Soros: “Financial System Remains Extremely Vulnerable… We Are On The Verge Of An Economic Collapse”

Tyler Durden's picture

From Gold Core

Soros: “Financial system remains extremely vulnerable  …  We are on the verge of an economic collapse”

Gold is mixed today after last week’s 2.4% fall. The short term trend remains negative but medium and long fundamentals remain supportive as do the very challenging and risky macro, sovereign debt and currency environment. Physical buying remains strong at the $1500 level with premiums for gold bullion bars higher in Singapore and Hong Kong.

The risk of contagion in the Eurozone and indeed a global financial contagion remains real. Peripheral European bond markets are under pressure again today with 10 year bond yields in Ireland rising to over 12.1% and to over 11.65% in Portugal.

Cross Currency Rates

European leaders are preparing for a default by Greece. The German finance minister, Wolfgang Schaeuble, said yesterday that Europe is preparing "for the worst".

George Soros, Chairman of Soros Fund Management and famous for breaking the Bank of England in 1992, has warned that "we are on the verge of an economic collapse which starts, let's say, in Greece but it could easily spread."

Gold in Euros – 1 Year (Daily)

The 80-year-old investor said that the “financial system remains extremely vulnerable."

Soros added that "there are fundamental flaws that need to be corrected."  The core flaw, says Soros, is that the euro is not backed by a political union or joint treasury, so when something goes wrong with a participating country, there is "no provision for correction."

Soros said that it is "probably inevitable" that highly indebted countries will be given a way to quit the euro.

Gold has been the strongest currency in the world in recent years and all major fiat currencies, including the Swiss franc, have fallen against it. Should Greece revert to drachmas, Ireland to punts, Spain to pesetas, Italy to lira and Portugal to escudos, these countries would suffer massive inflation and the price of gold would surge in terms of these local currencies.

PORTUGUESE GOVERNMENT BONDS 10YR NOTE – 1 Year (Daily)

The assertion that gold is a bubble may soon be seen as silly as gold increasingly reasserts itself as a safe haven asset and currency.

Gold’s primary advantage is that it protects against currency devaluation – this will be realized again in the coming weeks and months.

The very strong demand for gold seen in Greece in recent days will likely soon be experienced in other peripheral Eurozone countries It will likely be replicated internationally as concerns mount about currency debasement and currencies in general including the euro, the British pound and the U.S. dollar.

Soros Gold ETF Sale - Well Publicized but Poorly Analyzed

Soros’ recent sale of his gold ETF holdings made headline news internationally with much commentary claiming that Soros sale of his gold ETF holdings means that gold has “peaked” and the “bubble” may soon burst.

However, what was less reported was the fact that Soros maintained very significant positions in gold mining companies.

It is highly unlikely that Soros Fund Management would maintain significant allocation to gold mining companies if there was a belief that gold was a bubble that was soon to burst.

Indeed, if his hedge fund truly believed that gold was a bubble and significantly overvalued, it would seem sensible of them to have shorted the gold ETF and not have added to gold mining positions.

More plausible is that Soros, given his political activism, may have decided that he did not want continuing publicity regarding his large ETF gold holding. ETF gold holdings like all securities must be declared in SEC filings.

Given Soros view that “we are on the verge of an economic collapse” and his oft repeated deep concerns about the U.S. dollar, it is very possible that he is accumulating gold in allocated accounts away from the spotlight of the media and the public.

London Good Delivery gold bars (400 oz) can be bought in volume at much the same prices as the gold ETF. They can be stored at a cheaper cost but have the added advantage of not having to be declared.

Importantly,  London Good Delivery gold bars are highly liquid and would be more liquid than ETFs in the event of a systemic crash and or currency crisis. This is one of the reasons that increasingly respected hedge fund manager, David Einhorn, has opted for gold bars in allocated accounts in specialist depositories.

Counter party risk is also one of the reasons that the University of Texas Investment Management Co., the second-largest U.S. academic endowment, said April 14 that it has taken delivery of about $1 billion worth of gold bullion bars.

NEWS

(Reuters) -- Gold steady on Asian physical buying; dollar weighs
http://www.reuters.com/article/2011/06/27/us-markets-precious-idUSTRE7592IU20110627

(Bloomberg) -- Gold May Drop as Greek Rescue Plan, Crude-Oil Decline Erodes Haven Demand
http://www.bloomberg.com/news/2011-06-27/gold-may-drop-as-greek-rescue-plan-crude-oil-decline-erodes-haven-demand.html

(Bloomberg) -- BIS Says Gold Held in Swap Contracts Rose 18% as of March 31
http://www.bloomberg.com/news/2011-06-26/bis-says-gold-held-in-swap-contracts-rose-18-as-of-march-31.html

