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 "
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.
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
*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.
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:
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.
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.
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.
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 transmission channel is officially broken…
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.
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.”
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.