BIS

• Index of largest Chinese stocks drops to lowest since February 2009 (BBG)
• Plane-Debris Hunters Seek Suspected Aircraft Window Part (BBG)
• New-Home Building Is Shifting to Apartments (WSJ)
• Forward Guidance Risks Stoking Instability, BIS Says (BBG)
• Alleged Bitcoin Millionaire Nakamoto Gets $28,000 Donations (BBG)
• Mexico kills drug kingpin reported dead years ago (Reuters)
• Tencent to Buy 15% Stake in JD.com to Boost E-Commerce (BBG)
• Bitcoin exchange MtGox 'faced 150,000 hack attacks every second’ (Telegraph)
• Noyer Says Stronger Euro Creates Unwarranted Pressure on Economy (BBG)
• Russian Forces Gain in Ukraine as Separatist Vote Looms (BBG)

In recent months the Fed (and ECB for that matter) has taken up the mythical charm offensive of "forward guidance" as a way to assure markets that punchbowls will remain free and available for as long as it takes. At the same time, the Bank of England has been shown up (and lost credibility) over its threshold-ignorance, the Fed has also now started to hit the wall on any 'quantitative'-based forward-guidance communications policy, proposed Fed vice-Chair Stan Fischer is skeptical: "you can't expect the Fed to spell out what it's going to do... because it doesn't know;" and finally Bob Rubin slammed the Fed, saying "their forecast models don't work.. and forward guidance [has no validity] as it is impossible to know what is going to happen in 6 months." So today's BIS report on the the fallacy of forward guidance and risks to central bank reputation (and the following 4 charts) suggest faith in central banker omnipotence may be fading.

I clearly have a very hard time reconciling a U.S. stock market making new all-time-highs almost daily, especially in the face of what most economists consider to be a weak domestic economy with negligible growth prospects.  Moreover, when you layover the thoroughly stalled and certainly weaker overall global economic picture, it’s even harder to rationalize.  Finally, throw into the mix the gravity of threatening geopolitical tensions between the U.S. and Russia, the two nations with the largest stockpiles of tactical nuclear weapons on earth, and the market actually welcomes it.  Something majorly does not add up, well, to this Idiot anyways.

While the US may be rejoicing its daily stock market all time highs day after day, it may come as a surprise to many that global equity capitalization has hardly performed as impressively compared to its previous records set in mid-2007. In fact, between the last bubble peak, and mid-2013, there has been a $3.86 trillion decline in the value of equities to $53.8 trillion over this six year time period, according to data compiled by Bloomberg. Alas, in a world in which there is no longer even hope for growth without massive debt expansion, there is a cost to keeping global equities stable (and US stocks at record highs): that cost is $30 trillion, or nearly double the GDP of the United States, which is by how much global debt has risen over the same period. Specifically, total global debt has exploded by 40% in just 6 short years from  2007 to 2013, from "only" $70 trillion to over $100 trillion as of mid-2013, according to the BIS' just-released quarterly review.

Big Bubble Brutally Bursts ... Bringing Bankruptcies, Bond Busts

Below is the photo that reveals why US and EU bankers despise Russian President Putin so much

With US equity markets hitting fresh all-time highs (as much of the rest of the world is 10-15% off its highs and falling), the meme that rules the "common knowledge" talking-head world is "US decoupling" or yet another version of 'cleanest dirty shirt'. Well, as much as we hate to steal the jam from many an asset-gatherer's donut, the BIS provides us with a simple quick efficient guide to show that no, not all...as the BIS finds the US business cycle is entirely co-dependent on Asian (and Emerging Market) economic cycles. Perhaps it is snowing everywhere in the world?

The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.

Asia outperformed emerging market peers in Europe and Latin America during the recent selloff, which coincided with a drop in China’s PMI below 50. As Bloomberg's Tamara Hendereson notes, that was partly due to 'smoothing' by Asian central banks to temper volatility and partly because of the region’s reputation for strong growth and ample current-account cushions. Still, she warns, emerging market investors may in time focus more on Asia’s vulnerabilities, including higher valuations, lower real yields and greater sensitivity to Fed tapering and China’s rebalancing.

There is no point in trying to avert or prevent bubbles caused by monetary pumping by regulatory means. If one avenue for bubble formation is cut off, the newly created money will simply flow into another area. In fact, new bubbles almost always become concentrated in new sectors. If there were a genuine desire to keep the formation of bubbles in check, adopting sound money would be a sine qua non precondition. However, no-one who has any say in today's system has a desire to adopt sound money and give up on the failed centrally planned monetary system in favor of a genuine free market system. Our guess is that the booms and busts the current system inevitably produces will simply continue to grow larger and larger until there comes a denouement that can no longer be 'fixed'.

Yesterday we covered the supply side of the gold market from the perspective of global mints, which were kind enough to advise that they "can’t meet the demand, even if we work overtime." Today, courtesy of Bloomberg, we take a closer look at the demand aspect of the physical gold market, which as most know by now can be described with just one word: China.

What goes up (and tests $1,280 overnight)... must not be allowed to go up for the sake of the children of the status quo. It would appear the BIS' Benoit Gilson took over the reins from Michel Charoze this morning and the precious metal pilfering has begun. Why not? What else would you do faced with an Emerging Market FX crisis, various nations in mass upheaval, China's liquidity crisis front-and-center, and growth hopes around the developed and emerging world collapsing... buy US stocks and sell gold...

The US wants its dollar system to prevail for as long as possible. It therefore has every interest in preventing a ‘rush out of dollars into gold’. By selling (paper) gold, bankers have been trying in the last few decades to keep the price of gold under control. This war on gold has been going on for almost one hundred years, but it gained traction in the 1960's with the forming of the London Gold Pool. Just like the London Gold Pool failed in 1969, the current manipulation scheme of gold (and silver prices) cannot be maintained for much longer.

On December 24, we posted an update on Germany's gold repatriation process: a year after the Bundesbank announced its stunning decision, driven by Zero Hedge revelations, to repatriate 674 tons of gold from the New York Fed and the French Central Bank, it had managed to transfer a paltry 37 tons. This amount represents just 5% of the stated target, and was well below the 84 tons that the Bundesbank would need to transport each year to collect the 674 tons ratably over the 8 year interval between 2013 and 2020. The release of these numbers promptly angered Germans, and led to the rise of numerous allegations that the reason why the transfer is taking so long is that the gold simply is not in the possession of the offshore custodians, having been leased, or worse, sold without any formal or informal announcement. However, what will certainly not help mute "conspiracy theorists" is today's update from today's edition of Die Welt, in which we learn that only a tiny 5 tons of gold were sent from the NY Fed. The rest came from Paris.

Simplistic, subjective and unbalanced anti-gold opinions tend to get media coverage. However, it is important to always focus on the empirical evidence as seen in the academic research, price performance over the long term and the historical record.