What A Confidential 1974 Memo To Paul Volcker Reveals About America's True Views On Gold, Reserve Currency And "PetroGold"Submitted by Tyler Durden on 11/11/2013 - 23:09
"U.S. objectives for world monetary system—a durable, stable system, with the SDR as a strong reserve asset at its center — are incompatible with a continued important role for gold as a reserve asset.... It is the U.S. concern that any substantial increase now in the price at which official gold transactions are made would strengthen the position of gold in the system, and cripple the SDR... Countries could give up their gold holdings to the IMF in exchange for SDRs. The gold could then be sold gradually, over time, by the IMF to the private market.... There is a belief among certain Europeans that a higher price of gold for settlement purposes would facilitate financing of oil imports... From the Arab point of view [gold] would have the advantages of being protected from exchange-rate changes and inflation, and subject to absolute national control. "
With Bitcoin ranging from $395 to $295 and back up to $370 in the last 24 hours, keeping an eye on where exactly the "selling" and "buying" is coming from may prove useful to some. As Liberty Blitzkrieg's Mike Krieger highlights, there is a site for that "FiatLeak.com," which uses data from the three major Bitcoin exchanges for which data is published, Mt. Gox, Bitstamp and BTC China to show you which countries and which currencies are moving in and out of bitcoin in real time.
Did you know that there are more than 102 million working age Americans that do not have a job? Right now, there are more than 11 million Americans that are considered to be "officially unemployed", and there are more than 91 million Americans that are not employed and that are considered to be "not in the labor force". When you add those two numbers together, the total is more than 102 million. Overall, the number of working age Americans that do not have a job has increased by about 27 million since the year 2000. But aren't things getting better? After all, the mainstream media is full of headlines about how "good" the jobs numbers for October were. Sadly, the truth is that the mainstream media is not being straight with the American people. As you will see below, we are in the midst of a long-term unemployment crisis in America, and things got even worse last month.
"We need help!" is the sad handwritten sign hanging outside a shuttered church in the Philippine town of Tacloban surrounded, as Reuters reports, by uncollected corpses and canyons of debris. Demand for relief is huge and despite 66 tons of supplies having landed since Saturday, they are not reaching those who need them the most as "people are roaming around the city, looking for food and water," because aid trucks from the airport struggle to enter the city because of the stream of people and vehicles leaving it. "People are angry. They are going out of their minds," warned one aid-worker as relief was delayed due to security concerns "there might be a stampede," after dark. The terrible state of affairs is summed up by on aid worker, "there is nothing left to loot... even if you have money there is no food to buy. There is nothing here." Police are trying to enforce a curfew...
It would appear that the Horatio Alger myth - that hard work and pluck will lift a person from dire circumstances to enviable success - is not living up to expectations for Americans. As WSJ's Lauren Weber notes, 40% of Americans think it’s fairly common for someone to start off poor, work hard and eventually rise to the top of the economic heap but a new Pew study shows that in reality, only 4% of Americans travel the rags-to-riches path. Unfortunately, they discovered considerable “stickiness” at both ends of the income spectrum and that Americans attached to the rags-to-riches myth might be disappointed to know that other countries show greater mobility among have-nots - "this is what we call the 'parental penalty,' and it's really high in the U.S. - If you’re born in the bottom here, your likelihood of sticking in the bottom is much higher."
Bloomberg may be in hot water for scuttling an article that "might anger China" as exposed over the weekend, but that was only after winning investigative prizes for its series of reports exposing the epic wealth of China top ruling families in 2012: a topic that has received prominence at a time when the forced wealth redistribution plans of developed and developing nations, usually originated by these same uber-wealthy families, is all the rage. Another country, whose oligarchic wealth had largely escaped press scrutiny, was Iran. At least until today, when in a six month investigation culminating in a three-part report on the assets of the Iranian Supreme Leader Ayatollah Ali Khamenei, Reuters exposed Setad, an Iranian company that manages and sells property on order from the Imam. In a nutshell, the company has built up its wealth by seizing thousands of properties from Iranian citizens. According to the investigation, Setad’s assets are worth $95 billion – 40 percent more than Iran’s total 2012 oil exports. It is this confiscated "wealth" that has allowed the Iranian clergy, and especially the Ayatollah, to preserve their power over the years.
"It will end badly," Marc Faber explains in this brief CNBC clip, "the question is whether we will have a minor economic crisis and then huge money printing or get into an inflationary spiral first." If you thought that "we had a credit crisis in 2008 because we had too much credit in the economy," then Faber notes "there is that much more credit as a percent of the economy now." Of course, as Bill Fleckenstein recently noted, as long as stocks are rising, investors remain blinded by the exuberance, but as Faber concludes, "we are in a worse position than we were back then," and inflation is already here...
