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    • Fri, Apr 03, 2015 - 01:05pm



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    Perhaps there is not enough "liquidity" in the job market, Dave?

    Perhaps we should just create fake, I mean 'naked', I mean "liquidity enhancing" jobs, 

    Perhaps, we should also just create fake, I mean "naked", I mean "liquidity enhancing" wealth.

    After all, a wise man once told me, it is not whether or not there is real underlying wealth to support markets, it is only whether their is enough "liquidity".

    Enjoy Easter weekend, find out what the real meaning of Easter is (beyond Easter eggs).


    • Wed, Dec 10, 2014 - 02:32am



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      Great Bitcoin Seminar

    Thank you, mrees999,  Very thorough and convincing explanations.

    This motivates me to read the white paper and take a serious look at bitcoins.

    I most like supporting the idea of having a people's money, that is outside of the control of narcissistic, sociopathic governments.

    Bitcoiners will have to be ready to fight hard.  The ideas I stated above about people's money will mean that governments will surely come after bitcoins in intensity that is in direct proportion to their adoption success.

    Must control the money in order to control taxes and wealth confiscation (i.e. financial repression), pay for those expensive voter bribing operations, and pay for high dollar lifestyles in Manahattan and D.C.


    • Tue, Dec 09, 2014 - 09:24am



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      Thought provoking on Bitcoins


    Thanks for your thought-provoking piece on Bitcoin.  Very capable case made for bitcoins.

    I'm still biased toward gold and silver as backups to fiat, but am considering a diversification into bitcoins for all the good reasons you outline.

    My issues are, despite the very fair points you make, are:

    Bitcoins require a working infrastructure of electricity, computer servers, DBAs, ever-faster CPUs, trusted networks of internet connections.

    All well and good, but what if what Chris is describing, i.e. an energy constrained world, which means a complexity constrained world, comes into being?  And it doesn't have to be Mad Max to cause a serious crimp in electronic bitcoins.

    I've been in several global locales where smooth and continuous electricity is not a given.  In a debt crisis, the Western World could start to look like those locales in a relatively short time.

    As far as I can tell, no electricity, no servers means no bitcoins.  Not true for gold and silver.

    Plus bitcoins do not have 6,000 years of human history, experience and literature to lean on.  But that's not your or anyone else's fault.

    Secondly, is there a way to counterfeit bitcoins?  I confess ignorance here about how bitcoins are "mined" and authenticated / validated.  But if there is any way to counterfeit them, or even trick some buyer into thinking you are transacting with 'real' bitcoins, then as bitcoins become as valuable as you believe, the pressures to counterfeit will become enormous.  Thus it is always so for things of value, whether paintings, gold, or Chinese copies of DVDs.

    Things of value always attract thieves and governments.  But I repeat myself (hattip to Mark Twain).

