MELTUP - "The Beginning Of US Currency Crisis And Hyperinflation", The Viral Video

Tyler Durden's picture

Must watch hour long video from Inflation.us that is now making the viral rounds, explaining what everyone on this website understand, in simple language. Please forward to your friends and neighbors. Inflationist or deflationist, the facts behind this video are undeniable. It is time for the truth about our economy to break through the propaganda machine.

 

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Cheeky Bastard's picture

OT (maybe not given the topic of the post).

I recommend all gold-bugs to go to LBMA web page and check LIBOR, GOFO and LIBOR-GOFO spread. It indicates future movements in gold. It is a fantastic set of indicators if you are buying on every dip. Just remember; LIBOR was, historically always higher than GOFO, so the positive LIBOR-GOFO spread indicates prevailing long interest, and negative LIBOR-GOFO indicates short interest. Hope this helps in predicting buying dips. Also, study more about gold forwards and how futures are utilized as a hedge [think GLD SPDR ETF] for cash settlements, further increasing supply when there is in fact no gold mined. The market is being incredibly manipulated by trades structured in this way. 

Bron Suchecki's picture

Keep in mind that LIBOR-GOFO, or the gold lease rate, does not really go negative and just reflects the fact that those stats on LBMA are means. Those lease rates are not reflective of actual costs to borrow gold or revenue earned when lending gold.

I'm not sure what you mean by long interest and short interest.

 

FranSix's picture

Lease rates on gold bullion are here:

http://www.kitco.com/market/LFrate.html

They are negative for the short term.  Longer term bullion leases have positive interest rates.

Bron Suchecki's picture

Real lease rates do not go negative, no one is paying anyone to borrow gold. The rates you quote are just indicators.

Cheeky Bastard's picture

LIBOR-GOFO is and indicator; LIBOR and GOFO [separately] are lending rates. Spread can, and does, go into negative. 

Bron Suchecki's picture

You have misunderstood what GOFO is and hence your further posts are incorrect, particularly where you give an example of borrowing gold at GOFO and lending cash at LIBOR and state that “you pocket the difference” between LIBOR and GOFO.

In fact one borrows gold at the lease rate, sells it and lends the resulting cash at LIBOR. In other words, LIBOR-Lease Rate = the difference you pocket, ie GOFO.

Don't take my word for it. As per the LBMA guide to the London Precious Metals Market http://www.lbma.org.uk/docs/OTCguide20081117.pdf page 19: “Forward rate = Dollar interest rate – metal lease rate”. GOFO is a Gold Forward Offered Rate, not an interest rate for gold. The LBMA defines GOFO as "rates at which the Market Making Members will lend gold on swap against US dollars." (page 21).

This is the same as the LBMA FAQ, but what you missed was the key phrase "on swap against". This makes GOFO different to gold "placed on deposit to earn interest ... and generically the interest rates applied to such lending of bullion are often referred to as lease rates." (page 15).

See also Blanchard http://blanchardonline.com/pdfs/Gold_Market_Lending.pdf which says on page 5: "A central bank loans a bullion bank some amount of gold with a lease rate" and goes on to say (with my comments in []): "The carry return [ie GOFO] is the return on the bonds [ie LIBOR] minus the gold lease rate."

 

 

Cheeky Bastard's picture

Actually, they are. That is clearly said in the GOFO FAQ. LMBA Gold Fixing Banks offer GOFO rates, same as they offer LIBOR rates, and it clearly and without any doubt states that those rates denote the will of the member banks to lend gold. Also, it clearly says that GOFO is a bilateral currency-commodity swap [currency being dollar and dollar only] and has maturity dates and rates which are priced against the value of the USD on the day the swap agreement is conducted. Basically GOFO is a fixed income security [like most of other derivatives].

Well since I, obviously, have not articulated well what i mean by long interest and short interest i will re-formulate; basically its the indicator whether the market is net short or net long [supply-demand]. LIBOR, GOFO and LIBOR-GOFO data for the entire year 2010 is listed and with charts available all over the place it is not hard to draw correlation between the three and the price of gold. Negative LIBOR-GOFO [for whatever maturity period of the swap] mimics movements in the gold prices [fall in the price], and for positive LIBOR-GOFO the opposite is true. Now, im not saying that GOFO represents all who wish to lend gold [it probably does not; forwards can be bought and sold on the OTC market where maturity periods and rates do not need to follow LMBA maturity periods and rates], but the same can be said about LIBOR. Truth is; both are benchmark rates when it comes to the markets in which they price will/risk. True one does not have to follow them and borrow or lend based on them; but most market participant do and will continue to do so since prevailing belief is that both LIBOR and GOFO correctly represent risk in the market. And since the member banks are the following :

The contributors are the Market Making Members of the LBMA: The Bank of Nova Scotia–ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA London Branch, Goldman Sachs, JP Morgan Chase Bank, Royal Bank of Canada, Société Générale and UBS AG.

i posit very large percentage of market participants price their costs of borrowing upon those rates. I personally am not stating that the rates are objective or even representative in the high degree of the risk in the market, what I am, however, stating is that they are benchmark rates and set market movements.