(The Telegraph) -- European leaders prepare for a Greek default
http://www.telegraph.co.uk/finance/financialcrisis/8600016/European-leaders-prepare-for-a-Greek-default.html

COMMENTARY

(The Daily Mail) -- Lord Rees Mogg: The Greeks are buying gold - so should you
http://www.dailymail.co.uk/debate/article-2008068/WILLIAM-REES-MOGG-The-Greeks-buying-gold--you.html#ixzz1QSfFIhai

(Financial Times) -- The UK can learn from Greece’s tragic loss of faith
http://www.ft.com/cms/s/0/795e17fa-9daa-11e0-b30c-00144feabdc0.html#axzz1QSdCUWeE

(ZeroHedge) -- What If Greece Says No?
http://www.zerohedge.com/article/what-if-greece-says-no

(CommodityOnline) -- US Middle Class nears extinction, Looks for gold,silver to rescue
http://www.commodityonline.com/news/US-Middle-Class-nears-extinction-Looks-for-goldsilver-to-rescue-40310-2-1.html

(The Telegraph) -- Where Greece goes now, we will soon follow
http://www.telegraph.co.uk/comment/columnists/christopherbooker/8598664/Where-Greece-goes-now-we-will-soon-follow.html

(King World News) -- Rickards: Fiat system's abuse will force world back to gold standard
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/6/25_Jim_Rickards.html

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doomandbloom's picture

Senator Palpatine speaks.. formation of the empire is near..

TheEmperor's picture

Wipe them out...all of them.

curbyourrisk's picture

Economy on brink of collapse.

 

Soros should know, he bet it would!

WaterWings's picture

Our society's crack-riddled brain wants to stop, but we still listen to this pusher, Soros.

It's madness that anyone trusts this guy after making a cool billion on the crash of the Pound. Madness!

Pegasus Muse's picture

Bankers Declare War on Commodities by Jeff Nielson, Friday, 24 June 2011 11:59

"Some may suggest that my choice of subject for this commentary is misplaced, given that the “reason” why the oil market plummeted yesterday was the big oil-dump of 60 million barrels by the International Energy Agency (IEA). My reply to that is that the response of all of the commodities markets to that news demonstrates conclusively that the bankers are attacking all commodities."

http://www.bullionbullscanada.com/index.php?option=com_content&view=arti...

overmedicatedundersexed's picture

so Soros sold his gold recently as has been rumored..one lie after another has worked for a very long time. I bet even Soros gets confused as to which lie he is promoting at the moment.

PM's are getting stronger against paper  who knew?

Going Loco's picture

Er, no. Not at the moment they are not.

Read around a bit and what do you find? Liquidity is a problem. Cash (ie: instant access to computerised credits) is in short supply.

Nobody knows for certain, and those like Soros who might have a better chance of knowing will only tell you the things that will help them achieve their own objectives. But right now the squeeze seems to be on. If so, I think we are moving into Ruffer's "moment of deflationary fear" and it is only after we have experienced that phase that the "inflation of currency compromise" will make PMs the safe haven.

Meanwhile my most reliable source in the UK has issued a red alert to subscribers - ensure your bank deposits are below the (alleged) guaranteed deposit scheme, and he has listed the Uk banks in order of safety - some surprises for me in that list.

cahadjis's picture

Interesting... Natwest anywhere there? Just asking, or maybe you can help us by saying who is this source? Thanks.

fiddler_on_the_roof's picture

Nadeem walayat has given a list of UK banks which are safe in decreasing order. Goto walayatstreet.com

Going Loco's picture

Yes, it's Nadeem. That man has been the most consistently accurate forecaster of Uk financial affairs since I started reading him 3 years ago. Not sure I agree with his forecast for the Dow at the moment. Anyway, banks:

"The following table lists Britain's major retail banking groups (separate licences) in terms of the percentage probability that your deposits above the UK compensation limit of £85k and Euro-zone banks 100,000 (current £/E £86k) would be secure in the event of a series of euro-zone debt defaults starting with Greece and that the crisis is contained to these smaller peripheral euro-zone countries i.e. Greece, Portugal and Ireland, if Spain comes under real risk of default then that would require a revaluation of this list as banks such as Santander would come under far greater pressure given exposure to Spanish government debt."

NatWest is down at the bottom. 5%  probability Deposits over £85k are Safe

 

http://www.marketoracle.co.uk/Article28905.html

eureka's picture

"Not sure I agree with his forecast for the Dow at the moment."

All technical, chartist, cycle "analysis" exist in "naturalistic" - i.e. romantic vacuums; there are no natural laws governing leveraged, manipulated finance - rather, one must consider political power games and popular perception as co-forces of globalist, casino-capitalism.

US Republicans will lose the next election if they do not get sufficient US budget cuts in return for continuous incrementally raised US budget ceilings, which govern the amount of issuable US debt. Consequently US debt issuance, and thus US equities-pump, will subside.

