Here are some excerpts from an interview forwarded to me by Mr. Lars Schall of chaostheoren.de with oil expert F. William Engdahl. Whether you agree or disagree with Mr. Engdahl’s theories, his insight always presents perspectives given almost zero coverage by the mainstream media. Much of the fraudulent and deceptive practices of big global banks that Mr. Engdahl discusses regarding the oil markets can be extended to other commodity markets such as gold and silver.
inflation is pretty much our entire bullish premise
Well, those devious gold bugs and sound money advocates are at it again! They had the audacity to produce economic analysis that consistently outshines and embarrasses mainstream Keynesian pundits. They had the nerve to expose the seedy underpinnings of the private Federal Reserve. They even had the gall to bring the long established short manipulations of metals markets by global banks like JP Morgan and HSBC into the light of day, where anyone whose head was not buried in the dark recesses of their own colon could see and say “My god! There really is an organized cabal against gold and silver!” But if you thought all that was outrageous, these people, who promote the insane notion that our currency should actually be backed by tangible wealth and should be under the control of the voting public instead of some unaccountable parasitic corporate central bank, have now brought state legislators into the mix! The return to sound money has begun…
This is not "Commie talk" people. If you are not one of the Forbes 400 you are either a victim or a victim-in-waiting because what do you think the 400 will do when the bottom 90% are bled dry?
The collapse of the Shadow Banking is not resulting in the degree of asset deflation you might expect because the assets deflating are what has been referred to as toxic debt. The underlying basis for these instruments is real estate which is correspondingly being stopped from collapsing by the halting of Mark-to Market and other Fed sanctioned accounting gimmickry. Meanwhile the offsetting Money creation by the Fed is flowing into equities and bonds. This is creating the asset inflation that the Fed wants and needs. A major problem for the Fed is not just being able to generate the amount required to offset the Shadow Banking System erosion, but also the rate at which the it can realistically make this happen. The Fed needs to buy more time. Unfortunately there are other major problems that are boxing them in.
Holy fucking shit. It is not often Money McBags wakes up to such a far reaching news story...
Sean Corrigan's Letter To All The "Idiots" Who Believe The Japanese Calamity Will "Prove Positive For GDP"Submitted by Tyler Durden on 03/15/2011 19:31 -0400
All the sophist idiots (Corrigan's word not ours) in the media and the bleeding edge of financial lemmingdom who believe there could be no greater boon to global economy than the death and suffering of hundreds of thousands(you know who you are) are kindly requested to read the following missive from Diapason's Sean Corrigan who cleanly and clinically blows out this latest moronic piece of uber-false groupthink out of the water: "We cannot abstain from expressing our utter contempt for the many idiots who have already begun parroting the standard Keynesian nonsense that this calamity will ultimately 'prove positive for GDP', or that the rebuilding efforts can only redound to the nation's well-being to the extent that they shake it out of its ongoing 'deflation'... If the awful spectacle of vast swathes of land littered with shattered buildings and crumpled vehicles—or the concern that they suffer the invisible hazards of radioactive contamination—offers such grand opportunities for advancement, why stop there? Why wait for the vagaries of the climate, or the tortured creaking of continental plates to bring about such a 'stimulus' to growth? Why not declare war on ourselves and unleash our titanic arsenals of destruction on our own towns and cities, and rain down hellfire upon our own farms and gardens, razing the first to the ground and sowing the last with salt, until we make a self-inflicted Carthage of them, one in whose midst we can hope to become rapidly richer than our neighbours as, shivering and starving, we pick our way among the debris of our former civilisation to the nearest construction site? This is all such arrant nonsense that you should banish from your consideration, henceforth and forever, all of the jejune scribblings of the fool whom you once catch propounding it!
It is not yet clear how devastating the nuclear-reactor damage will prove to be, but the situation appears to be worsening. What is clear is that the potential crisis in the Persian Gulf, the loss of nuclear reactors and the rising radiation levels will undermine the confidence of the Japanese. Beyond the human toll, these reactors were Japan’s hedge against an unpredictable world. They gave it control of a substantial amount of its energy production. Even if the Japanese still had to import coal and oil, there at least a part of their energy structure was largely under their own control and secure. Japan’s nuclear power sector seemed invulnerable, which no other part of its energy infrastructure was. For Japan, a country that went to war with the United States over energy in 1941 and was devastated as a result, this was no small thing. Japan had a safety net. The safety net was psychological as much as anything. The destruction of a series of nuclear reactors not only creates energy shortages and fear of radiation; it also drives home the profound and very real vulnerability underlying all of Japan’s success. Japan does not control the source of its oil, it does not control the sea lanes over which coal and other minerals travel, and it cannot be certain that its nuclear reactors will not suddenly be destroyed. To the extent that economics and politics are psychological, this is a huge blow. Japan lives in constant danger, both from nature and from geopolitics. What the earthquake drove home was just how profound and how dangerous Japan’s world is. It is difficult to imagine another industrial economy as inherently insecure as Japan’s. The earthquake will impose many economic constraints on Japan that will significantly complicate its emergence from its post-boom economy, but one important question is the impact on the political system.