    • Thu, Sep 25, 2014 - 10:43am



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      Gold does not go Poof

    You are right and you are wrong about money.
    You are trapped in the same trap as the vast majority of Americans, in thinking that a historical situation will carry on forever, the so called normalcy bias.
    I know that eloquent spokesmen like Mike Maloney have made the statements that "only gold is money", and I admit I cringe at that statement sometimes, but I equally cringe at your statements that a fiat currency that is being debased at exponential rates is perfectly good "money".
    The money v. not money debate is the same off point discussion that inflation v. deflation is.
    Rather than get into a semantics discussion, why not open clear eyes, and see what is and what is not.
    Let's look at a few basic facts.  First, the historical and universal qualities of money:
    1 Widely marketable (acceptable and recognizable for exchange)
    2 Transports easily
    3  Rare
    4  Assayable
    5  Durable and easy to store
    6  Easily divisible
    7  Fungible (all units are similar)
    Gold and silver have functioned as money, over millenia, because they have all of the above qualities.
    Almost nothing else (physical) comes close.
    Fiat paper money (and credit money, which we will come to in a minute) are relatively recent inventions.
    Fiat paper money and credit money, like most liberal, progressive ideas, are ideas that are fine in theory, and simply work out poorly in practice.
    Kind of like the communist ideas of "if we just take excess profit (whatever that is) from people who are high producers and redistribute to low producers, everyone will be happy".
    Or "if we just negotiate with terrorists, they will understand that we don't hate them and they will get along with us and not cut off our heads".
    Good ideas for grade school (and some prominent universities and political parties), bad ideas for the adult world.
    In my experience, communism breeds narcistic brutal dictators and impoverished nations, and terrorists want to cut off my head no matter what I say to them.
    So, unlike Mike Maloney, I agree with you, conceptually, in a theoretical world, that paper fiat credit-units could function as money, but you and I and Jim H. don't live in a theoretical world.  
    We live in a real world.  
    I would concede that fiat money, specifically the USD, has basically functioned as money, because it has had, at least on the surface, the appearance of, and to some extent, the reality of, all the above qualities number 1 through 7.  At least during most King Dollar/ petro dollar times, which include the last 60 years.
    Gold and silver, sitting (forced these days) quietly in the background, also have maintained all the above qualities number 1 to 7, as they have for all of human history.
    The key misconceptions that you, and the majority of Americans hold, is that fiat dollars and gold are equal in their stability and intrinsic qualities, and that they are born and die equally.
    This is simply wrong.
    Gold and silver are born out of hard human and machine labor, requiring vast amounts of intelligence, exploration, permitting, building, digging, purification, heating and melting, molding, and finally minting, not to mention transporting at several points in time, from the original loads of rock from earth works to moving ingots across the globe to investors and minting companies, and finally to you and me.
    This hard work, which is increasingly getting harder due to the peak resource paradigm of lower quality ore, which we all know about.  And at the same time, the energy required to extract and purify gold and silver is getting more expensive, driving up the costs and thus lowering the supply at any given price.   This trend could be reversed in theory, if there were a surprise energy renaissance, but none of us see that on the near horizon.
    The ability of gold and silver to maintain the 7 qualities of money is dependent only on physics.  
    I don't see the laws of physics changing any time soon, so I have confidence that tomorrow gold and silver will still have all the qualities of money.
    What you (and admittedly the majority of dollar users) don't understand that fiat paper money's ability to maintain the 7 qualities of money is dependent not on physics, but on human competency and moral behavior.
    I have conceded that theoretically, fiat paper money could, and historically has, functioned similarly to gold and silver as money.  The two key words are "theoretically" and "historically".
    Fiat currency is only valuable, and 'rare', if the caretakers of the fiat paper money are exceedingly careful to ensure that the amount of money in circulation "matches" or is representative of the the total true wealth in existence.
    Unfortunately for you, me, Jim H, and all users of fiat currency is that our caretakers, specifically the United States government and the Federal Reserve, are horribly corrupt and at the same time, completely incompetent. 
    USD are created at the present time, not to be an accurate representation of wealth in order to facilitate the economic exchange of goods and services.
    USD are created at present for two main reasons – to keep failing banking institutions solvent, and to allow the U.S. government to continue to spend more money that it takes in in taxes.
    We can argue about the morality and wisdom of the current situation, but these are the simple facts.
    The creation of new credit-money in 2014 and the expansion of the credit markets has nothing to do with representing a certain amount of wealth creation, as happens in a normal and correctly functioning monetary system, and everything to do with debt expansion.
