The facts are the facts

“Facts do not cease to exist because they are ignored.”   Aldous Huxley


The last two and half years for gold have been terrible - and in the miners disastrous, but their performance does not diminish the facts that exist today. The Fed and all Central bankers have been manipulating the price of money to provide an illusion of prosperity, which appears as facts to many. Yet the key questions are rarely asked; maybe we like the illusion.
- Why, 6 years after the crisis, is the US Fed still buying bonds?
- Why is it we have the lowest interest rates in hundreds of years?
- Why under these conditions are economies growing at "sub-par" rates?

When asking Allianz SE’s chief investment officer about the euro area’s sovereign debt woes, be prepared for an emphatic response.
“The fundamental problems are not solved and everybody knows it,” Maximilian Zimmerer said at Bloomberg LP’s London office. The “euro crisis is not over,” he said.

http://www.bloomberg.com/news/2014-07-10/portugal-smolders-as-allianz-says-debt-crisis-isn-t-over.html

Container Store coins the investor catchphrase of the summer: "Consistent with so many of our fellow retailers, we are experiencing a retail funk," said Container Store (TCS_) Chairman and CEO Kip Tindell in the company's first-quarter earnings report. Tindell also said the company continues" to experience slight traffic declines in this surprisingly tepid retail environment."

http://www.thestreet.com/story/12771365/1/5-new-signs-the-us-consumer-is-still-struggling.html

Meanwhile equity investors are exuberant: (mea culpa: the stock market has performed way better than anticipated - especially the last 18 months):
CYNK Technology (a US social media company) shares are traded 'over-the-counter' in the US on an unregulated exchange.  Three days ago its market value was $US1 billion.  Two days ago: US$3 billion.  Yesterday: US$4 billion.
For now, some further questions to ponder:
- if the US is in such a strong position why is it's dollar so weak?
- if the economy is so strong, why are real incomes declining

http://www.usgovernmentdebt.us/federal_debt
US government Debt has risen approximately $7T since FY2009 while US GDP has risen just over $2T...hmmmm.

Gold will have it's day - it must, because the central bankers and the governments only have one major practical policy tool - "print", to make most debts "money good". Those who save (i.e. the east) accumulate, those in the west watch "reality" tv.

"It's a maths problem"

http://www.sovereignman.com/expat/i-apologize-for-what-youre-about-to-read-9397/

Simon Black summarises it well (above link)

It took just 286 days to accumulate the most recent trillion (from $15 trillion to $16 trillion).
Last month alone, the first full month of Fiscal Year 2013, the US government accumulated nearly $200 billion in new debt– 20% of the way to a fresh trillion in just 31 days.


The big issue about to hit is the "fiscal cliff" - that is the gap between what the government brings in and spends. Certain tax breaks are due to expire meaning greater taxes will come from the taxpayer. Taxing will not lead to growth - growth is the only option the US has to get over the debt binge and prevent the banks from further writedowns.

The printing press must continue...

USD - countries are acting

we don't want your dollars!

http://www.nationmultimedia.com/business/Yen-yuan-direct-trading-to-begin-on-Friday-30183064.html

May 2012
Beijing - China and Japan have agreed to begin direct-trading of their currencies from Friday, avoiding use of the dollar as an intermediary currency, the two governments said.

The direct currency trading was designed to promote bilateraltrade, facilitate the use of the yuan and the yen in international trade settlement, and lower the cost of currency conversion, the China Foreign Exchange Trade System said Tuesday.

The People’s Bank of China, China’s central bank, said it would support the "important step in strengthening cooperation between China and Japan in developing financial markets." The move followed an agreement to strengthen financial cooperation by Chinese Premier Wen Jiabao and Japanese Prime Minister Yoshihiko Noda in December.

China is Japan’s largest trading partner with bilateral trade valued at 345 billion dollars last year.
An estimated 60 per cent of trade between China and Japan is settled in US dollars, China’s official Xinhua news agency said.

Using the dollar as an intermediary, the yuan can be tradeda gainst the currencies of Japan, the European Union, Britain, HongKong, Malaysia, Russia, Australia and Canada, the agency said.

http://www.theaustralian.com.au/business/markets/direct-a-yuan-conversion-to-save-costs-treasurer/story-e6frg94o-1226423563725
July 2012
AUSTRALIA will discuss with Chinese officials the potential for direct conversion of the Australian dollar and the Chinese yuan for transactions completed in mainland China, Treasurer Wayne Swan said today.   
...
The Reserve Bank of Australia and the People's Bank of China signed a $30 billion currency swap line in March to support liquidity in Australian dollar-yuan trades.




http://www.bbc.co.uk/news/business-18545978
July 2012

China and Brazil have agreed a currency swap deal in a bid to safeguard against any global financial crisis and strengthen their trade ties.