Hope that clarifies what i meant to say with my original comment.

silvertrain's picture

Thats why I come here , To get my daily education that I didnt get in the classroom..

oklaboy's picture

Silver, here here, as do I

Duuude's picture

Cheeky

Could you please elaborate with an example, haven't been aware of this before.

Thanx

Cheeky Bastard's picture

Basically; you borrow lets say, 50 million ounces, GOFO 1 year [if LIBOR-GOFO positive] and offer to lend in currency the value of those 50 million ounces at LIBOR 1 year and lock in the profit when swaps are conducted [Lets say LIBOR 1y (on the day you entered the swap)=1.5% and GOFO 1y (on the day you entered the swap agreement (possibly on the same day you enter LIBOR-based swap))=1.25% and the spot price for gold on the same day is 1000 dollars. You pocket the difference. Next; if you want to use the gold you borrowed [and which really isn't there] to short the market you dump it, and to hedge yourself against the price of rising gold you buy European call options [basically going long the market for the whole period until maturity]. European options are better if you are a) certain to a high degree that at the end of maturity the strike price will be exercisable [that is if your trading strategy is only based on options and those options are not hedges, it doesnt matter if the opposite is true] and b) you get a discount against the price of American option due to the nature of of how the European option is structured. It would be good if both LIBOR swap, GOFO swap and hedge are all done on the same day [due to price and rate fluctuations]. Then basically you wait for the whatever maturity period of all three is and finally unwind the trade. If gold rises the worst loss you can suffer is profit from LIBOR-GOFO trade you did+price of the option. For shits and giggles you can trade the market with American options according to the view you see the market moving for a period shorter than duration of your main trade. IMHO this is how gold price is being manipulated. Maybe there are some other ways to do it, but i have not put much thought into them.

*if this is in any way to technical or not clear enough that is due to me having a really really bad day pain-wise. seems as if the only thing which makes it bearable is burying my head into this and taking away the dominant role of the pain center in my brain and giving it to other parts of it. I will write a detailed post about this, as soon as im able, and i will make it less technical; thats for sure. 

Duuude's picture

Thanz Cheeky, I hope tha pain abates. I've been on the LBMA site trying to self-educate, knowing that I'll make incorrect suppositions and make a frail construct. Yeah yeah, learn by yer mistakes an allthat...how about this from you to me "Ya dumb fuck, on the LBMA site go here, look at this then go there".

Anyway, the blonde calls out to the blonde on the other side of the river "How do you get to the other side?!?"...

Figure me to be both blondes.

Cheeky Bastard's picture

Of course what i wrote was only from a theoretical position [regarding values I used]. You can not dump 50 million ounces since that would cause a nuclear holocaust; also it not advisable to enter 50 billion dollars one LIBOR swap [high exposure]. The rest stands as i have written it before. If you want a more, down to earth trade, just use lower values.

Thank you for the good wishes-

PS

You are not "both blonds" [i know the joke :D]. Its really simple just masked in an overcomplicated language and omission of critical data. The markets are really easy to figure out from the technical side; the problem is how to minimize risk and maximize returns [something i really dont care about in any other way than from the persepctive of gaining knowledge about something new].

Im also not a trader and when i was trading [if me fucking around the markets because i was bored can be called trading] i never [nor could have I] employed strategy as the one i written in the response to your comment. so, take it with a grain of salt.

Duuude's picture

As a way of thanking thanks for your time Cheeky...

 

http://www.wikiwak.com/image/Shitennoj+honbo+garden06s3200.jpg

 

You can zoom in on it.

merehuman's picture

Cheeky, i hurt too and found weed, pot helps me get past that as it takes me out of the body conciousness.  years ago when i fished with commercial fishermen i got sea sick and they said to smoke pot. I did, was still sick, but smiling all the while.  Best wishes to you .

Kali's picture

Pot will get you through times of no money, better than money will get you through times of no pot- old stoner saying.

dark pools of soros's picture

not sure I follow the bother to buy on dips when most people on that side of the tracks feel gold should go to >$5,000.  That logic goes against all the attacks on the gold traders..  unless one is doing both??