    The most charitable explanation I can give is that our current money creation system is based in debt and future promises to pay, and we have financial caretakers that assume our future ability to create wealth will eventually match, i.e. "catch up" the present rate of credit money creation in the form of government direct debt and financial obligations.
    This assumption is laughable.
    Since we have a GDP of about 15 trillion, with on-book government (federal, state and local) of close to 50 trillion, and future retirement and healthcare obligations of 120 trillion, in the face of a system that is becoming more indebted by the day.  I'll leave it up to you whether you think the financial masters are correct.  I do not think so.
    You also ignore the fact that most of modern economy functions on USD that are actually credit money, the so called lines of credit.  
    Again, if you do not believe this, please go back and study the sources and events surrounding the 2008 financial collapse.  
    The 2008 collapse was not a crisis of "where did all those printed up dollars go that I stuffed under my mattress, I need to spend them to remain solvent".  This was a crisis in 'I will not create more digital credit-dollars for you because I do not trust in your future ability to pay" crisis.
    While not paper currency and coinage, these lines of credit "spend like money".   They function identical to fiat currency that is earned by hard labor and put into a bank account.
    If you don't think so, go out and see if you can buy watermelons with your credit card.
    I think if you try, you will find the answer is yes.
    The same watermelons can be purchased with a withdrawal of dollars from your savings account.
    So I hope you understand that your credit-money spends exactly the same as your earned money.
    One small problem.  Credit money can go away with an immediate 'poof' if the creator or financer of the line of credit decides to withdraw it.  This is true for Visa, your local bank line of credit for local businesses, the big commercial bank members who hold lines of credit including manufacturing and financial corporations, or the Federal Reserve and its funny money balance sheet that expands by buying U.S. Treasurys and MSBs.
    It is interesting.  I have held gold and silver in my hands, have moved it from one container to another, but I have never seen it go "poof".  Maybe you have.
    Other dollars that go poof: the value of your house and property in USD, your future earning potential when you lose your job, the value of non-essential items such as jet skis and pleasure boats.
    Call me old fashioned, but I like to buy and save things that don't go "poof".  As a person with a fiduciary responsibility for my family, things that go "poof" make me nervous.  
    In addition to the going "poof" phenomenon, the simple fact is that a reckless and irresponsible government and reckless and irresponsible Federal Reserve can destroy at least two of the above qualities of money for USD- rare commodity and wide exchangeability.
    If the government continues to spend more than it takes in by grotesque levels, and the Federal Reserve continues to enable the reprehensible behavior of monetizing US debt and supporting banks and financial systems by printing USD and creating vast amounts of unbacked derivatives and paper commodities through naked shorting, the USD will die a hyperinflationary death.
    This is mathematically certain.
    In contrast to the theoretical world you and the Federal Reserve live in, in the actual world, fiat currency has universally been debased due to the irresponsible behavior of those in charge of the paper (or minted) currency. 
    This has been true of the Romans, the Germans, the Chinese, or the U.S. government.
    I appreciate you don't respect my psychoanalytical approach to looking at things monetary and governmental, but in my psychoanalytical construct, based on my experience and study of history, I find nothing to suggest that the current human beings in charge of the monetary system have somehow evolved into superhumans that don't have all the flaws of every human culture previously.
    Perhaps you see some remarkable qualities that I am missing.  Oh yes, I forgot, we now have really fast computers, and the internet, and the smartest, most "progressive" president in history who clearly does not have all those old pesky shortcomings that those ancient peoples had of dishonesty, greed, narcissism, or power-seeking, so all is well.
    And just a quick walk down the comment section of any well read blog or website tells you that, should the remarkable superhumans in charge somehow fall short, thanks to the miracles of public schools and great universities and the modern welfare state, the general population has reached a new enlightened state of education, careful thought and critical thinking, tempered with charitable concern for the feelings of their neighbors on the blog or down the street.
    These inconvenient facts destroy your theoretical world that we can be blissfully happy with our fiat currency.  Apparently your logic is that because I can go down to the 7 Eleven and buy a gallon of milk today with my five dollars today, or pay my rent with a neat little check made out in dollars today, or that greedy and corrupt financial leaders suppress the gold and silver price by naked shorting and manipulative algorithms, that fiat USD are perfectly good money.
    You may be right now, but I don't only live for the now.
    Until they find a way to print unlimited oceans of gold and silver, or find a way to make gold and silver go poof, I will be happy to collect those 'worthless' items that I can't pay my rent with, or buy bread with, or buy that internet trinket from China with.
    • Sat, Sep 06, 2014 - 11:48am



