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Why Is Gold Crashing?

George Washington's picture




 

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Gold Crashes Most in 30 Years … What Does It Really Mean?

Gold has fallen off a cliff.   It has fallen faster than at any time in the last 30 years.

Zero Hedge notes:

Adding insult to injury, the Shanghai Gold Exchange overnight announced that following the tumbling precious metal prices and limit down drop in early trading, it may raise trading margins for its gold and silver forward contracts.

(Margin calls tend to trigger further selling.)

Some Say It Is a Good Time to Buy

While most financial advisers are screaming “sell!”, there are some well-known contrarians.

For example, Bill Gross still recommends buying gold.

Marc Faber says:

“I love the fact that gold is finally breaking down because that will offer an excellent buying opportunity” …. “The bull market in gold is not completed.”

John Hathaway of Tocqueville Funds (with $10 billion under management) says that the selloff in gold is “a contrarian’s dream scenario”:

The evidence shows strong macro fundamentals for gold, investor sentiment at a negative extreme and compelling valuations in the mining shares. It seems like a contrarian’s dream scenario to us.

And Zero Hedge notes that – from the perspective of technical analysis – gold is the most oversold it has been in 14 years.

The Bearish Explanation

But why has gold crashed?

Bloomberg blames:

  • “Optimism that a U.S. recovery will curb the need for stimulus”; and
  • “The prospect that beleaguered members of the euro zone might be forced to sell gold to raise part of the funding, and there are much bigger holders in that category than Cyprus.”

Citigroup opines:

Gold decline may have been related to some break in technical levels and the general improvement in global risk appetite.

Business Insider argues:

[Gold's price collapse] vindicates the economic ideas of the economic elites.

 

***

 

To respond to the economic crisis, economists and mainstream policy makers have favored highly unusual policy measures (massive Fed balance sheet expansion, massive stimulus, etc.). These ideas are usually based on years of traditional economic research (Keynesianism, monetarism, etc.).

 

All of these ideas have been slammed by heterodox types like Austrian economists, who have warned of hyperinflation, and gold going to $10,000.

 

So the collapse in gold is not about gold, but about vindication for a large corpus of belief and economic research, which has largely panned out. It’s great that our economic elites know what they’re talking about, and have the tools at their disposal to address crises without creating some new catastrophe.

 

Things aren’t great in the economy, but the collapse/hyperinflation fears haven’t panned out, and the decline in gold is a manifestation of that.

Barry Ritholtz writes:

History shows Gold trades differently than equities. Why? It comes back to those fundamentals.

 

It has are none.

 

This is not to say gold is not affected by Macro issues. But that is very different than saying Gld has a fundamental value, an intrinsic worth. It does not. That led to this heretical advice: Gold is not, and can never be, an investment. It has no true intrinsic value, no cash flow, no earnings, no coupon. no yield. What people call fundamentals are nothing more than broad macro analysis (and how have your macro funds done lately?). Gold is the ultimate greater fool trade, with many of its owners part of a collective belief theory rife with cognitive errors and bias.

 

I do not want to engage in Goldenfreude — the delight in gold bugs’ collective pain — but I am compelled to point out how basic flaws in their belief system has led them to this place where they are today.

 

Gold does trade technically, and is especially driven by the collective belief system of the crowd. When that falter, well, you know what happens . . .

The Gold Bugs View

Gold bugs, on the other hand, see things quite differently.

Andrew Maguire says that the crash is solely in the paper gold market … and that there is actually a shortage of physical gold. Many other sources make the same claim.

Egon von Greyerz – founder and managing partner at Matterhorn Asset Management – argues:

They shouldn’t be concerned about the temporary pressure on gold.  This decline has nothing to do with the physical market because enormous demand for gold continues.

 

The paper market in gold is not a real market, and at some point in the near future paper gold holders will wake up and realize they are holding are worthless pieces of paper.  This is when the world will witness one of the greatest short squeezes in history as investors panic in to physical and the price of gold explodes to the upside.”

London bullion dealer Sharps Pixley thinks that the crash was largely initiated by a single entity:

The gold futures markets opened in New York on Friday 12th April to a monumental 3.4 million ounces (100 tonnes) of gold selling of the June futures contract in what proved to be only an opening shot. The selling took gold to the technically very important level of $1540 which was not only the low of 2012, it was also seen by many as the level which confirmed the ongoing bull run which dates back to 2000. In many traders minds it stood as a formidable support level… the line in the sand.