 

I have a small stash of Gold and Silver myself, but I would just buy whenever I am putting away savings since saving in dollars is pointless.  Money on hand is different of course - you gotta stay liquid to some extent.

Black Swan's picture

You really are a cheeky basterd arn't you........!!

Cheeky Bastard's picture

i dont know if you are taking a piss at me or not, but yeah ... cheekiness is my main trait.

Crab Cake's picture

Only a side of bastard?  :)

Sudden Debt's picture

Being called a nice guy these days, is actually a insult.

 

boooyaaaah's picture

The only way we can start producing stuff in America again is if American wages become lower -- more in line with the 3rd world developing nations

Since no American wants a lower wage --- what are we to do?

We devalue the dollar

The problem comes when, through devaluation, the amount of currency increases and the Government ---- either our facist wing ---wants to defend the world ---- or our communist wing wants to buy votes and give free benefits to all especially certain votiong blocks ---- unions and illegal aliens

So instead of the American taxpaying public benefiting from this devaluation / inflation they are even more burdened and the effort to bring our wage rates lower results a larger Facist or Communist planned economy.

Freedom oh freedom

Before I'll be a slave I'll be buried in my grave

and go home to my lord and be free

http://www.youtube.com/watch?v=FfXdTWFwPLk&feature=fvw

 

 

 

 

tip e. canoe's picture

how exactly are illegal aliens a voting bloc?  maybe those other aliens are hacking the black boxes on their behalf?

jeff montanye's picture

to speak of the democratic party as a communist wing is absurd.  obama is walking the path trod by gwb and cheney.  he is a tool of the corporations, the zionists and the rich.  and he is adding to the police state he inherited (not incompatible with communism as practiced in the ussr and china but the blind obedience to the previously existing moneyed elite sure is).  

for me the eye opener (at the tender age of 61) of obama's election is the confirmation of the now undeniable truth of ralph nader's (for whom i never voted) claim that both parties are essentially the same.  oh they listen to slightly different music, maybe differ on abortion (and more for public consumption -- bet most national republicans wouldn't think twice if their daughter needed one), play up (emphasis on "play up") to different voters, if gay a little more or less in the closet.  but when it comes to war or peace, who gives and gets the money, what countries we bribe or bomb, whether you can jail or kill a citizen and for what.  not so much.

boooyaaaah's picture

I agree with you and Ralph

They are both socialist

National socialist

And Communist Socialist

All Central Planners

cossack55's picture

I would argue with you most vehemently if I did not agree so wholeheartedly.

LiquidBrick's picture

Bloomberg for President, Ron Paul for Vice President, Peter Schiff for CoB for Fed Reserve (an oxymoron) and Glenn Beck for Speaker of the House. Will that fix it? Or at least a good start?

KTV Escort's picture

Beck? I'm surprised you didn't throw Palin in your mix.

LiquidBrick's picture

Ah, good idea. Energy Tzar provided that the only drilling she allows is behind closed doors and becomes a solar, wind and ng bug.

Thank you KTV = )

Liquid

Gold...Bitches's picture

Apparently you prefer the Genovese over the Gambino's...

thesapein's picture

is not the sort of thing governments fix. Governments are slow, lagging behind change. Laws only get written well after the important changes have already ocured within the pop.

WaterWings's picture

Bloomberg and Paul.

Judas and Jesus.

Tom and Jerry.

 

Mark McGoldrick's picture

You lost me at Glenn Beck. Have him wear a hat with a bell on it, and I'd vote for him as Jester Czar.  He's not qualified for anything else - except Chief Spinnster at Faux News.  

Gold...Bitches's picture

Gambino/Genovese

Democrat/Republican

When your choice is which family you want to get shaken down from, its not much of a choice.

Bringin It's picture

shame you got junked.  maybe you can't say the 'z' word.  Where is the village idiot on this point?  VI is it ok?

merehuman's picture

VI did me a good turn. By harrassing me i learned alot , even about myself.

I learned to always stand my ground, to not back up. Funny @ 59 i thought i was all grown up. I find resolve growing to make a stand  and can only hope that all of america awakens and takes a stand also.

So far we seem to be a country of watchers , hoping the other guy will fix it.

Morally lazy or just overburdened by the filling and chasing of desires to occupy the mind. This is more than a fight about money, its also a fight for our evolution.

Those who decry and putdown the meltup video have something against a general awakening and may be the same as MasterBates and the rest of the anti gold crew.