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      Thanks for the scorecard

    Thanks also, Dave,

    My unofficial scorecard:

    Government manipulates:

    Online polls

    Video-based websites

    Skype messaging and content lists


    Individual citizens' online accounts

    Youtube video amplification

    Webservers they don't like


    Email addresses of any citizen

    Add the above to those we know about based on published information



    Mortgage rates and mortgage backed paper


    Money supply

    Labor prices


    Public perception of war, other countries, the economic outlook, the labor market, public optimism

    All economic statistics (inflation, labor market, GDP, CPI, consumer confidence, Manufacturing)

    Taxes (most un-elected officials through regulatory fees and fines)

    What can be sold and not sold based on Attorney General and Regulatory agency attacks- see firearms industry, healthcare insurance, and myriad others

    Broadcast content (FCC rules and regulations, fines and selective penalties)

    Political speech and freedom to associate (see Lois Lerner's IRS)

    Not Manipulated:



    • Tue, Jul 15, 2014 - 10:32am



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      Market Realization

    that organic growth is not ahead, Has been happening since 2001.

    Exhibit A

    Then, something happened in 2011.  Yes, I know, I know, the government and Fed fixed all our monetary and debt problems in 2011 with QE.   Total Credit Debt Obligations reversed their exponential growth.  Global GDP returned to 6% annual growth.  Real interest rates shot into the positive.  Consumers and corporation deleveraged massively.  Inflation risk collapsed.

    That explains the huge correction.

    • Tue, Jul 15, 2014 - 10:05am



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      Letter to CME

    Reprinted and timely

    The CME’s latest gold margin change announcement got kicked off in grand fashion. All of the cartel’s dirty tricks were pulled out of their bag. There was pressure on the access trade open. Next up was the 2:20 AM flash crash, featuring a 13 ½ ton gold dump in that single minute. That set up the pre-Comex open bash at 8:20 AM, featuring another 27 ½ ton dump in just 7 minutes. And finally there was the 9:00 AM pre-NYSE open dump, with a whopping 12,862 August contracts dumped in just 3 minutes. Most of that 40 ton blitz occurred in one single minute at 9:01 AM, and left no doubt that the cartel is apparently defending $1320 to the death. Nothing like selling a cumulative 81 tons of paper gold in just 11 trading minutes to make a powerful statement, that being regulation and enforcement is non-existent.

    The newer lower margin requirements for gold and silver now have gold at a fairly lofty 22-1 leverage, with silver still lagging at 12.7-1. Enticing more (alleged) speculators into silver while it is at near record open interest is a curious decision. Funny too they decided to lower margins right as silver finally became more "volatile". I suppose now we can look forward to silver open interest topping 200K. That would be a billion ounces of silver contracts, no biggie I guess only if you don’t care about manipulation. You have to wonder just WHO those alleged speculators are that all along that have been willing to pile on such huge amounts of contracts in spite of leverage mostly in the single digits. Optimistically you’d say the shorts are screwed but who knows what’s going on with the COT.

    Dow back to 17K, gold back under $1320. Central planners of the world rejoice. Any "doldrums", as in the summer variety, are strictly an imposed event. Behind the scenes however the action is anything but a state of torpor. No matter though, just keep MOPE alive in the hearts of the clueless, until bail-ins and hyperinflation become an all-too painful reality.

    • Tue, Jul 15, 2014 - 09:57am



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      Need Analysis


    Someone told me that gold markets were free and fair, that they were reliable pricing signals of actual supply and demand, I need to stop worrying about U.S. policy of manipulation since really that's just how a commodity market works and that I'm not sophisticated or experienced to understand that there are fluctuations, and that it is just conspiracy theory talk to suggest that the United States government has an official, but secret, policy to suppress the price of precious metals through collusion with commercial banking institutions.

    Fair enough.  I need some analysis of the last 24 hours.

    81 tons of gold were sold in 11 minutes

    I'm sure its not fake paper gold, because, as I've been told by our trustworthy regulators and some highly experienced gold analysts that these markets are free and fair, that sellers would never create 81 tons of paper gold for the simple reason of price capping and profiteering, so these 81 tons of gold represent actual producers proffering actual physical gold, readily available.  Now by my calculations that's over a third of the U.S. annual production.  One third of production in 11 minutes.

    So I need some analysis, because I watch economic indicators and news fairly closely, and in my inexpert eyes, I could not find an explosive, fantastically big gold-negative consequential event that would ignite what could only be described as a massive panic in gold selling.

    Did a mining company announce a wonderful, gigantic high-grade ore find with plans to dig it out of the ground and throw it into the market as soon as possible?

    Did the president and congress make a joint announcement that they are completely changing their reckless financial course, and making immediate changes by dramatically reducing government spending, creating much-needed, pro-business tax relief laws, and total reformation and reduction of government bureacracy?

    Did a group of U.S. physicists announce they discovered really cheap and easily produced cold fusion technology which would lower energy costs by 90%, albeit in 10 years.?