 

Two hours later the initial selling, rumoured to have been routed through Merrill Lynch’s floor team, by a rather more significant blast when the floor was hit by a further 10 million ounces of selling (300 tonnes) over the following 30 minutes of trading. This was clearly not a case of disappointed longs leaving the market – it had the hallmarks of a concerted ‘short sale’, which by driving prices sharply lower in a display of ‘shock & awe’ – would seek to gain further momentum by prompting others to also sell as their positions as they hit their maximum acceptable losses or so-called ‘stopped-out’ in market parlance – probably hidden the unimpeachable (?) $1540 level.

 

The selling was timed for optimal impact with New York at its most liquid, while key overseas gold markets including London were open and able feel the impact. The estimated 400 tonne of gold futures selling in total equates to 15% of annual gold mine production – too much for the market to readily absorb, especially with sentiment weak following gold’s non performance in the wake of Japanese QE, a nuclear threat from North Korea and weakening US economic data.

 

***

 

By forcing the market lower the Fund sought to prompt a cascade or avalanche of additional selling, proving the lie \; predictably some newswires were premature in announcing the death of the gold bull run doing, in effect, the dirty work of the shorters in driving the market lower still.

Gold Core’s Mark O’Byrne agrees.

James Rickards thinks the Fed is manipulating the gold market (and every other market).

Former assistant Treasury Secretary Paul Craig Roberts says:

Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.

 

***

 

According to Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can be to drive down the market price.

 

***

 

Bullion dealer Bill Haynes told kingworldnews.com that last Friday bullion purchasers among the public outpaced sellers by 50 to 1, and that the premiums over the spot price on gold and silver coins are the highest in decades. I myself checked with Gainesville Coins and was told that far more buyers than sellers had responded to the price drop.

 

***

 

In addition to short selling that is clearly intended to drive down the gold price, orchestration is also indicated by the advance announcements this month first from brokerage houses and then from Goldman Sachs that hedge funds and institutional investors would be selling their gold positions.

 

***

 

I see the orchestrated effort to suppress the price of gold and silver as a sign that the authorities are frightened that trouble is brewing that they cannot control unless there is strong confidence in the dollar.

Roberts also says:

This is an orchestration (the smash in gold).  It’s been going on now from the beginning of April.  Brokerage houses told their individual clients the word was out that hedge funds and institutional investors were going to be dumping gold and that they should get out in advance.   Then, a couple of days ago, Goldman Sachs announced there would be further departures from gold.  So what they are trying to do is scare the individual investor out of bullion.  Clearly there is something desperate going on….

Indeed, this may tie into the Federal Reserve leak of insider information.  Specifically, Roberts writes:

The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, which quickly went out to clients, that hedge funds and other large investors were going to unload their gold positions and that clients should get out of the precious metal market prior to these sales. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion prices took a big hit, and bullishness departed from the gold and silver markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.

As Congressman Grayson pointed out in a recent letter, right after the Federal Reserve’s Open Market Committee leaked valuable inside information to big banks, Goldman told its clients:

We recommend initiating a short COMEX gold position ….

Background on gold manipulation.

 

 

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Tue, 04/16/2013 - 21:13 | 3459030 MeelionDollerBogus
MeelionDollerBogus's picture

Judging by all the critical comments I would say the smash-down in silver pricing is forming what in technical analysis we call the "sandy vagina scream" somewhat resembling the triple-inverted head & shoulders :D

Tue, 04/16/2013 - 09:30 | 3455831 pbr streetgang
pbr streetgang's picture

gold is crashing because its one big lie. this county's biggest exports are bubbles and war. beware of monex metals , their in on it too

Tue, 04/16/2013 - 09:22 | 3455706 Fiat Burner
Fiat Burner's picture

Ritholtz, does the DOLLAR provide cash flow, earnings, a coupon, yield? No, it does not.  Where's the dollar's intrinsic value? A piece of paper with numbers printed on it is intrinsic value? Any number can be put on a piece of paper, $1 or $1Trillion, and it requires the same amount of labor. That's not intrinsic value, my friend. 

Fiat is the ultimate bubble, not gold.  Gold is real money and fiat is its counterfeit. Those who believe in fiat are the ones with cognitive errors and bias. They've been indoctrinated with a fradulent scheme and they can't see through the propaganda or are afraid of accepting the truth.