Iam_Silverman's picture

"so Soros sold his gold recently as has been rumored"

Here, I'll edit that for you....

So, Soros sold his soon to be worthless ETF shares recently, as has been rumored.

Doesn't that make it more accurate?

White.Star.Line's picture

Soros did not sell any gold.
He did sell a substantial amount of gold shares, however.

King_of_simpletons's picture

*clap clap clap*......

hungarianboy's picture

Problem is that when Soros starts to talk, position is always going the opposite direction.

Also the fact that GS Tech is saying short EU could implicate that to many are on the short side and a snap back could be expected.

PaperBear's picture

Do ZH readers still say "buying gold" or "buying silver" ?

The act of "buying gold/silver" is actually EXCHANGING toilet paper for gold/silver.

Iam_Silverman's picture

"Do ZH readers still say "buying gold" or "buying silver" ?"

I always say that I'm going down to the coin shop to get some change.  Isn't that what it's called when you hand someone paper bills and get coins in return?

bagpiper's picture

Yup....lol...wish ZH had some good smilies...

;-)

 

Zero Govt's picture

got a feeling George will do well in riding out the approaching (fast) Hell Storm but despite being a sharp cookie he still talks some rubbish:

the Euro is not backed by a political union or joint treasury, so when something goes wrong with a participating country, there is "no provision for correction."

The Euro as a patent fact has out-preformed both the US Dollar and Sterling over the past decade, both of whom have his beloved central banks. It seems having a central bank is not an advantage over a rag-bag de-centralised system such as Europe has, indeed both have under-performed the disparate Euro system

And will the US and UK's central banks save or resolve anything better in the coming Depression? Absolutely unequivicably not. All 3 zones will suffer the exact same economic turmoil, central banks proving once again their worthlessness and absolute uselessness both in rising and declining economies.

Sorry George, State monopolies are under-performing garbage, you're talking complete crap (again)

QuantTrader's picture

After partying with his son in the hamptons this past weekend, I wouldn't beleive anything the old man says

oddjob's picture

If the Hamptons is a gay bar, I believe you.

WaterWings's picture

Worse.

"Okay, close your eyes, and just pretend it's the Hamptons."

Coffin Dodger's picture

To anyone who hasn't already: MAKE PLANS

1) Stockpile food and water NOW

2) Select a house to all meet at as far from cities as possible, from amongst your circle of trusted friends/relatives

3) Convince anyone you trust to accept your plan. Sell it as a 'worst-case scenario'. Numbers will be VERY important

4) Ensure EVERYONE has enough gasoline stored to reach the chosen destination

5) Ensure you have means to defend yourselves

6) Tell NO ONE outside your circle what your plans are

You'll know the time has come when you turn on your TV and the gov't has bugged out.

Greeny's picture

Buy bomb-proof Nuclear bunker and hide there for

the rest of your miserable live, like a rat, what a freak.

Zero Govt's picture

Coffin Dodger

You're almost as hysterical as Timmay on the deficit ceiling! Are you preparing for an asteroid attack, super-tsunami or a nuclear war?

Check the last Great Depression, 1929-34, and you'll see all sectors of business stayed open including water, food retailers, clothes and pretty much everything. There will be no shortage of anything, in fact businesses will be keen as mustard for your custom. Be prepared only for a culling of the business sector, not a killing. So relax. . .

moonstears's picture

Kinda true. Vast numbers didn't use city/state services, at that time(water from wells, minimal electricity, say just 6 lights and a few plugs for the radio). I've told my loved ones, this is how it works...currency breaks down goods and services remain, but for at LEAST a few weeks the object of desired trade or barter for those goods goes out the window..."Dollars? Give me something I can use!".

TheDriver's picture

I have no issues with people preparing but this line of thinking always cracks me up: "4) Ensure EVERYONE has enough gasoline stored to reach the chosen destination". No one will be driving anywhere if TSHTF. This is what I-95 looks like on a good day in DC -- http://imgur.com/MWpeC

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Some of us live in what you in the East call "fly over country" and we actually have room to breathe.

 

Tuco Benedicto Pacifico Juan Maria Ramirez

knowless's picture

i don't know how many times i've said this; but during the last great depression 97% of the population didn't live in global import dependant cities.

ibjamming's picture

Government dependent cities...

Without SNAP, section 8, and general welfare...the cities would already look like the pictures of the great depression.  Bread lines, people living in tents in the parks...we'd have all that now without the government programs.

Silver Dreamer's picture

Exactly. Comparing the coming collapse to the Great Depression is foolishness.  Back then 90% of the population lived in rural areas and was NOT dependent on the government for anything.  Now consider today's exact opposite scenario of 90% in urban areas.  That retreat or bunker is beginning to look like a good idea, not a paranoid one.