    Did the Fed announce that they would raise interest rates from 0% to 15%, and start unwinding its $4 trillion balance sheet immediately in the open market in order to make the USD hugely more scarce and more valuable?

    In your expert analysis, could you point to the singular event that occurred at 2:00 AM EST that would lead to such massive, panic selling of 81 tons of gold in 11 minutes?  I appreciate it in advance as I would like to learn how to trade free and fair markets based on reliable trading signals.

    Thank you in advance.

    • Sun, Jul 13, 2014 - 09:00pm



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      Sea Change Analyzed

    Dave, Jim H,
    Apologies for being a bit OPP (Off Peak Prosperity), but life duties sometimes take priority.  As usual, I find myself appreciating Dave's analysis, then the further I read, the more the proverbial analytical train comes off the rails.

    Dave, you're making a fundamental error in your "Martenson Construct", due to several wrong assumptions, which is the downfall of many constructs.

    First, lets level-set through some basic concepts which we seem to have wandered away from.

    1.  It's not of matter of selecting whether it's the banks or the government manipulating the market for their ulterior motives.

    They work together as one entity.

    The government and banks are one entity, acting as divisions within a single corporation.  I don't care to speculate whether Yellen calls up Dimon three times a week, talks with him once a year at Davos, transmit policy concerns and questions via trusted intermediaries, meets with him in an underground bunker in Washington.  These are mostly irrelevant details. 

    The government is not some independent entity, calmy working over there in DC, separate and watching over things impartially.  The government and the financial sector are extraordinarily tightly joined in policy making and policy execution.   Overtly and openly, and also in many ways clearly that are hidden from public scrutiny in ways that we will soon learn. 

    Recall it took years of lawsuits for Bloomberg to get made public the Fed's documents, that no one knew about and very few people speculated about or reported on, and that the Fed never revealed to anyone in Congress, that showed that the Fed provided trillions in USD currency swaps to European banks.

     If you don't understand this, and continue with your consistent artificial separation of the two leads me to question whether you do understand it.  If you want evidence, let's input a few facts to illustrate the point (There are dozens and dozens of data points, but we won't do a comprehensive view for the sake of conciseness).

    Data point 1:  The entire financial system that we are currently using was designed as a collusion of the government with the big banks in the financial system.  Average folks, such as store clerks, pastors, and farmers were not invited to Georgia to draw up the "rules of the game".  The book "Creature from Jekyll Island"  by G. Edwin Griffin documents this highly linked relationship elaborately (not speculation), in deep detail.

    Data point 2:  The Federal Reserve (yes, you can argue not technically "government", but yes they are government because they are essentially contracted by the government according to statue to manage monetary systems) openly has a policy to manipulate the price of money.  This is not speculation.  This is published Fed policy which we have documented on this site many times. 

    And how does the Fed manipulate money?  Through the banking system.  To inject new fiat currency, the Fed must buy government UST, through the banking system transmission channels to effect monetary control.  By definition they are working as a team with banks to effect monetary policy and thus control the price of money. 

    The government working with the Fed decides who and who is not a Primary Dealer.   Last time I checked, neither Jim H, nor Dave, nor Hrunner was listed as Primary Dealer.  So the Fed ain't working with me, and I damn sure would like some of that free money to buy some UST directly from the government and flip it to the Fed for a risk free profitable trade. 

    Data point 3:  Please recall what happened in August 2008 when the financial crisis hit.  Last time I checked, the Fed and U.S. Treasury Department did not sit in a room with a bunch of average folks, the Rotary club, or Chamber of Commerce deciding what to do about the Credit Crisis.  It was well documented that only the CEO's of the big commercial banks got called into those closed-door meetings. 

    I would direct you to PBS Frontline's excellent documentary on the Financial Crisis if you don't understand the level of collusion between private banks and the U.S. Government during the crisis.  For what it's worth, some large banks were not invited (not clear why other than they were pro free market versus pro government-commercial bank fascism).

    So we have established based on evidence, that in times of financial stress the Fed, i.e. the U.S. government, collude with banks to effect monetary policy and decide what markets should and should not do.