Tue, 04/16/2013 - 09:37 | 3455834 edifice
edifice's picture

The cost to produce an FRN is $.06.  That is its intrinsic value which, consequently, is what a $1 FRN purchases.

Tue, 04/16/2013 - 08:25 | 3455587 Kina
Kina's picture

It has been a long time coming.... the blow up of the LBMA

 

LBMA Closes Off Public Access To Key Bullion Bank Trading Data

http://www.zerohedge.com/article/lbma-closes-public-access-key-bullion-b...

 

So if the bullion banks can't deliver, and holders wont accept fiat (especially at a slammed price of gold)...what they going to do?

 

They could go buy it and eventually push the price to highest levels yet, probably bankrupting themselves in the process.  Borrow it from the USA (if it has any)...or declare force majeur and say bad like, thanks for all the fish and fail....but I doubt fail is any option for them, TBTF.

 

So if the US has it will it give away all its gold to keep the bullion banks from crashing?

 

Well the stupid thing is if the Cartel and Fed did not play with Gold and Silver prices probably nobody would be looking at securing the actual physical or cashing it in. Maybe these guys unable to stay away from corrupting everything they touch have just ruined themselves by playing games with bullion markets.

 

 

 

Tue, 04/16/2013 - 08:05 | 3455538 rp1
rp1's picture

Gold is crashing because the world has chosen its reserve currency.  Whatever currency the world sells more gold into will be the next reserve currency.  Looks like a US dollar bull.

Tue, 04/16/2013 - 07:52 | 3455495 chinaboy
chinaboy's picture

Aliens conquered humans. They want you 'rotate' to the 'US equities'. 

Tue, 04/16/2013 - 07:10 | 3455413 Notarocketscientist
Notarocketscientist's picture

Oil under a hundred bucks.....  desperate manipulation of gold... horrible numbers out of Germay... trillions of zirp already infusing the market...

I smell something wicked coming this way.... oh right... its the dead carcass called the GLOBAL ECONOMY

Tue, 04/16/2013 - 07:03 | 3455401 disabledvet
disabledvet's picture

Again "wrong question." what needs to be asked is why our ASSUMPTIONS crashing (as all of ours indeed are.) this is really simple...stop making it hard: "if the time value of fiat goes down over time as we all know it does...then why are prices falling?" it really isn't that complicated folks.

Tue, 04/16/2013 - 06:16 | 3455351 pbr streetgang
pbr streetgang's picture

CAUSE ITS A SCAM JUST LIKE EVERYTHING ELSE , AVIOD MONEX LIKE THE PLAGUE. ENJOY

Tue, 04/16/2013 - 06:11 | 3455349 Kina
Kina's picture

So if everybody knows this take down was to help out bullion banks unable to deliver the Fed's effort should be a once only trick.

 

The next time people will know and be buying hand over fist.

Tue, 04/16/2013 - 05:38 | 3455328 CEE
CEE's picture

two notes:

1. someone having paper leveraged gold position in paper wants to hold the physical gold in his vault (and does not want to repo at any price). I.e. sells 10-20 times more than he is able to buy. And he does it big...

2. the RATIO of gold prices to gold miners has even widened. It is largest ever since 2006 (BBG can not see more). Any idea why?

 

Tue, 04/16/2013 - 06:47 | 3455383 EmileLargo
EmileLargo's picture

Even when gold was around $1600, the miners could barely make any money. The actual cost of production is way higher than the $700 per ounce that people usually tout. The current price makes mining totally unviable as an economic activity. If the price does not recover, expect a whole bunch of miners to go bust.

Tue, 04/16/2013 - 03:47 | 3455253 Kina
Kina's picture

OK so now we know.

 

The LBMA was about to default. Gold and silver trashed to get the price down......still if entities want the real thing it will have to be bought and.......

 

And if they were about to default yesterday...the would be about to default every day....

 

The NY Fed bailing out mates again at everybody elses expense. Obviously the Fed doesn't think it needs to think of Americans, morals, ethics and criminal behavior.....just print $20bn to naked short sell metals.

 

 

Tue, 04/16/2013 - 03:43 | 3455249 TerraHertz
TerraHertz's picture

The Boston bombing is just sideshow distraction. There will be more CIA bombings on that scale, to keep people off balance and distracted from world events. Because it's showtime soon.

