boockvar of the Lindsey Group. History indeed shows that since 2009, the stock market has lost its gains each time the Fed has previously ended QE. With the global economy rapidly slowing, and with no correction of 10% or more in the S&P 500 in three years, stocks are overdue for a fall.

And the real danger here is that once the stock market corrects — or any number of risks from Ebola to a eurozone debt implosion cause a wider crisis — the Fed will succumb to pressure and launch a new round of QE. That’s when things could start to spiral out of control.

Where should investors turn? “Greenspan said gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments,” The Wall Street Journal reported.

CIGA Art M.

 

Jim,

I read today that the stimulus program was halted. I believe in QE to infinity, so do you see this as a temporary reprieve and/or propaganda to try to calm down Americans?

Thanks,
CIGA Jason

Jason,

It will be reinstated under a different name in 3 months.

Jim