The Fed is being disingenuous in claiming it is blameless for global inflation: the Fed's zero-interest rate policy and quantitative easing are both unleashing "hot money" that is seeking higher returns anywhere they can be found in the global economy. In a larger sense, the Fed is attempting to repeal the business cycle. In the normal course of capitalism, low rates and easy credit lead to increased borrowing, which leads to rising consumption and investment in production to feed that increased consumption. This leads to higher profits, which feed more investment and debt. At some point, the cycle hits a brick wall: borrowers can't afford to pay more interest, so debt stops rising, and consumption and demand slump as borrowing levels off. In the rush to mint profits, production capacity exceeds demand, and as a result prices and profits both fall. As the boom progressed, investors sought out riskier, more marginal investments. As new debt and demand fall, then these riskier investments lose money and are either shuttered or sold for a loss. As profits decline, workers are laid off and commercial borrowers find their income streams aren't sufficient to meet their obligations. The credit cycle turns from expansion to contraction, as marginal borrowers go bankrupt and insolvent businesses and loans are liquidated or written down. This purging of bad debt, speculative excess and misallocated resources sets the foundation for another cycle of renewed growth. But the Fed has attempted to repeal the credit cycle.
Marc Faber appeared earlier on CNBC in response to a plunging market, and gave his latest updated outlook on QE3... and 4, 5, 6, 7 and 8 (not to mention 18). "We may drop 10 to 15 percent. Then QE 2 will come, (then) QE 4, QE 5,
QE 6, QE 7—whatever you want. The money printer will continue to print,
that I'm sure. Actually I made a mistake. I meant to
say QE 18." Faber was modestly constructive on the Japanese selloff, which at one point hit 18% down in overnight futures trading: "This huge selloff is an investment opportunity in Japanese equities, but if a meltdown occurs then all bets are off." As usual, there is no love loss between Faber and the Chairsatan (recall that today's Empire Manufacturing survey confirmed margins continue to be crushed due to surging input costs): "I think Mr. Bernanke doesn't know much about the global economy but he probably watches the S&P every day." And on Fed criticism: ""Until very recently the Feds have had very few critiques, very few
people criticized the Fed's policies under Mr. Greenspan and Mr.
Bernanke. Over the last few months, a lot of critical
comments have come up about the Fed and its money-printing habit. The
S&P drops 20 percent (and) all the critics will be silent and they
will all applaud new money-printing." No fear of that here: Zero Hedge has been rather vocal in our opinion of the world's most destructive central planning buro from day one. We will continue being so, regardless how low the S&P plummets... Perhaps even to its fair value south of 500.
Does anyone seriously think the global recovery is still intact? Based on what? Does anyone think that stagnant/declining wages, falling real estate values, skyrocketing prices for materials and energy, and belt-tightening by bankrupt States are ideal foundations for higher profits? Anyone who doesn't realize the quake in Japan is a tragic load dumped on a fragile addict's quivering back (i.e. the global recovery) will undoubtedly be surprised by how fast the global economy will start unraveling. Anyone who kept their eyes open is only wondering how a debt and propaganda-fueled recovery lasted this long.
The damage control comes earlier. In an Op-Ed just posted at the FT, Pimco executive Mohamed El-Erian has presented his thoughts on why the Japanese devastation, while disrputive, will eventually lead to another GDP surge: "Japan’s economic growth rate will fall in the immediate aftermath of the natural disasters before rising sharply due to reconstruction activities." Yet even by Pimco standards it is not all good news and the immediate effect will likely be a jump in inflation per the former Harvdardite: "Disruptions to supply chains and the loss of inventories will cause shortages and inflation to spike temporarily from very low levels. The fiscal deficit and public debt will rise meaningfully due to lost revenues and, more importantly, emergency spending. The central bank will ease monetary policy which, given policy interest rates floored at the zero bound, will involve the provision of extraordinary credit and liquidity facilities. Last, the country will receive transfers from abroad, including the repatriation of funds held outside the country by Japanese residents." What however received no mention is Pimco's lamentation that the firm will no longer be able to frontrun Japanese buying of Spanish (and Eurozone in general) bonds: a plan that is certainly put on indefinite hold.
Gold ticked lower momentarily to $1,417.63/oz on the open in Asia prior to rising to over $1,432/oz where determined sellers sold aggressively, sending gold back down to near Friday's closing price on the London AM Fix (see chart). Silver also rose initially prior to determined selling. Ordinarily, last week's lower silver and gold weekly close would lead to further momentum-driven liquidation but these are no ordinary times. The catastrophe in Japan is already leading to safe haven demand for gold. Premiums for gold bars in Tokyo rose to their highest level since February. Overnight, gold bars were quoted at a premium of $1 an ounce to the spot London prices in Tokyo, up from zero last week and a discount of 50 cents two weeks ago. In Japan, panic buying and stocking up with essentials such as food and gasoline has seen shortages developing, prices rising sharply and concerns of inflation. A bullion dealer in Tokyo said that premiums were higher as the Japanese market is a bit tight on gasoline, so there are inflation risks."