Who has the gold has the power, so lets all of us get some, no matter the price.  

masterinchancery's picture

because a large number vote in the cities, winked at by the democratic machines, and most vote democratic

tip e. canoe's picture

it wouldn't surprise me in the least. that said though, a recent thought by Joe Bageant:

"And most of all, "The Gram" is required to keep its captives deluded and sated enough to remain productive and consuming -- not to mention hating the right people -- right up to the last moment before total collapse, and they are no longer needed."

http://www.joebageant.com/joe/2010/05/lost-on.html

Bringin It's picture

People are so manipulated.  Goebels would be proud.

I was thinking, Gee if only those poor upcountry Thai protesters would learn not to sell their vote and then I realized ... Americans sell their vote in the sense that if they hold their nose and look away, they'll get to keep buying more stuff.

Being a citizen in a functioning democracy doesn't work like that.

RockyRacoon's picture

I'd be interested in your statistics on this data, with some reference links.

Thank you.

Carl Marks's picture

I thought Joan Baez was a commie?

dnarby's picture

Yes, but she didn't write that song.

overmedicatedundersexed's picture

I have read this type of comment so very often:

Us wages must fall to compete with 3rd world workers..

The BIG LIE told over and over to a public who

has given up critical thinking.

prior to WWI the total Federal gov was funded by Tariffs.

The One world - NWO - CFR- elites of which all our presidents and most in congress are members - pushed this lie of "free Trade"

The USA is the LARGEST MARKET in the world

if we had the same tariff structure as 95% of the world ie 20%+

those busineses across the world that depend on our markets would have to relocate back HERE

America by that structure would have much higher wages and living standards with much less taxation. 

Remember: the elites are not Americans and have been working to destroy the living standards here..

WAKE UP.

The answer to all our problems is so very simple and staring you all in the face..so no one in Gov or Media will address it.

 

 

snowdude's picture

That implies that you want to build the economy on production of low-value commodity goods.  The US and other western countries are able to compete quite well in the production and sale of advanced goods, like some machinery, etc., although in a lot of cases the actual building is done in cheaper locations.

One of the main reasons US production is too expensive is the level of the USD which is driven by the fact that it is a reserve currency and not just a domestic one.

Combine that with the fact that part of the cost structure of cheap imported goods is the relatively low transportation cost.  If oil really gets into short supply, watch those costs escalate in a hurry.  We saw how quickly the coastal regions of China dumped tens of millions of workers a couple of years back as oil peaked and the economy tanked.

So in other words, you could probably fix much of the problem by dropping the value of the dollar and letting the price of oil go through the roof.  American wages could stay where they are, although prices domestically would go up and more expensive Americans start building all the previously-imported goodies that so many people can't resist buying.

overmedicatedundersexed's picture

You are getting close to what I see as an answer to some of our problems:
the recreation of America would be an apt description:
1. massive tariff increase: (the CFR and their "running dogs" to copt a Maoism. have discredited tariffs as one cause of the Great Depression) totally false . The policy of Gov drove capital into the wrong sectors ie gov.

2. Capital must be allocated away from wall st banks and the money handlers..into infrastructure..electric grid, power,transportation.,as examples

3. America Gov must get out of the way of our own production of energy..Nuclear, coal, and most importantly oil and NG..

4. Reduction of taxes across the board

5. Leadership who are exclusively CFR types must go..their plans for massive gov spending and out sourcing of our wealth : the EU bailout as most recent example. must end

6. Our debt will be paid off with the resulting growth in real wealth that we KEEP HERE.

 

 

 

snowdude's picture

A lot of that sounds good to me.  I would question a couple of points.  First, "Our debt will be paid off..."  This is likely not possible when you combine the current official debt, plus the present value of deficits in future obligations.  It would take all the value produced by the US economy for a generation to pay those debts.  The alternatives are to default or "print" money, thereby devaluing the currency.

The second point is your first:  "massive tariff increases".  I have lived in economies that do this for many years and can say, based on my experience, nothing good comes from tariffs.  They are protectionist but what they protect is poor performance and waste.  They also cause investment to leave, meaning there is little or no funding available to develop any opportunities that come along.  The U.S. today lives off enormous sums of foreign capital.  We even know that much of the GDP number includes offshore production for most of what is consumed, revalued at American rates.  That means the country likely would not have enough capital on its own to do much if foreign investment was reallocated elsewhere.  The bailouts that the U.S. and other nations are providing to Greece and other places are not accumulated capital - they are just more debt because there is no money sitting around to give them.

Gold...Bitches's picture

its easier and more complicated at the same time.  Its taxes on your/our labor/work which is the inhibitor to wealth creation and building.  And thats before getting into the question of legality of the IRS, taxes on labor, 16th amendment, etc...