It will allow their respective central banks to exchange local currencies worth up to 60bn reais or 190bn yuan ($30bn; £19bn).

http://www.zerohedge.com/news/usd-trap-closing-dollar-exclusion-zone-crosses-pacific-brazil-signs-china-currency-swap

from Mr Lipps' book Gold Wars...

The Role of Oil Wealth and OPEC

   
At the beginning of the 1970s, wage and price inflation soared, leading to lofty energy prices and vice versa. The Arabs were very slow to understand dollar debasement, the currency in which their
bills were paid. For a long time they did not understand they had been cheated for years. The paper money they received for their black gold had dwindled in value. In 1973 and 1979, they massively increased their prices to compensate for the increment in the American Consumer Price Index. The sudden quasi quadrupling of the oil price turned many energy producers into megamillionaires in a very short time. In 1973, one barrel of oil bought one bushel of U.S. wheat. In 1980, the same barrel of oil bought nine bushels of U.S. wheat. By the middle of the 1970s, the demand for gold by investors from oil producing countries exploded.

Not only individual investors were buying gold, but OPEC nations were also in the market. Timothy Green commented: 

.[the] single most important development in the gold market since 1970 has been gold buying by

central banks (or other government institutions) in oil producing nations: Indonesia, Iran, Iraq, Libya, Qatar and Oman have all acquired gold..



comment: maybe many of us are slow to understand dollar debasement

1 video explaining bubbles forming...and one to form

http://www.youtube.com/watch?v=b4zOAHoncF0&feature=relmfu


then 1 article which articulates well, what few really understand...

Thankyou Lan

http://www.economicsvoodoo.com/quantitative-easing-0-1-2-3-and-federal-reserve-banks-love-affair-with-its-member-banks-and-mortgage-bonds-levitating-the-black-hole/

The black hole is the balance sheet of the banks

a facade "papered" over with fiat paper.

In the late 70s, in the midst of a dollar crisis...it was clear what was needed

Clarity is coming on the unattractiveness of "paper"


http://www.laffercenter.com/1979/10/a-return-to-convertibility/

A Return To Convertibility
Tuesday, October 30th, 1979

Making the Dollar ‘as Good as Gold’

By Arthur B. Laffer

L.A. Times 10/30/79

The events of the past several weeks have served to make interest rates, reserve requirements and money supply targets of cocktail talk at all proper meeting places. What appears to be missing, however, is any serious discussion of a word understood by virtually everyone: gold. In my view, any successful solution to the monetary crises occurring at ever-more frequent intervals must include a reestablishing of dollar convertibility. Historically, convertibility of a currency has been into gold.




this is why those with grey hair get it...because it's not that new.

In 1977
http://www.foreignaffairs.com/articles/29522/jahangir-amuzegar/opec-and-the-dollar-dilemma
...
OPEC's worries about the continued erosion of its purchasing power, and the market's fears about the oil exporters' reactions, have been both serious and real. Between January 1977 (when the crude oil price was last raised) and April 1978 (when the dollar showed faint signs of stabilization), the U.S. currency depreciated by more than 22 percent against the Swiss franc, 21.5 percent against the Japanese yen, nearly 14 percent against the deutsche mark, 10 percent against the pound sterling, some 6 percent against the French franc, and even a small 3 percent vis-à-vis the Italian lira. While the decline of the U.S. dollar over a 21-month period, weighted in terms of U.S. trade, was much less than these figures might indicate1 - actually, only 7.5 percent - the damaging impact on OPEC as a whole, and particularly on some of its members, was considerable...

A Golden Lion speaks about what is coming

a 43 min video worthy of your time...

http://ceo.ca/frank-giustra-long-form-interview/

By all accounts Giustra is brilliant, connected and wealthy. He made headlines in 2007 by pledging over $100 million and half of his future earnings to establish a charitable foundation with President Clinton. Outside of philanthropy however, Giustra has been reluctant to draw attention to himself, and rarely speaks publicly about investing.

Gold at $1634; silver at $29+....hmmmmmm

Even with no QE, gold has behaved well the last 4 weeks.
Can this be the onset of the move. Alf Field thought so

He forecasts $4,500 in a violent move.

Meanwhile Paulson puts in 44%  of firm's assets into Gold...nothing to see here
http://www.bloomberg.com/news/2012-08-15/paulson-steps-up-gold-bet-to-44-of-firm-s-equity-assets.html


Interesting take by James Rickards on the next QE steps and why...maybe gold is sniffing this out
http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/20/how-china-is-driving-federal-reserve-policy

USD has been weak the last week - now under 82 on the USD Index

The Gold stocks have had a good bounce - gold closer to $1,700 might set them on fire...watch

Einhorn mocks Buffett - my gold is on Einhorn

Done with class and tounge in cheek, Einhorn mocks Buffett!

http://www.forbes.com/sites/ycharts/2012/05/31/einhorn-trashes-buffett-cash-but-loves-gold/