A factor to keep in mind here, is that Tokyo and northern Japan are severely contaminated with radioisotopes from Fukushima.  This is going to be bad for the world's nuclear corporates, as the medical horror statistics start to pile up. 'Bad', as in they could easily end up being impaled on spikes by enraged mobs. What the nuke industries really, really need, asap, is some heavy duty obfuscation of the radiation situation in Japan. A few nuclear explosions would be perfect from their pov. Especially if Tokyo was one of the hits. Then the world would forget about Fukushima, and future radiation sickness and death in Japan could be blamed on Nth Korea.

There's also the ongoing banking meltdown, with Cyprus just another step up in the drama. The Elites must be *desperate* to close the curtains on public exposure of their global fiat money/fractional reserve banking scam just now. Global nuclear war - perfect for shutting down the Internet forever.

So, my bet is that Kim has been bribed to ramp up tension, but thinks nothing is going to happen and he'll get to enjoy his money at Disneyland some day. Then there'll be some nukes let off in Japan. Notice the stories about 'small Nth Korean subs' that evaded tracking. Perfect for the blame game. Expect Nth Korea to be erased, and Iran too while the opportunity is there. Kim is the perfect patsy - so easy to make everyone hate or ridicule him.

When I see Faux News printing stories like this: http://www.foxnews.com/world/2013/04/12/north-korea-reportedly-warns-jap...
North Korea reportedly warns Japan it would target Tokyo first
what I see is the Elites conditioning the public to believe the nuke about to go off in Tokyo could only have come from Nth Korea.

The plummeting gold & silver price just now is scary. Elites dumping all the paper metal they can, to kill the price and buy up every last bit of physical they can before the fan and feces are introduced to each other in Tokyo harbor. Or something like that.

Tue, 04/16/2013 - 03:10 | 3455226 boeing747
boeing747's picture

Japanese bought all Gold with newly printed money, then dropped two 'bombs' that MSMs even have no time to cover 'gold stories'. They laugh all the way to Pearl Harbor.

Tue, 04/16/2013 - 01:38 | 3455133 jakedark
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Tue, 04/16/2013 - 08:02 | 3455523 GMadScientist
GMadScientist's picture

"...my gown had very few noticeable pecker tracks on arrival."

"...always glad to help pregnant brides like my girl Sha-nay-nay."

"...they really worked to stay within my lowlife boyfriend's budget."

 

Tue, 04/16/2013 - 01:47 | 3455145 Prairie Dog
Prairie Dog's picture

You make more sense than most of the people here

Tue, 04/16/2013 - 00:57 | 3455089 ebworthen
ebworthen's picture

In the past four hours, Gold has caught a +$45 bid (18:45-22:45).

Tue, 04/16/2013 - 01:17 | 3455111 Notarocketscientist
Notarocketscientist's picture

That would be Soros stepping in - buying from the MUPPETS.

Tue, 04/16/2013 - 01:16 | 3455107 Lets Buy The Dip
Lets Buy The Dip's picture

yes i agree ebworthen, do not listen to the dwits that say gold is about ot crash to 800. 

Why gold really CRASHED HARD today??

Was it really the boston bombing

Or are there other factors at play?

==> http://bit.ly/107S4QR

This is going to set up for a nice huge rally in gold later in the year! Huzahhh!

Tue, 04/16/2013 - 00:50 | 3455080 Notarocketscientist
Notarocketscientist's picture

Big players like Soros (who was deep in paper gold till recently) now see the writing on the wall - Japan is doomed - Europe as well - and one of them will take us all down with them.

So paper gold will be exposed as useless as this plays out. 

So what do you do? Sell your positions triggering an avalanche of auto-sells driving the price down.

Then take your cash and buy PHYSICAL GOLD at 30% off and sit back and wait for the fireworks.

I am left wondering - is this sell-off the beginnning of the Mother of all Capitulations?  i.e. has some of the big money given up and will now go to PM - but before doing so they crash the market so they can get a better deal - because of course they are smart and they will ALWAYS try to enter at a discount.

Tue, 04/16/2013 - 00:55 | 3455085 The Heart
The Heart's picture

"because of course they are smart and they will ALWAYS try to enter at a discount."

Yes.

July reset maybe?

Tue, 04/16/2013 - 00:48 | 3455074 Magnum
Magnum's picture

Thanks for the interesting article GW.