    Data point 4:  Virtually every regulatory position of consequence is held by a former banker.  Or a future banker or banking consultant.  People like Bernanke are another breed, i.e. economic academics.  I can't decide which is worse, our financial system run by people who have no real world experience using deeply flawed models derived from isolated university departments, or run by bank executives who care only about banks and don't give a rat's ass about people or destruction of the average person's savings and earnings power.

    Now I suppose you could make that argument that magically, when bankers assume governmental roles as regulators, they all of sudden switch their bias and allegiance to the average man on the street versus their former employer and colleagues.  Based on everything I know about human nature, based on my direct observations in the real world, and based on the evidence of what actual financial policy is that harms to average person at the expense of the banks, I do not make that argument.

    So go ahead and trust banks as if they are separate, isolated entities just listening to Mr. Market and trying to ensure some ill-defined feature such as "liquidity" for the good of the average citizen.  That is a view that ignores the mountains of evidence and data to the contrary.

    As far as the deeply misguided discussion about the "Martenson Context" and the "Martenson Method" I confess I don't even understand what you're talking about.

    You said:

    "So when I ask you for evidence of this claimed sea change, it is an essential Martensonian requirement that there be some kind of strong correlation to back up what you say, otherwise we must admit that we are just engaging in unsubstantiated guessing.  Which is not Martensonian at all.  I can't remember Chris ever suggesting in the crash course that "Oh, it won't show up in the charts."  I wouldn't be here if he did that sort of thing."

    Dave, you seem to not have been listening to anything Chris has said for the last year.  Chris has said numerous times that A) all markets are manipulated (some recent pieces actual have this as their title), and B) all markets have lost their utility as price discovery tools due to the severe degree of manipulation, which is by design by TPTB to buy time and keep things patched as they "make it up as they go along" and C) none of the markets make any sense to him, looking at the EVIDENCE. 

    Evidence means, to me at least, and I believe for Chris, is the most reliable sources of least-manipulated data available, hopefully as distant from government manipulation as possible.  These more reliable evidences (note that I did not say perfectly reliable) include corporate revenues and profits, corporate capital deployment in new capital projects versus share buybacks, retail sales, ADP jobs, labor participation rates, number of people on food stamps and disability, electricity consumption, Baltic Dry Index.

    One caveat that you must understand that, yes the market and supply and demand will eventually rule, and the forces we discuss will eventually be reflected in price, but sometimes price must travel through a period of sometimes significant market distortion on the way to true price discovery.  This is one of those distortion periods.

    This is one of your fundamental flaws.  You accept as informative evidence market numbers from headline markets such as SP, oil, gold, thatare highly manipulated and blithely accept that price discovery in these markets is pristine"data".  On what basis, I don't know.  Because you trust that the folks that run theComex have the ability to calmly and dutifully pass electronic digits from one entity to another?  That ain't a market, Dave, that's IT networking and computer software.

    I acknowledge that somewhere in these markets are some players contributing that are likely honest buyers and sellers, though I believe that number is becoming smaller each month.  And most markets, especially the stock market, are composed of financial firms gaming the system with programmatic trading, or institutional investors that are forced into the stock market to survive.  Huge numbers of investors who have control and freedom to seek best markets are opting out of the market.  So if half the market participants are carrying out government price manipulation and half are not, how does that add up to an unmanipulated market?

    As far as gold, if a commercial bank comes in and smashes price three times a week instead of seven times a week, is that your rational for markets being unmanipulated price discovery engines, and free and fair?

    You also said:

    "So lets assume you are right and look for correlations that might confirm your hypothesis: this price rise in gold here in June is all about "the market figuring out organic growth isn't coming."  Were this true, if the market (those guys who buy COMEX contracts) had just realized the Martenson Context was going to be truth going forward, what other market behaviors might we expect to see?

    1) ever-higher energy costs – so, oil prices rising? [no, it has been flat YTD; Brent has plummeted -2.01 to 106.66 just on Friday, down -2% in June]

    2) debt more difficult to repay – bond prices dropping? [No, long term US treasury up 10% YTD, and up 2% in June]

    3) earnings in real terms very difficult – stock market multiples compressing resulting in stock prices dropping?  [No, SPX up 6% YTD and +2.4% in June]

    4) Japan is a Martensonian basket case – the Yen should be having some difficulty. [No, Yen up 3% YTD and up +0.8% in June]"

    And thus you are basing your hypothesis for non-manipulation of precious metals markets based on "evidence" from four of the most highly manipulated markets in existence- oil, bonds, SPX, Japanese yen.  ???