“The debate around currencies, cash, and cash equivalents continues. Over the last few years, we have come to doubt whether cash will serve as a good store of value. If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side. If you stacked the money seven feet high, you could store it in a warehouse roughly the size of a football field. The value of all that cash would be about a trillion dollars. In a hundred years, that money will have produced nothing. In a thousand years, it is likely that the cash will either be worthless or worth very little. It will not pay you interest or dividends and it won’t grow earnings, though you could burn it for heat. You’d have to pay someone to guard it. You could fondle the money. Alternatively, you could take every U.S. note in circulation, lay them end to end, and cover the entire 116 square miles of Omaha, Nebraska. Of course, if you managed to assemble all that money into your own private stash, the Federal Reserve could simply order more to be printed for the rest of us.”

The USD - walks a fine line

The USD has been very weak during this stock market correction and the flight into government bonds. This is quite surprising given the problems in Europe. I'm not sure who coined or used the phrase recently, but he said "we walk on the edge of chaos" - he is right, and the USD right now is close to crossing that line. Once it does, GOLD will go higher, reflecting the loss of purchasing power of those dollars. Never has a global reserve currency been at such a point. This may be why Mr Sinclair, an extraordinary "harmonious" market reader, sees the beginnings of a hyperbolic move. Gold looks extended - but that's the definition of hyperbolic - the next month will give us the signal.

GOLD in USD at $1,604...a siren to those listening

European debt fears have been the major theme for the last couple of months. Now, the US debt ceiling debate begins to take centre stage. Gold screams higher in all currencies, (even the stronger ones eg AUS).

There is no value in sovereign debt. Not at this juncture and at these prices. This won't end well.

Now that the slowdown appears to have arrived, Dalio thinks it will be prolonged. “We are still in a deleveraging period,” he said. “We will be in a deleveraging period for ten years or more.”
Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.”

Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said.

Read more http://www.newyorker.com/reporting/2011/07/25/110725fa_fact_cassidy#ixzz1SVKzNYtT

gold and silver smell the burning of the USD...

Kocherlakota...The CB has to bail out the government sometimes...there you have it!

Central Bank Independence and Sovereign DefaultNarayana Kocherlakota - President
Federal Reserve Bank of Minneapolis
Wharton Conference
Philadelphia, Pennsylvania
April 1, 2011

exerpt below...

More subtly, regardless of the FA’s solvency, sovereign debt issues can fail simply through a co-ordination failure among investors. If I, as an investor, don’t anticipate that others will buy into the debt issue, I won’t either. In this sense, sovereign debt issues may be susceptible to suboptimal “runs”. The CB can eliminate this possibility by ensuring the nominal promises of the FA whenever the FA is threatened with default.
Thus, I see trade-offs. On the one hand, the CB is known to be willing to intervene to keep the FA solvent, then inflation is necessarily shaped by fiscal considerations and by the short-run incentives of elected officials. We know from many years of theoretical and empirical research that this effect is not a desirable one. On the other hand, if the CB is fully committed to allow the FA to default if necessary, then even optimal debt management by the FA may end up exposing the country to troubling risks.
Let me wrap up. I’ve argued that even if the fiscal authority borrows exclusively in its country’s own currency, the central bank can have a large amount of control over the price level. But the central bank can only achieve that control if it is willing to commit to letting the fiscal authority default. Such a commitment may expose the country to risks of short-term and medium-term output losses. How this trade-off should best be resolved awaits future research. But I suspect that it may be optimal for central banks to guarantee fiscal authority debts in some situations. If so, we again have to think of price level determination as something that is done jointly by the fiscal authority and the central bank — just as Sargent and Wallace taught us 30 years ago.

USD looks tired...safe haven no more?

The USD has been weak for some months - barely able to rally. The recent "risk off" seen in the markets, linked to the Japanes earthquake, has not flown through to USD strength. Something is wrong. As I type it is nudging 76 on the index. It will fall - it must. The only/last hope to keep rates low. It is now 75.86! A close under 76 over night and another leg down may be upon us.

Gold is at $1,401

USD v USB(onds)

USD Index at 76.76...as I type;

Lower yields (the aim of the Fed) will go hand in hand with a lower dollar...for now.
Then one day it will be higher yields for as far as the eye can see...
Lower dollar will go hand in hand with higher gold/silver

Gold at $1,412 as I type...Mr Gold says keep watch!

How do you like your toast?...Golden!

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/2/26_Jim_Rickards.html

Mr Rickards always puts a well thought argument together...listen to his thoughts about a global currency (liquidity) via SDR’s (special drawing rights). Note, how countries are coming up with arrangements to settle trade outside of the USD and put 2 and 2 together.

The USD is toast...(all currencies are) - the transition to the “new world” will not be orderly!

USD hangs on...a close below 76.80 and the gold party goes techno!