I once purchased Revlon zero-coupon bonds at 12% annual return.  In the weeks prior to maturity I was given notice that Revlon (led by shyster perilman who bought the company then loaded it with debt) was not going to be able to pay bondholders on maturity date.  $770M.  They offered instead to pay 25 cents on the dollar prior to maturity.  Many people took it!  I held on and was paid in full at maturity.  It was just a ploy by Perilman to get people to sell their asset for a deep discount.  He wasn't going to lose his company to bankruptcy.

http://www.nytimes.com/1999/04/18/business/wrinkles-under-the-surface-at...

I see similarities in this Revlon sham and the market for physical gold--convince people to sell at a discount before the market price goes way up due to inevitable circumstance.  

For those who own actual gold bars--don't sell.  Accumulate more if you can find it.  More than likely the price will promptly rise to be 4x the coming bottom.

Tue, 04/16/2013 - 00:33 | 3455049 Bernankenstein
Bernankenstein's picture

Haven't posted in a while. Ain't this fun?

Mon, 04/15/2013 - 23:47 | 3454962 Billy Shears
Billy Shears's picture

Fiat is the legal franchise for confiscating public wealth. This remit will be defended at all costs by FED. It is, after all,  their bread and butter. 

Mon, 04/15/2013 - 23:45 | 3454953 RaceToTheBottom
RaceToTheBottom's picture

 

Can they really be Naked shorts when they are backed by a printing press?

Mon, 04/15/2013 - 23:13 | 3454863 The_Gold_Standard
The_Gold_Standard's picture

What a terrific buying opportunity! 100 oz bars here I come..... If they are available somewhere lol

Mon, 04/15/2013 - 22:35 | 3454718 are we there yet
are we there yet's picture

No financial Entity on earth can demonstrate this level of gold manipulation other then one controlled by the Fed. This buys time for money printing, but it just makes the eventual crash worse. Physical gold is getting as hard to find as ammunition.

Mon, 04/15/2013 - 22:14 | 3454618 hooligan2009
hooligan2009's picture

remember this?

http://www.examiner.com/article/largest-dutch-bank-defaults-on-physical-gold-deliveries-to-customers

what is stored in the bank..comes back as fiat

if you don't have it in your hand..it isn't yours

Mon, 04/15/2013 - 21:47 | 3454455 Prairie Dog
Prairie Dog's picture

But but but... I thought Bernanke and his central bank cronies were debasing the currency leading to inevitable hyperinflation and that gold was the only refuge. Zerohedge told me so! Zerohedge wouldn't lie to me!

I know. Bernanke and Krugman must be using money printed by the FED to short-sell gold and drive the price down, as part of their Evil Plan to sow chaos and destroy the world. Of course!

 

Tue, 04/16/2013 - 09:05 | 3455708 EmileLargo
EmileLargo's picture

Thanks Joe. Did you consult Paul before writing that?

Mon, 04/15/2013 - 22:10 | 3454602 ebworthen
ebworthen's picture

What about the debt?

What about the cost of insurance (health care, etc.)?

What about employment, labor participation, retail sales, shipping, consumer debt, etc., etc., etc.?

Your teenager is doing great at 17 while smoking meth and fucking half the town and part of the car-jacking parts gang as long as they get good grades and you don't know about it, is that it?

Mon, 04/15/2013 - 21:58 | 3454548 fijisailor
fijisailor's picture

Then what is the FED doing with $85 billion monthly and ZIRP?  I suppose you think that leads to a normal and healthy economy?  There are no consequences to unlimited money creation?

Mon, 04/15/2013 - 22:06 | 3454585 ebworthen
ebworthen's picture

Exactly.

If the recovery is here put rates at 6% and stop QE.

Lying two-faced equivocating manipulative sado-masochistic mammon lusting worms.

Mon, 04/15/2013 - 22:22 | 3454666 Prairie Dog
Prairie Dog's picture

I guess you believe what you want, and you live with the consequences. Get your bargain physical gold now! The big short squeeze is coming!

Or could it be that conventional economic analysis actually works and hyperinflation isn't coming after all? No, surely not...

 

Tue, 04/16/2013 - 02:28 | 3455193 ebworthen
ebworthen's picture

You tell me how $16+ Trillion of debt and $65+ Trillion of unfunded liabilities get paid off and funded.

TRILLIONS!  Not millions or billions.  TRILLIONS!

Hmmm?

Inflation?

Default?

Either would prove this ridiculous economic crime doesn't work.

