Central Banks

"It is already too late. Having delayed way beyond the point when it might typically have raised rates in previous cycles, it has allowed an Orc-like monster to incubate, hatch and emerge into the sunlight, snarling and ready to do battle."

In the next financial crisis, physical gold held outside the banking system in safe vaults in safe jurisdictions will prove to be a “financial cushion” to individuals, companies, pension funds, family offices,  and indeed nations.

While the U.S. equity markets, until the last few days, seemed unconcerned about the prospects of the rate hike, the so called canaries in the coal mine are once again sending troubling signals, as the consequences of a reversal of Fed policy after 7 years of crisis management are significant, and the stresses are amplified as policy change looks likely to occur while most other central banks are taking the opposite monetary policy tact.

The world of Bubble Finance economies created by the Fed and other central banks is fundamentally different than that prevailing under the “Lite Touch” monetary policies which preceded the Greenspan era. The problem today is that the PhDs running the Fed have an economic model which is a relic of the Lite Touch era. It is not only utterly irrelevant in today’s casino driven system, but is actually tantamount to a blindfold. It causes them to look at a dashboard full of lagging indicators like jobs and GDP components, while ignoring the explosive leading indicators starring them in the face on CNBC. The clueless inhabitants of the Eccles Building do not recognize that they have created a world in which Wall Street supersedes main street.

There’s no reason to sweat a drop in the gold price or cheer a rise.

The recent new highs on the Nasdaq accompanying the surge off the August and September lows have been accompanied by bullish headlines, and it is true the action in some stocks is truly awe inspiring. Yet all the action has an oddly familiar ring to it and it may not be bullish. While most traders today haven't really lived through the 2000 bubble, older hats have institutional memory.

Inflation expectations are collapsing in the EU, Japan and the US. Is another deflationary spiral about to hit?

Evidently, voters are in a very bad mood just about everywhere. Unfortunately, they are bereft of good choices in most places. Usually one essentially gets to exchange one bunch of psychopathic looters for another – so it is like jumping from the frying pan into the fire. Very often, things will simply go from bad to worse, as the underlying basic problems are usually misdiagnosed, resp. there is no-one willing to actually tackle them. Investors should pay very close attention to this trend...When the performance of financial markets diverges from underlying social mood trends, it is usually time to be very careful.

The internals were mixed with the Bid to Cover sliding from 2.460 to 2.409, which however was above the 12 TTM average of 2.356. Offsetting the slightly weaker BtC print was the jump in Indirects, which rose from 56.4% to 60.3% the second highest on record, as foreign central bankers have again decided that the safety of US paper offsets the duration risk of holding it in a rate hike environment.

Ooops ...

Good Thing Debt Doesn't Matter! </sarc>

With the 'paper' price of gold are a somewhat unprecedented barrage of selling currently (down 9 of the last 11 days) to 4-month lows, one could be forgiven for thinking that demand for the precious metal is dropping. However, as almost every nation in the world (ex US) is devaluing their currency, The World Gold Council reports that physical gold demand has risen dramatically with US gold Eagle coin sales at the highest levels since the financial crisis.

The biggest event overnight came from Europe, where Draghi managed to once again jawbone the Euro lower by ober 50 pips when he told European lawmakers in a prepared testimony that downside economic risks are "clearly visible," repeating his October press conference statement, adding that the ECB will reexamine degree of accommodation in December as "inflation dynamics have somewhat weakened." And the statement that crushed the Euro: "If we were to conclude that our medium-term price stability objective is at risk, we would act by using all the instruments available within our mandate to ensure that an appropriate degree of monetary accommodation is maintained." I.e., another "whatever it takes" moment.

There is a driving desire among weaker-minded people to seek control over other people in the name of arbitrary standards of safety as well as arbitrary standards of “civil” conformity. While such people proclaim publicly that they do what they do for the “greater good,” in reality they seek only to satiate a private lust for power. Any fight for freedom from collectivists will require the removal of command and control. This is the only way that humanity can be given breathing room to rebuild without remaining under constant preplanned threat.