    A market exists where honest buyers and honest sellers can place bids and offers transparently, based on simple common sense rules. 

    Rules like if you offering a commodity to sell and are placing it on offer at the market, then you must have the actual commodity to sell, or a direct physical connection with the commodity.   This is the way that supply and demand can operate normally.  Supply and demand was never intended to work with unlimited fictitious supply created by the whim of a few bankers, and trading with equally unlimited fictitious demand based on a desire to make money off of trades, and not to take delivery and actually use the commodity for a downstream product needed by consumers. 

    Suppliers should subject to random periodic inspection of their ability to deliver.  Translation: No naked paper. 

    No one entity can possess more than a non-controlling minority position of futures in a market, say 5%. 

    Margin requirements are fixed, transparent and fair, not changed at the whim of market managers.  100% margin, like 100% fractional reserve banking, would create much fairer markets and remove much of the cheating, even at the expense of that oft mentioned liquidity.  I'll exchange liquidity and explosive exponential growth for fairness and stable prices and stable markets.

    You're not seeing any correlations of the arrival of the sea change because you're not looking at both sides of the force equation, you're only looking at movement.  By force equation, I mean looking at pressure for up movement versus pressure for down movement.  The massive currency and credit creation and continued exponential credit growth in the face of no parallel productivity output, debt reconciliation or aggregate demand creates a massive tectonic force, and massive currency risk, that should be signaled in the price of precious metals as a hedge for that massive risk.  No such price is present.

    Think of tectonic plates of currency risk versus government need to have their currency appear stable.  You can stand on top of a piece of land and say it is not moving and consider two interpretations.  One world view is that the land is very stable and no tectonic forces are in operation.  Another view is that, if you look beyond the single variable of movement, and start to fill in the picture with other data such as pressure, historical earthquakes, etc, you would understand the view that reality is that two massive forces are pressing against each other and it is extraordinarily likely there will be a resultant huge shift when one stronger force gets the upper hand over the massive opposing force that is pushing back. 

    With every billion dollars the Fed is printing, with every month that interest rates are near zero (or negative), with every quarter with real inflation increases and food prices outstrip wage growth, with every quarter that shows a contraction of the labor force resulting in fewer workers supporting more retirees, with every month that the U.S. (or any financially irresponsible country) adds to its un-payable on-balance sheet debt and off-balance sheet retirement obligations, with every month of trade deficit where the U.S. imports more goods and services than it exports, the forces on the fault line increase. 

    I believe, like I think Jim H. does, and perhaps Chris, that before the "Big One" occurs, there will be small tremors and initial "slippage" that will be the sign that the Big One is moments away.  That's why we watch the precious metals closely.  Slippage looks to me like the inability to hold gold price down, the inability to control bond yields, an accelerating pace of bank and municipal defaults, and accelerating inflation. 

    Or we can assume the market will go on indefinitely with gold prices defying the laws of supply and demand.

    • Wed, May 28, 2014 - 12:58pm



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      Answer to Trend Manipulation


    I apologize.  You are correct that in my previous post on this thread I did not answer your fair question.  I really did intend to, but ran out of time, electronic ink and honestly forgot.

    The best description for the Fed's (and central banks in general) approach to gold in the run up to 2008 that I know of is "managed ascent".   I can't take credit for coining that phrase, and apologies, I can't give proper attribution, but Jim Rickards or James Turk possibly.

    During pre-2008 "normal" times, there was movement connection of asset prices to generic inflation, and debt-fueled global growth.  Everything went up.  Whether is was Oil, roughly 430%

    Copper, roughly 700%

    Sugar, roughly 700%

    or Housing, roughly 250%

    In summary, during this period, A) the Fed had few choices but to allow a Managed Ascent because all asset classes were rising rapidly, and B) (more importantly) the Fed did not need to do much because the global economy was perceived as sound, gold insurance was not highly sought, and dollar collapse was not on anyone's radar screen.  Happy days were here again.  The Fed needed to only 'tap on the brakes' of gold price periodically (again, several intelligent investors could see the liquidity-fueled asset inflation and were bidding gold higher).