There is currently a debate being waged on Wall Street. On one side of the argument are individuals who believe that we have entered into the next "secular bull market" and that the markets have only just begun what is an expected multi-year advance from current levels. The other side of the argument reiterates that the current market advance is predicated on artificial stimulus and that the "secular bear market" remains intact, and the next major reversion is just a function of time. The series of charts below is designed to allow you to draw your own conclusions. While it is certainly easy to be swept up in the daily advances of the stock market casino, it is important to remember that eventually the "house always wins." What has always separated successful professional gamblers from the weekend sucker is strictly the difference of knowing when to cash in your chips and step away from the table.
The administration had estimated that nearly 500,000 people would enroll in October, according to internal memos cited last week by Rep. Dave Camp (R., Mich.); but as WSJ reports, initial reports suggest that fewer than 50,000 people successfully navigated the troubled federal health-care website to enroll in private health insurance plans as of last week. The figures represent an improvement from the website's first days. On Oct. 1, when it opened, only six people signed up for coverage, according to internal administration memos but remains 90% below expectations with only 4 months until seven million are expected to have signed up for private coverage when the open-enrollment period is set to end.
The latest myth of a European recovery came crashing down two weeks ago when Eurostat reported an inflation print of 0.7% (putting Europe's official inflation below that of Japan's 1.1%), followed promptly by a surprise rate cut by Mario Draghi which achieves nothing but sends a message that the ECB is, impotently, watching the collapse in European inflation and loan creation coupled by an ongoing rise in unemployment to record levels (not to mention the record prints in the amount of peripheral bad debt). Needless to say, all of this is largely aggravated by the EURUSD which until a week ago was trading at a two year high against the dollar, and while helpful for Germany, makes the so-needed external rebelancing of the peripheral Eurozone countries next to impossible. Which means that like it or not, and certainly as long as hawkish Germany says "nein", Draghi is stuck in a corner when it comes to truly decisive inflation-boosting actions. But what is Draghi to do? Well, according to BNP's Paul-Mortimer Lee, it should join the "no holds barred" monetary "policy" of the Fed and the BOJ, and promptly resume a €50 billion per month QE.
Isn't it intriguing that with the cash bond market closed, every other risk-asset-class in the world dies a horrible death of volume-less list-less price action? Today's only activity - bearing in mind the absence of the bond-market's almost ubiquitous POMO leveraging idiocy - was from the US open to the European close. From that point on FX markets (JPY crosses) and stocks went dead-stick pinned to VWAP (but managed new highs in the Dow). There was some divergences... HY credit (via ETFs) dropped rather notably to its lowest in almost a month; VIX was banged back under 12.5% - its lowest in almost 3 months; and crude oil prices jerked higher. Treasury futures indicate a 1-3bps yield rise on the day, the USD leaked lower (led by EUR strength), and PMs went nowhere fast treading water with modest losses. Stocks closed at record highs as the dash-for-trash remains front-and-center: "most shorted' names have tripled the market's 1.4% gain in the last 2 days!
Investors who believe that history has lessons to teach should take our present concerns with significant weight, but should also recognize that tendencies that repeatedly prove reliable over complete market cycles are sometimes defied over portions of those cycles. Meanwhile, investors who are convinced that this time is different can ignore what follows. The primary reason not to listen to a word of it is that similar concerns, particularly since late-2011, have been followed by yet further market gains. If one places full weight on this recent period, and no weight on history, it follows that stocks can only advance forever. What seems different this time, enough to revive the conclusion that “this time is different,” is faith in the Federal Reserve’s policy of quantitative easing. The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak...
With global financial company stock prices soaring, analysts proclaiming holding bank shares is a win-win on rates, NIM, growth, and "fortress balance sheets", and a European stress-test forthcoming that will 'prove' how great banks really are; the question one is forced to ask, given the ruling below, is "Why is ISDA so worried about derivatives-based systemic risk?"
History is full of people and institutions that rose to positions of supremacy only to come crashing down. In most cases, hubris – a sense of invincibility fed by uncontested power – was their undoing. In other cases, however, both the rise and the fall stemmed more from the unwarranted expectations of those around them. The more responsibilities central banks have acquired, the greater the expectations for what they can achieve, especially with regard to the much-sought-after trifecta of greater financial stability, faster economic growth, and more buoyant job creation. And governments that once resented central banks’ power are now happy to have them compensate for their own economic-governance shortfalls – so much so that some legislatures seem to feel empowered to lapse repeatedly into irresponsible behavior. The trouble is that few outsiders seem to be listening, much less preparing to confront the eventual limits of central-bank effectiveness. As a result, they risk aggravating the potential challenges.