Zero Govt's picture

i agree this will be worse than the 1929 Great Depression but for every benefit they had in their day and for every Govt dependency we have today there's still technological advancement for our better keeping ...the Web should prove a real boon to sharing ideas, barter and trade etc ...regards Cities being dependent on international trade what's wrong with that? It's unlikely to break down, just contract, in fact it's a productive bonus (flexibility of supply etc) over 1929... as for us huddled in suburbia instead of out in the sticks again human interaction is always a positive not a negative, that's why towns and Cities and got larger in the first place, the opportunities of so much more on offer in urban areas for comfort and quaility of life

No need to add lots more negatives to a dire economic situation, we can prepare without need of bunkers, bullets and storing oil in drums 

ibjamming's picture

Huh?  Did you forget that half the people living in the cities are going to suddenly be broke and starving?  It's good for YOU...but not for them.  Riots WILL ensure.  The cities won't be safe.

Monedas's picture

No one ever starved in Kansas ! Your bomb shelter can double as a tornado shelter ? Monedas 2011 Digging for the Truth !

Captain Planet's picture

i'm concerned they're going to outlaw farming in the northeast, on grounds of public health, so i'm a little hesitant to start there.

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

7,000,000 Americans died of malnutrition/starvation in the Great Depression!  Given your attitutde, you would have been amongst them.  Have fun!

 

Tuco Benedicto Pacifico Juan Maria Ramirez

Greeny's picture

Well, Soros full of S**, as month ago he reported that he sold all his GOLD, and now he's probably shorting EUR, Good luck, old fart, betting against China, which are buying EUR debt.

anony's picture

Soros didn't become a multibillionaire by giving away his moves.

His public credibility is worthless.  Until he publishes his Trade confirmations, so are his public utterances.

This informatino is null. Unless filtered thru a Soros decoder ring.

Ghordius's picture

Hemm... what is the best way to get at large quantities of physical gold? If I could, this would be my way:

1. buy ETF's
2. wait
3. redeem ETF's with physical gold
4. tell everybody my gold ETF position has decreased
5. wait and see

Temporalist's picture
Ron Paul on the Gold Standard – June 26th 2011

http://ronpaulflix.com/2011/06/ron-paul-on-the-gold-standard-june-26th-2...

 

China's Move Away from the U.S. Dollar Means You Need to Invest in the Yuan

""China admits to buying small quantities of gold - about $50 billion in the last year. But it may be buying a lot more gold - and silver, as Imperial China was on a silver standard, not a gold standard," said Money Morning Contributing Editor Martin Hutchinson."

http://moneymorning.com/2011/06/27/invest-in-the-yuan/


Can Gold Save the Euro?

"Professor Robert Mundell urges gold convertibility for the euro, the currency which he fathered, as well as for the dollar."

"Mundell: [T]here could be a kind of Bretton Woods type of gold standard where the price of gold was fixed for central banks and they could use gold as an asset to trade central banks.

The great advantage of that was that gold is nobody’s liability and it can’t be printed. So it has a strength and confidence that people trust. So If you had not just the United States but the United States and the euro tied together to each other and to gold, gold might be the intermediary and then with the other important currencies like the yen and Chinese yuan and British pound all tied together as a kind of new SDR that could be one way the world could move forward on a better monetary system."

http://www.midasletter.com/index.php/can-gold-save-the-euro/

 

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

It is my understanding that the Euro is backed 15% by gold!?

 

Tuco

falak pema's picture

if you want gold buy lead...if you want lead buy Land...if you want land buy a cow...if you want a cow buy a calf...if you want a calf buy  a half moon...if you want a half moon buy a laugh... Then you'll know that the best things in life are free...

Tater Salad's picture

Soros sold his ETF holdings as this is public knowledge.  However, he reinvested the proceeds in a manager that buys nothing but gold and gold stocks.  So much for "selling" gold.

He just repositioned so that the public couldn't follow his each and every move through the 13F.

 

 

Pseudo Anonym's picture

Soros, given his political activism, may have decided that he did not want continuing publicity regarding his large ETF gold holding.

and therefore, the treacherous jew who sent many of other jews into gas chambers, took delivery on his ETF's and stores his bullion now in hofjuden vaults.

tradewithdave's picture

The probable inevitability of Soros agenda of libertarian paternalism and the new and improved gold backed SDR has the surprising plot twist of "End The Fed."

Dave Harrison
www.tradewithdave.com

Yen Cross's picture

 The last Bastian of Rusky Liberalism!

Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Right!  He came to this earth straight from the bowels of hell!

 

Tuco Benedicto Pacifico Juan Maria Ramirez

ivana's picture

he's not investor

he's corrupt insider and bankster "facility"