    The Fed policy agents are now seen standing on the brakes.

    Let me know if you want a post of a Nanex chart of what "standing on the brakes" looks like.

    You can read my previous post re "Confidence" if you want to have background on the "Why".

    So all of these asset classes were rising, driven by Fed easy money policies, and fair enough, secondarily, overall global demand.   The Fed only needed a moderated overall economic policy that included allowed gold to rise in parallel to other asset classes.  Just not too much and not out of alignment with other assets.

    Recall that these were the halcyon days of free money, housing prices rising into infinity, the always growing home equity credit card.  So simply, people and investors were happy and not worried.  

    Of course, as we learned in retrospect, there were very troubling goings on in the background of these happy days by reckless financial institutions levering up on their MBS to the sky, but virtually no one noticed that, nor did anyone care.

    It goes without saying, but I'll say it, everything changed after the credit crisis.  Besides deflationary collapses in, well, just about everything, we all know what the Fed did to the money supply.  QE to infinity is fact not fiction.  ZIRP as far as the eye can see.  We only learned recently how many trillions of dollar swaps the Fed made available to Europe.  The Fed truly "saved" the world with the magic liquidity button.

    Fast forward past 2009, to today, after credit markets and asset prices stabilized in the short term.

    Anyone with two neurons knows that we have not solved our debt issues, that what has happened in the past 5 years was a Fed fire hose rescue operation that (temporarily) arrested prematurely a pre-ordained deflationary collapse.  Now 7 billion of us are whistling past the graveyard, betting our futures on a handful of flawed humans with dubious economic models and suspect allegiances and motives.

    To coin another phrase, good luck with all of that.

    And as I and others have said seemingly thousands of times, in the face of oceans of increasing money and credit-money, smart folks should be buying every ounce of gold they can get with whatever non-essential cash is available.  The price of gold should be multiples higher to appropriately reflect inflation risk and investment demand.

    But thanks to an endless stream of "optics control" by the Fed, by the MSM, by the conventional investment community, we have a lot fewer smart, at least educated, folks than there ought to be regarding financial risk and risk mitigation.

    That's the entire point about how important the optics of price of gold reflected in the gold charts, and derivative analytics i.e. TA world of trends, 100 DMA, stochastics, etc, etc, etc, etc.

    The blatant and obvious price smashes in the middle of the night, the hiding of 10's of trillions of dollar swaps, the lies about the meaning and utility of precious metals by Fed officials.  These are obvious signs (to me and a few others, at least) of the current level of desperation.  But, as any student of human psychology knows, desperate and stressful situations create symmetrically desperate and stressful responses.  I predict some big mistakes are coming.

    To answer your bond price question, I have never said that the Fed agents were the only market participants.  The global economy is continuously fragile at present and has had a string of national economic scares, for example Cyprus and EU bank collapses, Argentinian and Turkish central bank balance sheet destruction, and now Chinese credit market concerns with some major financial institutional bankruptcies.  The dollar i.e. UST always benefits in these serial crises from a flood to safety via the "cleanest dirty shirt in the laundry" phenomenon.  The Fed steps in when there are outflows i.e. risk-on trade periods to pick up any slack as bonds roll over / new issuance.  The mission is always to keep bond prices at historic lows.  Because the big commercial banks and most importantly the U.S. government simply cannot afford historic bond yields of 4, 5, 6% 10 year UST.  They simply cannot.  It will immediately double the national deficit.  And set off a vicious cycle of yield increases.  The Fed of course knows this.  So those rates will not materialize.  I answered your question, now please answer one of mine.  If the economy is "normal" and "recovered" and "growing", why aren't bond yields at historically normal levels of at least 4% and higher?

    So I think you would agree from the Fed perspective, "mission accomplished" on the bond front.

    Just like the Tacoma bridge disaster, we can watch with fascination, intuitively knowing that it cannot go on forever, and likely not much longer, but unable to predict with perfect precision when it breaks.

    But soon enough, my friend.  May God bless you and other people of good will as they prepare spiritually, physically and financially for that period of time when things break.

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