The deficits, debts, and unpayable promises prove it as well.

Go on, tell me how this works.

Mon, 04/15/2013 - 22:30 | 3454706 Vooter
Vooter's picture

"Or could it be that conventional economic analysis actually works and hyperinflation isn't coming after all? No, surely not..."

WHAT IS CONVENTIONAL ABOUT PRINTING AND DISTRIBUTING $85 BILLION IN COUNTERFEIT CURRENCY EVERY MONTH???

Mon, 04/15/2013 - 22:45 | 3454762 Prairie Dog
Prairie Dog's picture

It's an unconventional policy, based on conventional macroeconomic analysis. Keynes showed that increasing the monetary base in a liquidity trap would not be inflationary. I believe Milton Friedman also said the Fed should have expanded the money supply during the Great Depression - but maybe he's part of the conspiracy!

Mon, 04/15/2013 - 23:09 | 3454858 hooligan2009
hooligan2009's picture

the unconventional policy being pursued by the fed is as valid as the complete oposite policy of withdrawing reserves from banks to prevent overt speculation and reduce the level of leverage/debt at the consumer, government and corporate level.

this is an untried experiment..why didnt the fed try the opposite and correct the over borrowing that has existed for decades?

Mon, 04/15/2013 - 23:09 | 3454856 fijisailor
fijisailor's picture

So to you it's sound economic policy even though the FED itself says it's experimental and even though history has proven that it does not work.

Mon, 04/15/2013 - 23:14 | 3454869 Prairie Dog
Prairie Dog's picture

Has history proven that? In the 1930s, the Fed squeezed the money supply and unemployment went to 30 percent, while industrial output fell by 30 pecent. In the recession that followed the global financial crisis, US unemployment peaked at 10 percent and is currently 7.6 percent.

 

Tue, 04/16/2013 - 05:28 | 3455323 Reci
Reci's picture

No one said they should have squeezed the money supply just that they shouldn't be expanding it at fever pitch rates to fund and support corruption which is exactly what did and is happening.  The reason investment in things shuts down is because people lose trust and faith in the veracity and integrity of the system.  People began to realize the reality that many of these debt promises never had a chance in hell of ever being repaid which means they should never have been funded or should have been funded in another way where the risk level was understood but not through corrupt people and organizations that benefit from making deals that they know are reckless and improper from a sound business perspective.  As a result, the system breaks down under the stress of too many people looking at the "Jones's" and how they became wealthy using fraud and imitating their process to achieve similar results.   Without proper law and regulatory enforcement like we have had at the banking level, the system runs amock with corruption and the reality sinks in (eventually) to the investment community.  This is where/when the system should be allowed to break down and those responsible for making themselves wealthy at the expense of  business and public institutions should be held accountable for irresponsible management thus keeping the system integrity in tact. 

Unfortunately, the Federal Reserve whom are a bunch of private bankers see that the head honchos of their system are going to be (rightfully) going down in flames and decide the fix is to inflate the money supply to the degree equal to the level of corruption in the system so they can fill the holes of unpayable debt that had been written and profited from to which is now causing deflation.  Thus, the only ones to really benefit from this system are the people who took the debt with no expectation of ever paying it and the people who profited from writing the false debt.  This is corruption at it's finest. The responsible people  get screwed mercilessly through the eventual cost inflation of products and loss of jobs while the country gets screwed through the enrichment of criminals and thieves at all levels who set the tone for the future conduct of business in both the private sector and government.  This is all enabled and endorsed by the Fed with the "covering up" of fraud with paper currency which has no limits or controls on it's expansion.  They are the lynchpin to approving, allowing and furthering this economic fraud and corruption.  Their basic implied argument seems that the ends of "business activity" justify the means of fraud and that economic activity is so scarce across America and the world that corruption and fraud need to be supported in order to keep the system moving even if that movement is backwards.

This support by the Fed of this dysfuntional system also supports many other unfavorable effects which is reducing the strength of the middle class (through loss of savings) while strengthening those at the top.  This means the elitists have even more monetary power to control the system and it's government officials which reinforces the abilities of these people to successfully carry out their self serving special interests and further reducing the value of the government to the general populace both functionally, economically and integrity wise.  And this is only a mere surface level view of the negative ramifications of the Fed's out of control pulling of the spring that will eventually deform it completely or have it snap back with painful results.  There is nothing beneficial going to be realized by the average person nor the country based upon the actions of the Fed to cover the tracks of its banksters with your devalued money even if you choose to believe their lies disguised as statistics.

Tue, 04/16/2013 - 00:04 | 3455006 outofhere
outofhere's picture

In 1933 FDR and con-gress ammended the trading with the enemy act making it illegal to have or own gold.  All gold, gold certficates and or bullion had to be forfitted or a citizen could be fined $10,000 and spend ten years in prison.  The way they accomplished this was by placing financial transactions of US citizens under the jurisdiction of the trading with the enemy act of October 6, 1917 when ammended March 9, 1933.  Find it here... USC Title 12 section 95b.

Mon, 04/15/2013 - 23:43 | 3454944 hooligan2009
hooligan2009's picture

unemployment is over 20% now..

http://www.shadowstats.com/alternate_data/unemployment-charts

around the same level as unemployment in the depression..and where did the millions of unemployed came from where in the 1930's? overleverage in the 20's

http://www.studyworld.com/depression_of_the_1930%27s.htm

the fed cannot halt or slow the inexorable rise in the use of technology..governments prevent the adaptation of technology through socialising losses in banks that have made bad loans to entities that cannot pay them back..

the choice is to apportion these losses over decades (like Japan) or write them off and let the private sector move on to the next big thing.

of couse, this wont be done by this marxist government and, instead, the US will engage in the classic communist 5 year plans of infrastructure spending and "make work" programs. the fed is pwned by the government and will monetize whatever the shortfall of fiscal deficits turns out to be.

that is, if and when the US stops spying on them, supplying them arms and otherwise reducing their infrastructure to rubble

a better experiment would be to fail the banking system by allowing sales of goods and services (not government goods and services) to find the level that can afforded by people without ridiulously high levels of debt. 

this has to be done hand in hand with developing exports that build out the infrastructure of countries that need it, all by trade financing so that these countries get the debt, not the US

 

Mon, 04/15/2013 - 23:57 | 3454987 Prairie Dog
Prairie Dog's picture

It's fun to be rational, in a world of loons. I love Zerohedge!

 

Mon, 04/15/2013 - 21:58 | 3454530 Money 4 Nothing
Mon, 04/15/2013 - 23:11 | 3454436 hooligan2009
hooligan2009's picture

"sequere pecuniam" (follow the money):

fom brown shipley..or whatever they are called now, level of selling is:

http://news.sharpspixley.com/article/ross-norman-gold-crushed-by-400-tonnes-or-usd20-billion-of-selling-on-comex/159239/

the gold etfs market caps ae here (e and oe)

http://www.google.com/finance?q=gold+etfs&ei=kKlsUZC1MsKWwQP51wE

one year old, but for what its worth (now)

http://www.relbanks.com/rankings/world-gold-reserves

who has $20 billion or 400 tonnes of gold that it can sell and who has the money to buy 400 tonnes of gold with a 20 billion dollar check?

what is the maximum permitted leverage for gold trading? 30 to 1? 40 to 1? 50 to 1?

the only unleveraged sellers of this size possible are the top 13 countries. even they wouldn't be so stupid as to dump this gold onto the market in a week, unless they were getting out of gold completely (venezuela, portugal or taiwan)..venezuela just elected a new prez who supports the policies of chavez and took physical delivery...portugal is bankrupt and must be the prime candidate on the criteria of selling out..i dont think taiwan would be so radical

the germans will want to hang on to their gold fillings from decades ago..maybe the swiss are having problems maintaining their peg at 1.20 to the euro and need some cash for p/l on its hundreds of billions of euros of intervention to support its fiat currency (a la Cyprus)

who else?

the fed slamming the market and selling in the knowledge that it will devalue the rest of its holdings (400 out of a supposed 8,133 tonnes)?

could be france (a "broke country")  italy (broke) netherlands (broke) 

or perhaps it is a mining company pre-selling five years of production (via rolling of 40 quarters of futures rolls?)

or 

it could be the massive naked short that is claimed by many. in which case

"he who shorts what isnt his'n, buys it back or goes to prison"!!!!!

all the anectdotal i am seeing says there is a shortage of physical as it is being hoovered up by retail investors..so the gold will disappear from the supply chain

of course, this doesn't explain the falls in all the other commodities, unless these are "cross rates" whose gaps are traded as pairs.

interesting how merrills did it and not JPM?

perhaps JPM has gone bust!

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